[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2000 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          
          
                    7


          Parts 700 to 899

                         Revised as of January 1, 2000

Agriculture





          Containing a Codification of documents of general 
          applicability and future effect
          As of January 1, 2000
          With Ancillaries
          Published by:
          Office of the Federal Register
          National Archives and Records
          Administration

A Special Edition of the Federal Register



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                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2000



               For sale by U.S. Government Printing Office
 Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328



[[Page iii]]




                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 7:
    Subtitle B--Regulations of the Department of Agriculture 
      (Continued):
          Chapter VII--Farm Service Agency, Department of 
          Agriculture                                                5
          Chapter VIII--Grain Inspection, Packers and 
          Stockyard Administration (Federal Grain Inspection 
          Service), Department of Agriculture                      495
  Finding Aids:
      Material Approved for Incorporation by Reference........     647
      Table of CFR Titles and Chapters........................     649
      Alphabetical List of Agencies Appearing in the CFR......     667
      List of CFR Sections Affected...........................     677



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                     ----------------------------

                     Cite this Code:  CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus,  7 CFR 700.1 refers 
                       to title 7, part 700, 
                       section 1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
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    To determine whether a Code volume has been amended since its 
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EFFECTIVE AND EXPIRATION DATES

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OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
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OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
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of provisions in effect on a given date in the past by using the 
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INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
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if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    Properly approved incorporations by reference in this volume are 
listed in the Finding Aids at the end of this volume.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed in 
the Finding Aids of this volume as an approved incorporation by 
reference, please contact the agency that issued the regulation 
containing that incorporation. If, after contacting the agency, you find 
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Register, National Archives and Records Administration, Washington DC 
20408, or call (202) 523-4534.

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    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

[[Page vii]]


REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
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or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, Washington, DC 20408.

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                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

January 1, 2000.



[[Page ix]]



                               THIS TITLE

    Title 7--Agriculture is composed of fifteen volumes. The parts in 
these volumes are arranged in the following order: parts 1-26, 27-52, 
53-209, 210-299, 300-399, 400-699, 700-899, 900-999, 1000-1199, 1200-
1599, 1600-1899, 1900-1939, 1940-1949, 1950-1999, and part 2000 to end. 
The contents of these volumes represent all current regulations codified 
under this title of the CFR as of January 1, 2000.

    The Food and Nutrition Service current regulations in the volume 
containing parts 210-299, include the Child Nutrition Programs and the 
Food Stamp Program. The regulations of the Federal Crop Insurance 
Corporation are found in the volume containing parts 400-699.

    All marketing agreements and orders for fruits, vegetables and nuts 
appear in the one volume containing parts 900-999. All marketing 
agreements and orders for milk appear in the volume containing parts 
1000-1199. Part 900--General Regulations is carried as a note in the 
volume containing parts 1000-1199, as a convenience to the user.

    Redesignation tables appear in the Finding Aids section of the 
volumes containing parts 210-299 and parts 1600-1899.

    For this volume, Jonn V. Lilyea was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Frances D. McDonald, assisted by Alomha S. Morris.

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[[Page 1]]



                          TITLE 7--AGRICULTURE




                  (This book contains parts 700 to 899)

  --------------------------------------------------------------------

  SUBTITLE B--Regulations of the Department of Agriculture-- Continued:

                                                                    Part

chapter vii--Farm Service Agency, Department of Agriculture.         700

chapter viii--Grain Inspection, Packers and Stockyard 
  Administration (Federal Grain Inspection Service), 
  Department of Agriculture.................................         800

[[Page 3]]

   Subtitle B--Regulations of the Department of Agriculture--Continued

[[Page 5]]



                            CHAPTER VII--FARM






                             SERVICE AGENCY,






                        DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------


  Editorial Note: 1. Nomenclature changes to chapter VII appear at 59 FR 
60299, Nov. 23, 1994, as corrected at 59 FR 66438, Dec. 27, 1994.

  2. Nomenclature changes to chapter VII appear at 60 FR 64297, Dec. 15, 
1995.

             SUBCHAPTER A--AGRICULTURAL CONSERVATION PROGRAM
Part                                                                Page
700             Experimental Rural Clean Water Program......           7
701             Conservation and environmental programs.....          21
702             Colorado River Basin Salinity (CRSC) Control 
                    Program.................................          40
707             Payments due persons who have died, 
                    disappeared, or have been declared 
                    incompetent.............................          49
708             Record retention requirements--all programs.          51
SUBCHAPTER B--FARM MARKETING QUOTAS, ACREAGE ALLOTMENTS, AND PRODUCTION 
                               ADJUSTMENT
711             Marketing quota review regulations..........          53
714             Refunds of penalties erroneously, illegally, 
                    or wrongfully collected.................          62
717             Holding of referenda........................          65
718             Provisions applicable to multiple programs..          78
723             Tobacco.....................................         101
729             Peanuts.....................................         182
                SUBCHAPTER C--REGULATIONS FOR WAREHOUSES
735             Cotton warehouses...........................         213
736             Grain warehouses............................         240
737             Tobacco warehouses..........................         268
738             Wool warehouses.............................         286
739             Dry bean warehouses.........................         302
740             Nut warehouses..............................         320
741             Sirup warehouses............................         339
742             Cottonseed warehouses.......................         356

[[Page 6]]

743             [Reserved]

                     SUBCHAPTER D--SPECIAL PROGRAMS
750             Soil Bank [Note]............................         376
752             Water Bank Program..........................         376
755             Regional programs...........................         383
759             Small hog operation payment program.........         391
760             Indemnity payment programs..................         395
761             General and administrative..................         402
762             Guaranteed farm loans.......................         403
777             Disaster payment program for 1990 crop of 
                    sugarcane, sugar beets, soybeans and 
                    peanuts.................................         445
780             Appeal regulations..........................         448
781             Disclosure of foreign investment in 
                    agricultural land.......................         451
782             End-Use Certificate Program.................         458
783             1997 Tree Assistance Program................         463
        SUBCHAPTER E--PROVISIONS COMMON TO MORE THAN ONE PROGRAM
792             Debt settlement policies and procedures.....         470
795             Payment limitation..........................         479
                      SUBCHAPTER F--PUBLIC RECORDS
798             Availability of information to the public...         486
                 SUBCHAPTER G--ENVIRONMENTAL PROTECTION
799             Environmental quality and related 
                    environmental concerns--compliance with 
                    the National Environmental Policy Act...         488

[[Page 7]]





             SUBCHAPTER A--AGRICULTURAL CONSERVATION PROGRAM





PART 700--EXPERIMENTAL RURAL CLEAN WATER PROGRAM--Table of Contents




                           Subpart A--General

Sec.
700.1  Purpose and scope.
700.2  Objective.
700.3  Administration.
700.4  Definitions.
700.5  Responsibilities.
700.6  Officials not precluded from exercising authority.

              Subpart B--Project Authorization and Funding

700.10  Applicability.
700.11  Availability of funds.
700.12  Eligible project areas.
700.13  Project applications.
700.14  Review and approval of project applications.
700.15  Transfer of funds.
700.16  Termination of project funding.

                 Subpart C--Participant's RCWP Contracts

700.20  Eligible land.
700.21  Eligible person (participant).
700.22  Application for assistance.
700.23  Water quality plan.
700.24  Cost-sharing.
700.25  RCWP contract.
700.26  Contract modifications.
700.27  Cost-share payment.
700.28  Appeals.
700.29  Contract violations.

                  Subpart D--Monitoring and Evaluation

700.40  General program monitoring and evaluation.
700.41  Comprehensive USDA/EPA joint project water, quality monitoring, 
          evaluation and analysis.
700.42  Program evaluation.
700.43  Public benefits when installing BMP's.

    Authority: Pub. L. 96-108, 93 Stat. 821, 835.

    Source: 45 FR 14009, Mar. 4, 1980, unless otherwise noted.



                           Subpart A--General



Sec. 700.1  Purpose and scope.

    (a) The purpose of this part is for the U.S. Department of 
Agriculture (USDA), with certain concurrences by the U.S. Environmental 
Protection Agency (EPA), to set forth regulations to carry out an 
experimental Rural Clean Water Program (RCWP) as authorized by the 
Agriculture, Rural Development and Related Agencies Appropriations Act, 
fiscal year 1980, Pub. L. 96-108 (hereinafter referred to as the ``1980 
Appropriations Act'') and subsequent appropriations.
    (b) The RCWP will provide financial and technical assistance to 
private land owners and operators (participants) having control of 
agricultural land. The assistance is provided through long-term 
contracts of 3 to 10 years to install best management practices (BMPs) 
in approved project areas which have critical water quality problems 
resulting from agricultural activities. The project area must reflect 
the water quality priority concerns developed through the established 
water quality management program process. Participation RCWP is 
voluntary.
    (c) This is a new USDA program using the experiences under various 
on-going USDA programs and the established water quality management 
program of EPA.

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981]



Sec. 700.2  Objective.

    The objectives of the RCWP are to:
    (a) Improve impaired water use and quality in the approved project 
area in the most cost-effective manner possible in keeping with the 
provision of adequate supplies of food, fiber, and a quality 
environment.
    (b) Assist agricultural land owners and operators to reduce 
agricultural nonpoint source water pollutants and to improve water 
quality in rural areas to meet water quality standards or water quality 
goals.
    (c) Develop and test programs, policies and procedures for the 
control of agricultural nonpoint source pollution.

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981]

[[Page 8]]



Sec. 700.3  Administration.

    At the national level, the Secretary of Agriculture will administer 
the RCWP in consultation with the Administrator, EPA, including EPA's 
concurrence in the selection of the BMPs, as provided in the 1980 
Appropriations Act and subsequent appropriations. Authority to approve 
projects is reserved to the Secretary. The Secretary of Agriculture 
hereby delegates responsibility for administration of the program to the 
Administrator, Farm Service Agency (FSA) and the coordination of 
technical assistance to the Chief, Soil Conservation Service (SCS). FSA 
will be assisted by other USDA agencies in accordance with existing 
authorities.
    (a) A National Rural Clean Water Coordinating Committee (NCC), 
chaired by the Administrator, FSA, will assist in carrying out the RCWP.
    (b) A State Rural Clean Water Coordinating Committee (SCC) will 
assist the State ASC Committee in administering the program. The State 
ASC Committee Chairperson will chair the SCC. Where two or more States 
are involved in a project area the Deputy Administrator, State and 
County Operations (DASCO), FSA, shall develop a coordinating process.
    (c) A Local Rural Clean Water Coordinating Committee (LCC) will be 
established to assure coordination at the project level. The LCC 
committee will be chaired by the County ASC Committee Chairperson and 
will assist the County ASC Committee as provided in these regulations 
and as otherwise developed by the SCC and the LCC. Where two or more 
counties are involved in a project area, the SCC shall develop a 
coordination process.

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981 59 
FR 60299, Nov. 23, 1994]



Sec. 700.4  Definitions.

    (a) Adequate Level of Participation. An adequate level of 
participation is reached when participants having control of 75 percent 
(unless a different level is approved by the Administrator, FSA, with 
the concurrence of the NCC), of the identified critical area(s) or 
source(s) of the agricultural nonpoint source pollution problem in the 
project area, are under contract.
    (b) Administrative Services. The administration of the RCWP except 
for the technical phases as assigned in Sec. 700.5 of these regulations.
    (c) Agricultural Land. That portion(s) of a farm or ranch used to 
produce: Grains, row crops, seed crops, vegetables, hay, pasture, 
orchards, vineyards, trees, field grown ornamentals, livestock or other 
agricultural commodities.
    (d) Agricultural Nonpoint Source Pollution. Pollution originating 
from diffuse sources, including, but not limited to, land areas and 
return flows from agricultural lands such as:
    (1) Animal waste areas and land used for livestock and/or crop 
production, or
    (2) Lands with silviculturally related pollution.
    (3) Concentrated animal feeding operations defined as point sources 
in 40 CFR 125.1 and 125.51, are not eligible for assistance under RCWP.
    (e) Applicant. A person in an approved project area who applies for 
RCWP assistance.
    (f) Average Cost. The calculated cost, determined by recent actual 
local costs and current cost estimates, considered necessary for 
carrying out BMPs or an identifiable unit thereof.
    (g) Best Management Practice (BMP). A single practice or a system of 
practices to improve water quality included in the approved RCWP 
application that reduces or prevents agricultural nonpoint source 
pollution.
    (h) BMP Costs. The amount of money actually paid or obligated to be 
paid by the participant for equipment use, materials and services for 
carrying out BMPs or an identifiable unit of a BMP. Loss of income from 
crops during the first twelve months following the conversion of 
productive cropland to permanent vegetative cover or trees may be 
considered a part of the BMP cost for a project where it is determined 
that harvesting or grazing restrictions are necessary in order to 
establish properly the practice and the reimbursement for loss of income 
is necessary to provide incentives to achieve an adequate level of 
participation as defined in 7 CFR 700.4(a). If the participant uses 
personal resources, the cost

[[Page 9]]

includes the computed value of personal labor, equipment use, and 
materials.
    (i) BMP Life Span. Each BMP shall have a life span of not less than 
5 years unless otherwise approved by the Administrator, FSA.
    (j) Conservation District (CD). A subdivision of a State or 
territory organized pursuant to the State Soil Conservation District 
Law, as amended. In some States these are called soil conservation 
districts, soil and water conservation districts, resource conservation 
districts, or natural resource districts.
    (k) Contract. The document that includes the water-quality plan and 
is executed by the participant and approved by the County ASC Committee. 
Such document evidences the agreement between parties for carrying out 
BMPs on the participant's land.
    (l) Contract Period. That period of time, 3 to 10 years, established 
as necessary to implement the BMPs needed to solve the water quality 
problems in the contract.
    (m) Cost-Share Level. That percentage of the total cost of 
installing a BMP which is to be borne by the government under the RCWP.
    (n) Cost Share Rate. The amount of money per unit (cubic yard, acre, 
etc.) to be paid for carrying out BMPs under the RCWP.
    (o) County ASC Committee. The County ASC Committee elected by the 
farmers/ranchers in the county as provided for under section 8(b) of the 
Soil Conservation and Domestic Allotment Act (16 U.S.C. 590h(b)).
    (p) Critical Areas or Sources. Those designated areas or sources of 
agricultural nonpoint source pollutants identified in the project area 
as having the most significant impact on the impaired use of the 
receiving waters.
    (q) Direct Costs. The costs that can be specifically identified with 
the program.
    (r) Farmer/Rancher. An owner and/or operator who has a vested 
interest in the operation of the farm or ranch.
    (s) Federal Funds Authorized. The total amount of funds authorized 
to approved projects.
    (t) Fiscal Year. The fiscal year beginning October 1 and ending 
September 30.
    (u) Identifiable Unit. A part of a BMP that can be clearly 
identified as a separate component in carrying out BMPs in the water 
quality plan.
    (v) Implementation. The act of carrying out or executing a water 
quality plan, including both installation and maintenance of BMPs.
    (w) Maximum Payment Limitation. The total amount of RCWP payments 
which a participant may receive for the full contract period. The total 
amount of such payments shall not exceed $50,000.
    (x) Offsite Benefits. Favorable effects of BMPs that occur away from 
the land of the participant receiving RCWP assistance and which accrue 
to the public.
    (y) Participant. A land owner and/or operator who is an agricultural 
producer and applies for and receives assistance under RCWP.
    (z) Participant's Water Quality Plan. The plan that identifies 
critical agricultural nonpoint sources of pollution, identifies water 
quality problems and schedules the application of BMPs which contribute 
to meeting the water quality objectives of the project.
    (aa) Plan of Work. A written strategy for implementing the approved 
project, outlining the actions needed and to be taken by various USDA, 
State and local agencies and interested groups.
    (bb) Pooling Agreement. An agreement between two or more 
participants or ranchers to pool their resources to treat a common 
critical area or source.
    (cc) Privately-Owned Rural Land. Lands not owned by Federal, State, 
or local governments that include cropland, pastureland, forest land, 
rangeland, and other associated lands.
    (dd) Project Area. The geographic determination included in the 
project application as agreed upon by the SCC and LCC, and approved by 
the Secretary, utilizing the water quality planning process which 
identifies agricultural nonpoint source water quality problems.
    (ee) Project Life Span. The maximum total life span of a project 
shall be not greater than fifteen (15) years from the date RCWP funds 
are first made available for the project.

[[Page 10]]

    (ff) RCWP Project. The total system of BMPs, administrative support, 
institutional arrangements, cost-sharing, technical and community 
support that are authorized in a RCWP project application.
    (gg) Secretary. The Secretary of the U.S. Department of Agriculture.
    (hh) Silvicultural. The science and art of cultivating (growing and 
tending) forest crops based on the knowledge of forestry. Silviculture-
related pollution is included as agriculture nonpoint source pollution 
in the RCWP.
    (ii) Standards and Specifications. Requirements that establish the 
minimum acceptable quality level for planning, designing, installing, 
and maintaining BMPs.
    (jj) State ASC Committee (STC). The State ASC Committee appointed by 
the Secretary in accordance with Section 8 b of the Soil Conservation 
and Domestic Allotment Act, as amended.
    (kk) Technical Assistance. The preparation of the participant's 
water quality plan, the design, layout and implementation of BMPs to 
accomplish the purposes of the water quality plan, and water quality 
monitoring and evaluation.
    (ll) Water Quality Management Program. A Federal-state-local program 
for addressing and solving point and non-point source pollution problems 
consistent with national clean water goals. The basic authority for this 
program is in section 208 of the Federal Water Pollution Control Act, as 
amended, (Pub. L. 92-500).

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981]



Sec. 700.5  Responsibilities.

    (a) The United States Department of Agriculture (USDA) shall:
    (1) Administer the RCWP by entering into contracts with land owners 
and operators to install and maintain BMPs to control agricultural 
nonpoint source pollution for improved water quality and:
    (i) Consult with EPA in the selection of projects;
    (ii) Obtain concurrence from EPA in approval of BMPs; and
    (iii) Insure an adequate joint USDA/EPA monitoring and evaluation 
plan is carried out on selected projects.
    (2) Provide technical assistance and share the cost of carrying out 
BMPs as specified in the contracts.
    (3) Evaluate the overall effectiveness of the program in improving 
water quality.
    (b) The Environmental Protection Agency (EPA) will:
    (1) Participate on the NCC, SCC and LCC.
    (2) Furnish information from the water quality management planning 
process which can assist in identifying areas with the most critical 
water quality problems for project applications.
    (3) Participate in the approval of project applications for funding.
    (4) Concur with the Secretary on BMPs recommended by the County and 
State ASC Committees and approved by the Secretary for funding, or 
recommended by the Secretary, with concurrence of the Administrator, 
EPA, and approved by the State and County ASC Committees.
    (5) Assist USDA in evaluating the effectiveness of the program in 
improving water quality, including concurrence on projects selected for 
comprehensive monitoring and evaluation and development of the criteria 
for the comprehensive, joint USDA/EPA water quality monitoring, 
evaluation, and analysis program.
    (c) The Farm Service Agency shall:
    (1) Serve as chairperson of the NCC, SCC and LCC and be responsible 
for developing and administering the RCWP.
    (2) Provide to the Secretary those project applications recommended 
for approval, including the recommendations of the NCC.
    (3) Through County FSA Offices, provide the administrative support 
in all approved RCWP projects, such as accepting applications, preparing 
and approving contracts, carrying out funds control, issuing cost-share 
payments, otherwise administering contracts and payments, provide 
compliance oversight, maintain records and develop reports.
    (4) Enter into agreements with Federal, State and local agencies and 
others as needed for support to be provided in an approved RCWP project.

[[Page 11]]

    (5) Through County and Community ASC Committees work with landowners 
and operators in the project area to encourage participation.
    (6) Develop cost-share rates for installing needed BMPs.
    (7) Assure that RCWP is in addition to and is coordinated with other 
related programs.
    (8) Provide guidance to State and County ASC Committees and 
coordinate the Agricultural Conservation Program (ACP), the Forestry 
Incentives Program (FIP), and related conservation programs, with RCWP.
    (9) Allocate project funds to County ASC Committees in the approved 
project areas.
    (10) Designate the State ASC Chairperson where a project area 
involves a part(s) of two or more States to chair the SCC, for that 
project.
    (d) The Soil Conservation Service (SCS) shall:
    (1) Participate on the NCC, SCC and LCC.
    (2) Coordinate technical assistance and recommend appropriate agency 
or group to provide technical assistance on a project by project basis.
    (3) Provide technical assistance for the appropriate BMPs.
    (4) Assist the LCC in developing criteria for use by the County ASC 
Committees and the Conservation Districts in determining priorities of 
assistance among individual applicants for developing the water quality 
plan.
    (5) Provide technical assistance in developing and certifying the 
technical adequacy of the participant's water quality plan.
    (e) The Forest Service (FS) shall:
    (1) Participate on the NCC and as appropriate, SCC and LCC.
    (2) Have technical responsibility for forestry.
    (3) Provide technical assistance for appropriate BMPs, by providing 
technical assistance through the State Forestry Agency (State Forester 
as appropriate) for planning, applying and maintaining forestry BMPs.
    (4) Participate in the monitoring and evaluation as appropriate.
    (5) As appropriate, assist in developing the water quality plan to 
assure that the most critical water quality problems are addressed.
    (f) The Science and Education Administration (SEA), through the 
State and County Extension Services, Appropriate, shall:
    (1) Participate on the NCC, SCC and LCC.
    (2) Develop, implement, and coordinate informational and educational 
programs for agricultural nonpoint source water pollution control.
    (3) Encourage the State and County Extension Services to develop and 
carry out a comprehensive educational and informational program.
    (4) Provide technical assistance for appropriate BMPs including, but 
not limited to, fertilizer management, pest management, conservation 
tillage, and animal waste as appropriate.
    (g) The Economics and Statistics Service (ESS) shall:
    (1) Participate on the NCC and as appropriate, SCC and LCC.
    (2) Assist in the economic evaluation of RCWP projects and BMPs.
    (3) Make data available from existing and planned ESS surveys 
relating to water quality and related matters.
    (4) Conduct socioeconomic research, within ESS authorities and 
funds, on relevant policy and program issues pertinent to RCWP.
    (5) Assist in the annual program evaluation and be responsible for 
the economic component of the comprehensive evaluation of selected 
projects.
    (h) The Farmers Home Administration (FmHA) shall:
    (1) Participate on the NCC, SCC and LCC.
    (2) Provide assistance and coordinate their farm loan and grant 
programs with RCWP.
    (3) Assist in the annual program evaluation.
    (i) The National Rural Clean Water Coordinating Committee (NCC). The 
NCC is chaired by the Administrator, FSA. Other members of the National 
Committee are Director, Office of Environmental Quality, the 
Administrators of, FmHA, and ESS: the Chief of FS, SCS; the Director of 
SEA; and the Assistant Administrator for Water and Waste Management, 
EPA. Nonfederal agencies such as Conservation Districts, State soil and 
water conservation agencies, State water quality management agencies, 
and other organizations

[[Page 12]]

may attend as observers. The duties of the NCC are to:
    (1) Assist the Administrator, FSA, in developing the program 
regulations and procedures.
    (2) Recommend to the Administrator, FSA, the project applications to 
be approved.
    (3) Advise the Secretary on the maximum Federal contribution to the 
total cost of the project and establish the maximum cost-share levels of 
BMPs.
    (4) Assist in coordinating individual agency programs with the RCWP.
    (5) Make recommendations as appropriate on the technical aspects of 
the program.
    (6) Recommend project areas and criteria for comprehensive joint 
USDA/EPA water quality monitoring, evaluation, and analysis.
    (7) Annually review the plans of work and recommend changes in the 
projects.
    (8) Annually review the progress in each project and periodically 
advise the Secretary, the Under Secretary for International Affairs and 
Commodity Programs, and Assistant Secretary for Natural Resources and 
the Environment on program and policy issues.
    (j) The State Rural Clean Water Coordinating Committee (SCC). The 
SCC is chaired by the STC chairperson. Members include a representative 
of the agency members on the NCC or their designee. Other members are 
the State water quality agency having responsibility for the water 
quality management program, the State soil and water conservation 
agency, the State Director, Cooperative Extension Service, and others, 
including those recommended by the Governor, and approved by the 
Chairperson of SCC. Other State and local agencies, and organizations, 
or individuals may attend as observers. The duties of the committee are 
to:
    (1) Submit its recommendations for approval of project 
application(s) to the State ASC Committee for forwarding to the NCC, 
through the Administrator, FSA.
    (2) Insure that each project application referred to the state ASC 
committee includes a water quality monitoring plan which specifies the 
organization(s) responsible for general monitoring, including cost and 
budget breakdown by organization(s).
    (3) Assure coordination of activities at the project level by 
assisting in determining the composition and responsibilities of the 
LCC.
    (4) Assure adequate public participation, including public 
meeting(s), and appropriate environmental evaluation in the preparation 
of RCWP applications.
    (5) Provide oversight for the RCWP in the State and to assist USDA 
and EPA in their comprehensive, joint water quality monitoring and 
evaluation of selected project areas, including coordination with the 
LCC.
    (6) Develop procedures for coordination between the RCWP and other 
water quality programs.
    (7) Assist the State ASC Committee in developing the membership of 
the LCC. For multi county projects, there will be one LCC.
    (8) Annually review and approve the plan(s) of work and changes 
proposed by the LCC and forward a copy to the NCC through the 
administrator, FSA.
    (k) The Local Rural Clean Water Coordinating Committee (LCC). The 
LCC is chaired by the County ASC Committee Chairperson. Other members 
include a representative of the agency members on the NCC, or their 
designee, where applicable, and a representative of the soil and water 
conservation district, the designated water quality management agency, 
State forestry agency, the Director, County Extension Service, and 
others recommended by the LCC and approved by the STC. (Where more than 
one county is in a project area only one LCC will be established in the 
project area.) The duties of the committee are to ensure that a process 
exists and actions are taken to implement any approved project. The 
duties will include, among others which may be outlined by the SCC, the 
following:
    (1) Assure an adequate level of public participation in implementing 
the project.
    (2) Provide project coordination, including development of the plan 
of work for implementing the approved project using various USDA 
agencies, local agencies and interested groups.
    (i) Enlist resources from other agencies and local groups.

[[Page 13]]

    (ii) Conduct informational and educational activities relating to 
the project.
    (iii) Develop criteria with the SCC for use by the County ASC 
Committee and the soil conservation district to establish priorities 
among individual applications for developing water quality plans.
    (iv) Assure the development of an adequate plan for project 
monitoring and evaluation.
    (3) Consult with SCC for coordination with USDA State officials, 
State water quality official, and EPA regional representatives to 
develop criteria for project plan of work and project coordination.
    (4) Review the project Plan of Work annually and recommend changes 
in the approved project to the SCC.
    (l) State ASC Committee shall:
    (1) Provide the chairperson for the SCC and be responsible for 
administration of the RCWP project(s) in the State.
    (2) Submit those project applications recommended by the SCC to the 
Administrator, FSA.
    (3) Provide overall administrative support for the RCWP through the 
County ASC Committee(s).
    (4) Designate a County ASC Committee Chairperson to serve as 
Chairperson of the LCC in multi-county projects.
    (5) Approve the BMPs for inclusion in project applications.
    (6) Be responsible for all other administrative functions as 
provided in these regulations.
    (m) The Governor of each State, at the Governor's option, may:
    (1) Recommend to the SCC Chairperson appropriate additional 
individuals for membership on the SCC.
    (2) Furnish to the SCC a listing of the water quality priority areas 
in the State which are to be used by the SCCs and LCCs in considering 
and developing project applications.
    (n) the State soil and water conservation agency will:
    (1) Participate on the SCC.
    (2) Assist in preparing and submitting RCWP project applications.
    (3) Carry out responsibilities of soil conservation districts, 
including participation on the LCC, where no soil conservation district 
exists.
    (o) The State water quality agency will:
    (1) Participate on the SCC.
    (2) Provide expertise in preparing RCWP project applications.
    (3) Assist in monitoring and evaluating the effectiveness of the 
water quality projects.
    (p) The County ASC Committee shall:
    (1) Be responsible for administration of the RCWP at the local 
level.
    (2) Provide the chairperson of the LCC.
    (3) Provide overall administrative support for the RCWP approved 
project through the FSA County Office, including accepting applications, 
administering the contracts and making payments and preparing reports.
    (4) Recommend approval of BMP's.
    (5) Together with the Soil Conservation District, determine the 
priority for technical assistance among individual applicants for water 
quality plans bases on criteria developed by the LCC to assure that the 
most critical water quality problems are addressed.
    (6) Establish the recommended cost share level for BMP's in the RCWP 
project applications in consultation with the LCC.
    (7) Utilize the Community ASC Committee(s) and LCC in encouraging 
farmers in the project area to install needed BMPs on the priority basis 
developed by the LCC.
    (8) Be responsible for developing, and annually reviewing, and 
carrying out the plan of work for the approved project.
    (q) The Soil Conservation District will:
    (1) Participate on the LCC.
    (2) Assist in the preparation and submission of applications for the 
RCWP.
    (3) Assist in the promotion of the approved RCWP project.
    (4) Together with the County ASC Committee, determine the priority 
of technical assistance among individual applicants for water quality 
plans based on criteria developed by the LCC to assure that the most 
critical water quality problems are addressed.

[[Page 14]]

    (5) Approve applicants' water quality plans and revisions.

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981; 59 
FR 60299, Nov. 23, 1994]



Sec. 700.6  Officials not precluded from exercising authority.

    Nothing in these regulations shall preclude the Secretary; 
Administrator, FSA; NCC; or Deputy Administrator, State and County 
Operations, FSA; from administering any or all phases of the RCWP 
programs delegated to the LCC, County ASC Committee, SCC, State ASC 
Committee or any employee(s) where the committee or employee fails to 
perform a function required in these regulations. In exercising this 
authority either the Secretary, Administrator, FSA, or Deputy 
Administrator, FSA, may delegate a person or persons to be in charge 
with full authority to carry out the program or other function(s) 
without regard to the LCC, ASC committee(s), or employee(s) for such 
period of time as is deemed necessary.

[59 FR 60299, Nov. 23, 1994]



              Subpart B--Project Authorization and Funding



Sec. 700.10  Applicability.

    The RCWP is applicable in project areas that meet the criteria for 
eligibility contained in Sec. 700.12 and are authorized for funding by 
the Secretary.



Sec. 700.11  Availability of funds.

    (a) The allocation of funds to the County ASC Committee(s) in a 
project area is to be made on the basis of the total funds needed to 
carry out the approved project.
    (b) The obligation of Federal funds for RCWP contracts with 
participants is to be made on the basis of the total contract costs.



Sec. 700.12  Eligible project areas.

    (a) Only those project areas which reflect the water quality 
priority concerns developed through the established water quality 
management program planning process and have identified agricultural 
nonpoint source water quality problems are eligible for authorization 
under RCWP. Only those critical areas or sources of pollutants 
significantly contributing to the water quality problems are eligible 
for financial and technical assistance.
    (b) An RCWP project area is a hydrologically related land area. 
Exceptions may be made for ease of administration, or to focus on 
concentrated critical areas. To be designated as an RCWP project area 
eligible for authorization, the area's water quality problems must be 
related to agricultural nonpoint source pollutants, including but not 
limited to, sediment, animal waste, irrigation return flows, runoff, or 
leachate that contain high concentrations of nitrogen, phosphorus, 
dissolved solids, toxics (pesticides and heavy metals), or high pathogen 
levels.



Sec. 700.13  Project applications.

    Existing and subsequent project applications submitted for 
consideration must contain adequate information on each item specified 
in Sec. 700.14. Instructions on such information requirements will be 
issued by the Administrator, FSA. Opportunity will be provided prior to 
final approval of a project for the LCC and the SCC, in consultation 
with the Govenor, through the applicable County and State ASC 
Committees, for modification necessary to bring them into conformance 
with the provisions of these regulations.



Sec. 700.14  Review and approval of project applications.

    (a) In reviewing applications and recommending priorities, the NCC 
will consider the following:
    (1) Severity of the water quality problem caused by agricultural and 
silvicultural related pollutants, including:
    (i) State designated uses of the water affected.
    (ii) Kinds, sources, and effects of pollutants.
    (iii) Miles of stream or acres of water bodies affected, extent of 
groundwater contamination.
    (2) Demonstration of public benefits from the project, including:
    (i) Effects on human health.

[[Page 15]]

    (ii) Population benefited by improved water quality.
    (iii) Effects on the natural environment.
    (iv) Additional beneficial uses of the waters that result from 
improvement of the water quality.
    (3) Economic, and technical feasibility to control water quality 
problems within the life of the project, including:
    (i) Size of the area and extent of BMPs needed.
    (ii) Cost per participant and cost per acre or source for solution 
of problem.
    (iii) Cost effectiveness of BMPs.
    (iv) Adequacy of planned actions to meet the project's objectives.
    (4) Suitability of the project for the experimental RCWP in the 
testing of programs, policies and procedures for the control of 
agricultural non-point source pollution, including:
    (i) A project representative of a geographic area with significant 
water quality problems.
    (ii) The potential of the project for monitoring and evaluation, 
including existing base line data.
    (5) State, local and other input in the project area, including:
    (i) Funds for cost-sharing general monitoring and technical 
assistance.
    (ii) Commitment of local leadership to promote the program.
    (iii) Commitment of farmers and ranchers to participate in RCWP.
    (6) The project's contribution to meeting the national water quality 
goals taking into consideration of other major sources of pollutants 
which affect the water quality in or near the project area.
    (b) Based on the project application, the NCC is to recommend an 
upper limit of the Federal contribution to the total cost of the 
project. This includes both BMP cost-share and technical assistance 
costs.
    (c) All project applications will be reviewed by EPA. BMPs approval 
for funding require EPA concurrence, except that the Secretary may 
assume EPA's concurrence, if EPA does not act within 15 days following 
receipt of the request for concurrence.
    (d) The Secretary will approve proj- ects for funding taking into 
consideration the recommendations of the NCC and consultation with EPA. 
The Chairperson, State ASC Committee, through the SCC, will assure that 
involved Federal, State, and local agencies are informed of the project 
approval.



Sec. 700.15  Transfer of funds.

    (a) Upon approval of a project, the Administrator, FSA, will 
transfer funds to the State(s) ASC Committee for funding the project. 
The State committee will transfer funds to the County ASC Committee(s) 
for the county or counties in an approved project.
    (b) FSA will transfer funds to the applicable agency or organization 
providing specific technical assistance and/or expanded information and 
education. The transfer will be made on a project by project basis.

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981]



Sec. 700.16  Termination of project funding.

    (a) Based on evidence of failure to accomplish the approved project 
objectives, including inadequate level of participation, the 
Administrator, FSA, may issue a termination notice after conferring with 
the Administrator, EPA, and the NCC.
    (b) The State ASC Committee shall give 10-day written notice to the 
applicable County ASC Committee of intent to terminate project funding. 
The termination shall establish the effective date of termination and 
the date for return of funds.
    (c) After receipt of a project termination, the County ASC Committee 
shall not make any new commitments or enter into any new RCWP contracts. 
Those contracts in force at the time of project termination will remain 
in force until completed.



                 Subpart C--Participant's RCWP Contracts



Sec. 700.20  Eligible land.

    RCWP is only applicable to privately owned agricultural lands in 
approved project areas. Indian tribal lands and lands owned by 
irrigation districts are eligible lands.

[[Page 16]]



Sec. 700.21  Eligible person (participant).

    (a) Any land owner or operator whose land or activities in a project 
area is contributing to the area's agricultural nonpoint source water 
quality problems and who has an approved water quality plan is eligible 
to enter into an RCWP contract. For the purpose of this section, an 
eligible person is an individual, partnership, corporation (except 
corporations whose stock is publicly traded), Indian tribe, irrigation 
district or other entity.
    (b) Federal, State or local governments, or subdivisions thereof 
(except irrigation districts), are not considered as an eligible person 
for RCWP contracts.
    (c) This program will be conducted in compliance with all 
requirements respecting nondiscrimination as contained in the Civil 
Rights Act of 1964 and amendments thereto and the Regulations of the 
Secretary of Agriculture (7 CFR 15.1 through 15.12)

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981]



Sec. 700.22  Application for assistance.

    (a) Land owners or operators in an approved project area must apply 
for RCWP assistance through the office of the County ASC Committee(s) by 
completing the prescribed application form.
    (b) The priority for developing water quality plans among applicants 
is to be determined by the County ASC Committee and the soil 
conservation district based on the criteria developed by the LCC in 
consultation with the SCC, with technical assistance from SCS.



Sec. 700.23  Water quality plan.

    (a) The participant's water quality plan, developed with technical 
assistance and certification by the SCS or its designee and approved by 
the CD, is to include appropriate approved BMPs. Such BMPs must reduce 
the amount of pollutants that enter a stream, aquifer, or lake by:
    (1) Methods such as reducing the application rates or changing the 
application methods or potential pollutants.
    (2) Methods such as practices or combinations of practices which 
prevent potential pollutants from leaving source areas or reduce the 
amount of potential pollutants that reach a stream or lake after leaving 
a source area.
    (b) Participants' water quality plans shall include BMPs for the 
treatment of all critical areas or sources on the farm on that land 
within the project area regardless of eligibility for cost-sharing with 
RCWP funds. Management type BMPs which are not cost-shared but for which 
technical advice will be given project participants shall be listed in 
the plan. A water quality plan is not required for that portion of a 
farm that does not include a critical area or source.
    (c) The participant is responsible for compliance with all 
applicable Federal, State, and local laws including those relating to 
the environment, in installing BMPs to solve the nonpoint source water 
quality problems.
    (d) Time schedules for implementing BMPs are to be provided in the 
participant's water quality plan.
    (e) The SCS or its designee shall make an annual status review to 
assure the technical adequacy of the implementation of the water quality 
plan.



Sec. 700.24  Cost-sharing.

    (a) The maximum cost-share for each project will be approved by the 
Secretary, taking into consideration the recommendation of the NCC. The 
Federal cost-share for each BMP shall not exceed 75 percent of the cost 
of carrying out the practice unless otherwise approved by the 
Administrator, FSA.
    (b) The combined cost-sharing by Federal, State, or Subdivision 
thereof shall not exceed 100% of the cost of carrying out the BMP.
    (c) The County ASC Committee(s) in consultation with the LCC will 
annually set maximum individual BMP cost-share rates for the project 
area.
    (d) BMPs to be cost shared must have a positive effect on water 
quality.
    (e) Cost sharing is not to be made available for measures installed 
primarily for:
    (1) Bringing additional land into crop production.
    (2) Increasing production on existing crop land.
    (3) Flood protection.

[[Page 17]]

    (4) Structural measures authorized for installation under Pub. L. 
83-566, Watershed Protection and Flood Prevention Act.

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981]



Sec. 700.25  RCWP contract.

    (a) In order to participate in the RCWP, each landowner, operator, 
or person who controls or shares in the control of a tract of land on 
which one or more of the BMP's will be performed must execute the RCWP 
contract in which they agree to carry out the water quality plan.
    (b) The participant must furnish satisfactory evidence of his or her 
control of the tract of land on which one or more of the BMP's will be 
performed.
    (c) Cost-sharing payments cannot be provided for any measure that is 
initiated before the contract is approved by the County ASC Committee.
    (d) RCWP contracts shall include the basic contract document, the 
participant's water-quality plan, schedule of operations, and special 
provisions as needed.
    (e) Technical assistance will be provided to participants to develop 
the water quality plan and to install BMPs.
    (f) SCS or its designee shall approve the technical adequacy of the 
Water Quality Plan.
    (g) Participants shall install BMPs according to the specifications 
that are applicable at the time the contract is signed or the measures 
are installed.
    (h) The contract period is to be not less than 3 and not more than 
10 years. A contract is to extend for at least 1 year after the 
application of the last cost-shared BMPs. All contract items are to be 
accomplished prior to contract expiration.
    (i) BMPs are to be maintained by the participant at no cost to the 
RCWP.
    (j) All BMPs in the water-quality plan shall be maintained for the 
established life span of the BMP.
    (k) The County ASC Committee in consultation with the LCC shall 
establish a BMP life span for each BMP offered in the approved project 
area. Each BMP cost-shared shall have a life span of at least 5 years, 
unless otherwise approved by the Administrator, FSA.
    (l) A participant may enter into a pooling agreement with other 
participants to solve mutual water quality problems.
    (m) Participants are responsible for:
    (1) Accomplishing the water quality plan.
    (2) Obtaining and maintaining any required permits and easements 
necessary to perform the planned work.
    (3) Applying or arranging for the application of BMPs, as scheduled 
in the plan, according to approved standards and specifications.
    (4) The operation and maintenance of BMPs installed during the 
contract period.
    (5) Obtaining the authorities, rights, easements, or other approvals 
necessary to maintain BMPs in keeping with applicable laws and 
regulations.
    (n) Unless otherwise approved by the NCC, the County ASC Committees 
shall not enter into any new RCWP contracts after five (5) years from 
the date when RCWP funds are first made available to the project.

(Pub. L. 96-108, 98 Stat. 821, 835 and Pub. L. 96-528, 94 Stat. 3095, 
3111)

[45 FR 14009, Mar. 4, 1980, as amended at 48 FR 42803, Sept. 20, 1983]



Sec. 700.26  Contract modifications.

    (a) The County ASC Committee by mutual agreement with the landowner 
or operator, may modify contracts previously entered into if it is 
determined to be desirable to carry out the purposes of the program, 
facilitate the practical administration thereof, or to accomplish 
equitable treatment with respect to other conservation, land-use, and/or 
water quality programs.
    (b) Requirements of active contracts may be modified by the County 
ASC Committee only if such modifications are specifically provided for 
in these regulations. The concurrence of SCS or its designee and the CD 
are necessary when modifications involve a technical aspect of the 
participant's water quality plan. A contract may be modified only if it 
is determined that such modifications are desirable to carry out 
purposes of the program or to facilitate the program's practical 
administration.

[[Page 18]]

    (c) Contracts may be modified when the participants add or delete 
land to the farm.
    (d) Contracts may be modified to add, delete, or substitute BMPs 
when:
    (1) The installed measure failed to achieve the desired results 
through no fault of the participant.
    (2) The installed measure deteriorated because of conditions beyond 
the control of the participant.
    (3) Another BMP will achieve the desired results.
    (4) The extent of the BMP is changed.
    (e) Contract modifications are not required when items of work are 
accomplished prior to scheduled completion or within 1 year following 
the year of scheduled completion. Other time schedule revisions will 
require modification.
    (f) If, during the contract period, all or part of the right and 
interest in the land is transferred by sale or other transfer action, 
the contract is terminated on that portion of the contract, the 
participant:
    (1) Forfeits all right to any future cost-share payments on the 
transferred portion.
    (2) Must refund all cost-share payments that have been made on the 
transferred land unit unless the new land owner or operator becomes a 
party to the contract, except the payment may be retained where it is 
determined by the County ASC Committee after consultation with the 
technical agency and the CD, that the established BMPs will provide 
water quality benefits for the designed life of the BMP.
    (g) If the new land owner or operator becomes a party to the 
contract:
    (1) Payment which has been earned, may be made to the participant 
who applied the BMPs and had control prior to the transfer.
    (2) The new land owner or operator is to assume all obligations of 
the previous participant with respect to the transferred land.
    (3) The contract with the new participant is to remain in effect 
with the original terms and conditions, except that;
    (4) The original contract is to be modified in writing to show the 
changes caused by the transfer. If the modification is not acceptable to 
the County ASC Committee, the provisions of paragraphs (f)(1) and (2) of 
this section apply.



Sec. 700.27  Cost-share payment.

    (a) General. Participants are to obtain or contract for materials or 
services as needed to install BMPs. Federal cost-share payments are to 
be made by the County ASC Committee upon certification by the District 
Conservationist, SCS, or designee, that the BMPs, or an identifiable 
unit thereof, have been properly carried out and meet the appropriate 
standards and specifications.
    (b) Payment maximum. The maximum RCWP cost-share payment to a 
participant shall be limited to $50,000.
    (c) Basis for cost-share payment. (1) Cost-share payments are to be 
made by the County ASC Committee at the cost-share percentage specified 
in the project approval notice and by one of the following methods as 
set out in the contract:
    (i) Average cost; or
    (ii) Actual cost but not to exceed the average cost.
    (2) If the average cost at the time of starting the installation of 
a BMP or identifiable unit is less than the costs specified in the 
contract, payment is to be at the lower rate. If the costs at the start 
of installation are higher, payment may be made at the higher rate. A 
modification will be necessary if the higher cost results in a 
significant increase in the total cost-share obligation. Cost-share 
payment is not to be made until the modification reflecting the increase 
is approved.
    (d) Average cost development. Average costs are to be developed by 
the County ASC Committee for each project using cost data from the local 
area. These costs shall be reviewed by the SCC for consistency with 
average costs in other USDA programs. These average costs shall be 
updated annually by the County ASC Committee in consultation with the 
LCC.
    (e) Application for payment. Cost-share payments shall be made by 
the County ASC Committee after a participant has completed a BMP or an 
identifiable unit of a BMP and it is determined to

[[Page 19]]

meet standards and specifications. Application for payment must be 
submitted to the County ASC Committee, on the prescribed form and be 
supported by such cost receipts as are required by the County ASC 
Committee. It is the participant's responsibility to apply for payments.
    (f) Authorizations for payments to suppliers. (1) The contract may 
authorize that part or all of the Federal cost share for a BMP or an 
identifiable unit be made directly to suppliers of materials or 
services. The materials or services must be delivered or performed 
before payment is made.
    (2) Federal cost shares will not be in excess of the cost share 
attributable to the material or service used or not in excess of the 
cost share for all identifiable units as may be requested by the 
participant.
    (g) Material inspection and analysis. When authorizations for 
payments to suppliers are specified, the County ASC Committee, its 
representatives, or the Federal Government reserve the right to inspect, 
sample, and analyze materials or services prior to their use.
    (h) Assignments, set-offs, and claims. (1) Any person who may be 
entitled to any cost-share may assign rights thereto in accordance with 
regulations governing the assignments of payments. (31 U.S.C. 203, as 
amended, and 41 U.S.C. 15, as amended.)
    (2) If any participant to whom compensation is payable under RCWP is 
indebted to the United States and such indebtedness is listed on the 
county register of indebtedness maintained by the County ASC Committee, 
the compensation due the participant must be used (set-off) to reduce 
that indebtedness. Indebtedness to USDA is to be given first 
consideration. Setoffs made pursuant to this section are not to deprive 
the participant of any right to contest the justness of the indebtedness 
involved. (See 7 CFR part 13.)
    (3) Any cost-share payment due any participant shall be allowed 
without deduction of claims for advances except as provided for above 
and without regard to any claim or lien against any crop, or proceeds 
thereof, in favor of the participant or any other creditor.
    (i) Access to land unit and records. The County ASC Committee, the 
agency providing technical assistance or representatives thereof, shall 
have the right of access at reasonable times to land under application 
or contract, and the right to examine any program records to ascertain 
the accuracy of any representations made in the applications or 
contract.
    (j) Suspension of payments. No cost-share payments will be made 
pending a decision on whether or not a contract violation has occurred.
    (k) Ineligible payments. The filing of requests for payment for BMPs 
not carried out, or for BMPs carried out in such a manner that they do 
not meet the contract specifications, constitutes a violation of the 
contract.



Sec. 700.28  Appeals.

    (a) The applicant may, prior to execution of the contract, request 
that the County ASC Committee review or reconsider administrative 
criteria being used in developing his or her contract.
    (1) The applicant shall make a written request to the County ASC 
Committee setting forth the basis for the appeal.
    (2) The County ASC Committee shall have 30 days in which to make a 
decision and notify the applicant in writing.
    (3) The decision of the County ASC Committee may be appealed to the 
State ASC Committee.
    (4) The State ASC Committee decision shall be final.
    (b) The applicant/participant may request and receive a review by 
the SCS State Conservationist of criteria used in developing the water 
quality plan or BMP specifications.
    (c) After the contract has been executed, the participant may 
request and receive a review of administrative procedures under the FSA 
appeals procedures set out in 7 CFR part 780.



Sec. 700.29  Contract violations.

    (a) The following actions constitute a violation of the RCWP 
contract by a participant:
    (1) Knowingly or negligently damaging or causing BMPs to become 
impaired.
    (2) Failing to comply with the terms of the contract.
    (3) Filing a false claim.

[[Page 20]]

    (4) Misusing conservation materials or services.
    (5) Adopting a land use or practice during the contract period which 
tends to defeat the purposes of the program.
    (b) Contract termination as a result of violations. (1) The 
participant agrees to forfeit all rights to further cost-sharing 
payments under a contract and to refund all cost-share payments received 
if the County ASC Committee with the concurrence of the State ASC 
Committee, determines that:
    (i) There was a violation of the contract during the time the 
participant had control of the land.
    (ii) The violation was of such a nature as to warrant termination of 
the contract.
    (2) The participant shall be obligated to refund all cost-share 
payments, including those paid to vendors for materials and services.
    (c) Payment adjustments and refunds resulting from violations. (1) 
The participant agrees to refund cost-share payments received under the 
contract or to accept payment adjustments if the County ASC Committee 
determines and the State ASC Committee concurs that:
    (i) There was a violation of the contract during the time the 
participant had control of the land.
    (ii) The nature of the violation does not warrant termination of the 
contract.
    (2) Payment adjustments may include decreasing the rate of the cost 
share, or deleting from the contract a cost-share commitment, or 
withholding cost-share payments earned but not paid. The participant who 
signs the contract may be obligated to refund cost-share payments.



                  Subpart D--Monitoring and Evaluation



Sec. 700.40  General program monitoring and evaluation.

    (a) Requirement. All approved RCWP projects will be monitored in 
sufficient detail to determine BMP application progress and to generally 
document water quality improvement trends through the life of the 
project. This will include, among others, data on BMP installation 
progress, payments made, refunds and periodic water quality monitoring 
for addressing short and long-term trends in water quality.
    (b) Monitoring Report. A water quality monitoring report will be 
submitted as a part of the annual progress report. The initial report 
will include:
    (1) A description of water quality monitoring strategy for the area.
    (2) Data collection schedule.
    (3) Parameters being monitored (and baseline values).
    (4) Collection and analytical methods.
    (5) A summary of existing data and trends.

Subsequent reports will update the initial data and report any 
significant changes in water quality land use.
    (c) Program Monitoring Funding. The project application and the 
proposed monitoring plan are to include an estimate of the local and 
State financial and technical support. General monitoring will not be 
financed with RCWP funds.



Sec. 700.41  Comprehensive USDA/EPA joint project water quality monitoring, evaluation, and analysis.

    (a) Requirement. The Secretary and Administrator, EPA will jointly 
select a limited number of projects to be comprehensively monitored and 
evaluated from a list of projects recommended by the NCC. The NCC will 
develop criteria for selecting the project areas.
    (b) Project Selection. The NCC will recommend projects for this 
comprehensive program. The project areas are to be representative of the 
agricultural and silvicultural nonpoint source pollution problems.
    (c) Plan Development. After a project is selected for the 
comprehensive monitoring and evaluation, the SCC is to submit within 90 
days, a plan for USDA-EPA review and approval. USDA and EPA will have 30 
days for the plan review and approval process.
    (d) Plan Requirements. In general, the comprehensive monitoring plan 
will address and include the following:
    (1) Objective. Define the purpose and scope of the monitoring 
program and establish clear objectives for each activity proposed.
    (2) Monitoring Strategy. Define the basic hydrological and 
meteorological

[[Page 21]]

factors within the proposed RCWP project area and identify the strategy 
and parameters to be used to identify the changes in water quality 
attributable to the installation of BMPs. Wherever possible, identify 
and quantify changes in land use, land use patterns and farming 
practices that will affect the quantity, quality or timing of nonpoint 
source pollutants reaching an aquatic system and detail information as 
to number and location of sampling stations and the frequency of sample 
collection.
    (3) Socioeconomic Impacts. Identify the positive and negative 
impacts on the landowners in the project area and estimate the community 
or off-site benefits expected of the project if completed as planned.
    (4) Institutional Aspects. Identify and clearly define the role and 
responsibility for each participating agency including, where 
appropriate fiscal and manpower commitments.
    (5) Educational Aspects. Clearly define the approache(s) to be used 
to inform and educate individual landowners. Include procedures for 
periodic evaluation of this effort so the mid-course corrections can be 
made if needed.
    (6) Quality Assurance. To insure that the data collected is usable 
to make National projections, a quality assurance program must be 
included that is consistent with that of the EPA Region within which the 
project is located.
    (7) Data Storage. The data collected on comprehensive monitoring 
projects must be available to USDA and EPA RCWP user groups.
    (e) Reporting. Reports for these projects are to be made at least 
annually to the NCC based on guidance sent to the SCC by the 
Administrator, FSA.
    (f) Funding. Funding for the comprehensive monitoring will be 
provided from RCWP funds and other authorizations.



Sec. 700.42  Program evaluation.

    (a) The RCWP will be evaluated annually by the USDA. The evaluation 
will be based on the reports provided in these regulations and on 
special studies undertaken by USDA or EPA as part of the RCWP program.
    (b) The USDA Deputy Under Secretary for International Affairs and 
Commodity Program will have the responsibility for coordinating the 
program evaluation and preparing an annual report for transmittal to the 
Secretary of Agriculture and the Administrator of EPA. The Deputy 
Assistant Secretary for Natural Resources and the Director of Economics, 
Policy Analysis and Budget, USDA, and the Assistant Administrator for 
Water and Waste Management, EPA will assist in this effort.



Sec. 700.43  Public benefits when installing BMP's.

    All BPM's implemented under this program shall be in compliance with 
regulations promulgated under part 799 on environmental quality and 
related environmental concerns or similar regulations issued by a 
technical agency. Persons responsible for any aspect of performing BMPs 
shall carry out their responsibilities in such a way as to promote 
public benefits:
    (a) By improving or preserving environmental quality and ecological 
balance.
    (b) By preventing or abating pollution and other environmental 
degradation.
    (c) Benefiting the community by means such as preserving open space 
or enhancing the appearance of the area.
    (d) Benefiting wildlife and other desirable life forms.
    (e) Preserving historic, archaeological, or scenic sites, wetlands, 
ecologically critical areas and prime farmland.
    (f) Avoiding the creation of hazards to persons or animals.
    (g) Avoiding actions that may adversely affect an endangered or 
threatened species and flood plains.



PART 701--CONSERVATION AND ENVIRONMENTAL PROGRAMS--Table of Contents




Sec.
701.1  Background.
701.2  Definitions.

               Subpart--Agricultural Conservation Program

701.3  Program objective.
701.4  State funds.
701.5  County funds.
701.6  Availability of funds.

[[Page 22]]

701.7  Eligible person.
701.8  Eligible land.
701.9  Conservation practices.
701.10  County programs.
701.11  State programs.
701.12  Selection of practices.
701.13  Levels and rates of cost-sharing.
701.14  Starting of practices.
701.15  Method of approval.
701.16  Long-term agreements.
701.17  Replacement, enlargement, or restoration.
701.18  Pooling agreements.
701.19  Special provisions for low-income farmers and ranchers.
701.20  Encumbering land.
701.21-701.22  [Reserved]
701.23  Maximum cost-share limitation.
701.24  Completion of practices.
701.25  Time of filing payment application.
701.26  Other program provisions.

                  Subpart--Forestry Incentives Program

701.27  Program objective.
701.28  [Reserved]
701.29  Designated counties.
701.30  Eligible person, land, and ownerships.
701.31  Program funds.
701.32  Eligible practices and cost-share requirements.
701.33  The National program.
701.34  Development of State programs.
701.35  Development of county programs.
701.36  Adaptation of practices.
701.37  Levels and rates of cost-sharing.
701.38  Prior approval for cost-sharing.
701.39  Methods of approval.
701.40  Long-term agreements.
701.41  Restoration of practices.
701.42  Maximum cost-share limitations.
701.43  Completion of practice.
701.44  Time of filing payment application.
701.45  Other program provisions.

                 Subpart--Emergency Conservation Program

701.46  Program objective.
701.47  Program availability.
701.48  Eligibility of person and land.
701.49  Emergency conservation program practices.
701.50  Practice approval.
701.51  Extent of cost-sharing.
701.52  Eligible costs.
701.53  Filing requests.
701.54  Approving requests.
701.55  Pooling agreements.
701.56  Payment approval.
701.57  Other program provisions.

                       Subpart--General Provisions

701.58  Restriction on program eligibility.
701.59  Delegation of authority.
701.60  Practice specifications.
701.61  Responsibility for technical phases of practices.
701.62  Items of cost on which rates of cost-sharing may be based.
701.63  Handbook, bulletins, instructions, and forms.
701.64  Opportunity for requesting cost-shares.
701.65  Repair, upkeep and maintenance of practices.
701.66  Public benefits when installing practices.
701.67  Payments for uncompleted practices.
701.68  Practices involving the establishment or improvement of 
          vegetative cover.
701.69  Failure to meet minimum requirements or failure to comply fully 
          with program provisions.
701.70  Practices carried out with aid from ineligible persons.
701.71  Division of cost-shares.
701.72  Death, incompetency, or disappearance.
701.73  Applying cost-share limitations.
701.74  Persons eligible to file application for payment of cost-shares.
701.75  Time and manner of filing application and required information.
701.76  Appeals.
701.77  Performance based on advice or action of county or State 
          committee.
701.78  Compliance with regulatory measures.
701.79  Maintenance and use of practice.
701.80  Actions defeating purpose of program.
701.81  Depriving others of cost-shares.
701.82  Filing of false claims.
701.83  Cost-shares not subject to claims.
701.84  Assignments.
701.85  Environmental considerations.
701.86  Information collection requirements.

    Authority: 16 U.S.C. 590d, 590g-590o, 590p(a), 590q, 1501-1510, 
1606, 2101-2111, 2201-2205; 48 U.S.C. 1469d(c).

    Source: 45 FR 49522, July 25, 1980, unless otherwise noted.



Sec. 701.1  Background.

    (a) Through the conservation and environmental programs administered 
by the Department of Agriculture, the Federal Government will share with 
farmers, ranchers, and other eligible private landowners in the United 
States and the applicable territories and possessions of the United 
States, the cost of carrying out:
    (1) Approved soil and water conservation and pollution abatement 
practices, including related wildlife conservation practices.
    (2) Approved forestry practices.

[[Page 23]]

    (3) Emergency conservation measures, in accordance with the 
provisions of this part and such modifications there of as may hereafter 
be made.
    (b) Cost-sharing may be made available to eligible program 
participants by the Farm Service Agency for:
    (1) Soil and water conservation and pollution abatement practices 
under the Agricultural Conservation Program.
    (2) Forestry practices under the Agricultural Conservation Program 
or Forestry Incentives Program.
    (3) Practices to correct damage to land or conservation practices 
caused by natural disaster under the Emergency Conservation Program.
    (4) Installation of water conservation measures under the Emergency 
Conservation Program during periods of severe drought.
    (c) Information on the practices for which costs will be shared, the 
exact specifications and rates of cost-sharing for such practices, and 
the eligibility requirements for participating in the programs, may be 
obtained from the Agricultural Stabilization and Conservation county 
committee (hereinafter referred to as ``county committee'') for the 
county in which the farm, ranch or other eligible land is located or 
from the Agricultural Stabilization and Conservation State committee 
(hereinafter referred to as ``State committee''), for the State in which 
such county is located.



Sec. 701.2  Definitions.

    (a) County conservation review group consists of the county 
committee; the county extension agent; a representative of the Soil 
Conservation Service; a representative of the U.S. Forest Service; a 
representative of the Farmers Home Administration; a representative of 
the State forestry agency or its equivalent, when the representative 
accepts an invitation to be a member of the group; and a representative 
of the conservation district in the county, where the governing board of 
the district accepts an invitation to designate a representative (if 
there is more than one district in the county, the governing boards of 
the districts may jointly designate only one person to represent all of 
the districts). The county conservation review group shall have the 
responsibilities as provided for in Secs. 701.10 and 701.35.
    (b) Farm or ranch means that area of land considered as a farm under 
the regulations governing reconstitution of farms, allotments, and 
bases, part 719 of this chapter, as amended, and, for the forestry 
incentives program, ``farm'' or ``ranch'' means eligible land (or 
ownership tracts) as provided in Sec. 701.30.
    (c) National conservation review group consists of representatives 
of the Farm Service Agency; Soil Conservation Service; U.S. Forest 
Service; Science and Education Administration; Economics, Statistics, 
and Cooperatives Service; Farmers Home Administration; Office of the 
General Counsel, U.S. Department of Agriculture; Office of Budget 
Planning and Evaluation, U.S. Department of Agriculture; Environmental 
Protection Agency; and Office of Management and Budget. The national 
conservation review group is responsible for recommending changes in 
program administrative procedures and policy guidelines, and evaluations 
of program effectiveness and operating arrangements.
    (d) Program year means the Federal fiscal year for accounting 
purposes.
    (e) State means any one of the United States, Puerto Rico, the 
Virgin Islands, and (1) In the case of the Agricultural Conservation 
Program and the Emergency Conservation Program, Guam and the 
Commonwealth of the Northern Mariana Islands; and (2) In the case of the 
Forestry Incentives Program, Guam, American Samoa, the Commonwealth of 
the Northern Mariana Islands, the Trust Territory of the Pacific Islands 
and the Territories and possessions of the United States.
    (f) State conservation review group consists of the State committee, 
the State Director of Extension; the State Conservationist of the Soil 
Conservation Service; a representative of the U.S. Forest Service; a 
representative of the Farmers Home Administration; a representative of 
the State forestry agency, or its equivalent, when the representative 
accepts an invitation to be a member of the group; a representative of 
the State Soil Conservation Committee, or its equivalent, when the

[[Page 24]]

representative accepts an invitation to be a member of the group; and a 
representative of the State Water Quality Agency, or its equivalent when 
it accepts an invitation to be a member of the group. The State 
conservation review group has the responsibility provided for in 
Sec. 701.11.
    (g) State forestry committee, or its equivalent, consists of the 
State forester or equivalent State official, who serves as chairperson; 
and a head or representative at the State level of the following USDA 
agencies: Farm Service Agency; U.S. Forest Service; Science and 
Education Administration; Farmers Home Administration; Soil Conservation 
Service. At the discretion of the committee, State and local interests 
may also be involved. The function of the State forestry committee is to 
coordinate forestry budget proposals, agency roles in education, 
technical assistance, technology transfers, and forestry incentives.
    (h) In the regulations in this part and in all instructions, forms, 
and documents in connection therewith, all other words and phrases 
specifically relating to FSA operations shall, unless the context or 
subject matter otherwise requires, have the meanings assigned to them in 
the regulations governing reconstitution of farms, allotments and bases, 
part 719 of this chapter, as amended.

[45 FR 49522, July 25, 1980, as amended at 47 FR 46998, Oct. 22, 1982; 
53 FR 15657, May 3, 1988]



               Subpart--Agricultural Conservation Program



Sec. 701.3  Program objective.

    (a) The objective of the Agricultural Conservation Program 
(hereinafter referred to in this subpart as the ``program'') is to 
assure the continued supply of food and fiber necessary for the 
maintenance of a strong and healthy people and economy, and to provide 
for environmental conservation or enhancement.
    (b) This will be accomplished through a program that has been 
formulated and is to be carried out, taking into consideration:
    (1) The need to control erosion and sedimentation from agricultural 
land and conserve the water resources on such land.
    (2) The need to control pollution from animal wastes.
    (3) The need to facilitate sound resource management systems through 
soil and water conservation.
    (4) The need to encourage voluntary compliance by agricultural 
producers with Federal and State requirements to solve point and non-
point sources of pollution.
    (5) National priorities reflected in the National Environmental 
Policy Act of 1969 and other congressional and administrative actions.
    (6) The degrees to which the measures contribute to the national 
objective of assuring a continuous supply of food and fiber necessary 
for the maintenance of a strong and healthy people and economy.
    (7) The type of conservation measures needed to improve water 
quality in rural America.
    (8) The types of conservation measures needed that have significant 
energy conserving benefits.

[45 FR 49522, July 25, 1980, as amended at 47 FR 939, Jan. 8, 1982]



Sec. 701.4  State funds.

    Funds available for practices to be performed under the program will 
be distributed among the States in accordance with conservation needs as 
determined by the Secretary.



Sec. 701.5  County funds.

    The State committee will allocate the funds available for practices 
among the counties within the State consistent with the program 
objective, and will give particular consideration to the furtherance of 
special projects, watershed conservation projects, resources 
conservation development projects, approved State water quality plans, 
and other conservation and pollution abatement projects sponsored by 
local people and organizations.



Sec. 701.6  Availability of funds.

    (a) The provisions of the program are subject to such legislation as 
the Congress of the United States may hereafter enact; the paying of the 
cost-shares provided herein is contingent

[[Page 25]]

upon such appropriation as the Congress may provide for such purpose; 
and the amounts of such cost-shares will be within the limits finally 
determined by such appropriation.
    (b) Funds available for the Agricultural Conservation Program may be 
made available as needed for practices to be performed under the Naval 
Stores Conservation Program, in accordance with instructions issued by 
the Deputy Administrator, State and County Operations.



Sec. 701.7  Eligible person.

    An eligible person is a farmer or rancher who as an individual, 
partnership, association, corporation, estate, trust, or other business 
enterprise, or other legal entity (excluding districts which have taxing 
authority, Federal agencies, States and State agencies, but not 
excluding political subdivisions of a State) and, as an owner, landlord, 
tenant, or sharecropper, participates in the operation of a farm or 
ranch.



Sec. 701.8  Eligible land.

    (a) The program is applicable to:
    (1) Privately-owned lands;
    (2) Land owned by a State or political subdivision of a State;
    (3) Lands owned by corporations which are partly owned by the United 
States;
    (4) Lands temporarily owned by the United States or a corporation 
wholly owned by it, which were not acquired or reserved for conservation 
purposes, including lands administered by the Farmers Home 
Administration, the U.S. Department of Defense, or by any other 
government agency designated by the Deputy Administrator, State and 
County Operations;
    (5) Any cropland farmed by private persons which is owned by the 
United States or a corporation wholly owned by it;
    (6) Indian lands, except that where grazing operations are carried 
out on Indian lands administered by the Department of the Interior, such 
lands are within the scope of the program only if covered by a written 
agreement approved by the Department of the Interior giving the operator 
an interest in the grazing and forage growing on the land and a right to 
occupy the land in order to carry out the grazing operations; and
    (7) Noncropland owned by the United States on which practices are 
performed by private persons where such practices directly conserve or 
benefit nearby or adjoining privately-owned lands of the persons 
performing the practices and such persons maintain and use such 
federally-owned noncropland under agreement with the Federal agency 
having jurisdiction thereof.
    (b) The program is not applicable to:
    (1) Noncropland owned by the United States which was acquired or 
reserved for conservation purposes, or which is to be retained 
permanently under Government ownership, including, but not limited to, 
grazing lands administered by the Forest Service of the U.S. Department 
of Agriculture, or by the Bureau of Land Management (including lands 
administered under the Taylor Grazing Act), or the Fish and Wildlife 
Service of the U.S. Department of the Interior, except as indicated in 
paragraph (a)(7) of this section.
    (2) Nonprivate persons for performance of practices on any land 
owned by the United States or a corporation wholly owned by it.



Sec. 701.9  Conservation practices.

    Conservation practices as specified by the Deputy Administrator, 
State and County Operations, FSA, are made available nationally under 
the Agricultural Conservation Program and may be included in the State 
and county programs. Practices shall not be primarily production 
oriented or have little or no conservation or pollution abatement 
benefits. The practices are designed to be consistent with the 
agricultural conservation policy stated in section 7 of the Soil 
Conservation and Domestic Allotment Act, as amended, and national 
program policy, and are developed primarily to meet a definite need to 
accomplish one or more of the following:
    (a) Establish long-lasting protective cover.
    (b) Improve or sustain existing protective cover.
    (c) Conserve or safely dispose of water.
    (d) Benefit wildlife.

[[Page 26]]

    (e) Establish or improve stands of forest trees.
    (f) Give protection against soil erosion.
    (g) Prevent or abate agricultural-related pollution of water, land, 
and air.
    (h) Meet special State or county conservation needs.
    (i) Encourage energy conservation practices.

[45 FR 49522, July 25, 1980, as amended at 47 FR 939, Jan. 8, 1982]



Sec. 701.10  County programs.

    (a) A program shall be developed in each county by the county 
committee, in consultation with the county conservation review group, in 
accordance with the National and State development guidelines and 
policies provided. At least one public meeting per year shall be held 
for this purpose.
    (b) The county program shall be that approved by the State committee 
and the Secretary or designee.

[45 FR 49522, July 25, 1980, as amended at 47 FR 46998, Oct. 22, 1982]



Sec. 701.11  State programs.

    (a) The State committee, in consultation with the State conservation 
review group, shall develop recommendations for the State program. The 
chairperson of the State conservation review group may also invite 
others with conservation or water quality interests to participate in 
such deliberations. At least one public meeting per year shall be held 
for this purpose.
    (b) The State program shall consist of the guidelines and practices 
selected by the State committee after considering the recommendations 
submitted by the county committee to the State review group and approved 
by the Secretary or designee.

[45 FR 49522, July 25, 1980, as amended at 47 FR 46999, Oct. 22, 1982]



Sec. 701.12  Selection of practices.

    The practices to be included in the State or county program shall be 
only those practices for which cost-sharing is essential to permit 
accomplishment of the program objective.



Sec. 701.13  Levels and rates of cost-sharing.

    (a) The maximum level of cost-sharing for each practice shall be the 
percentage of the average cost of performing the practice considered 
necessary to obtain the needed performance of the practice, but at a 
level such that the participant will make a significant contribution to 
the cost of performing the practice.
    (b) Levels of cost-sharing under annual agreements for each practice 
shall not be in excess of 75 percent of the average cost of carrying out 
the practice as determined by the county committee. However, where the 
Deputy Administrator, State and County Operations, determines a higher 
level of cost-sharing is necessary to provide adequate incentive for 
producer to carry out a conservation practice, the Deputy Administrator, 
State and County Operations, may specifically authorize a higher level. 
(See Sec. 701.19 for special provision for low-income farmers.)
    (c) Levels of cost-sharing under long term agreements shall not be 
in excess of 75 percent nor less than 50 percent of the average cost for 
each practice as determined by the county committee.
    (d) For the purpose of establishing rates of cost-sharing, the 
average cost of performing a practice may be the average cost for a 
county or a part of a county, as determined by the county committee.

[45 FR 49522, July 25, 1980, as amended at 47 FR 939, Jan. 8, 1982]



Sec. 701.14  Starting of practices.

    Costs will not be shared for practices or components of practices 
that are started before a formal approval is given by the county 
committee.

[47 FR 939, Jan. 8, 1982]



Sec. 701.15  Method of approval.

    The county committee will determine the extent to which Federal 
funds will be made available to share the cost of each approved 
practice, taking into consideration the county allocation, the 
conservation and environmental problems in the county, the land 
involved, and the practices for

[[Page 27]]

which requested cost-sharing is considered by the county committee as 
most needed. The method approved shall provide for the issuance of 
notices of approval showing for each approved practice the number of 
units of the practice for which the Federal Government will share in the 
cost and the amount of the cost-share for the performance of that number 
of units of the practice. To the extent practicable, notices of approved 
practices shall be issued before performance of the practice is started. 
No practice may be approved for cost-sharing except as authorized by the 
county program, or in accordance with procedures incorporated therein. 
Available funds for cost-sharing shall not be allocated on a pro-rata 
basis, but shall be directed to the accomplishment of the most enduring 
benefits attainable.
    (a) Cost-sharing may be approved under annual agreements or long-
term agreements.
    (b) Annual agreements may be approved in all counties. Long-term 
agreements are limited to farms or ranches which are within Soil 
Conservation Districts (or comparable districts) through which the Soil 
Conservation Service provides planning and technical services, except:
    (1) Farms and ranches located within a county designated for the 
Great Plains Conservation Program are only eligible for long-term 
agreements that cover part of a farm. Long-term agreements that cover 
whole farms shall not be approved in these counties.
    (2) Farms and ranches not located within a Soil Conservation 
District (or comparable district) may be eligible for a long-term 
agreement, provided conservation plans of operations are developed by 
the farmer or rancher in cooperation with the Soil Conservation Service 
and approved by an appropriate State official or, in cases where an 
appropriate State official is not available, approved by the Soil 
Conservation Service.



Sec. 701.16  Long-term agreements.

    (a) The period of a long-term agreement will be for not less than 
three (3) program years nor more than ten (10) program years. The county 
committee and the signatories to the agreement in consultation with the 
Soil Conservation Service representative, will mutually determine the 
period of the agreement.
    (b) The long-term agreement will be based on a conservation plan of 
operations for the farm or ranch or portion thereof which has been 
approved by the Soil Conservation District (or comparable district) or, 
for farms or ranches not located in a Soil Conservation District (or 
comparable district), by an appropriate State Official or the Soil 
Conservation Service, as applicable.
    (c) The long-term agreement will provide that the farmer or rancher 
will carry out those measures in the conservation plan of operations 
which are determined to be essential to meeting the basic conservation 
needs of the farm or ranch, or portion thereof, whether or not cost-
sharing is approved for such measures.
    (d) The owner of the farm or ranch will be required to be a 
signatory to a long-term agreement, whether or not that person 
contributes to the cost of approved practices thereon.
    (e) Any signatory to a long-term agreement who is not an owner of 
the farm or ranch must provide assurance of control of the land for the 
duration of the period of the agreement.
    (f) The level of cost-sharing, as provided in Sec. 701.13, in effect 
for practices in all years of a long-term agreement shall be the level 
in effect for the beginning year of the agreement. The rate of cost-
sharing for payment purposes for such practice will be based on the 
average cost of performing the practice at the time the practice is 
performed.
    (g) A long-term agreement may be cancelled for failure to comply 
with the terms of the agreement if, after consulting with the Soil 
Conservation District (or comparable district) board or, if none exists, 
with a representative of the Soil Conservation Service, the county 
committee and State committee find that the seriousness of the 
irregularities warrant such action. If the agreement is cancelled, the 
signatories to the agreement are jointly and severally responsible for 
refunding all cost-shares paid and will forfeit all rights to further 
payments under the

[[Page 28]]

agreement. In such a case, no other refund or forfeiture provisions of 
these regulations apply.
    (h) A long-term agreement may be revised in accordance with 
instructions issued by the Deputy Administrator, State and County 
Operations, by mutual agreement between the signatories to the agreement 
and the county committee based on approved changes in the Conservation 
plan of operations for the farm or ranch.
    (i) An eligible person who acquires control of land under an 
approved agreement may elect to become a successor in interest under 
such agreement.
    (j) An agreement will be terminated with respect to land for which 
loss of control has occurred and where the person acquiring control of 
such land elects not to become a successor in interest under the 
agreement. If the loss of control is for reasons beyond the control of 
the signatories to the agreement, the county committee will determine 
whether or not any cost-shares previously paid shall be refunded, but in 
no event shall the refund be greater than would be required in cases 
where loss of control is voluntary. If the loss of control is voluntary 
on the part of the signatories to the agreement, the signatories will be 
jointly and severally responsible for refunding all cost-shares paid and 
will forfeit all rights to further payments, with respect to the land 
for which control is lost. However, a refund will not be required for 
cost-shares where, the county committee and the State committee 
determine, after consulting with a representative of the Soil 
Conservation Service, that failure to perform the remaining practices in 
the agreement will not impair the effectiveness of the practices which 
have been performed and that the completed practices have provided 
conservation benefits consistent with the cost-shares which have been 
paid.
    (k) An agreement may be terminated by the county committee, after 
considering the recommendation of the Soil Conservation District (or 
comparable district) board or, if none exists, with a representative of 
the Soil Conservation Service, if such action is in the public interest. 
The county committee will determine the amount of cost-shares previously 
paid that shall be refunded.
    (l) An agreement may be terminated by the county committee upon the 
written request of the participant(s) to an agreement where no cost-
shares have been paid for any of the scheduled practices and where the 
participant(s) does(do) not intend to perform any of the scheduled 
practices.



Sec. 701.17  Replacement, enlargement, or restoration.

    The establishment or installation of a practice, for the purposes of 
the program shall be deemed to include the replacement, enlargement, or 
restoration of a practice for which cost-sharing has been allowed if the 
practice has served for its normal lifespan, or if all of the following 
conditions exist:
    (a) Replacement, enlargement, or restoration of the practice is 
needed to solve the problem.
    (b) The failure of the original practice was not due to the lack of 
proper maintenance by the current operator.
    (c) The county committee believes that the replacement, enlargement 
or restoration of the practice merits consideration under the program to 
an equal extent with other practices.



Sec. 701.18  Pooling agreements.

    Farmers, ranchers, or eligible landowners in any local area may 
agree in writing, with the approval of the county committee, to perform 
designated practices which, by conserving or improving resources of the 
community, will solve a mutual conservation, pollution, or other 
environmental problem on the land of the participants. For purposes of 
eligibility for cost-sharing, practices carried out under such an 
approved written agreement shall be regarded as having been carried out 
on the land of the persons who performed the practices.



Sec. 701.19  Special provisions for low-income farmers and ranchers.

    (a) Except as otherwise provided in Sec. 701.13(c), the county 
committee may approve, in the case of low-income farmers and ranchers as 
defined in this section, level of cost-sharing of up to 80 percent of 
the average cost of performing practices.

[[Page 29]]

    (b) A low-income farmer or rancher is one who, as determined by the 
county committee, is a small producer whose livelihood is largely 
dependent on the farm or ranch and whose prospective income and 
financial resources for the current year are such that the farmer or 
rancher could not reasonably be expected to perform needed conservation 
practices at levels of cost-sharing applicable to other persons in the 
county.
    (c) In approving requests for cost-sharing the county committee 
shall give special consideration to requests filed by low-income farmers 
and ranchers.

[45 FR 49522, July 25, 1980, as amended at 47 FR 939, Jan. 8, 1982]



Sec. 701.20  Encumbering land.

    In order to receive cost-share assistance for a conservation 
practice in a Salinity Control Project area, a person participating in 
the program shall agree, as a condition of eligibility to receive such 
assistance, that a recordable encumbrance may be filed by FSA with 
respect to the land on which the conservation practice is installed. 
Such encumbrance shall reflect the amount of the cost-share assistance 
which is received by the program participant for the practice and shall 
continue until such time as the established lifespan for the practice 
has expired. Notwithstanding the foregoing, this requirement may be 
waived by the county committee if such committee determines, with the 
concurrence of the State committee and after consultation with 
appropriate Federal, State and local authorities, that the land will not 
likely be converted to a nonagricultural use within the next five years.

[48 FR 33847, July 26, 1983]



Secs. 701.21-701.22  [Reserved]



Sec. 701.23  Maximum cost-share limitation.

    For each program year the total amount which may be received by any 
person under this subpart for approved practices shall not exceed $3,500 
except that (a) the total amount received for approved practices, 
including those carried out under pooling agreements, shall not exceed 
$10,000 and (b) the total amount received under an ACP long-term 
agreement (LTA) shall not exceed the annual payment limitation ($3,500) 
multiplied by the number of years of the LTA.

[52 FR 19716, May 27, 1987]



Sec. 701.24  Completion of practices.

    Cost-sharing for the practices contained in this part is conditioned 
upon the performance of the practice in accordance with all applicable 
specifications and program provisions.



Sec. 701.25  Time of filing payment application.

    Payment of cost-shares will be made only upon application submitted 
on the prescribed form to the county office by a date established by the 
county committee. Any application for payment may be rejected if any 
form or information required of the applicant is not submitted to county 
office within the applicable time limit.



Sec. 701.26  Other program provisions.

    Other provisions as contained in Secs. 701.1 and 701.2 and in the 
subpart, General Provisions, apply to the Agricultural Conservation 
Program.



                  Subpart--Forestry Incentives Program



Sec. 701.27  Program objective.

    The objective of the Forestry Incentives Program (hereinafter 
referred to in this subpart as the ``program'') is to help assure a 
future supply of timber. This will be accomplished by encouraging 
landowners to apply forestry practices for the following:
    (a) Production of softwood and hardwood timber and other forest-
resources associated therewith to increase afforestation of suitable 
open lands.
    (b) Reforestation of cutover and understocked forest lands.
    (c) Timber stand improvement.
    (d) Intensive multipurpose management.
    (e) Protection of forest resources.

[[Page 30]]



Sec. 701.28  [Reserved]



Sec. 701.29  Designated counties.

    The State committee in consultation with the State Forester, will 
designate the counties or parts of counties in which the program will be 
operated. The following will be considered in making the selections:
    (a) The total acreage in the county devoted to desirable types of 
softwood and hardwood timber.
    (b) The estimated area in the county that is under eligible 
ownership.
    (c) The estimated acreage suitable for the production of forest 
products.
    (d) The availability of funds.
    (e) The enhancement of other forest resources.



Sec. 701.30  Eligible person, land, and ownerships.

    (a) An eligible person is a private individual, group, Indian Tribe 
or other native group, association, corporation excluding corporations 
whose stocks are publicly traded, or other legal entity which owns 
eligible land. Firms principally engaged in the manufacture of wood 
products are not eligible. However, forest landowners who manufacture 
forest products on a part-time or irregular basis, are eligible.
    (b) Eligible land is ``nonindustrial'' private forest land capable 
of producing at least 50 cubic feet of wood per acre per year.
    (c) Eligible farms are those not exceeding a total of 1,000 acres of 
eligible private nonindustrial forest land in the United States or any 
commonwealth, territory or possession of the United States. The State 
Committee with the concurrence of the State Forester may approve cost-
sharing with landowners owning more than 1,000 but not more than 5,000 
acres of eligible forest land where it is deemed to be to the public's 
significant benefit.
    (d) Significant public benefits are primarily those resulting from 
cost-effective timber production, with related benefits to aesthetics, 
recreation, other resource values, watershed protection and erosion 
reduction.



Sec. 701.31  Program funds.

    (a) State and counties. Each designated State and county will 
receive a share of the funds provided nationally for the program. Funds 
will be distributed on the basis of the forest production opportunities 
in each State, considering the acreage of private nonindustrial forest 
lands, the number of eligible owners, the potential productivity of such 
lands and the need for reforestation, timber stand improvement, other 
forestry management needs, and the enhancement of other forest 
resources. The Director, Conservation and Environmental Protection 
Division, FSA, will allocate funds after consultation with 
representatives of the U.S. Forest Service and a committee of not less 
than five State foresters or equivalent State officials selected by a 
majority of the State foresters or equivalent State officials. The State 
committee will consult with the State forester when determining the 
allocation of such funds to the designated counties.
    (b) A limitation on the amount of funds which may be obligated under 
long-term agreements shall be established by the State committee in 
accordance with guidelines provided by the Deputy Administrator, State 
and County Operations.



Sec. 701.32  Eligible practices and cost-share requirements.

    (a) Cost-sharing may be available for the following National 
practices and authority:
    (1) Practice FP1. Planting Trees.
    (2) Practice FP2. Improving a Stand of Forest Trees.
    (3) Practice authority--SF Practice. Special Forestry Practices. The 
Director, Conservation and Environmental Protection Division, FSA, after 
consultation with the Forest Service, may approve special forestry 
practices needed to solve a significant and unique local condition for 
which the National practices are not adequate. Such practices may be 
approved for inclusion in a county program after consultation with the 
program development group, and the recommendation of the county 
committee, the service forester, the State committee and the State 
forester.
    (b) A forest management plan is required as a condition of cost-
sharing.

[[Page 31]]

The plan will be developed in consultation with the landowner, approved 
by the service forester, and will contain information for accurate 
evaluation of practice effectiveness. The participant will be required 
to perform those measures in the plan which are essential to the 
effectiveness of the practice for which costs are shared. In the 
development of the plan, consideration will be given to wildlife, 
watershed protection, recreation, erosion control, aesthetics, and other 
associated forest resources values as well as cost-effective timber 
production.



Sec. 701.33  The National program.

    The National program is based on recommendations developed by the 
Director, Conservation and Environmental Protection Division, FSA, in 
consultation with representatives of the U.S. Forest Service and the 
committee of State foresters provided for in Sec. 701.31.



Sec. 701.34  Development of State programs.

    (a) A State program shall be developed in each State in accordance 
with the provisions contained in this part and in the National program 
and such modifications thereof as may thereafter be made. The program 
shall be developed by the State forestry committee as provided in 
Sec. 701.2.
    (b) The program for the State shall be that recommended by the State 
committee and State forester and approved by the Director, Conservation 
and Environmental Protection Division, FSA, after consulting the U.S. 
Forest Service.



Sec. 701.35  Development of county programs.

    (a) A county program shall be developed in each designated county in 
accordance with the provisions of the State program and such 
modifications thereof as may be made. The county program shall be 
developed by the county conservation review group. The county 
conservation review group, working with the governing body of the 
conservation district, the State forestry agency representatives, the 
county supervisor of the Farmers Home Administration, and others with 
conservation and environmental interest, shall develop recommendations 
for the county program.
    (b) The program for the county shall be that recommended by the 
county committee and service forester and approved by the State 
committee and State forester.

[45 FR 49522, July 25, 1980, as amended at 47 FR 46999, Oct. 22, 1982]



Sec. 701.36  Adaptation of practices.

    (a) The practices included in the State program meet the conditions 
and requirements of the National program. National program provisions 
may be modified or deleted to make practices more restrictive where such 
changes meet the objectives of the program.
    (b) The practices included in the county program must meet the 
conditions and requirements of the State program. State program 
provisions may be modified or deleted to make practices more restrictive 
where such changes will still result in the practices effectively 
meeting the objectives of the program.



Sec. 701.37  Levels and rates of cost-sharing.

    (a) The maximum cost-share for each practice shall be the percentage 
of the actual cost of performing the practice considered necessary to 
obtain the needed performance of the practice, but which will be such 
that the participant will make a significant contribution to the cost of 
performing the practice.
    (b) Levels of cost-sharing shall be approved by the State ASC 
committee and shall not be in excess of 65 percent of actual costs 
incurred by the landowners.
    (c) For the purpose of establishing rates of cost-sharing, the 
average cost of performing a practice may be the average cost for a 
State, a county or a part of a county, as determined by the State 
committee.
    (d) The rates of cost-sharing for practices included in the county 
program may be lower than the rates approved for general use in the 
State.

[45 FR 49522, July 25, 1980, as amended at 47 FR 20109, May 11, 1982]

[[Page 32]]



Sec. 701.38  Prior approval for cost-sharing.

    Costs will be shared only for those practices, or components of 
practices, for which cost-sharing is requested and approval issued 
before performance thereof is started.



Sec. 701.39  Methods of approval.

    The county committee will determine the extent to which Federal 
funds will be made available to share the cost of each approved 
practice. Approvals shall be made based on consideration of the county 
allocation, cost-effective opportunities for increasing timber 
production, potential for enhancing other forest resources, the forestry 
needs in the county, and the practices for which requested cost-sharing 
is considered by the county committee as most needed. The method 
approved shall provide for the issuance of notices of approval showing 
for each approved practice the number of units of the practice for which 
the Federal Government will share in the cost and the amount of the 
cost-share for the performance of that number of units of the practice. 
Notices of appeared practices shall be issued before performance of the 
practice may be started. No practice may be approved for cost-sharing 
except as authorized by the National, State or county program, or in 
accordance with procedures incorporated therein. Available funds for 
cost-sharing shall not be allocated on a pro-rata basis, but shall be 
directed to the accomplishment of the most production attainable.
    (a) Cost-sharing may be approved under annual agreements or long-
term agreements.
    (b) Land covered by a Great Plains Conservation Program contract is 
not excluded from an annual or long-term agreement if otherwise eligible 
and is approved by both the Forest Service and the Soil Conservation 
Service.
    (c) The same practices, cost-share levels and general program 
provisions apply to both annual agreements and long-term agreements.



Sec. 701.40  Long-term agreements.

    (a) The period of a long-term agreement will be for not less than 
three (3) years nor more than 10 (10) years. The county committee and 
the signatories to the agreement in consultation with the State forestry 
representative, will mutually determine the scheduling of essential 
practices and practice cost-sharing over the period of the agreement.
    (b) The long-term agreement will be based on a forest management 
plan for the land which has been developed by the service forester.
    (c) The long-term agreement will provide that the owner will carry 
out those measures in the forest management plan which are determined to 
be essential whether or not cost-sharing is approved for such measures.
    (d) The level of cost-sharing in effect for practices in all years 
of a long-term agreement shall be the level in effect for the beginning 
year of the agreement. The rate of cost-sharing for payment purposes for 
such practice will be based on the average cost of performing the 
practice at the time the practice is performed.
    (e) A long-term agreement may be canceled for failure to comply with 
the terms of the agreement if, after consulting with the service 
forester, the county committee and State committee find that the 
seriousness of the irregularities warrant such action. If the agreement 
is canceled, the signatories to the agreement are jointly and severally 
responsible for refunding all cost-shares paid and will forfeit all 
rights to further payments under the agreement. In such a case no other 
refund or forfeiture provisions of these regulations apply.
    (f) A long-term agreement may be revised in accordance with 
instructions issued by the Deputy Administrator, State and County 
Operations, where there is a change in status of the participants or the 
land under agreement.
    (g) An eligible person who acquires control of land under an 
approved agreement may elect to become a successor in interest under 
such agreement.
    (h) An agreement will be terminated with respect to land for which 
loss of control has occurred and where the person acquiring control of 
such land elects not to become a successor in interest under the 
agreement. If the loss of control is for reasons beyond the

[[Page 33]]

control of the signatories to the agreement, the county committee will 
determine whether or not any cost-shares previously paid shall be 
refunded, but in no event shall the refund be greater than would be 
required in cases where loss of control is voluntary. If the loss of 
control is voluntary on the part of the signatories, they will be 
jointly and severally responsible for refunding all cost-shares paid and 
will forfeit all rights to further payments, with respect to the land 
for which control is lost. A refund will not be required for cost-shares 
where, the county committee and the State committee determine, after 
consulting with the service forester, that failure to perform the 
remaining practices in the agreement will not impair the effectiveness 
of the practices which have been performed and that the completed 
practices will provide forestry benefits consistent with the cost-shares 
which have been paid.
    (i) An agreement may be terminated if, after considering the 
recommendation of the service forester, the county committee recommends 
and the State committee concurs that such action is in the public 
interest.



Sec. 701.41  Restoration of practices.

    (a) Cost-sharing may be authorized under the program only for the 
establishment or installation of the practices contained in this part. 
Cost-sharing may not be authorized for repeating any of the practices in 
this part with the same owner on the same acreage, except as provided in 
paragraph (b) or (c) of this section.
    (b) Cost-sharing may be authorized for the replacement, enlargement, 
or restoration of practices for which cost-sharing has been allowed 
under the program only if all of the following conditions exist:
    (1) Replacement or restoration of the practice is needed to solve 
the problem.
    (2) The failure of the original practice was not due to the lack of 
proper maintenance by the current operator.
    (3) The county committee believes that the replacement or 
restoration of the practice merits consideration under the program to an 
equal extent with other practices cost-shared.
    (c) Cost-sharing may be authorized for timber stand improvement 
measures carried out in repetitive steps where, in the judgment of the 
service forester, the stand treatment warrants such silvicultural 
practice.



Sec. 701.42  Maximum cost-share limitations.

    For each fiscal year the total of all cost-shares paid to any 
eligible person shall not exceed the sum of $10,000 with respect to 
eligible ownerships (Sec. 701.30(b)) in the United States or any 
commonwealth, territory or possessions of the United States for approved 
practices carried out under annual and/or long-term agreements.



Sec. 701.43  Completion of practice.

    Cost-sharing for the practices contained in this subpart is 
conditioned upon the performance of the practices in accordance with all 
applicable specifications and program provisions.



Sec. 701.44  Time of filing payment application.

    Payment of cost-shares will be made only upon application submitted 
on the prescribed form to the county office by the prescribed time limit 
or any authorized extension thereof. Any application for payment may be 
rejected if any form or information required of the applicant is not 
submitted to the county office within the applicable time limit.



Sec. 701.45  Other program provisions.

    Other provisions as contained in Secs. 701.1 and 701.2 and in the 
subpart, General Provisions, apply to the Forestry Incentives Program. 
st



                 Subpart--Emergency Conservation Program



Sec. 701.46  Program objective.

    The objective of the Emergency Conservation Program is to cost-share 
with eligible persons to rehabilitate farmlands damaged by wind and 
water erosion, floods, hurricanes, or other natural disasters and to 
provide water conservation or water enhancement measures during periods 
of severe drought.

[[Page 34]]



Sec. 701.47  Program availability.

    (a) The county committee may implement the program subject to the 
availability of funds where new conservation problems have been created 
on farmland by a natural disaster or wind erosion which, if not treated; 
will:
    (1) Impair or endanger the land or water resource.
    (2) Materially affects the productive capacity of the land or water 
resource.
    (3) Represent damage which is unusual in character and, except for 
wind erosion, shall not be the type that would recur frequently in the 
same area.
    (4) Be so costly to rehabilitate that Federal assistance is or will 
be required to return the land to productive agricultural use.
    (b) Subject to the availability of funds, the county committee with 
the concurrence of the State committee and approval of the Deputy 
Administrator, State and County Operations may implement the program to 
carry out emergency water conservation and water enhancement measures 
during periods of severe drought.



Sec. 701.48  Eligibility of person and land.

    Eligibility of person and land is the same as for the Agricultural 
Conservation Program as provided in Secs. 701.7 and 701.8.



Sec. 701.49  Emergency conservation program practices.

    (a) Except for severe drought and wind erosion, cost-sharing may be 
offered for emergency conservation practices only to replace or restore 
farmland to a condition similar to that existing prior to the natural 
disaster. Cost-sharing may not be offered for the solution of 
conservation problems existing prior to the disaster.
    (b) Emergency Conservation Program practices for which cost-sharing 
may be authorized are generally:
    (1) Removing debris from farmland.
    (2) Grading, shaping, releveling or similar measures.
    (3) Restoring permanent fences.
    (4) Restoring structures and other installations.
    (5) Emergency wind control measures.
    (6) Drought emergency measures.
    (7) Other emergency conservation measures.



Sec. 701.50  Practice approval.

    Practices listed in Sec. 701.49(b)(1) through (5) may be approved by 
the county committees. Practices (6) and (7) of Sec. 701.49(b) must be 
approved by the Deputy Administrator, State and County Operations.



Sec. 701.51  Extent of cost-sharing.

    (a) The maximum payment under this subpart per person, per disaster, 
is limited to $200,000, including the amount of any payment received by 
such person as the result of a disaster under a pooling agreement.
    (b) The cost-share payments which may be made by FSA for a practice 
under the program shall, subject to the maximum payment amount specified 
in paragraph (a) of this section and any other limitation as may apply, 
be further limited to the level of cost-share assistance established by 
the county committee not to exceed the following amounts:
    (1) 64 percent of the first $62,500 of eligible reimbursable costs; 
plus
    (2) 40 percent of the second $62,500 of eligible reimbursable costs; 
plus
    (3) 20 percent of the remaining eligible reimbursable costs up to 
such amount as would produce a cost-share not in excess of the 
limitation in paragraph (a) of this section.



Sec. 701.52  Eligible costs.

    Upon determination that a person is eligible for Emergency 
Conservation Program assistance, cost-sharing shall be granted for all 
reasonable costs incurred in the completion of the practice. Such costs 
may include personal labor, equipment, and other such costs which are 
determined by the county committee to be related to the costs of 
carrying out the practice. County committees shall limit costs for the 
use of personal equipment to an amount that reflects out-of-pocket 
expenses. Expenses for personal labor and personal equipment should be 
less than rates charged by contractors who expect to make a profit for 
their efforts.

[[Page 35]]



Sec. 701.53  Filing requests.

    The county committee shall establish a sign up period for filing 
cost-sharing requests immediately after the county committee's decision 
has been made (by the Deputy Administrator, State and County Operations, 
in cases of drought) to implement the Emergency Conservation Program in 
the county. Such periods should be at least 30 days in length. Late 
filed requests may be accepted by the county committee in justifiable 
cases.



Sec. 701.54  Approving requests.

    County committees will issue practice approvals only when the 
requested practice has been determined eligible for cost-sharing 
assistance and the eligible person has indicated he/she is ready to 
start the practice.



Sec. 701.55  Pooling agreements.

    Pooling agreements may be used on the same basis as provided for in 
the Agricultural Conservation Program in Sec. 701.18.



Sec. 701.56  Payment approval.

    The county committee is authorized to approve payments not to exceed 
$10,000 per person, per disaster. Cost-share assistance in excess of 
$10,000 must be approved by the Deputy Administrator, State and County 
Operations, or designee.



Sec. 701.57  Other program provisions.

    Other provisions of this part as provided for in Secs. 701.1 and 
701.2 and in the subpart, General Provisions, apply to the Emergency 
Conservation Program.



                       Subpart--General Provisions



Sec. 701.58  Restriction on program eligibility.

    The regulations in part 796 of this chapter prohibiting the making 
of payments to program participants who harvest or knowingly permit to 
be harvested for illegal use, marijuana or other such prohibited drug-
producing plants on any part of the land owned or controlled by them are 
applicable to these programs.



Sec. 701.59  Delegation of authority.

    No delegation of authority contained in these programs to a State or 
county committee shall preclude the Deputy Administrator, State and 
County Operations or designee, from determining any question arising 
under these programs or from reversing or modifying any determination 
made by a State or county committee.



Sec. 701.60  Practice specifications.

    (a) Minimum specifications that practices must meet to be eligible 
for cost-sharing shall be set forth in the county program, or 
incorporated therein by specific reference to a standard publication or 
other written document containing such specifications.
    (b) Practice specifications shall represent those levels of 
performance which are needed in order for the practice to be effective 
in meeting the program objective and which are not in excess of levels 
for which cost-sharing can be justified.



Sec. 701.61  Responsibility for technical phases of practices.

    The Soil Conservation Service and the U.S. Forest Service are 
responsible for technical phases of the practice as assigned and such 
assignment will be specified in State and county programs.
    (a) The State conservationist of the Soil Conservation Service may 
utilize assistance from private, State or Federal agencies in carrying 
out the assigned responsibilities. No responsibilities will be assigned 
for counties when the Deputy Administrator, State and County Operations 
and the Administrator, SCS, determines that it would not be 
administratively practicable for the Soil Conservation Service to 
discharge such responsibilities. In such counties, these 
responsibilities shall be assumed by the county committees. The Soil 
Conservation Service may utilize to the fullest extent available 
resources of the State forestry agencies in carrying out assigned 
responsibilities for practices involving the establishment of wind-
breaks or shelterbelts on farmland to prevent wind erosion.

[[Page 36]]

    (b) The U.S. Forest Service is responsible for the technical phases 
of practices or components of practices involving the planting of trees 
for forestry purposes and those involving the improving or protecting of 
a stand of forest trees, as specified in State and county programs. The 
U.S. Forest Service may utilize the assistance of private, State or 
Federal agencies in carrying out these assigned responsibilities, but 
services of State forestry agencies will be utilized to the extent that 
such services are available.
    (c) The technical assistance to be furnished in servicing assigned 
practices will include, where appropriate, the following technical 
phases:
    (1) Determining whether the practice is needed and practicable;
    (2) Selecting the site (if necessary), complying with environmental 
and cultural regulations, determining the specific measures needed, and 
performing any required layout work for the practice;
    (3) Supervising the installation of the practice if needed to assure 
conformity with specifications; and
    (4) Certifying the extent performed and whether the specifications 
for the practice have been met. The technical agency shall perform all 
four phases for all assigned practices in State and county programs, 
except as may be provided in instructions issued by the Deputy 
Administrator, State and County Operations.



Sec. 701.62  Items of cost on which rates of cost-sharing may be based.

    Except as otherwise provided by the specific FSA procedural 
handbooks, notices, and regulations, the cost of any direct and 
significant factor in the performance of a practice may be considered in 
establishing the rate of cost-sharing for the practice.



Sec. 701.63  Handbook, bulletins, instructions, and forms.

    The Deputy Administrator, State and County Operations is authorized 
to prepare and issue handbooks, bulletins, instructions, and forms, 
required in administering these programs. Copies of handbooks, 
bulletins, instructions and forms, containing detailed information on 
these programs as they apply to specific States, counties, areas, farms, 
ranches and other eligible ownerships, will be available in the office 
of the State committee and the office of the county committee.



Sec. 701.64  Opportunity for requesting cost-shares.

    Farmers, ranchers, eligible landowners, or eligible persons, 
regardless of race, sex, religion, color, or national origin, shall be 
given an opportunity to request that the Federal Government share in the 
cost of those practices they consider to be needed on their farm, ranch, 
or other eligible land. The county committee shall direct the available 
funds for cost-sharing to those practices where cost-sharing is 
considered most essential to the accomplishment of the program 
objective.



Sec. 701.65  Repair, upkeep and maintenance of practices.

    Cost-sharing is not authorized for repairs or for normal upkeep or 
maintenance of any practice.



Sec. 701.66  Public benefits when installing practices.

    Persons responsible for any aspect of performing practices are to be 
encouraged to install the practices in such a way to promote public 
benefits by improving or preserving environmental quality and ecological 
balance by preventing or abating pollution and other environmental 
degradation; benefiting the community by such means as preserving open 
space, or enhancing the appearance of the area; benefiting wildlife and 
other desirable life forms; preserving historic, archeological, or 
scenic sites, wetlands, ecologically critical areas and prime farmlands; 
avoiding the creation of hazards to persons or animals and avoiding 
actions that may adversely affect an endangered or threatened species 
and flood plains.



Sec. 701.67  Payments for uncompleted practices.

    Cost-shares approved under these programs will not be considered as 
earned until all components of the approved practice are completed in 
accordance with applicable specifications and program provisions. Cost-
shares

[[Page 37]]

for completed components may be paid only on the condition that the 
farmers, ranchers, or eligible landowners, will complete the remaining 
components of the practice within the time prescribed by the county 
committee regardless of whether cost-sharing is offered for them, unless 
they are prevented from doing so because of reasons beyond their 
control.



Sec. 701.68  Practices involving the establishment or improvement of vegetative cover.

    (a) Costs for practices involving the establishment or improvement 
of vegetative cover, including trees may be shared even though a good 
stand is not established, if the country committee determines, in 
accordance with standards approved by the State committee, that the 
practice was carried out in a manner which could normally result in the 
establishment of a good stand, and that failure to establish a good 
stand was due to weather or other conditions beyond the control of the 
operator. The county committee may require as a condition of cost-
sharing in such cases that the area be reseeded or replanted or that 
other needed protective measures be carried out. Cost-sharing in such 
cases may be approved also for repeat applications of measures 
previously carried out or for additional eligible measures. Cost-sharing 
for such measures shall be approved to the extent such measures are 
needed to assure a good stand even though less than that required by the 
applicable practice wording for initial approvals.
    (b) In the case of Foresty Incentives Program, replanting of trees 
is required where the landowner received cost-sharing for site 
preparation.



Sec. 701.69  Failure to meet minimum requirements or failure to comply fully with program provisions.

    (a) Notwithstanding other provisions of these programs, costs may be 
shared for performance actually rendered even though the minimum 
requirements for a practice are not met, if the farmer, rancher, 
eligible landowner, or eligible person establishes to the satisfaction 
of the county committee and the county representative of any other 
agency having responsibility for technical phases of the practice that a 
reasonable effort was made to meet the minimum requirements and that the 
practice as performed adequately solves the problem.
    (b) Notwithstanding the provisions in paragraph (a) of this section, 
the terms and conditions of contracts entered into pursuant to programs 
in this part may be modified to grant relief when the Deputy 
Administrator, State and County Operations, determines that a person 
acting in good faith failed to fully comply with the program provisions.



Sec. 701.70  Practices carried out with aid from ineligible persons.

    (a) Except as provided in paragraph (b) of this section, financial 
assistance which is made available, or will be made available, to a 
program participant from a person ineligible for cost-share assistance 
under this part for the practice, including aid from a State or Federal 
agency other than assistance made available under this part, shall be 
deducted from the program participant's total costs incurred for the 
practice for purposes of determining the applicant's eligible 
reimbursable costs under this part.
    (b) Third party contributions need not be deducted under paragraph 
(a) of this section where it is determined by the State ASC Committee, 
in accordance with instructions of the Deputy Administrator, State and 
County Operations (DASCO), FSA, that an exception would be in 
furtherance of program objectives. However, the total cost-share paid 
may not, in any case, exceed the net contribution (exclusive of any 
contribution by ineligible persons) otherwise made by the applicant to 
the cost of carrying out the practice.

[56 FR 46368, Sept. 12, 1991]



Sec. 701.71  Division of cost-shares.

    (a) The cost-share for a practice shall be credited to the person 
who carried out the practice. If more than one person contributed to the 
carrying out of the practice, the cost-share for the practice shall be 
divided among those persons in the proportion that the county committee 
determines they contributed to the carrying out of the

[[Page 38]]

practice. In making this determination, the county committee shall take 
into consideration the value of the labor, equipment, or material 
contributed by each person toward the carrying out of the practice, and 
shall assume that each contributed equally unless the county committee 
is satisfied that their respective contributions were not in equal 
proportion. Any advances made by FSA toward the cost of materials or 
services under Sec. 701.21, the furnishing of land, and the furnishing 
of the right to use water, will not be considered as a contribution to 
the carrying out of any practice.
    (b) The allowance by an eligible person of a credit to another 
eligible person in the form of an adjustment in rental, an exchange of 
cash, or other consideration, will not be considered as a contribution 
to the carrying out of any practice, unless the county committee is 
satisfied that such credit is directly related to the cost or cost-share 
of the practice. A person will not be considered as having contributed 
to the carrying out of a practice if the county committee determines 
that a person has been, or is to be, fully reimbursed for contributions 
made to the performance of the practice, through an adjustment in 
rental, an exchange of cash, or other consideration.



Sec. 701.72  Death, incompetency, or disappearance.

    In case of death, incompetency, or disappearance of any person, any 
cost-shares due shall be paid to the successor, determined in accordance 
with provisions of the regulations in part 707 of this chapter, as 
amended.



Sec. 701.73  Applying cost-share limitations.

    (a) All or any part of cost-share which otherwise would be due any 
person for a program year may be withheld, or required to be refunded, 
if, with respect to that program year, the person has adopted, or 
participated in adopting, any scheme or device, including the 
dissolution, reorganization, revival, formation, or use of any 
corporation, partnership, estate, trust, or any other means, designed to 
evade a maximum cost-share limitation.
    (b) The rules set forth in 7 CFR 795.3 through 795.22 shall apply in 
determining whether certain individuals or other entities are to be 
considered as separate persons for the purpose of applying any maximum 
payment limitations provided for in this part. In cases where more than 
one rule would appear to be applicable, the rule which is most 
restrictive as to number of persons shall apply.

[45 FR 49522, July 25, 1980, as amended at 51 FR 12985, Apr. 17, 1986]



Sec. 701.74  Persons eligible to file application for payment of cost-shares.

    Any eligible person who bore a part of the cost of an approved 
practice is eligible to file an application for payment of cost-shares 
due.



Sec. 701.75  Time and manner of filing application and required information.

    It shall be the responsibility of persons participating in these 
programs to submit to the county office forms and information needed to 
establish the extent of the performance of approved practices and 
compliance with applicable program provisions. The time limits for 
submission of such forms and information shall be established where 
necessary for efficient administration of the programs. Such time limits 
shall afford a full and fair opportunity to those eligible to file the 
forms and information within the period prescribed. At least 2 weeks 
notice of any general time limits prescribed shall be given to the 
public. The notice shall be given by mailing notice to the office of 
each county committee and making copies available to the press. Other 
means of notification; including radio announcements and individual 
notices to person(s) affected, shall be used to the extent practicable. 
Notice of such time limits which are applicable to individual persons, 
such as time limits for reporting performance of approved practices, 
shall be issued in writing to the person(s) affected. Exceptions to the 
time limits may be made in cases where failure to submit required forms 
and information within the applicable time limits is due to reasons 
beyond the control of the farmer or rancher.

[[Page 39]]



Sec. 701.76  Appeals.

    Any person may obtain review of determinations affecting 
participation in:
    (a) The Forestry Incentive Program, in accordance with part 614 of 
this title; and
    (b) All other programs within this part, in accordance with part 780 
of this title.

[60 FR 67316, Dec. 29, 1995]



Sec. 701.77  Performance based on advice or action of county or State committee.

    Cases involving performance rendered in good faith in reliance upon 
action or advice of an authorized representative of a county or State 
committee shall be handled in accordance with part 790 of this chapter.



Sec. 701.78  Compliance with regulatory measures.

    Persons who carry out practices under these programs shall be 
responsible for obtaining the authorities, rights, easements, or other 
approvals necessary to the performance and maintenance of the practices 
in keeping with applicable laws and regulations. The person with whom 
the cost of the practice is shared shall be responsible to the Federal 
Government for any losses it may sustain because such persons infringe 
on the rights of others or fail to comply with applicable laws or 
regulations.



Sec. 701.79  Maintenance and use of practice.

    Each person receiving cost-share assistance under these programs is 
responsible for the maintenance and proper use of the practice. Each 
practice shall have an established lifespan or minimum period of time 
that it is expected to function as a conservation practice with proper 
maintenance. If it is determined that a practice has not been properly 
maintained for the established lifespan, the person receiving the cost-
share assistance shall refund all or any part of such cost-share 
assistance as determined to be appropriate by the county committee. 
Further, any agreement providing for cost-share assistance will be 
terminated with respect to the land on which the practice is located if 
there is voluntary loss of control of the land by the person receiving 
the cost-share assistance and the person acquiring control of such land 
elects not to become a successor in interest to the agreement. If the 
agreement providing for cost-share assistance is terminated as a result 
of the voluntary loss of control of the land, each person receiving 
cost-share assistance under that agreement shall be liable for refunding 
to FSA any cost-share assistance which has been received with respect to 
the practice. In addition, such person shall forfeit any right to 
receive any further cost-share assistance with respect to the land on 
which the practice is located.

[48 FR 33848, July 26, 1983]



Sec. 701.80  Actions defeating purpose of program.

    If the county committee finds with the concurrence of the State 
committee, or if the State committee finds, that a person has taken any 
action which tends to defeat the purposes of these programs, it may 
withhold or require a refund of all or part of any of these program 
payments otherwise due or paid that person during the program year. 
These actions include, but are not limited to, failure to properly 
maintain or deliberately destroying a practice carried out under a 
previous program year.



Sec. 701.81  Depriving others of cost-shares.

    If the State committee finds that any person has employed any scheme 
or device to deprive any other person of cost-shares, it may impose a 
penalty. The State committee may withhold or require a refund of all or 
part of any of these program payments otherwise due or paid that person 
during the program year. A scheme or device includes, but is not limited 
to, coercion, fraud or misrepresentation.



Sec. 701.82  Filing of false claims.

    If the State committee finds that any person has knowingly supplied 
false information or has knowingly filed a false claim, that person is 
ineligible for cost-sharing under the program year with respect to which 
information or

[[Page 40]]

claim is filed. False information or false claims include a claim for 
payment for a practice not carried out or for practices which do not 
meet the required specifications. Any amounts paid under these 
circumstances shall be refunded and any amounts otherwise due the person 
shall be withheld. The withholding or refunding of cost-shares will be 
in addition to any other penalty or liability otherwise imposed by law.



Sec. 701.83  Cost-shares not subject to claims.

    Any cost-share or portion thereof due any person shall be allowed 
without regard to questions of title under State law, and without regard 
to any claim or lien against the crop, or proceeds thereof, in favor of 
the owner or any other creditor except agencies of the U.S. Government. 
The regulations issued by the Secretary governing set-offs and 
withholdings, part 13 of this title, as amended, shall be applicable to 
these programs.



Sec. 701.84  Assignments.

    Any person who may be entitled to any cost-share under these 
programs may assign the right thereto, in whole or in part, in 
accordance with the regulations governing the assignment of payments at 
7 CFR part 709.



Sec. 701.85  Environmental considerations.

    All actions implemented under the programs in this part shall be in 
compliance with regulations issued as part 799--Environmental Quality 
and Related Environmental concerns which includes the procedures for 
complying with the National Environmental Policy Act, for Floodplain 
Management and Wetland Protection and for other environmental concerns.



Sec. 701.86  Information collection requirements.

    Information collection requirements contained in this part have been 
approved by the Office of Management and Budget under the provisions at 
44 U.S.C. Chapter 35 and have been assigned OMB Numbers 0560-0078, 0560-
0079, and 0560-0082.

[54 FR 41819, Oct. 12, 1989]



PART 702--COLORADO RIVER BASIN SALINITY (CRSC) CONTROL PROGRAM--Table of Contents




Sec.
702.1  General.
702.2  Definitions.
702.3  Administration.
702.4  Applicability.
702.5  Eligible land.
702.6  Eligible entity.
702.7  Salinity control plan.
702.8  Eligible salinity reduction practices (SRP's).
702.9  CRSC Contract and obligations of the participant.
702.10  Operation and maintenance agreements.
702.11  Obligations of USDA.
702.12  Availability of cost-share payments.
702.13  Levels and rates of cost-share payments.
702.14  Assignments.
702.15  Payments not subject to claims.
702.16  Maximum amount of cost-share payments.
702.17  Transfers of land and contract modifications.
702.18  Violations.
702.19  CRSC Contracts and operation and maintenance agreements not in 
          conformity with regulations.
702.20  Appeals.
702.21  Access to land.
702.22  Performance based upon advice or action of representatives of 
          the Department or a CD.
702.23  Filing of false claims.
702.24  Depriving others of payments.
702.25  Miscellaneous.
702.26  Paperwork Reduction Act assigned numbers.

    Authority: Sec. 201, Pub. L. 93-320, 88 Stat. 271; Sec. 2, Pub. L. 
98-569, 98 Stat. 2933 (43 U.S.C. 1592(c)).

    Source: 52 FR 16741, May 5, 1987, unless otherwise noted.



Sec. 702.1  General.

    The regulations in this part set forth the terms and conditions of 
the Colorado River Salinity Control (CRSC) Program authorized by section 
202 of the Colorado River Basin Salinity Control Act, as amended (43 
U.S.C. 1592) (the Act). Under the Act the Secretary is authorized to:
    (a) Identify salt-source areas in the Colorado River Basin;
    (b) Develop plans for implementing conservation measures that will 
reduce the salt load in the Colorado River, including the voluntary 
replacement of

[[Page 41]]

incidental fish and wildlife values foregone;
    (c) Share the cost of establishing such conservation measures and 
practices;
    (d) Provide technical assistance;
    (e) Monitor and evaluate changes in salt contributions to the 
Colorado River; and
    (f) Carry out related research, demonstration and education 
activities.



Sec. 702.2  Definitions.

    (a) The following definitions shall be applicable for the purposes 
of this part:
    (1) Applicant means an entity who has offered to enter into a CRSC 
Contract in accordance with the provisions of this part;
    (2) Actual cost means the direct costs of establishing a salinity 
reduction practice, and includes the cost of labor, supplies, and other 
necessary activities;
    (3) Average cost means the cost, determined by averaging actual 
costs and current cost estimates, considered to be necessary for a 
participant to carry out a salinity reduction practice, a designated 
component of a salinity reduction practice, or a system of practices;
    (4) Conservation District (CD) means a subdivision of a State 
organized pursuant to applicable State law. The term includes bodies 
variously known in the States as conservation district, soil 
conservation district, soil and water conservation district, natural 
resource district, resource conservation district, or natural resource 
conservation district;
    (5) Components means measurable units of a salinity reduction 
practice which, when completed by the program participant, can be 
certified by the Soil Conservation Service (SCS) as reasonable, 
identifiable progress toward completion of the practice with respect to 
which cost-share payment is being made under the CRSC program;
    (6) Conservation treatment means the combination of salinity 
reduction practices that will provide the salinity control treatment 
required to reduce seepage and improve irrigation water management in 
order to achieve the projected salt load reductions indicated in the 
applicable published USDA Salinity Control Report. Such treatment may 
include replacement of incidental fish and wildlife values foregone as a 
result of salinity control treatment applied by the participant under 
the CRSC program.
    (7) CRSC Contract means the contract including the salinity control 
plan, entered into in writing between the local Agricultural 
Stabilization and Conservation Committee (COC) and the participant which 
sets forth the terms and conditions for participation in the CRSC 
Program established in accordance with this part.
    (8) Cost-effective means maximization of the CRSC Program on-farm 
and offsite benefits at the least Federal cost per unit of salinity 
reduction.
    (9) Cost-share assistance means the providing of financial resources 
to assist program participants in establishing conservation treatment 
identified in participants' contracts;
    (10) Cost-share rate means a fixed amount of cost-share funds paid 
per unit for carrying out certain salinity reduction practices.
    (11) Deputy Administrator means the FSA Deputy Administrator for 
State and County Operations, or designee.
    (12) Entity means an individual or group of individuals, Indian 
tribe, partnership, firm, joint-stock company, corporation, association, 
trust, estate, irrigation district/company, or other public or nonpublic 
entity (except federal agencies), and wherever applicable, a State, a 
political subdivision of a State, or any agency thereof;
    (13) Fish and wildlife values foregone means incidental fish and 
wildlife habitats that may be affected adversely by salinity reduction 
practices applied by the program participant;
    (14) Irrigation district/company means a group of individuals 
(private or public) associated together in a locality, that has a vested 
interested in the operation of an irrigation distribution system that 
serve as a specific area. This definition includes irrigation districts, 
mutual water companies or districts, water conservancy districts, canal 
companies, and other similar entities;
    (15) Lifespan means the period of time during which a salinity 
reduction practice is expected to effectively achieve

[[Page 42]]

or provide the results for which it was developed and implemented.
    (16) Offsite benefits means those benefits which accrue downstream 
as a result of reduced salinity concentrations in the Colorado River by 
the salt load reductions achieved through implementation of the CRSC 
Program and/or its constituent practices and treatments;
    (17) On-farm benefits means those benefits which accrue on a farm 
from improved irrigation systems and efficiencies, including reduced 
production costs, reduced labor costs, reduced operation and maintenance 
costs, and improved crop yields;
    (18) Operation and Maintenance Agreement means the agreement entered 
into between the COC and the participant which sets forth the terms and 
conditions requiring the participant to use and maintain the salinity 
reduction practices for their effective lifespans as set forth in the 
agreement;
    (19) Participant means any entity who has entered into an approved 
CRSC Contract with the COC to participate in the CRSC Program;
    (20) Project implementation plan means a plan of operations 
developed by Farm Service Agency, Extension Service and Soil 
Conservation Service, in consultation with local officials for the 
purpose of implementing a project plan for a specific salt source area;
    (21) Project plan means that plan of conservation treatment that is 
identified in the applicable USDA Salinity Control Report as the 
preferred plan for implementation of salinity reduction practices in a 
specific salt source area. The project plan will identify cost-effective 
salinity reduction practices, the land which should receive conservation 
treatment on a priority basis in relation to other land in the specific 
salt source area, and the levels of conservation treatment needed in the 
specific salt source area in order to achieve the most cost-effective 
salinity control objectives for the particular area to be achieved;
    (22) Salinity control plan means the plan and schedule of operations 
that sets forth salinity reduction practices that must be establish on a 
specific unit of land. The salinity control plan shall be developed by 
the applicant with assistance from the SCS and must be approved by the 
CD;
    (23) Salinity Reduction Practice (SRP) means a specific conservation 
practice designed to reduce salt loading from a salt source area or to 
replace incidental fish and wildlife values foregone that is identified 
in a project plan and project implementation plan for a salt-source 
area;
    (24) Salt-source area means a geographical area within the Colorado 
River Basin that has been identified by SCS as a significant 
contributing source of salt to the Colorado River;
    (25) Specifications means minimum quantity and quality requirements 
established by SCS to meet the standard for a specific conservation 
practice;
    (26) State Conservationist means the SCS official in charge of 
agency operations within a state, as set forth in part 600 of this 
chapter;
    (27) Technical assistance means use of personnel and financial 
resources to identify salt-source areas, develop project plans, prepare 
salinity control plans, contracts, and designs, supervise plan 
installation, and carry out research, demonstration, education, 
monitoring, and evaluation activities;
    (28) USDA Salinity Control Report means a report that identifies 
salt source areas in the Colorado River Basin and establishes a cost-
effective project plan for such areas designed to reduce the salinity 
levels in the Colorado River. The USDA Salinity Control Report is 
prepared and published by the Soil Conservation Service with provision 
for public comment;
    (29) Technical guide means a document on file in the local SCS 
office containing technical information and specifications for the 
conservation of soil, water, plant, animal, and related natural 
resources specifically applicable to the area for which it is prepared.
    (b) In the regulations in this part and in all instructions, forms, 
and documents in connection therewith, all other words and phrases 
shall, unless the context of subject matter otherwise requires, have the 
meanings assigned to them in the regulations governing reconstitutions 
of farms, allotments and bases, 7 CFR part 719.

[52 FR 16741, May 5, 1987, as amended at 58 FR 11785, Mar. 1, 1993]

[[Page 43]]



Sec. 702.3  Administration.

    (a) Farm Service Agency. (1) The Farm Service Agency (FSA), under 
the general supervision of the Administrator, FSA, shall administer the 
program established by this part. This program shall be carried out in 
the field by State ASC committees (STC) and local county ASC committees 
(COC).
    (2) Except as provided in paragraph (b) of this section, the Deputy 
Administrator, State and County Operations, FSA (Deputy Administrator), 
may determine any question arising under the program provided for in 
this part, may reverse or modify any determination made by an STC or COC 
in connection with this program, and may administer any and all phases 
of this program delegated to the COC, STC, or any employee(s) where the 
COC, STC, or any employee fails to perform a function required in these 
regulations. In exercising this authority, the Deputy Administrator may 
authorize a person or persons to carry out this program for such period 
of time as is deemed necessary.
    (b) Soil Conservation Service. (1) The Soil Conservation Service 
(SCS) shall:
    (i) Identify salt source areas in the Colorado River Basin;
    (ii) Develop USDA Salinity Control Reports;
    (iii) Assist participants in developing salinity control plans; and
    (iv) Provide such other technical assistance in the implementation 
of the CRSC Program as is determined to be necessary.
    (2) The Chief, SCS, may determine any question arising under the 
CRSC Program with respect to the activities of SCS, State 
Conservationists, and conservation districts.
    (3) In developing the USDA Salinity Control Report and implementing 
the project plan, SCS shall coordinate with other agencies of the U.S. 
Department of Agriculture, the United States Department of the Interior, 
and the Environmental Protection Agency.
    (c) The Extension Service (ES) shall develop and coordinate 
information and educational programs and may provide other technical 
support to carry out the program provided for by this part.
    (d) Other USDA agencies such as Cooperative State Research Service 
(CSRS) and the Agricultural Research Service (ARS) may conduct research 
and may provide other technical support needed to carry out the CRSC 
Program.



Sec. 702.4  Applicability.

    (a) The provision of this part shall be applicable to areas within 
the Colorado River Basin that have been identified by SCS as salt source 
areas.
    (b) The program provided for by this part shall be applicable to 
private lands, Indian tribal lands, lands owned or controlled by 
irrigation districts or companies, Federal land under the control of the 
USDA, and State and local government lands.



Sec. 702.5  Eligible land.

    For the purposes of this part, eligible land is land that is within 
the Colorado River Basin area which:
    (a) Has been identified by SCS as a salt source area;
    (b) Is the subject of a published USDA Salinity Control Report and 
an approved project implementation plan;
    (c) Has been irrigated at least two years during the period between 
1982 and 1986, inclusive; and
    (d) Notwithstanding the criteria articulated in paragraphs (a) 
through (c) of this section, the Deputy Administrator has final 
authority to approve land for CRSC program eligibility if one of the 
following conditions is satisfied:
    (1) If it is determined impossible to reorganize the existing 
irrigation system to increase irrigation efficiencies to obtain salt 
load reduction, irrigated land may be exchanged for nonirrigated land.
    (2) Nonirrigated wildlife areas devoted to replacing incidental fish 
and wildlife values foregone because of the CRSC program.
    (3) Incidental land, which in the course of improving or 
reorganizing the existing irrigation system, becomes irrigable.

[52 FR 16741, May 5, 1987, as amended at 58 FR 11785, Mar. 1, 1993]

[[Page 44]]



Sec. 702.6  Eligible entity.

    In order to be eligible to enter into a CRSC Contract, an entity 
must own or have control over eligible land.



Sec. 702.7  Salinity control plan.

    (a) The applicant, in consultation with SCS, shall develop the 
salinity control plan which is the most cost-effective consistent with 
the project plan.
    (b) All salinity control plans must be approved by the CD in order 
for the SRP's contained therein to be eligible for cost-share 
assistance.
    (c) When approving salinity control plans, the CD shall ensure that 
the salinity control plan is consistent with the approved project plan 
and cost-effective SRP's identified in the approved project 
implementation plan for the area.



Sec. 702.8  Eligible salinity reduction practices (SRP's).

    (a) Eligible SRP's are those practices specified in the project 
implementation plan and the participant's salinity control plan that:
    (1) Significantly reduce the salt loading from a unit of land; or
    (2) Replace incidental fish and wildlife values foregone; or
    (3) Reduce erosion or seepage to a degree which significantly 
benefits salinity control.
    (b) Notwithstanding the foregoing provisions of this section, the 
following practices shall not be considered to be eligible SRP's:
    (1) Practices installed primarily for the purpose of bringing 
additional land into production, for increasing production above that 
which is incidental to application of conservation treatment for 
salinity control, or for flood protection; and
    (2) Practices which are installed or commenced before the contract 
for cost-share assistance has been approved.



Sec. 702.9  CRSC Contract and obligations of the participant.

    (a) In order to receive cost-share assistance in accordance with 
this part, an eligible entity must enter into a CRSC Contract with a COC 
and, if required by the COC, enter into separate operation and 
maintenance agreements in accordance with Sec. 702.10 of this part.
    (b) The CRSC Contract will be comprised of:
    (1) The terms and conditions of the contract; and
    (2) The salinity control plan.
    (c) All CRSC Contracts shall have a term of not less than 3 nor more 
than 10 years.
    (d) Eligible entities may offer to enter into a CRSC Contract in 
accordance with this part through the COC located in the same county as 
the eligible land or such other COC designated to administer contracts 
in the project area.
    (e) By entering into a CRSC Contract, the participant agrees to:
    (1) Carry out the terms and conditions of the CRSC Contract;
    (2) Implement the salinity control plan:
    (i) In accordance with the schedule of completion dates included in 
such plan, unless an extension of time is granted by the COC in 
consultation with the CD; and
    (ii) Install all SRP's included in the salinity control plan in 
accordance with the SCS field office technical guide, regardless of 
whether the applicant receives cost-share assistance with respect to a 
SRP;
    (3) Acquire all authorities, rights, easements, permits or other 
approvals necessary to install and maintain the SRP's and for compliance 
with applicable Federal, State, and local laws and regulations;
    (4) Hold the Federal government harmless for any losses it may 
sustain if the participant infringes on the rights of others or fails to 
comply with applicable Federal, State, or local laws or regulations;
    (5) Operate and maintain, at no cost to the Federal government, the 
SRP's as specified in the salinity control plan and ACP-245, Practice 
Approval and Payment Application, or as specified in separate operation 
and maintenance agreements entered into by the participant for the 
effective lifespan of the SRP's, as determined by SCS; and
    (6) Not undertake any action on the land subject to the CRSC 
Contract that tends to defeat the purposes of the program provided for 
by this part.

[[Page 45]]

    (f) All entities who have a present possessory interest in the land, 
to be eligible for CRSC cost share, must sign a CRSC contract.
    (g) The participant and each entity signing the CRSC Contract shall 
be jointly and severally responsible for compliance with the contract 
and the provisions of this part and for any refunds or payments which 
may be required for violation of any of the terms and conditions of the 
CRSC Contract and the provisions of this part.
    (h) The CRSC contract may require that all participants and/or 
landowners, as a condition of eligibility for cost-share assistance, 
grant to the Secretary a recordable security interest in the property or 
equipment of the SRP's that are installed, with the value of the granted 
interest to be determined by FSA.
    (i) The Deputy Administrator, or the Deputy Administrator's 
designee, may, in consultation with SCS and the CD, accept or reject 
offers to enter into a CRSC Contract.
    (j) CRSC Contracts shall be implemented, and salinity control plans 
shall be developed, in the order of priority within the applicable salt 
source area that is established by the COC and CD in consultation with 
SCS.

[52 FR 16741, May 5, 1987, as amended at 58 FR 11785, Mar. 1, 1993]



Sec. 702.10  Operation and maintenance agreements.

    (a) The participant shall enter into with the COC any operation and 
maintenance agreements determined to be necessary by the COC in order to 
ensure proper operation and maintenance of the SRP's provided for in the 
CRSC Contract.
    (b) The operation and maintenance agreement will be comprised of:
    (1) The terms and conditions of the agreement; and
    (2) An operation and maintenance plan prepared by SCS.
    (c) By entering in a operation and maintenance agreement, the 
participant agrees to:
    (1) Carry out the terms and conditions of the operation and 
maintenance agreement;
    (2) Operate and maintain, at no cost to the Federal government, the 
SRP's for the effective lifespan of all SRP's included in the operation 
and maintenance agreement;
    (3) Operate, maintain and inspect the SRP's in accordance with the 
operation and maintenance plan;
    (4) Obtain prior COC and SCS approval of all plans, designs, and 
specifications for any alteration to the SRP's;
    (5) Prohibit the installation of any structure or facility that will 
interfere with the operation and maintenance of the SRP's;
    (6) Notify the COC and SCS of any agreement to be entered into with 
other parties for the operation and maintenance of all or part of SRP's 
and provide the COC and SCS with a copy of such agreement when it has 
been signed by the participant and the other party; and
    (7) Not undertake any action on the land subject to the operation 
and maintenance agreement that tends to defeat the purposes of the CRSC 
program;
    (d) The participant and each person signing the operation and 
maintenance agreement shall be jointly and severally responsible for 
compliance with the operation and maintenance agreement and the 
provisions of this part and for any refunds or payment adjustments that 
may be required for violation of any of the terms and conditions of the 
operation and maintenance agreement and provisions of this part.



Sec. 702.11  Obligations of USDA.

    FSA shall, subject to the availability of funds, share the cost with 
participants of establishing eligible SRP's specified in the salinity 
control plan at the levels and rates of cost-sharing determined in 
accordance with the provisions of Sec. 702.13 and SCS shall provide such 
technical assistance as may be necessary to assist the participant in 
carrying out the CRSC Contract.



Sec. 702.12  Availability of cost-share payments.

    (a) Cost-share payments shall be made available to a participant in 
a CRSC Contract upon a determination by the COC that SCS has certified 
that

[[Page 46]]

the eligible SRP or an identifiable portion thereof has been established 
in accordance with the appropriate standards and specifications and that 
such SRP would serve the functional purposes for which the practice is 
intended.
    (b) Cost-share payments may be made available under this part only 
for the establishment or installation of an eligible SRP.
    (c) Cost-share assistance may be approved for the replacement, 
enlargement, or restoration of SRP's installed under a CRSC Contract if 
such practices, as originally installed, failed to achieve the desired 
salinity reduction and if:
    (1) The replacement, enlargement, or restoration of the SRP is 
required to solve identified problems or to achieve salt reduction 
benefits;
    (2) The approved specifications for the SRP were met in the original 
installation of the practice; and
    (3) The failure of the SRP to solve the identified problem or to 
achieve salt reduction benefits was caused by circumstances beyond the 
control of the participant.
    (d) If a participant has taken any action which tends to defeat the 
purposes of the program provided for by this part, the COC may withhold 
or require a refund of all or part of any payments otherwise due or paid 
that participant in accordance with this part. Such actions include, but 
are not limited to, failure to properly maintain or deliberately 
destroying a SRP.



Sec. 702.13  Levels and rates of cost-share payments.

    (a) The level of Federal cost-share assistance for the required 
SRP's for the project shall be determined by formulas as established in 
the USDA Salinity Control Report.
    (b) Except as provided in paragraph (c) of this section, cost-share 
payments shall not exceed the lesser of 70 percent of the average cost 
or 70 percent of the actual cost of the installation of the SRP.
    (c) The Deputy Administrator, in consultation with the USDA Salinity 
Control Coordinating Committee, may approve cost-share levels in excess 
of 70 percent of the average or actual cost of installation of the SRP 
or in excess of the level based on the ratio of on-farm and offsite 
benefits if such increased assistance is necessary to obtain acceptable 
program participation. Higher cost-share levels shall be considered only 
when one or more of the following apply, unless the Secretary finds at 
his descretion that such cost-sharing requirement would result in a 
failure to proceed with needed on-farm measures:
    (1) On-farm benefits that are low relative to offsite benefits;
    (2) Higher degree of project cost-effectiveness and magnitude of 
salinity reduction benefits to be achieved relative to other projects;
    (3) The need for and the cost of implementing voluntary SRP's to 
replace incidental fish and wildlife values foregone;
    (d) The combined cost-share assistance provided by Federal, State, 
and local governments or subdivisions thereof shall not exceed 100 
percent of the cost of installing the SRP.

[52 FR 16741, May 5, 1987, as amended at 58 FR 11786, Mar. 1, 1993]



Sec. 702.14  Assignments.

    Any participant entitled to cost-share payments under this program 
may assign the right to receive such payment, in whole or in part, as 
provided in the regulations at 7 CFR part 709, Assignment of Payment, or 
as provided in instructions issued by the Deputy Administrator.



Sec. 702.15  Payments not subject to claims.

    Subject to the regulations found at 7 CFR part 13, any cost-share 
payment or portion thereof due any entity shall be allowed without 
regard to questions of title under State law, and without regard to any 
claim or lien against the practice in favor of the owner or any other 
creditor, except agencies of the United States Government.



Sec. 702.16  Maximum amount of cost-share payments.

    (a) Maximum payments for on-farm SRP's.
    (1) Except as provided in paragraph (a)(2) of this section, the 
maximum amount of cost-share payments that a

[[Page 47]]

COC may approve for the establishment of on-farm SRP's on all land owned 
or controlled by a participant for the life of the program provided for 
by this part shall not exceed $100,000.
    (2) The Deputy Administrator may approve cost-share payments to a 
participant for the establishment of on-farm SRP's in excess of 
$100,000.
    (b) Except as provided in paragraphs (b)(1) and (b)(2) of this 
section, the maximum program cost-share payment that a COC may approve 
for implementing required SRP's for installing and improving canals and 
laterals on all land owned and controlled by a participant for the life 
of the program shall not exceed $200,000.
    (1) Upon the request of the COC, the STC may authorize the COC to 
approve cost-share payments to a participant for the establishment of 
canal and lateral improvements in an amount that exceeds, $200,000 but 
not greater than $400,000.
    (2) Upon the request of the COC, the Deputy Administrator may 
authorize the COC to approve cost-share payments to a participant for 
the establishment of canal and laterals improvements in amounts 
exceeding $400,000.
    (c) Cost-sharing payments in excess of $100,000 shall be considered 
only when such payment will result in greater total offsite benefits, 
because the offsite benefits for the participants SCP, are greater than 
those of other participants under consideration at the same time and one 
or more of the following conditions exist:
    (1) The cost of establishing required SRP's on the participant's 
land is high relative to the cost of installing practices on other 
similar land because of barriers or limitations imposed by nature or by 
man through past irrigation system practices;
    (2) The extent of SRP's that must be established on a participant's 
land; and
    (3) Increases in the cost of conservation materials and services 
that are beyond the participant's control.



Sec. 702.17  Transfers of land and contract modifications.

    (a) CRSC Contracts may be transferrred or modified with the 
agreement of all parties to the contract. The transferee shall assume 
full responsibility for performance under the CRSC Contract, including 
the implementation of scheduled SRP's and the operation and maintenance 
of existing and scheduled SRP's.
    (b) A participant who sells or loses control of the land under a 
CRSC Contract or any related operation and maintenance agreement to a 
new owner who refuses to perform the provisions of the CRSC Contract or 
operation and maintenance agreement or a participant who sells the water 
rights before there is compliance with all of the terms and conditions 
of a CRSC Contract or operation and maintenance agreement may be 
required to refund all or a portion of the cost-share assistance earned 
under the program.



Sec. 702.18  Violations.

    (a)(1) If a participant violates the CRSC Contract or any related 
operations and maintenance agreement, the COC may, after considering the 
recommendations of the CD and SCS, terminate the CRSC Contract and 
operation and maintenance agreement.
    (2) If the CRSC Contract is terminated by the COC in accordance with 
this section, the participant shall forfeit all rights to further cost-
share payments under the CRSC Contract and shall refund all or part of 
the payments received as determined by the COC.
    (b) The following actions constitute a violation of the CRSC 
Contract or any related operation and maintenance agreement by a 
participant:
    (1) Destruction of a SRP on land which is the subject of a CRSC 
Contract, unless prior approval in writing is granted by FSA with SCS 
concurrence;
    (2) Failure to comply with the terms and conditions of the CRSC 
Contract and any related operation and maintenance agreements;
    (3) Filing of a false claim;
    (4) Undertaking any action during the CRSC Contract or any operation 
and maintenance agreement period that tends to defeat the purpose of the 
program, including the destruction of any existing conservation 
practices that were established under any other cost-share program 
unless the participant provides evidence that all of the

[[Page 48]]

participant's obligations under such other program have been met; or
    (5) Employment of any scheme or device to obtain cost-share 
assistance or additional cost-share assistance, or to deprive any other 
land user of cost-share assistance or the right to participate in the 
program.
    (c) The Deputy Administrator may terminate any CRSC Contract and any 
related operation and maintenance agreements by mutual agreement with 
the paticipant based upon recommendations from COC, STC, SCS, and CD, if 
the termination of the CRSC Contract and operation and maintenance 
agreement is determined to be in the best interest of the public.
    (d) If the participant fails to perform the terms and conditions of 
the CRSC contract and the Deputy Administrator determines, after 
considering the recommendations of the CD and SCS, that such failure 
does not warrant termination of the CRSC contract, the Deputy 
Administrator may require such participant to refund all or part of the 
payments received under the CRSC contract, or to accept such adjustments 
in the payment as are determined to be appropriate by the Deputy 
Administrator.

[52 FR 16741, May 5, 1987, as amended at 58 FR 11786, Mar. 1, 1993]



Sec. 702.19  CRSC Contracts and operation and maintenance agreements not in conformity with regulations.

    If, after a CRSC Contract and related operation and maintenance 
agreement are entered in by the COC with a participant, it is discovered 
that such contract and operation and maintenance agreement are not in 
conformity with the provisions of this part as the result of a 
misunderstanding of the program procedures by a signatory to the 
contract and operation and maintenance agreement, a modification of the 
contract and operation and maintenance agreement may be made by mutual 
agreement. If the parties to the CRSC Contract and operation and 
maintenance agreement cannot reach agreement with respect to such 
modification, the contract and operation and maintenance agreement shall 
be terminated and all payments paid or payable under the contract shall 
be forfeited or refunded to the Federal government, except as may 
otherwise be allowed in accordance with the provisions of Sec. 702.18 of 
this part.



Sec. 702.20  Appeals.

    The participant may obtain a review, in accordance with the 
provisions of 7 CFR part 614 and 7 CFR part 11, of any administrative 
decision made under the provisions of this part.

[60 FR 67316, Dec. 29, 1995]



Sec. 702.21  Access to land.

    The COC, SCS or other agency providing technical services or 
representatives thereof shall have the right of access to land for which 
application to enter into a CRSC Contract has been made or for which a 
CRSC Contract has been entered into and the right to examine any program 
records to ascertain the accuracy of any representation made in the 
application or to determine compliance with the contract.



Sec. 702.22  Performance based upon advice or action of representatives of the Department or a CD.

    Notwithstanding any other provision of law, performance rendered in 
good faith in reliance upon the action or advice of any authorized 
representative of a CD, a representative of SCS or the STC or COC may be 
accepted by the Chief of SCS or the Deputy Administrator, as applicable, 
as meeting the requirements of this program. SCS or the Deputy 
Administrator, respectively, may grant relief because of such good faith 
reliance to the extent it is deemed necessary to provide fair and 
equitable treatment.



Sec. 702.23  Filing of false claims.

    (a) If it is determined by the COC, with STC concurrence, that any 
participant has knowingly submitted false information or filed a false 
claim, such participant shall be ineligible for payments under the 
provisions of this part with respect to the calendar year in which the 
false information or claim was filed.
    (b) False information or false claims include a claim for payment 
for a SRP not carried out or for the establishment of SRP's which do not 
meet the required specifications. Any amounts

[[Page 49]]

paid under these circumstances shall be refunded and any amounts 
otherwise due the participant shall be withheld. The withholding or 
refunding of such payments will be in addition to any other penalty or 
liability otherwise imposed by law.



Sec. 702.24  Depriving others of payments.

    If the COC with STC concurrence finds that any participant has 
employed any scheme or device to deprive any other person of payments 
under this part, it may withhold or require a refund of all or part of 
any program payment otherwise due or paid that person in accordance with 
the CRSC Contract. A scheme or device includes, but is not limited to, 
coercion, fraud, or misrepresentation.



Sec. 702.25  Miscellaneous.

    (a) In accordance with the regulations set forth at 7 CFR part 796:
    (1) No payment shall be made to any participant who harvests or 
knowingly permits to be harvested for illegal use, marihuana or other 
such prohibited drug-producing plants on any part of the lands owned or 
controlled by such participants; and
    (2) Any participant who is convicted under Federal or State law of 
planting, cultivating, growing, producing, harvesting, or storing a 
controlled substance in any crop year shall be ineligible for any 
payments under this part during that crop year and the four (4) 
succeeding crop years.
    (b) In case of death, incompetency, or disappearance of any 
participant, any cost-share payment due shall be paid to the 
participant's successor in accordance with provisions of 7 CFR part 707.



Sec. 702.26  Paperwork Reduction Act assigned numbers.

    The Office of Management and Budget has approved the information 
collection requirements contained in these regulations under the 
provisions of 44 U.S.C. Chapter 33 and OMB number 0560-0128 has been 
assigned.



PART 707--PAYMENTS DUE PERSONS WHO HAVE DIED, DISAPPEARED, OR HAVE BEEN DECLARED INCOMPETENT--Table of Contents




Sec.
707.1  Applicability.
707.2  Definitions.
707.3  Death.
707.4  Disappearance.
707.5  Incompetency.
707.6  Death, disappearance, or incompetency of one eligible to apply 
          for payment pursuant to the regulations in this part.
707.7  Form of application.

    Authority: 54 Stat. 728, as amended, sec. 121, 70 Stat. 197, sec. 
375, 52 Stat. 66, as amended, sec. 124(i), 75 Stat. 300, sec. 307(h), 76 
Stat. 617, sec. 318, 76 Stat. 622, sec. 324(2), 76 Stat. 630, sec. 704, 
68 Stat. 911, secs. 4, 8(b), 49 Stat. 164, 1149, as amended, sec. 
101(4), 76 Stat. 606, sec. 3, 77 Stat. 45, sec. 4, 62 Stat. 1070; 5 
U.S.C. 301, 7 U.S.C. 1334 note, 1339, 1375, 1379j, 1385, 1783, 1809; 16 
U.S.C. 590d, 590h(b), 590(e), 590p(h), 15 U.S.C. 714b(d)(j)(k).

    Source: 30 FR 6246, May 5, 1965, unless otherwise noted.



Sec. 707.1  Applicability.

    This part applies to all programs in title 7 of the Code of Federal 
Regulations which are administered by the Farm Service Agency under 
which payments are made to eligible program participants. This part also 
applies to all other programs to which this part is applicable by the 
individual program regulations.



Sec. 707.2  Definitions.

    ``Person'' when relating to one who dies, disappears, or becomes 
incompetent, prior to receiving payment, means a person who has earned a 
payment in whole or in part pursuant to any of the programs to which 
this part is applicable. ``Children'' shall include legally adopted 
children who shall be entitled to share in any payment in the same 
manner and to the same extent as legitimate children of natural parents. 
``Brother'' or ``sister'', when relating to one who, pursuant to the 
regulations in this part, is eligible to apply for the payment which is 
due a person who

[[Page 50]]

dies, disappears, or becomes incompetent prior to the receipt of such 
payment, shall include brothers and sisters of the half blood who shall 
be considered the same as brothers and sisters of the whole blood. 
``Payment'' means a payment by draft, check or certificate pursuant to 
any of the Programs to which this part is applicable. Payments shall not 
be considered received for the purposes of this part until such draft, 
check or certificate has been negotiated or used.



Sec. 707.3  Death.

    (a) Where any person who is otherwise eligible to receive a payment 
dies before the payment is received, payment may be made upon proper 
application therefor, without regard to claims of creditors other than 
the United States, in accordance with the following order of precedence:
    (1) To the administrator or executor of the deceased person's 
estate.
    (2) To the surviving spouse, if there is no administrator or 
executor and none is expected to be appointed, or if an administrator or 
executor was appointed but the administration of the estate is closed 
(i) prior to application by the administrator or executor for such 
payment or (ii) prior to the time when a check, draft, or certificate 
issued for such payment to the administrator or executor is negotiated 
or used.
    (3) If there is no surviving spouse, to the sons and daughters in 
equal shares. Children of a deceased son or daughter of a deceased 
person shall be entitled to their parent's share of the payment, share 
and share alike. If there are no surviving direct descendants of a 
deceased son or daughter of such deceased person, the share of the 
payment which otherwise would have been made to such son or daughter 
shall be divided equally among the surviving sons and daughters of such 
deceased person and the estates of any deceased sons or daughters where 
there are surviving direct descendants.
    (4) If there is no surviving spouse and no direct descendant, 
payment shall be made to the father and mother of the deceased person in 
equal shares, or the whole thereof to the surviving father or mother.
    (5) If there is no surviving spouse, no direct descendant, and no 
surviving parent, payment shall be made to the brothers and sisters of 
the deceased person in equal shares. Children of a deceased brother or 
sister shall be entitled to their parent's share of the payment, share 
and share alike. If there are no surviving direct descendants of the 
deceased brother or sister of such deceased person, the share of the 
payment which otherwise would have been made to such brother or sister 
shall be divided equally among the surviving brothers and sisters of 
such deceased person and the estates of any deceased brothers or sisters 
where there are surviving direct descendants.
    (6) If there is no surviving spouse, direct descendant, parent, or 
brothers or sisters or their descendants, the payment shall be made to 
the heirs-at-law in accordance with the law of the State of domicile of 
the deceased person.
    (b) If any person who is entitled to payment under the above order 
of precedence is a minor, payment of his share shall be made to his 
legal guardian, but if no legal guardian has been appointed payment 
shall be made to his natural guardian or custodian for his benefit, 
unless the minor's share of the payment exceeds $1,000, in which event 
payment shall be made only to his legal guardian.
    (c) Any payment which the deceased person could have received may be 
made jointly to the persons found to be entitled to such payment or 
shares thereof under this section or, pursuant to instructions issued by 
the Farm Service Agency, a separate payment may be issued to each person 
entitled to share in such payment.



Sec. 707.4  Disappearance.

    (a) In case any person otherwise eligible to receive payment 
disappears before receiving the payment, such payment may be made upon 
proper application therefor, without regard to claims of creditors other 
than the United States, to one of the following in the order mentioned:
    (1) The conservator or liquidator of his estate, if one be duly 
appointed.
    (2) The spouse.
    (3) An adult son or daughter or grandchild for the benefit of his 
estate.

[[Page 51]]

    (4) The mother or father for the benefit of his estate.
    (5) An adult brother or sister for the benefit of his estate.
    (6) Such person as may be authorized under State law to receive 
payment for the benefit of his estate.
    (b) A person shall be deemed to have disappeared if (1) he has been 
missing for a period of more than 3 months, (2) a diligent search has 
failed to reveal his whereabouts, and (3) such person has not 
communicated during such period with other persons who would be expected 
to have heard from him. Evidence of such disappearance must be presented 
to the county committee in the form of a statement executed by the 
person making the application for payment, setting forth the above 
facts, and must be substantiated by a statement from a disinterested 
person who was well acquainted with the person who has disappeared.



Sec. 707.5  Incompetency.

    (a) Where any person who is otherwise eligible to receive a payment 
is adjudged incompetent by a court of competent jurisdiction before the 
payment is received, payment may be made, upon proper application 
therefor, without regard to claims of creditors other than the United 
States, to the guardian or committee legally appointed for such 
incompetent person. In case no guardian or committee has been appointed, 
payment, if not more than $1,000, may be made without regard to claims 
of creditors other than the United States, to one of the following in 
the order mentioned for the benefit of the incompetent person:
    (1) The spouse.
    (2) An adult son, daughter, or grandchild.
    (3) The mother or father.
    (4) An adult brother or sister.
    (5) Such person as may be authorized under State law to receive 
payment for him (see standard procedure prescribed for the respective 
region).
    (b) In case payment is more than $1,000, payment may be made only to 
such person as may be authorized under State law to receive payment for 
the incompetent.



Sec. 707.6  Death, disappearance, or incompetency of one eligible to apply for payment pursuant to the regulations in this part.

    In case any person entitled to apply for a payment pursuant to the 
provisions of Sec. 707.3, Sec. 707.4, Sec. 707.5, or this section, dies, 
disappears, or is adjudged incompetent, as the case may be, after he has 
applied for such payment but before the payment is received, payment may 
be made upon proper application therefor, without regard to claims of 
creditors other than the United States, to the person next entitled 
thereto in accordance with the order of precedence set forth in 
Sec. 707.3, Sec. 707.4, or Sec. 707.5, as the case may be.



Sec. 707.7  Form of application.

    Persons desiring to claim payment in accordance with this part 707 
may do so on Form FSA-325, ``Application for Payment of Amounts Due 
Persons Who Have Died, Disappeared, or Have Been Declared Incompetent''. 
If the person who died, disappeared, or was declared incompetent did not 
apply for payment by filing the applicable program application for 
payment form, such program application for payment must also be filed in 
accordance with applicable regulations. If the payment is made under the 
Naval Stores Conservation Program, Part II of the Form FSA-325 shall be 
executed by the local District Supervisor of the U.S. Forest Service. In 
connection with applications for payment under all other programs 
itemized in Sec. 707.1, Form FSA-325, and program applications for 
payments where required, shall be filed with the FSA county office where 
the person who earned the payment would have been required to file his 
application.



PART 708--RECORD RETENTION REQUIREMENTS--ALL PROGRAMS--Table of Contents




    Authority: Sec. 4, 49 Stat. 164, secs. 7-17, 49 Stat. 1148, as 
amended; 16 U.S.C. 590d, 590g-590q.



Sec. 708.1  Record retention period.

    For the purposes of the programs in this chapter, no receipt, 
invoice, or other record required to be retained by any agricultural 
producer as evidence

[[Page 52]]

tending to show performance of a practice under any such program needs 
to be retained by such producer more than two years following the close 
of the program year of the program.

[25 FR 105, Jan. 7, 1960. Redesignated at 26 FR 5788, June 29, 1961]

[[Page 53]]





SUBCHAPTER B--FARM MARKETING QUOTAS, ACREAGE ALLOTMENTS, AND PRODUCTION 
                               ADJUSTMENT





PART 711--MARKETING QUOTA REVIEW REGULATIONS--Table of Contents




                                 General

Sec.
711.1  Effective date.
711.2  Expiration of time limitations.
711.3  Definitions.
711.4  Forms.
711.5  Public information.

                            Review Committee

711.6  Eligibility as member of a panel.
711.7  Appointment of members of a panel.
711.8  Oath of office.
711.9  Composition of review committee.
711.10  Term of office.
711.11  Compensation.
711.12  Effect of change in composition of review committee.

                              Jurisdiction

711.13  Areas of venue and jurisdiction.

                     Application for Review of Quota

711.14  Application for review.
711.15  Matters subject to review.
711.16  County committee answer.
711.17  Amendments.

                        Hearing and Determination

711.18  Place and schedule of hearing.
711.19  Notice of hearing.
711.20  Continuances.
711.21  Conduct of hearing.
711.22  Nonappearance of applicant.
711.23  Determination by review committee.
711.24  Service of determination.
711.25  Reopening of hearing.
711.26  Record of hearing.

                            Court Proceedings

711.27  Procedure in the case of court proceedings.

                               Puerto Rico

711.28  Special provisions applicable to Puerto Rico.

                           OMB Control Numbers

711.29  OMB control numbers assigned pursuant to the Paperwork Reduction 
          Act.

    Authority: Secs. 301, 363-368, 371, 374, 375, 379, 52 Stat. 38, as 
amended, 63-66, amended, 79 Stat. 1211, as amended; 7 U.S.C. 1301, 1363-
1368, 1371, 1374, 1375, 1379.

    Source: 35 FR 15355, Oct. 2, 1970, unless otherwise noted.

                                 General



Sec. 711.1  Effective date.

    The Marketing Quota Review Regulations (26 FR 10204, 27 FR 4831, 
6539, 28 FR 3913, 31 FR 4271, 5663, 32 FR 15704) shall remain in effect 
and shall apply to all actions and proceedings taken prior to October 
15, 1970, and such regulations are superseded as of midnight, October 
14, 1970. The provisions of Secs. 711.1 to 711.50 are effective October 
15, 1970.



Sec. 711.2  Expiration of time limitations.

    The provisions of part 720 of this chapter concerning the expiration 
of time limitations shall apply to this part.



Sec. 711.3  Definitions.

    (a) General terms. In determining the meaning of the provisions of 
this part, unless the context indicates otherwise, words importing the 
singular include and apply to several persons or things, words importing 
the plural include the singular, words importing the masculine gender 
include the feminine as well, and words used in the present tense 
include the future as well as the present. The definitions in part 719 
of this chapter shall apply to this part.
    (b) Act. Act means the Agricultural Adjustment Act of 1938, and any 
amendments or supplements thereto.
    (c) Applicant. Applicant means the farmer who filed an application 
for review of a farm marketing quota and if a hearing involves the quota 
of a farm resulting from the reconstitution by division of a parent 
farm, the farm operator of each farm resulting from such reconstitution 
shall be considered an applicant for purposes of this part.
    (d) Clerk. Clerk means the county executive director for the county 
in which the application for review is filed unless another employee of 
the county or State office is designated by the State executive director 
to serve as clerk to the review committee.
    (e) Review committee. Review committee means three farmers 
designated

[[Page 54]]

to review a quota by the State executive director from the panel of 
farmers appointed by the Secretary under section 363 of the Act.
    (f) Quota. Quota means the farm marketing quota established under 
the Act for a farm during a year in which quotas are approved in the 
national referendum for a commodity, including any of the following 
factors:
    (1) Farm acreage allotment, farm marketing quota, and any 
adjustments in such allotment and quota resulting from: (i) Program 
violations; (ii) lease and transfer; (iii) sale and purchase; (iv) 
overmarketing and undermarketing; (v) release and reapportionment; (vi) 
eminent domain transactions; and (vii) forfeiture and reallocation.
    (2) Farm preliminary yield, farm normal yield and farm yield.
    (3) A determination of the land constituting a farm for which a farm 
acreage allotment or farm marketing quota is established, including the 
following: (i) Land devoted to nonagricultural use, (ii) land used for 
agricultural purposes, (iii) cropland acreage; and (iv) tillable 
cropland.
    (4) Acreage planted to the commodity on the farm.
    (5) Actual production for the farm.
    (6) Farm marketing excess (acres or pounds).
    (7) Marketing quota penalties, including but not limited to, 
assessments for marketing quota violations involving: (i) False 
identification, (ii) failure to account for production and disposition, 
(iii) failure to file a report, and (iv) the filing of a false report.

(Secs. 301, 363-368, 371, 374, 375, 379, 52 Stat. 38 as amended, 63-64, 
as amended, 66, as amended; 7 U.S.C. 1301, 1363-1368, 1375)

[35 FR 15355, Oct. 2, 1970, as amended by Amdt. 9, 45 FR 37398, June 3, 
1980; 49 FR 38240, Sept. 28, 1984]



Sec. 711.4  Forms.

    The following general forms, as revised from time to time, are 
prescribed for use in connection with review proceedings;
    (a) MQ-53 Application for Review of Farm Marketing Quota.
    (b) MQ-54 Notice of Untimely Filing of Review Application.
    (c) MQ-56 Notice of Hearing of Review Application.
    (d) MQ-58 Determination of Review Committee Farm Marketing Quota.
    (e) MQ-59 Oath of Review Committeeman.



Sec. 711.5  Public information.

    The clerk shall maintain a record of applications and review 
committee proceedings which shall be available at the office of the 
clerk for public inspection and copying in accordance with part 798 of 
this chapter.

                            Review Committee



Sec. 711.6  Eligibility as member of a panel.

    Any farmer who meets the eligibility requirements for county 
committeeman prescribed in the regulations in part 7 of subtitle A of 
this title, as amended, in a county within the area of venue for which 
he is to be appointed shall be eligible for appointment as a member of a 
review committee panel for such area of venue. If the area of venue 
consists of only one county or a part of a county, these eligibility 
requirements must be met in such county or in a nearby county. No farmer 
whose legal residence is in one State shall be eligible for appointment 
as a member of a review committee panel for an area of venue in another 
State.



Sec. 711.7  Appointment of members of a panel.

    The Secretary shall appoint six or more eligible farmers to serve as 
members of a review committee panel in each area of venue. Notice of 
appointment shall be sent to the State committee, which shall notify the 
farmers so appointed. Appointments may be made before, during, or after 
the period in which applications for review of quotas are required to be 
filed. Notwithstanding the foregoing, the Secretary shall have the 
continuing power to revoke or suspend any appointment made pursuant to 
the regulations in this part, and subject to the provisions of the act, 
to make such other appointment deemed proper.

[[Page 55]]



Sec. 711.8  Oath of office.

    Each farmer appointed to serve as a member of a review committee 
panel shall, as soon as possible after appointment, execute an oath of 
office on such form as may be prescribed by the Deputy Administrator, 
duly subscribed and sworn to or affirmed before a notary public. No 
farmer shall serve on a review committee unless such oath of office has 
been duly executed and filed with the State executive director or the 
clerk. A farmer appointed for consecutive terms to serve as a member of 
a review committee panel shall not be required to file a new oath of 
office after the original filing. If the form of oath of office is 
materially changed, a new oath of office shall be executed if required 
by the Deputy Administrator.



Sec. 711.9  Composition of review committee.

    (a) Three designated members from the panel constitute a review 
committee. Three members from the panel shall act as a review committee 
to hear applications for review for the prescribed area of venue. The 
State executive director shall designate from the panel of members for 
the prescribed area of venue three members who shall act as a review 
committee to hear specific applications and shall designate one of these 
three members as chairman of the review committee and another member as 
vice-chairman. Where the number of applications pending require two or 
more review committees for prompt disposition of such applications, the 
State executive director shall designate the members of each review 
committee, the chairman and vice chairman thereof, and the specific 
application to be heard by each review committee. Two or more review 
committees may hear applications concurrently in an area of venue. In 
the absence of the chairman, the vice chairman shall perform the duties 
and exercise the powers of the chairman. The State executive director 
shall notify members of each review committee of the schedule of 
hearings. No member shall serve in any case in which a quota will be 
reviewed for a farm in which such member, any of his relatives or 
business associates, is interested, nor shall any member serve where he 
had acted as State, county, or community committee member on a quota to 
be reviewed by the review committee.
    (b) Only two members present to commence hearing. Where only two 
members of a review committee are present to commence a hearing, 
although three members were scheduled to hear the application, at the 
request of or with the consent of the applicant in writing, a hearing 
conducted by two members of the review committee shall be deemed to be a 
regular hearing of the review committee as to such application. The 
determination made by such members shall constitute the determination of 
the review committee. In the event such members cannot agree upon a 
determination, such fact shall be set forth in writing and a new hearing 
scheduled by the State executive director. If the applicant does not 
consent in writing to a hearing conducted by two members of the review 
committee, the hearing shall be rescheduled.
    (c) Only two members remain to complete a hearing. Where only two 
members of a review committee remain to complete a hearing commenced 
with three members, due to serious illness, death, or other cause which 
prevents one of the members from completing the hearing within a 
reasonable time, at the request or with the consent of the applicant in 
writing, the remaining two members of the review committee shall 
henceforth constitute an entire review committee for the purpose of such 
hearing. In the event such members cannot agree upon a determination, 
such fact shall be set forth in writing and a new hearing scheduled by 
the State executive director. If the applicant does not consent in 
writing to completion of the hearing by two members of the review 
committee, the hearing shall be rescheduled.
    (d) Reopened or remanded hearings. In the case of a reopened or 
remanded hearing, if any member of the review committee is no longer in 
office because of death, resignation, or ineligibility, the State 
executive director shall designate another member of the review 
committee panel to serve on the review committee. If a hearing held 
pursuant to paragraph (b) or (c) of this section is reopened or remanded 
and

[[Page 56]]

only one review committee member is available to hear such reopened or 
remanded hearing, the State executive director shall designate two 
additional members from the review committee panel to serve on the 
review committee.



Sec. 711.10  Term of office.

    Appointment as a member of a review committee panel shall be for a 
term of 3 calendar years. A member may be reappointed for succeeding 
terms. Notwithstanding the foregoing, a review committee shall continue 
in office to conclude hearings before it which are begun during such 3-
year term and make final determinations thereof, or to hold a reopened 
hearing, or to conclude a hearing remanded to it by a court.

[Amdt. 3, 38 FR 967, Jan. 8, 1973]



Sec. 711.11  Compensation.

    The members designated as review committeemen shall receive 
compensation when serving at the same rate as that received by the 
members of the county committee which established the quotas sought to 
be reviewed. No member of a review committee shall be entitled to 
receive compensation for services as such member for more than 30 days 
in any one year. Payment of compensation, reimbursement for travel 
expenses and rates therefor, shall be made under such conditions as may 
be prescribed by the Deputy Administrator.



Sec. 711.12  Effect of change in composition of review committee.

    Nothing contained in Secs. 711.6 to 711.11 relating to any vacancy 
or revocation or suspension of appointment and nothing done pursuant 
thereto shall be construed as affecting the validity of any prior 
hearing conducted or determination made in accordance with the 
regulations in this part, in which the member of the review committee 
whose office has become vacant participated, or as affecting in any way 
court proceeding which may be instituted to review such determination.

                              Jurisdiction



Sec. 711.13  Areas of venue and jurisdiction.

    (a) Areas of venue. The State committee shall establish one or more 
areas of venue in the State. An area of venue may consist of all or part 
of a county, or more than one county within a State. In establishing 
areas of venue, the State committee shall take into consideration the 
requirements of section 363 of the Act as to eligibility of review 
committee members, the prompt handling of applications for review, 
transportation problems and the limit of 30-day service by review 
committeemen in any one year.
    (b) Jurisdiction. A review committee shall have jurisdiction within 
the area of venue for which it is established to hear applications 
respecting quotas established or denied by written notice issued by the 
county committee or other authorized official for farms within its area 
of venue, in accordance with this part.
    (c) A listing of the areas of venue within a State shall be 
available from the State FSA office and the Deputy Administrator.

[35 FR 15355, Oct. 2, 1970, as amended at 49 FR 38240, Sept. 28, 1984]

                     Application for Review of Quota



Sec. 711.14  Application for review.

    (a) Manner and time of filing. Any farmer who is dissatisfied with 
his quota may, within 15 days after the date of mailing to him of notice 
of such quota, file a written application for review thereof by the 
review committee. Such 15-day period is prescribed in accordance with 
section 363 of the Act. Unless application for review is timely filed, 
as determined under this section, the quota established by the notice 
shall not be subject to review by the review committee. Notice of quota 
subject to review under this part includes an official written notice as 
to the land constituting the farm. For example, a notice denying a 
request for farm reconstitution would be such a reviewable notice of 
quota. An application shall be in writing and addressed to, and filed 
with, the county executive director for the county from which the

[[Page 57]]

notice of quota was received. Any application (Form MQ-53 available on 
request) whether made on Form MQ-53 or not, shall contain the following:
    (1) Date of application and commodity (including type where 
applicable, e.g. Upland cotton, Flue-cured tobacco).
    (2) Correct full name and address of applicant.
    (3) Brief statement of each ground upon which the application is 
based.
    (4) A statement of the amount of quota which it is claimed should 
have been established.
    (5) Signature of applicant.

In any case where an application is timely filed for review of a quota 
on a farm which was reconstituted by division of a parent farm into two 
or more farms, such application shall be considered an application for 
review of the reconstitution of the parent farm. In any such case the 
farm operator of each farm resulting from such reconstitution shall be 
considered an applicant for purposes of this part with all the rights 
and privileges provided in this part. If an action may be taken by an 
applicant which affects the rights of any other applicant in the case, 
the other applicants shall be given the opportunity to concur in such 
action or to oppose such action.
    (b) Procedure where application is not timely filed. The county 
committee shall examine each application for review. If the application 
is not filed within the prescribed 15-day period, the county executive 
director shall send a notice of untimely filing on Form MQ-54 by 
certified mail to the applicant at the address shown on the application. 
The applicant may file a request in writing with the county executive 
director within 15 days after the date of mailing such notice to him 
requesting a review committee hearing on the sole issue of whether the 
application was filed within the prescribed 15-day period. In the 
absence of timely request in writing for such review committee hearing, 
the application shall be deemed withdrawn by the applicant. If timely 
request in writing for such review committee hearing is filed, a copy of 
the application and request shall be forwarded by the county executive 
director to the State executive director with a request that a hearing 
on the sole issue of timely filing be scheduled before the review 
committee. In cases involving the sole issue of timely filing of an 
application, the review committee shall determine whether the date the 
application was filed, or the postmark date in case of mailing by the 
applicant, was within the 15-day period. If the review committee 
determines that the application was timely filed, a hearing on the 
merits of the application shall be held. In addition, a hearing on the 
merits shall be conducted and the application treated as timely filed in 
any case where the review committee determines that the applicant in 
good faith requested review of his quota by the county or State 
committee under the regulations in part 780 of this chapter in reliance 
upon action or advice of any authorized representative of a county or 
State committee and subsequently filed application for review under this 
part within a reasonable time after he learns that the quota is subject 
to review committee jurisdiction.
    (c) Withdrawal of application. An application may be withdrawn upon 
the written request of the applicant. Any application so withdrawn or 
deemed withdrawn under paragraph (b) of this section shall be endorsed 
by the clerk ``Dismissed by the applicant''.
    (d) Procedure where application is timely filed. The county 
committee shall examine each application for review and where an 
application is found to be timely filed, the county executive director 
shall forward a copy of the application to the State executive director 
with a request that a hearing on the merits be scheduled before the 
review committee.



Sec. 711.15  Matters subject to review.

    In all cases, the review committee shall consider only such factors 
as, under applicable provisions of law and regulations, are required or 
permitted to be considered by the county committee in the establishment 
of the quota being reviewed. The establishment of national marketing 
quotas and apportionment of national acreage allotments and marketing 
quotas among States and counties and the establishment of reserve 
acreages and quotas at

[[Page 58]]

the national level and apportionment of such reserves among States and 
counties are not subject to review by a review committee. Review of a 
quota may include any of the factors which enter into the establishment 
of such quota for the farm and crop year as set forth in Sec. 711.3(f): 
Provided, however, That any factor of such quota considered by a review 
committee in a prior determination for the farm and crop year shall not 
be considered in a subsequent review proceeding. For example, a 
determination of the farm acreage allotment by the review committee 
would not be reconsidered upon any application for review of the farm 
marketing excess for the same farm and crop year.

[49 FR 38240, Sept. 28, 1984]



Sec. 711.16  County committee answer.

    (a) The county committee shall prepare a written answer to each 
application scheduled for hearing setting forth the pertinent facts, the 
applicable regulations, the data used in establishing the quota and any 
other matters deemed pertinent:
    (b) Provided, That the answer may be limited to the issue of timely 
filing where the hearing is limited to that issue. If the county 
committee determines that the increase, adjustment or other 
determination requested in the application is proper in whole or in 
part, the written answer shall set forth the proposed determination and 
in such cases, the applicant shall be notified by the county committee 
of such proposed determination prior to the scheduled review hearing if 
practicable to do so. In the event the applicant is satisfied with the 
proposed determination, the county committee shall, upon the withdrawal 
of the application, take the necessary action to revise the quota within 
the limits of the Act and applicable commodity regulations if the 
required amount of acreage allotment or marketing quota is available in 
the county. The State executive director may perform the functions of 
the county committee under this section and the functions of the county 
committee and county executive director under Sec. 711.14 (b) and (d) in 
any case where the application for review involves a notice of farm 
marketing quota issued by officials other than the county committee.

[35 FR 15355, Oct. 2, 1970, as amended at 49 FR 38240, Sept. 28, 1984]



Sec. 711.17  Amendments.

    Upon due request, and within the discretion of the review committee, 
the right to amend the application and all procedural documents in 
connection with any hearing, shall be granted upon such reasonable terms 
as the review committee may deem right and proper.

                        Hearing and Determination



Sec. 711.18  Place and schedule of hearing.

    The place of hearing shall be in the office of the county committee 
through which the quota sought to be reviewed was established, or such 
other appropriate place in the county as may be designated by the State 
executive director or by the review committee in cases arising under 
Sec. 711.21: Provided, however, That the place of hearing may be in some 
other county if agreed to in writing by the applicant. The State 
executive director shall schedule applications for hearings and forward 
such schedule to the clerk.



Sec. 711.19  Notice of hearing.

    The clerk shall give written notice on Form MQ-56 to the applicant 
by depositing such notice in the U.S. mail, certified and addressed to 
the last known address of the applicant at least 10 days prior to the 
time appointed for the hearing and copies of such notice shall also be 
sent to the county committee and the State office. If the applicant 
requests waiver of such 10-day period, the hearing may be scheduled 
earlier upon consent of the other interested parties. The notice of the 
hearing shall specify the time and place of the hearing, contain a 
statement of the statutory authority for the hearing, state that the 
application will be heard by the review committee duly appointed for the 
area of venue in which the applicant's farm is located, and that a 
verbatim transcript may be obtained by the applicant if he makes 
arrangement therefor before the hearing and pays the expense thereof.

[[Page 59]]



Sec. 711.20  Continuances.

    Hearings shall be held at the time and place set forth in the notice 
of hearing or in any subsequent notice amending or superseding the prior 
notice, but may without notice other than an announcement at the hearing 
by the chairman of the review committee, be continued from day to day or 
adjourned to a different place in the county or to a later date or to a 
date and place to be fixed in a subsequent notice to be issued pursuant 
to Sec. 711.19. In the event a full committee of three is not present, 
those members present, or in the absence of the entire committee, the 
clerk, shall postpone the hearing unless the hearing is held pursuant to 
Sec. 711.9 (b) or (c). There shall not be a continuance for lack of a 
full committee in the case of a reopened or remanded hearing where the 
hearing was initially held pursuant to Sec. 711.9 (b) or (c) and the two 
review committeemen who previously held the hearing are present and 
eligible to serve.



Sec. 711.21  Conduct of hearing.

    (a) Open to public. Except as otherwise provided in Secs. 711.1 to 
711.50, each hearing shall take place before the entire review committee 
and shall be presided over by the chairman of such committee. The 
hearing shall be open to the public and shall be conducted in a fair and 
impartial manner and in such a way as to afford the applicant, members 
of the appropriate county and community committees, and appropriate 
officers and agents of the Department of Agriculture, and all persons 
appearing on behalf of such parties, reasonable opportunity to give and 
produce evidence relevant to the quota being reviewed.
    (b) Consolidation of hearings. Wherever practicable, two or more 
applications relating to the same commodity and the same farm shall be 
consolidated by the review committee on its own motion or at the request 
of the State executive director and heard at the same time on the same 
record. In any case involving two or more farms resulting from 
reconstitution by division of a parent farm, the hearing shall be 
consolidated.
    (c) Representation. The applicant and the Secretary may be 
represented at the hearing. The county committee shall be present or 
represented at the hearing.
    (d) Order of procedure. At the commencement of the hearing, the 
chairman of the review committee shall read or cause to be read the 
pertinent portions of the application for review. The written answer of 
the county committee shall be submitted and shall be made a part of the 
record of the hearing. If the applicant asserts and shows to the 
satisfaction of the review committee that he has not been informed of 
the county committee's position in time to afford him adequate 
opportunity to prepare and present his case, the review committee shall 
continue the hearing, without notice other than announcement thereof at 
the hearing, for such period of time as will afford the applicant 
reasonable opportunity to meet the issues of fact and law involved. 
After answer by the county committee and following such continuance, if 
any, as may be granted by the review committee, evidence shall be 
received with respect to the matters relevant to the quota under review 
in such order as the chairman of the review committee shall prescribe. 
The review committee may take official notice of relevant publications 
of the Department of Agriculture and regulations of the Secretary.
    (e) Submission of evidence. The burden of proof shall be upon the 
applicant as to all issues of fact raised by him. Each witness shall 
testify under oath or affirmation administered by the member of the 
review committee who is presiding at the hearing. The review committee 
shall confine the evidence to pertinent matters and shall exclude 
irrelevant, immaterial, or unduly repetitious evidence. Interested 
persons shall be permitted to present oral and documentary evidence, to 
submit rebuttal evidence and to conduct such cross-examination as may be 
required for a full and true disclosure of the facts. The hearing shall 
be concluded within such reasonable time as may be determined by the 
review committee.
    (f) Transcript of testimony. The review committee shall provide for 
the taking of such notes including but not limited to stenographic 
reports or recordings at the hearing as will enable it to make

[[Page 60]]

a summary of the proceedings and the testimony received at the hearing. 
The testimony received at the hearing shall be reported verbatim by a 
representative of a private firm under an existing Departmental contract 
for such services if the review committee, the State Executive Director, 
or the applicant, requests such transcript be made. If such transcript 
is so requested, the State Executive Director shall advise the Deputy 
Administrator, State and County Operations, prior to the hearing date 
who will then arrange for the service. A copy of such transcript shall 
be furnished to each of the following: The review committee, the State 
Executive Director, and the Regional Attorney, Office of the General 
Counsel, United States Department of Agriculture. The applicant or his 
representative may obtain a copy from the firm at his own expense.
    (g) Written arguments and proposed findings. The review committee 
shall permit the applicant, the members of the appropriate county and 
community committees, and appropriate officers and agents of the 
Department of Agriculture to file written arguments and proposed 
findings of fact and conclusions, based on the evidence adduced at the 
hearing, for the consideration of the review committee within such 
reasonable time after the conclusion of the hearing as may be prescribed 
by the review committee. Such written arguments and proposed findings 
shall be filed in triplicate with the clerk and an additional copy 
thereof shall be provided to the other party.

[35 FR 15355, Oct. 2, 1970, as amended by Amdt. 5, 38 FR 16989, June 28, 
1973]



Sec. 711.22  Nonappearance of applicant.

    (a) Original hearing. If, at the time of the hearing, the applicant 
is absent and no appearance is made on his behalf, the review committee 
shall, after a lapse of such period of time as it may consider proper 
and reasonable, have the name of the absent applicant called in the 
hearing room. If, upon such call, there is no response, and no 
appearance on behalf of such applicant and no continuance has been 
requested by the applicant, the review committee shall thereupon close 
the hearing, as to such applicant, and, without further proceedings in 
the case, make a determination dismissing the application.
    (b) Reopened or remanded hearing. If, at a hearing which is reopened 
pursuant to Sec. 711.25 or remanded by a court, the applicant is absent 
and no appearance is made on his behalf, the review committee shall 
continue the hearing for a reasonable period of time and if the 
applicant does not appear at such continued hearing, the review 
committee shall make a determination.



Sec. 711.23  Determination by review committee.

    As soon as practicable after hearing on an application, including a 
hearing on the sole issue of timely filing, the review committee shall 
make a determination upon the application. If it is determined by the 
review committee that the application should be dismissed for untimely 
filing or denied, the review committee shall so indicate. If it is 
determined that the application should be granted in whole or in part, 
the review committee shall establish the quota which it finds to be 
proper. Each determination made by the review committee shall be in 
writing, shall contain specific findings of fact and conclusions 
together with the reasons or basis therefor, and shall be based upon and 
made in accordance with reliable, probative, and substantial evidence 
adduced at the hearing. The concurrence of two members of the review 
committee shall be sufficient to make a determination. The written 
determination shall contain such subscription by each member of the 
review committee as will indicate his concurrence therein or his dissent 
therefrom. In case of an increase in the quota, the review committee 
shall specifically state in the determination in what respect, if any, 
the county committee has failed properly to apply the act and 
regulations thereunder. If such increase is based upon evidence not 
available to the county committee, the findings of the review committee 
shall so indicate. The appropriate county executive director shall make 
available to the review committee such clerical and stenographic 
assistance as may be required.

[[Page 61]]



Sec. 711.24  Service of determination.

    A copy of the determination, certified by the clerk as a true and 
correct copy of the signed original, shall be served upon the applicant 
by sending the same by certified mail addressed to the applicant at his 
last known address. The copy of the determination shall contain at the 
top thereof substantially the following statement: ``To all persons who, 
as operator, landlord, tenant, or sharecropper, are or will be 
interested in the above-named commodity on the farm identified below in 
the year for which the marketing quota being reviewed is established'' 
and such statement shall constitute notice to all such persons. The 
clerk shall make a notation on the original determination of the date 
and place of such mailing. The clerk forthwith shall forward two copies 
of such determination to the State office, and one copy to the county 
committee. The determination of the review committee does not become 
final until the period for reopening of hearing under Sec. 711.25 has 
expired without any reopening; or if reopened thereunder, such 
determination becomes final upon issuance of a new determination 
pursuant to the reopened hearing, subject to further appeal to a court 
by the applicant.



Sec. 711.25  Reopening of hearing.

    (a) Upon motion of review committee. Upon its own motion within 15 
days from the date of mailing to the applicant of a copy of the 
determination of the review committee, the review committee may reopen a 
hearing for the purpose of taking additional evidence or of adding any 
relevant matter or document.
    (b) Upon written request based on new evidence. Upon written request 
by the applicant, the county committee, the State executive director, or 
other interested parties, to the review committee within 15 days from 
the date of mailing to the applicant of a copy of the determination of 
the review committee, the review committee shall reopen the hearing for 
the purpose of taking additional evidence or of adding any relevant 
matter or document if the review committee finds that such evidence or 
documents constitute new evidence not available to the parties at the 
time of the hearing.
    (c) Upon written notice by the Secretary. Upon written notice by the 
Secretary or on his behalf by the Deputy Administrator to the review 
committee within 45 days from the date of mailing to the applicant of a 
copy of the determination of the review committee on Form MQ-58, the 
hearing shall be deemed reopened and the State executive director shall 
schedule the reopened hearing.
    (d) Schedule of reopened hearing. Schedule of and notice of any 
reopened hearing shall follow the requirements of Secs. 711.18 and 
711.19 insofar as practicable. Notwithstanding the provisions of 
paragraphs (a), (b), and (c) of this section, no hearing shall be 
reopened after an appeal to a court pursuant to section 365 of the act 
has been timely filed by the applicant. No special hearing to contest a 
reopening of a hearing shall be scheduled; however, the applicant may 
present evidence and arguments to contest the reopening when the 
reopened hearing is held.



Sec. 711.26  Record of hearing.

    The record of the proceedings shall be prepared by the clerk and 
shall consist of the following:
    (a) All procedural documents in the case under review, including the 
application and written notices of quota and hearing and any other 
written notice in connection with the application.
    (b) Copies of regulations presented at the hearing.
    (c) The answer of the county committee or the State executive 
director.
    (d) The summary of the proceedings and the testimony prepared by the 
review committee if a verbatim transcript is not made, or a transcript 
of the testimony where a verbatim transcript is made, in accordance with 
Sec. 711.21(f), to which shall be annexed any documentary evidence 
received at the hearing.
    (e) Any written arguments or proposed findings of fact and 
conclusions filed in connection with the hearing.
    (f) The written determination of the review committee.
    (g) A list of all papers included in the record and a certificate by 
the clerk

[[Page 62]]

stating that such record is true, correct and complete.

                            Court Proceedings



Sec. 711.27  Procedure in the case of court proceedings.

    Upon the institution of any suit against the review committee for 
the purpose of reviewing its determination upon any application for 
review, the review committee is required by section 365 of the Act to 
certify and file in court a transcript of the record upon which the 
determination was made, together with the findings of fact made by the 
review committee. Any suit for review is required to be instituted by 
the applicant within 15 days after a notice of the review committee's 
determination is mailed to him. Such suit may be instituted in the U.S. 
District Court or in any court of record of the State having general 
jurisdiction, sitting in the county of the district in which the 
applicant's farm is located. The bill of complaint in such proceeding 
may be served by delivering a copy thereof to any member of the review 
committee. Any member of the review committee served with papers in such 
suit shall immediately forward such papers to the clerk. No member of 
the review committee shall appear or permit any appearance in his behalf 
or in behalf of the review committee, or take any action in respect to 
the defense of such suit, except in accordance with the instructions 
from the Deputy Administrator.

                               Puerto Rico



Sec. 711.28  Special provisions applicable to Puerto Rico.

    Notwithstanding the provisions of Secs. 711.1 to 711.50, the 
Caribbean Area Agricultural Stabilization and Conservation Committee 
(hereinafter referred to as the ``ASC Committee'') shall perform, 
insofar as applicable, the duties and assume such responsibilities and 
be subject to the limitations as are otherwise required of State and 
county committees except as provided herein. The Director, Caribbean 
Area FSA office, shall recommend members of the review committee panel, 
the areas of venue, and perform the functions of the State executive 
director. Any farmer who is eligible to vote in a referendum for which a 
quota has been proclaimed shall be eligible for appointment as a member 
of a review committee panel. The clerk shall be the ASC district 
supervisor of the district in which the review committee will hold its 
hearings. Where it is impractical or impossible to use the United States 
mail to serve the applicant with notice of hearing or determination, use 
shall be made of such other method of service as is available. However, 
when such other method is used, the ASC Committee shall make provision 
for keeping an accurate record of the date and method of delivery to the 
applicant.

                           OMB Control Numbers



Sec. 711.29  OMB control numbers assigned pursuant to the Paperwork Reduction Act.

    The information collection requirements contained in these 
regulations (7 CFR part 711) have been approved by the Office of 
Management and Budget (OMB) in accordance with the provisions of the 44 
U.S.C. Chapter 35 and have been assigned OMB control number 0560-0068.

[49 FR 38240, Sept. 28, 1984]



PART 714--REFUNDS OF PENALTIES ERRONEOUSLY, ILLEGALLY, OR WRONGFULLY COLLECTED--Table of Contents




Sec.
714.35  Basis, purpose, and applicability.
714.36  Definitions.
714.37  Instructions and forms.
714.38  Who may claim refund.
714.39  Manner of filing.
714.40  Time of filing.
714.41  Statement of claim.
714.42  Designation of trustee.
714.43  Recommendation by county committee.
714.44  Recommendation by State committee.
714.45  Approval by Deputy Administrator.
714.46  Certification for payment.

    Authority: Secs. 372, 375, 52 Stat. 65, as amended, 66, as amended; 
7 U.S.C. 1372, 1375.

    Source: 35 FR 12098, July 29, 1970, unless otherwise noted.

[[Page 63]]



Sec. 714.35  Basis, purpose, and applicability.

    (a) Basis and purpose. The regulations set forth in this part are 
issued pursuant to the Agricultural Adjustment Act of 1938, as amended, 
for the purpose of prescribing the provisions governing refunds of 
marketing quota penalties erroneously, illegally, or wrongfully 
collected with respect to all commodities subject to marketing quotas 
under the Act.
    (b) Applicability. This part shall apply to claims submitted for 
refunds of marketing quota penalties erroneously, illegally, or 
wrongfully collected on all commodities subject to marketing quotas 
under the Act. It shall not apply to the refund of penalties which are 
deposited in a special deposit account pursuant to sections 314(b), 
346(b), 356(b), or 359 of the Agricultural Adjustment Act of 1938, as 
amended, or paragraph (3) of Pub. L. 74, 77th Congress, available for 
the refund of penalties initially collected which are subsequently 
adjusted downward by action of the county committee, review committee, 
or appropriate court, until such penalties have been deposited in the 
general fund of the Treasury of the United States after determination 
that no downward adjustment in the amount of penalty is warranted. All 
prior regulations dealing with refunds of penalties which were contained 
in this part are superseded upon the effective date of the regulations 
in this part.



Sec. 714.36  Definitions.

    (a) General terms. In determining the meaning of the provisions of 
this part, unless the context indicates otherwise, words imparting the 
singular include and apply to several persons or things, words imparting 
the plural include the singular, words imparting the masculine gender 
include the feminine as well, and words used in the present tense 
include the future as well as the present. The definitions in part 719 
of this chapter shall apply to this part. The provisions of part 720 of 
this chapter concerning the expiration of time limitations shall apply 
to this part.
    (b) Other terms applicable to this part. The following terms shall 
have the following meanings:
    (1) ``Act'' means the Agricultural Adjustment Act of 1938, and any 
amendments or supplements thereto.
    (2) ``Claim'' means a written request for refund of penalty.
    (3) ``Claimant'' means a person who makes a claim for refund of 
penalty as provided in this part.
    (4) ``County Office'' means the office of the Agricultural 
Stabilization and Conservation County Committee.
    (5) ``Penalty'' means an amount of money collected, including 
setoff, from or on account of any person with respect to any commodity 
to which this part is applicable, which has been covered into the 
general fund of the Treasury of the United States, as provided in 
section 372(b) of the Act.
    (6) ``State office'' means the office of the Agricultural 
Stabilization and Conservation State Committee.



Sec. 714.37  Instructions and forms.

    The Deputy Administrator shall cause to be prepared and issued such 
instructions and forms as are necessary for carrying out the regulations 
in the part.



Sec. 714.38  Who may claim refund.

    Claim for refund may be made by:
    (a) Any person who was entitled to share in the price or 
consideration received by the producer with respect to the marketing of 
a commodity from which a deduction was made for the penalty and bore the 
burden of such deduction in whole or in part.
    (b) Any person who was entitled to share in the commodity or the 
proceeds thereof, paid the penalty thereon in whole or in part and has 
not been reimbursed therefor.
    (c) Any person who was entitled to share in the commodity or the 
proceeds thereof and bore the burden of the penalty because he has 
reimbursed the person who paid such penalty.
    (d) Any person who, as buyer, paid the penalty in whole or in part 
in connection with the purchase of a commodity, was not required to 
collect or pay such penalty, did not deduct the amount of such penalty 
from the price paid the producer, and has not been reimbursed therefor.
    (e) Any person who paid the penalty in whole or in part as a surety 
on a

[[Page 64]]

bond given to secure the payment of penalties and has not been 
reimbursed therefor.
    (f) Any person who paid the whole or any part of the sum paid as a 
penalty with respect to a commodity included in a transaction which in 
fact was not a marketing of such commodity and has not been reimbursed 
therefor.



Sec. 714.39  Manner of filing.

    Claim for refund shall be filed in the county office on a form 
prescribed by the Deputy Administrator. If more than one person is 
entitled to file a claim, a joint claim may be filed by all such 
persons. If a separate claim is filed by a person who is a party to a 
joint claim, such separate claim shall not be approved until the 
interest of each person involved in the joint claim has been determined.



Sec. 714.40  Time of filing.

    Claim shall be filed within 2 years after the date payment was made 
to the Secretary. The date payment was made shall be deemed to be the 
date such payment was deposited in the general fund of the Treasury as 
shown on the certificate of deposit on which such payment was scheduled.



Sec. 714.41  Statement of claim.

    The claim shall show fully the facts constituting the basis of the 
claim; the name and address of and the amount claimed by every person 
who bore or bears any part or all of the burden of such penalty; and the 
reasons why such penalty is claimed to have been erroneously, illegally, 
or wrongfully collected. It shall be the responsibility of the county 
committee to determine that any person who executes a claim as agent or 
fiduciary is properly authorized to act in such capacity. There should 
be attached to the claim all pertinent documents with respect to the 
claim or duly authenticated copies thereof.



Sec. 714.42  Designation of trustee.

    Where there is more than one claimant and all the claimants desire 
to appoint a trustee to receive and disburse any payment to be made to 
them with respect to the claim, they shall be permitted to appoint a 
trustee. The person designated as trustee shall execute the declaration 
of trust.



Sec. 714.43  Recommendation by county committee.

    Immediately upon receipt of a claim, the date of receipt shall be 
recorded on the face thereof. The county committee shall determine, on 
the basis of all available information, if the data and representations 
on the claim are correct. The county committee shall recommend approval 
or disapproval of the claim, and attach a statement to the claim, signed 
by a member of the committee, giving the reasons for their action. After 
the recommendation of approval or disapproval is made by the county 
committee, the claim shall be promptly sent to the State committee.



Sec. 714.44  Recommendation by State committee.

    A representative of the State committee shall review each claim 
referred by the county committee. If a claim is sent initially to the 
State committee, it shall be referred to the appropriate county 
committee for recommendation as provided in Sec. 714.43 prior to action 
being taken by the State committee. Any necessary investigation shall be 
made. The State committee shall recommend approval or disapproval of the 
claim, attaching a statement giving the reasons for their action, which 
shall be signed by a representative of the State committee. After 
recommending approval or disapproval, the claim shall be promptly sent 
to the Deputy Administrator.



Sec. 714.45  Approval by Deputy Administrator.

    The Deputy Administrator shall review each claim forwarded to him by 
the State committee to determine whether, (a) the penalty was 
erroneously, illegally, or wrongfully collected, (b) the claimant bore 
the burden of the payment of the penalty, (c) the claim was timely 
filed, and (d) under the applicable law and regulations the claimant is 
entitled to a refund. If a claim is filed initially with the Deputy 
Administrator, he shall obtain the recommendations of the county 
committee and the State committee if he deems such action necessary in

[[Page 65]]

arriving at a proper determination of the claim. The claimant shall be 
advised in writing of the action taken by the Deputy Administrator. If 
disapproved, the claimant shall be notified with an explanation of the 
reasons for such disapproval.



Sec. 714.46  Certification for payment.

    An officer or employee of the Department of Agriculture authorized 
to certify public vouchers for payment shall, for and on behalf of the 
Secretary of Agriculture, certify to the Secretary of the Treasury of 
the United States for payment all claims for refund which have been 
approved.



PART 717--HOLDING OF REFERENDA--Table of Contents




                                 General

Sec.
717.1  Definitions.
717.2  Supervision of referenda and prescribed method of balloting.
717.3  Voting eligibility.
717.4  Register of eligible voters.

                   Holding Referenda at Polling Places

717.5  Community referendum committees.
717.6  Place for balloting.
717.7  Time of voting.
717.8  Notice of referendum.
717.9  Manner of voting.
717.10  Local arrangements for holding the referendum.
717.11  Issuing ballots.
717.12  Community referendum committee's canvass of ballots.
717.13  Community committee's reporting and record of results of 
          referendum.
717.14  County committee's canvass of ballots.
717.15  County committee's reporting and record of results of the 
          referendum.
717.16  Investigation as to correctness of summary of the referendum.
717.17  State committee's reporting and record of result of the 
          referendum.

                    Holding Referenda by Mail Ballot

717.18  Issuing ballots.
717.19  Manner of voting.
717.20  Receiving and tabulating voted ballots.
717.21  Canvassing voted ballots.
717.22  Reporting and record of result of the referendum.

                              Miscellaneous

717.23  Applicability of this part to Puerto Rico.
717.24  Result of referendum.
717.25  Disposition of ballots and records.
717.26  Applicability.

    Authority: Secs. 312, 317, 336, 343, 344a, 358, 376, 52 Stat. 46, as 
amended; 79 Stat. 66, as amended; 52 Stat. 55, as amended, 56, as 
amended; 79 Stat. 1197, as amended; 55 Stat. 88 as amended; 52 Stat. 66, 
as amended; 7 U.S.C. 1312, 1314c, 1336, 1343, 1344b, 1358, 1376.

    Source: 33 FR 18345, Dec. 11, 1968, unless otherwise noted.

                                 General



Sec. 717.1  Definitions.

    In determining the meaning of the provisions in this part, unless 
the context indicates otherwise, words importing the singular include 
and apply to several persons or things, words importing the plural 
include the singular, words importing the masculine gender include the 
feminine as well, and words used in the present tense include the future 
as well as the present.
    (a) General terms. The definitions in part 719 of this chapter shall 
apply to this part. The provisions of part 720 of this chapter 
concerning the expiration of time limitations shall apply to this part.
    (b) Act. The Agricultural Adjustment Act of 1938 and any amendments 
or supplements thereto.
    (c) Referendum community. For referenda conducted by mail ballot, 
the entire county shall be the referendum community. For referenda 
conducted at polling places, the referendum community shall conform with 
the community established by the State committee for purposes of 
elective areas under the regulations in the subpart--Selection and 
Functions of Agricultural Stabilization and Conservation County and 
Community Committees in part 7, subtitle A, of this title (Sec. 7.7, 33 
FR 12955), as amended from time to time: Provided, That a referendum 
community may be composed of an area differing from the community so 
established in the following cases:
    (1) A referendum community may be established by the county 
committee, with the approval of a representative of the State committee, 
to conform to a

[[Page 66]]

political township, a local voting precinct for purposes of general 
elections, or a combination of such townships or precincts;
    (2) A referendum community may be established by the county 
committee, if it determines eligible producers will be given a 
convenient place to vote, which consists of a combination of a community 
with less than 25 farms on which there are producers eligible to vote, 
with one or more communities; and
    (3) The entire county shall be the referendum community in counties 
with less than 100 farms on which there are producers eligible to vote 
unless the county committee, with the approval of the State committee, 
determines that more than one referendum community is needed in the 
county.

The county committee shall maintain in the county office, and make 
available for public inspection, a descriptive list of the referendum 
communities established for the county for referenda conducted at 
polling places.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 1, 34 FR 12940, Aug. 9, 
1969]



Sec. 717.2  Supervision of referenda and prescribed method of balloting.

    (a) Supervision of referenda. The Deputy Administrator shall be in 
charge of and responsible for conducting each referendum required by the 
Act. Each State committee shall be in charge of and responsible for 
conducting such referendum in its State. Each county committee shall be 
responsible for the proper holding of such referendum in its county. It 
shall be the duty of the Deputy Administrator and of each committee to 
conduct each referendum by secret ballot in a fair, unbiased, and 
impartial manner in accordance with this part.
    (b) Prescribed method of balloting. Each referendum held under this 
part shall be by mail ballot unless the Administrator, FSA, or the 
Deputy Administrator prescribes that a particular referendum shall be 
held at polling places.



Sec. 717.3  Voting eligibility.

    (a) Statutory requirements--(1) Tobacco quotas proclaimed on an 
acreage basis under section 312(a) of the Act. Within 30 days after the 
proclamation under section 312(a) of the Act of national marketing 
quotas on an acreage basis for any kind of tobacco for the next 3 
succeeding marketing years, there shall be a referendum under section 
312(c) of the Act of farmers engaged in the production of the crop of 
such tobacco harvested immediately prior to the holding of the 
referendum to determine whether such farmers are in favor of or opposed 
to such quotas for the 3-year period. If more than one-third of the 
farmers voting oppose such quotas, the quotas so proclaimed for the 3-
year period shall not be in effect: Provided, That such referendum 
result shall not preclude the proclamation of national marketing quotas 
for such kind of tobacco for the next 3 succeeding marketing years 
subject to a referendum as required under this paragraph. If the 
referendum results in approval of quotas for the 3-year period, no 
further referendum applicable to such quotas shall be held (i) unless a 
new proclamation during the 3-year period is made pursuant to 
subdivision (3) of section 312(a) of the Act in which case a referendum 
shall be held as provided in this paragraph (a)(1)(i) of this section, 
or (ii) unless quotas on an acreage-poundage basis are established 
pursuant to section 317(c) of the Act, in which case a special 
referendum shall be held as provided in paragraph (a)(2) of this 
section.
    (2) Tobacco quotas proclaimed on an acreage-poundage basis under 
section 317(c) of the Act. During the first or second marketing year of 
the 3-year period for which marketing quotas for any kind of tobacco are 
in effect on an acreage basis, if the Secretary, under section 317(c) of 
the Act, determines that marketing quotas on an acreage-poundage basis 
would result in a more effective program, at the time of the next 
announcement of the amount of the marketing quota on an acreage basis, 
the Secretary shall also announce the national acreage allotment and 
national average yield goal. Within 45 days after such announcement of 
acreage-poundage quotas there shall be a special referendum under 
section 317(c) of the Act of farmers engaged in the production of the 
kind of tobacco of the most recent crop to determine

[[Page 67]]

whether such farmers favor the establishment of marketing quotas on an 
acreage-poundage basis for the next 3 marketing years. If more than two-
thirds of the farmers voting in the special referendum favor marketing 
quotas on an acreage-poundage basis, such quotas shall be in effect for 
the next 3 marketing years and the marketing quotas on an acreage basis 
shall cease to be in effect at the beginning of such 3-year period and 
no further special referendum applicable to such 3-year period shall be 
held. If marketing quotas on an acreage-poundage basis are not favored 
by more than two-thirds of the farmers voting in the special referendum, 
marketing quotas on an acreage basis as previously proclaimed shall 
continue in effect.
    (3) Tobacco quotas proclaimed on an acreage-poundage basis under 
section 317(d) of the Act. If marketing quotas on an acreage-poundage 
basis have been made effective for a kind of tobacco, the Secretary 
shall proclaim a national marketing quota for such kind of tobacco for 
the next 3 succeeding marketing years if the marketing year is the last 
year of 3 consecutive years for which marketing quotas previously 
proclaimed will be in effect. Such proclamation may be on an acreage-
poundage basis or on an acreage basis. Within 30 days after such 
proclamation, there shall be a referendum under section 312(c) of the 
Act of farmers engaged in the production of the crop of such kind of 
tobacco harvested immediately prior to the holding of the referendum to 
determine whether such farmers are in favor of or opposed to such quotas 
for the next 3 succeeding marketing years. If more than one-third of the 
farmers voting oppose such quotas, the quotas so proclaimed for the 3-
year period shall not be in effect: Provided, That such referendum 
result shall not preclude the proclamation of national marketing quotas 
for such kind of tobacco for the next 3 succeeding marketing years under 
section 312(a) of the Act subject to a referendum thereon as provided in 
paragraph (a)(1) of this section. If a referendum results in approval of 
quotas for 3 marketing years on an acreage basis, no further referendum 
applicable to such 3 marketing years shall be held except as may be 
required under section 317(c) of the Act. If a referendum results in 
approval of quotas for 3 marketing years on an acreage-poundage basis, 
no further referendum applicable to such 3 marketing years shall be 
held.
    (4) Tobacco quotas proclaimed but disapproved in 3 successive years. 
Under section 312(a)(4) of the Act, if producers have disapproved 
national marketing quotas for a kind of tobacco in referenda held in 3 
successive years subsequent to 1952, a national marketing quota shall 
not be proclaimed for any marketing year within the 3-year period for 
which quotas were disapproved unless prior to November 10 of the 
marketing year, one-fourth or more of the farmers engaged in the 
production of the crop of tobacco harvested in the calendar year in 
which such marketing year begins petition the Secretary to proclaim a 
national marketing quota for each of the next 3 succeeding marketing 
years.
    (5) [Reserved]
    (6) Extra long staple cotton quotas. Not later than December 15 
following the proclamation of a national quota for extra long staple 
cotton there shall be a referendum under section 343 of the Act, of 
farmers engaged in the production of extra long staple cotton in the 
calendar year in which the referendum is held to determine whether such 
farmers are in favor of or opposed to the quota for the next marketing 
year. If more than one-third of the farmers voting in the referendum 
oppose the quota, such quota shall not be in effect.
    (7) [Reserved]
    (8) Rice quotas. Within 30 days after the proclamation of a national 
marketing quota for rice there shall be a referendum under section 
354(b) of the Act of farmers engaged in the production of the 
immediately preceding crop of rice to determine whether such farmers are 
in favor of or opposed to the quota for the next marketing year. If more 
than one-third of the farmers voting in the referendum oppose the quota, 
such quota shall not be in effect.
    (9) Peanut quotas. Not later than December 15 of each calendar year 
there shall be a referendum under section 358(b) of the Act of farmers 
engaged in

[[Page 68]]

the production of peanuts in the calendar year in which the referendum 
is held to determine whether such farmers are in favor of or opposed to 
marketing quotas with respect to the crops of peanuts produced in the 3 
calendar years immediately following the year in which the referendum is 
held. If more than one-third of the farmers voting in the referendum 
oppose such quotas, the quotas so proclaimed shall not be in effect: 
Provided, That such referendum result shall not preclude the 
proclamation of quotas in the next calendar year for a 3-year period 
subject to a referendum as required under this paragraph. If quotas are 
favored, no further referendum with respect to the 3-year period shall 
be held.
    (b) Farmers engaged in the production of a commodity. For purposes 
of referenda with respect to marketing quotas for tobacco, extra long 
staple cotton, rice and peanuts the phrase ``farmers engaged in the 
production of a commodity'' includes any person who is entitled to share 
in a crop of the commodity, or the proceeds thereof because he shares in 
the risks of production of the crop as an owner, landlord, tenant, or 
sharecropper (landlord whose return from the crop is fixed regardless of 
the amount of the crop produced is excluded) on a farm on which such 
crop is planted in a workmanlike manner for harvest: Provided, That any 
failure to harvest the crop because of conditions beyond the control of 
such person shall not affect his status as a farmer engaged in the 
production of the crop. In addition, the phrase ``farmers engaged in the 
production of a commodity'' also includes each person who it is 
determined would have had an interest as a producer in the commodity on 
a farm for which a farm allotment for the crop of the commodity was 
established and no acreage of the crop was planted but an acreage of the 
crop was regarded as planted for history acreage purposes under the 
applicable commodity regulations.
    (c) Special conditions applicable to peanuts and rice--(1) Peanuts. 
In the case of a referendum for marketing quotas for peanuts, farmers 
engaged in the production of peanuts as determined under paragraph (b) 
of this section shall not be eligible to vote in the referendum if the 
farm does not have any production of peanuts subject to marketing 
quotas. Under section 359(b) of the Act, marketing quotas are not 
applicable to peanuts produced on any farm on which the acreage 
harvested for nuts is 1 acre or less provided the producers who share in 
the peanuts produced on such farm do not share in the peanuts produced 
on any other farm. Under section 359(b) of the Act, marketing quotas are 
not applicable to peanuts which it is established (i) were not picked or 
threshed either before or after marketing from the farm, or (ii) were 
marketed by the producer before drying or removal of moisture from such 
peanuts either by natural or artificial means for consumption 
exclusively as boiled peanuts.
    (2) Rice. In the case of a referendum for a marketing quota for 
rice, farmers engaged in the production of rice as determined under 
paragraph (b) of this section shall not be eligible to vote in the 
referendum if the farm is not subject to marketing quotas. Under section 
353(d) of the Act, marketing quotas are not applicable (i) to 
nonirrigated rice produced on any farm on which the acreage planted to 
nonirrigated rice does not exceed 3 acres, or (ii) to rice produced 
outside the continental United States.
    (d) [Reserved]
    (e) One vote limitation. Each person eligible to vote in a 
particular marketing quota referendum shall be entitled to only one vote 
in such referendum regardless of the number of farms in which such 
person is interested or the number of communities, counties, or States 
in which farms are located in which farms such person is interested: 
Provided, That:
    (1) The individual members of a partnership shall each be entitled 
to one vote, but the partnership as an entity shall not be entitled to 
vote;
    (2) An individual eligible voter shall be entitled to one vote even 
though he is interested in an entity (including but not limited to a 
corporation) which entity is also eligible to vote;
    (3) A person shall also be entitled to vote in each instance of his 
capacity as a fiduciary (including but not limited to a guardian, 
administrator, executor or trustee) if in such fiduciary capacity

[[Page 69]]

he is eligible to vote but the person for whom he acts as a fiduciary 
shall not be eligible to vote.
    (f) Joint and family interest. Where several persons, such as 
members of a family, have participated or will participate in the 
production of a commodity under the same lease or cropping agreement, 
only the person or persons who signed the lease or agreement, or agreed 
to an oral lease or agreement, shall be eligible to vote. Where two or 
more persons have produced or will produce a commodity as joint tenants, 
tenants in common, or owners of community property, each such person 
shall be entitled to one vote if otherwise eligible. The eligibility of 
one spouse does not affect the eligibility of the other spouse.
    (g) Minors. A minor shall be entitled to one vote if he is otherwise 
eligible and is 18 years of age or older when he votes.
    (h) [Reserved]
    (i) Interpretation. In the case of any commodity on a farm where no 
acreage of the commodity is actually planted but an acreage of the 
commodity is regarded as planted under applicable regulations of the 
Department, persons on the farm who it is determined would have had an 
interest in the commodity as a producer if an acreage of the commodity 
had been actually planted shall be eligible to vote in the referendum.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 2, 36 FR 12730, July 7, 
1971]



Sec. 717.4  Register of eligible voters.

    Prior to the date of the referendum a register shall be prepared by 
the county office manager listing the name and address of each known 
eligible voter. For referenda conducted at polling places a register 
shall be prepared for each referendum community. For referenda conducted 
by mail ballot the entire county is considered to be the referendum 
community and one register shall be prepared for the county.

                   Holding Referenda at Polling Places



Sec. 717.5  Community referendum committees.

    (a) Where one referendum is to be conducted. Except where the entire 
county is to be considered a referendum community, the county committee 
shall designate a community referendum committee for each referendum 
community. Each referendum committee shall consist of at least three 
regular members and one alternate. The membership of the referendum 
committee shall be chosen from among the farmers who reside in the 
community and who are eligible to vote in the referendum or who are 
community committeemen elected pursuant to the regulations in the 
subpart--Selection and Functions of Agricultural Stabilization and 
Conservation County and Community committees (part 7 of this title). The 
county committee shall name one member of the community referendum 
committee as chairman and another member thereof as vice chairman. The 
vice chairman shall act as the chairman in the event of the absence or 
incapacity of the chairman and the alternate shall serve on the 
committee in the place of any regular member who cannot serve. The 
community referendum committee shall be responsible for the proper 
holding of the referendum in its community in a fair, unbiased and 
impartial manner in accordance with this part. In counties where the 
entire county is treated as one referendum community, the county 
committee shall perform, in addition to its other duties, the duties of 
the community referendum committee.
    (b) Where two or more referenda are to be conducted. Where two or 
more referenda are to be held in the county on the same day, the 
provisions of paragraph (a) of this section shall be applicable except 
that (1) the total number of farms on which there are producers eligible 
to vote in any one or more of such referenda shall be used to determine 
whether there are 100 or

[[Page 70]]

more farms on which there are producers who are eligible to vote in the 
referenda, and (2) each community referendum committee shall be chosen 
from among the farmers who reside in the community and who are eligible 
to vote in any of such referenda or who are community committeemen 
elected pursuant to the regulations in the subpart--Selection and 
Functions of Agricultural Stabilization and Conservation County and 
Community committees (part 7 of this title).



Sec. 717.6  Place for balloting.

    The county committee shall designate only one polling place for 
balloting in each referendum community. The polling place shall be one 
well known to and readily accessible to the persons in the community and 
shall be equipped and arranged so that each voter can mark and cast his 
ballot in secret and without coercion, duress, or interference of any 
sort whatsoever. Subject to the provisions of Sec. 717.9(c) for absentee 
ballots, a farmer or producer eligible to vote, shall vote only at a 
polling place designated for the referendum community in which he was 
engaged in the production of the commodity for which the referendum is 
held.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 2, 36 FR 12730, July 7, 
1971]



Sec. 717.7  Time of voting.

    There shall be no voting except on the day fixed for the holding of 
the referendum (except as provided in Sec. 717.9(c) in the case of 
absentee ballots) and the day fixed for the holding of the referendum 
shall be the same in all neighborhoods, communities, counties, and 
States. The date for holding the referendum shall be determined by the 
Secretary in accordance with the provisions of law applicable thereto 
and stated in the notice of the referendum prescribed by him. The time 
that polls shall be opened and closed on the date fixed for holding the 
referendum in the States and Puerto Rico is as follows:

------------------------------------------------------------------------
                                                                Polls to
                       State                         Polls to    close
                                                    open a.m.     p.m.
------------------------------------------------------------------------
Alabama...........................................       7:00       7:00
Alaska............................................       8:00       6:00
Arizona...........................................       8:00       6:00
Arkansas..........................................       8:00       6:30
California........................................       8:00       6:00
Colorado..........................................       7:00       7:00
Connecticut.......................................       8:00       6:00
Delaware..........................................       8:00       6:00
Florida...........................................       7:00       7:00
Georgia...........................................       7:00       7:00
Idaho.............................................       8:00       8:00
Illinois..........................................       8:00       6:00
Indiana...........................................       8:00       6:00
Iowa..............................................       8:00       8:00
Kansas............................................       8:00       8:00
Kentucky..........................................       8:00       6:00
Louisiana.........................................       8:00       6:00
Maine.............................................       8:00       6:00
Maryland..........................................       8:00       6:00
Massachusetts.....................................       8:00       6:00
Michigan..........................................       8:00       8:00
Minnesota.........................................       8:00       8:00
Mississippi.......................................       8:00       6:00
Missouri..........................................       8:00       6:00
Montana...........................................       8:00       7:00
Nebraska..........................................       8:00       8:00
Nevada............................................       8:00       6:00
New Hampshire.....................................       8:00       6:00
New Jersey........................................       8:00       6:00
New Mexico........................................       8:00       6:00
New York..........................................       8:00       6:00
North Carolina....................................       7:00       7:00
North Dakota......................................       8:00       9:00
Ohio..............................................       8:00       6:00
Oklahoma..........................................       8:00       6:00
Oregon............................................       8:00       8:00
Pennsylvania......................................       8:00       9:00
Rhode Island......................................       8:00       6:00
South Carolina....................................       7:00       7:00
South Dakota......................................       8:00       8:00
Tennessee.........................................       8:00       7:00
Texas.............................................       8:00       7:00
Utah..............................................       8:00       6:00
Vermont...........................................       8:00       6:00
Virginia..........................................       7:00       7:00
Washington........................................       8:00       8:00
West Virginia.....................................       8:00       8:00
Wisconsin.........................................       8:00       8:00
Wyoming...........................................       8:00       8:00
Puerto Rico.......................................       8:00       6:00
------------------------------------------------------------------------


The times listed in this section shall be the local time in effect for 
the area in which the polling place is located.



Sec. 717.8  Notice of referendum.

    (a) Posting a notice. The county committee shall give public notice 
of the referendum in each referendum community by posting a notice at 
one or more places open to the public within such community prior to the 
date of the referendum. Such notice shall be on a form prescribed by the 
Deputy Administrator and shall state the commodity or commodities and 
marketing year, or years, or crops for which the referendum is to be 
held, the location of the polling place in the community, the date of 
the referendum, and the

[[Page 71]]

hours when the polls will be opened and closed. The county executive 
director is authorized to sign such notice on behalf of the county 
committee.
    (b) Use of agencies of public information. The county committee and 
community referendum committees shall utilize, to the extent practicable 
(without advertising expense), all available agencies of public 
information, including newspapers, radio, television and other means, to 
give persons in the county public notice of the day and hours of voting, 
the location of polling places, and the rules governing eligibility to 
vote. Such notice should be given as soon as practicable after the 
arrangements for holding the referendum in the county have been made.



Sec. 717.9  Manner of voting.

    (a) Secret ballot. The voting in the referendum shall be by secret 
ballot. Each voter shall, at the time he is handed the form on which to 
cast his ballot, be instructed to mark his ballot form so as to indicate 
clearly how he votes and in such manner that no one else shall see how 
he votes and then to fold his ballot and place it in the ballot box 
without allowing anyone else to see how he voted. A suitable place where 
each voter may mark and cast his ballot in secret and without coercion, 
duress, or interference of any sort whatever, shall be provided in each 
polling place. Every unchallenged ballot shall be placed in the ballot 
box by the person who voted it. The fact that a voter fails to fold a 
ballot placed in the ballot box shall not invalidate it. It shall be the 
duty of each community referendum committee to see that no device of any 
sort whatever is used whereby any voter's ballot may be identified 
except as provided in this part in the case of a challenged ballot or an 
absentee ballot.
    (b) Voting by proxy prohibited. There shall be no voting by proxy or 
agent, or in any manner except by the eligible voter (or the challenged 
voter under paragraph (d) of this section) personally depositing in the 
ballot box his ballot as marked by him (except as provided in the case 
of an absentee ballot), but a duly authorized officer of a corporation, 
association, or other legal entity, may cast its vote.
    (c) Absentee ballots. Any person who will not be present on the day 
of the referendum in the county in which he is eligible to vote or who 
will be prevented from voting in person on the day of the referendum 
because of physical incapacity, or whose religious belief forbids him 
from voting on the day of the referendum, may obtain prior to the date 
of the referendum, one ballot from a State or county FSA office 
conveniently situated for him, or from the Commodity Programs Division, 
FSA, Department of Agriculture, Washington, D.C., and cast an absentee 
ballot. The office so issuing the ballot form shall endorse on the 
reverse side thereof a statement in substantially the following form 
identifying the place in which it was issued and the county to which it 
will be mailed or delivered, initialed and dated by the person issuing 
such form.
    Issued in ________ County ________ State, or by ________________ 
State FSA Office, or by ________________ Division, FSA, Washington, 
D.C., for use in ________ County, ________ State.

The issuing office shall keep a register showing for each ballot form so 
issued by it to be voted absentee, the name and address to whom issued, 
the date of issuance, and the county and State in which the ballot is to 
be voted, and the name and title of the person who issued the ballot. 
The person to whom the ballot is issued shall mark the ballot so as to 
indicate clearly how he votes and place the ballot in a plain envelope 
which shall be marked clearly with the words ``Absentee Ballot,'' sealed 
and inserted in another envelope which shall be marked clearly with the 
voter's name and return address, sealed and delivered, or mailed, 
postage paid, to the county committee for the county in which he is 
eligible to vote. All absentee ballots must, in order to be accepted, 
reach the county office for the county in which the voter is eligible to 
vote by not later than the hour for closing the polls in the county on 
the day of the referendum. No such ballot shall be counted unless the 
voter's name and address appear on the envelope and it is determined 
that he is eligible to vote.

[[Page 72]]

    (d) Challenged ballots. The community referendum committee or any 
member thereof shall challenge the eligibility of any person to vote in 
the referendum where (1) the community referendum committee or any 
member thereof is unable to determine that the person is eligible to 
vote in the referendum in the community, or (2) the community referendum 
committee or any member thereof has reason to believe that such person 
has previously voted in the referendum in another community in the same 
or another county in person or by mail, or (3) the person's name and 
address have not been entered on the register of eligible voters, prior 
to its delivery to the referendum committee, unless the referendum 
committee is satisfied that the person is eligible to vote. In every 
case where the eligibility of the voter is challenged, his ballot form, 
after being marked by the challenged person so as to show how he votes, 
but in such manner that no one else sees how he votes, shall be folded 
and placed by him (or by a member of the committee if he refuses) in an 
envelope, which shall then be sealed and placed in another envelope, 
identified with his name and address, the word ``Challenged'' and a 
statement of the reason for the challenge, and shall then be placed in 
the ballot box. The county committee shall make an investigation in each 
case of controversy or dispute regarding the eligibility of a voter to 
vote in the referendum. In each case of a challenged ballot the 
eligibility of the person to vote in the referendum shall be determined 
by the county committee as soon as may be possible after the polls are 
closed and before the time for forwarding to the State committee the 
county summary of ballots. If it is determined that the person whose 
vote was challenged is eligible to vote, the sealed envelope containing 
the ballot shall be placed with the challenged ballot of every other 
person found to be eligible to vote until all challenged ballots have 
been passed upon by the county committee. If it is determined that the 
person whose vote was challenged is not eligible, the sealed envelope 
shall be marked ``Not eligible'' and signed by a member of the county 
committee and shall not be opened. When all of the challenged ballots 
have been passed upon by the county committee, the challenged ballots 
which were cast by eligible voters shall be opened and tabulated on the 
county summary of ballots, but no disclosure shall be made as to how any 
particular person voted.
    (e) Ballot box. Each polling place shall be furnished with a 
suitable ballot box. Any container of sufficient size so arranged that 
no ballot can be read or removed without breaking seals on the container 
will be suitable. When strip adhesive paper or corresponding seals are 
used on the ballot box, such seals shall be signed or initialed by the 
chairman or a member of the community referendum committee so that 
breaking or replacing the seal will so destroy or affect the identifying 
marks as to show that the seal has been tampered with.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 1, 34 FR 12940, Aug. 9, 
1969]



Sec. 717.10  Local arrangements for holding the referendum.

    The county committee shall make all arrangements for the proper 
holding of the referendum in accordance with this part prior to the date 
of the referendum. The county committee shall instruct each community 
referendum committee concerning its duties so that each member of the 
committee understands his duties and the duties of the committee in all 
respects, with particular emphasis as to (a) issuing ballot forms, (b) 
challenged ballots, (c) recording votes, (d) tabulating ballots, and (e) 
certifying results of the referendum in the referendum community. The 
county executive director shall furnish each community referendum 
committee an adequate supply of forms prior to the time the polls in the 
county are opened for the acceptance of ballots, by delivering the 
ballot forms and the forms for the community summary of ballots to each 
chairman of the several community referendum committees.



Sec. 717.11  Issuing ballots.

    The community referendum committee shall open the polling place for 
the issuance of ballot forms and the casting of ballots at the time 
designated and shall thereafter until the

[[Page 73]]

time when the polls are required to be closed and the casting of ballots 
discontinued issue a ballot to each person who is eligible to vote and 
applies for a ballot and to each person who claims to be eligible to 
vote and insists upon voting even though his eligibility to vote is 
challenged by a member of the committee. The community referendum 
committeeman who issued the ballot form shall immediately enter on the 
register of voters opposite the name and address of the person voting, a 
record of the issuance of the ballot, the casting of the ballot, and any 
challenge of the eligibility of the person casting the ballot. Ballot 
forms shall be issued and ballots placed in the ballot box while at 
least two members serving on the community referendum committee are 
physically present in the polling place and in position to see each 
ballot form as it is issued and each ballot as it is placed in the 
ballot box.



Sec. 717.12  Community referendum committee's canvass of ballots.

    Immediately after the polls are closed, the community referendum 
committee shall open the ballot box and canvass the ballots cast. The 
canvass of the ballots shall be kept open to the public. A ballot shall 
be considered as a spoiled ballot if it is mutilated or marked in such a 
way that it is not possible to determine with certainty how the ballot 
was intended to be counted on a particular question. The envelope 
containing the challenged ballots shall not be opened. The total number 
of ballots issued as shown on the register of voters shall be determined 
and the total number of ballots cast, including the spoiled and 
challenged ballots, shall be determined. The number of ballots cast in 
favor of and the number of ballots cast in opposition to the question on 
which the referendum was held shall be determined. The spoiled ballots 
and challenged ballots shall not be considered in favor of or against 
the question. If any member of the community referendum committee should 
see or learn how any person besides himself voted, whether or not the 
ballot was challenged, spoiled, or otherwise, he shall not disclose such 
knowledge to a fellow committeeman or any other person except in an 
investigation conducted under this part.



Sec. 717.13  Community committee's reporting and record of results of referendum.

    The community referendum committee shall notify the county committee 
by telephone, telegraph, messenger, or in person of the preliminary 
count of the votes on each question and of the number of spoiled and 
challenged ballots, as soon as may be possible. All the spoiled ballots 
shall be placed in an envelope and sealed and marked with the initials 
of the chairman (or vice chairman) of the community referendum committee 
and the designation ``Spoiled Ballots'' followed by the number of 
spoiled ballots and the names of the community, the county and the 
State. The community referendum committee shall execute the 
certification as to the accuracy of the register of eligible voters and 
ballots cast. The community referendum committee shall then prepare and 
execute the community summary of ballots and post one copy thereof, as 
soon as it is executed, in a conspicuous place at the polling place, so 
that it will remain posted and accessible to the public for at least 3 
calendar days after the holding of the referendum. The community 
referendum committee shall seal the voted ballots, including those 
challenged and spoiled, the register of eligible voters and ballots 
cast, and the community summary of ballots, in one or more envelopes 
appropriately identified by the names of the community, the county, and 
the State, and the nature of the referendum and the date on which it was 
held, and deliver them to the county committee not later than 9 a.m., 
local time, on the second calendar day after the date of the referendum, 
together with the unused ballot and other forms. The chairman (or vice 
chairman) of the community referendum committee shall be responsible for 
the safe delivery of such reports, ballots, and forms to the county 
committee.

[[Page 74]]



Sec. 717.14  County committee's canvass of ballots.

    The county committee, after the closing of the polls, shall open and 
canvass the absentee ballots received and determine the eligibility of 
each voter. If any person voting absentee is found to be ineligible to 
vote, or the ballot is so mutilated or marked that it is not possible to 
determine with certainty how the person intended to vote, such ballot 
shall not be counted as for or against the question in the referendum. 
The county committee shall meet and pass upon the challenged ballots as 
soon as may be reasonably possible after the challenged ballots are 
received from the community referendum committees, but not later than 4 
calendar days after the day of the referendum. The result of the 
referendum in each community shall be reviewed and summarized as soon as 
may be reasonably possible after the records, ballots, and forms are 
received from the several community referendum committees. Every meeting 
of the county committee for the purpose of canvassing the ballots cast 
and reviewing and tabulating the results of the referendum shall be open 
to the public. No member of the county committee who learns how any 
person besides himself voted, whether the ballot was an absentee ballot, 
challenged, spoiled, or otherwise, shall disclose such knowledge to any 
fellow committeeman or other person except in an investigation conducted 
under this part.



Sec. 717.15  County committee's reporting and record of results of the referendum.

    The county committee shall notify the State committee by telephone, 
telegraph, or messenger (who may be a member of the county committee), 
as to the preliminary count of the votes on each question and the number 
of challenged ballots by the several community referendum committees as 
soon as possible. The county committee shall, as soon as may be 
reasonably possible, but in no event later than 4 calendar days after 
the date of the referendum, have prepared and certified the county 
summary of ballots. Such summary shall be prepared and certified in 
triplicate, one copy of which shall be sent to the State committee, one 
copy posted for 30 calendar days in a conspicuous place accessible to 
the public in or near the office of the county committee, and one copy 
filed in the office of the county committee and kept available for 
public inspection. One copy of each community summary shall likewise be 
posted for 30 calendar days in a conspicuous place accessible to the 
public in or near the office of the county committee.



Sec. 717.16  Investigation as to correctness of summary of the referendum.

    The county committee shall make an investigation in each case of a 
dispute or challenge regarding the correctness of the summary of the 
referendum in a community. No dispute or challenge shall be investigated 
by the county committee unless it is brought to its attention within 3 
calendar days after the date on which the referendum was held. The 
county committee shall promptly decide the dispute or the challenge and 
report its findings to the State committee within 5 calendar days after 
the holding of the referendum and send by certified mail, or deliver in 
person, to the office of the State committee all voted ballots, register 
forms, and community summary sheets involved in the dispute or 
challenge.



Sec. 717.17  State committee's reporting and record of result of the referendum.

    The State committee for each State shall notify the Deputy 
Administrator by telegraph or telephone as to the preliminary count of 
the votes in the State as soon as the preliminary results of the 
referendum are made known to the State committee. The county summaries 
of ballots shall be summarized on the State summary of ballots as soon 
as possible, but in no event later than 7 calendar days after the date 
of the referendum, unless there is a dispute or challenge regarding the 
correctness of the summary for any county, in which case the State 
committee shall complete its investigation thereof, decide the dispute 
or challenge, and prepare the State summary accordingly within 14 
calendar

[[Page 75]]

days after the date of the referendum. The State summary shall be 
prepared in triplicate and certified to by the State executive director. 
The original and one copy of the State summary shall be forwarded to the 
Director of the FSA Division having the responsibility for the commodity 
for which the referendum was held. One copy of the State summary shall 
be filed for a period of 5 years in the office of the State committee 
available for public inspection.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 1, 34 FR 12940, Aug. 9, 
1969]

                    Holding Referenda by Mail Ballot



Sec. 717.18  Issuing ballots.

    The county committee shall furnish each person who is eligible to 
vote in a particular referendum a ballot suitable for mailing back to 
the office of the county committee. If a person who is eligible to vote 
in a particular referendum is not furnished a ballot, he may obtain one 
during the referendum period from the office of the county committee for 
the county in which he is eligible to vote or from any other FSA office 
where ballots are available, including the Commodity Programs Division, 
FSA, Department of Agriculture, Washington, D.C. When a ballot is issued 
from an FSA office other than the FSA office in the county in which the 
producer is eligible to vote in a particular referendum, the issuing 
office shall keep a register showing to whom it was issued, the person's 
address, the county and State in which the ballot is to be voted, and 
the name and title of the person who issued the ballot.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 1, 34 FR 12940, Aug. 9, 
1969]



Sec. 717.19  Manner of voting.

    (a) Voting procedure. Each person to whom a ballot is issued by mail 
or in person may vote in the referendum by marking the ballot so as to 
indicate clearly how the vote is cast, placing the ballot in a plain 
envelope, sealing the envelope provided by FSA which is marked clearly 
with the voter's name and return address, signing the certification on 
such envelope or making his mark thereto (which mark shall be 
witnessed), sealing such envelope, and delivering or mailing the 
envelope to the offfice of the county committee for the county in which 
the person is eligible to vote.
    (b) Voting by proxy prohibited. There shall be no voting by proxy or 
agent except as provided in Sec. 717.3.

(Secs. 312, 317, 336, 343, 344, 354, 358, 375, 52 Stat. 46, as amended, 
79 Stat. 66, 52 Stat. 55, as amended, 56, as amended, 79 Stat. 1197, 52 
Stat. 61, as amended, 55 Stat. 88, as amended, 52 Stat. 66, as amended; 
7 U.S.C. 1312, 1314c, 1336, 1343, 1344b, 1354, 1356, 1375)

[Amdt. 2, 36 FR 12730, July 7, 1971, as amended by Amdt. 4, 49 FR 24371, 
June 13, 1984]



Sec. 717.20  Receiving and tabulating voted ballots.

    Ballots received at the county FSA office during the referendum 
period shall be placed immediately in a ballot box provided by the 
county executive director and so arranged that ballots cannot be read or 
removed without breaking the seal on the container. Voted ballots 
received by the county committee of the county in which the voter is 
eligible to vote during the period established for holding a particular 
referendum, shall be tabulated by the county committee. A ballot shall 
be considered to have been received during the referendum period if (a) 
in the case of a ballot delivered to the county committee, it was 
received in the office prior to the close of the work day on the final 
day of the referendum period, or (b) in the case of a mailed ballot, it 
was postmarked not later than midnight of the final day of the 
referendum period and was received in the county office prior to the 
start of canvassing the ballots. However, no such ballot shall be 
counted unless the voter signs the certification or his mark is 
witnessed on the returned envelope, and it is determined that he is 
eligible to vote in the particular referendum.

(Secs. 312, 317, 336, 343, 344, 354, 358, 375, 52 Stat. 46, as amended, 
79 Stat. 66, 52 Stat. 55, as amended, 56, as amended, 79 Stat. 1197, 52 
Stat. 61, as amended, 55 Stat. 88, as amended, 52 Stat. 66, as amended; 
7 U.S.C. 1312, 1314c, 1336, 1343, 1344b, 1354, 1356, 1375)

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 4, 49 FR 24371, June 
13, 1984]

[[Page 76]]



Sec. 717.21  Canvassing voted ballots.

    (a) Time of canvassing. The canvassing of voted ballots shall take 
place at the opening of the county office on the fifth day after the 
close of the referendum period. Ballots received after the start of 
tabulation, even though contained in envelopes that were post-marked 
prior to midnight of the final day of the referendum period, shall not 
be counted.
    (b) Canvassing by county committee. The canvassing shall be in the 
presence of at least two members of the county committee and open to the 
public: Provided, That if two or more counties have been combined and 
are served by one county office, the canvassing of ballots shall be 
conducted by at least one member of the county committee from each 
county served by the county office: Provided further, That the State 
committee, or the State executive director if authorized by the State 
committee, may (1) designate the county executive director and a county 
or State FSA office employee to canvass the ballots and report the 
results, as provided in paragraph (c) and Sec. 717.22, instead of two 
members of the county committee, when it is determined that the number 
of eligible voters for the commodity for which the referendum is being 
conducted is so limited that having two members of the county committee 
present for this function is impractical and (2) designate the county 
Executive Director and/or another county or State FSA office employee to 
canvass ballots in any emergency situation precluding at least two 
members of the county committee from being present to carry out the 
functions required in this section.
    (c) Manner of canvassing. The canvassing of ballots shall follow the 
following procedure:
    (1) The ballot box shall be opened;
    (2) The envelopes from the ballot box shall be separated into three 
groups consisting of (i) unopened certification envelopes which do not 
have a proper signed certification, (ii) unopened certification 
envelopes from ineligible voters, and (iii) unopened certification 
envelopes from eligible voters;
    (3) The unopened certification envelopes from eligible voters shall 
be opened and plain envelopes removed and then shuffled to preserve the 
secrecy of the ballots contained in such plain envelopes;
    (4) The ballots shall be removed from such plain envelopes and 
tabulated. A ballot shall be considered as a spoiled ballot if it is 
mutilated or marked in such a way that it is not possible to determine 
with certainty how the ballot was intended to be counted on a particular 
question. The spoiled ballots shall not be considered in favor of or 
against the question.
    (5) The unopened certification envelopes which do not have a proper 
signed certification shall not be opened and shall not be considered in 
favor of or against the question.
    (6) The unopened certification envelopes from ineligible voters 
shall be considered as challenged ballots. The county committee shall 
determine the eligibility of the person to vote in the referendum. If 
determined to be eligible such envelopes shall be handled as provided 
under paragraphs (c)(3) and (4) of this section. If determined not to be 
eligible, such envelopes shall not be opened and shall not be considered 
in favor of or against the question.
    (d) Dispute or challenge. A dispute or challenge with respect to any 
referendum held by mail ballot shall not be considered unless 
notification of such dispute or challenge is filed in writing with the 
county executive director of the county in which the alleged 
irregularity occurred within 3 days after the date of the canvassing of 
voted ballots. Such written notification of a dispute or challenge must 
identify each alleged instance in which the county committee erred when 
canvassing the ballots or tabulating the referendum results. The county 
committee shall determine the validity of the dispute or challenge and 
report its findings to the State committee within 3 working days after 
the final date for filing a dispute or challenge.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 2, 36 FR 12730, July 7, 
1971; Amdt. 3, 38 FR 12891, May 17, 1973; 51 FR 10609, Mar. 28, 1986; 52 
FR 10727, Apr. 3, 1987]

[[Page 77]]



Sec. 717.22  Reporting and record of result of the referendum.

    (a) County committee. The county committee shall notify the State 
committee by telephone, telegraph, or messenger (who may be a member of 
the county committee), as to the preliminary count of the votes on each 
question and the number of challenged ballots as soon as possible. The 
county committee shall, as soon as may be reasonably possible, but in no 
event later than 4 calendar days after canvassing of the ballots, have 
prepared and certified the county summary of ballots. Such summary shall 
be prepared and certified in triplicate, one copy of which shall be sent 
to the State committee, one copy posted for 30 calendar days in a 
conspicuous place accessible to the public in or near the office of the 
county committee, and one copy filed in the office of the county 
committee and kept available for public inspection.
    (b) State committee. The State committee for each State shall notify 
the Deputy Administrator by telephone or telegraph as to the preliminary 
count of the votes in the State as soon as the preliminary results of 
the referendum are made known to the State committee. The county 
summaries of ballots shall be summarized on the State summary of ballots 
as soon as possible, but in no event later than 7 calendar days after 
canvassing of the ballots, unless there is a dispute or challenge 
regarding the correctness of the summary for any county, in which case 
the State committee shall complete its investigation thereof, decide the 
dispute or challenge, and prepare the State summary accordingly within 
14 calendar days after canvassing of the ballots. The State summary 
shall be prepared in triplicate and certified to by the State executive 
director. The original and one copy of the State summary shall be 
forwarded to the Director of the FSA Division having the responsibility 
for the commodity for which the referendum was held. One copy of the 
State summary shall be filed for a period of 5 years in the office of 
State committee available for public inspection.

[Amdt. 1, 34 FR 12940, Aug. 9, 1969]

                              Miscellaneous



Sec. 717.23  Applicability of this part to Puerto Rico.

    The Caribbean Area Agricultural Stabilization and Conservation 
Committee shall be in charge of and responsible for conducting in Puerto 
Rico each referendum required by the Act. Insofar as applicable, the 
Caribbean Area ASC Committee shall perform all the duties and assume all 
the responsibilities otherwise required of State and county committees 
as provided in this part, except that (a) the Director, Agricultural 
Stabilization and Conservation Caribbean Area Office shall nominate for 
appointment by the Caribbean Area ASC Committee the members and 
alternates to serve on community referendum committees and shall 
establish the boundaries of referendum communities in such a manner that 
polling places therein will be conveniently located for the farmers 
eligible to vote in the referendum, and (b) following the canvass of the 
ballots, results of the referendum shall be reported to the Caribbean 
Area ASC Committee.



Sec. 717.24  Result of referendum.

    (a) Proclamation of result. The final and official tabulation of the 
votes cast in the referendum shall be made by the Deputy Administrator 
and the result of the referendum will be publicly proclaimed and 
published in the Federal Register. The State summaries and related 
papers shall be filed with such tabulation for a period of 5 years 
available for public inspection in the Department of Agriculture.
    (b) Unofficial announcements of result. Each county committee is 
authorized to issue unofficial reports of the total ``Yes'' and ``No'' 
votes in its county to the press and the public. Each State committee is 
authorized to issue to the press and the public the unofficial result of 
the referendum in its State by counties as rapidly as the votes in the 
various counties are reported to it.
    (c) Investigations. If the Deputy Administrator or the Secretary 
deems it necessary, the report of any community referendum committee, 
county committee, or State committee shall be reexamined and checked by 
such

[[Page 78]]

persons or agents as may be designated.



Sec. 717.25  Disposition of ballots and records.

    The county committee shall seal the voted ballots, challenged 
ballots found to be ineligible, spoiled ballots, unopened certification 
envelopes, register sheets, and community summaries for the county in 
one or more envelopes or packages, plainly marked with the 
identification of the referendum, the date, and the names of the county 
and State, and place them under lock in a safe place under the custody 
of the county office manager for a period of 30 calendar days after the 
date of the referendum. If no notice to the contrary is received by the 
end of such time, the voted ballots, challenged ballots, spoiled 
ballots, and unopened certification envelopes shall be destroyed, but 
the registers and community and county summary sheets and the register 
of absentee ballots shall be filed for a period of 5 years in the office 
of the county committee.



Sec. 717.26  Applicability.

    The regulations contained in this part shall be applicable to all 
referenda held pursuant to the Agricultural Adjustment Act of 1938, as 
amended.



PART 718--PROVISIONS APPLICABLE TO MULTIPLE PROGRAMS--Table of Contents




                      Subpart A--General Provisions

Sec.
718.1  Applicability.
718.2  Definitions.
718.3  State committee responsibilities.
718.4  Authority for farm entry and providing information.
718.5  Delegations of authority.
718.6  Signature requirements and time limitations.
718.7  Failure to fully comply.
718.8  Incomplete performance based upon action or advice of an 
          authorized representative of the Secretary.
718.9  Finality rule.
718.10  Rule of fractions.
718.11  Denial of benefits.
718.12  Furnishing maps.

           Subpart B--Determination of Acreage and Compliance

718.101  Measurements.
718.102  Acreage reports.
718.103  Late-filed reports.
718.104  Revised reports.
718.105  Tolerances, variances, and adjustments for tobacco.
718.106  Acreages.
718.107  Skip rows and strip crops.
718.108  Deductions.
718.109  Adjustments.
718.110  Notice of measured acreage.
718.111  Redetermination.

  Subpart C--Reconstitution of Farms, Allotments, Quotas, and Acreages

718.201  Farm constitution.
718.202  Determining the land constituting a farm.
718.203  County committee action to reconstitute a farm.
718.204  Reconstitution of allotments, quotas, and acreages.
718.205  Rules for determining farms, allotments, quotas, and acreages 
          when reconstitution is made by division.
718.206  Rules for determining allotments, quotas, and acreages when 
          reconstitution is made by combination.
718.207  Eminent domain acquisitions.
718.208  Exempting Federal prison farms and Federal wildlife refuges.
718.209  Transfer of allotments and quotas--State public lands.

    Authority: 7 U.S.C. 1373, 1374, 7201 et seq.; 15 U.S.C. 714b and 
714c; and 21 U.S.C. 889.

    Source: 61 FR 37552, July 18, 1996, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 718.1  Applicability.

    (a) This part is applicable to all programs set forth in chapters 
VII and XIV of this title which are administered by the Farm Service 
Agency (FSA).
    (b) The provisions of this part will be administered under the 
general supervision of the Administrator, FSA, and shall be carried out 
in the field by State and county FSA committees (State and county 
committees).
    (c) State and county committees, and representatives and employees 
thereof, do not have authority to modify or waive any of the provisions 
of the regulations of this part.
    (d) The State committee shall take any action required by these 
regulations which has not been taken by the county committee. The State 
committee shall also:

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    (1) Correct, or require a county committee to correct, any action 
taken by such county committee which is not in accordance with the 
regulations of this part; or
    (2) Require a county committee to withhold taking any action which 
is not in accordance with the regulations of this part.
    (e) No provisions or delegation herein to a State or county 
committee shall preclude the Administrator, FSA, or a designee, from 
determining any question arising under the program or from reversing or 
modifying any determination made by a State or county committee.
    (f) The Deputy Administrator may authorize State and county 
committees to waive or modify deadlines and other requirements in cases 
where lateness or failure to meet such other requirements does not 
adversely affect the operation of the program.



Sec. 718.2  Definitions.

    Except as provided in individual parts of chapters VII and XIV of 
this title, the following terms shall be as defined herein:
    Administrative variance (AV) means the amount by which the 
determined acreage may exceed the effective allotment and be considered 
in compliance with program regulations.
    Agricultural Use means devoting the land to annual or perennial 
crops, including conserving uses, pasture, aquaculture or plantings of 
trees for any purpose. Land may be left fallow, but weeds must be 
controlled.
    Allotment means an acreage for a commodity allocated to a farm in 
accordance with the Agricultural Adjustment Act of 1938, as amended.
    Allotment crop means any crop for which acreage allotments are 
established pursuant to parts 723 and 729 of this chapter.
    Combination means consolidation of two or more farms or parts of 
farms into one farm.
    Contract acreage means the quantity of acres enrolled in a contract 
in accordance with part 1412 of this title.
    Contract commodity means a crop of wheat, corn, grain sorghum, oats, 
barley, upland cotton, or rice.
    Controlled substances means the term as set forth in accordance with 
21 CFR part 1308.
    County means the County or parish of a State. For Alaska, Puerto 
Rico and the Virgin Islands, a county shall be an area designated by the 
State committee with the concurrence of the Deputy Administrator.
    Crop of economic significance means a crop that has contributed in 
the previous year, or is expected to contribute in the current crop 
year, 10 percent or more of the total expected value of all crops grown 
by the producer. However, notwithstanding the preceding sentence, if the 
total expected liability under the catastrophic risk protection 
endorsement is equal to or less than the administrative fee required for 
the crop, such crop will not be considered a crop of economic 
significance.
    Crop reporting date means date established by the Administrator, 
FSA, representing the final date by which the farm operator, farm owner, 
or properly authorized agent must report applicable crop acreage for the 
report to be considered timely filed.
    Cropland. (1) Means land which the county committee determines meets 
any of the following conditions:
    (i) Is currently being tilled for the production of a crop for 
harvest;
    (ii) Is not currently tilled, but it can be established that such 
land has been tilled in a prior year and is suitable for crop 
production;
    (iii) Is currently devoted to a one- or two-row shelterbelt 
planting, orchard, or vineyard;
    (iv) Is in terraces, that, were cropped in the past, even though 
they are no longer capable of being cropped;
    (v) Is in sod waterways or filter strips planted to a perennial 
cover; or
    (vi) Is preserved as cropland in accordance with part 704 or 1410 of 
this title.
    (2) Land classified as cropland shall be removed from such 
classification upon a determination by the county committee that the 
land is:
    (i) No longer used for agricultural production;
    (ii) No longer suitable for production of crops;
    (iii) Subject to a restrictive easement or contract that prohibits 
its use for

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the production of crops unless otherwise authorized by the regulation of 
this chapter;
    (iv) No longer preserved as cropland in accordance with the 
provisions of part 704 or 1410 of this title and does not meet the 
conditions in paragraphs (1)(i) through (1)(vi) of this definition; or
    (v) Devoted to trees (other than those set forth in accordance with 
part 704 or 1410 of this title, one- or two-row shelterbelt plantings, 
orchards, or vineyards) which were planted in the preceding year except 
that land planted to trees or devoted to ponds, lakes, or tanks from 
September 1 through December 31 of the preceding year shall retain its 
cropland classification for the succeeding year, and in the current year 
shall retain its cropland classification for the current year.
    Current year means the year for which applicable allotments, quotas, 
and acreages, or other program determinations are established for that 
program. For controlled substance violations, the year that contains the 
date of actual conviction.
    Deputy Administrator means Deputy Administrator for Farm Programs, 
Farm Service Agency, U.S. Department of Agriculture or a designee.
    Determination means a decision issued by a State, county or area FSA 
committee or the employees of such a committee that affects a 
participant's participation in a program administered by FSA.
    Determined acreage means that acreage established by a 
representative of the Department of Agriculture by use of official 
acreage, digitizing or planimetering areas on the photograph or other 
photographic image, or computations from scaled dimensions or ground 
measurements.
    Division means the division of a farm into two or more farms or 
parts of farms.
    Entity means a corporation, joint stock company, association limited 
partnership, irrevocable trust, estate, charitable organization, or 
other similar organization including any such organization participating 
in the farming operation as a partner in a general partnership, a 
participant in a joint venture, a grantor of a revocable trust, or as a 
participant in a similar organization.
    Family member means an individual to whom a person is related as 
spouse, lineal ancestor, lineal descendant, or sibling, including:
    (1) Great grandparent;
    (2) Grandparent;
    (3) Parent;
    (4) Child, including legally adopted children;
    (5) Great grandchildren;
    (6) Sibling of the family member in the farming operation; and
    (7) Spouse of a person listed in paragraphs (1) through (6) of this 
definition.
    Farm means land that is being operated by one producer with 
equipment, labor, accounting system and management substantially 
separate from that of any other unit. Land on which tenants provide 
their own labor and equipment shall not be considered a separate farm.
    Farm inspection (spot-check) means an inspection by an authorized 
FSA representative using aerial or ground compliance to determine the 
extent of producer adherence to program requirements.
    Farm number means serial number assigned to a farm by the county 
committee for the purpose of identification.
    Farm program payment yield means the yield for a crop which is 
determined in accordance with part 1413 of this title as in effect on 
January 2, 1996.
    Farmland means the sum of the cropland, forest, and other land on 
the farm.
    Field means a part of a farm which is separated from the balance of 
the farm by permanent boundaries such as fences, permanent waterways, 
woodlands, and croplines in cases where farming practices make it 
probable that such cropline is not subject to change, or other similar 
features.
    Ground measurement means the distance between 2 points on the 
ground, obtained by actual use of a chain tape, or other measuring 
device, that is expressed in chains and links.
    Joint operation means a general partnership, joint venture, or other 
similar business organization.

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    Landlord means one who rents or leases farmland to another.
    Measurement service means a measurement of acreage or farm-stored 
commodities performed by a representative of FSA and paid for by the 
producer requesting the measurement.
    Measurement service guarantee means a guarantee provided when a 
producer requests and pays for an authorized FSA representative to 
measure acreage for FSA and CCC program participation unless the 
producer takes action to adjust the measured acreage. If the producer 
has taken no such action, and the measured acreage is later discovered 
to be incorrect, the acreage determined pursuant to the measurement 
service will be used for program purposes for that program year.
    Measurement service after planting means determining a crop or 
designated acreage after planting but before the farm operator files a 
report of acreage for the crop.
    Minor child means an individual who is under 18 years of age. Court 
proceedings conferring majority on an individual under 18 years of age 
will not change such an individual's status as a minor.
    Nonagricultural commercial or industrial use means land that is no 
longer suitable for producing annual or perennial crops, including 
conserving uses, or forestry products.
    Normal planting period means that period during which the crop is 
normally planted in the county, or area within the county, with the 
expectation of producing a normal crop.
    Normal row width means the normal distance between rows of the crop 
in the field, but not less than 30 inches for all crops.
    Operator means an individual, entity, or joint operation who is 
determined by the county committee as being in general control of the 
farming operations on the farm during the current year.
    Owner means one who has legal ownership of farmland, including one:
    (1) Who is buying farmland under a contract for deed;
    (2) Who has a life-estate in the property; or
    (3) (i) For purposes of enrolling a farm in a program authorized by 
chapters VII and XIV of this title one who has purchased a farm in a 
foreclosure proceeding and:
    (A) The redemption period has not passed; and
    (B) The original owner has not redeemed the property.
    (ii) One who meets the provisions of paragraph (3)(i) of this 
definition shall be entitled to receive benefits in accordance with such 
a program only to the extent the owner complies with all program 
requirements.
    Partial reconstitution means a reconstitution that is made effective 
in the current year for some crops, but is not made effective in the 
current year for other crops, which results in having two or more farm 
numbers for the same farm.
    Participant means one who participates in, or receives payments or 
benefits in accordance with any of the programs administered by FSA.
    Pasture means land that is used to, or has the potential to, produce 
food for grazing animals.
    Person means an individual, or an individual participating as a 
member of a joint operation or similar operation, a corporation, joint 
stock company, association, limited stock company, limited partnership, 
irrevocable trust, revocable trust together with the grantor of the 
trust, estate, or charitable organization including any entity 
participating in the farming operation as a partner in a general 
partnership, a participant in a joint venture, a grantor of a revocable 
trust, or a participant in a similar entity, or a State, political 
subdivision or agency thereof. To be considered a separate person for 
the purpose of this part, the individual or other legal entity must:
    (1) Have a separate and distinct interest in the land or the crop 
involved;
    (2) Exercise separate responsibility for such interest; and
    (3) Be responsible for the cost of farming related to such interest 
from a fund or account separate from that of any other individual or 
entity.
    Producer means an owner, operator, landlord, tenant, or 
sharecropper, who shares in the risk of producing a crop and who is 
entitled to share in the crop available for marketing from the farm, or 
would have shared had the crop been

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produced. A producer includes a grower of hybrid seed.
    Production flexibility contract means a contract entered in 
accordance with part 1412 of this title.
    Prohibited plants means marijuana (cannabis sativa), opium poppies 
(papaver somniferum), coca bushes (erythroxylum coca), cacti of the 
genus lophophora and other drug producing plants, the planting or 
harvesting of which is prohibited by Federal or State law.
    Random inspection means an examination of a farm by an authorized 
representative of FSA selected as a part of an impartial sample to 
determine the adherence to program requirements.
    Quota means the pounds allocated to a farm for a commodity in 
accordance with the Agricultural Adjustment Act of 1938, as amended.
    Reconstitution means a change in the land constituting a farm as a 
result of combination or division.
    Reported acreage means the acreage reported by the farm operator, 
farm owner, or a properly authorized agent on form FSA-578, Report of 
Acreage, or other form designated by the Deputy Administrator.
    Required inspection means an examination by an authorized 
representative of FSA of a farm specifically selected by application of 
prescribed rules to determine the producer's adherence to program 
requirements or to verify the farm operator's, farm owner's, or properly 
authorized agent's report.
    Secretary means the Secretary of Agriculture of the United States, 
or a designee.
    Sharecropper means one who performs work in connection with the 
production of a crop under the supervision of the operator and who 
receives a share of such crop for its labor.
    Skip-row or strip-crop planting means a cultural practice in which 
strips or rows of the crop are alternated with strips of idle land or 
another crop.
    Staking and referencing means determining an acreage before planting 
by:
    (1) Measuring a delineated area on photography or computing the 
chains and links from ground measurement and sketching the field or 
subdivision of a field; and,
    (2) Staking and referencing the area on the ground.
    Standard deduction means an acreage that is excluded from the gross 
acreage in a field because such acreage is considered as being used for 
farm equipment turn-areas. Such acreage is established by application of 
a prescribed percentage of the area planted to the crop in lieu of 
measuring the turn area.
    State means each of the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, Guam, the Virgin Islands of the United 
States, American Samoa, the Commonwealth of the Northern Mariana 
Islands, or the Trust Territory of the Pacific Islands.
    Subdivision means a part of a field that is separated from the 
balance of the field by temporary boundary, such as a cropline which 
could be easily moved or will likely disappear.
    Tenant means:
    (1) One who rents land from another in consideration of the payment 
of a specified amount of cash or amount of a commodity; or
    (2) One (other than a sharecropper) who rents land from another 
person in consideration of the payment of a share of the crops or 
proceeds therefrom.
    Tolerance means for marketing quota crops, and peanuts, a prescribed 
amount within which the reported acreage may differ from the determined 
acreage and still be considered as correctly reported.
    Tract means a unit of contiguous land under one ownership which is 
operated as a farm or part of a farm.
    Tract combination means the combining of two or more tracts if the 
tracts have common ownership and are contiguous.
    Tract division means the dividing of a tract into two or more tracts 
because of a change in ownership or operation.
    Turn-area means the area across the ends of crop rows which is used 
for operating equipment necessary to the production of a row crop (also 
called turnrow, headland, or endrow).



Sec. 718.3  State committee responsibilities.

    (a) The State committee shall, with respect to county committees:

[[Page 83]]

    (1) Take any action required of the county committee which the 
county committee fails to take in accordance with this part;
    (2) Correct or require the county committee to correct any action 
taken by such committee which is not in accordance with this part;
    (3) Require the county committee to withhold taking any action which 
is not in accordance with this part;
    (4) Review county office rates for producer services to determine 
equity between counties;
    (5) Determine, based on cost effectiveness, which counties will use 
aerial compliance methods and which counties will use ground measurement 
compliance methods; or
    (6) Adjust the per acre rate for acreage in excess of 25 acres to 
reflect the actual cost involved when performing measurement service 
from aerial slides.
    (b) The State committee shall submit to the Deputy Administrator for 
Farm Programs, requests to deviate from deductions prescribed in 
Sec. 718.108 of this part, or the error amount or percentage for refunds 
of redetermination costs as prescribed in Sec. 718.111.



Sec. 718.4  Authority for farm entry and providing information.

    (a) The provisions of this section are applicable to any farm 
enrolled in a program authorized by chapter XIV of this title, all farms 
on which peanuts are planted for harvest (part 729 of this chapter), and 
all farms that have an effective tobacco allotment or quota (part 723 of 
this chapter).
    (b) To ascertain compliance by producers to the regulations 
specified in paragraph (a), a representative of FSA may enter any farm 
specified in such paragraph. An owner, operator or producer on a farm 
may refuse the FSA representative entry to the farm and request FSA to 
provide written authorization for the entry. If entry is not allowed 
within 30 days of such written notification:
    (1) All program benefits otherwise available with respect to such 
farm in accordance with such regulations shall be denied;
    (2) The person objecting to the entry shall pay all costs associated 
with cost of the inspection by FSA of the farm;
    (3) The entire crop production on the farm will be considered to be 
in excess of the quota established for the farm; and
    (4) With respect to tobacco produced on such farm, the farm operator 
must furnish proof of disposition of:
    (i) Burley and flue-cured tobacco which is in addition to the 
production shown on the marketing card issued with respect to such farm; 
and
    (ii) Other kinds of tobacco produced on the farm and no credit will 
be given for disposing of any excess tobacco other than properly 
identified by a marketing card unless such tobacco is disposed of in the 
presence of a representative of FSA in accordance with Sec. 718.109.
    (c) If an owner or operator of a farm refuses to furnish reports or 
data which are necessary to determine benefits in accordance with the 
regulations specified in paragraph (a) or FSA determines that the report 
or data was erroneously provided through the lack of good faith by the 
operator or owner, all benefits will be denied with respect to the farm 
which would otherwise be available in accordance with the program under 
which the report or data is requested.



Sec. 718.5  Delegations of authority.

    The State committee or State Executive Director, as authorized by 
the Deputy Administrator may, in accordance with instructions issued, 
exercise the authority provided in this part in cases where the total of 
any payments and benefits extended under chapters VII and XIV of this 
title does not exceed:
    (a) $5,000 for cases subject to Sec. 718.8; or
    (b) $25,000 for cases subject to Sec. 718.9.



Sec. 718.6  Signature requirements and time limitations.

    (a) When a program authorized by this chapter and parts 1410 and 
1412 of this title requires the signature of a producer; landowner; 
landlord; or tenant, a husband or wife may sign all such FSA or CCC 
documents on behalf of the other spouse, unless such other

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spouse has provided written notification to FSA and CCC that such action 
is not authorized. The notification must be provided to the county FSA 
office which administers FSA and CCC programs with respect to each farm.
    (b) Except a husband or wife may not sign a document on behalf of a 
spouse with respect to:
    (1) Program documents required to be executed in accordance with 
part 3 of this title and part 704 of this chapter;
    (2) Easements entered into under part 1410 of this title;
    (3) Form FSA-211, Power of Attorney and Form FSA-211-1, Power of 
Attorney for Husband and Wife; and
    (4) Such other program documents as determined by FSA or CCC.
    (c) Whenever the final date prescribed in any of the regulations in 
this title for the performance of any act falls on a Saturday, Sunday, 
national holiday, State holiday on which the office of the county or 
State Farm Service Agency committee having primary cognizance of the 
action required to be taken is closed, or any other day on which the 
cognizant office is not open for the transaction of business during 
normal working hours, the time for taking required action shall be 
extended to the close of business on the next working day. Or in case 
the action required to be taken may be performed by mailing, the action 
shall be considered to be taken within the prescribed period if the 
mailing is postmarked by midnight of such next working day. Where the 
action required to be taken is within a prescribed number of days after 
the mailing of notice, the day of mailing shall be excluded in computing 
such period of time.



Sec. 718.7  Failure to fully comply.

    In any case in which the failure of a producer to fully comply with 
the terms and conditions of a program authorized by this chapter 
precludes the making of price support to such producer, the Deputy 
Administrator for Farm Programs may authorize the making of such price 
support in such amounts as determined to be equitable in relation to the 
seriousness of the failure if the regulations of this title authorizing 
the program specifically authorize such action. The provisions of this 
part shall only be applicable to producers who are determined to have 
made a good faith effort to comply fully with the terms and conditions 
of the program and rendered substantial performance.



Sec. 718.8  Incomplete performance based upon action or advice of an authorized representative of the Secretary.

    (a) Notwithstanding any other provision of the law, performance 
rendered in good faith based upon action of, or information provided by, 
any authorized representative of a County or State Farm Service Agency 
Committee, may be accepted by the Administrator, FSA (Executive Vice 
President, CCC), the Associate Administrator, FSA (Vice President, CCC), 
or the Deputy Administrator for Farm Programs, FSA (Vice President, 
CCC), as meeting the requirements of the applicable program, and 
benefits may be extended or payments may be made therefor in accordance 
with such action or advice to the extent it is deemed desirable in order 
to provide fair and equitable treatment.
    (b) The provisions of this section shall be applicable only if a 
producer relied upon the action of a county or State committee or an 
authorized representative of such committee or took action based on 
information provided by such representative. The authority provided in 
this part does not extend to cases where the producer knew or had 
sufficient reason to know that the action or advice of the committee or 
its authorized representative upon which they relied was improper or 
erroneous, or where the producer acted in reliance on their own 
misunderstanding or misinterpretation of program provisions, notices, or 
advice.



Sec. 718.9  Finality rule.

    (a) A determination by a State or county committee made on or after 
October 13, 1994, becomes final and binding 90 days from the date the 
application for benefits has been filed, and supporting documentation 
required to be supplied by the producer as a condition for eligibility 
for the particular program has been filed unless one of the following 
conditions exist:

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    (1) The participant has requested an administrative review of the 
determination in accordance with the provisions of part 780 of this 
chapter;
    (2) The determination was based on misrepresentation, false 
statement, fraud, or willful misconduct by or on behalf of the 
participant;
    (3) The determination was modified by the Administrator, FSA, or the 
Executive Vice President, CCC; or
    (4) The participant had reason to know that the determination was 
erroneous.
    (b) Should an erroneous determination become final under the 
provisions of this section, it shall only be effective through the year 
in which the error was found and communicated to the participant.



Sec. 718.10  Rule of fractions.

    (a) Rounding of fractions shall be done after the completion of the 
entire computation which is being made. In making mathematical 
determinations all computations shall be carried to two decimal places 
beyond the required number of decimal places as specified in the 
regulations governing each program. In rounding, fractional digits of 49 
or less beyond the required number of decimal places shall be dropped; 
if the fractional digits beyond the required number of decimal places 
are 50 or more, the figure sat the last required decimal place shall be 
increased by ``1'' as follows:

------------------------------------------------------------------------
          Required decimal                Computation          Result
------------------------------------------------------------------------
Whole numbers......................  6.49 (or less).......        6
                                     6.50 (or more).......        7
Tenths.............................  7.649 (or less)......        7.6
                                     7.650 (or more)......        7.7
Hundredths.........................  8.8449 (or less).....        8.84
                                     8.8450 (or more).....        8.85
Thousandths........................  9.63449 (or less)....        9.634
                                     9.63450 (or more)....        9.635
10 thousandths.....................  10.993149 (or less)..       10.9931
                                     10.993150 (or more)..       10.9932
------------------------------------------------------------------------

    (b) The acreage of each field or subdivision computed for tobacco 
and CCC disaster assistance programs shall be recorded in acres and 
hundredths of an acre, dropping all thousandths of an acre. The acreage 
of each field or subdivision computed for crops, except tobacco, shall 
be recorded in acres and tenths of an acre, rounding all hundredths of 
an acre to the nearest tenth.



Sec. 718.11  Denial of benefits.

    (a) For the purposes of this section, a person means an individual.
    (b) Any person convicted under Federal or State law of planting, 
cultivating, growing, producing, harvesting, or storing a controlled 
substance, as defined in 21 CFR part 1308, shall be ineligible for, with 
respect to any commodity produced during the same year and the next 
succeeding four years:
    (1) Any price support loan available in accordance with parts 1446 
and 1464 of this title;
    (2) Any price support or payment made under the Commodity Credit 
Corporation Charter Act;
    (3) A farm storage facility loan made under section 4(h) of the 
Commodity Credit Corporation Charter Act;
    (4) Crop Insurance under the Federal Crop Insurance Act;
    (5) A loan made, insured or guaranteed under the Consolidated farm 
and Rural Development Act or any other provision of law formerly 
administered by the Farmers Home Administration; or
    (6) Any payment made under any Act.
    (c) If any person denied benefits under this part is a beneficiary 
of a trust, benefits for which the trust is eligible shall be reduced, 
for the appropriate period, by a percentage equal to the total interest 
of the beneficiary in the trust.

[61 FR 37552, July 18, 1996, as amended at 62 FR 25437, May 9, 1997]



Sec. 718.12  Furnishing maps.

    The cost of furnishing reproductions of photographs, mosaics and 
maps is free upon request to the farm operator, owner, Federal Crop 
Insurance Corporation (FCIC) and reinsured companies, Natural Resources 
Conservation Service (NRCS) and other Federal or State Agencies 
performing their official duties in making FSA and related program 
determinations. To all others, reproductions shall be made available at 
the rate FSA determines will cover the cost of making such items 
available.

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           Subpart B--Determination Of Acreage and Compliance



Sec. 718.101  Measurements.

    (a) Measurement services include, but are not limited to, measuring 
land and crop areas, quantities of farm-stored commodities, and 
appraising the yields of crops when required for program administration 
purposes. The county committee shall provide measurement service if the 
producer requests such service and pays the cost, except that service 
shall not be provided to determine total acreage of a crop when the 
request is made:
    (1) After the established final reporting date for the applicable 
crop except as provided in Sec. 718.103;.
    (2) After the farm operator has furnished the county office 
production evidence when required for program administration purposes 
except as provided in this subpart; or
    (3) In connection with a late-filed report of acreage, unless there 
is evidence of the existence and use made of the crop, the lack of the 
crop or a disaster condition affecting the crop.
    (b) The acreage requested to be measured by staking and referencing 
shall not exceed the effective farm allotment for marketing quota crops 
or acreage of a crop that is limited to a specific number of acres to 
meet any program requirement.
    (c) When a producer requests, pays for, and receives written notice 
that measurement services have been furnished, the measured acreage 
shall be guaranteed to be correct and used for all program purposes for 
the current year even though an error is later discovered in the 
measurement thereof, if the producer has taken action with an economic 
significance based on the measurement service, and the entire crop 
required for the farm was measured. If the producer has not taken action 
with an economic significance based on the measurement service, the 
producer shall be notified in writing that an error was discovered and 
the nature and extent of such error. In such cases, the corrected 
acreage will be used for determining program compliance for the current 
year.
    (d) When a measurement service reveals acreage in excess of the 
permitted acreage by more than the allowable tolerance, the producer 
must destroy the excess acreage and pay for an authorized employee of 
FSA to verify destruction, in order to keep the measurement service 
guarantee.



Sec. 718.102  Acreage reports.

    (a) In order to be eligible for benefits, participants in the 
programs specified in paragraph (b)(1) through (3) of this section and 
those who are subject to the regulations cited in paragraph (b)(4) and 
(5) of this section must submit accurate information as required by 
these provisions.
    (b)(1) Participants in the program authorized by part 1412 of this 
title must report the acreage of fruits and vegetables planted for 
harvest on a farm enrolled in such program;
    (2) Participants in the programs authorized by parts 1421 and 1427 
of this title must report the acreage planted to a commodity for harvest 
for which a marketing assistance loan or loan deficiency payment is 
requested; and
    (3) Participants in the programs authorized by parts 704 and 1410 of 
this title must report the use of the land enrolled in such programs;
    (4) Participants in the programs authorized by parts 723 and 1464 of 
this title (except burley tobacco producers) must report the acreage 
planted to tobacco by kind (except burley tobacco) on all farms that 
have an effective allotment or quota greater than zero; and
    (5) Participants in the programs authorized by parts 729 and 1446 of 
this title must report the acreage planted to peanuts by type.
    (c) The reports required under paragraph (a) of this section shall 
be timely filed by the farm operator, farm owner, or a duly authorized 
representative with the county committee by the final reporting date 
applicable to the crop as established by the county committee and State 
committee.
    (d) Peanut producers shall provide the county office evidence of 
disposition of any peanuts that are kept on the farm, including:
    (1) Type and quantity for use for seed on any farm in which the 
producer has an interest; and

[[Page 87]]

    (2) Type, quantity, names, and addresses of purchases for peanuts 
sold or given to others.
    (e) Peanut producers shall provide the county office information for 
acquisition of seed peanuts from other sources, including:
    (1) Name and address of person who sold or gave producer the 
peanuts;
    (2) Type, farmer's stock or shelled basis, and quantity; and
    (3) Acquisition date.



Sec. 718.103  Late-filed reports.

    (a) A farm operator's report may be accepted after the established 
date for reporting if evidence is still available for inspection which 
may be used to make a determination with respect to the existence and 
use made of the crop, the lack of the crop or a disaster condition 
affecting the crop.
    (b) The farm operator shall pay the cost of a farm visit by an 
authorized FSA employee unless the County Committee has determined that 
failure to report in a timely manner was beyond the producer's control.



Sec. 718.104  Revised reports.

    (a) The farm operator may revise a report of acreage with respect to 
1996 and subsequent years to change the acreage reported if the county 
committee determines that the revision does not have an adverse impact 
on the program and the acreage has not already been determined by FSA.
    (b) Revised reports shall be filed and accepted:
    (1) At any time for all crops if evidence exists for inspection and 
determination of the existence and use made of the crop, the lack of the 
crop, or a disaster condition affecting the crop; and
    (2) If the requirements of paragraph (a) have been met and the 
producer was in compliance with all other program requirements by the 
applicable established crop reporting date.



Sec. 718.105  Tolerances, variances, and adjustments for tobacco.

    (a) Tolerance or variance for tobacco is the amount by which the 
determined acreage may differ from the reported acreage or allotment and 
still be considered in compliance with program requirements.
    (b) Tolerance rules apply to those fields for which a staking and 
referencing was performed but such acreage was not planted according to 
those measurements or when a measurement service is not requested for 
acreage destroyed to meet program requirements. Tolerance rules do not 
apply to:
    (1) Official fields when the entire field is devoted to one crop;
    (2) Those fields for which staking and referencing was performed and 
such acreage was planted according to those measurements; or
    (3) The adjusted acreage for farms using measurement after planting 
which have a determined acreage greater than the marketing quota crop 
allotment.
    (c) An administrative variance is applicable to all marketing quota 
crop acreages. Marketing quota crop acreages as determined in accordance 
with this part shall be deemed in compliance with the effective farm 
allotment or program requirement when the determined acreage does not 
exceed the effective farm allotment by more than an administrative 
variance determined as follows:
    (1) For all kinds of tobacco subject to marketing quotas, except 
dark air-cured and fire-cured the larger of 0.1 acre or 2 percent of the 
allotment; and
    (2) For dark air-cured and fire-cured tobacco, an acreage based on 
the effective acreage allotment as provided in the table as follows:

------------------------------------------------------------------------
                                                          Administrative
    Effective acreage allotment is within this range         variance
------------------------------------------------------------------------
0.01 to 0.99............................................           0.01
1.00 to 1.49............................................           0.02
1.50 to 1.99............................................           0.03
2.00 to 2.49............................................           0.04
2.50 to 2.99............................................           0.05
3.00 to 3.49............................................           0.06
3.50 to 3.99............................................           0.07
4.00 to 4.49............................................           0.08
4.50 and up.............................................           0.09
------------------------------------------------------------------------

    (d) A tolerance applies to tobacco other than flue-cured or burley, 
if the determined acreage exceeds the allotment by more than the 
administrative variance but by not more than the tolerance. Such excess 
acreage of tobacco may be adjusted to the effective farm acreage 
allotment to avoid marketing

[[Page 88]]

quota penalties or receive price support.



Sec. 718.106  Acreages.

    (a) If an acreage has been established by a representative of FSA 
for an area delineated on an aerial photograph, such acreage will be 
recognized by the county committee as the official acreage for the area 
until such time as the boundaries of such area are changed. When 
boundaries not visible on the aerial photograph are established from 
data furnished by the producer, such acreage shall not be recognized as 
official acreage until the boundaries are verified by an authorized 
representative of FSA.
    (b) Measurements of any row crop shall extend beyond the planted 
area by the larger of 15 inches or one-half the distance between the 
rows.
    (c) The entire acreage of a field or subdivision of a field devoted 
to a crop shall be considered as devoted to the crop subject to any 
allowable deduction or adjustment credit except as otherwise provided in 
this part.



Sec. 718.107  Skip rows and strip crops.

    (a) To be considered under the skip row provisions of this section 
the field must be planted in a uniform planting pattern and the number 
of rows planted between skips cannot exceed 36 rows. If more than one 
pattern is used within a field, the area planted to each pattern will be 
considered a subdivision.
    (b) The entire acreage of the field or subdivision shall be 
considered as devoted to the crop where the crop is planted in strips of 
two or more rows and the strips of idle land are less than 64 inches 
wide, except where cotton is planted in skip row patterns:
    (1) If the distance between the rows is 30 inches the strips of the 
idle land are less than 60 inches wide; or
    (2) If the distance between the rows is 32 inches or wider and the 
strips of idle land are at least 60 inches but less than 64 inches, the 
producer has the option to consider the crop as either solid planted or 
skip row if the producer has a history of planting 32-inch or wider 
rows.
    (c) The county committee shall determine if the producer has a 
history of 32-inch or wider rows by verifying that cotton acreage has 
been planted in 32-inch or wider rows in past years and reported on the 
acreage report, or reported to other State or Federal Agencies.
    (d) If the strips of idle land are too wide to be classified as 
solid planted in accordance with paragraph (b) of this section the 
acreage of the strips planted to the crop, including one-half the 
distance between the rows of the crop but not less than 15 inches beyond 
the outside rows of the crop in each strip, shall be considered as 
devoted to the crop.
    (e) When one crop is alternating with another crop, the entire 
acreage of the field or subdivision shall be considered as devoted to 
the crop being measured where such crop is planted in strips of one or 
more rows and the strips of the other crop are less than 64 inches.
    (f) If strips of the alternating crop are too wide to be considered 
solid planted in accordance with paragraph (b) of this section and if 
the alternating crop:
    (1) Has substantially the same growing season as the crop being 
measured, only the acreage planted to the crop being measured, including 
the smaller of one-half the distance between the strips of the crop 
being measured or 30 inches shall be considered as being devoted to the 
crop being measured; or
    (2) Does not have substantially the same growing season as the crop 
being measured, then the acreage of the crop being measured shall be 
determined in accordance with paragraph (b) or (c) of this section.
    (g) When the crops are planted in single wide rows, the entire 
acreage of the field or subdivision shall be considered as devoted to 
the crop where the distance between the rows of such crop is less than 
64 inches. If the distance between the rows of the crop is at least 64 
inches, only 64 inches in width for each row shall be considered as 
being devoted to the crop.



Sec. 718.108  Deductions.

    (a) Any contiguous area which is not devoted to the crop being 
measured and which is not part of a skip-row pattern under Sec. 718.107 
shall be deducted from the acreage of the crop if such area

[[Page 89]]

meets the following minimum national standards or requirements:
    (1) A minimum width of 30 inches;
    (2) For tobacco, three-hundredths acre, except that turn areas, 
terraces, permanent irrigation and drainage ditches, sod waterways, 
noncropland, and subdivision boundaries each of which is at least 30 
inches in width may be combined to meet the 0.03-acre minimum 
requirement; or
    (3) For all other crops and land uses, one-tenth acre. Turn areas, 
terraces, permanent irrigation and drainage ditches, sod waterways, 
noncropland, and subdivision boundaries each of which is at least 30 
inches in width and each of which contain 0.1 acre or more may be 
combined to meet any larger minimum prescribed for a State in accordance 
with this subpart.
    (b) If the area not devoted to the crop is located within the 
planted area, the part of any perimeter area that is more than 33 links 
in width will be considered to be an internal deduction if the standard 
deduction is used.
    (c) A standard deduction of 3 percent of the area devoted to a row 
crop and zero percent of the area devoted to a close-sown crop may be 
used in lieu of measuring the acreage of turn areas.



Sec. 718.109  Adjustments.

    (a) The farm operator or other interested producer having excess 
tobacco acreage (other than flue-cured or burley) may adjust an acreage 
of the crop in order to avoid a marketing quota penalty if such person:
    (1) Notifies the county committee of such election within 15 
calendar days after the date of mailing of notice of excess acreage by 
the county committee; and
    (2) Pays the cost of a farm visit to determine the adjusted acreage 
prior to the date the farm visit is made.
    (b) The farm operator may adjust an acreage of tobacco (except flue-
cured and burley) by disposing of such excess tobacco prior to the 
marketing of any of the same kind of tobacco from the farm. The 
disposition shall be witnessed by a representative of FSA and may take 
place before, during, or after the harvesting of the same kind of 
tobacco grown on the farm. However, no credit will be allowed toward the 
disposition of excess acreage after the tobacco is harvested but prior 
to marketing, unless the county committee determines that such tobacco 
is representative of the entire crop from the farm of the kind of 
tobacco involved.



Sec. 718.110  Notice of measured acreage.

    Written notice of measured acreage shall be on Form FSA-468, Notice 
of Determined Acreage, when mailed to the farm operator and shall 
constitute notice to all interested producers on the farm.



Sec. 718.111  Redetermination.

    (a) A redetermination of crop acreage, appraised yield, or farm-
stored production for a farm may be initiated by the county committee, 
State committee, or Deputy Administrator at any time. Such 
redeterminations may also be initiated by a producer who has an interest 
in the farm upon filing a request within 15 calendar days after the date 
of the notice furnished the farm operator in accordance with 
Sec. 718.109 or Sec. 718.110 or within 5 calendar days after the initial 
appraisal of the yield of a crop or before any of the farm-stored 
production is removed from storage and upon payment of the cost of 
making such redetermination. A redetermination shall be undertaken in 
the manner prescribed by the Deputy Administrator. Such redetermination 
shall be used in lieu of any prior determination.
    (b) The county committee shall refund the payment of the cost for a 
redetermination when, because of an error in the initial determination:
    (1) The appraised yield is changed by at least the larger of:
    (i) Five percent or 5 pounds for cotton;
    (ii) Five percent or 1 bushel for wheat, barley, oats, and rye; or
    (iii) Five percent or 2 bushels for corn and grain sorghum; or
    (2) The farm stored production is changed by at least the smaller of 
3 percent or 600 bushels; or
    (3) The acreage of the crop is:
    (i) Changed by at least the larger of 3 percent or 0.5 acre; or
    (ii) Considered to be within program requirements.

[[Page 90]]



  Subpart C--Reconstitution of Farms, Allotments, Quotas, and Acreages



Sec. 718.201  Farm constitution.

    (a) Land which has been properly constituted under prior regulations 
shall remain so constituted until a reconstitution is required under 
paragraph (c) of this section. The constitution and identification of 
land as a farm for the first time and the subsequent reconstitution of a 
farm made hereafter, shall include all land operated by one person as a 
single farming unit except that it shall not include:
    (1) After August 1, 1996, land subject to a production flexibility 
contract with land not subject to a production flexibility contract;
    (2) Land under separate ownership unless the owners agree in 
writing;
    (3) Land under a lease agreement of less than 1 year duration;
    (4) Land in different counties when the tobacco allotments or quotas 
established for the land involved cannot be transferred from one county 
to another county by lease, sale, or owner. However, this paragraph 
shall not apply if:
    (i) All of the land is owned by one person and operated by one 
person and all such land is contiguous;
    (ii) Two or more tracts are located in counties that are contiguous 
in the same State and are owned by the same person if:
    (A) A burley tobacco quota is established for one or more of the 
tracts; and
    (B) The county committee determines that the tracts will be operated 
as a single farming unit as set forth in Sec. 718.202; or
    (iii) Because of a change in operation, tracts or parts of tracts 
will be divided from the parent farm that currently has land in more 
than one county, and there is no change in operation and ownership of 
the remainder of the farm, or if there is a change in ownership, the new 
owner agrees in writing to the constitution of the farm.
    (5) Federally owned land;
    (6) State-owned wildlife land unless the former owner has possession 
of the land under a leasing agreement;
    (7) Land constituting a farm which is declared ineligible to be 
enrolled in a program under the regulations governing the program;
    (8) For land subject to production flexibility contracts, land 
located in counties that are not contiguous. However, this subparagraph 
shall not apply if:
    (i) Counties are divided by a river;
    (ii) Counties do not touch because of a correction line adjustment; 
or
    (iii) The land is within 20 miles, by road, of other land that will 
be a part of the farming unit; and
    (9) With respect to peanut poundage quotas, land across:
    (i) County lines when the quotas established for the land involved 
cannot be transferred; or
    (ii) State lines.
    (b)(1) If all land on the farm is physically located in one county, 
the farm records shall be administratively located in such county. If 
there is no FSA office in the county or the county offices have been 
consolidated, the farm shall be administratively located in the 
contiguous county most convenient for the farm operator.
    (2) If the land on the farm is located in more than one county, the 
farm shall be administratively located in either of such counties as the 
county committees and the farm operator agree. If no agreement can be 
reached, the farm shall be administratively located in the county where 
the principal dwelling is situated, or where the major portion of the 
farm is located if there is no dwelling.
    (c) A reconstitution of a farm either by division or by combination 
shall be required whenever:
    (1) A change has occurred in the operation of the land after the 
last constitution or reconstitution and as a result of such change the 
farm does not meet the conditions for constitution of a farm as set 
forth in paragraph (b) except that no reconstitution shall be made if 
the county committee determines that the primary purpose of the change 
in operation is to establish eligibility to transfer allotments subject 
to sale or lease;

[[Page 91]]

    (2) The farm was not properly constituted under the applicable 
regulations in effect at the time of the last constitution or 
reconstitution;
    (3) An owner requests in writing that the owner's land no longer be 
included in a farm which is composed of tracts under separate ownership;
    (4) The county committee determines that the farm was reconstituted 
on the basis of false information furnished by the owner or farm 
operator;
    (5) The county committee determines that the tracts of land included 
in a farm are not being operated as a single farming unit;
    (6) An owner of a farm, constituted as a single farming unit prior 
to 1978, which is comprised of land located in two or more counties for 
which there is a quota or allotment established for such farm and such 
quota or allotment is subject to lease and transfer restrictions across 
county lines, requests in writing that the farm be reconstituted by 
dividing the tracts. The resulting farms shall be administratively 
serviced by the county office serving the county in which the land is 
geographically located; or
    (7) Land is sold for or devoted to nonagricultural commercial or 
industrial uses; however, a reconstitution is not required and 
allotments, quotas and acreages may remain with the farm if either of 
the following apply:
    (i) The land is already devoted to residential, recreational, 
industrial or commercial buildings; or
    (ii) The owner would qualify to use the landowner designation method 
of division in accordance with Sec. 718.205 or the allotments and quotas 
can be transferred by sale or owner in accordance with this part and 
parts 723 or 729 of this chapter and the owner of the parent farm and 
the purchaser file a signed written memorandum of understanding before 
Form FSA-476 or Form MQ-24 is issued, stating that the land will be 
devoted immediately or within 3 years to:
    (1) Nonagricultural commercial uses; or
    (2) Recreational, residential, industrial or non-farm commercial 
uses.
    (d) Notwithstanding the provisions of paragraphs (c)(1) through 
(c)(7), a reconstitution shall not be approved if the county committee 
determines that the primary purpose of the reconstitution is to:
    (1) Circumvent the provisions of part 12 of this title; or
    (2) Circumvent any other chapter of this title.



Sec. 718.202  Determining the land constituting a farm.

    (a) In determining the constitution of a farm, consideration shall 
be given to provisions such as ownership and operation. For purposes of 
this part, the following rules shall be applicable to determining what 
land is to be included in a farm.
    (b) A minor shall be considered to be the same owner or operator as 
the parent or court-appointed guardian (or other person responsible for 
the minor child) unless:
    (1) The minor child is a producer on a farm;
    (2) Neither the minor's parents nor guardian has any interest in the 
minor's farm or production from the farm;
    (3) The minor establishes and maintains a separate household from 
the parent or guardian;
    (4) Personally carries out the farming activities in the operation; 
and
    (5) Maintains a separate accounting for the farming operation.
    (c) Notwithstanding paragraph (b) of this section, a minor shall not 
be considered to be the same owner or operator as the parent or court-
appointed guardian if the minor's interest in the farming operation 
results from being the beneficiary of an irrevocable trust and ownership 
of the property is vested in the trust or the minor.
    (d) A life estate tenant shall be considered to be the owner of the 
property for their life.
    (e) A trust shall be considered to be an owner with the beneficiary 
of the trust; except a trust can be considered a separate owner or 
operator from the beneficiary, if the trust:
    (1) Has a separate and distinct interest in the land or crop 
involved;
    (2) Exercises separate responsibility for the separate and distinct 
interest; and

[[Page 92]]

    (3) Maintains funds and accounts separate from that of any other 
individual or entity for the interest.



Sec. 718.203  County committee action to reconstitute a farm.

    Action to reconstitute a farm may be initiated by the county 
committee, the farm owner, or the operator with the concurrence of the 
owner of the farm. Any request for a farm reconstitution shall be filed 
with the county committee.



Sec. 718.204  Reconstitution of allotments, quotas, and acreages.

    (a) Farms shall be reconstituted in accordance with this subpart 
when it is determined that the land areas are not properly constituted 
and, to the extent practicable, shall be based on the facts and 
conditions existing at the time the change requiring the reconstitution 
occurred.
    (b) Reconstitutions of farms subject to a production flexibility 
contract in accordance with part 1412 of this title will be effective 
for the current year if initiated on or before July 1 of the fiscal 
year.
    (c) For tobacco and peanut farms, a reconstitution will be effective 
for the current year for each crop for which the reconstitution is 
initiated before the planting of such crop begins or would have begun.
    (d) Notwithstanding the provisions of paragraph (b) and (c) of this 
section, a reconstitution may be effective for the current year if the 
county committee, with the concurrence of the State committee, 
determines that the purpose of the request for reconstitution is not to 
perpetrate a scheme or device the effect of which is to avoid the 
statutes and regulations governing commodity programs found in this 
title.



Sec. 718.205  Rules for determining farms, allotments, quotas, and acreages when reconstitution is made by division.

    (a) The methods for dividing farms, allotments, quotas, and acreages 
in order of precedence, when applicable, are estate, designation by 
landowner, contribution, agricultural use, cropland, and history. The 
proper method shall be determined on a crop by crop basis.
    (b)(1) The estate method is the proration of allotments, quotas, and 
acreages for a parent farm among the heirs in settling an estate. If the 
estate sells a tract of land before the farm is divided among the heirs, 
the allotments, quotas, and acreages for that tract shall be determined 
by using one of the methods provided in paragraphs (c) through (g) of 
this section.
    (2) Allotments, quotas, and acreages shall be divided in accordance 
with a will, but only if the county committee determines that the terms 
of the will are such that a division can reasonably be made by the 
estate method.
    (3) If there is no will or the county committee determines that the 
terms of a will are not clear as to the division of allotments, quotas, 
and acreages, such allotments, quotas, and acreages shall be apportioned 
in the manner agreed to in writing by all interested heirs or devisees 
who acquire an interest in the property for which such allotments, 
quotas, and acreages have been established. An agreement by the 
administrator or executor shall not be accepted in lieu of an agreement 
by the heirs or devisees.
    (4) If allotments, quotas, and acreages are not apportioned in 
accordance with the provisions of paragraph (b)(2) or (3) of this 
section, the allotments, quotas, and acreages shall be divided pursuant 
to paragraphs (d) through (g) of this section, as applicable.
    (c)(1) If the ownership of a tract of land is transferred from a 
parent farm, the transferring owner may request that the county 
committee divide the allotments, quotas, and acreages, including 
historical acreage that has been doublecropped, between the parent farm 
and the transferred tract, or between the various tracts if the entire 
farm is sold to two or more purchasers, in a manner designated by the 
owner of the parent farm subject to the conditions set forth in 
paragraph (c)(4) of this section. In the case of land subject to a 
Wetlands Reserve Program easement or Emergency Wetlands Reserve Program 
easement, the parent farm shall retain the allotments, quotas, and 
acreages.

[[Page 93]]

    (2) If the county committee determines that allotments, quotas, and 
acreages cannot be divided in the manner designated by the owner because 
of the conditions set forth in paragraph (c)(4) of this section, the 
owner shall be notified and permitted to revise the designation so as to 
meet the conditions in paragraph (c)(4) of this section. If the owner 
does not furnish a revised designation of allotments, quotas, and 
acreages within a reasonable time after such notification, or if the 
revised designation does not meet the conditions of paragraph (c)(4) of 
this section, the county committee will prorate the allotments, quotas, 
and acreages in accordance with paragraphs (d) through (g) of this 
section.
    (3) If a parent farm is composed of tracts, under separate 
ownership, each separately owned tract being transferred in part shall 
be considered a separate farm and shall be constituted separately from 
the parent farm using the rules in paragraphs (d) through (g) of this 
section, as applicable, prior to application of the provisions of this 
paragraph.
    (4) A landowner may designate, as provided in this paragraph, the 
manner in which allotments, quotas, and acreages are divided.
    (i) The transferring owner and transferee shall file a signed 
written memorandum of understanding of the designation with the county 
committee before the farm is reconstituted and before a subsequent 
transfer of ownership of the land. The landowner shall designate the 
allotments, quotas, and acreage that shall be permanently reduced when 
the sum of the allotments, quotas, and acreages exceeds the cropland for 
the farm.
    (ii) Where the part of the farm from which the ownership is being 
transferred was owned for a period of less than 3 years, the designation 
by landowner method shall not be available with respect to the transfer 
unless the county committee determines that the primary purpose of the 
ownership transfer was other than to retain or to sell allotments or 
quotas. In the absence of such a determination, and if the farm contains 
land which has been owned for less than 3 years, that part of the farm 
which has been owned for less than 3 years shall be considered as a 
separate farm and the allotments or quotas, shall be assigned to that 
part in accordance with paragraphs (d) through (g) of this section. Such 
apportionment shall be made prior to any designation of allotments and 
quotas, with respect to the part which has been owned for 3 years or 
more.
    (5) The designation by landowner method is not applicable to:
    (i) Burley tobacco quotas; or
    (ii) Crop allotments or quotas which are restricted to transfer 
within the county by lease, sale, or by owner, when the land on which 
the farm is located is in two or more counties.
    (6) The designation by landowner method may be applied at the 
owner's request to land owned by any Indian Tribal Council which is 
leased to two or more producers for the production of any crop of a 
commodity for which an allotment, quota, or acreage has been 
established. If the land is leased to two or more producers, an Indian 
Tribal Council may request that the county committee divide the 
allotments, quotas, and acreages between the applicable tracts in the 
manner designated by the Council. The use of this method shall not be 
subject to the conditions of paragraph (c)(4).
    (d)(1) The contribution method is the proration of a parent farm's 
allotments, quotas, and acreages to each tract as the tract contributed 
to the allotments, quotas, or acreages at the time of combination and 
may be used when the provisions of paragraphs (b) and (c) of this 
section do not apply. The contribution method shall be used to divide 
allotments and quotas for a farm that resulted from a combination which 
became effective during the 6-year period before the crop year for which 
the reconstitution is effective. This method for dividing allotments and 
quotas shall be used beyond the 6-year period if FSA records are 
available to show the amount of contribution.
    (2) The county committee determines with the concurrence of the 
State committee or representative thereof, that the use of the 
contribution method would not result in an equitable distribution of 
allotments and quotas,

[[Page 94]]

considering available land, cultural operations, and changes in type of 
farming. The contribution method shall not be used in cases involving 
the division of allotment or quota for any commodity for which there was 
no allotment or quota established at the time of the combination.
    (e) The agricultural use method is the proration of contract acreage 
to the tracts being separated from the parent farm in the same 
proportion that the agricultural and related activity land for each 
tract bears to the agricultural and related activity land for the parent 
farm. This method of division shall be used if the provisions of 
paragraphs (b) through (d) of this section do not apply.
    (f)(1) The cropland method is the proration of allotments and quotas 
to the tracts being separated from the parent farm in the same 
proportion that the cropland for each tract bears to the cropland for 
the parent farm. This method shall be used if the provisions of 
paragraphs (b) through (d) of this section do not apply unless the 
county committee determines that a division by the history method would 
result in allotments and quotas which are more representative than if 
the cropland method is used after taking into consideration the 
operation normally carried out on each tract for the commodities 
produced on the farm.
    (2) The cropland method shall not be used to divide contract 
acreage.
    (g)(1) The history method is the proration of allotments and quotas 
to the tracts being separated from the farm on the basis of the 
allotments and quotas determined to be representative of the operations 
normally carried out on each tract. The county committee may use the 
history method of dividing allotments and quotas when it:
    (i) Determines that this method would result in the proration of 
allotments and quotas, more representative than the cropland method of 
division of the operation normally carried out on each tract; and
    (ii) Obtains written consent of all owners to use the history 
method.
    (2) Notwithstanding any other provision of this section, the county 
committee may waive the requirement for written consent of the owners 
for dividing allotments and quotas if the county committee determines 
that the use of the cropland method would result in an inequitable 
division of the parent farm's allotments and quotas and the use of the 
history method would provide more favorable results for all owners.
    (3) The history method shall not be used to divide contract acreage.
    (h)(1) Allotments, quotas, and acreages apportioned among the 
divided tracts pursuant to paragraphs (d), (e), (f) and (g) of this 
section may be increased or decreased with respect to a tract by as much 
as 10 percent of the allotment, quota, or acreage determined under such 
subsections for the parent farm if:
    (i) The owners agree in writing; and
    (ii) The county committee determines the method used did not provide 
an equitable distribution considering available land, cultural 
operations, and changes in the type of farming conducted on the farm. 
Any increase in an allotment, quota, or acreage with respect to a tract 
pursuant to this paragraph shall be offset by a corresponding decrease 
for such allotments, quotas or acreages established with respect to the 
other tracts which constitute the farm.
    (2) Farm program payment yields calculated for the resulting farms 
of a division performed according to paragraphs (d) through (g) may be 
increased or decreased if the county committee determines the method 
used did not provide an equitable distribution considering available 
land, cultural operations, and changes in the type of farming conducted 
on the farm. Any increase in a farm program payment yield on a resulting 
farm shall be offset by a corresponding decrease on another resulting 
farm of the division.
    (i) If a farm with burley tobacco quota is divided through 
reconstitution and one or more of the farms resulting from the division 
are apportioned less than 1,000 pounds of burley tobacco quota, the 
owners of such farms shall take action as provided in part 723 of this 
chapter to comply with the 1,000 pound minimum by July 1 of the current 
year or the quota shall be dropped. Exceptions to this are farms 
divided:
    (1) Among family members;

[[Page 95]]

    (2) By the estate method; and
    (3) When no sale or change in ownership of land occurs.



Sec. 718.206  Rules for determining allotments, quotas, and acreages when reconstitution is made by combination.

    When two or more farms or tracts are combined for a year, that 
year's allotments, quotas, and acreages, with respect to the combined 
farm or tract, as required by applicable commodity regulations, shall 
not be greater than the sum of the allotments, quotas, and acreages for 
each of the farms or tracts comprising the combination, subject to the 
provisions of Sec. 718.204.

[61 FR 37552, July 18, 1996; 61 FR 49049, Sept. 18, 1996]



Sec. 718.207  Eminent domain acquisitions.

    (a) This section provides a uniform method for reallocating 
allotments and quotas, with respect to land involved in eminent domain 
acquisitions. Such allotments and quotas, in accordance with this 
section, may be pooled for the benefit of the owner who is displaced 
from the acquired farm by eminent domain acquisition. Such pooling shall 
be for a 3-year period from the date of displacement or during such 
other period as the displaced owner may request for the transfer of 
allotments and quotas, from the pool to other farms owned by such 
person.
    (b) An eminent domain acquisition is a taking of title to land, or 
the taking of an impoundment easement to impound water on the land, or 
the taking of a flowage easement to intermittently flood the land, 
consummated with respect to land which is, or could be, so taken under 
the power of eminent domain by a Federal, State, or other agency. Such 
acquisition may be by court proceedings to condemn the land or by 
negotiation between the agency and the owner. An acquisition by an 
agency with respect to land not subject to the agency's power of eminent 
domain shall not be an eminent domain acquisition for purposes of this 
section. All land acquired by an agency for the intended project, 
including surrounding land not needed for the project but acquired as a 
package acquisition, shall be considered to be in the eminent domain 
acquisition if the agency expended funds for the package acquisition on 
the basis of its power of eminent domain.
    (c) For purposes of this section, owner means the person, or persons 
in a joint ownership, having title to the land for a period of at least 
12 months immediately prior to the date of transfer of title or grant of 
the impoundment or flowage easement under the eminent domain 
acquisition. If such person or persons have owned the land for less than 
such 12-month period, they may, nevertheless, be considered the owner if 
the State committee determines that such person or persons acquired the 
land for the purpose of carrying out farming operations and not for the 
purpose of obtaining status as an owner under this section. However, no 
person shall be considered the owner if he acquired the land subject to 
an eminent domain acquisition under an outstanding contract to an agency 
or an option by an agency or subject to pending condemnation 
proceedings. In any case where the current titleholders cannot be 
considered the owner for the purpose of this section, the State 
committee shall determine the person or persons who previously had title 
to the land and who qualify for status as the owner under the criteria 
in this paragraph.
    (d) The owner shall be considered displaced from a farm which is 
subject to an eminent domain acquisition on the date:
    (1) The owner loses possession of the land;
    (2) The owner is voluntarily displaced if a binding contract for 
acquisition has been executed;
    (3) The owner, in the case of a flowage easement, determines it is 
no longer practical to conduct farming operations on the land; or
    (4) The owner loses possession of the land as lessee under a lease 
from the agency or its designee if the lease provided uninterrupted 
possession to the owner from the date of acquisition to the end of the 
lease or extensions of the lease.
    (e) The owner shall notify the county committee in writing of the 
eminent domain acquisition and furnish the

[[Page 96]]

date of displacement within 30 days so that allotments and quotas may be 
pooled in accordance with this section. Failure to so notify the county 
committee shall result in the loss of the ability of the owner to extend 
the 3-year period of the pool.
    (f) Whenever the county committee determines, by notice from the 
owner or otherwise, that an owner has been displaced from the farm, the 
county committee shall establish a pool for the allotments and quotas 
eligible for pooling under this section for a 3-year period beginning on 
the date of displacement. Pooled allotments and quotas shall be 
considered fully planted and, for each year in the pool, shall be 
established in accordance with applicable commodity regulations.
    (g) Pooling is not permitted or required:
    (1) If the county committee determines that an agency has authority 
under its eminent domain powers to acquire a farm for the continued 
production of an allotment or quota and does so acquire a farm only for 
such purpose and files a written notice with the county committee of the 
county in which the farm is located at the time of acquisition 
designating the allotment and quota to be produced on the farm, there 
shall be no pooling of such allotment and quota. Such farm allotments 
and quotas shall be established for the farm in accordance with 
applicable commodity regulations. For acreages, there shall be no 
pooling of the acreage under any circumstances if an agency acquires 
land and retains the land in an agricultural or related activity;
    (2) If the displaced owner files written notice with the county 
committee of an intention to waive the right to have all the allotments 
and quotas or any part thereof pooled and the county committee 
determines that the displaced owner has not been coerced to waive such 
right, the allotments and quotas shall be retained on the agency 
acquired land;
    (3) If an agency acquires part of a farm for non-farming purposes 
and the cropland on the land so acquired represents less than 15 percent 
of the total cropland on the farm, the allotments and quotas shall be 
retained on the portion of the farm not acquired by the agency and shall 
not be pooled;
    (4) If an agency acquires part of a farm for non-farming purposes 
and the cropland on the land so acquired represents 15 percent or more 
of the total cropland on a farm, the allotments and quotas attributable 
to the acquired land shall be retained on the portion of the farm not 
acquired by the agency if the owner files a written request with the 
county committee for such retention. The amount of an allotment and 
quota which may be retained on the farm cannot exceed the land devoted 
to an agricultural or related activity. Allotments and quotas which are 
not retained shall be pooled; or
    (5) If, prior to pooling, an owner files a request to transfer the 
allotments and quotas to other farms in the same county which are owned 
by such owner, the county committee may approve a direct transfer 
without the formal establishment of a pool. Such transfer shall be 
subject to the requirements of paragraph (j) of this section. This 
paragraph shall govern the release and reapportionment of pooled 
allotments and quotas notwithstanding other provisions of applicable 
commodity regulations.
    (h) Pooled allotments and quotas may be released on an annual basis 
by the owner to a county committee during any year for which allotments 
and quotas are pooled and not otherwise transferred from the pool. The 
county committee may reapportion the released allotments and quotas to 
other farms in the same county that have allotments or quotas for the 
same commodity. Pooled allotments and quotas shall not be released on a 
permanent basis or surrendered after release to the State committee for 
reapportionment in other counties. Reapportionment shall be on the basis 
of past acreage of the commodity, land, labor, and equipment available 
for the production of the commodity, crop rotation practices, and other 
physical factors affecting the production of the commodity. Pooled 
allotments and quotas which are released shall be considered to have 
been fully planted in the pool and not on the farm to which such 
allotments and quotas are reapportioned.

[[Page 97]]

    (i) Pooled allotments and quotas that may be transferred on a 
permanent or temporary basis by sale, lease, or by owner designation may 
be transferred permanently from the pool by the owner or temporarily for 
the duration of the pooled allotment or quota, subject to the terms and 
conditions for such transfers in the applicable commodity regulations. 
The transfer of tobacco acreage allotment or marketing quota shall be 
approved acre for acre.
    (j) (1) The displaced owners may request a transfer of all or part 
of the pooled allotments and quotas to any other farm in the United 
States which is owned by the displaced owner, but only if there are 
farms in the receiving county with allotments and quotas, for the 
particular commodity or, if there are no such farms, the county 
committee determines that farms in the receiving county are suited for 
the production of the commodity. For purposes of this paragraph:
    (i) Receiving farm means the farm to which transfer from the pool is 
to be made;
    (ii) Receiving State and county committee mean those committees for 
the State and county in which the receiving farm is located; and
    (iii) Transferring State and county committees mean those committees 
for the State and county in which the agency acquired farm is located.
    (2) The displaced owner shall file with the receiving county 
committee written application for transfer of an allotment and quota 
from the pool within 3 years after the date of displacement. The 
application shall contain a certification from the owner that no 
agreement has been made with any person for the purpose of obtaining an 
allotment or quota from the pool for a person other than for the 
displaced owner. The owner shall attach to the application all pertinent 
documents pertaining to the current ownership or purchase of land and 
any leasing arrangements, such as the deed of trust or mortgage, a 
warranty deed, a note, sales agreement, and lease.
    (3) The receiving county committee shall consider each application 
and determine whether the transfer from the pool shall be approved. 
Before an application is acted upon by the receiving county committee, 
the owner shall personally appear before the receiving county committee 
after reasonable notice, bring any additional pertinent documents as may 
be requested for examination by the receiving county committee, and 
answer all pertinent questions bearing on the proposed transfer. Such 
personal appearance requirement may be waived if the receiving county 
committee determines from facts presented to it on behalf of the owner 
that such personal appearance would unduly inconvenience the owner on 
account of illness or other good cause and such personal appearance 
would serve no useful purpose. Any action by the receiving county 
committee shall be subject to the approval required under paragraph 
(j)(5) of this section.
    (4) The transfer from the pool will be approved by the receiving 
county committee only if the county committee determines that the owner 
has made a normal acquisition of the receiving farm for the purpose of 
bona fide ownership to reestablish farming operations. The elements of 
such an acquisition shall include, but are not limited to, the 
following:
    (i) Appropriate legal documents must establish title to the 
receiving farm;
    (ii) If the displaced owner was the operator of the acquired farm at 
the date of displacement, such owner must personally operate and be the 
operator of the receiving farm for the first year that the allotment and 
quota is transferred;
    (iii) If the displaced owner was not the operator of the acquired 
farm at the date of displacement and was not a producer on that farm 
because the leasing or rental agreement provided for cash, fixed rent, 
or standing rent payment, such owner shall not be required to operate 
personally and be the operator of the receiving farm, but at least 75 
percent of the allotments for the receiving farm must be planted on the 
receiving farm during the first year of the transfer. With respect to a 
commodity for which a quota is applicable but for which there is no 
acreage allotment, an acreage which is equal to the result of dividing 
the quota transferred to the receiving farms by the receiving farm's 
yield, multiplied by 75 percent

[[Page 98]]

must be planted during the first year of the transfer;
    (iv) If the displaced owner was not the operator of the acquired 
farm at the date of displacement but was a producer on that farm at the 
date of displacement as the result of having received a share of the 
crops produced on the acquired farm, such displaced owner shall not be 
required to be the operator of the receiving farm but must be a producer 
on the receiving farm during the first year that an allotment or quota 
is transferred;
    (v) The contractual arrangements between the displaced owner and the 
seller of the receiving farm must not contain a requirement that the 
receiving farm be leased to the seller or a person designated by or 
subject to the control of the seller. The seller or a person designated 
by or subject to the control of the seller may not lease the receiving 
farm for the first year the allotment or quota is transferred; and
    (vi) The contractual arrangements under which the receiving farm was 
purchased or leased must be customary in the community where the 
receiving farm is located with respect to purchase price and timing and 
amount of purchase or rental payments.
    (5) The approval by the receiving county committee of a transfer 
from the pool under this paragraph shall be effective upon concurrence 
by the State committee of the State where the receiving farm is located 
(the receiving State committee). Notwithstanding any other provision of 
this section, the receiving State committee may authorize a transfer 
from the pool in any case where the owner presents evidence satisfactory 
to the receiving State committee that:
    (i) The eligibility requirements of paragraph (j)(4) (ii), (iii) and 
(iv) of this section cannot be met without substantial hardship because 
of illness, old age, multiple farm ownership, or lack of a dwelling on 
the farm to which an allotment or quota is to be transferred; or
    (ii) The owner has made a normal acquisition of the receiving farm 
for the purpose of bona fide ownership to reestablish farming operations 
for the displaced owner, even if the farm is leased to the seller of the 
farm for the first year for which the allotment or quota is transferred.
    (6) Upon completion of all necessary approvals under this paragraph, 
the receiving county committee shall issue an appropriate notice of 
allotment and quota under the applicable commodity regulations, taking 
into consideration the land, labor, and equipment available for the 
production of the commodity, crop rotation practices, and the soil and 
other physical factors affecting the production of the commodity. For 
purposes of determining the amount of the allotment and quota available 
for transfer, the receiving county committee shall consider the 
receiving tract as a separate ownership. The acreage transferred from 
the pool shall not exceed the allotments and quotas, most recently 
established for the acquired farm placed in the pool. When all or a part 
of the allotment and quota placed in the pool is transferred and used to 
establish or increase the allotment and quota for other farms owned or 
purchased by the owner, all of the proportionate part of the past 
acreage history for the acquired farm shall be transferred to and 
considered for purposes of future allotments and quotas to have been 
planted on the receiving farm for which an allotment and quota, are 
established or increased under this section. If only a part of the 
available allotment and quota is transferred from the pool, the 
remaining part of the allotment and quota, shall remain in the pool for 
transfer to other farms of the owner until all such allotments and 
quotas have been transferred or until the period of eligibility for 
establishing or increasing allotments and quotas under this section has 
expired.
    (7) If any allotment or quota is transferred under this section and 
it is later determined by the receiving county or State committee, or by 
the Deputy Administrator, that the transfer was obtained by 
misrepresentation by or on behalf of the owner, or that the conditions 
of paragraph (j)(4) of this section are not met, the allotment and quota 
for the receiving farm shall be reduced for each year the transfer 
purportedly was in effect by the amount attributable to the allotment or 
quota transferred from the pool. If the time period

[[Page 99]]

for the transfer of the allotment or quota from the pool has not 
expired, the amount of allotment or quota initially transferred from the 
pool shall be returned to the pool after the period of time has expired 
in which the displaced owner could exercise the right of administrative 
review. Any cancellation of the transfer of an allotment or quota by the 
receiving county committee shall be subject to approval by the receiving 
State committee. The receiving county committee shall issue a notice of 
any marketing quota and penalty as may be required in accordance with 
applicable commodity regulations.
    (8) If the displaced owner files a request for transfer of pooled 
allotments or quotas, within the prescribed period for filing such 
request, but the request for transfer is filed during a year in which 
all or a part of the pooled allotments or quotas were released to the 
transferring county committee pursuant to paragraph (h), the application 
for transfer will be processed in the usual manner but the amount of the 
commodity released shall not be effective on the receiving farm until 
the succeeding year. When a request for transfer of pooled allotment or 
quota involves a transfer from one State to another, the receiving State 
committee shall obtain information from the transferring State committee 
as to whether any part of the allotment or quota for which the transfer 
is requested has been released to the transferring county committee for 
the current year.
    (k)(1) When the displaced owner leases part but not all of the 
agency acquired land, such part shall be constituted as a separate farm 
on the date of the displacement of the owner from the land not so 
leased.
    (2) If a parent farm consists of separate ownership tracts, each 
such tract being acquired in whole or in part shall be considered as a 
separate farm for purposes of paragraphs (g) (3) and (4) of this 
section.
    (3) If a portion of a farm is acquired by an agency and the owner is 
displaced therefrom, the acquired portion shall be constituted as a 
separate farm on the date of displacement unless the allotments and 
quotas are retained on the portion not acquired as provided in 
paragraphs (g) (3) and (4) of this section, in which case the farm shall 
not be reconstituted but the farmland and cropland data shall be 
corrected on all appropriate records for the parent farm.
    (l)(1) The displaced owner may file with the county committee a 
written designation of beneficiary of the rights in the allotments and 
quotas attributable to the acquired land in the event of the death of 
the displaced owner, and may revise such designation from time to time. 
The beneficiary of a deceased owner may exercise the right to continue a 
lease or negotiate a lease with the agency or its designee, the regular 
transfer rights with respect to farms owned by such beneficiary, and the 
release, sale, lease, and owner transfer rights under this section.
    (2) If the displaced owner does not file a designation of 
beneficiary under paragraph (l)(1) and the displaced owner dies before 
displacement or after pooling occurs, the following persons shall be 
considered the beneficiary with the rights provided under paragraph 
(l)(1) of this section:
    (i) The surviving joint owner of the farm where two persons own the 
farm as joint tenants with right of survivorship; and
    (ii) The persons who succeed to the deceased displaced owner's 
interest under a will or by intestate succession. However, in the case 
of intestate succession, the person shall be limited to the surviving 
spouse, parent, sibling or child of the deceased displaced owner. In the 
settlement of the estate of the deceased displaced owner, the heirs may 
file a written agreement with the county committee for the division of 
the deceased displaced owner's rights under this section.
    (m)(1) No transfer from the pool under paragraph (h), (i), or (j) of 
this section shall be approved if there remains any unpaid marketing 
quota penalty due with respect to the marketing of the commodity from 
the acquired farm by the displaced owner, or if any of the commodity 
produced on the agency acquired farm has not been accounted for as 
required under applicable commodity regulations.

[[Page 100]]

    (2) If an allotment or quota for an acquired farm next established 
after the data of displacement would have been reduced because of false 
or improper identification of the commodity produced on or marketed from 
the farm, or as the result of a false acreage report, the allotment or 
quota shall be reduced in the pool in accordance with the applicable 
commodity regulations.



Sec. 718.208  Exempting Federal prison farms and Federal wildlife refuges.

    A marketing penalty shall not be assessed with respect to any 
commodity which is produced on a Federal prison farm or Federal wildlife 
refuge. This exception does not apply to penalties incurred by an 
individual who has a separate interest in a crop which is subject to 
marketing quotas and was produced on a Federal prison farm or Federal 
wildlife refuge.



Sec. 718.209  Transfer of allotments and quotas--State public lands.

    (a) Transfers of allotments and quotas between farms in the same 
county may be permitted where both farms are lands owned by the State.
    (b) An application requesting the transfer of one or more of the 
allotments and quotas on a farm entirely comprised of lands owned by a 
State shall be filed with the county committee by the State. The 
application shall identify the farms as being within the same county, 
show that each farm is entirely comprised of lands owned by the State, 
and list the allotments and quotas requested to be transferred. 
Additional information with respect to the present operations on the 
farms, including all leasing arrangements, shall also be set forth in 
the application.
    (c) The State committee shall establish the closing date for filing 
applications under paragraph (b) of this section for each year which 
shall be no later than the general planting date in the county for the 
commodity involved in the transfer.
    (d)(1) Each transfer of an allotment and quota under this section 
shall be adjusted for differences in farm productivity if the yield 
projected for the year the transfer is to take effect for the farm to 
which transfer is made exceeds by more than ten percent the yield 
projected for the year the transfer is to take effect for the farm from 
which transfer is made. The county committee shall determine the amount 
of the allotment and quota to be transferred where a productivity 
adjustment is required to be made by dividing:
    (i) The product of the yield for the farm from which the transfer is 
made and the acreage to be transferred from such farm, by
    (ii) The yield for the farm to which the transfer is made.
    (2) Acreage for the farm receiving the allotment or quota shall be 
adjusted by the same percentage as the allotment or quota being 
transferred is adjusted. The amount of the allotment and quota and 
related acreage transferred from the farm from which the transfer is 
made shall be the full amount, but the amount of all allotment or quota 
and related acreage for the farm to which the transfer is made shall be 
the adjusted amount.
    (e) The amount of allotment and quota on a farm after a transfer 
under this section is made shall not exceed the average amount of 
allotment or quota of at least three farms with acreage of cropland 
similar to the farm receiving the transfer in the community having the 
applicable allotment acreage and quota on these farms.
    (f) Each transfer of any allotment and quota shall be subject to the 
condition that an acreage equal to the allotment and quota transferred, 
before any productivity adjustment, shall be devoted to and maintained 
in permanent vegetative cover on the farm from which the transfer is 
made. The acreage to be devoted to and maintained in permanent 
vegetative cover with respect to quota crops shall be determined by 
dividing the quota transferred by the yield of the farm from which the 
quota is transferred.
    (g) Transfer of an allotment and quota under this section shall only 
be approved if:
    (1) The county committee determines that a timely filed application 
has been received and that the provisions of this section have been met; 
and
    (2) A representative of the State committee also determines that the 
provisions of this section have been met. If

[[Page 101]]

such a transfer is approved, the county committee shall issue revised 
notices of the allotment or quota for each farm affected by the 
transfer. If a county committee obtains evidence that the conditions 
applicable to any transfer under this section have not been met, a 
report of the facts shall be made to the State committee. If the State 
committee determines that such conditions have not been met, the 
transfer will be canceled, and the allotment and quota shall be 
retransferred to the original farm. Where cancellation and retransfer is 
required, the county committee shall issue revised notices of the 
allotment or quota showing the reasons for the cancellation of the 
transfer.



PART 723--TOBACCO--Table of Contents




                      Subpart A--General Provisions

Sec.
723.101  OMB control numbers assigned pursuant to the Paperwork 
          Reduction Act.
723.102  Applicability.
723.103  Administration.
723.104  Definitions.
723.105  Extent of determinations, computations, and rule for rounding 
          fractions.
723.106  Location of farm for administrative purposes.
723.107-723.110  [Reserved]
723.111  Flue-cured (types 11-14) tobacco.
723.112  Burley (type 31) tobacco.
723.113  Fire-cured (type 21) tobacco.
723.114  Fire-cured (types 22-23) tobacco.
723.115  Dark air-cured (types 35-36) tobacco.
723.116  Sun-cured (type 37) tobacco.
723.117  Cigar-filler and binder (types 42-44 and 53-55) tobacco.
723.118  Cigar-filler (type 46) tobacco.
723.119-723.121  [Reserved]

     Subpart B--Allotments, Quotas, Yields, Transfers, Release and 
           Reapportionment, History Acreages, and Forfeitures

723.201  Determination of preliminary farm acreage allotments and 
          preliminary farm marketing quotas.
723.202  Determining farm acreage allotment, except for flue-cured 
          tobacco.
723.203  Determination of flue-cured tobacco preliminary farm yields.
723.204  Determination of farm yields and normal yields.
723.205  Determination of farm acreage allotments and effective farm 
          acreage allotments for flue-cured tobacco.
723.206  Determining farm marketing quotas and effective farm marketing 
          quotas.
723.207  Determination of acreage allotments or burley marketing quotas 
          for new farms.
723.208  Determination of acreage allotments, marketing quotas, and 
          yields for divided farms.
723.209  Determination of acreage allotments, marketing quotas, yields 
          for combined farms; and special tobacco combinations.
723.210  Corrections of errors and adjusting inequities in acreage 
          allotments and marketing quotas for old farms.
723.211  Allotments, quotas, and yields for farms acquired under right 
          of eminent domain.
723.212  Time for making reduction of farm marketing quotas or acreage 
          allotments for violation of the marketing quota or acreage 
          allotment regulations for a prior marketing year.
723.213  Approval of acreage allotments and marketing quotas and notices 
          to farm operators.
723.214  Application for review.
723.215  Transfer of tobacco farm acreage allotment or farm marketing 
          quota that cannot be planted or replanted due to a natural 
          disaster.
723.216  Transfer of tobacco acreage allotment or marketing quota by 
          sale, lease, or owner.
723.217  Release and reapportionment of old farm acreage allotments for 
          Cigar-filler and Binder (types 42, 43, 44, 54, and 55) 
          tobacco.
723.218  Determining tobacco history acreage.
723.219  Forfeiture of burley tobacco marketing quota.
723.220  Forfeiture of flue-cured tobacco acreage allotment and 
          marketing quota.

 Subpart C--Tobacco Subject to Quota, Exemptions From Quotas, Marketing 
                  Cards, and General Penalty Provisions

723.301  Identification of tobacco subject to quota.
723.302  Tobacco for experimental purposes.
723.303  Production of registered or certified flue-cured tobacco seed.
723.304  Determination of discount varieties.
723.305  Issuance of marketing cards.
723.306  Claim stamping and replacing marketing cards.
723.307  Invalid cards.
723.308  Rate of penalty.
723.309  Persons to pay penalty.
723.310  Date penalty is due.
723.311  Lien for penalty; liability of persons who are affiliated with 
          indebted person or who permit the indebted person to use their 
          identification card.
723.312  Request for refund of penalty.
723.313  Identification of marketings.

[[Page 102]]

 Subpart D--Recordkeeping, Reporting Requirements, Marketing Penalties, 
                           and Other Penalties

723.401  Registration of burley and flue-cured warehouse operators and 
          dealers.
723.402  Warehouse authorized to retain producer marketing cards between 
          sales.
723.403  Auction warehouse operators' records and reports.
723.404  Dealer's records and reports, excluding cigar tobacco buyers.
723.405  Dealers exempt from regular records and reports on MQ-79; and 
          season report for dealers.
723.406  Provisions applicable to damaged tobacco or to purchases of 
          tobacco from processors or manufacturers.
723.407  Cigar tobacco buyer's records and reports.
723.408  Producer's records and reports.
723.409  Producer violations, penalties, false identification 
          collections and remittances by dealers, buyers, handlers, 
          warehouses, and other parties; related issues.
723.410  Penalties considered to be due from warehouse operators, 
          dealers, buyers, and others excluding the producer.
723.411  Records and reports regarding hauling, processing, and storage 
          of tobacco.
723.412  Separate records and reports from persons engaged in tobacco 
          related businesses.
723.413  Length of time records and reports are to be kept.
723.414  Failure to keep records and make reports or making false report 
          or record.
723.415  Examination of records and reports.
723.416  Information confidential.

Subpart E--Establishing Burley and Flue-Cured Tobacco National Marketing 
                                 Quotas

723.501  Scope.
723.502  Definitions.
723.503  Establishing the quotas.
723.504  Manufacturer's intentions; penalties.

    Authority: 7 U.S.C. 1301, 1311-1314, 1314-1, 1314b, 1314b-1, 1314b-
2, 1314c, 1314d, 1314e, 1314f, 1314i, 1315, 1316, 1362, 1363, 1372-75, 
1421, 1445-1, and 1445-2.

    Source: 55 FR 39914, Oct. 1, 1990, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 723 appear at 62 FR 
15600, Apr. 2, 1997, and at 63 FR 11585, Mar. 10, 1998.



                      Subpart A--General Provisions



Sec. 723.101  OMB control numbers assigned pursuant to the Paperwork Reduction Act.

    The information collection requirements contained in these 
regulations (7 CFR part 723) have been approved by the Office of 
Management and Budget (OMB) in accordance with the provisions of U.S.C. 
chapter 35 and have been assigned OMB control numbers 0560-0058 and 
0560-0006.



Sec. 723.102  Applicability.

    The regulations contained in this subpart are applicable to the 1990 
and subsequent crops of burley; flue-cured; fire-cured; dark air-cured; 
Virginia sun-cured; cigar-filler and binder (types 42, 43, 44, 54, and 
55); and Cigar filler (type 46) tobacco. These regulations govern the 
establishment of farm marketing quotas and acreage allotments, the 
issuance of marketing cards, the identification of marketings of 
tobacco, the collection and refund of penalties and the keeping of 
records and making of reports. All of the provisions of these 
regulations apply to each kind of tobacco for which marketing quotas are 
in effect unless the wording of the text indicates otherwise.



Sec. 723.103  Administration.

    (a) The regulations in this part will be administered under the 
general supervision of the Administrator, Farm Service Agency (``FSA'') 
and shall be carried out in the field by State and county Agricultural 
Stabilization and Conservation committees (``State and county FSA 
committees'').
    (b) State and county FSA committees, and representatives and 
employees thereof do not have the authority to modify or waive any of 
the provisions of the regulations of this part.
    (c) The State FSA committee shall take any action required by these 
regulations which has not been taken by the county FSA committee. The 
State FSA committee shall also:
    (1) Correct, or require a county FSA committee to correct any action 
taken by such county FSA committee which

[[Page 103]]

is not in accordance with the regulations of this part, or
    (2) Require a county FSA committee to withhold taking any action 
which is not in accordance with the regulations of this part.
    (d) No provision or delegation herein to a State or county FSA 
committee shall preclude the Administrator, FSA, or a designee, from 
determining any question arising under the regulations of this part or 
from reversing or modifying any determination made by a State or county 
FSA committee. Further, the Administrator or the Administrator's 
designee may modify any deadline or other provisions of this part to the 
extent that doing so is determined by such person to be appropriate and 
not inconsistent with the purposes of the program administered under 
this part.

[55 FR 39914, Oct. 1, 1990, as amended at 63 FR 9128, Feb. 24, 1998]



Sec. 723.104  Definitions.

    (a) Applicability. The definitions set forth in this section shall 
be applicable for all purposes of program administration for all kinds 
of tobacco except as may otherwise be indicated. The definitions in and 
provisions of parts 718 and 720 of this chapter are hereby incorporated 
by reference in these regulations unless the context or subject matter 
or the provisions of these regulations require otherwise.
    (b) Terms. The following terms shall be defined as set forth in this 
paragraph.
    Act. The Agricultural Adjustment Act of 1938, as amended.
    Active burley and flue-cured tobacco producer. (1) Any person who 
shared in the risk of producing a crop of burley or flue-cured tobacco 
in at least one of the three years preceding the current year, or
    (2) Any person who intends to become a burley or flue-cured tobacco 
producer in the current year by sharing in the risk of producing the 
crop and who provides a certification of such intentions on a form 
approved by the Deputy Administrator.
    Allowable floor sweepings. The quantity of floor sweepings 
determined by multiplying 0.0024 times the total producer first sales of 
the respective kind of tobacco at auction for the season for the 
warehouse involved.
    Auction sale. A marketing of tobacco by a sale at public auction 
through a warehouse in the regular course of business including sale of 
all lots of tobacco at public auction in sequence at a given time.
    Base Period. The 5 calendar years immediately preceding the year for 
which farm acreage allotments or marketing quotas are currently being 
established. For burley tobacco marketing quotas established effective 
for the 1994 and subsequent crop years, the base period shall be the 3 
calendar years immediately preceding the year for which farm marketing 
quotas are currently being established. For all other kinds of tobacco 
the five year base period shall remain in effect.
    Buyer. A person who engages to any extent in acquiring or marketing 
tobacco in the form normally marketed by producers.
    Buyers corrections account. The warehouse account of tobacco 
purchased at auction by the buyer but not delivered to the buyer, or any 
tobacco returned by the buyer, lost ticket, or any other valid reason, 
which is turned back to the warehouse operator and supported by an 
adjustment invoice from the buyer. This account shall include the pounds 
deducted resulting from returned lots, short lots, and short weights, 
and pounds added resulting from long lots and long weights, which buyers 
debit or credit to the warehouse operator and support with adjustment 
invoices.
    Carryover tobacco. Tobacco produced prior to the current calendar 
year which has not been marketed or otherwise disposed of prior to the 
beginning of the marketing year for the current crop.
    Common ownership unit. A common ownership unit is a distinguishable 
part of a farm, consisting of one or more tracts of land with the same 
owners, as determined by FSA.
    Considered planted acreage. An acreage that is used for determining 
an old farm's history acreage for a kind of tobacco when the acreage 
planted on the farm to the kind of tobacco in the current year is less 
than the farm acreage

[[Page 104]]

allotment established for such farm in the current year. With respect 
to:
    (1) Flue-cured tobacco. If flue-cured tobacco was marketed from the 
farm during the current year, the considered planted acreage is an 
acreage determined by subtracting the planted acres from the farm 
acreage allotment. If flue-cured tobacco was not marketed from the farm 
in the current year, the considered planted acreage is an acreage, not 
to exceed the farm's acreage allotment, that is equal to the sum of the 
acreage:
    (i) That could not be planted to flue-cured tobacco because of a 
natural disaster,
    (ii) Computed for pounds leased from the farm,
    (iii) In the eminent domain pool,
    (iv) Reduced for overmarketing,
    (v) Reduced for violation of marketing quota regulations, and
    (vi) Converted from the production of flue-cured tobacco during the 
respective crop year in accordance with part 704 of this chapter.
    (2) A kind of tobacco other than burley or flue-cured tobacco. The 
considered planted acreage for a farm is an acreage, not to exceed the 
farm's acreage allotment, that is equal to the sum of the acreage:
    (i) That could not be planted to the kind of tobacco because of a 
natural disaster.
    (ii) Temporarily transferred from the farm.
    (iii) Temporarily released.
    (iv) Converted from production of the kind of tobacco in accordance 
with part 704 of this chapter.
    (v) In the eminent domain pool.
    (vi) Reduced for violation of the regulations set forth in this 
part.
    Container. A package in which tobacco is marketed, packed, and 
stored.
    Current crop. The crop planted in the current year.
    Current year. The calendar year for which acreage allotments are 
being established, or tobacco history acreage and yields are being 
determined, or the farm is being considered under the provisions of the 
marketing quota program.
    Damaged tobacco. Any tobacco that has suffered a loss of value due 
to deterioration resulting from a cause such as rot, separation of 
leaves from stems, fire, smoke, water, or other conditions that would 
cause such tobacco to be distinguishably different from that normally 
marketed in trade channels.
    Dealer. A person who engages to any extent in acquiring or marketing 
tobacco in the form normally marketed by producers.
    Director. The Director, or Acting Director, Tobacco and Peanuts 
Division, Farm Service Agency, U.S. Department of Agriculture.
    Effective farm acreage allotment. The effective farm acreage 
allotment for flue-cured tobacco is the allotment determined under 
Sec. 723.205 of this part.
    Effective farm marketing quota. The effective farm marketing quota 
is the current year farm marketing quota plus or minus any temporary 
quota adjustments.
    Excess tobacco for a farm. (1) For burley and flue-cured tobacco. 
The quantity of tobacco marketed above 103 percent of the effective farm 
marketing quota.
    (2) For kinds of tobacco other than burley or flue-cured. That 
quantity of tobacco which is equal to the average yield per acre of the 
entire acreage of tobacco harvested on the farm times the number of 
acres harvested in excess of the farm acreage allotment, plus any 
carryover excess tobacco.
    Experimental tobacco. Tobacco grown by or under the direction of a 
publicly owned agricultural experiment station for experimental purposes 
only.
    False identification. False identification occurs if:
    (1) Tobacco was marketed or was permitted to be marketed in any 
marketing year as having been produced on any farm when, in fact, it was 
produced on another farm; or
    (2) Tobacco was marketed or was permitted to be marketed in any 
marketing year from a farm and was not identified by a tobacco marketing 
card for the farm; or
    (3) The farm operator or any other producer on a farm permits the 
use of the tobacco marketing card for the farm to record a marketing of 
tobacco when, in fact, no tobacco was marketed from the farm.
    (4) A tobacco marketing card issued to market a kind of tobacco is 
used to

[[Page 105]]

market another kind of tobacco produced on the same farm.
    Family farm corporation. A corporation for which:
    (1) Not less than 50 percent of the stock is owned by:
    (i) An individual or;
    (ii) An individual in combination with:
    (A) The spouse of such individual; or
    (B) The parent, aunt, uncle, child, grandchild, or cousin of such 
individual; or
    (C) A spouse of any individual specified in paragraph (1)(ii)(B) 
and;
    (2) One or more of the individuals specified in paragraph (1) 
participates in the direct management of the day to day operations of 
the corporation.
    Farm acreage allotment. For flue-cured tobacco, the allotment 
established in accordance with Sec. 723.205 of this chapter.
    Farm marketing quota. (1) For burley tobacco, old farms. The pounds 
determined by multiplying the preliminary farm marketing quota by the 
national factor and adjusting the result for any permanent quota 
adjustment.
    (2) For burley tobacco, new farms. The pounds for the farm 
determined by the county FSA committee with the approval of the State 
FSA committee.
    (3) For flue-cured tobacco. The pounds determined by multiplying the 
farm acreage allotment by the farm yield.
    (4) For kinds of tobacco other than burley or flue-cured. The actual 
production of tobacco on the farm acreage allotment, which shall be the 
average yield per acre for the entire acreage of tobacco harvested on 
the farm times the farm acreage allotment.
    Farm Service Agency. An agency within the U.S. Department of 
Agriculture.
    Farm yield. The yield determined as provided in Sec. 723.204 of this 
part.
    Floor sweepings. The scraps or leaves of tobacco which accumulate on 
the warehouse floor in the regular course of business.
    FSA. The Farm Service Agency.
    Green weight. The weight of tobacco which is in the form normally 
marketed by farmers prior to being redried, or processed.
    Leaf account tobacco. The quantity of tobacco purchased or otherwise 
acquired by or for the account of a warehouse operator, including floor 
sweepings purchased from another warehouse operator or dealer, as 
adjusted by the debits and credits to the buyers correction account. 
Such quantity shall not include tobacco in the form not normally 
marketed by producers, including tobacco pickings, and floor sweepings 
which accumulate on the warehouse floor.
    Market. The disposition of tobacco in raw or processed form by 
voluntary or involuntary sale, barter, or exchange, or by gift between 
living persons. ``Marketing'' and ``marketed'' shall have corresponding 
meaning to the term ``market.''
    Marketing recorder. Any employee of the U.S. Department of 
Agriculture, or any employee of an Farm Service Agency county (FSA) 
office, whose duties involve the preparation and handling of the records 
and reports pertaining to the identification of marketing of tobacco.
    Marketing year. (1) For flue-cured tobacco, the period beginning 
July 1 of the current year and ending June 30 of the following year.
    (2) For kinds of tobacco other than flue cured. The period beginning 
October 1 of the current year and ending September 30 of the following 
year.
    New farm. A farm for which an acreage allotment or marketing quota 
is established for the current year from the national reserve that is 
set aside for such purpose from the national acreage allotment or 
marketing quota established for the kind of tobacco.
    Nonauction sale. Any marketing of tobacco other than at an auction 
sale.
    Old farm. (1) For burley tobacco. A farm which had burley tobacco 
planted or considered planted in one or more years of the base period.
    (2) For tobacco other than burley. A farm on which there is tobacco 
history acreage in one or more years of the base period.
    Overmarketings. The pounds by which the pounds marketed exceed the 
effective farm marketing quota.
    Planted or considered planted credit. For burley tobacco, credit 
that is assigned in the current year for a farm with an established farm 
marketing quota when:

[[Page 106]]

    (1) Burley tobacco is planted on the farm.
    (2) Burley tobacco could not be planted because of a natural 
disaster.
    (3) Quota is:
    (i) Leased and transferred from the farm, or
    (ii) In the eminent domain pool.
    (4) A restrictive lease on federally owned land is in effect 
prohibiting tobacco production.
    (5) Effective quota is zero because of overmarketings or a violation 
of regulations, or
    (6) Acreage is converted from production of burley tobacco in 
accordance with part 704 of this chapter.
    Pound. The amount of tobacco which, if weighed in its unstemmed form 
and in the condition in which it is normally marketed by a producer, 
would equal 1 pound standard weight.
    Preceding year. The calendar year immediately preceding the year for 
which the allotments and quotas are established, or the marketing year 
preceding the marketing year for which the allotments and quotas are 
established.
    Preliminary farm marketing quota. For burley tobacco, the farm 
marketing quota for the preceding year.
    Preliminary farm yield. For flue-cured tobacco, the yield determined 
for a farm as provided in Sec. 723.203 of this part.
    Processed, Processing. A method of preparing green weight tobacco 
for storage in which the tobacco may be redried, stemmed, tipped or 
threshed and the resulting product packed in a container.
    Production record. A record prepared by a processor to account for 
the processing of tobacco.
    Quota adjustments. For burley tobacco:
    (1) Temporary. Adjustments for:
    (i) Effective undermarketings,
    (ii) Overmarketings from any prior year,
    (iii) Reapportioned quota from quota released from farms in the 
eminent domain pool,
    (iv) Quota transferred by lease or by owner,
    (v) Pounds in violation of the regulations for a prior year, and
    (vi) Pounds reduced from the burley tobacco quota during the current 
year in accordance with part 704 of this chapter.
    (2) Permanent. Adjustments for:
    (i) Old farm adjustment from reserve,
    (ii) Pounds of quota transferred to the farm from the eminent domain 
pool,
    (iii) Pounds of quota transferred to or from the farm by sale,
    (iv) Pounds of quota transferred to the farm from the forfeiture 
pool, or
    (v) Pounds of forfeited quota.
    Resale. The disposition by sale, barter, exchange, or gift between 
living persons, of tobacco which has been marketed previously.
    Sale. The first marketing of tobacco on which the gross amount of 
the sale price therefore has been or could be readily determined.
    Sale date. The date on which the gross amount of the sale price of 
tobacco is determined.
    Sale day. The period at the end of which the warehouse operator 
bills to buyers the tobacco purchased by them during such period.
    Scrap tobacco. The residue which accumulates in the course of 
preparing tobacco for market, consisting chiefly of portions of tobacco 
leaves and leaves of poor quality.
    Shared in the risk of production. For burley or flue-cured tobacco, 
involvement in the production of the respective kind of tobacco by a 
person who:
    (1) Invests in the production of a crop of the respective kind of 
tobacco in an amount which is not less than 20 percent of the proceeds 
of the sale of the crop;
    (2) Depends solely on a share of the proceeds from the marketing of 
the tobacco for the return on the investment;
    (3) Waits until such crop of tobacco is marketed to receive any 
return on the investment; and
    (4) Maintains records, for a period of 3 years after the end of the 
marketing year in which the tobacco is sold, which may be used to verify 
that the provisions of this definition have been met.
    Strip, scrap, stem. Types of products resulting from processing of 
tobacco.
    Suspended sale. Any marketing of tobacco at auction for which the 
sale is not identified by a producer marketing card or a dealer's 
identification card by

[[Page 107]]

the end of the sale day on which such marketing occurred.
    Tillable cropland. With respect to flue-cured tobacco only, cropland 
(excluding orchards, vineyards, land devoted to trees, and land being 
prepared for non-agricultural uses) which the county FSA committee 
determines can be planted to crops without unusual preparation or 
cultivation.
    Tobacco. Kinds of tobacco that are subject to marketing quotas as 
follows: Burley tobacco, (type 31); Flue-cured tobacco, (types 11, 12, 
13, and 14); Fire-cured tobacco (types 21, 22, and 23); Dark air-cured 
tobacco (types 35 and 36); Virginia sun-cured tobacco (type 37); Cigar 
filler (type 46); and Cigar-filler and binder tobacco (types 42, 43, 44, 
54, and 55) as classified by the Agricultural Marketing Service at part 
30 of this title.
    Tobacco available for marketing. All tobacco produced on a farm 
which has not been marketed and which has not been disposed of so that 
it cannot be marketed.
    Tobacco in the form not normally marketed by producers. Tobacco 
leaves, stems, strips, scrap or parts thereof that are the result of 
green tobacco having been redried, stemmed, tipped, threshed or 
otherwise processed.
    Tobacco pickings. The residue which accumulates in the course of 
processing tobacco prior to the redrying of such tobacco, consisting of 
scrap, stems, portions of leaves, and leaves of poor quality shall be 
considered to be tobacco in the form not normally marketed by producers.
    Trucker. A person who trucks, or who otherwise hauls tobacco for a 
producer, or for any other person.
    Undermarketings. For burley or flue-cured tobacco, the actual 
undermarketings are the pounds by which the effective farm marketing 
quota is more than the pounds of the respective kind of tobacco 
marketed, and the effective undermarketings are the smaller of actual 
undermarketings or the sum of the previous year's farm marketing quota 
plus pounds of quota temporarily transferred to the farm for the 
previous year. However, with respect to the 1989 crop, actual 
undermarketings are the number of pounds by which the effective farm 
marketing quota is more than the sum of the number of pounds of tobacco 
marketed and number of pounds for which a disaster payment was made on 
the 1989 crop of tobacco under part 1477 of this title.
    Warehouse operator. A person who engages in the business of 
conducting a sale of tobacco at public auction.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21441, May 9, 1991; 57 
FR 43581, Sept. 21, 1992; 63 FR 11582, Mar. 10, 1998]



Sec. 723.105  Extent of determinations, computations, and rule for rounding fractions.

    (a) General. All rounding herein shall be in accordance with the 
provisions of part 793 of this chapter.
    (b) Allotments. Farm acreage allotments shall be determined in 
hundredths of acres.
    (c) Percent excess. The percentage of excess tobacco available for 
marketing from a farm, hereinafter referred to as the ``percent 
excess,'' shall be determined in tenths of a percent.
    (d) Converted rate of penalty. For tobacco other than burley or 
flue-cured, the amount of penalty per pound upon marketings of tobacco 
subject to penalty, hereinafter referred to as the ``converted rate of 
penalty,'' shall be determined in tenths of a cent.
    (e) Percentage reduction for violation. A percentage of reduction in 
an allotment due to a violation shall be determined in tenths of a 
percent.
    (f) Yields and quotas. Yields and quotas shall be determined in 
whole pounds.



Sec. 723.106  Location of farm for administrative purposes.

    The location of a farm in a county for administrative purposes shall 
be as provided in part 718 of this chapter.



Secs. 723.107-723.110  [Reserved]



Sec. 723.111  Flue-cured (types 11-14) tobacco.

    (a) The 1993-crop national marketing quota is 891.8 million pounds.
    (b) The 1994-crop national marketing quota is 802.6 million pounds.
    (c) The 1995-crop national marketing quota is 934.6 million pounds.
    (d) The 1996-crop national marketing quota is 873.6 million pounds.

[[Page 108]]

    (e) The 1997-crop national marketing quota is 973.8 million pounds.
    (f) The 1998-crop national marketing quota is 807.6 million pounds.
    (g) The 1999-crop national marketing quota is 666.2 million pounds.

[58 FR 11962, Mar. 2, 1993, as amended at 59 FR 6866, Feb. 14, 1994; 60 
FR 22460, May 8, 1995; 61 FR 37673, July 19, 1996; 62 FR 24800, May 7, 
1997; 63 FR 55938, Oct. 20, 1998; 64 FR 66718, Nov. 30, 1999]



Sec. 723.112  Burley (type 31) tobacco.

    (a) The 1993-crop national marketing quota is 603.0 million pounds.
    (b) The 1994-crop national marketing quota is 542.7 million pounds.
    (c) The 1995-crop national marketing quota is 549.0 million pounds.
    (d) The 1996-crop national marketing quota is 633.8 million pounds.
    (e) The 1997-crop national marketing quota is 704.5 million pounds.
    (f) The 1998-crop national marketing quota is 637.8 million pounds.

[58 FR 36859, July 9, 1993, as amended at 59 FR 22725, May 3, 1994; 60 
FR 27868, May 26, 1995; 61 FR 50425, Sept. 26, 1996; 62 FR 30230, June 
3, 1997; 63 FR 55940, Oct. 20, 1998]



Sec. 723.113  Fire-cured (type 21) tobacco.

    (a) The 1993-crop national marketing quota is 1.975 million pounds.
    (b) The 1994-crop national marketing quota is 2.15 million pounds.
    (c) The 1995-crop national marketing quota is 1.95 million pounds.
    (d) The 1996-crop national marketing quota is 1.97 million pounds.
    (e) The 1997-crop national marketing quota is 2.395 million pounds.
    (f) The 1998-crop national marketing quota is 2.725 million pounds.

[58 FR 36857, July 9, 1993, as amended at 59 FR 27220, May 26, 1994; 60 
FR 38234, July 26, 1995; 61 FR 63702, Dec. 2, 1996; 62 FR 43922, Aug. 
18, 1997; 64 FR 15295, Mar. 31, 1999]



Sec. 723.114  Fire-cured (types 22-23) tobacco.

    (a) The 1993-crop national marketing quota is 38.2 million pounds.
    (b) The 1994-crop national marketing quota is 40.4 million pounds.
    (c) The 1995-crop national marketing quota is 39.8 million pounds.
    (d) The 1996-crop national marketing quota is 40.6 million pounds.
    (e) The 1997-crop national marketing quota is 43.4 million pounds.
    (f) The 1998-crop national marketing quota is 44.6 million pounds.

[58 FR 36857, July 9, 1993, as amended at 59 FR 27220, May 26, 1994; 60 
FR 38234, July 26, 1995; 61 FR 63702, Dec. 2, 1996; 62 FR 43922, Aug. 
18, 1997; 64 FR 15295, Mar. 31, 1999]



Sec. 723.115  Dark air-cured (types 35-36) tobacco.

    (a) The 1993-crop national marketing quota is 11.16 million pounds.
    (b) The 1994-crop national marketing quota is 10.6 million pounds.
    (c) The 1995-crop national marketing quota is 9.6 million pounds.
    (d) The 1996-crop national marketing quota is 9.2 million pounds.
    (e) The 1997-crop national marketing quota is 9.88 million pounds.
    (f) The 1998-crop national marketing quota is 11.15 million pounds.

[58 FR 36857, July 9, 1993, as amended at 59 FR 27220, May 26, 1994; 60 
FR 38234, July 26, 1995; 61 FR 63702, Dec. 2, 1996; 62 FR 43922, Aug. 
18, 1997; 64 FR 15295, Mar. 31, 1999]



Sec. 723.116  Sun-cured (type 37) tobacco.

    (a) The 1993-crop national marketing factor is 128,000 pounds.
    (b) The 1994-crop national marketing quota is 131,000 pounds.
    (c) The 1995-crop national marketing quota is 130,000 pounds.
    (d) The 1996-crop national marketing quota is 148,000 pounds.
    (e) The 1997-crop national marketing quota is 156,400 pounds.
    (f) The 1998-crop national marketing quota is 163,000 pounds.

[58 FR 36857, July 9, 1993, as amended at 59 FR 27220, May 26, 1994; 60 
FR 38234, July 26, 1995; 61 FR 63702, Dec. 2, 1996; 62 FR 43922, Aug. 
18, 1997; 64 FR 15295, Mar. 31, 1999]



Sec. 723.117  Cigar-filler and binder (types 42-44 and 53-55) tobacco.

    (a) The 1993-crop national marketing quota is 14 million pounds.
    (b) The 1994-crop national marketing quota is 9.3 million pounds.
    (c) The 1995-crop national marketing quota is 9.0 million pounds.
    (d) The 1996-crop national marketing quota is 8.9 million pounds.
    (e) The 1997-crop national marketing quota is 8.4 million pounds.

[[Page 109]]

    (f) The 1998-crop national marketing quota is 6.63 million pounds.

[58 FR 36857, July 9, 1993, as amended at 59 FR 27220, May 26, 1994; 60 
FR 38234, July 26, 1995; 61 FR 63702, Dec. 2, 1996; 62 FR 43922, Aug. 
18, 1997; 64 FR 15295, Mar. 31, 1999]



Sec. 723.118  Cigar-filler (type 46) tobacco.

    (a) The 1993-crop national marketing quota is zero pounds.
    (b) The 1994-crop national marketing quota is zero pounds.
    (c) The 1995-crop national marketing quota is 0.0 million pounds.
    (d) There shall be no national or individual marketing quotas for 
the 1996 and subsequent marketing years for this type (46).

[58 FR 36857, July 9, 1993, as amended at 59 FR 27220, May 26, 1994; 60 
FR 38234, July 26, 1995; 61 FR 63702, Dec. 2, 1996]



Secs. 723.119-723.121  [Reserved]



     Subpart B--Allotments, Quotas, Yields, Transfers, Release and 
           Reapportionment, History Acreages, and Forfeitures



Sec. 723.201  Determination of preliminary farm acreage allotments and preliminary farm marketing quotas.

    (a) Flue-cured tobacco. A preliminary farm acreage allotment shall 
be determined for the current year for each farm which has flue-cured 
tobacco history acreage for the base period. The preliminary farm 
acreage allotment shall be the same as the farm acreage allotment 
established for the preceding year.
    (b) Burley tobacco. The preceding year's farm marketing quota shall 
be the current year's preliminary farm marketing quota for each old farm 
except that the preliminary farm marketing quota shall be zero if:
    (1) The farm or all of cropland has gone out of agricultural 
production and eminent domain procedure of part 718 of this chapter does 
not apply.
    (2) Quota that was pooled under the provisions of part 718 of this 
chapter has been canceled.
    (3) A new farm quota that was established in a prior year is 
canceled.
    (4) There was no acreage of burley tobacco planted or considered 
planted for any year of the base period.
    (5) All the cropland on the farm has been determined by the county 
FSA committee to be no longer suitable for the production of a crop and 
provisions of part 704 of this chapter do not apply.
    (6) Beginning with the 1994 crop year there was no acreage of burley 
tobacco planted or considered planted in 2 out of the 3 immediate 
preceding years.
    (c) Kinds of tobacco other than flue-cured and burley. A preliminary 
farm acreage allotment shall be determined for each farm which has 
tobacco history acreage, as established under paragraph Sec. 723.218 of 
this part in the base period. If the history acreage for the previous 
year is the same as the basic allotment, the preliminary allotment shall 
be the same as the previous year's basic allotment. Otherwise, the 
preliminary allotment shall be the simple average of the sum of the 
basic allotment and history acreage for the preceding year.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21441, May 9, 1991]



Sec. 723.202  Determining farm acreage allotment, except for flue-cured tobacco.

    With respect to each kind of tobacco, the preliminary allotments 
determined for all old farms shall be adjusted uniformly so that the 
total of such allotments for old farms plus the reserve acreage 
available for establishing new farm allotments, adjusting inequities in 
acreage allotments for old farms, and for correcting errors in old farm 
allotments shall not exceed the national acreage allotment established 
for such kind of tobacco.



Sec. 723.203  Determination of flue-cured tobacco preliminary farm yields.

    (a) Old farms. The preliminary farm yield for a flue-cured tobacco 
old farm for the current year shall be determined as follows:
    (1) Farm having preliminary farm acreage allotment. The preliminary 
farm yield established for the farm shall be the same preliminary farm 
yield as was in effect for the preceding year.
    (2) Farm not having preliminary farm acreage allotment. The 
preliminary farm yield shall be determined by dividing the farm yield by 
the national yield factor.

[[Page 110]]

    (b) New Farms. The preliminary farm yield for a new farm shall be 
determined by dividing the farm yield determined in accordance with 
Sec. 723.204 of this part for such farm by the national yield factor 
applicable for the year in which the new farm allotment was established.



Sec. 723.204  Determination of farm yields and normal yields.

    (a) Flue-cured tobacco. The farm yield for an old farm shall be 
determined by multiplying the preliminary farm yield, if the farm has 
such a yield, by the national yield factor for the current year. The 
farm yield for new farms and old farms that do not have a preliminary 
yield shall be that yield, which the county FSA committee determines for 
the farm taking into consideration:
    (1) The soil and other physical factors affecting the production of 
tobacco on the farm, and
    (2) The farm yields determined for other farms on which the soil and 
other physical factors affecting the production of tobacco are similar.
    (b) Burley tobacco. The farm yield for a farm on which a farm yield 
has been established shall be the same in the current year as the farm 
yield previously established for the farm. For any farm not having a 
previously established yield, the county FSA committee shall establish a 
yield based on similar farms having a farm yield; however, such yield 
shall not exceed 3500 pounds.
    (c) All kinds of tobacco except burley and flue-cured. The normal 
yield for a farm shall be that yield which the county FSA committee 
determines is normal for the farm taking into consideration the yields 
obtained on the farm during any of the years of the base period for 
which data are available, the soil and other physical factors affecting 
the production of tobacco on the farm, and the yields obtained on other 
farms in the locality which are similar with respect to such factors. 
The normal yield first determined for a farm for any year in accordance 
with the foregoing provision shall serve as the normal yield for the 
farm for all purposes in connection with the tobacco marketing program 
for the year for which such normal yield is determined.



Sec. 723.205  Determination of farm acreage allotments and effective farm acreage allotments for flue-cured tobacco.

    (a) Farm acreage allotments. The farm acreage allotment shall be 
determined by multiplying the national acreage factor as determined by 
the Secretary for the current year by the preliminary farm acreage 
allotment for the current year and adjusting the result by:
    (1) Upward adjustment. Adding the:
    (i) Acreage approved in accordance with the provisions of 
Sec. 723.210 of this part in order to adjust for an inequity or to 
correct an error;
    (ii) Acreage determined by dividing the pounds of quota which are 
purchased in the current year by the farm yield; and
    (iii) Acreage determined by dividing the pounds of forfeited quota 
which are approved for adjustment from the forfeiture pool by the farm 
yield.
    (2) Downward Adjustment. Subtracting the:
    (i) Acreage determined by dividing the pounds of quota sold in the 
current year by the farm yield; and
    (ii) Acreage of forfeited allotment.
    (b) Effective farm acreage allotment. The effective farm acreage 
allotment for the current year shall be determined by dividing by the 
effective farm marketing quota by the farm yield.



Sec. 723.206  Determining farm marketing quotas and effective farm marketing quotas.

    (a) Burley tobacco. The burley farm marketing quota shall be 
determined by multiplying the national factor as determined by the 
Secretary for the current year by the preliminary farm marketing quota 
for the current year and adjusting the result for permanent quota 
adjustments.
    (b) Flue-cured tobacco. The flue-cured farm marketing quota shall be 
determined by multiplying the farm acreage allotment by the farm yield.
    (c) Burley or flue-cured tobacco. The effective farm marketing quota 
shall be the farm marketing quota adjusted by:
    (1) Upward adjustments. Adding the:

[[Page 111]]

    (i) Effective undermarketings from the preceding marketing year,
    (ii) The pounds of quota which are temporarily transferred to the 
farm in the current year.
    (2) Downward adjustments. Subtracting the pounds of quota that are:
    (i) Overmarketed from the preceding marketing year,
    (ii) Overmarketed from any year before the preceding year but have 
not been subtracted when determining the effective farm marketing quota 
in a prior year.
    (iii) Temporarily transferred from the farm in the current year.
    (iv) Reduced in the current year as a result of a violation in a 
prior year as provided for in Sec. 723.408 of this part.
    (v)  [Reserved]
    (vi) Determined, for flue-cured tobacco only, by multiplying the 
farm yield by the acres reduced from the flue-cured tobacco acreage 
allotment during the current year in accordance with part 704 of this 
chapter.
    (vii) For burley tobacco only, designated for reduction under a 
Conservation Reserve Program contract in accordance with part 704 of 
this chapter.



Sec. 723.207  Determination of acreage allotments or burley marketing quotas for new farms.

    (a)(1) All kinds of tobacco. The acreage allotment or burley 
marketing quota established in any crop year for all new farms shall not 
exceed the national acreage or poundage, as applicable, reserved for new 
farms for the respective kind of tobacco. The acreage allotment or 
burley marketing quota for a new farm shall be that acreage or burley 
marketing quota which the county FSA committee, with the approval of the 
State FSA committee, determines is fair and reasonable for the farm, 
taking into consideration the past tobacco experience of the farm 
operator; the land, labor, and equipment available for the production of 
tobacco; crop rotation practices; and the soil and other physical 
factors affecting the production of tobacco. Such acreage allotments or 
burley marketing quota shall not exceed 50 percent (75 percent for 
Cigar-filler and Binder tobacco) of the average of the applicable 
acreage allotments or burley marketing quotas established for at least 
two but not more than five old farms which are similar with respect to 
land, labor; and equipment available for the production of tobacco; crop 
rotation practices; and the soil and other physical factors affecting 
the production of tobacco; and with respect to flue-cured tobacco 
acreage allotments, shall not exceed one acre.
    (2) Kinds of tobacco, except burley and flue-cured. If the acreage 
planted to tobacco on a new tobacco farm is less than 75 percent of the 
tobacco acreage allotment otherwise established for the farm pursuant to 
this section, such allotment shall be automatically reduced to the sum 
of the tobacco planted acreage and the prevented planted tobacco acreage 
as determined under part 718 of this chapter for the farm.
    (b)(1) Written application. The farm operator must file an 
application for a new farm acreage allotment or marketing quota at the 
office of the county FSA committee where the farm is administratively 
located on or before February 15 of the year for which the new farm 
acreage allotment or marketing quota is requested.
    (2) Operator requirements. The operator requesting a new farm 
acreage allotment or marketing quota must be the sole owner of the farm, 
except for Cigar-filler and Binder tobacco, the operator need not own 
the farm. The farm operator shall not own or have an ownership interest 
in or operate any other farm in the United States for which a tobacco 
allotment or quota for any kind of tobacco is established for the 
current year.
    (3) Availability of equipment and facilities. The operator must own, 
or have readily available, adequate equipment and any other facilities 
of production necessary to the production of tobacco on the farm.
    (4)(i) Income from farming. The operator must expect to obtain 
during the current year more than 50 percent of the producer's income 
from the production of agricultural commodities or products. The 
following shall be considered in computing the operator's income:
    (A) Farm income. Income from farming shall include the estimated 
return

[[Page 112]]

from home gardens, livestock and livestock products, poultry, or other 
agricultural products produced for home consumption or other use on the 
farm(s). The estimated return from the production of the requested new 
farm allotment or quota shall not be included.
    (B) Non-farm income. Non-farming income shall include but not 
limited to salaries, commissions, pensions, social security payments, 
and unemployment compensation.
    (C) Spousal income. The spouse's farm and non-farm income shall be 
included in the computation.
    (ii) Operator a partnership. If the operator is a partnership, each 
partner must expect to obtain more than 50 percent of their current year 
income from farming.
    (iii) Operator a corporation. If the operator is a corporation, it 
must have no other major corporate purpose other than ownership or 
operation of the farm(s). Farming must provide its officers and general 
manager with more than 50 percent of their expected income. Salaries and 
dividends from the corporation shall be considered as income from 
farming.
    (iv) Special provisions for low-income farmers. The county FSA 
committee may waive the income provisions in this section provided they 
determine that the farm operator's income, from both farm and non-farm 
sources is so low that it will not provide a reasonable standard of 
living for the operator and the operator's family, and a State FSA 
committee representative approves such action. In making their 
determination, the county FSA committee shall consider such factors as 
size and type of farming operations, estimated net worth, estimated 
gross family income, estimated family off-farm income, number of 
dependents, and other factors affecting the individual's ability to 
provide a reasonable standard of living.
    (5) Experience. The operator must have had experience in producing, 
harvesting, and marketing the kind of tobacco requested. Such experience 
must have been gained by being a sharecropper, tenant, or farm operator 
(bona fide tobacco production experience gained by a person as a member 
of a partnership shall be accepted as experience gained in meeting this 
requirement) during at least 2 of the 5 years immediately preceding the 
year for which the new farm allotment is requested. The experience must 
have been gained on a farm having a tobacco allotment for such years for 
the kind of tobacco requested in the application. However, for Cigar-
filler and binder tobacco only, the operator must have experience in any 
prior year in the production of tobacco as a farm owner, farm operator, 
sharecropper, tenant, warehouse operator, or laborer on a farm which 
produced Cigar-filler and binder tobacco.
    (6) Operator has not sold or forfeited allotment. For flue-cured 
tobacco only, during the current or the 4 preceding years, the operator 
must not have sold or forfeited any flue-cured tobacco allotment from 
any farm.
    (c) Eligibility requirements for the farm. A new farm acreage 
allotment or marketing quota may be established if each of the following 
conditions is met:
    (1) Current allotment or quota. The farm must not have on the date 
of approval of a new farm acreage allotment, an allotment or quota for 
any kind of tobacco.
    (2) Availability of land, type of soil, and topography. The 
available land, type of soil, and topography of the land on the farm 
must be suitable for tobacco production. Also, continuous production of 
tobacco must not result in an undue erosion hazard.
    (3) Eminent domain acquisition. A farm which includes land acquired 
by an agency having the right of eminent domain for which the entire 
tobacco allotment was pooled pursuant to part 718 of this chapter, which 
is subsequently returned to agricultural production shall not be 
eligible for a new farm allotment or marketing quota for a period of 5 
years from the date the former owner was displaced.
    (4) Farm includes land previously having a tobacco acreage 
allotment. A farm which includes land which has no tobacco allotment 
because the owner did not designate an allotment for such land when the 
parent farm was reconstituted pursuant to part 718 of this chapter shall 
not be eligible for a new farm acreage allotment for a period of

[[Page 113]]

5 years beginning with the year in which the reconstitution became 
effective.
    (5) Entire quota sold. A new farm tobacco acreage allotment may not 
be established for a farm if, during the current year or the 4 preceding 
years, the farm was constituted as any part of a farm for which an 
acreage allotment or marketing quota had been established and for which 
the current or a former owner sold or permanently transferred all of the 
tobacco acreage allotment or marketing quota.
    (d) False information. Any new farm acreage allotment or marketing 
quota which was determined by the county FSA committee on the basis of 
incomplete or inaccurate information knowingly furnished by the 
applicant, shall be canceled by the county FSA committee as of the date 
the allotment or quota was established. When incomplete or inaccurate 
information was unknowingly furnished by the applicant, the allotment or 
quota shall be canceled effective for the current crop year.
    (e) Failure to plant. A new farm acreage allotment or marketing 
quota shall be reduced to zero if no tobacco is planted on the farm the 
first year.



Sec. 723.208  Determination of acreage allotments, marketing quotas, and yields for divided farms.

    (a) Flue-cured tobacco. The farm acreage allotment for the divided 
farm shall be divided pursuant to the provisions of part 718 of this 
chapter. History acreages and other basic data shall be apportioned 
among the divided tracts as provided in part 718 of this chapter.
    (b) Burley tobacco. (1) Division of farm marketing quota. The farm 
marketing quota for the divided farm shall be divided according to part 
718 of this chapter. Other basic data shall be apportioned among the 
resulting farms in the same proportion as the farm marketing quota.
    (2) Divided burley tobacco farms with less than 1,000 pounds of 
quota. If a farm is divided through reconstitution and the burley 
tobacco poundage quota which transfers with the resulting farms receive 
less than 1,000 pounds of quota, the owners of such farms shall take 
action by July 1 of the current crop year to increase the quota to a 
minimum of 1,000 pounds or the quota shall be reduced to zero. The quota 
on the divided farms may be increased by:
    (i) Combining the farm having less than 1,000 pounds with other land 
owned by the same person so that the combined farm has a minimum of 
1,000 pounds of farm marketing quota, or
    (ii) Purchasing a sufficient amount of quota so that the farm has at 
least 1,000 pounds of quota.
    (3) Sale of Quota. If the owners of the divided farms fail to 
increase the quota on such farms to a minimum of 1,000 pounds as 
provided in paragraph (b)(2), the owner must sell the quota by July 1 of 
the current crop year.
    (4) Effective Quota. For the current crop year, the effective farm 
marketing quota on the divided farms shall be considered to be zero for 
leasing and planting purposes until the farm complies with the 1,000 
pound minimum quota.
    (5) Reduction of Quota. The county FSA committee shall reduce the 
quota to zero on the divided farms if the owners of such farms fail to 
take action as provided in paragraph (b)(2) and (3) of this section.
    (6) Farm Exemptions. Farms exempt from the 1,000 pound minimum quota 
limitation are farm divisions:
    (i) among immediate family members,
    (ii) through probate or,
    (iii) when no sale or change in ownership of land occurs or,
    (iv) when the buyer and purchaser can furnish proof acceptable to 
the county FSA committee, in accordance with guidelines provided by the 
Deputy Administrator, that the transaction was finalized prior to 
November 15, 1990.
    (v) when the individual tract or farm with less than 1,000 pounds of 
quota could be combined with another tract or farm with sufficient quota 
to reach 1,000 pounds but for the existence of a production flexibility 
contract on one of the farms.
    (c) Burley and flue-cured tobacco. (1) Tract yield. The tract yield 
for the tracts divided from a parent farm shall be the same as the tract 
yield established for the tracts before the division

[[Page 114]]

of the parent farm. If a tract is divided, the tract yields for the 
resulting tracts shall be the same as the tract yield established for 
the tract before it was divided.
    (2) Single tract farm. If a tract that is divided from a parent farm 
becomes a single tract farm, the tract yield shall become the 
preliminary farm yield and the farm yield for the farm shall be 
determined by multiplying the preliminary farm yield by the national 
yield factor for the current year.
    (3) Carryover tobacco. Where carryover tobacco produced on a parent 
farm is marketed after the effective date of a reconstitution, such 
marketings shall be charged to the divided tracts in the same ratio as 
the marketing quotas are established for the divided tracts or as the 
county FSA committee determines that:
    (i) The proceeds from such marketings are received by the owner or 
operator of one or more of the divided tracts, or
    (ii) The owners of the divided tracts agree.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21441, May 9, 1991; 62 
FR 15600, Apr. 2, 1997]



Sec. 723.209  Determination of acreage allotments, marketing quotas, yields for combined farms; and special tobacco combinations.

    (a) Burley tobacco. The farm yield for a combined burley farm shall 
be the weighted average of the tract yields for the tracts being 
combined. The weighted average shall be the summation of the extensions 
of each respective tract's contribution percentage times the tract's 
yield.
    (b) Flue-cured tobacco. Flue-cured farm acreage allotments, history 
acreages, and other basic data for combined farms shall be computed for 
the base period in accordance with part 718 of this chapter, except that 
the preliminary farm yield for a combined farm shall be the weighted 
average of the tract yields for the tracts that comprise the 
combination. The weighted average shall be the summation of the 
extensions of each respective tract's contribution percentage times the 
tract's yield. The farm yield for the combined farm shall be determined 
by multiplying the preliminary farm yield for the combined farm by the 
national yield factor for the current year.
    (c) Special tobacco combinations. Notwithstanding other provision of 
this title, the Deputy Administrator may, upon proper application and to 
the extent deemed consistent with other obligations, permit farms, with 
respect to tobacco allotments and tobacco quotas, to be considered 
combined for purposes of this part and part 1464 of this title only 
without being combined for other purposes. This allowance shall apply 
for tobacco of all kinds and types and with respect to all farms even if 
one or more of the farms to be combined is the subject of a production 
flexibility contract (PFC) executed in connection with the program 
operated under the provisions of 7 CFR part 1412. Such special, limited 
combinations must otherwise meet the requirements of 7 CFR part 718 for 
combinations, except the signature (consent) requirements of 
Sec. 718.201(a)(2) of that part. The Deputy Administrator may set such 
consent requirements for special farm combinations under this section as 
the Deputy Administrator believes necessary or appropriate. Further, in 
any case in which one of the farms is a PFC farm, none of the land on 
any PFC farm that would have been used for the production of tobacco can 
be used for the production of a ``PFC commodity'' as defined in this 
section. Such permission shall be conditioned upon the agreement of all 
interested parties that land on the PFC allotment or quota farm that 
would have been used for the production of tobacco shall not be used for 
the production of any PFC commodity. In the event that such production 
nonetheless occurs, the special tobacco combination may be made void, 
retroactive to the date of original approval. Such curative action will 
likely result in a finding of excess tobacco plantings and sanctions and 
remedies, which would likely include liability for penalties and other 
sanctions for excess marketings of tobacco. The Deputy Administrator may 
set such other conditions on the combinations as needed or deemed 
appropriate to serve the goals of the tobacco program and the goals of 
the PFC. The term PFC commodity for purposes of this section means 
wheat,

[[Page 115]]

corn, grain sorghum, barley, oats, upland cotton, and rice.

[55 FR 39914, Oct. 1, 1990, as amended at 62 FR 15600, Apr. 2, 1997; 63 
FR 9128, Feb. 24, 1998; 63 FR 26714, May 14, 1998]



Sec. 723.210  Corrections of errors and adjusting inequities in acreage allotments and marketing quotas for old farms.

    (a)(1) General. The allotment or quota for a farm under a long-term 
land use program agreement shall be given the same consideration under 
this section as the allotment or quota for any other old farm. 
Notwithstanding the limitations contained in any other section of this 
part, the farm acreage allotment or marketing quota for each kind of 
tobacco established for an old farm may be increased to correct an error 
or adjust an inequity if the county FSA committee determines, with the 
approval of a representative of the State FSA committee, that the 
increase is necessary to establish an allotment or quota for such farm 
which is fair and equitable in relation to the allotment or quota for 
other old farms in the county in which the farm is located. Correction 
of errors shall be made out of that portion of the national reserve held 
at the national level.
    (2) Burley tobacco. The reserve for adjusting inequities under this 
paragraph will be prorated to States based on the relationship of the 
total of the preliminary farm marketing quotas in each State to the 
national total of preliminary farm marketing quotas.
    (3) All kinds of tobacco except burley tobacco. The reserve for 
adjusting inequities under this paragraph will be prorated to States 
based on the relationship of the total preliminary farm acreage 
allotments in each State to the national total of preliminary farm 
acreage allotments.
    (b) Basis for adjustment. Increases to adjust inequities in acreage 
allotments or marketing quotas shall be made on the basis of the past 
farm acreage, yields, and farm acreage allotments of tobacco, making due 
allowances for failed acreage and acreage prevented from being planted 
because of a natural disaster as determined under part 718 of this 
chapter; land, labor, and equipment available for the production of 
tobacco; crop rotation practices; and the soil and other physical 
factors affecting the production of tobacco. The total of all 
adjustments in old farm allotments or quotas under this paragraph shall 
not exceed the pounds apportioned to the county for such purpose.
    (c)(1) Burley tobacco. Adjustments in a farm marketing quota under 
this paragraph shall become a part of the farm marketing quota.
    (2) Flue-cured tobacco. Acreage apportioned to a farm under this 
section becomes a part of the farm acreage allotment. The farm marketing 
quota for such a farm shall be adjusted by multiplying the adjusted farm 
acreage allotment by the farm yield.
    (3) All other kinds of tobacco. For all other kinds of tobacco, 
acreage approved for a farm under this section becomes a part of the 
farm acreage allotment.
    (d) Making certain adjustments on a common ownership unit basis. 
Notwithstanding other provisions of this section, inequity adjustments 
may be allotted by common ownership unit rather than by farm when it is 
determined by the county FSA committee that the making of the allocation 
on that basis provides greater equity.

[55 FR 39914, Oct. 1, 1990, as amended at 63 FR 11582, Mar. 10, 1998]



Sec. 723.211  Allotments, quotas, and yields for farms acquired under right of eminent domain.

    (a) Determination of acreage allotments and marketing quotas. The 
determination of farm acreage allotments and marketing quotas for farms 
acquired by an agency having the right of eminent domain, the transfer 
of such allotments or quotas to a pool, and reallocation from the pool 
shall be administered as provided in part 718 of this chapter. Where all 
or a part of an allotment or quota is pooled, all or a proportionate 
part of the farm acreage allotment or marketing quota shall be pooled.
    (b) Closing dates. The State FSA committee shall establish, in 
accordance with instructions issued by the Deputy Administrator, a final 
date for:
    (1) Release. Releasing pooled farm acreage allotment or farm 
marketing

[[Page 116]]

quota to the county FSA committee for reapportionment to other farms in 
the county having allotments or quotas for the same kinds of tobacco.
    (2) Request for reapportionment. Filing a request to receive 
reapportioned acreage or quota from the county FSA committee for the 
current year.
    (c) Displaced owner release. The displaced owner of a farm may, not 
later than the final release date established by the State FSA committee 
for the current year, release in writing to the county FSA committee for 
the current year, all or any part of the acreage allotment or burley 
tobacco marketing quota for the farm in a pool under part 718 of this 
chapter for reapportionment for the current year by the county committee 
to other farms in the county having allotments or marketing quotas for 
the same kind of tobacco.
    (d) Reapportionment. The county FSA committee may reapportion, not 
later than 30 days after the final date established by the State FSA 
committee for requesting reapportioned acreage or marketing quota for 
the current year, the released acreage or quota or any part thereof to 
other farms in the county on the basis of the past farm acreage or 
marketings and the past farm acreage allotments or quotas for the same 
kind of tobacco; land, labor, and equipment available for the production 
of such kind of tobacco; crop rotation practices; and soil and other 
physical factors affecting the production of such kind of tobacco.
    (e) Effect of reapportionment. For purposes of establishing future 
farm allotments or quotas, any reapportioned allotment or quota shall 
not be considered as planted on the farm to which the allotment or quota 
was reapportioned.
    (f) Burley or flue-cured tobacco provisions. For burley or flue-
cured tobacco:
    (1) Farm yield. The farm yield for a farm to which a pooled 
marketing quota is transferred shall be determined in accordance with 
instructions issued by the Deputy Administrator.
    (2) Undermarketings or overmarketings. The undermarketings of a farm 
acquired by eminent domain shall be added to the marketing quota for the 
receiving farm and the overmarketings of the acquired farm shall be 
subtracted from the marketing quota of the receiving farm.
    (3) Undermarketings while in eminent domain pool. The pooled quota 
is considered planted while in the pool. Therefore, for the purpose of 
determining undermarketings during the time the quota is pooled, the 
effective quota is considered to be zero.



Sec. 723.212  Time for making reduction of farm marketing quotas or acreage allotments for violation of the marketing quota or acreage allotment regulations for 
          a prior marketing year.

    Any reduction made in a farm acreage allotment or farm marketing 
quota for the current year for any of the reasons provided for in 
Sec. 723.408 of this part, shall be made no later than April 1 of the 
current year in the States of Alabama, Florida, Georgia, North Carolina, 
South Carolina, and Virginia; or May 1 in all other States. If the 
reduction cannot be made by such dates for the current year, the 
reduction shall be made in the farm acreage allotment or farm marketing 
quota next established for the farm, but no later than by corresponding 
dates in a later year. No reduction shall be made in the farm acreage 
allotment or farm marketing quota for any farm for a violation if the 
farm acreage allotment or marketing quota for such farm for any prior 
year was reduced because of the same violation.



Sec. 723.213  Approval of acreage allotments and marketing quotas and notices to farm operators.

    (a) Review by State FSA committee. All farm yields, acreage 
allotments, and marketing quotas shall be determined by the county FSA 
committee of the county in which the farm is located and shall be 
reviewed by a representative of the State FSA committee.
    (b) Notice to farm operator. An official notice of the effective 
farm acreage allotment or farm marketing quota shall be mailed to the 
operator of each farm shown by the records of the county FSA committee 
to be entitled to an allotment or quota. The notice to the operator of 
the farm shall constitute notice to all persons who as operator, 
landlord, tenant, or sharecropper are

[[Page 117]]

interested in the farm for which the allotment or quota is established. 
Insofar as practicable, all notices shall be mailed in time to be 
received prior to the date of any tobacco marketing quota or acreage 
allotment referendum. A copy of such notice containing the date of 
mailing or a printout summary of such data shall be maintained for not 
less than 30 days in a conspicuous place in the county FSA office and 
shall thereafter be kept available for public inspection in the office 
of the county FSA committee. A copy of the notice of acreage allotment 
or marketing quota certified as true and correct shall be furnished to 
any person interested in the farm for which the allotment or quota is 
established.
    (c) Marketing quota erroneous notice. (1) If the official written 
notice of the farm acreage allotment and marketing quota issued for any 
farm erroneously stated an acreage allotment or marketing quota larger 
than the correct effective farm acreage allotment or marketing quota, 
the acreage allotment or marketing quota shown on the erroneous notice 
shall be deemed to be the tobacco acreage allotment or marketing quota 
for the farm for the current year only, if the county FSA committee 
determines (with the approval of the State Executive Director) that the:
    (i) Error was not so gross as to place the operator on notice 
thereof, and
    (ii) Operator, relying upon such notice and acting in good faith, 
materially changes the operator's position with respect to the 
production of the crop.
    (2) Undermarketings and overmarketings for farms for which the 
erroneous notice of marketing quota is applied shall be determined based 
on the correct effective farm marketing quota.
    (3) For purposes of determining history acreage the correct acreage 
allotment shall be used, in determining whether or not 75 percent of the 
allotment has been planted.

[55 FR 39914, Oct. 1, 1990, as amended at 63 FR 11582, Mar. 10, 1998]



Sec. 723.214  Application for review.

    Any producer who is dissatisfied with the farm acreage allotment and 
marketing quota established for the producer's farm may, within 15 days 
after mailing of the official notice of the farm acreage allotment and 
marketing quota, file application in writing with the county FSA office 
to have such allotment and marketing quota reviewed by a review 
committee in accordance with part 711 of this chapter.



Sec. 723.215  Transfer of tobacco farm acreage allotment or farm marketing quota that cannot be planted or replanted due to a natural disaster.

    (a) Designation of counties affected by a natural disaster. The 
State FSA committee shall determine those counties affected by a natural 
disaster (including but not limited to hurricane, rain, flash flood, 
hail, drought, and any other severe weather) which prevents the timely 
planting or replanting of any of the tobacco acreage allotment or 
marketing quota for any farm in the county. The county FSA committee of 
each county affected by the determination shall publicize the 
determination.
    (b) Application for transfer. The owner or operator of a farm in a 
county designated for any year under paragraph (a) of this section may 
file a written application for transfer of tobacco acreage with the farm 
acreage allotment or marketing quota for such year to another farm or 
farms in the same county or in any other nearby county in the same or 
another State if such acreage cannot be planted or replanted because of 
the natural disaster determined for such year. The application shall be 
filed with the county FSA committee for the county in which the farm 
affected by such disaster is located. If the application involves a 
transfer to a nearby county, the county FSA committee for the nearby 
county shall be consulted before action is taken by the county FSA 
committee receiving the application.
    (c)(1) Amount of burley tobacco transfer. The burley quota to be 
transferred shall not exceed the smaller of:
    (i) The effective farm quota established under this part less such 
quota planted to tobacco and not destroyed by the natural disaster, or
    (ii) The quota requested to be transferred.

[[Page 118]]

    (2) Amount of transfer for other than burley tobacco. The allotment 
to be transferred shall not exceed the smaller of:
    (i) The farm allotment established under this part less such acreage 
planted to tobacco and not destroyed by the natural disaster, or
    (ii) The allotment requested to be transferred.
    (d) County FSA committee approval. The county FSA committee shall 
approve the transfer if it finds that:
    (1) All or part of the farm acreage allotment or marketing quota for 
the transferring farm could not be timely planted or replanted because 
of the natural disaster.
    (2) One or more of the producers of tobacco on the transferring farm 
will be a bona fide producer engaged in the production of tobacco on the 
receiving farm and will share in the proceeds of the tobacco.
    (e) Cancellation of transfer. If a transfer is approved under this 
section and it is later determined that the conditions in paragraph (d) 
of this section have not been met, the county FSA committee, or the 
Deputy Administrator may cancel such transfer. Action by the county FSA 
committee to cancel a transfer shall be subject to the approval of the 
State FSA committee or its representative.
    (f) Acreage history credits. Any acreage transferred under this 
paragraph shall be considered for the purpose of determining future 
allotments or quotas to have been planted to tobacco on the farm from 
which such allotment or quota is transferred.
    (g) Closing dates. The closing date for filing applications for 
transfers with the county FSA committee shall be July 15 of the current 
year. Notwithstanding such closing date requirement, the county FSA 
committee may accept applications filed after the closing date upon a 
determination by the county FSA committee that the failure to timely 
file an application was the result of conditions beyond the control of 
the applicant and a representative of the State FSA committee approves 
such determination.



Sec. 723.216  Transfer of tobacco acreage allotment or marketing quota by sale, lease, or owner.

    (a) General. The allotment or quota established for a farm may be 
transferred to another farm to the extent provided for in this section. 
For transfers by sale, common ownership units on a farm may be 
considered to be separate farms. Transfers are not permitted for cigar 
binder (types 54 and 55) tobacco allotments.
    (1) Types of transfers. With respect to:
    (i) Cigar-filler (type 46) and cigar-filler (types 42, 43, and 44), 
tobacco transfers may be by lease only.
    (ii) Flue-cured tobacco, transfers may be by:
    (A) Sale, or
    (B) Lease under certain natural disaster conditions provided in this 
section.
    (iii) Burley tobacco, transfers may be by:
    (A) Lease
    (B) Owner, or
    (C) Sale.
    (iv) Fire-cured, dark air-cured, and Virginia sun-cured tobacco, 
transfers may be by:
    (A) Lease,
    (B) Owner, or
    (C) Sale.
    (2) Transfer agreement. In order to transfer a marketing quota or 
allotment between two eligible farms, including a marketing quota or 
allotment that is pooled in accordance with part 718 of this chapter, 
the transfer must be recorded on Form FSA-375 and:
    (i) Where to file. Filed in the county FSA office which serves the 
county in which the transferring farm is located for administrative 
purposes.
    (ii) Signature-burley tobacco. Signed by, for burley tobacco only:
    (A) Leases. The owner and operator of the transferring farm and the 
owner or operator of the receiving farm. For leases made under the 
disaster provisions of this section, the signature of the owner of the 
transferring farm will not be required if the FSA determines that the 
farm is cash leased for the current crop year and that the owner does 
not share in the crop.

[[Page 119]]

    (B) Sales. The owner of the selling farm and an active burley 
tobacco producer who is the buyer. If the buyer is neither owner nor 
operator of the farm to which the quota will be assigned, the owner or 
operator of the farm must give written consent for the quota to be 
assigned to the farm.
    (C) Owner transfers. The owner of the transferring farm, who also 
must be the owner or operator of the receiving farm.
    (iii) Signature-flue-cured tobacco. Signed by, for flue-cured 
tobacco only:
    (A) Leases. The owner of the transferring farm and the owner or 
operator of the receiving farm. For leases made under the disaster 
provisions of this section, the signature of the owner of the 
transferring farm will not be required if the FSA determines that the 
farm is cash leased for the current crop year and that the owner does 
not share in the crop.
    (B) Sales. The owner of the selling farm and an active flue-cured 
tobacco producer who is the buyer. If the buyer is neither owner nor 
operator of the farm to which allotment and quota will be assigned, the 
owner or operator of the farm must be given written consent for the 
allotment and quota to be assigned to the farm.
    (iv) Signatures--except burley and flue-cured tobacco. Signed by, 
for all kinds of tobacco other than burley and flue-cured tobacco, the 
owner and operator of the transferring farm and the owner or operator of 
the receiving farm.
    (v) Witness. Each person whose signature is required by paragraphs 
(a)(2)(ii), (iii), or (iv) of this section must sign Form FSA-375 in the 
presence of a State or county FSA committee member or employee who shall 
sign Form FSA-375 as a witness, except that when both the owner and the 
operator of a transferring farm must sign, such witness is required for 
the signature of either the owner or operator, but not both. If such 
signatures cannot be witnessed in the county FSA office where the farm 
is administratively located, they may be witnessed in any State or 
county FSA office convenient to the owner or operator's residence. The 
requirement that signatures be witnessed for producers that are ill, 
infirm, reside in distant areas, or are in similar hardship situations 
or may be unduly inconvenienced may be waived provided the county FSA 
office mails Form FSA-375 for the required signatures;
    (b) Effective date. In order for the transfer to be effective for 
the current year, the Form FSA-375 shall be filed:
    (1) When to file--burley tobacco. For burley tobacco:
    (i) On or before July 1 of the current year, except as provided in 
paragraph (b)(1)(ii) of this section. An agreement to transfer quota by 
lease may be considered to have been filed on July 1 of the current year 
if such transfer agreement is filed not later than the end of the 
marketing year that begins during the current year and the county FSA 
committee, with the concurrence of the State FSA committee, determines 
that on or before July 1 of the current year the lessee and lessor 
agreed to such lease and transfer of quota and the failure to file such 
transfer agreement did not result from gross negligence on the part of 
any party to such lease and transfer.
    (ii) After July 1 of the current crop year and before February 16 of 
the following calendar year when the transfer is by lease and the 
transferring farm has suffered a loss of production of burley tobacco 
due to hail, drought, excessive rain, wind, tornado, or other natural 
disasters as determined by the Deputy Administrator.
    (2) When to file--flue-cured tobacco. For flue-cured tobacco:
    (i) On or before June 15 if the transfer is by sale.
    (ii) After June 30 and on or before November 15 for a transfer by 
lease when the transferring farm has suffered a loss of production of 
flue-cured tobacco due to drought, excessive rain, hail, wind, tornado, 
or other natural disasters as determined by the Deputy Administrator.
    (3) When to file--except burley and flue-cured tobacco. For all 
other kinds of tobacco, by the date established by the State FSA 
committee, except that a lease shall be effective if the county FSA 
committee, with the approval of a State FSA committee representative, 
finds that the producer was prevented from timely filing the transfer 
agreement due to reasons beyond the control of the producer.

[[Page 120]]

    (c) Approval or disapproval. A transfer agreement shall not be 
approved before the period for filing an application for review of the 
initial notice of allotment or quota has expired. The county FSA 
committee or its designee shall approve each transfer agreement that 
meets the eligibility requirements of this section. The county FSA 
committee shall disapprove any transfer agreement that does not meet the 
eligibility requirement of this section. Any approval or disapproval of 
a transfer agreement shall to the extent possible be made within 30 days 
after the transfer agreement is filed with the county FSA committee 
unless additional time is required as the result of conditions beyond 
the control of the county FSA committee. However;
    (1) Burley tobacco. If an agreement is filed after July 1 which 
provides for the sale of quota, a transfer agreement shall not be 
approved until the next year's quota is computed for the selling farm. 
In addition, if marketing quota referendum will be conducted to 
determine whether or not quotas will be in effect for the crop, a 
transfer agreement shall not be approved until the Secretary announces 
that quotas have been approved by referendum.
    (2) Flue-cured tobacco. If an agreement is filed after June 15 which 
provides for the sale of an allotment and quota, a transfer agreement 
shall not be approved until next year's allotment and quota is computed 
for the selling farm. In addition, if a marketing quota referendum will 
be conducted to determine whether or not quotas will be in effect for 
the crop, a transfer agreement shall not be approved until the Secretary 
announces that quotas have been approved by referendum.
    (d) Time of determination. An approved transfer agreement shall 
become effective for the then current crop year, except that if an 
agreement that is filed after June 15 for the sale of flue-cured tobacco 
quota or after July 1 for the sale of burley tobacco quota, such 
approved agreement shall become effective for the next crop year.
    (e) Burley tobacco. For burley tobacco only:
    (1) Basis for transfer by sale. If the transfer of a quota is by 
sale, the transfer shall be based on part or all of the farm poundage 
quota.
    (2) Basis for transfer by lease or owner. If the transfer of a quota 
is by lease or by the owner, transfer shall be based on a part of or all 
of the effective farm poundage quota.
    (3) Accumulation of quota. A transfer by lease or by owner shall not 
be approved if the county FSA committee determines that the primary 
purpose of the transfer is to accumulate the quota on the farm (i.e., 
alternately transferring to and from the farm for 2 or more years to 
maintain the quota without satisfactory evidence of plans for producing 
the quota on the receiving farm).
    (4) Subleasing. In order to determine whether there is any 
subleasing of a burley farm marketing quota, the current year is divided 
into two periods, the period up to and including July 1, and the period 
after July 1. The county FSA committee shall not approve a transfer 
during either period if the effect would be both a transfer to and from 
the farm during the same period. However, a transfer may be approved 
within any crop year if quota is transferred from a farm for one or more 
years and the farm subsequently is combined with another farm that 
otherwise is eligible to receive quota by lease or by the owner.
    (5) Transferring farm restrictions. An agreement to transfer quota 
from a farm by lease or by the owner shall not be approved:
    (i) Limitation. If the pounds of quota being transferred exceed the 
difference obtained by subtracting from the effective farm marketing 
quota the total pounds of quota purchased and/or reallocated from 
forfeited quota in the current and two preceding years, as adjusted to 
reflect changes in national quota factors which have occurred since each 
respective purchase and/or reallocation of quota. However, this 
provision shall not be applicable to transfer agreements that are filed 
after July 1.
    (ii) New farm. If the farm is a new farm.
    (iii) Reduction pending. If consideration of a marketing quota 
violation is pending which may result in a quota reduction for the farm 
for the current

[[Page 121]]

year. However, if the county FSA committee determines that a decision 
will not be made on the pending case on or before the date specified in 
Sec. 723.212 of this part, a   1-year transfer will be approved if 
otherwise eligible.
    (iv) Filed on or before July 1. Unless the receiving farm is 
administratively located in the same county as the transferring farm. 
However, for 1991 and subsequent crops burley tobacco producers in the 
State of Tennessee shall be permitted to lease and transfer burley 
tobacco quota to any other farm in the State.
    (v) Filed after July 1. If the transfer agreement is filed after 
July 1, unless the county FSA committee in the county in which the farm 
is located for administrative purposes determines that the:
    (A) Farm's expected production of burley tobacco is less than 80 
percent of the farm's effective marketing quota as a result of a flood, 
hail, wind, drought, excessive rain, tornado, or other natural disaster.
    (B) Acreage planted to burley tobacco on the farm was sufficient to 
produce, under average conditions, an amount of tobacco which, when 
added to any carryover tobacco from the previous marketing year, would 
equal the farm's effective farm marketing quota.
    (C) Lessor made reasonable and customary efforts to produce the 
effective farm marketing quota;
    (D) Producers on the farm qualify for price support in accordance 
with the provisions of part 1464 of this title; and
    (E) Receiving farm is administratively located in the same State as 
the transferring farm.
    (vi) Consent of lien holder. For a multiple year transfer, if the 
farm is subject to lien, unless the lien holder agrees in writing to the 
transfer; and
    (vii) Claim for marketing quota penalty. If a claim has been filed 
against the lessor for a tobacco marketing quota penalty and the claim 
remains unpaid; However, this provision shall not apply if the claim is 
paid or the entire proceeds of the lease of the quota are applied 
against the claim and the county FSA committee determines that the 
amount paid for the lease represents a reasonable price for the pounds 
of quota being leased.
    (viii) Forfeiture pending. To the extent that forfeiture of such 
quota is expected to become final before July 1.
    (ix) Divided farms with less than 1,000 pounds of quota. If the farm 
has been divided by reconstitution and the divided farm has a farm 
marketing quota of less than 1,000 pounds subject to being reduced to 
zero pursuant to section 723.208(b).
    (6) Receiving farm restrictions. An agreement to transfer quota to a 
farm by lease or by owner shall not be approved:
    (i) Filed on or before July 1. If the transfer agreement is filed on 
or before July 1:
    (A) Unless the receiving farm is administratively located in the 
same county as the transferring farm and the provisions of paragraph 
(e)(5)(iv) of this section are not applicable.
    (B) If the pounds of quota being transferred to the farm exceed the 
smaller of 30,000 pounds or the difference between the farm marketing 
quota and one-half the result obtained by multiplying the acres of 
cropland on the farm by the farm yield.
    (ii) Filed after July 1. If the transfer agreement is filed after 
July 1, unless the:
    (A) Producers on the farm qualify for price support in accordance 
with the provisions of part 1464 of this title; and
    (B) Pounds of quota to be transferred to the lessee farm do not 
exceed the difference obtained by subtracting the effective farm 
marketing quota (before the filing of the transfer agreement) for the 
lessee farm from the total pounds of tobacco marketed and/or available 
for marketing (based on estimated pounds of tobacco on hand and/or in 
the process of being produced) from the farm in the current year.
    (C) Transferring farm is administratively located in the same State 
as the receiving farm.
    (7) Selling farm restrictions. A transfer of quota from a farm by 
sale shall not be approved:
    (i) Previously purchased and/or reallocated quota. If the farm 
marketing quota was bought and/or reallocated from quota previously 
forfeited as provided in Sec. 723.219(i)(1), and the purchase and/or 
reallocation became effective within the current or any of the three

[[Page 122]]

preceding years; if the purchased and/or reallocated quota was obtained 
from quota purchased and/or reallocated as provided in paragraph (b) of 
this section within the four preceding years. However, this provision 
shall not be applicable if:
    (A) The quota was purchased and/or reallocated to the farm during 
four preceding years; and
    (B) The county FSA committee, with the concurrence of a 
representative of the State FSA committee, determines that the failure 
to permit the sale of quota, to the extent otherwise permitted by this 
section, would cause an undue hardship on the seller and the:
    (1) Sale is in connection with the settlement of an estate which 
includes the farm for which the quota was established;
    (2) Owner of the quota is experiencing financial distress to the 
extent that current year financing is unlikely;
    (3) Owner of the quota is disabled due to health reasons to the 
extent that such person can no longer continue to share in the risk of 
production of the purchased and/or reallocated quota; or
    (4) Owner of the quota is sharing in the risk of production as an 
investing producer and loses resources necessary to produce the crop due 
to reasons beyond such owner's control such as the loss of a tenant or 
sharecropper and a replacement cannot be obtained.
    (ii) Location of farms. Unless both the selling farm and the buying 
farm are administratively located in the same county.
    (iii) Pounds for sale. The pounds transferred by sale shall be based 
on part of all of the farm poundage quota.
    (iv) Reduction pending. If consideration of an indicated marketing 
quota violation is pending which may result in quota reduction for the 
farm for the current year. However, if the county FSA committee 
determines that a decision will not be made on the pending case on or 
before the date specified in Sec. 723.212 of this part, a transfer will 
be approved if otherwise eligible.
    (v) Forfeiture pending. If the agreement for transfer by sale is 
filed subsequent to the final date which is permitted for the sale of 
the quota in order to prevent forfeiture.
    (vi) Claim for marketing quota penalty. If a claim has been filed 
against the seller for a tobacco marketing quota penalty and the claim 
remains unpaid: However, this provision shall not be applicable if the 
claim for such penalty is paid or the entire proceeds of the sale of the 
quota are applied against the claim and the county FSA committee 
determines that the amount paid represents a reasonable selling price 
for the pounds of quota being sold.
    (vii) Consent of lien holder. Requires consent of the lien holder, 
if the farm is subject to a lien, unless the lien holder agrees in 
writing to the transfer. However, consent of a lien holder is not 
required for a transfer of the pounds of quota from a farm for which 
forfeiture is required in accordance with the provisions of 
Sec. 723.219.
    (viii) Quota is subject to an approved Conservation Reserve Program 
Contract. If the quota has been reduced because of an approved 
Conservation Reserve Program contract according to part 704 of this 
chapter unless forfeiture is otherwise required.
    (8) Restrictions on buying farm. A transfer of quota to a farm by 
purchase shall not be approved:
    (i) Active producers. Unless the buyer is an active burley tobacco 
producer.
    (ii) Cropland limitation. If the sum of the pounds of quota being 
transferred exceeds the difference between the farm marketing quota and 
one-half the result obtained by multiplying the acres of cropland on the 
farm by the farm yield.
    (iii) Quota previously sold. If quota was sold from the farm in the 
current or either of the two preceding years.
    (iv) Unless both the buying farm and the selling farm are 
administratively located in the same county.
    (v) Quota limitation. If the sum of the pounds of quota being 
transferred in the current year exceeds the larger of: (A) 30 percent of 
the receiving farm's existing quota, or (B) 20,000 pounds.
    (9) Period of transfer. A transfer by lease or by owner may be for a 
period of one to five years: However, an agreement to transfer quota by 
lease shall be limited to the current crop year if the transfer is filed 
after July 1 in accordance with the natural disaster provisions of this 
section.

[[Page 123]]

    (10) Redetermination of quota after transfer by lease or by the 
owner. After a transfer by lease or by the owner, the effective farm 
marketing quota shall be redetermined for both the transferring farm and 
the receiving farm.
    (11) Apportionment of data-selling farm. The pounds of farm 
marketing quota retained on the selling farm after the sale of quota 
shall be divided by the farm marketing quota established for the selling 
farm before the sale to determine a factor for apportioning farm data. 
The data to be retained on the selling farm shall be determined by 
multiplying the factor by the following data:
    (i) The amount of any overmarketings which have not been subtracted 
when a determination is made of the effective farm marketing quota of 
the selling farm;
    (ii) The pounds of quota which have been transferred from the 
selling farm by lease or by the owner in the current year;
    (iii) The pounds of quota which have been reduced in the current 
year as the result of a marketing quota violation in a prior year;
    (iv) The pounds of quota transferred to the farm by lease or by 
owner in the previous year;
    (v) The previous year's farm marketing quota; and
    (vi) The previous year's effective farm marketing quota.
    (12) Apportionment of data-buying farm. The buying farm's share of 
each respective item of farm data shall be determined by subtracting the 
pounds which are retained on the selling farm for the respective item 
from the pounds which were established for the selling farm for the 
respective item before the current sale of quota. However, the pounds of 
quota transferred from the selling farm by lease or by the owner and/or 
the pounds of quota reduction resulting from a marketing quota violation 
on the selling farm may be apportioned between the farms in accordance 
with a written agreement between the buyer and the seller if the farm 
marketing quota retained on the selling farm is sufficient to satisfy 
the pounds of quota which were transferred by lease or by the owner, the 
pounds of quota which have been reduced as the result of a marketing 
quota violation, and the overmarketings for the farm, if any. The data 
determined in accordance with this paragraph shall he added to any 
previous data for the buying farm.
    (13) Redetermination quota after sale or purchase of quota. After 
adjusting the data in accordance with the provisions of this section, 
the effective farm marketing quota shall be determined for both the 
buying and selling farm.
    (14) Farm division after transfer by lease. If a farm is divided 
after there has been a transfer of a marketing quota to the farm by 
lease, the transferred quota shall be divided in the manner which is 
designated in writing by the lessee. In the absence of a written 
designation, the leased quota shall be apportioned in the same manner as 
the farm marketing quota of the parent farm.
    (15) Multiple year transfer by lease or by owner. The effective farm 
marketing quota on a receiving farm having a multiple-year transfer 
agreement in effect shall be adjusted for each year for which such 
transfer agreement is in effect to reflect any decrease in the national 
quota factor which causes the farm marketing quota established for the 
transferring farm to be less than the pounds of quota which have been 
transferred to the receiving farm.
    (16) Considered planted credit. Considered planted credit shall be 
given to the transferring farm when tobacco quota is transferred from 
the farm by lease or by owner.
    (f) Flue-cured tobacco. For flue-cured tobacco only:
    (1) Location of buying and selling farms. Marketing quota 
transferred by sale must be to a farm administratively located within 
the same county.
    (2) Maximum quota to be transferred by sale. If the transfer is by 
sale, the transfer shall be based on part or all of the farm poundage 
quota. the maximum quota that may be transferred by sale is the farm 
poundage quota.
    (3) Transfer by lease-involvement of outside parties. If the 
transfer is by lease, only the lessor and lessee (or any attorney, 
trustee, bank, or other agent who regularly represents either the lessor 
or lessee in business transactions

[[Page 124]]

unrelated to the production or marketing of tobacco) may be parties to, 
or involved in the arrangements for such transfer. The transfer shall be 
based on a portion or all of the effective farm poundage quota. The 
maximum quota that may be transferred by lease is the effective farm 
poundage quota.
    (4) Lessor farm restrictions. A transfer of quota from a farm by 
lease shall not be approved:
    (i) New farm. If the farm is a new farm.
    (ii) Natural disaster. Unless the county FSA committee in the county 
in which the farm is located for administrative purposes determines that 
the:
    (A)(1) The farm has planted an acreage equal to or more than 90 
percent of the effective farm acreage allotment, or
    (2) In accordance with guidelines issued by the Deputy 
Administrator, the planted acreage of flue-cured tobacco on the farm is 
sufficient to produce, under average conditions, an amount of tobacco 
which, when added to any carryover tobacco from the previous marketing 
year, would equal the farm's effective farm marketing quota;
    (B) Lessor made reasonable and customary efforts to produce the 
effective farm marketing quota;
    (C) Producers on the farm qualify for price support in accordance 
with the provisions of part 1464 of this title; and
    (D) Farm's expected production of flue-cured tobacco is less than 80 
percent of the farm's effective marketing quota as a result of a 
drought, excessive rain, hail, wind, tornado, or other natural disaster 
as determined by the Deputy Administrator.
    (iii) Claim for tobacco marketing quota penalty. If a claim has been 
filed against the lessor for tobacco marketing quota penalty and the 
claim remains unpaid unless the claim is paid or the entire proceeds of 
the lease of the allotment and quota are applied against the claim and 
the county FSA committee determines that the amount of the lease 
represents a reasonable price for the pounds of quota being leased.
    (iv) Located in the same State. Unless the lessor farm is 
administratively located in the same State as the lessee farm.
    (5) Lessee farm restrictions. A transfer of quota to a farm by lease 
shall not be approved:
    (i) Price support eligibility. Unless the producers on the farm 
qualify for price support under the provisions of part 1464 of this 
title; and
    (ii) Limitation. If the pounds of quota to be transferred to the 
lessee farm exceed the difference obtained by subtracting the effective 
farm marketing quota (before the filing of the transfer agreement) for 
the lessee farm from the total pounds of tobacco marketed and/or 
available for marketing (based on estimated pounds of tobacco on hand 
and/or in the process of being produced) from the farm in the current 
year.
    (iii) Located in same State. Unless the lessee farm is 
administratively located in the same State as the lessor farm.
    (6) Selling farm restrictions. A transfer of quota from a farm by 
sale shall not be approved:
    (i) Previously purchased and/or reallocated quota. If a farm 
marketing quota includes quota that was purchased and/or reallocated 
from the quota which has been forfeited and the purchase and/or 
reallocation became effective in the current or any of the three 
preceding years. However, this provision shall not be applicable if:
    (A)(1) The quota being sold was purchased in such period, if 
forfeiture of such quota is required by Sec. 723.220 of this part, and 
the amount of quota being transferred does not exceed the amount of 
quota for which forfeiture otherwise is required in accordance with the 
provisions of Sec. 723.220 of this part; or
    (2) The county FSA committee, with the concurrence of a 
representative of the State FSA committee, determines that the failure 
to approve the sale would cause an undue hardship on the seller and:
    (B) The sale is in connection with the settlement of an estate which 
includes the farm for which the quota was established;
    (C) The owner of the quota is experiencing financial distress to the 
extent that current year financing is unlikely;
    (D) The owner of the quota is disabled due to health reasons to the 
extent that such person can no longer

[[Page 125]]

continue to share in the risk of production of the purchased and/or 
reallocated quota; or
    (E) The owner of the quota is sharing in the risk of production as 
an investing producer and loses resources necessary to produce the crop 
due to reasons beyond such owner's control such as the loss of a tenant 
or share cropper and a replacement cannot be obtained.
    (ii) Reduction pending. If consideration of an indicated violation 
is pending which may result in an allotment and quota reduction for the 
farm for the current year. However, if the county FSA committee 
determines that a decision will not be made on the pending case on or 
before April 1, a transfer may be approved.
    (iii) Forfeiture pending. If the agreement for transfer by sale is 
filed subsequent to the final date which is permitted for the sale of 
the allotment and quota in order to prevent forfeiture.
    (iv) Consent of lien holder. If the farm is subject to a lien unless 
the lien holder agrees in writing to the transfer: However, consent of a 
lien holder is not required for a transfer of the pounds of quota for 
which forfeiture is required in accordance with the provisions of 
Sec. 723.220 of this part.
    (v) Claim for marketing quota penalty. If a claim has been filed 
against the seller for a tobacco marketing quota penalty and the claim 
remains unpaid: However, this provision shall not be applicable if the 
claim for such penalty is paid or the entire proceeds of the sale of the 
allotment and quota are applied against the claim and the county FSA 
committee determines that the amount paid represents a reasonable 
selling price for the pounds of quota being sold.
    (vi) Allotment and quota subject to an approved Conservation Reserve 
Program contract. If the allotment and quota is subject to an approved 
Conservation Reserve Program contract, unless forfeiture otherwise would 
be required in accordance with the provisions of Sec. 723.220 of this 
part.
    (7) Buying farm restrictions. A transfer of quota to a farm by 
purchase shall not be approved:
    (i) Active producer. Unless the buyer is an active flue-cured 
tobacco producer.
    (ii) Tillable cropland limitation. If the sum of the pounds of quota 
being transferred, plus the pounds of quota previously transferred to 
the farm in the current year by lease, exceeds the difference between 
the farm marketing quota and one-half the result obtained by multiplying 
the acres of tillable cropland by the farm yield.
    (iii) Quota previously sold. If the farm owner sold quota from a 
farm during the current or any of two preceding years.
    (iv) Installment payment option. Unless the buyer of the flue-cured 
tobacco acreage allotment and marketing quota has been afforded an 
option to pay for such allotment and quota in two to five equal annual 
installments payable each fall beginning with the fall of the crop year 
in which the transfer becomes effective and such buyer certifies on a 
form prescribed by the Deputy Administrator that such option has been 
made available to the buyer.
    (8) Allotment and quota after transfer by lease. The effective farm 
acreage allotment and the effective farm marketing quota shall be 
determined for both the lessee farm and the lessor farm in accordance 
with the provisions of Secs. 723.205 and 723.206 of this part, 
respectively.
    (9) Apportionment of data after transfer of quota by sale-selling 
farm. The pounds of farm marketing quota retained on the selling farm 
after the sale of quota shall be divided by the farm marketing quota 
established for the selling farm before the sale to determine a factor 
for apportioning farm data for the current year and for the base period. 
The data to be retained on the selling farm shall be determined by 
multiplying the factor by the following data:
    (i) The planted and considered planted acres for the base period;
    (ii) The history acres for the base period;
    (iii) The farm acreage allotment for the current year and for the 
base period;
    (iv) The amount of any overmarketings which have not been subtracted 
when a determination is made

[[Page 126]]

of the effective farm marketing quota of the selling farm;
    (v) The pounds of quota which have been transferred from the selling 
farm by lease in the current year;
    (vi) The acres of allotment which have been reduced in the current 
year as the result of a marketing quota violation in a prior year;
    (vii) The pounds of quota transferred to the farm by lease in the 
previous year;
    (viii) The previous year's farm marketing quota;
    (ix) The previous year's effective farm marketing quota; and
    (x) The previous year's marketings.
    (10) Apportionment of data-buying farm. The pounds of farm marketing 
quota which have been purchased shall be divided by the farm yield for 
the buying farm in order to determine the farm acreage allotment for the 
buying farm. The buying farm's share of other farm data shall be 
determined by subtracting the acres or pounds, as applicable, which are 
retained on the selling farm from the acres or pounds which were 
established for the selling farm before the current sale of quota: 
However, the acres computed for the acres of reduction resulting from a 
marketing quota violation for the buying farm shall be multiplied by a 
factor determined by dividing the farm yield of the selling farm by the 
farm yield of the buying farm in order to determine the acres of 
reduction from the buying farm for the current year. The pounds of quota 
transferred from the selling farm by lease and/or the acres of allotment 
reduction resulting from a marketing quota violation on the selling farm 
may be apportioned between the farms in accordance with a written 
agreement between the buyer and the seller if the farm marketing quota 
retained on the selling farm is sufficient to satisfy the pounds of 
quota which are leased, the pounds of quota which have been reduced as 
the result of a marketing quota violation, and the overmarketings for 
the farm, if any. The data determined in accordance with this paragraph 
shall be added to any previous data for the buying farm.
    (11) Allotment and quota. After adjusting the data in accordance 
with the provisions of this section, the farm acreage allotment, the 
effective farm acreage allotment, and the effective farm marketing quota 
shall be determined for both the buying and the selling farm.
    (12) Effect of price support eligibility. If a lease agreement is 
filed after the farm operator reports the acreage of tobacco on the farm 
in the current year, the effective farm acreage allotment which has been 
determined prior to the approval of the transfer will be used in 
determining price support eligibility for the farm.
    (13) Violation of lease provisions. (i) If, after a lease agreement 
is approved, information is brought to the attention of the county FSA 
committee which indicates that either the lessor or the lessee, or both, 
knowingly filed a false certification with respect to a transfer of 
quota by lease, the county FSA committee shall schedule a hearing, 
notify such person of the time and place of the hearing, and present 
evidence at the hearing with respect to the allegation of false 
certification. If, as a result of the evidence presented, the county FSA 
committee determines that such person knowingly made a false 
certification, the county FSA committee shall notify the person of the 
determination and afford such person 15 days after the mailing of the 
notice to request a review of the determination by a review committee as 
provided for by part 711 of this chapter.
    (ii) If it is determined that the lessor knowingly made a false 
certification, the next flue-cured tobacco acreage allotment and 
marketing quota established for the lessor's farm shall be reduced by 
that percentage which the leased quota was of the total flue-cured 
tobacco farm marketing quota established for the farm in the year of the 
lease.
    (iii) If it is determined that the lessee knowingly made a false 
certification, the lease agreement for purposes of the flue-cured 
tobacco marketing quota program with respect to the lessee's farm shall 
be considered to be null and void as of the date approved by the county 
FSA committee.
    (14) Considered planted credit. Considered planted credit shall be 
given to the lessor farm for the tobacco acreage

[[Page 127]]

allotment which is deducted as the result of the transfer of quota from 
the farm by lease.
    (15) Sale of quota with installment payment option. Notwithstanding 
any other provision of this section the owner of a farm who sells any 
flue-cured tobacco acreage allotment and marketing quota may:
    (i) Negotiate with more than one prospective buyer before selling 
such allotment and quota; or
    (ii) Sell such allotment and quota to any eligible buyer whom such 
owner may select; or
    (iii) Sell such allotment and quota for a single payment; or
    (iv) Include provisions in the agreement of sale to protect the 
seller's interest if the buyer fails to make full payment. Such 
provisions may not include the use of such allotment and quota as 
collateral for purposes of protecting the seller's interest in the 
allotment and quota.
    (v) Flue-cured tobacco acreage allotment and marketing quota 
purchased in accordance with this subparagraph shall not revert to the 
seller's farm but shall remain with the farm to which assigned at the 
time of purchase even though the buyer fails to make full payment to the 
seller for such allotment and quota.
    (g) Burley and flue-cured tobacco. For burley or flue-cured tobacco:
    (1) Carryover tobacco. If tobacco is marketed after the entire farm 
marketing quota of the producing farm has been transferred by sale, the 
tobacco shall be considered as having been marketed on each farm to 
which farm marketing quota was transferred by sale in accordance with a 
transfer agreement filed after June 15 for flue-cured tobacco, or July 1 
for burley tobacco, of the last year in which a farm marketing quota was 
established for the producing farm. Such marketing shall be prorated to 
each farm in proportion to the pounds of farm poundage quota purchased 
by each farm. If there was more than one farm to which a farm marketing 
quota was transferred by sale, the marketing may be assigned to the 
farms in the manner agreed to in writing by each of the buyers of such 
farm marketing quota.
    (2) Cancellation of transfer. A transfer of flue-cured allotment and 
quota, or burley quota, under this section which was approved in error 
or on the basis of incorrect information furnished by the parties to the 
agreement shall be canceled by the county FSA committee. For the purpose 
of determining any overmarketings and undermarketings from the farms, 
and for the purpose of determining eligibility for price support and 
marketing quota penalties, the cancellation shall be effective as of the 
date of approval. However, such cancellation shall not be effective for 
the current marketing year for price support and marketing quota penalty 
purposes if the:
    (i) Transfer approval was made in error or on the basis of incorrect 
information which had been unknowingly furnished by the parties to the 
agreement; and
    (ii) Parties to the transfer agreement were not notified of the 
cancellation before the marketing for the receiving farm exceeded the 
correct effective farm marketing quota.
    (3) Canceled because of fraud. If a transfer of a flue-cured 
allotment and quota, or burley quota, is canceled because of fraud on 
the part of the owner of the transferring farm but no fraud is 
attributable to either the owner or operator of the receiving farm, such 
cancellation shall be effective as of the date of approval of the 
transfer except for purposes of determining eligibility for price 
support and marketing quota penalties for the receiving farm. In such 
case, the overmarketings shall be charged against the farm from which 
the transfer was made if the farm, after any reconstitution which may be 
necessary as a result of fraud, is assigned a flue-cured allotment and 
quota, or burley quota, against which the overmarketings could be 
charged. Otherwise, the overmarketings shall be charged against any 
other farm involved in the fraud having a flue-cured allotment and 
quota, or burley quota, after any reconstitution required by such fraud. 
Notwithstanding the foregoing, any overmarketings on the receiving farm 
which are in excess of the amount of quota involved in the canceled 
transfer shall be charged against the receiving farm.

[[Page 128]]

    (4) Dissolution or revision of a transfer agreement. A transfer 
agreement may be dissolved or minor revisions made with respect to such 
agreement if a written request by all parties to the agreement is made 
to the county FSA committee by November 15 of the current marketing year 
for flue-cured tobacco, or by February 15 of the current marketing year 
for burley tobacco. After any such dissolution or revision of a transfer 
agreement, an official notice of the flue-cured acreage allotment and 
marketing quota, or burley quota, shall be issued by the county FSA 
committee to each of the operators involved in the transfer agreement.
    (h) Cigar tobacco. For cigar-filler (type 46) and cigar-filler 
(types 42, 43, and 44) tobacco only, the provisions of paragraph (j) of 
this section are applicable in addition to the following:
    (1) Farm eligible. The owner and operator (acting together if 
different person) of any farm for which an old farm tobacco acreage 
allotment is established for the current year may lease and transfer all 
or any part of the farm acreage allotment established for such farm to 
any other owner or operator of a farm in the same county with a current 
year's allotment (old or new farm) for the same kind of tobacco for use 
on such farm. Transfer of allotments by lease shall not exceed 5 years.
    (2) Transfer approved acre per acre. The lease and transfer shall be 
approved acre per acre.
    (3) Considered planted credit. The amount of allotment acreage which 
is leased from a farm shall be considered for the purpose of determining 
future allotments (and tobacco history acreage) to have been planted to 
tobacco on such farm. The amount of allotment acreage which is leased 
and transferred to a farm shall not be taken into account in 
establishing allotments for subsequent years for such farms.
    (4) Limitation on acreage transferred. The total acreage allotted to 
any farm after the transfer by lease of tobacco acreage allotment to the 
farm shall not exceed 50 percent of the acreage of cropland in the farm, 
except that in the case of cigar-filler (types 42, 43, 44, and 46) 
transfers, such transfers shall be limited to a total of 10 acres.
    (5) Transfer from the pool. Allotments in a pool pursuant to part 
718 of this chapter may be eligible for lease and transfer during the 3-
year life of the pooled allotment. An agreement to lease and transfer 
shall not serve to extend the life of such pooled allotment.
    (i) Fire-cured, Dark air-cured, and Virginia sun-cured tobacco. For 
Fire-cured, Dark air-cured, and Virginia sun-cured tobacco, only, the 
provisions of this section are applicable in addition to the following:
    (1) Persons eligible to file a record of transfer (FSA-375)--sale or 
lease. The owner and operator of any old farm for which a Fire-cured, 
Dark air-cured, or Virginia sun-cured tobacco allotment is established 
for the current year may sell or lease all or any part of such allotment 
to any other owner or operator of a farm in the same county, and in the 
same State for Virginia fire-cured (type 21) or Virginia sun-cured (type 
37) tobaccos. The receiving farm need not be an old farm. In the case of 
a permanent transfer, a statement signed by all parties to the 
transaction confirming that the sale has been made shall be filed with 
the county FSA committee.
    (2) By owner. The owner of any old tobacco farm for which a Fire-
cured, Dark air-cured, or Virginia sun-cured tobacco allotment is 
established for the current year may transfer any or all of such 
allotment permanently, or for a term of years designated by the owner, 
to another farm in the same county (within the same State for Virginia 
fire-cured and Virginia sun-cured tobacco) owned or controlled by such 
owner.
    (3) Maximum period of transfer by lease. Transfer of allotments by 
lease shall not exceed 5 years.
    (4) Basis for transfer. The transfer shall be approved acre for 
acre.
    (5) Adjustments in farm history acreage. The farm history acreage 
for the immediately preceding 5 years on farms from which and to which 
permanent transfer of allotment is made shall be adjusted by the county 
FSA committee for each of the base years to correspond with the amount 
of allotment transferred between the farms. In the case of temporary 
transfers of allotment for 1 or more years by lease or by owner, the

[[Page 129]]

farm history acreage shall not be reduced on the farm from which the 
transfer is made and farm history acreage shall not be transferred to 
the receiving farm.
    (6) Limitation on acreage transferred. The total of the Fire-cured, 
Dark air-cured, or Virginia sun-cured tobacco allotment which may be 
transferred for each kind of tobacco, by sale, lease, or by owner, to a 
farm shall not exceed 10 acres of allotment. However, the total of each 
acreage for each kind of tobacco allotted to any farm after such 
transfer (the sum of its own allotment and the acreage transferred after 
any adjustment in normal yields for the current year) shall not exceed 
50 percent of the acreage of cropland on the farm. The cropland in the 
farm for the current year for purposes of such transfers shall be the 
total cropland as defined in part 718 of this chapter.
    (7) Prohibition on permanent transfer. A permanent transfer by sale 
or by owner shall not be approved from any farm to which an allotment 
was permanently transferred by sale or by owner within the 3 immediately 
preceding crop years.
    (8) Temporary transfer to non-owned farm. A transfer requested on a 
temporary basis to a farm controlled but not owned by the applicant 
shall be approved only if the applicant will be the operator of the farm 
to which the transfer is to be made for each year of the period for 
which the transfer is requested. When the applicant for whom such 
transfer has been approved no longer is the operator of the receiving 
farm due to conditions beyond such operator's control, the transfer 
shall remain in effect unless the transfer is terminated under the 
provisions of paragraph (j) of this section. Conditions beyond the 
operator's control shall include, but not be limited to, death, illness, 
incompetence, or bankruptcy of such person.
    (9) Transfer of pooled allotment. Allotments established for a farm 
as pooled allotment under part 718 of this chapter may be transferred on 
a:
    (i) Permanent basis during the 3-year life of a pooled allotment, or
    (ii) Temporary basis for a term of years not to exceed the remaining 
number of crop years of such 3-year period. A temporary agreement to 
transfer shall not serve to extend the life of such pooled allotment.
    (10) New farm eligibility. Any farm from which the entire farm 
allotment is sold or permanently transferred by the owner shall not be 
eligible for a new farm tobacco allotment for the kind transferred 
during the 5 years following the year in which such transfer is made.
    (11) Transfer of history acreage. Permanent transfer of allotment 
shall have the effect of transferring history acreage, farm base, and 
marketing quota attributable to such allotment. In the case of a 
transfer by lease, the transferred allotment shall be considered for 
purposes of establishing future allotments to have been planted on the 
farm from which such allotment was transferred.
    (j) Tobacco except burley, flue-cured, and cigar (types 54 and 55). 
For tobacco that may be transferred in accordance with the provisions of 
paragraph (h) or (i) of this section, the following provisions shall 
also apply:
    (1) New farm allotment. A new farm allotment shall not be 
transferred.
    (2) Tobacco allotment subject to an approved Conservation Reserve 
Program contract. A transfer of allotment designated for reduction under 
a Conservation Reserve Program contract shall not be approved.
    (3) Subleasing prohibited. A transfer of allotment from a farm shall 
not be approved during the period for which a current temporary transfer 
agreement is in effect that transferred quota to the same farm.
    (4) Limitation on transfer to and from a farm in the same year. If a 
transfer agreement is in effect for the current crop year for a farm, a 
transfer of allotment shall not be approved during the same crop year:
    (i) From such farm receiving allotment by transfer for such year, or
    (ii) To such farm which had allotment transferred from it for such 
year.
    (5) Farm in violation. If consideration of a violation is pending 
which may result in an allotment reduction for a farm for the current 
year, the county FSA committee shall delay approval of any transfer of 
allotment from or to the farm until the violation is cleared

[[Page 130]]

or the allotment reduction is made. However, if the allotment reduction 
in such case cannot be made effective for the current crop year before 
the final date for reducing allotments for violations, the transfer may 
be approved by the county FSA committee. In any case, if, after a 
transfer of a tobacco acreage allotment has been approved by the county 
FSA committee, it is determined that the allotment for the farm from 
which or to which such acreage is transferred is to be reduced for a 
violation, the allotment reduction for such farm shall be delayed until 
the following year.
    (6) Claim for tobacco marketing quota penalty. A transfer of acreage 
allotment from a farm shall not be approved if a claim has been filed 
against the lessor, seller, or transferring owner for a tobacco 
marketing quota penalty and the claim remains unpaid. However, this 
provision shall not apply if the claim is paid or the entire proceeds of 
the lease or sale of the allotment are applied against the claim and the 
county FSA committee determines that the amount paid for the lease or 
sale represents a reasonable price for the acres of allotment being 
transferred.
    (7) Approval after review period. A transfer of allotment shall not 
be approved by the county FSA committee for any farm before the time of 
filing an application for review, as shown on the original allotment 
notice for the farm, has expired. If an application for review is filed 
for a farm involved in a transfer agreement, such agreement shall not be 
approved by the county FSA committee until the allotment for such farm 
is finally determined pursuant to part 711 of this chapter.
    (8) Acreage allotment after lease and transfer. The acreage 
allotment determined after a temporary transfer for a farm under the 
provisions of this section shall be the allotment of such farm for the 
current year only for the purpose of determining:
    (i) Excess acreage,
    (ii) The amount of penalty to be collected on marketings of excess 
tobacco including absorption of carryover penalty tobacco,
    (iii) Eligibility for price support, and
    (iv) The farm marketing quota and the percentage reduction for a 
violation in the allotment for the farm.
    (9) Cancellation of transfer. Any transfer of allotment under this 
section which was approved by the county FSA committee in error or on 
the basis of incorrect information furnished by the parties to the 
agreement shall be canceled by the county FSA committee. Such 
cancellation shall be effective as of the date of approval for purposes 
of determining eligibility for price support and marketing quota 
penalties except that such cancellation shall not be effective for the 
current marketing year for price support and marketing quota penalty 
purposes, if:
    (i) The transfer approval was made in error or on the basis of 
incorrect information unknowingly furnished by the parties to the 
transfer agreement; and
    (ii) The parties to the transfer agreement were not notified of the 
cancellation before the tobacco was planted.
    (10) Dissolution or revision. A transfer agreement may be dissolved 
or minor revisions made where a request by all parties to the agreement 
is made in writing to the county FSA committee. Such written 
notification shall be filed prior to planting the tobacco. A late filed 
request to dissolve or revise the transfer may be effective for the 
current year if the county FSA committee with approval of a 
representative of the State FSA committee determines that the producer 
was prevented from timely filing for reasons beyond such producer's 
control.
    (11) Reconstituted farm. The allotment for a farm being divided or 
combined in the current year shall be the allotment after the transfer 
has been approved. Notwithstanding the above, in the case of a division, 
the county FSA committee shall allocate the acreage that was transferred 
by lease to the tracts involved in the division as the parent farm 
owners and operators designate in writing. In the absence of such 
designation, the county FSA committee shall apportion the leased 
acreage.
    (12) Consent of lien holder. A transfer of allotment other than by 
annual lease shall not be approved from a farm

[[Page 131]]

subject to a mortgage or other lien unless the transfer is agreed to in 
writing by the lien holder.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21441, May 9, 1991; 58 
FR 11960, Mar. 2, 1993; 63 FR 11582, Mar. 10, 1998]



Sec. 723.217  Release and reapportionment of old farm acreage allotments for Cigar-filler and Binder (types 42, 43, 44, 54, and 55) tobacco.

    (a) Annual or permanent release of acreage allotments to State 
committee. Except as provided in this paragraph, all or any part of a 
farm acreage allotment on which Cigar-filler and Binder (types 42, 43, 
44, 54, and 55) tobacco will not be produced and which the operator of 
the farm voluntarily releases on an annual basis, or both the owner and 
operator voluntarily releases on a permanent basis, in writing to the 
State FSA committee by not later than the final date for filing releases 
established by the State FSA committee for the current year shall be 
deducted from the allotment of such farm.
    (1) For the farm voluntarily releasing tobacco farm acreage 
allotment on an annual basis, such acreage will be considered as having 
been planted on the releasing farm for the purpose of establishing 
allotments for subsequent years. For the farm receiving such annual 
released acreage, such acreage shall not be taken into account in 
establishing future allotments for the farm. The tobacco history acreage 
for a farm releasing on a permanent basis shall not be taken into 
account in establishing future allotments for the farm. The tobacco 
history acreage for a farm releasing on a permanent basis shall be 
adjusted to reflect the acreage permanently released.
    (2) An acreage allotment shall not be released either annually or 
permanently:
    (i) From the eminent domain allotment pool if an application for 
transfer from the pool has been filed in accordance with part 718 of 
this chapter;
    (ii) From a new farm; or
    (iii) To the extent such acreage is designated for reduction under a 
Conservation Reserve Program contract.
    (b) Reapportionment of released acreage allotment. The acreage 
voluntarily released on an annual or permanent basis for the current 
year may be reapportioned by the State FSA committee to any farm in any 
county in the State including a farm receiving a new farm allotment. The 
State FSA committee shall select the counties to which the released 
acreage will be reapportioned. The county FSA committee shall select the 
farms to which the released acreage will be reapportioned. The State FSA 
committee shall keep records on both an annual and permanent basis of 
the source of acreage released. Any acreage released for the current 
year on a permanent basis which is not reapportioned by the State FSA 
committee in the current year may be reapportioned in the following 
year. The county FSA committee for the county receiving released acreage 
may reapportion the tobacco allotment acreage on an annual or permanent 
basis to other farms in the county in amounts determined by the county 
FSA committee to be fair and reasonable on the basis of land, labor, and 
equipment available for production of Cigarfiller and binder (types 42, 
43, 44, 54, and 55) tobacco; crop rotation practices; and the soil and 
other physical factors affecting the production of tobacco. Released 
acreage should not be reapportioned on a temporary or permanent basis to 
any farm unless there is assurance from the operator to the county FSA 
committee that the released acreage being received will be produced. 
Allotment reapportioned to a farm on an annual basis can only be used by 
the receiving farm for increased production during the current year. 
Allotment reapportioned to a farm on a permanent basis shall be added to 
the current year allotment or shall serve to establish an allotment for 
a farm without a current allotment. A farm shall be eligible to receive 
reapportionment of released acreage on either or both an annual or 
permanent basis only if a written request is filed by the farm owner or 
operator at the office of the county FSA committee not later than the 
final date for filing such requests established by the State FSA 
committee for the current year.

[[Page 132]]



Sec. 723.218  Determining tobacco history acreage.

    With respect to each respective kind of tobacco, the tobacco history 
acreage shall be determined for each farm for which a tobacco acreage 
allotment was established for such kind of tobacco for the current year.
    (a) The history acreage shall be the same as the farm acreage 
allotment for the respective kind of tobacco if in the current year, or 
either of the two preceding years, the sum of the planted and considered 
planted acreage of such kind of tobacco was as much as 75 percent of the 
farm acreage allotment. Otherwise, the history acreage shall be the sum 
of the planted and considered planted acreage of such kind of tobacco.
    (b) Notwithstanding any other provision of this section, for the 
respective kind of tobacco, the history acres for the current year and 
for each year of the base period shall be reduced to zero if:
    (1) A new farm allotment was canceled;
    (2) The allotment was in a pool established in accordance with the 
eminent domain provision of part 718 of this chapter and the period of 
eligibility has expired for transferring the allotment from the pool; or
    (3) The county FSA committee determines that the farm has been 
retired from agricultural production and the allotment is not eligible 
for pooling in accordance with the eminent domain provisions of part 718 
of this chapter.



Sec. 723.219  Forfeiture of burley tobacco marketing quota.

    (a) Determination of quota subject to forfeiture. (1) For purposes 
of paragraph (b) of this section, the phrase ``owns a farm'' means 
ownership of:
    (i) A farm as constituted under part 718 of this chapter, if the 
entire farm shares a common ownership; or
    (ii) All of the land within a farm which shares a common ownership 
if the parent farm consists of tracts of land having separate 
ownerships.
    (2) For purposes of paragraph (b) of this section, the county FSA 
committee shall apportion, in accordance with the provisions of part 718 
of this chapter, the burley tobacco quota assigned to a farm between the 
various tracts of land which are separately owned by:
    (i) A person not using the land on the farm for which a burley 
tobacco marketing quota is established for agricultural purposes.
    (ii) A person who uses the land on the farm for which the burley 
tobacco marketing quota is established for agricultural purposes or for 
educational, instructional, or demonstrational purposes.
    (3) The farm marketing quota determined under this section for each 
farm or tract, as applicable, shall be the amount of quota subject to 
forfeiture under this section.
    (b) Person who does not use the land on the farm for which the 
marketing quota is established for agricultural purposes or does not use 
such marketing quota for educational, instructional, or demonstrational 
purposes. For purposes of this paragraph, the term ``person'' means a 
person as defined in part 718 of this chapter, including any 
governmental entity, public utility, educational institution, religious 
institution or joint venture (but not including any farming operation 
involving only spouses), but excluding any individual.
    (1) Required forfeiture. With respect to any person owning a farm 
for which a burley tobacco marketing quota is established, if the county 
FSA committee determines that such person does not use the land on such 
farm for agricultural purposes, or does not use such burley tobacco 
marketing quota for educational, instructional, or demonstrational 
purposes, such person shall forfeit such quota which is not sold on or 
before December 1 of the year after any year for which the county FSA 
committee makes such determination.
    (2) Agricultural purposes. Land on the farm for which a burley 
tobacco marketing quota is established shall be considered to be used 
for agricultural purposes if the county FSA committee determines that:
    (i) In the current year or either of the 2 preceding years such land 
is used for the production of:
    (A) Row crops of any type;
    (B) Livestock or poultry (including pasture and forage for 
livestock);

[[Page 133]]

    (C) Trees (including orchards and vineyards); or
    (D) Hay or native grasses on open land; or
    (ii) In the current year such farm is owned by an educational 
institution which uses such burley tobacco marketing quota solely for 
educational, instructional, or demonstrational purposes.
    (3) Documentation. Within 30 days after a written request is made by 
the county FSA committee, or within such extended time as may be granted 
by the county FSA committee, a person must submit such documentation as 
may be requested to support a determination that the provisions of 
paragraph (b)(1) of this section have been met with respect to such 
person. Upon failure of such person to timely respond to this request, 
the county FSA committee shall determine that the person does not use 
the land on the farm for agricultural purposes, or does not use the 
burley tobacco marketing quota for educational, instructional, or 
demonstrational purposes.
    (c) Buyers of quota fail to share in the risk of production.
    (1) Forfeiture required. If any person buys burley tobacco quota and 
such person fails to share in the risk of producing the tobacco which 
was planted subject to such quota during any of the 3 crop years 
beginning with the crop year for which the purchase became effective, 
such person shall forfeit the purchased quota if it is not sold on or 
before December 31 of the year after the crop year in which such crop 
was planted. However, any purchaser or subsequent purchaser of quota 
required to be sold under the mandatory sale to prevent forfeiture, 
provisions of paragraph (b) of this section shall be required to share 
in the risk of production of such quota for five crop years beginning 
with the crop year for which the purchase became effective.
    (2) Failure to utilize purchased quota for the production of tobacco 
shall not result in the forfeiture of such quota, but the three year 
period and the five year period which is specified in paragraph (c)(1) 
of this section shall be extended 1 year for each year for which the 
quota is not utilized.
    (3) Reduction for failure to share in the risk of production. The 
effective quota shall be reduced, but not below zero pounds, for leasing 
and marketing quota purposes only, to the extent of the purchased quota 
for each crop after the crop year in which the buyer of such quota fails 
to share in the risk of producing a crop of tobacco which is subject to 
such quota.
    (4) Determining forfeited amount. If only part of the quota on a 
farm is attributable to a purchased quota, the amount of the farm 
marketing quota which must be forfeited under paragraph (c) of this 
section shall be determined by increasing or decreasing each respective 
purchase of farm marketing quota for the farm to reflect changes in 
national quota factors since the purchase occurred and subtracting the 
pounds of quota which have been sold to prevent forfeiture.
    (d) Hearing. Before any forfeiture of quota becomes effective under 
the provisions of this section, the county FSA committee shall:
    (1) Schedule a hearing for the affected person.
    (2) Notify the affected person of the hearing at least 10 days in 
advance of the hearing.
    (3) Make a determination, on the basis of the evidence presented at 
the hearing by or on behalf of the affected person and by or on behalf 
of the county FSA committee as to whether or not:
    (i) Any of the conditions for forfeiture specified in this section 
exist; and
    (ii) The affected person knowingly failed to take steps to prevent 
forfeiture of allotment and quota when such forfeiture conditions have 
been determined to exist with respect to the provisions of paragraph (b) 
of this section.
    (iii) The affected person knowingly failed to take steps to prevent 
forfeiture of burley tobacco quota.
    (4) Notify the affected persons of the county FSA committee 
determination and, if forfeiture of quota is to be required, afford such 
person an opportunity to appeal to a review committee in accordance with 
the provision of part 711 of this chapter.

[[Page 134]]

    (e) Apportionment of data and determination of quota after 
forfeiture. (1) Apportionment of data. The pounds of farm marketing 
quota retained on the forfeiting farm after the forfeiture shall be 
divided by the farm marketing quota established for the farm before the 
forfeiture to determine a factor for apportioning farm data. The data to 
be retained on the forfeiting farm shall be determined by multiplying 
the factor by the following data for the forfeiting farm:
    (i) Overmarketings which have been subtracted when determining the 
effective farm marketing quota of the forfeiting farm.
    (ii) Pounds of quota transferred from the forfeiting farm by lease 
or by the owner in the current year.
    (iii) Pounds of quota reduced in the current year for a marketing 
quota violation in a prior year.
    (iv) Previous year's effective farm marketing quota.
    (v) Previous year's marketings.
    (vi) Previous year's farm marketing quota.
    (vii) Pounds of quota transferred to the farm by lease or by owner 
in the previous year.

The portion of the forfeiting farm data which shall be included in a 
forfeiture pool for the county shall be determined by subtracting the 
pounds of each respective item of farm data which are retained on the 
forfeiting farm from the pounds of the respective item of data which 
were established for the forfeiting farm before forfeiture.
    (2) Forfeiture pool. The data for the forfeiture pool shall be added 
to any previous data in the forfeiture pool.
    (3) Quota after forfeiture. After adjustment of data, the effective 
farm marketing quota shall be determined in accordance with the 
provisions of Sec. 723.206 of this part for the forfeiting farm.
    (f) Forfeiture pool. (1) Establishing forfeiture pool. A forfeiture 
pool shall be established in each county in which a forfeiture of quota 
occurs. The forfeiture pool shall be increased to include data for each 
forfeiture and shall be decreased for each reallocation in order to 
reflect any forfeited or reallocated amounts of:
    (i) Farm marketing quota for the current year.
    (ii) Quota reduced for marketing quota violations.
    (iii) Quota transferred from the forfeiting farm by lease or by the 
owner.
    (iv) Previous year's effective farm marketing quota.
    (v) Previous year's marketings.
    (2) Adjustment of data in forfeiture pool. At the beginning of the 
current year, the data in the forfeiture pool shall be adjusted by the 
factor used in determining quotas for old farms. Quota data in the 
forfeiture pool shall be decreased each time any burley tobacco quota is 
reallocated from the forfeiture pool. Such decrease in the quota data 
will be made in the same proportion as the pounds of quota which are 
reallocated from the pool are to the pounds of quota which were in the 
pool before the reallocation.
    (g) Reallocation of quota from forfeiture pool. (1) Application. In 
order to establish eligibility to receive quota from the forfeiture pool 
in the current year, an application must be made on a form approved by 
the Deputy Administrator. Such application must be filed:
    (i) Who may file. By an active producer.
    (ii) When to file. On or before April 30. The State FSA committee 
may establish an earlier date if notice of such earlier date is given in 
time for interested applicants to file an application by the earlier 
date.
    (iii) Where to file. At the county FSA office which serves the farm 
for which the application is filed.
    (2) Eligibility of applicant. In order for an applicant to be 
eligible for quota from the forfeiture pool, the county FSA committee 
must determine that:
    (i) The application was filed timely.
    (ii) The applicant is an active tobacco producer.
    (iii) During the current year or during the 4 years preceding the 
current year, the applicant has not sold or forfeited quota from any 
farm.
    (3) Time to reallocate. The county FSA committee shall:
    (i) Not reallocate any quota from the forfeiture pool until the time 
has passed for filing an application for forfeited quota for the current 
year.
    (ii) Reallocate any quota from the forfeiture pool only during the 
30-day period beginning on the day after the

[[Page 135]]

final day for filing an application for quota from the forfeiture pool.
    (4) Reallocation by county FSA committee. Reallocation of any burley 
tobacco quota shall be made by the county FSA committee. In making its 
determination of the amounts of quota to reallocate, the county FSA 
committee may consider the size of the current quotas on the farms of 
the eligible applicants, the length of time the applicants have been 
farming tobacco, the type of farming done by the applicants (i.e., 
livestock, grain, or other commodities), previous leasing history of the 
applicants, and such other factors which in the judgment of the county 
FSA committee should be considered. A burley tobacco quota may be 
reallocated to a farm which currently does not have a burley tobacco 
quota. A factor shall not be used to reallocate quota between all 
eligible applicants.
    (5) Basis for reallocation from forfeiture pool. Reallocation from 
the forfeiture pool shall be on the basis of pounds of farm marketing 
quota.
    (6) Amount of quota to be reallocated. The county FSA committee may 
reallocate all or part of the quota in the forfeiture pool. The minimum 
amount of quota which may be reallocated to an eligible applicant is the 
total amount of quota in the pool or 100 pounds, whichever is less. The 
maximum amount is 500 pounds. However, up to 1,500 pounds may be 
allocated with State FSA committee concurrence.
    (7) Data for receiving farm. All data for the forfeiture pool shall 
be apportioned to the receiving farm in the proportion that the 
reallocated farm marketing quota is to the total farm marketing quota in 
the forfeiture pool before the reallocation. The data determined for the 
receiving farm in accordance with the provisions of this paragraph shall 
be added to any previous data for the receiving farm.
    (8) Quota for receiving farm. After any adjustments which are made 
in accordance with the provisions of this section, the effective farm 
marketing quota shall be determined for the receiving farm.
    (h) Forfeiture of reallocated quota. Any burley tobacco quota which 
is reallocated in accordance with the provisions of this section shall 
be forfeited if the applicant to whom the quota is reallocated fails to 
share in the risk of producing a crop of tobacco which is subject to 
such quota during any of the 3 years beginning with the crop year during 
which the quota is reallocated. The amount of farm marketing quota which 
must be forfeited shall be determined in the same manner which is 
specified in paragraph (c)(4) of this section with respect to the 
forfeiture of purchased quota. Any forfeiture of quota shall occur on 
December 1 of the year in which the applicant fails to share in the risk 
of production of tobacco which is produced subject to such quota. While 
the failure to utilize a quota shall not subject the quota to 
forfeiture, the 3 year period which is specified in this paragraph shall 
be extended by 1 year for each year in which the quota is not utilized.
    (i) Successor-in-interest. A successor-in-interest shall be subject 
to the provisions of this section in the same manner and to the same 
extent as would be applicable to the person whose interest has been 
assumed by such successor-in-interest.
    (1) New owner of farm. The new owner of a farm on which a portion or 
all of the farm marketing quota for such farm was either purchased and/
or was reallocated from forfeited quota shall become the successor-in-
interest to the previous owner of the farm. However, if a farm is 
acquired by a new owner on or before June 30 of the current crop year 
and such owner would otherwise be required to sell or forfeit the farm 
marketing quota because in the preceding crop year the owner of such 
quota did not share in the risk of producing a crop of tobacco which was 
subject to such purchased or reallocated quota, the new owner may be 
considered the buyer of the quota instead of being considered as a 
successor-in-interest to the previous owner of the farm. However, the 
new owner must furnish to the county FSA committee on or before June 30 
of the current year a certification that such owner intends to become an 
active burley tobacco producer. Any purchased or reallocated quota, 
which is acquired by a new owner who is not considered to be the buyer 
of the quota in accordance

[[Page 136]]

with the provisions of this paragraph, shall be subject to the same 
terms and conditions with respect to forfeiture which would be 
applicable if the new owner actually had purchased the quota at the time 
the farm was acquired.
    (2) Buyer no longer shares in risk of production. The owner of a 
farm shall become the successor-in-interest to the buyer of burley 
tobacco quota which was transferred to a farm but which was not owned by 
such buyer if the buyer ceases to share in the risk of production of 
burley tobacco produced on the farm.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21442, May 9, 1991]



Sec. 723.220  Forfeiture of flue-cured tobacco acreage allotment and marketing quota.

    (a) Determination of allotment and quota subject to forfeiture. (1) 
For purposes of paragraphs (b) and (c) of this section, the phrase 
``owns a farm'' means ownership of:
    (i) A farm as constituted under part 718 of the chapter if the 
entire farm shares a common ownership; or
    (ii) All of the land within a common ownership if the parent farm 
consists of separate ownership tracts of land.
    (2) For purposes of paragraphs (b) and (c) of this section, the 
county FSA committee shall, in accordance with the provisions of part 
718 of this chapter, apportion the flue-cured tobacco acreage allotment 
and marketing quota assigned to a farm between:
    (i) All land which is owned by any person which is not significantly 
involved in the management or use of land for agricultural purposes, as 
described in paragraph (b) of this section; and
    (ii) Each common ownership tract of land in the farm other than that 
described in paragraph (a)(2)(i) of this section.
    (3) With respect to the provisions of paragraph (c) of this section, 
an acreage allotment and marketing quota shall be determined for a tract 
in accordance with paragraph (a)(2)(ii) of this section only to the 
extent that records are available to show the contribution which the 
tract made to the flue-cured tobacco acreage allotment of the parent 
farm.
    (4) The farm acreage allotment and farm marketing quota determined 
under this section for each farm or tract, as applicable, will be the 
amount of allotment and quota subject to forfeiture under this section.
    (b) Persons not significantly involved in management or use of land 
for agricultural purposes. For purposes of this paragraph, the term 
``person'' means a person as defined in part 718 of this chapter, 
including any: Governmental entity, public utility, educational 
institution, or religious institution, but not including any: 
Individual, partnership, joint venture, family farm corporation, trust, 
estate, or similar fiduciary account with respect to which 50 percent or 
more of the beneficial interest is in one or more individuals; or 
educational institution that uses a flue-cured tobacco acreage allotment 
and marketing quota for instruction or demonstrational purposes.
    (1) Required forfeiture. If at any time the county FSA committee 
determines that any person which owns farm for which a flue-cured 
tobacco acreage allotment and marketing quota are established is not 
significantly involved in the management or use of land for agricultural 
purposes, such person shall forfeit such allotment and quota which is 
not sold on or before December 1 of the year for which the county FSA 
committee makes such a determination.
    (2) Owner ceases to be significantly involved. A person shall be 
considered to be significantly involved in the management or use of land 
for agricultural purposes if the county FSA committee determines that:
    (i) For the 3 preceding years, more than 20 percent of the gross 
income of the person has been derived from the management or use of land 
for the production of crops which are planted and harvested annually, 
and/or livestock, including pasture and forage for livestock; and
    (ii) Any other person or all other persons which in combination own 
more than 50 percent of the assets of the owner of the flue-cured 
tobacco allotment and marketing quota also meet

[[Page 137]]

the criteria specified in paragraph (b)(2)(i) of this section.
    (3) Documentation. Within 30 days after a written request is made by 
the county FSA committee, or within such extended time as may be granted 
by the county FSA committee, a person must submit such documentation as 
may be requested to support a determination that the provisions of 
paragraph (b)(2) of this section have been met with respect to such 
person. Upon failure of such person to timely respond to such request, 
the county FSA committee shall determine that the person is not 
significantly involved in the management or use of land for agricultural 
purposes.
    (c) Flue-cured tobacco farm acreage allotment exceeds 50 percent of 
tillable cropland. If any person owns a farm for which the flue-cured 
tobacco farm acreage allotment assigned to the land owned by the person 
exceeds 50 percent of the tillable cropland on such farm, the person 
shall take steps, such as the sale of allotment, the purchase of 
tillable cropland, or conversion of land to tillable cropland status, 
which will result in the elimination of the excess or the person shall 
forfeit flue-cured tobacco farm acreage allotment equal to the amount of 
such excess that remains on or after;
    (1) July 1 of the year, after the year of acquisition, if the farm 
was acquired after December 1, 1983.
    (2) July 1 of the year after the crop year for which the change(s) 
become effective, for increases in allotment resulting from changes in 
national acreage or national yield factors.
    (3) July 1 of the year after the year in which the farm owner 
disposes of an acreage of tillable cropland or changes the status of 
land in the farm so as to cause such land to lose its tillable cropland 
status.
    (d) Farm includes purchased allotment. If a farm includes purchased 
allotment, notwithstanding the provisions of paragraph (c)(1) of this 
section, when the flue-cured tobacco farm acreage includes acreage of 
purchased allotment and the flue-cured tobacco farm acreage allotment 
exceeds 50 percent of the tillable cropland because the owner disposed 
of an acreage of tillable cropland after purchasing the allotment, the 
forfeiture shall not take place until July 1 of the year after the year 
of such disposal.
    (e) Buyers of allotment fail to share in the risk of production.
    (1) Forfeiture required. If any person buys flue-cured acreage 
allotment and quota and such person fails to share in the risk of 
producing the tobacco which was planted subject to such quota during any 
of the three crop years beginning with the crop year for which the 
purchase became effective such person shall forfeit the purchased quota 
if it is not sold on or before December 31 of the year after the crop 
year in which such crop was planted.
    (2) Failure to utilize purchased allotment and quota. Failure to 
utilize purchased allotment and quota for the production of tobacco 
shall not result in the forfeiture of such quota, but the 3 year period 
which is specified in paragraph (e)(1) of this section shall be extended 
1 year for each year for which the quota is not utilized.
    (3) Reduction for failure to share in risk of production. The 
effective allotment and quota shall be reduced, but not below zero acres 
or pounds, for planting, leasing, and marketing quota purposes only, to 
the extent of purchased allotment and quota for each crop year after the 
crop year in which the buyer of such allotment and quota fails to share 
in the risk of producing a crop of tobacco planted under such allotment 
and quota.
    (4) Determining forfeited amount. If only part of the allotment and 
quota on a farm resulted from purchased allotment or quota, the amount 
of farm marketing quota which must be forfeited under paragraph (e) of 
this section shall be determined by:
    (i) Increasing or decreasing each respective purchase of farm 
marketing quota for the farm to reflect any annual changes in national 
acreage and national yield factors subsequent to the year of purchase.
    (ii) Adding the amounts determined in paragraph (e)(4)(i) of this 
section, multiplying the result by the farm yield for the farm, and 
subtracting the pounds of quota which have been sold to prevent 
forfeiture.
    (f) Tobacco not planted nor considered planted. Notwithstanding any 
other

[[Page 138]]

provision of this part, any person who owns a farm for which a flue-
cured tobacco acreage allotment and marketing quota are established, 
shall forfeit such allotment and quota after February 15 of any year 
immediately following the 1st year of the 3-year period immediately 
preceding the year for which the county FSA committee determines that 
flue-cured tobacco was not planted nor considered planted on such farm 
during at least 2 years of such 3-year period.
    (g) Hearing. Before any forfeiture of allotment and quota becomes 
effective under the provisions of this section, the county FSA committee 
shall:
    (1) Schedule a hearing for the affected person.
    (2) Notify the affected person of the hearing at least 10 days in 
advance of the hearing.
    (3) Make a determination, on the basis of evidence presented at the 
hearing by or on behalf of the affected person and by or on behalf of 
the county FSA committee as to whether:
    (i) Any of the conditions of requiring forfeiture as specified in 
this section exist; and
    (ii) The affected person knowingly failed to take steps to prevent 
forfeiture of a flue-cured tobacco acreage allotment and marketing 
quota.
    (4) Notify the affected person of the county FSA committee 
determination and, if forfeiture of allotment and quota is to be 
required, afford such person an opportunity to appeal to a review 
committee under the provision of part 711 of this chapter.
    (5) Wait until the period has passed for the affected person to 
appeal the county FSA committee or review committee determination that 
allotment and quota must be forfeited under the provisions of this 
section.
    (h) Apportionment of data and determination of allotment and quota 
after forfeiture. (1) Apportionment of data. The pounds of farm 
marketing quota retained on the forfeiting farm after the forfeiture 
shall be divided by the farm marketing quota established for the 
forfeiting farm before the forfeiture to determine a factor for 
apportioning farm data for the current year and for the base period. The 
data to be retained on the forfeiting farm shall be determined by 
multiplying the factor by the following data of the forfeiting farm, 
the:
    (i) Planted and considered planted acres for the base period.
    (ii) History acres for the base period.
    (iii) Farm acreage allotment for the base period.
    (iv) Overmarketings which have not been subtracted when determining 
the effective farm marketing quota of the forfeiting farm.
    (v) Acres of allotment reduced in the current year for a marketing 
quota violation in a prior year.
    (vi) Previous year's effective farm marketing quota.
    (vii) Previous year's marketings.
    (viii) Previous year's farm marketing quota.
    (ix) Pounds of quota transferred from the forfeiting farm by lease 
in the current year.
    (x) Pounds of quota transferred to the farm by lease in the previous 
year.

The portion of the forfeiting farm data which shall be included in a 
forfeiture pool for the county shall be determined by subtracting the 
acres or pounds which are retained on the forfeiting farm from the acres 
or pounds established for the forfeiting farm before forfeiture.
    (2) Forfeiture pool. The data for the forfeiture pool shall be added 
to any previous data in the forfeiture pool.
    (3) Allotment and quota after forfeiture. After adjustment of data, 
the effective farm acreage allotment and the effective farm marketing 
quota shall be determined in accordance with Sec. 723.205 and 723.206 of 
this part, respectively, for the forfeiting farm.
    (i) Forfeiture pool. (1) Establishing forfeiture pool. A forfeiture 
pool shall be established in each county in which a forfeiture of 
allotment and quota occurs. The forfeiture pool shall be increased to 
include data for each forfeiture and shall be decreased for each 
reallocation in order to reflect any forfeited or reallocated amounts of 
the:
    (i) Farm acreage allotment for the current year and for the base 
period.
    (ii) Farm marketing quota for the current year and for the base 
period.
    (iii) Acres reduced for violation.
    (iv) Planted and considered planted acres for the base period.

[[Page 139]]

    (v) History acres for the base period.
    (vi) Previous year's effective farm marketing quota.
    (vii) Previous year's marketing.
    (viii) Quota transferred from the forfeiting farm by lease.
    (2) Yield for forfeiture pool. The farm yield for the forfeiture 
pool shall be determined by dividing the farm marketing quota in the 
forfeiture pool by the farm acreage allotment in the forfeiture pool. 
The preliminary farm yield for the forfeiture pool shall be determined 
by dividing the farm yield by the national yield factor.
    (3) Adjustment of data in forfeiture pool. At the beginning of the 
current year, the data in the forfeiture pool shall be adjusted by the 
factors used in determining yields, allotments, and quotas for old 
farms. Acreage and quota data in the forfeiture pool shall be decreased 
each time quota is reallocated from the forfeiture pool, such decrease 
to be made in the same proportion as the pounds of quota which are 
reallocated from the pool are to the pounds of quota which were in the 
pool before the reallocation.
    (j) Reallocation of allotment and quota from forfeiture pool. (1) 
Application. In order to establish eligibility to receive allotment and 
quota from the forfeiture pool in the current year, an application must 
be made on a form approved by the Deputy Administrator. Such application 
must be filed:
    (i) Who may file. By an active producer.
    (ii) When to file. On or before March 31. The State FSA committee 
may establish an earlier date if notice of such earlier date is given in 
time for interested applicants to file an application by the earlier 
date.
    (iii) Where to file. At the county FSA office which serves the farm 
for which the application is filed.
    (2) Eligibility of applicant. In order for an applicant to be 
eligible for allotment and quota from the forfeiture pool, the county 
FSA committee must determine that:
    (i) The application was filed timely.
    (ii) The applicant is an active producer.
    (iii) During the current year or during the 4 years preceding the 
current year, the applicant has not:
    (A) Sold or forfeited allotment and quota from any farm.
    (B) Used the designation method of division to retain less allotment 
than the farm would have retained by another method of division.
    (3) Time to reallocate. The county FSA committee shall:
    (i) Not reallocate any allotment and quota from the forfeiture pool 
until the time has passed for filing an application for forfeited 
allotment and quota for the current year.
    (ii) Reallocate any allotment and quota from the forfeiture pool 
only during the 30-day period beginning on the day after the final day 
for filing an application for allotment and quota from the forfeiture 
pool.
    (4) Reallocation by county FSA committee. Reallocation of any 
allotment and quota shall be made by the county FSA committee. In making 
its determination of the amounts to reallocate, the county FSA committee 
may consider the size of the current allotments on the farms of the 
eligible applicants, the length of time the applicants have been farming 
tobacco, the type of farming done by the applicants (i.e., livestock, 
grain, or other commodities), and other factors which in the judgment of 
the county FSA committee should be considered. Allotment and quota may 
be reallocated to a farm which currently does not have a flue-cured 
tobacco allotment. A factor shall not be used to reallocate allotment 
and quota between all eligible applicants.
    (5) Basis for reallocation from forfeiture pool. Reallocation from 
the forfeiture pool shall be on the basis of pounds of farm marketing 
quota.
    (6) Amount of quota to reallocate. The county FSA committee may 
reallocate all or part of the quota in the forfeiture pool.
    (i) Minimum. The minimum amount of quota which may be reallocated to 
an eligible applicant is the total amount of quota in the pool or 200 
pounds, whichever is less.
    (ii) Maximum. The maximum amount of quota which may be reallocated 
to an eligible applicant is 1,000 pounds. However, with State FSA 
committee approval, up to 2,500 pounds may be allocated.

[[Page 140]]

    (7) Data for receiving farm. All data for the forfeiture pool shall 
be apportioned to the receiving farm in the proportion that the 
reallocated farm marketing quota is to the total farm marketing quota in 
the forfeiture pool before the reallocation. The pounds of farm 
marketing quota reallocated to a farm shall be divided by the farm yield 
for the farm to determine the amount of reallocated farm acreage 
allotment. The data determined for the receiving farm in accordance with 
the provisions of this paragraph shall be added to any previous data for 
the receiving farm.
    (8) Allotment and quota for receiving farm. After any adjustments 
which are made in accordance with the provisions of this section, the 
farm acreage allotment, the effective farm acreage allotment, and the 
effective farm marketing quota shall be determined for the receiving 
farm according to Secs. 723.205 and 723.206, respectively, of this part.
    (k) Forfeiture of reallocated allotment and quota. Allotment and 
quota which is reallocated in accordance with the provisions of this 
section shall be forfeited if the applicant to whom the quota is 
reallocated fails to share in the risk of producing a crop of tobacco 
which is subject to such quota during any of the 3 years beginning with 
the crop year during which the quota is reallocated. The amount of farm 
marketing quota which must be forfeited shall be determined in the same 
manner which is specified in paragraph (e)(4) of this section with 
respect to the forfeiture of purchased quota. Any forfeiture of quota 
shall occur on December 1 of the year in which the applicant fails to 
share in the risk of production of tobacco which is produced subject to 
such quota. While the failure to utilize a quota shall not subject the 
quota to forfeiture, the 3 year period which is specified in this 
paragraph shall be extended by 1 year for each year in which the quota 
is not utilized.
    (l) Successor-in-interest. The successor-in-interest shall be 
subject to the provisions of this section in the same manner and to the 
same extent as would be applicable to the person whose interest was 
assumed.
    (1) New owner. The new owner of a farm on which a portion or all of 
the farm acreage allotment and farm marketing quota for such farm was 
either purchased and/or was reallocated from forfeited allotment and 
quota shall become the successor-in-interest to the previous owner of 
the farm. However, if a farm is acquired by a new owner on or before 
June 15 of the current crop year and such owner would otherwise be 
required to sell or forfeit the farm acreage allotment and farm 
marketing quota because in the preceding crop year the owner of such 
allotment and quota did not share in the risk of producing a crop of 
tobacco which was subject to such purchased or reallocated allotment and 
quota, the new owner may be considered the buyer of the allotment and 
quota instead of being considered as a successor-in-interest to the 
previous owner of the farm. However, the new owner must furnish to the 
county FSA committee on or before June 15 of the current year a 
certification that such owner intends to become an active flue-cured 
tobacco producer. Any purchased or reallocated allotment and quota, 
which is acquired by a new owner who is considered to be the buyer of 
the allotment and quota in accordance with the provisions of this 
paragraph, shall be subject to the same terms and conditions with 
respect to forfeiture which would be applicable if the new owner 
actually had purchased the allotment and quota at the time the farm was 
acquired.
    (2) Buyer no longer shares in risk of production. The owner of a 
farm shall become the successor-in-interest to the buyer of allotment 
and quota which was transferred to a farm but which was not owned by 
such buyer if the buyer ceases to share in the risk of the production of 
tobacco produced on the farm.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21442, May 9, 1991]



 Subpart C--Tobacco Subject to Quota, Exemptions From Quotas, Marketing 
                  Cards, and General Penalty Provisions



Sec. 723.301  Identification of tobacco subject to quota.

    (a) Except as provided in paragraphs (b) and (c) of this section, 
any tobacco

[[Page 141]]

which is determined by a representative of the State FSA committee or 
county FSA committee to have the same appearance and characteristics as 
a kind of tobacco for which marketing quotas are in effect shall be 
deemed to be a quota kind of tobacco. Such tobacco shall continue to be 
deemed a quota kind of tobacco unless it has been certified by the 
Agricultural Marketing Service, U.S. Department of Agriculture, under 
the Tobacco Inspection Act (7 U.S.C. 511) and implementing regulations 
(7 CFR part 30), prior to removal of the tobacco from the State where it 
was produced, as a kind of tobacco not subject to marketing quotas.
    (b) Any kind of tobacco for which marketing quotas are not in effect 
that is produced in a State where marketing quotas are in effect for any 
kind of tobacco shall be subject to the quota for the kind of tobacco 
for which marketing quotas are in effect in that State. If marketing 
quotas are in effect in a State for more than one kind of tobacco, 
nonquota tobacco produced in the State shall be subject to the quota for 
the kind of quota tobacco produced in the State having the highest price 
support under the Agricultural Act of 1949.
    (c) Paragraph (b) of this section shall not apply to:
    (1) Maryland (type 32) tobacco when it is nonquota tobacco and 
produced on a farm for which a marketing quota for Maryland (type 32) 
tobacco was established when marketing quotas for such kind of tobacco 
were last in effect (1965);
    (2) Cigar-filler (type 41) tobacco when it is nonquota tobacco and 
produced in Pennsylvania;
    (3) Cigar-wrapper (types 61 and 62) tobacco when it is nonquota 
tobacco and produced in Connecticut, Massachusetts, Georgia or Florida;
    (4) Tobacco produced in a quota State that is represented to be 
nonquota tobacco and that is readily and distinguishably different from 
all kinds of quota tobacco, as determined by the Agricultural Marketing 
Service, U.S. Department of Agriculture, through application of the 
standards issued by the Secretary for the inspection and identification 
of tobacco. Such inspection and identification shall be made prior to 
removal of the tobacco from the State where it was produced; and
    (5) Tobacco which is nonquota tobacco and produced in a quota area 
in which the total of the acreage allotments for quota tobacco 
established for farms is less than twenty acres.



Sec. 723.302  Tobacco for experimental purposes.

    For farms on which tobacco is being grown for experimental purposes 
by or under the direction of a publicly owned agricultural experiment 
station, such tobacco shall be exempt from any penalties otherwise 
required by this part if, before the beginning of the harvesting of 
tobacco from any farm on which experimental tobacco is being grown, the 
director of such publicly owned agricultural experimental station 
furnishes a report, to the State Executive Director for the State in 
which the farm is located, that includes the following information:
    (a) Name and address of the publicly owned agricultural experiment 
station.
    (b) Name of the owner, and name of the operator if different from 
the owner, and the farm number of each farm on which tobacco is grown 
for experimental purposes only.
    (c) The acreage or poundage of tobacco that is to be grown on each 
farm for experimental purposes only.
    (d) A certification signed by the director of the publicly owned 
agricultural experiment station to the effect that such acreage or 
poundage of tobacco is being grown for each farm for experimental 
purposes only, the tobacco is being grown under the auspices of such 
director, and the acreage of each plot was considered necessary for 
carrying out the experiment.



Sec. 723.303  Production of registered or certified flue-cured tobacco seed.

    Producers of registered or certified flue-cured tobacco seed may 
devote flue-cured tobacco acreage in excess of the effective allotment 
to seed production without such acreage of tobacco causing a ``No Price 
Support'' entry on the marketing card issued for the farm if an 
agreement is signed by the farm operator, and the producer, if different 
from the operator, which provides:

[[Page 142]]

    (a) Destruction prior to harvest. For the destruction prior to 
harvest of all tobacco produced on the acreage designated for seed 
production.
    (b) Producer payment of compliance costs. That the producers shall 
pay the cost of compliance visits to a farm by representatives of the 
county FSA committee for the purposes of:
    (1) Designating and determining the acreage of seed production, and
    (2) Determining that no tobacco has been harvested from the acreage 
designated for seed production and to witness destruction of tobacco 
leaves.
    (c) Agreement. That the producer(s) signing the agreement shall 
agree to timely notify the county FSA office when the tobacco seed has 
been harvested.
    (d) No history credit. That the planting of the tobacco acreage for 
seed production will not create history acreage for the purpose of 
establishing future farm allotments.
    (e) Cancellation of marketing cards. That if the county FSA 
committee determines that any of the terms and conditions of the 
agreement have been violated or any material misrepresentation has been 
made, any marketing card issued for the farm in recognition of the 
agreement shall be recalled and canceled, and a marketing card shall be 
issued to reflect that tobacco produced on the farm is not eligible for 
price support.



Sec. 723.304  Determination of discount varieties.

    (a) Definition. Discount variety means any of the flue-cured tobacco 
seed varieties designated as Coker 139, Coker 140, Coker 316, Reams 64, 
Reams 266, or Dixie Bright 244, or a mixture or strain of such seed 
varieties, or any breeding line of flue-cured tobacco seed varieties, 
including, but not limited to, 187-Golden Wilt (also designated by such 
names as No-Name, XYZ, Mortgage Lifter, Super XyZ), having the quality 
and chemical characteristics of the seed varieties designated as Coker 
139, Coker 140, Coker 316, Reams 64, Reams 266, or Dixie Bright 244. 
However, where there is growing in a field offtype plants of not more 
than 2 percent, such offtype plants shall not be considered in 
certifying the flue-cured tobacco variety being produced. Flue-cured 
tobacco variety which is not certified to be discount variety shall be 
considered as ``acceptable variety.''
    (b) Producer report. The operator, or any producer, on each farm 
producing flue-cured tobacco shall file with the county FSA office a 
report on MQ-32 showing whether or not discount variety tobacco was 
planted on the farm.
    (c) Failure to file report. If the operator of a farm on which flue-
cured tobacco is being produced in the current year fails or refuses, 
within 7 days after a request of the county FSA committee on MQ-34-1, 
Notice of Action Required Regarding Determination of Seed Varieties of 
Flue-Cured Tobacco, to file a report on MQ-32, showing whether or not 
there was planted any of the discount varieties of flue-cured tobacco on 
such farm, all flue-cured tobacco produced on such farm shall be 
considered by the county FSA committee to be discount variety tobacco 
unless the county FSA committee finds that failure to comply with the 
request was due to circumstances beyond the control of the farm 
operator.
    (d) Notice to farm operator. The farm operator having discount 
variety tobacco shall be given written notice by certified mail on MQ-
34-2, Notice of Determination of Discount Variety of Flue-Cured Tobacco. 
This notice to the farm operator shall constitute notice to all persons 
who, as owner, operator, landlord, tenant, or sharecropper, are 
interested in the tobacco grown on the farm.
    (e) Producer's right to recertify. Any producer on a farm who 
received a Form MQ-34-2 notifying such producer that the farm has 
discount variety tobacco when in fact an acceptable variety is being 
produced may recertify on Form MQ-32.
    (f) Issuance of marketing cards. (1) If a farm is considered to have 
discount variety tobacco available for marketing and the farm is 
eligible for price support, the county FSA executive director shall 
issue MQ-76, bearing the notation ``Discount Variety-Limited Price 
Support.'' If the farm is considered to have discount variety tobacco 
but it is not eligible for price support, the county FSA executive 
director shall issue

[[Page 143]]

MQ-76, bearing the notation ``Discount Variety-No Price Support.''
    (2)(i) Where an MQ-76, bearing the notation, ``Discount Variety-
Limited Price Support'' is issued for a farm, the card may be exchanged 
at the county FSA office for an MQ-76, without the notation, or
    (ii) Where an MQ-76, bearing the notation ``Discount Variety-No 
Price Support'' is issued for a farm the card may be exchanged at the 
county FSA office for MQ-76 with the notation ``No Price Support.'' 
However, the farm operator shall establish to the satisfaction of the 
county FSA committee that there has been no commingling or substitution 
of discount variety tobacco produced on the farm or on any other farm 
operated by such operator, and that all discount variety tobacco has 
been marketed or satisfactorily disposed of, or accounted for.
    (3) MQ-76 issued to identify marketings of tobacco grown for 
experimental purposes by or for publicly owned experiment stations shall 
bear the notation ``Discount Variety-Limited Price Support'' if such 
tobacco is discount variety tobacco.
    (g) Identification of flue-cured leaf account tobacco as acceptable 
variety--(1) Whenever the Director determines there is a significant 
amount of discount variety tobacco available for marketing in any 
marketing year, the Director may cause to be initiated the provisions of 
this paragraph. In addition, the Director may terminate any action 
initiated hereunder when it is determined that no discount variety of 
flue-cured tobacco remains available for sale during the remainder of 
the current marketing season. Notification to warehouse operators of 
action required under this paragraph shall be by the State FSA executive 
director.
    (2)(i) Each warehouse operator who offers for auction sale any leaf 
account flue-cured tobacco on a warehouse floor other than such 
operator's own floor, and who requests the other warehouse operator to 
identify such tobacco as being ``acceptable variety'' shall execute MQ-
79-1 (Flue-Cured), Dealer's Certification-Resale Tobacco.
    (ii) Each warehouse operator who is participating in the Commodity 
Credit Corporation price support program, and who identifies resale 
tobacco indicating that such tobacco with a ``certified'' lot ticket 
indicating that such tobacco is covered by an executed MQ-79-1.
    (iii) Each executed MQ-79-1 (Flue-Cured) shall show the following 
information with respect to each lot of resale tobacco:
    (A) Crop year.
    (B) Name and address of warehouse where the tobacco is being offered 
for sale.
    (C) Tobacco sale bill number and date.
    (D) Date, signature of dealer and current address, and dealer 
identification number.
    (3)(i) Each dealer or any other person who offers for auction sale 
any resale flue-cured tobacco on a warehouse floor which is 
participating in the Commodity Credit Corporation price support program 
and on which floor eligible resale flue-cured tobacco is identified with 
a ``certified'' lot ticket, and who requests the warehouse operator to 
identify such operator's tobacco as being an ``acceptable variety,'' 
shall execute MQ-79-1 (Flue-Cured), Dealer's Certification-Resale 
Tobacco.
    (ii) Each executed MQ-79-1 (Flue-Cured) shall show the following 
information with respect to resale tobacco:
    (A) Crop year.
    (B) Name and address of warehouse where the tobacco is being offered 
for sale.
    (C) Date, signature of dealer and current address and dealer 
identification number.
    (D) Tobacco sale bill number and date.
    (iii) Each dealer or any person who acquires acceptable variety 
tobacco in a manner which would make it eligible for certification on 
MQ-79-1, or who has on hand both discount variety tobacco and acceptable 
variety tobacco, and desires to dispose of acceptable variety tobacco 
prior to disposing of the discount variety tobacco, may apply in writing 
to the State FSA executive director for a special authorization to have 
the acceptable variety tobacco certified when offered for auction sale.
    (h) Estimate of production. For any farm on which discount variety 
tobacco is being grown, a Form MQ-92,

[[Page 144]]

Estimate of Production, shall be obtained.



Sec. 723.305  Issuance of marketing cards.

    (a) General. Each marketing of tobacco from a farm in a quota area 
shall be identified by a valid marketing card unless prior to marketing 
an AMS certification is issued for such tobacco to indicate that such 
tobacco is a nonquota kind of tobacco.
    (1) A marketing card (MQ-76 or MQ-77) shall be issued for the 
current marketing year for each farm having quota tobacco available for 
marketing. Cards shall be issued in the name of the farm operator except 
that:
    (i) Cards issued for tobacco grown for experimental purposes only 
shall be issued in the name of the experiment station,
    (ii) Cards issued to a successor-in-interest shall be issued in the 
name of the successor-in-interest,
    (iii) For kinds of tobacco other than flue-cured and burley, if a 
part of a farm which includes the tobacco acreage on the farm is cash 
leased to such producer, cards shall be issued in the name of such 
producer. The face of the marketing card may show the name of other 
interested producers. A marketing card may be issued in the name of a 
producer who is not the farm operator if the county FSA committee 
determines pursuant to the procedure in paragraph (a)(2) of this section 
that such producer has been or likely will be deprived of the right to 
use the marketing card issued for the farm to market such producer's 
proportionate share of the crop.
    (2) If the county FSA committee has reason to believe that one or 
more producers on the farm have been or likely will be deprived of the 
right to use such marketing card to market such producer's proportionate 
share of the crop, a hearing shall be scheduled by the county FSA 
committee and the operator of the farm and the producer or producers 
involved shall be invited to be present, or to be represented, at which 
time they shall be given the opportunity to substantiate their claims 
concerning the use of the farm marketing card to market each such 
producer's proportionate share of the effective farm marketing quota for 
such crop. At least two members of the county FSA committee shall be 
present at the hearing. The hearing shall be held at the time and place 
named in the notice. A summary of the evidence presented at the hearing 
shall be prepared for use of the county FSA committee. If the farm 
operator or other producer(s) on the farm do not attend the hearing, or 
are not represented, the county FSA committee shall make its decision on 
the basis of information available to such committee. If the county FSA 
committee finds that any producer on the farm has been or likely will be 
deprived of the right to use the marketing card issued for the farm to 
market such producer's proportionate share of the crop, a separate 
marketing card shall be issued to such producer. With respect to burley 
and flue-cured tobacco, the marketing card issued for the farm shall be 
recalled and a separate marketing card, showing 103 percent of the 
producer's proportionate share of the effective farm marketing quota 
shall be issued to each such producer who it is determined has been or 
likely will be deprived of the opportunity to market such producer's 
proportionate share of the crop and another card (or other cards if 
considered preferable by the county FSA committee) shall be issued 
showing 103 percent of the effective farm marketing quota to enable the 
other producers on the farm to market their proportionate shares. The 
marketing cards issued pursuant to this subparagraph shall reflect the 
proportionate pounds, if any, already marketed by each producer.
    (3) The procedure in paragraph (a)(2) of this section shall not 
apply to a person who was a producer on the farm in a prior year but who 
is not a producer in the current crop year.
    (b) Person authorized to issue marketing cards. The county FSA 
executive director shall be responsible for the issuance of marketing 
cards. For kinds of tobacco other than burley and flue-cured tobacco, 
each marketing card shall bear the actual or facsimile signature of the 
county FSA executive director who issued the card.
    (c) Rights of producers and successors-in-interest. (1) Each 
producer having a

[[Page 145]]

share in tobacco available for marketing from a farm shall be entitled 
to the use of the marketing card for marketing such producer's 
proportionate share.
    (2) Any person who succeeds, other than a dealer, in whole or in 
part to the share of a producer in the tobacco available for marketing 
from a farm, shall, to the extent of such succession, have the same 
right to the use of the marketing card and bear the same liability for 
penalties as the original producer.
    (d) No price support-burley and flue-cured tobacco. For burley and 
flue-cured tobacco, the notation ``No Price Support'' shall be entered 
on each marketing card issued for the use of:
    (1) Farm. The farm if any producer on the farm is ineligible for 
price support under the provisions of part 1464 of this title.
    (2) Producer. The producer on a farm if the producer is ineligible 
for price support under the provisions of part 1464 of this title.
    (e) Farm quota data entered on marketing card and supplemental card 
for burley or flue-cured tobacco:
    (1) Any marketing card issued to market burley or flue-cured tobacco 
shall show when issued, in the space provided on the reverse side, the 
pounds computed by multiplying 103 percent times the effective farm 
marketing quota.
    (2) Notwithstanding paragraph (e)(1) of this section, if the tobacco 
available for marketing from the farm is determined by the county FSA 
committee or the county FSA executive director to be less than the 
effective farm marketing quota, for purposes of issuing a marketing card 
and showing thereon the farm's 103 percent of the effective quota, the 
effective farm marketing quota for the farm shall be considered to be 
the pounds determined to be available for marketing from the farm. If 
any producer on the farm satisfies the county FSA committee or county 
FSA executive director that the quantity of tobacco produced on the farm 
in the current year, plus any carryover tobacco from a prior year, is 
greater than the previously determined pounds of tobacco available for 
marketing from the farm, the pounds shown on the marketing card shall be 
increased accordingly, but not to exceed an amount which would cause the 
total pounds shown on the marketing card to equal 103 percent of the 
effective farm marketing quota.
    (3) Upon request by the farm operator, a supplemental marketing card 
bearing the same name and identification as shown on the original 
marketing card may be issued for a farm upon return to the county FSA 
office of an original marketing card or a supplemental marketing card. 
The pounds computed as the balance of 103 percent of quota from a prior 
marketing card shall be shown in the first space on the reverse side of 
the marketing card.
    (4) Upon written request of the farm operator two or more marketing 
cards may be issued for a farm if the farm operator specifies the number 
of pounds of quota to be assigned to each marketing card. In such case, 
the total pounds of quota specified in the entry, ``103 percent of 
quota,'' on all marketing cards issued for the farm may not exceed 103 
percent of the effective farm marketing quota.
    (f) Farm quota data entered on marketing card and supplemental card 
for any kind of tobacco other than burley or flue-cured: (1) Within 
quota marketing card. A within quota marketing card, MQ-76, indicating 
the tobacco is eligible for price support shall be issued for use in 
identifying the kind of tobacco that is available for marketing from a 
farm when such tobacco:
    (i) Is eligible for price support according to the provisions of 
part 1464 of this title.
    (ii) Was grown for experimental purposes by a publicly owned 
agricultural experiment station.
    (2) Excess marketing card. An excess marketing card (MQ-77) shall be 
issued for a farm for marketing a kind of tobacco that is ineligible for 
price support. Before the MQ-77 is issued the county FSA executive 
director shall enter on such marketing card the rate of any penalty that 
is to be deducted from the proceeds from any marketing of tobacco 
identified by such marketing card. An MQ-77 shall be issued for each 
farm for each kind of tobacco for which:

[[Page 146]]

    (i) There is excess tobacco available for marketing from the farm; 
or
    (ii) The producer is not an eligible producer or the tobacco is not 
eligible tobacco as determined in accordance with part 1464 of this 
title.
    (3) Full penalty rate. The full penalty rate shall be entered on 
each MQ-77 issued to identify tobacco produced on a farm for which:
    (i) An acreage allotment was not established;
    (ii) The farm operator or another producer on the farm prevents the 
county FSA committee from obtaining information necessary to determine 
the correct acreage of tobacco on the farm;
    (iii) The farm operator fails in accordance with part 718 of this 
chapter to provide a certification of acreage planted to tobacco, or
    (iv) The farm operator or another producer on the farm has not 
agreed to make contributions to the No Net Cost Fund or pay assessments 
to the No Net Cost Account, as applicable, in accordance with part 1464 
of this title.
    (4) Converted penalty rate. Except as provided in paragraph (f)(3) 
of this section, a converted penalty rate shall be entered on each MQ-77 
issued to identify tobacco produced on a farm from which there is excess 
tobacco available for marketing and the percentage of excess is less 
than 100 percent. For the purpose of determining the penalty due on each 
marketing by a producer of tobacco subject to penalty, the converted 
rate of penalty per pound shall be determined by multiplying the 
applicable rate of penalty for the current crop by the percent excess 
determined according to this paragraph. For a farm without carryover 
tobacco from a prior year, the percent excess shall be determined by 
dividing the excess acreage of tobacco by the harvested acreage of 
tobacco for the farm. For a farm having carryover tobacco from a prior 
year, the percent excess shall be determined as follows:
    (i) Determine the number of ``carryover'' acres by dividing the 
number of pounds of carryover tobacco from the prior year by the normal 
yield for the farm for that year. Reduce such ``carryover'' acres by the 
amount determined by subtracting the harvested acreage from the 
allotment in the current year. If the ``carryover'' acres are entirely 
offset by the underharvested acreage, the percent excess will be zero 
and a MQ-76 may be issued if the farm otherwise is eligible for price 
support and the remainder of this paragraph (f)(4) of this section are 
inapplicable.
    (ii) Determine the number of ``within quota carryover acres'' by 
multiplying the ``carryover acres'' by the ``percent within quota'' 
(i.e., 100 percent minus the percent excess) for the year in which the 
carryover tobacco was produced.
    (iii) Determine the ``total acres'' of tobacco by adding the 
``carryover acres'' and the acreage of tobacco harvested in the current 
year.
    (iv) Determine the ``excess acres'' by subtracting from the ``total 
acres'' the sum of the current year's allotment and the ``within quota 
carryover acres.''
    (v) Determine the percent excess by dividing the ``excess acres'' by 
the ``total acres.''
    (5) Except as provided in paragraphs (f)(3) and (4) of this section, 
a zero penalty rate shall be entered on any MQ-77 issued in accordance 
with this section.
    (g) Other marketing card data. Other data specified in instructions 
issued by the Deputy Administrator shall be entered on the marketing 
card.



Sec. 723.306  Claim stamping and replacing marketing cards.

    (a) Claim stamping. If a person is indebted to the United States and 
such indebtedness has been recorded on the county debt record, any 
marketing card issued for the farm on which the person has a producer 
interest shall bear the notation ``U.S. Claim'' followed by the amount 
of the indebtedness. The name of the debtor-producer, if different from 
the farm operator, shall be recorded directly under the claim notation. 
The notation ``TMQ'' indicating tobacco marketing quota as the type of 
indebtedness shall constitute notice to any buyer that until the amount 
of penalty is paid, the United States has a lien with respect to any 
crop of tobacco in which the debtor-producer has an interest. A claim 
notation other than ``TMQ'' shall constitute notice to any buyer that

[[Page 147]]

subject to prior liens, the net proceeds from any tobacco pledged as 
collateral for a price support loan shall be paid to the ``Farm Service 
Agency, USDA'' to the extent of the indebtedness shown. The acceptance 
and use of a marketing card bearing a notation and information 
concerning an indebtedness to the United States shall not constitute a 
waiver by the debtor-producer of any right to contest the validity of 
such indebtedness by appropriate appeal. As claim collections are made, 
the amount of the claim shown on the card shall be revised to show the 
claim balance. If requested by the producer, the county FSA executive 
director who issued the marketing card shall issue a claim-free 
marketing card when the claim has been paid.
    (b) Replacing, exchanging, or issuing additional marketing cards. 
Subject to the approval of the county FSA executive director, two or 
more marketing cards may be issued for any farm. Upon the return to the 
county FSA office of a marketing card which had been used in its 
entirety and before the marketing of tobacco from the farm has been 
completed, a new marketing card bearing the same name, information, and 
identification as the used card shall be issued for the farm. A new 
marketing card shall be issued to replace a card which has been 
determined by the county FSA executive director who issued the card to 
have been lost, destroyed, or stolen.



Sec. 723.307  Invalid cards.

    (a) Reasons for being invalid. A marketing card shall be invalid if:
    (1) It is not issued or delivered in the manner prescribed;
    (2) An entry is omitted or is incorrect;
    (3) It is lost, destroyed, stolen, or becomes illegible; or,
    (4) Any erasure or alteration has been made and not properly 
initialed by the county FSA executive director.
    (b) Validating invalid cards. If any entry is not made on a 
marketing card as required, either through omission or incorrect entry, 
and the proper entry is made and initialed by the county FSA executive 
director who issued the card, or by a marketing recorder, then such card 
shall become valid.
    (c) Returning invalid cards. In the event any marketing card becomes 
invalid (other than by loss, destruction or theft, or by omission, 
alteration, or incorrect entry, which has not been corrected by the 
county FSA executive director who issued the card, or by a marketing 
recorder), the farm operator, or the person in possession of the card, 
shall return it to the county FSA office at which it was issued.



Sec. 723.308  Rate of penalty.

    The rate of penalty for a marketing year shall be equal to seventy-
five (75) percent of the average market price for the kind of tobacco 
for the immediately preceding marketing year as determined and announced 
annually by the U.S. Department of Agriculture.

[55 FR 39914, Oct. 1, 1990, as amended at 63 FR 11582, Mar. 10, 1998]



Sec. 723.309  Persons to pay penalty.

    Subject to any additional requirements or provisions for remittances 
which are contained in Sec. 723.409 of this part, the persons to pay the 
penalty due on any marketing of tobacco subject to penalty shall be 
determined as follows:
    (a) Auction sale. The penalty due on marketings by a producer or 
dealer through an auction sale shall be paid by the warehouse operator 
who may deduct an amount equivalent to the penalty from the price paid 
to the producer or dealer.
    (b) Nonauction sale. The penalty due on tobacco acquired directly 
from a producer or dealer, other than at an auction sale, shall be paid 
by the person acquiring the tobacco who may deduct an amount equivalent 
to the penalty from the price paid to the producer or dealer in the case 
of a sale.
    (c) Marketing outside the United States. The penalty due on 
marketings by a producer or dealer directly to any person outside the 
United States shall be paid by the producer or dealer making the sale.

[55 FR 39914, Oct. 1, 1990, as amended at 63 FR 11582, Mar. 10, 1998]



Sec. 723.310  Date penalty is due.

    (a) Payment of penalty. Penalties shall become due at the time the 
tobacco is

[[Page 148]]

marketed, except that in the case of false identification or failure to 
account for disposition, the penalty shall be due on the date of such 
false identification or failure to account for disposition. The penalty 
shall be paid by remitting the amount due to the State FSA office not 
later than the end of the calendar week in which the tobacco becomes 
subject to penalty. A draft, money order, or check drawn payable to the 
Farm Service Agency may be used to pay any penalty, but any such draft 
or check shall be received subject to payment at par.
    (b) Auction sale net proceeds. If the penalty due on any auction 
sale of tobacco by a producer is in excess of the net proceeds of such 
sale (gross amount for all lots included in the sale less usual 
warehouse charges), the amount of the net proceeds accompanied by a copy 
of the tobacco sale bill covering such sale may be remitted as the full 
penalty due. Usual warehouse charges shall not include the following:
    (1) Advances to producers,
    (2) Charges for hauling, or
    (3) Any other charges not usually incurred by producers in marketing 
tobacco through a warehouse.
    (c) Nonauction sales. Nonauction sales of excess tobacco shall be 
subject to the full rate of penalty and shall be paid in full even 
though the penalty may exceed the proceeds for the sale of tobacco.



Sec. 723.311  Lien for penalty; liability of persons who are affiliated with indebted person or who permit the indebted person to use their identification card.

    (a) Lien on tobacco. Until the amount of any marketing quota penalty 
imposed under this part is paid, a lien shall exist in favor of the 
United States for the amount of the penalty on:
    (1) The tobacco with respect to which such penalty is incurred; and
    (2) Any other tobacco subject to marketing quotas in which the 
person liable for payment of the penalty has an interest and which is 
marketed in the same or a subsequent marketing year.
    (b) Lien precedence. The lien, described in paragraph (a) of this 
section, attaches at the time that the penalty is assessed. As to third 
parties, in the event of a lack of actual notice of the lien, then 
notice shall be deemed to occur when:
    (1) In the case of indebted producers, the debt is entered on the 
debt record maintained by the county FSA office of the county in which 
the tobacco was grown;
    (2) In the case of an indebted warehouse operator, the debt is 
entered on the debt record of the State FSA office for the State in 
which the warehouse is located; and
    (3) In the case of an indebted dealer, the debt is entered on the 
debt record of the State FSA office for the State in which the dealer is 
required to file reports.
    (c) Availability of list of marketing quota penalty debts. Each 
county and State FSA office shall maintain a list of tobacco marketing 
penalty debts which have been entered on the debt record in their 
office. The list shall be available for examination upon request by any 
interested person.
    (d) Liability for penalty owed by another person. (1) When a penalty 
in excess of $10,000 is incurred under this part by an entity, all 
persons who have a substantial ownership interest in the entity shall be 
jointly and severally liable with the entity for the payment of such 
penalty, unless it is demonstrated to the satisfaction of the Deputy 
Administrator that the violation was inadvertent. Substantial ownership 
interest shall be deemed to be any ownership interest greater than ten 
percent.
    (2) A dealer or warehouse operator who permits an indebted person to 
use such dealer's or warehouse operator's identification card to market 
tobacco shall be liable for the amounts due by the indebted person to 
the United States under this part up to the amount of the value of the 
tobacco so marketed. In addition, unless the Deputy Administrator 
determines otherwise, any persons or person, who as a warehouse operator 
or dealer becomes affiliated with any person who at the time of 
affiliation is indebted under this part to the United States, shall be 
liable for the amount of the debt owed to the United States by the 
person with whom such person or persons become affiliated up to the 
amount of the value of any tobacco which is marketed by

[[Page 149]]

such affiliated warehouse operator or dealer during the time of the 
affiliation with the indebted person. Affiliation may include any 
relationship in which the parties have a common interest in tobacco, or 
in an enterprise or entity involved in the marketing, processing, or 
handling of tobacco, or where the parties both hold a position of 
responsibility or ownership in such an enterprise or entity, or where 
there is common ownership of a business involved in the transaction. A 
warehouse operator or dealer may also be considered to be affiliated 
with an indebted person when such warehouse operator or dealer is 
associated with a person who is both:
    (i) An employee or otherwise authorized to buy and sell tobacco for 
such warehouse operator or dealer; and
    (ii) An indebted person or at the time of indebtedness incurred by 
an entity was a substantial owner or an officer of the indebted entity.

Affiliation may also be deemed to occur where parties have traded in 
tobacco under circumstances which indicate that there may be a lack of 
arm's length trading between the parties such as where the parties 
engage in casual or undocumented transactions in significant quantities 
of tobacco, or where the parties have traded in tobacco with each other 
without a movement of the tobacco, or where there is a trading in 
tobacco without documentation of a significant exchange of money, or 
other circumstances which indicate an affiliation. Where questions of 
affiliation arise, it shall be the burden on the parties involved to 
show that trading in such tobacco was conducted in accordance with 
normal trade practices and was not part of a scheme or device to avoid 
payments of sums due the United States or the CCC.
    (e) TMQ lien notation. Upon notification that a TMQ lien has been 
established, the producer marketing card (MQ-76) or dealer 
identification card (MQ-79-2) shall be returned immediately to the 
issuing office for recording the TMQ lien. Failure to immediately return 
the applicable card will result in FSA notifying all registered 
warehouse operators and dealers of the TMQ lien information and of their 
responsibilities for collecting the TMQ lien. The card shall be promptly 
returned to the producer or dealer after it is annotated with the TMQ 
lien.

[57 FR 43581, Sept. 21, 1992]



Sec. 723.312  Request for refund of penalty.

    Any person who paid any penalty may request the return of the amount 
of any such payment which is in excess of the amount required to be 
paid. Such request shall be filed on Form MQ-85, Farm Record and 
Account, with the county FSA office within 2 years after the payment of 
the penalty. Approval of return shall be by the county FSA committee, 
subject to the approval of the State FSA executive director.



Sec. 723.313  Identification of marketings.

    (a) Burley or flue-cured tobacco. With respect to:
    (1) Identification of producer marketings. Each auction and 
nonauction marketing of burley or flue-cured tobacco shall be identified 
by a valid marketing card, Form MQ-76, issued for the farm. The reverse 
side of the marketing card shall show in pounds:
    (i) 103 percent of quota,
    (ii) Balance of 103 percent of quota after each sale, and
    (iii) Date of each sale.
    (2) Cross-references of tobacco sale bill number to prior sale bill. 
Each warehouse operator, for each lot of tobacco weighed in on the 
warehouse floor for sale the same day, shall cross-reference the tobacco 
sale bill to each prior tobacco sale bill for tobacco identified by the 
same marketing card. To accomplish the cross-reference, each other 
tobacco sale bill number shall be entered by the warehouse operator in 
the ``Remarks'' space on the tobacco sale bill, on all copies, at the 
time such tobacco is weighed at the warehouse.
    (3) Recording producer sale. Each producer sale at auction shall be 
recorded on Form MQ-72-1, Report of Tobacco Auction Sale, and each 
producer sale at nonauction shall be recorded on a Form MQ-72-2, Report 
of Tobacco Nonauction Purchase. For producer sales at nonauction, the 
dealer purchaser shall execute Form MQ-72-2 and shall enter the data on 
Form MQ-76. For producer sales at auction, Form 72-1

[[Page 150]]

and Form MQ-76 shall be executed only by the FSA marketing recorder.
    (4) Identification of dealer marketings of resale tobacco. Each 
auction and nonauction marketing of resale tobacco in the current year, 
such tobacco shall be identified by a dealer identification card, Form 
MQ-79-2, issued to the dealer for use in the current marketing year.
    (b) Dark air-cured, fire-cured, or Virginia sun-cured tobacco. With 
respect to dark air-cured, fire-cured, or Virginia sun-cured tobacco:
    (1) Identification of producer marketings. Each marketing of such 
kind of tobacco from a farm shall be identified by a valid marketing 
card issued for the farm for the respective kind of a tobacco, either an 
MQ-76 or MQ-77 (including sale memo). With respect to each nonauction 
sale from:
    (i) A within quota farm a check mark shall be entered on the inside 
of MQ-76, and
    (ii) An excess farm for which an MQ-77 is issued, an executed bill 
of nonauction sale shall be prepared, and such bill of nonauction sale 
shall be delivered to a marketing recorder or other person who is 
authorized to issue sale memos.
    (2) Suspended sale and sales without marketing cards. Any suspended 
sale, which is not identified by an MQ-76 or MQ-77 (including a sale 
memo) on or before the last warehouse sale day of the marketing season, 
or within 4 weeks after the date of marketing, whichever comes first, 
shall be identified by MQ-82, Sale Without Marketing Card, as a 
marketing of excess tobacco. Form MQ-82 shall be executed only by a 
marketing recorder or other representative of the State FSA executive 
director.
    (3) Other persons authorized to execute MQ-76 or MQ-77 (including 
sale memo). (i) A warehouse operator who has been authorized during the 
current marketing year on MQ-78, Tobacco Warehouse Organization, may 
record a sale on MQ-76 or MQ-77 (including the issuance of a sale memo) 
to identify a sale for a farm if a marketing recorder is not available 
at the warehouse when the marketing card is presented.
    (ii) Any warehouse operator, or dealer, who engages in the business 
of acquiring scrap tobacco from farmers, and who has been authorized on 
MQ-78, may for each purchase of scrap tobacco execute an MQ-76, or MQ-77 
(including a sale memo if the bill of nonauction sale has been 
executed).
    (4) Verification of sales processed during the absence of marketing 
recorder. Any person authorized on MQ-78 to act as a marketing recorder 
shall promptly present to a marketing recorder for verification each 
warehouse bill (floor sheet) processed and identified by an MQ-76 or MQ-
77 (including any sale memos) executed in the absence of a marketing 
recorder.
    (5) Withdrawal of approval to act as marketing recorder. The 
authorization on MQ-78 for persons may be withdrawn by the State FSA 
executive director if such action is determined to be necessary to 
properly enforce the regulations in this part.
    (c) Separate display on auction warehouse floor. Any warehouse 
operator upon whose floor more than one kind of tobacco is offered for 
sale at public auction shall for each respective kind of tobacco:
    (1) Display it in separate areas on the auction warehouse floor.
    (2) Use a lot ticket that is distinguishably different from the lot 
ticket used to identify any other kind of tobacco.
    (3) Identify each lot by a lot ticket clearly showing the kind of 
tobacco. However, if where the tobacco is represented to be a nonquota 
kind the lot ticket shall have imprinted thereon the type designation 
for the kind of quota tobacco normally marketed in the area.
    (4) Make and keep records that will ensure a separate accounting and 
reporting of each of such kinds of tobacco (quota and nonquota) sold at 
auction over the warehouse floor.
    (d) Identification of returned first sale (producer) tobacco. When 
resold at auction, tobacco which has been previously sold and returned 
to the warehouse by the buyer is resale tobacco. When such tobacco is 
resold by the warehouse operator, it shall be identified as leaf account 
resale tobacco.
    (e) Verification of penalties by warehouse operators or dealers. 
Each sale of tobacco by a producer which is subject

[[Page 151]]

to penalty and which has been recorded by a marketing recorder shall be 
verified by a warehouse operator or dealer to determine whether the 
amount of penalty shown to be due has been correctly computed. Such 
warehouse operator shall not be relieved of any liability for the amount 
of penalty due because of any error which may occur in computing the 
penalty and recording the sale.
    (f) Check register. The serial number of the tobacco sale bill(s) 
shall be recorded by the warehouse operator on the check register or 
check stub for the check written covering the auction sale of tobacco by 
a producer.
    (g) Marketing card and sale memo for cigar tobacco. With respect to 
cigar tobacco:
    (1) If a sale of producer's cigar tobacco to a buyer is not 
identified with a marketing card (MQ-76 or MQ-77) issued for the farm, 
including a sale memo from MQ-77, by the end of the sale day and 
recorded and reported on MQ-79 (CF&B), Buyers Record, by the tenth day 
of the calendar month next following the month during which the sale 
occurred, the marketing shall be identified on MQ-79 (CF&B) as a 
marketing of excess tobacco and reported not later than the tenth day of 
the calendar month next following the month during which the sale date 
occurred, the marketing shall be identified on MQ-79 (CF&B) as a 
marketing of excess tobacco, and reported not later than the tenth day 
of the calendar month next following the month during which the sale day 
occurred.
    (2) Verification of penalty by buyer. Each excess sale memo issued 
by a buyer shall be verified by the buyer to determine whether the 
amount of penalty shown to be due has been correctly computed and such 
buyer shall not be relieved of any liability with respect to the amount 
of penalty due because of any error which may occur in issuing the sale 
memo.



 Subpart D--Recordkeeping, Reporting Requirements, Marketing Penalties, 
                           and Other Penalties



Sec. 723.401  Registration of burley and flue-cured tobacco warehouse operators and dealers.

    (a) Warehouse registration. For burley and flue-cured tobacco, any 
warehouse operator dealing in either flue-cured or burley tobacco shall 
be registered with the U.S. Department of Agriculture. Such registration 
will be handled by the North Carolina State FSA Office, Raleigh, North 
Carolina.
    (b) Dealer registration. Each person who expects to deal in burley 
or flue-cured tobacco during a marketing year shall complete a Dealer 
Application and Agreement (MQ-79-2-A) annually, except dealers who are 
exempt from maintaining or filing records and reports as provided in 
Sec. 723.405. The application must be filed after March 1 of the 
calendar year in which the marketing year begins, and shall be filed 
with the State FSA office or, if designated by the State Executive 
Director, the county FSA office for the county where the dealer resides 
or where the dealer's principal business is located. The applicant shall 
provide the names, and such other information as required by the Deputy 
Administrator, of all other persons who will be authorized to use the 
dealer identification card (MQ-79-2). A dealer entity is limited to one 
dealer registration number. Persons affiliated with another dealer of 
the same household shall not be eligible for a dealer registration 
number unless the Deputy Administrator determines that the entities or 
individuals are separate and independent.
    (c) Approval of application and agreement. The State Executive 
Director of the State FSA office shall, under the direction of the 
Deputy Administrator, be the approving official for the Dealer 
Application and Agreement. If the approving official has reason to doubt

[[Page 152]]

that the applicant is a bona fide dealer or intends to become a bona 
fide dealer, the application may be disapproved until such time as the 
applicant furnishes information satisfactory to the State FSA committee 
that the application is bona fide. An application shall also be 
disapproved for any person who has failed to file reports or permit 
inspections required in Sec. 723.404(d)(9). A person whose application 
is disapproved shall be provided with the opportunity to appeal the 
disapproval and to furnish information to substantiate the application 
or to comply with other requirements in Sec. 723.404.
    (d) Letter of credit or bond--(1) General requirements. Effective 
with the beginning of the 1992 marketing year for burley tobacco and 
with the 1993 marketing year for flue-cured tobacco, in order to secure 
the payment of penalties as may be incurred by a dealer during the 
marketing year for which approval as a dealer is sought, each dealer, as 
a condition for final approval to handle tobacco, must present a letter 
of credit or bond which is determined by the Deputy Administrator to be 
acceptable security and which meets the dollar requirements of this 
section. The letter of credit or bond shall be submitted to the State 
FSA office where the dealer is registered. A letter of credit must have 
been issued by a commercial bank insured by the Federal Deposit 
Insurance Corporation. A bond must be a surety bond insured by a bonding 
company or agent licensed in the State where the dealer is registered. 
The letter of credit or bond must be in the form and have the content 
specified by the Deputy Administrator. A letter of credit or bond shall 
be furnished annually after initial approval of the dealer's application 
and notification of the amount required. The dealer identification card 
shall not be issued until it is determined that acceptable security has 
been presented.
    (2) Amount required. The base amount of the letter of credit or bond 
shall be the larger of:
    (i) $25,000 or
    (ii) the sum of the amounts determined by multiplying the respective 
pounds of burley and flue-cured tobacco purchased by the dealer during 
the preceding marketing year by 10 percent of the marketing year penalty 
rate for the respective kind of tobacco involved for the relevant year 
with the resulting amount not to exceed $100,000.

A dealer shall submit the letter of credit or bond for the base amount 
plus an amount equal to the amount of any unpaid tobacco marketing quota 
penalty owed by such dealer. The amount shall also be increased by 
$5,000 for each 10,000 pounds of tobacco for which the dealer has failed 
to file reports or filed false reports in violation of Sec. 723.404 for 
the 3 previous marketing years. The Deputy Administrator may reduce the 
amount of security required in order to avoid undue hardship and shall 
make provision for release of the letter of credit or bond at the 
appropriate time.
    (e) Suspension and surrender of dealer card. The dealer 
identification card shall be surrendered upon demand of the FSA. Failure 
to comply with the provisions of Secs. 723.404 or 723.414 or with other 
material provisions of this part shall be cause for suspension of the 
dealer identification card and the dealer shall be given 15 days to 
complete all necessary compliance measures or to show cause why the card 
should not remain suspended.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21443, May 9, 1991; 57 
FR 43581, Sept. 21, 1992]



Sec. 723.402  Warehouse authorized to retain producer marketing cards between sales.

    (a) General. Notwithstanding any other provisions of this part, to 
facilitate the scheduling of farmer's tobacco to the warehouse, 
marketing cards, with the permission of the producer, may be retained at 
the warehouse between sales even though no producer on the farm for 
which the card is issued has tobacco on the floor for sale or to be 
settled for, as provided in this section.
    (b) Warehouse eligible to retain producers marketing cards between 
sales. A warehouse shall be eligible to retain producer marketing cards 
between sales if the operator thereof shall:
    (1) Execute and file on a form approved by FSA a written request 
with the State FSA committee (or county

[[Page 153]]

FSA committee if designated by the State FSA committee).
    (2) Agree to be responsible to FSA for an amount of money equal to 
that amount that may be assessed against any producer as marketing quota 
penalties, if the marketing that is the basis of assessment of penalty 
occurred while the warehouse was authorized to have custody of the 
marketing card, for:
    (i) Burley or flue-cured tobacco for any overmarketing resulting 
from errors made at the warehouse in entering ``balance after sale'' 
pounds on the producer's marketing card or failure to deduct pounds sold 
on producer's marketing card.
    (ii) Tobacco falsely identified for marketing by use of the 
producer's marketing card.
    (iii) Producer's failure to account for any tobacco marketed by use 
of the producer's marketing card.
    (iv) Any burley or flue-cured tobacco marketed at the warehouse in 
excess of 103 percent of quota as shown on the producer's marketing 
card.
    (3) Agree to maintain an accurate and up-to-date journal containing 
a listing of all producer marketing cards retained by the warehouse to 
facilitate the scheduling of farmer's tobacco. The journal shall show 
for each card retained the:
    (i) Name of the operator;
    (ii) Serial number of farm;
    (iii) Marketing card number, if applicable;
    (iv) Date marketing card obtained from producer; and
    (v) Date marketing card returned to producer.

Such journals shall be maintained for the length of time and under the 
conditions required for other warehouse records.
    (4) Agree to return the marketing card to the producer at any time 
the producer may so request, or in the absence of a request, return it 
to the producer within 7 days after the close of the warehouse for the 
season.
    (5) Agree that this authorization may be terminated by FSA for 
failure to comply with provisions of this agreement.
    (c) Penalties considered to be the responsibility of warehouse 
operators. Notwithstanding any other provision of this part, a warehouse 
operator who executes and files a written request with the State FSA 
committee (or county FSA committee if designated by the State FSA 
committee) for authorization to retain producer's marketing cards at the 
warehouse, with grower permission, shall be responsible to FSA for an 
amount of money equal to the amount that may be assessed against the 
producer as marketing quota penalties if the marketing that is the basis 
of such assessment occurred while the warehouse was authorized to have 
custody of the marketing card, for:
    (1) Any burley or flue-cured tobacco overmarketings resulting from 
errors made at the warehouse in entering ``balance after sale'' pounds 
on the burley or flue-cured producer's marketing card or failure to 
deduct pounds sold on the producer's marketing card. However, the 
warehouse operator shall not be responsible for any penalty under this 
subparagraph, if such penalty would not have been assessed against the 
producer in accordance with Sec. 723.409(e) of this part.
    (2) Tobacco falsely identified for marketing by use of the 
producer's marketing card.
    (3) Producer's failure to account for any tobacco marketed by use of 
such producer's marketing card.
    (4) With respect to burley or flue-cured producers, tobacco marketed 
at the warehouse in excess of 103 percent of quota as shown on the 
producer's marketing card.



Sec. 723.403  Auction warehouse operators' records and reports.

    (a) Report on Form MQ-78, Tobacco Warehouse organization. Each 
warehouse operator shall annually, prior to opening of auction markets, 
furnish FSA an executed Form MQ-78 showing:
    (1) Form of business organization.
    (2) Names and addresses of warehouse officials and bookkeeper.
    (3) Names and addresses of other warehouses in which the officials 
and bookkeepers have a financial interest.
    (4) Names and addresses of custodians of warehouse records, 
including their location.

[[Page 154]]

    (b) Separate records and reports. Each auction warehouse operator 
shall keep the records and make the reports separately for each quota or 
nonquota kind of tobacco as provided in this section.
    (c) Record of marketing. Each warehouse operator shall:
    (1) Auction or nonauction sale. Keep such records as will enable the 
warehouse operator to furnish the following information to State FSA 
office with respect to each sale of tobacco made at such person's 
warehouse:
    (i) The name of the operator of the farm on which the tobacco was 
produced and the name of the producer, in the case of a sale by a 
producer.
    (ii) The name of the seller in the case of a resale.
    (iii) Date of sale.
    (iv) Number of pounds sold.
    (v) Amount of any penalty and the amount of any deduction for such 
penalty from the price paid the producer.
    (vi) With respect to each individual lot of tobacco constituting an 
auction sale, the:
    (A) Name of purchaser.
    (B) Number of pounds sold.
    (C) Gross sale price.
    (2) Separate account records. Maintain records of all purchases and 
resales of tobacco by the warehouse operator to show a separate account 
for:
    (i) Nonauction purchases by or on behalf of the warehouse operator 
of farmer-owned tobacco.
    (ii) Purchases and resales of:
    (A) Leaf account tobacco.
    (B) Floor sweeping tobacco.
    (d) Tobacco sale bill for burley and flue-cured tobacco. (1) Each 
burley or flue-cured tobacco warehouse operator shall use tobacco sales 
bills furnished at the warehouse operator's expense showing, as a 
minimum, the following information:
    (i) Tobacco sale bill number;
    (ii) For flue-cured tobacco only, registration number assigned the 
warehouse by the Department;
    (iii) Name and address of warehouse where sale is held;
    (iv) For flue-cured tobacco only, the identification of other 
producers having an interest in the tobacco;
    (v) Date of sale;
    (vi) Number of pounds in each lot;
    (vii) Name and address of seller; and
    (A) Farm number (including State and county codes) for producer 
tobacco, and
    (B) Dealer registration number for resale tobacco;
    (viii) Identification number, if available, for each lot of tobacco 
to be offered for sale;
    (ix) Poundage balance before sale for producer tobacco based on 103 
percent of farm quota;
    (x) Name or symbol of purchaser of each lot which is sold;
    (xi) Gross number of pounds sold;
    (xii) Sale price for each lot and gross sale price for all lots 
sold;
    (xiii) Nonauction purchases by the warehouse holding the sale;
    (xiv) Tobacco grade for tobacco consigned to price support;
    (xv) The buyer's grade symbol for tobacco bought by private buyers.
    (xvi) The letters ``N/A'' in the buyer and grade space for 
nonauction purchases by the warehouse.
    (xvii) Marketing quota penalty collected; and
    (xviii) Amount withheld from sale to cover claims due the United 
States.
    (2) At the end of each sale day, the tobacco sale bills shall be 
sorted and filed in numerical order by sale dates, and lot tickets shall 
be filed in an orderly manner by sale dates or by numerical order.
    (e) Identification of tobacco for marketing--(1) Marketing card. 
Each marketing of tobacco from a farm in any State for which a farm 
marketing quota has been established for any kind of tobacco shall be 
identified by a marketing card issued for the farm on which such tobacco 
was produced (unless prior to the marketing of such tobacco an AMS 
inspection certificate is obtained showing that the tobacco offered for 
sale is a kind of tobacco not subject to marketing quotas).
    (2) Recording farm identification. For burley or flue-cured tobacco, 
at the time the tobacco is weighed in, the warehouse operator shall 
record on the tobacco sale bill, the State and county codes and the farm 
serial number from the marketing card issued for the farm from which the 
tobacco is to be marketed.
    (3) Return of marketing card. For tobacco that is to be sold at 
auction, the

[[Page 155]]

warehouse operator shall retain the marketing card until the producer 
has been paid for the sale of the tobacco or the tobacco is removed from 
the warehouse by the producer at which time the marketing card shall be 
returned to the producer. In any case where a producer's marketing card 
is found in the possession of a warehouse operator, and no producer on 
the farm for which the card is issued has tobacco on the floor for sale, 
or tobacco for which settlement is not yet completed, such card will be 
picked up by an FSA representative for return to the producer. The 
warehouse operator shall be responsible for the safekeeping and proper 
use of the marketing card during such person's retention of the 
marketing card.
    (4) No price support. For burley or flue-cured tobacco, if tobacco 
is to be marketed at auction from a farm for which a marketing card is 
issued bearing the notation ``No Price Support'', the warehouse operator 
shall enter the same notation on the tobacco sale bill at the time the 
tobacco is weighed in for sale. The warehouse operator shall prepare a 
separate tobacco sale bill to cover any tobacco which represents more 
than 103 percent of the effective farm marketing quota and the notation 
``No Price Support'' shall be shown on such tobacco sale bill. The sale 
of such tobacco shall be considered a separate sale.
    (5) Nonauction purchase. The warehouse operator shall enter the 
letters ``NA'' on each line of a tobacco sale bill on which there is 
recorded tobacco purchased by or for the warehouse at nonauction sale 
and shall record on all such tobacco sale bills:
    (i) For burley or flue-cured tobacco, the farm serial number from 
the marketing card that is used to identify the tobacco at the time of 
the nonauction purchase.
    (ii) For tobacco other than burley or flue-cured, the serial number 
of the marketing card that is used to identify the tobacco at the time 
of the nonauction purchase.
    (6) Copy of sale bill. The warehouse operator shall furnish to the 
producer a copy of the tobacco sale bill bearing the letters ``NA'' for 
any lot of such tobacco purchased by the warehouse operator.
    (7) Lot ticket. At the time tobacco is weighed for marketing, the 
warehouse operator shall record the weight of the lot of tobacco on the 
tobacco sale bill and on the lot ticket. The sale bill number on which 
the lot of tobacco is recorded shall be recorded on the lot ticket. If 
the marketing card which is presented to identify the tobacco at weigh-
in bears the notation ``No Price Support,'' the same notation shall be 
entered by the warehouse operator on the lot ticket for each lot of 
tobacco which is identified with the same marketing card.
    (8) Recording serial number of marketing card. For tobacco other 
than burley or flue-cured, before the tobacco is offered for sale, the 
warehouse operator shall record, on the sale bill, the serial number of 
the Form MQ-76 or MQ-77 issued for the farm from which the tobacco is to 
be marketed at auction.
    (9) Recording sale bill number. For tobacco other than burley or 
flue-cured, the serial number of the sale bill shall be recorded:
    (i) By the warehouse operator on the check register or check stub 
from the check written to cover an auction sale of tobacco by a 
producer.
    (ii) On the inside of the marketing card by the marketing recorder 
or warehouse operator for each sale of tobacco by a producer.
    (10) Burley or flue-cured marketings. A marketing card used to cover 
a sale of burley or flue-cured tobacco shall show on the reverse side 
the poundage balance of the ``103 percent of quota.''
    (i) Auction sale. At the time of weigh-in the tobacco sale bill 
shall show the poundage balance of 103 percent of the farm's quota. The 
tobacco sale bill shall show the pounds on which penalty is due, and the 
amount of penalty.
    (ii) Nonauction sale to a warehouse operator at the warehouse. If 
the tobacco sale bill includes both an auction sale and a nonauction 
sale such combined pounds shall be used to compute and reflect the 
balance of the ``103 percent of quota.'' The tobacco sale bill shall 
show the pounds on which penalty is due and the amount of the penalty.

[[Page 156]]

    (iii) Nonauction country purchase by a warehouse operator. The 
warehouse operator shall deduct, from the balance of the ``103 percent 
of quota'' entry on the marketing card, the pounds of tobacco purchased 
as a nonauction country purchase. In addition, each warehouse operator 
shall record on Form MQ-79 and on Form MQ-72-2, Report of Tobacco 
Nonauction Purchase, each nonauction country purchase of tobacco made by 
such warehouse operator. The data to be reported on Form MQ-72-2 is set 
forth in Sec. 723.404 of this part.
    (11) Sale memo and bill of nonauction sales. For tobacco other than 
burley or flue-cured, a record of sales on Forms MQ-76, MQ-77, or MQ-82, 
Sale Without Marketing Card (including sale memo from MQ-77 or MQ-82), 
shall be obtained by a warehouse operator to cover each marketing of 
tobacco from a farm through a warehouse and each nonauction sale of 
tobacco purchased by or for the warehouse operator including scrap 
tobacco obtained as a result of providing curing space or stripping 
space for farmers. Each MQ-76 and MQ-77 (including sale memo) shall be 
executed as follows:
    (i) Auction sale. An auction sale identified by MQ-76 shall show in 
the spaces provided thereon, the sale bill number, check-mark to show 
the sale was by auction, a check-mark to show nonauction for purchases 
identified ``NA'' on the sale bill, pounds sold, name and address of 
warehouse, and date of sale. In addition, each sale memo issued from MQ-
77 to cover an auction sale shall show on the first page thereof in all 
of the spaces provided therefor, the warehouse bill number, pounds sold, 
amount of penalty due, name and address of warehouse, and date of sale.
    (ii) Nonauction sale to a warehouse operator who does not prepare a 
sale bill. An MQ-76 used to cover a nonauction sale of tobacco to a 
warehouse operator who does not prepare a sale bill to cover the sale 
shall show, a check-mark to indicate sale was by nonauction, pounds 
sold, name and address of the warehouse, and date of sale. When an MQ-77 
is used under this paragraph, a sale memo shall be executed, including 
the signature of the producer on the reverse side.
    (iii) Nonauction sale to a warehouse operator who prepares a sale 
bill. When a warehouse operator purchases:
    (A) All the delivery of a producer's tobacco at a nonauction sale 
and prepares a sale bill to cover the purchase, on MQ-76 there shall be 
shown the bill number, check-mark to show nonauction purchases, pounds 
sold, name and address of warehouse, and date of sale. When an MQ-77 is 
used a sale memo shall be executed, including the signature of the 
producer on the reverse side.
    (B) Part of a delivery of a producer's tobacco as a nonauction 
purchase and the remainder of the tobacco is sold at auction, if such 
tobacco is identified by an MQ-76 the Record of Sales shall be completed 
to show the name and address of the warehouse, the date of sale, the 
sale bill number, check-mark under both auction and nonauction, and, 
under ``Lbs. Sold,'' the total number of pounds covered by the entire 
delivery. If the sale is identified by an MQ-77, the sale memo (front) 
shall be completed to show the sale bill number, the total number of 
pounds covered by the entire delivery under ``Lbs. Sold,'' the amount of 
penalty due, name and address of the warehouse, and the date of sale. In 
addition, the reverse side of the sale memo shall show the number of 
pounds sold at nonauction.
    (f) Nonquota tobacco or quota tobacco of a different kind. If 
tobacco is presented for sale that is represented to be nonquota tobacco 
or should there be a question as to what kind of quota tobacco is being 
offered for sale, an inspection shall be obtained from the Agricultural 
Marketing Service of this Department (AMS) after the tobacco is weighed 
and in line for sale. The lot ticket for the tobacco shall be cross-
referenced to the sale bill by sale bill number and date. The sale bill 
shall show the producer's name and address and the State and county code 
and farm number of the farm on which the tobacco was produced. If an AMS 
inspection shows that a lot of tobacco is of a different kind than that 
identified by the lot ticket, such tobacco shall be deleted from the 
original sale bill and a revised sale bill prepared. Copies of

[[Page 157]]

the lot ticket and sale bill shall be furnished to the State FSA office 
at the end of the sale day.
    (g) Labeling tobacco sale bill for resale tobacco. In the case of 
resales, each sale bill shall show ``resale'' and;
    (1) For dealers, the name of the dealer making each resale; and
    (2) For the warehouse, the name of the warehouse and either ``floor 
sweepings'' or ``leaf account'' tobacco.
    (h) Suspended sale record. (1) Any tobacco sale bill covering sale 
of tobacco for which a valid marketing card or dealer identification 
card was not presented at the end of the sale day shall be given to a 
marketing recorder who shall stamp such bills, ``Suspended'', and shall 
handle according to instructions provided by the Deputy Administrator.
    (2) When cleared, such suspended sale shall show ``suspended-
cleared'' and date cleared. If a suspended sale is not cleared from 
suspension by the last auction sale day for the warehouse for the season 
(or for burley tobacco only, within 7 days of the sale if such date is 
earlier), it shall be considered a sale of excess tobacco and penalty at 
the full rate shall be remitted by the warehouse operator.
    (i) Payee to be shown on auction warehouse check. Any auction 
warehouse which issues a check to cover the auction or nonauction sale 
of tobacco shall issue such check only in the name of the payee. A 
warehouse check shall not be issued in the name of the seller and 
bearer, for example ``John Doe or Bearer.''
    (j) Warehouse entries on other dealer's reports. Each warehouse 
operator shall record, or have the dealer record, on a Form MQ-79 the 
total purchases and resales made by each such dealer or other warehouse 
operator during each sale day at the warehouse. Warehouse operators 
shall sign the Form MQ-79 on the same line as the transaction is 
recorded when a dealer resells tobacco at the warehouse. If any tobacco 
resold by the dealer and carried over by the dealer from a crop produced 
prior to the current crop, an entry shall be made on the MQ-79 to 
clearly show such fact.
    (k) Warehouse data for burley or flue-cured tobacco. (1) Each 
operator of a burley or flue-cured tobacco auction warehouse shall 
prepare at the end of each sale day a report on MQ-80, Daily Warehouse 
Sales Summary, showing for each sale day:
    (i) For each manufacturer, buyer, order buyer, and any tobacco 
cooperative, pounds of tobacco purchased at auction (consigned in the 
case of tobacco cooperatives).
    (ii) The sum of the items for paragraph (k)(1)(i) of this section.
    (iii) Resales at auction for each person listed under paragraph 
(k)(1)(i) of this section.
    (iv) For each dealer subject to reporting purchases and resales on 
MQ-79, as originally billed, the total pounds of tobacco purchased at 
auction, and resales at auction.
    (v) The total pounds purchased at auction at the warehouse for the 
leaf account.
    (vi) The total pounds purchased at nonauction at the warehouse for 
the leaf account.
    (vii) The sum of the total pounds for paragraphs (k)(v) and (vi) of 
this section.
    (viii) The total leaf account resales.
    (ix) The total floor sweeping resales.
    (x) The sum of the total purchases for paragraphs (k)(1)(ii), (iv), 
and (vii) of this section.
    (xi) The sum of the total resales for paragraphs (k)(1)(ii), (iv), 
(viii) and (ix) of this section.
    (xii) The totals of the purchases column on the Form MQ-79 
representing the nonauction purchases for the warehouse leaf account.
    (xiii) The totals of the resales column on Form MQ-79 representing 
the nonauction resales (including floor sweepings nonauction sales) by 
the warehouse.
    (xiv) For each warehouse sale of excess tobacco from a farm, the 
applicable farm number with daily remittance of the penalty due to 
accompany Form MQ-72-1.
    (xv) For each dealer, at the time of settlement having excess resale 
tobacco, the applicable dealer identification number with daily 
remittance of the penalty due.
    (2) As to the information required to be entered on MQ-80, Daily 
Warehouse Sales Summary, by the marketing recorder, the warehouse 
operator shall

[[Page 158]]

keep and make available such records as will enable the marketing 
recorder to enter thereon:
    (i) The total number of Forms MQ-72-1 for the sale day and the sum 
of pounds sold, and
    (ii) The total number of suspended sale bills and the sum of such 
pounds sold.
    (3) At the end of the season, each warehouse operator shall:
    (i) Report on the final MQ-80 for the season the quantity of leaf 
account tobacco and floor sweepings, if any, on hand and its location, 
provided further that if on inspection it is determined that there is 
damaged tobacco in the warehouse or otherwise on hand, no carryover 
credit for the next marketing year shall be allowed for the damaged 
tobacco and the amount of pounds of damaged tobacco shall be deducted 
from the operator's purchase credit for the current year,
    (ii) Permit its inspection by a representative of FSA, and
    (iii) Provide for the weighing of such tobacco, to be witnessed by 
an FSA representative, and furnish to such representative a 
certification as to the actual weight of such tobacco. After the weight 
of such tobacco has been obtained, it shall be considered as the 
official weight for comparing purchases and resales for the purpose of 
determining the amount of penalty, if penalty is due.
    (4) The warehouse operator shall furnish to the marketing recorder a 
copy of each executed MQ-80.
    (5) Before the next marketing season begins, carryover tobacco 
reported by the warehouse operator as provided in paragraph (k)(3) of 
this section shall be reinspected by a representative of FSA.
    (i) If the reinspection indicates an amount of carryover tobacco 
different from that amount determined by the initial inspection, the 
warehouse operator shall:
    (A) Provide for the weighing of such tobacco which shall be 
witnessed by a representative of FSA.
    (B) Furnish to such representative at the time of weighing a 
certification as to the actual weight of the tobacco.
    (ii) If the FSA representative determines that the weight of the 
tobacco is different, by reweighing, than the amount reported on the 
initial certification, the initial weight, together with the reweighed 
quantity after taking into consideration any purchases and resales that 
occurred subsequent to the initial certification as provided in 
paragraph (k)(3) of this section, shall be used for the purpose of 
determining the amount of penalty, if penalty is due.
    (iii) The reweighed quantity shall be the official pounds to be 
credited to the account as carryover tobacco.
    (iv) If upon reinspection by a representative of FSA, there is an 
amount of tobacco determined to be damaged tobacco, the pounds of 
damaged tobacco shall be deducted from the purchase credit, if not done 
so previously, and no carryover credit shall be allowed for such damaged 
tobacco for the next marketing year.
    (l) Warehouse data for tobacco other than burley or flue-cured. (1) 
Each operator of a tobacco auction warehouse, other than the operator of 
a burley or flue-cured auction warehouse, shall prepare and promptly 
forward at the end of each sale day to the State FSA office a report on 
MQ-80, Daily Auction Warehouse Report, showing for each sale day, unless 
otherwise stated below:
    (i) For each dealer or buyer as originally billed, the total pounds 
of tobacco purchased at auction and resales at auction on the warehouse 
floor.
    (ii) For any association as originally billed, the total pounds and 
gross amount of loan tobacco acquired at auction, and resales at 
auction, if any, on the warehouse floor.
    (iii) The total pounds of:
    (A) Leaf account purchases at auction on the warehouse operator's 
own floor,
    (B) Leaf account purchases at nonauction sale for which a floor 
sheet is prepared,
    (C) All leaf account resales at auction on the warehouse operator's 
own floor, including resales of tobacco from the warehouse operator's 
buyers corrections account, and
    (D) All resales at auction on the warehouse operator's own floor of 
floor sweepings which accumulated on the warehouse operator's own floor.

[[Page 159]]

    (iv) The respective sums of the purchases, including loan tobacco, 
and resales for paragraphs (l)(1)(i), (ii), and (iii) of this section.
    (v) The computed total of first sales at auction on the warehouse 
floor.
    (vi) The warehouse gross sale pounds for the day as billed to 
buyers.
    (vii) The pounds on warehouse check register if shown thereon, and
    (viii) The total pounds of the resales,
    (ix) On the report for the last sale day for the season, the pounds 
of all tobacco on hand whether such tobacco represents leaf account 
tobacco or floor sweepings which accumulated on the warehouse operator's 
own floor.
    (x) For each warehouse sale of excess tobacco from a farm, the 
applicable sale memo and numbers thereof with remittance of the penalty 
due as shown thereon.
    (2) As to information required to be entered on MQ-80, Daily Auction 
Warehouse Report, by the marketing recorder, the warehouse operator 
shall keep and make available such records as will enable the marketing 
recorder to enter thereon:
    (i) For each sale identified by an MQ-76, MQ-77 (including sale 
memo), or MQ-82, Sale Without Marketing Card, the pounds sold;
    (ii) For each sale suspended, the warehouse bill(s) number and 
pounds sold;
    (iii) For each sale cleared from suspension, the MQ-76 number or, 
for MQ-77 or MQ-82, the sale memo number and the date of clearance.
    (3) When a producer rejects the sale of a lot of tobacco, and the 
tobacco has been billed out and the bills presented to the buyer, the 
warehouse operator shall not change the marketing card, or Form MQ-80 on 
which the sale was reported. If the warehouse operator gains possession 
of the tobacco and it is resold by such warehouse operator, it shall be 
identified as resale tobacco.
    (4) In balancing first sales (represented by marketing recorder's 
total) with computed first sales (bill-out total minus resales as 
reported by the warehouse operator) the State FSA executive director is 
authorized to approve reports with variance not to exceed one-half of 1 
percent of such pounds.
    (5) At the end of the season, each warehouse operator shall:
    (i) Report on the final MQ-80 for the season the quantity of leaf 
account tobacco and floor sweepings, if any, on hand and its location,
    (ii) Permit its inspection by a representative of FSA, and
    (iii) Provide for the weighing of such tobacco (to be witnessed by a 
representative of FSA) and furnish to such representative a 
certification as to the actual weight of such tobacco. After the weight 
of such tobacco has been obtained, it shall be considered as the 
official weight for comparing purchases and resales for the purpose of 
determining the amount of penalty, if penalty is due. Separate data 
shall be reported for floor sweeping tobacco.
    (m) Bill-out invoice. For flue-cured tobacco when the tobacco has 
been sold at auction, the bill-out invoice to the buyer shall include 
the warehouse registration number (warehouse code), sale bill number, 
and line number on which the lot of tobacco was recorded on the sale 
bill.
    (n) Maintaining copies of bill-out invoices to purchaser or daily 
summary journal sheet to reflect daily transactions. For each marketing 
year, the warehouse operator shall maintain copies of the bill-out 
invoice to the purchaser by grades showing the pounds purchased. In lieu 
of this requirement, the warehouse operator may prepare and maintain for 
each sale day on a current basis a daily summary journal sheet to 
reflect for each purchaser (including warehouse leaf account or other 
similar account) pounds and dollar amounts for:
    (1) Tobacco originally billed to the purchaser.
    (2) Mathematical billing errors and corrections (added and deducted) 
from purchaser's adjustment invoices.
    (3) Short (deducted) and long (added) weights from purchaser's 
adjustment invoices.
    (4) Short (deducted) and long (added) lots from purchaser's 
adjustment invoices.
    (5) Net tobacco received and paid for by purchase.
    (o) Handling rejected (producer) sale after bill-out. Where a 
producer rejects

[[Page 160]]

the sale of a lot of tobacco, and the tobacco has been billed-out and 
bills presented to the buyer, the warehouse operator shall not change 
the MQ-76 or MQ-80 on which the sale was reported. If the warehouse 
operator gains possession of the tobacco, and it is resold by such 
warehouse operator, it shall be identified as resale tobacco.
    (p) Report to county FSA office of long weights and long lots. Each 
warehouse operator shall report to the county FSA office or marketing 
recorder long weights and long lots of producer tobacco (first sales) 
for which the farmer has been paid.
    (q) Record and report of warehouse operator's leaf account purchases 
and resales not on such warehouse operator's floor. (1) Each warehouse 
operator shall keep a record and make reports on MQ-79, Dealer's Report, 
showing:
    (i) All nonauction purchases of tobacco, except nonauction purchases 
at such warehouse operator's warehouse which are reported on MQ-80.
    (ii) All purchases and resales of tobacco at public auction through 
warehouses other than such operator's own warehouse.
    (iii) All nonauction resales of tobacco.
    (2) Form MQ-79 shall be prepared and a copy, including copies of 
Form MQ-72-2 for all nonauction purchases of burley or flue-cured 
tobacco, forwarded to the State FSA office not later than the end of the 
calendar week (at the end of each sale day during the auction season for 
such warehouse) in which such tobacco was purchased or resold.
    (3) If tobacco is purchased prior to the opening of the local 
auction market, an MQ-79 shall be prepared and a copy, together with 
copies of MQ-72-2 for all nonauction purchases of burley or flue-cured 
tobacco, forwarded to the State FSA office not later than the end of the 
calendar week which would include the first sale day of the local 
auction markets.
    (4) A remittance for all penalties shown by the entries on Form MQ-
79 and Form MQ-72-2 to be due shall be forwarded to the State FSA office 
with the original copy of MQ-79.
    (5) Resales of floor sweepings shall be reported separately from 
leaf account tobacco.
    (r) Buyers corrections account. Each warehouse operator shall keep 
such records including negative adjustment invoices as will enable the 
warehouse operator to furnish a weekly report on Form MQ-71 to the State 
FSA office showing the total pounds of the debits (for returned lots, 
short lots, and short weights of tobacco) and the credits (for long lots 
and long weights of tobacco) to the buyers corrections account. Where 
the warehouse operator returns to the seller tobacco debited to the 
buyers corrections account, the warehouse operator shall prepare an 
adjustment invoice to the seller. This invoice shall be the basis for a 
credit entry for the warehouse in the buyers corrections account and a 
corresponding purchase (debit entry) in the case of a dealer on such 
dealer's MQ-79, Dealer's Report. Any balancing figure reflected on the 
warehouse operator's summary of bill-outs shall not be included in the 
buyers corrections account.
    (s) Reporting of processed leaf account tobacco. Any warehouse 
operator who delivers tobacco to a firm for the purpose of redrying, 
processing, or stemming of such tobacco shall, by the end of the week in 
which such tobacco was delivered, report to the State FSA office on MQ-
79, Dealer's Report:
    (1) The date delivered;
    (2) Name and address of the firm to which the tobacco was delivered, 
and
    (3) The pounds of tobacco (green weight) delivered which shall be 
entered in the resales pounds column. Such tobacco shall be considered a 
resale on the date of delivery for the purpose of balancing the 
warehouse account and collection of penalties where penalties are due.
    (t) Report of farm scrap resulting from grading tobacco for farmers. 
Any warehouse operator or any other person who grades tobacco for 
farmers shall maintain records which will enable such person to furnish 
the State FSA office the name of the farm operator and the approximate 
amount of scrap tobacco obtained from the grading of tobacco from each 
farm.
    (u) Report of farm scrap resulting from furnishing stripping space 
for farmers. Any warehouse operator or any other person who provides 
tobacco curing space or stripping space for farmers

[[Page 161]]

shall maintain records which will enable such person to furnish the 
State FSA office the name of the farm operator and the approximate 
amount of scrap tobacco obtained from each farm resulting from providing 
such space.
    (v) Producer tobacco. Producer tobacco (first sale) in possession of 
a warehouse operator, resulting from long weights and long lots, which 
has not previously been identified by a sale shall be recorded and 
reported in the same manner as a nonauction sale to a warehouse operator 
who does not prepare a warehouse bill (floor sheet) and shall be 
reported on MQ-79, Dealer's Record. Penalty shall be due on this tobacco 
at the full penalty rate for the respective kind of tobacco or, if the 
kind is not known, at the penalty rate for the kind of tobacco generally 
marketed through the warehouse.

[55 FR 39914, Oct. 1, 1990, as amended at 57 FR 43582, Sept. 21, 1992]



Sec. 723.404  Dealer's records and reports, excluding cigar tobacco buyers.

    (a) General. This section is applicable to all kinds of tobacco 
except cigar tobacco.
    (1) Each dealer, except as provided in Sec. 723.405 of this part 
shall keep by kinds of tobacco the records and make the reports 
separately for each kind (quota and nonquota) of tobacco as provided in 
this section. Adjustment invoices, including the adjustment invoices for 
any sale day for which there is no adjustment to be made, required to be 
furnished to an auction warehouse shall be identified by the warehouse 
identification number (if applicable) and the reporting dealer's 
identification number (if applicable) as well as the names of the 
warehouse and dealers involved in the transaction.
    (2) Each dealer shall properly execute the ``Receipt for Dealer's 
Record'' contained in MQ-79, which is issued to the dealer, and shall 
transmit such receipt to the applicable State FSA office.
    (b) Record of marketings. A dealer shall keep records which provide 
the following information for each lot of tobacco, including scrap 
tobacco, purchased or sold by the dealer:
    (1) Purchases. (i) The name of:
    (A) The warehouse through which the tobacco was purchased, if 
purchased at a warehouse auction; or
    (B) The operator of the farm on which the tobacco was produced, if 
purchased from a producer as a nonauction purchase, and the name of the 
producer of the tobacco, if different from the operator; or
    (C) The seller if purchased as a nonauction purchase from a 
warehouse operator or dealer.
    (ii) The identification number of the warehouse, farm, or dealer, as 
applicable, at/from which the tobacco was purchased.
    (iii) The address, the producer association number, if applicable, 
and percentage share of the proceeds of the farm operator and any other 
producer from whom tobacco was purchased as a nonauction purchase.
    (iv) The date of purchase.
    (v) The pounds of tobacco purchased.
    (vi) The gross purchase price.
    (vii) The amount of penalty.
    (viii) The amounts remitted for the No Net Cost and the Tobacco 
Marketing Assessments.
    (ix) The quantity of tobacco purchased from a prior crop and carried 
over for marketing in a subsequent crop year.
    (2) Sales. (i) The name and identification number of the:
    (A) Warehouse through which the tobacco was sold, if sold at a 
warehouse auction, or
    (B) Buyer if the tobacco was sold at a nonauction sale.
    (ii) The date of sale.
    (iii) The pounds of tobacco sold.
    (iv) The gross sale price.
    (c) Nonauction purchase. (1) Each purchase of tobacco from a 
producer from a quota producing area shall be identified by a marketing 
card, issued for the farm on which the tobacco was produced unless an 
AMS inspection is obtained prior to purchase which shows that tobacco 
being offered for sale is a kind not subject to marketing quotas.
    (2) For burley and flue-cured tobacco:
    (i) After each nonauction purchase, the dealer shall enter a 
declining balance of ``103 percent of quota'' on the reverse side of the 
marketing card. The declining balance shall be determined by reducing 
the previous ``103 percent

[[Page 162]]

of quota'' entry on the marketing card by the number of pounds of 
tobacco purchased. The date the tobacco was purchased also shall be 
entered on the marketing card at the time each lot of tobacco is 
purchased.
    (ii) After each nonauction purchase, the dealer shall prepare a form 
MQ-72-2 which shall set forth the following:
    (A) The date of the purchase.
    (B) The registration number of the dealer.
    (C) The name and address of the person selling the tobacco.
    (D) The identification number (farm number, warehouse code, or 
dealer number, as applicable) of the person selling the tobacco.
    (E) The pounds of tobacco purchased.
    (F) The amount of penalty collected.
    (G) The method (estimating or weighing) of determining the pounds of 
tobacco marketed.
    (H) The signature of the seller and the date signed.
    (iii) For nonauction purchases which are made by the dealer from 
producers, the dealer shall remit the producer's and the dealer's share 
of the No Net Cost and Tobacco Marketing Assessments as provided in part 
1464 of this title. The dealer may deduct the producer's share of each 
assessment from the price paid for the tobacco. However, the No Net Cost 
Assessment shall not be remitted from a producer who identifies the 
tobacco for marketing with a marketing card which has zero pounds as the 
103 percent entry on the marketing card. A marketing penalty at the full 
rate shall be collected on the marketings identified by such card. The 
amount of the No Net Cost and the Tobacco Marketing Assessments which is 
applicable to tobacco marketed during each marketing year will be the 
amount per pound which is approved and announced by the Secretary.
    (3) For all other kinds of tobacco:
    (i) When a Form MQ-77 Marketing Card is used to identify a 
nonauction sale, the producer's signature shall be obtained on the 
reverse side of a sale memo which is a part of the Form MQ-77. A 
nonauction sale not identified by a marketing card shall be identified 
by a Form MQ-82 executed by a marketing recorder or other representative 
of the State FSA committee. The dealer shall record each nonauction 
purchase of tobacco on Form MQ-79, Dealer's Record.
    (ii) For nonauction purchases which are made by the dealer from 
producers, the dealer shall remit the producer's and the dealer's share 
of the No Net Cost and Tobacco Marketing Assessments as provided in part 
1464 of this title. The dealer may deduct the producer's share of each 
assessment from the price paid for the tobacco. However, the No Net Cost 
Assessment shall not be remitted from a producer if the marketing card 
used to identify a kind of tobacco shows a converted penalty rate of 100 
percent. A marketing penalty at the full rate shall be collected on the 
marketings identified by such card. The amount of the No Net Cost and 
the Tobacco Marketing Assessments which is applicable for each kind of 
tobacco marketed during each marketing year will be the amount per pound 
which is approved and announced by the Secretary.
    (d) Record and report of purchases and resales. (1) For burley and 
flue-cured tobacco, each dealer shall keep a record and make reports on 
Form MQ-79 showing all purchases and resales, excluding tobacco not in 
the form normally marketed by producers. After each transaction is 
entered on the Form MQ-79, each dealer shall enter a balance to reflect 
the pounds of tobacco remaining that may be sold without causing prior 
resales to exceed prior purchases. Any tobacco sold in excess of such 
balance shall be considered excess tobacco and subject to a marketing 
quota penalty at the full penalty rate. The purchaser shall sign the 
Form MQ-79 on the same line as the transaction is recorded by the dealer 
who is offering such tobacco for resale. In the event of a purchase or 
resale of tobacco which is purchased by the dealer from a crop of 
tobacco produced prior to the current crop, the Form MQ-79 shall be 
annotated to indicate that such tobacco was so purchased and carried 
over from a crop produced prior to the current crop.
    (2) For all other kinds of tobacco, each dealer shall keep a record 
and make reports on Form MQ-79 showing all purchases and resales of 
tobacco made by or for the dealer and, in the event of a purchase or 
resale of tobacco

[[Page 163]]

which is purchased prior to the current crop, the fact that such tobacco 
was so purchased and carried over from a crop produced prior to the 
current crop.
    (3) A Form MQ-79 shall be prepared and a copy (together with 
executed copies of Form MQ-72-2 for all nonauction purchases of burley 
and flue-cured tobacco) shall be forwarded to the State FSA office not 
later than the end of the calendar week in which such tobacco was 
purchased or resold. However, if tobacco is purchased prior to the 
opening of the local auction market, a Form MQ-79 shall be prepared and 
a copy, together with executed copies of Form MQ-72-2 for all nonauction 
purchases, shall be forwarded to the State FSA office not later than the 
end of the calendar week which would include the first sale date of the 
local auction markets. In addition, if tobacco is resold in a State 
other than where the tobacco is produced and the auction markets at such 
location open earlier than the auction market where the tobacco normally 
would be sold at auction by farmers, reports together with executed 
copies of Form MQ-72-2 for all nonauction purchases shall be prepared 
and forwarded to the State FSA office not later than the end of the 
calendar week which would include the first day of the local auction 
market where the resale takes place.
    (4) The data to be entered on Form MQ-72-2 for nonauction purchases 
from a producer shall be the data which is enumerated in accordance with 
the provisions of paragraph (c)(2) of this section.
    (5) At the end of the dealer's marketing operation, but not later 
than April 1 for tobacco other than flue-cured and January 15 for flue-
cured tobacco, such dealer shall for each kind of tobacco:
    (i) Show the word ``final'' on the Dealer's Report, MQ-79, for the 
season,
    (ii) Report on such ``final'' MQ-79 for the season the quantity of 
tobacco on hand and its location,
    (iii) Permit its inspection by a representative of FSA, and
    (iv) Provide for weighing of such tobacco (to be witnessed by a 
representative of FSA) and furnish a certification as to the actual 
weight of such tobacco. After the weight of such tobacco has been 
determined as provided in this section, it shall be considered as the 
official weight for comparing purchases and resales for the purpose of 
determining the amount of penalty, if penalty is due.
    (v) If upon inspection by a representative of FSA, there is an 
amount of tobacco determined to be damaged tobacco according to 
Sec. 723.104, such amount of pounds shall be deducted from the purchase 
credit and no carryover credit shall be allowed for such damaged tobacco 
for the next marketing year.
    (6) Notwithstanding the provisions of paragraph (d)(5) of this 
section, any dealer having tobacco transactions after January 15 for 
flue-cured and April 1 for other than flue-cured shall make reports on 
Form MQ-79 at the end of each week, as provided in paragraph (d)(3) of 
this section.
    (7) For burley and flue-cured tobacco, before the next marketing 
season begins, carryover tobacco reported by the dealer as provided in 
paragraph (d)(5) of this section shall be reinspected by a 
representative of FSA. When the reinspection indicates an amount of 
carryover tobacco different from that amount determined by the initial 
inspection, the dealer shall provide for the weighing of such tobacco 
which shall be witnessed by an FSA representative. The dealer shall 
furnish to such representative at the time of weighing a certification 
as to the actual weight of such tobacco. If an FSA representative 
determines that the weight of the tobacco is different, by reweighing, 
than the amount reported on the initial weight together with the 
reweighed quantity after taking into consideration any purchases and 
resales that occurred subsequent to the initial certification as 
provided in paragraph (d)(5) of this section shall be used for the 
purpose of determining penalty, if penalty is due. Penalty shall be 
assessed, after the initial certification and reconciliation, when the 
redetermined pounds exceed the amount determined by taking the initial 
pounds of carryover tobacco plus purchases, minus resales. The 
redetermined pounds shall be the official pounds to be credited to the 
account as carryover. If upon reinspection by a

[[Page 164]]

representative of FSA, there is an amount of tobacco determined to be 
damaged tobacco under Sec. 723.104, such amount of pounds shall be 
deducted from the purchase credit and no carryover credit shall be 
allowed for such damaged tobacco for the next marketing year.
    (8) In addition to forms MQ-79 and MQ-72-2, if applicable, form MQ-
79 (Supplemental) shall be executed to record information relating to 
each nonauction purchase of tobacco for which the No Net Cost and 
Tobacco Marketing Assessments are due from producers and dealers. The 
form MQ-79 (Supplemental) shall be forwarded to the State FSA office at 
the same time as the purchase is reported on the MQ-79. A check, draft, 
or money order in the amount of the collections recorded on form MQ-79 
(Supplemental) and made payable to Commodity Credit Corporation shall be 
submitted to the State FSA office along with the forms MQ-79 and MQ-79 
(Supplemental).
    (9) Any flue-cured or burley dealer who fails to comply with all 
provisions of paragraph (d)(5) of this section by January 15 for flue-
cured and April 1 for burley tobacco will be issued a notice of 
noncompliance and the dealer shall be given 15 days to either comply or 
show cause why compliance is not feasible. Failure to complete all 
required actions within 15 days from date of such notice shall result in 
such dealer not being issued a MQ-79-2 for the marketing year 
immediately following the marketing year in which the dealer failed to 
conform with the deadline of January 15 for flue-cured and April 1 for 
burley tobacco.
    (e) Daily report to warehouse operator for buyers correction 
account. Notwithstanding the provisions of Sec. 723.405 of this part, 
reports shall be made as follows:
    (1) Any dealer, buyer, or any other person receiving tobacco from or 
through a warehouse operator at an auction sale or otherwise, which is 
not invoiced to such person or which is incorrectly invoiced to such 
person by the warehouse operator, shall furnish to the warehouse 
operator on a daily sales basis an adjustment invoice or buyers 
settlement sheet.
    (2) Each dealer who purchases tobacco on a warehouse floor for any 
sale day in which there is no adjustment required in the account as 
shown on the warehouse bill-out invoice for that sale day, shall file a 
negative report with the warehouse operator for that sale day.
    (3) Such reports as required under paragraphs (d)(1) and (2) of this 
section shall be furnished daily, if practicable (otherwise, they shall 
be furnished at the end of each week), and shall show the identification 
number of the warehouse where the purchase was made.
    (f) Reporting of processed tobacco. Any dealer who delivers tobacco 
to a firm for the purpose of redrying, processing or stemming of such 
tobacco shall, by the end of the week in which such tobacco was 
delivered, report to the State FSA office on MQ-79, Dealer's Report:
    (1) The date delivered;
    (2) Name and address of the firm to which the tobacco was delivered; 
and
    (3) Pounds of tobacco (green weight) delivered which shall be 
entered in the resales pounds column. Such tobacco shall be considered 
as a resale on the date of delivery for the purpose of balancing the 
dealer account and collection of penalties where penalties are due.
    (g) Tobacco represented to be a nonquota kind. Any dealer who plans 
to purchase tobacco that was produced on a farm in a quota area shall 
treat such tobacco as a quota kind of tobacco according to the 
provisions of this part 723 unless prior to the purchase a certification 
is obtained from an AMS inspector to indicate that such tobacco is a 
nonquota kind of tobacco. In such case, the dealer shall mail or 
otherwise deliver to the State FSA office, on the date of the purchase, 
a copy of the AMS certification and a statement signed by the AMS 
inspector, the producer, and the dealer to indicate the:
    (1) State and county code and farm number of the farm on which the 
tobacco was produced.
    (2) Name and address of the producer.
    (3) Name and address of the dealer.
    (4) Weight of the tobacco.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21443, May 9, 1991; 57 
FR 43582, Sept. 21, 1992]

[[Page 165]]



Sec. 723.405  Dealers exempt from regular records and reports on MQ-79; and season report for dealers.

    (a) Any dealer or buyer who acquires tobacco in the form in which 
tobacco ordinarily is sold by farmers and resells 5 percent or less of 
any such tobacco shall not be subject to the requirements of 
Sec. 723.404 of this part except for the requirements which relate to 
the reporting of nonauction purchases from producers and the 
requirements of Sec. 723.404(e) of this part. A dealer or buyer whose 
resales in the form normally marketed by producers farmers exceed 5 
percent of their purchases as a direct result of order buying for 
another dealer for a service fee may report under paragraph (b) of this 
section in lieu of Sec. 723.404 of this part (except for requirements 
which relate to nonauction purchases from producers and requirements of 
Sec. 723.404(e) of this part.
    (b)(1) This paragraph is applicable only to burley and flue-cured 
tobacco. Each dealer or buyer shall make a report to the Director, not 
later than February 1 of each year for flue-cured and April 1 for burley 
tobacco, showing by States where acquired, source and pounds of all 
tobacco, in the form normally marketed by producers, purchased at 
auction or nonauction including tobacco received which was not billed to 
the dealer or buyer. Any acquisition of tobacco in the form normally 
marketed by producers by the dealer or buyer during the marketing year 
(October 1 through September 30 for burley tobacco and July 1 through 
June 30 for flue-cured tobacco) which is not included in the initial 
report shall be reported in like manner no later than the end of the 
calendar week following the week in which the tobacco was acquired. The 
report shall show:
    (2) For purchases at auction for each warehouse;
    (i) USDA registration number (warehouse code),
    (ii) Name and address of warehouse,
    (iii) Gross pounds originally billed to the buyer,
    (iv) Gross pounds billed to the buyer for which payment was made,
    (v) Gross pounds from the company correction account deducted for 
short lots and short weights and returned lots, and
    (vi) Gross pounds from the company correction account added for long 
lots and long weights.
    (3) For purchases at nonauction;
    (i) Name and address of seller (dealer or farmer),
    (ii) Seller's number (dealer's registration number or farm number, 
including State and county code), and
    (iii) Pounds purchased.



Sec. 723.406  Provisions applicable to damaged tobacco or to purchases of tobacco from processors or manufacturers.

    (a) Damaged tobacco. Any dealer, warehouse operator, or other person 
who intends to purchase damaged tobacco shall notify the State FSA 
office where the warehouse operator or dealer is registered or should be 
registered. Such report must be made at least 2 business days in advance 
of the purchase so as to allow for inspection arrangements to be made. 
The inspection shall be conducted by an FSA representative and no 
purchase credit shall be allowed the buyer for the quantity determined 
to be damaged tobacco. Damaged tobacco may be disposed of without 
incurring a penalty only if the tobacco is destroyed and the destruction 
is witnessed by an FSA representative or the tobacco is sold directly to 
a processor or manufacturer and such sale is reported to the same State 
FSA office. Any tobacco not disposed of in that manner shall be deemed 
to have been a marketing of excess tobacco and will be subject to a 
penalty at the full penalty rate for the quantity of tobacco involved.
    (b) Purchase from processor or manufacturer. Any tobacco purchased 
by a dealer, warehouse operator, or other person from a processor or 
manufacturer shall be considered to be tobacco in the form not normally 
marketed by producers unless the purchaser obtains from the processor or 
manufacturer a certification stating that such purchased tobacco is in 
the form normally marketed by producers. The certification by the 
processor or manufacturer shall be on a form prescribed by the Deputy 
Administrator certifying to FSA that the tobacco involved in the 
transfer of ownership is in the form normally marketed by producers. No

[[Page 166]]

purchase credit shall be given to a dealer, warehouse operator, or other 
person on MQ-79, Dealer's Record Book, for any purchase of tobacco which 
is not in the form normally marketed by producers. Tobacco which meets 
the definition of pickings as defined in this part shall be considered 
tobacco in the form not normally marketed by producers.
    (c) Report by dealer or warehouse operator. Any dealer, warehouse 
operator or other person who plans to purchase tobacco in the form 
normally marketed by producers from a processor or manufacturer shall, 
prior to purchase, report such plans to the State FSA office issuing 
form MQ-79, Dealer's Record Book, to such person. Such report shall be 
made timely so that a representative of FSA may inspect the tobacco to 
determine its marketable value and whether the tobacco is in the form 
normally marketed by producers. Any tobacco purchased from processors or 
manufacturers before such plans are reported to the state FSA office and 
before the tobacco is inspected by an FSA representative or an 
inspection is declined by an FSA representative shall be deemed excess 
tobacco and the penalty at the full rate shall be due.
    (d) Report by processor or manufacturer. Each processor or 
manufacturer shall make a report to the Director, showing the quantity 
of tobacco sold in the form not normally marketed by producers to 
dealers and buyers other than processor or manufacturers. The report 
shall be filed no later than the end of the calendar week following the 
week in which such tobacco was sold and shall show the name of the 
purchaser, the date of the sale and the pounds sold.
    (e) Dealer records and reports. (1) Any dealer, warehouse operator 
or other persons who purchased tobacco classified as not in the form 
normally marketed by producers shall keep such records as will enable 
such person to report to the State FSA office the following:
    (i) Name of seller, pounds purchased, and date of purchase.
    (ii) The disposition of such tobacco including name of buyer, pounds 
sold, date of sale,
    (2) Upon request by the State FSA office such person shall provide 
for the inspection and weighting of the tobacco to be witnessed by an 
FSA representative.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21443, May 9, 1991; 57 
FR 43582, Sept. 21, 1992]



Sec. 723.407  Cigar tobacco buyer's records and reports.

    (a) This section is applicable to buyers of cigar tobacco--(1) 
Definition of cigar buyer. With respect to this section, a buyer is any 
person who buys cigar tobacco including an association or cooperation 
that receives tobacco from producers for the purpose of:
    (i) Selling it for the producers, or
    (ii) Placing it under price-support loan through Commodity Credit 
Corporation.
    (2) Report of buyer's name and address. Each buyer shall properly 
execute, detach, and promptly forward to the State FSA office, ``Receipt 
for Buyer's Record'' contained in MQ-79 (CF&B), which is issued to the 
buyer.
    (b) Record of purchases. A buyer shall keep records which provide 
the following information for each lot of each kind of tobacco purchased 
or sold by the buyer, including tobacco obtained from grading tobacco 
for producers or furnishing curing space, or stripping space:
    (1) The name of:
    (i) The operator of the farm on which the tobacco was produced; or
    (ii) The name and address of the seller, in the case of a sale by a 
person other than the farm operator.
    (2) The identification number of the farm at/from which the tobacco 
was purchased.
    (3) The date of purchase.
    (4) The pounds of tobacco purchased.
    (5) The gross purchase price.
    (6) The amount of penalty.
    (7) The amounts remitted for the No Net Cost and Tobacco Marketing 
Assessments.
    (c) Report of sales. Each buyer shall maintain records which will 
show, by kind of tobacco, the disposition of tobacco purchased under 
paragraph (b) of this section.
    (d) The dealer shall remit the producer's and the dealer's share of 
the No

[[Page 167]]

Net Cost and Tobacco Marketing Assessments as provided in part 1464 of 
this title. The dealer may deduct the producer's share of each 
assessment from the price paid for the tobacco. The No Net Cost 
Assessment shall not be collected from a producer who identifies the 
tobacco for marketing with a marketing card which has a converted 
penalty rate of 100 percent on the marketing card. A marketing penalty 
at the full rate shall be collected on the marketings identified by such 
card. The amount of the No Net Cost and the Tobacco Marketing 
Assessments which is applicable to tobacco marketed during each 
marketing year will be the amount per pound which is approved and 
announced by the Secretary.
    (e) Identification of sale or marketing card memo and buyers 
records. Each MQ-76 and each sale memo from an MQ-77 used to identify 
each sale of tobacco by a producer shall be properly executed by the 
buyer. The serial number of the MQ-76 marketing card or sale memo from 
an HQ-77 to identify such tobacco, shall be recorded on the buyer's copy 
of the MQ-79 (CF&B) and on the check register or check stub for the 
check written with respect to such tobacco.
    (f) Record and report of purchases of tobacco from producers. (1) 
Each buyer shall keep a record and make reports on MQ-79 (CF&B), Buyer's 
Record, showing by kinds of tobacco purchased by or for such buyer from 
producers. Such record and report shall show for each sale the sale 
date, the name of the farm operator, (and the name and address of the 
person selling the tobacco if other than the operator), the serial 
number of the within quota marketing card (MQ-76), and from each excess 
card (MQ-77), the sale memo number used to identify the sale, the pounds 
of tobacco represented in the sale, the rate of penalty shown on the 
sale memo (MQ-77), and the amount of penalty. If a marketing card is not 
presented by the producer, the buyer shall record and report the 
purchase as provided above except that the buyer shall enter the word 
``None'' in the space for the serial number of the marketing card (MQ-
76) or sale memo (MQ-77), the applicable rate of penalty per pound in 
the space for rate of penalty, and shall show the name and address of 
the seller in the space for the seller's name.
    (2) The original of MQ-79 (CF&B), excess sale memos (MQ-77), and a 
remittance for all penalties shown by entries on MQ-79 (CF&B) and on the 
excess sale memos (MQ-77) to be due shall be forwarded to the State FSA 
office not later than the 10th day of the calendar month next following 
the month during which the sale date occurred.
    (3) In addition to forms MQ-79 and MQ-72-2, if applicable, form MQ-
79 (Supplemental) shall be executed to record information relating to 
each nonauction purchase of tobacco for which the No Net Cost and 
Tobacco Marketing Assessments are due from producers and dealers. The 
form MQ-79 (Supplemental) shall be forwarded to the State FSA office at 
the same time as the purchase is reported on the MQ-79. A check, draft, 
or money order in the amount of the collections recorded on form MQ-79 
(Supplemental) and made payable to Commodity Credit Corporation shall be 
submitted to the State FSA office along with the forms MQ-79 and MQ-79 
(Supplemental).

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21443, May 9, 1991]



Sec. 723.408  Producer's records and reports.

    (a) Failure to file reports or filing false reports. (1) With 
respect to any kind of tobacco, if the producer on a farm files an 
incomplete or incorrect report, fails to file a report, or files or aids 
or acquiesces in the filing of any false report with respect to the 
amount of such kind of tobacco produced on or marketed from the farm, 
applicable tobacco acreage allotment or burley farm marketing quota next 
established for such farm shall be reduced, unless the county and State 
FSA committees determine, according to instructions issued by the Deputy 
Administrator, that such reduction is not required.
    (2) For all kinds of tobacco except burley tobacco, if a farm 
operator files a report of acreage of the applicable kind of tobacco on 
the farm and, after a determination of the acreage, it is determined by 
the county FSA committee (with approval of the State FSA committee) that 
the report was false (either significantly under reported or

[[Page 168]]

significantly over reported by more than the tolerance for reporting as 
provided in part 718 of this chapter) in what amounts to a scheme or 
device to defeat the purpose of the program, the allotment next 
established for the farm shall be reduced by an amount determined by 
multiplying the acreage falsely reported (difference between reported 
and determined acreage) by:
    (i) With respect to flue-cured tobacco, the farm yield established 
for the farm for the year in which the false report was filed, or
    (ii) For any other kind of tobacco, the actual yield per acre for 
the year in which the false report was filed.
    (3) Any report of a marketing of tobacco by a producer or any use of 
producer's marketing card to sell the tobacco or the pledge the tobacco 
for a price support loan shall be considered the filing of a false 
report by the producer and, in addition to other remedies as may apply, 
the remedies provided in paragraph (a)(1) of this section shall apply, 
if, under the provisions of part 1464 of this title, the producer was 
not considered to have been an ``eligible producer'' with respect to 
such marketing or other disposition of tobacco.
    (b) Harvesting second crop tobacco from the same farm. For all kinds 
of tobacco except burley, if in the same calendar year more than one 
crop of tobacco was grown from:
    (1) The same tobacco plants, or
    (2) Different tobacco plants, and is harvested for marketing from 
the same acreage of a farm, the acreage allotment next established for 
such farm shall be reduced by an amount equivalent to the acreage from 
which more than one crop of tobacco was so grown and harvested.
    (c) False identification. If there is false identification of any 
kind of tobacco, the applicable farm acreage allotment or farm marketing 
quota next established for the farm and kind of tobacco involved shall 
be reduced, except that such reduction for any such farm shall not be 
made if the county and State FSA committees determine, according to 
instructions issued by the Deputy Administrator, that such reduction is 
not required.
    (d) Report on marketing card. (1) The operator of each farm on which 
tobacco is produced shall return to the county FSA office each marketing 
card issued for the farm whenever marketings from the farm are completed 
and, in no event, later than,
    (i) June 1 of the marketing year in the case of cigar tobacco, and
    (ii) For all other kinds of tobacco, not later than 20 days after 
the close of the tobacco auction markets for the marketing year for the 
locality in which the farm is located. Failure to return the marketing 
card within 15 days after written request by certified mail from the 
county FSA executive director shall constitute failure to account for 
disposition of all tobacco marketed from the farm unless disposition of 
tobacco marketed from the farm is otherwise accounted for to the 
satisfaction of the county FSA committee.
    (2) For all kinds of tobacco except burley and flue-cured:
    (i) At the time the marketing card is returned to the county FSA 
office, the farm operator must certify with respect to each:
    (A) MQ-77, to the quantity of tobacco on hand and its location.
    (B) MQ-76, to the accuracy of the Record of Sales recorded on the 
card.
    (ii) Failure of the farm operator to make the applicable 
certification shall constitute failure to satisfactorily account for the 
disposition of tobacco marketed from the farm.
    (3) Upon failure to satisfactorily account to the county FSA 
committee for disposition of tobacco marketed from the farm the 
allotment or quota next established for such farm and such kind of 
tobacco shall be reduced, except that such reduction for any such farm 
shall not be made if it is established to the satisfaction of the county 
FSA committee and a representative of the State FSA committee that the 
failure to furnish such proof of disposition was unintentional and no 
producer on such farm could reasonably have been expected to furnish 
such proof of disposition. However, such failure will be construed as 
intentional unless such proof of disposition is furnished and payment of 
all additional penalty is made, or no person connected with

[[Page 169]]

such farm for the year for which the acreage allotment or quota is being 
established caused, aided, or acquiesced in the failure to furnish such 
proof.
    (e) Report of production and disposition. (1) In addition to any 
other reports which may be required by this subpart, the operator or any 
producer on a farm (even though the harvested acreage does not exceed 
the acreage allotment or even though no farm acreage allotment or farm 
marketing quota was established for the farm) shall, upon written 
request by certified mail from the State or county FSA committee, 
furnish on MQ-108, Report of Production and Disposition, a written 
report of the acreage, production and disposition of all tobacco 
produced on the farm by sending the same to the State or county FSA 
committee within 15 days after the request was mailed showing as to the 
farm at the time of filing such report with respect to the applicable 
kind of tobacco the:
    (i) Total harvested acres,
    (ii) Total amount of tobacco on hand and its location,
    (iii) Total pounds of tobacco produced,
    (iv) Name and address of the warehouse operator, dealer, or other 
person to or through whom tobacco was marketed, and the number of pounds 
marketed, the gross price paid and the date of the marketings, and
    (v) Complete details as to any tobacco disposed of other than by 
sale.
    (2) With respect to any farm on which burley or flue-cured tobacco 
was produced or available for marketing from carryover tobacco, the 
operator or any producer on the farm (even though the harvested acreage 
does not exceed the flue cured farm acreage allotment or even though no 
farm acreage allotment or farm marketing quota was established for the 
farm) shall, upon written request from the county FSA committee, furnish 
on Form MQ-108-1, Report of Unmarketed Tobacco, a written report of the 
amount and location of the applicable kind of tobacco produced on the 
farm which is unmarketed at the end of the marketing season and the 
amount the applicable kind of tobacco produced by such operator or 
producer on any other farm, which is unmarketed at the end of the 
marketing season and which is stored on the farm, by sending the report 
to the county FSA committee within 15 days after the request was mailed 
to such person at such person's last known address.
    (3) Failure to file the MQ-108 or MQ-108-1 as requested, or the 
filing of MQ-108 or MQ-108-1 which is found by the State or county FSA 
committee to be incomplete or incorrect shall, to the extent that it 
involves tobacco produced on the farm, constitute failure to account for 
the disposition of tobacco produced on the farm and the allotment or 
quota next established for such farm shall be reduced, except that such 
reduction shall not be made if it is established to the satisfaction of 
the county or State FSA committee that failure to furnish such proof of 
disposition was unintentional and no producer on such farm could 
reasonably have been expected to furnish such proof of disposition: 
However, such failure will be construed as intentional unless such proof 
of disposition is furnished and payment of all additional penalty is 
made, or no person connected with such farm for the year for which the 
farm acreage allotment or farm marketing quota is being established 
caused, aided, acquiesced in the failure to furnish such proof.
    (f) Reports by producer-manufacturers. (1) For all kinds of tobacco 
except burley and flue-cured tobacco, each producer who manufactures 
tobacco products from tobacco produced by or for such person as a 
producer, shall report to the State FSA office with respect to each farm 
on which such tobacco is produced and as soon as all tobacco from the 
farm has been weighed as follows:
    (i) If the harvested acreage is within the allotment, the producer-
manufacturer shall report the total pounds of tobacco produced, the 
date(s) on which such tobacco was weighed, the farm serial number of the 
farm on which it was produced, and the estimated value of such tobacco.
    (ii) If the harvested acreage is in excess of the allotment, the 
producer-manufacturer shall report the total pounds of tobacco produced 
on the farm, the date(s) on which the tobacco was weighed, the farm 
serial number of

[[Page 170]]

the farm on which it was produced, the estimated value of the tobacco, 
and the location of the tobacco. If the required reports are not made, 
penalty shall be paid on the tobacco by the producer-manufacturer, at 
the converted rate of penalty shown on the marketing card issued for the 
farm, when it is moved from the place where it can be conveniently 
inspected by the county FSA committee at any time separate and apart 
from any other tobacco.
    (2) If the producer-manufacturer has excess tobacco and does not pay 
the penalty thereon at the converted rate of penalty shown on the 
marketing card, such producer-manufacturer shall notify in writing the 
buyer of the manufactured product or the buyer of any residue resulting 
from processing the tobacco, at time of sale of such product or residue, 
of the precise amount of penalty due on such manufactured product or 
residue. In such event, the producer-manufacturer shall immediately 
notify the State FSA executive director and shall account for the 
disposition of such tobacco by furnishing the State FSA executive 
director a report on a form to be furnished by such State FSA executive 
director, showing the name and address of the buyer of the manufactured 
products or residue, a detailed account of the disposition of such 
tobacco and the exact amounts of penalty due with respect to each such 
sale of such products or residue to indicate, together with copies of 
the written notice that was given to the buyer of such products or 
residue to indicate the exact amount of the penalty due.
    (3) Failure to file the report required in paragraph (f)(2) of this 
section, or the filing of a report which is found by the State FSA 
committee to be incomplete or incorrect, shall be considered failure of 
the producer-manufacturer to account for the disposition of tobacco 
produced on the farm and the allotment next established for the farm 
shall be reduced for such failure, except that such reduction for any 
such farm shall not be made if it is established to the satisfaction of 
the county and State FSA committees, that:
    (i) The failure to furnish such report of disposition was 
unintentional and the producer-manufacturer on such farm could not 
reasonably have been expected to furnish such report of disposition. 
However such failure will be construed as intentional unless such report 
of disposition is furnished and payment of all additional penalty is 
made, or
    (ii) No person connected with such farm for the year for which the 
allotment is being established caused, aided, or acquiesced in the 
failure to furnish such report. The producer-manufacturer shall be 
liable for the payment of penalty.
    (g) Amount of allotment or quota reductions--(1) Burley tobacco. For 
burley tobacco, the farm marketing quota determined for a farm for the 
current year shall be reduced by that amount of tobacco which is 
involved in a marketing quota violation as described in paragraphs (a), 
(b), (c), (d), or (e), of this section which occurred in any prior year. 
However, the amount of such reduction shall not exceed the current year 
farm marketing quota. The county FSA committee shall determine the 
amount of tobacco involved in the marketing quota violation. If the 
actual quantity of tobacco involved in such violation is unknown, the 
county FSA committee shall determine the quantity by considering both 
the condition of the crop during production, if known, and such other 
information as is available.
    (2) Kinds of tobacco except burley tobacco. The amount of reduction 
in the allotment for the current year for a violation described in 
paragraphs (a), (c), (d), (e), or (f) of this section shall be that 
percentage, but not to exceed 100 percent, which the amount of the 
tobacco involved in the violation is of the respective farm marketing 
quota for the farm for the year in which the violation occurred times 
the current year farm acreage allotment. The quantity of tobacco in 
violation shall be determined by the county FSA committee. If known, the 
actual quantity shall be determined by the county FSA committee to be 
the amount of tobacco involved in the violation. If the actual quantity 
is unknown, determine the quantity by taking into consideration the 
condition of the crop during production, if known, and such other 
information that is available.

[[Page 171]]

    (h) Allotment or quota reduction for combined farms. If the farm 
involved in the violation is combined with another farm prior to the 
reduction, the allotment or quota reduction shall be applied as 
heretofore provided in this section to that portion of the farm acreage 
allotment or farm marketing quota for which a reduction is required.
    (i) Allotment or quota reduction for divided farms. If the farm 
involved in the violation has been divided prior to the reduction, the 
reduction shall be applied as heretofore provided in this section to the 
allotments or quota for the divided farms required to be reduced.
    (j) Quota reductions for flue-cured tobacco. For flue-cured tobacco 
only, if an acreage allotment reduction is made under this section, the 
marketing quota shall be reduced to reflect such reduction in an amount 
determined by multiplying the acreage reduction by the farm yield.
    (k) County administrative hearing in connection with violations. 
Except for the failure to return a marketing card, the allotment or 
quota for any farm shall not be reduced for a violation under this 
section until the operator of the farm has been afforded an opportunity 
to discuss the nature and extent of the violation with the county FSA 
committee. If after having been afforded an opportunity to discuss a 
violation with the county FSA committee the farm operator fails or 
refused to discuss the violation, the county FSA committee shall take 
action as required by this part.
    (l) Sequence of allotment or quota reductions. For burley and flue-
cured tobacco, if the tobacco farm acreage allotment or farm marketing 
quota for a farm is to be reduced in the current year because of both:
    (1) A violation, and
    (2) Overmarketings in a prior year, the reduction in the farm 
acreage allotment or farm marketing quota for the violation shall be 
made before making the reduction for overmarketings.
    (m) Correction of farm records. For burley and flue-cured tobacco, 
where farm data for actual marketings are determined to be incorrect 
because of a violation, the records shall be corrected for each farm on 
which the tobacco was produced, and for each farm whose card was used to 
identify marketings.
    (n) Report on Form MQ-92, Estimate of Production. An estimate of 
production, Form MQ-92, shall be prepared immediately prior to harvest 
for each farm for which the county or State FSA committee or a 
representative of the county or State FSA committee believes than an MQ-
92 for the farm would be in the best interests of the program. The 
county FSA committee shall have the authority to visit any farm for the 
purposes of making an estimate of production or determination of planted 
acreage needed to complete an estimate of production.
    (o) Effect of false identification on establishing future farm 
marketing quotas. Notwithstanding any other provision of this section, 
with respect to burley or flue-cured tobacco, if a producer falsely 
identifies such tobacco as having been produced on or marketed from a 
farm, the quantity of the tobacco which is falsely identified shall be 
considered, for the purpose of establishing future farm marketing 
quotas, as having been produced on both the farm for which it was 
identified as having been produced, and the farm of actual production, 
if known, or, as the case may be, such quantity of tobacco shall be 
considered as actually marketed from the farm.

[55 FR 39914, Oct. 1, 1990, as amended at 57 FR 43582, Sept. 21, 1992]



Sec. 723.409  Producer violations, penalties, false identification collections and remittances by dealers, buyers, handlers, warehouses, and other parties; 
          related issues.

    (a) Generally--(1) Circumstances in which penalties are due. A 
penalty shall be due on all marketings from a farm which are:
    (i) In excess of the applicable quota or allotment;
    (ii) Made without a valid marketing card;
    (iii) Made under circumstances where a buyer or dealer, or their 
agents, know, or have reason to know, that the tobacco was, or is, 
marketed in a manner which by itself or in combination with other 
marketings is designed to, or has the effect of, defeating the purposes 
of the tobacco price support and

[[Page 172]]

production adjustment program, avoiding marketing quota limitations, or 
otherwise avoiding provisions of this part or part 1464 of this title;
    (iv) Falsely identified; or,
    (v) Marketings for which the producer or other party fails to make a 
proper account as required by the provisions of this part.
    (2) Amount of the penalty. The amount of the penalty shall be the 
amount computed by multiplying the penalty rate by the penalty quantity.
    (3) Penalty rate. The penalty rate for purposes of this section is 
that rate which is computed as the penalty rate per pound for the 
applicable kind of tobacco under Sec. 723.308, except to the extent that 
a converted penalty rate may be used as provided for in this section.
    (4) Penalty quantity. The penalty quantity for purposes of this 
section is the quantity of tobacco that is determined by the county FSA 
committee subject to the Director's review to be subject to penalty, 
provided further that:
    (i) For burley and flue-cured tobacco, the penalty quantity for 
purposes of this section shall be the amount of marketings from the farm 
in excess of 103 percent of the farm's effective marketing quota for 
that year, except that if the violation involves false identification or 
a failure to account for tobacco, the FSA may, in its discretion, 
depending on the nature of the violations, use as the penalty quantity 
an amount up to 25 percent of the farm's effective marketing quota plus 
100 percent of the farm yield on any excess acreage for the farm 
(acreage planted in excess of the allotted acres, as estimated or 
determined).
    (ii) For tobacco other than burley and flue-cured tobacco, the 
penalty quantity shall be the amount of marketings from the farm in 
excess of the farm's marketing quota provided further, that in order to 
aid in the collection of the penalty the FSA may endeavor, to the extent 
practicable, to apply the penalty to all of the farm's marketing by 
converting the full penalty rate to a converted proportionate penalty 
rate which rate may be identified on the producer's marketing card and 
collected and remitted accordingly. In making the calculation of the 
converted penalty rate, the agency shall take into account any carryover 
tobacco applicable for the farm. If an erroneous penalty rate is shown 
on the marketing card, then the producer of the tobacco and the producer 
who marketed the tobacco shall be liable for any balance due.
    (5) Limitations on reduced penalty quantities. No penalty shall be 
assessed at less than the maximum amount unless it is determined by the 
county FSA committee, with the concurrence of the State FSA committee, 
that all of the following exist with respect to such violation:
    (i) The violation was inadvertent and unintentional;
    (ii) All of the farm's production has been accounted for and there 
are no excess marketings for which there are penalties outstanding;
    (iii) The records for all involved farms have been corrected to show 
the marketings involved; and
    (iv) The false identification or failure to account did not give the 
producer an advantage under the program.
    (6) Effect of improper, invalid, deceptive or unaccounted for 
marketings on penalty quantity calculation. Any marketing made without a 
valid marketing card, falsely identified, or unaccounted for in 
accordance with the requirements of this part, or made under 
circumstances which are designed to, or have the effect of, defeating 
the purpose of the tobacco marketing quota and price support program, 
avoiding any limitation on marketings, avoiding a penalty, or avoiding 
compliance with, or the requirements of, any regulation under this part 
or under part 1464 of this title, shall be considered an excess 
marketing of tobacco. Further, such marketings shall, unless shown to 
the satisfaction of the county FSA committee to be otherwise, be 
considered, where relevant, to be in excess of 103 percent of the 
applicable marketing quota for the farm, and shall be subject to a 
penalty at the full penalty rate for each pound so marketed.
    (7) Pledging of tobacco by an ineligible producer. In addition to 
any other circumstances in which a penalty may be assessed under this 
part, the marketing or pledging for a price support loan of any tobacco 
when the producer is not

[[Page 173]]

considered to be an ``eligible producer'' under the provisions of part 
1464 of this title, shall be considered to be a false identification of 
tobacco and shall be dealt with accordingly. This remedy shall be in 
addition to all others as may apply.
    (8) Failures to make certain reports. If any producer who 
manufactures tobacco products from tobacco produced by such person or 
another fails to make the report required by Sec. 723.408(f) or 
otherwise required by this part, or makes a false report, such producer 
shall be deemed to have failed to account for the disposition of tobacco 
produced on the farm(s) involved. The filing of a report by a producer 
under Sec. 723.408 of this part which the State FSA committee finds to 
be incomplete or incorrect shall constitute a failure to account for the 
disposition of tobacco produced on the farm.
    (b) Special provisions for tobacco buyers, dealers, handlers, 
warehouse operators and others who acquire, handle, or facilitate the 
marketing of tobacco. Notwithstanding the provisions of paragraph (a) of 
this section and other provisions of this part:
    (1) Unless such amount has been remitted by another in accord with 
the provisions of this part, a dealer, buyer, warehouse operator or 
other person handling tobacco shall collect, and remit to FSA, an amount 
equal to the full penalty rate provided for in Sec. 723.208 times the 
quantity of tobacco involved where the tobacco is not identified with a 
valid producer or dealer card, the tobacco is sold under suspicious 
circumstances, or when there is reason to suspect that the tobacco may 
be subject to a penalty for any reason or may be marketed in derogation 
of the goals and purposes of the tobacco support program. For purposes 
of the preceding sentence ``handling'' shall include any services 
provided with respect to the tobacco, and any facilitation of the 
marketing of tobacco regardless of the level or amount of contact, if 
any, that the party may actually have with the tobacco.
    (2) The amount of the penalty required to be collected may be 
deducted from the proceeds due a seller and all parties chargeable under 
paragraph (b)(1) of this section shall be jointly and severally liable 
for insuring that the monies are remitted to FSA except to the extent 
that the Director shall allow for an exemption to facilitate the 
marketing of tobacco, or for some other reason.
    (3) The collection and remittance of penalty shall be in addition to 
any other obligations that such person may have to collect other 
amounts, including other penalties or assessments due on such 
marketings.
    (4) If a penalty is collected and remitted by a buyer, dealer, or 
warehouse operator that is shown not to be due or only partially due, 
then the overpayment shall be refunded to the appropriate party. It is 
the responsibility of the person that collected the penalty and the 
person that sold the tobacco involved to show to the satisfaction of the 
FSA that such penalty is not due in the full amount collected.
    (c) Canceled allotment or quota. If part or all of the tobacco 
produced on a farm has been marketed and the farm acreage allotment or 
farm marketing quota for the farm is canceled, any penalty due on the 
marketings shall be paid by the producers.
    (d) Overmarketing proportionate share of effective farm marketing 
quota-burley or flue-cured tobacco. With respect to burley or flue cured 
tobacco, if the county FSA committee determines that the farm operator 
or another producer on the farm has marketed more than 103 percent of 
such operator's or producer's share of the effective farm marketing 
quota with intent to deprive some other producer on the farm from 
marketing such producer's proportionate share of the same crop of 
tobacco, such operator or other producer shall be liable for marketing 
penalties at the full rate per pound for each pound of tobacco marketed 
above 103 percent of such producer's share of the effective farm 
marketing quota. However, the sum of such penalties shall not exceed the 
total penalties due on total marketings above 103 percent of the 
effective farm marketing quota for the farm on which such tobacco was 
produced. Before assessment of penalty pursuant to this paragraph, a 
hearing shall be scheduled by the county FSA committee and the operator 
and affected producers shall be invited to be

[[Page 174]]

present, or to be represented, to determine whether the operator or 
another producer on the farm has marketed more than 103 percent of such 
person's proportionate share of the effective farm marketing quota. The 
notice of the hearing shall request the farm operator and affected 
producers to bring to the hearing floor sheets and other relevant 
supporting documents. At least two members of the county FSA committee 
shall be present at the hearing. The hearing shall be held at the time 
and place named in the notice and any action taken to impose penalty 
shall be taken after the hearing. If the farm operator or other affected 
producer does not attend the hearing, or is not represented, the county 
FSA committee shall make a determination on the basis of available 
records and shall assess any penalties that may be required against the 
applicable person.
    (e) Penalties not to be assessed-burley or flue-cured tobacco. With 
respect to burley or flue-cured tobacco, if the operator or another 
producer on the farm markets a quantity of tobacco above 103 percent of 
the effective farm marketing quota for the farm and such overage is 
found to have been caused by the failure to record or improper recording 
of tobacco poundage data on the marketing card, that amount of the 
penalty as was due to such failure to record or improper recording will 
not be required to be paid by the farm operator or other producer if:
    (1) For amounts of $100 or less, the county FSA committee, and
    (2) For amounts over $100, the county FSA committee with approval of 
the State FSA committee determines that each of the following conditions 
is applicable:
    (i) The failure to record or incorrect recording resulted from 
action or inaction of a marketing recorder or another FSA employee, and
    (ii) The farm operator or another producer on the farm had no 
knowledge of such failure or error. Overmarketings for a farm for which 
the marketing penalty will not be paid pursuant to the provisions of 
this paragraph shall be determined based upon the correct effective farm 
marketing quota and correct actual marketings of tobacco from the farm.
    (f) Refusal to contribute required assessments. A marketing penalty 
at the full rate per pound is due on each pound of tobacco marketed from 
a farm when the farm operator or producers refuse to pay no-net-cost or 
marketing assessments as provided in part 1464 of this title. In all 
such cases, the farm from which the tobacco has been produced shall be 
considered to have a marketing quota of zero pounds and an allotment of 
zero acres.

[55 FR 39914, Oct. 1, 1990, as amended at 57 FR 43583, Sept. 21, 1992; 
63 FR 11582, Mar. 10, 1998]



Sec. 723.410  Penalties considered to be due from warehouse operators, dealers, buyers, and others excluding the producer.

    Subject to any additional requirements or provisions for remittances 
which are contained in Sec. 723.409 of this part, any marketing of 
tobacco under one of the following conditions shall be considered to be 
a marketing of excess tobacco.
    (a) Auction sale without burley or flue-cured tobacco marketing 
card. For burley and flue-cured tobacco, any first marketing of tobacco 
at an auction sale by a producer which is not identified by a valid 
marketing card at the time of marketing shall be considered to be a 
marketing of excess tobacco and the penalty thereon shall be collected 
and remitted by the warehouse operator unless prior to marketing, an AMS 
inspection certificate is obtained showing that the tobacco is of a kind 
not subject to marketing quotas.
    (b) Auction sale without dark air-cured, fire-cured, or Virginia 
sun-cured tobacco marketing card. For dark air-cured, fire-cured, or 
Virginia sun-cured tobacco, any first marketing of tobacco at an auction 
sale by a producer which is not identified by a valid marketing card 
(MQ-76 or MQ-77 (including sale memo)) on or before the last warehouse 
sale day of the marketing season, or within 4 weeks following the date 
of marketing, whichever comes first, shall be identified by an MQ-82, 
and shall be presumed, subject to rebuttal, to be a marketing of excess 
tobacco. The penalty thereon shall be paid by the warehouse operator.
    (c) Burley or flue-cured tobacco nonauction sale. For burley and 
flue-cured

[[Page 175]]

tobacco, any nonauction marketing of tobacco which:
    (1) Is not identified by a valid marketing card and recorded at the 
time of marketing on MQ-79, Dealer's Report, the marketing card, and MQ-
72-2, Report of Tobacco Nonauction Purchase; or,
    (2) If purchased prior to the opening of the local auction market 
for the current year, it is not identified by a valid marketing card and 
recorded on MQ-79, the marketing card, and MQ-72-2, Report of Tobacco 
Nonauction Purchase not later than the end of the calendar week which 
includes the first sale day of the local auction markets, shall be 
considered a marketing of excess tobacco. The penalty thereon shall be 
collected by the purchaser of such tobacco, and remitted with MQ-79, 
unless prior to marketing an AMS inspection certificate is obtained 
showing that the tobacco is of a kind not subject to marketing quotas.
    (d) Nonauction sale, except burley, flue-cured, and cigar tobacco. 
For dark air-cured, fire-cured, or Virginia sun-cured tobacco, any 
nonauction sale of tobacco which:
    (1) Is not identified by an MQ-76 or MQ-77 (including a valid sale 
memo); and
    (2) Recorded on MQ-79, Dealer's Record, not later than the end of 
the calendar week in which the tobacco was purchased; or
    (3) If purchased prior to the opening of the local auction market 
for the current year, is not identified by an MQ-76 or MQ-77 (including 
a valid sale memo) and recorded on MQ-79 not later than the end of the 
calendar week which includes the first day of the local auction markets, 
shall be presumed, subject to rebuttal, to be a marketing of excess 
tobacco. The penalty thereon shall be paid by the purchaser of such 
tobacco.
    (e) Failure to obtain an MQ-76 and sale memo, and failure to record 
a sale on MQ-76-cigar tobacco. Any sale of cigar tobacco for which a 
dealer:
    (1) If within quota, fails to record the sale on the marketing card 
issued for the farm, or
    (2) If the tobacco was produced on a farm for which an excess 
marketing card was issued, fails to obtain a valid sale memo by the end 
of the sale date, shall be presumed, subject to rebuttal, to be a 
marketing of excess tobacco. The penalty thereon shall be paid by the 
buyer who fails to make the required record.
    (f) Leaf account tobacco. If warehouse resales exceed prior leaf 
account purchases, such marketings shall be considered to be a marketing 
of excess tobacco unless such warehouse operator furnishes evidence 
acceptable to the State FSA committee showing that such marketing is not 
a marketing of excess tobacco. However, evidence acceptable to the State 
FSA committee shall not be based on the warehouse operator's proof of 
purchase of tobacco that is not in the form normally marketed by 
producers even though such evidence indicates that resales exceed prior 
leaf account purchases as a result of the blending of tobacco, which was 
not in the form normally marketed by producers, with the warehouse 
operator's prior purchases of leaf account tobacco.
    (g) Dealer tobacco--burley and flue-cured. The burley or flue-cured 
tobacco resales by a dealer (as shown or due to be shown on Form MQ-79), 
which are in excess of such dealer's total prior purchases of the 
respective kind of tobacco shall be considered to be a marketing of 
excess tobacco and penalty thereon shall be due at the time the 
marketing takes place which results in the excess. If the resale which 
results in penalty being due is made at auction, the warehouse shall 
deduct the penalty from the proceeds of the sale and shall remit the 
penalty to the marketing recorder. If the resale which results in 
penalty being due is made at nonauction, the purchaser shall deduct the 
penalty from the proceeds of the sale and shall remit the penalty to the 
applicable State FSA office.
    (h) Resales not reported. Any resale of tobacco which is required to 
be reported by a warehouse operator or dealer, but which is not reported 
within the time and in the manner required, shall be considered to be a 
marketing of excess tobacco, unless and until such warehouse operator or 
dealer furnishes proof of such resale which is acceptable to the State 
FSA executive director. The penalty thereon shall

[[Page 176]]

be paid by the warehouse operator or dealer who fails to make the report 
as required.
    (i) Marketing falsely identified by a person other than the producer 
of the tobacco. If any marketing of tobacco by a person other than the 
producer is identified by a marketing card other than the marketing card 
issued for the farm on which the tobacco was produced, and the source of 
production of the tobacco is unknown, such marketing shall be presumed, 
subject to rebuttal, to be a marketing of excess tobacco. The marketing 
quota penalty shall be paid by the person who marketed the tobacco.
    (j) Carryover tobacco, except cigar tobacco. Any tobacco on hand, 
except for cigar tobacco, and reported or due to be reported under 
Sec. 723.403 of this part for warehouse operators and Sec. 723.404 of 
this part for dealers shall be included as a resale in determining 
whether an account for a kind of tobacco has excess resales. Unless the 
warehouse operator furnishes proof acceptable to the State FSA committee 
and unless the dealer furnishes proof acceptable to the State FSA 
executive director, showing that such account does not represent excess 
tobacco, penalty at the full rate for the respective kind of tobacco 
shall be paid thereon by such warehouse operator or dealer.
    (k) Unrecorded sale of cigar tobacco. Any sale of cigar tobacco 
which is not recorded on MQ-79 (CF&B), Buyer's Record Book, by the 10th 
day of the month following the month during which the sale dated 
occurred shall be presumed, subject to rebuttal, to be a marketing of 
excess tobacco. The penalty thereon shall be paid by the buyer who fails 
to make the record.
    (l) Floor sweepings. Any person who markets floor sweepings in 
excess of allowable floor sweepings shall be subject to a civil penalty 
of 150 percent of the average market price for the immediately preceding 
marketing year, as determined by the U.S. Department of Agriculture. The 
calculated penalty rate shall be rounded to the nearest whole cent. Any 
floor sweepings on hand more than 30 days (15 days with respect to flue-
cured tobacco) after the warehouse closes for the auction season shall 
be considered marketed. The floor sweepings on hand shall be weighed by 
the warehouse operator and the weight shall be certified by the 
warehouse operator, such weighing to be done in the presence of a 
representative of either the county FSA committee or State FSA 
committee. Floor sweepings which are destroyed in the presence of a 
representative of the county FSA committee, within 30 days (15 days with 
respect to flue-cured tobacco) after the warehouse closes shall not be 
considered as marketed when determining the quantity of floor sweepings 
marketed. If the county FSA committee determines, after the warehouse 
has been closed for the auction season for more than 30 days (15 days 
with respect to flue-cured tobacco), that the cumulative quantity of 
floor sweepings marketed and considered marketed in the current 
marketing year is in excess of the allowable floor sweepings, the person 
responsible for such marketings shall be given notice of the 
determination and shall be afforded an opportunity to request 
reconsideration of such determination in accordance with the provisions 
of part 780 of this chapter. A determination that a civil penalty is due 
for marketing floor sweepings in excess of the allowable floor sweepings 
shall not become final and shall not be assessed until such person has 
been afforded an opportunity for a hearing and such person has exhausted 
the applicable administrative remedies. The notice of assessment shall 
require such person to pay the civil penalty to the ``Farm Service 
Agency, USDA'' within 15 days after the mailing of the notice.
    (m) Blending tobacco not in the form normally marketed by 
producers--burley and flue-cured tobacco. Tobacco purchased from 
processors or manufacturers that is considered not in the form normally 
marketed by producers that is blended with tobacco in the form normally 
marketed by producers shall not be credited as a purchase to the 
dealer's or warehouse operator's account by the State FSA committee when 
reconciling the warehouse operator's leaf account or the dealer's 
purchases and resales. Tobacco not in the form normally marketed by 
producers that is blended with other tobacco shall be deemed to be 
excess tobacco

[[Page 177]]

and penalty shall be due on the pounds of tobacco by which a warehouse 
operator's or dealer's resales exceed prior purchases.
    (n) Advances and other cases in which the producer's marketing card 
is used improperly. For tobacco of any kind to which this part applies, 
if tobacco is marketed by a person by using the producer's marketing 
card or the tobacco is pledged for a price support loan by using that 
card, but under the provisions of part 1464 of this title, the producer 
is deemed to have not been an ``eligible producer'' with respect to the 
disposition of that tobacco at the time because of an advance or other 
preauction arrangement, such disposition of the tobacco shall be 
considered a false identification of the tobacco and may be considered 
to be a marketing of excess tobacco. In such cases, the person who paid 
the advance, took possession of the tobacco, or made the agreement with 
the producer which made the producer no longer an ``eligible producer'' 
with respect to the tobacco, shall be jointly and severally liable with 
the producer for any penalty with respect to such disposition which is 
levied against the producer under the provisions of this part and 
additionally, if such disposition is determined to be a marketing of 
excess tobacco, shall be liable for a penalty calculated by using the 
penalty rate for the tobacco involved multiplied by the pounds of 
tobacco involved. These remedies shall be in addition to any other 
remedies which may apply, including but not limited to, any liability 
for a refund of any price support loan advances which were paid in the 
name of, or for the account of, the producer of the tobacco.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21444, May 9, 1991; 57 
FR 43583, Sept. 21, 1992; 63 FR 11583, Mar. 10, 1998]



Sec. 723.411  Records and reports regarding hauling, processing, and storage of tobacco.

    (a) Trucker records. Each trucker shall keep such records as will 
enable such trucker to furnish the State FSA office a report with 
respect to each lot of tobacco received by such trucker showing.
    (1) The name and address of the producer;
    (2) The date of receipt of the tobacco;
    (3) The number of pounds received;
    (4) The location where received; and
    (5) The name and address of the person to whom it was delivered.
    (b) Processor records. Each firm engaged in the business of 
processing tobacco shall keep records with respect to each lot of 
tobacco received by such firm showing:
    (1) The name and address of producer, dealer, warehouse operator, or 
other person for whom the tobacco was received.
    (2) The date of receipt of tobacco.
    (3) The number of pounds (green weight) received.
    (4) The purpose for which tobacco was received (redrying or 
stemming).
    (5) The amount of any advance or loan made by such person on the 
tobacco.
    (6) The disposition of the tobacco including the net weight of the 
tobacco processed and the number of containers by classification 
(strips, stems, scrap or leaf).
    (7) Person to whom delivered and pounds involved.
    Any such firm shall report this information to the State FSA office 
of the State in which the business is located within 15 days of the end 
of the marketing year, except for tobacco handled for an association 
operating the price support program and tobacco purchased at auction or 
tobacco which was previously reported on Form MQ-79. Where such firm 
qualifies for the exemption in Sec. 723.405 of this part, such firm is 
required to report only such tobacco received that does not belong to 
such firm.
    (c) Records for stored tobacco. Each firm engaged in storing 
unprocessed tobacco shall keep records with respect to each lot of 
unprocessed tobacco received by such firm showing:
    (1) The name and address of producer, dealer, warehouse operator, 
marketing agent or other person for whom the tobacco was received;
    (2) The date and receipt of the tobacco;
    (3) The number of pounds received;
    (4) The amount of any advance or loan made by such firm;

[[Page 178]]

    (5) The disposition of the tobacco; and
    (6) The person to whom delivered and the pounds involved.
    Any such firm shall report this information to the State FSA office 
of the State in which the business is located within 15 days of the end 
of the marketing year, except for tobacco handled for an association 
operating the price support program and tobacco purchased by such firm 
at auction or for which such firm had previously reported on Form MQ-79. 
Where such firm qualifies for the exemption in Sec. 723.405 of this 
part, the firm is only required to report such tobacco received for 
storage that does not belong to such firm.



Sec. 723.412  Separate records and reports from persons engaged in tobacco related businesses.

    Any person who is required to keep any record or make any report as 
a warehouse operator, dealer, buyer, trucker, or as a person engaged in 
the hauling, processing, or storage of tobacco, and who is engaged in 
more than one such business, shall keep such records as will enable such 
person to make separate reports for each such business in which such 
person is engaged to the same extent for each such business as if the 
person were engaged in no other business.



Sec. 723.413  Length of time records and reports are to be kept.

    Records to be kept and copies of the reports required to be made by 
any person under this subpart shall be on a marketing year basis and 
shall be retained for 3 years after the end of the marketing year. 
Records shall be kept for such longer period of time as may be requested 
in writing by the State FSA executive director, or the Director.



Sec. 723.414  Failure to keep records and make reports or making false report or record.

    (a)(1) Failure to keep records and make reports. Under the 
provisions of section 373(a) of the Act, any warehouse operator, 
processor, buyer, dealer, trucker, or person engaged in the business of 
sorting, redrying, stemming, packing, or otherwise processing tobacco 
who fails to make any report or keep any record as required, or who 
makes any false report or record, is guilty of a misdemeanor, and upon 
conviction shall be subject to a fine of not more than $500 for each 
offense. In addition, any tobacco warehouse operator, dealer, or buyer 
who fails, upon being requested to do so, to remedy a violation by 
submitting complete reports and keeping accurate records shall be 
subject to an additional fine, not to exceed $5,000.
    (2) Failure to obtain producer marketing card or sale memo. The 
failure of any dealer or warehouse operator to obtain a:
    (i) Producer's marketing card, MQ-76 and MQ-77, to identify a sale 
of producer tobacco, or
    (ii) Dealer identification card, MQ-79-2, to cover a resale of 
tobacco, shall constitute a failure to make a report.
    (b) False representation--warehouse operators, dealers, and 
processors. The monetary penalties described in this part are in 
addition to penalties prescribed by other criminal statutes including 18 
U.S.C. 231 which provides for a fine of not more than $10,000 or 
imprisonment for not more than 5 years, or both, for a person convicted 
of knowingly and willingly committing such acts as making a false 
acreage report, altering a marketing card, falsely identifying tobacco 
or buying and selling unused ``103 percent of quota poundage'' on 
marketing cards.
    (c) Misrepresentation and scheme or device. A warehouse operator or 
dealer who is determined by FSA to have knowingly:
    (1) Adopted any scheme or device which tends to defeat the purpose 
of the tobacco program.
    (2) Made any fraudulent representation,
    (3) Misused a MQ-76 or MQ-79-2, or
    (4) Sold excess tobacco, shall pay a marketing quota penalty as 
prescribed in this part.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21444, May 9, 1991]



Sec. 723.415  Examination of records and reports.

    For the purpose of ascertaining the correctness of any report made 
or

[[Page 179]]

record kept, or of obtaining the information required to be furnished, 
in any report, but not so furnished, any warehouse operator, processor, 
dealer, buyer, trucker, or person engaged in the business of sorting, 
redrying, stemming, picking, or otherwise processing tobacco for 
producers, shall make available at one place for examination by 
representatives of the State FSA executive director and by employees of 
the Office of Investigation and Office of Audit, and of the Tobacco and 
Peanuts Division of the Farm Service Agency, U.S. Department of 
Agriculture upon written request by the State FSA executive director, 
all such books, papers, records, lot tickets, tobacco sale bills, buyer 
adjustment invoices, accounts, canceled checks, check register, check 
stubs, correspondence, contracts, documents, warehouse bill-out invoices 
or daily summary journal sheet, the tissue copy of Form MQ-72-l, Report 
of Tobacco Auction Sale, journal of producer marketing cards retained at 
warehouse and memoranda as the State FSA executive director has reason 
to believe are relevant and are within the control of such person.



Sec. 723.416  Information confidential.

    All data reported to or acquired by the Secretary pursuant to the 
provisions of this subpart shall be kept confidential by all officers 
and community committees, and all county FSA office employees. Only such 
data so reported or acquired as the Deputy Administrator deems relevant 
shall be disclosed by them, and then only in a suit or administrative 
hearing under title III of the Act. The provisions of this section shall 
not be deemed to prohibit the issuance of general statements based upon 
the report of a number of parties which statements do not identify the 
information furnished by any person.



Subpart E--Establishing Burley and Flue-Cured Tobacco National Marketing 
                                 Quotas

    Source: 63 FR 11583, Mar. 10, 1998, unless otherwise noted.



Sec. 723.501  Scope.

    This subpart sets out regulations for setting annual national 
marketing quotas for burley and flue-cured tobacco based on the purchase 
intentions of certain manufacturers of cigarettes and on other factors. 
It also sets out penalty provisions for manufacturers who fail to 
purchase, within the tolerances set in this part, the amount of domestic 
tobacco, by kind, reflected in the stated intention as accounted for in 
accordance with this subpart.



Sec. 723.502  Definitions.

    In addition to the definitions set forth at Sec. 723.104, the 
definitions set forth in this section shall be applicable for purposes 
of administering the provisions of this subpart.
    CCC. The Commodity Credit Corporation, an instrumentality of the 
USDA.
    Domestic manufacturer. A domestic manufacturer of cigarettes.
    Domestic manufacturer of cigarettes. A manufacturer, who as 
determined by the Director, produces and sells more than 1 percent of 
the cigarettes produced and sold in the United States annually.
    Price support inventory. The inventory of tobacco which, with 
respect to a particular kind of tobacco, has been pledged as collateral 
for a price support loan made by CCC through a producer-owned 
cooperative marketing association.
    Producer owned cooperative marketing associations. Those 
associations or their successors, which by law act as agents for 
producers for price support loans for tobacco, and which were, as of 
January 1, 1996, for burley and flue-cured tobacco, the Burley Tobacco 
Growers Cooperative Association, the Burley Stabilization Corporation, 
and the Flue-Cured Tobacco Cooperative Stabilization Corporation.
    Unmanufactured tobacco. Stemmed and unstemmed leaf tobacco, stems, 
trimmings, and scrap tobacco.



Sec. 723.503  Establishing the quotas.

    (a) General. Subject to the 3-percent adjustment provided for in 
paragraph (b) of this section, the annual marketing quotas for burley 
and flue-cured tobacco shall be calculated for each

[[Page 180]]

marketing year for each kind separately as follows:
    (1) Domestic manufacturer purchase intentions. First, for each kind 
and year, the Director shall calculate the aggregate relevant purchaser 
intentions as declared or set under this section.
    (2) Exports. Next, the Director shall add to the total determined 
under paragraph (a)(1) of this section the amount which is equal to the 
Director's determination of the average quantity of exported domestic 
leaf tobacco of the applicable kind for the past 3 marketing years. For 
this purpose, exports include unmanufactured tobacco only, including, 
but not limited to, stemmed and unstemmed leaf tobacco, stems, 
trimmings, and scrap tobacco, and excludes tobacco contained in 
manufactured products including, but not limited to, cigarettes, cigars, 
smoking tobacco, chewing tobacco, snuff and semi-processed bulk smoking 
tobacco. The quantity of exports for the most recent year, as needed, 
may be estimated.
    (3) Reserve stock level adjustment. The Director may then adjust the 
total calculated by adding the sums of paragraphs (a)(1) and (a)(2) of 
this section, by making such adjustment which the Director, in his 
discretion, determines necessary to maintain inventory levels held by 
producer loan associations for burley and flue-cured tobacco at the 
reserve stock level. For burley tobacco, the reserve stock level for 
these purposes is the larger of 50 million pounds farm sales weight or 
15 percent of the previous year's national marketing quota. For flue-
cured tobacco, the reserve stock level for these purposes is the larger 
of 100 million pounds farm sales weight or 15 percent of the previous 
year's national marketing quota. Any adjustment under this clause shall 
be discretionary taking into account supply conditions; however, for 
burley tobacco no downward adjustment under this clause may exceed the 
larger of 35 million pounds (farm sales weight) or 50 percent of the 
amount by which loan inventories exceed the reserve stock level.
    (b) Additional 3-percent adjustment. The amount otherwise calculated 
under paragraph (a) of this section may be adjusted by the Director by 3 
percent of the total. This adjustment is discretionary and may be made 
irrespective of whether any adjustment has been made under paragraph 
(a)(3) of this section and may be made to the extent the Director deems 
such an adjustment is in the best interest of the program.
    (c) Dates of announcement. For flue-cured tobacco, the quota 
determination should be announced by December 15 preceding the marketing 
year. For burley, the announcement should be made by February 1 
preceding the marketing year.



Sec. 723.504  Manufacturers' intentions; penalties.

    (a) Generally. Each domestic manufacturer shall, for each marketing 
year, for burley and flue-cured tobacco separately, submit a statement 
of its intended purchases of eligible tobacco by the date prescribed in 
paragraph (d) of this section; further, at the end of the marketing 
year, each such manufacturer shall submit a statement of its actual 
countable purchases of eligible tobacco for that marketing year, by 
kind, for burley and flue-cured tobacco. For these purposes, countable 
purchases of eligible tobacco shall be as defined in, and determined 
under, paragraph (b) of this section. If a domestic manufacturer fails 
to file a statement of intentions, the Director shall declare the amount 
which will be considered that manufacturer's intentions for the 
marketing year. That declaration by the Director shall be based on the 
domestic manufacturer's previous reports, or such other information as 
is deemed appropriate by the Director in the Director's discretion. 
Notice of the amount so declared shall be forwarded to the domestic 
manufacturer. If the domestic manufacturer fails to file a year-end 
report or files an inaccurate or incomplete report, then the Director 
may deem that the manufacturer has no purchases to report or take such 
other action as the Director believes is appropriate to fulfill the 
goals of this section. Intentions and purchases of countable tobacco 
will be compared for purposes of determining whether a penalty is due 
from the domestic manufacturer.

[[Page 181]]

    (b) Eligible tobacco for statements of intentions and countable 
purchases toward those intentions. For reports and determinations under 
this section, eligible tobacco for purposes of determining the countable 
purchases under paragraph (a) of this section will be unmanufactured 
domestic tobacco of the relevant kind for use to manufacture, for 
domestic or foreign consumption, cigarettes, semi-processed bulk smoking 
tobacco and other tobacco products. Eligible tobacco for these purposes 
does not include tobacco purchased for export as leaf tobacco, stems, 
trimmings, or scrap. Countable purchases of eligible tobacco shall 
include purchases of eligible tobacco made by domestic manufacturers 
directly from the producers, from a regular auction market, or from the 
price support loan inventory, and shall also include purchases by the 
manufacturer where the manufacturer purchases or acquires the tobacco 
from dealers or buyers who purchased the tobacco for the domestic 
manufacturer during the relevant marketing year directly from a 
producer, at a regular auction market, or from the price support loan 
inventory.
    (c) Weight basis and nature of reports. The weight basis used for 
all reports and comparisons shall be a farm sales weight basis unless 
the Director permits otherwise and all reports will be considered to 
have been made on that basis unless the report clearly states otherwise. 
Submitted reports shall be assumed to cover countable purchases of 
eligible tobacco only, absent indications to the contrary.
    (d) Due dates and addresses for reports. For flue-cured tobacco, the 
domestic manufacturer's statement of intentions shall be submitted by 
December 1 before the marketing year and the year-end report shall be 
submitted by August 20 following the end of the marketing year. Those 
respective dates for burley tobacco shall be January 15 before the 
burley tobacco marketing year and November 20 after the burley tobacco 
marketing year. Reports shall be mailed or delivered to the Director, 
Tobacco and Peanuts Division, STOP 0514, 1400 Independence Avenue, SW, 
Washington, DC 20250-0514.
    (e) Penalties. A domestic manufacturer shall be liable for a penalty 
equal to twice the purchaser's no-net-cost assessment rate per pound for 
the applicable kind of tobacco for the relevant marketing year, if the 
manufacturer's purchases of either burley or flue-cured tobacco for the 
marketing year do not equal or exceed, as determined by the Director, 90 
percent of their stated purchase intentions for that kind of tobacco for 
the relevant marketing year. The Director shall adjust the domestic 
manufacturer's intentions, however, to the extent, that producers have 
not produced the full amount of the national quota for the relevant 
marketing year for the particular kind of tobacco. The burden of 
establishing all purchases shall be with the domestic manufacturer and 
the Director may, in the case of indirect purchases for the 
manufacturer, require that the manufacturer obtain verification of the 
purchases by the dealer who made the purchase from the producer, at a 
regular auction market, or from the price support loan inventory, in 
order to assure that the tobacco is, to the manufacturer, a countable 
purchase. The Director may require such additional information as 
determined needed to enforce this subpart.
    (f) Penalty notice and penalty remittance. Penalties will be 
assessed after notice and an opportunity for hearing before the 
Director. Remittances are to be made to the CCC and will be credited to 
the applicable producer loan association's no-net-cost fund or account 
as provided for in part 1464 of this title.
    (g) Maintenance and examination of records. Each domestic 
manufacturer shall keep all relevant records of purchases, by kind, of 
burley and flue-cured tobacco for a period of at least 3 years. The 
Director, Office of Inspector General, or other duly authorized 
representative of the United States may examine such records, receipts, 
computer files, or other information held by a domestic manufacturer 
that may be used to verify or audit such manufacturer's reports. The 
reasonable cost of such examination or audit may be charged to the 
domestic manufacturer who is the subject of the examination or audit. 
All records examined or received under this part by officials of

[[Page 182]]

the Department of Agriculture shall be kept confidential to the extent 
required by law.



PART 729--PEANUTS--Table of Contents




                      Subpart A--General Provisions

Sec.
729.101  Paperwork Reduction Act assigned number.
729.102  Applicability.
729.103  Definitions.
729.104  Administration.
729.105  Types of peanuts.
729.106  Extent of calculations and rule of fractions.
729.107  Location of farms for administrative purposes.
729.108  Request for reconsideration or appeal.
729.109  Instructions and forms.

 Subpart B--Poundage Quotas, Notices of Quotas, Transfers, and Release 
                           and Reapportionment

729.201  Apportionment of National poundage quota to States.
729.202  Reserve for corrections.
729.203  Quota not produced.
729.204  Temporary seed quota allocation.
729.205  Farms ineligible for farm poundage quota.
729.206  Determining a farm's basic quota.
729.207  Tenants sharing in increased quota.
729.208  Allocation of quota for experimental and research programs.
729.209  Tillable cropland limitation.
729.210  Determining a farm's effective quota.
729.211  Determination of farm yields.
729.212  Approval of farm yield and farm poundage quota and notice to 
          farm operator.
729.213  Erroneous notice of effective farm poundage quota.
729.214  Transfer of quota by sale, lease, owner, or operator.
729.215  Release and reapportionment of quota.
729.216  National poundage quota.

   Subpart C--Marketing Cards, Marketings, Penalties, and Assessments

729.301  Issuance of cards.
729.302  Identification of producer marketings.
729.303  Designation of category for marketing peanuts.
729.304  Marketing card entries.
729.305  Peanuts on which penalties are due and refund of excess penalty 
          collected.
729.306  Farms with one acre or less of peanuts.
729.307  Assessment of penalties; joint and several liability.
729.308  Lien for penalty.
729.309  Persons to pay penalty or collect debts.
729.310  Payment of penalty or other debt.
729.311  Peanuts on which penalties are not to be assessed.
729.312  Reduction or waiver of penalty.
729.313  Failure to comply with program.
729.314  Schemes and devices.
729.315  Handling Segregation 3 peanuts.
729.316  Marketing assessments.
729.317  Increased marketing assessments.

           Subpart D--Recordkeeping and Reporting Requirements

729.401  Peanuts marketed to persons who are not registered handlers.
729.402  Report on marketing card.
729.403  Report of marketing green peanuts.
729.404  Report of acquisition of seed peanuts.
729.405  Report of production and disposition.
729.406  Persons engaged in more than one business.
729.407  Penalty for failure to keep records and make reports.
729.408  Examination of records and reports.
729.409  Length of time records and reports are to be kept.

    Authority: 7 U.S.C. 1301, 1357 et seq., 1372, 1373, 1375, and 7271.

    Source: 56 FR 16211, Apr. 19, 1991, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 729.101  Paperwork Reduction Act assigned number.

    The information collection requirements contained in 7 CFR part 729 
have been approved by the Office of Management and Budget (OMB) in 
accordance with the provisions of 44 U.S.C. chapter 35 and have been 
assigned OMB control number 0560-0006.



Sec. 729.102  Applicability.

    The regulations contained in 7 CFR part 729 are issued in accordance 
with the Agricultural Adjustment Act of 1938, as amended, and are 
applicable to the 1996 through 2002 crops of peanuts. They govern the 
establishment of farm poundage quotas, the issuance of marketing cards, 
the identification of marketings of peanuts, the collection and refund 
of penalties, the keeping of

[[Page 183]]

records, and the making of reports incident thereto. The peanut 
marketing quota and disposition requirements for peanuts for the 1991 
through 1995 crops shall, as applicable, continue to be governed by the 
regulations codified at 7 CFR part 729, as of April 1, 1996.

[56 FR 16211, Apr. 19. 1991, as amended at 61 FR 36999, July 16, 1996]



Sec. 729.103  Definitions.

    (a) Applicability. The definitions set forth in this section shall 
be applicable for all purposes of program administration for peanuts 
except as may otherwise be indicated. The definitions in, and provisions 
of, parts 718, 719, and 720 of this chapter and 1446 of this title are 
hereby made applicable to these regulations unless the context or 
subject matter or the provisions of these regulations require otherwise.
    (b) Terms. The following terms shall be defined as set forth in this 
paragraph.
    Act. The Agricultural Adjustment Act of 1938, as amended.
    Additional peanuts. Any peanuts which are marketed from a farm other 
than peanuts marketed or considered marketed as quota peanuts.
    Base period. The 3 crop years immediately preceding the current year 
for which a basic quota is being established.
    Basic penalty rate. The per pound amount determined by multiplying 
the national support level per ton for quota peanuts, as announced by 
the Secretary for the applicable marketing year, by 1.4 and dividing the 
result by 2000.
    Basic quota. A farm's share of the peanut poundage quota allocated 
to a State. The basic quota for the current year is the preliminary 
quota as adjusted pursuant to this part for any:
    (i) Increase or decrease in the State poundage quota from the 
poundage quota allocated to the State for the preceding year;
    (ii) Reduction in the quota due to nonproduction;
    (iii) Reduction for permanent release of quota from the farm in the 
current year;
    (iv) Permanent transfers of quota to or from the farm for the 
current year; and
    (v) Reallocation of quota to the farm from quotas;
    (A) Reduced for nonproduction.
    (B) Permanently released.
    Buyer. A person, who also may be known as a handler, who:
    (i) Buys or otherwise acquires peanuts in any form;
    (ii) Markets, as a commission merchant, broker, cooperative, agent, 
or in any other capacity, any peanuts for the account of a producer and 
is responsible to the producer for the amount received for the peanuts; 
or
    (iii) Receives peanuts as collateral for, or in settlement of, a 
price support loan.
    CCC. The Commodity Credit Corporation, a financial instrumentality 
within the United States Department of Agriculture.
    Commingled peanuts. Peanuts that were produced on 2 or more farms 
and loaded into a single conveyance in such manner that the peanuts 
become, or can become, intermingled and as a result making it impossible 
to divide the peanuts into separate lots in such manner that the peanuts 
may be identified accurately as to the farm of production at the time of 
marketing.
    Considered produced credit. If the marketings of peanuts from a farm 
in the current year are less than such farm's basic quota, the credit 
granted in the current year (but not to exceed the basic quota 
established for the farm for the current year less the pounds of peanuts 
which were produced and marketed from the farm during the current 
marketing year) for the amount of:
    (i) Peanuts that the county committee determines, according to 
instructions provided by the Deputy Administrator, were not produced 
because of drought, flood or any other natural disaster or any other 
condition beyond the control of the producer. Conditions beyond the 
control of the producer are for this purpose:
    (A) Unavailability of an adequate supply of seed to plant an acreage 
of peanuts that is sufficient to produce the basic quota.
    (B) A court order that prevents access to the farm or otherwise 
prevents the release or transfer of the peanut quota in a manner in 
which considered produced credit could be earned.

[[Page 184]]

    (ii) A peanut poundage quota that was leased and transferred by a 
transfer agreement that was filed before August 1 of the current year to 
the extent the quota was produced or considered produced on the 
receiving farm; provided further, that to the extent that for any base 
period a farm receives credit under this paragraph, such farm may not 
receive credit under paragraph (iii) of this definition.
    (iii) Peanut poundage quota that was voluntarily released for the 
current year, or was leased and transferred by a transfer agreement that 
was filed before August 1 of the current year, if neither of the 
following are applicable:
    (A) Part, or all, of the quota was voluntarily released during any 2 
or more years of the base period, or
    (B) Part, or all, of the quota was leased and transferred to another 
farm within the same county during any 2 or more years of the base 
period.
    (iv) A farm's basic quota that was not produced if the Farmers Home 
Administration or the Farm Service Agency had control of, or title to, 
such farm.
    (v) Peanut quota converted from the production of peanuts in 
accordance with part 704 of this chapter.
    (vi) Quota in an eminent domain pool.
    Converted penalty rate. The per pound amount determined by 
multiplying the basic penalty rate by the result obtained when the 
absolute value (positive or negative) of the difference between the 
acreage of peanuts reported by the farm operator and the acreage of 
peanuts determined to have been planted on the farm as determined in 
accordance with part 718 of this chapter is divided by the acreage of 
peanuts determined for such farm.
    Deputy Administrator. The Deputy Administrator for Farm Programs, 
Farm Service Agency.
    Director. The Director, or Acting Director, Tobacco and Peanuts 
Division, Farm Service Agency, U.S. Department of Agriculture.
    Effective quota. The basic quota as adjusted for the applicable crop 
year for:
    (i) Temporary transfers of quota to or from the farm;
    (ii) Temporary releases of quota from the farm;
    (iii) Temporary reapportionment of quota to the farm;
    (iv) Quota converted and reduced in the current year from the 
production of peanuts pursuant to regulations in part 704 of this 
chapter for the Conservation Reserve Program, or in any other 
regulations for that program or similar program; and
    (v) Temporary seed quota allocated to the farm.
    Electronic (smart) marketing card. A CCC approved standard card for 
use in identifying peanuts when marketed, and which contain a micro 
computer chip on which applicable:
    (i) Farm data is recorded by the county FSA office before the 
marketing card is issued to the farm operator.
    (ii) Marketing data is recorded at the buying point when the peanuts 
are marketed.
    Excess peanuts. The quantity of peanuts:
    (i) Marketed or considered marketed as quota peanuts from the farm 
in the current marketing year in excess of the farm's effective quota, 
or
    (ii) Marketed as contract additional peanuts from the farm in the 
current marketing year in excess of the amount contracted in accordance 
with part 1446 of this title.
    False identification. The deliberate or inadvertent identification 
of peanuts at the time of marketing as being produced on a farm when the 
peanuts were not produced on such farm.
    Farm production history. The sum of the produced and considered 
produced quantity of peanuts for a farm during the base period.
    Farm yield. The yield established for a farm for the immediately 
preceding year on the basis of peanut production on the farm or on 
similar farms during the years 1973 through 1977 or, if a farm yield was 
not established for the preceding year, the yield appraised by the 
county committee that is fair and reasonable on the basis of farm yields 
established on other farms in the locality on which the soil and other 
physical factors affecting production are similar.
    Farmers stock peanuts. Picked or threshed peanuts produced in the 
United States which have not been

[[Page 185]]

changed (except for removal of foreign material, loose shelled kernels, 
and excess moisture) from the condition in which picked or threshed 
peanuts are customarily marketed by producers, plus any loose shelled 
kernels that are removed from farmers stock peanuts before such farmers 
stock peanuts are marketed.
    Final acreage. The acreage devoted to peanuts on a farm, excluding 
any acreage devoted to green peanuts, as determined in accordance with 
part 718 of this chapter.
    First purchaser. Any person acquiring peanuts from a producer except 
that in the case of peanuts forfeited by a producer to CCC or brought 
from the price support loan inventory, the term means the person 
acquiring the peanuts from CCC or the inventory.
    FSA. The Farm Service Agency of the Department of Agriculture.
    Green peanuts. Peanuts which, before drying or removal of moisture 
from the peanuts either by natural or artificial means, are marketed by 
the producer for consumption exclusively as boiled peanuts.
    Inspector. A Federal or Federal-State inspector authorized or 
licensed by the Secretary, U.S. Department of Agriculture to grade 
peanuts.
    Loan additional peanuts. Peanuts which are pledged as collateral for 
a price support loan at the applicable additional loan rate established 
by or for CCC.
    Market. To dispose of peanuts (including farmers stock peanuts, 
shelled peanuts, cleaned peanuts, or peanuts in processed form) by 
voluntary or involuntary sale, barter, or exchange, or by gift inter 
vivos. The terms ``marketed'', ``marketing'', and ``for market'' shall 
have corresponding meanings to the term ``market'' in the connection in 
which they are used. The terms ``barter'' and ``exchange'' shall include 
the use of any quantity of peanuts by the producer as payment to another 
for any reason including payment for the harvesting, picking, threshing, 
cleaning, crushing, or shelling of peanuts, or for any other service 
rendered to the producer. Any lot of farmers stock peanuts will be 
considered as marketed when acquired from the producer. Peanuts which 
are delivered by the producer as collateral for, or in settlement of, a 
price support loan will be considered as marketed at the time of 
delivery. Delivery shall be deemed to have occurred when the peanuts are 
unloaded at the delivery point. Any peanuts produced on a farm which are 
retained on the farm after January 31, or such later date as may be 
established by the Executive Vice President, CCC, of the year following 
the year in which the peanuts were produced shall be considered as 
marketed for domestic edible use as of January 31, or such later date.
    Marketing year. The 12 month period beginning on August 1 of a 
current year in which the peanuts are grown and ending July 31 of the 
following year.
    National poundage quota. The poundage quota announced by the 
Secretary for the relevant crop year.
    Nonquota farm. A farm that does not have a basic quota greater than 
zero for the current year.
    Peanut quantity marketed or considered marketed. With respect to a 
lot of farmers stock peanuts, the quantity of such peanuts that is 
marketed or considered marketed shall be:
    (i) Inspected peanuts. For peanuts inspected by the Federal-State 
Inspection Service at the time of marketing, the gross weight of the lot 
less foreign material in the lot and less moisture in excess of 7 
percent of gross weight for the lot.
    (ii) Noninspected peanuts. For peanuts not inspected by the Federal-
State Inspection Service at the time of marketing, the gross weight of 
the lot.
    (iii) Shelled peanuts. For shelled peanuts marketed by a producer, 
the poundage of the shelled peanuts in the lot multiplied by a factor of 
1.5.
    Peanuts. All peanuts produced, excluding:
    (i) Any peanuts which were not dug;
    (ii) Any dug peanuts not picked or threshed which are disposed of 
under the direction and supervision of FSA personnel; and
    (iii) Green peanuts.
    Planted acreage. The acreage on which peanuts were planted in a 
workmanlike manner determined in accordance with the provisions of part 
718 of this chapter.

[[Page 186]]

    Preliminary quota. For the current year and an eligible farm, the 
basic quota established for the farm for the preceding year to the 
extent that the farm is not subject to a reduction in quota.
    Quota farm. A farm having a basic quota greater than zero in the 
current year.
    Quota peanuts. Peanuts (except green peanuts) which are marketed or 
considered marketed from a farm for domestic edible use. Quota peanuts 
shall be considered to be all peanuts which are dug on a farm except the 
following:
    (i) Green peanuts;
    (ii) Peanuts which are placed under loan at the additional loan rate 
and not redeemed by the producer;
    (iii) Peanuts which are marketed in accordance with the requirements 
of this part as contract additional peanuts.
    (iv) Peanuts considered marketed but because of conditions beyond 
the control of the producer had no commercial value as determined by the 
FSA at the time the peanuts were marketed.
    Seed sheller. A person who in the course of such person's usual 
business operations shells peanuts for use as seed for the subsequent 
year's crop.
    Temporary seed quota. Quota temporarily allocated for the current 
crop year only and in an amount determined by FSA to account for the 
amount of seed peanuts planted on the farm for production of peanuts, 
excluding green peanuts and peanuts produced under the one-acre 
exemption set forth in Sec. 729.306 of this part.
    Tillable cropland. Cropland (excluding orchards, vineyards, land 
devoted to trees, and land being prepared for nonagricultural uses) 
which the county committee determines can be planted to crops without 
unusual preparation or cultivation.
    Yield per acre or actual yield. The yield of peanuts for a farm for 
a crop year computed by dividing the total production of peanuts for the 
farm by the final acreage of peanuts for the farm.

[56 FR 16211, Apr. 19, 1991, as amended at 56 FR 38327, Aug. 13, 1991; 
57 FR 27144, June 18, 1992; 61 FR 36999, July 16, 1996; 62 FR 25438, May 
9, 1997]



Sec. 729.104  Administration.

    (a) The regulations in this part will be administered under the 
general supervision of the Administrator, FSA, and shall be carried out 
in the field by State and county FSA 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 part.
    (c) The State committee:
    (1) Shall instruct a county committee to:
    (i) Correct any action taken by such committee which is not in 
accordance with the regulations of this part, or
    (ii) Withhold taking any action which such committee is known to be 
contemplating if such action is not in accordance with the regulations 
of this part.
    (iii) Take any action required in accordance with the regulations of 
this part if such county committee has knowingly failed to take such 
action.
    (2) May, after duly instructing a county committee in accordance 
with paragraph (c)(1) of this section, correct or modify any action 
required by these regulations that such committee has failed or refused 
to take.
    (d) The Deputy Administrator:
    (1) Shall instruct a State committee to:
    (i) Correct any action taken by such committee which is not in 
accordance with the regulations of this part, or
    (ii) Withhold taking any action which such committee is known to be 
contemplating if such action is not in accordance with this part.
    (iii) Take any action required in accordance with regulations of 
this part if such State committee has knowingly failed to take such 
action.
    (2) Shall after duly instructing the State committee in accordance 
with paragraph (d)(1) of this section, correct or modify any action 
required by these regulations that such committee has failed or refused 
to take.
    (3) May waive or modify deadlines and other program requirements in 
cases for which the Deputy Administrator determines that lateness, or 
failure to meet such other requirements, as applicable, does not affect 
adversely the operation of the peanut program.

[[Page 187]]

Such authority shall include, but not be limited to, the delegation of 
the authority to the State FSA committee to, acting in accordance with 
such instructions as the Deputy Administrator may issue, modify 
deadlines for the filing of transfer of peanut quotas.
    (e) Notwithstanding any provisions in the regulations of this part, 
the Administrator, FSA, or a designee, may determine any question 
arising under the regulations of this part or may reverse or modify any 
determination made by a State or county committee.

[56 FR 16211, Apr. 19, 1991, as amended at 61 FR 36999, July 16, 1996; 
62 FR 25438, May 9, 1997]



Sec. 729.105  Types of peanuts.

    Peanuts shall be classified by type into one of the following types 
as identified and determined by the Federal-State Inspection Service:
    (a) Runner;
    (b) Spanish;
    (c) Valencia; or
    (d) Virginia.



Sec. 729.106  Extent of calculations and rule of fractions.

    (a) Computations made pursuant to this part shall be rounded in 
accordance with the provisions of part 793 of this chapter.
    (b) Acreages shall be determined in tenths of an acre.
    (c) Per pound penalties and liquidated damages shall be determined 
in tenths of a cent.
    (d) The following calculations shall be determined in whole pounds:
    (1) Peanuts produced;
    (2) Considered produced;
    (3) Marketed;
    (4) Preliminary quotas;
    (5) Basic quotas;
    (6) Effective quotas;
    (7) Farm yields; and
    (8) Actual yields per acre.



Sec. 729.107  Location of farms for administrative purposes.

    The location of a farm in a county for administrative purposes shall 
be as provided in part 719 of this chapter.



Sec. 729.108  Request for reconsideration or appeal.

    Any producer who is dissatisfied with a determination rendered by 
the county FSA committee under this part may file a request for 
reconsideration or appeal in accordance with part 780 of this chapter.

[56 FR 16211, Apr. 19, 1991, as amended at 61 FR 36999, July 16, 1996]



Sec. 729.109  Instructions and forms.

    The Director shall cause to be prepared and issued such forms and 
instructions as are necessary for carrying out this subpart. The forms 
and instructions shall be approved by, and the instructions shall be 
issued by, the Deputy Administrator.



 Subpart B--Poundage Quotas, Notices of Quotas, Transfers, and Release 
                           and Reapportionment



Sec. 729.201  Apportionment of National poundage quota to States.

    The national poundage quota for peanuts for each of the 1996 through 
2002 crops less a reserve for the correction of errors shall be 
apportioned to States in the same proportion that the national poundage 
quota was allocated to farms in the State for the 1995 crop year. 
Accordingly, based on the poundage quota allocated to farms in the State 
for the 1995 crop year, 16 States shall share in the 1996 through 2002 
national poundage quotas for peanuts and the following factors shall be 
used to allocate such quota to the respective States: Alabama--
0.13445344, Arizona--0.00062508, Arkansas--0.00208329, California--
0.00043493, Florida--0.04275200, Georgia--0.41291226, Louisiana--
0.00091430, Mississippi--0.00379765, Missouri--0.00015357, New Mexico--
0.00580694, North Carolina--0.11052130, Oklahoma--0.06677613, South 
Carolina--0.00735223, Tennessee--0.00042788. Texas--0.13183290, and 
Virginia--0.07915610.

[56 FR 16211, Apr. 19, 1991, as amended at 56 FR 38328, Aug. 13, 1991; 
61 FR 36999, July 16, 1996]

[[Page 188]]



Sec. 729.202  Reserve for corrections.

    A national reserve will be held for purposes of correcting errors 
that are made when determining a farm's basic quota. The reserve will be 
determined annually by multiplying the national quota announced by the 
Secretary by 0.0025. To the extent determined appropriate, the Deputy 
Administrator may authorize a State committee to correct any error in a 
farm's basic quota.



Sec. 729.203  Quota not produced.

    (a) Determining nonproduced quota. For purposes of making a 
reduction in a farm's basic quota when the quantity of peanuts produced 
and considered produced on such farm during any 2 or more years of the 
base period is less than the basic quota established for such farm for 
the respective year, the nonproduced quota shall be determined, for any 
year of the base period for which the sum of the farm's produced and 
considered produced quota is less than such farm's basic quota 
established for such year. The nonproduced quota shall be determined by 
subtracting the sum of the farm's produced and considered produced quota 
for such year from the basic quota established for the farm for such 
year.
    (b) Adjustment to nonproduced quota. For purposes of determining 
basic quota for subsequent crop years, if the basic quota for a farm is 
reduced for nonproduction in accordance with this subpart, the 
nonproduced quota for the base period of the year of the reduction, as 
determined in accordance with paragraph (a) of this section, shall be 
adjusted downward by the amount that the basic quota was reduced. The 
adjustment shall be made in the nonproduced quota by starting with the 
year in which the nonproduced quantity was smallest during the most 
recent 2 years of that base period. If the nonproduced quota was equal 
in each of the most recent 2 years of that base period the adjustment 
shall begin with the most recent year of such 2 year period. If the 
nonproduced quota for the year the adjustment begins is less than the 
amount by which the farm's basic quota was reduced for nonproduction, 
the adjustment to the nonproduced quota shall continue in the remaining 
year of the most recent 2 years of that base period until the 
nonproduced quota has been adjusted by an amount equal to the amount 
that the basic quota was reduced for nonproduction or until the 
nonproduced quota in each of the most recent 2 years of that base period 
has been reduced to zero.



Sec. 729.204  Temporary seed quota allocation.

    (a) Applicability. The temporary allocation of quota pounds, as 
provided in this section shall be determined:
    (1) For the marketing year only in which the crop is planted;
    (2) For eligible producers for each of the 1996 through 2002 
marketing years; and
    (3) To exclude the production of green peanuts and peanuts produced 
under the one-acre exemption provided for in 7 CFR 729.306.
    (b) Quantity of allocation. The temporary quota allocated to a 
producer shall be the farmers stock equivalent pounds of qualifying seed 
peanuts considered planted on the farm as determined by FSA by 
multiplying the acres determined planted to qualifying peanuts times the 
per-acre planting rates of:
    (1) 95 pounds for Runner-type peanuts;
    (2) 110 pounds for Virginia peanuts;
    (3) 80 pounds for Spanish peanuts; and
    (4) 80 pounds for Valencia peanuts.
    (c) Conversion factor. For the purpose of determining the farmers 
stock basis for temporary seed quota allocations under this section, the 
amount of seed planted as determined in accord with paragraph (b) of 
this section shall be multiplied by a factor of 1.5.
    (d) Time of notification. The notice of determination for temporary 
seed quota allocations shall be made by the Deputy Administrator as soon 
as practicable following the deadline for filing certifications of 
planted acres.
    (e) Penalty for erroneous certification. If the certified acreage on 
which the temporary seed quota allocation is made is greater than the 
acreage determined by FSA to be planted to peanuts by more than the 
smaller of 2 percent of the certified acreage or 5 acres, the producer 
shall be assessed a penalty based on this difference. The penalty

[[Page 189]]

amount shall be calculated by multiplying the difference between the 
certified and determined peanut acreage by the applicable per acre 
seeding rate used in the calculation of the temporary seed quota by 140 
percent of the applicable per pound quota support rate for the crop year 
involved. In addition, a commensurate penalty at the same rate may be 
assessed in cases within the tolerance allowed by the previous sentence 
in any instance in which the variance is determined to be due to a 
scheme or device to defeat the purposes of the program, or is repeated. 
Further, all errors may in all cases result in a commensurate diminution 
of the quota allowed the farm for the following year.

[61 FR 36999, July 16, 1996, as amended at 62 FR 25438, May 9, 1997]



Sec. 729.205  Farms ineligible for farm poundage quota.

    (a) Ineligible farms. Except for quota allocated under the 
provisions of Sec. 729.208 for experimental and research programs, 
effective beginning with the 1998 crop year, farm poundage quotas shall 
not be established for farms which are determined by FSA to be owned or 
controlled by:
    (1) Municipalities, airport authorities, schools, colleges, refuges, 
and other public entities (other than a university used for research 
purposes).
    (2) A person:
    (i) Who is not a peanut producer; and
    (ii) Whose primary domicile, as determined by FSA, in the case of 
any individual is in a State outside the State in which the quota is 
allocated or, in the case of an entity, does not qualify under this 
section to be considered to be a resident of the State in which the 
quota is allocated.
    (b) Determination of residency and related rules. (1) For purposes 
of administering paragraph (a) of this section, an entity may be 
considered a resident of the State in which the quota is located if:
    (i) It is determined that a person or persons with at least a 
cumulative 20-percent interest in any such entity are individuals whose 
primary residence is in the State in which the quota is allocated; or
    (ii) As determined appropriate by the Deputy Administrator, the 
corporation or other entity, but not a general partnership or an entity 
not recognized as a separate and distinct legal entity from its members, 
has been created under the laws of the State in which the quota is 
allocated.
    (2) For purposes of the provisions of (a)(2)(i) of this section, a 
person shall not be considered to be a producer of a crop of peanuts 
unless such person is at risk for at least 15 percent of the proceeds 
from the marketing of the production of the quota at issue.
    (c) Exemption for involuntary acquisition. Paragraph (a)(2) of this 
section shall not apply to any involuntary acquisition of a farm by 
foreclosure, or otherwise, resulting directly from the conduct of a 
public business in the State in which the quota is allocated, or an 
acquisition resulting directly by reason of a death. The exemption for 
involuntary farm acquisitions allowed under the preceding sentence shall 
only apply to the establishment of quota in the three crop years 
immediately following the date of the involuntary acquisition of the 
quota farm.
    (d) Applicable crop year. For purposes of applying the rules in 
paragraph (a) of this section as they regard production, the 
determination of whether paragraph (a)(2) of this section applies shall 
be made based on the crop last planted before the date on which the 
determination is to be made.
    (e) Allocating forfeited quota and sales of quotas subject to 
paragraph (a). Except for the exemption for involuntary acquisition in 
Sec. 729.205(c), beginning in 1997 any farm poundage quota held on or 
after August 1 of 1997 by an ineligible person as determined under 
paragraph (a) of this section shall be allocated from the quota farm to 
other farms in the same State in accordance with Sec. 729.206 of this 
part; provided, however, that if the ineligibility arises solely because 
of a purchase of a farm after August 1, 1997, or involves a quota which 
is acquired because of the expiration of a CRP contract after August 1, 
1997, the quota shall not be forfeited but may not be used to market 
peanuts until the ineligibility is determined by

[[Page 190]]

the county committee to have been removed or the quota is sold to an 
eligible farm. Such reallocations shall be made to the extent 
practicable but shall take into account those instances in which the 
regulations call for an ineligibility for quota allocation rather than 
forfeiture of the quota.

[61 FR 37000, July 16, 1996, as amended at 62 FR 25438, May 9, 1997]



Sec. 729.206  Determining a farm's basic quota.

    (a) No change in State poundage quota. If the poundage quotas 
allocated to the State for the current year is the same as the State's 
poundage quota for the preceding year, the current year's basic quota 
for each quota farm in the State shall be the same as such farm's 
preliminary quota for the current year.
    (b) Increase in State poundage quota--(1) Eligible farms. If the 
poundage quota allocated to a State for the current year is greater than 
the poundage quota allocated to such State for the preceding year, the 
amount of increase in the poundage quota shall be allocated 
proportionately, on the basis of each farm's production history as 
determined under this part, among:
    (i) All quota farms in the State.
    (ii) All other farms in the State that were nonquota farms in the 
preceding year and on which peanuts were produced and marketed in at 
least 2 years of the base period.
    (2) Factor. A factor shall be determined to apportion, to eligible 
farms, the increase in the State's poundage quota. The factor shall be 
determined by dividing the amount of increase in the State poundage 
quota by the total of the farm production history for all eligible farms 
determined in accordance with paragraph (b)(1) of this section.
    (3) Basic quota. The current year basic quota for each:
    (i) Quota farm in the State shall be the preliminary quota plus an 
amount determined by multiplying the farm's production history by the 
factor determined in accordance with paragraph (b)(2) of this section.
    (ii) Eligible farm that was a nonquota farm in the preceding year 
shall be the result obtained by multiplying such farm's production 
history by the factor determined in accordance with paragraph (b)(2) of 
this section.
    (c) Decrease in State poundage quota. If the poundage quota 
allocated to a State for the current year is less than the poundage 
quota allocated to such State for the preceding year, the current year's 
basic quota for each quota farm in the State shall be determined by 
multiplying the current year's preliminary quota by a factor determined 
by dividing the State quota by the total of the current year's 
preliminary quotas on all farms in the State.
    (d) Reduction for nonproduction of quota--(1) Reconstitutions. If 
the farm resulted from a farm reconstitution during the base period, any 
reduction determined according to this paragraph for nonproduction of 
the basic quota shall be made separately for the individual tracts in 
the farm in such manner as the Deputy Administrator determines to be 
appropriate.
    (2) Reduction amount. The current year's basic quota otherwise 
determined for a farm in accordance with paragraph (a), (b), or (c) of 
this section shall be reduced if, with respect to any 2 years of the 
base period, the county committee determines that part, or all, of the 
basic quota for such farm was not produced or considered produced on the 
farm. The amount of the reduction shall be the sum of the two smallest 
quantities, including zero pounds if applicable, of nonproduced quota 
determined in accordance with this subpart for such farm during the base 
period.
    (e) Reallocation of quota reduced or permanently released--(1) 
Eligible farms. The total of quotas permanently released and quotas 
reduced for nonproduction according to paragraph (d) of this section, 
hereinafter referred to as the State quota available for reallocation, 
shall be reallocated to farms on which peanuts were produced and 
marketed in at least 2 years of the base period.
    (2) Factor for reallocation of quotas. The factor(s) for 
reallocating the State quota available for reallocation shall be 
determined as follows:
    (i) Determine State totals of farm production history separately for 
eligible:
    (A) Quota farms.
    (B) Nonquota farms.

[[Page 191]]

    (ii) If the totals of the farm production history from eligible 
quota farms is equal to or greater than 3 times the total of the farm 
production history from eligible nonquota farms, determine a factor by 
dividing the State quota available for reallocation by the sum of the 
separate State totals of farm production history from eligible quota and 
nonquota farms.
    (iii) If paragraph (e)(2)(ii) of this section is not applicable, 
determine separate factors for eligible quota and nonquota farms as 
follows:
    (A) For eligible quota farms, determine the factor by multiplying 
the State quota available for reallocation by .75 and dividing the 
result by the State total of the farm production history from eligible 
quota farms.
    (B) For eligible nonquota farms, determine the factor by multiplying 
the State quota available for reallocation by .25 and dividing the 
result by the State total of farm production history from eligible 
nonquota farms.
    (iv) Notwithstanding paragraphs (e)(2)(ii) and (iii) of this 
section, if the factor determined for a nonquota farm is greater than 
0.3333 a factor of 0.3333 shall be used to reallocate to the nonquota 
farm such nonquota farm's share of the State quota available for 
reallocation.
    (3) Application of factor. The current year's basic quota for each 
eligible farm determined according to paragraph (e)(1) of the section 
shall be determined by multiplying such farm's production history by the 
applicable factor determined in accordance with paragraph (e)(2) of this 
section. If a current year's basic quota otherwise has been determined 
for the farm in accordance with this section, the basic quota determined 
in accordance with this paragraph shall be added to any basic quota 
otherwise determined for such farm in accordance with this section.
    (f) Reallocation in Texas of quota reduced for nonproduction and 
permanently released quota--(1) Special provisions for certain Texas 
Counties. Notwithstanding the provisions in paragraphs (b) and (e) of 
this section, all of the quota reduced for nonproduction on all Texas 
farms, except that portion reallocated to nonquota farms in accordance 
with paragraph (e) of this section, shall be reallocated to farms having 
1990-crop basic quotas in any Texas county in which the production of 
additional peanuts in 1989 exceeded the total of 1989-crop basic quotas 
on all farms in such county. The production of additional peanuts in 
1989 exceeded the total of 1989-crop basic quotas on all farms in each 
of the following Texas counties: Andrews, Bailey, Briscoe, Childress, 
Collingsworth, Dickens, Donley, Gaines, Hale, Hall, Hardeman, Haskell, 
Hidalgo, Hockley, Knox, Lamb, Terry, Wheeler, Wilbarger, and Yoakum 
counties.
    (2) Allocation to counties. Any quota to be allocated to eligible 
Texas counties in accordance with paragraph (f)(1) of this section shall 
be apportioned to the eligible counties on the basis of the total 
production of additional peanuts in the respective counties for the 1988 
crop. Accordingly, based on the production of additional peanuts in 
1988, such quota shall be apportioned to eligible counties according to 
the following factors: Andrews--0.005342, Bailey--0.003007, Briscoe-- 
0.016039, Childress--0.008190, Collingsworth--0.184498, Dickens--
0.000000, Donley--0.03 1981, Gaines--0.413627, Hale--0.000647, Hall--
0.063101, Hardeman--0.010278, Haskell--0.137459, Hidalgo--0.026700, 
Hockley--0.000679, Knox--0.002818, Lamb--0.026475, Terry--0.009885, 
Wheeler--0.003102, Wilbarger--0.000000, and Yoakum--0.056172.
    (3) Exception to allocation to counties. In that Gaines county is 
the only county listed in paragraph (f)(1) of this section for which the 
total of farm basic quotas exceeded 20,000,000 pounds for the 1989 crop 
of peanuts and the total of farm basic quotas in Gaines County for the 
1989 crop was 22,853,615 pounds, if the cumulative increase in the basic 
quota for Gaines County, granted under any special rules for Texas under 
this section and its predecessor for the 1991 and subsequent crops 
exceeds 22,853,615 pounds, the amount in excess of 22,853,615 pounds 
shall, in accordance with the provisions of the authorizing legislation, 
be apportioned to the remainder of the counties listed in paragraph 
(f)(1) of this section on the basis of the total production of 
additional

[[Page 192]]

peanuts in the respective counties for the 1988 crop.
    (4) Determining factor for reallocation of quota--(i) To receive a 
share of any quota allocated to eligible Texas counties under paragraph 
(f)(2) of this section, a farm must have had a basic quota greater than 
zero for the 1990 crop of peanuts. If a farm that had a basic quota 
greater than zero in 1990 is reconstituted subsequent to 1990:
    (A) By division, the resulting farms will be considered to have had 
a basic quota greater than zero in 1990 for purposes of determining 
eligibility to receive a share of any quota allocated to eligible Texas 
counties under paragraph (f)(2) of this section.
    (B) By combination, the resulting farm will not be considered to 
have had a basic quota greater than zero in 1990 for purposes of 
determining eligibility to receive a share of any quota allocated to 
eligible Texas counties under paragraph (f)(2) of this section unless, 
prior to the combination, each farm that is involved in the combination 
was considered to have had a basic quota greater than zero in 1990 for 
purposes of determining eligibility to receive an increased quota under 
paragraph (f)(2) of this section.
    (ii) A farm allocation factor shall be determined for each eligible 
farm as follows:
    (A) Using data from the year preceding the year for which the 
reallocation is being made, determine a factor by dividing the quantity 
of contract additional peanuts delivered to handlers from the farm by 
the total remaining peanuts marketed from the farm.
    (B) Total all factors determined in accordance with paragraph 
(f)(4)(ii)(A) of this section.
    (C) Except as may be determined by the Deputy Administrator to avoid 
schemes and devices in contravention of the purposes of this part to 
avoid inequities, the farm allocation factor shall be determined by 
dividing the factor determined in accordance with paragraph 
(f)(4)(ii)(A) of this section by the total determined in accordance with 
paragraph (f)(4)(ii)(B) of this section.
    (5) Increase in basic quota. The basic quota otherwise determined 
for a farm in accordance with the provisions of this section shall be 
increased by an amount determined by multiplying any quota allocated to 
the county in accordance with paragraph (f)(2) of this section by the 
farm allocation factor determined in accordance with paragraph 
(f)(4)(ii)(C) of this section.
    (6) Quotas for eligible nonquota farms. Quotas for eligible nonquota 
farms in any Texas county shall be determined in the same manner as 
provided for other States in paragraph (e) of this section.
    (7) Allocation of increase in State poundage quota. Any increase in 
the State poundage quota for Texas, shall be reallocated to eligible 
farms in any Texas county, including the counties in paragraph (f)(1) of 
this section, in accordance with paragraph (b) of this section.

[56 FR 16211, Apr. 19, 1991, as amended at 56 FR 38328, Aug. 13, 1991; 
57 FR 27144, June 18, 1992. Redesignated and amended at 61 FR 36999, 
37000, July 16, 1996]



Sec. 729.207  Tenants sharing in increased quota.

    (a) General. If the poundage quota allocated to a State is greater 
than the poundage quota allocated to such State for the preceding year, 
an eligible tenant who leased a part or all of a farm in any county in 
such State for the production of peanuts shall share equally with the 
farm owner, in accordance with the provisions in this section, in that 
quantity of basic quota that is allocated, as a result of the tenants 
production of additional peanuts on the farm during the base period to 
such farm, from the State's increased poundage quota.
    (b) Eligible tenant. If a person leased part or all of a farm, and 
had a 100 percent producer interest in one or more fields of peanuts 
that were produced on such farm during the base period, and such farm's 
basic quota is increased as a result of an increase in a State's 
poundage quota, such person shall be considered as an eligible tenant on 
such farm and shall share in such increase in the farm's basic quota if 
such person:
    (1) Qwnership interest. Does not have any ownership interest in such 
farm;

[[Page 193]]

    (2) Shared in previous year's production of peanuts. Shared in the 
production of any peanuts produced on the farm in the crop year 
immediately preceding the crop year for which such increase in basic 
quota is granted;
    (3) Application for share of increase. Files an application at the 
county FSA office of the county in which such farm is located for 
administrative purposes, by February 15 of the crop year for which such 
increase in basic quota is granted, for a share of such increase;
    (4) Supporting proof. Provides supporting proof, that is acceptable 
to the county committee, of the quantity of additional peanuts produced 
on such farm by such person during each year of the base period.
    (c) Tenant's share of increase. An eligible tenant's share of the 
increase in a farm's basic quota shall be one half of an amount 
determined by multiplying the quantity of additional peanuts produced by 
such tenant and for which acceptable proof was provided in accordance 
with paragraph (b)(4) of this section by the factor determined in 
accordance with Sec. 729.206(b)(2) of this part.
    (d) Disposition of tenant's share of increase-(1) By tenant. An 
eligible tenant may dispose of any basic quota determined for such 
tenant in accordance with paragraph (c) of this section. Such 
disposition must take place by:
    (i) Time for disposition. The later of April 1 of the current year 
or 30 days after the date of notification of the amount of such basic 
quota.
    (ii) Manner of disposition. Filing an application at the county FSA 
office to transfer such basic quota:
    (A) Farm owned by tenant. To a farm within the county that is owned 
by such tenant.
    (B) Sale of quota. By sale to the owner of any farm within the 
county in accordance with Sec. 729.214 of this part.
    (2) Allocation to other farms. Any basic quota determined for an 
eligible tenant in accordance with paragraph (c) of this section that is 
not disposed of by such eligible tenant in accordance with paragraph 
(d)(1) of this section shall, to the extent practicable, be reallocated 
to other farms within the State in accordance with Sec. 729.206(e) of 
this part.
    (e) Other provisions. Any increase in a farm's basic quota that 
results from a tenant's production of additional peanuts on such farm 
during the base period shall remain on such farm if the:
    (1) Tenant who otherwise might have qualified to receive a share of 
such increase in basic quota does not file an application for a share of 
such quota in accordance with paragraph (b) of this section; or
    (2) Additional peanuts were produced by a person who was a tenant on 
such farm only during the beginning year of the base period or the 
second year of the base period.

[56 FR 16211, Apr. 19, 1991. Redesignated and amended at 61 FR 36999, 
37000, July 16, 1996]



Sec. 729.208  Allocation of quota for experimental and research programs.

    (a) General. A basic quota shall be established for the 1991 crop 
for each land-grant institution identified in the Act of May 8, 1914 (38 
stat. 372, chapter 79; 7 U.S.C. 341 et seq.), colleges eligible to 
receive funds under the Act of August 30, 1890 (26 stat. 419 chapter 
841; 7 U.S.C. 321 et seq), including Tuskegee Institute and, as 
appropriate, the Agricultural Research Service of the Department of 
Agriculture if such institution possessed basic quota for the 1985 crop 
year or was authorized under this part at that time to market peanuts 
from the 1985 crop for quota purposes without incurring marketing 
penalties.
    (b) Amount of allocation. The amount of quota allocated from the 
State reserve to an eligible institution shall not exceed the poundage 
quota allocated to the institution for the 1985 crop year and shall not 
exceed the quantity of peanuts that was exempted from payment of 
marketing penalties by such institution for the 1985 crop year, as 
applicable, except that the total pounds allocated for the 1991 crop to 
all institutions in the State shall be allocated so as not to exceed 
one-tenth of one percent of the poundage quota allocated to the State in 
which the respective institutions are located.
    (c) Limitation. The quantity of peanuts marketed by such institution 
by use of the quota granted in accordance with paragraph (b) of this 
section shall

[[Page 194]]

not exceed the quantity needed for experimental and research purposes. 
The director of each such institution shall be responsible for providing 
information as needed to determine compliance with this section.
    (d) Quota for 1996 through 2002 crops. For each institution with 
continuing eligibility for which a 1995 basic quota was determined in 
accordance with this section or its predecessor, a basic quota shall be 
established for the 1996 through 2002 crops in the same manner as for 
other farms within the State.

[56 FR 16211, Apr. 19, 1991. Redesignated and amended at 61 FR 36999, 
37000, July 16, 1996]



Sec. 729.209  Tillable cropland limitation.

    If any person owns a farm for which the basic quota exceeds an 
amount determined by multiplying the larger of the farm yield or the 
highest actual yield for the farm during the base period by the tillable 
cropland on the farm, the person shall take steps, such as the sale of 
quota, the purchase of tillable cropland, the permanent transfer of 
quota, or other similar means that will result in elimination of the 
excess. If such person fails to take such action, the farm's preliminary 
quota for the next year, and the basic quota permanently shall be 
reduced by the amount of the excess.

[56 FR 16211, Apr. 19, 1991. Redesignated at 61 FR 36999, July 16, 1996]



Sec. 729.210  Determining a farm's effective quota.

    The effective quota for a farm shall be the basic quota adjusted by:
    (a) Upward adjustment. Adding the:
    (1) The temporary seed quota allocated to the farm;
    (2) Quota temporarily reapportioned to the farm; or
    (3) Quota temporarily transferred to the farm by either lease, 
owner, or operator.
    (b) Downward adjustment. Subtracting the quota:
    (1) Temporarily transferred from the farm by either lease, owner or 
operator;
    (2) Temporarily released; or
    (3) Converted in the current year from the production of peanuts in 
accordance with part 704 of this chapter or similar program as 
determined by the Deputy Administrator.

[56 FR 16211, Apr. 19, 1991. Redesignated and amended at 61 FR 36999, 
37000, July 16, 1996]



Sec. 729.211  Determination of farm yields.

    (a) Farm yield--(1) Quota farm in previous year. The farm yield for 
the current year for a farm that was a quota farm in the previous year 
shall be the same as the farm yield established for the farm in the 
previous year.
    (2) Nonquota farm. If a farm was a nonquota farm in the year 
preceding the current year and such farm becomes a quota farm in the 
current year, a farm yield shall be determined by the county committee 
if a farm yield has not been established previously for such farm. Such 
farm yield shall be determined on a fair and reasonable basis by the 
county committee after considering the farm yields that have been 
established on other similar farms in the same locality.
    (b) Reconstituted farms. For reconstituted farms, the farm yield for 
such farm shall be:
    (1) Combination of quota farms. For combined quota farms, the 
weighted average of the farm yields for the tracts being combined.
    (2) Combinations of quota and nonquota farms. For a combination of a 
quota and nonquota farm, the farm yield of the tract(s) with an 
established quota, even though a farm yield had been previously 
established for such nonquota tract(s).
    (3) Combination of nonquota farms. For a combination of a nonquota 
farm, established by the county committee in the same manner as for 
farms under paragraph (a)(2) of this section, even though a farm yield 
had been previously established for the individual tracts.
    (4) Divisions. For tracts resulting from the division of a farm, the 
same farm for each tract that results from the division as the farm 
yield for the parent farm, except that should one or more tracts within 
the divided farm have a previously established farm yield, the farm 
yield for such tract(s)

[[Page 195]]

shall be that previously established for such tract(s).

[56 FR 16211, Apr. 19, 1991. Redesignated at 61 FR 36999, July 16, 1996]



Sec. 729.212  Approval of farm yield and farm poundage quota and notice to farm operator.

    (a) Approval. Each farm yield, basic quota, and effective quota 
shall be determined under the supervision of, and approved by, the 
county committee of the county in which the farm is administratively 
located, subject to the concurrence of the State committee or a 
representative of the State committee.
    (b) Notice to farm operator. (1) As soon as practicable after the 
basic quota or the effective quota is approved, an official notice of 
such quota shall be mailed to the farm operator.
    (2) If the basic quota is reduced to zero for the current year, the 
county committee shall mail to the farm operator a notice of such 
determination.
    (3) A revised notice of basic quota or effective quota shall be 
mailed to the farm operator as soon as possible after the county 
committee determines that an incorrect notice has been mailed, or the 
county committee takes an action which requires a revision of the 
previously determined quota.
    (4) The notice to the operator shall constitute notice to all 
persons, including, but not limited to, any person who as operator, 
landlord, tenant, or sharecropper has an interest in the farm for which 
the quota is established.
    (c) A failure to provide the notice provided for in paragraph (b) of 
this section shall not entitle any person to a quota to which they are 
otherwise entitled, unless otherwise provided in this part.

[56 FR 16211, Apr. 19, 1991. Redesignated at 61 FR 36999, July 16, 1996]



Sec. 729.213  Erroneous notice of effective farm poundage quota.

    If the official notice of effective quota issued for a farm 
erroneously stated a quota larger than the correct effective quota, the 
quota shown on the erroneous notice shall serve as the basis for 
marketing penalty computations for the farm for the current marketing 
year only if the county committee determines and the State Executive 
Director concurs that:
    (a) Extent of error. The error was not so substantial as to place 
the operator on notice that such notice of quota was incorrect; and
    (b) Response to notice. The operator, relying upon such notice and 
acting in good faith:
    (1) Has made plans, or is engaged in activities, to produce the 
quota in the amount set forth on the erroneous notice (for example, land 
preparation; purchase of seed, fertilizer, and other production 
materials; or reducing the acreage of other crops); or
    (2) Has planted the acreage of peanuts needed to produce the 
erroneous farm poundage quota.

[61 FR 37000, July 16, 1996]



Sec. 729.214  Transfer of quota by sale, lease, owner, or operator.

    Peanut quota may be transferred between eligible farms, or between 
separately owned tracts within a farm, in accordance with the provisions 
of this section.
    (a) Basis of transfers. A transfer of quota may be either permanent 
or temporary to the extent provided for in this section.
    (1) Permanent. A permanent transfer shall be based on a part or all 
of the farm's basic quota. The maximum quota that may be permanently 
transferred from a farm in the current year is the farm's basic quota. A 
permanent transfer may be by:
    (i) Sale. The sale of a farm's basic quota.
    (ii) Owner. The owner transfering basic quota between two farms when 
such farms have identical ownership as determined by FSA under 
instructions of the Deputy Administrator.
    (2) Temporary. A temporary transfer is for one year and shall be 
based on a part or all of the farm's effective quota. The maximum quota 
that may be temporarily transferred from a farm in the current year is 
the farm's effective quota. A temporary transfer, to the extent 
permitted by this section, may be by:
    (i) Lease. The lease and transfer of a farm's effective quota.

[[Page 196]]

    (ii) Owner. The owner transferring effective quota to another farm 
owned or operated by such owner.
    (iii) Operator. The operator transferring effective quota to another 
farm owned or operated by such operator.
    (b) Transfer agreement. In order to transfer poundage quota in the 
current year between two eligible farms, the transfer agreement must be:
    (1) Form. Recorded on Form FSA-375.
    (2) Where to file. Filed in the county FSA office which serves the 
county in which the transferring farm is located for administrative 
purposes.
    (3) Signatures. Agreed upon and signed by:
    (i) Sale or lease. In the case of a sale or lease, the owner(s) and 
operator of the transferring farm and the owner(s) or operator of the 
receiving farm. However, if a lease is filed after July 31 by a farm 
operator who cash leased the farm the signature of the owner(s) of such 
farm is not required.
    (ii) Owner transfer. In the case of an owner transfer, the owner of 
the transferring farm who also must be the owner or operator of the 
receiving farm.
    (iii) Operator transfer. In the case of an operator transfer, the 
operator of the transferring farm who also must be the owner or operator 
of the receiving farm.
    (iv) Lienholder. In all cases, any person who holds a mortgage or 
other lien against the transferring farm.
    (4) Witness. Signed on Form FSA-375, by each person whose signature 
is required by paragraph (b)(3) of this section, in the presence of a 
State or county committee member or an FSA employee who shall sign Form 
FSA-375 as a witness, except that when both the owner and the operator 
of a transferring farm must sign, such witness is required for the 
signature of either the owner or operator, but not both. If such 
signatures cannot be witnessed in the county FSA office where the farm 
is administratively located, they may be witnessed in any State or 
county FSA office convenient to the owner or operator's residence. The 
requirement that signatures be witnessed for producers that are ill, 
infirm, reside in distant areas, or are in similar hardship situations 
or may be unduly inconvenienced may be waived provided the county FSA 
office mails Form FSA-375 for the required signatures.
    (5) When to file. Filed at any time after all required signatures 
have been recorded.
    (i) Permanent transfer. If filed:
    (A) Before August 1, the transfer shall be effective for the current 
year.
    (B) After July 31, the transfer agreement shall not be approved 
until the next year's quota is determined for the transferring farm.
    (ii) Temporary transfer. If filed after July 31 and before February 
1, the transfer agreement shall not be approved unless both the 
transferring farm and the receiving farm meet applicable provisions in 
paragraph (f) of this section that apply to transfers filed during such 
period.
    (c) Location of farms. In order to transfer poundage quota between 
two farms, such farms must be located within the same State and, to the 
extent required by paragraph (d) of this section, in the same county. It 
is not necessary for the receiving farm to have had a basic quota in the 
current or prior year, except as provided in paragraph (d)(4) of this 
section.
    (d) Limitations on transfer by sale or lease. Subject to the 
provisions of paragraph (m) of this section:
    (1) States with less than 10,000 tons of quota. With respect to 
farms in any State for which the State's poundage quota for the year 
preceding the current year was less than 10,000 tons, transfers of 
peanut quota by sale or lease may be made to any other farm in any 
county within the State.
    (2) States with 10,000 tons or more of quota. For farms in States 
with 10,000 tons or more of quota:
    (i) Poundage quota may be transferred to any other farm within the 
same county.
    (ii) If the farm is in a county with less than a total of 50 tons of 
quota, the poundage quota may be transferred to any other farm within 
the same State without regard to the limitations set forth in paragraph 
(d)(2)(iii) of this section.
    (iii) If the farm is in a county with a total of 50 tons or more of 
quota, poundage quota transferred out of county shall be limited to 40 
percent of

[[Page 197]]

the quota in the transferring county as of January 1, 1996. Further, the 
cumulative unexpired out-of-county transfers for a crop year may not 
exceed the following percentages of the quota in the transferring county 
as of January 1, 1996:
    (A) 15 percent for the 1996 crop;
    (B) 25 percent for the 1997 crop;
    (C) 30 percent for the 1998 crop;
    (D) 35 percent for the 1999 crop; and
    (E) 40 percent for the 2000 and subsequent crops.
    (iv) Selecting approved transfers. For purposes of administering the 
limitations on the amount of transfers, the Director shall establish a 
method for selecting, by lot or other method, those applications which 
are to be approved. The Director may give preference to permanent 
transfers.
    (3) Fall transfers. The limitations in paragraph (d)(2)(iii) of this 
section do not apply to 1-year fall transfers, which may, in all cases, 
be made to any farm in the same State, subject to such restrictions as 
otherwise apply for fall transfers.
    (4) Owner or operator transfer. Owner or operator transfers of 
poundage quota are permitted to contiguous counties within the same 
State without regard to the percentage limitations of paragraph 
(d)(2)(iii) of this section; provided that, the receiving farm had a 
basic quota established for the preceding year's crop and has the same 
owner, in an owner transfer, or the same operator, in an operator 
transfer.
    (e) Transfers to and from the same farm (subleasing)--
    (1) Transfer agreement filed after January 31 and before August 1. 
The county committee shall not approve a transfer agreement which is 
filed after January 31 of any year and before August 1 of the same year, 
if the approval would result in a temporary transfer both to and from 
either the transferring or receiving farm during such period, except 
that such transfer agreement may be approved if the farm that otherwise 
would be eligible to transfer or receive such quota resulted from a farm 
reconstitution that was approved subsequent to a transfer of quota.
    (2) Record of transfer filed after July 31 and before February 1. 
The county committee shall not approve a temporary transfer of effective 
quota if the transfer agreement is filed after July 31 of any year and 
before February 1 of the following year and approval would result in a 
temporary transfer both to and from either the receiving farm or 
transferring farm during such period.
    (f) Other transfer provisions--(1) Temporary transfer of quota from 
a farm. A temporary transfer of quota from a farm by lease, owner, or 
operator shall not be approved:
    (i) Effective quota includes reapportioned quota. If the transfer 
agreement was filed before August 1 of a crop year and the effective 
quota for the farm includes temporarily reapportioned quota from quota 
released from other farms of that crop year.
    (ii) Peanut poundage quota penalty. If any person whose signature is 
required to perfect the transfer is known to owe a peanut poundage quota 
penalty. However, this provision shall not apply if the penalty is paid 
or, in the case of a transfer by lease, the entire proceeds of the lease 
are applied to the penalty and the county committee determines that the 
amount paid for the lease represents a reasonable price for the pounds 
of quota being leased.
    (iii) Filed after July 31 and before February 1 (``Fall 
transfers''). If filed after July 31 of the crop year and before 
February 1 of the following year, unless:
    (A) The reported or determined acreage of peanuts plus prevented 
planted credit for the transferring farm for the current year, when 
multiplied by the larger of the farm yield or the highest actual yield 
during the base period, is equal to or greater than 90 percent of the 
farm's effective quota prior to adjustment for temporary seed quota 
allocated to the farm;
    (B) The county committee determines that the producers on the farm 
made a good faith effort to produce a normal crop of peanuts on the 
acreage devoted to peanuts.
    (C) The quantity to be transferred does not exceed the quota balance 
remaining on the farm's marketing card(s); and
    (D) For a lessee, such lessee provides satisfactory evidence that 
the lease is a cash lease or the owner signs the transfer agreement.

[[Page 198]]

    (2) Temporary transfer of quota to a farm. A temporary transfer of 
quota to a farm by lease, owner, or operator shall not be approved:
    (i) Tillable cropland limitation. If the transfer agreement was 
filed before August 1 of the crop year and the effective quota after the 
transfer would exceed an amount determined by multiplying the acreage of 
tillable cropland on the farm by the larger of the farm yield or the 
highest actual yield per acre during the base period.
    (ii) Filed after July 31 and before February 1. If the transfer 
agreement is filed after July 31 of the crop year and before February 1 
of the following year unless the quantity being transferred:
    (A) Is needed in order to market all eligible peanuts from the 
receiving farm as quota peanuts, and
    (B) Does not exceed an amount by which the receiving farm's 
effective quota before the transfer is less than the entire production 
of peanuts from the farm exclusive of any peanuts that have been graded 
as Segregation 2 or Segregation 3 peanuts.
    (3) Permanent transfer of quota from a farm. A permanent transfer of 
quota from a farm by sale or by owner shall not be approved:
    (i) Permanent transfer of quota to the farm. For the amount of quota 
purchased or otherwise permanently transferred to the farm in the 
current year and during the base period, as adjusted for any increase or 
decrease in such quota due to adjustment in the national quota during 
the base period, except that a transfer of a tenant's share of any 
peanut quota increase shall not be considered for purposes of 
determinations made under the provisions of this paragraph.
    (ii) Peanut poundage quota penalty. If the owner is known to owe a 
peanut poundage quota penalty. However, this provision shall not apply 
if the penalty is paid, or in the case of a sale of quota, the entire 
proceeds from the sale of quota are applied to the penalty and the 
county committee determines that the amount paid for the quota 
represents a reasonable price for the pounds of quota being sold.
    (iii) Conservation Reserve contract. If the peanut quota is subject 
to an approved Conservation Reserve Program contract.
    (4) Permanent transfer of quota to a farm. A permanent transfer of 
quota to a farm by sale or by owner shall not be approved if the basic 
quota after transfer would exceed an amount determined by multiplying 
the acreage of tillable cropland on the farm by the larger of the farm 
yield or the highest actual yield per acre during the base period.
    (g) Approval or disapproval of a transfer agreement. The county 
committee shall approve or disapprove each transfer agreement. The 
county committee shall approve each transfer agreement which meets the 
eligibility conditions as set forth in this section or in this part. 
However, the county committee may delegate authority to the county 
executive director or other county FSA employee to act on behalf of the 
county committee and approve a transfer agreement which meets the 
eligibility conditions as set forth in this section. Such delegation may 
authorize the approval of any eligible transfer agreement or the 
delegation of authority may be restrictive as to the type of transfer 
agreements that may be approved. Only the county committee shall 
disapprove a transfer agreement.
    (1) Time for determination. Any approval or disapproval of a 
transfer agreement should be made within 30 days after the transfer 
agreement is filed with the county committee unless additional time is 
required as the result of conditions beyond the control of the county 
committee. However, if a transfer agreement is filed after July 31 of 
the crop year that provides for a permanent transfer of poundage quota, 
the transfer agreement shall not be approved until the next year's quota 
is determined for the transferring farm.
    (2) Effective date. An approved transfer agreement shall become 
effective during the current crop year, except that if an agreement to 
permanently transfer quota is filed after July 31 of the crop year, such 
agreement shall become effective for the next crop year.
    (h) Effect of permanent transfer of quota. In the event of a 
permanent transfer of a quota, applicable farm data for each year of the 
base period shall be transferred to the receiving

[[Page 199]]

farm from the transferring farm in proportion to the quantity of basic 
quota which has been transferred from the transferring farm.
    (i) Notice of revised quotas. A revised notice of farm poundage 
quota shall be issued for each farm affected by the transfer of farm 
poundage quota.
    (j) Cancellation of transfer--(1) A transfer approved on the basis 
of incorrect information furnished by the parties to the transfer 
agreement, or approved due to error by the county committee, shall be 
void and canceled effective as of the date of approval except as may be 
provided by the Deputy Administrator to accomplish the purposes of this 
part. The cancellation shall not be effective for the current marketing 
year if:
    (i) The transfer approval was made on the basis of incorrect 
information unknowingly furnished in good faith by the parties to the 
transfer agreement or the transfer approval was made in error by the 
county committee, and
    (ii) The parties to the transfer agreement were not notified of the 
cancellation prior to the marketing of quota peanuts in excess of the 
revised effective farm poundage quota.
    (2) If cancellation of a transfer is required, the county committee 
shall issue revised notices of poundage quota showing the reasons for, 
and effect of, the cancellation.
    (k) Withdrawal or minor revision. The county committee may permit 
withdrawal or minor revisions of a transfer upon a:
    (1) Written request by all parties to the transfer, and
    (2) County committee determination that such withdrawal or revision 
is clearly in the best interest of all the producers and will not impair 
the effective operation of the peanut program.
    (l) Adjustment of marketings. For the purpose of computing 
production history for quota increase based on production, in the case 
of temporary transfers by owner to the same owner or operator to the 
same operator, if the current year's produced or considered-produced 
credit from the receiving farm exceeds such farm's basic quota, such 
produced or considered-produced credit on the receiving farm shall be 
reduced by the amount of such excess, to the extent of the quota 
temporarily transferred to such farm by owner or operator, and such 
reduced amount shall be added to the current year produced or 
considered-produced credit for the transferring farm.
    (m) Considered produced credit. Quota that is leased and transferred 
from a farm shall be considered produced on such farm to the extent of 
considered produced credit set forth in the definition of ``Considered 
produced credit'' in Sec. 729.103 of this part.

[56 FR 16211, Apr. 19, 1991, as amended at 57 FR 27144, June 18, 1992. 
Redesignated and amended at 61 FR 36999, 37001, July 16, 1996; 62 FR 
2719, Jan. 17, 1997; 62 FR 25438, May 9, 1997]



Sec. 729.215  Release and reapportionment of quota.

    (a) Release. By filing Form FSA-278 with the county FSA office that 
serves the county in which the farm is located for administrative 
purposes, part or all of the farm's:
    (1) Temporary release. Effective quota may be temporarily released 
to the county committee for the current year.
    (2) Permanent release. Basic quota may be permanently released to 
the county committee. If the farm consists of separately identifiable 
tracts having different ownership, the owner(s) of any tract may 
permanently release part or all of the basic quota contributed to the 
farm by such tract.
    (b) Request for released quota. Permanently released quota shall be 
reallocated without a request from the farm's owner or operator to 
eligible farms as determined in accordance with Sec. 729.204 of this 
part. Temporarily released quota, may be reapportioned to farms for 
which a request for released quota has been filed, on Form FSA-278, in 
the county FSA office that serves the county in which the farm is 
located for administrative purposes. Temporarily released quota shall be 
reapportioned in accordance with the provisions of this section.
    (c) Time for filing. The final date for filing a release of quota or 
for requesting reapportionment of temporary released quota shall be:
    (1) Permanent release. For quota to be permanently released, thirty 
days after

[[Page 200]]

the date of mailing of the notice of the farm's quota.
    (2) Temporary release or request for released quota. For a temporary 
release or a request for released quota, the date established by the 
State committee for the county in which the farm is located for 
administrative purposes.
    (d) Signature requirement. The FSA-278 shall be signed by:
    (1) Temporary releases. In the case of a temporary release, the farm 
operator. In addition, if quota was either leased and transferred from 
the farm, or released from the farm, in more than one year of the base 
period, the FSA-278 shall be signed by the farm's owner(s).
    (2) Permanent releases. In the case of a permanent release, both the 
owner(s) and operator of the farm.
    (e) Reapportionment of temporarily released quota--(1) Time to 
reapportion. The county committee shall reapportion, within 10 days 
after the final date for temporary release of quota in the county, any 
quota that will be reapportioned to farms in the county. In addition, if 
the county committee receives released quota from the State committee, 
such quota shall be reapportioned within 10 days after receipt of the 
notice of the availability of the quota.
    (2) Basis of reapportionment. The county committee:
    (i) When reapportioning temporarily released quota, shall give 
priority to producers on nonquota farms and to producers on farms having 
basic quotas that are significantly below the average basic quota in the 
county. Otherwise, the county committee shall reapportion the released 
quota in amounts determined by the county committee to be fair and 
reasonable on the basis of:
    (A) Experience by the applicant in producing peanuts;
    (B) Soil and other physical factors affecting the production of 
peanuts on the applicant's farm; and
    (C) Tillable cropland available for the production of peanuts on the 
applicant's farm.
    (ii) Shall not reapportion released quota to a farm that has 
transferred quota from the farm in the current year.
    (iii) Shall not reapportion quota to a farm to the extent that the 
farm's effective quota after the reapportionment will exceed an amount 
determined by multiplying the farm's tillable cropland by the larger of 
the farm yield or the highest actual yield for peanuts during the base 
period.
    (f) Release to State committee. (1) Temporarily released quota that 
is not reapportioned by the county committee to farms in the county 
shall be released to the State committee for reallocating to other 
county committees that have requested additional quota for 
reapportionment to eligible producers.
    (2) Permanently released quota shall be released to the State 
committee for reallocation to eligible farms in accordance with 
Sec. 729.206 of this part.
    (g) Considered produced credit. Quota that is temporarily released 
shall be considered produced on the releasing farm if neither of the 
following are applicable:
    (1) Part, or all, of the farm's quota was released during any 2 or 
more years of the base period, or
    (2) Part, or all, of the farm's quota was leased and transferred to 
another farm in the same county during any 2 or more years of the base 
period.
    (h) Withdrawal or minor revision of released quota. A withdrawal or 
minor revision in the pounds temporarily or permanently released may be 
approved upon a written request filed with the county committee if, at 
the time the request is filed, the county committee has not transmitted 
permanently released quota to the State committee or, with respect to 
temporarily released quota, has not reapportioned such released quota to 
farms in the county or released such quota to the State committee for 
reallocation to requesting county committees.

[56 FR 16211, Apr. 19, 1991. Redesignated and amended at 61 FR 36999, 
37001, July 16, 1996]



Sec. 729.216  National poundage quota.

    (a) National poundage quota for 1996 and subsequent crop years. The 
national poundage quota for the 1996 and subsequent crop years shall be 
established by the Secretary at a level that is equal to the quantity of 
peanuts that

[[Page 201]]

the Secretary estimates will be devoted in each marketing year to 
domestic edible use (except seed), and related uses as may be set out in 
paragraph (c) of this section.
    (b) Disapproval of quotas. No loan for quota peanuts may be made 
available for any crop of peanuts with respect to which it is determined 
by the Deputy Administrator that poundage quotas have been disapproved 
by producers pursuant to a referendum conducted in accordance with 
section 358-1(d) of the Agricultural Adjustment Act of 1938, as amended.
    (c) Quota determination for individual marketing years (excluding 
seed):
    (1) The national poundage quota for quota peanuts for marketing year 
1996 is 1,100,000 short tons.
    (2) The national poundage quota for quota peanuts for marketing year 
1997 is 1,133,000 short tons.
    (3) The national poundage quota for quota peanuts for marketing year 
1998 is 1,167,000 short tons.

[61 FR 37001, July 16, 1996, as amended at 61 FR 60510, Nov. 29, 1996; 
62 FR 62692, Nov. 25, 1997; 64 FR 48942, Sept. 9, 1999]



   Subpart C--Marketing Cards, Marketings, Penalties, and Assessments



Sec. 729.301  Issuance of cards.

    (a) General. As used in this part, peanut marketing card, Form FSA-
1002, means a paper marketing card on which data is manually recorded or 
a plastic marketing card in which data is recorded electronically into a 
micro computer chip by a computer.
    (b) Issuance of marketing cards. A marketing card shall be issued in 
the name of the farm operator for each farm on which peanuts are 
produced in the United States in the current year for use by each 
producer on the farm for marketing such producer's share of the peanuts 
produced except that:
    (1) A marketing card issued for experimental peanuts shall be issued 
in the name of the experiment station, and
    (2) A marketing card issued to a successor-in-interest shall be 
issued in the name of the successor-in-interest.
    (c) Issuance of producer identification cards. A producer 
identification card shall be issued in the same name that is entered on 
the marketing card(s) for each eligible farm. The producer 
identification card will be used to identify the farm on which the 
peanuts were produced and the card must accompany each lot of peanuts 
when offered for sale. Producer identification cards shall be issued at 
the time the marketing cards are issued.
    (d) Person authorized to issue cards. The county executive director 
shall be responsible for the issuance of marketing cards and producer 
identification cards.
    (e) Rights of producers and successors-in-interest. (1) Each 
producer having a share in the peanuts available for marketing from a 
farm shall be entitled to the use of the marketing and identification 
cards for marketing such producer's proportionate share of the peanuts 
produced on the farm, as determined by the county committee.
    (2) Any person who the county committee determines has succeeded, in 
whole or in part, to the share of a producer in the peanuts available 
for marketing from a farm shall, to the extent of such succession, have 
the same rights to the use of the marketing and identification cards and 
bear the same liability for penalties as the original producer would 
with respect to the disposition of the peanuts.
    (f) Data on marketing card and supplemental card--(1) Before 
issuance, the following data and information must be recorded on the 
marketing card:
    (i) The name of each producer and the producer's share of the crop 
of peanuts;
    (ii) The effective farm poundage quota;
    (iii) The pounds of any additional peanuts contracted and the 
handler number of the contracting handler;
    (iv) The converted penalty rate, if applicable;
    (v) The name of any producer on the farm against whom a peanut 
poundage quota lien has been established and the unpaid balance of such 
lien;
    (vi) The name of any producer on the farm against whom a U.S. claim 
has been established and the unpaid amount of such claim;

[[Page 202]]

    (vii) With respect to any farm with a producer that is ineligible 
for price support, an indication of such ineligibility; and
    (viii) An indication that the peanuts marketed from the farm are 
``Eligible for Buyback'' if the farm operator authorizes the handler to 
purchase peanuts under the ``Immediate Buyback'' purchase in accordance 
with part 1446 of this title.
    (2) A supplemental marketing card bearing the same name 
identification as shown on the original marketing card may be issued for 
a farm if an original or supplemental marketing card is returned to the 
county office. The balance of the poundage quota for the farm from the 
returned marketing card shall be recorded as the effective farm poundage 
quota on the supplemental card.
    (3) Two or more marketing cards may be issued for a farm if the farm 
operator specifies in writing the amount of the effective quota (not to 
exceed the balance of effective quota available) which is to be assigned 
to each card.
    (g) Issuance of producer identification cards--(1) Before issuance, 
the following information shall be recorded on the producer 
identification card:
    (i) Name and address of the farm operator, and
    (ii) State, county code, and farm serial number.
    (2) A farm operator may receive as many identification cards as may 
be needed at any one time to accompany each lot of peanuts until such 
lot of peanuts has been marketed.
    (h) Replacing a lost, stolen, or destroyed marketing card. A new 
marketing card shall be issued to replace a card which has been 
determined by the county executive director who issued the card to have 
been lost, destroyed, or stolen, if the farm operator gives immediate 
written notice of such fact to the appropriate county FSA office and 
furnishes a satisfactory report of the quantity of peanuts which was 
marketed by use of such marketing card before such card was lost, 
stolen, or destroyed.
    (i) Invalid cards. A marketing card shall be invalid under any one 
of the following conditions:
    (1) It is not issued or delivered in the form and manner prescribed.
    (2) Any entry is omitted or is incorrect.
    (3) It is lost, destroyed, or stolen.
    (4) An alteration has been made without the approval of the county 
executive director.
    (5) For a paper card, the card becomes illegible.
    (j) Validating invalid cards. If a marketing card is known to be 
invalid, the farm operator or other producer shall return the marketing 
card to the county office. The county executive director shall issue a 
replacement marketing card or the marketing card may be made valid by 
entering data previously omitted or by correcting any incorrect data 
previously entered.



Sec. 729.302  Identification of producer marketings.

    The producer must identify each lot of peanuts offered for marketing 
through a handler by furnishing to the handler the farm operator 
identification card FSA-1003, and the peanut marketing card FSA-1002, 
which was issued for the farm on which the peanuts were produced. The 
producer may at the producer's risk leave the peanut marketing card in 
the custody of the handler during the period between marketing lots of 
peanuts to the same handler; however, the marketing card shall not be 
left in the possession of the handler after the producer has completed 
marketings for the season.



Sec. 729.303  Designation of category for marketing peanuts.

    Any marketings of peanuts which are not inspected by the Federal-
State Inspection Service prior to marketing shall be deemed to be a 
marketing of quota peanuts. If a lot of peanuts is inspected by the 
Federal-State Inspection Service, the producer shall designate to the 
handler whether the lot of peanuts is to be marketed as quota loan, 
quota commercial, loan additional, or contract additional peanuts as 
defined in part 1446 of this title. The designation must be made within 
the time allowed by the handler but not later than the close of 
inspection of the third workday (excluding Saturday,

[[Page 203]]

Sunday, or legal holiday) after the peanuts are inspected and graded. In 
the absence of a designation, any Segregation 1 peanuts shall be 
marketed and deemed to be marketed in the following order of priority:
    (a) As quota loan or quota commercial peanuts, at the option of the 
buying point operator, to the extent of the unused poundage quota on the 
peanut marketing card which is used to identify the peanuts for 
marketing;
    (b) As contract additional peanuts to the extent of the unused 
contract poundage balance on the peanut marketing card which is used to 
identify the peanuts for marketing if the peanuts are being marketed 
through the contracting handler; or
    (c) As loan additional peanuts.



Sec. 729.304  Marketing card entries.

    (a) Immediately after each lot of peanuts is marketed the buyer, or 
the buyer's representative, shall make the following entries on the 
marketing card from the FSA-1007:
    (1) The FSA-1007 serial number which identifies the lot of peanuts;
    (2) The net pounds marketed;
    (3) The unused poundage quota balance remaining after the marketing;
    (4) The unused contract additional poundage balance remaining after 
the marketing;
    (5) The handler's number, or for loan peanuts, the association 
number;
    (6) The buying point number;
    (7) The type of peanuts marketed; and
    (8) Any penalties or claims collected.
    (b) If noninspected peanuts are purchased at a buying point, the 
buyer, or the buyer's representative, shall make the following entries 
on the paper marketing card from the FSA-1030, Report of Purchase of 
Noninspected Peanuts;
    (1) The date of marketing;
    (2) The pounds purchased;
    (3) The unused poundage quota balance remaining after the marketing;
    (4) The unused contract additional poundage balance remaining after 
the marketing;
    (5) The handler's number;
    (6) The type of peanuts marketed; and
    (7) Any penalties or claims collected.



Sec. 729.305  Peanuts on which penalties are due and refund of excess penalty collected.

    (a) In addition to other remedies as may apply, a penalty is due 
from the person involved in a violation of this part and shall be 
assessed against such person at the basic penalty rate on:
    (1) The quantity of peanuts which is marketed or considered to be 
marketed from a farm for domestic edible use in excess of the effective 
farm poundage quota for the farm.
    (2) All peanuts produced on a farm for which the producer:
    (i) Failed to report the peanut acreage as provided in accordance 
with part 718 of this chapter; or
    (ii) Is responsible, if entry on the farm to authorized 
representatives of the Secretary for the purpose of determining the 
acreage of peanuts on the farm is refused or denied.
    (3) The quantity of peanuts falsely identified, as determined by the 
county committee with the concurrence of the State committee. The 
quantity of peanuts subject to penalty under this provision shall be the 
quantity of peanuts determined by the county committee to have been 
falsely identified. Acts considered to be false identification shall 
include the following:
    (i) Identifying or permitting the identification of peanuts at time 
of marketing as having been produced on a farm other than the farm of 
actual production;
    (ii) Marketing or permitting the marketing of peanuts to a 
registered handler without identifying the peanuts with a peanut 
marketing card issued for the farm on which such peanuts were produced;
    (iii) Permitting the use of the peanut marketing card for the farm 
to record a marketing of peanuts when, in fact, peanuts were not 
marketed from the farm; or
    (iv) Marketing peanuts that have been commingled with those of 
another farm.
    (4) All peanuts, the disposition of which the producer has failed to 
account for to the satisfaction of the county committee. The quantity of 
peanuts subject to penalty under this

[[Page 204]]

provision shall be the amount of peanuts determined by the county 
committee to have been marketed or considered marketed from the farm in 
excess of the quantity for which the producer has satisfactorily 
accounted.
    (5) All additional peanuts marketed as contract additional peanuts 
in excess of the pounds contracted between the producer and handler as 
provided in part 1446 of this title.
    (6) The quantity of farmers stock peanuts the county committee 
determines was necessary to plant the reported acreage for the crop year 
if the producer fails or refuses to file an accurate seed peanut report 
of seed purchases; and
    (7) All peanuts marketed in violation of this subpart for reasons 
not otherwise enumerated in paragraph (a) of this section.
    (b) If the reported acreage of peanuts on a farm differs from the 
determined acreage by more than the tolerance provided in part 718 of 
this chapter, a penalty at the converted rate shall be due from all 
producers on the farm on all peanuts marketed from the farm.
    (c) Any penalty collected in excess of the correct amount as 
determined pursuant to this section may be refunded upon a finding by 
the county committee that an excess amount was collected.



Sec. 729.306  Farms with one acre or less of peanuts.

    All peanuts produced on a farm on which the acreage of peanuts is 
one acre or less may be marketed for domestic edible use without 
incurring a marketing penalty if the producer who shares in the peanuts 
produced on any such farm does not share in the peanuts produced on any 
other farm.



Sec. 729.307  Assessment of penalties; joint and several liability.

    Any person against whom a penalty is assessed in accordance with 
this subpart, shall be notified of the penalty assessment in writing by 
the appropriate county committee. Such notice shall state the amount of 
the penalty and the basis upon which the penalty is being assessed. The 
notice shall also state that the person against whom the penalty is 
being assessed may request reconsideration of the assessment of the 
penalty in accordance with part 780 of this chapter. If more than one 
person is liable for a penalty, the liability of all persons involved 
shall be joint and several liability.



Sec. 729.308  Lien for penalty.

    (a) Lien on peanuts. Until the amount of any penalty provided by 
this part is paid, a lien on the crop of peanuts with respect to which 
such penalty is incurred, and on any subsequent crops of peanuts subject 
to poundage quotas in which the person liable for payment of the penalty 
has an interest, shall be in effect in favor of the United States.
    (b) Lien precedence. The lien on the peanuts takes precedence over 
all claims and attaches at the time the debt is entered on a county 
claim record in the county FSA office for the county in which the 
subsequent crop is grown.
    (c) List of peanut marketing penalty debts. Each county FSA office 
shall maintain a list of peanut marketing penalties for which a claim 
has been established and recorded in such office. The list shall be made 
available for examination upon written request by any interested person.



Sec. 729.309  Persons to pay penalty or collect debts.

    (a) Marketings to handlers. The buyer shall be liable for the full 
penalty due on marketings of excess quota peanuts that such handler buys 
or otherwise acquires from a producer. Also, the buyer shall be liable 
with the producer for the full penalty due on peanuts purchased from a 
producer as additional peanuts in excess of the amount contracted with 
the producer as contract additional peanuts in accordance with part 1446 
of this title. The buyer may deduct the penalty from the price paid to 
the producer for the peanuts. If the net value of a lot of peanuts is 
less than the penalty due on such lot, or if the handler fails to 
collect the penalty due on any marketing of a lot of peanuts from a 
farm, the buyer and each of the producers on the farm shall be held 
jointly and severally liable for the amount of any unpaid penalty due on 
such lot of peanuts.

[[Page 205]]

    (b) Other marketings. The producer is liable for the penalty due on 
any marketings of excess quota peanuts to persons who are not 
established peanut buyers.
    (c) Penalty for error on marketing card. The producer and the buyer 
are jointly and severally liable for any penalties which may be due if 
the buyer made an error or failed to properly record the pounds of 
peanuts marketed on the producer's marketing card and such error 
resulted in marketings in excess of the effective poundage quota or the 
pounds contracted as additional peanuts in accordance with part 1446 of 
this title.
    (d) Notice to affected parties. All affected parties shall be deemed 
to be on notice that penalties are due when the marketings of peanuts 
for domestic edible use exceed the effective poundage quota indicated on 
the marketing card or the marketing of peanuts as contract additional 
peanuts exceeds the amount contracted by the producer as additional 
peanuts in accordance with part 1446 of this title. In addition:
    (1) PPQ lien. If a peanut poundage quota (PPQ) lien is recorded on a 
claim record maintained in a county FSA office in accordance with 
Sec. 729.308 of this part or recorded on the peanut marketing card such 
recordation shall constitute notice to any peanut buyer that until the 
amount of the penalty involved plus accrued interest is paid, the United 
States has a lien on any peanuts, from any crop year that are subject to 
farm poundage quotas in which the person liable for payment of the 
penalty has an interest. Peanut poundage quota (PPQ) lien amounts shall 
be collected by the buyer and paid to the Farm Service Agency prior to 
making collection for any other liens or claims, except for a lien that 
was perfected before the PPQ lien became attached, as provided in 
Sec. 729.308 of this part. Such buyer shall be liable for payment of 
such amount that was, or should have been, collected by the buyer.
    (2) U.S. claim. If a U.S. claim, other than for a PPQ lien, is 
recorded on a marketing card, such recordation shall constitute notice 
to any peanut buyer that, to the extent of the indebtedness shown, and 
subject to prior liens, the net proceeds from any price support loan due 
the debtor must be withheld from the producer and paid to the Farm 
Service Agency. Such buyer shall be liable for payment of such amount 
that was, or should have been, withheld.
    (3) Converted penalty rate. If a converted penalty rate is entered 
on the marketing card by the county FSA office, the buyer shall collect 
penalty at such converted penalty rate on each pound of peanuts acquired 
from the producers of the peanuts. Any penalty that is collected must be 
paid to the Farm Service Agency. Such buyer shall be liable for payment 
of such amount that was, or should have been, collected by the buyer.



Sec. 729.310  Payment of penalty or other debt.

    (a) Method of payment. A draft, money order, or check made payable 
to the Farm Service Agency may be used to pay any penalty, other 
indebtedness collected in accordance with this subpart, or interest 
thereon. All methods of payment shall be received subject to collection 
and payment at face value.
    (b) Due date. The penalty becomes due on the date of marketing, or 
in the case of false identification or failure to account for the 
disposition of peanuts, the date the producer is notified of the false 
identification or the failure to account, as applicable.
    (c) Interest. The person liable for payment or collection of the 
penalty shall be liable also for interest thereon at the rate of 
interest charged CCC for its borrowings by the United States Treasury on 
the date such penalty became due. If the rate charged CCC by the 
Treasury is increased, the interest due on the penalty may be, to the 
extent permitted by law, increased commensurately for the period of such 
increase. Interest shall accrue from the date the penalty was due if the 
penalty is not remitted within 30 days after the date the penalty was 
assessed. Nothing in paragraph (c) of this section, shall limit the 
liability of a person for pre-penalty interest where otherwise provided 
for in this part or otherwise provided for by law.

[[Page 206]]



Sec. 729.311  Peanuts on which penalties are not to be assessed.

    Notwithstanding other provisions in this subpart:
    (a) Error in weight. A penalty shall not be collected if such 
penalty results from an error in net weight of a lot of peanuts 
marketed, as reported on Form FSA-1007, Inspection Certificate and Sales 
Memorandum, and the error does not exceed one-tenth of one percent of 
the correct net weight of such lot of peanuts. However, notwithstanding 
the preceding sentence, in the case of fraud or conspiracy, a penalty 
shall be due for any error in the net weight, regardless of the size or 
amount of the error.
    (b) Peanuts grown on State prison farms. A penalty shall not be 
collected on peanuts grown on State prison farms for consumption within 
such State prison system, and so consumed.
    (c) Peanuts grown for experimental or research purposes. (1) A 
penalty shall not be collected on the marketing of any peanuts that are:
    (i) Grown only for experimental or research purposes, which shall 
include seed determined by the Deputy Administrator to be breeder or 
foundation seed;
    (ii) Grown on land owned or leased by a publicly-owned agricultural 
experiment station, which shall include a State-operated seed 
organization;
    (iii) Produced at public expense by employees of entities described 
in paragraph (c)(1)(ii) of this section, or are produced by farmers for 
seed determined by the Deputy Administrator to be breeder or foundation 
seed peanuts for experimental or research purposes pursuant to an 
agreement with a publicly-owned agricultural experiment station, which 
shall include such State-operated seed organizations.
    (2) The exemption from penalty, as provided in paragraph (c)(1) of 
this section shall not apply unless:
    (i) Such peanuts are used for purposes other than for:
    (A) Food or feed, or
    (B) Seed to produce peanuts for food.
    (ii) The director of the applicable publicly-owned agricultural 
experiment station, including State-operated seed organizations, 
furnishes to the State FSA Executive Director:
    (A) A list, by county, showing for each farm on which such peanuts 
are grown for experimental or research purposes, the name and address of 
the entity that supplies information; the name of the owner, and 
operator, if different from the owner, of the farm on which such peanuts 
are grown; and the acreage of peanuts grown for such experimental or 
research purposes;
    (B) A signed statement that such acreage of peanuts will be grown 
for experimental and research purposes including breeder and foundation 
seed; such production of peanuts is necessary for the State-operated 
program conducted for such purposes by the entity; and such peanuts will 
be produced under the direction of representatives of such entity; and
    (C) Such additional reports, if any, as the Deputy Administrator may 
require.
    (d) Unique strains used to plant green peanut acreage. Seed peanuts 
used to plant peanuts for use as green peanuts shall not be subject to 
penalty if the county committee determines that such seed peanuts:
    (1) Are unique strains of peanuts used for green peanuts.
    (2) Are not commercially available, and,
    (3) Are used exclusively to plant peanuts for harvest as green 
peanuts.



Sec. 729.312  Reduction or waiver of penalty.

    (a) Reduction or waiver of penalty. The county committee may reduce 
or waive any penalty required to be assessed by this subpart in cases in 
which the county committee, with concurrence of the State committee, 
determines that the violations upon which the penalties were based were 
unintentional or without knowledge on the part of the parties concerned.
    (b) Time of reduction or waiver. A penalty may be reduced or waived 
by an authorized official or committee either before or after it has 
been formally assessed. If the reduction or waiver is made before formal 
assessment, the notice of assessment shall state the amount of reduction 
or waiver and the basis upon which the reduction or waiver was made.
    (c) Reconsideration or appeal. Any person against whom a penalty is 
assessed

[[Page 207]]

under this subpart may, through a request for reconsideration or through 
an appeal, as applicable, request that the penalty be reduced or waived.



Sec. 729.313  Failure to comply with program.

    Any person who has failed to comply with the provisions in this part 
because such person was misinformed or relied on the advice of an 
authorized representative of the Secretary in rendering performance 
under this part, and such person believed in good faith that such 
misinformation or advice met the requirements of the program as set 
forth in these regulations, may file a request with the State committee 
for review of an adverse county committee ruling with respect to such 
failure to comply. After review of the case, the State committee shall 
submit the case to the Deputy Administrator with its recommendation. The 
Deputy Administrator may grant relief as deemed appropriate in such 
case. This authority, however, does not extend to cases where such 
person knew or had sufficient reason to know that the action or advice 
of the representative of the Secretary upon which the person relied was 
improper or erroneous, or where the adverse action is based on changes 
made in the statutory authority of the program or changes in regulations 
issued for the program.



Sec. 729.314  Schemes and devices.

    (a) Penalties shall be assessed in such manner as will correct for 
and nullify any action in which a person has knowingly, whether 
passively or actively:
    (1) Engaged in, acquiesced in, or adopted any scheme or device which 
tends to defeat the purpose of the regulations in this part,
    (2) Made any fraudulent representation, or
    (3) Misrepresented any fact affecting a program determination.
    (b) Such penalties as are provided for in this part shall be in 
addition to all other remedies and sanctions provided for, or permitted, 
by law.



Sec. 729.315  Handling Segregation 3 peanuts.

    (a) Disposition of Segregation 3 peanuts. Any producer who has a lot 
of farmers stock peanuts classified by the inspector as Segregation 3 
peanuts shall retain such lot of peanuts for seed in accordance with 
paragraph (c) of this section or shall deliver such lot of peanuts:
    (1) To the area association for a price support loan subject to such 
conditions as apply to eligibility for such loans including those in 
part 1446 of this title.
    (2) As contract additional peanuts subject to provisions of part 
1446 of this title;
    (3) As quota peanuts, subject to the conditions set forth in this 
part to a handler who has signed the peanut marketing agreement provided 
the peanuts were produced for seed under an agreement with a State 
agency; or
    (4) To a handler as quota peanuts if:
    (i) The peanuts were produced for seed under an agreement with a 
State agency.
    (ii) The handler to whom the peanuts are sold has, for that purpose, 
signed a supervision supplement to a warehousing contract with the area 
marketing association.
    (b) Failure to properly dispose of Segregation 3 peanuts--(1) Loss 
of price support. If the producer does not, within the time allowed in 
this part for designation of the category for marketing such peanuts, 
dispose of Segregation 3 peanuts in the manner specified in this 
section, such producer shall be ineligible for continued quota price 
support for the remainder of the marketing year.
    (2) Liquidated damages. Any peanut producer participating in the 
price support loan program shall be deemed to have agreed that:
    (i) CCC will incur serious and substantial damage to its program to 
support the price of peanuts if Segregation 3 peanuts are disposed of 
other than in the manner prescribed by this subpart or by the CCC;
    (ii) The amount of such damages will be difficult, it not 
impossible, to ascertain;
    (iii) With respect to any lot of peanuts which is pledged as 
collateral for a quota price support loan but which is ineligible for 
such loan, or any lot of peanuts which is pledged as collateral for a 
quota price support loan by a producer after the producer has disposed

[[Page 208]]

of any lot of Segregation 3 peanuts in any manner other than in the 
manner prescribed in this section, liquidated damages shall be due to 
CCC, not as a penalty, based on the difference between the quota loan 
rate and the additional loan rate (on a per pound basis) per net pound 
of such peanuts,
    (iv) Such liquidated damages are a reasonable estimate of the 
probable actual damages which CCC would suffer because of such action by 
the producer; and,
    (v) This remedy shall be in addition to any other remedy or sanction 
available against the producer, including penalties under this part.
    (c) Retention of Segregation 3 peanuts for seed. If the producer 
elects to retain a lot of Segregation 3 peanuts for seed, the buying 
point operator shall give a copy of the FSA-1007 to the producer as a 
record showing the quantity and quality factors of the peanuts. The 
producer:
    (1) Shall designate such peanuts as quota peanuts.
    (2) Shall have the net weight of such peanuts determined and 
deducted from the farm marketing card.
    (3) Shall advise the inspector that the peanuts are being retained 
for seed.
    (4) Must store such peanuts separate from other peanuts on the farm.
    (5) Shall notify the county executive director when such peanuts are 
used and otherwise account for the disposition of such peanuts.
    (6) Shall not sell such peanuts to a handler for seed; however, the 
peanuts may be sold to another producer for seed.
    (7) May, if it is later determined that such peanuts are unfit for 
seed use and after receiving prior approval from the county office, sell 
such peanuts as quota peanuts for crushing without benefit of price 
support.



Sec. 729.316  Marketing assessments.

    (a) Subject to adjustments in accordance with Sec. 729.317, a 
nonrefundable marketing assessment shall, in the amount provided for in 
this section, be due on each pound of farmers stock peanuts marketed or 
considered marketed by a producer, including marketings by pledging 
peanuts as collateral for a price support loan. The per pound assessment 
as a percentage of the applicable national average quota or additional 
peanut loan rate, shall be an amount equal to:
    (1) 1.15 percent for the 1996 crop; and
    (2) 1.2 percent for the 1997 through 2002 crops.
    (b) Collections and payment of marketing assessments. The first 
purchaser of peanuts shall:
    (1) Collect from the producer a marketing assessment equal to the 
quantity of peanuts acquired multiplied by:
    (i) In the case of the 1996 crop, a per pound amount equal to .6 
percent of the national average loan rate; and
    (ii) In the case of each of the 1997 through 2002 crops, a per pound 
amount equal to .65 percent of the applicable national average loan 
rate.
    (2) In addition to the amount collected under paragraph (1) of this 
section, pay a marketing assessment in an amount equal to the quantity 
of peanuts acquired multiplied by .55 percent of the applicable national 
average loan rate.
    (c) Private marketings. For all peanuts retained on the farm for 
seed or other uses or marketed by such producer to any person outside 
the United States or marketed in private marketings through a retail or 
wholesale outlet to any person who is not required to register as a 
handler in accordance with part 1446 of this title, the producer shall 
pay a marketing assessment equal to the full amount determined by 
multiplying the per pound amount provided in paragraph (a) of this 
section by the gross weight of the peanuts if they are uninspected 
farmers stock peanuts or, if inspected, the net weight of such peanuts. 
If such peanuts are shelled before they are marketed, the quantity 
marketed shall be converted to a farmers stock equivalent as consistent 
with this part, for purposes of determining the amount of assessment 
that is due.
    (d) Loan collateral peanuts. With respect to peanuts that are 
pledged as collateral for a price support loan through an approved 
warehouse, an assessment shall be:
    (1) Determined and paid by multiplying the net weight of such 
peanuts by the applicable per pound amount

[[Page 209]]

provided in paragraph (b)(1) of this section for private sales and 
deducting the total from the loan value of such peanuts before other 
deductions may be made for any other reason; and
    (2) Further determined and paid by multiplying the net weight of 
such peanuts, when sold from the price support inventory, by the 
applicable per pound amount provided in paragraph (b)(2) of this section 
for private sales and collecting that amount from the person who 
acquires such peanuts from the applicable association or from the CCC.
    (e) Remittance of marketing assessments. With respect to marketing 
assessments as provided in:
    (1) Paragraph (b) of this section, such assessments shall be 
remitted in a manner prescribed by the Deputy Administrator. To avoid a 
penalty, as prescribed in this section, the marketing assessments due 
with respect to any lot of peanuts acquired directly from a producer 
must be remitted during the 15 days that follow the week in which the 
data from the applicable Form FSA-1007 is due to be transmitted to FSA 
in accordance with the provisions in part 1446 of this title. For 
purposes of this section a week shall be the 168 hour period that begins 
at 12:01 a.m. local time on any Sunday and the postmark on the envelope 
in which such marketing assessment is remitted may be the basis for 
determining whether the marketing assessment was remitted timely;
    (2) Paragraph (c) of this section, such assessments shall be 
remitted, within 10 days after the date such peanuts are marketed, and 
shall be remitted to the county FSA office that serves the county in 
which the farm is administratively located. Peanuts that are retained on 
the farm for seed or other use, shall be considered marketed at the time 
the certification of marketings is filed or due to be filed at the 
county FSA office, whichever is earlier;
    (3) Paragraph (d)(1) of this section, such assessments shall be 
credited by the association to the appropriate account of the CCC and in 
accordance with instructions issued by the Executive Vice President, 
CCC; and
    (4) Paragraph (d)(2) of this section, such assessment shall be paid 
at the time and in the manner prescribed in the applicable:
    (i) Sales announcements for sales of farmers stock peanuts by CCC;
    (ii) Sales announcement or other similar document issued by the 
association for association sales of loan stocks of farmers stock 
peanuts; and
    (iii) Storage contract for farmers stock peanuts purchased by a 
handler when peanuts are purchased by such handler in accordance with 
the ``immediate buyback'' provisions set forth in Sec. 1446.309.
    (f) Penalties. If any person fails to collect, pay or timely remit 
the assessment required by this section, the person shall be liable in 
addition to principal and interest, for a penalty determined by 
multiplying the quantity of peanuts involved by 10 percent of the per 
pound national average quota support rate for the applicable crop year.

[61 FR 37565, July 18, 1996]



Sec. 729.317  Increased marketing assessments.

    (a) Applicability. If area quota pool losses are not otherwise 
covered by the offsets prescribed by part 1446 of this title, and the 
transfer of marketing assessments collected in accordance with 
provisions of this part, the marketing assessment for quota peanut 
producers shall be:
    (1) Increased by an amount needed by CCC to cover such losses; and
    (2) Collected as determined by CCC on all quota peanuts marketed in 
the next marketing year in the area covered by the quota pool which had 
the loss.
    (b) Insufficient collections. If the amount of such increased 
assessments collected on the marketing of quota peanuts in any year is 
less than the amount needed to cover the accumulated net pool losses for 
any crop, there shall be an increased assessment in subsequent years 
until the amount needed is collected.
    (c) Excess collections. If the increased amount of assessments, as 
provided in this section, collected on the marketing of quota peanuts 
for any year is greater than the amount needed for the purpose for which 
the collection is made, the excess amount shall be retained to offset 
any losses which may

[[Page 210]]

occur in quota pools within that marketing area in subsequent years.
    (d) Collection procedures. Unless otherwise specified by CCC, the 
collection procedures for the increased assessments shall be as provided 
for in Sec. 729.316 and the assessment rates of Sec. 729.316 shall be 
increased accordingly.

[61 FR 37566, July 18, 1996]



           Subpart D--Recordkeeping and Reporting Requirements



Sec. 729.401  Peanuts marketed to persons who are not registered handlers.

    (a) If peanuts are marketed to persons other than registered peanut 
handlers, the operator of the farm on which the peanuts were produced 
shall file a report of the marketings by executing Form FSA-1011, Report 
of Acreage and Marketing of Peanuts to Nonestablished Buyers. The FSA-
1011 must be mailed or delivered to the county executive director of the 
county in which the farm is administratively located within 15 days 
after the marketing of peanuts from the farm has been completed. If 
peanuts are marketed by the producer in small lots directly to 
consumers, such as in the case of local street sales, a daily or weekly 
summary of the quantity marketed and the place of marketing may be 
reported in lieu of the name and address of each buyer.
    (b) Failure to file an FSA-1011 as required or the filing of a 
report which the county committee finds to be incomplete or inaccurate 
shall constitute failure to account for the disposition of the peanuts 
on the farm and may result in the assessment of marketing penalties, as 
provided in this part.
    (c) All peanuts marketed to persons other than registered handlers 
shall be considered as marketings of quota peanuts.



Sec. 729.402  Report on marketing card.

    The farm operator shall return each peanut marketing card to the 
issuing county FSA office as soon as marketings from the farm are 
completed or at such earlier time as the county executive director may 
request. At the time the last marketing card for a farm is returned, the 
farm operator shall execute a certification of the pounds of peanuts 
retained for seed or other use. Failure to return a marketing card or 
failure to execute the certification of the quantity of peanuts retained 
for seed or other uses shall constitute failure to account for the 
disposition of peanuts marketed from the farm. Marketing penalties may 
be assessed for such failure as provided in this part, unless a 
satisfactory report of disposition is furnished to the county committee.



Sec. 729.403  Report of marketing green peanuts.

    (a) Farm operator report. The operator of each farm from which green 
peanuts are marketed shall report the marketing of green peanuts. The 
operator shall make the report by filing Form FSA-1011 at the FSA office 
of the county in which the farm is administratively located. The report 
shall show for the farm:
    (1) The acreage on the farm from which peanuts were marketed solely 
as green peanuts; and
    (2) The name and address of the buyer to, or through whom, each lot 
of green peanuts was marketed and the quantity in each lot marketed and 
the date marketed. However, if green peanuts are marketed by the 
producer in small lots directly to consumers, such as in the case of 
local street sales, the report may be made as either a daily or weekly 
summary of the quantity so marketed and the place of marketing may be 
reported in lieu of the name and address of each buyer.
    (b) Buyer report. Each buyer of green peanuts shall report purchases 
of green peanuts from producers on FSA-1011 to the county FSA office in 
the county in which the farm is administratively located. Small lot 
purchases not in commercial quantities including, but not limited to, 
street sales, local market sales, and grocery store sales shall not be 
subject to this reporting requirement. This report shall subject the 
buyer to a review of those purchase and sales records as required in 
this part. Each buyer shall keep records of green peanuts purchased 
including the following information:
    (1) Date of purchase;

[[Page 211]]

    (2) Name and address of producer selling green peanuts;
    (3) Name and address of farm operator and farm number (including 
State and county codes) of the farm on which the green peanuts were 
produced; and
    (4) Pounds of green peanuts purchased.
    (c) Failure to file green peanut report. Failure to file any report 
of the marketing of green peanuts as required by this section or the 
filing of a report which the county committee finds to be incomplete or 
inaccurate shall, subject the farm operator or buyer, as applicable, to 
marketing penalties as set forth in this part.



Sec. 729.404  Report of acquisition of seed peanuts.

    (a) If peanuts are planted on a farm in the current year and the 
seed peanuts were acquired by purchase or gift, the farm operator shall 
file a report with the county FSA office of the acquisition of the seed 
peanuts. The report must be filed by the farm operator at the time a 
report of planted acreage of peanuts is made in accordance with 
provisions of part 718 of this chapter. The report shall include:
    (1) The name and address of the handler or person from whom peanuts 
were purchased or obtained as a gift for the purpose of planting the 
peanut acreage on the farm in the current year;
    (2) The pounds of peanuts acquired for seed;
    (3) The basis (farmers stock or shelled) of determining the quantity 
acquired;
    (4) The type of peanuts acquired; and
    (5) The date of acquisition.
    (b) Unique strains of peanuts that are not commercially available 
and are retained on a farm to plant green peanuts shall also be reported 
to the county FSA office.



Sec. 729.405  Report of production and disposition.

    (a) In addition to any other reports which may be required under 
this subpart, the farm operator or any producer on the farm shall 
furnish, upon written request by certified mail from the State Executive 
Director, a report to the State committee of production and disposition 
of the peanuts grown on the farm. The report must be filed on FSA-1010, 
Report of Production and Disposition, within 15 days after the request 
is mailed. The report shall show the:
    (1) Final acreage of peanuts on the farm;
    (2) Total production of peanuts on the farm;
    (3) Name and address of the buyer to or through whom each lot of 
peanuts was marketed, the number of pounds in each lot, and the date 
marketed:
    (4) Quantity and disposition of peanuts not marketed; and
    (5) Type of peanuts.
    (b) Notwithstanding paragraph (a) of this section, if peanuts are 
marketed in small lots to persons who are not established buyers, the 
report otherwise required in paragraph (a) of this section, may be made 
as either a daily or weekly summary of the number of pounds marketed and 
the place of marketing may be reported in lieu of the name and address 
of each buyer.
    (c) Failure to file the FSA-1010 as requested or the filing of an 
FSA-1010 which is found by the State committee to be incomplete, 
incorrect, or in violation of the requirements of paragraphs (a) or (b) 
of this section, shall constitute failure of the producer to account for 
the production and disposition of peanuts produced on the farm and will 
subject the producer to marketing penalties as set forth in this part.



Sec. 729.406  Persons engaged in more than one business.

    Any person who is required under this subpart to keep any record or 
make any report as a buyer, processor, or other person engaged in the 
business of shelling or crushing peanuts, and who is engaged in more 
than one such business, shall keep such records for each such business.



Sec. 729.407  Penalty for failure to keep records and make reports.

    Any person, who dries farmers stock peanuts by artificial means for 
a producer, any buyer, warehouseman, processor, common carrier of 
peanuts, any broker or dealer in peanuts, any agency marketing peanuts 
for a buyer or

[[Page 212]]

dealer, any peanut growers' cooperative association, any person engaged 
in the business of cleaning, shelling, crushing, or salting peanuts, or 
manufacturing peanut products, or any person owning or operating a 
peanut combine, or any farmer engaged in the production of peanuts, who 
fails to make any report or keep any record, including electronic 
records, as required under this part or who makes any false report or 
record shall be deemed to have improperly handled peanuts for the 
quantity of peanuts to which such failure applies for which a penalty 
may be assessed under the provisions of this part or part 1446 of this 
title, as applicable. Such liability is in addition to criminal 
penalties or other remedies permitted by law.



Sec. 729.408  Examination of records and reports.

    The Deputy Administrator, the Director of the Tobacco and Peanuts 
Division, the FSA State Executive Director, or their designees, and all 
auditors and agents of the Office of Inspector General, United States 
Department of Agriculture (USDA) or the General Accounting Office are 
authorized to examine any records of any producer, or handler, or person 
buying or processing peanuts as deemed necessary to enforce the peanut 
poundage quota program and shall be allowed access to such records. Upon 
a request for such examination, any person who dries farmers stock 
peanuts by artificial means for a producer, any buyer, warehouseman, 
processor, or common carrier of peanuts, any broker or dealer in 
peanuts, any farmer engaged in the production of peanuts, any agent 
marketing peanuts for a producer or acquiring peanuts for a buyer or 
association, any person engaged in the business of cleaning, shelling, 
crushing, or salting peanuts or manufacturing peanut products, or any 
person owning or operating a peanut combine, shall make available for 
examination such books, papers, automated records, electronic records, 
accounts, correspondence, contracts, documents, and memoranda as are 
under the control of the person receiving the request which any person 
hereby authorized to examine records has reason to believe are relevant 
to any matter which relates to the provisions of this part. Any person 
who fails to provide such access shall be subject to a penalty payable 
to CCC in amount up to, as determined by the Deputy Administrator, the 
amount calculated by multiplying the amount of peanuts involved by the 
quota support rate for the applicable crop year.



Sec. 729.409  Length of time records and reports are to be kept.

    Records required to be kept and copies of the reports required to be 
made by any person under this subpart shall be on a marketing year basis 
and shall be retained for a period of 3 years after the end of the 
marketing year. Records shall be kept for such longer periods of time as 
may be required in writing by the State Executive Director, or the 
Director of the Tobacco and Peanuts Division.

[[Page 213]]





                SUBCHAPTER C--REGULATIONS FOR WAREHOUSES





PART 735--COTTON WAREHOUSES--Table of Contents




                               Definitions

Sec.
735.1  Meaning of words.
735.2  Terms defined.

                           Warehouse Licenses

735.3  Application forms.
735.3a  All facilities to be licensed or exempted.
735.4  Grounds for not issuing a license.
735.5  Financial requirements.
735.6  License shall be posted.
735.7  Suspension or revocation of warehouse licenses.
735.8  Return of suspended or revoked warehouse license.
735.9  Lost or destroyed warehouse license.
735.10  Unlicensed warehousemen must not represent themselves as 
          licensed.

                             Warehouse Bonds

735.11  Bond required; time of filing.
735.12  Amount of bond; additional amounts.
735.13  Amendment to license.
735.14  Bond required each year.
735.15  Approval of bond.

                           Warehouse Receipts

735.16  Form.
735.17  Copies of receipts.
735.18  Lost or destroyed receipts; bond.
735.19  Printing of receipts.
735.20  Partial delivery of cotton.
735.21  Return of receipts before delivery of cotton.
735.22  Omission of grade; no compulsion by warehouseman.

                     Duties of Licensed Warehouseman

735.23  Insurance; requirements.
735.24  Premiums; inspections; reports.
735.25  Warehouseman to collect and pay over insurance.
735.26  Care of cotton in licensed warehouse.
735.27  Care of other cotton and other commodities.
735.28  Records to be kept in safe place.
735.29  Warehouse charges.
735.30  Business hours.
735.31  Tags to be attached to bales.
735.32  Arrangement of stored cotton.
735.33  System of accounts.
735.34  Reports.
735.35  Canceled receipts; auditing.
735.36  Copies of reports to be kept.
735.37  Inspections and examinations of warehouses.
735.38  Weighing of cotton; weighing apparatus.
735.39  Loose cotton.
735.40  Excess storage.
735.41  Removal of cotton from storage.
735.42    Storage of wet and fire-damaged cotton.
735.43  Cotton handling; storage; injuries.
735.44  Fire loss to be reported.
735.45  Signatures on receipts to be filed with Department.
735.46  [Reserved]
735.47  Certificates to be filed with warehouseman.
735.48  Drawing of samples.
735.49  Methods for drawing and marking samples.

                                  Fees

735.50  License fees.
735.51  Warehouse annual and inspection fees.
735.52  Advance deposit.
735.53  Return of excess deposit.

               Licensed Classifiers and Licensed Weighers

735.54  Sampler's, classifier's, and weigher's applications.
735.55  Examination of applicant.
735.56  Posting of license.
735.57  Duties of sampler, classifier, and weigher.
735.58  Class certificates; form.
735.59  Weight certificates; form.
735.60  Combined class and weight certificates.
735.61  Copies of certificates to be kept.
735.62  Licensees to permit and assist in inspection.
735.63  Reports.
735.64  Licenses; suspension or revocation.
735.65  Suspended or revoked licenses; return; termination of license.
735.66  Lost or destroyed licenses.
735.67  Unlicensed classifiers and weighers.

                          Cotton Classification

735.68  Statement of class.
735.69  Official cotton standards of the United States.
735.70  Defective cotton; designation; terms defined.
735.71  Class based on inspection and sample.
735.72  Samples.
735.73  Lower grade (of two samples) to determine classification.
735.74  Access to official cotton standards.

                             Cotton Appeals

735.75  Who may appeal.

[[Page 214]]

735.76  Complaint.
735.77  Contents of complaint.
735.78  Proof of agent's authority.
735.79  Determination of appeals; samples.
735.80  Dismissal of appeals.
735.81  Cotton appeal certificate.
735.82  Expenses paid by complainant.
735.83  Advance deposit by complainant.
735.84  New warehouse receipt.
735.85  Disposition of samples.

                              Miscellaneous

735.86  Bonds required.
735.87  Publications.
735.88  Information of violations.
735.89  Procedure in hearings.
735.90  One document and one license to cover several products.
735.91  Assets and bond; combination warehouses.
735.92  Amendments.
735.93  OMB control number assigned pursuant to Paperwork Reduction Act.
735.94--735.99  [Reserved]

                      Electronic Warehouse Receipts

735.100  General statement.
735.101  Electronic warehouse receipts.
735.102  Provider requirements and standards for applicants.
735.103  Audits.
735.104  Provider-user relationship.
735.105  Security.

    Authority: 7 U.S.C. 241 et seq.

    Source: 29 FR 15720, Nov. 24, 1964, unless otherwise noted. 
Redesignated at 50 FR 1814, Jan. 14, 1985.

    Editorial Note: Nomenclature changes to part 735 appear at 62 FR 
33540, June 20, 1997.

                               Definitions



Sec. 735.1  Meaning of words.

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



Sec. 735.2  Terms defined.

    For the purpose of this part, unless the context otherwise requires, 
the following terms shall be construed, respectively, to mean:
    (a) The act. The United States Warehouse Act, approved August 11, 
1916 (39 Stat. 486; 7 U.S.C. 241-273), as amended.
    (b) Person. An individual, corporation, partnership, or two or more 
persons having a joint or common interest.
    (c) Secretary. The Secretary of Agriculture of the United States or 
any officer or employee of the Department to whom authority has 
heretofore been delegated, or to whom authority may hereafter be 
delegated, to act in his stead.
    (d) Administrator. The Administrator of the Service or any other 
officer or employee of the Service to whom authority has heretofore 
lawfully been delegated, or may hereafter lawfully be delegated, to act 
in his stead.
    (e) Designated representative. The Administrator.
    (f) Regulations. Rules and regulations made under the act by the 
Secretary.
    (g) Department. The United States Department of Agriculture.
    (h) Service. The Farm Service Agency of the U.S. Department of 
Agriculture.
    (i) Linters. As far as applicable the regulations in this part shall 
include linters.
    (j) Warehouse. Any building, structure, or other protected inclosure 
in which cotton is or may be stored for interstate or foreign commerce, 
or, if located within any place under the exclusive jurisdiction of the 
United States, in which cotton is or may be stored.
    (k) Warehouseman. A person lawfully engaged in the business of 
storing cotton.
    (l) License. A license issued under the act by the Secretary.
    (m) Licensed warehouseman. A warehouseman licensed as such under the 
act.
    (n) Licensed warehouse. A warehouse for the conduct of which a 
license has been issued.
    (o) Licensed warehouseman's bond. A bond required to be given under 
the act by a licensed warehouseman.
    (p) Licensed classifier. A person licensed under the act to classify 
according to grade or otherwise and certificate the grade or other class 
of cotton.
    (q) Licensed weigher. A person licensed under the act to weigh and 
certificate the weight of cotton.
    (r) Cotton examiner. An officer of the Department of Agriculture 
designated by the Administrator for the purpose of hearing cotton 
appeals under Secs. 735.75 through 735.85.
    (s) Receipt. A warehouse receipt.
    (t) Bale. A bale or other package.

[[Page 215]]

    (u) State. A State, Territory, or district of the United States.
    (v) Licensed sampler. A person, employed by a licensed warehouseman, 
licensed under the act to draw samples from cotton stored in the 
licensed warehouse at which such person is employed.
    (w) Board of cotton examiners. A board of cotton examiners properly 
qualified and designated as such under the regulations (part 28 of this 
chapter) under the United States Cotton Standards Act.
    (x) Net assets. The difference remaining when liabilities are 
subtracted from allowable assets. In determining allowable assets, 
credit may be given for appraisal of real property less improvements and 
for the appraisal of insurable property such as buildings, machinery, 
equipment, and merchandise inventory only to the extent that such 
property is protected by insurance against loss or damage by fire, 
lightning, and tornado. Such insurance must be in the form of lawful 
insurance policies issued by insurance companies authorized to do such 
business and subject to service of process in the State in which the 
warehouse is located. The Secretary shall, at his discretion, determine 
what assets are allowable and under what conditions appraisals may be 
used.
    (y) Warehouse capacity. Warehouse capacity is the maximum number of 
bales of cotton that the warehouse will accommodate when stored in the 
manner customary to the warehouse and as required by the Secretary.
    (z) Current assets. Assets, including cash, that are reasonably 
expected to be realized in cash or sold or consumed during the normal 
operating cycle of the business or within one year if the operating 
cycle is shorter than one year.
    (aa) Current liabilities. Those financial obligations which are 
expected to be satisfied during the normal operating cycle of the 
business or within one year if the operating cycle is shorter than one 
year.
    (bb) Access. The ability when authorized, to read, change, and 
transfer warehouse receipt information retained in the central filing 
system.
    (cc) Central filing system (CFS). An electronic computer system 
operated and maintained by an approved provider where the information 
relating to warehouse receipts is recorded.
    (dd) Electronic warehouse receipt (EWR). An electronic file in the 
CFS that contains at the least information required to be included in a 
warehouse receipt by section 18 of the Act, and Sec. 735.16, regarding a 
bale of cotton and has been identified to a holder.
    (ee) Holder. An individual or entity in possession, in fact, or by 
operation of law, of a receipt and by extension, of the cotton 
represented thereby.
    (ff) Issue. EWRs are considered issued when a licensed warehouseman 
has transmitted all necessary information to an approved provider, and 
when such information is entered into the provider's CFS.
    (gg) Provider. An individual or entity that maintains EWRs in a CFS, 
meets the requirements of this part, and has a Provider Agreement with 
the Service.
    (hh) Provider Agreement. An agreement entered into between the 
Secretary and a provider that delineates the provider's responsibilities 
and defines the relationship between the provider and the Service 
regarding the provider's maintenance and security of EWRs in the CFS and 
other requirements of this part.
    (ii) User. An individual or entity that uses the provider's CFS but 
shall not include the Service in its regulatory capacity.

[29 FR 15720, Nov. 24, 1964. Redesignated and amended at 50 FR 1814, 
Jan. 14, 1985; Amdt. 2, 53 FR 27148, July 19, 1988; 59 FR 15038, Mar. 
31, 1994; 62 FR 33540, June 20, 1997]

                           Warehouse Licenses



Sec. 735.3  Application forms.

    Applications for licenses under sections 4 and 9 of the act and for 
amendments of licenses under section 5 of the act shall be made to the 
Secretary upon forms prescribed for the purpose and furnished by the 
Service, shall be in English, shall truly state the information therein 
contained, and shall be signed by the applicant. The applicant shall at 
any time furnish such additional information as the Secretary or

[[Page 216]]

the Administrator shall find to be necessary to the consideration of his 
application.



Sec. 735.3a  All facilities to be licensed or exempted.

    All facilities within the same city or town used for the storage of 
cotton by an applicant for a warehouse license must qualify for a 
license and be licensed under the act if the applicant is to be licensed 
to operate as a cotton warehouseman in such city or town, unless the 
facilities which are not to be covered by a license are exempted by the 
Secretary or his designated representative upon a finding that, due to 
the exercise of adequate controls by some independent agency over the 
operation of nonfederally licensed facilities, there would be no 
likelihood of interchange or substitution of cotton stored in such 
facilities with cotton stored in the federally licensed facilities. If 
all such facilities do not qualify for a license or for an exemption 
under this section, the applicant shall not be licensed under the act as 
a cotton warehouseman in the city or town in which the facilities in 
question are located. Each applicant for a warehouse license must apply 
for a license covering all facilities operated by him for the storage of 
cotton within the same city or town or for exemption as provided in this 
section. If a licensed cotton warehouseman acquires any additional 
cotton storage facilities within the same city or town in which his 
licensed warehouse is located, he shall file promptly an application for 
a license or an exemption of the additional facilities. No cotton 
storage facility acquired by a licensed cotton warehouseman, subsequent 
to the issuance of his license, in the same city or town as his licensed 
facilities, shall be used for the storage of cotton until it qualifies 
for license and is licensed or is exempted as provided in this section. 
If any one of the licensed cotton storage facilities operated by a 
warehouseman in the same city or town becomes ineligible for a license 
at any time for any reason, it shall not thereafter be used for the 
storage of cotton until the condition making it ineligible is removed or 
an exemption is granted as provided in this section. The use for the 
storage of cotton by a licensed warehouseman of a facility which is in 
the same city or town as his licensed facilities and is neither licensed 
nor exempted, or other violation of the provisions of this section, 
shall be cause for suspension or revocation of any license issued to the 
warehouseman for the storage of cotton.



Sec. 735.4  Grounds for not issuing a license.

    A license for the conduct of a warehouse, or any amendment to a 
license, under the regulations in this part, shall not be issued if it 
is found by the Secretary, or his designated representative, that the 
warehouse is not suitable for the proper storage of cotton; that the 
warehouseman does not possess a good reputation, or does not have a net 
worth of at least $25,000, or is incompetent to conduct such warehouse 
in accordance with the act and the regulations in this part; or that 
there is any other sufficient reason within the intent of the act for 
not issuing such license. If all the facilities operated for the storage 
of cotton by the applicant within the same city or town are not to be 
licensed under the act, the applicant shall not be licensed as a cotton 
warehouseman with respect to any of such facilities, unless an exemption 
of the facilities which are not to be licensed is granted as provided in 
Sec. 735.3a.

[29 FR 15720, Nov. 24, 1964. Redesignated at 50 FR 1814, Jan. 14, 1985, 
and amended at Amdt. 2, 53 FR 27148, July 19, 1988]



Sec. 735.5  Financial requirements.

    (a) Each warehouseman conducting a warehouse licensed under the Act 
or for which application for a license under the Act has been made must 
maintain complete, accurate, and current financial records which shall 
be available to the Secretary for review or audit at the Secretary's 
request.
    (b) Each warehouseman conducting a warehouse for which application 
for license under the Act is made shall provide with the application and 
each licensed warehouseman: shall annually, or more frequently if 
required, furnish to the Secretary, financial statements from the 
records required in paragraph (a) of this section, prepared according

[[Page 217]]

to generally accepted accounting principles. Such statements shall 
include but not be limited to: (1) Balance sheet, (2) statement of 
income (profit and loss), (3) statement of retained earnings, and (4) 
statement of changes in financial position. The chief executive officer 
for the warehouseman shall certify under penalty of perjury that the 
statements, as prepared, accurately reflect the financial condition of 
the warehouseman as of the date designated and fairly represent the 
results of operations for the period designated.
    (c) Each warehouseman conducting a warehouse licensed under these 
regulations shall have the financial statements required in paragraph 
(b) of this section audited or reviewed by an independent public 
accountant. The Secretary may, at his discretion, require an audited 
financial statement prepared by an independent certified public 
accountant. He may also, at his discretion, require an on-site 
examination and an audit by USDA personnel. Audits and reviews by 
independent certified public accountants and independent public 
accountants specified in this section must be made in accordance with 
standards established by the American Institute of Certified Public 
Accountants. The accountant's certification, assurances, opinion, 
comments, and notes on such statements, if any, must be furnished along 
with the financial statements. Licensees who cannot immediately meet 
these requirements may apply to the Secretary for a temporary waiver of 
this provision. The Secretary may grant such waiver for a period not to 
exceed 180 days if the licensee can furnish evidence of good and 
substantial reasons therefor.
    (d) Each warehouseman conducting a warehouse which is licensed under 
this part, or for which application for such a license has been made, 
must have and maintain:
    (1) Total net assets liable and available for the payment of any 
indebtedness arising from the conduct of the warehouse of at least the 
amount obtained by multiplying $10.00 by the warehouse capacity in bales 
to a maximum of $250,000 in each State; however, no person may be 
licensed or remain licensed as a warehouseman under this part unless 
that person has allowable net assets of at least $25,000 in each State, 
(Any deficiency in net assets above the $25,000 minimum may be supplied 
by an increase in the amount of the warehouseman's bond in accordance 
with Sec. 735.12(c) of this part); and
    (2) Total current assets equal to or exceeding total current 
liabilities or evidence acceptable to the Secretary that funds will be 
and remain available to meet current obligations.
    (e) If a warehouseman is licensed or is applying for licenses to 
operate two or more warehouses under this part, the maximum number of 
bales which all such warehouses will accommodate when stored in the 
manner customary to the warehouses, as determined by the Secretary, 
shall be considered in determining whether the warehouseman meets the 
net asset requirements specified in paragraph (d) of this section.
    (f) Subject to such terms and conditions as the Secretary may 
prescribe and for the purposes of determining allowable assets and 
liabilities under paragraphs (d) and (e) of this section:
    (1) Capital stock will not be considered a liability;
    (2) Appraisals of the value of fixed assets in excess of the book 
value claimed in the financial statement submitted by a warehouseman to 
conform with paragraphs (b) and (c) of this section may be allowed if 
(i) prepared by independent appraisers acceptable to the Secretary and 
(ii) the assets are fully insured against casualty loss;
    (3) Financial statements of a parent company which separately 
identifies the financial position of the warehouse as a wholly owned 
subsidiary and which meets the requirements of paragraphs (b), (c), and 
(d) of this section may be accepted by the Secretary in lieu of the 
warehouseman meeting such requirements; and
    (4) Guaranty agreements from a parent company submitted on behalf of 
a wholly owned subsidiary may be accepted by the Secretary as meeting 
the requirements of paragraphs (b), (c), and (d) of this section, if the 
parent company submits a financial statement which qualifies under this 
section.

[[Page 218]]

    (g) If a State agency is licensed or applying for a license as 
provided in section 9 of the Act has funds of not less than $500,000 
guaranteeing the performance of obligations of the agency as a 
warehouseman, such funds shall be considered sufficient to meet the net 
asset requirements of this section.
    (h) If a warehouseman files a bond in the form of a certification of 
participation in an indemnity or insurance fund as provided for in 
Sec. 735.11(b), the certification may only be used to satisfy any 
deficiencies in assets above $25,000.
    (i) When a warehouseman files a bond in the form of either a deposit 
of public debt obligations of the United States or other obligations 
which are unconditionally guaranteed as to both interest and principal 
by the United States as provided for in Sec. 735.11(c):
    (1) The obligation deposited shall not be considered a part of the 
warehouseman's assets for purposes of Sec. 735.5(d), (1) and (2);
    (2) A deficiency in total allowable net and current assets as 
computed for Sec. 735.5(d), (1) and (2) may be offset by the licensed 
warehouseman furnishing a corporate surety bond for the difference;
    (3) The deposit may be replaced or continued in the required amount 
from year to year; and
    (4) The deposit shall not be released until one year after 
termination (cancellation or revocation) of the license which it 
supports or until satisfaction of any claim against the deposit, 
whichever is later.

Nothing in these regulations shall prohibit a person other than the 
licensed warehouseman from furnishing such bond or additions thereto on 
behalf of and in the name of the licensed warehouseman subject to 
provisions of Sec. 735.11(c).

[Amdt. 2, 53 FR 27148, July 19, 1988]



Sec. 735.6  License shall be posted.

    Immediately upon receipt of his license or of any modification or 
extension thereof under the act, the warehouseman shall post the same, 
and thereafter, except as otherwise provided in the regulations in this 
part, keep it posted until suspended or terminated, in a conspicuous 
place in the principal office where receipts issued by the warehouseman 
are delivered to depositors.



Sec. 735.7  Suspension or revocation of warehouse licenses.

    Pending investigation, the Secretary, or his designated 
representative, whenever he deems necessary, may suspend a 
warehouseman's license temporarily without hearing. Upon written request 
and a satisfactory statement of reasons therefor, submitted by a 
warehouseman, the Secretary, or his designated representative, may, 
without hearing, suspend or cancel the license issued to such 
warehouseman. The Secretary, or his designated representative, may, 
after opportunity for hearing has been afforded in the manner prescribed 
in this section, suspend or revoke a license issued to a warehouseman 
when such warehouseman:
    (a) Does not have a net worth of at least $25,000;
    (b) Has parted, in whole or in part, with his control over the 
licensed warehouse;
    (c) Is in process of dissolution or has been dissolved;
    (d) Has ceased to conduct such licensed warehouse;
    (e) Has in any other manner become nonexistent or incompetent or 
incapacitated to conduct the business of the warehouse;
    (f) Has made unreasonable or exorbitant charges for services 
rendered;
    (g) Is operating in the same city or town in which his licensed 
warehouse facilities are located, any facility for storage of cotton 
which is not covered by a license or an exemption as provided in 
Sec. 735.3a; or
    (h) Has in any other manner violated or failed to comply with any 
provision of the act or the regulations in this part. Whenever any of 
the conditions mentioned in paragraphs (a) through (h) of this section 
shall come into existence, it shall be the duty of the warehouseman to 
notify the Administrator immediately of the existing condition. Before a 
license is revoked or suspended (other than temporarily pending 
investigation) for any violation of, or failure to comply with, any 
provision of the act or of the regulations in this part, or upon the 
ground that unreasonable or exorbitant

[[Page 219]]

charges have been made for services rendered, the warehouseman involved 
shall be furnished by the Secretary, or his designated representative, a 
written statement specifying the charges and shall be allowed a 
reasonable time within which he may answer the same in writing and apply 
for a hearing, an opportunity for which shall be afforded in accordance 
with Sec. 735.89.

[29 FR 15720, Nov. 24, 1964. Redesignated at 50 FR 1814, Jan. 14, 1985; 
Amdt. 2, 53 FR 27149, July 19, 1988]



Sec. 735.8  Return of suspended or revoked warehouse license.

    In case a license issued to a warehouseman terminates or is 
suspended or revoked by the Secretary, or his designated representative, 
such license shall be returned to the Secretary. At the expiration of 
any period of suspension of such license, unless it be in the meantime 
revoked, the dates of the beginning and termination of the suspension 
shall be indorsed thereon, it shall be returned to the warehouseman to 
whom it was originally issued, and it shall be posted as prescribed in 
Sec. 735.6; or in the discretion of the Administrator a new license may 
be issued.



Sec. 735.9  Lost or destroyed warehouse license.

    Upon satisfactory proof of the loss or destruction of a license 
issued to a warehouseman, a duplicate thereof may be issued under the 
same number.



Sec. 735.10  Unlicensed warehousemen must not represent themselves as licensed.

    No warehouse or its warehouseman shall be designated as licensed 
under the act and no name or description conveying the impression that 
it or he is so licensed shall be used, either in a receipt or otherwise, 
unless such warehouseman holds an unsuspended and unrevoked license for 
the conduct of such warehouse.

                             Warehouse Bonds



Sec. 735.11  Bond required; time of filing.

    Each warehouseman applying for a warehouse license under the Act 
shall, before such license is granted, file with the Secretary or his 
designated representative a bond either:
    (a) In the form of a bond containing the following conditions and 
such other terms as the Secretary or his designated representative may 
prescribe in the approved bond forms, with such changes as may be 
necessary to adapt the forms to the type of legal entity involved:
    Now, therefore, if the said license(s) or any amendments thereto be 
granted and said principal, and its successors and assigns operating 
said warehouse(s), shall faithfully perform during the period of this 
bond all obligations of a licensed warehouseman under the terms of [the 
United States Warehouse Act] and regulations thereunder relating to the 
above-named products.
    Then this obligation shall be null and void and of no effect, 
otherwise to remain in full force. For purposes of this bond, the 
aforesaid obligations under the Act, regulations, and contracts include 
obligations under any and all modifications of the Act, the regulations, 
and the contracts that may hereafter be made, notice of which 
modifications to the surety being hereby waived.
    This bond shall remain in force and effect for a minimum term of one 
year beginning with the effective date of this bond and thereafter shall 
be considered as a continuous bond, subject to termination as herein 
provided.
    Regardless of the number of years this bond remains in force, or the 
number of premiums paid, and regardless of the number or amount of 
claims or claimants, in no event shall the aggregate liability of the 
surety under this bond exceed the amount of this bond.
    This bond may be terminated at the end of the initial one year term 
by providing at least 120 days advance written notice of cancellation to 
the Secretary. This bond may be canceled at any time after the initial 
one year term beginning with the bond effective date by providing 120 
days advance written notice of cancellation to the Secretary. If said 
notice is given by the surety, a copy of the notice shall be mailed on 
the same day to the principal. Cancellation of this bond shall not 
affect any liability that shall have accrued under this bond prior to 
the effective date of cancellation.
    This bond shall be effective on and after ______.
    A bond in this form shall be subject to 7 CFR 735.5 and 735.12 
through 735.15, and 31 CFR part 225; or
    (b) In the form of a certificate of participation in and coverage by 
an indemnity or insurance fund as approved by the Secretary, established 
and

[[Page 220]]

maintained by a State, backed by the full faith and credit of the 
applicable State, and which guarantees depositors of the licensed 
warehouse full indemnification for the breach of any obligation of the 
licensed warehouseman under the terms of the Act and regulations. A 
certificate of participation and coverage in such fund shall be 
furnished to the Secretary annually. If administration or application of 
the fund shall change after being approved by the Secretary, the 
Secretary may revoke his approval. Such revocation shall not affect a 
depositor's rights which have arisen prior to such revocation. Upon such 
revocation the licensed warehouseman then must comply with paragraphs 
(a) or (c) of this section. Such certificate of participation shall not 
be subject to Secs. 735.12 and 735.13; or
    (c) In the form of a deposit with the Secretary as security, United 
States bonds, Treasury notes, or other public debt obligations of the 
United States or obligations which are unconditionally guaranteed as to 
both interest and principal by the United States, in a sum equal at 
their par value to the amount of the penal bond required to be 
furnished, together with an irrevocable power of attorney and agreement 
in the form prescribed, authorizing the Secretary to collect or sell, 
assign and transfer such bonds or notes so deposited in case of any 
default in the performance of any of the conditions or stipulations of 
such penal bond. Obligations posted in accordance with this paragraph 
may not be withdrawn by the warehouseman until one year after license 
termination or until satisfaction of any claims against the obligations 
whichever is later. A bond in this form shall be subject to 7 CFR 735.5 
and 735.12 through 735.15, and 31 CFR part 225.

[Amdt. 2, 53 FR 27149, July 19, 1988]



Sec. 735.12  Amount of bond; additional amounts.

    (a) The amount of bond to be furnished by each warehouseman under 
the regulations in this part, shall be the rate of ten dollars ($10.00) 
per bale for the maximum number of bales that the warehouse accommodates 
when stored in the manner customary to the warehouse as determined by 
the Secretary, but not less than twenty thousand dollars ($20,000) nor 
more than two hundred fifty thousand dollars ($250,000); except as 
provided in paragraphs (b) and (c) of this section.
    (b) In case a warehouseman is licensed or applying for licenses to 
operate two or more warehouses in the same State, he may give a single 
bond meeting the requirements of the Act and the regulations in this 
part to cover all his warehouses within the State and shall be deemed to 
be one warehouse only for purposes of determining the amount of bond 
required under paragraph (a) of this section.
    (c) In case of a deficiency in net assets above the twenty-five 
thousand dollars ($25,000) minimum required by Sec. 735.5(d)(1), there 
shall be added to the amount of bond determined in accordance with 
paragraph (a) of this section an amount equal to such deficiency or a 
letter of credit in the amount of the deficiency issued to the Secretary 
for a period of not less than two years to coincide with the period of 
any deposit of obligations under 7 CFR 735.11(c). Any letter of credit 
must be clean, irrevocable, issued by a commercial bank payable to the 
Secretary by sight draft and insured as a deposit by the Federal Deposit 
Insurance Corporation.
    (d) If the Secretary, or his designated representative, finds that 
conditions exist which warrant requiring additional bond, there shall be 
added to the amount of bond as determined under the other provisions of 
this section, a further amount to meet such conditions.

[Amdt. 2, 53 FR 27150, July 19, 1988]



Sec. 735.13  Amendment to license.

    In case an application is made under Sec. 735.3 for an amendment to 
a license and no bond previously filed by the warehouseman covers 
obligations arising under such amendment, the warehouseman shall, when 
notice has been given by the Secretary, or his designated 
representative, that such amendment will be granted upon compliance by 
such warehouseman with the act, file with the Secretary, within the 
time, if any, fixed in such notice, a bond complying with the act. In 
the discretion of the Secretary, a properly executed instrument in form 
approved

[[Page 221]]

by him, amending, extending, or continuing in force and effect the 
obligations of a valid bond previously filed by the warehouseman and 
otherwise complying with the act and the regulations in this part may be 
filed in lieu of a new bond.



Sec. 735.14  Bond required each year.

    A continuous form of license shall remain in force for more than one 
year from its effective date or any subsequent extension thereof, 
provided that the warehouseman has on file with the Secretary a bond 
meeting the terms and conditions as outlined in 7 CFR 735.11. Such bond 
must be in the amount required by the Secretary and approved by him or 
his designated representative. Failure to provide for or renew a bond 
shall result in immediate and automatic termination of the 
warehouseman's license.

[Amdt. 2, 53 FR 27150, July 19, 1988]



Sec. 735.15  Approval of bond.

    No bond, amendment, or continuation thereof shall be accepted for 
the purposes of the act and the regulations in this part until it has 
been approved by the Secretary, or his designated representative.

                           Warehouse Receipts



Sec. 735.16  Form.

    (a) Every receipt, whether negotiable or non-negotiable, issued for 
cotton stored in a licensed warehouse shall, in addition to complying 
with the requirements of section 18 of the act, embody within its 
written or printed terms the following:
    (1) The name of the licensed warehouseman and the designation, if 
any, of the warehouse;
    (2) The license number of the warehouse;
    (3) A statement whether the warehouseman is incorporated or 
unincorporated, and, if incorporated, under what laws;
    (4) In the event the relationship existing between the warehouseman 
and any depositor is not that of strictly disinterested custodianship, a 
statement setting forth the actual relationship;
    (5) The tag identifier given to each bale of cotton in accordance 
with Sec. 735.31;
    (6) A statement conspicuously placed, whether or not the cotton is 
insured, and if insured, to what extent, by the warehouseman, against 
loss or damage by fire, lightning and other risks;
    (7) The words ``Not Negotiable,'' or ``Negotiable,'' according to 
the nature of the receipt, clearly and conspicuously printed or stamped 
thereon;
    (8) A blank space designated for the purpose in which the grade and/
or other classification may be stated; and
    (9) A statement indicating that the weight was determined by a 
weigher licensed under the U.S. Warehouse Act, except that if at the 
request of the depositor, the weight is not so determined or if the 
point of origin weight was determined as permitted in Sec. 735.38, the 
receipt shall contain a statement to that effect.
    (b) Except when an expiration date authorized by the Department is 
shown on the face of the receipt, every negotiable receipt issued for 
cotton stored in a licensed warehouse shall be effective until 
surrendered for delivery of the cotton, and every non-negotiable receipt 
shall be effective until surrendered for delivery of the cotton or until 
all cotton covered by the receipt has been delivered in response to 
proper delivery orders of the person rightfully entitled to the cotton: 
Provided, that nothing contained in this section shall prohibit a 
warehouseman from legally selling the cotton when the accrued storage 
and other charges approach the current market value of the cotton.
    (c) In addition to complying with paragraphs (a) and (b) of this 
section, every negotiable receipt issued for cotton stored in a licensed 
warehouse shall embody within its written or printed terms a statement 
that the cotton covered by such receipt was classified by a licensed 
classifier or a board of cotton examiners when such cotton is so 
classified.
    (d) Whenever the grade or other class of the cotton is stated in a 
receipt issued for cotton stored in a licensed warehouse, such grade or 
other class shall be determined by a licensed classifier or a board of 
cotton examiners

[[Page 222]]

upon the basis of a sample drawn in accordance with Sec. 735.71, and 
shall be stated in the receipt in accordance with Secs. 735.68 through 
735.74.
    (e) If, at the request of the depositor, a warehouseman issues a 
receipt omitting the statement of grade and/or weight, such receipt 
shall have clearly and conspicuously stamped or written on the face 
thereof, or included as part of the electronic warehouse receipt record, 
either one or both of the following: ``Not graded on request of the 
depositor'' or ``Not weighed on request of the depositor,'' as 
applicable.
    (f) Licensed receipts issued to cover linters shall be clearly and 
conspicuously marked ``Linters''.
    (g) If a warehouseman issue a receipt under the act omitting any 
information not required to be stated, for which a blank space is 
provided in the form of the receipt, a line shall be drawn through such 
space to show that such omission has been made by the warehouseman.
    (h) A warehouse receipt may contain additional information; Provided 
that such information does not interfere with the information required 
by this part.

(Approved by the Office of Management and Budget under control number 
0560-0120)

[29 FR 15720, Nov. 24, 1964, as amended at 33 FR 14699, Oct. 2, 1968; 37 
FR 12920, June 30, 1972; 47 FR 745, Jan. 7, 1982. Redesignated at 50 FR 
1814, Jan. 14, 1985; 59 FR 15038, Mar. 31, 1994; 64 FR 54510, Oct. 7, 
1999]



Sec. 735.17  Copies of receipts.

    (a) At least one actual, skeleton, or microfilm copy of all receipts 
shall be made, and all copies, except skeleton and microfilm copies, 
shall have clearly and conspicuously printed or stamped thereon the 
words ``Copy--Not Negotiable.''
    (b) A copy of each receipt issued shall be retained by the 
warehouseman for a period of 1 year after December 31 of the year in 
which the corresponding original receipt is canceled.
    (c) If copies are retained on microfilm, the warehouseman shall:
    (1) Have available at all times facilities for immediate, easily 
readable projection of the microfilm and for producing easily readable 
facsimile enlargements;
    (2) Arrange, index, and file the films in such a manner as to permit 
the immediate location of any particular microfilm record; and
    (3) Be ready at all times to provide, and immediately provide, at 
the expense of the warehouseman, any facsimile enlargement of such 
microfilm copies which any authorized officers or agents of the 
Department of Agriculture may request.

(Approved by the Office of Management and Budget under control number 
0560-0120)

[37 FR 12920, June 30, 1972, as amended at 47 FR 745, Jan. 7, 1982. 
Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 735.18  Lost or destroyed receipts; bond.

    (a) In the case of a lost or destroyed receipt, a new receipt upon 
the same terms, subject to the same conditions, and bearing on its face 
the number and the date of the receipt in lieu of which it is issued and 
a plain and conspicuous statement that it is a duplicate issued in lieu 
of a lost or destroyed receipt, may be issued upon compliance with the 
conditions set out in paragraph (b) of this section.
    (b) Before issuing such new or duplicate receipt the warehouseman 
shall require the depositor or other person applying therefor to make 
and file with the warehouseman (1) an affidavit showing that he is 
lawfully entitled to the possession of the original receipt, that he has 
not negotiated or assigned it, how the original receipt was lost or 
destroyed, and, if lost, that diligent effort has been made to find the 
receipt without success, and (2) a bond in an amount double the value, 
at the time the bond is given, of the cotton represented by the lost or 
destroyed receipt. Such bond shall be in a form approved for the purpose 
by the Secretary, or his designated representative, shall be conditioned 
to indemnify the warehouseman against any loss sustained by reason of 
the issuance of such receipt, and shall have as surety thereon 
preferably a surety company which is authorized to do business, and is 
subject to service of process in a suit on the bond, in the State in 
which the warehouse is located, or at least two individuals who are 
residents of such State and each of whom owns real

[[Page 223]]

property therein having a value, in excess of all exemptions and 
encumbrances, equal to the amount of the bond.



Sec. 735.19  Printing of receipts.

    No receipt shall be issued by a licensed warehouseman unless it is:
    (a) In a form prescribed by the Administrator;
    (b) Upon distinctive paper or card stock specified by the 
Administrator;
    (c) Printed by a printer with whom the United States has a 
subsisting agreement and bond for such printing; and
    (d) On paper and/or card stock tinted with ink in the manner 
prescribed by the agreement under paragraph (c) of this section.

[64 FR 54510, Oct. 7, 1999]



Sec. 735.20  Partial delivery of cotton.

    If a warehouseman delivers a part only of a lot of cotton for which 
he has issued a negotiable receipt under the act, he shall take up and 
cancel such receipt and issue a new receipt in accordance with the 
regulations in this part for the undelivered portion of the cotton.



Sec. 735.21  Return of receipts before delivery of cotton.

    Except as permitted by law or by the regulations in this part, a 
warehouseman shall not deliver cotton for which a negotiable receipt has 
been issued under the Act until such receipt has been returned and 
canceled; and shall not deliver cotton for which a non-negotiable 
receipt has been issued until such receipt has been returned or until 
the warehouseman has obtained from the person lawfully entitled to such 
delivery or their authorized agent, a written delivery order that is 
properly signed, specifying by bale or tag number, mark, or identifier 
each bale to be delivered from any receipt or receipts.

[64 FR 54510, Oct. 7, 1999]



Sec. 735.22  Omission of grade; no compulsion by warehouseman.

    No licensed warehouseman shall, directly or indirectly by any means 
whatever, compel or attempt to compel the depositor of any cotton in his 
warehouse to request the issuance of a receipt omitting the statement of 
grade.

                     Duties of Licensed Warehouseman



Sec. 735.23  Insurance; requirements.

    (a) When requested in writing by the depositor of cotton in a 
licensed warehouse, or by the holder of the receipt covering such 
cotton, to insure such cotton against loss or damage by fire, lightning, 
and other risks, each licensed warehouseman shall secure in his own name 
such insurance under reporting forms of policies which automatically 
attach for the full value of such cotton, including daily changes of 
value through market fluctuations and changes in the quantity of such 
product from day to day, as soon as such cotton is placed in his legal 
custody, and he shall continue such insurance in effect so long as the 
cotton remains in his legal custody. Such insurance shall be covered by 
lawful policies issued by one or more insurance companies. Each 
warehouseman insuring cotton under the provisions of this section shall 
submit such reports to underwriters as may be required under the terms 
of such policies, and copies of such reports shall be submitted to the 
Department as it may require. If the warehouseman is unable to procure 
insurance to the extent requested, he shall, orally or by telegraph or 
by telephone, and at his own expense, immediately notify the person 
making the request of such fact. When insurance is not carried in the 
warehouseman's name, the receipt shall show that the cotton is not 
insured by the warehouseman. Nothing in this section shall be construed 
to prevent a licensed warehouseman from adopting a rule that he will 
insure all cotton stored in his warehouse, but if he elects to insure he 
shall accomplish such insurance through policies as above specified.
    (b) Each warehouseman shall keep exposed conspicuously in the place 
prescribed by Sec. 735.6, and at such other place as the Administrator 
or his representative may from time to time designate, a notice, stating 
briefly the conditions under which the cotton will

[[Page 224]]

be insured against loss or damage by fire, lightning, and other risks.



Sec. 735.24  Premiums; inspections; reports.

    Each warehouseman shall, in accordance with his contracts with 
insurance and bonding companies for the purpose of meeting the insurance 
and bonding requirements of the regulations in this part, pay such 
premiums, permit such reasonable inspections and examinations, and make 
such reasonable reports as may be provided for in such contracts.



Sec. 735.25  Warehouseman to collect and pay over insurance.

    Each warehouseman shall promptly take such steps as may be necessary 
and proper to collect any moneys which may become due under contracts of 
insurance entered into by him for the purpose of meeting the 
requirements of the regulations in this part, and shall, as soon as 
collected, promptly pay over to the persons concerned any portion of 
such moneys which they may be entitled to receive from him.



Sec. 735.26  Care of cotton in licensed warehouse.

    Each warehouseman shall at all times exercise such care in regard to 
cotton in his custody as a reasonably careful owner would exercise under 
the same circumstances and conditions.



Sec. 735.27  Care of other cotton and other commodities.

    If, at any time, a warehouseman shall handle or store cotton 
otherwise than as a licensed warehouseman, or shall handle or store any 
other commodity, he shall so protect the same, and otherwise exercise 
such care with respect to it, as not to endanger the cotton in his 
custody as a licensed warehouseman or impair his ability to meet his 
obligations and perform his duties under the act and the regulations in 
this part. Nonlicensed cotton shall be kept separate from licensed 
cotton.



Sec. 735.28  Records to be kept in safe place.

    (a) Each warehouseman shall provide a metal fireproof safe, a 
fireproof vault, or fireproof compartment in which he shall keep, when 
not in actual use, all records, books, and papers pertaining to the 
licensed warehouse, including his current receipt book, copies of 
receipts issued, and canceled receipts or microfilm copies of canceled 
receipts except that with the written consent of the Administrator or 
his representative, upon a showing by such warehouseman that it is not 
practicable to provide such fireproof safe, vault, or compartment he may 
keep such records, books, and papers in some other place of safety, 
approved by the Administrator or his representative.
    (b) Each canceled receipt or microfilm copy of each canceled receipt 
shall be retained by the warehouseman for a period of 6 years after 
December 31 of the year in which the receipt is canceled and for such 
longer period as may be necessary for the purposes of any litigation 
which the warehouseman knows to be pending, or as may be required by the 
Administrator in particular cases to carry out the purposes of the Act.
    (c) Canceled receipts shall be arranged by the warehouseman in 
numerical order and otherwise in such manner as shall be directed, for 
purposes of audit, by authorized officers or agents of the Department of 
Agriculture.
    (d) If microfilm copies of canceled receipts are to be retained in 
lieu of canceled receipts, the warehouseman shall:
    (1) Have available at all times facilities for immediate, easily 
readable projection of the microfilm and for producing easily readable 
facsimile enlargements;
    (2) Arrange, index, and file the films in such a manner as to permit 
the immediate location of any particular microfilm copy; and,
    (3) Be ready at all times to provide, and immediately provide, at 
the expense of the warehouseman, any facsimile enlargement of such 
microfilm copies which any authorized officers or

[[Page 225]]

agents of the Department of Agriculture may request.

(Approved by the Office of Management and Budget under control number 
0560-0120)

[37 FR 12920, June 30, 1972, as amended at 47 FR 745, Jan. 7, 1982. 
Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 735.29  Warehouse charges.

    A licensed warehouseman shall not make any unreasonable, exorbitant, 
or discriminatory charge for services rendered. Before a license to 
conduct a warehouse is granted under the act, the warehousemen shall 
file with the Department a copy of his rules, if any, and a schedule of 
the charges to be made by him if licensed. Effective at the beginning of 
any cotton season, a licensed warehouseman may change his rate of 
charges for storage and other services, and the new rates may apply to 
all cotton then in storage as well as cotton received thereafter. At or 
before the beginning of each season every licensed warehouseman shall 
file with the Department a copy of his rules, if any, and of his 
schedule of charges for the ensuing season. Should a licensed 
warehouseman wish to make changes in his rates to become effective at 
any time other than at the beginning of a season, he shall file with the 
Department an amended schedule showing the contemplated changes, 
accompanied by a statement setting forth the reasons therefor. No 
increase in the storage rate shown in such an amended schedule shall 
apply to cotton in storage at the time the changes become effective. A 
licensed warehouseman may demand payment of all accrued charges at the 
close of each cotton season. If, upon demand, the owner of the cotton 
refuses to pay such charges at the end of a season, the warehouseman may 
take such action to enforce collection of his charges as is permitted by 
the laws of the State in which the warehouse is located. Each licensed 
warehouseman shall keep a copy of his current rules and schedule of 
charges exposed conspicuously in the place prescribed by Sec. 735.6 and 
at such other place accessible to the public as the Secretary or his 
designated representative may from time to time designate. For the 
purposes of this section the cotton season shall commence, with respect 
to each warehouse, at such time not later than September 1 of each year, 
as the operator of the warehouse shall select, and he shall notify the 
Department in writing not less than five days next preceding the date 
selected.

[29 FR 15720, Nov. 24, 1964, as amended at 47 FR 35751, Aug. 17, 1982. 
Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 735.30  Business hours.

    (a) Each licensed warehouse shall be kept open for the purpose of 
receiving cotton for storage and delivering cotton out of storage every 
business day for a period of not less than six hours between the hours 
of 8 a.m. and 6 p.m., except as provided in paragraph (b) of this 
section. The warehouseman shall keep conspicuously posted on the door of 
the public entrance to his office and to his warehouse a notice showing 
the hours during which the warehouse will be kept open, except when such 
warehouse is kept open continuously from 8 a.m. to 6 p.m.
    (b) In case the warehouse is not to be kept open as required by 
paragraph (a) of this section, the notice posted as prescribed in that 
paragraph shall state the period during which the warehouse is to be 
closed and the name of an accessible person, with the address where he 
is to be found, who shall be authorized to deliver cotton stored in such 
warehouse, upon lawful demand by the depositor thereof or the holder of 
the receipt therefor, as the case may be.



Sec. 735.31  Tags to be attached to bales.

    Except as provided in Sec. 735.32, each warehouseman shall, upon 
acceptance of any bale of cotton for storage, immediately attach thereto 
an identification tag of good quality which shall identify the bale. 
Such tag either shall be made of reasonably heavy waterproof paper or 
linen, with reinforced eyelet or eyelets, and be attached to the bale 
with a flexible, rustproof wire, or shall be made of such other material 
and attached by such other means as

[[Page 226]]

shall be approved by the Administrator. These tags will contain a 
number, mark, or identifier and shall be attached in an orderly 
systematic sequence, clearly distinguishable from each other.

[64 FR 54510, Oct. 7, 1999]



Sec. 735.32  Arrangement of stored cotton.

    (a) Each warehouseman shall store each bale of cotton for which a 
receipt under the act has been issued so that the tag thereon, required 
by Sec. 735.31 is visible and readily accessible, except as provided in 
paragraph (b) of this section, and shall arrange all other cotton in his 
licensed warehouse so as to permit an accurate check thereof.
    (b) If cotton is tendered to a licensed warehouseman for storage and 
the cotton is of the same grade and staple and is tendered in such 
quantity by any one depositor that efficiency of operation dictates that 
such cotton should be stored in a lot or lots without regard to 
visibility of all tags on all bales within any lot, the warehouseman may 
store such cotton if each lot originally contained two or more bales: 
Provided, however, that each bale entering into a lot must bear an 
individual bale identification, and must be stored so that the number of 
bales within the lot may be accurately determined.
    (c) An individual lot identification tag showing the lot number and 
the number of bales in the lot shall be affixed by the warehouseman to 
each lot of cotton. The warehouseman shall also maintain an office 
record showing the bale or tag number, mark, or identifier of each bale 
in the lot and the location of the lot in the warehouse. Each lot shall 
be so arranged as to be readily distinguishable from each and every 
other lot. When requested by a proper representative of the Department 
of Agriculture engaged in making an examination of the warehouse, the 
warehouseman shall tear or break down at his own expense such stacks or 
lots of cotton as the examiner deems necessary to a proper examination. 
Before any warehouseman undertakes to store in accordance with this 
section he shall submit a statement setting forth: (1) His reasons for 
desiring to avail himself of this section and (2) the plan of storage he 
proposes to follow, and he shall secure prior permission from the 
Secretary or his designated representative to practice such method of 
storage.

[29 FR 15720, Nov. 24, 1964. Redesignated at 50 FR 1814, Jan. 14, 1985, 
as amended at 64 FR 65510, Oct. 7, 1999]



Sec. 735.33  System of accounts.

    Each warehouseman shall use a system of accounts which is approved 
by the Service. The system of accounts shall show the following for each 
bale of cotton: the tag number, mark, or identifier as specified in 
Sec. 735.31; its weight; its class when required or ascertained; its 
location; the dates received for, and delivered out of, storage; and the 
receipts issued and canceled. All systems of accounts shall include a 
detailed record of all moneys received and disbursed and of all 
effective insurance policies.

[64 FR 54510, Oct. 7, 1999]



Sec. 735.34  Reports.

    Each licensed warehouseman shall, from time to time, when requested 
by the Administrator, or his representative, make such reports, on forms 
prescribed and furnished for the purpose by the Service, concerning the 
condition, contents, operation, and business of the warehouse as the 
Administrator may require.



Sec. 735.35  Canceled receipts; auditing.

    Each warehouseman, if requested by the Service, shall forward 
canceled receipts for auditing to an entity or office of the Service as 
may be designated from time to time.

[62 FR 33540, June 20, 1997]



Sec. 735.36  Copies of reports to be kept.

    Each warehouseman shall keep on file, as a part of the records of 
the warehouse, for a period of three years after December 31 of the year 
in which submitted, an exact copy of each report

[[Page 227]]

submitted by such warehouseman under the regulations in this part.

(Approved by the Office of Management and Budget under control number 
0560-0120)

[29 FR 15720, Nov. 24, 1964, as amended at 47 FR 745, Jan. 7, 1982. 
Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 735.37  Inspections and examinations of warehouses.

    Each licensed warehouseman shall permit any officer or agent of the 
Department, authorized by the Secretary for the purpose, to enter and 
inspect or examine, on any business day during the usual hours of 
business, any warehouse for the conduct of which such warehouseman holds 
a license, the office thereof, the books, records, papers, and accounts 
relating thereto, and the contents thereof, and such warehouseman shall 
furnish such officer or agent, when he so requests, the assistance 
necessary to enable him to make any inspection or examination under this 
section.



Sec. 735.38  Weighing of cotton; weighing apparatus.

    (a) Before being stored in a licensed warehouse, all cotton shall be 
weighed at the warehouse by a licensed weigher, and the weight so 
determined shall be stated on the warehouse receipt. Point of origin 
weights may be used for single bale or lot stored cotton by agreement 
with the depositor. Any point of origin weights shown on a warehouse 
receipt will be the official warehouse bale or lot weight. Lot cotton 
tendered for storage on which a multiple bale warehouse receipt is 
issued must be maintained so as to preserve its individual and 
collective identity during storage and shipment, provided that if such 
lot is broken at the warehouse, for the issuance of new receipts, each 
bale shall be weighed at the warehouse by a licensed weigher before 
single bale warehouse receipts are issued.
    (b) Each licensed warehouse shall be equipped with scales acceptable 
to the Department for weighing cotton into and out of the warehouse. The 
weighing apparatus used for ascertaining the weight stated in a receipt 
or certificate, issued for cotton stored in a licensed warehouse, shall 
be subject to examination by an officer or agent of the Department 
designated by the Administrator for the purpose. If the Department shall 
disapprove such weighing apparatus, it shall not thereafter, unless such 
disapproval be withdrawn, be used in ascertaining the weight of any 
cotton for the purposes of the act and the regulations in this part.

[33 FR 14699, Oct. 2, 1968. Redesignated at 50 FR 1814, Jan. 14, 1985, 
as amended at 64 FR 54511, Oct. 7, 1999]



Sec. 735.39  Loose cotton.

    Each warehouseman shall keep his warehouse reasonably free of loose 
cotton, except in a space or container separate and apart from other 
cotton.



Sec. 735.40  Excess storage.

    (a) If at any time a warehouseman shall store cotton in his licensed 
warehouse in excess of the capacity thereof as determined in accordance 
with 7 CFR 735.12, such warehouseman shall so arrange the cotton as not 
to obstruct free access thereto and the proper operation of the 
sprinkler or other fire protection equipment provided for such 
warehouse, and shall immediately notify the Secretary of such excess 
storage, the reason therefor and the location thereof.
    (b) A warehouseman who lacks space and desires to transfer at his 
own expense, identity preserved depositor stored cotton, for which 
receipts have been issued to another licensed warehouse may physically 
do so subject to the following terms and conditions:
    (1) The transferring (shipping) warehouseman's accepted rules or 
schedule of charges must contain notice that the warehouseman may 
forward cotton deposited on an identity preserved bases with the written 
permission of the depositor under such terms and conditions as the 
Secretary may prescribe;
    (2) For purposes of this section, a licensed warehouse means; (i) a 
warehouse operated by a warehouseman who holds an unsuspended, unrevoked 
license under the U.S. Warehouse Act for cotton; or (ii) a warehouse 
operated by a warehouseman who holds an effective warehouse license for 
the public storage of cotton issued by a State that has financial, 
bonding and examination requirements for the benefit of

[[Page 228]]

all depositors at least equal to the requirements of this section;
    (3) The shipping warehouseman must transfer all identity-preserved 
cotton in lots and must list on a Bill of Lading all forwarded bales by 
receipt number and weight. The receiving warehouseman shall promptly 
issue a non-negotiable warehouse receipt for each lot of cotton stored 
and shall attach a copy of the corresponding Bill of Lading to each 
receipt and return the receipt promptly to the shipping warehouseman. 
The receiving warehouseman will store each such lot intact, and will 
attach a header card to the lot showing the receipt number, number of 
bales, and a copy of the Bill of Lading with the individual tag numbers, 
marks, or identifiers to the stored lot. Such non-negotiable warehouse 
receipts issued for forwarded cotton shall have printed or stamped 
diagonally in large bold outline letters across the face of the receipt 
the words: ``NOT NEGOTIABLE.''
    (4) The shipping warehouseman's bond shall be increased to consider 
the addition of the transferred cotton to the licensed capacity of the 
warehouse with the net asset requirements based on the total of the 
licensed capacity and the forwarded cotton (The bond amount need not be 
more than $250,000 unless necessary to cover a deficiency in net assets 
to meet requirements. The receiving warehouseman must not incur storage 
obligations that exceed the licensed capacity of the receiving 
warehouse);
    (5) The shipping warehouseman continues to retain storage 
obligations to the owners of all cotton deposited in the warehouse for 
storage whether forwarded or retained and is, except as otherwise agreed 
upon under paragraph (b)(6) of this section, required to redeliver the 
cotton, upon demand, to the depositor or the depositor's transferee at 
the warehouse where the cotton was first deposited for storage;
    (6) The owner of cotton deposited for storage at the warehouse must 
make settlement and take delivery at the warehouse where the cotton was 
first deposited for storage, unless the owner of the cotton, with the 
consent of both the shipping warehouseman and the receiving 
warehouseman, elects to take delivery at the warehouse to which cotton 
was transferred under this section;
    (7) Nothing in this section diminishes the right of the owner of the 
cotton to receive or the obligation of the warehouseman of a licensed 
warehouse from which the product is transferred, to deliver to the owner 
the same cotton, identity preserved, called for by the warehouse receipt 
or other evidence of storage;
    (8) Recording and retention of non-negotiable warehouse receipts 
received as a result of forwarding cotton under this section shall be 
subject to the requirements for warehouse receipts specified elsewhere 
in these regulations; and
    (9) If it is the shipping warehouseman's obligation by terms of the 
warehouse receipt or otherwise to insure the cotton subject to the 
transfer, he must in accordance with 7 CFR 735.23 keep such cotton 
insured in his own name or transfer the cotton only to a warehouse where 
the cotton is fully insured.

[Amdt. 2, 53 FR 27150, July 19, 1988, as amended at 64 FR 54511, Oct. 7, 
1999]



Sec. 735.41  Removal of cotton from storage.

    Except as may be permitted by law or the regulations in this part, a 
warehouseman shall not remove any cotton, for storage, from the licensed 
warehouse or a part thereof designated in the receipt for such cotton, 
if by such removal the insurance thereon will be impaired, without first 
obtaining the consent in writing of the holder of the receipt, and 
indorsing on such receipt the fact of such removal. Under no other 
circumstances, unless it becomes absolutely necessary to protect the 
interests of holders of receipts, shall cotton be removed from the 
warehouse, and immediately upon any such removal the warehouseman shall 
notify the Administrator of such removal and the necessity therefor.



Sec. 735.42  Storage of wet and fire-damaged cotton.

    A warehouseman shall not place any bale of cotton that is 
excessively wet in contact with any other cotton in the licensed 
warehouse. A warehouseman

[[Page 229]]

shall not store in the same compartment with cotton that has not been 
damaged by fire any cotton that has been damaged by fire until the risk 
of fire therein has passed and the fire-damaged cotton has been removed 
from the bale, and then he shall not store it in contact with cotton 
that has not been so damaged.



Sec. 735.43  Cotton handling; storage; injuries.

    A warehouseman shall not handle or store cotton in such manner as 
will injure or damage it, or in any part of the warehouse in which it is 
likely to be injured or damaged by excessive moisture, or otherwise.



Sec. 735.44  Fire loss to be reported.

    If at any time a fire occurs at or within any licensed warehouse, it 
shall be the duty of the warehouseman to report immediately the 
occurrence of such fire and the extent of damage to the Administrator.

[64 FR 54511, Oct. 7, 1999]



Sec. 735.45  Signatures on receipts to be filed with Department.

    Each warehouseman shall file with the Department the name and 
genuine signature of each person authorized to sign warehouse receipts 
for the licensed warehouseman, and shall promptly notify the Department 
of any changes as to persons authorized to sign, and shall file 
signatures of such persons.



Sec. 735.46  [Reserved]



Sec. 735.47  Certificates to be filed with warehouseman.

    When a grade or weight certificate has been issued by a licensed 
grader or weigher, a copy of such certificate shall be filed with the 
warehouseman in whose warehouse the cotton covered by such certificate 
is stored, and such certificates shall become a part of the records of 
the licensed warehouseman. All certificates and supporting documentation 
that form the basis for any receipt issued by the warehouseman shall be 
retained in the records of the warehouseman for a period of 1 year after 
December 31 of the year in which the receipt based on such certificates 
or supporting documentation is canceled.

[64 FR 54511, Oct. 7, 1999]



Sec. 735.48  Drawing of samples.

    Each warehouseman shall have in his employ at all times one or more 
licensed samplers whose duty it shall be to draw samples from any cotton 
stored or to be stored in the licensed warehouse if the owner of such 
cotton or any person having a legal right to have such cotton sampled 
requests that samples be drawn. When directed by the Administrator such 
requests shall be in writing. Such samplers shall perform their duties 
under the supervision and at the direction of the licensed warehouseman 
and the samples shall be drawn in accordance with Sec. 735.72.



Sec. 735.49  Methods for drawing and marking samples.

    Each sample shall be appropriately marked to show the tag number, 
mark, or identifier of the bale of cotton from which it was drawn and 
the date of sampling.

[64 FR 54511, Oct. 7, 1999]

    Cross Reference: For regulations under the Cotton Futures Act and 
the Cotton Standards Act, see 7 CFR parts 27 and 28 of this chapter.

                                  Fees



Sec. 735.50  License fees.

    (a) Fees are collected in advance for each original, amended, 
modified, extended, reinstated, or duplicate warehouseman's license; and 
for each original, duplicate, or modified license issued to inspect, 
sample, grade, classify, or weigh commodities.
    (b) Fee changes, if applicable, will be announced by Notice in the 
Federal Register on or before July 1, and effective the following 
October 1.

[59 FR 51358, Oct. 11, 1994]



Sec. 735.51  Warehouse annual and inspection fees.

    Warehousemen must pay:

[[Page 230]]

    (a) An annual fee which will be determined by computing the capacity 
for each warehouse location under a single license and adding those 
amounts together to determine the total due. The fee will be assessed 
and payable when the warehouse bond is furnished in accordance with 
these regulations, for acceptance by the Secretary and annually 
thereafter on the bond renewal date. The capacity for each identifiable 
location will be determined by the Secretary. The total capacity of all 
locations may not exceed the capacity stated in the current license. An 
identifiable location is a fully functional public warehouse as 
determined by the Secretary. The annual fee a licensed warehouseman is 
assessed may be adjusted by the amount Commodity Credit Corporation 
(CCC) pays, if CCC has a storage contract or agreement with the 
warehouseman.
    (b) An inspection fee for each original and amendment inspection.
    (c) An inspection fee at the rate of 100 percent of the annual fee 
charged warehouses without a CCC storage contract or agreement, in all 
cases where the license has been suspended and the warehouseman has 
requested reinstatement. No fee will be charged if the Secretary 
determines that the suspension was not justified.
    (d) A fee for each inspection requested by the warehouseman at the 
rate of 100 percent of the annual fee charged warehouses without a CCC 
storage contract or agreement.

[59 FR 51358, Oct. 11, 1994]



Sec. 735.52  Advance deposit.

    Before any license is granted, or an original examination or 
inspection is made, or reexamination or reinspection for modification of 
an existing license is made, pursuant to the regulation in this part, 
the applicant or licensee shall deposit with the service the amount of 
the fee prescribed. Such deposit shall be made in the form of a check, 
certified if required by the Service, draft, or post office or express 
money order, payable to the order of the Service.

[49 FR 3640, Jan. 30, 1984. Redesignated at 50 FR 1814, Jan. 14, 1985, 
as amended at 62 FR 33540, June 20, 1997]



Sec. 735.53  Return of excess deposit.

    The Service shall hold in its custody each advance deposit made 
under Sec. 735.52 until the fee, if any, is assessed. Any part of such 
advance deposit which is not required for the payment of any fee 
assessed shall be returned to the party depositing the same.

[49 FR 3640, Jan. 30, 1984. Redesignated at 50 FR 1814, Jan. 14, 1985]

               Licensed Classifiers and Licensed Weighers



Sec. 735.54  Sampler's, classifier's, and weigher's applications.

    (a) Applications for licenses to sample, classify and/or weigh 
cotton under section 11 of the act shall be made to the Administrator on 
forms furnished for the purpose by him.
    (b) Each such application shall be in English, shall be signed by 
the applicant, shall be verified by him, under oath or affirmation 
administered by a duly authorized officer, and shall contain or be 
accompanied by--
    (1) The name and location of a warehouse or warehouses licensed, or 
for which application for license has been made, under the act, in which 
cotton sought to be sampled, classified and/or weighed under such 
license is or may be stored;
    (2) A statement from the warehouseman conducting such warehouse 
showing whether or not the applicant is competent and is acceptable to 
such warehouseman for the purpose;
    (3) Satisfactory evidence that he is competent to sample, classify 
and/or weigh cotton;
    (4) A statement by the applicant that he agrees to comply with and 
abide by the terms of the act and the regulations in this part so far as 
the same may relate to him; and
    (5) Such other information as the Administrator may deem necessary:

Provided, That when an application for a license to classify cotton is 
filed by a person who does not intend to classify cotton for any 
particular licensed warehouseman but who does intend to classify cotton 
stored or to be stored in a licensed warehouse and to issue class 
certificates therefor, as provided for by the act and the regulations in 
this

[[Page 231]]

part, independent of the warehouse receipts issued to cover such cotton, 
it shall not be necessary to furnish such statement as is required in 
this paragraph.
    (c) For the purpose of classifying cotton under the regulations in 
this part, each licensed classifier who holds an unsuspended or 
unrevoked license under the Cotton Standards Act of March 4, 1923, and 
regulations thereunder to classify cotton and certificate the grade 
thereof shall be deemed competent and a license may be issued to him 
under the United States Warehouse Act upon furnishing the information 
required by paragraph (b) of this section except as specified in 
paragraph (c)(3) of this section.
    (d) The applicant shall at any time furnish such additional 
information as the Secretary, or his designated representative, shall 
find to be necessary to the consideration of his application.
    (e) A single application may be made by any person for a license as 
a sampler, classifier and weigher upon complying with all the 
requirements of this section.



Sec. 735.55  Examination of applicant.

    Each applicant for a license as a sampler, classifier and/or weigher 
and each licensed sampler, classifier and/or weigher shall, whenever 
requested by an authorized agent of the Department designated by the 
Administrator, for the purpose, submit to an examination or test to show 
his ability to properly sample, classify or weigh cotton, as the case 
may be, and shall also make available for inspection copies of the 
standards of classification or the weighing apparatus as the case may 
be, used or to be used by him.



Sec. 735.56  Posting of license.

    Each licensed classifier shall keep his license conspicuously posted 
in the office where all or most of the classifying is done, and each 
licensed sampler and/or weigher shall keep his license conspicuously 
posted in the warehouse office or in such place as may be designated for 
the purpose by a representative of the Service.



Sec. 735.57  Duties of sampler, classifier and weigher.

    Each licensed classifier or weigher whose license remains in effect 
shall, without discrimination, as soon as practicable, and upon 
reasonable terms, classify or weigh and certificate the class or weight, 
respectively, of cotton stored or to be stored in a licensed warehouse 
to which his license applies, if such cotton is offered to him under 
such conditions as permit the proper performance of such functions; 
except that no class or weight certificate need be issued when the class 
or weight so determined is entered on a receipt by the licensed 
classifier or weigher making the determination thereof. Each licensed 
sampler shall sample cotton stored or to be stored in a licensed 
warehouse for which he holds a license, in accordance with Sec. 735.48. 
Each licensed sampler, classifier, and weigher shall give preference to 
persons who request his services as such over persons who request his 
services in any other capacity. No class or weight certificate shall be 
issued under the act for cotton not in the custody of a licensed 
warehouseman for purposes of storage in a licensed warehouse, nor shall 
cotton not in the custody of such a warehouseman for such purpose be 
sampled by a licensed sampler acting as such.



Sec. 735.58  Class certificates; form.

    (a) Each class certificate issued under the act by a licensed 
classifier shall be in a form approved for the purpose by the 
Administrator, and shall embody within its written or printed terms:
    (1) The caption ``Cotton class certificate'';
    (2) Whether it is an original, a duplicate, or other copy;
    (3) The name and location of the licensed warehouse in which the 
cotton is or is to be stored;
    (4) The date of the certificate;
    (5) The location of the cotton at the time of classification;
    (6) The identification of each bale of cotton by the tag number 
given to the bale in accordance with Sec. 735.31 or if there be no such 
tag number by other marks or numbers;

[[Page 232]]

    (7) The grade or other class, except length of staple, of each bale 
of cotton covered by the certificate, in accordance with Secs. 735.68 
through 735.73, as far as applicable, and the standard or description in 
accordance with which the classification is made;
    (8) A blank space designated for the purpose in which the length of 
staple may be stated;
    (9) That the certificate is issued by a licensed classifier under 
the United States Warehouse Act and regulations thereunder; and
    (10) The signature of the licensed classifier.

In addition, the class certificate may include any other matter not 
inconsistent with the act or the regulations in this part, provided the 
approval of the Service is first secured.
    (b) Form A memorandums and Form C certificates issued by a board of 
cotton examiners and class certificates issued by licensed classers 
under the United States Cotton Standards Act (7 U.S.C. 51 et seq.) shall 
be deemed sufficient for the purposes of the United States Warehouse Act 
and the regulations in this part, if the samples on which they are based 
were drawn in accordance with applicable requirements of Sec. 735.71, 
and, in case of a class certificate issued by such a licensed classer, 
if the classer holds an unsuspended and unrevoked license under each of 
said acts.



Sec. 735.59  Weight certificates; form.

    Each weight certificate issued under the act by a licensed weigher 
shall be in a form approved for the purpose by the Administrator, and 
shall embody within its written or printed terms:
    (a) The caption ``Cotton weight certificate'';
    (b) Whether it is an original, a duplicate, or other copy;
    (c) The name and location of the licensed warehouse in which the 
cotton is or is to be stored;
    (d) The date of the certificate;
    (e) The location of the cotton at the time of weighing;
    (f) The identification of each bale of cotton by the tag number 
given to the bale in accordance with Sec. 735.31 or if there be no such 
tag number by other marks or numbers;
    (g) The gross, or net and tare, weight of the cotton and, if the 
cotton be excessively wet or otherwise of a condition materially 
affecting its weight, a statement of such fact to which may be added the 
weigher's estimate of the number of pounds which should be allowed for 
such condition;
    (h) That the certificate is issued by a licensed weigher under the 
United States Warehouse Act and the regulations thereunder; and
    (i) The signature of such licensed weigher.

In addition, the weight certificate may include any other matter not 
inconsistent with the act or the regulations in this part, provided the 
approval of the Service is first secured.

[29 FR 15720, Nov. 24, 1964, as amended at 37 FR 12920, June 30, 1972. 
Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 735.60  Combined class and weight certificates.

    The class and weight of any cotton, ascertained by a licensed 
classifier and a licensed weigher, may be stated on a certificate 
meeting the combined requirements of Secs. 735.58 and 735.59 if the form 
of such certificate shall have been approved for the purpose by the 
Administrator.



Sec. 735.61  Copies of certificates to be kept.

    Each licensed classifier and each licensed weigher shall keep for a 
period of one year in a place accessible to interested persons a copy of 
each certificate issued by him under the regulations in this part and 
shall file a copy of each such certificate with the warehouse in which 
the cotton covered by the certificate is stored.



Sec. 735.62  Licensees to permit and assist in inspection.

    Each licensed sampler, classifier, and/or weigher shall permit any 
officer or agent of the Department authorized by the Secretary for the 
purpose, to inspect or examine, on any business day during the usual 
hours of business, his books, papers, records, and accounts relating to 
the performance of his duties under the act and the regulations in this 
part, and shall, with the consent

[[Page 233]]

of the licensed warehouseman concerned, assist any such officer or agent 
in the inspection or examination mentioned in Sec. 735.37 as far as any 
such inspection or examination relates to the performance of the duties 
of such licensed sampler, classifier, and/or weigher under the act and 
this part.



Sec. 735.63  Reports.

    Each licensed sampler, classifier, and/or weigher shall, from time 
to time, when requested by the Administrator, make reports, on forms 
furnished for the purpose by the Service, bearing upon his activities as 
such licensed sampler, classifier, and/or weigher.



Sec. 735.64  Licenses; suspension or revocation.

    Pending investigation, the Secretary, or his designated 
representative, may, whenever he deems necessary, suspend the license of 
a sampler, classifier and/or weigher temporarily without hearing. Upon a 
written request and a satisfactory statement of reasons therefor, 
submitted by a licensed sampler, classifier, and/or weigher, the 
Secretary, or his designated representative, may, without hearing, 
suspend or revoke the license issued to such licensed sampler, 
classifier, and/or weigher. The Secretary, or his designated 
representative, may, after opportunity for hearing has been afforded in 
the manner prescribed in this section, suspend or revoke a license 
issued to a licensed sampler, classifier, and/or weigher when such 
licensed sampler, classifier, and/or weigher (a) has ceased to perform 
services as such sampler, classifier, and/or weigher, or (b) has in any 
other manner become incompetent or incapacitated to perform the duties 
of such licensed sampler, classifier, and/or weigher. As soon as it 
shall come to the attention of a licensed warehouseman that any of the 
conditions mentioned under (a) or (b) of this section exist, it shall be 
the duty of such warehouseman to notify, in writing, the Administrator. 
Before the license of any licensed sampler, classifier, and/or weigher 
is permanently suspended or revoked pursuant to section 12 of the act, 
such licensed sampler, classifier, and/or weigher shall be furnished by 
the Secretary or by his designated representative, a written statement 
specifying the charges and shall be allowed a reasonable time within 
which he may answer the same in writing and apply for a hearing, an 
opportunity for which shall be afforded in accordance with Sec. 735.89.



Sec. 735.65  Suspended or revoked licenses; return; termination of license.

    (a) In case a license issued to a sampler, classifier, and/or 
weigher is suspended or revoked by the Secretary, or his designated 
representative, such license shall be returned to the Secretary. At the 
expiration of any period of suspension of such license, unless in the 
meantime it be revoked, the dates of the beginning and termination of 
the suspension shall be endorsed thereon, and it shall be returned to 
the licensed sampler, classifier, and/or weigher to whom it was 
originally issued, and it shall be posted as prescribed in Sec. 735.56.
    (b) Any license issued, under the act and the regulations in this 
part, to a sampler, classifier, and/or weigher shall automatically 
terminate as to any warehouse whenever the license of such warehouse 
shall be revoked or canceled. Thereupon the license of such sampler, 
classifier, and/or weigher shall be returned to the Secretary. In case 
such license shall apply to other warehouses, the Secretary, or his 
designated representative, shall issue to him a new license, omitting 
the names of the warehouses covering which licenses have been revoked. 
Such new license shall be posted as prescribed in Sec. 735.56.



Sec. 735.66  Lost or destroyed licenses.

    Upon satisfactory proof of the loss or destruction of a license 
issued to a licensed sampler, classifier, and/or weigher, a duplicate 
thereof may be issued under the same number.



Sec. 735.67  Unlicensed classifiers and weighers.

    No person shall in any way represent himself to be a sampler, 
classifier, and/or weigher licensed under the act unless he holds an 
unsuspended and unrevoked license issued under the act.

[[Page 234]]

                          Cotton Classification



Sec. 735.68  Statement of class.

    Whenever the grade or other class of cotton is required to be, or 
is, stated for the purpose of the act or the regulations in this part it 
shall be stated in accordance with Secs. 735.68 through 735.73 as far as 
applicable.



Sec. 735.69  Official cotton standards of the United States.

    The official cotton standards of the United States, established and 
promulgated under the United States Cotton Standards Act of March 4, 
1923 (42 Stat. 1517; 7 U.S.C. 51-56), within their scope, are hereby 
adopted as the official cotton standards for the purposes of the act and 
the regulations in this part.



Sec. 735.70  Defective cotton; designation; terms defined.

    (a) Cotton that,
    (1) Because of the presence of extraneous matter of any character or 
irregularities or defects, is reduced in value below that of Good 
Ordinary,
    (2) Is below the grade of Good Ordinary,
    (3) Is below the grade of Low Middling, if tinged,
    (4) Is below the grade of Middling, if stained,
    (5) Is linters,
    (6) Is less than seven-eighths of an inch in length of staple,
    (7) Is of perished staple,
    (8) Is of immature staple,
    (9) Is gin cut,
    (10) Is reginned,
    (11) Is repacked,
    (12) Is false packed,
    (13) Is mixed packed, or
    (14) Is water packed, shall be designated as such.
In the case of paragraph (a)(1) of this section the particular 
extraneous matter or irregularities or defects shall be stated.
    (b) If cotton be reduced in value, by reason of the presence of 
extraneous matter of any character or irregularities or defects, below 
its grade or below its apparent length of staple according to the 
official cotton standards of the United States, the grade or length of 
staple from which it is so reduced, and the grade or length of staple to 
which it is so reduced, and the quality or condition which so reduces 
its value shall be determined and stated.
    (c) For the purposes of this section, the following terms shall be 
construed, respectively, to mean:
    (1) Cotton of perished staple. Cotton that has had 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.
    (2) Cotton of immature staple. Cotton that has been picked and baled 
before the fiber has reached a normal state of maturity, resulting in a 
weakened staple of inferior value.
    (3) 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.
    (4) 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.
    (5) 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.
    (6) False packed cotton. Cotton in a bale (i) containing substances 
entirely foreign to cotton, (ii) containing damaged cotton in the 
interior with or without any indication of such damage upon the 
exterior, (iii) 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--that is, a plated bale, or (iv) containing 
pickings or linters worked into the bale.
    (7) Mixed packed cotton. Cotton in a bale which, in the samples 
drawn therefrom, shows (i) a difference of three or more grades, or (ii) 
a difference of three or more color gradations, or (iii) a difference of 
two or more grades and two or more color graduations, or (iv) a 
difference in length of staple of one-eighth inch or more.
    (8) Water packed cotton. Cotton in a bale that has been penetrated 
by water

[[Page 235]]

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.



Sec. 735.71  Class based on inspection and sample.

    Whenever the grade or other class of cotton is required to be, or 
is, stated by a warehouseman or a classifier or board of cotton 
examiners for the purposes of the act or the regulations in this part, 
it shall be based upon a careful inspection of and a sample properly 
drawn from the cotton. Samples submitted to a board of cotton examiners 
for issuance of Form A memorandums and samples from which classification 
is to be determined by licensed classifiers for purposes of the Act and 
the regulations in this part shall be drawn by samplers licensed under 
the Act and said regulations and in accordance with Sec. 735.72.



Sec. 735.72  Samples.

    Each sample shall be approximately 6 ounces in weight, not less than 
3 ounces of which are to be drawn from each side of the bale. Each 
sample must be representative of the bale from which drawn. 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 these requirements may be rejected.



Sec. 735.73  Lower grade (of two samples) to determine classification.

    If a sample drawn from one portion of a bale is lower in grade or 
shorter in length than one drawn from another portion of such bale, the 
classification of the bale shall be that of the sample showing the lower 
grade or shorter length.



Sec. 735.74  Access to official cotton standards.

    Each licensed warehouseman and each licensed classifier shall keep 
himself provided with, or have access to, a set of practical forms of 
the official cotton standards of the United States, or such parts 
thereof as the Administrator may deem necessary for use in the locality 
in which the licensed warehouse is located.

                             Cotton Appeals



Sec. 735.75  Who may appeal.

    Whenever the grade or other class of cotton, for which official 
cotton standards of the United States are in effect, is stated on a 
receipt or a cotton class certificate issued under the act and the 
regulations in this part, and a question arises as to the true grade or 
other class of such cotton, any person having an interest in the cotton 
may take an appeal for the determination of such question.



Sec. 735.76  Complaint.

    In order to take such an appeal a complaint in writing in accordance 
with Sec. 735.77 shall be filed with a duly authorized cotton examiner 
or a board of cotton examiners, or with the Administrator, who shall 
designate a cotton examiner or a board of cotton examiners for the 
purpose of disposing of such complaint.



Sec. 735.77  Contents of complaint.

    (a) Complaints shall be in English and shall state:
    (1) The name and post office address of the complainant;
    (2) The nature of the complainant's interest in the cotton;
    (3) The name and post office address of the holder of the receipt, 
if someone other than the complainant;
    (4) The name and post office address of any other interested party;
    (5) The name and location of the licensed warehouse in which the 
cotton is stored, and the tag number, mark, or identifier assigned to 
each bale of cotton involved in the appeal, the grade or other class 
assigned to such cotton by the licensed warehouseman, and the date of 
the receipt issued therefor;
    (6) The grade or other class assigned by the licensed classifier, if 
any;
    (7 ) The grade or other class, different from that assigned by the 
licensed warehouseman, which is contended for by any interested party;
    (8) Whether, within complainant's knowledge, any appeal involving 
the

[[Page 236]]

same cotton previously has been taken, and if so, an appropriate 
identification of such other appeal; and
    (9) If samples have been agreed upon and submitted in accordance 
with Sec. 735.79(b).
    (b) When practicable, the complainant shall file with the complaint, 
the warehouse receipt or class certificate, if any, covering the cotton 
involved in the appeal. When such receipt or certificate is not filed 
before the issuance of the cotton appeal certificate, a definite 
statement indicating why such papers are not produced shall be filed 
with the complaint.

[64 FR 54511, Oct. 7, 1999]



Sec. 735.78  Proof of agent's authority.

    In case a complaint is filed under Secs. 735.75 through 735.77 by a 
person purporting to act in behalf of another person, the Administrator, 
or the cotton examiner or the board of cotton examiners with whom it was 
filed, may, if considered necessary, require proof of the authority of 
such person to file the complaint.



Sec. 735.79  Determination of appeals; samples.

    (a) Appeals taken hereunder shall be determined upon the basis of 
samples of the cotton involved which have been drawn and submitted in 
accordance with this section.
    (b) The complainant may submit samples of the cotton involved which 
have been agreed upon by the licensed warehouseman in whose warehouse 
the cotton is stored and the interested parties other than such 
warehouseman, or have been drawn by a disinterested person selected for 
the purpose by the warehouseman and such parties. Such samples shall be 
drawn in accordance with Sec. 735.72.
    (c) If samples which have been submitted pursuant to paragraph (b) 
of this section be deemed unsatisfactory, the cotton examiner or board 
of cotton examiners by whom the appeal is heard or the Administrator may 
require the submission of new samples in accordance with paragraph (b) 
of this section.
    (d) In case samples are not submitted in accordance with paragraph 
(b) or (c) of this section, the Administrator, the cotton examiner, or 
board of cotton examiners by whom the appeal is heard may dismiss the 
appeal as provided in Sec. 735.80, or samples may be drawn from the 
cotton involved by a cotton examiner or by a disinterested person 
designated for the purpose by the cotton examiner or the board of cotton 
examiners by whom the appeal is heard or by the Administrator, and the 
complainant shall cause the cotton to be made accessible for the purpose 
of drawing such samples.



Sec. 735.80  Dismissal of appeals.

    The Administrator or the cotton examiner or board of cotton 
examiners by whom an appeal is heard may dismiss such appeal upon 
request of the complainant, or for noncompliance with the regulations in 
this part, or if it be found that the appeal was not taken in good 
faith. In case of an appeal filed in the first instance with a cotton 
examiner, a dismissal upon request of the complainant shall be made only 
before notice of grade or other class as provided in Sec. 735.81 is 
issued.



Sec. 735.81  Cotton appeal certificate.

    When an appeal filed with a board of cotton examiners has been 
determined, it shall immediately issue a cotton appeal certificate. When 
an appeal has been determined by a cotton examiner he shall issue a 
notice, a copy of which shall be sent by him to all parties shown by the 
record of the appeal to have an interest therein. In such notice the 
grade or other class assigned by him to the cotton involved in the 
appeal shall be stated, and any such interested party shall have a 
reasonable time, fixed in such notice, within which he may request of 
the Administrator a review of the appeal by a board of cotton examiners. 
In case such request is not filed with such cotton examiner in the time 
fixed therefor, or in case within such time every such interested party 
waives in writing a review by a board of cotton examiners, the cotton 
examiner shall immediately issue a cotton appeal certificate showing the 
grade or other class assigned to the cotton by him. In case a request 
under this section for a review of an appeal is filed within the time 
fixed for the filing of such request, the cotton examiner shall note in 
his records the

[[Page 237]]

time of such filing and shall immediately notify the Administrator, who 
shall cause the appeal to be reviewed and a cotton appeal certificate 
issued showing the grade or other class assigned upon such review. 
Immediately upon the issuance of a cotton appeal certificate under this 
section, the original thereof, together with any receipt covering such 
cotton filed in the appeal, shall be sent to the licensed warehouseman 
concerned, and a copy shall be sent to each other person shown by the 
record of the appeal to be interested therein.



Sec. 735.82  Expenses paid by complainant.

    All expenses for the transmission of communications from the 
complainant, for telegraph and telephone toll charges on messages 
addressed to him, and for drawing and submitting samples required by 
Sec. 735.79, including such traveling expenses, if any, incurred in 
accordance with the fiscal regulations of the Department as the 
Administrator may deem proper, shall be borne by the complainant in the 
appeal in connection with which such expenses were incurred.



Sec. 735.83  Advance deposit by complainant.

    If required by the cotton examiner or board of cotton examiners by 
whom the appeal is heard, the complainant shall make an advance deposit 
to cover the expenses payable by him under Sec. 735.82. Such deposit 
shall be in an amount fixed by the cotton examiner or board of cotton 
examiners, and shall be in the form of a check, certified if required by 
the Administrator or a post office or express money order, payable to 
the order of ``Treasurer of the United States.'' As soon as possible 
after the determination of an appeal in connection with which any such 
advance deposit shall have been made, the Administrator shall furnish 
the Treasurer of the United States with a statement of the expenses, if 
any, chargeable against such advance deposit. Thereupon the Treasurer of 
the United States shall return to the person making the advance deposit 
as much thereof as shall not be required for the payment of such 
expenses.



Sec. 735.84  New warehouse receipt.

    Upon demand by the lawful holder of a receipt for cotton involved in 
an appeal under Secs. 735.75 through 735.85, the licensed warehouseman 
shall surrender to such holder the original cotton appeal certificate 
issued in such appeal, and, if the grade or other class shown by such 
certificate be different from that shown by the receipt, shall, upon the 
return of the old receipt, issue a new receipt stating the grade or 
other class shown by such cotton appeal certificate.



Sec. 735.85  Disposition of samples.

    Samples submitted in appeals under this part may be used for the 
purposes of the Department or disposed of in accordance with the 
property regulations of the Department, and the proceeds, if any, 
covered into the Treasury of the United States as miscellaneous 
receipts, or may, at any time, in the discretion of the Administrator, 
be returned to the complainant at his expense.

                              Miscellaneous



Sec. 735.86  Bonds required.

    Every person applying for a license, or licensed, under section 9 of 
the act, shall, as such, be subject to all portions of these regulations 
so far as they may relate to warehousemen. In case there is a law of any 
State providing for a system of warehouses owned, operated, or leased by 
such State, a person applying for a license under section 9 of the act, 
to accept the custody of cotton and to store the same in any of said 
warehouses may, in lieu of a bond or bonds, complying with Secs. 735.11 
and 735.12, file with the Secretary a single bond meeting the 
requirements of the act and regulations in such form, and in such amount 
not less than $5,000, as he shall prescribe, to insure the performance 
by such person, with respect to the acceptance of the custody of cotton 
and its storage in the warehouses in such system for which licenses are 
or may be issued, of his obligations arising during the periods of such 
licenses, and in addition, if desired by the applicant, during the 
periods of any

[[Page 238]]

renewals or extensions thereof. In fixing the amount of such bond, 
consideration shall be given, among other appropriate factors, to the 
character of the warehouses involved, their actual or contemplated 
capacity, the bonding requirements of the State, and its liability with 
respect to such warehouses. If the Secretary, or his designated 
representative, shall find the existence of conditions warranting such 
action, there shall be added to the amount of the bond so fixed, a 
further amount, fixed by him, to meet such conditions.



Sec. 735.87  Publications.

    Publications under the act and the regulations in this part shall be 
made in such media as may be deemed proper by the Administrator.

[62 FR 33540, June 20, 1997]



Sec. 735.88  Information of violations.

    Every person licensed under the act shall immediately furnish the 
Service any information which comes to the knowledge of such person 
tending to show that any provision of the act or the regulations in this 
part has been violated.



Sec. 735.89  Procedure in hearings.

    Hearings under the Act or the regulations in this part, except those 
relating to appeals or arbitrations shall be conducted in accordance 
with the Rules of Practice Governing Formal Adjudicatory Administrative 
Proceedings Instituted by the Secretary under various statutes (7 CFR 
1.130 through 1.151).

[45 FR 6775, Jan. 30, 1980. Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 735.90  One document and one license to cover several products.

    A license may be issued for the storage of two or more agricultural 
products in a single warehouse. Where such a license is desired, a 
single application, inspection, bond, record, report or other paper, 
document or proceeding relating to such warehouse, shall be sufficient 
unless otherwise directed by the Administrator.



Sec. 735.91  Assets and bond; combination warehouses.

    Where such license is desired, the amount of the bond, net assets, 
and inspection and license fees shall be determined by the Administrator 
in accordance with the regulations applicable to the particular 
agricultural product which would require the largest bond and the 
greatest amount of net assets and of fees if the full capacity of the 
warehouse was used for its storage.



Sec. 735.92  Amendments.

    Any amendment to, or revision of this part, unless otherwise stated 
therein, shall apply in the same manner to persons holding licenses at 
the time it becomes effective as it applies to persons thereafter 
licensed under the act.



Sec. 735.93  OMB control number assigned pursuant to Paperwork Reduction Act.

    The information collection requirements contained in these 
regulations (7 CFR part 735) have been approved by the Office of 
Management and Budget (OMB) under the provisions of 44 U.S.C. Chapter 35 
and have been assigned OMB control number 0560-0120.

[53 FR 27151, July 19, 1988]



Secs. 735.94-735.99  [Reserved]

                      Electronic Warehouse Receipts



Sec. 735.100  General statement.

    The regulations in Secs. 735.100 through 735.105 give a USWA 
licensed warehouseman the option of issuing EWRs instead of paper 
warehouse receipts for the cotton stored in its facility. EWRs may only 
be created through a provider who is approved by the Service.

[59 FR 15038, Mar. 31, 1994, as amended at 62 FR 33540, June 20, 1997]



Sec. 735.101  Electronic warehouse receipts.

    (a) EWRs issued pursuant to this part establish the same rights and 
obligations with respect to a bale of cotton as a paper receipt. With 
the exception of the requirement that warehouse receipts be issued on 
paper (Sec. 735.19), all other requirements applicable to paper

[[Page 239]]

warehouse receipts shall apply to EWRs, unless otherwise specified. The 
person identified as the ``holder'' of an EWR shall be entitled to the 
same rights and privileges as the holder of a paper warehouse receipt.
    (b) EWRs may only be issued through a provider.
    (c) Warehousemen must notify all holders of cotton receipted by 
inclusion in the CFS at least 30 calendar days before changing 
providers, unless otherwise required or allowed by the Secretary.
    (d) Licensed warehousemen may cancel EWRs only when they are the 
holder of such receipts.
    (e) Licensed warehousemen, only as holder, may correct information 
on the EWR.
    (f) Only the holder of the receipt may transfer the receipt to a new 
holder.
    (g) The identity of the holder must be included as additional 
information for every EWR.
    (h) An EWR shall only designate one entity as a holder at any one 
time.
    (i) An EWR shall not be issued for a bale of cotton if another 
receipt, paper or electronic, on such bale is outstanding. No two 
warehouse receipts issued by a licensed warehouse may have the same 
receipt number.
    (j) Prior to issuing EWRs, each warehouseman shall request and 
receive from the Service a range of consecutive warehouse receipt 
numbers which the warehouseman shall use for the EWRs it issues.
    (k) If a warehouseman has a contract with a provider, all warehouse 
receipts issued by the warehouseman shall initially be issued as EWRs.
    (l) An EWR may only be issued to replace a paper receipt if the 
current holder of the warehouse receipt agrees.
    (m) Licensed warehousemen must inform the Secretary of the identity 
of their approved provider 60 calendar days in advance of issuing 
warehouse receipts through that provider. The Secretary may waive or 
modify this 60 day requirement.
    (n) Holders and licensed warehousemen may authorize any other user 
of a provider to act on their behalf with respect to their activities 
with such provider. Such authorization must be in writing, acknowledged, 
and retained by the provider.
    (o) Provisions of Sec. 735.18 shall be applicable to lost or 
destroyed EWRs.

[59 FR 15038, Mar. 31, 1994, as amended at 62 FR 33540, June 20, 1997; 
64 FR 54511, Oct. 7, 1999]



Sec. 735.102  Provider requirements and standards for applicants.

    (a) Financial requirements. All providers to be approved under this 
part must meet the following requirements:
    (1) Have a net worth of at least $25,000, and
    (2) Maintain two insurance policies; one for ``errors and 
omissions'' and another for ``fraud and dishonesty''. Each policy must 
have a minimum coverage of $2 million.
    (b) User fee charges. Providers shall pay to the Service user fees 
set by the Service and announced annually prior to April of each 
calendar year.
    (c) Provider agreement. The provider agreement shall contain, but 
not be limited to, the following basic elements:
    (1) Records. The retention period for records.
    (2) Liability. The liability of the provider.
    (3) Transfer of records. The requirements for transferring EWRs to 
another provider.
    (d) Suspension and termination. (1) The Secretary may suspend or 
terminate a provider's agreement for cause at any time.
    (2) Hearings and appeals will be conducted in accordance with 
procedures that are contained in Secs. 735.7 and 735.89.
    (3) Without specific written authority by the Secretary, suspended 
or terminated providers may not accept, transfer, or execute any other 
function pertaining to EWRs during the pendency of any appeal or 
subsequent to such appeal if the appeal is denied.
    (4) The provider or the Service may terminate the provider agreement 
without cause solely by giving the other party written notice 60 
calendar days prior to termination.
    (e) Renewal. Each provider agreement will be automatically renewed 
annually on April 30th as long as the provider complies with the terms 
contained in the provider agreement, the

[[Page 240]]

regulations in Secs. 735.100 through 735.105 and the Act.
    (f) Application form. Application for a provider agreement shall be 
made to the Secretary on forms prescribed and furnished by the Service.

[59 FR 15039, Mar. 31, 1994, as amended at 62 FR 33540, June 20, 1997; 
64 FR 54511, Oct. 7, 1999]



Sec. 735.103  Audits.

    (a) The provider must submit to the Secretary an annual audit level 
financial statement that meets the requirements of Sec. 735.5 with the 
exception of Secs. 735.5(d)(1), (e), (g), and (h); and an electronic 
data processing audit. These audits shall encompass the provider's 
fiscal year. The completed audits shall be submitted to the Secretary no 
later than four calendar months following the end of the provider's 
fiscal year. The electronic data processing audit shall result in an 
evaluation as to current computer operations, security, disaster 
recovery capabilities of the system, and other systems.
    (b) The provider will grant the Secretary or his designees 
unlimited, free access at any time to all records under the provider's 
control relating to activities conducted under this part and as 
specified in the provider agreement.

[59 FR 15039, Mar. 31, 1994]



Sec. 735.104  Provider-user relationship.

    (a) The provider shall not discriminate among its users regarding 
use of and access to its CFS and must charge fees on an equal basis to 
all users for its services.
    (b) The provider must furnish the Secretary with copies of its 
current schedule of fees for all services and charges as they become 
effective.
    (c) Fees charged any user by the provider must be in effect for a 
minimum period of one year.
    (d) Providers must furnish the Secretary and all users a 60 calendar 
day advance notice of their intent to change any fee.

[59 FR 15039, Mar. 31, 1994]



Sec. 735.105  Security.

    (a) Security must be in accordance with the standards set out in the 
provider agreement.
    (b) Security copies of the system are to be maintained off-site. 
Both on-site and off-site record security must be maintained.

[59 FR 15039, Mar. 31, 1994]



PART 736--GRAIN WAREHOUSES--Table of Contents




                               Definitions

Sec.
736.1  Meaning of words.
736.2  Terms defined.

                           Warehouse Licenses

736.3  Application form.
736.3a  All facilities to be licensed or exempted.
736.4  Scales; bin numbers.
736.5  [Reserved]
736.6  Financial requirements.
736.7  Grounds for not issuing license.
736.8  Posting of license.
736.9  Warehouse license; suspension; revocation.
736.10  Return of suspended or revoked license.
736.11  Lost or destroyed warehouse license.
736.12  Unlicensed warehousemen must not represent themselves as 
          licensed.

                             Warehouse Bonds

736.13  Bond required; time of filing.
736.14  Amount of bond; additional amounts.
736.15  Amendment to license.
736.16  New bond required each year.
736.17  Approval of bond.

                           Warehouse Receipts

736.18  Form.
736.19  Grain must be inspected and weighed.
736.20  Copies of receipts.
736.21  Lost or destroyed receipts; bond.
736.22  Printing of receipts.
736.23  Partial delivery of grain.
736.24  Return of receipts before delivery of grain.
736.25  Nonnegotiable receipts.
736.26  Omission of grade; no compulsion by warehouseman.
736.27  Loading out without weighing.
736.28  Persons authorized to sign receipts.
736.29  Receipts; basis for issuance.
736.30  Receipts for stored grain.
736.31  No receipts for screenings.
736.32  Canceled receipts; auditing.

                         Duties of Warehouseman

736.33  Insurance; requirements.
736.34  Records; safe keeping.
736.35  Warehouse charges.
736.36  Business hours.
736.37  System of accounts.
736.38  Reports required.

[[Page 241]]

736.39  Inspections; examination of warehouse.
736.40  Care of grain in licensed warehouses.
736.41  Care of other grain and other commodities.
736.42  Excess storage.
736.43  Removal of specially stored grain.
736.44  Grades and weights; bulk grain.
736.45  Storage of identity-preserved grain.
736.46  Sacked grain.
736.47  Warehouses to be kept clean.
736.48  Delivery of fungible grain.
736.49  Cleaning of grain.
736.50  Grades; separate in storage.
736.51  Stocks to be in balance by grades.
736.52  Out-of-condition and damaged grain.
736.53  Reconditioning grain.
736.54  Notice of condition of grain.
736.55  Sale of grain at public auction.
736.56  Identity-preserved grain; acceptance.

                                  Fees

736.57  License fees.
736.58  Warehouse annual and inspection fees.
736.59  Advance deposit.
736.60  Return of excess deposit.

                         Inspectors and Weighers

736.61  Inspectors' and weighers' applications.
736.62  Examination.
736.63  Posting of license.
736.64  Duties of inspector and weigher.
736.65  Inspection certificate; form.
736.66  Copies of certificate to be accessible.
736.67  Weight certificate.
736.68  Certificate; grade and weight.
736.69  Copies of certificates to be kept.
736.70  Inspections.
736.71  Reports.
736.72  Licenses; suspension or revocation.
736.73  Suspended or revoked license; termination of license.
736.74  Lost or destroyed licenses.
736.75  Unlicensed inspectors and weighers.

                              Grain Grading

736.76  Grade; statement.
736.77  Official Standards of the United States.
736.78  Standards of grades for other grain.
736.79  Grades based on inspection and sample.

                              Grain Appeals

736.80  Appeal procedure.
736.81  Request for appeal.
736.82  Appeal sample--obtaining, preservation, delivery and 
          examination.
736.83  Dismissal of appeal.
736.84  Freedom of appeal.
736.85  Owner not compelled to store.
736.86-736.95  [Reserved]

                              Miscellaneous

736.96  Bonds required; re State warehouses.
736.97  Publications.
736.98  Information of violations.
736.99  Procedure in hearings.
736.100  One document and one license to cover several products.
736.101  Assets and bond; combination warehouses.
736.102  Amendments.

                  Terminal and Futures Contract Markets

736.103  Futures contract markets defined.
736.104  Licenses to weigh grain; futures markets.
736.105  Registrar of warehouse receipts; futures contract market.
736.106-736.107  [Reserved]
736.108  Additional bonding required.
736.109  Examination of warehouses; board of trade interest.
736.110  Registration of public warehouse receipts; protection.
736.111  Terminal markets.

    Authority: 7 U.S.C. 241 et seq.

    Source: 29 FR 15730, Nov. 24, 1964, unless otherwise noted. 
Redesignated at 50 FR 1814, Jan. 14, 1985.

    Editorial Note: Nomenclature changes to part 736 appear at 62 FR 
33540, June 20, 1997.

    Cross Reference: For official grain standards of the United States, 
see chapter VIII, part 810 of this title.

                               Definitions



Sec. 736.1  Meaning of words.

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



Sec. 736.2  Terms defined.

    For the purposes of this part, unless the context otherwise 
requires, the following terms shall be construed, respectively, to mean:
    (a) The act. The United States Warehouse Act, approved August 11, 
1916 (39 Stat. 486; 7 U.S.C. 241-273), as amended.
    (b) Person. An individual, corporation, partnership, or two or more 
persons having a joint or common interest.
    (c) Department. The United States Department of Agriculture.
    (d) Secretary. The Secretary of Agriculture of the United States or 
any officer or employee of the Department to whom authority has 
heretofore been delegated, or to whom authority may

[[Page 242]]

hereafter be delegated, to act in his stead.
    (e) Designated representative. The Administrator.
    (f) Administrator. The Administrator of the Service or any other 
officer or employee to whom authority has heretofore lawfully been 
delegated, or may hereafter lawfully be delegated, to act in his stead.
    (g) Service. The Farm Service Agency of the U.S. Department of 
Agriculture.
    (h) Regulations. Rules and regulations made under the act by the 
Secretary.
    (i) Dockage. Dockage in grain as defined by the official grain 
standards of the United States.
    (j) Grain. All products commonly classed as grain such as wheat, 
corn, oats, barley, rye, flaxseed, rough, brown, and milled rice, 
sunflower seeds, field peas, soybeans, emmer, sorghum, safflower seed, 
triticale, millet and such other products as are ordinarily stored in 
grain warehouses, subject to the disapproval of the Administrator.
    (k) Nonstorage grain. Grain received temporarily into a warehouse 
for conditioning, transferring, assembling for shipment, or lots of 
grain moving through a warehouse for current merchandising or milling 
use, against which no receipts are issued and no storage charges 
assessed: Provided, That merchandising or milling stocks held in storage 
as reserve stocks, or stored for use at an indefinite future date, may 
not be treated as nonstorage grain.
    (l) Warehouse. Unless the context otherwise clearly indicates, any 
building, structure, or other protected inclosure licensed or to be 
licensed under the act, in which grain is or may be stored for 
interstate or foreign commerce, or, if located within any place under 
the exclusive jurisdiction of the United States, in which grain is or 
may be stored.
    (m) Bin. A bin, tank, interstice, or other container in a warehouse 
in which bulk grain may be stored.
    (n) Warehouseman. Any person lawfully engaged in the business of 
storing grain, who holds an effective warehouseman's license under the 
act, or who has applied for such a license.
    (o) License. A license issued under the act by the Secretary, or his 
designated representative.
    (p) Warehouseman's bond. The bond required by the act to be given by 
a warehouseman.
    (q) Inspector. (1) A person licensed under the provisions of section 
11 of the U.S. Warehouse Act, section 8 of the U.S. Grain Standards Act, 
or the provisions of the Agricultural Marketing Act of 1946 and (2) a 
Federal employee authorized under section 8 of the U.S. Grain Standards 
Act, or under the provisions of the Agricultural Marketing Act of 1946 
to inspect, grade and/or certificate the grade of grain stored or to be 
stored in a warehouse licensed under the U.S. Warehouse Act (the terms 
``duly licensed to inspect'' and ``licensed inspector'' shall be defined 
accordingly).
    (r) Weigher. (1) A person licensed under the provisions of section 
11 of the U.S. Warehouse Act, section 8 of the U.S. Grain Standards Act, 
or the provisions of the Agricultural Marketing Act of 1946 and (2) a 
Federal employee authorized under section 8 of the U.S. Grain Standards 
Act, or under the provisions of the Agricultural Marketing Act of 1946, 
to weigh and/or certificate the weight of grain stored or to be stored 
in a warehouse licensed under the U.S. Warehouse Act (the terms ``duly 
licensed to weigh'' and ``licensed weigher'' shall be defined 
accordingly).
    (s) Grain Standards Act. The United States Grain Standards Act, 
approved August 11, 1916 (39 Stat. 482; 7 U.S.C. 71-87) as amended.
    (t) Agricultural Marketing Act of 1946. The Agricultural Marketing 
Act of 1946 (7 U.S.C. 1621-1627) as amended.
    (u) Official Standards of the United States. The standards of the 
quality or condition for grain, fixed and established under the U.S. 
Grain Standards Act or the Agricultural Marketing Act of 1946.
    (v) Receipt. A licensed warehouse receipt issued under the act.
    (w) Net assets. The difference remaining when liabilities are 
subtracted from allowable assets as determined by the Secretary after 
review of the warehouseman's financial statement. In determining total 
net assets, credit may be given for insurable property

[[Page 243]]

such as buildings, machinery, equipment, and merchandise inventory only 
to the extent that such property is protected by insurance against loss 
or damage by fire, lightning, and tornado. Such insurance shall be in 
the form of lawful insurance policies issued by insurance companies 
authorized to do such business and subject to service of process in 
suits brought in the State in which the warehouse is located.
    (x) Warehouse capacity. Warehouse capacity is defined as the maximum 
number of bushels of grain that the warehouse could accommodate when 
stored in the manner customary to the grain for the warehouse, as 
determined by the Secretary.
    (y) Current assets. Assets, including cash, that are reasonably 
expected to be realized in cash or sold or consumed during the normal 
operating cycle of the business or within one year if the operating 
cycle is shorter than one year.
    (z) Current liabilities. Those financial obligations which are 
expected to be satisfied during the normal operating cycle of the 
business or within one year if the operating cycle is shorter than one 
year.
    (aa) Storage grain. All grain received into, stored in, or delivered 
out of the warehouse which is not classified as nonstorage grain under 
Sec. 736.19(c) of this part.

[29 FR 15730, Nov. 24, 1964, as amended at 41 FR 7751, Feb. 20, 1976; 42 
FR 12143, Mar. 3, 1977; 43 FR 14006, Apr. 4, 1978; 45 FR 5661, Jan. 24, 
1980. Redesignated and amended at 50 FR 1814, Jan. 14, 1985; further 
amended at 52 FR 37126, Oct. 5, 1987; 56 FR 40220, Aug. 14, 1991]

                           Warehouse Licenses



Sec. 736.3  Application form.

    Applications for licenses and for amendments of licenses under the 
act shall be made to the Secretary upon prescribed forms furnished by 
the Service, shall be in English, shall truly state the information 
therein contained, and shall be signed by the applicant. The applicant 
shall at any time furnish such additional information as the Secretary, 
or his designated representative, shall find to be necessary to the 
consideration of his application.



Sec. 736.3a  All facilities to be licensed or exempted.

    All facilities within the same city or town used for the storage of 
grain by an applicant for a warehouse license must qualify for a license 
and be licensed under the act if the applicant is to be licensed to 
operate as a grain warehouseman in such city or town, unless the 
facilities which are not to be covered by a license are exempted by the 
Secretary or his designated representative upon a finding that, due to 
the exercise of adequate controls by some independent agency over the 
operation of the nonfederally licensed facilities, there would be no 
likelihood of interchange, substitution, or commingling of grain stored 
in such facilities with grain stored in the federally licensed 
facilities. If all such facilities do not qualify for a license or for 
an exemption under this section, the applicant shall not be licensed 
under the act as a grain warehouseman in the city or town in which the 
facilities in question are located. Each applicant for a grain warehouse 
license must apply for a license covering all facilities operated by him 
for the storage of grain within the same city or town or for exemption 
as provided in this section. If a licensed grain warehouseman acquires 
any additional grain storage facilities within the same city or town in 
which his licensed warehouse is located, he shall file promptly an 
application for a license or an exemption of the additional facilities. 
No grain storage facility acquired by a licensed grain warehouseman, 
subsequent to the issuance of his license, in the same city or town as 
his licensed facilities, shall be used for the storage of grain until it 
qualifies for license and is licensed or is exempted as provided in this 
section. If any one of the licensed grain storage facilities operated by 
a warehouseman in the same city or town becomes ineligible for a license 
at any time for any reason, it shall not thereafter be used for the 
storage of grain until the condition making it ineligible is removed or 
an exemption is granted as provided in this section. The use for the 
storage of grain by a licensed warehouseman of a facility which is in 
the same city or town as his licensed facilities and is neither licensed 
nor exempted, or other

[[Page 244]]

violation of the provisions of this section, shall be cause for 
suspension or revocation of any license issued to the warehouseman for 
the storage of grain.



Sec. 736.4  Scales; bin numbers.

    (a) Each warehouse must be equipped with suitable scales in good 
order, and so arranged that all grain, whether for storage or for 
nonstorage purposes, can be weighed in and out of the warehouse. The 
scales in any warehouse shall be subject to examination by 
representatives of the Department and to disapproval by the 
Administrator. If he disapproves any weighing apparatus, it shall not 
thereafter be used in ascertaining the weight of grain for the purposes 
of this act, until such disapproval be withdrawn.
    (b) Both bulk grain bins and compartments for sacked grain of all 
warehouses licensed under the act shall be identified by means of 
clearly discernible numbers securely affixed thereto. The series of 
numbers to be used shall be approved by the Service. Bulk grain bins 
shall be numbered so as to be easily identified at the openings on top 
and also on or near the outlet valves underneath. Compartments shall be 
numbered in such a manner as to clearly show the space covered by each 
number.



Sec. 736.5  [Reserved]



Sec. 736.6  Financial requirements.

    (a) Each warehouseman conducting a warehouse licensed, or for which 
application for a license has been made under the regulations in this 
part, shall maintain complete, accurate and current financial records.
    (b) Each warehouseman conducting a warehouse for which application 
for license is made shall provide with this application and each 
warehouseman licensed under these regulations annually, or more 
frequently if required, shall furnish to the Secretary financial 
statements from the records required in paragraph (a) of this section 
prepared according to generally accepted accounting principles. Such 
statements shall include but not be limited to: (1) Balance sheet, (2) 
statement of income (profit and loss), (3) statement of retained 
earnings, and (4) statement of changes in financial position. The chief 
executive officer for the warehouseman shall certify under penalties of 
perjury that the statements as prepared accurately reflect the financial 
condition of the warehouseman as of the date named and fairly represent 
the results of operations for the period named.
    (c) Each warehouseman conducting a warehouse licensed under these 
regulations shall have the financial statements required in paragraph 
(b) of this section audited by an independent certified public 
accountant. Alternatively, financial statements audited or reviewed by 
an independent public accountant will be accepted with the understanding 
that the warehouseman will be subject to an additional on-site 
examination by the Secretary and to an audit by the Secretary. Audits 
and reviews by independent certified public accountants and independent 
public accountants specified in this section shall be made in accordance 
with standards established by the American Institute of Certified Public 
Accountants. The accountant's certification, assurances, opinion, 
comments, and notes on such statements, if any, shall be furnished along 
with the statements. Licensees who cannot immediately meet these 
requirements may apply to the Secretary for a temporary waiver of this 
provision. The Secretary may grant such waiver for a temporary period 
not to exceed 180 days if the licensee can furnish evidence of good and 
substantial reasons therefor.
    (d) Each warehouseman conducting a warehouse which is licensed under 
the regulations in this part, or for which application for such a 
license has been made, shall have and maintain:
    (1) Total net assets liable and available for the payment of any 
indebtedness arising from the conduct of the warehouse of at least 25 
cents multiplied by the warehouse capacity in bushels, however, no 
person may be licensed or remain licensed as a warehouseman under this 
part unless that person has allowable net assets of at least $50,000, 
(Any deficiency in net assets above the $50,000 minimum may be supplied 
by an increase in the amount of the warehouseman's bond in accordance 
with Sec. 736.14(c) of this part); and

[[Page 245]]

    (2) Total current assets equal to or exceeding total current 
liabilities or assurance that funds will be available to meet current 
obligations.
    (e) In case a warehouseman is licensed or is applying for licenses 
to operate two or more warehouses under the regulations in this part, 
the maximum number of bushels which all such warehouses will accommodate 
when stored in the manner customary to the warehouses, as determined by 
the Administrator, shall be considered in determining whether the 
warehouseman meets the net assets requirements specified in paragraph 
(d) of this section.
    (f) Subject to such terms and conditions as the Secretary may 
prescribe and for the purposes of determining allowable assets and 
liabilities under paragraphs (d) and (e) of this section:
    (1) Capital stock shall not be considered a liability;
    (2) Appraisals of the value of fixed assets in excess of the book 
value claimed in the financial statement submitted by warehousemen to 
conform with paragraphs (b) and (c) of this section may be allowed by 
the Secretary if prepared by independent appraisers acceptable to the 
Secretary;
    (3) Financial statements of a parent company which separately 
identifies the financial position of a wholly owned subsidiary and which 
meets the requirements of paragraphs (b), (c), and (d) of this section 
may be accepted by the Secretary in lieu of the warehouseman meeting 
such requirements; and
    (4) Guaranty agreements from a parent company submitted on behalf of 
a wholly owned subsidiary may be accepted by the Secretary as meeting 
the requirements of paragraphs (b), (c), and (d) of this section, if the 
parent company submits a financial statement which qualifies under this 
section.
    (g) In case a State agency licensed or applying for a license as 
provided in Section 9 of the Act has funds of not less than $500,000 
guaranteeing the performance of obligations of the agency as a 
warehouseman, such funds shall be considered sufficient to meet the net 
assets requirements of this section.
    (h) In case a warehouseman files a bond in the form of a 
certification of participation in an indemnity or insurance fund as 
provided for in Sec. 736.13(b), the licensed warehouseman shall have and 
maintain a minimum of $25,000 in allowable net assets and any deficiency 
in assets above the $25,000 minimum shall be covered by an acceptable 
and valid certificate.
    (i) When a warehouseman files a bond in the form of either a deposit 
of public debt obligations of the United States or other obligations 
which are unconditionally guaranteed as to both interest and principal 
by the United States as provided for in Sec. 736.13(c):
    (1) The obligation deposited shall not be considered a part of the 
warehouseman's assets for purposes of Sec. 736.6(d), (1) and (2);
    (2) A deficiency in total allowable net and current assets as 
computed for Sec. 736.6(d), (1) and (2) may be offset by the licensed 
warehouseman furnishing a corporate surety bond for the difference;
    (3) The deposit may be replaced or continued in the required amount 
from year to year; and
    (4) The deposit shall not be released until one year after 
termination (cancellation or revocation) of the license whch it supports 
or until satisfaction of any claim against the deposit, whichever is 
later.

Nothing in these regulations shall prohibit a person other than the 
licensed warehouseman from furnishing such bond or additions thereto on 
behalf of and in the name of the licensed warehouseman subject to 
provisions of Sec. 736.13(c).

[29 FR 15730, Nov. 24, 1964, as amended at 39 FR 41824, Dec. 3, 1974; 47 
FR 23910, June 1, 1982; 49 FR 12667, Mar. 30, 1984. Redesignated at 50 
FR 1814, Jan. 14, 1985; further amended at 52 FR 37126, Oct. 5, 1987]



Sec. 736.7  Grounds for not issuing license.

    A license for the conduct of a warehouse, or any amendment to a 
license, under the regulations in this part, shall not be issued if it 
is found by the Secretary, or his designated representative, that the 
warehouse is not suitable for the proper storage of grain; that the 
warehouseman does not possess a good reputation, or does not have a net 
worth of at least $50,000.00, or is incompetent to conduct such 
warehouse in accordance with the act

[[Page 246]]

and the regulations in this part; or that there is any other sufficient 
reason within the intent of the act for not issuing such license. If all 
the facilities operated for the storage of grain by the applicant within 
the same city or town are not to be licensed under the act, the 
applicant shall not be licensed as a grain warehouseman with respect to 
any of such facilities, unless an exemption of the facilities which are 
not to be licensed is granted as provided in Sec. 736.3a.

[29 FR 15730, Nov. 24, 1964, as amended at 47 FR 23911, June 1, 1982. 
Redesignated at 50 FR 1814, Jan. 14, 1985 and further amended at 52 FR 
37127, Oct. 5, 1987]



Sec. 736.8  Posting of license.

    Immediately upon receipt of his license or of any modification or 
extension thereof under the act, the warehouseman shall post same, and 
thereafter, except as otherwise provided in the regulations in this 
part, keep it posted until suspended or terminated, in a conspicuous 
place in the principal office where receipts issued by such warehouseman 
are delivered to depositors.



Sec. 736.9  Warehouse license; suspension; revocation.

    Pending investigation, the Secretary, or his designated 
representative, whenever he deems necessary, may suspend a 
warehouseman's license temporarily without hearing. Upon written request 
and a satisfactory statement of reasons therefor, submitted by a 
warehouseman, the Secretary, or his designated representative, may, 
without hearing, suspend or revoke the license issued to such 
warehouseman. The Secretary, or his designated representative, may, 
after opportunity for hearing has been afforded in the manner prescribed 
in this section, suspend or revoke a license issued to a warehouseman 
when such warehouseman--
    (a) Does not have a net worth of at least $50,000;
    (b) Has parted, in whole or in part, with his control over the 
licensed warehouse;
    (c) Is in process of dissolution or has been dissolved;
    (d) Has ceased to operate such licensed warehouse;
    (e) Has in any other manner become nonexistent or incompetent or 
incapacitated to conduct the business of the warehouse;
    (f) Has made unreasonable or exorbitant charges for services 
rendered;
    (g) Is operating in the same city or town in which his licensed 
warehouse facilities are located, any facility for storage of grain 
which is not covered by a license or an exemption as provided in 
Sec. 736.3a; or
    (h) Has in any other manner violated or failed to comply with any 
provision of the act or the regulations in this part. Whenever any of 
the conditions mentioned in paragraphs (a) through (h) of this section 
shall come into existence, it shall be the duty of the warehouseman to 
notify the Administrator immediately of the existing condition. Before a 
license is revoked or suspended (other than temporarily pending 
investigation) for any violation of, or failure to comply with, any 
provision of the act or of the regulations in this part, or upon the 
ground that unreasonable or exorbitant charges have been made for 
services rendered, the warehouseman involved shall be furnished by the 
Secretary, or his designated representative, a written statement, 
specifying the charges and shall be allowed a reasonable time within 
which he may answer the same in writing and apply for a hearing, an 
opportunity for which shall be afforded in accordance with Sec. 736.99.

[29 FR 15730, Nov. 24, 1964, as amended at 47 FR 23911, June 1, 1982. 
Redesignated at 50 FR 1814, Jan. 14, 1985 and further amended at 52 FR 
37127, Oct. 5, 1987; 53 FR 2477, Jan. 28, 1988]



Sec. 736.10  Return of suspended or revoked license.

    In case a license issued to a warehouseman terminates or is 
suspended or revoked by the Secretary or his designated representative, 
such license shall be immediately returned to the Secretary. At the 
expiration of any period of suspension of such license, unless it be in 
the meantime revoked, the dates of the beginning and termination of the 
suspension shall be indorsed thereon, it shall be returned to the 
warehouseman to whom it was originally issued and it shall be posted as

[[Page 247]]

prescribed in Sec. 736.8: Provided, That in the discretion of the 
Secretary, or his designated representative, a new license may be issued 
without reference to the suspension.



Sec. 736.11  Lost or destroyed warehouse license.

    Upon satisfactory proof of the loss or destruction of a license 
issued to a warehouseman, a duplicate thereof, or a new license may be 
issued under the same number.



Sec. 736.12  Unlicensed warehousemen must not represent themselves as licensed.

    No warehouse or its warehouseman shall be designated as licensed 
under the act, and no name or description conveying the impression that 
it or he is so licensed shall be used, either in a receipt or otherwise, 
unless such warehouseman holds an unsuspended and unrevoked license for 
the conduct of such warehouse.

                             Warehouse Bonds



Sec. 736.13  Bond required; time of filing.

    Each warehouseman applying for a warehouse license under the Act 
shall, before such license is granted, file with the Secretary or his 
designated representative a bond either:
    (a) In the form of a bond containing the following conditions and 
such other terms as the Secretary or his designated representative may 
prescribe in the approved bond forms, with such changes as may be 
necessary to adapt the forms to the type of legal entity involved:
    Now, therefore, if the said license(s) or any amendments thereto be 
granted and said principal, and its successors and assigns operating 
said warehouse(s), shall faithfully perform during the period of this 
bond all obligations of a licensed warehouseman under the terms of the 
Act and regulations thereunder relating to the above-named products;
    Then this obligation shall be null and void and of no effect, 
otherwise to remain in full force. For purposes of this bond, the 
aforesaid obligations under the Act and regulations and contracts 
include obligations under any and all modifications of the Act, the 
regulations, and the contracts that may hereafter be made, notice of 
which modifications to the surety being hereby waived.
    This obligation shall be and remain in full force and effect for a 
minimum of one year beginning with the effective date and shall be 
considered a continuous bond thereafter until terminated as herein 
provided. The total liability of the surety is limited to the penal 
amount hereof, for liabilities that accrue during the term hereof.
    This obligation shall be and remain in full force and effect from 
date of issue until one hundred twenty (120) days after notice in 
writing of cancellation shall have been received by the Secretary from 
the principal or surety. If said notice shall be given by the surety, a 
copy thereof shall be mailed on the same day to the principal. 
Cancellation of this bond and cancellation of any of its provisions 
shall not affect any liability accrued thereon at the time of said 
notice or which may accrue thereon during the one hundred twenty (120) 
days after such notice.

A bond in this form shall be subject to 7 CFR 736.6, and 736.14 through 
736.17, and 31 CFR part 225, or
    (b) In the form of a certificate of participation in and coverage by 
an indemnity or insurance fund as approved by the Secretary, established 
and maintained by a State, backed by the full faith and credit of the 
applicable State, and which guarantees depositors of the licensed 
warehouse full indemnification for the breach of any obligation of the 
licensed warehouseman under the terms of the Act and regulations. A 
certificate of participation and coverage in such fund shall be 
furnished to the Secretary annually. If administration or application of 
the fund shall change after being approved by the Secretary, the 
Secretary may revoke his approval. Such revocation shall not affect a 
depositor's rights which have arisen prior to such revocation. Upon such 
revocation the licensed warehouseman then must comply with paragraph 
(a). Such certificate of participation shall not be subject to 
Secs. 736.14 and 736.15, or
    (c) In the form of a deposit with the Secretary as security, United 
States, bonds, Treasury notes, or other public debt obligations of the 
United States or obligations which are unconditionally guaranteed as to 
both interest and principal by the United States, in a sum equal at 
their par value to the amount of the penal bond required to

[[Page 248]]

be furnished, together with an irrevocable power of attorney and 
agreement in the form prescribed, authorizing the Secretary to collect 
or sell, assign and transfer such bonds or notes so deposited in case of 
any default in the performance of any of the conditions or stipulations 
of such penal bond. Obligations posted in accordance with this paragraph 
may not be withdrawn by the warehouseman until one year after license 
termination or until satisfaction of any claims against the obligations 
whichever is later. A bond in this form shall be subject to 7 CFR 736.6 
and 736.14 through 736.17 and 31 CFR part 225.

[52 FR 37127, Oct. 5, 1987]



Sec. 736.14  Amount of bond; additional amounts.

    (a) The amount of bond to be furnished for each warehouse under the 
regulations in this part shall be fixed at a rate of 20 cents per bushel 
for the first 1,000,000 bushels of licensed capacity; 15 cents per 
bushel for the next 1,000,000 bushels of licensed capacity; and 10 cents 
per bushel for all licensed capacity over 2,000,000 bushels: Provided, 
That in any case the amount of bond shall not be less than $20,000 nor 
more than $500,000, except as prescribed in paragraph (c) of this 
section. The licensed capacity shall be the maximum number of bushels of 
grain that the warehouse could accommodate as determined under 
Sec. 736.6(d).
    (b) In case a warehouseman is licensed or is applying for licenses 
to operate two or more warehouses in the same State he may give a single 
bond meeting the requirements of the Act and the regulations in this 
part to cover all his warehouses within the State. In such case the 
warehouses to be covered by the bond shall be deemed to be one warehouse 
only for purposes of determining the amount of bond required under 
paragraph (a) of this section.
    (c) In case of a deficiency in net assets above the $50,000 minimum 
required under Sec. 736.6(d)(1), there shall be added to the amount of 
bond determined in accordance with paragraph (a) of this section an 
amount equal to such deficiency or a letter of credit in the amount of 
the deficiency issued to the Secretary for a period of not less than two 
years to coincide with the period of any deposit of obligation under 7 
CFR 736.13(c). Any letter of credit must be clean, irrevocable, issued 
by a commerical bank, payable to the Secretary by sight draft and 
insured as a deposit by the Federal Deposit Insurance Corporation. If 
the Secretary, or his designated representative, finds that conditions 
exist which warrant requiring additional bond, there shall be added to 
the amount of bond as determined under the other provisions of this 
section, a further amount to meet such conditions.

[29 FR 15730, Nov. 24, 1964, as amended at 39 FR 41824, Dec. 3, 1974; 47 
FR 23911, June 1, 1982. Redesignated at 50 FR 1814, Jan. 14, 1985, and 
further amended at 52 FR 37127, Oct. 5, 1987]



Sec. 736.15  Amendment to license.

    In case an application is made for an amendment to a license and no 
bond previously filed by the warehouseman under Secs. 736.13 through 
736.17 covers obligations arising during the period covered by such 
amendment, the warehouseman shall, when notice has been given by the 
Secretary, or his designated representative, that his application for 
such amendment will be granted upon compliance by such warehouseman with 
the act, file with the Secretary, within a time, if any, fixed in such 
notice, a bond complying with the act. In the discretion of the 
Secretary, or his designated representative, a properly executed 
instrument in form approved by him, amending, extending, or continuing 
in force and effect the obligations of a valid bond previously filed by 
the warehouseman and otherwise complying with the act and the 
regulations in this part, may be filed in lieu of a new bond.



Sec. 736.16  New bond required each year.

    A continuous form of license shall remain in force for more than one 
year from its effective date or any subsequent extension thereof, 
provided that the warehouseman has on file with the Secretary a bond 
meeting the terms and conditions as outlined in 7 CFR 736.13. Such bond 
must be in the amount required by the Secretary and

[[Page 249]]

approved by him or his designated representative. Failure to provide or 
renew a bond shall result in immediate and automatic termination of the 
warehouseman's license.

[52 FR 37127, Oct. 5, 1987]



Sec. 736.17  Approval of bond.

    No bond, amendment, or continuation thereof shall be accepted for 
the purposes of the act and the regulations in this part until it has 
been approved by the Secretary, or his designated representative.

                           Warehouse Receipts



Sec. 736.18  Form.

    (a) Every receipt, whether negotiable or nonnegotiable, issued for 
grain stored in a licensed warehouse shall, in addition to complying 
with the requirements of section 18 of the act, embody within its 
written or printed terms the following:
    (1) The name of the warehouseman and the designation, if any, of the 
warehouse,
    (2) A statement whether the warehouseman is incorporated or 
unincorporated, and if incorporated, under what laws,
    (3) In event the relationship existing between the warehouseman and 
any depositor is not that of strictly disinterested custodianship, a 
statement setting forth the actual relationship,
    (4) A statement conspicuously placed, whether or not the grain is 
insured, and, if insured, to what extent, by the warehouseman against 
loss by fire, lightning, tornado, or otherwise,
    (5) The net weight, including dockage, if any, of the grain,
    (6) In the case of grain the identity of which is to be preserved, 
its identification or location in accordance with Sec. 736.45,
    (7) The words ``Not Negotiable,'' or ``Negotiable,'' according to 
the nature of the receipt, clearly and conspicuously printed or stamped 
thereon, and
    (8) That the holder of the receipt or the depositor of the grain 
shall demand the delivery of the grain not later than the expiration of 
one year from the date of the receipt.
    (b) Every receipt, whether negotiable or nonnegotiable, issued for 
grain stored in a warehouse shall specify a period, not exceeding one 
year, for which the grain is accepted for storage under the Act and the 
regulations in this part. Upon demand for issuance of a new receipt, 
surrender of the old receipt by the lawful holder thereof at or before 
the expiration of the period specified therein and an offer to satisfy 
the warehouseman's lien, the warehouseman, upon such lawful terms and 
conditions as may be granted by him to other depositors of grain in his 
warehouse, shall, in the absence of some lawful excuse, issue a new 
receipt for a further specified period, not exceeding one year.
    (c) Every negotiable receipt issued shall, in addition to conforming 
with the requirements of paragraph (a) of this section, embody within 
its written or printed terms, a form of indorsement which may be used by 
the depositor, or his authorized agent, for showing the ownership of, 
and liens, mortgages, or other encumbrances on the grain covered by the 
receipt.
    (d) The grade stated in a receipt shall be stated in accordance with 
Sec. 736.76 as determined by the inspector who last inspected and graded 
the grain or if an appeal has been taken, the grade shall be stated on 
such receipt in accordance with the grade as finally determined in such 
appeal.
    (e) If a warehouseman issues a receipt omitting the statement of 
grade on request of the depositor as permitted by section 18 of the act, 
such receipt shall have clearly and conspicuously stamped or written in 
the space provided for the statement of grade the words ``Not graded on 
request of depositor.''
    (f) If a warehouseman issues a receipt under the act omitting any 
information not required to be stated, for which a blank space is 
provided in the form of the receipt, a line shall be drawn through such 
space to show that such omission has been made purposely by the 
warehouseman.

(Approved by the Office of Management and Budget under control number 
0560-0120)

[29 FR 15730, Nov. 24, 1964, as amended at 45 FR 5661, Jan. 24, 1980; 47 
FR 745, Jan. 7, 1982. Redesignated at 50 FR 1814, Jan. 14, 1985]

[[Page 250]]



Sec. 736.19  Grain must be inspected and weighed.

    (a) Except in case of identity-preserved grain, when the grading is 
omitted at request of depositor, all storage and nonstorage grain 
received into the warehouse shall be inspected, graded and weighed by a 
licensed inspector and/or weigher--and no receipt may be issued under 
the Act or the regulations in this part until the grain covered by such 
receipt has been so inspected, graded and weighed.
    (b) When requested by the depositor of grain the identity of which 
is to be preserved, a receipt omitting statement of grade but not weight 
may be issued.
    (c) Except as provided in Sec. 736.27 of this part, all storage 
grain delivered out of a warehouse must be inspected, graded, and 
weighed by a licensed inspector or weigher, as applicable.

[40 FR 19011, May 1, 1975. Redesignated at 50 FR 1814, Jan. 14, 1985; 
amended at 56 FR 40220, Aug. 14, 1991]



Sec. 736.20  Copies of receipts.

    At least one actual or skeleton copy of all receipts shall be made, 
and all copies, except skeleton copies, shall have clearly and 
conspicuously printed or stamped thereon the words ``Copy--Not 
Negotiable.'' A copy of each receipt issued shall be retained by the 
warehouseman for a period of one year after December 31 of the year in 
which the corresponding original receipt is canceled.

(Approved by the Office of Management and Budget under control number 
0560-0120)

[29 FR 15730, Nov. 24, 1964, as amended at 47 FR 745, Jan. 7, 1982. 
Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 736.21  Lost or destroyed receipts; bond.

    (a) In the case of lost or destroyed receipts, if there be no 
statute of the United States or law of a State applicable thereto a new 
receipt upon the same terms, subject to the same conditions, and bearing 
on its face the number and the date of the receipt in lieu of which it 
is issued and a plain and conspicuous statement that it is a duplicate 
receipt issued in lieu of a lost or destroyed receipt, may be issued 
upon compliance with the conditions set out in paragraph (b) of this 
section.
    (b) Before issuing such new or duplicate negotiable receipt the 
warehouseman shall require the depositor or other person applying 
therefor to make and file with him (1) an affidavit showing that the 
applicant is lawfully entitled to the possession of the original 
receipt, that he has not negotiated or assigned it, how the original 
receipt was lost or destroyed, and if lost, that diligent effort has 
been made to find the receipt without success, and (2) a bond in an 
amount double the value, at the time the bond is given, of the grain 
represented by the lost or destroyed receipt. Such bond shall be in a 
form approved for the purpose by the Secretary, or his designated 
representative, shall be conditioned to indemnify the warehouseman 
against any loss sustained by reason of the issuance of such receipt, 
and shall have a surety thereon a surety company which is authorized to 
do business, and is subject to service of process in a suit on the bond, 
in the state in which the warehouse is located or at least two 
individuals who are residents of such state and each of whom owns real 
property therein having a value, in excess of all exemptions and 
encumbrances, equal to the amount of the bond.
    (c) Before issuing such new or duplicate non-negotiable receipt, 
obtain a written statement from the holder that the original non-
negotiable receipt is lost and requires the issuance of a duplicate non-
negotiable receipt.

[29 FR 15730, Nov. 24, 1964. Redesignated at 50 FR 1814, Jan. 14, 1985, 
and amended at 57 FR 57648, Dec. 7, 1992]



Sec. 736.22  Printing of receipts.

    No receipt shall be issued by a licensed warehouseman unless it is:
    (a) In a form prescribed by the Administrator,
    (b) Upon distinctive paper or card stock specified by the 
Administrator,
    (c) Printed by a printer with whom the United States has a 
subsisting agreement and bond for such printing, and
    (d) On paper and/or card stock tinted with ink in the manner 
prescribed by

[[Page 251]]

the agreement under paragraph (c) of this section.

[62 FR 33540, June 20, 1997]



Sec. 736.23  Partial delivery of grain.

    If a warehouseman delivers a part only of a lot of grain for which 
he has issued a negotiable receipt under the act, he shall take up and 
cancel such receipt and issue a new receipt in accordance with the 
regulations in this part for the undelivered portion of the grain. The 
new receipt shall show the date of issuance and also indicate the number 
and date of the receipt first issued.



Sec. 736.24  Return of receipts before delivery of grain.

    Except as permitted by law or by the regulations in this part, a 
warehouseman shall not deliver any grain for which he has issued a 
negotiable receipt until the receipt has been returned to him and 
canceled; and shall not deliver grain for which he has issued a non-
negotiable receipt until such receipt has been returned, or he has 
obtained from the depositor or the depositor's agent, a written order 
therefore and a receipt upon delivery.

[57 FR 57649, Dec. 7, 1992]



Sec. 736.25  Nonnegotiable receipts.

    Each person to whom a nonnegotiable receipt is issued shall furnish 
the warehouseman with a statement in writing indicating the person or 
persons having power to authorize delivery of grain covered by such 
receipt, together with the bona fide signature of such person or 
persons. No licensed warehouseman shall honor an order for the release 
of grain covered by a nonnegotiable receipt until he has first 
ascertained that the person issuing the order has authority to order 
such release, and that the signature of the releasing party is genuine.



Sec. 736.26  Omission of grade; no compulsion by warehouseman.

    No warehouseman shall, directly or indirectly by any means 
whatsoever, compel or attempt to compel the depositor of any grain 
stored or offered for storage in his warehouse to request the issuance 
of a receipt omitting the statement of grade.



Sec. 736.27  Loading out without weighing.

    (a) When the lawful owner of an entire lot of identity preserved 
grain or a mass of grain stored in a single bin requests the 
warehouseman to deliver said lot or mass without reweighing said grain, 
the warehouseman may make such delivery if there is an accurate record 
of the weight of such grain when received. Such deliveries shall be made 
only when the lawful owner agrees to assume all shortages and other 
risks incidental thereto, and after the warehouse receipts covering all 
of the grain in the container have been surrendered to the warehouseman 
and canceled. After the receipts covering such grain have been 
surrendered for cancellation no other grain shall be placed in the bin 
until the entire lot has been delivered.
    (b)(1) When the lawful owner of fungible grain requests the 
warehouseman to deliver grain out of the warehouse without weighing, the 
warehouseman may, but is not compelled to, make such delivery provided 
the grain is to be moved into another warehouse in the United States 
where weights can be established. The weights established at the 
receiving warehouse must be supervised by an independent weighing agency 
unless the shipping warehouse and the receiving warehouse are operated 
by the same warehouseman, or unless destination weights are available 
within 24 hours of shipment. Whenever a warehouseman delivers fungible 
grain out of a warehouse without weighing, the weight of the grain 
unloaded at the receiving warehouse shall be the weight used to 
determine fulfillment of the shipping warehouseman's delivery 
obligations.
    (2) When fungible grain is delivered out of the warehouse without 
weighing, the warehouseman shall estimate as accurately as possible the 
weight of the grain delivered out and shall promptly obtain destination 
weights from the receiving warehouse. Should the Administrator determine 
that such estimated weights are not reasonably accurate, or that 
destination weights are not promptly obtained, or that destination

[[Page 252]]

weights are not supervised by an independent weighing agency when 
required, he may thereafter require the warehouseman to weigh all 
fungible grain delivered out of the warehouse.
    (3) Any weight certificate issued covering grain delivered out of 
the warehouse without being weighed must state in bold letters on the 
face of the certificate the fact that the weight is an estimated weight.

[40 FR 19011, May 1, 1975. Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 736.28  Persons authorized to sign receipts.

    Each warehouseman shall file with the Department the name and 
genuine signature of each person authorized to sign warehouse receipts 
for the warehouseman, and shall promptly notify the Department of any 
changes as to persons authorized to sign and shall file the signatures 
of such persons, and each warehouseman shall be bound by such signatures 
the same as if he had personally signed the receipt.



Sec. 736.29  Receipts; basis for issuance.

    Before issuing any receipt under the Act each warehouseman shall, 
unless he personally weighed, inspected, and graded, if graded, a lot of 
grain, first obtain either a copy of, or the original weight 
certificate, and inspection certificate, if any, covering said lot of 
grain. The warehouse records shall clearly identify the certificate(s) 
used as a basis for issuance of each warehouse receipt, and said weight 
and grade certificates shall be kept on file as a record in the 
warehouseman's office; provided that said filing requirements shall be 
deemed satisfied if copies of the certificates upon which warehouse 
receipts are based are filed in the office of a U.S. Registrar or in the 
office of an independent inspection or weighing agency which issued 
them, and are readily accessible for examination purposes. Such 
certificates shall be retained for a period of three years after 
December 31 of the year in which issued.

(Approved by the Office of Management and Budget under control number 
0560-0120)

[29 FR 15730, Nov. 24, 1964, as amended at 47 FR 745, Jan. 7, 1982. 
Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 736.30  Receipts for stored grain.

    Receipts must be issued for all grain stored in a warehouse. 
Receipts need not be issued against nonstorage grain, but each 
warehouseman shall keep accurate records of the weights, kinds, and 
grades of all lots of nonstorage grain received into and delivered from 
his warehouse. Whenever the purpose for which any lot of nonstorage 
grain was received into a warehouse is changed so that its approximate 
delivery period from the warehouse becomes indeterminate, receipts shall 
be issued to cover such grain. Records required under this section with 
respect to nonstorage grain shall be retained, as a part of the records 
of the warehouse, for a period of one year after December 31 of the year 
in which the lot of nonstorage grain is delivered from the warehouse.

(Approved by the Office of Management and Budget under control number 
0560-0120)

[29 FR 15730, Nov. 24, 1964, as amended at 47 FR 745, Jan. 7, 1982. 
Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 736.31  No receipts for screenings.

    No receipt shall be issued for any product or byproduct which would 
fall under the term ``screenings.''



Sec. 736.32  Canceled receipts; auditing.

    Each warehouseman, if requested by the Service, shall forward 
canceled receipts for auditing to an entity or office of the Service as 
may be designated from time to time.

[62 FR 33540, June 20, 1997]

                         Duties of Warehouseman



Sec. 736.33  Insurance; requirements.

    (a) Each warehouseman, when so requested in writing as to any grain 
by

[[Page 253]]

the depositor thereof or lawful holder of the receipt covering such 
grain, shall, to the extent to which, in the exercise of due diligence, 
he is able to procure such insurance, keep such grain while in his 
custody as a warehouseman insured in his own name or arrange for its 
insurance otherwise to the extent so requested, against loss or damage 
by fire, lightning, and/or tornado. When insurance is not carried in the 
warehouseman's name, the receipts shall show that the grain is not 
insured by the warehouseman. Such insurance shall be covered by lawful 
policies issued by one or more insurance companies authorized to do such 
business, and subject to service of process in suits brought in the 
State where the warehouse is located. If the warehouseman is unable to 
procure such insurance to the extent requested, he shall, orally or by 
telegraph or by telephone immediately notify the person making the 
request of the fact. Nothing in this section shall be construed to 
prevent the warehouseman from adopting a rule that he will insure all 
grain stored in his warehouse.
    (b) Each warehouseman shall comply fully with the terms of insurance 
policies or contracts covering his licensed warehouse and all products 
stored therein, and shall not commit any acts, nor permit his employees 
to do anything, which might impair or invalidate such insurance.
    (c) Each warehouseman shall keep exposed conspicuously in the place 
prescribed by Sec. 736.8, and at such other place as the Administrator 
or his representative may from time to time designate, a notice stating 
briefly the conditions under which the grain will be insured against 
loss or damage by fire, lightning, and tornado.
    (d) Each warehouseman shall, in accordance with his contracts with 
insurance and bonding companies for the purpose of meeting the insurance 
and bonding requirements of the regulations in this part, pay such 
premiums, permit such reasonable inspections and examinations, and make 
such reasonable reports as may be provided for in such contracts.
    (e) Each warehouseman shall promptly take such steps as may be 
necessary and proper to collect any moneys which may become due under 
contracts of insurance entered into by him for the purpose of meeting 
the requirements of the regulations in this part, and shall, as soon as 
collected, promptly pay to the persons concerned any portion of such 
moneys which they may be entitled to receive from him.
    (f) If at any time a fire occurs at or within any licensed 
warehouse, it shall be the duty of the warehouseman to report 
immediately the occurrence of such fire and the extent of damage to the 
Administrator.

[29 FR 15730, Nov. 24, 1964, as amended at 62 FR 33540, June 20, 1997]



Sec. 736.34  Records; safe keeping.

    Each warehouseman shall provide a fireproof safe, vault, or 
compartment in which he shall keep, when not in actual use, all records, 
books, and papers pertaining to the licensed warehouse, including his 
current receipt book, copies of issued and canceled receipts, except 
that with the written consent of the Service, upon a showing by such 
warehouseman that it is not practicable to provide such fireproof safe, 
vault, or compartment, he may keep such records, books and papers in 
some other place of safety, approved by the Service. Each canceled 
receipt shall be retained by warehouseman for a period of six years 
after December 31 of the year in which the receipt is canceled and for 
such longer period as may be necessary for the purposes of any 
litigation which the warehouseman knows to be pending, or as may be 
required by the Administrator in particular cases to carry out the 
purposes of the act. Canceled receipts shall be arranged by the 
warehouseman in numerical order and otherwise in such manner as shall be 
directed, for purposes of audit, by authorized officers or agents of the 
Department of Agriculture.

(Approved by the Office of Management and Budget under control number 
0560-0120)

[29 FR 15730, Nov. 24, 1964, as amended at 47 FR 745, Jan. 7, 1982. 
Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 736.35  Warehouse charges.

    A warehouseman shall not make any unreasonable or exorbitant charge 
for services rendered. Before a license to

[[Page 254]]

conduct a warehouse is granted under the act the warehouseman shall file 
with the Department a copy of his rules and a schedule of charges to be 
made by him if licensed. Before making any change in such rules or 
schedule of charges he shall file with the Department a statement in 
writing showing the proposed change and the reasons therefor. Each 
warehouseman shall keep exposed conspicuously in the place prescribed by 
Sec. 736.8, and at such other place, accessible to the public, as the 
Service may from time to time designate, a copy of his current rules and 
schedule of charges.



Sec. 736.36  Business hours.

    (a) Each warehouse shall be kept open for the purpose of receiving 
grain for storage and delivering grain out of storage every business day 
for a period of not less than six hours between the hours of 8 a.m. and 
6 p.m. except as provided in paragraph (b) of this section. The 
warehouseman shall keep conspicuously posted on the door of the public 
entrance to his office and to his licensed warehouse a notice showing 
the hours during which the warehouse will be kept open, except when such 
warehouse is kept open continuously from 8 a.m. to 6 p.m.
    (b) In case the warehouse is not to be kept open as required by 
paragraph (a) of this section, the notice posted as prescribed in that 
paragraph shall state the period during which the warehouse is to be 
closed and the name of an accessible person, with the address where he 
is to be found, and the telephone number, if any, who shall be 
authorized to deliver grain stored in such warehouse, upon lawful demand 
by the depositor thereof or the holder of the receipt therefor, as the 
case may be.



Sec. 736.37  System of accounts.

    Each warehouseman shall have and maintain a system of accounts, 
approved for the purpose by the Service. This shall include a stock 
record showing for each lot of grain received for storage its net weight 
including dockage, if any, its grade when its grade is required to be, 
or is, ascertained, its location, the dates received for and delivered 
out of storage, the receipts issued and canceled, also a separate record 
for each depositor of his grain, which shall include a detailed record 
of all moneys received and disbursed and of all insurance policies taken 
out and canceled on request of each depositor. The warehouseman shall 
further keep a general insurance account showing the policy number, 
issuing company, amount, binding, and expiration dates of all fire, 
tornado, and other insurance policies taken out by him and in each 
instance show the property covered by such policies. These records shall 
also show similar information concerning any nonstorage grain handled 
through the warehouse. Such records shall be retained by the 
warehouseman for a period of six years after December 31 of the year in 
which created, and for such longer period as may be necessary for the 
purposes of any litigation which the warehouseman knows to be pending, 
or as may be required by the Administrator in particular cases to carry 
out the purposes of the Act.

(Approved by the Office of Management and Budget under control number 
0560-0120)

[29 FR 15730, Nov. 24, 1964, as amended at 47 FR 745, Jan. 7, 1982. 
Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 736.38  Reports required.

    (a) Each warehouseman shall, from time to time, if requested by the 
Service, make such reports, on forms prescribed and furnished for the 
purpose by the Service, concerning the condition, contents, operation, 
and business of the warehouse.
    (b) Each warehouseman shall keep on file, as a part of the records 
of the warehouse, for a period of three years after December 31 of the 
year in which submitted, an exact copy of each report submitted by such 
warehouseman under the regulations in this part.

(Approved by the Office of Management and Budget under control number 
0560-0120)

[29 FR 15730, Nov. 24, 1964, as amended at 47 FR 745, Jan. 7, 1982. 
Redesignated at 50 FR 1814, Jan. 14, 1985]



Sec. 736.39  Inspections; examination of warehouse.

    Each warehouseman shall permit any officer or agent of the 
Department, authorized by the Secretary, or his designated 
representative, for the purpose,

[[Page 255]]

to enter and inspect or examine on any business day during the usual 
hours of business, any warehouse for the conduct of which such 
warehouseman holds a license, the office thereof, the books, records, 
papers, and accounts relating thereto, and the contents thereof and such 
warehouseman shall furnish such officer or agent the assistance 
necessary to enable him to make any inspection or examination under this 
section.



Sec. 736.40  Care of grain in licensed warehouses.

    Each warehouseman shall at all times, including any period of 
suspension of his license, exercise such care in regard to grain in his 
custody as a reasonably careful owner would exercise under the same 
circumstances and conditions.



Sec. 736.41  Care of other grain and other commodities.

    If, at any time, a warehouseman shall handle or store grain 
otherwise than as a licensed warehouseman, or shall handle or store any 
other commodity, he shall so protect the same, and otherwise exercise 
care with respect to it, as not to endanger the grain in his custody as 
a warehouseman or impair the insurance thereof or his ability to meet 
his obligations and perform his duties under the act and the regulations 
in this part.



Sec. 736.42  Excess storage.

    (a) If at any time a warehouseman shall store grain in his warehouse 
in excess of the capacity for which it is licensed, such warehouseman 
shall immediately notify the Secretary of such excess storage, the 
reason therefor, and the location thereof.
    (b) A warehouseman who lacks sufficient space and desires to 
transfer stored grain for which receipts have been issued to another 
licensed warehouse may do so either by physical movement or by other 
methods accepted as standard industry practice subject to the following 
terms and conditions:
    (1) The transferring (shipping) warehouseman's accepted rules or 
schedule of charges must contain notice that the warehouseman may 
forward g