(a) These regulations specify the terms and conditions under which the Commodity Credit Corporation (CCC) will make payments to eligible domestic users who have entered into an Upland Cotton Domestic User Agreement with the Agricultural Marketing Service to participate in the Economic Adjustment Assistance for Textile Mills Program.

(b) The Agricultural Marketing Service will specify the forms to be used in administering the Economic Adjustment Assistance for Textile Mills program.

For the purposes of the regulations in this part:

Agreement effective date means the date on which the Upland Cotton Domestic User Agreement takes effect or becomes operative and enforceable.

Agricultural Marketing Service (AMS) means the Agricultural Marketing Service of the United States Department of Agriculture, which administers the Economic Adjustment Assistance for Textile Mills Program.

Bale weight means the auditable weight of a bale of cotton as determined on a scale certified as accurate by an independent party.

Baled lint means ginned or processed cotton lint, including but not limited to lint classified by the Agricultural Marketing Service as Below Grade, compressed into a standard-sized and weighed pack.

Capital expenditures means funds expended by a business for modernization or acquisition of depreciable fixed assets such as property, fixtures, or machinery that are directly attributable to the improvement of productivity or efficiency of the domestic user in the manufacturing of final products containing upland cotton. Capital expenditures do not include debt service payments, even if such debt service payments are for debt used to finance capital expenditures.

Commodity Credit Corporation (CCC) means the wholly owned government corporation within the U.S. Department of Agriculture, whose funds, facilities, and authorities are used to implement specific activities as authorized by Congress.

Date of consumption means the date the bagging and ties are removed from the bale, as determined by AMS.

Director means the Director of the Warehouse and Commodity Management Division (WCMD) part of the Agricultural Marketing Service's Fair Trade Practices Program.

Domestic user means a person who is regularly engaged in the business of opening bales of eligible upland cotton in the United States for the purpose of spinning such cotton into yarn, papermaking, or production of non-woven cotton products also in the United States.

EAATM Program funds means funds provided by CCC as Economic Adjustment Assistance for Textile Mills under the terms of the Agreement.

Economic Adjustment Assistance for Textile Mills (EAATM) means the program authorized by Congress under which eligible domestic users of eligible upland cotton can apply for and receive financial assistance to offset capital expenditures related to investments in the United States for the manufacturing of products containing cotton, as provided in this part.

Eligible domestic user means a domestic user in the United States, who has entered into an agreement with CCC to participate in the Economic Adjustment Assistance for Textile Mills program.

Eligible upland cotton means baled upland cotton, regardless of origin, that is opened by an eligible domestic user and is baled lint, re-baled loose samples, suitable semi-processed motes, or re-ginned motes.

Equipment means any machine used directly in the production of final cotton products in order to improve product quality, handling, and/or production efficiency.

Facility or Plant means the structure(s) that houses the necessary equipment for consuming and manufacturing eligible upland cotton into the final cotton product.

Final cotton product means product manufactured domestically that contains upland cotton.

Linters means lint produced from the cottonseed crushing process.

Marketing year means the one-year period starting on August 1 and ending on the following July 31.

Monthly Consumption Report means Form CCC-1045-UP-2, the Monthly Consumption/Application for Payment Report, or other form as prescribed by AMS, submitted by the eligible domestic user for program payment purposes that contains documentation of inventory consumed, payment amounts, and a signed certification.

Net weight means the bale weight less the weight of the bagging and ties.

Operating expenses means funds expended by a business in its normal activities, including but not limited to rent, salaries, supplies, utilities, insurance, taxes, and maintenance.

Operational control means the domestic user has plenary control over the facility during the term of the Upland Cotton Domestic User Agreement.

Person means any individual, partnership, corporation, association, public or private organization or governmental entity, or combination thereof.

Pills means waste from the mote cleaning process.

Raw motes means lint cleaner waste resulting from the ginning process.

Readily put into service means facilities, equipment, and/or plants put into service within 24 months of delivery.

Re-baled loose samples means loose samples of upland cotton that have been removed from cotton bales for classification purposes and subsequently re-baled.

Re-ginned mote bales means baled cotton fiber that has been removed from small, broken, or immature cotton seeds by re-ginning.

Statement of eligible claim certification means an official document identifying the entity eligible to claim EAATM financial assistance for their use of suitable semi-processed motes or re-ginned mote bales.

Suitable semi-processed motes means small, broken, or immature cotton seeds with attached cotton fibers that are of a quality suitable, without further processing, for spinning, papermaking, or production of non-woven fabric.

Supplemental ledger means a line-item record detailing qualifying capital expenditures that the eligible domestic user proposes to claim for program purposes.

Upland cotton means a widely cultivated American cotton plant (Gossypium hirsutum) having short-to-medium staple fibers.

Upland Cotton Domestic User Agreement (Form CCC-1045DOM or Agreement) means an agreement between CCC and an eligible domestic user regarding EAATM program participation.

(a) To be eligible for payment under the Upland Cotton Economic Adjustment Assistance for Textile Mills program, domestic users must apply for program participation by submitting a signed original copy of the version of the Upland Cotton Domestic User Agreement, then in effect, for approval and execution by the Agricultural Marketing Service on behalf of CCC. Upon approval, AMS will return an executed copy to the domestic user.

(b) The domestic user must stipulate in writing that the intended use of all funds received under the EAATM program will be for the sole purpose of capital expenditures directly attributable to the purpose of manufacturing upland cotton into final cotton products in the United States.

(c) The domestic user must identify all plants and/or facilities to be included as a part of the Upland Cotton Domestic User Agreement. The domestic user must have operational control of these plants and/or facilities.

(d) Payments will be made available to eligible domestic users who have entered into the version of an Upland Cotton Domestic User Agreement with CCC, then in effect, and who have complied with the program requirements of this part.

(e) Upland Cotton Domestic User Agreement forms may be obtained from the Warehouse and Commodity Management Division website.

(a) Upland cotton eligible for payment under this part must be cotton that is consumed by the domestic user in the United States on or after the effective date of a signed Upland Cotton Domestic User Agreement, but not later than such date as may be set by the Agricultural Marketing Service.

(b) The following are not eligible for payment under this part:

(1) Cotton for which a payment under the provisions of this part has already been claimed or made available;

(2) Raw (unprocessed) motes, pills, linters, or other derivatives of the lint cleaning process; or

(3) Textile mill wastes.

(a) Eligible domestic users making applications for payment under this part must submit a Monthly Consumption Report to AMS. The Monthly Consumption Report must include the following:

(1) Documentation of eligible upland cotton inventory consumed by the eligible domestic user;

(2) The eligible domestic user's calculation of financial assistance claimed for payment under the program; and

(3) The eligible domestic user's signed certification as to the accuracy of the Monthly Consumption Report.

(b) The eligible domestic user must report to AMS the activity pursuant to paragraph (a)(1) of this section for each month beginning on the effective date of the Agreement.

(1) If the eligible domestic user's facility is temporarily closed for any reason, the eligible domestic user must notify AMS and submit a Monthly Consumption Report prior to the end of the month following the plant closure.

(2) Except as provided in paragraph (b)(1) of this section, the domestic user must submit Monthly Consumption Reports every month, even when no eligible upland cotton has been consumed.

(c) Monthly Consumption Reports not submitted by the last business day of the following month will be considered late by AMS and are ineligible for payment.

(d) AMS will not process for payment Monthly Consumption Reports or any other required documents from an eligible domestic user that contain errors or omissions.

(e) Any transaction between two eligible domestic users involving the transfer of eligible upland cotton bales must be reported to AMS by both eligible domestic users with a statement of eligible claim certification as defined in § 870.2.

(a) The payment rate for purposes of calculating payments as specified in this part is 3 cents per pound.

(b) The payment rate is the rate in effect on the date of consumption.

(1) Baled eligible upland cotton consumption must take place in a building or collection of buildings where the cotton bale will be used in the continuous process of manufacturing the cotton into final cotton products in the United States, and as determined by AMS. Unbaled eligible upland cotton will be considered consumed by the domestic user on the date processed.

(2) The quantity of eligible upland cotton with respect to which a payment is made available shall be determined based upon the net weight of each bale of eligible upland cotton.

(c) Payments specified in this part will be determined by multiplying the payment rate by one of the following:

(1) In the case of baled upland cotton, whether lint, loose samples, or re-ginned motes, but not semi-processed motes, the net weight of the cotton consumed;

(2) In the case of unbaled re-ginned motes consumed, without re-baling, for an end use in a continuous manufacturing process, the weight of the re-ginned motes after final cleaning; or

(3) In the case of suitable semi-processed motes, 25 percent of the net weight of the semi-processed motes.

(d) In all cases, the payment will be determined based on the amount of eligible upland cotton that an eligible domestic user consumed during the immediately preceding calendar month.

(e) Payments specified in this part will be made available upon application for payment and submission of supporting documentation, as required by the provisions of this part.

(a) All payments to eligible domestic users of upland cotton under this part shall be used only for capital expenditures that acquire, construct, install, modernize, develop, convert, or expand land, plant, buildings, equipment, or machinery in the United States. Capital expenditures must be directly attributable to the purpose of manufacturing upland cotton into final cotton products in the United States and certified as such by the domestic user. Expenditures that are not directly associated with manufacturing of upland cotton into final cotton products in the United States are outside the purpose and scope of the Economic Adjustment Assistance for Textile Mills Program and are not eligible expenditures for funds under this part.

(b) Operating expenses are not eligible for purposes of this part.

(c) If AMS determines, after a review or audit of the eligible domestic user's records, that economic adjustment assistance under this part was not used for the purposes specified in paragraph (a) of this section, the eligible domestic user shall be:

(1) Liable to repay the assistance to CCC, plus interest, as determined by CCC; and

(2) Ineligible to receive assistance under EAATM for a period of one year following AMS's determination.

(d) Any specific capital expenditure exceeding an amount, as specified in the version of the Upland Cotton Domestic User Agreement, then in effect, must be submitted for pre-approval. The request for pre-approval must include:

(1) The description of the proposed expenditure specified for the applicable marketing year;

(2) Itemized purchase order and/or invoice number, if applicable;

(3) Documentation of scheduled purchase date(s), installation date, and location (which facility); and

(4) Any additional information required by AMS.

(e) The eligible domestic user must make capital expenditures equal to, or greater than, any amounts received as EAATM Program funds, within 18 months following the end of the applicable marketing year. Equipment, facilities, and plants purchased with EAATM Program funds must be readily put into service as defined in § 870.2. The eligible domestic user must:

(1) Make capital expenditures that exceed the amount paid to the eligible domestic user for any marketing year. EAATM Program funds will not carry over to the following marketing year without a written Funding Utilization Extension from AMS.

(2) Request a Funding Utilization Extension for approval from AMS to be considered for any capital expenditure exceeding a value of $10 million on a single, allowable, fixed asset.

(3) Request a Funding Utilization Extension at the time of a pre-approval for a single item expenditure pursuant to paragraph (d) of this section.

(4) Applications for a Funding Utilization Extension Request must include, but are not limited to:

(i) Detailed plans for the expense;

(ii) Timeline of construction;

(iii) Schedule of payments;

(iv) Estimated date of when the capital expenditure will be operational;

(v) Explanation of how the expense meets the criteria for allowable purposes;

(vi) Justification for the extension request; and

(vii) Any other information or supporting documentation required by AMS.

(5) WCMD will consider Funding Utilization Extension requests based on allowable purposes. In any event, the maximum time extension for EAATM Program funds to be used for capital expenditures will be 36 months beyond the existing timeframe of 30 months (Marketing Year + 18 months), for a total of 66 months.

(6) EAATM Program funds will be reconciled against the eligible expense(s) specified in the Funding Utilization Extension until the approved time extension has expired or funds are exhausted.

(f) Fixed assets acquired and/or modernized with EAATM Program funds must be in operation within 24 months after the date of purchase. If unforeseen difficulties prevent utilization within the 24-month period, written approval must be obtained from WCMD for an extension of time.

(g) Direct or indirect transfer of EAATM Program funds to another entity is prohibited. In the event of a sale/transfer of an eligible domestic user's business or its assets, the eligible domestic user must sign a written verification certifying that no EAATM Program funds were transferred, either in cash or as an asset purchased exclusively to be transferred to the acquiring company.

(h) Each eligible domestic user involved in an acquisition/merger/transfer must notify AMS and provide AMS with an itemized ledger detailing specific equipment, building, facility, property, and/or plants bought with EAATM Program funds included with any acquisition/merger/transfer. In the event of an acquisition/merger/transfer and without extenuating circumstances, equipment, facilities, and/or plants purchased with EAATM Program funds by an eligible domestic user must be operational for a minimum of 36 months prior to its sale and cannot be purchased with EAATM Program funds again by another eligible domestic user.

(a) Required records. The eligible domestic user shall maintain all records and reports relating to their Upland Cotton Domestic User Agreement for a period of three years following termination of the Agreement. At a minimum, records must include those listed in paragraphs (a)(1) through (6) of this section.

(1) A monthly consumption record including a detailed list of bales consumed, showing the bale numbers, net weights, date received, date consumed, type of eligible upland cotton, and a facility identifier. The consumption record must be accompanied by source documents such as purchase orders and invoices to verify the information provided.

(2) Documentation supporting the receiving of cotton, including a register of contracts, amendments, and cancellations. Records must show the number of bales received each month by type of cotton, supported by invoices or waybills and weight sheets documenting the net weight when received at the user's facility.

(3) Documentation tracing the consumed bale weight back to source documents showing the documented bale weight received at the user's facility.

(4) Documentation supporting the acquisition, consumption, and disposition of ineligible cotton and other textiles.

(5) A bale inventory record that summarizes, at least monthly, the eligible domestic user's beginning inventory, receipts, adjustments, consumption, and ending inventory.

(6) Documentation of capital expenditures that are equal to or greater than payments received.

(i) The eligible domestic user must record information about capital expenditures in a supplemental ledger as defined in § 870.2, including, but not limited to, detailed descriptions of each capital expenditure, acquisition date, date of payment, amount of payment, and proof of payment, serial number(s), invoice number, and location (applicable facility).

(ii) Capital expenditures must be grouped by Marketing Year.

(iii) Each line item must reflect only a single expense for an identifiable single expenditure.

(b) Inspection of records. (1) Upon request from WCMD, the eligible domestic user must forward to WCMD copies of any and all records which support the domestic user's claims for payment.

(2) Eligible domestic users must make records available at all reasonable times for an audit or inspection by authorized representatives of AMS, the United States Department of Agriculture, and/or any other governmental unit needing access for audit or inspection purposes.

(3) Eligible domestic users shall permit, and assist without impediment, any AMS-authorized individual to inspect or audit, on any business day during the normal and customary hours of business, the books, papers, records, accounts, and other applicable documents relating to the Agreement. Failure to provide access or respond timely to requests for information and records will result in denial of benefits.

(a) AMS will notify the appropriate investigating agencies of the United States and CCC may terminate the Agreement and demand a full refund of payments plus interest and suspend and debar the offending company from further government participation as deemed necessary to protect the interests of the government, if the eligible domestic user is suspected by AMS to have knowingly:

(1) Adopted any scheme or device which violates the Agreement;

(2) Made any fraudulent representation; or

(3) Misrepresented any fact affecting a determination under the Agreement.

(b) No Member or Delegate of Congress shall be admitted to any share or part of the Agreement or to any benefit to arise therefrom, except that this provision shall not be construed to extend to their interest in any incorporated company, if the Agreement is for the general benefit of such company, nor shall it be construed to extend to any benefit which may accrue to such official in their capacity as a party to an Agreement.

(c) Eligible domestic users who dispute a WCMD program administration decision may request a review of the decision by the Director.

(1) Requests for review must be in writing and contain the relevant facts upon which the review will be heard. Requests must be received by WCMD within 15 days from the date the eligible domestic user receives the disputed decision.

(2) Requests must be directed to: Director, Warehouse and Commodity Management Division, Agricultural Marketing Service, U.S. Department of Agriculture, at [email protected].

(d) 7 CFR 2.79(a)(23) authorizes the AMS Administrator to administer the EAATM program (7 U.S.C. 9037(c)). In light of the aforementioned redelegation, AMS is considered a successor “Agency” under 7 CFR 11.1, and decisions made under EAATM, if deemed adverse, are subject to NAD jurisdiction. Accordingly, appeals under this program shall be heard by the USDA National Appeals Division.

(e) Eligible domestic users who dispute a review decision by the Director must appeal such decision to the USDA National Appeals Division pursuant to 7 U.S.C. 6912(e) and 7 CFR 11. Such an appeal must be made within 30 days of receipt of a WCMD decision.

(f) CCC may terminate the Upland Cotton Domestic User Agreement at any time.

(g) When a new Agreement is executed for any reason, including but not limited to programmatic requirements, expiration of authorizing legislation, or exhaustion of funds, any previous Agreement between CCC and the eligible domestic user shall be null and void/terminated.

(h) The Director may waive or modify deadlines and other program requirements in cases where timeliness or failure to meet such other requirements does not adversely affect the operation of the program.