(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.