7 U.S.C. § 15b — Cotton futures contracts

Page 125 TITLE 7—AGRICULTURE § 15b Pub. L. 93–463, title I, § 103(a), (b), Oct. 23, 1974, 88 Stat. 1392; Pub. L. 97–444, title II, § 230, Jan. 11, 1983, 96 Stat. 2319; Pub. L. 102–546, title IV, § 402(1)(D), (9)(C), Oct. 28, 1992, 106 Stat. 3624, 3625.) Editorial Notes AMENDMENTS 1992—Subsec. (c). Pub. L. 102–546, § 402(9)(C), which di- rected that ‘‘the Secretary of Agriculture or’’ be struck out, could not be executed because of amendment by Pub. L. 93–463, § 103(a). See 1974 Amendment note below. Pub. L. 102–546, § 402(1)(D), substituted ‘‘Commission’’ for ‘‘commission’’ before ‘‘to report’’. 1983—Subsec. (a). Pub. L. 97–444, § 230(1), struck out ‘‘in administrative proceedings under this chapter’’ after ‘‘may be held responsible’’. Subsecs. (b), (c). Pub. L. 97–444, § 230(2), (3), added sub- sec. (b) and redesignated former subsec. (b) as (c). 1974—Subsec. (b). Pub. L. 93–463, § 103(a), provided for substitution of ‘‘Commission’’ for ‘‘Secretary of Agri- culture’’ except where such words would be stricken by section 103(b), which directed striking the words ‘‘the Secretary of Agriculture or’’ where they appeared in the phrase ‘‘the Secretary of Agriculture or the Com- mission’’. Because the word ‘‘commission’’ was not cap- italized in the text of this section, section 103(b) did not apply to this section and therefore section 103(a) was executed, resulting in the substitution of ‘‘the Commis- sion or the commission’’ for ‘‘the Secretary of Agri- culture or the commission’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1983 AMENDMENT Amendment by Pub. L. 97–444 effective Jan. 11, 1983, see section 239 of Pub. L. 97–444, set out as a note under section 2 of this title. EFFECTIVE DATE OF 1974 AMENDMENT For effective date of amendment by Pub. L. 93–463, see section 418 of Pub. L. 93–463, set out as a note under section 2 of this title. EFFECTIVE DATE Section effective 120 days after Feb. 19, 1968, see sec- tion 28 of Pub. L. 90–258, set out as an Effective Date of 1968 Amendment note under section 2 of this title. § 14. Repealed. Pub. L. 99–641, title I, § 110(5), Nov. 10, 1986, 100 Stat. 3561 Section, act Sept. 21, 1922, ch. 369, § 11, 42 Stat. 1003, provided that violations of this chapter occurring be- fore Nov. 1, 1922, should not be punishable. § 15. Omitted Editorial Notes CODIFICATION Section, act Sept. 21, 1922, ch. 369, § 6(c) (part), for- merly § 6(b), 42 Stat. 1002, as amended and renumbered, which related to enforcement powers of Commission, was omitted in the general amendment of section 6(c) of act Sept. 21, 1922, by Pub. L. 111–203, title VII, § 753(a), July 21, 2010, 124 Stat. 1750. Section 6(c) is now classified to section 9 of this title. § 15a. Repealed. Pub. L. 95–405, § 24, Sept. 30, 1978, 92 Stat. 877 Section, Pub. L. 93–463, title II, § 217, Oct. 23, 1974, 88 Stat. 1405, related to leverage contracts for gold and silver. See section 23(b) of this title. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal effective Oct. 1, 1978, see section 28 of Pub. L. 95–405, set out as an Effective Date of 1978 Amendment note under section 2 of this title. § 15b. Cotton futures contracts (a) Short title This section may be cited as the ‘‘United States Cotton Futures Act’’. (b) Omitted (c) Definitions For purposes of this section— (1) Cotton futures contract The term ‘‘cotton futures contract’’ means any contract of sale of cotton for future deliv- ery made at, on, or in any exchange, board of trade, or similar institution or place of busi- ness which has been designated a ‘‘contract market’’ by the Commodity Futures Trading Commission pursuant to the Commodity Ex- change Act [7 U.S.C. 1 et seq.] and the term ‘‘contract of sale’’ as so used shall be held to include sales, agreements of sale, and agree- ments to sell, except that— (A) any cotton futures contract that, by its terms, is settled in cash is excluded from the coverage of this paragraph and section; and (B) any cotton futures contract that per- mits tender of cotton grown outside of the United States is excluded from the coverage of this paragraph and section to the extent that the cotton grown outside of the United States is tendered for delivery under the cot- ton futures contract. (2) Future delivery The term ‘‘future delivery’’ shall not include any cash sale of cotton for deferred shipment or delivery. (3) Person The term ‘‘person’’ includes an individual, trust, estate, partnership, association, com- pany, or corporation. (4) Secretary The term ‘‘Secretary’’ means the Secretary of Agriculture of the United States. (5) Standards The term ‘‘standards’’ means the official cotton standards of the United States estab- lished by the Secretary pursuant to the United States Cotton Standards Act, as amended [7 U.S.C. 51 et seq.]. (d) Bona fide spot markets and commercial dif- ferences (1) Definition For purposes of this section, the only mar- kets which shall be considered bona fide spot markets shall be those which the Secretary shall, from time to time, after investigation, determine and designate to be such, and of which he shall give public notice. (2) Determination In determining, pursuant to the provisions of this section, what markets are bona fide Page 126 TITLE 7—AGRICULTURE § 15b spot markets, the Secretary is directed to con- sider only markets in which spot cotton is sold in such volume and under such conditions as customarily to reflect accurately the value of middling cotton and the differences between the prices or values of middling cotton and of other grades of cotton for which standards shall have been established by the Secretary; except that if there are not sufficient places, in the markets of which are made bona fide sales of spot cotton of grades for which stand- ards are established by the Secretary, to en- able him to designate at least five spot mar- kets in accordance with subsection (f)(3), he shall, from data as to spot sales collected by him, make rules and regulations for deter- mining the actual commercial differences in the value of spot cotton of the grades estab- lished by him as reflected by bona fide sales of spot cotton, of the same or different grades, in the market selected and designated by him, from time to time, for that purpose, and in that event differences in value of cotton of various grades involved in contracts made pur- suant to subsection (f)(1) and (2) shall be deter- mined in compliance with such rules and regu- lations. It shall be the duty of any person en- gaged in the business of dealing in cotton, when requested by the Secretary or any agent acting under his instructions, to answer cor- rectly to the best of his knowledge, under oath or otherwise, all questions touching his knowledge of the number of bales, the classi- fication, the price or bona fide price offered, and other terms of purchase or sale, of any cotton involved in any transaction partici- pated in by him, or to produce all books, let- ters, papers, or documents in his possession or under his control relating to such matter. A person complying with the preceding sentence shall not be liable for any loss or damage aris- ing or resulting from such compliance. (3) Withholding information Any person engaged in the business of deal- ing in cotton who shall, within a reasonable time prescribed by the Secretary or any agent acting under his instructions, willfully fail or refuse to answer questions or to produce books, letters, papers, or documents, as re- quired under paragraph (2) of this subsection, or who shall willfully give any answer that is false or misleading, shall, upon conviction thereof, be fined not more than $500. (e) Form and validity of cotton futures contracts Each cotton futures contract shall be a basis grade contract, or a tendered grade contract, or a specific grade contract as specified in sub- sections (f), (g), or (h) and shall be in writing plainly stating, or evidenced by written memo- randum showing, the terms of such contract, in- cluding the quantity of the cotton involved and the names and addresses of the seller and buyer in such contract, and shall be signed by the party to be charged, or by his agent in his be- half. No cotton futures contract which does not conform to such requirements shall be enforce- able by, or on behalf of, any party to such con- tract or his privies. (f) Basis grade contracts (1) Conditions Each basis grade cotton futures contract shall comply with each of the following condi- tions: (A) Conformity with regulations Conform to the regulations made pursuant to this section. (B) Specification of grade, price, and dates of sale and settlement Specify the basis grade for the cotton in- volved in the contract, which shall be one of the grades for which standards are estab- lished by the Secretary, except grades pro- hibited from being delivered on a contract made under this subsection by subparagraph (E), the price per pound at which the cotton of such basis grade is contracted to be bought or sold, the date when the purchase or sale was made, and the month or months in which the contract is to be fulfilled or settled; except that middling shall be deemed the basis grade incorporated into the contract if no other basis grade be specified either in the contract or in the memo- randum evidencing the same. (C) Provision for delivery of standard grades only Provide that the cotton dealt with therein or delivered thereunder shall be of or within the grades for which standards are estab- lished by the Secretary except grades pro- hibited from being delivered on a contract made under this subsection by subparagraph (E) and no other grade or grades. (D) Provision for settlement on basis of ac- tual commercial differences Provide that in case cotton of grade other than the basis grade be tendered or delivered in settlement of such contract, the dif- ferences above or below the contract price which the receiver shall pay for such grades other than the basis grade shall be the ac- tual commercial differences, determined as hereinafter provided. (E) Prohibition of delivery of inferior cotton Provide that cotton that, because of the presence of extraneous matter of any char- acter, or irregularities or defects, is reduced in value below that of low middling, or cot- ton that is below the grade of low middling, or, if tinged, cotton that is below the grade of strict middling, or, if yellow stained, cot- ton that is below the grade of good middling, the grades mentioned being of the official cotton standards of the United States, or cotton that is less than seven-eighths of an inch in length of staple, or cotton of per- ished staple, or of immature staple, or cot- ton that is ‘‘gin cut’’ or reginned, or cotton that is ‘‘repacked’’ or ‘‘false packed’’ or ‘‘mixed packed’’ or ‘‘water packed’’, shall not be delivered on, under, or in settlement of such contract. (F) Provisions for tender in full, notice of de- livery date, and certificate of grade Provide that all tenders of cotton under such contract shall be the full number of Page 127 TITLE 7—AGRICULTURE § 15b 1 So in original. Probably should be ‘‘basis’’. bales involved therein, except that such variations of the number of bales may be permitted as is necessary to bring the total weight of the cotton tendered within the provisions of the contract as to weight; that, on the fifth business day prior to delivery, the person making the tender shall give to the person receiving the same written notice of the date of delivery, and that, on or prior to the date so fixed for delivery, and in ad- vance of final settlement of the contract, the person making the tender shall furnish to the person receiving the same a written notice or certificate stating the grade of each individual bale to be delivered and, by means of marks or numbers, identifying each bale with its grade. (G) Provision for tender and settlement in accordance with Government classifica- tion Provide that all tenders of cotton and set- tlements therefor under such contract shall be in accordance with the classification thereof made under the regulations of the Secretary by such officer or officers of the Government as shall be designated for the purpose, and the costs of such classification shall be fixed, assessed, collected, and paid as provided in such regulations and shall be credited to the account referred to in section 55 of this title. The Secretary may provide by regulation conditions under which cotton samples submitted or used in the perform- ance of services authorized by this act shall become the property of the United States and may be sold and the proceeds credited to the foregoing account: Provided, That such cotton samples shall not be subject to the provisions of chapters 1 to 11 of title 40 and division C (except sections 3302, 3307(e), 3501(b), 3509, 3906, 4710, and 4711) of subtitle I of title 41. The Secretary is authorized to prescribe regulations for carrying out the purposes of this subparagraph and the cer- tificates of the officers of the Government as to the classification of any cotton for the purposes of this subparagraph shall be ac- cepted in the courts of the United States in all suits between the parties to such con- tract, or their privies, as prima facie evi- dence of the true classification of the cotton involved. (2) Incorporation of conditions in contracts The provisions of paragraphs (1)(C), (D), (E), (F), and (G) shall be deemed fully incorporated into any such contract if there be written or printed thereon, or on the memorandums evi- dencing the same, at or prior to the time the same is signed, the phrase ‘‘Subject to United States Cotton Futures Act, subsection (f).’’ (3) Delivery allowances For the purpose of this subsection, the dif- ferences above or below the contract price which the receiver shall pay for cotton of grades above or below the basic 1 grade in the settlement of a contract of sale for the future delivery of cotton shall be determined by the actual commercial differences in value thereof upon the sixth business day prior to the day fixed, in accordance with paragraph (1)(F), for the delivery of cotton on the contract, estab- lished by the sale of spot cotton in the spot markets of not less than five places designated for the purpose from time to time by the Sec- retary, as such values were established by the sales of spot cotton, in such designated five or more markets. For purposes of this paragraph, such values in the such spot markets shall be based upon the standards for grades of cotton established by the Secretary. Whenever the value of one grade is to be determined from the sale or sales of spot cotton of another grade or grades, such value shall be fixed in accordance with rules and regulations which shall be prescribed for the purpose by the Sec- retary. (g) Tendered grade contracts (1) Conditions Each tendered grade cotton future contract shall comply with each of the following condi- tions: (A) Compliance with subsection (f) Comply with all the terms and conditions of subsection (f) not inconsistent with this subsection; and (B) Provision for contingent specific per- formance Provide that, in case cotton of grade or grades other than the basis grade specified in the contract shall be tendered in perform- ance of the contract, the parties to such con- tract may agree, at the time of the tender, as to the price of the grade or grades so ten- dered, and that if they shall not then agree as to such price, then, and in that event, the buyer of said contract shall have the right to demand the specific fulfillment of such con- tract by the actual delivery of cotton of the basis grade named therein and at the price specified for such basis grade in said con- tract. (2) Incorporation of conditions in contract Contracts made in compliance with this sub- section shall be known as ‘‘subsection (g) Con- tracts’’. The provisions of this subsection shall be deemed fully incorporated into any such contract if there be written or printed there- on, or on the memorandum evidencing the same, at or prior to the time the same is signed, the phrase ‘‘Subject to United States Cotton Futures Act, subsection (g)’’. (3) Application of subsection Nothing in this subsection shall be so con- strued as to authorize any contract in which, or in the settlement of or in respect to which, any device or arrangement whatever is re- sorted to, or any agreement is made, for the determination or adjustment of the price of the grade or grades tendered other than the basis grade specified in the contract by any ‘‘fixed difference’’ system, or by arbitration, or by any other method not provided for by this section. Page 128 TITLE 7—AGRICULTURE § 15b 2 See References in Text note below. (h) Specific grade contracts (1) Conditions Each specific grade cotton futures contract shall comply with each of the following condi- tions: (A) Conformity with rules and regulations Conform to the rules and regulations made pursuant to this section. (B) Specification of grade, price, dates of sale and delivery Specify the grade, type, sample, or descrip- tion of the cotton involved in the contract, the price per pound at which such cotton is contracted to be bought or sold, the date of the purchase or sale, and the time when shipment or delivery of such cotton is to be made. (C) Prohibition of delivery of other than specified grade Provide that cotton of or within the grade or of the type, or according to the sample or description, specified in the contract shall be delivered thereunder, and that no cotton which does not conform to the type, sample, or description, or which is not of or within the grade specified in the contract shall be tendered or delivered thereunder. (D) Provision for specific performance Provide that the delivery of cotton under the contract shall not be effected by means of ‘‘setoff’’ or ‘‘ring’’ settlement, but only by the actual transfer of the specified cotton mentioned in the contract. (2) Incorporation of conditions in contract The provisions of paragraphs (1)(A), (C), and (D) shall be deemed fully incorporated into any such contract if there be written or print- ed thereon, or on the document or memo- randum evidencing the same, at or prior to the time the same is entered into, the words ‘‘Sub- ject to United States Cotton Futures Act, sub- section (h)’’. (3) Application of subsection This subsection shall not be construed to apply to any contract of sale made in compli- ance with subsection (f) or (g). (i) Liability of principal for acts of agent When construing and enforcing the provisions of this section, the act, omission, or failure of any official, agent, or other person acting for or employed by any association, partnership, or corporation within the scope of his employment or office shall, in every case, also be deemed the act, omission, or failure of such association, partnership, or corporation, as well as that of the person. (j) Regulations The Secretary is authorized to make such reg- ulations with the force and effect of law as he determines may be necessary to carry out the provisions of this section and the powers vested in him by this section. (k) Violations Any person who knowingly violates any regu- lation made in pursuance of this section, shall, upon conviction thereof, be fined not less than $100 nor more than $500, for each violation there- of, in the discretion of the court, and, in case of natural persons, may, in addition be punished by imprisonment for not less than 30 days nor more than 90 days, for each violation, in the discre- tion of the court except that this subsection shall not apply to violations subject to sub- section (d)(3). (l) Applicability to contracts prior to effective date The provisions of this section shall not apply to any cotton futures contract entered into prior to the effective date of this section or to any act or failure to act by any person prior to such effective date and all such prior contracts, acts or failure to act shall continue to be gov- erned by the applicable provisions of the Inter- nal Revenue Code of 1954 2 as in effect prior to the enactment of this section. All designations of bona fide spot markets and all rules and regu- lations issued by the Secretary pursuant to the applicable provisions of the Internal Revenue Code of 1954 2 which were in effect on the effec- tive date of this section, shall remain fully ef- fective as designations and regulations under this section until superseded, amended, or ter- minated by the Secretary. (m) Authorization There are authorized to be appropriated such sums as may be necessary to carry out this sec- tion. (Pub. L. 94–455, title XIX, § 1952(a)–(m), Oct. 4, 1976, 90 Stat. 1841–1846; Pub. L. 97–35, title I, § 156(c), Aug. 13, 1981, 95 Stat. 374; Pub. L. 102–237, title I, § 123, Dec. 13, 1991, 105 Stat. 1844; Pub. L. 106–472, title III, § 311, Nov. 9, 2000, 114 Stat. 2076; Pub. L. 114–36, § 1(a), July 20, 2015, 129 Stat. 435.) Editorial Notes REFERENCES IN TEXT The Commodity Exchange Act, referred to in subsec. (c)(1), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, which is classified generally to chapter 1 (§ 1 et seq.) of this title. For complete classification of this Act to the Code, see section 1 of this title and Tables. The United States Cotton Standards Act, referred to in subsec. (c)(5), is act Mar. 4, 1923, ch. 288, 42 Stat. 1517, which is classified generally to chapter 2 (§ 51 et seq.) of this title. For complete classification of this Act to the Code, see section 51 of this title and Tables. The Internal Revenue Code of 1954, referred to in sub- sec. (l), was redesignated the Internal Revenue Code of 1986 by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, and is classified to Title 26, Internal Revenue Code. CODIFICATION Section was enacted as part of the Tax Reform Act of 1976, and not as part of the Commodity Exchange Act which comprises this chapter. Section is comprised of section 1952(a)–(m) of Pub. L. 94–455. Section 1952(b) of Pub. L. 94–455 repealed sub- chapter D of former chapter 39 of Title 26, Internal Rev- enue Code. See Prior Provisions note preceding section 4701 of Title 26. This section, referred to in subsec. (c)(1), was in the original a reference to this ‘‘Act’’, meaning the United States Cotton Futures Act, which comprises this sec- tion. Page 129 TITLE 7—AGRICULTURE § 16 1 See References in Text note below. In subsec. (f)(1)(G), ‘‘chapters 1 to 11 of title 40 and di- vision C (except sections 3302, 3307(e), 3501(b), 3509, 3906, 4710, and 4711) of subtitle I of title 41’’ substituted for ‘‘the Federal Property and Administrative Services Act of 1949 (40 U.S.C. 471 et seq.)’’ on authority of Pub. L. 107–217, § 5(c), Aug. 21, 2002, 116 Stat. 1303, which Act en- acted Title 40, Public Buildings, Property, and Works, and Pub. L. 111–350, § 6(c), Jan. 4, 2011, 124 Stat. 3854, which Act enacted Title 41, Public Contracts. AMENDMENTS 2015—Subsec. (c)(1). Pub. L. 114–36 inserted a dash after ‘‘except that’’, designated ‘‘any cotton futures contract that, by its terms, is settled in cash is ex- cluded from the coverage of this paragraph and sec- tion.’’ as subpar. (A), and added subpar. (B). 2000—Subsec. (d)(2). Pub. L. 106–472 inserted at end ‘‘A person complying with the preceding sentence shall not be liable for any loss or damage arising or resulting from such compliance.’’ 1991—Subsec. (c)(1). Pub. L. 102–237 inserted before pe- riod at end ‘‘, except that any cotton futures contract that, by its terms, is settled in cash is excluded from the coverage of this paragraph and section’’. 1981—Subsec. (f)(1)(G). Pub. L. 97–35 inserted provi- sions relating to crediting to account referred to in sec- tion 55 of this title and provisions respecting cotton samples submitted or used becoming the property of the United States. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2015 AMENDMENT Pub. L. 114–36, § 1(b), July 20, 2015, 129 Stat. 435, pro- vided that: ‘‘The amendments made by subsection (a) [amending this section] shall apply with respect to cot- ton futures contracts entered into on or after the date of the enactment of this Act [July 20, 2015].’’ EFFECTIVE DATE OF 1981 AMENDMENT Amendment by Pub. L. 97–35 effective Oct. 1, 1981, see section 156(e) of Pub. L. 97–35, set out as an Effective Date note under section 61a of this title. EFFECTIVE DATE Pub. L. 94–455, title XIX, § 1952(o), Oct. 4, 1976, 90 Stat. 1846, provided that: ‘‘The provisions of this section [en- acting this section, amending section 6808 of Title 26, Internal Revenue Code, and repealing sections 7233 and 7263, subchapter D of chapter 39, and subchapter E of chapter 76 of Title 26] shall take effect on the 90th day after the date of the enactment of this Act [Oct. 4, 1976].’’ § 16. Commission operations (a) Cooperation with other agencies The Commission may cooperate with any De- partment or agency of the Government, any State, territory, district, or possession, or de- partment, agency, or political subdivision there- of, any foreign futures authority, any depart- ment or agency of a foreign government or po- litical subdivision thereof, or any person. (b) Employment of investigators, experts, Admin- istrative Law Judges, consultants, clerks, and other personnel; contracts (1) The Commission shall have the authority to employ such investigators, special experts, Administrative Law Judges, clerks, and other employees as it may from time to time find nec- essary for the proper performance of its duties and as may be from time to time appropriated for by Congress. (2) The Commission may employ experts and consultants in accordance with section 3109 of title 5, and compensate such persons at rates not in excess of the maximum daily rate prescribed for GS–18 under section 5332 of title 5. (3) The Commission shall also have authority to make and enter into contracts with respect to all matters which in the judgment of the Com- mission are necessary and appropriate to effec- tuate the purposes and provisions of this chap- ter, including, but not limited to, the rental of necessary space at the seat of Government and elsewhere. (4) The Commission may request (in accord- ance with the procedures set forth in subchapter II of chapter 31 of title 5) and the Office of Per- sonnel Management shall authorize pursuant to the request, eight positions in the Senior Execu- tive Service in addition to the number of such positions authorized for the Commission on Oc- tober 28, 1992. (c) Expenses All of the expenses of the Commissioners, in- cluding all necessary expenses for transpor- tation incurred by them while on official busi- ness of the Commission, shall be allowed and paid on the presentation of itemized vouchers therefor approved by the Commission. (d) Authorization of appropriations There are authorized to be appropriated such sums as are necessary to carry out this chapter for each of the fiscal years 2008 through 2013. (e) Relation to other law, departments, or agen- cies (1) Nothing in this chapter shall supersede or preempt— (A) criminal prosecution under any Federal criminal statute; (B) the application of any Federal or State statute (except as provided in paragraph (2)), including any rule or regulation thereunder, to any transaction in or involving any com- modity, product, right, service, or interest— (i) that is not conducted on or subject to the rules of a registered entity or exempt board of trade; (ii) (except as otherwise specified by the Commission by rule or regulation) that is not conducted on or subject to the rules of any board of trade, exchange, or market lo- cated outside the United States, its terri- tories or possessions; or (iii) that is not subject to regulation by the Commission under section 6c or 23 of this title; or (C) the application of any Federal or State statute, including any rule or regulation thereunder, to any person required to be reg- istered or designated under this chapter who shall fail or refuse to obtain such registration or designation. (2) This chapter shall supersede and preempt the application of any State or local law that prohibits or regulates gaming or the operation of bucket shops (other than antifraud provisions of general applicability) in the case of— (A) an electronic trading facility excluded under section 2(e) 1 of this title; and