Warehouse Charges and Delivery Obligations for Peanuts Forfeited to the Commodity Credit Corporation Through the Marketing Assistance Loan Program

AGENCY:

Commodity Credit Corporation, USDA.

ACTION:

Notice.

SUMMARY:

This notice advises warehouse operators operating under a Commodity Credit Corporation (CCC) Peanut Storage Agreement of provisions that may not be altered, even through changes made to the public tariff of the warehouse. When CCC transfers title to CCC-owned peanuts in store (i.e., to a third-party buyer), the storage and handling rates applicable to CCC must remain applicable to the transferee under the terms of the Peanut Storage Agreement. Also, warehouse operators must load out, or transfer instore, the total loan value of the peanuts represented on the warehouse receipt, calculated by using USDA's Price Table File for the applicable crop year. This value is not subject to a subsequent shrink factor. The delivery obligation created by issuing the warehouse receipt may not be altered for any reason or by any method, including public tariffs.

DATES:

Effective Date: June 22, 2006.

FOR FURTHER INFORMATION CONTACT:

Mark Overbo, Deputy Director, Warehouse and Inventory Division, Farm Service Agency, USDA, STOP 0553, 1400 Independence Avenue, SW., Washington, DC 20250-0553. Telephone: (202) 720-4647. E-mail: mark.overbo@usda.gov. Persons with disabilities who require alternative means for communication (Braille, large print, audiotape, etc.) should contact the USDA Target Center at (202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

CCC incurred forfeitures on the 2004 crop of peanuts. A portion of the CCC-owned peanuts were sold to third-party buyers. During routine warehouse examinations, examiners received from several warehouse operators questions relating to: Storage and handling rates applicable to peanuts after title is transferred from CCC; and the delivery obligation of the warehouse operator with respect to issues of shrinkage.

The CCC Peanut Storage Agreement, Part 2, General Terms, Item D(2), provides “If CCC transfers title to CCC-owned peanuts in store, the storage and handling rates contained in the Schedule of Rates will apply to the peanuts until loaded out, provided the transferee, in writing, orders the peanuts loaded out for immediate shipment within 30 days after the date title is transferred. If the transferee does not request, in writing, load out within 30 days after the date title is transferred, the storage and handling rates applicable to the transferee for the peanuts shall not exceed CCC's Schedule of Rates in effect at the time of title transfer until the earlier of: (a) 60 days, or (b) title to the peanuts is transferred by the transferee to another party, or (c) the transferee loads the peanuts out of the warehouse.” Under this provision, it is permissible for warehouse operators to charge rates in excess of the CCC rates after the end of this specified date if the rates were included in the public tariff at the time the warehouse receipt was issued.

Under the CCC marketing assistance loan program, in perfecting its security interest in peanuts pledged as collateral for such a loan, CCC will only accept warehouse receipts that meet the regulations set forth in 7 CFR part 1421. Under these regulations and under the U.S. Warehouse Act, the warehouse operator must specify on the receipt: Net pounds; loose-shelled kernels (LSK) pounds; and the total value of the peanuts based on a USDA price table file (loan rate data). The warehouse operator must also indicate on the warehouse receipt that: “The warehouse operator's obligation shall be to deliver this total value upon demand”, and “Return of peanuts will be both net pounds and LSK pounds. Both have been reduced for a shrink factor.” Warehouse operators are advised that changes to the public tariff to include a shrink factor for peanuts does not in any way alter their delivery obligation created by issuing the warehouse receipt. In order for warehouse operators to compensate for shrinkage, any shrink factors must be applied before issuing the warehouse receipt.

Instructions for the issuance of negotiable warehouse receipts may be found on the Commodity Operations Web site at http://www.fsa.usda.gov/daco/peanuts.htm. Any questions about this notice may be directed to Mark Overbo by calling (202) 720-4647 or e-mail mark.overbo@usda.gov.