[Code of Federal Regulations]
[Title 7, Volume 10]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1427.172]

[Page 507-508]
 
                          TITLE 7--AGRICULTURE
 
  CHAPTER XIV--COMMODITY CREDIT CORPORATION, DEPARTMENT OF AGRICULTURE
 
PART 1427_COTTON--Table of Contents
 
                  Subpart D_Recourse Seed Cotton Loans
 
Sec.  1427.172  Settlement.

    (a) A producer may, at any time before maturity of the loan, obtain 
release of all or any part of the loan seed cotton by paying to CCC the 
amount of the loan, plus interest and charges.
    (b)(1) A producer or the producer's agent shall not remove from 
storage any cotton which is pledged as collateral for a loan until prior 
written approval has been received from CCC for removal of such cotton. 
If a producer or the producer's agent obtains such approval, they may 
remove such cotton

[[Page 508]]

from storage, sell the seed cotton, have it ginned, and sell the lint 
cotton and cottonseed obtained therefrom. The ginner shall inform the 
county office in writing immediately after the seed cotton removed from 
storage has been ginned and furnish the county office the loan number, 
producer's name, and applicable gin bale numbers. If the seed cotton is 
removed from storage, the loan principal plus interest and charges 
thereon must be satisfied not later than the earlier of:
    (i) The date established by the county committee;
    (ii) 5 days after the date of the producer received the AMS 
classification under Sec.  1427.9 (and the warehouse receipt, if the 
cotton is delivered to a warehouse), representing such cotton; or
    (iii) The loan maturity date.
    (2) If the seed cotton or lint cotton is sold, the loan principal, 
interest, and charges must be satisfied immediately.
    (3) A producer, except a CMA, may obtain a nonrecourse loan or loan 
deficiency payment under subpart A of this part, on the lint cotton, 
but:
    (i) The loan principal, interest, and charges on the seed cotton 
must be satisfied from the proceeds of the nonrecourse loan under 
subpart A of this part; or
    (ii) The loan deficiency payment must be applied to the loan 
principal, interest, and charges on the outstanding seed cotton loan.
    (4) A CMA must repay the seed cotton loan principal, interest, and 
charges before pledging the cotton for a nonrecourse loan or before a 
loan deficiency payment can be approved under subpart A of this part, on 
the lint cotton. If CMA's authorized by producers to obtain loans in 
their behalf remove seed cotton from storage before obtaining approval 
to move such cotton, such removal shall constitute conversion of such 
cotton unless the CMA:
    (i) Notifies the county office in writing the following morning by 
mail or otherwise that such cotton has been moved and is on the gin 
yard;
    (ii) Furnishes CCC an irrevocable letter of credit if requested; and
    (iii) Repays the loan principal, plus interest and charges, within 
the time specified by the county committee.
    (5) Any removal from storage shall not be deemed to constitute a 
release of CCC's security interest in the seed cotton or to release the 
producer or CMA from liability for the loan principal, interest, and 
charges if full payment of such amount is not received by the county 
office.
    (c) If, either before or after maturity, the producer discovers that 
the cotton is going out of condition or is in danger of going out of 
condition, the producer shall immediately notify the county office and 
confirm such notice in writing. If the county committee determines that 
the cotton is going out of condition or is in danger of going out of 
condition, the county committee will call for repayment of the loan 
principal, plus interest and charges on or before a specified date. If 
the producer does not repay the loan or have the cotton ginned and 
obtain a nonrecourse loan under subpart A of this part on the lint 
cotton produced therefrom within the period as specified by the county 
committee, the cotton shall be considered abandoned.
    (d) If the producer has control of the storage site and if the 
producer subsequently loses control of the storage site or there is 
danger of flood or damage to the seed cotton or storage structure making 
continued storage of the cotton unsafe, the producer shall immediately 
either repay the loan or move the seed cotton to the nearest approved 
gin for ginning and shall, at the same time, inform the county office. 
If the producer does not do so, the seed cotton shall be considered 
abandoned.