[Code of Federal Regulations]
[Title 7, Volume 10]
[Revised as of January 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1421.6]

[Page 451-454]
 
                          TITLE 7--AGRICULTURE
 
  CHAPTER XIV--COMMODITY CREDIT CORPORATION, DEPARTMENT OF AGRICULTURE
 
PART 1421_GRAINS AND SIMILARLY HANDLED COMMODITIES_MARKETING ASSISTANCE LOANS 
 
                            Subpart A_General
 
Sec. 1421.6  Beneficial interest.

    (a) To be eligible to receive marketing assistance loans and loan 
deficiency payments, a producer must have beneficial interest in the 
commodity that is tendered to CCC for a marketing assistance loan or is 
requested for a loan deficiency payment. For the purposes of this part, 
the term ``beneficial interest'' refers to a determination by CCC that a 
person has the requisite title to and control of the commodity that is 
tendered to CCC as collateral for a marketing assistance loan or is the 
commodity that will be used to determine a loan deficiency payment. A 
determination of whether a person has beneficial interest in a commodity 
is made by CCC in accordance with this part and is not based upon a 
determination under any State law or any other regulation of a Federal 
agency.

[[Page 452]]

    (b) Except as provided in paragraph (e) of this section, when 
requesting a marketing assistance loan for a loan commodity, in order to 
have beneficial interest in the commodity tendered as collateral for the 
loan, a person must:
    (1) Be the producer of the commodity as determined in accordance 
with Sec. 1421.4;
    (2) Have had ownership of the commodity from the time it was planted 
(with respect to wool and mohair from time of shearing) through the 
earlier the date the loan was repaid or the maturity date of the loan;
    (3) Have control of the commodity from the time of planting (for 
wool and mohair from the time of shearing) through the maturity date of 
the loan. To have control of the commodity, such person must have 
complete decision-making authority regarding whether the commodity will 
be tendered as collateral for a loan, when the loan will be repaid, or 
if the collateral will be forfeited to CCC in satisfaction of the loan 
obligations of such person, and where the commodity will be maintained 
during the term of the loan;
    (4) Not have received any payment from any party with respect to the 
commodity; and
    (5) If the commodity has been physically delivered to a location 
other than a location owned or under the total control of the producer, 
have delivered the commodity to a warehouse approved in accordance with 
Sec. 1421.103(c). Delivery of the commodity to a location other than to 
such an approved warehouse will result in the loss of beneficial 
interest in the commodity on the date of physical delivery and the 
producer will be considered to have lost beneficial interest as of 11:59 
p.m. of such day. Accordingly, delivery of a commodity to entities such 
as a dairy, feedlot, ethanol plant, wool pool, feed mill, or other 
facilities as determined by CCC will result in the loss of beneficial 
interest as of the date of delivery, regardless of any other action or 
agreement between such an entity and the producer unless such an entity 
has been approved by CCC under Sec. 1421.103(c).
    (c) Except as provided in paragraph (e) of this section, when 
requesting a loan deficiency payment for a loan commodity, in order to 
have beneficial interest in the commodity a person must:
    (1) Be the producer of the commodity as determined in accordance 
with Sec. 1421.4;
    (2) Have had ownership of the commodity from the time it was 
planted, with respect to wool and mohair from the time of shearing, or 
from the time of slaughter for unshorn pelts, through the date the 
producer has elected to determine the loan deficiency payment rate;
    (3) Have control of the commodity. For control such person must have 
complete decisionmaking authority regarding whether a loan deficiency 
payment will be requested with respect to the commodity; when the loan 
deficiency rate will be selected; and where the commodity will be 
maintained prior to the date on which the loan deficiency payment rate 
will be determined;
    (4) Not have received any payment from any party with respect to the 
commodity; and
    (5) If the commodity has been physically delivered to a location 
other than a location owned or under the total control of the producer, 
have delivered the commodity to a warehouse approved in accordance with 
Sec. 1421.103(c). Delivery of the commodity to a location other than to 
an approved warehouse will result in the loss of beneficial interest in 
the commodity on the date of physical delivery and the producer will be 
considered to have lost beneficial interest as of 11:59 p.m. of such 
day. Accordingly, delivery of a commodity to entities such as a dairy, 
feedlot, ethanol plant, wool pool, feed mill, or unapproved storage 
facility, will result in the loss of beneficial interest as of the date 
of delivery, regardless of any other action or agreement between such an 
entity and the producer unless such an entity has been approved by CCC 
under Sec. 1421.103(c).
    (d) Notwithstanding any provision of paragraphs (b) and (c) of this 
section and Sec. 1421.5(f), in order to facilitate handling situations 
involving the death of a producer, CCC will consider an estate, heirs of 
the deceased producer,

[[Page 453]]

and a person to whom title to a commodity has passed by virtue of State 
law upon the death of the producer to have beneficial interest in a 
commodity produced by the producer under the same terms and conditions 
that would otherwise be applicable to such producer;
    (e) Notwithstanding any provision of paragraphs (b) and (c) of this 
section and Sec. 1421.5(f), a person who purchases or otherwise 
acquires a commodity from a producer under any circumstances does not 
obtain beneficial interest to the commodity whether such purchase or 
acquisition is made prior to the harvest of the crop or after harvest; 
however, CCC will consider a person to have beneficial interest in a 
commodity if, prior to harvest, such person has obtained title to the 
growing commodity at the same time that such person obtained full title 
to the land on which such crop was growing;
    (f) If marketing assistance loans and loan deficiency payments are 
made available to producers through an approved cooperative marketing 
association in accordance with part 1425 of this chapter, the beneficial 
interest in the commodity must always have been in the producer-member 
who delivered the commodity to the approved cooperative marketing 
association or its member approved cooperative marketing association, 
except as otherwise provided in this section. If the producer-member who 
delivered the commodity does not retain the right to share in the 
proceeds from the marketing of the commodity as provided in part 1425 of 
this chapter, commodities delivered to an approved cooperative marketing 
association shall not be eligible to be pledged as collateral for a 
marketing assistance loan or be taken into consideration when a loan 
deficiency payment is made.
    (g) A producer will lose beneficial interest in a commodity if the 
producer receives any payment from any person under any contractual 
arrangement with respect to a commodity if the person who is making the 
payment, or any person otherwise associated with the person making the 
payment, will at any time have title to the commodity or control of the 
commodity prior to or after harvest, shearing, or slaughter unless:
    (1) Such payment is authorized in accordance with part 1425 of this 
chapter; or
    (2) The payment is made as consideration for an option to purchase 
the commodity and such option contains the following language:

    Notwithstanding any other provision of this option to purchase or 
any other contract, title and control of the commodity and beneficial 
interest in the commodity as specified in 7 CFR 1421.6 shall remain with 
the producer until the buyer exercises this option to purchase the 
commodity. This option to purchase shall expire, notwithstanding any 
action or inaction by either the producer or the buyer, at the earlier 
of:
    (1) The maturity of any Commodity Credit Corporation (CCC) loan that 
is secured by such commodity;
    (2) The date CCC claims title to such commodity; or
    (3) Such other date as provided in this option.

    (h) Inclusion in a contract of one or more of the following types of 
provisions will not result in the loss of beneficial interest in a 
commodity:
    (1) A provision that allows the producer to select the sales price 
of the commodity at a time the contract is entered into or at a later 
date, for example, a contract normally referred to as a deferred-price, 
forward or price later contract. The following conditions apply:
    (i) Producers under a deferred-price, forward, or price later 
contract will lose beneficial interest in the commodity once the 
commodity is applied in fulfillment of such a contract.
    (ii) Beneficial interest in the commodity is retained by the 
producer if the contract has no restrictive or contradictory clauses 
within the contract that may cause the producer to lose beneficial 
interest in the commodity.
    (2) A provision between the producer and a warehouse approved in 
accordance with Sec. 1421.103(c) for the storage of CCC loan collateral 
that provides the producer a period of time following the date of 
physical delivery of the commodity to elect whether the commodity is to 
be stored and receipted on

[[Page 454]]

behalf of the producer or is to be considered transferred to the 
warehouse.
    (i) Commodities produced under a contract in which the title to the 
seed remains with the entity providing the seed to the producer, 
including contracts for the production of hybrid seed, genetically 
modified commodities, and other specialty seeds as approved in writing 
by CCC, are eligible to be pledged as collateral for a marketing 
assistance loan and a loan deficiency payment may be made with respect 
to such production if, at the time of the request for such a loan or 
payment, the producer has not:
    (1) Received a payment under the contract; or
    (2) Delivered the commodity to another person.

[71 FR 32422, June 2, 2006, as amended at 71 FR 51426, Aug. 30, 2006; 71 
FR 60413, Oct. 13, 2006]