(a) This part specifies the terms and conditions an approved Cooperative Marketing Association (CMA) must meet to obtain marketing assistance loans (MALs) and loan deficiency payments (LDPs) from CCC on behalf of its members.

(b) A CMA meeting the requirements of this part may obtain MALs and LDPs for any eligible commodity for which a MAL and LDP program is in effect.

(a) On behalf of the Commodity Credit Corporation (CCC), the Farm Service Agency (FSA) will administer the provisions of this part under the general direction and supervision of the Deputy Administrator for Farm Programs.

(b) In the field, the provisions of this part will be administered by the State and county FSA committees.

The definitions in this section are applicable for all purposes of program administration. The terms defined in parts 718 of this title and parts 1421 and 1427 of this chapter are also applicable, except where those definitions conflict with the definitions in this section.

Active member is a member who has utilized the services offered by a CMA in one of the three preceding CMA fiscal years or such shorter period as may be provided in the CMA's articles of incorporation or bylaws.

Approved cooperative marketing association (CMA) is a cooperative approved by CCC to participate in MAL and LDP programs for any authorized commodity.

Authorized commodity is a commodity for which a CMA is approved by CCC to obtain MALs or LDPs.

Cooperative is a business owned and controlled by the producers who use its services and operated under generally accepted cooperative principles.

Eligible commodity is a commodity which meets the commodity's eligibility requirements set forth in chapter XIV of this title, and is produced and delivered to the CMA from a producer eligible for MALs or LDPs.

Loan deficiency payment (LDP) means a payment made in lieu of a MAL when the CCC-determined value, which is based on the current local price in a county, is below the applicable county loan rate. The payment is the difference between the two rates times the eligible quantity.

Loan pool is any CMA pool containing commodities used by the CMA to obtain either MALs or LDPs.

Market loan gain is the loan rate, minus the repayment rate on loans repaid at a rate that is less than the loan rate. The total of all market loan gains received by a producer for an applicable crop year cannot exceed the producer's applicable payment limitation as specified in part 1400 of this chapter. A producer's adjusted gross income must also be below the limit as specified in part 1400 of this chapter to receive a market loan gain.

Member is a producer who:

(a) Has fully paid for membership stock or earned equity credits in the CMA;

(b) Has executed a uniform marketing agreement with the CMA; and

(c) Is entitled to all CMA membership rights.

(a) For a cooperative to be eligible to participate in the MAL and LDP Programs as an approved CMA, the cooperative must submit an application to CCC. The application must include:

(1) A completed Form CCC-846 indicating commodities for which it seeks approval;

(2) A current financial statement, dated within the last year, prepared for the cooperative and accompanied by a letter from an independent Certified Public Accountant, certifying that the financial statement was prepared in accordance with generally accepted accounting principles;

(3) A copy of the articles of incorporation or articles of association and all marketing agreements for loan pools, together with a certification that this material is current;

(4) Resolutions made by the cooperative's board of directors stating the cooperative will abide by provisions of this part, the nondiscrimination provisions thereof, and all other related CCC policies;

(5) A detailed description of how proceeds from each loan pool will be distributed to members as provided for in § 1425.18;

(6) An executed form CCC-Cotton G, Cotton Cooperative Loan Agreement, by cooperatives applying for approval to participate in the cotton MAL and LDP program; and

(7) Other information as requested by CCC concerning the organizational, operational, financial or any other aspect of the cooperative requested by CCC related to the cooperative's proposed methods of conducting MAL and LDP business.

(b) A CMA must submit, on an annual basis, the following information to CCC:

(1) A completed Form CCC-846-1, which discloses:

(i) The number of active and inactive CMA members;

(ii) The CMA's allocated equity;

(iii) The CMA's unallocated equity; and

(iv) Quantity of each loan pool commodity delivered to the CMA for marketing and the portion of such commodities received from active members during the prior year.

(2) The CMA's latest financial statement. The financial statement must be dated within the past year and be accompanied by a letter from an independent Certified Public Accountant certifying that the financial statement was prepared in accordance with generally accepted accounting principles.

(c) A CMA must furnish information to CCC within thirty calendar days relating to any:

(1) Change in its articles of incorporation and loan pool marketing agreements;

(2) Resolution affecting MAL or LDP operations;

(3) Change to the CMA's name, address, phone number, or related data shown on the CCC-846-1;

(4) Change in loan pool operations with an explanation and justification; and

(5) Additional information CCC may request related to the CMA's continued approval by CCC.

(d) CCC may require a CMA to submit a new initial application instead of a recertification application when it questions whether the CMA is operating according to documents previously submitted.

Information submitted to CCC related to trade secrets, financial or commercial operations, or the financial condition of a CMA, whether for initial approval or continued approval, shall be kept confidential by the officers, agents, and employees of CCC and the Department of Agriculture except as required to be disclosed by law.

(a) CCC may approve a CMA to participate in the MAL and LDP program as:

(1) Unconditionally approved; or

(2) Conditionally approved.

(b) If CCC determines a CMA is in substantial but not total compliance with the requirements of this part, CCC may make the approval conditional on the CMA achieving full compliance within a reasonable period of time, as specified in the notification of conditional approval.

(c) A CMA is approved to participate in the MAL and LDP program until the CMA's approval is suspended or terminated by CCC.

(a) CCC may suspend a CMA from obtaining MALs and LDPs when CCC determines the CMA has violated any of its agreements with CCC or the CMA has not:

(1) Operated according to the CMA's application for approval or its last recertification submission;

(2) Complied with applicable regulations; or

(3) Corrected deficiencies of the CMA's operation as noted by CCC.

(b) A suspension may be lifted when CCC determines the CMA has complied with all requirements for approval. When suspensions are not lifted within 1 year, or a shorter time period if so indicated in CCC's suspension notification, the CMA's approval automatically terminates.

(c) CCC may terminate a CMA's approval by giving the CMA written notice of the termination.

(d) If a CMA does not have any MALs outstanding, it may voluntarily terminate its participation in the MAL and LDP program through written notice to CCC.

(e) CCC may, on demand, call all outstanding CCC loans made to a suspended or terminated CMA. When loans are called, CCC will provide at least 10 calendar days written notice to the CMA. Commodities pledged as collateral for loans must be repaid by the date specified by CCC. If redemption is not made by the date specified, title to the commodity will vest in CCC and CCC will have no obligation to pay the commodity's market value above the principal amount of such loans.

(a) CMA's must be owned and controlled by active members of the CMA.

(b) The CMA must provide evidence that:

(1) Active members own more than 50 percent of its allocated equity; and

(2) A majority of directors are active members of the CMA or authorized representatives of active members.

(c) An applicant cooperative or a CMA, not under the ownership or control, of its active members, may be approved by CCC if it is able to establish that, by retiring the equity of its inactive members or by obtaining new members, it can vest ownership and control in its active members, as required by this section, by a date specified by CCC.

(a) The CMA must provide CCC documented proof that the CMA admits every membership applicant who is eligible under the statute regulating the CMA.

(b) Notwithstanding paragraph (a) of this section, a CMA may refuse membership to an applicant whose admission would prejudice, hinder, or otherwise obstruct the interests or purposes of the CMA.

To be financially able to make advances to their members and to market their commodities, CMA's must have a current ratio of at least 1 dollar of current assets for each 1 dollar of current liabilities (current ratio of 1:1 or better) on the balance sheet it submits to CCC with its initial application or annual recertification required in § 1425.4.

(a) A CMA must enter into a uniform marketing agreement with each member who delivers a commodity to a loan pool.

(b) The identification number used by the member to report acreage on applicable farms to FSA must appear on the marketing agreement.

(a) At least 50 percent of a crop of an authorized commodity acquired by, or delivered to, a CMA for marketing must be produced by its members for the CMA to obtain a MAL or LDP for such crop. CCC may, for a period not to exceed 2 years, waive this requirement if:

(1) The CMA can establish to CCC that such authorization is necessary for the efficient operation of the CMA; and

(2) The CMA's plan, approved by CCC, will bring the CMA into compliance with the provisions of this section.

(b) Commodities purchased or acquired from CCC and processed products acquired from other processors or merchandisers shall not be considered in determining the volume of member or nonmember business.

The marketing agreement between the CMA and its members will give the CMA the authority to pledge the commodity as collateral for a loan, to place a lien on such commodity, and to market the commodity on behalf of its members even though the individual members retain the right, in effect, to determine the price at which the commodity can be marketed by the CMA.

(a) CMAs must apply any market loan gains received on behalf of members to the loan pool for distribution. However, CMAs must also monitor market loan gains they receive from CCC on behalf of their members and must not obtain market loan gains for a member above the member's payment limitation determined as specified in part 1400 of this chapter.

(b) CMAs must monitor LDPs they receive from CCC on behalf of their members and not obtain LDPs for a member whose AGI is above the limit specified in part 1400 of this chapter.

(a) A CMA may establish separate loan pools as needed for quantities of a commodity.

(b) Loans and, if applicable, LDP's will be available to CMA's for any eligible commodity in a loan pool as provided in paragraph (e) of this section and the beneficial interest provisions of parts 1421 and 1427 of this chapter.

(c) A loan pool is eligible for MALs and LDPs if:

(1) All of the commodity in the loan pool is eligible for MALs or LDPs, except as provided in paragraphs (d) and (e) of this section;

(2) The commodity was delivered by members to the CMA for their benefit;

(3) The commodity was delivered and the members are eligible for MALs and LDPs;

(4) Members retain the right to share in marketing proceeds from the commodity in accordance with § 1425.18; and

(5) Members agreed to accept a payment of initial advances from the CMA in accordance with § 1425.18(a).

(6) Members agree to refund to the CMA, if requested by the CMA, any denied market loan gain or LDP benefit realized when the proceeds from the loan pool are distributed to the CMA members.

(d) Ineligible commodities may be included in eligible pools when:

(1) The CMA inadvertently included ineligible quantities based on grade, quality, bale weight or repacking in the case of cotton, or other factors; or

(2) There are eligibility discrepancies within FSA records, the producer has certified to the CMA that the commodity is eligible for a MAL, and there is no market gain or LDP involved in the loan pool for the crop year.

(e) A CMA may include a commodity in a pool that is ineligible based on FSA records if the producer has certified to the CMA the commodity is eligible. (For example, an otherwise eligible commodity that is not reflected on a timely filed FSA acreage report.) CCC will specify a time period during which CMAs may obtain MALs or LDPs on the applicable quantity while the eligibility status is resolved. If the final resolution is that the commodity was ineligible, the CMA must repay any MALs outstanding with principal plus interest and any market loan gains obtained plus interest from the date of receiving the market loan gain through the repayment date.

(f) The CMA must have in inventory a quantity of commodity delivered by members of each class and grade at least equal to the quantity each class and grade pledged as MAL collateral.

(g) MALs will be available to the CMA for the quantity of a farm-stored commodity that is, pursuant to such CMA marketing agreement with a member, part of the CMA's loan pool.

(h) A CMA must have identity-preserved loan pool commodities stored in approved warehouses while the commodities are pledged as collateral for MAL.

(i) Comingled commodities with MAL eligibility stored on a farm or in a warehouse may be transferred to an authorized warehouse.

(j) Commodities pledged as collateral for MALs must be free and clear of all liens and encumbrances based on a CMA's financial agreements or the CMA must obtain and complete a lien waiver form. When liens are applicable based on CMA financial agreements, the CMA must provide CCC the completed lien waiver form. CMAs must not take any action to cause a lien or encumbrance to be placed on a commodity after a MAL is approved.

(k) If a MAL or LDP is obtained for any quantity in a loan pool, allocations of costs and expenses among separate pools for the commodity in the pool will be made according to generally accepted accounting principles.

(l) A CMA must not apply marketing losses from a commodity not used to obtain a MAL or LDP against the marketing proceeds of a commodity used to obtain a MAL or LDP.

(m) CMAs will not carry forward losses from one loan pool and apply them against a subsequent loan pool without CCC's authorization. CCC may grant authorization when it determines that carrying forward the loss complies with the MAL or LDP Program intent.

(n) The CMA is responsible to CCC for any loss related to commodities the CMA pledged as collateral for MAL or used to obtain LDP related to:

(1) The CMA failing to comply with these regulations;

(2) Changes in quantity or quality of either warehouse or farm stored commodities; or

(3) Liens based on either the CMA's or its members' financial agreements.

(o) Denied market loan gain or denied LDP benefits will be based on payment limitation attribution as specified in part 1400 of this chapter, and must be repaid to CCC by the CMA receiving the MAL or LDP proceeds.

(a)(1) If CCC makes loans or LDP's for any quantity in a loan pool, the related proceeds must be distributed or otherwise made available to the members account:

(i) Based on the quantity and quality of the commodity delivered by each member;

(ii) Less any authorized charges for services performed or paid by the CMA necessary to condition or otherwise make the commodity eligible for MALs or LDPs, according to the marketing agreement provided for in § 1425.13;

(iii) Within 15 work days from the date the CMA receives MAL or LDP proceeds from CCC, or held according to the terms of a deferred payment agreement if requested by the member.

(2) CMA's may credit advances to its members made before loans and LDP's are obtained against the distribution of MAL and LDP proceeds requirement in paragraph (a)(1)(iii) of this section.

(b)(1) Except as provided in paragraph (b)(2) of this section, loan pool proceeds must not be combined with non-loan pool proceeds and the CMA must distribute loan pool proceeds according to the information it provided CCC in accordance with § 1425.4(a)(5).

(2) Sales proceeds from a loan pool may be combined with sales proceeds from other pools if the proceeds from such pools are allocated among the pools according to the quantity and quality of the commodity included in the pools.

(3) MAL and LDP proceeds shall only be issued to members involved in pools used for MALs or LDP's.

(4) When notified by CCC that MAL and LDP distributions to a member are required to be reduced for a program year, farm, or crop, a CMA must not make subsequent pool distributions and must reimburse CCC for distributions previously issued, if applicable.

(c) CMAs must apply market loan gains to the payment limit that is earned on date of redemption for their members when the CMA distributes the pool funds.

(a) A CMA may obtain MALs or LDPs on behalf of a member cooperative when the member cooperative is itself a CMA operating in accordance with this part. For example, a cooperative of producers may be a member of a CMA that markets a commodity.

(b) If the CMA is approved according to § 1425.6, and otherwise meets all the requirements of this part, the MALs and LDPs submitted by members of that CMA will be eligible.

(a) A CMA shall maintain records for each MAL or LDP commodity showing the quantity:

(1) Received from each member and nonmember;

(2) Eligible for MALs and LDPs;

(3) By quality factors specified in the applicable commodity regulations including class, grade, and quality, where applicable; and

(4) Of unprocessed inventory broken down by items 1 through 3 above.

(b) Except as provided in paragraph (c) of this section, inventory must be allocated in the following manner until all inventory in a loan pool is depleted:

(1) For processed commodities, the pool's inventory must be adjusted when the commodity is withdrawn from inventory for processing; and

(2) For commodities that are not processed, the pool's inventory must be allocated to the pool and the pool's inventories adjusted when the commodity is shipped.

(c) Records of loan and non-loan pool dispositions do not have to be maintained separately when sales proceeds from pools are allocated according to the quantity and quality of commodity in the pools.

(a) The books, documents, papers, and records of the CMA and subsidiaries must be maintained for five years after the applicable crop year and must be available to CCC for inspection and examination at all reasonable times.

(b) At any time after an application is received, CCC has the right to examine all books, documents, papers, and determine whether the CMA is operating or has operated in accordance with the regulations in this part, its articles of incorporation or articles association, and agreements with producers, the representations made by the CMA in its application for approval, and, where applicable, its agreements with CCC.

(c) CCC reserves the right to determine examinations of CMAs based on:

(1) A 3-year rotation; or

(2) The previous crop year MAL or LDP activity if market loan gain and LDP activity increases substantially.

(a) CMA's must annually provide CCC a report of all commodity deliveries involved in loans and LDP's by FSA farm number for each member.

(b) When requested by CCC, CMA's must report market gains received on behalf of each member.

Parts 11 and 780 of this title apply to this part.