Page images
PDF
EPUB

CHAPTER 14-COTTON FUTURES

SEC. 1920. TAX.

(a) RATE.-Upon each contract of sale of any cotton for future delivery made at, on, or in any exchange, board of trade, or similar institution or place of business, there shall be levied a tax in the nature of an excise of 2 cents for each pound of the cotton involved in any such contract.

[For exemptions from the tax imposed by section 1920 (a), see sections 1922 (a), 1923 (a), and 1924 (a).]

(b) BY WHOM PAID.-The tax imposed by subsection (a) shall be paid by the seller of the cotton involved in the contract of sale.

(c) How PAID.-The tax imposed by subsection (a) shall be paid by means of stamps which shall be affixed to such contracts, or to the memoranda evidencing the same, and canceled in compliance with rules and regulations which shall be prescribed by the Secretary.1 (d) CROSS REFERENCE.

1

For authority of the Secretary to promulgate rules and regulations for the collection of the tax, see section 1928 (a).

SEC. 1921. EXEMPTION OF SPOT COTTON.

This chapter shall not be construed to impose a tax on any sale of spot cotton.

SEC. 1922. EXEMPTION OF BASIS GRADE CONTRACTS.

(a) CONDITIONS.-No tax shall be levied under this chapter on any contract of sale mentioned in section 1920 (a) if the contract comply with each of the following conditions:

(1) CONFORMITY WITH SECTION 1925 (a) AND REGULATIONS.— Conform to the requirements in section 1925 (a) of, and the rules and regulations made pursuant to, this chapter.

(2) SPECIFICATION OF GRADE, PRICE, DATES OF SALE AND SETTLEMENT.-Specify the basis grade for the cotton involved in the contract, which shall be one of the grades for which standards are established by the Secretary of Agriculture, except grades prohibited from being delivered on a contract made under this section by the fifth paragraph of this subsection, 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: Provided, 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 memorandum evidencing the same.

(3) 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 established by the Secretary of Agriculture except grades prohibited from

1 The words "of the Treasury" are omitted.

being delivered on a contract made under this section by the fifth paragraph of this subsection and no other grade or grades.

(4) PROVISION FOR SETTLEMENT ON BASIS OF ACTUAL COMMERCIAL DIFFERENCES.-Provide that in case cotton of grade other than the basis grade be tendered or delivered in settlement of such contract, the differences above or below the contract price which the receiver shall pay for such grades other than the basis grade shall be the actual commercial differences, determined as hereinafter provided.

(5) PROHIBITION OF DELIVERY OF INFERIOR COTTON.-Provide that cotton that, because of the presence of extraneous matter of any character, or irregularities or defects, is reduced in value. below that of low middling, or cotton that is below the grade of low middling, or, if tinged, cotton that is below the grade of strict middling, or, if yellow stained, cotton 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 seveneighths of an inch in length of staple, or cotton of perished staple, or of immature staple, or cotton 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.

(6) PROVISIONS FOR TENDER IN FULL, NOTICE OF DELIVERY DATE, AND CERTIFICATE OF GRADE.-Provide that all tenders of cotton under such contract shall be the full number of 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 advance 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.

(7) PROVISION FOR TENDER AND SETTLEMENT IN ACCORDANCE WITH GOVERNMENT CLASSIFICATION.-Provide that all tenders of cotton and settlements therefor under such contract shall be in accordance with the classification thereof made under the regulations of the Secretary of Agriculture 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. All moneys collected as such costs may be used as a revolving fund for carrying out the purposes of this paragraph. The Secretary of Agriculture is authorized to prescribe regulations for carrying out the purposes of this paragraph, and the certificates of the officers of the Government as to the classification of any cotton for the purposes of this paragraph shall be accepted in the courts of the United States in all suits between the parties to such contract, or their privies, as prima facie evidence of the true classification of the cotton involved.

(b) INCORPORATION OF CONDITIONS IN CONTRACTS.-The provisions of the third, fourth, fifth, sixth, and seventh paragraphs of subsection (a) shall be deemed fully incorporated into any such contract if there be written or printed thereon, or on the memoranda evidencing the same, at or prior to the time the same is signed, the phrase "subject to Internal Revenue Code, section 1922."

(c) DELIVERY ALLOWANCES.-For the purposes of this section, the differences above or below the contract price which the receiver shall pay for cotton of grades above or below the basis 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 the sixth paragraph of subsection (a), for the delivery of cotton on the contract, established 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 Secretary of Agriculture, as such values were established by the sales of spot cotton, in such designated five or more markets: Provided, That for the purpose of this subsection such values in the said spot markets be based upon the standards for grades of cotton established by the Secretary of Agriculture: And provided further, That 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 Secretary of Agriculture. SEC. 1923. EXEMPTION OF TENDERED GRADE CONTRACTS.

(a) CONDITIONS.-No tax shall be levied under this chapter on any contract of sale mentioned in section 1920 (a) if the contract—

(1) COMPLIANCE WITH SECTION 1922. Comply with all the terms and conditions of section 1922 not inconsistent with this section; and

1

(2) PROVISION FOR CONTINGENT SPECIFIC PERFORMANCE. Provide that, in case cotton of grade or grades other than the basis grade specified in the contract shall be tendered in performance of the contract, the parties to such contract may agree, at the time of the tender, as to the price of the grade or grades so tendered, 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 contract by the actual delivery of cotton of the basis grade named therein and at the price specified for such basis grade in said contract.

(b) INCORPORATION OF CONDITIONS IN CONTRACT.-Contracts made in compliance with this section shall be known as "Section 1923 Contracts." The provisions of this section shall be deemed fully incorporated into any such contract if there be written or printed thereon, or on the memorandum evidencing the same, at or prior to the time the same is signed, the phrase "Subject to Internal Revenue Code,

section 1923."

(c) APPLICATION OF SECTION.-Nothing in this section shall be so construed as to relieve from the tax levied by section 1920 (a) of this 1 The word "of" is omitted.

chapter any contract in which, or in the settlement of or in respect to which, any device or arrangement whatever is resorted 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 chapter.

SEC. 1924. EXEMPTION OF SPECIFIC GRADE CONTRACTS.

(a) CONDITIONS.-No tax shall be levied under this chapter on any contract of sale mentioned in section 1920 (a) if the contract comply with each of the following conditions:

(1) CONFORMITY WITH RULES AND REGULATIONS.-Conform to the rules and regulations made pursuant to this chapter.

(2) SPECIFICATION OF GRADE, PRICE, DATES OF SALE AND DELIVERY. Specify the grade, type, sample, or description 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.

(3) 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.

(4) PROVISION FOR SPECIFIC PERFORMANCE.-Provide that the delivery of cotton under the contract shall not be effected by means of "set-off" or "ring" settlement, but only by the actual transfer of the specified cotton mentioned in the contract.

(b) INCORPORATION OF CONDITIONS IN CONTRACT.-The provisions. of the first, third, and fourth paragraphs of subsection (a) shall be deemed fully incorporated into any such contract if there be written or printed thereon, or on the document or memorandum evidencing the same, at or prior to the time the same is entered into, the words "subject to Internal Revenue Code, section 1924."

(c) APPLICATION OF SECTION.-This section shall not be construed to apply to any contract of sale made in compliance with section 1922 or section 1923.

SEC. 1925. FORM AND VALIDITY OF CONTRACTS.

(a) FORM.-Each contract of sale of cotton for future delivery mentioned in section 1920 (a) of this chapter shall be in writing plainly stating, or evidenced by written memorandum showing, the terms of such contract, including 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 behalf. If the contract or memorandum specify in bales the quantity of the cotton involved, without giving the weight, each bale shall, for purposes of this chapter, be deemed to weigh five hundred pounds. (b) VALIDITY. No contract of sale of cotton for future delivery mentioned in section 1920 (a) of this chapter, which does not con

the

form to the requirements of subsection (a) and has not the necessary stamps affixed thereto as required by section 1920 (c), shall be enforceable in any court of the United States by, or on behalf of, any party to such contract or his privies.

SEC. 1926. COTTON STANDARDS.

(a) SOURCE AND DESCRIPTION.-Subject to the provisions of section 6 of the act of March 4, 1923, 42 Stat. 1518 (U. S. C., Title 7, § 56) the Secretary of Agriculture is authorized, from time to time, to establish and promulgate standards of cotton by which its quality or value may be judged or determined, including its grade, length of staple, strength of staple, color, and such other qualities, properties, and conditions as may be standardized in practical form, which, for the purposes of this chapter, shall be known as the "Official cotton standards of the United States": Provided, 'That any standard of any cotton established and promulgated under this chapter by the Secretary of Agriculture shall not be changed or replaced within a period less than one year from and after the date of the promulgation thereof by the Secretary of Agriculture: Provided further, That no change or replacement of any standard of any cotton established and promulgated under this chapter by the Secretary of Agriculture shall become effective until after one year's public notice thereof, which notice shall specify the date when same is to become effective.

(b) PRACTICAL FORMS.-

(1) PREPARATION, CERTIFICATION, AND DISTRIBUTION.—The Secretary of Agriculture is authorized and directed to prepare practical forms of the official cotton standards which shall be established by him, and to furnish such practical forms from time to time, upon request, to any person, the cost thereof, as determined by the Secretary of Agriculture, to be paid by the person requesting the same, and to certify such practical forms under the seal of the Department of Agriculture and under the signature of the said Secretary, thereto affixed by himself or by some official or employee of the Department of Agriculture thereunto duly authorized by the said Secretary.

(2) DISPOSITION OF RECEIPTS FROM SALES.-All sums collected by the Secretary of Agriculture for furnishing practical forms under paragraph (1) shall be deposited and covered into the Treasury as miscellaneous receipts.

SEC. 1927. BONA FIDE SPOT MARKETS.

(a) DEFINITION.-For the purposes of this chapter, the only markets which shall be considered bona fide spot markets shall be those which the Secretary of Agriculture shall, from time to time, after investigation, determine and designate to be such, and of which he shall give public notice.

(b) DETERMINATION.-In determining, pursuant to the provisions of this chapter, what markets are bona fide spot markets, the Secretary of Agriculture is directed to consider 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

« PreviousContinue »