New York Board of Trade; Proposed Amendments to the Coffee “C” Futures Contract

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Notice of availability of proposed amendments to contract terms and conditions.

SUMMARY:

The New York Board of Trade (Exchange) has proposed amendments to the Exchange's coffee “C” futures contract. The proposed amendments would specify the conditions under which deliverers, receivers and operators of regular warehouses are liable for the repair of torn coffee bags, require that Exchange-licensed warehouses maintain a log of the required weekly inspections of futures delivery coffee, and establish an expedited arbitration procedure to be used in the case of controversies concerning liability for torn bags. The proposed amendments were submitted under the Commission's 45-day Fast Track procedures which provide that, absent any contrary action by the Commission, the proposed amendments may be deemed approved on October 30, 2000—45 days after the Commission's receipt of the proposals. The Acting Director of the Division of Economic Analysis (Division) of the Commission, acting pursuant to the authority delegated by Commission Regulation 140.96, has determined that publication of the proposed amendments is in the public interest and will assist the Commission in considering the views of interested persons.

DATES:

Comments must be received on or before October 23, 2000.

ADDRESSES:

Interested persons should submit their views and comments to Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three Lafayette Centre, 21st Street, NW, Washington, DC 20581. In addition, comments may be sent by facsimile transmission to facsimile number (202) 418-5521, or by electronic mail to secretary @cftc.gov. Reference should be made to the proposed amendments to the New York Board of Trade coffee “C” futures contract regarding torn coffee bags.

FOR FURTHER INFORMATION, CONTACT:

Please contact John Bird of the Division of Economic Analysis, Commodity Futures Trading Commission, Three Lafayette Centre, 21st Street NW, Washington, DC 20581, telephone (202) 418-5274. Facsimile number: (202) 418-5527. Electronic mail: jbird@cftc.gov

SUPPLEMENTARY INFORMATION:

The coffee ‘C’ futures contract currently calls for the delivery of specified growths of washed arabica coffee packaged in bags and held in storage at Exchange-licensed warehouses located in New York, New Orleans and Miami. The duties and obligations of licensed warehouse operators are specified in Coffee ‘C’ Resolution No. 2 Under Part (IV)(2) of Resolution No. 2, Exchange-licensed warehouse operators are required to maintain coffee bags in store in accordance with Exchange standards, including keeping the stored coffee bags and coffee clean, undamaged, and free from any and all foreign matter which could be detrimental to the delivery of the coffee. Licensed warehouse operators also are required to conduct weekly inspections of each lot of Exchange coffee in store to determine the condition and conformity with Exchange standards.

Part (IV)(3) of Resolution No. 2 currently requires that licensed warehouse operators are required to promptly repair any coffee bags that are torn, bags from which coffee beans are sifting, or bags that are in peril of having coffee beans spilled therefrom. Part (IV)(4) further provides that, with the exception of coffee bags that exhibit the aforementioned conditions, the licensed warehouse operator must notify the owner of the coffee of any further maintenance to be performed on the bags and provide the owner five business days to respond. If no response is received within five business days, the owner is deemed to have authorized the maintenance and to have agreed to pay all costs associated with said maintenance. The resolution also currently specifies that the licensed warehouse operator may notify the Exchange if the warehouse operator believes that the response received from the owners is insufficient to bring the coffee bags into compliance with Exchange standards.

The proposed amendments would implement new provisions clarifying the responsibilities of deliverers, receivers and licensed warehouse operators with regard to the repair of torn bags. The proposed amendments would provide, in part, that, if the licensed warehouse operator has given written notice to the deliverer prior to delivery that one or more of the bags containing the delivery coffee are torn, the deliverer of the coffee is responsible for the repair of the torn bag(s). Alternatively, if the warehouse has met its obligations as provided in Coffee “C” Resolution No. 2(IV)(2) and the receiver has failed to inspect the coffee during the seven business days between the issuance of the delivery notice and the delivery date, the receiver is responsible for repair of the bag(s). The proposed amendments will further specify that, in order for the warehouse to demonstrate that it is conducting the weekly inspections of the coffee as required in Coffee “C” Resolution No. 2(IV)(2), the warehouse will be required to keep a log of the weekly inspections. The log will be required to contain specific information including the location of the warehouse, the name of the individual who conducted the inspection, and the Exchange application and lot numbers of the bags found to require maintenance work.

The proposed amendments also would provide, in part, that a dispute between any member and a licensed warehouse operator concerning the liability for a torn bag during the delivery period may be settled by arbitration before a Special Arbitration Committee consisting of three disinterested members of the Exchange's Warehouse and License Committee, who must be appointed by the Committee's Chairman within one business day after the Exchange's receipt of a written notice of the dispute. If members of the Warehouse and License Committee have an interest in the dispute, the Chairman may appoint other persons who are associated with coffee warehousing and storage. However, at least one member of the Special Arbitration Committee must be a member of the Exchange's Warehouse and License Committee. The proposed amendments also would change the fee a claimant must pay for filing a notice of dispute with the Exchange to $375 for each lot of coffee covered by a notice of dispute, in place of the current requirement that a single fee of $375 per notice by paid.

The Exchange intends to make the proposed amendments effective upon Commission approval for all existing and newly listed contract months.

According to the Exchange, the proposed amendments concerning the liability for repair of torn coffee bags essentially will provide that, as long as the warehouse is doing its job as required by Resolution No. 2, then either the delivery or the receiver is responsible for repair of the bags.

The Division is requesting comments on the proposed amendments.

Copies of the proposed amendments will be available for inspection at the Office of the Secretariat, Commodity Futures Trading Commission, Three Lafayette Centre, 21st Street NW, Washington, DC 20581. Copies of the proposed amendments can be obtained through the Office of the Secretariat by mail at the above address, by phone at (202) 418-5100, or via the Internet at secretary@cftc.gov.

Other materials submitted by the Exchange in support of the proposal may be available upon request pursuant to the Freedom of Information Act (5 U.S.C. 552) and the Commission's regulations thereunder (17 CFR part 145 (1987)), except to the extent they are entitled to confidential treatment as set forth in 17 CFR 145.5 and 145.9. Requests for copies of such materials should be made to the FOI, Privacy and Sunshine Act Compliance Staff of the Office of Secretariat at the Commission's headquarters in accordance with 17 CFR 145.7 and 145.8.

Any person interested in submitting written data, views, or arguments on the proposed amendments, or with respect to other materials submitted by the Exchange, should send such comments to Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three Lafayette Centre, 21st Street NW, Washington, DC 20581 by the specified date.