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Notice

Chicago Mercantile Exchange: Proposed Amendments to the Live Cattle Futures Contract Restricting Delivery to Cattle Born and Raised in the United States

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AGENCY:

Commodity Futures Trading Commission.

ACTION:

Notice of availability for public comment of the proposed amendments to the Chicago Mercantile Exchange's live cattle futures contract restricting delivery to cattle born and raised in the United States.

SUMMARY:

The Chicago Mercantile Exchange (CME or Exchange) has requested that the Commission approve the subject proposed amendments for the live cattle futures contract. The proposals were submitted pursuant to the provisions of Section 5c(c)(2) of the Commodity Exchange Act (Act) and Commission Regulation 405.5. The proposals will require that all cattle delivered on the futures contract must be born and raised exclusively in the United States, and the seller must provide supporting documentation that conforms to industry standards at the time of delivery. The amendments are contingent upon the promulgation by the United States Department of Agriculture (USDA) of regulations implementing Country Of Origin Labeling (COOL) requirements pursuant to Section 10816 of Public Law 107-171 (the Farm Security and Rural Investment Act of 2002), which by statute is intended to take effect on September 30, 2004.

The Director of the Division of Market Oversight (Division) of the Commission, acting pursuant to the authority delegated by Commission Regulation 140.96, has determined that publication of the Exchange's proposed amendments for comment 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 July 30, 2003.

ADDRESSES:

Interested persons should submit their views and comments to Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581. In addition, comments may be sent by facsimile transmission to (202) 418-5521 or by electronic mail to secretary@cftc.gov. Reference should be made to “CME Live Cattle Amendments.”

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FOR FURTHER INFORMATION CONTACT:

Please contact Martin G. Murray of the Division of Market Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581, (202) 418-5276. Facsimile number: (202) 418-5527. Electronic mail: mmurray@cftc.gov.

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SUPPLEMENTARY INFORMATION:

Background

The CME's live cattle futures contract calls for delivery at par of 40,000 pounds of live steers at specified CME-approved livestock yards in Texas, Kansas, Nebraska, Oklahoma, and New Mexico.[1] Under current contract terms, there is no country of origin requirement.

The proposed amendments will require that all cattle delivered on the futures contract must be born and raised exclusively in the United States, and the seller must provide supporting documentation that conforms to industry standards at the time of delivery. The amendments are contingent upon the promulgation by the USDA of final regulations implementing the COOL provisions (Section 10816 of Public Law 107-171), which by statute is intended to take effect on September 30, 2004. The Exchange intends to implement the amendments with respect to all newly listed futures contract months beginning with the October 2004 contract month.[2]

In support of the proposed amendments, the Exchange states the following:

[T]hese amendments are based on input from the Exchange's Ad Hoc Live Cattle Advisory Group, which includes a cross-section of industry representatives. This Group was convened on Monday, June 2nd specifically to discuss the implications associated with the impending adoption of COOL regulations. The Group agreed that the Live Cattle contract delivery specifications should be modified to require that all delivered cattle must be born and raised exclusively in the United States. Further, the seller (short) must provide documentation that conforms to industry standards at the time of delivery, verifying country of origin information. Finally, a contingency clause has been adopted in the event that COOL is postponed or repealed.

The Division is requesting comment on the proposals. The Division is particularly interested in comments assessing the potential impact of the proposals on available deliverable supplies for the live cattle futures contract and the consequential effects Start Printed Page 41784on the susceptibility of the futures contract to manipulation.

The Division notes that the COOL provisions, which the USDA is charged with implementing and enforcing, require country of origin labeling by specified large retailers of fresh beef (muscle cuts and ground beef).[3] The labeling must identify the country (or countries) of origin in which the cattle was born, raised, and slaughtered. The COOL provisions also define the criteria for a covered commodity such as beef to be labeled as “U.S. Country of Origin.” To receive this label, beef must be derived exclusively from animals born, raised, and slaughtered in the United States.[4] The COOL provisions also require any person supplying beef to a retailer to provide information to the retailer indicating the country of origin of the cattle. The provisions further provide USDA with the authority to require persons in the distribution chain to maintain a verifiable recordkeeping audit trail to verify compliance. The USDA must issue final regulations implementing the COOL provisions by September 30, 2004, when the labeling requirement takes effect.

Copies of the Exchange's proposed amendments will be available for inspection at the Office of the Secretariat, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581. Copies of the proposed amendments can also be obtained through the Office of the Secretariat by mail at the above address or by phone at (202) 418-5100.

Other materials submitted by the CME in support of the request for approval may be available upon request pursuant to the Freedom of Information Act (5 U.S.C. 552) and the Commission's regulations there under (17 CFR Part 145 (2000)), except to the extent they are entitled to confidential treatment as set forth in 7 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 pertaining to the proposed amendments or with respect to other materials submitted by the CME should send such comments to Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581 by the specified date.

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Issued in Washington, DC on July 9, 2003.

Michael Gorham,

Director, Division of Market Oversight.

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Footnotes

1.  At the buyer's option, cattle may be graded on a live basis at the delivery stockyard, or on a carcass basis at a CME-approved packaging plant located within the originating stockyard's delivery region.

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2.  The Exchange intends to list the October 2004 futures contract month on September 2, 2003.

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3.  The legislation also requires country of origin labeling for other specified commodities, including pork, lamb, fish, shellfish, fresh and frozen fruits and vegetables, and peanuts.

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4.  There is an exception for beef from cattle born and raised in Alaska or Hawaii and transported through Canada for not longer than 60 days before slaughter in the United States.

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[FR Doc. 03-17819 Filed 7-14-03; 8:45 am]

BILLING CODE 6351-01-M