Sec. CHAPTER FIFTEEN. UNITED STATES COTTON FUTURES ACT.1 1. Title of act. [Act August 11, 1916 (39 Stat. 476.)] 2. Definitions; act of official deemed 6. Mode of determining differences to 6A. Tax not to be levied on contracts complying with conditions prescribed, "Section Six A Contracts." 7. Bona fide spot markets; designation. 8. Bona fide spot markets; mode of Sec. 11. Tax to be paid by stamps. 14. Failure to pay tax or other viola- ment. 15. Penalty; additional; United States attorneys to prosecute actions. 16. Testimony deemed material not to be withheld; exemption of witness from prosecution. 17. Payment of tax not to exempt from State laws, nor to prohibit tax by State or municipality. 18. Expenditure on previous appropriation. 19. Appropriation; publication of results of investigation; disposition of moneys collected. 20. Date of taking effect; contracts not affected by act. 21. Repeal; effect. 22. Effect of partial invalidity of act. PART A. That this Part, to be known as the United States cotton futures act, be, and hereby is, enacted to read and be effective hereafter as follows: SEC. 1. That this act shall be known by the short title of the "United States cotton futures act." Title of act. act of corporation. official or SEC. 2. That, for the purposes of this act, the term Definitions; contract of sale" shall be held to include sales, agree- deemed act of ments of sale, and agreements to sell. That the word association 'person," wherever used in this act, shall be construed to import the plural or singular, as the case demands, and shall include individuals, associations, partnerships, and corporations. When construing and inforcing the provisions of this act, the act, omission, or failure of any official, agent, or other person acting for or employed by 1 The cotton futures act of Aug. 18, 1914, was held to be unconstitutional in the case of Hubbard v. Lowe, 226 Fed. 135, but an appeal to the Supreme Court was afterwards dismissed. (See 242 U. S., 654.) The law was reenacted by the act of Aug. 11, 1916, an act making appropriations for the Department of Agriculture for the fiscal year ending June 30, 1917. Tax 2 per pound volved. Contracts cents be in writing. in to levied on con any association, partnership, or corporation within the scope of his employment or office, shall, in every case, also be deemed the act, omission, or failure of such association, partnership, or corporation as well as that of the person. SEC. 3. That 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 is hereby levied a tax in the nature of an excise of 2 cents for each pound of cotton involved in any such contract. Subdivision 5, Schedule A, Title XI, act of February 24, 1919, imposes a tax of 2 cents upon each $100 in value of any product or merchandise sold on exchange for future delivery. Sections 3 and 4 contemplate making of contracts in accordance with usual rules of exchanges, and contract is not invalid because made by broker in own name, on own credit, without disclosing name of principal. (Hutton v. Terrill, 255 Fed., 860.) SEC. 4. That each contract of sale of cotton for future delivery mentioned in section three of this act 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 the purposes of this act, be deemed to weigh five hundred pounds. Broker's seller's slip or buyer's slip, duly signed "by the party to be charged" in accordance with the rules of the exchange, is sufficient to prove a valid sale or purchase, and it is not essential that the contract be signed by both parties, or that both the seller's and buyer's slips shall be introduced in evidence. (Thorn r. Brown, 257 Fed., 519.) Where contracts for purchase and sale of cotton futures are made between brokers on an exchange, where brokers only can make such contracts, this section does not require that the contracts should show the names of the principals for whom they act. (Id.) Tax not to be SEC. 5. That no tax shall be levied under this act on tracts complying any contract of sale mentioned in section three hereof with conditions if the contract comply with each of the following condi prescribed. tions: First. Conform to the requirements of section four of, and the rules and regulations made pursuant to, this act. Second. 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 subdivision of this section, 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. Third. 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 being delivered on a contract made under this section by the fifth subdivision of this section and no other grade or grades. Fourth. 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. Fifth. 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 Good Ordinary, or cotton that is below the grade of Good Ordinary, or, if tinged, cotton that is below the grade of Low Middling, or, if stained, cotton that is below the grade of Middling, the grades mentioned being of the official cotton standards of the United States, or cotton that is less than seven-eighths 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. Sixth. 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. Reference of disputes to Secof Agri culture. Seventh. Provide that, in case a dispute arises between the person making the tender and the person re- retary ceiving the same, as to the classification of any cotton tendered under the contract, either party may refer the question of the true classification of said cotton to the Secretary of Agriculture for determination, and that such dispute shall be referred and determined, and the costs thereof fixed, assessed, collected, and paid in such manner and in accordance with such rules and regula140184°-20-30 Mode of determining differ in settlement of contract on above or below tions as may be prescribed by the Secretary of Agriculture. The provisions of the third, fourth, fifth, sixth, and seventh subdivisions 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 United States cotton futures act, section five." The Secretary of Agriculture is authorized to prescribe rules and regulations for carrying out the purposes of the seventh subdivision of this section, and his findings, upon any dispute referred to him under said seventh subdivision, made after the parties in interest have had an opportunity to be heard by him or such officer, officers, agent, or agents, of the Department of Agriculture as he may designate, shall be accepted in the courts of the United States in all suits between such parties, or their privies, as prima facie evidence of the true classification of the cotton involved. Disputes arising upon delivery of cotton made upon contract under this section must be settled by the courts. (T. D. 2177.) SEC. 6. That for the purposes of section five of this act ences to be paid the differences above or below the contract price which de the receiver shall pay for cotton of grades above or below livery of cotton the basis grade in the settlement of a contract of sale for basis grade. 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 subdivision of section five, for the delivery of cotton on the contract, established by the sale of spot cotton in the market where the future transaction involved occurs and is consummated if such market be a bona fide spot market; and in the event there be no bona fide spot market at or in the place in which such future transaction occurs, then, and in that case, the said differences above or below the contract price which the receiver shall pay for cotton above or below the basis grade shall be determined by the average actual commercial differences in value thereof, upon the sixth business day prior to the day fixed, in accordance with the sixth subdivision of section five, for the delivery of cotton on the contract, 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 purposes of this section 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. levied on con with conditions tracts." SEC. 6A. That no tax shall be levied under this act on Tax not to be any contract of sale mentioned in section three hereof if tracts complying the contract provide that, in case cotton of grade or grades prescribed, "Secother than the basis grade specified in the contract shall ton six A Conbe 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, and if the contract also comply with all the terms and conditions of section five hereof not inconsistent with this section: Provided, That nothing in this section shall be so construed as to relieve from the tax levied by section three of this act 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 act. Contracts made in compliance with this section shall be known as "Section six A 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 United States cotton futures act, section six A." Section ten of this act shall not be construed to apply to any contract of sale made in compliance with section six A hereof. Bona fide spot markets; SEC. 7. That for the purposes of this act the only markets which shall be considered bona fide spot markets nation. 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. desig Bona fide spot markets; mode SEC. 8. That in determining, pursuant to the provisions of this act, what markets are bona fide spot markets, the of determining. 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 the Secretary of Agriculture: Provided, |