Wa0403_111031v01

United States Department of Agriculture

Farm Service Agency

WA-403

LICENSING AGREEMENT

FOR

WOOL

WA-403 U.S. Department of Agriculture Form Approved - OMB No. 0560-0120

(10-31-11) Farm Service Agency

United States Warehouse Act

License Number

Effective

LICENSING AGREEMENT FOR WOOL

Contents

I. Definitions 1

II. Financials 1

A. Financial Requirements 1

B. Financial Reporting 2

C. Accepting Other Financial Statements 2

D. Special Cases – Assets and Liabilities 2

E. Financial Special Conditions - Public Debt Obligations 3

III. Financial Assurance 3

A. Financial Assurance Requirements – Computation 3

B. Financial Assurance – Acceptable Forms 4

IV. Duties of Warehouse Operator 4

A. General 4

B. Insurance 5

C. Records to be kept in a Safe Place 5

D. Scales and Wool Storage 5

E. Warehouse Charges 6

F. Business Hours 6

G. System of Accounts 6

H. Excess Storage and Transferring Wool 7

I. Reports Required 8

J. Inspections, Examinations of Warehouse 9

K. Delivery of Wool 9

L. Storage Obligations 9

M. Out of Condition and Damaged Wool 9

N. Reconditioning Wool 9

O. Warehouse Receipts 10

V. Paper Warehouse Receipts 11

A. Issuance 11

B. Form 11

C. Persons Authorized to Sign Warehouse Receipts 12

D. Copies of Warehouse Receipts 12

E. Printing of Warehouse Receipts 12

F. Return of Warehouse Receipts Prior to Delivery 12

G. Balance Warehouse Receipts 12

H. Lost or Destroyed Warehouse Receipts 12

VI. Service Licenses 13

A. The Applicant 13

B. Examination of Applicant 13

C. Grade Certificate 13

D. Weight Certificates 14

E. Grade and Weight Certificate 14

F. Duties of Inspector and Weigher 15

VII. Wool Grading 15

A. United States Standards for Grades of Wool 15

B. Other Factors of Grade for Wool 15

VIII. Wool Arbitration 16

A. Procedure 16

B. Formation of an Arbitration Committee 16

C. Interested Parties - Duties 16

D. Arbitration Committee - Duties 17

E. Owner Not Compelled to Store Wool 17

IX. Fees 18

Licensing Agreement for Wool

As a condition of licensing under the United States Warehouse Act (the Act), administered by the Farm Service Agency (FSA), United States Department of Agriculture (USDA), the warehouse operator agrees to the conditions set forth in this agreement and the regulations found at 7 CFR Part 735:

I. Definitions

Current assets. Assets, including cash, that are reasonably expected to be realized in cash or sold or

consumed during the normal operating cycle of the business or within one year if the operating cycle is shorter than one year.

Current liabilities. Those financial obligations which are expected to be satisfied during the normal

operating cycle of the business or within one year if the operating cycle is shorter than one year.

Kind of Wool. Grease, scoured or pulled and sorted or unsorted wool or sorted or unsorted mohair.

Licensed grader and/or weigher. A person licensed under the Act to grade and/or weigh wool certificate the grade and/or other weight of wool stored at a warehouse licensed under the Act.

Net Worth. When liabilities are subtracted from allowable assets, it is the balance amount. In determining allowable assets, credit may be given for appraisal of real property less improvements and for the appraisal of insurable property such as buildings, machinery, equipment, and merchandise inventory only to the extent that such property is protected by insurance against loss or damage by fire, lightning, and other risk. Such insurance must be in the form of lawful insurance policies issued by insurance companies authorized to do such business and subject to service of process in the State in which the warehouse is located. FSA will determine what assets are allowable and under what conditions appraisals may be used.

II. Financials

A. Financial Requirements

1. The warehouse operator agrees to have and maintain:

a. Total net worth of at least the amount obtained by multiplying $15.00 per 1,000 pounds by the warehouse capacity in pounds; however, no person may be licensed or remain licensed as a warehouse operator unless that person has allowable net worth of at least $5,000.00 (Any deficiency in net worth above the $5,000.00 minimum may be supplied by an increase in the amount of the financial assurance). The warehouse operator’s net worth need not exceed $100,000.00.

b. Total allowable current assets equal to or exceeding total current liabilities or evidence acceptable to FSA that funds will be and remain available to meet current obligations.

2. If a warehouse operator is licensed or is applying for licenses to operate two or more warehouses, the maximum capacity of all licensed warehouses, as determined by FSA, will be the capacity considered in determining whether the warehouse operator meets the net worth requirements.

B. Financial Reporting

1. The warehouse operator agrees to provide annually, within 90 calendar days of the fiscal year end, or more frequently if required, to FSA, financial statements from the warehouse operators records prepared according to generally accepted accounting principles. The FSA may grant one 30 calendar day extension to provide a financial statement.

2. These financial statements must include but not be limited to:

a. Balance sheet,

b. Statement of income (profit and loss),

c. Statement of retained earnings, and

d. Statement of cash flows.

3. An authorized representative for the warehouse operator must certify under penalty of perjury that the statements, as prepared, accurately reflect the financial condition of the warehouse operator as of the date designated and fairly represent the results of operations for the period designated.

4. The warehouse operator must have the financial statements required audited or reviewed by a certified public accountant or an independent public accountant. Audits and reviews by independent certified public accountants and independent public accountants must be made in accordance with standards established by the American Institute of Certified Public Accountants. The accountant's certification, assurances, opinion, comments, and notes on this statement, must be furnished along with the financial statements. The FSA may also require an on‑site examination and an audit by an authorized officer or agent of USDA and request other pertinent information.

C. Accepting Other Financial Statements

1. Financial statements of a parent company which separately identify the financial position of the warehouse operator as a wholly owned subsidiary and which meet the basic requirements of financial statements, may be accepted by FSA in lieu of the warehouse operator meeting such requirements.

2. Guaranty agreements from a parent company submitted on behalf of a wholly owned subsidiary may be accepted by FSA as meeting the basic requirements of financial statements if the parent company submits a financial statement which meets the financial requirements and financial reporting requirements.

D. Special Cases – Assets and Liabilities

1. Subject to such terms and conditions as FSA may prescribe and for the purposes of determining allowable assets and liabilities, appraisals of the value of fixed assets in excess of the book value claimed in the financial statement submitted by a warehouse operator to conform with the requirements may be allowed if:

a. Prepared by independent appraisers acceptable to FSA, and

b. The assets are fully insured against casualty loss.

2. All wool purchased from and remaining in-store at another warehouse must be fully paid for and a warehouse receipt issued in the name of the purchasing warehouse operator for such quantity and quality as the warehouse operator’s records or assets may state.

E. Financial Special Conditions - Public Debt Obligations

The warehouse operator agrees that if they file a bond in the form of either a deposit of public debt obligations of the United States or other obligations which are unconditionally guaranteed as to both interest and principal by the United States:

1. The obligation deposited will NOT be considered a part of the warehouse operator's assets.

2. A deficiency in total allowable net worth as computed may be offset by the licensed warehouse operator furnishing acceptable financial assurance for the difference.

3. The deposit may be replaced or continued in the required amount from year to year.

4. The deposit will not be released until one year after cancellation or revocation of the license that it supports or until satisfaction of any claim against the deposit, whichever is later.

III. Financial Assurance

A. Financial Assurance Requirements – Computation

The warehouse operator agrees:

1. To furnish financial assurance computed at the rate of $15.00 per thousand pounds for the storage space that the warehouse accommodates when stored in the manner customary to the warehouse as determined by FSA, but not less than $5,000.00 nor more than $50,000.00.

2. When applying for licenses to operate two or more warehouses in the same State, or multiple states, and at the warehouse operator’s election, they may provide financial assurance meeting the requirements of the Act and the regulations to cover all these warehouses within the multiple states and the maximum of $50,000.00 of financial assurance will apply for each State covered.

3. In case of a deficiency in net worth above the $5,000.00 minimum required, to add to the amount of financial assurance determined in accordance with paragraph (1) of this section an amount equal to that deficiency. If a letter of credit is used for the amount of the deficiency, it must be issued for a period of not less than two years to coincide with the period of any deposit of obligations. Any letter of credit must be clean, irrevocable, issued by a commercial bank payable to Deputy Administrator for Commodity Operations (DACO) by sight draft and insured as a deposit by the Federal Deposit Insurance Corporation or an institution in good standing regulated by the Farm Credit Administration. The deposit will not be considered an asset of the company.

4. If FSA finds that conditions exist which warrant requiring additional financial assurance, they

will add to the amount of financial assurance a further amount to meet such conditions.

B. Financial Assurance – Acceptable Forms

The warehouse operator may offer as financial assurance any of the following:

1. A warehouse operators bond, or

2. In the form of a deposit with FSA, United States bonds, United States Treasury notes, or other public debt obligations of the United States or obligations that are unconditionally guaranteed as to both interest and principal by the United States, or

3. In the form of a letter of credit issued to DACO for a period of not less than two years to coincide with the period of any deposit of obligations, or

4. In the form of a certificate of participation in and coverage by an indemnity or insurance fund as approved by FSA, established and maintained by a State, backed by the full faith and credit of the applicable State, and which guarantees depositors of the licensed warehouse full indemnification for the breach of any obligation of the licensed warehouse operator under the terms of the Act and regulations, or

5. Other forms of financial assurance as may be prescribed in the applicable licensing agreement and related addenda deemed acceptable by FSA.

IV. Duties of Warehouse Operator

A. General

The warehouse operator agrees to:

1. At all times exercise such care in regard to wool in custody as a reasonably careful owner would exercise under the same circumstances and conditions.

2. To not differentiate among depositors regarding use of and access to services, except that available storage space may be allocated.

1. Accept all identity-preserved wool and, at the warehouse operator’s option, commingled wool, and, at the request of the depositor, deliver out all commingled wool in accordance with the grades of the wool as determined by a person duly licensed to inspect that wool and to certificate the grade and the weight of that wool under the Act and the regulations, and deliver out the identity-reserved wool as deposited.

4. If an appeal from the determination of an inspector has been taken, that commingled wool will be accepted for and delivered out of storage in accordance with the grades as finally determined in the appeal.

5. Keep the warehouse reasonably clean at all times and free from detritus, rubbish, or accumulations of materials that will create a hazard or interfere with the handling of wool and provide a safe environment in and around the warehouse and will provide all necessary assistance in the execution of inspections and examinations by representatives of FSA.

6. Not commingle wool for which a receipt is outstanding unless the warehouse receipt clearly states that the wool is commingled.

7. Not commingle the warehouse operator’s wool with any depositor’s wool.

B. Insurance

1. Requirements

The warehouse operator agrees to:

a. Secure, in their own name, insurance on stored wool against loss or damage by fire, lightning, and other risk under forms of policies which automatically attach for the full replacement value of stored wool, as soon as such wool is placed in their legal custody, and continue such insurance in effect so long as the wool remains in their legal custody. The warehouse operator also agrees to keep a general insurance account showing the policy number, issuing company, amount binding, and expiration dates of all insurance policies and in each instance show the property covered by such policies. This insurance will be lawful policies issued by one or more insurance companies. The warehouse operator must submit such reports to underwriters as may be required under the terms of such policies, and submit copies of such reports to FSA as required.

b. Show, in the tariff to be posted at all delivery points, the conditions under which the wool will be insured against loss or damage by fire, lightning, and other risk.

c. Require that the warehouse operator’s insurance company give 30 days advance notice to FSA of intent to cancel the stock (inventory) coverage.

C. Records to be kept in a Safe Place

The warehouse operator agrees to:

1. Provide a fireproof safe, a fireproof vault, or a fireproof compartment in which to keep, when not in use, all records, books, and papers pertaining to the licensed warehouse, including a current warehouse receipt book, copies of warehouse receipts issued, and canceled warehouse receipts or microfilm copies of canceled receipts, except that, with the written consent of FSA, upon a showing by the warehouse operator that it is not practicable to provide such fireproof safe, vault, or compartment, may keep such records, books, and papers in some other place of safety, approved by FSA.

2. Retain each canceled receipt for a period of six years after December 31 of the year in which the warehouse receipt is canceled and for such longer period as may be necessary for the purposes of any litigation which the warehouse operator knows to be pending, or as may be required by FSA in particular cases to carry out the purposes of the Act.

3. Arrange canceled warehouse receipts in numerical order and otherwise in such manner as may be directed, for purposes of audit, by authorized officers or agents of USDA and FSA.

D. Scales and Wool Storage

The warehouse operator agrees to:

1. Be equipped with suitable scales in good order, and so arranged that all wool, whether for storage or for non-storage purposes, can be weighed in and out of the warehouse. The scales in any warehouse must be subject to examination by authorized officers or agents of the USDA and to disapproval by FSA. If disapproved, any weighing apparatus must not thereafter be used in ascertaining the weight of wool for the purposes of this Act, until such disapproval is withdrawn.

2. Arrange bags or bales of wool in the warehouse so that each lot can be identified.

3. Secure a tag which is always visible showing lot or pile number and the number of bags or bales and, for bulk wool, the pounds of wool contained.

1. Mark on the reverse side of the tag all moved and removed wool.

4. Apply for licensing at all facilities controlled by them at a specific location, among which wool may be transferred without weighing, unless those facilities are specifically exempted by FSA. The warehouse operator must not select, randomly, the units to be licensed unless specifically exempted by FSA.

E. Warehouse Charges

The warehouse operator:

1. Not make any unreasonable or exorbitant charge for services rendered.

2. Before a license to conduct a warehouse is granted under the Act, file, with FSA, a copy of their rules and a schedule of charges to be assessed depositors.

3. Before making any change in such rules or schedule of charges, file with FSA a new rule statement or schedule of charges.

4. Post conspicuously where the depositor may access it at all delivery points, a copy of the current rules and schedule of charges.

F. Business Hours

The warehouse operator agrees to:

1. Be open for the purpose of receiving wool for storage and delivering wool out of storage and for settlement purposes every normal business day for a period of not less than six hours between the hours of 8 a.m. and 6 p.m. The warehouse operator must post their business hours at the public entrance to the office and to their licensed warehouse.

2. In case the warehouse is not to be kept open as required, state, in the posted notice, the period during which the warehouse is to be closed and the name, the address, and telephone number of the person who will be authorized to receive and deliver wool stored in the warehouse.

G. System of Accounts

The warehouse operator agrees to:

1. Have and maintain a system of accounts approved for the purpose by FSA. These records must include:

a. Weight of each lot received,

b. Number of bags or bales.

c. The grade when required,

d. Location in the warehouse,

e. Date received for storage,

f. Date delivered out of storage,

g. Receipt number,

h . A separate record for each depositor.

2. Maintain a detailed set of records of money received and disbursed and, if applicable, all insurance policies taken out and canceled on request of each depositor. These records will be maintained accurately and concisely as activity occurs. The warehouse operator must retain these records for a period of six years after December 31 of the year in which they were created, and for such longer period as may be necessary for the purposes of any litigation which the warehouse operator knows to be pending, or as may be required by FSA in particular cases to carry out the purposes of the Act.

3. For commingled wool, the accounts must show the designation of the lot or pile of which it is a part and the estimate of shrinkage.

H. Excess Storage and Transferring Wool

The warehouse operator agrees that:

1. If at any time wool stored in the warehouse exceeds the capacity for which the warehouse is licensed, the warehouse operator will immediately notify FSA of the fact and the location of excess storage.

2. If they desire to transfer stored wool to another warehouse (receiving), the warehouse operator may do so either by physical movement of the stored wool or by other methods accepted as standard industry practice subject to the following terms and conditions:

a. The transferring (shipping) warehouse operator's accepted rules or schedule of charges must contain notice that the warehouse operator may transfer wool according to conditions prescribed by FSA.

b. The warehouse operator must request permission in writing to FSA.

3. For purposes of transferring wool, a receiving warehouse means a warehouse operated by a warehouse operator who holds an un-suspended, un-revoked wool license under the Act, or a warehouse operated by a warehouse operator who holds an effective warehouse license for the public storage of wool issued by a State that has financial, bonding and examination requirements for the benefit of all depositors.

1. Non-negotiable warehouse receipts must be obtained promptly by the shipping warehouse operator from the receiving warehouse operator for all warehouse receipted or open storage transferred wool. Such warehouse receipts must have printed or stamped in large bold or outline letters diagonally across the face and covering the face from corner to corner the words “NOT NEGOTIABLE”. In the case of wool shipped to a warehouse in a State that doesn’t allow issuance of non-negotiable warehouse receipts, the receiving warehouse operator will issue an affidavit specifying the kind, class (and subclass for white club wheat), grade and quantity of the wool received from the shipping warehouse operator. These receipts and affidavits are not valid for collateral purposes. They must be retained by the shipping warehouse operator to be presented to and used by authorized officers and agents of the USDA, and FSA in lieu of an on-site inventory. The wool covered by these warehouse receipts and affidavits is not the property of either the receiving or shipping warehouse operator but held in trust by both solely for the benefit of the depositors whose bailed wool was transferred individually or collectively and which the depositor or the depositor’s transferee retains title.

5. The shipping warehouse operator’s financial assurance amount must be increased to consider the addition of the transferred wool to the licensed capacity of the warehouse with the net worth requirements based on the total of the licensed capacity and the transferred wool. The receiving warehouse operator must not incur storage obligations that exceed the licensed or approved capacity of their warehouse.

1. The shipping warehouse operator retains storage obligation to the owners of all wool deposited in the warehouse for storage, whether transferred or retained, and is except as otherwise agreed upon under paragraph (g), required to redeliver the wool upon demand to the depositor or the depositor’s transferee at the warehouse where the wool was first deposited for storage.

6. The owner of wool deposited for storage at the warehouse must make settlement and take delivery at the warehouse where the wool was first deposited for storage, unless the owner of the wool, with the consent of both the shipping warehouse operator and the receiving warehouse operator, elects to take delivery at the warehouse to which wool was transferred.

1. Nothing in this agreement will in any way diminish the right of the owner of the wool to receive on delivery, or the obligation of the warehouse operator of licensed warehouse from which the product is transferred, to deliver to the owner, wool in the quantity, and of the kind, quality, class and grade, called for by the warehouse receipts or other evidence of storage.

9. Recording and retention of non-negotiable warehouse receipts received as a result of transferring wool under this section will be subject to the requirements for warehouse receipts.

10. A receiving warehouse operator must not transfer or offset to another warehouse, in any manner, their obligation to the shipping warehouse operator.

I. Reports Required

The warehouse operator agrees to:

1. When requested by FSA, make such reports, on forms prescribed and furnished for the purpose by FSA, concerning the condition, contents, operation, and business of the warehouse.

2. Keep on file, as a part of the records of the warehouse, for a period of three years after December 31 of the year in which submitted, an exact copy of each report submitted.

J. Inspections, Examinations of Warehouse

The warehouse operator agrees to permit any officer or agent of the USDA, authorized by FSA, to enter and inspect or examine on any business day during the usual hours of business, any warehouse for which they hold a license, the office, the books, records, papers, and accounts relating, and the contents thereof and will furnish that officer or agent the assistance necessary to enable making any inspection or examination.

K. Delivery of Wool

The warehouse operator must:

1. Upon proper presentation of a warehouse receipt for any identity-preserved wool and, if requested by the warehouse operator, payment of all accrued charges associated with the storage of the wool, deliver to the person lawfully entitled thereto, the identical wool stored in the warehouse, or

1. Upon proper presentation of a warehouse receipt for commingled wool, and if requested by the warehouse operator, payment of all accrued charges associated with the storage of the wool, deliver to the depositor or lawful holder of the warehouse receipt, wool of the grade and quantity named in that warehouse receipt.

L. Storage Obligations

The warehouse operator, while authorized to commingle wool in store, is liable to each depositor for the care and delivery of wool stored as if the wool were separately stored. The warehouse operator is free to store in any manner that results in their ability to produce wool, as a bailee for hire, that meets or exceeds the quantity and quality specifications of the warehouse receipt or the original delivery receipt.

M. Out of Condition and Damaged Wool

The warehouse operator may refuse to accept wool offered for storage if its condition is such that it will affect the condition of existing wool in the warehouse unless the warehouse operator chooses to separately store and condition the wool.

N. Reconditioning Wool

The warehouse operator agrees to:

1. Immediately notify the owners and the FSA when wool is going out of condition and where the warehouse operator is unable to condition the wool and stop the deterioration, and

2. Follow instructions received from FSA.

O. Warehouse Receipts

1. The warehouse operator when choosing the option to issue Electronic Warehouse Receipts (EWRs) instead of paper warehouse receipts for the agricultural product(s) stored in their warehouse agrees to:

a. Only issue EWRs through a provider whom the FSA has approved.

b. Receive written authorization from FSA at least 30 calendar days before changing providers. Upon authorization a warehouse operator may request their current provider to transfer their EWR data from its Central Filing System (CFS) to the CFS of the approved provider whom they select. Warehouse operators must notify all holders of EWRs by inclusion in the CFS at least 30 calendar days before changing providers, unless otherwise required or allowed by the Agency. Warehouse operators may only change providers once a year.

c. Cancel EWRs only when they are the holder of the receipt(s).

d. Correct information on the EWR only with written notification to the provider.

e. Before issuing EWRs, request and receive from FSA a range of consecutive warehouse receipt numbers which the warehouse operator will use consecutively for issuing their EWRs.

f. Issue warehouse receipts initially as EWRs.

1. Inform FSA of the identity of their provider 60 calendar days in advance of issuing EWRs through that provider. The FSA may waive or modify this 60 calendar day requirement as set forth under §735.2(b).

2. The warehouse operator will ensure that an issued EWR establishes the same rights and obligations with respect to an agricultural product as a paper warehouse receipt, and possess the following attributes that:

a. The person identified as the 'holder' of a EWR will be entitled to the same rights and privileges as the holder of a paper warehouse receipt.

1. Only the current holder of the EWR may transfer the EWR to a new holder.

2. The identity of the holder must be included as additional information for every EWR.

3. An EWR will only designate one entity as a holder at any one time.

4. An EWR will not be issued for a specific identity preserved or a commingled agricultural product lot if another receipt, whether paper or electronic, representing the same specific identity preserved or commingled lot of agricultural product is outstanding. No two warehouse receipts issued by a warehouse operator may have the same receipt number or represent the same agricultural product lot.

5. An EWR may only be issued to replace a paper receipt if requested by the current holder of the paper warehouse receipt.

6. Allows a ‘holder’ the option to authorize any other user of a provider to act on their behalf with respect to their activities with their provider. This authorization must be in writing, acknowledged, and retained by the provider.

7. Provisions of §735.300(c) will be applicable to lost or destroyed EWRs.

8. Only the current EWR holder may request a paper warehouse receipt in lieu of a EWR with respect to an agricultural product.

V. Paper Warehouse Receipts

A. Issuance

The warehouse operator agrees to:

1. Issue warehouse receipts for any wool stored in a warehouse at the request of a depositor.

2. Prior to issuing any warehouse receipt under the Act, obtain a copy of the original weight certificate, original inspection certificate or original inspection and weight certificate representing the wool. The warehouse operator’s records must identify the certificate (s) used as the basis for issuing the receipt and retained for a period of three years after December 31 of the year in which issued. Certificates filed in the office of an independent inspection or weighing agency or with a U.S. Registrar meet this requirement.

B. Form

1. Every warehouse receipt, whether negotiable or non-negotiable, issued for wool stored in a licensed warehouse must, in addition to complying with the requirements of section 11 of the Act, embody within its written or printed terms the following:

1. The name of the warehouse operator and the designation, if any, of the warehouse.

2. The warehouse operator’s license number.

3. The CCC contract code number, if any.

4. A statement whether the warehouse operator is incorporated or unincorporated, and if incorporated, under what laws.

5. In the event the relationship existing between the warehouse operator and any depositor is not that of a strictly disinterested custodianship, a statement setting forth the actual relationship.

6. A statement conspicuously placed, whether or not the wool is insured, and, if insured, to what extent, by the warehouse operator against loss by fire, lightning, or other risk.

7. The kind of wool.

8. A blank space for an estimate of the shrinkage of the wool.

9. For identity-preserved wool, its identification and location.

10. For commingled wool, a clear and conspicuous notation of that fact and the designation of the lot or pile of which it is a part.

11. The words “Negotiable” or “Non Negotiable” and “Original” or “Copy” as appropriate.

12. The net weight of the wool.

1. Every negotiable warehouse receipt issued must, in addition to conforming with the requirements of paragraph (a), embody within its written or printed terms, a form of endorsement which may be used by the depositor, or their authorized agent, for showing the ownership of, and liens, mortgages, or other encumbrances on the wool covered by the receipt.

2. The grade stated in a warehouse receipt must be stated as determined by the inspector who last inspected and graded the wool or, if an appeal has been taken, the grade will be stated on such receipt in accordance with the grade as finally determined in such appeal.

2. If the warehouse operator issues a warehouse receipt omitting the statement of grade on request of the depositor, such receipt will have clearly and conspicuously stamped or written in the space provided for the statement of grade the words "Not graded on request of depositor."

2. If the warehouse operator issues a warehouse receipt under the Act omitting any information not required to be stated, for which a blank space is provided in the form of the receipt, a line will be drawn through such space to show that such omission has been made purposely.

C. Persons Authorized to Sign Warehouse Receipts

The warehouse operator must file with FSA, the name and genuine signature of each person authorized to sign warehouse receipts for the warehouse operator, promptly notify FSA of any changes as to person authorized to sign, file the signatures of such persons, and will be bound by such signatures the same as if the warehouse operator had personally signed the receipt.

D. Copies of Warehouse Receipts

The warehouse operator agrees that at least one copy of all warehouse receipts must be made and, except skeleton and microfilm copies, have clearly and conspicuously printed or stamped on the face the words “Copy - Not Negotiable”.

E. Printing of Warehouse Receipts

The warehouse operator agrees to issue only warehouse receipts that:

1. Are in a form prescribed by FSA.

2. Are on distinctive paper or card stock specified by FSA.

3. Printed by a printer with whom FSA has an agreement and bond for such printing.

4. On paper and/or card stock tinted with ink in the manner prescribed by the agreement.

F. Return of Warehouse Receipts Prior to Delivery

The warehouse operator agrees to:

1. Not deliver any wool for which they have issued a negotiable receipt until the receipt has been returned to the warehouse operator and canceled.

2. Not deliver wool for which they have issued a non‑negotiable receipt until such receipt has been returned, or they have obtained from the holder or agent, a written order and a receipt upon delivery of 90% (ninety percent) of the quantity.

G. Balance Warehouse Receipts

The warehouse operator, upon request of the holder, may issue a warehouse receipt for previously warehouse receipted wool, the receipt for which has been canceled. The balance warehouse receipt must show the number and issuance date of the original warehouse receipt.

H. Lost or Destroyed Warehouse Receipts

1. The warehouse operator may issue a new warehouse receipt subject to the same terms and conditions, and bearing on its face the number and the date of the original receipt when presented with the case of a lost or destroyed warehouse receipt.

2. Before issuing a replacement warehouse receipt, the warehouse operator must require the holder or other person applying therefor to make and file with the warehouse operator:

a. An affidavit showing that the holder is lawfully entitled to the possession of the original warehouse receipt; that the holder has not negotiated or assigned it; how the original receipt was lost or destroyed; and, if lost, that diligent effort has been made to find the warehouse receipt without success.

b. A bond in an amount double the value, at the time the bond is given, of the agricultural product represented by the lost or destroyed warehouse receipt. This bond will be in a form approved for the purpose by FSA, and will be conditioned to indemnify the warehouse operator against any loss sustained by reason of the issuance of this warehouse receipt. The bond will have as surety a surety company which is authorized to do business, and is subject to administration of process in a suit on the bond, in the State in which the warehouse is located, unless a variance is granted by FSA.

3. Auditing Canceled Warehouse Receipts

The warehouse operator agrees to forward canceled receipts for auditing, as requested, to FSA.

VI. Service Licenses

A. The applicant:

1. Must make application for license to sample, classify and weigh wool to FSA on forms furnished by FSA. Each application must:

a. Be signed by the applicant.

b. Contain or be accompanied by a statement from the warehouse that the applicant is acceptable to such warehouse operator.

c. If seeking sampling and/or classification licensing, certification that the applicant can correctly sample and/or classify wool in accordance with the Official Standards of the United States.

d. If seeking weighing licensing, certification that the applicant can correctly weigh wool.

e. Furnish such additional information as requested by FSA.

B. Examination of Applicant

As a service license applicant, submit to an examination or test to show ability to properly sample, classify and/or weigh wool, as the case may be, and also make available for inspection copies of the standards of classification or the weighing apparatus as the case may be, used or to be used.

C. Grade Certificate

1. Each class certificate issued under the Act by a licensed classifier must be in a form approved by FSA, and include the following information within its terms:

a. The caption “United States Warehouse Act Wool Class Certificate”.

b. Whether it is an original, a duplicate, or other copy, and that it is not negotiable.

c. The name and location of the warehouse in which the wool is or is to be stored.

d. The date of the certificate.

e. The consecutive number of the certificate.

f. The location of the wool at the time of grading.

g. The designation of the lot from which the wool was taken.

h. If identity-preserved, the identification of the wool.

i. The pounds of each grade of wool covered by the certificate.

j. A blank space for a careful estimate of the shrinkage of the wool.

k. The kind of the wool, as determined by such duly licensed grader, in accordance with Official Standards and, in the case of wool for which no Official Standards of the United States are in effect, the standards or description in accordance with which such wool is graded.

m. The pile or lot number assigned to the grade.

1. A statement that the certificate is issued by a grader licensed under the Act and the regulations thereunder.

2. The signature of the inspector who graded the wool.

1. In addition to the provisions of paragraph 1, the inspection certificate may include any other matter consistent with the Act or the regulations, provided the authorization of FSA is first secured.

2. In lieu of an inspection certificate in the form prescribed in paragraph one, an official inspection certificate issued pursuant to the provisions of the Agricultural Marketing Act of 1946 on wool which is stored or to be stored in a warehouse licensed under the Act will be acceptable for purposes of the Act and the regulations.

D. Weight Certificates

1. Each weight certificate issued under the Act by an inspector must be in a form approved for the purpose by FSA, and include the following information within its terms:

a. The caption “United States Warehouse Act, Wool Weight Certificate”.

b. Whether it is an original, a duplicate, or other copy, and that it is not negotiable.

c. The name and location of the warehouse in which the wool is or is to be stored.

d. The date of the certificate.

e. The consecutive number of the certificate.

f. The identification of the wool if its identity is to be preserved.

g. The net weight of the wool and a statement, if there is a material fact (i.e., moisture) affecting the weight of the wool.

h. A statement that the certificate is issued by a weigher licensed under the Act, and regulations thereunder.

i. The signature of the weigher.

2. In addition to the provisions of paragraph 1, the weight certificate may include any other matter consistent with the Act or the regulations in this part provided the authorization of FSA is first secured.

E. Grade and Weight Certificate

The grade and weight of any wool, ascertained by an inspector and a weigher, may be stated on a certificate meeting the combined requirements of subsections C and D: provided the form of the certificate is approved for the purpose by FSA.

F. Duties of Inspector and Weigher

Each inspector and weigher whose license remains in effect must:

1. When given wool to grade and/or weigh under conditions which permit proper inspection and weighing, without discrimination, as soon as practicable and upon reasonable terms, perform the requested services for which licensed.

2. Issue a certificate of grade for any wool only if the grading thereof is based upon a correct and representative sample of the wool.

3. As soon as possible after grading any wool and not later than the close of business on the next following business day, make accessible to the parties interested in a transaction in which the wool is involved at the location of the license, a copy of the inspection certificate issued by the licensed inspector.

4. Keep the license to inspect, grade and/or weigh conspicuously posted at the place where those duties are performed or as directed by FSA.

1. Permit any authorized officer or agent of the USDA or FSA or their designee to inspect or examine, on any business day during the usual hours of business, their books, papers, records, and accounts relating to the performance of their duties under the Act and, with the consent of the warehouse operator concerned, assist any such officer or agent in the inspection or examination as far as it relates to the performance of the duties of such sampler, classifier or weigher under the Act.

6. Keep for a period of one year, in a place accessible to interested parties, a copy of each certificate issued and file the certificate with the warehouse in which the wool covered by the certificates is stored.

VII. Wool Grading

A. United States Standards for Grades of Wool

The United States Standards for Grades of Wool and the United States Standards for Grease Mohair are hereby adopted as the official wool standards for the purposes of the Act and the regulations.

B. Other Factors of Grade for Wool

Factors other than those included in the official grades and for which no standards of the United States are established will be stated in accordance with standards approved by FSA.

C. Wool which is reduced in value due to defects or extraneous material not addressed in the official standards are identified and defined as:

1. Excessively wrapped. Wool tied with more wrappings of twine than necessary to bundle properly folded and rolled fleece.

2. Dead wool. Wool from dead sheep.

3. Cotted Wool. Wool that has felted or matted on the sheep’s back.

4. Burry wool. Wool containing burrs removable by hand or mechanical means.

5. Seedy wool. Wool containing seeds, chaff or other vegetable matter.

6. Black, gray or colored wool. Entire fleeces or portions of black, gray or colored wool.

7. Damaged wool. Wool damaged by fire, water, moisture, or moths.

8. Carbonizing wool. Wool from which burrs or other substances which can be removed only by carbonizing.

9. Kempy wool. Wool containing kemps, opaque, white fibers, found generally in sick or old sheep.

10. False packed. A fleece so packed as fraudulently to conceal substances entirely foreign to wool.

11. Lamb’s wool. The first fleeces shorn from young sheep.

12. Buck’s wool. The heavy, oily fleeces from male sheep.

13. Bright. Bright, White lustrous wool.

14. Semi Bright. Lustrous wool dulled in color by the foreign material it contains.

VIII. Wool Arbitration

A. Procedure

In case a question arises as to whether the condition, grade, or shrinkage of the wool was correctly stated in a receipt, or grade certificate issued under the act and the regulations in this part (Except when agreements have been made in accordance with the United States Arbitration Act (42 Stat. 883; 9 U.S.C. 1-14)), the licensed warehouse operator or the lawful holder of the receipt or certificate concerned, after reasonable notice to the other interested party, may submit the question to an arbitration committee for determination in accordance with this section.

B. Formation of an Arbitration Committee

1. The arbitration committee shall be composed of three or more disinterested persons who are competent to pass upon the questions involved.

2. If there is a local trade organization such as a board of trade, chamber of commerce, exchange, or inspection department which provides such a committee under a rule or practice acceptable to the FSA for the purpose, such a committee may determine the question.

3. In the absence of such committee, or if for any good reason not inconsistent with the act and the regulations, such committee is not acceptable to either of the parties interested, the complainant and the other party shall each name a member, and the two members so named shall select a third member, who shall constitute the arbitration committee. Each member of any such committee shall at all times be subject, for good cause, to the disapproval of FSA, and in case any member is so disapproved shall not thereafter act on an arbitration committee which is considering any questions relating to the same lot of wool unless such disapproval is withdrawn.

C. Interested Parties – Duties

1. It is the duty of the interested parties to acquaint the arbitration committee with the exact nature of the question to be determined and all the necessary facts and to permit the committee to examine the receipt, certificate, or wool involved or any papers or records needed for the determination of the question.

D. Arbitration Committee – Duties

1. The committee shall make a written finding setting forth the question involved, the necessary facts, and its determination. Such findings or a true copy thereof shall be filed as a part of the records of the licensed warehouse operator involved.

2. It may dismiss the matter without determination upon the request of the complainant, or for noncompliance by the complainant with the law or the regulations in this part, or because it is without sufficient evidence to determine the question, in which case the decision shall be deemed to be against the complainant.

3. Except as otherwise provided by law, its decision shall be final for the purposes of the act and the regulations in this part, unless the Administrator shall direct a review of the question. Any necessary and reasonable expense of such arbitration shall be borne by the losing party, unless the committee shall decide that such expense shall be prorated between the parties.

4. If the decision of the arbitration committee by that the grade, condition, or shrinkage was not correctly stated, the receipt or certificate involved shall be returned to and canceled by the licensee who issued it, and he shall substitute therefor one conforming to the decision of the committee.

E. Owner Not Compelled to Store Wool

Nothing in this agreement will require the owner or agent to store such wool with the warehouse operator after the appeal inspection, but if the wool is stored it will be accepted for and delivered out of storage in accordance with the grade as finally determined in such appeal.

IX. Fees

The Office of the Secretary (delegated to the Deputy Administrator for Commodity Operations) (DACO)) is authorized, by the enabling legislation, to collect fees to cover the administration of the warehouse activities. The rates of fees are set by DACO. All fees collected under this agreement will be credited to the account that incurs the costs of administering the warehousing activities and are available without further appropriation and without regard to fiscal year concerns. A schedule showing the current fees or any annual fee changes will be provided as an addendum to the licensing agreement.

The fees for wool warehouses are detailed in the attached addendum.

This agreement forms a part of the license, number		For
	License Number

at

Warehouse Operator

	and is effective		.
Licensed Location		Date

Warehouse Operator

By

Date

For the Farm Service Agency

NOTE:

The following statement is made in accordance with the Privacy Act of 1974 (5 U.S.C. 552a - as amended).  The authority for requesting the information identified on this form is 7 CFR Part 735, the United States Warehouse Act (Pub. L. 106-472), and the Commodity Credit Corporation Charter Act (15 U.S.C. 714 et seq.). The information will be used to document wool warehouse operator agreement to abide by the terms and conditions set forth in the Licensing Agreement for Wool. The information collected on this form may be disclosed to other Federal, State, Local government agencies, Tribal agencies, and nongovernmental entities that have been authorized access to the information by statute or regulation and/or as described in applicable Routine Uses identified in the System of Records Notice for USDA/FSA-2, Farm Records File (Automated) and USDA/FSA-3, Consultants File.  Providing the requested information is voluntary.  However, failure to furnish the requested information will result in a determination of ineligibility to obtain new licensing or retain existing licensing under the United States Warehouse Act. According to the Paperwork Reduction Act of 1995, an agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a valid OMB control number. The valid OMB control number for this information collection is 0560-0120. The time required to complete this information collection is estimated to average 30 minutes per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. The provisions of appropriate criminal and civil fraud, privacy, and other statutes may be applicable to the information provided. RETURN THIS COMPLETED FORM TO THE KANSAS CITY COMMODITY OFFICE, WAREHOUSE LICENSE AND EXAMINATION DIVISION, STOP 9148, P.O. BOX 419205, KANSAS CITY, MO 64141-6205.

The U.S. Department of Agriculture (USDA) prohibits discrimination in all of its programs and activities on the basis of race, color, national origin, age, disability, and where applicable, sex, marital status, familial status, parental status, religion, sexual orientation, political beliefs, genetic information, reprisal, or because all or part of an individual’s income is derived from any public assistance program.  (Not all prohibited bases apply to all programs.)  Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA’s TARGET Center at (202) 720-2600 (voice and TDD).  To file a complaint of discrimination, write to USDA, Assistant Secretary for Civil Rights, Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue, S.W., Stop 9410, Washington, DC  20250-9410, or call toll-free at (866) 632-9992 (English) or (800) 877-8339 (TDD) or (866) 377-8642 (English Federal-relay) or (800) 845-6136 (Spanish Federal-relay).  USDA is an equal opportunity provider and employer.