510 AGRICULTURAL ECONOMICS 



Up to the present time no foreign exchange has adopted a form 

 of future contract for cotton grown in the United States that complies 

 with the conditions specified, an important one of which is the recogni- 

 tion and use of the Official Cotton Standards of the United States. 

 During the latter part of 1914 representatives of this department 

 were sent to Liverpool, Bremen, and Havre to explain the proposed 

 Official Cotton Standards of the United States to the exchanges in 

 those cities, with the view of securing their adoption as international 

 or universal standards. 



H.R. 11861 substantially incorporates the provisions of the 

 United States Cotton Futures Act of August 18, 1914, and in addition 

 includes two new provisos to section n and a new section denominated 

 section nA. The first of the new provisos to section n provides 

 that if the Secretary of Agriculture determines and publicly announces 

 that the terms of any future contract made on a foreign exchange are 

 the substantial equivalent, and sufficient to accomplish the purposes, 

 of the conditions specified in the fourth, fifth, and sixth subdivisions 

 of section 5 of the act and the rules and regulations relating thereto, 

 such contract shall be deemed to comply with such conditions. The 

 obvious effect of this proviso would be to enable foreign exchanges 

 to comply more readily with the conditions for exemption from 

 taxation. 



It appears that the future contract for American cotton now in 

 use by the Liverpool Cotton Association likely is, or could very easily 

 be made, the substantial equivalent and sufficient to accomplish the 

 purposes of the fourth, fifth, and sixth subdivisions of section 5 of the 

 act. It now complies with the first subdivision of section 5. Thus 

 in addition, by its recognition and adoption of the Official Cotton 

 Standards of the United States (as specified in the second and third 

 subdivisions of section 5), the Liverpool contract could be freely 

 traded in by persons in the United States without liability to taxation 

 under the provisions of H.R. 11861, if enacted. 



The last proviso to section n of the bill exempts from taxation 

 thereunder all orders sent from the United States for future contracts 

 on foreign exchanges, as hedges of spot cotton of American growth 

 purchased or sold for shipment, or shipped or consigned, from v the 

 United States to a foreign country, and for the transfer and liquida- 

 tion of such hedges. It is made a condition of the exemption that 

 a report of the transaction, including the shipment of the cotton 

 involved, be made to the Secretary of the Treasury. Thus farmers, 



