[Federal Register Volume 59, Number 180 (Monday, September 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23035]


  Federal Register / Vol. 59, No. 180 / Monday, September 19, 1994 /
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[[Page Unknown]]

[Federal Register: September 19, 1994]


                                                   VOL. 59, NO. 180

                                         Monday, September 19, 1994

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 400

 

General Administrative Regulations; Actual Production History 
(APH) Coverage Program

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) hereby issues 
regulations to provide a method for determining insurance coverage 
based on Actual Production History (APH). An approved APH yield, when 
multiplied by a percentage of an elected coverage level and price per 
commodity unit, results in a dollar amount of insurance coverage per 
acre. This rule is being promulgated in accordance with the 
requirements of the Federal Crop Insurance Act, as amended.

EFFECTIVE DATE: October 19, 1994.

FOR FURTHER INFORMATION CONTACT:
Mari Dunleavy, Regulatory Specialist, Regulatory and Procedural 
Development, Federal Crop Insurance Corporation, U.S. Department of 
Agriculture, Washington, DC 20250, telephone (202) 254-8314.

SUPPLEMENTARY INFORMATION: This action has been reviewed under USDA 
procedures established by Executive Order 12866, and Departmental 
Regulation No. 1512-1. This action constitutes a review as to the need, 
currency, clarity, and effectiveness of these regulations under those 
procedures. The sunset review date established for these regulations is 
September 1, 1999.
    This rule has been determined to be not-significant for purposes of 
Executive Order 12866, and therefore, exempt from OMB review and has 
not been reviewed by the Office of Management and Budget (OMB).
    This action does not have a significant effect on a substantial 
number of small entities. It imposes no added burden on the insured 
farmer or on the private insurance company serving as the delivery 
agent. APH has been the basis for computing insurance guarantees under 
the Federal Crop Insurance Program, on an ad hoc basis for over eight 
years and has its genesis in the Individual Yield Coverage Plan (7 CFR 
400.15-400.21). This rule codifies procedure which is already 
effective. Therefore, this action is exempt from the provisions of the 
Regulatory Flexibility Act and no Regulatory Flexibility Analysis was 
prepared.
    The program is listed in the Catalog of Domestic Assistance under 
No. 10.450.
    This program is not subject to the provisions of Executive Order 
12372 which require intergovernmental consultation with State and local 
officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115, June 24, 1983.
    This action is not expected to have any significant impact on the 
quality of the human environment, health, and safety. Therefore, 
neither an Environmental Assessment or an Environmental Impact 
Statement is needed.
    The collection requirement for this regulation is form number FCI-
19A (APH Production Reporting Form) and has been previously approved by 
the OMB under the provisions of 44 U.S.C. 3501 et seq., the Paperwork 
Reduction Act of 1980. The control number for the APH Production 
Reporting Form is OMB #0563-0029. See 7 CFR part 400, subpart H.
    It has been determined under section 6(a) of Executive Order 12612, 
Federalism, that this proposal does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment. The 
policies and procedures contained in this rule will not have 
substantial direct effects on states or their political subdivisions, 
or on the distribution of power and responsibilities among the various 
levels of government.
    This rule has been reviewed in accordance with Executive Order 
12778. The provisions of this rule are not retroactive and will preempt 
State and local laws to the extent such State and local laws are 
inconsistent. The administrative appeal provisions, located at 7 CFR 
part 400, subpart J, must be exhausted before judicial action may be 
brought for actions taken under these proceedings.

Background

    The Federal Crop Insurance Act, as amended by the Omnibus Budget 
Reconciliation Act of 1993 (Pub. L. 103-66), requires the establishment 
of a plan and the publication of regulations for the use of the 
producer's actual production history to determine yield coverage. FCIC 
has used such a plan on an ad hoc basis for a number of years.
    An approved actual production history (APH) yield, multiplied by a 
percentage of an elected coverage level and price per commodity unit, 
provides the dollar amount of insurance coverage per acre. If the 
insured does not submit production records for insurance purposes, 65 
percent of an FCIC estimated yield (transitional or determined yield) 
is the default approved APH yield. The FCIC estimated yield, after 
applicable adjustment, is used in conjunction with actual production 
records to compute the approved APH yield when less than four years of 
actual production records are available.
    On October 14, 1993, the FCIC published in the Federal Register at 
58 FR 53150 proposed regulations outlining the provisions for the APH 
plan. The FCIC requested and received comments from the public 
regarding the proposal.
    The comments and their responses are grouped according to subject, 
area of concern, and by subpart of the proposed regulation.

1. General Comments, Differences Compared to 1994 APH Program

    Comments: Several comments pointed out that the new producer, crop 
year, and base period definitions differ from FCIC approved procedures 
implemented for the 1994 crop year. The comments requested that the 
regulation be changed to agree with those APH procedures if it is to be 
effective for the 1994 crop year. They indicated that these changes 
will drastically affect computer programming, computer edits, FCIC data 
reporting requirements, etc. If the regulation is not changed and is to 
be effective for the 1994 crop year, they requested that the comment 
period be reopened to provide an opportunity to review the impact of 
these changes.
    Response: There are differences between the regulation published 
for comment and the APH procedures used for the 1994 crop year. The 
differences are minor but, if implemented for the 1994 crop year, the 
regulation would have major impacts on the current program. Fall and 
spring seeded crop policies have been sold, production reports filed, 
and approved APH yields calculated, processed, and submitted to FCIC 
based on procedures implemented in July 1993.
    For these reasons, the regulation, with minor changes, will be 
implemented effective for the 1995 crop year.

2. Coverage and Participation

    Comment: Twenty comments stated that the APH program will reduce 
insurance protection to many farmers, decrease farmer participation, 
and increase future demand for free disaster payments. The comments 
suggested that FCIC encourage participation by offering higher levels 
of protection to producers.
    Comment: One comment noted that 65 percent of the transitional 
yield will be used when a producer does not furnish any previous yield 
data. The comment suggested that FCIC change this percentage to 80 
percent.
    Comment: Section 400.54(b)--the proposed reduction of transitional 
or determined yields by the stated 80 percent for maintaining one year 
of actual records and 90 percent for maintaining two years of actual 
records is inadequate to serve as an incentive for insureds to report 
all four years of actual production in relationship to the 65 percent 
reduction for no records. Also, there does not appear to be a penalty 
for maintaining only three years of actual records. A greater penalty 
is needed for not maintaining less than four years of records.
    Comment: One comment suggested that if a producer applying for 
Federal crop insurance coverage has no previous production records (an 
example of this would be production of the alternative crop Kenaf, 
where very little production history exists), that individual should be 
able to receive crop insurance coverage for the entire crop. The only 
way to accomplish this is to raise the transfer yield to 100 percent, 
as opposed to 65 percent. The comment also recommended that an option 
be provided to allow producers to purchase additional coverage for 
crops having no previous production records.
    Comment: One comment urged FCIC to exclude those losses resulting 
from catastrophic events in the loss ratio determination.
    Response: The Federal Crop Insurance Act, as amended, requires FCIC 
to take actions as necessary to improve actuarial soundness of the 
multiple peril crop insurance program. FCIC is mandated to achieve an 
overall loss ratio, within certain parameters, of not greater than 1.10 
by October 1, 1995. FCIC's research using existing insureds' APH data 
indicates insureds with no records of production (or one or two years 
of records) are paid disproportionate losses compared to insureds who 
have provided three or more years of production records. Further 
analyses by FCIC using modified APH procedures and existing insureds' 
APH data, indicates that 65 percent of the transitional or determined 
yield (hereafter referred to as T-Yield in FCIC's responses) is an 
appropriate percentage to attain the required loss ratio for persons 
who have not submitted records. Independent analyses from a private 
insurance association support these findings.
    Insureds who have provided three or four years of records have 
lower loss costs and do not require the use of reduced T-Yields. 
Modifications to APH are not intended to reduce insurance protection to 
farmers, rather the intent is to base yields more fully on actual 
yields and to rely less on T-Yields. APH procedures allow ample 
opportunity for producers who have not raised insurable crops (and 
therefore have not had the opportunity to establish records) to qualify 
for APH yields greater than 65 percent of the T-Yield through use of 
new producer, added land, and new practice procedures.
    Producers are encouraged to provide as many years of actual yields 
as possible. Above average yields will reduce the impact of low yields. 
If actual yields reported are higher than the T-Yield, modified APH 
procedures allow a better opportunity for increased insurance yields as 
compared to previous APH procedures.
    FCIC is not able to provide APH yields higher than the insured's 
average yields without adversely affecting FCIC loss ratio and 
financial accountability. FCIC has researched options that provide 
coverage based on yields higher than the insured's APH yield or the 
yield history available for the crop on a county basis. This analysis 
indicates that a significant increase in premium rates is required to 
make such a program actuarially sound. FCIC will retain the APH 
structure as proposed.

3. Section 400.50 Availability of APH Program

    Comment: The last sentence of Sec. 400.50 states, ``Except when in 
conflict with this subpart, all provisions of the applicable crop 
insurance contract for these crops apply.'' Concern was expressed that 
this regulation may override the terms and conditions in current crop 
filings. The commentor indicated that policy language should not be 
superseded by any other published regulations since policyholders 
receive copies of policy provisions but do not receive Federal 
regulations.
    Response: Federal regulations have the force and effect of law and 
all have constructive notice of the provisions. As a practical matter 
we are not aware of any provision of the published policies in conflict 
with these regulations. As crop insurance policies which base 
production guarantees on APH yields are revised, those provisions 
relating to APH will be changed in accordance with the final APH 
regulation. Reinsured companies furnish policyholder's letters that 
describe changes to each crop insurance contract. These letters also 
suggested that insureds contact their agents for a full explanation of 
the changes and once so advised, insureds then can make informed crop 
insurance decisions. Copies of these letters should be provided by the 
insurer to all affected policyholders.

4. Added Land (Purchased or Leased)

    Comment: One comment stated concern that, under the proposed 
regulation, the producer is not eligible to transfer his or her skill 
and history to new land purchased or leased. It was suggested that a 
producer's history be taken into account when calculating coverage 
under a crop insurance policy.
    Response: The regulation provides general rules while allowing 
flexibility for program details to be provided in procedures. Added 
land procedures for APH yield determinations are available that provide 
insureds the opportunity to establish approved APH yields higher than 
65 percent of the T-Yield when new land is purchased or leased. FCIC 
has added a new paragraph to Sec. 400.54(b) consistent with those 
procedures which allow yields for added land that are more comparable 
to approved APH yields determined from acreage with records.

5. Databases Used To Calculate the APH Yield

    Comment: One comment noted that a four year history does not 
provide a balanced history in which an agent can accurately calculate a 
producer's coverage. A one or two year drought would severely affect a 
producer's history. A ten year history would provide more stability.
    Comment: One comment suggested that the base period be a minimum of 
five years. Four years are not sufficient. Approved yields may 
fluctuate tremendously from year to year. The schedule for the 
percentage of the T-Yield used, based upon the years records provided, 
should be as follows: zero years--80 percent; one year--85 percent; two 
years--90 percent; three years--95 percent; four years--100 percent; 
and five or more years the T-Yield is not used.
    Comment: One comment noted that in Sec. 400.54(h), ``FCIC may use 
any production reports available under the provisions of any crop 
insurance contract, whether continuous or not (emphasis added), which 
involve the interests of the insured person in determining the approved 
APH yield.'' Current APH procedures allow new insureds (including 
insureds with a break in continuity of insurance coverage of at least 
one year) to certify one or more crop years to establish the APH yield. 
Since processing has already begun, implementation of yields that are 
not continuous will impose major difficulties. In accordance with the 
proposed definition of crop year, this could require companies to 
maintain yield history indefinitely (for example, a farmer may have had 
a policy five years ago with production history going back 30 or 40 
years to accumulate 10 crop years).
    Response: The level at which the reduced T-Yield has been set for 
zero, one, or two years of records was established to offset 
disproportionate losses as compared to insureds who have provided more 
years of actual records. Using higher levels of T-Yields is contrary to 
that objective. The modified APH program encourages the insured to 
provide actual records by using reduced T-Yields if the insured 
provides less than four years of actual yields.
    The proposed regulation does not limit insureds to providing only 
four years of actual yield. In fact, continuous records up to ten years 
must be used if available. The more years of records used, the less the 
effect fewer actual yields have. Insureds may submit one to ten years 
of continuous crop years of actual yields to be used in the APH yield 
calculation.
    With data automation and reporting changes, actual yields will be 
retained until the database contains ten crop years of actual yields. 
There is no need to expand the database to include calendar years that 
are not used to calculate the APH yield. Data processing changes can be 
accomplished for the 1995 crop year.

6. Why a Federal Regulation?

    Comment: One comment requested justification as to FCIC publishing 
in the Federal Register a program (APH) that has already been 
implemented by FCIC approved procedures. The comment went on to state 
that, as introduced in the mid 1980's the APH program did not have its 
procedures published in the Federal Register. By implementing the 
program as a regulation, the comment stated that FCIC is limiting its 
ability to administer the APH program as changes can no longer be 
handled administratively. Any changes will be required to be published 
in the Federal Register prior to implementation.
    Response: The regulation provides a foundation on which the APH 
program and procedures will be based. The regulation will strengthen 
FCIC's and reinsured companies' ability to defend the procedures used 
to determine APH yields if reconsideration, appeal, or litigation 
proceedings relating to APH are pursued by insureds. The previous 
unpublished procedures were not effective unless the insureds received 
actual notice of program changes prior to the contract change date.

7. Base Period Section 440.51(g) and Crop Year Section 400.51(i)

    Comment: Sec. 400.51(g), (i)--Three objections to the definition of 
crop year and base period were stated. The base period is defined at 10 
consecutive crop years. Crop year is defined as any year in which the 
crop is planted. Under the regulation, the base period is no longer 10 
consecutive crop years beginning with the most recent year, but would 
vary from each crop and policy, and possibly from each database within 
a policy. It is conceivable that a database may contain land planted to 
the insured crop every other year, in such case, the base period could 
stretch back 20 calendar years to obtain 10 crop years.
    Response: Crop year as defined, benefits producers who rotate 
different crops, rotate the same crop on different units, or who only 
occasionally plant the insured crop. For example, if an insured has 
three consecutive crop years of actual records on a unit: 1984, 1988, 
and 1993, by using crop year as defined in the regulation, all three 
actual yields will be retained in the database for the 1995 crop year. 
If the crop is not planted in 1994, 100 percent of the T-Yield will be 
used as the fourth yield when calculating the APH yield. The more years 
of experience in the database, the more reliable a yield determination 
can be made. Requiring only 10 consecutive calendar years of records 
may result in a yield determination which does not adequately reflect 
the farm history.
    Comment: A comment was received recommending deleting the last 
sentence of Sec. 400.51 (i) which states, ``If the insured is prevented 
from planting all of his acreage in the county due to flood and does 
not plant for harvest any other crop, FCIC will assign a yield for that 
year.''
    Response: FCIC agrees with this comment and has deleted the last 
sentence accordingly.

8. Section 400.51(m)  New Producer Definition

    Comment: Several comments noted that the definition of new producer 
is different in the rule than the definition implemented by the ad hoc 
procedures for 1994 fall crop year. The definition in the procedures 
defines a new producer as a ``person who has not been actively engaged 
in farming for a share of the insured crop's production in the county 
for more than two years.'' The rule defines the new producer as ``a 
person who has not been actively engaged in farming for a share of a 
crop for more than two years.'' The rule deals with individuals who are 
new to farming while procedures deal with individuals who are new to 
producing the crop they wish to insure. If the proposed definition of a 
``new producer'' goes into effect, very few producers will qualify as a 
new producer.
    Response: FCIC agrees that this definition may be too restrictive. 
For example, a producer who has never raised corn would NOT be 
considered a ``new producer'' for corn if he or she has raised another 
crop (wheat for example) for more than two crop years. Under the 
proposed regulation this producer's insurance yield for corn would be 
restricted to 65 percent of the T-Yield because records are not 
available for corn. A producer who has no farming experience at all 
would fare much better, because as a ``new producer'' he or she will 
qualify for an insurance yield based on 100 percent of the T-Yield (for 
all insured crops). After further evaluation, FCIC agrees that the 
``new producer'' provisions should apply to new producers of an insured 
crop regardless of their production of other crops.

9. Section 400.51  Definitions

    Comment: Several comments recommended technical corrections of 
definitions as follows:
    1. Actual Yield and Production Report--reference is made to 
``insurable acres for perennial crops'' instead of ``planted acres.''
    2. Approved APH Yield--the database may not always contain four 
consecutive crop years (actual yields). The definition needs clarity 
that the total of the yields is divided by the number of years with 
yields. (Also see comments to definition of ``Crop Year.'')
    3. Assigned Yield--suggest changing ``considered'' to ``handled in 
the same manner as.''
    4. Master Yield--indicate its availability is limited to certain 
crops and counties designated by FCIC.
    5. Production Report--remove ``by us'' in the first sentence. 
Rewrite to include the possibility that production may be reported for 
more than the one (most recent) crop year.
    Response: FCIC agrees with these comments and has revised the 
definitions accordingly.

10. Section 400.52  Reporting and Record Requirements

    Comment: One comment suggested that the language in 
Sec. 400.52(b)(1), regarding inaccurate reporting or failure to retain 
acceptable records, be changed from ``may result'' or ``may be'' to 
``shall be'' to eliminate any implicit option. The penalty for not 
having or retaining acceptable records should be the combining of farm 
units and the recalculation of the APH yield.
    Response: Basic farm units must be provided irrespective of APH 
records. Optional farm units are a further subdivision of basic units 
and must meet separate record requirements stated in the crop policy to 
qualify as separate optional units. Recalculation of the APH yield will 
not always result in a lower APH yield. However, if inaccurately 
reported or acceptable records are not retained for either basic or 
optional units, APH yields will be recalculated. FCIC has made changes 
to the regulation to address this concern that are consistent with the 
crop insurance policies.
    Comment: Section 400.52(b)(4)--This provision states that the 
policy may be canceled and subject to false claims penalties if the 
production history is not accurate. Section 400.52 (a)(3) indicates it 
is acceptable not to provide complete production reports since assigned 
yields are an acceptable means to maintain continuity of yield data on 
file. A comment suggested that Sec. 400.52 (a)(3) and (b)(4) are in 
conflict with Sec. 400.52(b)(1).
    Response: FCIC does not agree that a conflict exists. However, FCIC 
has clarified these provisions to more accurately reflect their intent. 
Section 400.52(a)(3) allows FCIC to use previously reported production 
history to calculate APH yields, if the insured does not file annual 
production reports as required by the policy. Section 400.52(b)(1) 
specifies that inaccurate reporting or failure to maintain acceptable 
supporting records will result in the combining of optional units and 
recalculation of the APH yield. Section 400.52(b)(4) is a separate 
action that may be taken if an insured misrepresents or fraudulently 
reports APH information.

11. Section 400.53  Submission and Accuracy of Production Reports

    Comment: One comment suggested deleting Sec. 400.53(e) since it 
essentially duplicates the provisions of Sec. 400.53(a).
    Response: FCIC agrees with this comment and has changed the 
provision accordingly.

12. Section 400.54  Qualification for Actual Production History 
Coverage Program

    Comment: Section 400.54(a)--One comment suggested that the first 
sentence be revised because production reports for the four most recent 
crop years are not required to qualify for APH. The comment also 
suggested revising the last sentence because of the possibility of zero 
planted years. The comment suggested employing ``. . . will occur in 
the database when there are less than four actual/assigned yields in 
the database.''
    Response: FCIC agrees with these suggestions and has made the 
appropriate changes.
    Comment: One comment noted that in Sec. 400.54(a) the term ``will 
be updated'' suggests that production reports are mandatory each 
subsequent crop year. The comment suggested that the regulation address 
the possibility that coverage may be based on 65 percent of the T/D 
yield without yearly production reports.
    A comment also stated that records are not mandatory, as indicated 
in Sec. 400.54(b), and that insureds may have approved APH yields based 
on 65 percent of the T/D-Yield if acceptable records are not available 
or not provided. The comment also stated that yields from claims will 
not be used (as indicated in Sec. 400.51(n)), if an insured elects not 
to provide records and have the APH yield based on 65 percent of the T/
D Yield (also applies to Sec. 400.54(d)).
    Response: FCIC implemented procedures for modified APH for the 1994 
crop year intending to allow producers the option of basing production 
guarantees on 65 percent of the T-Yield without requiring records. Not 
requiring records in subsequent crop years had been criticized because 
the use of loss records is perceived to be mandatory for APH purposes. 
It is also viewed as not encouraging insureds to provide records.
    FCIC agrees that use of loss records should be required for APH 
purposes. Actual yields determined from claims for indemnities will be 
used when calculating APH yields for the 1995 and succeeding crop 
years. Calculation of APH yields based on 65 percent of the T-Yield 
without records will be allowed only for the initial crop year of 
insurance. Records will be required for subsequent crop years.
    Comment: Section 400.54(d)--One comment suggested deleting the 
phrase ``to compute an approved APH yield'' because it is not required 
to have an actual yield for the most recent crop year to calculate an 
approved APH yield. The comment also suggested deleting the phrase ``at 
discretion of FCIC.''
    Response: FCIC does not agree with the suggestion to delete ``to 
compute an approved APH yield'' because the phrase relates to providing 
actual yields (production records) in order to qualify for optional 
units. However, the language has been clarified to reflect this intent.
    FCIC does not agree that ``at discretion of FCIC'' should be 
removed. This provision allows FCIC a degree of flexibility concerning 
the impact of loss records (e.g., FCIC may need to lessen the impact a 
loss record has on APH yields for a catastrophic year).
    Comment: Secion 400.54(e)--One comment suggested deleting 
provisions (1), (2), and (3), because the provisions are more 
applicable to procedures. If not deleted, the comment suggested 
inclusion of the definition ``FCIC RSO Determined Yield'' and 
clarification that provisions (1), (2), and (3) apply only to category 
C perennial crops, not just item (3). The comment further suggested 
deleting any reference to T-yield tables in (1).
    Response: FCIC does not agree that Sec. 400.54(e) (1), (2), and (3) 
of the rule should be deleted. These provisions allow additional 
flexibility for those situations listed. For example, T-Yields are not 
published for all crops or for all counties. Therefore, the rule must 
allow an alternative method to calculate approved APH yields when T-
Yields are not available. For this reason, the reference to T-Yields 
should not be deleted. These provisions allow FCIC to continue APH 
procedures implemented for the 1994 crop year that are consistent with 
procedures used in previous crop years. The term ``FCIC RSO Determined 
Yield'' is not used in the rule, so consequently, the term need not be 
defined.
    Comment: Section 400.54(g)--One comment suggested the following 
rewrite of the last sentence to improve clarity: ``Master Yields are 
based on production history from all acreage of the crop in which the 
insured has an interest in the county.'' Another comment noted that the 
rule consistently requires that the producer provide four years of 
records in order to qualify for a Master Yield. This requirement has 
hampered new sales of crop insurance which use the Master Yield 
concept. Master Yields may vary drastically between landlord and tenant 
on the same piece of ground due to the fact that a producer's yield is 
calculated using records from all farms. The comment suggested that 
FCIC work with the industry to resolve these problems.
    Response: FCIC agrees with these comments and has made the 
necessary changes. Regarding the concerns about Master Yields, FCIC 
will not change the four-year record requirement because APH is also 
available on Master Yield crops. FCIC also will base Master Yields on 
the operator's records. By calculating Master Yields from the 
operator's records, the same APH yield will be provided for both the 
landlord and tenant. FCIC has implemented the Master Yield changes for 
the 1994 crop year.
    Comment: Section 400.54(h)--One comment suggested that the phrase 
``whether continuous or not'' was misleading, considering the previous 
emphasis on maintaining continuity of production reports. The comment 
further made the following observations. If entering a yield is 
intended to allow use of history prior to the break in continuity of 
production reports, it should be so clarified. If intended to allow 
prior history regardless of a break in continuity of insurance, 
entering a yield will impose major difficulties. In conjunction with 
the revision in crop year definition, this could require companies to 
maintain yield history indefinitely. For example, a farmer many have 
had a policy five years ago but production history may have to go back 
30 or 40 calendar years to accumulate 10 crop years of actual yields.
    Response: This provision does not affect the continuity 
requirements applicable to annual production reports provided by the 
insured. However, it does allow FCIC to use production history on file 
prior to a break in continuity of insurance coverage. FCIC reserves the 
latitude of implementing this provision by issuing procedures outlining 
records identification (tracking) methods to correctly assign such 
production. FCIC recently implemented a policyholder tracking system 
based on social security/employee identification numbers and may 
implement this provision in the future. Use of this procedure keeps an 
insured who may have had a low APH yield from canceling insurance for 
one year in order to achieve a fresh start, and thus, gain a higher 
yield.

List of Subjects in 7 CFR Part 400

    Actual Production History Coverage Plan, Crop Insurance.

Final Rule

    Accordingly, pursuant to the authority contained in the Federal 
Crop Insurance Act, as amended by the Omnibus Budget Reconciliation Act 
of 1993, the Federal Crop Insurance Corporation hereby amends 7 CFR 
part 400 by adding a new subpart to read as follows:

PART 400--GENERAL ADMINISTRATIVE REGULATIONS

Subpart G--Actual Production History

Sec.
400.51  Availability of actual production history program.
400.52  Definitions.
400.53  Yield certification and acceptability.
400.54  Submission and accuracy of production reports.
400.55  Qualifications for actual production history coverage 
program.
400.56  Administrative appeal exhaustion.
400.57  OMB control numbers.

Subpart G--Actual Production History

    Authority: 7 U.S.C. 1506, 1516.


Sec. 400.51  Availability of actual production history program.

    An Actual Production History (APH) Coverage Program is offered 
under the provisions contained in the following regulations:

7 CFR 401.110--Almond Endorsement
7 CFR part 405--Apple Crop Insurance
7 CFR 401.118--Canning and Processing Bean Endorsement
7 CFR part 409--Arizona-California Citrus Crop Insurance
7 CFR 401.127--Cranberry Endorsement
7 CFR part 433--Dry Beans Crop Insurance
7 CFR 401.116--Flaxseed Endorsement
7 CFR part 415--Forage Production Corp Insurance
7 CFR 401.130--Grape Endorsement
7 CFR part 455--Macadamia Nut Crop Insurance
7 CFR 401.126--Onion Endorsement
7 CFR part 447--Popcorn Crop Insurance
7 CFR part 403--Peach Crop Insurance
7 CFR 401.140--Pear Endorsement
7 CFR part 416--Pea Crop Insurance
7 CFR 401.146--Fresh Plum Endorsement
7 CFR part 422--Potato Crop Insurance
7 CFR part 450--Prune Crop Insurance
7 CFR 401.123--Safflower Seed Endorsement
7 CFR 401.133--Sugarcane Endorsement
7 CFR part 430--Sugar Beet Crop Insurance
7 CFR 401.124--Sunflower Seed Endorsement
7 CFR part 437--Sweet Corn Crop Insurance
7 CFR part 441--Table Grape Crop Insurance
7 CFR 401.129--Guaranteed Tobacco Endorsement
7 CFR 401.114--Canning and Processing Tomato Endorsement
7 CFR part 454--Guaranteed Production Plan of Fresh Market Tomato
7 CFR part 446--Walnut Crop Insurance
7 CFR part 457--Common Crop Insurance Regulations; and all special 
provisions thereto unless specifically excluded by the special 
provisions.

    The APH program operates within limits prescribed by, and in 
accordance with, the provisions of the Federal Crop Insurance Act, as 
amended (7 U.S.C. 1501 et seq.), only on those crops identified in this 
section in those areas where the Actuarial Table provides coverage. 
Except when in conflict with this subpart, all provisions of the 
applicable crop insurance contract for these crops apply.


Sec. 400.52  Definitions.

    In addition to the definitions contained in the crop insurance 
contract, the following definitions apply for the purposes of the APH 
Coverage Program:
    (a) APH--Actual Production History.
    (b) Actual yield--The yield per acre for a crop year calculated 
from the production records or claims for indemnities. The actual yield 
is determined by dividing total production (which includes harvested 
and appraised production) by planted acres for annual crops or by 
insurable acres for perennial crops.
    (c) Adjusted yield--The transitional or determined yield reduced by 
the applicable percentage for lack of records. The adjusted yield will 
equal 65 percent of the transitional or determined yield, if no 
producer records are submitted; 80 percent, if records for one year are 
submitted; and 90 percent, if two years of records are submitted.
    (d) Appraised production--Production determined by the Agricultural 
Stabilization and Conservation Service (ASCS), the FCIC, or a company 
reinsured by the FCIC, that was unharvested but which reflected the 
crop's yield potential at the time of the appraisal. For the purpose of 
APH ``appraised production'' specifically excludes production lost due 
to uninsurable causes.
    (e) Approved APH yield--A yield, calculated and approved by the 
verifier, used to determine the production guarantee and determined by 
the sum of the yearly actual, assigned, and adjusted or unadjusted 
transitional or determined yields divided by the number of yields 
contained in the database. The database may contain up to 10 
consecutive crop years of actual and or assigned yields. At least four 
yields will always exist in the database.
    (f) Assigned yield--A yield assigned by FCIC in accordance with the 
crop insurance contract, if the insured does not file production 
reports as required by the crop insurance contract. Assigned yields are 
used in the same manner as actual yields when calculating APH yields 
except for purposes of the Nonstandard Classification System (NCS).
    (g) Base period--Ten consecutive crop years (except peaches, which 
have a five-year base period) immediately preceding the crop year 
defined in the insurance contract for which the approved APH yield is 
being established (except for sugarcane, which begins the calendar year 
preceding the immediate previous crop year defined in the insurance 
contract).
    (h) Continuous production reports--Reports submitted by a producer 
for each crop year that the unit was planted to the crop and for the 
most recent crop year in the base period.
    (i) Crop year--Defined in the crop insurance contract, however, for 
APH purposes the term does not include any year when the crop was not 
planted or when the crop was prevented from being planted by an 
insurable cause. For example, if an insured plants acreage in a county 
to wheat one year, that year is a crop year in accordance with the 
policy definition. If the land is summerfallowed the next calendar 
year, that calendar year is not a crop year for the purpose of APH.
    (j) Database--A minimum of four years up to a maximum of ten crop 
years of production data used to calculate the approved APH yield.
    (k) Determined yield (D-yield)--An estimated year for certain 
crops, which can be determined by multiplying an average yield for the 
crop (attained by using data available from The National Agricultural 
Statistics Service (NASS) or comparable sources) by a percentage 
established by the FCIC for each county.
    (l) Master yields--Approved APH yields, for certain crops and 
counties as initially designated by the FCIC, based on a minimum of 
four crop years of production records for a crop within a county.
    (m) New producer--A person who has not been actively engaged in 
farming for a share of the production of the insured crop for more than 
two crop years.
    (n) Production report--A written record showing the insured crop's 
annual production and used to determine the insured's yield for 
insurance purposes. The report contains yield history by unit, if 
applicable, including planted acreage for annual crops, insurable 
acreage for perennial crops, and harvested and appraised production for 
the previous crop years. This report must be supported by written 
verifiable records, measurement of farm stored production, or by other 
records of production approved by FCIC on an individual basis. 
Information contained in a claim for indemnity is considered a 
production report for the crop year for which the claim was filed.
    (o) Production Reporting Date (PRD)--The PRD is contained in the 
crop insurance contract and is the last date production reports will be 
accepted for inclusion in the database for the current crop year.
    (p) Transitional yield (T-Yield)--An estimated yield, for certain 
crops, generally determined by multiplying the ASCS program yield by a 
percentage determined by the FCIC for each county and provided on the 
actuarial table to be used in the APH yield calculation process when 
less than four consecutive crop years of actual or assigned yields are 
available.
    (q) Verifiable records--Contemporaneous records of acreage and 
production provided by the insured, which may be verified by FCIC 
through an independent source, and which are used to substantiate the 
acreage and production that have been reported on the production 
report.
    (r) Verifier--A person authorized by the FCIC to calculate approved 
APH yields.
    (s) Yield variance tables--Tables for certain crops that indicate 
unacceptable yield variations and yield trends which will require 
determination of the APH yield by the FCIC.


Sec. 400.53  Yield certification and acceptability.

    (a) Production reports must be provided to the crop insurance agent 
no later than the production reporting date for the crop insured.
    (1) Production reports must provide an accurate account of planted 
acreage for annual crops or insurable acres for perennial crops, as 
well as harvested and appraised production by unit.
    (2) The insured must certify the accuracy of the information.
    (3) Production reported for more than one crop year must be 
continuous. A year in which no acreage was planted to the crop on a 
unit or no acreage was planted to a practice, type, or variety 
requiring an APH yield will not be considered a break in continuity. 
Assigned yields, at the discretion of the FCIC, may be used to maintain 
continuity of yield data of file. Production on uninsured (for those 
years a crop insurance policy under the Federal Crop Insurance Act is 
in effect) or uninsurable acreage (for other years of the period) will 
not be used to determine APH yield unless production from such acreage 
is commingled with production from insured or insurable acreage.
    (b) Production reports and supporting records are subject to audit 
or review to verify the accuracy of the information certified. 
Production and supporting records may be reviewed and verified if a 
claim for indemnity is submitted on the insured crop. The reported 
yield is subject to revision, if needed, so that the claim conforms to 
the records submitted at that time.
    (1) Inaccurate production reports or failure to retain acceptable 
records shall result in the verifier combining optional farm units and 
recomputing the approved APH yield. These actions shall be taken at any 
time after reporting or record discrepancies are identified and may 
result in reduction of the approved APH yield for any calendar year.
    (2) Records must be provided by the insured at the time of an 
audit, review, or as otherwise requested, to verify that the acreage 
and production certified are accurate. Records of any other person 
having shares in the insured crop, which are used by the insured to 
establish the approved APH yield, must also be provided upon request.
    (3) In the event acreage or production data certified by two or 
more persons sharing in the crop on the same acreage is different, the 
verifier shall, at the verifier's discretion, determine which acreage 
and production data, if any, will be used to determine the approved APH 
yield. If the correct acreage and production cannot be determined, the 
data submitted will be considered unacceptable by the verifier for APH 
purposes.
    (4) Failure of the producer to report acreage and production 
completely and accurately may result in voidance of the crop insurance 
contract, as well as criminal or civil false claims penalties pursuant 
to applicable Federal criminal or civil statutes.


Sec. 400.54  Submission and accuracy of production reports.

    (a) The insured is solely responsible for the timely submission and 
certification of accurate, complete production reports to the agent. 
Production reports must be provided for all planted units.
    (b) Records may be requested by the FCIC, or an insurance company 
reinsured by the FCIC, or by anyone acting on behalf of the FCIC or the 
insurance company. The insured must provide such records upon request.
    (c) The agent will explain the APH Program to insureds and 
prospective insureds. When necessary, the agent will assist the insured 
in preparation of production reports. The agent will determine the 
adjusted or unadjusted transitional or determined yields in accordance 
with Sec. 400.54(b). The agent will review the production reports and 
forward them to the verifier, along with any requested and required 
supporting records for determination of an approved APH yield.
    (d) The verifier will determine if the certified production reports 
are acceptable and calculate the approved APH yield.


Sec. 400.55  Qualification for actual production history coverage 
program.

    (a) The approved APH yield is calculated from a database containing 
a minimum of four yields and will be updated each subsequent crop year. 
The database may contain a maximum of the 10 most recent crop years and 
may include actual, assigned, and adjusted or unadjusted T or D-Yields. 
T or D-Yields, adjusted or unadjusted, will only occur in the database 
when there are less than four years of actual and/or assigned yields.
    (b) The insured may be required to provide production records to 
determine the approved APH yield, if production records for the most 
recent crop year are available. If acceptable records of actual 
production are provided, the records must be continuous and contain at 
least the most recent crop year's actual yield.
    (1) If no acceptable production records are available, the approved 
APH yield is the adjusted T or D-Yield (65 percent of T or D-Yield).
    (2) If acceptable production records containing information for 
only the most recent crop year are provided, the three T or D-Yields 
adjusted by 80 percent will be used to complete the minimum database 
and calculate the approved APH yield.
    (3) If acceptable production records containing information for 
only the two most recent crop years are provided, the two T or D-Yields 
adjusted by 90 percent and the two actual yields will be used to 
complete the database and calculate the approved APH yield.
    (4) If acceptable production records containing information for 
only the three most recent crop years are provided, the three actual 
yields and one unadjusted T or D-Yield are used to complete the 
database and calculate the approved APH yield.
    (5) When the database contains four or more (up to ten) continuous 
actual yields, the approved APH yield is a simple average of the actual 
yields.
    (6) New producers may have their approved APH yields based on 
unadjusted T or D-Yields or a combination of actual and unadjusted T or 
D-Yields.
    (7) Producers who add land or new practice, types and varieties to 
their farming operations and who do not have available records for the 
added land, practice, types or varieties may have approved APH yields 
for the added land, practice, types or varieties that are based on 
adjusted or unadjusted T or D-Yields as determined by FCIC.
    (8) If the producer's crop is destroyed or if it produces a low 
actual yield due to insured causes of loss, the resulting average yield 
may qualify for catastrophic yield adjustment according to FCIC 
guidelines. APH yields qualifying for catastrophic yield adjustment may 
be adjusted to mitigate the effect of catastrophic years. Premium rates 
for approved APH yields, which are adjusted for catastrophic years, may 
be based on the producer's APH average yield prior to the catastrophic 
adjustment or such other basis as determined appropriate by FCIC.
    (c) If no insurable acreage of the insured crop is planted for a 
year, a production report indicating zero planted acreage will maintain 
the continuity of production reports for APH record purposes and that 
calendar year will not be included in the APH yield calculations.
    (d) Actual yields calculated from the claim for indemnity will be 
entered in the database. The resulting average yield will be used to 
determine the premium rate and approved APH yield, at the discretion of 
FCIC.
    (e) Optional units are not available to an insured who does not 
provide acceptable production reports for at least the most recent crop 
year with which to calculate an approved APH yield.
    (f) FCIC may determine approved APH yields for designated crops in 
the following situations:
    (1) If less than four years of yield history is certified and T or 
D-Yields are not provided in the actuarial documents,
    (2) If actual yield exceed tolerances specified in yield variance 
tables, and
    (3) For perennial crops:
    (i) If significant upward or downward yield trends are indicated;
    (ii) If tree or vine damage, or cultural practices will reduce the 
production level;
    (iii) if more than two percent of the trees or vines have been 
removed within the last two years; or
    (iv) If yield trends are evident and yields greater than the 
average yield are requested by the insured.
    (g) APH yields will not be approved the first insurance year on 
perennial crops until an inspection acceptable to FCIC has been 
performed and the acreage is accepted for insurance purposes in 
accordance with the crop insurance contract.
    (h) APH Master Yields may be established whenever crop rotation 
requirements and land leasing practices limit the yield history 
available. FCIC will establish crops and locations for which Master 
Yields are available. To qualify, the producer must have at least four 
recent continuous crop years' annual production reports and must 
certify the authenticity of the production reports of the insured crop. 
Master Yields are based on acreage and production history from all 
acreage of the insured crop in the county in which the operator has 
shared in the crop's production.
    (i) FCIC may use any production report available under the 
provisions of any crop insurance contract, whether continuous or not, 
involving the interests of the person's insured crops in determining 
the approved APH yield.


Sec. 400.56  Administrative appeal exhaustion.

    The insured may appeal the approved APH yield in accordance with 
the procedures contained in 7 CFR part 400, subpart J. Administrative 
remedies through the appeal process must be exhausted prior to any 
action for judicial review. The approved APH yield determined as a 
result of the appeal process will be the yield applicable to the crop 
year.


Sec. 400.57  OMB control numbers.

    OMB control numbers are contained in 7 CFR part 400, subpart H.

    Done in Washington, D.C., on September 8, 1994.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 94-23035 Filed 9-16-94; 8:45 am]
BILLING CODE 3410-08-M