[Federal Register Volume 61, Number 146 (Monday, July 29, 1996)]
[Rules and Regulations]
[Pages 39268-39270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19139]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 400


General Administrative Regulations; Reinsurance Agreement--
Standards for Approval

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) hereby amends 
its General Administrative Regulations by revising the Disputes clause. 
The intended effect of this rule is to provide reinsured companies with 
an informal reconsideration process through an administrative officer 
of FCIC and the right to appeal the administrative officer's 
determination to the Board of Contract Appeals.

EFFECTIVE DATE: July 29, 1996.

FOR FURTHER INFORMATION CONTACT: Diana Moslak, (202) 720-2832.

SUPPLEMENTARY INFORMATION:

Executive Order 12866 and Departmental Regulation 1512-1

    This action has been reviewed under United States Department of 
Agriculture (USDA) procedures established by Executive Order 12866 and 
Departmental Regulation 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 March 31, 1999.
    This rule has been determined to be not significant for the 
purposes of Executive Order 12866 and, therefore, has not been reviewed 
by the Office of Management and Budget (OMB).

Paperwork Reduction Act of 1995

    This rule does not contain information collection requirements that 
require approval by OMB under the Paperwork Reduction Act of 1995 (44 
U.S.C. chapter 35).

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, FCIC 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to State, local, or tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. When such a statement is needed for a rule, section 205 of 
the UMRA generally requires FCIC to identify and consider a reasonable 
number of regulatory alternatives and adopt the least costly, more 
cost-effective or least burdensome alternative that achieves the 
objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, and tribal 
governments of the private sector. Thus, this rule is not subject to 
the requirements of sections 202 and 205 of the UMRA.

Executive Order 12612

    It has been determined under section 6(a) of Executive Order 12612, 
Federalism, that this rule 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 a 
substantial direct effect on States or their political subdivisions, or 
on the distribution of power and responsibilities among the various 
levels of government.

Regulatory Flexibility Act Analysis

    This regulation will not have a significant impact on a substantial 
number of small entities. The amount of work required of the insurance 
companies should not increase because this action only changes the 
forum which determines the validity of decisions rendered by the 
agency. Therefore, this action is determined to be exempt from the 
provisions of the Regulatory Flexibility Act (5 U.S.C. Sec. 605) and no 
Regulatory Flexibility Analysis was prepared.

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order 12372

    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.

Executive Order 12778

    The Office of the General Counsel has determined that these 
regulations meet the applicable standards provided in sections 2(a) and 
2(b)(2) of Executive Order 12778. The provisions of this rule will 
preempt State and local laws to the extent such State and local laws 
are inconsistent herewith. The administrative appeal provisions 
contained in these regulations and the appeal provisions promulgated by 
the Board of Contract Appeals, 7 CFR part 24, subtitle A, must be 
exhausted before action for judicial review may be brought.

Environmental Evaluation

    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 nor an Environmental Impact 
Statement is needed.

National Performance Review

    This regulatory action is being taken as part of the National 
Performance Review program to eliminate unnecessary or duplicative 
regulations and improve those that remain in force.

Background

    As a result of the Departmental reorganization mandated by the 
Department of Agriculture Reorganization Act of 1994, FCIC must amend 
its dispute provisions located at 7 CFR 400.169 to provide reinsured 
companies with a mechanism to request reconsideration of appeal of 
adverse decisions determined by FCIC.
    On May 1, 1995, FCIC published an interim rule in the Federal 
Register at 60 FR 21035 to amend the General Crop Insurance 
Regulations, Subpart L, Reinsurance Agreement; Standards for Approval, 
by revising the disputes clause to provide reinsured companies with an 
informal appeal process through the FCIC, and a formal appeal process 
through the United States Department of Agriculture Board of Contract 
Appeals (BCA), for the purpose of resolving

[[Page 39269]]

disputes between the FCIC and reinsured companies on Standard 
Reinsurance Agreement (SRA) issues. Following publication of that 
interim rule, the public was afforded 60 days to submit written 
comments, data, and opinions. On August 7, 1995, FCIC extended the 
comment period for these regulations to August 18, 1995 (60 FR 40055). 
Three comments, two from private law firms and one from a trade 
association were received in response to the requests for comment on 
the interim rule.
    Comment: All three comments questioned the jurisdiction of the 
United States Department of Agriculture BCA over SRA issues in dispute 
since the SRA is not a typical Federal procurement contract.
    Response: The BCA continues to function as the agency board 
pursuant to the Contract Disputes Act of 1978 (Act), and as the agency 
board pursuant to jurisdiction outside the Act as set forth in 7 CFR 
Sec. 24.4. The BCA's jurisdiction is not, and never has been, limited 
to procurement disputes. Section 24.4 has been expanded to specifically 
cover appeals of final administrative determinations of FCIC pertaining 
to the SRAs under 7 CFR Sec. 400.169(d). Since BCA has jurisdiction 
over these issues, the disputes are not ``adverse decisions'' subject 
to appeal before the National Appeals Division according to 7 U.S.C. 
Sec. 6991. They also are specifically excluded from the scope of Farm 
Service Agency informal appeal regulations published at 7 CFR part 780. 
Disputes involving SRAs raise factual and legal questions of a 
contractual nature which fall within the express expertise of the BCA. 
The rules of procedure for these appeals are the same as for all others 
under 7 CFR part 24. There is no longer a distinction between 
``statutory'' and ``nonstatutory'' appeals.
    Comment: All three comments expressed concern with respect to the 
BCA's jurisdiction to hear appeals of final determinations rendered 
under Sec. 400.169.
    Response: The BCA amended its jurisdictional provisions on November 
7, 1995 (60 FR 56206) to provide the BCA with jurisdiction over final 
administrative determinations of the FCIC pertaining to SRAs under 7 
CFR Sec. 400.169(d). That is separate from its jurisdiction to hear 
contract disputes under the Contract Disputes Act. Therefore, no change 
will be made.
    Comment: Two commentors questioned the nonappealability of FCIC 
decisions rendered under bulletins and directives and complained that 
FCIC was limiting the companies' due process rights by limiting the 
types of disputes appealable.
    Response: The interim rule does not limit the companies' due 
process rights or their right to appeal any decision of FCIC based on 
any bulletin or directive that affects, interprets, explains or 
restricts any term of the SRA. FCIC has the right to limit the appeal 
of any decision that is solely within its discretion and not required 
under the SRA. Bulletins or directives that do not affect, interpret, 
explain or restrict any term of the SRA include, but are not limited 
to, those that provide changes in crop insurance policies before the 
contract change date, the addition of new crop insurance policies or 
programs, granting relief from requirements or sanctions if such 
requirements or sanctions are not required by the SRA, and requiring 
companies to take actions to protect the integrity of the program, even 
if such action may cause the company to incur additional costs, 
provided such requirement is implemented before the start of the 
reinsurance year. No change will be made to the rule.
    Comment: All three commentors expressed concern with respect to the 
propriety of permitting the Director of Compliance and the Director of 
Insurance Services to render final administrative decisions.
    Response: Section 400.169 provides an informal mechanism for 
companies to challenge decisions rendered by FCIC. Reconsideration of 
these decisions allows the division that rendered the decision the 
opportunity to correct any error prior to an appeal to the BCA. The 
Directors of Compliance and Insurance Services are persons with the 
most knowledge of the programs they administer and are most qualified 
to render final determinations. Therefore, there is no need to amend 
the rule to have the Deputy Manager make final determinations.
    Comment: One commentor questioned whether a FCIC decision of 
appealability itself should be reviewable or appealable.
    Response: Nothing in this rule prohibits a company from seeking a 
review of a determination of nonappealability from the BCA. The issue 
on appeal would be limited to a determination of whether the decision 
of FCIC was based on a provision of the SRA, a compliance review, or a 
bulletin or directive which affects, interprets, explains or restricts 
a term of the SRA.
    Comment: Two comments were received with respect to the definition 
of ``contracting officer.'' The commentors suggested that the term be 
amended to include the Directors of Insurance Services and Compliance 
and that these persons be given authority to settle disputes.
    Response: The term ``contracting officer'' is not defined in FCIC's 
regulations. Further, the Manager of FCIC has the authority to 
designate contracting officers and provide these persons with the 
authority to resolve disputes between reinsured companies and FCIC. 
This rule provides a delegation to these Directors to resolve such 
disputes. Therefore, no change is necessary.
    Comment: One comment suggested that the rule be amended to permit 
companies to bypass the BCA and go directly to the district court or 
the National Appeals Division (NAD).
    Response: It has been determined that the BCA is the best forum to 
hear these appeals. Although the BCA may not be an expert with respect 
to the SRA, it has extensive experience in contract matters. Since NAD 
does not have jurisdiction to hear any matter over which the BCA has 
jurisdiction, the BCA acquired jurisdiction over these cases. FCIC has 
no authority to permit any appeal to NAD. Further, administrative 
appeals provide the valuable service of permitting the Department to 
correct any errors and, therefore, conserving judicial resources. 
Therefore, the rule will not be amended to permit companies to appeal 
directly to the Federal courts or to NAD.
    Comment: One comment suggested that the rule be amended to specify 
the forum for an appeal of a BCA decision.
    Response: An amendment to the rule is not necessary. The 
administrative appeals process ends with a BCA decision. The Department 
of Agriculture Reorganization Act provided that once the administrative 
appeals process is complete, persons may bring suit. Section 506(d) of 
the Federal Crop Insurance Act, as amended, states that the Federal 
district court has exclusive original jurisdiction over any suit 
brought against FCIC.
    The comments did not result in any change to the final rule. 
Therefore, the interim rule as published on May 1, 1995, at 60 FR 21035 
is hereby adopted as a final rule.

List of Subjects in 7 CFR Part 400

    Crop insurance.

Final Rule

    Accordingly, pursuant to the authority contained in the Federal 
Crop Insurance Act, as amended (7 U.S.C. 1501 et seq.), and for the 
reasons set forth in the preamble, the Federal Crop Insurance 
Corporation hereby adopts as a final rule, the interim rule as

[[Page 39270]]

published at 60 FR 21035 on May 1, 1995.

    Signed in Washington, DC, on July 18, 1996.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 96-19139 Filed 7-26-96; 8:45 am]
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