[Federal Register Volume 61, Number 162 (Tuesday, August 20, 1996)]
[Rules and Regulations]
[Pages 42970-42979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21116]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Part 400
RIN 0563-AB11
General Administrative Regulations; Federal Crop Insurance Reform
Act of 1994, Regulations for Implementation
AGENCY: Federal Crop Insurance Corporation.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes 7 CFR
part 400, subpart T of its General Administrative Regulations. The
intended effect of this final rule is to provide noninsured producers,
policyholders, and insurance companies the regulations applicable to
the catastrophic risk protection program. It will also provide other
changes in FCIC insurance programs to comply with statutory mandates of
the Federal Crop Insurance Act (Act), as amended by the Federal Crop
Insurance Reform Act of 1994 (Reform Act) and the Federal Agriculture
Improvement and Reform Act of 1996 (1996 Act).
EFFECTIVE DATE: August 20, 1996.
FOR FURTHER INFORMATION CONTACT: Louise Narber, Program Analyst,
Research and Development Division, Product Development Branch, Federal
Crop Insurance Corporation, United States Department of Agriculture,
9435 Holmes Road, Kansas City, MO 64131, telephone (816) 926-7730.
SUPPLEMENTARY INFORMATION:
Executive Order No. 12866 and Departmental Regulation 1512-1
This action has been reviewed under United States Department of
Agriculture (USDA) procedures established by Executive Order No. 12866.
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 December 1, 2001.
This rule has been determined to be economically significant for
the purposes of Executive Order No. 12866 and, therefore, has been
reviewed by the Office of Management and Budget (OMB).
Cost Benefit Analysis
A Cost Benefit Analysis has been completed and is available to
interested persons at the address listed above. In summary, the
analysis finds that crop insurance reform generally is expected to
result in net positive benefits to producers, taxpayers, and society.
The effects on individual producers compared to payments under ad hoc
disaster programs depends primarily on the farm program payment yield
compared to the farm's actual yield and market prices. In general,
however, the reform is expected to result in less volatility of
producers' incomes and less risk of no income due to adverse weather
events. Rural communities and producers will benefit from the certainty
of payments in times of catastrophic yield losses. The Government and
taxpayers will benefit from a single disaster protection program and
consequent reduced Federal outlays. Although producers who had not
previously participated in the Federal crop insurance program will have
an added burden to make application and report yields and acreage, the
benefits in terms of greater risk protection outweigh the costs.
Paperwork Reduction Act of 1995
In accordance with the Paperwork Reduction Act of 1995, the
information collection requirements contained in these regulations have
been previously approved by OMB and assigned OMB control number 0563-
0003 through September 30, 1998. Copies of the information collection
may be obtained from Bonnie Hart, USDA, FSA Advisory and Corporate
Operations Staff, Regulatory Review Group, P.O. Box 2415, Ag Box 0572,
Washington, D.C. 20013-2415, 8:15 a.m.-4:45 p.m., Monday through
Friday, except holidays, telephone (202) 690-2857.
Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandate 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. This rule contains no Federal
mandates (under the regulatory provisions of Title II of the UMRA) for
State, local, and tribal governments or the private sector. Thus, this
rule is not subject to the requirements of sections 202 and 205 of the
UMRA.
Executive Order No. 12612
It has been determined under section 6(a) of Executive Order No.
12612, Federalism, that this rule does not have sufficient Federalism
implications to warrant the preparation of a Federalism Assessment. The
provisions 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
This regulation will not have a significant impact on a substantial
number of small entities. However, it does provide additional
flexibility and cost savings for small entities in the following three
areas. First, producers are no longer required to obtain at least CAT
coverage for economically significant crops. Instead, they may sign a
waiver foregoing emergency crop loss assistance. Insureds likely to
decline coverage are those who believe that the costs associated with
obtaining insurance exceed the benefits. The producers most likely to
fall into this category are those who have insurance policies with low
liabilities. For these producers, the $50 fee for CAT would be most
likely to outweigh expected indemnities. Second, an allowance has been
made to allow all producers with a share in a tobacco crop under one
marketing card to insure the crop under one insurance policy. To
qualify under this provision, none of the shareholders may have an
interest in another tobacco crop in the county. It is estimated that
35,100 policyholders may utilize this allowance, thereby saving the $50
[[Page 42971]]
processing fee for each. Third, with specified restrictions, persons
who hold an undivided interest in a crop may be eligible to purchase
one insurance policy covering all shares to satisfy linkage
requirements. The restrictions associated with this allowance include:
all landowners must agree in writing to the arrangement; none of the
landowners may hold any other interest in the given crop in the county
for which they are required to buy at least CAT coverage; and the total
liability under the CAT endorsement for all landowners must be $2,500
or less. Because no data are available providing an indication of
insureds with an undivided interest, it is not possible to estimate the
savings associated with not paying the $50 processing fee in these
situations. However, some small entities will benefit from this
allowance.
Federal Assistance Program
This program is listed in the Catalog of Federal Domestic
Assistance under No. 10.450.
Executive Order No. 12372
This program is not subject to the provisions of Executive Order
No. 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 No. 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 No. 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
published at 7 CFR parts 11 and 780 must be exhausted before any 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 Initiative to eliminate unnecessary or duplicative
regulations and improve those that remain in force.
Background
The amendments to the Act, made by the Reform Act, were effective
on October 13, 1994. This regulation provides the procedures to carry
out the requirements of those amendments.
On Friday, January 6, 1995, FCIC published an interim rule in the
Federal Register at 60 FR 1996-2000 to add regulations to carry out the
general requirements of the Act. Following publication of that interim
rule, the public was afforded 60 days to submit written comments, data,
and opinions. On Monday, August 7, 1995, by publication at 60 FR 40055,
FCIC reopened and extended the comment period to August 18, 1995. A
total of 35 comments were received from the crop insurance industry,
FSA, and from producer groups. The comments received and FCIC responses
are as follows:
Comment: One comment received from the crop insurance industry
suggested clarifying the definition of ``catastrophic risk protection''
by deleting the word ``minimal'' and replacing it with either the word
``minimum'' or ``lowest'' and by deleting the word ``be'' and replacing
it with ``offer protection'' after ``such coverage will.''
Response: FCIC agrees with the comment and has amended the
definition of ``catastrophic risk protection'' by replacing the word
``minimal'' with the word ``minimum'' and by replacing the word ``be''
with ``offer protection.''
Comment: Another comment received from the crop insurance industry
suggested clarifying the definition of ``crop of economic
significance'' by deleting ``by the producer'' in the first sentence.
Response: FCIC agrees with the comment and has modified the
definition of ``crop of economic significance'' accordingly.
Comment: The crop insurance industry suggested clarifying the
definition of ``crop of economic significance'' to explain the
consequences if a crop planted in 1994, is planted in 1995 although
originally there was no intent to plant the crop in 1995; and to
clarify who is responsible for determining which crops are of economic
significance.
Response: FCIC agrees with the comment and has added new provisions
in section 400.653 to clarify requirements regarding crops of economic
significance. Producers who do not intend to plant a crop do not have
to obtain crop insurance or execute a waiver of their eligibility for
emergency crop loss assistance in connection with the crop to remain
eligible for certain other USDA program benefits, even if they produced
the crop the previous year. However, if the producer later decides to
plant the crop after the sales closing date, the producer cannot obtain
insurance on the crop and must execute a waiver of any eligibility for
emergency crop loss assistance in connection with the crop to be
eligible for certain USDA program benefits. If a waiver is not
executed, the producer must return those benefits already received.
Provisions were also added indicating that it is the producer's
responsibility to determine crops of economic significance in the
county and that the producer may have to provide records to permit the
insurance provider to verify whether a crop is a crop of economic
significance. FCIC has issued a worksheet that may be used by producers
to assist them in determining crops of economic significance. USDA will
be ultimately responsible for determining eligibility and paying any
amount due a person for any applicable USDA program.
Comment: A producer group suggested that the definition of ``crop
of economic significance'' is contrary to the Act and invites legal
action to test it. They stated that the Act looks to a percentage of
all crops grown by the producer and the definition in this regulation
provides for a county by county test to be done.
Response: FCIC agrees that Sec. 508(b)(7) and (8) of the Act does
not specifically indicate that crops of economic significance are
determined on a county basis. However, since FCIC's insurance program
has always been county based trying to operate one portion of the
program across county lines would be extremely difficult. No changes
will be made to conform to this suggestion.
Comment: The Farm Service Agency requested that the term ``limited
resource farmer'' be changed to ``limited income farmer.'' Farm Credit
Programs, which are part of FSA, have used the term ``limited resource
farmer'' for many years and it has a very different definition than the
definition of ``limited resource farmer'' used for crop insurance
purposes.
Response: Section 508(b)(5) of the Act expressly authorizes FCIC to
waive the administrative fee for ``limited resource farmers.'' Since
``resources'' include more than the producer's ``income'' such as farm
size, the definition will not be changed.
Comment: The crop insurance industry and a producer group
questioned what the phrase ``a need to maximize farm income'' meant in
the
[[Page 42972]]
definition of ``limited resource farmer'' and recommended an
explanation be added to the regulations or the phrase deleted.
Response: FCIC has reconsidered this provision and amended the
definition of ``limited resource farmer'' by deleting the phrase ``a
need to maximize farm income''.
Comment: A producer group recommended defining or omitting the
phrase ``small or family farm'' in the definition of ``limited resource
farmer.'' They also questioned how a person is categorized as a limited
resource farmer and whether or not such person is required to obtain at
least catastrophic risk protection (CAT) coverage, if available. The
comment also asked if the limited resource status could be used as a
defense if a producer is denied benefits for failure to meet linkage
requirements.
Response: FCIC agrees that the terms ``small'' and ``family farm''
are not necessary in the definition and has amended the definition
accordingly. All producers, including limited resource farmers, are
required to obtain at least CAT coverage, if available, to be eligible
for certain other USDA program benefits, unless the producer executes a
waiver of any eligibility for emergency crop loss assistance in
connection with the crop. The limited resource farmer status only
authorizes FCIC to waive payment of the administrative fees and may not
be used as a defense for failure to obtain CAT coverage. Producers may
request ``limited resource farmer status'' at the time the application
for insurance is made.
Comment: A producer group also suggested that the word ``producer''
be defined and used rather than the word ``person'' because it would be
less confusing since ``person'' is specifically defined with regard to
payment limitation rules. If this change is not made, the comment
suggested adding provisions to indicate that the definition in these
provisions does not reference the term ``person'' for payment
limitation purposes.
Response: A definition of ``person'' contained in any other statute
or regulation is not applicable to the Federal crop insurance program
unless expressly provided. Therefore, the definition of a person with
respect to payment limitation purposes is not relevant. The term
``person'' is defined for this program and has been used in the crop
insurance program for longer than payment limitation has existed. The
term ``person'' cannot be replaced with ``producer'' because not all
``persons'' are producers within the context of the program and to
alternate between the two terms would be confusing. No change to the
provisions will be made.
Comment: The crop insurance industry suggested that the phrase ``at
the option of the Secretary'' should be added after ``through approved
insurance providers and'' in Sec. 400.652(b) to be consistent with the
Act. This change is needed to enable the FSA to cease delivering CAT
coverage in counties in which such coverage becomes unnecessary.
Response: The Federal Agriculture Improvement and Reform Act of
1996 provides for CAT coverage to be offered by approved insurance
providers if there are a sufficient number available within an area. If
approved insurance providers are not sufficiently available, local
offices of the USDA will provide CAT coverage. FCIC agrees that the
Secretary must now make an affirmative determination that CAT can be
delivered through local FSA offices. The provision has been changed
accordingly.
Comment: One comment was received from within FCIC recommending
that language be included that would deny benefits from other USDA
programs if the producers fail to carry out their responsibilities in
accordance with policy provisions. It was suggested that language be
added to indicate that such failure would be considered a scheme or
device to circumvent the insurance requirement. The comment indicates
that some people are interpreting current provisions to mean that once
a producer applies for crop insurance on a crop of economic
significance, by signing an application for insurance, that he or she
has met the requirement for eligibility for certain other USDA program
benefits, even though he or she has not met the requirements for crop
insurance coverage to be in effect.
Response: FCIC agrees that failure to comply with all policy
provisions may result in ineligibility for certain program benefits
specified in Sec. 400.657. A new Sec. 400.652(e) has been added that
states this requirement.
Comment: Two comments were received from the crop insurance
industry raising issues involving alternative crops.
(1) One comment suggested that the provisions regarding alternative
crops in Sec. 400.653 (now Sec. 400.654) be clarified with respect to
crops of economic significance, USDA linkage requirements, and late
filed applications.
(2) One comment states that this late application procedure could
provide producers with a false sense of security because of the
reliance on FCIC to make discretionary determinations following sales
closing. It states that the procedure limits the producer to CAT
coverage even if he or she had previously determined that a higher
level was necessary for the crop intended to be planted. The procedure
extends the sales closing date which is not permitted by the statute.
The procedure also requires the insured to make application prior to
the acreage reporting date, which requires the insured to make a
special trip to the agent or FSA office.
Response: Section 400.654 has been amended to clarify the
conditions under which a producer may insure a substitute crop. Section
400.651 has also been amended to add a definition of ``substitute
crop''. FCIC has not extended sales closing dates, it has simply
permitted another crop to be substituted for the intended crop,
provided that circumstances warrant such action. This provision was
intended to protect farm income by allowing the producer to plant and
insure another crop when there was an inability to plant the intended
crop or when a crop was planted and failed and replanting of such crop
was not practical. Since the producer must still obtain coverage by the
sales closing date for the initially intended crop, producers should
not have a false sense of security. The substitution of crops simply
permits producers to maintain their ability to manage their risks when
circumstances beyond their control require a change in the planned
farming operation. Since producers who have not executed a waiver of
any eligibility for emergency crop loss assistance in connection with
the crop must obtain insurance coverage on all crops of economic
significance to remain eligible for other farm program benefits,
producers had to be given the opportunity to insure such crops planted
as a substitute crop. However, although producers may originally have
selected higher levels of coverage, they will be limited to CAT
coverage on substitute crops to comply with the linkage requirements
and limit exposure for losses that occur after the sales closing date.
The producer's decision to insure the substitute crop is voluntary and,
although it may require another visit to the insurance provider, the
producer will be ensured of protection against crop disasters.
Comment: The crop insurance industry strongly protested the
requirement that all acreage reports be signed. They stated that a
signed acreage report was not a requirement of the Act and must be
removed in the final rule. They also stated that such a requirement
[[Page 42973]]
should not be imposed on CAT coverage.
Response: Acreage reports are required by the contract and are
binding on the producer. If acreage reports are not signed, an
insurance provider may not be able to legally challenge the contents.
However, Sec. 400.653(d) (now Sec. 400.654(e)) has been amended for CAT
coverage only, to permit the operator to sign the acreage report for
all other persons with an insurable interest in the crop. These
producers will be bound by all statements on that signed acreage
report. Any person may sign the application, acreage report, or any
other document relative to crop insurance coverage, provided he or she
has a properly executed power of attorney or other legal document
recognized by the state authorizing such person to sign. Section
400.654(d) has been amended accordingly.
Comment: The crop insurance industry also suggested that a producer
be allowed to specify his or her intended acreage at the time of the
prior year's production reporting or at the time of application.
Response: Producers may submit ``intended'' acreage reports as
suggested by the comment, however, they will be required to confirm
acreage reporting information in accordance with the policy on or
before the final acreage reporting date. Premium owed and the
production guarantee are determined based on actual acreage, not
``intended'' acreage. No change will be made to this provision.
Comment: Both the crop insurance industry and a producer group
suggested clarifying the language in Sec. 400.654(b) (now
Sec. 400.655(b)) to state how, and to what extent, FCIC intends to
reduce an indemnity to reflect out-of-pocket expenses that were not
incurred by the producer as a result of not planting, caring for, or
harvesting the crop. They asked: If a prevented planting payment that
is already less than the guarantee under the policy for a planted crop,
will it be further reduced? They also asked: If an insured has a total
crop loss, would the guarantee be reduced compared to someone who
incurred harvesting costs?
Response: With respect to the prevented planting program, FCIC
elected to reduce the guarantee, instead of reducing the indemnity, to
reflect out-of-pocket expenses not incurred by the producer. Therefore,
prevented planting guarantees or indemnities will not be further
reduced and Sec. 400.655(b) will be amended accordingly. Producers with
a total crop loss that occurred before harvest may have the indemnity
reduced to reflect the costs associated with harvest that were not
incurred if such reduction is provided for in the applicable crop
policy. Section 400.655(b) has been amended to state that reductions in
indemnities will be in an amount determined in accordance with the crop
provisions or the Special Provisions for the specific crop.
Comment: One comment from a producer group suggested that there is
insufficient guidance as to the procedure that will be followed in the
event of a loss or for appeal rights.
Response: Each individual crop policy contains procedures to be
followed in the event of a crop loss. These policies are published in
chapter IV of title 7 of the CFR. The applicable appeal procedures are
published at 7 CFR parts 11 and 780 for determinations made by FCIC.
Therefore, no change will be made.
Comment: The crop insurance industry recommended that
Sec. 400.654(c)(1) (now Sec. 400.655(d)(2)) contain a provision
indicating that when the insured with CAT coverage files a claim for
indemnity under the policy, that filing indicates the insured has made
the election to receive a CAT indemnity rather than a benefit under any
other USDA program that compensates for the same crop loss. It stated
that the regulations need to specify how the producer is to make this
election, when he or she must make it, and who is responsible for
enforcing it.
Response: The Act expressly provides the producer with the choice
of programs under which to receive benefits. Since information about
other program benefits may not be available until long after the crop
loss has occurred, producers cannot be presumed to have made a choice
because they have not delayed receipt of benefits to which they are
entitled. Producers cannot make informed choices with respect to which
program benefits to choose until they know what benefits will be
available. Therefore, Sec. 400.655(d)(2) has been amended to permit
producers to receive a CAT indemnity and, if other program benefits are
later made available, to reimburse the entire amount of the CAT
indemnity to be eligible for a benefit under the other program. USDA
will be responsible for determining if a crop insurance payment has
been made prior to making payment under any other applicable USDA
program.
Comment: A producer group stated that Sec. 400.654(c)(1) (now
Sec. 400.655(d)(2)), which provides that a person can receive either
CAT benefits or other USDA benefits for the same loss, but not both,
should be clarified to state that a producer will not have to forego
other USDA payments that are not specifically related to the crop loss,
e.g., regular deficiency payments.
Response: Deficiency payments did not compensate a producer for a
crop loss, they provided compensation for changes in the market price.
Therefore, deficiency payments could be made regardless of whether or
not the producer collected an indemnity. No changes have been made in
the provisions in response to the comment.
Comment: One comment from FSA stated that previous legislation
required emergency loan applicants to have obtained crop insurance the
previous year. The reform legislation prohibits the applicant from
collecting the CAT indemnity, or noninsured crop disaster assistance
program (NAP) payment, for the same loss that qualifies for the
emergency loan. This requires the producers to pay for coverage on
which they are never allowed to collect because if they collect the CAT
or NAP payment, they will immediately become ineligible for an
emergency loan. The commentor suggested a more reasonable approach
would be to limit the total benefits from all sources for a loss to the
total amount of loss, rather than limiting the benefit to a single
source. Otherwise the producer will often collect the payment and then
apply for a regular farm operating or farm ownership loan, rather than
an emergency loan. Denying the producer the opportunity to collect the
CAT or NAP payment will put a further strain on the Farm Credit
Programs already limited loan funds.
Response: The provision in previous legislation that required
emergency loan applicants to have obtained crop insurance the previous
year was removed in the Reform Act. The statute is clear that, for CAT
coverage policies, if another program provides compensation for the
same crop loss, the producer must elect only one program under which to
receive benefits. Therefore, the producer cannot receive benefits from
all sources up to the total amount of the loss. Further, since the Act
expressly provides the producer with the choice of which program to
receive benefits, FCIC cannot administratively abrogate that right.
However, any producer who receives a CAT indemnity payment is not
automatically prohibited from receiving assistance for the same loss
under other USDA programs. Such producers will be given the opportunity
to reimburse the entire amount of the indemnity and receive assistance
under the other USDA program. Farm ownership and operating loans which
are not conditioned on a production loss, may be obtained from the USDA
in addition
[[Page 42974]]
to crop insurance indemnities. This provision will not be changed in
response to the comment.
Comment: A producer group suggested that it is unnecessarily
confusing when one section requires that a person must obtain at least
catastrophic risk protection coverage, if available, for each crop on
all insurable acreage in the county; another section allows limited or
additional coverage on portions of the crop in the county; and yet
another section refers to linkage requirements if a crop is a crop of
economic significance. These requirements could be clarified,
distinguished, or perhaps even combined to make them easier to
comprehend.
Response: FCIC has combined these requirements into Sec. 400.655
for clarity.
Comment: The crop insurance industry suggested that the provisions
need to be clarified to indicate that CAT coverage for high risk land
must be obtained from the same insurance provider from which limited or
additional coverage is obtained, if that provider sells and services
CAT coverage.
Response: FCIC agrees with the comment and has amended
Sec. 400.655(c)(2) to clarify this requirement.
Comment: The crop insurance industry suggested that the hail and
fire exclusion should be available for limited coverage as well as
additional coverage.
Response: Section 508(c)(7) of the Act specifies that the hail and
fire exclusion is available only for additional coverage. This
provision cannot be changed.
Comment: The crop insurance industry suggested that the
administrative fees for CAT coverage should be addressed separately
from those for limited coverage (see Sec. 400.655(a)) (now
Sec. 400.656(a)).
Response: The provisions of the Act mandate aggregation of the fees
for CAT and limited coverage in order to ensure that the producer does
not pay any administrative fee in excess of the amount required on a
per county or per producer basis. Further, the use of the
administrative fee to offset the costs of delivery of the program is
the same for both CAT and limited coverage. This aggregation of fees is
more clearly communicated by the proposed language than it would be if
the provisions were separated, therefore, no revisions will be made.
Comment: The crop insurance industry suggests that the terms
``additional'' and ``limited'' be clarified.
Response: FCIC believes that the terms are clearly defined with
respect to the applicable coverage level. No changes have been made in
the definitions of these terms.
Comment: Two comments received from the crop insurance industry
were against the provision requiring the administrative fee for limited
coverage being due at acreage reporting time.
(1) One comment stated that the administrative fee should be
payable with the premium for limited coverage as well as for additional
coverage. This comment also stated that it would be more consistent if
CAT policies had a $50 fee, and the limited and additional coverage
levels had a $10 fee in addition to the premium.
(2) One comment stated that they strongly protest the requirement
that the administrative fee for limited coverage must be paid at
acreage reporting time for carry-over policies.
Response: FCIC agrees that the administrative fee for limited
coverage should be paid during the normal premium billing cycle and has
modified Sec. 400.656(a)(3) accordingly. However, sections 508(b)(5)
and 508(c)(10) of the Act specifies that the administrative fee for
both CAT and limited coverage will be $50 per crop per county. No
changes in these amounts can be made.
Comment: The crop insurance industry suggested that Sec. 400.655(a)
(now Sec. 400.656(a)) fails to include provisions requiring an insured
to refund any benefits received prior to the policy being terminated
for nonpayment of fees.
Response: FCIC agrees with the comment and has amended
Sec. 400.656(a)(5) and (6) accordingly.
Comment: One comment received from the crop insurance industry
asked if the regulation as proposed would permit a company to collect
the $50 fee for a crop year at the same time it collects the production
information from the prior crop year for purposes of computing the
current crop year Actual Production History. They also stated that the
regulations should be flexible enough so that if a particular producer
has CAT, limited and additional coverage, all fees and premium could be
collected at the usual premium billing time.
Response: Section 508(b)(5)(A) of the Act requires that
administrative fees for CAT coverage be paid at the time of
application. Since the Act requires that administrative fees be paid up
front, FCIC only has the discretion to permit the payment of
administrative fees on or before the acreage reporting date for carry-
over policies the date the producer indicates the intention to continue
coverage for the crop year. Administrative fees for limited and
additional coverage may be collected during the normal billing cycle.
Any fee may be paid prior to the due date, however, the insurance
provider cannot require such payment. No change will be made.
Comment: The crop insurance industry suggested that Sec. 400.655(b)
(now Sec. 400.656(b)) be clarified to state, ``Payment of an
administrative fee will not be required if the insured files a zero
acreage report.''
Response: FCIC agrees with the comment and has added a new
Sec. 400.656(b)(3) accordingly. However, producers who falsely file a
zero acreage report may be subject to administrative and criminal
sanction.
Comment: The crop insurance industry also suggested that
Sec. 400.656(c) (now Sec. 400.657(c)) be clarified to provide that
eligibility for Conservation Reserve Program benefits is limited to new
or amended contracts and not contracts already in existence.
Response: FCIC agrees with the comment and has modified
Sec. 400.657(c) accordingly.
Comment: FSA suggested that the requirement for a producer to have
at least CAT coverage only applies to ``new'' Farm Credit loans not
``new and amended'' loans. The Act specifically listed the applicable
benefits in three loan-making authorities and the authority to service
(reschedule, reamortize, subordinate, write-down or otherwise amend)
loans is given in other sections of the Consolidated Farm and Rural
Development Act. There is a discrepancy over the effective date of the
CAT requirement. The requirement was effective upon enactment, however,
applicants could not be required to purchase CAT coverage before it was
available. The commentor continued to say that the effective
implementation date for their loan programs is January 23, 1995.
Response: Section 508(b)(7)(A) of the Act was effective on October
13, 1994, and mandated that the producer obtain at least CAT coverage
on crops of economic significance to be eligible for certain farm
credit benefits. Therefore, producers who obtained farm credit
programs, loans, or amended existing loans after October 13, 1994, are
statutorily required to comply with this provision. Amendments to
existing loans were included because such amendments can have a
significant effect on the terms and duration of such loans. Further,
Congress realized that some producers obtained loans in 1995, prior to
enactment of the Act. To permit producers to comply with the
requirements of section 508(b)(7)(A),
[[Page 42975]]
sales closing dates for CAT coverage were extended to April 13, 1995.
Comment: One comment received from FSA disagreed with provisions
that require the producer to obtain CAT coverage for the crop year in
which a farm credit loan is sought. The producer is not always able to
anticipate credit needs by the CAT sales closing date so it would be
more workable to allow the producer to obtain coverage for the
following year if the sales closing date had passed and it was not
possible to obtain coverage for the current year.
Response: The requirement for CAT coverage in the crop year for
which a benefit is sought is a statutory requirement, although the
producer may execute a waiver of any eligibility for emergency crop
loss assistance in connection with the crop and remain eligible for
certain USDA program benefits. Therefore, no changes have been made. It
is the responsibility of the producer and the lender to anticipate
credit needs in the worst case scenario so crop insurance can be
obtained prior to the applicable sales closing date.
Comment: The crop insurance industry questioned why only insureds
who had participated in a conserving use program established for the
1994 crop year were eligible to receive the special prevented planting
benefits.
Response: Section 116 of the Reform Act specifically requires that
producers have participated in a conserving use program established for
the 1994 crop year for wheat, feed grains, upland cotton, or rice to be
eligible for the prevented planting payments.
In addition to the changes described above, FCIC has made the
following changes:
1. Sec. 400.651 has been amended to add definitions for ``Act,''
``administrative fee,'' ``expected market price,'' ``FSA,'' ``insurable
interest,'' ``intended crop,'' ``linkage requirement,'' ``Reform Act,''
``substitute crop,'' and ``zero acreage report'' for clarification
purposes.
2. Sec. 400.651 has been amended by clarifying the definition of
``approved yield.''
3. Sec. 400.654(c) has been amended to allow CAT coverage for a
crop planted as a substitute for the intended crop when the intended
crop is prevented from being planted or is planted and fails.
4. Sec. 400.654(d)(1) (now Sec. 400.655(e)(1)) has been amended by
deleting the phrase ``as determined by the approved insurance
provider.'' An insurance company is responsible for administering its
contract with an insured producer. The FSA will be responsible for
determining and paying the additional amount due the insured for any
applicable USDA program benefit, after first considering the amount of
any crop insurance payment.
5. Sec. 400.655 has been amended to add a new paragraph
Sec. 400.655(d)(4) to allow a tobacco producer to obtain catastrophic
risk protection for 100 percent of the tobacco crop that is identified
by a tobacco marketing card issued by FSA for a specific producer and
Farm Serial Number, when the producer and other persons share in the
crop and none of the persons hold any interest in another tobacco crop
for which they are required to obtain at least CAT coverage. This
change will alleviate the burden on each shareholder to pay separate
administrative fees in situations when numerous small shareholders have
a share in the crop.
6. Sec. 400.655 has been amended to add a new paragraph
Sec. 400.655(d)(5) to allow a landowner to obtain catastrophic risk
protection and establish linkage for all other landowners who hold an
undivided interest in the land, provided the landowners do not have
multiple farming interests and the total liability for all landowners
is $2,500 or less.
7. Sec. 400.655(b)(2) (now Sec. 400.656(b)(4)) has been amended to
include the provision that the administrative fee for additional
coverage is not subject to any limits.
List of Subjects in 7 CFR Part 400
Administrative practice and procedure, Claims, Crop insurance,
Reporting and recordkeeping requirements.
Final Rule
Accordingly, for the reasons set out in the preamble, the interim
rule adding a new subpart T to 7 CFR part 400, published at 60 FR 1996-
2000, is adopted as a final rule effective for the 1997 and succeeding
crop years for all crops with a 1997 crop year contract change date
after the effective date of this rule and for the 1998 and succeeding
crop years for all crops with a 1997 crop year contract change date
prior to the effective date of this rule, with changes as follows:
Subpart T of part 400 is revised to read as follows:
PART 400--GENERAL ADMINISTRATIVE REGULATIONS
Subpart T--Federal Crop Insurance Reform, Insurance Implementation;
Regulations for the 1997 and Subsequent Crop Years
Sec.
400.650 Purpose.
400.651 Definitions.
400.652 Insurance availability.
400.653 Determining crops of economic significance.
400.654 Application and acreage report.
400.655 Coverage provided.
400.656 Administrative fees and waivers.
400.657 Eligibility for other program benefits.
400.658 Coverage for acreage that is prevented from being planted.
400.659 Transitional yields for forage or feed crops, 1995-1997
crop years.
Authority: 7 U.S.C. 1506(l), and 1506(p)
Sec. 400.650 Purpose.
The Reform Act requires FCIC to implement a crop insurance program
that offers several levels of insurance coverage for producers. These
levels of protection include catastrophic risk protection, limited
coverage, and additional coverage insurance. This subpart provides
notice of the availability of these crop insurance options and
establishes provisions and requirements for implementation of the
insurance provisions of the Reform Act.
Sec. 400.651 Definitions.
Act--The Federal Crop Insurance Act, as amended (7 U.S.C.
Secs. 1501 et seq.).
Additional coverage--Plans of crop insurance providing a level of
coverage equal to or greater than sixty-five percent (65%) of the
approved yield indemnified at one hundred percent (100%) of the
expected market price, or comparable coverage as established by FCIC.
Administrative fee--The $50 fee the producer must pay on a per crop
and county basis with a maximum of $200 per producer per county and
$600 per producer for catastrophic and limited coverage on an annual
basis. Also, the $10 fee the producer must pay annually on a per crop
and county basis for additional coverage.
Approved insurance provider--A private insurance company, including
its agents, that has been approved and reinsured by FCIC to provide
insurance coverage to producers participating in the Federal crop
insurance program.
Approved yield--The amount of production per acre computed in
accordance with FCIC's Actual Production History Program (7 CFR part
400, subpart G) or for crops not included under 7 CFR part 400, subpart
G, the yield used to determine the guarantee in accordance with the
crop provisions or the Special Provisions.
Catastrophic risk protection--The minimum level of coverage offered
by FCIC which is required before a person may qualify for certain other
USDA program benefits unless the producer executes a waiver of any
eligibility for emergency crop loss assistance in connection with the
crop. For the 1995
[[Page 42976]]
through 1998 crop years, such coverage will offer protection equal to
fifty percent (50%) of the approved yield indemnified at sixty percent
(60%) of the expected market price, or a comparable coverage as
established by FCIC. For the 1999 and subsequent crop years, such
coverage will offer protection equal to fifty percent (50%) of the
approved yield indemnified at fifty-five percent (55%) of the expected
market price, or a comparable coverage as established by FCIC.
Catastrophic Risk Protection Endorsement--The part of the crop
insurance policy that contains provisions of insurance that are
specific to catastrophic risk protection.
Crop of economic significance--A crop that has either contributed
in the previous crop year, or is expected to contribute in the current
crop year, ten percent (10%) or more of the total expected value of the
producer's share of all crops grown in the county. However, a crop will
not be considered a crop of economic significance if the expected
liability under the Catastrophic Risk Protection Endorsement is equal
to or less than the administrative fee required for the crop.
Expected market price--(price election) The price per unit of
production (or other basis as determined by FCIC) anticipated during
the period the insured crop normally is marketed by producers. This
price will be set by FCIC before the sales closing date for the crop.
The expected market price may be less than the actual price paid by
buyers if such price typically includes remuneration for significant
amounts of post-production expenses such as conditioning, culling,
sorting, packing, etc.
FCIC--The Federal Crop Insurance Corporation, a wholly owned
Government Corporation within USDA.
FSA--The Farm Service Agency, an agency of the United States
Department of Agriculture or any successor agency.
Insurable interest--The value of the producer's interest in the
crop that is at risk from an insurable cause of loss during the
insurance period. The maximum indemnity payable to the producer may not
exceed the indemnity due on the producer's insurable interest at the
time of loss.
Intended crop--A crop stated on the application as submitted on or
before the sales closing date for the crop which the producer intended
to plant in the crop year for which application is made.
Limited coverage--Plans of insurance offering coverage that is
equal to or greater than fifty percent (50%) of the approved yield
indemnified at one hundred percent (100%) of the expected market price,
or a comparable coverage, but less than sixty-five percent (65%) of the
approved yield indemnified at one hundred percent (100%) of the
expected market price, or a comparable coverage.
Limited resource farmer--A producer or operator of a farm, with an
annual gross income of $20,000 or less derived from all sources of
revenue, including income from spouse's or other members of the
household, for each of the prior two years. Notwithstanding the
previous sentence, a producer on a farm or farms of less than 25 acres
aggregated for all crops, where a majority of the producer's gross
income is derived from such farm or farms, but the producer's gross
income from farming operations does not exceed $20,000, will be
considered a limited resource farmer.
Linkage requirement--The legal requirement that a producer must
obtain at least catastrophic risk protection coverage for any crop of
economic significance as a condition of receiving benefits for such
crop from certain other USDA programs in accordance with Sec. 400.657,
unless the producer executes a waiver of any eligibility for emergency
crop loss assistance in connection with the crop.
Person--An individual, partnership, association, corporation,
estate, trust, or other legal entity, and wherever applicable, a state
or a political subdivision or agency of a state.
Reform Act--The Federal Crop Insurance Reform Act of 1994, Public
Law 103-354.
Secretary--The Secretary of the United States Department of
Agriculture.
Substitute crop--An alternative crop whose sales closing date has
passed and that is planted on acreage that is prevented from being
planted to an intended crop or where an intended crop is planted and
fails.
Zero acreage report--An acreage report filed by the producer that
certifies that the producer does not have a share in the crop for that
crop year.
Sec. 400.652 Insurance availability.
(a) If sufficient actuarial data are available, FCIC will offer
catastrophic risk protection, limited, and additional coverage plans of
insurance to indemnify persons for FCIC insured or reinsured crop loss
due to loss of yield or prevented planting, if the crop loss or
prevented planting is due to an insured cause of loss specified in the
applicable crop insurance policy.
(b) Catastrophic risk protection coverage may be offered through
approved insurance providers and through local offices of the Farm
Service Agency specified by the Secretary. Limited and additional
coverage will only be offered through approved insurance providers
unless there is not a sufficient number of approved insurance providers
that offer such insurance within a service area.
(c) A person must obtain at least catastrophic risk protection for
the crop on all insurable acreage in the county in which the person has
a share on or before the sales closing date designated by FCIC for the
crop in the county in order to satisfy the linkage requirements unless
the producer executes a waiver of any eligibility for emergency crop
loss assistance in connection with the crop.
(d) For limited and additional coverage, in areas where insurance
is not available for a particular agricultural commodity that is
insurable elsewhere, FCIC may enter into a written agreement with a
person to insure the commodity, provided that the person has
actuarially sound data relating to the production of the commodity that
is acceptable to FCIC and that such written agreement is specifically
allowed by the crop insurance regulations applicable to the crop.
(e) Failure to comply with all provisions of the policy constitutes
a breach of contract and may result in ineligibility for certain other
farm program benefits for that crop year and any benefit already
received must be refunded. If a producer breaches the insurance
contract, the execution of a waiver of eligibility for emergency crop
loss assistance will not be effective for the crop year in which the
breech occurred.
Sec. 400.653 Determining crops of economic significance.
To be eligible for certain other program benefits under
Sec. 400.657 the following conditions will apply with respect to crops
of economic significance if the producer does not execute a waiver of
any eligibility for emergency crop loss assistance in connection with
the crop.
(a) If a producer planted a crop of economic significance in the
preceding crop year, and does not intend to plant the same crop in the
present crop year, the producer does not have to obtain insurance
coverage or execute a waiver of any eligibility for emergency crop loss
assistance in connection with the crop in the present crop year to
comply with the linkage requirements. However, if the producer later
decides to plant that crop, the producer will be unable to obtain
insurance after the sales closing date and must execute a waiver of any
eligibility for emergency crop loss assistance in connection with the
crop to be eligible for benefits as
[[Page 42977]]
specified in Sec. 400.657. Failure to execute such a waiver will
require the producer to refund any benefits already received under a
program specified in Sec. 400.657.
(b) The producer is initially responsible to determine the crops of
economic significance in the county. The insurance provider may assist
the producer in making these initial determinations. However, these
determinations will not be binding on the insurance provider. To
determine the percentage value of each crop:
(1) Multiply the acres planted to the crop times the producer's
share, times the approved yield, and times the price;
(2) Add the values of all crops grown by the producer (in the
county); and
(3) Divide the value of the specific crop by the result of
paragraph (b)(2).
(c) The producer may use the type of price, such as the current
local market price, futures price, established price, highest amount of
insurance, etc., for the price when calculating the value of each crop,
provided that the producer uses the same type of price for all crops in
the county.
(d) The producer may be required to justify the calculation and
provide adequate records to enable the insurance provider to verify
whether a crop is of economic significance.
Sec. 400.654 Application and acreage report.
(a) To participate in catastrophic risk protection, limited, or
additional coverage plans of insurance, a producer must submit an
application for insurance on or before the applicable sales closing
date.
(b) In order to remain eligible for certain farm programs, as
specified in Sec. 400.657, a producer must obtain at least catastrophic
risk protection on all crops of economic significance, if catastrophic
risk protection is available in the county, unless the producer
executes a waiver of any eligibility for emergency crop loss assistance
in connection with the crop.
(c) Notwithstanding the requirements of Sec. 400.654(a) that
applications for insurance be submitted on or before the applicable
sales closing date, FCIC may permit a producer to insure crops other
than those specified on the application under the following conditions:
(1) The producer must be unable to plant the intended crop or it is
not practical to replant a failed crop before the final planting date.
FCIC will take into consideration marketing windows when determining
whether it was not practical to replant.
(2) Conditions must exist to warrant allowing a producer to insure
crops other than the intended crop.
(3) The producer must submit an application for the substitute crop
on or before the acreage reporting date for the substitute crop and pay
any applicable administrative fee. A producer may not substitute a crop
that the producer planted in the preceding crop year unless that crop
was listed on a timely filed application for the current crop year.
(4) If the producer plants a substitute crop that is a crop of
economic significance, the producer must obtain CAT coverage, if
available, to comply with the linkage requirements specified in
Sec. 400.657. The producer may not substitute a crop under this
provision if the producer has signed or intends to sign a waiver for
emergency crop loss assistance for the crop year.
(5) The substitute crop must be planted on or before the final
planting date or within the late planting period, if applicable, for
the substitute crop.
(6) Under no circumstances may a producer submit an application for
limited or additional coverage after the sales closing date for the
substitute crop.
(d) For all coverages, including catastrophic risk protection,
limited, and additional coverages, the producer must file a signed
acreage report on or before the acreage reporting date. Any person may
sign any document relative to crop insurance coverage on behalf of any
other person covered by such a policy, provided that the person has a
properly executed power of attorney or other legally sufficient
document authorizing such person to sign.
(e) Under catastrophic risk protection, unless the other person
with an insurable interest in the crop objects in writing prior to the
acreage reporting date and provides a signed acreage report on their
own behalf an operator may sign the acreage report for all other
persons with an insurable interest in the crop without a power of
attorney. All persons with an insurable interest in the crop, and for
whom the operator purports to sign and represent, are bound by the
information contained in that acreage report.
Sec. 400.655 Coverage provided.
(a) The specific causes of loss for which insurance coverage is
offered are designated in the crop insurance policy for each crop.
(b) An indemnity paid to a producer may be reduced, in an amount
determined in accordance with crop provisions or Special Provisions, to
reflect out-of-pocket expenses that were not incurred by the producer
as a result of not planting, caring for, or harvesting the crop.
Indemnities paid for acreage that is prevented from being planted will
be based on a reduced guarantee as provided for in the crop policy and
will not be further reduced to reflect expenses not incurred.
(c) The producer must obtain the same level of coverage
(catastrophic, limited, or additional) for all acreage of the crop in
the county unless one of the following applies:
(1) The applicable crop insurance policy allows the producer the
option to separately insure individual crop types or varieties. In this
case each individual type or variety insured by the producer will be
subject to separate administrative fees. For example, if two grape
varieties in California are insured under a CAT policy and two
varieties are insured under a limited coverage policy, a separate
administrative fee will be charged for each of the four varieties.
Although insurance may be elected by type or variety in these
instances, failure to insure a type or variety that is of economic
significance may result in the denial of other farm program benefits,
unless the producer executes a waiver of any eligibility for emergency
crop loss assistance in connection with the crop.
(2) The producer with limited or additional coverage for the crop
in the county has acreage that has been designated as ``high risk'' by
FCIC. Such producers will be able to obtain a High Risk Land Exclusion
Option for the high risk acreage under the limited or additional
coverage policies and insure the high risk acreage under a separate CAT
policy provided that the CAT coverage is obtained from the same
insurance provider from which the limited or additional coverage was
obtained. The producer may only obtain CAT from another insurance
provider if the original insurance provider does not deliver CAT
policies.
(d) Catastrophic risk protection.
(1) Any person who has a bona fide insurable interest in a crop is
eligible for catastrophic risk protection subject to any limitations
contained in the crop insurance contract.
(2) A person who is eligible to receive an indemnity under
catastrophic risk protection and is also eligible to receive
compensation for the same crop loss under any other USDA programs, must
elect the program from which to receive benefits. A payment or program
benefit under only one of the programs is allowed. If other USDA
program benefits are not available until after the producer filed a
claim for indemnity, the producer may refund the total amount of the
indemnity and receive the other program benefit. Farm ownership and
operating loans may be obtained from USDA in addition to crop insurance
indemnities.
[[Page 42978]]
(3) Catastrophic risk protection may, on a commodity-by-commodity
basis, be elected on an individual yield and loss basis, or, where
offered, may be elected on an area yield and loss basis.
(4) A tobacco producer may insure one hundred percent (100%) of the
tobacco crop that is identified by a tobacco marketing card issued by
FSA for a specific producer and Farm Serial Number under one CAT
policy, provided the producer and other persons each have a share in
the crop, all the shareholders agree in writing to such arrangement,
and none of the shareholders hold any other interest in another tobacco
crop for which they are required to obtain at least catastrophic
coverage. If the tobacco crop is insured under one policy:
(i) The linkage requirements will be satisfied for each shareholder
of the crop; and
(ii) The producer insuring the crop will:
(A) Make application for insurance and provide the name and social
security number or employer identification number of each person with a
share in the tobacco crop;
(B) File the acreage report showing a one-hundred percent (100%)
share in the crop (all insurable acreage covered by such marketing card
will be considered as one unit);
(C) Be responsible to pay one administrative fee for all the
producers within the county;
(D) Fulfill all requirements under the crop insurance contract; and
(E) Receive any indemnity payment under his or her social security
number or employer identification number and distribute the indemnity
payments to the other person sharing in the crop.
(5) A landowner will be allowed to obtain catastrophic coverage to
satisfy linkage requirements for all other landowners who hold an
undivided interest in the insurable acreage, provided:
(i) All landowners agree in writing to such arrangement and have
their social security number or employer identification number listed
on the application, without regard to the actual amount of their
interest in the insured acreage;
(ii) All landowners must have an undivided interest in the
insurable acreage;
(iii) None of the landowners may hold any share in other acreage
for which they are required to obtain at least catastrophic coverage;
(iv) The total cumulative liability under the Catastrophic Risk
Protection Endorsement for all landowners must be $2,500 or less;
(v) The landowner insuring the crop will:
(A) Make application for insurance and provide the name and social
security number or employer identification number of each person with
an undivided interest in the insurable acreage;
(B) Be responsible to pay one administrative fee for all the
producers within the county;
(C) Fulfill all requirements under the insurance contract; and
(D) Receive any indemnity payment under the landowner's social
security number or employer identification number and distribute the
indemnity payments to the other persons sharing in the crop.
(E) Limited and additional coverage. (1) A producer who is eligible
to receive an indemnity under a limited or an additional coverage plan
of insurance and who also is eligible to receive benefits for the same
loss under any other USDA program may receive benefits under both
programs, unless specifically limited by the crop insurance contract or
by law. However, the total amount received from all such sources may
not exceed the amount of the actual loss sustained by the insured. The
total amount of the actual loss is the difference between the fair
market value of the insured commodity before and after the loss, based
upon the producer's production records and the highest price election
or amount of insurance available for the applicable crop. FSA will
determine and pay the additional amount due the producer for any
applicable USDA program, after first considering the amount of any crop
insurance indemnity. Farm ownership and operating loans may be obtained
from the USDA in addition to crop insurance indemnities.
(2) Limited or additional coverage may, on a commodity-by-commodity
basis, be elected on an individual yield and loss basis, or, where
offered, on an area yield and loss basis.
(3) Hail and fire coverage may be excluded from the covered causes
of loss for a crop policy only if additional coverage is elected.
Sec. 400.656 Administrative fees and waivers.
(a) Catastrophic risk protection and limited coverage. (1) The
producer must pay an administrative fee each year of fifty dollars
($50.00) per crop per county, not to exceed two hundred dollars
($200.00) per county, and six hundred dollars ($600.00) for all
counties in which the producer has elected to obtain catastrophic or
limited coverage.
(2) The producer must pay this administrative fee for catastrophic
coverage at the time of application for the first year, and by the
acreage reporting date for all subsequent years that crop insurance
coverage is in effect.
(3) The administrative fee for limited coverage must be paid no
later than the time that premium is due.
(4) Except for the initial application year of a crop, payment of
an administrative fee will not be required for a crop if the insured
files a bona fide zero acreage report for the crop on or before the
acreage reporting date. Any producer who falsely files a zero acreage
report may be subject to administrative and criminal sanctions.
(5) For Catastrophic coverage, if the administrative fee is not
paid when due, the crop insurance contract will terminate effective at
the beginning of the crop year for which the administrative fee was not
paid. Persons failing to pay the administrative fee, and all persons
with an insurable interest in the crop under the same contract, may not
be eligible for certain other USDA program benefits as set out in
Sec. 400.657 and all such benefits already received for the crop year
must be refunded. If a producer fails to pay the administrative fee
when due, the execution of a waiver of any eligibility for emergency
crop loss assistance in connection with the crop will not be effective
for any crop year in which payment was not made.
(6) For limited coverage, persons failing to pay the administrative
fee by the due date, and all persons with an insurable interest in the
crop under the same contract, will not be eligible for certain other
USDA program benefits as set out in Sec. 400.657 and all such benefits
already received for the crop year must be refunded. Since insurance
coverage was in effect throughout the insurance period, the producer
will be required to pay both the administrative fee and the premium for
that crop year in accordance with provisions regarding any amounts due
us contained in the applicable crop policy. If a producer fails to pay
the administrative fee when due, the execution of a waiver of any
eligibility for emergency crop loss assistance in connection with the
crop will not be effective for any crop year for which payment was not
made.
(7) The administrative fee may not be waived unless the insured
qualifies as a limited resource farmer.
(8) The administrative fee will be refunded if the insured has
previously obtained catastrophic risk protection or limited coverage
for the crop year, paid the administrative fee, and subsequently
purchased additional coverage for that same crop in the same county on
or
[[Page 42979]]
before the sales closing date. Administrative fees will not be refunded
if, after the purchase of the additional coverage, the producer still
has four or more crops insured in the county, or four or more crops
insured in each of three or more counties, at the catastrophic or
limited coverage level.
(9) The administrative fee will not be refunded for the year of
application even if the insured does not plant the crop for that year.
(10) For limited coverage, the administrative fee is in addition to
the amount of premium owed by the person.
(b) Additional coverage. (1) If additional coverage is elected, the
insured must pay, in addition to the premium, an administrative fee of
ten dollars ($10) per crop, per county, for the year of application and
each subsequent year in which crop insurance coverage remains in
effect. The administrative fee must be paid no later than the time that
premium is due.
(2) Persons failing to pay the administrative fee by the due date,
and all persons with an insurable interest in the crop under the same
contract, will not be eligible for certain other USDA program benefits
as set out in Sec. 400.657, and all such benefits already received for
the crop year must be refunded. Since insurance coverage was in effect
throughout the insurance period, the producer will be required to pay
both the administrative fee and the premium for that crop year in
accordance with provisions regarding any amounts due us contained in
the applicable crop policy. If a producer fails to pay the
administrative fee when due, the execution of a waiver of any
eligibility for emergency crop loss assistance in connection with the
crop will not be effective for any crop year for which payment was not
made.
(3) Payment of an administrative fee will not be required if the
insured files a bona fide zero acreage report on or before the acreage
reporting date for the crop. Any producer who falsely files a zero
acreage report may be subject to criminal and administrative sanctions.
(4) The administrative fee for additional coverage is not
refundable, is not subject to any limits, and may not be waived.
(c) When obtaining catastrophic risk protection, limited, or
additional coverage, a producer must provide information regarding crop
insurance coverage on any crop previously obtained at any other local
FSA office or from an approved insurance provider, including the date
such insurance was obtained and the amount paid in administrative fees.
If the producer paid more than the maximum allowable amount in
administrative fees, the producer will receive a refund of the excess
fees paid from the local FSA office or from the approved insurance
provider that last collected such fees.
Sec. 400.657 Eligibility for other program benefits.
The producer must obtain at least catastrophic coverage for each
crop of economic significance in the county in which the producer has
an insurable share, if insurance is available in the county for the
crop, unless the producer executes a waiver of any eligibility for
emergency crop loss assistance in connection with the crop, to be
eligible for:
(a) Benefits under the Agricultural Market Transition Act;
(b) Loans or any other USDA provided farm credit, including:
guaranteed and direct farm ownership loans, operating loans, and
emergency loans under the Consolidated Farm and Rural Development Act
provided after October 13, 1994; and
(c) Benefits under the Conservation Reserve Program derived from
any new or amended application or contract executed after October 13,
1994.
Sec. 400.658 Coverage for acreage that is prevented from being
planted.
For the 1995 and succeeding crop years, the insurance period for
prevented planting for those crop insurance policies containing
prevented planting coverage shall be extended so that prevented
planting coverage begins:
(a) On the sales closing date for the insured crop in the county
for the crop year the application for insurance is accepted; or
(b) For any crop year following the crop year the application for
insurance is accepted, or for any crop year the insurance policy is
transferred to a different insurance provider, on the sales closing
date for the insured crop in the county for the previous crop year,
provided continuous coverage has been in effect since that date. For
example: If the producer makes application and purchases a corn crop
insurance policy for the 1995 crop year (which is not terminated or
canceled during or after the 1995 crop year), prevented planting
coverage for the 1996 crop year began on the 1995 sales closing date.
Cancellation for the purpose of transferring the policy to a different
insurance provider when there is no lapse in coverage will not be
considered terminated or canceled coverage for the purpose of the
preceding sentence.
Sec. 400.659 Transitional yields for forage or feed crops, 1995-1997
crop years.
(a) For the 1995 through the 1997 crop years, producers who produce
feed or forage will be eligible for an adjustment in the assigned yield
described in 7 CFR 400.55(b)(1) if:
(1) The feed or forage is primarily for use by the producer as
livestock, dairy, or poultry operations; and
(2) At least fifty percent (50%) of the producer's net farm income
is derived from the livestock, dairy, or poultry operations.
(b) Producers that qualify under paragraph (a) of this section will
receive an assigned yield, if required, under 7 CFR 400.55(b)(1) equal
to eighty percent (80%) of the T- or D-Yield.
Signed in Washington, DC, on August 13, 1996.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 96-21116 Filed 8-19-96; 8:45 am]
BILLING CODE 3410-FA-P