[Federal Register Volume 62, Number 120 (Monday, June 23, 1997)]
[Rules and Regulations]
[Pages 33737-33744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16274]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 401 and 457


General Crop Insurance Regulations; Grape Endorsement and Common 
Crop Insurance Regulations; Grape Crop Insurance Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes 
specific crop provisions for the insurance of grapes. The provisions 
will be used in conjunction with the Common Crop Insurance Policy Basic 
Provisions, which contain standard terms and conditions common to most 
crops. The intended effect of this action is to provide policy changes 
to better meet the needs of the insured, include the current grape 
endorsement under the Common Crop Insurance Policy for ease of use and 
consistency of terms, and to restrict the effect of the current grape 
endorsement to the 1997 and prior crop years.

EFFECTIVE DATE: June 23, 1997.

FOR FURTHER INFORMATION CONTACT: John Meyer, Insurance Management

[[Page 33738]]

Specialist, Product Development Division, 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

    The Office of Management and Budget (OMB) has determined this rule 
to be exempt for the purposes of Executive Order No. 12866, and, 
therefore, this rule has not been reviewed by OMB.

Paperwork Reduction Act of 1995

    Following publication of the proposed rule, 61 FR 49982, the public 
was afforded 60 days to submit written comments on information 
collection requirements previously approved by OMB under OMB control 
number 0563-0053 through September 30, 1998. No public comments were 
received.

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. 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. New provisions included in this rule will not 
impact small entities to a greater extent than large entities. 
Therefore, this action is determined to be exempt from the provisions 
of the Regulatory Flexibility Act (5 U.S.C. 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 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. 12988

    This rule has been reviewed in accordance with Executive Order No. 
12988. The provisions of this rule will not have a retroactive effect 
prior to the effective date. 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 part 11 must be exhausted before any action for judicial 
review may be brought.

Environmental Evaluation

    This action is not expected to have a 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

    On Tuesday, September 24, 1996, FCIC published a proposed rule in 
the Federal Register at 61 FR 49982-49987 to add to the Common Crop 
Insurance Regulations (7 CFR part 457) a new section, 7 CFR 457.138, 
Grape Crop Insurance Provisions. The new provisions will be effective 
for the 1998 and succeeding crop years. These provisions will replace 
and supersede the current provisions for insuring grapes found at 7 CFR 
401.130. FCIC also amends 7 CFR 401.130 to limit its effect to the 1997 
and prior crop years.
    Following publication of the proposed rule, the public was afforded 
60 days to submit written comments. A total of 26 comments were 
received from reinsured companies, an insurance service organization, a 
grower group, and FCIC Regional Service Offices (RSO). The comments 
received, and FCIC's responses, follow:
    Comment: A grower group suggested that the definition of 
``irrigated practice'' should read ``irrigation practice'' for 
grammatical correctness and inclusion of the term commonly used to 
refer to the practice of introducing water by artificial means to 
agricultural lands.
    Response: FCIC agrees with the comment and has amended the defined 
term accordingly.
    Comment: An insurance service organization recommended that in the 
definition of ``production guarantee (per acre)'' rephrasing ``The 
number of grape (tons) * * *.'' to read ``The number of tons of 
grapes'' * * *.
    Response: FCIC has clarified this provision by deleting the crop 
reference. The provision now states, ``The number of tons * * *''.
    Comment: A reinsured company recommended adding the words ``and 
quality'' after the word ``quantity'' in the definition of ``irrigated 
practice.''
    Response: FCIC agrees that water quality is an important issue. 
However, since no standards or procedures have been developed to 
measure water quality for insurance purposes, FCIC has elected not to 
include quality in the definition. No changes have been made.
    Comment: A reinsured company questioned whether the definition of 
``non-contiguous land'' should state ``that it is land ownership that 
does not touch at any point.''
    Response: Land ownership is not a factor to determine non-
contiguous land. Rather, non-contiguous is only determined based on 
whether the boundaries of the land touch at any point. FCIC believes 
the provision is clearly stated. Therefore, no change will be made.
    Comment: An FCIC RSO recommended adding ``Risk Management Agency'' 
to the list of definitions.
    Response: These regulations are published under the authority of 
the Federal Crop Insurance Act, which created FCIC and gave it the 
authority to offer this crop insurance program. As a result, the term 
FCIC rather than Risk Management Agency is used appropriately 
throughout these regulations. Therefore, no change will be made.
    Comment: A reinsured company and an insurance service organization 
stated the provisions in section 2(e), ``All optional units established 
for a crop year must be identified on the acreage report for that crop 
year'' is ambiguous and could lead to misunderstanding concerning when 
optional units may be established. One of the comments also suggested 
adding language to section 2(f)(1) to clarify that the units must be 
based on production reports that were

[[Page 33739]]

reported timely since unit breakdown cannot occur without timely 
reported production.
    Response: Only those optional units determined under the selected 
method for the crop year for which the acreage report is completed must 
be listed. Optional unit designations from past years, or that could 
have been established for the current year but were not, should not be 
listed on the current crop years' acreage report. FCIC has clarified 
this provision accordingly. Section 2(f)(1) has also been clarified to 
indicate that records of production for the optional units must be 
provided by the production reporting date.
    Comment: An insurance service organization suggested deleting ``one 
or more of'' from section 2(g) since item (1) applies to California 
only, and item (2) applies to all other states and it would not be 
possible for both to be applicable on one policy.
    Response: FCIC agrees and has amended the provisions accordingly.
    Comment: An insurance service organization suggested that in 
section 2(g)(2) (ii), (iii), and (iv) it was not necessary to begin 
each of the paragraphs with ``In addition to, or instead of, 
establishing optional units by section, section equivalent, or FSA Farm 
Serial Number,'' and suggested beginning each paragraph with ``Optional 
units may be based on (ii) irrigated * * *, (iii) non-contiguous * * *, 
or (iv) varietal group * * *'' Section 2(g)(2) states ``that each 
optional unit must meet one or more of the following criteria'' .
    Response: To remain consistent with most crop provisions, and to 
clearly indicate that any combination of applicable unit division 
methods may be utilized, section 2(g)(2) (ii), (iii), and (iv) have not 
been changed.
    Comment: An FCIC RSO recommended that subsection 3(a) (re-
designated as subsection 3(b)) be amended for Idaho, Oregon and 
Washington, to read: ``The price elections you choose for each varietal 
group may have a different percentage relationship as compared to the 
maximum price offered by us for each varietal group.'' It was further 
recommended that producers be allowed to select coverage levels by 
varietal group. This would give producers the flexibility to insure 
different varietal groups at different price and coverage levels.
    Response: FCIC agrees that allowing variation in price election 
percentages will provide additional flexibility for producers in these 
states and has amended the provisions to allow this except in cases in 
which the producer has elected the Catastrophic Risk Protection (CAT) 
level of insurance. Some FCIC programs currently allow the coverage 
level percentage to vary by variety or type. However, for these 
programs it has been determined that adequate actuarial information is 
available to allow varieties or types to be insured separately, and 
separate administrative fees are charged for each variety or type that 
is insured. Further research must be completed before it is known 
whether or not adequate information is available to allow separate 
insurance by varietal groups in Oregon, Washington, and Idaho. 
Therefore, the provisions have not been changed to allow different 
coverage level percentages by varietal group.
    Comment: An insurance service organization suggested subsection 
3(a) (re-designated as subsection 3(c)) begin with the phrase, ``You 
may select only one price percentage * * *.'' It would not then be 
necessary to include complex provisions regarding different varieties 
with different maximum prices.
    Response: The methods used to select price elections vary between 
insurance providers. While some require selection of a percentage, 
others require selection of a specific dollar amount. The suggested 
change will not work in all circumstances. Therefore, no change has 
been made to the provisions.
    Comment: An insurance service organization commented that allowing 
different coverage levels as well as price percentages by grape variety 
in California (section 3(a)) is a change from the current policy, which 
requires the same coverage level and price percentage of the maximum 
price for all grapes insured under the policy. The comment recommended 
this be identified as a policy change.
    Response: FCIC agrees with the comment. Provisions were added to 
allow different coverage levels and price percentages by variety in 
California. This should have been identified as a policy change.
    Comment: A grower group took exception to allowing written 
agreements only in California (section 3(b)), (redesignated as section 
3(d)) to establish a price election for a variety that does not have a 
separate price election on the Special Provisions. The comment stated 
that other states should also be allowed this opportunity.
    Response: Price elections are established by variety in California 
and by varietal group in all other states. Varietal groups may be 
composed of several different varieties based on final use of the 
varieties in the group or their expected value. The varietal groups 
should encompass all varieties grown in an area; so there is no need to 
use a written agreement. Therefore, no changes have been made.
    Comment: A reinsured company expressed concern about the language 
in section 3(c)(1) (redesignated as 3(e)(1)) that states the insured 
must report, ``any damage, removal of bearing vines, change in 
practices, or any other circumstance that may reduce the expected yield 
below the yield upon which the insurance guarantee is based, and the 
number of affected acres.'' Procedural requirements state that when a 
producer reports these items, a field inspection must occur and be 
forwarded to the RSO. The commenter expressed concern because the 
guarantee or insurability can not be determined at point of sale, and 
inspection costs and the number of cases the RSO must handle could 
increase dramatically.
    Response: Insurance providers must be made aware of circumstances 
that may reduce yields below historical levels. Removing these 
provisions would allow the yield guarantee to exceed the potential 
yield in some cases. This would result in a program that is not 
actuarially sound. Further, these requirements have been only clarified 
and are not new provisions. Therefore, FCIC does not expect an 
increased workload.
    Comment: An insurance service organization questioned whether the 
language in section 7(a) ``crop insured will be all grapes in which you 
have a share'' is affected by the new language in section 9(b) (1) and 
(2) which deals with insurable shares acquired or relinquished on or 
before the acreage reporting date, and whether there should be a 
reference in section 7(a) to the exception in section 9(b).
    Response: There is no exception to the share requirement in section 
9(b). Section 9(b) simply specifies how a share can be acquired or 
relinquished. If the share is relinquished by the insured, the insured 
will not receive any benefits under the policy, nor have to pay any 
premium. Therefore, no change is required.
    Comment: A reinsured company, an insurance service organization, 
and an FCIC RSO recommended changing the ``or'' used at the end of 
section 7(d) to ``and'' since both section 7(d) and section 7(e) are 
pre-requisite for grapes to be insurable.
    Response: FCIC agrees with the comment and has amended the 
provisions accordingly.
    Comment: A reinsured company suggested that section 7 (d) and (e) 
be revised to state, ``mature grapes ``grafted over'' to another 
variety after being set

[[Page 33740]]

out'' will be insurable one year earlier than the number of growing 
seasons designated in the Special Provisions, or, as soon as they have 
produced at least 2 tons per acre after being grafted over, which ever 
occurs first.
    Response: FCIC agrees that mature grapes ``grafted over'' to 
produce a variety other than originally grown tend to produce faster 
than normal rootstock that is set out; however, occasionally grafts do 
not ``take'' and the vines may never produce two tons. The Special 
Provisions will be revised to specify the number of growing seasons 
necessary for mature grapes grafted to another variety although the 
provisions in section 7(e) must still be met. Therefore, no change will 
be made.
    Comment: An FCIC RSO and a reinsured company recommended a section 
7(f) be added to the policy to read as follows: ``produced by vines 
where there is at least a 90 percent stand of bearing vines based on 
the current planting pattern.'' This language is in the current grape 
policy.
    Response: The provisions of section 3(c)(1) are intended to provide 
the opportunity to adjust the insurance yield when there is less than a 
full stand of vines. The 90 percent requirement is unduly restrictive. 
Therefore, no changes have been made.
    Comment: An insurance service organization asked whether the ``or'' 
in the last sentence of section 9(a)(1) should be deleted, and if not, 
what other information is required ``for the crop'' other than what is 
needed ``to determine the condition of the vineyard''?
    Response: A variety of information concerning the crop may be 
needed, including past production records, acreage records, etc. In 
addition, information regarding the current condition of the vineyard 
is necessary. This may include records of vine removal, grafting, 
changes in cultural practices, etc. This provision must include all 
these various types of information. Therefore, no changes have been 
made.
    Comment: An FCIC RSO recommended the end of the insurance period 
for Idaho, Oregon, and Washington section (9)(a)(2)(ii) be changed from 
November 10 to November 1 to maintain program integrity and actuarial 
soundness.
    Response: FCIC agrees that all production in these states should be 
harvested by November 1 and has amended the provisions accordingly.
    Comment: A reinsured company recommended adding a statement to 
section 9(b)(1) stating what happens if acreage is acquired after the 
acreage reporting date.
    Response: Acreage acquired after the acreage reporting date will 
not be insured. Section 9(b)(1) has been amended accordingly.
    Comment: A reinsured company requested the provision in section 
10(b)(2) ``Phylloxera, regardless of cause'' be deleted since 
phylloxera is an insect infestation for which there is no effective 
control mechanism and no effective way to separate the amount of damage 
caused by phylloxera from the amount of damage caused from an insurable 
cause of loss. According to another source, phylloxera is a fungus, and 
loss of production resulting from it cannot be separated from losses 
from other causes, at least for the first year. Also there was a 
question as to whether the provision as written allows for a loss due 
to phylloxera to be paid the first year, but not in subsequent years 
when the cause can be determined. If not, it was felt that this 
provision would be difficult (if not impossible) to enforce.
    Response: It is widely accepted that Type B phylloxera will 
ultimately destroy nearly all vineyards that were planted on non-
resistant root stock. The wine industry has done extensive research and 
worked with producers to develop plans to destroy and replace non-
resistant vineyards and some vineyards have been destroyed immediately 
after finding infestations. Providing coverage for phylloxera related 
losses may inhibit the efforts being made to stop the spread of this 
pest and may be considered to promote poor pest management practices. 
The provision does not allow payment for phylloxera related losses in 
any year. This provision will not be difficult to enforce since 
phylloxera must still be identified in the crop year in order for it to 
be considered an uninsurable cause of loss. Therefore, no changes have 
been made.
    Comment: A reinsured company suggested adding the following 
language to section 11(b), ``notice must be given immediately if damage 
occurs less than 15 days prior to, or during, harvest.'' However, they 
did not feel it advisable for an insured to have to discontinue harvest 
or delivery of production until after the insurance provider inspected 
the damaged production or provided written consent. It was thought that 
as long as proper notice is received, damage could be determined at the 
winery, cannery, etc.
    Response: FCIC agrees that an insured should not have to 
discontinue harvest or delivery of production while waiting for the 
insurance provider's inspection of the damaged production. Policy 
provisions requiring the insured to not sell or dispose of the damaged 
crop until after the insurance provider gives written consent, have 
been deleted. However, the insured may not destroy the damaged crop 
until the insurance provider gives written consent. This will allow the 
producer to sell any damaged production if there is a market for it. 
Failure of the insured to notify the insurance provider could result in 
all damaged production being considered as undamaged and production to 
count.
    Comment: A reinsured company questioned whether in section 12(b)(2) 
and (4) ``respective price election'' referred to the price election 
selected by the insured or the high price for the variety or varietal 
group, and suggested that clarification may be advisable.
    Response: The respective price election used in sections 12(b)(2) 
and (4) refers to the price election selected by the insured for the 
specific variety or varietal group insured prior to the sales closing 
date. The provisions have been clarified accordingly.
    Comment: A reinsured company questioned the reference in section 
12(e)(1) to ``usual marketing outlets for the area.'' These marketing 
outlets are used to determine the price of undamaged production. They 
stated that the ``area'' in California is the Crush District where the 
grapes are grown, and that price information can be difficult to obtain 
from wineries and other buyers. It was suggested the market price be 
determined by a single source such as the FCIC Regional Service Office 
or the producer's contract with the winery or other buyers.
    Response: FCIC agrees it does takes time to contact buyers and 
establish an average market price. However, a single source such as an 
RSO does not have the resources to establish this price since it may 
vary considerably by year and according to growing conditions. In a 
heavy loss year, price determinations must be made without delay during 
the week in which the damaged grapes are valued. Transferring this 
function to the RSO could result in unacceptable delays. Therefore, no 
changes have been made.
    Comment: An insurance service organization suggested combining the 
provisions contained in section 13(e) with the provisions in section 
13(a).
    Response: The requirement that requests for written agreement be 
executed by the sales closing date is intended to be the rule and the 
application submitted after the sales closing date will only be an 
exception to this rule in limited circumstances. Therefore, no change 
will be made.
    Comment: An insurance service organization and a reinsured company 
suggested the provision in section 13(d)

[[Page 33741]]

stating ``Each written agreement will only be valid for one year'' be 
removed. Terms of the agreement should be stated in the agreement to 
fit the particular situation for the policy, or if no substantive 
changes occur from one year to the next, allow the written agreement to 
be continuous.
    Response: Written agreements are intended to change policy terms or 
permit insurance in unusual situations where such changes will not 
increase risk. If such practices continue year to year, they should be 
incorporated into the policy or Special Provisions. It is important to 
keep non-uniform exceptions to the minimum and to insure that the 
insured is well aware of the specific terms of the policy. Therefore, 
no change will be made.
    In addition to the changes described above, FCIC has made the 
following changes to the Grape Crop Provisions:
    1. Sections 5 and 9--In California, the Cancellation and 
Termination Date was moved from February 28 to January 31, and the 
coverage inception date was moved from March 1 to February 1. These 
dates correspond to the current Grape Endorsement. Further research 
indicated that some vines ``bud out'' in late February in some areas 
and it was preferred that coverage be in effect at the earlier date.
    2. Section 10--Added provisions to provide coverage against loss 
due to disease and insect infestation unless proper control measures 
are not utilized. This change was made to conform to the coverage 
provided for most other crops.
    3. Section 11(b)--Clarify that damaged crop which is not marketed 
in normal commercial channels must not be destroyed until after the 
insurance provider gives written consent. Failure to meet this 
requirement will result in all such production to be considered 
undamaged and included as production to count.
    Good cause is shown to make this rule effective upon publication in 
the Federal Register. This rule improves the raisin crop insurance 
coverage and brings it under the Common Crop Insurance Policy Basic 
Provisions for consistency among policies. The contract change date 
required for new policies is August 31 preceding the cancellation date 
for all states except California, and October 31 preceding the 
cancellation date for California. It is, therefore, imperative that 
these provisions be made final before that date so that the reinsured 
companies and insureds may have sufficient time to implement the new 
provisions. Therefore, public interest requires the agency to act 
immediately to make these provisions available for the 1998 crop year.

List of Subjects in 7 CFR Parts 401 and 457

    Crop insurance, Grape endorsement.

Final Rule

    Accordingly, for the reasons set forth in the preamble, the Federal 
Crop Insurance Corporation hereby amends 7 CFR parts 401 and 457, as 
follows:

PART 401--GENERAL CROP INSURANCE REGULATIONS--REGULATIONS FOR THE 
1988 AND SUBSEQUENT CONTRACT YEARS

    1. The authority citation for 7 CFR part 401 continues to read as 
follows:

    Authority: 7 U.S.C. 1506(l), 1506(p).

    2. The introductory text of Sec. 401.130 is revised to read as 
follows:


Sec. 401.130  Grape endorsement.

    The provisions of the Grape Endorsement for the 1991 through 1997 
(1990 through 1997 in California) crop years are as follows:
* * * * *

PART 457--COMMON CROP INSURANCE REGULATIONS; REGULATIONS FOR THE 
1994 AND SUBSEQUENT CONTRACT YEARS

    3. The authority citation for 7 CFR part 457 continues to read as 
follows:

    Authority: 7 U.S.C. 1506(l), 1506(p).
    4. Section 457.138 is added to read as follows:


Sec. 457.138  Grape crop insurance provisions.

    The Grape Crop Insurance Provisions for the 1998 and succeeding 
crop years are as follows:
    FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

    Reinsured Policies:

(Appropriate title for insurance provider)

    Both FCIC and reinsured policies:

Grape Crop Provisions

    If a conflict exists among the Basic Provisions (Sec. 457.8), 
these Crop Provisions, and the Special Provisions, the Special 
Provisions will control these Crop Provisions and the Basic 
Provisions, and these Crop Provisions will control the Basic 
Provisions.

1. Definitions

    Days. Calendar days.
    FSA. The Farm Service Agency, an agency of the United States 
Department of Agriculture, or a successor agency.
    Good farming practices. The cultural practices generally in use 
in the county for the crop to make normal progress toward maturity 
and produce at least the yield used to determine the production 
guarantee, and are those recognized by the Cooperative State 
Research, Education, and Extension Service as compatible with 
agronomic and weather conditions in the county.
    Graft. To unite a shoot or bud (scion) with a rootstock or an 
existing vine in accordance with recommended practices to form a 
living union.
    Harvest. Picking the clusters of grapes from the vines either by 
hand or machine.
    Interplanted. Acreage on which two or more crops are planted in 
any form of alternating or mixed pattern.
    Irrigation practice. A method of producing a crop by which water 
is artificially applied during the growing season by appropriate 
systems and at the proper times, with the intention of providing the 
quantity of water needed to produce at least the yield used to 
establish the irrigated production guarantee on the irrigated 
acreage planted to the insured crop.
    Non-contiguous. Any two or more tracts of land whose boundaries 
do not touch at any point, except that land separated only by a 
public or private right-of-way, waterway, or an irrigation canal, 
will be considered as contiguous.
    Production guarantee (per acre). The number of tons determined 
by multiplying the approved APH yield per acre by the coverage level 
percentage you elect.
    Set out. Physically planting the desired variety of grape plant 
in the ground in a desired planting pattern.
    Ton. Two thousand (2,000) pounds avoirdupois.
    USDA. United States Department of Agriculture.
    Varietal group. Grapes with similar characteristics that are 
grouped for insurance purposes as specified in the Special 
Provisions.
    Written agreement. A written document that alters designated 
terms of this policy in accordance with section 13.

2. Unit Division

    (a) In California only, in addition to the requirements of 
section 1 (Definitions) of the Basic Provisions (Sec. 457.8) (basic 
unit), a basic unit will also be established for each variety that 
you insure.
    (b) Unless limited by the Special Provisions, these basic units 
may be divided into optional units if, for each optional unit, you 
meet all the conditions of this section.
    (c) Basic units may not be divided into optional units on any 
basis including, but not limited to, production practice, type, and 
variety, other than as described in this section.
    (d) If you do not comply fully with these provisions, we will 
combine all optional units that are not in compliance with these 
provisions into the basic unit from which they were formed. We will 
combine the optional units at any time we discover that you have 
failed to comply with these provisions. If failure to comply with 
these provisions is determined to be inadvertent, and the optional 
units are combined into a basic unit, that portion of the additional 
premium paid for the optional units that have been combined will be 
refunded to you for the units combined.

[[Page 33742]]

    (e) All optional units you selected for the crop year must be 
identified on the acreage report for that crop year.
    (f) The following requirements must be met to qualify for 
separate optional units:
    (1) You must have provided records by the production reporting 
date, that can be independently verified, of acreage and production 
for each optional unit for at least the last crop year used to 
determine your production guarantee; and
    (2) For each crop year, records of marketed production or 
measurement of stored production from each optional unit must be 
maintained in such a manner that permits us to verify the production 
from each optional unit, or the production from each unit must be 
kept separate until loss adjustment is completed by us.
    (g) Each optional unit must also meet the following criteria, as 
applicable:
    (1) In California only, unless otherwise allowed by a written 
agreement, optional units may only be established if each optional 
unit is located on non-contiguous land.
    (2) In all states except California, each optional unit must 
meet one or more of the following criteria:
    (i) Optional Units by Section, Section Equivalent, or FSA Farm 
Serial Number: Optional units may be established if each optional 
unit is located in a separate legally identified section. In the 
absence of sections, we may consider parcels of land legally 
identified by other methods of measure including, but not limited to 
Spanish grants, railroad surveys, leagues, labors, or Virginia 
Military Lands, as the equivalent of sections for unit purposes. In 
areas that have not been surveyed using the systems identified 
above, or another system approved by us, or in areas where such 
systems exist but boundaries are not readily discernable, each 
optional unit must be located in a separate farm identified by a 
single FSA Farm Serial Number.
    (ii) Optional Units on Acreage Including Both Irrigated and Non-
irrigated Practices: In addition to, or instead of, establishing 
optional units by section, section equivalent, or FSA Farm Serial 
Number, optional units may be based on irrigated acreage and non-
irrigated acreage if both are located in the same section, section 
equivalent, or FSA Farm Serial Number. The irrigated acreage may not 
extend beyond the point at which your irrigation system can deliver 
the quantity of water needed to produce the yield on which the 
guarantee is based and you may not continue into non-irrigated 
acreage in the same rows or planting pattern.
    (iii) Optional Units on Acreage Located on Non-contiguous Land: 
In addition to, or instead of, establishing optional units by 
section, section equivalent, FSA Farm Serial Number, or irrigated/
non-irrigated land, optional units may be established if each 
optional unit is located on non-contiguous land.
    (iv) Optional Units on Acreage by Varietal Group: In addition 
to, or instead of, establishing optional units by section, section 
equivalent, FSA Farm Serial Number, irrigated/non-irrigated land or 
on non-contiguous land, optional units may be established by 
varietal group when separate varietal groups are specified in the 
Special Provisions.

3. Insurance Guarantees, Coverage Levels, and Prices for Determining 
Indemnities

    In addition to the requirements of section 3 (Insurance 
Guarantees, Coverage Levels, and Prices for Determining Indemnities) 
of the Basic Provisions (Sec. 457.8):
    (a) In California, you may select only one price election and 
coverage level for each grape variety in the county specified in the 
Special Provisions.
    (b) In Idaho, Oregon, and Washington, you may select only one 
coverage level and only one price election for all the grapes in the 
county insured under this policy unless the Special Provisions 
provide different price elections by varietal group, in which case 
you may select one price election for each varietal group designated 
in the Special Provisions. The price elections you choose for each 
varietal group are not required to have the same percentage 
relationship to the maximum price offered by us for each varietal 
group. For example, if you choose 100 percent of the maximum price 
election for one varietal group, you may choose 80 percent of the 
maximum price election for all other varietal groups. However, if 
you elect the Catastrophic Risk Protection level of insurance for 
any varietal group, that level of coverage will be applicable to all 
insured grapes in the county.
    (c) In all other states, you may select only one coverage level 
and only one price election for all the grapes in the county insured 
under this policy unless the Special Provisions provide different 
price elections by varietal group, in which case you may select one 
price election for each varietal group designated in the Special 
Provisions. The price elections you choose for each varietal group 
must have the same percentage relationship to the maximum price 
offered by us for each varietal group. For example, if you choose 
100 percent of the maximum price election for one varietal group, 
you must also choose 100 percent of the maximum price election for 
all other varietal groups.
    (d) In California only, if the Special Provisions do not provide 
a price election for a specific variety you wish to insure, you may 
apply for a written agreement to establish a price election. Your 
application for the written agreement must include:
    (1) The number of tons sold for at least the two most recent 
crop years; and
    (2) The price received for all production of the variety in the 
years for which production records are provided.
    (e) You must report, by the production reporting date designated 
in section 3 (Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities) of the Basic Provisions (Sec. 457.8), by 
variety or varietal group, if applicable :
    (1) Any damage, removal of bearing vines, change in practices or 
any other circumstance that may reduce the expected yield below the 
yield upon which the insurance guarantee is based, and the number of 
affected acres;
    (2) The number of bearing vines on insurable and uninsurable 
acreage;
    (3) The age of the vines and the planting pattern; and
    (4) For the first year of insurance for acreage interplanted 
with another perennial crop, and anytime the planting pattern of 
such acreage is changed:
    (i) The age of the interplanted crop, and the type or variety or 
varietal group, if applicable;
    (ii) The planting pattern; and
    (iii) Any other information that we request in order to 
establish your approved yield.
    We will reduce the yield used to establish your production 
guarantee, based on our estimate of the effect of the following: 
Interplanted perennial crop; removal of vines; damage; change in 
practices and any other circumstance that may affect the yield 
potential of the insured crop. If you fail to notify us of any 
circumstance that may reduce your yields from previous levels, we 
will reduce your production guarantee at any time we become aware of 
the circumstance.

4. Contract Changes

    In accordance with section 4 (Contract Changes) of the Basic 
Provisions (Sec. 457.8), the contract change date is August 31 
preceding the cancellation date for all states except California, 
and October 31 preceding the cancellation date for California.

5. Cancellation and Termination Dates

    In accordance with section 2 (Life of Policy, Cancellation, and 
Termination) of the Basic Provisions (Sec. 457.8), the cancellation 
and termination dates are January 31 in California and November 20 
in all other states.

6. Report of Acreage

    In addition to the requirements of section 6 (Report of Acreage) 
of the Basic Provisions (Sec. 457.8), you must report your acreage 
by each grape variety you insure in California, or by varietal group 
in all other states.

7. Insured Crop

    In accordance with section 8 (Insured Crop) of the Basic 
Provisions (Sec. 457.8), the crop insured will be any insurable 
variety that you elect to insure in California or all insurable 
varieties in all other states in the county for which a premium rate 
is provided by the actuarial table:
    (a) In which you have a share;
    (b) That are grown for wine, juice, raisins, or canning;
    (c) That are grown in a vineyard that, if inspected, is 
considered acceptable by us;
    (d) That, after being set out or grafted, have reached the 
number of growing seasons designated by the Special Provisions; and
    (e) That have produced an average of two tons of grapes per acre 
during at least one of the three crop years immediately preceding 
the insured crop year, unless we inspect and allow insurance on such 
acreage.

8. Insurable Acreage

    In lieu of the provisions in section 9 (Insurable Acreage) of 
the Basic Provisions (Sec. 457.8) that prohibit insurance attaching 
to a crop planted with another crop, grapes interplanted with 
another perennial crop are insurable unless we inspect the acreage 
and determine that it does not meet the requirements contained in 
your policy.

[[Page 33743]]

9. Insurance Period

    (a) In accordance with the provisions of section 11 (Insurance 
Period) of the Basic Provisions (Sec. 457.8):
    (1) Coverage begins on February 1 in California and November 21 
in all other states of each crop year. Notwithstanding the previous 
sentence, for the year of application, if your application is 
received after January 22 but prior to February 1 in California, or 
after November 11 but prior to November 21 in all other states, 
insurance will attach on the 10th day after your properly completed 
application is received in our local office, unless we inspect the 
acreage during the 10 day period and determine that it does not meet 
insurability requirements. You must provide any information that we 
require for the crop or to determine the condition of the vineyard.
    (2) The calendar date for the end of the insurance period for 
each crop year is the date during the calendar year in which the 
grapes are normally harvested, as follows:
    (i) October 10 in Mississippi and Texas;
    (ii) November 1 in Idaho, Oregon, and Washington;
    (iii) November 10 in California; and
    (iv) November 20 in all other states.
    (b) In addition to the provisions of section 11 (Insurance 
Period) of the Basic Provisions (Sec. 457.8):
    (1) If you acquire an insurable share in any insurable acreage 
after coverage begins, but on or before the acreage reporting date 
for the crop year, and after an inspection we consider the acreage 
acceptable, insurance will be considered to have attached to such 
acreage on the calendar date for the beginning of the insurance 
period. Acreage acquired after the acreage reporting date will not 
be insured.
    (2) If you relinquish your insurable share on any insurable 
acreage of grapes on or before the acreage reporting date for the 
crop year, insurance will not be considered to have attached to, and 
no premium or indemnity will be due for such acreage for that crop 
year unless:
    (i) A transfer of coverage and right to an indemnity, or a 
similar form approved by us, is completed by all affected parties;
    (ii) We are notified by you or the transferee in writing of such 
transfer on or before the acreage reporting date; and
    (iii) The transferee is eligible for crop insurance.

10. Causes of Loss

    (a) In accordance with the provisions of section 12 (Causes of 
Loss) of the Basic Provisions (Sec. 457.8), insurance is provided 
only against the following causes of loss that occur during the 
insurance period:
    (1) Adverse weather conditions;
    (2) Fire, unless weeds and other forms of undergrowth have not 
been controlled or pruning debris has not been removed from the 
vineyard;
    (3) Insects, except as excluded in 10(b)(1), but not damage due 
to insufficient or improper application of pest control measures;
    (4) Plant disease, but not damage due to insufficient or 
improper application of disease control measures;
    (5) Wildlife;
    (6) Earthquake;
    (7) Volanic eruption; or
    (8) Failure of irrigation water supply, if caused by an insured 
peril that occurs during the insurance period.
    (b) In addition to the causes of loss excluded in section 12 
(Causes of Loss) of the Basic Provisions (Sec. 457.8), we will not 
insure against damage or loss of production due to:
    (1) Phylloxera, regardless of cause; or
    (2) Inability to market the grapes for any reason other than 
actual physical damage from an insurable cause specified in this 
section. For example, we will not pay you an indemnity if you are 
unable to market due to quarantine, boycott, or refusal of any 
person to accept production.

11. Duties in the Event of Damage or Loss

    In addition to the requirements of section 14 (Duties in the 
Event of Damage or Loss) of the Basic Provisions (Sec. 457.8), the 
following will apply:
    (a) You must notify us within 3 days of the date harvest should 
have started if the crop will not be harvested.
    (b) If the crop has been damaged during the growing season and 
you previously gave notice in accordance with section 14 of the 
Basic Provisions (Sec. 457.8), you must also provide notice at least 
15 days prior to the beginning of harvest if you intend to claim an 
indemnity as a result of the damage previously reported. You must 
not destroy the damaged crop that is marketed in normal commercial 
channels, until after we have given you written consent to do so. If 
you fail to meet the requirements of this section, all such 
production will be considered undamaged and included as production 
to count.

12. Settlement of Claim

    (a) We will determine your loss on a unit basis. In the event 
you are unable to provide acceptable production records:
    (1) For any optional units, we will combine all optional units 
for which such production records were not provided; or
    (2) For any basic units, we will allocate any commingled 
production to such units in proportion to our liability on the 
harvested acreage for the units.
    (b) In the event of loss or damage covered by this policy, we 
will settle your claim by:
    (1) Multiplying the insured acreage by its respective production 
guarantee;
    (2) Multiplying each result in section 12(b)(1) by the 
respective price election you selected for each variety or varietal 
group;
    (3) Totaling the results in section 12(b)(2);
    (4) Multiplying the total production to count of each variety or 
varietal group, if applicable, (see section 12 (c) through (e)) by 
the respective price election you selected;
    (5) Totaling the results in section 12(b)(4);
    (6) Subtracting the result in section 12(b)(5) from the result 
in section 12(b)(3); and
    (7) Multiplying the result in section 12(b)(6) by your share.
    (c) The total production to count (in tons) from all insurable 
acreage on the unit will include:
    (1) All appraised production as follows:
    (i) Not less than the production guarantee per acre for acreage:
    (A) That is abandoned or destroyed by you without our consent;
    (B) That is damaged solely by uninsured causes; or
    (C) For which you fail to provide production records;
    (ii) Production lost due to uninsured causes;
    (iii) Unharvested production (mature unharvested production may 
be adjusted for quality deficiencies in accordance with subsection 
12 (e)); and
    (iv) Potential production on insured acreage that you intend to 
abandon or no longer care for, if you and we agree on the appraised 
amount of production. Upon such agreement, the insurance period for 
that acreage will end. If you do not agree with our appraisal, we 
may defer the claim only if you agree to continue to care for the 
crop. We will then make another appraisal when you notify us of 
further damage or that harvest is general in the area unless you 
harvested the crop, in which case we will use the harvested 
production. If you do not continue to care for the crop, our 
appraisal made prior to deferring the claim will be used to 
determine the production to count; and
    (2) All harvested production from the insurable acreage. Grape 
production that is harvested and dried for raisins will be converted 
to a fresh weight basis by multiplying the number of tons of raisin 
production by 4.5.
    (d) If any grapes are harvested before normal maturity or for a 
special use (such as Champagne or Botrytis-affected grapes), the 
production of such grapes will be increased by the factor obtained 
by dividing the price per ton received for such grapes by the price 
per ton for fully matured grapes of the type for which the claim is 
being made.
    (e) Mature marketable grape production may be adjusted for 
quality deficiencies as follows:
    (1) Production will be eligible for quality adjustment if, due 
to insurable causes, it has a value of less than 75 percent of the 
average market price of undamaged grapes of the same or similar 
variety. The value per ton of the qualifying damaged production and 
the average market price of undamaged grapes will be determined on 
the earlier of the date the damaged production is sold or the date 
of final inspection for the unit. The average market price of 
undamaged production will be calculated by averaging the prices 
being paid by usual marketing outlets for the area during the week 
in which the damaged grapes were valued.
    (2) Grape production that is eligible for quality adjustment, as 
specified in subsection 12(e)(1) will be reduced by:
    (i) Dividing the value per ton of the damaged grapes by the 
maximum price election available for such grapes to determine the 
quality adjustment factor; and
    (ii) Multiplying this result (not to exceed 1.000) by the number 
of tons of the eligible damaged grapes.

13. Written Agreement

    Terms of this policy which are specifically designated for the 
use of written agreement may be altered by written agreement in 
accordance with the following:

[[Page 33744]]

    (a) You must apply in writing for each written agreement no 
later than the sales closing date, except as provided in section 
13(e);
    (b) The application for a written agreement must contain all 
variable terms of the contract between you and us that will be in 
effect if the written agreement is not approved;
    (c) If approved, the written agreement will include all variable 
terms of the contract, including, but not limited to, crop type or 
variety, the guarantee, premium rate, and price election;
    (d) Each written agreement will only be valid for one year (If 
the written agreement is not specifically renewed the following 
year, insurance coverage for subsequent crop years will be in 
accordance with the printed policy); and
    (e) An application for a written agreement submitted after the 
sales closing date may be approved if, after a physical inspection 
of the acreage, it is determined that no loss has occurred and the 
crop is insurable in accordance with the policy and written 
agreement provisions.

    Signed in Washington, DC, on June 16, 1997.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 97-16274 Filed 6-20-97; 8:45 am]
BILLING CODE 3410-08-P