[Federal Register Volume 62, Number 127 (Wednesday, July 2, 1997)]
[Rules and Regulations]
[Pages 35666-35670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17355]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 456 and 457


Macadamia Tree Crop Insurance Regulations; and Common Crop 
Insurance Regulations, Macadamia Tree 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 macadamia trees. 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 macadamia tree crop insurance

[[Page 35667]]

regulations with the Common Crop Insurance Policy for ease of use and 
consistency of terms, and to restrict the effect of the current 
macadamia tree crop insurance regulations to the 1997 and prior crop 
years.

EFFECTIVE DATES: July 2, 1997.

FOR FURTHER INFORMATION CONTACT: Stephen Hoy, Insurance Management 
Specialist, Research and Development, 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, has not been reviewed by OMB.

Paperwork Reduction Act of 1995

    Following publication of the proposed rule, the public was afforded 
60 days to submit written comments and opinions 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

    The Manager, FCIC, certifies that this regulation will not have a 
significant impact on a substantial number of small entities. The new 
provisions included in this rule will not impact small entities to a 
greater extent than large entities. Under the current regulations, a 
producer is required to complete an application and acreage report. If 
the crop is damaged or destroyed, the insured is required to give 
notice of loss and provide the necessary information to complete a 
claim for indemnity. The producer must also annually certify to the 
previous years production if adequate records are available to support 
the certification. The producer must maintain the production records to 
support the certified information for at least three years. This 
regulation does not alter those requirements. The amount of work 
required of the insurance companies delivering and servicing these 
policies will not increase significantly from the amount of work 
currently required. This rule does not have any greater or lesser 
impact on the producer. 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 final 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 Friday, April 18, 1997, FCIC published a proposed rule in the 
Federal Register at 62 FR 19067-19071 to add to the Common Crop 
Insurance Regulations (7 CFR part 457), a new section, 7 CFR 457.130, 
Macadamia Tree 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 macadamia 
trees found at 7 CFR part 456 (Macadamia Tree Crop Insurance 
Regulations). FCIC also amends 7 CFR part 456 to limit its effect to 
the 1997 and prior crop years.
    Following publication of the proposed rule, the public was afforded 
30 days to submit written comments and opinions. A total of 12 comments 
were received from an insurance service organization, reinsured 
companies and an FCIC Regional Service Office (RSO). The comments 
received and FCIC's responses are as follows:
    Comment: An insurance service organization recommended that the 
definition of ``Destroyed'' be revised to state ``Trees damaged to the 
extent that we determine replacement, including grafts, is required.''
    Response: FCIC agrees and has revised the definition accordingly.
    Comment: An insurance service organization and a reinsured company 
expressed concern with the definition of ``Good farming practices,'' 
which makes reference to ``cultural practices generally in use in the 
county * * * recognized by the Cooperative State Research, Education, 
and Extension Service as compatible with agronomic and weather 
conditions in the county.'' The commenter questioned whether cultural 
practices exist that are not necessarily recognized (or possibly known) 
by the Cooperative State Research, Education, and Extension Service. 
The commenter also indicated that the term ``county'' in the definition 
of ``Good farming practice'' should be changed to ``area.''
    Response: FCIC believes that the Cooperative State Research, 
Education, and Extension Service (CSREES) recognizes farming practices 
that are considered acceptable for growing and maintaining macadamia 
trees. If a producer is following practices currently not recognized as 
acceptable by the CSREES, there is no reason why such recognition 
cannot be sought by interested parties. The cultural practices 
recognized by the CSREES may pertain only to specific areas within a 
county.

[[Page 35668]]

Such limitation would be considered by FCIC; therefore, no change has 
been made. FCIC agrees with the recommendation to change the term 
``county'' to ``area'' in the definition of ``Good farming practice'' 
and has revised the definition accordingly.
    Comment: Comments received from reinsured companies, an insurance 
service organization, and an FCIC RSO expressed concern that the 
provisions for an optional unit in section 2(e) (2) and (3), as 
proposed, would require each unit to contain at least 80 acres of 
bearing macadamia trees and be located on non-contiguous land. Optional 
unit division guidelines currently require at least 80 acres of bearing 
macadamia trees. Requiring both minimum acreage and non-contiguous land 
would severely limit the number of units allowed, particularly for 
growers with large, contiguous orchards. The majority of commenters 
recommended that the word ``and'' be replaced with ``or'' so that the 
provisions require each optional unit to be at least 80 acres of 
bearing macadamia trees or be located on non-contiguous land.
    Response: FCIC agrees and has revised the requirements accordingly.
    Comment: An insurance service organization recommends that section 
3(a)(3)(iv) be revised to clarify that the month and year of tree 
replacement are reported the first year of insurance coverage following 
replacement.
    Response: FCIC agrees and has revised this section accordingly.
    Comment: A reinsured company questioned the reason for the ``10-day 
period'' to inspect the acreage as specified in section 8(a)(1). The 
commenter indicated that the period limits their ability to reject an 
unacceptable orchard. In addition, an insurance service organization 
recommended that a specific date by which an application must be 
received for insurance to attach on January 1 should not be listed. 
Instead of a date, this section should state ``if your application is 
received less than ten days before the sales closing date.''
    Response: FCIC believes that the insurance provider must expedite 
its review of the application and any supporting documentation filed by 
the producer, determine if a visual inspection of the orchard is 
necessary, and perform any inspection within the 10-day period. The 
period of 10 days is believed appropriate to meet the needs of both the 
producer and the insurance provider. Listing the date by which an 
application must be received for insurance to attach on January 1 is 
more specific, avoids possible confusion, and is consistent with other 
perennial crop policies. No change has been made to these provisions.
    Comment: An insurance service organization and a reinsured company 
recommended removal of the requirement for a written agreement to be 
renewed each year. If no substantive changes occur from one year to the 
next, allow the written agreement to be continuous.
    Response: Written agreements are intended to supplement policy 
terms or permit insurance in unusual situations that require 
modification of the otherwise standard insurance provisions. If such 
practices continue year to year, they should be incorporated into the 
policy or Special Provisions. It is not intended that written 
agreements be so numerous that they would significantly increase 
administrative costs and cause producer misunderstanding. It is 
important to minimize written agreement exceptions to assure 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 editorial change to the Macadamia Tree Provisions:
    Section 2(e)--Modified the language to clarify optional unit 
requirements. For each optional unit, the producer must have provided 
records of acreage and age of trees for each unit for at least the last 
crop year. Each optional unit must also meet specific criteria unless 
otherwise specified by written agreement.
    Good cause is shown to make this rule effective upon publication in 
the Federal Register. This rule improves the macadamia tree insurance 
coverage and brings it under the Common Crop Insurance Policy Basic 
Provisions for consistency among policies. The current regulations are 
not continuous, and the actuarial filing date for the 1998 crop year is 
August 31, 1997. It is, therefore, imperative that these provisions be 
made final before that date so that the reinsured companies may have 
sufficient time to implement these changes. 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 456 and 457

    Crop insurance, Macadamia trees.

Final Rule

    Accordingly, for the reasons set forth in the preamble, the Federal 
Crop Insurance Corporation hereby amends 7 CFR parts 456 and 457, as 
follows:

PART 456--MACADAMIA TREE CROP INSURANCE REGULATIONS FOR THE 1988 
THROUGH 1997 CROP YEARS

    1. The authority citation for 7 CFR part 456 is revised to read as 
follows:

    Authority: 7 U.S.C. 1506(1), 1506(p).

    2. The part heading is revised to read as set forth above.
    3. The subpart heading ``Subpart--Regulations for the 1988 and 
Succeeding Crop Years'' is removed.
    4. Section 456.7 is amended by revising the introductory text of 
paragraph (d) to read as follows:


Sec. 456.7  The application and policy.

* * * * *
    (d) The application is found at subpart D of part 400, General 
Administrative Regulations (7 CFR 400.37, 400.38). The provisions of 
the Macadamia Tree Crop Insurance Policy for the 1988 through 1997 crop 
years are as follows:
* * * * *

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

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

    Authority: 7 U.S.C. 1506(1), 1506(p).

    6. Section 457.130 is added to read as follows:


Sec. 457.130  Macadamia tree crop insurance provisions.

    The Macadamia Tree Crop Insurance Provisions for the 1998 and 
succeeding crop years are as follows:

    FCIC policies:

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

    Reinsured policies: (appropriate title for insurance provider).
    Both FCIC and reinsured policies:

Macadamia Tree 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

    Age. The number of complete 12-month periods that have elapsed 
since the month the trees were set out or were grafted, whichever is 
later. Age determination will be made for each unit, or portion 
thereof, as of January 1 of each crop year.
    Crop year. A period beginning with the date insurance attaches 
to the macadamia tree crop extending through December 31 of the same 
calendar year. The crop year is designated by the calendar year in 
which insurance attaches.

[[Page 35669]]

    Days. Calendar days.
    Destroyed. Trees damaged to the extent that we determine 
replacement, including grafts, is required.
    Good farming practices. The cultural practices generally in use 
in the county for the crop to have normal growth and vigor, and are 
those recognized by the Cooperative State Research, Education, and 
Extension Service as compatible with agronomic and weather 
conditions in the area.
    Graft. The uniting of a macadamia shoot to an established 
macadamia tree rootstock for future production of macadamia nuts.
    Interplanted. Acreage on which two or more crops are planted in 
any form of alternating or mixed pattern.
    Irrigated practice. A method by which the normal growth and 
vigor of the insured trees is maintained by artificially applying 
adequate quantities of water during the growing season by 
appropriate systems and at the proper times.
    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.
    Rootstock. The root and stem portion of a macadamia tree to 
which a macadamia shoot can be grafted.
    Written agreement. A written document that alters designated 
terms of this policy in accordance with section 12.

2. Unit Division

    (a) Unless limited by the Special Provisions, a unit as defined 
in section 1 (Definitions) of the Basic Provisions (Sec. 457.8), 
(basic unit) may be divided into optional units if, for each 
optional unit, you meet all the conditions of this section.
    (b) Basic units may not be divided into optional units on any 
basis other than as described in this section.
    (c) 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.
    (d) All units you selected for the crop year must be identified 
on the acreage report for that crop year.
    (e) The following requirements must be met for each optional 
unit:
    (1) You must have provided records, which can be independently 
verified, of acreage and age of trees for each unit for at least the 
last crop year; and
    (2) Each optional unit must meet one or more of the following 
criteria, as applicable, unless otherwise specified by written 
agreement:
    (i) Contain at least 80 acres of insurable age macadamia trees; 
or
    (ii) Be located on non-contiguous land.

3. Insurance Guarantees, Coverage Levels, and Dollar Amounts for 
Determining Indemnities

    (a) In addition to the requirements of section 3 (Insurance 
Guarantees, Coverage Levels, and Prices for Determining Indemnities) 
of the Basic Provisions (Sec. 457.8):
    (1) You may select only one dollar amount of insurance for all 
the macadamia trees in the county in each age group contained in the 
actuarial table that are insured under this policy. The dollar 
amount of insurance you choose for each age group must have the same 
percentage relationship to the maximum dollar amount offered by us 
for each age group. For example, if you choose 100 percent of the 
maximum dollar amount of insurance for one age group, you must also 
choose 100 percent of the maximum dollar amount of insurance for all 
other age groups.
    (2) If the stand is less than 90 percent, based on the original 
planting pattern, the dollar amount of insurance will be reduced 1 
percent for each percent below 90 percent. For example, if the 
dollar amount of insurance you selected is $2,000 and the stand is 
85 percent of the original stand, the dollar amount of insurance on 
which any indemnity will be based is $1,900 ($2,000 multiplied by 
0.95).
    (3) You must report, by the sales closing date contained in the 
Special Provisions, by type if applicable:
    (i) Any damage, removal of trees, change in practices, or any 
other circumstance that may reduce the dollar amount of insurance 
and the number of affected acres;
    (ii) The number of trees on insurable and uninsurable acreage;
    (iii) The month and year on which the trees were set out or 
grafted and the planting pattern;
    (iv) For the first year of insurance following replacement, the 
month and year of replacement if more than 10 percent of the trees 
on any unit have been replaced in the previous five crop years; and
    (v) For the first year of insurance for acreage interplanted 
with another perennial crop, and any time the planting pattern of 
such acreage is changed:
    (A) The age of the interplanted crop, and type if applicable;
    (B) The planting pattern; and
    (C) Any other information that we request in order to establish 
your dollar amount of insurance.
    We will reduce the dollar amount of insurance as necessary, 
based on our estimate of the effect of interplanted perennial crop, 
removal of trees, damage, change in practices, and any other 
circumstance that adversely affects the insured crop. If you fail to 
notify us of any circumstance that may reduce your dollar amount of 
insurance from previous levels, we will reduce your dollar amount of 
insurance as necessary at any time we become aware of the 
circumstance.
    (b) The production reporting requirements contained in section 3 
(Insurance Guarantees, Coverage Levels, and Prices for Determining 
Indemnities) of the Basic Provisions (Sec. 457.8), do not apply to 
macadamia trees.

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.

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 December 31.

6. Insured Crop

    In accordance with section 8 (Insured Crop) of the Basic 
Provisions (Sec. 457.8), the crop insured will be all macadamia 
trees 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 the production of macadamia nuts;
    (c) For which the rootstock is adapted to the area;
    (d) That are at least one year of age when the insurance period 
begins; and
    (e) That, if the orchard is inspected, is considered acceptable 
by us.

7. 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, macadamia trees 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.

8. Insurance Period

    (a) In accordance with the provisions of section 11 (Insurance 
Period) of the Basic Provisions (Sec. 457.8):
    (1) Coverage begins on January 1 of each crop year, except that 
for the year of application, if your application is received after 
December 22 but prior to January 1, 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 orchard.
    (2) The calendar date for the end of the insurance period for 
each crop year is December 31.
    (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.
    (2) If you relinquish your insurable share on any insurable 
acreage of macadamia trees 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

[[Page 35670]]

    (iii) The transferee is eligible for crop insurance.

9. 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 
orchard;
    (3) Earthquake;
    (4) Volcanic eruption;
    (5) Wildlife, unless proper measures to control wildlife have 
not been taken; or
    (6) Failure of irrigation water supply, if caused by an insured 
cause of loss 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 due to disease or insect infestation, unless 
adverse weather:
    (1) Prevents the proper application of control measures or 
causes properly applied control measures to be ineffective; or
    (2) Causes disease or insect infestation for which no effective 
control mechanism is available.

10. 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), in 
case of damage or probable loss, if you intend to claim an indemnity 
on any unit, you must allow us to inspect all insured acreage before 
pruning or removing any damaged trees.

11. Settlement of Claim

    (a) We will determine your loss on a unit basis.
    (b) In the event of loss or damage covered by this policy, we 
will settle your claim by:
    (1) Multiplying the insured acreage by the dollar amount of 
insurance per acre for each age group;
    (2) Totaling the results in section 11(b)(1);
    (3) Multiplying the total dollar amount of insurance obtained in 
section 11(b)(2) by the applicable percent of loss, which is 
determined as follows:
    (i) Subtract the coverage level percent you elected from 100 
percent;
    (ii) Subtract the result obtained in section 11(b)(3)(i) from 
the actual percent of loss;
    (iii) Divide the result in section 11(b)(3)(ii) by the coverage 
level you elected (For example, if you elected the 75 percent 
coverage level and your actual percent of loss was 70 percent, the 
percent of loss specified in section 11(b)(3) would be calculated as 
follows: 100%-75%=25%; 70%-25%=45%; 45%75%=60%.); and
    (4) Multiply the result in section 11(b)(3) by your share.
    (c) The total amount of loss will include both trees damaged and 
trees destroyed as follows:
    (1) Any orchard with over 80 percent actual damage due to an 
insured cause of loss will be considered to be 100 percent damaged; 
and
    (2) Any percent of damage by uninsured causes will not be 
included in the percent of loss.

12. Written Agreements

    Terms of this policy that are specifically designated for the 
use of written agreement may be altered by written agreement in 
accordance with the following:
    (a) You must apply in writing for each written agreement no 
later than the sales closing date, except as provided in section 
12(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 dollar amount of 
insurance;
    (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 D.C., on June 26, 1997.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 97-17355 Filed 7-1-97; 8:45 am]
BILLING CODE 3410-08-P