[Federal Register Volume 62, Number 143 (Friday, July 25, 1997)]
[Rules and Regulations]
[Pages 39917-39926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19631]



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 Rules and Regulations
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  Federal Register / Vol. 62, No. 143 / Friday, July 25, 1997 / Rules 
and Regulations  

[[Page 39917]]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 403 and 457


General Crop Insurance Regulations; Peach Crop Insurance 
Regulations, and Common Crop Insurance Regulations; and Peach 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 peaches. 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 peach 
(fresh) crop insurance regulations with the Common Crop Insurance 
Policy for ease of use and consistency of terms, and to restrict the 
effect to the current peach crop insurance regulations to the 1997 and 
prior crop years.

EFFECTIVE DATE: August 25, 1997.

FOR FURTHER INFORMATION CONTACT: Richard Brayton, 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, this rule 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 being reviewed by OMB pursuant to the Paperwork 
Reduction Act of 1995 (44 U.S.C. Chapter 35) previously approved by OMB 
under OMB control number 0563-0053. 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 economic 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

    The 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 the 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, November 19, 1996, FCIC published a notice of proposed 
rulemaking, in the Federal Register at 61 FR 58786 to add to the Common 
Crop Insurance Regulations (7 CFR part 457), a new section, 7 CFR 
457.153, Peach 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 peaches found 
at 7 CFR part 403 (Peach (Fresh) Crop Insurance Regulations). FCIC also 
amends 7 CFR 403 to limit its effect to the 1997 and prior crop years.
    Following publication of that proposed rule, the public was 
afforded 60 days to submit written comments and opinions. A total of 
116 comments were received from FCIC, the National Peach Council, state 
peach councils, peach growers, and the reinsured companies. The 
comments received, and FCIC's responses, are as follows:

[[Page 39918]]

    Comment: The peach council made several recommendations on peach 
appraisals: (a) Adjustments be made in the field, (b) quality 
adjustments be made for all insured causes of loss, (c) signatures of 
the producer and adjuster be required on all appraisals, (d) 
arbitration or similar process be used for unsatisfactory adjustments, 
and (e) regulations should clearly provide unencumbered ownership of 
any remaining peaches after a claim is settled.
    Response: Adopting recommendations in (a), (b) and (c) would 
simplify the settlement of claims and result in earlier payment of an 
indemnity, but they are not appropriate under insurance principles. 
Although peach appraisal methods are believed to be reliable, they are 
not as accurate as measured final production. Production to count of 
peaches may change greatly during the last few days before maturity, 
depending on how the peach sizes during the final swell stage. To 
protect its interests, the insurance provider would be required to 
assume that maximum sizing would occur. This may be contrary to the 
producers' interests. Use of arbitration is mandated by section 17 of 
the Common Crop Insurance Policy Basic Provisions whenever the crop is 
insured under a contract reinsured by FCIC. When the producer and the 
insurance provider agree on the settlement of the claim, insurance on 
the unit will end. The producer owns any peaches that remain on the 
unit. For these reasons, no changes have been made.
    Comment: The peach council noted that the responsibilities of 
producers are apparently even greater under the proposed peach policy 
than in the current policy. Notification by the producer is required, 
for each insured unit, on at least 5 occasions: (a) Within 72 hours of 
initial discovery of damage; (b) ``any circumstance that may affect the 
yield'; (c) 15 days prior to direct marketing; (d) within 3 days of the 
date that harvest ``* * * should have started if the crop will not be 
harvested'; and (e) ``* * * at least 15 days prior to the beginning of 
harvest of the damaged variety, if you previously gave notice * * *'' 
The Regulatory Flexibility Act review section summarized in the Federal 
Register notice states, ``this rule does not have any greater or lesser 
impact on the producer,'' and thereby claims exemption to a Regulatory 
Flexibility Analysis. The council contended that the impact to peach 
producers is indeed greater under the proposed rule. The council 
proposes, once initial notification of potential crop damage is 
provided by the producer to the insurance provider, responsibility for 
tracking crop status should be shared by the producer and the insurance 
provider.
    Response: FCIC does not agree that the burden on the typical 
insured is materially greater under the proposed provisions than under 
the current policy. The typical insured is not required to provide 5 
notices for every insured unit. Only those notices that are appropriate 
for each unit are required. The requirements that the producer give 
notice of circumstances that may affect the yield compared to prior 
years and within 15 days of direct marketing have been added. 
Previously, direct marketed production was not insurable. With the 
extension of insurance to such production appropriate notice provisions 
were added. However, relatively few producers should be affected since 
these conditions are the exception, not the norm. The other three 
events requiring notice are contained in the present policy, but the 
time of notice may have changed to assure that the insurance provider 
has opportunity to timely assess the damage and determine the amount of 
the loss. The insurance provider does have responsibility for tracking 
the potential for loss adjustment activity once initial notices are 
provided by producers. This assures that an adequate number of 
adjusters will be available. However, only the producers know the stage 
of development of the crop on a particular unit, and must bear the 
responsibility for promptly advising the insurance provider so that the 
loss adjustment can be performed in a timely manner. Therefore, no 
change has been made.
    Comment: The peach councils and peach growers proposed a change to 
improve equity in the actual production history (APH) calculation. 
These commenters maintain that more equitable APH determination must be 
enacted in these regulations, and proposed that a 5-year APH be derived 
by using 8 years of production history but eliminating the 2 lowest and 
1 highest yields. They stated that this method of calculating APH will 
help mitigate wild APH yield swings.
    Response: There is no statutory authority to eliminate reported 
production history. Therefore, no change has been made.
    Comment: The peach councils proposed that the practice of devising 
and assigning ``transitional yields'' be addressed in the peach policy 
to offer guidelines that: (1) Are more consistent from region to 
region; (2) are more closely related to APH and related to producing 
areas within the respective regions; and (3) require favorable yield 
adjustments for commercial producers with proven production skills and 
sound management practices.
    Responses: Transitional yields are determined in accordance with 7 
CFR part 400, subpart G and are consistent for all crop policies. To 
change the methodology for determining such yields on a crop, region, 
or farm basis would significantly increase the administrative burden on 
the program and subject it to greater program vulnerabilities. 
Production capabilities are different between producers depending on a 
myriad of factors including farming practices, soil types, climate, 
etc. Use of standardize transitional yields will ensure that all 
producers are treated equally until they establish their own yield 
bases. Therefore, no change has been made.
    Comment: The peach councils proposed to alleviate policy problems 
by (1) excluding commercial peach packers from the definition of 
``direct marketing;'' (2) identifying the intended marketing path of 
insured peaches in the definition; (3) requiring that direct marketers 
make their declaration in the insurance contract; (4) covering direct 
marketers under a separate specialized peach policy, possibly through a 
pilot program; (5) that pick-your-own operations be identified in the 
insurance contract and be covered under a policy distinct from the 
policy covering commercial peach producers. A separation of this sort 
should streamline the process for the insured and insurance provider. 
They also proposed that commercial producers should be excluded from 
``Direct Marketing'' and that for producers declaring a direct 
marketing intent, the proposed 15 day notification period is indeed 
unreasonable and should be changed to require 7 days notice before the 
actuarial practice of direct marketing begins; and (6) notification 
that the 15 day notification requirement in section 10(b) be deleted.
    Response: With respect to liability and risk, there is generally no 
distinction between direct marketed production and production marketed 
through a processor. The only difference is the insurance providers 
ability to accurately determine the amount of production. The 15 day 
notice requirement is intended to give insurance providers sufficient 
time to appraise the loss of production prior to direct marketing. This 
policy distinction is insufficient to justify the paperwork and 
administrative burden of creating a separate policy. However, section 
10 is modified by adding the provisions that the insured must notify us 
at least 15 days before any production from any

[[Page 39919]]

unit will be sold by direct marketing, unless the producer will have 
verifiable records to show that direct marketed peaches were harvested 
and graded through a packing shed. Further, FCIC does not believe the 
15 day notice to be unreasonable. The insurance provider needs adequate 
time to schedule a site visit to appraise the production. Therefore, no 
change has been made.
    Comment: The peach councils recommended from a safety net 
perspective, that FCIC delete all distinction between ``fresh'' and 
``processing'' peaches and that FCIC should offer assurance of a level 
of production, a price as agreed in the contract, and standardization 
of loss adjustment procedure for fresh and processing peaches without 
regard to how the peaches are marketed.
    Response: Fresh and processing uses have different requirements for 
quality as well as different prices and markets. Therefore, fresh and 
processing peaches must be differentiated to provide a fair insurance 
offer to producers and an actuarial sound insurance program for the 
insurance providers. Therefore, no change has been made.
    Comment: The peach councils pointed out that the peach industry may 
move away from the \3/4\ bushel box, however, the \3/4\ bushel graded 
equals 1 bushel ungraded as established by the insurance industry is 
fair and realistic and the grade/ungraded equivalent relationship 
should remain.
    Response: FCIC recognizes that the unit of measurement for peaches 
is not always a \3/4\ bushel. Any unit of measure can be converted to a 
full 50 pound bushel. Therefore, references to a \3/4\ bushel carton 
has been removed from these provisions.
    Comment: The peach council asked for an explanation regarding FOB 
prices in the background section item 13, and section 11.
    Response: FCIC has amended the term ``FOB'' in section 1 under the 
definition for ``Actual price per bushel.'' The shipping point price 
reported by the Market News Service is used to determine the value of 
production for the purpose of quality adjustment.
    Comment: The crop insurance industry questioned why Freight on 
Board (FOB) is also used in the definition of ``actual price per 
bushel'' and recommended it be changed to read ``(FOB) (Freight on 
Board)'' for reference.
    Response: The term ``(FOB) (Freight on Board)'' has been removed 
from the definitions. However, ``FOB'' will still be used in the term 
of ``actual price per bushel.''
    Comment: The peach councils requested that the Special Provisions 
be open for comments and modification.
    Response: FCIC agrees that the terms of the Special Provisions are 
important to producers because they are part of the insurance contract. 
However, the Special Provisions contain those terms and conditions that 
are unique to an area. Great variations in production and marketing 
practices make inclusion of all terms into the Crop Provisions 
impractical. Any person with questions or comments regarding the 
Special Provisions should direct such comments to the applicable 
Regional Service Office.
    Comment: The peach council recommended that the Secretary be given 
discretionary authority in the policy to declare a Crop Failure 
Mitigation Floor under which the decrease in the APH yield would be 
limited to 10 percent when a commodity within a growing region meets 
specified parameters for a total or near total crop failure.
    Response: Section 508(g) in the Federal Crop Insurance Act, as 
amended, provides for the calculation of APH. This section requires a 
straight average of the annual yield in the data base and does not 
authorize the use of yield ceilings or floors. Therefore, no change has 
been made.
    Comment: The peach council contends that standardization of crop 
policies should not be to the detriment of the peach producers.
    Response: FCIC does not believe that standardization of crop 
policies adversely affects the producers. FCIC makes every possible 
effort to assure that any unique characteristics of a crop are 
recognized. This is the reason that the Crop Provisions are used in 
conjunction with the Common Crop Insurance Policy.
    Comment: In three comments received from the peach council, two 
recommended that the definition ``Actual price per bushel'' be changed 
by deleting the distinction between fresh and processing peach types. 
The third commenter suggested deleting the entire paragraph.
    Response: The definition ``Actual price per bushel'' is used for 
quality adjustment purposes. Since marketing prices for fresh and 
processing uses differ materially, distinction between peach types is 
necessary. Therefore, no change has been made.
    Comment: The peach growers and the crop insurance industry 
expressed concern with the definition of ``Actual price per bushel'' 
referring to U.S. Extra No. 1 ``2 inch'' peach. There has not been a 
market for a ``2 inch'' peach in Pennsylvania and Maryland for many 
years. Most growers market ``2\1/2\ inch'' peaches.
    Response: FCIC recognizes that the typical size of marketable 
peaches varies among regions. For this reason, the definition states 
that, if the average price is not available for ``2 inch,'' the next 
larger size for which a price is available will be used. Therefore, no 
change has been made.
    Comment: The peach council recommended that ``adverse weather 
conditions'' be defined in the context of damage to the insured crop 
rather than specific weather events. They noted that problems 
previously have been experienced with events such as ``flooding,'' 
which technically was not considered flooding because water did not 
overflow the banks of a nearby river. There was no regard to the crop 
damage or inability to harvest and market the crop, which was a direct 
result of excessive moisture. Such technicalities should be avoided.
    Response: FCIC agrees that technicalities should be avoided, and 
believes that the Basic Provisions in conjunction with the Crop 
Provisions clearly specify that any adverse weather conditions, 
including excess moisture, that causes damage to the insured crop is 
covered by the policy. The consequence of adverse weather, such as 
inability to harvest or market the crop, would be covered as long as 
cause can be adequately established. However, under the principals of 
insurance, the actual cause of the loss, inability to harvest etc., 
must be identified, not just the result of that cause. Therefore, no 
change has been made.
    Comment: Two comments from the peach council recommended changes to 
the definition of ``Bushel.'' One peach council member proposed 
changing the definition of ``Bushel'' to better reflect actual 
practices of peach producers, as well as to parallel other existing 
industry definitions. The commenter noted that the peach industry is 
moving from the \3/4\ bushel box as the unofficial industry standard 
toward a \1/2\ bushel box to meet marketplace demands. The \1/2\ bushel 
box is more expensive to pack and distribute. In that light, the 
existing graded/ungraded relationship equivalent should be consistent, 
with due consideration given to packaging changes. The commenter 
proposed that the definition be amended to read, ``A \3/4\ bushel of 
graded peaches is considered equivalent to a 50-pound bushel of 
ungraded peaches.'' Another peach council member proposed deleting the 
second sentence in the definition of a bushel which states ``A \3/4\ 
bushel of graded peaches is

[[Page 39920]]

considered equivalent to a forty-eight-pound bushel of ungraded 
peaches.''
    Response: FCIC agrees with the comments and has amended the 
provision to read ``bushel--fifty pounds of ungraded peaches.''
    Comment: The crop insurance industry recommended that in the 
definition of ``Bushel'' identify who grades the peaches, i.e., a 
licensed grader.
    Response: A licensed grader is only used by the government or 
processor when the peach production is being shipped to market. For 
direct marketing producers, i.e., roadside stand, farmers market, u-
pick etc., the bushel is a bulk 50 pounds measure and not graded by a 
licensed grader. Therefore, no change has been made.
    Comment: Two comments from the peach council, addressed the 
definition of ``crop year.'' The peach council opposed the length of 
the proposed crop year because it further shortened the period 
producers have to make critical decisions for the upcoming crop by 10 
days. The peach council proposed definition is, ``The period beginning 
December 1 and extending through September 30 of the following year, 
which is designated by the calendar year in which the insurance period 
ends.''
    Response: The definition of ``crop year'' has been removed from the 
proposed rule because it is contained in the Common Crop Insurance 
Policy Basic Provisions. FCIC believes that an insurance attachment 
date of November 21 rather than December 1 does not pose an undue 
hardship and simplifies the program because the November 21 date is 
consistent with other perennial crop insurance policies.
    Comment: The peach councils recommended modifying the definition of 
``harvest'' by deleting the words ``or removal.'' The comment was based 
on the potential of usual and customary commercial peach production 
practices to cause peaches to be unintentionally knocked from the tree. 
The proposed definition could be misconstrued and misapplied. The 
council proposed the following definition: ``The picking of mature 
peaches from the trees either by hand or machine with the intent to 
sell.''
    Response: FCIC believes the words ``removal of peaches'' must 
remain in the definition to prevent the intentional knocking of peaches 
to the ground to reduce the production to count in a loss situation. 
Loss adjustment procedures account for ordinary and customary losses. 
Therefore, no change has been made.
    Comment: The peach council proposed adding a definition for the 
term ``in the field.''
    Response: The term is not used in the policy. Therefore, no change 
has been made.
    Comment: The peach council recommended the definition of 
``irrigated practice'' be changed because the proposed definition 
contains redundancies and is ambiguous. The council recommended 
changing the definition of ``irrigated practice'' to read ``A method of 
producing a crop by which water is artificially applied during the 
growing season by appropriate systems and at the proper times.''
    Response: The definition was written in the current manner to 
prevent insureds with inadequate irrigation facilities and those who do 
not supply sufficient water during the crop year from qualifying for an 
irrigated loss. Therefore, no change has been made.
    Comment: A reinsured company recommended adding the words ``and 
quality'' to the definition of ``irrigated practice.''
    Response: FCIC agrees that water quality is an important issue. 
However, there are no established criteria regarding the quality of 
water necessary to produce a crop. Such criteria would be difficult to 
develop and administer due to the complexity of the factors. Therefore, 
no change has been made.
    Comment: The peach council proposed adding a definition of ``loss 
in quality.''
    Response: A definition of ``loss in quality'' has been added which 
specifies that the crop must be damaged to the extent that the producer 
does not receive the price for U.S. Extra No. 1 Peaches.
    Comment: The peach council recommended adding a definition ``peach 
type'' to include all insurable peach types for clarification.
    Response: Peach types are not contained in the Crop Provisions. 
Insurable peach types for the county are listed on the Special 
Provisions. It is the agent's responsibility to have the current county 
actuarial documents. Therefore, no change has been made.
    Comment: The peach council recommended clarifying the clause in 
section 2(e)(1) that states ``you must have records, which 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'' by adding ``unless the unit is for trees that are in the 
fourth year of leaf growth or the unit is for insurable trees added 
since the previous crop year for which no records are available.''
    Response: The (APH) Crop Insurance Handbook contains procedures for 
determining coverage on newly acquired acreage provided the peach trees 
are in the fourth leaf of growth or the acreage of insurable trees 
added that have no prior year records. It is the agent's responsibility 
to have the current procedure. For reason stated, and to be consistent 
with other crop policies, no change has been made.
    Comment: A reinsured company expressed concern that the opening 
clause of section 2(e)(3)(ii) is not necessary since 2(e)(3) states 
that optional units must meet one or more of the following criteria.
    Response: FCIC agrees with the comment and has amended the 
provisions accordingly.
    Comment: A reinsured company asked what is considered a ``bearing'' 
tree as opposed to a ``non-bearing'' tree as these terms are used in 
section 3(b)(2).
    Response: FCIC has added a definition of ``bearing tree,'' which 
based on industry standards, is a tree in at least its 4th growing 
season after set out.
    Comment: The peach council recommended inserting the words 
``reasonable and pertinent'' between the words ``other information'' in 
section 3(b)(4)(iv).
    Response: Since the information requested must be necessary to 
establish the approved yield, it is presumed reasonable and pertinent.
    Comment: The peach council recommended deleting the sentence ``If 
you fail to notify us of any circumstance that may affect your yields 
from previous levels, we will adjust your production guarantee as 
necessary at any time we become aware of the circumstances'' from 
section 3(b)(4)(iv) because broad and ambiguous phrases like ``any 
circumstance'' are inappropriate and unreasonable.
    Response: This provision in its entirety requires information to 
establish reasonable yields for orchards that are interplanted, for 
which production practices have changed, etc. If the insurance provider 
discovers, after an approved yield has been established, that the 
condition of the orchard is not as reported, the insurance provider 
must have the right to adjust the production guarantee to reflect the 
actual condition of the orchard. Therefore, no change has been made.
    Comment: A reinsured company questioned why the proposed language 
in section 6 omitted the reference to peaches ``grown for the 
production of

[[Page 39921]]

fresh and processing peaches (except processing peaches in 
California'') that is contained in the current policy.
    Response: FCIC agrees and has added section 6(c) in these 
provisions.
    Comment: The peach councils recommended the cancellation and 
termination dates remain November 30.
    Response: The cancellation and termination dates were changed from 
November 30 to November 20 to be consistent with other perennial crop 
insurance policies. This action was taken to comply with legal 
directives that the program be simplified. Combining similar dates does 
reduce complexity. Further, this change is consistent with the change 
to the date insurance attaches. Therefore, no change has been made.
    Comment: The peach councils recommended changing section 8(a)(1) to 
state that insurance attaches on December 1 or ten (10) days after 
application for those applications filed after November 21.
    Response: FCIC has changed the date to November 21 to be consistent 
with other perennial crops. Therefore, no change has been made.
    Comment: The peach councils and peach growers requested that split 
pits not be automatically excluded as insured damage. They requested 
that section 9(b)(2) be revised to read ``Split pits regardless of 
cause, unless damaged by an insured cause of loss.''
    Response: FCIC realizes that the percentage of split pits may 
increase under certain adverse weather situations. However, some 
varieties are inherently subject to split pits. It is difficult to 
identify whether a split pit is the result of natural tendencies or is 
weather related. Split pits are not always obvious since the damage is 
internal. Principals of sound insurance require that losses be definite 
as to time, place, and cause. FCIC does not believe that split pits 
meet these principles. Therefore, no change has been made.
    Comment: The peach councils requested the notification date in 
section 10(a) be changed from 3 days to 7 days prior to the date that 
harvest of the damaged variety should have started if the crop is not 
to be harvested.
    Response: FCIC recognizes that 3 days is a short time frame. 
However, FCIC wants to provide the insured with the maximum amount of 
time to determine whether the crop can be harvested while still 
providing time for the insurance provider to conduct an appraisal. This 
requirement is consistent with other perennial crop insurance policies. 
Therefore, no change has been made.
    Comment: The peach councils recommended changes to section 10(c) by 
deleting the phrases ``at least 15 days prior to the beginning of 
harvest'' and ``you must not sell or dispose of the damaged crop until 
after we have given written consent to do so.'' The inherent nature of 
farming, weather, and marketing suggest that a notice one-half month 
(15 days) prior to beginning of harvest is unreasonable. Numerous 
examples can be raised to demonstrate the potential problems with this 
provision. If notice of damage has been previously given as required, 
then the insurance provider should accept at least a portion of the 
responsibility in managing the potential claim. Nullification of 
coverage for failure to meet this requirement is far too severe.
    Response: Initial reports of damage often do not result in a loss 
because the damage was not severe enough. The insured is best able to 
assess the conditions of the crop as it matures because he or she 
observes it. The insurance providers responsibility is to appraise the 
loss once it has been determined that a loss is likely. Under the 
insurance policy, the burden is on the insured to prove that a loss 
occurred as a result of an insured cause of loss. FCIC will not shift 
the burden to the insurance provider. Therefore, no change has been 
made.
    Comment: The peach council recommended a new section 10(d) that 
states ``in addition to our responsibilities outlined in the Basic 
Provisions, we will assume responsibilities for inspection requirements 
outlined in this section, following the initial notification by you 
that a crop may be damaged.''
    Response: The insurance provider does not have the day to day 
contact with the crop that the producer does to identify when losses 
have manifested themselves. It would place an undue burden on the 
insurance provider to take this responsibility. Therefore, no change 
has been made.
    Comment: The peach councils recommended the language in section 
11(b) be modified to be consistent with the current policy. The current 
policy specifies multiplying the total production to be counted by the 
actual price per bushel or by the price election, whichever is larger.
    Response: This change was made so that the same price is used to 
establish liability and the amount of loss. FCIC is no longer offering 
revenue insurance on peaches because it is currently not authorized 
under the Federal Crop Insurance Act, as amended, except on a pilot 
basis. Therefore, no change has been made.
    Comment: The peach councils recommended deleting the reference 
relating to direct marketing from section 11(c)(1)(i)(B).
    Response: FCIC will insure direct marketed peaches, so the 
requirement in section 10 must be addressed in determining the total 
production to count. Therefore, no change has been made.
    Comment: The peach council recommended deleting the last sentence 
in section 11(a) which reads, ``In the event you are unable to provide 
separate acceptable production records: * * *.''
    Response: Maintaining separate records is a condition of receiving 
optional units. If production records for optional units are not kept 
separate, it would be impossible to accurately determine production to 
count for each unit. Therefore, no change has been made.
    Comment: The peach council recommended changing 11(a)(1) to read: 
For any optional unit, we will combine all optional units for which 
``timely notice was not reported or representative samples for 
appraisals are not available.''
    Response: Neither timely notices nor representative samples for 
appraisals are a requirement for optional units. Units are combined 
when a producer fails to maintain separate production records. 
Therefore, no change has been made.
    Comment: The peach council recommended that FCIC delete 11(a)(2) 
which reads ``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.''
    Response: If production is commingled it is impossible to 
accurately establish the amount of production attributed to each unit. 
Allocation in proportion to our liability for the harvested acres in 
units is a fair and equitable process. The alternative is to deny 
liability due to failure to follow policy provisions. Therefore, no 
change has been made.
    Comment: The peach councils recommended that sections 11(b)(1), 
(2), (3), (4), (5), (6), and (7) be replaced by: ``11(b) In the event 
of loss or damage covered by this policy, we will settle your claim by:
    (1) Multiply the insured acreage of peaches on the farm unit by the 
applicable production guarantee per acre which product will be the 
production guarantee for the farm unit;
    (2) Subtract therefrom the total production of peaches to be 
counted for the farm unit;
    (3) Multiply the remainder by the applicable price election for 
computing indemnities; and

[[Page 39922]]

    (4) Multiply the result obtained in step (3) by the insured's 
share.
    Response: The abbreviated formula is not correct when both fresh 
and processing peaches are insured within the same unit. When 
applicable, separate prices must be used to establish the amount of 
liability and the value of the production to count. Therefore, no 
change has been made.
    Comment: The peach councils recommended deleting in the proposed 
provisions, references to appraised production in sections 
11(c)(1)(i)(B) and (D), 11(c)(1)(ii), (iii), and (iv), and 11(c)(2) and 
(3).
    Response: The recommended changes would permit abuse of the 
insurance program in many ways. A producer could simply elect not to 
harvest the crop and if the references to appraised production were 
deleted, the producer would receive a zero production to count. The 
crop insurance program only insures against legitimate losses of 
production. To permit such a change would significantly increase the 
premium rates for all producers. Therefore, no change has been made.
    Comment: The peach council proposed that two guidelines for 
production to count be added: ``(A) Peaches damaged by an insured cause 
of loss that fail to appraise ``2 inches'' and up in size will not be 
recorded as production to count; and (B) Upon inspection, peaches 
showing evidence of internal damage will not be recorded as production 
to count.''
    Response: In some regions of the country, certain varieties of 
peaches which grade near ``2 inches'' in size are sold. Peaches that 
are less than ``2 inches'' in size due to an insurable cause of loss 
are eligible for quality adjustment that takes into consideration their 
reduced value. If this damage is from an insurable cause and results in 
unmarketability of the peaches, they are not included as production to 
count. Therefore, no change has been made.
    Comment: The peach council recommended modifying section 11(c)(1) 
to read ``any appraisal we have made on insured acreage will be 
considered production to count.'' This recommendation would result in 
deleting the language ``unless such appraised production is exceeded by 
the actual harvested production.''
    Response: Harvested production is the most accurate determination 
and will be used as production to count. Appraisals are, by necessity, 
an estimate of production. Therefore, no change has been made.
    Comment: The peach councils recommended changing section 
11(c)(1)(iv) to read: (1) potential production on insured acreage that 
you intended to abandon or no longer care for, if you and we agree on 
the appraised amount of production. Upon such agreement, the insurance 
period ``and all crop adjustments'' for the acreage will end; and (2) 
add the statement ``In any regard, however, once you and we reach an 
agreement on appraised production, further activity or inactivity with 
the crop is immaterial.''
    Response: When the insurance period ends the producer can do 
whatever the producer wishes with the crop. Therefore, no change has 
been made.
    Comment: The peach council recommended revising section 11(c)(2) to 
read ``all production from the insurable acreage, unless the insurance 
period has ended due to a previous agreement between you and us.''
    Response: Harvested production will be used as production to count. 
For any acreage that is not harvested by the end of the insurance 
period, the appraised production will be used as production to count. 
Once the insurance period has ended and the claim finalized, the 
producer can do whatever the producer wishes with the crop. Therefore, 
no change has been made.
    Comment: The peach council recommended deleting section 11(c)(3). 
This provision permits mature marketable peach production to be reduced 
due to loss in quality as a result of an insured cause of loss.
    Response: This provision allows quality adjustment on damaged 
production due to all insured causes of loss. The current policy only 
permits quality adjustment for damage due to hail, wind, and misshapen 
fruit. Therefore, no change has been made.
    Comment: The peach councils recommended deleting section 
11(c)(3)(i)(A) which allows for (FOB) peach prices in the absence of 
the Market News Service.
    Response: The current policy does not specify the price to use when 
the Market News Service does not establish a price for peaches. The 
change to the definition of actual price per bushel rectifies this 
omission. Therefore, no change has been made.
    Comment: The peach councils recommended deleting that part of 
section 11(c)(3)(i) which reads: ``peaches grown for fresh use by:'' 
and deleting subparagraph 11(c)(3)(ii) in its entirety.
    Response: The county actuarial table provides for different price 
elections for fresh and processing peaches. For example: The price 
election for fresh peaches is $5.25 per bushel and processing peaches 
is $4.00 per bushel. While it is true that some fresh market varieties 
may be marketed as either fresh or processing, the true processing 
peaches do not make good fresh market peaches. Also the Market News 
Service only quotes prices for fresh peaches that are packed and 
shipped. Therefore, no change has been made.
    Comment: The peach council suggested adding a section 11(c)(5) 
``Economic Zero or Threshold Yield.'' This section would contain 
language to allow an appropriate level in which production is not 
economically feasible to maintain and therefore should be zero in 
production to count.
    Response: The crop insurance program only protects against loss of 
yield or crop damage due to insured causes. It does not ensure a 
profit. Therefore, no change has been made.
    Comment: The peach councils suggested adding language to section 
11(c)(6) to state ``Peaches damaged by an insured cause of loss that 
failed to appraise ``2 inch'' and up in size will not be recorded as 
production to count.''
    Response: Peaches less than ``2 inch'' in size due to an insurable 
cause of loss may still have value if they are sold. Such production 
will be eligible for quality adjustment which is more equitable for the 
insurance provider and insured. Therefore, no change has been made.
    Comment: One comment received from the peach council requested 
clarification of the written agreement in the summary. Specifically, an 
explanation of the phrase ``certain modifications allowed'' and the 
policies for which modifications are allowed was requested.
    Response: Written agreements are designed to modify certain terms 
and conditions of the crop insurance policy. Each crop insurance policy 
specifies the provisions that may be modified by written agreement. For 
example, section 6(c) states that: ``We may agree in writing to insure 
peaches on acreage that has not reached the fourth growing season after 
being set out if it has produced at least 100 bushels of peaches per 
acre.
    Comment: A reinsured company recommended that the requirement for a 
written agreement to be renewed each year should be removed in section 
12. 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 temporary and intended to address 
unusual situations. If the condition for written agreement remains from 
year to year, that condition should be

[[Page 39923]]

incorporated into the policy, the Special Provisions or the Actuarial 
Table. Therefore, no change has been made.
    In addition to the changes described above, FCIC has made the 
following changes to the Peach Crop Provisions.
    1. Section 1--Clarified the definition of ``actual price per 
bushel.''
    2. Section 1--Added the definition of ``packing shed'' and ``set 
out'' for clarification.
    3. Section 2(e)(1)--Clarified that the insured must provide records 
not later than the production reporting date of acreage and production 
for each optional unit for at least the last crop year used to 
determine the production guarantee.
    4. Section 3(a)--Clarified that the insured may select one price 
election for each peach type ``fresh or processing.''
    5. Section 3(b)(4)(i)--Clarified that for the first year of 
insurance, the insured must report the age of any perennial crop 
interplanted with peaches.
    6. Section 9--Added wildlife as an insurable cause of loss to be 
consistent with other perennial crop insurance policies. Clarified that 
peaches are insured for the same causes of loss as other crops. Disease 
and insect infestation are insured causes of loss, if due to natural 
causes beyond the control of the producer. The former limitation that 
``adverse weather'' be the sole cause factor no longer is necessary.
    7. Section 11(c)(3)(ii)(A)--Clarified that the production to count 
for damaged peaches grown for processing is calculated by dividing the 
value of the damaged peaches by the actual price of undamaged peaches 
for processing.

List of Subjects in 7 CFR Parts 403 and 457

    Crop Insurance, Peach crop.

Final Rule

    Accordingly, for the reasons set forth in the preamble, the Federal 
Crop Insurance Corporation, hereby amends 7 CFR parts 403 and 457, as 
follows:

PART 403--GENERAL CROP INSURANCE REGULATION

    1. The authority citation for 7 CFR part 403 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 1986 and 
Succeeding Crop Years'' is removed.
    4. Section 403.7 is amended by revising the introductory text of 
paragraph (d) to read as follows:


Sec. 403.7  The application and policy.

* * * * *
    (d) The application for the 1986 and succeeding crop years is found 
at subpart D of part 400, General Administrative Regulations (7 CFR 
400.34, 400.38). The provisions of the Peach Insurance Policy for the 
1986 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 457.153 is added to read as follows:


Sec. 457.153  Peach crop insurance provisions.

    The Peach 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:
    Peach Crop Provisions
    If a conflict exists among the Basic Provisions (Sec. 457.8), 
the Crop Provisions, the Special Provisions, and the Catastrophic 
Risk Protection Endorsement, if applicable, the Special Provisions 
will control the Crop Provisions and these Basic Provisions; the 
Crop Provisions will control the Basic Provisions; and the 
Catastrophic Risk Protection Endorsement, if applicable, will 
control all provisions.

1. Definitions

    Actual price per bushel for:
    (a) Fresh peaches means the average price per bushel of U.S. 
Extra No. 1 ``2-inch'' peaches (if not available, the next larger 
size for which a price is available) determined from applicable 
prices reported by the Market News Service of the United States 
Department of Agriculture for seven consecutive marketing days, 
commencing with the day harvest of the variety begins. In the 
absence of FOB shipping point price from the Market News Service, 
the price per bushel of U.S. Extra No. 1 ``2-inch'' peaches will be 
the total of the price election and allowable costs for the 
undamaged peaches; and
    (b) Processing peaches means the average price per bushel 
received from the processor for that applicable variety determined 
for seven consecutive marketing days, commencing with the day 
harvest of the variety begins.
    Bearing tree. A tree in at least the 4th growing season after 
set out.
    Bushel. Fifty pounds of ungraded peaches.
    Days. Calendar days.
    Direct marketing. Sale of the insured crop directly to consumers 
without the intervention of an intermediary such as a wholesaler, 
retailer, packer, processor, shipper or buyer. Examples of direct 
marketing include selling through an on-farm or roadside stand, 
farmer's market, or permitting the general public to enter the field 
for the purpose of picking all or a portion of the crop.
    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.
    Harvest. The picking or removal of mature peaches from the trees 
either by hand or machine.
    Interplanted. Acreage on which two or more crops are planted in 
any form of alternating or mixed pattern.
    Irrigated 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.
    Loss in quality. When the crop is damaged to the extent that the 
producer does not receive the average price for U.S. Extra No. 1 
peach.
    Packing shed. A facility at which peaches are graded, packed and 
cooled in preparation for shipment to a wholesale market.
    Production guarantee (per acre). The number of peaches (bushels) 
determined by multiplying the approved actual production history 
(APH) yield per acre by the coverage level percentage you elect.
    Set out. Transplanting the tree into the orchard.
    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 basic unit as 
defined in section 1 (Definitions) of the Basic Provisions 
(Sec. 457.8) 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.

[[Page 39924]]

    (d) All optional 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 not later than the production 
reporting date, which 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;
    (2) For each crop year, records of marketed 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; and
    (3) Each optional unit must meet one or more of the following 
criteria, as applicable, unless otherwise specified by written 
agreement:
    (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: Optional units may be based on irrigated 
acreage and non-irrigated acreage (in those counties where ``non-
irrigated'' practice is allowed in the actuarial table) 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.

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) You may select only one price election for all the peaches 
in the county insured under this policy unless the Special 
Provisions provide different price elections by type, in which case 
you may select one price election for each peach type (fresh or 
processing) designated in the Special Provisions. The price 
elections you choose for each type must have the same percentage 
relationship to the maximum price offered by us for each type. For 
example, if you choose 100 percent of the maximum price election for 
one type, you must choose 100 percent of the maximum price election 
for all other types.
    (b) You must report, not later than 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 type if applicable:
    (1) Any damage, removal of or addition of trees, or 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 and non-bearing trees on insurable and 
uninsurable acreage;
    (3) The age of the trees, variety, type, and the planting 
pattern; and
    (4) For the first year of insurance, acreage interplanted with 
another perennial crop, and anytime the planting pattern of such 
acreage is changed:
    (i) The age of the crop that is interplanted with the peaches;
    (ii) The variety, and type if applicable;
    (iii) The planting pattern; and
    (iv) Any other reasonable and pertinent information that we 
request in order to establish your approved yield.
    We will adjust the yield used to establish your production 
guarantee as necessary, based on our estimate of the effect of 
interplanting a perennial crop; removal or addition of trees or 
varieties of trees; physical or structural tree damage; a change in 
practices or changes in tree population and density, and any other 
circumstance affecting the yield potential of the insured crop. If 
you fail to notify us of any circumstance that may affect your 
yields from previous levels, we will adjust your production 
guarantee as necessary 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.

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 November 20.

6. Insured Crop

    In accordance with section 8 (Insured Crop) of the Basic 
Provisions (Sec. 457.8), the crop insured will be all the peaches 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 on tree varieties that:
    (1) Were commercially available when the trees were set out;
    (2) Are a variety having a chilling hour requirement that is 
appropriate for the area;
    (3) Are grown on a root stock that is adapted to the area.
    (c) That the crop insured will be any of the types or varieties 
of peaches that are grown for the production of Fresh or Processing 
Peaches (except Processing Peaches excluded in California) on 
insured acreage and for which a guarantee and premium rate are 
provided by the Actuarial Table.
    (d) That are grown in an orchard that, if inspected, is 
considered acceptable by us; and
    (e) That has reached at least the fourth growing season after 
set out. However, we may agree in writing to insure acreage that has 
not reached this age if it has produced at least 100 bushels of 
peaches per acre.

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, peaches 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 November 21 of each crop year, except 
that for the year of application, if your application is received 
after November 11 but prior to November 21, 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 to determine the condition of the orchard.
    (2) The calendar date for the end of the insurance period for 
each crop year is September 30.
    (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 interest on any acreage of 
peaches on or before the acreage reporting date for the crop year 
and if the acreage was insured by you the previous crop year, 
insurance will not be considered to have attached, 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.

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 within 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;

[[Page 39925]]

    (4) Insects, but not damage due to insufficient or improper 
application of pest control measures;
    (5) Plant disease, but not damage due to insufficient or improper 
application of disease control measures;
    (6) Volcanic eruption;
    (7) Wildlife, unless control measures have not been taken;
    (8) An insufficient number of chilling hours to effectively break 
dormancy; or
    (9) 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) Split pits, regardless of cause; or
    (2) Inability to market the peaches 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.
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), and unless the 
insurance period has ended prior to each of the following events, the 
following will apply:
    (a) You must notify us within three days of the date that harvest 
of the damaged variety should have started if the crop will not be 
harvested.
    (b) You must notify us at least 15 days before any production from 
any unit will be sold by direct marketing unless you have records 
verifying that the direct market peaches were ``weighed and graded'' 
through a packing shed. Failure to give timely notice that production 
will be sold by direct marketing will result in an appraised amount of 
production to count not less than the production guarantee per acre if 
such failure results in our inability to make the required appraisal.
    (c) If you previously gave notice in accordance with section 14 of 
the Basic Provisions (Sec. 457.8), and if you intend to claim an 
indemnity on any unit, you must notify us at least 15 days prior to the 
beginning of harvest of the damaged variety, so that we may inspect the 
damaged production. You must not sell or dispose of the damaged crop 
until after we have given you written consent to do so.
    (d) If you fail to meet the requirements of this section and such 
failure results in our inability to inspect the damaged production, all 
such production will be considered undamaged and included as production 
to count.
11. Settlement of Claim
    (a) We will determine your loss on a unit basis. In the event you 
are unable to provide separate 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 for each type, if applicable, 
by its respective production guarantee;
    (2) Multiplying each result in section 11(b)(1) by the respective 
price election;
    (3) Totaling the results in section 11(b)(2);
    (4) Multiplying the total production to be counted by type, if 
applicable, (see subsection 11(c)) by the respective price election;
    (5) Totaling the results in section 11(b)(4);
    (6) Subtracting the total in section 11(b)(5) from the total in 
section 11(b)(3); and
    (7) Multiplying the result in section 11(b)(6) by your share.
    (c) The total production to count (in bushels) from all insurable 
acreage on the unit will include:
    (1) All appraised production will be determined as follows:
    (i) Not less than the production guarantee per acre for acreage:
    (A) That is abandoned;
    (B) From which production is sold by direct marketing if you fail 
to meet the requirements contained in section 10;
    (C) That is damaged solely by uninsured causes; or
    (D) For which you fail to provide production records that are 
acceptable to us;
    (ii) Production lost due to uninsured causes;
    (iii) Unharvested production;
    (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 adequately care for the crop, our appraisal made prior to 
deferring the claim will be used to determine the production to count; 
and
    (v) Any appraised production on insured acreage will be considered 
production to count unless such production is exceeded by the actual 
harvested production.
    (2) All harvested production from the insurable acreage.
    (3) Mature marketable peach production may be reduced as a result 
of a loss in quality due to an insured cause of loss. The amount of 
production to count for such peaches will be determined as follows:
    (i) Peaches grown for fresh use by:
    (A) Dividing the value of the damaged peaches by the actual price 
for undamaged peaches; and
    (B) Multiplying the result of section 11(c)(3)(i)(A) by the number 
of bushels of the eligible damaged peaches.
    (ii) Peaches grown for processing by:
    (A) Dividing the value of the damaged peaches by the actual price 
of undamaged peaches for processing; and
    (B) Multiplying the result of section 11(c)(3)(ii)(A) by the number 
of bushels of the eligible damaged peaches.
    (4) Peaches that cannot be marketed due to insurable causes will 
not be considered production to count.
12. Written Agreements
    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:
    (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 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

[[Page 39926]]

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 July 21, 1997.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 97-19631 Filed 7-24-97; 8:45 am]
BILLING CODE 3410-08-P