[Federal Register Volume 62, Number 239 (Friday, December 12, 1997)]
[Rules and Regulations]
[Pages 65321-65338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32491]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 422 and 457


Potato Crop Insurance Regulations; and Common Crop Insurance 
Regulations, Northern Potato Crop Insurance Provisions, Central and 
Southern Potato Crop Insurance Provisions, Northern Potato Quality 
Endorsement Crop Insurance Provisions, Northern Processing Potato 
Quality Endorsement Crop Insurance Provisions, Certified Seed Potato 
Endorsement Crop Insurance Provisions, and Northern Potato Storage 
Endorsement Crop Insurance Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes crop 
provisions for the insurance of potatoes. 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 potato crop 
insurance regulations with the Common Crop Insurance Policy for ease of 
use and consistency of terms, and to restrict the effect of the current 
potato crop insurance regulations to the 1997 and prior crop years in 
counties in which the Northern Potato Crop Provisions will be used and 
to the 1998 and prior crop years in all other states.

EFFECTIVE DATE: December 12, 1997.

FOR FURTHER INFORMATION CONTACT:
Rob Coultis, Insurance Management Specialist, Product Development 
Division, Federal Crop Insurance Corporation, United States Department 
of Agriculture, 9435 Holmes Road, Kansas City, MO 64131, telephone 
(816) 926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order No. 12866

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

Paperwork Reduction Act of 1995

    Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), 
those collections of information have been approved by the Office of 
Management and Budget (OMB) under control number 0563-0053.

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. Therefore, 
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. The amount of work required of 
insurance companies will not increase because the information used to 
determine eligibility is already maintained at their office and the 
other information required is already being gathered as a result of the 
present policy. No additional actions are required as a result of this 
action on the part of either the producer or the reinsured company. 
Additionally, the regulation does not require any action on the part of 
the small entities than is required on the part of the large entities. 
Therefore, this action is determined to be exempt from the provisions 
of the Regulatory Flexibility Act (5 U.S.C. 605), and no Regulatory 
Flexibility Analysis was prepared.

Federal Assistance Program

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

Executive Order No. 12372

    This program is not subject to the provisions of Executive Order 
No. 12372, which require intergovernmental consultation with State and 
local officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115, June 24, 1983.

Executive Order No. 12988

    This final rule has been reviewed in accordance with Executive 
Order 12988 on civil justice reform. The provisions of this rule will 
not have retroactive effect. 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 against FCIC 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.

[[Page 65322]]

Background

    On Wednesday April 23, 1997, FCIC published a proposed rule in the 
Federal Register at 62 FR 19691-19701 to add to the Common Crop 
Insurance Regulations (7 CFR part 457), new sections: 7 CFR 457.142, 
Northern Potato Crop Insurance Provisions; 7 CFR 457.143, Northern 
Potato Quality Endorsement Crop Insurance Provisions; 7 CFR 457.144, 
Northern Processing Potato Quality Endorsement Crop Insurance 
Provisions; 7 CFR 457.145, Certified Seed Potato Endorsement Crop 
Insurance Provisions; 7 CFR 457.146, Northern Potato Storage 
Endorsement Crop Insurance Provisions; and 7 CFR 457.147, Central and 
Southern Potato Crop Insurance Provisions. The new provisions will be 
effective for the 1998 and succeeding crop years in counties in which 
the Northern Potato Crop Provisions will be used and for the 1999 crop 
year in all other counties. These provisions will replace and supersede 
the current provisions for insuring potatoes found at 7 CFR part 422 
(Potato Crop Insurance Regulations). FCIC also has amended 7 CFR part 
422 to limit its effect to the 1997 and prior crop years in counties in 
which the Northern Potato Crop Provisions will be used and to the 1998 
crop year in all other counties.
    Following publication of the proposed rule, the public was afforded 
30 days to submit written comments, data, and opinions. A total of 71 
comments were received from producer groups, reinsured companies and an 
insurance service organization. The comments received, and FCIC's 
responses, are as follows:
    Comment: An insurance service organization indicated it had heard 
the revised Potato Crop Provisions would not be effective in all states 
for the 1998 crop year, presumably because the Final Rule would not be 
published by the June 30 contract change date for counties in south 
Florida. The commentor questioned if it is the intent to defer the 
Central and Southern Potato Crop Policy in all states, or just those 
counties with a contract change date before the final rule is 
published. The commentor also stated it had received comments (for 
crops in general) that a contract change date of 60 or 90 days before 
the sales closing/cancellation date does not provide enough time to 
identify changes, prepare training materials, provide training to staff 
and agents, notify policyholders and solicit new sales.
    Response: FCIC will not implement the Central and Southern Potato 
Crop Provisions until the 1999 crop year in all applicable counties. 
The Northern Potato Crop Provisions and applicable endorsements will be 
implemented in all applicable counties for the 1998 crop year. The 60 
to 90 days before sales closing allows FCIC the opportunity to balance 
the need of the reinsured company to train and inform the insured, and 
the needs of FCIC and insured, to have the most recent data to enable 
FCIC to set rates, price, and other terms of the contract. Therefore, 
no change will be made.
    Comment: A reinsured company recommended delivery of the 1998 loss 
adjustment manual 90 days prior to the close of sales in order to 
adequately and correctly advise agents and insureds regarding purchase 
decisions.
    Response: FCIC will make all reasonable efforts to deliver 
supporting procedural manuals as soon as practicable after the contract 
change date. However, the loss adjustment manual cannot be finalized 
until the terms of the policy have been finalized.
    Comment: A reinsured company recommended changing either the 
definition of ``certified seed'' or section 7 (Insured Crop) to allow 
insurance to attach to acreage planted with seed that does not meet 
state certification requirements. The comment cited Idaho Seed Potato 
Regulations which state that ``Idaho growers will only be allowed to 
plant uncertified potatoes grown by them provided that they are no more 
than one generation from their own certified parent seed potatoes.'' 
Under the definition by the State of Idaho it appears that one 
generation past the initial certified seed is considered proper. The 
comment further stated that as long as State rules are followed, it 
should not matter if the seed is certified by the state or by a private 
organization.
    Response: Redesignated section 6 of the Northern Potato Crop 
Provision and section 7 of the Central and Southern Potato Crop 
Provisions allows insurance for acreage that is not planted with 
certified seed if authorized by the Special Provisions. FCIC's Regional 
Service Offices (RSO) will fully analyze individual areas to determine 
whether or not this practice should be allowed and, then, include the 
authority in the Special Provisions. Although certain private 
organizations may be able to duplicate State procedures, FCIC believes 
the most logical way to maintain consistent requirements among 
producers is to rely on authorized State agencies for the certification 
process. Therefore, no changes have been made in the provisions.
    Comment: A reinsured company and an insurance service organization 
indicated that cultural practices may exist that are not recognized (or 
possibly known) by the Cooperative State Research, Education and 
Extension Service. The comments indicated that the definition of ``Good 
farming practices'' is too restrictive since it limits acceptable 
farming practices to those recognized by the Cooperative State 
Research, Education, and Extension Service. The comments also suggested 
changing the last word of the definition from ``county'' to ``area.''
    Response: FCIC believes that the Cooperative State Research, 
Education, and Extension Service (CSREES) recognizes farming practices 
that are considered acceptable for producing potatoes. If a producer is 
following practices currently not recognized as acceptable by the 
CSREES, there is no reason why such recognition from CSREES cannot be 
sought by interested parties. The term ``area'' is more ambiguous than 
the term ``county'' and would allow more subjective determination, and 
less consistent application of the provision. No substantial change has 
been made in the definition. However, the definition has been moved to 
the Basic Provisions since it is applicable to most crops.
    Comment: An insurance service organization suggested the definition 
of ``harvest'' in the Northern and Central and Southern Crop Provisions 
be clarified to indicate if it means removing potatoes from the field 
or lifting them to the soil surface.
    Response: The definition has been clarified to indicate that 
acreage will be considered to be harvested when potatoes are lifted to 
the soil surface.
    Comment: A reinsured company suggested adding the words ``and 
quality'' after the words ``providing the quantity'' in the definition 
of ``Irrigated practice'' in the Northern and Central and Southern 
Potato Crop Insurance Provisions.
    Response: FCIC agrees that water quality is an important issue. 
However, since no standards or procedures have been developed to 
measure water quality for insurance purposes, quality cannot be 
included in the definition. No substantial change has been made in the 
definition. However, the definition has been moved to the Basic 
Provisions since it is applicable to most crops.
    Comment: An insurance service organization recommended the term 
``late blight'' be defined.
    Response: Late blight is a term commonly used in the potato 
industry and referenced in the U.S. Standards for Grades of Potatoes 
which are

[[Page 65323]]

incorporated herein by reference. Therefore, it is not necessary to 
define the term in the Crop Provisions.
    Comment: An insurance service organization indicated that the 
definition of ``marketable lot'' contained in the Central and Southern 
Crop Provisions describes a ``lot'' and recommended the definition be 
changed to distinguish it as a ``marketable lot.'' For the definition 
to be useful, it should specify that the production is saleable or 
grades U.S. No. 2 or better so the grade standard would be understood 
in all the references to ``marketable lots'' in section 12(e).
    Response: The requirements of marketability are clearly stated in 
section 12(e) of the Central and Southern Crop Provisions. However, 
FCIC agrees that the definition contained in the proposed rule 
describes a ``lot'' rather than a ``marketable lot'' and has revised 
the section to define the term ``lot.''
    Comment: An insurance service organization suggested clarifying the 
definition of ``Practical to replant'' in the Northern and Central and 
Southern Crop Insurance Provisions by changing the punctuation.
    Response: FCIC has clarified the definition by changing some of the 
punctuation. The definition has also been moved to the Basic Provisions 
since it is applicable to most crops.
    Comment: A reinsured company suggested revising the definition of 
``replanting'' in the Northern and Central and Southern Crop Provisions 
by replacing the wording ``. . . replace the potato seed and then 
replacing the potato seed . . .'' with ``. . . planting the potato seed 
and then replanting the potato seed . . .''
    Response: The first reference to ``replace the potato seed'' refers 
to preparation of the land, not planting. No substantial change has 
been made in the definition. However, the definition has been moved to 
the Basic Provisions since it is applicable to most crops.
    Comment: An insurance service organization recommended clarifying 
the definition of ``replanting'' by specifying the crop name as 
follows: ``. . . with the expectation of growing a successful potato 
crop.''
    Response: FCIC has revised the definition of ``replanting'' to 
clarify a ``successful crop'' to mean at least the approved yield for 
the unit. The definition also has been moved to the Basic Provisions 
since it is applicable to most crops.
    Comment: A reinsured company and a producer organization opposed 
the provisions in sections 3 (b) and (c) of the Northern and Central 
and Southern Crop Provisions that reduce the price election for 
unharvested acreage. In addition, an insurance service organization had 
two comments from its members favoring, and two opposing, these 
provisions. The opposing comments indicated that the unharvested 
reduction provision was removed from the peanut policy and is being 
considered for removal from the tobacco policy. Adding it to potatoes 
would appear to discriminate against potato producers who are unable to 
harvest due to insured causes. The opposing comments also indicated 
that the reduced coverage would: (1) Be hard to ``sell'' and explain to 
insureds; (2) make settlement of claims more difficult; (3) be 
inappropriate when damage occurs just prior to harvest because the 
insured has incurred most normal input costs; (4) encourage insureds to 
harvest damaged potatoes that have no value just to collect 100 percent 
of the price election; and (5) be unfair to producers with multi-unit 
policies because, when freeze damage occurs near the end of the harvest 
season, several fields have already been harvested and the costs have 
already been incurred for the entire crop. Producers with multi-unit 
policies pay a 10 percent surcharge for the added protection. 
Therefore, 100 percent coverage is only fair. Because of the objections 
received from its members, the insurance service organization 
recommended further study or a more detailed explanation be provided.
    Response: Prior to this rule, FCIC's price elections have not 
included harvesting costs. This means that producers have paid less 
premium than otherwise would have been owed. However, any loss from 
harvested acres has been indemnified at that lower expected market 
price. The Federal Crop Insurance Act authorizes FCIC to reduce the 
payment to producers for acreage that is not harvested or for other 
costs that are not incurred if the crop is lost prior to harvest. FCIC 
has exercised its authority to build harvesting costs into the price 
election but only reduce the price for those producers who do not incur 
harvesting costs. The price election reduction is limited to those 
costs associated with harvest. If the producer has already begun 
harvest before the cause of loss occurred that caused the 
discontinuance of harvest, and the producer can prove that harvesting 
costs have already been incurred, no reduction will occur. The change 
means that producers who harvest their potatoes will receive a higher 
price election. However, this higher price election will result in 
higher premiums than in the past. Section 3 has been redesignated as 
section 2 in the Northern Potato Crop Provisions.
    Comment: A reinsured company requested that section 3(c) of the 
Northern and Central and Southern Crop Provisions be clarified.
    Response: FCIC has clarified the provisions in redesignated section 
2(c) of the Northern Potato Crop Provisions and section 3(c) of the 
Central and Southern Crop Provisions.
    Comment: A reinsured company asked two questions regarding the 
following provision contained in section 3(c) of the Northern and 
Central and Southern Crop Provisions.
    (a) If the potatoes freeze before the end of the insurance period, 
is the claim settled by: (1) Using an appraisal at the 80 percent price 
election or (2) allowing the frozen potatoes to be taken to harvest, 
use the production to count, and then apply the 80 percent price 
election?
    (b) If the potatoes have 12 percent wet breakdown, a 100 percent 
loss would be paid if production is discarded within seven days of 
harvest. Will the indemnity be based on the 80 percent unharvested 
price if the neighbors would have destroyed similar production but did 
not do so because they didn't have that problem?
    The comment also recommended that the 80 percent price apply only 
when none of the acreage in a unit could be harvested because, once 
harvest on a unit has begun, the producer will have incurred costs 
regardless of the amount of acreage harvested.
    Response: This provision is intended to recognize reduced input 
costs when potatoes are not harvested. Therefore, in the event that 
freeze damage is severe, and a majority of producers would not further 
care for the crop, the insurance provider should determine the amount 
of production to count in accordance with applicable procedures, and 
settle the claim using 80 percent of the elected price. If similarly 
situated producers in the area would continue to care for the crop, and 
the producer elects to continue to care for and harvests the crop, the 
insurance provider should determine the amount of production to count 
and settle the claim using 100 percent of the elected price. FCIC will 
only allow the 100 percent price to be used if the producer has 
adequate proof that he has already incurred and paid the harvesting 
costs. A provision has been added to allow the apportionment of acreage 
within a unit as harvested and unharvested and only unharvested acreage 
will have the price election reduced. Section 3 has been

[[Page 65324]]

redesignated as section 2 in the Northern Potato Crop Provisions.
    Comment: A reinsured company suggested clarifying section 8(b) of 
the Northern and Southern and Central Potato Crop Provisions.
    Response: FCIC has clarified the provision in redesignated section 
7(b) of the Northern Potato Crop Provisions and section 8(b) of the 
Central and Southern Crop Provisions.
    Comment: A producer group recommended changing the date after which 
frost/freeze would no longer be covered in Minnesota and North Dakota 
from September 30 to October 15. This is referenced in section 10(b)(2) 
of the Northern Potato Crop Provisions, but the actual date is 
contained in the Special Provisions.
    Response: The Crop Provisions have been written to permit these 
dates to vary based on weather patterns and growing conditions. Data 
collected thus far by FCIC supports the current date of September 30. 
However, FCIC will review any additional information that can be 
provided. No changes can be made until such data are received and 
analyzed. Section 10 has been redesignated as section 9 in the Northern 
Potato Crop Provisions.
    Comment: An insurance service organization indicated that the 
calculation sequence in section 12(b)(1)-(7) of the Northern Potato and 
Central and Southern Potato Crop Provisions is difficult to follow 
because it is so wordy. It seems unnecessary to refer to the previous 
item by number as if it were on another page.
    Response: Since some of the calculations involved are not performed 
in sequential order, it is necessary to refer to specific section 
numbers. Removal of the section references would make the provisions 
less clear. However, an example has been added for clarity to 
redesignated section 11 of the Northern Potato Crop Provisions.
    Comment: A reinsured company stated that new quality adjustment 
provisions contained in section 12 of the Northern Potato Crop 
Provisions would increase the amount of work required of insurance 
providers and greatly increase loss adjustment expense. The comment 
indicated that the policy is complex, contrary to simplification 
efforts, and that previous regulations and procedures did not require 
grading or adjustment to the amount of production to count when less 
than 5 percent of the insured production had soft rot, wet breakdown or 
freeze damage.
    Response: The previous potato policy (without the Frost/Freeze 
Option) and related procedures also provided for reductions in the 
amount of production to count when production had any amount of soft 
rot, wet breakdown, or freeze damage. Previous provisions and 
procedures also required grading of the production to determine 
appropriate reductions in the amount of production to count. The only 
changes in these provisions are in the adjustment factors which do not 
change the requirement to grade damaged production or to adjust to the 
amount of production to count. Therefore, FCIC does not agree that 
additional work or expense will be incurred as a result of the changes, 
and no change will be made. Section 12 has been redesignated as section 
11 in the Northern Potato Crop Provisions.
    Comment: An insurance service organization recommended 
clarification of ``marketable lot'' as used in section 12(e) of the 
Central and Southern Potato Crop Provisions. As written, it seems 
somewhat unclear whether all marketable lots must grade U.S. No. 2 or 
better, or only in certain cases, such as unsold harvested or appraised 
production in 12(e)(1)(iv).
    Response: FCIC agrees that the provisions can be clarified and has 
revised section 12(e) to clearly indicate that any lot of potatoes that 
is stored, sold for seed, sold for human consumption, etc. will be 
considered to be a marketable lot.
    Comment: An insurance service organization received one comment 
asking why, if quality adjustment has been incorporated in section 
12(e) through (g) of the Northern Potato Crop Provisions, the options 
remain separate at the end of the proposed rule. As written, there is a 
lot of unnecessary duplication. The commenter would prefer to see the 
quality adjustment information included in the Crop Provisions and 
eliminate the need for endorsements and the resulting complications.
    Response: Quality adjustment for tuber rot and freeze damage has 
been incorporated into the base coverage in redesignated section 11 of 
the Northern Crop Provisions. However, coverage for other types of 
quality losses (e.g. internal and external defects) are not included in 
the Crop Provisions because many producers do not wish to pay the 
premium amounts associated with these types of quality losses. Although 
some redundancy and complication results, FCIC believes that the 
endorsements are the best way to provide coverage for certain quality 
deficiencies. Without the endorsements, coverage of internal and 
external defects would not be available, or, if made a part of the base 
coverage, would require substantial premium increases for all insureds. 
Therefore, no change will be made.
    Comment: An insurance service organization recommended using the 
defined term ``discarded'' instead of ``disposed of'' in section 
12(d)(1)(i)(D) of the Northern Potato and Central and Southern Potato 
Crop Provisions.
    Response: ``Discarded'' is defined in the policy as disposing of 
production by the insured, or a person acting for the insured, without 
received any value for it. The term ``disposed of'' in redesignated 
section 11(d)(1)(i)(D) of the Northern Potato Crop Provisions and 
section 12(d)(1)(i)(D) of the Central and Southern Crop Provisions 
refers to any disposition, including selling the production and a 
definition for it has been added. Therefore, the term ``discarded'' 
cannot be used as recommended.
    Comment: A reinsured company and an insurance service organization 
commented that subsection 12(d)(1)(iii) of the Northern and Central and 
Southern Crop Provisions, which requires an increase in the amount of 
production to count when harvest takes place prior to full maturity, 
will be difficult to administer. Insurance providers would be required 
to track harvested acreage on a daily basis in order to apply proper 
percentages. This would increase in complexity if multiple units, with 
multiple planting dates, were being harvested simultaneously. This 
adjustment is extremely subjective, which opens the insurance 
provider's decisions to questioning and does serious harm to the 
policy. Also, new tracking requirements will increase loss adjustment 
expense. Another reinsured company concurred with the additional 
production to count for potatoes harvested prior to full maturity, but 
recommended that a date for full maturity be established by area and 
variety. Fifty days prior to the calendar date for the end of the 
insurance period was recommended for most areas. The insurance service 
organization asked how and when will the ``normal number of days to 
full maturity'' be determined, and by whom and whether this will vary 
each year depending on favorable or adverse weather conditions. The 
comment indicated that, if the date is not allowed to vary from year to 
year, the adjustment could apply even though all the production in a 
given area matures earlier than normal.
    Response: This provision, redesignated section 11(d)(1)(iii) of the 
Northern Potato Crop provisions and section 12(d)(1)(iii) of the 
Central and Southern Crop Provisions, is intended to take into account 
reduced production

[[Page 65325]]

that is a result of harvest for the ``new'' or ``B'' potato market, for 
which small potatoes are required. FCIC agrees that this provision adds 
some complexity to the loss adjustment process. However, previous 
provisions did not provide any consistent method of adjustment when 
potatoes were harvested prior to full maturity. To lessen the 
administrative complications associated with this adjustment, FCIC has 
changed the provision to specify that full maturity will be presumed to 
have been reached 45 days prior to the calendar date for the end of the 
insurance period unless specified otherwise in the Special Provisions.
    Comment: An insurance service organization is concerned that 
section 12(d)(1)(v) of the Northern Potato and Central and Southern 
Potato Crop Provisions allows insureds to defer the settlement of a 
claim. The policy should not allow the insured to defer settlement and 
wait for a later, generally lower, appraisal, especially on crops that 
have a short ``shelf life.''
    Response: This provision allows deferment of a claim only if the 
insurance provider agrees that representative samples can be left or if 
the insured elects to continue to care for the entire crop. In either 
case, if the insured does not provide sufficient care for the remaining 
crop samples, the original appraisal will be used. Therefore, no 
changes have been made. Section 12 has been redesignated as section 11 
in the Northern Potato Crop Provisions.
    Comment: An insurance service organization stated section 
12(d)(1)(v)(A) of the Northern and Central and Southern Potato Crop 
Provisions should not refer to ``stage guarantee'' since there are no 
stages in this policy, only a price reduction for unharvested acreage.
    Response: FCIC agrees and has corrected the provisions in 
redesignated section 11(d)(1)(v)(A) of the Northern Potato Crop 
Provisions and section 12(d)(1)(v)(A) of the Central and Southern Crop 
Provisions.
    Comment: An insurance service organization asked if premium will be 
increased to compensate for the additional risk of adding quality 
adjustment for freeze damage to the Northern Crop Provisions.
    Response: All changes in coverage, including the addition of new 
freeze damage adjustment provisions, will be considered when premium 
rates are established.
    Comment: An insurance service organization recommended combining 
sections 12(e)(1) and (2) since they are so similar. Combining the 
provisions will avoid having to list the types of covered damage twice 
and reduce the chance of misinterpretation.
    Response: FCIC agrees with the comment and has combined the 
provisions in redesignated section 11(e) of the Northern Potato Crop 
Provisions and section 12(e) of the Central and Southern Crop 
Provisions.
    Comment: A reinsured company, an insurance service organization, 
and a producer group indicated that, in many situations, it will not be 
possible to determine percentages of damage or to complete grade 
inspections by the end of the insurance period as section 12(e)(3) of 
the Northern Potato Crop Provisions and the definition of ``grade 
inspection'' in the Northern and Central and Southern Potato Crop 
Provisions require. Producers may harvest potatoes near the end of the 
insurance period and, depending on the amount of potatoes in an area 
that require grading, it may be two to three weeks before grading of 
samples can be completed.
    Response: FCIC agrees that the actual percentage of damage may not 
be obtainable prior to the end of the insurance period in all 
situations. Therefore, the definition of ``grade inspection'' in the 
Northern and Central and Southern Crop Provisions has been changed to 
require that samples of production be obtained prior to the sale, 
storage, or disposal of the potatoes, and to allow the actual grading 
of the samples to take place at a later time. Redesignated section 
11(c) of the Northern Potato Crop Provisions and section 12(c) of the 
Central and Southern Potato Crop Provisions has also been changed to 
indicate that the extent of any loss, including quality adjustments, 
must be determined based on samples obtained no later than the time the 
potatoes are placed in storage, if the production is stored prior to 
sale, or the date it is delivered to a buyer, wholesaler, packer, 
broker, or other handler if it is not stored. Section 12(e)(3) of the 
Northern Potato Crop Provisions has been deleted.
    Comment: An insurance service organization suggested changing the 
language in section 12(f), 12(g)(1) and 12(g)(2)(ii)(B)(1) of Northern 
Crop provisions from ``will be adjusted 0.1 percent for each 0.1 
percent of damage through 5 percent'' to ``will be adjusted by the same 
percentage'' so the reader doesn't have to puzzle through the 
calculation to figure out that 4.5 percent damage means a 4.5 percent 
adjustment. Also, the existing frost/freeze potato option reduces 
production to count in 5 percent increments for damage from 6 percent 
to 20 percent. Changing this to increments of a tenth of a percent for 
each tenth of a percent damage is more complicated, and indicates an 
unrealistic degree of precision.
    Response: The use of the language ``0.1 percent for each 0.1 
percent of damage'' is necessary to avoid any ambiguity. Further, the 
use of 0.1 percent increments is intended to make these determinations 
more accurate and should not substantially complicate the calculations. 
Therefore, no changes have been made.
    Comment: An insurance service organization indicated that the 
language in section 12(g)(2) (i), (ii) & (iii) of the Northern Potato 
Crop Provisions is very complicated and difficult to follow and 
suggested that a chart might be developed to assist in understanding.
    Response: Section 12(g)(2)(i) (redesignated 11(g)(2)(i)) indicates 
that the price received for damaged production is divided by a price 
election to obtain an adjustment factor. Including this information in 
a chart will not improve clarity. Redesignated sections 11(g)(2) (ii) 
and (iii) indicate that 0.1 percent damage results in a 0.1 percent 
reduction in the amount of production to count, that 0.2 percent damage 
results in a 0.2 percent reduction, etc. A chart indicating all damage 
amounts in 0.1 percent increments would be extremely repetitive, result 
in additional policy pages, and not improve understanding. Therefore, 
no change has been made.
    Comment: An insurance service organization and a reinsured company 
are concerned with moral hazards, because in section 12(g)(2) of the 
Northern Crop Provisions, there is a different method of adjustment for 
production that is sold or discarded within 7 days and production that 
remains in storage 8 days or more. The comments indicated that a 
producer's production could have 11 percent damage which would result 
in zero production to count if it is kept more than 7 days, but, if it 
is sold immediately, a salvage value would count against the guarantee. 
The commenters also asked whether there is a way to recover some 
salvage value instead of showing zero production to count if production 
with more than 11 percent damage is sold and processed and whether the 
loss adjustment procedure provides a way to restrict any indemnity to 
the damaged acreage for a unit which includes four separate fields, and 
only one was damaged enough to result in significant damage for the 
whole unit.
    Response: FCIC agrees that a salvage value should be counted when 
an insured elects to keep and use the damaged crop for feed, starch, 
etc. and

[[Page 65326]]

has changed redesignated section 11(g)(2)(ii)(B) so that a minimum of 
15 percent of the production will be production to count in such 
instances. This amount is consistent with the value that is normally 
received for potatoes that are sold for cattle feed, starch, or other 
salvage uses. When only one field of a unit is damaged, the production 
from that field will be adjusted in accordance with the policy 
provisions, just as it would be for other insured crops. If that amount 
of damage reduces the production to count below the guarantee for the 
unit, an indemnity will be paid.
    Comment: A reinsured company recommended retaining current 
procedures that allow a 60 day period to determine the disposition of 
potatoes with 5 percent or more tuber rot. If the producer can sell the 
potatoes within 60 days of harvest, the salvage value should be used to 
determine the loss. Also, physiological disorders such as hollow heart, 
leaf roll, etc., should be covered in the same manner as pathological 
diseases (tuber rot, soft rot, late blight, etc.)
    Response: FCIC agrees that 60 days is an appropriate time period to 
allow for disposition of potatoes with tuber rot. However, many 
producers do not wish to pay the additional premium associated with the 
storage endorsement 60 day period. Also, many producers have indicated 
that they do not want to pay the additional premium associated with 
coverage for hollow heart and other defects. FCIC has elected to 
provide coverage for both of these circumstances via optional 
endorsements. Therefore, no changes have been made.
    Comment: A reinsured company stated that section 12(g) of the 
Northern Crop Provisions does not indicate how to determine the amount 
of production to count when production has a combination of freeze and 
soft rot. The comment suggested determining freeze damage and tuber rot 
separately and using the one that yields the least production to count.
    Response: FCIC agrees that a provision is needed to specify how a 
combination of freeze and tuber rot damage will be adjusted. However, 
considering only the type of damage that results in the least amount of 
production to count could result in the insurance provider ignoring 
what may be a significant amount of either freeze or tuber rot damage. 
Redesignated section 11(h) has been added to specify how production 
with more than one type of damage will be adjusted.
    Comment: A reinsured company suggested that the language in section 
12(g)(2)(i) of the Northern Potato Crop Provisions, 4(a)(1) of the 
Northern Potato Quality Endorsement, 6(a)(1)(i) of the Northern Potato 
Processing Quality Endorsement and 6(a) of the Northern Potato Storage 
Endorsement be strengthened to further define ``sold'' as the ``date of 
sale'' without regard to subsequent delivery or storage.
    Response: Since only referring to the amount of sold production; 
subsequent delivery or storage is not relevant. The provisions have 
been clarified accordingly.
    Comment: A reinsured company indicated that the 7 day time period 
provided in section 12(g)(2)(i) of the Northern Potato Crop Provisions, 
section 4(a)(1) of the Northern Potato Quality Endorsement, and section 
6(a)(1)(i) of the Northern Potato Processing Quality Endorsement to 
sell damaged production is not long enough. The grading process often 
takes two or three weeks to complete and the percent damage cannot be 
determined until the production is graded.
    Response: FCIC agrees that a longer time period is necessary and 
has changed the relevant provisions to reflect a time period of 21 
days.
    Comment: A reinsured company recommended changing section 
12(g)(2)(i) of the Northern Potato Crop Provisions, and section 4(a)(1) 
of the Northern Potato Quality Endorsement, so that the value of 
damaged production is compared to the producer's price election rather 
than the highest price election available.
    Response: This provision is intended to compare the relative value 
of the damaged production to the value of undamaged production. If the 
elected prices were used, insureds with different price election 
percentages could have different amounts of production to count even 
though they had the same amount of production and crop value. 
Therefore, no change has been made.
    Comment: A reinsured company recommended that the salvage value 
provision (section 12(g)(2)(i)) applicable to production with soft rot, 
wet breakdown or other tuber rot condition also be applicable to 
product damaged by freeze.
    Response: It would not be appropriate to allow potatoes with low 
levels of freeze damage (e.g., 5.1 percent) to be adjusted based on 
value, especially in years when the market value is low. Freeze damaged 
production, if handled correctly, can often be stored for long periods 
of time, sorted, and sold at full market value. In contrast, production 
with soft rot levels above 5 percent is much more difficult to store, 
sort and sell and often must be sold soon after harvest at a much 
reduced price. Therefore, the suggested change has not been made. 
However, FCIC has determined that some salvage value should be counted 
when an insured elects to keep damaged production and has changed 
redesignated section 11(g)(1) so that a minimum of 15 percent of 
production is counted in such instances.
    Comment: A reinsured company suggested the word ``with'' be 
inserted between ``accordance'' and ``section'' in section 
12(g)(2)(iii) of the Northern Potato Crop Insurance Provisions.
    Response: The provision in redesignated section 11(g)(2)(iii) has 
been revised accordingly.
    Comment: A reinsured company suggested that ``human consumption'' 
be spelled out in the Northern Potato Crop Provisions. The commenter 
stated human consumption defines that potatoes are grown for 
consumption by human beings and any potato crop not qualifying for 
human consumption is a total loss; and there should be no production to 
count if such potatoes are harvested. Counting production may encourage 
a producer to leave potatoes in the soil and this is simply a poor 
farming practice.
    Response: Potato production may be adjusted for quality 
deficiencies regardless of whether or not it is harvested. Production 
will be considered as production to count if it could have been fit for 
human consumption, not only if it was used or sold for human 
consumption. Therefore, no changes have been made.
    Comment: A reinsured company asked whether the Late Planting 
Agreement Option is no longer available and why late and prevented 
planting provisions were not included as they have been in other crops.
    Response: Late and prevented planting provisions will be included 
in the Basic Provisions and will apply to potatoes. Section 12 of the 
Northern Potato Crop Provisions and section 13 of the Central and 
Southern Crop Provisions indicate the available prevented planting 
coverage level percentages.
    Comment: An insurance service organization and a reinsured company 
suggested changing section 13(d) of the Northern and Central and 
Southern Crop Provisions to allow written agreements to be valid for 
more than one year. Some written unit agreements are continuous unless 
there are significant changes in the farming operation and some other 
written agreements should also be continuous.

[[Page 65327]]

    Response: Written agreements are intended to permit insurance 
coverage to be available in unusual or previously unknown situations. 
If the situation exists from year to year, it should be incorporated 
into the crop provisions or Special Provisions. It is important to 
minimize exceptions to the policy to ensure that the insured is well 
aware of the specific terms of the policy. The written agreement 
provisions have been moved to the Basic Provisions since they apply to 
most crops.
    Comment: An insurance service organization asked, with respect to 
the proposed endorsements to the Northern Crop Provisions, whether the 
provisions will be printed continuously so that the endorsements are 
after the written agreement provisions, or whether separate pages will 
be printed to be inserted with the Crop Provisions when chosen. The 
latter is preferable to ensure policy holders don't think the 
endorsements automatically apply. The commenter also asked whether FCIC 
would authorize the insurance service organization to add a statement 
before the endorsements clarifying they only apply if elected by the 
insured.
    Response: Each endorsement is a separate document and should be 
included in an insured's policy package only when elected. Provisions 
in each endorsement clearly state that additional premium is necessary 
and that the additional coverage must be elected on or before the sales 
closing date. An additional clarifying statement is not necessary. 
Therefore, no change will be made.
    Comment: An insurance service organization asked if the Northern 
Potato Quality Endorsement rates would be impacted since frost/freeze 
coverage is now a part of the basic potato policy.
    Response: Freeze damage was previously covered under the Quality 
Option. Removal of this coverage will be considered when establishing 
premium rates for the new Northern Quality Endorsement.
    Comment: Two reinsured companies, an insurance service 
organization, and a producer group disagreed with the removal of 
provisions in the Northern Quality Endorsement that allow adjustment 
based on U.S. No. 1 quality standards and that allow insureds to base 
their own proven historical percentage of U.S. No. 1's or 2's. The 
commenter stated that a producer who can prove better quality 
percentages than the county average should be able to do so. The 
commenter further indicated that adjustment based on U.S. No. 1 
standards should be provided by the policy, not just if allowed by the 
actuarial documents or Special Provisions, and that if adjustment based 
on U.S. No. 1 standards is not allowed, or if there is no quality 
endorsement for seed producers, the new proposal may be abused.
    Response: Quality adjustment based U.S. No. 1 standards will remain 
available, as will the ability of producers to certify historical 
quality percentages. Provisions previously used to indicate that this 
method of establishing a percentage factor have been added (see section 
9 of the Northern Quality Endorsement). FCIC does not agree that 
potatoes grown for seed should be eligible for coverage under the 
Quality Endorsement. Seed producers often utilize production practices 
designed to produce small tubers. Therefore, in many instances, U.S. 
size standards are intentionally not achieved. FCIC also does not agree 
that quality adjustment based on the U.S. No. 1 grade should be 
available in all instances. Such coverage should not be made available 
universally without first determining that adequate rating information 
is available for all counties in which potato insurance is offered.
    Comment: A reinsured company asked with respect to coverage under 
the Northern Quality Endorsement, whether there will be only one 
``default'' percentage factor per county; whether a producer with good 
history will be able to ``prove up'' an average quality factor; and 
whether a quality data base will be maintained and, if so, will there 
be cups and caps.
    Response: More than one percentage factor will apply in counties 
where coverage based on either U.S. No. 1 or 2 is available, or where 
separate percentage factors are specified by potato type. Producers 
will be able to certify, subject to verification, past records of 
percentages of potatoes meeting applicable standards to establish the 
factor.
    Comment: Comments were received regarding section 4(a) of the 
Northern Potato Crop Insurance Quality Endorsement. A reinsured company 
indicated that the section requires insurance providers to decide 
whether or not potatoes with internal defects can be separated from 
undamaged production using methods normally used by potato packers or 
processors. As new separation methods are developed, determination of 
``methods normally used'' becomes more and more subjective. A producer 
group disagreed with the provisions because equipment used to sort 
internal defects is not normally available to potato producers during 
harvest and such defects should be graded according to the United 
States Standards for Grades of Potatoes (either U.S. 1 or 2 as 
applicable).
    Response: Although producers generally do not have the equipment 
needed to sort internal defects, it is quite common for packers and 
processors to have the equipment needed to sort such defects. It would 
be inappropriate for the insurance provider to pay a total or near 
total loss for production that is later sorted and sold at full value. 
Therefore, no changes have been made. FCIC agrees that the use of new 
technology varies among packers and processors, and that it would be 
difficult to administer a provision that requires the reinsured company 
to be familiar with all methods. The provision has been changed to 
indicate that the potatoes with internal defects must not be separable 
from undamaged production by methods used by the potato packers or 
processors to which the insured person normally delivers production.
    Comment: A reinsured company asked for clarification regarding 
language in section 4(a) of the Northern Potato Crop Insurance Quality 
Endorsement that indicates internal defects must exceed the tolerance 
allowed for a certain U.S. grade. The U.S. grade standards contain a 6 
percent tolerance. However, in another section (``Application of 
Tolerances''), the standards indicate that individual samples cannot 
have more than double the specified tolerance amount.
    Response: The individual samples referred to in the Application of 
Tolerances are individual samples of a lot that has been prepared for 
shipping (bagged, boxed, etc.). The average of all samples from the lot 
cannot exceed the overall limits, but any of the samples may contain 
defects exceeding the limit. Section 4(a) specifies that tolerances are 
on a lot basis, not an individual sample basis.
    Comment: An insurance service organization suggested editorial 
changes in section 4 of the Northern Quality Endorsement and section 6 
of the Northern Processing Quality Endorsement. The comment indicated 
that, as proposed, the phase ``.  .  . and contains potatoes that grade 
less than U.S. No. 2 due to'' and subsequent items (a)-(b)(3) could be 
read as applying only to item (3) ``that is marketed after a grade 
inspection,'' and not to items (1) or (2). If this is not the intent, 
it would help to insert a semicolon before this phrase and change 
``and'' to ``that'' to separate it from (3).
    Response: FCIC agrees and has made the recommended changes.
    Comment: An insurance service organization suggested defining 
``lot'' in

[[Page 65328]]

section 4(a) of the Northern Potato Quality Endorsement since reference 
is made to ``lot basis'' and it is not defined in the Northern Potato 
Crop Provisions.
    Response: FCIC has revised the defined term ``marketable lot'' to 
``lot.''
    Comment: An insurance service organization asked for clarification 
regarding language in section 4(b)(1)-(3) and (6)(b)(1)-(3) of the 
Northern Quality and Processing Quality Endorsements respectively. The 
comment suggested the following language for clarity:
    (1) ``Remove production damaged by freeze or a cause that results 
in soft rot or wet breakdown from representative samples;
    (2) ``Divide the remaining weight of potatoes that grade U.S. No. 2 
or better by the total remaining weight;
    (3) ``Divide the resulting percentage by the applicable percentage 
factor contained in the Special Provisions.''
    The comment also indicated that sections (2) and (3) could be 
combined unless the preference is to keep separate for each step.
    Response: After further study, FCIC has determined that the method 
of determining the percentage of damage contained in the proposed rule 
was inaccurate. That method removed production damaged by freeze or 
tuber rot before determining applicable percentages, thus reducing the 
sample size. The percentage of potatoes that grade U.S. No. 2 should be 
based on the total sample weight, and, since freeze damage and tuber 
rot are adjusted under the Northern Crop Provisions, potatoes with such 
damage should be considered sound (No. 1 or 2, as applicable) 
production for the purposes of the Northern Quality and Processing 
Quality Endorsements. Section 4(b) of the Northern Quality Endorsement 
and Section 6(b) of the Northern Processing Quality Endorsement have 
been revised accordingly.
    Comment: A reinsured company asked if section 4(b)(1) of the 
Northern Quality Endorsement and section 6(b)(1) of the Northern 
Processing Quality Endorsement (Production damaged by freeze or a cause 
that results in soft rot or wet breakdown will be removed from 
representative samples of the production) would require the graders to 
grade the sample twice, once for freeze and tuber rot and once for all 
other quality considerations after they have removed the frost and 
tuber rot potatoes from the sample. If so, more time for grading will 
be required and the process will be more complex.
    Response: FCIC has revised these provisions so that two separate 
grading procedures will not be required.
    Comment: A reinsured company recommended discontinuing coverage 
under the Northern Quality Endorsement based on the U.S. No. 2 grade 
and redefining U.S. No. 1 standards to coincide with the new potato 
commodities future market.
    Response: The potato industry still utilizes No. 2 grade standards 
in many circumstances and this level of quality protection provides 
adequate insurance coverage for many insureds. Therefore, no changes 
have been made.
    Comment: A reinsured company commented that the Northern Processing 
Quality Endorsement needs to be expanded to all counties in Idaho that 
produce potatoes for processing.
    Response: FCIC agrees that expansion of the coverage provided by 
the Northern Processing Quality Endorsement should be studied. Several 
Regional Service Offices, including the office that would recommend new 
counties in Idaho, are now considering such expansion. If analysis 
proves that adequate information is available, and the coverage can be 
offered in an actuarially sound manner, the coverage provided by the 
endorsement will be expanded to additional counties.
    Comment: A reinsured company recommended that, if the potato 
producer does not sign a potato contract by the acreage reporting date 
as mandated by the Northern Potato Crop Insurance Processing Quality 
Endorsement, acreage automatically be covered under the Northern Potato 
Crop Insurance Quality Endorsement based on the U.S. No. 1 grade. This 
method would automatically protect the producer against quality losses 
even though a contract was not signed.
    Response: FCIC agrees that a producer who wants insurance against 
quality deficiencies should have such coverage when a processor 
contract is not completed. The Northern Quality Endorsement was 
designed so that the coverage under it is automatically applicable when 
a processor contract is not completed by the acreage reporting date. 
However, the grade upon which coverage is based will be that selected 
by the insured (U.S. No. 1 (if available in the county) or U.S. No. 2).
    Comment: An insurance service organization suggested replacing the 
reference to ``specific gravity'' in section 6(a) of the Northern 
Processing Quality Endorsement with ``percent solids.'' The term 
``specific gravity'' may not appear on settlement sheets.
    Response: Most settlement sheets still refer to ``specific 
gravity.'' For those that do not, a conversion chart commonly used in 
the potato industry will be referenced in procedural handbooks.
    Comment: An insurance provider recommended that production covered 
under the Northern Processing Quality Endorsement be eligible for 
adjustment if the specific gravity is less than 1.074. Most processor 
contracts require a specific gravity of 1.074 or higher.
    Response: FCIC agrees and has modified section 6(a)(1) 
(redesignated 6(a)) to indicate that production will be eligible for 
adjustment if it has a specific gravity that is less than the lower of 
1.074 or the minimum acceptable value under the terms of the processor 
contract.
    Comment: An insurance service organization suggested a change in 
the formatting of sections 6 (a) & (b) of the Northern Processing 
Quality Endorsement. Currently, there is no (a)(2) following (a)(1).
    Response: Section 6(a)(1) has been redesignated as 6(a) and the 
following sections have been redesignated accordingly.
    Comment: A reinsured company indicated that the Northern Quality 
Endorsement no longer provided quality protection for production grown 
for seed. This leaves the seed producer without adequate protection 
against losses in quality. The comment suggested developing a new 
certified seed endorsement based on the U.S. Certified Seed Standards 
in order to provide adequate protection for the seed grower.
    Response: FCIC agrees that seed producers may need protection in 
addition to that currently provided and will work with any party 
interested in developing such coverage.
    Comment: A producer group recommended revising the language in 
section 4 of the Certified Seed Endorsement from ``The certified seed 
acreage you insure in the current crop year cannot be greater than 125 
percent of the average number of acres grown for seed in the three 
previous years unless we agree otherwise in writing'' to ``The 
certified seed acreage you insure in the current crop year cannot be 
greater than 125 percent of the average number of acres entered into 
and passing certification in the potato certified seed program for the 
state in which the seed was grown in the three previous years unless we 
agree otherwise in writing.'' The group further suggested that the 
language in section 4(a) be changed from ``Multiply the average number 
of acres grown for certified seed the three previous years by 1.25 and 
divide this result by the number of acres grown for certified seed in 
the current crop year; and * * *'' to ``Multiply the average number of 
acres entered into and passing certification in the potato

[[Page 65329]]

certified seed program for the state in which the seed was grown the 
three previous years by 1.25 and divide this result by the number of 
acres grown for certified seed in the current crop year; and * * *'' 
This change should adequately address previous program abuse and limit 
indemnified acreage to only that which is actually being produced for 
seed. A reinsured company and an insurance service organization also 
recommended clarifying whether ``3 previous years'' means ``calendar'' 
or ``data base'' years.
    Response: FCIC has made the recommended changes and clarified the 
provisions to indicate the three previous calendar years.
    Comment: An insurance service organization indicated section 4 of 
the Potato Crop Insurance Certified Seed Endorsement which limits the 
increase to 125 percent in certified seed acreage compared to the 
average of the previous three years is a good idea. The comment 
indicated that the overall reduction in guarantee if excess acreage is 
reported may be the simplest way to handle this possibility, but asked 
if consideration was given to allowing the insured to designate which 
acres within the limit would be insured as certified seed.
    Response: Consideration was given to allowing insureds to designate 
insurable and uninsurable acreage. However, it was not considered the 
best alternative since identification of the source of production would 
be difficult, especially if insured and uninsured acreage were in the 
same field. Therefore, no change will be made.
    Comment: A reinsured company indicated that coverage for Certified 
Seed should be made available in areas from which the coverage was 
withdrawn. The endorsement was put on hold for review and has been 
under review for several years. The endorsement should be consistent 
with certification requirements used by the states of Montana and 
Idaho.
    Response: Coverage for certified seed was withdrawn in certain 
locations at the request of grower groups and potato industry 
representatives. FCIC will not reinstate this coverage until these 
groups and representatives agree that it should again be made 
available. FCIC believes that the endorsement is consistent with 
certification requirements used in Montana and Idaho. Provisions in the 
endorsement specify that potatoes must be produced and managed in 
accordance with standards, practices, and procedures required for 
certification by the state's certifying agency and applicable 
regulations. The endorsement cannot contain the specific requirements 
of the certifying agencies in Montana and Idaho because the endorsement 
is also used in other states. No changes have been made.
    Comment: An insurance service organization questioned the language 
in section 7 of the Potato Crop Insurance Certified Seed Endorsement. 
The comment stated the existing Certified Seed Potato Option Amendment 
specifies a payment of one dollar per hundredweight (multiplied by the 
guarantee and share) while the proposed language refers to ``the dollar 
amount per hundredweight shown in the Special Provisions.'' The 
commenter asks whether this dollar amount varies by state or country, 
and if so, by how much. The commenter also asks whether the rates 
reflect any increase or decrease.
    Response: Depending upon available price information for certified 
seed, the dollar amount of coverage per hundredweight could vary by 
state or county. The amount of variation would depend upon actual and 
expected prices for see. Premium rate percentages should not be 
impacted by variation in this dollar amount since the risk of not 
receiving certification due to an insured cause should remain constant 
regardless of the dollar amount of coverage per hundredweight. However, 
the amount of premium may increase if the price is higher.
    Comment: An insurance provider recommended that the Northern 
Storage Endorsement give producers time to make decisions based on a 
grade that was determined from sampling prior to storage and if the 
grading showed internal defects, then the producer should be allowed 
the same choices available under the Northern Quality Endorsement 
(section 4(a)). The comment further stated that the Northern Storage 
Endorsement covers quality problems that are communicable (the problem 
will spread throughout the storage facility, such as late blight or a 
tuber rot condition). Internal defects are not communicable and will 
not spread to other potatoes. In all cases, marketability and salvage 
will control the losses. Regardless of the type of problem in storage, 
salvage should always apply unless the crop is destroyed.
    Response: FCIC agrees that when the producer elects the Northern 
Quality Endorsement, the coverage provided will be extended to provide 
the same coverage under the Northern Storage Endorsement if the 
requirements of such Endorsement are met. Salvage provisions have been 
added.
    Comment: A producer group stated that the Northern Storage Coverage 
Endorsement attaches to the basic policy, but should also extend the 
coverage provided under the Northern Potato Quality Endorsement if that 
endorsement is elected by the producer.
    Response: FCIC agrees that coverage under the Northern Quality 
Endorsement should be extended when the producer also elects a Northern 
Storage Coverage Endorsement and has modified the Northern Storage 
Endorsement accordingly.
    Comment: An insurance service organization asked for clarification 
regarding language in section 3 of the Northern Potato Storage Coverage 
Endorsement that indicates ``all other potato production insured under 
the Northern Potato Crop Provisions must be insured under this 
endorsement unless the Special Provisions allow you to exclude certain 
potato varieties, types or groups from insurance under this 
endorsement, and you elect to exercise this option.'' The commenter 
understands this to mean that all potatoes insured under the Northern 
Potato Crop Provisions have to be insured under the Northern Storage 
Endorsement, unless a processor contract requires delivery within three 
days of harvest or if the producer elects to exclude other production 
when specifically allowed by the Special Provisions. The comment 
recommended starting the sentence with ``If you elect this 
endorsement'' for clarity.
    Response: The provision has been clarified.
    Comment: An insurance service organization questioned why coverage 
exclusions are required to be identified annually as stated in section 
3 of the Northern Potato Storage Coverage Endorsement. It would be more 
consistent for such exclusions to remain in effect until otherwise 
notified in writing by either the insured producer or the insurance 
provider.
    Response: Since the acreage to which exclusions apply is not likely 
to be identical from year to year, FCIC believes excluded varieties, 
types, or groups should be identified on the annual acreage report. 
Therefore, no change will be made.
    Comment: An insurance service organization indicated that the word 
``prorata'' in section 4 of the Northern Storage Endorsement should be 
two words. The comment also recommended changing the language in the 
example to account for the missing amount. Recommended changing to: 
``the production to count is 1,000 hundredweight because 500 
hundredweight went bad.''
    Response: The editorial correction has been made. However, the

[[Page 65330]]

recommendation regarding the ``missing amount of production'' has not 
been incorporated. The provision is clearly stated without the 
recommended change.
    Comment: An insurance service organization questioned how the 
insurance provider will be able to verify if notification was within 72 
hours of discovery of damage as indicated in section 5(b) of the 
Northern Storage Endorsement.
    Response: As with any insured loss, it is important that the 
insurance provider receive timely notification of damage. FCIC agrees 
that in many instances it is difficult to determine the exact time the 
insured person becomes aware of damage and therefore, some flexibility 
is required when administering this provision. However, if it can be 
clearly shown that an insured did not give timely notice, any claim 
could be denied.
    Comment: An insurance service organization suggested that section 
5(a) and 5(c) be combined in the Northern Potato Storage Coverage 
Endorsement since both refer to damage by an insured cause other than 
freeze.
    Response: FCIC agrees and has combined the provisions in 5(c) with 
section 5(a).
    Comment: An insurance service organization recommended that the 
insured be required to have the Quality Endorsement in order to take 
the Northern Potato Storage Coverage Endorsement.
    Response: Since damage that may later cause tuber rot is covered 
under the Northern Crop Provisions, the Northern Storage Endorsement 
should be available to producers who elect coverage under the Northern 
Crop Provisions only. Therefore, no changes have been made.
    In addition to the changes indicated above, FCIC has made the 
following changes:
    1. The term ``tuber rot'' is defined in the Northern Crop 
Provisions to avoid duplicating provisions in the Northern Crop 
Provisions, Quality Endorsement, Processing Quality Endorsement, and 
Storage Endorsement. Added a definition for ``disposed'' to the 
Northern and Central and Southern Crop Provisions for clarification. 
Added definitions for the terms ``buyer'' and ``reduction percentage'' 
to the Northern Crop Provisions for clarification. Also removed 
definitions for ``days'' ``FSA'', ``final planting date,'' 
``interplanted,'' ``irrigated practice,'' ``planted acreage,'' and 
``production guarantee (per acre),'' since definitions for these terms 
are now contained in the Basic Provisions.
    2. Section 2 of the Northern Crop Provisions is removed and section 
2 of the Southern Crop Provisions is modified because provisions 
previously contained in section 2 regarding unit division requirements 
and unit structure by section, section equivalent, FSA farm serial 
number, and irrigated and non-irrigated practices, have been moved to 
the Basic Provisions.
    3. Revised redesignated section 11(b)(2) of the Northern Crop 
Provisions and section 12(b)(2) of the Central and Southern Crop 
Provisions to clearly indicate that the price use to determine the 
amount of an indemnity may be limited.
    4. The initial paragraph of the Central and Southern Crop 
Provisions has been revised to add Arizona and Georgia as states in 
which these provisions apply. These states are also added in section 5 
(Cancellation and Termination Dates) and section 9 (Insurance Period) 
of the Central and Southern Crop Provisions.
    5. Sections 4 and 5 of the Central and Southern Crop Provisions 
have been revised to change the contract change and cancellation/
termination dates for Pinellas, Hillsborough, Polk, Oseola, and Brevard 
Counties, Florida, and all counties lying south thereof to June 30 and 
September 30 respectively. These dates were previously effective only 
in Manatee, Hardee, Highlands, Okeechobee, and St. Lucie Counties, and 
all counties lying south thereof.
    6. Section 4(a)(1) of the Northern Quality Endorsement and section 
6(a)(1) of the Northern Processing Quality Endorsement are revised to 
clarify that a ``price comparison'' method of adjustment will not be 
applicable if it has already been performed under the terms of 
redesignated section 11(g)(2)(i) of the Northern Potato Crop Insurance 
Provisions.
    7. Removed provisions regarding written agreements that are now 
contained in the Basic Provisions.
    8. Section 5 of the Northern Processing Quality Endorsement is 
clarified to indicate that the number of acres insured under the 
endorsement will not exceed the actual number of acres planted to the 
potato types under contract.
    9. Section 6(a)(1) of the Northern Processing Quality Endorsement 
is revised by changing the price against which the value of damaged 
production is compared from the ``base contract price'' to the 
``highest available price election.'' This change was made because of 
variation in methods used to establish base contract prices. Base 
prices tend to be set low when substantial incentives for good quality 
are contained in the contract, and tend to be set high when substantial 
discounts for low quality are included. Use of the price election will 
provide a consistent means of quality adjustment for all insureds.
    10. Section 8 of the Northern Quality Endorsement and section 9 of 
the Northern Processing Quality Endorsement are revised to indicate 
that an insured may elect quality adjustment based on U.S. No. 1 or 2 
by type or group, if both U.S. No. 1 and 2 are provided in the 
actuarial documents and if separate types or groups are specified in 
the Special Provisions.
    11. Section 4 of the Northern Storage Endorsement is revised to 
clarify that pro rata allocation of stored production to units will be 
allowed only if verifiable records of production placed in storage are 
available by unit.
    12. Section 6 of the Northern Storage Endorsement is removed. The 
proposed provisions duplicated those contained in redesignated section 
11 of the Northern Crop Provisions.
    Good cause is shown to make this rule effective upon publication in 
the Federal Register. This rule improves the potato insurance coverage 
and brings it under the Common Crop Insurance Policy Basic Provisions 
for consistency among policies. The earliest contract change date that 
can be met for the 1998 crop year is December 31, 1997. It is therefore 
imperative that these provisions be made final before that date so that 
the reinsured companies and insured 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 422 and 457

    Crop insurance, Potato crop insurance regulations, Potatoes.

Final Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation hereby amends 7 CFR parts 422 and 457 as follows:

PART 422--POTATO CROP INSURANCE REGULATIONS

    1. The authority citation for 7 CFR part 422 is amended to read as 
follows:

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

    2. The heading preceding Sec. 422.1 is revised to read as follows: 
Subpart--Regulations for the 1986 (1987 in certain California counties 
and Florida) through 1997 Crop Years (1998 in Alabama; Arizona; certain 
California counties; Delaware; Florida; Maryland; Missouri; New Jersey; 
New Mexico; North

[[Page 65331]]

Carolina; Oklahoma; Texas; and Virginia).
    3. Section 422.7 is amended by revising the introductory text of 
paragraph (d) to read as follows:


Sec. 422.7  The application and policy.

* * * * *
    (d) The application for the 1986 and succeeding crop year is found 
at subpart D of part 400--General Administrative Regulations (7 CFR 
400.37, 400.38). The provisions of the Potato Crop Insurance Policy for 
the 1986 (1987 in certain California counties and Florida) through 1997 
Crop Years (1998 in Alabama; Arizona; certain California counties; 
Delaware; Florida; Maryland; Missouri; New Jersey; New Mexico; North 
Carolina; Oklahoma; Texas; and Virginia) are as follows:
* * * * *

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

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

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

    5. Section 457.142 is added to read as follows:


Sec. 457.142  Northern Potato Crop Insurance Provisions.

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

United States Department of Agriculture

Federal Crop Insurance Corporation

    Reinsured policies:

(Appropriate title for insurance provider)
    Both FCIC and reinsured policies:

Northern Potato Crop Provisions

    These provisions will be applicable in: Alaska; Humboldt, Modoc, 
and Siskiyou Counties, California; Colorado; Connecticut; Idaho; 
Indiana; Iowa; Maine; Massachusetts; Michigan; Minnesota; Montana; 
Nebraska; Nevada; New York; North Dakota; Ohio; Oregon; 
Pennsylvania; Rhode Island; South Dakota; Utah; Washington; 
Wisconsin; and Wyoming.
    If a conflict exists among the policy provisions, the order of 
priority is as follows: (1) the Catastrophic Risk Protection 
Endorsement, as applicable; (2) the Special Provisions; (3) these 
Crop Provisions; and (4) the Basic Provisions, with (1) controlling 
(2), etc.
    1. Definitions.
    Buyer. A business entity in the business of buying or processing 
potatoes, that possesses all the licenses and permits required by 
the state in which it operates, and has the facilities to accept the 
potatoes purchased.
    Certified seed. Potatoes for planting a potato crop in a 
subsequent crop year that have been found to meet the standards of 
the public agency that is responsible for the seed certification 
process within the state in which they were grown.
    Discard. Disposal of production by you, or a person acting for 
you, without receiving any value for it.
    Disposed. Any disposition of the crop including but not limited 
to sale or discard.
    Grade inspection. An inspection in which samples of production 
are obtained by us, or a party approved by us, prior to the sale, 
storage, or disposal of any lot of potatoes, or any portion of a lot 
and the potatoes are evaluated and quality (grade) determinations 
are made by us, a laboratory approved by us, or a potato grader 
licensed or certified by the applicable State or the United States 
Department of Agriculture, in accordance with the United States 
Standards for Grades of Potatoes.
    Harvest. Lifting potatoes from within the soil to the soil 
surface.
    Hundredweight. One hundred (100) pounds avoirdupois.
    Local market. The area in which the insured potatoes are 
normally sold.
    Lot. A quantity of production that can be separated from other 
quantities of production by grade characteristics, load, location or 
other distinctive features.
    Processor contract. A written agreement between the producer and 
a processor, containing at a minimum:
    (a) The producer's commitment to plant and grow potatoes, and to 
deliver the potato production to the processor;
    (b) The processor's commitment to purchase the production stated 
in the contract; and
    (c) A price that will be paid to the producer for the production 
stated in the contract.
    Reduction percentage. A factor determined based on the weight of 
only freeze damaged production in a sample of potatoes in 
relationship to the total weight of the sample, and the provisions 
in section 11(g)(1) of these crop provisions; and that is used to 
determine a quantity of potatoes that will not be included as 
production to count.
    Tuber rot. Any soft, mushy, or leaky condition of potato tissue 
(soft rot or wet breakdown as defined in the United States Standards 
for Grades of Potatoes), including, but not limited to, breakdown 
caused by Southern Bacterial Wilt, Ring Rot, or Late Blight.
    2. Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities.
    (a) In addition to the requirements of section 3 of the Basic 
Provisions, you may select only one price election for all the 
potatoes in the county insured under this policy unless the Special 
Provisions provide different price elections by type. If the Special 
Provisions provide for different price elections by type, you may 
select one price election for each potato type designated in the 
Special Provisions. The price elections you choose for each type 
must have the same percentage relationship to the maximum price 
election offered by us for each type. For example, if you choose 100 
percent of the maximum price election for one type, you must also 
choose 100 percent of the maximum price election for all other 
types.
    (b) If the production from any acreage of the insured crop is 
not harvested, the price used to determine your indemnity will be 80 
percent of your price election.
    (c) Any acreage of potatoes damaged to the extent that similarly 
situated producers in the area would not normally further care for 
the potatoes will be deemed to have been destroyed even though you 
may continue to care for the potatoes. The price election for 
unharvested acreage will apply to such acreage.
    3. Contract Changes.
    In accordance with section 4 of the Basic Provisions, the 
contract change date is November 30 preceding the cancellation date.
    4. Cancellation and Termination Dates.
    In accordance with section 2 of the Basic Provisions, the 
cancellation and termination dates are March 15.
    5. Annual Premium.
    In lieu of the premium computation method contained in section 7 
of the Basic Provisions, the annual premium amount (y) is computed 
by multiplying (a) the production guarantee by (b) the price 
election for harvested acreage, by (c) the premium rate, by (d) the 
insured acreage, by (e) your share at the time of planting, and by 
(f) any applicable premium adjustment factors contained in the 
actuarial documents (a  x  b  x  c  x  d  x  e  x  f = y).
    6. Insured Crop.
    In accordance with section 8 of the Basic Provisions, the crop 
insured will be all the potatoes in the county for which a premium 
rate is provided by the actuarial documents:
    (a) In which you have a share;
    (b) Planted with certified seed (unless otherwise permitted by 
the Special Provisions);
    (c) Planted for harvest as certified seed stock, or for human 
consumption, (unless specified otherwise in the Special Provisions);
    (d) That are not (unless allowed by the Special Provision or by 
written agreement):
    (1) Interplanted with another crop; or
    (2) Planted into an established grass or legume.
    7. Insurable Acreage.
    In addition to the provisions of section 9 of the Basic 
Provisions, we will not insure any acreage that:
    (a) Does not meet the rotation requirements contained in the 
Special Provisions for the crop; or
    (b) Is damaged before the final planting date to the extent that 
similarly situated producers in the area would normally not further 
care for the crop, unless it is replanted or we agree that it is not 
practical to replant.
    8. Insurance Period.
    In accordance with the provisions of section 11 of the Basic 
Provisions, the calendar date for the end of the insurance period is 
the date immediately following planting as follows (exceptions, if 
any, for specific counties, varieties or types are contained in the 
Special Provisions):
    (a) October 1, in Alaska;
    (b) October 10 in Nebraska and Wyoming;
    (c) October 15 in Colorado; Indiana; Iowa; Michigan; Minnesota; 
Montana; Nevada;

[[Page 65332]]

North Dakota; South Dakota; Utah; and Wisconsin;
    (d) October 20 in Maine; and
    (e) October 31 in Humboldt, Modoc, and Siskiyou Counties, 
California; Connecticut; Idaho; Massachusetts; New York; Ohio; 
Oregon; Pennsylvania; Rhode Island; and Washington.
    9. Causes of Loss.
    (a) In accordance with the provisions of section 12 of the Basic 
Provisions, insurance is provided only against the following causes 
of loss that occur within the insurance period:
    (1) Adverse weather conditions;
    (2) Fire;
    (3) Insects, but only if sufficient and proper pest control 
measures are used;
    (4) Plant disease, but only if sufficient and proper disease 
control measures are used;
    (5) Wildlife;
    (6) Earthquake;
    (7) Volcanic eruption; or
    (8) Failure of the irrigation water supply, if caused by an 
insured peril that occurs during the insurance period (see section 
9(a)(1) through (7)).
    (b) In addition to the causes of loss not insured against as 
contained in section 12 of the Basic Provisions, we will not insure 
against any loss of production due to:
    (1) Damage that occurs or becomes evident after the end of the 
insurance period, including, but not limited to, damage that occurs 
or becomes evident in storage; or
    (2) Causes, such as freeze after certain dates, as limited by 
the Special Provisions.
    10. Duties in the Event of Damage or Loss.
    (a) In accordance with the requirements of section 14 of the 
Basic Provisions, you must leave representative samples at least 10 
feet wide and extending the entire length of each field in the unit 
if you are going to destroy any acreage of the insured crop that 
will not be harvested.
    (b) We must be given the opportunity to perform a grade 
inspection on the production from any unit for which you have given 
notice of damage.
    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 acceptable production records were not provided; and
    (2) For any basic units, we will allocate any commingled 
production to such units in proportion to our liability on the 
harvested acreage for the units.
    (b) In the event of loss or damage covered by this policy, we 
will settle your claim by:
    (1) Multiplying the insured acreage by its respective production 
guarantee (If there is unharvested acreage in the unit, the 
harvested and unharvested acreage will be determined separately);
    (2) Multiplying each result in section 11(b)(1) by the 
respective price election (The price election may be limited as 
specified in section 3.);
    (3) Totaling the results of section 11(b)(2);
    (4) Multiplying the total production to be counted of each type, 
if applicable (see section 11(d)), by the respective price election;
    (5) Totaling the results of section 11(b)(4);
    (6) Subtracting the results of section 11(b)(5) from the result 
in section 11(b)(3); and
    (7) Multiplying the result of section 11(b)(6) by your share.
    For example:
    You have a 100 percent share in 100 harvested acres of potatoes 
in the unit, with a guarantee of 150 hundredweight per acre and a 
price election of $4.00 per hundredweight. You are only able to 
harvest 10,000 hundredweight. Your indemnity would be calculated as 
follows:
    (1) 100 acres  x  150 hundredweight = 15,000 hundredweight 
guarantee;
    (2) 15,000 hundredweight  x  $4.00 price election = $60,000.00 
value of guarantee;
    (4) 10,000 hundredweight  x  $4.00 price election = $40,000.00 
value of production to count;
    (6) $60,000.00 - $40,000.00 = $20,000.00 loss; and
    (7) $20,000.00  x  100 percent = $20,000.00 indemnity payment.
    You also have a 100 percent share in 100 unharvested acres of 
potatoes in the same unit, with a guarantee of 150 hundredweight per 
acre and a price election of $3.20 per hundredweight. The price 
election for unharvested acreage is 80.0 percent of your elected 
price election ($4.00  x  0.80 = $3.20.) This unharvested acreage 
was appraised at 35 hundredweight per acre for a total of 3500 
hundredweight as production to count. Your total indemnity for the 
harvested and unharvested acreage would be calculated as follows:
    (1) 100 acres  x  150 hundredweight = 15,000 hundredweight 
guarantee for the harvested acreage, and 100 acres  x  150 
hundredweight = 15,000 hundredweight guarantee for the unharvested 
acreage;
    (2) 15,000 hundredweight guarantee  x  $4.00 price election = 
$60,000.00 value of guarantee for the unharvested acreage, and 
15,000 hundredweight guarantee  x  $3.20 price election = $48,000.00 
value of guarantee for the unharvested acreage;
    (3) $60,000.00 + $48,000.00 = $108,000.00 total value of 
guarantee;
    (4) 10,000 hundredweight  x  $4.00 price election = $40,000.00 
value of production to count for the harvested acreage, and 3500 
hundredweight  x  $3.20 = $11,200.00 value of production to count 
for the unharvested acreage;
    (5) $40,000.00 + $11,200.00 = $51,200.00 total value of 
production to count;
    (6) $108,000.00 - $51,200.00 = $56,800.00 loss; and
    (7) $56,800.00 loss  x  100 percent = $56,800.00 indemnity 
payment.
    (c) The extent of any quality loss must be determined based on 
samples obtained no later than the time the potatoes are placed in 
storage, if the production is stored prior to sale, or the date they 
are delivered to a buyer, wholesaler, packer, broker, or other 
handler if production is not stored.
    (d) The total production to count (in hundredweight) from all 
insurable acreage on the unit will include:
    (1) All appraised production as follows:
    (i) Not less than the production guarantee per acre for acreage:
    (A) That is abandoned;
    (B) That is put to another use without our consent;
    (C) That is damaged solely by uninsured causes;
    (D) From which any production is disposed of without a grade 
inspection; or
    (E) For which you fail to provide acceptable production records;
    (ii) Production lost due to uninsured causes;
    (iii) Production lost due to harvest prior to full maturity. 
Production to count from such acreage will be determined by 
increasing the amount of harvested production by 2 percent per day 
for each day the potatoes were harvested prior to the date the 
potatoes would have reached full maturity. The date the potatoes 
would have reached full maturity will be considered to be 45 days 
prior to the calendar date for the end of the insurance period, 
unless otherwise specified in the Special Provisions. This 
adjustment will not be made if the potatoes are damaged by an 
insurable cause of loss, and leaving the crop in the field would 
either reduce production or decrease quality;
    (iv) Unharvested production (the value of unharvested production 
will be calculated using the reduced price election determined in 
section 2(b) and unharvested production may be adjusted in 
accordance with sections 11(e), (f), (g), and (h)); and
    (v) Potential production on insured acreage that you intend to 
put to another use or abandon, if you and we agree on the appraised 
amount of production. Upon such agreement, the insurance period for 
that acreage will end when you put the acreage to another use or 
abandon the crop. If agreement on the appraised amount of production 
is not reached:
    (A) If you do not elect to continue to care for the crop, we may 
give you consent to put the acreage to another use if you agree to 
leave intact, and provide sufficient care for, representative 
samples of the crop in locations acceptable to us (The price used to 
determine the amount of any indemnity will be limited as specified 
in section 2 even if the representative samples are harvested. The 
amount of production to count for such acreage will be based on the 
harvested production or appraisals from the samples at the time 
harvest should have occurred. If you do not leave the required 
samples intact, or fail to provide sufficient care for the samples, 
our appraisal made prior to giving you consent to put the acreage to 
another use will be used to determine the amount of production to 
count); or
    (B) If you elect to continue to care for the crop, the amount of 
production to count for the acreage will be the harvested 
production, or our reappraisal if additional damage occurs and the 
crop is not harvested; and
    (2) All harvested production from the insurable acreage (the 
amount of production prior to the sorting or discarding of any 
production).
    (e) Potato production is eligible for quality adjustment if:
    (1) The potatoes have freeze damage or tuber rot that is evident 
at, or prior to, the end of the insurance period; and
    (2) A grade inspection is performed.

[[Page 65333]]

    (f) Potato production that is eligible for quality adjustment, 
as specified in section 11(e), with 5 percent damage or less (by 
weight) will be adjusted 0.1 percent for each 0.1 percent of damage 
through 5.0 percent.
    (g) Potato production that is eligible for quality adjustment, 
as specified in section 11(e), with 5.1 percent damage or more (by 
weight) will be adjusted as follows:
    (1) For potatoes damaged by freeze, production will be reduced 
0.1 percent for each 0.1 percent of damage through 5.0 percent, 0.5 
percent for each 0.1 percent of damage from 5.1 through 15.0 
percent, and by 1.0 percent for each 0.1 percent of damage from 15.1 
through 19.5 percent. However, if you do not discard any harvested 
production within 21 days of the end of the insurance period that 
has freeze damage in excess of 17.9 percent, we will include 15 
percent of such production when determining the amount of production 
to count.
    (2) For potatoes that have tuber rot due to an insurable cause 
other than freeze, production to count will be determined as 
follows:
    (i) For potatoes for which a price is agreed upon between you 
and a buyer within 21 days (60 days if the Northern Potato Crop 
Insurance Storage Coverage Endorsement is applicable) if the end of 
the insurance period, or that are delivered to a buyer within 21 
days (60 days if the Northern Potato Crop Insurance Storage Coverage 
Endorsement is applicable) of the end of the insurance period, by 
dividing the price received or that will be received per 
hundredweight by the highest price election designated in the 
Special Provisions for the insured potato type, and multiplying the 
result (not to exceed 1.0) by the number of hundredweight of sold 
production. If production is sold for a price lower than the value 
appropriate to and representative of the local market, we will 
determine the value of the production based on the price you could 
have received in the local market;
    (ii) For harvested potatoes discarded within 21 days (60 days if 
the Northern Potato Crop Insurance Storage Coverage Endorsement is 
applicable) of the end of the insurance period and appraised 
unharvested production that could:
    (A) Not have been sold, the production to count will be zero; or
    (B) Have been sold, the production will be reduced as follows 
(all percentage points of damage will be rounded to the nearest 0.1 
percent):
    (1) 0.1 percent for each 0.1 percent of damage through 5.0 
percent;
    (2) 05. percent for each 0.1 percent of damage from 5.1 percent 
through 6.0 percent;
    (3) 1.0 percent for each 0.1 percent of damage from 6.1 through 
8.0 percent;
    (4) 2.0 percent for each 0.1 percent of damage from 8.1 through 
9.0 percent; and
    (5) 2.5 percent for each 0.1 percent of damage from 9.1 through 
10.4 percent.
    (iii) For potatoes for which a price is not agreed upon between 
you and a buyer within 21 days (60 days if the Northern Potato Crop 
Insurance Storage Coverage Endorsement is applicable) of the end of 
the insurance period and that remain in storage 22 or more days (61 
or more days if the Northern Potato Crop Insurance Storage Coverage 
Endorsement is applicable) after the end of the insurance period, 
adjustment will be made in accordance with section 11(g)(2)(ii)(B).
    (h) When a combination of freeze damage or a tuber rot condition 
is 5.1 percent (by weight) or greater, the amount of production to 
count for production affected by tuber rot will first be determined 
in accordance with section 11(g)(2). If production is not sold 
within the time frame specified in section 11(g)(2), this amount 
will be further adjusted as follows:
    (1) The percentage of potatoes with freeze damage will be 
determined by dividing the weight of potatoes with only freeze 
damage in representatives samples of the production by the total 
weight of the samples;
    (2) The reduction percentage will be determined based on the 
result of section 11(h)(1) and section 11(g)(1); and
    (3) The reduction percentage determined in section 11(h)(2) will 
be multiplied by the amount of production determined in accordance 
with section 11(g)(2).
    12. Prevented Planting.
    Your prevented planting coverage will be 25 percent of your 
production guarantee for timely planted acreage. If you have limited 
or additional coverage, as specified in 7 CFR part 400, subpart T, 
and pay an additional premium, you may increase your prevented 
planting coverage to a level specified in the actuarial documents.

    6. Section 457.147 is added to read as follows:


Sec. 457.147  Central and Southern Potato Crop Insurance Provisions.

    The Central and Southern Potato Crop Insurance Provisions for the 
1999 and succeeding crop years are as follows:
    FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

    Reinsured policies:

(Appropriate title for insurance provider)
    Both FCIC and reinsured policies:

Central and Southern Potato Crop Provisions

    These provisions will be applicable in: Alabama; Arizona; all 
California counties except Humboldt, Modoc and Siskiyou; Delaware; 
Florida; Georgia; Maryland; Missouri; New Jersey; New Mexico; North 
Carolina; Oklahoma; Texas; and Virginia.
    If a conflict exists among the policy provisions, the order of 
priority is as follows:
    (1) The Catastrophic Risk Protection Endorsement, as applicable; 
(2) the Special Provisions; (3) these Crop Provisions; and (4) the 
Basic Provisions, with (1) controlling (2), etc.
    1. Definitions.
    Certified seed. Potatoes for planting a potato crop in a 
subsequent crop year that have been found to meet the standards of 
the public agency that is responsible for the seed certification 
process within the state in which they were grown.
    Discard. Disposal of production by you, or a person acting for 
you, without receiving any value for it.
    Disposed. Any disposition of the crop including but not limited 
to sale or discard.
    Grade inspection. An inspection in which samples of production 
are obtained by us, or a party approved by us, prior to the sale, 
storage or disposal of any lot of potatoes, or any portion of a lot 
and the potatoes are evaluated and quality (grade) determinations 
are made by us, a laboratory approved by us, or a potato grader 
licensed or certified by the applicable State or the United States 
Department of Agriculture, in accordance with the United States 
Standards for Grades of Potatoes.
    Harvest. Lifting potatoes from within the soil to the soil 
surface.
    Hundredweight. One hundred (100) pounds avoirdupois.
    Lot. A quantity of production that can be separated from other 
quantities of production by grade characteristics, load, location or 
other distinctive features.
    Planting period. The period of time between the calendar dates 
designated in the Special Provisions for the planting of spring-
planted, summer-planted, fall-planted, or winter-planted potatoes.
    Practical to replant. In lieu of the definition of ``Practical 
to replant'' contained in section one of the Basic Provisions, 
practical to replant is defined as our determination, after loss or 
damage to the insured crop, based on factors including, but not 
limited to, moisture availability, condition of the field, marketing 
windows, and time to crop maturity, that replanting to the insured 
crop will allow the crop to attain maturity prior to the calendar 
date for the end of the insurance period. It will not be considered 
practical to replant after the end of the late planting period, or 
the end of the planting period in which initial planting took place 
in counties for which the Special Provisions designates separate 
planting periods, unless replanting is generally occurring in the 
area.
    2. Unit Division.
    A basic unit, as defined in section 1 of the Basic Provisions, 
will be divided into additional basic units by planting period.
    3. Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities.
    (a) In addition to the requirements of section 2 of the Basic 
Provisions, you may select only one price election for all the 
potatoes in the county insured under this policy unless the Special 
Provisions provide different price elections by type. If the Special 
Provisions provide for different price elections by type, you may 
select one price election for each potato type designated in the 
Special Provisions. The price elections you choose for each type 
must have the same percentage relationship to the maximum price 
election offered by us for each type. For example, if you choose 100 
percent of the maximum price election for one type, you must also 
choose 100 percent of the maximum price election for all other 
types.
    (b) If the production from any acreage of the insured crop is 
not harvested, the price used to determine your indemnity will be 80 
percent of your price election.
    (c) Any acreage of potatoes damaged to the extent that similarly 
situated producers in the area would not normally further care for 
the potatoes will be deemed to have been destroyed even though you 
may continue to

[[Page 65334]]

care for the potatoes. The price election for unharvested acreage 
will apply to such acreage.
    4. Contract Changes.
    In accordance with section 4 of the Basic Provisions, the 
contract change date is:
    (a) June 30 preceding the cancellation date for counties with a 
September 30 cancellation date;
    (b) September 30 preceding the cancellation date for counties 
with a November 30 or December 31 cancellation date; and
    (c) November 30 preceding the cancellation date for counties 
with a February 28 or March 15 cancellation date.
    5. Cancellation and Termination Dates.
    In accordance with section 2 of the Basic Provisions, the 
cancellation and termination dates are:

------------------------------------------------------------------------
                 State and county                          Dates        
------------------------------------------------------------------------
Pinellas, Hillsborough, Polk, Oseola, and Brevard  Sep. 30.             
 Counties, Florida, and all Florida counties                            
 lying south thereof.                                                   
Arizona; all California counties; and all Texas    Nov. 30.             
 counties except Bailey, Castro, Dallam, Deaf                           
 Smith, Floyd, Gaines, Hale, Hartley, Haskell,                          
 Knox, Lamb, Parmer, Swisher, and Yoakum.                               
Alabama; Delaware; Georgia; Maryland; Missouri;    Dec. 31.             
 New Jersey; North Carolina; Virginia; and all                          
 Florida counties except Pinellas, Hillsborough,                        
 Polk, Oseola, and Brevard Counties, Florida, and                       
 all Florida counties to the south thereof.                             
Oklahoma; and Haskell and Knox Counties, Texas...  Feb. 28.             
Bailey, Castro, Dallam, Deaf Smith, Floyd,         Mar. 15.             
 Gaines, Hale, Hartley, Lamb, Parmer, Swisher,                          
 and Yoakum Counties, Texas; and New Mexico.                            
------------------------------------------------------------------------

    6. Annual Premium.
    In lieu of the premium computation method contained in section 7 
of the Basic Provisions, the annual premium amount (y) is computed 
by multiplying (a) the production guarantee by (b) the price 
election for harvested acreage, by (c) the premium rate, by (d) the 
insured acreage, by (e) your share at the time of planting, and by 
(f) any applicable premium adjustment factors contained in the 
actuarial documents (a x b x c x d x e x f = y).
    7. Insured Crop.
    In accordance with section 8 of the Basic Provisions, the crop 
insured will be all the potatoes in the county for which a premium 
rate is provided by the actuarial documents:
    (a) In which you have a share;
    (b) Planted with certified seed (unless otherwise permitted by 
the Special Provisions);
    (c) Planted for harvest as certified seed stock, or for human 
consumption, (unless specified otherwise in the Special Provisions);
    (d) That are not (unless allowed by the Special Provisions or by 
written agreement):
    (1) Interplanted with another crop; or
    (2) Planted into an established grass or legume.
    8. Insurable Acreage.
    In addition to the provisions of section 9 of the Basic 
Provisions, we will not insure any acreage that:
    (a) Does not meet the rotation requirements contained in the 
Special Provisions for the crop; or
    (b) Is damaged before the final planting date or before the end 
of the applicable planting period in counties for which the Special 
Provisions designate separate planting periods, to the extent that 
similarly situated producers in the area would normally not further 
care for the crop, unless it is replanted or we agree that it is not 
practical to replant.
    9. Insurance Period.
    In accordance with the provisions of section 11 of the Basic 
Provisions, the calendar date for the end of the insurance period is 
the date immediately following planting as follows (exceptions, if 
any, for specific counties, varieties or types are contained in the 
Special Provisions):
    (a) July 15 in Missouri; North Carolina; and all Texas counties 
except Bailey, Castro, Dallam, Deaf Smith, Floyd, Gaines, Hale, 
Haskell, Hartley, Knox, Lamb, Parmer, Swisher, and Yoakum.
    (b) July 25 in Arizona; and Virginia.
    (c) August 15 in Oklahoma; and Haskell and Knox Counties, Texas.
    (d) In Alabama; California; Florida; and Georgia; the dates 
established by the Special Provisions for each planting period; and
    (e) October 15 in Bailey, Castro, Dallam, Deaf Smith, Floyd, 
Gains, Hale, Hartley, Lamb, Parmer, Swisher, and Yoakum Counties, 
Texas; Delaware; Maryland; New Jersey; and New Mexico.
    10. Causes of Loss.
    (a) In accordance with the provisions of section 12 of the Basic 
Provisions, insurance is provided only against the following causes 
of loss which occur within the insurance period:
    (1) Adverse weather conditions;
    (2) Fire;
    (3) Insects, but only if sufficient and proper pest control 
measures are used;
    (4) Plant disease, but only if sufficient and proper disease 
control measures are used;
    (5) Wildlife;
    (6) Earthquake;
    (7) Volcanic eruption; or
    (8) Failure of the irrigation water supply, if caused by an 
insured peril that occurs during the insurance period (see section 
10(a) (1) through (7)).
    (b) In addition to the causes of loss not insured against as 
contained in section 12 of the Basic Provisions, we will not insure 
against any loss of production due to:
    (1) Damage that occurs or becomes evident after the end of the 
insurance period, including, but not limited to, damage that occurs 
after potatoes have been placed in storage; or
    (2) Causes, such as freeze after certain dates, as limited by 
the Special Provisions.
    11. Duties in the Event of Damage or Loss.
    (a) In accordance with the requirements of section 14 of the 
Basic Provisions, you must leave representative samples at least 10 
feet wide and extending the entire length of each field in the unit 
if you are going to destroy any acreage of the insured crop that 
will not be harvested.
    (b) We must be given the opportunity to perform a grade 
inspection on the production from any unit for which you have given 
notice of damage.
    12. 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 acceptable production records were not provided; and
    (2) For any basic units, we will allocate any commingled 
production to such units in proportion to our liability on the 
harvested acreage for the units.
    (b) In the event of loss or damage covered by this policy, we 
will settle your claim by:
    (1) Multiplying the insured acreage by its respective production 
guarantee (if there is unharvested acreage in the unit, the 
harvested and unharvested acreage will be determined separately);
    (2) Multiplying each result in section 12(b)(1) by the 
respective price election (the price election may be limited as 
specified in section 3.);
    (3) Totaling the results of section 12(b)(2);
    (4) Multiplying the total production to be counted of each type, 
if applicable, (see section 12(d)) by the respective price election;
    (5) Totaling the results of section 12(b)(4);
    (6) Subtracting the results of section 12(b)(5) from the result 
in section 12(b)(3); and
    (7) Multiplying the result of section 12(b)(6) by your share.
    For example:
    You have a 100 percent share in 100 harvested acres of potatoes 
in the unit, with a guarantee of 150 hundredweight per acre and a 
price election of $4.00 per hundredweight. You are only able to 
harvest 10,000 hundredweight. Your indemnity would be calculated as 
follows:
    (1) 100 acres  x  150 hundredweight=15,000 hundredweight 
guarantee;
    (2) 15,000 hundredweight  x  $4.00 price election=$60,000.00 
value of guarantee;
    (4) 10,000 hundredweight  x  $4.00 price election=$40,000.00 
value of production to count;
    (6) $60,000.00-$40,000.00=$20,000.00 loss; and
    (7) $20,000.00 x 100 percent=$20,000.00 indemnity payment.
    You also have a 100 percent share in 100 unharvested acres of 
potatoes in the same unit, with a guarantee of 150 hundredweight per 
acre and a price election of $3.20 per

[[Page 65335]]

hundredweight. (The price election for unharvested acreage is 80.0 
percent of your elected price election ($4.00 x 0.80=$3.20.) This 
unharvested acreage was appraised at 35 hundredweight per acre for a 
total of 3,500 hundredweight as production to count. Your total 
indemnity for the harvested and unharvested acreage would be 
calculated as follows:
    (1) 100 acres  x  150 hundredweight = 15,000 hundredweight 
guarantee for the harvested acreage, and
    100 acres  x  150 hundredweight = 15,000 hundredweight guarantee 
for the unharvested acreage;
    (2) 15,000 hundredweight guarantee  x  $4.00 price election = 
$60,000.00 value of guarantee for the harvested acreage, and
    15,000 hundredweight guarantee  x  $3.20 price election = 
$48,000.00 value of guarantee for the unharvested acreage;
    (3) $60,000.00 + $48,000.00 = $108,000.00 total value of 
guarantee;
    (4) 10,000 hundredweight  x  $4.00 price election = $40,000.00 
value of production to count for the harvested acreage, and
    3500 hundredweight  x  $3.20 = $11,200.00 value of production to 
count for the unharvested acreage;
    (5) $40,000.00 + $11,200.00 = $51,200.00 total value of 
production to count;
    (6) $108,000.00 - $51,200 = $56,800.00 loss; and
    (7) $56,800.00 loss  x  100 percent = $56,800.00 indemnity 
payment.
    (c) The extent of any quality loss must be determined based on 
samples obtained no later than the time potatoes are placed in 
storage, if the production is stored prior to sale, or the date they 
are delivered to a buyer, wholesaler, packer, broker, or other 
handler if production is not stored.
    (d) The total production to count (in hundredweight) from all 
insurable acreage on the unit will include:
    (1) All appraised production as follows:
    (i) Not less than the production guarantee per acre for acreage:
    (A) That is abandoned;
    (B) That is put to another use without our consent;
    (C) That is damaged solely by uninsured causes;
    (D) From which any production is disposed of without a grade 
inspection; or
    (E) For which you fail to provide acceptable production records;
    (ii) Production lost due to uninsured causes;
    (iii) Production lost due to harvest prior to full maturity. 
Production to count from such acreage will be determined by 
increasing the amount of harvested production by 2 percent per day 
for each day the potatoes were harvested prior to the date the 
potatoes would have reached full maturity. The date the potatoes 
would have reached full maturity will be considered to be 45 days 
prior to the calendar date for the end of the insurance period, 
unless otherwise specified in the Special Provisions. This 
adjustment will not be made if the potatoes are damaged by an 
insurable cause of loss, and leaving the crop in the field would 
either reduce production or decrease quality.
    (iv) Unharvested production (the value of unharvested production 
will be calculated using the reduced price election determined in 
section 3(b) and unharvested production may be adjusted in 
accordance with section 12(e)); and
    (v) Potential production on insured acreage that you intend to 
put to another use or abandon, if you and we agree on the appraised 
amount of production. Upon such agreement, the insurance period for 
that acreage will end when you put the acreage to another use or 
abandon the crop. If agreement on the appraised amount of production 
is not reached:
    (A) If you do not elect to continue to care for the crop, we may 
give you consent to put the acreage to another use if you agree to 
leave intact, and provide sufficient care for, representative 
samples of the crop in locations acceptable to us (The price used to 
determine the amount of any indemnity will be limited as specified 
in section 3 even if the representative samples are harvested. The 
amount of production to count for such acreage will be based on the 
harvested production or appraisals from the samples at the time 
harvest should have occurred. If you do not leave the required 
samples intact, or fail to provide sufficient care for the samples, 
our appraisal made prior to giving you consent to put the acreage to 
another use will be used to determine the amount of production to 
count); or
    (B) If you elect to continue to care for the crop, the amount of 
production to count for the acreage will be the harvested 
production, or our reappraisal if additional damage occurs and the 
crop is not harvested; and
    (2) All harvested production from the insurable acreage 
determined in accordance with section 12(e).
    (e) With the exception of production with external defects, only 
marketable lots of mature potatoes will be production to count for 
loss adjustment purposes. Production not meeting the standards for 
grading U.S. No. 2 due to external defects will be determined on an 
individual potato basis for all unharvested potatoes and for any 
harvested potatoes if we determine it is practical to separate the 
damaged production. All determinations must be based upon a grade 
inspection.
    (1) Marketable lots of potatoes will include any lot of potatoes 
that is:
    (i) Stored;
    (ii) Sold as seed;
    (iii) Sold for human consumption; or
    (iv) Harvested and not sold or that is appraised if such lot 
meets the standards for grading U.S. No. 2 or better on a sample 
basis.
    (2) Marketable lots will also include any potatoes that we 
determine:
    (i) Could have been sold for seed or human consumption in the 
general marketing area;
    (ii) Were not sold as a result of uninsured causes including, 
but not limited to, failure to meet chipper or processor standards 
for fry color or specific gravity; or
    (iii) Were disposed of without our prior written consent and 
such disposition prevented our determination of marketability.
    (3) Unless included in section 12(e) (1) or (2), a potato lot 
will not be considered marketable if, due to insurable causes of 
damage, it:
    (i) Is partially damaged, and is salvageable only for starch, 
alcohol, or livestock feed;
    (ii) Is left unharvested and does not meet the standards for 
grading U.S. No. 2 or better due to internal defects; or
    (iii) does not meet the standards for grading U.S. No. 2 or 
better due to external defects, is harvested, and it is not 
practical to separate the damaged production.
    13. Prevented Planting.
    Your prevented planting coverage will be 25 percent of your 
production guarantee for timely planted acreage. If you have limited 
or additional coverage, as specified in 7 CFR part 400, subpart T, 
and pay an additional premium, you may increase your prevented 
planting coverage to a level specified in the actuarial documents.

    7. Section 457.143 is added to read as follows:


Sec. 457.143  Northern Potato Crop Insurance--Quality Endorsement.

    The Northern Potato Crop Insurance Quality Endorsement provisions 
for the 1998 and succeeding years are as follows:
    FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

    Reinsured policies:

(Appropriate title for insurance provider)
    Both FCIC and reinsured policies:

Northern Potato Crop Insurance Quality Endorsement

    1. In return for payment of the additional premium designated in 
the actuarial documents, this endorsement is attached to and made 
part of your Northern Potato Crop Provisions subject to the terms 
and conditions described herein. In the event of a conflict between 
the Northern Potato Crop Provisions and this endorsement, this 
endorsement will control.
    2. You must elect this endorsement on or before the sales 
closing date for the initial crop year in which you wish to insure 
your potatoes under this endorsement. This endorsement will continue 
in effect until canceled. It may be canceled by either you or us for 
any succeeding crop year by giving written notice to the other party 
on or before the cancellation date.
    3. All acreage of potatoes insured under the Northern Potato 
Crop Provisions will be insured under this endorsement except:
    (a) Any acreage specifically excluded by the actuarial 
documents; and
    (b) Any acreage grown for seed.
    4. We will adjust production to count (determined in accordance 
with section 15 of the Basic Provisions and section 11 of the 
Northern Potato Crop Provisions) from (1) unharvested acreage; (2) 
harvested acreage that is stored after a grade inspection; or (3) 
that is marketed after a grade inspection; and that contains 
potatoes that grade less than U.S. No. 2 due to:
    (a) Internal defects (the number of potatoes with such defects 
must be in excess of the tolerance allowed for U.S. No. 2 grade 
potatoes on a lot basis and must not be separable from undamaged 
production using

[[Page 65336]]

methods used by the potato packers or processors to whom you 
normally deliver your potato production), will be adjusted as 
follows:
    (1) For potatoes for which a price is agreed upon in writing 
between you and a buyer within 21 days (60 days if the Northern 
Potato Crop Insurance Storage Coverage Endorsement is applicable) of 
the end of the insurance period, or that are delivered to a buyer 
within 21 days (60 days if the Northern Potato Crop Insurance 
Storage Coverage Endorsement is applicable) of the end of the 
insurance period, by multiplying the production to count by the 
factor (not to exceed 1.0) that results from dividing the price 
received or that will be received per hundredweight of the damaged 
production by the highest available price election. This method of 
adjustment will not be performed if it has already been performed 
under the terms of section 11(g)(2)(i) of the Northern Potato Crop 
Insurance Provisions. If production is sold for a price lower than 
the value appropriate to and representative of the local market, we 
will determine the value of the production based on the price you 
could have received in the local market.
    (2) For harvested potatoes discarded within 21 days (60 days if 
the Northern Potato Crop Insurance Storage Coverage Endorsement is 
applicable) of the end of the insurance period and appraised 
unharvested production that could:
    (i) Not have been sold, the production to count will be zero; or
    (ii) Have been sold, the production to count will be determined 
in accordance with section 4(a)(1). The price used for the damaged 
production will be the price you could have received in the local 
market.
    (3) For potatoes for which a price is not agreed upon between 
you and a buyer within 21 days (60 days if the Northern Potato Crop 
Insurance Storage Coverage Endorsement is applicable) of the end of 
the insurance period and that remain in storage 22 or more days (61 
or more days if the Northern Potato Crop Insurance Storage Coverage 
Endorsement is applicable) after the end of the insurance period, 
production to count will be determined in accordance with section 
4(b).
    (b) Factors other than those specified in section 4(a), by 
multiplying by a factor (not to exceed 1.0) that is determined as 
follows:
    (1) The combined weight of sampled potatoes that grade U.S. No. 
2 or better and that are damaged by freeze or tuber rot will be 
divided by the total sample weight; and
    (2) The percentage determined in section 4(b)(1) above will be 
divided by the applicable percentage factor determined in accordance 
with section 9.
    5. Potatoes harvested or appraised prior to full maturity that 
do not grade U.S. No. 2 due solely to size will be considered to 
have met U.S. No. 2 standards unless the potatoes are damaged by an 
insurable cause of loss and leaving the crop in the field would 
either reduce production or decrease quality.
    6. Production to count for potatoes destroyed, stored or 
marketed without a grade inspection will be 100 percent of the gross 
weight of such potatoes.
    7. All determinations must be based upon a grade inspection.
    8. The actuarial documents may provide ``U.S. No. 1'' in place 
of ``U.S. No. 2'' as used in this endorsement. If both U.S. No. 1 
and 2 are available in the actuarial documents, you may elect U.S. 
No. 1 or 2 by potato type or group, if separate types or groups are 
specified in the Special Provisions.
    9. Percentage factor means the historical average percentage of 
potatoes grading U.S. No. 2 or better, by type, determined from your 
records. If at least 4 continuous years of records are available, 
the percentage factor will be the simple average of the available 
records not to exceed 10 years. If less than four years of records 
are available, the percentage factor will be determined based on a 
combination of your records and the percentage factor contained in 
the Special Provisions.

    8. Section 457.144 is added to read as follows:


Sec. 457.144  Northern Potato Crop Insurance--Processing Quality 
Endorsement

    The Northern Potato Crop Insurance Processing Quality Endorsement 
provisions for the 1998 and succeeding crop years are as follows:
    FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

    Reinsured policies:

(Appropriate title for insurance provider)
    Both FCIC and reinsured policies:

Northern Potato Crop Insurance Processing Quality Endorsement

    1. In return for payment of the additional premium designated in 
the actuarial documents, this endorsement is attached to and made 
part of your Northern Potato Crop Provisions and Quality Endorsement 
subject to the terms and conditions described herein. In the event 
of a conflict between the Northern Potato Crop Provisions or Quality 
Endorsement and this endorsement, this endorsement will control.
    2. You must have a Northern Potato Quality Endorsement in place 
and elect this endorsement on or before the sales closing date for 
the initial crop year in which you wish to insure your potatoes 
under this endorsement. This endorsement may be canceled by either 
you or us for any succeeding crop year by giving written notice to 
the other party on or before the cancellation date.
    3. All terms of the Northern Potato Quality Endorsement not 
modified by this endorsement will be applicable to acreage covered 
under this endorsement.
    4. A processor contract must be executed with a potato processor 
for the potato types insured under this endorsement and a copy 
submitted to us on or before the acreage reporting date for 
potatoes. If you elect this endorsement, all insurable acreage of 
production under contract with the processor must be insured under 
this endorsement.
    5. When the processor contract requires the processor to 
purchase a stated amount of production, rather than all of the 
production from a stated number of acres, the insurable acreage will 
be determined by dividing the stated amount of production by the 
approved yield for the acreage. The number of acres insured under 
this endorsement will not exceed the actual number of acres planted 
to the potato types and which are needed to fulfill the contract.
    6. In lieu of the provisions contained in section 4 of the 
Northern Potato Quality Endorsement, production that is rejected by 
the processor will be adjusted as follows: Production to count 
(determined in accordance with section 15 of the Basic Provisions 
and section 11 of the Northern Potato Crop Provisions) from (1) 
unharvested acreage; (2) harvested acreage that is stored after a 
grade inspection; or (3) that is marketed after a grade inspection; 
and that contains potatoes that:
    (a) Grade less than U.S. No. 2 due to internal defects, a 
specific gravity lower than the lesser of 1.074 or the minimum 
acceptable amount specified in the processor contract, or a fry 
color of No. 3 or darker due to either sugar exceeding 10 percent or 
sugar ends exceeding 19 percent (the number of potatoes with such 
defects must be in excess of the tolerance allowed for U.S. No. 2 
grade potatoes on a lot basis and must not be separable from 
undamaged production using methods used by the processors to which 
you normally deliver your potato production), will be adjusted as 
follows:
    (1) For potatoes for which a price is agreed upon in writing 
between you and a buyer within 21 days (60 days if the Northern 
Potato Crop Insurance Storage Coverage Endorsement is applicable) of 
the end of the insurance period, or that are delivered to a buyer 
within 21 days (60 days if the Northern Potato Crop Insurance 
Storage Coverage Endorsement is applicable) of the end of the 
insurance period, by multiplying the production to count by the 
factor (not to exceed 1.0) that results from dividing the price 
received or that will be received per hundredweight of the damaged 
production by the highest available price election. This method of 
adjustment will not be performed if it has already been performed 
under the terms of section 11(g)(2)(i) of the Northern Potato Crop 
Insurance Provisions. If production is sold for a price lower than 
the value appropriate and representative of the local market, we 
will determine the value of the production based on the price you 
could have received in the local market.
    (2) For harvested potatoes discarded within 21 days (60 days if 
the Northern Potato Crop Insurance Storage Coverage Endorsement is 
applicable) of the end of the insurance period and appraised 
unharvested production that could:
    (i) Not have been sold, the production to count will be zero; or
    (ii) Have been sold, the production to count will be determined 
in accordance with section 6(a)(1). The price used for the damaged 
production will be the price you could have received in the local 
market.
    (3) For potatoes for which a price is not agreed upon in writing 
between you and a buyer within 21 days (60 days if the Northern 
Potato Crop Insurance Storage Coverage Endorsement is applicable) of 
the end of the insurance period and that remain in storage

[[Page 65337]]

22 or more days (61 or more days if the Northern Potato Crop 
Insurance Storage Coverage Endorsement is applicable) after the end 
of the insurance period, production to count will be determined in 
accordance with section 6(b).
    (b) Grade less than U.S. No. 2 due to factors other than those 
specified in section 6(a) will be multiplied by a factor (not to 
exceed 1.0) that is determined as follows:
    (1) The combined weight of sampled potatoes that grade U.S. No. 
2 or better and that are damaged by freeze or tuber rot will be 
divided by the total sample weight; and
    (2) The percentage determined in section 6(b)(1) above will be 
divided by the applicable percentage factor determined in accordance 
with section 10.
    7. All grade determinations for the purposes of this endorsement 
will be made using the United States Standards for Grades of 
Potatoes for Processing or Chipping.
    8. All determinations must be based upon a grade inspection.
    9. The actuarial documents may provide ``U.S. No. 1'' in place 
of ``U.S. No. 2'' as used in this endorsement. If both U.S. No. 1 
and 2 are available in the actuarial documents, you may elect U.S. 
No. 1 or 2 by potato type or group, if separate types or groups are 
specified in the Special Provisions.
    10. Percentage factor means the historical average percentage of 
potatoes grading U.S. No. 2 or better, by type, determined from your 
records. If at least 4 continuous years of records are available, 
the percentage factor will be the simple average of the available 
records not to exceed 10 years. If less than four years of records 
are available, the percentage factor will be determined based on a 
combination of your records and the percentage factor contained in 
the Special Provisions.

    9. Section 457.145 is added to read as follows:


Sec. 457.145  Potato Crop Insurance--Certified Seed Endorsement.

    The Potato Crop Insurance Certified Seed Endorsement provisions for 
the 1998 and succeeding years are as follows:
    FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

    Reinsured policies:

(Appropriate title for insurance provider)
    Both FCIC and reinsured policies:

Potato Crop Insurance Certified Seed Endorsement

    1. In return for payment of the additional premium designated in 
the actuarial documents, this endorsement is attached to and made 
part of your Northern Potato Crop Provisions subject to the terms 
and conditions described herein. In the event of a conflict between 
the Northern Potato Provisions and this endorsement, this 
endorsement will control.
    2. For the purpose of this endorsement, the term ``potato 
certified seed program'' means the state program administered by the 
public agency responsible for the seed certification process within 
the state in which the seed is produced.
    3. You must elect this endorsement on or before the sales 
closing date for the initial crop year you wish to insure your 
potatoes under this endorsement. This endorsement will continue in 
effect until canceled. It may be canceled by either you or us for 
any succeeding crop year by giving written notice to the other party 
on or before the cancellation date.
    4. All potatoes grown on insurable acreage and that are entered 
into the potato seed certification program administered by the state 
in which the seed is grown must be insured unless limited by section 
5 below.
    5. The certified seed acreage you insure in the current crop 
year cannot be greater than 125 percent of your average number of 
acres entered into and passing certification in the potato certified 
seed program in the three previous calendar years unless a written 
agreement provides otherwise. If you enter more than this number of 
acres into the certification program, your certified seed production 
guarantee for the current crop year will be reduced as follows:
    (a) Multiply the average number of your acres entered into and 
passing certification in the potato certified seed program the 3 
previous calendar years by 1.25 and divide this result by the number 
of acres grown by you for certified seed in the current crop year; 
and
    (b) Multiply the result of section 5(a) (not to exceed 1.0) by 
the production guarantee for certified seed for the current crop 
year.
    6. You must provide acceptable records of your certified seed 
potato acreage and production for the previous three years. These 
records must clearly indicate the number of your acres entered into 
the potato seed certification program administered by the state in 
which the seed is grown.
    7. All potatoes insured for certified seed production must be 
produced and managed in accordance with standards, practices, and 
procedures required for certification by the state's certifying 
agency and applicable regulations.
    8. If, due to insurable causes occurring within the insurance 
period, potato production does not qualify as certified seed on any 
insured certified seed potato acreage within a unit, we will pay you 
the dollar amount per hundredweight contained in the Special 
Provisions for that purpose, multiplied by your production guarantee 
for such acreage, multiplied by your share. Any production that does 
not qualify as certified seed because of varietal mixing or your 
failure to follow the standard practices and procedures required for 
certification will be considered as lost due to uninsured causes.
    9. You must notify us of any loss under this endorsement not 
later than 14 days after you receive notice from the state 
certification agency that any acreage has failed certification.

    10. Section 457.146 is added to read as follows:


Sec. 457.146  Northern Potato Crop Insurance--Storage Coverage 
Endorsement.

    The Northern Potato Crop Insurance Storage Coverage Endorsement 
provisions for the 1998 and succeeding years are as follows:
    FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

    Reinsured policies:

(Appropriate title for insurance provider)
    Both FCIC and reinsured policies:

Northern Potato Crop Insurance Storage Coverage Endorsement

    1. In return for payment of the required additional premium as 
contained in the actuarial documents, this endorsement is attached 
to and made part of your Northern Potato Crop Provisions subject to 
the terms and conditions described herein. In the event of a 
conflict between the Northern Potato Crop Provisions and this 
endorsement, this endorsement will control.
    2. You must elect this endorsement on or before the sales 
closing date for the initial crop year in which you wish to insure 
your potatoes under this endorsement. This endorsement will continue 
in effect until canceled. It may be canceled by either you or us for 
any succeeding crop year by giving written notice to the other party 
on or before the cancellation date.
    3. Potato production grown under a contract that requires the 
production to be delivered to a buyer within three days of harvest 
will not be insured under this endorsement. When such contract 
requires delivery of a stated amount of production, rather than all 
of the production from a stated amount of acres, the number of acres 
not insured under this endorsement will be determined by dividing 
the stated amount of production by the approved yield for the 
acreage. All other potato production insured under the Northern 
Potato Crop Provisions must be insured under this endorsement unless 
the Special Provisions allow you to exclude certain potato 
varieties, types, or groups from this endorsement, and you elect to 
exercise this option. If you elect this endorsement, such exclusions 
must be shown annually on your acreage report and will be applicable 
to all acreage of the excluded varieties, types, or groups for the 
crop year.
    4. When production from separate insurance units, basic or 
optional, is commingled in storage, the production to count for each 
unit will be allocated pro rata based on the production placed in 
storage from each unit. Such allocation will be allowed only if 
verifiable records of production placed in storage are available by 
unit. If you do not have verifiable records, all units without 
verifiable records will be combined in accordance with section 11 of 
the Northern Potato Crop Provisions. For example, if 500 
hundredweight from one unit are commingled with 1,500 hundredweight 
from another unit and the production to count from the stored 
production is 1,000 hundredweight, 250 hundredweight of

[[Page 65338]]

production to count will be allocated to the unit contributing 500 
hundredweight and 750 hundredweight to the unit contributing 1500 
hundredweight to the stored production. This provision does not 
eliminate or change any other requirement contained in this policy 
to provide or maintain separate records of acreage or production by 
unit.
    5. The extended coverage provided by this endorsement will be 
applicable only if:
    (a) Insured potatoes are damaged within the insurance period by 
an insured cause other than freeze that later results in:
    (1) Tuber rot as defined in the Northern Potato Crop Provisions, 
to the extent that 5.1 percent (by weight) or more of the insured 
production is affected;
    (2) Internal defects to the extent that such defects are in 
excess of the amount allowed for the U.S. grade standard you elected 
for purposes of coverage under the Northern Potato Crop Insurance 
Quality Endorsement. Such defects must not be separable from 
undamaged production using methods used by the packers or processors 
to which you normally deliver your potato production. This coverage 
is applicable only to production covered under the Northern Potato 
Crop Insurance Quality Endorsement; or
    (3) A specific gravity lower than the lesser of 1.074 or the 
minimum acceptable amount specified in the processor contract, or a 
fry color of No. 3 or darker due to either sugar exceeding 10 
percent or sugar ends exceeding 19 percent. This coverage is 
applicable only to production covered under the Northern Potato Crop 
Insurance Processing Quality Endorsement.
    (b) You notify us within 72 hours of your initial discovery of 
any damage that has or that may later result in the quality 
deficiencies specified in section 5(a);
    (c) The percentage of production that has any of the quality 
deficiencies specified in section 5(a) is determined no later than 
60 days after the end of the insurance period; and
    (d) The potatoes are evaluated and quality (grade) 
determinations are made by us, a laboratory approved by us, or a 
potato grader licensed or certified by the applicable State or the 
United States Department of Agriculture, in accordance with the 
United States Standards for Grades of Potatoes. Samples of damaged 
production must be obtained by us or party approved by us prior to 
the sale or disposal of any lot of potatoes. Or, if production is 
not sold or disposed of within 60 days of the end of the insurance 
period, samples must be obtained within 60 days of the end of the 
insurance period.

    Signed in Washington, D.C., on December 5, 1997.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 97-32491 Filed 12-11-97; 8:45 am]
BILLING CODE 3410-08-P