[Federal Register Volume 63, Number 6 (Friday, January 9, 1998)]
[Rules and Regulations]
[Pages 1321-1331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-550]



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  Federal Register / Vol. 63, No. 6 / Friday, January 9, 1998 / Rules 
and Regulations  

[[Page 1321]]


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DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

7 CFR Part 301

[Docket No. 96-016-25]
RIN 0579-AA83


Karnal Bunt; Compensation for Wheat Seed and Straw in the 1995-
1996 Crop Season

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Final rule.

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SUMMARY: We are amending the Karnal bunt regulations by adding 
compensation provisions for growers and seed companies for the loss in 
value of wheat seed and straw in the 1995-1996 crop season. The payment 
of compensation is necessary in order to reduce the economic impact of 
the Karnal bunt regulations on affected wheat growers and other 
individuals.

EFFECTIVE DATE: December 23, 1997.

FOR FURTHER INFORMATION CONTACT: Mr. Mike Stefan, Operations Officer, 
Domestic and Emergency Operations, PPQ, APHIS, 4700 River Road Unit 
134, Riverdale, MD 20737-1236, (301) 734-8247, or e-mail: 
[email protected].

SUPPLEMENTARY INFORMATION:

Background

    Karnal bunt is a fungal disease of wheat (Triticum aestivum), durum 
wheat (Triticum durum), and triticale (Triticum aestivum X Secale 
cereale), a hybrid of wheat and rye. Karnal bunt is caused by the smut 
fungus Tilletia indica (Mitra) Mundkur and is spread by spores, 
primarily through the movement of infected seed. In the absence of 
measures taken by the U.S. Department of Agriculture (USDA) to prevent 
its spread, the establishment of Karnal bunt in the United States could 
have significant consequences with regard to the export of wheat to 
international markets. The regulations regarding Karnal bunt are set 
forth in 7 CFR 301.89-1 through 301.89-14. Among other things, the 
regulations define areas regulated for Karnal bunt and restrict the 
movement of certain regulated articles, including wheat seed and grain, 
from the regulated areas.
    On May 6, 1997, we published a document in the Federal Register (62 
FR 24745-24753, Docket No. 96-016-17, effective April 30, 1997) making 
final an interim rule that amended the regulations to provide 
compensation for certain growers and handlers of wheat grain, owners of 
grain storage facilities, and flour millers in order to mitigate losses 
and expenses incurred in the 1995-1996 crop season because of actions 
taken by the Secretary to prevent the spread of Karnal bunt. The final 
rule also added compensation provisions for handlers of wheat grain 
that was tested and found negative for Karnal bunt and participants in 
the National Karnal Bunt Survey whose wheat grain tested positive for 
Karnal bunt in the 1995-1996 crop season. These compensation 
regulations are set forth at 7 CFR 301.89-14.
    On July 30, 1997, we published in the Federal Register (62 FR 
40756-40763, Docket No. 96-016-21) a proposal to amend the regulations 
by adding compensation provisions for wheat seed growers and seed 
companies for the loss in value of wheat seed in the 1995-1996 crop 
season. We also proposed to add compensation provisions for the loss in 
value of wheat straw in the 1995-1996 crop season.
    We solicited comments concerning our proposal for 30 days ending 
August 29, 1997. We received six comments by that date. They were from 
wheat growers, plant breeders, seed companies, and seed industry 
associations. All the comments recommended additions or revisions to 
the compensation provisions. They are discussed below.

Comments Resulting in Changes to the Proposed Rule

Seed That Is Not Sold--Proposed Sec. 301.89-14(e)

    With one exception, our proposed compensation for seed companies 
addressed loss in value of wheat seed that was sold. As an exception, 
we also proposed that a seed company that did not sell its wheat seed 
could receive compensation at $7.00 per bushel for private variety seed 
and $4.90 per bushel for public variety seed. We explained that these 
amounts represent the seed margins of $4.50 for private variety seed 
and $2.40 for public variety seed plus the maximum $2.50 per bushel 
compensation for wheat grain provided in the regulations (see 
Sec. 301.89-14(b) of the regulations). We stipulated that compensation 
would only be paid if the seed company has destroyed the wheat by 
burying it in a sanitary landfill or other site that has been approved 
by the Animal and Plant Health Inspection Service (APHIS).
    We explained in the preamble to the proposal that this compensation 
would be necessary in a small number of cases where seed companies had 
their seed treated with a fungicide and bagged. Most seed companies did 
not treat their 1995-1996 crop season seed. Some seed companies, 
however, had seed from past crop seasons on hand that had already been 
treated in this manner. Treated seed cannot be used as grain, so if a 
seed company was unable or chose not to market treated seed for 
planting within the regulated areas, the only option for disposal of 
the treated seed was burial.
    Two commenters said that the compensation offered in this 
circumstance should also include the cost of treating and bagging the 
seed, as well as the cost of cleaning it to separate out broken kernels 
and foreign matter prior to treating. These costs were incurred with 
the expectation of being able to sell the seed at a price that would 
allow the seed company to recover the costs. These costs are not 
accounted for in the seed margin that we factored into the proposed 
compensation amount.
    In response to these comments, we are amending the compensation 
amounts for seed companies that buried their seed instead of selling 
it. We have determined that the average cost of cleaning, treating, and 
bagging seed is $2.40 per bushel (based on $1.20 per bushel for 
cleaning, $.60 per bushel for treating, and $.60 per bushel for 
bagging). We are adding this amount to the proposed compensation 
amounts, so that the compensation rates for seed companies that do not 
sell their seed will equal $9.40 per bushel for private

[[Page 1322]]

variety seed and $7.30 per bushel for public variety seed.
    The preamble to the proposed rule explained that this compensation 
would apply to a small number of cases where seed companies had already 
cleaned, treated with a fungicide, and bagged their seed. However, the 
proposed rule did not limit the compensation to only those cases. 
Section 301.89-14(e) of the proposed rule stated that ``Seed companies 
are also eligible to receive compensation under the following 
circumstance: If a seed company is not able to or elects not to sell 
1995-1996 crop season wheat grown for propagative purposes or 
propagative wheat inventories in their possession that were unsold as 
of March 1, 1996, the compensation rate will equal * * *.'' Because the 
compensation in this final rule has been increased to provide for the 
cleaning, treating, and bagging of seed, the final rule limits 
compensation to buried seed that has been cleaned, treated, and bagged.
    We are not aware of any reason that a seed company would have been 
compelled or would have considered it more profitable to bury its seed 
rather than sell it in the 1995-1996 crop season, other than if the 
seed was previously cleaned, treated, and bagged. In fact, one of the 
comments on the proposed rule pointed out that a seed company trying to 
mitigate its losses would not dispose of untreated seed by burying it 
because the seed company would lose the salvage value. Therefore, 
Sec. 301.89-14(e) of this final rule states that a seed company is 
eligible for compensation if the seed company has wheat that cannot be 
sold for use as grain or animal feed because it was previously cleaned, 
treated, and bagged.
    The same two comments also requested that compensation for cleaned, 
treated, and bagged seed that was not sold include the cost of 
disposing of the wheat. We are not making any changes to the proposal 
in response to this request. Section 301.89-14(c) of the regulations 
provides compensation for 1995-1996 crop season wheat grain that was 
buried because it could not be sold, at the rate of $2.50 per bushel. 
This rate does not include the cost of disposal. It would be 
inconsistent to compensate seed companies for disposal costs for the 
burial of wheat seed when we did not compensate owners of grain that 
was buried for disposal.

Certified Seed

    Several commenters said that we should specify that compensation 
will be paid only on ``certified'' seed. Certified seed is wheat that 
has been classified as ``certified'' by a State seed certification 
agency. The seed production and certification process can vary. We have 
attempted to provide a general description of the process below.
    Certified seed is the final classification stage in the seed 
production process. The other classification stages are breeder, 
foundation, and registered seed. Breeder, foundation, and registered 
seed inventories are often produced by the seed company and are 
typically kept in relatively small quantities as stock for producing 
more seed. Certified seed is the progeny of breeder, foundation, or 
registered seed, and is the class of seed sold to farmers for growing 
wheat grain. Typically, seed companies contract with growers to produce 
certified seed. Before classifying seed as certified, the seed 
certification agency considers several factors, including the class of 
seed from which the seed to be certified will be grown and the 
condition of the field in which the seed to be certified is planted. 
The seed certification agency also analyzes the harvested seed for 
genetic and mechanical factors relating to specific seed standards.
    Several commenters said that compensating growers and seed 
companies only for certified seed would ensure that wheat being 
compensated was actually grown for use as seed, and not as grain. This 
would help prevent false claims for compensation. The commenters said 
that seed certification is the only clear establishment of intent to 
produce wheat as a seed crop.
    In the proposed rule, we specified that, to claim compensation for 
wheat seed, a copy of the contract under which the wheat was grown must 
be provided with each compensation claim. We believed that a contract 
would show that the wheat for which compensation is being claimed was 
intended to be sold as seed. Some commenters said, however, that seed 
production contracts could be easily forged, resulting in illegitimate 
claims.
    We agree with commenters that requiring that seed be certified in 
order to be eligible for compensation is the most reliable 
establishment of intent to produce wheat as a seed crop. However, some 
seed companies did not complete the seed certification process because 
of the Karnal bunt quarantine. As explained above, the seed 
certification process consists of several steps. The final step is 
usually laboratory analysis of the harvested wheat for genetic and 
mechanical factors relating to specific seed standards. Prior to 
completion of this final step, the wheat is considered ``certifiable.'' 
However, seed that is grown with the intention of producing breeder, 
foundation, or registered seed is also classified as ``certifiable'' up 
to the point that it has completed the laboratory analysis step of the 
seed certification process. The intent of the proposed rule was to 
offer compensation only for seed in the final stage of seed production 
(that is, commercially available seed). We did not intend to offer 
compensation for seed still in non-final stages (that is, breeder, 
foundation, or registered seed).
    With all this in mind, and in response to commenters concerns, we 
are amending the proposed rule to require that seed be either certified 
or grown with the intention of producing certified seed in order to be 
eligible for compensation. We will require this for both grower and 
seed company compensation. Throughout the rule, we will insert language 
indicating that compensation is for certified seed or seed grown with 
the intention of producing certified seed only. This language will 
replace proposed language referring to ``wheat grown for propagative 
purposes.'' In addition, in order to claim compensation, we will 
require that growers and seed companies submit documentation that 
provides evidence that the wheat being considered for compensation is 
classified as certified seed or is considered certifiable as certified 
seed by a State seed certification agency. Seed certification agencies 
usually require that applicants for seed certification keep records of 
the amount of certifiable seed harvested. This documentation may 
include one or more of the following types of documents: An application 
to the State seed certification agency for field inspection (to show 
that seed is eligible for certification); a bulk sale certificate; 
certification tags or labels issued by the State seed certification 
agency; or a document issued by the State seed certification agency 
verifying that the wheat is certified seed. Growers who do not have 
copies of such documentation can obtain it from the seed company or 
from their State's seed certification agency.

Private Variety Seed

    The proposed rule provided different compensation rates to seed 
companies depending on whether their seed was private variety seed or 
public variety seed. Specifically, the seed margin used in the 
compensation calculations was set by the proposal at $4.50 for private 
variety seed and $2.40 for public variety seed. We explained in the 
preamble to the proposal that private variety seed is seed that has a 
plant variety protection

[[Page 1323]]

patent. The seed margin for private variety seed was set higher than 
the seed margin for public variety seed to reflect premiums paid by the 
seed company to the private firm that owns the plant variety protection 
patent.
    Several of the commenters pointed out to us that not all private 
variety seed is patented. Usually, private varieties are protected by a 
patent. However, there are some private varieties that do not have 
patent protection. For example, some varieties are developed to be so 
specific to the needs of a particular customer that a patent is not 
deemed necessary. Another example is that a private individual (such as 
someone doing research at a university) may develop a variety that they 
do not wish to patent. The individual may sell the rights to this 
variety to a seed company. Such varieties may be recognized within the 
industry as being ``owned'' by a seed company, even though they are not 
protected by a patent. Commenters said that, among seed industry 
groups, private variety seed is defined simply as a variety owned by a 
private individual or company.
    We agree with commenters that our description of private variety 
seed was incomplete. Public varieties of seed are usually developed by 
State or Federal government researchers, or by a university. Public 
variety seed is considered to be owned by the public and is available 
to anyone for planting and production. Because it is owned by the 
public, no private individual must be reimbursed for the development 
costs. In contrast, private varieties of seed are usually developed by 
a private individual or company. Seed margins for private variety seed 
are intended to reimburse the individual or company for the costs of 
developing the seed variety. In the case of patented varieties, the 
higher seed margin reflects premiums paid by the seed company to the 
developer who owns the patent. In other cases (as described above), the 
seed company may have purchased the rights to the variety from a 
developer. In such cases, the higher seed margin reflects the up front 
costs of the seed company for purchasing the seed variety.
    Our explanation of private variety seed was in the preamble to the 
proposed rule. Because the actual rule did not define private variety 
seed, it is not necessary for us to make any changes to the rule in 
response to this comment. However, in implementing this final rule, we 
will consider any variety that is owned by a private individual or 
company to be a private variety. USDA's Farm Service Agency (FSA) will 
be processing compensation claims under this rule. The State FSA 
offices will make the determination as to what varieties are private 
and what varieties are public.

Seed Premium Not Specified in Contract

    For compensation for growers, we proposed that ``the seed premium 
specified in the contract'' is to be used for certain compensation 
calculations. For example, compensation for growers under proposed 
Sec. 301.89-14(d)(1)(i) would equal the contract price (CP) including 
the seed premium specified in the contract (SP)(contract) minus the 
higher of either the salvage value (SV) plus the actual seed premium 
received by the grower (SP)(actual), or the actual price received by 
the grower (AP) plus the actual seed premium received by the grower 
(SP)(actual). The equation for this compensation would be: Compensation 
rate = [CP + SP(contract)]--higher of [SV + SP(actual)] or [AP + 
SP(actual)].
    One commenter said that this would be a problem because not all 
seed production contracts specify a seed premium separately. In these 
cases, the seed premium is included in the contract price. In response 
to the comment, we are making several changes to the proposed rule to 
accommodate these cases. Section 301.89-1 of the Karnal bunt 
regulations already defines ``contract price'' to mean the net price 
after adjustment for any premiums or discounts stated in the contract. 
Under this definition, seed premiums are considered part of the 
contract price. In the calculations, we will continue to mention the 
seed premium to make it clear that the seed premium must always be 
included in the contract price, even if it is specified in the contract 
separately. However, we are amending the proposed rule so that 
calculations will use only the contract price, with a phrase explaining 
that the contract price must include the seed premium if one is 
specified in the contract. Similarly, because the actual seed premium 
received by the grower may not always be specified on the receipt for 
the final sale of the wheat, we would make similar changes to the 
calculations that use ``actual price received.'' In addition, some 
calculations require use of either the seed premium specified in the 
contract or the actual seed premium received by the grower, separately 
from the contract price or the actual price received. In cases where 
there is no seed premium specified, we will use $.30 in the 
calculation. This represents the average seed premium received by 
growers in the regulated area.
    For example, proposed Sec. 301.89-14(d)(1)(i), cited above, will 
read as follows in this final rule: The compensation rate will equal 
the contract price (CP), including the seed premium if specified in the 
contract, minus the higher of either the salvage value (SV) plus the 
actual seed premium received by the grower (SP)(actual), or the actual 
price received by the grower (AP), including any seed premium specified 
on the receipt for the final sale of the wheat. If the actual seed 
premium received by the grower is not specified on the receipt for the 
final sale of the wheat, the seed premium will be set at $.30 for the 
compensation calculation. The equation for this compensation will be: 
Compensation rate = CP - higher of [SV + (SP(actual) or $.30)] or [AP].
    In addition, we are making a change to the compensation provisions 
for seed companies. Under proposed Sec. 301.89-14(d)(3)(i), a seed 
company would be eligible for compensation if the seed company honored 
the contract with the grower by paying the grower the full contract 
price, including the seed premium. For the same reasons discussed 
above, this final rule will state that a seed company is eligible for 
compensation if the seed company paid the grower the full contract 
price, ``including the seed premium if a seed premium is specified in 
the contract.''

Binned Seed Inventories

    One commenter requested that we remove the requirement in proposed 
Sec. 301.89-14(d)(7) that, to claim compensation, seed companies must 
provide a copy of the contract under which the wheat was grown. The 
commenter said that a common practice of seed companies is to ``bin'' 
bulk seed inventories, meaning that harvested seed from multiple 
growers (and contracts) is combined together in the same storage bin. 
This would make it impossible for seed companies to specifically 
associate a particular grower contract with a specific volume of seed. 
The commenter said that the requirement that seed companies must 
``certify to FSA that the propagative wheat was in the seed company's 
possession as of March 1, 1996'' should be adequate.
    We believe that the commenter is referring to seed inventories from 
past crop seasons that have been binned. Compensation provisions for 
seed companies for seed inventories from past crop seasons appear in 
proposed Sec. 301.89-14(d)(3)(ii), (d)(4), (d)(5), and (e). To claim 
compensation for seed inventories, the proposed rule stated that seed 
companies must certify to FSA that the wheat was in the seed

[[Page 1324]]

company's possession as of March 1, 1996. The proposed rule also 
requires that the seed company provide a contract under which the wheat 
was grown. We understand that this may be difficult if seed inventories 
have been binned, because seed companies may not be able to tell which 
grower's seed was sold the previous year and which grower's seed was 
kept in inventory.
    We have reviewed the proposed rule, and have determined that a copy 
of the contract under which the wheat was grown is not necessary to 
process compensation claims for seed inventories from past crop 
seasons. However, our review of the proposed rule also revealed an 
oversight in regard to compensation for seed companies for 1995-1996 
crop season seed. Section 301.89-14(d)(3)(i) of the proposal stated 
that the seed company must have paid the grower the full contract price 
for the wheat. In this case, a copy of the contract is necessary to 
verify the full contract price. Proposed Sec. 301.89-14(d)(4) (``Seed 
companies that sold propagative wheat for nonpropagative purposes and 
that have claimed compensation'') and (d)(5) (``Seed companies that 
sold propagative wheat for propagative purposes'') should have also 
contained the requirement that the seed company must have paid the 
grower the full contract price on the wheat seed in order to claim 
compensation. This requirement is necessary because if a seed company 
did not pay the grower the full contract price, the seed company would 
in effect have already been compensated for the loss in value of the 
wheat seed.
    The failure to include this requirement in proposed Sec. 301.89-
14(d)(4) and (d)(5) was an oversight. This final rule, therefore, 
requires that, to claim compensation for 1995-1996 crop season wheat 
seed under Sec. 301.89-14(d)(4) and (d)(5), the seed company must have 
paid the grower the full contract price, and must provide a copy of the 
contract under which the wheat was grown. For seed inventories from 
past crop seasons, seed companies would have already paid growers of 
the seed in the year it was harvested (prior to the discovery of Karnal 
bunt). Any variation in payment from the contract price on the 
inventories would not, therefore, have been related to Karnal bunt, 
making it unnecessary for FSA to verify the contract price. For this 
reason, we are removing the requirement that seed companies claiming 
compensation for seed inventories from past crop seasons provide a copy 
of the contract under which the wheat was grown.

Karnal Bunt Certificate

    The proposed rule also required that claimants provide a copy of 
the Karnal bunt certificate issued by APHIS showing whether the wheat 
tested positive or negative for Karnal bunt. The salvage values used in 
the proposed compensation calculations vary depending on whether the 
wheat tested positive or negative for Karnal bunt. A Karnal bunt 
certificate is the most reliable documentation of the Karnal bunt test 
results.
    One commenter said that binning (as described previously in this 
document) will make it difficult to associate Karnal bunt certificates 
with a particular volume of seed inventory. Further, the commenter said 
that seed inventories on hand as of March 1, 1996, were selectively 
sampled by APHIS for Karnal bunt testing. Therefore, not all 
inventories have a corresponding Karnal bunt certificate. The commenter 
also said this same requirement caused several weeks of delays in 
processing claims for 1995-1996 crop season wheat grain and that, 
ultimately, it will only prove what is already known, that only wheat 
that tested negative for Karnal bunt was allowed to be saved as seed.
    This commenter addresses several issues. First, the commenter's 
assertion that only wheat that tested negative for Karnal bunt was 
allowed to be saved as seed is true. However, the proposed rule 
included compensation for wheat that was grown with the intention of 
producing certified seed, whether it tested positive or negative for 
Karnal bunt. If it tested positive for Karnal bunt, it was likely sold 
for use as animal feed, and would be compensated under proposed 
Sec. 301.89-14(d)(2) for growers or Sec. 301.89-14(d)(3) or (d)(4) for 
seed companies. Regardless, to determine the correct compensation 
amount, we would need to know whether the seed tested positive or 
negative for Karnal bunt.
    Second, selective sampling of seed inventories was done by APHIS; 
however, a positive or negative status for Karnal bunt was determined 
for all seed inventories. For example, a lot of seed may have been 
composed of 2000 bags of seed. By March 1996, these bags of seed from a 
single lot could have potentially been held in inventory in several 
different locations. APHIS would have selectively sampled a number of 
bags of seed from the lot, in the same or in different locations. Based 
on the results of those samples, the entire lot would have been 
considered positive or negative for Karnal bunt.
    Third, the commenter is correct that some delays were experienced 
when processing compensation for a small amount of 1995-1996 crop 
season wheat grain because a Karnal bunt certificate was never issued 
for this wheat. In the 1995-1996 crop season, a Karnal bunt certificate 
was issued only on wheat that was tested for movement outside of the 
regulated area. In a few cases in the 1995-1996 crop season, wheat 
grain that was considered negative based on a field test was sold 
within the regulated area, and so no Karnal bunt certificate was issued 
for it. Those cases were few, and we were able to handle them on a 
case-by-case basis to determine what other documentation was available 
to verify the Karnal bunt status of the wheat.
    We agree with the commenter that a similar situation may occur when 
we process seed compensation claims. As described previously in regard 
to grain, any wheat that was intended for movement outside of the 
regulated area was tested for Karnal bunt and issued a Karnal bunt 
certificate at the time of movement. However, there are several 
circumstances under which wheat grown with the intention of producing 
certified seed would not have been issued a Karnal bunt certificate. 
First, because the Karnal bunt regulations prohibited the movement of 
wheat outside the regulated area if it was to be used as seed for 
planting, no Karnal bunt certificates were issued on wheat that was 
tested as seed. Most such seed that tested positive was sold within the 
regulated area for use as animal feed; the balance of positive testing 
seed was buried or kept in inventory. Some seed that tested negative 
for Karnal bunt was sold for planting within the regulated area; some 
was sold as grain for milling within the regulated area (if it could 
not be marketed as seed); some was kept in inventory. A Karnal bunt 
certificate would not have been issued on such seed.
    We are adding several sentences to the regulations to accommodate 
claimants who do not have Karnal bunt certificates for their wheat. All 
wheat that tested positive for Karnal bunt in the 1995-1996 crop season 
was moved under a limited permit, even within the regulated area. The 
limited permits stated whether the wheat being moved was positive for 
Karnal bunt. We are adding a sentence to Sec. 301.89-14(d)(7) (``To 
claim compensation'') to state that if the grower or seed company moved 
its wheat only within the regulated area, and therefore, does not have 
a corresponding Karnal bunt certificate for the wheat for which 
compensation is being claimed, a limited permit stating that the wheat 
was positive for Karnal bunt will be accepted in lieu of a Karnal

[[Page 1325]]

bunt certificate. Any wheat that was moved only within the regulated 
area and that was not moved under a limited permit will be considered 
negative for Karnal bunt.

Claims Deadline

    In the proposed rule, we set the deadline for claiming compensation 
at on or before 60 days after the effective date of the final rule. We 
also said that the Administrator could extend the deadline, upon 
request in specific cases, when unusual or unforeseen circumstances 
occur which prevent or hinder a claimant from requesting compensation 
prior to that date.
    Several commenters requested that we extend the deadline in the 
final rule to on or before 120 days after the effective date of the 
final rule. This would give growers and seed companies more time to 
collect the required paperwork and submit their claims to FSA. Based on 
our past experience in receiving compensation claims, we believe that 
extending the deadline would be helpful to affected growers and seed 
companies. It would also give the FSA offices more time to familiarize 
themselves with the compensation regulations for seed and straw 
following the effective date of the final rule. Therefore, we are 
extending the deadline for claiming compensation to on or before 120 
calendar days after the effective date of the final rule. We will 
retain the option for the Administrator to extend the deadline, upon 
request in specific cases, when unusual or unforeseen circumstances 
occur which prevent or hinder a claimant from requesting compensation 
prior to that date.

Comments Not Resulting in Changes to the Proposed Rule

    We received numerous comments requesting compensation for losses 
not addressed in the proposed rule, as well as requests for changes in 
the compensation amounts offered in the proposal. We recognize that the 
compensation we have offered for wheat seed and straw does not fully 
account for every loss or expense due to Karnal bunt in the 1995-1996 
crop season. We regret that we cannot offer compensation for every loss 
experienced by growers and seed companies resulting from Karnal bunt. 
However, we believe the compensation provisions in this final rule do 
significantly mitigate losses due to the actions taken by USDA to 
control Karnal bunt. Before addressing each of the remaining comments 
specifically, we offer a general description of the rationale behind 
the Karnal bunt compensation program to date.
    In the absence of measures taken by USDA to prevent the spread of 
Karnal bunt, the establishment of Karnal bunt in the United States 
would have significant consequences with regard to marketing wheat in 
the United States and with regard to the export of U.S. wheat to 
international markets. Approximately 50 percent of U.S. wheat exports 
are to countries that maintain restrictions against wheat imports from 
countries where Karnal bunt is known to occur. Upon discovering Karnal 
bunt in Arizona in March 1996, quarantine of affected areas and 
emergency actions were necessary to maintain the integrity of the wheat 
industry in the United States in order to preserve international 
markets, both for wheat within the regulated areas and for wheat 
produced in other parts of the country. The Karnal bunt regulations 
that were initially established were necessarily broad due to the lack 
of data available at the time as to the extent of the infestation. The 
discovery of Karnal bunt and subsequent quarantine and emergency 
actions occurred after production and marketing decisions had been 
made. Producers and other affected individuals had little time or 
ability to avoid the unexpected costs or pass those costs on to others 
in the marketing chain.
    In previous Karnal bunt compensation rules, we have explained that 
compensation to mitigate certain losses has been offered to affected 
parties in the regulated areas in order to alleviate some of these 
hardships and to ensure full and effective compliance with the Karnal 
bunt regulatory program. The payment of compensation is in recognition 
of the fact that while benefits from regulation accrue to a large 
portion of the wheat industry outside the regulated areas, the 
regulatory burden falls predominantly on a small segment of the 
affected wheat industry within the regulated area.
    APHIS identified three principles for deciding whether to provide 
compensation. First, compensation may be appropriate where quarantine 
and emergency actions cause losses over and above those that would 
result from the normal operation of market forces. Payment of 
compensation would reflect the incremental burdens of complying with 
regulatory requirements insofar as market forces would not otherwise 
impose similar or analogous costs. Second, compensation may be 
appropriate where parties undertake actions that confer significant 
benefits on others. Under this principle, payment of compensation would 
be intended to overcome the usual disincentives to produce such 
benefits. Third, compensation may be appropriate where a small number 
of parties necessarily bear a disproportionate share of the burden of 
providing such benefits. This principle rests on the widely shared 
belief that burden-sharing is a fundamental principle of equity.
    Individual decisions regarding what specific losses to compensate 
and how much compensation to offer in each case were made in line with 
the above basic principles, which describe the goals of compensation. A 
top equity priority was compensation for wheat and other articles the 
Agency ordered destroyed or prohibited movement. Compensation amounts 
took into account the need to mitigate real losses caused by the 
regulations, so that regulated parties would not have a strong economic 
incentive to avoid compliance. At the same time, amounts were not set 
at a high enough rate to establish a ``bounty'' that would encourage 
fraudulent claims or behavior that would result in increases in 
contaminated wheat or other articles eligible for compensation.
    Several comments on the proposed rule requested compensation for 
losses not addressed in the proposed rule, including demurrage charges 
on railcars, the cost of cleaning and sanitizing railcars prior to 
loading, declines in transporter operations due to delays caused by the 
Karnal bunt regulations, and extra storage costs due to the shipping 
delays. Commenters also requested compensation for losses incurred at 
various stages of seed production, including losses caused by 
interruption of seed increase programs, destruction and/or fumigation 
of research nurseries and resulting loss of germplasm, and loss of 
future royalties from destroyed seed varieties still in the development 
stages. Commenters further requested compensation for loss of the 
ability to ``conduct business as usual'' outside the regulated area. 
One commenter requested compensation for loss of export seed markets.
    We have considered all of these comments very carefully, but we are 
not making any changes to the compensation regulations in response to 
these comments. Again, we recognize that the compensation we have 
offered does not fully account for every loss or expense due to Karnal 
bunt. However, we believe the compensation provisions in this final 
rule do significantly mitigate losses due to the actions taken by USDA 
to control Karnal bunt.
    In regard to the request for compensation for demurrage charges on

[[Page 1326]]

railcars, cleaning of railcars, declines in transporter operations, and 
extra storage, we did not offer compensation for similar costs and 
losses related to wheat grain. In regard to requests for compensation 
for losses incurred at various stages of seed production, the loss in 
value of certified, market ready seed is the most quantifiable and 
direct loss associated with the actions taken by the Department to 
prevent the spread of Karnal bunt. For this reason, this rule provides 
compensation for loss in value of wheat seed that was intended to be 
sold in the 1995-1996 crop season. Many losses connected with seed in 
other stages of production are less quantifiable and may have been 
otherwise imposed by market forces, such as market demand and prices 
over the long term. Further, the eventual impact of these types of 
losses will likely be alleviated by reductions in the restrictions on 
the movement of seed from areas regulated for Karnal bunt.
    One commenter said that the Regulatory Flexibility Analysis in the 
proposed rule did not include a discussion of numerous impacts on the 
wheat seed industry that resulted from Karnal bunt. Losses specifically 
referred to by the commenter are destruction of research nurseries, 
costs of additional required treatments, nursery seed losses of 
research and development companies, lost cleaning revenues of seed 
companies due to reduced seed sales, and carry costs paid to maintain 
seed inventories.
    The Regulatory Flexibility Analysis that appeared in the proposed 
rule referenced a more detailed analysis that was published in the 
Federal Register on May 6, 1997 (62 FR 24753-24765, Docket No. 96-016-
20). However, as the commenter says, neither of these analyses provides 
a detailed discussion of losses for which we did not intend to provide 
compensation. The intent of this rule is to compensate for the loss in 
market value of wheat seed and straw in the 1995-1996 crop season. The 
decision of intent was made in line with several criteria for 
compensation, which have been discussed earlier in this document. For 
this reason, the discussion of losses to the seed industry as a result 
of Karnal bunt were limited, both in the proposed rule and in the 
Regulatory Flexibility Analysis published on May 6, to losses in market 
value of 1995-1996 crop season wheat seed. We stated in the analysis 
published on May 6 that other economic losses were suffered by the seed 
industry due to Karnal bunt. These are mainly long-term losses, 
including costs to relocate wheat breeding operations outside the 
regulated areas and loss of breeding stock under development. The costs 
mentioned by the commenter would also be long term losses potentially 
suffered by the seed industry in the regulated area. As discussed 
previously in this document, the Karnal bunt compensation program for 
seed is intended to cover only for the loss in value of market-ready 
seed.
    One commenter requested compensation for barley seed. The commenter 
said that types of planting seed other than wheat, most notably barley, 
were affected by the regulations for Karnal bunt; the commenter further 
stated that he has not been able to sell barley seed outside the 
regulated area since the original Karnal bunt quarantine was issued, 
and that his barley seed inventories had to be sold as grain.
    Barley is not a regulated article under the Karnal bunt 
regulations. Therefore, the Karnal bunt regulations place no 
restrictions on the movement of barley from the regulated area. We are 
aware that, primarily early in the 1996 harvest, some countries (for 
example, Canada) prohibited the importation of anything from the 
regulated area that would fall under the category of small grains. 
Wheat, barley, and oats are small grains. These importing countries 
were fearful that Karnal bunt could infect or be spread by means of any 
small grain. However, the Karnal bunt fungus only affects wheat and 
wheat hybrids. Barley, oats, and other small grains are not affected by 
Karnal bunt. In general, importers from other countries recognized 
this, and growers and seed companies in the regulated area experienced 
little difficulty in exporting their barley and oat seed. Because the 
Karnal bunt regulations placed no restrictions on the movement of 
barley from the regulated area, we will not offer compensation for this 
loss.
    Another commenter requested compensation for winter seed increases 
of wheat, barley, oats, and triticale that could not be shipped outside 
the regulated area. Winter seed increases are often grown in Arizona 
and other parts of the regulated area for seed companies in northern 
climates (such as Minnesota or Canada). These companies contract with 
growers in southern climates to grow seed during the winter months in 
order to increase their seed stock. Typically, winter seed increases 
are not certified, commercially available seed; winter seed increase 
programs are more likely used to increase foundation or registered seed 
stock.
    After the 1996 harvest, some crops of winter seed increases could 
not be moved out of the regulated area. Because winter seed increases 
were not intended for sale as certified seed during the 1995-1996 crop 
season, we are not compensating for most of these situations. However, 
if the winter seed increase was for certified seed, the grower who was 
unable to move the seed out of the regulated area would be eligible for 
compensation. In regard to barley and oat seed increases, the Karnal 
bunt regulations did not place restrictions on the movement of such 
seed. For this reason, we are not offering compensation. In regard to 
triticale (which is a regulated article), we are not aware of any 
attempts to move triticale from the regulated area in the 1995-1996 
crop season. Even so, winter seed increases of triticale were most 
likely not intended for sale as certified seed during the 1995-1996 
crop season, and would therefore not be eligible for compensation.
    One commenter requested that we consider compensation for losses 
caused by the delay in paying compensation until almost a year and a 
half after the losses were incurred.
    Karnal bunt was first discovered in the United States in Arizona on 
March 8, 1996, and a quarantine and regulations were promulgated soon 
after. On July 5, 1996, we published an interim rule in the Federal 
Register (61 FR 35102-35107, Docket No. 96-016-7) that provided 
compensation to certain wheat grain growers and handlers, owners of 
grain storage facilities, and flour millers. Because the seed industry 
is complex, we needed more time to develop a compensation plan for seed 
growers and seed companies. Some growers and seed companies may have 
experienced certain kinds of losses due to uncertainty over what losses 
they would eventually be compensated for. We regret that such losses 
occurred as a result of the delay in compensation for 1995-1996 crop 
season seed. However, the intent of the Karnal bunt compensation 
program for seed is to compensate for the loss in value of seed that 
was intended for sale in the 1995-1996 crop season. We are not making 
any changes to the proposed rule based on this comment.
    One commenter noted that the proposed rule estimated that the loss 
in seed value in the 1995-1996 crop season was between $5 and $6 
million. The commenter said they have also heard USDA estimates of 
$10.8 million. The commenter said they would like us to clarify whether 
these levels are considered caps or estimates.
    We stated in the preamble to the proposed rule that an estimated 
1.5 million bushels of wheat seed grown in the regulated areas 
sustained a loss in value of between $5 and $6 million in

[[Page 1327]]

the 1995-1996 crop season. In the Regulatory Flexibility Act portion of 
the proposed rule, we said that $10.8 million has been apportioned for 
compensation to seed producers and companies for the loss in value of 
their seed. The $5 to $6 million figure is, therefore, an estimate. The 
$10.8 million figure is the maximum amount currently available to USDA 
for payments on seed compensation claims. Considering that we estimate 
the loss in value to be between $5 and $6 million, we anticipate that 
the $10.8 million apportionment will be adequate to fulfill all 
eligible claims for compensation.
    One commenter said that growers and seed companies should not have 
to provide copies of Karnal bunt certificates, and also asked that we 
remove the requirement that growers and seed companies provide copies 
of Emergency Action Notifications (EANs) for wheat grown in an area 
that was not regulated for Karnal bunt but for which an EAN had been 
issued. The commenter's reason was that Karnal bunt certificates and 
EANs were issued by USDA, and so should not have to be provided back to 
USDA to claim compensation.
    We are making no changes to the proposed rule based on this 
comment. Claims for 1995-1996 crop season wheat seed and straw will be 
processed by FSA. While FSA and APHIS are both a part of USDA, they do 
not share offices, computer systems, or recordkeeping systems. We 
understand that filing claims for compensation does require claimants 
to provide a number of documents, and collecting these requirements may 
seem cumbersome. However, affected entities were provided with copies 
of EANs and Karnal bunt certificates, and claimants should, therefore, 
not have difficulty in collecting these documents. At this time, the 
most efficient way for FSA to process compensation claims is for the 
claimant to provide the documents to FSA. As discussed previously in 
this document, this final rule will accommodate situations where a 
Karnal bunt certificate is not available.
    One commenter said that our proposed seed margins and maximum 
compensation amounts are too low, and, further, that the proposed rule 
did not give enough information about how APHIS calculated these 
figures. Another commenter asked us to add a $.90 cleaning margin to 
the proposed seed margin amount.
    We are not making any changes to the proposed rule in response to 
these comments. Seed margins were used in the proposed rule to 
calculate compensation for seed companies. We set seed margins at $4.50 
for private variety seed and $2.40 for public variety seed because, 
according to our information, these were the average seed margins that 
seed companies in the regulated areas expected to receive in the 1995-
1996 crop season. We set maximum compensation amounts for seed 
companies at $7.00 per bushel for private variety seed and $4.90 per 
bushel for public variety seed. We stated in the preamble to the 
proposed rule that these maximum compensation amounts represent the 
seed margins (described above) plus the maximum $2.50 compensation for 
nonpropagative wheat provided in the regulations. We believe that these 
amounts will provide reasonable compensation for losses sustained by 
seed companies.
    Another commenter also said that the maximum compensation amount is 
too low. Some seed companies held on to their 1995-1996 crop season 
seed while awaiting publication of regulations on seed compensation. 
The commenter stated that, for this reason, these seed companies have 
been unable to sell their seed in 1997 at the market highs that existed 
during the summer of 1996. As a result, the commenter said that losses 
exceeded $7.00 per bushel (the proposed maximum compensation amount for 
private variety seed). The commenter recommends that the maximum 
compensation amounts should be revised to $14.00 per bushel for 
``bagged treated seed'' and $8.00 per bushel for ``bulk non-treated 
seed.''
    We are making no changes to the proposed rule based on this 
comment. As discussed previously in response to other comments, we 
based the proposed maximum compensation rates for seed companies on the 
seed margins plus the maximum $2.50 compensation for nonpropagative 
wheat provided in the regulations. The seed margins were determined in 
accordance with information we received from a variety of individuals 
operating in the regulated area. We believe the proposed maximum 
compensation amounts of $7.00 per bushel for private variety seed and 
$4.90 per bushel for public variety seed are appropriate for the losses 
that occurred in the 1995-1996 crop season, and will significantly 
mitigate the effects of those losses for seed companies.
    One commenter cited the estimation in the proposal that 1.5 million 
bushels of wheat seed grown in the regulated areas sustained a loss in 
value of between $5 and 6 million dollars in the 1995-1996 crop season. 
The commenter stated that, calculated on a per bushel basis, the 
proposed maximum compensation of $2.50 per bushel is inadequate (i.e., 
1.5 million multiplied by $2.50 only equals $3.75 million). The 
commenter says that to cover estimated losses, the maximum compensation 
amount should be raised to at least $3.00 per bushel.
    This comment implies a misunderstanding of the proposed rule, and 
we are making no changes to the proposed rule based on this comment. 
The maximum compensation amount for wheat grain is $2.50 in the 1995-
1996 crop season; this amount appears in the current regulations. The 
maximum compensation amounts we proposed for wheat seed in the 1995-
1996 crop season are higher than for grain. For growers, the maximum 
compensation amount is $2.80 per bushel, which consists of $2.50 grain 
compensation plus an additional $.30 seed premium. For seed companies, 
the maximum compensation amounts are $7.00 per bushel for private 
variety seed and $4.90 per bushel of public variety seed. These amounts 
represent the $2.50 grain compensation plus seed margins of $4.50 per 
bushel for private variety seed and $2.40 per bushel for public variety 
seed.
    We received one comment concerning the proposed compensation for 
loss in value of 1995-1996 straw. The commenter said that, though he 
normally bales and sells wheat straw, he did not bale straw after the 
1996 harvest because of the Karnal bunt quarantine. The commenter 
requests compensation for this loss, even though in this case there are 
no bales of straw to weigh or count.
    The proposed rule offered compensation to wheat straw producers at 
the rate of $1.00 per 80-pound bale or $1.25 per hundredweight. We 
proposed that producers would be eligible for compensation regardless 
of whether or not the straw is sold, but the straw must have been 
produced under contract. Thus, the criteria for compensation 
eligibility under the proposed rule requires that the straw must have 
been baled or weighed, and that there must be a contract for 
production. It would be impossible for us verify a grower's intent to 
produce straw if no straw was actually harvested and baled or weighed. 
Further, a significant portion of the proposed compensation amount for 
straw was intended to reimburse straw producers for the costs of 
harvesting and baling the straw, and moving the straw to the intended 
destination. If the straw was not actually harvested and baled or 
weighed, the grower incurred no production costs. For these reasons, we

[[Page 1328]]

are not making any changes to the proposed rule based on this comment.

Miscellaneous

    Throughout the proposed rule, we specified maximum compensation 
amounts. For growers who sold wheat seed under contract, the maximum 
compensation amount that appears in Sec. 301.89-14(d)(1) is $2.80 per 
bushel. We neglected to add the same maximum compensation amount to 
paragraph (d)(2) for growers who sold wheat seed for nonpropagative 
purposes. To correct this oversight, we are adding a sentence to 
paragraph (d)(2) to state that compensation will not exceed $2.80 per 
bushel under any circumstances.
    Therefore, based on the rationale set forth in the proposed rule 
and in this document, we are adopting the provisions of the proposal as 
a final rule with the changes discussed in this document.

Effective Date

    Pursuant to the administrative procedure provisions in 5 U.S.C. 
553, we find good cause for making this rule effective less than 30 
days after publication in the Federal Register. This rule provides 
compensation to individuals who experienced economic losses because of 
the quarantine for Karnal bunt. Immediate action is necessary to 
compensate these losses. Therefore, the Administrator of the Animal and 
Plant Health Inspection Service has determined that this rule should be 
effective upon signature.

Executive Order 12866 and Regulatory Flexibility Act

    This rule has been reviewed under Executive Order 12866. The rule 
has been determined to be economically significant for the purposes of 
Executive Order 12866 and, therefore, has been reviewed by the Office 
of Management and Budget (OMB).
    The quarantine and regulations for Karnal bunt were established by 
a series of interim rules and a final rule published in the Federal 
Register on October 4, 1996. A final rule effective on April 30, 1997, 
and published in the Federal Register on May 6, 1997, amended the 
regulations to provide compensation for certain wheat grain growers and 
handlers, owners of grain storage facilities, flour millers, and 
participants in the National Karnal Bunt Survey in order to mitigate 
losses and expenses incurred in the 1995-1996 crop season because of 
actions taken by the Secretary of Agriculture to prevent the spread of 
Karnal bunt. The economic impact of the series of interim rules and the 
October 1996 final rule establishing the Karnal bunt quarantine and 
regulations, and the May 1997 final rule on compensation, was discussed 
in a regulatory flexibility analysis and regulatory impact analysis 
also published in the Federal Register on May 6, 1997 (62 FR 24753-
24765, Docket No. 96-016-20). The analyses estimate that losses due to 
the discovery of Karnal bunt and the subsequent emergency regulatory 
actions amounted to $44 million (see table below). These losses were 
associated with the plowdown of fields in New Mexico and Texas that 
were known to be planted with Karnal bunt-infected seed, 
decontamination of grain storage facilities, the decline in market 
value of wheat grain testing either positive or negative for Karnal 
bunt, treatment of millfeed required by the regulations, the decline in 
market value of wheat seed and straw, and damages to combine harvesters 
due to required disinfection treatment.
    In order to alleviate some of the economic hardships caused by the 
Karnal bunt regulations, and to ensure full and effective compliance 
with the regulatory program, compensation to mitigate certain losses 
was offered to affected parties in the regulated areas. A discussion of 
losses and the rationale for compensation can be found in the 
regulatory flexibility analysis and regulatory impact analysis cited 
above. Funding for compensation in the amount of $39 million has been 
made available through apportionment action (transfers from the 
Commodity Credit Corporation). Of the $39 million, $26.5 million has 
been allocated specifically for compensation for plowdown, 
decontaminating grain storage facilities, loss in value of grain, and 
millfeed treatment.
    This final rule amends the Karnal bunt regulations by adding 
compensation provisions for wheat straw producers and wheat seed 
growers and seed companies for the loss in value of their straw and 
seed due to the regulations for Karnal bunt. As discussed in the 
regulatory impact analysis referred to above, losses to seed growers 
were estimated to be about $6 million; losses to straw producers were 
estimated at about $200,000. The compensation in this final rule for 
buried seed (see Sec. 301.89-14(e)) has been increased from what was 
proposed, to provide an additional $2.40 per bushel for the cost of 
previously cleaning, treating, and bagging the seed. Based on our 
experience with compensating for buried grain in the 1995-1996 crop 
season, we expect the amount of compensation for buried seed in the 
1995-1996 crop season to be less than $100,000. Given that the amount 
of buried seed for which compensation will be claimed is expected to be 
small, the inclusion of cleaning, treatment, and bagging costs in the 
compensation offered for buried seed does not affect the estimated loss 
in value of seed that appeared in the regulatory impact analysis 
referred to above. Other changes in this final rule primarily clarify 
the intent of the proposed rule, and, likewise, do not affect the 
estimated loss in value of seed or straw that appeared in the 
regulatory impact analysis.
    The regulatory flexibility analysis referred to above discusses the 
impact of the Karnal bunt regulations on small entities. The majority 
of the affected entities in the regulated areas have been determined to 
be small entities. The table below is taken from the regulatory impact 
analysis, and shows estimated losses due to the Karnal bunt regulations 
in the 1995-1996 crop season.

  Estimated Loss in Value Due to Karnal Bunt Regulations, 1995-96 Crop  
                                  Year                                  
                        [In millions of dollars]                        
------------------------------------------------------------------------
                                                               Estimated
                            Action                              loss in 
                                                                 value  
------------------------------------------------------------------------
1. Plowdown of NM and TX fields planted with infected seed...      $1.2 
2. KB-positive grain diverted to animal feed market..........       4.2 
3. KB-negative grain that experienced loss in value..........  \1\ 28.0 
4. Cost of sanitizing storage facilities.....................       0.3 
5. Millfeed treatment of KB-negative grain...................       1.6 
6. Loss in value of seed.....................................       6.0 
7. Loss in value of straw....................................       0.2 
8. Loss related to cleaning and disinfecting of combine                 
 harvesters..................................................       2.0 
                                                              ----------
  Total......................................................     44.0  
------------------------------------------------------------------------
\1\ $28 million is the potential maximum amount of loss in value of     
  uninfected wheat.                                                     

Executive Order 12372

    This program/activity is listed in the Catalog of Federal Domestic 
Assistance under No. 10.025 and is subject to Executive Order 12372, 
which requires intergovernmental consultation with State and local 
officials. (See 7 CFR part 3015, subpart V.)

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule: (1) Preempts all State and local laws and 
regulations that are

[[Page 1329]]

inconsistent with this rule; (2) has no retroactive effect; and (3) 
does not require administrative proceedings before parties may file 
suit in court challenging this rule.

Paperwork Reduction Act

    In accordance with section 3507(d) of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501 et seq.), the information collection or 
recordkeeping requirements included in this final rule have been 
approved by the Office of Management and Budget (OMB). The assigned OMB 
control numbers are 0579-0121 and 0579-0126. Some of the information 
collection requirements in this final rule differ from what was 
proposed in order to facilitate the submission of applications for 
compensation. However, these changes do not result in any changes in 
burden hours.

List of Subjects in 7 CFR Part 301

    Agricultural commodities, Plant diseases and pests, Quarantine, 
Reporting and recordkeeping requirements, Transportation.

    Accordingly, 7 CFR part 301 is amended as follows:

PART 301--DOMESTIC QUARANTINE NOTICES

    1. The authority citation for part 301 continues to read as 
follows:

    Authority: 7 U.S.C. 147a, 150bb, 150dd, 150ee, 150ff, 161, 162, 
and 164-167; 7 CFR 2.22, 2.80, and 371.2(c).

    2. In Sec. 301.89-14, paragraph (f)(2), the reference to 
``paragraph (d)'' is removed both times it appears and a reference to 
``paragraph (f)'' is added in its place.
    3. In Sec. 301.89-14, paragraphs (d), (e), and (f) are redesignated 
as paragraphs (f), (g), and (h) respectively; and new paragraphs (d), 
(e), and (i) are added to read as set forth below.


Sec. 301.89-14  Compensation for the 1995-1996 crop season.

* * * * *
    (d) Growers and seed companies that sold wheat seed. Growers of and 
seed companies with certified wheat seed or wheat grown with the intent 
of producing certified wheat seed are eligible for compensation for the 
loss in value of their seed, in accordance with this section, if the 
seed was grown in a State where the Secretary has declared an 
extraordinary emergency, and if the seed was grown in an area of that 
State that was regulated for Karnal bunt or under Emergency Action 
Notification (PPQ Form 523) for Karnal bunt during the 1995-1996 crop 
season.
    (1) Growers who sold wheat seed under contract. Growers who sold 
1995-1996 crop season certified wheat seed or 1995-1996 crop season 
wheat grown with the intent of producing certified wheat seed are 
eligible to receive compensation as described in paragraphs (d)(1)(i) 
and (d)(1)(ii) of this section if they sold the wheat under contract to 
a seed company. However, compensation will not exceed $2.80 per bushel 
under any circumstances.
    (i) If the wheat was grown under contract and a price was 
determined in the contract on or before March 1, 1996, and the contract 
price was not honored by the seed company, the compensation rate will 
equal the contract price (CP), including the seed premium if specified 
in the contract, minus the higher of either the salvage value (SV), as 
described in paragraph (d)(6) of this section, plus the actual seed 
premium received by the grower (SP)(actual), or the actual price 
received by the grower (AP), including any seed premium specified on 
the receipt for the final sale of the wheat. If the actual seed premium 
received by the grower is not specified on the receipt for the final 
sale of the wheat, the seed premium will be set at $.30 for the 
compensation calculation. In each case, the amount of the actual price 
or the salvage value of the wheat seed will include the value of any 
proceeds accrued through insurance claims, judgments, or from any other 
source. The equation for this compensation is: Compensation rate = CP--
higher of [SV + (SP(actual) or $.30) or [AP].
    (ii) If the wheat was grown under contract and a price was 
determined in the contract after March 1, 1996, the compensation rate 
will equal the estimated market price for grain (EMP) plus the seed 
premium if specified in the contract (SP)(contract) minus the higher of 
either the salvage value (SV), as described in paragraph (d)(6) of this 
section, plus the actual seed premium received by the grower 
(SP)(actual), or the actual price received by the grower (AP), 
including any seed premium specified on the receipt for the final sale 
of the wheat. If a seed premium is not specified in the contract or on 
the receipt for the final sale of the wheat, the seed premium that is 
added to the estimated market price (EMP) and the seed premium that is 
added to the salvage value (SV) will be set at $.30. In each case, the 
amount of the actual price or the salvage value of the wheat seed will 
include the value of any proceeds accrued through insurance claims, 
judgments, or from any other source. The equation for this compensation 
is: Compensation rate = [EMP + (SP(contract) or $.30)]--higher of [SV + 
(SP(actual) or $.30)] or [AP]. The estimated market price will be 
calculated by APHIS for each class of wheat, taking into account the 
prices offered by relevant terminal markets (animal feed, milling, or 
export) for the period between May 1 and June 30, 1996, with 
adjustments for transportation and other handling costs.
    (2) Growers who sold wheat seed for nonpropagative purposes. 
Growers with 1995-1996 crop season certified wheat seed or 1995-1996 
crop season wheat grown with the intent of producing certified wheat 
seed are eligible to receive compensation in accordance with paragraphs 
(d)(2)(i) and (d)(2)(ii) of this section if they sold the wheat for 
nonpropagative purposes. However, compensation will not exceed $2.80 
per bushel under any circumstances.
    (i) If the grower has not claimed compensation under paragraph (b) 
of this section, the compensation rate will equal the estimated market 
price for grain (EMP) minus the actual price received by the grower 
(AP), plus the seed premium specified in the contract the grower had 
with a seed company (SP). If a seed premium is not specified in the 
contract, SP will equal $.30. In each case, the amount of the actual 
price of the wheat seed will include the value of any proceeds accrued 
through insurance claims, judgments, or from any other source. The 
equation for this compensation is: Compensation rate = (EMP-AP) + (SP 
or $.30). Growers who claim compensation under this paragraph may not 
claim compensation under paragraph (b) of this section.
    (ii) If the grower has claimed compensation under paragraph (b) of 
this section, the compensation rate will equal the premium specified in 
the contract the grower had with a seed company. If no seed premium is 
specified in the contract, compensation will equal $.30 per bushel.
    (3) Seed companies that sold wheat seed for nonpropagative purposes 
and that have not claimed compensation. Seed companies with 1995-1996 
crop season certified wheat seed or 1995-1996 crop season wheat grown 
with the intent of producing certified wheat seed, and seed companies 
with certified wheat seed inventories in their possession that were 
unsold as of March 1, 1996, are eligible to receive compensation as 
described in paragraphs (d)(3)(i) and (d)(3)(ii) of this section if the 
wheat seed was sold for nonpropagative purposes and if the seed company 
has not claimed compensation under paragraph (b) of this section. Seed 
companies that claim compensation under paragraph (d)(3)(i) or 
(d)(3)(ii) of

[[Page 1330]]

this section may not claim compensation under paragraph (b) of this 
section.
    (i) If the wheat was grown in the 1995-1996 crop season, was under 
contract, and the seed company honored the contract by paying the 
grower the full contract price, including the seed premium if a seed 
premium is specified in the contract, the compensation rate will equal 
the estimated market price for grain (EMP) plus the seed margin (SM) 
minus the higher of either the actual price received by the seed 
company (AP) or the salvage value (SV), as described in paragraph 
(d)(6) of this section. The equation for this compensation is: 
Compensation rate = EMP + SM-higher of AP or SV. The seed margin is 
$4.50 per bushel for private variety seed and $2.40 per bushel for 
public variety seed. In each case, the amount of the actual price or 
the salvage value of the wheat seed will include the value of any 
proceeds accrued through insurance claims, judgments, or from any other 
source. However, compensation will not exceed $7.00 per bushel for 
private variety seed and $4.90 per bushel for public variety seed under 
any circumstances.
    (ii) If a seed company had wheat inventories from past crop seasons 
that were unsold as of March 1, 1996, the compensation rate will equal 
the estimated market price for grain (EMP) plus the seed margin (SM) 
minus the higher of either the actual price received by the seed 
company (AP) or the salvage value (SV), as described in paragraph 
(d)(6) of this section. The equation for this compensation is: 
Compensation rate = EMP + SM-higher of AP or SV. The seed margin is 
$4.50 per bushel for private variety seed and $2.40 per bushel for 
public variety seed. In each case, the amount of the actual price or 
the salvage value of the wheat seed will include the value of any 
proceeds accrued through insurance claims, judgments, or from any other 
source. However, compensation will not exceed $7.00 per bushel for 
private variety seed and $4.90 per bushel for public variety seed under 
any circumstances.
    (4) Seed companies that sold wheat seed for nonpropagative purposes 
and that have claimed compensation. Seed companies with 1995-1996 crop 
season certified wheat seed or 1995-1996 crop season wheat grown with 
the intent of producing certified wheat seed, and seed companies with 
certified wheat seed inventories in their possession that were unsold 
as of March 1, 1996, are eligible to receive compensation as described 
in this paragraph if the wheat seed was sold for nonpropagative 
purposes and if the seed company has claimed compensation under 
paragraph (b) of this section. In addition, for claims on 1995-1996 
crop season wheat, the wheat must have been grown under contract and 
the seed company must have honored the contract by paying the grower 
the full contract price, including the seed premium if a seed premium 
is specified in the contract. The compensation rate will equal the seed 
margin. The seed margin is $4.50 per bushel for private variety seed 
and $2.40 per bushel for public variety seed.
    (5) Seed companies that sold wheat seed for propagative purposes. 
Seed companies with 1995-1996 crop season certified wheat seed or 1995-
1996 crop season wheat grown with the intent of producing certified 
wheat seed, and seed companies with certified wheat seed inventories in 
their possession that were unsold as of March 1, 1996, are eligible to 
receive compensation as described in this paragraph if the wheat seed 
was sold for propagative purposes. In addition, for claims on 1995-1996 
crop season wheat, the wheat must have been grown under contract and 
the seed company must have honored the contract by paying the grower 
the full contract price, including the seed premium if a seed premium 
is specified in the contract. The compensation rate will equal the 
estimated market price for grain (EMP) plus the seed margin (SM) minus 
the higher of either the actual price received by the seed company (AP) 
or the salvage value (SV), as described in paragraph (d)(6) of this 
section. In each case, the amount of the actual price or the salvage 
value of the wheat seed will include the value of any proceeds accrued 
through insurance claims, judgments, or from any other source. The 
equation for this compensation is: Compensation rate = EMP + SM-higher 
of AP or SV. The seed margin is $4.50 per bushel for private variety 
seed and $2.40 per bushel for public variety seed. However, 
compensation will not exceed $7.00 per bushel for private variety seed 
and $4.90 per bushel for public variety seed under any circumstances.
    (6) Salvage value. Salvage values will be determined as follows:
    (i) If the wheat is positive for Karnal bunt and is sold for use as 
animal feed, salvage value equals $6.00 per hundredweight or $3.60 per 
bushel for all classes of wheat.
    (ii) If the wheat is positive for Karnal bunt and is sold for a use 
other than animal feed, salvage value equals whichever is higher of the 
following: the average price paid in the region of the regulated areas 
where the wheat is sold for the relevant class of wheat (meaning type 
of wheat, such as durum or hard red winter) for the period between May 
1 and June 30, 1996; or, $3.60 per bushel.
    (iii) If the wheat is negative for Karnal bunt and is sold for any 
use, salvage value equals whichever is higher of the following: the 
average price paid in the region of the regulated areas where the wheat 
is sold for the relevant class of wheat (meaning type of wheat, such as 
durum or hard red winter) for the period between May 1 and June 30, 
1996; or, $3.60 per bushel.
    (7) To claim compensation. Compensation payments for claims made 
under paragraph (d) of this section will be issued by the Farm Service 
Agency (FSA). Claims for compensation must be received by FSA on or 
before April 22, 1998. The Administrator may extend this deadline, upon 
request in specific cases, when unusual and unforeseen circumstances 
occur which prevent or hinder a claimant from requesting compensation 
on or before that date. To claim compensation, a grower or seed company 
must submit to the local FSA county office all of the following that 
apply:
    (i) The grower or seed company must submit a Karnal Bunt 
Compensation Claim form, provided by FSA;
    (ii) The grower or seed company must submit a copy of the receipt 
for the final sale of the wheat, showing the intended use for which the 
wheat was sold, total bushels sold, and the total price received by the 
grower or seed company;
    (iii) The grower or seed company must submit verification as to the 
actual (not estimated) weight of the wheat for which compensation is 
being claimed (such as a copy of a facility weigh ticket, or other 
verification);
    (iv) The grower or seed company must submit documentation showing 
that the wheat is either certified seed or was grown with the intention 
of producing certified seed (this documentation may include one or more 
of the following types of documents: an application to the State seed 
certification agency for field inspection; a bulk sale certificate; 
certification tags or labels issued by the State seed certification 
agency; or a document issued by the State seed certification agency 
verifying that the wheat is certified seed);
    (v) For claims on 1995-1996 crop season wheat, the grower or seed 
company must submit a copy of the contract under which the wheat was 
grown. Seed companies claiming compensation on seed inventories that 
were in their possession as of March 1, 1996, do not have to submit a 
copy of

[[Page 1331]]

the contract under which the wheat was grown;
    (vi) A seed company that is claiming compensation for seed 
inventories must certify to FSA that the wheat seed was in the seed 
company's possession as of March 1, 1996;
    (vii) The grower or seed company must submit a copy of the Karnal 
bunt certificate issued by APHIS that shows the Karnal bunt test 
results; provided that, if a grower or seed company moved its wheat 
only within the regulated area, and therefore, does not have a 
corresponding Karnal bunt certificate for the wheat for which 
compensation is being claimed, a limited permit stating that the wheat 
was positive for Karnal bunt will be accepted in lieu of a Karnal bunt 
certificate. Any wheat that was moved only within the regulated area 
and that was not moved under a limited permit will be considered 
negative for Karnal bunt;
    (viii) If the wheat was grown in an area that is not a regulated 
area, but for which an Emergency Action Notification (PPQ Form 523) 
(EAN) for Karnal bunt has been issued, the grower or seed company must 
submit a copy of the EAN.
    (e) Other compensation for seed companies. Seed companies are also 
eligible to receive compensation under the following circumstance: If a 
seed company has 1995-1996 crop season certified wheat seed, or 1995-
1996 crop season wheat grown with the intent of producing certified 
wheat seed, that cannot be sold for use as grain or animal feed because 
it was previously cleaned, treated, and bagged, the compensation rate 
will equal $9.40 per bushel for private variety seed and $7.30 per 
bushel for public variety seed. Compensation will only be paid if the 
seed company has destroyed the wheat by burying it in a sanitary 
landfill or other site that has been approved by APHIS. The 
compensation will be issued by the Farm Service Agency (FSA). Claims 
for compensation must be received by FSA on or before April 22, 1998. 
The Administrator may extend this deadline, upon request in specific 
cases, when unusual and unforeseen circumstances occur which prevent or 
hinder a claimant from requesting compensation on or before that date. 
To claim compensation, a seed company must submit to the local FSA 
county office all of the following that apply:
    (1) The seed company must submit a Karnal Bunt Compensation Claim 
form, provided by FSA;
    (2) The seed company must submit verification of how much wheat was 
buried, in the form of a receipt from the sanitary landfill or 
verification signed by an APHIS inspector;
    (3) The seed company must submit documentation showing that the 
wheat is either certified seed or was grown with the intention of 
producing certified seed (this documentation may include one or more of 
the following types of documents: an application to the State seed 
certification agency for field inspection; a bulk sale certificate; 
certification tags or labels issued by the State seed certification 
agency; or a document issued by the State seed certification agency 
verifying that the wheat is certified seed);
    (4) For claims on 1995-1996 crop season wheat that was buried, the 
seed company must submit a copy of the contract under which the wheat 
was grown. Seed companies claiming compensation on buried seed 
inventories that were in their possession as of March 1, 1996, do not 
have to submit a copy of the contract under which the wheat was grown;
    (5) A seed company that is claiming compensation for seed 
inventories that were buried must certify to FSA that the wheat seed 
was in the seed company's possession as of March 1, 1996;
    (6) If the wheat was grown in an area that is not a regulated area, 
but for which an Emergency Action Notification (PPQ Form 523)(EAN) for 
Karnal bunt has been issued, the seed company must submit a copy of the 
EAN.
* * * * *
    (i) Wheat straw producers. Producers of wheat straw (either growers 
who bale their own wheat straw or individuals contracted by growers to 
remove wheat straw from the growers' fields) made from wheat grown in 
the regulated areas in the 1995-1996 crop season are eligible to 
receive compensation on a one-time-only basis at the rate of $1.00 per 
80-pound bale or $1.25 per hundredweight. Producers are eligible for 
compensation regardless of whether or not the straw is sold, but the 
straw must have been produced under contract. Compensation payments 
will be issued by the Farm Service Agency (FSA). To claim compensation, 
a wheat straw producer must submit a Karnal Bunt Compensation Claim 
form, provided by FSA, and a copy of the contract under which the wheat 
straw was produced to the local FSA county office. Claims for 
compensation must be received by FSA on or before April 22, 1998. The 
Administrator may extend this deadline, upon request in specific cases, 
when unusual and unforeseen circumstances occur which prevent or hinder 
a claimant from requesting compensation prior to that date.

    Done in Washington, DC, this 23rd day of December 1997.
Craig A. Reed,
Acting Administrator, Animal and Plant Health Inspection Service.
[FR Doc. 98-550 Filed 1-8-98; 8:45 am]
BILLING CODE 3410-34-P