[Federal Register Volume 63, Number 67 (Wednesday, April 8, 1998)]
[Rules and Regulations]
[Pages 17050-17056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9208]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 405 and 457


Apple Crop Insurance Regulations and Common Crop Insurance 
Regulations, Apple Crop Insurance Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes 
specific crop provisions for the insurance of apples. 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 
apple 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 apple crop insurance regulation to the 1998 and prior crop 
years.

EFFECTIVE DATE: May 8, 1998.

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

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be exempt for the purposes of 
Executive Order 12866 and, therefore, has not been reviewed by the 
Office of Management and Budget (OMB).

Paperwork Reduction Act of 1995

    Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 
35), the collections of information for this rule have been approved by 
the Office of Management and Budget (OMB) under control number 0563-
0053 through October 31, 2000.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 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 12612

    It has been determined under section 6(a) of Executive Order 12612, 
Federalism, that this rule does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions contained

[[Page 17051]]

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 
the 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 work is required as a result of this 
action on the part of either the insured or the insurance companies. 
Additionally, the regulation does not require any action on the part of 
small entities than is required for 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 12372

    This program is not subject to the provisions of Executive Order 
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 12988

    This rule has been reviewed in accordance with Executive Order 
12988 on civil justice reform. The provisions of this rule will not 
have a 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.

Background

    On Thursday, May 8, 1997, FCIC published a notice of proposed rule 
making in the Federal Register at 62 FR 25140 to add to the Common Crop 
Insurance Regulations (7 CFR part 457), a new section 7 CFR 457.158, 
Apple Crop Insurance Provisions. The new provisions will be effective 
for the 1999 and succeeding crop years. These provisions will replace 
and supersede the current provisions for insuring apples found at 7 CFR 
part 405 (Apple Crop Insurance Regulations). FCIC also amends 7 CFR 
part 405 to limit its effect to the 1998 and prior crop years.
    Following publication of the proposed rule, the public was afforded 
30 days to submit written comments and opinions. A total of 103 
comments were received from reinsured companies, an insurance service 
organization, producer groups, and apple producers. The comments 
received and FCIC's responses are as follows:
    Comment: A reinsured company stated the price elections need to be 
refined to reflect true markets. The price election for both fresh and 
processing is too low.
    Response: Price elections established by FCIC are a projected 
market price, as required by law. Reported market prices often contain 
substantial post-production value added, such as harvesting, packing, 
cullage, transportations to market, and other factors that are not 
included in the expected market price. Thus, reported market prices are 
reduced by an amount deemed representative of these post-production 
added costs. The amount of the price election is determined from cost 
of production estimated by the Cooperative State Research, Education, 
and Extension Service or the land-grant university in many states. 
Therefore, no change will be made.
    Comment: A reinsured company stated that FCIC acreage determination 
is based on land acres while the industry uses estimated tree count 
acres. The commenter stated that FCIC should be more reflective of 
reality and not impose their unique demands on an industry for no 
apparent reason.
    Response: FCIC has discussed the issue of land verses tree acre 
with producers, reinsured companies, and an insurance service 
organization, and has determined that land acres will be used, unless 
otherwise provided in the Special Provisions. This will allow 
flexibility in situations where circumstances dictate that tree acres 
may be more accurate.
    Comment: A reinsured company expressed concern over the paperwork 
burden. The commenter stated that several years ago a self-
certification form was developed to eliminate the need for full 
inspections on small orchards. Now the self-certification form is 
required on all orchards in addition to the full inspection and must be 
completed annually.
    Response: The overall paperwork burden on the producer or reinsured 
company on the self-certification form is not materially greater under 
the proposed provisions. Pre-acceptance field inspections are only 
required for limited situations as specified in the 1998 FCIC 18010 
Crop Insurance Handbook. Pre-acceptance field inspections were designed 
to identify those situations requiring a full inspection, thereby 
eliminating the requirement to inspect all orchards. Therefore, no 
change will be made.
    Comment: A reinsured company stated the insurance coverage is too 
expensive for the medium size and larger producers considering the 
limited protection they receive. The coverage becomes less effective as 
the acreage increases and the inequity accelerates if the producer has 
high tree density and high value varieties of apples. Most of the 
progressive, professional producers are adding more and more acres of 
the higher value apples with high tree density plantings (more trees 
per acre), and the coverage is falling further and further behind in 
being able to provide protection against major losses.
    Response: FCIC reviews and makes necessary revisions to premium 
rates for all crop programs including crop type and practices. 
Insurance guarantees are based on the actual production history (APH) 
regulations, 7 CFR part 400, subpart G, not the size of the unit. The 
policy allows for changes in established guarantees when changes in the 
orchard cause significant changes in yield. FCIC recognizes the 
commenter's concerns, and will consider them in the future as 
regulations, procedures and premium rates are revised.
    Comment: A reinsured company stated the actual production history 
(APH) method understates future production potential for up trending 
orchards.
    Response: FCIC recognizes the commenter's concerns that the APH 
method understates future production potential for up trending orchards 
and will take these concerns under consideration when APH regulations 
and procedures are reviewed to comply with the Federal Crop Insurance 
Act.
    Comment: A reinsured company recommended deleting the definition of

[[Page 17052]]

``adapted'' because it is already covered under the definition of 
``good farming practices'' and referenced in 6(b)(1).
    Response: FCIC has removed the definition of ``adapted'' from these 
provisions.
    Comment: A reinsured company suggested identifying the states or 
regions using various container sizes in the definition of ``production 
guarantee.''
    Response: Standard container sizes vary by state or region based on 
buyers, packinghouses, or processors. Identifying the state or region 
using various container sizes in the definition of ``production 
guarantee'' would make it difficult to recognize changes in container 
sizes. The units of measurement for apples are contained in the 
actuarial documents to permit changes in container sizes to recognize 
industry practices without changing the regulations. Therefore, no 
change has been made.
    Comment: A reinsured company is concerned with the definition of 
``good farming practice.'' Commenter suggested the definition should 
read,* * * ``recognized by the Cooperative State Research, Education, 
and Extension Service as compatible with agronomic and weather 
conditions in the area.''
    Response: FCIC believes the term ``area'' is less clear than the 
term ``county'' and would tend to make determinations more subjective 
in nature. The definition of ``good farming practices'' has not been 
revised, but has been removed from these Crop Provisions and placed in 
the Basic Provisions.
    Comment: A reinsured company suggested defining ``sunburn'' instead 
of referring to the definition contained in the U.S. Standards for 
Apples.
    Response: Referring to ``sunburn'' as contained in the U.S. 
Standards for Apples, allows changes in the U.S. Standards to be 
recognized without changing these regulations. Also, using U.S. 
Standards for Apples assures standards will be based on a single 
source. Therefore, no change will be made.
    Comment: A reinsured company recommended changes in section 
2(e)(3). The commenters expressed concern regarding the use of FSN farm 
serial numbers to establish optional units. The commenter suggested 
establishing an optional unit by block, with a minimum number of acres 
required for an optional unit. Also, comments were made that the 
standard definition from the Common Crop Insurance Policy which defines 
a unit ``all insurable acreage of the insured crop in the county'' 
should be used. The commenter further suggested that unit division for 
optional units be based only on non-contiguous land or the irrigated 
and non-irrigated practice (if allowed in the actuarial documents).
    Response: All provisions from the Basic Provisions apply unless 
otherwise excepted in these provisions. FSN farm serial numbers, non-
contiguous land, and irrigated and non-irrigated practices are only a 
few of the requirements needed for establishing optional units. These 
requirements allow a producer to establish optional units if all 
applicable requirements are met. Basing optional units on minimum 
acreage may not be fair to producers who have small acreage in several 
locations. The optional unit requirements contained in these provisions 
are consistent with other perennial crop policies. Therefore, no 
changes have been made.
    Comment: A reinsured company stated that the change from basic to 
optional units by contiguous land in 2(e)(3)(iii) should be 
communicated to the insured. The commenter believes that the insured 
needs to understand this change and the impact it has on the premium, 
if the insured wishes to retain units by non-contiguous land.
    Response: It is the agent's responsibility to explain program 
changes to their insureds. FCIC will furnish the summary of program 
changes to insurance providers, who will then notify agents and issue 
the new policy to policyholders.
    Comment: A reinsured company requested clarification as to how much 
change to the orchard would have to occur to reduce the expected yield 
under section 3(b). The commenter questioned whether the loss of one 
tree would reduce the expected yield enough so that it must be 
reported, or would the reduction in trees have to exceed a certain 
percentage per acre.
    Response: This section requires the insured to inform the agent 
when production practices have changed, any damage, removal of trees, 
or any circumstance specified in the 1998 FCIC 18010 Crop Insurance 
Handbook that may reduce the yield below the yield upon which the 
insurance guarantee is based. If the change in the orchard is not 
likely to affect the yield, the change need not be reported. This 
requirement is consistent with other perennial crop policies. 
Therefore, no change has been made.
    Comment: A producer recommended that the insurance period be 
defined as late December in section 8. This would allow producers time 
to consider risk management strategies in a more reasonable time frame. 
The commenter believes the November date is too close to the end of the 
harvest period.
    Response: The apple crop insurance coverage includes loss of 
production due to adverse weather conditions, some of which may incur 
during the winter months. Therefore, it is reasonable and prudent to 
begin coverage prior to the date such weather is most likely to occur, 
and has selected November 21 as the date for insurance to attach. While 
this shortens the time available after harvest for risk management 
decisions, the need to operate a sound insurance program is paramount. 
This is also consistent with other perennial crop insurance policies. 
Therefore, no change has been made.
    Comment: A producer recommended deleting the phrase ``pruning 
debris has not been removed from the orchard'' in section 9(a)(2). The 
commenter stated it is no longer a standard practice in their area to 
remove pruning debris from the orchard. Pruned branches customarily are 
chopped and left on the orchard floor.
    Response: The practice of chopping pruning debris and leaving it on 
the orchard floor is not customary in all apple growing regions. This 
provision applies to pruning debris that is not mulched and left in 
place. The provision has been clarified to specify unmulched pruning 
debris.
    Comment: A producer recommended in section 9(a)(9) removing 
``wildlife as a cause of loss, unless appropriate control measures have 
not been taken.''
    Response: Damage caused by wildlife will remain as an insurable 
cause of loss. This coverage is consistent with other crop policies. 
FCIC has removed the phase, ``unless appropriate control measures have 
not been taken'' because that language is too subjective.
    Comment: A reinsured company questioned the provisions in 10(b) 
that requires a 15 day notice before any production is sold by direct 
marketing so the insurance provider can appraise the production to 
count. The commenter believes the pre-inspection process is very 
inaccurate.
    Response: This inspection is presently the only method to obtain a 
reasonable estimate of production to count for direct marketed 
production. This requirement is consistent with other perennial crop 
policies. Therefore, no change has been made.
    Comment: A reinsured company recommended the calculation sequence 
in section 11(b) (1) through (7) be changed. The commenter stated it 
was difficult to follow because it is too wordy.
    Response: The steps in calculating a claim for indemnity in section 
11 are

[[Page 17053]]

clearly stated. Therefore, no change has been made.
    Comment: A reinsured company recommended that the provisions in 
section 11(c)(1)(iv) not allow the insured to defer settlement and wait 
for a later, generally a lower appraisal, especially since apples have 
a short shelf life.
    Response: The later appraisal will only be necessary if the 
insurance provider agrees that such appraisal would result in a more 
accurate determination and if the producer continues to care for the 
crop. If the producer does not care for the crop, the original 
appraisal is used. If the insurance provider believes the original 
appraisal is accurate, resolution of the dispute may be sought through 
arbitration or appeal, whichever is applicable. Therefore, no change 
has been made.
    Comment: A reinsured company recommended removing the requirement 
for a written agreement to be renewed each year contained in section 
12(d) ``Written agreement.''
    Response: Written agreements are intended to change policy terms or 
permit insurance in unusual situations. If such practices continue from 
year to year, they should be incorporated into the policy, Special 
Provisions or the actuarial documents. To streamline Crop Provisions 
and prevent duplication, the written agreement section was removed from 
these Crop Provisions and was added to section 18 of the Basic 
Provisions.
    Comment: A reinsured company questioned whether the provisions in 
section 12(e) allows for orchards purchased or leased after the sales 
closing or acreage reporting dates to be accepted (add-on) by written 
agreement.
    Response: Written agreements can be used to allow insurability of 
orchards purchased or leased after the sales closing or acreage 
reporting date as provided in section 18 of the Basic Provisions.
    Comment: A reinsured company questioned the reference in section 
13(f)(1) to section 11(c). They suggested that it reference section 
11(b) instead.
    Response: Sections 13(f)(1) and 11(c) refer to production to count. 
Section 11(b) refers to the steps used in the settlement of claim for 
indemnity. Therefore, no change has been made.
    Comment: A reinsured company recommended changes in section 
13(f)(2) by replacing the words ``a unit'' with ``any acreage'' 
designated for fresh market; and questioned if grading procedure 
applies only to harvested production or the total apple production.
    Response: The production guarantee is based on total production of 
apples for each unit. Therefore, no change has been made. The grading 
procedure applies to the total production to count, including harvested 
and unharvested.
    Comment: A reinsured company recommended inserting the word 
``will'' between ``better'' and ``be''* * * in section 13(f)(2)(iv).
    Response: FCIC has amended the provisions accordingly.
    Comment: A reinsured company recommended deleting the requirement 
in section 13(f)(3) that apples knocked to the ground by wind be 
considered 100 percent cull production. The commenter pointed out that 
many juicers will not accept apples that are knocked to the ground. 
This is especially important in view of the excessive requirement that 
30 percent of such apples are production to count under the proposed 
rule.
    Response: Apples knocked to the ground by wind are covered under 
``adverse weather'' and will be considered 100 percent cull production. 
In certain areas, thirty (30) percent of all cull production as 
production to count is not excessive. To account for the other areas, 
FCIC will make the appropriate adjustments in the Special Provisions.
    Comment: A reinsured company, producers, and insurance service 
organization opposed the change in section 13(f)(2)(vii) that increases 
the amount of culls in the production to count from 15 to 30 percent. 
One commenter stated it may not reduce the overall loss ratio since 
many insureds may cancel their policies when they learn of the change. 
They further stated that the 30 percent figure is too high and makes 
packing fruit less desirable to the producer. The other commenter 
recommended that the words, ``excessive sun'' between ``or'' and 
``along'' be inserted in section 13(g)(2)(iv).
    Response: The provision that increases the amount of cull 
production from 15 to 30 percent is correct. However, FCIC realizes 
that the increased amount of the percent of cull production may be 
excessive for some producers in certain growing regions where fresh 
market fruit may have a normal 10 percent cull rate. If damage in some 
years is more than 30 percent, the fruit will not be packed as U.S. 
Fancy and will be diverted to processing because it is economically 
impossible, due to the high cost of handling and grading damaged fruit, 
to pack out at least 80 percent U.S. Fancy or better. The producer who 
has invested more money for the fresh fruit market and has more 
intensive pruning, spraying, and handling is under-compensated. 
Therefore, FCIC has amended the provisions to allow the flexibility of 
counting 15 percent of cull production for certain regions, if allowed 
by the Special Provisions. ``Excessive sun'' has been inserted between 
the words ``or'' and ``along'' accordingly.
    Comment: A reinsured company asked, if section 13(f)(2) (iii) 
through (vi) apply only to Option B or to both Options A and B.
    Response: Sections 13(f)(1) has been revised to incorporate the 
provisions of section 13(f)(2) (iii) through (vi).
    In addition to the changes described above and minor editorial 
changes, FCIC has made the following changes to these Crop Provisions:
    1. Section 1. Removed definitions of ``days,'' ``FSA,'' good 
farming practices,'' ``interplanted,'' irrigated practice,'' ``USDA,'' 
and ``written agreement'' because these definitions now appear in the 
Basic Provisions. Deleted the term ``ton'' because it is not used.
    2. Section 2 is revised to remove all provisions that were 
incorporated into the Basic Provisions.
    3. Section 9(b)(1) is revised to move, ``russeting'' to 9(b)(4) 
because russeting cannot be described as a failure characteristic.
    4. Removed section 12 and added it to the Basic Provisions.
    5. Added new section 12 to indicate that late and prevented 
planting provisions are not applicable for apples.

List of Subjects in 7 CFR Parts 405 and 457

    Crop insurance, Apples, Reporting and recordkeeping requirements.

Final Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation hereby amends the Apple Crop Insurance 
Regulations (7 CFR part 405) and the Common Crop Insurance Regulations 
(7 CFR part 457) as follows:

PART 405--APPLE CROP INSURANCE REGULATIONS FOR THE 1986 THROUGH THE 
1998 CROP YEARS

    1. The authority citation for 7 CFR part 405 is revised to read as 
follows:

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

    2. The part heading is revised as set forth above.
    3. The subpart heading ``Subpart-Regulations for the 1986 through 
the 1998 Crop Years'' is removed.
    4. Section 405.7 is amended by revising the introductory text of 
paragraph (d) to read as follows:

[[Page 17054]]

Sec. 405.7  The application and policy.

* * * * *
    (d) The application is found at subpart D of part 400, General 
Administrative Regulations (7 CFR 400.37, 400.38). The provisions of 
the Apple Insurance Policy for the 1986 through 1998 crop years are as 
follows:
* * * * *

PART 457--COMMON CROP INSURANCE REGULATIONS; REGULATIONS FOR THE 
1998 AND SUBSEQUENT CONTRACT YEARS

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

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

    6. The part heading is revised as set forth above.
    7. Section 457.158 is added to read as follows:


Sec. 457.158  Apple crop insurance provisions.

    The Apple 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:

Apple Crop Insurance Provisions

    If a conflict exists among the policy provisions, the order of 
priority is as follows: (1) the Catastrophic Risk Protection 
Endorsement, if applicable; (2) the Special Provisions; (3) these 
Crop Provisions; and (4) the Basic Provisions, with (1) controlling 
(2), etc.

1. Definitions

    Area A. A geographic area that includes Montana, Wyoming, Utah, 
New Mexico and all states west thereof.
    Area B. A geographic area that includes all states not included 
in Area A, except for Colorado.
    Area C. Colorado.
    Bin. A container that contains a minimum of 875 pounds of apples 
or some other quantity designated in the Special Provisions.
    Box. A container that contains 35 pounds of apples or some other 
quantity designated in the Special Provisions.
    Bushel. In all states except Colorado, 42 pounds of apples. In 
Colorado, 40 pounds of apples.
    Culls. Apples that fail to meet the requirements of U.S. Cider 
Grade.
    Direct marketing. Sale of the insured crop directly to consumers 
without the intervention of an intermediary such as a wholesaler, 
retailer, packer, processor, shipper, buyer or broker. Examples of 
direct marketing include selling through an on-farm or roadside 
stand, or a farmer's market, and permitting the general public to 
enter the field for the purpose of picking all or a portion of the 
crop.
    Excessive sun. Exposure of unharvested apples to direct or 
indirect sunlight that causes apples to grade less than U.S. Fancy 
due to sunburn.
    Harvest. The picking of mature marketable apples from the trees 
or removing such apples from the ground.
    Marketable. Apple production that grades U.S. No. 1, 2, or Cider 
in accordance with the United States Standards for Grades of Apples.
    Non-contiguous. Any two or more tracts of land whose boundaries 
do not touch at any point, except that land separated only by a 
public or private right-of-way, waterway, or an irrigation canal 
will be considered as contiguous.
    Pound. Sixteen (16) ounces avoirdupois.
    Production guarantee (per acre). The quantity of apples (boxes 
or bushels) determined by multiplying the approved APH yield per 
acre by the coverage level percentage you elect.
    Russeting. A brownish roughened area on the surface of the 
apple.
    Sunburn. As defined in the United States Standards for Grades of 
Apples.

2. Unit Division

    In addition to the requirements of section 34(b) of the Basic 
Provisions, optional units may be established if each optional unit 
is located on non-contiguous land.

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

    In addition to the requirements of section 3 of the Basic 
Provisions:
    (a) You may select only one price election for all the apples in 
the county insured under this policy unless the Special Provisions 
provide different price elections by type, in which case you may 
select one price election for each apple type designated in the 
Special Provisions. The price elections you choose for each type 
must have the same percentage relationship to the maximum price 
offered by us for each type. For example, if you choose 100 percent 
of the maximum price election for one type, you must also choose 100 
percent of the maximum price election for all other types.
    (b) You must report, by the production reporting date designated 
in section 3 of the Basic Provisions, by type if applicable:
    (1) Any damage, removal of trees, change in practices, or any 
other circumstance that may reduce the expected yield below the 
yield upon which the insurance guarantee is based, and the number of 
affected acres;
    (2) The number of bearing trees on insurable and uninsurable 
acreage;
    (3) The age of the trees and the planting pattern;
    (4) The separate acreage of apples intended for fresh-market or 
processing as shown on the actuarial table; and
    (5) For the first year of insurance for acreage interplanted 
with another perennial crop, and anytime the planting pattern of 
such acreage has changed:
    (i) The age of the interplanted crop, and type if applicable;
    (ii) The planting pattern; and
    (iii) Any other information that we request in order to 
establish your approved yield. We will reduce the yield used to 
establish your production guarantee as necessary, based on our 
estimate of the effect of the following: interplanted perennial 
crop; removal of trees; damage; change in practices and any other 
circumstance on the yield potential of the insured crop. If you fail 
to notify us of any circumstance that may reduce your yields from 
previous levels, we will reduce your production guarantee as 
necessary at any time we become aware of the circumstance.

4. Contract Changes

    In accordance with section 4 of the Basic Provisions, the 
contract change date is August 31 preceding the cancellation date.

5. Cancellation and Termination Dates

    In accordance with section 2 of the Basic Provisions, the 
cancellation and termination dates are November 20.

6. Insured Crop

    In accordance with section 8 of the Basic Provisions, the crop 
insured will be all the apples in the county for which a premium 
rate is provided by the actuarial table:
    (a) In which you have a share;
    (b) That are grown on tree varieties that:
    (1) Are adapted to the area;
    (2) Are in area A and have produced at least an average of 10 
bins per acre;
    (3) Are in area B and have produced at least an average of 150 
bushels per acre;
    (4) Are in Area C and have produced at least an average of 200 
bushels per acre; and
    (c) That are grown in an orchard that, if inspected, is 
considered acceptable by us.

7. Insurable Acreage

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

8. Insurance Period

    (a) In accordance with the provisions of section 11 of the Basic 
Provisions:
    (1) Coverage begins on November 21 of each crop year, except for 
the year of application, if your application is received after 
November 11 but prior to November 21. In that case, insurance will 
attach on the 10th day after your properly completed application is 
received in our local office unless we inspect the acreage prior to 
the end of the 10 day period and determine that it does not meet 
insurability requirements. You must provide any information that we 
require for the crop to determine the condition of the orchard.
    (2) The calendar date for the end of the insurance period for 
each crop year is November 5.
    (b) In addition to the provisions of section 11 of the Basic 
Provisions:
    (1) If you acquire an insurable share in any insurable acreage 
after coverage begins but on or before the acreage reporting date 
for the crop year, and after an inspection we

[[Page 17055]]

consider the acreage acceptable, insurance will be considered to 
have attached to such acreage on the calendar date for the beginning 
of the insurance period. There will no coverage of any insurable 
interest acquired after the acreage reporting date.
    (2) If you relinquish your insurable share on any insurable 
acreage of apples on or before the acreage reporting date for the 
crop year, and the acreage was insured by you the previous crop 
year, insurance will not be considered to have attached to, and no 
premium or indemnity will be due for such acreage for that crop year 
unless:
    (i) A transfer of coverage and right to an indemnity, or a 
similar form approved by us, is completed by all affected parties;
    (ii) We are notified by you or the transferee in writing of such 
transfer on or before the acreage reporting date; and
    (iii) The transferee is eligible for crop insurance.

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 during the insurance period:
    (1) Adverse weather conditions;
    (2) Fire, unless weeds and other forms of undergrowth have not 
been controlled or unmulched pruning debris has not been removed 
from the orchard;
    (3) Insects, but not damage due to insufficient or improper 
application of pest control measures;
    (4) Plant disease, but not damage due to insufficient or 
improper application of disease control measures;
    (5) Earthquake;
    (6) Volcanic eruption;
    (7) Failure of the irrigation water supply, if caused by an 
insured peril that occurs during the insurance period;
    (8) Excess sun, only if you have elected the Fresh Fruit Option 
B and the Sunburn Option as described in section 13; and
    (9) Wildlife;
    (b) In addition to the causes of loss excluded in section 12 of 
the Basic Provisions, we will not insure against damage or loss of 
production due to:
    (1) Failure of the fruit to size, shape, or color properly; or
    (2) Inability to market the apples for any reason other than 
actual physical damage from an insurable cause specified in this 
section. For example, we will not pay you an indemnity if you are 
unable to market due to quarantine, boycott, or refusal of any 
person to accept production.
    (3) Mechanical damage including, but not limited to, limb rubs, 
scars, and punctures; or
    (4) Russeting.

10. Duties In the Event of Damage or Loss

    In addition to the requirements of section 14 of the Basic 
Provisions, the following will apply:
    (a) You must notify us within three 3 days of the date harvest 
should have started if the crop will not be harvested.
    (b) You must notify us at least 15 days before any production 
from any unit will be sold by direct marketing. We will conduct an 
appraisal that will be used to determine your production to count 
for production that is sold by direct marketing. If damage occurs 
after this appraisal, we will conduct an additional appraisal. These 
appraisals, and any acceptable records provided by you, will be used 
to determine your production to count. Failure to give timely notice 
that production will be sold by direct marketing will result in an 
appraised amount of production to count of not less than the 
production guarantee per acre if such failure results in our 
inability to make the required appraisal.
    (c) If you intend to claim an indemnity on any unit, you must 
notify us at least 15 days prior to the beginning of harvest, or 
immediately if damage is discovered during harvest, so that we may 
inspect the damaged production.
    (d) You must not destroy the damaged crop until after we have 
given you written consent to do so. If you fail to meet the 
requirements of this section and such failure results in our 
inability to inspect the damaged production, all such production 
will be considered undamaged and included as production to count.

11. Settlement of Claim

    (a) We will determine your loss on a unit basis. In the event 
you are unable to provide separate acceptable production records:
    (1) For any optional unit, we will combine all optional units 
for which such production records were not provided; or
    (2) For any basic units, we will allocate any commingled 
production to such units in proportion to our liability on the 
harvested acreage for the units.
    (b) In the event of loss or damage covered by this policy, we 
will settle your claim by:
    (1) Multiplying the insured acreage by its respective production 
guarantee, by type if applicable;
    (2) Multiplying each result in section 11(b)(1) by the 
respective price election, by type if applicable;
    (3) Totaling the results in section 11(b)(2) if there are more 
than one type;
    (4) Multiplying the total production to count (see section 
11(c)), for each type if applicable, by the respective price 
election;
    (5) Totaling the results in section 11(b)(4), if there are more 
than one type;
    (6) Subtracting the total in section 11(b)(5) from the total in 
section 11(b)(3); and
    (7) Multiplying the result in section 11(b)(6) by your share.
    For example:
    You have 100 percent share in 28 acres of fresh market apples 
and 30 acres of processing apples in the unit, with a 300 bushel per 
acre guarantee and a price election of $5.00 per bushel for fresh 
market and $2.00 per bushel for processing. You are only able to 
harvest 4,500 bushels of fresh market apples and 6,500 bushels of 
processing. Your indemnity would be calculated as follows:
    (1) 28 acres  x  300 bushels = 8,400 bushels guarantee of fresh 
market; 30 acres  x  300 bushels = 9,000 bushels guarantee of 
processing;
    (2) 8,400 bushels  x  $5.00 price election = $42,000.00 value of 
guarantee for fresh market; 9,000 bushels  x  $2.00 price election = 
$18,000.00 value of guarantee for processing;
    (3) $42,000.00 + $18,000.00 = $60,000 total value guarantee;
    (4) 4,500.00 bushels  x  $5.00 price election = $22,500.00 value 
of production to count for fresh market;
    6,500.00 bushels  x  $2.00 price election = $13,000.00 value of 
production to count for processing;
    (5) $22,500.00 + $13,000.00 = $35,500.00 total value of 
production to count;
    (6) $60,000.00-$35,500.00 = $24,500.00 loss; and
    (7) $24,000.00  x  100 percent = $24,500.00 indemnity payment.
    (c) The total production to count (boxes or bushels) 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 sold by direct marketing if you fail to meet the 
requirements contained in section 10;
    (C) That is damaged solely by uninsured causes; or
    (D) For which you fail to provide acceptable production records;
    (ii) Production lost due to uninsured causes;
    (iii) Unharvested production; and
    (iv) Potential production on insured acreage that you intend to 
abandon or no longer care for, if you and we agree on the appraised 
amount of production. Upon such agreement, the insurance period for 
that acreage will end. If you do not agree with our appraisal, we 
may defer the claim only if you agree to continue to care for the 
crop. We will then make another appraisal when you notify us of 
further damage or that harvest is general in the area unless you 
harvested the crop, in which case we will use the harvested 
production. If you do not continue to care for the crop, our 
appraisal made prior to deferring the claim will be used to 
determine the production to count; and
    (2) All marketable harvested production from the insurable 
acreage.
    (3) Mature marketable apple production may be reduced as a 
result of loss in quality due to hail, wind, freeze, or sunburn in 
accordance with section 13 of these provisions, if you elect one or 
more of these coverages.

12. Late and Prevented Planting

    The late and prevented planting provisions of the Basic 
Provisions are not applicable.

13. Optional Coverage for Quality Adjustment

    (a) These quality adjustment options apply only if the following 
conditions are met:
    (1) You have not elected to insure your apples under the 
Catastrophic Risk Protection (CAT) Endorsement.
    (2) You elected the Fresh Fruit Option A or the Fresh Fruit 
Option B; or you elected both the Fresh Fruit Option B and the 
Sunburn Option on your application or other form approved by us, and 
did so on or before the sales closing date for the initial crop year

[[Page 17056]]

for which you wish it to be effective. By doing so, you agreed to 
pay the additional premium designated in the actuarial documents for 
this optional coverage; and
    (3) You or we did not cancel the option in writing on or before 
the cancellation date. Your election of CAT coverage for any crop 
year after this endorsement is effective will be considered as 
notice of cancellation by you.
    (b) If you select Fresh Fruit Option A only, Fresh Fruit Option 
A will apply to all of your apples intended for processing and fresh 
market.
    (c) If you select Fresh Fruit Option B, those provisions will 
apply to all of your apples intended for fresh market and the 
provisions of Fresh Fruit Option A will apply to all of your apples 
intended for processing.
    (d) If you select the Sunburn Option as designated in the 
Special Provisions, you must also select Fresh Fruit Option B.
    (e) In addition to the requirements of section 10 of these 
provisions, you must permit us to inspect and grade the fruit prior 
to harvest or no quality adjustment will be made.
    (f) Fresh Fruit Option A and Fresh Fruit Option B are subject to 
the following conditions:
    (1) Fresh Fruit Option A--In addition to section 11(c) of these 
provisions and notwithstanding the definition of ``marketable'' in 
section 1 of these provisions, your production to count will be 
adjusted when your apples are damaged by hail to the extent that 
such apples will not grade U.S. No. 1 (processing). Harvested apple 
production that is damaged by hail to the extent that it does not 
grade 80 percent U.S. No. 1 (processing) or better, in accordance 
with applicable USDA Standards for Grades of Apples, will be 
adjusted as follows:
    (i) Production to count with 21 through 40 percent not grading 
U.S. No. 1 (processing) or better will be reduced 2 percent for each 
full percent in excess of 20 percent.
    (ii) Production to count with 41 through 50 percent not grading 
U.S. No. 1 (processing) or better will be reduced 40 percent plus an 
additional 3 percent for each full percent in excess of 40 percent.
    (iii) Production to count with 51 percent through 64 percent not 
grading U.S. No. 1 (processing) or better will be reduced 70 percent 
plus an additional 2 percent for each full percent in excess of 50 
percent.
    (iv) Production to count with 65 percent or more not grading 
U.S. No. 1 (processing) or better will be considered 100 percent 
cull production.
    (v) The difference between the total production and the 
production to count as determined above will be considered cull 
production.
    (vi) Thirty (30) percent of all cull production will be 
considered production to count, unless otherwise specified in the 
Special Provisions.
    (vii) No reduction in production to count will be applied to any 
apple grading less than U.S. No. 1 (processing) due solely to size, 
shape, russeting, or color.
    (viii) Any appraisal we make on the insured acreage will be 
considered production to count unless such appraised production is 
knocked to the ground by wind or hail or frozen on the tree to the 
extent that harvest is not practical.
    (2) Fresh Fruit Option B--Notwithstanding section 11(c) and the 
definitions of ``harvest'' and ``marketable'' in section 1 of these 
provisions, the total production to count for a unit will include 
all harvested and appraised production. Harvested apple production 
that is damaged by hail to the extent that it does not grade 80 
percent U.S. Fancy or better, in accordance with applicable USDA 
Standards for Grades of Apples, will be adjusted as follows:
    (i) Production to count with 21 through 40 percent not grading 
U.S. Fancy or better will be reduced 2 percent for each full percent 
in excess of 20 percent.
    (ii) Production to count with 41 through 50 percent not grading 
U.S. Fancy or better will be reduced 40 percent plus an additional 3 
percent for each full percent in excess of 40 percent.
    (iii) Production to count with 51 percent through 64 percent not 
grading U.S. Fancy or better will be reduced 70 percent plus an 
additional 2 percent for each full percent in excess of 50 percent.
    (iv) Production to count with 65 percent or more not grading 
U.S. Fancy or better will be considered 100 percent cull production.
    (v) The difference between the total production and the 
production to count as determined above will be considered cull 
production.
    (vi) Apples that are knocked to the ground by wind or frozen to 
the extent they can be harvested but not marketed as U.S. Fancy 
grade apples will be considered 100 percent cull production.
    (vii) Thirty (30) percent of all cull production will be 
considered production to count, unless otherwise specified in the 
Special Provisions.
    (viii) No reduction in production to count will be applied to 
any apple grading less than U.S. Fancy due solely to size, shape, 
russeting, or color.
    (ix) Any appraisal we make on the insured acreage will be 
considered production to count unless such appraised production is 
knocked to the ground by wind, hail, or frozen on the tree to the 
extent that harvest is not practical.
    (g) Sunburn Option
    (1) In addition to the causes of loss specified in section 9 of 
these provisions, excess sun is an insurable cause of loss.
    (2) Notwithstanding the definitions of ``harvest'' and 
``marketable'' in section 1 and 11(c)(1) and (2) of these 
provisions, the total production to be counted for a unit will 
include all harvested and appraised production. Harvested apple 
production that, due to excessive sun or in conjunction with hail 
damage, does not grade 80 percent U.S. Fancy or better, in 
accordance with applicable USDA Standards, will be adjusted as 
follows:
    (i) Production to count with 21 through 40 percent not grading 
U.S. Fancy or better due solely to excessive sun or excessive sun 
along with hail damage, will be reduced 2 percent for each full 
percent in excess of 20 percent.
    (ii) Production to count with 41 through 50 percent not grading 
U.S. Fancy or better due solely to excessive sun or excessive sun 
along with hail damage, will be reduced 40 percent plus an 
additional 3 percent for each full percent in excess of 40 percent.
    (iii) Production to count with 51 through 64 percent not grading 
U.S. Fancy or better due solely to excessive sun or excessive sun 
along with hail damage, will be reduced 70 percent plus an 
additional 2 percent for each full percent in excess of 50 percent.
    (iv) Production to count with 65 percent or more not grading 
U.S. Fancy or better due solely to excessive sun or excessive sun 
along with hail damage, will be considered 100 percent cull 
production.
    (v) The difference between the total production and the 
production to count as determined above will be considered cull 
production.
    (vi) Thirty (30) percent of all cull production will be 
considered as production to count unless otherwise specified in the 
Special Provisions.

    Signed in Washington, D.C., on April 2, 1998.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 98-9208 Filed 4-7-98; 8:45 am]
BILLING CODE 3410-08-P