[Federal Register Volume 63, Number 122 (Thursday, June 25, 1998)]
[Rules and Regulations]
[Pages 34549-34553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16967]



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 Rules and Regulations
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  Federal Register / Vol. 63, No. 122 / Thursday, June 25, 1998 / Rules 
and Regulations  

[[Page 34549]]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 401 and 457

RIN 0563-AA84


General Crop Insurance Regulations, Tobacco (Guaranteed Plan) 
Endorsement; and Common Crop Insurance Regulations, Guaranteed Tobacco 
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 guaranteed tobacco. 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 tobacco (guaranteed plan) endorsement with the Common Crop 
Insurance Policy for ease of use and consistency of terms, and to 
restrict the effect of the current tobacco (guaranteed plan) 
endorsement to the 1998 and prior crop years.

EFFECTIVE DATE: July 27, 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 in 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), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. This rule contains no Federal 
mandates (under the regulatory provisions of title II of the UMRA) for 
State, local, and tribal governments or the private sector. Therefore, 
this rule is not subject to the requirements of sections 202 and 205 of 
the UMRA.

Executive Order 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 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 effect of this regulation on 
small entities will be no greater than on large entities. Under the 
current regulations, a producer is required to complete an application 
and acreage report. If the crop is damaged or destroyed, the insured is 
required to give notice of loss and provide the necessary information 
to complete a claim for indemnity.
    The amount of work required of insurance companies delivering and 
servicing these policies will not increase significantly from the 
amount of work currently required. The rule does not have any greater 
or lesser impact on the producer. Therefore, this action is determined 
to be exempt from the provisions of the Regulatory Flexibility Act (5 
U.S.C. 605), and no Regulatory Flexibility Analysis was prepared.

Federal Assistance Program

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

Executive Order 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 for judicial 
review of any determination made by FCIC 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 Monday, June 16, 1997, FCIC published a notice of proposed 
rulemaking in the Federal Register at 62 FR 32544 to add to the Common 
Crop Insurance Regulations (7 CFR part 457), a new section, 7 CFR 
457.136, Guaranteed Tobacco 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 guaranteed tobacco found at 7 CFR 401.129 (Tobacco (Guaranteed 
Plan) Endorsement). FCIC also amends 7 CFR

[[Page 34550]]

part 401 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 88 comments 
were received from reinsured companies and an insurance service 
organization. The comments received and FCIC's responses are as 
follows:
    Comment: An insurance service organization recommended that FCIC 
either revise or delete the definition of ``approved yield.'' The 
commenter mentioned that since guaranteed tobacco currently is not an 
actual production history (APH) crop, the definition will be questioned 
by insureds who do not receive a copy of the Code of Federal 
Regulations with their crop insurance policies.
    Response: ``Approved yield'' is referenced in section 3 of the Crop 
Provisions, so it must be defined. Section 3 clearly indicates that an 
approved yield is not necessary unless required by the Special 
Provisions. As written, if the FSA guaranteed tobacco support price 
program is discontinued and guaranteed tobacco becomes an APH crop in 
the future, the Special Provisions could be amended easily to require 
an approved yield. Therefore, no changes have been made.
    Comment: A reinsured company and an insurance service organization 
expressed concern with the definition of ``good farming practices,'' 
which makes reference to ``cultural practices generally in use in the 
county * * * recognized by the Cooperative State Research, Education, 
and Extension Service as compatible with agronomic and weather 
conditions in the county.'' The commenters questioned whether cultural 
practices exist that are not recognized (or possibly not known) by the 
Cooperative State Research, Education, and Extension Service. The 
commenters also indicated that the term ``county'' in the definition of 
``good farming practices'' should be changed to ``area.''
    Response: FCIC believes that the Cooperative State Research, 
Education, and Extension Service (CSREES) recognizes farming practices 
that are considered acceptable for producing guaranteed tobacco. If a 
producer is following practices currently not recognized as acceptable 
by the CSREES, there is no reason why such recognition cannot be sought 
by interested parties. The term ``area'' is less definitive than the 
term ``county'' and would cause insurance providers to make 
determinations more subjective in nature. Therefore, no change has been 
made except that the definition of ``good farming practices'' has been 
moved to the Basic Provisions.
    Comment: A reinsured company and an insurance service organization 
recommended revising the definition of ``harvest'' to include the 
requirement that at least 20 percent of the production guarantee must 
be cut on each acre to qualify as harvested. Commenters also 
recommended that a minimum appraisal of 35 percent of the production 
guarantee be established to encourage producers to harvest damaged 
tobacco. In some cases, it will be difficult to verify unharvested 
production due to deterioration of the leaves before an adjuster works 
the final claim. The commenters believe that removal of these 
requirements from the current crop provisions will result in a 
significant increase in premium rates. Commenters expressed concern 
that FCIC may have overreacted if the changes were made because of one 
lawsuit.
    Response: FCIC has determined that at least 20 percent of the 
production guarantee be cut on each acre to qualify as harvested and 
the 35 percent minimum appraisal for unharvested acreage is too severe. 
Producers should not be forced to incur the costs associated with 
harvesting tobacco acres that may not be marketable. In addition, FCIC 
cannot ignore a court ruling that such provisions are unenforceable. 
Therefore, no change has been made.
    Comment: An insurance service organization asked if the phrase ``if 
not available'' means the season average price is not available at all 
or is not available when a claim for an indemnity is processed. The 
commenter stated that the market price is never available when the 
tobacco is harvested, only when it is marketed.
    Response: The term ``if not available'' means that the market price 
is not available because no marketings of the applicable insured type 
of tobacco grown in the area have occurred. The provision has been 
clarified accordingly.
    Comment: An insurance service organization recommended deleting 
``marketing window'' from the definition of ``practical to replant.'' 
The commenter stated that guaranteed tobacco is unlike other crops, 
such as processor and fresh market crops, where the producer only has a 
certain amount of time to market the crop.
    Response: FCIC agrees that the concept of a ``marketing window'' is 
most applicable to processor and fresh market crops and recognizes that 
guaranteed tobacco is unlike these crops. However, the Federal 
Agriculture Improvement and Reform Act of 1996 mandated that FCIC 
consider marketing windows in determining whether it is feasible to 
require planting during a crop year. Therefore no change has been made 
except that the definition of ``practical to replant'' has been moved 
to the Basic Provisions.
    Comment: A reinsured company and an insurance service organization 
expressed concern about the terms ``replace'' and ``replacing'' in the 
definition of ``replanting.'' Commenters stated that the terms, as 
used, seem awkward and cumbersome.
    Response: FCIC believes that the definition of ``replanting'' 
clearly describes the steps required to replant the crop. However, FCIC 
has replaced the phrase ``growing a successful tobacco crop'' with 
``producing at least the guarantee,'' for clarity.
    Comment: An insurance service organization and a reinsured company 
recommended the unit division guidelines in the proposed rule remain 
the same in the final rule.
    Response: FCIC has not changed the unit division guidelines.
    Comment: A reinsured company and an insurance service organization 
recommended removing any references to ``annual production reports'' 
for the APH plan. The commenters contend that if the FSA guaranteed 
tobacco support price program is changed or eliminated, it will be 
necessary to revise several provisions of the policy.
    Response: Section 3(b) of these provisions requires annual 
production reports only when required by the Special Provisions. The 
current method for establishing yields will continue for the 1998 crop 
year. If the guaranteed tobacco support price program is discontinued 
or modified in future years, these provisions provide an alternative 
method for establishing the production guarantee. Therefore, no change 
has been made. However, FCIC has amended the definition of ``support 
price'' to include the possibility that the tobacco support program may 
be changed. If there is not a tobacco support program, FCIC will 
announce the average price per pound for the type of tobacco.
    Comment: A reinsured company and an insurance service organization 
recommended deleting the word ``carryover'' in section 6. Commenters 
stated that the basic premise of Multiple Peril Crop Insurance coverage 
is to insure actual planted acreage of the crop. Subtracting the 
carryover poundage would take coverage away from a planted crop which 
is legally insurable (i.e., the carryover poundage has value and is 
exposed to perils). This could have additional unwanted

[[Page 34551]]

consequences by making the insurance providers responsible for tracking 
and placing value on carryover poundage.
    Response: Although producers normally reduce the number of acres 
grown in the current crop year to account for carryover production from 
the prior year, they may instead elect to reduce inputs (fertilizer, 
etc.), thereby producing fewer pounds per acre. Further, to reduce the 
opportunity to falsely report the amount of carryover tobacco at time 
of loss adjustment, the amount of any carryover production must be 
reported on the acreage report. Therefore, no change has been made.
    Comment: A reinsured company and an insurance service organization 
asked if the provisions in section 8(c) are intended to allow written 
agreement requests for a type not rated in the actuarial documents.
    Response: Section 8(c) only references a method of planting. 
Therefore, section 8(c) does not authorize written agreements for types 
not rated.
    Comment: A reinsured company and an insurance service organization 
question why section 9(a) is not as precise as section 11(a) of the 
Basic Provisions, which specifies ``total destruction * * * on the 
unit.''
    Response: FCIC has revised section 9(a) to refer to the total 
destruction of the tobacco on the unit.
    Comment: A reinsured company and an insurance service organization 
asked if the current requirement that notice be given without delay if 
any tobacco is damaged and will not be sold through an auction 
warehouse was removed intentionally from section 11.
    Response: Section 14(a)(2) of the Basic Provisions states that ``* 
* * you must * * * give us notice within 72 hours of your initial 
discovery of damage * * *'' FCIC believes this requirement is 
substantially the same as requiring a notice ``without delay,'' so the 
latter requirement of section 11 was removed in the proposed rule.
    Comment: Two reinsured companies and an insurance service 
organization recommended adding the phrase ``containing at least two 
rows'' after the phrase ``at least 5 feet wide'' in section 11(a). 
Commenters stated that a representative sample of 5 feet could have 
only one row in a sample where tobacco is planted in greater than 30 
inch rows.
    Response: FCIC has amended the provision accordingly.
    Comment: Two reinsured companies and an insurance organization 
recommended that the word ``resulting'' be added in section 12(b)(2) 
and the reference ``section 12(b)(2)'' be deleted from section 12(b)(3) 
because reference to the previous item by number is unnecessary.
    Response: The recommendations do not add any additional 
clarification to the provision. Therefore, no change has been made.
    Comment: Two reinsured companies and an insurance service 
organization recommend removing the words ``acceptable production 
records'' from section 12(c)(1)(D), if these words relate to other APH 
references in these provisions.
    Response: As stated in earlier responses, section 12(c)(1)(D) will 
only apply if annual production reports are required by the Special 
Provisions and the provision has been so clarified.
    Comment: Two reinsured companies and an insurance service 
organization expressed concern that section 12(c)(1)(iii) of these 
provisions allows the insured to defer settlement and wait for a later, 
generally lower appraisal.
    Response: Section 12(c)(1)(iii) allows deferment of a claim only if 
the insurance provider agrees that representative samples can be left 
or if the insured elects to continue to care for the entire crop. In 
either case, if the insured does not provide sufficient care for the 
remaining crop, the original appraisal will be used. Therefore, no 
change has been made.
    Comment: Two reinsured companies and an insurance service 
organization are opposed to any reference to the word ``carryover'' in 
section 12(g).
    Response: Section 12(g) eliminates the adjustment of next year's 
production when the insurance provider agrees that any carryover or 
current years' tobacco has no market value due to an insured cause of 
loss. It also eliminates the opportunity to falsely report that the 
carryover and current years' tobacco have no value and thus increase 
the indemnity payment. This provision is consistent with the Farm 
Service Agency's requirement that tobacco having no value be destroyed. 
Therefore, no change has been made.
    Comment: Two reinsured companies and an insurance service 
organization suggested that the requirement to renew a written 
agreement each year should be removed in section 13(d). Terms of the 
agreement should be stated in the agreement to fit the particular 
situation for the policy, or if no substantive changes occur from one 
year to the next, allow the written agreement to be continuous.
    Response: Written agreements are temporary and intended to address 
unusual situations. If the condition creating a need for written 
agreement remains from year to year, it should be incorporated into the 
policy, the Special Provisions, or the actuarial documents. Therefore, 
no change has been made except that the provisions for written 
agreements have been moved to the Basic Provisions.
    Comment: Two reinsured companies and an insurance service 
organization asked: (1) Why the Late Planting Agreement Option is no 
longer available; and (2) Why the late and prevented planting language 
provisions are not included in the proposed rule as they have been in 
other crops.
    Response: A new section 13 has been added to provide for late 
planting coverage. Under section 14, prevented planting coverage will 
not be provided for guaranteed tobacco as set out in the Basic 
Provisions because the high cash value per acre and the hand labor 
required to transplant tobacco on relatively small acreage enables 
producers to plant sufficient acreage to maintain their production 
levels even under extremely adverse weather conditions that would 
prevent planting of most other crops.
    In addition to the changes indicated above, FCIC has made the 
following changes:
    1. Section 1--Removed definitions of ``days,'' ``FSA,'' ``final 
planting date,'' and ``USDA,'' because these definitions were moved to 
the Basic Provisions. Changed the definition of ``unit'' to ``basic 
unit.''
    2. Section 12(b)--Revised for clarification. Also, added an example 
of an indemnity calculation for illustration purposes.

List of Subjects in 7 CFR Parts 401 and 457

    Crop insurance, Guaranteed tobacco, Tobacco (guaranteed plan) 
endorsement.

Final Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation hereby amends 7 CFR parts 401 and 457 as follows:

PART 401--GENERAL CROP INSURANCE REGULATIONS; REGULATIONS FOR THE 
1988 AND SUBSEQUENT CONTRACT YEARS

    1. The authority citation for 7 CFR part 401 continues to read as 
follows:

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

    2. Section 401.129 introductory paragraph is revised to read as 
follows:


Sec. 401.129  Tobacco (guaranteed plan) endorsement

    The provisions of the Tobacco (Guaranteed Plan) Crop Insurance

[[Page 34552]]

Endorsement for the 1990 through the 1998 crop years are as follows:
* * * * *

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

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

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

    4. Section 457.136 is added to read as follows:


Sec. 457.136  Guaranteed tobacco crop insurance provisions

    The Guaranteed Tobacco 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:

Guaranteed Tobacco 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.
    Adequate stand. A population of live plants per unit of acreage 
that can be expected to produce at least your production guarantee.
    Approved yield. The yield calculated in accordance with 7 CFR 
part 400, subpart G, if required by section 3(b) of these 
provisions.
    Average value. For appraised production, the estimated value of 
all such production divided by the appraised pounds. For harvested 
production, the total value of such production divided by the 
harvested pounds.
    Basic unit. In lieu of the definition in the Basic Provisions, a 
basic unit is all insurable acreage of an insurable type of tobacco 
in the county in which you have a share on the date of planting for 
the crop year and that is identified by a single FSA farm serial 
number at the time insurance first attaches under these provisions 
for the crop year.
    Carryover tobacco. Any tobacco produced on the FSA farm serial 
number in previous years that remained unsold at the end of the most 
recent marketing year.
    Discount variety. Tobacco defined as such under the provisions 
of the United States Department of Agriculture tobacco price support 
program.
    Fair market value. The current year's tobacco season average 
market price for the applicable type of tobacco obtained from the 
average sale of tobacco through a market other than an auction 
warehouse.
    Harvest. Cutting or priming and removing all insured tobacco 
from the field in which it was grown.
    Hydroponic plants. Seedlings grown in liquid nutrient solutions.
    Late planting period. In lieu of the definition in section 1 of 
the Basic Provisions, the period that begins the day after the final 
planting date for the insured crop and ends 15 days after the final 
planting date, unless otherwise specified in the Special Provisions.
    Market price.
    (a) For types 11, 12, 13, 14, 21, 22, 23, 31, 35, 36, 37, 42, 
44, 54, and 55:
    (1) The support price per pound for the insured type of tobacco 
as announced by the USDA for its tobacco price support program; or
    (2) The current year's season average market price, when 
available; if not available because the insured type of tobacco has 
not been marketed in the area, the previous year's season average 
market price for the applicable insured type tobacco grown in the 
area for any crop year a tobacco price support program is not in 
effect.
    (b) For types 32, 41, 51, 52, and 61, the current year's season 
average market price, when available; if not available because the 
insured type of tobacco has not been marketed in the area, the 
previous year's season average market price for the applicable 
insured type of tobacco grown in the area.
    Planted acreage. Land in which tobacco seedlings, including 
hydroponic plants, have been transplanted by hand or machine from 
the tobacco bed to the field.
    Pound. Sixteen ounces avoirdupois.
    Priming. A method of harvesting tobacco by which each leaf is 
severed from the stalk as it matures.
    Production guarantee (per acre). Either the number of pounds of 
tobacco for the tobacco type and classification shown on the county 
actuarial table, or the approved yield as provided in the Special 
Provisions, multiplied by the coverage level percentage you elect.
    Replanting. In lieu of the definition in section 1 of the Basic 
Provisions, performing the cultural practices necessary to replace 
the tobacco plant, and then replacing the tobacco plant in the 
insured acreage with the expectation of producing at least the 
guarantee.
    Season average market price. The simple average price paid by 
buyers for a tobacco type for all days sales occur at public markets 
during the tobacco sales season in the area in which the farm is 
located.
    Support price. The average price per pound for the type of 
tobacco as announced by the USDA under its tobacco price support 
program, or, if there is no such program, as announced by FCIC.
    Tobacco bed. An area protected from adverse weather in which 
tobacco seeds are sown and seedlings are grown until transplanted 
into the tobacco field by hand or machine.
    2. Unit Division.
    A unit will be determined in accordance with the definition of 
basic unit contained in section 1 of these Crop Provisions. The 
provision in the Basic Provisions regarding optional units are not 
applicable, unless specified by the Special Provisions.
    3. Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities.
    In addition to the requirements of section 3 of the Basic 
Provisions:
    (a) You must select only one price election and coverage level 
for each guaranteed tobacco type designated in the Special 
Provisions that you elect to insure.
    (b) A production report, if required by the Special Provisions, 
must be filed in accordance with section 3(c) of the Basic 
Provisions.
    4. Contract Changes.
    In accordance with section 4 of the Basic Provisions, the 
contract change date is November 30 preceding the cancellation date.
    5. Cancellation and Termination Dates.
    In accordance with section 2 of the Basic Provisions, the 
cancellation and termination dates are March 15.
    6. Report of Acreage.
    In addition to the requirements of section 6 of the Basic 
Provisions, you must report any carryover tobacco from previous 
years on the acreage report.
    7. Insured Crop.
    In accordance with section 8 of the Basic Provisions, the 
insured crop will be any of the tobacco types designated in the 
Special Provisions, in which you have a share, that you elect to 
insure, and for which a premium rate is provided by the actuarial 
documents.
    8. Insurable Acreage.
    In addition to the provisions of section 9 of the Basic 
Provisions, we will not insure any acreage under these crop 
provisions that is:
    (a) Planted to a discount variety;
    (b) Planted to a tobacco type for which no premium rate is 
provided by the actuarial documents;
    (c) Planted in any manner other than as provided in the 
definition of ``planted acreage'' in section 1 of these Crop 
Provisions, unless otherwise provided by the Special Provisions or 
by written agreement; or
    (d) Damaged before the final planting date to the extent that 
most producers of tobacco acreage with similar characteristics in 
the area would normally not further care for the crop, unless such 
crop is replanted or we agree that replanting is not practical.
    9. Insurance Period.
    In accordance with the provisions of section 11 of the Basic 
Provisions, insurance ceases at the earliest of:
    (a) Total destruction of the tobacco on the unit;
    (b) Weighing-in at the tobacco warehouse;
    (c) Removal of the tobacco from the field where grown except for 
curing, grading, packing, or immediate delivery to the tobacco 
warehouse; or
    (d) The calendar date for the end of the insurance period, which 
is:
    (i) Types 11 and 12--November 30;
    (ii) Type 13--October 31;
    (iii) Type 14--October 15;
    (iv) Types 31 and 36--February 28;
    (v) Types 21, 35 and 37--March 15;
    (vi) Types 22 and 23--April 15;

[[Page 34553]]

    (vii) Type 32--May 15;
    (viii) All other types--April 30.
    10. Causes of Loss.
    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:
    (a) Adverse weather conditions;
    (b) Fire;
    (c) Insects, but not damage due to insufficient or improper 
application of pest control measures;
    (d) Plant disease, but not damage due to insufficient or 
improper application of disease control measures;
    (e) Wildlife;
    (f) Earthquake;
    (g) Volcanic eruption; or
    (h) Failure of the irrigation water supply, if caused by a peril 
specified in section 10(a) through (g) that occurs during the 
insurance period.
    11. Duties In The Event of Damage or Loss.
    (a) In accordance with the requirements of section 14 of the 
Basic Provisions, any representative samples we may require of each 
unharvested tobacco type must be at least 5 feet wide (at least two 
rows), and extend the entire length of each field in the unit. The 
samples must not be harvested or destroyed until after our 
inspection.
    (b) If tobacco types 11, 12, 13, or 14 are insured and you have 
filed a notice of damage, you also must leave all tobacco stalks and 
stubble intact for our inspection. The stalks and stubble must not 
be destroyed until we give you written consent to do so or until 30 
days after the end of the insurance period, whichever is earlier.
    12. Settlement of Claim.
    (a) We will determine your loss on a unit basis. In the event 
you are unable to provide separate acceptable production records:
    (1) For any optional 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 12(b)(1) by the 
respective price election, by type if applicable;
    (3) Totaling the results of section 12(b)(2) if there are more 
than one type;
    (4) Multiplying the total production to count (see section 
12(c)), for each type if applicable, by its respective price 
election;
    (5) Totaling the results of section 12(b)(4), if there are more 
than one type;
    (6) Subtracting the results of section 12(b)(4) from the results 
of section 12(b)(2) if there is only one type or subtracting the 
results of section 12(b)(5) from the result of section 12(b)(3) if 
there are more than one type; and
    (7) Multiplying the result of section 12(b)(6) by your share.
    For example:
    You have 100 percent share in 1 acre of type 35 (dark air cured) 
guaranteed tobacco in the unit, with a 2,000 pounds per acre 
guarantee and a price election of $2.00 per pound. You are only able 
to harvest 500 pounds. Your indemnity would be calculated as 
follows:
    (1) 1.0 acre  x  2,000 pounds = 2,000 pounds guarantee;
    (2) 2,000 pounds  x  $2.00 price election = $4,000.00 value of 
guarantee;
    (4) 500 pounds  x  $2.00 price election = $1,000.00 value of 
production to count;
    (6) $4,000.00-$1,000.00 = $3,000.00 loss; and
    (7) $3,000  x  100 percent = $3,000 indemnity payment.
    (c) The total production to count (pounds of appraised or 
harvested production multiplied by the applicable price) for all 
insurable acreage on the unit will include:
    (1) All appraised production as follows:
    (i) Not less than the production guarantee per acre for the unit 
for any acreage:
    (A) That is abandoned;
    (B) Put to another use without our consent;
    (C) That is damaged solely by uninsured causes;
    (D) For which you fail to provide production records, if 
required by the Special Provisions, that are acceptable to us; or
    (E) Of types 11, 12, 13, or 14 when the stalks and stubble have 
been destroyed without our consent;
    (ii) Production lost due to uninsured causes.
    (iii) Potential production on insured acreage that you intend to 
put to another use or abandon with our consent, if you and we agree 
on the appraised amount of production. Upon such agreement, the 
insurance period for that acreage will end when you put the acreage 
to another use or abandon the crop. If agreement on the appraised 
amount of production is not reached:
    (A) If you do not elect to continue to care for the crop, we may 
give you consent to put the acreage to another use if you agree to 
leave intact, and provide sufficient care for, representative 
samples of the crop in locations acceptable to us (The value of 
production to count for such acreage will be the number of pounds 
harvested or appraised production multiplied by the support price 
taken from the samples at the time harvest should have occurred. If 
you do not leave the required samples intact, or fail to provide 
sufficient care for the samples, our appraisal made prior to giving 
you consent to put the acreage to another use will be used to 
determine the amount of production to count); or
    (B) If you elect to continue to care for the crop, the amount of 
production to count for the acreage will be the harvested 
production, or our reappraisal if additional damage occurs and the 
crop is not harvested; and
    (2) All harvested production from insurable acreage.
    (d) Mature tobacco production that is damaged by insurable 
causes will be adjusted for quality based on the USDA Official 
Standard Grades for the insured type if it has an average value less 
than the market price, as follows:
    (1) Divide the average value of the damaged appraised and/or 
harvested production by the market price;
    (2) Multiply the result in section 12(d)(1) (not to exceed 1.0) 
by the number of pounds of damaged appraised and/or harvested 
tobacco; and
    (3) Multiply the product by your price election.
    If no market price has been established for the grade of the 
damaged tobacco, a market price will be imputed by reducing the 
lowest available market price by 20 percent for each grade that the 
production falls below the grade for which such lowest market price 
is available.
    (e) To enable us to determine the fair market value of tobacco 
not sold through auction warehouses, we must be given the 
opportunity to inspect such tobacco before it is sold, contracted to 
be sold, or otherwise disposed. Failure to provide us the 
opportunity to inspect such tobacco may result in rejection of any 
claim for indemnity.
    (f) If we consider the best offer you receive for any such 
tobacco to be inadequate, we may obtain additional offers on your 
behalf.
    (g) Once we agree that any carryover or current year's tobacco 
has no market value due to insured causes, you must destroy it and 
it will not be considered production to count. If you refuse to 
destroy such tobacco, we will include it as production to count and 
value it at the support price.
    13. Late Planting.
    In lieu of late planting provisions in the Basic Provisions 
regarding acreage initially planted after the final planting date, 
insurance will be provided for acreage planted to the insured crop 
after the final planting date as follows:
    (a) The production guarantee (per acre) for each type planted 
during the late planting period will be reduced by:
    (1) One percent (1%) for the 1st through the 10th day; and
    (2) Two percent (2%) for the 11th through the 15th day;
    (b) The premium amount for insurable acreage planted to the 
insured crop after the final planting date will be the same as that 
for timely planted acreage. If the amount of premium you are 
required to pay (gross premium less our subsidy) for acreage planted 
after the final planting date exceeds the liability on such acreage, 
coverage for those acres will not be provided (no premium will be 
due and no indemnity will be paid for such acreage).
    14. Prevented Planting.
    The prevented planting provisions in the Basic Provisions are 
not applicable to guaranteed tobacco.

    Signed in Washington, D.C., on June 19, 1998.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 98-16967 Filed 6-24-98; 8:45 am]
BILLING CODE 3401-08-P