[Federal Register Volume 64, Number 44 (Monday, March 8, 1999)]
[Rules and Regulations]
[Pages 10923-10929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-5557]



[[Page 10923]]

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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1434

RIN 0560-AF62


Recourse Loan Regulations for Honey

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: This final rule is issued pursuant to the provisions of the 
Omnibus Consolidated and Emergency Supplemental Appropriations Act, 
1999 (the 1999 Act), which amended the Agricultural Market Transition 
Act, and provides for the availability of recourse loans to producers 
of 1998 crop honey. This rule sets forth the regulations for the 
administration of the honey recourse loan program.

DATES: Effective March 3, 1999.

FOR FURTHER INFORMATION CONTACT: Margaret Wright, Program Specialist, 
Farm Service Agency (FSA), USDA, STOP 0512, 1400 Independence Avenue, 
SW, Washington, D.C. 20250-0512; telephone: (202) 720-8481.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule is in conformance with Executive Order 12866 and has been 
determined to be significant and therefore has been reviewed by the 
Office of Management and Budget.

Federal Assistance Program

    The title and number of the Federal Assistance Program, as found in 
the Catalog of Federal Domestic Assistance, to which this rule applies, 
are Commodity Loans and Purchases--10.051.

Environmental Evaluation

    It has been determined by an environmental evaluation that this 
action will have no significant impact on the quality of the human 
environment. Therefore, neither an environmental assessment nor an 
environmental impact statement is needed.

Executive Order 12372

    This activity is not subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with State and 
local officials. See the notice related to 7 CFR part 3014, subpart V, 
published at 48 FR 29115 (June 24, 1983).

Executive Order 12988

    This final rule has been reviewed in accordance with Executive 
Order 12988. The provisions of this final rule are not retroactive and 
preempt State laws to the extent that such laws are inconsistent with 
the provisions of the final rule. Before any legal action is brought 
regarding determinations made under provisions of 7 CFR part 723, the 
administrative appeal provisions set forth at 7 CFR part 780 must be 
exhausted.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this final rule since the Commodity Credit Corporation 
(CCC) is not required by 5 U.S.C. 553 or any other provision of law to 
publish a notice of proposed rule making with respect to the subject 
matter of this rule.

Unfunded Federal Mandates

    This rule contains no Federal mandates under the regulatory 
provisions of Title II of the Unfunded Mandate Reform Act of 1995 
(UMRA) for State, local, and tribal governments or the private sector. 
Thus, this rule is not subject to the requirements of sections 202 and 
205 of the UMRA.

Paperwork Reduction Act and Notice and Comment

    Section 1133 of the Omnibus Consolidated and Emergency Supplemental 
Appropriations Act, 1999 (the ``1999 Act'') provides that this rule-
making shall be issued without regard to the public notice and comment 
provisions of 5 U.S.C. 553 or the Paperwork Reduction Act, and provides 
that the provisions of 5 U.S.C. 808 which allows exemption from 
layovers for Congressional review shall be applied. Accordingly, this 
rule and its information collection requirements are made effective 
immediately in accordance with these provisions. Because of the 
foregoing provisions and because this rule provides needed time-
sensitive relief, delay in completing this rule would be contrary to 
the public interest.

Background

    Section 1122 of the 1999 Act provides that in order to assist 
producers of honey to market their honey in an orderly manner during a 
period of disastrously low prices, the Secretary of Agriculture 
``[S]hall make available recourse loans to producers of the 1998 crop 
of honey on fair and reasonable terms and conditions, as determined by 
the Secretary''. This final rule contains the terms and conditions that 
the Secretary has determined are necessary to implement Sec. 1122 of 
the 1999 Act. The terms and conditions focus on two critical issues: 
(1) eligibility and (2) program administration.

Eligibility

    The regulation at 7 CFR Sec. 1434.4 lists the eligibility 
requirements for both the persons applying for a recourse loan (loan) 
and for the honey being tendered as loan collateral. The essence of the 
eligibility requirements is that loan applicants must be ``producers'' 
of honey and not speculators who have purchased the honey. In general, 
a loan applicant must have a separate and identifiable interest in both 
the bees and the honey. This means, in part, that the loan applicant 
must have been responsible for the financial risk of keeping the bees 
and for producing and extracting the honey.
    The loan applicant must also hold a beneficial interest in the 
honey collateral until the loan is repaid. Under the regulation, such 
an interest will require that the producer maintains title and control 
over the disposition of the honey, as well as the risk of loss of the 
honey.
    Persons handling the marketing of the honey through a CCC-approved 
cooperative marketing association (CMA) are also eligible to 
participate in the loan program, provided the beneficial interest in 
the honey remains with the CMA member/loan applicant who shares in the 
marketing proceeds realized by the CMA. Two or more applicants may be 
eligible for a joint loan if, as individuals, they would fulfill the 
eligibility requirements and the commingled honey is not already under 
CCC loan.

Program Administration

    The program will be administered through the Department's Farm 
Service Agency (FSA). Section 1122 of the 1999 Act provides that 
recourse loans will be made to producers of 1998 crop honey and will 
operate on a no-net-cost basis. To operate the program on a no-net-cost 
basis, a service fee will be assessed at time of loan making to cover 
administrative costs associated with the honey recourse loan program. 
These administrative costs include costs associated with the county 
office loan workload, for publishing and distributing program 
information and procedures, and salary expenses. The honey recourse 
loan program will operate similarly to the way the honey program was 
operated in the 1994 and 1995 crop years. CCC has determined that the 
final date to request a loan will be 60 calendar days after publication 
of the regulation in the Federal Register. The loans will mature 9 
months after loan disbursement. Anyone interested

[[Page 10924]]

in applying for a loan or who has questions concerning eligibility or 
any other matter covered under this regulation will be able to obtain 
assistance from the local FSA county office.
    Any producer seeking to sell the honey pledged as collateral to 
repay the loan will be required to obtain written authorization from 
the county office before moving the honey for sale. If the producer 
fails to obtain such authorization, provides incorrect certifications, 
or makes fraudulent representations, the producer will be in violation 
of the terms and conditions of the loan note and security agreement and 
will be subject to liquidated damages and other actions as provided in 
Sec. 1434.13 of the regulations. If the loan is not repaid in full by 
the loan maturity date, CCC may foreclose on the pledged honey and sell 
the honey. CCC's security interest in the honey loan collateral is 
first and superior to all other security interests. Also, the 
Government may pursue other options open to it including remedies 
against persons handling honey in disregard of the security interest.

List of Subjects in 7 CFR Part 1434

    Honey, Loan programs/agriculture, Reporting and record keeping 
requirements.

    Accordingly, 7 CFR part 1434 is added to read as follows:

PART 1434--RECOURSE LOAN REGULATIONS FOR HONEY

Sec.
1434.1  Applicability.
1434.2  Administration.
1434.3  Definitions.
1434.4  Eligibility.
1434.5  Containers and drums.
1434.6  Application, availability, disbursement, and maturity.
1434.7  Eligible storage.
1434.8  Liens.
1434.9  Fees and interest.
1434.10  Determination of quantity.
1434.11  Transfer of producer's interest prohibited.
1434.12  Loss or damage.
1434.13  Personal liability of the producer.
1434.14  Release of the honey pledged as collateral for a loan.
1434.15  Liquidation of loans.
1434.16  Foreclosure.
1434.17  Handling payments and collections not exceeding $9.99.
1434.18  Death, incompetency, or disappearance; appeals; other loan 
provisions.

    Authority: Section 1122, Pub. L. 105-277, 112 Stat. 2681.


Sec. 1434.1  Applicability.

    The regulations of this part provide the terms and conditions under 
which the Commodity Credit Corporation (CCC) may issue recourse loans 
for the 1998 crop of honey that has remained continuously within the 
beneficial interest of the producer. Additional terms and conditions 
that must be followed to obtain a loan will be set forth in these 
regulations and the applicable note and security agreements. Forms 
needed to obtain a loan will be available in State and county Farm 
Service Agency (State and county) offices.


Sec. 1434.2  Administration.

    (a) The regulations of this part shall be administered under the 
general supervision of the Executive Vice President, CCC, and shall be 
carried out in the field by State and county committees.
    (b) State and county committees, representatives and employees 
thereof, do not have the authority to modify or waive any of the 
provisions of the regulations of this part.
    (c) The State committee shall take any action required by these 
regulations that has not been taken by the county committee. The State 
committee shall also:
    (1) Correct, or require a county committee to correct, any action 
taken by such county committee that is not in accordance with the 
regulations of this part; or
    (2) Require a county committee to withhold taking any action that 
is not in accordance with the regulations of this part.
    (d) No provision or delegation herein to a State or county 
committee shall preclude the Executive Vice President, CCC, or a 
designee, from determining any question arising under the program or 
from reversing or modifying any determination made by a State or county 
committee.
    (e) The Deputy Administrator for Farm Programs, FSA, may authorize 
State and county committees to waive or modify deadlines and other 
program requirements in cases where timeliness or failure to meet such 
other requirements does not affect adversely the operation of the 
program.
    (f) An approving official of CCC may execute loans and related 
documents only under the terms and conditions determined and announced 
by CCC. Any such document that is not executed in accordance with such 
terms and conditions, including any purported execution before the date 
authorized by CCC, shall be null and void unless affirmed by the 
Executive Vice President, CCC.


Sec. 1434.3  Definitions.

    The definitions set forth in this section shall be applicable for 
all purposes of program administration. The terms defined in part 718 
of this title shall also be applicable except where those definitions 
conflict with the definitions set forth in this section or in program 
instruments created under this part.
    Administrator is the FSA Administrator.
    Adulterated honey, is for the purpose of this part only, honey 
where any foreign substance including water has been substituted in 
whole or in part for honey whether or not such substance is poisonous 
or deleterious to render honey injurious to health or otherwise makes 
the honey unsound, unhealthy, unwholesome, or otherwise unfit for human 
or animal consumption.
    Approving official is a representative of CCC who is authorized by 
the Executive Vice President, CCC, to approve loan documents prepared 
under this part.
    Charge is a fee, cost, and expense (including foreclosure costs) 
incident to insuring, carrying, handling, storing, conditioning, and 
marketing the honey and otherwise protecting the honey.
    CMA is a cooperative marketing association engaged in marketing 
honey.
    County office is the local FSA office.
    Crop year is the calendar year in which honey is extracted.
    Executive Vice President, CCC, is the Administrator, FSA.
    FSA is the Farm Service Agency, United States Department of 
Agriculture.
    Ineligible honey is honey not eligible for a loan under this part 
for which ineligibility shall include, but is not limited to, honey 
from the following floral sources regardless of whether the honey meets 
other eligibility requirements: Andromeda, bitterweed, broomweed, 
cajeput (melaleuca), carrot, chinquapin, dog fennel, desert hollyhock, 
gumweed, mescal, onion, prickly pear, prune, queen's delight, rabbit 
brush, snowbrush (ceanothus), snow-on-the-mountain, spurge (leafy 
spurge), tarweed, and similar objectionably-flavored honey or blends of 
honey as determined by the Director, Price Support Division, FSA. If 
any blends of honey contain such ineligible honey, the lot as a whole 
shall be considered ineligibile for loan.
    Loan is a recourse loan on honey.
    Loan quantity is the quantity on which the loan was disbursed shown 
on the note and security agreement.
    Nontable honey is honey having a predominant flavor of limited 
acceptability for table use even though

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such honey may be considered suitable for table use in areas in which 
it is produced and includes honey with a predominant flavor of aster, 
athel, avocado, Brazilian pepper, buckwheat (except western wild 
buckwheat), cabbage palmetto, Christmas berry, cranberry, dandelion, 
eucalyptus, goldenrod, heartsease (smartweed), horsemint, kiawe, 
loosestrife, macadamia, mangrove, manzanita, mint, partridge pea, 
rattan vine, safflower, salt cedar (Tamarix Gallica) spanish needle, 
spikeweed, titi, toyon, tulip popular, wild cherry, yaupon, and 
similarly-flavored honey or blends of such honeys as determined by the 
Director, Price Support Division, Farm Service Agency.
    Ownership is with respect to honey tendered for a loan, control, 
title, risk of loss, and the right to make all decisions regarding the 
tender of honey to CCC for a loan or for marketing.
    Person is an individual, partnership, association, corporation, 
estate or trust, or other business enterprise or other legal entity 
and, whenever applicable a State, political subdivision of a State, or 
any agency thereof.
    Program is the administration and issuance of a loan in accordance 
with the terms and conditions of this part and of any note and security 
agreement which must be executed by a loan recipient under this part.
    Table honey is any honey having a good flavor of the predominant 
floral source which can be readily marketed for table use in all parts 
of the country including honey having the following sources: alfalfa, 
apple, basswood, bird's-foot trefoil, blackberry, blueberry, brazil 
brush, catsclaw, Chinese tallow, clover, cotton, fireweed, gallberry, 
huajillo, knapweed (American), lima bean, mesquite, orange, raspberry, 
sage, saw palmetto, snowberry, sourwood, soybean, star thistle 
(barnaby's thistle), sunflower, sweet clover, tupelo, vetch, western 
wild buckwheat, wild alfalfa, and similar mild flavors or blends of 
mild-flavored honeys as determined by the Director, Price Support 
Division, FSA.
    Representative is a receiver, executor, administrator, guardian, or 
trustee representing the interests of a person or an estate.
    State committee is the FSA committee so designated for the 
applicable State.


Sec. 1434.4  Eligibility.

    (a) To be eligible to receive an individual or joint loan under 
this part, a person must:
    (1) Own, other than through a security interest, mortgage, or lien, 
honey that:
    (i) Is produced in the United States during the calendar year for 
which a loan is requested and extracted on or before December 31 of 
such calendar year;
    (ii) Does not contain any ineligible honey floral sources;
    (iii) Is not adulterated;
    (iv) Has not been scorched, burned, or subjected to excessive heat 
resulting in objectionable flavor, color deterioration or 
carmelization;
    (v) Does not contain excessive bees or bee parts, paint chips, wood 
chips, or other foreign matter; and
    (vi) Is not fermenting.
    (2) Share in the risk of producing honey;
    (3) Comply with paragraph (h) of this section;
    (4) Store the honey pledged as loan collateral in eligible storage 
and in eligible metal containers that meet the requirements of 
Secs. 1434.7 and 1434.5, respectively;
    (5) Adequately protect the interests of CCC by providing security 
for a loan in accordance with the requirements in Sec. 1434.8 and by 
maintaining in good condition the honey pledged as security for a loan;
    (6) Be accurate and truthful and not make any misrepresentations 
with respect to any information provided to CCC concerning any activity 
covered by this part; and
    (7) Not have been convicted of a crime as would render the person 
not eligible for the loan because of the provisions of part 718 of this 
title.
    (b) A person who complies with paragraph (a) of this section, who 
enters into a contract to sell the honey used as collateral for a loan 
but retains, at a minimum, a beneficial interest in the honey and who 
does not receive an advance payment from the purchaser to enter into 
the contract unless the purchaser is a cooperative marketing 
association (CMA) that is eligible under paragraph (g) of this section, 
remains eligible for a loan.
    (c) Two or more applicants may be eligible for a joint loan if:
    (1) The conditions in paragraphs (a) and (b) of this section are 
met with respect to the commingled honey collateral stored in the same 
eligible containers they are tendering for a loan; and
    (2) The commingled honey is not used as collateral for an 
individual loan that has not been repaid.
    (d) Heirs who succeed to a beneficial interest in the honey are 
eligible for a loan if they:
    (1) Assume the decedent's obligation under a loan if such loan has 
already been obtained; and
    (2) Assure continued safe storage of the honey if such honey has 
been pledged as collateral for a loan.
    (e) A representative may be eligible to receive a loan on behalf of 
a person or estate who or which meets the requirements in paragraphs 
(a), (b), (c), and (d) of this section and that the honey tendered as 
collateral by the representative, in his capacity as a representative, 
shall be considered as tendered by the person or estate being 
represented.
    (f) A minor who otherwise meets the requirements of this part for a 
loan shall be eligible to receive a loan only if the minor meets one of 
the following requirements:
    (1) A court or statute has conferred the right of majority on the 
minor;
    (2) A guardian has been appointed to manage the minor's property 
and the applicable loan documents are signed by the guardian;
    (3) Any note signed by the minor is cosigned by a person determined 
by the county committee to be financially responsible; or
    (4) A surety, by furnishing a bond, guarantees to protect CCC from 
any loss incurred for which the minor would be liable had the minor 
been an adult.
    (g) A CMA which the Executive Vice President, CCC, determines meets 
the requirements for CMA's in part 1425 of this title may be eligible 
to obtain a loan on behalf of those members who themselves are eligible 
to obtain a loan provided that:
    (1) The beneficial interest in the honey must always, until loan 
repayment or forfeiture, remain in the member who delivered the honey 
to the eligible CMA or its member CMA's, except as otherwise provided 
in this part; and
    (2) The honey delivered to an eligible CMA shall not be eligible 
for a loan if the member who delivered the honey does not retain the 
right to share in the proceeds from the marketing of the honey as 
provided in part 1425 of this title.
    (h)(1) To be eligible to receive loans under this part a producer 
must have the beneficial interest in the honey that is tendered to CCC 
for a loan. The producer must always have had the beneficial interest 
in the honey unless, before the honey was extracted, the producer and a 
former producer whom the producer tendering the honey to CCC has 
succeeded had such an interest in the honey. Honey obtained by gift or 
purchase shall not be eligible to be tendered to CCC for loans. Heirs 
who succeed to the beneficial interest of a deceased producer or who 
assume the decedent's obligations under an existing loan shall be 
eligible to receive loans whether succession to the honey occurs before 
or after extraction so long as the

[[Page 10926]]

heir otherwise complies with the provisions of this part.
    (2) A producer shall not be considered to have divested the 
beneficial interest in the honey if the producer retains control, 
title, and risk of loss in the honey including the right to make all 
decisions regarding the tender of such honey to CCC for a loan, and the 
producer takes one of the following actions:
    (i) Executes an option to purchase, whether or not a payment is 
made by the potential buyer for such option to purchase, with respect 
to such honey if all other eligibility requirements are met and the 
option to purchase contains the following provision:

    Notwithstanding any other provision of this option to purchase, 
title, risk of loss, and beneficial interest in the honey, as 
specified in 7 CFR part 1434, shall remain with the producer until 
the buyer exercises this option to purchase the honey. This option 
to purchase shall expire, notwithstanding any action or inaction by 
either the producer or the buyer, at the earlier of: (1) the 
maturity of any CCC loan which is secured by such honey; (2) the 
date the CCC claims title to such honey; or (3) such other date as 
provided in this option.

    (ii) Enters into a contract to sell the honey if the producer 
retains title, risk of loss, and beneficial interest in the honey and 
the purchaser does not pay to the producer any advance payment amount 
or any incentive payment amount to enter into such contract except as 
provided in part 1425 of this chapter.
    (3) If loans are made available to producers through an approved 
CMA in accordance with part 1425 of this chapter, the beneficial 
interest in the honey must always have been in the producer-member who 
delivered the honey to the CMA or its member CMA's, except as otherwise 
provided in this section. Honey delivered to such a CMA shall not be 
eligible for loans if the producer-member who delivered the honey does 
not retain the right to share in the proceeds from the marketing of the 
honey as provided in part 1425 of this chapter.
    (i) A producer may, before the final date for obtaining a loan for 
honey, re-offer as loan honey any honey that has been previously 
pledged as loan honey except that the loan on such re-offered honey 
shall have the same maturity date as the original loan.


Sec. 1434.5  Containers and drums.

    (a)(1) The honey must be packed in metal containers of a capacity 
of not less than 5 gallons or greater than 70 gallons. The metal 
containers must meet the requirements of the Federal Food, Drug, and 
Cosmetic Act, as amended, and regulations issued thereunder and must be 
generally fit for the purpose for which they are to be used;
    (2) The 5-gallon containers must hold approximately 60 pounds of 
honey, and must be new, clean, sound, uncased, and free from 
appreciable dents and rust. The handle of each container must be firm 
and strong enough to permit carrying the filled container. The cover 
and can opening must not be damaged in any way that will prevent a 
tight seal. Cans which are punctured or have been punctured and 
resealed by soldering will not be acceptable, and
    (3) The steel drums must be an open-end type and filled no closer 
than 2 inches from the top of the drums. Such drums must be new or must 
be used drums which have been reconditioned inside and outside. The 
steel drums must be clean, treated inside and outside to prevent 
rusting, fitted with gaskets which provide a tight seal and have an 
inside coating suitable for honey storage.
    (b) Honey shall not be eligible to be pledged as collateral for 
loans if such honey is stored in:
    (1) 55-gallon steel drums having a tare weight less than 38 pounds, 
30-gallon steel drums having a tare weight less than 26 pounds, or 
drums having removable liners of polyethylene or other materials;
    (2) Bung-type drums;
    (3) Bulk tanks;
    (4) Plastic buckets and containers;
    (5) Steel drums which are severely enough dented as to cause damage 
to their lining, improper seal, or stacking capabilities; and
    (6) Rusted drums with corroded areas.


Sec. 1434.6  Application, availability, disbursement, and maturity.

    (a) The deadline for requesting a loan offered under this part is 
May 7, 1999.
    (b) Loans mature on demand but not later than the last day of the 
ninth calendar month following the month in which the note and security 
agreement was approved. When the final maturity date falls on a non-
workday for county offices, CCC shall extend the final date to the next 
workday. Before the date determined in paragraph (a) of this section, a 
producer may re-offer as loan collateral any eligible honey that has 
been offered previously for a CCC loan and the loan has been repaid.
    (c) A producer must request loans at the county office of the 
county where the honey is stored if the honey is stored at the 
producer's farm. A producer who requests a loan on honey stored in 
eligible storage other than the producer's farm, may request loans at 
either the county office of the county where the storage facility is 
located or at the county office of the county where the producer's main 
place of business is located. A CMA must request loans at the county 
office for the county in which the principal office of the CMA is 
located unless the State committee designates another county office. If 
the CMA has operations in two or more States, the CMA must file its 
loan applications at the county office for the county in which its 
principal office for each State is located.
    (d) Subject to paragraph (a) of this section, loans for the 1998 
crop of honey are available to producers as soon as announced by CCC.
    (e) Loans will be made on the honey as declared and certified by 
the producer on Form CCC-633 (Honey), (Honey Loan Certification and 
Worksheet) at the time the honey is pledged as collateral for a loan. 
The producer is also required to declare and certify on Form CCC-633 
(Honey) the class (table or nontable) and floral source of the honey at 
the time the honey is pledged as collateral for a loan.
    (f) The request for a loan shall not be approved until all 
producers having an interest in the honey sign the note and security 
agreement and CCC approves such note and security agreement. The 
disbursement of loans will be made by county offices on behalf of CCC.
    (g) The loan documents shall not be presented for disbursement 
unless the honey subject to the note and security agreement:
    (1) Is eligible to be pledged as collateral for a loan;
    (2) Is in existence;
    (3) Has been extracted;
    (4) Is in eligible storage; and
    (5) Has not been blended or mixed with ineligible honey.
    (h) If, after a loan is made, CCC determines that the producer or 
the honey collateral is not in compliance with any of the provisions of 
this part, the producer shall refund the total amount disbursed under 
loan and charges plus interest, including late payment interest as 
provided in part 1403 of this title.


Sec. 1434.7  Eligible storage.

    (a) Loans will be made only on honey in eligible storage which 
shall consist of a storage structure located on or off the farm which 
is determined by CCC to be under the control of the producer and 
affords safe storage for honey pledged as collateral for a loan. If the 
honey located in a farm storage structure is pledged as collateral that 
secures more than one loan, the honey must be segregated so as to 
preserve the identity of the honey

[[Page 10927]]

securing such loan. Honey securing a loan must also be segregated from 
any honey not pledged as collateral for a loan which is stored in the 
same structure.
    (b) Producers may also obtain loans on honey packed in eligible 
containers and stored in facilities owned by third parties in which the 
honey of more than one person is stored if the honey which is to be 
pledged as collateral for a loan and which is stored identity preserved 
or is segregated from all other honey. Each container of the segregated 
quantity of honey shall be marked with the producer's name, loan 
number, and lot number so as to identify the honey from other honey 
stored in the structure.


Sec. 1434.8  Liens.

    (a) CCC's security interest in the honey pledged as collateral is 
first and superior to all other security interests.
    (b) The county office shall file or record, as required by State 
law, all financing statements needed to perfect a security interest in 
honey pledged as collateral for a loan. The cost of filing and 
recording shall be for the account of CCC.
    (c) If there are any other security interests, liens, or 
encumbrances on the honey, CCC shall obtain waivers that fully protect 
the interest of CCC even though the security interests, liens, or 
encumbrances are satisfied from the loan proceeds. No additional 
security interests, liens, or encumbrances shall be placed on the honey 
after the loan is approved.


Sec. 1434.9  Fees and interest.

    (a) A producer shall pay a nonrefundable loan service fee to CCC at 
a rate determined by CCC to operate the program on a no-net-cost basis 
as determined by the Executive Vice President, CCC. The amount of such 
fees will be available in State and county offices and will be shown on 
the note and security agreement.
    (b) Interest which accrues with respect to a loan shall be 
determined in accordance with part 1405 of this chapter.


Sec. 1434.10  Determination of quantity.

    The amount of a loan shall be based on 100 per cent of the net 
weight in pounds of such quantity certified by the producer for honey 
on Form CCC-633 (Honey) which is pledged as security for the loan and 
covered by the note and security agreement. Estimates of the quantity 
of honey shall be made on the basis of 12 pounds for each gallon of 
rated capacity of the container.


Sec. 1434.11  Transfer of producer's interest prohibited.

    Absent written approval from CCC, the producer shall not transfer 
either the remaining interest in, or right to redeem, the honey pledged 
as collateral for a loan on honey nor shall anyone acquire such 
interest or right. Subject to the provisions of Sec. 1434.14, a 
producer who wishes to liquidate all or part of a loan by contracting 
for the sale of the honey must obtain written approval from the county 
office on a form prescribed by CCC to remove a specified quantity of 
the honey from storage. Any such approval shall be subject to the terms 
and conditions set forth in the applicable form, copies of which may be 
obtained by producers at the county office.


Sec. 1434.12  Loss or damage.

    The producer is responsible for any loss in quantity or quality of 
the honey pledged as collateral for a loan. CCC shall not assume any 
loss in quantity or quality of the loan collateral.


Sec. 1434.13  Personal liability of the producer.

    (a) When applying for an individual or joint loan, each producer 
agrees:
    (1) When signing Form CCC-633 (Honey), Honey Loan Certification and 
Worksheet and Form CCC-677 Farm Storage Note and Security Agreement, 
that the producer will:
    (i) Provide correct, accurate, and truthful certifications and 
representations of the loan quantity and all other matters of fact and 
interest; and
    (ii) Not remove or dispose of any amount of the loan quantity 
without prior written approval from CCC in accordance with this 
section.
    (2) That violation of the terms and conditions of this part and 
Form CCC-677 will cause harm or damage to CCC in that funds may be 
disbursed to the producer for a loan quantity which is not actually in 
existence or for a quantity for which the producer is not eligible.
    (b) For the purposes of this section, violations include any 
failure to comply with this part or the loan agreement, including but 
not limited to any incorrect certification or:
    (1) Unauthorized removal of honey which shall include but is not 
limited to the movement of any loan quantity of honey from the storage 
structure in which the commodity was stored when the loan was approved 
to any other storage structure whether or not such structure is located 
on the producer's farm without prior written authorization from the 
county committee in accordance with Sec. 1434.14.
    (2) Any unauthorized disposition which shall include, but is not 
limited to the conversion of any loan quantity pledged as collateral 
for a loan without prior written authorization from the county 
committee in accordance with Sec. 1434.14.
    (c) The producer and CCC agree that it will be difficult, if not 
impossible, to prove the amount of damages to CCC for conduct which is 
in violation of this section. Accordingly, if the county committee 
determines that the producer has engaged in any such violation, 
liquidated damages shall be assessed in addition to any loan refund and 
other charges that may be due. The amount of such damages shall be 
computed using the quantity of honey that is involved in the violation 
and the formula set out below. If CCC determines the producer:
    (1) Acted in good faith when the violation occurred, liquidated 
damages will be assessed by multiplying the quantity involved in the 
violation by:
    (i) 10 percent of the loan rate applicable to the loan note for the 
first offense; or
    (ii) 25 percent of the loan rate applicable to the loan note for 
the second offense; or
    (2) Did not act in good faith with regard to the violation, or for 
cases other than the first or second offense, liquidated damages will 
be assessed by multiplying the quantity involved in the violation by 25 
percent of the loan rate applicable to the loan note.
    (d) For liquidated damages assessed in accordance with paragraph 
(c)(1) of this section, the county committee shall:
    (1) Require repayment of the loan principal applicable to the loan 
quantity involved in the violation plus charges and interest; and
    (2) If the producer fails to pay such amount within 30 calendar 
days from the date of notification, call the applicable loan for all of 
the honey under loan, plus charges and interest.
    (e) For liquidated damages assessed in accordance with paragraph 
(c)(2) of this section, the county committee shall call the loan 
involved in the violation, and charges plus interest.
    (f) The county committee:
    (1) May waive the administrative actions taken in accordance with 
paragraphs (c)(1) and (d) of this section if the county committee 
determines that:
    (i) The violation occurred inadvertently, accidentally, or 
unintentionally; or
    (ii) The producer acted to prevent spoilage of the commodity.
    (2) Shall not consider the following acts as inadvertent, 
accidental, or unintentional:

[[Page 10928]]

    (i) Movement of loan collateral off the farm;
    (ii) Movement of loan collateral from one storage structure to 
another on the farm; and
    (iii) Consumption of loan collateral.
    (3) Shall furnish a copy of its determination to the State 
committee, and the Administrator. If the determination of the county 
committee is not disapproved by either the State committee or the 
Administrator or a designee, within 60 calendar days from the date the 
determination is received, such determination may be considered to have 
been approved unless the Administrator issues procedures that allow for 
more time or decides in an individual case that more time is needed.
    (g) If there is any violation of the loan agreement or this part, 
the loan may be terminated in which case there must be a full refund of 
the loan plus interest and costs.
    (h) If the county committee determines that the producer has 
violated this part or the loan agreement, the county committee shall 
notify the producer in writing that:
    (1) The producer has 30 calendar days to provide evidence and 
information regarding the circumstances which caused the violation, to 
the county committee, and
    (2) Administrative actions will be taken in accordance with 
paragraph (d) or (e) of this section.
    (i)(1) If a producer:
    (i) Makes any fraudulent or misleading representation in obtaining 
a loan, maintaining, or settling a loan; or
    (ii) Disposes or moves the loan collateral without the approval of 
CCC, such loan shall become payable upon demand by CCC. The producer 
shall be liable for:
    (A) The amount of the loan;
    (B) Any additional amounts paid by CCC with respect to the loan;
    (C) All other costs which CCC would not have incurred but for the 
fraudulent representation, the unauthorized disposition or movement of 
the loan collateral;
    (D) Interest on such amounts;
    (E) Late payment interest as may be provided for in part 1403 of 
this title; and
    (F) Liquidated damages assessed under paragraph (c) of this 
section; and
    (2) Notwithstanding any provisions of the note and security 
agreement, if a producer has made any such fraudulent or misleading 
representation to CCC or if the producer has disposed of, or moved, the 
loan collateral without prior written approval from CCC in accordance 
with Sec. 1434.14, the value of the settlement for such collateral 
removed by CCC shall be determined by CCC according to Sec. 1434.16.
    (j) A producer shall be personally liable for any damages resulting 
from honey removed by CCC, containing mercurial compounds or other 
substances poisonous to humans, animals, or food commodities which are 
contaminated.
    (k) If the amount disbursed under a loan or in settlement thereof 
exceeds the amount authorized under this part, the producer shall be 
personally liable for repayment of such excess and charges, plus 
interest, and for any other sanction as may be allowed by law.
    (l) If the amount collected from the producer in satisfaction of 
the loan is less than the amount required in accordance with this part, 
the producer shall be personally liable for repayment of the amount of 
such deficiency and charges, plus interest.
    (m) In the case of joint loans, the personal liability for the 
amounts specified in this section shall be joint and several on the 
part of each producer signing the loan note. Further, each producer who 
is a party to a joint loan will be jointly and severally liable for any 
violation of the terms and conditions of the note and security 
agreement, and the regulations set forth in this part. Each such 
producer shall also remain liable for repayment of the entire loan 
amount until the loan is fully repaid without regard to such producer's 
claimed share in the honey, or loan proceeds, after execution of the 
note and security agreement by CCC.
    (n) Any or all of the liquidated damages assessed in accordance 
with the provisions of paragraph (c) of this section may be waived as 
determined by CCC.
    (o) Remedies set out here are in addition to remedies the CCC will 
have through its security interest on honey which secures the repayment 
of the loan made on the honey.
    (p) All remedies provided for in this section or part are in 
addition to any remedies as may otherwise be provided for in law.


Sec. 1434.14  Release of the honey pledged as collateral for a loan.

    (a)(1) A producer shall not move or dispose of any honey pledged as 
collateral for a loan until prior written approval for such removal or 
disposition has been received from the county committee in accordance 
with this section.
    (2) A producer may at any time obtain a release of all or part of 
the honey remaining as loan collateral by paying to CCC the amount of 
the loan and any charges which had been made by CCC to the producer 
with respect to the quantity of the honey released, plus interest.
    (3) When the proceeds of a sale of honey are needed to repay all or 
part of a loan, the producer must request and obtain prior written 
approval of the county office on a form prescribed by CCC in order to 
remove a specified quantity of the honey from storage. Any such 
approval shall be subject to the terms and conditions set forth in the 
applicable form, copies of which may be obtained by producers at the 
county office. Any such approval shall not constitute a release of 
CCC's security interest in the commodity or release the producer from 
liability for any amounts due and owing to CCC with respect to any loan 
indebtedness if full payment of such amounts is not received by the 
county office.
    (b) The note and security agreement shall not be released until all 
loan liability has been satisfied in full.
    (c) After satisfaction of a loan, CCC shall release CCC's security 
interest in the honey at the producer's request. The producer shall be 
responsible for payment of any fee for such release if such fee can be 
determined.


Sec. 1434.15  Liquidation of loans.

    (a) The producer is required to repay the loan on or before 
maturity by payment of the amount of loan, plus any charges, plus 
interest.
    (b) If a producer fails to settle the loan in accordance with 
paragraph (a) of this section within 30 calendar days from the maturity 
date of such loan, or other reasonable time period as established by 
CCC, a claim for the loan amount, plus charges, plus interest shall be 
established. CCC shall inform the producer before the maturity date of 
the loan of the date by which the loan must be settled or a claim will 
be established in accordance with part 1403 of this title.


Sec. 1434.16  Foreclosure.

    (a) Upon maturity and nonpayment of the loan, title to the 
unredeemed honey securing the loan shall vest in CCC.
    (b) If the total amount due on a loan or the unpaid amount of the 
note and charges, plus interest is not satisfied upon maturity, CCC may 
remove the honey from storage and assign, transfer, and deliver the 
honey or documents evidencing title thereto at such time, in such 
manner, and upon such terms as CCC may determine at public or private 
sale. Any such disposition may also be effected without removing the 
honey from storage. The honey may be processed before sale and CCC may

[[Page 10929]]

become the purchaser of the whole or any part of the honey at either a 
public or private sale.
    (c) If the honey is removed from storage by CCC and is sold, the 
value of the settlement shall be the proceeds from the sale of the 
honey minus costs associated with the disposition of the honey and 
shall be applied to the amount owed CCC by the producer; and
    (1) If the value of the collateral computed at settlement is less 
than the amount due, the producer shall pay to CCC the amount of such 
deficiency and charges, plus interest on such deficiency and CCC may 
take any action against the producer to recover the deficiency; or
    (2) If the proceeds received from the sale of the honey so computed 
are greater than the sum of the amount due plus any cost incurred by 
CCC in conducting the sale of the honey, such excess shall be paid to 
the producer or, if applicable, to any secured creditor of the 
producer.


Sec. 1434.17  Handling payments and collections not exceeding $9.99.

    In order to avoid administrative costs of making small payments and 
handling small accounts, amounts of $9.99 or less which are due the 
producer will be paid only upon the producer's request. Deficiencies of 
$9.99 or less, including interest, may be disregarded unless demand for 
payment is made by CCC.


Sec. 1434.18  Death, incompetency, or disappearance; appeals; other 
loan provisions.

    (a) In the case of death, incompetency, or disappearance of any 
producer who is entitled to the payment of any sum in settlement of a 
loan, payment shall, upon proper application to the county office which 
made the loan, be made to the persons who would be entitled to such 
producer's share under the regulations contained in part 707 of this 
title. Applications for loans may be made upon application of a 
representative of the producer as allowed under standard practice for 
farm programs.
    (b) Appeals of adverse decisions made under this part shall be 
subject to the provisions of 7 CFR parts 11 and 780.
    (c) The Executive Vice President, CCC, may impose such additional 
loan conditions as are determined to be necessary or appropriate to 
insure that the purposes and goals of the program provided for in this 
part are met.

    Signed at Washington, D.C., on March 2, 1999.
Keith Kelly,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 99-5557 Filed 3-3-99; 12:57 pm]
BILLING CODE 3410-05-P