[Federal Register Volume 64, Number 120 (Wednesday, June 23, 1999)]
[Rules and Regulations]
[Pages 33367-33378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15624]



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 Rules and Regulations
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  Federal Register / Vol. 64, No. 120 / Wednesday, June 23, 1999 / 
Rules and Regulations  

[[Page 33367]]


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DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Parts 1 and 11


National Appeals Division Rules of Procedure

AGENCY: National Appeals Division, Office of the Secretary, USDA.

ACTION: Final rule.

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SUMMARY: On December 29, 1995, the National Appeals Division (NAD) in 
the Office of the Secretary published an interim final rule to 
implement Title II, Subtitle H, of the Federal Crop Insurance Reform 
and Department of Agriculture Reorganization Act of 1994, by setting 
forth procedures for program participant appeals of adverse decisions 
by United States Department of Agriculture (USDA) agency officials to 
NAD. The deadline for receipt of comments was March 28, 1996. Nineteen 
timely public comments were received in response to the interim final 
rulemaking.
    The Secretary now issues a final rule for the rules of procedure of 
NAD and for the technical change regarding authentication of NAD 
records by the NAD Director. The interim final rulemaking document also 
included conforming changes to the former appeal rules of USDA agencies 
whose adverse decisions are now subject to NAD review. This final 
rulemaking document does not contain final rules for the conforming 
changes. Those final rules will be issued by the respective agencies at 
a later date.

DATES: Effective Date: This final rule is effective July 23, 1999.
    Applicability Date: This rule applies to all agency adverse 
decisions issued after July 23, 1999, all agency adverse decisions on 
which timely NAD appeals have not yet been taken, and pending NAD 
appeals.

FOR FURTHER INFORMATION CONTACT: L. Benjamin Young, Jr., General Law 
Division, Office of the General Counsel, United States Department of 
Agriculture, STOP 1415, 1400 Independence Avenue SW, Washington, DC 
20250-1415; 202/720-4076; e-mail: [email protected].

SUPPLEMENTARY INFORMATION:

Classification

    This final rule has been reviewed under E.O. 12866, and it has been 
determined that it is not a ``significant regulatory action'' rule 
because it will not have an annual effect on the economy of $100 
million or more or adversely and materially affect a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, of State, local, or tribal governments or 
communities. This final rule will not create any serious 
inconsistencies or otherwise interfere with actions taken or planned by 
another agency. It will not materially alter the budgetary impact of 
entitlements, grants, user fees, or loan programs, or the rights and 
obligations of recipients thereof, and does not raise novel legal or 
policy issues arising out of legal mandates, the President's 
priorities, or principles set forth in E.O. 12866.

Regulatory Flexibility Act

    USDA certifies that this rule will not have a significant impact on 
a substantial number of small entities as defined in the Regulatory 
Flexibility Act, Pub. L. 96-534, as amended (5 U.S.C. 601 et seq.).

Paperwork Reduction Act

    USDA has determined that the provisions of the Paperwork Reduction 
Act, as amended, 44 U.S.C., chapter 35, do not apply to any collections 
of information contained in this rule because any such collections of 
information are made during the conduct of administrative action taken 
by an agency against specific individuals or entities. 5 CFR 
1320.4(a)(2).

Background and Purpose

    On December 27, 1994 (see 59 FR 66517), the Secretary of 
Agriculture noticed that the NAD was established pursuant to Title II, 
Subtitle H of the Federal Crop Insurance Reform and Department of 
Agriculture Reorganization Act of 1994, Pub. L. No. 103-354, 7 U.S.C. 
6991 et seq. (``the Reorganization Act''). NAD was assigned 
responsibility for all administrative appeals formerly handled by the 
National Appeals Division of the former Agriculture Stabilization and 
Conservation Service (ASCS) and by the National Appeals Staff of the 
former Farmers Home Administration (FmHA), appeals arising from 
decisions of the former Rural Development Administration (RDA) and the 
former Soil Conservation Service (SCS), appeals arising from decisions 
of the successor agencies to the foregoing agencies established by the 
Secretary, appeals arising from decisions of the Commodity Credit 
Corporation (CCC) and the Federal Crop Insurance Corporation (FCIC), 
and such other administrative appeals arising from decisions of 
agencies and offices of USDA as may in the future be assigned by the 
Secretary.
    This final rule sets for the jurisdiction of the NAD, and the 
procedures appellants and agencies must follow upon appeal of adverse 
decisions by covered USDA program ``participants'' as defined in detail 
in 7 CFR part 11.

Response to Comments and Changes to Interim Final Rule

    Nineteen comments were received by March 28, 1996 in response to 
the request for comments on the interim final NAD rule. In response to 
these comments, minor changes have been made to the interim final rule. 
Additionally, a few other changes to the interim final rule have been 
made to reflect subsequent Congressional and USDA action established in 
the Risk Management Agency and to clarify some aspects of the rule as a 
result of the application of the interim final rule since it was 
promulgated.
    The following explanation is given for those sections of the 
interim final rule that have been changed. Responses to comments not 
addressed in the explanation of changes follow.

Effective Date

    The provisions of the interim final rule applicable to NAD Director 
review (7 CFR 11.9) were made effective retroactively to October 20, 
1994, the date on which the Secretary established NAD. The purpose of 
the retroactive application of that section was to provide an 
administrative mechanism

[[Page 33368]]

for reconsideration of Director reviews during the transition from the 
old to the new appeals system where appellants had not received notice 
or copies or agency requests for review of hearing officer decisions. 
At this point, USDA has determined that any difficulties with prior 
decisions should have been resolved. In order to remove any ambiguity 
regarding the finality of Director review decisions, USDA accordingly 
is not making Sec. 11.9 of this final rule retroactive.

Section 11.1  Definitions

    Agency. Section 194 of the Federal Agriculture Improvement and 
Reform Act of 1996, Pub. L. No. 104-127, amended the Reorganization Act 
by adding a new section 226A (7 U.S.C. 6933) authorizing the Secretary 
to establish an Office of Risk Management to supervise the Federal Crop 
Insurance Corporation (FCIC) and other crop insurance-related programs. 
The Secretary implemented this provision with Secretary's Memorandum 
1010-2 issued on May 3, 1996, which established the Risk Management 
Agency (RMA). Since the RMA has taken over FCIC supervisory functions 
formerly assigned to the Farm Service Agency (FSA), USDA has added RMA 
to the definition of ``agency'' in this final rule.
    Given that the Reorganization Act was enacted more than four years 
ago, USDA has deleted obsolete references to the former Agricultural 
Stabilization and Conservation Service (ASCS), Farmers Home 
Administration (FmHA), and Soil Conservation Service (SCS) from the 
definition of ``agency.'' However, to ensure any matters that may arise 
from those former agencies remain within the jurisdiction of NAD, 
appropriate reference has been made to include a ``predecessor'' of a 
named agency within the definition of ``agency.''
    USDA has deleted the Rural Development Agency (RDA) from the 
definition of ``agency'' as that agency no longer exists.
    In many States and at the national office level, decisions relating 
to programs of the Rural Housing Service (RHS), Rural Business-
Cooperative Service (RBS), and Rural Utilities Service (RUS) may be 
issued under the auspices of ``Rural Development.'' Accordingly, USDA 
adds Rural Development (RD) to the definition of ``agency'' to avoid 
any confusion as to whether such decisions are subject to appeal to 
NAD.
    Participant. For USDA response to comments and amendments regarding 
the participation of parties in NAD proceedings other than the agency 
and the appellant, see the preamble text below addressing new 
Sec. 11.15 of the rule.
    USDA also amends this section to clarify that participants in 
proceedings before State Tobacco Marketing Quota Review Committees 
(``Tobacco Committees) under section 361, et seq., of the Agricultural 
Adjustment Act of 1938, as amended (7 U.S.C. 1361, et seq.) are 
excluded from the definition of ``participant'' in Sec. 11.1. In 
creating the NAD, Congress repealed several statutory appeal processes 
in section 273 of the Reorganization Act, but did not repeal these 
statutory appeal and judicial review provisions for decisions of the 
Tobacco Committees. Accordingly, in order to construe the statutes 
harmoniously, USDA concludes Congress did not intend for NAD review to 
supersede the specific statutory review process for decisions of the 
Tobacco Committees, and amends the NAD rule to give effect to this 
interpretation.

Section 11.4  Inapplicability of Other Laws and Regulations

    Three comments were received from the same commenter concerning the 
applicability of the provisions of the Administrative Procedure Act 
(APA) regarding formal adjudicative proceedings (5 U.S.C. 554-57, 3105) 
and the Equal Access to Justice Act (EAJA) (5 U.S.C. 504) to NAD 
proceedings. The commenter suggests that 5 U.S.C. 559 requires that the 
formal adjudication provisions of the APA apply to NAD proceedings, and 
therefore, by its terms, EAJA also applies to NAD proceedings.
    For the reasons set forth in the preamble to the interim final 
rule, it is the position of USDA that Congress did not intend for 
either the APA or the EAJA to apply to NAD proceedings. This is the 
same position that USDA took with respect to the applicability of the 
APA and EAJA when it was addressed in the regulations applicable to 
appeals before the former Farmers Home Administration National Appeals 
Staff. See 53 FR 26401 (July 12, 1988).
    In Lane v. U.S. Dept. of Agriculture, 120 F.3d 106 (8th Cir. 1997), 
the court disagreed with the USDA position regarding the applicability 
of the APA and EAJA, holding that 5 U.S.C. 559 required application of 
both Acts to NAD proceedings. Consequently, USDA will apply the holding 
in Lane to NAD appeals which arise within the 8th Circuit. For adverse 
decisions arising outside of the 8th Circuit, USDA will continue to 
assert the inapplicability of NAD and EAJA, and NAD will not process 
EAJA applications filed in such appeals.
    By definition, USDA EAJA regulations at 7 CFR part 1, subpart J, 
apply to any adjudication that USDA is required to conduct under the 
formal adjudication provisions of the APA. 7 CFR 1.183(a)(1)(i). 
Accordingly, EAJA applications on 8th Circuit NAD appeals have been 
processed by USDA in accordance with the USDA EAJA regulations at 7 CFR 
part 1, subpart J, and will continue to be processed in accordance with 
those regulations with one change.
    Under EAJA, it is the agency, not the adjudicative officer, that is 
the final agency decisionmaker on an administrative EAJA application. 5 
U.S.C. 504(a)(3). A NAD Hearing Officer clearly falls within the 
definition of ``adjudicative officer'' under the USDA EAJA regulations 
(7 CFR 1.180(b)); however, the Secretary has delegated to the Judicial 
Officer (with the exception of covered proceedings arising before the 
Board of Contract Appeals) his authority to review decisions of 
adjudicative officers as the final agency decisionmaker under EAJA (7 
CFR 1.189). Concurrently with the promulgation of this final rule, the 
Secretary by separate memorandum will reassign, from the Judicial 
Officer to the NAD Director, his authority to make final agency 
determinations under EAJA for initial EAJA determinations rendered by 
NAD Hearing Officers. This delegation will apply prospectively to 
initial EAJA determinations issued by NAD Hearing Officers after the 
date the memorandum is signed.
    As the holding of the 8th Circuit in Lane makes apparent, the right 
of a NAD appellant under EAJA to recover attorneys fees incurred in NAD 
proceedings will not rise or fall on the basis of whether or not USDA 
promulgates a regulation accepting or denying the applicability of the 
APA and EAJA. Further, as a result of Lane, the statement in the 
interim final rule regarding the inapplicability of the APA and EAJA no 
longer has universal application.
    Accordingly, USDA has determined to remove any references to the 
APA or EAJA from the final rule in order to eliminate the issue of 
rulemaking from what is a pure matter of statutory construction 
involving the relationship of the Reorganization Act, the APA, and 
EAJA. The removal of references to the APA and EAJA, however, does not 
mean that USDA now finds the APA and EAJA applicable to NAD 
proceedings. As indicated above, USDA will continue to assert that the 
APA and EAJA do not apply to NAD appeals except where required by 
judicial ruling.

[[Page 33369]]

Section 11.5  Informal Review of Adverse Decisions

    Section 11.5(a) of the interim final rule provides that a 
participant first must seek county or area committee review of any 
adverse decision issued at the field service office level by an officer 
or employee of FSA, or any employee of such county or area committee. 
In the context of the USDA reorganization with the combination of the 
former Farmers Home Administration and the Agricultural Stabilization 
and Conservation Service into FSA, confusion has surrounded this 
provision with respect to its applicability to the former FmHA farm 
credit programs. As a result of reorganization, very few farm credit 
decisions would come within the scope of this requirement in any case. 
Accordingly, to clarify the scope of the provision, language has been 
added excepting farm credit programs from its coverage. Any 
inconsistency with the interim final rule at 7 CFR part 780 will be 
corrected when that rule is finalized but in the meantime NAD will 
apply these rules in determining the acceptability of an appeal to NAD 
of a farm credit decision by FSA.

Section 11.6  Director Review of Agency Determinations of Appealability 
and Right of Participants to Division Hearing

    Paragraph (a)(1) of Sec. 11.6 is amended to correct an omission in 
the interim final rule that led to a discrepancy between the statement 
in the preamble to that rule and the text of that rule. The preamble of 
the interim final rule provided that a request for Director review of 
an agency determination that a decision is not appealable must be 
personally signed by the participant, just as the case with a 
participant request for a hearing and request for Director review of a 
Hearing Officer determination. However, the language of section 
11.6(a)(1) did not expressly state that such requests must be 
personally signed. Section 11.6(a)(1) now makes clear that the 
participant must personally sign the request for Director review of an 
agency determination of non-appealability.
    Further, with respect to the need for personal signature for 
certain actions, USDA clarifies that the reasonable interpretation of 
this requirement is vested in the NAD Hearing Officers or Director in 
individual cases. While it is not a statutory jurisdictional 
prerequisite for perfecting a timely appeal, it is reasonable to expect 
that authorized representatives seeking to file appeals before NAD 
would check the rules of the forum for filing requirements. Even though 
the requirement is expressed using the term ``personally,'' it also is 
reasonable to interpret that term as applying to a responsible officer 
or employee of an entity where the definition of ``participant'' in 
Sec. 11.1 encompasses an ``entity'' as well as an ``individual.''

Section 11.8  Division Hearings

    Section 11.8(b)(6) is ambiguous with respect to the options of a 
NAD hearing officer when a party fails to show up at a hearing. Section 
11.8(b)(6)(i)(B) states that if the hearing officer elects to cancel 
the hearing, he can accept evidence into the record from any party 
present and then issue a determination, whereas Sec. 11.8(b)(6)(ii) 
suggests that the hearing officer must allow the absent party an 
opportunity to respond to any such evidence admitted prior to rendering 
a determination. USDA has modified the language of 
Sec. 11.8(b)(6)(i)(B) to make the acceptance of evidence clearly 
subject to Sec. 11.8(b)(6)(ii) prior to issuing a determination.

Section 11.9  Director Review of Determinations of Hearing Officers

    The word ``Associate'' in Sec. 11.9(d)(3) is changed to 
``Assistant'' to reflect the curent organization of NAD.

Section 11.15  Participation of Third Parties and Interested Parties in 
Division Proceedings

    Several commenters, either reinsurance companies or organizations 
commenting on behalf of reinsurance companies, requested that 
reinsurance companies be notified of and allowed to participate in NAD 
proceedings on participant appeals of FCIC decisions where the outcome 
of the NAD proceeding would affect policies held by reinsurance 
companies. For example, if FCIC declares an insured ineligible for crop 
insurance, a reinsurance company may cancel a previously existing 
policy as a result of that decision; however, if the insured then 
successfully appeals to NAD and the FCIC decision is overturned, the 
reinsurance company now will have a policy on its books that it had 
thought removed and it may not have received any notice of the NAD 
appeal or decision.
    One commenter also objected to the change from the proposed rule in 
the interim final rule that required a bank holding a guaranteed loan 
to jointly appeal with the borrower any adverse decision. The commenter 
argued that the borrower was the individual directly affected and thus 
should be able to appeal an adverse decision related to a guaranteed 
loan independently from the lender.
    In addition to the concerns raised by these commenters, NAD also 
has experienced difficulties in the appeal process where the interests 
of parties other than the appellant and the agency are involved.
    Accordingly, a new Sec. 11.15 has been added to the rule to provide 
procedures for handling these types of situations involving the 
interests of other parties in a NAD appeal.
    The new Sec. 11.15 recognizes that there are two types of 
situations where parties other than the appellant or the agency may be 
interested in participating in NAD proceedings. In the first situation, 
a NAD proceeding may in fact result in the adjudication of the rights 
of a third party, e.g., an appeal of a tenant involving a payment 
shared with a landlord, an appeal by one recipient of a share of a 
payment shared by multiple parties, or an appeal by one heir of an 
estate. In the second situation, there may be an interested party that 
desires to receive notice of and perhaps participate in an appeal 
because of the derivative impact the appeal determination will have on 
that party, e.g., guaranteed lenders and reinsurance companies.
    These two different types of situations require separate 
procedures. Thus, in the first type where the actual rights of a third 
party are being adjudicated, USDA has termed such a party a ``third 
party'' and provided a new Sec. 11.15(a) to provide for the 
participation of a ``third party.'' After an appellant files an appeal, 
if the agency, appellant, of NAD itself identifies a third party whose 
rights will be adjudicated in an appeal, NAD will issue a notice of the 
appeal to the third party and provide such party with an opportunity to 
participate fully as a party in the NAD proceeding. Participation will 
include the right to seek Director review of the determination of the 
Hearing Officer. USDA believes the participation of a third party under 
Sec. 11.15 also gives the third party the right to seek judicial review 
of the final NAD determination. If the third party receiving notice 
declines to participate, he will be bound by the final NAD 
determination as if he had participated. The intent of this provision 
is to include all parties in the initial NAD appeal and prevent a 
secondary appeal by a third party who did not receive notice of the 
appeal, but who is adversely affected by the agency implementation of 
the NAD determination of appeal, and who thus would then be entitled to 
an appeal of his own that could lead to a contradictory result.
    For example, the agency determines a recipient sharing in a payment 
with two

[[Page 33370]]

other parties is entitled to 25% of the payment, and the recipient 
appeals. NAD determines that the agency decision was erroneous, and the 
agency implements by according the appellant 50% of the payment. The 
first NAD determination would not be binding as to the other two 
recipients, thus giving rise to secondary appeals, unless the other two 
recipients had notice and opportunity to participate in the first 
appeal.
    In the second type of situation, new Sec. 11.15(b) provides for the 
participation of guaranteed lenders and crop reinsurers as ``interested 
parties'' in an appeal where the actual rights of such interested 
parties under a USDA program are not being adjudicated (i.e., the 
appeal would not lead to an agency implementation decision that would 
give rise to NAD appeal rights for them), but such parties would be 
impacted by the outcome. Interested parties are not entitled under this 
new provision to request Director review of a hearing officer 
determination. It also is the position of USDA that such participation 
of an ``interested party'' does not give rise to a right by such 
``interested party'' to judicial review of the final NAD determination.
    In light of these changes, USDA is striking the requirement in the 
definition of ``participant'' in Sec. 11.1 of the interim final rule 
that guaranteed lenders jointly appeal to NAD with borrowers.
    With respect to the comments suggesting that reinsurers should be 
notified of NAD appeals taken by insureds, that topic should be 
addressed in agency rules and not the rules pertaining to NAD itself. 
NAD does not have the resources, capability, or function to carry out 
that mission.

Other Comments

    As indicated above, the other CFR sections amended by the interim 
final rule and that are not a part of this final rule will be issued as 
final rules at a later date. Comments received on those rules are not 
addressed below except to the extent that they are related to a 
provision of 7 CFR part 11. Comments related to other parts of the 
interim final rule, or other agency rules (such as those for 
mediation), will be referred to the appropriate parties for further 
consideration.
Crop Insurance Issues
    One commenter expressed concern that the revision of 7 CFR part 
400, subpart J, in the interim final rule eliminated the rights of 
appeal previously contained in 7 CFR 400.92. The commenter questioned 
whether the more general language of the interim final rule provided 
for appeal rights coextensive to those in 7 CFR 400.92.
    Except with respect to the provision for notification to the 
reinsurance company in 7 CFR 400.92(f), USDA believes that the 
specified rights of appeal outlined in 7 CFR 400.92 are covered by the 
NAD appeal regulations contained in this final rule. Further, the 
notification issue has been dealt with partially in this final rule by 
providing reinsurance companies the right to participate in NAD appeals 
as detailed above.
    One reinsurance commenter also expressed the view that if allowed 
to participate in a NAD appeal it also should be allowed to request 
Director review of a hearing officer's decision. The comment reflected 
a concern that the agency would not timely request Director review of a 
hearing officer's decision and thus leave the reinsurer at risk. USDA 
does not adopt this recommendation because only program participants 
receiving adverse decisions from an agency have a statutory right to 
appeal under the NAD statute; since a reinsurer is not the recipient of 
the adverse decision, it may not be a NAD appellant able to request 
hearings and Director review. However, as interested parties, USDA is 
allowing reinsurers to participate in the hearing and Director review 
process.
    One commenter on behalf of crop insurers suggested that the interim 
final rule be revised to allow reinsurance companies to appeal to NAD 
where a matter would not be subject to appeal to the Agriculture Board 
of Contract Appeals (AGBCA). The NAD process was established as a forum 
primarily for producer appeals, not as a forum for contractual and 
quasi-contractual matters. USDA at this time does not perceive a gap 
between a reinsurance company's right of appeal to the AGBCA and the 
availability of participant appeals to NAD by recipients of FCIC or RMA 
adverse decisions; therefore, a safety provision in this NAD final rule 
to cover appeals not taken by the AGBCA is neither required nor 
appropriate.
Mediation
    Several commenters addressed issues regarding mediation. The 
mediation process between participants and agencies is not the subject 
of this final rule. Mediation is relevant to this rule only with 
respect to the determination of when a participant's right to appeal to 
NAD begins to toll. Comments regarding the length of time agencies 
allow for mediation to be requested and the length of time they permit 
for mediation to continue therefore are outside the scope of this rule 
and are not addressed herein.
    Section 11.5(c)(1) of the interim final rule provides that a 
participant request for mediation or alternative dispute resolution 
(ADR) stops the running of the 30-day period after an adverse decision 
in which a participant may appeal that decision. Once mediation or ADR 
has concluded, this provision provides that the participant then has 
the remaining balance of the 30 days to appeal. Finding this process 
prone to confusion, four commenters suggested that the termination of 
mediation without settlement should in some way be construed as a new 
adverse decision with a full 30 days to seek NAD review of the 
decision. This suggestion does not comport with the concept of 
mediation. First of all, the mediator is not an agency decisionmaker 
and the results of the mediator's work is not therefore an agency 
decision. Second, mediation does not result in decisions; it results 
either in a mutually acceptable solution to all parties or a 
termination of the mediation with no resolution of the dispute. The NAD 
statute does not provide for a new 30-day period for a NAD appeal to 
begin at the conclusion of the mediation process.
    One of the commenters, however, suggested that agencies issue a new 
adverse decision at the conclusion of mediation, with a notice of 
appeal rights. This adverse decision would replace the initial adverse 
determination and start the 30-day clock running anew for a NAD appeal. 
Such a mandate on USDA program agencies is beyond the scope of this 
final rule.
    Three commenters suggested that Sec. 11.5 of the rule provide that 
agencies notify participants of the balance of time remaining for 
appeal at the conclusion of mediation. Two commenters suggested that it 
would be inappropriate for the mediator to perform this task for 
reasons of liability and impartiality.
    USDA agrees that it would be inappropriate to require the mediator 
to provide such notice; however, USDA does not adopt the suggestion 
that agencies should be required to give such notice. Agency notices to 
participants of appeal rights are beyond the scope of this final rule.
    One commenter suggested that participants be billed for their share 
of the costs of medication. That subject is beyond the scope of this 
final rule.
Required Informal Agency Review
    One commenter suggested that the required informal review by a 
county or area committee as a prerequisite to a NAD appeal, as set 
forth in Sec. 11.5(a),

[[Page 33371]]

should be dropped because it results in additional costs and delays for 
participants. USDA declines to remove this provision.
Notification of Appeal Rights for Adverse Decisions Determined Non-
Appealable
    One commenter suggested that agencies be required to provide 
participants with notice of appeal rights to NAD under Sec. 11.6(a) of 
agency determinations that an adverse decision is not appealable. USDA 
agrees that information on such appeal rights should be given by 
agencies when a decision is issued with a statement that it is not 
appealable. As with other notice requirements, however, USDA does not 
mandate this requirement on agencies in this final rule.
``Reasonably Should Have Known''
    One commenter objected to the requirement in Sec. 11.6(b)(1) that a 
participant must request an appeal within 30 days after ``the 
participant reasonably should have known that the agency had not acted 
within the timeframes specified by agency program regulations''. The 
commenter suggested that the agency should have specified timeframes to 
respond to participant requests, application, or inquiries; that 
participants should be notified of agency deadlines so that they can 
monitor them and know when to appeal; and that, alternatively, that if 
an agency fails to respond by deadlines, participant requests or 
applications should be automatically approved.
    The purpose of the above-quoted phrase in Sec. 11.6(b)(1) is to 
bring finality to agency decisions and programs by requiring appellants 
to appeal within 30 days of an agency missing a deadline specified in 
published agency regulations. Participants are deemed to have knowledge 
of published laws and regulations. If a regulation states that the 
agency will act on a given application in 60 days, a participant may 
not rest on his or her rights for a year before appealing to NAD 
because the agency never acted on the applications. Requiring an agency 
to specify timeframes for all actions in regulations, or to notify 
participants of such timeframes, is beyond the scope of this rule and 
the mission of NAD. Finally, USDA by general rule cannot establish 
automatic award of applications for failure to act on them where 
contrary to statute or principles of sovereign immunity.
``Adverse Decision''
    Two commenters suggested that Sec. 11.8(b) should be revised to 
allow participants 30 days to appeal upon receiving a written decision 
from the agency including: a clear statement of the adverse decision, a 
citation of the regulatory basis for the adverse decision, a 
notification of appeal rights, notification of the proper agency from 
which to appeal the adverse decision, notification of the proper 
reviewing officer to whom the appeal must be sent, and notification of 
mediation rights. One of the commenters further suggested that the 
definition of ``adverse decision'' be changed to ``adverse final 
decision'' so that preliminary adverse letters to participants--which a 
given agency may not regard as starting the 30-day clock--will not 
start the 30-day clock until the adverse decision is made officially by 
the agency.
    These suggestions by the commenters appear to reflect several 
concerns. First, one commenter takes issue with our view, stated in the 
preamble to the interim final rule, that the requirement fro notice of 
an agency adverse decision in Sec. 274 of the Reorganization Act is not 
a prerequisite for NAD jurisdiction. Placing the requirement for a 
written decision in Sec. 11.8(b)(1), as suggested, implicitly would 
provide that notice and allow the participant a fair amount of time to 
develop his or her appeal. Second, there is a concern that agencies 
will seek to trigger the 30-day clock with oral decisions that 
participants will not understand as triggering their appeal rights. 
Third, agencies often do not view some actions as the adverse decisions 
for which appeal rights run and thus participants may prematurely 
appeal. Fourth, the suggested required content for an adverse decision 
is needed for the written determinations so that participants 
understand all their rights and clearly understand what the adverse 
decision is and the basis therefor.
    USDA declines to adopt these suggestions for several reasons. While 
well-intentioned, these suggestions would be a triumph of form over 
substance spawning unnecessary litigation over who got what notice 
when. First and foremost, USDA interprets the statute to provide a 
clear intent on the part of Congress to afford participants the right 
to appeal de facto decisions rendered by an agency failure to act. The 
definition of ``adverse decision'' in section 271(1) of the 
Reorganization Act expressly includes ``the failure of an agency to 
issue a decision or otherwise act on the request or right of the 
participant.'' To require a written decision from the agency before a 
participant may appeal essentially stops a participant's ability to 
appeal agency inaction, contrary to Congressional intent.
    Second, if an administrative decision adversely affects a 
participant, it is an adverse decision subject to appeal under the 
statute regardless of whether the agency has sent out the formal letter 
with formal appeal rights. Each agency subject to NAD jurisdiction 
handles decisions in various ways and to attempt to specify that only 
``final'' adverse decisions will count does not provide for an 
efficient NAD appeals process. (This, of course, does not mean that an 
agency may not recall and re-issue an earlier decision, in which case 
the 30-day clock begins to run anew).
    Finally, with respect to the fairness of the appeal by providing 
the basis therefore, USDA sees no intent on the part of Congress to 
allow agencies to hold up the processing of appeals by failing to 
provide the basis for the decision. Section 11.8(c)(ii) in fact is 
written to require the agency to provide NAD with a copy of the adverse 
decision and a written explanation, including regulatory and statutory 
citation, once an appeal is filed in the event the participant was 
unable to get that information beforehand. If the agency does not 
furnish the information at that point, it merely runs the danger of 
losing the appeal for lack of information. At least, however, the 
participant has gotten his appeal before NAD whereas requiring the 
agency to provide that information to the participant before he or she 
may appeal to NAD effectively would prevent the participant from even 
filing an appeal.
Copies of Agency Record
    Two commenters suggested changes to Secs. 11.8(a) and 11.8(b)(1) to 
require agencies to notify an appellant of the appellant's right to an 
agency record after the appellant has filed an appeal, to require the 
agency to provide the hearing officer with a copy of the agency file to 
be placed automatically in the record, to require the agency to provide 
a copy of the agency record upon request, and to provide specific 
procedures for how an appellant could obtain the agency record. One 
commenter also suggested adding language to Sec. 11.8(c)(5)(ii) to 
require the agency to present similar information, as well as 
additional information on the basis of the decision, at the hearing 
itself.
    USDA declines to adopt these comments. They are either already 
covered specifically in the cited sections of the rule or else are 
covered within the language of the rule in a way that allows 
flexibility for agency and NAD response. Appellants are placed on 
notice of their

[[Page 33372]]

right to request and receive copies of the agency record by this final 
rule itself and a further requirement for agencies to provide such 
notice is beyond the scope of this rule. Further, requiring the agency 
to present such information at the hearing runs contrary to the 
statutory requirement that the appellant must prove the agency decision 
erroneous. This places the burden of going forward in the appeal on the 
appellant. If the agency fails to provide an adequate response to the 
appellant by failing to provide informataton, it runs the risk of 
losing the appeal.
Notice of Director Review
    Section 11.9(b) requires the Director to notify all parties of 
receipt of a request for Director review and section 11.9(c) requires a 
party to submit responses to a request for Director review within 5 
business days of receiving a copy of the request for Director review.
    One commenter suggested clarifying how the Director is to provide 
notification under Sec. 11.9(b), and suggested inserting the word 
``their'' in Sec. 11.9(c) presumably to distinguish the running of the 
5 business days from the receipt of the Director review itself by the 
Division from the 5 business days from receipt of a copy by the other 
parties. USDA declines to adopt either of these comments. The method of 
notification should remain within the discretion of the Director and 
Sec. 11.9(c) is clear without further amendment.
Basis for Determinations
    Three commenters suggested removal or revision of the phrase ``and 
with the generally applicable interpretations of such laws and 
regulations'' in Sec. 11.10(b) to reflect that generally applicable 
interpretations of laws and regulations should not be the sole basis 
for agency adverse decisions. These commenters were concerned that 
Sec. 11.10(b) is inconsistent with the principle that adverse decisions 
must be based on regulations promulgated in accordance with notice-and-
comment rulemaking procedures. For the reasons set forth in explanation 
of Sec. 11.10(b) in the preamble to the interim final rule, USDA finds 
this language appropriate and declines to remove it as requested in the 
comments. Further, USDA notes that inclusion of this language does not 
reflect an intent to bind NAD to arbitrary interpretations of statutes 
or regulations by agency officials. Any unpublished, generally 
applicable interpretations of laws and regulations may be relied upon 
only to the extent permitted by the APA and interpretations thereof by 
relevant caselaw. NAD is bound to decide appeals in accordance with 
law; therefore, if an interpretation is not permissible under the APA, 
then NAD cannot rely upon that interpretation to sustain an agency 
decision.
Reconsideration
    One commenter suggested that appellants be given 15 days, instead 
of 10 days, to request the Director to reconsider his determination 
under Sec. 11.11. USDA declines to change this provision.
    Section 11.11 was added to the interim final rule to reflect the 
inherent authority of a decisionmaker under general principles of law 
to review his or her decisions to correct errors. These are errors 
(such as citation to the wrong dates, wrong amounts, wrong regulations, 
or wrong statutes), not changes of interpretations or opinions, and as 
such should be quickly detectable upon reading the determination and 
reviewing the record. A request for reconsideration under this 
provision should not require a great deal of time for research, and 
rarely should require additional time for gathering information and 
evidence since this is not another step in the appeal process.
Implementation
    One commenter suggested that Sec. 11.12(a) was vague about how 
implementation would occur, thus allowing agencies to obstruct the 
implementation process. The commenter suggested amending Sec. 11.12(a) 
to incorporate the implementation language from the old National 
Appeals Staff rules of procedure (7 CFR 1900.59(d) (1-1-95)) that 
provided that implementation meant the taking of the next step by the 
agency that would be required by agency regulations if no adverse 
action had occurred.
    USDA indicated in the preamble to the interim final rule its 
position that implementation meant taking the next step. However, that 
interpretation of implementation comes from the farm credit appeals 
system that is now under the auspices of NAD. NAD also reviews 
decisions related to farm programs, disaster assistance, soil and water 
conservation programs, and crop insurance. Given the variety of 
programs now covered by NAD that were not subject to the ``next step'' 
rule, USDA declines to adopt any express guidance regarding 
implementation at this time until experience with a unified appeals 
process provides a clear picture of what uniform implementation rule 
would work for all agencies under the jurisdiction of NAD.
Discrimination Complaints
    One commenter suggested that NAD develop a process for 
consolidating program appeals with related civil rights complaints. 
USDA declines to adopt this suggestion. The rights and remedies 
available to NAD appellants under USDA statutes and regulations are 
much different than those available to individuals asserting 
discrimination claims against USDA under civil rights laws of 
governmentwide applicability. USDA already has a separate 
administrative process for review of discrimination complaints. NAD 
does not have the ability or capacity to undertake consolidated civil 
rights appeals that exceed the scope of the purpose for which it was 
established.

List of Subjects

7 CFR Part 1

    Administrative practice and procedure, Agriculture, Reporting and 
recordkeeping requirements.

7 CFR Part 11

    Administrative practice and procedure, Agriculture, Agricultural 
commodities, Crop insurance, Ex parte communications, Farmers, Federal 
aid programs, Guaranteed loans, Insured loans, Loan programs, Price 
support programs, Soil conservation.

    For the reasons set out in the preamble, Title 7 of the Code of 
Federal Regulations is amended as set forth below.

PART 1--ADMINISTRATIVE REGULATIONS

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

    Authority: 5 U.S.C. 301 and 552. Appendix A also issued under 7 
U.S.C. 2244; 31 U.S.C. 9701, and 7 CFR 2.75(a)(6)(xiii).

    2. Section 1.20 is revised to read as follows:


Sec. 1.20  Authentication.

    When a request is received for an authenticated copy of a document 
which the agency determines to make available to the requesting party, 
the agency shall cause a correct copy to be prepared and sent to the 
Office of the General Counsel which shall certify the same and cause 
the seal of the Department to be affixed, except that the Hearing Clerk 
in the Office of Administrative Law Judges may authenticate copies of 
documents in the records of the Hearing Clerk and that the Director of 
the National Appeals Division may authenticate copies of documents in 
the records of the National Appeals Division.

[[Page 33373]]

PART 11--NATIONAL APPEALS DIVISION RULES OF PROCEDURE

    Part 11 is revised to read as follows:

PART 11--NATIONAL APPEALS DIVISION RULES OF PROCEDURE

Sec.
11.1  Definitions.
11.2  General statement.
11.3  Applicability.
11.4  Inapplicability of other laws and regulations.
11.5  Informal review of adverse decisions.
11.6  Director review of agency determination of appealability and 
right of participants to Division hearing.
11.7  Ex parte communications.
11.8  Division hearings.
11.9  Director review of determinations of Hearings Officers.
11.10  Basis for determinations.
11.11  Reconsideration of Director determinations.
11.12  Effective date and implementation of final determinations of 
the Division.
11.13  Judicial review.
11.14  Filing of appeals and computation of time.
11.15  Participation of third parties and interested parties in 
Division proceedings.

    Authority: 5 U.S.C. 301; Title II, Subtitle H, Pub. L. 103-354, 
108 Stat. 3228 (7 U.S.C. 6991 et seq.); Reorganization Plan No. 2 of 
1953 (5 U.S.C. App.).


Sec. 11.1  Definitions.

    For purposes of this part:
    Adverse decision means an administrative decision made by an 
officer, employee, or committee of an agency that is adverse to a 
participant. The term includes a denial of equitable relief by an 
agency or the failure of an agency to issue a decision or otherwise act 
on the request or right of the participant within timeframes specified 
by agency program statutes or regulations or within a reasonable time 
if timeframes are not specified in such statutes or regulations. The 
term does not include a decision over which the Board of Contract 
Appeals has jurisdiction.
    Agency means:
    (1) The Commodity Credit Corporation (CCC);
    (2) The Farm Service Agency (FSA);
    (3) The Federal Crop Insurance Corporation (FCIC);
    (4) The Natural Resources Conservation Service (NRCS);
    (5) The Risk Management Agency (RMA);
    (6) The Rural Business-Cooperative Service (RBS);
    (7) Rural Development (RD);
    (8) The Rural Housing Service (RHS);
    (9) The Rural Utilities Service (RUS) (but not for programs 
authorized by the Rural Electrification Act of 1936 or the Rural 
Telephone Bank Act, 7 U.S.C. 901 et seq.);
    (10) A State, county, or area committee established under section 
8(b)(5) of the Soil Conservation and Domestic Allotment Act (16 U.S.C. 
590h (b)(5)); and
    (11) Any predecessor or successor agency to the above-named 
agencies, and any other agency or office of the Department which the 
Secretary may designate.
    Agency record means all the materials maintained by an agency 
related to an adverse decision which are submitted to the Division by 
an agency for consideration in connection with an appeal under this 
part, including all materials prepared or reviewed by the agency during 
its consideration and decisionmaking process, but shall not include 
records or information not related to the adverse decision at issue. 
All materials contained in the agency record submitted to the Division 
shall be deemed admitted as evidence for purposes of a hearing or a 
record review under Sec. 11.8.
    Agency representative means any person, whether or not an attorney, 
who is authorized to represent the agency in an administrative appeal 
under this part.
    Appeal means a written request by a participant asking for review 
by the National Appeals Division of an adverse decision under this 
part.
    Appellant means any participant who appeals an adverse decision in 
accordance with this part. Unless separately set forth in this part, 
the term ``appellant'' includes an authorized representative.
    Authorized representative means any person, whether or not an 
attorney, who is authorized in writing by a participant, consistent 
with Sec. 11.6(c), to act for the participant in an administrative 
appeal under this part. The authorized representative may act on behalf 
of the participant except when the provisions of this part require 
action by the participant or appellant personally.
    Case record means all the materials maintained by the Secretary 
related to an adverse decision: The case record includes both the 
agency record and the hearing record.
    Days means calendar days unless otherwise specified.
    Department means the United States Department of Agriculture 
(USDA).
    Director means the Director of the Division or a designee of the 
Director.
    Division means the National Appeals Division established by this 
part.
    Equitable relief means relief which is authorized under section 326 
of the Food and Agriculture Act of 1962 (7 U.S.C. 1339a) and other laws 
administered by the agency.
    Ex parte communication means an oral or written communication to 
any officer or employee of the Division with respect to which 
reasonable prior notice to all parties is not given, but it shall not 
include requests for status reports, or inquiries on Division 
procedure, in reference to any matter or proceeding connected with the 
appeal involved.
    Hearing, except with respect to Sec. 11.5, means a proceeding 
before the Division to afford a participant the opportunity to present 
testimony or documentary evidence or both in order to have a previous 
determination reversed and to show why an adverse determination was in 
error.
    Hearing Officer means an individual employed by the Division who 
conducts the hearing and determines appeals of adverse decisions by any 
agency.
    Hearing record means all documents, evidence, and other materials 
generated in relation to a hearing under $11.8.
    Implement means the taking of action by an agency of the Department 
in order fully and promptly to effectuate a final determination of the 
Division.
    Participant means any individual or entity who has applied for, or 
whose right to participate in or receive, a payment, loan, loan 
guarantee, or other benefit in accordance with any program of an agency 
to which the regulations in this part apply is affected by a decision 
of such agency. The term does not include persons whose claim(s) arise 
under:
    (1) Programs subject to various proceedings provided for in 7 CFR 
part 1;
    (2) Programs governed by Federal contracting laws and regulations 
(appealable under other rules and to other forums, including to the 
Department's Board of Contract Appeals under 7 CFR part 24);
    (3) The Freedom of Information Act (appealable under 7 CFR part 1, 
subpart A);
    (4) Suspension and debarment disputes, including, but not limited 
to, those falling within the scope of 7 CFR parts 1407 and 3017;
    (5) Export programs administered by the Commodity Credit 
Corporation;
    (6) Disputes between reinsured companies and the Federal Crop 
Insurance Corporation;
    (7) Tenant grievances or appeals prosecutable under the provisions 
of 7 CFR part 1944, subpart L, under the multi-family housing program 
carried out by RHS;
    (8) Personnel, equal employment opportunity, and other similar 
disputes

[[Page 33374]]

with any agency or office of the Department which arise out of the 
employment relationship;
    (9) The Federal Tort Claims Act, 28 U.S.C. 2671 et seq., or the 
Military Personnel and Civilian Employees Claims Act of 1964, 31 U.S.C. 
3721;
    (10) Discrimination complaints prosecutable under the 
nondiscrimination regulations at 7 CFR parts 15, 15a, 15b, 15e, and 
15f; or
    (11) Section 361, et seq., of the Agricultural Adjustment Act of 
1938, as amended (7 U.S.C. 1361, et seq.) involving Tobacco Marketing 
Quota Review Committees.
    Record review means an appeal considered by the Hearing Officer in 
which the Hearing Officer's determination is based on the agency record 
and other information submitted by the appellant and the agency, 
including information submitted by affidavit or declaration.
    Secretary means the Secretary of Agriculture.


Sec. 11.2  General statement.

    (a) This part sets forth procedures for proceedings before the 
National Appeals Division within the Department. The Division is an 
organization within the Department, subject to the general supervision 
of and policy direction by the Secretary, which is independent from all 
other agencies and offices of the Department, including Department 
officials at the state and local level. The Director of the Division 
reports directly to the Secretary of Agriculture. The authority of the 
Hearing Officers and the Director of the Division, and the 
administrative appeal procedures which must be followed by program 
participants who desire to appeal an adverse decision and by the agency 
which issued the adverse decision, are included in this part.
    (b) Pursuant to section 212(e) of the Federal Crop Insurance Reform 
and Department of Agriculture Reorganization Act of 1994, Pub. L. 103-
354 (the Act), 7 U.S.C. 6912(e), program participants shall seek review 
of an adverse decision before a Hearing Officer of the Division, and 
may seek further review by the Director, under the provisions of this 
part prior to seeking judicial review.


Sec. 11.3  Applicability.

    (a) Subject matter. The regulations contained in this part are 
applicable to adverse decisions made by an agency, including, for 
example, those with respect to:
    (1) Denial of participation in, or receipt of benefits under, any 
program of an agency;
    (2) Compliance with program requirements;
    (3) The making or amount of payments or other program benefits to a 
participant in any program of an agency; and
    (4) A determination that a parcel of land is a wetland or highly 
erodible land.
    (b) Limitation. The procedures contained in this part may not be 
used to seek review of statutes or USDA regulations issued under 
Federal Law.


Sec. 11.4  Inapplicability of other laws and regulations.

    (a) Reserved.
    (b) The Federal Rules of Evidence, 28 U.S.C. App., shall not apply 
to proceedings under this part.


Sec. 11.5  Informal review of adverse decisions.

    (a) Required informal review of FSA adverse decisions. Except with 
respect to farm credit programs, a participant must seek an informal 
review of an adverse decision issued at the field service office level 
by an officer or employee of FSA, or by any employee of a county or 
area committee established under section 8(b)(5) of the Soil 
Conservation and Domestic Allotment Act, 16 U.S.C. 590h(b)(5), before 
NAD will accept an appeal of a FSA adverse decision. Such informal 
review shall be done by the county or area committee with 
responsibility for the adverse decision at issue. The procedures for 
requesting such an informal review before FSA are found in 7 CFR part 
780. After receiving a decision upon review by a county or area 
committee, a participant may seek further informal review by the State 
FSA committee or may appeal directly to NAD under Sec. 11.6(b).
    (b) Optional informal review. With respect to adverse decisions 
issued at the State office level of FSA and adverse decisions of all 
other agencies, a participant may request an agency informal review of 
an adverse decision of that agency prior to appealing to NAD. 
Procedures for requesting such an informal review are found at 7 CFR 
part 780 (FSA), 7 CFR part 614 (NRCS), 7 CFR part 1900, subpart B 
(RUS), 7 CFR part 1900, subpart B (RBS), and 7 CFR part 1900, subpart B 
(RHS).
    (c) Mediation. A participant also shall have the right to utilize 
any available alternative dispute resolution (ADR) or mediation 
program, including any mediation program available under title V of the 
Agricultural Credit Act of 1987, 7 U.S.C. 5101 et seq., in order to 
attempt to seek resolution of an adverse decision of an agency prior to 
a NAD hearing. If a participant:
    (1) Requests mediation or ADR prior to filing an appeal with NAD, 
the participant stops the running of the 30-day period during which a 
participant may appeal to NAD under Sec. 11.6(b)(1), and will have the 
balance of days remaining in that period to appeal to NAD once 
mediation or ADR has concluded.
    (2) Requests mediation or ADR after having filed an appeal to NAD 
under Sec. 11.6(b), but before the hearing, the participant will be 
deemed to have waived his right to have a hearing within 45 days under 
Sec. 11.8(c)(1) but shall have a right to have a hearing within 45 days 
after conclusion of mediation or ADR.


Sec. 11.6  Director review of agency determination of appealability and 
right of participants to Division hearing.

    (a) Director review of agency determination of appealability. (1) 
Not later than 30 days after the date on which a participant receives a 
determination from an agency that an agency decision is not appealable, 
the participant must submit a written request personally signed by the 
participant to the Director to review the determination in order to 
obtain such review by the Director.
    (2) The Director shall determined whether the decision is adverse 
to the individual participant and thus appealable or is a matter of 
general applicability and thus not subject to appeal, and will issue a 
final determination notice that upholds or reverses the determination 
of the agency. This final determination is not appealable. If the 
Director reverses the determination of the agency, the Director will 
notify the participant and the agency of that decision and inform the 
participant of his or her right to proceed with an appeal.
    (3) The Director may delegate his or her authority to conduct a 
review under this paragraph to any subordinate official of the Division 
other than a Hearing Officer. In any case in which such review is 
conducted by such a subordinate official, the subordinate official's 
determination shall be considered to be the determination of the 
Director and shall be final and not appealable.
    (b) Appeals of adverse decisions. (1) To obtain a hearing under 
Sec. 11.8, a participant personally must request such hearing not later 
than 30 days after the date on which the participant first received 
notice of the adverse decision or after the date on which the 
participant receives notice of the Director's determination that a 
decision is appealable. In the case of the failure

[[Page 33375]]

of an agency to act on the request or right of a recipient, a 
participant personally must request such hearing not later than 30 days 
after the participant knew or reasonably should have known that the 
agency had not acted within the timeframes specified by agency program 
regulations, or, where such regulations specify no timeframes, not 
later than 30 days after the participant reasonably should have known 
of the agency's failure to act.
    (2) A request for a hearing shall be in writing and personally 
signed by the participant, and shall include a copy of the adverse 
decision to be reviewed, if available, along with a brief statement of 
the participant's reasons for believing that the decision, or the 
agency's failure to act, was wrong. The participant also shall send a 
copy of the request for a hearing to the agency, and may send a copy of 
the adverse decision to be reviewed to the agency, but failure to do 
either will not constitute grounds for dismissal of the appeal. Instead 
of a hearing, the participant may request a record review.
    (c) If a participant is represented by an authorized 
representative, the authorized representative must file a declaration 
with NAD, executed in accordance with 28 U.S.C. 1746, stating that the 
participant has duly authorized the declarant in writing to represent 
the participant for purposes of a specified adverse decision or 
decisions, and attach a copy of the written authorization to the 
declaration.


Sec. 11.7  Ex parte communications.

    (a)(1) At no time between the filing of an appeal and the issuance 
of a final determination under this part shall any officer or employee 
of the Division engage in ex parte communications regarding the merits 
of the appeal with any person having any interest in the appeal pending 
before the Division, including any person in an advocacy or 
investigative capacity. This prohibition does not apply to:
    (i) Discussions of procedural matters related to an appeal; or
    (ii) Discussions of the merits of the appeal where all parties to 
the appeal have been given notice and an opportunity to participate.
    (2) In the case of a communication described in paragraph 
(a)(1)(ii) of this section, a memorandum of any such discussion shall 
be included in the hearing record.
    (b) No interested person shall make or knowingly cause to be made 
to any officer or employee of the Division an ex parte communication 
relevant to the merits of the appeal.
    (c) If any officer or employee of the Division receives an ex parte 
communication in violation of this section, the one who receives the 
communication shall place in the hearing record:
    (1) All such written communications;
    (2) Memoranda stating the substance of all such oral 
communications; and
    (3) All written responses to such communications, and memoranda 
stating the substance of any oral responses thereto.
    (d) Upon receipt of a communication knowingly made or knowingly 
caused to be made by a party in violation of this section the Hearing 
Officer or Director may, to the extent consistent with the interests of 
justice and the policy of the underlying program, require the party to 
show cause why such party's claim or interest in the appeal should not 
be dismissed, denied, disregarded, or otherwise adversely affected on 
account of such violation.


Sec. 11.8  Division hearings.

    (a) General rules. (1) The Director, the Hearing Officer, and the 
appellant shall have access to the agency record of any adverse 
decision appealed to the Division for a hearing. Upon request by the 
appellant, the agency shall provide the appellant a copy of the agency 
record.
    (2) The Director and Hearing Officer shall have the authority to 
administer oaths and affirmations, and to require, by subpoena, the 
attendance of witnesses and the production of evidence. A Hearing 
Officer shall obtain the concurrence of the Director prior to issuing a 
subpoena.
    (i) A subpoena requiring the production of evidence may be 
requested and issued at any time while the case is pending before the 
Division.
    (ii) An appellant or an agency, acting through any appropriate 
official, may request the issuance of a subpoena requiring the 
attendance of a witness by submitting such a request in writing at 
least 14 days before the scheduled date of a hearing. The Director or 
Hearing Officer shall issue a subpoena at least 7 days prior to the 
scheduled date of a hearing.
    (iii) A subpoena shall be issued only if the Director or a Hearing 
Officer determined that:
    (A) For a subpoena of documents, the appellant or the agency has 
established that production of documentary evidence is necessary and is 
reasonably calculated to lead to information which would affect the 
final determination or is necessary to fully present the case before 
the Division; or
    (B) For a subpoena of a witness, the appellant or the agency has 
established that either a representative of the Department or a private 
individual possesses information that is pertinent and necessary for 
disclosure of all relevant facts which could impact the final 
determination, that the information cannot be obtained except through 
testimony of the person, and that the testimony cannot be obtained 
absent issuance of a subpoena.
    (iv) The party requesting issuance of a subpoena shall arrange for 
service. Service of a subpoena upon a person named therein may be made 
by registered or certified mail, or in person. Personal service shall 
be made by personal delivery of a copy of the subpoena to the person 
named therein by any person who is not a party and who is not less than 
18 years of age. Proof of service shall be made by filing with the 
Hearing Officer or Director who issued the subpoena a statement of the 
date and manner of service and of the names of the persons served, 
certified by the person who made the service in person or by return 
receipts for certified or registered mail.
    (v) A party who requests that a subpoena be issued shall be 
responsible for the payment of any reasonable travel and subsistence 
costs incurred by the witness in connection with his or her appearance 
and any fees of a person who serves the subpoena in person. The 
Department shall pay the costs associated with the appearance of a 
Department employee whose role as a witness arises out of his or her 
performance of official duties, regardless of which party requested the 
subpoena. The failure to make payment of such charges on demand may be 
deemed by the Hearing Officer or Director as sufficient ground for 
striking the testimony of the witness and the evidence the witness has 
produced.
    (vi) If a person refuses to obey a subpoena, the Director, acting 
through the Office of the General Counsel of the Department and the 
Department of Justice, may apply to the United States District Court in 
the jurisdiction where that person resides to have the subpoena 
enforced as provided in the Federal Rules of Civil Procedure (28 U.S.C. 
App.).
    (3) Testimony required by subpoena pursuant to paragraph (a)(2) of 
this section may, at the discretion of the Director or a Hearing 
Officer, be presented at the hearing either in person or 
telephonically.
    (b) Hearing procedures applicable to both record review and 
hearings. (1) Upon the filing of an appeal under this part of an 
adverse decision by any

[[Page 33376]]

agency, the agency promptly shall provide the Division with a copy of 
the agency record. If requested by the applicant prior to the hearing, 
a copy of such agency record shall be provided to the appellant by the 
agency within 10 days of receipt of the request by the agency.
    (2) The Director shall assign the appeal to a Hearing Officer and 
shall notify the appellant and agency of such assignment. The notice 
also shall advise the appellant and the agency of the documents 
required to be submitted under paragraph (c)(2) of this section, and 
notify the appellant of the option of having a hearing by telephone.
    (3) The Hearing Officer will receive evidence into the hearing 
record without regard to whether the evidence was known to the agency 
officer, employee, or committee making the adverse decision at the time 
the adverse decision was made.
    (c) Procedures applicable only to hearings. (1) Upon a timely 
request for a hearing under Sec. 11.6(b), an appellant has the right to 
have a hearing by the Division on any adverse decision within 45 days 
after the date of receipt of the request for the hearing by the 
Division.
    (2) The Hearing Officer shall set a reasonable deadline for 
submission of the following documents:
    (i) By the appellant;
    (A) A short statement of why the decision is wrong;
    (B) A copy of any document not in the agency record that the 
appellant anticipates introducing at the hearing; and
    (C) A list of anticipated witnesses and brief descriptions of the 
evidence such witnesses will offer.
    (ii) By the agency:
    (A) A copy of the adverse decision challenged by the appellant;
    (B) A written explanation of the agency's position, including the 
regulatory or statutory basis therefor;
    (C) A copy of any document not in the agency record that the agency 
anticipates introducing at the hearing; and
    (D) A list of anticipated witnesses and brief descriptions of the 
evidence such witnesses will offer.
    (3) Not less than 14 days prior to the hearing, the Division must 
provide the appellant, the authorized representative, and the agency a 
notice of hearing specifying the date, time, and place of the hearing. 
The hearing will be held in the State of residence of the appellant, as 
determined by the Hearing Officer, or at a location that is otherwise 
convenient to the appellant, the agency, and the Division. The notice 
also shall notify all parties of the right to obtain an official record 
of the hearing.
    (4) Pre-hearing conference. Whenever appropriate, the Hearing 
Officer shall hold a pre-hearing conference in order to attempt to 
resolve the dispute or to narrow the issues involved. Such pre-hearing 
conference shall be held by telephone unless the Hearing Officer and 
all parties agree to hold such conference in person.
    (5) Conduct of the hearing. (i) A hearing before a Hearing Officer 
will be in person unless the appellant agrees to a hearing by 
telephone.
    (ii) The hearing will be conducted by the Hearing Officer in the 
manner determined by the Division most likely to obtain the facts 
relevant to the matter or matters at issue. The Hearing Officer will 
allow the presentation of evidence at the hearing by any party without 
regard to whether the evidence was known to the officer, employee, or 
committee of the agency making the adverse decision at the time the 
adverse decision was made. The Hearing Officer may confine the 
presentation of facts and evidence to pertinent matters and exclude 
irrelevant, immaterial, or unduly repetitious evidence, information, or 
questions. Any party shall have the opportunity to present oral and 
documentary evidence, oral testimony of witnesses, and arguments in 
support of the party's position; controvert evidence relied on by any 
other party; and question all witnesses. When appropriate, agency 
witnesses requested by the appellant will be made available at the 
hearing. Any evidence may be received by the Hearing Officer without 
regard to whether that evidence could be admitted in judicial 
proceedings.
    (iii) An official record shall be made of the proceedings of every 
hearing. This record will be made by an official tape recording by the 
Division. In addition, either party may request that a verbatim 
transcript be made of the hearing proceedings and that such transcript 
shall be made the official record of the hearing. The party requesting 
a verbatim transcript shall pay for the transcription service, shall 
provide a certified copy of the transcript to the Hearing Officer free 
of charge, and shall allow any other party desiring to purchase a copy 
of the transcript to order it from the transcription service.
    (6) Absence of parties. (i) If at the time scheduled for the 
hearing either the appellant or the agency representative is absent, 
and no appearance is made on behalf of such absent party, or no 
arrangements have been made for rescheduling the hearing, the Hearing 
Officer has the option to cancel the hearing unless the absent party 
has good cause for the failure to appear. If the Hearing Officer elects 
to cancel the hearing, the Hearing Officer may:
    (A) Treat the appeal as a record review and issue a determination 
based on the agency record as submitted by the agency and the hearing 
record developed prior to the hearing date;
    (B) Accept evidence into the hearing record submitted by any party 
present at the hearing (subject to paragraph (c)(6)(ii) of this 
section), and then issue a determination; or
    (C) Dismiss the appeal.
    (ii) When a hearing is cancelled due to the absence of a party, the 
Hearing Officer will add to the hearing record any additional evidence 
submitted by any party present, provide a copy of such evidence to the 
absent party or parties, and allow the absent party or parties 10 days 
to provide a response to such additional evidence for inclusion in the 
hearing record
    (iii) Where an absent party has demonstrated good cause for the 
failure to appear, the Hearing Officer shall reschedule the hearing 
unless all parties agree to proceed without a hearing.
    (7) Post-hearing procedure. The Hearing Officer will leave the 
hearing record open after the hearing for 10 days, or for such other 
period of time as the Hearing Officer shall establish, to allow the 
submission of information by the appellant or the agency, to the extent 
necessary to respond to new facts, information, arguments, or evidence 
presented or raised at the hearing. Any such new information will be 
added by the Hearing Office to the hearing record and sent to the other 
party or parties by the submitter of the information. The Hearing 
Officer, in his or her discretion, may permit the other party or 
parties to respond to this post-hearing submission.
    (d) Interlocutory review. Interlocutory review by the Director of 
rulings of a Hearing Officer are not permitted under the procedures of 
this part.
    (e) Burden of proof. The appellant has the burden of proving that 
the adverse decision of the agency was erroneous by a preponderance of 
the evidence.
    (f) Timing of issuance of determination. The Hearing Officer will 
issue a notice of the determination on the appeal to the named 
appellant, the authorized representative, and the agency not later than 
30 days after a hearing or the closing date of the hearing record in 
cases in which the Hearing Officer receives additional evidence from 
the agency or appellant after a hearing. In the case of a record 
review, the Hearing Officer will issue a notice of determination within 
45 days

[[Page 33377]]

of receipt of the appellant's request for a record review. Upon the 
Hearing Officer's request, the Director may establish an earlier or 
later deadline. A notice of determination shall be accompanied by a 
copy of the procedures for filing a request for Director review under 
Sec. 11.9. If the determination is not appealed to the Director for 
review under Sec. 11.9, the notice provided by the Hearing Officer 
shall be considered to be a notice of a final determination under this 
part.


Sec. 11.9  Director review of determinations of Hearing Officers.

    (a) Requests for Director review. (1) Not later than 30 days after 
the date on which an appellant receives the determination of a Hearing 
Officer under Sec. 11.8, the appellant must submit a written request, 
signed personally by the named appellant, to the Director to review the 
determination in order to be entitled to such review by the Director. 
Such request shall include specific reasons why the appellant believes 
the determination is wrong.
    (2) Not later than 15 business days after the date on which an 
agency receives the determination of a Hearing Officer under Sec. 11.8, 
the head of the agency may make a written request that the Director 
review the determination. Such request shall include specific reasons 
why the agency believes the determination is wrong, including citations 
of statutes or regulations that the agency believes the determination 
violates. Any such request may be made by the head of an agency only, 
or by a person acting in such capacity, but not by any subordinate 
officer of such agency.
    (3) A copy of a request for Director review submitted under this 
paragraph shall be provided simultaneously by the submitter to each 
party to the appeal.
    (b) Notification of parties. The Director promptly shall notify all 
parties of receipt of a request for review.
    (c) Responses to request for Director review. Other parties to an 
appeal may submit written responses to a request for Director review 
within 5 business days from the date of receipt of a copy of the 
request for review.
    (d) Determination of Director. (1) The Director will conduct a 
review of the determination of the Hearing Officer using the agency 
record, the hearing record, the request for review, any responses 
submitted under paragraph (c) of this section, and such other arguments 
or information as may be accepted by the Director, in order to 
determine whether the decision of the Hearing Officer is supported by 
substantial evidence. Based on such review, the Director will issue a 
final determination notice that upholds, reverses, or modifies the 
determination of the Hearing Officer. The Director's determination upon 
review of a Hearing Officer's decision shall be considered to be the 
final determination under this part and shall not be appealable. 
However, if the Director determines that the hearing record is 
inadequate or that new evidence has been submitted, the Director may 
remand all or a portion of the determination to the Hearing Officer for 
further proceedings to complete the hearing record or, at the option of 
the Director, to hold a new hearing.
    (2) The Director will complete the review and either issue a final 
determination or remand the determination not later than--
    (i) 10 business days after receipt of the request for review, in 
the case of a request by the head of an agency; or
    (ii) 30 business days after receipt of the request for review, in 
the case of a request by an appellant.
    (3) In any case or any category of cases, the Director may delegate 
his or her authority to conduct a review under this section to any 
Deputy or Assistant Directors of the Division. In any case in which 
such review is conducted by a Deputy or Assistant Director under 
authority delegated by the Director, the Deputy or Assistant Director's 
determination shall be considered to be the determination of the 
Director under this part and shall be final and not appealable.
    (e) Equitable relief. In reaching a decision on an appeal, the 
Director shall have the authority to grant equitable relief under this 
part in the same manner and to the same extent as such authority is 
provided an agency under applicable laws and regulations.


Sec. 11.10  Basis for determinations.

    (a) In making a determination, the Hearing Officers and the 
Director are not bound by previous findings of facts on which the 
agency's adverse decision was based.
    (b) In making a determination on the appeal, Hearing Officers and 
the Director shall ensure that the decision is consistent with the laws 
and regulations of the agency, and with the generally applicable 
interpretations of such laws and regulations.
    (c) All determinations of the Hearing Officers and the Director 
must be based on information from the case record, laws applicable to 
the matter at issue, and applicable regulations published in the 
Federal Register and in effect on the date of the adverse decision or 
the date on which the acts that gave rise to the adverse decision 
occurred, whichever date is appropriate under the applicable agency 
program laws and regulations.


Sec. 11.11  Reconsideration of Director determinations.

    (a) Reconsideration of a determination of the Director may be 
requested by the appellant or the agency within 10 days of receipt of 
the determination. The Director will not consider any request for 
reconsideration that does not contain a detailed statement of a 
material error of fact made in the determination, or a detailed 
explanation of how the determination is contrary to statute or 
regulation, which would justify reversal or modification of the 
determination.
    (b) The Director shall issue a notice to all parties as to whether 
a request for reconsideration meets the criteria in paragraph (a) of 
this section. If the request for reconsideration meets such criteria, 
the Director shall include a copy of the request for reconsideration in 
the notice to the non-requesting parties to the appeal. The non-
requesting parties shall have 5 days from receipt of such notice from 
the Director to file a response to the request for reconsideration with 
the Director.
    (c) The Director shall issue a decision on the request for 
reconsideration within 5 days of receipt of responses from the non-
requesting parties. If the Director's decision upon reconsideration 
reverses or modifies the final determination of the Director rendered 
under Sec. 11.9(d), the Director's decision on reconsideration will 
become the final determination of the Director under Sec. 11.9(d) for 
purposes of this part.


Sec. 11.12  Effective date and implementation of final determinations 
of the Division.

    (a) On the return of a case to an agency pursuant to the final 
determination of the Division, the head of the agency shall implement 
the final determination not later than 30 days after the effective date 
of the notice of the final determination.
    (b) A final determination will be effective as of the date of 
filing of an application, the date of the transaction or event in 
question, or the date of the original adverse decision, whichever is 
applicable under the applicable agency program statutes or regulations.


Sec. 11.13  Judicial review.

    (a) A final determination of the Division shall be reviewable and 
enforceable by any United States District Court of competent 
jurisdiction in accordance with chapter 7 of title 5, United States 
Code.
    (b) An appellant may not seek judicial review of any agency adverse 
decision appealable under this part without

[[Page 33378]]

receiving a final determination from the Division pursuant to the 
procedures of this part.


Sec. 11.14  Filing of appeals and computation of time.

    (a) An appeal, a request for Director Review, or any other document 
will be considered ``filed'' when delivered in writing to the Division, 
when postmarked, or when a complete facsimile copy is received by the 
Division.
    (b) Whenever the final date for any requirement of this part falls 
on a Saturday, Sunday, Federal holiday, or other day on which the 
Division is not open for the transaction of business during normal 
working hours, the time for filing will be extended to the close of 
business on the next working day.
    (c) The time for filing an appeal, a request for Director review, 
or any other document expires at 5:00 p.m. local time at the office of 
the Division to which the filing is submitted on the last day on which 
such filing may be made.


Sec. 11.15  Participation of third parties and interested parties in 
Division proceedings.

    In two situations, parties other than the appellant or the agency 
may be interested in participating in Division proceedings. In the 
first situation, a Division proceeding may in fact result in the 
adjudication of the rights of a third party, e.g., an appeal of a 
tenant involving a payment shared with a landlord, an appeal by one 
recipient of a portion of a payment shared by multiple parties, an 
appeal by one heir of an estate. In the second situation, a party may 
desire to receive notice of and perhaps participate in an appeal 
because of the derivative impact the appeal determination will have on 
that party, e.g., guaranteed lenders and reinsurance companies. The 
provisions in this section set forth rules for the participation of 
such third and interested parties.
    (a) Third parties. When an appeal is filed, the Division shall 
notify any potential third party whose rights may be adjudicated of its 
right to participate as an appellant in the appeal. This includes the 
right to seek Director review of the Hearing Officer determination. 
Such third parties may be identified by the Division itself, by an 
agency, or by the original appellant. The Division shall issue one 
notice to the third party of its right to participate, and if such 
party declines to participate, the Division determination will be 
binding as to that third party as if it had participated. For purposes 
of this part, a third party includes any party for which a 
determination of the Division could lead to an agency action on 
implementation that would be adverse to the party thus giving such 
party a right to a Division appeal.
    (b) Interested parties. With respect to a participant who is a 
borrower under a guaranteed loan or an insured under a crop insurance 
program, the respective guaranteed lender or reinsurance company having 
an interest in a participant's appeal under this part may participate 
in the appeal as an interested party, but such participation does not 
confer the status of an appellant upon the guaranteed lender or 
reinsurance company such that it may request Director review of a final 
determination of the Division.

    Done at Washington, D.C., this 14th day of June 1999.
Dan Glickman,
Secretary of Agriculture.
[FR Doc. 99-15624 Filed 6-22-99; 8:45 am]
BILLING CODE 3410-01-M