[Federal Register Volume 64, Number 144 (Wednesday, July 28, 1999)]
[Rules and Regulations]
[Pages 40740-40743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19013]


-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 400 and 457

RIN 0563-AB67


General Administrative Regulations, Subpart T--Federal Crop 
Insurance Reform, Insurance Implementation; Regulations for the 1999 
and Subsequent Reinsurance Years; and the Common Crop Insurance 
Regulations; Basic Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes 
subpart T in the General Administrative Regulations (7 CFR part 400, 
subpart T) and the Common Crop Insurance Regulations, Basic Provisions 
(7 CFR 457.8), to implement the statutory mandates of the Agricultural 
Research, Extension, and Education Reform Act of 1998 (1998 Research 
Act) and Agriculture, Rural Development, Food and Drug Administration 
and Related Agencies Appropriations Act, 1999 (1999 Appropriations 
Act), enacted on October 19, 1998.

EFFECTIVE DATE: This rule is effective September 27, 1999.

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

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant for the purposes of 
Executive Order 12866 and, therefore, has been reviewed by the Office 
of Management and Budget (OMB).

Paperwork Reduction Act of 1995

    Under the provisions of the Paperwork Reduction Act of 1995 (44 
U.S.C. chapter 35), the collections of information for this rule have 
been previously approved by OMB under control number 0563-0053 through 
April 30, 2001. This rule was amended to implement the statutory 
mandates of the 1998 Research Act which changed the administrative fee 
for additional coverage from $10 per crop to $20 per crop. The 
amendments set forth in this rule do not revise the content or alter 
the frequency of reporting for any of the forms or information 
collections cleared under the above-referenced docket.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. This rule contains no Federal 
mandates (under the regulatory provisions of title II of UMRA) for 
State, local, and tribal governments or the private sector. Therefore, 
this rule is not subject to the requirements of sections 202 and 205 of 
UMRA.

Executive Order 12612

    It has been determined under section 6(a) of Executive Order 12612, 
Federalism, that this rule does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions contained in this rule will not have a substantial direct 
effect on States or their political subdivisions or on the distribution 
of power and responsibilities among the various levels of government.

Regulatory Flexibility Act

    This regulation will not have a significant economic impact on a 
substantial number of small entities. The regulation does not require 
any more action on the part of the small entities than is required on 
the part of large entities. Therefore, this action is determined to be 
exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C. 
605) and no Regulatory Flexibility Analysis was prepared.

Federal Assistance Program

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

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372 which require intergovernmental consultation with State and local 
officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115, June 24, 1983.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988 on civil justice reform. The provisions of this rule will not 
have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. The administrative appeal provisions

[[Page 40741]]

published at 7 CFR part 11 must be exhausted before any action for 
judicial review of any determination made by FCIC may be brought.

Environmental Evaluation

    This action is not expected to have a significant economic impact 
on the quality of the human environment, health, and safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

Background

    This rule finalizes revisions to subpart T and the Basic Provisions 
mandated by the 1998 Research Act, enacted June 23, 1998, and 
subsequently amended by the 1999 Appropriations Act, enacted on October 
19, 1998. On Thursday, July 30, 1998, FCIC published an interim rule in 
the Federal Register at 63 FR 40632-40635 to amend subpart T and the 
Basic Provisions to implement the statutory mandates of the 1998 
Research Act, which required the provisions be implemented for the 1999 
and subsequent reinsurance years. The 1999 Appropriations Act, which 
was enacted after publication of the interim rule, waives the 
administrative fee of 10 percent of the premium that was enacted in the 
1998 Research Act for the 1999 and subsequent reinsurance years. 
Changes in this rule, not made effective by the interim rule, are not 
in effect until the effective date of this rule.
    Following publication of the interim rule, the public was afforded 
60 days to submit written comments. A total of 18 comments was received 
from an insurance company and an insurance service organization. The 
comments received and FCIC's responses are as follows:
    Comment: An insurance company and an insurance service organization 
suggested the word ``expected'' be replaced with the word ``projected'' 
in the definitions of ``additional coverage'' and ``limited coverage'' 
in the Basic Provisions since that is the word used when market price 
elections are announced.
    Response: Sections 508(b), (c), (d), and (e) of the Federal Crop 
Insurance Act all refer to the phrase ``expected market price'' and the 
regulations, procedures, and clarifications were written accordingly. 
When market price elections are announced, FCIC will also use the term 
``expected market price.'' Therefore, no change has been made.
    Comment: An insurance service organization suggested revising the 
definition of ``limited resource farmer'' in the Basic Provisions by 
removing the words ``notwithstanding the previous sentence'' and adding 
two parts such as ``A producer or operator of a farm or farms:
    (a) With an annual gross income * * * each of the prior two years; 
or
    (b) Of less than 25 acres * * * does not exceed $20,000.''
    Response: This definition of ``limited resource farmer'' is more 
clear. Therefore, this definition will be added to the Basic Provisions 
and the definition removed from Subpart T .
    Comment: An insurance company and an insurance service organization 
suggested that exceptions for: (1) a producer who grows hybrid seed 
corn or hybrid sorghum seed with different companies; and (2) when the 
crop provisions allow for a crop to be insured at different levels and 
at multiple prices, should be added to section 3(f) of the Basic 
Provisions since this section identifies exceptions to the requirement 
that the producer must obtain the same level of coverage for all 
acreage of the crop in the county. The insurance service organization 
also suggested deleting the example of California grape varieties which 
only deals with one crop in one state.
    Response: The Basic Provisions are intended to provide the terms 
that are general to all policies. Exceptions are provided in the Crop 
Provisions, which take precedence over the Basic Provisions. The Hybrid 
Sorghum Seed Crop Provisions and the Hybrid Seed Corn Crop Provisions 
have the exception to allow any of the insured crop under contract with 
different seed companies to be insured under separate policies with 
different insurance providers provided all acreage of the insured crop 
in the county is insured. Likewise, those Crop Provisions that allow 
the crop to be insured at different levels and multiple prices will 
also contain the exception to the Basic Provisions. The example of two 
grape varieties insured under CAT coverage and two varieties insured 
under limited coverage in California, which specifies that separate 
administrative fees will be due for each of the four varieties, adds 
clarity even though it is only for one crop in one state. Therefore, no 
change has been made.
    Comment: An insurance company and an insurance service organization 
suggested the entire administrative fee for nursery be collected at one 
time and not at three different dates since 40 percent of the premium 
is due at the time of application, with the balance due at two other 
times during the year. They asked if section 7(e)(3) of the Basic 
Provisions should specify when the administrative fee is due since it 
is not accurate for nursery as written.
    Response: With respect to section 7(e)(3) of the Basic Provisions, 
these provisions are intended to apply to all crops and the premium due 
date is not the same for each crop. Therefore, a fixed date cannot be 
included here. The new Nursery Crop Provisions (99-073), which are 
effective for the 1999 and succeeding crop years, will only have one 
premium due date specified in the Special Provisions, and this will be 
the date that all premium and administrative fees are due. For the 1999 
crop year, for the old Nursery Crop Insurance Provisions (96-056), all 
administrative fees must be paid by the third billing date, which is 
not inconsistent with the Basic Provisions. This policy will not be 
effective after the 1999 crop year. Therefore, no change has been made.
    Comment: An insurance service organization suggested revising 
section 7(e)(5) of the Basic Provisions to read ``The administrative 
fee for limited coverage will be waived if you request it and qualify 
as a limited resource farmer.''
    Response: FCIC has made the requested change.
    Comment: An insurance company and an insurance service organization 
asked if the phrase ``is not refundable'' should be deleted from 
section 7(e)(6) of the Basic Provisions since the administrative fee 
for additional coverage is not due until the premium is due, and this 
provision for CAT coverage was removed from the CAT provisions after 
the fee due date was changed.
    Response: FCIC has removed the phrase.
    Comment: An insurance company and an insurance service organization 
questioned what is meant by section 35(b) of the Basic Provisions and 
how it will be implemented, who will make the determination and the 
timing of the determination. They also asked if this provision should 
be added to the Crop Provisions instead of the Basic Provisions since 
not all crops have other USDA programs. They stated that section 35(c) 
of the Basic Provisions implies that crop insurance indemnity payments 
would always be done prior to any USDA payment. They asked if insurance 
companies would be in a position to determine the additional USDA 
amount due if non-crop insurance USDA benefits are distributed through 
the crop insurance delivery system. They do not think this will always 
be the case, which would add confusion and could reduce the perceived 
value of crop insurance to policyholders. The company also stated that 
it appears that due to the producers

[[Page 40742]]

decision to purchase crop insurance other free benefits could be 
limited or reduced and this situation should be avoided.
    Response: Section 508(n) of the Act specifies that a producer who 
purchases limited or additional coverage may also receive assistance 
for the same crop loss under other programs administered by the 
Secretary, except the amount received for the loss under the limited or 
additional coverage together with the amount received under the other 
programs may not exceed the amount of the actual loss of the producer. 
Section 35(b) of the Basic Provisions specifies how to determine the 
amount of the actual loss. Since a producer pays for crop insurance 
coverage, the indemnity will always be paid in accordance with the 
terms and conditions of the policy. FSA will determine and pay any 
additional amount due or collect any overpayment if such benefits are 
paid prior to the payment of any indemnity regardless of how such 
benefits are delivered. These provisions are only needed in the Basic 
Provisions. Therefore, no change has been made.
    In addition to the changes described above, FCIC has made a few 
minor editorial changes.

List of Subjects in 7 CFR Parts 400 and 457 `

    Administrative practice and procedure, Basic Provisions, Claims, 
Common Crop Insurance Regulations, Crop insurance, Reporting and record 
keeping requirements.

Final Rule

    Accordingly, as set forth in the preamble, the interim rule 
amending 7 CFR parts 400 and 457, published on July 30, 1998, at 63 FR 
40632, is adopted as final with the following changes:

PART 400--GENERAL ADMINISTRATIVE REGULATIONS

Subpart T--Federal Crop Insurance Reform, Insurance Implementation; 
Regulations for the 1999 and Subsequent Reinsurance Years

    1. The authority citation for 7 CFR part 400 continues to read as 
follows:

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


Sec. 400.651  [Amended]

    2. Amend Sec. 400.651 by removing the definition of ``limited 
resource farmer.''
    3. Amend the definition of ``linkage requirement,'' in 
Sec. 400.651, the introductory text of Sec. 400.653, and 
Secs. 400.653(a), 400.654(b) and (c)(4) by removing the section 
designation of ``Sec. 400.657'' and adding in its place the section 
designation of ``Sec. 400.655.''

PART 457--COMMON CROP INSURANCE REGULATIONS

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

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

Sec. 457.8  [Amended]

    5. Amend Sec. 457.8 as follows:
    a. Revise the definitions of ``administrative fee,'' ``catastrophic 
risk protection'' and ``limited resource farmer'' in Section 1 of the 
Basic Provisions.
    b. Revise Section 2 paragraph (i) of the Basic Provisions.
    c. Revise Section 3 paragraph (f) of the Basic Provisions.
    d. Revise Section 7 paragraphs (e)(1), (4), (5), and (6) of the 
Basic Provisions.
    e. Revise Section 15 paragraph (d) of the Basic Provisions.
    f. Remove Section 35 paragraph (d) of the Basic Provisions. The 
revisions to Sec. 457.8 read as follows:


Sec. 457.8  The application and policy.

* * * * *
    1. Definitions.
* * * * *
    Administrative fee. An amount you must pay for catastrophic risk 
protection, limited, and additional coverage for each crop year as 
specified in section 7 and the Catastrophic Risk Protection 
Endorsement.
* * * * *
    Catastrophic risk protection. The minimum level of coverage offered 
by FCIC that is required before you may qualify for certain other USDA 
program benefits unless you execute a waiver of any eligibility for 
emergency crop loss assistance in connection with the crop.
* * * * *
    Limited resource farmer. A producer or operator of a farm:
    (a) With an annual gross income of $20,000 or less derived from all 
sources, including income from a spouse or other members of the 
household, for each of the prior two years; or
    (b) With less than 25 acres aggregated for all crops, where a 
majority of the producer's gross income is derived from such farm or 
farms, but the producer's gross income from farming operations does not 
exceed $20,000.
* * * * *
    2. Life of Policy, Cancellation, and Termination.
* * * * *
    (i) When obtaining catastrophic, limited, or additional coverage, 
you must provide information regarding crop insurance coverage on any 
crop previously obtained at any other local FSA office or from an 
approved insurance provider, including the date such insurance was 
obtained and the amount of the administrative fee.
* * * * *
    3. Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities.
* * * * *
    (f) You must obtain the same level of coverage (catastrophic risk 
protection, limited or additional) for all acreage of the crop in the 
county unless one of the following applies:
    (1) The applicable Crop Provisions allow you the option to 
separately insure individual crop types or varieties. In this case, 
each individual type or variety insured by you will be subject to 
separate administrative fees. For example, if two grape varieties in 
California are insured under the Catastrophic Risk Protection 
Endorsement and two varieties are insured under a limited coverage 
policy, a separate administrative fee will be charged for each of the 
four varieties. Although insurance may be elected by type or variety in 
these instances, failure to insure a type or variety that is of 
economic significance may result in the denial of other farm program 
benefits unless you execute a waiver of any eligibility for emergency 
crop loss assistance in connection with the crop.
    (2) If you have limited or additional coverage for the crop in the 
county and the acreage has been designated as ``high risk'' by FCIC, 
you will be able to obtain a High Risk Land Exclusion Option for the 
high risk land under the limited or additional coverage policies and 
insure the high risk acreage under a separate Catastrophic Risk 
Protection Endorsement, provided that the Catastrophic Risk Protection 
Endorsement is obtained from the same insurance provider from which the 
limited or additional coverage was obtained.
* * * * *
    7. Annual Premium and Administrative Fees.
    (e) * * *
    (1) If you elect limited coverage, you must pay an administrative 
fee each crop year of $50 per crop per county, not to exceed $200 per 
county, or $600 for all counties in which you elected to obtain limited 
coverage.
* * * * *
    (4) Payment of an administrative fee will not be required if you 
file a bona fide zero acreage report on or before the acreage reporting 
date for the crop. If you falsely file a zero acreage report you

[[Page 40743]]

may be subject to criminal and administrative sanctions.
    (5) The administrative fee for limited coverage will be waived if 
you request it and you qualify as a limited resource farmer.
    (6) The administrative fee for additional coverage is not subject 
to any limits and may not be waived.
* * * * *
    15. Production Included in Determining Indemnities.
* * * * *
    (d) The amount of an indemnity that may be determined under the 
applicable provisions of your crop policy may be reduced by an amount, 
determined in accordance with the Crop Provisions or Special 
Provisions, to reflect out-of-pocket expenses that were not incurred by 
you as a result of not planting, caring for, or harvesting the crop. 
Indemnities paid for acreage prevented from being planted will be based 
on a reduced guarantee as provided for in the crop policy and will not 
be further reduced to reflect expenses not incurred.
* * * * *
    Signed in Washington, DC, on July 20, 1999.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 99-19013 Filed 7-27-99; 8:45 am]
BILLING CODE 3410-08-P