[Federal Register Volume 65, Number 92 (Thursday, May 11, 2000)]
[Rules and Regulations]
[Pages 30345-30351]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-11833]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1436

RIN 0560-AG00


Farm Storage Facility Loan Program

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Interim rule.

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SUMMARY: This rule implements the Commodity Credit Corporation's 
(CCC's) Farm Storage Facility Loan program utilizing authority in the 
CCC Charter Act. The program will provide financing for producers to 
build or upgrade farm storage and handling facilities.

DATES: This rule is effective May 11, 2000. Comments concerning this 
rule should be received on or before June 12, 2000 to be assured 
consideration. Comments on the information collections in this rule 
must be received by July 10, 2000 to be assured consideration.

ADDRESSES: Comments must be submitted to Grady Bilberry, Director, 
Price Support Division, Farm Service Agency, 1400 Independence Avenue, 
S.W., STOP 0512, Washington, DC 20250-0512.

FOR FURTHER INFORMATION CONTACT: Chris Kyer, (202) 720-7935 or e-mail 
fsa.usda.gov">chris_kyer@wdc.fsa.usda.gov.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

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

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this rule because the Farm Service Agency is not required 
by 5 U.S.C. 553 or any other provision of law to publish a notice of 
proposed rulemaking with respect to the subject matter of this rule.

Environmental Evaluation

    It has been determined by an Environmental Evaluation that this 
program, as a whole, will have no significant impact on the quality of 
the human environment. Therefore, neither an Environmental Assessment 
nor an Environmental Impact Statement for the program is needed. 
However, because it is possible that individual projects may have 
limited impacts on the local environment, environmental evaluations for 
each project will be conducted to determine the need for environmental 
assessment and/or mitigation.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988. The provisions of this rule preempt State laws to the extent 
such laws are inconsistent with the provisions of this rule. Before any 
legal action may be brought regarding determinations of this rule, the 
administrative appeal provisions set forth at 7 CFR part 780 must be 
exhausted.

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 3014, subpart V, 
published at 48 FR 29115 (June 24, 1983).

The Unfunded Mandates Reform Act of 1995

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

Paperwork Reduction Act of 1995

    A Notice with request for comments on the information collection is 
part of this proposed rule. An emergency information collection package 
has been sent to OMB for review.
    In accordance with the Paperwork Reduction Act of 1995, this notice 
announces the Commodity Credit Corporation's (CCC) request for approval 
of a new information collection in support of the Farm Storage Facility 
Loan Program.
    Title: 7 CFR 1436, Farm Storage Facility Loan Program Regulations.
    OMB Control Number: 0506-NEW.
    Type of Request: Approval of an information collection.
    Abstract: This information is needed to administer the CCC's Farm 
Storage Facility Loan Program. The information will be gathered from 
producers needing additional on-farm grain storage and handling 
capacity to determine whether they are eligible for loans.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 22 minutes per producer.
    Respondents: Eligible producers: 200.000.
    Estimated Number of Respondents: 50,000.
    Estimated Number of Responses per Respondent: 2.
    Estimated Total Annual Burden on Respondents: 47,250 hours.
    Proposed topics for comments are: (a) Whether the collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (b) the accuracy of the agency's estimate of burden including 
the validity of the methodology and assumptions used; (c) ways to 
enhance the quality, utility, and clarity of the information to be 
collected; or (d) ways to minimize the burden of the collection of 
information on those who are to respond, including the use of 
appropriate automated, electronic, mechanical or other technological 
collection techniques or other forms of information technology.
    Comments should be sent to the Desk Officer for Agriculture, Office 
of Information and Regulatory Affairs, Office of Management and Budget, 
Washington, DC 20503 and to Chris Kyer, USDA--Farm Service Agency--
Price Support Division, 1400 Independence Avenue, SW., STOP 0512, 
Washington, DC 20250-0512; Telephone (202) 720-7935 or e-mail 
chris_kyer@wdc,fsa.usda.gov. Copies

[[Page 30346]]

of the information collection may be obtained from Chris Kyer at the 
above address.
    All responses to this notice will be summarized. All comments will 
also become a matter of public record.

Executive Order 12612

    It has been determined 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.

Immediate Effectiveness of This Rule

    It has been determined that this rule should be issued as an 
interim rule, without prior comment, but subject to modification on the 
consideration of those comments that are timely received. It has been 
determined that to delay the implementation of the rule pending comment 
would be impracticable and contrary to the public interest. That 
finding is based on the current shortage of available storage, rapidly 
changing market needs that are forcing producers to consider new 
storage arrangement on their farms, and the lack of material adverse 
effect on other parties. With respect to storage availability, recent 
data indicates a critical shortage of storage that continues to 
deteriorate. The Deputy Administrator for Commodity Operations, Farm 
Service Agency, recently completed an analysis of on-farm and 
commercial grain storage utilization, which showed that the utilization 
of both on-farm and commercial storage had increased from 79 percent 
utilization in 1996 to 95 percent utilization in 1999. At the time of 
the review, eleven key grain producing states were utilizing over one 
hundred percent of available storage capacity when including temporary 
and emergency storage. Four other states were at ninety percent of 
storage capacity. The fifteen states identified with ninety percent or 
above utilization of grain storage capacity are: Arkansas, Colorado, 
Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan, Minnesota, 
Mississippi, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin. In 
1998 the requests by warehouse operators with CCC Uniform Grain Storage 
Agreements for emergency (on the ground) storage were at a level of 
192.3 million bushels; for 1999, that level increased to 238.1 million 
bushels.
    Also, in the meantime, changing market needs are putting pressure 
on producers to build new facilities since some buyers of grain seek to 
limit purchases to specialty grains that are not genetically modified 
or to segregate either specialty crops or grains that are not 
genetically modified. To meet those demands, while utilizing the 
benefits of genetically modified grains for other markets, the producer 
may find it necessary to grow different kinds of grain in which case 
they may need separate storage facilities in order to guarantee the 
proper identity of the grains. Many producers, however, will not be 
able to meet that need without the assistance provided for in this rule 
and will not be able to do so in a timely manner for this crop year 
unless this rule is made effective immediately. In addition, a delay in 
implementing this rule could also mean that producers, who otherwise 
might be helped and who are the most in need, will be unable to take 
full advantage of CCC's nonrecourse marketing assistance loan program 
for the current marketing year. For those producers who cannot store 
their crops, the only program option available is the loan deficiency 
payment available at the time of harvest, thus denying those producers 
the ability to delay marketings until a more favorable market situation 
might arise. Moreover, the lack of adequate facilities can mean that 
the producer also loses out on the other guarantees and assistance that 
a marketing loan can afford the producer such as the special benefits 
that can inure to a producer as a result of a marketing loan when the 
producer has reached the maximum limitation on the amount of payments 
that the producer can receive in the form of loan deficiency payments 
or marketing loan gains.
    Storage conditions have not improved materially in the last few 
months so as to relieve the shortage of storage and, therefore, there 
is a critical need to act as quickly as possible. The public interest 
in this respect has been established by the Congressional direction 
contained in Section 4(h) of the CCC Charter Act (15 U.S.C. 714b(h)), 
which requires a storage program whenever it is determined that there 
is a shortage of a storage. Furthermore, while the need for immediate 
assistance is critical, the potential harm to other parties, by 
issuance of this rule as an interim rule, is expected to be minimal by 
comparison. In addition, the rule is flexible enough so that, in the 
event that any comments are received that would dictate a reason to 
suspend the program, a suspension could be imposed before the response 
to the comments is published. Even after the interim rule is issued, it 
will take some time to complete loan applications. As a result, a delay 
in the start-up of the program until comments could be received would 
put availability of the program beyond the time in which many producers 
in need of storage could obtain relief for the current crop year. This 
could be damaging not only to the producers themselves but also to the 
effort to increase the marketability in all markets of U.S.-produced 
grains.
    Accordingly, for all the foregoing reasons, it has been determined 
that the provisions of this rule should be made effective immediately.

The Small Business Regulatory Enforcement Fairness Act

    The finding made above, that this rule should be made effective 
immediately, applies for all purposes including, but not limited, to 
the provisions of 5 U.S.C. 808 of the Small Business regulatory 
Enforcement Fairness Act (SBREFA), which provides that a rule may, 
without regard to certain special Congressional oversight measures 
provided for in SBREFA, take effect at such time as the agency may 
determine if the agency finds for good cause that public notice is 
impracticable, unnecessary, or contrary to the public interest. For the 
reasons set out, it has been determined that delay would be contrary to 
the public interest and that the rule should be made effective 
immediately.

Cost Benefit Analysis Summary

    U.S. grain storage capacity steadily declined from 1987 to 1997. 
Storage capacity has increased modestly since its low in 1997, but 
increases have not been sufficient to keep pace with growing 
production. Despite persistent harvest-time storage capacity shortfalls 
and the advantages of on-farm storage for producers, low commodity 
prices and reduced farm income will limit the ability of producers to 
significantly expand their on-farm storage. The Farm Storage Facility 
Loan Program will add additional storage capacity in deficit areas and 
help farmers adapt to identity preserved storage and handling 
requirements for genetically enhanced organisms. One direct benefit to 
producers from the Farm Storage Facility Loan Program would be reduced 
financing costs on facility construction. Interest savings for a farmer 
on the construction of a 15,000-bushel grain bin could total as much as 
$3,840 under the program when compared with financing through some 
commercial banks. Producers would also benefit from the potential for 
higher

[[Page 30347]]

market returns on their crops because on-farm storage capacity creates 
pricing and hedging opportunities that can significantly increase 
marketing returns. The Farm Storage Facility Loan Program is expected 
to expand on-farm storage by more than 750 million bushels over the 
next 5 years.

Background

    Section 5(b) of the CCC Charter Act (15 U.S.C. 714c(b)) authorizes 
CCC to use its general powers to make available materials and 
facilities required in connection with the production and marketing of 
agricultural commodities. Section 4(f) of the CCC Charter Act (15 
U.S.C. 714b(h)) provides that the Corporation may make loans to grain 
producers needing storage facilities and that loans shall be made in 
areas in which the Secretary determines that there is a deficiency of 
such storage.
    CCC made loans for storage facilities intermittently since 1948 and 
stopped making new storage facility loans in 1982 based on studies that 
revealed that producers had sufficient storage for their crops. Since 
1995, the storage situation has changed. Storage capacity utilization 
rates are running extremely high and storage shortages exist in some 
areas. The net decrease in storage capacity from 1996 to 1998 has been 
about 79.5 million bushels, of nearly 1 percent of total capacity. 
During this same period, grain production increased by nearly 8 
percent, from 14 billion bushels in 1996 to 15 billion bushels in 1998. 
As a result, there is insufficient capacity to allow farmers to store 
their grain, forcing farmers to sell at harvest when prices are usually 
at their lowest.
    CCC's immediate intent is to use this program to address the 
existing shortage of grain storage. However, section 5(b) of the CCC 
Charter Act, gives CCC broad authority to make ``available materials 
and facilities required in connection with the production and marketing 
of agricultural commodities''. Thus, CCC will explore marking available 
facility loans for the storage of commodities harvested as other than 
grain such as silage, alternative types of storage arrangements such as 
``condominium storage'', or storage facilities for other agricultural 
products. Since CCC has not identified shortages in storage facilities 
for other than whole grain or analyzed the feasibility of alternative 
storage arrangements, it would be improper to implement such provisions 
under an interim rule. CCC is seeking comments during the comment 
period on all of these aforementioned areas. Comments received will be 
given consideration for inclusion in the final rule.
    On February 2, 2000, the Secretary announced the availability of 
financing for farm storage and handling facilities. Based upon this 
announcement, producers may have made commitments to construct on-farm 
storage facilities. The decision has been made to extend loan 
eligibility to those producers who took action on or after February 2, 
2000 based on the Secretary's announcement.
    Although a similar program was available in the past, this rule 
allows for a new farm storage facility loan program with terms and 
conditions that differ from the previous program. The rule calls for 
eligible producers to apply for farm storage facility loans at their 
FSA administrative county office. Producers requesting loans must 
provide information regarding the need for farm storage capacity and 
the storage facility they propose to construct. They must also 
establish that they are eligible for the program, and that the site 
proposed for a storage structure does not adversely impact the 
environment.
    Specific eligibility requirements for applicants are a satisfactory 
credit rating as determined by CCC; no delinquent Federal debt as 
defined by the Debt Collection Improvement Act of 1996; production of 
facility loan commodities; proof of crop insurance from FCIC or a 
private company; compliance with USDA provisions for highly erodible 
land and wetlands; ability to repay the debt resulting from the 
program; compliance with any applicable local zoning, land use and 
building codes for the applicable farm storage facility structures; and 
need for new or additional farm grain storage or handling capacity. 
This information is needed by CCC to make loans where there is a 
bonafide need, and to make loans that will be repaid on time.
    County offices will use existing office records to determine if the 
producer is in compliance with highly erodible land and wetlands 
provisions. The county office will utilize a government wide system to 
identify if the applicant is delinquent on any Federal debt. The 
applicant's credit history will be obtained using existing credit 
reporting agencies that are contracted to FSA. Proof of crop insurance 
must be provided by the applicant in the form of an approved crop 
insurance application or statement of coverage for the current crop 
year. Applicants must provide copies of local building permits, if 
applicable, to demonstrate compliance with local land use laws.
    Applicants will be required to file requests for farm storage 
facility loans on form CCC-185, Loan Application for Farm Storage 
Facility and Drying Equipment Loan Program. The applicant must provide 
information that is generally unavailable to CCC from other sources, 
such as, name, address, tax identification number and phone number of 
the person applying for the loan; the purpose of the loan and the 
amount of the loan requested; and details about the type and cost of 
the storage structure, and related handling systems, or drying systems 
the applicant proposes to install. This information becomes the basis 
for the net cost of eligible components which determines the amount of 
the loan. Producers must also provide specific commodity production 
data that supports the determination the producer requires storage or 
that existing facility loan commodity storage capacity is not adequate. 
This will help insure that CCC is not lending funds on capacity that is 
not needed. The applicant must provide information regarding whether 
the facility equipment has been purchased, delivered, or installed.
    The applicant must sign CCC-185 when it is complete and will be 
provided a copy. Information to support the applicant's request will 
also be necessary. Financial information will be obtained from the 
applicant to determine if the applicant has the means to provide the 
required down payment and to make future loan installments. The 
applicant will be asked to verify debts and assets in order to prepare 
an accurate balance sheet and cash flow statement. The applicant will 
be asked to sign the form authorizing financial institutions and 
creditors to release asset and debt information to CCC. The applicant 
will be required to sign a UCC-1 Financing Statement and other forms as 
needed to grant CCC a security interest in the proposed structure and 
equipment. Upon acceptance of a complete application, a CCC 
representative will conduct a lien search as needed.
    Borrowers must maintain the collateral in good condition; pay loan 
installments and real estate taxes on time, and maintain all peril 
structural, and if applicable, flood insurance policies. FSA will 
conduct annual collateral checks. If installments are not paid during 
each due and payable period, collection activity will proceed according 
to standard CCC policy.

List of Subjects in 7 CFR Part 1436

    Applicability, administration, definitions, availability of loans, 
eligible borrowers, eligible storage facilities, term of loan, security 
of loan, amount of loan and loan application approvals, downpayment, 
interest, repayment of loan, taxes, maintenance,

[[Page 30348]]

disbursements, sale or conveyance, environmental compliance.


    Accordingly, for the reasons set forth in the preamble, the 
Commodity Credit Corporation adds 7 CFR part 1436 to read as follows:
PART 1436--FARM STORAGE FACILITY LOAN PROGRAM REGULATIONS
Sec.
1436.1   Applicability.
1436.2   Administration.
1436.3   Definitions.
1436.4   Availability of loans.
1436.5   Eligible borrowers.
1436.6   Eligible storage facilities or handling equipment.
1436.7   Term of loans.
1436.8   Security for loan.
1436.9   Loan amount and loan application approvals.
1436.10   Down payment.
1436.11   Disbursements.
1436.12   Interest.
1436.13   Repayment of loan.
1436.14   Taxes.
1436.15   Maintenance.
1436.16   Sale or conveyance.
1436.17   Environmental compliance.

    Authority: 15 U.S.C. 714 et seq.

PART 1436--FARM STORAGE FACILITY LOAN PROGRAM REGULATIONS


Sec. 1436.1  Applicability.

    The regulations of this part provide the terms and conditions under 
which CCC may provide low-cost financing for producers to build or 
upgrade on-farm storage and handling facilities. Because liens and 
security interests related to this activity may be governed by state 
law, CCC may adapt certain procedures relating to those issues that may 
vary between states.


Sec. 1436.2  Administration.

    (a) The Farm Storage Facility Loan Program shall be administered 
under the general supervision of the Executive Vice President, CCC or 
designee and shall be carried out in the field by State FSA committees, 
county FSA committees and FSA employees.
    (b) State FSA committees, county FSA committees and FSA employees, 
do not have the authority to modify or waive any of the provisions of 
the regulations of this part.
    (c) The State FSA committee shall take any action required by these 
regulations that has not been taken by the county committee. The State 
FSA committee shall also:
    (1) Correct, or require the county FSA committee to correct, any 
action taken by such county FSA committee that is not in accordance 
with the regulations of this part; and
    (2) Require the county FSA committee to withhold taking any action 
that is not in accordance with the regulations of this part.
    (d) No provision or delegation herein to a State or county FSA 
committee shall preclude the Executive Vice President, CCC, or a 
designee, or the Administrator, FSA, or a designee, from determining 
any question arising under the program or from reversing or modifying 
any determination made by the State or county FSA committee.
    (e) The Deputy Administrator, Farm Programs, FSA, may authorize 
State and county FSA committees to waive or modify deadlines and other 
program requirements in cases where lateness or failure to meet such 
other requirements does not adversely affect the operation of the Farm 
Storage Facility Loan Program.
    (f) A representative of CCC may execute Farm Storage Facility Loan 
Program applications and related documents only under the terms and 
conditions determined and announced by CCC. Any such document that is 
not executed in accordance with such terms and conditions, including 
any purported execution prior to the date authorized by CCC, shall be 
null and void.
    (g) The Deputy Administrator may suspend this program at any time 
when it appears that there is no shortage of storage that needs to be 
addressed or where some other reason shall arise for which it appears 
that the program goals can be achieved more efficiently in a manner 
different from that provided for this part.


Sec. 1436.3  Definitions.

    The following definitions shall be applicable to the program 
authorized by this part and will be used in all aspects of 
administering this program:
    Aggregate outstanding balance means the sum of the outstanding 
balances of all loans disbursed to the applicant.
    Assumption means the act or agreement by which one borrower takes 
over or assumes the mortgage debt of another borrower.
    Collateral means the storage structure, drying equipment or 
handling equipment securing the loan.
    Consent, disclaimer, severance, or subordination agreement means an 
agreement under which a party may consent to the security interest of 
another in property, disclaim security interest in property, or 
subordinate security interest in property to the interest of another 
party.
    Facility loan commodity means wheat, rice, soybeans, sunflower 
seed, canola, rapeseed, safflower, flaxseed, mustard seed, crambe, 
other oilseeds as determined and announced by CCC, corn, grain sorghum, 
oats, or barley harvested as whole grain.
    Financing statement. means a document that gives legal notice of a 
lien on chattel property when properly filed or recorded.
    Non-movable or non-salable collateral means either collateral the 
county committee determines cannot be sold and moved to a new location 
because of the type of construction or collateral that has deteriorated 
to the point that it has no sale recovery value.
    Person means any individual, group of individuals, partnership, 
corporation, estate, trust, association, cooperative, or other business 
enterprise, or other legal entity who is, or whose members are, a 
citizen or citizens of, or legal resident alien in the United States.
    Uniform Commercial Code means the multi-state code of laws covering 
commercial transactions such as sales, negotiable instruments, and 
secured transactions.


Sec. 1436.4  Availability of loans.

    (a) An application for a loan shall be submitted to the 
administrative county office that maintains the records of the farm or 
farms to which the application applies. Upon request, the applicant 
shall furnish information and documents as the state or county 
committee deems reasonably necessary to support the application. This 
may include financial statements, receipted bills, invoices, purchase 
orders, specifications, drawings, plats, or written authorization of 
ingress and egress.
    (b) Producers who authorize actions without an approved loan, do so 
at their own risk and without creating any liability on behalf of CCC 
except for producers who between February 2, 2000 and May 11, 2000 took 
action based on the announcement of the program. Such action may 
include, but is not limited to, entering into purchase contracts, 
purchases of materials, taking delivery of parts, site preparation, and 
construction.


Sec. 1436.5   Eligible borrowers.

    (a) The term ``eligible borrower'' means any person who, as 
landowner, landlord, operator, producer, tenant, leaseholder, or 
sharecropper:
    (1) Has a satisfactory credit history, and demonstrates an ability 
to repay the debt arising under this program;

[[Page 30349]]

    (2) Has no delinquent Federal debt defined by the Debt Collection 
Improvement Act of 1996;
    (3) Is a producer of a facility loan commodity;
    (4) Demonstrates a need for increased storage capacity;
    (5) Provides proof of crop insurance from FCIC or a private 
company;
    (6) Is in compliance with USDA provisions for highly erodible land 
and wetlands conservation according to 7 CFR part 12;
    (7) Demonstrates compliance with any applicable local zoning, land 
use, and building codes for the applicable farm storage facility 
structures;
    (8) Provides proof of flood insurance if CCC determines such 
insurance is necessary to protect the interests of CCC, and proof of 
all peril structural insurance, to CCC annually; and
    (9) Demonstrates compliance with the National Environmental Policy 
Act regulations at 40 CFR, parts 1500 through 1508.
    (b) [Reserved]


Sec. 1436.6  Eligible storage facilities for handing equipment.

    (a) Loans may be made only for the purchase and installation of 
eligible storage facilities and permanently affixed drying and handling 
equipment, or for the remodeling of existing storage facilities or 
permanently affixed drying and handling equipment as provided in this 
section. Eligible storage and handling facilities shall include the 
following:
    (1) New conventional-type cribs or bins designed and engineered for 
whole grain storage and having a useful life of at least 10 years;
    (2) Oxygen-limiting and other upright silo-type structures designed 
for whole grain storage and having a useful life of at least 10 years; 
and
    (3) Flat-type storage structures for which the primary use is to 
store whole grain.
    (b) The calculation of the loan amount may include costs associated 
with building or improving an eligible storage and handling facility, 
including:
    (1) Permanently affixed grain handling equipment and grain drying 
equipment, including perforated floors considered to be essential to 
the proper functioning of the grain storage system;
    (2) Safety equipment such as lighting, inside and outside ladders;
    (3) Equipment to improve, maintain, or monitor the quality of 
stored grain, such as cleaners, moisture testers, and heat detectors;
    (4) Electrical equipment, including labor and materials for 
installation, such as lighting, motors, and wiring integral to the 
proper operation of the grain storage and handling equipment; and
    (5) Concrete foundations, aprons, pits, and pads (including site 
preparation, labor and materials) essential to the proper operation of 
the grain storage and handling equipment.
    (c) Ineligible storage and handling equipment with respect to which 
no loans for installation or related costs shall be disbursed under 
this part include:
    (1) Portable grain drying equipment and portable augers;
    (2) Structures of a temporary nature that require the weight or 
bulk of the stored commodity to maintain its shape (such as fences or 
bags);
    (3) Structures that are bunker-type, horizontal, or open silos;
    (4) Structures that are not suitable for storing the facility loan 
commodities for which a need is determined; and
    (5) Storage structures to be used for commercial purposes. 
Commercial purpose is defined as the storage and handling of grain, 
whether paid or unpaid, for persons other than the loan applicant. 
State FSA committees may allow, subject to the approval of the Deputy 
Administrator, Farm Programs, FSA, exceptions to this requirement if an 
applicant is otherwise eligible and the intent and purpose of the Farm 
Storage Facility Loan program is being met. Any facility that is in 
working proximity to any commercial storage operation, shall be 
considered to be part of a commercial storage operation.
    (d) Loans may be approved for financing additions to more 
modifications of an existing storage facility to increase storage 
capacity if the county FSA committee determines that the modification 
is necessary to increase the storage capacity of the unit and is not 
for maintenance, repair, or replacement of items such as motors, fans, 
or wiring.


Sec. 1436.7  Term of loan.

    The maximum term of the loan shall be 7 years from the date of 
execution of a promissory note and security agreement. No extensions of 
the loan term will be granted.


Sec. 1436.8  Security for loan.

    (a) All loans shall be secured by a promissory note and security 
agreement covering the farm storage facility. The promissory note and 
security agreement shall grant CCC a security interest in the 
collateral and shall be perfected in the manner specified in accordance 
with applicable state law. CCC's security interest in the collateral 
shall constitute the sole security interest in such collateral except 
for prior liens on the underlying realty that by operation of law 
attaches to the collateral if it is or becomes a fixture. If any such 
prior lien on the realty will attach to the collateral, a waiver, 
severance, or subordination of such lien must be obtained in writing 
from each person having an interest in the real estate on which the 
collateral is to be located. No additional liens or encumbrances may be 
placed on the storage facility after the loan is approved unless CCC 
approves otherwise in writing.
    (b) A lien on the real estate on which the farm storage facility is 
located will be required on all loans in the form of a real estate 
mortgage, deed of trust, or other security instrument approved by the 
CCC. For loan amounts exceeding $50,000, CCC's interest in the real 
estate shall be superior to all other lien holders. If the real estate 
is covered by a prior lien, a lien may be obtained by means of a 
subordination agreement prescribed by CCC. CCC will not require such an 
agreement from any agency of the Department of Agriculture.
    (c) Real estate liens may cover an acreage of land separate from 
the collateral if a lien on the underlying real estate is not feasible 
and if:
    (1) The borrower owns the separate acreage; and
    (2) The acreage is large and valuable enough, in the approving 
authority's opinion, to insure repayment of the loan.
    (d) Notwithstanding paragraphs (a), (b) and (c) of this section, a 
borrower, in lieu of such liens as are otherwise required by those 
paragraphs, may provide a letter of credit, bond, or other form of 
security, as approved by CCC.
    (e) If an existing structure is remodeled and an addition becomes 
an attached, integral part of the existing storage structure, CCC's 
security interest shall include the existing storage structure.
    (f) The cost of filing and recording all real estate liens and 
later subordinations will be paid by the borrower. CCC shall pay such 
costs relating to filing and recording financing statements.


Sec. 1436.9  Loan amount and loan application approvals.

    (a) The cost on which the loan shall be based is the net cost of 
the eligible facility, accessories, and services to the applicant after 
discounts and rebates, not to exceed a maximum per-bushel cost 
established by the State FSA committee.
    (b) The net cost for storage and handling equipment may include 
purchase price, sales tax, shipping, and delivery charges. The net cost 
shall not include secondhand material or any

[[Page 30350]]

other item that is determined by the approving authority to be 
ineligible for loan.
    (c) The principal amount of any farm storage facility loan shall be 
75 percent of the net cost of the applicant's needed storage or 
handling equipment not to exceed $100,000. Borrowers are limited to 
obtaining one loan per fiscal year under this part.
    (d) The aggregate outstanding balance of all facility loans for any 
one borrower may not exceed $100,000.
    (e) When a storage structure has a larger capacity than the 
applicant's needed capacity, as determined by CCC, the net cost 
eligible for a loan shall be prorated. Only costs associated with the 
applicant's needed storage capacity will be loan-eligible.
    (f) The county FSA committee may approve applications, if loan 
funds are available, up to the maximum approval amount unless the State 
FSA committee establishes a lower limit for country FSA committee 
approval authority.
    (g) Loan approvals will expire four months after the date of 
approval unless extended in writing for an additional four months by 
the State FSA committee.


Sec. 1436.10  Down payment.

    (a) A minimum down payment representing the difference between the 
net cost of the storage facility and the amount of the loan determined 
in accordance with Sec. 1436.9 shall be made by the loan applicant to 
the supplier or contractor before the loan is disbursed.
    (b) The down payment shall be in cash unless some other form of 
payment is approved by CCC.
    (c) The down payment may not include any trade-in, discount, 
rebate, credit, deferred payment, post-dated check, or promissory note 
to the supplier or contractor.


Sec. 1436.11  Disbursement.

    (a) Disbursement of the loan by CCC will be made when the farm 
storage facility has been delivered, erected, constructed, assembled, 
or installed and a CCC representative has inspected and approved such 
facility.
    (b) Disbursement will be made only if the borrower furnishes 
satisfactory evidence of the total cost of the facility and payment of 
all debts on the facility in excess of the amount of the loan.
    (c) Disbursement may be made jointly to the borrower and the 
contractor or supplier, except disbursement may be made to the borrower 
if CCC determines the borrower has paid the contractor or supplier all 
amounts that are due and owing with respect to the facility.


Sec. 1436.12  Interest.

    (a) Loans shall bear interest at the rate equivalent to the rate of 
interest charged on Treasury securities of comparable maturity on the 
date the loan is approved.
    (b) The interest rate for each loan will remain in effect for the 
term of the loan.
    (c) The loan applicant shall pay a non-refundable application fee 
of at least $45 to CCC


Sec. 1436.13  Payment of loan.

    (a) Equal installments of principal plus interest will be amortized 
over the loan term. Installments are due and payable by no later than 
the last day of each 12 month period of the loan, until the principal 
plus interest has been paid in full.
    (b) The payment of each installment may be by cash, money order, 
wire transfer, or by personal, certified, or cashier's check. Repayment 
shall be applied first to accrued interest and then to principal.
    (c) A claim will be established in accordance with 7 CFR part 1403 
for the principal and accrued interest amount due and late payment 
interest for any installment that is not paid within 30 days after the 
due and payable date.
    (d) Loan amounts outstanding, whether or not overdue, may be 
collected from payments that the borrower may otherwise be due to 
receive as marketing loan gains or other payments under 7 CFR part 1421 
or 7 CFR part 1427. In the even that a claim is established against a 
borrower for any amount due under this part, the provisions of 7 CFR 
part 1403 may be used to recover the debt from other Federal payments 
or loans.
    (e) CCC may declare the entire indebtedness immediately due and 
payable if the borrower violates any of the terms and conditions of 
this part, fails to pay any installment on time, or breaches any of the 
terms and conditions of any of the instruments executed in connection 
with the loan, or if the collateral is used in connection with any 
unauthorized commercial operation including, but not limited to, 
elevators, warehouses, dryers or processing plants, during the life of 
the loan.
    (f) The loan may be paid in full or in part at any time before 
maturity.
    (g) Upon payment of a loan, CCC shall release CCC's security 
interest in the collateral.


Sec. 1436.14  Taxes.

    The borrower must pay all real and personal property taxes that may 
affect CCC's security interest in all collateral securing the note 
evidencing the loan. To protect its interests, CCC may pay any unpaid 
taxes with respect to the collateral securing a loan made in accordance 
with this part, and if CCC does so, the borrower shall reimburse CCC 
for such payment, and if unpaid by the borrower, such debt shall become 
part of the current installment due.


Sec. 1436.15  Maintenance.

    (a) The borrower must maintain the loan collateral in a condition 
suitable for the storage of one or more of the facility loan 
commodities.
    (b) Until the loan has been repaid, the borrower shall be liable 
for all damages to or destruction of the collateral. CCC shall not 
assume any loss of the loan collateral.
    (c) CCC shall conduct annual collateral checks to insure compliance 
with this section.
    (d) Structures must be insured against all perils in all cases and 
must also be insured against flooding if the structure is located in a 
flood plain, as determined by CCC. Proof of flood insurance, if 
required, and proof of all peril structural insurance, must be provided 
to CCC annually. CCC must be listed as a loss payee on all peril and 
flood insurance policies.
    (e) CCC shall have rights in ingress and egress where the facility 
is located. Failure of the borrower to secure such access will render a 
borrower ineligible for the loan and, if a loan has already been made 
shall constitute a loan violation for which the remaining balance of 
the loan shall became due immediately.


Sec. 1436.16  Sale or conveyance.

    (a) The collateral or land securing a loan may be sold by CCC 
whenever CCC has declared the entire indebtedness immediately due and 
owing under this part or when the borrower voluntarily conveys the 
collateral to CCC before repaying the loan. Before a borrower sells or 
conveys the facilities or other property securing a loan without 
repaying the loan in full, the borrower shall obtain approval for the 
sale or conveyance from the county FSA committee.
    (b) Assumption of a farm storage facility loan is permitted.


Sec. 1436.17  Environmental compliance.

    (a) Except as otherwise specified in this section, prior to 
approval of any farm storage facility loan, an environmental evaluation 
will be completed to determine if the proposed action will have any 
adverse impacts on the environmental and cultural resources.
    (b) If it is determined that a proposed action or group of proposed 
actions will

[[Page 30351]]

not result in any adverse impact, the action will be considered as 
being categorically excluded for the purpose of compliance with the 
National Environmental Policy Act (NEPA), 40 CFR parts 1500 through 
1508.
    (c)(1) If adverse environmental impacts, either direct or indirect, 
are identified, an environmental assessment will be completed in 
accordance with the Council on Environmental Quality's Regulations for 
Implementing the Procedural Provisions of NEPA to the extent required 
by law.
    (2) The environmental assessment will be used to develop an action 
that results in no significant environmental impact on the human 
environment or cultural resources.
    (3) No action will be approved that has been determined to have 
significant impacts on the human environment or cultural resources.
    (d)(1) In order to minimize the exposure to environmental 
liabilities from the presence of contamination on real estate 
collateral, an evaluation will be made of the economic and 
environmental risks to the real estate collateral posted by the 
presence of hazardous substances and petroleum products.
    (2) If the evaluation made under paragraph (d)(1) of this section 
reveals that the collateral is or may be contaminated, then the 
applicant will be notified and given an option of offering as 
collateral other real estate that is free from contamination or 
remediating the contamination on the original site offered as 
collateral.

    Signed at Washington, D.C., on May 8, 2000.
Keith Kelly,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 00-11833 Filed 5-10-00; 8:45 am]
BILLING CODE 3410-05-M