[Federal Register Volume 65, Number 195 (Friday, October 6, 2000)]
[Proposed Rules]
[Pages 59759-59761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25665]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 65, No. 195 / Friday, October 6, 2000 / 
Proposed Rules  

[[Page 59759]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1412

RIN 0560-AF79


Contract Violations and Diminution in Payments: Fruits and 
Vegetable Planting Payment Reduction

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Proposed rule with request for comments.

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SUMMARY: Federal Agriculture Improvement and Reform Act of 1996 (1996 
Act) prohibited, with exceptions, the planting of fruits or vegetables 
on land enrolled in a Production Flexibility Contract (PFC). If a 
producer planted fruits or vegetables on acreage covered by a PFC and 
one of the exceptions in the 1996 Act did not apply, the producer 
violated the PFC. If the degree of the violation did not warrant 
termination of the contract, future PFC payments were reduced in 
accordance with the respective regulations. The Commodity Credit 
Corporation (CCC) published an advance notice of proposed rulemaking in 
May of 1999, seeking public comment on this issue. This proposed rule 
seeks additional public comment on the payment reductions applicable to 
a PFC when there has been a violation due to the planting of fruits or 
vegetables.

DATES: Comments must be received by November 6, 2000 to be assured 
consideration.

ADDRESSES: Submit comments to: Rebecca Davis, Production, Emergencies 
and Compliance Division (PECD), Farm Service Agency (FSA), USDA, STOP 
0517, 1400 Independence Avenue, SW., Washington, DC 20250-0517, 
telephone (202) 720-9882, e-mail Rebecca_Davis @wdc.fsa.usda.gov.

FOR FURTHER INFORMATION CONTACT: Rebecca Davis at (202) 720-9882.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule has been determined to be significant and was 
reviewed by the Office of Management and Budget (OMB) under Executive 
Order 12866.

Regulatory Flexibility Act

    It has been determined that Regulatory Flexibility Act is not 
applicable to this proposed rule because FSA is not required by 5 
U.S.C. 553 or any other provisions of the law to publish a notice of 
proposed rule making.

Environmental Evaluation

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

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988. The provisions of this proposed rule preempt State laws to the 
extent such laws are inconsistent with the provisions of this rule. The 
provisions of this rule are retroactive.

Executive Order 12372

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

Unfunded Mandates Reform Act of 1995

    This rule contains no Federal mandates under the 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 UMRA.

Paperwork Reduction Act

    Information collected in this rule has been approved by OMB and 
assigned OMB Control Number 0560-0092. This rule does not contain any 
new information collection requirements.

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.

Discussion of the Proposed Rule

    The Federal Agriculture Improvement and Reform Act of 1996 (the 
1996 Act) provided producers the opportunity to enter into a Production 
Flexibility Contract (PFC) but generally prohibited the planting of 
fruits or vegetables on PFC acreage except as provided by three 
specific exceptions in the Statute. See 7 U.S.C. 7218. Two of the 
exceptions in the 1996 Act require that the PFC payment applicable to 
an acre to be reduced for each acre on which fruits or vegetables were 
planted.
    When the exceptions do not apply, the planting of a fruit or 
vegetable on PFC acreage is a violation of the PFC. In such cases, the 
1996 Act provides that the PFC shall be terminated on each farm in 
which that producer has an interest, except that if the Secretary, 
through designated representatives, determines that termination of the 
contract is not warranted, reductions in PFC payments may be applied in 
lieu of termination. Regulations addressing those reductions are found 
at 7 CFR 1412.401.
    Under the current regulations, if the Farm Service Agency (FSA) 
county committee determines that a planting violation involving fruits 
or vegetables does not warrant termination of the PFC, a reduction may 
be made in the current or future PFC payments equal to the market value 
of the fruits or vegetables planted on contract acreage. This reduction 
is in addition to an acre-for-acre payment reduction for each acre of 
fruits or vegetables planted on contract acres. Acre-for-acre 
reductions are calculated starting with the contract commodity with the 
lowest contract payment rate per acre and proceeding to the contract 
commodity with the next lowest contract payment rate per acre until the 
PFC payment has been reduced for each acre of fruits or vegetables 
planted on contract acres. The planting violation payment reduction is 
applied

[[Page 59760]]

to current PFC payments and any future PFC payments for the farm on 
which the violation occurred and any other farm in which the producers 
who share in PFC payments on the violating farm have an interest.
    A producer who violates this provision can simply, instead, accept 
the termination remedy, in which case the producer must refund with 
interest all payments otherwise payable at the time of the violation 
and forfeit all future payments. Nonetheless, the non-termination and 
payment reduction now allowed is viewed by some to be out of proportion 
to the severity of the fruit or vegetable planting violation. In the 
past, some producers have accepted the payment reduction in lieu of 
termination, while others have chosen to terminate their PFC.
    In the interim, a conference report accompanying the Agriculture, 
Rural Development, Food and Drug Administration, and Related Agencies 
Appropriations Act, 1999 (Pub. L. 105-277), addressed this issue and 
``urged [the Secretary] to exercise reasonable treatment of producers 
to avoid harmful consequences.'' 144 Cong. Rec. H 11301 (daily ed. Oct. 
19, 1998).
    Because of this concern and in order to provide a full discussion 
of this issue, advance notices of proposed rule making were published 
in the Federal Register on May 5, 1999 (64 FR 24091), and June 25, 1999 
(64 FR 34154), seeking comments on the fruits and vegetables payment 
reduction provisions. More than 100 responses were received within the 
comment periods. Based on a review of the comments received, CCC has 
decided to proceed with the proposed rule set out in this notice and to 
seek additional public comment. This proposed rule, if adopted, would 
amend 7 CFR 1412.401 to change the payment reduction for both prior and 
future violations. Under the proposed rule, where termination is 
determined not to be warranted, in addition to the acre-for-acre 
payment reduction, the reduction for the planting violation would be 
calculated as follows: (1) For the initial offense for the producer, 
twice the payment rate for each acre on which the violation occurred, 
not to exceed the market value the producer could have expected to 
receive when planting the fruits or vegetables on the acreage; and (2) 
For subsequent violations, the expected market value of the fruits or 
vegetables planted on each contract acre. Generally, the result for 
first-time violators is that the payment reduction will be three times 
the lowest payment rates applicable to the number of acres in 
violation. The result for subsequent violations is that the payment 
reduction will be the loss of the lowest payment rates applicable to 
the number of acres in violation and the expected market value of the 
fruit or vegetable planted in violation of the contract. The rationale 
for this provision is that in all cases where a producer plants fruits 
or vegetables on contract acreage, the contract acreage should not earn 
a contract payment. The 1996 Act provides that in permissive cases of 
planting fruits or vegetables there is an acre-for-acre payment 
reduction, such that, at a minimum, contract violators should have the 
acre-for-acre payment reduction apply in all circumstances so as to not 
end up in a better position than permissive planters. Because some 
producers qualify for PFC payments based on different historical rates, 
the acres with the lowest payment rates will be used in determining the 
payment reduction.
    This rule should, for first offenses involving fruits or 
vegetables, result in a lower payment reduction because the total 
impact of the violation on the producer would now be no greater than 
three times the applicable per-acre PFC payment rate, whereas under the 
current rule the loss can be equal to the per-acre payment plus the 
total expected value of the crop. This will allow for a uniform and 
less onerous payment reduction. At the same time, the payment reduction 
will be significant enough to avoid the possibility that the leniency 
would be an invitation to attempt to circumvent the policy of the PFC 
to the detriment of traditional producers of fruits or vegetables whose 
interests are protected by the limitation.
    Producers have an obligation to make themselves aware of program 
restrictions and to abide by those restrictions. For second offenses, 
and additional offenses that might occur, where the seriousness of the 
matter would be beyond doubt and where a misunderstanding would not 
appear plausible, the sanction under the proposed rule would be the 
same as it is now--namely, the full value of the crop would be taken 
into account, as well as eliminating a payment amount on the land equal 
to the payment rate for the lowest contract commodity.
    In order to provide even greater uniformity in the administration 
of the sanctions, the proposed rule would allow refunds, or claim 
reductions, to those producers who on their first offenses had the 
current payment reduction applied. To the extent that a refund will be 
paid, however, no interest will be paid on such sums as the original 
charge was valid (given that the producer was, in fact, in violation of 
the contract). Any payments earned due to this recalculation are not 
payments for a past-due debt, but simply reflect a change in policy.
    Likewise, the rule only addresses changes in the monetary 
implications for fruit and vegetables violations. Farmers with prior 
violations who chose to terminate the contract will not be allowed to 
re-enroll the land in the program. Compliance cannot be performed 
retroactively and, as to future performance, re-enrollment of the 
property is contrary to the very limited enrollment window allowed by 
the 1996 Act. Furthermore, while those farmers who did opt for 
termination might have, in some cases, been influenced by the size of 
the alternative payment reduction sanction for their violation, 
determining the significance of that factor would be very difficult. In 
any event, those producers choose to cease participation in this 
program in which their production would have been limited over the life 
of the full PFC period. Accordingly, those producers did achieve a 
flexibility which those that remained in PFC did not have and which is 
not consistent with the long-term commitments except for continued 
benefits under the program.
    Refunds made under the rule, if adopted, would not count against 
the producer's payment limitations for the current year, but will be 
applied to the program year for which the original payment was reduced. 
These payments, moreover, will have only a limited effect on current 
payments to other producers as the amounts involved are small; 
moreover, those reductions that were made in payments in prior years 
for fruit or vegetable violations were added into the PFC payments made 
in subsequent years to other producers. Accordingly, overall, there is 
no net effect on other farmers involved with the PFC program though the 
results with individual producers could be impacted in a very minor 
way.

List of Subjects in 7 CFR Part 1412

    Contract acreage, Contract payments, Cotton, Feed grains, Price 
support programs, Rice, Wheat.

PART 1412--PRODUCTION FLEXIBILITY CONTRACTS FOR WHEAT, FEED GRAINS, 
RICE, AND UPLAND COTTON.

    1. The authority citation for part l412 continues to read as 
follows:

    Authority: 7 U.S.C. 7201 et seq; 15 U.S.C. 714b, 714c; Sec. 734, 
Pub. L. 105-86; Pub. L. 105-228; Sec 727, Pub. L. 105-277; Secs. 
727, 811, Pub. L. 106-78, 113 Stat. 1181.


[[Page 59761]]


    2. Revise Sec. 1412.401 to read as follows:


Sec. 1412.401  Contract violations.

    (a) Except as provided further in this section, if a producer 
subject to a contract violates a requirement of the contract the Deputy 
Administrator shall terminate the contract with respect to the producer 
on each farm in which the producer has an interest. Upon such 
termination, the producer shall forfeit all rights to receive future 
contract payments on each farm in which the producer has an interest 
and shall refund all contract payments received by the producer during 
the period of violation, plus interest with respect to the contract 
payments as determined in accordance with part 1403 of this chapter.
    (b) Except for violations of Sec. 1412.206, if the county committee 
determines that a violation is not serious enough to warrant 
termination of the contract, the county committee may in lieu of 
termination allow the contract to continue subject to a reduction in 
contract payments for the period of the violation.
    (c) If there is a violation of Sec. 1412.206, and the county 
committee determines that the violation is not serious enough to 
warrant termination of the contract the County Committee may in lieu of 
termination allow the contract to continue but reduce the contract 
payments as set forth below.
    (1) For the initial violation for the producer, the contract 
payment will be reduced by an amount that is twice the payment rate on 
the acre or acres found to be in violation, but not to exceed the 
market value the producer could have expected to receive when planting 
the fruits or vegetables on the acreage, as determined by the State 
committee.
    (2) For subsequent violations for the producer, the contract 
payment will be reduced by an amount that is equal to the market value 
the producer could have expected to receive when planting the fruits or 
vegetables on the acreage, as determined by the State committee.
    (d) The standard rule applicable to acreage planted to fruits or 
vegetables which provides for an acre-for-acre reduction will apply in 
addition to the payment reductions in paragraph (c) of this section.
    (e) If the county committee determines not to terminate the 
contract, the producer shall be required as a condition of contract 
continuance to refund to CCC that part of the contract payment received 
by the producer during the period of the violation, plus interest 
determined in accordance with part 1403 of this chapter.
    (f) Payment reductions will be applied in ascending order beginning 
with the acreage with the lowest contract payment rate.
    (g) For producers who violated Sec. 1412.206 in 1997, 1998, 1999, 
or 2000, and had their payments reduced under Sec. 1412.401(b) in 
effect on January 1, 2000, payment reductions will be calculated under 
the new formula now provided in Sec. 1412.401. Refunds will be issued 
to those producers as appropriate but without the payment of interest 
or other fees. Acreage affected by any contract termination cannot be 
re-enrolled in the program.
    (h) Refunds made under the rule would not count against the 
producer's payment limitations for the current year, but rather will be 
applied to the program year for which the original payment was reduced.
    (i) Producers who do not plant a crop on contract acreage must 
protect any such land from weeds and erosion, including providing 
sufficient cover if determined necessary by the county committee. The 
first violation of this provision by a producer will result in a 
reduction in the producer's payment for the farm by an amount equal to 
three times the cost of maintenance of the acreage, but not to exceed 
50 percent of the payment for the farm for that fiscal year. The second 
violation of this provision will result in a reduction in the payment 
for the farm by an amount equal to three times the cost of maintenance 
of the acreage, not to exceed the payment for the farm for that fiscal 
year.

    Signed at Washington, D.C., on October 2, 2000.
Keith Kelly,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 00-25665 Filed 10-5-00; 8:45 am]
BILLING CODE 3410-05-P