[Federal Register Volume 65, Number 235 (Wednesday, December 6, 2000)]
[Rules and Regulations]
[Pages 76115-76121]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30977]



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 Rules and Regulations
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  Federal Register / Vol. 65, No. 235 / Wednesday, December 6, 2000 / 
Rules and Regulations  

[[Page 76115]]



DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Parts 773 and 774

RIN 0560-AG23


Implementation of the Special Apple Loan Program and Emergency 
Loan for Seed Producers Program

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: This action is being taken to implement provisions of the 
Agricultural Risk Protection Act of 2000 (Act). The intended effect is 
to assist producers of apples suffering economic loss as a result of 
low prices and by making low cost loans available to seed producers 
adversely affected by the bankruptcy filing of AgriBiotech.

DATES: Effective December 6, 2000.

FOR FURTHER INFORMATION CONTACT: Pat Elzinga, Senior Loan Officer, 
USDA/FSA/DAFLP/STOP 0522, 1400 Independence Avenue, SW., Washington, DC 
20250-0522; telephone (202) 720-3889; facsimile (202) 690-1117; 
electronic mail: [email protected]; and Orlando C. Kilcrease, 
Senior Loan Officer, USDA/FSA/DAFLP/STOP 0522, Independence Avenue, 
SW., Washington, DC 20250-0522; telephone (202) 720-1472; facsimile: 
202-720-6797; electronic mail: Orlando [email protected].

SUPPLEMENTARY INFORMATION:

Notice and Comment

    Section 263 of the Agricultural Risk Protection Act requires that 
these regulations be promulgated without regard to the notice and 
comment provisions of 5 U.S.C. 553 or the Statement of Policy of the 
Secretary of Agriculture effective July 24, 1971 (36 FR 13804) related 
to notices of proposed rulemaking and public participation in the 
rulemaking process. This rule is thus issued as final and is effective 
immediately.

Executive Order 12866

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

Regulatory Flexibility Act

    The Farm Service Agency (Agency) certifies that this rule will not 
have a significant economic effect on a substantial number of small 
entities and, therefore, is not required to perform a Regulatory 
Flexibility Analysis as required by the Regulatory Flexibility Act, as 
amended (5 U.S.C. 601). This rule does not impact the small entities to 
a greater extent than the large entities.

Environmental Evaluation

National Environmental Policy Act

    The Agency has determined that this action does not constitute a 
major Federal action significantly affecting the quality of the human 
environment, and in accordance with the National Environmental Policy 
Act of 1969, (42 U.S.C. 4321 et seq.) neither an Environmental Impact 
Statement nor an environmental assessment is required.

Environmental Justice, Executive Order 12898

    This rule is subject to the requirements of Executive Order 12898, 
Federal Actions to Address Environmental Justice in Minority 
Populations and Low-Income Populations. Implementation of these 
requirements will occur at the time of actions performed hereunder.

Executive Order 12988

    The rule has been reviewed in accordance with E.O. 12988, Civil 
Justice Reform. The provisions of this rule are not retroactive and 
preempt State laws to the extent such laws are inconsistent with the 
provisions of this rule. In accordance with section 212(e) of the 
Department of Agriculture Reorganization Act of 1994, before any 
judicial action may be brought concerning the provisions of this rule, 
administrative review under 7 CFR part 11 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 3015, subpart V, 
published at 48 FR 29115 (June 24, 1983).

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 
establishes requirements for Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and 
the private sector. Under section 202 of the UMRA, the Agency generally 
must prepare a written statement, including a cost-benefit assessment, 
for proposed and final rules with ``Federal mandates'' that may result 
in expenditures to State, local, or tribal governments, in the 
aggregate, or the private sector, of $100 million or more in any 1 
year. When such a statement is needed for a rule, section 205 of the 
UMRA generally requires the Agency to identify and consider a 
reasonable number of regulatory alternatives and adopt the least 
costly, more cost-effective or least burdensome alternative that 
achieves the objectives of the rule.
    This rule contains no Federal mandates, under the regulatory 
provisions of title II of the 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 the UMRA.

Paperwork Reduction Act

    Section 263 of the Act provides that this rule will be promulgated 
without regard to the Paperwork Reduction Act contained in chapter 35 
of title 44, United States Code. This means that the information to be 
collected from the public to implement these programs and the burden, 
in time and money, the collection of the information would have on the 
public does not have to be approved by the Office of Management and 
Budget or be subject to the normal requirement for a 60-day public 
comment period.

Background

    This rule will implement sections Sec. 203(f) and 253 of the Act 
(Pub. L. 106-224) enacted June 20, 2000, related to the Special Apple 
Loan Program and

[[Page 76116]]

Emergency Loan for Seed Producers Program, respectively.

1. 7 CFR Part 773--Special Apple Loan Program

    Apple prices in the 1998-1999 growing season fell to their lowest 
levels in nearly 10 years. The average U.S. 1998-1999 farm price for 
fresh market apples was estimated to be down more than 20 percent from 
the previous growing season, resulting in a 16 percent drop in total 
farm revenue. Even with a possible improvement in the coming growing 
seasons, the serious economic impact of the earlier economic losses 
will result in ongoing financial difficulties for apple producers.
    Section 203(f) of the Act directed the Secretary to make loans to 
producers of apples that are suffering economic loss as a result of low 
prices for apples. To ensure that the borrowers under this program are 
those that most likely are suffering economic loss, the Agency 
restricted applicants to those that produced apples, on not less than 
10 acres, for sale in 1999 or 2000. This restriction excludes hobby 
apple producers. Funds allocated will most effectively assist those 
most directly affected by the economic crisis in the apple industry 
since those eligible will have been dependent on apple production for a 
primary source of income. In addition, this program is intended to 
assist producers recover from economic losses and enable them to 
continue their farming operations. Therefore, loan funds must be used 
for specified purposes related to the production and marketing of 
apples. Distribution of funds has been determined to be on a per acre 
basis to provide the most equitable access to assistance for all 
affected producers, and to best meet the intent of the authorizing 
statute.
    Congress allocated a limited amount of funds for this program so 
certain limits are necessary to help ensure that loan funds are 
distributed equitably to all interested producers. In addition, this 
program is intended to assist producers through a period of low apple 
prices, not replace the producers' established sources of credit. For 
these reasons, the regulation limits loan size to a maximum of $300.00 
per acre of apples in production and a maximum indebtedness of $500,000 
per producer. To expedite funding of eligible requests, the Agency will 
waive the application requirements of historical production and 
financial information, and cash flow projections, for applicants 
requesting $30,000 or less. The Agency, however, will require these 
applicants to provide cash flow projections later to show repayment if 
their balance sheet shows a net worth of less than three times the loan 
amount. This additional documentation is needed to minimize the credit 
risk to the Government. For loans for more than $30,000, repayment will 
always be based on the applicant's projected cash flow budget.
    To minimize the credit risk to the Government, the Agency requires 
that the applicants have an acceptable credit history and demonstrate 
an ability to repay the proposed loan. The Agency cannot make a loan to 
an applicant who is delinquent on a non-tax Federal debt (31 U.S.C. 
3720B), or has an outstanding non-tax Federal judgment (28 U.S.C. 
3201(e)). The restrictions will not apply if the Federal delinquency 
and judgment are cured on or before the loan closing date. Applicants 
who have provided the Agency false or misleading information are also 
not eligible for this program.
    The Agency has established rates, terms, and collateral 
requirements for Special Apple Loans to allow for maximum flexibility. 
The Act allows the Agency to require collateral in an amount adequate 
to protect the Government's interest and to minimize potential loss. 
The Agency therefore, will take a lien on available assets as necessary 
to adequately secure the loan. The level of documentation of collateral 
value will depend on the risk of loss, as determined by a review of the 
applicant's financial condition, and the size of the loan. For loans 
over $30,000, applicants with net worth of at least three times the 
loan amount have demonstrated an ability to successfully manage the 
finances of their operation and have accumulated assets to protect 
against adverse conditions. Applicants with those characteristics 
generally represent significantly less potential loss, so Agency will 
place less emphasis on collateral when evaluating the soundness of the 
loan request. Therefore, these applicants will be allowed to provide 
documentation of collateral value in the form of assessments or 
depreciation schedules. For loans over $30,000, applicants with net 
worth of less than three times the loan amount will be required to 
provide current appraisals, at the applicant's expense, to document 
collateral values. All appraisals must be completed by a knowledgeable 
appraiser, acceptable to the Agency. Real estate appraisals must be 
prepared by a state certified general appraiser in compliance with the 
Uniform Standards of Professional Appraisal Practices (USPAP). For 
loans of $30,000 or less, collateral value will be based on the best 
available, verifiable information. In addition, debtors will be subject 
to the collection authorities of 31 U.S.C. chapter 37.
    All persons approved for such loan assistance must execute loan 
instruments and legal documents to secure the loan and reduce the risk 
to the Government. For entity applicants, the loan instruments and 
legal documents must be executed in the name of the entity and by each 
individual member. This requirement is necessary to minimize the credit 
risk.
    The Agency will service Special Apple Loans like nonprogram loans 
under 7 CFR part 1951, subpart J. These borrowers have not been 
required at loan origination to meet the more stringent eligibility 
requirements of Agency loans under the Consolidated Farm and Rural 
Development Act (CONACT), and the Act does not provide CONACT servicing 
benefits to Special Apple Loan program borrowers.

2. 7 CFR Part 774--Emergency Loans for Seed Producers Program

    Seed producers have suffered economic hardships as a result of the 
bankruptcy filing of AgriBiotech. AgriBiotech, one of the largest 
single turf, forage, and alfalfa seed companies in the country, filed 
for protection under chapter 11 of the bankruptcy code affecting over 
1,200 farmer growers in 39 States. The growers are the largest segment 
of creditors in the bankruptcy proceedings. AgriBiotech cannot pay 
these growers for their 1999 produced crop as a result of the 
bankruptcy filing. The courts have estimated the total value of seed 
growers' claims to be approximately $50 million.
    Section 253 of the Act directed the Secretary to make no-interest 
loans to producers of the 1999 crop of grass, forage, vegetable, or 
sorghum seed that have not received payments for the seed as a result 
of bankruptcy proceedings involving AgriBiotech. The funds allocated 
for the program are believed to be adequate for all eligible producers. 
If demand does exceed the allocation, funds will be paid in order of 
application approval. For the producer to be eligible, the seed 
producer must have a valid claim in the bankruptcy proceeding arising 
from a contract to grow seeds in the United States.
    The Agency has established terms and collateral requirements for 
Emergency Loans for Seed Producers to allow for maximum flexibility. 
The Agency will take as security an assignment on the bankruptcy claim, 
and any seed still held in the applicant's possession, as provided by 
the Act to secure loans made to producers under this program. The 
Agency will obtain a balance sheet

[[Page 76117]]

and any other financial information needed to determine if there are 
liens impacting the collateral. In addition, debtors will be subject to 
the debt collection authorities of 31 U.S.C. chapter 37. For example, 
in cases of default, the Agency may seek to attach additional assets by 
filing judgments or refer the debt to the Department of Treasury for 
offset and cross-servicing. In light of the Government's limited 
exposure on these small loans and desire for simple administration, the 
Agency believes that no further security requirements are needed.
    The Agency cannot make a loan to an applicant who is delinquent on 
a non-tax Federal debt (31 U.S.C. 3720B) or has an outstanding non-tax 
Federal judgment (28 U.S.C. 3201(e)). These restrictions will not apply 
if the Federal delinquency and judgment are cured on or before the loan 
closing date. Applicants who have provided false or misleading 
information also are not eligible for this program. The above 
restrictions are needed to minimize credit risk and comply with 
statutory requirements.
    All persons approved for such loan assistance must execute the 
Agency's loan instruments and legal documents. For entity applicants, 
the loan instruments and legal documents must be executed in the name 
of the entity and by each individual member. This requirement is 
necessary to minimize risk and protect the Government's interest should 
default occur.
    In accordance with Sec. 253 of the Act, the loan interest rate for 
Emergency Loans for Seed Producers will be zero initially. Upon 
completion and disbursal of the estate in bankruptcy or 18 months after 
the date of the note, whichever comes first, the note will convert any 
outstanding balance to the then current Farm Operating loan-direct 
interest rate over an additional 7 years. Interest rates are specified 
in exhibit B of Agency Instruction 440.1 (available in any Agency 
office) by loan type. If the loan is not paid in full during this term 
and default occurs, servicing will proceed in accordance with existing 
Agency regulations (7 CFR part 1951, subpart J, Management and 
Collection of Nonprogram Loans, specifically Sec. 1951.468). The loan 
will be serviced as a nonprogram loan because the program is not 
authorized by the CONACT and, therefore, does not receive the benefits 
of CONACT program loans. The borrowers also have not been required to 
meet the more stringent CONACT requirements.
    Section 263 of the Act directed the Secretary to implement this 
program as soon as practicable and without regard to the notice and 
comment provisions of section 553 of title 5, United States Code and 
the Statement of Policy of the Secretary of Agriculture effective July 
24, 1971, relating to notices of proposed rulemaking and public 
participation in rulemaking. Publication of this rule for immediate 
effect without prior notice and comment as a final rule, therefore, is 
warranted.

List of Subjects

7 CFR Part 773

    Fruits, Loan programs-agriculture.

7 CFR Part 774

    Seeds, Loan programs-agriculture.

    For reasons set out in the preamble, 7 CFR chapter VII is amended 
as set forth below.
    1. Part 773 is added to read as follows:

PART 773--SPECIAL APPLE LOAN PROGRAM

Sec.
773.1  Introduction.
773.2  Definitions.
773.3  Appeals.
773.4-773.5  [Reserved]
773.6  Eligibility requirements.
773.7  Loan uses.
773.8  Limitations.
773.9  Environmental compliance.
773.10  Other Federal, State, and local requirements.
773.11-773.17  [Reserved]
773.18  Loan application.
773.19  Interest rate, terms, security requirements, and repayment.
773.20  Funding applications.
773.21  Loan decision, closing and fees.
773.22  Loan servicing.
773.23  Exception.

    Authority: Pub. L. 106-224.


Sec. 773.1  Introduction.

    This part contains the terms and conditions for loans made under 
the Special Apple Loan Program. These regulations are applicable to 
applicants, borrowers, and other parties involved in making, servicing, 
and liquidating these loans. The program objective is to assist 
producers of apples suffering from economic loss as a result of low 
apple prices.


Sec. 773.2  Definitions.

    As used in this part, the following definitions apply:
    Agency is the Farm Service Agency, its employees, and any successor 
agency.
    Apple producer is a farmer in the United States or its territories 
that produced apples, on not less than 10 acres, for sale in 1999 or 
2000.
    Applicant is the individual or business entity applying for the 
loan.
    Business entity is a corporation, partnership, joint operation, 
trust, limited liability company, or cooperative.
    Cash flow budget is a projection listing all anticipated cash 
inflows (including all farm income, nonfarm income and all loan 
advances) and all cash outflows (including all farm and nonfarm debt 
service and other expenses) to be incurred by the borrower during the 
period of the budget. A cash flow budget may be completed either for a 
12 month period, a typical production cycle or the life of the loan, as 
appropriate.
    Domestically owned enterprise is an entity organized in the United 
States under the law of the state or states in which the entity 
operates and a majority of the entity is owned by members meeting the 
citizenship test.
    False information is information provided by an applicant, 
borrower, or other source to the Agency which information is known by 
the provider to be incorrect, and was given to the Agency in order to 
obtain benefits for which the applicant or borrower would not otherwise 
have been eligible.
    Feasible plan is a plan that demonstrates that the loan will be 
repaid as agreed, as determined by the Agency.
    Security is real or personal property pledged as collateral to 
assure repayment of a loan in the event there is a default on the loan.
    USPAP is Uniform Standards of Professional Appraisal Practice.


Sec. 773.3  Appeals.

    A loan applicant or borrower may request an appeal or review of an 
adverse decision made by the Agency in accordance with 7 CFR part 11.


Secs. 773.4-773.5  [Reserved]


Sec. 773.6  Eligibility requirements.

    Loan applicants must meet all of the following requirements to be 
eligible for a Special Apple Program Loan:
    (a) The loan applicant must be an apple producer;
    (b) The loan applicant must be a citizen of the United States or an 
alien lawfully admitted to the United States for permanent residence 
under the Immigration and Nationalization Act. For a business entity 
applicant, the majority of the business entity must be owned by members 
meeting the citizenship test or, other entities that are domestically 
owned. Aliens must provide the appropriate Immigration and 
Naturalization Service forms to document their permanent residency;
    (c) The loan applicant and anyone who will execute the promissory 
note

[[Page 76118]]

must possess the legal capacity to enter into contracts, including debt 
instruments;
    (d) At loan closing the loan applicant and anyone who will execute 
the promissory note must not be delinquent on any Federal debt, other 
than a debt under the Internal Revenue Code of 1986;
    (e) At loan closing the loan applicant and anyone who will execute 
the promissory note must not have any outstanding unpaid judgments 
obtained by the United States in any court. Such judgments do not 
include those filed as a result of action in the United States Tax 
Courts;
    (f) The loan applicant, in past or present dealings with the 
Agency, must not have provided the Agency with false information; and
    (g) The individual or business entity loan applicant and all entity 
members must have acceptable credit history demonstrated by debt 
repayment. A history of failure to repay past debts as they came due 
(including debts to the Internal Revenue Service) when the ability to 
repay was within their control will demonstrate unacceptable credit 
history. Unacceptable credit history will not include isolated 
instances of late payments which do not represent a pattern and were 
clearly beyond the applicant's control or lack of credit history.


Sec. 773.7  Loan uses.

    Loan funds may be used for any of the following purposes related to 
the production or marketing of apples:
    (a) Payment of costs associated with reorganizing a farm to improve 
its profitability;
    (b) Payment of annual farm operating expenses;
    (c) Purchase of farm equipment or fixtures;
    (d) Acquiring, enlarging, or leasing a farm;
    (e) Making capital improvements to a farm;
    (f) Refinancing indebtedness;
    (g) Purchase of cooperative stock for credit, production, 
processing or marketing purposes; or
    (h) Payment of loan closing costs.


Sec. 773.8  Limitations.

    (a) The maximum loan amount any individual or business entity may 
receive under the Special Apple Loan Program is limited to $500,000.
    (b) The maximum loan is further limited to $300 per acre of apple 
trees in production in 1999 or 2000, whichever is greater.
    (c) Loan funds may not be used to pay expenses incurred for 
lobbying or related activities.
    (d) Loans may not be made for any purpose which contributes to 
excessive erosion of highly erodible land or to the conversion of 
wetlands to produce an agricultural commodity.


Sec. 773.9  Environmental compliance.

    (a) Except as otherwise specified in this section, prior to 
approval of any loan, an environmental evaluation will be completed by 
the Agency to determine if the proposed action will have any adverse 
impacts on the human environment and cultural resources. Loan 
applicants will provide all information necessary for the Agency to 
make its evaluation.
    (b) The following loan actions were reviewed for the purpose of 
compliance with the National Environmental Policy Act (NEPA), 40 CFR 
parts 1500 through 1508, and determined not to have a significant 
impact on the quality of the human environment, either individually or 
cumulatively. Therefore the following loan actions are categorically 
excluded from the requirements of an environmental evaluation:
    (1) Payment of legal costs associated with reorganizing a farm to 
improve its profitability as long as there will be no changes in the 
land's use or character;
    (2) Purchase of farm equipment which will not be affixed to a 
permanent mount or position;
    (3) Acquiring or leasing a farm;
    (4) Refinancing an indebtedness not greater than $30,000;
    (5) Purchase of stock in a credit association or in a cooperative 
which deals with the production, processing or marketing of apples; and
    (6) Payment of loan closing costs.
    (c) The loan actions listed in paragraph (b) of this section were 
also reviewed in accordance with section 106 of the National Historic 
Preservation Act (NHPA). It was determined that these loan actions are 
non-undertakings with no potential to affect or alter historic 
properties and therefore, will not require consultation with the State 
Historic Preservation Officer, Tribal Historic Preservation Officer, or 
other interested parties.
    (d) If adverse environmental impacts, either direct or indirect, 
are identified, the Agency will complete an environmental assessment in 
accordance with the Council on Environmental Quality's Regulations for 
Implementing the Procedural Provisions of NEPA to the extent required 
by law.
    (e) In order to minimize the financial risk associated with 
contamination of real property from hazardous waste and other 
environmental concerns, the Agency will complete an environmental risk 
evaluation of the environmental risks to the real estate collateral 
posed by the presence of hazardous substances and other environmental 
concerns.
    (1) The Agency will not accept real estate as collateral which has 
significant environmental risks.
    (2) If the real estate offered as collateral contains significant 
environmental risks, the Agency will provide the applicant with the 
option of properly correcting or removing the risk, or offering other 
non-contaminated property as collateral.


Sec. 773.10  Other Federal, State, and local requirements.

    Borrowers are required to comply with all applicable:
    (a) Federal, State, or local laws;
    (b) Regulatory commission rules; and
    (c) Regulations which are presently in existence, or which may be 
later adopted including, but not limited to, those governing the 
following:
    (1) Borrowing money, pledging security, and raising revenues for 
repayment of debt;
    (2) Accounting and financial reporting; and
    (3) Protection of the environment.


Secs. 773.11-773.17  [Reserved]


Sec. 773.18  Loan application.

    (a) A complete application will consist of the following:
    (1) A completed Agency application form;
    (2) If the applicant is a business entity, any legal documents 
evidencing the organization and any State recognition of the entity;
    (3) Documentation of compliance with the Agency's environmental 
regulations contained in 7 CFR part 1940, subpart G;
    (4) A balance sheet on the applicant;
    (5) The farm's operating plan, including the projected cash flow 
budget reflecting production, income, expenses, and loan repayment 
plan;
    (6) The last 3 years of production and income and expense 
information;
    (7) Payment to the Agency for ordering a credit report; and
    (8) Any additional information required by the Agency to determine 
the eligibility of the applicant, the feasibility of the operation, or 
the adequacy and availability of security.
    (b) Except as required in Sec. 773.19(e), the Agency will waive 
requirements for a complete application, listed in paragraphs (a)(5) 
and (a)(6) of this section, for requests of $30,000 or less.


Sec. 773.19  Interest rate, terms, security requirements, and 
repayment.

    (a) Interest rate. The interest rate will be fixed for the term of 
the loan. The

[[Page 76119]]

rate will be established by the Agency and available in each Agency 
Office, based upon the cost of Government borrowing for loans of 
similar maturities.
    (b) Terms. The loan term will be for up to 3 years, based upon the 
useful life of the security offered.
    (c) Security requirements. The Agency will take a lien on the 
following security, if available, as necessary to adequately secure the 
loan:
    (1) Real estate;
    (2) Chattels;
    (3) Crops;
    (4) Other assets owned by the applicant; and
    (5) Assets owned and pledged by a third party.
    (d) Documentation of security value.
    (1) For loans that are for $30,000 or less, collateral value will 
be based on the best available, verifiable information.
    (2) For loans of greater than $30,000 where the applicant's balance 
sheet shows a net worth of three times the loan amount or greater, 
collateral value will be based on tax assessment of real estate and 
depreciation schedules of chattels, as applicable, less any existing 
liens.
    (3) For loans of greater than $30,000 where the applicant's balance 
sheet shows a net worth of less than three times the loan amount, 
collateral value will be based on an appraisal. Such appraisals must be 
obtained by the applicant, at the applicant's expense and acceptable to 
the Agency. Appraisals of real estate must be completed in accordance 
with USPAP.
    (e) Repayment. (1) All loan applicants must demonstrate that the 
loan can be repaid.
    (2) For loans that are for $30,000 or less where the applicant's 
balance sheet shows a net worth of three times the loan amount or 
greater, repayment ability will be considered adequate without further 
documentation.
    (3) For loans that are for $30,000 or less where the applicant's 
balance sheet shows a net worth of less than three times the loan 
amount, repayment ability must be demonstrated using the farm's 
operating plan, including a projected cash flow budget based on 
historical performance. Such operating plan is required notwithstanding 
Sec. 773.18 of this part.
    (4) For loans that are for more than $30,000, repayment ability 
must be demonstrated using the farm's operating plan, including a 
projected cash flow budget based on historical performance.
    (f) Creditworthiness. All loan applicants must have an acceptable 
credit history demonstrated by debt repayment. A history of failure to 
repay past debts as they came due (including debts to the Internal 
Revenue Service) when the ability to repay was within their control 
will demonstrate unacceptable credit history. Unacceptable credit 
history will not include isolated instances of late payments which do 
not represent a pattern and were clearly beyond the applicant's control 
or lack of credit history.


Sec. 773.20  Funding applications.

    Loan requests will be funded based on the date the Agency approves 
the application. Loan approval is subject to the availability of funds.


Sec. 773.21  Loan decision, closing, and fees.

    (a) Loan decision. (1) The Agency will approve a loan if it 
determines that:
    (i) The loan can be repaid;
    (ii) The proposed use of loan funds is authorized;
    (iii) The applicant has been determined eligible;
    (iv) All security requirements have been, or will be met at 
closing;
    (vi) All other pertinent requirements have been, or will be met at 
closing.
    (2) The Agency will place conditions upon loan approval as 
necessary to protect its interest.
    (b) Loan closing. (1) The applicant must meet all conditions 
specified by the loan approval official in the notification of loan 
approval prior to loan closing;
    (2) There must have been no significant changes in the plan of 
operation or the applicant's financial condition since the loan was 
approved; and
    (2) The applicant will execute all loan instruments and legal 
documents required by the Agency to evidence the debt, perfect the 
required security interest in property securing the loan, and protect 
the Government's interests, in accordance with applicable State and 
Federal laws. In the case of an entity applicant, all officers or 
partners and any board members also will be required to execute the 
promissory notes as individuals.
    (c) Fees. The applicant will pay all loan closing fees including 
credit report fees, fees for appraisals, fees for recording any legal 
instruments determined to be necessary, and all notary, lien search, 
and similar fees incident to loan transactions. No fees will be 
assessed for work performed by Agency employees.


Sec. 773.22  Loan servicing.

    Loans will be serviced in accordance with subpart J of part 1951, 
or its successor regulation, during the term of the loan. If the loan 
is not paid in full during this term, servicing will proceed in 
accordance with Sec. 1951.468 of that part.


Sec. 773.23  Exception.

    The Agency may grant an exception to the security requirements of 
this section, if the proposed change is in the best financial interest 
of the Government and not inconsistent with the authorizing statute or 
other applicable law.

    2. Part 774 is added to read as follows:

PART 774--Emergency Loan for Seed Producers Program

Sec.
774.1   Introduction.
774.2   Definitions.
774.3   Appeals.
774.4-774.5   [Reserved]
774.6   Eligibility requirements.
774.7   [Reserved]
774.8   Limitations.
774.9   Environmental requirements.
774.10   Other Federal, State, and local requirements.
774.11-774.16   [Reserved]
774.17   Loan application.
774.18   Interest rate, terms, and security requirements.
774.19   Processing applications.
774.20   Funding applications.
774.21   [Reserved]
774.22   Loan closing.
774.23   Loan servicing.
774.24   Exception.

    Authority: Pub. L. 106-224


Sec. 774.1  Introduction.

    The regulations of this part contain the terms and conditions under 
which loans are made under the Emergency Loan for Seed Producers 
Program. These regulations are applicable to applicants, borrowers, and 
other parties involved in making, servicing, and liquidating these 
loans. The program objective is to assist certain seed producers 
adversely affected by the bankruptcy filing of AgriBiotech.


Sec. 774.2  Definitions.

    As used in this part, the following definitions apply:
    Agency is the Farm Service Agency, its employees, and any successor 
agency.
    Applicant is the individual or business entity applying for the 
loan.
    Business entity is a corporation, partnership, joint operation, 
trust, limited liability company, or cooperative.
    Domestically owned enterprise is an entity organized in the United 
States under the law of the state or states in which the entity 
operates and a majority

[[Page 76120]]

of the entity is owned by members meeting the citizenship test.
    False information is information provided by an applicant, borrower 
or other source to the Agency that the borrower knows to be incorrect, 
and that the borrower or other source provided in order to obtain 
benefits for which the borrower would not otherwise have been eligible.
    Seed producer is a farmer that produced a 1999 crop of grass, 
forage, vegetable, or sorghum seed for sale to AgriBiotech under 
contract.


Sec. 774.3  Appeals.

    A loan applicant or borrower may request an appeal or review of an 
adverse decision made by the Agency in accordance with 7 CFR part 11.


Secs. 774.4-774.5  [Reserved]


Sec. 774.6  Eligibility requirements.

    Loan applicants must meet all of the following requirements to be 
eligible under the Emergency Loan for Seed Producers Program;
    (a) The loan applicant must be a seed producer;
    (b) The individual or entity loan applicant must have a timely 
filed proof of claim in the Chapter XI bankruptcy proceedings involving 
AgriBiotech and the claim must have arisen from acontract to grow seeds 
in the United States;
    (c) The loan applicant must be a citizen of the United States or an 
alien lawfully admitted to the United States for permanent residence 
under the Immigration and Nationalization Act. For a business entity 
applicant, the majority of the business entity must be owned by members 
meeting the citizenship test or, other entities that are domestically 
owned. Aliens must provide the appropriate Immigration and 
Naturalization Service forms to document their permanent residency;
    (d) The loan applicant and anyone who will execute the promissory 
note must possess the legal capacity to enter into contracts, including 
debt instruments;
    (e) At loan closing, the applicant and anyone who will execute the 
promissory note must not be delinquent on any Federal debt, other than 
a debt under the Internal Revenue Code of 1986;
    (f) At loan closing, the applicant and anyone who will execute the 
promissory note must not have any outstanding unpaid judgments obtained 
by the United States in any court. Such judgments do not include those 
filed as a result of action in the United States Tax Courts;
    (g) The loan applicant, in past and current dealings with the 
Agency, must not have provided the Agency with false information.


Sec. 774.7  [Reserved]


Sec. 774.8  Limitations.

    (a) The maximum loan amount any individual or business entity may 
receive will be 65% of the value of the timely filed proof of claim 
against AgriBiotech in the bankruptcy proceeding as determined by the 
Agency.
    (b) Loan funds may not be used to pay expenses incurred for 
lobbying or related activities.
    (c) Loans may not be made for any purpose which contributes to 
excessive erosion of highly erodible land or to the conversion of 
wetlands to produce an agricultural commodity.


Sec. 774.9  Environmental requirements.

    The loan actions in this part were reviewed for the purpose of 
compliance with the National Environmental Policy Act (NEPA), 40 CFR 
parts 1500 through 1508, and determined not to have a significant 
impact on the quality of the human environment, either individually or 
cumulatively. These loan actions are categorically excluded from the 
requirements of an environmental evaluation due to the fact that the 
loan funds would be utilized to replace operating capital the applicant 
would have had if AgriBiotech had not filed bankruptcy.


Sec. 774.10  Other Federal, State, and local requirements.

    Borrowers are required to comply with all applicable:
    (a) Federal, State, or local laws;
    (b) Regulatory commission rules; and
    (c) Regulations which are presently in existence, or which may be 
later adopted including, but not limited to, those governing the 
following:
    (1) Borrowing money, pledging security, and raising revenues for 
repayment of debt;
    (2) Accounting and financial reporting; and
    (3) Protection of the environment.


Sec. 774.11-774.16  [Reserved]


Sec. 774.17  Loan application.

    A complete application will consist of the following:
    (a) A completed Agency application form;
    (b) Proof of a bankruptcy claim in the AgriBiotech bankruptcy 
proceedings;
    (c) If the applicant is a business entity, any legal documents 
evidencing the organization and any State recognition of the entity;
    (d) Documentation of compliance with the Agency's environmental 
regulations contained in 7 CFR part 1940, subpart G;
    (e) A balance sheet on the applicant; and
    (f) Any other additional information the Agency needs to determine 
the eligibility of the applicant and the application of any Federal, 
State or local laws.


Sec. 774.18  Interest rate, terms and security requirements.

    (a) Interest rate. (1) The interest rate on the loan will be zero 
percent for 18 months or until the date of settlement of, completion 
of, or final distribution of assets in the bankruptcy proceeding 
involving AgriBiotech, whichever comes first.
    (2) Thereafter interest will begin to accrue at the regular rate 
for an Agency Farm operating-direct loan (available in any Agency 
office).
    (b) Terms. (1) Loans shall be due and payable upon the earlier of 
the settlement of the bankruptcy claim or 18 months from the date of 
the note.
    (2) However, any principal remaining thereafter will be amortized 
over a term of 7 years at the Farm operating-direct loan interest rate 
(available in any Agency office). If the loan is not paid in full 
during this term and default occurs, servicing will proceed in 
accordance with Sec. 1951.468 of this title.
    (c) Security Requirements. (1) The Agency will require a first 
position pledge and assignment of the applicant's monetary claim in the 
AgriBiotech bankruptcy estate to secure the loan.
    (2) If the applicant has seed remaining in their possession that 
was produced under contract to AgriBiotech, the applicant also will 
provide the Agency with a first lien position on this seed. It is the 
responsibility of the applicant to negotiate with any existing 
lienholders to secure the Agency's first lien position.


Sec. 774.19  Processing applications.

    Applications will be processed until such time that funds are 
exhausted, or all claims have been paid and the bankruptcy involving 
AgriBiotech has been discharged. When all loan funds have been 
exhausted or the bankruptcy is discharged, no further applications will 
be accepted and any pending applications will be considered withdrawn.


Sec. 774.20  Funding applications.

    Loan requests will be funded based on the date the Agency approves 
an application. Loan approval is subject to the availability of funds.

[[Page 76121]]

Sec. 774.21  [Reserved]


Sec. 774.22  Loan closing.

    (a) Conditions. The applicant must meet all conditions specified by 
the loan approval official in the notification of loan approval prior 
to closing.
    (b) Loan instruments and legal documents. The applicant will 
execute all loan instruments and legal documents required by the Agency 
to evidence the debt, perfect the required security interest in the 
bankruptcy claim, and protect the Government's interest, in accordance 
with applicable State and Federal laws. In the case of an entity 
applicant, all officers or partners and any board members also will be 
required to execute the promissory notes as individuals.
    (c) Fees. The applicant will pay all loan closing fees for 
recording any legal instruments determined to be necessary and all 
notary, lien search, and similar fees incident to loan transactions. No 
fees will be assessed for work performed by Agency employees.


Sec. 774.23  Loan servicing.

    Loans will be serviced in accordance with subpart J of part 1951 of 
this title, or its successor regulation. If the loan is not repaid as 
agreed and default occurs, servicing will proceed in accordance with 
section 1951.468 of that part.


Sec. 774.24  Exception.

    The Agency may grant an exception to any of the requirements of 
this section, if the proposed change is in the best financial interest 
of the Government and not inconsistent with the authorizing statute or 
other applicable law.

    Signed at Washington, D.C., on November 29, 2000.
August Schumacher, Jr.,
Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 00-30977 Filed 12-5-00; 8:45 am]
BILLING CODE 3410-05-P