[Federal Register Volume 66, Number 12 (Thursday, January 18, 2001)]
[Rules and Regulations]
[Pages 4607-4616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1332]



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  Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / 
Rules and Regulations  

[[Page 4607]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1436

RIN 0560-AG00


Farm Storage Facility Loan Program

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: This rule finalizes an interim rule implementing the Commodity 
Credit Corporation's (CCC) Farm Storage Facility Loan Program (FSFLP). 
The program provides financing for producers to build or upgrade farm 
storage and handling facilities. On the basis of the comments and 
suggestions received, CCC is making several changes to the program 
provisions in the interim rule and is adding other provisions.

DATES: This rule is effective January 18, 2001.

ADDRESSES: Copies of the regulation are available from Price Support 
Division, Farm Service Agency, 1400 Independence Avenue, SW., STOP 
0512, Washington., DC 20250-0512.

FOR FURTHER INFORMATION CONTACT: Chris Kyer, (202) 720-7935 or e-mail 
[email protected].

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. The Cost/Benefit 
Assessment is summarized below.

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.

Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) 
(Chapter 8 of the Administrative Procedures Act)
    The SBREFA generally requires that major rules be submitted to 
Congress for a 60-day review period before they may be made effective. 
This rule is considered major. However, section 808 of SBREFA (5 U.S.C. 
808) provides that if good cause exists and public notice is 
impracticable, unnecessary, or contrary to the public purpose, a rule 
may be made effective immediately. CCC finds that because this rule 
affects the incomes of a large number of agricultural producers that it 
would be contrary to the public interest to delay this rule. Therefore, 
this rule is issued as final, effective immediately.

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 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 
was part of the interim rule. An emergency information collection 
package has been approved by OMB and assigned OMB control number 0560-
204. No comments were received from the public during the 60-day 
comment period regarding the information collection. A regular 
information collection package will be submitted to OMB.

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.

Cost-Benefit Assessment Summary

    U.S. grain storage capacity steadily declined from 1987 to 1997. 
Storage capacity has increased modestly since its low in 1997, but not 
sufficiently 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 FSFLP will encourage the construction of grain 
storage capacity in deficit areas and help farmers adapt to identity-
preserved storage and handling requirements for genetically enhanced 
production. The program will also assist dairy and livestock feeders 
who need new or additional silage or green-chop storage. For these 
producers, additional storage capacity increases their ability to 
manage feed inventories and control feed costs. One direct benefit to

[[Page 4608]]

producers from the program will be reduced financing costs on facility 
construction. Interest savings for a grain farmer on the construction 
of a 15,000-bushel grain bin could total as much as $5,417 under the 
program when compared with financing through some commercial banks. 
Interest savings for a dairy or livestock feeder could be as much as 
$6,139 on a 2,000-ton bunker-type silage storage facility. Grain 
producers would also benefit from the potential for higher market 
returns on their crops because on-farm storage capacity creates pricing 
and hedging opportunities that can significantly increase marketing 
returns. The program is expected to expand on-farm grain storage by 746 
million bushels and on-farm silage storage by 4.75 million tons over 
the next 5 years.

Background

    The interim rule published in the Federal Register on May 11, 2000 
(65 FR 30345) set out regulations to allow for loans to be made to 
assist producers in providing storage for certain agricultural 
commodities. The back ground provisions of that rule described, in 
addition, the statutory underpinnings of the program, those being 
provisions of the Commodity Credit Corporation Charter Act. One of 
those provisions is 15 U.S.C. 714c(b) (section 5(b) of that Act), which 
authorizes CCC to use its general powers to make available material and 
facilities required in connection with the production and marketing of 
agricultural commodities. Another is 15 U.S.C. 714b(h) (section 4(h) of 
the Act), which was incorrectly identified as section ``4(f)'' in the 
interim rule. The latter provides that the Corporation may make loans 
to grain producers needing storage facilities.
    Comments regarding the provisions of the program were accepted 
until June 12, 2000. Comments were received from 272 entities or 
persons: 40 agricultural associations, six banks, one Commissioner of 
Agriculture, 19 FSA county committee members, 109 private agricultural 
companies or corporations representing storage structure manufacturers, 
distributors and construction contractors, one United States Senator, 
five grain storage elevator companies or cooperatives, 57 farmers, and 
34 FSA State committee members or representatives.
    Most of the comments addressed particular provisions in the interim 
rule. These are discussed below on a section-by-section basis, along 
with the changes that have been made to the interim rule. Changes to 
each section based on the experience of operating the program under the 
interim rule are also discussed on a section-by-section basis.

Background section of the interim rule

    There were 63 comments regarding the background section of the 
interim rule. Within the background section of the interim rule it was 
stated that 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, it was stated that CCC would explore making 
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.
    There were 15 comments from elevators, agricultural associations, 
and cooperatives supporting a program to finance condominium-type 
storage arrangements. There were two respondents who did not favor such 
a program for on-farm type condominium storage because in their States, 
Ohio and Iowa, on-farm condominium storage would be subject to 
licensing requirements for public warehouses. Another respondent was 
against off-farm condominium storage because, in their opinion, on-farm 
storage works better for segregation of speciality crops.
    Condominium-type grain storage is generally viewed as commercial 
off-farm storage offered by private companies or cooperatives where 
farmers can lease or purchase a set amount of shared storage space for 
a period of time. Farmers pay a set time purchase or lease fee for the 
storage and may subsequently pay an annual fee to cover the costs 
associated with the maintenance of the structure and grain maintenance 
and handling. In some cases, the condominium storage on a per-bushel 
basis may be less than the cost of constructing and owning on-farm 
grain storage structures. During years when the owner of the 
condominium storage may not use the entire quantity that is allocated 
to him, the storage owner may sublease or sell the space to another 
producer. This arrangement can result in giving condominium storage a 
value, which may be used by lenders as collateral to secure loans on 
condominium storage agreements. Condominium storage may allow the 
producer to market grain without further transportation or handling 
costs, and relief from the costs of owning and maintaining on-farm 
storage. Also a respondent pointed out that condominium storage loans 
if made to cooperatives could allow for a lessening of the 
administrative burden of operating the program by allowing the storage 
needs of multiple producers to be dealt with in one large loan rather 
than in many small loans.
    The primary disadvantage of condominium storage expressed by some 
farmers is the waiting time to deliver their grain to the elevator when 
they should be in the field harvesting grain because the condition of 
the crop and ideal harvesting conditions are always time sensitive. On-
farm storage provides that flexibility. Also, farmers indicate that 
once grain is delivered to the elevator, they may lose marketing 
flexibility because to sell grain that is in elevator storage they may 
be required to pay additional handling fees. Despite the comments 
received supporting a loan program for condominium storage, the 
respondents provided little information as to how FSA should operate 
such a program. Inasmuch as the primary focus of the program was on-
farm storage and helping producers cope with their restricted storage 
capacity, condominium storage might not mitigate the storage problem 
and might ultimately only benefit commercial facilities who already 
have alternate financing at their disposal. Because a program including 
condominium storage would differ considerably from the on-farm storage 
program, at issue are program provisions such as the term of the loan; 
loan security requirements; who should be the borrower, (the elevator 
or individual farmers); eligible types of storage structures and 
handling equipment; applicant eligibility requirements; the maximum 
loan amount; environmental law compliance for large commercial storage 
structures; and loan servicing provisions such as loan assumptions, 
foreclosure procedures, loan deferments and extensions. CCC has not 
prepared a cost benefit assessment regarding off-farm condominium 
storage and must do so to consider implementing such a program. Also, 
it should be pointed out that farmers wishing to receive loans for 
shared, on-farm storage may do so under the present program as long as 
they otherwise meet all of the eligibility and security requirements. 
Accordingly, for these reasons, CCC will not implement loans for 
condominium type storage at this time.
    There were nine comments regarding the timeliness of the program 
announcement. Generally, the announcement of the program on May 11 was 
regarded as being too late to allow producers to apply, obtain 
approval, and to finish construction in time to store crops that will 
be harvested for the 2000 crop year. To

[[Page 4609]]

assist producers who took purchase actions based on the announcement of 
the program in the press on February 2, 2000, CCC provided that 
producers who made purchase decisions between February 2 and May 30, 
2000, could apply and be approved for loans, if all other eligibility 
requirements were met. Furthermore, citing a critical need for storage 
in 19 States and recognizing the need to implement the program as soon 
as possible, CCC implemented the program under the interim rule 
effective on May 11, 2000. Additional relief in this regard would not 
be consistent with the nature of this program, which is designed to 
provide incentives rather than to make payments for past actions.
    There were eight comments regarding the need for a program to 
finance the construction of storage for other agricultural products 
such as dry peas, lentils, peaches, cherries, pears, berries, 
vegetables, apples (including necessary cold storage equipment and cold 
storage supplies such as nitrogen), cotton seed, dry beans, straw, 
nuts, peanuts, rye, wood, wool, seed potatoes, grass seed, rice straw, 
livestock feed such as processed feed, cake, purchased feed, millet, 
and sugar. There were 16 comments supporting loans for structures to 
store dry hay. While CCC recognizes the support for such a program, CCC 
will not implement a program because of the lack of any USDA study 
indicating a critical need for a program to finance such storage for 
these commodities.
    There were 130 comments regarding the provision to restrict the 
program to specified facility loan commodities harvested as whole grain 
as set out, and specified, in the interim rule. Under that rule, 
eligible facility loan commodities were limited to 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. 
These commodities are the same commodities on which farmers can obtain 
CCC marketing assistance loans and loan deficiency payments. Generally, 
the respondents favored the financing of structures to store corn 
silage and other facility loan commodities that are commonly harvested 
as other than whole grain citing that dairy farmers are expanding their 
herds and need more upright silos for grains and forage to feed their 
animals, many farmers have been using temporary storage, and that it is 
more economical to store high moisture ground ear corn, high moisture 
shell corn, or corn silage to save on the cost of fuels for drying. 
Also, comments were received concerning the provisions in the interim 
rule that limited financing to certain kinds of facilities--certain 
cribs or bins designed for whole grain storage, certain upright silo-
type structures designed for whole grain storage and flat-type storage 
structures for which the primary use is to store whole grain 
commodities. Some respondents favored extending financing also to other 
structures such as upright silos and bunker-type storage structures 
that are horizontal and generally constructed of concrete. Bunker-type 
silos are generally easier and cheaper to construct than upright silos 
because they are usually constructed from precast reinforced concrete 
panels and may have more recovery value than poured cement structures.
    The interim rule specifically sought comments on extending the 
program beyond whole grain storage. Given CCC's broad authority, under 
the CCC Charter Act, to make available materials and facilities in the 
production and marketing of ``agricultural commodities'' and the 
overwhelming sense of the comments received, it has been determined 
that CCC will extend the program beyond facilities designed only for 
whole grain storage. Accordingly, eligible ``facility loan 
commodities'' (that is, the kind of commodities for which the building 
of a storage facility can be allowed under the rule) will be extended 
to also include corn, grain sorghum, wheat, oats or barley that is 
harvested for non-whole-grain use. Accordingly, the rule will also be 
amended to specifically provide for financing structures that are 
designed for that purpose. Other commodities will not at this time be 
folded into the program definition of ``facility loan commodities'' so 
as to expand the program further. Such an expansion would at a minimum 
involve a large-scale increase in the complexity of the program given 
that many commodities can have special needs such as refrigeration. 
Thus, the administrative difficulties of the program would increase 
dramatically. Moreover, and more importantly, the storage crisis 
mentioned in the interim rule was a crisis in the storage of grain (and 
certain related) crops and an expansion of the program beyond those 
would disperse the effect of the program unless there was to be a much 
greater commitment of funds to the program. At this time, there does 
not appear to be a justification for that kind of additional 
expenditure. On the other hand, the limited expansion, for silage, will 
allow farmers who grow the covered crops to have the flexibility of 
addressing their storage needs for all harvesting of their crop. This 
modest expansion should be workable, which, accordingly, closes the 
circle of storage needs for certain producers, does so without undue 
difficulty and should allow program expense to remain within reasonable 
bounds. Also, to the extent that silage facilities are available, such 
availability could remove the pressure that might otherwise exist in 
particular cases to make use of the storage available for whole grain 
harvesting of the same crop. In that sense, the expansion of 
eligibility will also tend to further the goals of the original interim 
rule. Further, this limitation of the program is also in accord with 
the special emphasis given in the Charter Act on grain crops as 
evidenced by Section 4(h) of that Act. Also for the sake of 
cohesiveness, the provisions in the rule dealing with eligible 
structures have also been amended to allow for bunker-silo type 
structures, in accord with the comments. Still further, certain 
clarifying changes have been made in the rules as regards pre-owned and 
manufactured structures.
    There were six comments from banks regarding the need to implement 
a guaranteed farm storage facility loan program with an interest rate 
buy-down provision in addition to the direct loan program. Respondents 
cited the advantages of a guaranteed loan program such as easing the 
program administrative burden on already overburdened FSA employees, 
better use of taxpayer dollars, assisting more producers, and the level 
of good experience with banks that already participate in FSA's 
guaranteed loan program for FSA ownership and farm operating loans. 
While CCC recognizes the support for such a program, none of the 
respondents provided any information as to how CCC should operate such 
a program and an interest rate buy-down provision could prove to be 
very costly compared to the current program. Accordingly, CCC will not 
implement a guaranteed loan program at this time.

Section 1436.3 of the Interim Rule

    There were no comments on this section, but the reference to a 
consent, disclaimer and subordination agreement was deleted and the 
definition of a severance agreement, and a subordination agreement were 
added to further clarify definitions. A definition of unsatisfactory 
credit history was added to provide guidance on eligibility 
determinations to approving county committees. The term ``tribal 
venture'' was added to the definition of a person to clarify that such 
ventures are eligible

[[Page 4610]]

for the program. Finally, a definition of the calculation for computing 
the storage need requirement was added to provide further 
clarification.

Section 1436.4 of the Interim Rule

    In order to clarify what actions applicants may take before a loan 
can be approved, section 1436.4(b) was amended by identifying the 
actual actions producers may take. Furthermore, the provision allowing 
producers who took actions between February 2, 2000 and May 30, 2000 to 
be considered for loans was removed because those producers should have 
been accommodated during the time the program was operated under the 
interim rule. That provision is, thus, no longer needed but its removal 
will not affect prior loans.

Section 1436.5 of the Interim Rule

    There were five comments regarding the provision in section 
1436.5(a)(5) that requires an eligible borrower to provide proof of 
crop insurance. Generally, the respondents, three farmers, one FSA 
State Executive Director, and the American Farm Bureau Federation, 
questioned the value of crop insurance in furthering an applicant's 
repayment ability when crop losses occur, the additional cost an 
applicant may incur just to obtain a farm storage facility loan and the 
subsequent costs to maintain the insurance during the term of the loan. 
CCC will not change the requirement except that, based on the comments, 
we will not require insurance on crops that are determined to be 
economically insignificant by CCC. A definition for a crop of economic 
significance was added to the definitions section 1436.3 and the 
provision was clarified in 1436.5(a)(5).
    There was one comment regarding the requirement for applicant 
compliance with the Debt Collection Improvement Act of 1996. Because 
this is a statutory requirement, CCC cannot change the requirement. 
Section 1436.5(a)(2) was amended, however, to further clarify the 
provision dealing with compliance with the Debt Collection Improvement 
Act.
    There were several comments regarding section 1436.5(a)(4), which 
requires that in order for an applicant to be eligible for a loan, the 
applicant must demonstrate a need for an increase in storage capacity. 
This does not allow farmers with adequate existing capacity to be 
eligible for a loan to add or replace handling and drying equipment or 
to upgrade existing storage space. Based on this comment, and because 
CCC encourages the proper handling and maintenance of stored 
commodities, section 1436.5(a)(4) and section 1436.6(b)(1) have been 
amended to allow loans for handling and drying equipment, and for loans 
to upgrade existing storage capacity without increasing storage 
capacity. We also amended section 1436.5(a)(1) to make reference to the 
definition of satisfactory credit history and to make reference to a 
current financial statement. Finally, section 1436.5(a)(10) was added 
to require that borrowers may not have been convicted under Federal or 
State law of certain controlled substance violations in order to 
conform to the rule according to 7 CFR Part 718.

Section 1436.6 of the Interim Rule

    A comment from the Pennsylvania FSA State committee questioned the 
definition of commercial purpose. Commercial purpose is defined as the 
storage and handling of grain, whether paid or unpaid, for persons 
other than the applicant. According to the respondent and other State 
offices, this definition hinders family operations where family members 
store their commodities together. Recognizing this problem, CCC amended 
the definition of a commercial operation in section 1436.3 to exempt 
immediate family members from this requirement.
    Two respondents questioned the requirement that the program only 
allows loans to be made on new storage structures. One stated that pre-
owned equipment should be considered to be eligible if CCC's interest 
is protected. Another suggested that 1436.6(a)(2) be changed to ``new 
oxygen limiting or used oxygen limiting storage built to original 
manufacturer's design specifications using original manufacturer's 
rebuild kits, and other upright silo type structures, designed for 
whole grain storage and having a useful life of at least 10 years.'' 
Based on this comment, as indicated, CCC amended section 1436.6 to 
allow for loans on remanufactured structures, built to original 
manufacturer's design specifications using original manufacturer's 
rebuild kits. Section 1436.6(b)(2) was amended to clarify that CCC may 
require safety equipment meeting OSHA standards. Section 1436.6(e) was 
added to provide that new storage and handling components of purchased 
pre-owned structures may be eligible for loan.

Section 1436.7 of the Interim Rule

    There were several comments regarding the term of the loan, which 
is 7 years. It was suggested that the term be flexible at 7, 10, or 15 
years depending on repayment ability. CCC will not change the term of 
the loan because at 7 years the term is longer than most commercial 
banks will offer and should be of sufficient length to allow the 
program goals to be met without jeopardizing repayment because of 
changed circumstances.

Section 1436.8 of the Interim Rule

    There were 25 comments regarding this section, which provides for 
security for loans. Respondents generally cited a concern with the 
requirement in section 1436.8(b) that 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. Respondents were concerned 
that the requirement for what could be considered to be small loans was 
excessive and would create an unnecessary burden on loan applicants. 
CCC has responded to this concern by generally dropping the real estate 
lien requirement for loans with a principal amount less than $50,000. 
It was also recommended that all facility loans be cross collateralized 
when the facility is constructed on real estate where there is a direct 
FSA farm loan program mortgage in existence. Accordingly, section 
1436.8(b) was amended to provide that a real estate lien will not be 
required for loans of $50,000 or less unless CCC determines through 
analysis of the applicant's financial condition that additional 
security in the form of a lien on real estate is necessary to protect 
CCC's interest in the collateral. Also, section 1436.8(b) has been 
clarified to provide that for loans exceeding $50,000, a junior lien 
position on the entire real estate parcel underlying the storage 
facility may be acceptable as long as CCC's security interest is 
sufficiently protected. Also section 1436.8(b) was amended to define 
when a loan is considered to be adequately secured and to specify that 
a title opinion or title insurance is required for loans exceeding 
$50,000. Section 1436.8(g) was amended to clarify fees that shall be 
paid by CCC or the applicant in connection with completing the loan 
transaction.

Section 1436.9 of the Interim Rule

    There were 12 comments regarding this section, which explains how 
the amount of the loan is determined. Generally, the respondents cited 
a concern with the maximum amount of the loan, which is $100,000 per 
loan and the maximum aggregate outstanding loan balance, which is 
$100,000 per borrower. Respondents told FSA that $100,000 is not enough 
in many cases to finance the storage structures and handling equipment 
needed by some farmers to adequately store facility loan

[[Page 4611]]

commodities. One respondent stated that, ``Facilities and equipment can 
cost $500,000 or greater.'' An example of farm operations that may be 
adversely affected by this requirement are large family-run operations 
that have formed family partnerships. The family conducts business as a 
general partnership; however, generally, FSA recognizes for commodity 
programs that each member of the partnership can be a separate 
``person'' for program payment purposes so long as certain conditions 
are met. For the purposes of the farm storage facility loan program 
under the interim rule, however, CCC limited the loan at $100,000 to 
the partnership since the loan limit was $100,000 per loan in all 
cases. As this limit may adversely impact some farmers contrary to 
normal principles that guide farm programs, section 1436.9 has been 
amended to change the maximum loan to $100,000 for each eligible 
borrower signing the loan note and security agreement and remove the 
limit of one loan per borrower per fiscal year. This will also allow 
more than one farmer to enter into a joint loan to share a storage 
structure with another and to receive a larger loan than one farmer 
acting alone. Section 1436.9 was also amended to remove the limit of 
one loan per borrower per fiscal year because the loan amount limit of 
$100,000 accomplishes the same thing as a limit on the number of loans 
a borrower may obtain.

Section 1436.10 of the Interim Rule

    There were 13 comments regarding section 1436.10, which set out the 
down payment requirements for the program. The down payment amount is 
25 percent of the total cost of the items eligible for loan. 
Respondents think that 25 percent is too high and that the requirement 
places undue burden on loan applicants to provide cash at a time when 
grain prices are low and cash flow problems exist. CCC recognizes this 
burden and has changed the requirement to 15 percent of the cost of the 
items eligible for loan. Also, CCC will allow fees such as attorney 
fees and archaeological study fees to be considered as an eligible net 
cost item (items that may be figured into the calculation of the total 
amount for which the loan may be made) and amended section 1436.9(b) to 
reflect the change. Finally, section 1436.10(b) was amended to clarify 
that farmers may obtain a loan for the down payment amount from another 
lending source.

Section 1436.11 of the Interim Rule

    This section provides generally that the loan will be disbursed 
when all construction is complete, final cost data has been submitted, 
and the facility has been inspected and determined to be satisfactory 
by CCC. Four respondents addressed this portion of the rule and in one 
case the respondent suggested that the monies should be dispersed upon 
loan approval. Another suggested that the monies be dispersed upon 
delivery of the materials and a completion of the labor. Others 
suggested that the loan disbursements should always be jointly payable 
to both the borrower and the contractor or supplier, and that, in any 
event, CCC should always obtain a written release of liability from the 
contractor or supplier. The rule will continue allow the checks to be 
made payable to the borrower alone in certain cases as there does 
appear to be circumstance in which such payments could be made in that 
manner with sufficient security. However, the rule has been amended, in 
accord with the comments, to specify that in all cases a written 
release of liability from the contractors or suppliers involved will be 
required before loan funds are disbursed. These provisions should allow 
sufficient flexibility to handle all circumstances as might arise. 
Also, a provision was added to this section to specify that loan 
proceeds cannot be assigned. This will also reduce program complexity 
and allow for certainty in program administration.

Section 1436.12 of the Interim Rule

    There were five comments regarding the interest rate for loans, 
which is the rate in effect on the date the loan is approved that is 
equivalent to Treasury securities of comparable maturity. Generally, 
respondents thought that the interest rate should be the lowest rate in 
effect at the time of application, approval, or disbursement. The rate 
allowed by the interim rule appears be to a fair rate, which will allow 
the accomplishment of the program goals and the terms of the rule, as 
provided for in the interim rule, will allow for certainty in the 
administration of loans. In the event that a applicant is dissatisfied 
with the rate, the applicant can withdraw from the program.

Section 1436.13 of the Interim Rule

    There were five comments regarding section 1436.13, which provides 
provisions regarding repayment of the loan. Four comments focused on 
the term of the loan while one comment suggested discontinuance of the 
requirement to offset commodity loan or LDP proceeds towards facility 
loan installments before the installment is due or the borrower is 
delinquent. CCC will discontinue that requirement and amended section 
1436.13(d) accordingly. Section 1436.13(c) was further amended to set 
out procedures that will be used in the event an installment is not 
paid.

Section 1436.15 of the Interim Rule

    There was one comment regarding section 1436.15, which provides 
maintenance provisions for a program loan. The respondent suggested 
removing the requirement for an annual check by CCC of the loan 
collateral because FSA salary funds do not allow for ``extreme'' 
expenditures. CCC feels the requirement is reasonable and can be 
fulfilled with available resources.

Section 1436.16 of the Interim Rule

    There were no comments regarding this section, but provisions have 
been added to this section for foreclosure, liquidation, and bankruptcy 
actions to help insure accomplishment of the goals of the program.

Section 1436.17 of the Interim Rule

    There were two comments regarding the provision to require 
compliance with the National Environmental Policy Act. The provision 
requires that an environmental evaluation be conducted by CCC for each 
loan application. In most cases, this will require a farm visit to 
assess the impact of the proposed storage construction project on the 
environment and on historic and archaeological resources. Respondents 
generally indicated that the environmental assessment goes far beyond 
the intent and scope of a program designed to benefit farmers hard-
pressed for storage capacity and in need of additional opportunities to 
enhance marketing returns. Respondents also pointed out that the 
requirement for compliance with local land use laws should be adequate 
for environmental compliance as well and that the interim rule states 
that the program as a whole will have no significant impact on the 
quality of the human environment. While CCC recognizes that the 
environmental review may delay loan approvals, this provision should 
help assure the maximum overall benefit from the expenditures to be 
made in this important program in conjunction with other programs, 
including conservation programs, operated by the participant.

Section 1436.18

    Section 1436.18 was added to provide appeal provisions.
    Additional editorial changes have also been made.

[[Page 4612]]

List of Subjects in 7 CFR Part 1436

    Administrative practice and procedure, Loan programs--agriculture, 
Reporting and recordkeeping requirements.

    Accordingly, for the reasons set forth in the preamble, 7 CFR part 
1436 is revised 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 or handling equipment
1436.7  Term of loan
1436.8  Security for loan
1436.9  Loan amount and loan application approvals
1436.10  Down payment
1436.11  Disbursements and assignments
1436.12  Interest and fees
1436.13  Loan installments, delinquency, and acceleration of 
maturity date
1436.14  Taxes
1436.15  Maintenance, liability, insurance, and inspections
1436.16  Foreclosure, liquidation, assumptions, sale or conveyance, 
bankruptcy
1436.17  Environmental compliance
1436.18  Appeals

    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 FSA State committees, 
FSA county committees and FSA employees.
    (b) FSA State committees, FSA county 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 FSA State committee shall take any action required by these 
regulations that has not been taken by the county committee. The FSA 
State committee shall also:
    (1) Correct, or require the FSA county committee to correct, any 
action taken by such FSA county committee that is not in accordance 
with the regulations of this part; and
    (2) Require the FSA county 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 FSA county 
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 FSA county committee.
    (e) The Deputy Administrator, Farm Programs, FSA, may authorize 
State and FSA county 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 
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 in this rule.


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 under this part to each borrower 
signing the note and security agreement.
    Assumption means the act or agreement by which one borrower takes 
over or assumes the debt of another borrower.
    Collateral means the storage structure, drying equipment or 
handling equipment securing the loan.
    Crop of economic significance means any insurable facility loan 
commodity that contributes 10 percent or more of the total expected 
value of all crops grown by the loan applicant except if the expected 
liability under the catastrophic level of crop insurance for a crop is 
equal to or less than the administrative fee for the crop, that crop 
shall not be economically significant.
    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 except that corn, grain 
sorghum, oats, wheat, or barley shall be included whether harvested as 
whole grain or other than whole grain.
    Financing statement means the appropriate document that gives legal 
notice of a security interest in personal 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 involved or because the collateral 
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, tribal venture, 
or other business enterprise, or other legal entity who is, or whose 
members are, a citizen or citizens of the United States, or a legal 
resident alien.
    Satisfactory credit history means a history of repaying debts as 
they came due unless the failure to repay or tardiness in payment was 
due to circumstance beyond the applicant's control as determined by CCC 
upon proof submitted by the applicant.
    Severance agreement means an agreement under which a party may 
consent to the security interest of another in property thereby 
allowing the severance of a fixture from the real estate.
    Storage need requirement means the result of up to the average of 
the most recent 3 years available planted acreage from the applicant's 
share of the applicable farm operation for each facility loan commodity 
requiring storage at the proposed storage location multiplied by the 
applicable crop yield as determined reasonable by the county committee, 
multiplied by two, and less the available existing storage capacity. If 
there is no acreage data available, including prevented planted acres, 
or the data is not applicable relative to the storage need, a 
reasonable acreage projection may be made for newly

[[Page 4613]]

acquired farms, changes in cropping operations, or for facility loan 
commodity crops being grown for the first time.
    Subordination agreement means any agreement under which a party may 
subordinate a security interest in property to the interest of another 
party.
    Uniform Commercial Code means the laws generally known by that name 
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. With State office approval, 
loans may be made or serviced by a county office other than the 
administrative county office. 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 access.
    (b) Producers who authorize delivery, site preparation, or 
construction actions without an approved loan, do so at their own risk 
and without creating any liability on behalf of CCC.


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 according to the definition 
in Sec. 1436.3 and as recommended to the approving committee by a FSA 
employee with FSA loan approval authority;
    (2) Demonstrates an ability to repay the debt arising under this 
program using a financial statement acceptable to CCC prepared within 
90 days of the date of application, as recommended to the approving 
committee by a FSA employee with FSA loan approval authority;
    (3) Has no disqualifying delinquent Federal debt under the Debt 
Collection Improvement Act of 1996;
    (4) Is a producer of a facility loan commodity by CCC;
    (5) Demonstrates a need for increased storage capacity as 
determined by CCC if the applicant is applying for a loan for a storage 
structure;
    (6) Provides proof of crop insurance offered under the Federal Crop 
Insurance Program for insurable crops of economic significance on all 
farms operated by the borrower in the county where the storage facility 
is located;
    (6) Is in compliance with USDA provisions for highly erodible land 
and wetlands conservation provisions 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) Annually provides proof of flood insurance if CCC determines 
such insurance is necessary to protect the interests of CCC, and 
annually provides proof that the structures for which the loan is made 
has all peril structural insurance;
    (9) Demonstrates compliance with the National Environmental Policy 
Act regulations at 40 CFR parts 1500-1508; and
    (10) Has not been convicted under Federal or State law of a 
disqualifying controlled substance violation under 7 CFR part 718.


Sec. 1436.6  Eligible storage or handling equipment.

    (a) Loans may be made only for the purchase and installation of 
eligible storage facilities and permanently affixed drying and handling 
equipment, for the remodeling of existing storage facilities, or for 
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) New oxygen-limiting storage structures or remanufactured 
oxygen-limiting storage structures built to the original manufacturer's 
design specifications using original manufacturer's rebuild kits, and 
other upright silo-type structures designed for whole grain storage or 
other than whole grain storage and having a useful life of at least 10 
years; and
    (3) New flat-type storage structures including a permanent concrete 
floor, designed for and primarily used to store facility loan 
commodities for the term of the loan and having a useful life of at 
least 10 years; and
    (4) New structures that are bunker-type, horizontal, or open silo 
structures designed for whole grain storage or other than whole grain 
storage and having a useful life of at least 10 years.
    (b) The calculation of the loan amount may include costs associated 
with building, improving, or renovating an eligible storage or handling 
facility, including:
    (1) Permanently affixed grain handling equipment and grain drying 
equipment, including perforated floors determined by the approving 
committee to be needed and essential to the proper functioning of the 
grain storage system;
    (2) Safety equipment as required by CCC and meeting OSHA 
requirements such as lighting, and 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) 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, portable handling 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) Used structures or handling equipment;
    (4) Structures that are not suitable for storing the facility loan 
commodities for which a need is determined;
    (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, 
except for family members as defined in 7 CFR Part 718, and tenants or 
landlords sharing in the crop requiring storage. Any facility that is 
in working proximity to any commercial storage operation shall be 
considered to be part of a commercial storage operation; and
    (6) Portable or permanent weigh scales.
    (d) Loans may be approved for financing additions to or 
modifications of an existing storage facility with an expected useful 
life of at least 10 years if the county committee determines there is a 
need for the capacity of the structure, but not for the sole 
replacement of worn out items such as motors, fans, or wiring.
    (e) Loans may be approved for new storage and handling components 
of a pre-owned structure provided the completed facility has a useful 
life of at least 10 years. The pre-owned structure must be purchased 
and moved to a new storage location. Eligible items for such a loan 
include costs such as new bin

[[Page 4614]]

rings or roof panels needed to make a purchased pre-owned structure 
useable, new aeration systems, site preparation, construction off-farm 
paid labor cost, foundation material and off-farm paid labor. 
Ineligible items for such a loan include the cost of purchasing and 
moving the used structure.


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. The loan balance and all attendant costs 
are due 7 years from the date of the execution of the promissory note 
and security agreement.


Sec. 1436.8  Security for loan.

    (a) Except as agreed to by CCC, 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 the laws of the state where the collateral is 
located. 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 attach to the collateral if 
it is or will become a fixture. If any such prior lien on the realty 
will attach to the collateral, a severance agreement must be obtained 
in writing from each holder of such a lien, including all government or 
USDA agencies. No additional liens or encumbrances may be placed on the 
storage facility after the loan is approved unless CCC approves 
otherwise in writing.
    (b) For loan amounts exceeding $50,000, or where the aggregate 
outstanding loan balance will exceed $50,000 or for loans where the 
approving committee determines as a result of financial analysis that 
additional security is required, a lien on the real estate parcel on 
which the farm storage facility is located will be required in the form 
of a real estate mortgage, deed of trust, or other security instrument 
approved by the United States Department of Agriculture's Office of 
General Counsel. CCC's interest in the real estate shall be superior to 
all other liens and is the first lien that secures the amount of the 
loan. A loan will be considered to be adequately secured when the real 
estate security for the loan is at least equal to the loan amount. If 
the real estate is covered by a prior lien, a lien waiver may be 
obtained by means of a subordination agreement approved for use in the 
State by USDA's Office of General Counsel. CCC will not require such an 
agreement from any agency of the Department of Agriculture. Loans may 
be secured by a junior lien on real estate when the loan is adequately 
secured and a severance agreement is obtained from prior lien holders.
    (c) Title insurance or a title opinion is required for loans 
secured by real estate.
    (d) Real estate liens may cover 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 has sufficient value based on the fair market value 
of the acreage at the time of the application as determined by the 
county committee, to insure repayment of the loan.
    (e) Notwithstanding the preceding subsections of this section, a 
borrower, in lieu of such liens as are otherwise required by those 
subsections, may provide a letter of credit, bond, or other form of 
security, as approved by CCC.
    (f) 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.
    (g) The cost of loan closings by attorneys, title opinions, title 
insurance, title searches, filing and recording all real estate liens, 
fixture filings and later subordinations will be paid by the borrower. 
CCC shall pay such costs relating to credit reports, collateral lien 
searches, and filing and recording financing statements for the 
collateral.


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 FSA State committee.
    (b) The net cost for storage facilities and handling equipment may 
include the following: all real estate lien related fees paid by the 
borrower, including attorney fees, except for filing fees, 
environmental and historic review fees including archaeological study 
fees, the facility purchase price, sales tax, shipping, delivery 
charges, site preparation costs, installation cost, material and labor 
for concrete pads and foundations, material and labor for electrical 
wiring, electrical motors, off-farm paid labor, on farm site 
preparation and construction equipment costs not to exceed commercial 
rates approved by the county committee, and new on-farm material 
approved by the county committee. The net cost shall not include 
secondhand material or any other item that is determined by the 
approving authority to be ineligible for loan.
    (c) The maximum principal amount of any farm storage facility loan 
shall be 85 percent of the net cost of the applicant's needed storage 
or handling equipment not to exceed $100,000 for each borrower signing 
the note and security agreement. Unless otherwise approved by CCC, 
borrowers shall be considered to be separate persons or borrowers for 
purposes of applying the preceding sentence only to the extent that 
they would normally be considered a separate person under the rules set 
out in 7 CFR part 1400.
    (d) The aggregate outstanding balance of all facility loans for any 
one borrower signing the note and security agreement 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 considered eligible for 
loan under this part.
    (f) When a flat storage structure has space that is not used 
primarily for facility loan commodity storage, such as office space, 
the loan amount shall be adjusted for the ineligible space as 
determined by CCC.
    (g) The FSA county committee may approve applications, if loan 
funds are available, up to the maximum approval amount unless the FSA 
State committee establishes a lower limit for county committee approval 
authority.
    (h) Loan approvals will expire 4 months after the date of approval 
unless extended in writing for an additional 4 months by the FSA State 
Committee.
    (i) CCC may at any time refuse to make new loans.


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. The down payment may be obtained by the 
borrower from another lending source.
    (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.

[[Page 4615]]

Sec. 1436.11  Disbursement and assignments.

    (a) Disbursement of the loan by CCC will be made after 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 
only if CCC determines the borrower has paid the contractor or supplier 
all amounts that are due and owing with respect to the facility and 
that all applicable liens, security interests, or other encumbrances 
have been released.
    (d) A release of liability will be required from contractors and 
suppliers providing goods and services to the loan applicant.
    (e) Loan proceeds cannot be assigned.


Sec. 1436.12  Interest and fees.

    (a) Loans shall bear interest at the rate equivalent, as determined 
by CCC, 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 
in such amount determined appropriate by CCC, which fee may not in any 
case be less then $45.


Sec. 1436.13  Loan installments, delinquency, and acceleration of 
maturity date.

    (a) Equal installments of principal plus interest will be amortized 
over the loan term for purposes of setting a payment schedule. 
Installments are due and payable not later than the last day of each 
12-month period of the loan, until the principal plus interest has been 
paid in full.
    (b) Each installment may be paid in 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) The following actions will be taken when installments are not 
paid on the due date: A demand for payment shall be mailed to the 
debtor after the due date has passed. If the installment is not paid 
within 30 days of the due date or if a new due date acceptable to CCC 
has not been established based on a financial plan submitted by the 
debtor, the initial demand may be followed by two subsequent written 
demands at approximately 30-day intervals unless other action is needed 
to protect the interests of CCC. If the debtor files an appeal 
according to Sec. 1436.18 of this part, collection action shall cease 
until the appeal process is complete, however, any payments due the 
debtor may be withheld and, depending on the outcome of the appeal, may 
later be offset and applied to reduce the indebtedness. In lieu of a 
foreclosure on the collateral in the case of a delinquency, CCC may 
permit a rescheduling of the debt or other measures consistent with the 
collection of other debts under the provisions of Part 1403. 
Alternately, CCC may implement such other collection procedures as it 
deems appropriate.
    (d) A claim shall be established against a borrower for any amounts 
remaining due after liquidation of the loan.
    (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 , during the life of the loan, the collateral is 
used in connection with or by any unauthorized commercial operation 
including, but not limited to, elevators, warehouses, dryers or 
processing plants.
    (f) Any action authorized by the provisions of this section may be 
taken:
    (1) Against a debtor's pro rata share of payments due any entity 
that the borrower participates in, either directly or indirectly, as 
determined by CCC.
    (2) Against related persons or entities, irrespective of the 
debtors share, when CCC determines that the debtor has established an 
entity, or reorganized, transferred ownership of, or changed in some 
other manner, their operation, for the purpose of avoiding the payment 
of the debt.
    (g) The loan may be paid in full or in part without penalty at any 
time before maturity.
    (h) Upon payment of a loan, CCC shall release CCC's security 
interest in the collateral.


Sec. 1436.14  Taxes.

    The borrower must pay, when due, 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 due immediately.


Sec. 1436.15  Maintenance, liability, insurance, and inspections.

    (a) The borrower must maintain the loan collateral in a condition 
suitable for the storage of one or more of the facility loan 
commodities. For purpose of this section the term ``loan collateral'' 
shall mean any property of any kind that was built or improved, or 
acquired using a loan made under this part.
    (b) Until the loan has been repaid, the borrower shall be liable 
for all damages to or destruction of the loan collateral. CCC shall not 
assume any loss of the loan collateral.
    (c) CCC may conduct annual collateral inspections to insure 
compliance with this part. The borrower must consent to such inspection 
as a term of the loan and failure to supply such access shall put the 
borrower into default.
    (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 of 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 default for which the remaining balance of the 
loan shall become immediately due and payable.


Sec. 1436.16  Foreclosure, liquidation, assumptions, sale or 
conveyance, bankruptcy.

    (a) The collateral or land securing a loan may be sold by CCC 
whenever CCC has declared the entire indebtedness immediately due and 
payable under this part as follows:
    (1) If a demand for payment is not received by the due date 
acceptable to CCC, CCC may call the loan and initiate foreclosure 
proceedings by issuing a liquidation letter to the borrower.
    (2) The debtor may voluntarily agree to allow removal of the 
collateral to facilitate sale by signing an agreement for sale. If the 
debtor objects to removal of collateral, the law of the state where the 
collateral exists will be used to foreclose on the property.
    (3) For loans with movable collateral and no real estate lien, CCC 
may sell the collateral for the best price obtainable. Sales proceeds 
shall be distributed in the following order:

[[Page 4616]]

    (i) To CCC to satisfy the debtor's indebtedness including all costs 
associated with selling the collateral.
    (ii) Payment to junior lien holders if approved by USDA's Office of 
the General Counsel and then to the borrower or other persons as 
determined appropriate by that office.
    (4) For loans with nonmovable collateral, as determined by CCC, and 
no real estate lien, CCC may establish a claim according to 7 CFR part 
1403.
    (5) For loans secured with a real estate lien, CCC may obtain an 
appraisal of the property. Sales proceeds shall be distributed in the 
following order:
    (i) To CCC to satisfy the debtor's indebtedness including all costs 
associated with selling the collateral and the appraisal.
    (ii) To junior lien holders if approved by USDA's Office of the 
General Counsel; or
    (iii) To the borrower or other persons as determined appropriate by 
that office.
    (b) Assumption by another borrower of a farm storage facility loan 
is permitted subject to county committee approval and the subsequent 
borrower's ability to show a satisfactory credit history. An assumption 
of the loan may be approved when the collateral is sold by CCC to an 
otherwise eligible borrower, the current borrower will convey the 
collateral or property securing the loan to another eligible borrower, 
or the borrower is dead, incompetent, or missing and an eligible 
borrower wants to assume the loan.
    (1) Requests for approval of assumptions shall be made to the 
county committee by the borrower, the borrower's successors, or 
representatives of the borrower. If approval is granted, the borrower's 
successors or representatives shall execute a new farm storage facility 
note and security agreement for the balance of the term of the loan.
    (2) The principal amount of the loan shall include the unpaid 
amount of the loan, interest computed to the date of assumption, all 
past due installments, and any other charges that may be required.
    (c) The borrower may voluntarily convey 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 FSA county committee with the understanding that sale proceeds 
shall be paid to satisfy the borrowers indebtedness to CCC.
    (d) Remedies provided for in this section shall, unless CCC 
determines otherwise, be subject to the administrative appeals provided 
for elsewhere in this part, including those that are found at 
Sec. 1436.13.


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 environment and cultural resources.
    (b) If it is determined that a proposed action or group of proposed 
actions will 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 1500-1508.
    (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.
    (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 posed 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.


Sec. 1436.18  Appeals.

     The appeal, reconsideration, or review of all determinations made 
under this part, except for provisions for which there are no appeal 
rights because they are determined rules of general applicability, must 
be in accordance with parts 11 and 780 of this title.

    Signed at Washington, DC, on January 10, 2001.
 George Arredondo,
Acting Executive Vice President, Commodity Credit Corporation.
[FR Doc. 01-1332 Filed 1-17-01; 8:45 am]
BILLING CODE 3410-05-P