[Federal Register Volume 67, Number 185 (Tuesday, September 24, 2002)]
[Rules and Regulations]
[Pages 59770-59773]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-24191]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 771

Rural Housing Service

Rural Business--Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Part 1941

RIN 0560-AG69


Boll Weevil Eradication Loan Program

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: This action is being taken to finalize provisions of the 
interim regulations published May 16, 1997, that implemented the Boll 
Weevil Eradication Loan Program. This rule also implements changes 
intended to continue to assist in the eradication of the boll weevil, 
and promote cooperation between the United States Department of 
Agriculture (USDA) and State chartered organizations with regard to 
boll weevil eradication.

DATES: This rule is effective September 24, 2002.

FOR FURTHER INFORMATION CONTACT: Richard W. Sharp, Senior Loan Officer, 
Funds Management/Direct Loans Branch, Farm Service Agency (FSA). 
Telephone: 202-690-0651; facsimile: 202-690-1117; e-mail; [email protected]

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule has been determined to be not significant for 
purposes of Executive Order 12866 and, therefore, has not been reviewed 
by the Office of Management and Budget.

Regulatory Flexibility Act

    FSA certifies that this rule will not have a significant economic 
impact on a substantial number of small entities. This program applies 
only to chartered organizations whose primary mission is the 
eradication of the boll weevil. These loans cannot be made to small 
entities or individuals. Thus, a Regulatory Flexibility Analysis is not 
required.

Environmental Impact Statement

    A Finding Of No Significant Impact was published for the interim 
rule on April 21, 1997. There is no significant change in this final 
rule. Therefore, no further environmental assessments are required.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988, Civil Justice Reform. All State and local laws and regulations 
that are in conflict with this rule will be preempted. No retroactive 
effect will be given to this rule. This rule will not affect agreements 
entered into prior to the effective date of the rule. The 
administrative appeal provisions published at 7 CFR part 11 must be 
exhausted before bringing any action for judicial review.

Executive Order 12372

    For reasons set forth in the Notice to 7 CFR part 3015, subpart V 
(48 FR 29115, June 24, 1983), the programs and activities within this 
rule are excluded from the scope of Executive Order 12372, which 
requires intergovernmental consultation with State and local officials.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments as well as in the private sector. 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

    FSA has reviewed this rule to determine the applicability of the 
Paperwork Reduction Act of 1995. In accordance with 5 CFR 1320.3(c)(4), 
there are fewer than 10 persons or organizations from which the 
collection of information can reasonably be expected within a 12-month 
period. The information requirements of this program do not impact a 
substantial majority of the industry, nor do the requirements meet the 
rule of general applicability. Therefore, the provisions of 5 CFR part 
1320 do not apply to this rule.

New CFR Part

    This rule will relocate the Boll Weevil Eradication Loan Program 
from 7 CFR part 1941, subpart C, to 7 CFR part 771. This will better 
organize the regulation and incorporate it with the other FSA 
regulations.

[[Page 59771]]

Discussion of the Final Rule

    A total of 24 responses were received on the interim rule. Comments 
were received from two Congressional Representatives, five agricultural 
businesses, one cotton industry firm, 14 boll weevil organizations, and 
two farmers. All comments were positive and highly supportive of the 
program. All comments praised the Government's entry into the boll 
weevil eradication process with the creation of the Boll Weevil 
Eradication Loan Program. The Agency received no substantive comments 
recommending change.
    The Boll Weevil Eradication Loan Program became effective upon 
publication of the May 16, 1997, interim rule. The Animal and Plant 
Health Inspection Service (APHIS) provides eligible grower 
organizations: (1) Equipment; (2) technical and administrative support; 
and (3) cost-sharing not to exceed 30 percent of the program costs. 
Program costs not provided by APHIS must be paid by the eligible grower 
organizations through the collection of producer assessments. FSA's 
funding is needed by the grower organizations to finance the high 
initial costs of the eradication program. Full producer assessments, 
without the FSA loan program, would create significant financial 
hardships for most of the cotton producers. The APHIS Boll Weevil 
Eradication Program and the FSA Boll Weevil Eradication Loan Program 
have both been very successful.
    Although the FSA program has been substantially successful, two 
changes need to be made to the loan program. The changes are based upon 
a House of Representatives Committee on Appropriations recommendation 
in connection with the Agriculture, Rural Development, Food and Drug 
Administration, and Related Agencies Appropriations Act, 2000 (Public 
Law 106-78) (2000 Act). In House Report 106-157, page 44, the Committee 
on Appropriations directed the Secretary of Agriculture to consider all 
eligible applicants, private or state-run, organized to eradicate the 
boll weevil, to be determined potential candidates for the boll weevil 
eradication loan program. The Committee also recommended that 
candidates be considered eligible for FSA's boll weevil eradication 
loan program whether or not they are financially capable of securing 
operating funds elsewhere.
    These two changes are made in the final rule at Sec.  771.2 by 
adding a definition of ``State Organization'' and in Sec.  771.4 by 
adding that an eligible applicant may be a state organization. The no 
credit elsewhere requirement has been removed from the latter section.
    These recommendations have merit based upon 5 years of joint APHIS 
and FSA experience in the eradication program. When this loan program 
began, all boll weevil eradication programs were private non-profit 
corporations. This fact has changed. The structure of all of the 
individual state-run boll weevil organizations is extremely similar. 
All State agricultural departments/authorities have various amounts of 
oversight authority for their respective boll weevil program. Most 
eradication finances go through an accounting review tied loosely to 
the State's treasury. Some operations require state approval of FSA 
loans. The eradication of the boll weevil is in the public's interest, 
whether the operation is private or public, therefore this 
recommendation was adopted. As to the second recommendation, there are 
a small number of boll weevil eradication organizations within the 
boundaries of the United States. States tend to have varying amounts of 
funding available to the eradication organizations depending upon the 
economic status of the state and the economic times. State 
organizations generally will be able to obtain credit elsewhere. The 
purpose of the loan program is the elimination of all boll weevils. All 
qualified boll weevil eradication programs should have equal access to 
FSA funding regardless of whether funding is available elsewhere. 
Therefore, this eligibility requirement has been eliminated. These 
changes are made in the final rule at Sec. Sec.  771.2 and 771.4.

Justification for Effective Date

    An immediate effective date for this rule is justified under 5 
U.S.C. 553(d)(1) because the rule relieves two restrictions for boll 
weevil eradication loan applicants. The requirement that the applicant 
be a non-profit corporation has been modified to also allow state 
organizations to qualify for loans. The requirement that applicants be 
unable to obtain credit elsewhere also has been removed.

List of Subjects

7 CFR Part 771

    Loan programs--agriculture, Pesticides and pests, Cotton.

7 CFR Part 1941

    Loan programs--agriculture, Pesticides and pests, Cotton.
    FSA adopts the interim rule published on May 16, 1997 (62 FR 26918-
26921) as final with changes discussed above.


    Accordingly, 7 CFR Chapters VII and XVIII are amended as follows:

7 CFR Chapter VII

    1. Part 771 is added to chapter VII, subchapter D, to read as 
follows:

PART 771--BOLL WEEVIL ERADICATION LOAN PROGRAM

Sec.
771.1 Introduction.
771.2 Abbreviations and definitions.
771.3 [Reserved]
771.4 Eligibility requirements.
771.5 Loan purposes.
771.6 Environmental requirements.
771.7 Equal opportunity and non-discrimination requirements.
771.8 Other Federal, State, and local requirements.
771.9 Interest rates, terms, security requirements, and repayment.
771.10 [Reserved]
771.11 Application.
771.12 Funding applications.
771.13 Loan closing.
771.14 Loan monitoring.
771.15 Loan servicing.

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; and Pub. L. 104-180, 110 
Stat. 1569.


Sec.  771.1  Introduction.

    The regulations in this part set forth the terms and conditions 
under which loans are made through the Boll Weevil Eradication Loan 
Program. The regulations in this part are applicable to applicants, 
borrowers, and other parties involved in the making, servicing, and 
liquidation of these loans. The program's objective is to assist 
producers and state government agencies in the eradication of boll 
weevils from cotton producing areas.


Sec.  771.2  Abbreviations and definitions.

    The following abbreviations and definitions apply to this part:
    (a) Abbreviations:
    APHIS means the Animal and Plant Health Inspection Service of the 
United States Department of Agriculture, or any successor Agency.
    FSA means the Farm Service Agency, its employees, and any successor 
agency.
    (b) Definitions:
    Extra payment means a payment derived from the sale of property 
serving as security for a loan, such as real estate or vehicles. 
Proceeds from program assessments and other normal operating income, 
when remitted for payment on a loan, will not be considered as an extra 
payment.
    Non-profit corporation means a private domestic corporation created 
and organized under the laws of the State(s) in which the entity will 
operate whose net earnings are not distributable

[[Page 59772]]

to any private shareholder or individual, and which qualifies under the 
Internal Revenue Service code.
    Restructure means to modify the terms of a loan. This may include a 
modification of the interest rate and/or repayment terms of the loan.
    Security means assets pledged as collateral to assure repayment of 
a loan in the event of default on the loan.
    State organization means a quasi-state run public operation 
exclusively established and managed by state and/or non-state 
employees, with all employees currently dedicated to the specific task 
of eliminating the boll weevil from the cotton growing area of the 
state.


Sec.  771.3  [Reserved]


Sec.  771.4  Eligibility requirements.

    (a) An eligible applicant must:
    (1) Meet all requirements prescribed by APHIS to qualify for cost-
share grant funds as determined by APHIS, (FSA will accept the 
determination by APHIS as to an organization's qualification);
    (2) Have the appropriate charter and/or legal authority as a non-
profit corporation or as a State organization specifically organized to 
operate the boll weevil eradication program in any State, biological, 
or geographic region of any State in which it operates;
    (3) Possess the legal authority to enter into contracts, including 
debt instruments;
    (4) Operate in an area in which producers have approved a 
referendum authorizing producer assessments and in which an active 
eradication or post-eradication program is underway or scheduled to 
begin no later than the fiscal year following the fiscal year in which 
the application is submitted;
    (5) Have the legal authority to pledge producer assessments as 
security for loans from FSA.
    (b) Individual producers are not eligible for loans.


Sec.  771.5  Loan purposes.

    (a) Loan funds may be used for any purpose directly related to boll 
weevil eradication activities, including, but not limited to:
    (1) Purchase or lease of supplies and equipment;
    (2) Operating expenses, including but not limited to, travel and 
office operations;
    (3) Salaries and benefits.
    (b) Loan funds may not be used to pay expenses incurred for 
lobbying, public relations, or related activities, or to pay interest 
on loans from the Agency.


Sec.  771.6  Environmental requirements.

    No loan will be made until all Federal and state statutory and 
regulatory environmental requirements have been complied with.


Sec.  771.7  Equal opportunity and non-discrimination requirements.

    No recipient of a boll weevil eradication loan shall directly, or 
through contractual or other arrangement, subject any person or cause 
any person to be subjected to discrimination on the basis of race, 
religion, color, national origin, gender, or other prohibited basis. 
Borrowers must comply with all applicable Federal laws and regulations 
regarding equal opportunity in hiring, procurement, and related 
matters.


Sec.  771.8  Other Federal, State, and local requirements.

    (a) In addition to the specific requirements in this subpart, loan 
applications will be coordinated with all appropriate Federal, State, 
and local agencies.
    (b) Borrowers are required to comply with all applicable:
    (1) Federal, State, or local laws;
    (2) Regulatory commission rules; and
    (3) Regulations which are presently in existence, or which may be 
later adopted including, but not limited to, those governing the 
following:
    (i) Borrowing money, pledging security, and raising revenues for 
repayment of debt;
    (ii) Accounting and financial reporting; and
    (iii) Protection of the environment.


Sec.  771.9  Interest rates, terms, security requirements, and 
repayment.

    (a) Interest rate. The interest rate will be fixed for the term of 
the loan. The rate will be established by FSA, based upon the cost of 
Government borrowing for instruments on terms similar to that of the 
loan requested.
    (b) Term. The loan term will be based upon the needs of the 
applicant to accomplish the objectives of the loan program as 
determined by FSA, but may not exceed 10 years.
    (c) Security requirements. (1) Loans must be adequately secured as 
determined by FSA. FSA may require certain security, including but not 
limited to the following:
    (i) Assignments of assessments, taxes, levies, or other sources of 
revenue as authorized by State law;
    (ii) Investments and deposits of the applicant; and
    (iii) Capital assets or other property of the applicant or its 
members.
    (2) In those cases in which FSA and another lender will hold 
assignments of the same revenue as collateral, the other lender must 
agree to a prorated distribution of the assigned revenue. The 
distribution will be based upon the proportionate share of the 
applicant's debt the lender holds for the eradication zone from which 
the revenue is derived at the time of loan closing.
    (d) Repayment. The applicant must demonstrate that income sources 
will be sufficient to meet the repayment requirements of the loan and 
pay operating expenses.


Sec.  771.10  [Reserved]


Sec.  771.11  Application.

    A complete application will consist of the following:
    (a) An application for Federal assistance (available in any FSA 
office);
    (b) Applicant's financial projections including a cash flow 
statement showing the plan for loan repayment;
    (c) Copies of the applicant's authorizing State legislation and 
organizational documents;
    (d) List of all directors and officers of the applicant;
    (e) Copy of the most recent audited financial statements along with 
updates through the most recent quarter;
    (f) Copy of the referendum used to establish the assessments and a 
certification from the Board of Directors that the referendum passed;
    (g) Evidence that the officers and employees authorized to disburse 
funds are covered by an acceptable fidelity bond;
    (h) Evidence of acceptable liability insurance policies;
    (i) Statement from the applicant addressing any current or pending 
litigation against the applicant as well as any existing judgments;
    (j) A copy of a resolution passed by the Board of Directors 
authorizing the officers to incur debt on behalf of the borrower;
    (k) Any other information deemed to be necessary by FSA to render a 
decision.


Sec.  771.12  Funding applications.

    Loan requests will be processed based on the date FSA receives the 
application. Loan approval is subject to the availability of funds. 
However, when multiple applications are received on the same date and 
available funds will not cover all applications received, applications 
from active eradication areas, which FSA determines to be most critical 
for the accomplishment of program objectives, will be funded first.


Sec.  771.13  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 borrower, through its

[[Page 59773]]

authorized representatives will execute all loan instruments and legal 
documents required by FSA to evidence the debt, perfect the required 
security interest in property and assets securing the loan, and protect 
the Government's interest, in accordance with applicable State and 
Federal laws.
    (c) Loan agreement. A loan agreement between the borrower and FSA 
will be required. The agreement will set forth performance criteria and 
other loan requirements necessary to protect the Government's financial 
and programmatic interest and accomplish the objectives of the loan. 
Specific provisions of the agreement will be developed on a case-by-
case basis to address the particular situation associated with the loan 
being made. However, all loan agreements will include at least the 
following provisions:
    (1) The borrower must submit audited financial statements to FSA at 
least annually;
    (2) The borrower will immediately notify FSA of any adverse actions 
such as:
    (i) Anticipated default on FSA debt;
    (ii) Potential recall vote of an assessment referendum; or
    (iii) Being named as a defendant in litigation;
    (3) Submission of other specific financial reports for the 
borrower;
    (4) The right of deferral under 7 U.S.C. 1981a; and
    (5) Applicable liquidation procedures upon default.
    (d) Fees. The borrower will pay all 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 FSA employees.


Sec.  771.14  Loan monitoring.

    (a) Annual and periodic reviews. At least annually, the borrower 
will meet with FSA representatives to review the financial status of 
the borrower, assess the progress of the eradication program utilizing 
loan funds, and identify any potential problems or concerns.
    (b) Performance monitoring. At any time FSA determines it 
necessary, the borrower must allow FSA or its representative to review 
the operations and financial condition of the borrower. This may 
include, but is not limited to, field visits, and attendance at 
Foundation Board meetings. Upon FSA request, a borrower must submit any 
financial or other information within 14 days unless the data requested 
is not available within that time frame.


Sec.  771.15  Loan servicing.

    (a) Advances. FSA may make advances to protect its financial 
interests and charge the borrower's account for the amount of any such 
advances.
    (b) Payments. Payments will be made to FSA as set forth in loan 
agreements and debt instruments. The funds from extra payments will be 
applied entirely to loan principal.
    (c) Restructuring. The provisions of 7 CFR part 1951, subpart S, 
are not applicable to loans made under this section. However, FSA may 
restructure loan debts; provided:
    (1) The Government's interest will be protected;
    (2) The restructuring will be performed within FSA budgetary 
restrictions; and
    (3) The loan objectives cannot be met unless the loan is 
restructured.
    (d) Default. In the event of default, FSA will take all appropriate 
actions to protect its interest.

7 CFR Chapter XVIII

PART 1941--OPERATING LOANS

    2. The authority citation for Part 1941 continues to read as 
follows:

    Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.

Subpart C--[Removed]

    3. Subpart C is removed.

    Signed at Washington, DC, on September 18, 2002.
J.B. Penn,
Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 02-24191 Filed 9-19-02; 3:06 pm]
BILLING CODE 3410-05-P