[Federal Register Volume 67, Number 213 (Monday, November 4, 2002)]
[Rules and Regulations]
[Pages 67089-67096]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-27988]


-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

9 CFR Part 53

[Docket No. 02-048-1]
RIN 0579-AB46


Low Pathogenic Avian Influenza; Payment of Indemnity

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Interim rule and request for comments.

-----------------------------------------------------------------------

SUMMARY: We are amending our general indemnity regulations to allow the 
Department to pay indemnity to contract growers and owners for poultry 
destroyed because of low pathogenic avian influenza associated with a 
disease situation in Virginia. Subject to available funding, the 
Department may pay all eligible losses of contract growers and up to 50 
percent of eligible losses of owners, minus any amount paid to the 
contract grower of a flock. However, total payments may not exceed 50 
percent of all eligible costs. Additionally, we are providing that the 
value of poultry destroyed due to the disease may be determined after 
destruction and disposal of the poultry, and, except in limited 
situations, are requiring a waiting period of 7 days following cleaning 
and disinfection before premises that contained poultry affected by the 
disease may be restocked. These actions are necessary to help control 
this disease in the United States.

DATES: This interim rule is effective December 9, 2002. We will 
consider all comments that we receive by December 4, 2002.

ADDRESSES: You may submit comments by postal mail/commercial delivery 
or by e-mail. If you use postal mail/commercial delivery, please send 
four copies of your comment (an original and three copies) to: Docket 
No. 02-048-1, Regulatory Analysis and Development, PPD, APHIS, Station 
3C71, 4700 River Road Unit 118, Riverdale, MD 20737-1238. Please state 
that your comment refers to Docket No. 02-048-1. If you use e-mail, 
address your comment to [email protected]. Your comment must 
be contained in the body of your message; do not send attached files. 
Please include your name and address in your message and ``Docket No. 
02-048-1'' on the subject line.
    You may read any comments that we receive on this docket in our 
reading room. The reading room is located in room 1141 of the USDA 
South Building, 14th Street and Independence Avenue, SW., Washington, 
DC. Normal reading room hours are 8 a.m. to 4:30 p.m., Monday through 
Friday, except holidays. To be sure someone is there to help you, 
please call (202) 690-2817 before coming.
    APHIS documents published in the Federal Register, and related 
information, including the names of organizations and individuals who 
have commented on APHIS dockets, are available on the Internet at 
http://www.aphis.usda.gov/ppd/rad/webrepor.html.

FOR FURTHER INFORMATION CONTACT: Dr. Cheryl Hall, Staff Veterinarian, 
Planning, Certification, and Monitoring Staff, VS, APHIS, 4700 River 
Road Unit 46, Riverdale, MD 20737-1231; (301) 734-4924.

[[Page 67090]]


SUPPLEMENTARY INFORMATION:

Background

    The Animal and Plant Health Inspection Service (APHIS) of the 
United States Department of Agriculture (the Department) administers 
regulations at 9 CFR part 53 (referred to below as the regulations) 
that provide for the payment of indemnity to owners of animals that are 
required to be destroyed because of foot-and-mouth disease, 
pleuropneumonia, rinderpest, exotic Newcastle disease, highly 
pathogenic avian influenza, infectious salmon anemia, or any other 
communicable disease of livestock or poultry that, in the opinion of 
the Secretary of Agriculture, constitutes an emergency and threatens 
the U.S. livestock or poultry population. Payment for animals destroyed 
is to be based on the fair market value of the animals.

Payment of Indemnity

    Section 53.2 of the regulations authorizes the APHIS Administrator 
to cooperate with a State in the control and eradication of disease. 
Paragraph (b) of this section allows for the payment of indemnity to 
cover the costs for purchase, destruction, and disposition of animals 
and materials required to be destroyed because of being contaminated by 
or exposed to such disease. In the case of low pathogenic avian 
influenza (LPAI), the Administrator may pay up to 50 percent of the 
costs.

Low Pathogenic Avian Influenza

    Avian influenza (AI) viruses are classified into 15 subtypes based 
on their surface hemagglutinin (H) proteins. LPAI viruses constitute 
the vast majority of AI viruses and cause few clinical signs in 
infected birds. However, LPAI H5 and H7 viruses can mutate into highly 
pathogenic forms under field conditions.
    Highly pathogenic AI (HPAI) is not known to exist in the United 
States. It is an extremely infectious and deadly form of the disease 
and can cause sudden death in poultry without any warning signs of 
infection. Recently, a subtype of the H7 virus, the H7N2 strain, was 
determined to be present in commercial poultry flocks in the State of 
Virginia. (To date, no poultry infected with the H5 virus have been 
found in Virginia.) Because of the possibility that LPAI H5 and H7 
viruses could mutate into HPAI, we have determined that it is necessary 
to eliminate these specific viruses if they occur in poultry in 
relation to the disease situation occurring in Virginia.
    Agricultural authorities in Virginia have taken action to control 
the disease through diagnostic activities, quarantines, surveillance, 
depopulation and disposal of infected and exposed poultry, and cleaning 
and disinfection or disposal of contaminated materials. To protect the 
poultry industry in the United States, APHIS is cooperating with 
Virginia in its control measures. Integral to these efforts is the 
destruction of all poultry known to be infected with or exposed to the 
disease.

Payment for Losses

    In reviewing the regulations in Sec.  53.2 regarding authorization 
of payments by the Department for losses growing out of the destruction 
of animals affected with the disease, we found the wording too narrow 
to cover costs borne by contract growers of poultry, who do not own the 
birds, but who nonetheless would suffer losses associated with their 
destruction. Therefore, we are adding a new Sec.  53.11(a) to the 
regulations, in which we provide that, subject to available funding, in 
the case of the current disease situation in Virginia associated with 
the H5 or H7 virus, the Administrator may pay claims of up to 100 
percent of eligible losses incurred by each contract grower resulting 
from the destruction of poultry affected with the disease, up to the 
amount that the owner of the poultry is eligible to receive before 
grower compensation is deducted, as discussed below.
    We are also adding a new Sec.  53.11(b) to provide that, in the 
case of the current LPAI situation in Virginia, the Administrator may 
pay up to 50 percent of all eligible losses incurred by each owner 
resulting from the destruction of poultry affected with the disease, 
minus any amount APHIS pays to the contract grower of the poultry under 
Sec.  53.11(a). A copy of the LPAI compensation plan is available for 
review at the location listed in the ADDRESSES section at the beginning 
of this document and at http://www.aphis.usda.gov/ppd/rad/avianecon.pdf. Compensation will be made only for poultry destroyed and 
the costs of destruction and disposal, and not for materials.

Method of Calculating Compensation

    Under the LPAI compensation plan, the total per bird compensation 
value is determined first. Compensation for growers is determined next, 
with the amount per bird based on the payments that growers have earned 
in previous production cycles. Once the amount to be paid to growers is 
arrived at, that amount is subtracted from the total compensation value 
to determine what owners will receive.

(Compensation will not be paid for meat birds sent to slaughter. For 
breeder or table egg layer birds, the amount of compensation paid will 
be reduced by any salvage value of the birds.)
    In general, the compensation plan will be applied according to the 
following formulas:

1. Compensation to Contract Growers

Per bird payment based on the average per bird company grower payment 
received during the previous year's production
    x the number of birds depopulated (based on company and grower 
records)
    = estimated grower payment if the disease situation hadn't occurred
    - any company grower payment already received
    = grower compensation

    The compensation plan for growers allows for Federal payment of 100 
percent of eligible losses suffered by a grower, up to the amount that 
the owner of the poultry is eligible to receive before grower 
compensation is deducted. In all cases, 100 percent of eligible grower 
losses will be less than 50 percent of the value of the birds.
    By targeting growers for indemnities, the Federal Government 
enhances the probability of rapid reporting by growers who are in a 
position to quickly report a disease situation. This enhances the 
likelihood of prompt eradication. In addition, such payments will 
benefit poultry growers who could otherwise suffer uncompensated 
economic losses from participating in an eradication program. If 
growers are not compensated, any sunk mortgage, electricity, or labor 
costs a grower has invested in a flock are lost when the flock is 
depopulated. Some of these costs, such as mortgage costs, continue even 
if there are no poultry on the grower's premises.

2. Compensation to Owners

Compensation value per bird (based on tables included in the 
compensation plan)
    x the number of birds depopulated
    = the total bird value loss
    + cost to owners of destruction and disposal of birds
    x 50 percent
    = total compensation for birds, destruction, and disposal
    - grower compensation
    = net owner compensation from the Department

Depopulation Agreement

    We are providing in new Sec.  53.11(c) that payments are 
conditioned on each

[[Page 67091]]

claimant's complying with all applicable requirements of part 53 and, 
additionally, adhering to and complying with the specific conditions 
set forth in the ``Avian Influenza Depopulation Agreement'' regarding 
cleaning and disinfection, restocking, surveillance, and other disease 
prevention measures.
    We will consider affected poultry to be related to the current 
disease situation in Virginia if they are located in Virginia or if 
they are poultry in another State that are determined to be affected 
with LPAI because of being epidemiologically linked to the disease 
situation in Virginia.
    Owners who collect salvage value for poultry destroyed because of 
LPAI will have that value subtracted from the amount of indemnity they 
are eligible to receive.

Determining the Value of Poultry Destroyed

    Prior to this interim rule, Sec.  53.4 provided, among other 
things, that poultry affected by disease must be killed promptly after 
appraisal. However, in the case of a disease such as LPAI that can 
spread rapidly among poultry in close proximity, it may be necessary in 
controlling the disease to destroy poultry before determining its 
value. Therefore, we are providing in a new Sec.  53.4(b) that, in the 
case of the current disease situation in Virginia, the value of poultry 
may be calculated following destruction and disposal of the poultry, 
based on the number, type, and age of the poultry destroyed.
    We are providing in Sec.  53.8 that any claims for payment for 
poultry destroyed in relation to the current disease situation in 
Virginia must be submitted to APHIS within 90 days after the effective 
date of this rule or the destruction of the poultry, whichever is 
later. Additionally, we are revising Sec.  53.8 to provide that claims 
for payment must simply be made on a form approved by the 
Administrator, and remove the requirement that a separate voucher be 
used for each type of commodity for which a claim is made. In the case 
of the disease situation in Virginia, compensation will be made for the 
poultry and for the costs of destruction and disposal of the poultry. 
In all other cases, the claim form approved by the Administrator can be 
used for claims for other eligible losses.
    The Administration is examining how the costs of program 
activities, including the payment of claims, are shared among the 
Federal government and cooperators such as State and local governments, 
industry, and producers. Hence, in the future, the payment rate 
provided under this rule may change.

Restocking of Premises

    We are providing in Sec.  53.7 that, in the case of LPAI related to 
the current disease situation in Virginia, premises that have contained 
poultry for which indemnity is paid under the provisions of this 
interim rule may not be restocked with poultry until at least 7 days 
following cleaning and disinfection of the premises, unless the 
Administrator determines that a shorter or longer period of time is 
adequate or necessary to protect new poultry against infection. 
Generally, we consider 7 days following cleaning and disinfection 
(which usually follows approximately 14 days after the removal of the 
poultry) to be a sufficient period of time for the elimination of any 
LPAI virus that might remain on the premises. However, in some cases it 
is possible it might not be entirely safe to restock a premises until 
more than 7 days following cleaning and disinfection, such as when 
poultry have not yet been removed from a premises contiguous to the 
premises that has been cleaned and disinfected, or when poultry litter 
is left in a barn that has been otherwise cleaned and disinfected. In 
such cases, an APHIS official will recommend to the Administrator that 
more than 7 days be required before restocking may occur. If on the 
other hand, owners or growers can demonstrate to the Administrator that 
less than a 7-day waiting period following cleaning and disinfection is 
sufficient to ensure that the virus has been eliminated, this interim 
rule allows the Administrator to approve such a shorter period.

Immediate Action

    The Administrator has determined that there is good cause for 
publishing this interim rule without prior opportunity for public 
comment. This rulemaking is necessary to allow contract growers, as 
well as owners, of poultry destroyed because of LPAI associated with a 
disease situation in Virginia to be compensated. The rulemaking is also 
necessary to allow the value of the poultry to be determined after 
destruction, and to specify how soon a premises that contained affected 
poultry may be restocked. These provisions are necessary to help 
control the disease in the United States.
    We will consider comments we receive during the comment period for 
this interim rule (see DATES above). After the comment period closes, 
we will publish another document in the Federal Register. The document 
will include a discussion of any comments we receive and any amendments 
we are making to the rule.

Executive Order 12866 and Regulatory Flexibility Act

    This rule has been reviewed under Executive Order 12866. The rule 
has been determined to be significant for the purposes of Executive 
Order 12866 and, therefore, has been reviewed by the Office of 
Management and Budget.
    Below is a summary of the economic analysis for the changes in 
indemnity with regard to low pathogenic avian influenza in Virginia 
contained in this document. The economic analysis provides a cost-
benefit analysis as required by Executive Order 12866 and an analysis 
of the potential economic effects on small entities as required by the 
Regulatory Flexibility Act. A copy of the full economic analysis is 
available for review at the location listed in the ADDRESSES section at 
the beginning of this document and at http://www.aphis.usda.gov/ppd/rad/avianecon.pdf.
    We do not have enough data for a comprehensive analysis of the 
economic effects of this interim rule on small entities. Therefore, in 
accordance with 5 U.S.C. 603, we have performed an initial regulatory 
flexibility analysis for this rule. We are inviting comments about this 
rule as it relates to small entities. In particular, we are interested 
in determining the number and kinds of small entities who may incur 
benefits or costs from implementation of this interim rule and the 
economic effect of those benefits or costs.

Authorization for Payment of Indemnity

    The Secretary of Agriculture is authorized to carry out operations 
and measures to detect, control, or eradicate any diseases affecting 
livestock (7 U.S.C. 8308). These measures include the payment of claims 
growing out of the destruction of animals, articles, and means of 
conveyance (7 U.S.C. 8308).
    Subject to available funding, this rule will permit compensation of 
up to 50 percent of the value of poultry destroyed because of LPAI 
associated with a disease situation in Virginia, plus 50 percent of the 
costs of the destruction and disposal of the poultry. It will allow 
both contract growers and owners to be compensated for losses, and for 
each contract grower to be compensated for 100 percent of his or her 
losses, up to the amount that the owner is eligible to receive before 
grower compensation is deducted. Language requiring appraisal before 
depopulation is amended to allow birds to be valued after

[[Page 67092]]

depopulation based on the age and type of birds. Finally, except in 
limited situations, the rule requires a 7-day waiting period following 
cleaning and disinfection before poultry houses may be restocked. A key 
issue in terms of benefits and distributional issues is compensation to 
growers.
    We consider it important to formalize provisions to share indemnity 
payments among poultry owners and poultry growers, both of whose 
productive assets are imbedded in the value of the birds. For example, 
an owner may own large numbers of birds located on several different 
farms where they are cared for by contract growers who provide the 
housing, equipment, labor, and other inputs. There is at present no 
formal requirement or procedure for assuring that the indemnity is 
properly shared with the contract grower, depending on the terms of the 
contractual arrangement. But if the owner does not pass on the proper 
amount to the grower, the grower loses costs committed to production 
when flocks under his or her care are depopulated.

Comparison of Baseline With This Rule

    The existing regulations provide that APHIS and the States will 
cooperate in controlling and eradicating disease. For most diseases, 
including LPAI, the regulations prior to this interim rule provided 
that APHIS may pay 50 percent of the costs of indemnity.
    In assessing the need for this interim rule, we identified the 
baseline and an alternative:
    1. The baseline option is to maintain the status quo, where State 
and industry efforts to control LPAI are supported by Federal technical 
assistance and by Federal compensation of up to 50 percent of the 
costs.
    2. The alternative provides for up to 50 percent Federal 
compensation and allows for both growers and owners to be compensated 
for economic losses arising from depopulation. It also allows growers 
to be fully compensated for their losses, provided that the amount for 
each grower does not exceed the amount that the owner of the poultry is 
eligible to receive before grower compensation is deducted. In 
addition, appraisal and restocking provisions are added.
    The baseline and the alternative differ with respect to three broad 
issues: (1) Distribution of compensation between owners and growers; 
(2) appraisal; and (3) restocking. The baseline and the alternative are 
alike in every respect except for the distribution of compensation paid 
by the Federal Government. In the baseline, the Federal Government pays 
all compensation to the owner and, in the alternative, the Federal 
Government pays compensation to the owner and the grower.

Alternative: 50 Percent Federal Compensation and Payment to Growers

    In this alternative, the key issue for comparison in terms of 
benefits and distributional issues is compensation of growers. APHIS is 
amending the regulations so that contract growers, as well as poultry 
owners, can be compensated for economic losses arising from 
depopulation.
    For contract growers, this is a significant change from the 
baseline and a benefit. Prior to this interim rule, the regulations 
have been interpreted to mean that the owner of the bird should receive 
the compensation. Owners own the bird and provide most of the physical 
inputs, such as feed, into production. The farmer--or contract grower 
who raises the bird--provides inputs such as labor, electricity, and 
housing. Embedded in the value of a bird at any point in time is the 
value of the physical inputs as well as the value of the farmer's labor 
and inputs. In the past, only one payment check was issued. It went to 
the owner who, depending on the terms of the contractual relationship, 
could compensate the grower or not.
    By targeting growers for indemnities, the Federal Government 
enhances the probability of rapid reporting by growers' agents who are 
in a position to quickly report a disease situation and thus enhances 
the likelihood of prompt eradication of the disease. In addition, this 
alternative will benefit poultry growers who could otherwise suffer 
uncompensated economic losses from participating in an eradication 
program. If growers are not compensated, any sunk mortgage, 
electricity, or labor costs a grower has invested in a flock are lost 
when the flock is depopulated. Some of these costs, such as mortgage 
costs, continue even if there are no poultry on the grower's premises.
    Language relating to appraisal is also being changed in this 
interim rule. This change is more of a clarification than a substantive 
change with pronounced economic effects. Language in the regulations 
prior to this interim rule required that poultry be appraised before 
being depopulated. However, appraisal per se is often an impracticable 
approach for valuing commercial poultry flocks that can number hundreds 
of thousands of birds in size. Using a standard value per bird 
calculated by age (or weight) and type of bird (meat turkey, meat 
broiler, or breeder turkey, for example) is often more reasonable and 
effective than appraisal. Further, it could be difficult or 
unproductive to hold infected birds pending appraisal, or impossible to 
appraise birds that have already been incinerated, buried, or otherwise 
disposed of.
    Finally, except in limited situations, the alternative requires a 
7-day waiting period after cleaning and disinfection before poultry 
houses may be restocked. The baseline regulation is silent on the issue 
of restocking. This is a new requirement that will impose costs on 
industry, primarily on the growers whose houses will remain idle during 
cleaning and disinfection and the waiting period after, but that will 
confer benefits on industry as a whole in terms of reduced likelihood 
of reinfection.

Chronology of the 2002 LPAI Situation in the Shenandoah Valley

    On April 1, 2002, the Virginia Department of Agriculture and 
Consumer Services (VDACS) confirmed that 20 flocks of birds in 4 
Shenandoah Valley, VA, counties were infected with LPAI. As of June 18, 
2002, 11 weeks later, 165 farms had been quarantined and roughly 4.7 
million birds had been depopulated. Turkey farms, raising both meat 
birds (126 farms) and breeder birds (26 farms), had been hardest hit, 
accounting for 152 of the affected premises. Six Virginia counties were 
affected, with the bulk of cases (142) reported in Rockingham County.

State Response

    To control spread of disease, VDACS has set up quarantines around 
farms, implemented mandatory pre-slaughter testing on all breeder 
birds, commercial turkeys and broilers, as well as mandatory testing of 
any flocks with respiratory symptoms. If a flock tests positive, 
officials quarantine the farm immediately and order the destruction of 
the flock within 24 hours if logistically possible. State and industry 
have collaborated on surveillance, depopulation, disposal and 
diagnostics.

Coordinated State and Federal Response

    Beginning April 15, 2002, a significant Federal component joined 
the State of Virginia in an effort to contain the spread of the 
disease. The joint Federal/State task force has collaborated on 
diagnosis and inspection, disposal, cleaning and disinfection, vector 
control, and disease surveillance.

The U.S. Poultry Industry

    The United States is the world's largest producer and exporter of 
poultry

[[Page 67093]]

meat. In 1999, the most recent year for which Economic Research Service 
(ERS) reports summarized data, U.S. poultry meat production totaled 
35.3 billion pounds, of which 83 percent was broiler meat, 15 percent 
was turkey meat, and 2 percent was other chicken meat. The total farm 
value of U.S. poultry production in 1999 was $22.4 billion. Broiler 
production accounts for the majority of the value at $15.1 billion, 
followed by eggs at $4.3 billion, turkey at $2.8 billion, and other 
chicken at $68 million.
    Broiler production is concentrated in a group of States stretching 
from Delaware, south along the Atlantic Coast to Georgia, then westward 
through Alabama, Mississippi, and Arkansas. In 1999, these States 
accounted for over 70 percent of broilers produced in the United 
States. The top broiler-producing States were: Georgia (1.24 billion 
head); Arkansas (1.2 billion head); Alabama (0.971 billion head); 
Mississippi (0.735 billion head); and North Carolina (0.674 billion 
head).
    U.S. turkey production in 1999 totaled 273 million birds with a 
combined live weight of 6.9 billion pounds. Production of turkey is 
somewhat more scattered geographically than broiler production. The top 
five turkey-producing States are North Carolina, Minnesota, Arkansas, 
Virginia, and California.
    The United States is the world's largest exporter of broilers. In 
1999, broiler exports totaled 4.920 billion pounds (17 percent of total 
production), valued at $1.4 billion. Demand for U.S. broiler products 
has fluctuated over the last several years due to changing economic 
conditions and currency exchange rates in the major exporting 
countries. In 1999, the largest importers of U.S. broiler products were 
Russia (including the Baltic countries) and China (including Hong 
Kong), which together accounted for 62 percent of total shipments of 
U.S. broiler products, on a quantity basis.
    The United States is also the world's largest exporter of turkey 
products. In 1999, U.S. turkey exports were 378 million pounds and were 
valued at $198 million. Only 11 percent of turkey exports were as whole 
birds, with the majority of shipments being lower-valued turkey parts 
or ground or mechanically deboned meat (MDM). Many importing countries 
mix ground or MDM turkey meat with other meats in sausage production.

Virginia Poultry Industry

    In 2000, Virginia was the fourth ranking turkey-producing State and 
the eighth ranking broiler-producing State. Virginia produced 25.5 
million turkeys (almost 10 percent of the U.S. total) valued at $238 
million, and 265 million commercial broilers valued at $441 million. 
Gross income from Virginia broilers, turkeys, and all other poultry 
totaled over $700 million in 2000. Virginia's poultry industry is 
concentrated in the Shenandoah Valley. A recent industry survey 
determined that of the 1,285 poultry farms in Virginia, 1,100 were 
located in the Shenandoah Valley, and all were contract growers.

Structure of the U.S. Poultry Industry

    Contract production dominates the Virginia and the U.S. chicken, 
turkey, and egg industry. Owners place poultry on farms, and the farmer 
(or contract grower) cares for the birds until they reach processing 
size (usually 6.5 weeks for broilers, and 17-24 weeks for turkeys). 
Typically the owner provides chicks, feed, veterinary supplies and 
services, management services, field personnel, and transportation for 
the birds to and from the farm. The grower provides labor, land and 
housing facilities, utilities, and other operating expenses, such as 
repairs and maintenance.
    Specific contract terms vary greatly from situation to situation. 
Farmers are compensated by owners at the end of the grow-out period. 
The compensation typically consists of three components: (1) A base 
payment (per-bird payment or a per-pound fee); (2) an incentive or 
performance payment to reward efficient producers; and (3) a disaster 
clause that may compensate the grower for losses resulting from natural 
disasters, such as flood, excessive heat, fire, or for damage or loss 
of potential production. Some contracts have provisions under which 
owners can compensate growers for losses arising from depopulation and 
others do not.

Compensation to Owners and Growers

    This interim rule will allow both owners and growers to be 
compensated for their losses arising from depopulation of birds 
affected with LPAI. When a bird is depopulated and an indemnity is paid 
solely to an owner who does not pass on a portion to the grower, the 
grower suffers uncompensated economic losses. The process of 
compensating growers and owners will have three separate steps: (1) 
Calculation of per bird payments by age and type of bird; (2) 
determination of how much of this payment should go to growers and how 
much to owners; and (3) development of procedures for paying growers 
and owners.
    In conjunction with industry, production experts, and poultry price 
specialists, the Department has developed reference tables that specify 
per bird indemnity payments based on the age and type of bird. Fair 
market values have been developed for breeder birds (breeder broilers, 
breeder turkey hens, and breeder turkey toms), for meat birds 
(broilers, hens, and toms), and for table egg layers (two table egg 
layer flocks have been depopulated) using appropriate methodologies. 
These tables are available in the full economic analysis for this rule, 
which is available for review at the location listed in the ADDRESSES 
section at the beginning of this document and at http://www.aphis.usda.gov/ppd/rad/avianecon.pdf.
    Because there is limited price information (the U.S. poultry 
industry is a vertically integrated industry with no markets for 
poultry at intermediate stages of development), it has been necessary 
to develop ``fair market values'' for meat birds depopulated prior to 
``grow-out'' and for breeder birds, which are not typically sold at 
intermediate stages of development. In brief, the approach that has 
been taken is to start with published wholesale prices for meat birds 
(broilers and turkeys) and work backwards. Transportation and 
processing costs are subtracted out to arrive at broiler and turkey 
values. Then production costs are subtracted to arrive at the value of 
the chick. Then hatchery costs are subtracted to determine the value of 
a fertile egg. The value of a fertile egg times the number of fertile 
eggs laid equals the gross value of a breeding bird. Gross value less 
egg production cost equals the net value of a breeding bird. The value 
of birds at less than slaughter weight is calculated by adjusting for 
the cost of feed not fed. For breeders in production, adjustment is 
made for fertile eggs already produced and, for breeders being raised, 
adjustment is made for feed not fed.

Compensation of Growers and Owners

    The Department has determined that, subject to available funding, 
growers may recoup 100 percent of their eligible costs regardless of 
the age at which the birds are depopulated, up to 50 percent of all 
eligible losses incurred by each owner (as determined before grower 
compensation is deducted) resulting from the destruction of poultry 
affected with the disease. Grower payments will be based on historical 
contract settlement sheets or historical amounts paid per bird by 
companies in the past. Subject to available funding, payments to owners 
will equal 50 percent of the

[[Page 67094]]

estimated value of the birds and the cost of destroying and disposing 
of the birds, minus grower compensation.

Cost-Benefit Analysis

    The final cost of this rule will depend on a number of factors, 
including the number, type, and age of birds depopulated; actual 
indemnity paid per bird; and other program costs. Given the provisions 
of this rule (a 50 percent compensation cap on total compensation to 
owners and growers, with growers being compensated up to 100 percent of 
their losses) and the depopulation numbers as of October 2, 2002, of 
4.74 million birds, the total compensation bill is estimated at $51 
million, with growers being compensated $13.9 million and owners being 
compensated $37.1 million.
    The groups that primarily benefit because of a disease eradication 
campaign include consumers and those owners and growers whose flocks 
have remained healthy. The groups that bear the primary burden of the 
eradication effort are the owners and growers whose flocks are 
depopulated. In addition to the value of lost production, the owners 
and growers of affected birds may also bear costs of cleanup, 
disinfection, transportation, foregone income, and other financial 
hardships.
    The benefits of this rule are not quantified, but are expected to 
significantly exceed the costs. They stem from the enhanced probability 
of rapid detection and prompt eradication of a disease situation. 
Benefits include: (1) Avoided owner and grower losses from disease 
morbidity and mortality; (2) avoided consumer price increases resulting 
from decreased supplies; and (3) avoided trade bans (State, regional, 
or national) that result when trading partners close markets because of 
disease. In addition by eradication of a disease situation of LPAI, we 
reduce the probability of the disease mutating into HPAI and spreading 
to densely populated poultry production areas on the eastern seaboard, 
which would have severe industry costs.
    Although a quantified cost-benefit analysis was not conducted for 
this disease situation, the full economic analysis for this rule does 
summarize an economic analysis by ERS of a 1983-1984 outbreak of HPAI 
that affected parts of Pennsylvania, New Jersey, Maryland, and 
Virginia. That analysis found that the program and indemnity costs were 
small compared to losses avoided (consumer losses from increased 
prices). That analysis found that program and indemnity costs were $55 
million ($98 million in 2002 dollars). If the outbreak had spread to 
the Delmarva Peninsula in Delaware, Maryland, and Virginia, consumer 
losses due to increased prices would have approached $492 million 
($882.2 million in 2002 dollars). If the outbreak had spread to the 
entire eastern seaboard, consumer losses due to increased prices would 
have approached $5.6 billion ($10.04 billion in 2002 dollars) in 
increased consumer prices for eggs, fowl, broilers, turkeys, pork, and 
beef. Although market conditions have changed from the time that 
analysis was conducted, and although the current disease situation 
differs from the 1983-1984 outbreak, we believe that the conclusion 
holds that benefits of this action will significantly outweigh costs. 
Please also note that the ERS estimates do not include any potential 
effects on trade. We believe that the avoidance of potential reductions 
in trade increases the benefits of this interim rule substantially.

Potential Effects on Small Entities

    To the extent that the interim rule contributes to the elimination 
of AI in Virginia, all affected entities should benefit over the long 
term. In the short term, however, the economic effects will vary.
    As of June 18, 2002, 163 Shenandoah Valley poultry farms in a six-
county area of Virginia were quarantined because of LPAI. Assuming the 
LPAI event remains localized in this area, 5 or 6 poultry companies/
integrators who own the affected poultry, and a minimum of 104 to a 
maximum of 1,100 contract growers could be affected by this rule. A 
minimum of 7 and maximum of 15 poultry processors could be affected by 
this rule. In addition, other entities not yet identified may be 
directly or indirectly affected by the disease situation and/or the 
interim rule.
    The poultry companies/integrators who own the birds are all large, 
vertically integrated concerns that do not meet the Small Business 
Administration (SBA) small-entity criteria. There are 1,100 contract 
poultry growers in the Shenandoah Valley. It is unclear at this time 
how many contract growers will be affected by this rule, or how many of 
them will qualify for consideration as small entities. The SBA defines 
small poultry operations as those earning gross per-farm receipts of no 
more than $750,000 annually.
    There were 15 poultry processing plants in the State of Virginia in 
1997. Seven of the processing plants were located in Rockingham and 
Shenandoah Counties. The SBA defines small poultry processing plants as 
those earning receipts of no more than $500,000 annually. It is unclear 
at this time how poultry processing plants will be affected by this 
rule. Census data for 1997 suggests that most of the processing plants 
would not qualify as small businesses because their average revenues 
exceed $100 million annually.

Reporting and Recordkeeping

    The reporting and recordkeeping requirements in this rule are 
discussed below under the heading ``Paperwork Reduction Act.''

Executive Order 12372

    This program/activity is listed in the Catalog of Federal Domestic 
Assistance under No. 10.025 and is subject to Executive Order 12372, 
which requires intergovernmental consultation with State and local 
officials. (See 7 CFR part 3015, subpart V.)

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule: (1) Preempts all State and local laws and 
regulations that are in conflict with this rule; (2) has no retroactive 
effect; and (3) does not require administrative proceedings before 
parties may file suit in court challenging this rule.

Paperwork Reduction Act

    In accordance with section 3507(j) of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501 et seq.), the information collection and 
recordkeeping requirements included in this interim rule have been 
submitted for emergency approval to the Office of Management and Budget 
(OMB). OMB has assigned control number 0579-0208 to the information 
collection and recordkeeping requirements.
    We plan to request continuation of that approval for 3 years. 
Please send written comments on the 3-year approval request to the 
following addresses: (1) Office of Information and Regulatory Affairs, 
OMB, Attention: Desk Officer for APHIS, Washington, DC 20503; and (2) 
Docket No. 02-048-1, Regulatory Analysis and Development, PPD, APHIS, 
Station 3C71, 4700 River Road Unit 118, Riverdale, MD 20737-1238. 
Please state that your comments refer to Docket No. 02-048-1 and send 
your comments within 60 days of publication of this rule.
    This interim rule amends the regulations in a way that will allow 
the Department to pay indemnity to contract growers and owners relating 
to poultry destroyed because of low pathogenic avian influenza 
associated with a disease situation in Virginia. The

[[Page 67095]]

Department may pay all eligible losses of a contract grower, up to the 
amount that the owner is eligible to receive before grower compensation 
is deducted, and up to 50 percent of eligible losses of owners, minus 
any amount paid to the contract grower of a flock. Implementing this 
program will require affected entities to complete an appraisal and 
indemnity claim form, its accompanying worksheet, and depopulation 
agreements. We are soliciting comments from the public (as well as 
affected agencies) concerning our information collection and 
recordkeeping requirements.
    These comments will help us:
    (1) Evaluate whether the information collection is necessary for 
the proper performance of our agency's functions, including whether the 
information will have practical utility;
    (2) Evaluate the accuracy of our estimate of the burden of the 
information collection, including the validity of the methodology and 
assumptions used;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the information collection on those who 
are to respond (such as through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses).
    Estimate of burden: Public reporting burden for this collection of 
information is estimated to average 1 hour per response.
    Respondents: Participating poultry owners and growers, APHIS 
accredited veterinarians, State animal health officials, and State 
personnel who perform appraisal work.
    Estimated annual number of respondents: 800.
    Estimated annual number of responses per respondent: 2.
    Estimated annual number of responses: 1,600.
    Estimated total annual burden on respondents: 1,600 hours.
    Copies of this information collection can be obtained from Mrs. 
Celeste Sickles, APHIS' Information Collection Coordinator, at (301) 
734-7477.

List of Subjects in 9 CFR Part 53

    Animal diseases, Indemnity payments, Livestock, Poultry and poultry 
products.

    Accordingly, we are amending 9 CFR part 53 as follows:

PART 53--FOOT-AND-MOUTH DISEASE, PLEUROPNEUMONIA, RINDERPEST, AND 
CERTAIN OTHER COMMUNICABLE DISEASES OF LIVESTOCK OR POULTRY

    1. The authority citation for part 53 is revised to read as 
follows:

    Authority: 7 U.S.C. 8303-8306, 8308, 8310, 8315; 7 CFR 2.22, 
2.80, and 371.4.


Sec.  53.2  [Amended]

    2. In Sec.  53.2, paragraph (b) is amended by adding, immediately 
after the phrase ``control and eradication of the disease, and'' the 
words '', except as provided in Sec.  53.11,'.

    3. In Sec.  53.4, paragraph (a) is revised, paragraph (b) is 
redesignated as paragraph (c), and a new paragraph (b) is added to read 
as follows:


Sec.  53.4  Destruction of animals.

    (a) Except as provided in paragraph (b) of this section, animals 
infected with or exposed to disease shall be killed promptly after 
appraisal and disposed of by burial or burning, unless otherwise 
specifically provided by the Administrator, at his or her discretion. 
In the case of animals depopulated due to infectious salmon anemia, 
salvageable fish may be sold for rendering, processing, or any other 
purpose approved by the Administrator. In the case of poultry 
depopulated because of low pathogenic avian influenza related to the 
2002 disease situation in Virginia associated with the H5 or H7 virus, 
poultry may be slaughtered and sold. The proceeds gained from the sale 
of the fish or poultry will be subtracted from any payment from APHIS 
for which the producer or owner is eligible under Sec.  53.2(b) or 
Sec.  53.11.
    (b) In the case of low pathogenic avian influenza related to a 2002 
disease situation in Virginia associated with the H5 or H7 virus, the 
value of poultry depopulated because of the disease may be calculated 
following destruction and disposal of the poultry, based on the number, 
type, and age of the animals destroyed.
* * * * *


Sec.  53.7  [Amended]

    4. Section 53.7 is amended by adding, immediately after the second 
sentence, the following sentence: ``In the case of low pathogenic avian 
influenza related to the 2002 disease situation in Virginia associated 
with the H5 or H7 virus, premises may not be restocked with poultry 
until at least 7 days following such cleaning and disinfection, unless 
the Administrator determines that a shorter or longer period of time is 
adequate or necessary to protect new poultry against infection.''

    5. Section 53.8 is revised to read as follows:


Sec.  53.8  Presentation of claims.

    (a) Except for claims made under Sec.  53.11, claims for the 
following must be presented to APHIS, through the inspector in charge, 
on a form approved by the Administrator:
    (1) Compensation for the value of animals;
    (2) The cost of burial, burning, or other disposition of animals;
    (3) The value of material destroyed; and
    (4) The expenses of destruction.
    (b) In the case of claims made under Sec.  53.11, claims for 
compensation for losses from poultry destroyed or to be destroyed must 
be presented to APHIS, through the inspector in charge, on a form 
approved by the Administrator, and the claim must specify the number, 
type, and age of the poultry.
    (c) To be considered by the Department, claims made under Sec.  
53.11 must be submitted to APHIS within 90 days after December 9, 2002 
or the destruction of the poultry, whichever is later.

(Approved by the Office of Management and Budget under control 
number 0579-0208)


    6. A new Sec.  53.11 is added to read as follows:


Sec.  53.11  Payments arising from low pathogenic avian influenza; 
conditions for payment.

    In the case of low pathogenic avian influenza related to a 2002 
disease situation in Virginia associated with the H5 or H7 virus, the 
Administrator may pay claims, subject to available funding, as follows:
    (a) For contract growers. The Administrator may pay a contract 
grower up to 100 percent of the losses identified in accordance with 
the LPAI compensation plan, up to the amount that the owner is eligible 
to receive before grower compensation is deducted.
    (b) For owners. The Administrator, in accordance with Sec.  53.4, 
may pay an owner up to 50 percent of the value of the poultry destroyed 
plus 50 percent of the costs of destruction and disposal of the 
poultry, in accordance with the LPAI compensation plan, minus the 
amount paid in accordance with paragraph (a) of this section to the 
contract grower of that poultry.
    (c) Conditions. Payments to be made in accordance with paragraph 
(a) or (b) of this section are conditioned on each claimant's complying 
with all

[[Page 67096]]

applicable requirements of this part and, additionally, agreeing to and 
complying with the specific conditions set forth in the ``Avian 
Influenza Depopulation Agreement'' regarding cleaning and disinfection, 
restocking, surveillance, and other disease prevention measures.

(Approved by the Office of Management and Budget under control 
number 0579-0208)


    Done in Washington, DC, this 30th day of October 2002.
Bill Hawks,
Under Secretary for Marketing and Regulatory Programs.
[FR Doc. 02-27988 Filed 10-30-02; 1:21 pm]
BILLING CODE 3410-34-P