[Federal Register Volume 69, Number 152 (Monday, August 9, 2004)]
[Proposed Rules]
[Pages 48166-48174]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18059]


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

  Federal Register / Vol. 69, No. 152 / Monday, August 9, 2004 / 
Proposed Rules  

[[Page 48166]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AB80


Common Crop Insurance Regulations; Nursery Crop Insurance 
Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Proposed rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes to 
amend the Nursery Crop Insurance Provisions to: Make container and 
field grown plants separate crops; provide coverage for plants in 
containers that are equal to or greater than 1 inch in diameter; 
provide separate basic units by share which will be further divided 
into basic units by plant type and a basic unit for all liners when 
additional coverage is purchased; offer one coverage level and price 
election for each basic unit when additional coverage is purchased; 
offer optional units by location for field grown plants; allow 
increases to the plant inventory value report if made on or before 
August 31st of the crop year; change the provision that precludes 
acceptance of an application for insurance for any current crop year 
after May 31st of the crop year; and make other policy changes to 
improve coverage of nursery plants. FCIC also proposes to amend the 
Nursery Peak Inventory Endorsement to reflect changes made in the 
Nursery Crop Provisions and add a new Rehabilitation Endorsement to 
provide a rehabilitation payment for field grown plants that will 
recover from an insured cause of loss. The intended effect of this 
action is to provide policy changes to better meet the needs of the 
insureds and to restrict the effect of the current Nursery Crop 
Insurance Provisions and Nursery Peak Inventory Endorsement to the 2005 
and prior crop years.

DATES: Written comments and opinions on this proposed rule will be 
accepted until close of business October 8, 2004, and will be 
considered when the rule is to be made final. The comment period for 
information collections under the Paperwork Reduction Act of 1995 
continues through October 8, 2004.

ADDRESSES: Interested persons are invited to submit written comments to 
the Director, Product Development Division, Federal Crop Insurance 
Corporation, United States Department of Agriculture, 6501 Beacon 
Drive, Stop 0812, Kansas City, MO 64133. Comments titled Nursery Crop 
Insurance Provisions may be sent via the Internet to 
[email protected], or the Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting 
comments. A copy of each response will be available for public 
inspection and copying from 7 a.m. to 4:30 p.m., c.s.t., Monday through 
Friday, except holidays, at the above address.

FOR FURTHER INFORMATION CONTACT: Stephen Hoy, Risk Management 
Specialist, Research and Development, Product Development Division, 
Federal Crop Insurance Corporation, at the Kansas City, MO, address 
listed above, telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

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

Cost-Benefit Analysis

    A Cost-Benefit Analysis has been completed and is available to 
interested persons at the Kansas City address listed above. In summary, 
the analysis finds that the expected benefits associated with this 
proposed rule outweigh costs to the government. The Nursery Policy 
changes, as proposed, would stimulate sales and encourage nursery 
growers to purchase buy-up coverage.
    Government outlays were calculated based on, what were considered 
to be, the four most significant changes: (1) Insurability of plants in 
containers between 1 inch and 3 inches in diameter; (2) extension of 
the date for acceptance of an application for insurance; (3) extension 
of the date for acceptance of a revised plant inventory value report; 
and (4) addition of a Rehabilitation Endorsement. Under the most likely 
scenario, these proposed policy changes would increase government 
outlays by approximately 11.2 million dollars and would result in 
approximately 505 million dollars of increased liability to nursery 
growers.
    Few problems are expected in servicing insurance policies and data 
reporting systems due to the changes in this proposed rule.

Paperwork Reduction Act of 1995

    In accordance with section 3507(j) of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501), the information collection and record keeping 
requirements included in the proposed rule have been submitted for 
approval to the Office of Management and Budget (OMB). Please send your 
written comments to the Office of Information and Regulatory Affairs, 
OMB, Attention: Desk Officer for RMA, Washington, DC 20503. A comment 
to OMB is best assured of having its full effect if OMB receives it 
within 30 days of publication of this proposed rule.
    We are soliciting comments from the public concerning our proposed 
information collection and record keeping requirements. We need this 
outside input to help us:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information has practical utility;
    (2) Evaluate the accuracy of our estimate of the burden of the 
proposed collection of information, 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 collection of information 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 responses.)
    The collections of information for this rule revise the Multiple 
Peril Crop Insurance Collections of Information 0563-0053, which expire 
February 28, 2005.
    Title: Multiple Peril Crop Insurance (Nursery).

[[Page 48167]]

    Abstract: This rule amends the Common Crop Insurance Regulations (7 
CFR part 457) by revising the Nursery Crop Insurance Provisions (7 CFR 
457.162) and the Nursery Peak Inventory Endorsement (7 CFR 457.163) and 
by adding a new Nursery Rehabilitation Endorsement at (7 CFR 457.164).
    The Nursery Crop Insurance Provisions are revised to: (1) Make 
container and field grown plants separate crops; (2) provide coverage 
for plants in containers that are equal to or greater than 1 inch in 
diameter; (3) provide separate basic units by share which will be 
further divided into basic units by plant type and a basic unit for all 
liners when additional coverage is purchased; (4) offer one coverage 
level and price election for each basic unit when additional coverage 
is purchased; (5) offer optional units by location for field grown 
plants; (6) allow increases to the plant inventory value report if made 
on or before August 31st of the crop year; (7) change the provision 
that precludes acceptance of an application for insurance for any 
current crop year after May 31st of the crop year; and (8) make other 
policy changes to improve coverage of nursery plants.
    The Nursery Peak Inventory Endorsement is revised to reflect 
changes made in the Nursery Crop Provisions and clarify calculation of 
premium.
    A new Nursery Rehabilitation Endorsement is added to provide a 
rehabilitation payment for field grown plants that are damaged by an 
insured cause of loss but will recover.
    Purpose: The purpose of this proposed rule is to provide policy 
changes to better meet the needs of insureds and to restrict the 
effects of the current Nursery Crop Insurance Provisions and Nursery 
Peak Inventory Endorsement to the 2005 and prior crop years.
    Burden statement: The information that FCIC collects will be used 
in offering crop insurance coverage, determining program eligibility, 
establishing an amount of insurance, calculating losses qualifying for 
a payment, combating fraud, waste, and abuse, etc. The burden hours 
have increased because FCIC assumes more producers will obtain crop 
insurance coverage to help protect their investments against risk and 
producers will be required to provide more documentation and records 
and notify the insurance provider more often.
    Estimate of Burden: We estimate that it will take the producer and 
the insurance provider, including the agent, an average of 1.9 hours to 
provide the required information.
    Respondents: Producers and insurance providers including their 
agents.
    Estimated annual number of respondents: 3,886.
    Estimated annual number of responses per respondent: 6.2.
    Estimated annual number of responses: 24,096.
    Estimated total annual burden on respondents: The total public 
burden for this proposed rule is estimated at 7,313 hours.
    Record keeping requirements: FCIC requires complete records of 
shipping, sale, or other disposition of all the insured crop on the 
unit for three years after the end of the crop year. However, these 
records are retained as part of the normal business practice and FCIC's 
requirement does not place additional burden on insured producers. 
Therefore, FCIC is not estimating burden related to this record keeping 
requirement.

Unfunded Mandates Reform Act of 1995

    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 and the private sector. This rule contains no Federal 
mandates (under the regulatory provisions of title II of 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 
UMRA.

Executive Order 13132

    The policies contained in this rule do not have a substantial 
direct effect on States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States is not required.

Regulatory Flexibility Act

    FCIC certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. Program 
requirements for the Federal crop insurance program are the same for 
all producers regardless of the size of their farming operation. For 
instance, all producers are required to submit an application and 
acreage report to establish their insurance guarantees, and compute 
premium amounts, or a notice of loss and production information to 
determine an indemnity payment in the event of an insured cause of crop 
loss. Whether a producer has 10 acres or 1000 acres, there is no 
difference in the kind of information collected. To ensure crop 
insurance is available to small entities, the Federal Crop Insurance 
Act authorizes FCIC to waive collection of administrative fees from 
limited resource farmers. FCIC believes this waiver helps to ensure 
small entities are given the same opportunities to manage their risks 
through the use of crop insurance. A Regulatory Flexibility Analysis 
has not been prepared since this regulation does not have an impact on 
small entities, and, therefore, this regulation is exempt from the 
provisions of the Regulatory Flexibility Act (5 U.S.C. 605).

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order 12372

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

Executive Order 12988

    This proposed rule has been reviewed in accordance with Executive 
Order 12988 on civil justice reform. The provisions of this rule will 
not have a retroactive effect. This rule will preempt State and local 
laws to the extent such State and local laws are inconsistent herewith. 
If FCIC takes any specific action under this policy, the administrative 
appeal provisions published at 7 CFR part 11 must be exhausted before 
any action for judicial review of any determination made by FCIC may be 
brought.

Environmental Evaluation

    This action is not expected to have a significant economic impact 
on the quality of the human environment, health, and safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

Background

    FCIC proposes to amend the Common Crop Insurance Regulations (7 CFR 
part 457) by revising 7 CFR 457.162 (Nursery crop insurance provisions) 
and 7 CFR 457.163 (Nursery peak inventory endorsement) and adding a new 
Nursery rehabilitation endorsement at 7 CFR

[[Page 48168]]

457.164. The provisions will be effective for the 2006 and succeeding 
crop years. The changes to the provisions for insuring nursery 
production are as follows:

Section 457.162 Nursery Crop Insurance Provisions

    1. Definitions of ``American Standard for Nursery Stock,'' 
``container grown,'' ``crop value,'' ``fabric grow bag,'' ``FCIC,'' 
``good nursery practices,'' ``liners,'' ``monthly proration factors,'' 
``nursery crop,'' ``nursery plants,'' ``survival factor,'' and 
``wholesale'' are added for clarification. The definitions of ``amount 
of insurance,'' ``occurrence deductible,'' and ``under report factor'' 
are revised to reflect the removal of the term ``practice.'' The 
definition of ``under report factor'' is also revised to exclude any 
payments made under the Rehabilitation Endorsement when subtracting 
previous losses from the crop value. The definition of ``practice 
value'' is renamed ``basic unit value'' because container grown plants 
and field grown plants are separate insurable crops and not a separate 
practice. The definition of ``field grown'' is revised to clarify that 
in-ground fabric grow bags and balled and burlapping are not artificial 
root containment devices and plants grown in containers that allow the 
plants to root in the ground are considered field grown. The 
definitions of ``field market value A'' and ``field market value C'' 
are revised to clarify that the total number of liner plants applicable 
to each insurable plant and price listed in the Eligible Plant List is 
multiplied by the survival factor for liners. The definition of ``field 
market value C'' is also revised to specify that the value is based on 
the insurable plants within the crop immediately prior to the 
occurrence of any loss. The definition of ``in-ground fabric bag'' is 
removed because it has been combined with the definition of ``fabric 
grow bag.'' The definition of ``plant price schedule'' is revised to 
clarify that the schedule is an actuarial document. The definition of 
``practice'' is removed because container grown plants and field grown 
plants are separate crops and no longer separate practices. The 
definition of ``standard nursery containers'' is revised to clarify 
that fabric grow bags are insurable containers and to provide 
insurability for plants in containers that are equal to or greater than 
1 inch (reduced from 3 inches) in diameter at the widest point of the 
container interior to allow most liners to be insurable. Trays that 
contain 288 or fewer cells will be considered standard nursery 
containers.
    2. Section 2(a)--Remove provisions that provide basic units by 
container grown and field grown practices because container grown 
plants and field grown plants will be insured as separate crops and not 
practices. New provisions are added to allow basic units by share to be 
further divided into additional basic units for additional coverage 
policies by: (1) Plant type, if the plants are not liners, and (2) all 
insurable liners. Producers with catastrophic risk protection (CAT) 
coverage will continue to be limited to basic units by share. 
Provisions relating a basic unit structure's relationship to an 
optional unit structure are moved to section 2(b).
    3. Section 2(b)--Clarify that the basic unit will be used to 
establish the amount of insurance, crop year deductible, premium, and 
the total amount of indemnity payable under the policy. The insured 
will be subject to the under report factor if, at the time of loss, the 
aggregate value of the plants in all basic units exceeds the ``crop 
value.'' Provisions that provide optional units by plant type are 
removed because plant types will now be insured as separate basic 
units. Provisions for optional unit division are moved to section 2(d).
    4. Section 2(c)--Clarify that the listed plant types are insurable. 
The reference to ``Other plant types listed in the Special Provisions'' 
is removed as an insurable type because the listed types cover all 
wholesale nursery plants, so reference to ``other types'' is not 
necessary.
    5. Add a new section 2(d), and redesignate the following section, 
to provide optional units for field grown plants if each optional unit 
is located on non-contiguous land. Optional units are limited to field 
grown plants to avoid the potential for shifting of container grown 
plants between growing locations to facilitate losses.
    6. Section 3(b)--Revise the provisions to allow insureds with 
additional coverage to select a single price election and coverage 
level for each basic unit (plant type) under their nursery crop. 
Insureds who select CAT coverage for one plant type or for liners must 
select CAT coverage for all plant types and all liners. The ability to 
select a single price election and coverage level for each plant type 
will allow insureds, who have purchased additional coverage, to 
structure their amount of coverage based on the perceived risk 
associated with each plant type.
    A contract was recently awarded by RMA to evaluate the need for 
premium rate adjustments to reflect the additional risks associated 
with this change and the other proposed changes contained in this rule. 
RMA is aware that potential risks may vary by plant type. Based on the 
results of the contracted study and other available information, RMA 
anticipates that it will be necessary to initially apply a surcharge to 
the current premium rates to reflect these risk variations. As data are 
collected, RMA will continue to make premium rate adjustments based on 
actual insurance experience. Public comments related to risk 
variability by plant type and subsequent premium rate adjustments are 
welcomed. RMA will not publish a final rule prior to completion of the 
contracted study.
    7. Add a new section 3(c), and redesignate the following sections, 
to clarify that changes to the price election and coverage level will 
not be made after the date of application for new policies and after 
September 30th for carryover policies. The sales closing date is 
removed to allow applications for coverage to be submitted throughout 
the crop year. Premium will be prorated based on the number of months 
insured during the crop year.
    8. Add a new section 3(f) to clarify that for subsequent crop 
years, following the year of application, if the insured increases the 
coverage level or price election on a basic unit, coverage will attach 
to the unit the later of October 1st or 30 days after the date the 
request is submitted unless the increase is rejected.
    9. Section 6(b)--Revise this section to now require all producers 
to submit a plant inventory value report each crop year by September 
1st prior to the start of the crop year. The insured's policy will be 
canceled for the subsequent crop year if a plant inventory value report 
is not submitted by September 1st. This change is necessary because the 
inventory values of most nursery growers change from one crop year to 
the next. Therefore, reporting is required for each crop year to 
accurately establish coverage and premium amount of each insured. If an 
insured's policy is canceled due to failure to provide a plant 
inventory value report, the insured may still submit a new application 
for coverage for the crop year for which the policy was canceled. 
Coverage will attach 30 days after the date the crop insurance agent 
receives the application and plant inventory value report, unless the 
insurance provider determines the inventory is not acceptable.
    10. Section 6(c)--Change the term ``practice value'' to ``basic 
unit value'' since the term ``practice'' is no longer applicable. 
Clarify that failure to provide requested documentation on the plant 
inventory value report will result in denial of insurance, and 
misreporting on the plant inventory value report will

[[Page 48169]]

result in denial of an indemnity for the crop year although full 
premium will still be owed. The requirement that producers with CAT 
level policies report previous plant sales on their plant inventory 
value report is removed. Documentation of previous plant sales is no 
longer required because coverage is based on the value of insurable 
plants declared on the insured's plant inventory value report and is 
not restricted to limitations over previous years' sales.
    11. Section 6(e)--Clarify that the price for each plant and size 
listed on the insured's plant inventory value report is the lower of 
the Plant Price Schedule price or the lowest wholesale price listed in 
the insured's nursery catalog or price list. The amount of assumed 
liability is not in excess of plant values contained in the Plant Price 
Schedule.
    12. Add a new section 6(f), and redesignate the following sections, 
to clarify that prices for insurable plants that are damaged prior to 
the attachment of insurance coverage will be reduced for inventory 
reporting purposes to reflect their true values.
    13. Redesignated section 6(g)--Change the final plant inventory 
value report revision date from May 31st to on or before August 31st to 
allow the report to be increased throughout the crop year. A new 
provision is added to clarify that an inspection is required if the 
plant inventory value is increased 50 percent or more of the previous 
value on a policy basis.
    14. Redesignated section 6(h)--Change ``practice value'' to ``basic 
unit value'' since the term ``practice'' is no longer applicable.
    15. Redesignated section 6(i)--Remove the limitations for 
catastrophic insurance coverage that specify a producer's plant 
inventory value cannot exceed the lesser of the actual value based on 
prices contained in the Plant Price Schedule or 150 percent of previous 
years' sales for container grown plants or 250 percent of previous 
years' sales for field grown plants unless a waiver is received. 
Although a waiver is no longer required, the report must accurately 
reflect insurable plant inventory and valuations based on the lower of 
the Plant Price Schedule price or the lowest wholesale price listed in 
the insured's catalog or price list. Insureds with catastrophic risk 
protection coverage or additional coverage are still permitted to 
increase their plant inventory value during the crop year, subject to 
company approval, by submitting a revised plant inventory value report. 
New provisions are added to clarify that a plant in an oversized 
container will be valued as if the plant was in an appropriate sized 
container and each cell in a multiple cell container is considered a 
separate container for insurability and valuation purposes.
    16. Add a new section 6(j) to incorporate into the nursery policy 
that two copies of the insured's most recent wholesale catalog or price 
list, that are in accordance with stated requirements, must be 
submitted at the time of application and on or before September 1st for 
each crop year following the year of application. Catalogs from each 
insured nursery are required to establish insurable plant prices in the 
event of a loss and to update the Plant Price Schedule each crop year. 
This requirement was previously in the Special Provisions. Failure to 
provide the wholesale catalog or price list, or if they are not in 
accordance with FCIC procedure, will result in no indemnity being due 
for the crop year.
    17. Section 7(a)--Clarify that premium is determined by multiplying 
the amount of insurance by the appropriate premium rate and the monthly 
proration factor contained in the actuarial documents.
    18. Add a new section 7(c), and redesignate the following section, 
to specify that the insured's premium amount is due and must be paid at 
the time of application if the application for the crop year is 
received on or after July 1st of that same crop year. This is the same 
date that premium is due for all other nursery policies. Failure to pay 
the premium at the time of application, if the application is received 
on or after July 1st, will result in no insurance coverage for the crop 
year.
    19. Section 8--Clarify in the introductory paragraph that the 
insured nursery plant inventory is all the nursery plants in the county 
for each nursery crop insured since container grown and field grown are 
now considered as separate crops.
    20. Section 8(i)--Clarify that plants being grown solely for 
harvest of buds, flowers, or greenery are not insurable under the 
Nursery Crop Provisions.
    21. Section 8(j)--Revise the provision to allow harvest of fruits 
or nuts provided the plants are primarily intended for sale while in 
the nursery. The removal of fruits or nuts from nursery plants does not 
adversely affect plant values. Therefore, insurability should not be 
restricted if the plants are being grown primarily for sale.
    22. Section 9(a)--Remove the requirement that an application for 
insurance must be submitted on or before May 31st for coverage to 
attach during the current crop year. This change provides insureds with 
greater control over their risk management plan by allowing crop 
insurance coverage to be purchased throughout the entire crop year. 
Since there is a 30 day waiting period before coverage begins, if an 
application is received after August 31, coverage will not begin until 
the following crop year. Provisions pertaining to coverage for the 1999 
crop year are no longer applicable and are removed.
    23. Remove section 10(a)(7) because it provided insurance coverage 
for a delay in marketability which was vague and open to 
interpretation. In addition, section 10(a) specifies causes of loss on 
which insurance coverage is provided. Marketing impacts are a result 
rather than a cause of loss. Therefore, the provision addressing 
coverage of loss in plant value due to marketing ability is moved to 
new section 10(b).
    24. Add a new section 10(b), and redesignate the following 
sections, to provide coverage for loss in plant values because of an 
inability to market plants, if such plants would have been marketed 
during the crop year, due to an insured cause of loss that occurs 
within the insurance period. Changing the coverage criteria from 
delayed marketing to inability to market provides a more definitive 
guideline for coverage of plant valuations based on marketing ability. 
Delayed marketing can result in highly variable plant valuations that 
may be difficult to determine accurately. Inability to market can be 
ascertained more accurately and generally results in plants having 
little or no value.
    25. Redesignated section 10(c)--Clarify that insurance is not 
provided against causes of loss specified in sections 12(a) and (c) 
through (e) of the Basic Provisions. Section 12(b) of the Basic 
Provisions excludes insurability of a loss due to failure to follow 
``good farming practices.'' However, these Nursery crop insurance 
provisions use the term ``good nursery practices'' in lieu of the term 
``good farming practices.''
    26. Redesignated section 10(c)(3)--Clarify that insurance is not 
provided against any loss caused by the inability to market the nursery 
plant as a result of a refusal of a buyer to accept production, 
boycott, or an order from a public official prohibiting sales including 
but not limited to, a stop sales order, quarantine, or phytosanitary 
restriction on sales.
    27. Redesignated section 10(c)(6)--Revise the provision to clarify 
that no cause of loss will be covered if the damage suffered is only a 
failure of the plants to grow to an expected size. The reference to 
drought in this provision

[[Page 48170]]

was confusing because nursery plants must be irrigated unless the 
Special Provisions allow coverage of non-irrigated, field grown plants.
    28. Add a new section 10(c)(7) to clarify that failure to follow 
recognized good nursery practices is not a covered cause of loss.
    29. Section 11(a)(2)--Clarify that submission of a claim for 
indemnity may be waived if final loss adjustment is partially or 
totally deferred because the adjuster cannot make an accurate 
determination of amount of damage to the insured plants and what will 
occur if the claim is deferred. A deferred claim may be required to 
allow nursery plants to go through a dormancy period followed by a 
period of growth. The deferral period will result in more precise 
information on both the severity and amount of damage thereby improving 
the accuracy of the loss adjustment process.
    30. Section 12(g)--Revise the provision to specify that the total 
of all indemnities and rehabilitation payments cannot exceed the amount 
of insurance, including any peak amount of insurance during the 
coverage term of the Peak Inventory Endorsement, to ensure that the 
total amounts paid in any crop year do not exceed the value of the 
insurable plants.

Section 457.163 Nursery Peak Inventory Endorsement

    1. The definition of ``peak amount of insurance'' is revised to 
coincide with the change that allows insureds with additional coverage 
to select a single coverage level and price election for each basic 
unit (i.e. for each plant type and for all liners) in the Nursery Crop 
Provisions. A definition of ``premium adjustment factor'' is added to 
clarify calculation of the factor.
    2. Section 2(b)--Revise the provision to remove the term 
``limited'' because all coverage in excess of catastrophic risk 
protection is now termed ``additional coverage.''
    3. Section 2(d)--Revise the provision to reflect the removal of the 
term ``practice'' and clarify that an additional Peak Inventory 
Endorsement may be purchased after each insured loss if the nursery is 
restocked.
    4. Add a new section 3(c) to clarify that a Peak Inventory 
Endorsement can only be used to temporarily increase the value reported 
on the insured's initial or revised plant inventory value report for 
the crop year and cannot be used in lieu of a revised plant inventory 
value report to provide coverage of insurable plants that are added 
because of physical expansion of the nursery facilities (e.g. a newly 
acquired structure or location).
    5. Section 5(a)--Clarify that the premium for this endorsement is 
calculated by multiplying the peak amount of insurance by the 
appropriate premium rate and the premium adjustment factor. An example 
of a Peak Inventory Endorsement premium calculation is added for 
clarity.
    6. Section 7--Change ``practice value'' to ``basic unit value'' 
since the term ``practice'' is no longer applicable.

Section 457.164 Nursery Rehabilitation Endorsement

    This endorsement provides a rehabilitation payment for field grown 
plants that are damaged by an insured cause of loss but will recover to 
their pre-damaged stage of growth if appropriate rehabilitation 
measures are taken (i.e. pruning and setup) and rehabilitation costs 
equal or exceed the established trigger amount. Nursery growers who 
purchase the endorsement, have insurable plant damage, and qualify for 
a rehabilitation payment have an incentive to take necessary procedures 
to enhance the recovery and subsequent value of damaged plants. This 
payment will be the lesser of the actual cost of rehabilitation of the 
insurable damaged plants or 7.5 percent of the value (based on the 
lower of the Plant Price Schedule price or the lowest wholesale price 
listed in the insured's nursery catalog or price list) of all 
insurable, rehabilitated plants in each basic or optional unit at the 
time damage occurred, multiplied by the under report factor, multiplied 
by the coverage level, multiplied by the price election, and multiplied 
by the share. Based on reported rehabilitation costs of field grown 
material, calculation of the rehabilitation payment using 7.5 percent 
of the value of the insurable damaged plants is an approximation of 
such costs. Actual costs incurred by growers during the rehabilitation 
process must be verifiable through receipts and records.

List of Subjects in 7 CFR Part 457

    Crop insurance, Nursery.

Proposed Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation proposes to amend 7 CFR part 457 the Common Crop 
Insurance Regulations effective for the 2006 and succeeding crop years, 
to read as follows:

PART 457--COMMON CROP INSURANCE REGULATIONS;

    1. The authority citation for 7 CFR part 457 continues to read as 
follows:

    Authority: 7 U.S.C. 1506(l), 1506(p).

    2. Section 457.162 is amended as follows:
    a. Revise the first sentence of the introductory text.
    b. In section 1, remove the definitions of ``In-ground fabric 
bag,'' ``practice value'' and ``practice;'' add definitions of 
``American Standard for Nursery Stock,'' ``basic unit value,'' 
``container grown,'' ``crop value,'' ``fabric grow bag,'' ``FCIC,'' 
``good nursery practices,'' ``liners,'' ``monthly proration factors,'' 
``nursery crop,'' ``nursery plants,'' ``survival factor'' and 
``wholesale;'' and revise the definitions of ``amount of insurance,'' 
``field grown,'' ``field market value A,'' ``field market value C,'' 
``occurrence deductible,'' ``plant price schedule,'' ``standard nursery 
containers,'' and ``under report factor.''
    c. Revise section 2.
    d. Revise section 3(b).
    e. In section 3 redesignate paragraphs (c) and (d) as paragraphs 
(d) and (e) respectively.
    f. Add new sections 3(c) and (f).
    g. In section 6 redesignate paragraphs (f), (g), and (h) as 
paragraphs (g), (h), and (i) respectively.
    h. Revise sections 6(b), (c), (e), and newly redesignated 
paragraphs (g), (h), and (i).
    i. Add a new section 6(f).
    j. Add a new section 6(j).
    k. Revise section 7(a).
    l. Redesignate section 7 paragraph (c) as paragraph (d).
    m. Add a new section 7(c).
    n. Revise the introductory paragraph of section 8.
    o. Revise section 8(i) and (j).
    p. Revise section 9(a).
    q. Remove section 10(a)(7).
    r. Redesignate section 10(b) as 10(c).
    s. Add a new section 10(b).
    t. Revise newly redesignated section 10(c) introductory text and 
paragraphs (3), (6), and add paragraph (7).
    u. Revise section 11(a)(2).
    v. Revise section 12(g).
    The revisions and additions to Sec.  457.162 read as follows:


Sec.  457.162  Nursery Crop Insurance Provisions.

    The Nursery Crop Insurance Provisions for the 2006 and succeeding 
crop years are as follows:
* * * * *
    1. Definitions.
* * * * *
    American Standard for Nursery Stock. A publication of the American 
Association of Nurserymen issued in accordance with the rules of the 
American National Standards Institute, Inc. that provides common 
terminology and standards for nurseries.

[[Page 48171]]

    Amount of insurance. For each basic unit, your basic unit value is 
multiplied by the coverage level percentage you elect, multiplied by 
your price election, and multiplied by your share.
    Basic unit value. The full value of all insurable plants in each 
basic unit on your plant inventory value report including any revision 
that increases the value of your insurable plant inventory.
    Container grown. Nursery plants planted and grown in standard 
nursery containers. Nursery plants in standard nursery containers that 
are placed in the ground, either directly or when placed in pots in the 
ground (i.e. pot-in-pot), are considered as container grown plants.
    Crop value. The sum of all basic unit values for the crop reported 
on all plant inventory value reports, including any revised reports and 
any peak inventory value reports during the coverage term of the Peak 
Inventory Endorsement.
* * * * *
    Fabric grow bag. (root control bag) A fabric bag, including a woven 
or matted bag, with a plastic or fabric bottom, used for growing woody 
plants in-ground or as an above-ground nursery plant container, that 
provides adequate drainage and is appropriate in size for the plant.
    FCIC. The Federal Crop Insurance Corporation, a wholly owned 
corporation within the USDA, or a successor agency.
    Field grown. Nursery plants planted and grown in the ground without 
the use of an artificial root containment device. In-ground fabric grow 
bags and balled and burlapping are not considered artificial root 
containment devices. Plants that are grown in the field in containers 
that allow the plants to root into the ground (for example, a container 
without a bottom) are also considered field grown.
    Field market value A. The value of undamaged insurable plants, 
based on the prices contained in the Plant Price Schedule, in the basic 
or optional unit, as applicable, immediately prior to the occurrence of 
any loss as determined by our appraisal. This allows the amount of 
insurance under the policy to be divided among the individual units in 
accordance with the actual value of the plants in the unit at the time 
of loss for the purpose of determining whether you are entitled to an 
indemnity for insured losses in the optional or basic unit, as 
applicable. The total value of undamaged liners is multiplied by the 
survival factor for the purpose of determining the value of undamaged 
insurable plants.
* * * * *
    Field market value C. The value of undamaged insurable plants, 
based on the prices contained in the Plant Price Schedule for insurable 
plants within the crop immediately prior to the occurrence of any loss 
as determined by our appraisal. This value is used to calculate the 
actual value of the plants in the crop at the time of loss to ensure 
that you have not under reported your plant values. The total value of 
undamaged liners is multiplied by the survival factor for the purpose 
of determining the value of undamaged insurable plants.
    Good nursery practices. In lieu of the definition of ``good farming 
practices'' contained in section 1 of the Basic Provisions, the 
horticultural practices generally in use in the county for nursery 
plants to make normal progress toward the stage of growth at which 
marketing can occur and generally recognized by agricultural experts 
for the area as compatible with the nursery plant production practices 
and weather conditions in the county. We may, or you may request us to, 
contact FCIC to determine whether or not production methods will be 
considered to be ``good nursery practices.''
* * * * *
    Liners. Plants produced in standard nursery containers that are 
equal to or greater than 1 inch, including trays containing 288 or 
fewer individual cells, but less than 3 inches in diameter at the 
widest point of the container or cell interior, have an established 
root system reaching the sides of the containers, are able to maintain 
a firm root ball when lifted from the containers, and meet all other 
conditions specified in the Special Provisions.
* * * * *
    Monthly proration factors. Factors contained in the actuarial 
documents that are used to calculate premium when you do not insure the 
nursery plants for the entire crop year.
* * * * *
    Nursery crop. All eligible nursery plants:
    (1) Grown in standard nursery containers; or
    (2) Field grown.
    Nursery plants. Plants grown in wholesale nurseries.
    Occurrence deductible. (1) This deductible allows a smaller 
deductible than the crop year deductible to be used when:
    (i) Inventory values are less than the reported basic unit value; 
or
    (ii) You elected optional units, if applicable.
    (2) The occurrence deductible is the lesser of:
    (i) The deductible percentage multiplied by field market value A 
multiplied by the under report factor; or
    (ii) The crop year deductible.
    Plant price schedule. A schedule of insurable plant prices 
published by FCIC in the actuarial documents in electronic format that 
establishes the value of undamaged insurable plants and the maximum 
amount we will pay for damaged insurable plants. A paper copy is 
available from your crop insurance agent.
* * * * *
    Standard nursery containers. Rigid containers not less than 1 inch 
in diameter at the widest point of the container interior, including 
trays that contain 288 or fewer individual cells, above-ground fabric 
grow bags, and other types of containers specified in the Special 
Provisions that are appropriate in size and provide adequate drainage 
that is appropriate for the plant. In-ground fabric grow bags, burlap, 
and trays (flats) without individual cells are not considered standard 
nursery containers.
* * * * *
    Survival factor. A factor shown on the actuarial documents that 
specifies the expected percentage of liners that normally survive the 
period from insurance attachment to market.
    Under report factor. The factor that adjusts your indemnity for 
under reporting of inventory values. The factor is always used in 
determining indemnities. For each crop, the under report factor is the 
lesser of: 1.000; or the crop value minus the total of all previous 
losses, as adjusted by any previous under report factor, divided by 
field market value C. Payments made under the Rehabilitation 
Endorsement will not be considered a previous loss when calculating the 
under report factor.
    Wholesale. To sell:
    (a) In large quantities;
    (b) at a price below that offered on low-quantity sales; and
    (c) to retailers or commercial users or other end-users for 
business purposes (e.g., sales to landscape contractors and commercial 
fruit producers.)
    2. Unit Division.
    (a) If you elect additional coverage, a basic unit, as defined in 
section 1 of the Basic Provisions, will be divided into additional 
basic units by:
    (1) Each insurable plant type designated in section 2(c) if the 
plants are not liners; and
    (2) All insurable liners (inclusive of all insurable plant types).
    (b) Although the basic unit may be divided into optional units in

[[Page 48172]]

accordance with section 2(d), the basic unit will be used to establish 
the amount of insurance, crop year deductible, premium, and the total 
amount of indemnity payable under this policy. If, at the time of loss, 
the aggregate value of the plants in all your basic units exceeds your 
crop value, you will be subject to the under report factor.
    (c) Only the following plant types contained on the eligible plant 
list are insurable:
    (1) Deciduous Trees (Shade and Flower);
    (2) Broad-leaf Evergreen Trees;
    (3) Coniferous Evergreen Trees;
    (4) Fruit and Nut Trees;
    (5) Deciduous Shrubs;
    (6) Broad-leaf Evergreen Shrubs;
    (7) Coniferous Evergreen Shrubs;
    (8) Small Fruits;
    (9) Herbaceous Perennials;
    (10) Roses;
    (11) Ground Cover and Vines;
    (12) Annuals; and
    (13) Foliage.
    (d) In lieu of the optional unit provisions in the Basic 
Provisions, if you elect additional coverage, and for an additional 
premium, field grown inventory that would otherwise be one basic unit 
may be divided into optional units by growing location if each location 
is located on non-contiguous land.
    3. Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities.
* * * * *
    (b) In addition to the requirements of section 3 of the Basic 
Provisions, you may select only one price election and coverage level 
for each basic unit insured under this policy if additional coverage is 
selected. If you select catastrophic risk protection coverage, you must 
select catastrophic risk protection coverage for all plant types and 
all liners insured under your nursery crop policy.
    (c) In lieu of the definition of ``sales closing date'' in section 
1 of the Basic Provisions and in lieu of section 3(b) of the Basic 
Provisions, changes to the price election and coverage level that would 
become effective for the current crop year are limited as follows:
    (1) For new policies, changes will not be made for the crop year 
after the date of the application; and
    (2) For carryover policies, changes will not be made for the crop 
year after September 30th.
* * * * *
    (f) For subsequent crop years, following the year of application, 
if you increase your coverage level or price election, insurance will 
attach at the increased level or election on the basic units to which 
the increase applies on October 1st or 30 days after the date you 
submitted your request, whichever is later, unless we reject the 
proposed increase because a loss occurs within 30 days of the date the 
request is made.
* * * * *
    6. Plant Inventory Value Report.
* * * * *
    (b) You must submit a plant inventory value report to us with your 
application and for each subsequent crop year not later than September 
1 prior to the start of the crop year. If you fail to provide a plant 
inventory value report by September 1, we will cancel your policy for 
the subsequent crop year. You may submit a new application for coverage 
for the crop year for which your policy was canceled. Coverage will 
attach 30 days after your crop insurance agent receives the application 
and the plant inventory value report signed by you, unless we notify 
you that your inventory is not acceptable.
    (c) The plant inventory value report must include all growing 
locations, the basic unit value of each basic unit, and your share. At 
our option, you will be required to provide documentation in support of 
your plant inventory value report, including, but not limited to, a 
detailed plant inventory listing that includes the name, the number, 
and the size of each plant; sales and purchases of plants for the 3 
previous crop years; and your ability to properly obtain and maintain 
nursery stock. Failure to provide such documentation will result in 
denial of insurance. Misreporting of any material information on the 
plant inventory value report will result in denial of any indemnity due 
for the crop year and because such denial is based on a breach of 
policy, the full premium will still be owed.
* * * * *
    (e) Your plant inventory value report must reflect your insurable 
nursery plant inventory value. The price for each plant and size listed 
on your plant inventory value report will be the lower of the Plant 
Price Schedule price or the lowest wholesale price in your nursery 
catalog or price list submitted in accordance with section 6(j). In no 
instance will we be liable for plant values greater than those 
contained in the Plant Price Schedule.
    (f) The applicable price for insurable plants damaged prior to the 
attachment of insurance coverage will be reduced for inventory 
reporting purposes if we accept such plants for insurance coverage, or 
they will be removed from the plant inventory value report if they are 
not accepted. We will calculate the insurable value of damaged plants 
that are accepted for coverage as follows:
    (1) Determine the number of months required for the plant to reach 
the stage of growth at which damage occurred;
    (2) Determine the number of months required for the plant to 
recover to the stage of growth at which damage occurred;
    (3) Divide 6(f)(2) by 6(f)(1);
    (4) Subtract the results of 6(f)(3) from 1.00; and
    (5) Multiply the results of 6(f)(4) by the insurable plant price.
    (g) You may revise your plant inventory value report on or before 
August 31st to increase the reported inventory value for the crop year. 
Any revision must be made in writing. An inspection will be performed 
when the value shown on the plant inventory value report is increased 
50 percent or more from the previous values on a policy basis. At our 
discretion, we may inspect the inventory if an increase of less than 50 
percent is reported on a policy basis. Your revised plant inventory 
value report will be considered accepted by us and insurance will 
attach on any proposed increase in inventory value 30 days after your 
written request is received unless we reject the proposed increase in 
your plant inventory value in writing. We will reject any requested 
increase if a loss occurs within 30 days of the date the request is 
made.
    (h) You must report the full value of your basic unit value in 
accordance with section 6(e). Failure to report the full value of each 
basic unit value will result in the reduction of any claim in 
accordance with section 12(d).
    (i) Insurable plants in over-sized containers will be valued for 
purposes of reporting inventory and loss adjustment as if the plants 
were in appropriate sized containers in accordance with the standards 
contained in the current American Standard for Nursery Stock. Each cell 
in a multiple cell container is considered a separate container. (See 
the Eligible Plant List at http://www.rma.usda.gov/ for additional 
information and requirements on container specifications and volume 
calculation.)
    (j) You must submit two copies of your nursery's most recent 
wholesale catalog or price list at the time of application and on or 
before September 1st for each crop year following the year of 
application. If your nursery publishes more than one edition of its 
wholesale catalog or price list offering different plants (e.g., a fall 
plant catalog and a spring plant catalog), you must submit two copies 
of the most recent edition of

[[Page 48173]]

each at the time the initial plant inventory value report is submitted. 
If you fail to provide copies of your wholesale catalog or price list 
or they are not in accordance with FCIC's procedures, no indemnity will 
be payable for the crop year. At a minimum, your wholesale catalog or 
price list must:
    (1) Be legible;
    (2) Contain the name, address, and phone number of your nursery; 
and
    (3) List each plant's name (scientific or common), size, and 
wholesale price.
    7. Premium.
    (a) In lieu of section 7 (c) of the Basic Provisions, we will 
determine your premium by multiplying the amount of insurance by the 
appropriate premium rate and the monthly proration factor contained in 
the actuarial documents, if applicable.
* * * * *
    (c) In lieu of section 7(a) of the Basic Provisions, if you apply 
for insurance on or after July 1st, the premium for the partial crop 
year will be due and must be paid at the time of application. Failure 
to pay the premium at the time of application will result in no 
insurance, and no indemnity being owed, for the crop year.
* * * * *
    8. Insured Plants.
    In lieu of the provisions of section 8 and 9 of the Basic 
Provisions, the insured nursery plant inventory will be all insurable 
nursery plants in the county for each insured nursery crop that:
* * * * *
    (i) Are not stock plants or plants being grown solely for harvest 
of buds, flowers, or greenery; and
    (j) Produce edible fruits or nuts provided the plants are intended 
for sale. (If intended for harvest of the fruits or nuts and not for 
sale, the nursery plants are not insurable.)
    9. Insurance Period
    (a) In lieu of section 11 of the Basic Provisions:
    (1) For the year of application, coverage begins 30 days after your 
crop insurance agent receives an application signed by you, unless we 
notify you in writing that your inventory is not acceptable;
    (2) For subsequent crop years, the insurance period begins at 12:01 
a.m. each October 1st; and
    (3) If you apply for coverage after August 31st, coverage will not 
begin until the next crop year, subject to the 30 day delay specified 
in this section.
* * * * *
    10. Causes of Loss. 
* * * * *
    (b) Insurance is provided against a loss in plant values because of 
an inability to market such plants, if such plants would have been 
marketed during the crop year, due to a cause of loss specified in 
section 10(a)(1) through (6) that occurs within the insurance period. 
For example, coverage is provided for reduced value, due to an insured 
cause of loss, if a plant is not marketable during its usual and 
recognized marketing period (e.g., poinsettias with a marketing window 
between November 1st and December 25th).
    (c) In addition to the causes of loss excluded in sections 12(a) 
and (c) through (e) of the Basic Provisions, we do not insure against 
any loss caused by:
* * * * *
    (3) The inability to market the nursery plants as a result of 
refusal of a buyer to accept production, boycott, or an order from a 
public official prohibiting sales including, but not limited to, a stop 
sales order, quarantine, or phytosanitary restriction on sales.
* * * * *
    (6) Any cause of loss, including those specified in section 10(a), 
if the only damage suffered is a failure of plants to grow to an 
expected size.
    (7) Failure to follow recognized good nursery practices.
    11. Duties in the Event of Damage or Loss.
    (a) * * *
* * * * *
    (2) You must submit a claim for indemnity to us on our form, not 
later than 60 days after the date of your loss, but in no event later 
than 60 days after the end of the insurance period. This requirement 
will be waived by us if the final adjustment of your claim is totally 
or partially deferred because we are unable to make an accurate 
determination of the amount of damage to the insured plants. If within 
the time frame specified we notify you that we are unable to make an 
accurate determination of damage on all or some of your damaged plants:
    (i) For those damaged plants on which the loss adjustment and claim 
have not been deferred, you must submit a partial claim within the time 
frame specified in section 11(a)(2) and we will settle your claim on 
such plants;
    (ii) For those damaged plants on which the loss adjustment and 
claim have been deferred, we will determine amount of damage at the 
earliest possible date but no later than 1 year after the end of the 
insurance period for the crop year in which the damage occurred; and
    (iii) You must maintain the identity of the plants on which loss 
adjustment is deferred throughout the deferral period.
* * * * *
    12. Settlement of Claim.
* * * * *
    (g) The total of all indemnities and rehabilitation payments for 
the crop year will not exceed the amount of insurance, including any 
peak amount of insurance during the coverage term of the Peak Inventory 
Endorsement, if this endorsement is elected.
* * * * *
    3. Section 457.163 is amended as follows:
    a. In section 1, revise the definition of ``peak amount of 
insurance'' and add a definition for ``premium adjustment factor'';
    b. Revise sections 2(b) and (d);
    c. Add a new section 3(c);
    d. Revise section 5(a); and
    e. Revise section 7.
    The additions and revisions read as follows:


Sec.  457.163  Nursery peak inventory endorsement.

* * * * *
    1. Definitions
* * * * *
    Peak amount of insurance. The additional inventory value reported 
on the peak inventory value report for each basic unit multiplied by 
your coverage level, price election, and share.
* * * * *
    Premium adjustment factor. A factor calculated by subtracting the 
monthly proration factor for the month following the month containing 
the coverage termination date from the proration factor for the month 
that coverage commenced. Peak inventory endorsements with a coverage 
termination date during the month of September will have a premium 
adjustment factor equal to the proration factor for the month 
containing the coverage commencement date.
* * * * *
    2. Eligibility
* * * * *
    (b) You must have elected additional coverage.
* * * * *
    (d) You may purchase no more than two Peak Inventory Endorsements 
for each basic unit during the crop year unless you have suffered 
insured losses and have restocked your nursery, in which case an 
additional Peak Inventory Endorsement may be purchased after each 
insured loss and is limited to the amount of the restock.
    3. Coverage
* * * * *

[[Page 48174]]

    (c) This endorsement can only be used to temporarily increase the 
value reported on your initial or revised plant inventory value report 
for the crop year. If you expand your nursery growing facilities (e.g. 
newly acquired growing location or structure), you must revise your 
plant inventory value report.
* * * * *
    5. Premium
    (a) The premium for this endorsement is determined by multiplying 
the peak amount of insurance by the appropriate premium rate and by the 
premium adjustment factor.
    Example of Peak Endorsement Total Premium Calculation: Assume a 
grower reports a peak amount of insurance on a basic unit of $100,000 
with a 65 percent coverage level, a price election of 1.00, and a share 
of 1.000. The base premium rate is $0.051. The proration factors for 
the Peak Endorsement starting month and month following the month 
containing the coverage termination date are 0.68 and 0.52, 
respectively, as stated in the actuarial documents, which results in a 
premium adjustment factor of 0.16 (0.68--0.52). The total premium 
amount for the Peak Endorsement is $530.00 ($100,000 x 0.65 x 1.00 x 
1.000 x $0.051 x 0.16).
* * * * *
    7. Liability limit.
    The peak amount of insurance is limited to the basic unit value you 
declare under the Nursery Crop Insurance Provisions.
    4. Add Sec.  457.164 to read as follows:


Sec.  457.164  Nursery rehabilitation endorsement.

Nursery Crop Insurance

Optional Rehabilitation Endorsement

    In return for payment of the additional premium designated in the 
actuarial documents, this endorsement is attached to and made a part of 
your Nursery Crop Insurance Provisions subject to the terms and 
conditions herein. In the event of a conflict between the Nursery Crop 
Insurance Provisions and this endorsement, this endorsement will 
control.
    1. Eligibility.
    (a) You must have purchased additional coverage under the Nursery 
Crop Insurance Provisions, and you must comply with all terms and 
conditions contained in the applicable Nursery Crop Insurance 
Provisions and endorsements.
    (b) You must elect this endorsement at the time of application for 
the initial crop year your field grown nursery plants will be insured 
under the Nursery Crop Insurance Provisions or by October 1st if your 
field grown plants are already insured under the Nursery Crop Insurance 
Provisions.
    (c) All field grown nursery plants insured under the Nursery Crop 
Insurance Provisions must be insured under this endorsement. Nursery 
plants produced in standard nursery containers are not covered under 
this endorsement.
    2. Coverage.
    (a) Rehabilitation costs covered by this endorsement are limited to 
expenditures for labor and materials for pruning and setup (righting, 
propping, and staking) of field grown plants requiring rehabilitation 
that:
    (1) Are damaged by an insured cause of loss specified in section 10 
of the Nursery Crop Insurance Provisions; and
    (2) Have a reasonable expectation of recovery.
    (b) A rehabilitation payment may be made under this endorsement 
only if:
    (1) Verifiable records are provided showing actual expenditures for 
rehabilitation;
    (2) Rehabilitation procedures are performed directly following 
occurrence of damage before additional deterioration of the damaged 
plants occurs;
    (3) We determine it is practical to rehabilitate the damaged 
plants; and
    (4) The total actual rehabilitation costs for the basic or optional 
unit is, at least, the lesser of 2.0 percent of field market value A or 
$5,000.
    (c) The maximum amount of the rehabilitation payment for each basic 
or optional unit will be the lesser of:
    (1) Your total actual rehabilitation costs multiplied by the under 
report factor contained in the Nursery Crop Insurance Provisions; or
    (2) An amount equal to 7.5 percent of the value (based on the lower 
of the Plant Price Schedule price or the lowest wholesale price listed 
in the insured's nursery catalog or price list) of all your insurable 
field grown plants that were rehabilitated subsequent to an insured 
cause of loss, multiplied by the under report factor described in the 
Nursery Crop Insurance Provisions, multiplied by the coverage level 
percentage you elect, multiplied by your price election, and multiplied 
by your share. Insurable, rehabilitated plants that have not recovered 
from damage that occurred prior to attachment of this endorsement will 
have a reduced value in accordance with section 6(f) of the Nursery 
Crop Insurance Provisions.
    (d) Only one rehabilitation payment will be paid on insurable 
plants that are rehabilitated on each basic or optional unit during any 
crop year regardless of the number of losses that occur on the unit 
during the insurance period.
    3. Cancellation.
    This endorsement will continue in effect until canceled. It may be 
canceled by you or us for any succeeding crop year by giving written 
notice to the other party on or before the cancellation date, contained 
in the Nursery Crop Insurance Provisions, preceding the crop year for 
which the cancellation of this endorsement is to be effective.

    Signed in Washington, DC, on August 3, 2004.
Ross J. Davidson, Jr.,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 04-18059 Filed 8-6-04; 8:45 am]
BILLING CODE 3410-08-P