[Federal Register Volume 73, Number 43 (Tuesday, March 4, 2008)]
[Rules and Regulations]
[Pages 11519-11527]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-4141]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 786

RIN 0560-AH74


Dairy Disaster Assistance Payment Program III

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: This final rule establishes a new program, the Dairy Disaster 
Assistance Payment Program III, as authorized by the U.S. Troop 
Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability 
Appropriations Act, 2007. The program will provide $16 million in 
assistance for producers in counties designated as a major disaster or 
emergency area by the President, or those declared a natural disaster 
area by the Secretary of Agriculture. Counties declared disasters by 
the President may be eligible, even though agricultural loss was not 
covered by the declaration, if there has been a Farm Service Agency 
Administrator's Physical Loss Notice covering such losses. The natural 
disaster declarations by the Secretary or the President must have been 
issued between January 1, 2005 and December 31, 2007, that is, after 
January 1, 2005, and before December 31, 2007. Counties

[[Page 11520]]

contiguous to such counties will also be eligible. This program is 
designed to provide financial assistance to producers who suffered 
dairy production losses due to natural disasters in the eligible 
counties.

DATES: This rule is effective on March 4, 2008.

FOR FURTHER INFORMATION CONTACT: Danielle Cooke, telephone: (202) 720-
1919; e-mail: [email protected].

SUPPLEMENTARY INFORMATION: 

Background

    This rule establishes regulations based on the proposed rule 
published in the Federal Register on November 26, 2007 (72 FR 65889-
65897). The 30-day comment period for the proposed rule closed on 
December 26, 2007; 16 comments were submitted. The issues raised in the 
comments and the resulting changes to the rule are discussed later in 
this final rule.
    The proposed rule provided that the DDAP-III program would be based 
on disaster related dairy production losses suffered during the period 
of January 2, 2005, and February 27, 2007, in counties declared or 
designated a natural disaster by the President or Secretary of 
Agriculture. For timely Presidential declarations that do not cover 
agricultural loss, the subject counties may still be covered if the 
county was the subject of a Farm Service Agency (FSA) Administrator's 
Loss Notice. Counties contiguous to such declared counties are also 
eligible. The program will end at the conclusion of the application 
period and disbursement of allotted funds. The DDAP-III program will 
operate under regulations codified in 7 CFR part 786.
    The proposed rule specified that dairy producers would disclose the 
number of cows in the operation's dairy herd for each month of the 
calendar year in which a disaster declaration was issued to determine 
the average number of cows in the dairy herd for the operation per 
applicable year and calculate the qualifying production loss for the 
operation. The proposed rule also provided that spoiled or dumped milk 
would be counted as production for the relevant claim period. In 
addition, the proposed rule provided that qualifying production losses 
would be calculated from a set base amount determined from data 
obtained from the National Agricultural Statistics Service (NASS). The 
proposed rule provided that if the limited program funds were not 
sufficient to pay all claims for lost production, then priority would 
be given in making payments to those persons whose losses for each 
applicable disaster year were greater than 20 percent. The proposed 
rule also specified that the prices at which payments would be made 
would be amounts set out in the rule which were derived from a series 
of reported ``mailbox'' prices.

Comments and Changes to the Final Rule

    During the 30-day comment period the Agency received public 
comments from a dairy cooperative, five associations, a Farm Bureau, 
and eight private citizens. In general, the comments supported the 
proposed rule, however, each of the comments raised one or more issues 
addressing a specific aspect of implementing DDAP-III and several 
comments raised the same issues. As explained below, minor changes to 
the regulations based on the comments will slightly modify the 
provisions specified in the proposed rule.
    Two comments opposed the program, one indicated that assistance 
should only be provided to small dairy operations and the other 
objected to anyone other than the President making disaster 
declarations. One of those comments also indicated that assistance 
provided by this program is a misuse of taxpayer dollars and that it 
was misleading for Congress to insert a statute for agriculture in a 
non-related military spending bill. No changes have been made in the 
rule based on these comments. The Agency is charged with implementing 
the statutory provisions and has done so in this final rule.
    One comment requested clarification regarding spoiled or dumped 
milk being counted as production during the relevant claim period. 
Specifically, to ensure that milk production that spoiled or was dumped 
for a disaster related reason would be included in the qualifying 
production losses for the dairy operation. The provision in the rule 
that requires spoiled or dumped milk being counted as production is 
intended to account for milk that spoiled or was dumped due to non-
disaster related reasons and must be counted as production. The Agency 
clarified this point in the rule by revising section 786.106, 
paragraphs (e) and (h), which were proposed as paragraphs (c) and (f), 
respectively.
    Comments were received on the method of payment at two levels in 
the event of inadequate funds for all eligible losses and the 
appropriate loss level percentage. Two respondents opposed the use of 
the 20 percent threshold because its use over a full calendar year for 
an initial round of disaster benefits may not recognize the economic 
reality of significantly higher input costs on dairy farms and the 
devastating effect of short term disasters. With funding limitations, 
the proposed threshold percentage provides fair compensation and is 
consistent with other disaster programs administered by the Agency. 
Therefore, no change was made in response to these comments.
    One comment suggested making dairy operations outside of eligible 
disaster counties eligible when milk was dumped as a result of the 
market outlet being located in a disaster affected county. The 
statutory provisions did not provide for counties outside of disaster 
declared counties to be eligible. Therefore, no change was made in 
response to this comment.
    One comment requested clarification of the phrase ``legal resident 
alien'' and believed that holders of E12 Visas should be permitted to 
participate in the program. Provisions for foreign persons used for FSA 
programs are provided in 7 CFR part 1400, subpart F, and apply to this 
program. A definition for a lawful alien is also provided in 1400.3. 
Therefore, no change was made in response to this comment.
    Most comments received disagreed with how the base production for 
the dairy operation was determined. Twelve respondents opposed the use 
of NASS State averages to determine base production because of the 
great disparity between operations with minor breeds or poor herd 
management practices that produce significantly less than the NASS 
average and those dairy operations with higher inputs that are more 
efficient and produce well above the NASS average. Additionally, one 
comment received opposed the use of the calendar year of the disaster 
to determine base production and believed a period of weeks, months or 
the year prior to the disaster would be more representative of base 
period production for comparison. Further, the comment disagreed with 
the use of cow averages during the year of the disaster to determine 
base production because cow losses would factor into a decreased base 
production for the dairy operation. These comments supported an 
alternative method of determining base production for the dairy 
operation that was not based on the year of the disaster and did not 
include the use of NASS State averages based on cow averages during the 
applicable disaster year.
    After careful consideration of the recommendations proposed in the 
comments, the Agency will change the determination of base annual 
production for the dairy operation to use the average of the total

[[Page 11521]]

commercially marketed production during both calendar years 2003 and 
2004 prior to the eligible period, divided by the average number of 
cows in the dairy herd during both calendar years 2003 and 2004 prior 
to the eligible period, to establish the average annual production per 
cow. To calculate the base annual production for the dairy operation, 
the average annual production per cow determined from the base year 
information obtained from the producer, will be multiplied by the 
average number of cows (not including cow losses resulting from the 
disaster occurrence) in the dairy herd during the applicable year of 
the disaster. Dairy operations without the required information from 
the 2003 and 2004 base years will use an alternative method to estimate 
the average annual production per cow that will be determined by the 
FSA Administrator. For example, for new dairies not in operation during 
2003 and 2004, FSA may obtain information from three similar farms to 
estimate the base annual production for the operation. These changes 
were made throughout the regulations with revised definitions, sections 
786.104 through 786.106.

Miscellaneous Changes

    Payment rates for the four States of Colorado, Hawaii, Oklahoma, 
and Wyoming were inadvertently left out of the table in section 786.107 
in the proposed rule and are incorporated in this final rule.
    The Consolidated Appropriations Act of 2008 (Pub. L. 110-161), 
extended the eligible period for the program from February 27, 2007 to 
December 30, 2007. Changes are incorporated throughout to modify the 
date to reflect the extension.

Executive Order 12866

    This rule has been determined to be not significant under Executive 
Order 12866 and was reviewed by the Office of Management and Budget 
(OMB). A cost-benefit assessment of this rule was completed and is 
available from the contact information above.

Summary of Economic Impacts

    Program payments will provide eligible producers funds to help pay 
operating expenses and meet other financial obligations. Program 
payments are expected to total and increase both Federal outlays and 
aggregate farm revenue by $16 million. This assistance will help dairy 
producers affected by natural disasters to recover some lost income and 
additional repair expenses to aid in continuing their agricultural 
production businesses.
    The States with the highest percentages of dairies expected to make 
claims are: Idaho (33 percent), California (16 percent), New Mexico (13 
percent), Indiana and Michigan (7-8 percent), Washington and Arizona (5 
percent), and Wisconsin (3 percent). Expected claims totaled 3.1 
million hundred weight (cwt).
    If total eligible losses exceed available funding, losses above 20 
percent will be paid at the maximum payment rates. The average payment 
rate for losses below 20 percent will be determined by dividing 
remaining funding by the total milk pounds below 20 percent eligible 
for payment. The resulting payment rate is projected to be $5.15 per 
cwt, substantially below average mailbox prices.\1\ The average mailbox 
price for all Federal Orders in the United States was $12.87 in 2006 
and $11.28 in California, which is outside the Federal Order system. 
The lowest mailbox price in the Federal Order system in 2006 was $11.13 
in New Mexico.
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    \1\ The mailbox price is the net price producers receive for 
their milk, after all marketing costs, discounts, premiums are 
accounted for. The Agricultural Marketing Service collects and 
publishes monthly mailbox prices.
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    Producers who can demonstrate a loss exceeding 20 percent of their 
production will receive compensation equal to the average mailbox price 
prevailing in their region during the period of the disaster. To the 
extent that payments equal to the mailbox price are made to some 
producers, the otherwise-average payment rate of $5.15 will be reduced. 
In theory, it is possible that enough producers could claim a 20-
percent-or-greater loss and receive payments equal to the mailbox 
price, that payments to the remaining producers with lower losses could 
be considerably less than $5.15. However, FSA does not have sufficient 
data to estimate how many producers might have losses exceeding 20 
percent of their production, or how much milk such losses might 
represent.
    Payments are expected to increase producer income and defray repair 
and cattle replacement costs. Outlays will be monitored to ensure that 
they do not exceed the actual loss.
    The $16 million is a small share of federal farm assistance. For 
example, Commodity Credit Corporation (CCC) made $15.3 billion in 
direct cash payments to farmers and ranchers in fiscal 2005, excluding 
all payments made for disasters, with the largest category of payments 
being $8 billion paid under the Direct and Counter Cyclical Program. 
CCC direct cash payments for fiscal 2005 through estimated fiscal 2007 
total $43.7 billion, averaging $14.6 billion, annually.

Regulatory Flexibility Act

    The Regulatory Flexibility Act does not apply to this rule because 
FSA is not required by 5 U.S.C. 553 or any other law to publish a 
notice of proposed rulemaking with respect to the subject of this rule.

Environmental Assessment

    FSA has determined that this rule does not constitute a major State 
or Federal action that would significantly affect the human or natural 
environment consistent with the National Environmental Policy Act 40 
CFR part 1502.4, Major Federal actions requiring the preparation of 
Environmental Impact Statements, and 7 CFR part 799: Environmental 
Quality and Related Environmental Concerns--Compliance with NEPA 
implementing the regulations of the Council on Environmental Quality, 
40 CFR parts 1500-1508. Therefore no environmental assessment or 
environmental impact statement will be prepared.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12998. This rule preempts State laws to the extent such laws are 
inconsistent with it. This rule is not retroactive. Before judicial 
action may be brought concerning this rule, all administrative remedies 
set forth at 7 CFR parts 11 and 780 must be exhausted.

Executive Order 12372

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

Unfunded Mandates

    Although we published a proposed rule, Title II of the Unfunded 
Mandates Reform Act of 1995 (UMRA) does not apply to this rule because 
FSA is not required by 5 U.S.C. 553 or any other law to publish a 
notice of proposed rulemaking for the subject of this rule. Further, 
this rule contains no unfunded mandates as defined in sections 202 and 
205 of UMRA.

Paperwork Reduction Act of 1995

    The Information Collection Packages for the amendments to 7 CFR 786 
contained in this final rule have been submitted to the Office of 
Management and Budget (OMB) for approval as a revision to OMB Control 
Number 0560-

[[Page 11522]]

0252. A proposed rule containing an estimate of the burden impact of 
the rule was published in the Federal Register on November 26, 2007 (72 
FR 65889-65897) with estimates of the information collection burden 
required to implement this program and a request for comments on those 
requirements as required by 5 CFR section 1320.8(d)(1). No comments 
concerning the burden estimate were received.

E-Government Act Compliance

    FSA is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes. The forms, regulations, and other 
information collection activities required to be utilized by a person 
subject to this rule are available at http://www.fsa.usda.gov. 
Applications may be submitted at the FSA county offices.

List of Subjects in 7 CFR Part 786

    Dairy products, Disaster assistance, Fraud, Penalties, Price 
support programs, Reporting and recordkeeping requirements.

0
For the reasons set out in the preamble, 7 CFR part 786 is added to 
read as follows:

PART 786--DAIRY DISASTER ASSISTANCE PAYMENT PROGRAM (DDAP-III)

Sec.
786.100 Applicability.
786.101 Administration.
786.102 Definitions.
786.103 Time and method of application.
786.104 Eligibility.
786.105 Proof of production.
786.106 Determination of losses incurred.
786.107 Rate of payment and limitations on funding.
786.108 Availability of funds.
786.109 Appeals.
786.110 Misrepresentation, scheme, or device.
786.111 Death, incompetence, or disappearance.
786.112 Maintaining records.
786.113 Refunds; joint and several liability.
786.114 Miscellaneous provisions.
786.115 Termination of program.

    Authority: Sec. 9007, Pub. L. 110-28, 121 Stat. 112; and Sec. 
743, Pub. L. 110-161.

PART 786--DAIRY DISASTER ASSISTANCE PAYMENT PROGRAM III (DDAP-III)


Sec.  786.100   Applicability.

    (a) Subject to the availability of funds, this part specifies the 
terms and conditions applicable to the Dairy Disaster Assistance 
Payment Program (DDAP-III) authorized by section 9007 of Public Law 
110-28 (extended by Pub. L. 110-161). Benefits are available to 
eligible United States producers who have suffered dairy production 
losses in eligible counties as a result of a natural disaster declared 
during the period between January 1, 2005, and December 31, 2007, (that 
is, after January 1, 2005, and before December 31, 2007).
    (b) To be eligible for this program, a producer must have been a 
milk producer anytime during the period of January 2, 2005, through 
December 30, 2007, in a county declared a natural disaster by the 
Secretary of Agriculture, declared a major disaster or emergency 
designated by the President of the United States. For a county for 
which there was a timely Presidential declaration, but the declaration 
did not cover the loss, the county may still be eligible if the county 
is one for which an appropriate determination of a Farm Service Agency 
(FSA) Administrator's Physical Loss Notice applies. Counties contiguous 
to a county that is directly eligible by way of a natural disaster 
declaration are also eligible. Only losses occurring in eligible 
counties are eligible for payment in this program.
    (c) Subject to the availability of funds, FSA will provide benefits 
to eligible dairy producers. Additional terms and conditions may be 
specified in the payment application that must be completed and 
submitted by producers to receive a disaster assistance payment for 
dairy production losses.
    (d) To be eligible for payments, producers must meet the provisions 
of, and their losses must meet the conditions of, this part and any 
other conditions imposed by FSA.


Sec.  786.101   Administration.

    (a) DDAP-III will be administered under the general supervision of 
the Administrator, FSA, or a designee, and be carried out in the field 
by FSA State and county committees (State and county committees) and 
FSA employees.
    (b) State and county committees, and representatives and employees 
thereof, do not have the authority to modify or waive any of the 
provisions of the regulations of this part.
    (c) The State committee will take any action required by the 
regulations of this part that has not been taken by the county 
committee. The State committee will also:
    (1) Correct, or require the county committee to correct, any action 
taken by such county committee that is not in accordance with the 
regulations of this part; and
    (2) Require a county committee to withhold taking any action that 
is not in accordance with the regulations of this part.
    (d) No provision of delegation in this part to a State or county 
committee will preclude the Administrator, FSA, or a designee, from 
determining any question arising under the program or from reversing or 
modifying any determination made by the State or county committee.
    (e) The Deputy Administrator, Farm Programs, FSA, may authorize 
State and county committees to waive or modify deadlines in cases where 
lateness or failure to meet such requirements do not adversely affect 
the operation of the DDAP-III and does not violate statutory 
limitations of the program.
    (f) Data furnished by the applicants is used to determine 
eligibility for program benefits. Although participation in DDAP-III is 
voluntary, program benefits will not be provided unless the producer 
furnishes all requested data.


Sec.  786.102  Definitions.

    The definitions in 7 CFR part 718 apply to this part except to the 
extent they are inconsistent with the provisions of this part. In 
addition, for the purpose of this part, the following definitions 
apply.
    Administrator means the FSA Administrator, or a designee.
    Application means DDAP-III application.
    Application period means the time period established by the Deputy 
Administrator for producers to apply for program benefits.
    Base annual production means the pounds of production determined by 
multiplying the average annual production per cow calculated from base 
period information times the average number of cows in the dairy herd 
during each applicable disaster year.
    County committee means the FSA county committee.
    County office means the FSA office responsible for administering 
FSA programs for farms located in a specific area in a State.
    Dairy operation means any person or group of persons who, as a 
single unit, as determined by FSA, produces and markets milk 
commercially from cows and whose production facilities are located in 
the United States.
    Department or USDA means the United States Department of 
Agriculture.
    Deputy Administrator means the Deputy Administrator for Farm 
Programs (DAFP), FSA, or a designee.

[[Page 11523]]

    Disaster claim period means the calendar year(s) applicable to the 
disaster declaration during the eligible period in which the production 
losses occurred.
    Disaster county means a county included in the geographic area 
covered by a natural disaster declaration, and any county contiguous to 
a county that qualifies by a natural disaster declaration.
    Farm Service Agency or FSA means the Farm Service Agency of the 
Department.
    Hundredweight or cwt. means 100 pounds.
    Milk handler or cooperative means the marketing agency to, or 
through, which the producer commercially markets whole milk.
    Milk marketings means a marketing of milk for which there is a 
verifiable sale or delivery record of milk marketed for commercial use.
    Natural disaster declaration means a natural disaster declaration 
issued by the Secretary of Agriculture after January 1, 2005, but 
before December 31, 2007, under section 321(a) of the Consolidated Farm 
and Rural Development Act (7 U.S.C. 1961(a)), a major disaster or 
emergency designation by the President of the United States in that 
period under the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act, or a determination of a Farm Service Agency 
Administrator's Physical Loss Notice for a county covered in an 
otherwise eligible Presidential declaration.
    Payment pounds means the pounds of milk production from a dairy 
operation for which the dairy producer is eligible to be paid under 
this part.
    Producer means any individual, group of individuals, partnership, 
corporation, estate, trust association, cooperative, or other business 
enterprise or other legal entity who is, or whose members are, a 
citizen of, or a legal resident alien in, the United States, and who 
directly or indirectly, as determined by the Secretary, have a share 
entitlement or ownership interest in a commercial dairy's milk 
production and who share in the risk of producing milk, and make 
contributions (including land, labor, management, equipment, or 
capital) to the dairy farming operation of the individual or entity.
    Reliable production evidence means records provided by the producer 
subject to a determination of acceptability by the county committee 
that are used to substantiate the amount of production reported when 
verifiable records are not available; the records may include copies of 
receipts, ledgers of income, income statements of deposit slips, 
register tapes, and records to verify production costs, contemporaneous 
measurements, and contemporaneous diaries.
    Verifiable production records means evidence that is used to 
substantiate the amount of production marketed, including any dumped 
production, and that can be verified by FSA through an independent 
source.


Sec.  786.103  Time and method of application.

    (a) Dairy producers may obtain an application, in person, by mail, 
by telephone, or by facsimile from any FSA county office. In addition, 
applicants may download a copy of the application at http://www.sc.egov.usda.gov.
    (b) A request for benefits under this part must be submitted on a 
completed DDAP-III application. Applications and any other supporting 
documentation must be submitted to the FSA county office serving the 
county where the dairy operation is located, but, in any case, must be 
received by the FSA county office by the close of business on the date 
established by the Deputy Administrator. Applications not received by 
the close of business on such date will be disapproved as not having 
been timely filed and the dairy producer will not be eligible for 
benefits under this program.
    (c) All persons who share in the milk production of the dairy 
operation and risk of the dairy operation's total production must 
certify to the information on the application before the application 
will be considered complete.
    (d) Each dairy producer requesting benefits under this part must 
certify to the accuracy and truthfulness of the information provided in 
their application and any supporting documentation. Any information 
entered on the application will be considered information from the 
applicant regardless of who entered the information on the application. 
All information provided is subject to verification by FSA. Refusal to 
allow FSA or any other agency of the Department of Agriculture to 
verify any information provided may result in a denial of eligibility. 
Furnishing the information is voluntary; however, without it program 
benefits will not be approved. Providing a false certification to the 
Government may be punishable by imprisonment, fines, and other 
penalties or sanctions.


Sec.  786.104  Eligibility.

    (a) Producers in the United States will be eligible to receive 
dairy disaster benefits under this part only if they have suffered 
dairy production losses, previously uncompensated by disaster payments 
including any previous dairy disaster payment program, during the claim 
period applicable to a natural disaster declaration in a disaster 
county. To be eligible to receive payments under this part, producers 
in a dairy operation must:
    (1) Have produced and commercially marketed milk in the United 
States and commercially marketed the milk produced anytime during the 
period of January 2, 2005 through December 30, 2007;
    (2) Be a producer on a dairy farm operation physically located in 
an eligible county where dairy production losses were incurred as a 
result of a disaster for which an applicable natural disaster 
declaration was issued between January 1, 2005 and December 31, 2007, 
and limit their claims to losses that occurred in those counties, 
specific to conditions resulting from the declared disaster as 
described in the natural disaster declaration;
    (3) Provide adequate proof, to the satisfaction of the FSA county 
committee, of the average number of cows in the dairy herd and annual 
milk production commercially marketed by all persons in the eligible 
dairy operation during the years of the base period (2003 and 2004 
calendar years) and applicable disaster year that corresponds with the 
issuance date of the applicable natural disaster declaration, or other 
period as determined by FSA, to determine the total pounds of eligible 
losses that will be used for payment; and
    (4) Apply for payments during the application period established by 
the Deputy Administrator.
    (b) Payments may be made for losses suffered by an otherwise 
eligible producer who is now deceased or is a dissolved entity if a 
representative who currently has authority to enter into a contract for 
the producer or the producer's estate signs the application for 
payment. Proof of authority to sign for the deceased producer's estate 
or a dissolved entity must be provided. If a producer is now a 
dissolved general partnership or joint venture, all members of the 
general partnership or joint venture at the time of dissolution or 
their duly-authorized representatives must sign the application for 
payment.
    (c) Producers associated with a dairy operation must submit a 
timely application and satisfy the terms and conditions of this part, 
instructions issued by FSA, and instructions contained in the 
application to be eligible for benefits under this part.
    (d) As a condition to receive benefits under this part, a producer 
must have

[[Page 11524]]

been in compliance with the Highly Erodible Land Conservation and 
Wetland Conservation provisions of 7 CFR part 12 for the calendar year 
applicable to the natural disaster declaration and loss claim period, 
and must not otherwise be barred from receiving benefits under 7 CFR 
part 12 or any other law or regulation.
    (e) Payments are limited to losses in eligible counties, in 
eligible disaster years.
    (f) All payments under this part are subject to the availability of 
funds.
    (g) Eligible losses are determined from the applicable base annual 
production, as defined in Sec.  786.102, that corresponds to the 
natural disaster declaration and must have occurred during that same 
period as follows:
    (1) For disaster declarations for disasters during a calendar year 
(2005, 2006, or 2007), the disaster claim period is the full calendar 
year and
    (2) For disaster declarations issued during one calendar year that 
ends in another calendar year, the producer will be eligible for both 
disaster years.
    (h) Deductions in eligibility will be made for any disaster 
payments previously received for the loss including any made under a 
previous dairy disaster assistance payment program for 2005.


Sec.  786.105  Proof of production.

    (a) Evidence of production is required to establish the commercial 
marketing and production history of the dairy operation so that dairy 
production losses can be computed in accordance with Sec.  786.106.
    (b) A dairy producer must, based on the instructions issued by the 
Deputy Administrator, provide adequate proof of the dairy operation's 
commercial production, including any dairy herd inventory records 
available for the operation, for the years of the base period (2003 and 
2004 calendar years) and disaster claim period that corresponds with 
the issuance date of the applicable natural disaster declaration.
    (1) A producer must certify and provide such proof as requested 
that losses for which compensation is claimed were related to the 
disaster declaration issued and occurred in an eligible county during 
the eligible claim period.
    (2) A producer must certify to the average number of cows in the 
dairy herd during the base period and applicable disaster claim period 
when there is insufficient documentation available for verification.
    (3) Additional supporting documentation may be requested by FSA as 
necessary to verify production losses to the satisfaction of FSA.
    (c) Adequate proof of production history of the dairy operation 
under paragraph (b) of this section must be based on milk marketing 
statements obtained from the dairy operation's milk handler or 
marketing cooperative. Supporting documents may include, but are not 
limited to: Tank records, milk handler records, daily milk marketings, 
copies of any payments received from other sources for production 
losses, or any other documents available to confirm or adjust the 
production history losses incurred by the dairy operation. All 
information provided is subject to verification, spot check, and audit 
by FSA.
    (d) As specified in Sec.  786.106, loss calculations will be based 
on comparing the expected base annual production consistent with this 
part and the actual production during the applicable disaster claim 
year. Such calculations are subject to adjustments as may be 
appropriate such as a correction for losses not due to the disaster. If 
adequate proof of normally marketed production and any other production 
for relevant periods is not presented to the satisfaction of FSA, the 
request for benefits will be rejected. Special adjustments for new 
producers may be made as determined necessary by the Administrator.


Sec.  786.106  Determination of losses incurred.

    (a) Eligible payable losses are calculated on a dairy operation by 
dairy operation basis and are limited to those occurring during the 
applicable disaster claim period, as provided by Sec.  786.104(g), that 
corresponds with the applicable natural disaster declaration. 
Specifically, dairy production losses incurred by producers under this 
part are determined on the established history of the dairy operation's 
average number of cows in the dairy herd and actual commercial 
production marketed during the base period and applicable disaster 
claim period that corresponds with the applicable natural disaster 
declaration, as provided by the dairy operation consistent with Sec.  
786.105. Except as otherwise provided in this part, the base annual 
production, as defined in Sec.  786.102 and established in Sec.  
786.104(g) is determined for each applicable disaster year based on the 
average annual production per cow determined according to the 
following:
    (1) The average of annual marketed production during the base 
period calendar years of 2003 and 2004, divided by;
    (2) The average number of cows in the dairy operation's herd during 
the base period calendar years of 2003 and 2004.
    (b) If relevant information to calculate the average annual 
production per cow for one or both of the base period calendar years of 
2003 and 2004, is not available, an alternative method of determining 
the average annual production per cow may be established by the FSA 
Administrator. For example, for new dairies not in operation during 
2003 and 2004, information from three similar farms may be obtained by 
FSA to estimate base annual production.
    (c) The average annual production per cow, as determined according 
to paragraphs (a)(1) and (a)(2) of this section, is multiplied by the 
average number of cows in the dairy operation's herd during the 
applicable disaster year (excluding cow losses resulting from the 
disaster occurrence), to determine base annual production for the dairy 
operation for each applicable disaster claim period year.
    (d) The eligible dairy production losses for a dairy operation for 
each of the authorized disaster claim period years will be:
    (1) The relevant period's base annual production for the dairy 
operation calculated under paragraph (c) of this section less,
    (2) For each such disaster claim period for each dairy operation 
the actual commercially-marketed production relevant to that period.
    (e) Spoiled or dumped milk, disposed of for reasons unrelated to 
the disaster occurrence, must be counted as production for the relevant 
disaster claim period. Actual production losses may be adjusted to the 
extent the reduction in production is not certified by the producer to 
be the result of the disaster identified in the natural disaster 
declaration or is determined by FSA not to be related to the natural 
disaster identified in the natural disaster declaration. FSA county 
committees will determine production losses that are not caused by the 
disaster associated with the natural disaster declaration. The 
calculated production loss determined in Sec.  786.106(d) will be 
adjusted to account for pounds of production losses determined by the 
FSA county committee to not have been associated with the declared 
natural disaster for an eligible disaster county. The FSA county 
committee may convert cow numbers to actual pounds of production used 
in the adjustment, by multiplying the average annual production per cow 
determined from base period information, by the applicable number of 
cows determined to be ineligible to generate claims for

[[Page 11525]]

benefits. Other appropriate adjustments will be made on such basis as 
the Deputy Administrator finds to be consistent with the objectives of 
the program.
    (f) Actual production, as adjusted, that exceeds the base annual 
production will mean that the dairy operation incurred no eligible 
production losses for the corresponding claim period as a result of the 
natural disaster.
    (g) Eligible production losses as otherwise determined under 
paragraphs (a) through (f) of this section for each authorized year of 
the program are added together to determine total eligible losses 
incurred by the dairy operation under DDAP-III subject to all other 
eligibility requirements as may be included in this part or elsewhere, 
including the deduction for previous payments including those made 
under a previous DDAP program.
    (h) Payment on eligible dairy operation losses will be calculated 
using whole pounds of milk. No double counting is permitted, and only 
one payment will be made for each pound of milk calculated as an 
eligible loss after the distribution of the dairy operation's eligible 
production loss among the producers of the dairy operation according to 
Sec.  786.107(b). Payments under this part will not be affected by any 
payments for dumped or spoiled milk that the dairy operation may have 
received from its milk handler, marketing cooperative, or any other 
private party; however, produced milk that was dumped or spoiled for 
reasons unrelated to the disaster occurrence will still count as 
production.


Sec.  786.107  Rate of payment and limitations on funding.

    (a) Subject to the availability of funds, the payment rate for 
eligible production losses determined according to Sec.  786.106 is, 
depending on the State, the annual average Mailbox milk price for the 
Marketing Order, applicable to the State where the eligible disaster 
county is located, as reported by the Agricultural Marketing Service 
during the relevant period. States not regulated under a Marketing 
Order will be assigned a payment rate based on contiguous or nearby 
State's Mailbox milk price. Maximum per pound payment rates for 
eligible losses for dairy operations located in specific states during 
the relevant period are as follows:

----------------------------------------------------------------------------------------------------------------
                                                     Mailbox price   Mailbox price   Mailbox price
                       State                             2005            2006           2007 *
--------------------------------------------------------------------------------------------------
Alabama...........................................          0.1596          0.1443  ..............
Alaska............................................          0.2040          0.2010  ..............
Arizona...........................................          0.1388          0.1128  ..............
Arkansas..........................................          0.1596          0.1443  ..............
California........................................          0.1388          0.1128  ..............
Colorado..........................................          0.1403          0.1214  ..............
Connecticut.......................................          0.1539          0.1344  ..............
Delaware..........................................          0.1539          0.1344  ..............
Florida...........................................          0.1758          0.1603  ..............
Georgia...........................................          0.1596          0.1443  ..............
Hawaii............................................          0.2700          0.2600  ..............
Idaho.............................................          0.1402          0.1215  ..............
Illinois..........................................          0.1514          0.1283  ..............
Indiana...........................................          0.1503          0.1294  ..............
Iowa..............................................          0.1507          0.1285  ..............
Kansas............................................          0.1403          0.1214  ..............
Kentucky..........................................          0.1527          0.1349  ..............
Louisiana.........................................          0.1596          0.1443  ..............
Maine.............................................          0.1539          0.1344  ..............
Maryland..........................................          0.1539          0.1344  ..............
Massachusetts.....................................          0.1539          0.1344  ..............
Michigan..........................................          0.1478          0.1264  ..............
Minnesota.........................................          0.1512          0.1277  ..............
Mississippi.......................................          0.1596          0.1443  ..............
Missouri (Northern)...............................          0.1403          0.1214  ..............
Missouri (Southern)...............................          0.1467          0.1254  ..............
Montana...........................................          0.1512          0.1277  ..............
Nebraska..........................................          0.1403          0.1214  ..............
Nevada............................................          0.1388          0.1128  ..............
New Hampshire.....................................          0.1539          0.1344  ..............
New Jersey........................................          0.1539          0.1344  ..............
New Mexico........................................          0.1323          0.1108  ..............
New York..........................................          0.1539          0.1303  ..............
North Carolina....................................          0.1527          0.1349  ..............
North Dakota......................................          0.1512          0.1277  ..............
Ohio..............................................          0.1506          0.1302  ..............
Oklahoma..........................................          0.1596          0.1443  ..............
Oregon............................................          0.1402          0.1215  ..............
Pennsylvania (Eastern)............................          0.1539          0.1340  ..............
Pennsylvania (Western)............................          0.1539          0.1302  ..............
Puerto Rico.......................................          0.2550          0.2570  ..............
Rhode Island......................................          0.1539          0.1344  ..............
South Carolina....................................          0.1527          0.1349  ..............
South Dakota......................................          0.1512          0.1277  ..............
Tennessee.........................................          0.1527          0.1349  ..............
Texas.............................................          0.1405          0.1194  ..............
Vermont...........................................          0.1539          0.1344  ..............
Virginia..........................................          0.1527          0.1349  ..............

[[Page 11526]]

 
Washington........................................          0.1402          0.1215  ..............
West Virginia.....................................          0.1506          0.1302  ..............
Wisconsin.........................................          0.1535          0.1305  ..............
Wyoming...........................................          0.1403          0.1214  ..............
----------------------------------------------------------------------------------------------------------------
Note: Calculations are rounded to 7 decimal places.
* Payment rates for 2007 are currently unavailable, but will be based on the annual average Mailbox milk price
  for the Marketing Order, applicable to the State where the eligible disaster county is located, as reported by
  the Agricultural Marketing Service, consistent with payment rates provided for 2005 and 2006.

    (b) Subject to the availability of funds, each eligible dairy 
operation's payment is calculated by multiplying the applicable payment 
rate under paragraph (a) of this section by the operation's total 
eligible losses as adjusted pursuant to this part. Where there are 
multiple producers in the dairy operation, individual producers' 
payments are disbursed according to each producer's share of the dairy 
operation's production as specified in the application.
    (c) If the total value of losses claimed nationwide under paragraph 
(b) of this section exceeds the $16 million available for the DDAP-III, 
less any reserve that may be created under paragraph (e) of this 
section, total eligible losses of individual dairy operations that, as 
calculated as an overall percentage for each full disaster claim period 
applicable to the disaster declaration, are greater than 20 percent of 
the total base annual production will be paid at the maximum rate under 
paragraph (a) of this section to the extent available funding allows. A 
loss of over 20 percent in only one or two months during the applicable 
disaster claim period does not of itself qualify for the maximum per-
pound payment. Rather, the priority level must be reached as an average 
over the whole disaster claim period for the relevant calendar year. 
Total eligible losses for a producer, as calculated under Sec.  
786.106, of less than or equal to 20 percent during the eligible claim 
period will then be paid at a rate, not to exceed the rate allowed in 
paragraph (a) of this section, determined by dividing the eligible 
losses of less than 20 percent by the funds remaining after making 
payments for all eligible losses above the 20-percent threshold.
    (d) In no event will the payment exceed the value determined by 
multiplying the producer's total eligible loss times the average price 
received for commercial milk production in the producer's area as 
defined in paragraph (a) of this section.
    (e) No participant will receive disaster benefits under this part 
that in combination with the value of production not lost would result 
in an amount that exceeds 95 percent of the value of the expected 
production for the relevant period as estimated by the Secretary. 
Unless otherwise program funds would not be fully expended, the sum of 
the value of the production not lost, if any; and the disaster payment 
received under this part, cannot exceed 95 percent of what the 
production's value would have been if there had been no loss. In no 
case, however, may the value of production and the payment exceed the 
value the milk would have without the loss.
    (f) A reserve may be created to handle pending or disputed claims, 
but claims will not be payable once the available funding is expended.


Sec.  786.108  Availability of funds.

    The total available program funds are $16 million as provided by 
section 9007 of Title IX of Public Law 110-28.


Sec.  786.109  Appeals.

    Provisions of the appeal regulations set forth at 7 CFR parts 11 
and 780 apply to this part. Appeals of determinations of ineligibility 
or payment amounts are subject to the limitations in Sec. Sec.  786.107 
and 786.108 and other limitations that may apply.


Sec.  786.110  Misrepresentation, scheme, or device.

    (a) In addition to other penalties, sanctions, or remedies that may 
apply, a dairy producer is ineligible to receive assistance under this 
program if the producer is determined by FSA to have:
    (1) Adopted any scheme or device that tends to defeat the purpose 
of this program,
    (2) Made any fraudulent representation,
    (3) Misrepresented any fact affecting a program determination, or
    (4) Violated 7 CFR 795.17 and thus be ineligible for the year(s) of 
violation and the subsequent year.
    (b) Any funds disbursed pursuant to this part to any person or 
dairy operation engaged in a misrepresentation, scheme, or device, must 
be refunded with interest together with such other sums as may become 
due. Interest will run from the date of the disbursement to the 
producer or other recipient of the payment from FSA. Any person or 
dairy operation engaged in acts prohibited by this section and any 
person or dairy operation receiving payment under this part is jointly 
and severally liable with other persons or dairy operations involved in 
such claim for benefits for any refund due under this section and for 
related charges. The remedies provided in this part are in addition to 
other civil, criminal, or administrative remedies that may apply.


Sec.  786.111  Death, incompetence, or disappearance.

    In the case of death, incompetency, disappearance, or dissolution 
of an individual or entity that is eligible to receive benefits in 
accordance with this part, such alternate person or persons specified 
in 7 CFR part 707 may receive such benefits, as determined appropriate 
by FSA.


Sec.  786.112  Maintaining records.

    Persons applying for benefits under this program must maintain 
records and accounts to document all eligibility requirements specified 
herein and must keep such records and accounts for 3 years after the 
date of payment to their dairy operations under this program. 
Destruction of the records after such date is at the risk of the party 
required, by this part, to keep the records.


Sec.  786.113  Refunds; joint and several liability.

    (a) Excess payments, payments provided as the result of erroneous 
information provided by any person, or payments resulting from a 
failure to meet any requirement or condition for payment under the 
application or this part, must be refunded to FSA.
    (b) A refund required under this section is due with interest 
determined in accordance with paragraph (d) of this section and late 
payment charges as provided in 7 CFR part 792. Notwithstanding any 
other regulation, interest will be due from the date of the 
disbursement to the producer or other recipient of the funds.

[[Page 11527]]

    (c) Persons signing a dairy operation's application as having an 
interest in the operation will be jointly and severally liable for any 
refund and related charges found to be due under this section.
    (d) In the event FSA determines a participant owes a refund under 
this part, FSA will charge program interest from the date of 
disbursement of the erroneous payment. Such interest will accrue at the 
rate that the United States Department of the Treasury charges FSA for 
funds plus additional charges as deemed appropriate by the 
Administrator or provided for by regulation or statute.
    (e) The debt collection provisions of part 792 of this chapter 
applies to this part except as is otherwise provided in this part.


Sec.  786.114  Miscellaneous provisions.

    (a) Payments or any portion thereof due under this part must be 
made without regard to questions of title under State law and without 
regard to any claim or lien against the livestock, or proceeds thereof, 
in favor of the owner or any other creditor except agencies and 
instrumentalities of the U.S. Government.
    (b) Any producer entitled to any payment under this part may assign 
any payments in accordance with the provisions of 7 CFR part 1404.


Sec.  786.115  Termination of program.

    This program will be terminated after payment has been made to 
those applicants certified as eligible pursuant to the application 
period established in Sec.  786.104. All eligibility determinations 
will be final except as otherwise determined by the Deputy 
Administrator. Any claim for payment may be denied once the allowed 
funds are expended, irrespective of any other provision of this part.

    Signed at Washington, DC, on February 20, 2008.
Thomas B. Hofeller,
Acting Administrator, Farm Service Agency.
 [FR Doc. E8-4141 Filed 3-3-08; 8:45 am]
BILLING CODE 3410-05-P