[Federal Register Volume 74, Number 57 (Thursday, March 26, 2009)]
[Rules and Regulations]
[Pages 13055-13061]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-6726]



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  Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules 
and Regulations  

[[Page 13055]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AB98


Common Crop Insurance Regulations, Tobacco Crop Insurance 
Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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

SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the 
Common Crop Insurance Regulations Tobacco Crop Provisions. The amended 
provisions removed the Quota Tobacco Crop Insurance Provisions, and 
revised the Guaranteed Tobacco Crop Insurance Provisions, and changed 
the title of the Guaranteed Tobacco Crop Insurance Provisions to 
Tobacco Crop Insurance Provisions. The intended effect of this action 
is to provide policy changes and clarify existing policy provisions to 
better meet the needs of insured producers. The changes will apply for 
the 2010 and succeeding crop years.

DATES: This rule is effective May 26, 2009.

FOR FURTHER INFORMATION CONTACT: Gary Johnson, Risk Management 
Specialist, Product Management, Product Administration and Standards 
Division, Risk Management Agency, United States Department of 
Agriculture, P.O. Box 419205, Stop 0812, Room 421, Kansas City, MO 
64141-6205, telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be non-significant for the 
purposes of Executive Order 12866 and, therefore, it has not been 
reviewed by the Office of Management and Budget (OMB).

Paperwork Reduction Act of 1995

    Pursuant to the provisions of the Paperwork Reduction Act of 1995 
(44 U.S.C. chapter 35), the collections of information in this rule 
have been approved by OMB under control number 0563-0053.

E-Government Act Compliance

    FCIC is committed to complying with the E-Government Act of 2002, 
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.

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 the UMRA) for 
State, local, and tribal governments or the private sector. Therefore, 
this rule is not subject to the requirements of sections 202 and 205 of 
UMRA.

Executive Order 13132

    It has been determined under section 1(a) of Executive Order 13132, 
Federalism, that this rule does not have sufficient implications to 
warrant consultation with the States. The provisions contained in this 
rule will not have a substantial direct effect on States, or on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

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, and all producers are required to submit a notice of 
loss and production information to determine the amount of 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 as large entities 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 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. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. With respect to any direct action taken by FCIC 
or to require the insurance provider to take specific action under the 
terms of the crop insurance policy, the administrative appeal 
provisions published at 7 CFR part 11 must be exhausted before any 
action against FCIC for judicial review may be brought.

Environmental Evaluation

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

[[Page 13056]]

    This rule finalizes changes to the Common Crop Insurance 
Regulations by removing the Quota Tobacco Crop Insurance Provisions and 
reserving Sec.  457.156. FCIC also changes the Guaranteed Tobacco Crop 
Insurance Provisions by changing the title to Tobacco Crop Insurance 
Provisions. The American Jobs Creation Act of 2004 eliminated the 
tobacco quota support program and quota support price as administered 
by the Farm Service Agency (FSA). Prior to the American Jobs Creation 
Act of 2004, tobacco was sold in United States Department of 
Agriculture (USDA) auction warehouses. The prices paid by various 
auction warehouses by tobacco companies were based upon the quality and 
grade of the tobacco. Today the majority of tobacco is grown and sold 
under contract with a tobacco company. Therefore, a new environment 
exists for tobacco production and marketing and FCIC proposed to revise 
the tobacco policy to reflect this new environment. These changes were 
published by FCIC on Wednesday, May 23, 2007, as a notice of proposed 
rulemaking in the Federal Register at 72 FR 28895-28901. The public was 
afforded 60 days to submit written comments after the regulation was 
published in the Federal Register.
    A total of 207 public comments were received from 131 commenters. 
The commenters were insurance providers, agents, an insurance service 
organization, attorneys, trade associations, producers, grower 
associations, agriculture credit associations, State agricultural 
associations, State departments of agriculture, and other interested 
parties.
    Based on these public comments, FCIC will not require a tobacco 
producer to have a tobacco contract with a tobacco company for their 
tobacco to be eligible for crop insurance, nor will an insured with a 
contract be allowed to insure tobacco using a contract price. FCIC 
recognized the proposed rule requiring a tobacco contract could deny 
insurance coverage to tobacco producers in regions where a tobacco 
contract is traditionally not offered, such as the New England States. 
Also, FCIC recognized the proposed rule requiring a tobacco contract 
could deny insurance coverage for small tobacco producers in other 
regions who cannot obtain a tobacco contract. Since contracts are no 
longer required, all provisions related to the contracting requirement 
are also removed. This would include the use of a base price to 
determine the price election, requirements to sign contracts prior to 
the acreage reporting date and quality adjustment based on contractual 
standards.
    Due to statutory language contained in the Food, Conservation, and 
Energy Act of 2008, FCIC removed the ``basic unit'' definition in 
section 1 of the proposed rule and will retain the current ``basic 
unit'' definition in the current Guaranteed Tobacco Crop Provisions and 
Quota Tobacco Crop Provisions in this final rule.
    The public comments regarding the proposed rule and FCIC's 
responses to the comments are listed below identifying issues and 
concerns, and the changes made, if any, to address the comments as 
follows:
    Comment: A commenter requested a clarification on the definition of 
``average price received'' in section 1. It appears the ``average price 
received'' is defined as the average price received for sold 
production. Also, this ``average price received'' is used in the 
calculation of quality adjustment in section 12(e)(4). Based on the 
definition, one would have to wait to quality adjust any tobacco until 
the production has actually been sold. In addition to waiting until the 
production is sold, it would not be possible to quality adjust mature 
appraised tobacco production. A change to the definition or an 
additional definition needs to be considered.
    Response: FCIC has removed the definition of ``average price 
received'' and will retain the existing policy definition of ``average 
value,'' which includes the average value of any production for the 
applicable tobacco type divided by the appraised pounds and/or 
harvested pounds without regard to discounts or incentives. Retention 
of the ``average value'' definition allows quality adjustment to be 
performed without waiting for the producer to sell the insured tobacco.
    Comment: A commenter questioned the phrase ``without regard to 
discounts or incentives'' in the definition of ``average price 
received'' whether this means ``excluding'' discounts or incentives.
    Response: FCIC has removed the definition of ``average price 
received'' and will retain the existing policy definition of ``average 
value''. Therefore, discounts or incentives are not applicable.
    Comment: Comments were received opposing the definition of ``basic 
unit'' in section 1 and the provisions in section 2 that limits units 
by tobacco type. A few commenters agreed with the proposed rule ``basic 
unit'' definition to limit units by tobacco type, but stated FCIC 
should allow optional and enterprise units by the Special Provisions 
where appropriate. Other commenters stated division by basic or 
optional units by farm serial number (FSN) should be retained because 
of the occurrences of drastic weather patterns on one farm and not the 
other. Other commenters stated tobacco growers should be treated the 
same as producers of other Category B crops, which allows optional 
units by FSN or by section.
    Response: Due to statutory language in the Food, Conservation, and 
Energy Act of 2008, FCIC has removed the ``basic unit'' definition in 
section 1 of the proposed rule and will retain the ``basic unit'' 
definition in the current Guaranteed Tobacco Crop Provisions and Quota 
Tobacco Crop Provisions in this final rule. Section 2 of these Crop 
Provisions allows optional and enterprise units if authorized in the 
Special Provisions.
    Comment: A commenter suggested that if the definition of 
``commercial tobacco producer'' is necessary, it should be included in 
the definition of ``tobacco contract'' in reference to ``producer or 
entity''.
    Response: FCIC is no longer requiring a tobacco producer to have a 
tobacco contract with a tobacco company for their tobacco to be 
eligible for crop insurance. Therefore, FCIC has removed the definition 
of ``commercial tobacco producer'' and all references to this term in 
this final rule.
    Comment: A commenter stated the definition of ``contract price'' 
needs to be clarified because tobacco contracts often contain multiple 
prices based on the type of tobacco grade and level of tobacco stalk 
position.
    Response: As stated above, FCIC is no longer requiring a tobacco 
producer to have a tobacco contract with a tobacco company for their 
tobacco to be eligible for crop insurance. Therefore, FCIC removed the 
definition of ``contract price'' and all references to this term in 
this final rule.
    Comment: A commenter stated the definition of ``minimum acreage'' 
needs clarification because the tobacco contract specifies the total 
pounds of tobacco to be delivered by the producer, plus the contract is 
not county specific.
    Response: As stated above, FCIC is no longer requiring a tobacco 
producer to have a tobacco contract with a tobacco company for their 
tobacco to be eligible for crop insurance. Therefore, FCIC removed the 
definition of ``minimum acreage'' and all references to this term in 
this final rule.
    Comment: A few comments were received regarding the definition of 
``price election.'' The commenters asked how would the price election 
be determined if an insured had multiple contracts for the same type of 
tobacco

[[Page 13057]]

within the unit. Another comment stated the definition does not 
recognize that contract prices will vary by the type and grade of 
tobacco.
    Response: As stated above, FCIC is no longer requiring a tobacco 
producer to have a tobacco contract with a tobacco company for their 
tobacco to be eligible for crop insurance. Since contracts are no 
longer required, contract prices will no longer be used. Therefore, 
FCIC removed the definition of ``price election'' in this final rule. 
The definition of ``price election'' contained in the Basic Provisions 
is applicable to these Tobacco Crop Insurance Provisions.
    Comment: A commenter noted FCIC deleted the definition of 
``production guarantee'' and recommends FCIC should retain the old 
``production guarantee'' definition in the policy and add the term 
``acres'' multiplied by the approved yield, multiplied by the coverage 
level percentage selected.
    Response: Tobacco is an actual production history (APH) crop. 
Therefore, the definition of ``production guarantee (per acre)'' in the 
Basic Provisions is applicable to the Tobacco Crop Insurance Provisions 
and is consistent with other APH crops. No change has been made.
    Comment: A commenter questioned whether the definition of ``tobacco 
bed'' is relevant to today's current tobacco farming operations.
    Response: Tobacco beds are still used by tobacco producers in their 
farming operations. Therefore, the definition of ``tobacco bed'' is 
left in this final rule.
    Comment: A commenter recommended revising the definition of 
``tobacco company'' to include the terms ``tobacco company,'' 
``commercial marketing association'' and ``tobacco handler'' to reduce 
two other definitions into one.
    Response: As stated above, FCIC is no longer requiring a tobacco 
producer to have a tobacco contract with a tobacco company for their 
tobacco to be eligible for crop insurance. Therefore, FCIC removed the 
definitions of ``tobacco company,'' ``commercial marketing 
association,'' and ``tobacco handler'' and all references to these 
terms in this final rule.
    Comment: A few comments were received regarding the definition of 
``tobacco contract''. A commenter recommended revising the definition 
of ``tobacco contract'' to state, ``A written agreement between the 
insured producer or entity and a tobacco company.'' This will clarify 
the insured must be a party to the underlying contract. Further, FCIC 
should revise subsections (a) and (b) accordingly. This revision is 
consistent with section 6(a), which requires the entity named on the 
tobacco contract to be the same as the entity named on the application 
for insurance. Another commenter stated tobacco companies will only 
give one contract name on their paperwork/checks, even if a share 
exists. The proposed policy language and elsewhere needs additional 
review to address the problem of a tobacco contact being in one entity 
name but other entities (not named on the tobacco contract) also having 
a share they wish to insure. A commenter stated subsection (b) of the 
definition of ``tobacco contract'' includes the phrase, ``(an option to 
purchase is not a commitment)'' [to purchase the tobacco pounds 
specified]. This language was a problem before for another contract 
crop and suggested revising the language to comply with other contract 
crops.
    Response: As stated above, FCIC is no longer requiring a tobacco 
producer to have a tobacco contract with a tobacco company for their 
tobacco to be eligible for insurance. Therefore, FCIC removed the 
definition of ``tobacco contract'' and all references to this term in 
this final rule.
    Comment: A commenter stated, although tobacco types are defined in 
the Special Provisions, the definition of ``Tobacco types'' should 
identify the various types of tobacco insured under the policy and 
include the caveat, not all types are insurable in all States.
    Response: It would be more confusing to add the insurable types to 
the policy because, as the commenter states, not all types are produced 
in all states. Further, new types may be developed that would require a 
revision to the policy to be effective. By including only the insurable 
tobacco types in a county in the Special Provisions, which are provided 
annually to the producer, there should be no confusion in any county 
what types are insurable. Therefore no change has been made.
    Comment: Comments were received opposing the proposed rule in 
section 2 to limit units by type. A few commenters agreed with the unit 
division to limit basic units by type; but stated, if FCIC intends on 
limiting units by type, the inclusion of a Special Provision of 
Insurance statement will provide FCIC the flexibility if it later 
decides in certain instances, optional units or enterprise units are 
appropriate. Other commenters stated the unit division for basic and 
optional units by FSN contained in the current Guaranteed and Quota 
Tobacco Crop Provisions should be retained. Other commenters stated 
tobacco growers should be treated the same as producers of other 
Category B crops, which allows for optional units by FSN or by section.
    Response: Due to statutory language contained in the Food, 
Conservation, and Energy Act of 2008, FCIC removed the ``basic unit'' 
definition in section 1 of the proposed rule and will retain the 
current ``basic unit'' definition in the current Guaranteed Tobacco 
Crop Provisions and Quota Tobacco Crop Provisions in this final rule. 
Section 2 of these Crop Provisions allows optional and enterprise units 
by the Special Provisions. However, the program integrity problems that 
revising the definition of ``basic unit'' was intended to address still 
exist. The loss ratio remains high in many areas and there have been 
issues with producers shifting production between units and between 
policies. FCIC is examining other changes to the policy that will 
prevent such program vulnerabilities.
    Comment: A few commenters stated the term ``sufficient acreage'' as 
referenced in section 3(b) is a defined term and should be included in 
section 1. A commenter asked why FCIC is imposing a set number of 
``sufficient acres'' on an insured deemed to have acreage for producing 
their contract poundage and then reduce the production guarantee if the 
insured did not plant enough acreage to fill their contract. This 
language penalizes the insured for planting fewer acres than the 
required number of acres which would be expected to produce the 
contracted amount of production. This would be an issue between the 
insured and the tobacco company if the insured was not able to produce 
the number of pounds required to fulfill the contract. The commenter 
also states this provision is internally inconsistent and does not 
provide the basis upon which one can determine whether the acreage is 
sufficient. Another commenter suggested FCIC to reconsider section 3 
and recommend using language in the Loss Adjustment Manual (LAM) to 
address how the total production guarantee is computed for all other 
contracted crops.
    Response: As stated above, FCIC is no longer requiring a tobacco 
producer to have a tobacco contract with a tobacco company for their 
tobacco to be eligible for insurance. Therefore, there is no longer a 
``sufficient acreage'' requirement and FCIC has removed all references 
to this term in this final rule.
    Comment: In reference to section 3(a), a commenter asked if Cigar 
Binder and Cigar Wrapper are tobacco types insured under the Tobacco 
Crop Insurance Provisions, and whether each insured tobacco type is 
insured as a separate crop, which is designated by a ``crop

[[Page 13058]]

code'' on the actuarial documents. Also, if a producer intends on 
insuring three types of tobacco, the commenter asks if the tobacco 
producer should be required to list all types separately on the 
application, will the tobacco producer be allowed to add a tobacco type 
at the acreage reporting date so long as the tobacco type is reported 
on their application, or with reference to the provision in subsection 
7(a), are tobacco producers only allowed coverage if the specific 
tobacco type is timely applied for by sales closing date.
    Response: Cigar Binder and Cigar Wrapper and other insurable 
tobacco types listed on the Special Provisions are insured as separate 
crops under these Tobacco Crop Insurance Provisions. The tobacco 
producer must elect each tobacco type being insured by the sales 
closing date. The tobacco producer cannot add a tobacco type to the 
acreage report if the tobacco producer did not elect to insure the 
tobacco type by the sales closing date.
    Comment: A few comments were received regarding the requirement in 
section 6(a), which states the insured is to provide a copy of all 
tobacco contracts to the approved insurance provider on or before the 
acreage reporting date and the name on the tobacco contract match the 
insured entity name. The commenters ask whether it is FCIC's intention 
the approved insurance provider, rather than the agent as designee/
affiliate, must review each contract for this requirement.
    Response: As stated above, FCIC is no longer requiring a tobacco 
producer to have a tobacco contract with a tobacco company for their 
tobacco to be eligible for crop insurance. Therefore, no tobacco 
contracts have to be submitted by the insured producer.
    Comment: A few commenters questioned why section 6(b) is requiring 
a copy of a written lease agreement, if applicable, between the insured 
and any landlord or tenant identifying all persons sharing in the crop 
and must be provided on or before the acreage reporting date.
    Response: There have been issues in the past with the proper 
identification of persons with a share in the crop when leases have 
been involved and the amount of such shares. FCIC added this provision 
to assist insurance providers in properly determining and verifying who 
has an insurable interest and that the reported shares in the insured 
crop are accurate.
    Comment: A commenter stated the following: (1) The use of the 
phrase, ``elect to insure'' in section 7(a) means an insured is not 
required to insure each tobacco type the insured grows in the county; 
(2) It is unclear when the insured must report all tobacco (insured or 
insurable) types produced in a county; and (3) Further, if the tobacco 
producer grows tobacco that is not insurable, i.e., not grown under a 
tobacco contract, the commenter asked whether the insured must report 
this tobacco too.
    Response: (1) FCIC agrees the use of the phrase, ``elect to 
insure'' in section 7(a) means a tobacco producer is not required to 
insure all insurable tobacco types the tobacco producer grows in the 
county. (2) and (3) Section 6 of the Basic Provisions requires 
producers to report all acreage of the crop in the county, including 
insurable and uninsurable on or before the acreage reporting date. 
Since each type is considered a separate crop, all insurable and 
uninsurable acreage of each type the producer elects to insure must be 
reported. However, as stated above, the provisions regarding the 
requirement to have a contract with a tobacco company have been 
removed. Therefore, failure to have a contract no longer makes the 
tobacco uninsurable.
    Comment: A commenter stated the provision in section 7(a) provides 
insureds the option to elect which types of tobacco to insure by 
treating each tobacco type as a separate crop, and presumably a 
separate administrative fee would apply to each type insured. The 
commenter recommended the provisions in section 7(a) be revised to 
require all insurable tobacco types grown by the insured to be the crop 
insured. This would be similar to the Dry Beans Crop Provisions which 
requires all dry bean types to be the crop insured.
    Response: FCIC has always allowed tobacco types to be insured as 
separate crops with separate administrative fees. This provision simply 
provides a clarification of the existing requirement. This proposed 
change would be a substantive change for which the public was not 
provided the opportunity to comment. Therefore, no change can be made.
    Comment: Comments were received opposing the proposed rule that 
only tobacco grown under a tobacco contract is eligible for insurance. 
Commenters stated FCIC's contention that the majority of tobacco is 
grown under contract with a tobacco company is not accurate as to all 
types of tobacco in all regions. Also, the commenter stated this 
requirement will adversely impact tobacco producers in the New England 
States, substantially all of whom grow the tobacco types for which 
tobacco contracts are not traditionally offered.
    A commenter disagreed with FCIC's certification in the Regulatory 
Flexibility Act that the proposed rule regulation will not have 
significant impact on a substantial number of small entities. The 
requirement of a tobacco contract will effectively disqualify a 
significant number of Cigar Binder, Filler and Wrapper tobacco 
producers. For this reason the commenter believes FCIC is not in 
compliance with the Regulatory Flexibility Act. Some commenters agreed 
with the proposed rule requirement to insure only tobacco grown under 
contract for the majority of tobacco acreage, but FCIC should allow 
insurance for certain tobacco types grown without a tobacco contract 
via the Special Provisions.
    Response: As stated above, for many of the reasons cited by these 
commenters, FCIC is no longer requiring a tobacco producer to have a 
tobacco contract with a tobacco company for their tobacco to be 
eligible for crop insurance. Therefore, FCIC removed all references to 
this term ``tobacco contract'' in this final rule.
    Comment: A comment recommended adding language to section 8(b) to 
read, ``Failure to obtain plants for replanting is not an insurable 
reason not to replant''.
    Response: The definition of ``practical to replant'' in the Basic 
Provisions states it will be considered ``practical to replant'' 
regardless of the availability of plants or seed. Thus, if the tobacco 
producer fails to obtain tobacco plants for any reason and does not 
replant the damaged acreage when it is practical to replant such 
acreage is not insured. Therefore, no change has been made.
    Comment: A few comments were received regarding changing the end of 
insurance period date in section 9(f) for Flue-Cured tobacco in the 
States of Alabama, Florida, Georgia, North Carolina, and Virginia, and 
moving dates for all other tobacco types to 15 days earlier than 
currently indicated.
    Response: FCIC based the end of the insurance periods on agronomic 
conditions in those States. However, if the commenter has information 
to support changes to the end of insurance periods; such information 
can be submitted to the appropriate Risk Management Agency (RMA) 
Regional Office for consideration. The current policy provisions allow 
for exceptions to the end of insurance period dates by the Special 
Provisions. No change has been made.
    Comment: A commenter questioned in reference to section 10, who 
can, or is going to be required to prove or disprove a fire was caused 
by lightning. Voltage surges and short circuits can

[[Page 13059]]

leave the same physical evidence as lightning in mechanical devices. 
Lightning striking in the middle of a tobacco field or tobacco barn 
will leave no physical evidence of its cause.
    Response: In accordance with section 14(e) of the Basic Provision, 
the burden of proof is on the insured to show that the loss was due to 
an insurable cause. This means to not only establish that a fire 
occurred, the insured must also establish that the fire was due to a 
naturally occurring event (i.e., lightning). Since fire can be caused 
by other naturally occurring events other than lightning, FCIC removed 
the terms ``if caused by lightning.'' As long as the fire can be proven 
to be from any naturally occurring event, it is an insurable cause of 
loss.
    Comment: One commenter asked when representative samples are 
required in reference to section 11. Both the Basic Provisions and the 
Tobacco Crop Insurance Provisions indicate representative samples are 
required, but neither one says when.
    Response: Section 11(b) states that if a notice of damage is filed 
the stalks and stubble must be left intact. However, it does not state 
when samples must be left for unharvested acreage. Section 11(a) is 
revised to require representative samples be left for any field that 
will not be harvested.
    Comment: A commenter stated section 12(a) refers to the commingling 
of production. The proposed rule permits insurance for basic units by 
type only. So, when there is commingled production by type, the 
commenter asks whether the commingled production is allocated on a pro 
rata basis. In the absence of optional units, FCIC must clarify the 
concept of commingled production.
    Response: Section 12(a) references the loss will be determined on a 
unit basis. Due to statutory language contained in the Food, 
Conservation, and Energy Act of 2008, FCIC removed the ``basic unit'' 
definition of section 1 of the proposed rule and will retain the 
current ``basic unit'' definition in the current Guaranteed Tobacco 
Crop Provisions and Quota Tobacco Crop Provisions in this final rule. 
Optional and enterprise units may be allowed by the Special Provisions. 
FCIC will also retain the current language in the section 12(a)(1)(2) 
of the Guaranteed Tobacco Crop Provisions that addressed how commingled 
production is handled for basic and optional units in this final rule 
and makes these Tobacco Crop Provisions consistent with other crop 
policies. If production is commingled, the production will be allocated 
to the liability on the harvested acreage for each unit and in 
accordance with procedures approved by FCIC.
    Comment: A commenter stated if section 12(c) does not define 
``production guarantee (per acre),'' an approved insurance provider 
cannot enforce section 12(c)(1)(i).
    Response: The definition of ``production guarantee (per acre)'' in 
the Basic Provisions is applicable to these Tobacco Crop Insurance 
Provisions. Therefore, there should be no difficulty in applying 
section 12(c)(1)(i).
    Comment: A commenter recommended adding a provision in section 
12(c) stating production to count will be at least 35 percent of all 
unharvested acreage. This provision is warranted due to the costs for 
harvesting tobacco which would not be incurred for an unharvested crop.
    Response: FCIC did not propose changes regarding production to 
count on unharvested acreage so the public was not afforded an 
opportunity to provide comments. Therefore, no change can be made as a 
result of this comment.
    Comment: A commenter stated section 12(c)(1)(i)(E) is inconsistent 
with section 11. Accordingly, this provision should be amended to read, 
``Of any type of tobacco when the stalks and stubble have been 
destroyed in violation of section 11(b)''.
    Response: FCIC has made the change for clarification.
    Comment: A few commenters stated they were not in favor of the 
addition of prevented planting coverage for tobacco and recommend that 
it be removed.
    Response: Prevented planting is a legitimate peril faced by tobacco 
producers. These provisions provide coverage for tobacco producers 
whose acreage is prevented from being planted due to an insured cause 
of loss. These provisions make the tobacco crop insurance program 
consistent with other crop programs. Therefore, FCIC will retain the 
prevented planting coverage provisions.
    In addition to the changes made above, FCIC will remove the 
paragraph immediately preceding section 1 which refers to the order of 
priority of provisions in the event of conflict. This information is 
contained in the Basic Provisions; therefore, it is duplicative and 
should be removed in the Tobacco Crop Insurance Provisions.
    FCIC has also added a new section 12(e) that allows claims to be 
settled based on appraised production even if the acreage has been 
harvested unless we determine that the harvested production is 
inconsistent with appraised production and the producer cannot prove 
that an insurable cause of loss occurred between the appraisal and the 
end of the insurance period that could account for the reduction in 
production. Once tobacco has been harvested and removed from the field 
it is placed in a curing barn and loses its identity. This makes it 
difficult to determine the total production to count at the unit level. 
FCIC realizes this is a program vulnerability. This language allows 
approved insurance providers to settle tobacco claims based on 
appraised tobacco production in the field and helps ensure accuracy in 
determining production to count for claims purposes. The appraised 
production will be determined in accordance with loss adjustment 
procedures approved by FCIC. If the claim is settled on the appraised 
production, redesignated section 12(f) regarding quality adjustment is 
not applicable, since quality adjustment on tobacco can only be 
determined after the tobacco is cured.

 List of Subjects in 7 CFR Part 457

    Crop insurance, Tobacco, Reporting, and recordkeeping requirements.

Final Rule

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Accordingly, as set forth in the preamble, the Federal Crop Insurance 
Corporation amends 7 CFR part 457 as follows:

PART 457--COMMON CROP INSURANCE REGULATIONS

0
1. The authority citation for 7 CFR part 457 continues to read as 
follows:

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


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2. Revise Sec.  457.136 to read as follows:


Sec.  457.136  Tobacco crop insurance provisions

    The Tobacco Crop Insurance Provisions for the 2010 and succeeding 
crop years are as follows:
    FCIC policies:

UNITED STATES DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
    Reinsured policies:
(Appropriate title for insurance provider)
    Both FCIC and reinsured policies:
Tobacco Crop Insurance Provisions

    1. Definitions.
    Average value. For appraised production, the value of such 
production divided by the appraised pounds for the tobacco types. For 
harvested production, the value of such production divided by the 
harvested pounds for the tobacco type.
    Basic unit. In lieu of the definition in the Basic Provisions, a 
basic unit is all

[[Page 13060]]

insurable acreage of an insurable type of tobacco in the county in 
which you have a share on the date of planting for the crop year and 
that is indentified by a single FSA farm serial number at the time 
insurance first attaches under these provisions for the crop year.
    Harvest. Cutting or priming and removing all insured tobacco from 
the unit.
    Hydroponic plants. Seedlings grown in liquid nutrient solutions.
    Late planting period. In lieu of the definition in section 1 of the 
Basic Provisions, the period that begins the day after the final 
planting date for the insured crop and ends 15 days after the final 
planting date, unless otherwise specified in the Special Provisions.
    Planted acreage. In addition to the definition contained in the 
Basic provisions, land in which tobacco seedlings, including hydroponic 
plants, have been transplanted by hand or machine from the tobacco bed 
to the field.
    Pound. Sixteen ounces avoirdupois.
    Priming. A method of harvesting tobacco by which one or more leaves 
are removed from the stalk as they mature.
    Tobacco bed. An area protected from adverse weather in which 
tobacco seeds are sown and seedlings are grown until transplanted into 
the tobacco field by hand or machine.
    Tobacco types. Insurable tobacco as shown on the Special Provisions 
of Insurance.
    2. Unit Division.
    A basic unit will be determined in accordance with the definition 
of basic unit contained in section 1 of these Crop Provisions. Optional 
and enterprise units may be allowed by the Special Provisions of 
Insurance.
    3. Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities.
    In addition to the requirements of section 3 of the Basic 
Provisions, you must select only one price election percentage and 
coverage level for each tobacco type designated in the Special 
Provisions of Insurance that you elect to insure.
    4. Contract Changes.
    In accordance with section 4 of the Basic Provisions, the contract 
change date is November 30 preceding the cancellation date.
    5. Cancellation and Termination Dates.
    In accordance with section 2 of the Basic Provisions, the 
cancellation and termination dates are March 15.
    6. Report of Acreage.
    In addition to the requirements of section 6 of the Basic 
Provisions, you must provide a copy of any written lease agreement, if 
applicable, between you and any landlord or tenant. The written lease 
agreement must:
    (1) Identify all other persons sharing in the crop; and
    (2) Be submitted to us on or before the acreage reporting date.
    7. Insured Crop.
    (a) In accordance with section 8 of the Basic Provisions, the 
insured crop will be each tobacco type you elect to insure and for 
which a premium rate is provided by the actuarial documents:
    (1) In which you have a share;
    (2) That meets all rotation requirements on the Special Provisions 
of Insurance.
    (b) You will be considered to have a share in the insured crop if 
you retain control of the acreage on which the tobacco is grown and you 
are at risk of loss.
    8. Insurable Acreage.
    In addition to the provisions of section 9 of the Basic Provisions, 
we will not insure any acreage that is:
    (a) Planted in any manner other than as provided in the definition 
of ``planted acreage'' in section 1 of these Crop Provisions, unless 
otherwise provided by the Special Provisions of Insurance or by written 
agreement; or
    (b) Damaged before the final planting date to the extent that the 
majority of producers in the area would normally not further care for 
the tobacco crop, unless such crop is replanted or we agree that 
replanting is not practical.
    9. Insurance Period.
    In lieu of the provisions of section 11 of the Basic Provisions, 
coverage ends at the earlier of:
    (a) Total destruction of the tobacco on the unit;
    (b) Removal of the tobacco from the unit where grown, except for 
curing, grading, and packing;
    (c) Abandonment of the crop on the unit;
    (d) Final adjustment of the loss on the unit; or
    (e) The calendar date for the end of the insurance period, which is 
the date immediately following planting and designated by tobacco types 
and states (or as otherwise stated on the Special Provisions of 
Insurance) as follows:
    (i) Flue cured--November 30 in North Carolina and Virginia;
    (ii) Flue cured--October 31 in Alabama, Florida, Georgia, and South 
Carolina;
    (iii) Burley--February 28 in all states;
    (iv) Dark air cured--March 15 in Kentucky, Tennessee, and Virginia;
    (v) Fire cured--April 15 in Kentucky, Tennessee, and Virginia;
    (vi) Cigar Binder, Cigar Filler, and Cigar Wrapper--April 30 in 
Connecticut, Massachusetts, Pennsylvania, and Wisconsin; and
    (vii) Maryland type--May 15 in Maryland and Pennsylvania.
    10. Causes of Loss.
    In accordance with the provisions of section 12 of the Basic 
Provisions, insurance is provided only against the following causes of 
loss that occur during the insurance period:
    (a) Adverse weather conditions;
    (b) Fire;
    (c) Insects, but not damage due to insufficient or improper 
application of pest control measures;
    (d) Plant disease, but not damage due to insufficient or improper 
application of disease control measures;
    (e) Wildlife;
    (f) Earthquake;
    (g) Volcanic eruption; or
    (h) Failure of the irrigation water supply due to a cause of loss 
specified in sections 10(a) through (g) that also occurs during the 
insurance period.
    11. Duties In The Event of Damage or Loss.
    (a) In accordance with section 14 of the Basic Provisions, you must 
maintain representative samples of each unharvested tobacco crop (type) 
for our inspection. The representative samples must be at least 5 feet 
wide (at least two rows), and extend the entire length of each field in 
the unit. The samples must not be harvested or destroyed until after 
our inspection.
    (b) If you have filed a notice of damage, you must leave all 
tobacco stalks and stubble in the unit intact for our inspection. The 
stalks and stubble must not be destroyed until we give you written 
consent to do so or until 30 days after the end of the insurance 
period, whichever is earlier.
    12. Settlement of Claim.
    (a) We will determine your loss on a unit basis. In the event you 
are unable to provide separate acceptable production records:
    (1) For any optional unit, we will combine all optional units for 
which such production records were not provided; or
    (2) For any basic units, we will allocate any commingled production 
to such units in proportion to our liability on the harvested acreage 
for the units.
    (b) In the event of loss or damage covered by this policy, we will 
settle your claim by:
    (1) Multiplying the number of insured acres by your applicable 
production guarantee (per acre);
    (2) Multiplying the result of section 12(b)(1) by your price 
election;
    (3) Multiplying the total production to count determined in section 
12(c) by your price election;

[[Page 13061]]

    (4) Subtracting the result of section 12(b)(3) from the result of 
section 12(b)(2); and
    (5) Multiplying the result of section 12(b)(4) by your share.
    For example:
    You have 100 percent share in a unit to produce 3,000 pounds of 
Burley tobacco, a production guarantee of 1,950 pounds (APH yield of 
3,000 pounds x .65 coverage level), you plant 1.0 acre, your price 
election is $1.50 per pound, and your production to count is 500 
pounds. Your indemnity would be calculated as follows:
    (1) 1.0 acre x 1,950 pounds production guarantee = 1,950 pounds;
    (2) 1,950 pounds x $1.50 price election = $2,925.00 value of the 
production guarantee;
    (3) 500 pounds production to count x $1.50 price election = $750.00 
value of the production to count;
    (4) $2,925.00 value of the production guarantee--$750.00 value of 
the production to count = $2,175.00; and
    (5) $2,175.00 x 1.000 share = $2,175.00 indemnity.
    (c) The total production to count (in pounds) from all insurable 
acreage on the unit will include:
    (1) All appraised production as follows:
    (i) Not less than the production guarantee for acreage:
    (A) That is abandoned;
    (B) Put to another use without our consent;
    (C) That is damaged solely by uninsured causes;
    (D) For which you fail to provide records of production, that are 
acceptable to us; or
    (E) For any type of tobacco when the stalks and stubble have been 
destroyed without our consent under section 11(b);
    (ii) Production lost due to uninsured causes.
    (iii) Potential production on insured acreage you intend to put to 
another use or abandon, if you and we agree on the appraised amount of 
production. Upon such agreement, the insurance period for that acreage 
will end when you put the acreage to another use or abandon the crop. 
If agreement on the appraised amount of production is not reached:
    (A) If you do not elect to continue to care for the crop, we may 
give you consent to put the acreage to another use if you agree to 
leave intact, and provide sufficient care for, representative samples 
of the crop in locations acceptable to us (The amount of production to 
count for such acreage will be based on the harvested production or 
appraisals from the samples at the time harvest should have occurred. 
If you do not leave the required samples intact, or fail to provide 
sufficient care for the samples, our appraisal made prior to giving you 
consent to put the acreage to another use will be used to determine the 
amount of production to count.); or
    (B) If you elect to continue to care for the crop, the amount of 
production to count for the acreage will be the harvested production, 
or our reappraisal if additional damage occurs and the crop is not 
harvested; and
    (2) All harvested production from insurable acreage.
    (d) Once we agree the current year's tobacco has no average value 
due to an insured cause of loss, you must destroy it, and it will not 
be considered production to count. If you refuse to destroy such 
tobacco, we will include it as production to count and value it at the 
applicable price election.
    (e) In lieu of section 15(b) of the Basic Provisions, if we have 
conducted an appraisal of your insured crop and we determine that the 
harvested production you report is inconsistent with the appraised 
production and you cannot prove that an insurable cause of loss 
occurred between the appraisal and the end of the insurance period that 
can account for the reduction in production, your claim will be settled 
based on the appraised production on insured acreage, even if you have 
harvested the acreage. If we settle your claim based on your appraised 
production, section 12(f) regarding quality adjustment is not 
applicable.
    (f) Mature tobacco may be adjusted for quality deficiencies when 
production has been damaged by insurable causes.
    (1) You must contact us before any tobacco is disposed of so we can 
inspect the tobacco to determine the extent of the damage.
    (2) Our inspection will be used to determine whether the average 
value is reasonable. Based on amount of damage determined during the 
inspection, if the average value is:
    (i) Reasonable, such average value will be used to determine the 
quality adjustment in section 12(f)(5);
    (ii) Unreasonable, we may adjust the average value used to 
calculate the quality adjustment in section 12(f)(5).
    (3) If you dispose of any production without giving us the 
opportunity to have the tobacco inspected, you will not receive a 
quality adjustment for such tobacco, regardless of the average value of 
the production.
    (4) Production to count will only be reduced if the average value 
for damaged tobacco is less than 75 percent of your tobacco price 
election. You must provide us with records that are acceptable to us 
which clearly shows the number of pounds, price per pound, and the 
quality of such tobacco.
    (5) Any reduction in the production to count will be determined by:
    (i) Dividing the average value per pound as determined by us in 
accordance with section 12(f)(2) of these Crop Provisions by your 
applicable price election; and
    (ii) Multiplying this result by the number of pounds of damaged 
production.
    13. Late Planting.
    In lieu of late planting provisions in the Basic Provisions 
regarding acreage initially planted after the final planting date, 
insurance will be provided for acreage planted to the insured crop 
after the final planting date as follows:
    (a) The production guarantee (per acre) for acreage planted during 
the late planting period will be reduced by:
    (1) One percent per day for the 1st through the 10th day; and
    (2) Two percent per day for the 11th through the 15th day;
    (b) The premium amount for insurable acreage planted to the insured 
crop after the final planting date will be the same as that for timely 
planted acreage. If the amount of premium you are required to pay 
(gross premium less our subsidy) for acreage planted after the final 
planting date exceeds the liability on such acreage, coverage for those 
acres will not be provided (no premium will be due and no indemnity 
will be paid for such acreage).
    14. Prevented Planting.
    Your prevented planting coverage will be 35 percent of your 
production guarantee for timely planted acreage. Additional prevented 
planting coverage levels are not available for tobacco.


Sec.  457.156  [Removed and Reserved]

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3. Remove and reserve Sec.  457.156.

    Signed in Washington, DC, on March 19, 2009.
William J. Murphy,
Acting Manager, Federal Crop Insurance Corporation.
[FR Doc. E9-6726 Filed 3-25-09; 8:45 am]
BILLING CODE 3410-08-P