[Federal Register Volume 74, Number 172 (Tuesday, September 8, 2009)]
[Proposed Rules]
[Pages 46023-46026]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-21598]


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

  Federal Register / Vol. 74, No. 172 / Tuesday, September 8, 2009 / 
Proposed Rules  

[[Page 46023]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AC10


Common Crop Insurance Regulations; Apple Crop Insurance 
Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Proposed rule with request for comments.

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

SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes to 
amend the Common Crop Insurance Regulations, Apple Crop Insurance 
Provisions. The intended effect of this action is to provide policy 
changes, to clarify existing policy provisions to better meet the needs 
of insured producers, and to reduce vulnerability to program fraud, 
waste, and abuse. The proposed changes will be effective for the 2011 
and succeeding crop years.

DATES: Written comments and opinions on this proposed rule will be 
accepted until close of business November 9, 2009 and will be 
considered when the rule is to be made final.

ADDRESSES: Interested persons are invited to submit comments, titled 
``Apple Crop Provisions'', by any of the following methods:
     By Mail to: Director, Product Administration and Standards 
Division, Risk Management Agency, United States Department of 
Agriculture, Beacon Facility--Mail Stop 0812, Room 421, PO Box 419205, 
Kansas City, MO 64141-6205.
     By Express Mail to: Director, Product Administration and 
Standards Division, Risk Management Agency, United States Department of 
Agriculture, Beacon Facility, Stop 0812, 9240 Troost Avenue, Kansas 
City, MO 64131-3055.
     E-Mail: [email protected].
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    A copy of each response will be available for public inspection and 
copying from 7 a.m. to 4:30 p.m., CST, Monday through Friday, except 
holidays, at 6501 Beacon Drive, Stop 0812, Room 421, Kansas City, MO 
64133-4676.

FOR FURTHER INFORMATION CONTACT: Erin Albright, Risk Management 
Specialist, Product Management, Product Administration and Standards 
Division, Risk Management Agency, United States Department of 
Agriculture, Beacon Facility, Stop 0812, Room 421, PO Box 419205, 
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 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 that 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 proposed rule has been reviewed in accordance with Executive 
Order 12988 on civil justice reform. The

[[Page 46024]]

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

    FCIC proposes to amend the Common Crop Insurance Regulations (7 CFR 
part 457) by revising Sec.  457.158, Apple Crop Insurance Provisions, 
to be effective for the 2011 and succeeding crop years. Several 
requests have been made for changes to improve the coverage offered, 
address program integrity issues, simplify program administration, and 
improve clarity of the policy provisions.
    The proposed changes are as follows:
    1. FCIC proposes to remove the paragraph immediately preceding 
section 1 which refers to the order of priority in the event of a 
conflict. This same information is contained in the Basic Provisions. 
Therefore, it is duplicative and should be removed in the Crop 
Provisions.
    2. Section 1--FCIC proposes to revise the definition of ``apple 
production'' to reference ``fresh apple production and processing apple 
production'' to be consistent with the proposed changes to revise the 
names of the defined terms of ``fresh apples'' and ``processing 
apples'' to ``fresh apple production'' and ``processing apple 
production.''
    FCIC proposes to revise the definition of ``damaged apple 
production'' to remove the reference to ``within each lot, bin, bushel, 
or box, as applicable.'' Questions have been raise regarding whether 
claims for indemnity, including appraisals and quality adjustment 
determinations, were required to be completed for each lot, bin, 
bushel, or box of damaged apples rather than on a unit basis. This 
change is being made to clarify that damage is determined on a unit 
basis.
    FCIC proposes to revise the name of the defined term ``fresh 
apples'' to ``fresh apple production'' for clarification. FCIC also 
proposes to revise the definition to require insureds to certify and, 
if requested by their approved insurance provider, provide verifiable 
records to prove at least 50 percent of their fresh apple acreage was 
sold as fresh apples in one or more of the three most recent crop 
years. FCIC also proposes to revise the definition to clarify insureds 
must follow the recommended cultural practices generally in use for 
fresh apple acreage in the county as determined by agricultural 
experts. These revisions will help ensure processing apple production 
is not insured as fresh apple production.
    FCIC proposes to revise the name of the defined term ``processing 
apples'' to ``processing apple production'' for clarification. FCIC 
also proposes to revise the definition to clarify processing apple 
production is apples from insurable acreage failing to meet the fresh 
apple production requirements.
    FCIC proposes to revise the definition of ``type'' to refer to a 
category of apples as designated in the Special Provisions. This change 
is being made to allow for type changes in the future.
    FCIC proposes to delete the definition of ``lot.'' With the removal 
of any reference to ``lot'' in the definition of ``damaged apple 
production,'' this term will no longer be needed and is no longer 
recognized by the apple industry.
    FCIC also proposes to delete the definition of ``varietal group.'' 
With the removal of the term in the definition of ``type'' and section 
2(b), this term will no longer be needed.
    3. Section 2--FCIC proposes to revise section 2(b) to allow 
optional units by type as specified in the Special Provisions. 
Different types may have significantly different management practices, 
production risks and uses.
    4. Section 3--FCIC proposes to add a new section 3(a) to allow the 
insured to select different coverage levels for all fresh apple acreage 
in the county and for all processing apple acreage in the county.
    FCIC also proposes to revise redesignated section 3(c)(1) to revise 
the list of possible effects on yield potential to include all of the 
items currently listed in section 3(c).
    FCIC proposes to revise redesignated section 3(d) to add provisions 
to specify if the insured fails to notify the insurance provider by the 
production reporting date of an event or action that occurs during the 
crop year that may reduce the yield potential, any loss of production 
from such acreage will result in an appraisal for uninsured causes. The 
yield used to establish the insured's production guarantee will be 
reduced for the subsequent crop year. FCIC also proposes to revise 
redesignated section 3(d) to remove the list of possible effects on 
yield potential and to add language that refers back to section 
3(c)(1)-(4), which currently contains the possible effects on yield 
potential. Removing the list of possible effects on yield potential in 
redesignated section 3(d) eliminates redundancy.
    5. Section 6--FCIC proposes to revise the second sentence in 
section 6 to clarify that only acreage qualifying as fresh apple 
production is eligible for the Optional Coverage for Quality Adjustment 
provisions contained in section 14. This revision will help ensure 
processing apple production is not insured or adjusted as fresh apple 
production.
    6. Section 7--FCIC proposes to add a new section 7(d) to clarify 
the insured crop is apples grown for either fresh apple production or 
processing apple production as defined in section 1.
    7. Section 11--FCIC proposes to add a new section 11(a) to clarify 
the insured must leave representative samples for appraisal purposes if 
required by the insurance provider in accordance with the Basic 
Provisions.
    8. Section 12--FCIC proposes to revise the Basic Coverage example 
in section 12 and move it to follow section 12(b)(7) to be consistent 
with the proposed example in section 14.
    FCIC proposes to remove the current section 12(d) and move the 
provisions to a new section 14(d). FCIC also proposes to add a new 
section 12(d) to state any apple production not graded prior to sale or 
storage will be considered as production to count. Since harvest ends 
the insurance period, no coverage is provided for any subsequent damage 
that occurs after the apple production is sold or placed in storage. 
Provisions have been added to make this clear.
    9. Section 14--FCIC proposes to revise section 14(a) to specify 
that insureds who select the Optional Coverage for Quality Adjustment 
cannot receive less than the indemnity due under section 12.
    FCIC proposes to revise section 14(b)(4) to clarify that production 
to count under the Optional Coverage for Quality Adjustment will 
include all appraised and harvested production from all of the fresh 
apple acreage in the unit.
    FCIC proposes to revise section 14(b)(5) to clarify the percent of 
damaged appraised or harvested apple production is applied within the 
applicable unit.

[[Page 46025]]

    FCIC proposes to revise section 14(b)(5)(v) by adding the phrase 
``or better'' after the phrase ``U.S. Fancy'' to clarify if any fresh 
apple production is sold as U.S. Fancy or better, all such sold 
production will be included as production to count under the Optional 
Coverage for Quality Adjustment.
    FCIC also proposes to add a new section 14(c) to state if any 
production is not graded prior to sale or storage, it will be 
considered as production to count. As stated above, since harvest ends 
the insurance period, no coverage is provided for any subsequent damage 
that occurs after the apple production is sold or placed in storage. 
Provisions have been added to make this clear.
    FCIC proposes to add a new section 14(d) to add provisions that any 
adjustments that reduce your production to count under the Optional 
Coverage for Quality Adjustment will not be applied when determining 
production to count for actual production history (APH) purposes. These 
provisions were previously contained in section 12(d), but since they 
are applicable to the Optional Coverage for Quality Adjustment, they 
are more appropriately included here.
    FCIC proposes to revise the example in section 14 to clarify loss 
calculations under the Optional Coverage for Quality Adjustment to 
include all appraised and harvested production for all of the unit's 
fresh apple acreage.

List of Subjects in 7 CFR Part 457

    Crop insurance, Apple, Reporting and recordkeeping requirements.

Proposed Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation proposes to amend 7 CFR part 457 effective for 
the 2011 and succeeding crop years as follows:

PART 457--COMMON CROP INSURANCE REGULATIONS

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

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

    2. Amend Sec.  457.158 as follows:
    a. Revise the introductory text;
    b. Remove the paragraph immediately preceding section 1;
    c. Add definitions in section 1 for ``fresh apple production'' and 
``processing apple production;'' remove the definitions of ``fresh 
apples,'' ``lot,'' ``processing apples,'' and ``varietal group;'' 
revise the definitions of ``apple production'' and ``type;'' and amend 
the definition of ``damaged apple production'' by removing the phrase 
``, within each lot, bin, bushel, or box, as applicable,'' from both 
paragraphs (a) and (b);
    d. Revise section 2(b);
    e. Amend section 3 by redesignating paragraphs (a), (b), and (c) as 
(b), (c), and (d) respectively, and adding a new paragraph (a);
    f. Revise sections 3(b)(1) and 3(c);
    g. Amend section 6 by removing the phrase ``Blocks of apple acreage 
grown for processing are'' and adding the phrase ``Any acreage not 
qualifying for fresh apple production is'' in its place in the second 
sentence;
    h. Amend section 7(b)(3) by removing the word ``and'' after the 
semicolon at the end;
    i. Amend section 7(c) by removing the period at the end and 
replacing it with ``; and'';
    j. Add a new section 7(d);
    k. Amend section 11 by redesignating the introductory text as 
paragraph (b), redesignating paragraphs (a), (b), and (c) as (1), (2), 
and (3) respectively, and adding a new paragraph (a);
    l. Revise the Basic Coverage Example in section 12 and move it to 
follow section 12(b)(7);
    m. Revise section 12(d);
    n. Amend section 14(a) by adding at the end of the paragraph the 
following sentence, ``Insureds who select this option cannot receive 
less than the indemnity due under section 12.'';
    o. Amend section 14(b)(3) by removing the phrase ``fresh apples'' 
and adding the phrase ``fresh apple production'' in its place and 
removing the phrase ``processing apples'' and adding the phrase 
``processing apple production'' in its place;
    p. Revise section 14(b)(4);
    q. Revise section 14(b)(5) introductory text;
    r. Amend section 14(b)(5) by adding the word ``one'' after the 
phrase ``percent for each full'' in paragraphs (i), (ii), and (iii);
    s. Amend section 14(b)(5)(v) by adding the phrase ``or better'' 
after the phrase ``if you sell any of your fresh apple production as 
U.S. Fancy'';
    t. Add new sections 14(c) and (d);
    u. Revise the Optional Coverage for Quality Adjustment example; and
    The revised and added text reads as follows:


Sec.  457.158  Apple crop insurance provisions.

    The apple crop insurance provisions for the 2011 and succeeding 
crop years are as follows:
* * * * *
    1. Definitions.
    Apple production. All fresh apple production and processing apple 
production from insurable acreage.
* * * * *
    Fresh apple production. Apples: (1) That are sold, or could be 
sold, for consumption without undergoing any change in its basic form, 
such as peeling, juicing, crushing, etc.; (2) from acreage that is 
designated as fresh apples on the acreage report; (3) that follow the 
recommended cultural practices generally in use for fresh apple acreage 
in the county as determined by agricultural experts; and (4) you 
certify and, if requested by us, provide verifiable records to show at 
least 50 percent of the production from acreage reported as fresh apple 
acreage was sold as fresh apples in one or more of the three most 
recent crop years.
* * * * *
    Processing apple production. Apples from insurable acreage failing 
to meet the insurability requirements for fresh apple production that 
are: (1) Sold, or could be sold for the purpose of undergoing a change 
to its basic structure such as peeling, juicing, crushing, etc.; or (2) 
from acreage designated as processing apples on the acreage report.
* * * * *
    Type. A category of apples as designated in the Special Provisions.
    2. Unit Division.
* * * * *
    (b) By type as specified in the Special Provisions.
* * * * *
    3. Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities.
* * * * *
    (a) You may select only one coverage level for all fresh apple 
acreage and only one coverage level for all processing apple acreage.
* * * * *
    (c) * * *
    (1) Any event or action that could impact the yield potential of 
the insured crop including, interplanted perennial crop, removal of 
trees, any damage, change in practices, or any other circumstance that 
may reduce the expected yield upon which the insurance guarantee is 
based, and the number of affected acres;
* * * * *
    (d) We will reduce the yield used to establish your production 
guarantee based on our estimate of such event or action of any of the 
items listed in section 3(c)(1) through (4) as indicated below. If the 
event or action occurred:
    (1) Before the beginning of the insurance period, we will reduce 
the yield used to establish your production guarantee for the current 
crop year as necessary. If you fail to notify us of any

[[Page 46026]]

circumstance that may reduce your yields from previous levels, we will 
reduce your production guarantee at any time we become aware of the 
circumstance;
    (2) Or may occur after the beginning of the insurance period and 
you notify us by the production reporting date, we will reduce the 
yield used to establish your production guarantee for the current crop 
year as necessary; or
    (3) Or may occur after the beginning of the insurance period and 
you fail to notify us by the production reporting date, we will 
appraise your production in accordance with section 12(c)(1)(ii). We 
will reduce the yield used to establish your production guarantee for 
the subsequent crop year.
    7. Insured Crop.
* * * * *
    (d) That are grown for:
    (1) Fresh apple production; or
    (2) Processing apple production.
* * * * *
    11. Duties In the Event of Damage or Loss.
    (a) In accordance with the requirements of section 14 of the Basic 
Provisions, you must leave representative samples in accordance with 
our procedures.
* * * * *
    12. Settlement of Claim.
* * * * *
    (b) * * *
    (7) * * *
    Basic Coverage example:
    You have a 100 percent share in one basic unit with 10 acres of 
fresh apples and 5 acres of processing apples designated on your 
acreage report, with a 600 bushel per acre production guarantee for 
both fresh and processing apples, and a price election of $9.10 per 
bushel for fresh apples and $2.50 per bushel for processing apples. You 
harvest 5,000 bushels of fresh apples and 1,000 bushels of processing 
apples all grading U.S. No. 1 Processing or better. Your indemnity will 
be calculated as follows:

(A) 10 acres x 600 bushels = 6,000 bushel production guarantee of fresh 
apples;
5 acres x 600 bushels = 3,000 bushel production guarantee of processing 
apples;
(B) 6,000 bushel production guarantee x $9.10 price election = 
$54,600.00 value of production guarantee for fresh apples;
3,000 bushel production guarantee x $2.50 price election = $7,500.00 
value of production guarantee for processing apples;
(C) $54,600.00 value of production guarantee for fresh apples + 
$7,500.00 value of production guarantee for processing apples = 
$62,100.00 total value of the production guarantee;
(D) 5,000 bushels of fresh apple production to count x $9.10 price 
election = $45,500.00 value of fresh apple production to count;
1,000 bushels of processing apple production to count x $2.50 price 
election = $2,500.00 value of processing apple production to count;
(E) $45,500.00 value of fresh apple production to count + $2,500.00 
value of processing apple production to count = $48,000.00 total value 
of production to count;
(F) $62,100.00 total value of the production guarantee - $48,000.00 
total value of production to count = $14,100.00 value of loss; and
(G) $14,100.00 value of loss x 100 percent share = $14,100.00 indemnity 
payment.


[End of Example]
* * * * *
    (d) Any apple production not graded prior to the earlier of the 
time apples are placed in storage, or the date the apples are delivered 
to a packer, processor, or other handler will not be considered damaged 
apple production and will be considered production to count.
* * * * *
    14. Optional Coverage for Quality Adjustment.
* * * * *
    (b) * * *
    (4) In lieu of sections 12(c)(1)(iii), (iv) and (2), the production 
to count will include all appraised and harvested production from all 
of the fresh apple acreage in the unit.
    (5) If appraised or harvested fresh apple production within the 
applicable unit is damaged to the extent that more than 20 percent of 
the apple production does not grade U.S. Fancy or better the following 
adjustments will apply:
* * * * *
    (c) Any apple production not graded prior to the earlier of the 
time apples are placed in storage, or the date the apples are delivered 
to a packer, processor, or other handler will not be considered damaged 
apple production and will be considered production to count under this 
option.
    (d) Any adjustments that reduce your production to count under this 
option will not be applicable when determining production to count for 
APH purposes.
    Optional Coverage for Quality Adjustment:
    You have a 100 percent share in 10 acres of fresh apples designated 
on your acreage report, with a 600 bushel per acre guarantee, and a 
price election of $9.10 per bushel. You harvest 5,000 bushels of apples 
from your designated fresh apple acreage, but only 2,650 of those 
bushels grade U.S. Fancy or better. Your indemnity would be calculated 
as follows:

(1) 10 acres x 600 bushels per acre = 6,000 bushel production guarantee 
of fresh apples;
(2) 6,000 bushel production guarantee of fresh apples x $9.10 price 
election = $54,600.00 value of production guarantee for fresh apple 
acreage;
(3) The value of the fresh apple production to count is determined as 
follows:
    (i) 5,000 bushels harvested - 2,650 bushels that graded U.S. Fancy 
or better = 2,350 bushels of fresh apple production not grading U.S. 
Fancy or better;
    (ii) 2,350/5,000 = 47 percent of fresh apple production not grading 
U.S. Fancy or better;
    (iii) In accordance with section 14(b)(5)(ii): 47 percent - 40 
percent = 7 percent in excess of 40 percent;
    (iv) 7 percent x 3 = 21 percent;
    (v) 40 percent + 21 percent = 61 percent;
    (vi) 5,000 bushels harvested x .61 (61 percent) = 3,050 bushels of 
fresh apple production not grading U.S. Fancy or better;
    (vii) 5,000 bushels harvested - 3,050 bushels of fresh apple 
production not grading U.S. Fancy or better = 1,950 bushels of adjusted 
fresh apple production to count;
    (viii) 1,950 bushels of adjusted fresh apples production to count x 
$9.10 price election = $17,745.00 value of fresh apple production to 
count;
(4) $54,600.00 value of production guarantee for fresh apples - 
$17,745.00 value of fresh apple production to count = $36,855.00 value 
of loss;
(5) $36,855.00 value of loss x 100 percent share = $36,855.00 indemnity 
payment.

[End of Example]
* * * * *

    Signed in Washington, DC, on September 1, 2009.
William J. Murphy,
Manager, Federal Crop Insurance Corporation.
[FR Doc. E9-21598 Filed 9-4-09; 8:45 am]
BILLING CODE 3410-08-P