[Federal Register Volume 75, Number 164 (Wednesday, August 25, 2010)]
[Rules and Regulations]
[Pages 52218-52233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-20619]


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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: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the 
Common Crop Insurance Regulations, Apple 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, and to reduce vulnerability to program fraud, waste, and 
abuse. The changes will apply for the 2011 and succeeding crop years.

DATES: This rule is effective August 25, 2010.

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--Mail Stop 0812, PO Box 419205, Kansas 
City, MO 64141-6205, telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION: 

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
rule is non-significant for the purposes of Executive Order 12866 and, 
therefore, it has not been reviewed by 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 through March 
31, 2012.

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) 
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 final 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

    This rule finalizes changes to the Common Crop Insurance 
Regulations, Apple Crop Insurance Provisions that were published by 
FCIC on September 8, 2009, as a notice of proposed rulemaking in the 
Federal Register at 74 FR 46023--46026. The public was afforded 60 days 
to submit written comments after the regulation was published in the 
Federal Register. Based on comments received and specific requests to 
extend the comment period, FCIC published a notice in the Federal 
Register at 74 FR 59108 on November 17, 2009, extending the initial 60-
day comment period for an additional 30 days, until December 17, 2009.
    A total of 193 comments were received from 39 commenters. The

[[Page 52219]]

commenters were members of the U.S. Congress, insurance providers, 
State agricultural associations, agents, an insurance service 
organization, producers, State departments of agriculture, grower 
associations, agricultural credit associations, and other interested 
parties.
    The public comments received regarding the proposed rule and FCIC's 
responses to the comments are as follows:

General

    Comment: Several commenters urged FCIC to extend the comment 
period. A few commenters stated due to the public comment period 
overlapping with the apple harvest in some areas, sixty days was not 
adequate to properly review the proposed changes. The very producers 
the proposed amendment affected need ample time to study the changes 
and make their comments when not in the middle of their busy harvest 
season. An extended comment period would allow producers a fair chance 
to engage themselves in an issue directly affecting their livelihood. A 
commenter recommended extending the comment period six months and 
delaying the changes until the 2011 crop year. Another commenter 
recommended extending the comment period 30 days.
    Response: FCIC elected to reopen the comment period for 30 days and 
on November 17, 2009, a notice of reopening and extension of the 
comment period was published in the Federal Register. Written comments 
and opinions on the proposed rule were accepted until close of business 
on December 17, 2009. The changes in this rule will be effective for 
the 2011 crop year.
    Comment: A commenter stated the changes listed in the proposed rule 
seem reasonable. However, the commenter stressed the importance of 
letting each producer insure by orchard block, and not just as a farm 
entity. Each orchard block is in a different location and carries a 
different variety, and therefore a different value of ``fresh apple 
production.'' The location can also determine whether a certain block 
is more prone to weather damage than another. Considering these 
variables, it would be unreasonable to force apple producers to insure 
as a farm entity rather than by block.
    Response: Crop insurance is provided on a unit basis in accordance 
with the Basic Provisions and section 2 of the Apple Crop Provisions, 
not by block or farm entity. Therefore, policyholders must report 
acreage of a crop on a unit basis because all insurable acreage of 
apples within the unit is the basis for determining coverage, premium, 
and indemnity. Apple acreage may be divided into optional units 
according to section 34 of the Basic Provisions and section 2 of the 
Apple Crop Insurance Provisions. Section 2 of the Apple Crop Insurance 
Provisions allows optional units on noncontiguous land or for different 
types. No change has been made.
    Comment: A commenter requested that a packing house inspection on 
apples not be added to the policy. The commenter stated that apples are 
already a perishable product and delays can cost the producer a great 
deal especially if the product has been damaged.
    Response: The current Apple Crop Provisions do not reference 
packing house inspections and no changes regarding packing house 
inspections were proposed. No change has been made.
    Comment: Several commenters urged FCIC to increase the price 
election for processing apples. A few commenters stated they do not 
spray, fertilize, prune, weed spray or thin differently for processing 
apples or fresh market apples in their area, but realize this is not 
the case in every State. Because of this, the commenters think the 
processing apple price election is too low. A commenter stated their 
reason for the requested price increase is the U.S. Standards for 
processing apples, established on June 1, 1961, no longer reflects the 
present industry standards that producers must meet. These new 
standards are much higher and are more costly to meet. Comparing a 
large apple processing plant's processing requirements to U.S. 
1 Processing or U.S. 1, the quality requirements are 
U.S. 1 not U.S. 1 Processing. This is especially true 
in reference to peeling the apple. In another processor's standard, the 
amount of allowable defects is 2 percent by weight not the 5 percent 
allowed by U.S. 1 processing.
    A commenter recommended the processing apple price be 50 percent of 
the fresh market apple price. A few commenters recommended the 
processing price election be $6.00 to $7.00 per bushel. A few 
commenters stated the processing price election should be $5.50 per 
bushel. Another commenter stated the average price received for 
processing over the past three years in their area was $4.54 and 
believes this should be a minimum price for processing apples.
    Response: FCIC establishes the price for apples through the Special 
Provisions because such prices must be set each year. Further, the 
price is not based on the cost of producing the crop. The price is 
based on the best estimate of the average price producers can expect to 
receive for mature on-tree fruit ready for harvest. Since the Federal 
Crop Insurance Act (Act) limits coverage to crops in the field, with 
only a few exceptions, post-harvesting costs are excluded from the 
price data used to arrive at the value of processing apples for crop 
insurance purposes. Further, FCIC has no authority to arbitrarily set 
the suggested price or set a minimum price. According to the Act, the 
price election is the expected market price at the time of harvest. Any 
change to price elections for apples will be stated in the Special 
Provisions. No change has been made.

Section 1--Definitions

    Comment: A few commenters stated the definition of ``damaged apple 
production'' should be revised to indicate that U.S. Fancy or better 
may be modified in the Special Provisions to make it clear that the 
Special Provisions have the authority to change these grades (i.e. 
Washington Fancy Grade, marketing orders, etc.).
    Response: The definition of ``grade standards'' has language 
referencing the Special Provisions to provide for the use of existing 
or acceptable apple grade standards that are approved and enforced by 
individual States, regions, or organizations. This is to prevent 
producers from being penalized because their State or area uses a 
slightly different standard. For example, Washington Fancy Grade is 
comparable to U.S. Fancy Grade. However, for the purposes of 
determining damage, only those standards provided in the Special 
Provisions, which are comparable to U.S. No. 1 Processing Grade and 
U.S. Fancy Grade, will be used. No change has been made.
    Comment: A commenter stated the proposed definition of ``fresh 
apple production'' stating policyholders must ``follow the recommended 
cultural practices generally in use for fresh apple acreage in the 
county as determined by agricultural experts'' is not practical. 
According to the Common Crop Insurance Policy Basic Provisions, 
agricultural experts are ``persons who are employed by the Cooperative 
State Research, Education and Extension Service or the agricultural 
departments of universities, or other person approved by FCIC.'' The 
commenter believed the ``expert'' should be the crop adjuster using 
guidelines to determine what apple variety is commonly grown for 
processing (ex. Taylor Rome or York). The extension agent is charged to 
help educate the commercial farmer using research based information. 
The

[[Page 52220]]

commenter believed extension agents should not be a regulator/expert 
for crop insurance.
    Response: Due to frequent changes in apple cultural practices apple 
growers used in different areas of the country, neither FCIC nor the 
insurance providers have the knowledge necessary to determine the 
recommended cultural practices generally used for the apple acreage in 
the area and, therefore, has deferred such determinations to 
agricultural experts who do have the knowledge to determine cultural 
practices. FCIC has revised the phrase ``as determined by agricultural 
experts'' to ``in a manner generally recognized by agricultural 
experts'' to be consistent with the definition of ``good farming 
practices'' in the Basic Provisions.
    Comment: Several comments were received regarding subparagraph (4) 
in the definition of ``fresh apple production.'' A few commenters 
understood the necessity and rationale behind the proposed rule change 
to the definition of ``fresh apple production.'' A commenter 
appreciated FCIC taking steps to avoid fraud and abuse of crop 
insurance. Another commenter was in favor of the proposal to clarify 
the definition of ``fresh apple production.'' While the commenter 
believed this will cause some concern in some of the apple growing 
areas, they believe it is needed to improve program integrity.
    Response: FCIC believes such changes are necessary to protect the 
integrity of the program. No change has been made.
    Comment: Several commenters stated that in North Carolina the 
majority of apples orchards are sprayed, mowed and maintained to grow 
fresh apple production. Many of the apple producers in North Carolina 
have renewed their orchards over the past few years by planting new 
varieties specifically for the fresh market. However, in the past five 
years, North Carolina has received adverse weather conditions resulting 
in damaged apple production. The result of these conditions has been 
that apples originally grown for the fresh market have had to be 
diverted for processing. The commenters stated because the proposed 
rule requires ``verifiable'' proof that at least fifty-percent of the 
fresh apple acreage was sold as fresh apples in one or more of the past 
three years, many of North Carolina's largest producers would be locked 
out of the market for fresh market apple insurance because of the 
unique weather conditions they have experienced in the past three 
years. The proposed amendments would basically eliminate crop insurance 
for producers who have suffered losses beyond their control, at a time 
when those same producers are most in need of a safety net to manage 
risk (and to access credit for another crop year). A commenter 
questioned what the proposed changes to the definition of ``fresh apple 
production'' would do to a policyholder's fresh apple production 
coverage if it was damaged three years in a row. It seems as though 
that would be no fault of the policyholder (since due to an insurable 
cause of loss) but would result in the policyholder not being able to 
insure the apples as fresh. Therefore, the commenters urged FCIC to 
take into account the weather related challenges apple producers have 
encountered by lengthening the time period in which apple producers can 
demonstrate in one of those years they have sold at least 50 percent of 
their apple acreage in the fresh market. Several commenters recommended 
lengthening the time period to at least five years, as opposed to 
three. Another commenter recommended a threshold of two of the last 
five years as this would be consistent with other coverage thresholds, 
such as written agreements for grapes. A few commenters recommended 
leaving the policy as it currently is and not making the proposed 
changes.
    Response: FCIC understands apple producers may be subject to 
conditions that are out of their control. However, there have been 
issues with respect to whether producers seeking insurance have the 
experience or whether producers follow cultural practices appropriate 
to produce fresh apples. Fresh apples receive a higher price than 
processing apples and policyholders must demonstrate that they can 
produce fresh apples to be eligible to insure their apple acreage as 
fresh. However, FCIC agrees the proposed number of years in which 
policyholders must demonstrate they have sold at least 50 percent of 
their apple production as fresh to be eligible to insure their acreage 
as fresh may be too restrictive. Therefore, FCIC has revised the 
definition of ``fresh apple production'' by lengthening the time period 
in which policyholders can demonstrate that they have sold at least 50 
percent of their production from fresh apple acreage as fresh apples to 
one of the last four crop years. This time period is consistent with 
section 7 of the Apple Crop Provisions which requires apples be grown 
on tree varieties that are adapted to the area and have, in at least 
one of the previous four years, produced a certain amount of production 
to be insured.
    Comment: A few commenters stated the States in the Pacific 
Northwest Region primarily produce apples only for the fresh market 
and, therefore, this region should have more stringent requirements for 
substantiating fresh production in the definition of ``fresh apple 
production.'' The commenters recommended these requirements include 
requiring the producer to have records to support two years in the past 
four years or possibly even two years in the past three years. Also, 
the producer must be able to provide pack-out records and the 
percentage of fresh history should be greater than 50 percent.
    A commenter stated apple producers are subject to a variety of 
growing conditions that are uncontrollable and cannot be anticipated. 
Additionally, apple producers across the country employ different 
growing methods, face different growing challenges, and grow very 
different produce. What complicates the issue even further is the fact 
that FCIC would use an average of the previous three years sales for 
determining if producers are able to buy all fresh insurance or a 
mixture of fresh and processing insurance. Asking producers who have a 
significant financial investment in their product to carry insurance 
that would not cover their input costs is not sound policy.
    Response: FCIC does not believe it is necessary to have more 
stringent requirements for substantiating fresh production in the 
Pacific Northwest Region. The intent of the provisions is just to 
ensure that the apples are intended for a fresh market and that the 
producer has the capability of producing fresh market apples. The final 
provisions should accomplish these goals. Therefore, the fresh apple 
production requirements will remain consistent from region to region. 
No change has been made.
    Comment: A few commenters stated there needs to be clarification in 
subparagraph (4) of the definition of ``fresh apple production'' so 
that events beyond the producer's control do not affect the designation 
of acreage as fresh apple acreage. A commenter requested that any year 
declared as an emergency by the Governor be excluded and replaced with 
the next most recent year. Another commenter recommended adding to the 
proposed policy: ``that any year when a Secretarial Disaster 
Declaration is made will be excluded and replaced with the next most 
recent year (provided that next most recent year was not also a 
disaster declared year).'' Another commenter stated since the ultimate 
use of many varieties depends so much on weather and markets, the 50 
percent rule seems appropriate. However, due to multi-year losses 
caused by adverse weather, the

[[Page 52221]]

commenter requested that in the event of multiple year claims, that a 
loss year could be replaced by a prior year in order to comply with the 
50 percent rule.
    Response: FCIC understands multi-year losses caused by adverse 
weather could make it difficult for some policyholders to prove they 
have sold at least 50 percent of their production from fresh apple 
acreage as fresh apples. However, replacing a year designated as a 
disaster with the next most recent crop year would add unnecessary 
complexity and confusion to the requirement. As stated above, FCIC has 
revised the definition of ``fresh apple production'' by lengthening the 
time period in which apple producers can demonstrate that they have 
sold at least 50 percent of their production from fresh apple acreage 
as fresh to one of the last four crop years. This change should lessen 
the likelihood a policyholder would be unable to insure their apple 
acreage as fresh due to multi-year losses and is less complex to 
administer.
    Comment: A few commenters stated subparagraph (4) of the definition 
of ``fresh apple production'' is vague and needs to be clarified 
something like: ``* * * 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 from the specific acreage 
to be insured.'' The commenters stated this needs to be in place to 
prevent policyholders from moving records between units, which 
undermines program integrity. Another commenter stated it is good the 
requirement in the definition of ``fresh apple production'' to show 50 
percent of the production from the acreage reported as fresh was sold 
as fresh in one or more of the three most recent crop years is not tied 
to either a unit basis or a whole-farm basis. This provides flexibility 
and the leeway to help producers qualify as fresh market producers even 
if they have damage on part of their farm that requires part of their 
production to go to the processor. It also should encourage producers 
to buy above a catastrophic level of coverage in order to have separate 
units for fresh and processing apples even if the majority of their 
acreage is for processing.
    Response: FCIC agrees the policyholder should provide verifiable 
records by unit to prevent producers from moving records from unit to 
unit. Insurance coverage is provided on a unit basis. Therefore, it is 
appropriate to require verifiable records by unit. FCIC has revised the 
provisions to state that to qualify as fresh apple production a 
policyholder must certify, and provide records if requested, that at 
least 50 percent of the production from each unit reported as fresh 
apple acreage, was sold as fresh apples.
    Comment: A few comments were received regarding the term 
``verifiable records'' used in subparagraph (4) of the definition of 
``fresh apple production.'' A few commenters stated it is critical that 
FCIC clearly define the term ``verifiable records'' in the proposed 
amendments. Producers need to have a clear and concise explanation of 
what constitutes ``verifiable records'' in order to properly comply 
with the regulations.
    A commenter stated the term ``verifiable records'' needs to be made 
clear because of the multiple ways producers report their production. 
At present, there are many different types of records being submitted 
for reporting apple production. The producers need clear and specific 
definition of what will be accepted. An example would be: Name of 
buyers, date sold, quantity sold, grade, variety, and unit harvested 
from.
    Response: Subsequent to the proposed rule, FCIC published a final 
rule amending the Common Crop Insurance Regulations, Basic Provisions 
on March 30, 2010. A definition for the term ``verifiable records'' was 
added to that final rule to refer the reader to the definition 
contained in 7 CFR part 400, subpart G. Therefore, a definition of 
``verifiable records'' is not needed in the Apple Crop Provisions since 
the Common Crop Insurance Regulations Basic Provisions are a part of 
the policy. No change has been made.
    Comment: A commenter stated a significant number of apple producers 
sell all or a portion of their apple production to the public as fresh 
apples, without undergoing any change in its basic form. Because the 
apple production is sold directly to the consumer without an 
intermediary, they are required to have a pre-harvest production 
appraisal completed prior to opening the orchard to the public. The 
commenter recognized the ``Pre-Harvest Appraisal'' policy requirement 
as a valuable element to the integrity of the program and that it 
provides the means for direct-marketers to substantiate the disposal of 
their apple production. An addition to the Apple Appraisal worksheet 
that references how the crop is to be disposed of would provide the 
supporting documentation necessary to meet this requirement.
    A commenter stated direct market, retail, u-pick operations will 
not be able to provide third party verifiable records to show that at 
least 50 percent of the production was sold as fresh apples. All direct 
market, retail, u-pick operations that sell directly to the consumer 
without an intermediary are required to have a pre-harvest production 
appraisal. The commenter recommended adding a section/box on the pre-
harvest appraisal that states, ``Crop Disposition: Fresh or 
Processing'' could meet the requirement.
    Response: Under the Apple Crop Provisions, for direct marketed 
crops, pre-harvest and any verifiable records will be used to establish 
the production to count. To the extent that there are not verifiable 
records, production to count will be based on the appraisal. Although 
pre-harvest appraisals establish the production to count, a pre-harvest 
appraisal does not establish whether the production was sold as fresh 
apple production. Therefore, pre-harvest appraisals cannot be used to 
meet the requirements contained in paragraph (4) of the definition of 
``fresh apple production.'' The direct market records can be used to 
establish the production sold as fresh. No change has been made.
    Comment: A commenter stated there should be a period of three years 
the producer has to start keeping these records as most do not keep 
this type of record now. The commenter recommended by the year 2015 a 
producer should be able to produce a fresh apple production record. 
Another commenter recommended a delay of the implementation date of 
this rule would permit producers ample time to ensure that all 
necessary records are being kept and that all requirements are being 
met in the event they have to file a claim.
    Response: As with all APH programs, there is a requirement to 
certify yields based on actual records of production or transitional 
yields. This means producers should already have these records of past 
production. Therefore, the changes in this rule will be effective for 
the 2011 crop year. No change has been made.
    Comment: A few commenters stated a producer may have fresh quality 
fruit grown in one of the past three years, but did not have a market 
for that fresh quality fruit. Because the policy does not insure 
against the inability to market the fruit, it should not limit the 
producer's ability to have insurance for fresh apple production. The 
commenters questioned whether this fresh acreage would not be covered 
if they are unable to prove a history and the provisions do not include 
language indicating when an appraisal is appropriate. The commenters 
recommended subparagraph (4) of the definition of ``fresh apple 
production'' should state verifiable records may also include 
appraisals performed by the

[[Page 52222]]

insurance provider. Another commenter stated the requirement in 
subparagraph (1) refers to production ``* * * sold, or could be sold * 
* *'' The commenter questioned whether the requirement in subparagraph 
(4) should have something similar to account for production that could 
have been sold as fresh (with an appraisal as documentation of the 
fresh quality) but was not.
    A few commenters stated the definition of ``fresh apple 
production'' needs to include language that will indicate the FCIC/
insurance provider action if the producer is not able to provide 
records of fresh production being sold due to specific circumstances. A 
commenter stated there would be a concern if the acreage would not be 
insured in this situation as policyholders could then use this 
provision to their advantage by not having to pay any premium after it 
is apparent that they do not have a loss by indicating after the fact 
that they do not have the necessary records to be insured as fresh 
apple production. The commenter questioned whether there would be a 
need for the type being insured for the current crop year to be changed 
from fresh to processing in this situation. The commenter also 
questioned whether a misreporting information factor would apply in 
this type of situation and if additional language should be added to 
clarify what would happen in this situation. The commenters also 
recommended that the coverage be changed from fresh to processing in 
these types of situations.
    Response: Under paragraph (4) of the definition of ``fresh apple 
production,'' for the acreage to qualify as for fresh fruit production, 
at least 50 percent of the apples had to be sold as fresh fruit. 
Therefore, the appraised production is not relevant to this particular 
requirement. Paragraph (1) only pertains to the quality of the apples, 
not whether they are sold or the quantity sold. Therefore, appraisals 
could be used for that particular requirement. If a policyholder is 
unable to find a market for their fresh quality apples as fresh apple 
production in at least one of the four most recent crop years, it would 
be questionable whether they were growing apples in an area conducive 
to producing fresh quality apples. If there is no market for the fresh 
fruit, then it must be considered as processing and should not be 
eligible to receive the higher price election.
    Subsequent to the proposed rule, FCIC published a final rule 
amending the Common Crop Insurance Regulations, Basic Provisions on 
March 30, 2010, which removed the misreporting information factor. 
Therefore, the misreporting information factor would not apply in this 
situation. If a producer is certifying that 50 percent of the apples 
for the unit were sold as fresh, the producer is also certifying they 
have the records in support. If the producer provides this 
certification and does not have the records, this could be considered a 
false statement, which carries several different sanctions including 
voidance of the policy, denial of an indemnity for a possible scheme or 
device, or administrative, civil or criminal sanctions. Once certified, 
the producer cannot change the certification. No change has been made.
    Comment: A commenter stated while verifiable sales records may not 
appear to be a problem to FCIC in the definition of ``fresh apple 
production,'' apple producers do not believe it is fair to entirely 
depend on sales records to prove fresh apple production. The commenter 
recommended FCIC consider additional data in cases where multiple years 
of hail and/or weather related conditions damage an apple crop, that 
was intended to be sold as fresh fruit, but then had to be sold as 
processing fruit. In these cases, FCIC should consider asking apple 
producers to provide a copy of their spray records to document it was 
their intention to produce fresh apples. This requirement would be fair 
to apple producers and would be consistent with FCIC's proposed rule 
which stated ``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.'' Using a combination of sales records and spray records will 
help ensure the new apple policy is fair to apple producers who are 
doing their best to produce a quality fresh apple and are also 
following the cultural practices necessary to produce a quality fresh 
apple. Apple producers understand and appreciate FCIC's intent to 
clarify existing policy provisions and at the same time reduce 
vulnerability to program fraud, waste and abuse. The commenter 
requested that the new policy provide policyholders with an additional 
reporting opportunity when hail and weather conditions ruin an apple 
crop in three or more years. Giving the policyholder this additional 
reporting opportunity will help document the cultural practices and the 
additional expenses that are involved in bringing a fresh apple to 
market.
    Response: As stated above, FCIC has amended the requirement to 
allow the acreage to qualify as fresh production if the producer sold 
at least 50 percent of the production as fresh apple acreage in one or 
more of the four most recent crop years. It is unlikely that weather 
would prevent the sales of fresh apples for four consecutive years and, 
if it does, it provides evidence that the area may not be conducive to 
the production of fresh apples. Insurance for the fresh market can only 
be provided if the producer can produce and market apples as fresh. 
This requirement is simply a measure of that ability.
    Comment: A commenter stated fresh cut apple slices are sold for 
fresh consumption. These should be considered fresh apples in the 
definition of ``fresh apple production,'' even though the apple 
undergoes a change to its basic structure. It is consumed in the same 
way most people would eat fresh apples.
    Response: If a policyholder sells fresh apple production for the 
purpose of apple slices, the apples would meet the requirements 
contained in subparagraph (1) of the definition of ``fresh apple 
production.'' FCIC does not consider simply slicing the apple to be a 
change in basic form. However, to meet all the requirements of fresh 
apple production the policyholder would still need to be able to 
certify, and, if requested, provide records to show at least 50 percent 
of the production from acreage reported as fresh apple acreage by unit, 
was sold as fresh in one or more of the four most recent crop years. No 
change has been made.
    Comment: A few commenters stated the language in the definitions of 
``fresh apple production'' and ``processing apple production'' stating 
``or could be sold'' is very confusing and weakens these two 
definitions. The commenters questioned what exactly is meant by ``could 
be sold.'' The commenters recommended the language be changed to ``or 
intended to be sold.''
    Response: The Apple Crop Provisions do not insure against a 
policyholders inability to sell their fresh apple production as fresh 
apples. Assuming that the producer meets all the other requirements for 
fresh production, if a policyholder has fresh apple production, but is 
unable to market the fruit to sell as fresh, these apples should still 
be counted as fresh apple production to count and valued at the fresh 
apple price election. Therefore, the phrase ``could be sold'' should be 
included in the definition. The suggested revision to the definition 
cannot be adopted because use of the phrase ``or intended to be sold'' 
is vague and it is difficult to prove intent. No change has been made.
    Comment: A few commenters stated the definitions of ``fresh apple

[[Page 52223]]

production'' and ``processing apple production'' changed ``Apple 
production'' to ``Apples'' at the beginning (and ``is sold'' to ``are 
sold'' to match) but subparagraph (1) still refers to a change in 
``its'' basic form or structure, which no longer matches the plural 
subject ``Apples.'' The commenters stated a possible solution would be 
to delete the word ``its'' in each definition.
    Response: FCIC agrees the word ``its'' no longer matches the plural 
subject and has deleted the word ``its'' from the definitions of 
``fresh apple production'' and ``processing apple production.''
    Comment: A commenter stated the structure of the definition of 
``fresh apple production'' indicates any apples that fail to meet all 
four requirements would not be considered fresh apple production and 
presumably, by default, would be considered processing apple 
production. The first part of the definition of ``processing apple 
production'' would support this, but the rest might not. For example, 
apples that met subparagraphs (1) through (3) of the ``fresh apple 
production'' definition, but did not have the records required in 
subparagraph (4) that at least half were sold as fresh at least once in 
the last three years would not meet the ``fresh apple production'' 
definition, but would not fall under either subparagraph (1) or (2) of 
the ``processing apple production'' definition. The commenter stated if 
the failure to meet any one of the four requirements for fresh means 
the apple production will be considered processing, it would seem the 
``processing apple production'' definition could end after ``Apples 
from insurable acreage failing to meet the insurability requirements 
for fresh apple production.'' However, that might leave open the 
question of whether apples reported as fresh on the acreage report are 
really to be considered and insured as processing. The commenter stated 
these definitions need to be reviewed and probably rewritten.
    Response: FCIC has clarified in the definition of ``fresh apple 
production'' that if the acreage has production that does not meet all 
of the requirements for fresh apples, the acreage must be designated on 
the acreage report as acreage as processing apple production. 
Therefore, such production will fall within paragraph (2) of the 
definition of ``processing apple production.''
    Comment: A few commenters stated the first word of subparagraph (1) 
in the definitions of ``fresh apple production'' and ``processing apple 
production'' does not need to be capitalized unless the numbered 
subparts start a new line, in which case the first word of the other 
subparts would need to be capitalized as well.
    Response: FCIC has revised the definitions of ``fresh apple 
production'' and ``processing apple production'' to create 
subparagraphs and has capitalized the first word of each subparagraph.
    Comment: A few commenters questioned if a policyholder reports 
apple acreage as fresh on the acreage report, but ends up selling the 
production for processing, whether that will require a retroactive 
revised acreage report to change the insured type from fresh to 
processing. Or, if the acreage remains insured under the intended fresh 
type, the commenters questioned whether that year's acreage and 
production will be certified as fresh (as reported) or processing (as 
the production was disposed) to update the APH database for the 
subsequent crop year. If so, this will present significant 
difficulties, and even more so if different coverage levels are 
involved.
    Response: By designating the apples as fresh on the acreage report, 
the policyholder is certifying they meet the requirements to qualify as 
fresh apple production. If a policyholder reports apple acreage as 
fresh on the acreage report, and meets the requirements to qualify as 
fresh apple production, but has a loss in quality due to an insured 
cause of loss and sells the production for processing; this will not 
require a retroactive revised acreage report. The crop is still insured 
as fresh apple production and the producer may be eligible for an 
indemnity for the damaged production. If the production is not damaged, 
it is included as fresh apple production to count. That production 
would be reported on the subsequent year's production report. 
Regardless of whether the apples are damaged, failure to sell the 
production as fresh apple production may impact the ability to insure 
the acreage as fresh market production in future crop years. No change 
has been made.
    Comment: A commenter stated the definitions of ``fresh apple 
production'' and ``processing apple production'' contain requirements 
that are very troubling when determining what production is used for 
claim purposes. It currently appears that production produced from 
acreage designated as fresh apples on the acreage report would not meet 
the definition of fresh apple production and, therefore, could not be 
included as production to count, if such production was sold after 
undergoing a change in basic structure (i.e., processing apple). This 
would be true even in cases where the production did not qualify as 
damaged production.
    Response: Under the base policy, production to count is determined 
by whether the apple is marketable or whether it grades at least U.S. 
No. 1 Processing, not on the disposition of the fruit. Therefore, 
production from acreage that meets all the requirements for fresh apple 
production that grades at least U.S. No. 1 Processing will be 
considered as production to count, even if such production is sold for 
processing. No change has been made.
    Comment: A few commenters understood in the definition of ``type'' 
that replacing the specific definition of ``Fresh, processing, or 
varietal group apples* * *'' with the generic ``A category of apples as 
designated in the Special Provisions'' provides flexibility ``to allow 
for type changes in the future'' as stated in the Background of the 
proposed rule. In such cases, it would be helpful to provide a sample 
Special Provisions for reference as to whether any type changes are 
being proposed, presumably not immediately for Apples since the 
Background refers to ``future'' changes. Such a generic definition also 
makes it less clear than before as to what might constitute a type; it 
becomes necessary to look up one or more of the county Special 
Provisions to get some idea as to what ``types'' are involved when 
referenced elsewhere in the Crop Provisions. A few commenters 
questioned with the proposed rule eliminating the term ``varietal 
group'' and revising the definition of ``type,'' will FCIC be utilizing 
the existing numerical type codes as shown in the Special Provisions. 
If FCIC is considering expanding to new type codes, the commenters 
recommended the use of new type codes and not re-use of the existing 
111 and 112 type codes, as well as the 114 and 115 type codes, as this 
may create issues with converting existing data. The commenter stated 
that if the proposed changes are implemented, it will be necessary to 
change the Special Provisions, too. Because of the importance of the 
Special Provisions, the commenter recommended that FCIC provide 
insurance providers with a preview of the Special Provisions.
    Response: The types and numerical type codes will not change for 
the 2011 crop year. As stated in the proposed rule, a more generic 
definition of ``type'' will allow for changes or additional types in 
the future. FCIC agrees if type codes are expanded in the future, new 
type codes may be used as opposed to using the existing type codes. 
This is also consistent with other Crop Provisions and allows FCIC to 
make changes in the Special Provisions, if applicable, and without 
having to

[[Page 52224]]

promulgate regulations to revise, add or change type of apples. This 
will allow insurance of new types much quicker than if rulemaking were 
required, allowing FCIC to be more responsive to the risk management 
needs of producers. By including only the insurable apple types in the 
Special Provisions for a county, which are provided annually to the 
producer, there should be no confusion in any county what types are 
insurable. Because no new types are currently proposed to be added, 
there is nothing available for preview. No change has been made.

Section 2--Unit Division

    Comment: A few commenters stated it is difficult to comment on the 
impact of this proposed change when the definition of ``type'' is 
essentially deferred to the Special Provisions so the commenters cannot 
be certain how many types there might be. If fresh, processing and 
varietal groups continue to be separate types, then the proposed change 
will allow separate optional units for fresh and processing apples as 
well as for varietal groups and non-contiguous land, as before. This 
probably would be a beneficial change for apple producers who produce 
both fresh and processing, since the types are supposed to be kept 
separate anyway. The commenters questioned if RMA has researched the 
potential increased risk of allowing these additional optional units to 
determine if the premium rates might need to be revised accordingly.
    Response: As stated above, the types and numerical type codes will 
not change for the 2011 crop year. FCIC agrees allowing separate 
optional units by type will be a beneficial change for apple 
policyholders who produce both fresh and processing apples. FCIC 
reviewed the effect on losses due to allowing optional units by type 
and determined this change should not have any adverse affect on 
current premium rates. No change has been made.
    Comment: A few commenters questioned when it will be determined 
whether the apple production is considered fresh or processing: when it 
is reported on the current year's acreage report; when final 
disposition of the production is made; or when the acreage and 
production is certified to update the next year's APH database. If 
apple acreage is reported as fresh on the acreage report, but then sold 
as processing, the commenters questioned what that will do to the 
separate optional units for fresh and processing apples.
    Response: Designation of apple acreage as fresh or processing 
occurs on the acreage report based on the certification provided by the 
producer. If the acreage is subsequently determined not to qualify as 
fresh apple production, the policy and law provides for remedies. As 
stated above, production to count is determined in accordance with the 
claims provisions, not the disposition of the crop. The production to 
count for the current crop year will be considered as the production to 
be reported for the next crop year. Apple production, from apple 
acreage designated as fresh on the acreage report, that is sold as 
processing, could affect the producer's ability to qualify their apple 
acreage as fresh for the subsequent crop year. If, in the subsequent 
crop year, the producer is unable to prove that at least 50 percent of 
the production from acreage reported as fresh apple acreage by unit was 
sold as fresh apples in one or more of the four most recent crop years, 
the acreage would not qualify as fresh for that year. No change has 
been made.

Section 3--Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities

    Comment: A commenter stated provisions that will allow optional 
units by type, processing or fresh, and allow separate levels of 
coverage by type should solve current policy inequities and encourage 
proper separation of types. A few commenters stated section 3(a) may be 
beneficial in some regions but the majority of apple production in the 
Pacific Northwest is intended for fresh market only.
    Response: FCIC agrees allowing optional units by type and allowing 
different coverage levels for all fresh apple acreage in the county and 
for all processing apple acreage in the county will encourage proper 
separation of processing and fresh acreage. FCIC had received several 
requests prior to the proposed rule to allow separate coverage levels 
by fresh and processing apple acreage. Offering separate coverage 
levels by fresh and processing apple acreage provides the apple 
producers a better method to manage their risk. No change has been 
made.
    Comment: A few commenters did not agree with the intended effect of 
the proposed provisions in section 3(a). It was the commenters' 
recommendation that the policyholder continue to be allowed to choose a 
single coverage level on a county basis and all insurable types in the 
county would be insured on this basis. Another commenter stated if the 
intent in the future is to allow different levels, prices and units by 
variety (like occurred for grapes this year) in section 3(a), the 
policy should be prepared for this. The commenter recommended the 
language should state ``You may select only one coverage level by 
type,'' rather than saying by fresh and by processing.
    Response: FCIC did not intend to allow coverage levels by type. The 
intent of the provisions in section 3(a) is to allow different coverage 
levels for all fresh apple types in the county and for all processing 
apple types in the county. Offering separate coverage levels by fresh 
and processing apples provides the apple producers a better method to 
manage their risk. No change has been made.
    Comment: A few commenters stated they have concerns with making the 
proposed change in section 3(a) since the different types are not 
treated as separate crops (such as for California grapes where the 
insureds would have to add all types/varieties by the sales closing 
date with the chosen level and price) but are potentially separate 
optional units that could end up being combined if the optional unit 
requirements are not met. The commenters questioned what happens if 
fresh apples are being insured and processing apples are added to the 
acreage report (because all apples in the county must be insured) or it 
is determined the apples do not qualify as fresh apple acreage during 
the coverage period, when it is after the sales closing date deadline 
to select a coverage level. These items need to be addressed in the 
provisions.
    Response: The intent of the proposed provisions in section 3(a) is 
to allow separate coverage levels for all qualifying fresh apple 
acreage in the county and for all processing apple acreage in the 
county. Offering a separate coverage level by fresh apple acreage and 
processing apple acreage does not automatically imply each type be 
treated as a separate crop. FCIC has revised section 3 to include 
provisions if the policyholder only has fresh apple acreage designated 
on the acreage report and processing apple acreage is added after the 
sales closing date, the insurance provider will assign a coverage level 
equal to the coverage level the policyholder selected for their fresh 
apple acreage. If the policyholder only has processing apple acreage 
designated on the acreage report and fresh apple acreage is added after 
the sales closing date, the insurance provider will assign a coverage 
level equal to the coverage level the policyholder selected for their 
processing apple acreage. The producer knows if the acreage qualifies 
as fresh apple acreage by acreage reporting and if the information is 
incorrectly

[[Page 52225]]

reported, there are remedies in the policy and by law.
    Comment: A few commenters questioned in section 3(a) if the Special 
Provisions continue to designate fresh, processing, and varietal groups 
as separate types, would the acreage reported as fresh and the acreage 
reported as processing within the same varietal group be allowed to 
have different coverage levels although they may be required to have 
the same price election.
    Response: As stated above, the types and numerical type codes will 
not change for the 2011 crop year. Varietal groups are identified as 
fresh types in the Special Provisions. Therefore, any apple acreage 
grown for processing must be designated as the processing apple type 
and would not qualify as a fresh type. The price election is different 
for fresh apple types and the processing apple types. Acreage reported 
as fresh and the acreage reported as processing would be allowed to 
have different coverage levels. No change has been made.
    Comment: A few commenters questioned whether in section 3(a) an 
apple producer would be able to elect catastrophic risk protection 
(CAT) coverage on the processing apple acreage and buy-up coverage on 
fresh apple acreage as long as the price percentage on the fresh was 
the same as the CAT percentage. The commenters questioned if the option 
to have different levels is intended to apply only to different buy-up 
levels. Some Crop Provisions include a statement to the effect that if 
CAT coverage is elected on any type/variety, then all types/varieties 
must be CAT.
    Response: If the policyholder elected the CAT level of insurance 
for fresh apple acreage or processing apple acreage, the CAT level of 
coverage will be applicable to all insured apple acreage (fresh and 
processing) in the county. FCIC has revised the provisions accordingly.
    Comment: A few commenters stated it was their understanding the 
intent of the proposed section 3(a) was to allow the policyholder to 
elect different coverage levels for fresh apple acreage versus 
processing apple acreage. The language does not currently indicate this 
intent as it only indicates one coverage level may be elected for each 
of these different types of apples. If this is the intent, the 
commenters stated the language needs to be clarified such as ``You may 
select a different coverage level for fresh apple acreage and 
processing apple acreage.'' This revised language addresses the fact 
the coverage level could be different for each of these different types 
versus previously being limited to the same coverage level percentage 
for both types. When the language states one level may be selected for 
each of these two types it is not clear whether it must be the same or 
can vary between these two types. The language needs to be clarified so 
it is clear as to what is being intended.
    Response: Section 3(a) specifically states that it allows different 
coverage levels for processing and fresh apples. It does not mention 
``type'' at all so there should not be any confusion. FCIC has revised 
the provisions to add an example to clarify a policyholder may select 
one coverage level for all fresh apple acreage in the county and a 
different coverage level for all processing apple acreage in the 
county.
    Comment: A commenter stated the first comma between the words 
``including'' and ``interplanted'' in section 3(c) should be deleted.
    Response: FCIC has revised the provisions accordingly.
    Comment: A few commenters questioned using the word ``bearing'' in 
redesignated section 3(c)(2). Producers are required to report their 
uninsurable acres, and when trees are first planted, the trees will be 
non-bearing. The commenters questioned whether it is really the intent 
for producers to report zero trees on their uninsurable acres.
    Response: The information that must be submitted in accordance with 
section 3(c) is required in order to establish the producer's APH 
approved yield and the amount of coverage. While section 3(c)(2) only 
requires the bearing trees on insurable and uninsurable acreage to be 
reported, the number of bearing and non-bearing trees on insurable and 
uninsurable acreage must be reported on the Pre-acceptance Worksheet. 
However, since non-bearing trees are not eligible for coverage under 
the policy, the intent is to have the producer report zero if there are 
no bearing trees in the unit. Since premium and indemnity payments are 
based on the number of trees that meet eligibility requirements, 
insurance providers are required to track bearing trees as outlined in 
the Crop Provisions and the Crop Insurance Handbook. No change has been 
made.
    Comment: A few commenters questioned the need to know the planting 
pattern in redesignated section 3(c)(3). This requires space on the 
Pre-acceptance Worksheet that could better be used to ask if the 
producer is ``intending to direct market'' any portion of their crop. 
The commenters stated the insurance providers already capture tree 
spacing and tree count, which is what is needed to determine if there 
have been tree removals or acreage reductions.
    Response: FCIC requires the policyholder to report the planting 
pattern so the insurance provider can use this information to determine 
if there is adequate tree spacing for the policyholder to carry out the 
recommended orchard management practices. No change has been made.
    Comment: A commenter was in favor of the language in section 3(d), 
which allows the insurance provider to charge uninsured causes (rather 
than lower the guarantee) if the producer fails to notify the insurance 
provider of an event or cultural practice that reduces the yield 
potential. This will provide incentive for the producer to report this 
to the insurance providers rather than wait to see if they are caught 
at loss time.
    Response: FCIC agrees the language proposed in section 3(d) will 
provide incentive for policyholders to notify their insurance provider 
of an event or cultural practice that reduces the yield potential. No 
change has been made.
    Comment: A few commenters stated section 3(d) specifically states 
the yield used to establish the production guarantee will be reduced. 
Although much of this language exists in the current Apple Crop 
Provisions, the commenters stated FCIC needs to clarify what the yield 
will be reduced to or the procedures to be applied to reduce the yield.
    Response: There are numerous possible situations and it is not 
possible to list them all in the policy. For this reason, instructions 
are provided in sections 7F(2)(c) through (f) of the Crop Insurance 
Handbook. Since the preamble to the Basic Provisions already states 
that the handbooks issued by FCIC apply to the policy, it is not 
necessary for a specific reference to such procedures in this 
provision. No change has been made.
    Comment: A few commenters stated section 3(d), as written in the 
proposed rule, now appears to require a yield reduction any time 
anything happens that may reduce the approved APH yield. The commenters 
recommended either retaining the phrase ``as necessary'' before the 
phrase ``based on our estimate'' or changing ``We will * * * '' to ``We 
may * * *''
    Response: FCIC agrees and has retained the phrase ``as necessary'' 
before the phrase ``based on our estimate'' in section 3(d).
    Comment: A few commenters stated the phrase ``as indicated below'' 
at the end of the first sentence of section 3(d) could be deleted since 
the subsequent phrase ``If the event or action occurred:'' leads into 
sections 3(d)(1) through (3).

[[Page 52226]]

    Response: FCIC has revised the provisions accordingly.
    Comment: A few commenters stated the reference to the phrase ``any 
event or action of any of the items listed in sections 3(c)(1) through 
(4)'' in section 3(d) should be changed to refer to section 3(c)(1), or 
possibly sections 3(c)(1) and (4), since section 3(c)(2), number of 
bearing trees, and section 3(c)(3), age of trees and planting pattern, 
are not an ``event or action'' that will occur at a particular time and 
potentially reduce the approved actual production history (APH) yield.
    Response: FCIC agrees and has revised the provision to refer to any 
``situation'' listed in sections 3(c)(1) through (4). This better 
describes all of the possibilities.
    In addition, FCIC has removed the phrase ``of any of the items'' in 
section 3(d) because it is not needed.
    Comment: A few commenters stated according to the Background of the 
proposed rule, this proposed change is intended to eliminate 
redundancy, but there is still a fair amount of repetition in sections 
3(d)(1) through (3). As one example, section 3(d) begins ``We will 
reduce the yield used to establish your production guarantee * * *'' 
but that phrase is repeated in each of sections 3(d)(1) through (3) 
when perhaps it could be abbreviated to something like ``* * * the 
yield will be reduced * * *''].
    Response: FCIC has revised the provisions.
    Comment: A few commenters recommended language be added to the last 
sentence of section 3(d)(1) to read as follows: ``* * * If you fail to 
notify us of any circumstance that may reduce your yields from previous 
levels, we will reduce your production guarantee or assess uninsured 
cause of loss against your claim at any time we become aware of the 
circumstances.'' The phrase ``or assess uninsured cause of loss against 
your claim'' is the additional suggested language being proposed. The 
producers have a responsibility to report to us damage and removal of 
trees, etc. If they report it to us timely, we can adjust their 
production guarantee and premium. There should be a penalty if they do 
not timely report this information and it is discovered by the adjuster 
at claim time. Currently there is no penalty, so there is little 
incentive to timely report this information to us.
    Response: FCIC does not agree the additional suggested language 
should be added. Section 3(d)(1) refers to circumstances that occur 
before the beginning of the insurance period. Coverage can never be 
provided for any damage occurring prior to the beginning of the 
insurance period. Therefore, premium cannot be charged and there cannot 
be any uninsured cause of loss appraisals for coverage that could never 
be provided. No change has been made.
    Comment: A commenter questioned, in proposed section 3(d)(1) for a 
carryover policy, how this is even possible as the current crop year's 
insurance period begins on the day immediately following the end of the 
insurance period for the prior crop year (in most cases harvest of the 
crop). It would appear in most cases if the insured had damage to the 
prior year's crop on trees or damage to the trees themselves, the 
insured would report a notice of loss.
    Response: The insurance period ends when the crop is harvested, so 
if the trees are thinned at the end of harvest but before it is 
complete, this would be prior to the start of the insurance period. 
However, because it does not affect the harvest, sections 3(d)(2) or 
3(d)(3) would not be applicable and the provisions of section 3(d)(1) 
would apply. No change has been made.
    Comment: A few commenters questioned in sections 3(d)(2) and (3) if 
insureds will always be aware of an event or action that ``may occur 
after the beginning of the insurance period * * *'' in order to notify 
the insurance provider of that potential event or action. The 
commenters questioned how something unknown to the insured can be 
reportable. A commenter recommended deleting the opening phrase ``Or 
may occur'' in each of these subsections. And if such notification is 
not provided, but the event or action does not occur, does section 
3(d)(3) still require the insurance provider to do an appraisal and 
reduce the approved APH yield. A commenter stated sections 3(d)(2) and 
(3) indicate both the current year's APH and the subsequent crop year's 
APH will be reduced; the commenters questioned whether this was the 
intent.
    Response: Generally, producers should be aware of what is going on 
in their farming operations, including situations that may affect this 
year's crop production that may occur after the beginning of the 
insurance period (e.g., a planned orchard renovation). Therefore, the 
producers should be able to timely notify their reinsured company. In 
situations where a planned event (e.g., grafting of new varieties on 
existing trees) does not occur, then no adjustments are made since the 
situation did not occur. For situations impacting the yield used to 
establish the production guarantee after insurance has attached but the 
reinsured company was not notified, production lost due to uninsured 
causes equal to the amount of the reduction in the yield used to 
establish your production guarantee will be applied in determining any 
indemnity. The yield used to establish the production guarantee is not 
adjusted for the current crop year.

Section 5--Cancellation and Termination Dates

    Comment: A few commenters recommended moving the phrase ``in 
accordance with the terms of the policy'' in section 5(b) to the 
beginning of the sentence to read: ``If, in accordance with the terms 
of the policy, your apple policy is cancelled or terminated for any 
crop year after insurance attached * * *'' The commenters also 
recommended adding a comma before ``whichever is later'' or use 
parentheses instead of commas. A commenter recommended changing 
``insurance will be considered to have not attached'' to ``insurance 
will be considered not to have attached''
    Response: FCIC has revised the provisions accordingly.

Section 6--Report of Acreage

    Comment: A few commenters stated the Background section of the 
proposed rule indicates the second sentence of section 6 will be 
revised ``* * * to clarify only acreage qualifying as fresh apple 
production is eligible for the Optional Coverage for Fresh Fruit 
Quality Adjustment provisions contained in section 14 * * *'' in order 
to ``* * * help ensure processing apple production is not insured or 
adjusted as fresh apple production.'' However, no actual proposed 
language to replace that second sentence was provided in the proposed 
rule. The commenters questioned whether the public will be given an 
opportunity to review a draft of these proposed revisions.
    The commenters also stated this language also indicates the insured 
must designate all acreage by type by the acreage reporting date. As 
indicated in the above comments, if different coverage levels are going 
to be allowed between fresh apple acreage versus processing apple 
acreage, these two types and levels will need to be timely reported by 
the sales closing date in order to comply with the deadlines for adding 
types and levels.
    Response: The proposed language to replace the second sentence of 
section 6 was in the amendatory language of the proposed rule with 
request for comments. The amendatory language, which preceded the 
regulatory text in the proposed rule, stated ``g. Amend section 6 by 
removing the phrase `Blocks of apple acreage grown for

[[Page 52227]]

processing are' and adding the phrase `Any acreage not qualifying for 
fresh apple production is' in its place in the second sentence.'' As 
stated above, FCIC has revised section 3 to include provisions if the 
policyholder only has fresh apple acreage designated on the acreage 
report and processing apple acreage is added after the sales closing 
date, the insurance provider will assign a coverage level equal to the 
coverage level the policyholder selected for their fresh apple acreage. 
If the policyholder only has processing apple acreage designated on the 
acreage report and fresh apple acreage is added after the sales closing 
date, the insurance provider will assign a coverage level equal to the 
coverage level the policyholder selected for their processing apple 
acreage.

Section 7--Insured Crop

    Comment: A few commenters recommended deleting the ``or'' at the 
end of section 7(b)(1) since it is not the second-to-last item listed.
    Response: FCIC has revised the provisions accordingly.
    Comment: A few commenters questioned whether it is necessary to add 
section 7(d) to ``clarify'' the insured crop is apples ``(d) That are 
grown for: (1) Fresh apple production; or (2) Processing apple 
production.'' This would seem to be covered by the opening statement of 
(d), ``* * * all apples in the county for which a premium rate is 
provided by the actuarial table.'' If this remains as is, a commenter 
recommended revising to ``and/or'' at the end of section 7(d)(1), as 
both types of apples may be insured.
    Response: While section 7(d) may not be strictly necessary, it is 
provided to clarify the insured crop is not only for all apples in the 
county, but apples grown for either fresh apple production or 
processing apple production. The term ``and/or'' is synonymous with the 
word ``or'' which means any combination of two options; one, the other 
(either), or both. No change has been made.

Section 9--Insurance Period

    Comment: A few commenters stated the first sentence of section 
9(a)(1) gives the calendar date for the beginning of coverage for the 
year of application in California only. The second sentence provides 
the date for all other States, but does not specify this is also only 
for the year of application, and then goes on to provide an exception 
that applies to California as well. The commenters recommended revising 
the language to read something like:
    (1) ``For the year of application, coverage generally begins:''
    ``(i) In California, on February 1* * *''
    ``(ii) In all other States, on November 21* * *''
    ``However, if your application is received by us after * * *''
    Response: FCIC has revised section 9(a)(1) to separate the calendar 
dates for the beginning of the insurance period for the year of 
application in California and all other States from the exceptions in 
California and all other States.
    Comment: A commenter stated the reference to ``insurance provider'' 
in section 9(a)(2) should be changed to ``approved insurance 
provider''.
    Response: The term ``insurance provider'' is consistent with the 
Basic Provisions and other Crop Provisions. No change has been made.
    Comment: A few commenters stated the words ``after an inspection'' 
should be removed from section 9(b)(1). If damage has not generally 
occurred in the area where such acreage is located, the commenters 
stated it should be up to the insurance provider's discretion to decide 
whether the acreage needs an inspection to be considered acceptable.
    The commenters also stated the last sentence of section 9(b)(1) 
indicates ``There will be no coverage of any insurable interest 
acquired after the acreage reporting date.'' The commenters recommended 
this sentence be changed to allow insurance providers the opportunity 
to inspect and insure such acreage if they wish to do so. Insurance 
providers should have the opportunity to accept or deny coverage in 
these types of situations. This would be similar to what is currently 
allowed for acreage that is not reported per section 6(f) of the Basic 
Provisions.
    Response: FCIC does not agree with the commenters regarding removal 
of the phrase ``after an inspection.'' The insurance provider must 
inspect the acreage to ensure the newly-acquired acreage meets all 
policy requirements. This requirement is consistent with other 
perennial Crop Provisions, such as stonefruit, grapes and pears and 
ensures that only acreage that meets the requirements for coverage is 
insured. If left to the discretion of the insurance provider, there may 
be instances where acreage that is not insurable is provided coverage, 
creating a program integrity vulnerability.
    Additionally, section 9(b)(1) is silent regarding allowing 
insurance providers the opportunity to inspect and insure acreage that 
was acquired after the acreage reporting date. Therefore, section 6(f) 
of the Basic Provisions, which allows the insurance providers to 
determine by unit the insurable crop acreage, share, type and practice, 
or to deny liability if the producer failed to report all units, has 
been applied in this situation under other Crop Provisions and would 
apply here. The provisions in this final rule are consistent with 
provisions in other Crop Provisions, such as Texas citrus fruit, 
peaches and pears and to change them here would suggest section 6(f) of 
the Basic Provisions would not be applicable to these other policies, 
creating an unnecessary ambiguity. The Crop Insurance Handbook also 
allows for insurance providers to revise an acreage report that 
increases liability if the crop is inspected and the appraisal 
indicates the crop will produce at least 90 percent of the yield used 
to determine the guarantee or amount of insurance for the unit. No 
change has been made.

Section 10--Causes of Loss

    Comment: A commenter recommended the insured cause of loss in 
section 10(a)(2) be clarified as ``Fire, due to natural causes, * * *'' 
(or ``Fire, if caused by lightning, * * *'', as in the proposed 
revisions to the Tobacco Crop Provisions).
    Response: FCIC disagrees with the commenter. Revising the insured 
cause of loss to read ``Fire, due to natural causes'' is not necessary 
since section 12 of the Basic Provisions states all insured causes of 
loss must be due to a naturally occurring event. Further, the Federal 
Crop Insurance Act also limits coverage to naturally occurring events. 
To include this requirement for a single cause of loss in the Crop 
Provisions will only create confusion regarding whether or not the 
other listed causes must be naturally occurring. FCIC also disagrees 
with revising the insured cause of loss to read ``Fire, if caused by 
lightning * * *'' as in the proposed revisions to the Tobacco Crop 
Provisions. ``Fire, if caused by lightning * * *'' was proposed in the 
Tobacco Proposed Rule. However, due to public comments, the original 
provision, ``Fire,'' was retained because there are naturally occurring 
fires caused by other than lightning, such as animals getting stuck in 
transformers causing sparks to trigger a fire. No change has been made.
    Comment: A few commenters recommended adding a comma after the 
phrase ``excess sun causing sunburn'' in section 10(a)(9) to separate 
it from the phrase ``and frost and freeze causing russeting.''
    Response: FCIC has revised the provision accordingly.

Section 12--Settlement of Claim

    Comment: A few commenters stated since the proposed rule offers 
different

[[Page 52228]]

coverage levels for fresh and processing, and separate optional units 
by type, it would be more helpful to have a revised Basic Coverage 
example that included separate units and different levels for the fresh 
and processing types instead of this basic example with both types in 
one basic unit. Additionally, as processing and fresh are two separate 
types requiring separate APH databases, a commenter questioned the 
likelihood of each type having the same guarantee. The commenter 
recommended revising the example to be more reflective of an actual 
situation.
    Response: The claims provisions provide a step by step guide to 
calculating the indemnity. Claim examples are provided to the 
Settlement of Claim section to only provide a general illustration. 
Since it is impossible to address every situation, more detailed 
instructions are more appropriately provided in the Apple Loss 
Adjustment Handbook. No change has been made.
    Comment: A commenter recommended adding a comma before the phrase 
``all grading U.S. No. 1 Processing or better'' in the second sentence 
of the Basic Coverage example.
    Response: FCIC has revised the provisions accordingly.
    Comment: A commenter recommended adding hyphens in ``6,000-bushel 
production guarantee'' and ``3,000-bushel production guarantee'' in 
paragraphs (A) and (B) of the Basic Coverage Example.
    Response: FCIC has revised the provisions accordingly.
    Comment: A commenter stated the proposed section 12(d), which 
states ``any apple production not graded prior to sale or storage will 
be considered as production to count'' is not practical based on the 
lack of USDA licensed graders in many apple growing areas. Production 
sold from one producer to another is very common as well as roadside 
stands that sell directly to the consumer. Implementation of this new 
language will provide an unfair burden on the producer.
    Response: The policy provides coverage for fresh and processing 
apples. There is no way to know whether an apple is a fresh apple 
unless it is graded. Further, failure to grade the apples will result 
in producers grading their own and there is no way to prevent them from 
reducing the grade to collect an indemnity. There must be an 
independent third party establishing the grade of the apple. For 
policyholders who sell production by direct marketing (i.e., one 
producer to another, roadside stands, etc.), section 11(b) of the Apple 
Crop Provisions requires notice of loss be given at least 15 days 
before any production will be sold by direct marketing so an appraisal 
can be made by the insurance provider. If damage occurs after this 
appraisal, an additional appraisal will be made. The appraisals and any 
acceptable production records will be used to determine production to 
count. Since insurance is provided for direct marketed crops, and there 
may not be any verifiable records associated with such sales, this 
provision is necessary to more accurately determine production to 
count. FCIC has revised section 12(d) to clarify a policyholder must 
either have an appraisal or have their production graded prior to sale 
or storage in response to another comment. No change has been made.
    Comment: A commenter recommended in section 12(d) either deleting 
the comma after `` * * * placed in storage * * * '' or adding a 
matching comma after `` * * * or other handler * * * '' at the end of 
that set-off phrase.
    Response: FCIC has removed the comma after the phrase ``placed in 
storage'' in sections 12(d) and 14(c).

Section 14--Optional Coverage for Fresh Fruit Quality Adjustment

    Comment: A commenter recommended quality adjustment for processing 
fruit, because the industry standard for processing fruit in North 
Carolina is U.S. 1 not U.S. 1 Processing. A commenter 
requested FCIC allow North Carolina producers to purchase the quality 
adjustment option for any processed apples that meet U.S. Grade A apple 
standards.
    Response: Since the recommended changes were not proposed, and the 
public was not provided an opportunity to comment, the recommendation 
cannot be incorporated in the final rule. No change has been made.
    Comment: A few commenters stated the background section of the 
proposed rule states the intended effects of this policy are to clarify 
existing policy provisions to better meet the needs of producers, to 
reduce vulnerability to program fraud, waste, and abuse, and to 
simplify program administration. However, the language concerning the 
Optional Coverage for Fresh Fruit Quality Adjustment is so unclear and 
contradictory that producers and insurance providers will likely incur 
many hours in arbitration. This happens when the policy language is 
vague and alludes to issues that are then totally changed via the Apple 
Loss Adjustment Standards Handbook (LASH) and informational memorandums 
after the policy has been finalized and issued to the policyholders. 
This provides no opportunity for the apple producers to comment on the 
procedure because these procedures are not a part of the proposed rule. 
The intent of the policy language needs to be clearly spelled out in 
the final version of the Apple Crop Insurance Provisions so as to 
reduce the amount of clarification that needs to be made later in the 
Apple LASH or informational memorandums.
    Response: FCIC has made the policy as clear as possible. However, 
without specifying particular provisions that the commenter believes 
are ambiguous, FCIC is not able to adequately respond to make changes 
to the provisions. No change has been made.
    Comment: A commenter suggested going back to the old policy with 
quality adjustment on frost, freeze, or hail. The commenter also stated 
if FCIC would keep the current policy as is with the causes of loss the 
same and does away with the sliding scale, it would be fair to all 
involved. If a producer has a claim of 65 percent, it should stand at 
65 percent; that way the producer would have their 35 percent of fresh 
apple production to count back and it wouldn't automatically go to a 
100 percent loss. The commenter stated this would be fair to the 
producers, insurance companies, and government.
    Response: Since the recommended changes were not proposed, and the 
public was not provided an opportunity to comment, the recommendation 
cannot be incorporated in the final rule. No change has been made.
    Comment: A few commenters stated the background section of the 
proposed rule indicates a proposed revision ``to specify insureds who 
select the Optional Coverage for Fresh Fruit Quality Adjustment cannot 
receive less than the indemnity due under section 12.'' However, no 
actual proposed language was provided in the proposed rule. The 
commenters questioned whether the public would be given an opportunity 
to review a draft of these proposed revisions.
    Response: The proposed language to replace the second sentence of 
section 14(a) was in the amendatory language of the proposed rule with 
request for comments. The amendatory language, which preceded the 
regulatory text in the proposed rule, stated ``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.' ''
    Comment: A few commenters stated the background indicates the 
proposed change in section 14(b)(4) is ``to clarify production to count 
under the Optional Coverage for Fresh Fruit Quality Adjustment will 
include all appraised

[[Page 52229]]

and harvested production from all of the fresh apple acreage in the 
unit.'' This revision deletes the reference to production ``that grades 
at least U.S. No. 1 Processing, adjusted in accordance with this 
option.'' The commenters questioned whether the intention is to count 
harvested unmarketable production, or should this specify ``all 
appraised and harvested marketable production.''
    Response: For the purposes of section 14(b)(4), production to count 
should be all apples on the tree (i.e., unmarketable and marketable). 
FCIC has added the phrase ``adjusted in accordance with this option'' 
back to the provisions in section 14(b)(4) to clarify the production to 
count in section 14(b)(4) is adjusted in accordance with section 
14(b)(5) for the purposes of the Optional Coverage for Fresh Fruit 
Quality Option. Therefore, any apples that are unmarketable will be 
removed from the production to count in the loss adjustment under 
section 14. No change has been made.
    Comment: A commenter stated as currently written in sections 
14(b)(4) and 14(b)(5)(v), in a situation where an insured has elected 
the option, but also has processing apples in the same unit; if the 
production from the processing acreage is sold as U.S. Fancy, it is not 
counted as production to count under the Optional Coverage for Fresh 
Fruit Quality Adjustment and valued at the fresh apple production 
price.
    Response: If the acreage was designated as processing apple acreage 
on the acreage report and the apple production was subsequently sold as 
U.S. Fancy or better, it would not be considered production to count 
under the Optional Coverage for Fresh Fruit Quality Adjustment because 
processing apples are not covered under section 14. However, the sold 
production would be counted as production to count under section 12 of 
the Apple Crop Provisions and would be valued at the processing apple 
production price. No change has been made.
    Comment: A few commenters stated the phrase ``within the applicable 
unit'' in section 14(b)(5) may be subject to misinterpretation. It 
appears the intent of these added words are meant to clarify the 
Optional Coverage for Fresh Fruit Quality Adjustment is administered on 
a unit basis, however this new language could be misinterpreted. The 
procedures outlined in the Apple LASH require the field grading to be 
done by variety, by block, or by unit, as applicable, and then total 
each individual production to count to determine the production to 
count for the unit.
    For example, a producer may have 10 acres of Goldens and 50 acres 
of Reds within a unit. Assume a hail storm damaged the Goldens 
resulting in a 50 percent loss and the Reds only incurred a 10 percent 
loss. It would seem to be the intent the reduction would apply to the 
Goldens to determine the production to count for the Goldens. The Reds 
would not qualify as they do not meet the 20 percent damage deductible, 
and all the Reds would count as production to count. The wording that 
says ``within the applicable unit is damaged to the extent that more 
than 20 percent'' could lead one to assume in this example the overall 
unit did not sustain 20 percent damage, and no quality adjustment would 
apply. Another example would be if producers harvested 80 percent of 
their acreage prior to a hail storm, and then the storm came along and 
totaled the remaining 20 percent of the acreage. The commenters assumed 
the intent is that the loss adjuster would do a field grade on the 
remaining acreage even though less than 20 percent damage was sustained 
on a unit basis. The language, as proposed, might lead one to assume 
loss adjusters would, instead, say no adjustment is made because the 
producers have not incurred 20 percent damage across the whole unit. In 
order to eliminate this confusion, the commenters recommended the words 
`within the applicable unit' not be added to this section. This 
language needs to be clarified so it is clear how this section of the 
policy is intended to be applied.
    Response: FCIC agrees the proposed language could be subject to 
misinterpretation and has revised the provision to refer to ``for the 
block or unit, as applicable.'' In accordance with the Apple LASH, 
separate appraisals are required for each block within a unit and 
adjusted in accordance with section 14. The adjusted production to 
count from each block is added together to determine the total adjusted 
production to count for the unit.
    Comment: A few commenters stated the proposed rule does not amend 
sections 14(b)(5)(i) through (iv). However, FCIC should revisit the 
adjustments in the current Apple Crop Provisions and the Apple LASH to 
determine whether the current salvage values merit reconsideration.
    Response: If the commenters have any recommendations, they can 
provide such information to FCIC for consideration at a future date. 
FCIC is willing to work with any interested parties to revisit the 
provisions in section 14(b)(5)(i) through (iv). No change has been 
made.
    Comment: Several comments were received regarding section 
14(b)(5)(v). A commenter stated section 14(b)(5)(v) has been the most 
significant concern of insurance providers and policyholders and should 
be deleted as there are numerous other crop policies that allow similar 
deductions for extensive damage amounts and/or poor quality, etc., such 
that the production to count on the claim is reduced in excess of the 
actual monetary reductions to the producer. If section 14(b)(5)(v) 
remains in effect as written, FCIC should stop implying it is not their 
intent for insurance providers to keep claims open until production in 
storage was removed and then sold. Unless an insurance provider truly 
waits until all of the unit production is sold, they will not know the 
amount of production that was sold as U.S. Fancy or better.
    A few commenters stated the language in section 14(b)(5)(v) that 
was inserted into the Apple Crop Provisions (after the proposed rule) 
for the 2005 crop year has been so problematic that the Apple LASH was 
revised numerous times, and informational memorandums issued and then 
incorporated into the Apple LASH long after the Apple Crop Provisions 
were published as a final rule and policies were sold to producers. 
Exhibit 2 of the Apple LASH has created a procedure whereby the 
insurance provider must use the greater of the production that is sold 
as fancy or better, or the amount of production that was determined as 
production to count in the field. However, this language is nowhere to 
be found in the 2005 Apple Crop Insurance Provisions or in this 
proposed rule for the 2011 crop year provisions. Instead, there is 
conflicting language with no explanation of how it is to be 
administered.
    The commenters stated in order to determine what is ``sold as fancy 
or better'' and to comply with section 14(b)(5)(v), the insurance 
provider would need to wait to receive the pack-out. However, the 
example in the proposed rule makes no mention of waiting for the pack-
out to see what is sold as fancy for a comparison. The example deals 
with the number of bushels ``harvested'' and number of bushels that 
don't grade fancy or better based on the field grade and the damage 
chart, AND NOT FROM THE PACK-OUT. The proposed rule even states in 
section 14(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.''

[[Page 52230]]

Since it is not possible for the warehouse to grade and sell all the 
fruit the day it is delivered, one would need to presume the pack-out 
should not apply ever at any time.
    The commenters recommended section 14(b)(5)(v) be removed and the 
language in the Optional Coverage for Fresh Fruit Quality Adjustment be 
made simple, clear, and fair. If section 14(b)(5)(v) was removed, all 
the confusing and contradictory language in the Apple LASH could also 
be removed. The producers who elect this option pay a substantial price 
for this coverage. It was designed to increase the claim payment when 
there is a significant amount of damage because of the added expense of 
dealing with a highly damaged crop. The removal of section 14(b)(v) 
would give the producer freedom to decide whether: to try to salvage 
some of the good fruit; to deliver it to a juicer or processor; or to 
leave it unharvested. Producers should not be penalized for trying to 
salvage their crop. It is unreasonable for FCIC to penalize producers 
for attempting to salvage a part of their crop.
    Another commenter recommended section 14(b)(5)(v) either be removed 
or modified since it requires insurance providers to keep a claim open 
until final disposition of the fruit (for policies with the quality 
option), which can often take 12-13 months.
    Response: FCIC has the legal authority to only cover a loss of 
production or a reduction in price received due to an insured cause of 
loss. Section 14(b)(5)(v) cannot be removed because if the policyholder 
harvests apples that are undamaged and sells them as fresh apples and 
receives at least the expected market price, those apples must be 
counted as production to count. FCIC has a responsibility to ensure 
policyholders only receive the amount of indemnity to which they are 
entitled. Since the amount of sold production is included as production 
to count, the insurance provider must establish the value of the sold 
production based on the sales records when the crop is sold. FCIC 
understands that this can result in a delay in the claim. However, FCIC 
does not know of any other means to account for production that is 
actually sold as U.S. Fancy or better. If the commenters have any 
specific recommendations to address this issue, they can provide such 
information to FCIC for consideration at a future date. FCIC is willing 
to work with any interested parties to revisit the provisions in 
section 14(b)(v) to improve the Optional Coverage for Fresh Fruit 
Quality Adjustment. No change has been made.
    Comment: A commenter suggested the addition of the words ``or 
appraised'' to the first sentence of the new section 14(c), to read; 
``Any apple production not graded or appraised prior to the time.'' The 
reason for the suggested change is when apples are placed in storage, 
the insurance coverage ends, and this could be confusing and unclear to 
producers experiencing losses that result in claims. The commenter's 
proposal helps clarify the claim procedure by specifically noting 
producers with a potential loss claim must either have an appraisal or 
have their production graded prior to placement in storage.
    Response: FCIC has revised the provisions in sections 12(d) and 
14(c) accordingly.
    Comment: A few commenters recommended either deleting the comma 
after the phrase ``placed in storage'' or adding a matching comma after 
the phrase ``or other handler'' at the end of that set-off phrase in 
section 14(c).
    Response: As stated above, FCIC has removed the comma after the 
phrase ``placed in storage'' in sections 12(d) and 14(c).
    Comment: A few commenters recommended, identifying the example in 
section 14 as an ``Optional Coverage for Fresh Fruit Quality Adjustment 
example'' for clarity. The commenters also recommended adding hyphens 
in the phrase ``6,000-bushel production guarantee''. The commenters 
also recommended considering whether it is necessary to have ``[END OF 
EXAMPLE]'' when this is the end of the Apple Crop Provisions (no other 
policy provisions following the example).
    Response: FCIC has revised the provisions accordingly.
    Comment: A few commenters stated the example in section 14 shows 
the bushels of fruit that grade U.S. Fancy or better with an adjustment 
made on production to count based upon this grade. It should be 
clarified in the example that in addition to the grading, if the 
producer sells (X) amount of bushels at U.S. Fancy or better these will 
or will not be adjusted based upon the percentage that grade U.S. Fancy 
of better. It would reduce the confusion since there is an adjustment 
used in the appraisal process based upon the percentage that grade U.S. 
Fancy or better and producers do not understand what percentage is used 
in the indemnity process using production sold as US Fancy or better. 
Again, this information should be contained in the policy language as 
well as this example. For example, for a farm that has 25 percent of 
the production that grades US Fancy it would be considered zero 
production to count of a full indemnity. If the producer can pack this 
fruit and he packs out 20 percent US Fancy, those bushels are currently 
taken off the claim. This action needs to be made clear in the 
provisions. A few commenters stated the example in section 14 shows 
5,000 bushels harvested and 2,350 bushels not grading fancy or better. 
The example then goes on to show 47 percent actual damage equates to 61 
percent actual damage and the example then shows the claim paid based 
on 39 percent production to count, which equals 1,950 bushels. However, 
if the producer has delivered the production to the warehouse, packed 
the fruit, and the pack-out shows the exact amount of actual damage as 
the field adjustment, 53 percent of the fruit would pack-out as U.S. 
Fancy or better. Therefore, the greater of the production to count 
would be 2,650. However, the example does not show this to be the case. 
It shows the production to count to be 1,950 bushels. There is no 
language about waiting for the pack-out and using the greater of the 
production to count from the field appraisal or the amount of apples 
sold as fancy or better.
    Response: FCIC has revised the Optional Coverage for Fresh Fruit 
Quality Adjustment Example in section 14 to clarify it provides only a 
general explanation of how the indemnity payment would be calculated in 
accordance with section 14 assuming the producer did not sell any of 
their fresh apple production as U.S. Fancy.
    In addition to the changes described above, FCIC has revised 
section 12(b)(2), section 12(b)(4), the Basic Coverage Example, and the 
Optional Coverage for Fresh Fruit Quality Adjustment Example to address 
the applicability of the percent of price election.
    Good cause is shown to make this rule effective less than 30 days 
after publication in the Federal Register. Good cause to make a rule 
effective less than 30 days after publication in the Federal Register 
exists when the 30-day delay in the effective date is impracticable, 
unnecessary, or contrary to the public interest.
    With respect to the provisions of this rule, it would be contrary 
to public interest to delay implementation because public interest is 
served by improving the insurance product as follows: (1) Increasing 
insurance flexibility by providing for separate by type; (2) allowing 
different coverage levels for all fresh apple acreage in the county and 
for all processing apple acreage in the county; and (3) providing

[[Page 52231]]

simplification and clarity to the apple crop insurance program.
    If FCIC is required to delay the implementation of this rule 30 
days after the date it is published, the provisions of this rule could 
not be implemented until the 2012 crop year. This would mean the 
affected producers would be without the benefits described above for an 
additional year.
    For the reasons stated above, good cause exists to make these 
policy changes effective less than 30 days after publication in the 
Federal Register.

List of Subjects in 7 CFR Part 457

    Crop insurance, Apple, Reporting and recordkeeping requirements.

Final Rule

0
Accordingly, as set forth in the preamble, the Federal Crop Insurance 
Corporation amends 7 CFR part 457 effective for the 2011 and succeeding 
crop years as follows:

PART 457--COMMON CROP INSURANCE REGULATIONS

0
1. The authority citation for 7 CFR Part 457 is revised to read as 
follows:

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


0
2. Amend Sec.  457.158 as follows:
0
a. Revise the introductory text;
0
b. Remove the paragraph immediately preceding section 1;
0
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 (1) and (2);
0
d. Revise section 2(b);
0
e. Amend section 3 by redesignating paragraphs (a), (b), and (c) as 
(b), (c), and (d) respectively, and adding a new paragraph (a);
0
f. Revise redesignated sections 3(c)(1) and 3(d);
0
g. Revise section 5(b);
0
h. Revise section 6;
0
i. Amend section 7(b)(1) by removing the word ``or'' after the 
semicolon at the end;
0
j. Amend section 7(b)(3) by removing the word ``and'' after the 
semicolon at the end;
0
k. Amend section 7(c) by removing the period at the end and replacing 
it with ``; and'';
0
l. Add a new section 7(d);
0
m. Revise section 9(a)(1);
0
n. Amend section 10(a)(9) by adding a comma after the phrase ``excess 
sun causing sunburn'';
0
o. Amend section 11 by redesignating paragraphs (a), (b), and (c) as 
(1), (2), and (3) respectively, redesignating the introductory text as 
paragraph (b), and adding a new paragraph (a);
0
p. Revise sections 12(b)(2) and 12(b)(4);
0
q. Revise the Basic Coverage Example in section 12 and move it to 
follow section 12(b)(7);
0
r. Revise section 12(d);
0
s. 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.'';
0
t. 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;
0
u. Revise section 14(b)(4);
0
v. Revise section 14(b)(5) introductory text;
0
w. Amend section 14(b)(5) (i), (ii), and (iii) by adding the word 
``one'' after the phrase ``percent for each full'';
0
x. 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'';
0
y. Add new sections 14(c) and (d) before the Optional Coverage for 
Fresh Fruit Quality Adjustment Example; and
0
z. Revise the Optional Coverage for Fresh Fruit Quality Adjustment 
Example.
    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. (1) Apples:
    (i) That are sold, or could be sold, for human consumption without 
undergoing any change in the basic form, such as peeling, juicing, 
crushing, etc.;
    (ii) From acreage that is designated as fresh apples on the acreage 
report;
    (iii) That follow the recommended cultural practices generally in 
use for fresh apple acreage in the area in a manner generally 
recognized by agricultural experts; and
    (iv) From acreage that you certify, and, if requested by us provide 
verifiable records to support, that at least 50 percent of the 
production from acreage reported as fresh apple acreage from each unit, 
was sold as fresh apples in one or more of the four most recent crop 
years.
    (2) Acreage with production not meeting all the requirements above 
must be designated on the acreage report as processing apple 
production.
* * * * *
    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 the 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. 
For example, if you choose the 55 percent coverage level for all your 
fresh apple acreage (i.e., fresh, varietal group types), you may choose 
the 75 percent coverage level for all your processing apple acreage. 
However, if you elect the Catastrophic Risk Protection (CAT) level of 
insurance for fresh apple acreage or processing apple acreage, the CAT 
level of coverage will be applicable to all insured apple acreage in 
the county. If you only have fresh apple acreage designated on your 
acreage report and processing apple acreage is added after the sales 
closing date, we will assign a coverage level equal to the coverage 
level you selected for your fresh apple acreage. If you only have 
processing apple acreage designated on your acreage report and fresh 
apple acreage is added after the sales closing date, we will assign a 
coverage level equal to the coverage level you selected for your 
processing apple acreage.
* * * * *
    (c) * * *
    (1) Any event or action that could impact the yield potential of 
the insured

[[Page 52232]]

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, as necessary, based on our estimate of the effect of any 
situation listed in sections 3(c)(1) through (c)(4). If the situation 
occurred:
    (1) Before the beginning of the insurance period, the yield used to 
establish your production guarantee will be reduced for the current 
crop year regardless of whether the situation was due to an insured or 
uninsured cause of loss. If you fail to notify us of any circumstance 
that may reduce your yields from previous levels, we will reduce the 
yield used to establish 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, the yield used to 
establish your production guarantee will be reduced for the current 
crop year only if the potential reduction in the yield used to 
establish your production guarantee is due to an uninsured cause of 
loss; or
    (3) Or may occur after the beginning of the insurance period and 
you fail to notify us by the production reporting date, production lost 
due to uninsured causes equal to the amount of the reduction in the 
yield used to establish your production guarantee will be applied in 
determining any indemnity (see section 12(c)(1)(ii)). We will reduce 
the yield used to establish your production guarantee for the 
subsequent crop year.
* * * * *
    5. Cancellation and Termination Dates.
* * * * *
    (b) If, in accordance with the terms of the policy, your apple 
policy is canceled or terminated by us for any crop year after 
insurance attached for that crop year, but on or before the 
cancellation and termination dates, whichever is later, insurance will 
be considered not to have attached for that crop year and no premium, 
administrative fee, or indemnity will be due for such crop year.
* * * * *
    6. Report of Acreage.
    In addition to the requirements contained in section 6 of the Basic 
Provisions, you must report and designate all acreage by type by the 
acreage reporting date. Any acreage not qualifying for fresh apple 
production is not eligible for the Optional Coverage for Fresh Fruit 
Quality Adjustment option contained in section 14 of these Crop 
Provisions. If you designate fresh apple acreage on the acreage report, 
you are certifying at least 50 percent of the production from acreage 
reported as fresh apple acreage, by unit, was sold as fresh apples in 
one or more of the four most recent crop years in accordance with the 
definition of ``fresh apple production'' and that you have the records 
to support such production.
    7. Insured Crop.
* * * * *
    (d) That are grown for:
    (1) Fresh apple production; or
    (2) Processing apple production.
* * * * *
    9. Insurance Period.
    (a) * * *
    (1) For the year of application, coverage begins on February 1 of 
the calendar year the insured crop normally blooms in California and 
November 21 of the calendar year prior to the calendar year the insured 
crop normally blooms in all other States. Notwithstanding the previous 
sentence, if your application is received by us after January 12 but 
prior to February 1 in California, or after November 1 but prior to 
November 21 in all other States, insurance will attach on the 20th day 
after your properly completed application is received in our local 
office, unless we inspect the acreage during the 20-day period and 
determine that it does not meet insurability requirements. You must 
provide any information that we require for the crop or to determine 
the condition of the apple acreage.
* * * * *
    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) * * *
    (1) * * *
    (2) Multiplying each result in section 12(b)(1) by the respective 
price election and by the percent of price election;
* * * * *
    (4) Multiplying the total production to count (see section 12(c)), 
for each type as applicable, by the respective price election and by 
the percent of price election;
* * * * *
    (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 you select 100 percent of the 
price election on 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 x 
100 percent of price election = $54,600 value of production 
guarantee for fresh apples;
    3,000-bushel production guarantee x $2.50 price election x 100 
percent of price election = $7,500 value of production guarantee for 
processing apples;
    C. $54,600 value of production guarantee for fresh apples + 
$7,500 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 x 100 percent of price election = $45,500 value of 
fresh apple production to count;
    1,000 bushels of processing apple production to count x $2.50 
price election x 100 percent of price election = $2,500 value of 
processing apple production to count;
    E. $45,500 value of fresh apple production to count + $2,500 
value of processing apple production to count = $48,000 total value 
of production to count;
    F. $62,100 total value of the production guarantee - $48,000 
total value of production to count = $14,100.00 value of loss; and
    G. $14,100 value of loss x 100 percent share = $14,100 indemnity 
payment.
    [END OF EXAMPLE]
* * * * *
    (d) Any apple production not graded or appraised 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 Fresh Fruit 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, adjusted in accordance with 
this option.
    (5) If appraised or harvested fresh apple production for the block 
or unit,

[[Page 52233]]

as applicable, 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 to the production to count will apply:
* * * * *
    (c) Any apple production not graded or appraised 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 Fresh Fruit Quality Adjustment Example:
    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 you 
select 100 percent of the price election on 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. Assuming you do not sell any of your fresh apple production 
as U.S. Fancy or better, your indemnity would be calculated as follows:
    A. 10 acres x 600 bushels per acre = 6,000-bushel production 
guarantee of fresh apples;
    B. 6,000-bushel production guarantee of fresh apples x $9.10 price 
election x 100 percent of price election = $54,600 value of production 
guarantee for fresh apple acreage;
    C. 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 x 100 percent of price election = $17,745 value of 
fresh apple production to count;
    D. $54,600 value of production guarantee for fresh apples - $17,745 
value of fresh apple production to count = $36,855 value of loss;
    E. $36,855 value of loss x 100 percent share = $36,855 indemnity 
payment.
* * * * *

    Signed in Washington, DC, on August 16, 2010.
William J. Murphy,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 2010-20619 Filed 8-24-10; 8:45 am]
BILLING CODE 3410-08-P