[Federal Register Volume 77, Number 169 (Thursday, August 30, 2012)]
[Rules and Regulations]
[Pages 52587-52595]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-21350]



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  Federal Register / Vol. 77, No. 169 / Thursday, August 30, 2012 / 
Rules and Regulations  

[[Page 52587]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

[Docket No. FCIC-11-0011]
RIN 0563-AC34


Common Crop Insurance Regulations; Peach Crop Insurance 
Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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

SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the 
Common Crop Insurance Regulations, Peach Crop Insurance Provisions. The 
intended effect of this action is to provide policy changes, to clarify 
existing policy provisions to better meet the needs of insured 
producers, and to reduce vulnerability to program fraud, waste, and 
abuse. The changes will apply for the 2013 and succeeding crop years.

DATES: This rule is effective August 30, 2012.

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

SUPPLEMENTARY INFORMATION: 

Executive Order 12866

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

Paperwork Reduction Act of 1995

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

E-Government Act Compliance

    FCIC is committed to complying with the E-Government Act of 2002, 
to promote the use of the Internet and other information technologies 
to provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 
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.

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, Consultation and Coordination with Indian Tribal 
Governments. The review reveals that this regulation will not have 
substantial and direct effects on Tribal governments and will not have 
significant Tribal implications.

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 CFR part 400, subpart J, for the 
informal administrative review process of good farming practices as 
applicable, must be exhausted before any action against FCIC for 
judicial review may be brought.

[[Page 52588]]

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 (7 CFR part 457) 457.153 Peach Crop Insurance Provisions 
that were published by FCIC on January 24, 2012, as a notice of 
proposed rulemaking in the Federal Register at 77 FR 3400-3404. The 
public was afforded 60 days to submit comments after the regulation was 
published in the Federal Register. A total of 202 comments were 
received from 17 commenters. The commenters were insurance providers, 
agents, growers, growers associations, an insurance organization, and 
other interested parties.
    The public comments received regarding the proposed rule and FCIC's 
responses to the comments are as follows:
    General:
    Comment: A commenter stated many of the proposed changes in the 
Peach Crop Provisions Proposed Rule, as explained in the ``Background'' 
section, appear to be reasonable.
    Response: FCIC thanks the commenter for their review of the 
proposed rule and their support.
    Section 1--Definitions:
    Comment: A few commenters expressed support for the proposed change 
to remove the definition of ``actual price per bushel for'' since the 
Free on Board (FOB) prices are no longer consistently reported by 
Agricultural Marketing Service (AMS).
    Response: FCIC thanks the commenters for their review of the 
proposed rule and their support. The proposed changes have been 
retained in this final rule.
    Comment: A few commenters do not agree with the proposed addition 
of definitions of ``fresh and ``processing'' and recommend revising the 
definition to ``Fresh production'' or ``Fresh peach production'' as in 
the current Apple Crop Provisions. This would then necessitate revising 
item (1) to state ``Peaches from insurable acreage that:'' instead of 
``Peach production * * *.'' Commenters also recommended revising the 
definition to ``Processing production'' or ``Processing peach 
production'' as in the current Apple Crop Provisions.
    Response: FCIC agrees and has revised the definition of ``Fresh'' 
to ``Fresh peach production'' and ``Processing'' to ``Processing peach 
production'' in these this final rule.
    Comment: A few commenters recommended revising the definition of 
``fresh'' to read * * * ``its basic form * * *'' to ``* * * the basic 
form * * *'' as in the Apple Crop Provisions.
    Response: FCIC agrees and has deleted the word ``its'' and replaced 
with ``the'' from the definition of ``fresh'' and ``processing''.
    Comment: A few commenters recommended that if the lead-in remains 
``Peach production'' instead of ``Peaches'', to match a singular 
subject, change the word ``Are'' to ``Is'' at the start of section 
1(1)(i), (iii) & (iv); and change the first word of section 1(1)(ii) to 
``Grades'' and section 1(1)(iv) to ``Follows''.
    Response: FCIC agrees with the commenters and has revised the 
provisions accordingly.
    Comment: A few commenters questioned the definition of ``fresh.'' 
The definition requires fresh peaches to ``Grade at least U.S. Extra 
No. 1 or better consisting of the minimum diameter as specified in the 
Special Provisions.'' This requires the peaches actually be produced 
and graded before the determination is made. The commenters expressed 
concern because the peach acreage must be reported as fresh or 
processing on the acreage report. The commenters ask who will be 
required to grade the peaches because insurance providers have had no 
training for grading peaches in the past. The commenters ask whether 
there are USDA peach graders available to assist in the event of any 
questions or disagreements on the grading of peaches.
    Response: FCIC understands and agrees with the commenters that the 
determination of whether a peach meets the definition of fresh or 
processing is difficult when it is reported on the acreage report. 
There is no way to know whether a peach is a fresh peach or processing 
unless is it graded. The designation of peach acreage as fresh and 
processing occurs on the acreage report based on the certification 
provided by the producer that at least 50 percent of the peaches have 
been sold as fresh and meets the other requirements for fresh. If these 
requirements are met, the acreage qualifies as fresh even if the 
peaches subsequently produced do not meet the definition for fresh. If 
the acreage is subsequently determined not to meet the definition of 
fresh peach production, the policy provides for remedies. Further, the 
Peach Loss Adjustment Standards provides instructions to insurance 
providers to grade peach production or have the samples of the peach 
production taken to a State/Federal licensed grader to determine the 
grade of the peach production. No change has been made.
    Comment: Numerous commenters stated the phrase ``each unit'' needs 
to be revised to avoid the problem associated with the Apple Crop 
Provisions which necessitated issuance of a number of bulletins to 
clarify, the reference to ``each unit'' in section 1((1)(v) of the 
definition of ``Fresh''.
    Response: A large number of apple producers, who are also peach 
producers, pointed out that they can and do maintain records of 
production by unit. However, once apples or peaches are delivered to a 
warehouse, which is often a third party, for sales and distribution, it 
is virtually impossible and/or impractical to expect all the apples or 
peaches to be tracked by unit. FCIC agrees with the commenter and will 
revise the phrase ``each unit'' to ``total production''.
    Comment: Numerous commenters asked how the insured would 
``certify,'' as noted in section 1(1)(v) of this definition, that at 
least 50 percent of the production from acreage reported as fresh peach 
acreage from each unit was sold as fresh peaches in one or more of the 
four most recent crop years.'' The commenter asked whether this is 
accomplished simply by the fact that the insured is reporting the 
acreage as fresh rather than as processing, or whether some form of 
additional documentation required (and if so, is it required with the 
acreage report or at some other time, such as in the event of an Actual 
Production History (APH) review).
    Response: As with all APH programs, certifications include not only 
the yield but also an attestation to the fact that the producer has the 
actual records to support the yield. The same concept applies here. The 
producer is certifying that not only has at least 50 percent of the 
production from the acreage in the unit been sold as fresh but also 
that the producer has the records to support those sales. Verification 
by the insurance provider that records exist would occur the same as 
any other program where there is a need to verify the production 
reported for the purpose of establishing the guarantee. No change has 
been made.
    Comment: Numerous commenters stated that based on market demand, 
large growers must place peaches in cold storage where they lose 
quality over time. To illustrate, 1000 bushels of peaches that could be 
sold as fresh peaches today are placed in cold storage. When peaches 
are removed

[[Page 52589]]

from cold storage, only 850 bushels can be sold as fresh; thus only 850 
bushels can be used to qualify for fresh coverage. In contrast a 
smaller grower who distributes to local businesses will timely sell all 
1000 bushels as fresh and use 1000 bushels towards fresh coverage 
qualification. In this common situation, the policy does not treat to 
all growers equally.
    Response: It appears that the commenter is suggesting that grading 
records obtained before the peaches are put in storage be used to 
determine whether the acreage qualifies for fresh or processing. FCIC 
cannot simply use grading records because there are instances where 
peaches that grade as fresh are intended to be and are sold in the 
processing market. Because fresh peaches gets a higher price election 
than processing peaches, in order to avoid over-insuring the crop, FCIC 
must ensure the producer is capable of producing fresh peaches and has 
a buyer for the fresh peaches. Further, basing insurance on the intent 
to sell the production as fresh is too subjective a standard. FCIC can 
only base its insurance offer on verifiable documentation, in this case 
the sales records of the production. FCIC has taken the concerns 
expressed by the commenter into consideration when it set the threshold 
at 50 percent and not some greater percentage to establish that the 
acreage of peaches was produced for the fresh market. No change has 
been made.
    Comment: A few commenters stated direct marketers sell fresh 
peaches. Due to diverse methods of record keeping many direct marketers 
will be unable to produce verifiable sold records to qualify for fresh 
coverage. Most direct marketers are willing to comply with the 
requirements for a verifiable record. However, under the proposed 
policy many will be limited to processing coverage for one or more 
years until they can convert their record keeping methods and meet the 
50 percent sold as fresh peach production. In this common situation, 
the policy does not treat to all growers equally.
    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 records of past 
production. This record keeping requirement applies to all crops 
insured under the APH program, including those crops that are commonly 
direct marketed. FCIC understands direct marketing producers may have 
diverse methods of record keeping so FCIC has made revisions to 
procedure to allow other acceptable verifiable records to be used for 
peach direct marketers. In the past, there have been issues with 
respect to whether producers seeking insurance have the experience to 
grow and to follow cultural practices appropriate to produce fresh 
peaches. Fresh peaches receive a higher price than processing peaches. 
Therefore, to protect program integrity, FCIC must maintain the 
requirement that producers demonstrate that they can produce fresh 
peaches to be eligible to insure their peach acreage as fresh. No 
change has been made.
    Comment: A few commenters recommended that due to lack of records 
in a new orchard (or transferred orchards) and along with the desire of 
producers to insure fruit for fresh production, a new eligible producer 
or a new orchard, should be allowed to insure for fresh coverage by 
declaration.
    Response: Declarations of intent without the requirement for 
maintaining supporting records has proven in the past to lead to 
instances of abuse of the program when producers declare their intent 
to produce the crop as fresh when they have not been able to produce a 
crop meeting the definition of fresh or they have no viable market for 
their fresh production. FCIC cannot permit insurance based on a higher 
price election if the producer does not have the ability to ever 
receive that price. Unfortunately, this issue especially applies to new 
producers and new orchards where there is no history of ever producing 
a fresh peach crop. FCIC has taken the commenters concerns into 
consideration when it set the 50 percent threshold for producing fresh 
peaches and the one year requirement instead of some other percentage 
or number of years. In addition, the 50 percent threshold and record 
keeping requirement may limit insurance but if the new producer 
legitimately grows the peaches for the fresh market, this limitation 
should not last more than a year. No change has been made.
    Comment: A few commenters stated the apple policy requires apples 
to be sold at a price commensurate with that of a fresh apple via 
product management bulletin. If FCIC intends for the peach policy to 
follow the same rules then the price language needs to be added to the 
definition of Fresh. In addition, FCIC needs to define ``a price 
commensurate with that of a fresh peach''. The current definition is 
ambiguous and does not allow for unilateral application among the 
insurance providers.
    Response: FCIC agrees with the commenters and has clarified in the 
definition of ``fresh peach production'' to specify that peaches must 
have been sold or could have been sold for a price not less than Risk 
Management Agency's (RMA) published fresh peach price election. If 
fresh peaches were sold or could have been sold at a fresh price that 
was less than the RMA's published fresh peach price election for the 
applicable year, then the producer must provide verifiable records to 
show that the price received was not less than the price for fresh 
peaches sold in the area the insured normally sells peach her or her 
production.
    Comment: Commenters stated it is critical for FCIC to define 
``verifiable records'' in the definition of ``Fresh'' in section 1. 
Growers need to have a clear and concise explanation of what 
constitutes ``verifiable records'', especially for ``you- pick 
operations'' to properly comply with the regulations.
    Response: Subsequent to this proposed rule, FCIC published a final 
rule amending the Common Crop Insurance Regulations. 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 now contained in 
the policy. No change has been made.
    Comment: A few commenters asked if yields for you-pick operations 
can be verified by an on tree pre-harvest appraisal as opposed to sales 
receipts.
    Response: As in the case of most perennials, the peach policy 
states before production is sold by direct marketing a pre-harvest 
appraisal must be completed by the insurance provider to determine the 
potential production to count. However, a pre-harvest appraisal may 
determine potential production to count, but it does not determine the 
quantity of the total production sold as fresh peaches. Therefore, it 
is incumbent upon the insured to provide verifiable records when 
requested, that must reflect whether the value received is consistent 
with the value of fresh peaches verses the value of processing peaches. 
No change has been made.
    Comment: A few commenters stated that it is confusing as to why the 
phrase in section 1 in the definition of ``fresh peach production'' 
subsection (2) requires peach acreage with production not meeting all 
the requirements in subsection (1) of the ``fresh peach production'' 
definition to be designated on the acreage report as processing peach 
production. The commenters ask whether this designation of processing 
acreage on the acreage report considered a forward-looking or an after-
the-fact looking statement, or both. The commenters suggested this 
provision would be better situated in section 6 (Report of Acreage). If 
all of the requirements in subsection (1) of the

[[Page 52590]]

``fresh peach production'' definition must be met, then it would be 
impossible that any acreage could be designated as fresh peach 
production, as subsection (1) of the ``fresh peach production'' 
definition most likely will never be satisfied.
    Response: FCIC agrees with the commenter that the designation of 
acreage not producing production meeting the requirements as fresh 
peach production as processing acreage on the acreage report is not a 
definitional requirement and, therefore, FCIC has removed paragraph (2) 
and redesignated the remaining provisions. FCIC has also revised the 
provisions in section 6 to clarify that any acreage not qualifying for 
fresh peach production in accordance with these Crop Provisions must be 
designated on the acreage report as processing peach production.
    Comment: A few commenters recommended changing the term ``Grade'' 
to ``Grades'' in section 1 of ``fresh peach production'' since the 
definition refers to U.S. Extra No. 1 or better.
    Response: FCIC agrees with the commenters and has revised the 
definition of ``fresh peach production'' accordingly.
    Comment: FCIC received numerous comments in reference to the 
definition of ``post production cost'' in section 1, asking how ``post 
production cost'' is determined and stating the definition needs 
further clarification.
    Response: As FCIC stated in the ``Background'' of the proposed 
rule, the definition of ``post production cost'' is defined as cost 
associated with activities that occur during harvesting, packing, 
transportation, and marketing. Insurance coverage is limited to those 
perils and costs that occur while the crop is in the field. Therefore, 
for the purposes of determining ``post production costs,'' FCIC will 
separate those costs as determined by using regional peach price data 
of peach production budgets from regional respective universities 
extension, other USDA agencies, and other third party resources. The 
``post production cost'' is utilized in order to adjust quality damage 
by normalizing the actual sale price to the price election amount which 
is valued ``on tree''. Post production cost amounts will be provided in 
the Special Provisions. However, FCIC has revised the definition to 
specify how the post production costs will be determined.
    Section 2--Unit Division:
    Comment: Numerous commenters expressed support for the proposed 
change in section 2 which allows optional units by fresh, processing, 
and non-contiguous land as specified in the Special Provisions. The 
commenters stated this change will allow producers more flexibility in 
making management decisions on how to insure their crops.
    Response: FCIC thanks the commenters for their review of the 
proposed rule and their support. The proposed change has been retained 
in this final rule.
    Section 3--Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities:
    Comment: A few commenters questioned using the word ``bearing'' in 
the section 3(c)(2). Producers are required to report their uninsurable 
acres, and when trees are first planted, they will be non-bearing. The 
commenters ask whether it is the intent for producers to report zero 
trees on their uninsurable acres. If the block consists of older trees 
and younger interplanted trees of the same variety, and only the 
bearing trees are counted, the commenter states that there will be 
inconsistencies with the acres, the tree spacing, and the density. If 
growers remove many older trees and replace them with younger trees, 
they will need to report them on the producer's Pre-Acceptance 
Worksheet (PAW) as they have performed cultural practices that will 
reduce the yield from previous levels. Commenters suggested growers 
should be required to report all trees and this number should remain 
constant until they remove trees or plant new trees. Insurance 
providers should not be required to track only the trees that are 
bearing and be required to revise this figure each year.
    Response: The information that must be submitted in accordance with 
section 3(c) is required in order to establish the producers' APH, 
approved yield, and the amount of coverage. Section 3(c)(2) requires 
the bearing trees on both 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. 
Otherwise, there will be inconsistencies with acres, tree spacing, and 
the density, if only bearing trees are reported. 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 both bearing and non-bearing trees as outlined in the 
Crop Provisions and the Crop Insurance Handbook. No change has been 
made.
    Comment: Numerous commenters expressed support for the proposed 
change in section 3 allowing the insured to select different coverage 
levels for fresh and processed peaches within the same unit. The 
commenters stated this change will allow producers more flexibility in 
making management decisions on how to insure their crops.
    Response: FCIC thanks the commenters for their review of the 
proposed rule and their support. The proposed change has been retained 
in this final rule.
    Comment: A few commenters referenced section 3(d) about the 
reduction of the yield used to establish the production guarantee for 
subsequent crop years due to tree damage, removal of trees, change in 
practices, interplanted of a perennial crop, or any other circumstances 
that reduce the yield. The commenters state that the eastern peach 
growing areas have had downward trending component based on the 5 year 
database for APH calculations. The commenters state that this makes the 
peach database much more responsive to yield changes than a 10 year 
database. Commenters stated procedural changes by RMA to the 
application of ``downward trending'' circumvent actions taken by 
Congress to minimize flaws in the Federal crop insurance program 
through the Agricultural Risk Protection Act of 2000 (ARPA).
    ARPA created a yield adjustment option and mandated that in the 
event of a significant crop loss or zero production on a given 
insurance unit, the producer would be able to replace the low yield 
with 60 percent of the transitional yield. Recent procedural changes 
regarding downward trending as applied to the peach crop insurance 
program prohibits producers from selecting the yield adjustment option 
when there are two consecutive years of crop losses recorded on a 
particular insurance unit regardless of the reason for the loss. This 
change negatively affects APH and is in direct contradiction of the 
ARPA. Additionally downward trending allows RMA to reduce the APH to 75 
percent of its value. Currently, by definition and application, a 6 
year old block entering its prime production years could be subject to 
downward trending if it has losses in 2 of the last 3 years due to 
climatic weather events. In such a case losing the yield adjustment 
option directly refutes the ARPA intention of Congress in 2000 and 
dramatically lowers the producer's APH. Therefore this rule should be 
removed or, at the very minimum, be applied to orchards that are 10 
years of age.

[[Page 52591]]

    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. However, in 2009 FCIC 
released the ``Perennial Crop and Declining Yield Report to Congress'' 
http://www.rma.usda.gov/pubs/2009/perennialcrops.pdf. In this 
publication FCIC addressed the issues of utilizing the insured's APH in 
place of T-yields for yield adjustments, as well as high variability 
testing for crops with a shorter base period. As noted in the report, 
FCIC has requested legislative authority for these changes. Until 
legislative authority is granted, FCIC procedures allow RMA Regional 
Offices to modify or waive a high variability adjustment, which 
includes downward trend adjustments, and to authorize yield adjustment 
for APH, when appropriate. No change has been made.
    Comment: FCIC received numerous comments in reference to the last 
sentence of section 3(d), ``* * * We will reduce the yield used to 
establish your production guarantee for the subsequent crop year''. 
Commenters questioned what happens if the event that occurred was 
something that only impacts the crop for the year in question and has 
no carryover effect on the yield into the next year. Commenters 
suggested the language needs to be revised to provide the insurance 
provider some latitude as to whether the subsequent years yield should 
be reduced and to what extent it should be reduced. There could also be 
certain events that occur that have some effect on the next year but 
the impact is less than the production that was assessed for the year 
in which the event occurred. Therefore, this sentence needs to be 
modified to allow the approved insurance provider to have some 
flexibility to be able to determine how much, if any, that the yield 
should be reduced for the subsequent crop year.
    Response: Section 3(d) states that a reduction in the yield will be 
done, as necessary. This gives the insurance provider the discretion to 
determine the event will cause a reduction in yield on the subsequent 
crop year. In addition, section 3(d) allows the insurance provider to 
estimate the effect of any reduction in future years. Therefore, the 
provision already contains the flexibility requested. No change has 
been made.
    Section 6--Report of Acreage:
    Comment: FCIC received numerous comments regarding the provision to 
report and designate all acreage of peaches as fresh or processing 
peaches by the acreage reporting date. However, fresh and processing 
are identified as types in the Special Provisions of the Actuarial 
Information Browser. FCIC stated in the ``Background'' of the Peach 
Crop Provision proposed rule, it removed the word ``type'' because it 
is no longer applicable. The commenters stated, since the proposal is 
to remove the word ``type'', it will be necessary to change the Special 
Provisions. Due to the importance of the Special Provisions, the 
commenter recommended FCIC provide insurance providers with a preview 
of the Special Provisions, so they can see the changes.
    Response: FCIC understands the commenter's concern and agrees the 
types as well as the numerical type codes may change for the 2013 crop 
year. As stated in the proposed rule, the word ``type'' will not be 
applicable in the future, which is why the definitions of ``fresh'' and 
``processing'' were added. The Actuarial Information Browser will 
provide a generic definition of ``type'', which allows for changes or 
additional types in the future. This is consistent with other Crop 
Provisions and allows FCIC to make changes in the Special Provisions, 
if applicable, without having to promulgate regulations to revise, add, 
or change types of peaches, which allows FCIC to be more responsive to 
the risk management needs of producers. Since these changes are similar 
to other crops, it is not necessary to provide a preview of the changes 
since implementation of the Special Provisions are time sensitive and 
FCIC is concerned that sending the Special Provisions out for preview 
will delay implementation. The change also aids in sharing information 
with other United States Department of Agriculture (USDA). Adding the 
definition of ``fresh peach production'' and ``processing peach 
production'' clearly defines the intended use of peach production. No 
change has been made.
    Section 7--Insured Crop:
    Comment: FCIC received comments stating that the introductory 
paragraph in section 7 seems to be redundant. The opening paragraph 
states ``* * * the crop insured will be all the peaches in the county 
for which a premium rate is provided by the actuarial documents''. 
Section 7(c) repeats the same opening paragraph by stating ``* * * any 
varieties of peaches that are grown for the production of fresh or 
processing peaches on insured acreage for which a guarantee and premium 
rate are provided by the actuarial documents.''
    Response: FCIC agrees with the commenters stating the opening 
paragraph in section 7 is redundant with section 7(c) and the provision 
has been revised accordingly.
    Section 9--Insurance Period:
    Comment: A few commenters stated subsections in section 9(a)(1) and 
(c) seem somewhat contradictory and confusing. According to (a)(1): 
``Coverage begins on November 21 of each crop year, except that for the 
year of application* * *'' if the application is received in the last 
10 days before sales closing date, coverage attaches on the 10th day. 
But according to (c): ``* * * for each subsequent crop year that the 
policy remains continuously in force, coverage begins on the day 
immediately following the end of the insurance period * * *'' The 
calendar date for the end of the insurance period is September 30 in 
accordance with section 9(a)(2), so this indicates coverage would begin 
October 1 (unless some other event ended coverage earlier) rather than 
November 21. It appears that the November 21 date applies only the year 
of application (with the 10-day exception for applications during that 
10-day period) rather than for ``each'' crop year since all subsequent 
crop years are addressed in (c).
    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. However, FCIC believes there 
is no conflict. Insurance coverage begins on November 21 of each crop 
year, except for the year of application. Insurance coverage ends on 
September 30. However, in accordance with these Crop Provisions, for 
each subsequent crop year that the policy is remains continuously in 
force, coverage begins on the day immediately following the end of 
insurance period for the prior crop year. The insurance period is set 
to provide insurance during the same time when the crop is at risk from 
normal causes of loss. This is period is not the same for all crops. 
There needs to be variance in the beginning and ending of insurance 
periods to reflect differences in the crops being insured and the areas 
where they are grown. The calendar date for the end of insurance period 
must reflect the normal harvest date for each crop. No change has been 
made.
    Comment: A commenter recommended the words ``* * * after an 
inspection * * *'' should be removed in section 9(b)(1). If damage has 
not generally occurred in the area where such acreage is located, it 
should be up to the insurance providers' discretion to decide whether 
the acreage needs an inspection to be considered acceptable. The 
language in this section already refers to the insurance provider 
having the ability to consider the acreage acceptable. Since the 
acreage

[[Page 52592]]

and production reporting dates are after insurance attaches, the 
insurance provider may not know if the acreage was acquired after 
coverage began, but before the acreage reporting date. The insurance 
provider reserves the right to perform an inspection if they deem 
necessary, but this should NOT be a requirement.
    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 commenter recommended adding language to this section to 
allow the insurance provider the opportunity to inspect and insure any 
additional acreage that is acquired after the acreage reporting date if 
they wish to do so. The insurance provider 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 
in accordance with section 6(f) of the Basic Provisions.
    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.
    Section 11--Duties in the Even of Damage:
    Comment: FCIC received comments that the provision in section 11 
requiring the insured to leave representative samples in units should 
be removed. Peaches are extremely perishable, with a ripening period of 
only 10-14 days. Beyond that, the fruit will begin to break down and 
decay. Fruit left on trees provides an ideal environment for insect and 
disease infestation. Many units contain multiple varieties, ripening on 
different timelines. This practice of leaving samples would increase 
the likelihood of infection for neighboring varieties''.
    Response: FCIC realizes that there is a narrow window of time to 
harvest the peaches and has tried to achieve a balance with will the 
need to provide meaningful coverage, such as direct harvest which 
requires an appraisal because of the difficulty with verifiable 
records, and protect program integrity. Insurance providers know of the 
expediency needed to appraise peaches and the goal is to conduct such 
appraisals in a timely manner to avoid any adverse consequences to the 
peaches or trees. No change has been made.
    Section 12--Settlement of Claim:
    Comment: A few commenters suggested adding a second example in 
section 12(b) depicting two optional units, one for fresh peaches and a 
second for processing peaches and to demonstrate within the fresh peach 
unit a portion of the total production that does not meet the 
requirements for fresh production and is sold as processing peach 
production.
    Response: FCIC understands the commenters suggestion, but due to 
the numerous situations regarding optional units, it is not possible to 
list them all in an example. The example in section 12(b) is only 
intended to provide only a general explanation of how the indemnity 
payment would be calculated in accordance with these Crop Provisions. 
To the extent that other examples may be necessary, they will be 
provided in the applicable procedures. No change has been made.
    Comment: A few commenters recommended adding hyphens in the phrase 
``3,000-bushel production guarantee'' and ``1,500-bushel production 
guarantee'' in steps (A) (B).
    Response: FCIC has revised the provision accordingly.
    Comments: Commenter asks why the steps are designated (A)-(G) 
rather than (1)-(7) to match (b) (1)-(7) and to be consistent with 
other crop policies.
    Response: FCIC understands the commenters questioning why the steps 
in the example designated as (A)-(G) rather that (1)-(7) to match (b) 
(1)-(7). However, the example follows paragraph (7) and is, in effect, 
a descriptor for paragraphs (1) through (7). Therefore, it did not make 
sense to designate these provisions again as paragraphs (1) through 
(7). Further, descriptive headings and formatting of various policy 
provisions are formulated for convenience only and are not intended to 
affect the construction or meaning of any of the policy provisions. No 
change has been made.
    Comment: A few commenters recommended the subsection designation of 
``(2.)'' should read ``(2)''.
    Response: FCIC has revised the provision accordingly.
    Comment: A commenter asked whether the reference to the fresh peach 
price election and processing peach price election in section 
12(c)(3)(i) and (ii)(A) is the same as RMA's price election in the 
Special Provisions or the addendum to the Special Provisions and not 
the insured's price election.
    Response: The ``fresh peach and processing price election'' 
referenced in section 12(c)(3)(i) and (ii)(A) are RMA's price elections 
as published in the Special Provisions. No change has been made.
    In addition to the changes described above, FCIC has made minor 
typographical and punctuation changes.
    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 provision for 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 optional units by fresh 
and processing; (2) allowing different coverage levels for all fresh 
peach acreage in the county and for all processing peach acreage in the 
count; and (3) providing simplification and clarity to the peach 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 unit the 2014 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, Peach, Reporting and recordkeeping requirements.

Final Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation amends 7 CFR part 457 effective for the 2013 and 
succeeding crop years as follows:

PART 457--COMMON CROP INSURANCE REGULATIONS

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

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


0
2. Amend Sec.  457.153 as follows:
0
a. Amend the introductory text by removing the ``2001'' and adding 
``2013'' in its place;
0
b. Remove the undesignated paragraph immediately preceding section 1.
0
c. Amend section 1 as follows:
0
1. Add definitions of ``fresh peach production'', ``post production 
cost'', and ``processing peach production'' in alphabetical order; and

[[Page 52593]]

0
2. Remove the definition of ``actual price per bushel for''.
0
d. Redesignate sections 2, 3, 4, 5, 6, 7, 8, 9, 10, and 11 as 3, 4, 5, 
7, 8, 9, 10, 11, 12, and 13, respectively.
0
e. Add a new section 2.
0
f. Amend redesignated section 3 as follows:
0
i. Remove the phrase ``(Insurance Guarantees, Coverage Levels, and 
Prices for Determining Indemnities)'' in the introductory text;
0
ii. Redesignate paragraphs (a), (b), and (c) as (b), (c), and (e), 
respectively, and adding a new paragraph (a);
0
iii. Revise redesignated paragraphs (b), (c) introductory text, (c)(1), 
(c)(3), and (c)(4)(ii);
0
iv. Designate the undesignated paragraph following redesignated 
paragraph (c) as paragraph (d); and
0
v. Revise redesignated paragraph (d).
0
g. Amend redesignated section 4 by removing the phrase ``(Contract 
Changes)''.
0
h. Amend redesignated section 5 by removing the phrase ``(Life of 
Policy, Cancellation and Termination)''.
0
i. Add a new section 6.
0
j. Amend redesignated section 7 as follows:
0
i. Remove the phrase ``(Insured Crop)'';
0
ii. Amend paragraph (c) by removing phrases ``of the types or'' and 
``(except Processing Peaches excluded in California) on insured acreage 
and for which guarantee and premium rate are provided by the Actuarial 
Table'';
0
iii. Amend paragraph (d) by removing the word ``and'' at the end;
0
iv. Amend paragraph (e) by removing the period at the end and adding 
the phrase ``; and'' in its place; and
0
v. Add a new paragraph (f).
0
k. Amend redesignated section 8 by removing the phrase ``(Insurable 
Acreage)''.
0
l. Amend redesignated section 9 as follows:
0
i. Remove the phrase ``(Insurance Period)''in paragraphs (a) and (b); 
and
0
ii. Amend paragraph (c) by removing the phrase ``paragraph (a)(1)'' and 
adding the phrase ``section 9(a)(1)'' in its place.
0
iii. Amend paragraph (d) to add a comma after the phrase, ``termination 
dates.''
0
m. Amend redesignated section 10 by removing the phrase ``(Causes of 
Loss)'' in paragraphs (a) and (b).
0
n. Amend redesignated section 11 as follows:
0
i. Redesignate the introductory text as paragraph (b);
0
ii. Redesignate paragraphs (a), (b), (c), and (d) as (1), (2), (3), and 
(4), respectively;
0
iiii. Add a new paragraph (a); and
0
iv. Remove the phrase ``(Duties in the Event of Damage or Loss)'' in 
redesignated paragraph (b).
0
o. Amend redesignated section 12 as follows:
0
i. Revise paragraphs (b)(1) through (b)(7);
0
ii. Add a loss example after paragraph (b)(7);
0
iii. Revise paragraph (c)(1) introductory text:
0
iv. Revise paragraph (c)(1)(i)(B);
0
v. Revise paragraph (c)(1)(iii);
0
vi. Revise paragraph (c)(2); and
0
vii. Revise paragraphs (c)(3)(i) and (c)(3)(ii).
    The revised and added text reads as follows:


Sec.  457.153  Peach crop insurance provisions.

* * * * *
    1. Definitions.
* * * * *
    Fresh peach production. Peach production from insurable acreage 
that:
    (1) Is sold, or could be sold, for human consumption without 
undergoing any change in the basic form, such as peeling, juicing, 
crushing, etc.
    (2) Grades at least U.S. Extra No. 1 or better, and consisting of a 
2\1/4\ inch minimum diameter, unless otherwise specified in the Special 
Provisions.
    (3) Is from acreage that is designated as fresh peaches on the 
acreage report;
    (4) Follows the recommended cultural practices generally in use for 
fresh peach acreage in the area in a manner generally recognized by 
agricultural experts;
    (5) Is from acreage that you certify, and if requested by us, 
provide verifiable records to support, that at least 50 percent of the 
total production from acreage reported as fresh peach acreage was sold 
as fresh peaches in one or more of the four most recent crop years; and
    (6) Is sold or could have been sold for a price that is not less 
than the applicable fresh peach price election for the applicable crop 
year in the actuarial documents. If the fresh peach production is sold 
or could have been sold for a price less than the applicable fresh 
peach price election for the applicable crop year in the actuarial 
documents, you must provide verifiable records to show that the price 
received was at least the amount paid by buyers for fresh peaches in 
the area in which you sell your peaches.
* * * * *
    Post production cost. The costs, as specified in the Special 
Provisions, associated with activities that occur during harvesting, 
packing, transportation, and marketing, as determined by FCIC using 
regional peach price data of peach production budgets from regional 
respective universities extension, other USDA agencies, and other third 
party resources.
    Processing peach production. Peach production from insurable 
acreage that is:
    (i) Sold, or could be sold, for the purpose of undergoing a change 
to its basic structure such as peeling, juicing, crushing, etc.; or
    (ii) From acreage designated as processing peaches on the acreage 
report.
* * * * *
    2. Unit Division.
    In addition to the requirements contained in section 34 of the 
Basic Provisions, optional units may be established if each optional 
unit is:
    (a) Located on non-contiguous land; or
    (b) By fresh and processing as specified in the Special Provisions.
    3. Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities.
* * * * *
    (a) You may select a separate coverage level for all fresh peach 
acreage and for all processing peach acreage. For example, if you 
choose the 55 percent coverage level for all fresh peach acreage, you 
may choose the 75 percent coverage level for all processing peach 
acreage.
    (1) Notwithstanding paragraph (a) of this section, if you elect the 
Catastrophic Risk Protection (CAT) level of coverage for fresh peach 
acreage or processing peach acreage, the CAT level of coverage will be 
applicable to all insured peach acreage in the county of both fresh and 
processing peaches.
    (2) If you only have fresh peach acreage designated on your acreage 
report and processing peach acreage is added after the sales closing 
date, we will assign a coverage level equal to the coverage level you 
selected for your fresh peach acreage.
    (3) If you only have processing peach acreage designated on your 
acreage report and fresh peach acreage is added after the sales closing 
date, we will assign a coverage level equal to the coverage level you 
selected for your processing peach acreage.
    (b) You may select only one price election for all the peaches in 
the county insured under this policy unless the Special Provisions 
provide different price elections by fresh and processing peaches. If 
the Special Provisions allow

[[Page 52594]]

different price elections, you may select a separate price election for 
all your fresh peaches and for all your processing peaches. If the 
Special Provisions do not allow for different price elections, the 
price elections you choose for fresh peaches and processing peaches 
must have the same percentage relationship to the maximum price offered 
by us for fresh and processing peaches. For example, if you choose 100 
percent of the maximum price election for fresh peaches, you must 
choose 100 percent of the maximum price election for processing 
peaches.
    (c) You must report, not later than the production reporting date 
designated in section 3 of the Basic Provisions, separately by fresh 
and processing peach acreage, as applicable:
    (1) Any event or action that could impact the yield potential of 
the insured crop including, interplanting of a perennial crop, removal 
of trees, any tree 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;
    (2) * * *
    (3) The age of trees, variety, and the planting pattern; and
    (4) * * *
    (ii) The variety;
* * * * *
    (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 (4). If the situation 
occurred:
    (1) Before the beginning of the insurance period, we will reduce 
the yield used to establish your production guarantee for the current 
crop year as necessary. If you fail to notify us of any circumstance 
that may reduce your yields from previous levels, we will reduce your 
production guarantee at any time we become aware of the circumstance;
    (2) Or may occur after the beginning of the insurance period and 
you notify us by the production reporting date, the yield used to 
establish your production guarantee is due to an uninsured cause of 
loss;
    (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 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.
* * * * *
    6. Report of Acreage.
    In addition to the requirements contained in section 6 of the Basic 
Provisions, you must report and designate all acreage of peaches as 
fresh or processing peaches by the acreage reporting date. Any acreage 
not meeting all the requirements to qualify for fresh peach production 
must be designated on the acreage report as processing peach 
production.
    7. Insured Crop.
    * * *
    (f) That are grown for:
    (1) Fresh peach production; or
    (2) Processing peach production.
* * * * *
    11. Duties In the Event of Damage or Loss.
    (a) In accordance with the requirements of section 14 of the Basic 
Provisions, you must leave representative samples in accordance with 
our procedures.
* * * * *
    12. Settlement of Claim.
* * * * *
    (b) * * *
    (1) Multiplying the insured acreage for fresh and processing 
peaches, as applicable, by the respective production guarantee;
    (2) Multiplying each result in section 12(b)(1) by the respective 
price election;
    (3) Totaling the results in section 12(b)(2);
    (4) Multiplying the total production of fresh and processing 
peaches to be counted, as applicable (see subsection 12(c)) by the 
respective price election;
    (5) Totaling the results in section 12(b)(4);
    (6) Subtracting the total in section 12(b)(5) from the total in 
section 12(b)(3); and
    (7) Multiplying the result in section 12(b)(6) by your share.
    Example:
    You have a 100 percent share in one basic unit with 10 acres of 
fresh peaches and 5 acres of processing peaches designated on your 
acreage report, with a 300 bushel per acre production guarantee for 
both fresh and processing peaches, and you select 100 percent of the 
price election of $15.50 per bushel for fresh peaches and $6.50 per 
bushel for processing peaches. You harvest 2,500 bushels of fresh 
peaches and 500 bushels of processing peaches. Your indemnity will be 
calculated as follows:
    (A) 10 acres x 300 bushels = 3,000-bushel production guarantee of 
fresh peaches;
    5 acres x 300 bushels = 1,500-bushel production guarantee of 
processing peaches;
    (B) 3,000-bushel production guarantee x $15.50 price election = 
$46,500 value of the production guarantee for fresh peaches; 1,500-
bushel production guarantee x $6.50 price election = $9,750 value of 
the production guarantee for processing peaches;
    (C) $46,500 value of the production guarantee for fresh peaches + 
$9,750 value of the production guarantee for processing peaches = 
$56,250 total value of the production guarantee;
    (D) 2,500 bushels of fresh peach production to count x $15.50 price 
election = $38,750 value of the fresh peach production to count; 500 
bushels of processing peach production to count x $6.50 price election 
= $3,250 value of the processing peach production to count;
    (E) $38,750 value of the fresh peach production to count + $3,250 
value of the processing peach production to count = $42,000 total value 
of the production to count;
    (F) $56,250 total value of the production guarantee--$42,000 total 
value of the production to count = $14,250 value of loss; and
    (G) $14,250 value of loss x 100 percent share = $14,250 indemnity 
payment.
    [End of Example]
    (c) * * *
    (1) All appraised production as follows:
    (i) * * *
    (B) From which production is sold by direct marketing if you fail 
to meet the requirements contained in section 11.
    * * *
    (iii) Unharvested peach production that would be marketable if 
harvested;
    * * *
    (2) All harvested marketable peach production from the insurable 
acreage.
    (3) * * *
    (i) For fresh peaches by:
    (A) Dividing the value of the damaged peaches minus the post 
production cost specified in the Special Provisions, by the fresh peach 
price election; and
    (B) Multiplying the result of section 12(c)(3)(i)(A) (not to exceed 
1.00) by the number of bushels of the damaged fresh peaches.
    (ii) For processing peaches by:
    (A) Dividing the value of the damaged peaches minus the post 
production cost specified in the Special Provisions, by the processing 
peach price election; and
    (B) Multiplying the result of section 12(c)(3)(ii)(A) (not to 
exceed 1.00) by the number of bushels of the damaged processing 
peaches.
* * * * *


[[Page 52595]]


    Signed in Washington, DC, on August 24, 2012.
William J. Murphy,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 2012-21350 Filed 8-29-12; 8:45 am]
BILLING CODE 3410-01-P