[Federal Register Volume 79, Number 144 (Monday, July 28, 2014)]
[Rules and Regulations]
[Pages 43593-43604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-17491]



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  Federal Register / Vol. 79, No. 144 / Monday, July 28, 2014 / Rules 
and Regulations  

[[Page 43593]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

[Docket No. FCIC-13-0003]
RIN 0563-AC42


Common Crop Insurance Regulations; Pear 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, Pear Crop Insurance Provisions. The 
intended effect of this action is to improve coverage available to pear 
producers, to clarify existing policy provisions to better meet the 
needs of insured producers, and to reduce vulnerability to program 
fraud, waste, and abuse. Changes are also proposed to the Optional 
Coverage for Pear Quality Adjustment Endorsement to broaden coverage 
available to producers to manage their risk more effectively. The 
proposed changes will be effective for the 2015 and succeeding crop 
years.

DATES: This rule is effective August 27, 2014.

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 not-significant for the 
purposes of Executive Order 12866 and, therefore, it has not been 
reviewed by the Office of Management and Budget.

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, 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 action by FCIC directing 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, or 7 CFR part 400, 
subpart J for determinations of good farming practices, as applicable, 
must be exhausted before any action

[[Page 43594]]

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 (7 CFR Part 457), Pear Crop Insurance Provisions that were 
published by FCIC on April 11, 2014, as a notice of proposed rulemaking 
in the Federal Register at 79 FR 20110-20114. The public was afforded 
30 days to submit comments after the regulation was published in the 
Federal Register.
    A total of 107 comments were received from 4 commenters. The 
commenters were insurance providers and an insurance service 
organization.
    The public comments received regarding the proposed rule and FCIC's 
responses to the comments are as follows:

General

    Comment: A commenter stated that a number of the proposed changes 
appear to provide additional flexibility, as requested by the growers 
(according to the background in the proposed rule) and which appears to 
be part of a general trend (separate units, coverage levels and price 
election percentages by practice/type). The commenter stated that while 
such flexibility can be beneficial in many ways, they are concerned 
with the potential impact on loss ratios if the premium rates do not 
reflect the potential risk being added.
    Response: FCIC is required by the Federal Crop Insurance Act to 
take actions, including the establishment of adequate premiums, as are 
necessary, to assure the actuarial soundness of the Federal crop 
insurance program. To maintain actuarial soundness in accordance with 
the Federal Crop Insurance Act, FCIC will adjust premium rates to 
reflect any additional risk associated with changes to the Pear Crop 
Provisions.
    Comment: A few commenters stated that FCIC has made several changes 
to the Pear Crop Provisions that are similar to changes that have 
previously been made as a part of the 2011 Apple Crop Provisions. 
However, the commenters stated that some of the changes in the 2011 
Apple Crop Provisions were not carried over and should be considered as 
well, as indicated in other specific comments provided. The commenters 
also asked that FCIC consider making some additional changes to other 
parts of the Pear Crop Provisions that were not published in order to 
minimize the number of problems or issues that could arise with 
implementing the proposed changes.
    Response: FCIC believes the pear policy is distinctly different 
from the apple policy primarily because of the inherent differences in 
the industry. Therefore, not all of the provisions from the Apple Crop 
Provisions were proposed to be included in the Pear Crop Provisions. 
FCIC cannot make changes that were not proposed unless a flaw or 
vulnerability is identified. FCIC has made several changes in the final 
rule due to the suggestions of commenters.

Section 1--Definitions

    Comment: A few commenters stated that the definition of 
``marketable'' needs to be clarified. The commenters questioned exactly 
what it means to be ``acceptable for processing or other human 
consumption even if failing to meet any U.S. or applicable state 
grading standard.'' The commenters stated that a definition is needed 
that is simple, so that agents and growers can understand. The 
commenters stated the apple policy makes it clear that U.S. No. 1 
processing grade is the standard for the basic policy and for actual 
production history (APH) purposes. A similar simple definition is 
needed for pears so it is clear exactly what to count for claim 
purposes as well as for APH purposes. A few commenters stated the grade 
standards for Summer and Fall, and Winter types have the lowest grade 
as U.S. No. 2. The only other grade these standards address is 
unclassified. Unclassified pears are defined as pears which have not 
been classified in accordance with any of the grades. The term 
unclassified is not a grade within the meaning of these standards, but 
is provided as a designation to show that no grade has been applied to 
the lot. The standards for grades of pears for processing includes a 
definition for culls and defines them as pears which do not meet the 
requirements of the grades. The commenters stated that from all of this 
language it is unclear exactly what we would count as production for 
APH or for loss adjustment. The commenters asked if growers delivered 
all of their production to a packing shed, and the packing shed did not 
pay them for their culls, would the culls still be counted as 
production since they were accepted, but not paid for. The commenter 
asked if the grower did not harvest, whether graders would grade the 
pears U.S. No. 2 grade since that is the lowest level addressed as 
marketable in the standards or would all pears be counted since 
everything makes cull grade according to the processing pear grade 
standards. The commenters stated it would appear that for pears the 
insurance providers should count all pears that meet the standard of 
U.S. No. 2 processing grade or any production sold for human 
consumption even if such production fails to meet the U.S. No. 2 
processing grade. A few commenters stated that without a clear 
definition of ``marketable,'' insurance providers will not know how 
they are expected to handle the situations where growers deliver all of 
their production to a packing shed, and the packing shed discards, 
rather than pays for their culls. The commenters stated that without a 
specific definition of ``marketable'' the insurance providers will not 
have language to use to defend their determination of production to 
count in instances where growers do not harvest their crop.
    Response: FCIC agrees that without specifying a grade standard in 
the definition of marketable, it is unclear what pears would be 
acceptable for processing or human consumption. FCIC also agrees that 
U.S. No. 2 processing is the lowest grade that would be acceptable for 
human consumption. While the definition of ``marketable'' was not 
included in proposed rule, the commenter has identified a vulnerability 
that needs to be addressed because without a clear definition of 
``marketable'' there is the potential for producers to be treated 
disparately. FCIC has revised the definition of ``marketable'' to state 
that it means pear production that grades U.S. No. 2 processing or 
better, unless otherwise provided in the Special Provisions, or that is 
sold (even if failing to meet any U.S. or applicable state grading 
standard). This definition clearly identifies what pears are acceptable 
for human consumption, while also considering anything that is sold as 
marketable, even if the sold pears are not graded or fail to meet the 
specified grade. This change is consistent with the intent of the 
current policy and clarification should prevent confusion about what 
pears should be considered production to count. This change is also 
similar to the Apple Crop Provisions because a minimum grade used to 
determine production to count will be specified.
    Comment: A few commenters stated the proposed rule does not include 
a definition of the term ``type.'' The commenters stated that perhaps 
it is sufficiently understood as used in the

[[Page 43595]]

Crop Provisions and Special Provisions (actuarial documents), but 
perhaps there should be a definition such as the one in the Apple Crop 
Provisions: ``A category of pears as designated in the Special 
Provisions.''
    Response: A definition of type was not proposed because insurable 
types are specified in the actuarial documents. No change has been made 
in the final rule.
    Comment: A few commenters asked if the new ``types'' will be the 
same as the existing ``varietal groups'' (Bartlett, and others, 
depending on the county/state).
    Response: Insurable types will be specified in the actuarial 
documents. In most regions there will be a type for Summer and Fall 
pears and a type for Winter pears. However, some regions may have 
additional types depending on prices and data availability. The 
varieties that belong to the current types will be reorganized into the 
new types based on their maturity dates. The Special Provisions will 
identify which varieties will be included in each type. There will no 
longer be an ``all other'' type, so varieties that were previously 
insured as ``all other'' will now fall under either Summer and Fall or 
Winter.

Section 2--Unit Division

    Comment: The proposed rule background states that ``FCIC proposes 
to revise section 2 to allow optional units by irrigated and non-
irrigated practices'' and ``Optional units will also be available by 
type if specified in the Special Provisions'' However, a few commenters 
stated the proposed language in section 2 also suggests another change 
is being made since the possibility of optional units by non-contiguous 
land or by type is ``In addition to the provisions in section 34 of the 
Basic Provisions.'' The current 2011 policy language allows for 
optional units by non-contiguous land only ``instead of'' the 
applicable optional unit provisions in section 34 of the Basic 
Provisions (section, section equivalent, or FSA farm number). Optional 
units by varietal group are ``In addition to, or instead of'' the other 
optional unit provisions so that is unchanged. The commenters stated 
that if this change is intended, it should be identified as such and 
that it could result in pear producers having a large number of 
optional units because of the combinations of legal description, non-
contiguous land, and type, which could lead to complications in 
administration and loss adjustment. The commenters asked if this change 
is made, will the premium rates be reviewed for possible adjustment.
    Response: FCIC did not intend to allow additional unit structure 
options with the exception of irrigated/non-irrigated and the change 
from varietal group to type. Section 2(b) in the current Pear Crop 
Provisions allows the producer to choose optional units by non-
contiguous land instead of optional units by section, section 
equivalent, or FSA Farm Serial Number. The proposed language would 
eliminate this choice and allow optional units by non-contiguous land 
in addition to optional units by section, section equivalent, or FSA 
Farm Serial Number. FCIC agrees that the proposed change could result 
in pear producers having a large number of optional units, which could 
lead to complications in administration and loss adjustment. Therefore, 
FCIC has revised this section to clarify optional units may be 
established either: (1) In accordance with section 34(c) of the Basic 
Provisions (by section/section equivalent/FSA Farm Serial Number, 
irrigated/non-irrigated practices, and organic farming practices); or 
(2) by non-contiguous land. In addition, FCIC has revised the section 
to clarify that optional units are also available by type. As with any 
policy change, FCIC will evaluate such changes to determine whether 
they will have an impact on premium rates and make such adjustments as 
required.
    Comment: According to the proposed rule background, ``FCIC proposed 
to remove the definition of ``varietal group'' and replace it with the 
term ``type,'' the unit structure will be by type as specified in the 
Special Provisions.'' A few commenters stated that the last phrase 
regarding unit structure is not as clear as the statement in the 
proposed rule background that states ``Optional units will also be 
available by type if specified in the Special Provisions.''
    Response: FCIC agrees the phrase ``unit structure will be by type'' 
could be misleading if taken out of context. FCIC did not intend to 
imply that the policyholder's unit structure options are limited to 
optional units by type. Unit structure is determined by the 
policyholder in accordance with the Basic Provisions, Crop Provisions 
and Special Provisions. FCIC has revised section 2 to allow the 
policyholder to elect optional units by type if allowed by the Special 
Provisions.
    Comment: A few commenters stated that although the proposed 
language in section 2 makes it clear that separate optional units are 
now available by type, this language does not address situations where 
the types are interplanted on the same acreage. The commenters stated 
that this needs to be clarified, especially in light of allowing 
different coverage levels and percent of prices for different types. 
The Bartlett type is often interplanted with other types of pears, and 
if we cannot provide optional units by type in this situation, we could 
end up having to combine existing units resulting in different percent 
of prices and different coverage levels within a single unit. The 
commenters asked if it is the intent of FCIC to allow separate optional 
units by type if a Bartlett type is interplanted with another type on 
the same acreage.
    Response: FCIC agrees that the issue with interplanted acreage 
needs to be addressed. Therefore, FCIC has retained the provision that 
nullifies section 34(b)(1) of the Basic Provisions. However, FCIC has 
reworded to specifically state that the requirements of section 34 of 
the Basic Provisions that require the crop to be planted in a manner 
that results in a clear and discernable break in the planting pattern 
at the boundaries of each optional unit are not applicable for optional 
units by type. This will allow separate optional units for types that 
do not have a clear and discernable planting pattern, such as 
situations where types are interplanted. However, it is important to 
note that separate records of production must still be maintained for 
each optional unit in accordance with section 11(a) of the Pear Crop 
Provisions.

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

    Comment: FCIC is proposing to revise section 3(a) to allow 
different coverage levels and price election percentages by type. The 
proposed rule states that risks may not be the same for each type of 
pear, so this gives the producer an opportunity to tailor the coverage 
to the specific risks associated with each type. The commenters asked 
if this change is made in the Pear policy, has the FCIC considered the 
potential increased risk of adverse selection involved in allowing 
producers to vary the coverage levels and prices by type rather than by 
crop/county. A commenter asked, if current rates are not currently 
established to recognize these differences in risk, will they be 
revised accordingly.
    Response: FCIC agrees that allowing different coverage levels and 
price election percentages by type may increase risk. As with any 
policy change, FCIC will evaluate such changes to determine whether 
they will have an impact on premium rates and make such adjustments as 
required.
    Comment: A few commenters stated they are concerned with how 
allowing

[[Page 43596]]

different coverage levels and price percentages by type, which may or 
may not be set up as separate optional units, will work. The commenters 
asked if it is determined that the different types do not qualify as 
separate optional units, what happens to the different coverage levels 
and prices. The comments asked if the provisions are intended to allow 
different coverage levels and prices within the same basic unit. The 
commenters asked whether it is intended to allow producers to elect 
basic units, but still choose different coverage levels and prices by 
type within a basic unit. The commenters also asked how FCIC plans to 
administer this provision when multiple types are interplanted on the 
same acreage.
    Response: Many policies allow more than one type to be selected 
under a unit. When there is more than one type in a unit the guarantee 
is calculated separately for each type within the unit and then the 
guarantee for each type is added together to determine the guarantee 
for the unit. Therefore, allowing separate coverage levels and price 
election percentages to be selected for each type will simply require 
different values for coverage level and price election percentage to be 
used in the guarantee calculation. When production records contain 
comingled production, FCIC plans to develop procedures for determining 
how production will be allocated to each type within unit. The 
procedures will be similar to procedures for other APH crops that allow 
multiple types to be selected within a unit in that comingled 
production will be prorated using a method similar to the comingled 
production worksheet contained in the Crop Insurance Handbook. Even if 
it is determined that the policyholder does not qualify for separate 
optional units by type because they do not have separate production 
records for establishing their APH guarantee or the producer does not 
choose optional units by type, because the damaged crop must be 
appraised, it will still be possible to settle the claim with separate 
coverage levels and price elections by type.
    Comment: A few commenters suggested revising the first sentence of 
section 3(a) to state, ``You may select different coverage levels and 
percent of price elections for each type in the county as specified in 
the Special Provisions except if you elect Catastrophic Risk Protection 
(CAT) on any individual type.''
    Response: FCIC agrees the phrase in section 3(a) should be revised 
to provide an exception if CAT is elected. The CAT Endorsement 
supersedes the Crop Provisions in order of precedence and, therefore, 
the Crop Provisions cannot override the CAT Endorsement. The CAT 
Endorsement applies to the entire crop in the county. FCIC has revised 
section 3(a) consistent with the commenter's recommendation.
    Comment: A few commenters stated they acknowledge similar changes 
were made in the 2011 Apple Crop Provisions (allowing different 
coverage levels) and 2013 Peach Crop Provisions (different coverage 
levels and price percentages), but prior to these Crop Provisions being 
changed the general rule has been that only one coverage level and 
price percentage could be elected for all the acreage of the crop in 
the county unless separate types were treated as if they were separate 
``crops'' (grapes in California, for example), in which case the 
insured also could choose whether to insure all or just some of those 
types (which is not proposed in this draft, and was not changed for 
Apples or Peaches).
    Response: FCIC agrees that the general rule in section 3(b)(2) of 
the Basic Provisions allows the insured to select different coverage 
levels and price elections if the Crop Provisions allow the insured to 
separately insure an individual type, in which case these types are 
treated like separate crops and charged separate administrative fees. 
However, under the Pear policy, the types are not considered separate 
crops so they are not subject to the provision in section 3(b)(2) of 
the Basic Provisions.
    Comment: A few commenters questioned using the word ``bearing'' in 
section 3(b)(2). The commenters stated that producers are required to 
report their uninsurable acres, and when trees are first planted, they 
will be non-bearing. The commenters asked if it is really the intent 
for producers to report zero trees on their uninsurable acres. The 
commenters stated that if the block consists of older trees and younger 
interplanted trees of the same variety, and only bearing trees are 
counted, then 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. 
Growers should be required to report all trees and this number should 
remain constant until they remove trees or plant new trees. The 
commenters concluded it should not be a requirement to track only the 
trees that are bearing and to revise this figure each year.
    Response: No changes were proposed to this provision and the 
comment does not address a conflict or vulnerability in the provision. 
Therefore, FCIC cannot consider the recommended change because the 
public was not given an opportunity to provide comments. No change has 
been made to the final rule. However, in response to the concerns 
raised, the information that must be submitted in accordance with 
section 3(b) is required to establish the producer's APH approved yield 
and the amount of their coverage. While section 3(b)(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 producers pre-acceptance 
worksheet (PAW). Perennial crop policies contain provisions for 
``bearing trees'' to identify such trees that meet the eligibility 
requirements for insurance coverage. Because 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 
(CIH). Requiring all trees be reported under section 3(b)(2) would 
create confusion regarding insurability and could result in the 
overstatement of premium and liability.
    Comment: A commenter questioned the need to know the planting 
pattern as required in section 3(b)(3). The commenter stated that tree 
spacing and tree count is already captured and this is what is needed 
to determine if there have been tree removals or acreage reductions.
    Response: No changes were proposed to this provision and the 
comment does not address a conflict or vulnerability in the provision. 
Therefore, FCIC cannot consider the recommended change because the 
public was not given an opportunity to provide comments. No change has 
been made to the final rule. However, with respect to the concerns 
expressed by the commenter, the planting pattern consists of tree 
spacing and arrangement. FCIC requires the producer to report the 
planting pattern so the insurance provider can use this information to 
determine if there is adequate tree spacing for the producer to carry 
out recommended good orchard management practices and to determine the 
number of trees per acre.
    Comment: A few commenters questioned if it is possible to rewrite 
section 3(c) so the phrase ``yield used to establish your production 
guarantee'' does not have to be repeated seven times in this section.

[[Page 43597]]

    Response: Section 3(c) contains three subparagraphs (1) through (3) 
to describe different scenarios during the insurance period. While the 
phrase is repetitive, it is necessary for the provision. This is 
standard language that has been added to most of the perennial APH Crop 
Provisions and to maintain consistency with other perennial APH 
policies, no change has been made in the final rule.
    Comment: A few commenters stated that the proposed rule background 
refers to the addition of ``subparagraphs (1) through (4)'' but there 
are only three subparagraphs in section 3(c). The commenters stated 
that presumably this is a typo in the background, rather than the 
fourth subparagraph being left out.
    Response: FCIC agrees with the commenters that the proposed rule 
background should have referenced paragraphs 3(c)(1) through (3). A 
subparagraph (4) was neither proposed nor intended to be included in 
the proposed rule.
    Comment: The proposed rule states in section 3(c) that 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(b)(1) through (b)(4). A few commenters asked how 3(b)(2) 
through (4) impacts yield as it relates to 3(c)(1) and (2). The 
commenters stated that they are using the information reported by the 
production reporting date in 3(b)(2) through (4) to establish the 
approved yield/guarantee. Only damage as referenced in (b)(1) would 
have a relationship to insured or uninsured causes. Removal of trees 
might affect both the insured acres and yield/guarantee depending on 
the trees removed. If old, poorly producing trees are removed, the 
yield/guarantee could actually increase. The commenters stated the 
relationship to insured and uninsured damage is unclear. A few 
commenters asked how the reductions in the proposed paragraphs 3(c)(2) 
and (3) are being coordinated with the loss adjustment procedure. The 
commenters stated that these provisions will be difficult to enforce 
(i.e. you may never know and if an insurable event occurs later in the 
season or at harvest, any prior uninsurable damage will be masked). The 
commenters stated that after insurance attaches, this all seems like a 
loss adjustment issue and not yield adjustment.
    Response: Sections 3(b)(2) through (4) involve the reporting 
requirements that are necessary to track whether there are changes in 
the unit that could affect the guarantee. Sections 3(b)(2) through (4) 
refer to the number of bearing trees, the age of the trees, and 
interplanted trees. The number of trees can affect the yield because 
fewer trees will likely result in fewer pears per acre, although this 
is not always true, such as the case of overcrowded orchards. The age 
of trees also affects yield because the productive capacity of trees 
generally follow a bell shaped curve over the life of the tree. 
Interplanted acreage affects the production per acre because there are 
fewer trees per acre of a given crop to produce fruit. All of these 
variables have the potential to affect the productive capacity of the 
tree and can be caused by insured or uninsured causes. FCIC agrees that 
the damage occurring after insurance has attached appears to be a loss 
adjustment issue but these are the types of damage that are expected to 
affect the production capacity of the unit in the following year so for 
this reason the guarantee is adjusted to reflect the expected 
production capacity in the current year but only if the losses are 
result of uninsured causes. This will have the same effect as assigning 
production for uninsured causes for the year in which the damage 
occurred so there is no double counting, but the adjusted guarantee 
will be effective for the subsequent crop year. For insured causes of 
loss, the guarantee remains the same for the existing crop year and the 
losses measured. For the subsequent crop year, the procedures in 
section 3(c)(1) are applicable to adjust the guarantee to reflect the 
expected production capacity of the unit. Although FCIC agrees these 
variables can and often will be handled through acreage adjustments in 
accordance with FCIC approved procedures, the proposed provision allows 
for the possibility of adjusting the yield ``as necessary.'' FCIC will 
revise the Pear Loss Adjustment Handbook to ensure it is clear how to 
address situations that require an adjustment at the time of loss. No 
change has been made in the final rule.
    Comment: A few commenters stated the Pear Crop Provisions provide 
continuous coverage for a carryover policyholder and, therefore, damage 
due to an insured cause that would have occurred within the prior crop 
year and should be reflected in current year actual production history 
and also in the number of insured acres in a situation where trees were 
damaged/destroyed. Example: For the 2014 crop year a policyholder has a 
one acre block composed of 109 trees. Lightning sparks a fire, 
destroying 22 trees and the production on the trees. Based on harvested 
records each tree (remaining) produced an average of 100 lbs., with a 
total loss of production for 22 trees equal to 2,200 lbs. This 
reduction in yield of 1.1 ton/acre will directly impact the APH for the 
2015 crop year. Additionally, because of the destroyed trees, the 
percent of stand will reduce the insurable acres from 1.0 to 0.8. The 
commenter states this subsection implies the insurance provider would 
further reduce the APH yield by 1.1 tons/acre. This would appear to 
subject the insured to double reduction of his/her APH yield.
    A few commenters stated that sections 3(c)(2) and (3) differ in the 
fact that in (2) the insured provides notice of a situation occurring 
after the beginning of the insurance period by the production reporting 
date, whereas in (3) the insured fails to provide notice of a situation 
during the same time period. If the same example above occurred during 
the 2015 crop year and the cause of loss was a small aircraft crashing 
and destroying the trees, then provisions imply the impact would be as 
such: In accordance with (c)(2) the APH yield would be reduced by 1.1 
ton/acre and only 0.8 acres would be insurable; in accordance with 
(c)(3) for the 2015 crop year, the production guarantee would be 
assessed for the acreage for any indemnity claim (result: No indemnity 
paid) and the acreage would be reduced to 0.8 acres; and in accordance 
with the last sentence of section (c)(3) for the 2016 crop year, the 
APH yield would be reduced by 1.1 ton/acre. If these results are 
correct, the commenters ask if this is FCIC's intent with these 
provisions.
    Response: FCIC disagrees with the commenters. A policyholder's APH 
is based on at least 4 years of yields building to 10 years. Therefore, 
a single years loss will have some effect of the APH, but would not 
have the same effect as if a situation arises that affects the future 
production capacity of the unit, such as the loss of trees. Section 
3(c) is required to address this latter situation where instead of 
using the historical production to establish the guarantee, the 
guarantee is reset based on the best estimate of the effect of the loss 
on the production capacity of the unit. Therefore, there is no double 
counting because the adjustment effectively overrides the normal APH 
process. Further, the provisions in section 3(c) are not cumulative. 
Each is applicable depending on the timing of the notice of one of the 
conditions in section 3(b)(2) through (4). No change has been made in 
the final rule.
    Comment: In section 3(c)(3), the last sentence states ``We will 
reduce the yield used to establish your production guarantee for the 
subsequent crop year.'' A few commenters asked what if the

[[Page 43598]]

event that occurred was something that only affects the crop for the 
year in question and has no carryover effect on the yield into the next 
crop year. The commenters stated the word ``will'' should be changed to 
``may'' to provide the flexibility to either reduce or not reduce the 
yield for the subsequent year depending on whether the effect of the 
damage will carry over to that year. This language needs to be revised 
to allow the insurance providers to have some flexibility in 
determining how much, if any, the approved APH yield should be reduced 
for the subsequent year. The commenter stated that FCIC responded to 
similar comments to the Peach proposed rule by saying that insurance 
providers already have that flexibility according to the opening 
statement in section 3(c) of the Pear Crop Provisions that refers to 
reducing the yield ``as necessary, based on our estimate of the 
effect.'' However, the commenters stated they still have a concern with 
this language as proposed. The specifics in subsection (1) refer to 
reducing the yield ``any time we become aware'', and in (2) to ``only 
if the potential reduction . . . is due to an uninsured cause,'' so 
when (3) states flatly that ``We will reduce the yield . . . for the 
subsequent crop year'' with no qualifiers, it could be taken as not 
being subject to any determination of necessity.
    Response: The stem in section 3(c) states that it is only 
applicable if the conditions in sections 3(b)(2) through (4) exist and 
the insurance provider determines that an adjustment is necessary. If 
the insurance provider determines that an adjustment is necessary 
because the yield capacity of the unit has been affected then the 
application of the adjustment must be required, otherwise there may be 
disparate treatment between policyholders and insurance providers.
    Comment: Section 3(d) states ``You may not increase your elected or 
assigned coverage level or the ratio of your price election to the 
maximum price election we offer if a cause of loss that could or would 
reduce the yield of the insured crop is evident prior to the time that 
you request the increase.'' A few commenters stated that this is a 
difficult provision to administer and we would recommend that it be 
removed from the policy. The Producer's Pre-acceptance Worksheet (PAW) 
contains the following question: ``Has damage (i.e. disease, hail, 
freeze) occurred to Trees/Vines/Bushes/Bog or have cultural practices 
been performed that will reduce the insured crop's production from 
previous levels?'' If damage has occurred, and the question has been 
answered ``Yes'', the approved APH yield will be adjusted accordingly 
to reflect the reduced potential production. This question on the PAW 
appears to address the issues that this section is intending to handle. 
In addition, the sales closing dates are generally established based on 
the precept that any applications taken by that date will not be 
subject to adverse selection. If the decision is made to retain this 
provision, we have the following comments: Might help to clarify what 
time frame is meant by ``if a cause of loss . . . is evident prior to 
the time that you request the increase.'' A cause of loss that occurred 
the previous crop year would be ``prior to the time that you request 
the increase.'' The commenters ask FCIC to consider rewriting something 
like: ``Your request to increase the coverage level or price election 
percentage will not be accepted if a cause of loss that could or would 
reduce the yield of the insured crop is evident when your request is 
made.''
    Response: No changes were proposed to this provision and the 
comment does not address a conflict or vulnerability in the provision. 
Therefore, FCIC cannot consider the recommended change because the 
public was not given an opportunity to provide comments. No change has 
been made to the final rule. However, with respect to the inquiry, the 
provision in section 3(d) already contains a timeframe that is 
identified by when the cause of loss occurred relative to when the 
insured requests the increase. According to the provision, if a cause 
of loss that could or would reduce the yield has occurred prior to the 
time the insured requests the increase, the policyholder is prohibited 
from increasing their coverage level or the ratio of the price election 
to the maximum price election. Therefore, even if the cause of loss 
occurred during the prior crop year, if the cause of loss could or 
would reduce the yield for the crop year in which the request is made, 
no increase is allowed.

Section 6--Insured Crop

    Comment: A few commenters asked if the 5-ton minimum requirement in 
section 6(c) is appropriate for all types. A commenter asked if 
production varies by type, would it be more appropriate to provide the 
minimum production by type in the Special Provisions as opposed to 
providing a minimum in section 6(c). The commenter stated that if 5 
tons covers most all types, then perhaps that is why the policy only 
need to provide for the exceptions.
    Response: The 5-ton minimum is appropriate for most types of pears. 
The language in section 6(c) is drafted so as to provide an exception 
through the Special Provisions if the 5-ton minimum is determined to be 
inappropriate in certain areas or for certain varieties.
    Comment: A commenter asked if approval in writing as referenced in 
section 6(c) infers a written agreement and if so, why not state ``if 
allowed by written agreement.'' A few commenters stated that the 
proposed rule background is clear that ``This change is proposed to 
allow the approval of the level of production to be made without a 
written agreement,'' but not so clear in the proposed policy language. 
It will need to be clearly stated in the underwriting procedures to 
avoid any confusion. The phrase ``approval in writing'' sounds similar 
to ``agreement in writing,'' which has sometimes been used to refer to 
written agreements. A few commenters asked if the intent of section 
6(c) is to allow these situations to go through the RMA Regional Office 
determined yield process rather than the written agreement process. A 
few commenters stated that section 6(c) is a proposed change to allow 
insurance providers to accept coverage for production levels less than 
what the Crop Provisions require. The commenters state this language is 
vague without instruction provided. The commenters asked what the 
parameters are for such an agreement. The commenters stated that 
instruction should at least be referenced in the proposed rule in order 
for an insured to know if they are being treated equitably. A commenter 
asked if the determination of whether or not to allow a lower 
production level becomes the responsibility of the insurance provider 
instead of the RMA Regional Office, will this mean a change in which 
policy provisions regarding arbitration, mediation, etc, apply if the 
insured disagrees with that determination (if the insurance provider 
refused to allow the lower production level, for example).
    Response: Although the current provision allows for an exception to 
the minimum production requirement through a written agreement, the 
written agreement handbook instructs the insurance provider to instead 
request a determined yield from the Risk Management Agency Regional 
Office. The proposed change in the Pear Crop Provisions from the term 
``written agreement'' to ``approval in writing'' was intended to direct 
the insurance provider to the written agreement handbook without giving 
the impression that a written agreement was required. However, due to 
the number and nature of comments received it appears that this change 
will create more confusion than clarity. Therefore, no changes to

[[Page 43599]]

section 6 have been made in the final rule.
    Comment: A few commenters asked if there will be impacts to T-
Yields and rates when an insurance provider elects to insure a lower 
production level than what is allowed under section 6(c) of the Crop 
Provisions. A commenter asked how many policy exceptions written 
agreements for producers who did not meet the minimum production 
requirement were requested in previous years, and how many of those 
requests were approved. Did any of them involve a different premium 
rate than what would apply if the AIP approves the lower production 
level? If so, the commenter stated this is another resulting change 
since AIPs would not have that authority.
    Response: As stated in response to the previous comment, FCIC has 
retained the original language from the 2011 Pear Crop Provisions and 
does not intend to change current procedure. Because these exceptions 
are handled through determined yields, T-Yields and rates are not 
changed on a case by case basis. Because no change has been made, this 
provision will continue to affect county T-Yields and rates in the same 
manner that it has in the past. Because of the small number of 
producers that have historically been allowed to insure pears in this 
manner, this provision is expected to continue to have minimal effect 
on county T-Yields and rates.

Section 8--Insurance Period

    Comment: A few commenters stated the language in section 8(a)(2) 
has been added to most, if not all, of the perennial Crop Provisions 
several years ago. The commenters stated they are in agreement with the 
concept of continuous coverage applying for renewal policyholders, but 
do have some concerns with language as it currently reads. The present 
language indicates that for each subsequent crop year the policy 
remains continuously in force, coverage begins on the day immediately 
following the end of the insurance period for the prior crop year. The 
commenters asked about damage that occurs to next year's buds prior to 
this year's end of the insurance period. The comments asks whether this 
is the damage that is intended to be covered by this language. For 
example, assume a grower is insured and a severe hail storm occurs in 
July. This damage may injure this year's crop as well as the buds that 
will produce next year's crop. However, this damage would be outside 
the current insurance period based on the current language. If the 
intent is to cover this damage for renewal policyholders, the language 
should be revised to something along the lines of the language in the 
Adjusted Gross Revenue handbook that states that the policy covers 
damage that occurred due to insurable causes during the previous crop 
year. The commenters stated they feel that it will be difficult to 
assess such damage and that it should be covered under the policy. If 
this is not the intent, it should be stated very clearly that the 
policy will not cover damage that occurs the previous crop year if such 
damage occurs prior to the end of the previous year's end of insurance 
period.
    Response: Section 8 simply describes the period of insurance and 
clarifies that the pear policy is now a 12 month policy. Section 9 
covers insurable causes of loss and makes it clear that to receive an 
indemnity any damage must result from an insurable cause of loss 
occurring within the insurance period. Therefore, no additional 
language is required and FCIC does not want to create any potential 
ambiguity by referencing insurable causes of loss and when they must 
occur to be indemnified in section 8. This means that the Pear Crop 
Provisions do not provide coverage for damage to fruit if the damage 
occurs outside of the insurance period and, in reference to the example 
provided, the policy does not cover any reduction in production that 
was caused by damage to the buds in a prior crop year. FCIC cannot 
consider the recommended change to the Pear Crop Provisions to provide 
coverage for damage that occurs outside of the insurance period because 
this change was not proposed, the comment does not address a conflict 
or vulnerability, and the public has not been given an opportunity to 
provide comments. No change has been made to the final rule.
    Comment: A few commenters asked FCIC to consider removing the 
phrase ``after an inspection'' from section 8(b)(1). If damage has not 
generally occurred in the area, it should be up to the insurance 
provider's discretion as to whether or not an inspection is needed for 
them to ``consider the acreage acceptable.'' Because the acreage and 
production reporting dates are after insurance attaches, the insurance 
provider might not know if the acreage was acquired after coverage 
began, but before the acreage reporting date. The commenters stated the 
insurance providers should be able to inspect if they decide it is 
necessary, but it should not be a requirement. The commenters also 
asked FCIC to consider adding language to allow insurance providers the 
opportunity to inspect and insure any additional acreage acquired after 
the acreage reporting date if they wish to do so (similar to what is 
currently allowed for acreage that is not reported per section 6(f) of 
the Basic Provisions).
    Response: No changes were proposed to this provision and the 
comment does not address a conflict or vulnerability in the provision. 
Therefore, FCIC cannot consider the recommended changes because the 
public was not given an opportunity to comment. No change has been made 
to the final rule. However, with respect to acreage acquired after the 
acreage report, section 6(f) of the Basic Provisions, which allows the 
insurance provider to determine by unit the insurable crop acreage, 
share, type and practice, or to deny liability if the producer fails to 
report all units, would apply. FCIC approved procedures allow the 
insurance provider to revise an acreage report to increase 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.

Section 9--Causes of Loss

    Comment: A commenter recommended the insured cause of loss be 
clarified as ``Fire, due to natural causes, unless weeds . . .'' (or 
``Fire, if caused by lightning, unless weeds . . .'').
    Response: No changes were proposed to this provision and the 
comment does not address a conflict or vulnerability in the provision. 
Therefore, FCIC cannot consider the recommended changes because the 
public was not given an opportunity to comment. No change has been made 
to the final rule. However, section 12 of the Basic Provisions already 
states all insured causes of loss must be due to a naturally occurring 
event. In addition, the Federal Crop Insurance Act is clear that only 
natural causes can be covered under the policy.

Section 11--Settlement of Claim

    Comment: The proposed rule states that 11(c)(3)(iii)(A) would be 
revised to size 165. A commenter asks if the revised section needs to 
be shown [in the settlement of claims example] or is listing in the 
section 11 revisions sufficient.
    Response: FCIC did not include the adjustments that are applicable 
only to California in the example because it is intended to show the 
basic process for settling a claim as outlined in section 11(b). FCIC 
has added a phrase to indicate the example is for a state other than 
California.

[[Page 43600]]

Section 13--Fresh Pear Quality Adjustment Endorsement

    Comment: A few commenters suggested adding the term ``Fresh'' in 
the heading prior to the phrase ``Pear Quality Adjustment 
Endorsement.'' A commenter stated that otherwise producers could make 
the case that this endorsement applies to both fresh and processing and 
this change would clarify that this is not true. A few commenters 
stated there are growers in the Northwest U.S. who generally grow pears 
for the fresh market. However, some of these growers may grow some 
Bartletts for the cannery and some Bartletts for fresh market usage. 
These Bartletts may be in the same optional unit, and attempting to 
break out fresh verses processing as separate type designations will 
not be possible administratively. The commenters asked how FCIC 
proposes that these situations be addressed for purposes of coverage 
under the Quality Adjustment Endorsement.
    Response: Although the Pear policyholders are not currently 
required to report fresh and processing intended uses, the Pear Quality 
Adjustment Endorsement only applies to fresh pear acreage. Section 
13(b) states, ``If the fresh pear production is damaged by an insured 
cause of loss.'' Accordingly, if production practices necessary to 
produce fresh pears are not applied to the entire unit, the unit will 
not qualify for the endorsement. To provide further clarification, FCIC 
has revised the heading of section 13 by adding the term ``Fresh'' and 
added language to clarify that the endorsement is only applicable to a 
unit if all trees in the unit are managed for the production of fresh 
market pears.
    Comment: The proposed rule states that premium rating for the 
changes in the Pear Quality Adjustment Endorsement in section 13 will 
be reviewed to establish appropriate premium rates to maintain 
actuarial soundness. FCIC is proposing to revise the minimum size 
requirement in section 11(c)(3)(iii)(A) from 180 to 165 or smaller for 
California pear quality adjustment. A commenter stated that it appears 
any cull count back has also been eliminated. A few other commenters 
stated that the proposed rule proposes to cover damage due to all 
covered causes of loss in place of hail only; and the grade to meet has 
increased to U.S. No. 1 from U.S. No. 2 and, therefore, it would be 
reasonable to expect a significant rate increase for coverage under the 
Endorsement. The commenters asked if these changes are being considered 
in the new rating.
    Response: FCIC agrees with the commenter that changing the minimum 
size for California pears should have an impact on indemnities. FCIC 
also agrees that eliminating the cull count back, expanding the causes 
of loss, and increasing the grade to U.S. No. 1 should affect frequency 
and severity of losses under the Quality Adjustment Endorsement. FCIC 
will revise premium rate factors for the Quality Adjustment Endorsement 
accordingly to cover the additional expected losses.
    Comment: A few commenters stated that as this endorsement is in 
concept very similar to the Apple Quality Adjustment Endorsement, it 
would appear the likelihood exists that an insured could receive a 
greater indemnity under the base policy than under the endorsement in 
situations where damage caused a small percentage of the pears to meet 
the grade standard set in the endorsement. As such, the commenters 
stated that a statement such as found in section 14(a) of the Apple 
Crop Provisions should be added: ``Insureds who select this option 
cannot receive less than the indemnity due under section 12.''
    Response: Because policyholders will be charged a higher premium, 
it would not be appropriate if the policyholder received a smaller 
indemnity under the Quality Adjustment Endorsement than they would have 
received under the base policy. Therefore, FCIC has revised section 13 
by adding a provision that clarifies that the policyholder cannot 
receive an indemnity less than due under section 11.
    Comment: A few commenters stated that the Quality Adjustment 
Endorsement appears to now be available to pear producers in 
California. Under section 11(c)(3)(iii), California production may be 
reduced if a percentage of the pears are of a specific size or smaller. 
The commenters stated that because the Pear Quality Adjustment 
Endorsement provides for no such reduction, size is not a consideration 
for pear production under the endorsement.
    Response: The Quality Adjustment Endorsement under 13(a)(1) states 
it is available in the states where coverage is provided for in the 
actuarial documents and for which there is a designated premium rate 
for the endorsement. A premium rate will be provided for only those 
states where the quality adjustment applies. There are no plans to 
include California under the Quality Adjustment Endorsement and, 
therefore, no premium rate will be provided for the endorsement in the 
actuarial documents for California. With respect to size requirements 
under the Quality Adjustment Endorsement, size is only a consideration 
to the extent that it is specified in the applicable grade standards.
    Comment: A few commenters stated that it would seem prudent due to 
the similarities between the two crop endorsements to add the following 
statement from the Apple Crop Provisions: ``Any pear production not 
graded or appraised prior to the earlier of the time pears are placed 
in storage or the date the pears are delivered to a packer, processor, 
or other handler will not be considered damaged pear production and 
will be considered production to count under this option.''
    Response: FCIC agrees with the commenter that a statement such as 
the one included in the Apple Crop Provisions is needed to avoid a 
policy vulnerability. Because insurance ends at harvest, it is 
necessary to appraise the crop before it leaves the field. It could be 
difficult or impossible to determine if damage occurred before or after 
the pears were placed into storage or delivered to the packer or 
processer. Additionally, production could become comingled making it 
difficult or impossible to make an accurate determination of what unit 
the production came from. To avoid a potential vulnerability, FCIC has 
added a provision in section 11 stating that any pear production not 
graded or appraised prior to the earlier of the time pears are placed 
in storage or the date the pears are delivered to a packer, processor, 
or other handler will not be considered damaged pear production and 
will be considered production to count. This provision is applicable to 
both the Quality Adjustment Endorsement and the underlying policy.
    Comment: A few commenters recommended FCIC reconsider the damage 
thresholds and triggers for coverage under this endorsement. The 
commenters stated this proposed rule has changed the grade trigger from 
U.S. No. 2 to U.S. No. 1, as well as allowed this coverage to apply due 
to damage from all perils rather than just hail, but yet the damage 
chart has remained the same. The commenters stated that based on their 
field knowledge and experience, they are concerned that keeping the 
damage trigger at 11 percent may be cost prohibitive for many growers. 
The commenters recommended FCIC consider having the damage chart 
trigger at 21 percent rather than 11 percent as a compromise between 
the rate impact and increased quality standards that are now being 
proposed. In addition, the commenters pointed out that the apple damage 
chart uses 65 percent as the point at which there is

[[Page 43601]]

zero production to count while the pear chart uses 60 percent. The 
commenters recommended FCIC consider changing the 60 percent level for 
pears to 65 percent to be consistent with what is used for apples. The 
commenters stated this would also be more cost effective for the 
growers to use 65 percent for pears as well.
    Response: No changes were proposed to this provision and the 
comment does not address a conflict or vulnerability in the provision. 
Therefore, FCIC cannot consider the recommended changes because the 
public was not given an opportunity to comment. No change has been made 
to the final rule. However, some of the changes to the Quality 
Adjustment Endorsement such as the elimination of the cull add-back and 
change in the grade trigger were requested by producers and industry 
personnel because of the diminished value of low quality pears. These 
changes will more accurately adjust production to count to represent 
the value of low quality pears. While FCIC agrees these changes are 
likely to result in increased premium rate factors for the Quality 
Adjustment Endorsement, it remains to be seen whether the cost for the 
coverage changes requested will be considered cost prohibitive by 
producers. FCIC will monitor and evaluate the performance of the 
Quality Adjustment Endorsement and consider potential changes that may 
be needed the next time the Pear Crop Provisions are revised.
    Comment: Section 13(b)(3) states, ``if you sell any of your fresh 
pear production as U.S. No. 1 or better.'' A commenter stated that this 
language suggests that a less than No. 1 pear is being mis-graded as a 
No. 1 and sold as such. A few commenters asked if FCIC is trying to say 
that the pears are sold for the same price applicable to a No. 1 or 
better. A few commenters asked what it is sold for and why. The 
commenters asked if it would it be clearer if the disposition was 
specified.
    Response: A different number of pears being sold as U.S. No. 1 or 
better than what was appraised does not necessarily mean the pears were 
mis-graded when appraised. The appraisal only utilizes a representative 
sample to extrapolate the estimated number of pears that meet the U.S. 
No. 1 grade. Because this is an estimate, there is a degree of error, 
which means the actual number of fruit that meet the U.S. No. 1 grade 
is likely to be somewhat more or less than what is determined in the 
appraisal. The provision is also intended to include any sold pears 
that receive a price greater than or equal to the value of a U.S. No. 
1, regardless of grade. Additionally, pears on the ground during an 
appraisal would be considered unmarketable, but if these pears are 
later sold as U.S. No. 1 or better, they should be included as 
production to count.
    Comment: A commenter stated that the language ``all such sold 
production will be included as production to count'' proposed to be 
included in section 13(b)(3) is very confusing and misleading. The 
apple handbook had to include an exhibit to show how to address this 
language. It would be so much more clear if the wording was rewritten 
to say ``If you sell any of your fresh pear production as U.S. No. 1 or 
better, your production to count will be the greater of the production 
you sold as U.S. No. 1 or better, or your production determined under 
sections 13 (b)(1) and (2).''
    Response: FCIC agrees that the proposed wording of this provision 
could be misleading because it is not clear if the pear production sold 
as U.S. No. 1 is included as production to count in addition to the 
quantity determined in the appraisal or instead of the quantity 
determined in the appraisal. FCIC has revised this provision to clarify 
that the quantity of pears sold as U.S. No. 1 or better that exceed the 
quantity of pears determined to grade U.S. No. 1 in the appraisal will 
be included as production to count.
    Comment: A few commenters stated that the provision in 13(b)(3) has 
been in the Apple Crop Provisions for a number of years and has caused 
a significant amount of concern. If the provision is retained in the 
final rule, it is important that pear insureds, agents, insurance 
providers, etc., understand that losses under the endorsement cannot be 
finalized until the actual amount of production that was sold as U.S. 
No. 1 or better is known. The commenter stated that perhaps as an 
alternative, in situations where damage is such that 60 percent or more 
of the pears fail to meet grade (100 percent resultant damage) and the 
insured will be selling some production, the 15 percent cull add-back 
be utilized.
    Response: FCIC agrees with the commenters that it is necessary to 
wait until the final deposition of the crop is known to settle a claim. 
However, the provision is necessary to allow FCIC to account for sold 
production. Not including the pears sold as U.S. No. 1 as production to 
count when the quantity of such pears exceeds the quantity determined 
in the appraisal could lead to a vulnerability. Section 13(b)(3) has 
been retained in the final rule, but revised for clarity as stated in 
response to the previous comment.
    Comment: A few commenters stated it was very beneficial to have 
language in the policy that stated pears knocked to the ground by wind 
are not considered marketable production. The commenters recommended 
this language from section 13(c) be retained or the definition of 
harvest be revised to match that of apples in order to address this 
item. The commenters stated they often have growers who are not in a 
loss situation, but want their acreage appraised for APH purposes. The 
commenters stated it is very helpful to have a statement or definition 
to point to that clearly shows pears on the ground are not counted as a 
part of production for APH purposes.
    Response: FCIC agrees with the commenters that pears on the ground 
should not be appraised as production to count. As stated in response 
to a previous comment, FCIC has made revisions to clarify the lowest 
grade standards that will be considered as production to count. The 
grade standards for U.S. No. 2 Pears require these pears to be ``hand-
picked'' which means they cannot show any evidence of being on the 
ground. Therefore, pears on the ground during an appraisal clearly 
should not be counted as production to count. However, if the pears on 
the ground are picked up and sold they, should be counted against their 
guarantee. Therefore, FCIC has included pears that are sold (even if 
failing to meet any U.S. or applicable state grading standard) in the 
definition of ``marketable.''
    Comment: FCIC is proposing to add a new section 13(d) stating 
production to count under the Quality Adjustment Endorsement will not 
apply in determining the producer's APH. The proposed rule states that 
the APH will be based on all harvested and appraised marketable 
production from insurable acreage. The proposed rule also states this 
change is proposed in order to maintain consistency in APH reporting, 
as coverage is optional for the Quality Adjustment Endorsement and can 
be cancelled in writing on or before the cancellation date. Therefore, 
the APH can vary significantly from year to year. A commenter stated 
this would then suggest that the rate for the option would not be yield 
dependent relative the actual/approved APH yield.
    Response: Premium is set to cover expected losses and a reasonable 
reserve. The premium rate factor for the Quality Adjustment Endorsement 
will be calculated using historical loss data under the endorsement 
adjusted for increased frequency and severity of losses due to the 
changes to the Quality Adjustment Endorsement.

[[Page 43602]]

    Comment: A few commenters asked, if in fact 150 tons were graded 
No. 1 or better as stated in the Optional Coverage for Pear Quality 
Adjustment Example in section 13, then why weren't they sold as No. 1 
and why should the graded No. 1 production be reduced for quality. The 
commenters asked if FCIC is suggesting that based on a sample grade, 75 
percent of the 200 tons (i.e. 150 tons) would have graded No. 1 and 
that the No. 1s could not be separated, thus the entire 200 tons could 
not be marketed as fresh No. 1 pears and, therefore, the entire 200 
tons is subject to quality adjustment.
    Response: The production to count under the Quality Adjustment 
Endorsement is reduced because in theory, the cost to harvest the 
undamaged production increases exponentially as the percent of damage 
increases until you reach a point where it is no longer economically 
feasible to harvest the undamaged production. The Quality Adjustment 
Endorsement has a threshold set when 60 percent of the pears fail to 
grade U.S. No. 1, then it is considered uneconomical to harvest and at 
that point the entire crop would be eligible for quality adjustment. In 
the example, the amount of production that graded less than U.S. No. 1 
did not meet this 60 percent threshold and, therefore, the entire crop 
is not eligible for quality adjustment.
    In addition to the changes described above, FCIC has made minor 
editorial changes.

List of Subjects in 7 CFR Part 457

    Crop insurance, Pear, 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 2015 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.  457.111 as follows:
0
a. In the introductory text by removing ``2011'' and adding ``2015'' in 
its place;
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b. In section 1 by:
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i. Revising the definition of ``marketable''; and
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ii. Removing the definition of ``varietal group'';
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c. Revise section 2;
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d. In section 3 by:
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i. Removing the phrase ``(Insurance Guarantees, Coverage Levels, and 
Prices for Determining Indemnities)'' in the introductory text;
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ii. Revising paragraph (a);
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iii. In paragraph (b) introductory text by: removing the phrase 
``(Insurance Guarantees, Coverage Levels, and Prices for Determining 
Indemnities)''; and removing ``varietal group'' and adding the term 
``type'' in its place;
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iv. Revising paragraph 3(b)(4)(iii);
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v. Redesignating paragraph (c) as (d); and
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vi. Adding new paragraph (c);
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e. In section 4 by removing the phrase ``(Contract Changes)'';
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f. In section 5 by removing the phrase ``(Life of Policy, Cancellation, 
and Termination)'' in the introductory text;
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g. In section 6 by removing the phrase ``(Insured Crop)'' in the 
introductory text;
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h. In section 7 by removing the phrase ``(Insurable Acreage)'' in the 
introductory text;
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i. In section 8 by:
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i. Revising paragraphs (a) introductory text and (a)(1);
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ii. Redesignating paragraph (a)(2) as paragraph (a)(3) and revising 
newly redesignated paragraph (a)(3);
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iii. Redesignating paragraph (c) as paragraph (a)(2) and revising newly 
redesignated paragraph (a)(2);
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iv. Redesignating paragraph (d) as paragraph (a)(4); and
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v. Removing the phrase ``(Insurance Period)'' in paragraph (b) 
introductory text;
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j. In section 9 by:
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i. Removing the phrase ``(Cause of Loss)'' in paragraph (a) 
introductory text;
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ii. Removing the term ``or'' at the end of paragraph (a)(4);
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iii. Removing the period at the end of paragraph (a)(5) and adding a 
semicolon in its place;
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iv. Adding new paragraphs (a)(6) and (7);
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v. Removing the phrase ``(Causes of Loss)'' in paragraph (b) 
introductory text;
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vi. Removing paragraph (b)(1); and
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vii. Redesignating paragraphs (b)(2) and (3) as (b)(1) and (2) 
respectively;
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k. In section 10 by:
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i. Redesignating paragraphs (a), (b), and (c) as paragraphs (b)(1), 
(2), and (3) respectively;
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ii. Designating the introductory text of the section as the 
introductory text of paragraph (b) and removing the phrase ``(Duties in 
the Event of Damage or Loss)'' in newly redesignated paragraph (b);
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iii. Adding a new paragraph (a);
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l. In section 11 by:
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i. Removing the term ``varietal group'' in paragraph (b)(1) and adding 
the term ``type'' in its place;
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ii. Revising paragraph (b)(2);
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iii Revising paragraph (b)(4);
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iv. Removing the word ``this'' in paragraph (b)(6) and adding the word 
``the'' in its place;
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v. Revising paragraph (b)(7);
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vi. In paragraph (c)(3)(iii)(A) by removing the number ``180'' and 
adding the number ``165'' in its place;
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vii. Removing the phrase ``varietal group'' in paragraph (c)(3)(iii)(B) 
and adding in its place the term ``type''; and
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viii. Adding a new paragraph (d);
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m. Revise section 13.
    The revisions and additions read as follows:


Sec.  457.111  Pear crop insurance provisions.

* * * * *
    1. * * *
* * * * *
    Marketable--Pear production that grades U.S. Number 2 processing or 
better, unless otherwise provided in the Special Provisions, or that is 
sold (even if failing to meet any U.S. or applicable state grading 
standard).
* * * * *
    2. Unit Division
    (a) Optional units may either be established in accordance with 
section 34(c) of the Basic Provisions or by non-contiguous land, but 
not both.
    (b) In addition to establishing optional units in accordance with 
section 2(a), optional units may be established by type if allowed by 
the Special Provisions. The requirements of section 34 of the Basic 
Provisions that require the crop to be planted in a manner that results 
in a clear and discernable break in the planting pattern at the 
boundaries of each optional unit are not applicable for optional units 
by type.
    3. * * *
    (a) You may select different coverage levels and percent of price 
elections for each type in the county as specified in the Special 
Provisions, unless you elect Catastrophic Risk Protection (CAT) on any 
type.
    (1) For example, if you choose 75 percent coverage level and 100 
percent of the maximum price election for one type, you may choose 65 
percent coverage level and 75 percent of the maximum price election for 
another type. However, if you elect the CAT level of coverage for any 
pear type, the CAT level of coverage will be applicable to all insured 
pear acreage for all types in the county.
    (2) Notwithstanding section 3(b)(2) of the Basic Provisions, pear 
types will not be considered as separate crops and will

[[Page 43603]]

not be subject to separate administrative fees.
    (b) * * *
    (4) * * *
    (iii) Any other information that we request in order to establish 
your approved yield.
    (c) 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(b)(1) through (b)(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) 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) 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 11(c)(1)(ii)). We will reduce the yield used to 
establish your production guarantee for the subsequent crop year to 
reflect any reduction in the productive capacity of the trees.
* * * * *
    8. * * *
    (a) In accordance with the provisions of section 11 of the Basic 
Provisions:
    (1) For the year of application, coverage begins:
    (i) In California, on February 1, except that if your application 
is received after January 22 but prior to February 1, insurance will 
attach on the 10th day after your properly completed application is 
received in our local office, unless we inspect the acreage during the 
10-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 orchard); or
    (ii) In all other states, on November 21, except that if your 
application is received after November 11 but prior to November 21, 
insurance will attach on the 10th day after your properly completed 
application is received in our local office, unless we inspect the 
acreage during the 10-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 orchard).
    (2) 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 for the prior crop year. Policy 
cancellation that results solely from transferring an existing policy 
to a different insurance provider for a subsequent crop year will not 
be considered a break in continuous coverage.
    (3) The calendar date for the end of the insurance period for each 
crop year is:
    (i) September 15 for all types of summer or fall pears;
    (ii) October 15 for all types of winter pears; or
    (iii) As otherwise provided for specific types in the Special 
Provisions.
* * * * *
    9. * * *
    (a) * * *
    (6) Insects, but not damage due to insufficient or improper 
application of pest control measures; or
    (7) Plant disease, but not damage due to insufficient or improper 
application of disease control measures.
* * * * *
    10. * * *
    (a) In accordance with the requirements of section 14 of the Basic 
Provisions, you must leave representative samples in accordance with 
our procedures.
* * * * *
    11. * * *
* * * * *
    (b) * * *
    (2) Multiplying the results of section 11(b)(1) by your price 
election for each type, if applicable;
* * * * *
    (4) Multiplying the total production to be counted of each type, if 
applicable, by your price election;
* * * * *
    (7) Multiplying the result of section 11(b)(6) by your share.
    Basic Coverage Example:
    You have a 100 percent share of a 20-acre pear orchard located in a 
state other than California. You elect 100 percent of the $500/ton 
price election. You have a production guarantee of 15 tons/acre; you 
are only able to produce 10 tons of pears per acre. Your indemnity will 
be calculated as follows:
    (1) 20 acres x 15 tons/acre = 300-ton production guarantee;
    (2) $500/ton (100 percent of the price election) x 300-ton 
production guarantee;
    (3) = $150,000 value of production guarantee;
    (4) 20 acres x 10 tons = 200-ton production to count;
    (5) $500/ton (100 percent of the price election) x 200-ton 
production to count = $100,000 value of production to count;
    (6) $150,000 value of production guarantee--$100,000 value of 
production to count = $50,000 loss; and
    (7) $50,000 x 100 percent share = $50,000 indemnity payment.
    [END OF EXAMPLE]
* * * * *
    (d) Any pear production not graded or appraised prior to the 
earlier of the time pears are placed in storage or the date the pears 
are delivered to a packer, processor, or other handler will not be 
considered damaged pear production and will be considered production to 
count.
* * * * *
    13. Fresh Pear Quality Adjustment Endorsement
    In the event of a conflict between the Pear Crop Insurance 
Provisions and this option, this option will control. Insured who 
select this option cannot receive less than the indemnity due under 
section 11.
    (a) This endorsement applies to any crop year, provided:
    (1) The insured pears are located in a State designated for such 
coverage on the actuarial documents and for which there is designated a 
premium rate for this endorsement;
    (2) All the pear trees in the unit are managed for the production 
of fresh market pears (Units that are not managed for the production of 
fresh market pears do not qualify for this endorsement);
    (3) You have not elected to insure your pears under the CAT 
Endorsement;
    (4) You elect it on your application or other form approved by us, 
and did so on or before the sales closing date for the initial crop 
year for which you wish it to be effective (By doing so, you agree to 
pay the additional premium designated in the actuarial documents for 
this optional coverage); and
    (5) You or we do not cancel it in writing on or before the 
cancellation date. Your election of CAT coverage for any crop year 
after this endorsement is effective will be considered as notice of 
cancellation of this endorsement by you.

[[Page 43604]]

    (b) If the fresh pear production is damaged by an insured cause of 
loss, and if eleven percent (11%) or more of the harvested and 
appraised production does not grade at least U.S. Number 1 in 
accordance with the United States Standards for Grades of Summer and 
Fall Pears or the United States Standards for Grades of Winter Pears, 
as applicable, the amount of production to count will be reduced as 
follows:
    (1) By two percent (2%) for each full one percent (1%) in excess of 
ten percent (10%), when eleven percent (11%) through sixty percent 
(60%) of the pears fail the grade standard; or
    (2) By one hundred percent (100%) when more than sixty percent 
(60%) of the pears fail the grade standard.
    (3) If you sell more of your fresh pear production as U.S. Number 1 
or better than the quantity of pears determined to grade U.S. Number 1 
or better in the appraisal, the quantity of such sold production 
exceeding the amount determined to grade U.S. Number 1 or better in the 
appraisal will be included as production to count under this option.
    (c) Marketable production that grades less than U.S. Number 1 due 
to uninsurable causes not covered by this endorsement will not be 
reduced.
    (d) Any adjustments that reduce your production to count under this 
option will not be applicable when determining production to count for 
Actual Production History purposes.
    Fresh Pear Quality Adjustment Example:
    You have a 100 percent share of a 20-acre pear orchard. You have a 
production guarantee of 15 tons/acre. You elect 100 percent of the 
$500/ton price election. You are only able to produce 10 tons/acre and 
only 7.5 tons/acre grade U.S. Number 1 or better (7.5 x 20 = 150 tons). 
Your indemnity would be calculated as follows:
    (1) 20 acres x 15 tons per acre = 300 tons production guarantee;
    (2) 300 tons production guarantee x $500/ton = $150,000 value of 
production guarantee;
    (3) The value of fresh pear production to count is determined as 
follows:
    (i) 200 tons harvested production minus 150 tons that graded U.S. 
Number 1 or better = 50 tons failing to make grade;
    (ii) 50 tons failing grade/200 tons of production = 25 percent of 
production failing to grade U.S. Number 1;
    (iii) 25 percent minus 10 percent = 15 percent in excess of 10 
percent allowance failing to make grade;
    (iv) 15 percent x 2 = 30 percent total quality adjustment for pears 
failing to grade U.S. Number 1;
    (v) 200 tons production x 30 percent quality adjustment = 60 tons 
of pears failing to make grade;
    (vi) 200 tons production minus 60 tons failing to make grade = 140 
tons of quality adjusted fresh pear production to count;
    (vii) 140 tons of quality adjusted fresh pear production to count x 
$500/ton price election = $70,000 value of fresh pear production to 
count;
    (4) $150,000 value of production guarantee minus $70,000 value of 
fresh pear production to count = $80,000 value of loss;
    (5) $80,000 value of loss x 100 percent share = $80,000 indemnity 
payment.

    Signed in Washington, DC, on July 18, 2014.
Brandon Willis,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 2014-17491 Filed 7-25-14; 8:45 am]
BILLING CODE 3410-08-P