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