[Federal Register Volume 79, Number 168 (Friday, August 29, 2014)]
[Rules and Regulations]
[Pages 51453-51470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-20567]



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  Federal Register / Vol. 79, No. 168 / Friday, August 29, 2014 / Rules 
and Regulations  

[[Page 51453]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1430

RIN 0560-AI23


Margin Protection Program for Dairy and Dairy Product Donation 
Program

AGENCY: Commodity Credit Corporation and Farm Service Agency, USDA.

ACTION: Final rule.

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

SUMMARY: This rule implements regulations for the Margin Protection 
Program for Dairy (MPP-Dairy) and the Dairy Product Donation Program 
(DPDP) as authorized in subtitle D of the Agricultural Act of 2014 (the 
2014 Farm Bill). MPP-Dairy provides dairy producers with risk 
management coverage that will pay producers when the difference between 
the price of milk and the cost of feed (the margin) falls below a 
certain level. MPP-Dairy provides basic catastrophic level coverage for 
an administrative fee, and greater coverage for a premium in addition 
to the administrative fee. Amounts of coverage and premiums vary based 
on producer selections. This rule specifies the eligibility 
requirements and payment formulas for MPP-Dairy. Under the related 
DPDP, which is a complimentary program designed to support producer 
margins by increasing the price of milk, the U.S. Department of 
Agriculture (USDA) will buy dairy products when the margin falls below 
a certain level, and will distribute those products to individuals in 
low-income groups through public and private non-profit organizations. 
The Farm Service Agency (FSA) will operate both programs using funds of 
the Commodity Credit Corporation (CCC). The USDA Food and Nutrition 
Service (FNS) will assist in the distribution of the dairy products 
under DPDP.

DATES: Effective Date: This rule is effective August 29, 2014.
    Comment Date: We will consider comments we receive by October 28, 
2014.

ADDRESSES: We invite you to submit comments specifically to address the 
questions related to intergenerational transfers in this document. In 
your comment, please specify RIN 0560-AI18 and include the volume, 
date, and page number of this issue of the Federal Register. You may 
submit comments by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments; or
     Mail, Hand Delivery, or Courier Danielle Cooke, Special 
Programs Manager, Price Support Division, FSA, USDA, STOP 0512, 1400 
Independence Ave. SW., Washington, DC, 20250-0512.
    All written comments will be available for inspection online at 
www.regulations.gov and at the mail address above during business hours 
from 8 a.m. to 5 p.m., Monday through Friday, except holidays. A copy 
of this rule is available through the FSA home page at http://www.fsa.usda.gov/.

FOR FURTHER INFORMATION CONTACT: For MPP-Dairy: Danielle Cooke; 
telephone: (202) 720-1919. For DPDP purchases: Christine Gouger, 
telephone: (816) 926-3379. For DPDP donations: Anne Fiala, telephone: 
(703) 305-2662. Persons with disabilities who require alternative means 
for communication should contact the USDA Target Center at (202) 720-
2600.

SUPPLEMENTARY INFORMATION:

MPP-Dairy--Overview

    This final rule establishes the regulations for the new MPP-Dairy 
as specified in sections 1401-1410 of the 2014 Farm Bill (7 U.S.C. 
9051-9060, Pub. L. 113-79). MPP-Dairy provides a risk management 
program for dairy operations and is authorized through December 31, 
2018.
    MPP-Dairy is a voluntary risk management program that provides 
payments when the margin between the national average milk price and a 
national average feed cost falls below a specified ``trigger'' level. 
Eligible producers may purchase coverage for their dairy operations by 
paying an administrative fee, and a premium as applicable. The coverage 
is for a dairy operation; all producers in an operation must agree to 
register the operation for the program in order for that operation to 
be eligible for MPP-Dairy coverage. MPP-Dairy pays dairy operations 
when the national margin falls below the operation's selected margin 
trigger for one of the specified 2-month periods in this rule. As part 
of the initial registration process, dairy operations must agree to 
carry MPP-Dairy coverage through calendar year 2018, but they can 
select a different level of coverage during each annual enrollment 
period. At the time of registration and annually thereafter, the dairy 
operation must make coverage level elections. For example, if margins 
are consistently above the trigger point or the dairy operations decide 
they want only limited coverage, the operation may switch during the 
annual enrollment from a coverage level with a higher premium to the 
catastrophic coverage level with a lower or no premium, but they cannot 
drop coverage altogether, except in cases where a producer is retiring, 
dies, or the operation goes out of business.

Eligible Operations for MPP-Dairy

    Any dairy operation that produces and commercially markets milk in 
the United States may register for MPP-Dairy. As required by the 2014 
Farm Bill, to be an eligible dairy operation for MPP-Dairy, each of the 
producers in an eligible dairy operation must share in the risk of 
production, and must make contributions (including capital, land, 
labor, equipment, or management) to the operation commensurate with 
such producer's share of the proceeds. Participating dairy operations 
can be operated by more than one producer. A single producer may be 
member of more than one operation and each operation may separately 
participate in MPP-Dairy.

Definition of a Dairy Operation

    This rule specifies that any dairy facility that was part of a 
single dairy operation that was eligible for and participated in the 
Milk Income Loss Contract (MILC) Program administered by FSA as of 
February 7, 2014 (date of enactment of the Agricultural Act of 2014) is 
a ``dairy operation'' for the purposes of MPP-Dairy. All other 
operations must meet the requirements specified in this rule to be a 
dairy

[[Page 51454]]

operation for the purposes of MPP-Dairy these include the criteria and 
procedures established under the MILC Program. Operations that are 
determined to be ``new operations'' under this rule, will be subject to 
the ``affiliation'' test if the operation elects to participate in MPP-
Dairy separately.
    For the purposes of this rule, a ``new'' operation is one that did 
not produce and commercially market milk at least 12 full months as of 
February 7, 2014. Under certain circumstances new operations may 
participate in MPP-Dairy and existing operations can restructure and 
still be eligible for MPP-Dairy. A dairy operation can be sold or 
transferred and keep MPP-Dairy eligibility. The main restriction on 
eligibility for a new operation is that an existing operation that 
restructures or reconstitutes cannot result in an increase in 
production history as a whole.

Production History for MPP-Dairy

    MPP-Dairy payments for a given dairy operation are based on a 
coverage level and percentage of coverage annually elected by a 
participating dairy operation for the operation's production history. 
Such production history for existing operations with at least a year of 
production history as of February 7, 2014, will be the highest of the 
operation's annual milk marketings in any one of 2011, 2012, or 2013 
calendar years, subject to an annual upward adjustment in subsequent 
years to reflect any increase in the national average milk production 
as specified in this rule.
    Eligible production history for new operations will be determined 
by one of two methods, at the election of the dairy operation. The 
first option is to extrapolate from actual production data for the 
first calendar year with at least one full month of production history, 
adjusted using a national seasonality index to calculate a yearly 
amount of production. The national seasonality index was created by FSA 
using monthly milk production data for 2009 through 2013. Since milk 
production naturally fluctuates in some regions during different 
seasons of the year, the index is needed to extrapolate a full year 
production amount from partial year production data. To develop the 
index, the total milk production for the 5 years for each individual 
month was divided by the total annual milk production for those years 
to determine the share of annual milk production produced in each 
month. The resulting figure is the seasonality index that is set for 
the duration of MPP-Dairy. Alternatively, new operations may choose a 
second option to determine production history. Under this option, 
annual production would be estimated based on the herd size of the 
dairy operation relative to the national ``rolling herd average'' 
production data published by the Secretary.
    As required by the 2014 Farm Bill, the production history amount 
established for an operation will never be reduced because of changes 
in national milk production, but may only be increased. Once a dairy 
operation has enrolled in MPP-Dairy and the production history is 
established for that operation, USDA in subsequent years will update 
the production amount to reflect annual changes in the national average 
milk production. That adjustment factor will be announced each year.
    The production history is established for a participating dairy 
operation, and it is assigned to that operation, not to an individual 
producer. If a participating dairy operation, with an established 
production history, sells or changes ownership of the operation, the 
established production history will stay with that operation, and be 
assigned to the new owner. For participating dairy operations, with an 
established production history, that relocate or otherwise move their 
operation to another location, the production history will move to the 
new location. If the new location has existing production history, the 
production history may be reconstituted that combines the production 
history of the relocated operation and the new location to the new 
location and become available for the next calendar year of coverage.
    Section 1410 of the 2014 Farm Bill specifies that USDA is required 
to establish regulations that ``prohibit a dairy producer from 
reconstituting a dairy operation for the purpose of the dairy producer 
receiving margin protection payments.'' This rule therefore prohibits 
an increase in production history as a result of most restructurings 
and reconstitutions. Only in cases where a dairy producer purchases a 
dairy operation with no established production history can a new 
history be established, subject to the affiliation rule. For example, 
if a father and son jointly operate a dairy and the son decides to 
leave and purchase a dairy operation that is already participating in 
MPP-Dairy with an established production history, the son would get the 
production history already established by the participating dairy 
operation and would not be considered a new dairy operation for the 
purposes of MPP-Dairy. (No new production history would be created; it 
would only be transferred.) However, if the son purchased a dairy 
operation that lacked any production history, then the son may be 
considered a new dairy operation for MPP-Dairy purposes and could 
establish a new production history for that operation, subject to the 
affiliation rule.

Other Eligibility Requirements and Limits

    MPP-Dairy benefits are not subject to payment limitations or 
average adjusted gross income (AGI) limitations that apply to most FSA 
and CCC programs. However, these benefits are subject to the 
conversation compliance requirements provided for in 7 CFR part 12. 
Further, there is no set program maximum number of pounds any dairy 
operation can cover under the program. MPP-Dairy's coverage limitation 
for a specific dairy operation is 90 percent of the operation's 
production history.
    In general, all U.S. dairy producers are eligible to participate in 
MPP-Dairy through their eligible dairy operation; however, producers 
cannot participate in both MPP-Dairy and the Livestock Gross Margin for 
Dairy (LGM-Dairy) insurance program administered by the USDA Risk 
Management Agency (RMA). For 2014 and 2015, producers already enrolled 
in LGM-Dairy may register for MPP-Dairy, but in no case will they 
receive benefits from both programs. If an operation with LGM-Dairy 
coverage registers for MPP-Dairy, coverage under MPP-Dairy will not 
become effective until after the target month of marketings under LGM-
Dairy has ended or the dairy operation provides proof that the LGM-
Dairy policy has been cancelled.

MPP-Dairy Coverage Levels

    As part of the annual coverage election process for MPP-Dairy, the 
dairy operation is required to select the level of coverage and pay an 
administrative fee and, if applicable, a premium based on the level of 
coverage elected. In addition, once a participating dairy operation 
registers for MPP-Dairy, regardless if it fails to make a coverage 
election, it must annually pay the administrative fee through December 
31, 2018. The level of coverage chosen by a participating dairy 
operation requires two selections. One is the margin trigger (between 
$4 and $8 per hundredweight (cwt), in 50 cent increments); the other is 
the percentage of production history that will be covered (from 25 
percent to 90 percent, in 5 percent increments). The operation can only 
select one margin trigger level and one percentage of production 
history; the operation cannot ``split'' the operation's coverage and, 
for example, purchase $4 margin

[[Page 51455]]

coverage on 25 percent of production history and $8 coverage on 50 
percent of production history. (At the catastrophic level coverage of 
$4, the producer will be paid when the margin, the difference between 
the price of milk and the cost of feed, falls below $4.)
    As specified in the 2014 Farm Bill, operations may elect a $4 per 
cwt margin trigger for the administrative fee of $100 with no premium 
owed. This rule defines this to be catastrophic level coverage, in that 
it provides the lowest level of margin protection offered under MPP-
Dairy. If $4 margin coverage is selected, 90 percent of production 
history will be covered, the maximum amount of production coverage 
allowed by the 2014 Farm Bill. Alternatively, participating dairy 
operations may elect a higher margin trigger, up to $8 per cwt of milk 
(in 50 cent increments), for 25 percent to 90 percent of production (in 
5 percent increments). Margin triggers higher than $4 require payment 
of a premium. At each margin trigger level, corresponding rates are 
different with respect to the first 4 million pounds (40,000 cwt) of 
covered production history and covered production history above 4 
million pounds. As specified in the 2014 Farm Bill, the premiums for 
the first 4 million pounds of eligible covered production history will 
be reduced by 25 percent for each of calendar years 2014 and 2015.
    The annual premium rates listed in this regulation are specified in 
the 2014 Farm Bill. USDA has no discretion to set different premium 
rates other than those in the 2014 Farm Bill. The premium will be 
determined based on the producer's election of each of the margin 
trigger and percentage of coverage. The schedule of premiums below 
refers to these levels as Tier 1 (first 4 million pounds of production 
history covered by the program) and Tier 2 (covered production in 
excess of 4 million pounds).
    For example, a dairy operation with a production history of 6 
million pounds that elects a coverage level of $6 and a 50 percent 
coverage percentage will pay a premium based on the premium rate for 
covered production history for up to 4 million pounds because as a 
function of the dairy operation election to cover at the 50 percent 
rate, only 3 million pounds of production history is being covered by 
the program. (Note that production history is in pounds, while the 
premium schedule below is per cwt, so we divide covered production by 
100 to calculate the premium). Therefore, in this example, the dairy 
operation pays a premium for a calendar year of coverage during 2016, 
in the amount of $1,650 based on 6 million pounds covered at a 50 
percent coverage level, yielding 3 million pounds of covered production 
history. The 3 million pounds of production history multiplied by 
$0.055, the premium at the $6 margin level for covered production up to 
4 million pounds (50 percent of 6 million is 3 million; 3 million 
divided by 100 is 30,000 cwt; 30,000 cwt x $0.055 per cwt =$1,650). The 
premium schedule is as follows; the 2014 Farm Bill specifies the 
amounts:

------------------------------------------------------------------------
                                     Tier 1  Premium
                                    per  cwt in  2014    Tier 2 Premium
                                      and 2015  (for     per  cwt, all
                                     the  covered \1\   years  (for the
     Coverage level  (margin)           production      part  of covered
                                     history that is    \1\  production
                                    4 million  pounds    history over 4
                                       or less) \2\     million pounds)
------------------------------------------------------------------------
$4.00.............................               None               None
$4.50.............................             $0.008             $0.020
$5.00.............................              0.019              0.040
$5.50.............................              0.030              0.100
$6.00.............................              0.041              0.155
$6.50.............................              0.068              0.290
$7.00.............................              0.163              0.830
$7.50.............................              0.225              1.060
$8.00.............................              0.475              1.360
------------------------------------------------------------------------
\1\ The ``covered production history'' is the amount elected for MPP-
  Dairy coverage by the dairy operation; this will be 25 percent to 90
  percent. The catastrophic coverage level provided at the $4 margin is
  90 percent.


------------------------------------------------------------------------
                                     Tier 1  Premium
                                    per  cwt in 2016,    Tier 2 Premium
                                       2017 and 2018     per  cwt, all
                                    (for the  covered   years  (for the
     Coverage level  (margin)        \1\  production    part  of covered
                                     history that is    \1\  production
                                    4 million  pounds    history over 4
                                         or less)       million pounds)
------------------------------------------------------------------------
$4.00.............................               None               None
$4.50.............................             $0.010             $0.020
$5.00.............................              0.025              0.040
$5.50.............................              0.040              0.100
$6.00.............................              0.055              0.155
$6.50.............................              0.090              0.290
$7.00.............................              0.217              0.830
$7.50.............................              0.300              1.060
$8.00.............................              0.475              1.360
------------------------------------------------------------------------
\1\ The ``covered production history'' is the amount elected for MPP-
  Dairy coverage by the dairy operation; this will be 25 percent to 90
  percent. The catastrophic coverage level provided at the $4 margin is
  90 percent.


[[Page 51456]]

    The following is an example with higher coverage levels and both 
tiers of premium: If a dairy operation with an established production 
history of 10 million pounds elects a coverage level of $8 and a 75 
percent coverage percentage, 7.5 million pounds would be considered 
covered production history (10,000,000 x 0.75), and of that 7.5 million 
pounds, 4 million pounds would be assessed at $0.475 rate from the 
lower (Tier 1) premium schedule for production at 4 million pounds or 
less (4,000,000 x $0.475/100 = $19,000), and the remaining 3.5 million 
pounds of covered production history would be assessed at the $1.360 
rate from the higher premium schedule for production in excess of 4 
million pounds (3,500,000 x $1.360/100 = $47,600). The dairy operation 
would pay a total premium for a calendar year of coverage in the amount 
of $66,600 ($19,000 + $47,600) based on 7.5 million pounds of covered 
production history that falls under each premium schedule at the $8 
coverage level.
    For calendar years 2014 and 2015, the premium per cwt for covered 
production that falls under the first 4 million pound premium schedule 
will be reduced by 25 percent, except at the $8 coverage level, from 
the table shown above. The premium reduction is required by the 2014 
Farm Bill. FSA will provide premium calculators on the FSA Web site, so 
that producers can evaluate the costs of different coverage options 
easily.

Registration Process

    Registration of a dairy operation under MPP-Dairy results in a 
multi-year contract between CCC and the dairy operation. As discussed 
above, dairy operations agree to pay an administrative fee to register 
and annually thereafter through December 31, 2018. In addition, a 
participating dairy operation is obligated to pay the premium, if any, 
associated with its annual coverage elections, through calendar year 
2018.
    The $4 per cwt margin level coverage is available for a $100 
administrative fee, without premium; higher levels of coverage are 
available for a premium plus the administrative fee. Operations must 
pay at least half the premium for the year (if applicable), plus the 
$100 administrative fee, at the time of the election of coverage. Once 
the election period has ended, a dairy operation's election of coverage 
is final and it can be changed only for the next calendar year of 
coverage during the next election period.
    The 2014 Farm Bill requires that USDA offer more than one method by 
which a participating dairy operation may pay the required premium in 
any manner that maximizes participating dairy operation payment 
flexibility and program integrity. Unless otherwise determined by the 
Deputy Administrator, at the time of coverage election, operations must 
pay either:
    (1) The full premium plus the administrative fee; or
    (2) A minimum of 50 percent of the total premium (if applicable) 
plus the administrative fee, with the remaining balance due no later 
than June 1 of the applicable calendar year of coverage.
    However, a premium calculated for calendar year 2014 only (which 
provides coverage through December of 2014) must be paid in full at the 
time of coverage election. The coverage election period for 2014 
partial year coverage and 2015 full year coverage will both be during 
the fall of 2014. New operations registered during a calendar year 
starting in 2015 will be allowed to pay a prorated premium for the 
first year of participation.
    If an operation fails to pay either the required annual 
administrative fee or premium owed on time, it remains obligated for 
payment of such administrative fee and entire premium, but will lose 
coverage until the premium is paid. If an operation does not make an 
annual coverage level election, it will still be liable for the 
administrative fee for the following year. It will automatically 
receive coverage at the $4 coverage level at 90 percent, but only if 
the administrative fee is paid. For dairy operations that want to 
continue coverage levels established in the prior calendar year, the 
Deputy Administrator will establish a procedure to allow such coverage 
levels to continue that will include the requirement of a timely 
payment of administrative fees and any premiums, if applicable.

How Margins Are Calculated To Determine Payments

    The 2014 Farm Bill specifies what prices for milk and feed USDA is 
required to use to calculate the ``actual dairy production margin.'' 
The margin, based on published USDA national data for milk and feed 
prices, is used to trigger payments under MPP-Dairy and the authority 
to make purchases under DPDP. The 2014 Farm Bill requires the margin to 
be based on the average price received, per cwt of milk, by dairy 
operations for all milk sold to plants and dealers in the United 
States. It also requires calculation of a national average feed cost, 
based on specific sources for the monthly price of corn, soybean meal, 
and alfalfa hay. Therefore, MPP-Dairy uses USDA-reported monthly 
national average price data for all classes of milk (the all-milk 
price) and the cost of the three specified feeds, which represent the 
bulk of purchased feeds in dairy rations (corn, soybean meal, and 
alfalfa hay) to calculate the ``actual dairy production margin'' by 
subtracting from the price for a cwt of milk produced the cost of an 
average feed ration used to produce a cwt of milk. The 2014 Farm Bill 
prescribes that USDA calculate the actual dairy production margin in 
consecutive 2-month periods.
    If the actual dairy production margin falls below the selected 
margin coverage level of an operation for any such consecutive 2-month 
period, that operation will be eligible for a payment under MPP-Dairy. 
For example, if, for a particular consecutive 2-month period, the 
actual dairy production margin is $6, and the operation has chosen $4 
coverage level, there will be no payment, but if the operation had 
chosen the $7.50 coverage level on 50 percent of production, it would 
have been paid $1.50 times 50 percent of its covered production 
history. A recalculation would occur in each subsequent 2-month period. 
MPP-Dairy pays only on the basis of such 2-month periods; in no case 
does the program pay for a period of low margins shorter than such 2-
month periods.
    USDA will calculate the actual dairy production margin using the 
national ``all-milk price'' minus the national ``average feed cost,'' 
as those terms are specified in the 2014 Farm Bill. If the actual dairy 
production margin calculation produces a negative number, then the 
margin will be considered zero. For example, if the cost of feed is 
higher than the price of milk by $1 per cwt, the margin will be 
considered to be zero. The term ``all-milk price'' is defined in the 
2014 Farm Bill to mean the average price received, per cwt of milk, by 
dairy operations for all milk sold to plants and dealers in the United 
States, as determined by USDA. The term ``average feed cost'' is 
defined to mean the average cost of feed used by a dairy operation to 
produce a cwt of milk using the sum of:
     1.0728 times the price of corn per bushel;
     0.00735 times the price of soybean meal per ton; and
     0.0137 times the price of alfalfa hay per ton.
    The 2014 Farm Bill specifies which USDA-published price series FSA 
is required to use for such prices; FSA has no discretion in what 
prices to use.
    The 2014 Farm Bill requires the margin to be calculated using 
specific

[[Page 51457]]

consecutive 2-month pairs--January and February, March and April, May 
and June, July and August, September and October, and November and 
December.
    If a dairy operation has a premium due at the time it becomes 
eligible for a payment under MPP-Dairy, the premium will be 
automatically deducted from the payment. If the premium is overdue 
(past June 1 of the coverage year) however, an operation will not be 
eligible for a payment, because it will have lost coverage. In the case 
of an operation with an overdue premium, the operation will regain 
coverage only after any overdue premium is paid, in which case it would 
be eligible for the next consecutive 2-month period after such payment 
of premium.

DPDP--Overview

    In addition, this rule provides regulations for DPDP, authorized by 
section 1431 of the 2014 Farm Bill (7 U.S.C. 9071). DPDP shares certain 
goals of MPP-Dairy, in that it is intended to support dairy producer 
margins by triggering the obligation to purchase dairy products when 
the dairy production margin fall below a certain level. Under DPDP, 
USDA will purchase dairy products to support dairy producer margins and 
to provide such products to individuals in low-income groups through 
public and private non-profit organizations. The 2014 Farm Bill 
specifies that such purchases will be made whenever the ``actual dairy 
production margin'', calculated using a formula prescribed in the 2014 
Farm Bill, is determined to be $4 or less per cwt for 2 consecutive 
months.
    The 2014 Farm Bill specifies that the same margin calculation is 
used for both MPP-Dairy and DPDP. The ``actual dairy production 
margin'' is, as it is under MPP-Dairy, the difference between the 
``all-milk price'' (the average U.S. price for producer milk sold to 
plants and dealers as specified in section 1401 of the 2014 Farm Bill 
(7 U.S.C. 9051)) and the average feed cost determined using the formula 
specified in sections 1401 and 1402 (7 U.S.C. 9052) of the 2014 Farm 
Bill. The feed cost formula is the same as specified for MPP-Dairy, and 
was discussed above in the MPP-Dairy section of this document. Once 
triggered, DPDP purchases end when--
     DPDP purchases have occurred for 3 consecutive months 
(regardless of the actual dairy production margin at the end of those 3 
months),
     The actual dairy production margin for the previous month 
goes above $4 per cwt, or
     The U.S. price for cheddar cheese or nonfat dry milk (NDM) 
exceeds the world price by certain levels (5 percent if the actual 
dairy production margin is at or below $4 but above $3 or 7 percent, if 
such margin is $3 or less).
    DPDP is intended to time its purchases to support dairy producers 
in times of low margins, reinforcing and supporting the dairy producer 
support provided by MPP-Dairy. Reflecting that relationship, the 2014 
Farm Bill specifies that DPDP is required to be established no later 
than 120 days after the Secretary certifies that MPP-Dairy is 
operational. USDA has chosen to make the two programs effective at the 
same time. The Secretary determined that additional time was not 
required to implement DPDP as FSA and FNS will be able to use existing 
expertise with purchasing and distributing similar products to the same 
recipients.
    As specified in section 1431 of the 2014 Farm Bill, DPDP purchases 
will be distributed for domestic consumption by individuals in low-
income groups through public and private non-profit organizations. 
Further, the DPDP purchases cannot be stored by CCC. DPDP purchases 
will be made in package sizes suitable for immediate household use, to 
facilitate direct distribution to individuals through participating 
public and private nonprofit organizations. The 2014 Farm Bill 
specifically prohibits re-sales of DPDP-purchased products into the 
commercial market.
    The 2014 Farm Bill requires USDA consultation with public and 
private nonprofit organizations that feed low-income groups, in order 
to determine the types and quantities of dairy products to be purchased 
and distributed under DPDP. This will be achieved through existing FNS 
food program consultations.

Administration of DPDP

    This rule implements DPDP as specified in the 2014 Farm Bill. DPDP 
purchases will be made using CCC funds. The 2014 Farm Bill authorizes 
DPDP through December 31, 2018. As specified in this rule, FSA will 
operate DPDP for CCC with assistance from FNS.
    Distribution of DPDP purchases will be made to public and private 
non-profit organizations eligible to participate in FNS' food 
distribution programs for low-income individuals.
    Purchase quantities may be limited to meet the 2014 Farm Bill's 
immediate distribution requirement, taking into account impacts on 
present demand in order to limit potential short- and long-term market 
disruptions.

When will FSA make DPDP purchases?

    The 2014 Farm Bill specifies that the DPDP purchases are required 
to start after any consecutive 2 month period when margins are below 
$4, with a maximum of 3 consecutive months of purchases. If prices rise 
above the $4 margin level during a month of purchases, DPDP purchases 
will terminate at the end of that month, so in that case it might 
operate for only 1 or 2 months. As specified in the 2014 Farm Bill, 
after 3 consecutive months of purchases, the DPDP purchases are 
required to cease (terminate) until there have been at least 2 more 
consecutive months of margins of $4 or less.
    Because full data for a given month is not available until the 
following month (see example below) and the 2014 Farm Bill requires 
that program activity be on a monthly basis, this effectively means 
that no purchases may be made for 3 months following the end of a 
purchase period, even if margins remain below the trigger level. This 
rolling ``up to 3 months on, 3 months off'' procedure for DPDP 
purchases is consistent with the 2014 Farm Bill goal of having a long-
term intermittent tool for addressing low margins and providing 
nutrition assistance. DPDP is intended to time its purchases to support 
dairy producer margins by reducing the supply of dairy products. Given 
relatively inelastic (constant) demand, such purchases should drive the 
market price of dairy products up, hopefully also driving margins above 
the trigger level. In some cases, prices and margins will rise 
sufficiently to engender only a 1or 2-month purchase period. In that 
case, the 3 month ``off'' requirement still applies, as required by the 
2014 Farm Bill.
    Data for calculating the domestic versus world price differential 
will not be available immediately at the end of a month, so DPDP 
purchases will not commence or terminate until the full month after all 
data for a month becomes available. For example, and as shown in the 
chart below if actual dairy production margins in May and June fall 
below the ``trigger'' level, the data for June would be available in 
July, but not in time to start making DPDP purchases immediately on 
July 1. Therefore, the DPDP purchases would start in August based on 
May and June data. If July data, which would be available in August, 
showed that margins were still below the trigger, DPDP purchases would 
continue in September. If margins rise above the trigger level in July, 
the DPDP purchases would terminate at the end of August, and the next 
eligible month for calculations would be September. If margins in

[[Page 51458]]

September and October were below the trigger level, with October data 
available in November, the DPDP purchases would start up again in 
December. But if margins remained consistently below the trigger level 
for the entire period in this example, the DPDP purchases would 
continue in September and October, based on May, June, July, and August 
data, and could not start up again until February, based on November 
data and December data, which would become available in January. The 
following chart shows an example of the timing for the determination of 
DPDP purchases.

                                                           DPDP Purchase Determination Example
                                        [Based on dairy production margins and 3-month maximum for purchases \1\]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               If both margins below $4
        2 Consecutive months         Calculate margin for 2        per cwt in the 2             3-Month maximum        If either margin above $4 per cwt
                                     consecutive months \2\       consecutive months             consideration            in the 2 consecutive months
--------------------------------------------------------------------------------------------------------------------------------------------------------
January and February...............  March.................  Dairy product purchases \3\  1st month of purchases.....  No purchases.
                                                              begin in April.
February and March.................  April.................  Dairy product purchases \3\  2nd consecutive month of     No purchases.
                                                              begin in May.                purchases.
March and April....................  May...................  Dairy product purchases \3\  3rd consecutive month of     No purchases.
                                                              begin in June.               purchases.
April and May......................  June \4\..............  No purchases; terminated     3-month maximum reached      No purchases.
                                                              after 3 consecutive months.  (1st month off).
May and June.......................  July..................  No purchases; terminated     3-month maximum reached      No purchases.
                                                              after 3 consecutive months.  (2nd month off).
June and July......................  August................  No purchases; terminated     3-month maximum reached      No purchases.
                                                              after 3 consecutive months.  (3rd month off).
July and August....................  September.............  Dairy product purchases \3\  1st month of purchases.....  No purchases.
                                                              begin in October.
August and September...............  October...............  Dairy product purchases \3\  2nd consecutive month of     No purchases.
                                                              begin in November.           purchases.
September and October..............  November..............  Dairy product purchases \3\  3rd consecutive month of     No purchases.
                                                              begin in December.           purchases.
October and November...............  December..............  No purchases; terminated     3-month maximum reached      No purchases.
                                                              after 3 consecutive months.  (1st month off).
November and December..............  January...............  No purchases; terminated     3-month maximum reached      No purchases.
                                                              after 3 consecutive months.  (1st month off).
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ This example assumes that purchases begin in January. In reality, DPDP can--depending on prices and margin triggers--begin on September 1, 2014,
  which is the start of MPP-Dairy.
\2\ The full month data for a given month is available at the end of the following month. For example, January data are not available until the end of
  February.
\2\ Purchases cannot begin unless domestic cheddar cheese or nonfat dry milk prices are at certain differentials relative to world prices.
\3\ In the example, June is the 3rd month of consecutive purchases. June would not be calculated as a potential trigger month, but it is shown on the
  chart to clearly show the concept of 3 months on and 3 months off for purchases. If purchases are taking place during a month, that month cannot be
  used as a trigger month for a future purchase period.

    The trigger level is a $4 margin per cwt of milk, with an 
additional requirement from the 2014 Farm Bill that USDA's authority 
for purchases will end if the U.S. price and world price differential 
for cheddar cheese or nonfat dry milk exceeds certain percentage 
levels, even when margins remain at $4 or less. In other words, FSA 
will stop making DPDP purchases, even if the margins are at $4 or less, 
if the U.S. price for certain dairy products is significantly above 
world prices. As required by the 2014 Farm Bill, FSA will stop making 
DPDP purchases if the margin is $4 or less but above $3 and the U.S. 
price is more than 5 percent above the world price or if the margin is 
at or below $3, DPDP will not make purchases if the price differential 
is more than 7 percent.
    If DPDP purchases were suspended due to domestic prices being 
sufficiently above world prices, margins would be tracked for the next 
2 months, and purchases could begin after 3 months. For example, at the 
end of July, it would be known if May and June margins were at or below 
$4 per cwt. If margins for both May and June were at $4 or less per 
cwt, and the relation between domestic and world prices did not 
preclude it, the DPDP purchasing process would start August 1. At the 
end of August, the July margin could be calculated and if at $4 or less 
per cwt, DPDP purchases would continue in September (the second 
consecutive month ``on''). If the July margin were above $4 per cwt, 
DPDP purchase activity would cease August 31, and DPDP purchases could 
next be made in December (after the required 3 months ``off''), if 
September and October margins were at $4 or less per cwt. If July and 
August margins were both at $4 or less per cwt, DPDP purchases would 
continue in September and October and end due to the 3-month maximum of 
purchases. If November and December margins were at $4 or less per cwt, 
DPDP purchase activities could begin again in February (after the 
required 3 months ``off'').
    DPDP will not stop or start making purchases in the middle of a 
month even if the margin or the world price data has hit one of the 
``trigger'' numbers mid-month.

U.S. Price Versus World Market Price Differential Trigger

    The calculations for the price differential determination (which 
require a comparison of U.S. prices and world prices) as specified in 
this rule allow FSA to consult with other agencies of USDA that collect 
foreign and domestic price data, such as the Agricultural Marketing 
Service (AMS). The 2014 Farm Bill specifies that USDA is required to 
calculate the differential between U.S. prices and world prices for 
cheddar cheese and nonfat dry milk; it does not specify what data FSA 
should use for U.S. prices or world prices. For world prices FSA 
expects (although not specified in the

[[Page 51459]]

regulations) to use the AMS Oceania price series because of the 
quantity of sales in that series. Alternatively, FSA could use a multi-
region weighted average or some other method to make the 
determinations, if those other methods are more appropriate for 
calculating a relevant world price. FSA expects to base U.S. prices on 
the AMS monthly prices for cheddar cheese and nonfat dry milk, although 
FSA may use a different data set, as needed.
    FSA intends to post the price calculation method and results, and 
purchase determinations, on the FSA Web site. If another method proves 
to be more appropriate for providing information to the public, it will 
replace the planned on-line posting.

Product Determinations

    The 2014 Farm Bill requires USDA consultation with public and 
private nonprofit organizations to determine the types and quantities 
of products to purchase through DPDP. This requirement will be met by 
FNS's existing food program consultations with groups involved in the 
distribution of food to low-income people, including food banks, State 
and local agencies, and advocacy organizations. DPDP purchases are 
expected to be made in package sizes suitable for immediate household 
use, to best accommodate the immediate distribution requirement of the 
2014 Farm Bill, in a manner that is cost effective to the U.S. 
taxpayer.

Comments Requested on Cost Effective Purchases

    FSA is requesting comments on how to best administer the dairy 
product purchases for DPDP to ensure that dairy prices are increased in 
the most cost effective way. In your comments, please suggest options 
and provide data to show the cost effectiveness of the suggestion as it 
relates to the goals of DPDP.

Distribution and Use of DPDP Purchases

    The 2014 Farm Bill requires that products purchased under DPDP 
will:
     Be distributed in a manner that encourages their domestic 
consumption by individuals in low-income groups;
     Be distributed using the services of public and private 
nonprofit organizations; and
     Not be resold back into commercial markets by any 
organization that receives them.
    It is expected that all these requirements will be addressed as 
specified in the regulations for the existing FNS programs through 
which the products will be distributed. Public or private nonprofit 
organizations that receive DPDP products may transfer those products to 
other nonprofits only if the transferee will likewise distribute to 
domestic low-income recipients without cost or waste, consistent with 
existing FNS regulations. FNS regulations in 7 CFR 250.13(d)(1) provide 
that donated foods ``be distributed only to recipient agencies and 
individual recipients eligible to receive them'' under applicable 
program regulations. FNS regulations in 7 CFR 250.13(a)(1)(ii) provide 
that donated foods ``not be sold, exchanged or otherwise disposed of 
without the approval of the Department.'' Any losses of donated foods 
resulting from improper distribution or use will be subject to the 
requirements of 7 CFR part 250 and the instruction and guidance 
provided in FNS Instruction 410-1, Rev 2 ``Claims for Losses of Donated 
Foods and Related Administrative Losses--Procedures for the State 
Distributing Agency,'' and in FNS Instruction 420-1, ``Managing Agency 
Debts.''

Start of DPDP

    This rule specifies that DPDP is effective the day this rule is 
published, in the sense that it provides the regulations and purchase 
authority necessary to operate DPDP, but FSA will not make DPDP 
purchases unless other price and margin requirements are met.
    Because MPP-Dairy and DPDP use the same definition of actual dairy 
production margin, which is defined in the 2014 Farm Bill using 
existing USDA reported data, FSA will have data on actual dairy 
production margins the day this rule is effective. Therefore, if 
margins have been at $4 or less for the 2 months before the effective 
date of this rule, and all other requirements are met for eligible 
purchase months, including the world price differential, DPDP can begin 
making purchases the first full month that DPDP is effective.
    In preparation of starting to make DPDP purchased, FSA will closely 
monitor the margins and related information to analyze the potential 
need for starting DPDP purchases. If the analysis shows that DPDP would 
be expected to trigger, FSA will consult with FNS, then FNS will 
determine the types and quantities of products that will be purchased, 
in consultation with public or private nonprofit organizations and 
State and local agencies eligible to receive such products. When the 
list of products and other details, such as size of the packaged 
products is identified, FSA will analyze various factors, including the 
expected result on the dairy market of the various purchasing options 
to determine the best combination and quantity of dairy products to 
purchase to meet the dual goals of the program: (1) To support dairy 
producer margins and (2) to provide dairy products to individuals in 
low-income groups through public and private non-profit organizations. 
The process of determining the exact combination of dairy products to 
be purchased and the quantity to purchase will continue through the bid 
solicitation process to ensure the dual goals of DPDP are achieved at 
the least cost to taxpayers. FSA will purchase the types and quantities 
of products determined through this process.

Structure of This Rule

    This rule specifies the regulations for MPP-Dairy in 7 CFR part 
1430, subpart A, replacing the regulations for the Dairy Product Price 
Support Program, which is no longer authorized. It specifies the 
regulations for DPDP in subpart C, replacing the regulations for the 
2004 Dairy Disaster Assistance Payments Program, which is also no 
longer authorized. As part of FSA's ongoing retrospective review 
efforts, this rule also removes the regulations in subpart D for the 
Market Loss Assistance Program and subpart E for the 2005 Dairy 
Disaster Assistance Payment Program, both of which are also no longer 
authorized.

Notice and Comment

    In general, the Administrative Procedure Act (5 U.S.C. 553) 
requires that a notice of proposed rulemaking be published in the 
Federal Register and interested persons be given an opportunity to 
participate in the rulemaking through submission of written data, 
views, or arguments with or without opportunity for oral presentation, 
except when the rule involves a matter relating to public property, 
loans, grants, benefits, or contracts. Regulations to implement the 
provisions of Title I of the 2014 Farm Bill and the administration of 
Title I are exempt from the notice and comment provisions of 5 U.S.C. 
553 and the Paperwork Reduction Act (44 U.S.C. chapter 35), as 
specified in section 1601(c)(2) of the 2014 Farm Bill.

Comments Requested on Intergenerational Transfers and Family Members 
Joining an Operation

    The 2014 Farm Bill exempts CCC from notice and comment rulemaking 
under 5 U.S.C. 553 with respect to MPP-Dairy and DPDP; however, FSA 
would like to invite comments with respect to

[[Page 51460]]

the establishment of additional production history under MPP-Dairy.
    Section 1401(9) of the 2014 Farm Bill and this rule define the term 
``production history'' as the production history determined for a dairy 
operation when a participating dairy operation first registers to 
participate in MPP-Dairy. Section 1405(a) provides, except as provided 
in section 1405(b), the production history of the dairy operation is 
equal to the highest annual milk marketings of the dairy operation 
during any one of the 2011, 2012, or 2013 calendar years, with an 
adjustment in subsequent years to reflect any increase in national 
average milk production. Section 1405(b) provides that in the case of a 
participating dairy operation that has been in operation for less than 
a year, the dairy operation elect one of two methods for the Department 
to determine the production history of the dairy operation:
     The volume of the actual milk marketings extrapolated to a 
yearly amount, or
     An estimate of actual milk marketings based on the herd 
size relative to the national rolling average data.
    The provisions in this regulation are consistent with the 2014 Farm 
Bill.
    The 2014 Farm Bill provisions regarding MPP-Dairy and the rule do 
not address the establishment of additional production history for a 
participating dairy operation in specific instances, such as an inter-
generational transfer or when a family member joins a participating 
dairy operation. Other statutory provisions of MPP-Dairy do suggest 
that Congress intended to benefit smaller dairy operations, which tend 
to be family owned and operated. These provisions include the 
establishment of lower premium rates for insured annual production of 
less than 4,000,000 pounds. This rule does not take into account the 
size and structure of the dairy operation in determining whether the 
operation can adjust its production history to assist small, family 
dairy operations, especially with intergenerational transfers of the 
operation. FSA invites interested parties to address whether the 
regulation should be amended to authorize the establishment of 
additional production history, and if so, whether limitations should be 
imposed on any increases. Specifically, FSA requests comments on the 
following questions; please include any data that supports your 
comments:
    1. Does the provision in the rule regarding transfers of production 
history hinder intergenerational transfers of dairy operations? If so, 
how?
    2. How would you suggest the rule be amended to accommodate 
intergenerational transfers or adult children who want to join their 
parent's dairy operation and obtain additional production history for 
the dairy operation?
    3. If additions to production history based on intergenerational 
transfers or adult children joining family dairies are allowed, should 
there be a cap on the overall amount of production history that cannot 
be exceeded or a percentage or quantity limitation on the amount by 
which the production history could be increased per participating dairy 
operation under this provision? If so, what amount?

Effective Date

    The Administrative Procedure Act (5 U.S.C. 553) provides generally 
that before rules are issued by Government agencies, the rule is 
required to be published in the Federal Register, and the required 
publication of a substantive rule is to be not less than 30 days before 
its effective date. One of the exceptions is when the agency finds good 
cause for not delaying the effective date. Subsection 1601(c)(2) of the 
2014 Farm Bill makes this final rule exempt from notice and comment. 
Therefore, using the administrative procedure provisions in 5 U.S.C. 
553, FSA finds that there is good cause for making this rule effective 
less than 30 days after publication in the Federal Register. This rule 
allows FSA to provide adequate notice to dairy operations about the new 
MPP-Dairy so they will be ready to begin enrollment no later than 
September 1, 2014, as required by section 1403 of the 2014 Farm Bill. 
Therefore, to begin providing benefits to operations in a timely 
fashion, the MPP-Dairy regulations in 7 CFR part 1430, subpart A are 
effective when published in the Federal Register.
    Section 1431 of the 2014 Farm Bill requires that DPDP be 
operational no later than 120 days after MPP-Dairy, but as discussed 
above, USDA decided to make DPDP effective at the same time as MPP-
Dairy, so as not to delay needed assistance to dairy operations and low 
income groups. A 30 day delay in the effective date would unnecessarily 
delay needed assistance to dairy operations and individuals in low 
income groups.

Executive Orders 12866 and 13563

    Executive Order 12866, ``Regulatory Planning and Review,'' and 
Executive Order 13563, ``Improving Regulation and Regulatory Review,'' 
direct agencies to assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). Executive Order 13563 emphasized the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility.
    The Office of Management and Budget (OMB) designated this rule as 
economically significant under Executive Order 12866, ``Regulatory 
Planning and Review,'' and therefore, OMB has reviewed this rule. This 
regulatory action is being taken to implement two programs required by 
the 2014 Farm Bill. A summary of the cost-benefit analysis of this rule 
is provided below and the full cost benefit analysis is available on 
regulations.gov.

Cost Benefit Analysis Summary

    The current actual dairy production margin is about $12, so neither 
DPDP nor MPP-Dairy would have any cost in the first month. If current 
milk prices and cattle feed prices continue through the end of 2018, 
the payments to dairy producers from the government via MPP-Dairy and 
DPDP will be zero. Any program payments would be more than offset by 
MPP-Dairy premiums and fees. However, in the event of prolonged low 
margins, programs outlays could exceed $100 million per year.
    If actual margins vary significantly from mean projections used for 
the 2015 President's Budget Midsession Review, DPDP is expected to 
trigger twice during the 2015 to 2018 period and total cost is expected 
to be about $400 million over the 4-year period, for an average cost of 
$100 million per year. That is a net cost to the government for both 
MPP-Dairy and DPDP, meaning the projected total payments to producers 
and the cost of the dairy products purchased minus the MPP-Dairy fees 
and premiums paid to CCC. Nearly all of the impacts estimated in this 
analysis are transfers between entities within society. For example, 
DPDP results in an average annual cost to the government of about $30 
million for dairy product purchases (cost side of the transfer), which 
would be balanced by low income individuals receiving $30 million worth 
of free dairy products (benefit side of the transfer).

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA), generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to the notice and comment

[[Page 51461]]

rulemaking requirements under the Administrative Procedure Act or any 
other law, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
This rule is not subject to the Regulatory Flexibility Act because the 
2014 Farm Bill exempts CCC from notice and comment rulemaking under 5 
USC 553 with respect to these programs and therefore, CCC is not 
required by any law to publish a proposed rule for public comment for 
this rulemaking.

Environmental Review

    The environmental impacts of this final rule have been considered 
in a manner consistent with the provisions of the National 
Environmental Policy Act (NEPA, 42 U.S.C. 4321-4347), the regulations 
of the Council on Environmental Quality (40 CFR parts 1500-1508), and 
the FSA regulations for compliance with NEPA (7 CFR part 799). FSA has 
determined that the provisions identified in this final rule are 
administrative in nature, intended to clarify the mandatory 
requirements of the programs, as defined in the 2014 Farm Bill, and do 
not constitute a major Federal action that would significantly affect 
the quality of the human environment, individually or cumulatively. The 
few discretionary features of the rules include establishing deadlines, 
determinations of eligibility and prices, and purchase procedures, and 
have been selected largely based on pre-existing USDA programs. While 
these dairy programs are new, their creation is mandated by the 2014 
Farm Bill, and are therefore not subject to review under NEPA. The few 
discretionary provisions left for FSA to determine were all purely 
administrative and would not alter any environmental impacts resulting 
from implementing the mandatory programs. Therefore, as this rule 
presents administrative clarifications only, FSA will not prepare an 
environmental assessment or environmental impact statement for this 
regulatory action.

Executive Order 12372

    Executive Order 12372, ``Intergovernmental Review of Federal 
Programs,'' requires consultation with State and local officials. The 
objectives of the Executive Order are to foster an intergovernmental 
partnership and a strengthened Federalism, by relying on State and 
local processes for State and local government coordination and review 
of proposed Federal Financial assistance and direct Federal 
development. For reasons specified in the final rule related notice 
regarding 7 CFR part 3015, subpart V (48 FR 29115, June 24, 1983), the 
programs and activities within this rule are excluded from the scope of 
Executive Order 12372, which requires intergovernmental consultation 
with State and local officials.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, ``Civil 
Justice Reform.'' This rule will not preempt State or local laws, 
regulations, or policies unless they represent an irreconcilable 
conflict with this rule. The rule will not have retroactive effect. 
Before any judicial action may be brought regarding the provisions of 
this rule, the administrative appeal provisions of 7 CFR parts 11 and 
780 are to be exhausted.

Executive Order 13132

    This rule has been reviewed under Executive Order 13132, 
``Federalism.'' The policies contained in this rule do not have any 
substantial direct effect on States, on the relationship between the 
Federal government and the States, or on the distribution of power and 
responsibilities among the various levels of government, except as 
required by law. Nor does this rule impose substantial direct 
compliance costs on State and local governments. Therefore, 
consultation with the States is not required.

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Federal agencies 
to consult and coordinate with tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal Government 
and Indian tribes or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.
    FSA has assessed the impact of this rule on Indian tribes and 
determined that this rule does not, to our knowledge, have tribal 
implications that require tribal consultation under Executive Order 
13175. If a Tribe requests consultation, FSA will work with the USDA 
Office of Tribal Relations to ensure meaningful consultation is 
provided where changes, additions, and modifications identified in this 
rule are not expressly mandated by the 2014 Farm Bill.

The Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 
104-4) requires Federal agencies to assess the effects of their 
regulatory actions on State, local, and Tribal governments, or the 
private sector. Agencies generally need to prepare a written statement, 
including a cost benefit analysis, for proposed and final rules with 
Federal mandates that may result in expenditures of $100 million or 
more in any year for State, local, or Tribal governments, in the 
aggregate, or to the private sector. UMRA generally requires agencies 
to consider alternatives and adopt the more cost effective or least 
burdensome alternative that achieves the objectives of the rule. This 
rule contains no Federal mandates, as defined in Title II of 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.

Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)

    This rule is a major rule under the Small Business Regulatory 
Enforcement Fairness Act of 1996, (Pub. L. 104-121, SBREFA). SBREFA 
normally requires that an agency delay the effective date of a major 
rule for 60 days from the date of publication to allow for 
Congressional review. Section 808 of SBREFA allows an agency to make a 
major regulation effective immediately if the agency finds there is 
good cause to do so. Section 1601(c)(3) of the 2014 Farm Bill provides 
that the authority in section 808 of SBREFA be used in implementing the 
changes required by Title I of the 2014 Farm Bill, such as for the 
changes being made by this rule. Consistent with section 1601(c)(3) of 
the 2014 Farm Bill, FSA therefore finds that it would be contrary to 
the public interest to delay the effective date of this rule, because 
it would delay implementation MPP-Dairy as required in the 2014 Farm 
Bill. The regulation needs to be effective to provide adequate time for 
producers to be ready to begin the sign-up process in a timely fashion 
to allow coverage to begin by September 1, 2014. Therefore, the rule is 
effective when published in the Federal Register.

Federal Assistance Programs

    The title and number of the Federal Domestic Assistance Program 
found in the Catalog of Federal Domestic

[[Page 51462]]

Assistance to which this rule applies are:

10.116--Margin Protection Program-Dairy
10.115--Dairy Product Donation Program

Paperwork Reduction Act of 1995

    The regulations in this rule are exempt from the requirements of 
the Paperwork Reduction Act (44 U.S.C. Chapter 35), as specified in 
subsection 1601(c)(2)(B) of the 2014 Farm Bill, which provides that 
these regulations be promulgated and administered without regard to the 
Paperwork Reduction Act.

E-Government Act Compliance

    FSA and CCC are 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.

List of Subjects in 7 CFR Part 430

    Dairy products, Fraud, Penalties, Price support programs, Reporting 
and recordkeeping requirements.

    For the reasons discussed above, the regulations at 7 CFR part 1430 
are amended as follows:

PART 1430--DAIRY PRODUCTS

0
1. The authority for part 1430 is revised to read as follows:

    Authority: 7 U.S.C. 8773, 9051-9060, and 9071 and 15 U.S.C. 714b 
and 714c.


0
2. Revise 7 CFR part 1430, subpart A to read as follows:
Subpart A--Margin Protection Program for Dairy Producers
Sec.
1430.100 Purpose.
1430.101 Administration.
1430.102 Definitions.
1430.103 Eligible dairy operations.
1430.104 Time and method of registration and annual election.
1430.105 Establishment and transfer of production history for a 
participating dairy operation.
1430.106 Administrative fees.
1430.107 Buy-up coverage.
1430.108 Margin protection payments.
1430.109 Effect of failure to pay administrative fees or premiums.
1430.110 Calculation of average feed cost and actual dairy 
production margins.
1430.111 Relation to RMA's LGM-Dairy Program.
1430.112 Multi-year contract.
1430.113 Contract modifications.
1430.114 Reconstitutions.
1430.115 Offsets and withholdings.
1430.116 Assignments.
1430.117 Appeals.
1430.118 Misrepresentation and scheme or device.
1430.119 Estates, trusts, and minors.
1430.120 Death, incompetency, or disappearance.
1430.121 Maintenance and inspection of records.
1430.122 Refunds; joint and several liability.
1430.123 Violations of highly erodible and wetland conservation 
provisions.
1430.124 Violations regarding controlled substances.

Subpart A--Margin Protection Program for Dairy Producers


Sec.  1430.100  Purpose.

    The regulations in this subpart apply for the Margin Protection 
Program for Dairy (MPP-Dairy), which is authorized by sections 1401 
through 1410 of the Agricultural Act of 2014 (Pub. L. 113-79, 7 U.S.C. 
9051-9060). MPP-Dairy is intended to provide eligible dairy producers 
risk protection against low margins resulting from a combination of low 
milk prices and high feed costs.


Sec.  1430.101  Administration.

    (a) MPP-Dairy is administered under the general supervision of the 
Executive Vice President, CCC, or a designee, and will be carried out 
by Farm Service Agency (FSA) State and county committees and employees.
    (b) State and county committees and their employees may not waive 
or modify any requirement of this subpart.
    (c) The State committee will take any action required when not 
taken by the county committee, require correction of actions not in 
compliance, or require the withholding of any action that is not in 
compliance with this subpart.
    (d) The Executive Vice President, CCC, or a designee, may determine 
any question arising under MPP-Dairy or reverse or modify any decision 
of the State or county committee.
    (e) The Deputy Administrator, Farm Programs, FSA, may waive or 
modify MPP-Dairy requirements not statutorily required when failure to 
meet such requirements does not adversely affect the operation of MPP-
Dairy.
    (f) A representative of CCC will execute a contract for 
registration in MPP-Dairy and related documents under the terms and 
conditions determined and announced by the Deputy Administrator on 
behalf of CCC. Any document not under such terms and conditions, 
including any execution before the date authorized by CCC, will be null 
and void.


Sec.  1430.102  Definitions.

    The definitions in this section are applicable for the purposes of 
administering MPP-Dairy established by this subpart.
    Actual dairy production margin means the difference between the 
all-milk price and the average feed cost, as calculated under Sec.  
1430.110. If the calculation would produce a negative number the margin 
will be considered to be zero.
    Administrative county office means the county office designated to 
make determinations, handle official records, and issue payments for 
the producer as specified in 7 CFR part 718.
    All-milk price means the national average price received, per 
hundredweight of milk, by dairy operations for all milk sold to dairy 
plants and milk dealers in the United States, as determined by the 
Secretary.
    AMS means the Agricultural Marketing Service of the USDA.
    Annual election period for MPP-Dairy means the period, each 
calendar year, established by the Deputy Administrator, for a dairy 
operation to register initially to participate in MPP-Dairy, pay 
associated administrative fees, and applicable premiums, or, if already 
registered as a participating dairy operation, to make annual coverage 
elections for an applicable calendar year.
    Average feed cost means the national average cost of feed used by a 
dairy operation to produce a hundredweight of milk, as determined under 
Sec.  1430.110(b).
    Buy up coverage means margin protection coverage for a margin 
protection level above $4 per hundredweight of milk.
    Catastrophic level coverage means $4 per cwt margin protection 
coverage and a coverage percentage of 90 percent, with no premium 
assessed.
    CCC means the Commodity Credit Corporation of the U.S. Department 
of Agriculture.
    Commercially marketed means selling whole milk to either the market 
to which the dairy operation normally delivers and receives monetary 
compensation or other similar markets.
    Consecutive 2-month period means a 2-month period consisting, 
respectively, of the months of January and February; March and April; 
May and June; July and August; September and October; or November and 
December.
    Contract means the terms and conditions to register for the MPP-
Dairy as executed on a form prescribed by CCC and required to be 
completed by the dairy operation and accepted by CCC, including any 
contract modifications made in an annual election period before 
coverage for the applicable calendar year commences.

[[Page 51463]]

    County committee means the FSA county committee.
    County office means the FSA office responsible for administering 
FSA programs for farms located in a specific area in a State.
    Covered production history is equal to the production history of 
the operation multiplied by the coverage percentage selected by the 
participating dairy operation.
    Dairy operation means a dairy operation as defined pursuant to the 
criteria and procedures under the Milk Income Loss Contract (MILC) 
Program or any dairy facility that was part of a single dairy operation 
that participated in the MILC Program as of February 7, 2014. 
Operations that are determined to be ``new operations'' under this 
subpart, will be subject to the ``affiliation'' test under Sec.  
1430.103(e) if the operation elects to participate in MPP-Dairy 
separately. A single dairy operation operated by more than one dairy 
producer will be treated as a single dairy operation for purposes of 
participating in MPP-Dairy and can only submit one application. All 
dairy operations under this part shall commercially market milk 
produced from cows as a single unit located in the United States in 
which each dairy producer:
    (1) Has risk in the production of milk in the dairy operation; and
    (2) Makes contributions, including land, labor, management, 
equipment, or capital, to the dairy operation at least commensurate to 
the producers' share of the operation.
    Deputy Administrator means the Deputy Administrator for Farm 
Programs, or designee.
    Farm Service Agency or FSA means the Farm Service Agency of the 
USDA.
    Hundredweight or cwt means 100 pounds.
    Milk Income Loss Contract Program or MILC means the program 
established under section 1506 of the Food, Conservation, and Energy 
Act of 2008 (7 U.S.C. 8773) and the regulations found in subpart B of 
this part.
    Milk marketing means a sale of milk for which there is a verifiable 
production record for milk commercially marketed.
    NASS means the National Agricultural Statistics Service of the 
USDA.
    New operation means a dairy operation that did not commercially 
market milk at least 12 full months as of February 7, 2014.
    Participating dairy operation means a dairy operation that 
registers to participate in MPP-Dairy under this part.
    Producer means any individual, group of individuals, partnership, 
corporation, estate, trust association, cooperative, or other business 
enterprise or other legal entity who is, or whose members are, a 
citizen of, or legal resident alien in the United States, and who 
directly or indirectly, shares in the risk of producing milk, makes 
contributions including land, labor, management, equipment, or capital 
to the dairy operation at least commensurate to the producers' share of 
the operation, to the dairy operation of the individual or entity, as 
determined by the Deputy Administrator.
    Production history means the production history determined for a 
participating dairy operation when the participating dairy operation 
registers in MPP-Dairy.
    RMA means the Risk Management Agency of the USDA.
    Secretary means the Secretary of Agriculture.
    United States means the 50 States of the United States of America, 
the District of Columbia, American Samoa, Guam, the Commonwealth of the 
Northern Mariana Islands, the Commonwealth of Puerto Rico, the Virgin 
Islands of the United States, and any other territory or possession of 
the United States.
    USDA means the United States Department of Agriculture.
    Verifiable production records mean evidence that is used to 
substantiate the amount of production commercially marketed and that 
can be verified by CCC through an independent source.


Sec.  1430.103  Eligible dairy operations.

    (a) The eligibility requirements for a dairy operation to register 
in MPP-Dairy and receive payments under this subpart, are to:
    (1) Produce milk from cows in the United States that is marketed 
commercially at the time of each annual election in MPP-Dairy;
    (2) Submit accurate and complete information as required by the 
this subpart;
    (3) Provide proof of milk production marketed commercially by all 
persons in the dairy operation to establish production history;
    (4) Not participate in the Livestock Gross Margin for Dairy (LGM-
Dairy) Program administered by the USDA Risk Management Agency (RMA) 
under the Federal Crop Insurance Act (7 U.S.C. 1501-1536), except to 
the extent permitted by this subpart, provided that under no 
circumstance may the operation receive coverage for the same period in 
MPP-Dairy for which payments have been received or earned under LGM-
Dairy; and
    (5) Pay required administrative fees for participation in MPP-Dairy 
as specified in this subpart and any premiums, if applicable, as 
specified in this subpart.
    (b) A person or entity covered by Sec.  1400.401 of this chapter 
(hereafter ``foreign person'') must meet the eligibility requirements 
contained in that section to receive payments under this part. A dairy 
operation with ineligible foreign persons as members will have any 
payment reduced by the proportional share of such members.
    (c) Federal agencies and States, including all agencies and 
political subdivisions of a State, are not eligible for payments under 
this subpart.
    (d) As specified in Sec.  1430.104, each dairy operation is 
required to submit a separate registration to be eligible for MPP-Dairy 
coverage and payment. A producer who owns more than one eligible dairy 
operation may participate separately for each dairy operation; each 
eligible dairy operation must be registered separately, subject to the 
affiliation test for new operations.
    (e) A new dairy operation will be treated as an affiliated dairy 
operation and not be treated as a separate dairy operation under MPP-
Dairy if producers that collectively own more than 50 percent of the 
new dairy operation also collectively own more than 50 percent interest 
in another dairy operation registered in MPP-Dairy.


Sec.  1430.104  Time and method of registration and annual election.

    (a) A dairy operation may register to participate in MPP-Dairy by 
submitting a contract prescribed by CCC. Dairy operations may obtain a 
blank contract in person, by mail, or by facsimile from any county 
office. In addition, dairy operations may download a copy of the forms 
at http://www.sc.egov.usda.gov.
    (b) Dairy operation shall submit completed contracts and any other 
supporting documentation during the annual election period established 
by the Deputy Administrator, to the administrative county office 
serving the dairy operation.
    (1) A new dairy operation that has been established after the most 
recent election period is required to submit a contract within the 
first 90 calendar days from the date on of which the dairy operation 
first commercially markets milk and may elect coverage that begins the 
next consecutive 2-month period following the approval date of the 
registration and coverage election; or
    (2) A new dairy operation that does not meet the 90 day requirement 
of

[[Page 51464]]

paragraph (b)(1) of this section cannot enroll until the next annual 
election period for coverage for the following calendar year.
    (c) Registration requests and coverage elections are to be 
submitted in time to be received at FSA by the close of business on the 
last day of the annual election period established by the Deputy 
Administrator.
    (1) The applicable year of coverage for contracts arising from 
accepted registrations in the annual election period will be the 
following calendar year, except for 2014, where the election and 
coverage year will be the same.
    (2) Registration requests and coverage elections submitted after 
the applicable allowed time for submission will not be considered.
    (3) During an annual election period, participating dairy 
operations may change coverage elections for the following calendar 
year.
    (d) To receive margin protection coverage, separate registrations 
are required for each separately constituted dairy operation. If a 
dairy producer operates more than one separate and distinct operation, 
the producer registers each operation for each operation to be eligible 
for coverage.
    (e) A participating dairy operation must elect, during the 
applicable annual election period and by using the form prescribed by 
CCC, the coverage level threshold and coverage percentages for that 
participating dairy operation for the applicable calendar year.
    (1) Once the initial completed registration is submitted and 
approved by CCC, it cannot be cancelled by the participating dairy 
operation through December 31, 2018; however, each calendar year 
subsequent to the initial registration of the participating dairy 
operation, it may elect to change the coverage level threshold and 
coverage percentage, on a form prescribed by CCC, during the election 
period for the applicable subsequent calendar year. For dairy 
operations that want to continue coverage levels established in the 
prior calendar year, the Deputy Administrator will establish a 
procedure to allow such coverage levels to continue that will include 
the requirement of a timely payment of administrative fees and any 
premiums, if applicable.
    (2) If the operation fails to file an update of its election during 
the annual election period, the coverage level will be reduced to the 
catastrophic level coverage, but such coverage will only be provided if 
the participating dairy operation pays the annual administrative fee 
for the relevant calendar year.
    (3) All producers in the participating dairy operation must agree 
to the coverage level threshold and coverage percentage elected by the 
dairy operation.
    (f) By registering to participate or receive payment under MPP-
Dairy, producers in the participating dairy operation certify to the 
accuracy and truthfulness of the information in their applications and 
supporting documentation.
    (1) All producers in a participating dairy operation must sign and 
certify all submissions made under MPP-Dairy that relate to the level 
of coverage.
    (2) All information provided is subject to verification. FSA may 
require a dairy operation to provide documentation to support all 
verifiable records. Furnishing the information is voluntary; however, 
without it MPP-Dairy benefits will not be approved. Providing a false 
certification to the Federal Government may be punishable by 
imprisonment, fines, other penalties, or sanctions.
    (g) At the time the completed contract is submitted to FSA for the 
first year in which the dairy operation is to participate in MPP-Dairy, 
the dairy operation must also submit a separate form, as specified by 
CCC, to establish the production history for the dairy operation.


Sec.  1430.105  Establishment and transfer of production history for a 
participating dairy operation.

    (a) A participating dairy operation must provide all information 
required by FSA to establish the production history of the 
participating dairy operation for purposes of participating in MPP-
Dairy. Except as provided in paragraph (b) of this section relating to 
new dairy operations, FSA will establish the production history for a 
dairy operation for margin protection as the highest annual milk 
marketings of the participating dairy operation during any one of the 
2011, 2012, or 2013 calendar years.
    (1) All producers in the participating dairy operation are required 
to provide adequate proof of the dairy operation's quantity of milk 
commercially marketed, to establish the production history for the 
dairy operation.
    (2) All information provided is subject to verification, spot check 
and audit by FSA. If the dairy operation does not provide to the 
satisfaction of FSA documentation requested to substantiate the 
production history of the highest annual milk marketings for the 
participating dairy operation, then, the registration will not be 
approved.
    (b) A participating dairy operation that did not produce and 
commercially market milk at least 12 full months as of February 7, 
2014, will be considered a new dairy operation. To establish the 
production history for such a new dairy operation the new dairy 
operation is required to elect one of the following methods:
    (1) The volume of the actual milk marketings for the months the 
dairy operation has been in operation, extrapolated to a yearly amount 
based on a national seasonally adjusted index, as determined by the 
Deputy Administrator, to account for differences in milk production 
during the year; or
    (2) An estimate of the actual milk marketings of the dairy 
operation based on the herd size of the dairy operation relative to the 
national rolling herd average data published by the Secretary.
    (c) If FSA determines that the new enterprise was formed for the 
purpose of circumventing MPP-Dairy provisions, including, but not 
limited to, reconstituting a dairy operation to receive additional 
benefits, or establishing new production history, that enterprise will 
not be considered a new dairy operation for the purpose of establishing 
production history.
    (d) Once the production history of a participating dairy operation 
is established under paragraphs (a) or (b) of this section, the 
production history will be adjusted upward by FSA only to reflect any 
increase in the national average milk production, as determined by the 
Deputy Administrator.
    (e) The production history may be transferred from one dairy 
facility to another:
    (1) Producers of a dairy operation may relocate the dairy operation 
to another location and the production history of the original 
operation may be transferred to the new location and may be added to 
production history at the new location that has not been transferred;
    (2) Producers of a dairy operation may transfer ownership of a 
dairy operation with its associated production history, but if the 
producers start a new operation such new operation may only be eligible 
for new production history if the new operation is otherwise not 
affiliated with participants in MPP-Dairy as described in Sec.  
1430.103(e); or
    (3) Producers of more than one dairy operation that separately 
participate in MPP-Dairy may transfer the production histories of these 
dairy operations into a previously unregistered dairy operation.
    (f) If CCC waives the obligation, under MPP-Dairy of a 
participating dairy operation due to death or retirement of the 
producer or of the permanent

[[Page 51465]]

dissolution of the dairy operation or under other circumstances as 
determined by the Deputy Administrator, FSA may reestablish the 
production history provided that the production history has not been 
transferred.


Sec.  1430.106  Administrative fees.

    (a) Dairy operations must pay an initial administrative fee to FSA 
in the amount of $100 to participate in MPP-Dairy at the time of 
initial registration to participate. Each approved participating dairy 
operation must also pay a $100 administrative fee each year through 
December 31, 2018. Annual administrative fees are due and payable to 
FSA through the administrative county FSA office no later than the 
close of business on the last day of the annual election period 
established by the Deputy Administrator for each applicable calendar 
year of margin protection coverage under MPP-Dairy. The administrative 
fee paid is non-refundable.
    (b) The required annual administrative fee is per dairy operation. 
Therefore, multiple dairy producers in a single unit participating 
dairy operation are required to pay only one annual administrative fee 
for the participating dairy operation. Conversely, in the case of a 
dairy producer that operates more than one dairy operation, each 
participating dairy operation is required to pay a separate 
administrative fee annually.
    (c) Failure to pay the administrative fee timely will result in 
loss of margin protection coverage for the applicable calendar year. 
The payment will still be due, as provided in Sec.  1430.109.


Sec.  1430.107  Buy-up coverage.

    (a) For purposes of receiving MPP-Dairy coverage, a participating 
dairy operation may annually elect during an annual election period the 
following for the succeeding calendar year:
    (1) A coverage level threshold for margins that, per cwt, is equal 
to one of the following: $4, $4.50, $5, $5.50, $6, $6.50, $7, $7.50, or 
$8; and
    (2) A percentage of coverage for the production history from 25 
percent to 90 percent, in 5-percent increments.
    (b) In the absence of any such election, the applicable coverage 
level provided, with no premium due, is catastrophic level coverage.
    (c) A participating dairy operation that elects margin protection 
coverage above $4 is required to pay an annual premium based on 
coverage level and covered production history in addition to the 
administrative fee. Tier 1 applies to covered production history up to 
and including 4 million pounds; Tier 2 applies to covered production 
history above 4 million pounds.
    (d) The premium per cwt of milk, based on the elected percentage of 
coverage of production history is specified in the following tables.

                      Table 1 to Sec.   1430.107(d)
------------------------------------------------------------------------
                                      Tier 1 Premium
                                     per cwt in 2014     Tier 2 Premium
                                    and 2015 (for the     per cwt, all
                                       covered \1\       years (for the
      Coverage level (margin)           production      part of covered
                                    history that is 4    \1\ production
                                    million pounds or    history over 4
                                        less) \2\       million pounds)
------------------------------------------------------------------------
$4.00.............................               None               None
$4.50.............................             $0.008             $0.020
$5.00.............................              0.019              0.040
$5.50.............................              0.030              0.100
$6.00.............................              0.041              0.155
$6.50.............................              0.068              0.290
$7.00.............................              0.163              0.830
$7.50.............................              0.225              1.060
$8.00.............................              0.475              1.360
------------------------------------------------------------------------
\1\ The catastrophic coverage level provided at the $4 margin is 90
  percent.


                      Table 2 to Sec.   1430.107(d)
------------------------------------------------------------------------
                                      Tier 1 Premium
                                      per cwt after      Tier 2 Premium
                                      2015 (for the       per cwt, all
                                       covered \1\       years (for the
      Coverage level (margin)           production      part of covered
                                    history that is 4    \1\ production
                                    million pounds or    history over 4
                                          less)         million pounds)
------------------------------------------------------------------------
$4.00.............................               None               None
$4.50.............................             $0.010             $0.020
$5.00.............................              0.025              0.040
$5.50.............................              0.040              0.100
$6.00.............................              0.055              0.155
$6.50.............................              0.090              0.290
$7.00.............................              0.217              0.830
$7.50.............................              0.300              1.060
$8.00.............................              0.475              1.360
------------------------------------------------------------------------
\1\ The catastrophic coverage level provided at the $4 margin is 90
  percent.

    (e) The annual premium due for a participating dairy operation is 
calculated by multiplying:
    (1) The covered production history; and
    (2) The premium per cwt of milk specified in paragraph (d) of this 
section

[[Page 51466]]

for the coverage level elected by the dairy operation.
    (f) In the case of a new dairy operation that first registers to 
participate in MPP-Dairy for a calendar year after the start of the 
calendar year, the participating dairy operation is required to pay a 
pro-rated premium for that calendar year based on the portion of the 
calendar year for which the participating dairy operation is eligible, 
and for which it purchases the coverage.
    (g) The total annual premium for a participating dairy operation 
calculated as provided in paragraphs (d) and (e) of this section for 
calendar year 2014, is due in full at the time the contract is 
submitted to FSA during the open election period applicable for 
calendar year 2014, as determined by the Deputy Administrator. For 
subsequent calendar years, a participating dairy operation is required 
to pay the annual premium calculated as specified in paragraphs (d) and 
(e) of this section for the applicable calendar year, unless otherwise 
determined by the Deputy Administrator, according to either of the 
following options:
    (1) In total at time of submission of coverage election to FSA; or
    (2) In installments, with a minimum of 50 percent at the time of 
submission of coverage election to FSA and the remaining balance due no 
later than June 1 of the applicable calendar year of coverage.
    (h) If a minimum of 50 percent of the premium is not paid by the 
end of an open election period for an applicable calendar year of 
coverage, the participating dairy operation will only be covered at 
catastrophic level coverage, except that the participating dairy 
operation will have no coverage whatsoever if the administrative fee 
for the applicable calendar year of coverage has not been timely paid.
    (i) Annual premium balances due to FSA from a participating dairy 
operation for a calendar year of coverage must be paid in full no later 
than June 1 of the applicable calendar year. Premium balances due, but 
not in arrears, prior to June 1 will be deducted from any MPP-Dairy 
payment(s) made to the participating dairy operation during the 
applicable calendar year of coverage.
    (j) A participating dairy operation with an unpaid premium balance 
after June 1 for a calendar year of coverage will lose eligibility for 
coverage as provided in Sec.  1430.109.
    (k) The Deputy Administrator may waive the obligation to pay the 
premium, or refund the premium paid, of a participating dairy operation 
for a calendar year, in cases that include, but are not limited to, as 
determined by the Deputy Administrator, death, retirement, permanent 
dissolution of a participating dairy operation, or other circumstances 
determined by the Deputy Administrator.
    (l) MPP-Dairy administrative fees and premiums are required to be 
paid by a negotiable instrument satisfactory in form to the Deputy 
Administrator and made payable to FSA and either mailed to or provided 
in person to the administrative county office or other location 
designated by FSA.


Sec.  1430.108  Margin protection payments.

    (a) An MPP-Dairy payment will be made to a participating dairy 
operation for any consecutive 2-month period when the average actual 
dairy production margin for the consecutive 2-month period falls below 
the coverage level threshold in effect for the participating dairy 
operation.
    (b) The MPP-Dairy payment to an eligible participating dairy 
operation relative to the qualifying 2-month period will equal the 
product obtained by multiplying:
    (1) The amount by which the coverage level in effect for the 
participating dairy operation exceeds the average actual dairy 
production margin for the applicable 2-month period;
    (2) The coverage percentage in effect for the participating dairy 
operation; and
    (3) The production history of the participating dairy operation, 
divided by 6.
    (c) For any coverage period, a participating dairy operation can 
for all of its production select only one coverage level threshold 
between $4 and $8 (in 50 cent increments) per hundredweight under Sec.  
1430.107(a)(1); and only one percentage for its production history 
between 25 percent and 90 percent (in 5 percent increments) under Sec.  
1430.107(a)(2).


Sec.  1430.109  Effect of failure to pay administrative fees or 
premiums.

    (a) A participating dairy operation that fails to pay a required 
administrative fee or premium payment due upon application to MPP-Dairy 
or for a calendar year of coverage:
    (1) Remains legally obligated to pay such administrative fee or 
premium, as applicable; and
    (2) Upon such failure to pay when due, loses coverage under MPP-
Dairy until such administrative fee or premium is paid in full, and 
once paid, coverage will begin with the next consecutive 2-month 
period.
    (b) CCC may take such actions as necessary to collect unpaid 
administrative fees and premium payments.


Sec.  1430.110  Calculation of average feed cost and actual dairy 
production margins.

    (a) Payments are made to a participating dairy operation as 
specified in this subpart only when, for a consecutive 2-month period, 
the calculated average actual dairy production margin is below the 
coverage level in effect for the participating dairy operation. That 
margin will be calculated on a national basis and is the amount by 
which for the relevant consecutive 2-month period, the all milk price 
exceeds the average feed cost for dairy producers. All calculations 
will be made on a per cwt basis. The average actual dairy production 
margin calculation applies to all participating dairy operations. The 
calculations are not made on an operation by operation basis or on 
their marketings.
    (b) For calculating the national average feed cost that dairy 
operations use to produce a cwt of milk, the following three items will 
be added together:
    (1) The product determined by multiplying 1.0728 by the price of 
corn per bushel;
    (2) The product determined by multiplying 0.00735 by the price of 
soybean meal per ton; and
    (3) The product determined by multiplying 0.0137 by the price of 
alfalfa hay per ton.
    (c) To make those feed calculations, the Deputy Administrator on 
behalf of CCC will use the following full month data:
    (1) For corn, the full month price received by farmers during the 
month in the United States as reported in the monthly Agricultural 
Prices report by USDA NASS;
    (2) For soybean meal, the Central Illinois soybean meal price 
delivered by rail as reported in the USDA AMS Market News-Monthly; and
    (3) For alfalfa hay, the full month price received during the month 
by farmers in the United States for alfalfa hay as reported in the 
monthly Agricultural Prices report by USDA NASS.
    (d) The national average feed cost data for corn, soybean meal, and 
alfalfa hay used in the calculation of the national average feed cost 
to determine the actual dairy production margin for the relevant 
period, will be the data reported in the publication the following 
month. (For example, preliminary May prices for corn and soybean meal 
were reported in the May Agricultural Prices publication but full month 
May prices will be

[[Page 51467]]

available in the June publication, and those will be the prices used).
    (e) The actual dairy production margin for each consecutive 2-month 
period, will be calculated by subtracting:
    (1) The average feed cost for that consecutive 2-month period, 
determined under paragraph (b) of this section; from
    (2) The all-milk price for that consecutive 2-month period.


Sec.  1430.111  Relation to RMA's LGM-Dairy Program.

    (a) In general, a producer may participate in either MPP-Dairy 
through a dairy operation or the LGM-Dairy program operated by RMA, but 
not both. However, since MPP-Dairy is first being made available after 
potential applicants may have already applied for 2014 or 2015 coverage 
under LGM-Dairy, for the annual election period for MPP-Dairy 
established for the 2014 and 2015 calendar year coverage only, a 
producer with coverage under LGM-Dairy that wishes to participate 
through their dairy operation in MPP-Dairy, is required to:
    (1) Register the dairy operation to participate in MPP-Dairy during 
the annual election period established for calendar year 2014 and 2015, 
as established by the Deputy Administrator;
    (2) Agree not to extend or obtain new LGM-Dairy coverage;
    (3) Acknowledge in writing at the time of registration that no MPP-
Dairy payment will be made to the dairy operation for any month 
included in any period for which any producer in the dairy operation 
has LGM-Dairy coverage; and
    (4) Pay applicable administrative fees in the same manner as other 
participating dairy operations by paying fees and premiums that may be 
prorated by the Deputy Administrator to reflect the limited period of 
coverage.
    (b) Margin protection coverage under MPP-Dairy will not become 
effective until after the target month of marketings under LGM-Dairy 
has ended by natural expiration of the LGM-Dairy agreement or by an 
RMA-allowed cancellation. Any applicable premium for the participating 
dairy operation will be prorated based on the remaining months of the 
applicable calendar year of coverage following the month the LGM-Dairy 
target month has ended.
    (c) MPP-Dairy payment may only trigger after the target month of 
marketings under LGM-Dairy has ended.
    (d) A participating dairy operation will be required to provide 
proof, to the satisfaction of FSA, of the cancellation or expiration of 
the LGM-Dairy policy based on the final month of target marketings 
under the LGM-Dairy policy.


Sec.  1430.112  Multi-year contract.

    (a) Participating dairy operations enrolled in MPP-Dairy are 
enrolled until December 31, 2018. As such, a participating dairy 
operation is obligated to pay initial and annual administrative fees 
and applicable premiums each succeeding calendar year following the 
date the contract is first entered into through December 31, 2018.
    (b) Failure to pay administrative fees and premiums will result in 
the loss of coverage, and the participating dairy operation remains 
obligated to pay such administrative fees and premiums as provided in 
Sec.  1430.108.
    (c) If a participating dairy operation goes out of business as 
described in Sec.  1430.107(k) before December 31, 2018, the contract 
will be terminated immediately, except with respect to payments accrued 
to the benefit of the participating dairy operation under this subpart 
before such termination.


Sec.  1430.113  Contract modifications.

    (a) Producers in a participating dairy operation must notify FSA 
immediately of any changes that may affect their participation in MPP-
Dairy under this subpart. Changes include, but are not limited to death 
of a producer on the contract, producer joining the operation, producer 
exiting the operation, relocation of the dairy operation, transfer of 
shares by sale or other transfer action, or dairy operation 
reconstitutions as provided in Sec.  1430.114.
    (b) Payment of any outstanding premium or administrative fee for a 
participating dairy operation must be paid in full before a transfer of 
shares by sale or any other change in producers on the contract 
originally submitted to FSA may take effect. Otherwise, producer 
changes will not be recognized until the following annual election 
period, and only if at that time all associated premiums and 
administrative fees from any previous calendar year of coverage have 
been paid in full.


Sec.  1430.114  Reconstitutions.

    (a) A participating dairy operation under this subpart may 
reorganize or restructure itself in such a way that the constitution or 
makeup of its operation is reconstituted in another organization 
framework. However, any participating dairy operation that reorganizes 
or restructures after enrolling is subject to a review by FSA to 
determine if the operation was reorganized or restructured for the sole 
purpose of establishing an alternative production history for a 
participating dairy operation or was reorganized or restructured to 
otherwise circumvent any MPP-Dairy provision under this subpart 
(including the tier system for premiums) or otherwise to prevent the 
accomplishment of the purpose of the program.
    (b) A participating dairy operation that FSA determines has 
reorganized solely to establish a new production history or to 
circumvent the determination of applicable fees or premiums based on an 
established production history determined under this subpart will be 
considered to have failed to meet MPP-Dairy requirements and, in 
addition to other sanctions or penalties that may apply, will not be 
eligible for MPP-Dairy payments.
    (c) Under no circumstance, except as approved by the Deputy 
Administrator or provided for in these regulations, will the 
reconstitution or restructure of a participating dairy operation change 
the determined production history for the operation. The Deputy 
Administrator may, however, adjust the production history of a 
participating dairy operation if there is a calculation error or if 
erroneous information has been supplied by or on behalf of the 
participating dairy operation.


Sec.  1430.115  Offsets and withholdings.

    FSA may offset or withhold any amount due FSA under this subpart 
under the provisions of part 1403 of this chapter or any successor 
regulations, or any other authorities that may allow for collection 
action of that sort.


Sec.  1430.116  Assignments.

    Any producer may assign a payment to be made under this subpart in 
accordance with part 1404 of this chapter or successor regulations as 
designated by the Secretary or as allowed by the Deputy Administrator 
in writing.


Sec.  1430.117  Appeals.

    Any producer who is dissatisfied with a determination made pursuant 
to this subpart may request reconsideration or appeal of such 
determination under parts 11 or 780 of this title.


Sec.  1430.118  Misrepresentation and scheme or device.

    (a) In addition to other penalties, sanctions or remedies as may 
apply, all or any part of a payment otherwise due a person or legal 
entity on all participating dairy operations in which the person or 
legal entity has an interest may be withheld or be required to be 
refunded if the person or legal entity fails to comply with the 
provisions of

[[Page 51468]]

this subpart or adopts or participates in adopting a scheme or device 
designed to evade this subpart, or that has the effect of evading this 
part. Such acts may include, but are not limited to:
    (1) Concealing information that affects an registration or coverage 
election;
    (2) Submitting false or erroneous information; or
    (3) Creating a business arrangement using rental agreements or 
other arrangements to conceal the interest of a person or legal entity 
in a dairy operation for the purpose of obtaining MPP-Dairy payments 
the individual or legal entity would otherwise not be eligible to 
receive. Indicators of such business arrangement include, but are not 
limited to the following:
    (i) No milk is produced and commercially marketed by a 
participating dairy operation;
    (ii) The participating dairy operation has no appreciable assets;
    (iii) The only source of capital for the dairy operation is the 
MPP-Dairy payments; or
    (iv) The represented dairy operation exists mainly for the receipt 
of MPP-Dairy payments.
    (b) If the Deputy Administrator determines that a person or legal 
entity has adopted a scheme or device to evade, or that has the purpose 
of evading, the provisions of this subpart, such person or legal entity 
will be ineligible to receive MPP-Dairy payments in the year such 
scheme or device was adopted and the succeeding year.
    (c) A person or legal entity that perpetuates a fraud, commits 
fraud, or participates in equally serious actions for the benefit of 
the person or legal entity, or the benefit of any other person or legal 
entity, in violation of the requirements of this subpart will be 
subject to a 5-year denial of all program benefits. Such other equally 
serious actions may include, but are not limited to:
    (1) Knowingly engaging in, or aiding in the creation of a 
fraudulent document or statement;
    (2) Failing to disclose material information relevant to the 
administration of the provisions of this subpart, or
    (3) Engaging in any other actions of a person or legal entity 
determined by the Deputy Administrator to be designed, or intended to, 
circumvent the provisions of this subpart.
    (d) Program payments and benefits will be denied on pro-rata basis:
    (1) In accordance with the interest held by the person or legal 
entity in any other legal entity or joint operations; and
    (2) To any person or legal entity that is a cash rent tenant on 
land owned or under control of a person or legal entity for which a 
determination of this section has been made.


Sec.  1430.119  Estates, trusts, and minors.

    (a) MPP-Dairy documents executed by producers legally authorized to 
represent estates or trusts will be accepted only if such producers 
furnish evidence of the authority to execute such documents.
    (b) A minor who is otherwise eligible for benefits under this 
subpart is also required to:
    (1) Establish that the right of majority has been conferred on the 
minor by court proceedings or by law;
    (2) Show that a guardian has been appointed to manage the minor's 
property and the applicable MPP-Dairy documents are executed by the 
guardian; or
    (3) Furnish a bond under which the surety guarantees any loss 
incurred for which the minor would be liable had the minor been an 
adult.


Sec.  1430.120  Death, incompetency, or disappearance.

    In the case of death, incompetency, disappearance or dissolution of 
a producer that is eligible to receive benefits under this subpart, 
such persons as are specified in part 707 of this title may receive 
such benefits, as determined appropriate by FSA.


Sec.  1430.121  Maintenance and inspection of records.

    (a) Participating dairy operations are required to maintain 
accurate records and accounts that will document that they meet all 
eligibility requirements specified in this subpart, as may be requested 
by CCC or FSA. Such records and accounts are required to be retained 
for 3 years after the date of MPP-Dairy payments to the participating 
dairy operation. Destruction of the records 3 years after the date of 
payment will be at the risk of the party undertaking the destruction.
    (b) A participating dairy operation is required to allow authorized 
representatives of CCC, the Secretary, or the Comptroller General of 
the United States to have access to the premises of the dairy operation 
in order to inspect the herd of cattle, examine, and make copies of the 
books, records, and accounts, and other written data as specified in 
paragraph (a) of this section.
    (c) Any producer or dairy operation that does not comply with the 
provisions of paragraphs (a) or (b) of this section, or that otherwise 
receives a payment for which it is not eligible, is liable for that 
payment and is required to repay it to FSA, with interest to run from 
the date of disbursement.


Sec.  1430.122  Refunds; joint and several liability.

    (a) Any legal entity, including joint operations, joint ventures 
and partnerships, and any member of a legal entity determined to have 
knowingly participated in a scheme or device, or other such equally 
serious actions to evade, or that has the purpose of evading the 
provisions of this part, will be jointly and severally liable for any 
amounts determined to be payable as the result of the scheme or device, 
or other such equally serious actions, including amounts necessary to 
recover the payments.
    (b) Any person or legal entity that cooperates in the enforcement 
of the provisions of this part may be partially or fully released from 
liability, as determined by the Executive Vice President, CCC.
    (c) The provisions of this section will be applicable in addition 
to any liability that arises under a criminal or civil statute, 
regulation, or provision of law.


Sec.  1430.123  Violations of highly erodible and wetland conservation 
provisions.

    The provisions of part 12 of this title apply to this part.


Sec.  1430.124  Violations regarding controlled substances.

    The provisions of Sec.  718.6 of this title apply to this part.

0
3. Revise 7 CFR part 1430, subpart C to read as follows:
Subpart C--Dairy Product Donation Program
Sec.
1430.300 Administration, purpose, and funding.
1430.301 Definitions.
1430.302 Commencement and termination of DPDP purchases.
1430.303 DPDP purchases.
1430.304 Distribution of DPDP purchased products.

Subpart C--Dairy Product Donation Program


Sec.  1430.300  Administration, purpose, and funding.

    (a) The regulations in this subpart apply for the Dairy Product 
Donation Program (DPDP). DPDP is authorized by section 1431 of the 
Agricultural Act of 2014 (Pub. L. 113-79, 7 U.S.C. 9071).
    (b) DPDP is designed to address low dairy producer margins, through 
periodic purchases of dairy products, as specified in this subpart. 
Dairy products purchased for DPDP will be used to

[[Page 51469]]

provide nutritional assistance to members of low-income groups.
    (c) The purchase aspect of DPDP will be operated for the Secretary 
of Agriculture and for the Commodity Credit Corporation by the Farm 
Service Agency (FSA) under the direction of the FSA's Deputy 
Administrator for Commodity Operations. Purchases are subject to the 
terms and conditions in FSA's purchase announcements. The distribution 
of products purchased through DPDP will be operated for the Secretary 
under the direction of the Food and Nutrition Service.


Sec.  1430.301  Definitions.

    For purposes of this subpart, the following terms and acronyms 
apply:
    2014 Farm Bill means the Agricultural Act of 2014 (Pub. L. No. 113-
79).
    Actual dairy production margin is as defined in subpart A of this 
part.
    AMS means the Agricultural Marketing Service of the USDA.
    CCC means the Commodity Credit Corporation.
    Deputy Administrator means the Farm Service Agency Deputy 
Administrator for Commodity Operations.
    Distribution means the provision of products purchased through DPDP 
to low-income groups through FNS food distribution programs in 
accordance with those program regulations and 7 CFR part 250.
    DPDP means the Dairy Product Donation Program.
    FNS means the Food and Nutrition Service of the USDA.
    FSA means the Farm Service Agency of the USDA.
    FSA Administrator means Administrator of the Farm Service Agency, 
USDA.
    Hundredweight or cwt means 100 pounds.
    MPP-Dairy means the Margin Protection Program for Dairy provided 
for in subpart A of this part.
    NDM means non-fat dry milk.
    Recipient agencies means agencies or organizations that are 
eligible to receive donated product for distribution under this 
subpart.
    USDA means the United States Department of Agriculture.


Sec.  1430.302  Commencement and termination of DPDP purchases.

    (a) DPDP purchases commence only if approved by the FSA 
Administrator under the provisions of this subpart. The FSA 
Administrator will approve DPDP purchases only if the actual dairy 
production margin has been $4 or less per cwt for each of the preceding 
2 months. The actual dairy production margin will be calculated as 
specified in Sec.  1430.110. The following chart shows an example of 
the timing for the determination of DPDP purchases.

                       DPDP Purchase Determination Example Based on Dairy Production Margins and 3-Month Maximum for Purchases \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               If both margins below $4
        2 Consecutive months         Calculate margin for 2        per cwt in the 2             3-Month maximum        If either margin above $4 per cwt
                                     consecutive months \2\       consecutive months             consideration            in the 2 consecutive months
--------------------------------------------------------------------------------------------------------------------------------------------------------
January and February...............  March.................  Dairy product purchases \3\  1st month of purchases.....  No purchases.
                                                              begin in April.
February and March.................  April.................  Dairy product purchases \3\  2nd consecutive month of     No purchases.
                                                              begin in May.                purchases.
March and April....................  May...................  Dairy product purchases \3\  3rd consecutive month of     No purchases.
                                                              begin in June.               purchases.
April and May......................  June \4\..............  No purchases; terminated     3-month maximum reached      No purchases.
                                                              after 3 consecutive months.  (1st month off).
May and June.......................  July..................  No purchases; terminated     3-month maximum reached      No purchases.
                                                              after 3 consecutive months.  (2nd month off).
June and July......................  August................  No purchases; terminated     3-month maximum reached      No purchases.
                                                              after 3 consecutive months.  (3rd month off).
July and August....................  September.............  Dairy product purchases \3\  1st month of purchases.....  No purchases.
                                                              begin in October.
August and September...............  October...............  Dairy product purchases \3\  2nd consecutive month of     No purchases.
                                                              begin in November.           purchases.
September and October..............  November..............  Dairy product purchases \3\  3rd consecutive month of     No purchases.
                                                              begin in December.           purchases.
October and November...............  December..............  No purchases; terminated     3-month maximum reached      No purchases.
                                                              after 3 consecutive months.  (1st month off).
November and December..............  January...............  No purchases; terminated     3-month maximum reached      No purchases
                                                              after 3 consecutive months.  (1st month off).
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ This example assumes that purchases begin in January. In reality, DPDP can--depending on prices and margin triggers--begin on September 1, 2014,
  which is the start of MPP-Dairy.
\2\ The full month data for a given month is available at the end of the following month. For example, January data are not available until the end of
  February.
\2\ Purchases cannot begin unless domestic cheddar cheese or nonfat dry milk prices are at certain differentials relative to world prices.
\3\ In the example, June is the 3rd month of consevutive purchases. June would not be calculated as a potential trigger month, but it is shown on the
  chart to clearly show the concept of 3 months on and 3 months off for purchases. If purchases are taking place during a month, that month cannot be
  used as a trigger month for a future purchase period.

    (b) DPDP purchases terminate and are not reinstated until the 
condition specified in paragraph (a) of this section is again met, 
whenever any one of the following occurs:
    (1) If purchases were made for the preceding 3 months, even if the 
actual dairy production margin remains $4 or less per cwt of milk.
    (2) If the actual dairy production margin has been greater than $4 
per cwt of milk for the immediately preceding month.
    (3) If the actual dairy production margin has been $4 or less, but 
more than $3, per cwt for the immediately preceding month and during 
the same month --
    (i) The price in the United States for cheddar cheese was more than 
5 percent above the world price, or
    (ii) The price in the United States for non-fat dry milk (NDM) was 
more than

[[Page 51470]]

5 percent above the world price of skim milk powder.
    (4) If the actual dairy production margin has been $3 or less per 
cwt of milk for the immediately preceding month and during the same 
month --
    (i) The price in the United States for cheddar cheese was more than 
7 percent above the world price; or
    (ii) The price in the United States for NDM was more than 7 percent 
above the world price of skim milk powder.
    (c) Purchases will terminate beginning with the first day of any 
month that does not qualify for DPDP purchases.
    (d) For calculations under paragraphs (b)(3) and (4) of this 
section, the FSA Administrator may use data from a single or multiple 
locales or markets, including weighted averages, in consultation with 
AMS or other USDA agencies.


Sec.  1430.303  DPDP purchases.

    (a) DPDP purchases will be made only for those months that the FSA 
Administrator has determined meet all the requirements specified in 
Sec.  1430.302. The purchases are subject to DPDP requirements 
including price and quantity restrictions specified in this subpart.
    (b) The Secretary has the authority to determine purchase and 
distribution methods for dairy product purchases and distribution. 
Unless otherwise determined by the Secretary, this authority is 
delegated to the Deputy Administrator in consultation with FNS.
    (c) FSA and FNS will determine the types and quantities of products 
that will be purchased, in consultation with public or private 
nonprofit organizations and State and local agencies eligible to 
receive such products.
    (d) The FSA Administrator will determine the quantity of purchases 
to be made for a qualifying month and will consider the results of any 
consultations in determining the quantity to be purchased. In making 
the determination, the FSA Administrator will also take into account a 
number of factors, including, but not limited to, dairy product market 
conditions, logistical considerations involved in the efficient and 
immediate distribution of the dairy products, the potential effect on 
markets and margins, time constraints of DPDP, and the cost 
effectiveness of the purchases. Approved quantities for a month will 
not exceed the amount of product that may be effectively distributed 
without waste.
    (e) Purchases may be approved for a qualifying month to the extent 
that the purchase by FSA can reasonably be expected to be completed in 
that calendar month and the products delivered to recipient agencies 
within 90 days.
    (f) DPDP purchases cannot be stored by or for CCC, and CCC cannot 
incur storage costs on behalf of recipient agencies for the dairy 
products.
    (g) The purchase price of products will be the prevailing market 
price for like dairy products for private buyers as determined by the 
Deputy Administrator. That price may be, if approved by the Deputy 
Administrator, the price determined by the normal procurement methods 
used to procure foods for FNS domestic food assistance programs, if the 
dairy products are obtained that way.


Sec.  1430.304  Distribution of DPDP purchased products.

    (a) Purchased products will be distributed to private and public 
nonprofit organizations eligible to receive donated foods for 
distribution to low-income groups through FNS' food distribution 
programs as specified in FNS program regulations and the requirements 
in 7 CFR part 250.
    (b) Public and private nonprofit organizations receiving donated 
dairy products under this section will be responsible for the proper 
handling and distribution of such products in accordance with FNS 
program regulations, 7 CFR part 250, and FNS guidance and instructions.
    (c) A private or nonprofit organization agency receiving donated 
products under this section which improperly distributes or uses such 
product or causes loss of or damage to such product, will be subject to 
recovery of losses or other corrective action in accordance with FNS 
program regulations, 7 CFR part 250.

Subparts D and E--[Removed]

0
4. Remove subparts D and E.

    Signed on August 20, 2014.
Juan M. Garcia,
Administrator, Farm Service Agency, and Executive Vice President, 
Commodity Credit Corporation.
[FR Doc. 2014-20567 Filed 8-28-14; 8:45 am]
BILLING CODE 3410-05-P