[Federal Register Volume 81, Number 71 (Wednesday, April 13, 2016)]
[Rules and Regulations]
[Pages 21699-21706]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08482]



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  Federal Register / Vol. 81, No. 71 / Wednesday, April 13, 2016 / 
Rules and Regulations  

[[Page 21699]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1430

RIN 0560-AI36


Margin Protection Program for Dairy

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

ACTION: Final rule.

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SUMMARY: This rule amends the regulations for the Margin Protection 
Program for Dairy (MPP-Dairy) to allow dairy operations to update their 
production history when a son, daughter, grandchild, or spouse of a 
child or grandchild of a current producer participating in the MPP-
Dairy program joins the operation. In addition, this rule provides for 
a later due date for the payment of the entire premium and clarifies 
that dairy operations that purchase buy-up coverage on less than 90 
percent of their production history will also receive catastrophic 
coverage on the balance, up to 90 percent of the production history. 
The rule also makes corrections and clarifications.

DATES: This rule is effective April 13, 2016.

FOR FURTHER INFORMATION CONTACT: For MPP-Dairy: Danielle Cooke; 
telephone: (202) 720-1919. Persons with disabilities who require 
alternative means for communication should contact the USDA Target 
Center at (202) 720-2600.

SUPPLEMENTARY INFORMATION: 

Background

    On August 29, 2014, the Commodity Credit Corporation (CCC) and Farm 
Service Agency (FSA) published a final rule titled ``Margin Protection 
Program for Dairy and Dairy Product Donation Program'' (79 FR 51453-
51470). The final rule implemented MPP-Dairy and DPDP as authorized in 
the Agricultural Act of 2014 (the 2014 Farm Bill, Pub. L. 113-79). FSA 
operates both programs using CCC funds. Following the August 2014 final 
rule, in response to public comments on the final rule, FSA and CCC 
published a comment period extension on October 30, 2014, (79 FR 64503) 
for the final rule; comments were accepted through December 15, 2014. 
This rule makes regulatory changes to MPP-Dairy in response to the 
public comments and also makes minor corrections and clarifications. 
Specifically, this rule:
     Allows dairy operations to update their production history 
once during the term of the contract (through December 31, 2018) to 
accommodate intergenerational transfers where a son, daughter, 
grandchild, or spouse of a child or grandchild joins the dairy 
operation;
     Clarifies that dairy operations that purchase buy-up 
coverage on less than 90 percent of their production history will also 
receive catastrophic coverage on the balance, up to 90 percent of the 
production history;
     Sets a later final premium payment due date to allow 
greater flexibility for dairy operations in making payments; and
     Includes technical amendments that make minor corrections 
and clarify the effects of failure to pay administrative or premium 
fees.
    Subtitle D, sections 1401-1410, of the 2014 Farm Bill (7 U.S.C. 
9051-9060) authorizes MPP-Dairy to provide 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 dollar amount 
selected by the producer. Producers are eligible for catastrophic level 
margin protection (based on a $4 margin and 90 percent production 
history coverage) for their dairy operations by paying an 
administrative fee, and are also able to purchase greater coverage (up 
to $8 margin on 25 to 90 percent of production history) for an 
additional premium.
    A production history is established when a dairy operation first 
registers to participate in MPP-Dairy. The production history is based 
on the operation's production from 2011 through 2013, as specified in 
the 2014 Farm Bill. For entirely new operations or operations with less 
than a full year of production history prior to the 2014 Farm Bill, it 
is based on the number of cows and the national average production per 
cow (the ``national rolling herd average data'') or an extrapolation 
from the operation's actual production data. As specified in section 
1405 of the 2014 Farm Bill, once an operation has bought MPP-Dairy 
coverage, FSA will only update the production amount that can be 
covered to reflect annual changes in the national average milk 
production. (For example, if national milk production increases 5 
percent in a year, operations can buy MPP-Dairy coverage on up to 5 
percent more production the following year, up to 90 percent of 
production). Section 1410 of the 2014 Farm Bill also specifically 
requires that the Secretary promulgate regulations that prohibit a 
dairy producer from reconstituting an operation for the purpose of 
receiving margin protection payments. The intent of these provisions is 
to ensure that the risk management coverage does not encourage excess 
production that could drive down the price of milk, which would be 
counterproductive for a price-based risk management program.
    In the August 29, 2014, final rule, FSA requested comments about 
the establishment of additional production history and any limitations 
for such a production increase under MPP-Dairy since that final rule 
only addressed additional production history for the annual adjustment 
based on an increase to the national average milk production. The final 
rule did not address the establishment of additional production history 
for a participating dairy operation in specific instances, such as when 
a descendent of the current producer joins a participating dairy 
operation.
    The ability to transfer the dairy business from one generation to 
the next has become increasingly difficult in the past decade due to 
increased market volatility and the large capital investment required 
to start a dairy operation. While the August 29, 2014, regulation does 
allow for new covered production for entirely new operations, many new 
dairy farmers get started by joining their family's existing dairy 
operation, due to the capital costs involved. Under the August 29, 
2014, rule, if an existing family-owned dairy operation with MPP-Dairy 
coverage added more cows to support a family

[[Page 21700]]

member or members joining the business, they would not be able to buy 
MPP-Dairy coverage on that additional production.

Comments and Responses

    In response to the August 29, 2014, final rule, FSA received 38 
comments. Comments were submitted by individuals, insurance providers, 
industry groups (including coalitions, associations, farm credit 
organizations, dairy cooperatives, and milk marketing companies), and a 
State Department of Agriculture.
    The preamble to the August 29, 2014, final rule asked for public 
input on three specific questions about intergenerational transfers and 
family members, as well as general comments on other aspects of MPP-
Dairy. All of the comments received on intergenerational transfers 
supported provisions to allow additional production history under 
certain circumstances, with various suggestions for what eligibility 
requirements should be. A summary of the input received on three 
questions, and our responses, is provided below, followed by a 
discussion of other general comments received.

Do the provisions in the rule regarding transfers of production history 
hinder intergenerational transfers of dairy operations? If so, how?

    Comment: Yes, the provisions in the final rule hinder 
intergenerational transfers. Under current MPP-Dairy rules, once the 
production history for a dairy operation under MPP-Dairy is 
established, other than the annual production increase, the production 
history cannot not be adjusted to support the income needs of two or 
more families (or one extended family) in instances when a dairy farmer 
wants to bring on a son or daughter or spouse of a son or daughter and 
add more cows to the herd.
    Response: We agree. The average age of dairy farmers in the United 
States is 62 years old; allowing intergenerational transfers of 
production history will facilitate the transfer of dairy operations to 
the next generation, which is particularly important for small family 
operations. Therefore, this rule will amend production history 
requirements to add Sec.  1430.105(g) to specify that a dairy operation 
may add additional production history for an intergenerational transfer 
when a lineal descendant, or spouse thereof, joins a participating 
dairy operation. In addition, this rule adds a definition of 
``intergenerational transfer'' to Sec.  1430.102. Only sons, daughters, 
grandchildren, and their spouses are included in the definition. 
Intergenerational transfers to more distant non-lineal relatives such 
as cousins, nieces, or nephews will not result in eligibility for 
additional production history, nor will transfers to siblings.

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?

    Comment: Suggestions included:
     Allow a one-time reorganization of the ownership structure 
to allow for children, grandchildren, or their spouses joining the 
farm, but specify that the additional member(s) must meet certain 
requirements, such as minimum labor contribution and equity ownership 
standards; significant equity ownership should be at least 10 percent 
individually or at least 25 percent collectively, if multiple new 
members are joining the dairy operation at the same time;
     Require that the farm provide adequate supporting 
documentation of a legitimate restructure within a family operation 
that includes verifiable financial investments proportionate to the 
income needs of the new farmer and the size of the dairy operation;
     Restrict it to a lineal descendant or their spouse, not a 
distant relative;
     Determine additional production history using similar 
provisions for establishing production history for new dairy operations 
in Sec.  1430.105(b) where the additional production quantity would be 
estimated based on the number of additional cows added to the herd 
multiplied by the national ``rolling herd average'' production data 
published by the Secretary; and
     To ensure all production from the additional member is 
protected, either allow an operation's base to be a rolling average of 
the last 3 years of production or allow 50 percent of production above 
the base, including the adjustment for the average national increase to 
be included with the base calculation during times when MPP-Dairy 
activates.
    Response: This rule amends production history requirements to allow 
for a one-time restructuring of currently established production 
history for a dairy operation when a son, daughter, grandchild, or 
spouse of child or grandchild of a current operation member joins an 
MPP-Dairy participating operation, to accommodate the transfer of a 
dairy from one generation to a subsequent generation. The increase to 
the production history will be based on how many cows are being added 
and the national rolling herd average data (national average annual 
production per cow) in effect at the time of the intergenerational 
transfer. The operation must certify to equity and labor contributions 
by the new member(s) as well, as specified in this rule. The 
certification must show that the new member(s) has a significant equity 
ownership in the participating MPP-Dairy operation; ``significant 
equity ownership'' will be at levels determined by the Deputy 
Administrator and announced on the FSA Web site (www.fsa.usda.gov). The 
certification must also show that each new member is working full time 
at the dairy, or transitioning to working full time at the dairy. We 
considered an income-based standard, but that would not be consistent 
with the provisions in the regulation that apply to the production 
history for other existing and new operations, which use past 
production and size of herd to determine production history.
    The participating dairy operation will have the option for coverage 
of the additional production history to begin with either the next 
consecutive 2-month period following notification to FSA, or January 1 
following notification.
    For cow purchases made by the new members between January 1, 2016, 
and June 30, 2016, the operation must notify FSA during the coverage 
year 2017 registration and annual coverage election period that begins 
July 1, 2016. For cow purchases made on or after July 1, 2016, 
notification to FSA must be made within 60 days of purchasing the 
additional cows.
    Participating dairy operations in which an intergenerational 
transfer occurred in calendar year 2014 or 2015 will have an 
opportunity to increase the dairy operation's production history during 
the 2017 registration period. The 2014 and 2015 intergenerational 
transfers will have to meet the same requirements specified for all 
intergenerational transfers, except for the 60-day notification period 
applicable only to the purchase of additional cows made on or after 
July 1, 2016. The opportunity to increase production history based on 
an intergenerational transfer that occurred in 2014 or 2015 will only 
be available during the registration and annual coverage election 
period that begins July 1, 2016. This provision only applies to an 
increase in production history for 2016 and subsequent year coverage. 
These dairy operations will have the option for their coverage to begin 
on either the consecutive 2-month period

[[Page 21701]]

following FSA notification or January 1, 2017. There will be no 
retroactive payments made related to 2014 or 2015 intergenerational 
transfers.
    Premiums for additional production coverage will be due at the same 
time as the premium on existing production, if the notification is made 
between January 1 and August 31, prior to the September 1 premium 
deadline, or immediately if notification is made during September 1 to 
December 31.

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?

    Comments: Suggestions included:
     Yes, there should be a cap on the additional production 
quantity resulting from the intergenerational transfer in order to 
discourage gaming of the system;
     A production quantity capped at 4 million pounds is 
consistent with other limitations of the same production quantity 
specified in the 2014 Farm Bill with respect to the 2-tier premium rate 
schedule that increases premium rates for production history in excess 
of 4 million pounds;
     For the production increase, use a percentage based on the 
farm's production history and the total number of members receiving 
income from the farm, compared before and after the new generation was 
included;
     The production allowance increase should be proportionate 
to the income needs of the new farmer and not proportional to the size 
of the dairy;
     Up to 4 million pounds of new production history can be 
added to the established production history for a member joining the 
dairy operation with a pro-rated accommodation for growth beyond that 
limit.
    Response: The suggested 4 million pound cap is consistent with the 
intent of the 2014 Farm Bill to support modest-sized family farms, as 
demonstrated in the 2-tier premium structure where the discounted first 
tier is set at 4 million pounds. Therefore, this rule caps the 
production history increase for an intergenerational transfer at a 
maximum of 4 million pounds.

Other Issues Raised in Public Comments

    Comment: Producers who bought coverage above the minimum 
catastrophic level on some production should receive catastrophic level 
coverage on all production history up to 90 percent. In the current 
regulations, producers must choose either a buy-up coverage or 
catastrophic coverage, but not both. Providing catastrophic level 
coverage to all participants on 90 percent of production is a 
reasonable interpretation of the 2014 Farm Bill intent.
    Response: After careful analysis, we agree, and are changing the 
regulations to allow participants who purchase buy-up level coverage on 
less than 90 percent of their production history to receive in addition 
catastrophic level coverage on the balance, up to 90 percent of their 
production history. The total coverage cannot exceed the statutory 
maximum of 90 percent of production history. We believe that MPP-Dairy 
will be improved by allowing operations that cover from 25 percent to 
85 percent of their production history at a buy-up coverage level from 
$4.50 to $8.00 per cwt, to also be covered for the balance of their 
established production history at the $4.00 catastrophic level. For 
example, if an operation purchased buy-up coverage at the 50 percent 
level, then that operation will receive catastrophic level coverage for 
the next 40 percent resulting in total coverage of 90 percent. This 
provision would not affect an operation purchasing buy-up coverage at 
the 90 percent level since it would already be covered at the maximum 
statutory percentage. This change will allow producers to better meet 
their risk management needs and will not discourage producers from 
electing buy-up coverage with greater protection. Therefore, this rule 
revises Sec.  1430.108 to make the changes to how payments will be 
calculated. The change will provide producers with more risk management 
options and may increase producer participation in MPP-Dairy. 
Implementation of this change will begin with the 2016 coverage year. 
Since MPP-Dairy's inception, margin levels have been consistently above 
the $4.00 catastrophic level; so, implementing this policy will have no 
immediate impact on current MPP-Dairy participants.
    Comment: Clarify inconsistencies in the premium payment schedule in 
Sec.  1430.107(g)(2), which requires 50 percent of the total premium 
payment by February 1 of the coverage year and the balance by June 1; 
and the Fact Sheet and forms that say 25 percent by February 1 of the 
coverage year and the balance by the June 1. The Fact Sheet and forms 
for MPP Dairy are not consistent with the rule.
    Premium payment options should be allowed on a monthly or bi-
monthly basis rather than annually or semi-annually. A premium payment 
option should allow milk marketing companies to collect and send 
premium payments to FSA on behalf of the dairy operation by way of milk 
check deductions of premiums on a monthly basis by the dairy 
operation's milk marketing company.
    Response: We agree that MPP-Dairy would be improved by providing 
additional premium payment options. Therefore, effective with the 2016 
coverage year, rather than require the balance of the premium 
collection in two payment installments by June 1 of the coverage year, 
the rule will change Sec.  1430.107 to require 100 percent of the 
payment by September 1 of the coverage year. This would allow dairy 
producers to make arrangements with their milk marketing companies to 
prorate and deduct their premium payment from their monthly milk check 
and to send the CCC payments to FSA on behalf of the producer. We will 
correct the Fact Sheet and forms as noted in the comment when this rule 
is published.
    This rule makes conforming changes in Sec.  1430.107(g)(2), (h), 
(i), and (j). For example, due to the split premiums provision in the 
August 29, 2014, regulation, an option had been included to deduct 
premium balances from MPP-Dairy payments. Now that the premium payment 
is due in a single payment, that option is being removed from Sec.  
1430.107(g)(2), (h), (i).
    Comment: Dairy producers should be able to participate in both the 
Livestock Gross Margin for Dairy Producers (LGM-Dairy) Program and MPP-
Dairy. They should be able to buy LGM-Dairy coverage on milk not 
covered under MPP-Dairy up to 100 percent of their dairy operation's 
total production.
    Revise the rules to allow dairy operations to choose annually 
whether or not to participate in LGM-Dairy or MPP-Dairy and not require 
mandatory participation in MPP-Dairy through 2018 to allow flexibility 
to move back and forth from LGM-Dairy and MPP-Dairy.
    Response: The 2014 Farm Bill specifies that a dairy operation may 
participate in either LGM-Dairy or MPP-Dairy, but not both. Therefore, 
we do not have statutory authority to make either of these changes to 
the regulations. Additionally, section 1404 of the 2014 Farm Bill 
specifies that the MPP-Dairy administrative fee must be paid annually 
by the participant; so, clearly the intent of the legislation is that 
participants continue participation for the duration of MPP-Dairy 
(because

[[Page 21702]]

there would be no need for an ``annual'' payment for a policy that only 
lasted 1 year). Therefore, no change is being made in response to these 
comments.
    Comments: Make an adjustment to increase the overall production 
history established for a dairy operation to allow for greater 
protection and the expansion or growth of the operation. New production 
rules should allow for full recognition of growth up to 4 million 
pounds and then a base that would allow some pro-rated accommodation 
for growth beyond that limit. Recognize new milk marketings for farms 
in transition as new operations and allow beginning farmers to adjust 
production history when purchasing an existing dairy operation. Allow 
production adjustments for disaster counties.
    Response: The 2014 Farm Bill clearly limits increases in production 
history to annual adjustments to reflect any increase in the national 
average milk production per cow, with limited authority to update 
production history for changes in ownership structure. The 2014 Farm 
Bill does not provide the authority to add production history for other 
reasons, including business expansions or declared disaster counties, 
and specifically prohibits reconstitutions for the purpose of 
increasing MPP-Dairy payments. The new provisions in this rule for 
adjustments to production history for intergenerational transfers is 
based on the authority of section 1401(5)(B) of the 2014 Farm Bill that 
allows for the Secretary to determine additional ownership structures 
to be covered by the definition of a dairy operation, in this case the 
addition of a son, daughter, grandchild, or spouse of a child or 
grandchild to the dairy operation. Since the 2014 Farm Bill does not 
authorize any other reasons for adjustments to the established 
production history for the dairy operation, no change is being made in 
response to these comments.
    Comments: For the production history covered under MPP-Dairy, allow 
extrapolation for a full 12 months of production as is done for new 
operations for those producers who missed some production months in 
2013 during the period between of January 2, 2013 through February 7, 
2014.
    Response: Producers that marketed milk from January 2, 2013, 
through February 7, 2014 (date of 2014 Farm Bill enactment) do not meet 
the legislative definition of a new dairy operation because they would 
have been marketing milk for more than 12 months; therefore, the date 
of the 2014 Farm Bill enactment was used as a benchmark to establish 
the 12-month period from which to determine new operations. Defining 
the 12-month period from any other date would exclude more dairy 
operations from eligibility. Therefore, no change is being made in 
response to this comment.
    Comment: MPP-Dairy payments should be made on a monthly or bi-
monthly basis rather than on a consecutive 2-month period when a 
payment is triggered.
    Response: The 2014 Farm Bill specifies the schedule for MPP-Dairy 
payments. We have no authority to implement a different schedule. 
Therefore, no change is being made in response to this comment.
    Comment: The premium discount applicable to the first 4 million 
pounds of production history in 2014 and 2015 should continue for the 
duration of MPP-Dairy. Premiums would continue to rise to the point 
that they are unaffordable for farmers because there is no margin 
trigger to reduce production because of price losses due to over-
production.
    Response: The annual premium rates listed in the regulation are 
specified in the 2014 Farm Bill. FSA has no authority to set different 
premium rates other than those in the 2014 Farm Bill. Therefore, no 
change is being made in response to these comments.
    Comments: For coverage under MPP-Dairy, documented production over 
the national average of production per cow should be insured.
    Organic farms should have more coverage because of higher overall 
feed costs that make their margins lower than conventional farms.
    Response: The 2014 Farm Bill does not authorize additional coverage 
for production over the national average or different coverage for 
organic farmers. Therefore, no change is being made in response to 
these comments.
    Comment: For the cost of production in relation to feed costs and 
milk prices, the 2014 Farm Bill should have been similar to that of the 
Federal Milk Marketing Improvement Act of 2011 (S. 1640, 112th 
Congress) to provide adequate prices to farmers. MPP-Dairy did not 
adequately cover the farmers cost of production and is inadequate 
protection on feed cost. Feed prices are higher on the west coast and 
prices for specific feed ingredients used in calculating the margin 
have not dropped much in that region of the United States.
    Response: Congress did not enact the bill titled ``Federal Milk 
Marketing Improvement Act of 2011.'' We are required to implement MPP-
Dairy as specified in the 2014 Farm Bill. The 2014 Farm Bill specified 
that the margin is to be calculated using a national average feed cost 
and the national all-milk price. Therefore, no change is being made in 
response to these comments.
    Comment: The affiliation test for what constitutes a new dairy 
operation is impractical. Producers that have collectively more than a 
50 percent ownership in another dairy operation should be able to get 
coverage for a new operation, if they can demonstrate that the 
operation is separate and distinct from the existing dairy operation, 
but the new and existing dairy operation would be restricted from 
selling or exiting the dairy business.
    Response: Section 1410 of the 2014 Farm Bill specifically states 
that the regulations must prohibit producers from dairy operation 
reconstitutions for the purposes of receiving MPP-Dairy payments. The 
provision in Sec.  1430.103 that a new dairy operation will be treated 
as an affiliated dairy operation if the producers in the new operation 
own 50 percent of an existing dairy operation is consistent with the 
farm reconstitution provisions in 7 CFR part 718, which are intended to 
prohibit reconstitutions for the purposes of increasing other CCC and 
FSA program payments. FSA believes the provisions to accommodate new 
dairy operations as specified in the current rule are within the 2014 
Farm Bill authority, and are consistent with how reconstitutions and 
base acres are handled in the regulations for other CCC and FSA 
programs. The provisions in this rule for intergenerational transfers 
are intended to address expansions of existing dairy operations to add 
additional family members within the same operation. Also, we have no 
authority to prevent any dairy operation from selling or shutting down. 
No change is made in response to this comment.
    Comment: Are MPP-Dairy funds sufficient to reimburse farmers in the 
event of a shortfall? Will funds be invested within insurance 
companies?
    Response: FSA administers MPP-Dairy using CCC funds and not through 
private insurance companies; therefore, FSA may use CCC borrowing 
authority to replenish funds as necessary. Private insurers are not 
involved in MPP-Dairy.

Corrections and Clarifications

    This final rule revises Sec.  1430.104(b)(1), to correct wording 
that allows a new dairy operation to elect coverage that begins the 
next consecutive 2-month period following the submission date of the 
registration and coverage election rather than the approval date of the 
MPP-Dairy coverage application.

[[Page 21703]]

    This final rule also revises Sec. Sec.  1430.106(c), 
1430.109(a)(2), and 1430.112(b) to clarify the effects of failure to 
pay the administrative or premium fees. Failure to pay the 
administrative fee timely will result in loss of coverage for the 
applicable calendar year; however, coverage for the applicable calendar 
year may be reinstated with the next consecutive 2-month period if paid 
late and the appropriate CCC form is submitted to FSA. In the case of 
unpaid premiums, coverage will be reduced to the catastrophic level and 
no payment will be earned at the buy-up level for the rest of the year. 
This rule also amends Sec.  1430.112(b) to correct the cross reference 
from Sec.  1430.108 to Sec.  1430.109.
    This final rule also revises Sec. Sec.  1430.106(a) and 1430.107(l) 
to correct that fees should be made payable to CCC rather than to FSA.
    This rule amends Sec. Sec.  1430.107 and 1430.111 to remove 
provisions that only applied to the 2014 and 2015 coverage years.

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.

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. Therefore, 
to continue 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.

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 
not significant under Executive Order 12866, ``Regulatory Planning and 
Review,'' and therefore, OMB has not reviewed this rule.

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, 
Pub. L. 104-121), generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to the notice and comment 
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 this rule from notice and comment rulemaking 
under 5 U.S.C. 553 with respect to MPP-Dairy and therefore, FSA 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 
discretionary feature of the rule include when operations can increase 
production history and what coverage they will receive. These 
discretionary provisions are purely administrative and would not alter 
any environmental impacts resulting from implementing the mandatory 
program. 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 have a retroactive effect that 
will allow a production history increase for dairy operations that had 
an intergenerational transfer occur in calendar year 2014 or 2015. 
However, there will not be any retroactive payments for the production 
history increase. 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

[[Page 21704]]

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 not a major rule under SBREFA. Therefore, FSA is not 
required to delay the effective date for 60 days from the date of 
publication to allow for Congressional review. Therefore, the rule is 
effective when published in the Federal Register, as discussed above.

Federal Assistance Programs

    The title and number of the Federal Domestic Assistance Program 
found in the Catalog of Federal Domestic Assistance to which this rule 
applies are:
    10. 116--Margin Protection Program-Dairy

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 1430

    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 citation for part 1430 continues to read as follows:

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


0
2. In Sec.  1430.102, add in alphabetical order a definition for 
``intergenerational transfer'' to read as follows:


Sec.  1430.102  Definitions.

* * * * *
    Intergenerational transfer means the one-time establishment of 
additional production history for a participating dairy operation when 
a lineal descendant, who is a son, daughter, grandchild, or spouse of a 
child or grandchild of a current member joins a participating dairy 
operation.
* * * * *


Sec.  1430.104  [Amended]

0
3. Amend Sec.  1430.104 as follows:
0
a. In paragraph (b)(1), remove the word ``approval'' and add the word 
``submission'' in its place;
0
b. In paragraph (c)(1), remove the words ``, except for 2014, where the 
election and coverage year will be the same'',
0
c. In paragraph (e) introductory text, remove the word ``percentages'' 
and add the word ``percentage'' in its place, and
0
d. In paragraph (e)(2), add the words ``and submits the appropriate CCC 
forms'' to the end after the word ``year''.

0
4. Amend Sec.  1430.105 by revising paragraph (d) and add paragraph (g) 
to read as follows:


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

* * * * *
    (d) Once the production history of a participating dairy operation 
is established as specified in 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, except as provided by paragraph (g) of this 
section.
* * * * *
    (g) The established production history of a participating dairy 
operation may be adjusted upward once during the term of the contract 
for an intergenerational transfer based on the purchase of additional 
cows by the new family member(s). The increase in the established 
production history of the participating dairy operation will be 
determined on the basis of the national rolling herd average data for 
the current year in effect at the time of the intergenerational 
transfer and the quantity of the production history increase will be 
limited to an amount not more than 4 million pounds. The additional 
quantity of production history will receive coverage at the same 
elected coverage threshold and coverage percentage in effect for the 
participating dairy operation at the time the production history 
increase takes effect. Intergenerational transfers will not be allowed 
if the participating dairy operation's current annual production and 
the increase in herd size by the new member(s) is less than the 
operation's established production history.
    (1) The dairy operation must notify FSA, using the appropriate CCC 
form(s), of the intergenerational transfer within 60 days of the 
purchase of the cows, except that for purchases made for 
intergenerational transfers occurring

[[Page 21705]]

between January 1, 2016, and June 30, 2016, the dairy operation must 
notify FSA during the registration and annual coverage election period 
for coverage year 2017, established by the Deputy Administrator. The 
operation has the option of the additional production history taking 
effect beginning either with the consecutive 2-month period following 
notification, or the following January 1. If the additional production 
history takes effect between January 1 and August 31, the premium is 
due September 1, as specified in Sec.  1430.107(a)(2). If the 
additional production history takes effect between September 1 and 
December 31, the premium is due immediately.
    (2) All of the items specified in this paragraph must be documented 
in the notification to FSA and self-certified by the current and new 
member(s) for the intergenerational transfer to be considered eligible 
for additional production history, except that intergenerational 
transfers that occurred in 2014 and 2015 that otherwise meet the 
requirements of this paragraph will be considered during the 
registration and annual coverage election period for coverage year 2017 
established by the Deputy Administrator for the purposes of adding the 
new member(s) to the participating dairy operation. However, there will 
not be any retroactive payments based on a production history increase 
for the intergenerational transfer. All of the following information is 
subject to verification by CCC. Refusal to allow CCC or any other 
agency of USDA to verify any information provided will result in 
disapproval of the intergenerational transfer.
    (i) Documentation that the new member(s) joining the operation have 
purchased the dairy cows being added to the dairy operation;
    (ii) Certification that each new member will have a share of the 
profits or losses from the dairy operation commensurate with such 
person's contributions to the dairy operation;
    (iii) Certification that each new member has a significant equity 
ownership in the participating dairy operation at levels determined by 
the Deputy Administrator and announced on the FSA Web site, 
www.fsa.usda.gov;
    (iv) Certification that each new member is a lineal descendant or 
spouse thereof of a current member of the participating dairy 
operation;
    (v) Agreement that each new member will contribute labor in the 
dairy operation at a minimum of 35 hours per week or have a plan for 
transition to full-time, subject to FSA county committee review and 
approval, if only working seasonally or part-time;
    (vi) Certification that the dairy operation will be the principal 
source of non-investment earned income for each new member; and
    (vii) Documentation of the participating dairy operation's current 
annual marketings as of the date of the intergenerational transfer.

0
5. Amend Sec.  1430.106 as follows:
0
a. Revise paragraph (a);
0
b. In paragraph (b) remove the word ``unit'' from the second sentence; 
and
0
c. In paragraph (c), add a sentence at the end.
    The revision and addition read as follows:


Sec.  1430.106  Administrative fees.

* * * * *
    (a) Dairy operations must pay an initial administrative fee to CCC 
in the amount of $100 at the time of initial registration to 
participate in MPP-Dairy. Each approved participating dairy operation 
must also pay a $100 administrative fee each year through 2018. Annual 
administrative fees are due and payable to CCC 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.
* * * * *
    (c) * * * However, coverage for the applicable calendar year, at 
the catastrophic level only, may be reinstated if the administrative 
fee is paid late, effective the consecutive 2-month period following 
payment of the late-filed administrative fee plus applicable charges, 
if any, and submission to FSA of the appropriate CCC form.

0
6. Amend Sec.  1430.107 as follows:
0
a. In paragraph (a) introductory text, add ``buy-up'' after 
``receiving'';
0
b. In paragraph (a)(1), remove ``$4,'';
0
c. Revise paragraphs (d), (g) introductory text, (g)(2), (h), (i), and 
(j);
0
d. In paragraph (l), remove the words ``satisfactory in form to the 
Deputy Administrator and made payable to FSA'' and add the words 
``satisfactory to FSA and made payable to CCC'' in their place; and
0
e. Add paragraph (m).
    The revisions and addition read as follows:


Sec.  1430.107  Buy-up coverage.

* * * * *
    (d) The premium per cwt of milk, based on the elected percentage of 
coverage of production history is specified in the following table.

                       Table to Sec.   1430.107(d)
------------------------------------------------------------------------
                                          Tier 1 premium  Tier 2 premium
                                           per cwt (for    per cwt (for
                                            the covered     the part of
                                            production        covered
         Coverage level (margin)           history that     production
                                           is 4 million    history over
                                             pounds or       4 million
                                               less)          pounds)
------------------------------------------------------------------------
$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
------------------------------------------------------------------------

* * * * *
    (g) 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, according to either of the 
following options:
* * * * *
    (2) In total no later than September 1 of the applicable calendar 
year of coverage, unless otherwise specified by the Deputy 
Administrator.
    (h) If the total premium is not paid for an applicable calendar 
year of coverage as specified in paragraph (g) of this section, the 
participating dairy operation will only be covered at catastrophic 
level coverage beginning with the September-October consecutive 2-month 
period and for the remainder of the applicable coverage year.
    (i) Annual premium balances due CCC from a participating dairy 
operation for a calendar year of coverage must be paid in full no later 
than September 1 of the applicable calendar year or within a grace 
period determined by the Deputy Administrator, if applicable.
    (j) A participating dairy operation with an unpaid premium balance 
for a calendar year of coverage will lose eligibility for buy-up 
coverage for the subsequent coverage year if the premium is not paid in 
full by the close of the coverage election period, and will have its 
current buy-up level coverage reduced to the catastrophic level, as 
provided in Sec.  1430.109.
* * * * *
    (m) In the case of an intergenerational transfer, the additional 
premium, if any, is due September 1 if the notification of the transfer 
is made to FSA between January 1 and September 1 of the applicable 
calendar year, and immediately, if the notification is made

[[Page 21706]]

between September 2 and December 31, unless otherwise specified by the 
Deputy Administrator.

0
7. Revise Sec.  1430.108 to read as follows:


Sec.  1430.108  Margin protection payments.

    (a) When do MPP-Dairy payments trigger? 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. Payments may trigger at 
either the elected buy-up level if purchased by the dairy operation, or 
the catastrophic level.
    (b) How will payments be calculated? Whether payments trigger at 
the catastrophic level or at the buy-up level, the payments will be 
calculated as explained in this paragraph. If the dairy operation only 
has catastrophic coverage or buy-up coverage at 90 percent, there will 
be a single calculation. If the dairy operation purchased buy-up 
coverage at less than 90 percent and the catastrophic level also 
triggers a payment, then there will be two calculations to determine 
the payment--first the calculation for the buy-up coverage percentage 
and then the calculation for the catastrophic level percentage, which 
is the balance of the established production history up to 90 percent; 
the result of these two calculations will be added together to 
determine the payment amount. Each calculation multiplies the payment 
rate times the coverage percentage times the production history divided 
by 6 as follows:
    (1) Payment rate. The amount by which the coverage level exceeds 
the average actual dairy production margin for the 2-month period;
    (2) Coverage percentage. The coverage percentage; and
    (3) Production history. The production history of the dairy 
operation, divided by 6.
    (c) Example of payment for buy-up coverage of less than 90 percent 
when catastrophic level also triggers a payment. If the dairy operation 
purchased buy-up level coverage at less than 90 percent of production 
history, then the dairy operation will receive a payment calculated at 
the buy-up level, plus the payment at the catastrophic level, if 
triggered, for the balance of 90 percent of its established production 
history. For example, if a producer purchased buy-up coverage at the 50 
percent level, then that producer will also receive catastrophic level 
coverage for the next 40 percent for total coverage of 90 percent.

0
8. Revise Sec.  1430.109(a)(2) to read as follows:


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

    (a) * * *
    (2) Upon such failure to pay when due after initial approved 
registration, 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. Failure to pay the premium fee 
when due will reduce coverage to the catastrophic level for the 
September and October period and November and December period in that 
coverage year.
* * * * *

0
9. Revise Sec.  1430.111 to read as follows:


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

    (a) A producer may participate in either MPP-Dairy through a dairy 
operation or the LGM-Dairy program operated by RMA, but not both.
    (b) Producers in dairy operations participating in MPP-Dairy must 
certify at the time of registration and annually during each coverage 
election period that they will not have an LGM-Dairy policy in effect 
during the calendar year the dairy operation is requesting coverage.
    (c) A participating dairy operation may be required to provide 
proof, to the satisfaction of FSA, of the cancellation or expiration of 
any previous LGM-Dairy policy.

0
10. Amend Sec.  1430.112 by revising paragraph (b) to read as follows:


Sec.  1430.112  Multi-year contract.

* * * * *
    (b) Failure to pay administrative fees and premiums will result in 
the loss or reduction of coverage, as applicable, and the participating 
dairy operation remains obligated to pay such administrative fees and 
premiums as specified in Sec.  1430.109.
* * * * *

Val Dolcini,
Administrator, Farm Service Agency, and Executive Vice President, 
Commodity Credit Corporation.
[FR Doc. 2016-08482 Filed 4-12-16; 8:45 am]
BILLING CODE 3410-05-P