[Federal Register Volume 81, Number 126 (Thursday, June 30, 2016)]
[Rules and Regulations]
[Pages 42453-42475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15327]



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  Federal Register / Vol. 81, No. 126 / Thursday, June 30, 2016 / Rules 
and Regulations  

[[Page 42453]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 400, 402, 407, and 457

[Docket No. FCIC-14-0005]
RIN 0563-AC43


General Administrative Regulations; Catastrophic Risk Protection 
Endorsement; Area Risk Protection Insurance Regulations; and the Common 
Crop Insurance Regulations, Basic Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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

SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the 
General Administrative Regulations--Ineligibility for Programs under 
the Federal Crop Insurance Act, the Catastrophic Risk Protection 
Endorsement, the Area Risk Protection Insurance Regulations, and the 
Common Crop Insurance Regulations, Basic Provisions to revise those 
provisions affected by changes mandated by the Agricultural Act of 2014 
(commonly referred to as the 2014 Farm Bill), enacted on February 7, 
2014.

DATES: This rule is effective June 30, 2016.

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

SUPPLEMENTARY INFORMATION: 

Background

    This rule finalizes changes to the General Administrative 
Regulations--Ineligibility for Programs under the Federal Crop 
Insurance Act, the Catastrophic Risk Protection Endorsement, the Area 
Risk Protection Insurance Regulations, and the Common Crop Insurance 
Regulations, Basic Provisions that were published by FCIC on July 1, 
2014, as a notice of interim rulemaking in the Federal Register at 79 
FR 37155-37166. The public was afforded 60 days to submit written 
comments and opinions.
    A total of 364 comments were received from 74 commenters. The 
commenters included persons or entities from the following categories: 
Academic, farmer, financial, insurance company, producer group, trade 
association, and other.
    FCIC received a number of comments regarding sections of the Farm 
Bill that were not included in the interim rule. The comments received 
included but are not limited to (1) section 1404 participation of dairy 
operations in margin protection program; (2) section 11003 supplemental 
coverage option; (3) section 11017 stacked income protection plan for 
producers of upland cotton; (4) section 11022 whole farm diversified 
risk management insurance plan; and (5) section 11023 crop insurance 
for organic crops. These sections of the Farm Bill were not a part of 
this regulation. Therefore, FCIC is not publishing these comments in 
this final rule. FCIC thanks the public for their input.
    The public comments received are organized below by the issues 
identified in this rule and the specific public comments received. The 
comments received and FCIC's responses are as follows:

General

    Comment: A commenter stated programs to educate farmers on the new 
provisions contained in the Farm Bill are essential to proper 
implementation of this legislation and to the long-term success of 
Northeast agriculture.
    The commenter suggested the United States Department of Agriculture 
(USDA) aggressively promote educational and informational programming, 
especially initiatives that involve and combine the efforts of public, 
private and educational entities.
    Response: FCIC collaborated with producers, producers groups, 
agents, approved insurance providers, as well as the National Resource 
and Conservation Service (NRCS) and the Farm Service Agency (FSA) 
regarding several sections of the 2014 Farm Bill through meetings, 
teleconferences, webinars, and listening sessions to develop policies 
and procedures. The purpose of this outreach was to provide feedback 
and explain revisions, explain the rationale and approach for 
implementation, and reach out to specialty groups. General updates to 
ongoing activities were provided to approved insurance providers. 
Conservation compliance education included producers, producer groups, 
agents, and approved insurance provider meetings, collaborations with 
RMA, NRCS, and FSA, revising forms and certification policy and 
procedure, as well as providing this information to producers. FCIC 
conducted 135 in-person and webinar training sessions, and conducted 
radio spots and other forms of interviews reaching an even larger 
audience.
    FCIC has published information on its Web site highlighting the 
major changes to the Federal crop insurance program in response to the 
2014 Farm Bill implementation. Also published on the Web site are Fact 
Sheets, Question and Answers, and brochures regarding each section of 
the Farm Bill. FCIC has worked closely with approved insurance 
providers to make system changes and prepare procedural documents. In 
addition, FCIC participated with approved insurance providers and an 
insurance trade association to train the trainers, underwriters, loss 
adjusters, and agents. FCIC will continue to promote and educate on the 
implementation of the Farm Bill provisions as opportunities arise.
    Comment: A commenter stated the current agricultural subsidy system 
is a maze of market distorting and highly parochial policies that 
generally rewards a handful of large farm businesses or well-connected 
industry segments at the expense of taxpayers. The system results in 
costly inefficiencies that detract from program goals and produce 
numerous unintended consequences. The Federal government bears a 
disproportionate amount of the financial risks for agribusinesses to 
the detriment of taxpayers, consumers, and agriculture as a sector 
making it less competitive, less resilient, and less accountable for 
its impacts.

[[Page 42454]]

    The commenter has long advocated for reforms to make the 
agricultural safety net more cost-effective, transparent, accountable 
to taxpayers, and responsive to current market conditions and needs. 
While the Agricultural Act of 2014 fails to take the necessary steps to 
achieve this reformed safety net, instead of expanding the role of 
Washington in agriculture through new business income entitlement 
programs and increasing spending on federally subsidized crop 
insurance, there is an opportunity to make progress in the 
implementation of crop insurance provisions.
    The commenter strongly encouraged FCIC to remember that while USDA 
may consider producers and other agricultural businesses ``clients,'' 
it is taxpayers who are footing the bill. Farm Bills are notorious for 
vastly exceeding their estimated costs--the last two Farm Bills are on 
pace to exceed by $400 billion their Congressional Budget Office scores 
at passage. The decisions FCIC makes in developing and administering 
programs under its jurisdiction play an important role in determining 
whether taxpayer-funded agricultural programs will continue to be 
vastly over budget.
    The commenter strongly encourages FCIC to implement the 
Agricultural Act of 2014 while being cognizant of the reality that 
federal taxpayers are responsible for more than $17 trillion in debt 
and are facing annual deficits exceeding $500 billion. The commenter 
suggested FCIC not simply attempt to maximize spending, but follow the 
will of Congress in prioritizing federal support only where necessary 
and in a manner that is cost-effective and transparent.
    Response: FCIC does not have the authority to change the amount of 
subsidies that are mandated by the Federal Crop Insurance Act and such 
subsidies cannot be eliminated without a change in law by Congress. 
Since the program changes contained in this rule were mandated by the 
2014 Farm Bill, FCIC is required by law to implement the changes and 
will do so in the most cost-effective and transparent manner possible. 
No change has been made.
    Comment: A commenter stated the third paragraph of background item 
i. indicates that as of the publication of FR Doc. 2013-25321 on 
October 25, 2013, a 1971 amendment to the Administrative Procedures Act 
that previously required codified Federal crop insurance policies to be 
published for public review and comment is no longer in effect. The 
commenter believed it would be a loss to FCIC if approved insurance 
providers, producers and others outside the Federal government were no 
longer able to ask questions and offer comments to planned policy 
revisions. Furthermore, the publication of comments and responses in 
the final rule clarifies the reason for policy changes and helps to 
avoid potential disputes and ambiguity in policy language. The 
commenter urged FCIC to continue its practice of publishing all 
codified crop insurance policy changes in the Federal Register for 
public review and comment.
    Response: FCIC is no longer required by the Administrative 
Procedures Act due to the revocation of the Hardin Memorandum (78 FR 
33045) to publish proposed rules because contracts are exempt from 
notice and comment rulemaking and the crop insurance policy is a 
contract. FCIC now has the discretion to determine the appropriateness 
of affording the public an opportunity for notice and comment when 
promulgating regulations relating to contracts. When issuing rules 
regarding crop insurance policies in the future, FCIC will take many 
factors into consideration including but not limited to the nature of 
the change, and whether it is anticipated to be controversial to any 
party, the exigency of the change, the significance of the change to 
stakeholders and any recommendations made by producers, producer 
groups, agents, loss adjusters, approved insurance providers or other 
interested parties. To the extent practicable, FCIC will solicit 
comments before making administrative rules effective, all other rules 
will be final rule with comment, which still affords the opportunity 
for the public to comment while making the rule effective upon 
publication. FCIC may consider the comments received and may conduct 
additional rulemaking based on those comments.
    Comment: A commenter stated throughout section 6 of the CAT 
Endorsement, FCIC uses the word ``paragraph'' to reference other 
portions of the Endorsement, the commenter recommended FCIC replace the 
word ``paragraph'' with the word ``section.'' The commenter believed 
this change will ensure the CAT Endorsement would be consistent with 
phrasing used in the CCIP Basic Provisions and other crop insurance 
policies.
    Response: FCIC agrees and has made the change accordingly.
    Comment: A commenter stated the phrase ``. . . within 30 days after 
you have been billed . . .'' in revised section 6(b) of the CAT 
Endorsement implies the payment must be received within 30 days, 
precluding any potential for interest owed and making the timeframe for 
policy termination for unpaid premium ambiguous. As written, this 
phrase in the CAT Endorsement is inconsistent with the Annual Premium 
and Administrative Fees section in the applicable Basic Provisions. The 
commenter therefore recommended FCIC revise section 6(b) as follows: 
``In return for catastrophic risk protection coverage, you must pay an 
administrative fee and any applicable premium as specified in paragraph 
(f) of this section to us, unless otherwise authorized in the Federal 
Crop Insurance Act;'' and insert a new sub-clause 6(b)(3) that states 
``You will be billed for any applicable premium and administrative fee 
not earlier than the premium billing date specified in the Special 
Provisions.''
    Response: The phrase ``within 30 days after you have been billed'' 
in section 6(b) of the CAT Endorsement was not a change made by the 
interim final rule. The only change made to section 6(b) of the CAT 
Endorsement by the interim final rule was to add the phrase ``and 
premium as specified in paragraph (f) of this section'' between the 
phrases ``administrative fee'' and ``to us within.'' The addition of 
the phrase ``and premium as specified in paragraph (f) of this 
section'' does not preclude the potential for interest owed, when 
applicable, nor change the termination date of the policy. FCIC 
disagrees that the addition of the phrase ``and premium as specified in 
paragraph (f) of this section'' or the existing phrase ``within 30 days 
after you have been billed'' are inconsistent with the provisions in 
the Annual Premium and Administrative Fees section of the applicable 
Basic Provisions. However, as provided in the applicable Basic 
Provisions, if a conflict exists between the CAT Endorsement and the 
Basic Provisions, the CAT Endorsement controls. No change has been 
made.

Section 2611

    Comment: A commenter did not think crop insurance should be 
connected with conservation. Farmers should be left alone to maintain 
their own land. The farmers are paying for their land, not the Federal 
Government. Farmers know and understand their land much better than 
USDA or Natural Resources Conservation Service (NRCS). USDA or NRCS 
cannot even understand the land classifications and want to make all 
land in a parcel ``highly erodible'' when there may be only a very 
small part of the parcel that is really erodible. The commenter 
recommended FCIC disconnect insurance from NRCS and let insurance 
companies compete for the business rather than continue with the 
current monopoly.

[[Page 42455]]

    The commenter felt we have gotten very far off-base with government 
programs. The commenter explained that there are so many people working 
in government now that don't have any real understanding of how to work 
land, improve it, etc. They are only there to draw a salary and pretend 
to know something. Let the real farmers and ranchers control 
agriculture. Government programs now are really created and maintained 
for special interest groups, and that creates all kinds of requirements 
for the real farmers who know what they are doing. The people who farm 
small operations do not have a chance because there is somebody telling 
them they must do what the government wants when the government is 
unfairly operated in favor of takers rather than producers. The further 
we go into government control of farming, the less productivity we will 
have, and our food costs will continue to sky-rocket.
    The commenter recommended separating the Supplemental Nutrition 
Assistance Program (SNAP) from farm programs. SNAP is leading the 
country in the wrong direction--dependency on somebody else to provide 
for those who will not keep a job, or maybe choose to have children 
with no intention of making a living for them.
    Response: The 2014 Farm Bill linked the conservation compliance 
provisions to eligibility for Federal crop insurance premium subsidy. 
FCIC is required to implement these provisions of the 2014 Farm Bill. 
Further, FCIC has no control over how the conservation compliance 
programs are administered or the designation of highly erodible land. 
All such decisions are made by FSA and NRCS and communicated to FCIC. 
However, a producer may obtain Federally reinsured crop insurance 
without being in compliance with the conservation compliance provisions 
but such producer will be ineligible for premium subsidy on all 
Federally reinsured crop insurance policies and plans of insurance. The 
interim rule did not address any provisions of SNAP. Therefore, the 
comments cannot be considered in this final rule. No change has been 
made.
    Comment: A commenter stated specialty crop and perennial producers 
have had limited participation in USDA programs, with the exception of 
the Federal crop insurance program. This agricultural segment is 
significant in number of producers and overall production throughout 
the Northeast and will have the greatest challenge meeting the timeline 
provided by USDA to comply with the conservation compliance 
requirements. The commenter requested that USDA recognize this 
challenge and provide leniency in the form of additional time for 
specialty crop producers that do not currently have an established 
relationship with FSA and the NRCS.
    Response: The 2014 Farm Bill requires that all persons seeking 
eligibility for Federal crop insurance premium subsidy must provide a 
certification of compliance with the conservation compliance provisions 
beginning with the first full reinsurance year following February 7, 
2014. The 2014 Farm Bill also requires that existing processes and 
procedures be used for certifying compliance to avoid creating an 
additional burden on producers and to provide fair and equal treatment 
to all producers regardless of what crops a producer grows or which 
program benefits a producer is seeking to obtain. Form AD-1026 has been 
used by producers to certify compliance with the provisions since the 
1980's, including specialty and perennial crop producers seeking FSA 
benefits under programs such as the Tree Assistance Program and 
multiple ad hoc disaster programs.
    However, while all persons must file a certification of compliance, 
Form AD-1026, by June 1, 2015, to be eligible for Federal crop 
insurance premium subsidy for the 2016 reinsurance year (July 1, 2015--
June 30, 2016), the 2014 Farm Bill does provide additional time for 
producers who are subject to the conservation compliance provisions for 
the first time to develop and comply with a conservation plan or remedy 
a wetland violation, if needed. Since the conservation provisions are 
administered by FSA and NRCS, the terms and conditions relating to the 
additional time frames are specified in 7 CFR part 12. In addition, 
producers who are subject to the conservation compliance provisions for 
the first time will receive priority for NRCS technical assistance in 
developing and applying a conservation plan or in making a wetland 
determination, if needed.
    Comment: A commenter stated the interim rule states, ``Section 2611 
of the 2014 Farm Bill links the eligibility for premium subsidy paid by 
FCIC to an insured's compliance with the Highly Erodible Land 
Conservation (HELC) and Wetland Conservation (WC) provisions of the 
Food Security Act of 1985.'' The premise of these accountability 
standards--``conservation compliance''--is that receipt of Federal 
funding is a two-way street, and subsidies should not be used to tear 
up sensitive land, drain wetlands, or shift unintended costs onto 
others. These Farm Bill provisions reduce the cost of agricultural 
pollution and limit long term liabilities by ensuring producers 
minimize soil erosion on highly erodible land and forgo draining 
wetlands.
    The commenter added that in order for these provisions to be 
effective, adequate enforcement of these minimum conservation practices 
must be prioritized after implementation. Independent analysts 
including USDA's own Office of Inspector General (OIG) found that from 
1991 to 2008, compliance with conservation accountability standards 
varied from region to region, many farms were out of compliance (up to 
20 percent in the 1995 OIG report), and millions in taxpayer dollars 
could have been saved if subsidies were appropriately withheld for 
risky production practices (http://www.agri-pulse.com/uploaded/ConservationCompliance.pdf). Strong enforcement, proper monitoring, and 
effective implementation should be prioritized so these provisions 
achieve measurable public benefits. Adequate resources must also be 
provided to local officials for monitoring and enforcement efforts, and 
staff members must be well-trained to ensure consistent enforcement 
from county to county and state to state.
    The commenter also suggested that flexibility should also be built 
into program regulations so local, on-the-ground knowledge and 
realities are considered in farms' conservation plans. For instance, if 
only a small portion of a field is categorized as highly-erodible land, 
the sensitive acres may require a different conservation plan than the 
rest of the field. In addition, conservation practices should be 
evaluated in a holistic view to ensure that those with public benefits 
greatly outweigh others with potential negative impacts. For instance, 
installing stream buffers to conserve soil and water could be zeroed 
out if they are covered in excess agricultural residue left over from 
flooding or heavy rains. Public benefits of conservation practices may 
also be reduced when drainage tile is installed on farmland, increasing 
the rate at which water flows from farmland to nearby waterways. 
Considering these factors when developing conservation accountability 
standards will ensure that these provisions not only achieve their 
stated outcomes but also reduce long-term liabilities of agricultural 
runoff.
    Response: Technical determinations regarding the conservation 
compliance provisions, such as whether land is highly erodible or a 
wetland, are made by NRCS. NRCS is also responsible for approving 
conservation and mitigation

[[Page 42456]]

plans, when needed, to ensure land meets the conservation compliance 
requirements. The interim rule did not address the development, 
approval, or enforcement of the technical requirements for conservation 
or mitigation plans or the associated staffing needs. No change has 
been made.
    Comment: A commenter believed that the conservation compliance 
provisions from the 2014 Farm Bill are effectively included in the rule 
concerning the CAT Endorsement, ARPI, and CCIP Basic Provisions. The 
commenter noted that the same text is included under each of these 
three parts of the rule. However, there are a few areas where some 
refinement could be helpful.
    The rule specifically denies the premium subsidy for a compliance 
violation or failure to file a form AD-1026, and then specifically 
states that failure by the person to pay the full premium (without the 
premium subsidy) would result in termination of the policy and all 
other policies with FCIC. For example, section 6(f) of the CAT 
Endorsement denies the premium subsidy in the case of a violation and 
section 6(h) terminates the policy for failure to pay the required 
premium. The commenter supported the way that compliance has been 
handled in the rule, and the way it has provided clarity to the way 
FCIC will be handling it.
    However, the commenter also pointed out that form AD-1026, as 
revised in June 2014 by FSA, can represent a somewhat more complex form 
for producers that are newly covered by compliance requirements--most 
of which have been participants in crop insurance, but not other USDA 
programs that have required compliance for some time. This final rule 
should provide some greater explanation about the form AD-1026, such as 
indicating the explanatory purpose of the appendix (as expanded in June 
of 2014), some description of the boxes to be checked on the form, and 
the significance of the affiliated person section.
    The commenter recommended that the final rule include a specific 
discussion, perhaps in the background section, that indicates the time 
allowance for development and compliance with an approved conservation 
plan. The statute specified that any person newly covered would have 
five reinsurance years and persons that would have been in violation if 
they had continued participation in the programs requiring compliance 
would have two reinsurance years to come into compliance. Some 
indication of this phase in period would be helpful for those producers 
that are not familiar with conservation compliance requirements. This 
is especially important since the rule (and the statute) refer to 
reinsurance year whereas the form AD-1026 refers to crop year. While 
the commenter agreed with the time allowance and certain other 
provisions affecting a decision concerning compliance or a violation 
being left up to FSA, some greater explanation to that effect and 
perhaps a link to the FSA rules on HELC and WC would be helpful. Even 
with the reference to FSA responsibilities, the commenter urged FCIC to 
provide some clarity on the time allowance the insured has for 
developing and complying with conservation plans where applicable.
    The commenter agreed with the clarity provided by the specific 
reference in the rule background that the HELC and WC provisions apply 
only to annually tilled crops.
    Response: Form AD-1026 is an FSA form used by producers to self-
certify compliance with the conservation compliance provisions. On June 
30, 2014, FSA released a modified Form AD-1026 and appendix to 
incorporate the 2014 Farm Bill provisions relating to crop insurance. 
As an FSA form, the explanation of and instructions for completing the 
form are provided by FSA, which can be found at http://forms.sc.egov.usda.gov/efcommon/eFileServices/eForms/AD1026.PDF. Since 
it is FSA that is administering the AD-1026 process, it is best that 
FSA explain the process and the forms to producers and that such 
information is contained in their procedures where it can be more 
comprehensive and up to date than FCIC can provide in this rule.
    The interim rule changed the applicable crop insurance Basic 
Provisions to indicate that producers must have Form AD-1026 on file 
and they must be in compliance with the conservation compliance 
provisions of 7 CFR part 12. FSA and NRCS administer the conservation 
compliance programs and make determinations regarding the additional 
time frames. Therefore, FSA and NRCS are in the best position to 
explain the requirements to producers regarding the additional time 
frames to come into compliance with the conservation compliance 
provisions. The provisions of 7 CFR part 12 regarding the requirements 
for conservation compliance and the additional time frames for 
producers who have never participated in programs for which the 
conservation compliance provisions were applicable to come into 
compliance can be found at http://www.gpo.gov/fdsys/pkg/FR-2015-04-24/pdf/2015-09599.pdf. However, RMA, FSA, and NRCS have been working 
diligently to assure that all producers are aware of their obligations 
under the conservation compliance provisions through meetings, 
mailings, outreach, etc. To clarify, a producer must provide an AD-1026 
form that encompasses all acreage in the producers' farming operation. 
However, if the crop on acreage does not qualify as an ``agricultural 
commodity'' as defined in section 2601 of the Food Security Act of 
1985, then the producer may be exempt from the other conservation 
compliance requirements. No change has been made.
    Comment: A commenter stated as USDA implements the new conservation 
compliance provisions that link compliance to crop insurance, the 
commenter asked that FCIC take into consideration the impact of access 
and availability of crop insurance for producers. Close to 80 percent 
of the nation's wheat acres are covered by crop insurance and the 
impact of the regulations USDA is developing could have a significant 
adverse impact on wheat growers' access to crop insurance in future 
years. The ability of USDA personnel to address highly erodible land 
(HEL) and wetland compliance issues in the field and work with 
producers directly on mitigation and understanding of the new 
requirements will be critical to producers livelihoods.
    Specifically, the commenter asked that USDA clarify that producers 
must only complete the AD-1026 prior to June 1, 2015, not that a 
completed compliance check be undertaken. It is also very important 
that USDA ensure that producers undergoing existing wetland compliance 
review or appeals are not adversely impacted when seeking crop 
insurance next year.
    The 2014 Farm Bill establishes a new date of February 7, 2014 for 
wetland conversion related to eligibility for crop insurance premium 
subsidies and wheat growers suggest a clear distinction be made between 
reviews to determine eligibility for premium subsidies for crop 
insurance, and participation in agriculture risk coverage (ARC) or 
price loss coverage (PLC) and conservation programs. The 2014 Farm Bill 
also establishes timeframes for producers to come into compliance if 
they have not been participating in programs covered by conservation 
compliance. There are wheat growers who may not currently be 
participating in commodity or conservation programs, and are, 
therefore, not subject to conservation compliance, so they may need to 
use the time to come into compliance. USDA must ensure that these 
producers needing to come into HEL compliance

[[Page 42457]]

or wetland conservation compliance are not adversely impacted when they 
are seeking insurance next year and subsequent years.
    Response: The interim rule changed the policy provisions to 
indicate that producers must have Form AD-1026 on file by June 1 prior 
to the sales closing date, and they must be in compliance with the 
conservation compliance provisions of 7 CFR part 12. For producers who 
have previously been required to file Form AD-1026, such producers must 
be in compliance with the conservation compliance provisions. For 
certain producers, additional time is provided to get into compliance 
with the conservation provisions. However, since FSA and NRCS are 
administering the conservation compliance programs, the provisions to 
provide the additional time frames to allow producers who have never 
before been subject to the conservation compliance provisions can be 
found at 7 CFR part 12 and http://www.gpo.gov/fdsys/pkg/FR-2015-04-24/pdf/2015-09599.pdf.
    Technical determinations regarding the conservation compliance 
provisions, such as whether land is highly erodible or a wetland, are 
made by NRCS. NRCS is also responsible for approving conservation and 
mitigation plans, when needed, to ensure land meets the conservation 
compliance requirements and conducting any compliance reviews and spot-
checks. The interim rule did not address the development, approval, or 
enforcement of the technical requirements for conservation or 
mitigation plans, as these are not RMA, FCIC, or approved insurance 
provider responsibilities.
    The details regarding the additional time afforded for certain 
producers to comply with the provisions, how administrative appeals 
affect a final determination of violation, and the differing dates for 
determining eligibility for FSA programs and Federal crop insurance 
premium subsidy due to a wetland conservation violation were not 
included in the interim rule. The details regarding such provisions and 
how they apply are contained in an amendment to the regulations at 7 
CFR part 12. No change has been made.
    Comment: A commenter stated section 7(h) of the CCIP Basic 
Provisions is poorly organized and includes repetition of Highly 
Erodible Land/Wetland Conservation and Form AD-1026 requirements. To 
streamline and eliminate any ambiguity in this section, the commenter 
recommended FCIC reorganize section 7(h) of the CCIP Basic Provisions 
as follows:

    (h) Effective for any policies with a sales closing date on or 
after July 1, 2015:
    (1) You will be ineligible for any premium subsidy paid on your 
behalf by FCIC for any policy issued by us if:
    (i) USDA determines you have committed a violation . . .; or
    (ii) You fail to file form AD-1026, or a successor form, with 
FSA by the applicable deadline to be properly identified as in 
compliance with the applicable conservation provisions specified in 
section 7(h)(1):
    (A) By June 1 after you make application for insurance if you 
demonstrate you are a beginning farmer or rancher . . . ; or
    (B) By June 1 prior to the sales closing date for all others.
    (2) To be eligible for premium subsidy paid on your behalf by 
FCIC, it is your responsibility to assure you meet all the 
requirements in section 7(h)(1) above.

    Response: FCIC does not agree the suggested language streamlines, 
clarifies or improves the readability of the section to the extent that 
a change is warranted. The proposed changes may have adverse or 
unintended consequences. The proposed revision introduces new paragraph 
designations that are not necessary and create additional cross-
references that can lead to greater confusion and potential for 
inaccurate reading. In addition, the proposed revisions could 
inadvertently change the meaning of the provisions. No change has been 
made.
    Comment: A commenter requested that FCIC allow producers who are 
out of compliance as of June 1 preceding the sales closing date for the 
upcoming reinsurance year to be able to regain eligibility if they are 
determined to be back in compliance prior to the sales closing date for 
any crop on their policy.
    Another commenter agreed with the requirement of maintaining 
Conservation Compliance in order to qualify for the insurance premium 
subsidy and with FCIC's approach of not denying benefits during the 
year in which a farm is found to be out of compliance. However, the 
commenter urged FCIC to reconsider the manner in which penalties are 
imposed in the following year. There is significant time between the 
start of the reinsurance year and the sales closing date for most 
crops, especially cotton and other spring-seeded crops. If a producer 
is found to be out of compliance at the beginning of the reinsurance 
year, the commenter encouraged FCIC to consider giving producers the 
opportunity to reinstate their eligibility for premium subsidies if 
they are able to achieve conservation compliance by the sales closing 
date.
    Another commenter stated the proposed June 1 deadline for filing 
the AD-1026 form is in the regulation, but not in the statute. The 
commenter requested that FCIC allow producers who are out of compliance 
as of June 1 to be able to regain eligibility for premium subsidy if 
they are determined to be back in compliance before the SCD for any 
crop on their policy. The commenter assumed that FSA will establish 
procedures around the ability of producers to become eligible for 
premium subsidy after June 1 but prior to the SCD for any crop on their 
policy.
    A commenter stated the proposed implementation of the new 
``Conservation Compliance'' provisions for the Federal crop insurance 
program appears to be fairly straightforward with the exception of the 
direction FCIC has taken regarding possible penalties for producers who 
temporarily fall out of compliance during an insurance year. While the 
commenter supported maintaining producer eligibility for premium 
assistance during the year that a conservation compliance-related 
problem is recognized, the commenter believed the automatic exclusion 
of the producer from participating in the program the following 
insurance year is overly harsh and inflexible. It fails to recognize 
that the producer may be able to bring themselves back into compliance 
prior to the start of the next reinsurance year or by their next 
applicable sales closing date. For cotton producers in the commenter's 
service area, there is a nine-month difference between the start of a 
reinsurance year on July 1 and the applicable sales closing date for 
cotton of March 15. This is a significant period of time during which a 
producer can come back into compliance, especially if the issue that 
made them non-compliant was temporary or short-term in nature and can 
be remedied prior to the next growing season. The commenter believed 
FCIC should reevaluate the interim rule and revise so that it 
recognizes and encourages a producer to get back into compliance as 
quickly as possible and prior to their next applicable sales closing 
date in order to prevent any lapse in their ability to participate and 
receive premium assistance. By allowing this option FCIC will 
accomplish two important goals. First, it will provide a reasonable 
incentive to quickly address conservation compliance related issues and 
further the purpose of the provision to enhance environmental 
stewardship. Second, it will prevent the unnecessary exclusion of 
otherwise eligible Federal crop insurance program participants.
    Response: The 2014 Farm Bill specifies, in the case of a violation, 
ineligibility for Federal crop insurance premium subsidy applies to the

[[Page 42458]]

reinsurance year following the date of a final determination of a 
violation, including all administrative appeals. The reinsurance year 
runs from July 1 through June 30. This is why the June 1 date for 
determining compliance was used so that approved insurance providers 
would know before the start of the reinsurance year on July 1 who was 
in compliance and would be eligible for premium subsidy. However, under 
the commenters' proposal, it would directly conflict with the 2014 Farm 
Bill to allow producers to regain their eligibility during the 
reinsurance year when the 2014 Farm Bill expressly states they are 
ineligible for premium subsidy. For example, under the 2014 Farm Bill, 
if a producer is determined to be in violation of the conservation 
compliance provisions as of June 1, 2016 and all appeals have been 
exhausted, the producer is ineligible for Federal crop insurance 
premium subsidy the 2017 reinsurance year, which runs from July 1, 2016 
to June 30, 2017. This means the producer would be ineligible for 
premium subsidy for all crops with a sales closing date within that 
period. Even if the producer becomes compliant in August 2016, the 2014 
Farm Bill requires eligibility for the remainder of the reinsurance 
year. No change has been made.
    Comment: A commenter stated the National Environmental Policy Act 
(NEPA) and Implementing Regulations NEPA requires all Federal agencies 
to prepare an Environmental Impact Statement (EIS) for ``every 
recommendation or report on proposals for legislation and other major 
Federal actions significantly affecting the quality of the human 
environment.'' As a preliminary step, an agency may prepare an 
Environmental Assessment (EA) to determine whether the environmental 
impact of the proposed action is significant enough to warrant an EIS. 
If an EA establishes that the agency's action may have a significant 
effect upon the environment, the agency must prepare an EIS.
    An agency does not have to prepare an EIS or EA if the action to be 
taken falls under a categorical exclusion (CE), which include agency-
identified categories of actions that do not individually or 
cumulatively have a significant effect on the human environment. An EA 
or EIS must be prepared even for otherwise categorically excluded 
actions where the action may have the potential to affect the 
environment.
    USDA regulations exempt FCIC from NEPA compliance. However, the 
commenter notes that actions of excluded agencies, including FCIC, are 
no longer categorically excluded from the preparation of an EA or EIS 
if ``the agency head determines that an action may have a significant 
environmental effect.''
    Similarly, FSA regulations provide that ``major changes in ongoing 
programs'' or ``major environmental concerns with ongoing programs'' 
are among the categories of FSA activities ``that have or are likely to 
have significant environment[al] impacts on the human environment.'' 
``Initial NEPA involvement in program categories'' that are listed as 
likely to have significant environmental impacts ``shall begin at the 
time [ ]FSA begins developing proposed legislation, begins the planning 
stage for implementing a new or changed program or receives notice that 
an ongoing program may have a significant adverse impact on the quality 
of the human environment.''
    Accordingly, CFS hereby provides notice to FCIC as the joint 
administrator of the crop insurance program that it must comply with 
NEPA because the crop insurance provisions of the 2014 Farm Bill 
implicate conservation programs to which NEPA applies, and may have a 
significant environmental effect.
    The 2014 Farm Bill made two significant changes to existing 
agricultural programs. First, it tied the federally-funded portion of 
crop insurance premiums for commodities to conservation compliance. The 
2014 Farm Bill requires farmers who purchase subsidized crop insurance 
to develop conservation plans when they grow crops on land subject to 
high rates of erosion. The 2014 Farm Bill reattaches soil and wetland 
conservation requirements to crop insurance premium subsidies, and 
establishes a Sodsaver provision to protect native grasslands, which 
prohibits recipients of crop insurance subsidies from draining or 
filling wetlands unless they mitigate those wetland losses. Now a 
producer who plows native prairie for crop production in one of the six 
states covered by the program will receive a 50-percentage-point crop 
insurance premium subsidy reduction. The prerequisite of implementing 
an approved conservation plan before producing a commodity on highly 
erodible land or converting a wetland to crop production has existed 
since the 1985 Farm Bill and previously affected most USDA farm program 
benefits, but has excluded crop insurance since 1996. The 2014 Farm 
Bill again links crop insurance to conservation compliance.
    Second, the 2014 Farm Bill merges commodity payments into the crop 
insurance scheme. The 2014 Farm Bill eliminates direct commodity 
payments, countercyclical payments in their current form, and the 
Average Crop Revenue Election (ACRE) program. In place of direct 
payments, the 2014 Farm Bill revises the counter-cyclical payment 
program that was established in 2002 and the ACRE program that existed 
alongside direct payments into the new Price Loss Coverage (PLC) and 
Agriculture Risk Coverage (ARC) crop insurance options. Thus commodity 
support is now part of the crop insurance program.
    As a result of these two significant changes, NEPA applies to the 
crop insurance program. First, conservation programs are subject to 
NEPA under FSA regulations. Because the 2014 Farm Bill explicitly links 
conservation compliance to the new crop insurance program, NEPA 
obligations attach to the new crop insurance program.
    Second, the changes to the crop insurance program will 
significantly affect the human environment. In fact, the crop 
insurance-conservation program is specifically designed to 
significantly affect the quality of the human environment by protecting 
sensitive lands and preventing soil loss. Degraded soil quality has a 
host of serious environmental consequences, while directly undermining 
the ability of farmers to grow nutritious food and be resilient in the 
face of disruption. Soil erosion causes water pollution, impacts 
wildlife habitat, and threatens long-term land productivity. Soil 
erosion and depletion also affects air quality and climate change: 
Clearing land converts stored carbon into carbon monoxide, and more 
than a third of the excess carbon monoxide that has been added to the 
atmosphere has come from the destruction of soils. Releasing more 
carbon monoxide into the atmosphere than it can effectively absorb also 
causes ocean acidification and contributes to the destruction of coral 
reefs and other marine ecosystems.
    Now, farmers who purchase or receive crop insurance will have to 
develop conservation plans when growing on land subject to high rates 
of erosion and will be prohibited from draining or filling wetlands 
without mitigating the losses. Approximately one third of cropland in 
the United States is highly erodible, meaning that these provisions 
affect a significant percentage of acreage. The program also limits 
subsidies to farmers who convert native grasslands to crop production. 
From 2008 to 2011, more than 23 million acres of grassland, shrub land, 
and wetlands were destroyed for crop production, destroying habitat 
that

[[Page 42459]]

sustains many species of birds and other animals and threatening the 
diversity of North America's wildlife. In light of these realities, the 
intended result of these new provisions is to protect sensitive land 
and prevent soil loss. NEPA is concerned with all significant 
environmental impacts, not merely adverse impacts. These impacts alone 
are significant enough to trigger NEPA.
    The new crop insurance program may also significantly, and 
directly, impact the environment in a negative way. The negative 
effects of commodity crop subsidies have been thoroughly documented. In 
short, subsidies--including crop insurance--encourage farmers to grow 
commodity crops on otherwise fallow or environmentally sensitive land. 
As just one example, a 2012 study by researchers at Iowa State 
University utilized field-level yield data up to 2006 and price data 
over 2005-2008, and found that up to three percent of land under the 
Federal crop insurance program would not have been converted from 
grassland if there had been no crop insurance subsidies.
    With commodity crop production often comes intensive and 
environmentally destructive practices such as mono-cropping and heavy 
pesticide use. Single-crop production is more intensive and requires 
significantly higher usage of pesticides, herbicides, and fertilizers. 
Reduced crop diversity significantly increases crop losses due to 
insects and pathogens and reduced soil organic matter. These problems 
lead to increased use of pesticides and fertilizers, which in turn can 
increase pathogen and insect populations. Commodity-crop monoculture 
reduces habitat for wildlife, including birds, pollinators, and other 
animals that eat pest insects. In addition to reducing species richness 
and harming key species, this compounds the need for pesticides. On 
average organic farms have 30 percent higher biodiversity, including 
birds, pollinators, and plants, than their mono-cropped industrial 
counterparts. Subsidies also create higher marginal revenues for inputs 
(fertilizers, pesticides, herbicides, seeds, and labor), thereby 
motivating additional input use, by raising prices and reducing price 
variations in program crops. For example, compared with farmers who do 
not participate in commodity programs, corn farmers receiving subsidies 
have reported significantly increased herbicide use in all cropping 
sequences, ``supporting the conventional view that commodity programs 
directly contribute to greater herbicide use in corn production.'' The 
industrial-scale use of pesticides, herbicides, and fertilizers in turn 
significantly affects rivers and groundwater, harming aquatic 
ecosystems and the life forms they support. Over half of synthetic 
nitrogen fertilizers used on global cereal production (including corn 
and soy) are lost through groundwater leaching or released as nitrous 
oxide into the atmosphere. Nitrous oxide is a greenhouse gas 310 times 
more potent than carbon monoxide, and in the United States three-
quarters of it comes from agricultural soil management. The effects of 
commodity farming as supported by the new crop insurance program are 
thus serious and significant.
    These impacts flow directly from the new crop insurance program--a 
major Federal action significantly affecting the human environment--
triggering FCIC's duty to comply with NEPA in implementing the 
programs.
    For the forgoing reasons, NEPA applies to the new crop insurance 
program. NEPA requires FCIC to, at a minimum, conduct an EA for the new 
crop insurance subsidies. FCIC's failure to comply with NEPA in 
implementing these programs would constitute a blatant violation of 
NEPA and USDA regulations.
    Response: The regulations at 7 CFR part 1b provide that the FCIC is 
categorically excluded from the preparation of an environmental 
assessment or environmental impact statement unless the agency head 
determines that an action may have a significant environmental effect. 
The 2014 Farm Bill mandates the expansion of current conservation 
compliance requirements to apply to persons who seek eligibility for 
Federal crop insurance premium subsidy. However, these 2014 Farm Bill 
provisions do not change the existing rules regarding the technical 
determinations for the conservation compliance provisions, such as 
whether land is highly erodible or a wetland, conservation and 
mitigation plans, when needed, to ensure land meets the conservation 
compliance requirements and conducting any compliance reviews and spot-
checks. Further, FCIC merely amended the policy to include the 
requirements of the 2014 Farm Bill, the regulations governing the 
conservation compliance provisions of the Food Security Act of 1985, as 
amended by the 2014 Farm Bill, are found at 7 CFR part 12. In addition, 
although Federal crop insurance participants were not previously 
subject to conservation compliance, the majority of insured 
participants were already participating in farm programs subject to 
conservation compliance. Therefore, the head of the agency has 
determined that this final rule will not have a significant 
environmental effect.
    Comment: A commenter stated there is considerable confusion 
surrounding the issue of new conservation compliance rules for crop 
insurance.
    For instance, the Background in the interim rule, in the third 
column of page 37157, states that ``[e]ven if the insured [determined 
to be non-compliant on June 1, 2015, (2015 reinsurance year)] becomes 
compliant during the 2016 reinsurance year, the insured will not be 
eligible for premium subsidy until the 2017 reinsurance year starting 
on July 1, 2016.'' However, when questioned about this matter during a 
hearing of the House Subcommittee on General Farm Commodities and Risk 
Management, held July 10, 2014, Undersecretary Michael Scuse stated, 
``Well, remember, we're asking them to sign up that they will be in 
compliance on June 15th and then they are given a period of time to 
come into compliance.'' In response to a follow up question of exactly 
how long the producer would have to come back into compliance, 
Undersecretary Scuse stated that this would be established ``in the 
rule.''
    The commenter agreed with the Undersecretary's point of view that 
the producer ought to be given time to come back into compliance. 
However, the interim rule, at least in the Background, appears to take 
a punitive approach that is inconsistent with the Undersecretary's 
statement. The commenter respectfully urged that the rule clarify that 
the producer does, in fact, have time to come back into compliance and 
what that time period is precisely. The commenter also urged that, 
beyond the rulemaking, FCIC develop a FAQ document that answers the 
questions concerning conservation compliance. Only the Department can 
provide answers that will give producers confidence in the safe harbors 
provided by the law and regulation.
    Response: The 2014 Farm Bill states that ineligibility for Federal 
crop insurance premium subsidy due to a violation of the conservation 
compliance provisions shall apply to reinsurance years subsequent to 
the date of final determination of a violation, including all 
administrative appeals. The requirement that producers file their AD-
1026 form by June 1 did not come into effect until June 1, 2015, more 
than a year after enactment of the 2014 Farm Bill. RMA, FSA, NRCS, 
agents and approved insurance providers have been conducting a 
significant effort to inform all producers of the conservation 
compliance requirement so that any

[[Page 42460]]

producers not in compliance would have an opportunity to get into 
compliance prior to June 1, 2015.
    Since FCIC does not administer the conservation compliance 
provisions or make determinations of compliance, as stated above, the 
details regarding the additional time afforded certain producers to 
comply with the provisions and how administrative appeals affect a 
final determination of violation are contained in an amendment to the 
regulations at 7 CFR part 12.
    However, the Food Security Act of 1985 and the 2014 Farm Bill 
provide an exemption for persons who act in good faith and without 
intent to commit a violation. The exemption allows such persons to 
remain eligible for Federal crop insurance premium subsidy for a period 
of time if the person is taking action to remedy the violation. The 
determination of whether a person acted in good faith and without 
intent to violate the provisions is part of the administrative appeals 
process. Therefore, a person who meets the requirements of the good 
faith exemption would not have a final determination of violation 
unless they do not take the appropriate steps to remedy the violation 
within the established time period. The person would not be ineligible 
for Federal crop insurance premium subsidy until a final determination 
of violation is made. The details of the good faith exemption are 
contained in an amendment to the regulations at 7 CFR part 12. No 
change has been made in this final rule.
    Comment: A commenter supported the provision in the rule for 
beginning farmers and ranchers concerning the deadline for filing the 
form AD-1026. While all other insureds must file a form AD-1026 by June 
1 of any reinsurance year to be eligible for premium assistance in the 
next reinsurance year, beginning farmers that have not had any 
insurable interest in a crop or livestock operation previously, and 
started farming after the beginning of the new reinsurance year, have 
until the sales closing date to file an AD-1026. In effect, this allows 
a new entrant to farming the same access to premium assistance as 
established farmers, up until the sales closing date. While the 
commenter did not believe that there is any provision in the 2014 Farm 
Bill or in prior law that specifically authorizes this flexibility to 
beginning farmers and ranchers, the commenter believed that it has 
merit and is fair to this special group of producers.
    Response: FCIC agrees with the commenter that the exception to the 
requirement to have form AD-1026 on file on or before June 1 prior to 
the sales closing date for certain producers who were not previously 
engaged in farming is needed and is not inconsistent with the statutory 
requirements. Such producers would not have known of the requirement to 
file an AD-1026 form by June 1 and, therefore, they cannot be penalized 
for non-compliance. However, the term ``beginning farmer or rancher'' 
has a specific definition that will result in the exception not being 
applied as intended. The intent of the exception is to provide 
producers who are new to or began farming for the first time after the 
June 1 deadline the ability to remain eligible for premium subsidy the 
subsequent reinsurance year. ``Beginning farmer or rancher'' can 
include producers who have been farming for a few years. Therefore, in 
order for the exception to be applied as intended, the reference to 
``beginning farmer or rancher'' will be changed to reference producers 
who begin farming for the first time after June 1. The needed changes 
were provided in the Special Provisions of the applicable crop 
insurance policies until this final rule was published. FCIC has issued 
administrative procedures that describes what constitutes beginning 
farming for the first time, and how producers without form AD-1026 on 
file can self-certify that such a situation applies to them in 
procedures. Producers may only qualify for this exception for one year 
and must have form AD-1026 on file by the following June 1 to remain 
eligible for premium subsidy in subsequent reinsurance years. 
Therefore, FCIC has incorporated this change in section 6(f)(2)(i) of 
the CAT Endorsement, section 7(h)(2)(i) of the CCIP Basic Provisions, 
and section 7(i)(2)(i) of the ARPI Basic Provisions of this final rule 
and will remove the Special Provisions statement after this final rule 
is published.

Section 11007

    Comment: A commenter stated the current definition of enterprise 
unit is ``All insurable acreage of the same insured crop in the county 
in which you have a share on the date coverage begins for the crop 
year, provided the requirements of section 34 are met.'' With the new 
allowance for enterprise units by irrigation practice, the commenter 
does not believe this definition is sufficient. The commenter 
recommended FCIC revise the enterprise unit definition in the CCIP 
Basic Provisions as follows: ``All insurable acreage of the same 
insured crop or crop/irrigation practice, when allowed by the actuarial 
documents, in the county in which you have a share on the date coverage 
begins for the crop year, provided the requirements of section 34 are 
met.''
    Response: FCIC agrees and has revised the definition to take into 
account that separate enterprise units are allowed for all irrigated 
acreage and non-irrigated acreage of the crop in the county.
    Comment: A commenter stated when the option for enterprise unit 
coverage was introduced in the 2008 Farm Bill, it quickly gained 
popularity across the Cotton Belt. The new farm law enhances enterprise 
unit coverage by providing the ability to separate irrigated and non-
irrigated acres when using enterprise unit coverage. However, the 
commenter understood that this provision will only be available when a 
producer has the ability to qualify for enterprise unit coverage for 
both their irrigated acreage and non-irrigated acreage. If a producer 
cannot qualify for enterprise unit coverage on both practices, that 
producer would then have a common enterprise unit. The commenter 
recommended FCIC implement the new enterprise unit provisions with 
greater flexibility than the commenter understood to be the case. 
Specifically, if a producer qualifies for enterprise unit coverage for 
a single practice, the producer should be allowed to select enterprise 
unit coverage for that practice, without impacting his ability to 
choose the most appropriate unit structure, be it a separate enterprise 
unit or optional units that meets the needs of his operation under the 
other practice. This would allow producers to utilize the law's intent 
of separating by practice and also prevent them from being penalized 
simply because a portion of their acreage does not meet the enterprise 
unit size requirements.
    Another commenter stated in Sec.  457.8, in section 34 of the CCIP 
Basic Provisions, the units provision, if a producer elects to insure 
dry land acreage planted to a specific commodity by enterprise unit, 
the producer is then also required under the interim rule to insure any 
irrigated acreage planted to that commodity by enterprise unit. The 
authority for separate enterprise units by practice, section 11007 of 
the Farm Bill, provides: ``(D) Nonirrigated crops.--Beginning with the 
2015 crop year, the Corporation shall make available separate 
enterprise units for irrigated and nonirrigated acreage of crops in 
counties.'' The purpose of the provision is to require FCIC to make 
separate enterprise units available to irrigated and dry land acreage 
planted to a commodity but to allow the producer to elect enterprise 
units for both or either. As a matter of policy, assuming

[[Page 42461]]

minimum acreage requirements are met, allowing a producer to elect to 
insure irrigated acreage of a commodity by enterprise unit and to elect 
to insure dryland acreage planted to a commodity by optional or basic 
units or vice-versa still achieves the risk-reducing intent of 
enterprise units because one practice has been insured by enterprise 
unit rather than optional or basic units. Denying a producer the 
election to insure one practice by an enterprise unit and the other 
practice by optional or basic units may frustrate the goal of providing 
more options for producers by forcing the producer to insure both 
practices by optional or basic units. Importantly, the premium support 
connected with enterprise units would be unchanged by a producer's 
election of enterprise units for one practice and optional or basic 
units for the other because the premium support for enterprise units is 
fixed in statute and optional or basic units have already been 
appropriately rated.
    If the purpose of section 11007 is fully effectuated, the commenter 
believed that the risk-reducing intent of enterprise units will be 
furthered, not diminished. Producers will have a more complete set of 
options for how best to manage risk, consistent with the goal of the 
Farm Bill. The commenter respectfully urged that the purpose of section 
11007 of the Farm Bill be implemented accordingly.
    Another commenter, regarding the proposed implementation of the 
``Enterprise Unit by Practice'' provision, stated they believed that 
the proposed rule does not provide the degree of flexibility the 
commenter expected in this provision. The commenter strongly supported 
the provision based on their understanding that producers would be able 
to select the enterprise unit structure for a single practice (i.e.--
non-irrigated), as long as acreage insured under that practice meets 
the minimum requirements to be a stand-alone enterprise unit, without 
compromising their ability to select a different or more suitable unit 
structure for a different practice (i.e.--irrigated). This flexibility 
provides the insured the ability to match the most appropriate 
insurance unit structure to the predominant risk associated with a 
given practice. The commenter believed the current interpretation of 
the provision by FCIC does not fully recognize the intent of Congress 
to provide meaningful flexibility to program participants. Given that 
the overarching goal of this provision is flexibility, the commenter 
believed any concern or intent from Congress to implement the provision 
in a more restrictive manner as FCIC has proposed would have been 
specifically indicated in the legislative language. The commenter urged 
FCIC to reconsider their current interpretation in light of this 
commentary and revise this provision accordingly.
    Response: The text of Section 11007 states that ``the Corporation 
shall make available separate enterprise units for irrigated and 
nonirrigated acreage of crops in counties.'' Under the plain meaning of 
the text, this means two separate enterprise units. Therefore, FCIC has 
made changes to allow separate enterprise units (not policies) by 
practice, i.e. one enterprise unit for irrigated acreage and one 
enterprise unit for non-irrigated acreage. Since the provision provides 
for two enterprise units and does not change or otherwise modify the 
definition of an enterprise unit, FCIC interpreted this to mean that 
the existing regulation for an enterprise unit remained overarching and 
that all acreage of the crop in the county had to be insured as an 
enterprise unit regardless of construct as a single enterprise unit or 
two separate enterprise units, one for all the irrigated acreage in the 
county and one for all the non-irrigated acreage in the county. To 
allow producers to choose smaller unit structures on some acreage of 
the crop in the county, such as optional and basic units, for one of 
the practices is counter to this intent. In addition, allowing an 
enterprise unit for one practice and another unit structure for the 
other practice complicates program administration and premium subsidy 
determination. Enterprise unit subsidies are based on the average 
enterprise unit discount received by growers. The enterprise unit 
discounts themselves are affected by the size of the unit--the larger 
the acreage in an enterprise unit, the greater the discount (and vice-
versa). As growers are given additional flexibility to reduce the size 
(less acres) of their enterprise unit, then the enterprise unit 
discount becomes smaller. This brings into question whether the premium 
subsidy rates offered for enterprise units would need to be revised 
downward accordingly. To the extent that the average size of enterprise 
units moves closer towards the average size of optional units, the 
premium subsidy rates for enterprise units must also move closer 
towards the premium subsidy rates for optional units. No change has 
been made.
    Comment: A commenter stated the interim rule stipulates timelines 
for implementing separate enterprise units and coverage levels for 
irrigated and dryland acreage. These provisions will greatly benefit 
growers in areas that utilize irrigated agriculture. Producers who use 
both practices in their operations are currently unable to fully 
realize the benefits of using enterprise units due to the wide 
variation in production between their irrigated and non-irrigated 
crops. As producers in Texas have faced multiple years of extreme 
drought, their dryland yields have plummeted, bringing enterprise unit 
yields down significantly even though the irrigated acreage was not as 
severely affected. The result is reduced coverage and crop insurance 
policies that do not reflect average production. The ability to have 
separate, distinct levels of coverage on irrigated and non-irrigated 
acres will allow farmers to create a better risk management plan for 
their operation. The commenter urged FCIC to implement this provision 
as soon as possible. By delaying the implementation of these provisions 
until spring of 2015, FCIC has put winter wheat producers at a distinct 
disadvantage to growers of other crops.
    Response: The changes mandated by the 2014 Farm Bill impact almost 
all county crop programs within the Federal crop insurance program. 
Unfortunately, given the magnitude of the work required, FCIC was 
unable to implement the provision for crops with a contract change date 
prior to November 30, 2014. The actuarial documents specified the 
ability to make this election beginning with 2015 crop year spring 
crops with a contract change date of November 30, 2014, and later.
    Comment: A commenter stated they identified a major flaw in section 
34(a)(4)(viii)(C)(1) of the CCIP Basic Provisions as currently 
proposed. This section needs to be clarified to indicate that if the 
insured does not qualify for enterprise units by practice that he or 
she then has to automatically default to enterprise unit, provided that 
he or she qualifies for such unit structure on a crop basis. If it is 
subsequently determined that the insured does not qualify for 
enterprise unit either, the unit structure would then revert to basic 
units or optional units, whichever the insured reports on the acreage 
report and qualifies for. There should not be an option for the insured 
to not elect to have enterprise unit simply because he or she does not 
qualify for enterprise units by practice up to the acreage reporting 
date. The rationale for this is that the insured has to make the 
decision to elect enterprise units or enterprise units by practice by 
the sales closing date. Therefore, if the insureds do not qualify for 
enterprise units by practice the commenter felt it should not allow 
insureds the opportunity to not have enterprise units up to the acreage 
reporting date. There are valid

[[Page 42462]]

reasons for requiring the enterprise units or enterprise units by 
practice election by the sales closing date and if this provision is 
not revised it would allow insureds the opportunity to elect enterprise 
units by practice by the sales closing date, even if they know that 
they will not qualify for such election, and then have the option to 
decide by the acreage reporting date if they want to go with enterprise 
units or change to basic or optional units, whichever they qualify for. 
The current language as structured allows insureds the opportunity to 
circumvent the sales closing date deadline for this election which is 
counter to the requirement that this election be made by the sales 
closing date. It creates an unintended loophole that producers could 
use to circumvent the sales closing date deadline for this election. If 
this provision is not changed it subjects the Approved Insurance 
Providers to possible adverse selection by producers since they would 
now be allowed to decide if they want to have enterprise units up to 
the acreage reporting date. In summary, the commenter stated the proper 
way to administer this provisions is to automatically apply enterprise 
units if the insured does not qualify for enterprise units by practice 
and then revert to basic or optional units if the insured does not 
qualify for enterprise units either (similar to how the commenter would 
handle this if it was discovered after the acreage reporting date 
except that optional units would also be an option in addition to basic 
units).
    Response: FCIC disagrees with the commenter. There is nothing in 
the policy that requires the election of unit structure by the sales 
closing date. Such decisions have always been made by the acreage 
report once the producer knows what crops/types/practices have been 
used. It is impossible to make such determinations by the sales closing 
date. However, to protect program integrity, coverage levels must be 
selected by the sales closing date because there is always a potential 
for loss before the acreage reporting date and it would adversely 
affect program integrity to allow producers to change their coverage 
level after a loss has occurred. Even though the producer may request 
separate coverage levels if authorized by type or practice, it cannot 
be binding on the producer because the producer may elect not to plant 
to one of the selected types or practices. This will not be known until 
the crop is planted, which may be months after the sales closing date. 
Allowing the insured to choose, before the acreage reporting date, one 
enterprise unit, or basic or optional units depending on which the 
insured has reported on the acreage report, allows flexibility for 
those insureds who would not have elected one enterprise unit but for 
the new enterprise unit by practice election. Removing this flexibility 
may deter insureds from electing separate enterprise units by practice. 
FCIC does not allow this flexibility after the acreage reporting date. 
If after the acreage reporting date, an insured who elected separate 
coverage levels by practice does not qualify is automatically applied 
basic or optional units, depending on which they have reported on their 
acreage report. No change has been made.

Section 11009

    Comment: A commenter stated their reading of the regulation 
indicates that USDA is limiting the use of actual production history 
(APH) based on production data availability. The commenter strongly 
recommended that APH Yield Adjustment Option be implemented for all 
producers without delay. This is an important provision especially for 
very progressive farms that have excellent production results.
    Another commenter stated erosion of APH due to consecutive years of 
disaster is an issue the wheat industry has been fighting for many 
years. With wheat being grown in some of the most diverse regions of 
the country, wheat farmers can be devastated with drought, floods or 
freezes in any given year. This provision would be very beneficial to 
wheat growers across the country, primarily in areas where they are 
dealing with multi-year disasters. FCIC announced that this provision 
will not be available for the 2015 crop year which has left a number of 
wheat farmers frustrated. The commenter would appreciate FCIC doing 
everything in its power to make this provision available to our growers 
for 2015. The commenter is specifically concerned over continued 
economic injury to those who can least afford it after years of 
financial stress due to ongoing drought. The commenter believed this 
provision will go a long way toward their goal of ensuring a producer 
is paying for coverage that matches his or her production expectation.
    Another commenter stated this provision will provide immediate 
relief to farmers who have suffered from multiple years of extreme 
weather disasters. The provision is not likely to trigger frequently, 
but will aid farmers in disaster areas to secure crop insurance 
coverage that meets average production estimates. A delay in 
implementation for the APH provision will result in one more year of 
eroding APH levels for growers across the Southern Plains region who 
are currently experiencing a record breaking, multiple year drought. 
The APH provision should be implemented immediately to adequately 
protect farmers and maintain the strength of the crop insurance 
program. As several key farm policy leaders have mentioned, if the 
provision cannot be implemented in 2015 for all areas and all crops, 
the commenter urged FCIC to target those areas most likely to benefit 
from the provision.
    Another commenter stated they appreciated FCIC's work in making 
other provisions included in the 2014 Farm Bill applicable for the 2015 
insurance year including: The ability to insure at different coverage 
levels by practice; enterprise unit coverage by practice; and the 
beginning farmer provisions. One provision that FCIC has indicated will 
not be available in 2015 is the APH adjustment. This provision is 
especially important for portions of the Cotton Belt who have recently 
incurred several years of historic drought conditions. Again, with 
insurance being the foundation of risk management for cotton producers, 
the commenter urged FCIC to continue to review every avenue possible 
for implementation of this important provision.
    Another commenter stated concerning the implementation of section 
11009 of the 2014 Farm Bill allowing insureds to exclude certain 
yields, the commenter understood there has been considerable discussion 
regarding the feasibility of an implementation in time for the 2015 
reinsurance year. The commenter also supported the provision and its 
timely implementation and the commenter offered their expertise and 
their agent members in assisting to achieve this objective that is so 
important to producers struck by natural disasters, particularly the 
drought-stricken producers of recent years.
    A commenter stated ``Section 11009--The ``APH Adjustment'' 
provision is one that is of particular importance to the commenter's 
membership and is among their top priorities for implementation. Based 
on previous statements from FCIC, the commenter continues to be 
concerned that this provision will not be implemented in time for the 
2015 insurance year. The commenter appreciated FCIC's willingness to 
continue to evaluate possible avenues for partial implementation of the 
provision for those regions of the country that are most impacted by 
the current drought and for which this provision was intended to 
provide

[[Page 42463]]

relief. The commenter believed that FCIC is making progress in this 
regard as it has become clear in recent weeks that FCIC has performed a 
significant amount of data collection and analysis in high impact 
regions. Based on these observations the commenter believes that FCIC 
can realistically implement this provision at a significant level for 
2015. The commenter encouraged FCIC to continue to work on this issue 
and to make every effort to make this provision available to cotton and 
grain producers in the regions that are most in need, specifically 
Texas and Oklahoma.
    Response: FCIC had a number of 2014 Farm Bill provisions that 
mandate a 2015 crop year implementation. In accordance with these 
mandates by Congress, FCIC had to devote considerable resources to this 
effort. Further, while many of the crop insurance provisions in the 
2014 Farm Bill were found in previous versions, section 11009 was not 
included until the final enactment of the 2014 Farm Bill. Due to many 
2014 Farm Bill programs being completed ahead of schedule, and the 
timing of these completions, FCIC was able to implement this provision 
for select spring crops for the 2015 crop year but given the sheer 
amount of work required to implement this provision for all crops, in 
all counties, by irrigated and non-irrigated practice, FCIC simply did 
not have the time or the resources to implement the provision for all 
crops and counties.
    Comment: A commenter stated section 11009 of the 2014 Farm Bill 
allows producers to exclude historic yields when county yields were at 
least 50 percent below the ten-year simple average. Agricultural 
producers already receive generous premium subsidies in addition to 
favorable provisions allowing any producer to receive crop insurance 
subsidies regardless of the risk profile of the farmland. Basing these 
taxpayer-subsidized guarantees on an ``actual'' production history that 
cherry-picks the best years of production is fiscally reckless. APH 
should reflect the history of production actually experienced, rather 
than some aspirational potential harvest that would have occurred if 
not for the growing conditions actually experienced. The commenter 
suggested this provision not be implemented. If it is, the commenter 
suggested a surcharge be charged for every yield plug inserted in a 
producer's APH, to account for the likelihood of yields falling short 
of these artificially high guarantees.
    Response: Since the provisions regarding exclusion of yields were 
mandated by the 2014 Farm Bill, FCIC is required by law to implement 
the changes. FCIC must also, by law, set premium rates sufficient to 
cover anticipated losses plus a reasonable reserve. FCIC has revised 
the premium rate calculations to account for the increase in a grower's 
coverage, and potential losses, due to the exclusion of certain yields 
from a producer's actual production history.
    Comment: A commenter stated the new CCIP Basic Provisions section 5 
states ``. . . the per planted acre yield was at least 50 percent below 
the simple average of the per acre planted yield for the crop in the 
county for the previous 10 consecutive crop years.'' The commenter does 
not believe FCIC intended to use different phrasing for per planted 
acre yield. The commenter recommended FCIC revise this section to only 
use the phrase ``per planted acre yield'' to accurately reflect that 
the yields to be considered are on a per-acre basis, but are limited to 
planted acreage.
    Response: FCIC agrees with the commenter and has revised the 
provisions accordingly.

Section 11014

    Comment: A commenter stated section 11014 of the 2014 Farm Bill 
reduces crop insurance premium subsidies on native sod acres in certain 
Midwestern states. This provision only applies to plots of land that 
are larger than five acres. Due to the unintended consequences and 
large public costs of tearing up native sod for cropland production, 
this threshold should be reduced to zero acres, or at a minimum, ensure 
that producers tear up no more than five acres across all of their 
farms, regardless of location, joint ownership, etc. The commenter 
believed taxpayers should not subsidize the conversion of sensitive 
cropland to crop production. Proper enforcement and monitoring of this 
provision should also be prioritized to ensure that taxpayer subsidies 
are not subsidizing risky planting decisions.
    Response: The 2014 Farm Bill specifically states ``The Secretary 
shall exempt areas of 5 acres or less''. Therefore, the 2014 Farm Bill 
does not provide the authority to change this threshold. FCIC has made 
changes to exempt a total of five acres or less per county, per 
producer, across all applicable insured crop policies cumulating each 
year until the 5-acre threshold is reached. Once a producer converts 
more than five acres of native sod, the reduction in benefits will 
apply to all native sod acreage going forward. The premium subsidy 
reduction of 50 percentage points is required by the 2014 Farm Bill on 
converted native sod. This guarantees that taxpayers will not bear the 
risk of the conversion of native sod acreage. No change has been made.
    Comment: Several commenters stated under the interim rule, a 
producer could convert native sod to an annual crop not covered by 
their chosen crop insurance policy and choose not to insure it during 
the first four crop years. During the fifth crop year the producer 
could add the converted acres to their policy and receive full Federal 
crop insurance benefits. For example, a crop insurance policy in the 
six sodsaver states would be for corn, soybeans, and wheat. A producer 
could plant annual crops of sunflowers, sorghum, millet, or oats during 
the first four years native sod is cropped and not include them in 
their crop insurance policy. The fifth year they could plant corn, 
soybeans or wheat and receive full crop insurance benefits. A producer 
could alternatively plant a perennial crop, like alfalfa, during the 
first four years of cropping native sod, receive full premium subsidies 
for forage insurance, and then again in year five plant an insurable 
annual crop and never be subject to sodsaver disincentives.
    The commenters recommended to avoid these potential loopholes, 
minimize taxpayer liabilities, and maintain Congressional intent, any 
native sod acreage converted after February 7, 2014, should be subject 
to sodsaver premium reductions for the first four years of Federally 
insured crop production. For example, a producer who converted 160 
acres of native sod in March 2014 plants alfalfa on that acreage in 
2014-2017, and plants Federally insured wheat in 2018 should be subject 
to four years of sodsaver disincentives beginning in year 2018. This 
would ensure that the disincentive to convert native sod to cropland is 
fulfilled as intended by Congress.
    Response: The 2014 Farm Bill states the reduction of benefits are 
during the first four crop years of planting on native sod acreage. 
These reduction of benefits only apply to annual crops planted during 
the first four crop years of planting on such acreage. FCIC does not 
have the authority to change these requirements and make them more 
restrictive. Therefore, no change has been made.
    Comment: Several commenters stated the sodsaver provisions define 
native sod as any land that has no substantiated cropping history prior 
to February 7, 2014. The statute reduces Federal crop insurance premium 
benefits by 50 percentage points following conversion of native sod, 
limits transitional yields to 65 percent, and prohibits yield 
substitution during the first four years an annual crop is

[[Page 42464]]

Federally-insured. Substantiation of cropping history should include a 
combination of verifiable FSA records and/or spatially-explicit data 
tied to those tracts. The commenters stated simply providing seed or 
input cost receipts with no verifiable tract-level spatial information 
or supporting FSA documentation should not suffice as adequate 
substantiation of cropping history.
    A few commenters stated a fact sheet published in June titled 
``Native Sod Guidelines for Federal Crop Insurance'' does not provide 
any limitation on the types of evidence that may be used to prove that 
land has been tilled. Instead, the guidance provides seven examples of 
acceptable documentation. Moreover, the interim rule stated that the 
absence of tillage will be ``determined in accordance with information 
collected and maintained by an agency of the USDA or other verifiable 
records that you provide and are acceptable to us[. . .]'' The 
commenters were concerned that this flexibility will result in the use 
of unreliable evidence of tillage. Therefore, the commenters 
recommended that if a producer cannot provide FSA, NRCS, or Common Land 
Unit documentation that demonstrates a cropping history on the land, 
there must be a body of spatially explicit evidence (e.g., GIS 
planting/harvest maps vs. simply seed or other input receipts with no 
verifiable spatial information) showing the cropping history clearly. 
The commenters strongly opposed the use of receipts and/or invoices as 
evidence of tillage, and the commenters urged that the rule explicitly 
exclude this as a form of documentation. The commenters believed third-
party verification will help ensure accurate ``substantiation'' of 
prior cropping history. A commenter further recommended that the final 
rule explicitly exclude the use of receipts and/or invoices as 
documentation of tillage.
    Response: FCIC agrees that the evidence for a cropping history must 
be tied to the specific acreage. Therefore, FCIC has removed from its 
issued procedures the reference to ``receipts and invoices'' as a form 
of documentation that may be used to substantiate the ground has been 
previously tilled for the production of a crop. In addition, FCIC has 
revised and issued procedures requiring the use of USDA documentation 
when available, including FSA and NRCS documentation.
    Comment: Several commenters stated under the interim rule, crop 
insurance agents would determine the classification of native sod. 
Three significant factors make this process unworkable: Inadequate 
training on landscape classification, lack of access to FSA 
information, and conflict of interest. Crop insurance agents are 
trained in crop insurance regulations, coverage, and processing. Their 
responsibilities require considerable knowledge of a number of 
processes. Adding another component starkly foreign to their existing 
heavy workload and for one which few crop insurance agents are trained 
is not an effective method for processing native sod determinations. 
This would likely result in a significant rate of errors, leading to 
the need for new determinations by a trained staff of experts.
    The commenters also stated that functionally, crop insurance agents 
have access to their own records regarding the cropping history of 
insured fields. However, that data often does not include the full 
cropping history of a field. Many fields may have data and history not 
accessible in insurance files. Often only FSA files have information on 
cropping history. This would require all crop insurance agents to 
contact FSA offices to obtain all information. It would simply be 
easier for FSA to make the determination and to remove the extra step 
of having the crop insurance agent make the inquiry into FSA.
    For many crop insurance agents, selling crop insurance is their 
livelihood. Placing them in charge of making native sod determinations, 
what is and is not insurable, stands in a stark conflict of interest. 
In the free market of crop insurance, if a farmer is not happy with the 
decision of an agent, they can simply go to another agent. This threat 
of lost business for upholding the sodsaver provisions could punish 
crop insurance agents who do the right thing. It is unfair to place 
that burden on crop insurance agents. Here again, it is better to leave 
native sod determinations to an independent third party and in 
particular, to the FSA since they already possess much of the necessary 
data.
    A few commenters stated the FSA and RMA have the ability, expertise 
and resources to work together to provide independent third-party 
verifications in a timely and accurate manner.
    Response: Native sod guidelines apply to all counties in Iowa, 
Minnesota, Montana, Nebraska, North Dakota, and South Dakota. An 
insured's benefits are reduced if they till native sod acreage to grow 
an annual crop during the first 4 crop years they are covered by 
Federal crop insurance for that acreage. Native sod acreage is acreage 
that has never been tilled or that the insured cannot prove to have 
been previously tilled for crop production. To prove that acreage was 
previously tilled, the insured must provide documentation to the 
approved insurance provider. Acceptable documentation may include, but 
is not limited to:
    (1) A Farm Service Agency (FSA)-578 document showing the crop that 
was previously planted on the requested acreage;
    (2) A prior crop year's FSA-578 document showing that the requested 
acreage is classified as cropland;
    (3) A prior crop year's Common Land Unit (CLU) Schema (RMA provides 
this to approved insurance providers), presented in a map format that 
contains the farm number, tract number, field number, CLU 
classification (the cropland classification code is `2'), and 
calculated acres by field;
    (4) Receipts and/or invoices from custom planters or harvesters 
identifying the fields that were planted or harvested;
    (5) A Natural Resources Conservation Service (NRCS) Form CPA-026e 
identifying the acreage with a ``No'' in the Sodbust column and a 
``Yes'' in the HEL column;
    (6) An NRCS Form CPA-026e identifying the acreage with a ``Yes'' in 
the Sodbust column and a determination date on or before February 7, 
2014; or
    (7) Precision agriculture planting records and/or raw data for 
previous crop years, provided such records meet the precision farming 
acreage reporting requirements.
    Therefore, agents do not determine the classification of land as 
native sod but rather the acreage itself and records provided by the 
producer to the approved insurance providers will be the basis for such 
determinations. The agent's role in native sod classification is to 
gather the documents provided by the insured to submit to the approved 
insurance providers or FCIC. Since agents do not make the 
determination, approved insurance providers or FCIC acts as a third-
party verifier. No change has been made.
    Comment: A commenter was not in favor of the provisions regarding 
native sod. The commenter recommended the determination of whether a 
parcel of land is prairie, or that it once was cultivated, should be 
made by the USDA as opposed to crop insurance agents.
    Response: Since the provisions regarding native sod contained in 
this rule were mandated by the 2014 Farm Bill, FCIC is required by law 
to implement the changes. As stated above, determinations are made 
based on records provided by the producer to

[[Page 42465]]

approved insurance providers. Agents do not make the determination. No 
change has been made.
    Comment: Several commenters stated FSA and RMA should monitor and 
provide publically available new breakings reports each year. This 
requirement was highlighted in the 2014 Farm Bill, which directs USDA 
to report changes in cropland acreage at the county level (including 
changes from non-cropland to cropland) since 2000 and on an annual 
basis post-enactment of the 2014 Farm Bill. The reporting requirement 
within Sec. 11014 Crop Production on Native Sod (Subsection C 
``Cropland Report'') also directs USDA to report changes in cropland 
acreage. While not explicitly stated, the intent of this subsection was 
to monitor and report changes in native sod acreage. Simply reporting 
annual cropland acreage does not achieve this goal and would be 
duplicative of other ongoing USDA cropland reporting efforts. According 
to USDA Bulletin--MGR-11-006, FSA should already be tracking and 
reporting new breakings each year.
    The commenters recommended FSA and RMA work together to monitor and 
provide annual new breakings reports at the county-level to measure the 
effectiveness of these policies, maintain public transparency, and help 
inform future policy making decisions. This can be done in a timely and 
accurate manner without jeopardizing landowner confidentiality. 
Specifically, the commenters asked USDA to develop and maintain a 
county-level ``data field'' of new breakings with no prior cropping 
history as they update their IT technology infrastructure. A commenter 
recommended that in order to track the impact of policies on grassland 
loss and the resulting impacts on wildlife, FSA must produce an annual 
report that tracks the conversion of native grasslands into row crop 
production. Another commenter stated information about new land 
breakings should be made available to the public on an annual basis.
    Response: The 2014 Farm Bill provides that a cropland report shall 
be required to be provided to the specific congressional committees 
indicating the changes in cropland acreage by county and state from 
year to year. Congress provided no other interpretation or intent other 
than what is provided in the 2014 Farm Bill. Therefore the report will 
be constructed according to the 2014 Farm Bill language. FSA is the 
lead agency in preparing the cropland acreage report because they have 
a more complete data set of the changes in cropland acreage. FCIC works 
with FSA, providing any data applicable and appropriate, to provide 
this report to specific congressional committees.
    Comment: Several commenters stated the sodsaver provisions include 
a de minimis exemption for lands five acres or less. That means 
producers can convert up to five acres of their land without being 
subject to sodsaver provisions. The interim rule is unclear whether 
this five-acre exemption is annual or cumulative over time. The intent 
of this de minimis provision was not to encourage conversion of five 
acres of native sod for a particular tract in year one, five more acres 
in year two, five more acres in year three, etc. Instead, it was 
intended to minimize conversion of native sod, like in the case of 
field round-outs, and avoid slowly converting native tracts over time.
    The commenters recommended a cumulative five-acre limit apply to 
all land that the producer is a property owner, operator, or tenant, 
similar to current FSA policy for conservation compliance provisions.
    Response: FCIC agrees that the interim rule was ambiguous. FCIC 
also agrees that the actual text and intent of the provision in the 
2014 Farm Bill is to discourage conversion of native sod and to make 
this determination on an annual county and crop basis would allow the 
continued slow conversion over time. Therefore, FCIC has determined 
native sod acreage will be determined on a cumulative basis over time 
by county. FCIC procedures will be revised to require producers to 
report native sod acreage by insured crop of five acres or less 
beginning with the 2017 crop year. Once a producer breaks out more than 
five acres cumulatively across all insured crops dating back to the 
2015 crop year, the provisions for reduced benefits due to converting 
native sod will be applied to the current crop year's insured native 
sod acreage and to any native sod acreage broken out in all subsequent 
crop years.
    Comment: A commenter supported the provision that indicates the de 
minimis acreage for the native sod provision to apply is five acres. 
This was in the earlier statutory provisions where the new sodsaver 
provisions were inserted, so the five acre minimum continues to apply.
    Response: FCIC agrees with the commenter and has retained the five-
acre de minimis provision in the final rule but has also made revisions 
so that the five-acre rule applies on a cumulative basis over time by 
county.
    Comment: A commenter stated they are glad that the rule appears to 
have incorporated the legislative provisions for sodsaver very 
effectively. The rule includes a new definition of ``native sod'' that 
references: (1) Absence of tillage; and (2) vegetative plant cover of 
native grasses, forbs, or shrubs as well as the trigger date of 
February 7, 2014, concerning potential violation. It also includes the 
specific listing of states covered by this aspect of the rule and 
removes the prior provision of the ``Prairie Pothole National Priority 
Area'' and the option formerly available for governors in those states. 
In the rule, if the native sod acreage is located in any of the listed 
states of Iowa, Minnesota, North Dakota, South Dakota, Nebraska, and 
Montana and tilled and planted, after February 7, 2014, to an annual 
crop during the first four crop years the rule reduces the insurance 
liability to be 65 percent of the protection factor and reduces the 
premium subsidy by 50 percentage points. The rule indicates that if the 
premium subsidy applicable to these acres is less than 50 percent 
before the reduction, then no premium subsidy at all would be 
available. However, the commenter did not find anything in the rule 
that bars yield substitution as specified in the native sod statutory 
provisions. While the commenter supported what is provided for native 
sod in the interim rule, they urged FCIC to include in the final rule 
the bar on yield substitution for violations and consider an amendment 
to the interim rule to include this important statutory provision.
    Response: FCIC agrees with the commenter that the 2014 Farm Bill 
required yield substitution be disallowed on native sod acreage. 
However, by restricting the native sod acreage yield guarantee to 65 
percent of the insured's applicable transitional yield, yield 
substitution cannot be utilized on native sod acreage because yield 
substitution is only applicable when the actual yields in the insured's 
production history database are less than 60 percent of the applicable 
transitional yield. Therefore, yield substitution would not be 
applicable to native sod acreage. To avoid any confusion, FCIC did not 
include this restriction to yield substitution in the interim rule and 
it is not necessary in the final rule. No change has been made.
    Comment: A commenter stated the language in item e. of the 
background and in section 9(f) of the CCIP Basic Provisions indicates 
that section 9(e) is not applicable to acres of native sod acreage that 
is five acres or less in the county. The commenter stated they received 
additional clarification from FCIC based on the procedures issued for 
native sod as a part of Information Memorandum: PM-14-027 that the five 
acres applies on a crop and county basis. For example, if an insured 
tilled

[[Page 42466]]

and planted four acres of native sod to corn and tilled and planted a 
different tract of four acres of native sod in the same county and year 
to soybeans that this would be allowable and that such acreage would 
not be subject to the reduction of benefits for the first four years. 
The language in this section of the provisions should be revised to be 
consistent with the procedural interpretations that are being made by 
the FCIC that the five-acre threshold for native sod is based on the 
crop and county.
    Response: As stated above, FCIC has determined that to allow 
determinations of the five-acre threshold by crop and county was 
inconsistent with the 2014 Farm Bill. Instead, native sod acreage will 
be cumulative over time by county to prevent the scenario stated above 
where producers continue to slowly convert new land by simply planting 
the acreage to a different crop on the acreage. Once a producer breaks 
out more than five acres cumulatively across all insured crops dating 
back to the 2015 crop year, the provisions for reduced benefits due to 
converting native sod will be applied to the current crop year's 
insured native sod acreage and to any native sod acreage broken out in 
all subsequent crop years. Since the native sod acreage is cumulative 
for all insured crops by county, a specification by crop is no longer 
needed.
    Comment: A commenter stated since the rule was not issued until 
July 1, 2014, producers who made investments to prepare ground for 
planting in 2014 had no way of knowing their decisions would result in 
a reduction of premium subsidies and production guarantees. Applying 
these penalties after-the-fact is unreasonable. The commenter proposed 
the rule be modified to prevent this unintended consequence by striking 
``and is planted to an annual crop'' from section 9(e) of the CCIP.
    The suggested change will also ensure that it conforms to the 
agency's definition of native sod (which makes no reference to a 
restriction on acreage being planted for crop year 2014).
    Response: FCIC agrees and has revised the provisions of the CCIP 
Basic Provisions and the ARPI Basic Provisions accordingly.

Section 11015

    Comment: A commenter stated section 11015 of the 2014 Farm Bill 
allows producers to receive taxpayer subsidies for separate coverage of 
irrigated versus non-irrigated cropland in a county. Agricultural 
producers have access to a suite of unsubsidized risk management 
options; some of the primary risk management techniques are 
diversification of crops, use of hybrids, and irrigation practices. 
Taxpayers should not subsidize risk management options that are readily 
available and already widely used in the private sector. At a minimum, 
when implementing this provision, the commenter recommended FCIC reduce 
the likelihood that producers shift acreage between irrigated and non-
irrigated acres after this rule is finalized, a likely unintended 
consequence if adequate measures are not taken in advance.
    Response: When enacting this provision, Congress observed that the 
risks relative to producing crops on dry land acreage versus irrigated 
acreage are considerably different, and that many insureds seek 
different coverage levels that are tailored to those varying risks. An 
insured must make an election for separate coverage levels for 
irrigated and non-irrigated acreage by the sales closing date and must 
meet all the policy requirements to insure their acreage under an 
irrigated practice. If the insured does not meet the policy 
requirements for insuring a crop under an irrigated practice by the 
acreage reporting date, the coverage level percentage they elected for 
the non-irrigated practice will be used to insure all acres qualifying 
for a non-irrigated practice. Therefore, FCIC does not believe there is 
a risk that insureds will shift acreage between irrigated and non-
irrigated acreage. Insureds can only insure acreage as irrigated for 
which they have an adequate amount of water to irrigate as specified by 
good farming practices for the area. Further, they have to actually 
apply the irrigation water to the acreage in the recommended amounts 
and intervals or any subsequent loss will be considered due to poor 
farming practices and no indemnity may be due. No change has been made.
    Comment: A commenter supported a producer's ability to purchase 
separate insurance for irrigated versus dry-land production. This Farm 
Bill provision was supported by the U.S. cotton industry and will be 
extremely beneficial to cotton producers. The commenter commended FCIC 
for making this change available for the 2015 crop year.
    Response: All acreage of the crop in the county must be insured 
under a single policy, but producers will now have the option of 
selecting different coverage levels for the irrigated and non-irrigated 
practices.

Section 11016

    Comment: A commenter strongly recommended that USDA expand 
incentives for beginning and young farmers and ranchers to Military 
Veterans and urged an increased premium subsidy for this segment of 
farmers.
    Response: FCIC has implemented the beginning farmer and rancher 
provisions in a way that is fair to all military personnel and 
consistent with the Joint Explanatory Statement of the Committee of 
Conference, which states the Managers intend this section to be 
implemented in a manner that does not discriminate against producers 
who grew up on a farm or ranch, left for post-secondary education or 
military service, and returned to the farm or ranch. When calculating 
the five crop years in this section, the Managers intend that any year 
when a producer was under the age of 18, in post-secondary studies, or 
serving in the U.S. military should not be counted. The implementation 
of this provision has been done to give the maximum benefit possible to 
military veterans as allowed by law. No change has been made.
    Comment: A commenter stated as the average age of farmers increase, 
it is imperative for U.S. agriculture to encourage more new and 
beginning farmers. The commenter believed the 10 percentage point 
premium subsidy increase for beginning farmers is an important 
provision that can allow a new producer to possibly purchase higher 
levels of coverage or provide a savings in insurance premiums that can 
be used for further investments. For many of these individuals, the 
prospect of starting an operation from the bottom up is nearly 
impossible due to the capital costs and credit availability. A more 
common practice is for new and beginning farmers to form partnerships 
within established operations with the intention of taking over the 
operation as the more established producer retires. FCIC's exclusion of 
these individuals by limiting the increased premium subsidy to only 
operations in which all of the substantial beneficial interested 
holders qualify as a beginning famer severely limits the reach of this 
provision. The commenter understood that the percentage of substantial 
beneficial interest holders is noted within the insurance documents. 
The commenter recommended that FCIC prorate the 10 percentage point 
increase in relation to the new and beginning farmer's percentage of 
substantial beneficial interest. This would allow more beginning 
farmers to utilize this provision and not put disadvantages on

[[Page 42467]]

the type of partnerships that represent the only option for some 
beginning farmers to enter farming.
    Response: Implementing the provision as suggested by the commenter 
would extend beginning farmer and rancher benefits to individuals who 
have previous farming experience and who are not the intended target of 
the 2014 Farm Bill. The 2014 Farm Bill defines a beginning farmer or 
rancher as one who has not actively operated and managed a farm or 
ranch with a bona fide interest in a crop or livestock as an owner-
operator, landlord, tenant, or sharecropper for more than five crop 
years. Since the 2014 Farm Bill specifically limits benefits to 
producers with five crop years or less of insurable interest in any 
crop or livestock, no change has been made.
    Comment: A commenter stated the language in item g. of the 
background describes the additional crop insurance incentives for 
beginning farmers and ranchers. This includes allowing the producer who 
qualifies as a beginning farmer or rancher to use the yield history 
from any previous involvement in a farm or ranch operation. The 
commenter questioned if a producer qualifies to use four years of 
history from another operator, can he/she pick and choose which year(s) 
to use or must all four years be used if he/she chooses to use such 
records. In addition, this item indicates that years of insurable 
interest can be excluded if earned while under the age of 18. The 
commenter questioned if it mattered when the person in question turns 
18. For example, if the beginning farmer or rancher applicant turns 18 
on December 31, after the crop year has already ended, the commenter 
questioned if he/she is able to exclude that crop year for beginning 
farmer or rancher purposes. The commenter questioned if the fact that 
he or she turned 18 during the same calendar year would disallow that 
year from being excluded for beginning farmer or rancher purposes.
    Response: FCIC issued procedures allow a beginning farmer or 
rancher to use the APH of the previous producer when the beginning 
farmer or rancher was previously involved in the farming or ranching 
operation. The insured may choose how many years in which to transfer 
but the history being transferred must start with the most recent crop 
year and there must not be a break in continuity in the crop years 
being transferred. Therefore, there are limitations on the insured's 
ability to pick and choose which years to transfer. FCIC issued 
procedures specify that an individual may exclude a crop year as 
insurable interest if the insurable interest in the crop occurred while 
the individual was under the age of 18, which includes any crop year in 
which a beginning farmer or rancher turns 18.
    Comment: A commenter stated FCIC needs to clarify that a non-
individual insured person may qualify as a beginning farmer or rancher 
when all the individual substantial beneficial interest holders qualify 
as beginning farmers or ranchers. The commenter recommended FCIC revise 
the last sentence in the definition of ``beginning farmer or rancher'' 
as follows: ``. . . may be eligible for beginning farmer or rancher 
benefits if there is at least one individual substantial beneficial 
interest holder and all individual substantial beneficial interest 
holders qualify as a beginning farmer or rancher.''
    Response: FCIC agrees with commenter and has revised the definition 
of ``beginning farmer or rancher'' accordingly.
    Comment: A commenter stated section 3(l)(1) of the CCIP Basic 
Provisions indicates that the person who qualifies as a beginning 
farmer or rancher can use the APH of the previous producer of the crop 
or livestock on the acreage he or she was previously involved with. 
This section of the policy should be clarified to indicate the person 
who qualifies as a beginning farmer or rancher can only use the year(s) 
he or she was a part of the decision-making or physical involvement 
which may not be all years of past history from the previous producer. 
The way this section is currently written it could be construed that 
all years from this other producer can be used which may not always be 
the case if the beginning farmer or rancher was only involved with some 
of those years of APH.
    Response: Unlike existing transfer of APH data requirements 
contained in FCIC-issued procedures, the number of years of production 
history that may be transferred is not limited by the number of years 
the beginning farmer or rancher was previously involved in the other 
person's farming or ranching operation. However, a beginning farmer or 
rancher can only use another person's production history for a crop 
that the beginning farmer or rancher was previously involved in. Since 
the 2014 Farm Bill used the phrase ``actual production history of the 
previous producer,'' FCIC interprets that to include all of the years 
of actual production history of the previous producer on the acreage, 
not limited to just those years the beginning farmer or rancher was 
involved in the operation. If the beginning farmer or rancher was 
involved with the livestock, they can use the other person's livestock 
records. If the beginning farmer or rancher was involved with a crop, 
they can use the other person's crop production records. Only the 
production history of the specific acreage being transferred may be 
used by the beginning farmer or rancher. No change has been made.
    Comment: A commenter recommended section 36 of the CCIP Basic 
Provisions should be revised to indicate that if it is later determined 
that the producer does not qualify as a beginning farmer or rancher, or 
once the producer has produced a crop for more than five years and no 
longer qualifies as a beginning farmer or rancher, that the excluded 
actual yield(s) will then change from 80 percent of the applicable 
transitional yield to 60 percent of the applicable transitional yield. 
The commenter stated this language needs to clarify that the 80 percent 
of the applicable transitional yield is not retained once the producer 
no longer qualifies as a beginning farmer or rancher.
    Response: Provisions and benefits regarding beginning farmer or 
rancher are only applicable when a producer qualifies as a beginning 
farmer or rancher. Although the policy is continuous, the insured must 
meet the terms and conditions of the policy each crop year and must 
qualify for beginning farmer or rancher benefits each crop year. That 
means that in those years the producer qualifies as a beginning farmer 
and rancher, the producer will receive 80 percent of the transitional 
yield. However, after five years, the producer's own yields are used to 
establish the APH and transitional yields are no longer used. No change 
has been made.
    Comment: A commenter recommended FCIC add a comma in section 36(c) 
of the CCIP Basic Provisions as follows: ``. . . qualify as a beginning 
farmer or rancher, in which case. . .''
    Response: FCIC agrees with commenter and has revised the provisions 
accordingly.

Section 11019

    Comment: A few commenters stated the term ``reinstatement'' used in 
section 2(k)(2)(iii)(B)(3)(i) of the ARPI Basic Provisions and section 
2(f)(2)(ii)(B)(3)(i) of the CCIP Basic Provisions should be defined 
(either added in each of the applicable Basic Provisions as a 
definition or included in the applicable section of each of the 
applicable Basic Provisions). The commenters stated this is important 
to define as reinstatement should not

[[Page 42468]]

allow or require new applications to be submitted after the sales 
closing date, but limit reinstatement to the coverage that was 
terminated for which there would already be an application form on 
file. Allowing or requiring a new application to reinstate coverage is 
not necessary and could imply that changes to the coverage that was 
terminated is acceptable which would create a disproportionate benefit 
to those for whom coverage is reinstated. The commenters recommended 
``reinstatement'' be defined as ``Reinstatement of coverage will be 
limited to the coverage you had in place on the sales closing date for 
the crops that were terminated due to ineligibility for debt. No new 
application is required and no requests to change coverage level, 
change plans of insurance or add or remove options or endorsements will 
be accepted unless such changes were made and submitted on an 
application form on or prior to the sales closing date for the crop.''
    Response: FCIC agrees that the applicable provisions should clarify 
that reinstatement is under the same terms and conditions of the policy 
in effect as of the date termination became effective. Currently 
procedures published at http://www.rma.usda.gov/bulletins/pm/2015/15-010a.pdf make this clear. However, a definition of ``reinstatement'' 
has been added to subpart U because it is applicable to ineligibility 
determinations, appeals, and reinstatement requests and cross 
references have been added to section 2(k)(2)(iii)(B)(3)(i) of the ARPI 
Basic Provisions and section 2(f)(2)(iii)(B)(3)(i) of the CCIP Basic 
Provisions.
    Comment: A commenter questioned how is an approved insurance 
provider going to determine whether a policyholders failure to pay 
premium was inadvertent in section 2(k)(2)(iii)(C)(1)(i) of the ARPI 
Basic Provisions and section 2(f)(2)(iii)(C)(1)(i) of the CCIP Basic 
Provisions.
    Response: On February 24, 2015, FCIC issued information memorandum 
PM-15-010 Late Payment of Debt procedures found at http://www.rma.usda.gov/bulletins/pm/2015/15-010a.pdf. The criteria to qualify 
for an approved insurance provider authorized reinstatement can be 
found in section 2, paragraph 2 of these procedures. Those procedures 
have been modified to clarify the specific conditions that approved 
insurance providers are required to use in making the determination. 
The approved insurance providers must use the requirements in section 
2(f)(2)(iii)(C)(1) of the CCIP and section 2(k)(2)(iii)(C)(1) of the 
ARPI Basic Provisions to make this determination. Additionally, on June 
30, 2015, FCIC issued the General Standards Handbook, which can be 
found at http://www.rma.usda.gov/handbooks/18000/ to further clarify 
the criteria an approved insurance provider is required to use in 
making a determination. No change has been made.
    Comment: A commenter recommended FCIC move the current section 
2(f)(2)(iii)(B)(3)(ii) of the CCIP Basic Provisions to be new a new 
section 2(f)(2)(iii)(B)(3) of the CCIP Basic Provisions, and combine 
the current sections 2(f)(2)(iii)(B)(3)(i) and 2(f)(2)(iii)(B)(3) of 
the CCIP Basic Provisions as a new section 2(f)(2)(iii)(B)(4) of the 
CCIP Basic Provisions. This organizational change sets the requirement 
that ``there is no evidence of fraud or misrepresentation'' apart from 
other text and appropriately makes it a key criteria for the 
Administrator granting reinstatement.
    Response: FCIC disagrees with the commenter that the change 
provides improved organizational benefits to the extent that a change 
is warranted. The proposed changes may have adverse or unintended 
consequences. The proposed revision introduces new paragraph 
designations that are not necessary and may create the potential for 
additional cross-references that can lead to greater confusion and 
potential for inaccurate reading. No change has been made.
    Comment: A commenter recommended FCIC revise section 
2(f)(2)(iii)(C)(1)(iii) of the CCIP Basic Provisions as follows: ``You 
timely made the full payment of the amount owed but the delivery of 
that payment was delayed, and was postmarked no more than 7 calendar 
days. . .'' This change will clarify that this clause only provides an 
allowance for reinstatement following termination for a late postmarked 
payment; it does not allow the payment itself to be made late (e.g., a 
late-dated check).
    Response: FCIC agrees with the commenter and has revised the 
provisions accordingly.
    Comment: A commenter stated section 2(f)(2)(iii)(C)(3) of the CCIP 
Basic Provisions requires the insured to submit a written request for 
reinstatement by the approved insurance provider in the situations 
indicated in sections 2(f)(2)(iii)(C)(1)(i) through (iii). The 
commenter believed the insured should only be required to submit a 
formal written request for sections 2(f)(2)(iii)(C)(1)(i) and (ii); the 
insured should not have to submit a written request for section 
2(f)(2)(iii)(C)(1)(iii). For section 2(f)(2)(iii)(C)(1)(iii), the 
insured's full payment of the premium owed should serve as the payment 
and an implicit request for reinstatement. For any such late payment, 
the insured will not know at the time the check is mailed that the 
payment would be delayed in postal processing which resulted in policy 
termination. For reinstatements under section 2(f)(2)(iii)(C)(1)(iii), 
the approved insurance provider will verify the insured made a timely 
and full payment. This approach would eliminate any need for the 
insured to complete a form before an approved insurance provider can 
accept a payment that was postmarked late.
    Response: FCIC issued procedures, which can be found at http://www.rma.usda.gov/handbooks/18000/, provide the approved insurance 
providers the guidance and direction that satisfy the written request 
requirement of 2(f)(2)(iii)(C)(1)(iii). No change has been made.
    Comment: A commenter suggested that the language in current section 
2(f)(2)(iii)(B)(3)(i) of the CCIP Basic Provisions also be included in 
section 2(f)(2)(iii)(C) of the CCIP Basic Provisions. It should be 
clear that reinstatement, whether granted by the Administrator or an 
approved insurance provider, is effective at the beginning of the crop 
year for which this insured was determined to be ineligible.
    Response: FCIC agrees and has added the same language from section 
2(f)(2)(iii)(B)(3)(i) of the CCIP Basic Provisions in a new section 
2(f)(2)(iii)(C)(4) of the CCIP Basic Provisions. FCIC has made the same 
change in a new section 2(k)(2)(iii)(C)(4) of the ARPI Basic 
Provisions.
    Comment: A commenter stated to make the policy clear concerning the 
specific administrative remedies the insured is waiving, as well as to 
ensure the insured understands they are waiving all other 
administrative remedies for any reinstatement request under these 
provisions, the commenter recommended FCIC replace section 2(f)(2)(iv) 
of the CCIP Basic Provisions as follows: ``You may not commence 
litigation or arbitration against us, obtain an administrative review 
in accordance with 7 CFR part 400, subpart J (administrative review), 
or file an appeal in accordance with 7 CFR part 11 (appeal), with 
respect to any determination made under section 2(f)(2)(iii)(B) or 
section 2(f)(2)(iii)(C).''
    Response: FCIC disagrees with the commenter. Section 20 of the CCIP 
Basic Provisions states that if the insured and the approved insurance 
provider fail to agree, the insured has a right to commence litigation, 
arbitration,

[[Page 42469]]

administrative review, or file an appeal against the approved insurance 
provider. A determination made under section 2(f)(2)(iii)(B) or section 
2(f)(2)(iii)(C) of the CCIP Basic Provisions is consistent with those 
for which the insured has a right to pursue appeal or other recourse. 
FCIC has revised the provisions to clarify that determinations made by 
the Administrator are only appealable to National Appeals Division, and 
determinations made by the approved insurance provider are appealable 
through the arbitration process in section 20 of the CCIP Basic 
Provisions.
    Comment: A commenter stated it is unclear from section 2(f)(2)(iv) 
of the CCIP Basic Provisions if an insured still has the right to 
appeal a determination made by RMA under section 2(f)(2)(iii)(B) to 
USDA's National Appeals Division. RMA's draft procedures on this 
section stated that appeals to the National Appeals Division were not 
allowed. However, the commenter believed it is questionable whether 
FCIC has the authority to completely prohibit insured's from appealing 
these determinations to the National Appeals Division. Additionally, 
FCIC needs to clarify that requests for reinstatements made by approved 
insurance providers under section 2(f)(2)(iii)(C) are not subject to 
arbitration. Ultimately, only RMA has the power to reinstate a policy 
that has been terminated, even if the request is being made by the 
approved insurance provider under section 2(f)(iii)(C); therefore, 
these determinations should not be subject to arbitration.
    If National Appeals Division appeals are precluded, the commenter 
recommended revising section 2(f)(2)(iv) to read as follows: ``You may 
not commence litigation or arbitration against us, obtain an 
administrative review in accordance with 7 CFR part 400, subpart J 
(administrative review), or file an appeal in accordance with 7 CFR 
part 11 (appeal), with respect to any determination made under section 
2(f)(2)(iii)(B) or section 2(f)(2)(iii)(C).''
    If National Appeals Division appeals are allowed, the commenter 
recommended revising section 2(f)(2)(iv) to read as follows: 
``Determinations made under section 2(f)(2)(iii)(B) or section 
2(f)(2)(iii)(C) may only be appealed in accordance with 7 CFR part 11 
(appeal). You may not commence litigation or arbitration against us, or 
obtain an administrative review in accordance with 7 CFR part 400, 
subpart J (administrative review), with respect to any determination 
made under section 2(f)(2)(iii)(B) or section 2(f)(2)(iii)(C).''
    Response: FCIC agrees that section 2(f)(2)(iv) is ambiguous and it 
was only intended to preclude requests for reconsideration under 7 CFR 
part 400, subpart J. It was never intended to preclude an appeal to the 
National Appeals Division. Further, producers have the right to appeal 
determinations by approved insurance providers under section 20 of the 
CCIP Basic Provisions. The provisions have been revised accordingly.
    Comment: A commenter stated the interim rule narrative item 4.g. 
(Federal Register page 37161) indicates that removal of the phrase ``, 
or any portion thereof,'' from current section 24(a) of the CCIP Basic 
Provisions is intended ``. . . to remove ambiguity of the billing 
process and interest situations on amounts owed, and to ensure 
consistency in how insurance providers administer this section.'' The 
commenter does not believe this change clarifies how interest is to 
accrue. For example, if the insured does not pay premium for a crop 
with a 7/31 billing date until 9/15, under the 2014 provisions the 
insured could be assessed two months interest for the period of August 
and September. Absent the clause in 24(a), it is now unclear whether 
the insured would owe interest for any portion of the month of 
September. Any change to current billing practices could impact 
approved insurance providers ability to recoup debt collection costs 
for the insured's late payment when full premium payment was timely 
made to FCIC on behalf of the insured. The commenter questioned if this 
phrase should be removed.
    A commenter stated for the 2015 reinsurance year, FCIC continues to 
issue Special Provision statement number 01282, which states ``In lieu 
of the second sentence of Section 24(a) of the Basic Provisions, for 
the purpose of premium amounts owed to us or administrative fees owed 
to FCIC, interest will start to accrue on the first day of the month 
following the issuance of the notice by us, provided that a minimum of 
30 days have passed from the premium billing date specified in the 
Special Provisions.'' The interim rule does not change the second 
sentence of 24(a). The commenter did not see a reason why this Special 
Provision statement could not be incorporated into the interim rule and 
the Special Provision statement be discontinued. However, the commenter 
noted that for the February 1 billing date the added provision of a 
minimum of 30 days does not work as there are only 28 or 29 days in the 
month of February. FCIC should therefore consider changing this to 28 
days.
    However, instead of the two changes suggested above by the 
commenter, ambiguity as to the precise amount of interest owed on 
unpaid premium billings could be eliminated by replacing the second 
sentence of 24(a) with the following language, which is modeled on 
24(b): ``For the purpose of premium amounts owed to us or 
administrative fees owed to FCIC, interest will start to accrue on the 
date that notice is issued to you for the collection of the unpaid 
amount. Amounts found due under this paragraph will not be charged 
interest if payment is made within 30 days of issuance of the notice by 
us.'' This change not only standardizes basic provision policy 
language, it is also consistent with revisions to section 6(b) of the 
CAT Endorsement and ensures premium billing is administered uniformly 
because interest accrues on a daily basis for all amounts owed.
    Response: Interest is accrued on a monthly basis, not daily. For 
example, the billing date is July 1 and the due date for payment is 
July 31. Interest will be included on the next bill dated August 1 if 
the payment is not made on or before July 31, 30 days after the notice 
has been issued to the policyholder. If the producer pays their bill on 
September 15, they are only billed interest for July and August. The 
interest for the month of September has not yet accrued and therefore 
would not be owed or included in the amount due. Because interest 
accrues on a monthly basis the phrase ``, or any portion thereof,'' is 
not needed. No change has been made. FCIC agrees with the commenter's 
suggestion to incorporate Special Provisions Statement 01282 into the 
policy language and has revised the language accordingly.
    Comment: A commenter stated the interim rule removes the phrase ``, 
or any portion thereof,''. However, the Farm Bill Amendment posted to 
RMA's Web site did not remove the word ``or''. The revised section 
24(a) of the CCIP Basic Provisions in RMA's Farm Bill Amendment should 
read: ``Interest will accrue at the rate of 1.25 percent simple 
interest per calendar month or on any unpaid amount owed to us or on 
any unpaid administrative fees owed to FCIC . . .''
    Response: The Farm Bill Amendment published on RMA's Web site 
contained an error and did not remove the word ``or.'' However, the 
interim rule provided the correct language and the word ``or'' was 
removed in the regulation. FCIC will make this

[[Page 42470]]

correction when the amendment for this final rule is issued.
    Comment: A commenter stated the interim rule indicates the phrase 
``, or any part thereof,'' was removed from 24(b) for FCIC policies. 
The commenter was unaware of any Federal crop insurance policy 
regulation specific to ``FCIC policies'' and there is no such phrase in 
CCIP 24(b). The commenter stated FCIC should remove this item from the 
interim rule.
    Response: For certain portions of the policy, FCIC maintains 
separate sections ``for Reinsured Policies'' and ``FCIC Policies'' in 
the Code of Federal Regulations. While no FCIC Policies are currently 
written, the authority to write such policies still exists and if there 
comes a time when such policies are needed, FCIC needs the provisions 
to enable it to provide such policies. Information regarding FCIC 
policies is only contained in the Code of Federal Regulations and is 
not included in the typeset policies published on the RMA Web site. 
Therefore, no change has been made.
    Comment: A commenter stated the time limit set-forth in Sec.  
400.682(g) should be revised. An insured will always receive a notice 
of the amount due well before the policy is terminated and this 60 day 
period could potentially expire before the policy is terminated. Thus, 
the 60 day period should not be tied to a notice of debt. Also, until 
the insured receives notice that the policy has been terminated, there 
would really be no need for the insured to move forward with requesting 
relief from RMA. Therefore, we think a fairer and clearer approach to 
this issue would be to shorten the time period to 30 days; however, the 
30 days would not begin to accrue until the insured receives notice 
that the policy has been terminated. The revised language would read as 
follows:
    (3) No later than 30 days from the date of the notice from the FCIC 
informing the person of ineligibility due to nonpayment of a debt, the 
ineligible person may request consideration for reinstatement from the 
Administrator of the Risk Management Agency in accordance with section 
2 of the CCIP Basic Provisions (7 CFR 457.8).
    Response: FCIC agrees that as written, the language in Sec.  
400.682(g) can be confusing and requires further clarification. The 
phrase ``the due date specified in the notice to the person of the 
amount due'' could be interpreted to apply to different types of 
scenarios and/or notices, i.e. billing statements. FCIC intended for 
this phrase to only apply in situations where the insured has received 
notice of an amount due after the termination date (for example, an 
overpaid indemnity or when premium revisions occur requiring additional 
premium be owed and billed), meaning the ineligible person may request 
consideration for reinstatement no later than 60 days after the due 
date specified in the notice of overpaid indemnity, additional premium 
owed due to revisions, or any other amounts due after the termination 
date. FCIC has revised Sec.  400.682(g) to state the 60-day time period 
starts on the due date specified in the notice to the person of the 
amount due in the case of an overpaid indemnity or any other amount 
that becomes due after the termination date. FCIC has also made the 
same change in the ARPI Basic Provisions and CCIP Basic Provisions.
    Comment: A commenter stated the time limit set-forth in section 
2(f)(2)(iii)(B)(3) of the CCIP Basic Provisions should be revised. An 
insured will always receive a notice of the amount due well before the 
policy is terminated and this 60 day period could potentially expire 
before the policy is terminated. Thus, the 60 day period should not be 
tied to a notice of debt. Also, until the insured receives notice that 
the policy has been terminated, there would really be no need for the 
insured to move forward with requesting reinstatement from RMA. 
Therefore, the commenter thought a fairer and clearer approach to this 
issue would be to shorten the time period to 30 days; however the 30 
days would not begin to accrue until the insured receives notice that 
the policy has been terminated. The revised language would read as 
follows:
    You submit a written request for reinstatement of your policy to us 
no later than 30 days from the date of the notice from the FCIC 
informing you of your ineligibility due to nonpayment of a debt.
    The commenter stated the same comment above about the time limit 
for these requests that applies to section 2(f)(2)(iii)(C) of the CCIP 
Basic Provisions. Additionally, it makes no sense to apply the written 
request requirement to late postmarks that fall within the 7 day 
transit period. These should just be automatically reinstated by the 
approved insurance providers. An Appendix III code should be developed 
so that policies which fit these criteria are tracked, but are never 
actually terminated and made ineligible in the first instance. As 
revised, this section would read as follows:
    (C) We determine that, in accordance with 7 CFR part 400, subpart U 
and FCIC issued procedures, one of the following two conditions are 
met:
    (1) You submit a written request for reinstatement of your policy 
to us in accordance with 7 CFR part 400, subpart U and applicable 
procedures no later than 30 days after the termination date or the 
missed payment date of a previously executed written payment agreement, 
or the due date specified in the notice to you of the amount due, if 
applicable, in which you demonstrate that:
    (i) You made timely payment for the amount of premium owed but you 
inadvertently omitted some small amount, such as the most recent 
month's interest or a small administrative fee or the amount of the 
payment was clearly transposed from the amount that was otherwise due 
(For example, you owed $832 but you paid $823);
    (ii) You remit full payment of the delinquent debt owed to us with 
your request for reinstatement; and
    (iii) There is no evidence of fraud or misrepresentation; or
    (2) You sent the full payment to us by mail and the payment was 
postmarked after the termination date or other applicable due date, but 
received by us within 7 calendar days after the termination date or 
other applicable due date.
    Response: As stated above, FCIC agrees that as written, the 
language regarding the 60 day period can be confusing and requires 
further clarification. FCIC has revised section 2(f)(2)(iii) of the 
CCIP Basic Provisions and section 2(k)(2)(iii) of the ARPI Basic 
Provisions to state the 60 days starts on the due date specified in the 
notice to the person of the amount due in the case of an overpaid 
indemnity or any other amount that becomes due after the termination 
date. Lastly, FCIC has revised the reference to ``$832 but you paid 
$823'' in section 2(f)(2)(iii)(C)(1)(ii) of the CCIP Basic Provisions 
to ``$892 but you paid $829'' for clarity and consistency purposes in 
accordance with Appendix III to the Standard Reinsurance Agreement and 
instructions for handling debt and ineligibility. Appendix III of the 
Standard Reinsurance Agreement allows approved insurance providers the 
latitude to write-off balances equal to or less than $50. Therefore, 
the example has been revised to reflect a difference of greater than 
$50.
    In addition to the changes described above, FCIC has revised the 
definition of ``approved yield'' to clarify the approved yield may have 
yield exclusions elected under section 5 of the CCIP Basic Provisions. 
The definition listed exceptions or adjustments that may be made to an

[[Page 42471]]

approved yield. Section 5, which addresses exclusion of yields should 
be included in this list.
    FCIC has also revised the provisions in section 34(a)(5)(i)(A)(3) 
of the CCIP Basic Provisions. The requirement to allow separate units 
by irrigated and non-irrigated practice were added to enterprise units 
in the interim rule. FCIC inadvertently omitted allowing separate units 
by irrigated and non-irrigated practices for whole-farm units. FCIC 
published a Special Provisions statement to allow such and has 
incorporated this change in the final rule and will remove the Special 
Provisions statement after this final rule is published.

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. Delaying the effective of 
this rule would result in the inability of the Federal Government to 
implement these changes prior to the contract change date for fall 
planted crops, effectively delaying their implementation for an entire 
year. Therefore, using the administrative procedure provisions in 5 
U.S.C. 553, RMA finds that there is good cause for making this rule 
effective less than 30 days after publication in the Federal Register. 
This rule allows RMA to make the changes to the General Administrative 
Regulations; Catastrophic Risk Protection Endorsement; Area Risk 
Protection Insurance Regulations; and the Common Crop Insurance 
Regulations, Basic Provisions in time for 2017 fall planted crops. 
Therefore, this final rule is effective when published in the Federal 
Register.

Executive Order 12866

    This rule has been determined to be economically significant for 
the purposes of Executive Order 12866 and, therefore, it has been 
reviewed by the Office of Management and Budget (OMB).

Benefit-Cost Analysis

    A Benefit-Cost Analysis (BCA) has been completed and a summary is 
shown below; the full analysis may be viewed on http://www.regulations.gov in the docket listed above. In summary, the 
analysis finds that changes in the rule will have an expected cost to 
FCIC of $115.9 million annually over a 10-year period in administration 
of the Federal crop insurance program. Non-quantifiable benefits of 
this rule include increased program integrity, additional risk 
management tools for producers, and incentives for beginning farmers 
and ranchers to participate in the Federal crop insurance program.
    On February 7, 2014, the 2014 Farm Bill was enacted. As a result, 
FCIC revised those provisions of the General Administrative 
Regulations--Ineligibility for Programs under the Federal Crop 
Insurance Act (subpart U), Catastrophic Risk Protection Endorsement 
(CAT Endorsement), Area Risk Protection Insurance (ARPI) Basic 
Provisions, and the Common Crop Insurance Provisions (CCIP) Basic 
Provisions to timely implement program changes identified in Titles II 
and XI of the 2014 Farm Bill.
    On January 2014, the Congressional Budget Office (CBO) issued its 
estimates for the effects on direct spending and revenues of the 2014 
Farm Bill. These estimates were used as a basis for the quantifiable 
costs and benefits stated in this BCA.
    The purpose of this rule is to amend subpart U, the CAT 
Endorsement, the ARPI Basic Provisions, and the CCIP Basic Provisions 
to implement the following changes:
    Section 2611 requires those enrolled in Federal crop insurance, for 
certain agriculture commodities, to comply with conservation compliance 
requirements or forego premium subsidy. For acts or situations of non-
compliance, ineligibility for premium subsidy will be applied beginning 
with the 2016 reinsurance year. Annually, FCIC anticipates a savings of 
$4.6 million as a result of this change.
    Section 11007 makes available insurance coverage by separate 
enterprise units based on irrigated and non-irrigated acreage of a crop 
within a county. Annually, FCIC anticipates a cost of $53.3 million as 
a result of this change.
    Section 11009 allows insureds to exclude any recorded or appraised 
yield for any crop year in which the per planted acre yield in the 
county is at least 50 percent below the simple average per planted acre 
yield for the crop in the county for the previous 10 consecutive crop 
years, and allows insureds in any county contiguous to a county in 
which an insured is eligible to exclude a recorded or appraised yield 
to also elect a similar adjustment. Annually, FCIC anticipates a cost 
of $35.7 million as a result of this change.
    Section 11014 applies a reduction of premium subsidy, a reduced 
insurance guarantee, and eliminates substitute yields in the insurance 
guarantee during the first four crop years that land is converted from 
native sod to the production of an annual crop in the States of Iowa, 
Minnesota, Montana, Nebraska, North Dakota, and South Dakota. Annually, 
FCIC anticipates a savings of $11.4 million as a result of this change.
    Section 11015 allows producers to elect a different level of 
coverage for an agricultural commodity by irrigated and non-irrigated 
acreage. Annually, FCIC anticipates a cost of $16.8 million as a result 
of this change.
    Section 11016 establishes crop insurance benefits for beginning 
farmers and ranchers by increasing the premium subsidy available by ten 
percentage points, allowing the use of yield history from any previous 
farm or ranch operation in which they had decision making or physical 
involvement, and replacing a low yield in their actual production 
history (APH) with a yield equal to 80 percent of the applicable 
transitional yield. Annually, FCIC anticipates a cost of $26.1 million 
as a result of this change.
    Section 11019 allows for the correction of errors in information 
obtained from the producer within a reasonable amount of time and 
consistent with information provided by the producer to other agencies 
of the Department of Agriculture subject to certain limitations for 
maintaining program integrity. This section also provides for the 
payment of debt after the termination date in accordance with 
procedures and limitations established by the FCIC, if a producer 
inadvertently fails to pay a debt and has been determined to be 
ineligible to participate in the Federal crop insurance program. FCIC 
does not believe there are any additional cost outlays resulting from 
this change. Therefore, FCIC believes some insureds will benefit from 
this change and the benefits are non-quantifiable.

Paperwork Reduction Act of 1995

    Pursuant to the provisions of the Paperwork Reduction Act of 1995 
(44 U.S.C. chapter 35), the collections of information in this rule 
have been approved by OMB under control numbers 0563-0085, 0563-0083, 
and 0563-0053.

E-Government Act Compliance

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

[[Page 42472]]

information and services, and for other purposes.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
establishes requirements for Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and 
the private sector. This rule contains no Federal mandates (under the 
regulatory provisions of title II of the UMRA) for State, local, and 
tribal governments or the private sector. Therefore, this rule is not 
subject to the requirements of sections 202 and 205 of UMRA.

Executive Order 13132

    It has been determined under section 1(a) of Executive Order 13132, 
Federalism, that this rule does not have sufficient implications to 
warrant consultation with the States. The provisions contained in this 
rule will not have a substantial direct effect on States, or on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' 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.
    The Federal Crop Insurance Corporation 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 E.O. 13175. If a Tribe requests consultation, the 
Federal Crop Insurance Corporation will work with the Office of Tribal 
Relations to ensure meaningful consultation is provided where changes, 
additions and modifications identified herein are not expressly 
mandated by Congress.

Regulatory Flexibility Act

    FCIC certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. Program 
requirements for the Federal crop insurance program are the same for 
all producers regardless of the size of their farming operation. For 
instance, all producers are required to submit an application and 
acreage report to establish their insurance guarantees and compute 
premium amounts, and all producers are required to submit a notice of 
loss and production information to determine the amount of an indemnity 
payment in the event of an insured cause of crop loss. Whether a 
producer has 10 acres or 1000 acres, there is no difference in the kind 
of information collected. To ensure crop insurance is available to 
small entities, the Federal Crop Insurance Act (Act) authorizes FCIC to 
waive collection of administrative fees from beginning farmers or 
ranchers and limited resource farmers. FCIC believes this waiver helps 
to ensure that small entities are given the same opportunities as large 
entities to manage their risks through the use of Federal crop 
insurance. A Regulatory Flexibility Analysis has not been prepared 
since this regulation does not have an impact on small entities, and, 
therefore, this regulation is exempt from the provisions of the 
Regulatory Flexibility Act (5 U.S.C. 605).

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which require intergovernmental consultation with State and 
local officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115, June 24, 1983.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988 on civil justice reform. The provisions of this rule will not 
have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. With respect to any direct action taken by FCIC 
or to require the insurance provider to take specific action under the 
terms of the crop insurance policy, the administrative appeal 
provisions published at 7 CFR part 11 must be exhausted before any 
action against FCIC for judicial review may be brought.

Environmental Evaluation

    This action is not expected to have a significant economic impact 
on the quality of the human environment, health, or safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

List of Subjects in 7 CFR Parts 400, 402, 407 and 457

    Administrative practice and procedure, Crop insurance, Reporting 
and recordkeeping requirements.

Final Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation adopts as final the interim rule amending 7 CFR 
parts 400, 402, 407, and 457, published at 79 FR 37155 on July 1, 2014, 
as final with the following changes:

PART 400--GENERAL ADMINISTRATIVE REGULATIONS

0
1. The authority citation is added for 7 CFR part 400 to read as 
follows:

    Authority: 7 U.S.C. 1506(1), 1506(o).


0
2. Amend Sec.  400.677 by adding the definition of ``reinstatement'' in 
alphabetical order to read as follows:


Sec.  400.677  Definitions.

* * * * *
    Reinstatement means that the policy will retain the same plan of 
insurance, coverage levels, price percentages, endorsements and options 
the person had prior to termination, provided the person continues to 
meet all eligibility requirements, comply with the terms of the policy, 
and there is no evidence of misrepresentation or fraud.
* * * * *

0
3. Amend Sec.  400.679 as follows:
0
a. In paragraph (e) by adding a semicolon at the end of the paragraph; 
and
0
b. Revising paragraph (g).
    The revision reads as follows:


Sec.  400.679  Criteria for ineligibility.

* * * * *
    (g) Has requested the Administrator, Risk Management Agency, for 
consideration to reinstate their eligibility in accordance with the 
applicable policy provisions and such request has been denied.

0
4. Amend Sec.  400.682 by revising paragraph (g) to read as follows:


Sec.  400.682  Determination and notification.

* * * * *
    (g) No later than 60 days after the termination date, a missed 
payment date

[[Page 42473]]

of a previously executed written payment agreement, or in the case of 
an overpaid indemnity or any amount that became due after the 
termination date, the due date specified in a notice to the person of 
an amount due, as applicable, such ineligible person may request 
consideration for reinstatement from the Administrator, Risk Management 
Agency, in accordance with section 2 of the Common Crop Insurance 
Policy Basic Provisions (7 CFR 457.8).

PART 402--CATASTROPHIC RISK PROTECTION ENDORSEMENT

0
5. The authority citation for 7 CFR part 402 continues to read as 
follows:

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



0
6. Amend Sec.  402.4 as follows:
0
a. In section 3(c) by removing the phrase ``paragraph (b) above'' and 
adding in its place the phrase ``section 3(b)'';
0
b. In section 6(a) by removing the phrase ``paragraphs (f) and (h) of 
this section'' and adding in its place the phrase ``sections 6(f) and 
(h)'';
0
c. In section 6(b) by removing the phrase ``paragraph (f) of this 
section'' and adding in its place the phrase ``section 6(f)'';
0
d. In section 6(c) by removing the phrase ``paragraph (b) of this 
section'' and adding in its place the phrase ``section 6(b)'';
0
e. In section 6(d) by removing the phrase ``paragraph (b) of this 
section'' and adding in its place the phrase ``section 6(b)'';
0
f. In section 6(e) by removing the phrase ``paragraph (f) of this 
section'' and adding in its place the phrase ``section 6(f)'';
0
g. In section 6(f)(2) by removing the phrase ``paragraph (f)(1) of this 
section'' and adding in its place the phrase ``section 6(f)(1)'';
0
h. Revise section 6(f)(2)(i);
0
i. In section 6(f)(2)(ii)(A) by removing the phrase ``paragraph (f)(1) 
of this section'' and adding in its place the phrase ``section 
6(f)(1)'';
0
j. In section 6(f)(2)(ii)(B) by removing the phrase ``paragraph (f)(1) 
of this section'' and adding in its place the phrase ``section 
6(f)(1)''; and
0
k. In section 6(h) by removing the phrase ``paragraph (f) of this 
section'' and adding in its place the phrase ``section 6(f)''.
    The revision reads as follows:


Sec.  402.4  Catastrophic Risk Protection Endorsement Provisions.

* * * * *
    6. Annual Premium and Administrative Fees
* * * * *
    (f) * * *
    (2) * * *
    (i) Notwithstanding section 6(f)(2), if you demonstrate you began 
farming for the first time after June 1 but prior to the beginning of 
the reinsurance year (July 1), you may be eligible for premium subsidy 
the subsequent reinsurance year without having form AD-1026 on file 
with FSA on or before June 1. For example, if you demonstrate you 
started farming for the first time on June 15, 2015, you may be 
eligible for premium subsidy for the 2016 reinsurance year without form 
AD-1026 on file with FSA.
* * * * *

PART 407--AREA RISK PROTECTION INSURANCE REGULATIONS

0
7. The authority citation for 7 CFR part 407 continues to read as 
follows:

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



0
8. Amend Sec.  407.9 as follows:
0
a. In section 1 by revising the definition of ``beginning farmer or 
rancher'';
0
b. Revise sections 2(k)(2)(iii) and (iv);
0
c. Revise section 5(d);
0
d. In section 5(e) by removing the phrase ``areas of'' and adding in 
its place the word ``cumulative'';
0
e. Revise section 7(i)(2)(i);
0
f. In section 22(b) [FCIC policies] by adding the phrase ``the issuance 
of the notice by us, provided that a minimum of 30 days have passed 
from'' after the phrase ``interest will start to accrue on the first 
day of the month following'';
0
g. In section 22(a)(1) [Reinsured policies] by adding the phrase ``the 
issuance of the notice by us, provided that a minimum of 30 days have 
passed from'' after the phrase ``interest will start to accrue on the 
first day of the month following''; and
0
h. In section 31(a)(1) by removing the word ``the'' after the phrase 
``any person with a substantial beneficial interest in''.
    The revisions read as follows:


Sec.  407.9  Area risk protection insurance policy.

* * * * *
    1. Definitions
* * * * *
    Beginning farmer or rancher. An individual who has not actively 
operated and managed a farm or ranch in any state, with an insurable 
interest in a crop or livestock as an owner-operator, landlord, tenant, 
or sharecropper for more than five crop years, as determined in 
accordance with FCIC procedures. Any crop year's insurable interest 
may, at your election, be excluded if earned while under the age of 18, 
while in full-time military service of the United States, or while in 
post-secondary education, in accordance with FCIC procedures. A person 
other than an individual may be eligible for beginning farmer or 
rancher benefits if there is at least one individual substantial 
beneficial interest holder and all individual substantial beneficial 
interest holders qualify as a beginning farmer or rancher.
* * * * *
    2. Life of Policy, Cancellation, and Termination
* * * * *
    (k) * * *
    (2) * * *
    (iii) Once the policy is terminated, it cannot be reinstated for 
the current crop year unless:
    (A) The termination was in error;
    (B) The Administrator of the Risk Management Agency, at his or her 
sole discretion, determines that the following conditions are met:
    (1) In accordance with 7 CFR part 400, subpart U, and FCIC issued 
procedures, you provide documentation that your failure to pay your 
debt is due to an unforeseen or unavoidable event or an extraordinary 
weather event that created an impossible situation for you to make 
timely payment;
    (2) You remit full payment of the delinquent debt owed to us or 
FCIC with your request submitted in accordance with section 
2(k)(2)(iii)(B)(3); and
    (3) You submit a written request for reinstatement of your policy 
to us no later than 60 days after the termination date or the missed 
payment date of a previously executed written payment agreement, or in 
the case of overpaid indemnity or any amount that became due after the 
termination date, the due date specified in the notice to you of the 
amount due, if applicable.
    (i) If authorization for reinstatement, as defined in 7 CFR part 
400, subpart U, is granted, your policies will be reinstated effective 
at the beginning of the crop year for which you were determined 
ineligible, and you will be entitled to all applicable benefits under 
such policies, provided you meet all eligibility requirements and 
comply with the terms of the policy; and
    (ii) There is no evidence of fraud or misrepresentation; or
    (C) We determine that, in accordance with 7 CFR part 400, subpart 
U, and FCIC issued procedures, the following are met:
    (1) You can demonstrate:
    (i) You made timely payment for the amount of premium owed but you

[[Page 42474]]

inadvertently omitted some small amount, such as the most recent 
month's interest or a small administrative fee;
    (ii) The amount of the payment was clearly transposed from the 
amount that was otherwise due (For example, you owed $892 but you paid 
$829); or
    (iii) You timely made the full payment of the amount owed but the 
delivery of that payment was delayed, and was postmarked no more than 
seven calendar days after the termination date or the missed payment 
date of a previously executed written payment agreement, or in the case 
of overpaid indemnity or any amount that became due after the 
termination date, the due date specified in a notice to you of an 
amount due, as applicable;
    (2) You remit full payment of the delinquent debt owed to us; and
    (3) You submit a written request for reinstatement of your policy 
to us in accordance with 7 CFR part 400, subpart U, and applicable 
procedures no later than 30 days after the termination date or the 
missed payment date of a previously executed written payment agreement, 
or in the case of overpaid indemnity or any amount that became due 
after the termination date, the due date specified in the notice to you 
of the amount due, if applicable; and
    (4) If authorization for reinstatement, as defined in 7 CFR part 
400, subpart U, is granted, your policies will be reinstated effective 
at the beginning of the crop year for which you were determined 
ineligible, and you will be entitled to all applicable benefits under 
such policies, provided you meet all eligibility requirements and 
comply with the terms of the policy; and
    (5) There is no evidence of fraud or misrepresentation.
    (iv) A determination made under:
    (A) Section 2(k)(2)(iii)(B) may only be appealed to the National 
Appeals Division in accordance with 7 CFR part 11; and
    (B) Section 2(k)(2)(iii)(C) may only be appealed in accordance with 
section 23.
* * * * *
    5. Insurable Acreage
* * * * *
    (d) Except as provided in section 5(e), in the states of Iowa, 
Minnesota, Montana, Nebraska, North Dakota, and South Dakota, during 
the first four crop years of planting on native sod acreage that has 
been tilled after February 7, 2014, such acreage may be insured if the 
requirements of section 5(a) have been met but will:
    (1) Notwithstanding the provisions in section 6, receive a 
liability that is based on 65 percent of the protection factor; and
    (2) For additional coverage policies, receive a premium subsidy 
that is 50 percentage points less than would otherwise be provided on 
acreage not qualifying as native sod. If the premium subsidy applicable 
to these acres is less than 50 percent before the reduction, you will 
receive no premium subsidy.
* * * * *
    7. Annual Premium and Administrative Fees
* * * * *
    (i) * * *
    (2) * * *
    (i) Notwithstanding section 7(i)(2), if you demonstrate you began 
farming for the first time after June 1 but prior to the beginning of 
the reinsurance year (July 1), you may be eligible for premium subsidy 
the subsequent reinsurance year without having form AD-1026 on file 
with FSA on or before June 1. For example, if you demonstrate you 
started farming for the first time on June 15, 2015, you may be 
eligible for premium subsidy for the 2016 reinsurance year without form 
AD-1026 on file with FSA.
* * * * *

PART 457--COMMON CROP INSURANCE REGULATIONS

0
9. The authority citation for 7 CFR part 457 continues to read as 
follows:

    Authority: 7 U.S.C. 1506(1) and 1506(o).



0
10. Amend Sec.  457.8, in the Common Crop Insurance Policy, as follows:
0
a. In section 1 by revising the definitions of ``approved yield'', 
``beginning farmer or rancher'', and ``enterprise unit'';
0
b. Revise sections 2(f)(2)(iii) and (iv);
0
c. In section 5 by removing the phrase ``per acre planted'' and adding 
in its place the phrase ``per planted acre'';
0
d. Revise section 7(h)(2)(i);
0
e. In section 9(e) by removing the phrase ``and is planted to an annual 
crop'';
0
f. In section 9(f) by removing the phrase ``areas of'' and adding in 
its place the word ``cumulative'';
0
g. Under ``For FCIC policies'', in section 24(b), by adding the phrase 
``the issuance of the notice by us, provided that a minimum of 30 days 
have passed from'' after the phrase ``interest will start to accrue on 
the first day of the month following'';
0
h. Under ``For reinsured policies'', in section 24(a), by adding the 
phrase ``the issuance of the notice by us, provided that a minimum of 
30 days have passed from'' after the phrase ``interest will start to 
accrue on the first day of the month following'';
0
i. In section 25(a)(1) by removing the word ``the'' after the phrase 
``any person with a substantial beneficial interest in'';
0
j. Revise section 34(a)(5)(i)(A)(3); and
0
k. In section 36(c) by adding a comma after the phrase ``unless you 
qualify as a beginning farmer or rancher''.
    The revisions read as follows:


Sec.  457.8  The application and policy.

* * * * *

Common Crop Insurance Policy

* * * * *
    1. Definitions
* * * * *
    Approved yield. The actual production history (APH) yield, 
calculated and approved by the verifier, used to determine the 
production guarantee by summing the yearly actual, assigned, adjusted 
or unadjusted transitional yields and dividing the sum by the number of 
yields contained in the database, which will always contain at least 
four yields. The database may contain up to 10 consecutive crop years 
of actual or assigned yields. The approved yield may have yield 
exclusions elected under section 5, yield adjustments elected under 
section 36, revisions according to section 3, or other limitations 
according to FCIC approved procedures applied when calculating the 
approved yield.
* * * * *
    Beginning farmer or rancher. An individual who has not actively 
operated and managed a farm or ranch in any state, with an insurable 
interest in a crop or livestock as an owner-operator, landlord, tenant, 
or sharecropper for more than five crop years, as determined in 
accordance with FCIC procedures. Any crop year's insurable interest 
may, at your election, be excluded if earned while under the age of 18, 
while in full-time military service of the United States, or while in 
post-secondary education, in accordance with FCIC procedures. A person 
other than an individual may be eligible for beginning farmer or 
rancher benefits if there is at least one individual substantial 
beneficial interest holder and all individual substantial beneficial 
interest holders qualify as a beginning farmer or rancher.
* * * * *
    Enterprise unit. All insurable acreage of the same insured crop or 
all insurable irrigated or non-irrigated acreage of the same insured 
crop in the county in which you have a share on the date coverage 
begins for the crop year,

[[Page 42475]]

provided the requirements of section 34 are met.
* * * * *
    2. Life of Policy, Cancellation, and Termination
* * * * *
    (f) * * *
    (2) * * *
    (iii) Once the policy is terminated, it cannot be reinstated for 
the current crop year unless:
    (A) The termination was in error;
    (B) The Administrator of the Risk Management Agency, at his or her 
sole discretion, determines that the following are met:
    (1) In accordance with 7 CFR part 400, subpart U, and FCIC issued 
procedures, you provide documentation that your failure to pay your 
debt is due to an unforeseen or unavoidable event or an extraordinary 
weather event that created an impossible situation for you to make 
timely payment;
    (2) You remit full payment of the delinquent debt owed to us or 
FCIC with your request submitted in accordance with section 
2(f)(2)(iii)(B)(3); and
    (3) You submit a written request for reinstatement of your policy 
to us no later than 60 days after the termination date or the missed 
payment date of a previously executed written payment agreement, or in 
the case of overpaid indemnity or any amount that became due after the 
termination date, the due date specified in the notice to you of the 
amount due, if applicable.
    (i) If authorization for reinstatement, as defined in 7 CFR part 
400, subpart U, is granted, your policies will be reinstated effective 
at the beginning of the crop year for which you were determined 
ineligible, and you will be entitled to all applicable benefits under 
such policies, provided you meet all eligibility requirements and 
comply with the terms of the policy; and
    (ii) There is no evidence of fraud or misrepresentation; or
    (C) We determine that, in accordance with 7 CFR part 400, subpart 
U, and FCIC issued procedures, the following are met:
    (1) You can demonstrate:
    (i) You made timely payment for the amount of premium owed but you 
inadvertently omitted some small amount, such as the most recent 
month's interest or a small administrative fee;
    (ii) The amount of the payment was clearly transposed from the 
amount that was otherwise due (For example, you owed $892 but you paid 
$829); or
    (iii) You timely made the full payment of the amount owed but the 
delivery of that payment was delayed, and was postmarked no more than 
seven calendar days after the termination date or the missed payment 
date of a previously executed written payment agreement, or in the case 
of overpaid indemnity or any amount that became due after the 
termination date, the due date specified in a notice to you of an 
amount due, as applicable.
    (2) You remit full payment of the delinquent debt owed to us; and
    (3) You submit a written request for reinstatement of your policy 
to us in accordance with 7 CFR part 400, subpart U, and applicable 
procedures no later than 30 days after the termination date or the 
missed payment date of a previously executed written payment agreement, 
or in the case of overpaid indemnity or any amount that became due 
after the termination date, the due date specified in the notice to you 
of the amount due, if applicable; and
    (4) If authorization for reinstatement, as defined in 7 CFR part 
400, subpart U, is granted, your policies will be reinstated effective 
at the beginning of the crop year for which you were determined 
ineligible, and you will be entitled to all applicable benefits under 
such policies, provided you meet all eligibility requirements and 
comply with the terms of the policy; and
    (5) There is no evidence of fraud or misrepresentation.
    (iv) A determination made under:
    (A) Section 2(f)(2)(iii)(B) may only be appealed to the National 
Appeals Division in accordance with 7 CFR part 11; and
    (B) Section 2(f)(2)(iii)(C) may only be appealed in accordance with 
section 20.
* * * * *
    7. Annual Premium and Administrative Fees
* * * * *
    (h) * * *
    (2) * * *
    (i) Notwithstanding section 7(h)(2), if you demonstrate you began 
farming for the first time after June 1 but prior to the beginning of 
the reinsurance year (July 1), you may be eligible for premium subsidy 
the subsequent reinsurance year without having form AD-1026 on file 
with FSA on or before June 1. For example, if you demonstrate you 
started farming for the first time on June 15, 2015, you may be 
eligible for premium subsidy for the 2016 reinsurance year without form 
AD-1026 on file with FSA.
* * * * *
    34. Units
    (a) * * *
    (5) * * *
    (i) * * *
    (A) * * *
    (3) At the same coverage level (e.g., if you elect to insure your 
corn and canola at the 65 percent coverage level and your soybeans at 
the 75 percent coverage level, the corn, soybeans and canola would be 
assigned the unit structure in accordance with section 34(a)(5)(v)) 
unless you can elect separate coverage levels for all irrigated and all 
non-irrigated crops in accordance with section 3(b)(2)(iii) (e.g. if 
you elect to insure your irrigated corn at the 65 percent coverage 
level you must insure your irrigated canola at the 65 percent coverage 
level. If you elect to insure your non-irrigated corn at the 70 percent 
coverage level you must insure your non-irrigated canola at the 70 
percent coverage level. If you elect to insure your irrigated corn at 
the 65 percent coverage level and your irrigated canola at the 70 
percent coverage level your unit structure will be assigned in 
accordance with section 34(a)(5)(v));
* * * * *

    Signed in Washington, DC, on June 23, 2016.
Brandon C. Willis,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 2016-15327 Filed 6-29-16; 8:45 am]
 BILLING CODE 3410-08-P