[Federal Register Volume 84, Number 117 (Tuesday, June 18, 2019)]
[Rules and Regulations]
[Pages 28171-28185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12998]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
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  Federal Register / Vol. 84, No. 117 / Tuesday, June 18, 2019 / Rules 
and Regulations  

[[Page 28171]]



DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 760

Commodity Credit Corporation

7 CFR Part 1430

[Docket No. CCC-2019-0004]
RIN 0560-A137


Dairy Margin Coverage Program and Dairy Indemnity Payment Program

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

ACTION: Final rule.

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

SUMMARY: This final rule implements the requirements of the dairy 
programs administered by the Farm Service Agency (FSA) on behalf of the 
Commodity Credit Corporation (CCC). The Dairy Margin Coverage (DMC) 
Program, as authorized by the Agriculture Improvement Act of 2018 (2018 
Farm Bill), replaces the Margin Protection Program (MPP-Dairy) for 
dairy producers and retains much of the structure of MPP-Dairy. DMC is 
a margin-based support program for dairy producers that provides risk 
management coverage that will pay producers when the difference between 
the national price of milk and the national estimated cost of feed (the 
margin) falls below a certain level. The rule also extends the Dairy 
Indemnity Payment Program (DIPP) through 2023 and amends the 
regulations to incorporate a specific period of time for which claims 
for the same loss will be eligible for indemnification under DIPP.

DATES: Effective June 18, 2019.

FOR FURTHER INFORMATION CONTACT: Danielle Cooke, telephone: (202) 720-
1919; email: [email protected]. Persons with disabilities who 
require alternative means for communication should contact the USDA 
Target Center at (202) 720-2600 (voice).

SUPPLEMENTARY INFORMATION: 

Background

    The 2018 Farm Bill (Pub. L. 115-334) reauthorized DIPP and requires 
establishment of regulations for the DMC Program. The changes for each 
of the programs are explained below.

DIPP

    Section 1402 of the 2018 Farm Bill amends 7 U.S.C. 4553 to 
reauthorize DIPP through 2023, and does not make any other changes to 
DIPP.
    The purpose of DIPP is to indemnify dairy farmers and manufacturers 
of dairy products who, through no fault of their own, suffer income 
losses with respect to milk or milk products that were removed from 
commercial markets because such milk or milk products contained certain 
harmful pesticide residues, chemicals, or toxic substances, or were 
contaminated by nuclear radiation or fallout.
    This rule is adding a specific timeframe that will limit the period 
of time that a dairy claimant under DIPP is eligible to receive 
indemnification. This is a discretionary change. Current DIPP rules 
indemnify losses until such time as the dairy is reinstated to the 
commercial market by a State regulatory agency. The large majority of 
claims for indemnification to affected farmers under DIPP typically 
range from 2 to 10 days for which their milk has been removed from the 
commercial market before such milk has been reinstated by a State 
regulatory agency. However, some claims submitted for indemnification 
could span the course of several months. In these circumstances, FSA 
will limit indemnification for the same loss to a period not to exceed 
18 months. The current regulation does not have a limit on the time 
period for which an eligible dairy can receive DIPP payments for the 
same contaminating event. Accordingly, discretionary changes are being 
made to DIPP to limit indemnification to not extend past the time 
period that the impacted dairy cows in the dairy herd are no longer 
lactating or impacted dairy cows in gestation have delivered a calf and 
are no longer lactating from its most immediately preceding birth after 
the contaminating event, not to exceed 18 months. Claims for milk from 
the affected farmer not reinstated to the commercial markets after the 
impacted dairy cows in the herd are dry and no longer producing milk 
from its most immediately preceding birth after the contaminating 
event, or have exceeded the 18-month period will not be eligible for 
indemnification for their milk any further, in order to prevent 
continued indemnification to an affected farmer for the removal of milk 
based upon the same contaminating event, however long that 
contaminating event or activity lasts. The 18-month period is based on 
a 10-month lactation period after the calf is born, overlapping 
breeding period, and a remaining 6-month pregnancy term. The 18-month 
period also accounts for approximately 2 months of the 18-month period 
the cow may not be producing milk during the dry period between 
lactations. At any time when the impacted dairy cows are dry from 
lactating from its most immediately preceding birth after the 
contaminating event the occurrence will no longer be eligible for 
indemnification. Limiting indemnification of a contaminating event to 
the maximum 18-month period, during which such dairy cow could be 
affected, was determined a fair and reasonable time frame to limit 
claims. Otherwise, any indemnification payment beyond this specified 
time period would be for milk from cows that have already completed the 
gestation period prior to the contaminating event and lactation period 
following birth, or from cows that were conceived after the initial 
contaminating event that caused the milk to be removed from the market. 
Once the dairy is required to remove their milk from the commercial 
market, such dairy producer knows or has reason to know the presence of 
contamination and it is reasonable that such dairy should take such 
actions as to not allow their cows to be further exposed to such 
contamination. Claimants will be required to provide inventory of dairy 
cows bred and lactating as of the contamination event to determine 
eligible livestock producing milk during the contamination period for 
which DIPP assistance is provided. Further, once the contaminating 
event has occurred and the dairy has been directed to remove their milk 
from the commercial market, any subsequently purchased or bred animals 
are not eligible for assistance

[[Page 28172]]

under DIPP. The limitation will prevent a claimant from receiving 
indemnification in perpetuity for the same contaminating event. 
Therefore, this rule specifies a timeframe for which dairies are 
eligible to be indemnified for the same contaminating event or activity 
under DIPP. Dairy producers that have exceeded the specified timeframe 
established by FSA before June 18, 2019 will be allowed to submit one 
additional claim after June 18, 2019, since this new provision is being 
implemented as of June 18, 2019 and some producers may have already 
exceeded the specified timeframe.

DMC Program and MPP-Dairy

    This rule establishes a new subpart in the regulations in 7 CFR 
part 1430 to establish the new DMC Program for dairy producers as 
authorized by Subtitle D of Title I of the 2018 Farm Bill. The DMC 
Program regulation is in effect from June 18, 2019, through December 
31, 2023; however, the DMC Program is retroactive back to January 1, 
2019, as specified in the 2018 Farm Bill.
    DMC replaces MPP-Dairy (7 CFR part 1430 subpart A). The 2018 Farm 
Bill authorizes retroactive provisions that open eligibility for 
certain producers previously determined ineligible under MPP-Dairy and 
for MPP-Dairy participants when the total premiums paid exceeded the 
total payments received during each of the applicable years of MPP-
Dairy. This rule amends the MPP-Dairy regulations to make these 
changes. MPP-Dairy will only remain in effect until retroactive 
provisions have been administered and concluded.
    The DMC Program is based on a similar framework to MPP-Dairy, with 
some changes. The purpose of DMC is to provide eligible dairy producers 
risk protection against low margins resulting from a combination of low 
milk prices and high feed costs. DMC and MPP-Dairy both provide for 
payments to dairy operations that are calculated based on producer 
elected margins when the difference between the national ``all-milk'' 
price of milk and the national average cost of feed falls below that 
producer elected margin. However, revisions were made, including 
changes to premium rates, additional coverage levels, and a premium 
discount option for locking in coverage levels for a 5-year period. FSA 
will announce the date on which the DMC Program registration will 
begin. Under the 2018 Farm Bill, the DMC Program ends December 31, 
2023.
    The 2018 Farm Bill expands on the modifications made to MPP-Dairy 
by the Bipartisan Budget Act of 2018. DMC is a voluntary program for 
producers involving fees and coverage-based premiums at most levels 
that provides payments when the calculated national margin for a month 
falls below the producer's selected margin trigger. The ``margin'' is 
the difference between the average national price of one hundred pounds 
(cwt) of milk and the national average price of the feed components 
(corn, soymeal, and hay) needed to produce that milk. For example, if 
the average price of milk is $20.00 a cwt and the average cost of 
soybean meal, corn, and hay needed to produce that milk is $12.00 a 
cwt, the margin is $8.00 a cwt. A factored hay price determined by FSA 
by averaging the prices of ``premium and supreme'' alfalfa hay and 
conventional alfalfa hay will be used in the feed cost calculations for 
DMC. Section 1401(c) of the 2018 Farm Bill required the National 
Agricultural Statistics Service to revise monthly price survey reports 
to include prices for high-quality (premium and supreme) alfalfa hay in 
the top 5 milk producing states and to publish that data no later than 
120 days after passage of the 2018 Farm Bill. There is no mandate for 
USDA to use that data in the DMC feed cost calculation. However, there 
are indications that this higher quality alfalfa hay price would better 
reflect the quality of hay purchased by dairy operations. Since not all 
dairy producers feed high quality hay, a factored price, which assumes 
that 50 percent of alfalfa hay that is fed to dairy cows is ``premium 
and supreme,'' will more closely reflect the prices paid by dairy 
producers.
    As authorized by the 2018 Farm Bill, DMC is available for 
participating dairy operations. A dairy operation can have one or more 
producers and each of the producers on the operation must share in the 
risk of production, and must contribute capital, land, labor, 
equipment, or management to the operation commensurate with their share 
of the proceeds. However, all producers do not have to participate. 
Producer payments and premiums will be reduced according to the non-
participating producer's percentage share in the dairy operation. 
However, all participating producers in the dairy operation must 
unanimously agree to the elected coverage levels and any non-
participating producers from that same dairy operation cannot 
independently or separately apply for DMC.
    The production history for each dairy operation will be established 
in the same manner as MPP-Dairy, using the highest of the operation's 
annual milk marketings in any one of 2011, 2012, or 2013 calendar 
years. Under DMC, dairy operations that were not in operation prior to 
January 1, 2014, and have more than 1 year of production history but 
have not previously established a production history under MPP-Dairy, 
will establish production history from annual milk marketings during 
any 1 calendar year, as specified in this rule. However, dairy 
operations with less than a full calendar year of production history 
will establish production history using the same options established in 
MPP-Dairy, based on either an extrapolation from actual production data 
for the first calendar year with at least 1 full month of production 
history, adjusted for a seasonality index, or by estimating annual 
production based on the herd size of the dairy operation relative to 
the national rolling herd average production data.
    For DMC, the production history, once established for an operation, 
does not change, even for changes in the herd size of the dairy 
operation. MPP-Dairy previously allowed for an annual upward adjustment 
to established production history that was based on the national annual 
increase in milk production. However, under DMC, production history 
will be adjusted only for 2019 for certain dairies to reflect any 
increase in the national average milk production relative to calendar 
year 2017. FSA determined the national average milk production relative 
to calendar year 2017 based on the milk production history increase 
from April 2016 through March 2017 and applied that adjustment at a 
factor of 1.0186 to participating dairy operations under MPP-Dairy for 
coverage year 2018. Dairy operations participating in DMC that had 
production history previously established under MPP-Dairy but elected 
not to participate in MPP-Dairy are not eligible for the production 
history adjustment. Additionally, dairy operations that first 
participated in MPP-Dairy in 2018, are not eligible for a production 
history adjustment and will maintain that same production history. 
However, dairy operations that did not previously establish their 
production history for the purpose of MPP-Dairy and, consequently did 
not participate in MPP-Dairy, will have the same adjustment factor of 
1.0186 applied to their established production history upon 
registration in the DMC Program. However, unlike in MPP-Dairy, no 
additional production history adjustments will be made to the 
established production history in subsequent years of participation in 
DMC, per changes made by the 2018 Farm Bill.
    Provisions regarding production history remain largely unchanged 
from MPP-Dairy to DMC. The production

[[Page 28173]]

history is established for the participating dairy operation, and is 
assigned to that operation, not to an individual producer or to the 
facility location.
    The 2018 Farm Bill does not permit a producer to adjust the 
proportion of their share of the dairy operation for the production 
history that is covered by the premium rate schedule in Tier I and Tier 
II, from what is covered for the dairy operation. For example, a 
participating dairy operation with two equal partners, each with a 50 
percent ownership share in a 20 million pound production history that 
elects 60 percent coverage (20,000,000 x 60% = 12,000,000) under DMC, 
must cover the full 12,000,000 pounds, as applicable in the premium 
rate schedules. If one partner in that operation decides not to 
participate, the participating partner is not allowed to only cover 
their 50 percent share of the production history, 10 million pounds in 
this example, at the 60 percent election.
    In some instances for MPP-Dairy, production history was tied to the 
facility location if the dairy operation was under a lease agreement. 
As such, transfers of production history to a different location and 
successions-in-interest of production history to another owner were not 
allowed. Similarly, when transfers were allowed for a relocation of the 
dairy operation from another facility location of a dairy operation 
that previously had MPP-Dairy established production history, the 
relocating dairy operation was allowed to merge the two histories 
together.
    Under new DMC provisions, that in effect untie the production 
history from the facility location, the dairy operation, regardless of 
who established the production history, will be allowed to transfer the 
production history to another dairy operation, as specified by FSA, 
when there is no relative break in the continuity in the operation of 
the dairy being transferred. FSA has determined that based on its 
experience in administering MPP-Dairy that production history of a 
dairy operation should remain with the operation rather than with the 
facility because production is naturally tied to the animals that 
produce the dairy, not the facility; therefore, production should move 
with the dairy operation that established the production history. 
Although not a provision required by the 2018 Farm Bill, the provisions 
for transferring production histories will be implemented using FSA's 
discretionary authority to untie production history from the facility 
location in all cases as specified in this rule.
    The DMC Program eligibility requirements remain the same as MPP-
Dairy, except that producers that participate in the Livestock Gross 
Margin for Dairy (LGM-Dairy) insurance program administered by the USDA 
Risk Management Agency (RMA) on behalf of the Federal Crop Insurance 
Corporation, who under MPP-Dairy could only participate in either LGM-
Dairy or MPP-Dairy, are now eligible to receive benefits from both LGM-
Dairy and the DMC Program, as specified by the 2018 Farm Bill.
    The 2018 Farm Bill also authorizes those producers with LGM-Dairy 
coverage in 2018, who were previously ineligible to enroll for MPP-
Dairy coverage, the ability to retroactively enroll in MPP-Dairy for 
2018. FSA has announced a period for eligible LGM-Dairy producers to 
make application and retroactive 2018 coverage elections to qualify for 
the payments that triggered in 2018 during the months of February 
through August and also December (no other months resulted in MPP-Dairy 
payments). The retroactive 2018 MPP-Dairy signup is only for dairy 
producers with 2018 LGM-Dairy coverage who produced and commercially 
marketed milk in 2018 but did not obtain full year MPP-Dairy coverage. 
FSA will notify eligible producers of the retroactive application 
signup period.
    The 2018 Farm Bill makes significant changes from MPP-Dairy to DMC 
in the area of coverage levels. Both the previous MPP-Dairy and the new 
DMC Program require the dairy operation to select a margin trigger and 
a percentage of production history that will be covered. Coverage level 
thresholds under MPP-Dairy ranged from $4 per cwt for basic 
catastrophic (CAT) level coverage to an $8 per cwt maximum, in 50 cent 
increments. A dairy operation could elect coverage on anywhere from 25 
percent to 90 percent of the operation's established production 
history. Under DMC, CAT level coverage remains at $4, however, higher 
levels of coverage at the $8.50, $9.00, and $9.50 threshold levels have 
been added under Tier I. Tier II coverage level thresholds under DMC 
remain the same as those under MPP-Dairy ranging from $4 to $8 and at 
the same $0.50 increments. However, the percentage of production 
history that can be covered also changed. Under MPP-Dairy, coverage was 
available from 25 percent to 90 percent, in 5 percent increments, 
whereas under DMC, coverage is available from 5 percent up to 95 
percent, in 5 percent increments.
    MPP-Dairy required producers to select one margin trigger level and 
one percentage of production history for both Tier I and Tier II, 
however, the new DMC Program allows for a second election of a coverage 
level threshold in Tier II that can be different than what the dairy 
operation elects under Tier I, but only if the DMC participating dairy 
operation elects a Tier I coverage level threshold of $8.50, $9.00, or 
$9.50. For example, a dairy operation with a 12 million pound 
production history elects to cover 50 percent of the operations' 
production history, which is 6 million pounds in this example. The 
dairy operation can cover 5 million pounds at $9.00, then can elect to 
cover 1 million pounds under Tier II at the $5 margin trigger, or any 
other level in Tier II, from $4 to $8. This option was not previously 
available under MPP-Dairy and only allows for a second election of a 
coverage level threshold, not a different coverage percentage, as 
specified in this rule.
    As part of the annual coverage election process, the dairy 
operation is required to select the levels of coverage and pay an 
administrative fee, unless waived for a qualifying exemption, and if 
applicable, pay a premium based on the level of coverage (margin 
trigger) elected. Premium rates have changed from MPP-Dairy to DMC. The 
annual premium rates are specified in the 2018 Farm Bill. The premium 
for each participating dairy operation will be determined based on the 
dairy operation's election of each of the margin trigger and percentage 
of coverage. The method to calculate the premium due for participating 
dairy operations selecting coverage above CAT level, are the same in 
MPP-Dairy and the new DMC Program, and must be paid by a date 
determined by FSA, as specified in this rule.
    For DMC, just as in MPP-Dairy, the coverage level threshold and 
coverage percentage must be elected by the dairy operation during the 
annual coverage election period announced by FSA for the applicable 
coverage year. MPP-Dairy required producers to make annual coverage 
elections and participate in the program for the duration of the 2014 
Farm Bill. However, under DMC, annual participation is not mandatory. A 
dairy operation can decide annually during the coverage election period 
for the applicable year of coverage if they would like to participate.
    To be eligible for DMC, a dairy operation must be in the business 
of producing and commercially marketing milk at the time of application 
during each annual coverage election period. Because section 1401(m) of 
the 2018 Farm Bill requires that the DMC Program take effect on January 
1, 2019,

[[Page 28174]]

for the 2019 coverage year only, those dairy operations that have 
stopped producing and commercially marketing milk before the coverage 
election signup period for 2019 begins, may apply for 2019 coverage and 
applicable payments for only the months the operation was still 
producing and commercially marketing milk in 2019. These dairy 
operations are not eligible for the premium rate discount, however, 
premiums will be prorated based on the months such dairy was in 
operation for 2019, as such the last marketing statement for the dairy 
operation, or other documentation deemed appropriate by FSA will be 
required at the time of application.
    Payment of a $100 administrative fee is still required under DMC 
for each year of participation, unless the dairy operation qualifies 
for a waiver exemption based on the dairy operations qualifying status 
for socially disadvantaged, limited resource, beginning farmer or 
rancher, and veteran farmer or rancher.
    DMC also provides an option during the 2019 coverage election 
period to make a 1-time election of coverage level and percentage of 
coverage, ``locking-in'' those elections for a 5-year period beginning 
January 2019 and ending December 2023. After the 2019 coverage election 
period, the lock-in option is not available to dairy operations 
participating in DMC, except as specified for dairy operations that 
have not established a production history. All dairy operations that 
elect the lock-in option are required to participate in the DMC Program 
at the same elected premium coverage levels for a 5-year period 
beginning in January 2019. DMC participating dairy operations locking 
in elections for the 5-year period will receive a premium discount of 
25 percent off the premium rate per cwt in each applicable Tier table. 
For example, a dairy operation elects to lock-in coverage levels at $7 
and 70 percent (5.6 million pounds) of the operation's 8 million pound 
production history. The applicable premium rate for a $7 margin trigger 
is $0.08 per cwt, discounted by 25 percent of the applicable premium 
rate will be $0.06, for the first 5 million pounds covered under Tier I 
(50,000 cwt x $0.06 = $3,000 premium). Likewise, in Tier II, the 
applicable premium rate for a $7 margin trigger is $1.107, discounted 
by 25 percent, the applicable premium rate of $0.83025 per cwt will be 
applied to the remainder of the covered pounds (5,600,000-5,000,000 = 
600,000) above 5 million pounds that fall under Tier II (6,000 cwt x 
$0.83025 = $4,981.50). Therefore, in this example, the dairy operation 
will pay the same premium for each coverage year 2019 through 2023, in 
the amount of $7,981.50 (Tier I $3,000 + Tier II $4,981.50).
    New dairy operations will be eligible for the premium rate discount 
for locking in coverage for the period beginning with the first 
available calendar year and ending in December 2023. Operations that 
are determined to be ``new dairy operations'' under this rule are dairy 
operations that have never established a production history under MPP-
Dairy, and have begun producing and commercially marketing milk within 
60 calendar days prior to registering to participate in DMC.
    If there are producers in an operation that want to be considered 
new and are also part of another dairy operation participating in DMC, 
FSA must determine that the dairy operation is separate and distinct 
from the other DMC participating dairy operation. Under MPP-Dairy, 
separate participation by a new dairy operation that was purchased or 
acquired was subject to an affiliation test, however, under DMC, the 
affiliation test will no longer apply. The 2018 Farm Bill specifies 
that the Secretary may not make DMC payments to a dairy operation that 
is determined by FSA to have reorganized the structure of such 
operation for the sole purpose of qualifying as a new dairy operation.
    Section 1407(f) of the 2014 Farm Bill, as amended by Section 
1401(i) of the 2018 Farm Bill, specifies that dairy operations that 
participated in MPP-Dairy during any of calendar years 2014 through 
2017 that submit an application on an approved form may receive a 
repayment in an amount equal to the difference between the total amount 
of premiums paid by the dairy operation for each applicable calendar 
year of coverage and the total amount of payments made to the MPP-Dairy 
participating dairy operation for that applicable calendar year. 
Coverage years that result in payments that exceeded premiums paid for 
that coverage year will yield a $0 calculation for that calendar year. 
The 2018 Farm Bill further specifies that a dairy operation that is 
eligible to receive the calculated repayment must elect to receive the 
repayment in either an amount that is equal to:
    (1) 75 percent of the calculated repayment as a credit that may be 
used by the dairy operation towards DMC premiums; or
    (2) 50 percent of the calculated repayment as a direct cash 
repayment.
    FSA will determine the calculated repayment amounts for each year 
for each dairy operation that participated in MPP-Dairy. Adequate proof 
must be provided by the dairy operation, to the satisfaction of FSA, 
for any repayment amounts calculated by FSA under dispute. FSA will 
specify the time and manner to make a MPP-Dairy repayment request.
    Once the choice of cash or credit is made by the dairy operation 
and approved by FSA, that choice cannot be changed. Dairy operations 
that elect the credit option can only use that credit in the DMC 
Program. If the entire credit is not used, for any reason, it cannot be 
applied as credit to any other USDA program and will have zero cash 
value and cannot be redeemed for any purpose.
    Both cash and credit elections may be transferred to a dairy 
operation that succeeded to the dairy operation through a succession-
in-interest transfer under MPP-Dairy and the successor is currently 
participating in DMC. Otherwise, the repayment election is not 
transferrable.
    Dairy operations that give up their right to elect a premium 
repayment option or do not timely make application on a form specified 
by FSA are not eligible to receive a cash or credit benefit for 
premiums paid under MPP-Dairy.
    Dairy operations eligible for the MPP-Dairy premium that elect the 
cash repayment option will have cash repayments issued in the same name 
as the entity that participated in the MPP-Dairy.
    This rule includes provisions for MPP-Dairy in 7 CFR part 1430, 
subpart D, specifically to allow eligibility for LGM-Dairy producers 
for 2018 and allow for the MPP-Dairy premium repayments. These two 
provisions are the final actions for MPP-Dairy.

Effective Date, Notice and Comment, and Paperwork Reduction Act

    As specified in 7 U.S.C. 9091, the regulations to implement the 
provisions of Title I and the administration of Title I of the 2018 
Farm Bill are exempt from:
     The Paperwork Reduction Act (44 U.S.C. chapter 35), and
     The notice and comment provisions of 5 U.S.C. 553.
    In addition, 7 U.S.C. 9091(c)(3) directs the Secretary to use the 
authority provided in 5 U.S.C. 808, which provides that when an agency 
finds for good cause that notice and public procedure are 
impracticable, unnecessary, or contrary to the public interest, that 
the rule may take effect at such time as the agency determines. Due to 
the nature of the rule, the mandatory requirements of the 2018 Farm 
Bill, and the need to implement the dairy

[[Page 28175]]

regulations expeditiously to provide assistance to dairy producers, FSA 
and CCC find that notice and public procedure are contrary to the 
public interest. Therefore, even though this rule is a major rule for 
purposes of the Congressional Review Act of 1996, FSA and CCC are not 
required to delay the effective date for 60 days from the date of 
publication to allow for Congressional review. Therefore, this rule is 
effective on the date of publication in the Federal Register.

Executive Orders 12866, 13563, 13771 and 13777

    Executive Order 12866, ``Regulatory Planning and Review,'' and 
Executive Order 13563, ``Improving Regulation and Regulatory Review,'' 
direct agencies to assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). Executive Order 13563 emphasized the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility. Executive Order 13777, 
``Enforcing the Regulatory Reform Agenda,'' established a federal 
policy to alleviate unnecessary regulatory burdens on the American 
people.
    The Office of Management and Budget (OMB) designated this rule as 
economically significant under Executive Order 12866, ``Regulatory 
Planning and Review,'' and therefore, OMB has reviewed this rule. The 
costs and benefits of this rule are summarized below. The full cost 
benefit analysis is available on regulations.gov.
    As a transfer rule, per OMB guidance, this rule is not covered by 
Executive Order 13371, ``Reducing Regulation and Controlling Regulatory 
Costs.''

Summary of Economic Impacts

    DMC provides a greater subsidized margin protection to producers 
compared to the expired MPP-Dairy, which is expected to lead to greater 
participation. DMC expands options for dairy operations to buy higher 
coverage for margins up to $9.50 per cwt, at incremental premium 
increases of $0.50 per cwt. The coverage limit under MPP-Dairy was 
$8.00 per cwt. In addition, the premium structure of the DMC Program 
favors high coverage levels for Tier I production history. Further, 
dairy operations are now able to cover as little as 5 percent of their 
production history compared to 25 percent minimum for MPP-Dairy. Dairy 
operations are allowed to participate concurrently in DMC and Livestock 
Gross Margin Insurance for Dairy (LGM-Dairy), which also has the 
potential to increase DMC participation. Finally, operations that were 
excluded from participating in MPP-Dairy during 2018 because they were 
participating in LGM-Dairy can sign up for 2018 MPP-Dairy coverage 
retroactively.
    As a result of these changes, payments to producers from DMC are 
expected to be greater than for MPP-Dairy. USDA projections as of early 
2019 indicate that, over the 10-year baseline period, DMC payments will 
be triggered frequently. With national feed costs expected to average 
about $9.14 over the life of the DMC Program, margins are expected to 
average $8.50 per cwt through 2023, even as milk prices recover from 
2018 lows. DMC payments are less likely to trigger in the second half 
of the baseline period, 2024-2029, assuming lower feed prices and 
higher milk prices bring annual average margins near $10.29 per cwt.
    Stochastic modelling results indicate that DMC would trigger 
significant outlays under current baseline projections. Allowing 
variation around the means for milk prices and feed ingredient costs in 
a stochastic model generates annual gross estimates averaging to $1.3 
billion per year and collection of $89 million per year in fees and 
premiums paid by dairy program participants. For the 5-year life of the 
DMC Program, net expenditures through 2023 are projected to average 
$1.2 billion annually.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by 
Small Business Regulatory Enforcement Fairness Act, generally requires 
an agency to prepare a regulatory flexibility analysis of any rule 
whenever an agency is required by the Administrative Procedure Act or 
any other law to publish a proposed rule, unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. This rule is not subject to the 
Regulatory Flexibility Act because FSA and CCC are not required by any 
law to publish a proposed rule for this rulemaking initiative.

Environmental Review

    The environmental impacts of this final rule have been considered 
in a manner consistent with the provisions of the National 
Environmental Policy Act (NEPA, 42 U.S.C. 4321-4347), the regulations 
of the Council on Environmental Quality (40 CFR parts 1500-1508), and 
the FSA regulations for compliance with NEPA (7 CFR part 799). FSA has 
determined that the provisions identified in this final rule are 
administrative in nature, intended to clarify the mandatory 
requirements of the programs, as defined in the 2018 Farm Bill, and do 
not constitute a major Federal action that would significantly affect 
the quality of the human environment, individually or cumulatively. The 
few discretionary features of the rules include establishing deadlines, 
determinations of eligibility and prices, and have been selected 
largely based on pre-existing USDA programs and continuation with 
clarification of duration of existing indemnifiation payments. 
Accordingly, these discretionary aspects are covered by the Categorical 
Exclusion, in Sec.  799.31(b)(6)(iii), that applies to price support 
programs, and no Extraordinary Circumstances (Sec.  799.33) exist. 
Therefore, as this rule presents only administrative clarifications of 
mandatory requirements, FSA will not prepare an environmental 
assessment or environmental impact statement for this regulatory 
action; this rule serves as documentation of the programmatic 
environmental compliance decision for this federal action.

Executive Order 12372

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

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, ``Civil 
Justice Reform.'' This rule will not preempt State or local laws, 
regulations, or policies unless they represent an irreconcilable 
conflict with this rule. This rule has retroactive effect for MPP-Dairy 
for calendar year 2018. Also, coverage for dairy operations that 
register during the 2019 re-enrollment period will be retroactive to 
January 1, 2019. Before any judicial actions may be brought regarding 
the provisions of this

[[Page 28176]]

rule, the administrative appeal provisions of 7 CFR parts 11 and 780 
are to be exhausted.

Executive Order 13132

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

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires federal agencies 
to consult and coordinate with Tribes on a government-to-government 
basis on policies that have Tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian Tribes, on the relationship between the Federal Government 
and Indian Tribes or on the distribution of power and responsibilities 
between the Federal Government and Indian Tribes.
    The USDA's Office of Tribal Relations (OTR) has assessed the impact 
of this rule on Indian Tribes and determined that this rule has Tribal 
implications that required Tribal consultation under Executive Order 
13175. Tribal consultation for this rule was included in the 2018 Farm 
Bill Tribal consultation held on May 1, 2019, at the National Museum of 
the American Indian, in Washington, DC. The portion of the Tribal 
consultation relative to this rule was conducted by Bill Northey, USDA 
Under Secretary for the Farm Production and Conservation mission area, 
as part of the Title I session. There were no specific comments from 
Tribes on the dairy rule during the Tribal consultation. If a Tribe 
requests additional consultation, FSA will work with OTR to ensure 
meaningful consultation is provided where changes, additions, and 
modifications identified in this rule are not expressly mandated by 
legislation.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 
104-4) requires federal agencies to assess the effects of their 
regulatory actions of State, local, or Tribal governments or the 
private sector. Agencies generally must prepare a written statement, 
including cost benefits analysis, for proposed and final rules with 
federal mandates that may result in expenditures of $100 million or 
more in any 1 year for State, local or Tribal governments, in the 
aggregate, or to the private sector. UMRA generally requires agencies 
to consider alternatives and adopt the more cost effective or least 
burdensome alternative that achieves the objectives of the rule. This 
rule contains no federal mandates as defined by Title II of UMRA for 
State, local, or Tribal governments, or the private sector. In 
addition, CCC is not required to publish a notice of proposed 
rulemaking for this rule. Therefore, this rule is not subject to the 
requirements of sections 202 and 205 of UMRA.

Federal Assistance Programs

    The titles and numbers of the Federal assistance programs in the 
Catalog of Federal Domestic Assistance to which this rule applies are:

10.053--Dairy Indemnity Program
10.116--Margin Protection Program-Dairy
10.127--Dairy Margin Coverage Program

E-Government Act Compliance

    CCC and FSA are committed to complying with the E-Government Act, 
to promote the use of the internet and other information technologies 
to provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

List of Subjects

7 CFR Part 760

    Dairy products, Indemnity payments, Reporting and recordkeeping 
requirements.

7 CFR Part 1430

    Dairy products, Fraud, Penalties, Reporting and recordkeeping 
requirements.

    For the reasons discussed above, FSA and CCC amend the regulations 
in 7 CFR parts 760 and 1430 as follows:

PART 760--INDEMNITY PAYMENT PROGRAMS

Subpart A--Dairy Indemnity Payment Program

0
1. Revise the authority citation for part 760 to read as follows:

    Authority:  7 U.S.C. 4551--4553.


0
2. Amend Sec.  760.2 as follows:
0
a. Remove the alphabetical paragraph designations, and arrange the 
definitions in alphabetical order; and
0
b. Add a definition for ``Same loss'' in alphabetical order;
    The addition reads as follows:


Sec.  760.2  Definitions.

* * * * *
    Same loss means the event or trigger that caused the milk to be 
removed from the commercial market. For example, if milk is 
contaminated, the original cause of the contamination was the trigger 
and any loss related to that contamination would be considered the same 
loss.
* * * * *

0
3. In Sec.  760.9, add paragraph (c) to read as follows:


Sec.  760.9  Other legal recourse.

* * * * *
    (c) The period eligible for DIPP benefits for the same loss may not 
extend past the time period that the impacted dairy cows in the dairy 
herd are no longer lactating or impacted dairy cows in gestation have 
delivered a calf and are no longer lactating from its most immediately 
preceding birth after the contaminating event, not to exceed 18 months. 
Claims for milk from the affected farmer not reinstated to the 
commercial markets after the impacted dairy cows in the herd are dry 
and no longer producing milk from its most immediately preceding birth 
after the contaminating event, or have exceeded the 18-month period 
will not be compensated any further. Dairy producers that have exceeded 
the specified period established by FSA before June 18, 2018 will be 
allowed to submit one additional claim. Dairy cows purchased or bred 
after the occurrence of the contaminating event may not be included in 
the claim for benefits.

PART 1430--DAIRY PRODUCTS

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

    Authority:  7 U.S.C. 9051-9060, and 15 U.S.C. 714B and 714c.

0
 5. Add subpart D, consisting of Sec. Sec.  1430.400 through 1430.425, 
to read as follows:

Subpart D--Dairy Margin Coverage Program

Sec.
1430.400 Purpose.
1430.401 Administration.
1430.402 Definitions.
1430.403 Eligible dairy operations.
1430.404 Time and method of registration and annual election.
1430.405 Establishment and transfer of production history for a 
participating dairy operation.

[[Page 28177]]

1430.406 Administrative fees.
1430.407 Buy-up coverage.
1430.408 MPP-Dairy premium repayments.
1430.409 Dairy margin coverage payments.
1430.410 Effect of failure to pay administrative fees or premiums.
1430.411 Calculation of average feed cost and actual dairy 
production margin.
1430.412 Relation to RMA's LGM-Dairy Program.
1430.413 Multi-year contract for lock-in option.
1430.414 Contract modifications.
1430.415 Reconstitutions.
1430.416 Offsets and withholdings.
1430.417 Assignments.
1430.418 Appeals.
1430.419 Misrepresentation and scheme or device.
1430.420 Estates, trusts, and minors.
1430.421 Death, incompetency, or disappearance.
1430.422 Maintenance and inspection of records.
1430.423 Refunds; joint and several liability.
1430.424 Violations of highly erodible and wetland conservation 
provisions.
1430.425 Violations regarding controlled substances.


Sec.  1430.400  Purpose.

    The regulations in this subpart apply to the Dairy Margin Coverage 
(DMC) Program that replaces the Margin Protection Program for Dairy 
(MPP-Dairy) in subpart A. The purpose of DMC is to provide eligible 
dairy producers risk protection against low margins resulting from a 
combination of low milk prices and high feed costs.


Sec.  1430.401  Administration.

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


Sec.  1430.402  Definitions.

    The definitions in this section apply for all purposes of 
administering the DMC Program.
    Actual dairy production margin means the difference between the 
all-milk price and the average feed cost, as calculated under Sec.  
1430.411. If the calculation would produce a negative number, the 
margin is considered to be zero.
    Administrative county office means the county FSA office designated 
to make determinations, handle official records, and issue payments for 
the producer in accordance with 7 CFR part 718.
    All-milk price means the national average price received, per 
hundredweight of milk, by dairy operations for all milk sold to dairy 
plants and milk dealers in the United States, as determined by the 
Secretary.
    AMS means the Agricultural Marketing Service of USDA.
    Annual election period for DMC means the period, each calendar 
year, established by the Deputy Administrator, for a dairy operation to 
register to participate in DMC for the following coverage year, pay 
associated administrative fees, and make coverage elections for an 
applicable calendar year.
    Average feed cost means the national average cost of feed used by a 
dairy operation to produce a hundredweight of milk, as determined under 
the provisions of this subpart.
    Beginning farmer or rancher means an individual or entity who has 
both not operated a farm or ranch, or who has operated a farm or ranch 
for not more than 10 consecutive years; and materially and 
substantially participates in the operation of the farm or ranch. For 
legal entities to be considered a beginning farmer or rancher, all 
members must be related by blood or marriage; and all the members must 
be beginning farmers or ranchers.
    Buy up coverage means dairy margin coverage for a margin protection 
level above $4 per hundredweight of milk.
    Calendar year means the year beginning with January 1 and ending 
the following December 31.
    Catastrophic level coverage means $4 per cwt margin protection 
coverage and a coverage percentage of 95 percent, with no premium 
assessed.
    CCC means the Commodity Credit Corporation of USDA.
    Commercially marketed means selling whole milk to either the market 
to which the dairy operation normally delivers or other similar markets 
and receives monetary compensation.
    Contract means the terms and conditions to participate in the DMC 
Program as executed on a form prescribed by CCC and required to be 
completed by the producers in the dairy operation and accepted by CCC, 
including any contract modifications made in an annual election period 
before coverage for the applicable calendar year commences.
    Covered production history is equal to the production history of 
the operation multiplied by the coverage percentage selected by the 
participating dairy operation.
    County committee means the FSA county committee.
    County office means the FSA office responsible for administering 
FSA programs for farms located in a specific area in a state.
    Dairy margin coverage (or DMC) means the dairy margin coverage 
program for dairy producers established under this subpart.
    Dairy margin coverage payment (DMC payment) means a payment made to 
a participating dairy operation under the DMC Program under the terms 
of this subpart.
    Dairy operation means, as determined by the Deputy Administrator, 
and subject to conditions that the Deputy Administrator may impose to 
advance the achievement of the purposes of the DMC Program, any one or 
more dairy producers that produce and market milk commercially produced 
from cows as a single unit in which each dairy producer:
    (1) Shares in the pooling of resources under a common ownership 
structure;
    (2) Is at risk in the production of milk in the dairy operation;
    (3) Contributes land, labor, management, equipment, or capital to 
the dairy operation that are at least commensurate to the producer's 
share in the operation; and
    (4) Has production facilities located in the United States.
    Deputy Administrator means the Deputy Administrator for Farm 
Programs, Farm Service Agency, or designee.
    Farm Service Agency or FSA means the Farm Service Agency of USDA.
    Handler or producer handler means the initial individual or entity 
making

[[Page 28178]]

payment to a dairy operation for milk produced in the United States and 
marketed for commercial use.
    Hundredweight or cwt means 100 pounds.
    Limited resource farmer or rancher means a farmer or rancher that 
is a person with both:
    (1) Direct or indirect gross farm sales not more than an amount 
determined by FSA in each of the previous 2 years; and
    (2) A total household income at or below the national poverty level 
for a family of four or less than 50 percent of county median household 
income in each of the previous 2 years.
    Milk Income Loss Contract Program or MILC means the program 
established under section 1506 of the Food, Conservation, and Energy 
Act of 2008 (7 U.S.C. 8773) and the regulations in part 1430, subpart B 
of this part.
    Milk marketing means a sale of milk for which there is a verifiable 
production record for milk commercially marketed.
    NASS means the National Agricultural Statistics Service of USDA.
    New operation means a dairy operation that:
    (1) Did not establish a production history under the MPP-Dairy;
    (2) Has less than 12 full months in a calendar year of commercial 
milk marketings produced by the dairy operation; and
    (3) Started commercially marketing milk within 60 days of 
submitting a contract application under DMC.
    Open enrollment period for DMC means the period, each calendar 
year, established by the Deputy Administrator, for a participating 
dairy operation to either register to participate in the DMC Program, 
pay associated administrative fees, if applicable, and applicable 
premiums, or to make annual coverage elections for an applicable 
calendar year of participation.
    Participating dairy operation means a dairy operation that signs up 
to participate in the DMC Program under this part.
    Producer means any individual, group of individuals, partnership, 
corporation, estate, trust, association, cooperative, or other business 
enterprise or other legal entity who is, or whose members are, a 
citizen of, or legal resident alien in the United States, and who 
directly, or indirectly:
    (1) Shares in the risk of producing milk, and
    (2) Makes contributions including land, labor, management, 
equipment, or capital:
    (i) To the dairy operation at least commensurate to the producer's 
share of the operation, or
    (ii) To the dairy operation of the individual or entity, as 
determined by the Deputy Administrator.
    Production history means the production history determined for a 
participating dairy operation under this subpart when the participating 
dairy operation first registers to participate in DMC or previously 
established under MPP-Dairy, as determined under the provisions of this 
subpart.
    RMA means the Risk Management Agency of USDA.
    Secretary means the Secretary of USDA.
    Socially disadvantaged farmer or rancher means a farmer or rancher 
who is a member of a group whose members have been subject to racial, 
ethnic, or gender prejudice because of their identity as members of a 
group without regard to their individual qualities. Groups include: 
American Indians or Alaskan Natives, Asians or Asian Americans, Blacks 
or African Americans, Native Hawaiians or other Pacific Islanders, 
Hispanics, and women. For legal entities requesting to be considered 
Socially Disadvantaged, the majority interest must be held by socially 
disadvantaged individuals.
    United States means, unless the context suggests otherwise, the 50 
States of the United States of America, the District of Columbia, 
American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, 
the Commonwealth of Puerto Rico, the Virgin Islands of the United 
States, and any other territory or possession of the United States.
    USDA means the U.S. Department of Agriculture.
    Verifiable production records means evidence that is used to 
substantiate the amount of production marketed and that can be verified 
by CCC through an independent source.
    Veteran farmer or rancher means a person who has served in the 
United States Army, Navy, Marine Corps, Air Force, and Coast Guard, 
including the reserve components, and who has not operated a farm or 
ranch; has operated a farm or ranch but not for more than 10 years 
total, since becoming a veteran; or has obtained status as a veteran 
during the most recent 10-year period. A legal entity or joint 
operation will be considered a veteran farmer or rancher entity, if all 
members meet this definition.


Sec.  1430.403  Eligible dairy operations.

    (a) In order for a dairy operation to be eligible to register for 
DMC and receive payments, such dairy operation must:
    (1) Produce milk from cows in the United States that is marketed 
commercially at the time of each annual election for an applicable 
coverage year in DMC, except that dairy operations that have stopped 
producing and marketing milk in any month before or during the annual 
coverage election period for 2019 are eligible for only those 
applicable months;
    (2) Submit accurate and complete information as required by this 
subpart;
    (3) Provide proof of milk production marketed commercially by all 
persons in the dairy operation to establish production history;
    (4) Pay required administrative fees for participation in DMC as 
specified in this subpart and any premiums, if applicable, as specified 
in this subpart.
    (b) A person or entity covered by Sec.  1400.401 of this chapter 
(hereafter ``foreign person'') must meet the eligibility requirements 
in that section to receive payments under this subpart. A dairy 
operation with ineligible foreign persons as members will have any 
payment reduced by the proportional share of such members.
    (c) Federal agencies and States, including all agencies and 
political subdivisions of a State, are not eligible for payments under 
this subpart.
    (d) A single dairy operation operated by more than one dairy 
producer will be treated as a single dairy operation for purposes of 
participating in DMC and can only submit one application. If a producer 
owns more than one eligible dairy operation in which each operation is 
separate and distinct from each other, such dairy producer may be 
eligible to participate separately for each dairy operation, however, 
each eligible dairy operation must be separately registered, as 
specified in Sec.  1430.404.
    (e) The Deputy Administrator or designee will determine additional 
dairy operations that operate in a manner that are separate and 
distinct from each other according to paragraph (d) of this section and 
which may, as determined by the Deputy Administrator, be considered an 
operation even though they may not meet the conditions otherwise 
imposed in this definition. Also, the Deputy Administrator may require 
operations to be combined and considered one operation when there is 
close interest by family or otherwise between two operations, to avoid 
schemes or devices, or otherwise. Likewise, the Deputy Administrator 
may consider other factors as are deemed appropriate to adjust what is 
considered a dairy operation to conform with the DMC Program 
requirements in an equitable manner, including taking into account a 
dairy's status under MPP-Dairy and the

[[Page 28179]]

Milk Income Loss Contract Program formerly operated under this part.


Sec.  1430.404  Time and method of registration and annual election.

    (a) A dairy operation may register to participate in DMC by 
establishing a production history according to Sec.  1430.405 on a form 
prescribed by CCC and also submitting a contract prescribed by CCC. 
Dairy operations may obtain a contract in person, by mail, or by 
facsimile from any county office. In addition, dairy operations may 
download a copy of the forms at http://www.sc.egov.usda.gov.
    (b) A dairy operation must submit completed contracts and any other 
supporting documentation, during the annual election period established 
by the Deputy Administrator, to the administrative county FSA office 
serving the dairy operation. However, the production history must be 
established only once and approved by CCC before the contract is 
submitted and considered complete.
    (1) A new dairy operation that has been established after the most 
recent election period is required to submit a contract within the 
first 60 calendar days from the date of which the dairy operation first 
commercially markets milk and may elect coverage that begins the month 
and day the dairy operation has commercial marketings.
    (2) A new dairy operation that does not meet the 60-day requirement 
of paragraph (b)(1) of this section cannot enroll until the next annual 
election period for coverage for the following calendar year.
    (c) Annual contracts with coverage elections are to be submitted in 
time to be received at FSA by the close of business on the last day of 
the annual election period, established by the Deputy Administrator.
    (1) The applicable year of coverage for contracts received during 
an annual election period will be the following calendar year, except 
for 2019, where the election and coverage year will be the same, or 
unless otherwise specified by the Deputy Administrator for Farm 
Programs. Coverage for dairy operations that register during the 2019 
election period will be retroactive to January 1, 2019.
    (2) Annual contracts with coverage elections submitted after the 
applicable allowed time for submission will not be considered.
    (d) If the dairy producer operates more than one separate and 
distinct operation, the producer must register each operation for each 
operation to be eligible for coverage. If the producer moves the same 
herd of cattle between two facilities, then the two facilities will not 
be regarded as separate and distinct but as one operation unless the 
Deputy Administrator determines otherwise. A separate operation must 
distinctly, as a single unit, have their own cattle, facilities, milk 
marketings, tanks, feed, records, State level licenses, and permits. 
All new dairy operations that did not participate in MPP-Dairy must 
meet all the requirements of this paragraph. A participating dairy 
operation in business prior to January 1, 2019, that participated in 
MPP-Dairy will automatically be determined as a ``dairy operation'' for 
DMC Program purposes in the same manner as under MPP-Dairy. In disputes 
regarding separate dairy operations the Deputy Administrator will 
determine what is a separate and distinct operation and that decision 
will be final. A dairy operation operated by more than one dairy 
producer will be treated as a single dairy operation for purposes of 
participating in DMC and may only, submit one contract. Only 
participating dairy operations enrolling using contract forms approved 
by CCC will be covered by the DMC Program.
    (e) A participating dairy operation must elect, during the 
applicable annual election period and by using the form prescribed by 
CCC, the coverage level threshold and coverage percentage for that 
participating dairy operation for the applicable calendar year:
    (1) Once the registration for a calendar year of coverage is 
submitted and approved by CCC, coverage for subsequent years does not 
automatically carry forward. For each calendar year, a dairy operation 
that decides to participate in DMC must register for a calendar year of 
coverage according to this paragraph (e) during the applicable coverage 
election period, except as described in paragraph (e)(2) of this 
section;
    (2) During the 2019 annual coverage election period only, 
participating dairy operations that make a one-time election of 
coverage level and percentage of coverage, according to Sec.  
1430.407(j), will be locked in at the same coverage level and 
percentage of coverage for a 5-year period beginning January 1, 2019, 
and ending December 31, 2023. Dairy operations that elect the lock-in 
option are required to pay the annual administrative fee and submit an 
annual contract during the annual contract election period for each 
coverage year to certify that the dairy operation is still in the 
business of producing and commercially marketing milk. If the operation 
fails to pay the applicable administrative fees or certify the status 
of the dairy operation, the dairy operation will remain obligated for 
all applicable unpaid administrative and premium fees calculated for 
that 5-year period.
    (3) All participating producers in the participating dairy 
operation must agree to the coverage level threshold and coverage 
percentage elected by the operation on the contract. Producers in the 
participating dairy operation that elect not to participate may not 
submit a separate contract for coverage. All producers that share in 
risk of the dairy operations production must be indicated on the 
contract with their corresponding share in the dairy operation, 
however, a signature from the non-participating member will not be 
required for CCC approval.
    (f) By registering to participate or receive payment under DMC, all 
participating producers in the dairy operation must certify to the 
accuracy and truthfulness of the information in their applications and 
supporting documentation.
    (1) All participating producers who share in the risk of a dairy 
operation's production must sign and certify all submissions made under 
DMC that relate to the level of coverage and marketed production for 
the dairy operation.
    (2) All information provided is subject to verification by FSA. FSA 
may require a dairy operation to provide documentation that supports 
all verifiable records. Furnishing the information is voluntary; 
however, without such information DMC Program benefits will not be 
approved. Providing a false certification to the Federal Government may 
be punishable by imprisonment, fines, and other penalties or sanctions.
    (g) At the time the completed contract is submitted to FSA for the 
first program year in which the operation is to participate in DMC, the 
dairy operation must also submit a separate form, as prescribed by CCC, 
to establish the production history for the dairy operation. An 
established production history and a completed contract are both 
required to have a complete submission that is subject to approval by 
FSA. Production histories established for dairy operations under MPP-
Dairy will be used in the DMC Program. A new production history will 
only be established for new dairy operations that did not participate 
in MPP-Dairy.


Sec.  1430.405  Establishment and transfer of production history for a 
participating dairy operation.

    (a) Except as provided in paragraphs (b) and (c) of this section, 
FSA will

[[Page 28180]]

establish the production history for a dairy operation for DMC as the 
highest annual milk marketings of the participating dairy operation 
during any one of the 2011, 2012, or 2013 calendar years.
    (1) Producers in the participating dairy operation are required to 
provide adequate proof of the dairy operation's quantity of milk 
commercially marketed, to establish the production history for the 
dairy operation.
    (2) All information provided is subject to verification, spot 
check, and audit by FSA. If the dairy operation does not provide, to 
the satisfaction of FSA, documentation requested to substantiate the 
production history of the highest annual milk marketings for the 
participating dairy operation, then the registration will not be 
approved.
    (b) A participating dairy operation that was not in operation prior 
to January 1, 2014, that has not established a production history will 
elect the highest annual milk marketings during any one calendar year 
while in operation to determine the production history of the 
participating dairy operation.
    (c) A participating dairy operation with less than one year of 
production history will be considered a new dairy operation. To 
establish the production history for such a new dairy operation the new 
dairy operation is required to elect one of the following methods:
    (1) The volume of the actual milk marketings for the months the 
dairy operation has been in operation, extrapolated to a yearly amount 
based on a national seasonally adjusted index, as determined by the 
Deputy Administrator, to account for differences in milk production 
during the year; or
    (2) An estimate of the actual milk marketings of the dairy 
operation based on the herd size of the dairy operation relative to the 
national rolling herd average data published by the Secretary.
    (d) If FSA determines that the new enterprise was formed for the 
purpose of circumventing DMC provisions, including, but not limited to, 
reconstituting a dairy operation to receive additional benefits, or 
establishing new production history, that enterprise will not be 
considered a new dairy operation for the purpose of establishing 
production history.
    (e) Once the production history of a participating dairy operation 
is established under paragraph (a), (b), or (c) of this section, the 
production history will be adjusted by a one-time upward adjustment by 
FSA to reflect any increase in the national average milk production 
relative to calendar year 2017, as determined by the Deputy 
Administrator. Dairy operations participating in DMC, that had 
production history previously established under MPP-Dairy but elected 
not to participate in MPP-Dairy are not eligible for the production 
history adjustment. Dairy operations with approved contracts for 2018 
coverage under MPP-Dairy will maintain that same production history, as 
in the DMC Program and are not eligible for the production history 
adjustment. New dairy operations that participate in DMC, that did not 
previously have their production history established nor participate in 
MPP-Dairy, will have the same adjustment factor of 1.0186 applied to 
their established production history for registration in the DMC 
Program as 2018 MPP-Dairy participants. There will be no further 
adjustments in subsequent years of participation made to the 
established production history under the DMC Program.
    (f) The production history must be transferred from one dairy 
facility to another as follows:
    (1) Producers of a dairy operation relocate the dairy operation to 
another location and the production history of the original operation 
must be transferred to the new location and subject to the same elected 
coverage levels for that year; or
    (2) Producers of a dairy operation transfer ownership of a dairy 
operation with its associated production history through a succession-
in-interest transfer when there is a spouse, child, heir, or common 
member that the dairy operation is being transferred to and there is no 
break in the continuity of the dairy operation. However, the successor 
operation must submit a separate registration according to Sec.  
1430.404, to participate in DMC, but will be subject to the same 
elected coverage levels made by the predecessor for that coverage year 
or lock-in period, as applicable.
    (g) If CCC waives the obligation, under DMC of a participating 
dairy operation due to death or retirement of the producer or of the 
permanent dissolution of the dairy operation or under other 
circumstances as determined by the Deputy Administrator, FSA may 
reestablish the production history.
    (h) The established production history of a participating dairy 
operation may be adjusted upward once during the term of the contract 
for an intergenerational transfer based on the purchase of additional 
cows by the new family member(s). The increase in the established 
production history of the participating dairy operation will be 
determined on the basis of the national rolling herd average data for 
the current year in effect at the time of the intergenerational 
transfer and the quantity of the production history increase will be 
limited to an amount not more than 5 million pounds. The additional 
quantity of production history will receive coverage at the same 
elected coverage threshold and coverage percentage in effect for the 
participating dairy operation at the time the production history 
increase takes effect. Intergenerational transfers will not be allowed 
if the participating dairy operation's current annual production and 
the increase in herd size by the new member(s) is less than the 
operation's established production history.
    (1) The dairy operation must notify FSA, using the appropriate CCC 
form(s), of the intergenerational transfer within 60 days of the 
purchase of the cows, except that for purchases made for 
intergenerational transfers occurring in 2019 before the 2019 annual 
coverage election period, the dairy operation must notify FSA during 
the registration and annual coverage election period for coverage year 
2019, established by the Deputy Administrator. The operation has the 
option of the additional production history taking effect beginning 
with the month the producer first began to commercially produce and 
market milk as part of the dairy operation, or the following January 1. 
If the additional production history takes effect between January 1 and 
August 31, the premium is due September 1, as specified in Sec.  
1430.407(h)(2). If the additional production history takes effect 
between September 1 and December 31, the premium is due immediately.
    (2) All of the items specified in this paragraph must be documented 
in the notification to FSA and self-certified by the current and new 
member(s) for the intergenerational transfer to be considered eligible 
for additional production history. All of the following information is 
subject to verification by CCC. Refusal to allow CCC or any other 
agency of USDA to verify any information provided will result in 
disapproval of the intergenerational transfer.
    (i) Documentation that the new member(s) joining the operation has 
purchased the dairy cows being added to the dairy operation;
    (ii) Certification that each new member will have a share of the 
profits or losses from the dairy operation commensurate with such 
person's contributions to the dairy operation;

[[Page 28181]]

    (iii) Certification that each new member has a significant equity 
ownership in the participating dairy operation at levels determined by 
the Deputy Administrator and announced on the FSA website, 
www.fsa.usda.gov;
    (iv) Certification that each new member is a lineal descendant or 
spouse of a current member of the participating dairy operation;
    (v) Agreement that each new member will contribute labor in the 
dairy operation at a minimum of 35 hours per week or have a plan for 
transition to full-time, subject to FSA county committee review and 
approval, if only working seasonally or part-time;
    (vi) Certification that the dairy operation will be the principal 
source of non-investment earned income for each new member; and
    (vii) Documentation of the participating dairy operation's current 
annual marketings as of the date of the intergenerational transfer.


Sec.  1430.406  Administrative fees.

    (a) Except as provided in paragraph (e) of this section, dairy 
operations must pay an administrative fee to CCC in the amount of $100 
at the time of enrollment during the annual election period for each 
applicable coverage year the dairy operation decides to participate in 
DMC. Annual administrative fees are due and payable to CCC through the 
administrative county FSA office no later than the close of business on 
the last day of the annual election period established by the Deputy 
Administrator for each applicable calendar year of dairy margin 
coverage under DMC. The administrative fee paid is non-refundable.
    (b) The required annual administrative fee is per dairy operation. 
Therefore, multiple dairy producers in a single participating dairy 
operation are required to pay only one annual administrative fee for 
the participating dairy operation. Conversely, in the case of a dairy 
producer that operates more than one dairy operation, each 
participating dairy operation is required to pay a separate 
administrative fee annually.
    (c) Dairy operations that lock-in coverage according to Sec.  
1430.407(j), are required to pay the administrative fee each year 
through 2023, except as provided in paragraph (e) in this section.
    (d) Failure to pay the administrative fee timely will result in 
loss of dairy margin coverage for the applicable calendar year.
    (e) A limited resource, beginning, veteran, or socially 
disadvantaged farmer or rancher, as defined in Sec.  1430.402, will be 
exempt from paying the administrative fee in this section. The 
administrative fee waiver for the DMC Program for socially 
disadvantaged, beginning, and limited resource farmers and ranchers 
must be requested on a form specified by FSA and must accompany the 
contract application for coverage under this part in the administrative 
county FSA office.


Sec.  1430.407  Buy-up coverage.

    (a) For purposes of receiving buy-up dairy margin coverage, a 
participating dairy operation may annually elect, except as provided by 
paragraph (i) of this section, during an annual election period the 
following for the succeeding calendar year:
    (1) A coverage level threshold for margins that, per cwt, is equal 
to one of the following: $4.50, $5, $5.50, $6, $6.50, $7, $7.50, $8, 
$8.50. $9, or $9.50; and
    (2) A percentage of coverage for the production history from 5 
percent to 95 percent, in 5 percent increments.
    (b) In the absence of any such election, the applicable coverage 
level provided, with no premium due, is catastrophic level coverage.
    (c) A participating dairy operation that elects margin protection 
coverage above $4 is required to pay an annual premium based on 
coverage level and covered production history in addition to the 
administrative fee. Tier 1 applies to covered production history up to 
and including 5 million pounds; Tier 2 applies to covered production 
history above 5 million pounds.
    (d) A participating dairy operation may only select one coverage 
level threshold and only one percentage of coverage applicable to both 
Tier 1 and Tier 2. However, a participating dairy operation that elects 
a coverage level threshold of $8.50, $9, or $9.50, according to 
paragraph (a)(1) of this section, on the dairy operation's first 5 
million pounds of production history under Tier 1, must choose a 
different coverage level threshold that is equal to $4, $4.50, $5, 
$5.50, $6, $6.50, $7, $7.50, $8 to apply to production history in 
excess of 5 million pounds included in the covered production under 
Tier 2 elected by the participating dairy operation.
    (e) The premium per cwt of milk, based on the elected percentage of 
coverage of production history is specified in the following table:

                      Table 1 to Sec.   1430.407(e)
------------------------------------------------------------------------
                                              Tier 1          Tier 2
                                            premium per     premium per
                                           cwt (for the    cwt (for the
                                              covered         part of
         Coverage level (margin)            production        covered
                                           history that     production
                                           is  5 million   history over
                                             pounds or       5 million
                                               less)          pounds)
------------------------------------------------------------------------
$4.00...................................            None            None
4.50....................................         $0.0025         $0.0025
$5.00...................................           0.005           0.005
$5.50...................................           0.030           0.100
6.00....................................           0.050           0.310
6.50....................................           0.070           0.650
7.00....................................           0.080           1.107
7.50....................................           0.090           1.413
8.00....................................           0.100           1.813
8.50....................................           0.105             N/A
9.00....................................           0.110             N/A
9.50....................................           0.150             N/A
------------------------------------------------------------------------

    (f) The annual premium due for a participating dairy operation is 
calculated by multiplying:
    (1) The covered production history; and
    (2) The premium per cwt of milk specified in paragraph (e) of this 
section for the coverage level elected in paragraph (d) of this section 
by the dairy operation.
    (g) In the case of a new dairy operation that first registers to 
participate in DMC for a calendar year after the start of the calendar 
year, the participating dairy operation is required to pay a pro-rated 
premium for that calendar year based on the portion of the calendar 
year for which the participating dairy operation is eligible, and for 
which it purchases the coverage.
    (h) A participating dairy operation is required to pay the annual 
premium in total as specified in paragraphs (d) and (e) of this section 
for the applicable calendar year, at time of submission of coverage 
election to FSA; but no later than September 1 of the applicable 
calendar year of coverage, unless otherwise specified by the Deputy 
Administrator.
    (i) If the total premium is not paid for an applicable calendar 
year of coverage as specified in paragraph (g) of this section, the 
participating dairy operation will lose coverage until such time as the 
premium has been fully paid.
    (j) For each calendar year 2019 through 2023, a participating dairy 
operation that makes a one time election of a coverage level threshold 
and a percentage of coverage according to this section, for a 5-year 
period, will have their elected coverage level, as applicable to each 
tier, reduced by 25 percent. The option to lock in for the premium rate 
discount must be elected

[[Page 28182]]

during the 2019 annual coverage election period announced by FSA. 
Except that, new dairy operations, not in existence during the 2019 
annual election period, that elect to participate in DMC according to 
Sec.  1430.404(b), are eligible to receive the premium rate discount 
for locking coverage for the period beginning with the first available 
calendar year and ending in 2023, except that new dairy operations 
registering for DMC for the first time for coverage year 2023 and dairy 
operations that stop producing and marketing milk in 2019 that are 
registering for eligible months in 2019 are not eligible for the multi-
year premium discount. All dairy operations that elect the lock-in 
option are subject to full participation in the DMC Program at the same 
elected premium coverage levels and calculated premium for the duration 
of DMC according to Sec.  1430.413.
    (k) Annual premium balances due to CCC from a participating dairy 
operation for a calendar year of coverage must be paid in full no later 
than September 1 of the applicable calendar year or within a grace 
period determined by the Deputy Administrator, if applicable.
    (l) The Deputy Administrator may waive the obligation to pay the 
premium, or refund the premium paid, of a participating dairy operation 
for a calendar year, for death, retirement, permanent dissolution of a 
participating dairy operation, or other circumstances determined by the 
Deputy Administrator. In these instances, the contract will be 
terminated immediately, except with respect to payments accrued to the 
benefit of the participating dairy operation under this subpart before 
such termination.
    (m) DMC administrative fees and premiums are required to be paid by 
a negotiable instrument satisfactory to FSA and made payable to CCC and 
either mailed to or provided in person to the administrative county 
office or other location designated by FSA.


Sec.  1430.408  MPP-Dairy premium repayments.

    (a) A dairy operation that participated in MPP-Dairy during any of 
calendar years 2014 through 2017 may receive a repayment in an amount 
equal to the difference between the total amount of premiums paid by 
the dairy operation for each applicable calendar year of coverage and 
the total amount of payments made to the MPP-Dairy participating dairy 
operation for that applicable calendar year.
    (b) FSA will determine the calculated repayment amounts for each 
year for each dairy operation that participated in MPP-Dairy during the 
years of 2014 through 2017.
    (1) Coverage years in which the payments exceeded premiums paid for 
that coverage year will yield a $0 calculation for that calendar year.
    (2) Dairy operations must provide adequate proof, to the 
satisfaction of FSA, for calculated repayment amounts in dispute.
    (c) Qualifying dairy operations according to paragraph (a) of this 
section, must elect on a form prescribed by CCC, to receive the 
repayment in either an amount that is equal to the following:
    (1) 75 percent of the calculated repayment as a credit that may be 
used by the dairy operation towards DMC premiums; or
    (2) 50 percent of the calculated repayment as a direct cash 
repayment.
    (d) Dairy operations may transfer their premium repayment election 
choice in paragraph (c) of this section to a dairy operation that 
succeeded to the dairy operation through a succession-in-interest 
transfer under MPP-Dairy. However, the dairy operation to which the 
election choice is being transferred to must be participating in the 
DMC Program if the credit option is elected according to paragraph 
(c)(1) of this section. Otherwise, their credit repayment election is 
not transferrable. Dairy operations that give up their right to elect a 
premium repayment option by designation of such on a form prescribed by 
CCC are not eligible to receive a cash or credit benefit, in full or 
partially, for premiums paid under MPP-Dairy.
    (e) A dairy operation that elects the credit option can only use 
the credit in the DMC Program. If the entire credit is not used, for 
any reason, it cannot be applied as a credit to any other USDA program 
and will have zero cash value that cannot be redeemed for any purpose.
    (f) A dairy operation that elects the cash repayment option will 
have the repayment issued only in the name of the dairy operation 
entity as it existed in MPP-Dairy.
    (g) A dairy operation must choose their MPP-Dairy premium repayment 
option on a form prescribed by CCC during a period specified by FSA. 
Once the premium repayment choice of credit or cash is made by the 
dairy operation and approved by FSA, that choice cannot be changed.


Sec.  1430.409  Dairy margin coverage payments.

    (a) A DMC payment will be made to a participating dairy operation 
for any month when the average actual dairy production margin for that 
month falls below the coverage level threshold in effect for the 
participating dairy operation.
    (b) Payments trigger at the catastrophic level or at the buy-up 
level; the payments will be calculated according to this paragraph. If 
the dairy operation only has catastrophic coverage or buy-up coverage 
at 95 percent, there will be a single calculation. If the dairy 
operation purchased buy-up coverage at less than 95 percent and the 
catastrophic level also triggers a payment, then there will be two 
calculations to determine the payment--first the calculation for the 
buy-up coverage percentage and then the calculation for the 
catastrophic level percentage, which is the balance of the established 
production history up to 95 percent; the result of these two 
calculations will be added together to determine the payment amount. 
Each calculation multiplies the payment rate times the coverage 
percentage times the production history divided by 12 as follows:
    (1) Payment rate. The amount by which the coverage level exceeds 
the average actual dairy production margin for a month;
    (2) Coverage percentage. The coverage percentage; and
    (3) Production history. The production history of the dairy 
operation, divided by 12.
    (c) If the dairy operation purchased buy-up level coverage at less 
than 95 percent of production history, then the dairy operation will 
receive a payment calculated at the buy-up level, plus the payment at 
the catastrophic level, if triggered, for the balance of 95 percent of 
its established production history. For example, if a producer 
purchased buy-up coverage at the 50 percent level, then that producer 
will also receive catastrophic level coverage for the next 45 percent 
for total coverage of 95 percent.


Sec.  1430.410  Effect of failure to pay administrative fees or 
premiums.

    (a) A participating dairy operation that fails to pay a required 
administrative fee or premium payment due upon application to DMC or 
for a calendar year of coverage:
    (1) Remains legally obligated to pay such administrative fee or 
premium, as applicable; and
    (2) Upon such failure to pay when due, loses coverage under DMC 
until such administrative fee or premium is paid in full, and once 
paid, coverage will be reinstated beginning with the month coverage was 
lost.

[[Page 28183]]

    (b) CCC may take such actions as necessary to collect unpaid 
administrative fees and premium payments.


Sec.  1430.411  Calculation of average feed cost and actual dairy 
production margins.

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


Sec.  1430.412  Relation to RMA's LGM-Dairy Program.

    (a) Dairy producers that produced and commercially marketed milk in 
2018 and participated in the LGM-Dairy Program operated by RMA in 2018 
are eligible to receive retroactive 2018 coverage under MPP-Dairy for 
those months in operation. Approved participation for retroactive MPP-
Dairy coverage is subject to verification of LGM-Dairy coverage in 2018 
by RMA.
    (b) Eligible dairy producers must apply for the retroactive 2018 
MPP-Dairy coverage on a CCC-prescribed application form during a signup 
period announced by the Deputy Administrator.
    (c) Eligible producers that received partial year benefits under 
MPP-Dairy are eligible for the full year, less any payments issued for 
a month that triggered a payment under MPP-Dairy in 2018.


Sec.  1430.413  Multi-year contract for lock-in option.

    (a) Participating dairy operations enrolled in DMC according to 
Sec.  1430.407(j) are registered through December 31, 2023. As such, a 
participating dairy operation is obligated to pay applicable 
administrative fees and applicable premiums each succeeding calendar 
year following the date the contract is first entered into through 
December 31, 2023. Likewise, any successor to the dairy operation with 
lock-in coverage will be bound to the same coverage elections made by 
the predecessor and applicable premiums for the duration of the lock-in 
period.
    (b) A participating dairy operation under a lock-in option that 
fails to pay applicable administrative fees and premiums for each year 
of the lock-in will remain obligated to pay such applicable 
administrative fees and premiums as specified in Sec.  1430.410.
    (c) If a participating dairy operation goes out of business as 
described in Sec.  1430.407(l) before December 31, 2023, the contract 
will be terminated immediately, except with respect to payments accrued 
to the benefit of the participating dairy operation under this subpart 
before such termination.


Sec.  1430.414  Contract modifications.

    (a) Producers in a participating dairy operation must notify FSA 
immediately of any changes that may affect their participation in DMC. 
Changes include, but are not limited to, death of a producer who is on 
the contract, producer joining the operation, producer exiting the 
operation, relocation of the dairy operation, transfer of shares by 
sale or other transfer action, or dairy operation reconstitutions as 
provided in Sec.  1430.415.
    (b) Payment of any outstanding premium or administrative fee for a 
participating dairy operation must be paid in full before a transfer of 
shares by sale or any other change in producers on the contract 
originally submitted to FSA may take effect. Otherwise, producer 
changes will not be recognized until the following annual election 
period, and only if at that time all associated premiums and 
administrative fees from any previous calendar year of coverage have 
been paid in full.


Sec.  1430.415  Reconstitutions.

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

[[Page 28184]]

Sec.  1430.416  Offsets and withholdings.

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


Sec.  1430.417  Assignments.

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


Sec.  1430.418  Appeals.

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


Sec.  1430.419  Misrepresentation and scheme or device.

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


Sec.  1430.420  Estates, trusts, and minors.

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


Sec.  1430.421  Death, incompetency, or disappearance.

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


Sec.  1430.422  Maintenance and inspection of records.

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


Sec.  1430.423  Refunds; joint and several liability.

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


Sec.  1430.424  Violations of highly erodible and wetland conservation 
provisions.

    The provisions of 7 CFR part 12 apply to this part.

[[Page 28185]]

Sec.  1430.425  Violations regarding controlled substances.

    The provisions of 7 CFR 718.6 apply to this part.

Richard Fordyce,
Administrator, Farm Service Agency.
Robert Stephenson,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 2019-12998 Filed 6-14-19; 4:15 pm]
BILLING CODE 3410-05-P