Implementation of the Farm Program Provisions of the 1996 Farm Bill

SUMMARY: This final rule implements farm program provisions required by

Title I of the Federal Agriculture Improvement and Reform Act of 1996

(the 1996 Act). The primary issues concern: changes to the dairy,

sugar, and peanut programs; the establishment of production flexibility

contracts for producers of wheat, feed grains, upland cotton, and rice

that specify the terms and conditions for receiving payments from the

Commodity Credit Corporation (CCC); statutory payment limitation

provisions; implementation of marketing assistance loans, reduced loan

repayment rates, and loan deficiency payments; and a cap on Cotton User

Marketing Certificate payments.

This action will also: amend Chapter II to delegate authority to

implement these programs from the Secretary to the Under Secretary for

Farm and Foreign Agricultural Services and to the Administrator, Farm

Service Agency (FSA) and to correct an erroneous reference to an

existing delegation with respect to the Administrator, Foreign

Agricultural Service (FAS); reorganize Chapter VII to consolidate the

regulations in a more efficient manner, to free parts for future use

and to remove obsolete provisions; and reorganize Chapter XIV so that

the regulations of separate agencies that operate through CCC are

located and organized in separate and identifiable parts.

This regulation will complete many of the actions being taken by

FSA as part of the National Performance Review Initiative to eliminate

unnecessary regulations and improve those that remain in force.

EFFECTIVE DATE: July 12, 1996.

FOR FURTHER INFORMATION CONTACT: David Winningham, Director, Regulatory

Review Group, FSA, USDA, Stop 0572, 1400 Independence Ave. SW,

Washington, D.C. 20250-0572, Telephone: (202) 720-5457.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule is issued in conformance with Executive Order 12866

and has been determined to be economically significant and has been

reviewed by the Office of Management and Budget.

Cost-Benefit Assessment

A cost-benefit assessment of the implementation of commodity

programs provided under the 1996 Act was completed. Most of the impact

on the farm sector is due to Title I provisions (Agricultural Market

Transition Act of 1996). However, the cost-benefit assessment also

incorporates, but does not separately analyze, the effects of the

implementation of Title II (Agricultural Trade) and Title III

(Conservation) provisions.

The assessment is based, in part, on analyses of supply, demand,

and price conditions and trends in agricultural commodity markets

conducted by the U.S. Department of Agriculture (USDA). Several USDA

agencies conduct these analyses, which are coordinated through USDA's

Interagency Commodity Estimates Committees. The Committees are composed

of senior analysts and are responsible for publishing official USDA

supply, demand, and price estimates/forecasts. Weather, trade policy,

and economic uncertainties surrounding production and use projections

can change these forecasts.

The 1996 Act was signed into law on April 4, 1996. The fiscal year

(FY) 1997 President's Budget baseline estimates, based on supply and

demand conditions as of January 1996 assumed an extension of 1995

program provisions as provided by the Agricultural Act of 1949, as

amended (the 1949 Act) prior to enactment of the 1996 Act. The primary

amendments to the 1949 Act which are incorporated in this analysis are

the provisions of the Food, Agriculture, Conservation and Trade Act of

1990 (the 1990 Act) and related budget reconciliation acts in 1990 and

1993.

The 1996 Act replaces target prices, deficiency payments, and

acreage reduction programs with fixed, but declining, payments to

producers of contract commodities (wheat, corn, grain sorghum, barley,

oats, upland cotton, and rice). Contract payments are based on

historical acreage on the farm and will not change if acreage or market

prices change. In general, producers with production flexibility

contracts are given total flexibility to plant any crop on the farm,

except fruits and vegetables. However, participating producers must

comply with wetland and conservation requirements under Title XII of

the Food Security Act of 1985.

The 1996 Act accelerates the trend of the previous two major farm

acts toward greater market orientation, which gradually reduced the

Government's influence in the agricultural sector. The reduced role of

Government programs may make the sector more vulnerable to supply and/

or demand shocks, but the increased planting flexibility and

elimination of production adjustment programs allow producers to

respond more rapidly. Thus, alternative production and marketing

strategies that manage risk could increase in importance.

In aggregate, the national level of acreage planted to most of the

major field crops under the 1996 Act is expected to be nearly the same

as under the FY 1997 President's Budget baseline assuming continuation

of the 1995 program provisions. However, the increased planting

flexibility may result in a shift at the farm level and regionally to

take advantage of differences in comparative advantage in production of

specific crops. Plantings of the eight major field crops are expected

to average only about 600,000 acres less compared with the baseline,

due largely to the decoupling of payments from planting decisions and

the freeing-up of haying and grazing restrictions. The 1996 Act will

have little effect on fruits and vegetables because planting

limitations are similar to the 1949 Act.

Total outlays for the contract commodities and marketing assistance

loan commodities under the 1996 Act are estimated at $36.8 billion,

about $23.0 billion higher than under the FY 1997 President's Budget

baseline assuming continuation of the 1995 program provisions. This

largely reflects higher contract commodity payments compared with

projected deficiency payments under the FY 1997 President's Budget

baseline.

Net farm income (including crop and livestock sectors) during the

1996-2002 calendar years is expected to be about $15 billion higher

under the 1996 Act than under the FY 1997 President's Budget baseline.

This largely reflects higher Government payments to farmers under the

1996 Act as production flexibility contract payments exceed

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projected deficiency payments. Additionally, changes in the timing of

payments to farmers provide an additional boost to farm income in the

first year of the program--pushing 1996 net income up about $4 billion.

However, net farm income is up by less than the increase in Government

payments due to changes in the dairy and peanut programs. Crop sector

receipts are down slightly under the 1996 Act due to lower plantings

and production of the eight major commodities. Livestock sector

receipts are lower due primarily to lower dairy sector receipts. Cash

production expenses are up slightly due to increases in net cash rents,

which offset lower crop production expenses from lower plantings.

Farmland values are higher under the 1996 Act compared with the FY

1997 President's Budget, reflecting the capitalized value of higher

income. Land values average about 3 percent higher under the 1996 Act

compared with FY 1997 President's Budget estimates.

Consumer costs are expected to be only slightly lower under the

1996 Act. Because grain prices, on average, are expected to be

essentially unaffected, no appreciable change in grain-based food

product costs, such as cereal and meat products, is expected.

The livestock sector, excluding dairy, is expected to benefit

modestly from the 1996 Act because there are no restrictions on acreage

that may be hayed or grazed, and, on average, feed prices are expected

to be about unchanged. However, in aggregate, the net impact on

nondairy livestock prices and production is negligible. Alternatively,

the 1996 Act can be compared to a ``no program'' baseline. Under the

1996 Act, contract commodity payments represent a large portion of the

benefits received by producers and there are few planting restrictions.

The major differences between a no-program scenario (if the CRP and

export programs were continued) and the 1996 Act are that producers

would no longer receive contract commodity payments of about $35.9

billion and would no longer be subject to farm conservation and wetland

protection requirements. The loss in farm income would likely entail

substantial short-term adjustments and financial stress. However, over

the longer term, a no-program scenario is expected to have little or no

impact on supply, demand, and prices compared with the 1996 Act for

most commodities except for peanuts, sugar, and, in the initial years

of the period, dairy.

Plantings would be expected to decrease marginally with little or

no change in market prices. Farm income would likely be lower, but lost

revenue from eliminating contract commodity payments would be partially

offset by lower cash rents. Land values would be lower if there were no

program. In the aggregate, compared with a no-program scenario, impacts

of the 1996 Act on the livestock industry, input industry, consumers,

and the general economy would be minimal in the long run. However,

impacts in some sectors, such as those dependent on the peanut program

and sugar program, may be more significant.

The economic impacts of the peanut program provisions of the 1996

Act, including eliminating the peanut quota floor (which is addressed

in a separate rule), reducing the quota price support level, and

requiring the program to operate at no net cost are expected to reduce

producers' revenue by $1.5 billion from 1996 to 2002, while taxpayers

are expected to benefit by avoiding costs of $0.5 billion compared with

the FY 1997 President's Budget baseline. Consumers benefit from lower

prices. Quota lease and capitalized values of the quota are also

expected to decline.

Under a ``no peanuts program'' scenario, producer prices would

decline, resulting in gains to first buyers of peanuts of $150 to $160

million annually, compared with the 1996 provisions. Over the 7-year

life of the program, the capitalized gain to first buyers would total

about $800 million, assuming a 10 percent capitalization rate. Beet

sugar production under the 1996 Act is expected to expand slightly

faster than under the FY 1997 President's Budget baseline because of

the elimination of domestic marketing allotments. Production of raw

cane sugar is expected to be the same. Sugar imports are forecast to be

somewhat lower under the 1996 Act reflecting the increase in beet sugar

production. Based on the FY 1997 President's Budget baseline, the sugar

program is expected to offer nonrecourse loans in most years covered by

the 1996 Act because the tariff rate quota is expected to be above 1.5

million short tons, raw value. Sugar prices are not expected to change

significantly on average because supply is expected to be unchanged

from the FY 1997 President's Budget baseline. The 1996 Act is expected

to increase Federal revenues by $49 million over FY's 1996-2002,

compared with the FY 1997 President's Budget baseline, by increasing

assessments on sugar marketed.

One study estimated, under the assumptions of a low initial world

price for raw sugar, averaging 7.5 cents per pound, and unilateral

elimination of the U.S. sugar program, that the U.S. program increased

the domestic sugar price by an average of 13 cents per pound from 1984

to 1989. The study estimated that this domestic price premium cost U.S.

sweetener users $2.8 billion per year; increased returns to sugarcane

growers, sugar beet growers, and sweetener processors by $2.1 billion;

increased returns to foreign quota holders by $403 million; and cost

other foreign sugar suppliers $2.3 billion (by lowering the world

price); and benefitted foreign consumers $2.2 billion (1988 dollars).

Another study estimated that trade liberalization by the U.S., the

European Economic Union, China, and the former Soviet Union in sugar

would result in a domestic price of 22.4 cents per pound, which is

about the current domestic price under existing U.S. trade

restrictions. Since beet sugar production costs are lower than raw cane

sugar production and refining costs in the United States, very little

disruption of the domestic sugar industry would be expected with

multilateral deregulation of the world sugar market.

In the dairy sector, milk production is expected to be lower

compared with the FY 1997 President's Budget baseline as dairy farmers

respond to lower milk prices. Consumers benefit from lower milk and

dairy product prices as product clears through the marketplace as the

support program is being phased out by January 1, 2000. Cash receipts

in the dairy sector are lower under the 1996 Act, also a result of the

price support program being phased out. Lower farm milk prices are only

partially offset by the elimination of the assessment on all milk

marketings that became effective on May 1, 1996.

Lower producer prices under a ``no dairy program'' scenario would

result in gains to first buyers of milk of about $175 million per year

over the 7-year period, FY 1996-2002, compared with the new program.

Most of the gains to first buyers would occur during the first half of

the period, before the support program is eliminated. Lower farm-level

prices for milk could provide a temporary windfall to manufacturers and

retailers of milk and dairy products, but competitive pressures would

be expected eventually to lead to much of the reduction in producer

prices being passed on to retail consumers.

The 1996 Act provides the Secretary some limited implementation

options. Alternative options, reasons for selecting a particular

option, and

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analyses of the individual commodity sector impacts of the 1996 Act,

compared with FY 1997 President's Budget, are presented in the

assessment.

For further information, the following individuals may be contacted

regarding the different parts of the assessment:

Part I--Contract Commodity Payment, Marketing Assistance Loan, and

Related Provisions of the Agricultural Market Transition Act (Contact:

Philip Sronce, 202-720-2711)

Part II--Sugar (Contact: Dan Colacicco, 202-720-6733)

Part III--Dairy (Contact: John Mengel, 202-720-6733)

Part IV--Peanuts (Contact: Verner Grise, 202-720-5291)

Federal Assistance Programs

The titles and numbers of the Federal assistance programs, as

found in the Catalog of Federal Domestic Assistance, to which this

final rule applies are: Commodity Loans and Purchases-10.051; Cotton

Production Stabilization-10.052; Feed Grain Production

Stabilization-10.055; Wheat Production Stabilization-10.058; Rice

Production Program-10.065; and Conservation Reserve Program-10.069.

Regulatory Flexibility Act

It has been determined that the Regulatory Flexibility Act is not

applicable to this rule because the Office of the Secretary, FSA and

CCC are not required by 5 U.S.C. 553 or any other provision of law to

publish a notice of proposed rulemaking with respect to the subject

matter of this rule.

Environmental Evaluation

It has been determined by an environmental evaluation that this

action will have no significant impact on the quality of the human

environment. Therefore, neither an environmental assessment nor an

Environmental Impact Statement is needed.

Executive Order 12778

The final rule has been reviewed in accordance with Executive Order

12778. The provisions of this final rule preempt State laws to the

extent such laws are inconsistent with the provisions of this rule. The

provisions of this rule are not retroactive. Before any judicial action

may be brought concerning the provisions of this rule, the

administrative remedies must be exhausted.

Executive Order 12372

This program is not subject to the provisions of Executive Order

12372, which require intergovernmental consultation with State and

local officials. See the notice related to 7 CFR part 3015, subpart V,

published at 48 FR 29115 (June 24, 1983).

Unfunded Mandates

The provisions of Title II of the Unfunded Mandates Reform Act of

1995 are not applicable to this rule because the Office of the

Secretary, FSA and CCC are not required by 5 U.S.C. 553 or any other

provision of law to publish a notice of proposed rulemaking with

respect to the subject matter of this rule.

Small Business Regulatory Enforcement Fairness Act of 1996

Section 161(d) of the 1996 Act requires that the regulations

necessary to implement Title I of the 1996 Act must be issued within 90

days of enactment and that such regulations shall be issued without

regard to the notice and comment provisions of 5 U.S.C. 553. These

regulations affect the immediate planting and marketing decisions of an

extraordinarily large number of agricultural producers. In addition,

with respect to the revision of 7 CFR part 2, 5 U.S.C. 553 specifically

provides that rules relating to agency organization may be published

without the issuance of a general notice of proposed rulemaking.

Accordingly, as authorized by section 808 of the Small Business

Regulatory Enforcement Fairness Act of 1996, Pub. L. 104-121, this rule

is effective upon publication in the Federal Register.

Background

1. Part 2 Delegations of Authority by the Secretary of Agriculture and

General Officers of the Department

Delegations of authority are made from the Secretary to the Under

Secretary for Farm and Foreign Agricultural Services and from the Under

Secretary for Farm and Foreign Agricultural Services to the

Administrator, FSA, to formulate policies and administer programs

authorized by Title I of the 1996 Act. In addition, an erroneous

delegation is corrected and obsolete delegations are removed.

2. Part 718 Reporting and Maintaining Farm Records and General

Compliance Provisions

The regulations regarding the determination of acreage and

compliance, such as requirements for acreage reports, are amended to

conform to the program changes required by the 1996 Act. As a result of

the broad planting flexibility under the new regulations producers will

no longer be required to submit acreage reports on the production on

the farms. Reporting will only be required regarding the planting of

fruits and vegetables in order to receive production flexibility

contract payments. Producers who seek marketing assistance loans shall

file an acreage report, before harvest, on the production to be used

for the marketing assistance loan. No additional voluntary reporting by

producers will be considered for the purpose of determining benefits

under future programs. Section 718.7 is reorganized to reduce its size

and improve clarity. Also, internal agency procedures are removed from

the regulations and obsolete references are updated or removed. Parts

719--Reconstitution of Farms, Allotments, Normal Crop Acreage, and

Preceding Year Planted Acreage, 720--General Policy and

Interpretations, 790--Incomplete Performance Based Upon Action or

Advice of an Authorized Representative of the Secretary, 791--Authority

to Make Payments When There Has Been a Failure to Comply Fully With the

Program, 793--Rule of Fractions, and 796--Denial of Program Eligibility

for Controlled Substance Violations are consolidated into part 718 for

efficiency and ease of use.

3. Part 729 Peanuts

The 1996 Act amended the Agricultural Adjustment Act of 1938 (the

1938 Act) to provide a poundage quota program for the 1996 through 2002

crops of peanuts. Quota matters under the 1938 Act will be addressed in

a separate rule. This rule amends part 729 to implement the provision

of section 155 of the 1996 Act dealing with peanut marketing

assessments. The price support provisions of section 155 will be

addressed in the portion of this rule amending part 1446.

Under section 155(g)(1) of the 1996 Act, the Secretary is directed

to collect a nonrefundable marketing assessment on peanuts produced in

each of the 1996 through 2002 crops on all peanuts marketed and

considered marketed in the same manner as the assessment previously

collected under provisions of the 1949 Act. The per-pound basis for the

assessment as a percentage of the national average quota or additional

peanut loan rate for the applicable crop is, for producers, 0.6 percent

for the 1996 crop and 0.65 percent for the 1997 through 2002 crops,

and, for the first purchaser, 0.55 percent for each of the 1996 through

2002 crop years. Sections 155(d)(4) and (7) of the 1996 Act provide

further that the amounts of the assessments not required to offset

losses in area quota marketing pools shall be transferred to the

Treasury.

Further, section 155(d)(8) of the 1996 Act requires that the

marketing

[[Page 37547]]

assessment collected from producers be increased if the offsets, as

provided in part 1446 of this title, are not sufficient to cover losses

in an area quota pool. The increased assessment will be in an amount

determined by the Secretary to be necessary to cover such losses and

shall apply to the quota peanuts produced in the marketing area covered

by that pool.

Accordingly, this rule amends Sec. 729.316, and adds a new

Sec. 729.317. Any shortfall in additional assessments made to cover

losses will be made up in increased assessments in subsequent years.

Any excess collections from increased assessments to cover losses shall

be held by the Secretary to cover net losses in the pool in subsequent

years in the same marketing area.

4. Part 1400 Payment Limitation and Payment Eligibility

This rule clarifies the existing policy and implements the payment

limitation and eligibility requirements of the 1996 Act. The payment

limitation and eligibility provisions formerly found at parts 1497 and

1498 are combined and revised in a new part 1400. The 1996 Act provides

a $40,000 limitation per fiscal year on payments made to a person under

one or more production flexibility contracts, a $50,000 limitation on

the total of adjustments made pursuant to sections 113(c)(1) and

113(c)(2) of the 1996 Act and paid to person under one or more

flexibility contracts, and a $75,000 limitation on the amount of

marketing loan gains and loan deficiency payments a person may receive.

The 1996 Act applies the payment limitation and payment eligibility

requirements and restrictions of the Food Security Act of 1985 to

payments made under production flexibility contracts, marketing loan

gains, and loan deficiency payments. This rule will also update

regulations providing that persons who are not U.S. citizens are not

eligible for farm program payments, and make other minor changes to

enhance the implementation of the 1996 Act.

5. Parts 1401 and 1470 Commodity Certificates, In Kind Payments, and

Other Forms of Payment

Chapter XIV provides regulations for programs operated by the

Commodity Credit Corporation (CCC). Currently, three agencies operate

programs under CCC: the Farm Service Agency (FSA), the Natural

Resources Conservation Service (NRCS), and the Foreign Agricultural

Service (FAS). Currently, regulations for each agency are not all co-

located. The chapter will be reorganized to combine and unify each

agency's regulations in easily identifiable parts, as follows:

Parts 1400-1409 General CCC Regulations and Policies

Parts 1410-1464 FSA

Parts 1465-1479 NRCS

Parts 1480-1499 FAS

Part 1470 is thus redesignated as part 1401.

6. Part 1402 Policy for Certain Commodities Available for Sale

This final rule amends part 1402 to delete the requirement that

general sales offering information will be issued on a monthly basis.

7. Part 1405 Loans, Purchases and Other Operations

This final rule implements changes to Sec. 1405.1 by incorporating

the additional 1 percent interest requirement set forth for CCC loans,

and reserves Sec. 1405.5. Also, the rule implements crop insurance

requirements and contract violation provisions set forth by the 1996

Act.

8. Part 1412 Production Flexibility Contracts for Wheat, Feed Grain,

Rice, Upland Cotton

This final rule sets forth the rules and regulation for a new

Federal farm subsidy program. In the past, payments were determined by

taking into consideration the acreage planted to a crop and acreage

devoted to a conserving use. In addition, payments were only made when

the price of a commodity fell below an established (``target'') price

set forth in the 1949 Act. The new program decouples farm program

payments from program crop planting requirements. This rule allows

farms having a 1996 crop acreage base established for one or more of

the following crops: wheat, corn, barley, grain sorghum, oats, cotton

and rice (``contract commodities'') to be enrolled under a Production

Flexibility Contract for a period of 7 years. A producer may enroll the

farm and one or more contract commodities in a 7-year contract.

Contract payments are calculated by multiplying 85 percent of the

contract acreage times the farm program payment yield for the crop

times the payment rate for the crop.

The major provisions of these regulations include the following

provisions. Farms with previous years' crop acreage bases established

on a rotation basis for a crop shall have 1996 crop acreage bases for

the crop established by dividing the sum of planted and considered

planted acreage for the rotation cycle by the number of years in the

rotation cycle. The sign-up period for the program begins May 20, 1996,

and ends August 1, 1996. A producer on an enrolled farm may plant any

crop, including crops other than the contract commodity, on acreage

normally devoted to a contract commodity crop except for certain fruits

and vegetables, for which limitations are set forth in this regulation.

Tobacco may be planted on contract acreage; however, tobacco acreage on

a farm cannot exceed that farm's tobacco quota or allotment. Any 1996

crop acreage bases on a farm not enrolled by August 1, 1996, shall not

be eligible to be enrolled after that date unless such crop acreage

base is released upon expiration of a Conservation Reserve Program

(CRP) contract that expires or is voluntarily terminated after August

1, 1996. Producers who violate a Production Flexibility Contract may be

denied benefits under the Production Flexibility Contract for its

duration, depending on the nature of the violation. No acreage

reduction program requirements apply to this program. The regulations

also provide that landowners must provide fair treatment to

sharecroppers and tenants in order for the landowner to receive program

benefits.

9. Part 1421 Loans and Loan Deficiency Payments for Grains and

Similarly Handled Commodities

Part 1421 provided price support loan and loan deficiency payments

for the 1991 and subsequent crops of wheat, feed grains, rice,

oilseeds, and loans for farm-stored peanuts. The 1996 Act continues to

authorize loan and loan deficiency payments for these commodities from

1996 through 2002. The 1996 Act does not authorize the following: (1)

purchase agreements; (2) farmer-owned reserve (FOR); (3) a rice

marketing certificate program; (4) loans for high moisture barley; (5)

loans and loan deficiency payments for rye; and (6) loan extensions.

This rule removes these references from part 1421. The 1996 Act changes

the repayment rate for rice loan and loan deficiency payments and the

maturity date for oilseeds. Provisions of part 1421 have been amended

as necessary to delete price support terminology; and to reflect the

reorganization of the Department of Agriculture (USDA) pursuant to the

Department of Agriculture Reorganization Act of 1994, Public Law 103-

354, 7 U.S.C. 6991.

Rules for the Rice Marketing Certificate Program are deleted.

10. Part 1425 Cooperative Marketing Associations

This rule implements changes in the regulations for cooperative

marketing

[[Page 37548]]

associations (CMA's) that obtain loan and loan deficiency payments on

behalf of their members for the 1996 through 2002 crop years. The 1996

Act does not authorize: (1) loans and loan deficiency payments for rye

and honey; (2) wool and mohair payments; and (3) purchase agreements.

This rule removes rye, honey, wool, and mohair as approved commodities,

removes purchase agreement provisions, deletes price support

terminology, makes changes necessary to reflect the reorganization of

USDA, and removes definitions found elsewhere in this title. The term

``cooperative'' is amended to CMA.

11. Part 1427 Cotton Loan Programs

The 1996 Act sets forth the statutory authority for the cotton loan

program. This rule makes amendments to part 1427 that will incorporate

applicable provisions of the 1996 Act, provide greater clarity, and

remove obsolete provisions. The provisions of these regulations are

generally the same as regulations in effect with regard to the 1991

through 1995 crops.

However, Sec. 1427.7(a) has been amended to remove the provisions

for 8-month extensions of upland cotton and extra long staple cotton

nonrecourse loans. The 1996 Act prohibits extensions for all loans

authorized under the 1996 Act. CCC will continue the provisions for 8-

month loan extensions for the 1995 upland cotton crop. Sections 1427.8

and 1427.11(g) and (h) have been amended to remove the provisions that

the amount of the loan shall be reduced by the amount of any unpaid

warehouse receiving charges, warehouse storage charges in excess of 60

days, or charges for new bale ties. However, Sec. 1427.13(e) has been

added to require the producer, if the producer elects to forfeit cotton

to CCC, to pay to CCC all warehouse receiving and storage charges that

accrued on such forfeited cotton prior to the date such cotton is

tendered for loan.

Section 1427.19 has been amended to modify the repayment level for

upland cotton loans beginning with the 1996 crop. The 1996 Act removed

the minimum repayment rate of 70 percent of the national average loan

rate. Under the 1996 Act, upland cotton loans may be repaid at the

lesser of: (1) the loan level and charges, plus interest; or (2) the

adjusted world price. In addition, Sec. 1427.19 has been amended to

clarify when CCC will pay warehouse storage charges to permit upland

cotton loans to be repaid at the adjusted world price. Report language

accompanying the 1996 Act provides that current policy for establishing

the repayment rate for upland cotton should be continued, including

crediting storage costs against the repayment amount. Accordingly, the

regulations provide that producers will be responsible for paying

storage costs, except when producers repay a loan at a lower rate when

the adjusted world price of upland cotton is less than the total of the

principal amount of the loan plus accrued interest and storage costs

accruing after the cotton was pledged as collateral for the loan. This

is the same procedure as was used in prior years. However, producers

will now be responsible for storage charges accruing before the loan

was obtained.

Section 1427.24 has been reserved. The 1996 Act does not authorize

recourse loans except for recourse seed cotton loans, which are covered

in subpart D of this part.

Section 1427.100 is amended to set forth changes to the upland

cotton user marketing certificate program. A proposed rule was

published in the Federal Register on March 13, 1996, at 61 FR 10289,

requesting comments on a proposal to address bunching of export sales

under the upland cotton user marketing certificate (Step 2) program by

setting the exporter payment rate on the date the cotton is shipped.

Comments were also solicited on several alternative policies to fix

bunching such as prohibiting sales through third parties or to foreign

affiliates, or requiring exporters to provide evidence of a bona fide

export sales contract, identify the end user, or disclose the amount of

the Step 2 payment applied to the sales price.

The 30-day public comment period ended on April 12, 1996. A total

of 123 comments were received from 85 producers, nine ginners, seven

regional producer associations, five producer co-ops, five U.S. textile

manufacturers, five shippers, the Embassy of Australia, and six

national organizations including the American Cotton Shippers

Association (ACSA), the National Cotton Council (NCC), the NCC Producer

Steering Committee, the American Textile Manufacturers Institute

(ATMI), the National Cotton Ginner's Association (NCGA) and the

Cottongrowers Warehouse Association (CWA).

One hundred and thirteen comments supported the proposal, including

all 85 producers, nine ginners, and five producer co-ops as well as six

regional producer associations, four textile manufacturers, the NCC

Producer Steering Committee, NCGA, CWA and ATMI. The following reasons

for supporting the proposal were cited by one or more of those who

commented: solves the bunching problem, fixes an otherwise good

program; maintains competitiveness in both domestic and export markets;

brings the program closer in line with the original legislative intent;

puts exporters and domestic mills on an equal basis; removes the

incentive for exporters to bunch; limits program abuse; limited

transportation facilities would make bunching under this proposal too

hard and expensive to control; results in a return to normal marketing

practices; gives exporters an incentive to ship U.S. cotton on optional

origin contracts; and enables exporters to be competitive on future

sales.

ACSA, the Embassy of Australia, one regional producer association

and four shippers opposed the proposal. The following reasons were

cited by one or more of those who commented: compromises the

competitiveness feature of the Step 2 program by decoupling the payment

rate from the sale date; could result in bunching, disrupt shipping,

and cause congestion at ports and container terminals; will not

increase sales of U.S. cotton in foreign markets; does not remove the

potential for Step 2 to produce a high value payment rate, unrelated to

the market, and may require further changes in the future to fix any

unintended effects; increases the reporting burden on program

participants and USDA; is a give-away program providing the exporter

with a windfall profit; will generate negative publicity; may

indirectly subsidize foreign buyers who compete with U.S. textile mills

if export contracts include agreements that pass on to buyers all or

part of any Step 2 payment received by the exporter; the U.S. Treasury

would not receive income tax revenue on payments shared with foreign

buyers; may result in higher cotton imports under Step 3 (import

quota), which would lower producer prices; and shippers would be the

only entities to reap the benefits of the program.

Several other comments on the proposed rule were received. One

textile manufacturer indicated that the Step 2 program should be for

mills only, but if exporters were included, the payment rate should be

set only when the final destination is declared. ACSA and two shippers

recommended that the Step 2 program be discontinued for exporters. The

Embassy of Australia recommended that the Step 2 program be eliminated

entirely. Although NCC supported a rule change to address bunching, the

organization could not achieve unanimity among the seven industry

segments on a specific solution, so NCC could not endorse the proposal.

One shipper commented that the Step 2 program is fundamentally flawed

and

[[Page 37549]]

cannot be fixed by this or any other proposal.

Several comments about alternative policies were received. The NCC

Producer Steering Committee and three regional producer associations

stated that basing the exporter payment rate on the date the final

destination is declared would also solve the bunching problem. The

Embassy of Australia indicated that, like the proposal, the alternative

policies listed in the proposed rule would likely have negative,

unintended consequences. One regional cotton producer association

recommended that USDA continue to study alternatives to improve Step 2.

As pointed out in several comments, the proposal would decouple the

exporter payment rate from the sales date. However, to derive a fair

solution to bunching, the interests of all participants must be

weighed. Although the legislative intent was to make U.S. cotton

competitive, Step 2 was not intended to favor one subset of

participants over another in the process. In the past, U.S. mills and

exporters without foreign affiliates have been at somewhat of a

disadvantage vis-a-vis exporters with foreign affiliates. Mills cannot

lock in payments until the cotton is actually consumed, whereas under

current procedures, exporters lock in their payment rate on the sale

date, which can be months before the cotton is actually shipped.

Exporters with foreign affiliates have a greater capacity to do this

than exporters without such affiliates. To leave existing rules in

place for exporters would continue to place these groups at a

disadvantage. Also, the 1996 Act put a $701 million cap on Step 2

payments for fiscal years 1996 through 2002. The proposed rule would

make access among participants to Step 2 payments more equitable.

Disruptions in the infrastructure caused by exporters' trying to

bunch their exports are not anticipated. Due to the physical

limitations of the transportation system, exporters will not be able to

bunch exports to the extent they were able to bunch sales contracts.

The recordkeeping and reporting burden on both program participants

and CCC would be reduced significantly under the proposed rule.

Exporters would only report to CCC those exports made during a week a

payment rate was in effect. There would no longer be a need to track

current-crop/forward-crop shipment data nor would the requirement to

register sales cancellations and replacements be retained. Also, as a

result of changes to the exporter side, CCC has determined that

domestic mills would no longer have to report as much data about their

consumption during weeks in which the payment rate is zero. Adopting

this proposal would simplify program administration for CCC and all

program participants.

ACSA, which represents a large segment of the U.S. shipping

industry, called for the removal of exporters from the Step 2 program.

One shipper stated that the provisions of the new farm bill should

provide ``all tools necessary to compete in foreign markets.'' CCC has

no authority to exclude exporters from the Step 2 program or to

eliminate the Step 2 program. Whenever certain price conditions occur,

CCC is obligated by law to issue Step 2 payments to program

participants who have signed an agreement. Since new agreements must be

signed in order to continue to participate in the program, exporters or

domestic mills who believe that participation in the program will not

serve their interests may elect to not sign.

The 1996 Act Statement of Managers directed the Secretary to

eliminate the bunching problem to the extent practicable without

significantly disrupting normal marketing processes in domestic and

export markets. The industry did not offer alternatives except to

suggest that basing the exporter payment rate on the date the final

destination of the cotton is declared would solve the bunching problem.

As one comment pointed out, the proposal may not remove the

potential for high payment rates. However, bunching, not high payment

rates, was identified in the proposed rule as the problem to be

addressed. The payment rate calculation is designed to close the gap

between U.S. and world prices, which may at times be significant. If a

high payment rate occurred, mills and exporters would have equal access

to payments under the proposed rule.

Under current rules, with the payment rate determined as of the

date of sale, bunching of sales in the Step 2 program may have given

foreign mills an advantage over domestic mills by giving foreign mills

access to U.S. cotton with high Step 2 payments. Although it is true

that under the proposed rule foreign buyers will still benefit as

exporters pass on to them all or part of the Step 2 payment, the

elimination of bunching should prevent the fixation of season-high Step

2 payment rates on large volumes of exports, as has been observed in

past years. Overall, the program should be fairer to U.S. mills.

After considering these comments, this rule adopts as final the

proposed rule published on March 13, 1996. However, because new

legislation was enacted on April 4, 1996, two additional changes to the

Step 2 regulations are incorporated into the final rule. First, the

1996 Act extended the Step 2 program through July 31, 2003, and second,

the legislation provided that total expenditures for the program during

fiscal years 1996 through 2002 shall not exceed $701,000,000.

Obligations incurred by CCC to exporters under this program before

April 5, 1996, are not subject to this funding restriction. Obligations

incurred by CCC on or after April 5, 1996, are subject to the

$701,000,000 restriction.

CCC has determined that cotton contracted for delivery after

September 30, 1996, by eligible exporters will be covered under the new

regulations and the terms and conditions of the revised agreement.

Exporters will be eligible to receive Step 2 payments on such cotton if

they sign a new agreement and if a payment rate is in effect during the

week the cotton is exported. However, if, prior to July 18, 1996, a

positive payment rate was secured for cotton sold for delivery after

September 30, 1996, CCC will make payments to eligible exporters in

accordance with the terms and conditions of CCC-1045 (4-15-94) Revision

2. Any payments made on cotton contracted for delivery after September

30, 1996, will count against the $701,000,000 statutory limit.

The new rules will become effective on July 18, 1996. To continue

to participate in the Step 2 program, exporters and domestic users must

sign and return the revised agreement to CCC.

12. Part 1430 Dairy Products

The amendments to the dairy regulations made by this rule address

requirements of the 1996 Act regarding: (1) The price support level for

milk; (2) ineligibility of certain products for price support purchase

when State-allowed manufacturing allowances exceed certain levels; (3)

the Dairy Refund Program; (4) the deletion of regulations for the Dairy

Termination Program; (5) a future recourse loan program for milk

products; and (6) technical revisions to part 1430 to reflect a recent

USDA reorganization. The 1996 Act addresses a number of other dairy

issues, such as milk promotion, export programs, and Federal marketing

orders. Other rules and/or notices regarding those subjects will be

issued as appropriate.

Section 141 of the 1996 Act authorizes the Milk Price Support

Program from May 1, 1996, through December 31, 1999. Authority for

price support previously provided by section 204 of the 1949 Act, as

amended by the Food, Agriculture, Conservation, and

[[Page 37550]]

Trade Act of 1990 (the 1990 Act), was repealed as of May 1, 1996. Milk

prices are to be supported through the purchase of butter, nonfat dry

milk and cheese. Under the 1996 Act, the levels of support for milk

containing 3.67 percent milkfat are: $10.35 per hundredweight during

calendar year 1996, $10.20 per hundredweight during calendar year 1997,

$10.05 per hundredweight during calendar year 1998, and $9.90 per

hundredweight during calendar year 1999.

Provisions for price support, previously codified at Sec. 1430.282,

have been deleted and Sec. 1430.2 has been added to implement the 1996

Act provisions. Section 1430.1 has been added to provide the

definitions for Subpart A--Price Support Program for Milk.

Section 141 of the 1996 Act further provides that: (1) The CCC

support purchase prices for each of the products of milk (butter,

cheese, and nonfat dry milk) announced by CCC shall be the same for all

of that product sold by persons offering to sell the product to CCC,

and (2) the purchase prices shall be sufficient to enable plants of

average efficiency to pay producers, on average, a price that is not

less than the rate of price support in effect for milk. The Secretary

may allocate the rate of price support between the purchase prices for

butter and nonfat dry milk in a manner that will result in the lowest

level of CCC expenditures, or achieve such other objectives as the

Secretary considers appropriate. The Secretary may make such

adjustments not more than twice during a calendar year. Purchase

announcements will reflect these provisions.

Also, however, Sec. 1430.3 is added to provide that CCC will

suspend the purchase of butter, cheese and nonfat dry milk from plants

in a State that provides, through its regulation of milk prices,

manufacturing allowances in excess of those authorized by section 145

of the 1996 Act. The maximum manufacturing allowances allowed by

section 145 are: (1) $1.65 per hundredweight for milk manufactured into

butter and nonfat dry milk; and (2) $1.80 per hundredweight for milk

manufactured into cheese. The new regulation also specifies appeal

procedures.

The Dairy Refund Program, as authorized by section 204(h) of the

1949 Act, provided for a reduction in the price dairy producers receive

and a method by which they could obtain a refund. Section 141(g) of the

1996 Act repeals section 204 of the 1949 Act, effective May 1, 1996.

However, section 141(e)(1) of the 1996 Act authorizes a refund of the

total reduction in a producer's price during calendar year 1996 to

producers who provide evidence that they did not increase total milk

marketings in calendar year 1996 compared to their total marketings in

calendar year 1995. Section 1430.362 is added to provide for refunds of

1996 reductions in price and to clarify procedures and ongoing policies

regarding refund payments and producer eligibility.

Also, rules for the Dairy Termination Program (DTP) are deleted

from part 1430 because the contract periods for DTP contracts have

expired. This will not affect rights and liabilities under any DTP

contract.

The Recourse Loan Program for Commercial Processors of Dairy

Products is authorized by section 142 of the 1996 Act, and becomes

effective on January 1, 2000. The program will offer recourse loans to

commercial processors of eligible dairy products to assist in the

management of inventories of eligible dairy products and to assure a

degree of price stability for the dairy industry. These eligible dairy

products are cheddar cheese, butter, and nonfat dry milk. The loan

rates will reflect a milk equivalency value of $9.90 per hundredweight

of milk containing 3.67 percent butterfat. The parties receiving the

loans will be liable for full repayment of the loan principal and

interest. Regulations have been added at subpart C of part 1430 to

provide for this program.

Finally, provisions of part 1430 have been amended as necessary to

reflect the reorganization of USDA.

13. Part 1434 General Price Support Regulations for Honey

The 1996 Act did not authorize loan and loan deficiency payment

programs for the 1996 and subsequent crops of honey. This action will

remove the regulations for the program.

14. Part 1435 Sugar Program

Section 156 of the 1996 Act repeals section 206 of the 1949 Act and

institutes new sugar loan and marketing assessment programs. The

regulations governing the administration of the sugar loan program will

be extended through the 2002 crop year and changed to reflect the

changes mandated by the 1996 Act, which are as follows:

(1) Section 156(a) requires the national loan rate for raw cane

sugar to be fixed at 18 cents per pound;

(2) Section 156(b) requires the national loan rate for refined beet

sugar to be fixed at 22.90 cents per pound;

(3) Section 156(e) requires the Secretary to offer recourse loans

unless the tariff-rate quota (TRQ) is established at, or increased to,

a level above 1.5 million short tons, raw value, at which time CCC must

offer nonrecourse loans and convert any existing recourse loans to

nonrecourse loans; and

(4) Section 156(g) requires a penalty of 1 cent per pound, raw

value, for raw cane sugar and 1.072 cents per pound of refined beet

sugar to be assessed on the forfeiture of sugar pledged as collateral

for nonrecourse loans.

Section 156(c) requires the Secretary to reduce the loan rates if

the major sugar producing nations reduce their support for their

domestic sugar industries more than their commitments as part of the

Uruguay Round Agreements Act. CCC will promulgate new regulations

should such a reduction occur.

This rule also eliminates redundancies, clarifies terms, and

simplifies the Sugar Loan Program regulations. These regulations are

also modified to reflect the 1996 Act's authorization of the loan

program through the 2002 crop year. The definitions in Secs. 1435.101,

1435.201, and 1435.401 are consolidated into Sec. 1435.2. Definitions

of recourse and nonrecourse loans and the tariff-rate quota have been

added. All references to the Deputy Administrator for State and County

Operations (DASCO) are changed to the Deputy Administrator for Farm

Programs (DAFP) to reflect the reorganization of USDA.

Part 1435 is renumbered to reflect the complete reorganization of

the part. A new section on loan types, Sec. 1435.102, is added to

reflect the availability of recourse loans and nonrecourse loans. The

fixed national loan average rates are listed in Sec. 1435.103. Section

1435.104 is expanded to consolidate requirements previously found in

Sec. 1435.7 and Sec. 1435.9. Supplemental loans remain limited to sugar

produced from sugarcane or sugar beets harvested during July, August,

and September. Storage facility requirements are now set forth in

Sec. 1435.108. Section 1435.107, Settlement and Foreclosure, has been

organized to reflect the differences between the settlements of

nonrecourse loans and recourse loans. The bonding and other provisions

of Sec. 1435.11 that required loan recipients to provide CCC with

financial assurances that producers would be paid the minimum grower

payments have been deleted from the regulations.

Section 156(f) of the 1996 Act requires sugar marketing assessments

to increase 25 percent for the fiscal years (FY) 1997 through 2003. The

assessment on raw cane sugar increases from 1.1 percent to 1.375

percent of the loan rate for raw

[[Page 37551]]

cane sugar, or an increase from 0.198 cents to 0.2475 cents per pound

in FY 1997. The assessment on refined beet sugar increases from 1.1794

percent to 1.47425 percent of the loan rate for raw cane sugar. Since

the raw cane sugar loan rate is fixed at 18 cents per pound, the

assessment rate increases from 0.2123 cents to 0.2654 cents per pound,

refined basis. If the raw cane sugar loan rate were to be reduced, the

marketing assessments would be reduced accordingly and put forth in

revised regulations.

Section 156(h) of the 1996 Act extends the information reporting

requirements through the 2002 crop year. The suspension of sugar

marketing allotments permits the simplification of the information

reporting regulations. The exhibits containing the reporting forms have

been removed from the revised regulations.

Section 171(a)(1)(E) of the 1996 Act suspends sugar marketing

allotments for the 1996 through 2002 crop years. The regulations

regarding sugar marketing allotments are removed because the crop year

ends June 30, 1996, and the deadline for announcing marketing

allotments for this fiscal year has passed.

Section 171(b)(1)(j) suspends section 401(e)(2) of the 1949 Act,

which provides for benefits to be paid to producers in the event of

bankruptcy or insolvency of processors. The regulations regarding

protection for sugar beet and sugarcane producers are, therefore,

removed.

15. Part 1446 Peanuts

The 1996 Act amends the 1938 Act and the 1949 Act to provide, for

the 1996 through 2002 crop years, the peanut price support program and

for the contracting, handling and disposing of additional peanuts. The

peanut price support regulations that relate to the making of

warehouse-stored price support loans on peanuts and other activities

are found at part 1446. The peanut marketing, storage, handling and

disposition requirements for peanuts for the 1991 through 1995 crops

shall continue to be governed by the regulations codified at part 1446,

as of January 1, 1996.

This rule also implements provisions of section 155 of the 1996 Act

dealing with peanut warehouse-stored loans, contract additional

peanuts, peanut handler operations and other matters. Specifically,

this rule changes the peanut regulations in part 1446 regarding these

provisions as follows:

1. In Sec. 1446.103, the definition of ``eligible producer'' has

been changed, in accordance with provisions of the 1996 Act, to provide

that, under the conditions stated in the section, producers who pledge

100 percent of the crop as loan collateral for 2 consecutive years may

not be eligible for price support.

2. In Sec. 1446.103, the definition of ``Support rate--National

Average'' has been changed to reflect the new statutorily set national

average price support rate for quota peanuts of $610.00 per ton.

3. In Sec. 1446.307, the disaster transfer provisions for producers

who transfer Segregation 2 or Segregation 3 peanuts from additional

loan pools to quota loan pools have been changed, as required by the

1996 Act, by limiting the quantity of peanuts eligible for such a

transfer to 25 percent of the total farm quota pounds, excluding pounds

transferred in the fall and by reducing the support rate on such

transferred peanuts to 70 percent of the quota support rate for the

marketing year in which the transfers occur.

4. In Sec. 1446.308(a)(2), the New Mexico pool eligibility

requirements have been changed, as required by the 1996 Act, by adding

a clause that controls the quantity of Valencia peanuts that are

physically produced in Texas that may be placed in the New Mexico pools

based on amounts previously produced in Texas on farms administratively

located in New Mexico.

5. In Sec. 1446.308 the rules have been amended to implement new

provisions of the 1996 Act relating to the recovery of losses in area

quota loan pools, including provisions for increased marketing

assessments to make the peanut program a ``no-net-cost'' program.

6. Miscellaneous changes to the regulatory text have been made as a

result of the USDA reorganization, the need to update references to

forms and to change dates, and for technical and grammatical

sufficiency.

16. Part 1468 Wool and Mohair

The National Wool Act of 1954, as amended, terminated the Wool and

Mohair program effective December 31, 1995. This action will remove the

regulations for the program.

17. Parts 1477, 1478, and 1479 Disaster Payment Program for 1990 and

Subsequent Crops, Tree Assistance Program, and Forage Assistance

Program

Authority for these programs has expired. Parts 1477, 1478, and

1479 are therefore removed.

Paperwork Reduction Act

As provided in section 161(d) of the 1996 Act, the Paperwork

Reduction Act is not applicable to these regulations. However, the

forms necessary to conduct these programs have been submitted for

clearance to the Office of Management and Budget under the provisions

of 44 U.S.C. chapter 35.

List of Subjects

7 CFR Part 2

Authority delegations (Government agencies).

7 CFR Part 718

Acreage inspection, Acreage measurement, Acreage reporting,

Compliance, Controlled substance violation, Crop insurance requirement,

Delegations of Authority, Eminent domain, Farm Constitution, Finality

rule, Reconstituting farms, Signature requirements, Substantive change,

Tolerance, Transfer of allotments and quotas, Variances.

7 CFR Part 729

Peanuts, Penalties, Poundage quotas, Reporting and recordkeeping

requirements.

7 CFR Part 1400

Aliens, Production Flexibility Contracts for Wheat, Feed Grains,

Rice, and Upland Cotton, Price Support programs

7 CFR Part 1405

Federal crop insurance, Loan programs-agriculture, Price support

programs.

7 CFR Part 1412

Production Flexibility Contracts for Wheat, Feed Grain, Rice,

Upland Cotton.

7 CFR Part 1421

Grains, Loan programs/agriculture, Oilseeds, Peanuts, Price support

programs, Reporting and recordkeeping requirements, Soybeans, Surety

bonds, Warehouses.

7 CFR Part 1425

Cooperatives, Financial requirements, Loan and loan deficiency

payment programs--agriculture, Reporting and recordkeeping

requirements.

7 CFR Part 1427

Cotton loan programs/agriculture, Packaging and containers,

Marketing certificate programs, Price support programs, Reporting and

recordkeeping requirements, Surety bonds, Warehouses.

[[Page 37552]]

7 CFR Part 1430

Agriculture, Assessment, Dairy products, Manufacturing allowances,

Milk, Price support program, Recourse loans.

7 CFR Part 1434

Honey, Loan program--agriculture, Reporting and recordkeeping

requirements.

7 CFR Part 1435

Loan programs/agriculture, Reporting and recordkeeping

requirements, Sugar.

7 CFR Part 1446

Loan programs--agriculture, Peanuts, Price support programs,

Reporting and recordkeeping requirements, Warehouses.

7 CFR Part 1468

Assistance grant program--agriculture, Livestock, Mohair, Reporting

and recordkeeping requirements, Wool.

For the reasons set out in the preamble, 7 CFR Chapters I, VII and

XIV are amended as set forth below.

PART 2--DELEGATIONS OF AUTHORITY BY THE SECRETARY OF AGRICULTURE

AND GENERAL OFFICERS OF THE DEPARTMENT

1. The authority citation for Part 2 is revised to read as follows:

Authority: Sec. 212(a), Pub. L. 103-354, 108 Stat. 3210, 7

U.S.C. 6912(a)(1); 5 U.S.C. 301; Reorganization Plan No. 2 of 1953;

3 C.F.R. 1949-1953 Comp., p. 1024.

2. Section 2.16(a)(1) is amended by adding a new paragraph

(a)(1)(xxiv) to read as follows:

Sec. 2.16 Under Secretary for Farm and Foreign Agricultural Services.

(a) * * *

(1) * * *

(xxiv) Formulate policies and administer programs authorized by

Title I of the Federal Agriculture Improvement and Reform Act of 1996.

* * * * *

3. Section 2.16 is amended by removing and reserving paragraphs

(a)(3)(xxix) and (a)(3)(xxx).

4. Section 2.42(a) is amended by adding paragraph (a)(44) to read

as follows:

Sec. 2.42 Administrator, Farm Service Agency.

(a) * * *

* * * * *

(44) Formulate policies and administer programs authorized by Title

I of the Federal Agriculture Improvement and Reform Act of 1996.

* * * * *

5. Section 2.42(a)(43) is amended by removing the term ``charge''

and inserting the term ``arrange'' in its place.

Sec. 2.43 [Amended]

6. Section 2.43 is amended by removing and reserving paragraphs

(a)(29) and (a)(30).

7. Chapter VII is amended by revising part 718 to read as follows:

PART 718--PROVISIONS APPLICABLE TO MULTIPLE PROGRAMS

Subpart A--General Provisions

Sec.

718.1 Applicability.

718.2 Definitions.

718.3 State committee responsibilities.

718.4 Authority for farm entry and providing information.

718.5 Delegations of authority.

718.6 Signature requirements and time limitations.

718.7 Failure to fully comply.

718.8 Incomplete performance based upon action or advice of an

authorized representative of the Secretary.

718.9 Finality rule.

718.10 Rule of fractions.

718.11 Denial of benefits.

718.12 Furnishing maps.

Subpart B--Determination of Acreage and Compliance

718.101 Measurements.

718.102 Acreage reports.

718.103 Late-filed reports.

718.104 Revised reports.

718.105 Tolerance, variances, and adjustments for tobacco.

718.106 Acreages.

718.107 Skip rows and strip crops.

718.108 Deductions.

718.109 Adjustments.

718.110 Notice of determined acreage.

718.111 Redetermination.

Subpart C--Reconstitution of Farms, Allotments, Quotas, and Acreages

718.201 Farm constitution.

718.202 Guides for determining the land constituting a farm.

718.203 County committee action to reconstitute a farm.

718.204 Reconstitutions of allotments, quotas, and acreages.

718.205 Rules for determining farms, allotments, quotas, and

acreages when reconstitution is made by division.

718.206 Rules for determining allotments, quotas, and acreages when

reconstitution is made by combination.

718.207 Eminent domain acquisitions.

718.208 Exempting Federal prison farms and Federal wildlife

refuges.

718.209 Transfer of allotments and quotas--State public lands.

Authority: 7 U.S.C. 1373, 1374, 7201 et seq.; and 15 U.S.C. 714b

and 714c.

Subpart A--General Provisions

Sec. 718.1 Applicability.

(a) This part is applicable to all programs set forth in Chapters

VII and XIV of this title which are administered by the Farm Service

Agency (FSA).

(b) The provisions of this part will be administered under the

general supervision of the Administrator, FSA, and shall be carried out

in the field by State and county FSA committees (State and county

committees).

(c) State and county committees, and representatives and employees

thereof, do not have authority to modify or waive any of the provisions

of the regulations of this part.

(d) The State committee shall take any action required by these

regulations which has not been taken by the county committee. The State

committee shall also:

(1) Correct, or require a county committee to correct, any action

taken by such county committee which is not in accordance with the

regulations of this part; or

(2) Require a county committee to withhold taking any action which

is not in accordance with the regulations of this part.

(e) No provisions or delegation herein to a State or county

committee shall preclude the Administrator, FSA, or a designee, from

determining any question arising under the program or from reversing or

modifying any determination made by a State or county committee.

(f) The Deputy Administrator may authorize State and county

committees to waive or modify deadlines and other requirements in cases

where lateness or failure to meet such other requirements does not

adversely affect the operation of the program.

Sec. 718.2 Definitions.

Except as provided in individual parts of chapters VII and XIV of

this title, the following terms shall be as defined herein:

Administrative variance (AV) means the amount by which the

determined acreage may exceed the effective allotment and be considered

in compliance with program regulations.

Agricultural Use means devoting the land to annual or perennial

crops, including conserving uses, pasture, aquaculture or plantings of

trees for any purpose. Land may be left fallow, but weeds must be

controlled.

Allotment means an acreage for a commodity allocated to a farm in

accordance with the Agricultural Adjustment Act of 1938, as amended.

Allotment crop means any crop for which acreage allotments are

[[Page 37553]]

established pursuant to parts 723 and 729 of this chapter.

Combination means consolidation of two or more farms or parts of

farms into one farm.

Contract acreage means the quantity of acres enrolled in a contract

in accordance with part 1412 of this title.

Contract commodity means a crop of wheat, corn, grain sorghum,

oats, barley, upland cotton, or rice.

Controlled substances means the term as set forth in accordance

with 21 CFR part 1308.

County means the County or parish of a State. For Alaska, Puerto

Rico and the Virgin Islands, a county shall be an area designated by

the State committee with the concurrence of the Deputy Administrator.

Crop of economic significance means a crop that has contributed in

the previous year, or is expected to contribute in the current crop

year, 10 percent or more of the total expected value of all crops grown

by the producer. However, notwithstanding the preceding sentence, if

the total expected liability under the catastrophic risk protection

endorsement is equal to or less than the administrative fee required

for the crop, such crop will not be considered a crop of economic

significance.

Crop reporting date means date established by the Administrator,

FSA, representing the final date by which the farm operator, farm

owner, or properly authorized agent must report applicable crop acreage

for the report to be considered timely filed.

Cropland

(1) Means land which the county committee determines meets any of

the following conditions:

(i) Is currently being tilled for the production of a crop for

harvest;

(ii) Is not currently tilled, but it can be established that such

land has been tilled in a prior year and is suitable for crop

production;

(iii) Is currently devoted to a one- or two-row shelterbelt

planting, orchard, or vineyard;

(iv) Is in terraces, that, were cropped in the past, even though

they are no longer capable of being cropped;

(v) Is in sod waterways or filter strips planted to a perennial

cover; or

(vi) Is preserved as cropland in accordance with part 704 or 1410

of this title.

(2) Land classified as cropland shall be removed from such

classification upon a determination by the county committee that the

land is:

(i) No longer used for agricultural production;

(ii) No longer suitable for production of crops;

(iii) Subject to a restrictive easement or contract that prohibits

its use for the production of crops unless otherwise authorized by the

regulation of this chapter;

(iv) No longer preserved as cropland in accordance with the

provisions of part 704 or 1410 of this title and does not meet the

conditions in paragraphs (1)(i) through (1)(vi) of this definition; or

(v) Devoted to trees (other than those set forth in accordance with

part 704 or 1410 of this title, one- or two-row shelterbelt plantings,

orchards, or vineyards) which were planted in the preceding year except

that land planted to trees or devoted to ponds, lakes, or tanks from

September 1 through December 31 of the preceding year shall retain its

cropland classification for the succeeding year, and in the current

year shall retain its cropland classification for the current year.

Current year means the year for which applicable allotments,

quotas, and acreages, or other program determinations are established

for that program. For controlled substance violations, the year that

contains the date of actual conviction.

Deputy Administrator means Deputy Administrator for Farm Programs,

Farm Service Agency, U.S. Department of Agriculture or a designee.

Determination means a decision issued by a State, county or area

FSA committee or the employees of such a committee that affects a

participant's participation in a program administered by FSA.

Determined acreage means that acreage established by a

representative of the Department of Agriculture by use of official

acreage, digitizing or planimetering areas on the photograph or other

photographic image, or computations from scaled dimensions or ground

measurements.

Division means the division of a farm into two or more farms or

parts of farms.

Entity means a corporation, joint stock company, association

limited partnership, irrevocable trust, estate, charitable

organization, or other similar organization including any such

organization participating in the farming operation as a partner in a

general partnership, a participant in a joint venture, a grantor of a

revocable trust, or as a participant in a similar organization.

Family member means an individual to whom a person is related as

spouse, lineal ancestor, lineal descendant, or sibling, including:

(1) Great grandparent;

(2) Grandparent;

(3) Parent;

(4) Child, including legally adopted children;

(5) Great grandchildren;

(6) Sibling of the family member in the farming operation; and

(7) Spouse of a person listed in paragraphs (1) through (6) of this

definition.

Farm means land that is being operated by one producer with

equipment, labor, accounting system and management substantially

separate from that of any other unit. Land on which tenants provide

their own labor and equipment shall not be considered a separate farm.

Farm inspection (spot-check) means an inspection by an authorized

FSA representative using aerial or ground compliance to determine the

extent of producer adherence to program requirements.

Farm number means serial number assigned to a farm by the county

committee for the purpose of identification.

Farm program payment yield means the yield for a crop which is

determined in accordance with part 1413 of this title as in effect on

January 2, 1996.

Farmland means the sum of the cropland, forest, and other land on

the farm.

Field means a part of a farm which is separated from the balance of

the farm by permanent boundaries such as fences, permanent waterways,

woodlands, and croplines in cases where farming practices make it

probable that such cropline is not subject to change, or other similar

features.

Ground measurement means the distance between 2 points on the

ground, obtained by actual use of a chain tape, or other measuring

device, that is expressed in chains and links.

Joint operation means a general partnership, joint venture, or

other similar business organization.

Landlord means one who rents or leases farmland to another.

Measurement service means a measurement of acreage or farm-stored

commodities performed by a representative of FSA and paid for by the

producer requesting the measurement.

Measurement service guarantee means a guarantee provided when a

producer requests and pays for an authorized FSA representative to

measure acreage for FSA and CCC program participation unless the

producer takes action to adjust the measured acreage. If the producer

has taken no such action, and the measured acreage is later discovered

to be

[[Page 37554]]

incorrect, the acreage determined pursuant to the measurement service

will be used for program purposes for that program year.

Measurement service after planting means determining a crop or

designated acreage after planting but before the farm operator files a

report of acreage for the crop.

Minor child means an individual who is under 18 years of age. Court

proceedings conferring majority on an individual under 18 years of age

will not change such an individual's status as a minor.

Nonagricultural commercial or industrial use means land that is no

longer suitable for producing annual or perennial crops, including

conserving uses, or forestry products.

Normal planting period means that period during which the crop is

normally planted in the county, or area within the county, with the

expectation of producing a normal crop.

Normal row width means the normal distance between rows of the crop

in the field, but not less than 30 inches for all crops.

Operator means an individual, entity, or joint operation who is

determined by the county committee as being in general control of the

farming operations on the farm during the current year.

Owner means one who has legal ownership of farmland, including one:

(1) Who is buying farmland under a contract for deed;

(2) Who has a life-estate in the property; or

(3) (i) For purposes of enrolling a farm in a program authorized by

Chapters VII and XIV of this title one who has purchased a farm in a

foreclosure proceeding and:

(A) The redemption period has not passed; and

(B) The original owner has not redeemed the property.

(ii) One who meets the provisions of paragraph (3)(i) of this

definition shall be entitled to receive benefits in accordance with

such a program only to the extent the owner complies with all program

requirements.

Partial reconstitution means a reconstitution that is made

effective in the current year for some crops, but is not made effective

in the current year for other crops, which results in having two or

more farm numbers for the same farm.

Participant means one who participates in, or receives payments or

benefits in accordance with any of the programs administered by FSA.

Pasture means land that is used to, or has the potential to,

produce food for grazing animals.

Person means an individual, or an individual participating as a

member of a joint operation or similar operation, a corporation, joint

stock company, association, limited stock company, limited partnership,

irrevocable trust, revocable trust together with the grantor of the

trust, estate, or charitable organization including any entity

participating in the farming operation as a partner in a general

partnership, a participant in a joint venture, a grantor of a revocable

trust, or a participant in a similar entity, or a State, political

subdivision or agency thereof. To be considered a separate person for

the purpose of this part, the individual or other legal entity must:

(1) Have a separate and distinct interest in the land or the crop

involved;

(2) Exercise separate responsibility for such interest; and

(3) Be responsible for the cost of farming related to such interest

from a fund or account separate from that of any other individual or

entity.

Producer means an owner, operator, landlord, tenant, or

sharecropper, who shares in the risk of producing a crop and who is

entitled to share in the crop available for marketing from the farm, or

would have shared had the crop been produced. A producer includes a

grower of hybrid seed.

Production flexibility contract means a contract entered in

accordance with part 1412 of this title.

Prohibited plants means marijuana (cannabis sativa), opium poppies

(papaver somniferum), coca bushes (erythroxylum coca), cacti of the

genus lophophora and other drug producing plants, the planting or

harvesting of which is prohibited by Federal or State law.

Random inspection means an examination of a farm by an authorized

representative of FSA selected as a part of an impartial sample to

determine the adherence to program requirements.

Quota means the pounds allocated to a farm for a commodity in

accordance with the Agricultural Adjustment Act of 1938, as amended.

Reconstitution means a change in the land constituting a farm as a

result of combination or division.

Reported acreage means the acreage reported by the farm operator,

farm owner, or a properly authorized agent on form FSA-578, Report of

Acreage, or other form designated by the Deputy Administrator.

Required inspection means an examination by an authorized

representative of FSA of a farm specifically selected by application of

prescribed rules to determine the producer's adherence to program

requirements or to verify the farm operator's, farm owner's, or

properly authorized agent's report.

Secretary means the Secretary of Agriculture of the United States,

or a designee.

Sharecropper means one who performs work in connection with the

production of a crop under the supervision of the operator and who

receives a share of such crop for its labor.

Skip-row or strip-crop planting means a cultural practice in which

strips or rows of the crop are alternated with strips of idle land or

another crop.

Staking and referencing means determining an acreage before

planting by:

(1) Measuring a delineated area on photography or computing the

chains and links from ground measurement and sketching the field or

subdivision of a field; and,

(2) Staking and referencing the area on the ground.

Standard deduction means an acreage that is excluded from the gross

acreage in a field because such acreage is considered as being used for

farm equipment turn-areas. Such acreage is established by application

of a prescribed percentage of the area planted to the crop in lieu of

measuring the turn area.

State means each of the 50 States, the District of Columbia, the

Commonwealth of Puerto Rico, Guam, the Virgin Islands of the United

States, American Samoa, the Commonwealth of the Northern Mariana

Islands, or the Trust Territory of the Pacific Islands.

Subdivision means a part of a field that is separated from the

balance of the field by temporary boundary, such as a cropline which

could be easily moved or will likely disappear.

Tenant means:

(1) One who rents land from another in consideration of the payment

of a specified amount of cash or amount of a commodity; or

(2) One (other than a sharecropper) who rents land from another

person in consideration of the payment of a share of the crops or

proceeds therefrom.

Tolerance means for marketing quota crops, and peanuts, a

prescribed amount within which the reported acreage may differ from the

determined acreage and still be considered as correctly reported.

Tract means a unit of contiguous land under one ownership which is

operated as a farm or part of a farm.

Tract combination means the combining of two or more tracts if the

tracts have common ownership and are contiguous.

[[Page 37555]]

Tract division means the dividing of a tract into two or more

tracts because of a change in ownership or operation.

Turn-area means the area across the ends of crop rows which is used

for operating equipment necessary to the production of a row crop (also

called turnrow, headland, or endrow).

Sec. 718.3 State committee responsibilities.

(a) The State committee shall, with respect to county committees:

(1) Take any action required of the county committee which the

county committee fails to take in accordance with this part;

(2) Correct or require the county committee to correct any action

taken by such committee which is not in accordance with this part;

(3) Require the county committee to withhold taking any action

which is not in accordance with this part;

(4) Review county office rates for producer services to determine

equity between counties;

(5) Determine, based on cost effectiveness, which counties will use

aerial compliance methods and which counties will use ground

measurement compliance methods; or

(6) Adjust the per acre rate for acreage in excess of 25 acres to

reflect the actual cost involved when performing measurement service

from aerial slides.

(b) The State committee shall submit to the Deputy Administrator

for Farm Programs, requests to deviate from deductions prescribed in

Sec. 718.108 of this part, or the error amount or percentage for

refunds of redetermination costs as prescribed in Sec. 718.111.

Sec. 718.4 Authority for farm entry and providing information.

(a) The provsions of this section are applicable to any farm

enrolled in a program authroized by Chapter XIV of this title, all

farms on which peanuts are planted for harvest (part 729 of this

chapter), and all farms that have an effective tobacco allotment or

quota (part 723 of this chapter).

(b) To ascertain compliance by producers to the regulations

specified in paragraph (a), a representative of FSA may enter any farm

specified in such paragraph. An owner, operator or producer on a farm

may refuse the FSA representative entry to the farm and request FSA to

provide written authorization for the entry. If entry is not allowed

within 30 days of such written notification:

(1) All program benefits otherwise available with respect to such

farm in accordance with such regulations shall be denied;

(2) The person objecting to the entry shall pay all costs

associated with cost of the inspection by FSA of the farm;

(3) The entire crop production on the farm will be considered to be

in excess of the quota established for the farm; and

(4) With respect to tobacco produced on such farm, the farm

operator must furnish proof of disposition of:

(i) Burley and flue-cured tobacco which is in addition to the

production shown on the marketing card issued with respect to such

farm; and

(ii) Other kinds of tobacco produced on the farm and no credit will

be given for disposing of any excess tobacco other than properly

identified by a marketing card unless such tobacco is disposed of in

the presence of a representative of FSA in accordance with

Sec. 718.109.

(c) If an owner or operator of a farm refuses to furnish reports or

data which are necessary to determine benefits in accordance with the

regulations specified in paragraph (a) or FSA determines that the

report or data was erroneously provided through the lack of good faith

by the operator or owner, all benefits will be denied with respect to

the farm which would otherwise be available in accordance with the

program under which the report or data is requested.

Sec. 718.5 Delegations of authority.

The State committee or State Executive Director, as authorized by

the Deputy Administrator may, in accordance with instructions issued,

exercise the authority provided in this part in cases where the total

of any payments and benefits extended under Chapters VII and XIV of

this title does not exceed:

(a) $5,000 for cases subject to Sec. 718.8; or

(b) $25,000 for cases subject to Sec. 718.9.

Sec. 718.6 Signature requirements and time limitations.

(a) When a program authorized by this chapter and parts 1410 and

1412 of this title requires the signature of a producer; landowner;

landlord; or tenant, a husband or wife may sign all such FSA or CCC

documents on behalf of the other spouse, unless such other spouse has

provided written notification to FSA and CCC that such action is not

authorized. The notification must be provided to the county FSA office

which administers FSA and CCC programs with respect to each farm.

(b) Except a husband or wife may not sign a document on behalf of a

spouse with respect to:

(1) Program documents required to be executed in accordance with

part 3 of this title and part 704 of this chapter;

(2) Easements entered into under part 1410 of this title;

(3) Form FSA-211, Power of Attorney and Form FSA-211-1, Power of

Attorney for Husband and Wife; and

(4) Such other program documents as determined by FSA or CCC.

(c) Whenever the final date prescribed in any of the regulations in

this title for the performance of any act falls on a Saturday, Sunday,

national holiday, State holiday on which the office of the county or

State Farm Service Agency committee having primary cognizance of the

action required to be taken is closed, or any other day on which the

cognizant office is not open for the transaction of business during

normal working hours, the time for taking required action shall be

extended to the close of business on the next working day. Or in case

the action required to be taken may be performed by mailing, the action

shall be considered to be taken within the prescribed period if the

mailing is postmarked by midnight of such next working day. Where the

action required to be taken is within a prescribed number of days after

the mailing of notice, the day of mailing shall be excluded in

computing such period of time.

Sec. 718.7 Failure to fully comply.

In any case in which the failure of a producer to fully comply with

the terms and conditions of a program authorized by this chapter

precludes the making of price support to such producer, the Deputy

Administrator for Farm Programs may authorize the making of such price

support in such amounts as determined to be equitable in relation to

the seriousness of the failure if the regulations of this title

authorizing the program specifically authorize such action. The

provisions of this part shall only be applicable to producers who are

determined to have made a good faith effort to comply fully with the

terms and conditions of the program and rendered substantial

performance.

Sec. 718.8 Incomplete performance based upon action or advice of an

authorized representative of the Secretary.

(a) Notwithstanding any other provision of the law, performance

rendered in good faith based upon action of, or information provided

by, any authorized representative of a County or State Farm Service

Agency Committee, may be accepted by the Administrator, FSA (Executive

Vice President, CCC), the Associate Administrator, FSA (Vice President,

[[Page 37556]]

CCC), or the Deputy Administrator for Farm Programs, FSA (Vice

President, CCC), as meeting the requirements of the applicable program,

and benefits may be extended or payments may be made therefor in

accordance with such action or advice to the extent it is deemed

desirable in order to provide fair and equitable treatment.

(b) The provisions of this section shall be applicable only if a

producer relied upon the action of a county or State committee or an

authorized representative of such committee or took action based on

information provided by such representative. The authority provided in

this part does not extend to cases where the producer knew or had

sufficient reason to know that the action or advice of the committee or

its authorized representative upon which they relied was improper or

erroneous, or where the producer acted in reliance on their own

misunderstanding or misinterpretation of program provisions, notices,

or advice.

Sec. 718.9 Finality rule.

(a) A determination by a State or county committee made on or after

October 13, 1994, becomes final and binding 90 days from the date the

application for benefits has been filed, and supporting documentation

required to be supplied by the producer as a condition for eligibility

for the particular program has been filed unless one of the following

conditions exist:

(1) The participant has requested an administrative review of the

determination in accordance with the provisions of part 780 of this

chapter;

(2) The determination was based on misrepresentation, false

statement, fraud, or willful misconduct by or on behalf of the

participant;

(3) The determination was modified by the Administrator, FSA, or

the Executive Vice President, CCC; or

(4) The participant had reason to know that the determination was

erroneous.

(b) Should an erroneous determination become final under the

provisions of this section, it shall only be effective through the year

in which the error was found and communicated to the participant.

Sec. 718.10 Rule of fractions.

(a) Rounding of fractions shall be done after the completion of the

entire computation which is being made. In making mathematical

determinations all computations shall be carried to two decimal places

beyond the required number of decimal places as specified in the

regulations governing each program. In rounding, fractional digits of

49 or less beyond the required number of decimal places shall be

dropped; if the fractional digits beyond the required number of decimal

places are 50 or more, the figure sat the last required decimal place

shall be increased by ``1'' as follows:

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

Required decimal Computation Result

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

Whole numbers...................... 6.49 (or less)....... 6

6.50 (or more)....... 7

Tenths............................. 7.649 (or less)...... 7.6

7.650 (or more)...... 7.7

Hundredths......................... 8.8449 (or less)..... 8.84

8.8450 (or more)..... 8.85

Thousandths........................ 9.63449 (or less).... 9.634

9.63450 (or more).... 9.635

10 thousandths..................... 10.993149 (or less).. 10.9931

10.993150 (or more).. 10.9932

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

(b) The acreage of each field or subdivision computed for tobacco

and CCC disaster assistance programs shall be recorded in acres and

hundredths of an acre, dropping all thousandths of an acre. The acreage

of each field or subdivision computed for crops, except tobacco, shall

be recorded in acres and tenths of an acre, rounding all hundredths of

an acre to the nearest tenth.

Sec. 718.11 Denial of Benefits.

(a) For the purposes of this section, a person means an individual.

(b) Any person convicted under Federal or State law of planting

cultivating, growing, producing, harvesting, or storing a controlled

substance as defined in 21 CFR part 1308 shall be ineligible for:

(1) With respect to any commodity produced by such person that crop

year, and during the four succeeding crop years any price support loan

available in accordance with parts 1446 and 1464 of this title;

(2) Any payment made under any Act; and

(3) A payment made under the Commodity Credit Corporation Charter

Act (15 U.S.C. 714b and 714c) for the storage of an agricultural

commodity that is produced during such crop year, or any of the four

succeeding crop years by such person.

(c) If any person denied benefits under this part is a beneficiary

of a trust, benefits for which the trust is eligible shall be reduced,

for the appropriate period, by a percentage equal to the total interest

of the beneficiary in the trust.

Sec. 718.12 Furnishing maps.

The cost of furnishing reproductions of photographs, mosaics and

maps is free upon request to the farm operator, owner, Federal Crop

Insurance Corporation (FCIC) and reinsured companies, Natural Resources

Conservation Service (NRCS) and other Federal or State Agencies

performing their official duties in making FSA and related program

determinations. To all others, reproductions shall be made available at

the rate FSA determines will cover the cost of making such items

available.

Subpart B--Determination Of Acreage and Compliance

Sec. 718.101 Measurements.

(a) Measurement services include, but are not limited to, measuring

land and crop areas, quantities of farm-stored commodities, and

appraising the yields of crops when required for program administration

purposes. The county committee shall provide measurement service if the

producer requests such service and pays the cost, except that service

shall not be provided to determine total acreage of a crop when the

request is made:

(1) After the established final reporting date for the applicable

crop except as provided in Sec. 718.103;.

(2) After the farm operator has furnished the county office

production evidence when required for program administration purposes

except as provided in this subpart; or

(3) In connection with a late-filed report of acreage, unless there

is evidence of the existence and use made of the crop, the lack of the

crop or a disaster condition affecting the crop.

(b) The acreage requested to be measured by staking and referencing

shall not exceed the effective farm allotment for marketing quota crops

or acreage of a crop that is limited to a specific number of acres to

meet any program requirement.

(c) When a producer requests, pays for, and receives written notice

that measurement services have been furnished, the measured acreage

shall be guaranteed to be correct and used for all program purposes for

the current year even though an error is later discovered in the

measurement thereof, if the producer has taken action with an economic

significance based on the measurement service, and the entire crop

required for the farm was

[[Page 37557]]

measured. If the producer has not taken action with an economic

significance based on the measurement service, the producer shall be

notified in writing that an error was discovered and the nature and

extent of such error. In such cases, the corrected acreage will be used

for determining program compliance for the current year.

(d) When a measurement service reveals acreage in excess of the

permitted acreage by more than the allowable tolerance, the producer

must destroy the excess acreage and pay for an authorized employee of

FSA to verify destruction, in order to keep the measurement service

guarantee.

Sec. 718.102 Acreage reports.

(a) In order to be eligible for benefits, participants in the

programs specified in paragraph (b)(1) through (3) of this section and

those who are subject to the regulations cited in paragraph (b)(4) and

(5) of this section must submit accurate information as required by

these provisions.

(b)(1) Participants in the program authorized by part 1412 of this

title must report the acreage of fruits and vegetables planted for

harvest on a farm enrolled in such program;

(2) Participants in the programs authorized by parts 1421 and 1427

of this title must report the acreage planted to a commodity for

harvest for which a marketing assistance loan or loan deficiency

payment is requested; and

(3) Participants in the programs authorized by parts 704 and 1410

of this title must report the use of the land enrolled in such

programs;

(4) Participants in the programs authorized by parts 723 and 1464

of this title (except burley tobacco producers) must report the acreage

planted to tobacco by kind (except burley tobacco) on all farms that

have an effective allotment or quota greater than zero; and

(5) Participants in the programs authorized by parts 729 and 1446

of this title must report the acreage planted to peanuts by type.

(c) The reports required under paragraph (a) of this section shall

be timely filed by the farm operator, farm owner, or a duly authorized

representative with the county committee by the final reporting date

applicable to the crop as established by the county committee and State

committee.

(d) Peanut producers shall provide the county office evidence of

disposition of any peanuts that are kept on the farm, including:

(1) Type and quantity for use for seed on any farm in which the

producer has an interest; and

(2) Type, quantity, names, and addresses of purchases for peanuts

sold or given to others.

(e) Peanut producers shall provide the county office information

for acquisition of seed peanuts from other sources, including:

(1) Name and address of person who sold or gave producer the

peanuts;

(2) Type, farmer's stock or shelled basis, and quantity; and

(3) Acquisition date.

Sec. 718.103 Late filed reports.

(a) A farm operator's report may be accepted after the established

date for reporting if evidence is still available for inspection which

may be used to make a determination with respect to the existence and

use made of the crop, the lack of the crop or a disaster condition

affecting the crop.

(b) The farm operator shall pay the cost of a farm visit by an

authorized FSA employee unless the County Committee has determined that

failure to report in a timely manner was beyond the producer's control.

Sec. 718.104 Revised reports.

(a) The farm operator may revise a report of acreage with respect

to 1996 and subsequent years to change the acreage reported if the

county committee determines that the revision does not have an adverse

impact on the program and the acreage has not already been determined

by FSA.

(b) Revised reports shall be filed and accepted:

(1) At any time for all crops if evidence exists for inspection and

determination of the existence and use made of the crop, the lack of

the crop, or a disaster condition affecting the crop; and

(2) If the requirements of paragraph (a) have been met and the

producer was in compliance with all other program requirements by the

applicable established crop reporting date.

Sec. 718.105 Tolerances, variances, and adjustments for tobacco.

(a) Tolerance or variance for tobacco is the amount by which the

determined acreage may differ from the reported acreage or allotment

and still be considered in compliance with program requirements.

(b) Tolerance rules apply to those fields for which a staking and

referencing was performed but such acreage was not planted according to

those measurements or when a measurement service is not requested for

acreage destroyed to meet program requirements. Tolerance rules do not

apply to:

(1) Official fields when the entire field is devoted to one crop;

(2) Those fields for which staking and referencing was performed

and such acreage was planted according to those measurements; or

(3) The adjusted acreage for farms using measurement after planting

which have a determined acreage greater than the marketing quota crop

allotment.

(c) An administrative variance is applicable to all marketing quota

crop acreages. Marketing quota crop acreages as determined in

accordance with this part shall be deemed in compliance with the

effective farm allotment or program requirement when the determined

acreage does not exceed the effective farm allotment by more than an

administrative variance determined as follows:

(1) For all kinds of tobacco subject to marketing quotas, except

dark air-cured and fire-cured the larger of 0.1 acre or 2 percent of

the allotment; and

(2) For dark air-cured and fire-cured tobacco, an acreage based on

the effective acreage allotment as provided in the table as follows:

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

Administrative

Effective acreage allotment is within this range variance

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

0.01 to 0.99............................................ 0.01

1.00 to 1.49............................................ 0.02

1.50 to 1.99............................................ 0.03

2.00 to 2.49............................................ 0.04

2.50 to 2.99............................................ 0.05

3.00 to 3.49............................................ 0.06

3.50 to 3.99............................................ 0.07

4.00 to 4.49............................................ 0.08

4.50 and up............................................. 0.09

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

(d) A tolerance applies to tobacco other than flue-cured or burley,

if the determined acreage exceeds the allotment by more than the

administrative variance but by not more than the tolerance. Such excess

acreage of tobacco may be adjusted to the effective farm acreage

allotment to avoid marketing quota penalties or receive price support.

Sec. 718.106 Acreages.

(a) If an acreage has been established by a representative of FSA

for an area delineated on an aerial photograph, such acreage will be

recognized by the county committee as the official acreage for the area

until such time as the boundaries of such area are changed. When

boundaries not visible on the aerial photograph are established from

data furnished by the producer, such acreage shall not be recognized as

official acreage until the boundaries are verified by an authorized

representative of FSA.

[[Page 37558]]

(b) Measurements of any row crop shall extend beyond the planted

area by the larger of 15 inches or one-half the distance between the

rows.

(c) The entire acreage of a field or subdivision of a field devoted

to a crop shall be considered as devoted to the crop subject to any

allowable deduction or adjustment credit except as otherwise provided

in this part.

Sec. 718.107 Skip rows and strip crops.

(a) To be considered under the skip row provisions of this section

the field must be planted in a uniform planting pattern and the number

of rows planted between skips cannot exceed 36 rows. If more than one

pattern is used within a field, the area planted to each pattern will

be considered a subdivision.

(b) The entire acreage of the field or subdivision shall be

considered as devoted to the crop where the crop is planted in strips

of two or more rows and the strips of idle land are less than 64 inches

wide, except where cotton is planted in skip row patterns:

(1) If the distance between the rows is 30 inches the strips of the

idle land are less than 60 inches wide; or

(2) If the distance between the rows is 32 inches or wider and the

strips of idle land are at least 60 inches but less than 64 inches, the

producer has the option to consider the crop as either solid planted or

skip row if the producer has a history of planting 32-inch or wider

rows.

(c) The county committee shall determine if the producer has a

history of 32-inch or wider rows by verifying that cotton acreage has

been planted in 32-inch or wider rows in past years and reported on the

acreage report, or reported to other State or Federal Agencies.

(d) If the strips of idle land are too wide to be classified as

solid planted in accordance with paragraph (b) of this section the

acreage of the strips planted to the crop, including one-half the

distance between the rows of the crop but not less than 15 inches

beyond the outside rows of the crop in each strip, shall be considered

as devoted to the crop.

(e) When one crop is alternating with another crop, the entire

acreage of the field or subdivision shall be considered as devoted to

the crop being measured where such crop is planted in strips of one or

more rows and the strips of the other crop are less than 64 inches.

(f) If strips of the alternating crop are too wide to be considered

solid planted in accordance with paragraph (b) of this section and if

the alternating crop:

(1) Has substantially the same growing season as the crop being

measured, only the acreage planted to the crop being measured,

including the smaller of one-half the distance between the strips of

the crop being measured or 30 inches shall be considered as being

devoted to the crop being measured; or

(2) Does not have substantially the same growing season as the crop

being measured, then the acreage of the crop being measured shall be

determined in accordance with paragraph (b) or (c) of this section.

(g) When the crops are planted in single wide rows, the entire

acreage of the field or subdivision shall be considered as devoted to

the crop where the distance between the rows of such crop is less than

64 inches. If the distance between the rows of the crop is at least 64

inches, only 64 inches in width for each row shall be considered as

being devoted to the crop.

Sec. 718.108 Deductions.

(a) Any contiguous area which is not devoted to the crop being

measured and which is not part of a skip-row pattern under Sec. 718.107

shall be deducted from the acreage of the crop if such area meets the

following minimum national standards or requirements:

(1) A minimum width of 30 inches;

(2) For tobacco, three-hundredths acre, except that turn areas,

terraces, permanent irrigation and drainage ditches, sod waterways,

noncropland, and subdivision boundaries each of which is at least 30

inches in width may be combined to meet the 0.03-acre minimum

requirement; or

(3) For all other crops and land uses, one-tenth acre. Turn areas,

terraces, permanent irrigation and drainage ditches, sod waterways,

noncropland, and subdivision boundaries each of which is at least 30

inches in width and each of which contain 0.1 acre or more may be

combined to meet any larger minimum prescribed for a State in

accordance with this subpart.

(b) If the area not devoted to the crop is located within the

planted area, the part of any perimeter area that is more than 33 links

in width will be considered to be an internal deduction if the standard

deduction is used.

(c) A standard deduction of 3 percent of the area devoted to a row

crop and zero percent of the area devoted to a close-sown crop may be

used in lieu of measuring the acreage of turn areas.

Sec. 718.109 Adjustments.

(a) The farm operator or other interested producer having excess

tobacco acreage (other than flue-cured or burley) may adjust an acreage

of the crop in order to avoid a marketing quota penalty if such person:

(1) Notifies the county committee of such election within 15

calendar days after the date of mailing of notice of excess acreage by

the county committee; and

(2) Pays the cost of a farm visit to determine the adjusted acreage

prior to the date the farm visit is made.

(b) The farm operator may adjust an acreage of tobacco (except

flue-cured and burley) by disposing of such excess tobacco prior to the

marketing of any of the same kind of tobacco from the farm. The

disposition shall be witnessed by a representative of FSA and may take

place before, during, or after the harvesting of the same kind of

tobacco grown on the farm. However, no credit will be allowed toward

the disposition of excess acreage after the tobacco is harvested but

prior to marketing, unless the county committee determines that such

tobacco is representative of the entire crop from the farm of the kind

of tobacco involved.

Sec. 718.110 Notice of measured acreage.

Written notice of measured acreage shall be on Form FSA-468, Notice

of Determined Acreage, when mailed to the farm operator and shall

constitute notice to all interested producers on the farm.

Sec. 718.111 Redeterminations.

(a) A redetermination of crop acreage, appraised yield, or farm-

stored production for a farm may be initiated by the county committee,

State committee, or Deputy Administrator at any time. Such

redeterminations may also be initiated by a producer who has an

interest in the farm upon filing a request within 15 calendar days

after the date of the notice furnished the farm operator in accordance

with Sec. 718.109 or Sec. 718.110 or within 5 calendar days after the

initial appraisal of the yield of a crop or before any of the farm-

stored production is removed from storage and upon payment of the cost

of making such redetermination. A redetermination shall be undertaken

in the manner prescribed by the Deputy Administrator. Such

redetermination shall be used in lieu of any prior determination.

(b) The county committee shall refund the payment of the cost for a

redetermination when, because of an error in the initial determination:

(1) The appraised yield is changed by at least the larger of:

(i) Five percent or 5 pounds for cotton;

(ii) Five percent or 1 bushel for wheat, barley, oats, and rye; or

(iii) Five percent or 2 bushels for corn and grain sorghum; or

[[Page 37559]]

(2) The farm stored production is changed by at least the smaller

of 3 percent or 600 bushels; or

(3) The acreage of the crop is:

(i) Changed by at least the larger of 3 percent or 0.5 acre; or

(ii) Considered to be within program requirements.

Subpart C--Reconstitution of Farms, Allotments, Quotas, and

Acreages

Sec. 718.201 Farm constitution.

(a) Land which has been properly constituted under prior

regulations shall remain so constituted until a reconstitution is

required under paragraph (c) of this section. The constitution and

identification of land as a farm for the first time and the subsequent

reconstitution of a farm made hereafter, shall include all land

operated by one person as a single farming unit except that it shall

not include:

(1) After August 1, 1996, land subject to a production flexibility

contract with land not subject to a production flexibility contract;

(2) Land under separate ownership unless the owners agree in

writing;

(3) Land under a lease agreement of less than 1 year duration;

(4) Land in different counties when the tobacco allotments or

quotas established for the land involved cannot be transferred from one

county to another county by lease, sale, or owner. However, this

paragraph shall not apply if:

(i) All of the land is owned by one person and operated by one

person and all such land is contiguous;

(ii) Two or more tracts are located in counties that are contiguous

in the same State and are owned by the same person if:

(A) A burley tobacco quota is established for one or more of the

tracts; and

(B) The county committee determines that the tracts will be

operated as a single farming unit as set forth in Sec. 718.202; or

(iii) Because of a change in operation, tracts or parts of tracts

will be divided from the parent farm that currently has land in more

than one county, and there is no change in operation and ownership of

the remainder of the farm, or if there is a change in ownership, the

new owner agrees in writing to the constitution of the farm.

(5) Federally owned land;

(6) State-owned wildlife land unless the former owner has

possession of the land under a leasing agreement;

(7) Land constituting a farm which is declared ineligible to be

enrolled in a program under the regulations governing the program;

(8) For land subject to production flexibility contracts, land

located in counties that are not contiguous. However, this subparagraph

shall not apply if:

(i) Counties are divided by a river;

(ii) Counties do not touch because of a correction line adjustment;

or

(iii) The land is within 20 miles, by road, of other land that will

be a part of the farming unit; and

(9) With respect to peanut poundage quotas, land across:

(i) County lines when the quotas established for the land involved

cannot be transferred; or

(ii) State lines.

(b)(1) If all land on the farm is physically located in one county,

the farm records shall be administratively located in such county. If

there is no FSA office in the county or the county offices have been

consolidated, the farm shall be administratively located in the

contiguous county most convenient for the farm operator.

(2) If the land on the farm is located in more than one county, the

farm shall be administratively located in either of such counties as

the county committees and the farm operator agree. If no agreement can

be reached, the farm shall be administratively located in the county

where the principal dwelling is situated, or where the major portion of

the farm is located if there is no dwelling.

(c) A reconstitution of a farm either by division or by combination

shall be required whenever:

(1) A change has occurred in the operation of the land after the

last constitution or reconstitution and as a result of such change the

farm does not meet the conditions for constitution of a farm as set

forth in paragraph (b) except that no reconstitution shall be made if

the county committee determines that the primary purpose of the change

in operation is to establish eligibility to transfer allotments subject

to sale or lease;

(2) The farm was not properly constituted under the applicable

regulations in effect at the time of the last constitution or

reconstitution;

(3) An owner requests in writing that the owner's land no longer be

included in a farm which is composed of tracts under separate

ownership;

(4) The county committee determines that the farm was reconstituted

on the basis of false information furnished by the owner or farm

operator;

(5) The county committee determines that the tracts of land

included in a farm are not being operated as a single farming unit;

(6) An owner of a farm, constituted as a single farming unit prior

to 1978, which is comprised of land located in two or more counties for

which there is a quota or allotment established for such farm and such

quota or allotment is subject to lease and transfer restrictions across

county lines, requests in writing that the farm be reconstituted by

dividing the tracts. The resulting farms shall be administratively

serviced by the county office serving the county in which the land is

geographically located; or

(7) Land is sold for or devoted to nonagricultural commercial or

industrial uses; however, a reconstitution is not required and

allotments, quotas and acreages may remain with the farm if either of

the following apply:

(i) The land is already devoted to residential, recreational,

industrial or commercial buildings; or

(ii) The owner would qualify to use the landowner designation

method of division in accordance with Sec. 718.205 or the allotments

and quotas can be transferred by sale or owner in accordance with this

part and parts 723 or 729 of this chapter and the owner of the parent

farm and the purchaser file a signed written memorandum of

understanding before Form FSA-476 or Form MQ-24 is issued, stating that

the land will be devoted immediately or within 3 years to:

(1) Nonagricultural commercial uses; or

(2) Recreational, residential, industrial or non-farm commercial

uses.

(d) Notwithstanding the provisions of paragraphs (c)(1) through

(c)(7), a reconstitution shall not be approved if the county committee

determines that the primary purpose of the reconstitution is to:

(1) Circumvent the provisions of part 12 of this title; or

(2) Circumvent any other chapter of this title.

Sec. 718.202 Determining the land constituting a farm.

(a) In determining the constitution of a farm, consideration shall

be given to provisions such as ownership and operation. For purposes of

this part, the following rules shall be applicable to determining what

land is to be included in a farm.

(b) A minor shall be considered to be the same owner or operator as

the parent or court-appointed guardian (or other person responsible for

the minor child) unless:

(1) The minor child is a producer on a farm;

[[Page 37560]]

(2) Neither the minor's parents nor guardian has any interest in

the minor's farm or production from the farm;

(3) The minor establishes and maintains a separate household from

the parent or guardian;

(4) Personally carries out the farming activities in the operation;

and

(5) Maintains a separate accounting for the farming operation.

(c) Notwithstanding paragraph (b) of this section, a minor shall

not be considered to be the same owner or operator as the parent or

court-appointed guardian if the minor's interest in the farming

operation results from being the beneficiary of an irrevocable trust

and ownership of the property is vested in the trust or the minor.

(d) A life estate tenant shall be considered to be the owner of the

property for their life.

(e) A trust shall be considered to be an owner with the beneficiary

of the trust; except a trust can be considered a separate owner or

operator from the beneficiary, if the trust:

(1) Has a separate and distinct interest in the land or crop

involved;

(2) Exercises separate responsibility for the separate and distinct

interest; and

(3) Maintains funds and accounts separate from that of any other

individual or entity for the interest.

Sec. 718.203 County committee action to reconstitute a farm.

Action to reconstitute a farm may be initiated by the county

committee, the farm owner, or the operator with the concurrence of the

owner of the farm. Any request for a farm reconstitution shall be filed

with the county committee.

Sec. 718.204 Reconstitution of allotments, quotas, and acreages.

(a) Farms shall be reconstituted in accordance with this subpart

when it is determined that the land areas are not properly constituted

and, to the extent practicable, shall be based on the facts and

conditions existing at the time the change requiring the reconstitution

occurred.

(b) Reconstitutions of farms subject to a production flexibility

contract in accordance with part 1412 of this title will be effective

for the current year if initiated on or before July 1 of the fiscal

year.

(c) For tobacco and peanut farms, a reconstitution will be

effective for the current year for each crop for which the

reconstitution is initiated before the planting of such crop begins or

would have begun.

(d) Notwithstanding the provisions of paragraph (b) and (c) of this

section, a reconstitution may be effective for the current year if the

county committee, with the concurrence of the State committee,

determines that the purpose of the request for reconstitution is not to

perpetrate a scheme or device the effect of which is to avoid the

statutes and regulations governing commodity programs found in this

title.

Sec. 718.205 Rules for determining farms, allotments, quotas, and

acreages when reconstitution is made by division.

(a) The methods for dividing farms, allotments, quotas, and

acreages in order of precedence, when applicable, are estate,

designation by landowner, contribution, agricultural use, cropland, and

history. The proper method shall be determined on a crop by crop basis.

(b)(1) The estate method is the proration of allotments, quotas,

and acreages for a parent farm among the heirs in settling an estate.

If the estate sells a tract of land before the farm is divided among

the heirs, the allotments, quotas, and acreages for that tract shall be

determined by using one of the methods provided in paragraphs (c)

through (g) of this section.

(2) Allotments, quotas, and acreages shall be divided in accordance

with a will, but only if the county committee determines that the terms

of the will are such that a division can reasonably be made by the

estate method.

(3) If there is no will or the county committee determines that the

terms of a will are not clear as to the division of allotments, quotas,

and acreages, such allotments, quotas, and acreages shall be

apportioned in the manner agreed to in writing by all interested heirs

or devisees who acquire an interest in the property for which such

allotments, quotas, and acreages have been established. An agreement by

the administrator or executor shall not be accepted in lieu of an

agreement by the heirs or devisees.

(4) If allotments, quotas, and acreages are not apportioned in

accordance with the provisions of paragraph (b)(2) or (3) of this

section, the allotments, quotas, and acreages shall be divided pursuant

to paragraphs (d) through (g) of this section, as applicable.

(c)(1) If the ownership of a tract of land is transferred from a

parent farm, the transferring owner may request that the county

committee divide the allotments, quotas, and acreages, including

historical acreage that has been doublecropped, between the parent farm

and the transferred tract, or between the various tracts if the entire

farm is sold to two or more purchasers, in a manner designated by the

owner of the parent farm subject to the conditions set forth in

paragraph (c)(4) of this section. In the case of land subject to a

Wetlands Reserve Program easement or Emergency Wetlands Reserve Program

easement, the parent farm shall retain the allotments, quotas, and

acreages.

(2) If the county committee determines that allotments, quotas, and

acreages cannot be divided in the manner designated by the owner

because of the conditions set forth in paragraph (c)(4) of this

section, the owner shall be notified and permitted to revise the

designation so as to meet the conditions in paragraph (c)(4) of this

section. If the owner does not furnish a revised designation of

allotments, quotas, and acreages within a reasonable time after such

notification, or if the revised designation does not meet the

conditions of paragraph (c)(4) of this section, the county committee

will prorate the allotments, quotas, and acreages in accordance with

paragraphs (d) through (g) of this section.

(3) If a parent farm is composed of tracts, under separate

ownership, each separately owned tract being transferred in part shall

be considered a separate farm and shall be constituted separately from

the parent farm using the rules in paragraphs (d) through (g) of this

section, as applicable, prior to application of the provisions of this

paragraph.

(4) A landowner may designate, as provided in this paragraph, the

manner in which allotments, quotas, and acreages are divided.

(i) The transferring owner and transferee shall file a signed

written memorandum of understanding of the designation with the county

committee before the farm is reconstituted and before a subsequent

transfer of ownership of the land. The landowner shall designate the

allotments, quotas, and acreage that shall be permanently reduced when

the sum of the allotments, quotas, and acreages exceeds the cropland

for the farm.

(ii) Where the part of the farm from which the ownership is being

transferred was owned for a period of less than 3 years, the

designation by landowner method shall not be available with respect to

the transfer unless the county committee determines that the primary

purpose of the ownership transfer was other than to retain or to sell

allotments or quotas. In the absence of such a determination, and if

the farm contains land which has been owned for less than 3 years, that

part of the farm which has been owned for less than 3 years shall be

considered as a separate farm and the allotments or

[[Page 37561]]

quotas, shall be assigned to that part in accordance with paragraphs

(d) through (g) of this section. Such apportionment shall be made prior

to any designation of allotments and quotas, with respect to the part

which has been owned for 3 years or more.

(5) The designation by landowner method is not applicable to:

(i) Burley tobacco quotas; or

(ii) Crop allotments or quotas which are restricted to transfer

within the county by lease, sale, or by owner, when the land on which

the farm is located is in two or more counties.

(6) The designation by landowner method may be applied at the

owner's request to land owned by any Indian Tribal Council which is

leased to two or more producers for the production of any crop of a

commodity for which an allotment, quota, or acreage has been

established. If the land is leased to two or more producers, an Indian

Tribal Council may request that the county committee divide the

allotments, quotas, and acreages between the applicable tracts in the

manner designated by the Council. The use of this method shall not be

subject to the conditions of paragraph (c)(4).

(d) (1) The contribution method is the proration of a parent farm's

allotments, quotas, and acreages to each tract as the tract contributed

to the allotments, quotas, or acreages at the time of combination and

may be used when the provisions of paragraphs (b) and (c) of this

section do not apply. The contribution method shall be used to divide

allotments and quotas for a farm that resulted from a combination which

became effective during the 6-year period before the crop year for

which the reconstitution is effective. This method for dividing

allotments and quotas shall be used beyond the 6-year period if FSA

records are available to show the amount of contribution.

(2) The county committee determines with the concurrence of the

State committee or representative thereof, that the use of the

contribution method would not result in an equitable distribution of

allotments and quotas, considering available land, cultural operations,

and changes in type of farming. The contribution method shall not be

used in cases involving the division of allotment or quota for any

commodity for which there was no allotment or quota established at the

time of the combination.

(e) The agricultural use method is the proration of contract

acreage to the tracts being separated from the parent farm in the same

proportion that the agricultural and related activity land for each

tract bears to the agricultural and related activity land for the

parent farm. This method of division shall be used if the provisions of

paragraphs (b) through (d) of this section do not apply.

(f) (1) The cropland method is the proration of allotments and

quotas to the tracts being separated from the parent farm in the same

proportion that the cropland for each tract bears to the cropland for

the parent farm. This method shall be used if the provisions of

paragraphs (b) through (d) of this section do not apply unless the

county committee determines that a division by the history method would

result in allotments and quotas which are more representative than if

the cropland method is used after taking into consideration the

operation normally carried out on each tract for the commodities

produced on the farm.

(2) The cropland method shall not be used to divide contract

acreage.

(g)(1) The history method is the proration of allotments and quotas

to the tracts being separated from the farm on the basis of the

allotments and quotas determined to be representative of the operations

normally carried out on each tract. The county committee may use the

history method of dividing allotments and quotas when it:

(i) Determines that this method would result in the proration of

allotments and quotas, more representative than the cropland method of

division of the operation normally carried out on each tract; and

(ii) Obtains written consent of all owners to use the history

method.

(2) Notwithstanding any other provision of this section, the county

committee may waive the requirement for written consent of the owners

for dividing allotments and quotas if the county committee determines

that the use of the cropland method would result in an inequitable

division of the parent farm's allotments and quotas and the use of the

history method would provide more favorable results for all owners.

(3) The history method shall not be used to divide contract

acreage.

(h) (1) Allotments, quotas, and acreages apportioned among the

divided tracts pursuant to paragraphs (d), (e), (f) and (g) of this

section may be increased or decreased with respect to a tract by as

much as 10 percent of the allotment, quota, or acreage determined under

such subsections for the parent farm if:

(i) The owners agree in writing; and

(ii) The county committee determines the method used did not

provide an equitable distribution considering available land, cultural

operations, and changes in the type of farming conducted on the farm.

Any increase in an allotment, quota, or acreage with respect to a tract

pursuant to this paragraph shall be offset by a corresponding decrease

for such allotments, quotas or acreages established with respect to the

other tracts which constitute the farm.

(2) Farm program payment yields calculated for the resulting farms

of a division performed according to paragraphs (d) through (g) may be

increased or decreased if the county committee determines the method

used did not provide an equitable distribution considering available

land, cultural operations, and changes in the type of farming conducted

on the farm. Any increase in a farm program payment yield on a

resulting farm shall be offset by a corresponding decrease on another

resulting farm of the division.

(i) If a farm with burley tobacco quota is divided through

reconstitution and one or more of the farms resulting from the division

are apportioned less than 1,000 pounds of burley tobacco quota, the

owners of such farms shall take action as provided in part 723 of this

chapter to comply with the 1,000 pound minimum by July 1 of the current

year or the quota shall be dropped. Exceptions to this are farms

divided:

(1) Among family members;

(2) By the estate method; and

(3) When no sale or change in ownership of land occurs.

Sec. 718.206 Rules for determining allotments, quotas, and acreages

when reconstitution is made by combination.

When two or more farms or tracts are combined for a year, that

year's allotments, quotas, and acreages, with respect to the combined

farm or tract, as required by applicable commodity regulations, shall

not be greater than the sum of the allotments, quotas, and acreages for

each of the farms or tracts comprising the combination, subject to the

provisions of Sec. 718.204(a)(3).

Sec. 718.207 Eminent domain acquisitions.

(a) This section provides a uniform method for reallocating

allotments and quotas, with respect to land involved in eminent domain

acquisitions. Such allotments and quotas, in accordance with this

section, may be pooled for the benefit of the owner who is displaced

from the acquired farm by eminent domain acquisition. Such pooling

shall be for a 3-year period from the date of displacement or during

such other period as the displaced owner may request for the transfer

of allotments and quotas, from the pool to other farms owned by such

person.

(b) An eminent domain acquisition is a taking of title to land, or

the taking of

[[Page 37562]]

an impoundment easement to impound water on the land, or the taking of

a flowage easement to intermittently flood the land, consummated with

respect to land which is, or could be, so taken under the power of

eminent domain by a Federal, State, or other agency. Such acquisition

may be by court proceedings to condemn the land or by negotiation

between the agency and the owner. An acquisition by an agency with

respect to land not subject to the agency's power of eminent domain

shall not be an eminent domain acquisition for purposes of this

section. All land acquired by an agency for the intended project,

including surrounding land not needed for the project but acquired as a

package acquisition, shall be considered to be in the eminent domain

acquisition if the agency expended funds for the package acquisition on

the basis of its power of eminent domain.

(c) For purposes of this section, owner means the person, or

persons in a joint ownership, having title to the land for a period of

at least 12 months immediately prior to the date of transfer of title

or grant of the impoundment or flowage easement under the eminent

domain acquisition. If such person or persons have owned the land for

less than such 12-month period, they may, nevertheless, be considered

the owner if the State committee determines that such person or persons

acquired the land for the purpose of carrying out farming operations

and not for the purpose of obtaining status as an owner under this

section. However, no person shall be considered the owner if he

acquired the land subject to an eminent domain acquisition under an

outstanding contract to an agency or an option by an agency or subject

to pending condemnation proceedings. In any case where the current

titleholders cannot be considered the owner for the purpose of this

section, the State committee shall determine the person or persons who

previously had title to the land and who qualify for status as the

owner under the criteria in this paragraph.

(d) The owner shall be considered displaced from a farm which is

subject to an eminent domain acquisition on the date:

(1) The owner loses possession of the land;

(2) The owner is voluntarily displaced if a binding contract for

acquisition has been executed;

(3) The owner, in the case of a flowage easement, determines it is

no longer practical to conduct farming operations on the land; or

(4) The owner loses possession of the land as lessee under a lease

from the agency or its designee if the lease provided uninterrupted

possession to the owner from the date of acquisition to the end of the

lease or extensions of the lease.

(e) The owner shall notify the county committee in writing of the

eminent domain acquisition and furnish the date of displacement within

30 days so that allotments and quotas may be pooled in accordance with

this section. Failure to so notify the county committee shall result in

the loss of the ability of the owner to extend the 3-year period of the

pool.

(f) Whenever the county committee determines, by notice from the

owner or otherwise, that an owner has been displaced from the farm, the

county committee shall establish a pool for the allotments and quotas

eligible for pooling under this section for a 3-year period beginning

on the date of displacement. Pooled allotments and quotas shall be

considered fully planted and, for each year in the pool, shall be

established in accordance with applicable commodity regulations.

(g) Pooling is not permitted or required:

(1) If the county committee determines that an agency has authority

under its eminent domain powers to acquire a farm for the continued

production of an allotment or quota and does so acquire a farm only for

such purpose and files a written notice with the county committee of

the county in which the farm is located at the time of acquisition

designating the allotment and quota to be produced on the farm, there

shall be no pooling of such allotment and quota. Such farm allotments

and quotas shall be established for the farm in accordance with

applicable commodity regulations. For acreages, there shall be no

pooling of the acreage under any circumstances if an agency acquires

land and retains the land in an agricultural or related activity;

(2) If the displaced owner files written notice with the county

committee of an intention to waive the right to have all the allotments

and quotas or any part thereof pooled and the county committee

determines that the displaced owner has not been coerced to waive such

right, the allotments and quotas shall be retained on the agency

acquired land;

(3) If an agency acquires part of a farm for non-farming purposes

and the cropland on the land so acquired represents less than 15

percent of the total cropland on the farm, the allotments and quotas

shall be retained on the portion of the farm not acquired by the agency

and shall not be pooled;

(4) If an agency acquires part of a farm for non-farming purposes

and the cropland on the land so acquired represents 15 percent or more

of the total cropland on a farm, the allotments and quotas attributable

to the acquired land shall be retained on the portion of the farm not

acquired by the agency if the owner files a written request with the

county committee for such retention. The amount of an allotment and

quota which may be retained on the farm cannot exceed the land devoted

to an agricultural or related activity. Allotments and quotas which are

not retained shall be pooled; or

(5) If, prior to pooling, an owner files a request to transfer the

allotments and quotas to other farms in the same county which are owned

by such owner, the county committee may approve a direct transfer

without the formal establishment of a pool. Such transfer shall be

subject to the requirements of paragraph (j) of this section. This

paragraph shall govern the release and reapportionment of pooled

allotments and quotas notwithstanding other provisions of applicable

commodity regulations.

(h) Pooled allotments and quotas may be released on an annual basis

by the owner to a county committee during any year for which allotments

and quotas are pooled and not otherwise transferred from the pool. The

county committee may reapportion the released allotments and quotas to

other farms in the same county that have allotments or quotas for the

same commodity. Pooled allotments and quotas shall not be released on a

permanent basis or surrendered after release to the State committee for

reapportionment in other counties. Reapportionment shall be on the

basis of past acreage of the commodity, land, labor, and equipment

available for the production of the commodity, crop rotation practices,

and other physical factors affecting the production of the commodity.

Pooled allotments and quotas which are released shall be considered to

have been fully planted in the pool and not on the farm to which such

allotments and quotas are reapportioned.

(i) Pooled allotments and quotas that may be transferred on a

permanent or temporary basis by sale, lease, or by owner designation

may be transferred permanently from the pool by the owner or

temporarily for the duration of the pooled allotment or quota, subject

to the terms and conditions for such transfers in the applicable

commodity regulations. The transfer of tobacco acreage allotment or

marketing quota shall be approved acre for acre.

[[Page 37563]]

(j) (1) The displaced owners may request a transfer of all or part

of the pooled allotments and quotas to any other farm in the United

States which is owned by the displaced owner, but only if there are

farms in the receiving county with allotments and quotas, for the

particular commodity or, if there are no such farms, the county

committee determines that farms in the receiving county are suited for

the production of the commodity. For purposes of this paragraph:

(i) Receiving farm means the farm to which transfer from the pool

is to be made;

(ii) Receiving State and county committee mean those committees for

the State and county in which the receiving farm is located; and

(iii) Transferring State and county committees mean those

committees for the State and county in which the agency acquired farm

is located.

(2) The displaced owner shall file with the receiving county

committee written application for transfer of an allotment and quota

from the pool within 3 years after the date of displacement. The

application shall contain a certification from the owner that no

agreement has been made with any person for the purpose of obtaining an

allotment or quota from the pool for a person other than for the

displaced owner. The owner shall attach to the application all

pertinent documents pertaining to the current ownership or purchase of

land and any leasing arrangements, such as the deed of trust or

mortgage, a warranty deed, a note, sales agreement, and lease.

(3) The receiving county committee shall consider each application

and determine whether the transfer from the pool shall be approved.

Before an application is acted upon by the receiving county committee,

the owner shall personally appear before the receiving county committee

after reasonable notice, bring any additional pertinent documents as

may be requested for examination by the receiving county committee, and

answer all pertinent questions bearing on the proposed transfer. Such

personal appearance requirement may be waived if the receiving county

committee determines from facts presented to it on behalf of the owner

that such personal appearance would unduly inconvenience the owner on

account of illness or other good cause and such personal appearance

would serve no useful purpose. Any action by the receiving county

committee shall be subject to the approval required under paragraph

(j)(5) of this section.

(4) The transfer from the pool will be approved by the receiving

county committee only if the county committee determines that the owner

has made a normal acquisition of the receiving farm for the purpose of

bona fide ownership to reestablish farming operations. The elements of

such an acquisition shall include, but are not limited to, the

following:

(i) Appropriate legal documents must establish title to the

receiving farm;

(ii) If the displaced owner was the operator of the acquired farm

at the date of displacement, such owner must personally operate and be

the operator of the receiving farm for the first year that the

allotment and quota is transferred;

(iii) If the displaced owner was not the operator of the acquired

farm at the date of displacement and was not a producer on that farm

because the leasing or rental agreement provided for cash, fixed rent,

or standing rent payment, such owner shall not be required to operate

personally and be the operator of the receiving farm, but at least 75

percent of the allotments for the receiving farm must be planted on the

receiving farm during the first year of the transfer. With respect to a

commodity for which a quota is applicable but for which there is no

acreage allotment, an acreage which is equal to the result of dividing

the quota transferred to the receiving farms by the receiving farm's

yield, multiplied by 75 percent must be planted during the first year

of the transfer;

(iv) If the displaced owner was not the operator of the acquired

farm at the date of displacement but was a producer on that farm at the

date of displacement as the result of having received a share of the

crops produced on the acquired farm, such displaced owner shall not be

required to be the operator of the receiving farm but must be a

producer on the receiving farm during the first year that an allotment

or quota is transferred;

(v) The contractual arrangements between the displaced owner and

the seller of the receiving farm must not contain a requirement that

the receiving farm be leased to the seller or a person designated by or

subject to the control of the seller. The seller or a person designated

by or subject to the control of the seller may not lease the receiving

farm for the first year the allotment or quota is transferred; and

(vi) The contractual arrangements under which the receiving farm

was purchased or leased must be customary in the community where the

receiving farm is located with respect to purchase price and timing and

amount of purchase or rental payments.

(5) The approval by the receiving county committee of a transfer

from the pool under this paragraph shall be effective upon concurrence

by the State committee of the State where the receiving farm is located

(the receiving State committee). Notwithstanding any other provision of

this section, the receiving State committee may authorize a transfer

from the pool in any case where the owner presents evidence

satisfactory to the receiving State committee that:

(i) The eligibility requirements of paragraph (j)(4) (ii), (iii)

and (iv) of this section cannot be met without substantial hardship

because of illness, old age, multiple farm ownership, or lack of a

dwelling on the farm to which an allotment or quota is to be

transferred; or

(ii) The owner has made a normal acquisition of the receiving farm

for the purpose of bona fide ownership to reestablish farming

operations for the displaced owner, even if the farm is leased to the

seller of the farm for the first year for which the allotment or quota

is transferred.

(6) Upon completion of all necessary approvals under this

paragraph, the receiving county committee shall issue an appropriate

notice of allotment and quota under the applicable commodity

regulations, taking into consideration the land, labor, and equipment

available for the production of the commodity, crop rotation practices,

and the soil and other physical factors affecting the production of the

commodity. For purposes of determining the amount of the allotment and

quota available for transfer, the receiving county committee shall

consider the receiving tract as a separate ownership. The acreage

transferred from the pool shall not exceed the allotments and quotas,

most recently established for the acquired farm placed in the pool.

When all or a part of the allotment and quota placed in the pool is

transferred and used to establish or increase the allotment and quota

for other farms owned or purchased by the owner, all of the

proportionate part of the past acreage history for the acquired farm

shall be transferred to and considered for purposes of future

allotments and quotas to have been planted on the receiving farm for

which an allotment and quota, are established or increased under this

section. If only a part of the available allotment and quota is

transferred from the pool, the remaining part of the allotment and

quota, shall remain in the pool for transfer to other farms of the

owner until all such

[[Page 37564]]

allotments and quotas have been transferred or until the period of

eligibility for establishing or increasing allotments and quotas under

this section has expired.

(7) If any allotment or quota is transferred under this section and

it is later determined by the receiving county or State committee, or

by the Deputy Administrator, that the transfer was obtained by

misrepresentation by or on behalf of the owner, or that the conditions

of paragraph (j)(4) of this section are not met, the allotment and

quota for the receiving farm shall be reduced for each year the

transfer purportedly was in effect by the amount attributable to the

allotment or quota transferred from the pool. If the time period for

the transfer of the allotment or quota from the pool has not expired,

the amount of allotment or quota initially transferred from the pool

shall be returned to the pool after the period of time has expired in

which the displaced owner could exercise the right of administrative

review. Any cancellation of the transfer of an allotment or quota by

the receiving county committee shall be subject to approval by the

receiving State committee. The receiving county committee shall issue a

notice of any marketing quota and penalty as may be required in

accordance with applicable commodity regulations.

(8) If the displaced owner files a request for transfer of pooled

allotments or quotas, within the prescribed period for filing such

request, but the request for transfer is filed during a year in which

all or a part of the pooled allotments or quotas were released to the

transferring county committee pursuant to paragraph (h), the

application for transfer will be processed in the usual manner but the

amount of the commodity released shall not be effective on the

receiving farm until the succeeding year. When a request for transfer

of pooled allotment or quota involves a transfer from one State to

another, the receiving State committee shall obtain information from

the transferring State committee as to whether any part of the

allotment or quota for which the transfer is requested has been

released to the transferring county committee for the current year.

(k)(1) When the displaced owner leases part but not all of the

agency acquired land, such part shall be constituted as a separate farm

on the date of the displacement of the owner from the land not so

leased.

(2) If a parent farm consists of separate ownership tracts, each

such tract being acquired in whole or in part shall be considered as a

separate farm for purposes of paragraphs (g) (3) and (4) of this

section.

(3) If a portion of a farm is acquired by an agency and the owner

is displaced therefrom, the acquired portion shall be constituted as a

separate farm on the date of displacement unless the allotments and

quotas are retained on the portion not acquired as provided in

paragraphs (g) (3) and (4) of this section, in which case the farm

shall not be reconstituted but the farmland and cropland data shall be

corrected on all appropriate records for the parent farm.

(l)(1) The displaced owner may file with the county committee a

written designation of beneficiary of the rights in the allotments and

quotas attributable to the acquired land in the event of the death of

the displaced owner, and may revise such designation from time to time.

The beneficiary of a deceased owner may exercise the right to continue

a lease or negotiate a lease with the agency or its designee, the

regular transfer rights with respect to farms owned by such

beneficiary, and the release, sale, lease, and owner transfer rights

under this section.

(2) If the displaced owner does not file a designation of

beneficiary under paragraph (l)(1) and the displaced owner dies before

displacement or after pooling occurs, the following persons shall be

considered the beneficiary with the rights provided under paragraph

(l)(1) of this section:

(i) The surviving joint owner of the farm where two persons own the

farm as joint tenants with right of survivorship; and

(ii) The persons who succeed to the deceased displaced owner's

interest under a will or by intestate succession. However, in the case

of intestate succession, the person shall be limited to the surviving

spouse, parent, sibling or child of the deceased displaced owner. In

the settlement of the estate of the deceased displaced owner, the heirs

may file a written agreement with the county committee for the division

of the deceased displaced owner's rights under this section.

(m)(1) No transfer from the pool under paragraph (h), (i), or (j)

of this section shall be approved if there remains any unpaid marketing

quota penalty due with respect to the marketing of the commodity from

the acquired farm by the displaced owner, or if any of the commodity

produced on the agency acquired farm has not been accounted for as

required under applicable commodity regulations.

(2) If an allotment or quota for an acquired farm next established

after the data of displacement would have been reduced because of false

or improper identification of the commodity produced on or marketed

from the farm, or as the result of a false acreage report, the

allotment or quota shall be reduced in the pool in accordance with the

applicable commodity regulations.

Sec. 718.208 Exempting federal prison farms and Federal wildlife

refuges.

A marketing penalty shall not be assessed with respect to any

commodity which is produced on a Federal prison farm or Federal

wildlife refuge. This exception does not apply to penalties incurred by

an individual who has a separate interest in a crop which is subject to

marketing quotas and was produced on a Federal prison farm or Federal

wildlife refuge.

Sec. 718.209 Transfer of allotments and quotas--State public lands.

(a) Transfers of allotments and quotas between farms in the same

county may be permitted where both farms are lands owned by the State.

(b) An application requesting the transfer of one or more of the

allotments and quotas on a farm entirely comprised of lands owned by a

State shall be filed with the county committee by the State. The

application shall identify the farms as being within the same county,

show that each farm is entirely comprised of lands owned by the State,

and list the allotments and quotas requested to be transferred.

Additional information with respect to the present operations on the

farms, including all leasing arrangements, shall also be set forth in

the application.

(c) The State committee shall establish the closing date for filing

applications under paragraph (b) of this section for each year which

shall be no later than the general planting date in the county for the

commodity involved in the transfer.

(d)(1) Each transfer of an allotment and quota under this section

shall be adjusted for differences in farm productivity if the yield

projected for the year the transfer is to take effect for the farm to

which transfer is made exceeds by more than ten percent the yield

projected for the year the transfer is to take effect for the farm from

which transfer is made. The county committee shall determine the amount

of the allotment and quota to be transferred where a productivity

adjustment is required to be made by dividing:

(i) The product of the yield for the farm from which the transfer

is made and the acreage to be transferred from such farm, by

(ii) The yield for the farm to which the transfer is made.

(2) Acreage for the farm receiving the allotment or quota shall be

adjusted by

[[Page 37565]]

the same percentage as the allotment or quota being transferred is

adjusted. The amount of the allotment and quota and related acreage

transferred from the farm from which the transfer is made shall be the

full amount, but the amount of all allotment or quota and related

acreage for the farm to which the transfer is made shall be the

adjusted amount.

(e) The amount of allotment and quota on a farm after a transfer

under this section is made shall not exceed the average amount of

allotment or quota of at least three farms with acreage of cropland

similar to the farm receiving the transfer in the community having the

applicable allotment acreage and quota on these farms.

(f) Each transfer of any allotment and quota shall be subject to

the condition that an acreage equal to the allotment and quota

transferred, before any productivity adjustment, shall be devoted to

and maintained in permanent vegetative cover on the farm from which the

transfer is made. The acreage to be devoted to and maintained in

permanent vegetative cover with respect to quota crops shall be

determined by dividing the quota transferred by the yield of the farm

from which the quota is transferred.

(g) Transfer of an allotment and quota under this section shall

only be approved if:

(1) The county committee determines that a timely filed application

has been received and that the provisions of this section have been

met; and

(2) A representative of the State committee also determines that

the provisions of this section have been met. If such a transfer is

approved, the county committee shall issue revised notices of the

allotment or quota for each farm affected by the transfer. If a county

committee obtains evidence that the conditions applicable to any

transfer under this section have not been met, a report of the facts

shall be made to the State committee. If the State committee determines

that such conditions have not been met, the transfer will be canceled,

and the allotment and quota shall be retransferred to the original

farm. Where cancellation and retransfer is required, the county

committee shall issue revised notices of the allotment or quota showing

the reasons for the cancellation of the transfer.

PART 729--PEANUTS

8. The authority citation for part 729 continues to read as

follows:

Authority: 7 U.S.C. Chapters 1301, 1357 et seq., 1372, 1373,

1375; and 7 U.S.C. Chapter 1445c-3.

9. For the reason set out in the preamble, Sec. 729.316 is revised

to read as follows:

Sec. 729.316 Marketing assessments.

(a) Subject to adjustments in accordance with Sec. 729.317, a

nonrefundable marketing assessment shall, in the amount provided for in

this section, be due on each pound of farmers stock peanuts marketed or

considered marketed by a producer, including marketings by pledging

peanuts as collateral for a price support loan. The per pound

assessment as a percentage of the applicable national average quota or

additional peanut loan rate, shall be an amount equal to:

(1) 1.15 percent for the 1996 crop; and

(2) 1.2 percent for the 1997 through 2002 crops.

(b) Collections and payment of marketing assessments. The first

purchaser of peanuts shall:

(1) Collect from the producer a marketing assessment equal to the

quantity of peanuts acquired multiplied by:

(i) In the case of the 1996 crop, a per pound amount equal to .6

percent of the national average loan rate; and

(ii) In the case of each of the 1997 through 2002 crops, a per

pound amount equal to .65 percent of the applicable national average

loan rate.

(2) In addition to the amount collected under paragraph (1) of this

section, pay a marketing assessment in an amount equal to the quantity

of peanuts acquired multiplied by .55 percent of the applicable

national average loan rate.

(c) Private marketings. For all peanuts retained on the farm for

seed or other uses or marketed by such producer to any person outside

the United States or marketed in private marketings through a retail or

wholesale outlet to any person who is not required to register as a

handler in accordance with part 1446 of this title, the producer shall

pay a marketing assessment equal to the full amount determined by

multiplying the per pound amount provided in paragraph (a) of this

section by the gross weight of the peanuts if they are uninspected

farmers stock peanuts or, if inspected, the net weight of such peanuts.

If such peanuts are shelled before they are marketed, the quantity

marketed shall be converted to a farmers stock equivalent as consistent

with this part, for purposes of determining the amount of assessment

that is due.

(d) Loan collateral peanuts. With respect to peanuts that are

pledged as collateral for a price support loan through an approved

warehouse, an assessment shall be:

(1) Determined and paid by multiplying the net weight of such

peanuts by the applicable per pound amount provided in paragraph (b)(1)

of this section for private sales and deducting the total from the loan

value of such peanuts before other deductions may be made for any other

reason; and

(2) Further determined and paid by multiplying the net weight of

such peanuts, when sold from the price support inventory, by the

applicable per pound amount provided in paragraph (b)(2) of this

section for private sales and collecting that amount from the person

who acquires such peanuts from the applicable association or from the

CCC.

(e) Remittance of marketing assessments. With respect to marketing

assessments as provided in:

(1) Paragraph (b) of this section, such assessments shall be

remitted in a manner prescribed by the Deputy Administrator. To avoid a

penalty, as prescribed in this section, the marketing assessments due

with respect to any lot of peanuts acquired directly from a producer

must be remitted during the 15 days that follow the week in which the

data from the applicable Form FSA-1007 is due to be transmitted to FSA

in accordance with the provisions in part 1446 of this title. For

purposes of this section a week shall be the 168 hour period that

begins at 12:01 a.m. local time on any Sunday and the postmark on the

envelope in which such marketing assessment is remitted may be the

basis for determining whether the marketing assessment was remitted

timely;

(2) Paragraph (c) of this section, such assessments shall be

remitted, within 10 days after the date such peanuts are marketed, and

shall be remitted to the county FSA office that serves the county in

which the farm is administratively located. Peanuts that are retained

on the farm for seed or other use, shall be considered marketed at the

time the certification of marketings is filed or due to be filed at the

county FSA office, whichever is earlier;

(3) Paragraph (d)(1) of this section, such assessments shall be

credited by the association to the appropriate account of the CCC and

in accordance with instructions issued by the Executive Vice President,

CCC; and

(4) Paragraph (d)(2) of this section, such assessment shall be paid

at the time and in the manner prescribed in the applicable:

(i) Sales announcements for sales of farmers stock peanuts by CCC;

(ii) Sales announcement or other similar document issued by the

[[Page 37566]]

association for association sales of loan stocks of farmers stock

peanuts; and

(iii) Storage contract for farmers stock peanuts purchased by a

handler when peanuts are purchased by such handler in accordance with

the ``immediate buyback'' provisions set forth in Sec. 1446.309.

(f) Penalties. If any person fails to collect, pay or timely remit

the assessment required by this section, the person shall be liable in

addition to principal and interest, for a penalty determined by

multiplying the quantity of peanuts involved by 10 percent of the per

pound national average quota support rate for the applicable crop year.

10. Sec. 729.317 is added to subpart C to read as follows:

Sec. 729.317 Increased marketing assessments.

(a) Applicability. If area quota pool losses are not otherwise

covered by the offsets prescribed by part 1446 of this title, and the

transfer of marketing assessments collected in accordance with

provisions of this part, the marketing assessment for quota peanut

producers shall be:

(1) Increased by an amount needed by CCC to cover such losses; and

(2) Collected as determined by CCC on all quota peanuts marketed in

the next marketing year in the area covered by the quota pool which had

the loss.

(b) Insufficient collections. If the amount of such increased

ass

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