# Implementation of the Farm Program Provisions of the 1996 Farm Bill > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A96-17486 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** July 18, 1996 - **Citation:** 61 FR 37544 ## Text 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 [[Page 37545]] 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 [[Page 37546]] 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 desig [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A96-17486. Public record. Not legal advice.