General Administrative Regulations; Federal Crop Insurance Reform Act of 1994, Regulations for Implementation

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 400

RIN 0563-AB11

General Administrative Regulations; Federal Crop Insurance Reform

Act of 1994, Regulations for Implementation

AGENCY: Federal Crop Insurance Corporation.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes 7 CFR

part 400, subpart T of its General Administrative Regulations. The

intended effect of this final rule is to provide noninsured producers,

policyholders, and insurance companies the regulations applicable to

the catastrophic risk protection program. It will also provide other

changes in FCIC insurance programs to comply with statutory mandates of

the Federal Crop Insurance Act (Act), as amended by the Federal Crop

Insurance Reform Act of 1994 (Reform Act) and the Federal Agriculture

Improvement and Reform Act of 1996 (1996 Act).

EFFECTIVE DATE: August 20, 1996.

FOR FURTHER INFORMATION CONTACT: Louise Narber, Program Analyst,

Research and Development Division, Product Development Branch, Federal

Crop Insurance Corporation, United States Department of Agriculture,

9435 Holmes Road, Kansas City, MO 64131, telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order No. 12866 and Departmental Regulation 1512-1

This action has been reviewed under United States Department of

Agriculture (USDA) procedures established by Executive Order No. 12866.

This action constitutes a review as to the need, currency, clarity, and

effectiveness of these regulations under those procedures. The sunset

review date established for these regulations is December 1, 2001.

This rule has been determined to be economically significant for

the purposes of Executive Order No. 12866 and, therefore, has been

reviewed by the Office of Management and Budget (OMB).

Cost Benefit Analysis

A Cost Benefit Analysis has been completed and is available to

interested persons at the address listed above. In summary, the

analysis finds that crop insurance reform generally is expected to

result in net positive benefits to producers, taxpayers, and society.

The effects on individual producers compared to payments under ad hoc

disaster programs depends primarily on the farm program payment yield

compared to the farm's actual yield and market prices. In general,

however, the reform is expected to result in less volatility of

producers' incomes and less risk of no income due to adverse weather

events. Rural communities and producers will benefit from the certainty

of payments in times of catastrophic yield losses. The Government and

taxpayers will benefit from a single disaster protection program and

consequent reduced Federal outlays. Although producers who had not

previously participated in the Federal crop insurance program will have

an added burden to make application and report yields and acreage, the

benefits in terms of greater risk protection outweigh the costs.

Paperwork Reduction Act of 1995

In accordance with the Paperwork Reduction Act of 1995, the

information collection requirements contained in these regulations have

been previously approved by OMB and assigned OMB control number 0563-

0003 through September 30, 1998. Copies of the information collection

may be obtained from Bonnie Hart, USDA, FSA Advisory and Corporate

Operations Staff, Regulatory Review Group, P.O. Box 2415, Ag Box 0572,

Washington, D.C. 20013-2415, 8:15 a.m.-4:45 p.m., Monday through

Friday, except holidays, telephone (202) 690-2857.

Unfunded Mandates Reform Act of 1995

Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Public

Law 104-4, establishes requirements for Federal agencies to assess the

effects of their regulatory actions on State, local, and tribal

governments and the private sector. This rule contains no Federal

mandates (under the regulatory provisions of Title II of the UMRA) for

State, local, and tribal governments or the private sector. Thus, this

rule is not subject to the requirements of sections 202 and 205 of the

UMRA.

Executive Order No. 12612

It has been determined under section 6(a) of Executive Order No.

12612, Federalism, that this rule does not have sufficient Federalism

implications to warrant the preparation of a Federalism Assessment. The

provisions contained in this rule will not have a substantial direct

effect on States or their political subdivisions, or on the

distribution of power and responsibilities among the various levels of

Government.

Regulatory Flexibility Act

This regulation will not have a significant impact on a substantial

number of small entities. However, it does provide additional

flexibility and cost savings for small entities in the following three

areas. First, producers are no longer required to obtain at least CAT

coverage for economically significant crops. Instead, they may sign a

waiver foregoing emergency crop loss assistance. Insureds likely to

decline coverage are those who believe that the costs associated with

obtaining insurance exceed the benefits. The producers most likely to

fall into this category are those who have insurance policies with low

liabilities. For these producers, the $50 fee for CAT would be most

likely to outweigh expected indemnities. Second, an allowance has been

made to allow all producers with a share in a tobacco crop under one

marketing card to insure the crop under one insurance policy. To

qualify under this provision, none of the shareholders may have an

interest in another tobacco crop in the county. It is estimated that

35,100 policyholders may utilize this allowance, thereby saving the $50

[[Page 42971]]

processing fee for each. Third, with specified restrictions, persons

who hold an undivided interest in a crop may be eligible to purchase

one insurance policy covering all shares to satisfy linkage

requirements. The restrictions associated with this allowance include:

all landowners must agree in writing to the arrangement; none of the

landowners may hold any other interest in the given crop in the county

for which they are required to buy at least CAT coverage; and the total

liability under the CAT endorsement for all landowners must be $2,500

or less. Because no data are available providing an indication of

insureds with an undivided interest, it is not possible to estimate the

savings associated with not paying the $50 processing fee in these

situations. However, some small entities will benefit from this

allowance.

Federal Assistance Program

This program is listed in the Catalog of Federal Domestic

Assistance under No. 10.450.

Executive Order No. 12372

This program is not subject to the provisions of Executive Order

No. 12372, which require intergovernmental consultation with state and

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

published at 48 FR 29115, June 24, 1983.

Executive Order No. 12778

The Office of the General Counsel has determined that these

regulations meet the applicable standards provided in sections 2(a) and

2(b)(2) of Executive Order No. 12778. The provisions of this rule will

preempt state and local laws to the extent such state and local laws

are inconsistent herewith. The administrative appeal provisions

published at 7 CFR parts 11 and 780 must be exhausted before any action

for judicial review may be brought.

Environmental Evaluation

This action is not expected to have any significant impact on the

quality of the human environment, health, and safety. Therefore,

neither an Environmental Assessment nor an Environmental Impact

Statement is needed.

National Performance Review

This regulatory action is being taken as part of the National

Performance Review Initiative to eliminate unnecessary or duplicative

regulations and improve those that remain in force.

Background

The amendments to the Act, made by the Reform Act, were effective

on October 13, 1994. This regulation provides the procedures to carry

out the requirements of those amendments.

On Friday, January 6, 1995, FCIC published an interim rule in the

Federal Register at 60 FR 1996-2000 to add regulations to carry out the

general requirements of the Act. Following publication of that interim

rule, the public was afforded 60 days to submit written comments, data,

and opinions. On Monday, August 7, 1995, by publication at 60 FR 40055,

FCIC reopened and extended the comment period to August 18, 1995. A

total of 35 comments were received from the crop insurance industry,

FSA, and from producer groups. The comments received and FCIC responses

are as follows:

Comment: One comment received from the crop insurance industry

suggested clarifying the definition of ``catastrophic risk protection''

by deleting the word ``minimal'' and replacing it with either the word

``minimum'' or ``lowest'' and by deleting the word ``be'' and replacing

it with ``offer protection'' after ``such coverage will.''

Response: FCIC agrees with the comment and has amended the

definition of ``catastrophic risk protection'' by replacing the word

``minimal'' with the word ``minimum'' and by replacing the word ``be''

with ``offer protection.''

Comment: Another comment received from the crop insurance industry

suggested clarifying the definition of ``crop of economic

significance'' by deleting ``by the producer'' in the first sentence.

Response: FCIC agrees with the comment and has modified the

definition of ``crop of economic significance'' accordingly.

Comment: The crop insurance industry suggested clarifying the

definition of ``crop of economic significance'' to explain the

consequences if a crop planted in 1994, is planted in 1995 although

originally there was no intent to plant the crop in 1995; and to

clarify who is responsible for determining which crops are of economic

significance.

Response: FCIC agrees with the comment and has added new provisions

in section 400.653 to clarify requirements regarding crops of economic

significance. Producers who do not intend to plant a crop do not have

to obtain crop insurance or execute a waiver of their eligibility for

emergency crop loss assistance in connection with the crop to remain

eligible for certain other USDA program benefits, even if they produced

the crop the previous year. However, if the producer later decides to

plant the crop after the sales closing date, the producer cannot obtain

insurance on the crop and must execute a waiver of any eligibility for

emergency crop loss assistance in connection with the crop to be

eligible for certain USDA program benefits. If a waiver is not

executed, the producer must return those benefits already received.

Provisions were also added indicating that it is the producer's

responsibility to determine crops of economic significance in the

county and that the producer may have to provide records to permit the

insurance provider to verify whether a crop is a crop of economic

significance. FCIC has issued a worksheet that may be used by producers

to assist them in determining crops of economic significance. USDA will

be ultimately responsible for determining eligibility and paying any

amount due a person for any applicable USDA program.

Comment: A producer group suggested that the definition of ``crop

of economic significance'' is contrary to the Act and invites legal

action to test it. They stated that the Act looks to a percentage of

all crops grown by the producer and the definition in this regulation

provides for a county by county test to be done.

Response: FCIC agrees that Sec. 508(b)(7) and (8) of the Act does

not specifically indicate that crops of economic significance are

determined on a county basis. However, since FCIC's insurance program

has always been county based trying to operate one portion of the

program across county lines would be extremely difficult. No changes

will be made to conform to this suggestion.

Comment: The Farm Service Agency requested that the term ``limited

resource farmer'' be changed to ``limited income farmer.'' Farm Credit

Programs, which are part of FSA, have used the term ``limited resource

farmer'' for many years and it has a very different definition than the

definition of ``limited resource farmer'' used for crop insurance

purposes.

Response: Section 508(b)(5) of the Act expressly authorizes FCIC to

waive the administrative fee for ``limited resource farmers.'' Since

``resources'' include more than the producer's ``income'' such as farm

size, the definition will not be changed.

Comment: The crop insurance industry and a producer group

questioned what the phrase ``a need to maximize farm income'' meant in

the

[[Page 42972]]

definition of ``limited resource farmer'' and recommended an

explanation be added to the regulations or the phrase deleted.

Response: FCIC has reconsidered this provision and amended the

definition of ``limited resource farmer'' by deleting the phrase ``a

need to maximize farm income''.

Comment: A producer group recommended defining or omitting the

phrase ``small or family farm'' in the definition of ``limited resource

farmer.'' They also questioned how a person is categorized as a limited

resource farmer and whether or not such person is required to obtain at

least catastrophic risk protection (CAT) coverage, if available. The

comment also asked if the limited resource status could be used as a

defense if a producer is denied benefits for failure to meet linkage

requirements.

Response: FCIC agrees that the terms ``small'' and ``family farm''

are not necessary in the definition and has amended the definition

accordingly. All producers, including limited resource farmers, are

required to obtain at least CAT coverage, if available, to be eligible

for certain other USDA program benefits, unless the producer executes a

waiver of any eligibility for emergency crop loss assistance in

connection with the crop. The limited resource farmer status only

authorizes FCIC to waive payment of the administrative fees and may not

be used as a defense for failure to obtain CAT coverage. Producers may

request ``limited resource farmer status'' at the time the application

for insurance is made.

Comment: A producer group also suggested that the word ``producer''

be defined and used rather than the word ``person'' because it would be

less confusing since ``person'' is specifically defined with regard to

payment limitation rules. If this change is not made, the comment

suggested adding provisions to indicate that the definition in these

provisions does not reference the term ``person'' for payment

limitation purposes.

Response: A definition of ``person'' contained in any other statute

or regulation is not applicable to the Federal crop insurance program

unless expressly provided. Therefore, the definition of a person with

respect to payment limitation purposes is not relevant. The term

``person'' is defined for this program and has been used in the crop

insurance program for longer than payment limitation has existed. The

term ``person'' cannot be replaced with ``producer'' because not all

``persons'' are producers within the context of the program and to

alternate between the two terms would be confusing. No change to the

provisions will be made.

Comment: The crop insurance industry suggested that the phrase ``at

the option of the Secretary'' should be added after ``through approved

insurance providers and'' in Sec. 400.652(b) to be consistent with the

Act. This change is needed to enable the FSA to cease delivering CAT

coverage in counties in which such coverage becomes unnecessary.

Response: The Federal Agriculture Improvement and Reform Act of

1996 provides for CAT coverage to be offered by approved insurance

providers if there are a sufficient number available within an area. If

approved insurance providers are not sufficiently available, local

offices of the USDA will provide CAT coverage. FCIC agrees that the

Secretary must now make an affirmative determination that CAT can be

delivered through local FSA offices. The provision has been changed

accordingly.

Comment: One comment was received from within FCIC recommending

that language be included that would deny benefits from other USDA

programs if the producers fail to carry out their responsibilities in

accordance with policy provisions. It was suggested that language be

added to indicate that such failure would be considered a scheme or

device to circumvent the insurance requirement. The comment indicates

that some people are interpreting current provisions to mean that once

a producer applies for crop insurance on a crop of economic

significance, by signing an application for insurance, that he or she

has met the requirement for eligibility for certain other USDA program

benefits, even though he or she has not met the requirements for crop

insurance coverage to be in effect.

Response: FCIC agrees that failure to comply with all policy

provisions may result in ineligibility for certain program benefits

specified in Sec. 400.657. A new Sec. 400.652(e) has been added that

states this requirement.

Comment: Two comments were received from the crop insurance

industry raising issues involving alternative crops.

(1) One comment suggested that the provisions regarding alternative

crops in Sec. 400.653 (now Sec. 400.654) be clarified with respect to

crops of economic significance, USDA linkage requirements, and late

filed applications.

(2) One comment states that this late application procedure could

provide producers with a false sense of security because of the

reliance on FCIC to make discretionary determinations following sales

closing. It states that the procedure limits the producer to CAT

coverage even if he or she had previously determined that a higher

level was necessary for the crop intended to be planted. The procedure

extends the sales closing date which is not permitted by the statute.

The procedure also requires the insured to make application prior to

the acreage reporting date, which requires the insured to make a

special trip to the agent or FSA office.

Response: Section 400.654 has been amended to clarify the

conditions under which a producer may insure a substitute crop. Section

400.651 has also been amended to add a definition of ``substitute

crop''. FCIC has not extended sales closing dates, it has simply

permitted another crop to be substituted for the intended crop,

provided that circumstances warrant such action. This provision was

intended to protect farm income by allowing the producer to plant and

insure another crop when there was an inability to plant the intended

crop or when a crop was planted and failed and replanting of such crop

was not practical. Since the producer must still obtain coverage by the

sales closing date for the initially intended crop, producers should

not have a false sense of security. The substitution of crops simply

permits producers to maintain their ability to manage their risks when

circumstances beyond their control require a change in the planned

farming operation. Since producers who have not executed a waiver of

any eligibility for emergency crop loss assistance in connection with

the crop must obtain insurance coverage on all crops of economic

significance to remain eligible for other farm program benefits,

producers had to be given the opportunity to insure such crops planted

as a substitute crop. However, although producers may originally have

selected higher levels of coverage, they will be limited to CAT

coverage on substitute crops to comply with the linkage requirements

and limit exposure for losses that occur after the sales closing date.

The producer's decision to insure the substitute crop is voluntary and,

although it may require another visit to the insurance provider, the

producer will be ensured of protection against crop disasters.

Comment: The crop insurance industry strongly protested the

requirement that all acreage reports be signed. They stated that a

signed acreage report was not a requirement of the Act and must be

removed in the final rule. They also stated that such a requirement

[[Page 42973]]

should not be imposed on CAT coverage.

Response: Acreage reports are required by the contract and are

binding on the producer. If acreage reports are not signed, an

insurance provider may not be able to legally challenge the contents.

However, Sec. 400.653(d) (now Sec. 400.654(e)) has been amended for CAT

coverage only, to permit the operator to sign the acreage report for

all other persons with an insurable interest in the crop. These

producers will be bound by all statements on that signed acreage

report. Any person may sign the application, acreage report, or any

other document relative to crop insurance coverage, provided he or she

has a properly executed power of attorney or other legal document

recognized by the state authorizing such person to sign. Section

400.654(d) has been amended accordingly.

Comment: The crop insurance industry also suggested that a producer

be allowed to specify his or her intended acreage at the time of the

prior year's production reporting or at the time of application.

Response: Producers may submit ``intended'' acreage reports as

suggested by the comment, however, they will be required to confirm

acreage reporting information in accordance with the policy on or

before the final acreage reporting date. Premium owed and the

production guarantee are determined based on actual acreage, not

``intended'' acreage. No change will be made to this provision.

Comment: Both the crop insurance industry and a producer group

suggested clarifying the language in Sec. 400.654(b) (now

Sec. 400.655(b)) to state how, and to what extent, FCIC intends to

reduce an indemnity to reflect out-of-pocket expenses that were not

incurred by the producer as a result of not planting, caring for, or

harvesting the crop. They asked: If a prevented planting payment that

is already less than the guarantee under the policy for a planted crop,

will it be further reduced? They also asked: If an insured has a total

crop loss, would the guarantee be reduced compared to someone who

incurred harvesting costs?

Response: With respect to the prevented planting program, FCIC

elected to reduce the guarantee, instead of reducing the indemnity, to

reflect out-of-pocket expenses not incurred by the producer. Therefore,

prevented planting guarantees or indemnities will not be further

reduced and Sec. 400.655(b) will be amended accordingly. Producers with

a total crop loss that occurred before harvest may have the indemnity

reduced to reflect the costs associated with harvest that were not

incurred if such reduction is provided for in the applicable crop

policy. Section 400.655(b) has been amended to state that reductions in

indemnities will be in an amount determined in accordance with the crop

provisions or the Special Provisions for the specific crop.

Comment: One comment from a producer group suggested that there is

insufficient guidance as to the procedure that will be followed in the

event of a loss or for appeal rights.

Response: Each individual crop policy contains procedures to be

followed in the event of a crop loss. These policies are published in

chapter IV of title 7 of the CFR. The applicable appeal procedures are

published at 7 CFR parts 11 and 780 for determinations made by FCIC.

Therefore, no change will be made.

Comment: The crop insurance industry recommended that

Sec. 400.654(c)(1) (now Sec. 400.655(d)(2)) contain a provision

indicating that when the insured with CAT coverage files a claim for

indemnity under the policy, that filing indicates the insured has made

the election to receive a CAT indemnity rather than a benefit under any

other USDA program that compensates for the same crop loss. It stated

that the regulations need to specify how the producer is to make this

election, when he or she must make it, and who is responsible for

enforcing it.

Response: The Act expressly provides the producer with the choice

of programs under which to receive benefits. Since information about

other program benefits may not be available until long after the crop

loss has occurred, producers cannot be presumed to have made a choice

because they have not delayed receipt of benefits to which they are

entitled. Producers cannot make informed choices with respect to which

program benefits to choose until they know what benefits will be

available. Therefore, Sec. 400.655(d)(2) has been amended to permit

producers to receive a CAT indemnity and, if other program benefits are

later made available, to reimburse the entire amount of the CAT

indemnity to be eligible for a benefit under the other program. USDA

will be responsible for determining if a crop insurance payment has

been made prior to making payment under any other applicable USDA

program.

Comment: A producer group stated that Sec. 400.654(c)(1) (now

Sec. 400.655(d)(2)), which provides that a person can receive either

CAT benefits or other USDA benefits for the same loss, but not both,

should be clarified to state that a producer will not have to forego

other USDA payments that are not specifically related to the crop loss,

e.g., regular deficiency payments.

Response: Deficiency payments did not compensate a producer for a

crop loss, they provided compensation for changes in the market price.

Therefore, deficiency payments could be made regardless of whether or

not the producer collected an indemnity. No changes have been made in

the provisions in response to the comment.

Comment: One comment from FSA stated that previous legislation

required emergency loan applicants to have obtained crop insurance the

previous year. The reform legislation prohibits the applicant from

collecting the CAT indemnity, or noninsured crop disaster assistance

program (NAP) payment, for the same loss that qualifies for the

emergency loan. This requires the producers to pay for coverage on

which they are never allowed to collect because if they collect the CAT

or NAP payment, they will immediately become ineligible for an

emergency loan. The commentor suggested a more reasonable approach

would be to limit the total benefits from all sources for a loss to the

total amount of loss, rather than limiting the benefit to a single

source. Otherwise the producer will often collect the payment and then

apply for a regular farm operating or farm ownership loan, rather than

an emergency loan. Denying the producer the opportunity to collect the

CAT or NAP payment will put a further strain on the Farm Credit

Programs already limited loan funds.

Response: The provision in previous legislation that required

emergency loan applicants to have obtained crop insurance the previous

year was removed in the Reform Act. The statute is clear that, for CAT

coverage policies, if another program provides compensation for the

same crop loss, the producer must elect only one program under which to

receive benefits. Therefore, the producer cannot receive benefits from

all sources up to the total amount of the loss. Further, since the Act

expressly provides the producer with the choice of which program to

receive benefits, FCIC cannot administratively abrogate that right.

However, any producer who receives a CAT indemnity payment is not

automatically prohibited from receiving assistance for the same loss

under other USDA programs. Such producers will be given the opportunity

to reimburse the entire amount of the indemnity and receive assistance

under the other USDA program. Farm ownership and operating loans which

are not conditioned on a production loss, may be obtained from the USDA

in addition

[[Page 42974]]

to crop insurance indemnities. This provision will not be changed in

response to the comment.

Comment: A producer group suggested that it is unnecessarily

confusing when one section requires that a person must obtain at least

catastrophic risk protection coverage, if available, for each crop on

all insurable acreage in the county; another section allows limited or

additional coverage on portions of the crop in the county; and yet

another section refers to linkage requirements if a crop is a crop of

economic significance. These requirements could be clarified,

distinguished, or perhaps even combined to make them easier to

comprehend.

Response: FCIC has combined these requirements into Sec. 400.655

for clarity.

Comment: The crop insurance industry suggested that the provisions

need to be clarified to indicate that CAT coverage for high risk land

must be obtained from the same insurance provider from which limited or

additional coverage is obtained, if that provider sells and services

CAT coverage.

Response: FCIC agrees with the comment and has amended

Sec. 400.655(c)(2) to clarify this requirement.

Comment: The crop insurance industry suggested that the hail and

fire exclusion should be available for limited coverage as well as

additional coverage.

Response: Section 508(c)(7) of the Act specifies that the hail and

fire exclusion is available only for additional coverage. This

provision cannot be changed.

Comment: The crop insurance industry suggested that the

administrative fees for CAT coverage should be addressed separately

from those for limited coverage (see Sec. 400.655(a)) (now

Sec. 400.656(a)).

Response: The provisions of the Act mandate aggregation of the fees

for CAT and limited coverage in order to ensure that the producer does

not pay any administrative fee in excess of the amount required on a

per county or per producer basis. Further, the use of the

administrative fee to offset the costs of delivery of the program is

the same for both CAT and limited coverage. This aggregation of fees is

more clearly communicated by the proposed language than it would be if

the provisions were separated, therefore, no revisions will be made.

Comment: The crop insurance industry suggests that the terms

``additional'' and ``limited'' be clarified.

Response: FCIC believes that the terms are clearly defined with

respect to the applicable coverage level. No changes have been made in

the definitions of these terms.

Comment: Two comments received from the crop insurance industry

were against the provision requiring the administrative fee for limited

coverage being due at acreage reporting time.

(1) One comment stated that the administrative fee should be

payable with the premium for limited coverage as well as for additional

coverage. This comment also stated that it would be more consistent if

CAT policies had a $50 fee, and the limited and additional coverage

levels had a $10 fee in addition to the premium.

(2) One comment stated that they strongly protest the requirement

that the administrative fee for limited coverage must be paid at

acreage reporting time for carry-over policies.

Response: FCIC agrees that the administrative fee for limited

coverage should be paid during the normal premium billing cycle and has

modified Sec. 400.656(a)(3) accordingly. However, sections 508(b)(5)

and 508(c)(10) of the Act specifies that the administrative fee for

both CAT and limited coverage will be $50 per crop per county. No

changes in these amounts can be made.

Comment: The crop insurance industry suggested that Sec. 400.655(a)

(now Sec. 400.656(a)) fails to include provisions requiring an insured

to refund any benefits received prior to the policy being terminated

for nonpayment of fees.

Response: FCIC agrees with the comment and has amended

Sec. 400.656(a)(5) and (6) accordingly.

Comment: One comment received from the crop insurance industry

asked if the regulation as proposed would permit a company to collect

the $50 fee for a crop year at the same time it collects the production

information from the prior crop year for purposes of computing the

current crop year Actual Production History. They also stated that the

regulations should be flexible enough so that if a particular producer

has CAT, limited and additional coverage, all fees and premium could be

collected at the usual premium billing time.

Response: Section 508(b)(5)(A) of the Act requires that

administrative fees for CAT coverage be paid at the time of

application. Since the Act requires that administrative fees be paid up

front, FCIC only has the discretion to permit the payment of

administrative fees on or before the acreage reporting date for carry-

over policies the date the producer indicates the intention to continue

coverage for the crop year. Administrative fees for limited and

additional coverage may be collected during the normal billing cycle.

Any fee may be paid prior to the due date, however, the insurance

provider cannot require such payment. No change will be made.

Comment: The crop insurance industry suggested that Sec. 400.655(b)

(now Sec. 400.656(b)) be clarified to state, ``Payment of an

administrative fee will not be required if the insured files a zero

acreage report.''

Response: FCIC agrees with the comment and has added a new

Sec. 400.656(b)(3) accordingly. However, producers who falsely file a

zero acreage report may be subject to administrative and criminal

sanction.

Comment: The crop insurance industry also suggested that

Sec. 400.656(c) (now Sec. 400.657(c)) be clarified to provide that

eligibility for Conservation Reserve Program benefits is limited to new

or amended contracts and not contracts already in existence.

Response: FCIC agrees with the comment and has modified

Sec. 400.657(c) accordingly.

Comment: FSA suggested that the requirement for a producer to have

at least CAT coverage only applies to ``new'' Farm Credit loans not

``new and amended'' loans. The Act specifically listed the applicable

benefits in three loan-making authorities and the authority to service

(reschedule, reamortize, subordinate, write-down or otherwise amend)

loans is given in other sections of the Consolidated Farm and Rural

Development Act. There is a discrepancy over the effective date of the

CAT requirement. The requirement was effective upon enactment, however,

applicants could not be required to purchase CAT coverage before it was

available. The commentor continued to say that the effective

implementation date for their loan programs is January 23, 1995.

Response: Section 508(b)(7)(A) of the Act was effective on October

13, 1994, and mandated that the producer obtain at least CAT coverage

on crops of economic significance to be eligible for certain farm

credit benefits. Therefore, producers who obtained farm credit

programs, loans, or amended existing loans after October 13, 1994, are

statutorily required to comply with this provision. Amendments to

existing loans were included because such amendments can have a

significant effect on the terms and duration of such loans. Further,

Congress realized that some producers obtained loans in 1995, prior to

enactment of the Act. To permit producers to comply with the

requirements of section 508(b)(7)(A),

[[Page 42975]]

sales closing dates for CAT coverage were extended to April 13, 1995.

Comment: One comment received from FSA disagreed with provisions

that require the producer to obtain CAT coverage for the crop year in

which a farm credit loan is sought. The producer is not always able to

anticipate credit needs by the CAT sales closing date so it would be

more workable to allow the producer to obtain coverage for the

following year if the sales closing date had passed and it was not

possible to obtain coverage for the current year.

Response: The requirement for CAT coverage in the crop year for

which a benefit is sought is a statutory requirement, although the

producer may execute a waiver of any eligibility for emergency crop

loss assistance in connection with the crop and remain eligible for

certain USDA program benefits. Therefore, no changes have been made. It

is the responsibility of the producer and the lender to anticipate

credit needs in the worst case scenario so crop insurance can be

obtained prior to the applicable sales closing date.

Comment: The crop insurance industry questioned why only insureds

who had participated in a conserving use program established for the

1994 crop year were eligible to receive the special prevented planting

benefits.

Response: Section 116 of the Reform Act specifically requires that

producers have participated in a conserving use program established for

the 1994 crop year for wheat, feed grains, upland cotton, or rice to be

eligible for the prevented planting payments.

In addition to the changes described above, FCIC has made the

following changes:

1. Sec. 400.651 has been amended to add definitions for ``Act,''

``administrative fee,'' ``expected market price,'' ``FSA,'' ``insurable

interest,'' ``intended crop,'' ``linkage requirement,'' ``Reform Act,''

``substitute crop,'' and ``zero acreage report'' for clarification

purposes.

2. Sec. 400.651 has been amended by clarifying the definition of

``approved yield.''

3. Sec. 400.654(c) has been amended to allow CAT coverage for a

crop planted as a substitute for the intended crop when the intended

crop is prevented from being planted or is planted and fails.

4. Sec. 400.654(d)(1) (now Sec. 400.655(e)(1)) has been amended by

deleting the phrase ``as determined by the approved insurance

provider.'' An insurance company is responsible for administering its

contract with an insured producer. The FSA will be responsible for

determining and paying the additional amount due the insured for any

applicable USDA program benefit, after first considering the amount of

any crop insurance payment.

5. Sec. 400.655 has been amended to add a new paragraph

Sec. 400.655(d)(4) to allow a tobacco producer to obtain catastrophic

risk protection for 100 percent of the tobacco crop that is identified

by a tobacco marketing card issued by FSA for a specific producer and

Farm Serial Number, when the producer and other persons share in the

crop and none of the persons hold any interest in another tobacco crop

for which they are required to obtain at least CAT coverage. This

change will alleviate the burden on each shareholder to pay separate

administrative fees in situations when numerous small shareholders have

a share in the crop.

6. Sec. 400.655 has been amended to add a new paragraph

Sec. 400.655(d)(5) to allow a landowner to obtain catastrophic risk

protection and establish linkage for all other landowners who hold an

undivided interest in the land, provided the landowners do not have

multiple farming interests and the total liability for all landowners

is $2,500 or less.

7. Sec. 400.655(b)(2) (now Sec. 400.656(b)(4)) has been amended to

include the provision that the administrative fee for additional

coverage is not subject to any limits.

List of Subjects in 7 CFR Part 400

Administrative practice and procedure, Claims, Crop insurance,

Reporting and recordkeeping requirements.

Final Rule

Accordingly, for the reasons set out in the preamble, the interim

rule adding a new subpart T to 7 CFR part 400, published at 60 FR 1996-

2000, is adopted as a final rule effective for the 1997 and succeeding

crop years for all crops with a 1997 crop year contract change date

after the effective date of this rule and for the 1998 and succeeding

crop years for all crops with a 1997 crop year contract change date

prior to the effective date of this rule, with changes as follows:

Subpart T of part 400 is revised to read as follows:

PART 400--GENERAL ADMINISTRATIVE REGULATIONS

Subpart T--Federal Crop Insurance Reform, Insurance Implementation;

Regulations for the 1997 and Subsequent Crop Years

Sec.

400.650 Purpose.

400.651 Definitions.

400.652 Insurance availability.

400.653 Determining crops of economic significance.

400.654 Application and acreage report.

400.655 Coverage provided.

400.656 Administrative fees and waivers.

400.657 Eligibility for other program benefits.

400.658 Coverage for acreage that is prevented from being planted.

400.659 Transitional yields for forage or feed crops, 1995-1997

crop years.

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

Sec. 400.650 Purpose.

The Reform Act requires FCIC to implement a crop insurance program

that offers several levels of insurance coverage for producers. These

levels of protection include catastrophic risk protection, limited

coverage, and additional coverage insurance. This subpart provides

notice of the availability of these crop insurance options and

establishes provisions and requirements for implementation of the

insurance provisions of the Reform Act.

Sec. 400.651 Definitions.

Act--The Federal Crop Insurance Act, as amended (7 U.S.C.

Secs. 1501 et seq.).

Additional coverage--Plans of crop insurance providing a level of

coverage equal to or greater than sixty-five percent (65%) of the

approved yield indemnified at one hundred percent (100%) of the

expected market price, or comparable coverage as established by FCIC.

Administrative fee--The $50 fee the producer must pay on a per crop

and county basis with a maximum of $200 per producer per county and

$600 per producer for catastrophic and limited coverage on an annual

basis. Also, the $10 fee the producer must pay annually on a per crop

and county basis for additional coverage.

Approved insurance provider--A private insurance company, including

its agents, that has been approved and reinsured by FCIC to provide

insurance coverage to producers participating in the Federal crop

insurance program.

Approved yield--The amount of production per acre computed in

accordance with FCIC's Actual Production History Program (7 CFR part

400, subpart G) or for crops not included under 7 CFR part 400, subpart

G, the yield used to determine the guarantee in accordance with the

crop provisions or the Special Provisions.

Catastrophic risk protection--The minimum level of coverage offered

by FCIC which is required before a person may qualify for certain other

USDA program benefits unless the producer executes a waiver of any

eligibility for emergency crop loss assistance in connection with the

crop. For the 1995

[[Page 42976]]

through 1998 crop years, such coverage will offer protection equal to

fifty percent (50%) of the approved yield indemnified at sixty percent

(60%) of the expected market price, or a comparable coverage as

established by FCIC. For the 1999 and subsequent crop years, such

coverage will offer protection equal to fifty percent (50%) of the

approved yield indemnified at fifty-five percent (55%) of the expected

market price, or a comparable coverage as established by FCIC.

Catastrophic Risk Protection Endorsement--The part of the crop

insurance policy that contains provisions of insurance that are

specific to catastrophic risk protection.

Crop of economic significance--A crop that has either contributed

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

crop year, ten percent (10%) or more of the total expected value of the

producer's share of all crops grown in the county. However, a crop will

not be considered a crop of economic significance if the expected

liability under the Catastrophic Risk Protection Endorsement is equal

to or less than the administrative fee required for the crop.

Expected market price--(price election) The price per unit of

production (or other basis as determined by FCIC) anticipated during

the period the insured crop normally is marketed by producers. This

price will be set by FCIC before the sales closing date for the crop.

The expected market price may be less than the actual price paid by

buyers if such price typically includes remuneration for significant

amounts of post-production expenses such as conditioning, culling,

sorting, packing, etc.

FCIC--The Federal Crop Insurance Corporation, a wholly owned

Government Corporation within USDA.

FSA--The Farm Service Agency, an agency of the United States

Department of Agriculture or any successor agency.

Insurable interest--The value of the producer's interest in the

crop that is at risk from an insurable cause of loss during the

insurance period. The maximum indemnity payable to the producer may not

exceed the indemnity due on the producer's insurable interest at the

time of loss.

Intended crop--A crop stated on the application as submitted on or

before the sales closing date for the crop which the producer intended

to plant in the crop year for which application is made.

Limited coverage--Plans of insurance offering coverage that is

equal to or greater than fifty percent (50%) of the approved yield

indemnified at one hundred percent (100%) of the expected market price,

or a comparable coverage, but less than sixty-five percent (65%) of the

approved yield indemnified at one hundred percent (100%) of the

expected market price, or a comparable coverage.

Limited resource farmer--A producer or operator of a farm, with an

annual gross income of $20,000 or less derived from all sources of

revenue, including income from spouse's or other members of the

household, for each of the prior two years. Notwithstanding the

previous sentence, a producer on a farm or farms of less than 25 acres

aggregated for all crops, where a majority of the producer's gross

income is derived from such farm or farms, but the producer's gross

income from farming operations does not exceed $20,000, will be

considered a limited resource farmer.

Linkage requirement--The legal requirement that a producer must

obtain at least catastrophic risk protection coverage for any crop of

economic significance as a condition of receiving benefits for such

crop from certain other USDA programs in accordance with Sec. 400.657,

unless the producer executes a waiver of any eligibility for emergency

crop loss assistance in connection with the crop.

Person--An individual, partnership, association, corporation,

estate, trust, or other legal entity, and wherever applicable, a state

or a political subdivision or agency of a state.

Reform Act--The Federal Crop Insurance Reform Act of 1994, Public

Law 103-354.

Secretary--The Secretary of the United States Department of

Agriculture.

Substitute crop--An alternative crop whose sales closing date has

passed and that is planted on acreage that is prevented from being

planted to an intended crop or where an intended crop is planted and

fails.

Zero acreage report--An acreage report filed by the producer that

certifies that the producer does not have a share in the crop for that

crop year.

Sec. 400.652 Insurance availability.

(a) If sufficient actuarial data are available, FCIC will offer

catastrophic risk protection, limited, and additional coverage plans of

insurance to indemnify persons for FCIC insured or reinsured crop loss

due to loss of yield or prevented planting, if the crop loss or

prevented planting is due to an insured cause of loss specified in the

applicable crop insurance policy.

(b) Catastrophic risk protection coverage may be offered through

approved insurance providers and through local offices of the Farm

Service Agency specified by the Secretary. Limited and additional

coverage will only be offered through approved insurance providers

unless there is not a sufficient number of approved insurance providers

that offer such insurance within a service area.

(c) A person must obtain at least catastrophic risk protection for

the crop on all insurable acreage in the county in which the person has

a share on or before the sales closing date designated by FCIC for the

crop in the county in order to satisfy the linkage requirements unless

the producer executes a waiver of any eligibility for emergency crop

loss assistance in connection with the crop.

(d) For limited and additional coverage, in areas where insurance

is not available for a particular agricultural commodity that is

insurable elsewhere, FCIC may enter into a written agreement with a

person to insure the commodity, provided that the person has

actuarially sound data relating to the production of the commodity that

is acceptable to FCIC and that such written agreement is specifically

allowed by the crop insurance regulations applicable to the crop.

(e) Failure to comply with all provisions of the policy constitutes

a breach of contract and may result in ineligibility for certain other

farm program benefits for that crop year and any benefit already

received must be refunded. If a producer breaches the insurance

contract, the execution of a waiver of eligibility for emergency crop

loss assistance will not be effective for the crop year in which the

breech occurred.

Sec. 400.653 Determining crops of economic significance.

To be eligible for certain other program benefits under

Sec. 400.657 the following conditions will apply with respect to crops

of economic significance if the producer does not execute a waiver of

any eligibility for emergency crop loss assistance in connection with

the crop.

(a) If a producer planted a crop of economic significance in the

preceding crop year, and does not intend to plant the same crop in the

present crop year, the producer does not have to obtain insurance

coverage or execute a waiver of any eligibility for emergency crop loss

assistance in connection with the crop in the present crop year to

comply with the linkage requirements. However, if the producer later

decides to plant that crop, the producer will be unable to obtain

insurance after the sales closing date and must execute a waiver of any

eligibility for emergency crop loss assistance in connection with the

crop to be eligible for benefits as

[[Page 42977]]

specified in Sec. 400.657. Failure to execute such a waiver will

require the producer to refund any benefits already received under a

program specified in Sec. 400.657.

(b) The producer is initially responsible to determine the crops of

economic significance in the county. The insurance provider may assist

the producer in making these initial determinations. However, these

determinations will not be binding on the insurance provider. To

determine the percentage value of each crop:

(1) Multiply the acres planted to the crop times the producer's

share, times the approved yield, and times the price;

(2) Add the values of all crops grown by the producer (in the

county); and

(3) Divide the value of the specific crop by the result of

paragraph (b)(2).

(c) The producer may use the type of price, such as the current

local market price, futures price, established price, highest amount of

insurance, etc., for the price when calculating the value of each crop,

provided that the producer uses the same type of price for all crops in

the county.

(d) The producer may be required to justify the calculation and

provide adequate records to enable the insurance provider to verify

whether a crop is of economic significance.

Sec. 400.654 Application and acreage report.

(a) To participate in catastrophic risk protection, limited, or

additional coverage plans of insurance, a producer must submit an

application for insurance on or before the applicable sales closing

date.

(b) In order to remain eligible for certain farm programs, as

specified in Sec. 400.657, a producer must obtain at least catastrophic

risk protection on all crops of economic significance, if catastrophic

risk protection is available in the county, unless the producer

executes a waiver of any eligibility for emergency crop loss assistance

in connection with the crop.

(c) Notwithstanding the requirements of Sec. 400.654(a) that

applications for insurance be submitted on or before the applicable

sales closing date, FCIC may permit a producer to insure crops other

than those specified on the application under the following conditions:

(1) The producer must be unable to plant the intended crop or it is

not practical to replant a failed crop before the final planting date.

FCIC will take into consideration marketing windows when determining

whether it was not practical to replant.

(2) Conditions must exist to warrant allowing a producer to insure

crops other than the intended crop.

(3) The producer must submit an application for the substitute crop

on or before the acreage reporting date for the substitute crop and pay

any applicable administrative fee. A producer may not substitute a crop

that the producer planted in the preceding crop year unless that crop

was listed on a timely filed application for the current crop year.

(4) If the producer plants a substitute crop that is a crop of

economic significance, the producer must obtain CAT coverage, if

available, to comply with the linkage requirements specified in

Sec. 400.657. The producer may not substitute a crop under this

provision if the producer has signed or intends to sign a waiver for

emergency crop loss assistance for the crop year.

(5) The substitute crop must be planted on or before the final

planting date or within the late planting period, if applicable, for

the substitute crop.

(6) Under no circumstances may a producer submit an application for

limited or additional coverage after the sales closing date for the

substitute crop.

(d) For all coverages, including catastrophic risk protection,

limited, and additional coverages, the producer must file a signed

acreage report on or before the acreage reporting date. Any person may

sign any document relative to crop insurance coverage on behalf of any

other person covered by such a policy, provided that the person has a

properly executed power of attorney or other legally sufficient

document authorizing such person to sign.

(e) Under catastrophic risk protection, unless the other person

with an insurable interest in the crop objects in writing prior to the

acreage reporting date and provides a signed acreage report on their

own behalf an operator may sign the acreage report for all other

persons with an insurable interest in the crop without a power of

attorney. All persons with an insurable interest in the crop, and for

whom the operator purports to sign and represent, are bound by the

information contained in that acreage report.

Sec. 400.655 Coverage provided.

(a) The specific causes of loss for which insurance coverage is

offered are designated in the crop insurance policy for each crop.

(b) An indemnity paid to a producer may be reduced, in an amount

determined in accordance with crop provisions or Special Provisions, to

reflect out-of-pocket expenses that were not incurred by the producer

as a result of not planting, caring for, or harvesting the crop.

Indemnities paid for acreage that is prevented from being planted will

be based on a reduced guarantee as provided for in the crop policy and

will not be further reduced to reflect expenses not incurred.

(c) The producer must obtain the same level of coverage

(catastrophic, limited, or additional) for all acreage of the crop in

the county unless one of the following applies:

(1) The applicable crop insurance policy allows the producer the

option to separately insure individual crop types or varieties. In this

case each individual type or variety insured by the producer will be

subject to separate administrative fees. For example, if two grape

varieties in California are insured under a CAT policy and two

varieties are insured under a limited coverage policy, a separate

administrative fee will be charged for each of the four varieties.

Although insurance may be elected by type or variety in these

instances, failure to insure a type or variety that is of economic

significance may result in the denial of other farm program benefits,

unless the producer executes a waiver of any eligibility for emergency

crop loss assistance in connection with the crop.

(2) The producer with limited or additional coverage for the crop

in the county has acreage that has been designated as ``high risk'' by

FCIC. Such producers will be able to obtain a High Risk Land Exclusion

Option for the high risk acreage under the limited or additional

coverage policies and insure the high risk acreage under a separate CAT

policy provided that the CAT coverage is obtained from the same

insurance provider from which the limited or additional coverage was

obtained. The producer may only obtain CAT from another insurance

provider if the original insurance provider does not deliver CAT

policies.

(d) Catastrophic risk protection.

(1) Any person who has a bona fide insurable interest in a crop is

eligible for catastrophic risk protection subject to any limitations

contained in the crop insurance contract.

(2) A person who is eligible to receive an indemnity under

catastrophic risk protection and is also eligible to receive

compensation for the same crop loss under any other USDA programs, must

elect the program from which to receive benefits. A payment or program

benefit under only one of the programs is allowed. If other USDA

program benefits are not available until after the producer filed a

claim for indemnity, the producer may refund the total amount of the

indemnity and receive the other program benefit. Farm ownership and

operating loans may be obtained from USDA in addition to crop insurance

indemnities.

[[Page 42978]]

(3) Catastrophic risk protection may, on a commodity-by-commodity

basis, be elected on an individual yield and loss basis, or, where

offered, may be elected on an area yield and loss basis.

(4) A tobacco producer may insure one hundred percent (100%) of the

tobacco crop that is identified by a tobacco marketing card issued by

FSA for a specific producer and Farm Serial Number under one CAT

policy, provided the producer and other persons each have a share in

the crop, all the shareholders agree in writing to such arrangement,

and none of the shareholders hold any other interest in another tobacco

crop for which they are required to obtain at least catastrophic

coverage. If the tobacco crop is insured under one policy:

(i) The linkage requirements will be satisfied for each shareholder

of the crop; and

(ii) The producer insuring the crop will:

(A) Make application for insurance and provide the name and social

security number or employer identification number of each person with a

share in the tobacco crop;

(B) File the acreage report showing a one-hundred percent (100%)

share in the crop (all insurable acreage covered by such marketing card

will be considered as one unit);

(C) Be responsible to pay one administrative fee for all the

producers within the county;

(D) Fulfill all requirements under the crop insurance contract; and

(E) Receive any indemnity payment under his or her social security

number or employer identification number and distribute the indemnity

payments to the other person sharing in the crop.

(5) A landowner will be allowed to obtain catastrophic coverage to

satisfy linkage requirements for all other landowners who hold an

undivided interest in the insurable acreage, provided:

(i) All landowners agree in writing to such arrangement and have

their social security number or employer identification number listed

on the application, without regard to the actual amount of their

interest in the insured acreage;

(ii) All landowners must have an undivided interest in the

insurable acreage;

(iii) None of the landowners may hold any share in other acreage

for which they are required to obtain at least catastrophic coverage;

(iv) The total cumulative liability under the Catastrophic Risk

Protection Endorsement for all landowners must be $2,500 or less;

(v) The landowner insuring the crop will:

(A) Make application for insurance and provide the name and social

security number or employer identification number of each person with

an undivided interest in the insurable acreage;

(B) Be responsible to pay one administrative fee for all the

producers within the county;

(C) Fulfill all requirements under the insurance contract; and

(D) Receive any indemnity payment under the landowner's social

security number or employer identification number and distribute the

indemnity payments to the other persons sharing in the crop.

(E) Limited and additional coverage. (1) A producer who is eligible

to receive an indemnity under a limited or an additional coverage plan

of insurance and who also is eligible to receive benefits for the same

loss under any other USDA program may receive benefits under both

programs, unless specifically limited by the crop insurance contract or

by law. However, the total amount received from all such sources may

not exceed the amount of the actual loss sustained by the insured. The

total amount of the actual loss is the difference between the fair

market value of the insured commodity before and after the loss, based

upon the producer's production records and the highest price election

or amount of insurance available for the applicable crop. FSA will

determine and pay the additional amount due the producer for any

applicable USDA program, after first considering the amount of any crop

insurance indemnity. Farm ownership and operating loans may be obtained

from the USDA in addition to crop insurance indemnities.

(2) Limited or additional coverage may, on a commodity-by-commodity

basis, be elected on an individual yield and loss basis, or, where

offered, on an area yield and loss basis.

(3) Hail and fire coverage may be excluded from the covered causes

of loss for a crop policy only if additional coverage is elected.

Sec. 400.656 Administrative fees and waivers.

(a) Catastrophic risk protection and limited coverage. (1) The

producer must pay an administrative fee each year of fifty dollars

($50.00) per crop per county, not to exceed two hundred dollars

($200.00) per county, and six hundred dollars ($600.00) for all

counties in which the producer has elected to obtain catastrophic or

limited coverage.

(2) The producer must pay this administrative fee for catastrophic

coverage at the time of application for the first year, and by the

acreage reporting date for all subsequent years that crop insurance

coverage is in effect.

(3) The administrative fee for limited coverage must be paid no

later than the time that premium is due.

(4) Except for the initial application year of a crop, payment of

an administrative fee will not be required for a crop if the insured

files a bona fide zero acreage report for the crop on or before the

acreage reporting date. Any producer who falsely files a zero acreage

report may be subject to administrative and criminal sanctions.

(5) For Catastrophic coverage, if the administrative fee is not

paid when due, the crop insurance contract will terminate effective at

the beginning of the crop year for which the administrative fee was not

paid. Persons failing to pay the administrative fee, and all persons

with an insurable interest in the crop under the same contract, may not

be eligible for certain other USDA program benefits as set out in

Sec. 400.657 and all such benefits already received for the crop year

must be refunded. If a producer fails to pay the administrative fee

when due, the execution of a waiver of any eligibility for emergency

crop loss assistance in connection with the crop will not be effective

for any crop year in which payment was not made.

(6) For limited coverage, persons failing to pay the administrative

fee by the due date, and all persons with an insurable interest in the

crop under the same contract, will not be eligible for certain other

USDA program benefits as set out in Sec. 400.657 and all such benefits

already received for the crop year must be refunded. Since insurance

coverage was in effect throughout the insurance period, the producer

will be required to pay both the administrative fee and the premium for

that crop year in accordance with provisions regarding any amounts due

us contained in the applicable crop policy. If a producer fails to pay

the administrative fee when due, the execution of a waiver of any

eligibility for emergency crop loss assistance in connection with the

crop will not be effective for any crop year for which payment was not

made.

(7) The administrative fee may not be waived unless the insured

qualifies as a limited resource farmer.

(8) The administrative fee will be refunded if the insured has

previously obtained catastrophic risk protection or limited coverage

for the crop year, paid the administrative fee, and subsequently

purchased additional coverage for that same crop in the same county on

or

[[Page 42979]]

before the sales closing date. Administrative fees will not be refunded

if, after the purchase of the additional coverage, the producer still

has four or more crops insured in the county, or four or more crops

insured in each of three or more counties, at the catastrophic or

limited coverage level.

(9) The administrative fee will not be refunded for the year of

application even if the insured does not plant the crop for that year.

(10) For limited coverage, the administrative fee is in addition to

the amount of premium owed by the person.

(b) Additional coverage. (1) If additional coverage is elected, the

insured must pay, in addition to the premium, an administrative fee of

ten dollars ($10) per crop, per county, for the year of application and

each subsequent year in which crop insurance coverage remains in

effect. The administrative fee must be paid no later than the time that

premium is due.

(2) Persons failing to pay the administrative fee by the due date,

and all persons with an insurable interest in the crop under the same

contract, will not be eligible for certain other USDA program benefits

as set out in Sec. 400.657, and all such benefits already received for

the crop year must be refunded. Since insurance coverage was in effect

throughout the insurance period, the producer will be required to pay

both the administrative fee and the premium for that crop year in

accordance with provisions regarding any amounts due us contained in

the applicable crop policy. If a producer fails to pay the

administrative fee when due, the execution of a waiver of any

eligibility for emergency crop loss assistance in connection with the

crop will not be effective for any crop year for which payment was not

made.

(3) Payment of an administrative fee will not be required if the

insured files a bona fide zero acreage report on or before the acreage

reporting date for the crop. Any producer who falsely files a zero

acreage report may be subject to criminal and administrative sanctions.

(4) The administrative fee for additional coverage is not

refundable, is not subject to any limits, and may not be waived.

(c) When obtaining catastrophic risk protection, limited, or

additional coverage, a producer must provide information regarding crop

insurance coverage on any crop previously obtained at any other local

FSA office or from an approved insurance provider, including the date

such insurance was obtained and the amount paid in administrative fees.

If the producer paid more than the maximum allowable amount in

administrative fees, the producer will receive a refund of the excess

fees paid from the local FSA office or from the approved insurance

provider that last collected such fees.

Sec. 400.657 Eligibility for other program benefits.

The producer must obtain at least catastrophic coverage for each

crop of economic significance in the county in which the producer has

an insurable share, if insurance is available in the county for the

crop, unless the producer executes a waiver of any eligibility for

emergency crop loss assistance in connection with the crop, to be

eligible for:

(a) Benefits under the Agricultural Market Transition Act;

(b) Loans or any other USDA provided farm credit, including:

guaranteed and direct farm ownership loans, operating loans, and

emergency loans under the Consolidated Farm and Rural Development Act

provided after October 13, 1994; and

(c) Benefits under the Conservation Reserve Program derived from

any new or amended application or contract executed after October 13,

1994.

Sec. 400.658 Coverage for acreage that is prevented from being

planted.

For the 1995 and succeeding crop years, the insurance period for

prevented planting for those crop insurance policies containing

prevented planting coverage shall be extended so that prevented

planting coverage begins:

(a) On the sales closing date for the insured crop in the county

for the crop year the application for insurance is accepted; or

(b) For any crop year following the crop year the application for

insurance is accepted, or for any crop year the insurance policy is

transferred to a different insurance provider, on the sales closing

date for the insured crop in the county for the previous crop year,

provided continuous coverage has been in effect since that date. For

example: If the producer makes application and purchases a corn crop

insurance policy for the 1995 crop year (which is not terminated or

canceled during or after the 1995 crop year), prevented planting

coverage for the 1996 crop year began on the 1995 sales closing date.

Cancellation for the purpose of transferring the policy to a different

insurance provider when there is no lapse in coverage will not be

considered terminated or canceled coverage for the purpose of the

preceding sentence.

Sec. 400.659 Transitional yields for forage or feed crops, 1995-1997

crop years.

(a) For the 1995 through the 1997 crop years, producers who produce

feed or forage will be eligible for an adjustment in the assigned yield

described in 7 CFR 400.55(b)(1) if:

(1) The feed or forage is primarily for use by the producer as

livestock, dairy, or poultry operations; and

(2) At least fifty percent (50%) of the producer's net farm income

is derived from the livestock, dairy, or poultry operations.

(b) Producers that qualify under paragraph (a) of this section will

receive an assigned yield, if required, under 7 CFR 400.55(b)(1) equal

to eighty percent (80%) of the T- or D-Yield.

Signed in Washington, DC, on August 13, 1996.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance Corporation.

[FR Doc. 96-21116 Filed 8-19-96; 8:45 am]

BILLING CODE 3410-FA-P