General Administrative Regulations; Ineligibility for Programs Under the Federal Crop Insurance Act

SUMMARY: The regulations contained in this subpart are issued pursuant

to the Federal Crop Insurance Act, as amended (7 U.S.C. 1501 et seq.)

To prescribe the procedures for determining eligibility for program

participation in any program administered under the Federal Crop

Insurance Act, as amended, and administering and maintaining an

ineligible tracking system. In addition, this rule sets out the

criteria for reinstatement of program eligibility.

DATES: Written comments, data, and opinions on this proposed rule will

be accepted until close of business December 30, 1996 and will be

considered when the rule is to be made final. The comment period for

information collections under the Paperwork Reduction Act of 1995

continues through December 30, 1996.

ADDRESSES: Written comments, data, and opinions on this proposed rule

should be sent to the Chief, Product Development Branch, Federal Crop

Insurance Corporation (FCIC), United States Department of Agriculture

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

7730. Written comments will be available for public inspection and

copying in room 0324, South Building, USDA, 14th and Independence

Avenue, SW., Washington, DC, 8:15 a.m.-4:45 p.m., Monday through

Friday, except holidays.

FOR FURTHER INFORMATION CONTACT:

For further information, contact Bill Smith, Supervisory Program

Analyst, Research and Development Division, Product Development Branch,

FCIC, at the Kansas City, MO address listed above, telephone (816) 926-

7743. For a copy of the Cost-Benefit Analysis to the General

Administrative Regulations; Ineligibility for Programs Under the

Federal Crop Insurance Act, contact Bonnie Hart, USDA, FSA, Advisory

and Corporate Operations Staff, Regulatory Review Group, P.O. Box 2415,

STOP 0572, USDA, Washington, DC 20013-2415, 8:15 a.m.-4:45 p.m., est,

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

SUPPLEMENTARY INFORMATION:

Executive Order 12866 and Departmental Regulation 1512-1

This action has been reviewed under USDA procedures established by

Executive Order 12866 and Departmental Regulation No. 1512-1. 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 February 1, 2001.

This rule has been determined to be significant for the purposes of

Executive Order 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 the expected benefits of this action outweigh the

cost to society. By allowing the efficient tracking of ineligible

individuals, the Federal government will be able to collect about $6

million annually in debts owed by crop insurance policyholders. The

burden on policyholders and crop insurance companies for reporting

information to establish the tracking system is estimated to be $5.1

million. However, most policyholders have already reported their Social

Security Number for tracking purposes and will not need to report

again. Thus, the reporting burden in future years should be

considerably less. Federal costs for maintaining the tracking system

are estimated to be about $660,000 for the first year and somewhat less

in future years.

Paperwork Reduction Act of 1995

The information collection requirements contained in these

regulations have been submitted to OMB for their approval under section

3507(j) of the Paperwork Reduction Act of 1995. This proposed rule will

amend the information collection requirements under OMB number 0563-

0047, through September 30, 1996.

The title of this information collection is ``General

Administrative Regulation; Subpart Q, Collection and Storage of Social

Security Numbers (SSN) and Employer Identification Numbers (EIN), and

Subpart U, Ineligibility for Programs Under the Federal Crop Insurance

Act.'' The information collected is used to correctly identify the

participant, and any other person with an interest in the

policyholder's operation in excess of 10%, as a policyholder within the

systems maintained by FCIC, and to compile the names of debtors,

persons in violation of the controlled substance provisions of the Food

Security Act of 1985, persons who have committed fraud,

misrepresentation, or adopted a scheme or device.

The information requested is necessary to protect the integrity of

the program by ensuring that those producer's who have abused the

program are not eligible for further program benefits, or for program

participation in any program administered under the Federal Crop

Insurance Act, as amended, and administering and maintaining an

ineligible tracking system.

Estimate of Burden: Public reporting burden for this collection of

information is estimated to be 25 minutes per response.

Respondents: Policyholders and those with a substantial beneficial

interest in the policyholder or any person having any interest in the

policyholder and receiving separate benefits under another USDA program

as a direct result of such interest.

Estimated Number of Respondents: 2,032,800.

Estimated Number of Responses per Respondent: 1 per year.

Estimated Total Burden Hours: 508,200.

The comment period for information collections under the Paperwork

[[Page 56152]]

Reduction Act of 1995 continues on the following: (a) whether the

proposed collection of information is necessary for the proper

performance of the functions of the agency, including whether the

information shall have practical utility; (b) the accuracy of the

agency's estimate of the burden of the proposed collection of

information; (c) ways to enhance the quality, utility, and clarity of

the information to be collected; and (d) ways to minimize the burden of

the collection of information on respondents, including through the use

of automated collection techniques or other forms of information

gathering technology.

Comments regarding paperwork reduction should be submitted to the

Desk Officer of Agriculture, Office of Information and Regulatory

Affairs, Office of Management and Budget (OMB), Washington, D.C., 20503

and to Bonnie Hart, Advisory and Corporate Operations Staff, Regulatory

Review Group, Farm Service Agency, P.O. Box 2415, Ag Box 0572, United

States Department of Agriculture, Washington, D.C. 20013-2415. Copies

of the information collection may be obtained from Bonnie Hart at the

above address, telephone (202) 690-2857.

The Office of Management and Budget (OMB) is required to make a

decision concerning the collection(s) of information contained in these

proposed regulations between 30 and 60 days after submission to OMB.

Therefore, a comment to OMB is best assured of having its full effect

if OMB receives it within 30 days of publication. This does not affect

the deadline for the public to comment on the proposed regulation.

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. Under section 202 of the UMRA, FCIC

generally must prepare a written statement, including a cost-benefit

analysis, for proposed and final rules with Federal mandates that may

result in expenditures to State, local, or tribal governments, in the

aggregate, or to the private sector, of $100 million or more in any 1

year. When such a statement is needed for a rule, section 205 of the

UMRA generally requires FCIC to identify and consider a reasonable

number of regulatory alternatives and adopt the least costly, more

cost-effective or least burdensome alternative that achieves the

objectives of the rule.

This rule contains no Federal mandate (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 12612

It has been determined under section 6(a) of Executive Order 12612,

Federalism, that this rule does not have sufficient Federalism

implications to warrant the preparation of a Federalism Assessment. The

policies and procedures 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. The amount of work required of insurance

companies should not increase because the information used to determine

eligibility is already maintained at their office. The amount of work

required of insurance companies may actually be reduced because

verification with FCIC of a producer's compliance with the controlled

substance regulations, currently done manually, will be automated.

Therefore, this action is determined to be exempt from the provisions

of the Regulatory Flexibility Act (5 U.S.C. 605) and no Regulatory

Flexibility Analysis was prepared.

Federal Assistance Program

This program is listed in the Catalog of Federal Domestic

Assistance under No. 10.450.

Executive Order 12372

This program is not subject to the provisions of Executive Order

12372 which require intergovernmental consultation with State and local

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

published at 48 FR 29115, June 24, 1983.

Executive Order 12778

The Office of General Counsel has determined that these regulations

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

Executive Order 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 part

11 must be exhausted before 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.

Background

It is the intention of FCIC to compile a list of those persons who

have been found ineligible for participation in catastrophic risk

protection coverage, limited coverage, and additional coverage because

of various violations committed under the Federal Crop Insurance Act,

as amended, and the Food Security Act of 1985, as amended. Violations

which may cause a person's ineligibility include a delinquent debt from

non-payment of premium or overstatement of indemnity, a material scheme

or device, fraud, conviction of certain controlled substance

infractions, or other causes.

List of Subjects in 7 CFR Part 400

Administrative practice and procedure, Claims, Crop insurance,

Fraud, Reporting and recordkeeping requirements.

Pursuant to the authority contained in the Federal Crop Insurance

Act, as amended (7 U.S.C. 1501 et seq.) the Federal Crop Insurance

Corporation proposes to add a new subpart U to 7 CFR part 400,

effective for the 1997 (1998 for Texas and Arizona/California Citrus)

and succeeding crop years, to read as follows:

PART 400--GENERAL ADMINISTRATIVE REGULATIONS

Subpart U--Ineligibility for Programs Under the Federal Crop Insurance

Act

Sec.

400.675 Purpose.

400.676 OMB control numbers.

400.677 Definitions.

400.678 Applicability.

400.679 Criteria for ineligibility.

400.680 Determinations of ineligibility.

400.681 Effect of ineligibility.

400.682 Criteria for reinstatement of eligibility.

400.683 Administration and maintenance.

Subpart U--Ineligibility for Programs Under the Federal Crop

Insurance Act

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

Sec. 400.675 Purpose.

This subpart prescribes conditions under which a person may be

determined to be ineligible to participate in any program administered

by FCIC under the Federal Crop Insurance Act, as amended. This

[[Page 56153]]

subpart also establishes the criteria for reinstatement of eligibility.

Sec. 400.676 OMB control numbers.

The collecting of information requirements in this subpart has been

approved by the Office of Management and Budget and assigned OMB

control number 0563-0047.

Sec. 400.677 Definitions.

Act.--The Federal Crop Insurance Act, as amended (7 U.S.C. 1501 et

seq.).

Actively engaged in farming.--Means a person who, in return for a

share of profits and losses, makes a significant contribution to the

production of an insurable crop in the form of capital, equipment,

land, personal labor, or personal management.

Applicant.--A person who has submitted an application for crop

insurance coverage under the Act.

Authorized person.--Any current or past officer, employee, elected

official, general agent, agent, contractor, or loss adjuster of FCIC,

the insurance provider, or any other government agency whose duties

require access to the Ineligible Tracking System to administer the Act.

Controlled substance.--Any prohibited drug-producing plants

including, but not limited to, cacti of the genus (lophophora), coca

bushes (erythroxylum coca), marijuana (cannabis satiua), opium poppies

(papauer somniferum), and other drug-producing plants, the planting and

harvesting of which is prohibited by Federal or state law.

Debt.--An amount of money which has been determined by an

appropriate agency official to be owed, by any person, to FCIC or an

insurance provider under any program administered under the ACT. The

debt may have arisen from overpayment, premium non-payment, interest,

penalties, or other causes.

Debtor.--A person who owes a debt and that debt is delinquent.

Delinquent debt.--Any debt owed to FCIC or the insurance provider,

under any program administered under the authority of the Act, that has

not been paid by the termination date specified in the applicable

contract of insurance, or other due date for payment contained in any

other agreement or notification of indebtedness, or any overdue debt

owed to FCIC or the insurance provider which is the subject of a

scheduled installment payment agreement which the debtor has failed to

satisfy under the terms of such agreement. Such debt may include any

accrued interest, penalty, and administrative charges for which demand

for repayment has been made, or unpaid premium including any accrued

interest, penalty and administrative charges (Sec. 400.116). A

delinquent debt does not include debts discharged in bankruptcy and

other debts which are legally barred from collection.

EIN.--An Employer Identification Number as required under section

6109 of the Internal Revenue Code of 1986 (26 U.S.C. 6109).

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

corporation within the United States Department of Agriculture.

FSA.--The Farm Service Agency or successor agency, USDA.

Ineligible person.--A person who is denied participation in any

program administered by FCIC under the Act.

Insurance provider.--A private insurance company approved by FCIC,

or FSA providing crop insurance coverage to producers participating in

any Federal crop insurance program administered under the Act.

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

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

political subdivision, or an agency of a State.

Policyholder.--An applicant whose properly completed application

for insurance under the crop insurance program has been accepted by

FCIC or an insurance provider.

Reinsurance agreement.--An agreement between two parties by which

an insurer cedes to a reinsurer certain liabilities arising from the

insurer's sale of insurance policies.

Reinsured company.--A private insurance company having a Standard

Reinsurance Agreement, or other reinsurance agreement, with FCIC, whose

crop insurance policies are approved and reinsured by FCIC.

Scheduled installment payment agreement.--An agreement between a

person and FCIC or the insurance provider to satisfy financial

obligations of the person under conditions which modify the terms of

the original debt.

Settlement.--An agreement between a person and FCIC or the

insurance provider to resolve a dispute arising from a debt or other

administrative determination.

SSN.--An individual's Social Security Number as required under

section 6109 of the Internal Revenue Code of 1986.

Standard Reinsurance Agreement (SRA).--The primary reinsurance

agreement between the reinsured company and FCIC.

Substantial beneficial interest.--Any person having an interest of

at least ten percent (10%) or more in the applicant or policyholder.

System of records.--Records established and maintained by FCIC and

FSA containing SSN or EIN data, name, address, city and State,

applicable policy numbers, and other information related to Federal

crop programs as required by FCIC, from which information is retrieved

by a personal identifier including the SSN, EIN, name, or other unique

identifier of a person.

Sec. 400.678 Applicability.

This subpart applies to any program administered by FCIC under the

Act, including:

(a) The Catastrophic Risk Protection Program; and

(b) The Limited and Additional Coverage Program as authorized under

sections 508(c) and 508(h) of the Act.

Sec. 400.679 Criteria for ineligibility.

A person may be determined to be ineligible to participate in any

program administered by FCIC under the authority of the Act, if the

person meets one or more of the following criteria:

(a) Has a delinquent debt on a crop insurance policy, issued or

reinsured by FCIC, or any delinquent debt due FCIC. Any person with a

delinquent debt owed to FCIC or to the insurance provider shall be

ineligible to participate in any program administered under the

authority of the Act. Delinquent debts are limited to those that arise

from crop insurance programs administered by FCIC under the Act. The

existence and delinquency of the debt must be verifiable.

(b) Has violated the Controlled Substance (7 CFR part 796)

provisions of the Food Security Act of 1985, as amended. Any person who

violates the Controlled Substance provisions of the Food Security Act

of 1985, as amended, shall be ineligible to participate in all programs

administered under the Act.

(c) Has committed fraud, misrepresentation, or adopted a scheme or

device to obtain any benefits under the Act. Any person who is found in

a criminal or civil proceeding, or a formal or informal administrative

proceeding to have willfully and intentionally provided any false or

inaccurate information to FCIC or the insurance provider, which the

person knew or should have known was false or inaccurate, or adopted a

material scheme or device in their participation in programs

administered under the authority of the Act, shall be ineligible to

participate in all programs administered under the Act. Ineligibility

determinations resulting from judicial or administrative proceedings

will not be stayed pending review.

[[Page 56154]]

Sec. 400.680 Determinations of ineligibility.

If an insurance provider or any other authorized person has

evidence that any person meets any of the criteria set forth in this

subpart, they must submit the evidence to FCIC. After verification that

the person has met one or more of the criteria, a Notice of

Ineligibility will be issued and mailed to the person at the person's

last known address. The Notice of Ineligibility will state the criteria

upon which the determination of ineligibility has been based, a brief

statement of the facts to support the determination, the time period of

ineligibility, and the person's right for review of the ineligibility

determination. Any person receiving such a Notice of Ineligibility may

seek reconsideration of the determination of ineligibility from the

provider of insurance, or appeal to the USDA National Appeals Division

(NAD), pursuant to 7 CFR part 11, within thirty (30) days from the date

the Notice of Ineligibility is received by the person.

Sec. 400.681 Effect of ineligibility.

(a) Once the person has been determined to be ineligible:

(1) All policies in which the person has a 100 percent share of all

crops covered by the policy will be void effective for the crop year

for which the person was determined to be ineligible;

(2) If the ineligible person is a general partnership, all partners

will be individually ineligible and any policy in which a partner has a

100 percent interest will be void effective for the crop year for which

the partnership was determined to be ineligible. The partnership and

all partners will be removed from any policy in which they have a

substantial beneficial interest, and the policyholder share under the

policies will be reduced commensurate with the ineligible person's

share;

(3) If the applicant or policyholder is a corporation, partnership,

or other business entity, and an ineligible person has a substantial

beneficial interest in the applicant or policyholder, the application

may be accepted or existing policies remain in effect, although the

ineligible person will be removed from the policies and the

policyholder share under the policies will be reduced commensurate with

the ineligible person's share;

(4) If the applicant or policyholder is a corporation, partnership,

or other business entity that was created to conceal the interest of a

person in the farming operation or to evade the ineligibility

determination of a person with a substantial beneficial interest in the

applicant or policyholder, the corporation, partnership or other

business entity will be disregarded, the individual shareholders or

partners will be personally responsible, and any shareholder or partner

that is ineligible will be removed from the policy and the policyholder

share under the policies will be reduced commensurate with the

ineligible person's share;

(5) Any indemnities or payments made on a voided policy or on the

portion of the policy reduced because of ineligibility will be declared

overpayments and must be repaid; and

(6) If the policy is voided, all premiums may be refunded or if an

ineligible person is removed from a policy, the portion of the premium

commensurate with the ineligible person's share may be refunded, unless

FCIC determines the person has willfully and intentionally provided

false or inaccurate information to FCIC or an insurance provider.

(b) The spouse and minor children of an individual are considered

to be the same as the individual for purposes of this subpart except

that:

(1) The spouse who was actively engaged in farming in a separate

farming operation prior to their marriage will be a separate person

with respect to that separate farming operation so long as that

operation remains separate and distinct from any farming operation

conducted by the other spouse;

(2) A minor child who is actively engaged in farming in a separate

farming operation will be a separate person with respect to that

separate farming operation if:

(i) The parent or other entity in which the parent has a

substantial beneficial interest does not have any interest in the

minor's separate farming operation or in any production from such

operation;

(ii) The minor has established and maintains a separate household

from the parent;

(iii) The minor personally carries out the farming activities with

respect to the minor's farming operation; and

(iv) The minor establishes separate accounting and record keeping

for the minor's farming operation.

(c) An individual shall be considered to be a minor until the age

of 18 is reached. Court proceedings conferring majority on an

individual under 18 years of age will not change such individual's

status as a minor.

(d) Any person determined to be ineligible will be denied

subsequent participation in any program administered under the Act

until eligibility is reinstated pursuant to this subpart.

(e) Any person who has been determined ineligible for:

(1) Controlled substance violations will be denied benefits for the

crop year of the conviction and the four succeeding crop years;

(2) Adopting a material scheme or devise will be denied benefits

for one crop year; and

(3) Fraud or misrepresentation may be disqualified from receiving

benefits under the Catastrophic Risk protection plan for up to two crop

years and for any plan of insurance providing coverage greater than the

catastrophic coverage, may be disqualified from receiving benefits for

up to ten crop years.

Sec. 400.682 Criteria for reinstatement of eligibility.

A person who has been determined ineligible may have eligibility

reinstated as follows:

(a) A delinquent debt owed on a crop insurance policy insured or

reinsured by FCIC or any delinquent debt due FCIC. Eligibility may be

reinstated after payment of the debt, or acceptance by FCIC or the

insurance provider of a scheduled installment payment agreement.

Eligibility will be reinstated as of the date the debt is paid or the

date the agreement is accepted.

(b) Violations of the Controlled Substance provisions of the Food

Security Act of 1985, as amended. Eligibility will be reinstated in

accordance with Sec. 400.681.

(c) Commission of a fraud, misrepresentation, and adoption of a

material scheme or device to obtain benefits under any program

administered under the Act. Eligibility may be restored when the period

of disqualification has expired and payment of all penalties and

overpayments have been completed.

(d) Timing of reinstatement of eligibility. If the date of

reinstatement of eligibility occurs after the applicable sales closing

date for the crop year, the person may not participate in any program

administered under the Act until the following crop year.

(e) After eligibility has been reinstated, the person must complete

a new application for crop insurance coverage on or before the

applicable sales closing date.

Sec. 400.683 Administration and maintenance.

(a) Ineligible producer data will be maintained in a system of

records in accordance with the Privacy Act, 5 U.S.C. 552a.

(1) The Ineligible Tracking System is a record of all persons who

have been determined to be ineligible for participation in any program

pursuant

[[Page 56155]]

to this subpart. This system contains identifying information of the

ineligible person including, but not limited to, name, address,

telephone number, SSN or EIN, reason for ineligibility, and time period

for ineligibility.

(2) Information in the Ineligible Tracking System may be used by

Federal agencies, FCIC employees, contractors, and private companies

and their personnel who require such information in the performance of

their duties in connection with any program administered under the Act.

The information may be furnished to other users including, but not

limited to, FCIC contracted agencies; credit reporting agencies and

collection agencies; in response to judicial orders in the course of

litigation; and other users as may be appropriate or required by law or

regulation. The individual information will be made available in the

form of various reports and notices produced from the Ineligible

Tracking System, based on valid requests.

(3) Supporting documentation regarding the determination of

ineligibility and reinstatement of eligibility will be maintained by

FCIC and FSA, or its contractors, private companies, and Federal and

State agencies. This documentation will be maintained consistent with

the electronic information contained within the Ineligible Tracking

System.

(b) Information may be entered into the Ineligible Tracking System

by FCIC or FSA personnel.

(c) All persons applying for or renewing crop insurance contracts

issued or reinsured by FCIC will be subject to validation of their

eligibility status against the Ineligible Tracking System. Applications

or benefits approved and accepted are considered approved or accepted

subject to review of eligibility status in accordance with this

subpart.

Signed in Washington, D.C., October 22, 1996.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance Corporation.

[FR Doc. 96-27768 Filed 10-30-96; 8:45 am]

BILLING CODE 3410-FA-P