Macadamia Tree Crop Insurance Regulations; and Common Crop Insurance Regulations, Macadamia Tree Crop Insurance Provisions

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 456 and 457

Macadamia Tree Crop Insurance Regulations; and Common Crop

Insurance Regulations, Macadamia Tree Crop Insurance Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Proposed rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes

specific crop provisions for the insurance of macadamia trees. The

provisions will be used in conjunction with the Common Crop Insurance

Policy Basic Provisions, which contain standard terms and conditions

common to most crops. The intended effect of this action is to provide

policy changes to better meet the needs of the insured, include the

current macadamia tree crop insurance regulations with the Common Crop

Insurance Policy for ease of use and consistency of terms, and to

restrict the effect of the current macadamia tree crop insurance

regulations to the 1997 and prior crop years.

DATES: Written comments on this proposed rule will be accepted until

close of business May 19, 1997 and will be considered when the rule is

to be made final.

ADDRESSES: Interested persons are invited to submit written comments to

[[Page 19068]]

the Director, Product Development Division, Federal Crop Insurance

Corporation, United States Department of Agriculture, 9435 Holmes Road,

Kansas City, MO 64131.

FOR FURTHER INFORMATION CONTACT: Stephen Hoy, Insurance Management

Specialist, Research and Development, Product Development Division,

Federal Crop Insurance Corporation, at the Kansas City, MO, address

listed above, telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order No. 12866

The Office of Management and Budget (OMB) has determined this rule

to be exempt for the purposes of Executive Order No. 12866, and,

therefore, has not been reviewed by OMB.

Paperwork Reduction Act of 1995

The information collection requirements contained in these

regulations were previously approved by OMB pursuant to the Paperwork

Reduction Act of 1995 (44 U.S.C. chapter 35) under OMB control number

0563-0003 through September 30, 1998.

Section 7 of the 1998 Macadamia Tree Crop Provisions adds

interplanting as an insurable farming practice for macadamia trees

interplanted with another perennial crop as long as the macadamia tree

crop would not be adversely affected. This practice was not insurable

under the previous Macadamia Tree Crop Insurance Policy. Consequently,

interplanting information will need to be collected using the FCI-12-P

Pre-Acceptance Perennial Crop Inspection Report form for approximately

0.5 percent of the 27 insureds who interplant their macadamia tree

crop. Standard interplanting language has been added to most perennial

crops. Offering insurance for this practice benefits agriculture

because now more perennial crop producers are covered by insurance.

The amendments set forth in this proposed rule do not contain

additional information collections that require clearance by OMB under

the provisions of 44 U.S.C. chapter 35.

The title of this information collection is ``Catastrophic Risk

Protection Plan and Related Requirements including, Common Crop

Insurance Regulations; Macadamia Tree Crop Insurance Provisions.'' The

information to be collected includes a crop insurance application and

an acreage report. Information collected from the application and

acreage report is electronically submitted to FCIC by the reinsured

companies. Potential respondents to this information collection are

producers of macadamia trees that are eligible for Federal crop

insurance.

The information requested is necessary for the reinsured companies

and FCIC to provide insurance and reinsurance, determine eligibility,

determine the correct parties to the agreement or contract, determine

and collect premiums or other monetary amounts, and pay benefits.

All information is reported annually. The reporting burden for this

collection of information is estimated to average 16.9 minutes per

response for each of the 3.6 responses from approximately 1,755,015

respondents. The total annual burden on the public for this information

collection is 2,676,932 hours.

FCIC is requesting comments 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 for Agriculture, Office of Information and Regulatory

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

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

decision concerning the collections 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 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 Mandates 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. New provisions included in this rule will not

impact small entities to a greater extent than large entities. Under

the current regulations, a producer is required to complete an

application and acreage report. If the crop is damaged or destroyed,

the insured is required to give notice of loss and provide the

necessary information to complete a claim for indemnity. This

regulation does not alter those requirements. The amount of work

required of the insurance companies delivering and servicing these

policies will not increase significantly from the amount of work

currently required. This rule does not have any greater or lesser

impact on the producer. 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 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. 12988

The provisions of this rule will not have a retroactive effect

prior to the effective date. 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 any action for judicial

review may be brought.

[[Page 19069]]

Environmental Evaluation

This action is not expected to have a 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

FCIC proposes to add to the Common Crop Insurance Regulations (7

CFR part 457), a new section, 7 CFR 457.130, Macadamia Tree Crop

Insurance Provisions. The new provisions will be effective for the 1998

and succeeding crop years. These provisions will replace and supersede

the current provisions for insuring macadamia trees found at 7 CFR part

456 (Macadamia Tree Crop Insurance Regulations). FCIC also proposes to

amend 7 CFR part 456 to limit its effect to the 1997 and prior crop

years. FCIC will later publish a regulation to remove and reserve part

456.

This rule makes minor editorial and format changes to improve the

Macadamia Tree Crop Insurance Regulations' compatibility with the

Common Crop Insurance Policy. In addition, FCIC is proposing

substantive changes in the provisions for insuring macadamia trees as

follows:

1. Amend the insurance contract to provide continuous coverage. The

current policy is not a continuous contract. This change standardizes

the Macadamia Tree Crop Insurance Policy with other crop insurance

policies.

2. Section 1--Add definitions for the terms ``days,'' ``good

farming practices,'' ``interplanted,'' ``irrigated practice,'' ``non-

contiguous,'' ``rootstock,'' and ``written agreement'' for

clarification. Delete the definition of ``planting pattern.'' This is a

commonly understood term that is not defined in other crop policies.

3. Section 2--Describe the guidelines under which basic units may

be divided into optional units consistent with other perennial crops

offering optional units. These provisions also incorporate the

requirement that each optional unit must contain at least 80 acres of

insurable age macadamia trees and be located on non-contiguous land.

These optional unit guidelines standardize macadamia trees with other

perennial crops.

4. Section 3(a)(1)--Specify that the insured may select only one

dollar amount of insurance for all the macadamia trees in the county in

each age group contained in the actuarial table that are insured under

the policy to standardize these provisions with other perennial crops.

The dollar amount of insurance chosen by the insured for each age group

must have the same percentage relationship to the maximum dollar amount

offered by the insurance provider for each age group.

5. Section 3(a)(3)--Specify the reporting requirements when any

circumstance occurs that may be expected to cause a reduction in the

dollar amount of insurance and when the insured crop is interplanted

with another perennial crop to ensure that the amount of insurance

accurately reflects the value of the trees and to maximize the number

of acres which are insurable.

6. Section 4--Establish August 31 as the contract change date.

Previously, the policy contained no contract change date since it was

not a continuous policy.

7. Section 5--Establish December 31 as the cancellation date.

Previously, the policy contained no cancellation date since it was not

a continuous policy.

8. Section 7--Allow insurance for macadamia trees interplanted with

another perennial crop in order to increase the number of acres that

are insurable without adversely affecting the actuarial soundness of

the program.

9. Section 8(a)--Specify that if the application is received after

December 22 but prior to January 1, insurance will attach on the 10th

day after the insured's properly completed application is received in

the insurance provider's local office unless the acreage is inspected

during the 10 day period and it is determined that requirements of the

insurance contract are not met. These provisions were modified so they

will not be interpreted as allowing late-filed applications, and a

thirty day period in this situation is not reasonable. Ten days is

sufficient to prevent adverse selection and avoid unnecessary exposure

to uninsured losses during the waiting period.

10. Section 8(b)--Add provisions to clarify the procedure for

insuring acreage when an insurable share is acquired or relinquished on

or before the acreage reporting date.

11. Section 9--Add adverse weather conditions, earthquake, failure

of irrigation water supply, and wildlife, unless proper control

measures to control wildlife have not been taken, as insurable causes

of loss to be consistent with the coverage provided for other perennial

crops. Wind is deleted because it is encompassed by the term adverse

weather. Disease and insect infestation are also excluded as causes of

loss unless adverse weather prevents the proper application of control

measures, causes control measures to be ineffective when properly

applied, or causes disease or insect infestation for which no effective

control mechanism is available.

12. Section 12--Add provisions for providing insurance coverage by

written agreement. FCIC has a long standing policy of permitting

certain modifications of the insurance contact by written agreement for

some policies. This amendment allows FCIC to tailor the policy to a

specific insured in certain instances. The new section will cover the

procedures for, and duration of, written agreements.

List of Subjects in 7 CFR Parts 456 and 457

Crop insurance, Macadamia tree.

Proposed Rule

Accordingly, for the reasons set forth in the preamble, the Federal

Crop Insurance Corporation hereby proposes to amend 7 CFR parts 456 and

457, as follows:

PART 456--MACADAMIA TREE CROP INSURANCE REGULATIONS

1. The authority citation for 7 CFR part 456 is amended to read as

follows:

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

2. The subpart heading preceding 456.1 is revised to read as

follows:

Subpart--Regulations for the 1988 Through 1997 Crop Years

3. In Sec. 456.7 the introductory text of paragraph (d) is revised

to read as follows:

Sec. 456.7 The application and policy.

* * * * *

(d) The application is found at subpart D of part 400, General

Administrative Regulations (7 CFR 400.37, 400.38). The provisions of

the Macadamia Tree Crop Insurance Policy for the 1988 through 1997 crop

years are as follows:

* * * * *

PART 457--COMMON CROP INSURANCE REGULATIONS; REGULATIONS FOR THE

1994 AND SUBSEQUENT CONTRACT YEARS

4. The authority citation for 7 CFR part 457 continues to read as

follows:

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

5. Sec. 457.130 is added to read as follows:

[[Page 19070]]

Sec. 457.130 Macadamia Tree Crop insurance provisions.

The Macadamia Tree Crop Insurance Provisions for the 1998 and

succeeding crop years are as follows:

FCIC policies:

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

Reinsured policies:

(Appropriate title for insurance provider)

Both FCIC and reinsured policies:

Macadamia Tree Crop Provisions

If a conflict exists among the Basic Provisions (Sec. 457.8),

these Crop Provisions, and the Special Provisions; the Special

Provisions will control these Crop Provisions and the Basic

Provisions; and these Crop Provisions will control the Basic

Provisions.

1. Definitions

Age--The number of complete 12-month periods that have elapsed

since the month the trees were set out or were grafted, whichever is

later. Age determination will be made for each unit, or portion

thereof, as of January 1 of each crop year.

Crop year--A period beginning with the date insurance attaches

to the macadamia tree crop extending through December 31 of the same

calendar year. The crop year is designated by the calendar year in

which insurance attaches.

Days--Calendar days.

Destroyed--Trees damaged to the extent that replacement,

including grafts, is required.

Good farming practices--The cultural practices generally in use

in the county for the crop to have normal growth and vigor, and are

those recognized by the Cooperative State Research, Education, and

Extension Service as compatible with agronomic and weather

conditions in the county.

Graft--The uniting of a macadamia shoot to an established

macadamia tree rootstock for future production of macadamia nuts.

Interplanted--Acreage on which two or more crops are planted in

any form of alternating or mixed pattern.

Irrigated practice--A method by which the normal growth and

vigor of the insured trees is maintained by artificially applying

adequate quantities of water during the growing season by

appropriate systems and at the proper times.

Non-contiguous--Any two or more tracts of land whose boundaries

do not touch at any point, except that land separated only by a

public or private right-of-way, waterway, or an irrigation canal

will be considered as contiguous.

Rootstock--The root and stem portion of a macadamia tree to

which a macadamia shoot can be grafted.

Written agreement--A written document that alters designated

terms of this policy in accordance with section 12.

2. Unit Division

(a) Unless limited by the Special Provisions, a unit as defined

in section 1 (Definitions) of the Basic Provisions (Sec. 457.8),

(basic unit) may be divided into optional units if, for each

optional unit you meet all the conditions of this section or if the

division complies with a valid written agreement.

(b) Basic units may not be divided into optional units on any

basis other than as described in this section.

(c) If you do not comply fully with these provisions, we will

combine all optional units that are not in compliance with these

provisions into the basic unit from which they were formed. We will

combine the optional units at any time we discover that you have

failed to comply with these provisions. If failure to comply with

these provisions is determined to be inadvertent, and the optional

units are combined into a basic unit, that portion of the additional

premium paid for the optional units that have been combined will be

refunded to you for the units combined.

(d) All units you selected for the crop year must be identified

on the acreage report for that crop year.

(e) The following requirements must be met for each optional

unit:

(1) You must have records, which can be independently verified,

of acreage and age of trees for each unit for at least the last crop

year;

(2) Each optional unit must contain at least 80 acres of

insurable age macadamia trees; and

(3) Each optional unit must be located on non-contiguous land.

3. Insurance Guarantees, Coverage Levels, and Dollar Amounts for

Determining Indemnities

(a) In addition to the requirements of section 3 (Insurance

Guarantees, Coverage Levels, and Prices for Determining Indemnities)

of the Basic Provisions (Sec. 457.8):

(1) You may select only one dollar amount of insurance for all

the macadamia trees in the county in each age group contained in the

actuarial table that are insured under this policy. The dollar

amount of insurance you choose for each age group must have the same

percentage relationship to the maximum dollar amount offered by us

for each age group. For example, if you choose 100 percent of the

maximum dollar amount of insurance for one age group, you must also

choose 100 percent of the maximum dollar amount of insurance for all

other age groups.

(2) If the stand is less than 90 percent, based on the original

planting pattern, the dollar amount of insurance will be reduced 1

percent for each percent below 90 percent. For example, if the

dollar amount of insurance you selected is $2,000 and the stand is

85 percent of the original stand, the dollar amount of insurance on

which any indemnity will be based is $1,900 ($2,000 multiplied by

0.95).

(3) You must report, by the sales closing date contained in the

Special Provisions, by type if applicable:

(i) Any damage, removal of trees, change in practices, or any

other circumstance that may reduce the dollar amount of insurance

and the number of affected acres;

(ii) The number of trees on insurable and uninsurable acreage;

(iii) The month and year on which the trees were set out or

grafted and the planting pattern;

(iv) The month and year of replacement if more than 10 percent

of the trees on any unit have been replaced in the previous five

crop years; and

(v) For the first year of insurance for acreage interplanted

with another perennial crop, and anytime the planting pattern of

such acreage is changed:

(A) The age of the interplanted crop, and type if applicable;

(B) The planting pattern; and

(C) Any other information that we request in order to establish

your dollar amount of insurance.

We will reduce the dollar amount of insurance as necessary,

based on our estimate of the effect of interplanted perennial crop,

removal of trees, damage, change in practices, and any other

circumstance that adversely affects the insured crop. If you fail to

notify us of any circumstance that may reduce your dollar amount of

insurance from previous levels, we will reduce your dollar amount of

insurance as necessary at any time we become aware of the

circumstance.

(b) The production reporting requirements contained in section 3

(Insurance Guarantees, Coverage Levels, and Prices for Determining

Indemnities) of the Basic Provisions (Sec. 457.8), do not apply to

macadamia trees.

4. Contract Changes

In accordance with section 4 (Contract Changes) of the Basic

Provisions (Sec. 457.8), the contract change date is August 31

preceding the cancellation date.

5. Cancellation and Termination Dates

In accordance with section 2 (Life of Policy, Cancellation, and

Termination) of the Basic Provisions (Sec. 457.8), the cancellation

and termination dates are December 31.

6. Insured Crop

In accordance with section 8 (Insured Crop) of the Basic

Provisions (Sec. 457.8), the crop insured will be all macadamia

trees in the county for which a premium rate is provided by the

actuarial table:

(a) In which you have a share;

(b) That are grown for the production of macadamia nuts;

(c) For which the rootstock is adapted to the area;

(d) That are at least one year of age when the insurance period

begins; and

(e) That, if the orchard is inspected, is considered acceptable

by us.

7. Insurable Acreage

In lieu of the provisions in section 9 (Insurable Acreage) of

the Basic Provisions (Sec. 457.8), that prohibit insurance attaching

to a crop planted with another crop, macadamia trees interplanted

with another perennial crop are insurable unless we inspect the

acreage and determine that it does not meet the requirements

contained in your policy.

8. Insurance Period

(a) In accordance with the provisions of section 11 (Insurance

Period) of the Basic Provisions (Sec. 457.8):

(1) Coverage begins on January 1 of each crop year, except that

for the year of application, if your application is received after

December 22 but prior to January 1, insurance will attach on the

10th day after

[[Page 19071]]

your properly completed application is received in our local office,

unless we inspect the acreage during the 10 day period and determine

that it does not meet the requirements contained in the insurance

contract. You must provide any information that we require for the

crop or to determine the condition of the orchard.

(2) The calendar date for the end of the insurance period for

each crop year is December 31.

(b) In addition to the provisions of section 11 (Insurance

Period) of the Basic Provisions (Sec. 457.8):

(1) If you acquire an insurable share in any insurable acreage

after coverage begins but on or before the acreage reporting date

for the crop year, and after an inspection we consider the acreage

acceptable, insurance will be considered to have attached to such

acreage on the calendar date for the beginning of the insurance

period.

(2) If you relinquish your insurable share on any insurable

acreage of macadamia trees on or before the acreage reporting date

for the crop year, insurance will not be considered to have attached

to, and no premium or indemnity will be due for, such acreage for

that crop year unless:

(i) A transfer of coverage and right to an indemnity, or a

similar form approved by us, is completed by all affected parties;

(ii) We are notified by you or the transferee in writing of such

transfer on or before the acreage reporting date; and

(iii) The transferee is eligible for crop insurance.

9. Causes of Loss

(a) In accordance with the provisions of section 12 (Causes of

Loss) of the Basic Provisions (Sec. 457.8), insurance is provided

only against the following causes of loss that occur during the

insurance period:

(1) Adverse weather conditions;

(2) Fire, unless weeds and other forms of undergrowth have not

been controlled or pruning debris has not been removed from the

orchard;

(3) Earthquake;

(4) Volcanic eruption;

(5) Wildlife, unless proper measures to control wildlife have

not been taken; or

(6) Failure of irrigation water supply, if caused by an insured

cause of loss that occurs during the insurance period.

(b) In addition to the causes of loss excluded in section 12

(Causes of Loss) of the Basic Provisions (Sec. 457.8), we will not

insure against damage due to disease or insect infestation, unless

adverse weather:

(1) Prevents the proper application of control measures or

causes properly applied control measures to be ineffective; or

(2) Causes disease or insect infestation for which no effective

control mechanism is available.

10. Duties in the Event of Damage or Loss

In addition to the requirements of section 14 (Duties in the

Event of Damage or Loss) of the Basic Provisions ( 457.8), in case

of damage or probable loss, if you intend to claim an indemnity on

any unit, you must allow us to inspect all insured acreage before

pruning or removing of any damaged trees.

11. Settlement of Claim

(a) We will determine your loss on a unit basis.

(b) In the event of loss or damage covered by this policy, we

will settle your claim by:

(1) Multiplying the insured acreage by the dollar amount of

insurance per acre for each age group;

(2) Totaling the results in section 11(b)(1);

(3) Multiplying the total dollar amount of insurance obtained in

section 11(b)(2) by the applicable percent of loss, which is

determined as follows:

(i) Subtract the coverage level percent you elected from 100

percent;

(ii) Subtract the result obtained in section 11(b)(3)(i) from

the actual percent of loss;

(iii) Divide the result in section 11(b)(3)(ii) by the coverage

level you elected (For example, if you elected the 75 percent

coverage level and your actual percent of loss was 70 percent, the

percent of loss specified in section 11(b)(3) would be calculated as

follows: 100%-75%=25%; 70%-25%=45%; 45%75%=60%.); and

(4) Multiply the result in section 11(b)(3) by your share.

(c) The total amount of loss will include both trees damaged and

trees destroyed as follows:

(1) Any orchard with over 80 percent actual damage due to an

insured cause of loss will be considered to be 100 percent damaged;

and

(2) Any percent of damage by uninsured causes will not be

included in the percent of loss.

12. Written Agreements

Designated terms of this policy may be altered by written

agreement in accordance with the following:

(a) You must apply in writing for each written agreement no

later than the sales closing date, except as provided in section

12(e);

(b) The application for a written agreement must contain all

variable terms of the contract between you and us that will be in

effect if the written agreement is not approved;

(c) If approved, the written agreement will include all variable

terms of the contract, including, but not limited to, crop type or

variety, the guarantee, premium rate, and dollar amount of

insurance;

(d) Each written agreement will only be valid for one year (If

the written agreement is not specifically renewed the following

year, insurance coverage for subsequent crop years will be in

accordance with the printed policy); and

(e) An application for a written agreement submitted after the

sales closing date may be approved if, after a physical inspection

of the acreage, it is determined that no loss has occurred and the

crop is insurable in accordance with the policy and written

agreement provisions.

Signed in Washington D.C., on April 10, 1997.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance Corporation.

[FR Doc. 97-10041 Filed 4-17-97; 8:45 am]

BILLING CODE 3410-FA-P