Walnut Crop Insurance Regulations; and Common Crop Insurance Regulations, Walnut Crop Insurance Provisions

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 446 and 457

Walnut Crop Insurance Regulations; and Common Crop Insurance

Regulations, Walnut Crop Insurance Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes

specific crop provisions for the insurance of walnuts. 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 walnut

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 walnut crop insurance regulations to the 1997 and prior crop

years.

EFFECTIVE DATE: June 24, 1997.

FOR FURTHER INFORMATION CONTACT: Arden Routh, Insurance Management

Specialist, Product Development Division, 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

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

Following publication of the proposed rule, the public was afforded

60 days to submit written comments on information collection

requirements previously approved by OMB under OMB control number 0563-

0003 through September 30, 1998. No public comments were received.

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 an 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.

The insured must also annually certify to the previous years

production if adequate records are available to support the

certification. The producer must maintain the production records to

support the certified information for at least three years. 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 3015, subpart V,

published at 48 FR 29115, June 24, 1983.

Executive Order No. 12988

This rule has been reviewed in accordance with 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.

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

On Friday, August 9, 1996, FCIC published a proposed rule in the

Federal Register at 61 FR 41527-41531 to add to the Common Crop

Insurance Regulations (7 CFR part 457) a new section, 7 CFR 457.122,

Walnut Crop Insurance Provisions. The new

[[Page 20090]]

provisions will be effective for the 1998 and succeeding crop years.

These provisions will replace and supersede the current provisions for

insuring Walnuts found at 7 CFR part 446 (Walnut Crop Insurance

Regulations). FCIC also amends 7 CFR part 446 to limit its effect to

the 1997 and prior crop years. FCIC will later publish a regulation to

remove and reserve part 446.

Following publication of the proposed rule, the public was afforded

60 days to submit written comments. A total of 10 comments were

received from the crop insurance industry (industry) and FCIC. The

comments received, and FCIC's responses, are as follows:

Comment: The industry recommended adding the words ``and quality''

after the word ``quantity'' in the definition of ``irrigated

practice.''

Response: FCIC agrees that water quality is an important issue.

However, there are no standards that have been developed to measure

water quality for insurance purposes. Therefore, no change has been

made.

Comment: The industry questioned why all optional units must be

identified on the acreage report for each crop year, and if so, is this

by crop or also by practice, type, and variety.

Response: FCIC has clarified this provision to indicate that only

those optional units selected for the specific crop year need be

identified on the acreage report.

Comment: The industry is concerned with section 3 (Insurance

Guarantees, Coverage Levels, and Prices for Determining Indemnities),

and recommends that the language be changed to ``* * * select only one

price percentage * * *'' It would not then be necessary to include

complex provisions regarding varieties or varietal group with different

maximum prices.

Response: Methods used to select price elections vary between

insurance providers. While some require selection of a percentage of

the price election, others require selection of a specific dollar

amount. Therefore, no change has been made.

Comment: The industry questioned whether the language contained in

section 6(e) pertained to optional units, basic units, or both. If the

provisions applies only to optional units, the industry recommended

moving the provisions to section 2. The industry also questioned if the

agreement in writing to insure less than 5 acres would be a Written

Unit Agreement or a written statement accepted by the parties involved.

Response: This provision pertains to both optional and basic units.

The provision requires only that the insurance provider agree in

writing to insure the acreage. It is not necessary to have a formal

Written Unit Agreement. Therefore, no change has been made.

Comment: The industry recommended changing the language in section

8(a)(1) from ``in your insurance provider's local office'' to ``in our

local agent's office'' to be consistent with other perennial crop

policies. One comment also asked if the provisions in this section

allow late filed applications.

Response: FCIC agrees with the comment and has amended the

provisions to read ``* * * in our local office * * *'' This section was

not intended to allow late filed applications. The provisions have been

rewritten to indicate that the date insurance attaches is 10 days after

the application is received, if it is received within the 10 day period

prior to the sales closing date.

Comment: The industry believes that section 11(c)(1)(iv) should not

allow the producer to defer settlement and wait for a later, generally

lower, appraisal on insured acreage the producer intends to abandon or

no longer care for.

Response: The later appraisal will only be necessary if the

insurance provider agrees that such appraisal would result in a more

accurate determination and the producer continues to care for the crop.

If the producer does not care for the crop, the original appraisal is

used. If the insurance provider believes the original appraisal is

accurate, resolution of the dispute may be sought through arbitration

or appeal procedures, whichever are applicable. Therefore, no change

has been made.

Comment: The industry suggested combining the provisions contained

in section 12(e) with the provisions in section 12(a).

Response: The requirement that requests for written agreements be

submitted by the sales closing date is intended to be the rule and

acceptance after such date will only be allowed under unusual

circumstances. Therefore, no change has been made.

Comment: The industry recommended that the requirement for a

written agreement to be renewed each year be removed. Terms of the

agreement should be stated in the agreement to fit the particular

situation for the policy, or if no substantive changes occur from one

year to the next, allow the written agreement to be continuous.

Response: Written agreements are intended to change policy terms or

permit insurance in unusual situations where such changes will not

increase risk. If such practices continue year to year, they should be

incorporated into the policy or Special Provisions. It is important to

keep non-uniform exceptions to the minimum to assure that the insured

is well aware of the specific terms of the policy. Therefore, no change

will be made.

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

following changes to the Walnut Provisions:

1. Section 2(b)--Deleted this provision because it was in conflict

with section 2(a) and redesignated the following provisions.

2. Section 2(c)--Clarified provisions regarding premium refunds

when optional units are combined into a basic unit.

3. Section 2(e)(1)--Clarified that production reports must be

certified by the production reporting date as one of the requirements

for optional units.

4. Section 6(d)--Added a specific percentage of the trees that must

have reached the ninth growing season before the crop is insurable

unless the insured obtains a written agreement.

5. Section 8(b)(1)--Added a provision to clarify that acreage

acquired after the acreage reporting date is not insurable.

6. Section 8(b)(2)(iii)--Added a provision to clarify that a person

to whom coverage is transferred must be eligible for insurance.

7. Section 9--Clarified provisions to indicate that adverse weather

that prevents the proper application of control measures, causes

properly applied control measures to be ineffective, or causes a

circumstance that promotes disease or insect infestation for which no

effective control mechanism is available for disease and insect damage

is an insured causes of loss to be consistent with other crops. Also,

clarified that failure of the irrigation water supply is a covered loss

only if caused by a peril for which insurance is provided.

8. Section 11(b)--Clarified the calculations used to settle a

claim.

List of Subjects in 7 CFR Parts 446 and 457

Crop insurance, Reporting and recordkeeping requirements, Walnut

crop, Walnut insurance regulations.

Final Rule

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

Crop Insurance Corporation hereby amends 7 CFR parts 446 and 457 as

follows:

PART 446--WALNUT CROP INSURANCE REGULATIONS

1. The authority citation for 7 CFR part 446 continues to read as

follows:

[[Page 20091]]

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

2. The subpart heading preceding Sec. 446.1 is revised to read as

follows:

Subpart--Regulations for the 1986 Through the 1997 Crop Years

3. Section 446.7 is amended by revising the introductory text of

paragraph (d) to read as follows:

Sec. 446.7 The application and policy.

* * * * *

(d) The application for the 1986 and succeeding crop years is found

at subpart D of part 400--General Administrative Regulations and may be

amended from time to time for subsequent crop years. The provisions of

the Walnut Insurance Policy for the 1986 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. Section 457.122 is added to read as follows:

Sec. 457.122 Walnut Crop Insurance Provisions.

The Walnut 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:

Walnut 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

Days--Calendar days.

Good farming practices--The cultural practices generally in use

in the county for the crop to make normal progress toward maturity

and produce at least the yield used to determine the production

guarantee, and are those recognized by the Cooperative State

Research, Education, and Extension Service as compatible with

agronomic and weather conditions in the county.

Harvest--Removal of the walnuts from the orchard.

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

any form of alternating or mixed pattern.

Irrigated practice--A method of producing a crop by which water

is artificially applied during the growing season by appropriate

systems and at the proper times, with the intention of providing the

quantity of water needed to produce at least the yield used to

establish the irrigated production guarantee on the irrigated

acreage planted to the insured crop.

Net delivered weight--Delivered weight (pounds) of dry, hulled,

in-shell walnuts, excluding foreign material.

Non-contiguous land--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.

Pound--A unit of weight equal to 16 ounces avoirdupois.

Production guarantee (per acre)--The number of pounds (whole in-

shell walnuts), determined by multiplying the approved APH yield per

acre by the coverage level percentage you elect.

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 a

written agreement to such division exists.

(b) 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.

(c) All optional units you selected for the crop year must be

identified on the acreage report for that crop year.

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

unit and may not be waived by written agreement:

(1) You must have provided records by the production reporting

date, which can be independently verified, of acreage and production

for each optional unit for at least the last crop year used to

determine your production guarantee;

(2) You must have records of marketed production or measurement

of stored production from each optional unit maintained in such a

manner that permits us to verify the production from each optional

unit, or the production from each unit must be kept separate until

loss adjustment is completed by us; and

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

3. Insurance Guarantees, Coverage Levels, and Prices for

Determining Indemnities.

In addition to the requirements of section 3 (Insurance

Guarantees, Coverage Levels, and Prices for Determining Indemnities)

of the Basic Provisions (Sec. 457.8):

(a) You may select only one price election for all the walnuts

in the county insured under this policy unless the Special

Provisions provide different price elections by variety or varietal

group, in which case you may select one price election for each

walnut variety or varietal group designated in the Special

Provisions. The price elections you choose for each variety or

varietal group must have the same percentage relationship to the

maximum price offered by us for each variety or varietal group. For

example, if you choose 100 percent of the maximum price election for

a specific variety or varietal group, you must also choose 100

percent of the maximum price election for all other varieties or

varietal groups.

(b) You must report, by the production reporting date designated

in section 3 (Insurance Guarantees, Coverage Levels, and Prices for

Determining Indemnities) of the Basic Provisions (Sec. 457.8), by

variety or varietal group if applicable:

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

other circumstance that may reduce the expected yield below the

yield upon which the insurance guarantee is based, and the number of

affected acres;

(2) The number of bearing trees on insurable and uninsurable

acreage;

(3) The age of the trees and the planting pattern;

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

with another perennial crop, and anytime the planting pattern of

such acreage is changed, the age of the crop that is interplanted

with the walnuts, and type if applicable, and the planting pattern;

and

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

your approved yield.

We will reduce the yield used to establish your production

guarantee as necessary, based on our estimate of the effect of the

following: interplanted perennial crop; removal of trees; damage;

change in practices and any other circumstance on the yield

potential of the insured crop. If you fail to notify us of any

circumstance that may reduce your yields from previous levels, we

will reduce your production guarantee as necessary at any time we

become aware of the circumstances.

4. Contract Changes

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

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

6. Insured Crop

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

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

commercially grown English Walnuts (excluding black walnuts) 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 on tree varieties that:

[[Page 20092]]

(1) Were commercially available when the trees were set out;

(2) Are adapted to the area; and

(3) Are grown on a root stock that is adapted to the area;

(c) That are grown in an orchard that, if inspected, are

considered acceptable by us;

(d) On acreage where at least 90 percent of the trees have

reached at least the ninth growing season after being set out,

unless we agree in writing to insure trees not meeting this

requirement; and

(e) That are in a unit that consists of at least five acres,

unless we agree in writing to insure a smaller unit.

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, walnuts 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 February 1 of each crop year, except that

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

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

10th day after 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 insurability

requirements. 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 November 15.

(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. Acreage acquired after the acreage reporting date will not

be insured.

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

acreage of walnuts 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 undergrowth have not been controlled

or pruning debris has not been removed from the orchard;

(3) Insects, but not damage due to insufficient or improper

application of pest control measures;

(4) Plant disease, but not damage due to insufficient or

improper application of disease control measures;

(5) Wildlife;

(6) Earthquake;

(7) Volcanic eruption; or

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

peril 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 any damage or loss of production due to the inability

to market the walnuts for any reason other than actual physical

damage to the walnuts from an insurable cause specified in this

section. For example, we will not pay you an indemnity if you are

unable to market due to quarantine, boycott, or refusal of any

person to accept production.

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 (Sec. 457.8), if

you intend to claim an indemnity on any unit, you must notify us

prior to the beginning of harvest so that we may inspect the damaged

production. You must not sell or dispose of the damaged crop until

after we have given you written consent to do so. If you fail to

meet the requirements of this section, all such production will be

considered undamaged and included as production to count.

11. Settlement of Claim

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

you are unable to provide separate acceptable production records:

(1) For any optional units, we will combine all optional units

for which such production records were not provided; or

(2) For any basic units, we will allocate any commingled

production to such units in proportion to our liability on the

harvested acreage for the units.

(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 respective production

guarantee;

(2) Multiplying each result in section 11(b)(1) by the

respective price election for each variety or varietal group;

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

(4) Multiplying the total production to be counted of each

variety or varietal group, if applicable, (see section 11(c)) by the

respective price election;

(5) Totaling the results in section 11(b)(4);

(6) Subtracting the result in section 11(b)(5) from the result

in section 11(b)(3); and

(7) Multiplying the result in section 11(b)(6) by your share.

(c) The total production to count (whole in-shell pounds) from

all insurable acreage on the unit will include:

(1) All appraised production as follows:

(i) Not less than the production guarantee per acre for acreage:

(A) That is abandoned;

(B) That is damaged solely by uninsured causes; or

(C) For which you fail to provide acceptable production records;

(ii) Production lost due to uninsured causes;

(iii) Unharvested production; and

(iv) Potential production on insured acreage that you intend to

abandon or no longer care for, if you and we agree on the appraised

amount of production. Upon such agreement, the insurance period for

that acreage will end. If you do not agree with our appraisal, we

may defer the claim only if you agree to continue to care for the

crop. We will then make another appraisal when you notify us of

further damage or that harvest is general in the area unless you

harvested the crop, in which case we will use the harvested

production. If you do not continue to care for the crop, our

appraisal made prior to deferring the claim will be used to

determine the production to count; and

(2) All harvested production from the insurable acreage.

(d) Mature walnut production damaged due to an insurable cause

of loss which occurs within the insurance period may be adjusted for

quality based on an inspection by the Dried Fruit Association or as

determined by us. Walnut production that has mold damage greater

than 8 percent, based on the net delivered weight, will be reduced

by the factor contained in the Special Provisions. Walnut production

that has mold damage greater than 30 percent, based on the net

delivered weight, will not be considered as production to count

unless such production is sold. If such production is sold, the

total amount received for the production will be divided by the

maximum available price election to establish the amount of

production to count.

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 price election;

(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

[[Page 20093]]

accordance with the policy and written agreement provisions.

Signed in Washington, D.C., on April 17, 1997.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance Corporation.

[FR Doc. 97-10676 Filed 4-24-97; 8:45 am]

BILLING CODE 3410-FA-P