General Crop Insurance Regulations; Cranberry Endorsement and Common Crop Insurance Regulations; Cranberry Crop Insurance Provisions

SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes

specific crop provisions for the insurance of cranberries. 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 cranberry endorsement under the Common Crop Insurance Policy

for ease of use and consistency of terms, and to restrict the effect of

the current cranberry endorsement to the 1997 and prior crop years.

EFFECTIVE DATE: March 12, 1997.

FOR FURTHER INFORMATION CONTACT: Richard Brayton, 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

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

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

therefore, this rule 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, data, and opinions 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 3 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 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

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 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 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, September 13, 1996, FCIC published a proposed rule in

the Federal Register at 61 FR 48420-48423 to add to the Common Crop

Insurance Regulations (7 CFR part 457), a new

[[Page 5904]]

section, 7 CFR 457.132, Cranberry 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 cranberries found at 7 CFR 401.127 (Cranberry Endorsement).

This rule also amends the Cranberry Endorsement found at 7 CFR 401.127

to limit the effect of the current provisions to the 1997 and prior

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

Sec. 401.127.

Following publication of that proposed rule, the public was

afforded 60 days to submit written comments, data, and opinions. A

total of 20 comments were received from the crop insurance industry and

FCIC Regional Service Offices (RSO). The comments received, and FCIC's

responses, are as follows:

Comment: One comment received from an FCIC RSO recommended changing

the definition of ``Harvest'' in section 1 to read, ``Removal of the

cranberries from the bog.'' Cranberries can be picked from the vine but

remain in the bog, and be susceptible to an insured peril which can

cause cranberry fruit damage or loss.

Response: To be consistent with other crop policies, FCIC agrees

with the comment and has amended the definition accordingly.

Comment: Three comments received from the crop insurance industry

recommended changing the definition of ``Irrigated practice'' in

section 1 to delete the references to overhead solid set irrigation

systems and frost prevention. The commenters stated that overhead solid

irrigation systems are not applicable to all areas and that frost

prevention is not a policy requirement.

Response: FCIC agrees with the comment and has amended the

definition accordingly.

Comment: One comment received from the crop insurance 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 established criteria regarding the quality of

water necessary to produce a crop. Such criteria would be difficult to

develop and administer due to the complexity of the factors included.

Therefore, no change will be made.

Comment: One comment received from the crop insurance industry

recommended changing the definition of ``Non-contiguous land'' in

section 1 to clarify whether land ownership is a factor in the

determination.

Response: Land ownership is not a factor to determine non-

contiguous land. Non-contiguous land is land on which a producer has or

will have an insurable interest in the crop, and whose boundaries do

not touch at any point. FCIC believes the provision is clearly stated.

Therefore, no change will be made.

Comment: Two comments received from the crop insurance industry

suggested the provisions contained in section 2(d), which specify that

``all optional units must be identified on the acreage report for each

crop year,'' be changed. The commenters stated that as written, the

language appears to allow optional units to be established at acreage

reporting time, when in fact, optional units depend on acceptable

production reports being submitted by the production reporting date,

which is often earlier than the acreage reporting date.

Response: FCIC has clarified this provision to indicate that only

those optional units ``established for the crop year'' need to be

identified on the acreage report.

Comment: One comment received from an RSO recommended that section

6(d) be changed to read, ``that are grown on vines that have completed

four growing seasons after set out, unless otherwise provided by the

actuarial table or by written agreement.''

Response: FCIC agrees with the statement and has amended the

provisions accordingly.

Comment: One comment received from the crop insurance industry

stated that the provision contained in the current cranberry

endorsement that restricts insurance on vines that are being renovated

and are not likely to produce a full crop for the current year was

omitted from section 3(b).

Response: The current provisions have been replaced by the

provisions contained in section 3(b) that require the insured to report

any damage, removal of vines, changes in practices, or any other

circumstance that may reduce the expected yield below the yield upon

which the insurance guarantee is based. The insurance provider will

inspect the bog to determine the appropriate production guarantee based

on the effect of the circumstances that actually exist. This allows

insurance for such acres based on the actual expected yield, which will

increase the number of insurable acres and provide yield protection for

producers. Therefore, no change will be made.

Comment: One comment received from the crop insurance industry

questioned why the requirement for a 90 percent stand for insurability

was removed. The commenter stated that insurability of bogs with less

than 90 percent stand of bearing vines should be subject to inspection

and provided by written agreement.

Response: As stated above, such acreage will now be insurable at

yields commensurate with the production capabilities of the acreage.

Therefore, no change will be made.

Comment: One comment received from an RSO recommended that section

6(d) ``Insured Crop'' be change to read, ``that are grown in a bog with

at least a 90 percent stand of bearing vines based on the original

planting density unless otherwise provided by the actuarial table or by

written agreement.''

Response: FCIC disagrees with the comment. No change will be made

for the reasons stated above.

Comment: Two comments received, one from an RSO and one from the

crop insurance industry, recommended adding a subparagraph to section 8

``Causes of Loss'' to read, ``failure or breakdown of irrigation

equipment or facilities due to direct damage to it from an insurable

cause of loss if the cranberry crop is damaged by freezing temperatures

within 72 hours of such failure or breakdown and repair or replacement

was not possible before damage occurred.''

Response: FCIC agrees with the comment and has amended the

provisions accordingly.

Comment: One comment received from an RSO recommended that section

10(c)(1)(i)(D) ``Settlement of Claim'', be revised by adding

``destroyed or put to another use without our consent'' as in other

crop provisions.

Response: FCIC agrees with the comment and has amended the

provisions accordingly.

Comment: One comment was received from the crop insurance industry

stating that section 10(c)(1)(iv) ``Settlement of Claim'' should not

allow the insured 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: A later appraisal will only be necessary if the insurance

provider agrees that such an appraisal would result in a more accurate

determination and if the producer continues to care for the crop. If

the producer does not care for the crop, the original appraisal will be

used. No change will be made to these provisions.

Comment: One comment received from an RSO recommended changing the

proposed quality adjustment requirements which state, ``due to

insurable causes, does not meet, or

[[Page 5905]]

would not if properly handled meet, the United States Standards for

Fresh Cranberries for Processing'' in section 10(c)(3) ``Settlement of

Claim.'' The RSO recommended that the quality adjustment provisions

contained in the current cranberry endorsement should be used.

Response: FCIC agrees with the comment for those areas where the

U.S. Standards for Fresh Cranberries for processing may not be

available. The provisions have been amended accordingly.

Comment: Three comments received from the crop insurance industry

recommended in section 11(d) ``Written Agreements,'' that the

requirement for a written agreement to be renewed each year should 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 by design are temporary and intended

to address unusual situations. If the condition for which written

agreement is needed continue year to year, they should be incorporated

into the policy or Special Provisions. Therefore, no change will be

made.

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

changes for clarification on the following changes to the Cranberry

Crop Provisions:

1. Section 1--Added the term ``market price'' to the definitions

for clarification.

2. Section 3--Clarified that the insurance provider will adjust

yields in response to removal of vines, damage, other changes in

practices, or any other circumstance that will affect the yield.

3. Section 7(a)(1)--Clarified that an application will not be

accepted after the November 21 sales closing date. For applications

submitted within 10 days of the sales closing date, coverage will not

attach until 10 days after the date of application.

4. Section 7(b)(2)(iii)--Added a requirement to clarify that the

transferee must be eligible for crop insurance to be consistent with

other crop provisions.

5. Section 9(b)--Clarify that damaged production must not be sold

or disposed of until the earlier of 15 days from the date of notice of

loss or when the insurer gives consent to do so.

6. Section 9(c)--Clarify that the failure to meet the requirements

of this section result in the insurance providers inability to inspect

the damaged production, for all such production to be considered

undamaged and included as production to count.

List of Subjects in 7 CFR Parts 401 and 457

Cranberry, Cranberry endorsement, Crop insurance.

Final Rule

Accordingly, as set forth in the preamble, the Federal Crop

Insurance Corporation hereby amends 7 CFR parts 401 and 457 effective

for the 1998 and succeeding crop years, as follows:

PART 401--GENERAL CROP INSURANCE REGULATIONS--REGULATIONS FOR THE

1998 AND SUBSEQUENT CONTRACT YEARS

1. The authority citation for 7 CFR part 401 continues to read as

follows:

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

2. The introductory text of Sec. 401.127 is amended to read as

follows:

Sec. 401.127 Cranberry endorsement.

The provisions of the Cranberry Crop Insurance Endorsement for the

1990 through the 1997 crop years are as follows:

* * * * *

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

1994 AND SUBSEQUENT CONTRACT YEARS

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

follows:

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

4. Section 457.132 is added to read as follows:

Sec. 457.132 Cranberry crop insurance provisions.

The Cranberry 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:

CRANBERRY 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

Barrel--100 pounds of cranberries.

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 cranberries from the bog.

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.

Market price--The cash price per barrel of cranberries offered

by buyers in the area in which you normally market the cranberries.

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.

Production guarantee (per acre)--The number of barrels

determined by multiplying the approved actual production history

(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 11.

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

basis including, but not limited to, production practice, type, and

variety, 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 premium

paid for the purpose of electing optional units will be refunded to

you for the units combined.

(d) All optional units established 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 planted 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

[[Page 5906]]

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

cranberries in the county insured under this policy.

(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):

(1) Any damage, removal of vines, 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 age of the vines; and

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

your approved yield.

We will adjust the yield used to establish your production

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

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

circumstance that may affect the yield potential of the insured

crop. If you fail to notify us of any circumstance that may affect

your yields from previous levels, we will adjust your production

guarantee as necessary at any time we become aware of the

circumstance.

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 November 20.

6. Insured Crop

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

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

cranberries 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 harvest as cranberries;

(c) That are grown in a bog that, if inspected, is considered

acceptable by us; and

(d) That are grown on vines that have completed four growing

seasons after the vines were set out, unless otherwise provided by

the actuarial table or by written agreement.

7. Insurance Period

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

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

(1) Coverage begins on November 21 of each crop year, except

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

after November 11, but prior to November 21, 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 bog.

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

each crop year is November 20.

(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 cranberries 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.

8. 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 bog;

(3) Wildlife;

(4) Earthquake;

(5) Volcanic eruption;

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

peril that occurs during the insurance period; or

(7) Failure or breakdown of irrigation equipment or facilities

due to direct damage to the irrigation equipment or facilities from

an insurable cause of loss if the cranberry crop is damaged by

freezing temperatures within 72 hours of such failure or breakdown

and repair or replacement was not possible before damage occurred.

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

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

insure against damage or loss of production due to:

(1) Disease or insect infestation, unless adverse weather:

(i) Prevents the proper application of control measures or

causes properly applied control measures to be ineffective; or

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

control mechanism is available; or

(2) Inability to market the cranberries for any reason other

than actual physical damage from an insurable cause of loss

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.

9. 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):

(a) If you discover damage, or if you intend to claim an

indemnity on any insured unit, you must give us notice of probable

loss:

(1) At least 15 days before the beginning of any harvesting, or

(2) Immediately if probable loss is discovered after harvesting

has begun.

(b) You must not sell or dispose of any damaged production until

the earlier of 15 days from the date of notice of loss or when we

give you written consent to do so.

(c) If you fail to meet the requirements of this section, and

such failure results in our inability to inspect the damaged

production, all such production will be considered undamaged and

included as production to count.

10. 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 unit, we will combine all optional units

for which such production records were not provided; or

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

production to such units in proportion to our liability on the

harvested acreage for each unit.

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

will settle your claim by:

(1) Multiplying the insured acreage by its respective production

guarantee;

(2) Multiplying the result of section 10(b)(1) by the price

election;

(3) Multiplying the total production to be counted, (see section

10(c)) by the price election;

(4) Subtracting the total in section 10(b)(3) from the total in

section 10(b)(2); and

(5) Multiplying the result in section 10(b)(4) by your share.

(c) The total production to count (in barrels) 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) Damaged solely by uninsured causes;

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

or

(D) Destroyed or put to another use without our consent;

(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

will use the appraised amount of production or defer the claim 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

[[Page 5907]]

to 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.

(3) Harvested production which, due to insurable causes, is

determined not to meet the United States Standards for Fresh

Cranberries if available, or would not meet those standards if

properly handled, or does not meet the quality requirements of the

receiving handler if the United States Standards for Fresh

Cranberries, if not available, and such harvested production has a

value less than 75 percent of the market price for cranberries

meeting the minimum requirements will be adjusted by:

(i) Dividing the value per barrel of such cranberries by the

market price per barrel for cranberries meeting the minimum

requirements; and

(ii) Multiplying the result by the number of barrels of such

cranberries.

11. 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

11(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 accordance with the policy and written

agreement provisions.

Signed in Washington, DC, on January 31, 1997.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance Corporation.

[FR Doc. 97-3130 Filed 2-7-97; 8:45 am]

BILLING CODE 3410-FA-P