Hybrid Seed Crop Insurance Regulations; and Common Crop Insurance Regulations, Hybrid Seed Corn Crop Insurance Provisions
Federal RegisterDec 12, 1997
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DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Parts 443 and 457
RIN 0563-AA78
Hybrid Seed Crop Insurance Regulations; and Common Crop Insurance
Regulations, Hybrid Seed Corn 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 hybrid seed corn. 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 hybrid seed crop insurance regulations under the Common Crop
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Insurance Policy for ease of use and consistency of terms, and to
restrict the effect of the current hybrid seed crop insurance
regulations to the 1997 and prior crop years.
DATES: Effective December 12, 1997.
FOR FURTHER INFORMATION CONTACT: Ron Nesheim, Insurance Management
Specialist, Research and Development, 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, this rule has not been reviewed by OMB.
Paperwork Reduction Act of 1995
Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3507),
those collections of information have been approved by the Office of
Management and Budget (OMB) under control number 0563-0053.
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. Therefore,
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 economic impact on a
substantial number of small entities. The effect of this regulation on
small entities will be no greater than on larger 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
This final rule has been reviewed in accordance with Executive
Order No. 12988 on civil justice reform. The provisions of this rule
will not have a retroactive effect. 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 against
FCIC 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 Thursday, January 2, 1997, FCIC published a proposed rule in the
Federal Register at 62 FR 48 to add to the Common Crop Insurance
Regulations (7 CFR part 457), a new section, 7 CFR 457.152 (Hybrid Seed
Corn Crop Insurance Provisions). These provisions will replace and
supersede the current provisions for insuring hybrid seed corn found at
7 CFR part 443 and will be effective for the 1998 and succeeding crop
years. This rule also amends 7 CFR part 443 to restrict its effect to
the 1997 and prior crop years.
Following publication of the proposed rule, the public was afforded
60 days to submit written comments. A total of 37 comments were
received from reinsured companies and an insurance service
organization. The comments received, and FCIC's responses, follow:
Comment: A reinsured company and an insurance service organization
stated that the current hybrid seed policy limits the amount of other
insurance which can be carried on hybrid seed corn to one and a half
times the maximum amount of insurance available. Since no such
restriction appears in this 1998 proposal, the commenter assumes that
this is no longer applicable and supports not having this restriction
in the policy.
Response: The policy provision that limited the amount of other
insurance to one and a half times the highest price election has been
deleted. This deletion will be identified in the Summary of Changes
when the new policy is issued.
Comment: A reinsured company and an insurance service organization
suggested that the name of the Crop Provisions be changed to ``hybrid
seed corn'' rather than ``hybrid corn seed''. Everyone in the seed corn
industry refers to it as hybrid seed corn.
Response: FCIC has made the change accordingly.
Comment: A reinsured company and an insurance service organization
suggested that the definition of ``Amount of insurance per acre'' be
revised to match how this coverage is shown and defined in the Special
Provisions, although the commenter stated that the Special Provisions
definition should be multiplied by the price election before
subtracting the minimum guaranteed payment. The county yield is
multiplied by the factor for the coverage level selected, which is
multiplied by the price election selected by the producer less any
minimum guaranteed payment.
Response: FCIC has revised and clarified the definition to show the
proper calculation. Since the calculation is in the Crop Provisions, it
will be removed from the Special Provisions.
Comment: A reinsured company and an insurance service organization
were concerned about the definition of ``bushel'' and the provisions in
section 12(g)(3) (redesignated section 12(f)(3))
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that requires the insurance provider to work the claim in the same
manner as the records provided by the seed company to establish the
approved yield. Since the yields from the seed company are submitted to
the FCIC Regional Service Office (RSO) for determination of the
approved yield, the FCIC RSO needs to inform the insurance providers
when a seed company is using its own conversion charts and what this
chart is so that, at claim time, the production to count can be
converted in the same manner as the approved yield was determined.
Response: In order to ensure the accuracy of any claim, the same
moisture and weight per bushel must be used to calculate the amount of
insurance and the production to count. The FCIC procedure will specify
that the seed company will provide its conversion chart with the
production records. FCIC will provide the conversion chart to the
insurance provider when the moisture or weight used to determine a
bushel differs from the definition stated in the policy.
Comment: A reinsured company and an insurance service organization
were concerned with the definition of ``female parent plants,'' where
there is reference to the stamens (tassles) being removed. The
commenters indicated that some seed companies are experimenting with
male sterile plants from which the stamens may not have to be removed.
Response: FCIC has revised the definition to accommodate those
instances wherein parent plants are rendered male sterile by means
other than detassling.
Comment: A reinsured company and an insurance service organization
suggested that the definition of ``interplanting'' be revised to match
its use in the Special Provisions. Interplanting is listed as a
separate type with a different county yield than standard planting. The
male parent plants are planted between every female parent plant row
rather than in a planting pattern as defined in the Crop Provisions.
Response: The Special Provisions uses the term ``interplanting''
and the Crop Provisions uses the term ``interplanted'', and both terms
have different meanings. To avoid any confusion between these terms,
FCIC will change the reference to ``interplanting'' to ``non-standard
planting'' in the Special Provisions.
Comment: A reinsured company suggested that in the definition of
``irrigated practice,'' the words ``and quality'' be added after the
words ``* * * providing the quantity.''
Response: FCIC agrees that water quality is important. However,
there are no clear criteria regarding the quality of water necessary to
produce a crop. The highly variable factors involved would make such
criteria difficult to develop and administer. The provisions regarding
good farming practices can be applied in situations in which the
insured failed to exercise due care and diligence in the application of
irrigation water. Therefore, no change has been made.
Comment: An insurance service organization suggested adding, in the
definition of ``non-seed amount,'' the phrase ``(rejected for seed
purposes)'' or something similar after the first reference to ``non-
seed production'' for clarification.
Response: FCIC has revised the definitions and section 12 to
clarify that non-seed production is production that does not qualify as
seed production because of inadequate germination.
Comment: A reinsured company and an insurance service organization
suggested that the definition of ``planted acreage'' be amended to
require that the male and female parent plants be planted in accordance
with the production management practices of the seed company.
Response: The definition of ``planted acreage'' is broad enough to
permit planting in accordance with practices of the seed company. The
requirement that parent plants be planted in accordance with the
production management practices of the seed company is more appropriate
in sections 7 and 10 regarding insured crop and causes of loss and
those provisions have been revised accordingly.
Comment: An insurance service organization suggested that a
conflict exists between the definition of ``sample'' and ``inadequate
germination'' because the germination rate is determined by using a
certified seed test on clean seed, not field run seed.
Response: There is no conflict between the terms. The sample must
be at least 3 pounds of field run seed. The germination rate is based
on the amount of clean seed obtained from that sample. No change has
been made.
Comment: An insurance service organization asked why a ``seed
company'' must now be a corporation (previously defined as a ``business
enterprise''), and if there are any legitimate seed companies that are
not corporations.
Response: A seed company need only be a corporation if the seed
company is also the producer. To cover all other situations, FCIC has
changed ``a corporation'' to ``a business enterprise'' in the
definition of ``seed company.''
Comment: An insurance service organization suggested that section
2(a) be rearranged as follows: ``* * * a basic unit, as defined in
section 1 of the Basic Provisions, may be divided * * *'' (instead of
``(basic unit))'' at the end of the earlier phrase.
Response: All definitions and those provisions common to most crops
with respect to units have been deleted and moved to the Basic
Provisions.
Comment: A reinsured company and an insurance service organization
stated that the provisions contained in section 2(e)(1), which require
the insured to keep records by optional unit for optional units to
apply, conflict with section 3(b) which correctly indicates that
production reporting requirements do not apply to this crop. In most
instances the seed corn is harvested and hauled directly to the seed
companies' processing facilities. The seed company maintains records of
planted acreage and harvested production and provides all of the yield
records used by the FCIC RSO to establish the approved yields. All
references to the insured maintaining records by optional unit should
not be a requirement since this is maintained at the seed company
level. The historical yield of the producer's seed corn is not used to
establish the amount of insurance as stated in this item as this is
based on the county yield, coverage level and price elected and any
minimum guaranteed payment. Seed corn producers will often plant
different varieties from year to year with different expected yields.
Therefore, the actual yield produced from the previous year has little
or no value for the producer in subsequent years.
Response: The insured must have verifiable records of planted
acreage and production for each optional unit for at least the ``* * *
last crop year used to determine the amount of insurance''. This
requirement should not be removed simply because the seed company
maintains those records. In order to protect the integrity of the
program, FCIC must be able to verify the accuracy of the guarantee for
each unit. If the producer cannot produce the records from each
optional unit, they will be combined into basic units. The insured can
obtain the necessary records from the seed company. These provisions
have been deleted and moved to the Basic Provisions.
Comment: A reinsured company was concerned about the requirement
that the producer must meet all the requirements in section 6. They
stated
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that these requirements should not be mandatory for every acreage
report.
Response: The information required by the acreage report is
necessary to establish liability, premium, and insurability of the
acreage. No change has been made.
Comment: A reinsured company and an insurance service organization
mentioned that in section 6(a), each individual producer is the named
insured under this program and may not know the type or variety of
hybrid. The seed companies provide the seed and the producer grows it.
Seed companies do not want this information going any further than
necessary while still meeting the requirements of the MPCI program.
This information is needed only in the event of a claim and can be
obtained from the seed company as needed at that time. The commenter
believes collection of this information should be an option since the
insurance provider may want to capture it in certain instances but not
for all insureds. Therefore, this should be an option, not mandatory as
it would be with the word ``must'' in the proposed language.
Response: The reporting requirement by type or variety must be
maintained for rating purposes and to determine liability and premium
for the unit. Such information cannot be obtained only at the time of
loss. It is the responsibility of the producer to provide the
information which should be contained in the hybrid seed corn processor
contract. No change has been made.
Comment: A reinsured company and an insurance service organization
mentioned that section 6(b) requires that acreage occupied by the male
parent plants be reported. They realize it is common for other crops to
obtain all insurable and uninsurable acreage of the crop. However, this
stipulation to capture the total acreage occupied by the male parent
plants is an unnecessary and burdensome requirement for hybrid seed
corn. The commenter suggested that this should be determined in the
event of a claim. A number of seed companies require that the male
acres be destroyed after pollination.
Response: The requirement to report any acreage occupied by male
parent plants is necessary to determine the correct amount of insurance
for a unit since acres with male plants are not insurable. The amount
of insurance is determined on the Summary of Coverage so the insurance
provider cannot wait until a loss to determine insurable acreage. The
burden of determining the amount of acreage occupied by the male plant
can be minimized by mathematical calculation based on the planting
pattern of the crop. No change has been made.
Comment: A reinsured company and an insurance service organization
questioned section 6(c), which requires the insured to certify that
there is a hybrid seed corn processor contract and the amount of any
minimum guaranteed payment. The commenter questions what constitutes
certification. It is their feeling that if the insured goes through the
FCIC RSO to obtain an approved yield, and upon receiving copies of this
information, this would be adequate certification as to the insured
having a contract. The presumption is that the FCIC RSO would not go
through this process between the producer and the seed company if there
was not some type of contractual agreement in place. If they obtain
some of this information directly from the seed company it would also
constitute certification as the seed company would not provide this
information if a contract was not in place. If this does not constitute
certification for the purposes of having a contract then they have some
concerns as to what additional requirements must be met.
Response: The certification requirement is satisfied by a written
statement on the acreage report, signed by the producer, that such a
contract exists. In many cases, the RSO provides an approved yield for
a variety, not specifically for individual producers. Since a contract
is a condition of insurance, the insurance provider must have some
assurance that a contract exists. Receipt of an approved yield from the
RSO is not evidence of a contract between the processor and the
producer. No change has been made.
Comment: A reinsured company and an insurance service organization
were concerned with section 6(c) references to the minimum guaranteed
payment which, according to the Crop Insurance Handbook, must be
obtained from each insured. If an insurance company happens to insure
all producers of a seed company, there is generally only one base
contract which is used for all the individual seed corn producers. If
the base contract does not provide a minimum guarantee, each insured is
still required to certify to this effect even though this information
can be determined from the base contract.
Response: Section 6(c) only requires the producer to report a
minimum guaranteed payment if the hybrid seed corn processor contract
contains such a payment. No change has been made.
Comment: An insurance service organization asked if all the
exceptions in section 7(a)(4)(I)-(iv) should be required by written
agreement. For example, the commenter questions why acreage with female
and male parent plants in the same row would ever be insurable. Perhaps
the phrase ``unless allowed'' should be removed from item (4) and
inserted at the specific items where it is actually possible.
Response: Current planting practices do not allow male and female
plants to be planted in the same row. However, acceptable planting
practices may change and the provision must allow a certain amount of
flexibility to cover such changes. No change has been made.
Comment: A reinsured company questioned section 7(c) pertaining to
a producer who is also the seed company. If a seed corn producer is
insured as an individual, and also owns the seed corn company under a
corporate name and the company contracts with other producers, the
commenter questions whether this situation would fall into the
procedure outlined.
Response: If the other conditions in section 7(c) are met, the seed
company could be eligible for insurance. Section 7(c) has been amended
for clarification.
Comment: An insurance service organization asked that since ``seed
company,'' by definition, is required to be a corporation, whether it
is necessary to repeat the requirement again in section 7(c)(1).
Response: A seed company is no longer required to be a corporation
except when the seed company is also the producer. FCIC has revised the
definition of ``seed company'' to specify business enterprise and added
a provision requiring a seed company that is also an insured to be a
corporation.
Comment: A reinsured company and an insurance service organization
were concerned with section 7(c)(3) which states that if acceptable
sales records are not available, the crop may only be insured under the
Coarse Grains Crop Provisions. Since the yield potential for seed corn
is considerably less than for commercial field corn, a normal seed corn
crop could be harvested and still potentially have a payable loss under
the Coarse Grains Crop Provisions. Language similar to ``* * * may only
be insured by written agreement * * *'' is recommended.
Response: FCIC agrees that hybrid seed corn is best suited for
insurance under the Hybrid Seed Corn Crop Provision, but records must
be provided to assure that the person seeking insurance is a bona-fide
producer of hybrid seed corn. If the crop is insured under the Coarse
Grains Crop Provisions, the approved yield would be derived from hybrid
seed corn production records of the processor for
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the particular variety. The last sentence of section 7(c)(3) has been
revised to read ``If such records are not available, the crop may be
insured under the Coarse Grains Crop Provisions with a written
agreement; and * * *.''
Comment: An insurance service organization asked if it is necessary
that the phrase ``Of the insured crop'' be specified in section 8(c)
but not for items (a) or (b).
Response: FCIC has clarified the provisions. Further, since damage
to the male plant could also necessitate replanting, FCIC has modified
section 8(c) to include both male and female parent plants.
Comment: An insurance service organization stated that the phrase
``insurance attaches after'' in section 9(a) creates an ambiguity with
respect to when insurance attaches. The commenter suggested that the
term ``after'' could be changed to ``once'' (or ``upon completion of
planting:'') and then delete ``is completely planted'' from items (1)
and (2).
Response: Section 9(a) has been clarified.
Comment: A reinsured company and an insurance service organization
stated that the provisions in section 11(a) stipulate that any
representative samples must consist of one complete planting pattern
the entire length of the field if the acreage will not be harvested.
The commenters prefer that each representative sample be one complete
pattern which is long enough to provide a \1/100\ acre sample, and that
these be at various representative areas of the field rather than the
entire length of the field. This would be consistent with the appraisal
methods specified in the loss adjustment procedures.
Response: More than one representative sample may be required by
the insurance provider, and such samples may be in different parts of
the field. However, by having a strip the entire length of the field,
the loss adjuster can choose the areas to be sampled and is not
restricted to the crop the insured chose to leave for this purpose.
This permits a more accurate appraisal. Further, it would be difficult
for the person harvesting the crop to know what constitutes \1/100\ of
an acre. No change has been made.
Comment: An insurance service organization suggested that since the
Basic Provisions state that the term ``representative sample'' will be
further defined in the Crop Provisions, it should be included in
section 1 with the other definitions (as in the 1986-CHIAA 738) so the
term would be more easily located.
Response: The requirements for representative samples are
substantive and, therefore, should not be in the definition section.
The Basic Provisions are revised to amend the definition to state ``as
specified in the Crop Provisions''.
Comment: A reinsured company and an insurance service organization
disagreed that section 11(b)(2) should be a mandatory requirement for
all producers having a loss. If all seed corn producers for a seed
company are insured with the same insurance company, the company knows
that all of their producers have a seed corn contract. The company will
already have a copy of the base contract for the seed company and are
not gaining anything by having to obtain the exact contract in effect
for each producer. If some producers insured with an insurance company
grow seed corn for various seed companies (not all of their producers
are insured with them) there may be some benefit in obtaining a copy of
the contract. The commenter does not believe this should be a mandatory
requirement for all losses.
Response: Since not all producers may receive the same contract
terms, the insurance company must verify contract terms, unless it has
been determined that the contract provided by the seed company is used
for all its producers without any waivers or amendments. Section
11(b)(2) has been revised accordingly.
Comment: An insurance service organization suggested that section
12(e)(1)(v) (redesignated section 12(d)(1)(v)) of the policy should not
allow the insured to defer settlement and wait for a later, generally
lower appraisal, especially on crops that have a short ``shelf life.''
Response: A later appraisal will only be necessary if the insurance
provider and the insured do not agree on the appraisal or the insurance
provider believes the crop needs to be carried further. The producer
must continue to care for the crop. If the producer does not care for
the crop, the original appraisal will be used. No change has been made.
Comment: An insurance service organization stated that section
12(e)(2) (redesignated section 12(d)(2)) counts harvested production
delivered to the seed company, whereas section 4d(1)(I) of the 1986-
CHIAA 738 counts harvested production delivered to and accepted by the
seed company. The commenter questioned whether this is change, or
should this provision be interpreted to mean that production is not
considered delivered until it is accepted.
Response: This is a change. Section 12(d)(2) provides that seed
production to be counted includes mature harvested production that is
delivered as commercial hybrid seed corn to the seed company stated in
the hybrid seed corn processor contract, regardless of quality, unless
the production has inadequate germination.
Comment: A reinsured company and an insurance service organization
asked that since there has been a change in amounts for moisture
content (to 15 percent moisture content instead of 15.5 percent, and
increased for ear corn by 1.5 pounds, instead of 2.0 pounds, for each
percentage point of moisture in excess of 14.0 percent) in sections
12(f) (1) and (2), whether FCIC plans any adjustments to previous
yields that were adjusted using the previous amounts.
Response: Previous yield information will not be affected. These
changes will be effective for 1998 and subsequent crop years. Approved
yields after these provisions are effective will be determined on the
revised basis.
Comment: An insurance service organization suggested that section
13(d)(2) may be confusing because a sentence that states ``The unit
consists of 185 acres * * *'' is followed immediately by a sentence
that states ``The unit consists of 150 acres * * *.'' The example would
be clearer if it stated ``The unit consists of 150 acres of female
parent plants of the same type and variety (an additional 35 acres are
occupied by the male parent plants, which are not insurable). Of the
150 acres, 50 acres were planted * * *'' or some similar statement. At
the least, the latter should read ``The unit consists of 150 insurable
acres * * *.''
Response: The late and prevented planting provisions, common to
most crops, are deleted and moved to the Basic Provisions.
Comment: A reinsured company and an insurance service organization
favored the elimination of the substitute crop provisions under
prevented planting coverage.
Response: The late and prevented planting provisions, common to
most crops, are deleted and moved to the Basic Provisions. FCIC has
revised those provisions to remove the substitute crop provisions.
Comment: A reinsured company and an insurance service organization
stated that section 13(d)(5), which defines the maximum eligible
acreage for prevented planting, conflicts with the current provisions,
which correctly states that the maximum eligible acres for seed corn is
the number of acres the producer contracted for the crop year.
[[Page 65349]]
Response: FCIC has clarified the provision in the Basic Provisions.
Comment: A reinsured company stated that it understands that FCIC
is revising prevented planting for 1998 and assumes these new
provisions would be incorporated into the crop provisions for hybrid
seed corn.
Response: The late and prevented planting provisions have been
moved to the Basic Provisions and will be applicable to this policy.
Comment: A reinsured company and an insurance service organization
recommended deleting section 14(d). Written agreements should not be
limited to one year. Rather, such agreements should be valid for the
period stated in the agreement. In most cases, written agreements
should be continuous, as is the case with the policy. Limiting written
agreements to one year only increases administrative cost, complexity
and opportunity for misunderstanding and error.
Response: Written agreements are, by design, temporary and intended
to address unusual circumstances. If the conditions that require a
written agreement exists for multiple crop years, the policy or Special
Provisions should be amended to accommodate the conditions. The written
agreement provisions have been deleted and moved to the Basic
Provisions.
Comment: An insurance service organization suggested that section
14(e) be combined with the provisions in section 14(a).
Response: Section 14(e) is intended to be a limited exception, not
the rule, affecting only those cases in which conditions discovered
after the sales closing date make a written agreement necessary.
Therefore, these provisions should be kept separate. No change has been
made in the Basic Provisions.
Comment: A reinsured company expressed a general concern about many
of the mandatory requirements added to these provisions. In its view,
most of these requirements are unnecessary. Failure to collect this
information in prior years has not caused problems. The issues of
reduced expense reimbursement and simplification should be considered
prior to finalizing these provisions. This policy proposes to increase
the expense of writing hybrid seed corn along with the added complexity
involved from the additional collection requirements.
Response: FCIC understands the concerns of this commenter. These
Crop Provisions were revised to reduce program vulnerabilities and make
the insuring language more precise. FCIC has attempted to minimize any
additional requirements imposed upon the policyholder, the reinsured
company, and the seed company. All mandatory information is required to
fairly and properly administer the policy.
In addition to the changes described above, FCIC has made minor
editorial changes and has amended the following provisions:
1. The paragraph preceding section 1 has been revised to refer to
the Catastrophic Risk Protection Endorsement for the purpose of
clarification.
2. The definition of ``adjusted yield,'' ``amount of insurance per
acre,'' ``approved yield,'' ``county yield,'' ``dollar value per
bushel,'' ``field run,'' ``hybrid seed corn processor contract,'' and
``insurable interest'' have been revised for clarification.
3. A definition of ``coverage level factor'' has been added for
clarification.
4. The definitions of ``days,'' ``FSA,'' ``final planting date,''
``interplanted,'' ``irrigated practice,'' ``late planted,'' ``late
planting period,'' and ``timely planted'' have been deleted and moved
to the Basic Provisions.
5. The definition of ``good farming practices,'' ``planted
acreage,'' and ``prevented planting'' have been revised to delete the
provisions moved to the Basic Provisions.
6. The definition of ``practical to replant'' has been revised to
clarify that it will not be considered practical to replant unless
production from the replanted acreage can be delivered under the terms
of the hybrid seed corn processor contract, or the seed company agrees
to accept such production.
7. Section 2 has been revised to delete those provisions that have
been moved to the Basic Provisions, and to clarify the unit structure
for hybrid seed corn when the hybrid seed corn processor contract
specifies an amount of production to be delivered.
8. Section 7(d) has been added to allow the insured crop that is
under contract with different seed companies to be insured under
separate policies with different insurance providers provided all
acreage of the insured crop in the county is insured.
9. Section 8(c) has been revised for clarification.
10. In section 10(b)(4), the requirement that the crop be inspected
and the loss appraised before harvest is completed has been deleted to
be consistent with section 11(b)(1).
11. Section 12(c) has been revised for clarification. Also, an
example of an indemnity calculation has been added for illustration.
Section 12(d) is deleted since it was redundant with section 12(e) and
the following section redesignated accordingly.
12. In section 12(e)(1)(I), as redesignated, adjusted yield has
been changed to amount of insurance per acre.
13. In section 12(f)(3), as redesignated, the last sentence has
been corrected to clarify that records of the seed company will only be
used to determine the amount of production to count if the production
is calculated on the same basis as that used to determine the approved
yield.
14. Add provision specifying the prevented planting coverage
available.
Good cause is shown to make this rule effective upon publication in
the Federal Register. This rule improves the hybrid seed corn insurance
coverage and brings it under the Common Crop Insurance Policy, Basic
Provisions for consistency among policies. The earliest contract change
date that can be met for the 1998 crop year is December 31, 1997. It
is, therefore, imperative that these provisions be made final before
that date so that reinsured companies and insureds may have sufficient
time to implement these changes. Therefore, public interest requires
the agency to act immediately to make these provisions available for
the 1998 crop year.
List of Subjects in 7 CFR Parts 443 and 457
Crop insurance, Hybrid seed crop insurance regulations, Hybrid seed
corn.
Final Rule
Accordingly, for the reasons set forth in the preamble, the Federal
Crop Insurance Corporation hereby amends 7 CFR parts 443 and 457 as
follows:
PART 443--HYBRID SEED CROP INSURANCE REGULATIONS FOR THE 1986
THROUGH 1997 CROP YEARS
1. The authority citation for 7 CFR part 443 continues to read as
follows:
Authority: 7 U.S.C. 1506(l), 1506(p).
2. The part heading is revised to read as set forth above.
3. Subpart Heading ``Subpart--Regulations for the 1986 and
Succeeding Crop Years'' is removed.
4. Section 443.7 is amended by revising the introductory text of
paragraph (d) to read as follows:
Sec. 443.7 The application and policy.
* * * * *
(d) The application for the 1986 through 1997 crop years is found
at subpart D of part 400, General Administrative Regulations (7 CFR
400.37 and 400.38). The provisions of the Hybrid Seed Crop Insurance
[[Page 65350]]
Regulations for the 1986 through 1997 crop years are as follows:
* * * * *
PART 457--COMMON CROP INSURANCE REGULATIONS; REGULATIONS FOR THE
1994 AND SUBSEQUENT CONTRACT YEARS
5. The authority citation for 7 CFR part 457 continues to read as
follows:
Authority: 7 U.S.C. 1506(l), 1506(p).
6. Section 457.152 is added to read as follows:
Sec. 457.152 Hybrid seed corn crop insurance provisions.
The Hybrid Seed Corn Crop Insurance Provisions for the 1998 and
succeeding crop years are as follows:
FCIC policies:
United States Department of Agriculture
Federal Crop Insurance Corporation
Reinsured policies:
(Appropriate title for insurance provider)
Both FCIC and reinsured policies:
Hybrid Seed Corn Crop Provisions
If a conflict exists among the policy provisions, the order of
priority is as follows: (1) The Catastrophic Risk Protection
Endorsement, if applicable; (2) the Special Provisions; (3) these
Crop Provisions; and (4) the Basic Provisions, (Sec. 457.8) with (1)
controlling (2), etc.
1. Definitions.
Adjusted yield. An amount determined by multiplying the county
yield by the coverage level factor.
Amount of insurance per acre. A dollar amount determined by
multiplying the adjusted yield by the price election you select and
subtracting any minimum guaranteed payment, not to exceed the total
compensation specified in the hybrid seed corn processor contract.
If your hybrid seed corn processor contract contains a minimum
guaranteed payment that is stated in bushels, we will convert that
value to dollars by multiplying it by the price election you
selected.
Approved yield. In lieu of the definition contained in the Basic
Provisions, an amount FCIC determines to be representative of the
yield that the female parent plants are expected to produce when
grown under a specific production practice. FCIC will establish the
approved yield based upon records provided by the seed company and
other information it deems appropriate.
Bushel. Fifty-six pounds avoirdupois of shelled corn, 70 pound
avoirdupois of ear corn, or the number of pounds determined under
the seed company's normal conversion chart when that chart is used
to determine the approved yield and the claim for indemnity.
Certified seed test. A warm germination test performed on clean
seed according to specifications of the ``Rules for Testing Seeds''
of the Association of Official Seed Analysts.
Commercial hybrid seed corn. The offspring produced by crossing
a male and female parent plant, each having a different genetic
character. This offspring is the product intended for use by an
agricultural producer to produce a commercial field corn crop for
grain.
County yield. An amount contained in the actuarial documents
that is established by FCIC to represent the yield that a producer
of hybrid seed corn would be expected to produce if the acreage had
been planted to commercial field corn.
Coverage level factor. A factor contained in the Special
Provisions to adjust the county yield for commercial field corn to
reflect the higher value of hybrid seed corn.
Dollar value per bushel. An amount that determines the value of
any seed production to count. It is determined by dividing the
amount of insurance per acre by the result of multiplying the
approved yield by the coverage level percentage, expressed as a
decimal.
Female parent plants. Corn plants that are grown for the purpose
of producing commercial hybrid seed corn and have had the stamens
removed or are otherwise male sterile.
Field run. Commercial hybrid seed corn production before it has
been dried, screened, or processed.
Good farming practices. In addition to the definition contained
in the Basic Provisions, good farming practices include those
practices required by the hybrid seed corn processor contract.
Harvest. Combining, threshing or picking ears from the female
parent plants to obtain commercial hybrid seed corn.
Hybrid seed corn processor contract. An agreement executed
between the hybrid seed corn crop producer and a seed company
containing, at a minimum:
(a) The producer's promise to plant and grow male and female
parent plants, and to deliver all commercial hybrid seed corn
produced from such plants to the seed company;
(b) The seed company's promise to purchase the commercial hybrid
seed corn produced by the producer; and
(c) Either a fixed price per unit of measure (bushels,
hundredweight, etc.) of the commercial hybrid seed corn or a formula
to determine the value of such seed. Any formula for establishing
the value must be based on data provided by a public third party
that establishes or provides pricing information to the general
public, based on prices paid in the open market (e.g., commodity
futures exchanges), to be acceptable for the purpose of this policy.
Inadequate germination. Germination of less than 80 percent of
the commercial hybrid seed corn as determined by using a certified
seed test.
Insurable interest. Your share of the financial loss that occurs
in the event seed production is damaged by a cause of loss specified
in section 10.
Local market price. The cash price offered by buyers for any
production from the female parent plants that is not considered
commercial hybrid seed corn under the terms of this policy.
Male parent plants. Corn plants grown for the purpose of
pollinating female parent plants.
Minimum guaranteed payment. A minimum amount (usually stated in
dollars or bushels) specified in your hybrid seed corn processor
contract that will be paid or credited to you by the seed company
regardless of the quantity of seed produced.
Non-seed production. Production that does not qualify as seed
production because of inadequate germination.
Planted acreage. In addition to the definition contained in the
Basic Provisions, the insured crop must be planted in rows wide
enough to permit mechanical cultivation, unless otherwise provided
by the Special Provisions or by written agreement.
Planting pattern. The arrangement of the rows of the male and
female parent plants in a field. An example of a planting pattern is
four consecutive rows of female parent plants followed by two
consecutive rows of male parent plants.
Practical to replant. In addition to the definition contained in
the Basic Provisions, practical to replant applies to either the
female or male parent plant. It will not be considered practical to
replant unless production from the replanted acreage can be
delivered under the terms of the hybrid seed corn processor
contract, or the seed company agrees that it will accept the
production from the replanted acreage.
Prevented planting. In addition to the definition contained in
the Basic Provisions, prevented planting applies to the female and
male parent plants. The male parent plants must be planted in
accordance with the requirements of the hybrid seed corn processor
contract to be considered planted.
Sample. For the purpose of the certified seed test, at least 3
pounds of randomly selected field run shelled corn for each variety
of commercial hybrid seed corn grown on the unit.
Seed company. A business enterprise that possesses all licenses
for marketing commercial hybrid seed corn required by the state in
which it is domiciled or operates, and which possesses facilities
with enough storage and drying capacity to accept and process the
insured crop within a reasonable amount of time after harvest. If
the seed company is the insured, it must also be a corporation.
Seed production. All seed produced by female parent plants with
a germination rate of at least 80 percent as determined by a
certified seed test.
Shelled corn. Kernels that have been removed from the cob.
Variety. The name, number or code assigned to a specific genetic
cross by the seed company or the Special Provisions for the insured
crop in the county.
2. Unit Division.
For any processor contract that stipulates the amount of
production to be delivered:
(a) In lieu of the definition of ``basic unit'' contained in the
Basic Provisions, a basic unit will consist of all acreage planted
to the insured crop in the county that will be used to fulfill a
hybrid seed corn processor contract;
[[Page 65351]]
(b) There will be no more than one basic unit for all production
contracted with each processor contract;
(c) In accordance with section 12, all production from any basic
unit in excess of the amount under contract will be included as
production to count if such production is applied to any other basic
unit for which the contracted amount has not been fulfilled; and
(d) Optional units will not be established.
3. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
(a) In addition to the requirements of section 3 of the Basic
Provisions, you may select only one price election for all the
hybrid seed corn in the county insured under this policy unless the
Special Provisions provide different price elections by variety, in
which case you may select one price election for each hybrid seed
corn variety designated in the Special Provisions. The price
election you choose for each variety must have the same percentage
relationship to the maximum price offered by us for each variety.
For example, if you choose 100 percent of the maximum price election
for one specific variety, you must also choose 100 percent of the
maximum price election for all other varieties.
(b) The production reporting requirements contained in section 3
of the Basic Provisions are not applicable to this contract.
4. Contract Changes.
In accordance with section 4 of the Basic Provisions, the
contract change date is November 30 preceding the cancellation date.
5. Cancellation and Termination Dates.
In accordance with section 2 of the Basic Provisions, the
cancellation and termination dates are March 15.
6. Report of Acreage.
In addition to the requirements of section 6 of the Basic
Provisions, you must:
(a) Report by type and variety, the location and insurable
acreage of the insured crop;
(b) Report any acreage that is uninsured, including that portion
of the total acreage occupied by male parent plants; and
(c) Certify that you have a hybrid seed corn processor contract
and report the amount, if any, of any minimum guaranteed payment.
7. Insured Crop.
(a) In accordance with section 8 of the Basic Provisions, the
crop insured will be all the female parent plants in the county for
which a premium rate is provided by the actuarial documents:
(1) In which you have a share;
(2) That are grown under a hybrid seed corn processor contract
executed before the acreage reporting date;
(3) That are planted for harvest as commercial hybrid seed corn
in accordance with the requirements of the hybrid seed corn
processor contract and the production management practices of the
seed company; and
(4) That are not (unless allowed by the Special Provisions or by
written agreement):
(i) Planted with a mixture of female and male parent seed in the
same row;
(ii) Planted for any purpose other than for commercial hybrid
seed corn;
(iii) Interplanted with another crop; or
(iv) Planted into an established grass or legume.
(b) An instrument in the form of a ``lease'' under which you
retain control of the acreage on which the insured crop is grown and
that provides for delivery of the crop under substantially the same
terms as a hybrid seed corn processor contract will be treated as a
contract under which you have an insurable interest in the crop.
(c) A commercial hybrid seed corn producer who is also a seed
company may be able to insure the hybrid seed corn crop if the
following requirements are met:
(1) The seed company has an insurable interest in the hybrid
seed corn crop;
(2) Prior to the sales closing date, the Board of Directors of
the seed company has executed and adopted a corporate resolution
that contains the same terms as a hybrid seed corn processor
contract. This corporate resolution will be considered a contract
under this policy;
(3) Sales records for at least the previous years' seed
production must be provided to confirm that the seed company has
produced and sold seed. If such records are not available, the crop
may be insured under the Coarse Grains Crop Provisions with a
written agreement; and
(4) Our inspection reveals that the storage and drying
facilities satisfy the definition of a seed company.
(d) Any of the insured crop that is under contract with
different seed companies may be insured under separate policies with
different insurance providers provided all acreage of the insured
crop in the county is insured. If you elect to insure the insured
crop with different insurance providers, you agree to pay separate
administrative fees for each insurance policy.
8. Insurable Acreage.
In addition to the provisions of section 9 of the Basic
Provisions, we will not insure any acreage of the insured crop:
(a) Planted and occupied exclusively by male parent plants;
(b) Not in compliance with the rotation requirements contained
in the Special Provisions or, if applicable, required by the hybrid
seed corn processor contract; or
(c) If either the female or male parent plants are damaged
before the final planting date and we determine that the insured
crop is practical to replant but it is not replanted.
9. Insurance Period.
(a) In addition to the provisions of section 11 of the Basic
Provisions, insurance attaches upon completion of planting of:
(1) The female parent plant seed on or before the final planting
date designated in the Special Provisions, except as allowed in
section 16 of the Basic Provisions; and
(2) The male parent plant seed.
(b) In accordance with the provisions of section 11 of the Basic
Provisions, the calendar date for the end of the insurance period is
the October 31 immediately following planting.
10. Causes of Loss.
(a) In accordance with the provisions of section 12 of the Basic
Provisions, insurance is provided only against the following causes
of loss that occur within the insurance period:
(1) Adverse weather conditions;
(2) Fire;
(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 the irrigation water supply, if due to a cause of
loss contained in section 10(a) (1) through (7) that occurs during
the insurance period.
(b) In addition to the causes of loss excluded by section 12 of
the Basic Provisions, we will not insure against any loss of
production due to:
(1) The use of unadapted, incompatible, or genetically deficient
male or female parent plant seed;
(2) Frost or freeze after the date established by the Special
Provisions;
(3) Failure to follow the requirements stated in the hybrid seed
corn processor contract and production management practices of the
seed company;
(4) Inadequate germination, even if resulting from an insured
cause of loss, unless you have provided adequate notice as required
by section 11(b)(1); or
(5) Failure to plant the male parent plant seed at a time or in
a manner sufficient to assure adequate pollination of the female
parent plants, unless you are prevented from planting the male
parent plant seed by an insured cause of loss.
11. Duties In The Event of Damage or Loss.
(a) In accordance with the requirements of section 14 of the
Basic Provisions, you must leave representative samples of at least
one complete planting pattern of the female and male parent plant
rows and extend the entire length of each field in the unit. If you
are going to destroy any acreage of the insured crop that will not
be harvested, the samples must not be destroyed until after our
inspection.
(b) In addition to the requirements of section 14 of the Basic
Provisions:
(1) You must give us notice of probable loss at least 15 days
before the beginning of harvest if you anticipate inadequate
germination on any unit; and
(2) You must provide a completed copy of your hybrid seed corn
processor contract unless we have determined it has already been
provided by the seed company, and the seed company certifies that
such contract is used for all its growers without any waivers or
amendments.
12. 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) You will not receive an indemnity payment on a unit if the
seed company refuses to provide us with records we require to
determine the dollar value per bushel of production for each
variety.
[[Page 65352]]
(c) In the event of loss or damage covered by this policy, we
will settle your claim on any unit by:
(1) Multiplying the insured acreage by its respective amount of
insurance per acre, by type and variety if applicable;
(2) Totaling the results of section 12(c)(1) if there are more
than one type or variety;
(3) Multiplying the total seed production to count (see section
12(d)) for each type and variety of commercial hybrid seed corn by
the applicable dollar value per bushel for that type or variety;
(4) Multiplying the total non-seed production to count (see
section 12(e)) for each type and variety by the applicable local
market price determined on the earlier of the date the non-seed
production is sold or the date of final inspection;
(5) Totaling the results of sections 12(c)(3) and 12(c)(4) by
type and variety;
(6) Subtracting the result of section 12(c)(5) from the result
of section 12(c)(1) if there is only one type or variety, or
subtracting the result of 1or variety; and
(7) Multiplying the result of section 12(c)(6) by your share.
For example:
You have a 100 percent share in 50 acres insured for the
development of variety ``A'' hybrid seed corn in the unit, with an
amount of insurance per acre guarantee of $340 (county yield of 160
bushels times a coverage level factor of .867 for the 65 percent
coverage level, times a price election of $2.45 per bushel, minus
the minimum guaranteed payment of zero). Your seed production was
1,400 bushels and the dollar value per bushel was $9.80. Your non-
seed production was 100 bushels with a local market value of $2.00
per bushel. Your indemnity would be calculated as follows:
(1) 50 acres x $340=$17,000 amount of insurance guarantee;
(3) 1,400 bushels x $9.80=$13,720 value of seed production;
(4) 100 bushel of non-seed x $2.00=$200 of non-seed production;
(5) $13,720+$200=$13,920;
(6) $17,000-$13,920=$3,080; and
(7) $3,080 x 100 percent share=$3,080 indemnity payment.
You also have a 100 percent share in 50 acres insured for the
development of variety ``B'' hybrid seed corn in the unit, with an
amount of insurance per acre guarantee of $297 (county yield of 140
bushels times a coverage level factor of .867 for the 65 percent
coverage level, times a price election of $2.45 per bushel, minus
the minimum guaranteed payment of zero). You harvested 1,200 bushels
and the dollar value per bushel for the harvested amount was $8.56.
You also harvested 200 bushels of non-seed with a market value of
$2.00 per bushel. Your indemnity would be calculated as follows:
(1) 50 acres x $340=$17,000 amount of insurance guarantee for
type ``A'' and 50 acres x $297=$14,850 amount of insurance guarantee
for type ``B'';
(2) $17,000+$14,850=$31,850 amount of insurance guarantee;
(3) 1,400 bushels x $9.80=$13,720 value of seed production for
type ``A'' and 1,200 bushels x $8.56=$10,272 value of seed
production for type ``B'';
(4) 100 bushels of non-seed x $2.00=$200 of non-seed production
for type ``A'' and 200 bushels of non-seed x $2.00=$400 of non-seed
production for type ``B'';
(5) $13,720+$200+$10,272+$400=$24,592 value of production to
count;
(6) $31,850-$24,592=$7,258; and
(7) $7,258 x 100 percent share=$7,258 indemnity payment.
(d) Production to be counted as seed production will include:
(1) All appraised production as follows:
(i) Not less than the amount of insurance per acre for acreage:
(A) That is abandoned;
(B) Put to another use without our consent;
(C) That is damaged solely by uninsured causes; or
(D) For which you fail to provide acceptable production records;
(ii) Production lost due to uninsured causes;
(iii) Mature unharvested production with a germination rate of
at least 80 percent of the commercial hybrid seed corn as determined
by a certified seed test. Any such production may be adjusted in
accordance with section 12(f);
(iv) Immature appraised production;
(v) Potential production on insured acreage that you intend to
put to another use or abandon, if you and we agree on the appraised
amount of production. Upon such agreement, the insurance period for
that acreage will end when you put the acreage to another use or
abandon the crop. If agreement on the appraised amount of production
is not reached:
(A) If you do not elect to continue to care for the crop, we may
give you consent to put the acreage to another use if you agree to
leave intact, and provide sufficient care for, representative
samples of the crop in locations acceptable to us (The amount of
production to count for such acreage will be based on the harvested
production or appraisals from the samples at the time harvest should
have occurred. If you do not leave the required samples intact, or
fail to provide sufficient care for the samples, our appraisal made
prior to giving you consent to put the acreage to another use will
be used to determine the amount of production to count); or
(B) If you elect to continue to care for the crop, the amount of
production to count for the acreage will be the harvested
production, or our reappraisal if additional damage occurs and the
crop is not harvested; and
(2) Harvested production that you deliver as commercial hybrid
seed corn to the seed company stated in your hybrid seed corn
processor contract, regardless of quality, unless the production has
inadequate germination.
(e) Production to be counted as non-seed production will include
all harvested or mature appraised production that does not qualify
as seed production to count as specified in section 12(d). Any such
production may be adjusted in accordance with section 12(f).
(f) For the purpose of determining the quantity of mature
production:
(1) Shelled commercial hybrid seed corn will be:
(i) Increased 0.12 percent for each 0.1 percentage point of
moisture below 15 percent; or
(ii) Decreased 0.12 percent for each 0.1 percentage point of
moisture in excess of 15 percent.
(2) The weight of ear corn required to equal one bushel of
shelled seed corn will be increased 1.5 pounds for each full
percentage point of moisture in excess of 14 percent, and any
portion of a percentage point will be disregarded. The moisture
content of ear corn will be determined from a shelled sample of the
ear corn.
(3) When records of commercial hybrid seed corn production
provided by the seed company have been adjusted to a shelled corn
basis of 15.0 percent moisture and 56 pound avoirdupois bushels,
sections 12(f)(1) and (2) above will not apply to harvested
production. In such cases, records of the seed company will be used
to determine the amount of production to count, provided that the
moisture and weight of such production are calculated on the same
basis as that used to determine the approved yield.
13. Prevented Planting.
Your prevented planting coverage will be 50 percent of your
amount of insurance for timely planted acreage. If you have limited
or additional levels of coverage as specified in 7 CFR part 400,
subpart T, and pay an additional premium, you may increase your
prevented planting coverage to a level specified in the actuarial
documents.
Signed in Washington, D.C., on December 5, 1997.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 97-32498 Filed 12-11-97; 8:45 am]
BILLING CODE 3410-08-P
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.