Amendment to the Production Flexibility Contract Regulations

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1412

Amendment to the Production Flexibility Contract Regulations

RIN 0560-AF25

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Commodity Credit Corporation (CCC) is issuing its final

rule with respect to the amendments to the production flexibility

contract regulations published as an interim final rule in the Federal

Register on October 23, 1997. After considering the comments received

from the public, this rule adopts the interim rule as final with

changes as indicated. The rule also incorporates a specific change

required by the Agriculture, Rural Development, Food and Drug

Administration, and Related Agencies Appropriations Act, 1998, which

provides that if wild rice is planted on contract acreage, the contract

payment shall be reduced in an amount reflecting each contract acre

planted to wild rice.

EFFECTIVE DATE: June 8, 1998.

FOR FURTHER INFORMATION CONTACT: Lynn H. Tjeerdsma, Farm Service

Agency, United States Department of Agriculture, STOP 0517, 1400

Independence Avenue, SW., Washington, DC 20250-0517, telephone 202-720-

6602, Internet address: [email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be not significant and was not

reviewed by the Office of Management and Budget (OMB).

Regulatory Flexibility Act

It has been determined that the Regulatory Flexibility Act is not

applicable because CCC is not required by 5 U.S.C. 553 or any other

provision of law to publish a notice of proposed rulemaking with

respect to the subject matter of this rule.

Environmental Evaluation

An Environmental Evaluation with respect to the proposed rule has

been completed. It has been determined that this action will not have

significant adverse effects on environmental factors such as wildlife

habitat, water quality, air quality, land use, or appearance.

Therefore, neither an Environmental Assessment nor an Environmental

Impact Statement is needed.

Executive Order 12988

This rule has been reviewed in accordance with Executive Order

12988. The provisions of this proposed rule preempt State laws to the

extent such laws are inconsistent with the provisions of this rule. The

provisions of this rule are not retroactive. Before any judicial action

may be brought concerning the provisions of this rule, the

administrative remedies must be exhausted.

Executive Order 12372

This program/activity is not subject to the provisions of Executive

Order 12372, which requires 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).

Paperwork Reduction Act

The amendments to 7 CFR part 1412 set forth in this rule were

previously approved under OMB Control Number 0560-0092. An information

collection notice was published in the Federal Register (62 FR 27216)

on May 19, 1997. No comments were received regarding this notice. A

revised information collection package has been submitted to OMB.

Executive Order 12612

It has been determined 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.

Unfunded Mandates Reform Act of 1995

This rule contains no Federal mandates under the regulatory

provisions of Title II of the Unfunded Mandates Reform Act of 1995

(UMBRA) 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 UMBRA.

Background

On October 23, 1997, CCC published an interim rule in the Federal

Register (62 FR 55150) to add a final date for producers to designate

payment shares and provide supporting documentation to be eligible to

earn contract payments in a fiscal year when payment shares have not

been designated in such fiscal year; change the dates by which a

producer or owner must inform county committee of changes in interest;

add a final date for producers to request advance payments; clarify

cash lease provisions; change the provisions for determining whether a

lease is a cash lease or a share lease with respect to combination

leases; and change the date by which all landowners, tenants, and

sharecroppers failing to reach an agreement regarding the division of

contract payments for a fiscal year must execute a contract to be

eligible to receive the contract payment for that

[[Page 31103]]

fiscal year. Following publication of the interim rule, the public was

afforded 30 days to submit comments. CCC extended the comment period to

December 1, 1997 (62 FR 63441). There were 101 comments received in

response to the notice during the comment period that ended on December

1, 1997. The comments were received from 74 producers, 19 commodity

groups and eight Members of Congress. Five respondents were opposed to

the amendment to Sec. 1412.302(b). One hundred respondents were opposed

to, and one respondent was in favor of, the amendment to

Sec. 1412.303(a)(4). The comments received and CCC responses are as

follows:

Comment: Section 1412.302(b) Respondents were concerned that the

timing of the announcement allowed landlords and tenants a minimal

amount of time to negotiate leases to be eligible for the December

advance payment, and that the deadlines for requesting advance payments

were provided in legislation that did not envision USDA eliminating the

options through administrative changes. Respondents urged the

Department to suspend implementation of the new deadlines relating to

advance payments to ensure that the Department's implementation of the

Federal Agriculture Improvement and Reform Act of 1996 (1996 Act) is

consistent with the intent of Congress.

Response: The 1996 Act specifies that at the option of the owner or

producer for fiscal year 1997 and each subsequent year, 50 percent of

the annual contract payment shall be made on December 15 or January 15

of the fiscal year. Section 1412.302(b) does not change the statutory

deadline for issuing advance payments. This amendment to the regulation

was made to ensure that requests for advance payments are received in a

timely manner to enable CCC to issue the payments by the statutory

deadlines. The provision will not be changed from the interim rule.

Comment: Section 1412.303(a)(4) Respondents were concerned that

this provision was announced at an inappropriate time. Respondents were

also concerned that the provision would result in higher fixed cash

rents, reduced contract payments for tenants, limited crop financing

for tenants, increased financial exposure of tenants, renegotiation of

rental arrangements, minimal or no savings to the Government,

elimination of cash rent flexibility provisions under combination

leases, decreased land values because of limited improvements being

made to the land resulting in job losses and reduced tax bases in rural

communities, and elimination of the planting flexibility provisions in

the 1996 Act. Respondents were also concerned that the Department did

not explain the basis for the change.

Response: The amendment to Sec. 1412.303(a)(4) relates to

combination leases that are partially paid in cash and partially paid

in the crop. Prior to the amendment to this section, most combination

leases result in a determination that the lease is a share lease unless

there is a disaster. Changing this provision provides uniformity in

determining whether a lease is a cash or share lease. The substance of

Sec. 1412.303(a)(4) will not be changed, but the timing of the

implementation of this section has been modified as indicated below so

that producers who had made long-term commitments prior to the

publication of the interim rule will be unaffected. In addition,

Sec. 1412.303(a)(6) has been amended to comport with these changes.

Changes from the interim rule include:

Section 1412.206 Planting Flexibility

This rule incorporates the change required by the Agriculture,

Rural Development, Food and Drug Administration, and Related Agencies

Appropriations Act, 1998, which provides that if wild rice is planted

on contract acreage, the contract payment shall be reduced by an acre

for each contract acre planted to wild rice.

Section 1412.303 Sharing of Contract Payments

Combination leases are leases that contain provisions for both a

guaranteed amount such as a fixed dollar amount, or quantity and a

share of a crop or crop proceeds. Combination leases include those

leases that provide for the greater of a guaranteed amount, or share of

the crop or crop proceeds. The amendment provides that all combination

leases shall be considered share leases for fiscal years 1999 and later

fiscal years except for those producers who had made leasing and share-

designation decisions prior to the interim rule.

This rule amends Sec. 1412.303:

(1) by adding language that for fiscal year 1999 and subsequent

fiscal years, except as provided in (2) where producers had already

made leasing and share-designation decisions prior to the interim rule,

that a ``combination'' lease shall be considered a share lease if the

lease provides for both a guaranteed amount, such as a fixed dollar

amount or quantity, and a share of a crop or crop proceeds, including

leases which provide for the greater of a guaranteed amount or share of

the crop or crop proceeds; and

(2) by adding language that for producers who had already made

leasing and share-designation decisions prior to the interim rule that

for the years which had been designated and a lease executed, those

leases will continue to be considered cash leases.

List of Subjects in 7 CFR Part 1412

Contract acreage, Contract payments, Planting flexibility, Price

support programs.

Accordingly, the interim rule amending 7 CFR part 1412, which was

published at 62 FR 55150 on October 23, 1997, is adopted as a final

rule with the following changes:

PART 1412--PRODUCTION FLEXIBILITY CONTRACTS FOR WHEAT, FEED GRAINS,

RICE, AND UPLAND COTTON

1. The authority citation for part 1412 continues to read as

follows:

Authority: 7 U.S.C. 7201 et seq.; 15 U.S.C. 714b and 714c; and

Sec. 734 of Pub. L. 105-86.

2. Section 1412.201 is amended by revising paragraph (c) to read as

follows:

Sec. 1412.201 Production flexibility contract.

* * * * *

(c) All producers sharing in the contract payments on a farm whose

payment shares have not been designated for a fiscal year must sign the

contract designating payment shares and provide supporting

documentation as specified in parts 12, 1400, and 1405 of this title no

later than August 1 of the fiscal year to be eligible to earn a

contract payment in that fiscal year. If all producers have not signed

the contract by this deadline, no producers on the contract will be

eligible for a payment for that farm for that fiscal year.

3. Section 1412.206 is amended by revising paragraph (a) to read as

follows:

Sec. 1412.206 Planting flexibility.

(a) For the 1996 through 2002 crop years, any crop may be planted

on contract acreage on a farm, except as limited elsewhere in this

section. For fiscal year 1998, for each acre a producer plants wild

rice on contract acreage, 1 acre will not be used in determining the

contract payment. Any crop may be planted on cropland in excess of the

contract acreage.

* * * * *

4. Section 1412.207 paragraphs (d)(1) and (d)(2) are revised to

read as follows:

[[Page 31104]]

Sec. 1412.207 Succession-in-interest to a production flexibility

contract.

* * * * *

(d) * * *

(1) August 1 of the fiscal year in which the change occurs if

producers on the contract acreage remain the same, but payment shares

change; or

(2) August 1 of the fiscal year in which the change occurs, if a

new producer is being added to the contract.

* * * * *

5. Section 1412.302 paragraph (b) is revised to read as follows:

* * * * *

Sec. 1412.302 Contract payment provisions.

* * * * *

(b) At the option of the producer, for fiscal year 1997 and each

subsequent fiscal year, 50 percent of the annual contract payment shall

be paid on December 15 or January 15, as requested by the producer. To

receive the advance payment the producers on the farm must be in

compliance with all requirements of the contract at the time of the

advance payment. For fiscal year 1998 and each subsequent fiscal year,

all producers sharing in the contract payment on the farm must no later

than 15 days prior to the final date to issue the advance payment, sign

the contract designating payment shares and provide supporting

documentation as specified in parts 12, 1400, and 1405 of this title,

if applicable; and request the advance payment. If all producers on the

farm have not signed the contract designating payment shares according

to this paragraph, then no producers will be eligible for a payment for

that farm for that fiscal year.

* * * * *

6. Section 1412.303 is amended by adding paragraph (a)(6) and

revising paragraphs (a)(2) and (a)(4) to read as follows:

Sec. 1412.303 Sharing of contract payments.

(a) * * *

(2) A lease will be considered a cash lease if the lease provides

for only a guaranteed sum certain cash payment, or a fixed quantity of

the crop (for example, cash, pounds, or bushels per acre).

* * * * *

(4) Beginning on October 1, 1998, for years in which payment shares

had not been designated prior to October 23, 1997, a producer's lease,

including a lease which provides for the greater of a guaranteed amount

or share of the crop or crop proceeds, shall be considered a share

lease if the lease provides for both:

(i) A guaranteed amount such as a fixed dollar amount or quantity;

and

(ii) A share of the crop proceeds.

* * * * *

(6) A lease that the county committee determined to be a cash lease

under Sec. 1412.303 as contained in the 7 CFR, parts 1200 to 1499,

edition revised as of January 1, 1997, will be considered a cash lease

for the years in which payment shares were designated if, prior to

October 23, 1997:

(i) The designation of shares was executed; and

(ii) The county committee was provided a copy of the lease

applicable for the designated years.

* * * * *

7. Section 1412.304 paragraph (b) is revised to read as follows:

Sec. 1412.304 Provisions relating to tenants and sharecroppers.

* * * * *

(b) Notwithstanding the provisions set forth at Sec. 1412.302(c),

if the landowners, tenants and sharecroppers on a farm fail to reach an

agreement regarding the division of contract payments for a fiscal

year, the county committee shall make the payment at a later date if

all persons eligible to receive a share of the contract payment have

executed a contract not later than August 1 of the applicable fiscal

year and subsequently agree to the division of contract payment.

Signed at Washington, DC, on June 1, 1998.

Keith Kelly,

Executive Vice President, Commodity Credit Corporation.

[FR Doc. 98-15000 Filed 6-5-98; 8:45 am]

BILLING CODE 3410-05-P