General Crop Insurance Regulations, Tobacco (Guaranteed Plan) Endorsement; and Common Crop Insurance Regulations, Guaranteed Tobacco Crop Insurance Provisions

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 401 and 457

RIN 0563-AA84

General Crop Insurance Regulations, Tobacco (Guaranteed Plan)

Endorsement; and Common Crop Insurance Regulations, Guaranteed Tobacco

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 guaranteed tobacco. 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 tobacco (guaranteed plan) endorsement with the Common Crop

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

restrict the effect of the current tobacco (guaranteed plan)

endorsement to the 1998 and prior crop years.

EFFECTIVE DATE: July 27, 1998.

FOR FURTHER INFORMATION CONTACT: Gary Johnson, 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 12866

This rule has been determined to be exempt for the purposes of

Executive Order 12866 and, therefore, has not been reviewed by the

Office of Management and Budget (OMB).

Paperwork Reduction Act of 1995

Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. chapter

35), the collections of information in this rule have been approved by

the Office of Management and Budget (OMB) under control number 0563-

0053 through October 31, 2000.

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 12612

It has been determined under section 6(a) of Executive Order 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 large entities. Under the

current regulations, a producer is required to complete an application

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

required to give notice of loss and provide the necessary information

to complete a claim for indemnity.

The amount of work required of insurance companies delivering and

servicing these policies will not increase significantly from the

amount of work currently required. The 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 12372

This program is not subject to the provisions of Executive Order

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 12988

This rule has been reviewed in accordance with Executive Order

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 for judicial

review of any determination made by FCIC 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 Monday, June 16, 1997, FCIC published a notice of proposed

rulemaking in the Federal Register at 62 FR 32544 to add to the Common

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

457.136, Guaranteed Tobacco Crop Insurance Provisions. The new

provisions will be effective for the 1999 and succeeding crop years.

These provisions will replace and supersede the current provisions for

insuring guaranteed tobacco found at 7 CFR 401.129 (Tobacco (Guaranteed

Plan) Endorsement). FCIC also amends 7 CFR

[[Page 34550]]

part 401 to limit its effect to the 1998 and prior crop years.

Following publication of the proposed rule, the public was afforded

30 days to submit written comments and opinions. A total of 88 comments

were received from reinsured companies and an insurance service

organization. The comments received and FCIC's responses are as

follows:

Comment: An insurance service organization recommended that FCIC

either revise or delete the definition of ``approved yield.'' The

commenter mentioned that since guaranteed tobacco currently is not an

actual production history (APH) crop, the definition will be questioned

by insureds who do not receive a copy of the Code of Federal

Regulations with their crop insurance policies.

Response: ``Approved yield'' is referenced in section 3 of the Crop

Provisions, so it must be defined. Section 3 clearly indicates that an

approved yield is not necessary unless required by the Special

Provisions. As written, if the FSA guaranteed tobacco support price

program is discontinued and guaranteed tobacco becomes an APH crop in

the future, the Special Provisions could be amended easily to require

an approved yield. Therefore, no changes have been made.

Comment: A reinsured company and an insurance service organization

expressed concern with the definition of ``good farming practices,''

which makes reference to ``cultural practices generally in use in the

county * * * recognized by the Cooperative State Research, Education,

and Extension Service as compatible with agronomic and weather

conditions in the county.'' The commenters questioned whether cultural

practices exist that are not recognized (or possibly not known) by the

Cooperative State Research, Education, and Extension Service. The

commenters also indicated that the term ``county'' in the definition of

``good farming practices'' should be changed to ``area.''

Response: FCIC believes that the Cooperative State Research,

Education, and Extension Service (CSREES) recognizes farming practices

that are considered acceptable for producing guaranteed tobacco. If a

producer is following practices currently not recognized as acceptable

by the CSREES, there is no reason why such recognition cannot be sought

by interested parties. The term ``area'' is less definitive than the

term ``county'' and would cause insurance providers to make

determinations more subjective in nature. Therefore, no change has been

made except that the definition of ``good farming practices'' has been

moved to the Basic Provisions.

Comment: A reinsured company and an insurance service organization

recommended revising the definition of ``harvest'' to include the

requirement that at least 20 percent of the production guarantee must

be cut on each acre to qualify as harvested. Commenters also

recommended that a minimum appraisal of 35 percent of the production

guarantee be established to encourage producers to harvest damaged

tobacco. In some cases, it will be difficult to verify unharvested

production due to deterioration of the leaves before an adjuster works

the final claim. The commenters believe that removal of these

requirements from the current crop provisions will result in a

significant increase in premium rates. Commenters expressed concern

that FCIC may have overreacted if the changes were made because of one

lawsuit.

Response: FCIC has determined that at least 20 percent of the

production guarantee be cut on each acre to qualify as harvested and

the 35 percent minimum appraisal for unharvested acreage is too severe.

Producers should not be forced to incur the costs associated with

harvesting tobacco acres that may not be marketable. In addition, FCIC

cannot ignore a court ruling that such provisions are unenforceable.

Therefore, no change has been made.

Comment: An insurance service organization asked if the phrase ``if

not available'' means the season average price is not available at all

or is not available when a claim for an indemnity is processed. The

commenter stated that the market price is never available when the

tobacco is harvested, only when it is marketed.

Response: The term ``if not available'' means that the market price

is not available because no marketings of the applicable insured type

of tobacco grown in the area have occurred. The provision has been

clarified accordingly.

Comment: An insurance service organization recommended deleting

``marketing window'' from the definition of ``practical to replant.''

The commenter stated that guaranteed tobacco is unlike other crops,

such as processor and fresh market crops, where the producer only has a

certain amount of time to market the crop.

Response: FCIC agrees that the concept of a ``marketing window'' is

most applicable to processor and fresh market crops and recognizes that

guaranteed tobacco is unlike these crops. However, the Federal

Agriculture Improvement and Reform Act of 1996 mandated that FCIC

consider marketing windows in determining whether it is feasible to

require planting during a crop year. Therefore no change has been made

except that the definition of ``practical to replant'' has been moved

to the Basic Provisions.

Comment: A reinsured company and an insurance service organization

expressed concern about the terms ``replace'' and ``replacing'' in the

definition of ``replanting.'' Commenters stated that the terms, as

used, seem awkward and cumbersome.

Response: FCIC believes that the definition of ``replanting''

clearly describes the steps required to replant the crop. However, FCIC

has replaced the phrase ``growing a successful tobacco crop'' with

``producing at least the guarantee,'' for clarity.

Comment: An insurance service organization and a reinsured company

recommended the unit division guidelines in the proposed rule remain

the same in the final rule.

Response: FCIC has not changed the unit division guidelines.

Comment: A reinsured company and an insurance service organization

recommended removing any references to ``annual production reports''

for the APH plan. The commenters contend that if the FSA guaranteed

tobacco support price program is changed or eliminated, it will be

necessary to revise several provisions of the policy.

Response: Section 3(b) of these provisions requires annual

production reports only when required by the Special Provisions. The

current method for establishing yields will continue for the 1998 crop

year. If the guaranteed tobacco support price program is discontinued

or modified in future years, these provisions provide an alternative

method for establishing the production guarantee. Therefore, no change

has been made. However, FCIC has amended the definition of ``support

price'' to include the possibility that the tobacco support program may

be changed. If there is not a tobacco support program, FCIC will

announce the average price per pound for the type of tobacco.

Comment: A reinsured company and an insurance service organization

recommended deleting the word ``carryover'' in section 6. Commenters

stated that the basic premise of Multiple Peril Crop Insurance coverage

is to insure actual planted acreage of the crop. Subtracting the

carryover poundage would take coverage away from a planted crop which

is legally insurable (i.e., the carryover poundage has value and is

exposed to perils). This could have additional unwanted

[[Page 34551]]

consequences by making the insurance providers responsible for tracking

and placing value on carryover poundage.

Response: Although producers normally reduce the number of acres

grown in the current crop year to account for carryover production from

the prior year, they may instead elect to reduce inputs (fertilizer,

etc.), thereby producing fewer pounds per acre. Further, to reduce the

opportunity to falsely report the amount of carryover tobacco at time

of loss adjustment, the amount of any carryover production must be

reported on the acreage report. Therefore, no change has been made.

Comment: A reinsured company and an insurance service organization

asked if the provisions in section 8(c) are intended to allow written

agreement requests for a type not rated in the actuarial documents.

Response: Section 8(c) only references a method of planting.

Therefore, section 8(c) does not authorize written agreements for types

not rated.

Comment: A reinsured company and an insurance service organization

question why section 9(a) is not as precise as section 11(a) of the

Basic Provisions, which specifies ``total destruction * * * on the

unit.''

Response: FCIC has revised section 9(a) to refer to the total

destruction of the tobacco on the unit.

Comment: A reinsured company and an insurance service organization

asked if the current requirement that notice be given without delay if

any tobacco is damaged and will not be sold through an auction

warehouse was removed intentionally from section 11.

Response: Section 14(a)(2) of the Basic Provisions states that ``*

* * you must * * * give us notice within 72 hours of your initial

discovery of damage * * *'' FCIC believes this requirement is

substantially the same as requiring a notice ``without delay,'' so the

latter requirement of section 11 was removed in the proposed rule.

Comment: Two reinsured companies and an insurance service

organization recommended adding the phrase ``containing at least two

rows'' after the phrase ``at least 5 feet wide'' in section 11(a).

Commenters stated that a representative sample of 5 feet could have

only one row in a sample where tobacco is planted in greater than 30

inch rows.

Response: FCIC has amended the provision accordingly.

Comment: Two reinsured companies and an insurance organization

recommended that the word ``resulting'' be added in section 12(b)(2)

and the reference ``section 12(b)(2)'' be deleted from section 12(b)(3)

because reference to the previous item by number is unnecessary.

Response: The recommendations do not add any additional

clarification to the provision. Therefore, no change has been made.

Comment: Two reinsured companies and an insurance service

organization recommend removing the words ``acceptable production

records'' from section 12(c)(1)(D), if these words relate to other APH

references in these provisions.

Response: As stated in earlier responses, section 12(c)(1)(D) will

only apply if annual production reports are required by the Special

Provisions and the provision has been so clarified.

Comment: Two reinsured companies and an insurance service

organization expressed concern that section 12(c)(1)(iii) of these

provisions allows the insured to defer settlement and wait for a later,

generally lower appraisal.

Response: Section 12(c)(1)(iii) allows deferment of a claim only if

the insurance provider agrees that representative samples can be left

or if the insured elects to continue to care for the entire crop. In

either case, if the insured does not provide sufficient care for the

remaining crop, the original appraisal will be used. Therefore, no

change has been made.

Comment: Two reinsured companies and an insurance service

organization are opposed to any reference to the word ``carryover'' in

section 12(g).

Response: Section 12(g) eliminates the adjustment of next year's

production when the insurance provider agrees that any carryover or

current years' tobacco has no market value due to an insured cause of

loss. It also eliminates the opportunity to falsely report that the

carryover and current years' tobacco have no value and thus increase

the indemnity payment. This provision is consistent with the Farm

Service Agency's requirement that tobacco having no value be destroyed.

Therefore, no change has been made.

Comment: Two reinsured companies and an insurance service

organization suggested that the requirement to renew a written

agreement each year should be removed in section 13(d). Terms of the

agreement should be stated in the agreement to fit the particular

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

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

Response: Written agreements are temporary and intended to address

unusual situations. If the condition creating a need for written

agreement remains from year to year, it should be incorporated into the

policy, the Special Provisions, or the actuarial documents. Therefore,

no change has been made except that the provisions for written

agreements have been moved to the Basic Provisions.

Comment: Two reinsured companies and an insurance service

organization asked: (1) Why the Late Planting Agreement Option is no

longer available; and (2) Why the late and prevented planting language

provisions are not included in the proposed rule as they have been in

other crops.

Response: A new section 13 has been added to provide for late

planting coverage. Under section 14, prevented planting coverage will

not be provided for guaranteed tobacco as set out in the Basic

Provisions because the high cash value per acre and the hand labor

required to transplant tobacco on relatively small acreage enables

producers to plant sufficient acreage to maintain their production

levels even under extremely adverse weather conditions that would

prevent planting of most other crops.

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

following changes:

1. Section 1--Removed definitions of ``days,'' ``FSA,'' ``final

planting date,'' and ``USDA,'' because these definitions were moved to

the Basic Provisions. Changed the definition of ``unit'' to ``basic

unit.''

2. Section 12(b)--Revised for clarification. Also, added an example

of an indemnity calculation for illustration purposes.

List of Subjects in 7 CFR Parts 401 and 457

Crop insurance, Guaranteed tobacco, Tobacco (guaranteed plan)

endorsement.

Final Rule

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

Insurance Corporation hereby amends 7 CFR parts 401 and 457 as follows:

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

1988 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. Section 401.129 introductory paragraph is revised to read as

follows:

Sec. 401.129 Tobacco (guaranteed plan) endorsement

The provisions of the Tobacco (Guaranteed Plan) Crop Insurance

[[Page 34552]]

Endorsement for the 1990 through the 1998 crop years are as follows:

* * * * *

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

1998 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 457.136 is added to read as follows:

Sec. 457.136 Guaranteed tobacco crop insurance provisions

The Guaranteed Tobacco Crop Insurance Provisions for the 1999 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:

Guaranteed Tobacco Crop Insurance 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 with (1) controlling

(2), etc.

1. Definitions.

Adequate stand. A population of live plants per unit of acreage

that can be expected to produce at least your production guarantee.

Approved yield. The yield calculated in accordance with 7 CFR

part 400, subpart G, if required by section 3(b) of these

provisions.

Average value. For appraised production, the estimated value of

all such production divided by the appraised pounds. For harvested

production, the total value of such production divided by the

harvested pounds.

Basic unit. In lieu of the definition in the Basic Provisions, a

basic unit is all insurable acreage of an insurable type of tobacco

in the county in which you have a share on the date of planting for

the crop year and that is identified by a single FSA farm serial

number at the time insurance first attaches under these provisions

for the crop year.

Carryover tobacco. Any tobacco produced on the FSA farm serial

number in previous years that remained unsold at the end of the most

recent marketing year.

Discount variety. Tobacco defined as such under the provisions

of the United States Department of Agriculture tobacco price support

program.

Fair market value. The current year's tobacco season average

market price for the applicable type of tobacco obtained from the

average sale of tobacco through a market other than an auction

warehouse.

Harvest. Cutting or priming and removing all insured tobacco

from the field in which it was grown.

Hydroponic plants. Seedlings grown in liquid nutrient solutions.

Late planting period. In lieu of the definition in section 1 of

the Basic Provisions, the period that begins the day after the final

planting date for the insured crop and ends 15 days after the final

planting date, unless otherwise specified in the Special Provisions.

Market price.

(a) For types 11, 12, 13, 14, 21, 22, 23, 31, 35, 36, 37, 42,

44, 54, and 55:

(1) The support price per pound for the insured type of tobacco

as announced by the USDA for its tobacco price support program; or

(2) The current year's season average market price, when

available; if not available because the insured type of tobacco has

not been marketed in the area, the previous year's season average

market price for the applicable insured type tobacco grown in the

area for any crop year a tobacco price support program is not in

effect.

(b) For types 32, 41, 51, 52, and 61, the current year's season

average market price, when available; if not available because the

insured type of tobacco has not been marketed in the area, the

previous year's season average market price for the applicable

insured type of tobacco grown in the area.

Planted acreage. Land in which tobacco seedlings, including

hydroponic plants, have been transplanted by hand or machine from

the tobacco bed to the field.

Pound. Sixteen ounces avoirdupois.

Priming. A method of harvesting tobacco by which each leaf is

severed from the stalk as it matures.

Production guarantee (per acre). Either the number of pounds of

tobacco for the tobacco type and classification shown on the county

actuarial table, or the approved yield as provided in the Special

Provisions, multiplied by the coverage level percentage you elect.

Replanting. In lieu of the definition in section 1 of the Basic

Provisions, performing the cultural practices necessary to replace

the tobacco plant, and then replacing the tobacco plant in the

insured acreage with the expectation of producing at least the

guarantee.

Season average market price. The simple average price paid by

buyers for a tobacco type for all days sales occur at public markets

during the tobacco sales season in the area in which the farm is

located.

Support price. The average price per pound for the type of

tobacco as announced by the USDA under its tobacco price support

program, or, if there is no such program, as announced by FCIC.

Tobacco bed. An area protected from adverse weather in which

tobacco seeds are sown and seedlings are grown until transplanted

into the tobacco field by hand or machine.

2. Unit Division.

A unit will be determined in accordance with the definition of

basic unit contained in section 1 of these Crop Provisions. The

provision in the Basic Provisions regarding optional units are not

applicable, unless specified by the Special Provisions.

3. Insurance Guarantees, Coverage Levels, and Prices for

Determining Indemnities.

In addition to the requirements of section 3 of the Basic

Provisions:

(a) You must select only one price election and coverage level

for each guaranteed tobacco type designated in the Special

Provisions that you elect to insure.

(b) A production report, if required by the Special Provisions,

must be filed in accordance with section 3(c) of the Basic

Provisions.

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 report any carryover tobacco from previous

years on the acreage report.

7. Insured Crop.

In accordance with section 8 of the Basic Provisions, the

insured crop will be any of the tobacco types designated in the

Special Provisions, in which you have a share, that you elect to

insure, and for which a premium rate is provided by the actuarial

documents.

8. Insurable Acreage.

In addition to the provisions of section 9 of the Basic

Provisions, we will not insure any acreage under these crop

provisions that is:

(a) Planted to a discount variety;

(b) Planted to a tobacco type for which no premium rate is

provided by the actuarial documents;

(c) Planted in any manner other than as provided in the

definition of ``planted acreage'' in section 1 of these Crop

Provisions, unless otherwise provided by the Special Provisions or

by written agreement; or

(d) Damaged before the final planting date to the extent that

most producers of tobacco acreage with similar characteristics in

the area would normally not further care for the crop, unless such

crop is replanted or we agree that replanting is not practical.

9. Insurance Period.

In accordance with the provisions of section 11 of the Basic

Provisions, insurance ceases at the earliest of:

(a) Total destruction of the tobacco on the unit;

(b) Weighing-in at the tobacco warehouse;

(c) Removal of the tobacco from the field where grown except for

curing, grading, packing, or immediate delivery to the tobacco

warehouse; or

(d) The calendar date for the end of the insurance period, which

is:

(i) Types 11 and 12--November 30;

(ii) Type 13--October 31;

(iii) Type 14--October 15;

(iv) Types 31 and 36--February 28;

(v) Types 21, 35 and 37--March 15;

(vi) Types 22 and 23--April 15;

[[Page 34553]]

(vii) Type 32--May 15;

(viii) All other types--April 30.

10. Causes of Loss.

In accordance with the provisions of section 12 of the Basic

Provisions, insurance is provided only against the following causes

of loss that occur during the insurance period:

(a) Adverse weather conditions;

(b) Fire;

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

application of pest control measures;

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

improper application of disease control measures;

(e) Wildlife;

(f) Earthquake;

(g) Volcanic eruption; or

(h) Failure of the irrigation water supply, if caused by a peril

specified in section 10(a) through (g) that occurs during the

insurance period.

11. Duties In The Event of Damage or Loss.

(a) In accordance with the requirements of section 14 of the

Basic Provisions, any representative samples we may require of each

unharvested tobacco type must be at least 5 feet wide (at least two

rows), and extend the entire length of each field in the unit. The

samples must not be harvested or destroyed until after our

inspection.

(b) If tobacco types 11, 12, 13, or 14 are insured and you have

filed a notice of damage, you also must leave all tobacco stalks and

stubble intact for our inspection. The stalks and stubble must not

be destroyed until we give you written consent to do so or until 30

days after the end of the insurance period, whichever is earlier.

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 unit, we will combine all optional units

for which such production records were not provided; or

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

production to such units in proportion to our liability on the

harvested acreage for the units.

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

will settle your claim by:

(1) Multiplying the insured acreage by its respective production

guarantee, by type if applicable;

(2) Multiplying each result in section 12(b)(1) by the

respective price election, by type if applicable;

(3) Totaling the results of section 12(b)(2) if there are more

than one type;

(4) Multiplying the total production to count (see section

12(c)), for each type if applicable, by its respective price

election;

(5) Totaling the results of section 12(b)(4), if there are more

than one type;

(6) Subtracting the results of section 12(b)(4) from the results

of section 12(b)(2) if there is only one type or subtracting the

results of section 12(b)(5) from the result of section 12(b)(3) if

there are more than one type; and

(7) Multiplying the result of section 12(b)(6) by your share.

For example:

You have 100 percent share in 1 acre of type 35 (dark air cured)

guaranteed tobacco in the unit, with a 2,000 pounds per acre

guarantee and a price election of $2.00 per pound. You are only able

to harvest 500 pounds. Your indemnity would be calculated as

follows:

(1) 1.0 acre x 2,000 pounds = 2,000 pounds guarantee;

(2) 2,000 pounds x $2.00 price election = $4,000.00 value of

guarantee;

(4) 500 pounds x $2.00 price election = $1,000.00 value of

production to count;

(6) $4,000.00-$1,000.00 = $3,000.00 loss; and

(7) $3,000 x 100 percent = $3,000 indemnity payment.

(c) The total production to count (pounds of appraised or

harvested production multiplied by the applicable price) for all

insurable acreage on the unit will include:

(1) All appraised production as follows:

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

for any acreage:

(A) That is abandoned;

(B) Put to another use without our consent;

(C) That is damaged solely by uninsured causes;

(D) For which you fail to provide production records, if

required by the Special Provisions, that are acceptable to us; or

(E) Of types 11, 12, 13, or 14 when the stalks and stubble have

been destroyed without our consent;

(ii) Production lost due to uninsured causes.

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

put to another use or abandon with our consent, 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 value of

production to count for such acreage will be the number of pounds

harvested or appraised production multiplied by the support price

taken 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) All harvested production from insurable acreage.

(d) Mature tobacco production that is damaged by insurable

causes will be adjusted for quality based on the USDA Official

Standard Grades for the insured type if it has an average value less

than the market price, as follows:

(1) Divide the average value of the damaged appraised and/or

harvested production by the market price;

(2) Multiply the result in section 12(d)(1) (not to exceed 1.0)

by the number of pounds of damaged appraised and/or harvested

tobacco; and

(3) Multiply the product by your price election.

If no market price has been established for the grade of the

damaged tobacco, a market price will be imputed by reducing the

lowest available market price by 20 percent for each grade that the

production falls below the grade for which such lowest market price

is available.

(e) To enable us to determine the fair market value of tobacco

not sold through auction warehouses, we must be given the

opportunity to inspect such tobacco before it is sold, contracted to

be sold, or otherwise disposed. Failure to provide us the

opportunity to inspect such tobacco may result in rejection of any

claim for indemnity.

(f) If we consider the best offer you receive for any such

tobacco to be inadequate, we may obtain additional offers on your

behalf.

(g) Once we agree that any carryover or current year's tobacco

has no market value due to insured causes, you must destroy it and

it will not be considered production to count. If you refuse to

destroy such tobacco, we will include it as production to count and

value it at the support price.

13. Late Planting.

In lieu of late planting provisions in the Basic Provisions

regarding acreage initially planted after the final planting date,

insurance will be provided for acreage planted to the insured crop

after the final planting date as follows:

(a) The production guarantee (per acre) for each type planted

during the late planting period will be reduced by:

(1) One percent (1%) for the 1st through the 10th day; and

(2) Two percent (2%) for the 11th through the 15th day;

(b) The premium amount for insurable acreage planted to the

insured crop after the final planting date will be the same as that

for timely planted acreage. If the amount of premium you are

required to pay (gross premium less our subsidy) for acreage planted

after the final planting date exceeds the liability on such acreage,

coverage for those acres will not be provided (no premium will be

due and no indemnity will be paid for such acreage).

14. Prevented Planting.

The prevented planting provisions in the Basic Provisions are

not applicable to guaranteed tobacco.

Signed in Washington, D.C., on June 19, 1998.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance Corporation.

[FR Doc. 98-16967 Filed 6-24-98; 8:45 am]

BILLING CODE 3401-08-P