Common Crop Insurance Regulations; Basic Provisions

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AB69

Common Crop Insurance Regulations; Basic Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Crop Insurance Corporation (FCIC) amends the

Common Crop Insurance Policy; Basic Provisions for the purpose of:

Clarifying certain provisions; adding definitions and provisions to

allow enterprise and whole farm units; allowing the use of a written

agreement to insure acreage that has not been planted and harvested in

one of the three previous crop years; removing the requirement that a

minimum amount of prevented planting acreage be contiguous before a

prevented planting payment can be made; and removing the requirement

that the Palmer Drought Severity Index be used to determine eligibility

for a prevented planting payment in certain circumstances. The intended

effect of this action is to create a policy that best meets the needs

of the insured.

EFFECTIVE DATE: November 30, 1998.

FOR FURTHER INFORMATION CONTACT: Janice Nuckolls, 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

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

to be significant and, therefore, it has been reviewed by OMB.

Cost-Benefit Analysis

A Cost-Benefit Analysis has been completed and is available to

interested persons at the address listed above. In summary, the

analysis finds that of all the changes in the final rule, eliminating

the contiguous acreage requirement to determine eligible prevented

planting acreage will have the most impact. The impact is greatest in

certain regions of the Northern Plains, but the effect on overall crop

insurance payments is expected to be small. Additional indemnities

resulting from this change are estimated to average $500,000 per year.

Premium rate adjustments have been made to cover the additional

indemnities. Additional costs to the Government will be about $250,000

for premium subsidies, $110,000 in administrative subsidies, and

$38,000 in underwriting losses. Other provisions of the rule serve to

clarify provisions or make changes that may cause slight changes in

expected indemnities and premiums. Removal of the use of the Palmer

Drought Severity Index is not expected to significantly impact

indemnities over those that were expected to be covered. Previous

premium rates reflected this risk. Other than removal of the contiguous

land requirement indicated above, little impact is foreseen.

Paperwork Reduction Act of 1995

Under the provisions of the Paperwork Reduction Act of 1995 (44

U.S.C. chapter 35), the collections of information for this rule have

been previously approved by the Office of Management and Budget (OMB)

under control number 0563-0053 through October 31, 2000. The amendments

set forth in this rule do not revise the content or alter the frequency

of reporting for any of the forms or information collections cleared

under the above referenced docket.

Unfunded Mandates Reform Act of 1995

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA),

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 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 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. New provisions included in this

rule will not impact small entities to a greater extent than large

entities. The amount of work required of the insurance companies

delivering and servicing these policies will not increase from the

amount of work currently required. 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 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.

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 against FCIC for

judicial review may be brought.

Environmental Evaluation

This action is not expected to have a significant economic impact

on the quality of the human environment, health, and safety. Therefore,

neither an Environmental Assessment nor an Environmental Impact

Statement is needed.

Background

On Wednesday, September 30, 1998, FCIC published a notice of

proposed rulemaking in the Federal Register at 63 FR 52194-52198 to

amend the Common Crop Insurance Policy; Basic Provisions (Basic

Provisions) (7 CFR part 457) effective for the 1999 and succeeding crop

years for all crops with contract change dates after the effective date

of the final rule, and for the 2000 or 2001 and succeeding crop years

for all crops with contract change dates prior to the effective date of

the final rule.

The public was afforded 15 days following filing of the proposed

rule at the Federal Register to submit written comments and opinions. A

total of 59 comments were received from an insurance service

organization, reinsured companies, crop insurance agents, and a

national commodity

[[Page 66707]]

group. The comments received and FCIC's responses are as follows:

Comment: An insurance service organization stated that sufficient

time was not allowed to deal with the proposed rule. It stated that a

fifteen day comment period is simply inadequate to deal with the

magnitude of concerns and is an inadequate amount of time to

sufficiently consider the implications and to solicit and compile

comments from member companies.

Response: To meet the needs of producers and for ease in

administering the policy, it was important the provisions be revised

and effective for 1999 spring crops. This requires the rule to be made

effective prior to the contract change dates for the specific crops. In

order to accomplish this, the comment period could not be longer than

15 days. Most of the changes in the proposed rule arose from requests

from producers and insurance companies. All individual members and

other interested parties had an opportunity to comment.

Comment: A reinsured company and an insurance service organization

made the following comments regarding enterprise and whole farm units:

(1) Definitions should be consistent among policies such as Crop

Revenue Coverage (CRC), Revenue Assurance (RA), the Basic Provisions,

(2) The phrase ``and at least 50 insurable acres'' should be deleted

from the definitions of enterprise unit and whole farm unit. The

commenter stated that as long as at least two basic units were

involved, the number of acres should be irrelevant. (3) Clarify whether

the enterprise unit discount is based on the number of acres or the

number of sections in the enterprise unit. (4) A producer who farms in

four different sections, owning the land in one section but cash-

renting the land in the other three sections would qualify for one

basic unit and not for enterprise units under the proposed definition.

However, if the other three sections were share-rented, the producer

would qualify for at least two separate basic units and, therefore, for

an enterprise unit. This does not seem equitable. (5) Whether the

sentence referring to at least two basic units and at least 50

insurable acres mean cropland (plantable) acreage that may be counted

for more than one crop or is it crop specific, meaning a small

operation may qualify for an enterprise unit on a crop one year but not

the next because of crop rotation or other factors, and whether it

includes acreage that was prevented from being planted. (6) The

provision that requires producers to report acreage and production at

the basic unit level defeats the purpose of unit consolidation offered

by enterprise and whole farm units and should be eliminated. (7) Allow

an insured to report acreage and production on an optional unit basis

if the producer chooses (currently allowed under CRC). This would allow

flexibility in succeeding years to insure optional units. (8) Failure

to report information at the enterprise or whole farm unit level, if

those levels are chosen, should not result in premiums and indemnities

being based on basic units. It would be more logical to treat basic

units that were not reported as such as enterprise and whole farm units

rather than as basic units. This reversion to basic units is logical

when the insured wanted further division into optional units but did

not certify accordingly. The commenter questioned why enterprise and

whole farm units would revert to basic units when the required

information, on a basic unit basis is not provided. This could result

in more units and a higher possibility of a loss, although at a higher

premium. Section 34(a)(5) may not be necessary if enterprise or whole

farm units do not revert to basic units if acceptable production

reports are not provided.

The insurance service organization stated that adding to the

definition of ``enterprise unit,'' the requirement of separate legal

descriptions and at least two optional units, may cause need for some

clarification. The insurance service organization also asked whether

the following can qualify for enterprise units: (A) Multiple legal

descriptions as well as multiple basic units when two or more basic

units (by share arrangement in the same section) are not divided into

optional units; (B) Multiple optional units as a substitute for

multiple basic units when one basic unit is divided into two or more

optional units by legal description; and (C) When a basic unit is

divided into two optional units, such as irrigated and non-irrigated

practices within one section, rather than by legal description.

The reinsured company stated that section 34(a)(1) provides that an

election of enterprise or whole farm units must be made before the

earliest sales closing date for the insured crops. The company stated

this language would be appropriate for whole farm units (multiple crops

for a whole farm unit); however, language should also be added to

specify the sales closing date for the crop for enterprise units

(single crop). The insurance service organization stated if the

enterprise unit definition is changed to match the CRC wheat

definition, section 34(a) would need to be revised accordingly.

Response: With respect to the first set of comments: (1)

Consistency among crop insurance policies is desirable. However, FCIC

is required to offer its programs at an actuarially sound rate. Private

insurance products need only be offered at an actuarially appropriate

rate. Therefore, consistency may not always be achieved. (2) FCIC has

deleted the 50 acre requirement from both the enterprise and whole farm

units. (3) For enterprise units, the discount will be based on the

number of sections, not the number of acres. (4) FCIC has revised the

definition of ``enterprise unit'' to allow acreage to qualify for an

enterprise unit if the acreage would qualify for either two or more

basic units of the same crop located in separate sections, section

equivalents, or farm serial numbers or two or more optional units of

the same crop located in separate sections, section equivalents, or

farm serial numbers. Therefore, both scenarios discussed in the comment

would qualify for an enterprise unit. (5) As stated above, the

definition of ``enterprise unit'' has been revised to require two or

more basic or optional units of the same crop. (6) and (7) Producers

will still be required to report acreage on a basic or optional unit to

ensure eligibility for an enterprise unit, although when determining

premiums or indemnities, all the acreage within the enterprise unit

will be used. FCIC has eliminated the requirement that producers report

production on a basic or optional unit basis. Production must be

reported for the enterprise unit. However, a provision has also been

added to specify that any required production records must be

maintained separately by basic or optional units if the producer wishes

to change the unit structure in subsequent crop years. (8) FCIC has

eliminated the provisions that specified that if the producer fails to

report information at the enterprise or whole farm level, premiums and

indemnities will be based on the basic units. Instead, if the producer

fails to provide any required production reports for the enterprise

unit, the producer will be assigned a yield in accordance with section

3(c)(1) of the Basic Provisions. It is only if the acreage never

qualified for enterprise units will the acreage be divided in basic

units.

With respect to the second set of comments: (A) When there are

basic units in multiple sections, the acreage will qualify for an

enterprise unit. (B) When there are multiple optional units in multiple

sections, the acreage will qualify for enterprise units. (C) When there

are multiple optional units in the

[[Page 66708]]

same section, the acreage will not qualify as an enterprise unit.

Comment: A reinsured company suggested the wording in section 2(e)

should clarify that administrative fees that are not paid also make a

person ineligible to participate in crop insurance programs.

An insurance service organization asked if sections 2(e)(1)-(10)

would remain after revising section 2(e) introductory text. The

insurance service organization also stated that the phrase ``you may be

determined to be ineligible'' suggests that a company may choose to not

make that determination even though payment is past due. They

recommended saying ``You will be determined to be ineligible.''

Response: FCIC has added a provision in section 2(e) to include

administrative fees as ``any amount due'' for clarity. This provision

was not intended to permit insurance companies to allow insureds to

remain eligible even though they may be indebted. FCIC has revised the

provision to change the word ``may'' to ``will.'' Sections 2(e)(1)-(10)

were inadvertently deleted in the proposed rule and will remain in the

policy.

Comment: A reinsured company stated that the provision in section

9(a)(1)(iii) that allows a written agreement to provide insurance

coverage for acreage that has not been planted and harvested within one

of the 3 previous crop years must recognize that this is most likely to

occur at acreage reporting time. The written agreement process must be

very streamlined and flexible.

Response: The written agreement provisions allow written agreements

to be requested after the sales closing date if the producer was not

aware, or should not have been aware of the condition that required the

existence of a written agreement before the sales closing date, or if

it is submitted in accordance with written agreement regulations.

Written agreements will be prepared and submitted in accordance with

the provisions in the Basic Provisions, written agreement regulations

and FCIC approved procedures. Therefore, no change has been made.

Comment: An insurance service organization suggested that, if

perennial crops are limited to trees, vines or bushes, this should be

stated in the definitions instead of in section 9(a)(1)(i)(D).

Response: Perennial crops, under its common usage includes any

plant that regrows each crop year without replanting and would

encompass more than just tree, vine, and bush crops. However, section

9(a)(1)(i)(D) is intended to only include tree, vine and bush crops.

Therefore, no change has been made.

Comment: A reinsured company stated the language in section 15(d)

of the proposed rule that requires a crop to be destroyed or put to

another use prior to payment of an indemnity is unnecessary and should

not be implemented. Such language indicates lack of confidence in

appraisal methods and will require two contacts to resolve a claim (one

contact to appraise and another contact to confirm destruction or other

use).

An insurance service organization stated that we should have more

confidence in appraisals than section 15(d) of the proposed rule

indicates. The commenter stated that if harvest is general in the area,

it may not be prudent to require destruction. The producer may want to

maintain the damaged crop as a cover crop on highly erodible land. The

commenter asked who would be responsible to determine the crop had been

destroyed or the acreage put to another use before the indemnity is

paid. If this is intended to make insureds aware of their

responsibility in this matter and is treated as one of the facts

insureds certify to as part of the loss adjustment process, it may be

useful.

A reinsured company stated that section 15(d) of the proposed rule

appears to put in writing that use of a certification form for this

purpose will continue to be acceptable. However, if this section means

that such acreage must be physically inspected prior to an indemnity

payment, the company definitely opposed it.

Response: FCIC has redesignated proposed section 15(d) as 15(e) to

recognize the new section 15(d) that was added in the interim rule that

was published in the Federal Register on July 30, 1998. Actual

production is always more accurate than appraisals. FCIC has revised

newly designated section 15(e) to specify that appraised production

will be used if the acreage is not harvested. If the acreage is

harvested, the insured must report the harvested production, which will

be used to determine the indemnity, unless otherwise specified in the

policy.

Comment: A national commodity group stated that a producer should

be allowed to plant a noninsured ``ghost crop'' on the same acreage

without losing a prevented planting payment for a crop that was

prevented from being planted due to an insured cause.

Response: Prevented planting ``substitute crop'' coverage was

provided for producers with coverage greater than catastrophic risk

protection beginning with the 1995 crop year. During the three crop

years this provision was effective, FCIC received numerous complaints

from agents, reinsured companies, commodity groups, and producers, that

the provision was subject to abuse, and that it was difficult to

establish ``intent'' as required under those provisions.

If a producer is prevented from planting the ``intended'' crop, it

is the producer's choice to leave the acreage idle, plant a cover crop,

or plant another crop for harvest. Only one crop normally is produced

per acre, per crop year. Instead, FCIC has discovered that producers

were receiving windfalls by receiving a benefit from the crop they were

prevented from planting and the benefit associated with producing

another crop on the acreage. This was never an intended effect of

prevented planting. Therefore, no change has been made.

Comment: A reinsured company and an insurance service organization

stated that the entire prevented planting concept should be

reconsidered. The reinsured company stated that the prevented planting

provisions are overly complex and not workable. The company recommended

that the entire prevented planting process would be more understandable

and easier to administer if a set dollar amount per acre was

established (the amount could vary by geographic area) that would be

paid for acres that remained unplanted due to insurable causes after a

set date (which would also vary by geographic area), rather than making

prevented planting payments on a crop-specific basis.

The insurance service organization stated that the proposed changes

provide only minor remedial relief to the prevented planting portions

of the policy that continue to be complicated and burdensome. These

areas of the policy are major concerns of the industry that elevate

both loss and administrative costs, and subject providers to excessive

scrutiny by RMA's Risk Compliance Division. The insurance service

organization stated that it was unable to adequately address the

prevented planting provisions within the time constraints allowed. It

stated that the rule does not remedy larger problems of the current

concept and that they will work with FCIC to improve the prevented

planting provisions.

Response: The recommended changes, which are materially beyond the

scope of the proposed rule, cannot be accomplished without benefit of

public comment. FCIC considered similar ideas from the insurance

industry in the past and found the

[[Page 66709]]

recommendation lacked detail, would create additional administrative

burden, and may not be in the best interest of the insureds. FCIC is

willing to review any detailed proposal for improving prevented

planting for possible use in future crop years. Therefore, no change

has been made.

Comment: A reinsured company suggested expanding the definition of

``field'' to be more consistent with the Farm Service Agency (FSA)

definition. That definition incorporates references to ``crop lines

being acceptable to delineate a field, if past farming practices

indicate the crop lines are not subject to change.''

Response: A more permanent boundary, such as those required by the

insurance policy, rather than the more liberal definition of FSA, is

simpler to administer and best serves the purpose of field designation

for the prevented planting provisions. The suggested revision would

increase the administrative burden on the reinsured companies, which

the current definition avoids. Therefore, no change has been made.

Comment: A reinsured company recommended that the definition of

``Palmer Drought Severity Index'' be expanded to state that the

classification is determined on a weekly basis. Also, the rule must

clarify how this index is to be administered when the sales closing

date or final planting date occur between two weekly indexes. The

company suggested that FCIC do additional research because it believes

that neither the Palmer Drought Severity Index, which is a long term

index, nor the Crop Moisture Index, which is a short term index,

adequately define drought for all planting situations. The company

stated that some combination of the two indexes or other alternatives

might be useful.

Response: FCIC has received numerous complaints that although

drought was a major problem, the Palmer Drought Severity Index did not

reach the required ``severe or extreme'' category because it did not

accurately reflect actual drought conditions at the time of planting.

FCIC has reviewed the Crop Moisture Index and does not believe that it

would be a viable alternative. Therefore, FCIC has deleted the

definition of the Palmer Drought Severity Index and its reference in

section 17(d).

Instead of the Palmer Drought Severity Index, FCIC has added

language in section 17(d) to clarify when drought will be considered as

an insurable cause of loss for prevented planting.

Comment: Reinsured companies and an insurance service organization

commented on the definition of ``prevented planting.'' A reinsured

company stated that the phrase ``general in the surrounding area and

that prevents other producers from planting acreage with similar

characteristics'' is very vague and is subject to many interpretations.

This company was concerned whether oversight organizations would rely

on a company's interpretation or question the determinations made by

the company.

The insurance service organization questioned the intent of the

revised definition. It asked that if insureds are prevented from

planting until the final planting date due to an insurable cause and

are not required to plant in the late planting period (even if

possible) to qualify for a prevented planting payment, whether it

matters if there is an insurable cause of loss within the late planting

period. The commenter also stated that a crop planted in the late

planting period is covered with a late planting guarantee and if no

crop is planted in the late planting period, it is covered with a

prevented planting guarantee because planting was prevented before the

final planting date. The language, ``if you elect to plant the insured

crop during the late planting period, failure to plant the insured crop

within the late planting period . . .'' is not necessary since an

insured would not need a cause of loss in the late planting period.

Another reinsured company suggested that, for crops with a late

planting period, insureds be allowed to report prevented planting

acreage up to ten days after the final planting date, to encourage

producers to plant during that period.

Response: The proposed language ``general in the surrounding area

and that prevents other producers from planting acreage with similar

characteristics'' is intended to require the comparison of acreage,

which is a major factor in determining whether acreage is prevented

from being planted, and allow a producer legitimately prevented from

planting due to an insurable cause to qualify for prevented planting

coverage without requiring that over 50 percent of the producers in the

surrounding area also be prevented. Reasonableness will be the standard

used by oversight organizations examining the conduct of the reinsured

companies.

The intent of the language regarding the late planting period is to

allow producers to collect a prevented planting payment if they were

prevented from planting by the final planting date. The previous

definition made it unclear whether producers were required to be

prevented from planting by the end of the late planting period to be

eligible for a prevented planting payment. FCIC has amended the

definition of prevented planting in section 1 for clarification.

The reduction in the guarantee already provides a sufficient

incentive for producers to plant early in the late planting period.

Requiring the producer to declare that he has been prevented from

planting before the end of the late planting period may subject the

producer to sanctions if the producer later plants the crop. All

reporting must occur after the late planting period to give producers a

chance to plant the crop. Therefore, no change has been made.

Comment: A reinsured company suggested that section 17(a)(3) should

be revised to specify that prevented planting coverage is not available

if the insured planted any crop (not just the ``insured crop'') during

or after the late planting period, except an approved cover crop

planted for haying or grazing.

Response: Section 17(a)(3) is intended to clarify that prevented

planting provisions do not apply to any acreage when the insured crop

is prevented from being planted and that same insured crop is planted

during or after the late planting period. FCIC has revised section

17(a)(3) to specify that such acreage is covered under the late

planting provisions. Provisions in section 17(f)(5) exclude prevented

planting coverage for any acreage on which another crop is planted for

harvest. FCIC does not see any reason to repeat this provision.

Comment: A reinsured company and an insurance service organization

stated that section 17(d) provides that if a late planting period is

applicable, that period will also be considered when determining if

drought or failure of the irrigation water supply is an insurable cause

of loss for the purposes of prevented planting. They questioned why the

late planting period would matter if the date for determining prevented

planting under the proposal is the final planting date.

The insurance service organization asked if the phrase ``if a late

planting period is applicable'' means if the insured planted or

attempted to plant the insured crop during the late planting period, or

only if a late planting period is available for the crop in question.

If the latter, they recommended that FCIC consider revising the phrase

to state, ``* * * or within the late planting period (for crops with a

late planting

[[Page 66710]]

period)'' and place a comma before the word ``either'' and delete the

comma that now follows the word. The insurance service organization

also asked if the Palmer Drought Severity Index is still used. If so,

will the acreage qualify for prevented planting as long as the index

classifies the acreage as ``extreme'' or ``severe'' within the late

planting period, even though it did not reach one of those categories

by the final planting date?

Response: As stated above, FCIC has eliminated all references to

the Palmer Drought Severity Index and substituted another standard.

Section 17(d) is revised to clarify that drought will be considered an

insurable cause of loss for non-irrigated acreage if the drought exists

through the planting period to the final planting date, or within the

late planting period if the producer elects to try to plant the crop.

Comment: An insurance service organization stated that both column

headings in section 17(e)(1) refer to the four most recent crop years,

and asked if this means ``APH crop years'' or ``policy crop years.'' If

the former, this could mean having to verify backward an unlimited

number of years due to crop rotation, etc. They also questioned the

wording of the last phrase in both columns, ``* * * (have/have not)

received a prevented planting insurance guarantee,'' asking if a

prevented planting guarantee is considered the same as a prevented

planting indemnity for this purpose. If so, they suggested referring to

it as an indemnity. The commenter also stated that the headings are so

lengthy that it might be at least as clear to change this back from

table format to the standard outline format of the rest of the policy.

Response: Reference to the ``four most recent crop years'' means

the crop year as defined in the Basic Provisions, not APH crop years.

However, the heading also specifies ``any crop''. Therefore, reinsured

companies only have to verify the total acreage planted in each of the

previous four crop years. Reference to prevented planting insurance

guarantee in section 17(e)(1) is not the same as a prevented planting

payment. The term prevented planting insurance guarantee is necessary

to recognize acreage that received a prevented planting guarantee prior

to 1998, when payment began on an acre by acre basis, where an

indemnity may not have been paid under previous prevented planting

rules. While the column headings may be somewhat lengthy, FCIC believes

the chart format is the easiest format to present this information.

Therefore, no change has been made.

Comment: A reinsured company, an insurance service organization,

and crop insurance agents commented about removing the requirement that

a minimum number of prevented planting acres be contiguous from section

17(f)(1). The reinsured company strongly objected to removing the

contiguous requirement, stating that the potential negative effects on

loss ratios and delivery costs (loss adjustment expenses) are too

great. The commenter stated that it does not support the action because

they have no knowledge of proposed rate increases and because the

Standard Reinsurance Agreement, that governs company risk sharing and

administrative expense reimbursement is already in place for 1999. The

company stated that this would greatly increase loss adjustment

expenses and workload, as potholes and small acreages must be

determined and accumulated, resulting in an increased number of payable

prevented planting claims and increased indemnities. The company stated

that these prospects were not contemplated in the Standard Reinsurance

Agreement. The company further stated that, while FCIC may project

additional indemnities of $500,000 per year, they are not comfortable

that this figure is correct. They also stated that the increased loss

adjustment expenses are not identified in the Cost-Benefit Analysis,

but they will be greatly increased. The company was concerned that,

while the Cost-Benefit Analysis suggests higher premium rates, they

have no detail concerning these rates, and they doubt that they will

provide enough increased premium or administrative expense subsidy to

cover the increased indemnities or loss adjustment expenses.

The reinsured company challenged the statement in the Regulatory

Flexibility Act section in the preamble of the proposed rule which

states that, ``the amount of work required of the insurance companies

delivering and servicing these policies will not increase from the

amount of work currently required.'' The company stated that this is an

untrue statement given the loss adjustment process that will be

required to determine prevented planting acreage that would not have

been required if the ``contiguous'' requirement remained.

The reinsured company also stated that language contained in

section 17(f)(1) requiring knowledge of the crops planted by field in

the four most recent crop years is not workable. In many cases, the

provider will have no way of determining this information.

The crop insurance agents supported FCIC's proposal to remove the

contiguous acreage requirement from section 17(f)(1), stating that this

change is needed to fairly treat producers who might have a high

percentage of their land prevented from being planted but do not have a

contiguous block of prevented planting acres that is of sufficient

size.

The insurance service organization stated that section 17(f)(1)

requires that, in order for unplanted acreage to be considered

prevented planting acreage for a different crop than the crop planted

in the field, the insured must have produced both crops in the same

field in the same crop year within any of the four most recent crop

years. They stated that four years is not enough. The commenter also

suggested rewording the beginning of the second sentence to, ``Any

prevented planting acreage within a field that contains planted acreage

will be considered to be acreage of the same crop unless * * *'' or

similar wording. This avoids the problems of saying acreage that was

prevented from being planted ``will be presumed to have been planted *

* *''

Response: FCIC proposed to remove the ``contiguous'' acreage

requirement due to the numerous complaints received since the

requirement was implemented. This change was intended to recognize that

potholes and other small portions of fields are wet in most years,

although planting occasionally may be possible. However, this provision

has prevented some producers having a substantial number of acres that

could not be planted from qualifying for prevented planting coverage

because a single block of prevented planting acreage was not large

enough.

FCIC acknowledges that removing the ``contiguous'' acreage

requirement may result in an increased number of claims qualifying for

prevented planting payments. However, the reinsured company's complaint

that loss adjustment expenses and workload would greatly increase by

removal of this provision is not accurate. Prevented planting acreage

must be determined to assure the ``contiguous'' requirement is met.

Therefore, the loss adjustment expenses and workload are incurred in

any case. Further, FCIC has simply restored a part of the prevented

planting coverage that was in effect prior to the 1998 crop year.

Therefore, FCIC has ample evidence upon which to base the amount of

premium increase and estimate any additional losses. Although the

recommended change to remove the contiguous requirement is being made

after the date the SRA became effective for 1999, this change is done

within the time required for making contract

[[Page 66711]]

changes and will result in an increase in premium that should offset

any additional costs. Therefore, no change has been made.

The previous four crop years is an appropriate amount of time to

determine if a producer has a history of planting two crops in a field,

and is consistent with the four year time period used to determine the

maximum acreage eligible for prevented planting coverage. It is the

producer's burden to provide evidence of past planting practices. If

the producer cannot meet this burden, the acreage will be considered as

intended to be planted to the crop planted in the field. Therefore, no

change has been made.

FCIC has revised section 17(f)(1) to specify that ``Any prevented

planting acreage within a field that contains planted acreage will be

considered to be acreage of the same crop unless * * *'' and has added

references to crop, crop type, and practice for clarification.

Comment: A reinsured company stated that the 20 acre or 20 percent

acreage requirement to qualify for a prevented planting payment is too

high. The company suggested these parameters be changed to a 5 acre or

5 percent deductible amount and that only acreage in excess of this

amount be paid for prevented planting. The commenter stated that this

threshold would be consistent with NASS figures for acreage

historically left unplanted.

Response: Prevented planting regulations since the 1994 crop year

have had the 20 acre or 20 percent requirement. FCIC did not receive

adverse comments until the word ``contiguous'' was added beginning with

the 1998 crop year. Removing the word contiguous, while still retaining

the 20 acre or 20 percent requirement, best achieves the goal of not

paying prevented planting claims when only a small number of acres are

prevented from being planted. FCIC believes that once the minimum

acreage threshold has been met, all prevented planting acreage should

be indemnified. Therefore, no change has been made.

Comment: A reinsured company commented regarding the language

contained in section 17(f)(5), which states if one of the crops being

double-cropped is not insurable, other verifiable records of it being

planted may be used, recommending that only one crop should be

considered for prevented planting purposes and that no prevented

planting payment should be made for a second crop.

Response: Crop insurance, including prevented planting coverage, is

intended to compensate producers for their actual losses. Therefore,

producers who traditionally plant one crop per year can receive a

prevented planting payment for failure to plant that crop. However, if

producers have the expectation of producing two crops for a single

year, compensating them for their actual losses requires the payment of

a prevented planting payment if the producer is unable to plant one of

the crops. Therefore, no change has been made.

Comment: A reinsured company and an insurance service organization

commented on section 17(f)(12), stating that this section contains

several references to the ``four most recent years.'' The company

recommended that this should be revised to ``four most recent crop

years'' to be consistent throughout section 17.

The insurance service organization asked whether the phrase

``receive a prevented planting insurance guarantee'' means that as long

as such crop type was reported as prevented planting on the acreage

report within the four most recent crop years, it does not matter

whether any prevented planting payment was made on such acreage. If so,

they stated that language conflicts with section 17(e)(1)(i)(A), which

states that the maximum prevented planting acreage will not include

reported prevented planting acreage planted to a substitute crop other

than an approved cover crop.

Response: FCIC has revised section 17(f)(12) to refer to ``four

most recent crop years.'' The phrase ``receive a prevented planting

insurance guarantee'' was added because there are some years where the

producer is prevented from planting a crop, whether indemnified or not.

Now the provision states that no prevented planting payment will be

made for any crop that the producer has not planted, or has not

received a prevented planting guarantee for in at least one of the last

four years. This language does not conflict with the provisions

contained in section 17(e)(1)(i)(A). Provisions in section

17(e)(1)(i)(A) specify the method to determine the maximum acreage

eligible for prevented planting coverage of each crop. Section

17(f)(12) determines the crop acreage eligible for prevented planting.

Comment: A reinsured company stated that FCIC must assure that the

language in section 17(g), along with the provisions contained in 17

(e) and (f), sufficiently limits the high-risk land eligible for

prevented planting in relation to the total acres (planted or not) for

the crop.

Response: The provisions contained in sections 17 (e), (f), and (g)

limit the number of high risk acres eligible for prevented planting

under a catastrophic risk policy to the maximum number of high-risk

acres insured under the catastrophic risk policy in any one of the four

most recent crop years. Therefore, no change has been made.

Comment: Reinsured companies and an insurance service organization

commented on the provisions in section 17(h). They stated that the

provisions are too complex and difficult to administer. The reinsured

companies stated that the provision requires knowledge of the crop

planted on the acreage previously and that this conflicts with the

other prevented planting provisions which are just based on a number of

acres eligible and are not tied to a specific crop on specific acreage.

The companies and the insurance service organization point out the

administrative burden associated with making such determinations and

the problems that arise when there was no crop planted the previous

year or if the eligible acres for the crop that was planted to that

acreage have already been exhausted because the crop was planted on

other acreage. An insurance service organization also asked the

consequences if the previous crop planted on the acreage was not an

insurable crop, is a perennial, was not insured, or the acreage was

just coming out of CRP. It also asked whether the crop that the

producer was prevented from planting has to be insurable and whether

the crop will be eligible for prevented planting the following year.

As a solution, one company suggested providing coverage on a non-

crop specific basis. Another company suggested that the provision be

deleted and all eligible prevented planting acreage be determined in

accordance with section 17(e). A company also stated that it would be

simplest to state the crop acres on which the extra prevented planting

acres should be applied. It suggested that, as an alternative, to

determine the eligible prevented planting acres remaining for all crops

and to prorate the extra prevented planting acres to these crops in

proportion to the number of acres remaining. This would be consistent

with the rest of the prevented planting provisions by using the

eligible acres established over the four previous crop years and taking

into account the remaining eligible acres for prevented planting from

the insurable crops on the policy.

Response: FCIC acknowledges the problems associated with the

requirement that the eligible prevented planting acreage will be based

on the crop planted the previous year on the

[[Page 66712]]

acreage. Instead, FCIC has revised the provision to base the guarantee,

etc., on the crops insured for the current year for which the producer

has remaining eligible prevented planting acreage. The company need

only look at the application or acreage report to see the crops listed.

Most producers who have insured a crop in the farming operation do not

cancel their policy when they elect not to plant the crop during the

crop year. As a result, the crop remains insured and the eligible base

acreage for the crop may be used to determine the guarantee for those

acres where the producer intended to plant a crop without an adequate

base. FCIC has also added a provision that if there are several crops

with eligible base acres that may be used to establish the guarantee,

etc., the crops that would have provided the prevented planting

coverage most like the intended crop will be used first. This is

intended to ensure that the producer receives fair compensation.

Comment: A reinsured company recommended that FCIC develop a means,

such as a flowchart to effectively ``map'' the major options available

in the implementation of the prevented planting provisions. This

information could be presented at a spring update training session

prior to the 1999 spring crop year to assure uniform understanding by

all.

Response: FCIC agrees that a flow chart may be helpful to map the

prevented planting provisions and will work with insurance providers or

their service organization to develop such a chart.

Comment: A reinsured company stated it applauds the provision in

section 24(e) that provides that amounts owed to the company may be

collected through administrative set off from payments the policyholder

receives from U.S. Government agencies and is anticipating procedures

for its implementation.

An insurance service organization asked whether the producer will

be removed from the Ineligible Tracking System once the amount owed is

offset by another government payment.

Response: Unfortunately, FCIC only has the authority to use

administrative offset from payments received from other agencies,

against any portion of the debt that has been paid by FCIC. There is no

authority to offset that portion paid by the company. Section 24(e)

just puts the producer on notice that debts may be subject to such

offset. The producers name will only be removed from the Ineligible

Tracking System once all amounts due have been paid.

Additionally, FCIC received the following comments regarding

provisions that FCIC did not propose to change. These changes cannot be

made without first proposing the recommended changes and allowing the

public to comment. FCIC will consider these recommendations when

additional changes to the regulations are proposed.

Comment: A reinsured company recommended the ``Agreement to

Insure'' section of the policy be amended to clarify the priority order

for crop specific endorsements or options such as malting barley. The

company stated that during recent discussions on malting barley it was

mentioned that the Malting Barley Endorsement takes precedence over the

Special Provisions and the order of priority is currently not clear.

Comment: A reinsured company, a national commodity group, and an

insurance service organization expressed concern regarding the ability

of a producer to collect multiple indemnities for the same acreage

after the first, and possibly additional crops have failed. The

reinsured company recommended adding provisions to limit payment of

indemnities to one per acre per crop year, with the exception of

legitimate fall and spring crops. A national commodity group stated

that the second crop should be considered a ``ghost crop'' if the farm

does not have a history of double-cropping.

An insurance service organization has presented a policy prototype

that includes continued coverage as the producer tries to get a crop

established.

Comment: A reinsured company recommended adding wording to section

7(b) to authorize deducting unpaid premium from replant claims.

Comment: A reinsured company recommended adding language in section

20 to require arbitration proceedings to begin within 12 months.

Comment: A national commodity group stated that producers who plant

corn in areas that historically have been subject to aflatoxin should

not be allowed to insure that corn when they have the option of

planting grain sorghum, which is resistant to aflatoxin.

In addition to the changes described above and minor editorial and

format changes, FCIC has made the following changes:

1. The definition of ``crop year'' in section 1 is revised to

specify that it is the period within which the insured crop is normally

grown, regardless of whether or not it is actually grown, and

designated by the calendar year in which the insured crop is normally

harvested. This change clarifies that any year in which the crop is

prevented from being planted will not affect the crop year designation.

2. Section 6(f) is revised to clarify that when a producer fails to

report a unit and the insurer denies liability for the unreported

units, the insured's share of any production from the unreported unit

will be allocated, for loss purposes only, as production to count to

the reported units in proportion to the liability on each reported

unit; however, such production will not be allocated to prevented

planting acreage or otherwise affect any prevented planting payment.

3. Section 28 is revised to clarify that when a transfer of right

to an indemnity is in effect, that both the transferor and the

transferee are jointly and severally liable for the payment of both the

premium and administrative fees.

Good cause is shown to make this rule effective upon filing for

public inspection at the Office of the Federal Register. This rule

provides prevented planting coverage for crops under the Basic

Provisions, as applicable. This rule must be effective prior to the

November 30, 1998, contract change dates of the crops for which these

revised prevented planting provisions are effective. Therefore, public

interest requires the agency to act immediately to make these

provisions available for as many crops as possible for the 1999 crop

year.

List of Subjects in 7 CFR Part 457

Crop insurance.

Final Rule

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

Insurance Corporation amends 7 CFR part 457 as follows:

PART 457--COMMON CROP INSURANCE REGULATIONS

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

follows:

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

Sec. 457.2 [Amended]

2. Section 457.2(e) is amended to remove the words ``paragraph 21''

and insert the words ``paragraph 24'' in their place.

Sec. 457.8 [Amended]

3. Section Sec. 457.8 is amended as follows:

A. Section 1 of the Basic Provisions is amended by adding

definitions for ``enterprise unit'' and ``whole farm unit,'' removing

the definition of ``palmer drought severity index,'' and by revising

the definitions of ``crop year'' and ``prevented planting'' to read as

follows:

[[Page 66713]]

1. Definitions.

* * * * *

Crop year. The period within which the insured crop is normally

grown, regardless of whether or not it is actually grown, and

designated by the calendar year in which the insured crop is

normally harvested.

* * * * *

Enterprise unit. All insurable acreage of the insured crop in

the county in which you have a share on the date coverage begins for

the crop year. An enterprise unit must consist of:

(1) Two or more basic units of the same insured crop that are

located in two or more separate sections, section equivalents, or

FSA farm serial numbers; or

(2) Two or more optional units of the same insured crop

established by separate sections, section equivalents, or FSA farm

serial numbers.

* * * * *

Prevented planting. Failure to plant the insured crop with

proper equipment by the final planting date designated in the

Special Provisions for the insured crop in the county. You may also

be eligible for a prevented planting payment if you failed to plant

the insured crop with the proper equipment within the late planting

period. You must have been prevented from planting the insured crop

due to an insured cause of loss that is general in the surrounding

area and that prevents other producers from planting acreage with

similar characteristics.

* * * * *

Whole farm unit. All insurable acreage of the insured crops in

the county in which you have a share on the date coverage begins for

each crop for the crop year.

* * * * *

B. Section 2(e) introductory text, of the Basic Provisions is

revised to read as follows:

2. Life of Policy, Cancellation, and Termination.

* * * * *

(e) If any amount due, including administrative fees or premium,

is not paid or an acceptable arrangement for payment is not made on

or before the termination date for the crop on which the amount is

due, you will be determined to be ineligible to participate in any

crop insurance program authorized under the Act in accordance with 7

CFR part 400, subpart U.

* * * * *

C. Sections 6(a)(1) and (2), 6(e) and 6(f) of the Basic Provisions

are revised to read as follows:

6. Report of Acreage.

(a) * * *

(1) If you insure multiple crops with us that have final

planting dates on or after August 15 but before December 31, you

must submit an acreage report for all such crops on or before the

latest applicable acreage reporting date for such crops; and

(2) If you insure multiple crops with us that have final

planting dates on or after December 31 but before August 15, you

must submit an acreage report for all such crops on or before the

latest applicable acreage reporting date for such crops.

* * * * *

(e) We may elect to determine all premiums and indemnities based

on the information you submit on the acreage report or upon the

factual circumstances we determine to have existed, subject to the

provisions contained in section 6(g).

* * * * *

(f) If you do not submit an acreage report by the acreage

reporting date, or if you fail to report all units, we may elect to

determine by unit the insurable crop acreage, share, type and

practice, or to deny liability on such units. If we deny liability

for the unreported units, your share of any production from the

unreported units will be allocated, for loss purposes only, as

production to count to the reported units in proportion to the

liability on each reported unit. However, such production will not

be allocated to prevented planting acreage or otherwise affect any

prevented planting payment.

D. Sections 9(a)(1)(i)(D) and 9(a)(1)(iii) of the Basic

Provisions are revised to read as follows:

9. Insurable Acreage.

(a) * * *

(1) * * *

(i) * * *

(D) Because a perennial tree, vine, or bush crop was grown on

the acreage;

* * * * *

(iii) The Crop Provisions or a written agreement specifically

allow insurance for such acreage;

* * * * *

E. Section 15 of the Basic Provisions is amended to add a new

subsection (e) to read as follows:

(e) Appraised production will be used to calculate your claim if

you will not be harvesting the acreage. To determine your indemnity

based on appraised production, you must agree to notify us if you

harvest the crop and advise us of the production. If the acreage

will be harvested, harvested production will be used to determine

any indemnity due, unless otherwise specified in the policy.

F. Section 16(b)(2) of the Basic Provisions is amended to add the

word ``and'' immediately following the semicolon.

G. Section 16(b)(3) of the Basic Provisions is removed and section

16(b)(4) is redesignated as section 16(b)(3).

H. Section 16(c) of the Basic Provisions is revised to read as

follows:

16. Late Planting.

* * * * *

(c) The premium amount for insurable acreage specified in this

section 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 such acreage exceeds the liability, coverage for those

acres will not be provided (no premium will be due and no indemnity

will be paid).

I. Section 16(d) of the Basic Provisions is added to read as

follows:

16. Late Planting.

* * * * *

(d) Any acreage on which an insured cause of loss is a material

factor in preventing completion of planting, as specified in the

definition of ``planted acreage'' (e.g., seed is broadcast on the

soil surface but cannot be incorporated) will be considered as

acreage planted after the final planting date and the production

guarantee will be calculated in accordance with section 16(b)(1).

J. Revise section 17(a) of the Basic Provisions to delete the word

``and'' at the end of section 17(a)(1)(ii), add ``; and'' at the end of

section 17(a)(2), and add a new section 17(a)(3) to read as follows:

17. Prevented Planting.

(a) * * *

(3) You did not plant the insured crop during or after the late

planting period. If such acreage was planted to the insured crop

during or after the late planting period, it is covered under the

late planting provisions.

* * * * *

K. Revise sections 17(d) introductory text and 17(d)(1) of the

Basic Provisions to read as follows:

17. Prevented Planting.

* * * * *

(d) Drought or failure of the irrigation water supply will be

considered to be an insurable cause of loss for the purposes of

prevented planting only if on the final planting date (or within the

late planting period if you elect to try to plant the crop):

(1) For non-irrigated acreage, the area that is prevented from

being planted has insufficient soil moisture for germination of seed

and progress toward crop maturity due to a prolonged period of dry

weather. Prolonged precipitation deficiencies must be verifiable

using information collected by sources whose business it is to

record and study the weather, including, but not limited to, local

weather reporting stations of the National Weather Service; or

* * * * *

L. The middle column heading in the table in section 17(e)(1) of

the Basic Provisions is revised to read as follows:

``Eligible acres if, in any of the 4 most recent crop years, you

have planted any crop in the county for which prevented planting

insurance was available or have received a prevented planting

insurance guarantee''.

* * * * *

M. The last column heading in the table in section 17(e)(1) of the

Basic Provisions is revised to read as follows:

``Eligible acres if, in any of the 4 most recent crop years, you

have not planted any crop in the county for which prevented planting

insurance was available or have not received a prevented planting

insurance guarantee''.

* * * * *

[[Page 66714]]

N. Sections 17(f)(1), (f)(11), and (f)(12) of the Basic Provisions

are revised to read as follows:

17. Prevented Planting.

* * * * *

(f) * * *

(1) That does not constitute at least 20 acres or 20 percent of

the insurable crop acreage in the unit, whichever is less. Any

prevented planting acreage within a field that contains planted

acreage will be considered to be acreage of the same crop, type, and

practice that is planted in the field unless the acreage that was

prevented from being planted constitutes at least 20 acres or 20

percent of the total insurable acreage in the field and you produced

both crops, crop types, or followed both practices in the same field

in the same crop year within any of the 4 most recent crop years;

* * * * *

(11) Based on an irrigated practice production guarantee or

amount of insurance unless adequate irrigation facilities were in

place to carry out an irrigated practice on the acreage prior to the

insured cause of loss that prevented you from planting. Acreage with

an irrigated practice production guarantee will be limited to the

number of acres allowed for that practice under sections 17(e) and

(f); or

(12) Based on a crop type that you did not plant, or did not

receive a prevented planting insurance guarantee for, in at least

one of the four most recent crop years. Types for which separate

price elections, amounts of insurance, or production guarantees are

available must be included in your APH database in at least one of

the four most recent crop years, or crops that do not require yield

certification (crops for which the insurance guarantee is not based

on APH) must be reported on your acreage report in at least one of

the four most recent crop years except as allowed in section

17(e)(1)(i)(B). We will limit prevented planting payments based on a

specific crop type to the number of acres allowed for that crop type

as specified in sections 17(e) and (f).

* * * * *

O. Section 17(f)(5) of the Basic Provisions is revised to add the

following text to the end of the paragraph between the word ``acreage''

and the semicolon: ``(If one of the crops being double-cropped is not

insurable, other verifiable records of it being planted may be used)''

* * * * *

P. Section 17(g) of the Basic Provisions is redesignated as 17(i)

and new sections 17(g) and (h) are added to read as follows:

17. Prevented Planting.

* * * * *

(g) If you purchased a limited or additional coverage policy for

a crop, and you executed a High Risk Land Exclusion Option that

separately insures acreage which has been designated as ``high-

risk'' land by FCIC under a Catastrophic Risk Protection Endorsement

for that crop, the maximum number of acres eligible for a prevented

planting payment will be limited for each policy as specified in

sections 17(e) and (f).

(h) If you are prevented from planting a crop for which you do

not have an adequate base of eligible prevented planting acreage, as

determined in accordance with section 17(e)(1), your prevented

planting production guarantee or amount of insurance, premium, and

prevented planting payment will be based on the crops insured for

the current crop year, for which you have remaining eligible

prevented planting acreage. The crops used for this purpose will be

those that result in a prevented planting payment most similar to

the prevented planting payment that would have been made for the

crop that was prevented from being planted.

(1) For example, assume you were prevented from planting 200

acres of corn and have 100 acres eligible for a corn prevented

planting guarantee that would result in a payment of $40 per acre.

You also had 50 acres of potato eligibility that would result in a

$100 per acre payment, 90 acres of grain sorghum eligibility that

would result in a $30 per acre payment, and 100 acres of soybean

eligibility that would result in a $25 per acre payment. Your

prevented planting coverage for the 200 acres would be based on 100

acres of corn ($40 per acre), 90 acres of grain sorghum ($30 per

acre), and 10 acres of soybeans ($25 per acre).

(2) Prevented planting coverage will be allowed as specified in

this section (17(h)) only if the crop that was prevented from being

planted meets all policy provisions, except for having an adequate

base of eligible prevented planting acreage. Payment may be made

based on crops other than those that were prevented from being

planted even though other policy provisions, including but not

limited to, processor contract and rotation requirements, have not

been met for the crop on which payment is being based.

Q. Amend newly designated section 17(i)(2) of the Basic Provisions

by changing the section reference therein from ``17(g)(1)'' to

``17(i)(1).''

R. Amend newly designated section 17(i)(3) of the Basic Provisions

by changing the section reference therein from ``17(g)(2)'' to

``17(i)(2).''

S. Revise section 24(e) to read as follows:

* * * * *

For reinsured policies

24. Amounts Due Us.

* * * * *

(e) Amounts owed to us by you may be collected in part through

administrative offset from payments you receive from United States

government agencies in accordance with 31 U.S.C. chapter 37.

* * * * *

T. Section 28 of the Basic Provisions is revised to read as

follows:

28. Transfer of Coverage and Right to Indemnity.

If you transfer any part of your share during the crop year, you

may transfer your coverage rights, if the transferee is eligible for

crop insurance. We will not be liable for any more than the

liability determined in accordance with your policy that existed

before the transfer occurred. The transfer of coverage rights must

be on our form and will not be effective until approved by us in

writing. Both you and the transferee are jointly and severally

liable for the payment of the premium and administrative fees. The

transferee has all rights and responsibilities under this policy

consistent with the transferee's interest.

U. Section 34 of the Basic Provisions is amended by redesignating

sections 34(a) through 34(d) as sections 34(b) through 34(e)

respectively, and adding a new section 34(a) to read as follows:

* * * * *

34. Unit Division.

(a) You may elect an enterprise unit or a whole farm unit if the

Special Provisions allow such unit structure, subject to the

following:

(1) You must make such election on or before the earliest sales

closing date for the insured crops and report such unit structure to

us in writing. Your unit selection will remain in effect from year

to year unless you notify us in writing by the earliest sales

closing date for the crop year for which you wish to change this

election. These units may not be further divided except as specified

herein;

(2) For enterprise units:

(i) You must report the acreage for each optional or basic unit

on your acreage report that comprises the enterprise unit;

(ii) These basic units or optional units that comprise the

enterprise unit must each have insurable acreage of the same crop in

the crop year insured;

(iii) You must comply with all reporting requirements for the

enterprise unit (You must maintain any required production records

on a basic or optional unit basis if you wish to change your unit

structure for any subsequent crop year);

(iv) The qualifying basic units or optional units may not be

combined into an enterprise unit on any basis other than as

described herein;

(v) If you do not comply with the reporting provisions for the

enterprise unit, your yield for the enterprise unit will be

determined in accordance with section 3(c)(1); and

(vi) If you do not qualify for an enterprise unit when the

acreage is reported, we will assign the basic unit structure.

(3) For a whole farm unit:

(i) You must report on your acreage report the acreage for each

optional or basic unit for each crop produced in the county that

comprises the whole farm unit; and

(ii) Although you may insure all of your crops under a whole

farm unit, you will be required to pay separate applicable

administrative fees for each crop included in the whole farm unit.

* * * * *

[[Page 66715]]

Signed in Washington, D.C., on November 30, 1998.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance Corporation.

[FR Doc. 98-32156 Filed 11-30-98; 2:18 pm]

BILLING CODE 3410-08-P