Apple Crop Insurance Regulations and Common Crop Insurance Regulations, Apple Crop Insurance Provisions

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 405 and 457

Apple Crop Insurance Regulations and Common Crop Insurance

Regulations, Apple 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 apples. 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

apple crop insurance regulations with the Common Crop Insurance Policy

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

the current apple crop insurance regulation to the 1998 and prior crop

years.

EFFECTIVE DATE: May 8, 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 for 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), Pub.

L. 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

[[Page 17051]]

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 amount of work required of

the insurance companies will not increase because the information used

to determine eligibility is already maintained at their office and the

other information required is already being gathered as a result of the

present policy. No additional work is required as a result of this

action on the part of either the insured or the insurance companies.

Additionally, the regulation does not require any action on the part of

small entities than is required for large entities. 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 against FCIC for

judicial review may be brought.

Environmental Evaluation

This action is not expected to have a significant impact on the

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

neither an Environmental Assessment nor an Environmental Impact

Statement is needed.

National Performance Review

This regulatory action is being taken as part of the National

Performance Review Initiative to eliminate unnecessary or duplicative

regulations and improve those that remain in force.

Background

On Thursday, May 8, 1997, FCIC published a notice of proposed rule

making in the Federal Register at 62 FR 25140 to add to the Common Crop

Insurance Regulations (7 CFR part 457), a new section 7 CFR 457.158,

Apple 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 apples found at 7 CFR

part 405 (Apple Crop Insurance Regulations). FCIC also amends 7 CFR

part 405 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 103

comments were received from reinsured companies, an insurance service

organization, producer groups, and apple producers. The comments

received and FCIC's responses are as follows:

Comment: A reinsured company stated the price elections need to be

refined to reflect true markets. The price election for both fresh and

processing is too low.

Response: Price elections established by FCIC are a projected

market price, as required by law. Reported market prices often contain

substantial post-production value added, such as harvesting, packing,

cullage, transportations to market, and other factors that are not

included in the expected market price. Thus, reported market prices are

reduced by an amount deemed representative of these post-production

added costs. The amount of the price election is determined from cost

of production estimated by the Cooperative State Research, Education,

and Extension Service or the land-grant university in many states.

Therefore, no change will be made.

Comment: A reinsured company stated that FCIC acreage determination

is based on land acres while the industry uses estimated tree count

acres. The commenter stated that FCIC should be more reflective of

reality and not impose their unique demands on an industry for no

apparent reason.

Response: FCIC has discussed the issue of land verses tree acre

with producers, reinsured companies, and an insurance service

organization, and has determined that land acres will be used, unless

otherwise provided in the Special Provisions. This will allow

flexibility in situations where circumstances dictate that tree acres

may be more accurate.

Comment: A reinsured company expressed concern over the paperwork

burden. The commenter stated that several years ago a self-

certification form was developed to eliminate the need for full

inspections on small orchards. Now the self-certification form is

required on all orchards in addition to the full inspection and must be

completed annually.

Response: The overall paperwork burden on the producer or reinsured

company on the self-certification form is not materially greater under

the proposed provisions. Pre-acceptance field inspections are only

required for limited situations as specified in the 1998 FCIC 18010

Crop Insurance Handbook. Pre-acceptance field inspections were designed

to identify those situations requiring a full inspection, thereby

eliminating the requirement to inspect all orchards. Therefore, no

change will be made.

Comment: A reinsured company stated the insurance coverage is too

expensive for the medium size and larger producers considering the

limited protection they receive. The coverage becomes less effective as

the acreage increases and the inequity accelerates if the producer has

high tree density and high value varieties of apples. Most of the

progressive, professional producers are adding more and more acres of

the higher value apples with high tree density plantings (more trees

per acre), and the coverage is falling further and further behind in

being able to provide protection against major losses.

Response: FCIC reviews and makes necessary revisions to premium

rates for all crop programs including crop type and practices.

Insurance guarantees are based on the actual production history (APH)

regulations, 7 CFR part 400, subpart G, not the size of the unit. The

policy allows for changes in established guarantees when changes in the

orchard cause significant changes in yield. FCIC recognizes the

commenter's concerns, and will consider them in the future as

regulations, procedures and premium rates are revised.

Comment: A reinsured company stated the actual production history

(APH) method understates future production potential for up trending

orchards.

Response: FCIC recognizes the commenter's concerns that the APH

method understates future production potential for up trending orchards

and will take these concerns under consideration when APH regulations

and procedures are reviewed to comply with the Federal Crop Insurance

Act.

Comment: A reinsured company recommended deleting the definition of

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``adapted'' because it is already covered under the definition of

``good farming practices'' and referenced in 6(b)(1).

Response: FCIC has removed the definition of ``adapted'' from these

provisions.

Comment: A reinsured company suggested identifying the states or

regions using various container sizes in the definition of ``production

guarantee.''

Response: Standard container sizes vary by state or region based on

buyers, packinghouses, or processors. Identifying the state or region

using various container sizes in the definition of ``production

guarantee'' would make it difficult to recognize changes in container

sizes. The units of measurement for apples are contained in the

actuarial documents to permit changes in container sizes to recognize

industry practices without changing the regulations. Therefore, no

change has been made.

Comment: A reinsured company is concerned with the definition of

``good farming practice.'' Commenter suggested the definition should

read,* * * ``recognized by the Cooperative State Research, Education,

and Extension Service as compatible with agronomic and weather

conditions in the area.''

Response: FCIC believes the term ``area'' is less clear than the

term ``county'' and would tend to make determinations more subjective

in nature. The definition of ``good farming practices'' has not been

revised, but has been removed from these Crop Provisions and placed in

the Basic Provisions.

Comment: A reinsured company suggested defining ``sunburn'' instead

of referring to the definition contained in the U.S. Standards for

Apples.

Response: Referring to ``sunburn'' as contained in the U.S.

Standards for Apples, allows changes in the U.S. Standards to be

recognized without changing these regulations. Also, using U.S.

Standards for Apples assures standards will be based on a single

source. Therefore, no change will be made.

Comment: A reinsured company recommended changes in section

2(e)(3). The commenters expressed concern regarding the use of FSN farm

serial numbers to establish optional units. The commenter suggested

establishing an optional unit by block, with a minimum number of acres

required for an optional unit. Also, comments were made that the

standard definition from the Common Crop Insurance Policy which defines

a unit ``all insurable acreage of the insured crop in the county''

should be used. The commenter further suggested that unit division for

optional units be based only on non-contiguous land or the irrigated

and non-irrigated practice (if allowed in the actuarial documents).

Response: All provisions from the Basic Provisions apply unless

otherwise excepted in these provisions. FSN farm serial numbers, non-

contiguous land, and irrigated and non-irrigated practices are only a

few of the requirements needed for establishing optional units. These

requirements allow a producer to establish optional units if all

applicable requirements are met. Basing optional units on minimum

acreage may not be fair to producers who have small acreage in several

locations. The optional unit requirements contained in these provisions

are consistent with other perennial crop policies. Therefore, no

changes have been made.

Comment: A reinsured company stated that the change from basic to

optional units by contiguous land in 2(e)(3)(iii) should be

communicated to the insured. The commenter believes that the insured

needs to understand this change and the impact it has on the premium,

if the insured wishes to retain units by non-contiguous land.

Response: It is the agent's responsibility to explain program

changes to their insureds. FCIC will furnish the summary of program

changes to insurance providers, who will then notify agents and issue

the new policy to policyholders.

Comment: A reinsured company requested clarification as to how much

change to the orchard would have to occur to reduce the expected yield

under section 3(b). The commenter questioned whether the loss of one

tree would reduce the expected yield enough so that it must be

reported, or would the reduction in trees have to exceed a certain

percentage per acre.

Response: This section requires the insured to inform the agent

when production practices have changed, any damage, removal of trees,

or any circumstance specified in the 1998 FCIC 18010 Crop Insurance

Handbook that may reduce the yield below the yield upon which the

insurance guarantee is based. If the change in the orchard is not

likely to affect the yield, the change need not be reported. This

requirement is consistent with other perennial crop policies.

Therefore, no change has been made.

Comment: A producer recommended that the insurance period be

defined as late December in section 8. This would allow producers time

to consider risk management strategies in a more reasonable time frame.

The commenter believes the November date is too close to the end of the

harvest period.

Response: The apple crop insurance coverage includes loss of

production due to adverse weather conditions, some of which may incur

during the winter months. Therefore, it is reasonable and prudent to

begin coverage prior to the date such weather is most likely to occur,

and has selected November 21 as the date for insurance to attach. While

this shortens the time available after harvest for risk management

decisions, the need to operate a sound insurance program is paramount.

This is also consistent with other perennial crop insurance policies.

Therefore, no change has been made.

Comment: A producer recommended deleting the phrase ``pruning

debris has not been removed from the orchard'' in section 9(a)(2). The

commenter stated it is no longer a standard practice in their area to

remove pruning debris from the orchard. Pruned branches customarily are

chopped and left on the orchard floor.

Response: The practice of chopping pruning debris and leaving it on

the orchard floor is not customary in all apple growing regions. This

provision applies to pruning debris that is not mulched and left in

place. The provision has been clarified to specify unmulched pruning

debris.

Comment: A producer recommended in section 9(a)(9) removing

``wildlife as a cause of loss, unless appropriate control measures have

not been taken.''

Response: Damage caused by wildlife will remain as an insurable

cause of loss. This coverage is consistent with other crop policies.

FCIC has removed the phase, ``unless appropriate control measures have

not been taken'' because that language is too subjective.

Comment: A reinsured company questioned the provisions in 10(b)

that requires a 15 day notice before any production is sold by direct

marketing so the insurance provider can appraise the production to

count. The commenter believes the pre-inspection process is very

inaccurate.

Response: This inspection is presently the only method to obtain a

reasonable estimate of production to count for direct marketed

production. This requirement is consistent with other perennial crop

policies. Therefore, no change has been made.

Comment: A reinsured company recommended the calculation sequence

in section 11(b) (1) through (7) be changed. The commenter stated it

was difficult to follow because it is too wordy.

Response: The steps in calculating a claim for indemnity in section

11 are

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clearly stated. Therefore, no change has been made.

Comment: A reinsured company recommended that the provisions in

section 11(c)(1)(iv) not allow the insured to defer settlement and wait

for a later, generally a lower appraisal, especially since apples have

a short shelf life.

Response: The later appraisal will only be necessary if the

insurance provider agrees that such appraisal would result in a more

accurate determination and if the producer continues to care for the

crop. If the producer does not care for the crop, the original

appraisal is used. If the insurance provider believes the original

appraisal is accurate, resolution of the dispute may be sought through

arbitration or appeal, whichever is applicable. Therefore, no change

has been made.

Comment: A reinsured company recommended removing the requirement

for a written agreement to be renewed each year contained in section

12(d) ``Written agreement.''

Response: Written agreements are intended to change policy terms or

permit insurance in unusual situations. If such practices continue from

year to year, they should be incorporated into the policy, Special

Provisions or the actuarial documents. To streamline Crop Provisions

and prevent duplication, the written agreement section was removed from

these Crop Provisions and was added to section 18 of the Basic

Provisions.

Comment: A reinsured company questioned whether the provisions in

section 12(e) allows for orchards purchased or leased after the sales

closing or acreage reporting dates to be accepted (add-on) by written

agreement.

Response: Written agreements can be used to allow insurability of

orchards purchased or leased after the sales closing or acreage

reporting date as provided in section 18 of the Basic Provisions.

Comment: A reinsured company questioned the reference in section

13(f)(1) to section 11(c). They suggested that it reference section

11(b) instead.

Response: Sections 13(f)(1) and 11(c) refer to production to count.

Section 11(b) refers to the steps used in the settlement of claim for

indemnity. Therefore, no change has been made.

Comment: A reinsured company recommended changes in section

13(f)(2) by replacing the words ``a unit'' with ``any acreage''

designated for fresh market; and questioned if grading procedure

applies only to harvested production or the total apple production.

Response: The production guarantee is based on total production of

apples for each unit. Therefore, no change has been made. The grading

procedure applies to the total production to count, including harvested

and unharvested.

Comment: A reinsured company recommended inserting the word

``will'' between ``better'' and ``be''* * * in section 13(f)(2)(iv).

Response: FCIC has amended the provisions accordingly.

Comment: A reinsured company recommended deleting the requirement

in section 13(f)(3) that apples knocked to the ground by wind be

considered 100 percent cull production. The commenter pointed out that

many juicers will not accept apples that are knocked to the ground.

This is especially important in view of the excessive requirement that

30 percent of such apples are production to count under the proposed

rule.

Response: Apples knocked to the ground by wind are covered under

``adverse weather'' and will be considered 100 percent cull production.

In certain areas, thirty (30) percent of all cull production as

production to count is not excessive. To account for the other areas,

FCIC will make the appropriate adjustments in the Special Provisions.

Comment: A reinsured company, producers, and insurance service

organization opposed the change in section 13(f)(2)(vii) that increases

the amount of culls in the production to count from 15 to 30 percent.

One commenter stated it may not reduce the overall loss ratio since

many insureds may cancel their policies when they learn of the change.

They further stated that the 30 percent figure is too high and makes

packing fruit less desirable to the producer. The other commenter

recommended that the words, ``excessive sun'' between ``or'' and

``along'' be inserted in section 13(g)(2)(iv).

Response: The provision that increases the amount of cull

production from 15 to 30 percent is correct. However, FCIC realizes

that the increased amount of the percent of cull production may be

excessive for some producers in certain growing regions where fresh

market fruit may have a normal 10 percent cull rate. If damage in some

years is more than 30 percent, the fruit will not be packed as U.S.

Fancy and will be diverted to processing because it is economically

impossible, due to the high cost of handling and grading damaged fruit,

to pack out at least 80 percent U.S. Fancy or better. The producer who

has invested more money for the fresh fruit market and has more

intensive pruning, spraying, and handling is under-compensated.

Therefore, FCIC has amended the provisions to allow the flexibility of

counting 15 percent of cull production for certain regions, if allowed

by the Special Provisions. ``Excessive sun'' has been inserted between

the words ``or'' and ``along'' accordingly.

Comment: A reinsured company asked, if section 13(f)(2) (iii)

through (vi) apply only to Option B or to both Options A and B.

Response: Sections 13(f)(1) has been revised to incorporate the

provisions of section 13(f)(2) (iii) through (vi).

In addition to the changes described above and minor editorial

changes, FCIC has made the following changes to these Crop Provisions:

1. Section 1. Removed definitions of ``days,'' ``FSA,'' good

farming practices,'' ``interplanted,'' irrigated practice,'' ``USDA,''

and ``written agreement'' because these definitions now appear in the

Basic Provisions. Deleted the term ``ton'' because it is not used.

2. Section 2 is revised to remove all provisions that were

incorporated into the Basic Provisions.

3. Section 9(b)(1) is revised to move, ``russeting'' to 9(b)(4)

because russeting cannot be described as a failure characteristic.

4. Removed section 12 and added it to the Basic Provisions.

5. Added new section 12 to indicate that late and prevented

planting provisions are not applicable for apples.

List of Subjects in 7 CFR Parts 405 and 457

Crop insurance, Apples, Reporting and recordkeeping requirements.

Final Rule

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

Insurance Corporation hereby amends the Apple Crop Insurance

Regulations (7 CFR part 405) and the Common Crop Insurance Regulations

(7 CFR part 457) as follows:

PART 405--APPLE CROP INSURANCE REGULATIONS FOR THE 1986 THROUGH THE

1998 CROP YEARS

1. The authority citation for 7 CFR part 405 is revised to read as

follows:

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

2. The part heading is revised as set forth above.

3. The subpart heading ``Subpart-Regulations for the 1986 through

the 1998 Crop Years'' is removed.

4. Section 405.7 is amended by revising the introductory text of

paragraph (d) to read as follows:

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Sec. 405.7 The application and policy.

* * * * *

(d) The application is found at subpart D of part 400, General

Administrative Regulations (7 CFR 400.37, 400.38). The provisions of

the Apple Insurance Policy for the 1986 through 1998 crop years are as

follows:

* * * * *

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

1998 AND SUBSEQUENT CONTRACT YEARS

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

follows:

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

6. The part heading is revised as set forth above.

7. Section 457.158 is added to read as follows:

Sec. 457.158 Apple crop insurance provisions.

The Apple 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:

Apple 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

Area A. A geographic area that includes Montana, Wyoming, Utah,

New Mexico and all states west thereof.

Area B. A geographic area that includes all states not included

in Area A, except for Colorado.

Area C. Colorado.

Bin. A container that contains a minimum of 875 pounds of apples

or some other quantity designated in the Special Provisions.

Box. A container that contains 35 pounds of apples or some other

quantity designated in the Special Provisions.

Bushel. In all states except Colorado, 42 pounds of apples. In

Colorado, 40 pounds of apples.

Culls. Apples that fail to meet the requirements of U.S. Cider

Grade.

Direct marketing. Sale of the insured crop directly to consumers

without the intervention of an intermediary such as a wholesaler,

retailer, packer, processor, shipper, buyer or broker. Examples of

direct marketing include selling through an on-farm or roadside

stand, or a farmer's market, and permitting the general public to

enter the field for the purpose of picking all or a portion of the

crop.

Excessive sun. Exposure of unharvested apples to direct or

indirect sunlight that causes apples to grade less than U.S. Fancy

due to sunburn.

Harvest. The picking of mature marketable apples from the trees

or removing such apples from the ground.

Marketable. Apple production that grades U.S. No. 1, 2, or Cider

in accordance with the United States Standards for Grades of Apples.

Non-contiguous. Any two or more tracts of land whose boundaries

do not touch at any point, except that land separated only by a

public or private right-of-way, waterway, or an irrigation canal

will be considered as contiguous.

Pound. Sixteen (16) ounces avoirdupois.

Production guarantee (per acre). The quantity of apples (boxes

or bushels) determined by multiplying the approved APH yield per

acre by the coverage level percentage you elect.

Russeting. A brownish roughened area on the surface of the

apple.

Sunburn. As defined in the United States Standards for Grades of

Apples.

2. Unit Division

In addition to the requirements of section 34(b) of the Basic

Provisions, optional units may be established if each optional unit

is located on non-contiguous land.

3. Insurance Guarantees, Coverage Levels, and Prices for

Determining Indemnities

In addition to the requirements of section 3 of the Basic

Provisions:

(a) You may select only one price election for all the apples in

the county insured under this policy unless the Special Provisions

provide different price elections by type, in which case you may

select one price election for each apple type designated in the

Special Provisions. The price elections you choose for each type

must have the same percentage relationship to the maximum price

offered by us for each type. For example, if you choose 100 percent

of the maximum price election for one type, you must also choose 100

percent of the maximum price election for all other types.

(b) You must report, by the production reporting date designated

in section 3 of the Basic Provisions, by type if applicable:

(1) Any damage, removal of trees, change in practices, or any

other circumstance that may reduce the expected yield below the

yield upon which the insurance guarantee is based, and the number of

affected acres;

(2) The number of bearing trees on insurable and uninsurable

acreage;

(3) The age of the trees and the planting pattern;

(4) The separate acreage of apples intended for fresh-market or

processing as shown on the actuarial table; and

(5) For the first year of insurance for acreage interplanted

with another perennial crop, and anytime the planting pattern of

such acreage has changed:

(i) The age of the interplanted crop, and type if applicable;

(ii) The planting pattern; and

(iii) Any other information that we request in order to

establish your approved yield. We will reduce the yield used to

establish your production guarantee as necessary, based on our

estimate of the effect of the following: interplanted perennial

crop; removal of trees; damage; change in practices and any other

circumstance on the yield potential of the insured crop. If you fail

to notify us of any circumstance that may reduce your yields from

previous levels, we will reduce your production guarantee as

necessary at any time we become aware of the circumstance.

4. Contract Changes

In accordance with section 4 of the Basic Provisions, the

contract change date is August 31 preceding the cancellation date.

5. Cancellation and Termination Dates

In accordance with section 2 of the Basic Provisions, the

cancellation and termination dates are November 20.

6. Insured Crop

In accordance with section 8 of the Basic Provisions, the crop

insured will be all the apples in the county for which a premium

rate is provided by the actuarial table:

(a) In which you have a share;

(b) That are grown on tree varieties that:

(1) Are adapted to the area;

(2) Are in area A and have produced at least an average of 10

bins per acre;

(3) Are in area B and have produced at least an average of 150

bushels per acre;

(4) Are in Area C and have produced at least an average of 200

bushels per acre; and

(c) That are grown in an orchard that, if inspected, is

considered acceptable by us.

7. Insurable Acreage

In lieu of the provisions in section 9 of the Basic Provisions

that prohibit insurance attaching to a crop planted with another

crop, apples interplanted with another perennial crop are insurable

unless we inspect the acreage and determine that it does not meet

the insurability requirements contained in your policy.

8. Insurance Period

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

Provisions:

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

the year of application, if your application is received after

November 11 but prior to November 21. In that case, insurance will

attach on the 10th day after your properly completed application is

received in our local office unless we inspect the acreage prior to

the end of the 10 day period and determine that it does not meet

insurability requirements. You must provide any information that we

require for the crop to determine the condition of the orchard.

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

each crop year is November 5.

(b) In addition to the provisions of section 11 of the Basic

Provisions:

(1) If you acquire an insurable share in any insurable acreage

after coverage begins but on or before the acreage reporting date

for the crop year, and after an inspection we

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consider the acreage acceptable, insurance will be considered to

have attached to such acreage on the calendar date for the beginning

of the insurance period. There will no coverage of any insurable

interest acquired after the acreage reporting date.

(2) If you relinquish your insurable share on any insurable

acreage of apples on or before the acreage reporting date for the

crop year, and the acreage was insured by you the previous crop

year, insurance will not be considered to have attached to, and no

premium or indemnity will be due for such acreage for that crop year

unless:

(i) A transfer of coverage and right to an indemnity, or a

similar form approved by us, is completed by all affected parties;

(ii) We are notified by you or the transferee in writing of such

transfer on or before the acreage reporting date; and

(iii) The transferee is eligible for crop insurance.

9. Causes of Loss

(a) In accordance with the provisions of section 12 of the Basic

Provisions, insurance is provided only against the following causes

of loss that occur during the insurance period:

(1) Adverse weather conditions;

(2) Fire, unless weeds and other forms of undergrowth have not

been controlled or unmulched pruning debris has not been removed

from the orchard;

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

application of pest control measures;

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

improper application of disease control measures;

(5) Earthquake;

(6) Volcanic eruption;

(7) Failure of the irrigation water supply, if caused by an

insured peril that occurs during the insurance period;

(8) Excess sun, only if you have elected the Fresh Fruit Option

B and the Sunburn Option as described in section 13; and

(9) Wildlife;

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

the Basic Provisions, we will not insure against damage or loss of

production due to:

(1) Failure of the fruit to size, shape, or color properly; or

(2) Inability to market the apples for any reason other than

actual physical damage from an insurable cause specified in this

section. For example, we will not pay you an indemnity if you are

unable to market due to quarantine, boycott, or refusal of any

person to accept production.

(3) Mechanical damage including, but not limited to, limb rubs,

scars, and punctures; or

(4) Russeting.

10. Duties In the Event of Damage or Loss

In addition to the requirements of section 14 of the Basic

Provisions, the following will apply:

(a) You must notify us within three 3 days of the date harvest

should have started if the crop will not be harvested.

(b) You must notify us at least 15 days before any production

from any unit will be sold by direct marketing. We will conduct an

appraisal that will be used to determine your production to count

for production that is sold by direct marketing. If damage occurs

after this appraisal, we will conduct an additional appraisal. These

appraisals, and any acceptable records provided by you, will be used

to determine your production to count. Failure to give timely notice

that production will be sold by direct marketing will result in an

appraised amount of production to count of not less than the

production guarantee per acre if such failure results in our

inability to make the required appraisal.

(c) If you intend to claim an indemnity on any unit, you must

notify us at least 15 days prior to the beginning of harvest, or

immediately if damage is discovered during harvest, so that we may

inspect the damaged production.

(d) You must not destroy the damaged crop until after we have

given you written consent to do so. If you fail to meet the

requirements of this section and such failure results in our

inability to inspect the damaged production, all such production

will be considered undamaged and included as production to count.

11. 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 11(b)(1) by the

respective price election, by type if applicable;

(3) Totaling the results in section 11(b)(2) if there are more

than one type;

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

11(c)), for each type if applicable, by the respective price

election;

(5) Totaling the results in section 11(b)(4), if there are more

than one type;

(6) Subtracting the total in section 11(b)(5) from the total in

section 11(b)(3); and

(7) Multiplying the result in section 11(b)(6) by your share.

For example:

You have 100 percent share in 28 acres of fresh market apples

and 30 acres of processing apples in the unit, with a 300 bushel per

acre guarantee and a price election of $5.00 per bushel for fresh

market and $2.00 per bushel for processing. You are only able to

harvest 4,500 bushels of fresh market apples and 6,500 bushels of

processing. Your indemnity would be calculated as follows:

(1) 28 acres x 300 bushels = 8,400 bushels guarantee of fresh

market; 30 acres x 300 bushels = 9,000 bushels guarantee of

processing;

(2) 8,400 bushels x $5.00 price election = $42,000.00 value of

guarantee for fresh market; 9,000 bushels x $2.00 price election =

$18,000.00 value of guarantee for processing;

(3) $42,000.00 + $18,000.00 = $60,000 total value guarantee;

(4) 4,500.00 bushels x $5.00 price election = $22,500.00 value

of production to count for fresh market;

6,500.00 bushels x $2.00 price election = $13,000.00 value of

production to count for processing;

(5) $22,500.00 + $13,000.00 = $35,500.00 total value of

production to count;

(6) $60,000.00-$35,500.00 = $24,500.00 loss; and

(7) $24,000.00 x 100 percent = $24,500.00 indemnity payment.

(c) The total production to count (boxes or bushels) from all

insurable acreage on the unit will include:

(1) All appraised production as follows:

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

(A) That is abandoned;

(B) That is sold by direct marketing if you fail to meet the

requirements contained in section 10;

(C) That is damaged solely by uninsured causes; or

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

(ii) Production lost due to uninsured causes;

(iii) Unharvested production; and

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

abandon or no longer care for, if you and we agree on the appraised

amount of production. Upon such agreement, the insurance period for

that acreage will end. If you do not agree with our appraisal, we

may defer the claim only if you agree to continue to care for the

crop. We will then make another appraisal when you notify us of

further damage or that harvest is general in the area unless you

harvested the crop, in which case we will use the harvested

production. If you do not continue to care for the crop, our

appraisal made prior to deferring the claim will be used to

determine the production to count; and

(2) All marketable harvested production from the insurable

acreage.

(3) Mature marketable apple production may be reduced as a

result of loss in quality due to hail, wind, freeze, or sunburn in

accordance with section 13 of these provisions, if you elect one or

more of these coverages.

12. Late and Prevented Planting

The late and prevented planting provisions of the Basic

Provisions are not applicable.

13. Optional Coverage for Quality Adjustment

(a) These quality adjustment options apply only if the following

conditions are met:

(1) You have not elected to insure your apples under the

Catastrophic Risk Protection (CAT) Endorsement.

(2) You elected the Fresh Fruit Option A or the Fresh Fruit

Option B; or you elected both the Fresh Fruit Option B and the

Sunburn Option on your application or other form approved by us, and

did so on or before the sales closing date for the initial crop year

[[Page 17056]]

for which you wish it to be effective. By doing so, you agreed to

pay the additional premium designated in the actuarial documents for

this optional coverage; and

(3) You or we did not cancel the option in writing on or before

the cancellation date. Your election of CAT coverage for any crop

year after this endorsement is effective will be considered as

notice of cancellation by you.

(b) If you select Fresh Fruit Option A only, Fresh Fruit Option

A will apply to all of your apples intended for processing and fresh

market.

(c) If you select Fresh Fruit Option B, those provisions will

apply to all of your apples intended for fresh market and the

provisions of Fresh Fruit Option A will apply to all of your apples

intended for processing.

(d) If you select the Sunburn Option as designated in the

Special Provisions, you must also select Fresh Fruit Option B.

(e) In addition to the requirements of section 10 of these

provisions, you must permit us to inspect and grade the fruit prior

to harvest or no quality adjustment will be made.

(f) Fresh Fruit Option A and Fresh Fruit Option B are subject to

the following conditions:

(1) Fresh Fruit Option A--In addition to section 11(c) of these

provisions and notwithstanding the definition of ``marketable'' in

section 1 of these provisions, your production to count will be

adjusted when your apples are damaged by hail to the extent that

such apples will not grade U.S. No. 1 (processing). Harvested apple

production that is damaged by hail to the extent that it does not

grade 80 percent U.S. No. 1 (processing) or better, in accordance

with applicable USDA Standards for Grades of Apples, will be

adjusted as follows:

(i) Production to count with 21 through 40 percent not grading

U.S. No. 1 (processing) or better will be reduced 2 percent for each

full percent in excess of 20 percent.

(ii) Production to count with 41 through 50 percent not grading

U.S. No. 1 (processing) or better will be reduced 40 percent plus an

additional 3 percent for each full percent in excess of 40 percent.

(iii) Production to count with 51 percent through 64 percent not

grading U.S. No. 1 (processing) or better will be reduced 70 percent

plus an additional 2 percent for each full percent in excess of 50

percent.

(iv) Production to count with 65 percent or more not grading

U.S. No. 1 (processing) or better will be considered 100 percent

cull production.

(v) The difference between the total production and the

production to count as determined above will be considered cull

production.

(vi) Thirty (30) percent of all cull production will be

considered production to count, unless otherwise specified in the

Special Provisions.

(vii) No reduction in production to count will be applied to any

apple grading less than U.S. No. 1 (processing) due solely to size,

shape, russeting, or color.

(viii) Any appraisal we make on the insured acreage will be

considered production to count unless such appraised production is

knocked to the ground by wind or hail or frozen on the tree to the

extent that harvest is not practical.

(2) Fresh Fruit Option B--Notwithstanding section 11(c) and the

definitions of ``harvest'' and ``marketable'' in section 1 of these

provisions, the total production to count for a unit will include

all harvested and appraised production. Harvested apple production

that is damaged by hail to the extent that it does not grade 80

percent U.S. Fancy or better, in accordance with applicable USDA

Standards for Grades of Apples, will be adjusted as follows:

(i) Production to count with 21 through 40 percent not grading

U.S. Fancy or better will be reduced 2 percent for each full percent

in excess of 20 percent.

(ii) Production to count with 41 through 50 percent not grading

U.S. Fancy or better will be reduced 40 percent plus an additional 3

percent for each full percent in excess of 40 percent.

(iii) Production to count with 51 percent through 64 percent not

grading U.S. Fancy or better will be reduced 70 percent plus an

additional 2 percent for each full percent in excess of 50 percent.

(iv) Production to count with 65 percent or more not grading

U.S. Fancy or better will be considered 100 percent cull production.

(v) The difference between the total production and the

production to count as determined above will be considered cull

production.

(vi) Apples that are knocked to the ground by wind or frozen to

the extent they can be harvested but not marketed as U.S. Fancy

grade apples will be considered 100 percent cull production.

(vii) Thirty (30) percent of all cull production will be

considered production to count, unless otherwise specified in the

Special Provisions.

(viii) No reduction in production to count will be applied to

any apple grading less than U.S. Fancy due solely to size, shape,

russeting, or color.

(ix) Any appraisal we make on the insured acreage will be

considered production to count unless such appraised production is

knocked to the ground by wind, hail, or frozen on the tree to the

extent that harvest is not practical.

(g) Sunburn Option

(1) In addition to the causes of loss specified in section 9 of

these provisions, excess sun is an insurable cause of loss.

(2) Notwithstanding the definitions of ``harvest'' and

``marketable'' in section 1 and 11(c)(1) and (2) of these

provisions, the total production to be counted for a unit will

include all harvested and appraised production. Harvested apple

production that, due to excessive sun or in conjunction with hail

damage, does not grade 80 percent U.S. Fancy or better, in

accordance with applicable USDA Standards, will be adjusted as

follows:

(i) Production to count with 21 through 40 percent not grading

U.S. Fancy or better due solely to excessive sun or excessive sun

along with hail damage, will be reduced 2 percent for each full

percent in excess of 20 percent.

(ii) Production to count with 41 through 50 percent not grading

U.S. Fancy or better due solely to excessive sun or excessive sun

along with hail damage, will be reduced 40 percent plus an

additional 3 percent for each full percent in excess of 40 percent.

(iii) Production to count with 51 through 64 percent not grading

U.S. Fancy or better due solely to excessive sun or excessive sun

along with hail damage, will be reduced 70 percent plus an

additional 2 percent for each full percent in excess of 50 percent.

(iv) Production to count with 65 percent or more not grading

U.S. Fancy or better due solely to excessive sun or excessive sun

along with hail damage, will be considered 100 percent cull

production.

(v) The difference between the total production and the

production to count as determined above will be considered cull

production.

(vi) Thirty (30) percent of all cull production will be

considered as production to count unless otherwise specified in the

Special Provisions.

Signed in Washington, D.C., on April 2, 1998.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance Corporation.

[FR Doc. 98-9208 Filed 4-7-98; 8:45 am]

BILLING CODE 3410-08-P