Recourse Loan Regulations for Honey

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1434

RIN 0560-AF62

Recourse Loan Regulations for Honey

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: This final rule is issued pursuant to the provisions of the

Omnibus Consolidated and Emergency Supplemental Appropriations Act,

1999 (the 1999 Act), which amended the Agricultural Market Transition

Act, and provides for the availability of recourse loans to producers

of 1998 crop honey. This rule sets forth the regulations for the

administration of the honey recourse loan program.

DATES: Effective March 3, 1999.

FOR FURTHER INFORMATION CONTACT: Margaret Wright, Program Specialist,

Farm Service Agency (FSA), USDA, STOP 0512, 1400 Independence Avenue,

SW, Washington, D.C. 20250-0512; telephone: (202) 720-8481.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule is in conformance with Executive Order 12866 and has been

determined to be significant and therefore has been reviewed by the

Office of Management and Budget.

Federal Assistance Program

The title and number of the Federal Assistance Program, as found in

the Catalog of Federal Domestic Assistance, to which this rule applies,

are Commodity Loans and Purchases--10.051.

Environmental Evaluation

It has been determined by an environmental evaluation that this

action will have no significant impact on the quality of the human

environment. Therefore, neither an environmental assessment nor an

environmental impact statement is needed.

Executive Order 12372

This activity is not subject to the provisions of Executive Order

12372, which requires intergovernmental consultation with State and

local officials. See the notice related to 7 CFR part 3014, subpart V,

published at 48 FR 29115 (June 24, 1983).

Executive Order 12988

This final rule has been reviewed in accordance with Executive

Order 12988. The provisions of this final rule are not retroactive and

preempt State laws to the extent that such laws are inconsistent with

the provisions of the final rule. Before any legal action is brought

regarding determinations made under provisions of 7 CFR part 723, the

administrative appeal provisions set forth at 7 CFR part 780 must be

exhausted.

Regulatory Flexibility Act

It has been determined that the Regulatory Flexibility Act is not

applicable to this final rule since the Commodity Credit Corporation

(CCC) is not required by 5 U.S.C. 553 or any other provision of law to

publish a notice of proposed rule making with respect to the subject

matter of this rule.

Unfunded Federal Mandates

This rule contains no Federal mandates under the regulatory

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

(UMRA) for State, local, and tribal governments or the private sector.

Thus, this rule is not subject to the requirements of sections 202 and

205 of the UMRA.

Paperwork Reduction Act and Notice and Comment

Section 1133 of the Omnibus Consolidated and Emergency Supplemental

Appropriations Act, 1999 (the ``1999 Act'') provides that this rule-

making shall be issued without regard to the public notice and comment

provisions of 5 U.S.C. 553 or the Paperwork Reduction Act, and provides

that the provisions of 5 U.S.C. 808 which allows exemption from

layovers for Congressional review shall be applied. Accordingly, this

rule and its information collection requirements are made effective

immediately in accordance with these provisions. Because of the

foregoing provisions and because this rule provides needed time-

sensitive relief, delay in completing this rule would be contrary to

the public interest.

Background

Section 1122 of the 1999 Act provides that in order to assist

producers of honey to market their honey in an orderly manner during a

period of disastrously low prices, the Secretary of Agriculture

``[S]hall make available recourse loans to producers of the 1998 crop

of honey on fair and reasonable terms and conditions, as determined by

the Secretary''. This final rule contains the terms and conditions that

the Secretary has determined are necessary to implement Sec. 1122 of

the 1999 Act. The terms and conditions focus on two critical issues:

(1) eligibility and (2) program administration.

Eligibility

The regulation at 7 CFR Sec. 1434.4 lists the eligibility

requirements for both the persons applying for a recourse loan (loan)

and for the honey being tendered as loan collateral. The essence of the

eligibility requirements is that loan applicants must be ``producers''

of honey and not speculators who have purchased the honey. In general,

a loan applicant must have a separate and identifiable interest in both

the bees and the honey. This means, in part, that the loan applicant

must have been responsible for the financial risk of keeping the bees

and for producing and extracting the honey.

The loan applicant must also hold a beneficial interest in the

honey collateral until the loan is repaid. Under the regulation, such

an interest will require that the producer maintains title and control

over the disposition of the honey, as well as the risk of loss of the

honey.

Persons handling the marketing of the honey through a CCC-approved

cooperative marketing association (CMA) are also eligible to

participate in the loan program, provided the beneficial interest in

the honey remains with the CMA member/loan applicant who shares in the

marketing proceeds realized by the CMA. Two or more applicants may be

eligible for a joint loan if, as individuals, they would fulfill the

eligibility requirements and the commingled honey is not already under

CCC loan.

Program Administration

The program will be administered through the Department's Farm

Service Agency (FSA). Section 1122 of the 1999 Act provides that

recourse loans will be made to producers of 1998 crop honey and will

operate on a no-net-cost basis. To operate the program on a no-net-cost

basis, a service fee will be assessed at time of loan making to cover

administrative costs associated with the honey recourse loan program.

These administrative costs include costs associated with the county

office loan workload, for publishing and distributing program

information and procedures, and salary expenses. The honey recourse

loan program will operate similarly to the way the honey program was

operated in the 1994 and 1995 crop years. CCC has determined that the

final date to request a loan will be 60 calendar days after publication

of the regulation in the Federal Register. The loans will mature 9

months after loan disbursement. Anyone interested

[[Page 10924]]

in applying for a loan or who has questions concerning eligibility or

any other matter covered under this regulation will be able to obtain

assistance from the local FSA county office.

Any producer seeking to sell the honey pledged as collateral to

repay the loan will be required to obtain written authorization from

the county office before moving the honey for sale. If the producer

fails to obtain such authorization, provides incorrect certifications,

or makes fraudulent representations, the producer will be in violation

of the terms and conditions of the loan note and security agreement and

will be subject to liquidated damages and other actions as provided in

Sec. 1434.13 of the regulations. If the loan is not repaid in full by

the loan maturity date, CCC may foreclose on the pledged honey and sell

the honey. CCC's security interest in the honey loan collateral is

first and superior to all other security interests. Also, the

Government may pursue other options open to it including remedies

against persons handling honey in disregard of the security interest.

List of Subjects in 7 CFR Part 1434

Honey, Loan programs/agriculture, Reporting and record keeping

requirements.

Accordingly, 7 CFR part 1434 is added to read as follows:

PART 1434--RECOURSE LOAN REGULATIONS FOR HONEY

Sec.

1434.1 Applicability.

1434.2 Administration.

1434.3 Definitions.

1434.4 Eligibility.

1434.5 Containers and drums.

1434.6 Application, availability, disbursement, and maturity.

1434.7 Eligible storage.

1434.8 Liens.

1434.9 Fees and interest.

1434.10 Determination of quantity.

1434.11 Transfer of producer's interest prohibited.

1434.12 Loss or damage.

1434.13 Personal liability of the producer.

1434.14 Release of the honey pledged as collateral for a loan.

1434.15 Liquidation of loans.

1434.16 Foreclosure.

1434.17 Handling payments and collections not exceeding $9.99.

1434.18 Death, incompetency, or disappearance; appeals; other loan

provisions.

Authority: Section 1122, Pub. L. 105-277, 112 Stat. 2681.

Sec. 1434.1 Applicability.

The regulations of this part provide the terms and conditions under

which the Commodity Credit Corporation (CCC) may issue recourse loans

for the 1998 crop of honey that has remained continuously within the

beneficial interest of the producer. Additional terms and conditions

that must be followed to obtain a loan will be set forth in these

regulations and the applicable note and security agreements. Forms

needed to obtain a loan will be available in State and county Farm

Service Agency (State and county) offices.

Sec. 1434.2 Administration.

(a) The regulations of this part shall be administered under the

general supervision of the Executive Vice President, CCC, and shall be

carried out in the field by State and county committees.

(b) State and county committees, representatives and employees

thereof, do not have the authority to modify or waive any of the

provisions of the regulations of this part.

(c) The State committee shall take any action required by these

regulations that has not been taken by the county committee. The State

committee shall also:

(1) Correct, or require a county committee to correct, any action

taken by such county committee that is not in accordance with the

regulations of this part; or

(2) Require a county committee to withhold taking any action that

is not in accordance with the regulations of this part.

(d) No provision or delegation herein to a State or county

committee shall preclude the Executive Vice President, CCC, or a

designee, from determining any question arising under the program or

from reversing or modifying any determination made by a State or county

committee.

(e) The Deputy Administrator for Farm Programs, FSA, may authorize

State and county committees to waive or modify deadlines and other

program requirements in cases where timeliness or failure to meet such

other requirements does not affect adversely the operation of the

program.

(f) An approving official of CCC may execute loans and related

documents only under the terms and conditions determined and announced

by CCC. Any such document that is not executed in accordance with such

terms and conditions, including any purported execution before the date

authorized by CCC, shall be null and void unless affirmed by the

Executive Vice President, CCC.

Sec. 1434.3 Definitions.

The definitions set forth in this section shall be applicable for

all purposes of program administration. The terms defined in part 718

of this title shall also be applicable except where those definitions

conflict with the definitions set forth in this section or in program

instruments created under this part.

Administrator is the FSA Administrator.

Adulterated honey, is for the purpose of this part only, honey

where any foreign substance including water has been substituted in

whole or in part for honey whether or not such substance is poisonous

or deleterious to render honey injurious to health or otherwise makes

the honey unsound, unhealthy, unwholesome, or otherwise unfit for human

or animal consumption.

Approving official is a representative of CCC who is authorized by

the Executive Vice President, CCC, to approve loan documents prepared

under this part.

Charge is a fee, cost, and expense (including foreclosure costs)

incident to insuring, carrying, handling, storing, conditioning, and

marketing the honey and otherwise protecting the honey.

CMA is a cooperative marketing association engaged in marketing

honey.

County office is the local FSA office.

Crop year is the calendar year in which honey is extracted.

Executive Vice President, CCC, is the Administrator, FSA.

FSA is the Farm Service Agency, United States Department of

Agriculture.

Ineligible honey is honey not eligible for a loan under this part

for which ineligibility shall include, but is not limited to, honey

from the following floral sources regardless of whether the honey meets

other eligibility requirements: Andromeda, bitterweed, broomweed,

cajeput (melaleuca), carrot, chinquapin, dog fennel, desert hollyhock,

gumweed, mescal, onion, prickly pear, prune, queen's delight, rabbit

brush, snowbrush (ceanothus), snow-on-the-mountain, spurge (leafy

spurge), tarweed, and similar objectionably-flavored honey or blends of

honey as determined by the Director, Price Support Division, FSA. If

any blends of honey contain such ineligible honey, the lot as a whole

shall be considered ineligibile for loan.

Loan is a recourse loan on honey.

Loan quantity is the quantity on which the loan was disbursed shown

on the note and security agreement.

Nontable honey is honey having a predominant flavor of limited

acceptability for table use even though

[[Page 10925]]

such honey may be considered suitable for table use in areas in which

it is produced and includes honey with a predominant flavor of aster,

athel, avocado, Brazilian pepper, buckwheat (except western wild

buckwheat), cabbage palmetto, Christmas berry, cranberry, dandelion,

eucalyptus, goldenrod, heartsease (smartweed), horsemint, kiawe,

loosestrife, macadamia, mangrove, manzanita, mint, partridge pea,

rattan vine, safflower, salt cedar (Tamarix Gallica) spanish needle,

spikeweed, titi, toyon, tulip popular, wild cherry, yaupon, and

similarly-flavored honey or blends of such honeys as determined by the

Director, Price Support Division, Farm Service Agency.

Ownership is with respect to honey tendered for a loan, control,

title, risk of loss, and the right to make all decisions regarding the

tender of honey to CCC for a loan or for marketing.

Person is an individual, partnership, association, corporation,

estate or trust, or other business enterprise or other legal entity

and, whenever applicable a State, political subdivision of a State, or

any agency thereof.

Program is the administration and issuance of a loan in accordance

with the terms and conditions of this part and of any note and security

agreement which must be executed by a loan recipient under this part.

Table honey is any honey having a good flavor of the predominant

floral source which can be readily marketed for table use in all parts

of the country including honey having the following sources: alfalfa,

apple, basswood, bird's-foot trefoil, blackberry, blueberry, brazil

brush, catsclaw, Chinese tallow, clover, cotton, fireweed, gallberry,

huajillo, knapweed (American), lima bean, mesquite, orange, raspberry,

sage, saw palmetto, snowberry, sourwood, soybean, star thistle

(barnaby's thistle), sunflower, sweet clover, tupelo, vetch, western

wild buckwheat, wild alfalfa, and similar mild flavors or blends of

mild-flavored honeys as determined by the Director, Price Support

Division, FSA.

Representative is a receiver, executor, administrator, guardian, or

trustee representing the interests of a person or an estate.

State committee is the FSA committee so designated for the

applicable State.

Sec. 1434.4 Eligibility.

(a) To be eligible to receive an individual or joint loan under

this part, a person must:

(1) Own, other than through a security interest, mortgage, or lien,

honey that:

(i) Is produced in the United States during the calendar year for

which a loan is requested and extracted on or before December 31 of

such calendar year;

(ii) Does not contain any ineligible honey floral sources;

(iii) Is not adulterated;

(iv) Has not been scorched, burned, or subjected to excessive heat

resulting in objectionable flavor, color deterioration or

carmelization;

(v) Does not contain excessive bees or bee parts, paint chips, wood

chips, or other foreign matter; and

(vi) Is not fermenting.

(2) Share in the risk of producing honey;

(3) Comply with paragraph (h) of this section;

(4) Store the honey pledged as loan collateral in eligible storage

and in eligible metal containers that meet the requirements of

Secs. 1434.7 and 1434.5, respectively;

(5) Adequately protect the interests of CCC by providing security

for a loan in accordance with the requirements in Sec. 1434.8 and by

maintaining in good condition the honey pledged as security for a loan;

(6) Be accurate and truthful and not make any misrepresentations

with respect to any information provided to CCC concerning any activity

covered by this part; and

(7) Not have been convicted of a crime as would render the person

not eligible for the loan because of the provisions of part 718 of this

title.

(b) A person who complies with paragraph (a) of this section, who

enters into a contract to sell the honey used as collateral for a loan

but retains, at a minimum, a beneficial interest in the honey and who

does not receive an advance payment from the purchaser to enter into

the contract unless the purchaser is a cooperative marketing

association (CMA) that is eligible under paragraph (g) of this section,

remains eligible for a loan.

(c) Two or more applicants may be eligible for a joint loan if:

(1) The conditions in paragraphs (a) and (b) of this section are

met with respect to the commingled honey collateral stored in the same

eligible containers they are tendering for a loan; and

(2) The commingled honey is not used as collateral for an

individual loan that has not been repaid.

(d) Heirs who succeed to a beneficial interest in the honey are

eligible for a loan if they:

(1) Assume the decedent's obligation under a loan if such loan has

already been obtained; and

(2) Assure continued safe storage of the honey if such honey has

been pledged as collateral for a loan.

(e) A representative may be eligible to receive a loan on behalf of

a person or estate who or which meets the requirements in paragraphs

(a), (b), (c), and (d) of this section and that the honey tendered as

collateral by the representative, in his capacity as a representative,

shall be considered as tendered by the person or estate being

represented.

(f) A minor who otherwise meets the requirements of this part for a

loan shall be eligible to receive a loan only if the minor meets one of

the following requirements:

(1) A court or statute has conferred the right of majority on the

minor;

(2) A guardian has been appointed to manage the minor's property

and the applicable loan documents are signed by the guardian;

(3) Any note signed by the minor is cosigned by a person determined

by the county committee to be financially responsible; or

(4) A surety, by furnishing a bond, guarantees to protect CCC from

any loss incurred for which the minor would be liable had the minor

been an adult.

(g) A CMA which the Executive Vice President, CCC, determines meets

the requirements for CMA's in part 1425 of this title may be eligible

to obtain a loan on behalf of those members who themselves are eligible

to obtain a loan provided that:

(1) The beneficial interest in the honey must always, until loan

repayment or forfeiture, remain in the member who delivered the honey

to the eligible CMA or its member CMA's, except as otherwise provided

in this part; and

(2) The honey delivered to an eligible CMA shall not be eligible

for a loan if the member who delivered the honey does not retain the

right to share in the proceeds from the marketing of the honey as

provided in part 1425 of this title.

(h)(1) To be eligible to receive loans under this part a producer

must have the beneficial interest in the honey that is tendered to CCC

for a loan. The producer must always have had the beneficial interest

in the honey unless, before the honey was extracted, the producer and a

former producer whom the producer tendering the honey to CCC has

succeeded had such an interest in the honey. Honey obtained by gift or

purchase shall not be eligible to be tendered to CCC for loans. Heirs

who succeed to the beneficial interest of a deceased producer or who

assume the decedent's obligations under an existing loan shall be

eligible to receive loans whether succession to the honey occurs before

or after extraction so long as the

[[Page 10926]]

heir otherwise complies with the provisions of this part.

(2) A producer shall not be considered to have divested the

beneficial interest in the honey if the producer retains control,

title, and risk of loss in the honey including the right to make all

decisions regarding the tender of such honey to CCC for a loan, and the

producer takes one of the following actions:

(i) Executes an option to purchase, whether or not a payment is

made by the potential buyer for such option to purchase, with respect

to such honey if all other eligibility requirements are met and the

option to purchase contains the following provision:

Notwithstanding any other provision of this option to purchase,

title, risk of loss, and beneficial interest in the honey, as

specified in 7 CFR part 1434, shall remain with the producer until

the buyer exercises this option to purchase the honey. This option

to purchase shall expire, notwithstanding any action or inaction by

either the producer or the buyer, at the earlier of: (1) the

maturity of any CCC loan which is secured by such honey; (2) the

date the CCC claims title to such honey; or (3) such other date as

provided in this option.

(ii) Enters into a contract to sell the honey if the producer

retains title, risk of loss, and beneficial interest in the honey and

the purchaser does not pay to the producer any advance payment amount

or any incentive payment amount to enter into such contract except as

provided in part 1425 of this chapter.

(3) If loans are made available to producers through an approved

CMA in accordance with part 1425 of this chapter, the beneficial

interest in the honey must always have been in the producer-member who

delivered the honey to the CMA or its member CMA's, except as otherwise

provided in this section. Honey delivered to such a CMA shall not be

eligible for loans if the producer-member who delivered the honey does

not retain the right to share in the proceeds from the marketing of the

honey as provided in part 1425 of this chapter.

(i) A producer may, before the final date for obtaining a loan for

honey, re-offer as loan honey any honey that has been previously

pledged as loan honey except that the loan on such re-offered honey

shall have the same maturity date as the original loan.

Sec. 1434.5 Containers and drums.

(a)(1) The honey must be packed in metal containers of a capacity

of not less than 5 gallons or greater than 70 gallons. The metal

containers must meet the requirements of the Federal Food, Drug, and

Cosmetic Act, as amended, and regulations issued thereunder and must be

generally fit for the purpose for which they are to be used;

(2) The 5-gallon containers must hold approximately 60 pounds of

honey, and must be new, clean, sound, uncased, and free from

appreciable dents and rust. The handle of each container must be firm

and strong enough to permit carrying the filled container. The cover

and can opening must not be damaged in any way that will prevent a

tight seal. Cans which are punctured or have been punctured and

resealed by soldering will not be acceptable, and

(3) The steel drums must be an open-end type and filled no closer

than 2 inches from the top of the drums. Such drums must be new or must

be used drums which have been reconditioned inside and outside. The

steel drums must be clean, treated inside and outside to prevent

rusting, fitted with gaskets which provide a tight seal and have an

inside coating suitable for honey storage.

(b) Honey shall not be eligible to be pledged as collateral for

loans if such honey is stored in:

(1) 55-gallon steel drums having a tare weight less than 38 pounds,

30-gallon steel drums having a tare weight less than 26 pounds, or

drums having removable liners of polyethylene or other materials;

(2) Bung-type drums;

(3) Bulk tanks;

(4) Plastic buckets and containers;

(5) Steel drums which are severely enough dented as to cause damage

to their lining, improper seal, or stacking capabilities; and

(6) Rusted drums with corroded areas.

Sec. 1434.6 Application, availability, disbursement, and maturity.

(a) The deadline for requesting a loan offered under this part is

May 7, 1999.

(b) Loans mature on demand but not later than the last day of the

ninth calendar month following the month in which the note and security

agreement was approved. When the final maturity date falls on a non-

workday for county offices, CCC shall extend the final date to the next

workday. Before the date determined in paragraph (a) of this section, a

producer may re-offer as loan collateral any eligible honey that has

been offered previously for a CCC loan and the loan has been repaid.

(c) A producer must request loans at the county office of the

county where the honey is stored if the honey is stored at the

producer's farm. A producer who requests a loan on honey stored in

eligible storage other than the producer's farm, may request loans at

either the county office of the county where the storage facility is

located or at the county office of the county where the producer's main

place of business is located. A CMA must request loans at the county

office for the county in which the principal office of the CMA is

located unless the State committee designates another county office. If

the CMA has operations in two or more States, the CMA must file its

loan applications at the county office for the county in which its

principal office for each State is located.

(d) Subject to paragraph (a) of this section, loans for the 1998

crop of honey are available to producers as soon as announced by CCC.

(e) Loans will be made on the honey as declared and certified by

the producer on Form CCC-633 (Honey), (Honey Loan Certification and

Worksheet) at the time the honey is pledged as collateral for a loan.

The producer is also required to declare and certify on Form CCC-633

(Honey) the class (table or nontable) and floral source of the honey at

the time the honey is pledged as collateral for a loan.

(f) The request for a loan shall not be approved until all

producers having an interest in the honey sign the note and security

agreement and CCC approves such note and security agreement. The

disbursement of loans will be made by county offices on behalf of CCC.

(g) The loan documents shall not be presented for disbursement

unless the honey subject to the note and security agreement:

(1) Is eligible to be pledged as collateral for a loan;

(2) Is in existence;

(3) Has been extracted;

(4) Is in eligible storage; and

(5) Has not been blended or mixed with ineligible honey.

(h) If, after a loan is made, CCC determines that the producer or

the honey collateral is not in compliance with any of the provisions of

this part, the producer shall refund the total amount disbursed under

loan and charges plus interest, including late payment interest as

provided in part 1403 of this title.

Sec. 1434.7 Eligible storage.

(a) Loans will be made only on honey in eligible storage which

shall consist of a storage structure located on or off the farm which

is determined by CCC to be under the control of the producer and

affords safe storage for honey pledged as collateral for a loan. If the

honey located in a farm storage structure is pledged as collateral that

secures more than one loan, the honey must be segregated so as to

preserve the identity of the honey

[[Page 10927]]

securing such loan. Honey securing a loan must also be segregated from

any honey not pledged as collateral for a loan which is stored in the

same structure.

(b) Producers may also obtain loans on honey packed in eligible

containers and stored in facilities owned by third parties in which the

honey of more than one person is stored if the honey which is to be

pledged as collateral for a loan and which is stored identity preserved

or is segregated from all other honey. Each container of the segregated

quantity of honey shall be marked with the producer's name, loan

number, and lot number so as to identify the honey from other honey

stored in the structure.

Sec. 1434.8 Liens.

(a) CCC's security interest in the honey pledged as collateral is

first and superior to all other security interests.

(b) The county office shall file or record, as required by State

law, all financing statements needed to perfect a security interest in

honey pledged as collateral for a loan. The cost of filing and

recording shall be for the account of CCC.

(c) If there are any other security interests, liens, or

encumbrances on the honey, CCC shall obtain waivers that fully protect

the interest of CCC even though the security interests, liens, or

encumbrances are satisfied from the loan proceeds. No additional

security interests, liens, or encumbrances shall be placed on the honey

after the loan is approved.

Sec. 1434.9 Fees and interest.

(a) A producer shall pay a nonrefundable loan service fee to CCC at

a rate determined by CCC to operate the program on a no-net-cost basis

as determined by the Executive Vice President, CCC. The amount of such

fees will be available in State and county offices and will be shown on

the note and security agreement.

(b) Interest which accrues with respect to a loan shall be

determined in accordance with part 1405 of this chapter.

Sec. 1434.10 Determination of quantity.

The amount of a loan shall be based on 100 per cent of the net

weight in pounds of such quantity certified by the producer for honey

on Form CCC-633 (Honey) which is pledged as security for the loan and

covered by the note and security agreement. Estimates of the quantity

of honey shall be made on the basis of 12 pounds for each gallon of

rated capacity of the container.

Sec. 1434.11 Transfer of producer's interest prohibited.

Absent written approval from CCC, the producer shall not transfer

either the remaining interest in, or right to redeem, the honey pledged

as collateral for a loan on honey nor shall anyone acquire such

interest or right. Subject to the provisions of Sec. 1434.14, a

producer who wishes to liquidate all or part of a loan by contracting

for the sale of the honey must obtain written approval from the county

office on a form prescribed by CCC to remove a specified quantity of

the honey from storage. Any such approval shall be subject to the terms

and conditions set forth in the applicable form, copies of which may be

obtained by producers at the county office.

Sec. 1434.12 Loss or damage.

The producer is responsible for any loss in quantity or quality of

the honey pledged as collateral for a loan. CCC shall not assume any

loss in quantity or quality of the loan collateral.

Sec. 1434.13 Personal liability of the producer.

(a) When applying for an individual or joint loan, each producer

agrees:

(1) When signing Form CCC-633 (Honey), Honey Loan Certification and

Worksheet and Form CCC-677 Farm Storage Note and Security Agreement,

that the producer will:

(i) Provide correct, accurate, and truthful certifications and

representations of the loan quantity and all other matters of fact and

interest; and

(ii) Not remove or dispose of any amount of the loan quantity

without prior written approval from CCC in accordance with this

section.

(2) That violation of the terms and conditions of this part and

Form CCC-677 will cause harm or damage to CCC in that funds may be

disbursed to the producer for a loan quantity which is not actually in

existence or for a quantity for which the producer is not eligible.

(b) For the purposes of this section, violations include any

failure to comply with this part or the loan agreement, including but

not limited to any incorrect certification or:

(1) Unauthorized removal of honey which shall include but is not

limited to the movement of any loan quantity of honey from the storage

structure in which the commodity was stored when the loan was approved

to any other storage structure whether or not such structure is located

on the producer's farm without prior written authorization from the

county committee in accordance with Sec. 1434.14.

(2) Any unauthorized disposition which shall include, but is not

limited to the conversion of any loan quantity pledged as collateral

for a loan without prior written authorization from the county

committee in accordance with Sec. 1434.14.

(c) The producer and CCC agree that it will be difficult, if not

impossible, to prove the amount of damages to CCC for conduct which is

in violation of this section. Accordingly, if the county committee

determines that the producer has engaged in any such violation,

liquidated damages shall be assessed in addition to any loan refund and

other charges that may be due. The amount of such damages shall be

computed using the quantity of honey that is involved in the violation

and the formula set out below. If CCC determines the producer:

(1) Acted in good faith when the violation occurred, liquidated

damages will be assessed by multiplying the quantity involved in the

violation by:

(i) 10 percent of the loan rate applicable to the loan note for the

first offense; or

(ii) 25 percent of the loan rate applicable to the loan note for

the second offense; or

(2) Did not act in good faith with regard to the violation, or for

cases other than the first or second offense, liquidated damages will

be assessed by multiplying the quantity involved in the violation by 25

percent of the loan rate applicable to the loan note.

(d) For liquidated damages assessed in accordance with paragraph

(c)(1) of this section, the county committee shall:

(1) Require repayment of the loan principal applicable to the loan

quantity involved in the violation plus charges and interest; and

(2) If the producer fails to pay such amount within 30 calendar

days from the date of notification, call the applicable loan for all of

the honey under loan, plus charges and interest.

(e) For liquidated damages assessed in accordance with paragraph

(c)(2) of this section, the county committee shall call the loan

involved in the violation, and charges plus interest.

(f) The county committee:

(1) May waive the administrative actions taken in accordance with

paragraphs (c)(1) and (d) of this section if the county committee

determines that:

(i) The violation occurred inadvertently, accidentally, or

unintentionally; or

(ii) The producer acted to prevent spoilage of the commodity.

(2) Shall not consider the following acts as inadvertent,

accidental, or unintentional:

[[Page 10928]]

(i) Movement of loan collateral off the farm;

(ii) Movement of loan collateral from one storage structure to

another on the farm; and

(iii) Consumption of loan collateral.

(3) Shall furnish a copy of its determination to the State

committee, and the Administrator. If the determination of the county

committee is not disapproved by either the State committee or the

Administrator or a designee, within 60 calendar days from the date the

determination is received, such determination may be considered to have

been approved unless the Administrator issues procedures that allow for

more time or decides in an individual case that more time is needed.

(g) If there is any violation of the loan agreement or this part,

the loan may be terminated in which case there must be a full refund of

the loan plus interest and costs.

(h) If the county committee determines that the producer has

violated this part or the loan agreement, the county committee shall

notify the producer in writing that:

(1) The producer has 30 calendar days to provide evidence and

information regarding the circumstances which caused the violation, to

the county committee, and

(2) Administrative actions will be taken in accordance with

paragraph (d) or (e) of this section.

(i)(1) If a producer:

(i) Makes any fraudulent or misleading representation in obtaining

a loan, maintaining, or settling a loan; or

(ii) Disposes or moves the loan collateral without the approval of

CCC, such loan shall become payable upon demand by CCC. The producer

shall be liable for:

(A) The amount of the loan;

(B) Any additional amounts paid by CCC with respect to the loan;

(C) All other costs which CCC would not have incurred but for the

fraudulent representation, the unauthorized disposition or movement of

the loan collateral;

(D) Interest on such amounts;

(E) Late payment interest as may be provided for in part 1403 of

this title; and

(F) Liquidated damages assessed under paragraph (c) of this

section; and

(2) Notwithstanding any provisions of the note and security

agreement, if a producer has made any such fraudulent or misleading

representation to CCC or if the producer has disposed of, or moved, the

loan collateral without prior written approval from CCC in accordance

with Sec. 1434.14, the value of the settlement for such collateral

removed by CCC shall be determined by CCC according to Sec. 1434.16.

(j) A producer shall be personally liable for any damages resulting

from honey removed by CCC, containing mercurial compounds or other

substances poisonous to humans, animals, or food commodities which are

contaminated.

(k) If the amount disbursed under a loan or in settlement thereof

exceeds the amount authorized under this part, the producer shall be

personally liable for repayment of such excess and charges, plus

interest, and for any other sanction as may be allowed by law.

(l) If the amount collected from the producer in satisfaction of

the loan is less than the amount required in accordance with this part,

the producer shall be personally liable for repayment of the amount of

such deficiency and charges, plus interest.

(m) In the case of joint loans, the personal liability for the

amounts specified in this section shall be joint and several on the

part of each producer signing the loan note. Further, each producer who

is a party to a joint loan will be jointly and severally liable for any

violation of the terms and conditions of the note and security

agreement, and the regulations set forth in this part. Each such

producer shall also remain liable for repayment of the entire loan

amount until the loan is fully repaid without regard to such producer's

claimed share in the honey, or loan proceeds, after execution of the

note and security agreement by CCC.

(n) Any or all of the liquidated damages assessed in accordance

with the provisions of paragraph (c) of this section may be waived as

determined by CCC.

(o) Remedies set out here are in addition to remedies the CCC will

have through its security interest on honey which secures the repayment

of the loan made on the honey.

(p) All remedies provided for in this section or part are in

addition to any remedies as may otherwise be provided for in law.

Sec. 1434.14 Release of the honey pledged as collateral for a loan.

(a)(1) A producer shall not move or dispose of any honey pledged as

collateral for a loan until prior written approval for such removal or

disposition has been received from the county committee in accordance

with this section.

(2) A producer may at any time obtain a release of all or part of

the honey remaining as loan collateral by paying to CCC the amount of

the loan and any charges which had been made by CCC to the producer

with respect to the quantity of the honey released, plus interest.

(3) When the proceeds of a sale of honey are needed to repay all or

part of a loan, the producer must request and obtain prior written

approval of the county office on a form prescribed by CCC in order to

remove a specified quantity of the honey from storage. Any such

approval shall be subject to the terms and conditions set forth in the

applicable form, copies of which may be obtained by producers at the

county office. Any such approval shall not constitute a release of

CCC's security interest in the commodity or release the producer from

liability for any amounts due and owing to CCC with respect to any loan

indebtedness if full payment of such amounts is not received by the

county office.

(b) The note and security agreement shall not be released until all

loan liability has been satisfied in full.

(c) After satisfaction of a loan, CCC shall release CCC's security

interest in the honey at the producer's request. The producer shall be

responsible for payment of any fee for such release if such fee can be

determined.

Sec. 1434.15 Liquidation of loans.

(a) The producer is required to repay the loan on or before

maturity by payment of the amount of loan, plus any charges, plus

interest.

(b) If a producer fails to settle the loan in accordance with

paragraph (a) of this section within 30 calendar days from the maturity

date of such loan, or other reasonable time period as established by

CCC, a claim for the loan amount, plus charges, plus interest shall be

established. CCC shall inform the producer before the maturity date of

the loan of the date by which the loan must be settled or a claim will

be established in accordance with part 1403 of this title.

Sec. 1434.16 Foreclosure.

(a) Upon maturity and nonpayment of the loan, title to the

unredeemed honey securing the loan shall vest in CCC.

(b) If the total amount due on a loan or the unpaid amount of the

note and charges, plus interest is not satisfied upon maturity, CCC may

remove the honey from storage and assign, transfer, and deliver the

honey or documents evidencing title thereto at such time, in such

manner, and upon such terms as CCC may determine at public or private

sale. Any such disposition may also be effected without removing the

honey from storage. The honey may be processed before sale and CCC may

[[Page 10929]]

become the purchaser of the whole or any part of the honey at either a

public or private sale.

(c) If the honey is removed from storage by CCC and is sold, the

value of the settlement shall be the proceeds from the sale of the

honey minus costs associated with the disposition of the honey and

shall be applied to the amount owed CCC by the producer; and

(1) If the value of the collateral computed at settlement is less

than the amount due, the producer shall pay to CCC the amount of such

deficiency and charges, plus interest on such deficiency and CCC may

take any action against the producer to recover the deficiency; or

(2) If the proceeds received from the sale of the honey so computed

are greater than the sum of the amount due plus any cost incurred by

CCC in conducting the sale of the honey, such excess shall be paid to

the producer or, if applicable, to any secured creditor of the

producer.

Sec. 1434.17 Handling payments and collections not exceeding $9.99.

In order to avoid administrative costs of making small payments and

handling small accounts, amounts of $9.99 or less which are due the

producer will be paid only upon the producer's request. Deficiencies of

$9.99 or less, including interest, may be disregarded unless demand for

payment is made by CCC.

Sec. 1434.18 Death, incompetency, or disappearance; appeals; other

loan provisions.

(a) In the case of death, incompetency, or disappearance of any

producer who is entitled to the payment of any sum in settlement of a

loan, payment shall, upon proper application to the county office which

made the loan, be made to the persons who would be entitled to such

producer's share under the regulations contained in part 707 of this

title. Applications for loans may be made upon application of a

representative of the producer as allowed under standard practice for

farm programs.

(b) Appeals of adverse decisions made under this part shall be

subject to the provisions of 7 CFR parts 11 and 780.

(c) The Executive Vice President, CCC, may impose such additional

loan conditions as are determined to be necessary or appropriate to

insure that the purposes and goals of the program provided for in this

part are met.

Signed at Washington, D.C., on March 2, 1999.

Keith Kelly,

Executive Vice President, Commodity Credit Corporation.

[FR Doc. 99-5557 Filed 3-3-99; 12:57 pm]

BILLING CODE 3410-05-P