[Federal Register Volume 62, Number 239 (Friday, December 12, 1997)]
[Rules and Regulations]
[Pages 65321-65338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32491]
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DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Parts 422 and 457
Potato Crop Insurance Regulations; and Common Crop Insurance
Regulations, Northern Potato Crop Insurance Provisions, Central and
Southern Potato Crop Insurance Provisions, Northern Potato Quality
Endorsement Crop Insurance Provisions, Northern Processing Potato
Quality Endorsement Crop Insurance Provisions, Certified Seed Potato
Endorsement Crop Insurance Provisions, and Northern Potato Storage
Endorsement Crop Insurance Provisions
AGENCY: Federal Crop Insurance Corporation, USDA.
ACTION: Final rule.
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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes crop
provisions for the insurance of potatoes. 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 potato 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
potato crop insurance regulations to the 1997 and prior crop years in
counties in which the Northern Potato Crop Provisions will be used and
to the 1998 and prior crop years in all other states.
EFFECTIVE DATE: December 12, 1997.
FOR FURTHER INFORMATION CONTACT:
Rob Coultis, Insurance Management Specialist, 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 No. 12866
The Office of Management and Budget (OMB) has determined this rule
to be exempt for the purposes of Executive Order No. 12866, and
therefore, this rule has not been reviewed by OMB.
Paperwork Reduction Act of 1995
Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3507),
those collections of information have been approved by the Office of
Management and Budget (OMB) under control number 0563-0053.
Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. This rule contains no Federal
mandates (under the regulatory provisions of title II of the UMRA) for
State, local, and tribal governments or the private sector. Therefore,
this rule is not subject to the requirements of sections 202 and 205 of
the UMRA.
Executive Order No. 12612
It has been determined under section 6(a) of Executive Order No.
12612, Federalism, that this rule does not have sufficient federalism
implications to warrant the preparation of a Federalism Assessment. The
provisions contained in this rule will not have a substantial direct
effect on States or their political subdivisions, or on the
distribution of power and responsibilities among the various levels of
government.
Regulatory Flexibility Act
This regulation will not have a significant economic impact on a
substantial number of small entities. The amount of work required of
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 actions are required as a result of this
action on the part of either the producer or the reinsured company.
Additionally, the regulation does not require any action on the part of
the small entities than is required on the part of the 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 No. 12372
This program is not subject to the provisions of Executive Order
No. 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 No. 12988
This final rule has been reviewed in accordance with Executive
Order 12988 on civil justice reform. The provisions of this rule will
not have 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.
[[Page 65322]]
Background
On Wednesday April 23, 1997, FCIC published a proposed rule in the
Federal Register at 62 FR 19691-19701 to add to the Common Crop
Insurance Regulations (7 CFR part 457), new sections: 7 CFR 457.142,
Northern Potato Crop Insurance Provisions; 7 CFR 457.143, Northern
Potato Quality Endorsement Crop Insurance Provisions; 7 CFR 457.144,
Northern Processing Potato Quality Endorsement Crop Insurance
Provisions; 7 CFR 457.145, Certified Seed Potato Endorsement Crop
Insurance Provisions; 7 CFR 457.146, Northern Potato Storage
Endorsement Crop Insurance Provisions; and 7 CFR 457.147, Central and
Southern Potato Crop Insurance Provisions. The new provisions will be
effective for the 1998 and succeeding crop years in counties in which
the Northern Potato Crop Provisions will be used and for the 1999 crop
year in all other counties. These provisions will replace and supersede
the current provisions for insuring potatoes found at 7 CFR part 422
(Potato Crop Insurance Regulations). FCIC also has amended 7 CFR part
422 to limit its effect to the 1997 and prior crop years in counties in
which the Northern Potato Crop Provisions will be used and to the 1998
crop year in all other counties.
Following publication of the proposed rule, the public was afforded
30 days to submit written comments, data, and opinions. A total of 71
comments were received from producer groups, reinsured companies and an
insurance service organization. The comments received, and FCIC's
responses, are as follows:
Comment: An insurance service organization indicated it had heard
the revised Potato Crop Provisions would not be effective in all states
for the 1998 crop year, presumably because the Final Rule would not be
published by the June 30 contract change date for counties in south
Florida. The commentor questioned if it is the intent to defer the
Central and Southern Potato Crop Policy in all states, or just those
counties with a contract change date before the final rule is
published. The commentor also stated it had received comments (for
crops in general) that a contract change date of 60 or 90 days before
the sales closing/cancellation date does not provide enough time to
identify changes, prepare training materials, provide training to staff
and agents, notify policyholders and solicit new sales.
Response: FCIC will not implement the Central and Southern Potato
Crop Provisions until the 1999 crop year in all applicable counties.
The Northern Potato Crop Provisions and applicable endorsements will be
implemented in all applicable counties for the 1998 crop year. The 60
to 90 days before sales closing allows FCIC the opportunity to balance
the need of the reinsured company to train and inform the insured, and
the needs of FCIC and insured, to have the most recent data to enable
FCIC to set rates, price, and other terms of the contract. Therefore,
no change will be made.
Comment: A reinsured company recommended delivery of the 1998 loss
adjustment manual 90 days prior to the close of sales in order to
adequately and correctly advise agents and insureds regarding purchase
decisions.
Response: FCIC will make all reasonable efforts to deliver
supporting procedural manuals as soon as practicable after the contract
change date. However, the loss adjustment manual cannot be finalized
until the terms of the policy have been finalized.
Comment: A reinsured company recommended changing either the
definition of ``certified seed'' or section 7 (Insured Crop) to allow
insurance to attach to acreage planted with seed that does not meet
state certification requirements. The comment cited Idaho Seed Potato
Regulations which state that ``Idaho growers will only be allowed to
plant uncertified potatoes grown by them provided that they are no more
than one generation from their own certified parent seed potatoes.''
Under the definition by the State of Idaho it appears that one
generation past the initial certified seed is considered proper. The
comment further stated that as long as State rules are followed, it
should not matter if the seed is certified by the state or by a private
organization.
Response: Redesignated section 6 of the Northern Potato Crop
Provision and section 7 of the Central and Southern Potato Crop
Provisions allows insurance for acreage that is not planted with
certified seed if authorized by the Special Provisions. FCIC's Regional
Service Offices (RSO) will fully analyze individual areas to determine
whether or not this practice should be allowed and, then, include the
authority in the Special Provisions. Although certain private
organizations may be able to duplicate State procedures, FCIC believes
the most logical way to maintain consistent requirements among
producers is to rely on authorized State agencies for the certification
process. Therefore, no changes have been made in the provisions.
Comment: A reinsured company and an insurance service organization
indicated that cultural practices may exist that are not recognized (or
possibly known) by the Cooperative State Research, Education and
Extension Service. The comments indicated that the definition of ``Good
farming practices'' is too restrictive since it limits acceptable
farming practices to those recognized by the Cooperative State
Research, Education, and Extension Service. The comments also suggested
changing the last word of the definition from ``county'' to ``area.''
Response: FCIC believes that the Cooperative State Research,
Education, and Extension Service (CSREES) recognizes farming practices
that are considered acceptable for producing potatoes. If a producer is
following practices currently not recognized as acceptable by the
CSREES, there is no reason why such recognition from CSREES cannot be
sought by interested parties. The term ``area'' is more ambiguous than
the term ``county'' and would allow more subjective determination, and
less consistent application of the provision. No substantial change has
been made in the definition. However, the definition has been moved to
the Basic Provisions since it is applicable to most crops.
Comment: An insurance service organization suggested the definition
of ``harvest'' in the Northern and Central and Southern Crop Provisions
be clarified to indicate if it means removing potatoes from the field
or lifting them to the soil surface.
Response: The definition has been clarified to indicate that
acreage will be considered to be harvested when potatoes are lifted to
the soil surface.
Comment: A reinsured company suggested adding the words ``and
quality'' after the words ``providing the quantity'' in the definition
of ``Irrigated practice'' in the Northern and Central and Southern
Potato Crop Insurance Provisions.
Response: FCIC agrees that water quality is an important issue.
However, since no standards or procedures have been developed to
measure water quality for insurance purposes, quality cannot be
included in the definition. No substantial change has been made in the
definition. However, the definition has been moved to the Basic
Provisions since it is applicable to most crops.
Comment: An insurance service organization recommended the term
``late blight'' be defined.
Response: Late blight is a term commonly used in the potato
industry and referenced in the U.S. Standards for Grades of Potatoes
which are
[[Page 65323]]
incorporated herein by reference. Therefore, it is not necessary to
define the term in the Crop Provisions.
Comment: An insurance service organization indicated that the
definition of ``marketable lot'' contained in the Central and Southern
Crop Provisions describes a ``lot'' and recommended the definition be
changed to distinguish it as a ``marketable lot.'' For the definition
to be useful, it should specify that the production is saleable or
grades U.S. No. 2 or better so the grade standard would be understood
in all the references to ``marketable lots'' in section 12(e).
Response: The requirements of marketability are clearly stated in
section 12(e) of the Central and Southern Crop Provisions. However,
FCIC agrees that the definition contained in the proposed rule
describes a ``lot'' rather than a ``marketable lot'' and has revised
the section to define the term ``lot.''
Comment: An insurance service organization suggested clarifying the
definition of ``Practical to replant'' in the Northern and Central and
Southern Crop Insurance Provisions by changing the punctuation.
Response: FCIC has clarified the definition by changing some of the
punctuation. The definition has also been moved to the Basic Provisions
since it is applicable to most crops.
Comment: A reinsured company suggested revising the definition of
``replanting'' in the Northern and Central and Southern Crop Provisions
by replacing the wording ``. . . replace the potato seed and then
replacing the potato seed . . .'' with ``. . . planting the potato seed
and then replanting the potato seed . . .''
Response: The first reference to ``replace the potato seed'' refers
to preparation of the land, not planting. No substantial change has
been made in the definition. However, the definition has been moved to
the Basic Provisions since it is applicable to most crops.
Comment: An insurance service organization recommended clarifying
the definition of ``replanting'' by specifying the crop name as
follows: ``. . . with the expectation of growing a successful potato
crop.''
Response: FCIC has revised the definition of ``replanting'' to
clarify a ``successful crop'' to mean at least the approved yield for
the unit. The definition also has been moved to the Basic Provisions
since it is applicable to most crops.
Comment: A reinsured company and a producer organization opposed
the provisions in sections 3 (b) and (c) of the Northern and Central
and Southern Crop Provisions that reduce the price election for
unharvested acreage. In addition, an insurance service organization had
two comments from its members favoring, and two opposing, these
provisions. The opposing comments indicated that the unharvested
reduction provision was removed from the peanut policy and is being
considered for removal from the tobacco policy. Adding it to potatoes
would appear to discriminate against potato producers who are unable to
harvest due to insured causes. The opposing comments also indicated
that the reduced coverage would: (1) Be hard to ``sell'' and explain to
insureds; (2) make settlement of claims more difficult; (3) be
inappropriate when damage occurs just prior to harvest because the
insured has incurred most normal input costs; (4) encourage insureds to
harvest damaged potatoes that have no value just to collect 100 percent
of the price election; and (5) be unfair to producers with multi-unit
policies because, when freeze damage occurs near the end of the harvest
season, several fields have already been harvested and the costs have
already been incurred for the entire crop. Producers with multi-unit
policies pay a 10 percent surcharge for the added protection.
Therefore, 100 percent coverage is only fair. Because of the objections
received from its members, the insurance service organization
recommended further study or a more detailed explanation be provided.
Response: Prior to this rule, FCIC's price elections have not
included harvesting costs. This means that producers have paid less
premium than otherwise would have been owed. However, any loss from
harvested acres has been indemnified at that lower expected market
price. The Federal Crop Insurance Act authorizes FCIC to reduce the
payment to producers for acreage that is not harvested or for other
costs that are not incurred if the crop is lost prior to harvest. FCIC
has exercised its authority to build harvesting costs into the price
election but only reduce the price for those producers who do not incur
harvesting costs. The price election reduction is limited to those
costs associated with harvest. If the producer has already begun
harvest before the cause of loss occurred that caused the
discontinuance of harvest, and the producer can prove that harvesting
costs have already been incurred, no reduction will occur. The change
means that producers who harvest their potatoes will receive a higher
price election. However, this higher price election will result in
higher premiums than in the past. Section 3 has been redesignated as
section 2 in the Northern Potato Crop Provisions.
Comment: A reinsured company requested that section 3(c) of the
Northern and Central and Southern Crop Provisions be clarified.
Response: FCIC has clarified the provisions in redesignated section
2(c) of the Northern Potato Crop Provisions and section 3(c) of the
Central and Southern Crop Provisions.
Comment: A reinsured company asked two questions regarding the
following provision contained in section 3(c) of the Northern and
Central and Southern Crop Provisions.
(a) If the potatoes freeze before the end of the insurance period,
is the claim settled by: (1) Using an appraisal at the 80 percent price
election or (2) allowing the frozen potatoes to be taken to harvest,
use the production to count, and then apply the 80 percent price
election?
(b) If the potatoes have 12 percent wet breakdown, a 100 percent
loss would be paid if production is discarded within seven days of
harvest. Will the indemnity be based on the 80 percent unharvested
price if the neighbors would have destroyed similar production but did
not do so because they didn't have that problem?
The comment also recommended that the 80 percent price apply only
when none of the acreage in a unit could be harvested because, once
harvest on a unit has begun, the producer will have incurred costs
regardless of the amount of acreage harvested.
Response: This provision is intended to recognize reduced input
costs when potatoes are not harvested. Therefore, in the event that
freeze damage is severe, and a majority of producers would not further
care for the crop, the insurance provider should determine the amount
of production to count in accordance with applicable procedures, and
settle the claim using 80 percent of the elected price. If similarly
situated producers in the area would continue to care for the crop, and
the producer elects to continue to care for and harvests the crop, the
insurance provider should determine the amount of production to count
and settle the claim using 100 percent of the elected price. FCIC will
only allow the 100 percent price to be used if the producer has
adequate proof that he has already incurred and paid the harvesting
costs. A provision has been added to allow the apportionment of acreage
within a unit as harvested and unharvested and only unharvested acreage
will have the price election reduced. Section 3 has been
[[Page 65324]]
redesignated as section 2 in the Northern Potato Crop Provisions.
Comment: A reinsured company suggested clarifying section 8(b) of
the Northern and Southern and Central Potato Crop Provisions.
Response: FCIC has clarified the provision in redesignated section
7(b) of the Northern Potato Crop Provisions and section 8(b) of the
Central and Southern Crop Provisions.
Comment: A producer group recommended changing the date after which
frost/freeze would no longer be covered in Minnesota and North Dakota
from September 30 to October 15. This is referenced in section 10(b)(2)
of the Northern Potato Crop Provisions, but the actual date is
contained in the Special Provisions.
Response: The Crop Provisions have been written to permit these
dates to vary based on weather patterns and growing conditions. Data
collected thus far by FCIC supports the current date of September 30.
However, FCIC will review any additional information that can be
provided. No changes can be made until such data are received and
analyzed. Section 10 has been redesignated as section 9 in the Northern
Potato Crop Provisions.
Comment: An insurance service organization indicated that the
calculation sequence in section 12(b)(1)-(7) of the Northern Potato and
Central and Southern Potato Crop Provisions is difficult to follow
because it is so wordy. It seems unnecessary to refer to the previous
item by number as if it were on another page.
Response: Since some of the calculations involved are not performed
in sequential order, it is necessary to refer to specific section
numbers. Removal of the section references would make the provisions
less clear. However, an example has been added for clarity to
redesignated section 11 of the Northern Potato Crop Provisions.
Comment: A reinsured company stated that new quality adjustment
provisions contained in section 12 of the Northern Potato Crop
Provisions would increase the amount of work required of insurance
providers and greatly increase loss adjustment expense. The comment
indicated that the policy is complex, contrary to simplification
efforts, and that previous regulations and procedures did not require
grading or adjustment to the amount of production to count when less
than 5 percent of the insured production had soft rot, wet breakdown or
freeze damage.
Response: The previous potato policy (without the Frost/Freeze
Option) and related procedures also provided for reductions in the
amount of production to count when production had any amount of soft
rot, wet breakdown, or freeze damage. Previous provisions and
procedures also required grading of the production to determine
appropriate reductions in the amount of production to count. The only
changes in these provisions are in the adjustment factors which do not
change the requirement to grade damaged production or to adjust to the
amount of production to count. Therefore, FCIC does not agree that
additional work or expense will be incurred as a result of the changes,
and no change will be made. Section 12 has been redesignated as section
11 in the Northern Potato Crop Provisions.
Comment: An insurance service organization recommended
clarification of ``marketable lot'' as used in section 12(e) of the
Central and Southern Potato Crop Provisions. As written, it seems
somewhat unclear whether all marketable lots must grade U.S. No. 2 or
better, or only in certain cases, such as unsold harvested or appraised
production in 12(e)(1)(iv).
Response: FCIC agrees that the provisions can be clarified and has
revised section 12(e) to clearly indicate that any lot of potatoes that
is stored, sold for seed, sold for human consumption, etc. will be
considered to be a marketable lot.
Comment: An insurance service organization received one comment
asking why, if quality adjustment has been incorporated in section
12(e) through (g) of the Northern Potato Crop Provisions, the options
remain separate at the end of the proposed rule. As written, there is a
lot of unnecessary duplication. The commenter would prefer to see the
quality adjustment information included in the Crop Provisions and
eliminate the need for endorsements and the resulting complications.
Response: Quality adjustment for tuber rot and freeze damage has
been incorporated into the base coverage in redesignated section 11 of
the Northern Crop Provisions. However, coverage for other types of
quality losses (e.g. internal and external defects) are not included in
the Crop Provisions because many producers do not wish to pay the
premium amounts associated with these types of quality losses. Although
some redundancy and complication results, FCIC believes that the
endorsements are the best way to provide coverage for certain quality
deficiencies. Without the endorsements, coverage of internal and
external defects would not be available, or, if made a part of the base
coverage, would require substantial premium increases for all insureds.
Therefore, no change will be made.
Comment: An insurance service organization recommended using the
defined term ``discarded'' instead of ``disposed of'' in section
12(d)(1)(i)(D) of the Northern Potato and Central and Southern Potato
Crop Provisions.
Response: ``Discarded'' is defined in the policy as disposing of
production by the insured, or a person acting for the insured, without
received any value for it. The term ``disposed of'' in redesignated
section 11(d)(1)(i)(D) of the Northern Potato Crop Provisions and
section 12(d)(1)(i)(D) of the Central and Southern Crop Provisions
refers to any disposition, including selling the production and a
definition for it has been added. Therefore, the term ``discarded''
cannot be used as recommended.
Comment: A reinsured company and an insurance service organization
commented that subsection 12(d)(1)(iii) of the Northern and Central and
Southern Crop Provisions, which requires an increase in the amount of
production to count when harvest takes place prior to full maturity,
will be difficult to administer. Insurance providers would be required
to track harvested acreage on a daily basis in order to apply proper
percentages. This would increase in complexity if multiple units, with
multiple planting dates, were being harvested simultaneously. This
adjustment is extremely subjective, which opens the insurance
provider's decisions to questioning and does serious harm to the
policy. Also, new tracking requirements will increase loss adjustment
expense. Another reinsured company concurred with the additional
production to count for potatoes harvested prior to full maturity, but
recommended that a date for full maturity be established by area and
variety. Fifty days prior to the calendar date for the end of the
insurance period was recommended for most areas. The insurance service
organization asked how and when will the ``normal number of days to
full maturity'' be determined, and by whom and whether this will vary
each year depending on favorable or adverse weather conditions. The
comment indicated that, if the date is not allowed to vary from year to
year, the adjustment could apply even though all the production in a
given area matures earlier than normal.
Response: This provision, redesignated section 11(d)(1)(iii) of the
Northern Potato Crop provisions and section 12(d)(1)(iii) of the
Central and Southern Crop Provisions, is intended to take into account
reduced production
[[Page 65325]]
that is a result of harvest for the ``new'' or ``B'' potato market, for
which small potatoes are required. FCIC agrees that this provision adds
some complexity to the loss adjustment process. However, previous
provisions did not provide any consistent method of adjustment when
potatoes were harvested prior to full maturity. To lessen the
administrative complications associated with this adjustment, FCIC has
changed the provision to specify that full maturity will be presumed to
have been reached 45 days prior to the calendar date for the end of the
insurance period unless specified otherwise in the Special Provisions.
Comment: An insurance service organization is concerned that
section 12(d)(1)(v) of the Northern Potato and Central and Southern
Potato Crop Provisions allows insureds to defer the settlement of a
claim. The policy should not allow the insured to defer settlement and
wait for a later, generally lower, appraisal, especially on crops that
have a short ``shelf life.''
Response: This provision allows deferment of a claim only if the
insurance provider agrees that representative samples can be left or if
the insured elects to continue to care for the entire crop. In either
case, if the insured does not provide sufficient care for the remaining
crop samples, the original appraisal will be used. Therefore, no
changes have been made. Section 12 has been redesignated as section 11
in the Northern Potato Crop Provisions.
Comment: An insurance service organization stated section
12(d)(1)(v)(A) of the Northern and Central and Southern Potato Crop
Provisions should not refer to ``stage guarantee'' since there are no
stages in this policy, only a price reduction for unharvested acreage.
Response: FCIC agrees and has corrected the provisions in
redesignated section 11(d)(1)(v)(A) of the Northern Potato Crop
Provisions and section 12(d)(1)(v)(A) of the Central and Southern Crop
Provisions.
Comment: An insurance service organization asked if premium will be
increased to compensate for the additional risk of adding quality
adjustment for freeze damage to the Northern Crop Provisions.
Response: All changes in coverage, including the addition of new
freeze damage adjustment provisions, will be considered when premium
rates are established.
Comment: An insurance service organization recommended combining
sections 12(e)(1) and (2) since they are so similar. Combining the
provisions will avoid having to list the types of covered damage twice
and reduce the chance of misinterpretation.
Response: FCIC agrees with the comment and has combined the
provisions in redesignated section 11(e) of the Northern Potato Crop
Provisions and section 12(e) of the Central and Southern Crop
Provisions.
Comment: A reinsured company, an insurance service organization,
and a producer group indicated that, in many situations, it will not be
possible to determine percentages of damage or to complete grade
inspections by the end of the insurance period as section 12(e)(3) of
the Northern Potato Crop Provisions and the definition of ``grade
inspection'' in the Northern and Central and Southern Potato Crop
Provisions require. Producers may harvest potatoes near the end of the
insurance period and, depending on the amount of potatoes in an area
that require grading, it may be two to three weeks before grading of
samples can be completed.
Response: FCIC agrees that the actual percentage of damage may not
be obtainable prior to the end of the insurance period in all
situations. Therefore, the definition of ``grade inspection'' in the
Northern and Central and Southern Crop Provisions has been changed to
require that samples of production be obtained prior to the sale,
storage, or disposal of the potatoes, and to allow the actual grading
of the samples to take place at a later time. Redesignated section
11(c) of the Northern Potato Crop Provisions and section 12(c) of the
Central and Southern Potato Crop Provisions has also been changed to
indicate that the extent of any loss, including quality adjustments,
must be determined based on samples obtained no later than the time the
potatoes are placed in storage, if the production is stored prior to
sale, or the date it is delivered to a buyer, wholesaler, packer,
broker, or other handler if it is not stored. Section 12(e)(3) of the
Northern Potato Crop Provisions has been deleted.
Comment: An insurance service organization suggested changing the
language in section 12(f), 12(g)(1) and 12(g)(2)(ii)(B)(1) of Northern
Crop provisions from ``will be adjusted 0.1 percent for each 0.1
percent of damage through 5 percent'' to ``will be adjusted by the same
percentage'' so the reader doesn't have to puzzle through the
calculation to figure out that 4.5 percent damage means a 4.5 percent
adjustment. Also, the existing frost/freeze potato option reduces
production to count in 5 percent increments for damage from 6 percent
to 20 percent. Changing this to increments of a tenth of a percent for
each tenth of a percent damage is more complicated, and indicates an
unrealistic degree of precision.
Response: The use of the language ``0.1 percent for each 0.1
percent of damage'' is necessary to avoid any ambiguity. Further, the
use of 0.1 percent increments is intended to make these determinations
more accurate and should not substantially complicate the calculations.
Therefore, no changes have been made.
Comment: An insurance service organization indicated that the
language in section 12(g)(2) (i), (ii) & (iii) of the Northern Potato
Crop Provisions is very complicated and difficult to follow and
suggested that a chart might be developed to assist in understanding.
Response: Section 12(g)(2)(i) (redesignated 11(g)(2)(i)) indicates
that the price received for damaged production is divided by a price
election to obtain an adjustment factor. Including this information in
a chart will not improve clarity. Redesignated sections 11(g)(2) (ii)
and (iii) indicate that 0.1 percent damage results in a 0.1 percent
reduction in the amount of production to count, that 0.2 percent damage
results in a 0.2 percent reduction, etc. A chart indicating all damage
amounts in 0.1 percent increments would be extremely repetitive, result
in additional policy pages, and not improve understanding. Therefore,
no change has been made.
Comment: An insurance service organization and a reinsured company
are concerned with moral hazards, because in section 12(g)(2) of the
Northern Crop Provisions, there is a different method of adjustment for
production that is sold or discarded within 7 days and production that
remains in storage 8 days or more. The comments indicated that a
producer's production could have 11 percent damage which would result
in zero production to count if it is kept more than 7 days, but, if it
is sold immediately, a salvage value would count against the guarantee.
The commenters also asked whether there is a way to recover some
salvage value instead of showing zero production to count if production
with more than 11 percent damage is sold and processed and whether the
loss adjustment procedure provides a way to restrict any indemnity to
the damaged acreage for a unit which includes four separate fields, and
only one was damaged enough to result in significant damage for the
whole unit.
Response: FCIC agrees that a salvage value should be counted when
an insured elects to keep and use the damaged crop for feed, starch,
etc. and
[[Page 65326]]
has changed redesignated section 11(g)(2)(ii)(B) so that a minimum of
15 percent of the production will be production to count in such
instances. This amount is consistent with the value that is normally
received for potatoes that are sold for cattle feed, starch, or other
salvage uses. When only one field of a unit is damaged, the production
from that field will be adjusted in accordance with the policy
provisions, just as it would be for other insured crops. If that amount
of damage reduces the production to count below the guarantee for the
unit, an indemnity will be paid.
Comment: A reinsured company recommended retaining current
procedures that allow a 60 day period to determine the disposition of
potatoes with 5 percent or more tuber rot. If the producer can sell the
potatoes within 60 days of harvest, the salvage value should be used to
determine the loss. Also, physiological disorders such as hollow heart,
leaf roll, etc., should be covered in the same manner as pathological
diseases (tuber rot, soft rot, late blight, etc.)
Response: FCIC agrees that 60 days is an appropriate time period to
allow for disposition of potatoes with tuber rot. However, many
producers do not wish to pay the additional premium associated with the
storage endorsement 60 day period. Also, many producers have indicated
that they do not want to pay the additional premium associated with
coverage for hollow heart and other defects. FCIC has elected to
provide coverage for both of these circumstances via optional
endorsements. Therefore, no changes have been made.
Comment: A reinsured company stated that section 12(g) of the
Northern Crop Provisions does not indicate how to determine the amount
of production to count when production has a combination of freeze and
soft rot. The comment suggested determining freeze damage and tuber rot
separately and using the one that yields the least production to count.
Response: FCIC agrees that a provision is needed to specify how a
combination of freeze and tuber rot damage will be adjusted. However,
considering only the type of damage that results in the least amount of
production to count could result in the insurance provider ignoring
what may be a significant amount of either freeze or tuber rot damage.
Redesignated section 11(h) has been added to specify how production
with more than one type of damage will be adjusted.
Comment: A reinsured company suggested that the language in section
12(g)(2)(i) of the Northern Potato Crop Provisions, 4(a)(1) of the
Northern Potato Quality Endorsement, 6(a)(1)(i) of the Northern Potato
Processing Quality Endorsement and 6(a) of the Northern Potato Storage
Endorsement be strengthened to further define ``sold'' as the ``date of
sale'' without regard to subsequent delivery or storage.
Response: Since only referring to the amount of sold production;
subsequent delivery or storage is not relevant. The provisions have
been clarified accordingly.
Comment: A reinsured company indicated that the 7 day time period
provided in section 12(g)(2)(i) of the Northern Potato Crop Provisions,
section 4(a)(1) of the Northern Potato Quality Endorsement, and section
6(a)(1)(i) of the Northern Potato Processing Quality Endorsement to
sell damaged production is not long enough. The grading process often
takes two or three weeks to complete and the percent damage cannot be
determined until the production is graded.
Response: FCIC agrees that a longer time period is necessary and
has changed the relevant provisions to reflect a time period of 21
days.
Comment: A reinsured company recommended changing section
12(g)(2)(i) of the Northern Potato Crop Provisions, and section 4(a)(1)
of the Northern Potato Quality Endorsement, so that the value of
damaged production is compared to the producer's price election rather
than the highest price election available.
Response: This provision is intended to compare the relative value
of the damaged production to the value of undamaged production. If the
elected prices were used, insureds with different price election
percentages could have different amounts of production to count even
though they had the same amount of production and crop value.
Therefore, no change has been made.
Comment: A reinsured company recommended that the salvage value
provision (section 12(g)(2)(i)) applicable to production with soft rot,
wet breakdown or other tuber rot condition also be applicable to
product damaged by freeze.
Response: It would not be appropriate to allow potatoes with low
levels of freeze damage (e.g., 5.1 percent) to be adjusted based on
value, especially in years when the market value is low. Freeze damaged
production, if handled correctly, can often be stored for long periods
of time, sorted, and sold at full market value. In contrast, production
with soft rot levels above 5 percent is much more difficult to store,
sort and sell and often must be sold soon after harvest at a much
reduced price. Therefore, the suggested change has not been made.
However, FCIC has determined that some salvage value should be counted
when an insured elects to keep damaged production and has changed
redesignated section 11(g)(1) so that a minimum of 15 percent of
production is counted in such instances.
Comment: A reinsured company suggested the word ``with'' be
inserted between ``accordance'' and ``section'' in section
12(g)(2)(iii) of the Northern Potato Crop Insurance Provisions.
Response: The provision in redesignated section 11(g)(2)(iii) has
been revised accordingly.
Comment: A reinsured company suggested that ``human consumption''
be spelled out in the Northern Potato Crop Provisions. The commenter
stated human consumption defines that potatoes are grown for
consumption by human beings and any potato crop not qualifying for
human consumption is a total loss; and there should be no production to
count if such potatoes are harvested. Counting production may encourage
a producer to leave potatoes in the soil and this is simply a poor
farming practice.
Response: Potato production may be adjusted for quality
deficiencies regardless of whether or not it is harvested. Production
will be considered as production to count if it could have been fit for
human consumption, not only if it was used or sold for human
consumption. Therefore, no changes have been made.
Comment: A reinsured company asked whether the Late Planting
Agreement Option is no longer available and why late and prevented
planting provisions were not included as they have been in other crops.
Response: Late and prevented planting provisions will be included
in the Basic Provisions and will apply to potatoes. Section 12 of the
Northern Potato Crop Provisions and section 13 of the Central and
Southern Crop Provisions indicate the available prevented planting
coverage level percentages.
Comment: An insurance service organization and a reinsured company
suggested changing section 13(d) of the Northern and Central and
Southern Crop Provisions to allow written agreements to be valid for
more than one year. Some written unit agreements are continuous unless
there are significant changes in the farming operation and some other
written agreements should also be continuous.
[[Page 65327]]
Response: Written agreements are intended to permit insurance
coverage to be available in unusual or previously unknown situations.
If the situation exists from year to year, it should be incorporated
into the crop provisions or Special Provisions. It is important to
minimize exceptions to the policy to ensure that the insured is well
aware of the specific terms of the policy. The written agreement
provisions have been moved to the Basic Provisions since they apply to
most crops.
Comment: An insurance service organization asked, with respect to
the proposed endorsements to the Northern Crop Provisions, whether the
provisions will be printed continuously so that the endorsements are
after the written agreement provisions, or whether separate pages will
be printed to be inserted with the Crop Provisions when chosen. The
latter is preferable to ensure policy holders don't think the
endorsements automatically apply. The commenter also asked whether FCIC
would authorize the insurance service organization to add a statement
before the endorsements clarifying they only apply if elected by the
insured.
Response: Each endorsement is a separate document and should be
included in an insured's policy package only when elected. Provisions
in each endorsement clearly state that additional premium is necessary
and that the additional coverage must be elected on or before the sales
closing date. An additional clarifying statement is not necessary.
Therefore, no change will be made.
Comment: An insurance service organization asked if the Northern
Potato Quality Endorsement rates would be impacted since frost/freeze
coverage is now a part of the basic potato policy.
Response: Freeze damage was previously covered under the Quality
Option. Removal of this coverage will be considered when establishing
premium rates for the new Northern Quality Endorsement.
Comment: Two reinsured companies, an insurance service
organization, and a producer group disagreed with the removal of
provisions in the Northern Quality Endorsement that allow adjustment
based on U.S. No. 1 quality standards and that allow insureds to base
their own proven historical percentage of U.S. No. 1's or 2's. The
commenter stated that a producer who can prove better quality
percentages than the county average should be able to do so. The
commenter further indicated that adjustment based on U.S. No. 1
standards should be provided by the policy, not just if allowed by the
actuarial documents or Special Provisions, and that if adjustment based
on U.S. No. 1 standards is not allowed, or if there is no quality
endorsement for seed producers, the new proposal may be abused.
Response: Quality adjustment based U.S. No. 1 standards will remain
available, as will the ability of producers to certify historical
quality percentages. Provisions previously used to indicate that this
method of establishing a percentage factor have been added (see section
9 of the Northern Quality Endorsement). FCIC does not agree that
potatoes grown for seed should be eligible for coverage under the
Quality Endorsement. Seed producers often utilize production practices
designed to produce small tubers. Therefore, in many instances, U.S.
size standards are intentionally not achieved. FCIC also does not agree
that quality adjustment based on the U.S. No. 1 grade should be
available in all instances. Such coverage should not be made available
universally without first determining that adequate rating information
is available for all counties in which potato insurance is offered.
Comment: A reinsured company asked with respect to coverage under
the Northern Quality Endorsement, whether there will be only one
``default'' percentage factor per county; whether a producer with good
history will be able to ``prove up'' an average quality factor; and
whether a quality data base will be maintained and, if so, will there
be cups and caps.
Response: More than one percentage factor will apply in counties
where coverage based on either U.S. No. 1 or 2 is available, or where
separate percentage factors are specified by potato type. Producers
will be able to certify, subject to verification, past records of
percentages of potatoes meeting applicable standards to establish the
factor.
Comment: Comments were received regarding section 4(a) of the
Northern Potato Crop Insurance Quality Endorsement. A reinsured company
indicated that the section requires insurance providers to decide
whether or not potatoes with internal defects can be separated from
undamaged production using methods normally used by potato packers or
processors. As new separation methods are developed, determination of
``methods normally used'' becomes more and more subjective. A producer
group disagreed with the provisions because equipment used to sort
internal defects is not normally available to potato producers during
harvest and such defects should be graded according to the United
States Standards for Grades of Potatoes (either U.S. 1 or 2 as
applicable).
Response: Although producers generally do not have the equipment
needed to sort internal defects, it is quite common for packers and
processors to have the equipment needed to sort such defects. It would
be inappropriate for the insurance provider to pay a total or near
total loss for production that is later sorted and sold at full value.
Therefore, no changes have been made. FCIC agrees that the use of new
technology varies among packers and processors, and that it would be
difficult to administer a provision that requires the reinsured company
to be familiar with all methods. The provision has been changed to
indicate that the potatoes with internal defects must not be separable
from undamaged production by methods used by the potato packers or
processors to which the insured person normally delivers production.
Comment: A reinsured company asked for clarification regarding
language in section 4(a) of the Northern Potato Crop Insurance Quality
Endorsement that indicates internal defects must exceed the tolerance
allowed for a certain U.S. grade. The U.S. grade standards contain a 6
percent tolerance. However, in another section (``Application of
Tolerances''), the standards indicate that individual samples cannot
have more than double the specified tolerance amount.
Response: The individual samples referred to in the Application of
Tolerances are individual samples of a lot that has been prepared for
shipping (bagged, boxed, etc.). The average of all samples from the lot
cannot exceed the overall limits, but any of the samples may contain
defects exceeding the limit. Section 4(a) specifies that tolerances are
on a lot basis, not an individual sample basis.
Comment: An insurance service organization suggested editorial
changes in section 4 of the Northern Quality Endorsement and section 6
of the Northern Processing Quality Endorsement. The comment indicated
that, as proposed, the phase ``. . . and contains potatoes that grade
less than U.S. No. 2 due to'' and subsequent items (a)-(b)(3) could be
read as applying only to item (3) ``that is marketed after a grade
inspection,'' and not to items (1) or (2). If this is not the intent,
it would help to insert a semicolon before this phrase and change
``and'' to ``that'' to separate it from (3).
Response: FCIC agrees and has made the recommended changes.
Comment: An insurance service organization suggested defining
``lot'' in
[[Page 65328]]
section 4(a) of the Northern Potato Quality Endorsement since reference
is made to ``lot basis'' and it is not defined in the Northern Potato
Crop Provisions.
Response: FCIC has revised the defined term ``marketable lot'' to
``lot.''
Comment: An insurance service organization asked for clarification
regarding language in section 4(b)(1)-(3) and (6)(b)(1)-(3) of the
Northern Quality and Processing Quality Endorsements respectively. The
comment suggested the following language for clarity:
(1) ``Remove production damaged by freeze or a cause that results
in soft rot or wet breakdown from representative samples;
(2) ``Divide the remaining weight of potatoes that grade U.S. No. 2
or better by the total remaining weight;
(3) ``Divide the resulting percentage by the applicable percentage
factor contained in the Special Provisions.''
The comment also indicated that sections (2) and (3) could be
combined unless the preference is to keep separate for each step.
Response: After further study, FCIC has determined that the method
of determining the percentage of damage contained in the proposed rule
was inaccurate. That method removed production damaged by freeze or
tuber rot before determining applicable percentages, thus reducing the
sample size. The percentage of potatoes that grade U.S. No. 2 should be
based on the total sample weight, and, since freeze damage and tuber
rot are adjusted under the Northern Crop Provisions, potatoes with such
damage should be considered sound (No. 1 or 2, as applicable)
production for the purposes of the Northern Quality and Processing
Quality Endorsements. Section 4(b) of the Northern Quality Endorsement
and Section 6(b) of the Northern Processing Quality Endorsement have
been revised accordingly.
Comment: A reinsured company asked if section 4(b)(1) of the
Northern Quality Endorsement and section 6(b)(1) of the Northern
Processing Quality Endorsement (Production damaged by freeze or a cause
that results in soft rot or wet breakdown will be removed from
representative samples of the production) would require the graders to
grade the sample twice, once for freeze and tuber rot and once for all
other quality considerations after they have removed the frost and
tuber rot potatoes from the sample. If so, more time for grading will
be required and the process will be more complex.
Response: FCIC has revised these provisions so that two separate
grading procedures will not be required.
Comment: A reinsured company recommended discontinuing coverage
under the Northern Quality Endorsement based on the U.S. No. 2 grade
and redefining U.S. No. 1 standards to coincide with the new potato
commodities future market.
Response: The potato industry still utilizes No. 2 grade standards
in many circumstances and this level of quality protection provides
adequate insurance coverage for many insureds. Therefore, no changes
have been made.
Comment: A reinsured company commented that the Northern Processing
Quality Endorsement needs to be expanded to all counties in Idaho that
produce potatoes for processing.
Response: FCIC agrees that expansion of the coverage provided by
the Northern Processing Quality Endorsement should be studied. Several
Regional Service Offices, including the office that would recommend new
counties in Idaho, are now considering such expansion. If analysis
proves that adequate information is available, and the coverage can be
offered in an actuarially sound manner, the coverage provided by the
endorsement will be expanded to additional counties.
Comment: A reinsured company recommended that, if the potato
producer does not sign a potato contract by the acreage reporting date
as mandated by the Northern Potato Crop Insurance Processing Quality
Endorsement, acreage automatically be covered under the Northern Potato
Crop Insurance Quality Endorsement based on the U.S. No. 1 grade. This
method would automatically protect the producer against quality losses
even though a contract was not signed.
Response: FCIC agrees that a producer who wants insurance against
quality deficiencies should have such coverage when a processor
contract is not completed. The Northern Quality Endorsement was
designed so that the coverage under it is automatically applicable when
a processor contract is not completed by the acreage reporting date.
However, the grade upon which coverage is based will be that selected
by the insured (U.S. No. 1 (if available in the county) or U.S. No. 2).
Comment: An insurance service organization suggested replacing the
reference to ``specific gravity'' in section 6(a) of the Northern
Processing Quality Endorsement with ``percent solids.'' The term
``specific gravity'' may not appear on settlement sheets.
Response: Most settlement sheets still refer to ``specific
gravity.'' For those that do not, a conversion chart commonly used in
the potato industry will be referenced in procedural handbooks.
Comment: An insurance provider recommended that production covered
under the Northern Processing Quality Endorsement be eligible for
adjustment if the specific gravity is less than 1.074. Most processor
contracts require a specific gravity of 1.074 or higher.
Response: FCIC agrees and has modified section 6(a)(1)
(redesignated 6(a)) to indicate that production will be eligible for
adjustment if it has a specific gravity that is less than the lower of
1.074 or the minimum acceptable value under the terms of the processor
contract.
Comment: An insurance service organization suggested a change in
the formatting of sections 6 (a) & (b) of the Northern Processing
Quality Endorsement. Currently, there is no (a)(2) following (a)(1).
Response: Section 6(a)(1) has been redesignated as 6(a) and the
following sections have been redesignated accordingly.
Comment: A reinsured company indicated that the Northern Quality
Endorsement no longer provided quality protection for production grown
for seed. This leaves the seed producer without adequate protection
against losses in quality. The comment suggested developing a new
certified seed endorsement based on the U.S. Certified Seed Standards
in order to provide adequate protection for the seed grower.
Response: FCIC agrees that seed producers may need protection in
addition to that currently provided and will work with any party
interested in developing such coverage.
Comment: A producer group recommended revising the language in
section 4 of the Certified Seed Endorsement from ``The certified seed
acreage you insure in the current crop year cannot be greater than 125
percent of the average number of acres grown for seed in the three
previous years unless we agree otherwise in writing'' to ``The
certified seed acreage you insure in the current crop year cannot be
greater than 125 percent of the average number of acres entered into
and passing certification in the potato certified seed program for the
state in which the seed was grown in the three previous years unless we
agree otherwise in writing.'' The group further suggested that the
language in section 4(a) be changed from ``Multiply the average number
of acres grown for certified seed the three previous years by 1.25 and
divide this result by the number of acres grown for certified seed in
the current crop year; and * * *'' to ``Multiply the average number of
acres entered into and passing certification in the potato
[[Page 65329]]
certified seed program for the state in which the seed was grown the
three previous years by 1.25 and divide this result by the number of
acres grown for certified seed in the current crop year; and * * *''
This change should adequately address previous program abuse and limit
indemnified acreage to only that which is actually being produced for
seed. A reinsured company and an insurance service organization also
recommended clarifying whether ``3 previous years'' means ``calendar''
or ``data base'' years.
Response: FCIC has made the recommended changes and clarified the
provisions to indicate the three previous calendar years.
Comment: An insurance service organization indicated section 4 of
the Potato Crop Insurance Certified Seed Endorsement which limits the
increase to 125 percent in certified seed acreage compared to the
average of the previous three years is a good idea. The comment
indicated that the overall reduction in guarantee if excess acreage is
reported may be the simplest way to handle this possibility, but asked
if consideration was given to allowing the insured to designate which
acres within the limit would be insured as certified seed.
Response: Consideration was given to allowing insureds to designate
insurable and uninsurable acreage. However, it was not considered the
best alternative since identification of the source of production would
be difficult, especially if insured and uninsured acreage were in the
same field. Therefore, no change will be made.
Comment: A reinsured company indicated that coverage for Certified
Seed should be made available in areas from which the coverage was
withdrawn. The endorsement was put on hold for review and has been
under review for several years. The endorsement should be consistent
with certification requirements used by the states of Montana and
Idaho.
Response: Coverage for certified seed was withdrawn in certain
locations at the request of grower groups and potato industry
representatives. FCIC will not reinstate this coverage until these
groups and representatives agree that it should again be made
available. FCIC believes that the endorsement is consistent with
certification requirements used in Montana and Idaho. Provisions in the
endorsement specify that potatoes must be produced and managed in
accordance with standards, practices, and procedures required for
certification by the state's certifying agency and applicable
regulations. The endorsement cannot contain the specific requirements
of the certifying agencies in Montana and Idaho because the endorsement
is also used in other states. No changes have been made.
Comment: An insurance service organization questioned the language
in section 7 of the Potato Crop Insurance Certified Seed Endorsement.
The comment stated the existing Certified Seed Potato Option Amendment
specifies a payment of one dollar per hundredweight (multiplied by the
guarantee and share) while the proposed language refers to ``the dollar
amount per hundredweight shown in the Special Provisions.'' The
commenter asks whether this dollar amount varies by state or country,
and if so, by how much. The commenter also asks whether the rates
reflect any increase or decrease.
Response: Depending upon available price information for certified
seed, the dollar amount of coverage per hundredweight could vary by
state or county. The amount of variation would depend upon actual and
expected prices for see. Premium rate percentages should not be
impacted by variation in this dollar amount since the risk of not
receiving certification due to an insured cause should remain constant
regardless of the dollar amount of coverage per hundredweight. However,
the amount of premium may increase if the price is higher.
Comment: An insurance provider recommended that the Northern
Storage Endorsement give producers time to make decisions based on a
grade that was determined from sampling prior to storage and if the
grading showed internal defects, then the producer should be allowed
the same choices available under the Northern Quality Endorsement
(section 4(a)). The comment further stated that the Northern Storage
Endorsement covers quality problems that are communicable (the problem
will spread throughout the storage facility, such as late blight or a
tuber rot condition). Internal defects are not communicable and will
not spread to other potatoes. In all cases, marketability and salvage
will control the losses. Regardless of the type of problem in storage,
salvage should always apply unless the crop is destroyed.
Response: FCIC agrees that when the producer elects the Northern
Quality Endorsement, the coverage provided will be extended to provide
the same coverage under the Northern Storage Endorsement if the
requirements of such Endorsement are met. Salvage provisions have been
added.
Comment: A producer group stated that the Northern Storage Coverage
Endorsement attaches to the basic policy, but should also extend the
coverage provided under the Northern Potato Quality Endorsement if that
endorsement is elected by the producer.
Response: FCIC agrees that coverage under the Northern Quality
Endorsement should be extended when the producer also elects a Northern
Storage Coverage Endorsement and has modified the Northern Storage
Endorsement accordingly.
Comment: An insurance service organization asked for clarification
regarding language in section 3 of the Northern Potato Storage Coverage
Endorsement that indicates ``all other potato production insured under
the Northern Potato Crop Provisions must be insured under this
endorsement unless the Special Provisions allow you to exclude certain
potato varieties, types or groups from insurance under this
endorsement, and you elect to exercise this option.'' The commenter
understands this to mean that all potatoes insured under the Northern
Potato Crop Provisions have to be insured under the Northern Storage
Endorsement, unless a processor contract requires delivery within three
days of harvest or if the producer elects to exclude other production
when specifically allowed by the Special Provisions. The comment
recommended starting the sentence with ``If you elect this
endorsement'' for clarity.
Response: The provision has been clarified.
Comment: An insurance service organization questioned why coverage
exclusions are required to be identified annually as stated in section
3 of the Northern Potato Storage Coverage Endorsement. It would be more
consistent for such exclusions to remain in effect until otherwise
notified in writing by either the insured producer or the insurance
provider.
Response: Since the acreage to which exclusions apply is not likely
to be identical from year to year, FCIC believes excluded varieties,
types, or groups should be identified on the annual acreage report.
Therefore, no change will be made.
Comment: An insurance service organization indicated that the word
``prorata'' in section 4 of the Northern Storage Endorsement should be
two words. The comment also recommended changing the language in the
example to account for the missing amount. Recommended changing to:
``the production to count is 1,000 hundredweight because 500
hundredweight went bad.''
Response: The editorial correction has been made. However, the
[[Page 65330]]
recommendation regarding the ``missing amount of production'' has not
been incorporated. The provision is clearly stated without the
recommended change.
Comment: An insurance service organization questioned how the
insurance provider will be able to verify if notification was within 72
hours of discovery of damage as indicated in section 5(b) of the
Northern Storage Endorsement.
Response: As with any insured loss, it is important that the
insurance provider receive timely notification of damage. FCIC agrees
that in many instances it is difficult to determine the exact time the
insured person becomes aware of damage and therefore, some flexibility
is required when administering this provision. However, if it can be
clearly shown that an insured did not give timely notice, any claim
could be denied.
Comment: An insurance service organization suggested that section
5(a) and 5(c) be combined in the Northern Potato Storage Coverage
Endorsement since both refer to damage by an insured cause other than
freeze.
Response: FCIC agrees and has combined the provisions in 5(c) with
section 5(a).
Comment: An insurance service organization recommended that the
insured be required to have the Quality Endorsement in order to take
the Northern Potato Storage Coverage Endorsement.
Response: Since damage that may later cause tuber rot is covered
under the Northern Crop Provisions, the Northern Storage Endorsement
should be available to producers who elect coverage under the Northern
Crop Provisions only. Therefore, no changes have been made.
In addition to the changes indicated above, FCIC has made the
following changes:
1. The term ``tuber rot'' is defined in the Northern Crop
Provisions to avoid duplicating provisions in the Northern Crop
Provisions, Quality Endorsement, Processing Quality Endorsement, and
Storage Endorsement. Added a definition for ``disposed'' to the
Northern and Central and Southern Crop Provisions for clarification.
Added definitions for the terms ``buyer'' and ``reduction percentage''
to the Northern Crop Provisions for clarification. Also removed
definitions for ``days'' ``FSA'', ``final planting date,''
``interplanted,'' ``irrigated practice,'' ``planted acreage,'' and
``production guarantee (per acre),'' since definitions for these terms
are now contained in the Basic Provisions.
2. Section 2 of the Northern Crop Provisions is removed and section
2 of the Southern Crop Provisions is modified because provisions
previously contained in section 2 regarding unit division requirements
and unit structure by section, section equivalent, FSA farm serial
number, and irrigated and non-irrigated practices, have been moved to
the Basic Provisions.
3. Revised redesignated section 11(b)(2) of the Northern Crop
Provisions and section 12(b)(2) of the Central and Southern Crop
Provisions to clearly indicate that the price use to determine the
amount of an indemnity may be limited.
4. The initial paragraph of the Central and Southern Crop
Provisions has been revised to add Arizona and Georgia as states in
which these provisions apply. These states are also added in section 5
(Cancellation and Termination Dates) and section 9 (Insurance Period)
of the Central and Southern Crop Provisions.
5. Sections 4 and 5 of the Central and Southern Crop Provisions
have been revised to change the contract change and cancellation/
termination dates for Pinellas, Hillsborough, Polk, Oseola, and Brevard
Counties, Florida, and all counties lying south thereof to June 30 and
September 30 respectively. These dates were previously effective only
in Manatee, Hardee, Highlands, Okeechobee, and St. Lucie Counties, and
all counties lying south thereof.
6. Section 4(a)(1) of the Northern Quality Endorsement and section
6(a)(1) of the Northern Processing Quality Endorsement are revised to
clarify that a ``price comparison'' method of adjustment will not be
applicable if it has already been performed under the terms of
redesignated section 11(g)(2)(i) of the Northern Potato Crop Insurance
Provisions.
7. Removed provisions regarding written agreements that are now
contained in the Basic Provisions.
8. Section 5 of the Northern Processing Quality Endorsement is
clarified to indicate that the number of acres insured under the
endorsement will not exceed the actual number of acres planted to the
potato types under contract.
9. Section 6(a)(1) of the Northern Processing Quality Endorsement
is revised by changing the price against which the value of damaged
production is compared from the ``base contract price'' to the
``highest available price election.'' This change was made because of
variation in methods used to establish base contract prices. Base
prices tend to be set low when substantial incentives for good quality
are contained in the contract, and tend to be set high when substantial
discounts for low quality are included. Use of the price election will
provide a consistent means of quality adjustment for all insureds.
10. Section 8 of the Northern Quality Endorsement and section 9 of
the Northern Processing Quality Endorsement are revised to indicate
that an insured may elect quality adjustment based on U.S. No. 1 or 2
by type or group, if both U.S. No. 1 and 2 are provided in the
actuarial documents and if separate types or groups are specified in
the Special Provisions.
11. Section 4 of the Northern Storage Endorsement is revised to
clarify that pro rata allocation of stored production to units will be
allowed only if verifiable records of production placed in storage are
available by unit.
12. Section 6 of the Northern Storage Endorsement is removed. The
proposed provisions duplicated those contained in redesignated section
11 of the Northern Crop Provisions.
Good cause is shown to make this rule effective upon publication in
the Federal Register. This rule improves the potato insurance coverage
and brings it under the Common Crop Insurance Policy Basic Provisions
for consistency among policies. The earliest contract change date that
can be met for the 1998 crop year is December 31, 1997. It is therefore
imperative that these provisions be made final before that date so that
the reinsured companies and insured may have sufficient time to
implement these changes. Therefore, public interest requires the agency
to act immediately to make these provisions available for the 1998 crop
year.
List of Subjects in 7 CFR Parts 422 and 457
Crop insurance, Potato crop insurance regulations, Potatoes.
Final Rule
Accordingly, as set forth in the preamble, the Federal Crop
Insurance Corporation hereby amends 7 CFR parts 422 and 457 as follows:
PART 422--POTATO CROP INSURANCE REGULATIONS
1. The authority citation for 7 CFR part 422 is amended to read as
follows:
Authority. 7 U.S.C. 1506(1), 1506(p).
2. The heading preceding Sec. 422.1 is revised to read as follows:
Subpart--Regulations for the 1986 (1987 in certain California counties
and Florida) through 1997 Crop Years (1998 in Alabama; Arizona; certain
California counties; Delaware; Florida; Maryland; Missouri; New Jersey;
New Mexico; North
[[Page 65331]]
Carolina; Oklahoma; Texas; and Virginia).
3. Section 422.7 is amended by revising the introductory text of
paragraph (d) to read as follows:
Sec. 422.7 The application and policy.
* * * * *
(d) The application for the 1986 and succeeding crop year is found
at subpart D of part 400--General Administrative Regulations (7 CFR
400.37, 400.38). The provisions of the Potato Crop Insurance Policy for
the 1986 (1987 in certain California counties and Florida) through 1997
Crop Years (1998 in Alabama; Arizona; certain California counties;
Delaware; Florida; Maryland; Missouri; New Jersey; New Mexico; North
Carolina; Oklahoma; Texas; and Virginia) are as follows:
* * * * *
PART 457--COMMON CROP INSURANCE REGULATIONS; REGULATIONS FOR THE
1994 AND SUBSEQUENT CONTRACT YEARS
4. The authority citation for 7 CFR part 457 continues to read as
follows:
Authority: 7 U.S.C. 1506(l), 1506(p).
5. Section 457.142 is added to read as follows:
Sec. 457.142 Northern Potato Crop Insurance Provisions.
The Northern Potato Crop Insurance Provisions for the 1998 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:
Northern Potato Crop Provisions
These provisions will be applicable in: Alaska; Humboldt, Modoc,
and Siskiyou Counties, California; Colorado; Connecticut; Idaho;
Indiana; Iowa; Maine; Massachusetts; Michigan; Minnesota; Montana;
Nebraska; Nevada; New York; North Dakota; Ohio; Oregon;
Pennsylvania; Rhode Island; South Dakota; Utah; Washington;
Wisconsin; and Wyoming.
If a conflict exists among the policy provisions, the order of
priority is as follows: (1) the Catastrophic Risk Protection
Endorsement, as applicable; (2) the Special Provisions; (3) these
Crop Provisions; and (4) the Basic Provisions, with (1) controlling
(2), etc.
1. Definitions.
Buyer. A business entity in the business of buying or processing
potatoes, that possesses all the licenses and permits required by
the state in which it operates, and has the facilities to accept the
potatoes purchased.
Certified seed. Potatoes for planting a potato crop in a
subsequent crop year that have been found to meet the standards of
the public agency that is responsible for the seed certification
process within the state in which they were grown.
Discard. Disposal of production by you, or a person acting for
you, without receiving any value for it.
Disposed. Any disposition of the crop including but not limited
to sale or discard.
Grade inspection. An inspection in which samples of production
are obtained by us, or a party approved by us, prior to the sale,
storage, or disposal of any lot of potatoes, or any portion of a lot
and the potatoes are evaluated and quality (grade) determinations
are made by us, a laboratory approved by us, or a potato grader
licensed or certified by the applicable State or the United States
Department of Agriculture, in accordance with the United States
Standards for Grades of Potatoes.
Harvest. Lifting potatoes from within the soil to the soil
surface.
Hundredweight. One hundred (100) pounds avoirdupois.
Local market. The area in which the insured potatoes are
normally sold.
Lot. A quantity of production that can be separated from other
quantities of production by grade characteristics, load, location or
other distinctive features.
Processor contract. A written agreement between the producer and
a processor, containing at a minimum:
(a) The producer's commitment to plant and grow potatoes, and to
deliver the potato production to the processor;
(b) The processor's commitment to purchase the production stated
in the contract; and
(c) A price that will be paid to the producer for the production
stated in the contract.
Reduction percentage. A factor determined based on the weight of
only freeze damaged production in a sample of potatoes in
relationship to the total weight of the sample, and the provisions
in section 11(g)(1) of these crop provisions; and that is used to
determine a quantity of potatoes that will not be included as
production to count.
Tuber rot. Any soft, mushy, or leaky condition of potato tissue
(soft rot or wet breakdown as defined in the United States Standards
for Grades of Potatoes), including, but not limited to, breakdown
caused by Southern Bacterial Wilt, Ring Rot, or Late Blight.
2. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
(a) In addition to the requirements of section 3 of the Basic
Provisions, you may select only one price election for all the
potatoes in the county insured under this policy unless the Special
Provisions provide different price elections by type. If the Special
Provisions provide for different price elections by type, you may
select one price election for each potato type designated in the
Special Provisions. The price elections you choose for each type
must have the same percentage relationship to the maximum price
election 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) If the production from any acreage of the insured crop is
not harvested, the price used to determine your indemnity will be 80
percent of your price election.
(c) Any acreage of potatoes damaged to the extent that similarly
situated producers in the area would not normally further care for
the potatoes will be deemed to have been destroyed even though you
may continue to care for the potatoes. The price election for
unharvested acreage will apply to such acreage.
3. Contract Changes.
In accordance with section 4 of the Basic Provisions, the
contract change date is November 30 preceding the cancellation date.
4. Cancellation and Termination Dates.
In accordance with section 2 of the Basic Provisions, the
cancellation and termination dates are March 15.
5. Annual Premium.
In lieu of the premium computation method contained in section 7
of the Basic Provisions, the annual premium amount (y) is computed
by multiplying (a) the production guarantee by (b) the price
election for harvested acreage, by (c) the premium rate, by (d) the
insured acreage, by (e) your share at the time of planting, and by
(f) any applicable premium adjustment factors contained in the
actuarial documents (a x b x c x d x e x f = y).
6. Insured Crop.
In accordance with section 8 of the Basic Provisions, the crop
insured will be all the potatoes in the county for which a premium
rate is provided by the actuarial documents:
(a) In which you have a share;
(b) Planted with certified seed (unless otherwise permitted by
the Special Provisions);
(c) Planted for harvest as certified seed stock, or for human
consumption, (unless specified otherwise in the Special Provisions);
(d) That are not (unless allowed by the Special Provision or by
written agreement):
(1) Interplanted with another crop; or
(2) Planted into an established grass or legume.
7. Insurable Acreage.
In addition to the provisions of section 9 of the Basic
Provisions, we will not insure any acreage that:
(a) Does not meet the rotation requirements contained in the
Special Provisions for the crop; or
(b) Is damaged before the final planting date to the extent that
similarly situated producers in the area would normally not further
care for the crop, unless it is replanted or we agree that it is not
practical to replant.
8. Insurance Period.
In accordance with the provisions of section 11 of the Basic
Provisions, the calendar date for the end of the insurance period is
the date immediately following planting as follows (exceptions, if
any, for specific counties, varieties or types are contained in the
Special Provisions):
(a) October 1, in Alaska;
(b) October 10 in Nebraska and Wyoming;
(c) October 15 in Colorado; Indiana; Iowa; Michigan; Minnesota;
Montana; Nevada;
[[Page 65332]]
North Dakota; South Dakota; Utah; and Wisconsin;
(d) October 20 in Maine; and
(e) October 31 in Humboldt, Modoc, and Siskiyou Counties,
California; Connecticut; Idaho; Massachusetts; New York; Ohio;
Oregon; Pennsylvania; Rhode Island; and Washington.
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 within the insurance period:
(1) Adverse weather conditions;
(2) Fire;
(3) Insects, but only if sufficient and proper pest control
measures are used;
(4) Plant disease, but only if sufficient and proper disease
control measures are used;
(5) Wildlife;
(6) Earthquake;
(7) Volcanic eruption; or
(8) Failure of the irrigation water supply, if caused by an
insured peril that occurs during the insurance period (see section
9(a)(1) through (7)).
(b) In addition to the causes of loss not insured against as
contained in section 12 of the Basic Provisions, we will not insure
against any loss of production due to:
(1) Damage that occurs or becomes evident after the end of the
insurance period, including, but not limited to, damage that occurs
or becomes evident in storage; or
(2) Causes, such as freeze after certain dates, as limited by
the Special Provisions.
10. Duties in the Event of Damage or Loss.
(a) In accordance with the requirements of section 14 of the
Basic Provisions, you must leave representative samples at least 10
feet wide and extending the entire length of each field in the unit
if you are going to destroy any acreage of the insured crop that
will not be harvested.
(b) We must be given the opportunity to perform a grade
inspection on the production from any unit for which you have given
notice of damage.
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 units, we will combine all optional units
for which acceptable production records were not provided; and
(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 (If there is unharvested acreage in the unit, the
harvested and unharvested acreage will be determined separately);
(2) Multiplying each result in section 11(b)(1) by the
respective price election (The price election may be limited as
specified in section 3.);
(3) Totaling the results of section 11(b)(2);
(4) Multiplying the total production to be counted of each type,
if applicable (see section 11(d)), by the respective price election;
(5) Totaling the results of section 11(b)(4);
(6) Subtracting the results of section 11(b)(5) from the result
in section 11(b)(3); and
(7) Multiplying the result of section 11(b)(6) by your share.
For example:
You have a 100 percent share in 100 harvested acres of potatoes
in the unit, with a guarantee of 150 hundredweight per acre and a
price election of $4.00 per hundredweight. You are only able to
harvest 10,000 hundredweight. Your indemnity would be calculated as
follows:
(1) 100 acres x 150 hundredweight = 15,000 hundredweight
guarantee;
(2) 15,000 hundredweight x $4.00 price election = $60,000.00
value of guarantee;
(4) 10,000 hundredweight x $4.00 price election = $40,000.00
value of production to count;
(6) $60,000.00 - $40,000.00 = $20,000.00 loss; and
(7) $20,000.00 x 100 percent = $20,000.00 indemnity payment.
You also have a 100 percent share in 100 unharvested acres of
potatoes in the same unit, with a guarantee of 150 hundredweight per
acre and a price election of $3.20 per hundredweight. The price
election for unharvested acreage is 80.0 percent of your elected
price election ($4.00 x 0.80 = $3.20.) This unharvested acreage
was appraised at 35 hundredweight per acre for a total of 3500
hundredweight as production to count. Your total indemnity for the
harvested and unharvested acreage would be calculated as follows:
(1) 100 acres x 150 hundredweight = 15,000 hundredweight
guarantee for the harvested acreage, and 100 acres x 150
hundredweight = 15,000 hundredweight guarantee for the unharvested
acreage;
(2) 15,000 hundredweight guarantee x $4.00 price election =
$60,000.00 value of guarantee for the unharvested acreage, and
15,000 hundredweight guarantee x $3.20 price election = $48,000.00
value of guarantee for the unharvested acreage;
(3) $60,000.00 + $48,000.00 = $108,000.00 total value of
guarantee;
(4) 10,000 hundredweight x $4.00 price election = $40,000.00
value of production to count for the harvested acreage, and 3500
hundredweight x $3.20 = $11,200.00 value of production to count
for the unharvested acreage;
(5) $40,000.00 + $11,200.00 = $51,200.00 total value of
production to count;
(6) $108,000.00 - $51,200.00 = $56,800.00 loss; and
(7) $56,800.00 loss x 100 percent = $56,800.00 indemnity
payment.
(c) The extent of any quality loss must be determined based on
samples obtained no later than the time the potatoes are placed in
storage, if the production is stored prior to sale, or the date they
are delivered to a buyer, wholesaler, packer, broker, or other
handler if production is not stored.
(d) The total production to count (in hundredweight) 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 put to another use without our consent;
(C) That is damaged solely by uninsured causes;
(D) From which any production is disposed of without a grade
inspection; or
(E) For which you fail to provide acceptable production records;
(ii) Production lost due to uninsured causes;
(iii) Production lost due to harvest prior to full maturity.
Production to count from such acreage will be determined by
increasing the amount of harvested production by 2 percent per day
for each day the potatoes were harvested prior to the date the
potatoes would have reached full maturity. The date the potatoes
would have reached full maturity will be considered to be 45 days
prior to the calendar date for the end of the insurance period,
unless otherwise specified in the Special Provisions. This
adjustment will not be made if the potatoes are damaged by an
insurable cause of loss, and leaving the crop in the field would
either reduce production or decrease quality;
(iv) Unharvested production (the value of unharvested production
will be calculated using the reduced price election determined in
section 2(b) and unharvested production may be adjusted in
accordance with sections 11(e), (f), (g), and (h)); and
(v) Potential production on insured acreage that you intend to
put to another use or abandon, if you and we agree on the appraised
amount of production. Upon such agreement, the insurance period for
that acreage will end when you put the acreage to another use or
abandon the crop. If agreement on the appraised amount of production
is not reached:
(A) If you do not elect to continue to care for the crop, we may
give you consent to put the acreage to another use if you agree to
leave intact, and provide sufficient care for, representative
samples of the crop in locations acceptable to us (The price used to
determine the amount of any indemnity will be limited as specified
in section 2 even if the representative samples are harvested. The
amount of production to count for such acreage will be based on the
harvested production or appraisals from the samples at the time
harvest should have occurred. If you do not leave the required
samples intact, or fail to provide sufficient care for the samples,
our appraisal made prior to giving you consent to put the acreage to
another use will be used to determine the amount of production to
count); or
(B) If you elect to continue to care for the crop, the amount of
production to count for the acreage will be the harvested
production, or our reappraisal if additional damage occurs and the
crop is not harvested; and
(2) All harvested production from the insurable acreage (the
amount of production prior to the sorting or discarding of any
production).
(e) Potato production is eligible for quality adjustment if:
(1) The potatoes have freeze damage or tuber rot that is evident
at, or prior to, the end of the insurance period; and
(2) A grade inspection is performed.
[[Page 65333]]
(f) Potato production that is eligible for quality adjustment,
as specified in section 11(e), with 5 percent damage or less (by
weight) will be adjusted 0.1 percent for each 0.1 percent of damage
through 5.0 percent.
(g) Potato production that is eligible for quality adjustment,
as specified in section 11(e), with 5.1 percent damage or more (by
weight) will be adjusted as follows:
(1) For potatoes damaged by freeze, production will be reduced
0.1 percent for each 0.1 percent of damage through 5.0 percent, 0.5
percent for each 0.1 percent of damage from 5.1 through 15.0
percent, and by 1.0 percent for each 0.1 percent of damage from 15.1
through 19.5 percent. However, if you do not discard any harvested
production within 21 days of the end of the insurance period that
has freeze damage in excess of 17.9 percent, we will include 15
percent of such production when determining the amount of production
to count.
(2) For potatoes that have tuber rot due to an insurable cause
other than freeze, production to count will be determined as
follows:
(i) For potatoes for which a price is agreed upon between you
and a buyer within 21 days (60 days if the Northern Potato Crop
Insurance Storage Coverage Endorsement is applicable) if the end of
the insurance period, or that are delivered to a buyer within 21
days (60 days if the Northern Potato Crop Insurance Storage Coverage
Endorsement is applicable) of the end of the insurance period, by
dividing the price received or that will be received per
hundredweight by the highest price election designated in the
Special Provisions for the insured potato type, and multiplying the
result (not to exceed 1.0) by the number of hundredweight of sold
production. If production is sold for a price lower than the value
appropriate to and representative of the local market, we will
determine the value of the production based on the price you could
have received in the local market;
(ii) For harvested potatoes discarded within 21 days (60 days if
the Northern Potato Crop Insurance Storage Coverage Endorsement is
applicable) of the end of the insurance period and appraised
unharvested production that could:
(A) Not have been sold, the production to count will be zero; or
(B) Have been sold, the production will be reduced as follows
(all percentage points of damage will be rounded to the nearest 0.1
percent):
(1) 0.1 percent for each 0.1 percent of damage through 5.0
percent;
(2) 05. percent for each 0.1 percent of damage from 5.1 percent
through 6.0 percent;
(3) 1.0 percent for each 0.1 percent of damage from 6.1 through
8.0 percent;
(4) 2.0 percent for each 0.1 percent of damage from 8.1 through
9.0 percent; and
(5) 2.5 percent for each 0.1 percent of damage from 9.1 through
10.4 percent.
(iii) For potatoes for which a price is not agreed upon between
you and a buyer within 21 days (60 days if the Northern Potato Crop
Insurance Storage Coverage Endorsement is applicable) of the end of
the insurance period and that remain in storage 22 or more days (61
or more days if the Northern Potato Crop Insurance Storage Coverage
Endorsement is applicable) after the end of the insurance period,
adjustment will be made in accordance with section 11(g)(2)(ii)(B).
(h) When a combination of freeze damage or a tuber rot condition
is 5.1 percent (by weight) or greater, the amount of production to
count for production affected by tuber rot will first be determined
in accordance with section 11(g)(2). If production is not sold
within the time frame specified in section 11(g)(2), this amount
will be further adjusted as follows:
(1) The percentage of potatoes with freeze damage will be
determined by dividing the weight of potatoes with only freeze
damage in representatives samples of the production by the total
weight of the samples;
(2) The reduction percentage will be determined based on the
result of section 11(h)(1) and section 11(g)(1); and
(3) The reduction percentage determined in section 11(h)(2) will
be multiplied by the amount of production determined in accordance
with section 11(g)(2).
12. Prevented Planting.
Your prevented planting coverage will be 25 percent of your
production guarantee for timely planted acreage. If you have limited
or additional coverage, as specified in 7 CFR part 400, subpart T,
and pay an additional premium, you may increase your prevented
planting coverage to a level specified in the actuarial documents.
6. Section 457.147 is added to read as follows:
Sec. 457.147 Central and Southern Potato Crop Insurance Provisions.
The Central and Southern Potato 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:
Central and Southern Potato Crop Provisions
These provisions will be applicable in: Alabama; Arizona; all
California counties except Humboldt, Modoc and Siskiyou; Delaware;
Florida; Georgia; Maryland; Missouri; New Jersey; New Mexico; North
Carolina; Oklahoma; Texas; and Virginia.
If a conflict exists among the policy provisions, the order of
priority is as follows:
(1) The Catastrophic Risk Protection Endorsement, as applicable;
(2) the Special Provisions; (3) these Crop Provisions; and (4) the
Basic Provisions, with (1) controlling (2), etc.
1. Definitions.
Certified seed. Potatoes for planting a potato crop in a
subsequent crop year that have been found to meet the standards of
the public agency that is responsible for the seed certification
process within the state in which they were grown.
Discard. Disposal of production by you, or a person acting for
you, without receiving any value for it.
Disposed. Any disposition of the crop including but not limited
to sale or discard.
Grade inspection. An inspection in which samples of production
are obtained by us, or a party approved by us, prior to the sale,
storage or disposal of any lot of potatoes, or any portion of a lot
and the potatoes are evaluated and quality (grade) determinations
are made by us, a laboratory approved by us, or a potato grader
licensed or certified by the applicable State or the United States
Department of Agriculture, in accordance with the United States
Standards for Grades of Potatoes.
Harvest. Lifting potatoes from within the soil to the soil
surface.
Hundredweight. One hundred (100) pounds avoirdupois.
Lot. A quantity of production that can be separated from other
quantities of production by grade characteristics, load, location or
other distinctive features.
Planting period. The period of time between the calendar dates
designated in the Special Provisions for the planting of spring-
planted, summer-planted, fall-planted, or winter-planted potatoes.
Practical to replant. In lieu of the definition of ``Practical
to replant'' contained in section one of the Basic Provisions,
practical to replant is defined as our determination, after loss or
damage to the insured crop, based on factors including, but not
limited to, moisture availability, condition of the field, marketing
windows, and time to crop maturity, that replanting to the insured
crop will allow the crop to attain maturity prior to the calendar
date for the end of the insurance period. It will not be considered
practical to replant after the end of the late planting period, or
the end of the planting period in which initial planting took place
in counties for which the Special Provisions designates separate
planting periods, unless replanting is generally occurring in the
area.
2. Unit Division.
A basic unit, as defined in section 1 of the Basic Provisions,
will be divided into additional basic units by planting period.
3. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
(a) In addition to the requirements of section 2 of the Basic
Provisions, you may select only one price election for all the
potatoes in the county insured under this policy unless the Special
Provisions provide different price elections by type. If the Special
Provisions provide for different price elections by type, you may
select one price election for each potato type designated in the
Special Provisions. The price elections you choose for each type
must have the same percentage relationship to the maximum price
election 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) If the production from any acreage of the insured crop is
not harvested, the price used to determine your indemnity will be 80
percent of your price election.
(c) Any acreage of potatoes damaged to the extent that similarly
situated producers in the area would not normally further care for
the potatoes will be deemed to have been destroyed even though you
may continue to
[[Page 65334]]
care for the potatoes. The price election for unharvested acreage
will apply to such acreage.
4. Contract Changes.
In accordance with section 4 of the Basic Provisions, the
contract change date is:
(a) June 30 preceding the cancellation date for counties with a
September 30 cancellation date;
(b) September 30 preceding the cancellation date for counties
with a November 30 or December 31 cancellation date; and
(c) November 30 preceding the cancellation date for counties
with a February 28 or March 15 cancellation date.
5. Cancellation and Termination Dates.
In accordance with section 2 of the Basic Provisions, the
cancellation and termination dates are:
------------------------------------------------------------------------
State and county Dates
------------------------------------------------------------------------
Pinellas, Hillsborough, Polk, Oseola, and Brevard Sep. 30.
Counties, Florida, and all Florida counties
lying south thereof.
Arizona; all California counties; and all Texas Nov. 30.
counties except Bailey, Castro, Dallam, Deaf
Smith, Floyd, Gaines, Hale, Hartley, Haskell,
Knox, Lamb, Parmer, Swisher, and Yoakum.
Alabama; Delaware; Georgia; Maryland; Missouri; Dec. 31.
New Jersey; North Carolina; Virginia; and all
Florida counties except Pinellas, Hillsborough,
Polk, Oseola, and Brevard Counties, Florida, and
all Florida counties to the south thereof.
Oklahoma; and Haskell and Knox Counties, Texas... Feb. 28.
Bailey, Castro, Dallam, Deaf Smith, Floyd, Mar. 15.
Gaines, Hale, Hartley, Lamb, Parmer, Swisher,
and Yoakum Counties, Texas; and New Mexico.
------------------------------------------------------------------------
6. Annual Premium.
In lieu of the premium computation method contained in section 7
of the Basic Provisions, the annual premium amount (y) is computed
by multiplying (a) the production guarantee by (b) the price
election for harvested acreage, by (c) the premium rate, by (d) the
insured acreage, by (e) your share at the time of planting, and by
(f) any applicable premium adjustment factors contained in the
actuarial documents (a x b x c x d x e x f = y).
7. Insured Crop.
In accordance with section 8 of the Basic Provisions, the crop
insured will be all the potatoes in the county for which a premium
rate is provided by the actuarial documents:
(a) In which you have a share;
(b) Planted with certified seed (unless otherwise permitted by
the Special Provisions);
(c) Planted for harvest as certified seed stock, or for human
consumption, (unless specified otherwise in the Special Provisions);
(d) That are not (unless allowed by the Special Provisions or by
written agreement):
(1) Interplanted with another crop; or
(2) Planted into an established grass or legume.
8. Insurable Acreage.
In addition to the provisions of section 9 of the Basic
Provisions, we will not insure any acreage that:
(a) Does not meet the rotation requirements contained in the
Special Provisions for the crop; or
(b) Is damaged before the final planting date or before the end
of the applicable planting period in counties for which the Special
Provisions designate separate planting periods, to the extent that
similarly situated producers in the area would normally not further
care for the crop, unless it is replanted or we agree that it is not
practical to replant.
9. Insurance Period.
In accordance with the provisions of section 11 of the Basic
Provisions, the calendar date for the end of the insurance period is
the date immediately following planting as follows (exceptions, if
any, for specific counties, varieties or types are contained in the
Special Provisions):
(a) July 15 in Missouri; North Carolina; and all Texas counties
except Bailey, Castro, Dallam, Deaf Smith, Floyd, Gaines, Hale,
Haskell, Hartley, Knox, Lamb, Parmer, Swisher, and Yoakum.
(b) July 25 in Arizona; and Virginia.
(c) August 15 in Oklahoma; and Haskell and Knox Counties, Texas.
(d) In Alabama; California; Florida; and Georgia; the dates
established by the Special Provisions for each planting period; and
(e) October 15 in Bailey, Castro, Dallam, Deaf Smith, Floyd,
Gains, Hale, Hartley, Lamb, Parmer, Swisher, and Yoakum Counties,
Texas; Delaware; Maryland; New Jersey; and New Mexico.
10. 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 which occur within the insurance period:
(1) Adverse weather conditions;
(2) Fire;
(3) Insects, but only if sufficient and proper pest control
measures are used;
(4) Plant disease, but only if sufficient and proper disease
control measures are used;
(5) Wildlife;
(6) Earthquake;
(7) Volcanic eruption; or
(8) Failure of the irrigation water supply, if caused by an
insured peril that occurs during the insurance period (see section
10(a) (1) through (7)).
(b) In addition to the causes of loss not insured against as
contained in section 12 of the Basic Provisions, we will not insure
against any loss of production due to:
(1) Damage that occurs or becomes evident after the end of the
insurance period, including, but not limited to, damage that occurs
after potatoes have been placed in storage; or
(2) Causes, such as freeze after certain dates, as limited by
the Special Provisions.
11. Duties in the Event of Damage or Loss.
(a) In accordance with the requirements of section 14 of the
Basic Provisions, you must leave representative samples at least 10
feet wide and extending the entire length of each field in the unit
if you are going to destroy any acreage of the insured crop that
will not be harvested.
(b) We must be given the opportunity to perform a grade
inspection on the production from any unit for which you have given
notice of damage.
12. Settlement of Claim.
(a) We will determine your loss on a unit basis. In the event
you are unable to provide separate acceptable production records:
(1) For any optional units, we will combine all optional units
for which acceptable production records were not provided; and
(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 (if there is unharvested acreage in the unit, the
harvested and unharvested acreage will be determined separately);
(2) Multiplying each result in section 12(b)(1) by the
respective price election (the price election may be limited as
specified in section 3.);
(3) Totaling the results of section 12(b)(2);
(4) Multiplying the total production to be counted of each type,
if applicable, (see section 12(d)) by the respective price election;
(5) Totaling the results of section 12(b)(4);
(6) Subtracting the results of section 12(b)(5) from the result
in section 12(b)(3); and
(7) Multiplying the result of section 12(b)(6) by your share.
For example:
You have a 100 percent share in 100 harvested acres of potatoes
in the unit, with a guarantee of 150 hundredweight per acre and a
price election of $4.00 per hundredweight. You are only able to
harvest 10,000 hundredweight. Your indemnity would be calculated as
follows:
(1) 100 acres x 150 hundredweight=15,000 hundredweight
guarantee;
(2) 15,000 hundredweight x $4.00 price election=$60,000.00
value of guarantee;
(4) 10,000 hundredweight x $4.00 price election=$40,000.00
value of production to count;
(6) $60,000.00-$40,000.00=$20,000.00 loss; and
(7) $20,000.00 x 100 percent=$20,000.00 indemnity payment.
You also have a 100 percent share in 100 unharvested acres of
potatoes in the same unit, with a guarantee of 150 hundredweight per
acre and a price election of $3.20 per
[[Page 65335]]
hundredweight. (The price election for unharvested acreage is 80.0
percent of your elected price election ($4.00 x 0.80=$3.20.) This
unharvested acreage was appraised at 35 hundredweight per acre for a
total of 3,500 hundredweight as production to count. Your total
indemnity for the harvested and unharvested acreage would be
calculated as follows:
(1) 100 acres x 150 hundredweight = 15,000 hundredweight
guarantee for the harvested acreage, and
100 acres x 150 hundredweight = 15,000 hundredweight guarantee
for the unharvested acreage;
(2) 15,000 hundredweight guarantee x $4.00 price election =
$60,000.00 value of guarantee for the harvested acreage, and
15,000 hundredweight guarantee x $3.20 price election =
$48,000.00 value of guarantee for the unharvested acreage;
(3) $60,000.00 + $48,000.00 = $108,000.00 total value of
guarantee;
(4) 10,000 hundredweight x $4.00 price election = $40,000.00
value of production to count for the harvested acreage, and
3500 hundredweight x $3.20 = $11,200.00 value of production to
count for the unharvested acreage;
(5) $40,000.00 + $11,200.00 = $51,200.00 total value of
production to count;
(6) $108,000.00 - $51,200 = $56,800.00 loss; and
(7) $56,800.00 loss x 100 percent = $56,800.00 indemnity
payment.
(c) The extent of any quality loss must be determined based on
samples obtained no later than the time potatoes are placed in
storage, if the production is stored prior to sale, or the date they
are delivered to a buyer, wholesaler, packer, broker, or other
handler if production is not stored.
(d) The total production to count (in hundredweight) 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 put to another use without our consent;
(C) That is damaged solely by uninsured causes;
(D) From which any production is disposed of without a grade
inspection; or
(E) For which you fail to provide acceptable production records;
(ii) Production lost due to uninsured causes;
(iii) Production lost due to harvest prior to full maturity.
Production to count from such acreage will be determined by
increasing the amount of harvested production by 2 percent per day
for each day the potatoes were harvested prior to the date the
potatoes would have reached full maturity. The date the potatoes
would have reached full maturity will be considered to be 45 days
prior to the calendar date for the end of the insurance period,
unless otherwise specified in the Special Provisions. This
adjustment will not be made if the potatoes are damaged by an
insurable cause of loss, and leaving the crop in the field would
either reduce production or decrease quality.
(iv) Unharvested production (the value of unharvested production
will be calculated using the reduced price election determined in
section 3(b) and unharvested production may be adjusted in
accordance with section 12(e)); and
(v) Potential production on insured acreage that you intend to
put to another use or abandon, if you and we agree on the appraised
amount of production. Upon such agreement, the insurance period for
that acreage will end when you put the acreage to another use or
abandon the crop. If agreement on the appraised amount of production
is not reached:
(A) If you do not elect to continue to care for the crop, we may
give you consent to put the acreage to another use if you agree to
leave intact, and provide sufficient care for, representative
samples of the crop in locations acceptable to us (The price used to
determine the amount of any indemnity will be limited as specified
in section 3 even if the representative samples are harvested. The
amount of production to count for such acreage will be based on the
harvested production or appraisals from the samples at the time
harvest should have occurred. If you do not leave the required
samples intact, or fail to provide sufficient care for the samples,
our appraisal made prior to giving you consent to put the acreage to
another use will be used to determine the amount of production to
count); or
(B) If you elect to continue to care for the crop, the amount of
production to count for the acreage will be the harvested
production, or our reappraisal if additional damage occurs and the
crop is not harvested; and
(2) All harvested production from the insurable acreage
determined in accordance with section 12(e).
(e) With the exception of production with external defects, only
marketable lots of mature potatoes will be production to count for
loss adjustment purposes. Production not meeting the standards for
grading U.S. No. 2 due to external defects will be determined on an
individual potato basis for all unharvested potatoes and for any
harvested potatoes if we determine it is practical to separate the
damaged production. All determinations must be based upon a grade
inspection.
(1) Marketable lots of potatoes will include any lot of potatoes
that is:
(i) Stored;
(ii) Sold as seed;
(iii) Sold for human consumption; or
(iv) Harvested and not sold or that is appraised if such lot
meets the standards for grading U.S. No. 2 or better on a sample
basis.
(2) Marketable lots will also include any potatoes that we
determine:
(i) Could have been sold for seed or human consumption in the
general marketing area;
(ii) Were not sold as a result of uninsured causes including,
but not limited to, failure to meet chipper or processor standards
for fry color or specific gravity; or
(iii) Were disposed of without our prior written consent and
such disposition prevented our determination of marketability.
(3) Unless included in section 12(e) (1) or (2), a potato lot
will not be considered marketable if, due to insurable causes of
damage, it:
(i) Is partially damaged, and is salvageable only for starch,
alcohol, or livestock feed;
(ii) Is left unharvested and does not meet the standards for
grading U.S. No. 2 or better due to internal defects; or
(iii) does not meet the standards for grading U.S. No. 2 or
better due to external defects, is harvested, and it is not
practical to separate the damaged production.
13. Prevented Planting.
Your prevented planting coverage will be 25 percent of your
production guarantee for timely planted acreage. If you have limited
or additional coverage, as specified in 7 CFR part 400, subpart T,
and pay an additional premium, you may increase your prevented
planting coverage to a level specified in the actuarial documents.
7. Section 457.143 is added to read as follows:
Sec. 457.143 Northern Potato Crop Insurance--Quality Endorsement.
The Northern Potato Crop Insurance Quality Endorsement provisions
for the 1998 and succeeding 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:
Northern Potato Crop Insurance Quality Endorsement
1. In return for payment of the additional premium designated in
the actuarial documents, this endorsement is attached to and made
part of your Northern Potato Crop Provisions subject to the terms
and conditions described herein. In the event of a conflict between
the Northern Potato Crop Provisions and this endorsement, this
endorsement will control.
2. You must elect this endorsement on or before the sales
closing date for the initial crop year in which you wish to insure
your potatoes under this endorsement. This endorsement will continue
in effect until canceled. It may be canceled by either you or us for
any succeeding crop year by giving written notice to the other party
on or before the cancellation date.
3. All acreage of potatoes insured under the Northern Potato
Crop Provisions will be insured under this endorsement except:
(a) Any acreage specifically excluded by the actuarial
documents; and
(b) Any acreage grown for seed.
4. We will adjust production to count (determined in accordance
with section 15 of the Basic Provisions and section 11 of the
Northern Potato Crop Provisions) from (1) unharvested acreage; (2)
harvested acreage that is stored after a grade inspection; or (3)
that is marketed after a grade inspection; and that contains
potatoes that grade less than U.S. No. 2 due to:
(a) Internal defects (the number of potatoes with such defects
must be in excess of the tolerance allowed for U.S. No. 2 grade
potatoes on a lot basis and must not be separable from undamaged
production using
[[Page 65336]]
methods used by the potato packers or processors to whom you
normally deliver your potato production), will be adjusted as
follows:
(1) For potatoes for which a price is agreed upon in writing
between you and a buyer within 21 days (60 days if the Northern
Potato Crop Insurance Storage Coverage Endorsement is applicable) of
the end of the insurance period, or that are delivered to a buyer
within 21 days (60 days if the Northern Potato Crop Insurance
Storage Coverage Endorsement is applicable) of the end of the
insurance period, by multiplying the production to count by the
factor (not to exceed 1.0) that results from dividing the price
received or that will be received per hundredweight of the damaged
production by the highest available price election. This method of
adjustment will not be performed if it has already been performed
under the terms of section 11(g)(2)(i) of the Northern Potato Crop
Insurance Provisions. If production is sold for a price lower than
the value appropriate to and representative of the local market, we
will determine the value of the production based on the price you
could have received in the local market.
(2) For harvested potatoes discarded within 21 days (60 days if
the Northern Potato Crop Insurance Storage Coverage Endorsement is
applicable) of the end of the insurance period and appraised
unharvested production that could:
(i) Not have been sold, the production to count will be zero; or
(ii) Have been sold, the production to count will be determined
in accordance with section 4(a)(1). The price used for the damaged
production will be the price you could have received in the local
market.
(3) For potatoes for which a price is not agreed upon between
you and a buyer within 21 days (60 days if the Northern Potato Crop
Insurance Storage Coverage Endorsement is applicable) of the end of
the insurance period and that remain in storage 22 or more days (61
or more days if the Northern Potato Crop Insurance Storage Coverage
Endorsement is applicable) after the end of the insurance period,
production to count will be determined in accordance with section
4(b).
(b) Factors other than those specified in section 4(a), by
multiplying by a factor (not to exceed 1.0) that is determined as
follows:
(1) The combined weight of sampled potatoes that grade U.S. No.
2 or better and that are damaged by freeze or tuber rot will be
divided by the total sample weight; and
(2) The percentage determined in section 4(b)(1) above will be
divided by the applicable percentage factor determined in accordance
with section 9.
5. Potatoes harvested or appraised prior to full maturity that
do not grade U.S. No. 2 due solely to size will be considered to
have met U.S. No. 2 standards unless the potatoes are damaged by an
insurable cause of loss and leaving the crop in the field would
either reduce production or decrease quality.
6. Production to count for potatoes destroyed, stored or
marketed without a grade inspection will be 100 percent of the gross
weight of such potatoes.
7. All determinations must be based upon a grade inspection.
8. The actuarial documents may provide ``U.S. No. 1'' in place
of ``U.S. No. 2'' as used in this endorsement. If both U.S. No. 1
and 2 are available in the actuarial documents, you may elect U.S.
No. 1 or 2 by potato type or group, if separate types or groups are
specified in the Special Provisions.
9. Percentage factor means the historical average percentage of
potatoes grading U.S. No. 2 or better, by type, determined from your
records. If at least 4 continuous years of records are available,
the percentage factor will be the simple average of the available
records not to exceed 10 years. If less than four years of records
are available, the percentage factor will be determined based on a
combination of your records and the percentage factor contained in
the Special Provisions.
8. Section 457.144 is added to read as follows:
Sec. 457.144 Northern Potato Crop Insurance--Processing Quality
Endorsement
The Northern Potato Crop Insurance Processing Quality Endorsement
provisions for the 1998 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:
Northern Potato Crop Insurance Processing Quality Endorsement
1. In return for payment of the additional premium designated in
the actuarial documents, this endorsement is attached to and made
part of your Northern Potato Crop Provisions and Quality Endorsement
subject to the terms and conditions described herein. In the event
of a conflict between the Northern Potato Crop Provisions or Quality
Endorsement and this endorsement, this endorsement will control.
2. You must have a Northern Potato Quality Endorsement in place
and elect this endorsement on or before the sales closing date for
the initial crop year in which you wish to insure your potatoes
under this endorsement. This endorsement may be canceled by either
you or us for any succeeding crop year by giving written notice to
the other party on or before the cancellation date.
3. All terms of the Northern Potato Quality Endorsement not
modified by this endorsement will be applicable to acreage covered
under this endorsement.
4. A processor contract must be executed with a potato processor
for the potato types insured under this endorsement and a copy
submitted to us on or before the acreage reporting date for
potatoes. If you elect this endorsement, all insurable acreage of
production under contract with the processor must be insured under
this endorsement.
5. When the processor contract requires the processor to
purchase a stated amount of production, rather than all of the
production from a stated number of acres, the insurable acreage will
be determined by dividing the stated amount of production by the
approved yield for the acreage. The number of acres insured under
this endorsement will not exceed the actual number of acres planted
to the potato types and which are needed to fulfill the contract.
6. In lieu of the provisions contained in section 4 of the
Northern Potato Quality Endorsement, production that is rejected by
the processor will be adjusted as follows: Production to count
(determined in accordance with section 15 of the Basic Provisions
and section 11 of the Northern Potato Crop Provisions) from (1)
unharvested acreage; (2) harvested acreage that is stored after a
grade inspection; or (3) that is marketed after a grade inspection;
and that contains potatoes that:
(a) Grade less than U.S. No. 2 due to internal defects, a
specific gravity lower than the lesser of 1.074 or the minimum
acceptable amount specified in the processor contract, or a fry
color of No. 3 or darker due to either sugar exceeding 10 percent or
sugar ends exceeding 19 percent (the number of potatoes with such
defects must be in excess of the tolerance allowed for U.S. No. 2
grade potatoes on a lot basis and must not be separable from
undamaged production using methods used by the processors to which
you normally deliver your potato production), will be adjusted as
follows:
(1) For potatoes for which a price is agreed upon in writing
between you and a buyer within 21 days (60 days if the Northern
Potato Crop Insurance Storage Coverage Endorsement is applicable) of
the end of the insurance period, or that are delivered to a buyer
within 21 days (60 days if the Northern Potato Crop Insurance
Storage Coverage Endorsement is applicable) of the end of the
insurance period, by multiplying the production to count by the
factor (not to exceed 1.0) that results from dividing the price
received or that will be received per hundredweight of the damaged
production by the highest available price election. This method of
adjustment will not be performed if it has already been performed
under the terms of section 11(g)(2)(i) of the Northern Potato Crop
Insurance Provisions. If production is sold for a price lower than
the value appropriate and representative of the local market, we
will determine the value of the production based on the price you
could have received in the local market.
(2) For harvested potatoes discarded within 21 days (60 days if
the Northern Potato Crop Insurance Storage Coverage Endorsement is
applicable) of the end of the insurance period and appraised
unharvested production that could:
(i) Not have been sold, the production to count will be zero; or
(ii) Have been sold, the production to count will be determined
in accordance with section 6(a)(1). The price used for the damaged
production will be the price you could have received in the local
market.
(3) For potatoes for which a price is not agreed upon in writing
between you and a buyer within 21 days (60 days if the Northern
Potato Crop Insurance Storage Coverage Endorsement is applicable) of
the end of the insurance period and that remain in storage
[[Page 65337]]
22 or more days (61 or more days if the Northern Potato Crop
Insurance Storage Coverage Endorsement is applicable) after the end
of the insurance period, production to count will be determined in
accordance with section 6(b).
(b) Grade less than U.S. No. 2 due to factors other than those
specified in section 6(a) will be multiplied by a factor (not to
exceed 1.0) that is determined as follows:
(1) The combined weight of sampled potatoes that grade U.S. No.
2 or better and that are damaged by freeze or tuber rot will be
divided by the total sample weight; and
(2) The percentage determined in section 6(b)(1) above will be
divided by the applicable percentage factor determined in accordance
with section 10.
7. All grade determinations for the purposes of this endorsement
will be made using the United States Standards for Grades of
Potatoes for Processing or Chipping.
8. All determinations must be based upon a grade inspection.
9. The actuarial documents may provide ``U.S. No. 1'' in place
of ``U.S. No. 2'' as used in this endorsement. If both U.S. No. 1
and 2 are available in the actuarial documents, you may elect U.S.
No. 1 or 2 by potato type or group, if separate types or groups are
specified in the Special Provisions.
10. Percentage factor means the historical average percentage of
potatoes grading U.S. No. 2 or better, by type, determined from your
records. If at least 4 continuous years of records are available,
the percentage factor will be the simple average of the available
records not to exceed 10 years. If less than four years of records
are available, the percentage factor will be determined based on a
combination of your records and the percentage factor contained in
the Special Provisions.
9. Section 457.145 is added to read as follows:
Sec. 457.145 Potato Crop Insurance--Certified Seed Endorsement.
The Potato Crop Insurance Certified Seed Endorsement provisions for
the 1998 and succeeding 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:
Potato Crop Insurance Certified Seed Endorsement
1. In return for payment of the additional premium designated in
the actuarial documents, this endorsement is attached to and made
part of your Northern Potato Crop Provisions subject to the terms
and conditions described herein. In the event of a conflict between
the Northern Potato Provisions and this endorsement, this
endorsement will control.
2. For the purpose of this endorsement, the term ``potato
certified seed program'' means the state program administered by the
public agency responsible for the seed certification process within
the state in which the seed is produced.
3. You must elect this endorsement on or before the sales
closing date for the initial crop year you wish to insure your
potatoes under this endorsement. This endorsement will continue in
effect until canceled. It may be canceled by either you or us for
any succeeding crop year by giving written notice to the other party
on or before the cancellation date.
4. All potatoes grown on insurable acreage and that are entered
into the potato seed certification program administered by the state
in which the seed is grown must be insured unless limited by section
5 below.
5. The certified seed acreage you insure in the current crop
year cannot be greater than 125 percent of your average number of
acres entered into and passing certification in the potato certified
seed program in the three previous calendar years unless a written
agreement provides otherwise. If you enter more than this number of
acres into the certification program, your certified seed production
guarantee for the current crop year will be reduced as follows:
(a) Multiply the average number of your acres entered into and
passing certification in the potato certified seed program the 3
previous calendar years by 1.25 and divide this result by the number
of acres grown by you for certified seed in the current crop year;
and
(b) Multiply the result of section 5(a) (not to exceed 1.0) by
the production guarantee for certified seed for the current crop
year.
6. You must provide acceptable records of your certified seed
potato acreage and production for the previous three years. These
records must clearly indicate the number of your acres entered into
the potato seed certification program administered by the state in
which the seed is grown.
7. All potatoes insured for certified seed production must be
produced and managed in accordance with standards, practices, and
procedures required for certification by the state's certifying
agency and applicable regulations.
8. If, due to insurable causes occurring within the insurance
period, potato production does not qualify as certified seed on any
insured certified seed potato acreage within a unit, we will pay you
the dollar amount per hundredweight contained in the Special
Provisions for that purpose, multiplied by your production guarantee
for such acreage, multiplied by your share. Any production that does
not qualify as certified seed because of varietal mixing or your
failure to follow the standard practices and procedures required for
certification will be considered as lost due to uninsured causes.
9. You must notify us of any loss under this endorsement not
later than 14 days after you receive notice from the state
certification agency that any acreage has failed certification.
10. Section 457.146 is added to read as follows:
Sec. 457.146 Northern Potato Crop Insurance--Storage Coverage
Endorsement.
The Northern Potato Crop Insurance Storage Coverage Endorsement
provisions for the 1998 and succeeding 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:
Northern Potato Crop Insurance Storage Coverage Endorsement
1. In return for payment of the required additional premium as
contained in the actuarial documents, this endorsement is attached
to and made part of your Northern Potato Crop Provisions subject to
the terms and conditions described herein. In the event of a
conflict between the Northern Potato Crop Provisions and this
endorsement, this endorsement will control.
2. You must elect this endorsement on or before the sales
closing date for the initial crop year in which you wish to insure
your potatoes under this endorsement. This endorsement will continue
in effect until canceled. It may be canceled by either you or us for
any succeeding crop year by giving written notice to the other party
on or before the cancellation date.
3. Potato production grown under a contract that requires the
production to be delivered to a buyer within three days of harvest
will not be insured under this endorsement. When such contract
requires delivery of a stated amount of production, rather than all
of the production from a stated amount of acres, the number of acres
not insured under this endorsement will be determined by dividing
the stated amount of production by the approved yield for the
acreage. All other potato production insured under the Northern
Potato Crop Provisions must be insured under this endorsement unless
the Special Provisions allow you to exclude certain potato
varieties, types, or groups from this endorsement, and you elect to
exercise this option. If you elect this endorsement, such exclusions
must be shown annually on your acreage report and will be applicable
to all acreage of the excluded varieties, types, or groups for the
crop year.
4. When production from separate insurance units, basic or
optional, is commingled in storage, the production to count for each
unit will be allocated pro rata based on the production placed in
storage from each unit. Such allocation will be allowed only if
verifiable records of production placed in storage are available by
unit. If you do not have verifiable records, all units without
verifiable records will be combined in accordance with section 11 of
the Northern Potato Crop Provisions. For example, if 500
hundredweight from one unit are commingled with 1,500 hundredweight
from another unit and the production to count from the stored
production is 1,000 hundredweight, 250 hundredweight of
[[Page 65338]]
production to count will be allocated to the unit contributing 500
hundredweight and 750 hundredweight to the unit contributing 1500
hundredweight to the stored production. This provision does not
eliminate or change any other requirement contained in this policy
to provide or maintain separate records of acreage or production by
unit.
5. The extended coverage provided by this endorsement will be
applicable only if:
(a) Insured potatoes are damaged within the insurance period by
an insured cause other than freeze that later results in:
(1) Tuber rot as defined in the Northern Potato Crop Provisions,
to the extent that 5.1 percent (by weight) or more of the insured
production is affected;
(2) Internal defects to the extent that such defects are in
excess of the amount allowed for the U.S. grade standard you elected
for purposes of coverage under the Northern Potato Crop Insurance
Quality Endorsement. Such defects must not be separable from
undamaged production using methods used by the packers or processors
to which you normally deliver your potato production. This coverage
is applicable only to production covered under the Northern Potato
Crop Insurance Quality Endorsement; or
(3) A specific gravity lower than the lesser of 1.074 or the
minimum acceptable amount specified in the processor contract, or a
fry color of No. 3 or darker due to either sugar exceeding 10
percent or sugar ends exceeding 19 percent. This coverage is
applicable only to production covered under the Northern Potato Crop
Insurance Processing Quality Endorsement.
(b) You notify us within 72 hours of your initial discovery of
any damage that has or that may later result in the quality
deficiencies specified in section 5(a);
(c) The percentage of production that has any of the quality
deficiencies specified in section 5(a) is determined no later than
60 days after the end of the insurance period; and
(d) The potatoes are evaluated and quality (grade)
determinations are made by us, a laboratory approved by us, or a
potato grader licensed or certified by the applicable State or the
United States Department of Agriculture, in accordance with the
United States Standards for Grades of Potatoes. Samples of damaged
production must be obtained by us or party approved by us prior to
the sale or disposal of any lot of potatoes. Or, if production is
not sold or disposed of within 60 days of the end of the insurance
period, samples must be obtained within 60 days of the end of the
insurance period.
Signed in Washington, D.C., on December 5, 1997.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 97-32491 Filed 12-11-97; 8:45 am]
BILLING CODE 3410-08-P
