[Federal Register Volume 63, Number 6 (Friday, January 9, 1998)]
[Rules and Regulations]
[Pages 1321-1331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-550]
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Rules and Regulations
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Federal Register / Vol. 63, No. 6 / Friday, January 9, 1998 / Rules
and Regulations
[[Page 1321]]
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DEPARTMENT OF AGRICULTURE
Animal and Plant Health Inspection Service
7 CFR Part 301
[Docket No. 96-016-25]
RIN 0579-AA83
Karnal Bunt; Compensation for Wheat Seed and Straw in the 1995-
1996 Crop Season
AGENCY: Animal and Plant Health Inspection Service, USDA.
ACTION: Final rule.
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SUMMARY: We are amending the Karnal bunt regulations by adding
compensation provisions for growers and seed companies for the loss in
value of wheat seed and straw in the 1995-1996 crop season. The payment
of compensation is necessary in order to reduce the economic impact of
the Karnal bunt regulations on affected wheat growers and other
individuals.
EFFECTIVE DATE: December 23, 1997.
FOR FURTHER INFORMATION CONTACT: Mr. Mike Stefan, Operations Officer,
Domestic and Emergency Operations, PPQ, APHIS, 4700 River Road Unit
134, Riverdale, MD 20737-1236, (301) 734-8247, or e-mail:
mstefan@aphis.usda.gov.
SUPPLEMENTARY INFORMATION:
Background
Karnal bunt is a fungal disease of wheat (Triticum aestivum), durum
wheat (Triticum durum), and triticale (Triticum aestivum X Secale
cereale), a hybrid of wheat and rye. Karnal bunt is caused by the smut
fungus Tilletia indica (Mitra) Mundkur and is spread by spores,
primarily through the movement of infected seed. In the absence of
measures taken by the U.S. Department of Agriculture (USDA) to prevent
its spread, the establishment of Karnal bunt in the United States could
have significant consequences with regard to the export of wheat to
international markets. The regulations regarding Karnal bunt are set
forth in 7 CFR 301.89-1 through 301.89-14. Among other things, the
regulations define areas regulated for Karnal bunt and restrict the
movement of certain regulated articles, including wheat seed and grain,
from the regulated areas.
On May 6, 1997, we published a document in the Federal Register (62
FR 24745-24753, Docket No. 96-016-17, effective April 30, 1997) making
final an interim rule that amended the regulations to provide
compensation for certain growers and handlers of wheat grain, owners of
grain storage facilities, and flour millers in order to mitigate losses
and expenses incurred in the 1995-1996 crop season because of actions
taken by the Secretary to prevent the spread of Karnal bunt. The final
rule also added compensation provisions for handlers of wheat grain
that was tested and found negative for Karnal bunt and participants in
the National Karnal Bunt Survey whose wheat grain tested positive for
Karnal bunt in the 1995-1996 crop season. These compensation
regulations are set forth at 7 CFR 301.89-14.
On July 30, 1997, we published in the Federal Register (62 FR
40756-40763, Docket No. 96-016-21) a proposal to amend the regulations
by adding compensation provisions for wheat seed growers and seed
companies for the loss in value of wheat seed in the 1995-1996 crop
season. We also proposed to add compensation provisions for the loss in
value of wheat straw in the 1995-1996 crop season.
We solicited comments concerning our proposal for 30 days ending
August 29, 1997. We received six comments by that date. They were from
wheat growers, plant breeders, seed companies, and seed industry
associations. All the comments recommended additions or revisions to
the compensation provisions. They are discussed below.
Comments Resulting in Changes to the Proposed Rule
Seed That Is Not Sold--Proposed Sec. 301.89-14(e)
With one exception, our proposed compensation for seed companies
addressed loss in value of wheat seed that was sold. As an exception,
we also proposed that a seed company that did not sell its wheat seed
could receive compensation at $7.00 per bushel for private variety seed
and $4.90 per bushel for public variety seed. We explained that these
amounts represent the seed margins of $4.50 for private variety seed
and $2.40 for public variety seed plus the maximum $2.50 per bushel
compensation for wheat grain provided in the regulations (see
Sec. 301.89-14(b) of the regulations). We stipulated that compensation
would only be paid if the seed company has destroyed the wheat by
burying it in a sanitary landfill or other site that has been approved
by the Animal and Plant Health Inspection Service (APHIS).
We explained in the preamble to the proposal that this compensation
would be necessary in a small number of cases where seed companies had
their seed treated with a fungicide and bagged. Most seed companies did
not treat their 1995-1996 crop season seed. Some seed companies,
however, had seed from past crop seasons on hand that had already been
treated in this manner. Treated seed cannot be used as grain, so if a
seed company was unable or chose not to market treated seed for
planting within the regulated areas, the only option for disposal of
the treated seed was burial.
Two commenters said that the compensation offered in this
circumstance should also include the cost of treating and bagging the
seed, as well as the cost of cleaning it to separate out broken kernels
and foreign matter prior to treating. These costs were incurred with
the expectation of being able to sell the seed at a price that would
allow the seed company to recover the costs. These costs are not
accounted for in the seed margin that we factored into the proposed
compensation amount.
In response to these comments, we are amending the compensation
amounts for seed companies that buried their seed instead of selling
it. We have determined that the average cost of cleaning, treating, and
bagging seed is $2.40 per bushel (based on $1.20 per bushel for
cleaning, $.60 per bushel for treating, and $.60 per bushel for
bagging). We are adding this amount to the proposed compensation
amounts, so that the compensation rates for seed companies that do not
sell their seed will equal $9.40 per bushel for private
[[Page 1322]]
variety seed and $7.30 per bushel for public variety seed.
The preamble to the proposed rule explained that this compensation
would apply to a small number of cases where seed companies had already
cleaned, treated with a fungicide, and bagged their seed. However, the
proposed rule did not limit the compensation to only those cases.
Section 301.89-14(e) of the proposed rule stated that ``Seed companies
are also eligible to receive compensation under the following
circumstance: If a seed company is not able to or elects not to sell
1995-1996 crop season wheat grown for propagative purposes or
propagative wheat inventories in their possession that were unsold as
of March 1, 1996, the compensation rate will equal * * *.'' Because the
compensation in this final rule has been increased to provide for the
cleaning, treating, and bagging of seed, the final rule limits
compensation to buried seed that has been cleaned, treated, and bagged.
We are not aware of any reason that a seed company would have been
compelled or would have considered it more profitable to bury its seed
rather than sell it in the 1995-1996 crop season, other than if the
seed was previously cleaned, treated, and bagged. In fact, one of the
comments on the proposed rule pointed out that a seed company trying to
mitigate its losses would not dispose of untreated seed by burying it
because the seed company would lose the salvage value. Therefore,
Sec. 301.89-14(e) of this final rule states that a seed company is
eligible for compensation if the seed company has wheat that cannot be
sold for use as grain or animal feed because it was previously cleaned,
treated, and bagged.
The same two comments also requested that compensation for cleaned,
treated, and bagged seed that was not sold include the cost of
disposing of the wheat. We are not making any changes to the proposal
in response to this request. Section 301.89-14(c) of the regulations
provides compensation for 1995-1996 crop season wheat grain that was
buried because it could not be sold, at the rate of $2.50 per bushel.
This rate does not include the cost of disposal. It would be
inconsistent to compensate seed companies for disposal costs for the
burial of wheat seed when we did not compensate owners of grain that
was buried for disposal.
Certified Seed
Several commenters said that we should specify that compensation
will be paid only on ``certified'' seed. Certified seed is wheat that
has been classified as ``certified'' by a State seed certification
agency. The seed production and certification process can vary. We have
attempted to provide a general description of the process below.
Certified seed is the final classification stage in the seed
production process. The other classification stages are breeder,
foundation, and registered seed. Breeder, foundation, and registered
seed inventories are often produced by the seed company and are
typically kept in relatively small quantities as stock for producing
more seed. Certified seed is the progeny of breeder, foundation, or
registered seed, and is the class of seed sold to farmers for growing
wheat grain. Typically, seed companies contract with growers to produce
certified seed. Before classifying seed as certified, the seed
certification agency considers several factors, including the class of
seed from which the seed to be certified will be grown and the
condition of the field in which the seed to be certified is planted.
The seed certification agency also analyzes the harvested seed for
genetic and mechanical factors relating to specific seed standards.
Several commenters said that compensating growers and seed
companies only for certified seed would ensure that wheat being
compensated was actually grown for use as seed, and not as grain. This
would help prevent false claims for compensation. The commenters said
that seed certification is the only clear establishment of intent to
produce wheat as a seed crop.
In the proposed rule, we specified that, to claim compensation for
wheat seed, a copy of the contract under which the wheat was grown must
be provided with each compensation claim. We believed that a contract
would show that the wheat for which compensation is being claimed was
intended to be sold as seed. Some commenters said, however, that seed
production contracts could be easily forged, resulting in illegitimate
claims.
We agree with commenters that requiring that seed be certified in
order to be eligible for compensation is the most reliable
establishment of intent to produce wheat as a seed crop. However, some
seed companies did not complete the seed certification process because
of the Karnal bunt quarantine. As explained above, the seed
certification process consists of several steps. The final step is
usually laboratory analysis of the harvested wheat for genetic and
mechanical factors relating to specific seed standards. Prior to
completion of this final step, the wheat is considered ``certifiable.''
However, seed that is grown with the intention of producing breeder,
foundation, or registered seed is also classified as ``certifiable'' up
to the point that it has completed the laboratory analysis step of the
seed certification process. The intent of the proposed rule was to
offer compensation only for seed in the final stage of seed production
(that is, commercially available seed). We did not intend to offer
compensation for seed still in non-final stages (that is, breeder,
foundation, or registered seed).
With all this in mind, and in response to commenters concerns, we
are amending the proposed rule to require that seed be either certified
or grown with the intention of producing certified seed in order to be
eligible for compensation. We will require this for both grower and
seed company compensation. Throughout the rule, we will insert language
indicating that compensation is for certified seed or seed grown with
the intention of producing certified seed only. This language will
replace proposed language referring to ``wheat grown for propagative
purposes.'' In addition, in order to claim compensation, we will
require that growers and seed companies submit documentation that
provides evidence that the wheat being considered for compensation is
classified as certified seed or is considered certifiable as certified
seed by a State seed certification agency. Seed certification agencies
usually require that applicants for seed certification keep records of
the amount of certifiable seed harvested. This documentation may
include one or more of the following types of documents: An application
to the State seed certification agency for field inspection (to show
that seed is eligible for certification); a bulk sale certificate;
certification tags or labels issued by the State seed certification
agency; or a document issued by the State seed certification agency
verifying that the wheat is certified seed. Growers who do not have
copies of such documentation can obtain it from the seed company or
from their State's seed certification agency.
Private Variety Seed
The proposed rule provided different compensation rates to seed
companies depending on whether their seed was private variety seed or
public variety seed. Specifically, the seed margin used in the
compensation calculations was set by the proposal at $4.50 for private
variety seed and $2.40 for public variety seed. We explained in the
preamble to the proposal that private variety seed is seed that has a
plant variety protection
[[Page 1323]]
patent. The seed margin for private variety seed was set higher than
the seed margin for public variety seed to reflect premiums paid by the
seed company to the private firm that owns the plant variety protection
patent.
Several of the commenters pointed out to us that not all private
variety seed is patented. Usually, private varieties are protected by a
patent. However, there are some private varieties that do not have
patent protection. For example, some varieties are developed to be so
specific to the needs of a particular customer that a patent is not
deemed necessary. Another example is that a private individual (such as
someone doing research at a university) may develop a variety that they
do not wish to patent. The individual may sell the rights to this
variety to a seed company. Such varieties may be recognized within the
industry as being ``owned'' by a seed company, even though they are not
protected by a patent. Commenters said that, among seed industry
groups, private variety seed is defined simply as a variety owned by a
private individual or company.
We agree with commenters that our description of private variety
seed was incomplete. Public varieties of seed are usually developed by
State or Federal government researchers, or by a university. Public
variety seed is considered to be owned by the public and is available
to anyone for planting and production. Because it is owned by the
public, no private individual must be reimbursed for the development
costs. In contrast, private varieties of seed are usually developed by
a private individual or company. Seed margins for private variety seed
are intended to reimburse the individual or company for the costs of
developing the seed variety. In the case of patented varieties, the
higher seed margin reflects premiums paid by the seed company to the
developer who owns the patent. In other cases (as described above), the
seed company may have purchased the rights to the variety from a
developer. In such cases, the higher seed margin reflects the up front
costs of the seed company for purchasing the seed variety.
Our explanation of private variety seed was in the preamble to the
proposed rule. Because the actual rule did not define private variety
seed, it is not necessary for us to make any changes to the rule in
response to this comment. However, in implementing this final rule, we
will consider any variety that is owned by a private individual or
company to be a private variety. USDA's Farm Service Agency (FSA) will
be processing compensation claims under this rule. The State FSA
offices will make the determination as to what varieties are private
and what varieties are public.
Seed Premium Not Specified in Contract
For compensation for growers, we proposed that ``the seed premium
specified in the contract'' is to be used for certain compensation
calculations. For example, compensation for growers under proposed
Sec. 301.89-14(d)(1)(i) would equal the contract price (CP) including
the seed premium specified in the contract (SP)(contract) minus the
higher of either the salvage value (SV) plus the actual seed premium
received by the grower (SP)(actual), or the actual price received by
the grower (AP) plus the actual seed premium received by the grower
(SP)(actual). The equation for this compensation would be: Compensation
rate = [CP + SP(contract)]--higher of [SV + SP(actual)] or [AP +
SP(actual)].
One commenter said that this would be a problem because not all
seed production contracts specify a seed premium separately. In these
cases, the seed premium is included in the contract price. In response
to the comment, we are making several changes to the proposed rule to
accommodate these cases. Section 301.89-1 of the Karnal bunt
regulations already defines ``contract price'' to mean the net price
after adjustment for any premiums or discounts stated in the contract.
Under this definition, seed premiums are considered part of the
contract price. In the calculations, we will continue to mention the
seed premium to make it clear that the seed premium must always be
included in the contract price, even if it is specified in the contract
separately. However, we are amending the proposed rule so that
calculations will use only the contract price, with a phrase explaining
that the contract price must include the seed premium if one is
specified in the contract. Similarly, because the actual seed premium
received by the grower may not always be specified on the receipt for
the final sale of the wheat, we would make similar changes to the
calculations that use ``actual price received.'' In addition, some
calculations require use of either the seed premium specified in the
contract or the actual seed premium received by the grower, separately
from the contract price or the actual price received. In cases where
there is no seed premium specified, we will use $.30 in the
calculation. This represents the average seed premium received by
growers in the regulated area.
For example, proposed Sec. 301.89-14(d)(1)(i), cited above, will
read as follows in this final rule: The compensation rate will equal
the contract price (CP), including the seed premium if specified in the
contract, minus the higher of either the salvage value (SV) plus the
actual seed premium received by the grower (SP)(actual), or the actual
price received by the grower (AP), including any seed premium specified
on the receipt for the final sale of the wheat. If the actual seed
premium received by the grower is not specified on the receipt for the
final sale of the wheat, the seed premium will be set at $.30 for the
compensation calculation. The equation for this compensation will be:
Compensation rate = CP - higher of [SV + (SP(actual) or $.30)] or [AP].
In addition, we are making a change to the compensation provisions
for seed companies. Under proposed Sec. 301.89-14(d)(3)(i), a seed
company would be eligible for compensation if the seed company honored
the contract with the grower by paying the grower the full contract
price, including the seed premium. For the same reasons discussed
above, this final rule will state that a seed company is eligible for
compensation if the seed company paid the grower the full contract
price, ``including the seed premium if a seed premium is specified in
the contract.''
Binned Seed Inventories
One commenter requested that we remove the requirement in proposed
Sec. 301.89-14(d)(7) that, to claim compensation, seed companies must
provide a copy of the contract under which the wheat was grown. The
commenter said that a common practice of seed companies is to ``bin''
bulk seed inventories, meaning that harvested seed from multiple
growers (and contracts) is combined together in the same storage bin.
This would make it impossible for seed companies to specifically
associate a particular grower contract with a specific volume of seed.
The commenter said that the requirement that seed companies must
``certify to FSA that the propagative wheat was in the seed company's
possession as of March 1, 1996'' should be adequate.
We believe that the commenter is referring to seed inventories from
past crop seasons that have been binned. Compensation provisions for
seed companies for seed inventories from past crop seasons appear in
proposed Sec. 301.89-14(d)(3)(ii), (d)(4), (d)(5), and (e). To claim
compensation for seed inventories, the proposed rule stated that seed
companies must certify to FSA that the wheat was in the seed
[[Page 1324]]
company's possession as of March 1, 1996. The proposed rule also
requires that the seed company provide a contract under which the wheat
was grown. We understand that this may be difficult if seed inventories
have been binned, because seed companies may not be able to tell which
grower's seed was sold the previous year and which grower's seed was
kept in inventory.
We have reviewed the proposed rule, and have determined that a copy
of the contract under which the wheat was grown is not necessary to
process compensation claims for seed inventories from past crop
seasons. However, our review of the proposed rule also revealed an
oversight in regard to compensation for seed companies for 1995-1996
crop season seed. Section 301.89-14(d)(3)(i) of the proposal stated
that the seed company must have paid the grower the full contract price
for the wheat. In this case, a copy of the contract is necessary to
verify the full contract price. Proposed Sec. 301.89-14(d)(4) (``Seed
companies that sold propagative wheat for nonpropagative purposes and
that have claimed compensation'') and (d)(5) (``Seed companies that
sold propagative wheat for propagative purposes'') should have also
contained the requirement that the seed company must have paid the
grower the full contract price on the wheat seed in order to claim
compensation. This requirement is necessary because if a seed company
did not pay the grower the full contract price, the seed company would
in effect have already been compensated for the loss in value of the
wheat seed.
The failure to include this requirement in proposed Sec. 301.89-
14(d)(4) and (d)(5) was an oversight. This final rule, therefore,
requires that, to claim compensation for 1995-1996 crop season wheat
seed under Sec. 301.89-14(d)(4) and (d)(5), the seed company must have
paid the grower the full contract price, and must provide a copy of the
contract under which the wheat was grown. For seed inventories from
past crop seasons, seed companies would have already paid growers of
the seed in the year it was harvested (prior to the discovery of Karnal
bunt). Any variation in payment from the contract price on the
inventories would not, therefore, have been related to Karnal bunt,
making it unnecessary for FSA to verify the contract price. For this
reason, we are removing the requirement that seed companies claiming
compensation for seed inventories from past crop seasons provide a copy
of the contract under which the wheat was grown.
Karnal Bunt Certificate
The proposed rule also required that claimants provide a copy of
the Karnal bunt certificate issued by APHIS showing whether the wheat
tested positive or negative for Karnal bunt. The salvage values used in
the proposed compensation calculations vary depending on whether the
wheat tested positive or negative for Karnal bunt. A Karnal bunt
certificate is the most reliable documentation of the Karnal bunt test
results.
One commenter said that binning (as described previously in this
document) will make it difficult to associate Karnal bunt certificates
with a particular volume of seed inventory. Further, the commenter said
that seed inventories on hand as of March 1, 1996, were selectively
sampled by APHIS for Karnal bunt testing. Therefore, not all
inventories have a corresponding Karnal bunt certificate. The commenter
also said this same requirement caused several weeks of delays in
processing claims for 1995-1996 crop season wheat grain and that,
ultimately, it will only prove what is already known, that only wheat
that tested negative for Karnal bunt was allowed to be saved as seed.
This commenter addresses several issues. First, the commenter's
assertion that only wheat that tested negative for Karnal bunt was
allowed to be saved as seed is true. However, the proposed rule
included compensation for wheat that was grown with the intention of
producing certified seed, whether it tested positive or negative for
Karnal bunt. If it tested positive for Karnal bunt, it was likely sold
for use as animal feed, and would be compensated under proposed
Sec. 301.89-14(d)(2) for growers or Sec. 301.89-14(d)(3) or (d)(4) for
seed companies. Regardless, to determine the correct compensation
amount, we would need to know whether the seed tested positive or
negative for Karnal bunt.
Second, selective sampling of seed inventories was done by APHIS;
however, a positive or negative status for Karnal bunt was determined
for all seed inventories. For example, a lot of seed may have been
composed of 2000 bags of seed. By March 1996, these bags of seed from a
single lot could have potentially been held in inventory in several
different locations. APHIS would have selectively sampled a number of
bags of seed from the lot, in the same or in different locations. Based
on the results of those samples, the entire lot would have been
considered positive or negative for Karnal bunt.
Third, the commenter is correct that some delays were experienced
when processing compensation for a small amount of 1995-1996 crop
season wheat grain because a Karnal bunt certificate was never issued
for this wheat. In the 1995-1996 crop season, a Karnal bunt certificate
was issued only on wheat that was tested for movement outside of the
regulated area. In a few cases in the 1995-1996 crop season, wheat
grain that was considered negative based on a field test was sold
within the regulated area, and so no Karnal bunt certificate was issued
for it. Those cases were few, and we were able to handle them on a
case-by-case basis to determine what other documentation was available
to verify the Karnal bunt status of the wheat.
We agree with the commenter that a similar situation may occur when
we process seed compensation claims. As described previously in regard
to grain, any wheat that was intended for movement outside of the
regulated area was tested for Karnal bunt and issued a Karnal bunt
certificate at the time of movement. However, there are several
circumstances under which wheat grown with the intention of producing
certified seed would not have been issued a Karnal bunt certificate.
First, because the Karnal bunt regulations prohibited the movement of
wheat outside the regulated area if it was to be used as seed for
planting, no Karnal bunt certificates were issued on wheat that was
tested as seed. Most such seed that tested positive was sold within the
regulated area for use as animal feed; the balance of positive testing
seed was buried or kept in inventory. Some seed that tested negative
for Karnal bunt was sold for planting within the regulated area; some
was sold as grain for milling within the regulated area (if it could
not be marketed as seed); some was kept in inventory. A Karnal bunt
certificate would not have been issued on such seed.
We are adding several sentences to the regulations to accommodate
claimants who do not have Karnal bunt certificates for their wheat. All
wheat that tested positive for Karnal bunt in the 1995-1996 crop season
was moved under a limited permit, even within the regulated area. The
limited permits stated whether the wheat being moved was positive for
Karnal bunt. We are adding a sentence to Sec. 301.89-14(d)(7) (``To
claim compensation'') to state that if the grower or seed company moved
its wheat only within the regulated area, and therefore, does not have
a corresponding Karnal bunt certificate for the wheat for which
compensation is being claimed, a limited permit stating that the wheat
was positive for Karnal bunt will be accepted in lieu of a Karnal
[[Page 1325]]
bunt certificate. Any wheat that was moved only within the regulated
area and that was not moved under a limited permit will be considered
negative for Karnal bunt.
Claims Deadline
In the proposed rule, we set the deadline for claiming compensation
at on or before 60 days after the effective date of the final rule. We
also said that the Administrator could extend the deadline, upon
request in specific cases, when unusual or unforeseen circumstances
occur which prevent or hinder a claimant from requesting compensation
prior to that date.
Several commenters requested that we extend the deadline in the
final rule to on or before 120 days after the effective date of the
final rule. This would give growers and seed companies more time to
collect the required paperwork and submit their claims to FSA. Based on
our past experience in receiving compensation claims, we believe that
extending the deadline would be helpful to affected growers and seed
companies. It would also give the FSA offices more time to familiarize
themselves with the compensation regulations for seed and straw
following the effective date of the final rule. Therefore, we are
extending the deadline for claiming compensation to on or before 120
calendar days after the effective date of the final rule. We will
retain the option for the Administrator to extend the deadline, upon
request in specific cases, when unusual or unforeseen circumstances
occur which prevent or hinder a claimant from requesting compensation
prior to that date.
Comments Not Resulting in Changes to the Proposed Rule
We received numerous comments requesting compensation for losses
not addressed in the proposed rule, as well as requests for changes in
the compensation amounts offered in the proposal. We recognize that the
compensation we have offered for wheat seed and straw does not fully
account for every loss or expense due to Karnal bunt in the 1995-1996
crop season. We regret that we cannot offer compensation for every loss
experienced by growers and seed companies resulting from Karnal bunt.
However, we believe the compensation provisions in this final rule do
significantly mitigate losses due to the actions taken by USDA to
control Karnal bunt. Before addressing each of the remaining comments
specifically, we offer a general description of the rationale behind
the Karnal bunt compensation program to date.
In the absence of measures taken by USDA to prevent the spread of
Karnal bunt, the establishment of Karnal bunt in the United States
would have significant consequences with regard to marketing wheat in
the United States and with regard to the export of U.S. wheat to
international markets. Approximately 50 percent of U.S. wheat exports
are to countries that maintain restrictions against wheat imports from
countries where Karnal bunt is known to occur. Upon discovering Karnal
bunt in Arizona in March 1996, quarantine of affected areas and
emergency actions were necessary to maintain the integrity of the wheat
industry in the United States in order to preserve international
markets, both for wheat within the regulated areas and for wheat
produced in other parts of the country. The Karnal bunt regulations
that were initially established were necessarily broad due to the lack
of data available at the time as to the extent of the infestation. The
discovery of Karnal bunt and subsequent quarantine and emergency
actions occurred after production and marketing decisions had been
made. Producers and other affected individuals had little time or
ability to avoid the unexpected costs or pass those costs on to others
in the marketing chain.
In previous Karnal bunt compensation rules, we have explained that
compensation to mitigate certain losses has been offered to affected
parties in the regulated areas in order to alleviate some of these
hardships and to ensure full and effective compliance with the Karnal
bunt regulatory program. The payment of compensation is in recognition
of the fact that while benefits from regulation accrue to a large
portion of the wheat industry outside the regulated areas, the
regulatory burden falls predominantly on a small segment of the
affected wheat industry within the regulated area.
APHIS identified three principles for deciding whether to provide
compensation. First, compensation may be appropriate where quarantine
and emergency actions cause losses over and above those that would
result from the normal operation of market forces. Payment of
compensation would reflect the incremental burdens of complying with
regulatory requirements insofar as market forces would not otherwise
impose similar or analogous costs. Second, compensation may be
appropriate where parties undertake actions that confer significant
benefits on others. Under this principle, payment of compensation would
be intended to overcome the usual disincentives to produce such
benefits. Third, compensation may be appropriate where a small number
of parties necessarily bear a disproportionate share of the burden of
providing such benefits. This principle rests on the widely shared
belief that burden-sharing is a fundamental principle of equity.
Individual decisions regarding what specific losses to compensate
and how much compensation to offer in each case were made in line with
the above basic principles, which describe the goals of compensation. A
top equity priority was compensation for wheat and other articles the
Agency ordered destroyed or prohibited movement. Compensation amounts
took into account the need to mitigate real losses caused by the
regulations, so that regulated parties would not have a strong economic
incentive to avoid compliance. At the same time, amounts were not set
at a high enough rate to establish a ``bounty'' that would encourage
fraudulent claims or behavior that would result in increases in
contaminated wheat or other articles eligible for compensation.
Several comments on the proposed rule requested compensation for
losses not addressed in the proposed rule, including demurrage charges
on railcars, the cost of cleaning and sanitizing railcars prior to
loading, declines in transporter operations due to delays caused by the
Karnal bunt regulations, and extra storage costs due to the shipping
delays. Commenters also requested compensation for losses incurred at
various stages of seed production, including losses caused by
interruption of seed increase programs, destruction and/or fumigation
of research nurseries and resulting loss of germplasm, and loss of
future royalties from destroyed seed varieties still in the development
stages. Commenters further requested compensation for loss of the
ability to ``conduct business as usual'' outside the regulated area.
One commenter requested compensation for loss of export seed markets.
We have considered all of these comments very carefully, but we are
not making any changes to the compensation regulations in response to
these comments. Again, we recognize that the compensation we have
offered does not fully account for every loss or expense due to Karnal
bunt. However, we believe the compensation provisions in this final
rule do significantly mitigate losses due to the actions taken by USDA
to control Karnal bunt.
In regard to the request for compensation for demurrage charges on
[[Page 1326]]
railcars, cleaning of railcars, declines in transporter operations, and
extra storage, we did not offer compensation for similar costs and
losses related to wheat grain. In regard to requests for compensation
for losses incurred at various stages of seed production, the loss in
value of certified, market ready seed is the most quantifiable and
direct loss associated with the actions taken by the Department to
prevent the spread of Karnal bunt. For this reason, this rule provides
compensation for loss in value of wheat seed that was intended to be
sold in the 1995-1996 crop season. Many losses connected with seed in
other stages of production are less quantifiable and may have been
otherwise imposed by market forces, such as market demand and prices
over the long term. Further, the eventual impact of these types of
losses will likely be alleviated by reductions in the restrictions on
the movement of seed from areas regulated for Karnal bunt.
One commenter said that the Regulatory Flexibility Analysis in the
proposed rule did not include a discussion of numerous impacts on the
wheat seed industry that resulted from Karnal bunt. Losses specifically
referred to by the commenter are destruction of research nurseries,
costs of additional required treatments, nursery seed losses of
research and development companies, lost cleaning revenues of seed
companies due to reduced seed sales, and carry costs paid to maintain
seed inventories.
The Regulatory Flexibility Analysis that appeared in the proposed
rule referenced a more detailed analysis that was published in the
Federal Register on May 6, 1997 (62 FR 24753-24765, Docket No. 96-016-
20). However, as the commenter says, neither of these analyses provides
a detailed discussion of losses for which we did not intend to provide
compensation. The intent of this rule is to compensate for the loss in
market value of wheat seed and straw in the 1995-1996 crop season. The
decision of intent was made in line with several criteria for
compensation, which have been discussed earlier in this document. For
this reason, the discussion of losses to the seed industry as a result
of Karnal bunt were limited, both in the proposed rule and in the
Regulatory Flexibility Analysis published on May 6, to losses in market
value of 1995-1996 crop season wheat seed. We stated in the analysis
published on May 6 that other economic losses were suffered by the seed
industry due to Karnal bunt. These are mainly long-term losses,
including costs to relocate wheat breeding operations outside the
regulated areas and loss of breeding stock under development. The costs
mentioned by the commenter would also be long term losses potentially
suffered by the seed industry in the regulated area. As discussed
previously in this document, the Karnal bunt compensation program for
seed is intended to cover only for the loss in value of market-ready
seed.
One commenter requested compensation for barley seed. The commenter
said that types of planting seed other than wheat, most notably barley,
were affected by the regulations for Karnal bunt; the commenter further
stated that he has not been able to sell barley seed outside the
regulated area since the original Karnal bunt quarantine was issued,
and that his barley seed inventories had to be sold as grain.
Barley is not a regulated article under the Karnal bunt
regulations. Therefore, the Karnal bunt regulations place no
restrictions on the movement of barley from the regulated area. We are
aware that, primarily early in the 1996 harvest, some countries (for
example, Canada) prohibited the importation of anything from the
regulated area that would fall under the category of small grains.
Wheat, barley, and oats are small grains. These importing countries
were fearful that Karnal bunt could infect or be spread by means of any
small grain. However, the Karnal bunt fungus only affects wheat and
wheat hybrids. Barley, oats, and other small grains are not affected by
Karnal bunt. In general, importers from other countries recognized
this, and growers and seed companies in the regulated area experienced
little difficulty in exporting their barley and oat seed. Because the
Karnal bunt regulations placed no restrictions on the movement of
barley from the regulated area, we will not offer compensation for this
loss.
Another commenter requested compensation for winter seed increases
of wheat, barley, oats, and triticale that could not be shipped outside
the regulated area. Winter seed increases are often grown in Arizona
and other parts of the regulated area for seed companies in northern
climates (such as Minnesota or Canada). These companies contract with
growers in southern climates to grow seed during the winter months in
order to increase their seed stock. Typically, winter seed increases
are not certified, commercially available seed; winter seed increase
programs are more likely used to increase foundation or registered seed
stock.
After the 1996 harvest, some crops of winter seed increases could
not be moved out of the regulated area. Because winter seed increases
were not intended for sale as certified seed during the 1995-1996 crop
season, we are not compensating for most of these situations. However,
if the winter seed increase was for certified seed, the grower who was
unable to move the seed out of the regulated area would be eligible for
compensation. In regard to barley and oat seed increases, the Karnal
bunt regulations did not place restrictions on the movement of such
seed. For this reason, we are not offering compensation. In regard to
triticale (which is a regulated article), we are not aware of any
attempts to move triticale from the regulated area in the 1995-1996
crop season. Even so, winter seed increases of triticale were most
likely not intended for sale as certified seed during the 1995-1996
crop season, and would therefore not be eligible for compensation.
One commenter requested that we consider compensation for losses
caused by the delay in paying compensation until almost a year and a
half after the losses were incurred.
Karnal bunt was first discovered in the United States in Arizona on
March 8, 1996, and a quarantine and regulations were promulgated soon
after. On July 5, 1996, we published an interim rule in the Federal
Register (61 FR 35102-35107, Docket No. 96-016-7) that provided
compensation to certain wheat grain growers and handlers, owners of
grain storage facilities, and flour millers. Because the seed industry
is complex, we needed more time to develop a compensation plan for seed
growers and seed companies. Some growers and seed companies may have
experienced certain kinds of losses due to uncertainty over what losses
they would eventually be compensated for. We regret that such losses
occurred as a result of the delay in compensation for 1995-1996 crop
season seed. However, the intent of the Karnal bunt compensation
program for seed is to compensate for the loss in value of seed that
was intended for sale in the 1995-1996 crop season. We are not making
any changes to the proposed rule based on this comment.
One commenter noted that the proposed rule estimated that the loss
in seed value in the 1995-1996 crop season was between $5 and $6
million. The commenter said they have also heard USDA estimates of
$10.8 million. The commenter said they would like us to clarify whether
these levels are considered caps or estimates.
We stated in the preamble to the proposed rule that an estimated
1.5 million bushels of wheat seed grown in the regulated areas
sustained a loss in value of between $5 and $6 million in
[[Page 1327]]
the 1995-1996 crop season. In the Regulatory Flexibility Act portion of
the proposed rule, we said that $10.8 million has been apportioned for
compensation to seed producers and companies for the loss in value of
their seed. The $5 to $6 million figure is, therefore, an estimate. The
$10.8 million figure is the maximum amount currently available to USDA
for payments on seed compensation claims. Considering that we estimate
the loss in value to be between $5 and $6 million, we anticipate that
the $10.8 million apportionment will be adequate to fulfill all
eligible claims for compensation.
One commenter said that growers and seed companies should not have
to provide copies of Karnal bunt certificates, and also asked that we
remove the requirement that growers and seed companies provide copies
of Emergency Action Notifications (EANs) for wheat grown in an area
that was not regulated for Karnal bunt but for which an EAN had been
issued. The commenter's reason was that Karnal bunt certificates and
EANs were issued by USDA, and so should not have to be provided back to
USDA to claim compensation.
We are making no changes to the proposed rule based on this
comment. Claims for 1995-1996 crop season wheat seed and straw will be
processed by FSA. While FSA and APHIS are both a part of USDA, they do
not share offices, computer systems, or recordkeeping systems. We
understand that filing claims for compensation does require claimants
to provide a number of documents, and collecting these requirements may
seem cumbersome. However, affected entities were provided with copies
of EANs and Karnal bunt certificates, and claimants should, therefore,
not have difficulty in collecting these documents. At this time, the
most efficient way for FSA to process compensation claims is for the
claimant to provide the documents to FSA. As discussed previously in
this document, this final rule will accommodate situations where a
Karnal bunt certificate is not available.
One commenter said that our proposed seed margins and maximum
compensation amounts are too low, and, further, that the proposed rule
did not give enough information about how APHIS calculated these
figures. Another commenter asked us to add a $.90 cleaning margin to
the proposed seed margin amount.
We are not making any changes to the proposed rule in response to
these comments. Seed margins were used in the proposed rule to
calculate compensation for seed companies. We set seed margins at $4.50
for private variety seed and $2.40 for public variety seed because,
according to our information, these were the average seed margins that
seed companies in the regulated areas expected to receive in the 1995-
1996 crop season. We set maximum compensation amounts for seed
companies at $7.00 per bushel for private variety seed and $4.90 per
bushel for public variety seed. We stated in the preamble to the
proposed rule that these maximum compensation amounts represent the
seed margins (described above) plus the maximum $2.50 compensation for
nonpropagative wheat provided in the regulations. We believe that these
amounts will provide reasonable compensation for losses sustained by
seed companies.
Another commenter also said that the maximum compensation amount is
too low. Some seed companies held on to their 1995-1996 crop season
seed while awaiting publication of regulations on seed compensation.
The commenter stated that, for this reason, these seed companies have
been unable to sell their seed in 1997 at the market highs that existed
during the summer of 1996. As a result, the commenter said that losses
exceeded $7.00 per bushel (the proposed maximum compensation amount for
private variety seed). The commenter recommends that the maximum
compensation amounts should be revised to $14.00 per bushel for
``bagged treated seed'' and $8.00 per bushel for ``bulk non-treated
seed.''
We are making no changes to the proposed rule based on this
comment. As discussed previously in response to other comments, we
based the proposed maximum compensation rates for seed companies on the
seed margins plus the maximum $2.50 compensation for nonpropagative
wheat provided in the regulations. The seed margins were determined in
accordance with information we received from a variety of individuals
operating in the regulated area. We believe the proposed maximum
compensation amounts of $7.00 per bushel for private variety seed and
$4.90 per bushel for public variety seed are appropriate for the losses
that occurred in the 1995-1996 crop season, and will significantly
mitigate the effects of those losses for seed companies.
One commenter cited the estimation in the proposal that 1.5 million
bushels of wheat seed grown in the regulated areas sustained a loss in
value of between $5 and 6 million dollars in the 1995-1996 crop season.
The commenter stated that, calculated on a per bushel basis, the
proposed maximum compensation of $2.50 per bushel is inadequate (i.e.,
1.5 million multiplied by $2.50 only equals $3.75 million). The
commenter says that to cover estimated losses, the maximum compensation
amount should be raised to at least $3.00 per bushel.
This comment implies a misunderstanding of the proposed rule, and
we are making no changes to the proposed rule based on this comment.
The maximum compensation amount for wheat grain is $2.50 in the 1995-
1996 crop season; this amount appears in the current regulations. The
maximum compensation amounts we proposed for wheat seed in the 1995-
1996 crop season are higher than for grain. For growers, the maximum
compensation amount is $2.80 per bushel, which consists of $2.50 grain
compensation plus an additional $.30 seed premium. For seed companies,
the maximum compensation amounts are $7.00 per bushel for private
variety seed and $4.90 per bushel of public variety seed. These amounts
represent the $2.50 grain compensation plus seed margins of $4.50 per
bushel for private variety seed and $2.40 per bushel for public variety
seed.
We received one comment concerning the proposed compensation for
loss in value of 1995-1996 straw. The commenter said that, though he
normally bales and sells wheat straw, he did not bale straw after the
1996 harvest because of the Karnal bunt quarantine. The commenter
requests compensation for this loss, even though in this case there are
no bales of straw to weigh or count.
The proposed rule offered compensation to wheat straw producers at
the rate of $1.00 per 80-pound bale or $1.25 per hundredweight. We
proposed that producers would be eligible for compensation regardless
of whether or not the straw is sold, but the straw must have been
produced under contract. Thus, the criteria for compensation
eligibility under the proposed rule requires that the straw must have
been baled or weighed, and that there must be a contract for
production. It would be impossible for us verify a grower's intent to
produce straw if no straw was actually harvested and baled or weighed.
Further, a significant portion of the proposed compensation amount for
straw was intended to reimburse straw producers for the costs of
harvesting and baling the straw, and moving the straw to the intended
destination. If the straw was not actually harvested and baled or
weighed, the grower incurred no production costs. For these reasons, we
[[Page 1328]]
are not making any changes to the proposed rule based on this comment.
Miscellaneous
Throughout the proposed rule, we specified maximum compensation
amounts. For growers who sold wheat seed under contract, the maximum
compensation amount that appears in Sec. 301.89-14(d)(1) is $2.80 per
bushel. We neglected to add the same maximum compensation amount to
paragraph (d)(2) for growers who sold wheat seed for nonpropagative
purposes. To correct this oversight, we are adding a sentence to
paragraph (d)(2) to state that compensation will not exceed $2.80 per
bushel under any circumstances.
Therefore, based on the rationale set forth in the proposed rule
and in this document, we are adopting the provisions of the proposal as
a final rule with the changes discussed in this document.
Effective Date
Pursuant to the administrative procedure provisions in 5 U.S.C.
553, we find good cause for making this rule effective less than 30
days after publication in the Federal Register. This rule provides
compensation to individuals who experienced economic losses because of
the quarantine for Karnal bunt. Immediate action is necessary to
compensate these losses. Therefore, the Administrator of the Animal and
Plant Health Inspection Service has determined that this rule should be
effective upon signature.
Executive Order 12866 and Regulatory Flexibility Act
This rule has been reviewed under Executive Order 12866. The rule
has been determined to be economically significant for the purposes of
Executive Order 12866 and, therefore, has been reviewed by the Office
of Management and Budget (OMB).
The quarantine and regulations for Karnal bunt were established by
a series of interim rules and a final rule published in the Federal
Register on October 4, 1996. A final rule effective on April 30, 1997,
and published in the Federal Register on May 6, 1997, amended the
regulations to provide compensation for certain wheat grain growers and
handlers, owners of grain storage facilities, flour millers, and
participants in the National Karnal Bunt Survey in order to mitigate
losses and expenses incurred in the 1995-1996 crop season because of
actions taken by the Secretary of Agriculture to prevent the spread of
Karnal bunt. The economic impact of the series of interim rules and the
October 1996 final rule establishing the Karnal bunt quarantine and
regulations, and the May 1997 final rule on compensation, was discussed
in a regulatory flexibility analysis and regulatory impact analysis
also published in the Federal Register on May 6, 1997 (62 FR 24753-
24765, Docket No. 96-016-20). The analyses estimate that losses due to
the discovery of Karnal bunt and the subsequent emergency regulatory
actions amounted to $44 million (see table below). These losses were
associated with the plowdown of fields in New Mexico and Texas that
were known to be planted with Karnal bunt-infected seed,
decontamination of grain storage facilities, the decline in market
value of wheat grain testing either positive or negative for Karnal
bunt, treatment of millfeed required by the regulations, the decline in
market value of wheat seed and straw, and damages to combine harvesters
due to required disinfection treatment.
In order to alleviate some of the economic hardships caused by the
Karnal bunt regulations, and to ensure full and effective compliance
with the regulatory program, compensation to mitigate certain losses
was offered to affected parties in the regulated areas. A discussion of
losses and the rationale for compensation can be found in the
regulatory flexibility analysis and regulatory impact analysis cited
above. Funding for compensation in the amount of $39 million has been
made available through apportionment action (transfers from the
Commodity Credit Corporation). Of the $39 million, $26.5 million has
been allocated specifically for compensation for plowdown,
decontaminating grain storage facilities, loss in value of grain, and
millfeed treatment.
This final rule amends the Karnal bunt regulations by adding
compensation provisions for wheat straw producers and wheat seed
growers and seed companies for the loss in value of their straw and
seed due to the regulations for Karnal bunt. As discussed in the
regulatory impact analysis referred to above, losses to seed growers
were estimated to be about $6 million; losses to straw producers were
estimated at about $200,000. The compensation in this final rule for
buried seed (see Sec. 301.89-14(e)) has been increased from what was
proposed, to provide an additional $2.40 per bushel for the cost of
previously cleaning, treating, and bagging the seed. Based on our
experience with compensating for buried grain in the 1995-1996 crop
season, we expect the amount of compensation for buried seed in the
1995-1996 crop season to be less than $100,000. Given that the amount
of buried seed for which compensation will be claimed is expected to be
small, the inclusion of cleaning, treatment, and bagging costs in the
compensation offered for buried seed does not affect the estimated loss
in value of seed that appeared in the regulatory impact analysis
referred to above. Other changes in this final rule primarily clarify
the intent of the proposed rule, and, likewise, do not affect the
estimated loss in value of seed or straw that appeared in the
regulatory impact analysis.
The regulatory flexibility analysis referred to above discusses the
impact of the Karnal bunt regulations on small entities. The majority
of the affected entities in the regulated areas have been determined to
be small entities. The table below is taken from the regulatory impact
analysis, and shows estimated losses due to the Karnal bunt regulations
in the 1995-1996 crop season.
Estimated Loss in Value Due to Karnal Bunt Regulations, 1995-96 Crop
Year
[In millions of dollars]
------------------------------------------------------------------------
Estimated
Action loss in
value
------------------------------------------------------------------------
1. Plowdown of NM and TX fields planted with infected seed... $1.2
2. KB-positive grain diverted to animal feed market.......... 4.2
3. KB-negative grain that experienced loss in value.......... \1\ 28.0
4. Cost of sanitizing storage facilities..................... 0.3
5. Millfeed treatment of KB-negative grain................... 1.6
6. Loss in value of seed..................................... 6.0
7. Loss in value of straw.................................... 0.2
8. Loss related to cleaning and disinfecting of combine
harvesters.................................................. 2.0
----------
Total...................................................... 44.0
------------------------------------------------------------------------
\1\ $28 million is the potential maximum amount of loss in value of
uninfected wheat.
Executive Order 12372
This program/activity is listed in the Catalog of Federal Domestic
Assistance under No. 10.025 and is subject to Executive Order 12372,
which requires intergovernmental consultation with State and local
officials. (See 7 CFR part 3015, subpart V.)
Executive Order 12988
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule: (1) Preempts all State and local laws and
regulations that are
[[Page 1329]]
inconsistent with this rule; (2) has no retroactive effect; and (3)
does not require administrative proceedings before parties may file
suit in court challenging this rule.
Paperwork Reduction Act
In accordance with section 3507(d) of the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501 et seq.), the information collection or
recordkeeping requirements included in this final rule have been
approved by the Office of Management and Budget (OMB). The assigned OMB
control numbers are 0579-0121 and 0579-0126. Some of the information
collection requirements in this final rule differ from what was
proposed in order to facilitate the submission of applications for
compensation. However, these changes do not result in any changes in
burden hours.
List of Subjects in 7 CFR Part 301
Agricultural commodities, Plant diseases and pests, Quarantine,
Reporting and recordkeeping requirements, Transportation.
Accordingly, 7 CFR part 301 is amended as follows:
PART 301--DOMESTIC QUARANTINE NOTICES
1. The authority citation for part 301 continues to read as
follows:
Authority: 7 U.S.C. 147a, 150bb, 150dd, 150ee, 150ff, 161, 162,
and 164-167; 7 CFR 2.22, 2.80, and 371.2(c).
2. In Sec. 301.89-14, paragraph (f)(2), the reference to
``paragraph (d)'' is removed both times it appears and a reference to
``paragraph (f)'' is added in its place.
3. In Sec. 301.89-14, paragraphs (d), (e), and (f) are redesignated
as paragraphs (f), (g), and (h) respectively; and new paragraphs (d),
(e), and (i) are added to read as set forth below.
Sec. 301.89-14 Compensation for the 1995-1996 crop season.
* * * * *
(d) Growers and seed companies that sold wheat seed. Growers of and
seed companies with certified wheat seed or wheat grown with the intent
of producing certified wheat seed are eligible for compensation for the
loss in value of their seed, in accordance with this section, if the
seed was grown in a State where the Secretary has declared an
extraordinary emergency, and if the seed was grown in an area of that
State that was regulated for Karnal bunt or under Emergency Action
Notification (PPQ Form 523) for Karnal bunt during the 1995-1996 crop
season.
(1) Growers who sold wheat seed under contract. Growers who sold
1995-1996 crop season certified wheat seed or 1995-1996 crop season
wheat grown with the intent of producing certified wheat seed are
eligible to receive compensation as described in paragraphs (d)(1)(i)
and (d)(1)(ii) of this section if they sold the wheat under contract to
a seed company. However, compensation will not exceed $2.80 per bushel
under any circumstances.
(i) If the wheat was grown under contract and a price was
determined in the contract on or before March 1, 1996, and the contract
price was not honored by the seed company, the compensation rate will
equal the contract price (CP), including the seed premium if specified
in the contract, minus the higher of either the salvage value (SV), as
described in paragraph (d)(6) of this section, plus the actual seed
premium received by the grower (SP)(actual), or the actual price
received by the grower (AP), including any seed premium specified on
the receipt for the final sale of the wheat. If the actual seed premium
received by the grower is not specified on the receipt for the final
sale of the wheat, the seed premium will be set at $.30 for the
compensation calculation. In each case, the amount of the actual price
or the salvage value of the wheat seed will include the value of any
proceeds accrued through insurance claims, judgments, or from any other
source. The equation for this compensation is: Compensation rate = CP--
higher of [SV + (SP(actual) or $.30) or [AP].
(ii) If the wheat was grown under contract and a price was
determined in the contract after March 1, 1996, the compensation rate
will equal the estimated market price for grain (EMP) plus the seed
premium if specified in the contract (SP)(contract) minus the higher of
either the salvage value (SV), as described in paragraph (d)(6) of this
section, plus the actual seed premium received by the grower
(SP)(actual), or the actual price received by the grower (AP),
including any seed premium specified on the receipt for the final sale
of the wheat. If a seed premium is not specified in the contract or on
the receipt for the final sale of the wheat, the seed premium that is
added to the estimated market price (EMP) and the seed premium that is
added to the salvage value (SV) will be set at $.30. In each case, the
amount of the actual price or the salvage value of the wheat seed will
include the value of any proceeds accrued through insurance claims,
judgments, or from any other source. The equation for this compensation
is: Compensation rate = [EMP + (SP(contract) or $.30)]--higher of [SV +
(SP(actual) or $.30)] or [AP]. The estimated market price will be
calculated by APHIS for each class of wheat, taking into account the
prices offered by relevant terminal markets (animal feed, milling, or
export) for the period between May 1 and June 30, 1996, with
adjustments for transportation and other handling costs.
(2) Growers who sold wheat seed for nonpropagative purposes.
Growers with 1995-1996 crop season certified wheat seed or 1995-1996
crop season wheat grown with the intent of producing certified wheat
seed are eligible to receive compensation in accordance with paragraphs
(d)(2)(i) and (d)(2)(ii) of this section if they sold the wheat for
nonpropagative purposes. However, compensation will not exceed $2.80
per bushel under any circumstances.
(i) If the grower has not claimed compensation under paragraph (b)
of this section, the compensation rate will equal the estimated market
price for grain (EMP) minus the actual price received by the grower
(AP), plus the seed premium specified in the contract the grower had
with a seed company (SP). If a seed premium is not specified in the
contract, SP will equal $.30. In each case, the amount of the actual
price of the wheat seed will include the value of any proceeds accrued
through insurance claims, judgments, or from any other source. The
equation for this compensation is: Compensation rate = (EMP-AP) + (SP
or $.30). Growers who claim compensation under this paragraph may not
claim compensation under paragraph (b) of this section.
(ii) If the grower has claimed compensation under paragraph (b) of
this section, the compensation rate will equal the premium specified in
the contract the grower had with a seed company. If no seed premium is
specified in the contract, compensation will equal $.30 per bushel.
(3) Seed companies that sold wheat seed for nonpropagative purposes
and that have not claimed compensation. Seed companies with 1995-1996
crop season certified wheat seed or 1995-1996 crop season wheat grown
with the intent of producing certified wheat seed, and seed companies
with certified wheat seed inventories in their possession that were
unsold as of March 1, 1996, are eligible to receive compensation as
described in paragraphs (d)(3)(i) and (d)(3)(ii) of this section if the
wheat seed was sold for nonpropagative purposes and if the seed company
has not claimed compensation under paragraph (b) of this section. Seed
companies that claim compensation under paragraph (d)(3)(i) or
(d)(3)(ii) of
[[Page 1330]]
this section may not claim compensation under paragraph (b) of this
section.
(i) If the wheat was grown in the 1995-1996 crop season, was under
contract, and the seed company honored the contract by paying the
grower the full contract price, including the seed premium if a seed
premium is specified in the contract, the compensation rate will equal
the estimated market price for grain (EMP) plus the seed margin (SM)
minus the higher of either the actual price received by the seed
company (AP) or the salvage value (SV), as described in paragraph
(d)(6) of this section. The equation for this compensation is:
Compensation rate = EMP + SM-higher of AP or SV. The seed margin is
$4.50 per bushel for private variety seed and $2.40 per bushel for
public variety seed. In each case, the amount of the actual price or
the salvage value of the wheat seed will include the value of any
proceeds accrued through insurance claims, judgments, or from any other
source. However, compensation will not exceed $7.00 per bushel for
private variety seed and $4.90 per bushel for public variety seed under
any circumstances.
(ii) If a seed company had wheat inventories from past crop seasons
that were unsold as of March 1, 1996, the compensation rate will equal
the estimated market price for grain (EMP) plus the seed margin (SM)
minus the higher of either the actual price received by the seed
company (AP) or the salvage value (SV), as described in paragraph
(d)(6) of this section. The equation for this compensation is:
Compensation rate = EMP + SM-higher of AP or SV. The seed margin is
$4.50 per bushel for private variety seed and $2.40 per bushel for
public variety seed. In each case, the amount of the actual price or
the salvage value of the wheat seed will include the value of any
proceeds accrued through insurance claims, judgments, or from any other
source. However, compensation will not exceed $7.00 per bushel for
private variety seed and $4.90 per bushel for public variety seed under
any circumstances.
(4) Seed companies that sold wheat seed for nonpropagative purposes
and that have claimed compensation. Seed companies with 1995-1996 crop
season certified wheat seed or 1995-1996 crop season wheat grown with
the intent of producing certified wheat seed, and seed companies with
certified wheat seed inventories in their possession that were unsold
as of March 1, 1996, are eligible to receive compensation as described
in this paragraph if the wheat seed was sold for nonpropagative
purposes and if the seed company has claimed compensation under
paragraph (b) of this section. In addition, for claims on 1995-1996
crop season wheat, the wheat must have been grown under contract and
the seed company must have honored the contract by paying the grower
the full contract price, including the seed premium if a seed premium
is specified in the contract. The compensation rate will equal the seed
margin. The seed margin is $4.50 per bushel for private variety seed
and $2.40 per bushel for public variety seed.
(5) Seed companies that sold wheat seed for propagative purposes.
Seed companies with 1995-1996 crop season certified wheat seed or 1995-
1996 crop season wheat grown with the intent of producing certified
wheat seed, and seed companies with certified wheat seed inventories in
their possession that were unsold as of March 1, 1996, are eligible to
receive compensation as described in this paragraph if the wheat seed
was sold for propagative purposes. In addition, for claims on 1995-1996
crop season wheat, the wheat must have been grown under contract and
the seed company must have honored the contract by paying the grower
the full contract price, including the seed premium if a seed premium
is specified in the contract. The compensation rate will equal the
estimated market price for grain (EMP) plus the seed margin (SM) minus
the higher of either the actual price received by the seed company (AP)
or the salvage value (SV), as described in paragraph (d)(6) of this
section. In each case, the amount of the actual price or the salvage
value of the wheat seed will include the value of any proceeds accrued
through insurance claims, judgments, or from any other source. The
equation for this compensation is: Compensation rate = EMP + SM-higher
of AP or SV. The seed margin is $4.50 per bushel for private variety
seed and $2.40 per bushel for public variety seed. However,
compensation will not exceed $7.00 per bushel for private variety seed
and $4.90 per bushel for public variety seed under any circumstances.
(6) Salvage value. Salvage values will be determined as follows:
(i) If the wheat is positive for Karnal bunt and is sold for use as
animal feed, salvage value equals $6.00 per hundredweight or $3.60 per
bushel for all classes of wheat.
(ii) If the wheat is positive for Karnal bunt and is sold for a use
other than animal feed, salvage value equals whichever is higher of the
following: the average price paid in the region of the regulated areas
where the wheat is sold for the relevant class of wheat (meaning type
of wheat, such as durum or hard red winter) for the period between May
1 and June 30, 1996; or, $3.60 per bushel.
(iii) If the wheat is negative for Karnal bunt and is sold for any
use, salvage value equals whichever is higher of the following: the
average price paid in the region of the regulated areas where the wheat
is sold for the relevant class of wheat (meaning type of wheat, such as
durum or hard red winter) for the period between May 1 and June 30,
1996; or, $3.60 per bushel.
(7) To claim compensation. Compensation payments for claims made
under paragraph (d) of this section will be issued by the Farm Service
Agency (FSA). Claims for compensation must be received by FSA on or
before April 22, 1998. The Administrator may extend this deadline, upon
request in specific cases, when unusual and unforeseen circumstances
occur which prevent or hinder a claimant from requesting compensation
on or before that date. To claim compensation, a grower or seed company
must submit to the local FSA county office all of the following that
apply:
(i) The grower or seed company must submit a Karnal Bunt
Compensation Claim form, provided by FSA;
(ii) The grower or seed company must submit a copy of the receipt
for the final sale of the wheat, showing the intended use for which the
wheat was sold, total bushels sold, and the total price received by the
grower or seed company;
(iii) The grower or seed company must submit verification as to the
actual (not estimated) weight of the wheat for which compensation is
being claimed (such as a copy of a facility weigh ticket, or other
verification);
(iv) The grower or seed company must submit documentation showing
that the wheat is either certified seed or was grown with the intention
of producing certified seed (this documentation may include one or more
of the following types of documents: an application to the State seed
certification agency for field inspection; a bulk sale certificate;
certification tags or labels issued by the State seed certification
agency; or a document issued by the State seed certification agency
verifying that the wheat is certified seed);
(v) For claims on 1995-1996 crop season wheat, the grower or seed
company must submit a copy of the contract under which the wheat was
grown. Seed companies claiming compensation on seed inventories that
were in their possession as of March 1, 1996, do not have to submit a
copy of
[[Page 1331]]
the contract under which the wheat was grown;
(vi) A seed company that is claiming compensation for seed
inventories must certify to FSA that the wheat seed was in the seed
company's possession as of March 1, 1996;
(vii) The grower or seed company must submit a copy of the Karnal
bunt certificate issued by APHIS that shows the Karnal bunt test
results; provided that, if a grower or seed company moved its wheat
only within the regulated area, and therefore, does not have a
corresponding Karnal bunt certificate for the wheat for which
compensation is being claimed, a limited permit stating that the wheat
was positive for Karnal bunt will be accepted in lieu of a Karnal bunt
certificate. Any wheat that was moved only within the regulated area
and that was not moved under a limited permit will be considered
negative for Karnal bunt;
(viii) If the wheat was grown in an area that is not a regulated
area, but for which an Emergency Action Notification (PPQ Form 523)
(EAN) for Karnal bunt has been issued, the grower or seed company must
submit a copy of the EAN.
(e) Other compensation for seed companies. Seed companies are also
eligible to receive compensation under the following circumstance: If a
seed company has 1995-1996 crop season certified wheat seed, or 1995-
1996 crop season wheat grown with the intent of producing certified
wheat seed, that cannot be sold for use as grain or animal feed because
it was previously cleaned, treated, and bagged, the compensation rate
will equal $9.40 per bushel for private variety seed and $7.30 per
bushel for public variety seed. Compensation will only be paid if the
seed company has destroyed the wheat by burying it in a sanitary
landfill or other site that has been approved by APHIS. The
compensation will be issued by the Farm Service Agency (FSA). Claims
for compensation must be received by FSA on or before April 22, 1998.
The Administrator may extend this deadline, upon request in specific
cases, when unusual and unforeseen circumstances occur which prevent or
hinder a claimant from requesting compensation on or before that date.
To claim compensation, a seed company must submit to the local FSA
county office all of the following that apply:
(1) The seed company must submit a Karnal Bunt Compensation Claim
form, provided by FSA;
(2) The seed company must submit verification of how much wheat was
buried, in the form of a receipt from the sanitary landfill or
verification signed by an APHIS inspector;
(3) The seed company must submit documentation showing that the
wheat is either certified seed or was grown with the intention of
producing certified seed (this documentation may include one or more of
the following types of documents: an application to the State seed
certification agency for field inspection; a bulk sale certificate;
certification tags or labels issued by the State seed certification
agency; or a document issued by the State seed certification agency
verifying that the wheat is certified seed);
(4) For claims on 1995-1996 crop season wheat that was buried, the
seed company must submit a copy of the contract under which the wheat
was grown. Seed companies claiming compensation on buried seed
inventories that were in their possession as of March 1, 1996, do not
have to submit a copy of the contract under which the wheat was grown;
(5) A seed company that is claiming compensation for seed
inventories that were buried must certify to FSA that the wheat seed
was in the seed company's possession as of March 1, 1996;
(6) If the wheat was grown in an area that is not a regulated area,
but for which an Emergency Action Notification (PPQ Form 523)(EAN) for
Karnal bunt has been issued, the seed company must submit a copy of the
EAN.
* * * * *
(i) Wheat straw producers. Producers of wheat straw (either growers
who bale their own wheat straw or individuals contracted by growers to
remove wheat straw from the growers' fields) made from wheat grown in
the regulated areas in the 1995-1996 crop season are eligible to
receive compensation on a one-time-only basis at the rate of $1.00 per
80-pound bale or $1.25 per hundredweight. Producers are eligible for
compensation regardless of whether or not the straw is sold, but the
straw must have been produced under contract. Compensation payments
will be issued by the Farm Service Agency (FSA). To claim compensation,
a wheat straw producer must submit a Karnal Bunt Compensation Claim
form, provided by FSA, and a copy of the contract under which the wheat
straw was produced to the local FSA county office. Claims for
compensation must be received by FSA on or before April 22, 1998. The
Administrator may extend this deadline, upon request in specific cases,
when unusual and unforeseen circumstances occur which prevent or hinder
a claimant from requesting compensation prior to that date.
Done in Washington, DC, this 23rd day of December 1997.
Craig A. Reed,
Acting Administrator, Animal and Plant Health Inspection Service.
[FR Doc. 98-550 Filed 1-8-98; 8:45 am]
BILLING CODE 3410-34-P
