E9-13937. Common Crop Insurance Regulations, Basic Provisions

AGENCY:

Federal Crop Insurance Corporation, USDA.

ACTION:

Interim rule.

SUMMARY:

The Federal Crop Insurance Corporation (FCIC) amends the Common Crop Insurance Regulations, Basic Provisions to revise enterprise unit provisions to protect the program from potential abuse as a result of the increased premium subsidies for enterprise and whole farm units provided by the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill).

DATES:

This rule is effective June 15, 2009. Written comments and opinions on this rule will be accepted until the close of business August 14, 2009 and will be considered when the rule is to be made final.

ADDRESSES:

Interested persons are invited to submit comments, titled “Enterprise Unit Interim Rule”, by any of the following methods:

• By Mail to: Director, Product Administration and Standards Division, Risk Management Agency, United States Department of Agriculture, Beacon Facility—Mail Stop 0812, Room 421, P.O. Box 419205, Kansas City, MO 64141-6205.
• By Express Mail to: Director, Product Administration and Standards Division, Risk Management Agency, United States Department of Agriculture, Beacon Facility, Stop 0812, 9240 Troost Avenue, Kansas City, MO 64131-3055.
• E-Mail: [e-mail].
• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.

A copy of each response will be available for public inspection and copying from 7 a.m. to 4:30 p.m., CST, Monday through Friday, except holidays, at 6501 Beacon Drive, Stop 0812, Room 421, Kansas City, MO 64133-4676.

FOR FURTHER INFORMATION CONTACT:

Erin Albright, Risk Management Specialist, Product Management, Product Administration and Standards Division, Risk Management Agency, United States Department of Agriculture, Beacon Facility, Stop 0812, Room 421, P.O. Box 419205, Kansas City, MO 64141-6205, telephone [phone].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be non-significant for the purposes of Executive Order 12866 and, therefore, it has not been reviewed by the Office of Management and Budget (OMB).

Paperwork Reduction Act of 1995

Pursuant to the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the collections of information in this rule have been approved by OMB under control number 0563-0053 through March 31, 2012.

E-Government Act Compliance

FCIC is committed to complying with the E-Government Act of 2002, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

Unfunded Mandates Reform Act of 1995

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and Tribal governments and the private sector. This rule contains no Federal mandates (under the regulatory provisions of title II of 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 UMRA.

Executive Order 13132

It has been determined under section 1(a) of Executive Order 13132, Federalism, that this rule does not have sufficient implications to warrant consultation with the States. The provisions contained in this rule will not have a substantial direct effect on States, or on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

Regulatory Flexibility Act

FCIC certifies that this regulation will not have a significant economic impact on a substantial number of small entities. Program requirements for the Federal crop insurance program are the same for all producers regardless of the size of their farming operation. For instance, all producers are required to submit an application and acreage report to establish their insurance guarantees and compute premium amounts, and all producers are required to submit a notice of loss and production information to determine the amount of an indemnity payment in the event of an insured cause of crop loss. Whether a producer has 10 acres or 1,000 acres, there is no difference in the kind of information collected. To ensure crop insurance is available to small entities, the Federal Crop Insurance Act (Act) authorizes FCIC to waive collection of administrative fees from limited resource farmers. FCIC believes this waiver helps to ensure that small entities are given the same opportunities as large entities to manage their risks through the use of crop insurance. A Regulatory Flexibility Analysis has not been prepared since this regulation does not have an impact on small entities, and, therefore, this regulation is exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C. 605).

Federal Assistance Program

This program is listed in the Catalog of Federal Domestic Assistance under No. 10.450.

Executive Order 12372

This program is not subject to the provisions of Executive Order 12372, which require intergovernmental consultation with State and local officials. See the Notice related to 7 CFR part 3015, subpart V, published at 48 FR 29115, June 24, 1983.

Executive Order 12988

This rule has been reviewed in accordance with Executive Order 12988 on civil justice reform. The provisions of this rule will not have a retroactive effect. The provisions of this rule will preempt State and local laws to the extent such State and local laws are inconsistent herewith. With respect to any direct action taken by FCIC or to require the insurance provider to take specific action under the terms of the crop insurance policy, the administrative appeal provisions published at 7 CFR part 11 must be exhausted before any action against FCIC for judicial review may be brought.

Environmental Evaluation

This action is not expected to have a significant economic impact on the quality of the human environment, health, or safety. Therefore, neither an Environmental Assessment nor an Environmental Impact Statement is needed.

Background

On May 22, 2008, the 2008 Farm Bill was enacted. Section 12011 of the 2008 Farm Bill amended section 508(e) of the Federal Crop Insurance Act (7 U.S.C. 1508(e)) to allow producers who elect whole-farm or enterprise units to receive, to the maximum extent practicable, the same dollar amount of premium subsidy that would have otherwise been paid if they had elected a basic or optional unit for the crop.

The increased subsidy amount provides a much larger incentive than in the past to qualify for an enterprise unit. The increased incentive may lead to unintended consequences when producers change planting intentions solely for the purpose of qualifying for the larger subsidy. To qualify for an enterprise unit, current provisions require a producer to plant some acreage in two or more sections, FSA farm serial numbers, or other means of land measurement. There is no requirement stating a minimum number of acres that must be planted in more than one section, FSA farm serial number, etc., to qualify for an enterprise unit. This leaves the program vulnerable to producers who will plant only a small amount of acreage in an additional section, FSA farm serial number, etc. solely for the purpose of qualifying for an enterprise unit and the increased subsidy. FCIC has received questions and anecdotal information and has seen blogs on agricultural forums indicating that some insured producers are contemplating taking these actions.

The new subsidy amounts are intended only for producers who are willing to combine optional or basic units, not for those who manipulate unit structures solely to benefit from the higher subsidy. For this reason, FCIC is revising the definition of “enterprise unit” in the Basic Provisions to specify at least two of the sections, section equivalents, FSA farm serial numbers, or units established by written agreement must each have planted acreage that constitutes at least the lesser of 20 acres or 20 percent of the insured crop acreage in the enterprise unit. The lesser of 20 acres or 20 percent is consistent with other provisions in the policy that require a minimum amount of acreage to qualify for certain other coverage (for example, a replanting payment may be made when the number of acres replanted is at least the lesser of 20 acres or 20 percent of the insured planted acreage in a unit). This change is necessary to protect program integrity by ensuring that producers are unable to manipulate their unit structure by making slight changes in their farming operation to gain additional benefits from the increased subsidy.

The amendments in this rule are applicable for the 2010 and succeeding crop years for all crops with a 2010 crop year contract change date on or after the effective date of this rule and for the 2011 and succeeding crop years for all crops with a 2010 crop year contract change date prior to the effective date of this rule.

Good cause is shown to make this rule effective upon publication in the Federal Register. Good cause to make the rule effective upon publication in the Federal Register exists when the 30 day delay in the effective date is impracticable, unnecessary, or contrary to the public interest.

With respect to the provisions of this rule, it would adversely affect program integrity to delay its implementation. If FCIC is required to delay the implementation of this rule 30 days after the date it is published, the provisions of this rule could not be implemented until the next crop year for those crops having a contract change date prior to the effective date of this publication. Because a delay in the effective date of this rule is contrary to the public interest, good cause exists to make these policy changes effective upon publication in the Federal Register.

List of Subjects in 7 CFR Part 457

• Crop insurance
• Reporting and recordkeeping requirements

Interim Rule

Accordingly, as set forth in the preamble, the Federal Crop Insurance Corporation amends 7 CFR part 457 as follows:

PART 457—COMMON CROP INSURANCE REGULATIONS

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

Authority: 7 U.S.C. 1506(l), 1506(o).

2. In § 457.8, paragraph (b) is amended by revising the definition of “Enterprise unit.”

The revised text reads as follows:

§ 457.8

The application and policy.

* * * * *

(b) * * *

1. Definitions.

* * * * *

Enterprise unit. All insurable acreage of the insured crop in the county in which you have a share on the date coverage begins for the crop year.

(1) To qualify, an enterprise unit must contain all of the insurable acreage of the same insured crop in:

(i) One or more basic units that are located in two or more separate sections, section equivalents, FSA farm serial numbers, or units established by written agreement; or

(ii) Two or more optional units established by separate sections, section equivalents, FSA farm serial numbers, or as established by written agreement; and

(2) At least two of the sections, section equivalents, FSA farm serial numbers, or units established by written agreement making up the basic or optional units in paragraph (1) of this definition must each have planted acreage that constitutes at least the lesser of 20 acres or 20 percent of the insured crop acreage in the enterprise unit.

* * * * *

Signed in Washington, DC, on June 5, 2009.

William J. Murphy,

Acting Manager, Federal Crop Insurance Corporation.