[Federal Register Volume 59, Number 180 (Monday, September 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23035]
Federal Register / Vol. 59, No. 180 / Monday, September 19, 1994 /
[[Page Unknown]]
[Federal Register: September 19, 1994]
VOL. 59, NO. 180
Monday, September 19, 1994
DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Part 400
General Administrative Regulations; Actual Production History
(APH) Coverage Program
AGENCY: Federal Crop Insurance Corporation, USDA.
ACTION: Final rule.
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SUMMARY: The Federal Crop Insurance Corporation (FCIC) hereby issues
regulations to provide a method for determining insurance coverage
based on Actual Production History (APH). An approved APH yield, when
multiplied by a percentage of an elected coverage level and price per
commodity unit, results in a dollar amount of insurance coverage per
acre. This rule is being promulgated in accordance with the
requirements of the Federal Crop Insurance Act, as amended.
EFFECTIVE DATE: October 19, 1994.
FOR FURTHER INFORMATION CONTACT:
Mari Dunleavy, Regulatory Specialist, Regulatory and Procedural
Development, Federal Crop Insurance Corporation, U.S. Department of
Agriculture, Washington, DC 20250, telephone (202) 254-8314.
SUPPLEMENTARY INFORMATION: This action has been reviewed under USDA
procedures established by Executive Order 12866, and Departmental
Regulation No. 1512-1. This action constitutes a review as to the need,
currency, clarity, and effectiveness of these regulations under those
procedures. The sunset review date established for these regulations is
September 1, 1999.
This rule has been determined to be not-significant for purposes of
Executive Order 12866, and therefore, exempt from OMB review and has
not been reviewed by the Office of Management and Budget (OMB).
This action does not have a significant effect on a substantial
number of small entities. It imposes no added burden on the insured
farmer or on the private insurance company serving as the delivery
agent. APH has been the basis for computing insurance guarantees under
the Federal Crop Insurance Program, on an ad hoc basis for over eight
years and has its genesis in the Individual Yield Coverage Plan (7 CFR
400.15-400.21). This rule codifies procedure which is already
effective. Therefore, this action is exempt from the provisions of the
Regulatory Flexibility Act and no Regulatory Flexibility Analysis was
prepared.
The program is listed in the Catalog of Domestic Assistance under
No. 10.450.
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.
This action is not expected to have any significant impact on the
quality of the human environment, health, and safety. Therefore,
neither an Environmental Assessment or an Environmental Impact
Statement is needed.
The collection requirement for this regulation is form number FCI-
19A (APH Production Reporting Form) and has been previously approved by
the OMB under the provisions of 44 U.S.C. 3501 et seq., the Paperwork
Reduction Act of 1980. The control number for the APH Production
Reporting Form is OMB #0563-0029. See 7 CFR part 400, subpart H.
It has been determined under section 6(a) of Executive Order 12612,
Federalism, that this proposal does not have sufficient federalism
implications to warrant the preparation of a Federalism Assessment. The
policies and procedures contained in this rule will not have
substantial direct effects on states or their political subdivisions,
or on the distribution of power and responsibilities among the various
levels of government.
This rule has been reviewed in accordance with Executive Order
12778. The provisions of this rule are not retroactive and will preempt
State and local laws to the extent such State and local laws are
inconsistent. The administrative appeal provisions, located at 7 CFR
part 400, subpart J, must be exhausted before judicial action may be
brought for actions taken under these proceedings.
Background
The Federal Crop Insurance Act, as amended by the Omnibus Budget
Reconciliation Act of 1993 (Pub. L. 103-66), requires the establishment
of a plan and the publication of regulations for the use of the
producer's actual production history to determine yield coverage. FCIC
has used such a plan on an ad hoc basis for a number of years.
An approved actual production history (APH) yield, multiplied by a
percentage of an elected coverage level and price per commodity unit,
provides the dollar amount of insurance coverage per acre. If the
insured does not submit production records for insurance purposes, 65
percent of an FCIC estimated yield (transitional or determined yield)
is the default approved APH yield. The FCIC estimated yield, after
applicable adjustment, is used in conjunction with actual production
records to compute the approved APH yield when less than four years of
actual production records are available.
On October 14, 1993, the FCIC published in the Federal Register at
58 FR 53150 proposed regulations outlining the provisions for the APH
plan. The FCIC requested and received comments from the public
regarding the proposal.
The comments and their responses are grouped according to subject,
area of concern, and by subpart of the proposed regulation.
1. General Comments, Differences Compared to 1994 APH Program
Comments: Several comments pointed out that the new producer, crop
year, and base period definitions differ from FCIC approved procedures
implemented for the 1994 crop year. The comments requested that the
regulation be changed to agree with those APH procedures if it is to be
effective for the 1994 crop year. They indicated that these changes
will drastically affect computer programming, computer edits, FCIC data
reporting requirements, etc. If the regulation is not changed and is to
be effective for the 1994 crop year, they requested that the comment
period be reopened to provide an opportunity to review the impact of
these changes.
Response: There are differences between the regulation published
for comment and the APH procedures used for the 1994 crop year. The
differences are minor but, if implemented for the 1994 crop year, the
regulation would have major impacts on the current program. Fall and
spring seeded crop policies have been sold, production reports filed,
and approved APH yields calculated, processed, and submitted to FCIC
based on procedures implemented in July 1993.
For these reasons, the regulation, with minor changes, will be
implemented effective for the 1995 crop year.
2. Coverage and Participation
Comment: Twenty comments stated that the APH program will reduce
insurance protection to many farmers, decrease farmer participation,
and increase future demand for free disaster payments. The comments
suggested that FCIC encourage participation by offering higher levels
of protection to producers.
Comment: One comment noted that 65 percent of the transitional
yield will be used when a producer does not furnish any previous yield
data. The comment suggested that FCIC change this percentage to 80
percent.
Comment: Section 400.54(b)--the proposed reduction of transitional
or determined yields by the stated 80 percent for maintaining one year
of actual records and 90 percent for maintaining two years of actual
records is inadequate to serve as an incentive for insureds to report
all four years of actual production in relationship to the 65 percent
reduction for no records. Also, there does not appear to be a penalty
for maintaining only three years of actual records. A greater penalty
is needed for not maintaining less than four years of records.
Comment: One comment suggested that if a producer applying for
Federal crop insurance coverage has no previous production records (an
example of this would be production of the alternative crop Kenaf,
where very little production history exists), that individual should be
able to receive crop insurance coverage for the entire crop. The only
way to accomplish this is to raise the transfer yield to 100 percent,
as opposed to 65 percent. The comment also recommended that an option
be provided to allow producers to purchase additional coverage for
crops having no previous production records.
Comment: One comment urged FCIC to exclude those losses resulting
from catastrophic events in the loss ratio determination.
Response: The Federal Crop Insurance Act, as amended, requires FCIC
to take actions as necessary to improve actuarial soundness of the
multiple peril crop insurance program. FCIC is mandated to achieve an
overall loss ratio, within certain parameters, of not greater than 1.10
by October 1, 1995. FCIC's research using existing insureds' APH data
indicates insureds with no records of production (or one or two years
of records) are paid disproportionate losses compared to insureds who
have provided three or more years of production records. Further
analyses by FCIC using modified APH procedures and existing insureds'
APH data, indicates that 65 percent of the transitional or determined
yield (hereafter referred to as T-Yield in FCIC's responses) is an
appropriate percentage to attain the required loss ratio for persons
who have not submitted records. Independent analyses from a private
insurance association support these findings.
Insureds who have provided three or four years of records have
lower loss costs and do not require the use of reduced T-Yields.
Modifications to APH are not intended to reduce insurance protection to
farmers, rather the intent is to base yields more fully on actual
yields and to rely less on T-Yields. APH procedures allow ample
opportunity for producers who have not raised insurable crops (and
therefore have not had the opportunity to establish records) to qualify
for APH yields greater than 65 percent of the T-Yield through use of
new producer, added land, and new practice procedures.
Producers are encouraged to provide as many years of actual yields
as possible. Above average yields will reduce the impact of low yields.
If actual yields reported are higher than the T-Yield, modified APH
procedures allow a better opportunity for increased insurance yields as
compared to previous APH procedures.
FCIC is not able to provide APH yields higher than the insured's
average yields without adversely affecting FCIC loss ratio and
financial accountability. FCIC has researched options that provide
coverage based on yields higher than the insured's APH yield or the
yield history available for the crop on a county basis. This analysis
indicates that a significant increase in premium rates is required to
make such a program actuarially sound. FCIC will retain the APH
structure as proposed.
3. Section 400.50 Availability of APH Program
Comment: The last sentence of Sec. 400.50 states, ``Except when in
conflict with this subpart, all provisions of the applicable crop
insurance contract for these crops apply.'' Concern was expressed that
this regulation may override the terms and conditions in current crop
filings. The commentor indicated that policy language should not be
superseded by any other published regulations since policyholders
receive copies of policy provisions but do not receive Federal
regulations.
Response: Federal regulations have the force and effect of law and
all have constructive notice of the provisions. As a practical matter
we are not aware of any provision of the published policies in conflict
with these regulations. As crop insurance policies which base
production guarantees on APH yields are revised, those provisions
relating to APH will be changed in accordance with the final APH
regulation. Reinsured companies furnish policyholder's letters that
describe changes to each crop insurance contract. These letters also
suggested that insureds contact their agents for a full explanation of
the changes and once so advised, insureds then can make informed crop
insurance decisions. Copies of these letters should be provided by the
insurer to all affected policyholders.
4. Added Land (Purchased or Leased)
Comment: One comment stated concern that, under the proposed
regulation, the producer is not eligible to transfer his or her skill
and history to new land purchased or leased. It was suggested that a
producer's history be taken into account when calculating coverage
under a crop insurance policy.
Response: The regulation provides general rules while allowing
flexibility for program details to be provided in procedures. Added
land procedures for APH yield determinations are available that provide
insureds the opportunity to establish approved APH yields higher than
65 percent of the T-Yield when new land is purchased or leased. FCIC
has added a new paragraph to Sec. 400.54(b) consistent with those
procedures which allow yields for added land that are more comparable
to approved APH yields determined from acreage with records.
5. Databases Used To Calculate the APH Yield
Comment: One comment noted that a four year history does not
provide a balanced history in which an agent can accurately calculate a
producer's coverage. A one or two year drought would severely affect a
producer's history. A ten year history would provide more stability.
Comment: One comment suggested that the base period be a minimum of
five years. Four years are not sufficient. Approved yields may
fluctuate tremendously from year to year. The schedule for the
percentage of the T-Yield used, based upon the years records provided,
should be as follows: zero years--80 percent; one year--85 percent; two
years--90 percent; three years--95 percent; four years--100 percent;
and five or more years the T-Yield is not used.
Comment: One comment noted that in Sec. 400.54(h), ``FCIC may use
any production reports available under the provisions of any crop
insurance contract, whether continuous or not (emphasis added), which
involve the interests of the insured person in determining the approved
APH yield.'' Current APH procedures allow new insureds (including
insureds with a break in continuity of insurance coverage of at least
one year) to certify one or more crop years to establish the APH yield.
Since processing has already begun, implementation of yields that are
not continuous will impose major difficulties. In accordance with the
proposed definition of crop year, this could require companies to
maintain yield history indefinitely (for example, a farmer may have had
a policy five years ago with production history going back 30 or 40
years to accumulate 10 crop years).
Response: The level at which the reduced T-Yield has been set for
zero, one, or two years of records was established to offset
disproportionate losses as compared to insureds who have provided more
years of actual records. Using higher levels of T-Yields is contrary to
that objective. The modified APH program encourages the insured to
provide actual records by using reduced T-Yields if the insured
provides less than four years of actual yields.
The proposed regulation does not limit insureds to providing only
four years of actual yield. In fact, continuous records up to ten years
must be used if available. The more years of records used, the less the
effect fewer actual yields have. Insureds may submit one to ten years
of continuous crop years of actual yields to be used in the APH yield
calculation.
With data automation and reporting changes, actual yields will be
retained until the database contains ten crop years of actual yields.
There is no need to expand the database to include calendar years that
are not used to calculate the APH yield. Data processing changes can be
accomplished for the 1995 crop year.
6. Why a Federal Regulation?
Comment: One comment requested justification as to FCIC publishing
in the Federal Register a program (APH) that has already been
implemented by FCIC approved procedures. The comment went on to state
that, as introduced in the mid 1980's the APH program did not have its
procedures published in the Federal Register. By implementing the
program as a regulation, the comment stated that FCIC is limiting its
ability to administer the APH program as changes can no longer be
handled administratively. Any changes will be required to be published
in the Federal Register prior to implementation.
Response: The regulation provides a foundation on which the APH
program and procedures will be based. The regulation will strengthen
FCIC's and reinsured companies' ability to defend the procedures used
to determine APH yields if reconsideration, appeal, or litigation
proceedings relating to APH are pursued by insureds. The previous
unpublished procedures were not effective unless the insureds received
actual notice of program changes prior to the contract change date.
7. Base Period Section 440.51(g) and Crop Year Section 400.51(i)
Comment: Sec. 400.51(g), (i)--Three objections to the definition of
crop year and base period were stated. The base period is defined at 10
consecutive crop years. Crop year is defined as any year in which the
crop is planted. Under the regulation, the base period is no longer 10
consecutive crop years beginning with the most recent year, but would
vary from each crop and policy, and possibly from each database within
a policy. It is conceivable that a database may contain land planted to
the insured crop every other year, in such case, the base period could
stretch back 20 calendar years to obtain 10 crop years.
Response: Crop year as defined, benefits producers who rotate
different crops, rotate the same crop on different units, or who only
occasionally plant the insured crop. For example, if an insured has
three consecutive crop years of actual records on a unit: 1984, 1988,
and 1993, by using crop year as defined in the regulation, all three
actual yields will be retained in the database for the 1995 crop year.
If the crop is not planted in 1994, 100 percent of the T-Yield will be
used as the fourth yield when calculating the APH yield. The more years
of experience in the database, the more reliable a yield determination
can be made. Requiring only 10 consecutive calendar years of records
may result in a yield determination which does not adequately reflect
the farm history.
Comment: A comment was received recommending deleting the last
sentence of Sec. 400.51 (i) which states, ``If the insured is prevented
from planting all of his acreage in the county due to flood and does
not plant for harvest any other crop, FCIC will assign a yield for that
year.''
Response: FCIC agrees with this comment and has deleted the last
sentence accordingly.
8. Section 400.51(m) New Producer Definition
Comment: Several comments noted that the definition of new producer
is different in the rule than the definition implemented by the ad hoc
procedures for 1994 fall crop year. The definition in the procedures
defines a new producer as a ``person who has not been actively engaged
in farming for a share of the insured crop's production in the county
for more than two years.'' The rule defines the new producer as ``a
person who has not been actively engaged in farming for a share of a
crop for more than two years.'' The rule deals with individuals who are
new to farming while procedures deal with individuals who are new to
producing the crop they wish to insure. If the proposed definition of a
``new producer'' goes into effect, very few producers will qualify as a
new producer.
Response: FCIC agrees that this definition may be too restrictive.
For example, a producer who has never raised corn would NOT be
considered a ``new producer'' for corn if he or she has raised another
crop (wheat for example) for more than two crop years. Under the
proposed regulation this producer's insurance yield for corn would be
restricted to 65 percent of the T-Yield because records are not
available for corn. A producer who has no farming experience at all
would fare much better, because as a ``new producer'' he or she will
qualify for an insurance yield based on 100 percent of the T-Yield (for
all insured crops). After further evaluation, FCIC agrees that the
``new producer'' provisions should apply to new producers of an insured
crop regardless of their production of other crops.
9. Section 400.51 Definitions
Comment: Several comments recommended technical corrections of
definitions as follows:
1. Actual Yield and Production Report--reference is made to
``insurable acres for perennial crops'' instead of ``planted acres.''
2. Approved APH Yield--the database may not always contain four
consecutive crop years (actual yields). The definition needs clarity
that the total of the yields is divided by the number of years with
yields. (Also see comments to definition of ``Crop Year.'')
3. Assigned Yield--suggest changing ``considered'' to ``handled in
the same manner as.''
4. Master Yield--indicate its availability is limited to certain
crops and counties designated by FCIC.
5. Production Report--remove ``by us'' in the first sentence.
Rewrite to include the possibility that production may be reported for
more than the one (most recent) crop year.
Response: FCIC agrees with these comments and has revised the
definitions accordingly.
10. Section 400.52 Reporting and Record Requirements
Comment: One comment suggested that the language in
Sec. 400.52(b)(1), regarding inaccurate reporting or failure to retain
acceptable records, be changed from ``may result'' or ``may be'' to
``shall be'' to eliminate any implicit option. The penalty for not
having or retaining acceptable records should be the combining of farm
units and the recalculation of the APH yield.
Response: Basic farm units must be provided irrespective of APH
records. Optional farm units are a further subdivision of basic units
and must meet separate record requirements stated in the crop policy to
qualify as separate optional units. Recalculation of the APH yield will
not always result in a lower APH yield. However, if inaccurately
reported or acceptable records are not retained for either basic or
optional units, APH yields will be recalculated. FCIC has made changes
to the regulation to address this concern that are consistent with the
crop insurance policies.
Comment: Section 400.52(b)(4)--This provision states that the
policy may be canceled and subject to false claims penalties if the
production history is not accurate. Section 400.52 (a)(3) indicates it
is acceptable not to provide complete production reports since assigned
yields are an acceptable means to maintain continuity of yield data on
file. A comment suggested that Sec. 400.52 (a)(3) and (b)(4) are in
conflict with Sec. 400.52(b)(1).
Response: FCIC does not agree that a conflict exists. However, FCIC
has clarified these provisions to more accurately reflect their intent.
Section 400.52(a)(3) allows FCIC to use previously reported production
history to calculate APH yields, if the insured does not file annual
production reports as required by the policy. Section 400.52(b)(1)
specifies that inaccurate reporting or failure to maintain acceptable
supporting records will result in the combining of optional units and
recalculation of the APH yield. Section 400.52(b)(4) is a separate
action that may be taken if an insured misrepresents or fraudulently
reports APH information.
11. Section 400.53 Submission and Accuracy of Production Reports
Comment: One comment suggested deleting Sec. 400.53(e) since it
essentially duplicates the provisions of Sec. 400.53(a).
Response: FCIC agrees with this comment and has changed the
provision accordingly.
12. Section 400.54 Qualification for Actual Production History
Coverage Program
Comment: Section 400.54(a)--One comment suggested that the first
sentence be revised because production reports for the four most recent
crop years are not required to qualify for APH. The comment also
suggested revising the last sentence because of the possibility of zero
planted years. The comment suggested employing ``. . . will occur in
the database when there are less than four actual/assigned yields in
the database.''
Response: FCIC agrees with these suggestions and has made the
appropriate changes.
Comment: One comment noted that in Sec. 400.54(a) the term ``will
be updated'' suggests that production reports are mandatory each
subsequent crop year. The comment suggested that the regulation address
the possibility that coverage may be based on 65 percent of the T/D
yield without yearly production reports.
A comment also stated that records are not mandatory, as indicated
in Sec. 400.54(b), and that insureds may have approved APH yields based
on 65 percent of the T/D-Yield if acceptable records are not available
or not provided. The comment also stated that yields from claims will
not be used (as indicated in Sec. 400.51(n)), if an insured elects not
to provide records and have the APH yield based on 65 percent of the T/
D Yield (also applies to Sec. 400.54(d)).
Response: FCIC implemented procedures for modified APH for the 1994
crop year intending to allow producers the option of basing production
guarantees on 65 percent of the T-Yield without requiring records. Not
requiring records in subsequent crop years had been criticized because
the use of loss records is perceived to be mandatory for APH purposes.
It is also viewed as not encouraging insureds to provide records.
FCIC agrees that use of loss records should be required for APH
purposes. Actual yields determined from claims for indemnities will be
used when calculating APH yields for the 1995 and succeeding crop
years. Calculation of APH yields based on 65 percent of the T-Yield
without records will be allowed only for the initial crop year of
insurance. Records will be required for subsequent crop years.
Comment: Section 400.54(d)--One comment suggested deleting the
phrase ``to compute an approved APH yield'' because it is not required
to have an actual yield for the most recent crop year to calculate an
approved APH yield. The comment also suggested deleting the phrase ``at
discretion of FCIC.''
Response: FCIC does not agree with the suggestion to delete ``to
compute an approved APH yield'' because the phrase relates to providing
actual yields (production records) in order to qualify for optional
units. However, the language has been clarified to reflect this intent.
FCIC does not agree that ``at discretion of FCIC'' should be
removed. This provision allows FCIC a degree of flexibility concerning
the impact of loss records (e.g., FCIC may need to lessen the impact a
loss record has on APH yields for a catastrophic year).
Comment: Secion 400.54(e)--One comment suggested deleting
provisions (1), (2), and (3), because the provisions are more
applicable to procedures. If not deleted, the comment suggested
inclusion of the definition ``FCIC RSO Determined Yield'' and
clarification that provisions (1), (2), and (3) apply only to category
C perennial crops, not just item (3). The comment further suggested
deleting any reference to T-yield tables in (1).
Response: FCIC does not agree that Sec. 400.54(e) (1), (2), and (3)
of the rule should be deleted. These provisions allow additional
flexibility for those situations listed. For example, T-Yields are not
published for all crops or for all counties. Therefore, the rule must
allow an alternative method to calculate approved APH yields when T-
Yields are not available. For this reason, the reference to T-Yields
should not be deleted. These provisions allow FCIC to continue APH
procedures implemented for the 1994 crop year that are consistent with
procedures used in previous crop years. The term ``FCIC RSO Determined
Yield'' is not used in the rule, so consequently, the term need not be
defined.
Comment: Section 400.54(g)--One comment suggested the following
rewrite of the last sentence to improve clarity: ``Master Yields are
based on production history from all acreage of the crop in which the
insured has an interest in the county.'' Another comment noted that the
rule consistently requires that the producer provide four years of
records in order to qualify for a Master Yield. This requirement has
hampered new sales of crop insurance which use the Master Yield
concept. Master Yields may vary drastically between landlord and tenant
on the same piece of ground due to the fact that a producer's yield is
calculated using records from all farms. The comment suggested that
FCIC work with the industry to resolve these problems.
Response: FCIC agrees with these comments and has made the
necessary changes. Regarding the concerns about Master Yields, FCIC
will not change the four-year record requirement because APH is also
available on Master Yield crops. FCIC also will base Master Yields on
the operator's records. By calculating Master Yields from the
operator's records, the same APH yield will be provided for both the
landlord and tenant. FCIC has implemented the Master Yield changes for
the 1994 crop year.
Comment: Section 400.54(h)--One comment suggested that the phrase
``whether continuous or not'' was misleading, considering the previous
emphasis on maintaining continuity of production reports. The comment
further made the following observations. If entering a yield is
intended to allow use of history prior to the break in continuity of
production reports, it should be so clarified. If intended to allow
prior history regardless of a break in continuity of insurance,
entering a yield will impose major difficulties. In conjunction with
the revision in crop year definition, this could require companies to
maintain yield history indefinitely. For example, a farmer many have
had a policy five years ago but production history may have to go back
30 or 40 calendar years to accumulate 10 crop years of actual yields.
Response: This provision does not affect the continuity
requirements applicable to annual production reports provided by the
insured. However, it does allow FCIC to use production history on file
prior to a break in continuity of insurance coverage. FCIC reserves the
latitude of implementing this provision by issuing procedures outlining
records identification (tracking) methods to correctly assign such
production. FCIC recently implemented a policyholder tracking system
based on social security/employee identification numbers and may
implement this provision in the future. Use of this procedure keeps an
insured who may have had a low APH yield from canceling insurance for
one year in order to achieve a fresh start, and thus, gain a higher
yield.
List of Subjects in 7 CFR Part 400
Actual Production History Coverage Plan, Crop Insurance.
Final Rule
Accordingly, pursuant to the authority contained in the Federal
Crop Insurance Act, as amended by the Omnibus Budget Reconciliation Act
of 1993, the Federal Crop Insurance Corporation hereby amends 7 CFR
part 400 by adding a new subpart to read as follows:
PART 400--GENERAL ADMINISTRATIVE REGULATIONS
Subpart G--Actual Production History
Sec.
400.51 Availability of actual production history program.
400.52 Definitions.
400.53 Yield certification and acceptability.
400.54 Submission and accuracy of production reports.
400.55 Qualifications for actual production history coverage
program.
400.56 Administrative appeal exhaustion.
400.57 OMB control numbers.
Subpart G--Actual Production History
Authority: 7 U.S.C. 1506, 1516.
Sec. 400.51 Availability of actual production history program.
An Actual Production History (APH) Coverage Program is offered
under the provisions contained in the following regulations:
7 CFR 401.110--Almond Endorsement
7 CFR part 405--Apple Crop Insurance
7 CFR 401.118--Canning and Processing Bean Endorsement
7 CFR part 409--Arizona-California Citrus Crop Insurance
7 CFR 401.127--Cranberry Endorsement
7 CFR part 433--Dry Beans Crop Insurance
7 CFR 401.116--Flaxseed Endorsement
7 CFR part 415--Forage Production Corp Insurance
7 CFR 401.130--Grape Endorsement
7 CFR part 455--Macadamia Nut Crop Insurance
7 CFR 401.126--Onion Endorsement
7 CFR part 447--Popcorn Crop Insurance
7 CFR part 403--Peach Crop Insurance
7 CFR 401.140--Pear Endorsement
7 CFR part 416--Pea Crop Insurance
7 CFR 401.146--Fresh Plum Endorsement
7 CFR part 422--Potato Crop Insurance
7 CFR part 450--Prune Crop Insurance
7 CFR 401.123--Safflower Seed Endorsement
7 CFR 401.133--Sugarcane Endorsement
7 CFR part 430--Sugar Beet Crop Insurance
7 CFR 401.124--Sunflower Seed Endorsement
7 CFR part 437--Sweet Corn Crop Insurance
7 CFR part 441--Table Grape Crop Insurance
7 CFR 401.129--Guaranteed Tobacco Endorsement
7 CFR 401.114--Canning and Processing Tomato Endorsement
7 CFR part 454--Guaranteed Production Plan of Fresh Market Tomato
7 CFR part 446--Walnut Crop Insurance
7 CFR part 457--Common Crop Insurance Regulations; and all special
provisions thereto unless specifically excluded by the special
provisions.
The APH program operates within limits prescribed by, and in
accordance with, the provisions of the Federal Crop Insurance Act, as
amended (7 U.S.C. 1501 et seq.), only on those crops identified in this
section in those areas where the Actuarial Table provides coverage.
Except when in conflict with this subpart, all provisions of the
applicable crop insurance contract for these crops apply.
Sec. 400.52 Definitions.
In addition to the definitions contained in the crop insurance
contract, the following definitions apply for the purposes of the APH
Coverage Program:
(a) APH--Actual Production History.
(b) Actual yield--The yield per acre for a crop year calculated
from the production records or claims for indemnities. The actual yield
is determined by dividing total production (which includes harvested
and appraised production) by planted acres for annual crops or by
insurable acres for perennial crops.
(c) Adjusted yield--The transitional or determined yield reduced by
the applicable percentage for lack of records. The adjusted yield will
equal 65 percent of the transitional or determined yield, if no
producer records are submitted; 80 percent, if records for one year are
submitted; and 90 percent, if two years of records are submitted.
(d) Appraised production--Production determined by the Agricultural
Stabilization and Conservation Service (ASCS), the FCIC, or a company
reinsured by the FCIC, that was unharvested but which reflected the
crop's yield potential at the time of the appraisal. For the purpose of
APH ``appraised production'' specifically excludes production lost due
to uninsurable causes.
(e) Approved APH yield--A yield, calculated and approved by the
verifier, used to determine the production guarantee and determined by
the sum of the yearly actual, assigned, and adjusted or unadjusted
transitional or determined yields divided by the number of yields
contained in the database. The database may contain up to 10
consecutive crop years of actual and or assigned yields. At least four
yields will always exist in the database.
(f) Assigned yield--A yield assigned by FCIC in accordance with the
crop insurance contract, if the insured does not file production
reports as required by the crop insurance contract. Assigned yields are
used in the same manner as actual yields when calculating APH yields
except for purposes of the Nonstandard Classification System (NCS).
(g) Base period--Ten consecutive crop years (except peaches, which
have a five-year base period) immediately preceding the crop year
defined in the insurance contract for which the approved APH yield is
being established (except for sugarcane, which begins the calendar year
preceding the immediate previous crop year defined in the insurance
contract).
(h) Continuous production reports--Reports submitted by a producer
for each crop year that the unit was planted to the crop and for the
most recent crop year in the base period.
(i) Crop year--Defined in the crop insurance contract, however, for
APH purposes the term does not include any year when the crop was not
planted or when the crop was prevented from being planted by an
insurable cause. For example, if an insured plants acreage in a county
to wheat one year, that year is a crop year in accordance with the
policy definition. If the land is summerfallowed the next calendar
year, that calendar year is not a crop year for the purpose of APH.
(j) Database--A minimum of four years up to a maximum of ten crop
years of production data used to calculate the approved APH yield.
(k) Determined yield (D-yield)--An estimated year for certain
crops, which can be determined by multiplying an average yield for the
crop (attained by using data available from The National Agricultural
Statistics Service (NASS) or comparable sources) by a percentage
established by the FCIC for each county.
(l) Master yields--Approved APH yields, for certain crops and
counties as initially designated by the FCIC, based on a minimum of
four crop years of production records for a crop within a county.
(m) New producer--A person who has not been actively engaged in
farming for a share of the production of the insured crop for more than
two crop years.
(n) Production report--A written record showing the insured crop's
annual production and used to determine the insured's yield for
insurance purposes. The report contains yield history by unit, if
applicable, including planted acreage for annual crops, insurable
acreage for perennial crops, and harvested and appraised production for
the previous crop years. This report must be supported by written
verifiable records, measurement of farm stored production, or by other
records of production approved by FCIC on an individual basis.
Information contained in a claim for indemnity is considered a
production report for the crop year for which the claim was filed.
(o) Production Reporting Date (PRD)--The PRD is contained in the
crop insurance contract and is the last date production reports will be
accepted for inclusion in the database for the current crop year.
(p) Transitional yield (T-Yield)--An estimated yield, for certain
crops, generally determined by multiplying the ASCS program yield by a
percentage determined by the FCIC for each county and provided on the
actuarial table to be used in the APH yield calculation process when
less than four consecutive crop years of actual or assigned yields are
available.
(q) Verifiable records--Contemporaneous records of acreage and
production provided by the insured, which may be verified by FCIC
through an independent source, and which are used to substantiate the
acreage and production that have been reported on the production
report.
(r) Verifier--A person authorized by the FCIC to calculate approved
APH yields.
(s) Yield variance tables--Tables for certain crops that indicate
unacceptable yield variations and yield trends which will require
determination of the APH yield by the FCIC.
Sec. 400.53 Yield certification and acceptability.
(a) Production reports must be provided to the crop insurance agent
no later than the production reporting date for the crop insured.
(1) Production reports must provide an accurate account of planted
acreage for annual crops or insurable acres for perennial crops, as
well as harvested and appraised production by unit.
(2) The insured must certify the accuracy of the information.
(3) Production reported for more than one crop year must be
continuous. A year in which no acreage was planted to the crop on a
unit or no acreage was planted to a practice, type, or variety
requiring an APH yield will not be considered a break in continuity.
Assigned yields, at the discretion of the FCIC, may be used to maintain
continuity of yield data of file. Production on uninsured (for those
years a crop insurance policy under the Federal Crop Insurance Act is
in effect) or uninsurable acreage (for other years of the period) will
not be used to determine APH yield unless production from such acreage
is commingled with production from insured or insurable acreage.
(b) Production reports and supporting records are subject to audit
or review to verify the accuracy of the information certified.
Production and supporting records may be reviewed and verified if a
claim for indemnity is submitted on the insured crop. The reported
yield is subject to revision, if needed, so that the claim conforms to
the records submitted at that time.
(1) Inaccurate production reports or failure to retain acceptable
records shall result in the verifier combining optional farm units and
recomputing the approved APH yield. These actions shall be taken at any
time after reporting or record discrepancies are identified and may
result in reduction of the approved APH yield for any calendar year.
(2) Records must be provided by the insured at the time of an
audit, review, or as otherwise requested, to verify that the acreage
and production certified are accurate. Records of any other person
having shares in the insured crop, which are used by the insured to
establish the approved APH yield, must also be provided upon request.
(3) In the event acreage or production data certified by two or
more persons sharing in the crop on the same acreage is different, the
verifier shall, at the verifier's discretion, determine which acreage
and production data, if any, will be used to determine the approved APH
yield. If the correct acreage and production cannot be determined, the
data submitted will be considered unacceptable by the verifier for APH
purposes.
(4) Failure of the producer to report acreage and production
completely and accurately may result in voidance of the crop insurance
contract, as well as criminal or civil false claims penalties pursuant
to applicable Federal criminal or civil statutes.
Sec. 400.54 Submission and accuracy of production reports.
(a) The insured is solely responsible for the timely submission and
certification of accurate, complete production reports to the agent.
Production reports must be provided for all planted units.
(b) Records may be requested by the FCIC, or an insurance company
reinsured by the FCIC, or by anyone acting on behalf of the FCIC or the
insurance company. The insured must provide such records upon request.
(c) The agent will explain the APH Program to insureds and
prospective insureds. When necessary, the agent will assist the insured
in preparation of production reports. The agent will determine the
adjusted or unadjusted transitional or determined yields in accordance
with Sec. 400.54(b). The agent will review the production reports and
forward them to the verifier, along with any requested and required
supporting records for determination of an approved APH yield.
(d) The verifier will determine if the certified production reports
are acceptable and calculate the approved APH yield.
Sec. 400.55 Qualification for actual production history coverage
program.
(a) The approved APH yield is calculated from a database containing
a minimum of four yields and will be updated each subsequent crop year.
The database may contain a maximum of the 10 most recent crop years and
may include actual, assigned, and adjusted or unadjusted T or D-Yields.
T or D-Yields, adjusted or unadjusted, will only occur in the database
when there are less than four years of actual and/or assigned yields.
(b) The insured may be required to provide production records to
determine the approved APH yield, if production records for the most
recent crop year are available. If acceptable records of actual
production are provided, the records must be continuous and contain at
least the most recent crop year's actual yield.
(1) If no acceptable production records are available, the approved
APH yield is the adjusted T or D-Yield (65 percent of T or D-Yield).
(2) If acceptable production records containing information for
only the most recent crop year are provided, the three T or D-Yields
adjusted by 80 percent will be used to complete the minimum database
and calculate the approved APH yield.
(3) If acceptable production records containing information for
only the two most recent crop years are provided, the two T or D-Yields
adjusted by 90 percent and the two actual yields will be used to
complete the database and calculate the approved APH yield.
(4) If acceptable production records containing information for
only the three most recent crop years are provided, the three actual
yields and one unadjusted T or D-Yield are used to complete the
database and calculate the approved APH yield.
(5) When the database contains four or more (up to ten) continuous
actual yields, the approved APH yield is a simple average of the actual
yields.
(6) New producers may have their approved APH yields based on
unadjusted T or D-Yields or a combination of actual and unadjusted T or
D-Yields.
(7) Producers who add land or new practice, types and varieties to
their farming operations and who do not have available records for the
added land, practice, types or varieties may have approved APH yields
for the added land, practice, types or varieties that are based on
adjusted or unadjusted T or D-Yields as determined by FCIC.
(8) If the producer's crop is destroyed or if it produces a low
actual yield due to insured causes of loss, the resulting average yield
may qualify for catastrophic yield adjustment according to FCIC
guidelines. APH yields qualifying for catastrophic yield adjustment may
be adjusted to mitigate the effect of catastrophic years. Premium rates
for approved APH yields, which are adjusted for catastrophic years, may
be based on the producer's APH average yield prior to the catastrophic
adjustment or such other basis as determined appropriate by FCIC.
(c) If no insurable acreage of the insured crop is planted for a
year, a production report indicating zero planted acreage will maintain
the continuity of production reports for APH record purposes and that
calendar year will not be included in the APH yield calculations.
(d) Actual yields calculated from the claim for indemnity will be
entered in the database. The resulting average yield will be used to
determine the premium rate and approved APH yield, at the discretion of
FCIC.
(e) Optional units are not available to an insured who does not
provide acceptable production reports for at least the most recent crop
year with which to calculate an approved APH yield.
(f) FCIC may determine approved APH yields for designated crops in
the following situations:
(1) If less than four years of yield history is certified and T or
D-Yields are not provided in the actuarial documents,
(2) If actual yield exceed tolerances specified in yield variance
tables, and
(3) For perennial crops:
(i) If significant upward or downward yield trends are indicated;
(ii) If tree or vine damage, or cultural practices will reduce the
production level;
(iii) if more than two percent of the trees or vines have been
removed within the last two years; or
(iv) If yield trends are evident and yields greater than the
average yield are requested by the insured.
(g) APH yields will not be approved the first insurance year on
perennial crops until an inspection acceptable to FCIC has been
performed and the acreage is accepted for insurance purposes in
accordance with the crop insurance contract.
(h) APH Master Yields may be established whenever crop rotation
requirements and land leasing practices limit the yield history
available. FCIC will establish crops and locations for which Master
Yields are available. To qualify, the producer must have at least four
recent continuous crop years' annual production reports and must
certify the authenticity of the production reports of the insured crop.
Master Yields are based on acreage and production history from all
acreage of the insured crop in the county in which the operator has
shared in the crop's production.
(i) FCIC may use any production report available under the
provisions of any crop insurance contract, whether continuous or not,
involving the interests of the person's insured crops in determining
the approved APH yield.
Sec. 400.56 Administrative appeal exhaustion.
The insured may appeal the approved APH yield in accordance with
the procedures contained in 7 CFR part 400, subpart J. Administrative
remedies through the appeal process must be exhausted prior to any
action for judicial review. The approved APH yield determined as a
result of the appeal process will be the yield applicable to the crop
year.
Sec. 400.57 OMB control numbers.
OMB control numbers are contained in 7 CFR part 400, subpart H.
Done in Washington, D.C., on September 8, 1994.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 94-23035 Filed 9-16-94; 8:45 am]
BILLING CODE 3410-08-M
