03-19344. Common Crop Insurance Regulations; Blueberry Crop Insurance Provisions

AGENCY:

Federal Crop Insurance Corporation, USDA.

ACTION:

Proposed rule with request for comments.

SUMMARY:

The Federal Crop Insurance Corporation (FCIC) proposes to add to 7 CFR part 457 a new § 457.166 that provides for the insurance of Blueberries. The provisions will be used in conjunction with the Common Crop Insurance Policy Basic Provisions (Basic Provisions), which contain standard terms and conditions common to most crops. The intended effect of this action is to convert the blueberry pilot crop insurance program to a permanent insurance program administered by FCIC for the 2005 and succeeding crop years. In this rule the Risk Management Agency (RMA) particularly calls attention to, and solicits comments on the provisions contained in section 5, Cancellation and Termination Dates, and Section 7, Insurance Period, that were modified to accommodate year-round insurance coverage for blueberries.

DATES:

Written comments and opinions on this proposed rule will be accepted until close of business September 29, 2003 and will be considered when the rule is to be made final. The comment period for information collections under the Paperwork Reduction Act of 1995 continues through September 29, 2003.

ADDRESSES:

Interested persons are invited to submit written comments to the Director, Product Development Division, Federal Crop Insurance Corporation, United States Department of Agriculture, 6501 Beacon Drive, Stop 0812, Room 421, Kansas City, MO 64133. Comments titled “Blueberry Crop Insurance Provisions” may be sent via the Internet to “[e-mail].” 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 the above address.

FOR FURTHER INFORMATION CONTACT:

William Klein, Risk Management Specialist, Research and Development, Product Development Division, Federal Crop Insurance Corporation, at the Kansas City, MO address listed above, telephone [phone].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be Not-Significant for the purpose of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget (OMB).

Paperwork Reduction Act of 1995

Under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the collections of information for this rule have been previously approved by OMB under control number 0563-0053 through February 28, 2005.

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 the UMRA.

Executive Order 13132

The provisions contained in this rule will not have a substantial direct effect on States, the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, no consultation with States is required.

Regulatory Flexibility Act

This regulation will not have a significant economic impact on a substantial number of small entities. The availability of insurance for the current population of blueberry entities is limited to selected counties in nine pilot states that have significant blueberry production. New provisions included in this rule will not impact small entities to a greater extent than large entities. Under the Basic Provisions, every producer is required to complete an application and acreage report. If the crop is damaged or destroyed, the insured is required to give notice of loss and provide the necessary information to complete a claim for indemnity. This proposed rule does not alter those requirements. The amount of work required of insurance companies delivering and servicing these policies will not increase significantly from the amount of work currently required. Therefore, this action is determined to be exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C. 605), and no Regulatory Flexibility Analysis was prepared.

Federal Assistance Program

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

Executive Order 12372

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

Executive Order 12988

This proposed 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. The administrative appeal provisions published at 7 CFR part 11 must be exhausted before any action 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, and safety. Therefore, neither an Environmental Assessment nor an Environmental Impact Statement is needed.

Background

FCIC offered a pilot crop insurance program for blueberries beginning with the 1995 crop year in selected counties in Michigan, Mississippi, New Jersey, and North Carolina. In 1997 the pilot program was expanded to include two counties with lowbush blueberries in Maine, and in 1999 it was expanded to include five additional North Carolina counties. It was expanded to selected counties in Alabama, Florida, Georgia, and South Carolina for the 2000 crop year. For the 2002 crop year, blueberry crop insurance is available in selected counties in Alabama, Florida, Georgia, Maine, Michigan, Mississippi, New Jersey, North Carolina, and South Carolina.

The pilot program has provided a valuable risk management tool and has favorable insurance experience since the pilot program was initiated. The combined loss ratio from 1995 through the 2001 crop year has been approximately .40. The highest loss ratio for the pilot program was in 1996, at .77. Loss ratios for the other years of the pilot program were significantly lower, at .64 and below. The major causes of loss (accounting for approximately 76 percent of indemnities paid) from 1995 through 2001 were hail, freeze, frost, drought, and insufficient chilling hours.

FCIC has decided to convert the blueberry pilot program a permanent crop insurance program beginning with the 2005 crop year. To effectuate this conversion, FCIC proposes to add to the Common Crop Insurance Regulations (7 CFR part 457), a new section, 7 CFR 457.166, Blueberry Crop Insurance Provisions effective for the 2005 and succeeding crop years. The blueberry pilot program is an actual production history (APH) insurance plan of multiple peril crop insurance. Insurance is provided against the standard causes of loss such as adverse weather, fire, etc., insufficient chilling hours to effectively break dormancy, and loss of quality. Unit division is limited to basic units, unless otherwise specified in the Special Provisions of Insurance. The Special Provisions allow optional units by type for the rabbiteye and highbush types in Alabama, Florida, Georgia, North Carolina, and South Carolina.

The overall participation rate has been approximately 56 percent. The number of policies earning premiums increased 77 percent from 1995 to 2001. Under the blueberry pilot crop insurance program, 2,291 policies and approximately 151,000 acres were insured for the 1995 through 2001 crop years.

During the pilot program, modifications were made to improve the loss adjustment procedures. Policy language was also added to accommodate insuring lowbush blueberry varieties, after the first two Maine counties with lowbush blueberries were added to the pilot program in 1997.

As a result of the pilot program experience and program reviews, several changes have been made to the pilot program and are incorporated in this proposed rule. The most significant changes are as follows: (1) Modified provisions to increase the number of days for insurance to attach from 10 to 20 days to allow time for companies to complete inspections; (2) added provisions to eliminate any lapse in insurance coverage between crop years to ensure that all insurable perils are covered; (3) added provisions to specify that if the insured policy is canceled or terminated for any crop year after insurance attached for that crop year, but on or before the cancellation and termination dates, whichever is later, then insurance will not be considered to have attached for that year and no premium, administrative fee, or indemnity will be due; (4) added provisions to clarify that an insurance provider may not cancel an insured's policy when an insured cause of loss has occurred after insurance attached, but prior to the cancellation and termination date; (5) added a provision that notifies the insured that they may be required to harvest a sample that the insurance provider selects for appraisal purposes to simplify the loss adjustment process; (6) added quality adjustment provisions for determining production to count for mature blueberries, harvested or unharvested, that have been damaged to the extent the blueberries cannot be sold for fresh or processing (If damaged blueberry production is sold, the production to count is determined by dividing the price received for the damaged blueberries by the applicable price election and multiplying that factor by the production sold); (7) added provisions to reduce the indemnity for affected acreage in a unit by the percentage of premium reduction specified in the Special Provisions for frost protection equipment if the insurance provider determines that the frost protection equipment was not properly utilized or not correctly reported.

The proposed provisions will be effective for the 2005 and succeeding crop years. These provisions will replace and supersede the current unpublished provisions that insure blueberries under pilot program status.

List of Subjects in 7 CFR Part 457

• Crop insurance
• Blueberry
• Reporting and recordkeeping requirements

Proposed Rule

Accordingly, as set forth in the preamble, the Federal Crop Insurance Corporation proposes to amend 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(p).

2. Section 457.166 is added to read as follows:

§ 457.166

Blueberry crop insurance provisions.

The Blueberry Crop Insurance Provisions for the 2005 and succeeding crop years are as follows:

FCIC policies:

UNITED STATES DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

Reinsured policies:

(Appropriate title for insurance provider)

Both FCIC and reinsured policies:

Blueberry crop insurance provisions

If a conflict exists among the policy provisions, the order of priority is as follows: (1) the Catastrophic Risk Protection Endorsement, if applicable; (2) the Special Provisions; (3) these Crop Provisions; and (4) the Basic Provisions with (1) controlling (2), etc.

1. Definitions

Blueberry production—All mature harvested and appraised blueberries, excluding plant material and unsound blueberries eliminated during the inspection process by either wash or dry-line methods or field appraised in an equivalent manner, usually referred to as first net weight.

Direct marketing—Sale of the insured crop directly to consumers without the intervention of an intermediary such as a wholesaler, retailer, packer, processor, shipper or buyer. Examples of direct marketing include selling through an on-farm or roadside stand, farmer's market, or permitting the general public to enter the field for the purpose of picking the crop.

Dry-line—A process by which the blueberries are run across a “sorting belt” to allow for plant material to be blown off, the blueberries to be sized, and unsound blueberries to be removed mechanically by the belt or by hand.

Harvest—Picking mature blueberries from the bushes either by hand or machine.

Mechanical damage—Damage to the blueberries caused by machinery or tools.

Pound—Sixteen ounces avoirdupois.

Production guarantee (per acre)—The number of pounds determined by multiplying the approved yield per acre by the coverage level percentage you elect.

Prune—A cultural practice performed to increase blueberry production as follows:

(a) For lowbush blueberries, a process by which the acreage is either burned or mowed; and

(b) For all other blueberries, a process by which parts of the bush are cut off or the bush is cut back.

Unsound blueberries—Blueberry fruit that is not considered as blueberry production because it is undersized, immature, soft, overripe, damaged by insects, wildlife, disease, or mechanically damaged to the extent that the fruit is not marketable.

2. Unit Division

Notwithstanding section 34 of the Basic Provisions, blueberry acreage is limited to basic units as defined in section 1 of the Basic Provisions, unless otherwise specified in the Special Provisions.

3. Insurance Guarantees, Coverage Levels, and Prices for Determining Indemnities

In addition to the requirements of section 3 of the Basic Provisions:

(a) You may select only one price election for each blueberry type designated in the Special Provisions. The price elections you choose for each type must have the same percentage relationship to the maximum price offered by us for each type. For example, if you choose 100 percent of the maximum price election for one type, you must also choose 100 percent of the maximum price election for all other types.

(b) You must report (by type if applicable) by the production reporting date designated in section 3 of the Basic Provisions:

(1) For all types of blueberries: any damage; removal of bushes; change in practices, or any other circumstance that may reduce the expected yield below the yield upon which the insurance guarantee is based, and the number of affected acres; and

(2) For highbush and rabbiteye blueberry types:

(i) The number of bearing bushes on insurable and uninsurable acreage; and

(ii) The age of the bushes and the planting pattern.

(c) We will reduce the yield used to establish your production guarantee as necessary, based on our estimate of the effect of the following: removal of bushes; damage to bushes; changes in practices; and any other circumstance that may affect the yield potential of the insured crop. If you fail to notify us of any circumstance that may reduce your yields from previous levels, we will reduce your production guarantee as necessary at any time we become aware of the circumstance.

(d) You may not increase your elected or assigned coverage level or the ratio of your price election to the maximum price election we offer for the next year if a cause of loss that could or would reduce the yield of the insured crop is evident prior to the time you request the increase.

4. Contract Changes

In accordance with section 4 of the Basic Provisions, the contract change date is August 31 preceding the cancellation date.

5. Cancellation and Termination Dates

(a) In accordance with section 2 of the Basic Provisions, the cancellation and termination dates are November 20.

(b) If your blueberry policy is canceled or terminated by us for any crop year, in accordance with the terms of the policy, after insurance attached for that crop year, but on or before the cancellation and termination dates, whichever is later, insurance will not be considered to have attached for that crop year and no premium, administrative fee, or indemnity will be due for such crop year.

(c) We may not cancel your policy when an insured cause of loss has occurred after insurance attached, but prior to the cancellation date. However your policy can be terminated if a cause for termination contained in sections 2 or 27 of the Basic Provisions exists.

6. Insured Crop

(a) In accordance with section 8 of the Basic Provisions, the crop insured will be all the blueberries in the county for which a premium rate is provided in the actuarial documents:

(1) In which you have a share;

(2) That are grown on bush varieties that:

(i) Were commercially available when the bushes were set out; and

(ii) Are varieties adapted to the area of the following types:

(A) Highbush blueberries;

(B) Lowbush blueberries;

(C) Rabbiteye blueberries; or

(D) Other blueberry types listed on the Special Provisions.

(3) Are produced on bushes that have reached the minimum insurable age or have produced the minimum yield per acre designated in the Special Provisions; and

(4) If inspected, are considered acceptable by us.

(b) Lowbush blueberry plants must be pruned every other year to be eligible for insurance.

7. Insurance Period

(a) In accordance with the provisions of section 11 of the Basic Provisions:

(1) For the year of application, coverage begins on November 21 of the calendar year prior to the year the insured crop normally blooms, except that, if your application is received by us after November 1, insurance will attach on the twentieth day after your properly completed application is received in our local office, unless we inspect the acreage during the 20 day period and determine that it does not meet insurability requirements. You must provide any information that we require for the crop or to determine the condition of the blueberry acreage.

(2) For each crop year subsequent to the year of application, that the policy remains continuously in force, coverage begins on the day immediately following the end of the insurance period for the prior crop year. Policy cancellation that results solely from transferring an existing policy to a different insurance provider for a subsequent crop year will not be considered a break in continuous coverage.

(3) The calendar date for the end of insurance period for each crop year is, September 30 for Michigan and September 15 for all other states.

(4) Cancellation and termination provisions that pertain to the period after insurance has attached, but prior to the cancellation and termination date, are contained in section 5 of these crop provisions.

(b) In addition to the provisions of section 11 of the Basic Provisions:

(1) If you acquire an insurable share in any insurable acreage after coverage begins but on or before the acreage reporting date for the crop year, and after an inspection we consider the acreage acceptable, insurance will be considered to have attached to such acreage on the calendar date for the beginning of the insurance period. There will be no coverage of any insurable interest acquired after the acreage reporting date.

(2) If you relinquish your insurable share on any insurable acreage of blueberries on or before the acreage reporting date for the crop year, and the acreage was insured by you the previous crop year, insurance will not be considered to have attached to, and no premium or indemnity will be due for such acreage for that crop year unless:

(i) A transfer of coverage and right to an indemnity, or a similar form approved by us, is completed by all affected parties;

(ii) We are notified by you or the transferee in writing of such transfer on or before the acreage reporting date; and

(iii) The transferee is eligible for crop insurance.

8. Causes of Loss

(a) In accordance with the provisions of section 12 of the Basic Provisions, insurance is provided only against the following causes of loss that occur during the insurance period:

(1) Adverse weather conditions;

(2) Fire, unless weeds and other forms of undergrowth have not been controlled or pruning debris has not been removed from the unit;

(3) Insects, but not damage due to insufficient or improper application of pest control measures;

(4) Plant disease, but not damage due to insufficient or improper application of disease control measures;

(5) Earthquake;

(6) Volcanic eruption;

(7) An insufficient number of chilling hours to effectively break dormancy;

(8) Wildlife, unless appropriate control measures have not been taken; and

(9) Failure of the irrigation water supply, if caused by a cause of loss specified in this section that occurs during the insurance period.

(b) In addition to the causes of loss excluded in section 12 of the Basic Provisions, we will not insure against damage or loss of production due to:

(1) Failure to install and maintain a proper drainage system;

(2) Failure to harvest in a timely manner;

(3) Inability to market the blueberries for any reason other than actual physical damage to the blueberries from an insurable cause specified in this section (For example, we will not pay you an indemnity if you are unable to market due to quarantine, boycott, or refusal of any person to accept production); or

(4) Mechanical damage in excess of that normally experienced for mechanically harvested blueberries for the current crop year.

9. Duties in the Event of Damage or Loss

In addition to the requirements of section 14 of the Basic Provisions, the following will apply:

(a) You must notify us:

(1) Within 3 days of the date harvest should have started if the crop will not be harvested.

(2) Within 24 hours if any cause of loss occurs within 15 days of harvest, or when the blueberries are mature and ready for harvest or during harvest, so we can inspect the insured acreage.

(3) Within 24 hours if any cause of loss occurs during harvest, and you do not intend to complete harvesting of the crop, so that we can inspect the acreage.

(4) At least 15 days before any production from any unit will be sold by direct marketing. We will conduct an appraisal that will be used to determine your production to count sold by direct marketing. If damage occurs after this appraisal, we will conduct an additional appraisal. These appraisals, and any acceptable records provided by you, will be used to determine your production to count. Failure to give timely notice that production will be sold by direct marketing will result in an appraised amount of production to count that is not less than the production guarantee per acre if such failure results in our inability to make the required appraisal.

(5) At least 15 days prior to the beginning of harvest if you intend to claim an indemnity on any unit, as a result of previously reported damage, so that we may inspect the damaged production.

(b) You must not sell or dispose of the damaged crop until after we have given you written consent to do so. If you fail to meet the requirements of this section, and such failure results in our inability to inspect the damaged production, all such production will be considered undamaged and included as production to count.

(c) You may be required to harvest a sample, selected by us, to be used for appraisal purposes.

10. Settlement of Claim

(a) We will determine your loss on a unit basis. In the event you are unable to provide acceptable production records for any basic unit, we will allocate any commingled production to such units in proportion to our liability on the harvested acreage for each unit.

(b) In the event of loss or damage covered by this policy, we will settle your claim by:

(1) Multiplying the insured acreage for each type, if applicable, by its respective production guarantee;

(2) Multiplying each result in section 10(b)(1) by the respective price election, by type if applicable;

(3) Totaling the results in section 10(b)(2) if there is more than one type;

(4) Multiplying the total production to count for each blueberry type, if applicable, by the respective price election;

(5) Totaling the results in section 10(b)(4), if there is more than one type;

(6) Subtracting the result in section 10(b)(5) from the result in section 10(b)(3); and

(7) Multiplying the result in section 10(b)(6) by your share.

Example

You have 100 percent share in 25 acres of highbush blueberries with a production guarantee of 4,000 pounds per acre and a price election of $.45 per pound. You are only able to harvest 62,500 total pounds because adverse weather reduced the yield. Your indemnity would be calculated as follows:

(1) 25 acres × 4,000 pound production guarantee/acre = 100,000 pound total production guarantee;

(2) 100,000 pounds × $.45 price election = $45,000 guarantee;

(3) One type only, so same as (2) above $45,000;

(4) 62,500 pounds production to count × $.45 price election = $28,125 value of production to count;

(5) One type only, so same as (4) above $28,125;

(6) $45,000 − $28,125 = $16,875 loss; and

(7) $16,875 × 100 percent share = $16,875 indemnity payment.

End of Example

(c) The total production to count (in pounds) from all insurable acreage on the unit will include:

(1) All appraised production as follows:

(i) Not less than the production guarantee per acre for acreage:

(A) That is abandoned;

(B) That is sold by direct marketing if you fail to meet the requirements contained in section 9;

(C) That is damaged solely by uninsured causes; or

(D) For which you fail to provide production records;

(ii) Production lost due to uninsured causes; and

(iii) Potential production on insured acreage that you intend to abandon or no longer care for, if you and we agree on the appraised amount of production. Upon such agreement, the insurance period for that acreage will end. If you do not agree with our appraisal, we may defer the claim only if you agree to continue to care for the crop. We will then make another appraisal when you notify us of further damage or that harvest is general in the area unless you harvest the crop, in which case we will use the harvested production. If you do not continue to care for the crop, our appraisal made prior to deferring the claim will be used to determine the production to count; and

(2) All harvested production from the insurable acreage.

(3) If mature blueberries, harvested or unharvested, are damaged by an insurable cause of loss specified in section 8 of these Crop Provisions, to the extent that the blueberries can not be sold as fresh or processed blueberries, and the percent of damage to the blueberries exceeds that shown in the Special Provisions for the type, production to count for the unit or portion of a unit will be as follows:

(i) The damaged blueberries will not be counted for that acreage if the blueberries are not sold; and

(ii) The production to count for damaged blueberries that are sold will be adjusted by dividing the price received for the damaged blueberries by the applicable price election and multiplying the resulting factor times the pounds sold.

(4) If we determine that frost protection equipment, as shown on your accepted application was not properly utilized, the indemnity for the affected acreage in the unit will be reduced by the percentage reduction allowed for frost protection equipment as specified in the Special Provisions. You must, at our request, provide us records by date for each period the frost protection equipment was used.

11. Late and Prevented Planting

The late and prevented planting provisions in the Basic Provisions are not applicable.

12. Written Agreements

The written agreement provisions in the Basic Provisions are not applicable, unless provided otherwise in the Special Provisions.

Signed in Washington, DC, on July 23, 2003.

Ross J. Davidson Jr.,

Administrator, Federal Crop Insurance Corporation.