[Federal Register Volume 62, Number 239 (Friday, December 12, 1997)]
[Rules and Regulations]
[Pages 65313-65321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32497]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Parts 401 and 457
RIN 0563-AB03
General Crop Insurance Regulations; Hybrid Sorghum Seed
Endorsement and Common Crop Insurance Regulations; Hybrid Sorghum Seed
Crop Insurance Provisions
AGENCY: Federal Crop Insurance Corporation, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes
specific crop provisions for the insurance of hybrid sorghum seed. The
provisions will be used in conjunction with the Common Crop Insurance
Policy, Basic Provisions, which contain standard terms and conditions
common to most crops. The intended effect of this action is to provide
policy changes to better meet the needs of the insured, include the
current hybrid sorghum seed endorsement under the Common Crop Insurance
Policy for ease of use and consistency of terms, and to restrict the
effect of the current hybrid sorghum seed endorsement to the 1997 and
prior crop years.
DATES: Effective December 12, 1997.
FOR FURTHER INFORMATION CONTACT: Ron Nesheim, Insurance Management
Specialist, Research and Development, Product Development Division,
Federal Crop Insurance Corporation, United States Department of
Agriculture, 9435 Holmes Road, Kansas City, MO 64131, telephone (816)
926-7730.
SUPPLEMENTARY INFORMATION:
Executive Order No. 12866
The Office of Management and Budget (OMB) has determined this rule
to be exempt for the purposes of Executive Order No. 12866 and,
therefore, this rule has not been reviewed by OMB.
Paperwork Reduction Act of 1995
Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3507),
those collections of information have been approved by the Office of
Management and Budget (OMB) under control number 0563-0053.
Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. This rule contains no Federal
mandates (under the regulatory provisions of title II of the UMRA) for
State, local, and tribal governments or the private sector. Therefore,
this rule is not subject to the requirements of sections 202 and 205 of
the UMRA.
Executive Order No. 12612
It has been determined under section 6(a) of Executive Order No.
12612, Federalism, that this rule does not have sufficient federalism
implications to warrant the preparation of a Federalism Assessment. The
provisions contained in this rule will not have a substantial direct
effect on States or their political subdivisions, or on the
distribution of power and responsibilities among the various levels of
government.
Regulatory Flexibility Act
This regulation will not have a significant economic impact on a
substantial number of small entities. The effect of this regulation on
small entities will be no greater than on larger entities. Under the
current regulations, a producer is required to complete an application
and an 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 regulation does not
alter those requirements.
The amount of work required of the insurance companies delivering
and servicing these policies will not increase significantly from the
amount of work currently required. This rule does not have any greater
or lesser impact on the producer. 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.
[[Page 65314]]
Federal Assistance Program
This program is listed in the Catalog of Federal Domestic
Assistance under No. 10.450.
Executive Order No. 12372
This program is not subject to the provisions of Executive Order
No. 12372, which require intergovernmental consultation with State and
local officials. See the Notice related to 7 CFR 3015, subpart V,
published at 48 FR 29115, June 24, 1983.
Executive Order No. 12988
This final rule has been reviewed in accordance with Executive
Order No. 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 action against FCIC
for judicial review may be brought.
Environmental Evaluation
This action is not expected to have a significant impact on the
quality of the human environment, health, and safety. Therefore,
neither an Environmental Assessment nor an Environmental Impact
Statement is needed.
National Performance Review
This regulatory action is being taken as part of the National
Performance Review Initiative to eliminate unnecessary or duplicative
regulations and improve those that remain in force.
Background
On Monday, December 30, 1996, FCIC published a proposed rule in the
Federal Register at 61 FR 68674 to add to the Common Crop Insurance
Regulations (7 CFR part 457), a new section, 7 CFR 457.112 (Hybrid
Sorghum Seed Crop Insurance Provisions). These provisions will replace
and supersede the current provisions for insuring hybrid sorghum seed
found at 7 CFR section 401.109 and will be effective for the 1998 and
succeeding crop years. This rule also amends section 401.109 to
restrict its effect to the 1997 and prior crop years.
Following publication of the proposed rule, the public was afforded
60 days to submit written comments. A total of 36 comments were
received from reinsured companies and an insurance service
organization. The comments received, and FCIC's responses, follow:
Comment: A reinsured company and an insurance service organization
believed that the calculation sequence in the definition of ``amount of
insurance per acre'' formula should be revised to match the order shown
in the Special Provisions. The commenter stated that in the Special
Provisions, multiplication by the price election is not in the proper
sequence. Amount of insurance per acre is the county yield, multiplied
by the factor for the coverage level selected, multiplied by the price
election selected by the producer less any minimum guaranteed payment.
Response: FCIC has revised and clarified the definition to show the
proper calculation. Since the calculation is in the Crop Provisions, it
will be removed from the Special Provisions.
Comment: An insurance service organization suggested that the
definition of ``female parent plant'' may have to be changed because
some companies have started experimenting with female sterile plants
from which the stamen may not have to be removed.
Response: FCIC has revised the definition to accommodate those
instances where the parent plants are rendered male sterile by means
other than stamen removal.
Comment: A reinsured company and an insurance service organization
suggested that the definition of ``interplanting'' be revised to match
its use in the Special Provisions. Interplanting is listed as a
separate type with a different county yield than standard planting.
Response: The Special Provisions uses the term ``interplanting''
and the Crop Provisions uses the term ``interplanted,'' and the terms
have different meanings. To avoid any confusion between these terms,
FCIC will change the reference from ``interplanting'' to ``non-standard
planting'' in the Special Provisions.
Comment: A reinsured company suggested that in the definition of
``irrigated practice,'' the words ``and quality'' be added after the
words ``* * * providing the quantity.''
Response: Water quality is important. However, there are no clear
criteria regarding the quality of water necessary to produce a crop.
The highly variable factors involved would make such criteria difficult
to develop and administer. The provisions regarding good farming
practices can be applied in situations in which the insured failed to
exercise due care and diligence in the application of irrigation water.
No change has been made.
Comment: An insurance service organization suggested adding, in the
definition of ``non-seed amount,'' the phrase ``rejected for seed
purposes'' or something similar after the first reference to ``non-seed
production'' for clarification.
Response: FCIC has revised the definition and section 12 to clarify
that non-seed production is production that does not qualify as seed
production because of inadequate germination.
Comment: A reinsured company and an insurance service organization
suggested that the definition of ``planted acreage'' be amended to
require that the male and female parent plants be planted in accordance
with the production management practices of the seed company.
Response: The definition of ``planted acreage'' is broad enough to
permit planting in accordance with practices of the seed company. The
requirement that parent plants be planted in accordance with the
production management practices of the seed company is more appropriate
in sections 7 and 10 regarding insured crop and causes of loss, and
those provisions have been revised accordingly.
Comment: A reinsured company and an insurance service organization
suggested that a conflict exists between the definition of ``sample''
and ``inadequate germination'' because the germination rate is
determined by using a certified seed test on clean seed, not field run
seed.
Response: There is no conflict between the terms. The sample must
be at least 3 pounds of field run seed. The germination rate is based
on the amount of clean seed obtained from that sample. No change has
been made.
Comment: An insurance service organization asked why a seed company
must now be a corporation (previously defined as a ``business
enterprise''), and if there are any legitimate seed companies that are
not corporations.
Response: A seed company need only be a corporation if the seed
company is also the producer. To cover all other situations, FCIC has
changed ``a corporation'' to ``a business enterprise'' in the
definition of seed company.
Comment: An insurance service organization suggested that section
2(a) be changed to read ``. . . a basic unit, as defined in section 1
of the Basic Provisions, may be divided . . .'' instead of ``(basic
unit)'' at the end of the earlier phrase.
Response: All definitions and most provisions common to most crops
with respect to units have been deleted and moved to the Basic
Provisions.
Comment: A reinsured company and an insurance service organization
stated that the provisions contained in section 2(e)(1), which require
the insured to keep records by optional unit for optional units to
apply, conflict with
[[Page 65315]]
section 3(b) which correctly indicates that production reporting
requirements do not apply to this crop. In most instances the sorghum
seed is harvested and hauled directly to the seed companies' processing
facilities. The seed company maintains records of planted acreage and
harvested production and provides all of the yield records used by the
FCIC Regional Service Office (RSO) to establish the approved yields.
All references to the insured maintaining records by optional unit
should not be a requirement since this is maintained at the seed
company level. The historical yield of the producer's sorghum seed is
not used to establish the amount of insurance as stated in section
2(e)(1). The amount of insurance is based on the county yield, coverage
level and price elected and any minimum guaranteed payment.
Response: The insured must have verifiable records of planted
acreage and production for each optional unit for at least the ``. . .
last crop year used to determine the amount of insurance.'' This
requirement should not be removed simply because the seed company
maintains those records. In order to protect the integrity of the
program, FCIC must be able to verify the accuracy of the guarantee for
each unit. If the producer cannot provide the records for each optional
unit, they will be combined in basic units. The insured can obtain the
necessary records from the seed company. These provisions have been
moved to the Basic Provisions and deleted from these Crop Provisions.
Comment: An insurance service organization suggested that the
opening phrase of section 2(e)(4) ``Each optional unit must meet one or
more of the following criteria, as applicable:'' Is not necessary, and
may actually cause confusion, since this crop has only one method for
optional unit division (by section or other legal description). Perhaps
section (e)(4) should start with ``Each optional unit is located in a
separate legally identified section. . . .''
Response: All relevant changes have been made to the Basic
Provisions and those provisions deleted in these Crop Provisions.
Comment: A reinsured company was concerned about the requirement
that the producer must meet all the requirements in section 6. They
stated that these requirements should not be mandatory for every
acreage report.
Response: The information required in the acreage report is
necessary to establish liability, premium, and insurability of the
acreage. No change has been made.
Comment: A reinsured company and an insurance service organization
mentioned that in section 6(a), each individual producer is the named
insured under this program and may not know the type or variety of
hybrid. The seed companies provide the seed and the producer grows it.
Seed companies do not want this information going any further than
necessary while still meeting the requirements of the MPCI program.
This information is needed only in the event of a claim and can be
obtained from the seed company as needed at that time. The commenter
believes collection of this information should be an option since the
insurance provider may want to capture it in certain instances but not
for all insureds. Therefore, this should be an option, not mandatory as
it would be with the word ``must'' in the proposed language.
Response: The reporting requirement by type or variety must be
maintained for rating purposes and to determine liability and premium
for the unit. Such information cannot be obtained only at the time of
loss. It is the responsibility of the producer to provide the
information, which should be contained in the hybrid sorghum seed
processor contract. No change has been made.
Comment: A reinsured company and an insurance service organization
mentioned that section 6(b) requires that acreage occupied by the male
parent plants be reported. They realize it is common for other crops to
obtain all insurable and uninsurable acreage of the crop. However, this
stipulation to capture the total acreage occupied by the male parent
plants is an unnecessary and burdensome requirement for hybrid sorghum
seed. The commenter suggested that this should only be determined in
the event of a claim. A number of seed companies require that the male
acres be destroyed after pollination.
Response: The requirement to report any acreage occupied by male
parent plants is necessary to determine the correct amount of insurance
for a unit since acres with male plants are not insurable. The amount
of insurance is determined on the Summary of Coverage so the insurance
provider cannot wait until the loss to determine insurable acreage. The
burden of determining the amount of acreage occupied by the male plant
can be minimized by mathematical calculation based on the planting
pattern of the crop. No change has been made.
Comment: A reinsured company and an insurance service organization
questioned section 6(c), which requires the insured to certify that
there is a hybrid sorghum seed processor contract and the amount of any
minimum guaranteed payment. The commenter questioned what constitutes
certification. It is their feeling that if the insured goes through the
FCIC RSO to obtain an approved yield, and upon receiving copies of this
information, this would be adequate certification that the insured has
a contract. The presumption is that the FCIC RSO would not go through
this process between the producer and the seed company if there was not
some type of contractual agreement in place. If they obtain some of
this information directly from the seed company it would also
constitute certification as the seed company would not provide this
information if a contract was not in place. If this does not constitute
certification for the purposes of having a contract then they have some
concerns as to what additional requirements must be met.
Response: The certification requirement is satisfied by a written
statement on the acreage report, signed by the producer, that such a
contract exists. In many cases, the RSO provides an approved yield for
a variety, not specifically for individual producers. Since the
processor contract is a condition of insurance, the insurance provider
must have some assurance that a contract exists. Receipt of an approved
yield from the RSO is not evidence of a contract between the processor
and the producer. No change has been made.
Comment: An insurance service organization asked if all the
exceptions in section 7(a)(4)(I)-(iv) should be required by written
agreement. For example, the commenter questioned why acreage with
female and male parent plants in the same row would ever be insurable.
Perhaps the phrase ``unless allowed'' should be removed from item (4)
and inserted at the specific items where it is actually possible.
Response: Current planting practices do not allow male and female
plants in the same row. However, acceptable planting practices may
change and the provision must allow a certain amount of flexibility to
cover such changes. No change has been made.
Comment: Reinsured companies and an insurance service organization
questioned why section 7(c) requires the seed company to be a
corporation. The commenters also questioned whether there could be
other acceptable legal entities that could conduct business as a seed
company, and if the requirement in section 7(c)(1) is necessary, since
``seed company'' is a defined term.
Response: In most cases, a seed company need not be a corporation
and FCIC has changed the requirement for a
[[Page 65316]]
seed company from a ``corporation'' to a ``business enterprise'' in the
definition. However, to protect the integrity of the program, the seed
company must be a corporation if the seed company is also the producer.
FCIC has added a provision in the definition to require seed companies
that are also the insured to be a corporation.
Comment: A reinsured company and an insurance service organization
noted that section 7(c)(3) states that if sales records are not
available from a seed company who is also the insured, the crop could
be insured under the coarse grains policy, not the hybrid sorghum seed
policy. Yield potential for sorghum seed is lower than that for
commercial sorghum, so this would be a questionable move.
Response: FCIC agrees that hybrid sorghum seed is best suited for
insurance under the hybrid sorghum seed policy, but records must be
provided to assure that the person seeking insurance is a bona-fide
producer of hybrid sorghum seed. If the crop is insured under the
Coarse Grains Crop Provisions, the approved yield would be derived from
grain sorghum production records of the processor for the particular
type or variety. The last sentence of section 7(c)(3) has been revised
to allow such insurance by written agreement.
Comment: An insurance service organization asked if it is necessary
that the phrase ``Of the insured crop'' be specified in section 8(c)
but not for sections 8(a) or 8(b).
Response: FCIC has clarified the provision. Further, since damage
to the male plant could also necessitate replanting, FCIC has modified
section 8(c) to include both male and female parent plants.
Comment: An insurance service organization stated that the phrase
``insurance attaches after'' in section 9(a) creates an ambiguity with
respect to when insurance attaches. The commenter suggested that the
term ``after'' could be changed to ``once'' (or ``upon completion of
planting:'') and then delete ``is completely planted'' from items (1)
and (2).
Response: Section 9(a) has been clarified.
Comment: A reinsured company and an insurance service organization
stated that the provisions in section 11(a) stipulate that any
representative samples must consist of one complete planting pattern
the entire length of the field if the acreage will not be harvested.
The commenters prefer that each representative sample be one complete
pattern which is long enough to provide a \1/100\ acre sample, and that
these be at various representative areas of the field rather than the
entire length of the field. This would be consistent with the appraisal
methods specified in the loss adjustment procedures.
Response: More than one representative sample may be required by
the insurance provider, and such samples may be in different parts of
the field. However, by having a strip the entire length of the field,
the loss adjuster can choose the areas to be sampled and is not
restricted to the crop the insured chose to leave for this purpose.
This permits a more accurate appraisal. Further, it would be difficult
for the person harvesting the crop to know what constitutes \1/100\ of
an acre. No change has been made.
Comment: An insurance service organization suggested that since the
Basic Provisions state that the term ``representative sample'' will be
further defined in the Crop Provisions, it should be included in
section 1 with the other definitions (as in the 1988-CHIAA 797) so the
term would be more easily located.
Response: The requirement for representative samples is substantive
and, therefore, should not be in the definition section. The Basic
Provisions are revised to amend the definition to state ``as specified
in the Crop Provisions.''
Comment: A reinsured company and an insurance service organization
suggested the requirement in section 11(b)(2) that the insured provide
a completed copy of the seed processor contract in the event of a loss
should be optional, not mandatory. If an insurance company insures all
of a seed company's producers, the company knows each producer has a
seed contract, and should not have to obtain a copy from each one. The
insurance company will have a copy of the base contract for each seed
company and nothing is gained by having to obtain the exact contract in
effect for each producer. If some producers insured with an insurance
company grow hybrid sorghum seed for various seed companies (not all of
their producers are insured with them) there may be some benefit in
obtaining a copy of their contract.
Response: Since not all producers may receive the same contract
terms, the insurance company must verify contract terms, unless it has
been determined that the contract provided by the seed company is used
for all its producers without any waivers or amendments. Section
11(b)(2) has been revised accordingly.
Comment: An insurance service organization suggested that the
provisions in section 12(e)(1)(v) (redesignated section 12(d)(1)(v))
should not allow the insured to defer settlement and wait for a later,
generally lower, appraisal, especially on crops that have a short
``shelf life.''
Response: A later appraisal will only be necessary if the insurance
provider and the insured do not agree on the appraisal or the insurance
provider believes the crop needs to be carried further. The producer
must continue to care for the crop. If the producer does not care for
the crop, the original appraisal will be used. No change will be made.
Comment: An insurance service organization stated that section
12(e)(2) (redesignated 12(d)(2)), counts harvested production delivered
to the seed company, whereas section 6(c)(1)(a) of the 1998-CHIAA 797
counts harvested production delivered to and accepted by the seed
company. The commenter questioned whether this is a change, or should
this provision be interpreted to mean that production is not considered
delivered until it is accepted.
Response: This is a change. Section 12(d)(2) provides that seed
production to be counted includes mature harvested production that is
delivered as commercial hybrid sorghum seed to the seed company stated
in the hybrid sorghum seed processor contract, regardless of quality,
unless the production has inadequate germination.
Comment: A reinsured company and an insurance service organization
stated that section 12(g)(2) (redesignated section 12(f)(2)) requires a
company to work the claim in the same manner as the records of the seed
company provided for establishing the approved yield. Since the
approved yield is calculated by the RSO, the insurance provider must be
notified when a seed company has its own method for converting the
production.
Response: In order to ensure the accuracy of any claim, the same
moisture and weight per bushel must be used to calculate the amount of
insurance and the production to count. The FCIC procedure will specify
that the seed company will provide its conversion chart with the
production records. FCIC will provide the conversion chart to the
insurance provider when the moisture or weight used to determine a
bushel differs from the definition stated in the policy.
Comment: A reinsured company and an insurance service organization
suggested that the substitute crop provisions under Prevented Planting
[[Page 65317]]
coverage should be eliminated, as indicated in other comments being
submitted and as being discussed separately.
Response: The prevented planting provisions have been moved to the
Basic Provisions and FCIC has revised these provisions to remove the
substitute crop provisions.
Comment: A reinsured company understands that FCIC plans to revise
prevented planting for 1998 and assumes that these new provisions will
be incorporated into this policy.
Response: The prevented planting provisions have been moved to the
Basic Provisions and will be applicable to this policy.
Comment: An insurance service organization suggested that section
13(d)(2) may be confusing because a sentence that states ``The unit
consists of 185 acres * * *'' is followed immediately by a sentence
that states ``The unit consists of 150 acres * * *''. The example would
be clearer if it stated ``The unit consists of 150 acres of female
parent plants of the same type and variety (an additional 35 acres are
occupied by the male parent plants, which are not insurable). Of the
150 acres, 50 acres were planted * * *'' or some similar statement. At
the least, the latter should read ``The unit consists of 150 insurable
acres * * *''.
Response: The late and prevented planting provisions common to most
crops have been moved to the Basic Provisions.
Comment: An insurance service organization suggested that instead
of specifying years in section 13(d)(4)(ii), it could be written with
references to ``this year'' and ``the following year'' so it wouldn't
look outdated in subsequent years. Also, consider changing ``for the
purpose of the preceding sentence'' to ``for this purpose''.
Response: The late and prevented planting provisions common to most
crops are deleted and moved to the Basic Provisions.
Comment: A reinsured company and an insurance service organization
suggested that section 13(d)(5)(ii) should be changed since hybrid
sorghum seed is a crop grown under contract with a seed company, which
dictates the number of acres to be planted. The maximum eligible
acreage for prevented planting coverage should be contracted acres,
regardless of how many acres may have been planted in previous years.
Response: FCIC has clarified the provisions in the Basic
Provisions.
Comment: An insurance service organization suggested that in
section 13(d)(5)(iv)(E), the sentence should begin with ``On which * *
*'' (Or at least the first word should be capitalized to match the
other items).
Response: FCIC has revised the provision appropriately in the Basic
Provisions.
Comment: An insurance service organization questioned whether is it
necessary to keep repeating ``guarantee, or amount of insurance'' as
alternatives to a ``prevented planting indemnity'' in section
13(d)(5)(iv)(F).
Response: The prevented planting guarantee; amount of insurance;
and indemnity refer to different amounts, and all terms are necessary.
No change has been made in the Basic Provisions.
Comment: Reinsured companies and an insurance service organization
recommended deleting section 14(d). Written agreements should not be
limited to one year. Rather, such agreements should be valid for the
period stated in the agreement. In most cases, written agreements
should be continuous, as is the case with the policy.
Response: Written agreements are, by design, temporary and intended
to address unusual circumstances. If the conditions that require a
written agreement exists for multiple crop years, the policy or Special
Provisions should be amended to accommodate the conditions. The written
agreement provisions have been deleted and moved to the Basic
Provisions.
Comment: An insurance service organization suggested that the
provisions contained in section 14(e) be combined with the provisions
in section 14(a).
Response: Section 14(e) is intended to be a limited exception, not
the rule, affecting only those cases in which conditions discovered
after the sales closing date make a written agreement necessary.
Therefore, these provisions should be kept separate. No change has been
made in the Basic Provisions.
Comment: A reinsured company was concerned about many of the
mandatory requirements added to these provisions. In its view, most of
these requirements are unnecessary. The issues of reduced expense
reimbursement and simplification should be considered prior to
finalizing these provisions. This policy proposes to increase the
expense of writing hybrid sorghum seed along with the added complexity
involved from the additional collection requirements.
Response: FCIC understands the concerns of this commenter. These
Crop Provisions were revised to reduce program vulnerabilities and make
the insuring language more precise. FCIC has attempted to minimize the
additional requirements imposed upon the policyholder, the reinsured
company, and the seed company. All mandatory information is required to
fairly and properly administer the policy.
In addition to the changes described above, FCIC has made minor
editorial changes and has amended the following provisions:
1. The paragraph preceding section 1 has been revised to refer to
the Catastrophic Risk Protection Endorsement for the purpose of
clarification.
2. The definitions of ``days,'' ``FSA,'' ``final planting date,''
``interplanted,'' ``irrigated practice,'' ``late planted,'' ``late
planting period,'' and ``timely planted'' have been deleted and moved
to the Basic Provisions. Also, deleted the definition of ``seed
amount.''
3. The definitions of ``adjusted yield,'' ``approved yield,''
``county yield,'' ``dollar value of insurance,'' ``hybrid sorghum seed
processor contract,'' and ``insurable interest'' have been revised for
clarification.
4. A definition of ``coverage level factor'' has been added for
clarification.
5. The definitions of ``good farming practices,'' ``planted
acreage,'' and ``prevented planting'' have been revised to delete the
provisions moved to the Basic Provisions.
6. The definition of ``practical to replant'' has been revised to
clarify that it will not be considered practical to replant unless
production from the replanted acreage can be delivered under the terms
of the hybrid sorghum seed processor contract, or the seed company
agrees to accept such production.
7. Section 2 has been revised to delete those provisions that have
been moved to the Basic Provisions, and to clarify the unit structure
for hybrid sorghum seed when the hybrid sorghum seed processor contract
specifies an amount of production to be delivered. Also, for processor
contracts that stipulate a number of acres to be planted, the
provisions in the Basic Provisions that allow optional units by
irrigated and non-irrigated practices are not applicable.
8. Section 7(d) has been added to allow the insured crop that is
under contract with different seed companies to be insured under
separate policies with different insurance providers provided all
acreage of the insured crop in the county is insured.
9. Section 8(c) has been revised for clarification.
10. In section 10(b)(4), the requirement that the crop be inspected
and the loss appraised before harvest is
[[Page 65318]]
completed has been deleted to be consistent with section 11(b)(1).
11. Section 12(c) has been revised for clarification. Also, an
example of an indemnity calculation has been added for illustration.
Section 12(d) is deleted since it was redundant with section 12(e) and
the following section redesignated accordingly.
12. In section 12(e)(1)(I), as redesignated, adjusted yield has
been changed to amount of insurance per acre.
13. In section 12(f)(2), as redesignated, the last sentence has
been revised to clarify that records of the seed company will only be
used to determine the amount of production to count if the production
is calculated on the same basis as that used to determine the approved
yield.
14. Add provision specifying the prevented planting coverage
available.
Good cause is shown to make this rule effective upon publication in
the Federal Register. This rule improves the hybrid sorghum seed
insurance coverage and brings it under the Common Crop Insurance
Policy, Basic Provisions for consistency among policies. The earliest
contract change date that can be met for the 1998 crop year is December
31, 1997. It is, therefore, imperative that these provisions be made
final before that date so that reinsured companies and insureds may
have sufficient time to implement these changes. Therefore, public
interest requires the agency to act immediately to make these
provisions available for the 1998 crop year.
List of Subjects in 7 CFR Parts 401 and 457
Hybrid sorghum seed endorsement, Crop insurance, Hybrid sorghum
seed.
Final Rule
Accordingly, for the reasons set forth in the preamble, the Federal
Crop Insurance Corporation hereby amends 7 CFR parts 401 and 457 as
follows:
PART 401--GENERAL CROP INSURANCE REGULATIONS--REGULATIONS FOR THE
1988 THROUGH 1997 CROP YEARS
1. The authority citation for 7 CFR part 401 continues to read as
follows:
Authority: 7 U.S.C. 1506(l), 1506(p).
2. The introductory text of Sec. 401.109 is revised to read as
follows:
Sec. 401.109 Hybrid sorghum seed endorsement.
The provisions of the Hybrid Sorghum Seed Endorsement for the 1988
through the 1997 crop years are as follows:
* * * * *
PART 457--COMMON CROP INSURANCE REGULATIONS; REGULATIONS FOR THE
1994 AND SUBSEQUENT CONTRACT YEARS
3. The authority citation for 7 CFR part 457 continues to read as
follows:
Authority: 7 U.S.C. 1506(l), 1506(p).
4. Section 457.112 is added to read as follows:
Sec. 457.112 Hybrid sorghum seed crop insurance provisions
The Hybrid Sorghum Seed Crop Insurance Provisions for the 1998 and
succeeding crop years are as follows:
FCIC policies:
United States Department of Agriculture
Federal Crop Insurance Corporation
Reinsured policies:
(Appropriate title for insurance provider)
Both FCIC and reinsured policies:
Hybrid Sorghum Seed Crop 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, (Sec. 457.8) with (1) controlling (2), etc.
1. Definitions.
Adjusted yield. An amount determined by multiplying the county
yield by the coverage level factor.
Amount of insurance per acre. A dollar amount determined by
multiplying the adjusted yield by the price election you select and
subtracting any minimum guaranteed payment, not to exceed the total
compensation specified in the hybrid sorghum seed processor
contract. If your hybrid sorghum seed processor contract contains a
minimum guaranteed payment that is stated in bushels, we will
convert that value to dollars by multiplying it by the price
election you selected.
Approved yield. In lieu of the definition contained in the Basic
Provisions, an amount FCIC determines to be representative of the
yield that the female parent plants are expected to produce when
grown under a specific production practice. FCIC will establish the
approved yield based upon records provided by the seed company and
other information it deems appropriate.
Bushel. Fifty-six pounds avoirdupois of the insured crop.
Certified seed test. A warm germination test performed on clean
seed according to specifications of the ``Rules for Testing Seeds''
of the Association of Official Seed Analysts.
Commercial hybrid sorghum seed. The offspring produced by
crossing a male and female parent plant, each having a different
genetic character. This offspring is the product intended for use by
an agricultural producer to produce a commercial field sorghum crop
for grain or forage.
County yield. An amount contained in the actuarial documents
that is established by FCIC to represent the yield that a producer
of hybrid sorghum seed would be expected to produce if the acreage
had been planted to commercial field sorghum.
Coverage level factor. A factor contained in the Special
Provisions to adjust the county yield for commercial field sorghum
to reflect the higher value of hybrid sorghum seed.
Dollar value per bushel. An amount that determines the value of
any seed production to count. It is determined by dividing the
amount of insurance per acre by the result of multiplying the
approved yield by the coverage level percentage, expressed as a
decimal.
Female parent plants. Sorghum plants that are grown for the
purpose of producing commercial hybrid sorghum seed and are male
sterile.
Field run. Commercial hybrid sorghum seed production before it
has been processed or screened.
Good farming practices. In addition to the definition contained
in the Basic Provisions, good farming practices include those
practices required by the hybrid sorghum seed processor contract.
Harvest. Combining, threshing or picking of the female parent
plants to obtain commercial hybrid sorghum seed.
Hybrid sorghum seed processor contract. An agreement executed in
writing between the hybrid sorghum seed crop producer and a seed
company containing, at a minimum:
(a) The producer's promise to plant and grow male and female
parent plants, and to deliver all commercial hybrid sorghum seed
produced from such plants to the seed company;
(b) The seed company's promise to purchase the commercial hybrid
sorghum seed produced by the producer; and
(c) Either a fixed price per unit of measure (bushels,
hundredweight, etc.) of the commercial hybrid sorghum seed or a
formula to determine the value of such seed. Any formula for
establishing the value must be based on data provided by a public
third party that establishes or provides pricing information to the
general public, based on prices paid in the open market (e.g.,
commodity futures exchanges), to be acceptable for the purpose of
this policy.
Inadequate germination. Germination of less than 80 percent of
the commercial hybrid sorghum seed as determined by using a
certified seed test.
Insurable interest. Your share of the financial loss that occurs
in the event seed production is damaged by a cause of loss specified
in section 10.
Local market price. The cash price offered by buyers for any
production from the female parent plants that is not considered
commercial hybrid sorghum seed under the terms of this policy.
Male parent plants. Sorghum plants grown for the purpose of
pollinating female parent plants.
Minimum guaranteed payment. A minimum amount (usually stated in
dollars or bushels) specified in your hybrid sorghum
[[Page 65319]]
seed processor contract that will be paid or credited to you by the
seed company regardless of the quantity of seed produced.
Non-seed production. Production that does not qualify as seed
production because of inadequate germination.
Planted acreage. In addition to the definition contained in the
Basic Provisions, the insured crop must be planted in rows wide
enough to permit mechanical cultivation, unless provided by the
Special Provisions or by written agreement.
Planting pattern. The arrangement of the rows of the male and
female parent plants in a field. An example of a planting pattern is
four consecutive rows of female parent plants followed by two
consecutive rows of male parent plants.
Practical to replant. In addition to the definition contained in
the Basic Provisions, practical to replant applies to either the
female or male parent plant. It will not be considered practical to
replant unless production from the replanted acreage can be
delivered under the terms of the hybrid sorghum seed processor
contract, or the seed company agrees that it will accept the
production from the replanted acreage.
Prevented planting. In addition to the definition contained in
the Basic Provisions, prevented planting applies to the female and
male parent plants. The male parent plants must be planted in
accordance with the requirements of the hybrid sorghum seed
processor contract to be considered planted.
Sample. For the purpose of the certified seed test, at least 3
pounds of randomly selected field run sorghum seed for each type or
variety of commercial hybrid sorghum seed grown on the unit.
Seed company. A business enterprise that possesses all licenses
for marketing commercial hybrid sorghum seed required by the state
in which it is domiciled or operates, and which possesses facilities
with enough storage and drying capacity to accept and process the
insured crop within a reasonable amount of time after harvest. If
the seed company is the insured, it must also be a corporation.
Seed production. All seed produced by female parent plants with
a germination rate of at least 80 percent as determined by a
certified seed test.
Type. Grain sorghum, forage sorghum, or sorghum sudan parent
plants.
Variety. The name, number or code assigned to a specific genetic
cross by the seed company or the Special Provisions for the insured
crop in the county.
2. Unit Division.
(a) For any processor contract that stipulates the amount of
production to be delivered:
(1) In lieu of the definition of ``basic unit'' contained in the
Basic Provisions, a basic unit will consist of all acreage planted
to the insured crop in the county that will be used to fulfill a
hybrid sorghum seed processor contract;
(2) There will be no more than one basic unit for all production
contracted with each processor contract;
(3) In accordance with section 12, all production from any basic
unit in excess of the amount under contract will be included as
production to count if such production is applied to any other basic
unit for which the contracted amount has not been fulfilled; and
(4) Optional units will not be established.
(b) For any processor contract that stipulates a number of acres
to be planted, the provisions in the Basic Provisions that allow
optional units by irrigated and non-irrigated practices are not
applicable.
3. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
(a) In addition to the requirements of section 3 of the Basic
Provisions, you may select only one price election for all the
hybrid sorghum seed in the county insured under this policy unless
the Special Provisions provide different price elections by type or
variety, in which case you may elect one price election for each
hybrid sorghum seed type or variety designated in the Special
Provisions. The price election you choose for each type or variety
must have the same percentage relationship to the maximum price
offered by us for each type or variety. For example, if you choose
100 percent of the maximum price election for one specific type or
variety, you must also choose 100 percent of the maximum price
election for all other types or varieties.
(b) The production reporting requirements contained in section 3
of the Basic Provisions are not applicable to this contract.
4. Contract Changes.
In accordance with section 4 of the Basic Provisions, the
contract change date is November 30 preceding the cancellation date.
5. Cancellation and Termination Dates.
In accordance with section 2 of the Basic Provisions, the
cancellation and termination dates are March 15.
6. Report of Acreage.
In addition to the requirements of section 6 of the Basic
Provisions, you must:
(a) Report by type and variety, the location and insurable
acreage of the insured crop;
(b) Report any acreage that is uninsured, including that portion
of the total acreage occupied by male parent plants; and
(c) Certify that you have a hybrid sorghum seed processor
contract and report the amount, if any, of any minimum guaranteed
payment.
7. Insured Crop.
(a) In accordance with section 8 of the Basic Provisions, the
crop insured will be all the female parent plants in the county for
which a premium rate is provided by the actuarial documents:
(1) In which you have a share;
(2) That are grown under a hybrid sorghum seed processor
contract executed before the acreage reporting date;
(3) That are planted for harvest as commercial hybrid sorghum
seed in accordance with the requirements of the hybrid sorghum seed
processor contract and the production management practices of the
seed company; and
(4) That are not (unless allowed by the Special Provisions or by
written agreement):
(i) Planted with a mixture of female and male parent seed in the
same row;
(ii) Planted for any purpose other than for commercial hybrid
sorghum seed;
(iii) Interplanted with another crop; or
(iv) Planted into an established grass or legume.
(b) An instrument in the form of a ``lease'' under which you
retain control of the acreage on which the insured crop is grown and
that provides for delivery of the crop under substantially the same
terms as a hybrid sorghum seed processor contract will be treated as
a contract under which you have an insurable interest in the crop.
(c) A commercial hybrid sorghum seed producer who is also a
commercial hybrid sorghum seed company may be able to insure the
hybrid sorghum seed crop if the following requirements are met:
(1) The seed company has an insurable interest in the hybrid
sorghum seed crop;
(2) Prior to the sales closing date, the Board of Directors of
the seed company has executed and adopted a corporate resolution
containing the same terms as an acceptable hybrid sorghum seed
processor contract. This corporate resolution will be considered a
contract under the terms of this policy;
(3) Sales records for at least the previous years' seed
production must be provided to confirm that the seed company has
produced and sold seed. If such records are not available, the crop
may be insured under the Coarse Grains Crop Provisions with a
written agreement; and
(4) Our inspection reveals that the storage and drying
facilities satisfy the definition of a seed company.
(d) Any of the insured crop that is under contract with
different seed companies may be insured under separate policies with
different insurance providers provided all acreage of the insured
crop in the county is insured. If you elect to insure the insured
crop with different insurance providers, you agree to pay separate
administrative fees for each insurance policy.
8. Insurable Acreage.
In addition to the provisions of section 9 of the Basic
Provisions, we will not insure any acreage of the insured crop:
(a) Planted and occupied exclusively by male parent plants;
(b) Not in compliance with the rotation requirements contained
in the Special Provisions or, if applicable, required by the hybrid
sorghum seed processor contract; or
(c) If either the female or male parent plants are damaged
before the final planting date and we determine that insured crop is
practical to replant but it is not replanted.
9. Insurance Period.
(a) In addition to the provisions of section 11 of the Basic
Provisions, insurance attaches upon completion of planting of:
(1) The female parent plant seed on or before the final planting
date designated in the Special Provisions, except as allowed in
section 16 of the Basic Provisions; and
(2) The male parent plant seed.
(b) In accordance with the provisions of section 11 of the Basic
Provisions, the calendar date for the end of the insurance period is
the November 30 immediately following planting.
10. Causes of Loss.
(a) In accordance with the provisions of section 12 of the Basic
Provisions, insurance is provided only against the following causes
of loss that occur during the insurance period:
[[Page 65320]]
(1) Adverse weather conditions;
(2) Fire;
(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) Wildlife;
(6) Earthquake;
(7) Volcanic eruption; or
(8) Failure of the irrigation water supply, if due to a cause of
loss contained in section 10(a) (1) through (7) that occurs during
the insurance period.
(b) In addition to the causes of loss excluded by section 12 of
the Basic Provisions, we will not insure against any loss of
production due to:
(1) The use of unadapted, incompatible, or genetically deficient
male or female parent plant seed;
(2) Frost or freeze after the date set by the Special
Provisions;
(3) Failure to follow the requirements stated in the hybrid
sorghum seed processor contract and production management practices
of the seed company;
(4) Inadequate germination, even if resulting from an insured
cause of loss, unless you have provided adequate notice as required
by section 11(b)(1); or
(5) Failure to plant the male parent plant seed at a time or in
a manner sufficient to assure adequate pollination of the female
parent plants, unless you are prevented from planting the male
parent plant seed by an insured cause of loss.
11. Duties In The Event of Damage or Loss.
(a) In accordance with the requirements of section 14 of the
Basic Provisions, you must leave representative samples of at least
one complete planting pattern of the male and female parent plant
rows that extend the entire length of each field in the unit. If you
are going to destroy any acreage of the insured crop that will not
be harvested, the samples must not be destroyed until after our
inspection.
(b) In addition to the requirements of section 14 of the Basic
Provisions:
(1) You must give us notice of probable loss at least 15 days
before the beginning of harvest if you anticipate inadequate
germination on any unit; and
(2) You must provide a completed copy of your hybrid sorghum
seed processor contract unless we have determined it has already
been provided by the seed company, and the seed company certifies
that such contract is used for all its producers without any waivers
or amendments.
12. Settlement of Claim.
(a) We will determine your loss on a unit basis. In the event
you are unable to provide separate acceptable production records:
(1) For any optional units, we will combine all optional units
for which such production records were not provided; or
(2) For any basic units, we will allocate any commingled
production to such units in proportion to our liability on the
harvested acreage for the units.
(b) You will not receive an indemnity payment on a unit if the
seed company refuses to provide us with records we require to
determine the dollar value per bushel of production for each
variety.
(c) In the event of loss or damage covered by this policy, we
will settle your claim on any unit by:
(1) Multiplying the insured acreage by its respective amount of
insurance per acre, by type and variety if applicable;
(2) Totaling the results of section 12(c)(1) if there are more
than one type or variety;
(3) Multiplying the total seed production to count (see section
12(d)) for each type and variety of commercial hybrid sorghum seed
by the applicable dollar value per bushel for that type or variety;
(4) Multiplying the total non-seed production to count (see
section 12(e)) for each type and variety by the applicable local
market price determined on the earlier of the date the non-seed
production is sold or the date of final inspection;
(5) Totaling the results of sections 12(c)(3) and 12(c)(4) by
type and variety;
(6) Subtracting the result of section 12(c)(5) from the result
of section 12(c)(1) if there is only one type or variety, or
subtracting the result of 12(c)(5) from the result of section
12(c)(2) if there are more than one type or variety; and
(7) Multiplying the result of section 12(c)(6) by your share.
For example:
You have a 100 percent share in 50 acres insured for the
development of type ``A'' hybrid sorghum seed in the unit, with an
amount of insurance per acre guarantee of $361 (county yield of 170
bushels times a coverage level factor of .867 for the 65 percent
coverage level, times a price election of $2.45 per bushel, minus
the minimum guaranteed payment of zero). Your seed production was
1,400 bushels and the dollar value per bushel was $3.47. Your non-
seed production was 100 bushels with a local market value of $2.00
per bushel. Your indemnity would be calculated as follows:
(1) 50 acres x $361=$18,050 amount of insurance guarantee;
(3) 1,400 bushels x $3.47=$4,858 value of seed production;
(4) 100 bushels of non-seed x $2.00=$200 of non-seed production;
(5) $4,858+$200=$5,058;
(6) $18,050-$5,058=$12,992; and
(7) $12,992 x 100 percent share=$12,992 indemnity payment.
You also have a 100 percent share in 50 acres insured for the
development of type ``B'' hybrid sorghum seed in the unit, with an
amount of insurance per acre guarantee of $340 (county yield of 160
bushels times a coverage level factor of .867 for the 65 percent
coverage level, times a price election of $2.45 per bushel, minus
the minimum guaranteed payment of zero). You harvested 1,200 bushels
and the dollar value per bushel for the harvested amount was $4.63.
You also harvested 200 bushels of non-seed with a market value of
$2.00 per bushel. Your indemnity would be calculated as follows:
(1) 50 acres x $361=$18,050 amount of insurance guarantee for
type ``A'' and 50 acres x $340=$17,000 amount of insurance guarantee
for type ``B'';
(2) $18,050+$17,000=$35,050 amount of insurance guarantee;
(3) 1,400 bushels x $3.47=$4,858 value of seed production for
type ``A'' and 1,200 bushels x $4.63=$5,556 value of seed production
for type ``B'';
(4) 100 bushels of non-seed x $2.00=$200 of non-seed production
for type ``A'' and 200 bushels of non-seed x $2.00=$400 of non-seed
production for type ``B''
(5) $4,858+$200+$5,556+$400=$11,014 value of production to
count;
(6) $35,050-$11,014=$24,036; and
(7) $24,036 x 100 percent share=$24,036 indemnity payment.
(d) Production to be counted as seed production will include:
(1) All appraised production as follows:
(i) Not less than the amount of insurance per acre for acreage:
(A) That is abandoned;
(B) Put to another use without our consent;
(C) That is damaged solely by uninsured causes; or
(D) For which you fail to provide acceptable production records;
(ii) Production lost due to uninsured causes;
(iii) Mature unharvested production with a germination rate of
at least 80 percent of the commercial hybrid sorghum seed as
determined by a certified seed test. Any such production may be
adjusted in accordance with section 12(f);
(iv) Immature appraised production;
(v) Potential production on insured acreage that you intend to
put to another use or abandon, if you and we agree on the appraised
amount of production. Upon such agreement, the insurance period for
that acreage will end when you put the acreage to another use or
abandon the crop. If agreement on the appraised amount of production
is not reached:
(A) If you do not elect to continue to care for the crop, we may
give you consent to put the acreage to another use if you agree to
leave intact, and provide sufficient care for, representative
samples of the crop in locations acceptable to us (The amount of
production to count for such acreage will be based on the harvested
production or appraisals from the samples at the time harvest should
have occurred. If you do not leave the required samples intact, or
fail to provide sufficient care for the samples, our appraisal made
prior to giving you consent to put the acreage to another use will
be used to determine the amount of production to count); or
(B) If you elect to continue to care for the crop, the amount of
production to count for the acreage will be the harvested
production, or our reappraisal if additional damage occurs and the
crop is not harvested; and
(2) Harvested production that you deliver as commercial hybrid
sorghum seed to the seed company stated in your hybrid sorghum seed
processor contract, regardless of quality, unless the production has
inadequate germination.
(e) Production to be counted as non-seed production will include
all harvested or mature appraised production that does not qualify
as seed production to count as specified in section 12(d). Any such
production may be adjusted in accordance with section 12(f).
[[Page 65321]]
(f) For the purpose of determining the quantity of mature
production:
(1) Commercial hybrid sorghum seed production will be:
(i) Increased 0.12 percent for each 0.1 percentage point of
moisture below 13.0 percent; or
(ii) Decreased 0.12 percent for each 0.1 percentage point of
moisture in excess of 13.0 percent.
(2) When records of commercial hybrid sorghum seed production
provided by the seed company have been adjusted to a basis of 13.0
percent moisture and 56 pound avoirdupois bushels, section 12(f)(1)
above will not apply to harvested production. In such cases, records
of the seed company will be used to determine the amount of
production to count, provided that the moisture and weight of such
production are calculated on the same basis as that used to
determine the approved yield.
13. Prevented Planting.
Your prevented planting coverage will be 60 percent of your
amount of insurance for timely planted acreage. If you have limited
or additional levels of coverage as specified in 7 CFR part 400,
subpart T, and pay an additional premium, you may increase your
prevented planting coverage to a level specified in the actuarial
documents.
Signed in Washington, D.C, on December 5, 1997.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 97-32497 Filed 12-11-97; 8:45 am]
BILLING CODE 3410-08-P
