[Federal Register Volume 62, Number 95 (Friday, May 16, 1997)]
[Rules and Regulations]
[Pages 26918-26921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12837]
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DEPARTMENT OF AGRICULTURE
Farm Service Agency
7 CFR Part 1941
RIN 0560-AE99
Implementation of the Boll Weevil Eradication Loan Program
AGENCY: Farm Service Agency, USDA.
ACTION: Interim rule with request for comments.
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SUMMARY: This action is being taken to implement provisions of the
Agriculture, Rural Development, Food and Drug Administration, and
Related Agencies Appropriations Act, 1997 (Act). The Act directed the
Secretary to implement a new loan program to facilitate efforts to
eradicate, and protect eradication zones, of the boll weevil. The
intended effect is to comply with the Act, assist in boll weevil
eradication, and promote cooperation between the United States
Department of Agriculture (USDA) and State chartered organizations with
regard to boll weevil eradication.
DATES: Effective May 16, 1997. Comments must be submitted by July 15,
1997.
ADDRESSES: Submit written comments to the Director, Farm Loan Programs
Loan Making Division, Farm Service Agency, United States Department of
Agriculture, 1400 Independence Ave. SW, Washington, D.C. 20250-0522.
FOR FURTHER INFORMATION CONTACT: Michael R. Hinton, Branch Chief, Funds
Management/Direct Loans Branch, FSA. Telephone: 202-720-1472;
facsimile: 202-690-1117; or e-mail: mhinton@wdc.fsa.usda.gov
SUPPLEMENTARY INFORMATION
Executive Order 12866
This interim rule has been determined to be not significant for
purposes of Executive Order 12866 and, therefore, has not been reviewed
by the Office of Management and Budget.
Regulatory Flexibility Act
It has been determined that the Regulatory Flexibility Act is not
applicable to this program. The administration certifies that this
program will not have a significant economic impact on a substantial
number of small entities. By statute this program applies only to State
chartered non-profit organizations whose primary mission is the
eradication of the boll weevil. These loans cannot be made to small
entities or individuals. Small entity farmers may be indirectly
impacted by the program through lower producer assessments for boll
weevil eradication, but the impact will be the same for large entity
and individual producers.
Environmental Evaluation
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program''. An environmental assessment (EA)
has been completed. The EA found no significant environmental impact of
the boll weevil eradication loan program. The record of decision and
FONSI were published in the Federal Register on April 21, 1997.
Executive Order 12988
The interim rule has been reviewed in accordance with Executive
Order 12988. The provisions of this rule are not retroactive and
preempt State laws to the extent such laws are inconsistent with the
provisions of this rule. The provisions of this rule are not
retroactive. In accordance with section 212 (e) of the Department of
Agriculture Reorganization Act of 1994, before any judicial action may
be brought concerning the provisions of this rule, administrative
review under 7 CFR parts 11 and 780 must be exhausted.
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).
Unfunded Mandates
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.
L. 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. Under section 202 of the UMRA, the
Farm Service Agency (FSA) generally must prepare a written statement,
including a cost-benefit analysis, for proposed and final rules with
``Federal mandates'' that may result in expenditures to State, local,
or tribal governments, in the aggregate, or the private sector, of $100
million or more in any 1 year. When such a statement is needed for a
rule, section 205 of the UMRA generally requires FSA to identify and
consider a reasonable number of regulatory alternatives and adopt the
least costly, more cost-effective or least burdensome alternative that
achieves the objectives of the rule.
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.
Paperwork Reduction Act
The Agency has reviewed this rule to determine the applicability of
the Paperwork Reduction Act of 1995. In accordance with 5 CFR section
1320.3(c)(4), there are fewer than 10 persons or organizations from
whom a collection of information can reasonably be expected within a
12-month period. The information requirements of this program do not
impact a substantial majority of the industry, nor do they meet the
rule of general applicability. The Agency determined that the
regulatory provisions of 5 CFR part 1320 do not apply to this rule;
therefore, it was not reviewed by the Office of Management and Budget.
Background
The Boll Weevil Eradication Program is a cooperative program
between the Federal and State governments and the cotton industry. The
Animal and Plant Health Inspection Service (APHIS) provides eligible
grower organizations: (1) Equipment; (2) technical and administrative
support; and (3) cost-sharing not to exceed 30 percent of the program
costs. The portion of program costs not provided for by APHIS are paid
by the eligible grower organizations through the collection of producer
assessments. The high initial costs of eradication programs result in
levels of assessments which create significant financial hardship on
many producers.
The Act directed the Secretary to implement a new loan program to
facilitate efforts to eradicate, and protect eradication zones, of the
boll weevil. By implementing the Boll Weevil Eradication Loan Program,
FSA will provide loans to eligible grower organizations for the purpose
of spreading initial startup costs over a period of several years,
which will reduce the initial annual assessment
[[Page 26919]]
producers are required to pay. The end result will be a financially
feasible program.
The determination of whether or not an organization is an eligible
organization to receive APHIS cost share money is a determination made
solely by APHIS. FSA will rely on that determination, in part, in
determining whether or not a producer organization is an eligible
organization to receive a boll weevil eradication loan from FSA.
Because this determination is solely an APHIS determination it will be
subject to any APHIS review rights but will not be subject to any FSA
appeal rights in accordance with 7 CFR parts 11 or 780. Denial of a
boll weevil eradication loan on other bases will be subject to FSA
review rights.
The Act requires the Secretary to establish terms and conditions
including repayment schedules, interest rates, and collateral
requirements that best meet the needs of the borrowers. FSA has
established the rates, terms, and collateral requirements of this
regulation to allow for maximum flexibility. These requirements are
negotiable to a large extent, but the loan will be adequately secured.
Cotton grower organizations which are involved in eradication
programs have an urgent need for the new FSA loans. This need affects
two critical areas: existing programs, and new expansion programs for
1997.
Existing programs in Texas and the Southeast are experiencing
challenges regarding cashflow. Payroll expenses and the expense of
ordering equipment and supplies for the coming season require
significant resources immediately. These ongoing programs are not
scheduled to collect grower assessments for the 1997 season until late
spring or even mid-summer. Without the loan program to supplement APHIS
grant money, they will not be able to meet their current operating
expenses and the programs will be forced to be suspended due to a lack
of financial resources. Their cashflow needs are critical.
In addition, several new areas have conducted referenda to
determine areas of program expansion in 1997. Western Louisiana and
most of Mississippi have held affirmative referenda and are moving
toward starting their programs in the coming season. Large quantities
of capital equipment and supplies will need to be ordered immediately
to ensure delivery prior to the start of these two programs.
Any delay in obtaining FSA loans could seriously restrict current
operations and spring activities in the existing program areas. Such
delay could also cripple program expansion into new areas, and possibly
even delay program implementation for at least one year. Publication of
this rule for immediate effect without prior notice and comment as an
interim final rule, therefore, is warranted. Despite the need for the
program to be effective upon publication of this interim rule, FSA will
accept comments for a 60 day comment period after publication to
determine if the program should be subsequently modified.
List of Subjects in 7 CFR Part 1941
Loan programs/agriculture, Pesticides and pests, Cotton.
For reasons set out in the preamble, 7 CFR chapter XVIII is amended
as set forth below.
PART 1941--OPERATING LOANS
1. The authority citation for part 1941 is revised to read as
follows:
Authority: 5 U.S.C 301, 7 U.S.C. 1989, Pub. L. 104-180.
2. Subpart C is added to read as follows:
Subpart C--Boll Weevil Eradication Loan Program
Sec.
1941.970 Introduction.
1941.971 Definitions.
1941.972 [Reserved]
1941.973 [Reserved]
1941.974 [Reserved]
1941.975 Loan eligibility requirements.
1941.976 Eligible loan purposes.
1941.977 Environmental requirements.
1941.978 Equal opportunity and non-discrimination requirements.
1941.979 Other Federal, State, and local requirements
1941.980 Interest rates, terms, security requirements, and
repayment.
1941.981 Economic feasibility requirements.
1941.982 [Reserved]
1941.983 [Reserved]
1941.984 [Reserved]
1941.985 [Reserved]
1941.986 Application processing.
1941.987 Loan approval and obligation of funds.
1941.988 Funding applications.
1941.989 Loan closing.
1941.990 Loan monitoring.
1941.991 Loan servicing.
Subpart C--Boll Weevil Eradication Loan Program
Sec. 1941.970 Introduction.
The regulations of this subpart set forth the terms and conditions
under which loans are made under the Boll Weevil Eradication Loan
Program. These regulations are applicable to applicants, borrowers, and
other parties involved in making, servicing, and liquidating these
loans. The program objective is to assist producers and state
government agencies in the eradication of boll weevils from cotton
producing areas.
Sec. 1941.971 Definitions.
As used in this subpart, the following definitions apply:
APHIS means the Animal and Plant Health Inspection Service, or any
successor Agency.
Extra payment means a payment which was derived from sale of
property serving as security for a loan, such as real estate or
vehicles. Proceeds from program assessments and other normal operating
income, when remitted for payment on a loan will not be considered as
an extra payment.
FSA means the Farm Service Agency, its employees, and any successor
agency.
Non-profit corporation means a private domestic corporation created
and organized under the laws of the States in which the entity will
operate whose net earnings are not distributable to any private
shareholder or individual and which qualify under Internal Revenue
Service code.
Program subsidy account means a budget account established under
the Credit Reform provisions of the Omnibus Budget Reconciliation Act
of 1990 to cover all credit-related budgetary outlays for a specific
loan or guarantee program.
Restructure means to modify the terms of a loan. This includes
modification of the interest rate or repayment term of the loan.
Security means assets pledged as collateral to assure repayment of
a loan in the event there is a default on the loan.
Secs. 1941.972-1941.974 [Reserved]
Sec. 1941.975 Loan eligibility requirements.
(a) An eligible organization must:
(1) Meet all requirements prescribed by APHIS to qualify for cost-
share grant funds as determined by APHIS, (FSA will accept APHIS'
determination as to an organization's qualification);
(2) Have appropriate charter and legal authority as a non-profit
corporation to operate a boll weevil eradication program in any State
and biological or geographic region of any State in which it operates;
(3) Possess the legal authority to enter into contracts, including
debt instruments;
(4) Operate in an area in which producers have approved a
referendum authorizing producer assessments and in which an active
eradication or post-
[[Page 26920]]
eradication program is underway or scheduled to begin no later than
the fiscal year following the fiscal year in which the application is
submitted;
(5) Be unable to obtain, and certify in writing, that credit from
private, commercial, or cooperative sources at reasonable rates and
terms for loans for similar purposes and periods of time is not
available; and
(6) Have the legal authority to pledge producer assessments as
collateral for loans from FSA.
(b) Individual producers are not eligible for loans.
Sec. 1941.976 Eligible loan purposes.
(a) Loan funds may be used for any purpose directly related to boll
weevil eradication activities, including, but not limited to:
(1) Purchase or lease of supplies and equipment;
(2) Operating expenses, including but not limited to, travel and
office operations;
(3) Salaries and benefits;
(b) Loan funds may not be used to pay expenses incurred for
lobbying, public relations, or related activities, or to pay interest
on loans from the Agency.
Sec. 1941.977 Environmental requirements.
No loan will be made until all Federal and state statutory and
regulatory environmental requirements have been complied with.
Sec. 1941.978 Non-discrimination requirements.
No recipient of a boll weevil eradication loan will directly, or
through contractual or other arrangement, subject any person or cause
any person to be subjected to discrimination on the basis of race,
religion, color, national origin, gender, or other prohibited basis.
Borrowers must comply with all applicable Federal laws and regulations
regarding equal opportunity in hiring, procurement, and related
matters.
Sec. 1941.979 Other Federal, State, and local requirements.
(a) In addition to the specific requirements in this subpart, loan
applications will be coordinated with all appropriate Federal, State,
and local agencies.
(b) Borrowers are required to comply with all applicable:
(1) Federal, State, or local laws;
(2) Regulatory commission rules; and
(3) Regulations which are presently in existence, or which may be
later adopted including, but not limited to, those governing the
following:
(i) Borrowing money, pledging security, and raising revenues for
repayment of debt;
(ii) Accounting and financial reporting; and
(iii) Protection of the environment.
Sec. 1941.980 Interest rates, terms, security requirements, and
repayment.
(a) Interest rate. The interest rate will be fixed for the term of
the loan. The rate will be established by FSA, based upon the cost of
Government borrowing for instruments on terms similar to that of the
loan requested, and the impact of interest rate spreads on the amount
to be charged to the program subsidy account at the time the loan is
obligated.
(b) Term. The loan term will be based upon the needs of the
applicant to accomplish the objectives of the loan program and the
impact of the loan term on total program costs charged to the program
subsidy account at the time of loan obligation, as determined by FSA,
but may not exceed 10 years.
(c) Security requirements. (1) Loans must be adequately secured as
determined by FSA. FSA may require certain security including, but not
limited to the following:
(i) Assignments of assessments, taxes, levies, or other sources of
revenue as authorized by State law;
(ii) Investments and deposits of the applicant; and
(iii) Capital assets or other property of the applicant or its
members.
(2) In those cases in which FSA and another lender will hold
assignments of the same revenue as collateral, the other lender must
agree to a prorated distribution of the assigned revenue based upon the
proportionate share of the applicant's debt the lender holds for the
eradication zone from which the revenue is derived at the time of loan
closing.
(d) Repayment. The applicant must demonstrate that income sources
will be sufficient to meet the repayment requirements of the loan and
pay operating expenses.
Sec. 1941.981-1980.985 [Reserved]
Sec. 1941.986 Application.
A complete application will consist of the following:
(a) An application for Federal assistance (available in any FSA
office);
(b) Applicant's financial projections including a cashflow
statement showing the plan for loan repayment;
(c) Copies of the applicant's authorizing State legislation and
organizational documents;
(d) List of all directors and officers of the applicant;
(e) Copy of the most recent audited financial statements along with
updates through the most recent quarter;
(f) Copy of the referendum used to establish the assessments and a
certification from the Board of Directors that the referendum passed;
(g) Evidence that the officers and employees authorized to disburse
funds are covered by an acceptable fidelity bond;
(h) Evidence of acceptable liability insurance policies;
(i) Statement from the applicant addressing any current or pending
litigation against the applicant as well as any existing judgements;
(j) A copy of a resolution passed by the Board of Directors
authorizing the officers to incur debt on behalf of the borrower;
(k) Any other information deemed to be necessary by FSA to render a
decision.
Sec. 1941.987 [Reserved]
Sec. 1941.988 Funding applications.
Loan requests will be processed based on the date FSA receives the
application. Loan approval is subject to the availability of funds.
However, when multiple applications are received on the same date and
available funds will not cover all applications received, applications
from active eradication areas, which FSA determines to be most critical
for the accomplishment of program objectives, will be funded first.
Sec. 1941.989 Loan closing.
(a) Conditions. The applicant must meet all conditions specified by
the loan approval official in the notification of loan approval prior
to closing.
(b) Loan instruments and legal documents. The borrower, through
authorized representatives will execute all loan instruments and legal
documents required by FSA to evidence the debt, perfect the required
security interest in property and assets securing the loan, and protect
the Government's interest, in accordance with applicable State and
Federal laws.
(c) Loan agreement. A loan agreement between the borrower and FSA
will be required. The agreement will set forth performance criteria and
other loan requirements necessary to protect the Government's financial
and programmatic interest and accomplish the objectives of the loan.
Specific provisions of the agreement will be developed on a case-by-
case basis to address the particular situation associated with the loan
being made. However, all loan agreements will include at least the
following provisions:
(1) The borrower must submit audited financial statements to FSA at
least annually;
[[Page 26921]]
(2) The borrower will immediately notify FSA of any adverse actions
such as:
(i) Anticipated default on FSA debt;
(ii) Potential recall vote of an assessment referendum; or
(iii) Being named as a defendant in litigation;
(3) Submission of other specific financial reports for the
borrower;
(4) The right of deferral under 7 U.S.C. 1981a; and
(5) Applicable liquidation procedures upon default.
(d) Fees. The borrower will pay all fees for recording any legal
instruments determined to be necessary and all notary, lien search, and
similar fees incident to loan transactions. No fees will be assessed
for work performed by FSA employees.
Sec. 1941.990 Loan monitoring.
(a) Annual and periodic reviews. At least annually, the borrower
will meet with FSA representatives to review the financial status of
the borrower, assess the progress of the eradication program utilizing
loan funds, and identify any potential problems or concerns.
(b) Performance monitoring. At any time FSA determines it
necessary, the borrower must allow FSA or its representative to review
the operations and financial condition of the borrower. This may
include, but is not limited to, field visits, and attendance at
Foundation Board meetings. Upon FSA request, a borrower must submit any
financial or other information within 14 days unless the data requested
is not available within that timeframe.
Sec. 1941.991 Loan servicing.
(a) Advances. FSA may make advances to protect its financial
interests and charge the borrower's account for the amount of any such
advances.
(b) Payments. Payments will be made to FSA as set forth in loan
agreements and debt instruments. The funds from extra payments will be
applied entirely to loan principal. Extra payments will not extend the
time for the next scheduled payment. Funds from other payments will be
applied first to any advances, then to accrued interest, and when all
accrued interest is paid, the remainder of the payment will be applied
to loan principal.
(c) Restructuring. FSA may restructure loan debts; provided:
(1) the Government's interest will be protected,
(2) the restructuring will be performed within FSA budgetary
restrictions, and
(3) the loan objectives cannot be met unless the loan is
restructured. The provisions of part 1951, subpart S are not applicable
to loans made under this section.
(d) Default. In the event of default, FSA will take all appropriate
actions to protect its interest.
Signed at Washington, D.C., on May 12, 1997.
Dallas R. Smith,
Acting Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 97-12837 Filed 5-15-97; 8:45 am]
BILLING CODE 3410-05-P
