[Federal Register Volume 63, Number 123 (Friday, June 26, 1998)]
[Rules and Regulations]
[Pages 34778-34784]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16968]
[[Page 34778]]
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DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Parts 435 and 457
RIN 0563-AB47
Tobacco (Quota Plan) Crop Insurance Regulations; and Common Crop
Insurance Regulations; Quota Tobacco Crop Insurance Provisions
AGENCY: Federal Crop Insurance Corporation, USDA.
ACTION: Final rule.
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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes
specific crop provisions for the insurance of quota tobacco. 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 tobacco (quota plan) crop insurance regulations with the Common
Crop Insurance Policy for ease of use and consistency of terms, and to
restrict the effect of the current tobacco (quota plan) crop insurance
regulation to the 1998 and prior crop years.
EFFECTIVE DATE: July 27, 1998.
FOR FURTHER INFORMATION CONTACT: Gary Johnson, 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 12866
This rule has been determined to be exempt for the purposes of
Executive Order 12866 and, therefore, has not been reviewed by the
Office of Management and Budget (OMB).
Paperwork Reduction Act of 1995
Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. chapter
35), the collections of information for this rule have been approved by
the Office of Management and Budget (OMB) under control number 0563-
0053 through October 31, 2000.
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. Thus, this
rule is not subject to the requirements of sections 202 and 205 of the
UMRA.
Executive Order 12612
It has been determined under section 6(a) of Executive Order 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. New provisions included in this
rule will not impact small entities to a greater extent than large
entities. Under the current regulations, a 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.
The amount of work required of insurance companies delivering and
servicing these policies will not increase significantly from the
amount of work currently required. The 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.
Federal Assistance Program
This program is listed in the Catalog of Federal Domestic
Assistance under No. 10.450.
Executive Order 12372
This program is not subject to the provisions of Executive Order
12372 which require intergovernmental consultation with State and local
officials. See the Notice related to 7 CFR part 3015, subpart V,
published at 48 FR 29115, June 24, 1983.
Executive Order 12988
This rule has been reviewed in accordance with Executive Order
12988 on civil justice reform. The provisions of this rule will not
have a retroactive effect. The provisions of this rule will preempt
State and local laws to the extent such State and local laws are
inconsistent herewith. The administrative appeal provisions published
at 7 CFR part 11 must be exhausted before any action for judicial
review of any determination made by FCIC 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 Tuesday, May 13, 1997, FCIC published a notice of proposed
rulemaking in the Federal Register at 62 FR 26248-26252 to add to the
Common Crop Insurance Regulations (7 CFR part 457), a new section, 7
CFR 457.156, Quota Tobacco Crop Insurance Provisions. The new
provisions will be effective for the 1999 and succeeding crop years.
These provisions will replace and supersede the current provisions for
insuring quota tobacco found at 7 CFR part 435 (Tobacco (Quota Plan)
Crop Insurance Regulations). FCIC also amends 7 CFR part 435 to limit
its effect to the 1985 through 1998 crop years.
Following publication of the proposed rule, the public was afforded
30 days to submit written comments and opinions. A total of 510 signed
petitions were received from North Carolina and Virginia tobacco
producers, and 88 comments were received from an insurance service
organization and reinsured companies. The comments received and FCIC's
responses are as follows:
Comment: Two reinsured companies and an insurance service
organization recommended that the definition of ``amount of insurance''
be revised to read, ``the dollar amount determined by multiplying the
insured poundage quota by the current year's support price or the
percentage of the current year's support price you select.'' This
revision addresses the possibility of insureds selecting price
elections of less than 100 percent.
Response: FCIC agrees with the comment and has amended the
definition accordingly. FCIC also has revised this definition to
address the possible reduction in the amount of
[[Page 34779]]
insurance for late planted acreage in accordance with section 14.
Comment: An insurance service organization recommended that FCIC
either revise or delete the definition of ``approved yield.'' The
commenter mentioned that since quota tobacco currently is not an Actual
Production History (APH) crop, the definition will be questioned by
insureds who do not receive a copy of the Code of Federal Regulations
with their crop insurance policies.
Response: ``Approved yield'' is referenced in section 3 of the crop
provisions, so it must be defined. Section 3 clearly indicates that an
approved yield is not necessary unless required by the Special
Provisions. As written, if the FSA quota tobacco support price program
is discontinued and quota tobacco becomes an APH crop in the future,
the Special Provisions could be amended easily to require an approved
yield. Therefore, no changes have been made.
Comment: A reinsured company and an insurance service organization
made the following recommendations to revise the definition of
``effective poundage marketing quota'': (1) Remove the words ``minus
the amount of any carryover tobacco'' because crop insurance is
designed to cover the tobacco crop actually grown the current crop
year, and the restriction of yield times acres in the definition of
``insured poundage quota'' would take care of any allowance the
producer made for carryover tobacco; (2) Clarify whether any additional
poundage the producer intends to produce must be leased or if it can be
grown without any marketing quota; (3) Add language to the definition
of ``effective poundage marketing quota'' from section 7(b), which
states that effective poundage marketing quota may not include any
tobacco that would be subject to a marketing quota penalty under the
United States Department of Agriculture (USDA) Tobacco Marketing Quota
Regulations; and (4) Revise the definition to exclude the word
``county'' because the farm marketing quota is established by the Farm
Service Agency (FSA) on a Farm Serial Number (FSN) basis.
Response: (1) Although, producers will normally reduce the number
of acres grown in the current crop year to account for carryover
production from the prior years, they may instead elect to reduce
inputs (fertilizer, etc.), thereby producing fewer pounds per acre. To
maintain the appropriate relationship between the number of planted
acres and the effective poundage marketing quota, the amount of any
carryover production should be removed from the effective poundage
marketing quota. Therefore, no change has been made. (2) FCIC agrees
with the recommendation and has clarified the definition of ``effective
poundage marketing quota'' to include any additional (above quota)
poundage as allowed by the USDA Tobacco Marketing Quota Regulations.
Under current (FSA) procedures, a minimal percentage of additional
poundage is allowed to be marketed. (3) FCIC agrees and has revised the
definition of ``effective poundage marketing quota'' accordingly. (4)
The definition has been clarified to refer to the FSA office for the
county and the effective poundage marketing quota for the FSN.
Comments: A reinsured company and an insurance service organization
expressed concerns with the definition of ``good farming practices,''
which makes reference to ``cultural practices generally in use in the
county * * *'' recognized by the Cooperative State Research, Education,
and Extension Service as compatible with agronomic and weather
conditions in the county.'' The commenters questioned whether cultural
practices exist that are not necessarily recognized (or possibly not
known) by the Cooperative State Research, Education, and Extension
Service. The commenters also indicated that the term ``county'' in the
definition of ``good farming practices'' should be changed to ``area.''
Response: FCIC believes that the Cooperative State Research,
Education, and Extension Service (CSREES) recognizes farming practices
that are considered acceptable for producing quota tobacco. If a
producer is following practices currently not recognized as acceptable
by CSREES, there is no reason why such recognition cannot be sought by
interested parties. The term ``area'' is less definitive than the term
``county'' and would cause insurance providers to make determinations
more subjective in nature. Therefore, no change has been made in
response to this comment, except that the definition of ``good farming
practices'' has been moved to the Basic Provisions.
Comments: A reinsured company and an insurance service organization
recommended revising the definition of ``harvest'' to include a
requirement that at least 20 percent of the production guarantee must
be cut on each acre to qualify as harvested. Commenters also
recommended that a minimum appraisal of 35 percent of the amount of
insurance be established to encourage producers to harvest damaged
tobacco. In some cases, it will be difficult to verify unharvested
production due to deterioration of the leaves before the adjuster works
the final claim. The commenters believe that removal of these
requirements from the current crop provisions will result in a
significant increase in premium rates. Commenters expressed concern
that FCIC may have overreacted if the changes were made because of one
lawsuit.
Response: FCIC has determined that the requirement that at least 20
percent of the production guarantee be cut on each acre to qualify as
harvested and the 35 percent minimum appraisal for unharvested acreage
is too severe. Producers should not be forced to incur the costs
associated with harvesting tobacco acres that may not be marketable. In
addition, FCIC cannot ignore a court ruling that such provisions are
unenforceable. Therefore, no change has been made in the final rule
provisions.
Comments: A reinsured company and an insurance service organization
noted that the definition of ``harvest'' refers to the phrase
``removing tobacco from the field.'' They believe this is a
determination of when coverage ceases, which is already included in
section 9(c) of these provisions.
Response: Definitions are included in the crop provisions for
clarification of policy provisions. The definition of harvest is needed
because this term and its opposite ``unharvested'' are used repeatedly
in section 12 (Settlement of Claim) (redesignated as section 13). The
insurance period is defined in section 9 (redesignated as section 10).
When the crop is harvested does not solely determine when coverage
ceases. Therefore, no change has been made.
Comments: An insurance service organization asked why the phrase
``the average auction price * * *'' in the definition of ``market
price'' was changed to ``the previous years' season average price
published by National Agricultural Statistics Service * * *''
Response: The phrase was changed for clarification. In practice the
``average auction price'' has been interpreted consistently as the
previous years'' season average price published by National Agriculture
Statistics under the current crop provisions. Therefore, no change has
been made.
Comments: An insurance service organization recommended deleting
``marketing window'' from the definition of ``practical to replant.''
The commenters stated that quota tobacco is unlike other crops, such as
processor and fresh market crops, where the producer only has a certain
amount of time to market the crop.
Response: FCIC agrees that the concept of a ``marketing window'' is
[[Page 34780]]
most applicable to processor and fresh market crops and recognizes that
quota tobacco is unlike these crops. However, the Federal Agriculture
Improvement and Reform Act of 1996 mandated that FCIC consider
marketing windows in determining whether it is feasible to require
planting during a crop year. Therefore, no change has been made, except
that the definition of ``practical to replant'' has been moved to the
Basic Provisions.
Comments: A reinsured company and an insurance service organization
expressed concern about the terms ``replace'' and ``replacing'' in the
definition of ``replanting.'' Commenters stated that the terms, as
used, seem awkward and cumbersome.
Response: FCIC believes that the definition of ``replanting''
clearly describes the steps required to replant the crop. However, FCIC
has replaced the phrase ``growing a successful tobacco crop'' with
``producing at least the quota,'' for clarity.
Comments: An insurance service organization recommended that the
definition of ``support price'' be amended to read ``type 31 tobacco''
since type 31 is the only type of tobacco that is insurable under these
provisions.
Response: FCIC believes that the definition is clearly stated. The
term ``type'' is written for the flexibility of insuring other types of
tobacco if designated in the Special Provisions.
Comment: A reinsured company and an insurance service organization
recommended moving the definition of ``unit'' to section 2 for
consistency.
Response: All policy definitions are contained in section 1 for
uniformity. Therefore, no change has been made in this regard. FCIC has
changed the term ``unit'' to ``Basic Unit,'' however, to conform to
recent changes in the Basic Provisions.
Comments: An insurance service organization and 510 growers
recommended that the unit division guidelines of these provisions be
the same as currently specified for Guaranteed Tobacco. Those
provisions define basic units by share and optional units by Farm
Serial Number (FSN). Commenters believe that this change would resolve
the current conflict between basic units (by share) as defined for
Catastrophic Risk Protection (CAT) and basic units (by FSN) for buy-up
policyholders.
Response: FCIC acknowledges that adopting the unit division rules
contained in the Common Crop Insurance Policy for quota tobacco would
resolve the conflict between unit definition for catastrophic coverage
and additional coverage that now exists. However, the current unit
definition for quota tobacco was adopted beginning with the 1985 crop
year to resolve a vulnerability that exists in this program. Prior to
that time, units were defined similarly for guaranteed and quota
tobacco. Consider a landlord who share rents a portion of the quota to
a tenant and also produces quota tobacco on the Farm Serial Number
(FSN). Under the basic unit definition of the Common Crop Insurance
Policy, two basic units are established for the landlord (a 100 percent
share and the share with the tenant). One basic unit is established for
the tenant. Under the definition contained in the Quota Tobacco Crop
Provisions, one basic unit is established for each producer by FSN.
The insured quantity under these provisions is the insured
marketing quota, a quantity that is independent of acreage if a
sufficient number of acres are planted. Premium is charged only on the
amount of insured marketing quota. Under the ``Basic unit'' definition
contained in the Quota Tobacco Crop Provisions, the landlord's share of
all production from the FSN is counted against the landlord's share of
the quota. Under the ``Basic unit'' definition contained in the Common
Crop Insurance Provisions, there is greater opportunity to plant
additional acreage and manipulate production within the FSN so that the
entire quota may be produced and sold, yet a loss be paid on one unit.
However, premium will not be collected on the additional acreage.
Due to a large number of comments on this particular issue, FCIC
will review any additional information that may support a different
approach to establishing units for quota tobacco. All such information
must specifically address the concern described herein and demonstrate
how it will be alleviated by the proposed unit definition. Pending the
submission of such information, FCIC will implement the basic unit
definition contained in the proposed rule and will consider any changes
at such date as the information may be available. If warranted, the
unit definition can be changed for the 2000 or a subsequent crop year.
Comment: A reinsured company and an insurance service organization
recommended removing any references to ``annual production reports''
for the APH plan. The commenters contend that if the FSA quota tobacco
support program is changed or eliminated, it will be necessary to
revise several provisions of the policy.
Response: Section 3 of these provisions requires annual production
reports only when required by the Special Provisions. The current
method of establishing farm yields will continue for the 1998 crop
year. If the quota tobacco support price program is discontinued or
modified in future years, these provisions provide an alternative
method for establishing the production guarantee. Therefore, no change
has been made. However, FCIC has amended the definition of ``support
price'' to include the possibility that the tobacco support program may
be changed. If there is no tobacco support program, FCIC will announce
the average price per pound for the type of tobacco.
Comments: A reinsured company and an insurance service organization
recommended deleting the word ``carryover'' in section 6(a). Commenters
stated that the basic premise of multiple peril crop insurance coverage
is to insure actual planted acreage of the crop. Subtracting the
carryover poundage would take coverage away from a planted crop which
is legally insurable (i.e., the carryover poundage has value and is
exposed to perils). This could have additional unwanted consequences by
making the insurance providers responsible for tracking and placing
value on carryover poundage.
Response: Although producers normally reduce the number of acres
grown in the current crop year to account for carryover production from
the prior year, they may instead elect to reduce inputs (fertilizer,
etc.), thereby producing fewer pounds per acre. Further, to maintain
the appropriate relationship between the number of planted acres and
the effective poundage marketing quota, the amount of any carryover
production should be removed from the effective poundage marketing
quota. Therefore, no change has been made.
Comments: A reinsured company and an insurance service organization
recommended that section 6(a) be revised to remove the phrase, ``once
submitted, you may not revise the acreage report,'' because section
6(c), now 6(d), of the Basic Provisions already states, ``* * *you may
not revise this report after the acreage reporting date without our
consent.'' The commenter inquired about the impact of changes in
information between the time an acreage report is submitted and the
actual acreage reporting date. The commenter stated that, if this
sentence remains in the crop provisions, tobacco insureds will wait
until the last day to report acreage.
Response: FCIC agrees that section 6(d) of the Basic Provisions is
adequate and has deleted this language from the Crop Provisions.
[[Page 34781]]
Comments: A reinsured company and an insurance service organization
recommended revising section 7(a) to read ``type 31 tobacco designated
in the Special Provisions, in which you have a share.'' Commenters
noted that the current quota policy refers to only type 31 tobacco.
Response: FCIC agrees that the current quota tobacco policy only
refers to type 31 tobacco. However, section 7(a) (redesignated as
section 8(c)) is intended to allow the flexibility of insuring other
types of tobacco if they are designated in the Special Provisions.
Therefore, FCIC has not revised section 7(a). FCIC has changed section
12(d) (redesignated as section 13(d)) to refer to ``U.S. Official
Standard Grades for the insured type of tobacco,'' rather than ``U.S.
Official Standard Grades, Burley Tobacco, U.S. Type 31,'' for
consistency.
Comments: A reinsured company and an insurance service organization
asked if the provisions in section 8(c) are intended to allow written
agreement requests for a type not rated in the actuarial documents.
Response: Section 8(c) (redesignated as section 9(c)) only
references a method of planting. Therefore, section 9(c) does not
authorize written agreements for types not rated.
Comments: A reinsured company and an insurance service organization
questioned why section 9(a) is not as precise as section 11(a) of the
Basic Provisions, which specifies ``total destruction * * * on the
unit.''
Response: FCIC has revised section 9(a) (redesignated as section
10(a)) to refer to total destruction of the tobacco on the unit.
Comment: A reinsured company and an insurance service organization
asked if the current requirement that notice be given without delay if
any tobacco is damaged and will not be sold through an auction
warehouse was removed intentionally from section 11.
Response: Section 14(a)(2) of the Basic Provisions states ``* *
*you must * * *give us notice within 72 hours of your initial discovery
of damage* * *'' FCIC believes this requirement is substantially the
same as requiring a notice ``without delay,'' so the latter requirement
of section 11 was removed in the proposed rule.
Comment: Two reinsured companies and an insurance service
organization recommended that section 12(b)(1) reference price
elections less than 100 percent of the support price. The commenters
indicated that the language as written could be taken to mean that the
insured poundage quota will be multiplied by 100 percent of the support
price even for CAT policies.
Response: FCIC agrees with the recommendation and has amended
section 12(b)(1) (redesignated as section 13(b)(1)) to read
``multiplying the insured poundage quota by your elected percentage of
the current year's support price.''
Comments: Two reinsured companies and an insurance service
organization recommended the following: (1) Add the word ``resulting''
in section 12 (b)(2); and (2) Remove the reference to ``section
12(b)(2)'' from section 12(b)(3) because it is not necessary to
reference the previous item by number.
Response: The recommendations do not add any additional
clarification to the provision. Therefore, no changes have been made.
Comments: Two reinsured companies and an insurance service
organization recommend removing the words ``acceptable production
records'' from section 12(c)(1)(D), if these words relate to other APH
references in these provisions.
Response: As stated in earlier responses, section 12(c)(1)(D)
(redesignated as section 13(c)(1)(D)) will only apply if annual
production reports are required by the Special Provisions, and the
provision has been so clarified.
Comments: Two reinsured companies and an insurance service
organization expressed concern that section 12(c)(1)(iii) of these
provisions allows the insured to defer settlement and wait for a later,
generally lower appraisal.
Response: Section 12(c)(1)(iii) (redesignated as section
13(c)(1)(iii)) allows deferment of a claim only if the insurance
provider agrees that representative samples can be left or if the
insured elects to continue to care for the entire crop. In either case,
if the insured does not provide sufficient care for the remaining crop,
appraisals for uninsured causes of loss may be made. Therefore, no
change has been made.
Comments: Two reinsured companies and an insurance service
organization expressed concern that there are no instructions in
section 12(c) and (d) on how to value appraised production.
Response: Section 12(c)(1)(iv) (redesignated as section
13(c)(1)(iii)(A)) has been rewritten to more clearly specify the
valuation of harvested and appraised production.
Comments: Two reinsured companies and an insurance service
organization opposed any reference to the word ``carryover'' in section
12(h).
Response: Section 12(h) (redesignated as section 13(h)) eliminates
the adjustment of next year's quota when the insurance provider agrees
that any carryover or current years' tobacco has no market value due to
an insured cause of loss. It also eliminates the opportunity to falsely
report that carryover and current years' tobacco has no value and thus
increase the indemnity payment. This provision is consistent with FSA's
requirement that tobacco having no value be destroyed. Therefore, no
change has been made.
Comments: Two reinsured companies and an insurance service
organization suggested that requiring a written agreement to be renewed
each year should be removed in section 14(d). Terms of the agreement
should be stated in the agreement to fit the particular situation for
the policy, or if no substantive changes occur from one year to the
next, allow the written agreement to be continuous.
Response: Written agreements are temporary and intended to address
unusual situations. If the condition creating a need for written
agreement remains from year to year among producers it should be
incorporated into the policy, the Special Provisions, or the actuarial
documents. Therefore, no change has been made, except the provisions
for written agreements have been moved to the Basic Provisions.
Comments: Two reinsured companies and an insurance service
organization asked: (1) Is the Late Planting Agreement Option no longer
available; and (2) Why are the late and prevented planting language
provisions not included in the proposed rule as they have been in other
crops?
Response: A new section 14 has been added to provide for late
planting coverage. Under the new section 15, prevented planting
coverage will not be provided for quota tobacco as set out in the Basic
Provisions because the high cash value per acre and the hand labor
required to transplant tobacco on relatively small acreage enables
producers to plant sufficient acreage to maintain their effective
poundage marketing quota even under extremely adverse conditions that
would prevent planting of most other crops.
In addition to the changes indicated above, FCIC has made the
following changes:
1. Section 1. Removed definitions of ``days,'' ``FSA,'' ``final
planting date,'' and ``USDA,'' because these definitions were moved to
the Basic Provisions. Changed the definition of ``unit'' to ``basic
unit.''
2. Section 7 (Annual Premium). Added to modify section 7 of the
Basic Provisions to calculate premium, in part, based on the producer's
amount of insurance. As defined in these crop provisions, the
definition of ``amount of insurance'' takes into consideration the
insured poundage quota, current year's
[[Page 34782]]
support price, and late planting adjustments unique to quota tobacco.
3. Section 12(b) (redesignated as Section 13(b)). Revised for
clarification. Also, added an example of an indemnity calculation for
illustration purposes.
List of Subjects in 7 CFR Parts 435 and 457
Crop insurance, Quota tobacco, Tobacco (quota plan) crop insurance
regulations.
Final Rule
Accordingly, as set forth in the preamble, the Federal Crop
Insurance Corporation hereby amends the Tobacco (Quota Plan) Crop
Insurance Regulations (7 CFR part 435) and the Common Crop Insurance
Regulations (7 CFR part 457) as follows:
PART 435--TOBACCO (QUOTA PLAN) CROP INSURANCE REGULATIONS;
REGULATIONS FOR THE 1985 THROUGH 1998 CROP YEARS
1. The authority citation for 7 CFR part 435 is revised to read as
follows:
Authority: 7 U.S.C. 1506(1), 1506(p).
2. The part heading is revised as set forth above.
Subpart Heading [Removed]
3. The subpart heading ``Subpart--Regulations for the 1985 and
Succeeding Crop Years'' is removed.
4. Section 435.7 is amended by revising the introductory text of
paragraph (d) to read as follows:
Sec. 435.7 The application and policy.
* * * * *
(d) The application is found at subpart D of part 400--General
Administrative Regulations (7 CFR 400.37, 400.38). The provisions of
the Tobacco (Quota Plan) Insurance Policy for the 1985 through 1998
crop years are as follows:
* * * * *
PART 457--COMMON CROP INSURANCE REGULATIONS; REGULATIONS FOR THE
1998 AND SUBSEQUENT CONTRACT YEARS
5. The authority citation for 7 CFR part 457 continues to read as
follows:
Authority: 7 U.S.C. 1506(1), 1506(p).
6. Section 457.156 is added to read as follows:
Sec. 457.156 Quota tobacco crop insurance provisions.
The Quota Tobacco Crop Insurance Provisions for the 1999 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:
Quota Tobacco 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.
Amount of insurance. The dollar amount determined by multiplying
the insured poundage quota by the current year's support price or
the percentage of the current year's support price you select less
any adjustments for late planting as specified in section 14.
Approved yield. The yield calculated in accordance with 7 CFR
part 400, subpart G, if required by the Special Provisions.
Basic unit. In lieu of the definition in the Basic Provisions, a
basic unit is all insurable acreage of an insurable type of tobacco
in the county in which you have a share on the date of planting for
the crop year and that is identified by a single FSA farm serial
number at the time insurance first attaches under these provisions
for the crop year.
Carryover tobacco. Any tobacco produced on the land identified
by a FSA farm serial number in previous years that remained unsold
at the end of the most recent marketing year.
County. In lieu of the definition in the Basic Provisions,
county is defined as the county or other political subdivision of a
state shown on your accepted application including any land
identified by a FSA farm serial number for such county but
physically located in another county.
Discount variety. Tobacco defined as such under the provisions
of the United States Department of Agriculture tobacco price support
program.
Effective poundage marketing quota. The farm marketing quota as
established and recorded by the local FSA office for the land
identified by the FSA farm serial number plus any additional
poundage, as allowed by the USDA Tobacco Marketing Quota
Regulations, that you intend to produce for each unit in that crop
year minus the amount of any carryover tobacco. The term may not
include any tobacco that would be subject to a marketing quota
penalty under USDA Tobacco Marketing Quota Regulations. For any crop
year in which there are no effective USDA Tobacco Marketing Quota
Regulations, the effective poundage marketing quota will be the
pounds obtained by multiplying the applicable approved yield per
acre by the lower of the reported or insured acreage on the basic
unit, unless otherwise provided by the actuarial documents.
Fair market value. The current year's tobacco season average
price for the applicable type of tobacco obtained from the sale of
the tobacco through a market other than an auction warehouse.
Farm yield. The yield per acre used by FSA to establish the
effective poundage marketing quota for land identified by a FSA farm
serial number, unless we have estab lished a yield for that land in
the actuarial documents.
Harvest. Cutting and removing all insured tobacco from the field
in which it was grown.
Hydroponic plants. Seedlings grown in liquid nutrient solutions.
Insured poundage quota. The lesser of:
(1) The product (in pounds) obtained by multiplying the
effective poundage marketing quota for the land identified by a FSA
farm serial number by your selected coverage level; or
(2) The farm yield or approved yield, as applicable, adjusted
for late planting in accordance with section 14, if applicable,
multiplied by the appropriate number of insured acres and by your
selected coverage level.
Late planting period. In lieu of the definition in section 1 of
the Basic Provisions, the period that begins the day after the final
planting date for the insured crop and ends 15 days after the final
planting date, unless otherwise specified in the Special Provisions.
Market price. The previous years' season average price published
by National Agricultural Statistics Service for the applicable type
of tobacco in the area.
Marketing year. The marketing year published by National
Agricultural Statistics Service for the applicable type of tobacco
in the area.
Planted acreage. Land in which tobacco seedlings, including
hydroponic plants, have been transplanted by hand or machine from
the tobacco bed to the field.
Pound. Sixteen ounces avoirdupois.
Replanting. In lieu of the definition in section 1 of the Basic
Provisions, performing the cultural practices necessary to replace
the tobacco plant, and then replacing the tobacco plant in the
insured acreage with the expectation of producing at least the
quota.
Support price. The average price per pound for the type of
tobacco as announced by the USDA under its tobacco price support
program, or, if there is no such program, as announced by FCIC.
Tobacco bed. An area protected from adverse weather, in which
tobacco seeds are sown and seedlings are grown until transplanted
into the tobacco field by hand or machine.
2. Unit Division.
A unit will be determined in accordance with the definition of
basic unit contained in section 1 of these Crop Provisions. The
provision in the Basic Provisions regarding optional units are not
applicable, unless specified by the Special Provisions.
3. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
In addition to section 3 of the Basic Provisions, a production
report, if required by the Special Provisions, must be filed in
accordance with section 3(c) of the Basic Provisions.
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.
[[Page 34783]]
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:
(a) You must report the effective poundage marketing quota and
specify any amount of carryover tobacco, if applicable.
(b) You must provide a copy of any written lease agreement
between you and any landlord or tenant showing the amount of the
effective poundage marketing quota allocated to you. The written
lease agreement must:
(1) Identify all other persons sharing in the effective poundage
marketing quota; and
(2) Be submitted to your local insurance provider's office on or
before the acreage reporting date.
(c) In the event of a loss, if the written lease agreement has
been submitted timely, we will distribute the effective poundage
marketing quota in accordance with the terms of the written lease
agreement. If the written lease agreement is not submitted timely,
we will prorate the effective poundage marketing quota across the
FSA farm serial number to all insured and uninsured persons based on
planted acres within land identified by the FSA farm serial number.
7. Annual Premium.
In lieu of paragraph (c) of section 7 of the Basic Provisions,
your annual premium amount is determined by either:
(a) Multiplying the amount of insurance by the rate, your share,
and any premium adjustment percentages that may apply; or
(b) If no support price program exists, multiplying the approved
yield by the coverage level, the support price, the acres, your
share, and any premium adjustment percentages that may apply.
8. Insured Crop.
(a) In accordance with section 8 of the Basic Provisions, the
crop insured will be any of the tobacco types designated in the
Special Provisions for the county, in which you have a share, that
you elect to insure, and for which a premium rate is provided by the
actuarial documents.
(b) In addition to section 8 of the Basic Provisions, the crop
insured will not include any poundage above the effective poundage
marketing quota or the insured poundage quota.
9. Insurable Acreage.
In addition to the provisions of section 9 of the Basic
Provisions, we will not insure any acreage under these crop
provisions that is:
(a) Planted to a discount variety;
(b) Planted to a tobacco type for which no premium rate is
provided by the actuarial documents;
(c) Planted in any manner other than as provided in the
definition of ``planted acreage'' in section 1 of these Crop
Provisions, unless otherwise provided by the Special Provisions or
by written agreement; or
(d) Damaged before the final planting date to the extent that
most of the producers of tobacco acreage with similar
characteristics in the area would normally not further care for the
crop, unless such crop is replanted or we agree that replanting is
not practical.
10. Insurance Period.
In accordance with the provisions of section 11(b) of the Basic
Provisions, insurance ceases at the earliest of:
(a) Total destruction of the tobacco on the unit;
(b) Weighing-in at the tobacco warehouse;
(c) Removal of the tobacco from the field where grown except for
curing, grading, packing, or immediate delivery to the tobacco
warehouse; or
(d) The February 28 immediately following the normal harvest
period.
11. Causes of Loss.
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:
(a) Adverse weather conditions;
(b) Fire;
(c) Insects, but not damage due to insufficient or improper
application of pest control measures;
(d) Plant disease, but not damage due to insufficient or
improper application of disease control measures;
(e) Wildlife;
(f) Earthquake;
(g) Volcanic eruption; or
(h) Failure of the irrigation water supply, if caused by a peril
specified in section 11 (a) through (g) that occurs during the
insurance period.
12. Duties In The Event of Damage or Loss.
In accordance with the requirements of section 14 of the Basic
Provisions, any representative samples we may require of each
unharvested tobacco type must be at least 5 feet wide (at least two
rows) and extend the entire length of each field in the unit. The
samples must not be harvested or destroyed until after our
inspection.
13. 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, 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 poundage quota by your elected
percentage of the current year's support price.
(2) Subtracting the total value of the production to be counted
(see section 13(c)) from the amount of insurance; and
(3) Multiplying the result in section 13(b)(1) by your share.
For example:
You have 100 percent share of type 31 quota tobacco in the unit,
with an insurable poundage quota of 1,000 pounds and a support price
of $1.73 per pound. The amount of insurance equals $1730.00 (1,000
insurable poundage quota x $1.73 support price). You are only able
to harvest 600 pounds. The value of the total production to count
equals $1038.00 (600 harvested pounds x $1.73 support price). Your
indemnity would be calculated as follows:
(1) $1730.00 (amount of insurance)-$1038.00 (value of the total
production to count) = $692.00 loss
(2) $692.00 loss x 100 percent = $692.00 indemnity payment
(c) The value of the total production to count (pounds of
appraised or harvested production) for all insurable acreage on the
unit will include:
(1) All appraised production as follows:
(i) Not less than the amount of insurance per insured acre for
the unit for any 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,
if required by the Special Provisions;
(ii) The value of production lost due to uninsured causes which
is the number of pounds of such production multiplied by the support
price;
(iii) The value of potential production on unharvested insured
acreage that you intend to put to another use with our consent, if
you and we agree on the number of pounds of such production to count
which will be multiplied by the support price. 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
allow you 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 value of production to
count for such acreage will be the number of pounds of harvested or
appraised production taken from samples at the time harvest should
have occurred multiplied by the support price. If you do not leave
the required samples intact, or you fail to provide sufficient care
for the samples, the value of production to count will be our
appraisal made prior to giving you consent to put the acreage to
another use multiplied by the support price); or
(B) If you elect to continue to care for the crop, the value of
production to count for the acreage will be the harvested
production, or our reappraisal multiplied by the support price if
additional damage occurs and the crop is not harvested;
(2) All harvested production from insurable acreage multiplied
by:
(i) The average price for any tobacco sold on a warehouse floor;
and
(ii) Fair market value for all other tobacco sold or not sold.
(d) Mature tobacco production that is damaged by insurable
causes will be adjusted for quality based on the USDA Official
Standard Grades for the insured type of tobacco.
(e) To enable us to determine the fair market value of tobacco
not sold through auction warehouses, you must give us the
opportunity to inspect such tobacco before it is sold, contracted to
be sold, or otherwise disposed. Failure to provide us the
opportunity to inspect such tobacco may result in rejection of any
claim for indemnity.
(f) If we consider the best offer you receive for such tobacco
to be inadequate, we may obtain additional offers on your behalf.
(g) Once we agree that any carryover or current year's tobacco
has no market value
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due to insured causes, you must destroy it. If you disagree and
refuse to destroy the tobacco with no value, we will determine the
value and count it as production to count.
14. Late Planting.
(a) In lieu of late planting provisions in the Basic Provisions
regarding acreage initially planted after the final planting date,
insurance will be provided for acreage planted to the insured crop
after the final planting date as follows:
(1) For each acre or portion thereof planted during the first 10
days after the final planting date, the farm yield will be reduced
by 1 percent per day; and
(2) For each acre or portion thereof planted during the 11th
through the 15th day after the final planting date, the farm yield
will be reduced by 2 percent per day.
(b) If you plant enough acreage to fulfill the effective
poundage marketing quota, there will be no reduction in the insured
poundage quota as a result of any late planted acreage.
15. Prevented Planting.
The prevented planting provisions in the Basic Provisions are
not applicable to quota tobacco.
Signed in Washington, D.C., on June 19, 1998.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 98-16968 Filed 6-25-98; 8:45 am]
BILLING CODE 3410-08-P
