[Federal Register: June 25, 2003 (Volume 68, Number 122)]
[Rules and Regulations]
[Page 37697-37726]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25jn03-2]
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DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Parts 400, 407 and 457
RIN 0563-AB85
General Administrative Regulations, Subpart J--Appeal Procedure
and Subpart T--Federal Crop Insurance Reform, Insurance Implementation,
Regulations for the 1999 and Subsequent Reinsurance Years; Group Risk
Plan of Insurance Regulations for the 2001 and Succeeding Crop Years;
and the Common Crop Insurance Regulations, Basic Provisions
AGENCY: Federal Crop Insurance Corporation, USDA.
ACTION: Final rule.
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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the
General Administrative Regulations; the Group Risk Plan of Insurance
Regulations; and the Common Crop Insurance Regulations, Basic
Provisions to make
[[Page 37698]]
revisions mandated by the Federal Crop Insurance Act (Act), as amended
by the Agricultural Risk Protection Act of 2000 (ARPA), and to require
an earlier notice of loss for prevented planting in response to an
Office of Inspector General Audit. The changes will apply for the 2004
and succeeding crop years for all crops with a contract change date on
or after the effective date of this rule, and for the 2005 and
succeeding crop years for all crops with a contract change date prior
to the effective date of this rule. FCIC also made conforming
amendments to the General Administrative Regulations, that provide the
process for informal administrative review of determinations of good
farming practices, to make the definition of ``good farming practices''
consistent with the definition contained in the Basic Provisions, and
to consolidate all the provisions regarding the informal administrative
review process for determinations of good farming practices in a
separate section.
EFFECTIVE DATE: June 18, 2003.
FOR FURTHER INFORMATION CONTACT: For further information or a copy of
the Cost-Benefit Analysis, contact Janice Nuckolls, Insurance
Management Specialist, Research and Development, Product Development
Division, Risk Management Agency, United States Department of
Agriculture, 6501 Beacon Drive, Stop 0812, Room 421, Kansas City, MO,
64133-4676, telephone (816) 926-7730.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be significant for the purposes of
Executive Order 12866 and, therefore, it has been reviewed by the
Office of Management and Budget (OMB).
Cost-Benefit Analysis
A Cost-Benefit Analysis has been completed and is available to
interested persons at the Kansas City address listed above. In summary,
the analysis finds that changes in the rule will have positive
potential benefits for insureds who do not engage in program abuse.
Changes in prevented planting provisions will be beneficial to two
groups of producers. One group is made up of those who, under current
provisions, would forgo the full prevented planting payment on a first
crop in order to plant a second crop. Under the final rule, such
producers will receive a reduced prevented planting payment to at least
partially compensate for pre-planting costs incurred on the first crop.
The second group is made up of producers who change planting decisions
and plant a second crop that would not have been planted under current
provisions. In taking this action, these individuals will reveal they
perceive a positive economic benefit relative to the options offered
them by current provisions. Whether payments and costs associated with
prevented planting coverage increase or decrease and the magnitude of
any such change will depend on the proportion of reduced prevented
planting payments made under the final rule that are taken by producers
who would have taken a full versus zero payment under current
provisions.
Double insurance provisions of the final rule reduce the incentive
for program abuse that is perceived to have occurred under current
provisions. Earlier notice required from producers who are prevented
from planting should also help reduce instances in which insurance
providers cannot accurately determine whether insured causes resulted
in the loss. Over time, if program abuse is decreased, premium
reductions may result. Such reductions would be beneficial to producers
who do not abuse the program. However, because the amount of abuse that
currently occurs cannot be measured with existing data, immediate rate
adjustments for reduction of program abuse are not appropriate. Rather,
such adjustments should be made when adequate loss experience is
available to support actuarial calculations that satisfy appropriate
credibility standards.
Adding provisions to allow coverage for crops produced using an
organic farming practice may encourage more producers using this
practice to purchase insurance than in the past. Although it is not
possible to determine the number of additional producers who may
participate, the premium amount charged will be adequate to cover any
additional losses and the amount provided to insurance providers for
administrative and operating expenses will be as determined under the
SRA.
Providing a reconsideration process for determinations regarding
good farming practices will reduce costs incurred by insurance
providers and insured producers. Prior to this rule, arbitration or
judicial review were the mechanisms used to settle disputes regarding
the use of good farming practices, and both are significantly more
expensive than the reconsideration process that FCIC will perform.
Although it is not possible to estimate the savings because the number
of cases mediated or litigated in the past is not known, savings to
insurance providers and insured producers will clearly result.
Changes to the provisions regarding yield substitution when actual
yields fall below 60 percent of the applicable transitional yield
should have little impact on overall program costs. It is anticipated
that producers will continue to elect to substitute all low yields in a
data base even though they are allowed to select individual years.
Therefore this change should not affect program costs. Likewise, it is
not anticipated many producers will elect to cancel the yield
substitution election once they have it. Therefore, new provisions
allowing cancellation of the election will have little impact on
program costs.
Paperwork Reduction Act of 1995
Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501),
the collections of information in this rule have been approved by the
Office of Management and Budget (OMB) under control number 0563-0053
through February 28, 2005.
The following comments were received regarding information
collection burden: (1) A commenter stated FCIC estimates it will take
producers, a loss adjuster, and an insurance agent an average of one
hour to provide the requested information. The commenter believes this
is incorrect for the producer, agent, company, and loss adjuster. It
believes a more realistic estimate would be at least one hour for each
individual listed above; and (2) Another commenter states that while
the purpose of the proposed rule is to make changes and clarify
existing policy provisions to better meet the needs of the insured and
the insurance companies, it believes that the information FCIC collects
for use in offering crop insurance coverage, determining program
eligibility, establishing a production guarantee, calculating losses
qualifying for a payment, and combating fraud, waste, and abuse will
most likely result in a substantial increase in the number of burden
hours to producers and insurance providers. In addition, it believes
that it is critical the rule introduce greater clarity and common sense
in the regulations that ultimately define contract terms for crop
insurance polices as well as producers' responsibilities. The commenter
believes it is imperative the rule be developed without imposing
unnecessary, burdensome administrative requirements for crop insurance
participants.
Based on the comments received, FCIC has increased the burden that
FCIC estimates it will place on respondents for information collection
for the entire crop insurance process to 1.1 hours per
[[Page 37699]]
respondent for a new estimated total of 1,447,152 hours for 1,310,553
respondents with 4,017,742 responses. The information collection burden
is determined based on the average amount of time taken for all crops,
all producers, all required and optional notices, etc. However, the
large number of producers who do not provide loss notices and do not
have claims significantly reduce the average information collection.
FCIC strives to limit the information collection burden and implements
only those changes required to properly administer the program and keep
waste, fraud, and abuse to a minimum.
GPEA Compliance
RMA is committed to compliance with the GPEA, which requires
Government agencies, in general, to provide the public the option of
submitting information or transacting business electronically to the
maximum extent possible.
Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA)
establishes requirements for Federal agencies to assess the effects of
their regulatory actions on State, local, and tribal governments and
the private sector. This rule contains no Federal mandates (under the
regulatory provisions of title II of the UMRA) for State, local, and
tribal governments or the private sector. Therefore, this rule is not
subject to the requirements of sections 202 and 205 of UMRA.
Executive Order 13132
It has been determined under section 1(a) of Executive Order 13132,
Federalism, that this rule does not have sufficient implications to
warrant consultation with the States. The provisions contained in this
rule will not have a substantial direct effect on States, or on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government.
Regulatory Flexibility Act
This regulation will not have a significant 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. 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. 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. With respect to any action taken by FCIC under
the terms of the crop insurance policy, the administrative appeal
provisions published at 7 CFR part 11 and 7 CFR part 400, subpart J for
the informal administrative review process of good farming practices,
as applicable, must be exhausted before any 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.
Background
On September 18, 2002, FCIC published a notice of proposed
rulemaking in the Federal Register at 67 FR 58912-58933 to amend the
General Administrative Regulations, subpart T-Federal Crop Insurance
Reform, Insurance Implementation, the Group Risk Plan of Insurance
Regulations, and the Common Crop Insurance Regulations; Basic
Provisions to implement program changes mandated by the Act, as amended
by ARPA, and make other changes and clarify existing policy provisions
to better meet the needs of the insured, effective for the 2003 and
succeeding crop years for all crops with a contract change date of
November 30, 2002, or later.
Following publication of the proposed rule on September 18, 2002,
the public was afforded 30 days to submit written comments and
opinions. Based on comments received and specific requests to extend
the comment period, FCIC published a notice in the Federal Register at
67 FR 65732 on October 28, 2002, extending the initial 30-day comment
period an additional 15 days, until November 12, 2002.
A total of 3,407 comments were received from 209 commenters. The
commenters were reinsured companies, attorneys, trade organizations,
commodity associations, State agricultural associations, regional
agricultural associations, agents, insurance service organizations,
universities, producers, USDA agencies, State Departments of
Agriculture, grower associations, and other interested parties.
Significant comments were received regarding the provisions related
to the implementation of ARPA. However, since these changes are
statutorily mandated, FCIC has no choice but to implement these
provisions as expeditiously as possible. The provisions mandated by
ARPA include good farming practices and the reconsideration process,
sustainable farming, organic farming, multiple benefits on the same
acreage in the same crop year, prevented planting, yield substitutions,
removal of references to limited coverage, and all the related
provisions necessary to implement these provisions. Therefore, these
changes and all related conforming changes are included in this final
rule.
Further, an important program vulnerability was also raised by the
Office of Inspector General (OIG) in an audit report related to the
notice of loss for prevented planting acreage. Given the significance
of this identified problem, FCIC has elected to also include the
changes related to this vulnerability and any related conforming
changes in this final rule.
A significant number of comments were received that raised issues
that were not contemplated by FCIC when it proposed certain changes.
These comments pertain to provisions that can generally be categorized
as related to program integrity and administrative issues. Given the
concerns expressed by the commenters, FCIC needs additional time to
adequately consider such comments and take appropriate action. FCIC has
determined that it does not have sufficient time to adequately address
these comments prior to the contract change date for 2004 crop year
fall planted crops.
To avoid delaying the implementation of provisions mandated by ARPA
and OIG, FCIC has decided to separate those changes from the other
proposed changes for which FCIC needs
[[Page 37700]]
additional time and move forward only with the ARPA and OIG changes in
this final rule. FCIC has determined that it would impose an undue
burden to implement those changes for which it needs additional time to
respond to comments in the middle of a crop year. Further, it would
also adversely affect those producers who plant both fall and spring
planted crops to have different contract terms. All comments received
on the proposed provisions that are not included in this final rule
will be addressed in a subsequent final rule to be effective for the
2005 crop year.
The comments received that are related to the portions of the
proposed rule addressed in this final rule and FCIC's responses are as
follows:
Comment: A few commenters stated that the Basic Provisions must be
clear and unambiguous, and that they also should be revised only in
accordance with the best analysis available from the combined
experience of program administrators, approved insurance providers and
active agricultural producers. The commenters stated that any of the
several inclusive processes permitted by law for the material revision
of such a fundamental regulation would have been preferable to RMA's
unilateral pronouncement. They complain that they have difficulty
defending a policy that they did not help develop.
Response: Many of the changes that were originally proposed arose
from discussions with the insurance companies, producer groups, OIG,
the United States Attorney's offices, and other interested parties.
However, to utilize the negotiated rulemaking process that the
commenter proposes would drastically delay the process and hinder
efforts to make meaningful and necessary program changes in a timely
manner. The defense of the policy terms is dependent on the language of
the policy, not the drafter. Through notice and comment, FCIC permits
the insurance providers to have input into the specific language of the
policy. Further, 7 CFR part 400, subpart X permits insurance providers
and any other interested party to obtain an interpretation of policy
provisions.
Comment: A commenter urged FCIC to not make any changes in the
Basic Provisions at this time.
Response: The provisions related to ARPA must be implemented.
However, as stated above, FCIC has received such significant comments
on other provisions that it is taking the additional time needed to
fully evaluate the comments and take appropriate action.
Comment: Many commenters requested an extension of the comment
period.
Response: In response to such comments, FCIC extended the comment
period an additional fifteen days.
Comment: Many commenters expressed concerns regarding
implementation of the rule in the middle of a crop year. They also
expressed concerns regarding the legality of making the rule effective
upon filing with the Federal Register.
Response: As stated above, FCIC has elected not to implement the
rule in the middle of the crop year. With respect to the effective
date, FCIC will be in compliance with the applicable laws.
Comment: Many commenters noted that the amount of work required of
the insurance companies delivering and servicing these policies will
increase significantly from the amount of work currently required. It
claims that if more is being required of the companies, they need to be
compensated accordingly. Another commenter expressed concerns regarding
the increased workloads and program delivery costs.
Response: FCIC agrees some additional work will be required to
administer the new provisions contained in this final rule. However,
most of these changes in this final are statutorily mandated so FCIC
has no choice but to implement these provisions. Further, it is also
anticipated that companies will realize significant savings as a result
of the new limitations on multiple crop benefits on the same acreage,
which may also reduce the work the insurance providers must currently
devote to adjusting these claims. Further, Congress has placed a cap on
the amount of money that insurance providers can receive to pay for
their administrative costs. Therefore, FCIC does not have the authority
to increase the compensation paid to the insurance providers.
Comment: Many general comments were received regarding added
program complexity and unclear definitions, terms and conditions.
Response: Since no specific provisions were discussed, FCIC is
unable to respond directly. However, FCIC did receive similar comments
regarding specific provisions and has responded to those concerns
below.
Comment: A few commenters requested their comments to the Common
Crop Insurance Policy, Basic Provisions be considered for the Group
Risk Plan (GRP) proposed provisions where applicable.
Response: FCIC has considered all the comments to the Common Crop
Insurance Policy, Basic Provisions as if they are applicable to the GRP
provisions. Where applicable, in response to the comments, FCIC has
made the same or similar changes in both the GRP provisions and the
Basic Provisions.
Comment: A commenter stated the ``first,'' ``second'' and
``double'' crop provisions contained in ARPA should not apply to the
GRP policy. It stated that National Agricultural Statistics Service
(NASS) records are based on their own criteria, and are consistent from
year to year in methodology. The commenter added that, from an
administrative standpoint, including this language in the GRP policy
removes much of the administrative ease that has been associated with
GRP and that administrative ease has been one of GRP's biggest selling
points to many insureds.
Response: Section 108 of ARPA does not make any distinction between
plans of insurance. It simply requires that any loss for a first crop
insured under the Act be reduced by 65 percent if a second crop is
planted on the same acreage in the same crop year and suffers an
insurable loss. Since ARPA does not provide an exception for GRP
policies, no change has been made.
Comment: A few commenters stated beyond the definition itself, all
references to ``good farming practices'' in the GRP policy need to
reflect the provisions of section 123 of ARPA. For instance, in Sec.
407.9, section (3)(c)(2), the statement is made that insurance will not
be available if good farming practices are not followed, with the
unqualified warning that if ``any farming practice is not established
or widely used in the area, it may not be considered a good farming
practice.'' In this instance, there is not even an attempt to reflect
the ARPA provision in question. This sentence is clearly deficient and
at odds with the statute and must be changed to comply with section 123
of ARPA.
Response: Since the definition of ``good farming practices'' in the
GRP policy specifically references both sustainable and organic farming
practices as ``good farming practices,'' it is not necessary to repeat
these terms wherever ``good farming practices'' is used in this rule.
FCIC agrees the reference to ``widely used'' should be removed and has
revised section 3(c)(2) accordingly. A similar reference has also been
removed from the definition of ``good farming practices.'' These
references were removed because ``common usage'' is not a useful
measure to determine whether a practice is acceptable. The more
accurate measure is whether the
[[Page 37701]]
practice is generally recognized as agronomically sound since generally
recognized is a judicially determined objective standard.
Comment: A few commenters asked if it is intended that organic
crops will be insurable under the GRP policy. If so, the commenter
questioned whether they will be referred to as ``organic,'' or simply
fall under the generic heading of that crop. The commenters states that
if they will not receive ``special'' or distinct treatment under GRP,
there is no need for separate references to ``organic'' in the GRP
policy. The commenters also stated the definition of ``good farming
practices'' should be the same in the GRP policy and the Basic
Provisions. The commenters also asked that the Corporation include the
regulatory sections in 7 CFR part 400, subpart J if it extends or re-
opens the comment period on the crop insurance rules.
Response: Although organic farming practices will be insured under
the GRP policy, the organic crop will be insured using the same NASS
yield and expected market price as all other crop practices. Therefore,
organic crops are not insured separately from any other type of the
same crop. The definitions of ``good farming practices'' have been made
consistent to the extent possible in both the GRP policy and the Basic
Provisions. The only differences are due to the fact that GRP is not a
production based policy. At the time that the comment period for the
proposed rule was extended, FCIC did not know that there was an issue
regarding the reconsideration process published in 7 CFR part 400,
subpart J. However, now that FCIC has considered all the comments, it
realizes that amendments are required to subpart J as stated below.
Since changes to subpart J were made only in response to comments
received, an additional comment period was not required.
Comment: Several commenters recommended adding a definition of
``actual production history (APH).'' Some of the comments suggested the
definition cross reference 7 CFR part 400, subpart G.
Response: FCIC agrees with the comments and has added a definition
of ``actual production history (APH).''
Comment: Several commenters recommended adding the definition of
``area.'' Some of these commenters stated a definition is warranted
because it is possible to interpret ``area'' to be surrounding
townships, sections, etc., and the term could mean something different
depending on the region of the country where the crop is grown. Another
commenter stated that a definition is needed since the term ``area'' is
used throughout the policy. Another commenter stated it is not clear
who determines the area. An additional commenter stated the use of the
term ``area'' should be consistent throughout the policy. One commenter
recommended the definition take into consideration a three-mile
perimeter from the unit and consider the soil, climate, water, and
topographic conditions and other circumstances substantially similar to
those in the unit.
Response: FCIC agrees the term ``area'' should be defined. A
definition has been added for ``area,'' which encompasses all usages of
the term in the policy. The insurance provider is responsible to
determine the area in accordance with the definition. The definition of
``area'' cannot be limited to a certain size because many usages of the
term require that the area have same characteristics, which may not fit
within the suggested size.
Comment: A commenter recommended adding the definition of ``average
yield.'' A commenter stated the definition of ``average yield'' is
verbatim with the definition of ``approved yield,'' although as used in
the program the two terms have very different meanings. The commenter
recommended revising the definition of ``average yield'' and to
consistently use each term in a manner consistent with its respective
definition. Several commenters recommended revising the definition of
``average yield'' by changing ``* * * including any adjustments * * *''
to ``* * * prior to any adjustments * * *'' and/or including a
reference to the average yield as the ``preliminary'' APH yield, as
used in the Crop Insurance Handbook (``CIH''). A commenter recommended
reconsidering the reference to section 36 in the definition of
``average yield'' since ``average yield'' is used in rate calculations
for yield floors as well.
Response: The definition of ``average yield'' was included in the
proposed rule. FCIC agrees the definition of ``average yield'' should
not be the same as the definition of ``approved yield.'' The
definitions of ``average yield'' and ``approved yield'' have been
revised in this final rule such that the approved yield is the yield
after it has been adjusted in accordance with the policy provisions.
The average yield is the yield prior to any such adjustments. A
reference to ``preliminary APH yield'' is not included in the final
rule because it is not used in the policy. If the term is used in the
CIH, it should be defined there. FCIC agrees the reference to section
36 does not include all adjustments that may be made prior to
calculating approved APH yields and has revised the definition of
``average yield'' to include other adjustments.
Comment: Several commenters indicated buffer zones cannot prevent
drift and unintended contact, and, at best, can only minimize
contamination. Some of the commenters recommended revising the
definition of ``buffer zone'' by replacing the words ``prevent the
possibility'' with ``minimize the possibility.'' Other commenters
recommended FCIC accept any buffer zone approved by an organic farm's
accredited certifier, used in any certified organic operation, or
included in an organic plan.
Response: FCIC agrees buffer zones cannot always prevent
contamination of organic acreage and has replaced the word ``prevent''
with the word ``minimize'' in the definition of buffer zone. FCIC
agrees that buffer zones should be those included in the organic plan
that have been approved in writing by an accredited certifier. However,
FCIC cannot accept buffer zones that are used in any certified organic
operation, unless such buffer has been approved by the certifying
agent, to avoid any conflicts within the policy. FCIC has clarified the
definition accordingly.
Comment: A commenter asked how a company, agent or adjuster will
know if the certifying agent is ``accredited by the Secretary.''
Response: The company, agent or loss adjuster can determine whether
a certifying agent is accredited by the Secretary by accessing the list
of accredited certifying agents on the National Organic Program Web
site at http://www.ams.usda.gov/nop/CertifyingAgents/Accredited.html.
Comment: A few commenters recommended defining ``commonly used.''
Response: The phrase ``commonly used'' has been removed from this
rule, including the proposed definition of ``good farming practices,''
because FCIC has determined that it is not a useful measure to
determine whether a practice is or is not acceptable in an area. The
more accurate measure is whether the practice used is generally
recognized as agronomically sound since generally recognized is a
judicially determined objective standard.
Comments: Many comments were received regarding the definition of
``cover crop.'' The comments are as follows: (1) Several commenters
recommended revising the definition to indicate the effect on coverage
of haying, grazing or otherwise harvesting the cover crop. The
commenters stated it is important to clarify commercial use of a cover
crop can affect coverage for other crops on the same acreage; (2) A
[[Page 37702]]
few commenters stated the definition should be consistent with the
definitions of ``first crop'' and ``second crop.'' One commenter asked
if the reader should be referred to the definition of ``second crop;''
(3) Several commenters recommended revising the definition to exclude
acreage eventually used for haying or grazing, intended for harvest.
Other commenters thought it would be helpful to clarify ``left in
place'' means not haying, grazing or harvesting; (4) A commenter
suggested adding ``as defined by FCIC'' to the proposed definition; (5)
Several commenters stated the definition of ``cover crop'' is too
restrictive and inaccurate because it requires widespread or common
usage before innovative alternative practices are recognized. A few of
the commenters recommended replacing ``commonly used in the area'' with
``agronomically appropriate to;'' (6) A few commenters recommended
adding purposes for cover crops such as enhancing soil health and
nutrient availability, controlling weeds and pests, reducing fertilizer
and pesticide costs, conserving water moisture, and protecting water
quality; (7) A few commenters suggested deleting the proposed language
indicating cover crops are generally left in place for an entire
growing season. Some of the commenters stated producers will plant more
than one cover crop on the same ground at different points during the
same growing season, and cover crops often bridge two growing seasons;
(8) A commenter recommended using the following definition: ``A crop or
a succession of crops that are agronomically appropriate which are
planted for green manure, erosion control, to enhance soil health and
nutrient availability, control weeds and pests, reduce fertilizer and
pesticide costs, conserve water moisture, and protect water quality.
The crop is generally left in place for a portion of the growing
season, an entire growing season, or bridging two growing seasons;''
(9) A few commenters stated using the phrase ``generally left in
place'' causes the definition of ``cover crop'' to be unclear and
creates ambiguity. Some other commenters recommended deleting
``generally left in place for one growing season;'' (10) A few
commenters asked if grain planted for wildlife qualifies as a cover
crop;'' (11) A commenter asked if ``left in place'' meant it cannot be
hayed or grazed; (12) A commenter recommended defining ``green
manure;'' (13) A commenter suggested inserting ``surrounding'' before
``area'' in the definition of ``cover crop;'' (14) A commenter stated
it is unclear what constitutes or qualifies as a cover crop; and (15) A
commenter stated a cover crop could be commonly planted but not meet
the requirements in the Prevented Planting Loss Adjustment Manual, and
the definition should be more crop specific.
Response: FCIC does not agree the definition should include the
insurance coverage impacts of haying, grazing or otherwise harvesting a
cover crop. Those provisions are more appropriately included in
sections 15 and 17, which state the impact on insurance if a cover crop
is hayed, grazed or otherwise harvested. Therefore, no change has been
made in response to this recommendation. FCIC has revised the
definition of ``second crop'' to include cover crops. FCIC agrees the
definition of ``cover crop'' should refer to the definition of ``second
crop'' and has revised the definition accordingly. FCIC does not
believe excluding hayed or grazed acreage from being a cover crop in
the definition is as clear as stating the consequences of haying or
grazing the cover crop in sections 15 and 17. Therefore, the
recommended change has not been made. Use of the phrase ``as defined by
FCIC'' in a definition only creates ambiguity because FCIC can only
define terms in the definitions. Therefore, no change has been made in
response to this recommendation. As stated above, FCIC has removed all
references to ``commonly used'' and instead replaced it with the
requirement that the cover crop be generally recognized by agricultural
experts as agronomically sound for the area. FCIC agrees to add a
definition of the term ``generally recognized.'' ``Left in place'' in
the proposed provision did not mean it could not be hayed or grazed. In
the proposed definition, it was intended to mean the crop would remain
on the acreage for one growing season. However, FCIC agrees with
comments recommending deletion of provisions indicating cover crops are
generally left in place for one growing season and has removed this
provision. FCIC has not accepted the recommended definition of ``cover
crop'' because it is too restrictive to list the possible uses. FCIC
agrees there are many uses for cover crops and has elected to remove
the specific uses, other than the most common which is erosion control,
and instead has referenced the purpose of cover crops as being related
to conservation or soil improvement. However, FCIC has adopted a
similar standard of agronomic soundness in its definition. A crop
planted for wildlife use may qualify as a cover crop if it complies
with the definition of ``cover crop.'' Since FCIC has removed the
specific uses from the definition, the term ``green manure'' no longer
needs to be defined. FCIC has defined the term ``area.'' Therefore,
there is no need to include the term ``surrounding.'' With respect to
what qualifies as a cover crop, provided that the crop meets the
definition, it will be considered a cover crop. FCIC has revised the
definition to improve clarity and all procedures will be revised to be
consistent with such definition.
Comment: A few comments were received regarding the definition of
``double crop.'' The comments are as follows: (1) A commenter
recommended amending the definition of ``double-crop'' by stating ``two
or more different crops;'' (2) A commenter recommended replacing
``practice'' with ``cultural agronomic practice;'' (3) A commenter
recommended clarifying that the words ``the practice of * * *'' means
it is routinely done by the grower, not just one time; and (4) A
commenter recommended including, in the definition of ``double-crop''
information about a third crop on the same acreage if two crops have
already been planted in the same year, even if either or both crops
fail.
Response: Although not common, double cropping requirements could
be met with multiple plantings of the same crop, such as tomatoes or
other vegetable crops that have multiple planting periods and harvests
in the same crop year. No changes have been made in response to this
comment. To eliminate any ambiguity caused by the different uses of the
term ``practice,'' it has been removed from the definition. It is not
necessary for the definition to require routine performance of double
cropping because the provisions in sections 15 and 17 specify the
producer must have double cropped acreage in at least two of the last
four crop years in which the first crop was planted or grown on it. No
changes have been made in response to this comment. Since the
provisions in section 9 specify how crops planted following a second
crop will be handled, it is not necessary to include such a provision
here. No changes have been made in response to this comment.
Comment: Several comments were received regarding the proposed
definition of ``first crop.'' The comments are as follows: (1) A few
commenters recommended defining ``first insured crop'' rather than
``first crop;'' (2) A commenter stated it is irrelevant if the first
crop is insured or not; (3) A commenter stated, for the purposes of
prevented planting, it should not be
[[Page 37703]]
necessary for the ``first crop'' to be insured and the term should be
consistent with the definitions of ``cover crop'' and ``second crop;''
(4) A few commenters recommended separate definitions for ``first
crop'' and ``first insured crop'' and a review of the provisions in
which the terms are used; (5) A few commenters are concerned about
situations in which a first crop is planted and not insured; (6) A few
commenters are concerned about making the assumption that ``first
crop'' and ``crop'' are to be interpreted differently, and that there
will be confusion when dealing with double-cropping or following
another crop and not following another crop practices for crops such as
soybeans. One of these commenters was also concerned about the extra
work and confusion generated due to the necessity of explaining
potential outcomes to insureds of planting a second crop and of
insureds making decisions to insure only some acreage of a crop; (7) A
commenter recommended revising the definition of ``first crop'' as
follows: ``The first agricultural commodity planted on any specific
acreage that would reach maturity in the current crop year;'' and (8) A
commenter stated the example in the definition of ``first crop'' fails
to address short-rated wheat.
Response: For the reasons stated below, FCIC agrees with the
commenters that using the term ``first insured crop'' would be less
confusing to administer than the term ``first crop'' and it has revised
its definitions and other provisions accordingly. Section 108 of ARPA
clearly requires that to qualify as the first crop, the crop must be
insured. As stated above, FCIC has made the definitions of ``first
insured crop,'' ``second crop'' and ``cover crop'' consistent with one
another. If a first crop is planted and not insured, it is not
considered a first crop and the subsequently planted crop, if insured,
would be the first crop. FCIC cannot accept the recommended definition
of ``first crop'' since the requirements for a first crop are
specifically stated in section 108 of ARPA, which includes the
requirement that the first crop be planted for harvest in the crop
year, not just reach maturity in the crop year, which is reflected in
the proposed definition. The definition only requires that the crop be
insured and planted for harvest, not actually harvested. Since short
rated wheat is planted for harvest, it would qualify as a first crop.
Comment: Several commenters recommended separating fall and spring
crops when defining ``first crop.'' The commenters did not think that
the intent of ARPA was to discourage coverage of multiple crops in
different crop seasons, and instead think the intent is to limit
multiple crops within the same crop season, and recommended revising
the definition of ``first crop'' to include the crop season. The
commenters further stated the first spring seeded crop should be the
``first crop'' even though an insurable fall-seeded crop was planted on
the same acreage.
Response: FCIC disagrees with the commenters. The provisions of
ARPA do not distinguish between fall and spring season crops. The
definitions of first and second crops contained in ARPA specifically
reference the crop year rather than crop season. Since fall and spring
crops are planted for harvest in the same crop year, they cannot both
be considered as first crops. Therefore, no change has been made.
Comment: There were a large number of comments regarding the
definition of ``good farming practices'' and for the purposes of
addressing these comments, FCIC has grouped them into four following
categories: (a) reasons the definition is generally inadequate; (b)
statements and questions regarding the definition; (c) recommended
replacement definitions; and (d) concerns regarding organic and
sustainable farming practices.
(a) Many commenters stated the definition of ``good farming
practices'' is inadequate for the following reasons: (1) It fails to
establish a standard which is objective, consistent or ascertainable;
(2) It is confusing, poorly worded, and may open up ``good farming
practices'' to include virtually anything due to the language included
in the last sentence; (3) There is no objective standard because it is
whatever FCIC says it is; (4) Producers nor insurance providers will be
able to determine whether FCIC has recognized a particular practice to
be necessary, and certainly not on a timely basis; (5) It instructs the
producer to ``contact'' the company ``to determine if such practice is
insurable'' but does not tell how the company is to establish whether
FCIC recognizes a particular practice as necessary; (6) It lacks
recognition of the thousands of permutations of seed, seeding rate, row
spacing, tillage practices, fertilization, irrigation, chemical
application, herbicide application, harvesting procedures, and the
timing of each that are currently loosely defined as ``good farming
practices;'' (7) The word ``should'' used in a statutory or contractual
context always invites problems (the commenter stated ``should''
denotes an aspirational goal and aspirational goals are for preambles
and political speeches, not contractual or statutory terms; (8) Use of
the words ``area,'' ``commonly,'' and ``widely'' (also used in sections
3 and 8) creates ambiguity; (9) It does not address whether a common
practice is an insurable practice, e.g., it is a ``common'' practice in
Iowa and Missouri to plant Roundup-ready seed into established grass,
then burn it down; however, this is not an insurable practice; (10)
Inclusion of ``agronomic and weather conditions in the area'' implies a
temporal dimension that may invalidate certain practices that would
normally be considered good; (11) The term ``farming practice'' is not
defined; (12) It is unclear who makes the determination of good farming
practices (FCIC, NRCS, and private insurers are all referenced or
cross-referenced in the definition); (13) It infers that only
sustainable conventional practices are recognized as being good farming
practices; and (14) Farmers will miss planting windows because FCIC
will not be able to provide determinations quickly when they are
needed. One of these commenters asked what was meant by ``recognized.''
Response: FCIC agrees that the definition of ``good farming
practices'' should have an ascertainable standard and has revised the
definition to include production methods generally recognized by the
agricultural experts for the area. Further, as stated above FCIC has
added a definition of ``generally recognized'' to add objectivity to
the definition. FCIC agrees it is not reasonable to expect FCIC to know
all good farming practices for all crops. The definition has also been
revised to indicate the insurance provider will continue to make the
determination of whether the production method is a good farming
practice and FCIC will only assist in making such determinations if
asked. If asked, FCIC will consult with agricultural experts familiar
with a specific area for assistance in determining good farming
practices in these cases. FCIC will also provide procedures informing
insurance providers or insureds where to send requests for a
determination of good farming practices. FCIC agrees with the commenter
regarding the term ``should'' and for this and other reasons stated
above, FCIC has removed the entire sentence from the definition. FCIC
has defined the term ``area'' for the purposes of clarity and has
removed the references to ``commonly'' and ``widely.'' FCIC does not
agree the definition should address whether or not a farming practice
is insurable. Insurable practices are designated in
[[Page 37704]]
other parts of the policy. FCIC does not agree with the comment
regarding temporal and agronomic conditions. Climatic and agronomic
conditions such as soil type and annual rainfall are not temporal.
Further, even localized weather conditions should be considered in
determining whether a production method is a good farming practice
because they have an impact on the growth of the crop. References to
weather and agronomic conditions have been removed from the definition
of ``good farming practices'' and placed in the definition of ``area.''
FCIC agrees what constitutes ``farming practices'' should be included
in the definition and has revised the definition to explain they are
productions methods utilized to produce the insured crop. The comment
regarding the inference that only sustainable conventional practices
are recognized as good farming practices has been clarified to
distinguish between conventional, sustainable, and organic agricultural
practices. Since insurance providers will be making these
determinations, the timing should be no different than under the
previous definition under most circumstances.
Comment: Many commenters had the following statements and questions
regarding the definition of ``good farming practices:'' (1)
Substituting FCIC and NRCS as arbiters in place of Extension does
little to rectify the problem, and they recommend greater clarity about
how good farming practice decisions will be made and by whom, and how
they will be communicated to all parties; (2) Recommend clarifying what
``recognized by FCIC'' means; (3) The definition of ``good farming
practices'' does not include the ``common usage'' test, but looks for
practices that are compatible with the agronomic and weather conditions
in the area--it is too vague to be meaningful to producers; (4) The
definition misapprehends the role of accrediting agencies under the
National Organic Program because they do not ``recommend'' farming
practices; (5) The most effective means of enhancing the integrity of
the Federal crop insurance program and reducing producer fraud and
abuse would be to establish a totally objective ``good farming
practices'' standard, and one that can be ascertained very quickly in
all circumstances; (6) A question was asked regarding whether FCIC is
changing what practices are insurable with the new definition; (7) A
listing of ``good farming practices'' is necessary and producers must
know where to find the listing since the insured has the right to know
which practices are recognized by FCIC; (8) A question was asked
whether FCIC will publish a listing of ``good farming practices'' and
will the information be contained in the Special Provisions; (9) It
will be a huge task to list the thousands of good farming practices and
there is no provision for producers to request an appeal if a certain
practice is not listed; (10) The reference to ``produce at least the
yield used to determine the production guarantee'' may cause confusion
in replant situations since planting after the final planting date
results in yield reductions; (11) It is necessary to establish a
procedure for quick turn around time for the many questions companies
will receive from policyholders; (12) A question was asked what process
will be used to obtain approval of a farming practice from FCIC and is
it the obligation of the insured, as opposed to the insurance provider,
to obtain a decision; (13) A question was asked how will the insured
and insurance provider know, in advance, what FCIC considers to be good
farming practices for a given county; (14) It is necessary for
producers to know, up front, which practices FCIC will accept and it is
necessary for FCIC to publish something by crop, state and county by a
certain date; (15) FCIC should not have the ability to second-guess
after the fact, rather its determinations must be made known up front
at the same time growers are faced with the situations that cause
disputes; (16) Add a review process for ``good farming practices''
determinations that requires the producer to be given an opportunity to
review and respond to the evidence available to or considered by the
agency staff person who made the original adverse determination; (17)
FCIC does not have sufficient knowledge to know what sustainable and
organic practices should be considered good farming practices; (18)
FCIC failed to capture the intent of Congress to reduce discrimination
against producers using sustainable and organic farming practices;''
and (19) ``Common usage'' is a poor proxy for ``scientific soundness,''
the criteria set by Congress and indicated reference to common usage
recurs throughout the rule, including Sec. Sec. 407.9(3)(c)(2) and
457.8(b)(2).
Response: FCIC has revised the provision and now the insurance
providers will be making the determinations based on what agricultural
experts determine are generally recognized production methods. FCIC has
clarified that it will only make such determinations if asked to do so.
FCIC has deleted the reference to ``recognized by FCIC'' so no
clarification is needed. FCIC has clarified the provisions by using
weather, agronomic and other conditions to define the area. With
respect to good farming practices, FCIC has clarified that the key is
whether the crop will make normal progress toward maturity and produce
the specified yield. Such determinations are made by agricultural
experts based on generally recognized production methods. FCIC agrees
that the accrediting agency may not recommend farming practices.
However, in the organic plan, the accrediting agency must approve the
production methods to be used by the producer. FCIC has revised the
definition to add objectivity and allow determinations to be made as
expeditiously as possible. FCIC has not changed the practices that are
insurable with the new definition. It has simply clarified what
constitutes a good farming practice. Insurable practices are designated
in other parts of the policy. Since FCIC will no longer be making the
determinations of good farming practices, it does not intend to develop
or provide a listing of good farming practices. As pointed out by
commenters, the large number of farming practices in use would make
such a list extremely difficult, if not impossible to produce and
maintain. Determinations must be made on a case by case basis based on
individual farming operations. FCIC has revised the definition to
account for late planted acreage. Since insurance providers will be
making the determinations, the turn around time should be no different
than under the current provisions. Since the definition has been
revised, comments regarding decisions made by FCIC are no longer
applicable for a majority of the producers. FCIC intends to issue
procedures for those situations where FCIC is asked to render a
determination. The reconsideration process requires FCIC to review any
initial determination made by the insurance provider if it is disputed
by the producer. However, initial determinations will be made by the
insurance provider and can be made up front at the request of the
producer. In the reconsideration process, the producer will have an
opportunity to review and respond to the information upon which the
initial determination of good farming practices has been made.
Decisions made by FCIC in the reconsideration process will not be
subject to further administrative appeal. FCIC agrees neither it nor
the insurance providers have all the knowledge necessary to determine
good sustainable or organic farming practices and,
[[Page 37705]]
therefore, has deferred such determinations to agricultural experts who
do have the knowledge to determine good farming practices. FCIC does
not believe the definition contained in this final rule discriminates
against any producer. The definition allows sustainable practices to
include those generally recognized by the agricultural experts and good
organic farming practices to include those generally recognized by the
organic agricultural industry, or contained in the organic plan.
Further, since the expectation is that crops produced under a
sustainable practice will produce the same yields as a crop produced
under a conventional practice, the definition should not discriminate
between these practices. In response to previous comments, the term
``common usage'' has been removed from the definition.
Comment: Commenters recommended replacing the proposed definition
of ``good farming practices'' with the following: (1) ``Farming
practices, including sustainable farming practices, generally
recognized and used by agricultural producers in soil, climate, water,
topographic and other circumstances substantially similar to yours to
assure the insured crop makes normal progress toward maturity and
produces at least the yield used to determine the production guarantee
or amount of insurance.'' The commenter stated ``Generally recognized''
is a phrase venerated in accounting, engineering, legal and other
contexts, and which has been widely interpreted by courts to mean just
what it says; in this proposed definition, ``good farming practices''
would be what good farmers do, an objective and ascertainable standard,
not what academics theorize or the Agency decrees; (2) ``Those farming
practices recognized and required by RMA for the crop to be insured.
Good farming practices are those necessary to enable the crop to make
normal progress toward maturity and produce at least the guaranteed
insurable yield. For crops that have not previously been insured or
insurable under the Act, RMA will determine guidelines for acceptable
good farming practices for each crop in each area and post that
information on the RMA Web site. Otherwise, acceptable good farming
practices are those farming practices commonly used in the area,
compatible with the agronomic and weather conditions in the area, and
that have proven to successfully produce at least the guaranteed
insurable yield of the particular crop in the area. It is your
responsibility to find out what the good farming practices for your
crop in your area are and to follow those practices in order to produce
an insurable crop. We suggest you contact your nearest Cooperative
State Research, Education, and Extension Service (CSREES) office to
obtain this information and recommendations for growing your crop. You
should contact us if you have any questions regarding good farming
practices, especially if you intend to use a farming practice not
commonly used in the area or that differs from the recommendations
obtained from CSREES;'' and (3) ``Farming practices used by the
majority of growers in the county and proven to be sufficient to
establish the crop and produce a yield equal to at least the yield used
to establish your guarantee.''
Response: FCIC agrees in principle with the comment recommending
good farming practices being generally recognized in the area. However,
such a determination should be made by agricultural experts and FCIC
has revised the final definition accordingly. FCIC has also improved
the definition of ``good farming practices'' by adding a definition for
``area'' and ``generally recognized,'' clarifying the late planting
issues, and that it is insurance providers that make determinations and
FCIC will only make a determination if asked. The recommendation that
would have required FCIC to recognize all good farming practices, post
information on the website regarding determination of good farming
practices for new crops, and otherwise provides for a ``common usage''
test, is cumbersome and does not eliminate deficiencies noted by other
commenters. The recommendation requiring a majority of producers in the
county to use the practice would be difficult to administer, does not
address concerns regarding sustainable or organic practices, and also
does not eliminate deficiencies noted in the comments received.
Comment: Commenters recommended revising the definition of ``good
farming practices'' to: (1) Distinguish between sustainable and organic
farming practices and address both in each reference to good farming
practices; (2) Clearly place sustainable and organic practices on an
equal footing with conventional practices; (3) Include a statement of
non-discrimination against sustainable and organic practices and
systems; (4) Not require sustainable or organic farming systems to be
commonly in use in a given geographic area in order for producers using
those systems to be eligible; (5) Make the definition in the Basic
Provisions consistent with that in the GRP by including references to
organic farming practices, and to add ``* * * organic farming practices
will be considered to be good farming practices if they are those
specified in the organic plan,'' (found in section 37 of the proposed
Basic Provisions) to the definition in both policies; (6) Remove any
suggestion the burden of proof lies with the producer or that private
insurers will be the final arbiters of what constitutes good farming
practices; (7) Replace ``area'' with ``county;'' (8) State farming
practices not commonly used in the area would not be insurable unless
approved by written agreement; and (9) Include organic systems in the
definition of ``good farming practices'' by adding ``For crops grown
under an organic practice, the farming practices included in an
approved organic farm plan and those practices approved by a private
organization or government agency that certifies organic products in
accordance with 7 CFR part 205 and is accredited in accordance with the
requirements of the National Organic Food Production Act of 1990.
Commenters suggested this addition would include those who have the
knowledge and expertise necessary to make experience based
determinations, and that FCIC, NRCS, and private insurers have an
insufficient knowledge base and training to make appropriate
determinations.
Response: FCIC agrees the definition should distinguish between
sustainable and organic farming practices and has revised the
definition accordingly. Further, the definition has been revised to
treat sustainable, organic, and conventional practices equally. In
response to previous comments, the term ``common usage'' has been
removed from the definition. The definitions in the Group Risk Policy
and in the Basic Provisions have been made consistent in this final
rule to the extent possible and since reference to organic farming
practices has been added to the definition, FCIC has removed the
proposed section 37(f). The producer is required to be in compliance
with the policy terms. The insurance provider is supposed to verify
that such compliance has occurred, which includes a determination of
whether good farming practices have been followed, and ultimately FCIC
will make the determination of good farming practices in the
reconsideration process. The term ``area'' has been retained in the
definition and has been defined. The term ``county'' was considered but
not used because it is too restrictive in many instances because the
area is defined by characteristics of the acreage, not a political
subdivision. Requiring
[[Page 37706]]
the use of written agreements would be discriminatory against producers
who use good farming practices that are not commonly used in the area,
such as some sustainable practices. Therefore, this change has not been
made. FCIC has revised the definition of ``good farming practices'' to
include similar language to the recommended language regarding organic
farming.
Comment: Several commenters stated the definition of ``prohibited
substance'' is incomplete because it does not specify what list will be
used to determine ``prohibited substances.'' The commenters recommended
clarifying if the listing of prohibited synthetic substances and the
list of acceptable natural substances attached to the National Organic
Program (NOP) will be used or if other lists will be used. Some
commenters recommended clarifying that the list of prohibited synthetic
substances and the list of acceptable natural substances of the NOP are
the lists to be used.
Response: FCIC has revised the definition to include a reference to
the lists of prohibited and acceptable substances published at 7 CFR
part 205.
Comment: A commenter asked what the difference is between
``certified organic,'' ``organic'' and ``transitional organic''
acreage, and recommended either defining ``organic acreage'' or
removing it from the definition of ``prohibited substance.''
Response: The proposed provisions define ``certified organic
acreage'' and ``transitional acreage.'' The term ``transitional organic
acreage'' is not used nor defined in the provisions. The difference
between transitional acreage and certified organic acreage is that
transitional acreage may have organic practices used but it has not met
the requirements to be considered certified organic acreage by the
certifying agent. FCIC agrees with the commenter that reference to
``organic acreage'' should be removed from the definition of
``prohibited substance'' because the term ``organic acreage'' could be
misleading and is not defined or used elsewhere in the provisions.
Therefore, FCIC has revised the definition of ``prohibited substance''
to remove the reference to ``organic acreage.''
Comment: Several comments were received regarding the proposed
definition of ``second crop.'' The comments are as follows: (1) A
commenter suggested the defined term state the significance of summer
fallow and continuous cropping practices; (2) A commenter stated the
concluding sentence should be eliminated because a cover crop planted
after a first crop should not be considered a second crop when it is
hayed, grazed or otherwise harvested; (3) A commenter stated the
definition needs to be made consistent with the definition of ``cover
crop'' and ``first crop;'' (4) Several commenters stated the word
``immediately'' in the first sentence should be deleted as it suggests
a specific time to plant the second crop and is ambiguous; (5) Another
commenter recommended defining the term ``immediately;'' (6) A
commenter suggested clarifying multiple crops on the same acreage are
approved provided the actuarial table allows for more than one crop on
the same acreage in the same year; (7) Several commenters stated the
policy does not take into account an initial crop that is not insured
removes moisture and nutrients from the soil, which increases the yield
risk of any following crop; (8) A few commenters stated the phrase
``hayed, grazed, or otherwise harvested'' should be used to be
consistent with other areas in the policy; (9) A few commenters stated
the definition encroaches on the definition of ``cover crop'' by
implying a cover crop can be hayed, grazed or harvested (not remain
``in place''); (10) A commenter stated ``will be'' is an errant change
in tense; (11) A commenter suggested clarifying how a second crop can
be the same crop as a first crop and if the second crop has to be
insured or not; (12) A few commenters stated the definitions would
allow two uninsured crops and then a ``first crop'' which might not
meet the requirements of the definition of ``good farming practice;''
(13) A commenter suggested clarifying how crops with multiple planting
periods will be handled; and (14) A commenter stated the definition may
not be clear to a layman.
Response: FCIC does not agree it is necessary to state the
significance of summerfallow or continuous cropping practices in the
definition of ``second crop.'' Section 108 of ARPA does not make any
distinction with respect to the farming practice used. All that is
material is whether the second crop was planted for harvest. For the
purpose of section 108 of ARPA, FCIC has determined that harvest is the
removal of crop from the acreage by any means. Since haying and grazing
removes the crop from the acreage, it is considered harvested. However,
FCIC has clarified that for the purpose of determining the end of the
insurance period, harvest of the crop will be as defined in the Crop
Provisions, not as determined in the definition of ``second crop.''
FCIC has revised these definitions to ensure that they are not in
conflict with one another. FCIC agrees the word ``immediately'' could
be misinterpreted and has replaced it with the ``next occurrence of
planting.'' Since the second crop is not required to be insured, there
should be no reference to its insurability. Section 108 of ARPA does
not consider the effect of the first crop on the acreage in determining
whether the next crop planted is considered a second crop. As stated
above, if the initial crop planted is not insured, it is not a first
crop. If the initial crop is insured, the only determinant is whether
the next crop was planted for harvest. However, removal of moisture and
nutrients from the soil by the first crop or any previously planted
uninsured crop, or whether the producer used good farming practices
must still be considered in determining whether the crop is insurable.
There are several provisions that limit insurance on multiple crops
and, if planting multiple crops on the same acreage is considered to be
a poor farming practice, then no insurance would be provided for any
crop that is planted using a poor farming practice. FCIC has revised
the provisions to consistently use the phrase ``hayed, grazed or
otherwise harvested'' throughout the Basic Provisions. However, the
definition has been revised to make it clear that for the purposes of
determining the end of the insurance period, the definition of
``harvest'' in the Crop Provisions controls. As stated above, FCIC has
revised the definitions of ``second crop'' and ``cover crop'' to ensure
that they are consistent with each other. However, a producer may still
elect to hay, graze or otherwise harvest a cover crop. The definition
of second crop is intended to provide the conditions under which a
cover crop will be considered to be a second crop. The definition has
been revised to make it clearer that planting of the same crop twice on
the same acreage in the same crop year may be considered as both a
first and second crop if replanting is not required by the policy. FCIC
agrees the definition should be modified to indicate the second crop
does not have to be insured to be considered a second crop and has
modified the definition accordingly. The revisions made in response to
the comments clarify the definition. Crops with multiple planting
periods may qualify as first and second crops and will be administered
accordingly. For example, if a crop is planted in one planting period
and the same acreage is subsequently planted to the same crop in the
next planting period, and replanting is not required under the policy,
the first and second crop
[[Page 37707]]
provisions of the policy would be applicable.
Comment: Several commenters stated that if the term ``Secretary''
is used only in the definition of ``certifying agent'' it might be
better to refer to the ``Secretary of Agriculture'' in that definition
rather than adding a new definition.
Response: FCIC agrees with the commenters and has deleted the
definition of ``Secretary'' and amended the definition of ``certifying
agent'' as suggested.
Comment: Commenters stated the following regarding the definition
of ``sustainable farming practice:'' (1) The proposed definition is
narrow and makes ``sustainable farming practice'' synonymous with
conservation practice standards in the local NRCS Field Office
Technical Guide; (2) Merely cross referencing another agency's criteria
for conservation practices without some critical analysis to determine
the adequacy of those standards for crop insurance purposes is
insufficient and a more accurate definition is needed; (3) The
definition should, at the very least, reflect the existing statutory
definition of sustainable agriculture (7 U.S.C. 3103(17)) and
incorporate an ``including'' clause to reference the NRCS or university
extension approved practices and systems; (4) Producers and reinsured
companies should not be shunted off to NRCS to find out what counts as
a ``sustainable farming practice;'' (5) RMA should consult with USDA's
Agricultural Research Service (ARS) and the Organic Farming Research
Foundation in developing a framework for a good sustainable and organic
farming practices definition that recognizes current practices as well
as providing provisions for the kind of experimentation--for instance,
in varied and complex crop rotations--that may be unfamiliar to RMA but
have made organic farming the successful and reliable practice it is
today; (6) The definition could be deleted since the term is not used
anywhere except in the definition of ``good farming practices;'' and
(7) NRCS is not defined as part of the USDA.
Response: FCIC agrees the definition should be broadened and has
revised the definition to remove the reference to NRCS and incorporate
those practices generally recognized agricultural experts for the area
to conserve or enhance the environment. This revision allows experts to
determine whether the practice used is appropriate for the area.
Although NRCS and others may have guidelines or regulations regarding
sustainable farming practices it should not be necessary to reference
them in this policy. It is inappropriate to incorporate the definition
of ``sustainable agriculture'' from 7 U.S.C. 3103(17) because it
includes provisions that are not suitable for an insurance policy such
as sustaining and enhancing economic viability and quality of life.
FCIC has incorporated those provisions regarding enhancing and
conserving natural resources. FCIC has included provisions that would
be permit consultation with ARS and the Organic Farming Research
Foundation to determine whether the farming practice used or to be used
qualifies as a sustainable farming practice. Just because a term is
only used once, it must still be defined if there could be any
confusion as to its meaning. Since the term ``NRCS'' is removed from
the definition, it is not necessary to define it.
Comment: Several commenters thought the provisions in section 3(f)
would encourage producers to make a decision to plant or not plant
based on the effect planting has on the APH.
Response: Due to other revisions, the applicable provision is now
section 3(e). Producers must make their decisions based on what is best
for their farming operations. However, sometimes those decisions have
consequences. Under this provision, if the producer elects to plant
after a crop has been prevented from being planted, the consequence is
that the producer will receive a yield for the purposes of APH. Since
this is statutorily mandated, FCIC has no choice but to include the
provision even though it may affect the producer's decision.
Additionally, FCIC has revised section 3(e) to clarify that the
provisions contained therein do not apply if the double cropping
requirements have been met, because section 108 of ARPA specifies that
if the producer meets the double cropping requirements, the assigned
yield will not be included in the APH for the first insured crop that
was prevented from being planted.
Comment: A few commenters acknowledged the provisions in section
3(f) are mandated by ARPA, but stated there will be a number of
underwriting and data processing questions to be resolved in order to
be able to implement this in the APH process. For example, separate
yield descriptors may be needed to identify prevented planting yields
and blended yields and the addition of prevented planting data to the
Policy Holder Tracking System. In this case, there may be more detail
in section (3)(f)(1)-(3) than is needed in the basic policy language.
As written, it will require data processing changes to at least three
APH entries (total production, acres and per-acre yield) when, if not
mandated by the policy language, it might be possible to achieve the
same result while only affecting the per-acre yield entry.
Response: Even though it may affect several APH entries and some
systems may be impacted, it is important that the information be in the
policy so the producer can determine how planting a second crop will
affect his or her yield. No change has been made.
Comment: A commenter suggested changing ``APH yield'' to ``approved
yield'' in section 3(f).
Response: FCIC agrees with the comment and has changed the
provision accordingly.
Comment: A commenter stated section 3(f) applies only to APH crops
and that non-APH crops should be addressed.
Response: Section 108 of ARPA only refers to adjustments to the APH
that are to be used to determine the subsequent years' APH. There are
no references to other plans of insurance. No change has been made.
Comment: A few commenters recommended deleting section 3(f)
because, in prevented planting situations, there is no actual
production history.
Response: FCIC cannot delete redesignated section 3(e) because
section 108 of ARPA now requires a yield be determined for prevented
planting acreage to be used in the actual production history. No change
has been made.
Comment: A commenter stated section 3(f) is confusing and
recommended calculating the APH based on the harvested acreage in the
unit when at least 35 percent of the acreage in the unit is harvested.
Response: Section 108 of ARPA mandated that 60 percent of the APH
yield will be included in the APH database for the first crop whenever
the first crop is prevented from being planted and a second crop is
planted. This section did not provide for any exceptions based on the
amount of acreage that is prevented from being planted. No change can
be made.
Comment: A commenter suggested changing the phrase ``its respective
yield determined in accordance with this subsection'' to ``60 percent
of the approved yield'' in section 3(f)(1).
Response: FCIC agrees and has revised the provision accordingly.
Comment: Many commenters commented on the provisions proposed in
section 9(a)(8) that allow a producer to elect not to insure second
crop acreage when there is an insurable loss for planted acreage of a
first crop. The comments are as follows: (1) Several commenters stated
the term ``elect''
[[Page 37708]]
implies a new form is required, and this process would also require the
completion of a new or revised acreage report, which does not seem to
be addressed; (2) Several commenters asked who would record the
election and what procedures would be used; (3) A commenter stated the
provisions should be revised so it is clear to the producer how the
election is to be communicated and documented; (4) A commenter stated a
new form or guideline for the second crop will be needed. They believe
it is unclear if a box to check or a new form will need to be used by
the adjuster when appraising and releasing the first crop. The
commenter added this will be a training issue for all involved; (5)
Some commenters stated the provisions will be difficult to administer;
(6) Some commenters asked why the sentence is in parentheses. They
stated the election is required at time of appraisal, which will
require agent involvement in the loss process, which is prohibited by
the SRA and this language needs to be coordinated with SRA
requirements; (7) A commenter stated the provisions need to be
clarified as to when a company releases the acreage, who is responsible
or able to accept the insured's request to insure the second crop
acreage, the agent or the company; (8) Some commenters stated FCIC
should consider whether this would be more appropriate under section
8--Insured Crop; and (9) A commenter believes a cleaner approach would
have been to simply include language stipulating insurance for a second
crop planted after the failure of an initial crop lost due to non-
emergence of seed would not become effective until the second crop
emerges. They believe such language would prevent payment of a second
indemnity for drought in the same crop year on the same acreage, but
still allow a producer who is lucky enough to establish a second crop
to pay for and receive coverage for the remainder of the insurance
period. The commenter further recommended RMA rescind a 2002 change in
the Agency's Loss Adjustment Manual (LAM) that requires a 15-day
waiting period after the end of the late planting period before a crop
can be appraised for non-emergence. They stated RMA's oft-stated
reasoning behind this rule was it prevents a producer from waiting
until the last day of the late planting period and then being able to
get an adjustment one day later. They suggest if RMA is truly worried
about producers waiting to plant until the end of the late planting
period (and taking a significant reduction of coverage without any
reduction in the associated premium) to get a quick non-emergence
appraisal that they instead create rules to apply directly to those
very few individuals. The commenter believes for instance, RMA could
require a report of the planting date for each insured unit planted
during the late planting period and not allow an appraisal until the
end of the late planting period or at least 7-10 days from the actual
date of planting if planting occurred with less than seven days
remaining in the late planting period. They stated this would allow
producers who planted by the final planting date to get an appraisal at
the end of the late planting period (after their crop has been in the
ground at least 15 days) and establish a minimum 7-10 day emergence
window for crops planted toward the end of the late planting period.
The commenter has in the past been very critical of the addition of the
additional 15-day waiting period due to the fact there is no evidence
they have been able to discover supporting the need for this rule to
address a real problem. Instead, they believe the rule was developed
only to be used as a stop gap method for preventing a producer from
gaining the release of non-emerged acreage and planting a second crop
of grain sorghum before the final planting date. The commenter believes
with the development and implementation of the proposed first crop and
second crop rule, RMA should remove the additional 15-day waiting
period to allow for the timely planting of an uninsured second crop.
They suggested if RMA determines a sufficient number of producers are
taking advantage of the late planting period, RMA should look into a
revised rule similar to the one suggested above to deal specifically
with acreage planted during the late planting period.
Response: Due to other revisions, the applicable provision is now
section 9(a)(7). For GRP policies, the producer will make the election
not to insure the second crop acreage on the acreage report if it
insured under GRP. For policies other than GRP, the provision has been
revised to require that producers provide written notice of the
election at the time the first insured crop acreage is released. The
format of such written notice is up to the insurance provider. FCIC
does not require any specific forms. Under the notice provisions of the
policy, it would be the producer's responsibility to provide written
notice to the agent. As revised, FCIC no longer believes that the
provision will be difficult to administer. Just because a notice is
provided to an agent regarding an election at loss time, this does not
mean that the agent is to be involved in the loss adjustment. The
prohibitions in the SRA continue to apply in these situations. The
agent's role is merely ministerial. The parenthesis have been removed.
FCIC disagrees this provision would be more appropriate in section 8
since this is an insurable acreage issue that only applies to acreage
where a second crop has been planted and is not dependent on the crop
planted. FCIC cannot consider the ``non-emergence of seed'' approach
recommended to resolve multiple benefit issues addressed by ARPA
because section 108 of ARPA specifies that it is applicable whenever
the crop is planted for harvest and there is no requirement that the
crop actually emerge. Since the Basic Provisions do not address the
time a crop may or may not be released, the recommendation to remove
LAM procedures cannot be made in this rule. However, all LAM procedures
will be made consistent with the provisions of this rule. FCIC has also
restructured section 9(a)(7) for clarity.
Comment: Some commenters recommended that section 9(a)(9)(i)(A) be
deleted, and that alternately, if (A) is not deleted, they recommended
it be revised to require all 3 crops to be harvested, not just the 3rd
crop. They also suggested that if (A) is not deleted, the ``or'' be
changed to ``and.'' A commenter asked if this is trying to address a
previous operator on the land, and if not, what it is addressing. They
believe the entirety of sections 9(a)(8) and(9) are very difficult to
administer, and asked whose problem it ultimately is to properly
administer. The commenter stated the agent is saddled with tremendous
errors and omission exposure, and that typically agents enter what the
insured reports. They added this language would require the agent to
ask questions on a hypothetical basis of every insured in an attempt to
determine if a situation might possibly exist, which would be an
impossible situation, and one they believe will only be administered on
a ``gotcha'' basis by RMA.
Response: Due to other revisions, the applicable provision is now
section 9(a)(8). FCIC does not agree the provision can be deleted.
Section 108 of ARPA allows both sections 9(a)(8)(i)(A) and (B) to be
conditions upon which the third crop planted on the acreage in the same
crop year can be insured. FCIC cannot restrict the ability of the
producer to qualify for insurance beyond that specified in ARPA. FCIC
agrees the producer should have evidence that three crops have been
harvested and has revised the provision accordingly. The suggestion to
change
[[Page 37709]]
the word ``or'' to ``and'' cannot be made because ARPA allows either
the producer to prove that they themselves met the requirement or that
previous producers met the requirement on the applicable acreage. Since
it is a condition of insurability, it is the insurance providers
responsibility to determine whether the crops planted in any crop year
are the first, second or third. FCIC understands the provisions are
somewhat complex and may require some additional work. FCIC will assist
the insurance providers in any way it can to facilitate the process.
However, since the provisions are required by ARPA, no change can be
made.
Comment: A few commenters asked which crops section 9(a)(9) is
applicable to (for example, row crops or vegetable crops.) Some of the
commenters asked how it would be determined whether or not it is ``an
established practice in the area to plant three or more crops for
harvest on the same acreage in the same crop year'' and what kind of
documentation would be needed.
Response: The provisions of redesignated section 9(a)(8) are
applicable to all crops, including row and vegetable crops. Whether or
not it is a generally recognized practice in the area to plant and
harvest three crops will be determined by the insurance providers. No
specific documentation is required in the policy. However, if the
insurance provider believes the practice is questionable, it should
obtain a written opinion from agricultural experts, the organic
agricultural industry, or request a determination be made by FCIC.
Comment: A commenter would like to see winter wheat, whether
intended for harvest or not, considered a first crop with regard to
insurability of ``third'' and subsequent crops.
Response: ARPA requires the first crop to be an insured crop and
planted for harvest. Therefore, winter wheat that is not insured or it
is not planted for harvest cannot be considered a first crop when
determining the third or more crops. No changes have been made.
Comment: Numerous commenters expressed concern with the proposed
language in section 14(d)(1) (Your Duties). The comments are as
follows: (1) A commenter objected to the proposed provisions stating it
is unrealistic to expect an insured to maintain separate production
records within the same unit. The commenter also believes the proposed
change would unfairly discriminate against any insured who typically
double crops; (2) A commenter stated the proposed provisions create a
new geographic area or ``subunit'' previously unknown to the federal
crop insurance program. The commenter stated in addition to the
substantially increased administrative burden on the producer,
companies will have to find some way to describe, identify and keep
records about such sub-units, which can be infinite in number and
change their boundaries from year to year. They believe the proposed
provision is simply a bad idea incapable of resuscitation through
improved drafting; (3) A commenter stated the proposed requirements
should only be at the request of the company, otherwise it is
burdensome for both the insured and the company. The commenter stated
the proposed provisions require records by acreage, not unit, which
they feel is probably not practical; (4) A commenter stated the
proposed requirements are too burdensome. The commenter does not
believe it should be necessary to keep records separate between first
and second crops, since all production is aggregated to the unit; (5)
Several commenters stated the proposed requirements are very confusing.
They stated the proposed change creates additional record-keeping
burdens on the insured, especially if portions of a field or unit were
planted to a crop that failed and a second crop is planted on the
entire acreage in the field or unit. The commenters believe keeping
records for the acreage of the second crop where the first crop failed
will be difficult to verify; (6) A commenter stated while the proposed
provisions are necessary, the example of keeping production records
from 10 acres of wheat may not look practical; (7) A commenter stated
the proposed provisions should specifically reference section 15(e)(2)
and not just 15(e); (8) Several commenters stated the provisions are
confusing and should be clarified. They suggested the parenthetical
sentences might be better as a separate item since they provide
additional requirements beyond those in the first sentence of the
paragraph; and (9) A commenter recommended the last sentence be
clarified and specifically state if it is intended to allocate all of
the production from a field or if production will be pro-rated on a per
acre basis.
Response: FCIC agrees the provisions proposed in section 14 (Your
Duties) (d)(1) may require additional burdens on the insured and
insurance provider. However, ARPA requires that insurance benefits for
a first crop be limited when a second crop is planted on the same
acreage in the same year if the producer suffers an insurable loss on
the second crop, except in the case of double-cropping. Therefore,
separate production records are necessary for acreage planted to a
first and second crop to determine the appropriate indemnity reduction.
FCIC cannot eliminate this requirement and still be in compliance with
ARPA. No change has been made. However, if the producer fails to
maintain separate records, provisions are also included in section 14
that allow insurance providers to allocate production. FCIC disagrees
with the comment that the provisions unfairly discriminate against an
insured who typically double crops. Since double cropped acreage is
exempt from the indemnity reduction applicable when a second crop is
planted for harvest, the additional record keeping requirements would
not apply. FCIC agrees that additional records must be maintained for
claim audit purposes. However, no specific subunit is created and APH
records for the subunit would not need to be maintained for future
years. No change has been made. FCIC agrees the reference to section 15
should be changed to reference section 15(e)(2) and FCIC has revised
the provision accordingly. FCIC agrees the parentheses in the proposed
language are not necessary and has removed them and added language to
help clarify this section. FCIC cannot use the per acre basis because
there may be circumstances where the yield guarantee is different and
using the proportion to liability method takes into account these yield
differences. Therefore, no change has been made in response to the
comment. However, FCIC has determined it is necessary to state the
consequences of failure to provide any production records for the
second crop and has revised the provisions to specify that the
reduction will continue to apply if such production records are not
provided.
Comment: Several commenters commented on the provisions proposed in
section 14(f) (Your Duties) that require earlier notice of prevented
planting. The comments are as follows: (1) A commenter stated the
proposed provisions would be beneficial if the prevented planting
determination was made at the time of notice. The commenter added that
as it is now, there is nothing to encourage the company to make a
prevented planting determination until late in the season; (2) A
commenter stated the proposed provisions requiring the prevented
planting acreage report/notice of loss to be reported earlier than the
``normal'' acreage report create additional reporting and burden. The
commenter
[[Page 37710]]
questions what is wrong with the current process. They stated this
change could result in multiple prevented planting acreage reports and
increase loss adjustment expense cost. The commenter stated the company
still has to wait to pay prevented planting losses if the crop is
insured under a revenue plan of insurance, plus has to wait to see what
the producer does get planted, so they do not see any advantage to the
earlier reporting requirement for prevented planting; and (3) Several
commenters disagreed with the proposed provisions. Some of the
commenters do not believe it is feasible for most producers to be
documenting prevented planting losses within 72 hours. They stated many
crops have different final planting dates, the producer would still be
busy trying to plant other crops and that time is critical during
spring planting. The commenters recommended the current provisions be
retained that allow producers to report prevented planting acres by the
acreage reporting date. A commenter stated the proposed provisions are
far too strict. The commenter believes notification of prevented
planting should be given when producers provide their acreage reports.
Response: The insurance providers can certainly make the
determinations of the prevented planting at the time notice is given
and no longer have to wait until after the acreage reporting date.
Under current provisions, the insured is not required to give notice of
prevented planting acreage until the acreage reporting date, which is
well after the time the insured cause of loss prevented the producer
from planting, making it extremely difficult for the insurance company
to verify an insured cause of loss existed and prevented planting. The
proposed provisions were added to improve program integrity by
requiring insureds to report notice of prevented planting within 72
hours of prevented planting, thus allowing the insurance company an
earlier opportunity to verify the cause of prevented planting. FCIC
agrees the proposed change may create additional reporting requirements
for insureds. However, this change is necessary to improve program
integrity. FCIC does not agree the proposed provisions create
additional loss adjustment expenses or multiple prevented planting
acreage reports. The proposed earlier notice of prevented planting is
not required to be made on an acreage report, therefore multiple
prevented planting acreage reports would not be necessary. Under both
the current and proposed provisions, insurance companies are required
to verify the producer was prevented from planting due to an insured
cause of loss that occurred within the insurance period and adjust the
prevented planting claims. Therefore, the burden on the insurance
provider remains the same, it is only the timing that is different.
Therefore, no change has been made.
Comment: A commenter stated the provisions proposed in section
14(f) (Your Duties) conflict with current language in section 33 that
specifies notice of loss must be reported to the crop insurance agent
and not the company.
Response: FCIC does not believe the proposed provision conflicts
with provisions in section 33. Throughout section 14, the language for
notice requirements references ``us.'' This just means that notice to
the insurance provider is provided through the agent, as specified in
section 33. Therefore, no change has been made.
Comment: Several commenters stated that section 14(f) (Your Duties)
should be revised to require the insured must be prevented from
planting by the final planting date. A commenter suggested the
following language: ``(f) In the event you are prevented from planting
an insured crop which has prevented planting coverage, you must notify
us within 72 hours after: (1) The final planting date; and (2) If
applicable, you determine you will not be able to plant the insured
crop within any applicable late planting period.'' A few commenters
stated the insured must be prevented from planting by the final
planting date, therefore the phrase ``if you do not intend to plant the
insured crop during the late planting period or if a late planting
period is not applicable'' should be deleted in section 14(f)(1) (Your
Duties). Another commenter suggested the following language: ``(f) In
the event you are prevented from planting an insured crop which has
prevented planting coverage, you must notify us within 72 hours after:
(1) The final planting date. (2) You determine you will not be able to
plant the insured crop within any applicable late planting period. (3)
If you do plant during the late planting period, you must revise the
acreage report to reflect the correct planting 72 hours after the end
of the late planting period for the crop.'' A commenter suggested
inserting the words ``due to an insurable cause occurring prior to the
final planting date'' after the word ``crop'' in section 14(f) (Your
Duties).
Response: The first suggested change would require two notices and
this would be an unnecessary burden on the producer. Therefore, no
change has been made. The second suggestion cannot be adopted because
it would conflict with the definition of ``prevented planting''
contained in section 1 and provisions contained in section 17, which
specify when a producer must be prevented from planting. No change has
been made. The third suggestion is not adopted because the producer is
already required to report all planted acreage on the acreage report.
Therefore, no revision or additional requirements are needed. No change
has been made. The last suggestion is not adopted because the purpose
of the notice is to allow the insurance provider the best opportunity
to determine whether the producer was prevented from planting due to an
insurable cause. Therefore, whether the cause is insurable cannot be
made a condition of when the notice must be provided. No change has
been made.
Comment: A commenter stated the change proposed in section 14(f)
(Your Duties) will require losses to be reported for each field with
prevented planting acreage. The commenter states this will be a major
training issue.
Response: FCIC does not agree the proposed change will require
losses to be reported for each field with prevented planting acreage.
Section 14(f) requires notice when the insured crop is prevented from
being planted. Notice on a field-by-field basis is not required.
Therefore, no change has been made.
Comment: A commenter recommended the last part of section 14(f)(1)
and all of (2) (Your Duties) be deleted, so it will simply read ``In
the event you are prevented from planting an insured crop which has
prevented planting coverage, you must notify us within 72 hours after
the final planting date.'' The commenter believes the language they
recommend be deleted is confusing and can be handled in procedure.
Response: FCIC disagrees with the comment. Prevented planting can
occur during the late planting period and the producer must be made
aware of the reporting requirements under such circumstances. This
cannot be done in procedures because the producer does not receive
them. Therefore, no change has been made.
Comment: A commenter recommended that FCIC amend section 14(f)(1)
(Your Duties) to require the insured to provide notice within 72 hours
of the late planting period, rather than of the final planting date.
They believe an insured that must report notice within 72 hours of the
final planting date is more likely to claim a prevented planting loss,
and that the
[[Page 37711]]
additional planting time may persuade the insured to plant a crop. The
commenter stated the purpose of the program is to encourage, not
discourage, agricultural production. They stated this change will
obviate the need for subsection (f)(2). Another commenter suggested
that section 14(f)(1) (Your Duties) should read as follows: ``The final
planting date; or'', and strike out all other wording in the proposed
subsection (f)(1).
Response: Requiring a later notice when the producer never intended
to plant the crop during the late planting period inhibits the
insurance provider's ability to verify the cause of loss. Additionally,
the recommended change does not address when notice of prevented
planting would be required for crops that do not have a late planting
period. Therefore, no change has been made.
Comment: A commenter recommended section 14 (Our Duties) be revised
to state that both the government and reinsured companies have the duty
to participate in reconsideration, mediation and NAD appeals.
Response: FCIC does not agree with the recommended change.
Provisions contained in section 14 (Our Duties) referencing
arbitration, reconsideration, and appeals are intended to specify when
losses will be paid, and not how the appeals process will operate or
who will participate. Other provisions contained in section 20, 7 CFR
part 11 and 7 CFR part 400, subpart J specify how, and by whom,
arbitrations, reconsiderations, mediations and NAD appeals will be
conducted. Therefore, no change has been made.
Comment: A commenter provided the following comments on the
provisions contained in section 14(a) (Our Duties) that require if the
insured has complied with all policy provisions, ``we will pay your
loss within 30 days after'' agreement, completion of arbitration/
appeal/court adjudication. The commenter stated exceptions include the
inability to pay and a deferral period. The commenter believes a
deferral period in which information may be gathered may be an
acceptable delay; however, they believe acceptable reasons for an
inability to pay a loss should be clarified. The commenter stated
producers have found payment delays to be common and the 30-day rule
easily avoided. The commenter believes if payment is not possible
within the 30-day requirement, an insured should be compensated for the
late indemnity payment.
Response: Since no changes were proposed to provisions regarding
the insurers inability to determine the amount of the loss contained in
section 14(b) (Our Duties) or the provisions regarding deferral of loss
adjustment until the amount of loss can be accurately determined
contained in section 14(c) (Our Duties), the public was not provided an
opportunity to comment on the recommended changes. Therefore, the
recommendations cannot be incorporated in the final rule.
Comment: A few commenters recommended the words ``the later of'' be
added at the end of the text in section 14(a) (Our Duties) so that it
reads as follows: ``within 30 days after the later of:'
Response: FCIC agrees with the recommendation and has revised the
provision accordingly.
Comment: A commenter suggested the current language in section
14(a)(1) (Our Duties) be retained because they believe the added
portion does not change anything and is not necessary.
Response: FCIC agrees with the comment and has revised the
provision accordingly.
Comment: Several commenters recommended changing the colon at the
end of section 14(a)(1) (Our Duties) to a semi-colon.
Response: FCIC agrees and the change to section 14(a)(1) (Our
Duties) has been made accordingly.
Comment: A few commenters suggested the word ``or'' be added at the
end of section 14(a)(1) (Our Duties) and at the end of section 14(a)(2)
(Our Duties).
Response: Under proper drafting procedures, the use of ``or''
before the last paragraph implies that there is an ``or'' between each
of the paragraphs in the subsection. Therefore, FCIC has added ``or''
only at the end of (a)(2).
Comment: A commenter suggested retaining the current language in
section 14(a)(2) (Our Duties).
Response: FCIC does not agree. Since reconsideration of
determinations regarding good farming practices are used to determine
whether claims should be paid or the amount of the claim, there must be
a delay in the payment of such claims until the process is complete.
Therefore, no change has been made.
Comment: Many commenters stated that inclusion of the word
``arbitration'' in section 14(a)(2) (Our Duties) is inconsistent with
removal of the arbitration clause proposed in section 20.
Response: Since FCIC will address the proposal to remove
arbitration and the public comments regarding that proposal in a
subsequent rule, no change is necessary.
Comment: A commenter believes an adverse selection issue could
arise if the ``first crop'' and ``second crop'' are not insured by the
same company. They stated for example, in Texas a wheat grower could
buy wheat coverage by the sales closing date, then only report his so-
called ``for grain'' acreage on the acreage reporting date, which would
then drive whether wheat became the ``first crop.''
Response: In the scenario presented in the comment, the insured
producer would have little indication of growing conditions for a
second crop when reporting the wheat acreage in the fall. Therefore, if
adverse selection does exist, it would not matter whether or not the
first and second crops were insured with the same insurance provider.
However, FCIC has revised the reporting requirements in section 9(a)(7)
to ensure that both insurance providers know that there is a second
crop. No change has been made.
Comment: Several comments were received regarding proposed
provisions contained in sections 15(e) through (g). The comments are as
follows: (1) A few commenters believed the producers rights and
responsibilities for a partial loss on the first crop needed more
clarification; (2) A few commenters asked, if one insurance company
covers the first crop and a different company covers the second crop,
who has responsibility and liability for paperwork and premiums; (3) A
commenter questioned insuring only the first crop, and leaving the 2nd
crop uninsured; (4) A few commenters wanted clarification regarding
coverage and premium cost for second crop acreage and what happens when
the second crop suffers an insurable loss; (5) A few commenters felt
the 35% and 65% breakdown is confusing and one commenter did not feel
the 35% is fair since most input costs could be incurred by the time
the first crop is lost; (6) A few commenters were concerned with the
extra work, burden and costs companies would bear to implement these
rules because the rules may require adjusting the crop several times as
well as making trips to help decide if the first crop is a total loss
or partial loss; and (7) A few commenters felt sections 15(f) and (g)
(which FCIC believes should be correctly cited as 15(e) and (f)) will
increase loss adjustment expense (due to more paperwork and extra trips
to the farm), and one of these stated the producer may ask for two
calculations on loss adjustment and select the ``best deal.''
Response: Section 15 only pertains to the manner in which payments
are made. FCIC has clarified sections 9 and
[[Page 37712]]
14 regarding the notice requirements, record keeping for any acreage
subject to indemnity reduction when a second crop is planted, and
timing of payments. When more than one insurance company is involved,
and the insured elects to insure a second crop, it would be the
responsibility of the company insuring the first crop to pay the
reduced indemnity and collect the reduced premium for the first crop
and to revise the indemnity and premium if there is no loss to the
second crop. The proposed provisions allow a producer to elect whether
or not they want insurance on second crop acreage because a full
payment for a first crop can often exceed the total of a reduced
indemnity payment on the first crop and a full indemnity payment on the
second crop. For example, a producer who loses a cotton crop and would
receive an indemnity of $1,000 but elects to plant grain sorghum on the
same acreage, with a liability of $500, would only collect $350 for the
cotton and even if there was a total loss to the grain sorghum, the
producer would only collect $850 for the crop year, instead of $1000
they could have collected if they had not planted or insured the second
crop. FCIC has clarified sections 15(e) and (f) to specify that there
is no impact on the premium or indemnity for second crop acreage even
when the second crop suffers a loss or a subsequent crop is planted on
the same acreage. Section 108 of ARPA requires the 35 percent payment,
which equates to a 65 percent reduction. Therefore, both percentages
are used to determine the indemnities for the first crop when the
second crop is planted and does not sustain an insurable loss. No
change can be made in these percentages. FCIC agrees administration of
the new rules may require some extra work when adjustments to the claim
are needed because a second crop is planted. FCIC also agrees that for
prevented planting acreage, an additional loss adjustment is needed
when a second crop is planted. FCIC agrees that additional work is
required to determine the effects of planting a second crop. However,
since ARPA requires these provisions, no changes can be made.
Comment: A commenter suggested the provisions proposed in section
15(f) be modified to treat prevented planting claims in a similar
manner as non-emergence claims. The commenter stated knowing weather
related situations can change, they believe a producer who files a
prevented planting claim should be able to keep 100 percent of the
indemnity if the situation changes and the producer is later able to
plant a second crop on the acreage that they be allowed to keep the
prevented planting indemnity if they elect not to insure the second
crop. They believe the so-called ``black dirt'' policy currently in
place prevents growers from making good management decisions and
capitalizing on what can often be rapidly changed growing conditions,
even when they are willing to take the risk on themselves. The
commenter recommended the proposed rules be stricken until such time as
a comprehensive review of prevented planting rules can be completed and
a coherent set of recommendations in this regard can be put forth.
Response: FCIC not accept these suggestions. Section 108 of ARPA
mandates a reduction in prevented planting payments for first crops
anytime a second crop is planted on the same acreage, except in the
case of double-cropping. Unlike the provisions regarding a second crop
planted on acreage planted to a first crop on the same acreage, which
only requires the reduction when the second crop is insured and suffers
and insurable loss, ARPA mandates such reduction to the prevented
planting payment regardless of whether the second crop is insured.
Therefore, no change can be made.
Comment: A commenter stated the provisions proposed in section
15(h) seem to conflict with the definition of ``cover crop.''
Response: The double-cropping requirements cannot be met if a cover
crop is a second crop and is hayed, grazed or otherwise harvested. ARPA
requires, for the purpose of proving double-cropping, that both crops
be insurable. Cover crops are not insurable. Therefore, no changes can
be made.
Comment: A commenter asked what is meant by ``insurance offered
under the authority of the Act'' in section 15(h)(3). In other words,
does the insurance simply have to be offered for the two crops, or do
the specific crop types, practices, etc., have to be included in the
actuarial table for the county.
Response: ``Insurance offered under the authority of the Act''
means that the policy is reinsured by FCIC. Private hail policies or
other types of crop insurance policies that are not reinsured by FCIC
are not offered under the authority of the Act. Further, insurance must
be offered for the specific crop types, practices, etc., in order to
meet double-cropping requirements. If the actuarial documents do not
include the specific crop types, practices, etc., insurance is not
offered under the authority of the Act, unless insurance was provided
by a written agreement approved by FCIC.
Comment: A commenter stated that the provisions proposed in section
17(c) may present computer systems problems.
Response: FCIC agrees and appropriate changes will be made in data
systems to accommodate situations in which premium reductions are
required. No change has been made.
Comment: A few commenters thought the language in section 17(f)(4)
is confusing, in part due to the use of like terms in different ways
than they have been used in other sections. They asked whether they
should interpret the language proposed to remove the requirement that
the same acreage be prevented. One of the commenters suggested language
be added to identify the second crop and require that records must be
on the same physical location.
Response: FCIC incorporated the double cropping provisions from
ARPA. However, for the purposes of readability, FCIC simply changed the
wording to fit within the existing text. Therefore, the terms are being
used in the same manner as stated in other policy provisions. Section
108 of ARPA allows a producer to rotate the acreage they double crop
and does not restrict the producer from qualifying for benefits
associated with double cropping on specific acreage they have not
double cropped in the past. Therefore, the provisions do not require
the same physical acreage to be prevented from being planted as has
been double cropped in the past. No change has been made.
Comment: A commenter asked, regarding the provisions proposed in
section 17(f)(4)(i), whether the insurance provider, FCIC or some other
entity would determine whether or not a practice is an ``established
practice.'' The commenter further asked whether FCIC is the determining
agency, and what procedures must the insured or the insurance provider
follow to obtain such a determination.
Response: It is the insurance providers responsibility to determine
whether it is an established practice to plant the second crop for
harvest following harvest of the first insured crop based upon whether
such practice is generally recognized by agricultural experts or the
organic agricultural industry for the area. FCIC will not be
determining whether the practice is established in the area. However,
there may still be issues regarding whether the practice qualifies as a
good farming practice even if it is established in the area. In such
cases, FCIC may be requested to make a determination. But this is only
after the initial determination of whether the practice is
[[Page 37713]]
established has been made. To make that determination, insurance
providers must consult with agricultural experts or organic
agricultural industry.
Comment: A commenter suggested the word ``the'' be inserted after
the word ``double-cropped'' and before the word ``acreage'' in section
17(f)(4)(ii).
Response: FCIC disagrees with the recommended change because the
addition would lead a reader to believe specific acreage had to be
double cropped in the past. As stated above, this is not required.
Therefore, no change has been made.
Comment: A few comments were received regarding section 17(f)(5).
The comments are as follows: (1) A few commenters believe the proposed
language is unclear, and they are not sure what is intended; (2) A
commenter recommended the word ``crop'' be replaced with the words
``agricultural commodity'' in the first sentence of section 17(f)(5).
The commenter also asked how a company would know if another crop had
been planted on the acreage; and (3) A commenter suggested deleting the
comma after the words ``if any crop'' in the first sentence of section
17(f)(5). The commenter also recommended the words ``or other
authorization by USDA allows haying/grazing'' (similar to opening of
the Conservation Reserve Program (CRP) acreage) be inserted at the end
of the paragraph.
Response: FCIC is not sure where the ambiguity is. The provision is
intended to preclude the payment of a prevented planting payment if the
acreage is planted or a volunteer crop is harvested within the time
frame specified. The provision does not distinguish between who plants
the crop or harvests the volunteer crop. If it occurs on the acreage,
no prevented planting payment is made. FCIC disagrees that the word
``crop'' should be replaced with ``agricultural commodity'' because it
would make this provision inconsistent with other related provisions in
the policy. FCIC will consider the appropriateness of such a change in
the future. To properly administer these provisions, insurance
providers must ask the producer if another crop has been on the acreage
in the same crop year. FCIC agrees the comma should be deleted after
the phrase ``if any crop'' in the first sentence and has revised the
provision accordingly. FCIC disagrees with the comment recommending the
addition of language that would allow emergency haying or grazing. ARPA
does not allow exceptions from the reductions in premium and indemnity
when the crop was planted for harvest. If the provision were added, it
would be impossible to determine whether or not the insured intended to
plant the crop for harvest. To ease administration, there is now an
assumption that if the crop was harvested, it was planted for harvest.
Therefore, no change has been made.
Comment: A commenter believes the provisions proposed in section
17(f)(5)(ii) seem inconsistent with the provisions of section 15(g).
Response: FCIC agrees that a conflict exists. As proposed, section
15 indicated a prevented planting payment would be reduced when a cover
crop was hayed, grazed or otherwise harvested, while section 17
indicated no prevented planting payment would be made in this case. The
provisions in section 15(g)(3) have been revised to indicate the
prevented planting payment for a first crop is reduced when a cover
crop is hayed, grazed or otherwise harvested after the end of the late
planting period, or after the final planting date if a late planting
period is not applicable. Section 17(f)(5) has also been revised to
indicate the prevented planting payment for a first crop cannot be made
when a cover crop is hayed, grazed or otherwise harvested within or
prior to the late planting period, or on or prior to the final planting
date if no late planting period is applicable. FCIC has also
restructured section 17(f)(5) for clarification. Both sections 15(g)(3)
and 17(f)(5) have also been revised to clarify the impact of haying or
grazing a volunteer crop.
Comment: A commenter stated the proposed rule admittedly
liberalizes the prevented planting provisions for two groups of
producers, which will mean additional indemnities, costs and other
outlays of money by SRA holders. The commenter stated despite admitting
the Proposed Rule liberalizes the prevented planting provisions, the
agency states that it will not adjust premium rates to reflect the
changes in the prevented planting provisions, in fact, the agency
states adjusting rates would be ``inappropriate.'' The commenter
believes the agency's refusal to adjust rates to account for the
liberalization of the prevented planting provisions is arbitrary and
capricious, in violation of the custom, practice and course of dealings
between the agency and the SRA holders, contrary to the agency's
interpretation of its own duties and obligations under the SRA, the
Federal Crop Insurance Act (Act) and regulations, in breach of the
current and prior SRAs, in violation of the Act, and contrary to the
principles espoused in the recent Supreme Court cases of Mobil Oil
Exploration & Producing Southeast, Inc. v. United States, 2000 WL
807187 U.S. (June 26, 2000) and United States v. Winstar Corp., 518
U.S. 839 (1996). The commenter stated any and all rules increasing the
outlay of money by SRA holders must be appropriately rated in an
actuarially sound manner. They added moreover, if adequate loss
experience is unavailable to support the necessary actuarial
calculations, the provisions cannot, and should not, be liberalized.
The commenter hereby reserves, and specifically does not waive, any and
all claims that the SRA holders they represent and their Managing
General Agents may have against the agency or the FCIC arising out of
the liberalization of the prevented planning rules, or any other rules
or policy provisions, contemplated in the Proposed Rule.
Response: The commenter misinterprets the cost benefit analysis
(CBA) for the proposed rule. The CBA does state prevented planting
provisions are liberalized. This is because insureds now have the
additional choice of planting a second crop and receiving a prevented
planting payment. However, the CBA indicates changes made to the
provisions may require either decreases or increases in the premium
rate associated with prevented planting. The CBA specifies several
scenarios could exist with the new provisions and examines each with
respect to the impact on program costs. Whether or not the rate for
prevented planting coverage is increased or decreased depends, in part,
on the number of people who had a full prevented planting payment in
the past who now will elect to receive the reduced preventing planting
payment and plant a second crop. In addition, the number of people who
did not receive a prevented planting payment in the past, who would now
receive a reduced (35 percent) prevented planting payment must be
considered. FCIC will consider all of the possible scenarios resulting
in increased and decreased prevented planting payment amounts when
establishing premium rates for the new provisions and will make
appropriate adjustments in premium rates to ensure that they are
actuarially sound.
Comment: Several commenters commented on the provisions proposed in
section 20 that allow producers to request a reconsideration of any
loss determination regarding ``good farming practices.'' The comments
are as follows: (1) A commenter stated although they believe the
proposed language is effective and clear, they question why there is a
separate reconsideration procedure specifically for determinations
regarding good farming practices; (2) A few commenters
[[Page 37714]]
were concerned about producers ability to resolve disputes regarding
good farming practices with the proposed elimination of arbitration;
(3) A commenter stated the appeal and review provisions proposed are
difficult to follow and should be rewritten, if to be maintained at
all, and should read as follows: ``Only the FCIC may make a
determination regarding good farming practices. If you do not agree
with any loss determination made by it regarding good farming
practices, you may request reconsideration of its determination in
accordance with the review process established for this specific
purpose and published at 7 CFR part 400, subpart J.'' The commenter
added there is no reason to refer to appeal of other determinations
through application of the procedures specified at 7 CFR part 11,
subpart A, since FCIC is not a party to the insurance policy and has no
role for making determinations other than those with respect to good
farming practices; (4) A few commenters stated the proposed provisions
are not needed because only FCIC can render a determination of ``good
farming practices;'' (5) A few commenters stated there is a fine line
in many cases between whether a farmer failed to exercise ``good
farming practices'' with respect to a crop or ``abandoned'' the crop.
Therefore, the commenters believe ``abandonment'' cases should likewise
be subject to the reconsideration process; (6) A few commenters asked
if mediation might be a part of the ``informal administrative process''
to be established by the Corporation in an adverse determination of
``good farming practices.'' The commenters believe mediation provides a
vital opportunity for producers to speak with FCIC decision-makers face
to face. One of the commenters stated the subjective nature of
determining ``good farming practices'' and getting a clear
understanding from the producer of what was done and the other factors
at play, makes mediation an ideal way to sort those facts out in a
confidential and non-adversarial setting. One of the commenters stated
FCIC should solicit public input on a review process for determinations
of ``good farming practices.'' The commenter stated that while there
are bare references to the review process published at 7 CFR part 400,
subpart J in the proposed provisions, there is no proposal for an
administrative process in the proposed rule. The commenter realizes the
Corporation published a final rule on the appeal procedures under
USDA's general administrative regulations, (67 FR 13249 (2002)). The
commenter added the proposed rule was published in 1999, prior to
enactment of the ARPA, and the prefatory comments to the final rule
state that, ``After the proposed rule was published and the comments
received, Congress enacted ARPA, which created specific limitations on
the appeals of determinations of good farming practices made by FCIC.
Since these limitations are statutorily mandated, they are incorporated
into the final rule.'' The commenter was disappointed the Corporation
has taken this approach to its rule-making responsibilities. They added
while ARPA clearly states good farming practice determinations will not
be considered adverse decisions for purposes of the National Appeals
Division, it is silent on whether mediation might be a part of the
``informal administrative process'' to be established by the
Corporation. The commenter believes, especially in the absence of clear
standards under which ``good farming practices'' will be determined,
mediation may be a vital opportunity for producers to speak with FCIC
decision-makers face to face. They stated the review process for good
farming practice determinations should require the producer be given an
opportunity to review and respond to the evidence available to or
considered by the person who made the original determination. The
commenter suggested the Corporation include the regulatory sections in
7 CFR part 400, subpart J if it extends or re-opens the comment period
on the crop insurance rules; (7) A commenter suggested the CFR sections
be referenced by number not letter, for easy reference and consistency
with the rest of the policy; (8) A commenter stated some of the cited
regulations do not appear to exist, but rather are ``reserved''
sections. The commenter also asked if these regulations will be
finalized prior to the effective date of this policy, and if it is
appropriate to reference ``reserved'' sections; and (9) A commenter
suggested provisions regarding appeals and administrative reviews be
removed from section 20 and incorporated in a separate section 21,
since they appear to deal with determinations made only by FCIC or RMA.
Response: Section 123 of ARPA requires FCIC to establish an
informal administrative process that allows a producer the right to a
review of a determination regarding good farming practices. Even if the
arbitration provisions remain, they will be inapplicable to
determinations of good farming practices. The only dispute resolution
mechanism available is the reconsideration process to FCIC. FCIC does
not agree the provisions should be revised to specify only FCIC may
make good farming practice determinations. FCIC has revised the
definition of ``good farming practices'' to specify insurance companies
make the determination based on consultation with experts and that
insurance providers, or insureds through their insurance provider, may
contact FCIC to determine whether or not production methods will be
considered to be ``good farming practices.'' FCIC disagrees reference
to an appeal in accordance with 7 CFR part 11 is unnecessary. FCIC
still makes certain determinations, such as approval of written
agreements and some yields. FCIC has established the reconsideration
process for good farming practices because it is required by ARPA. FCIC
does not have the resources to reconsider other insurance provider
decisions, such as abandonment. In addition, since a determination of
abandonment is a factual determination made by the insurance company,
any dispute regarding a determination of abandonment could be resolved
through arbitration. Mediation cannot be a part of the reconsideration
process. The purpose of mediation is to reach a compromise. However,
determinations of good farming practices involve questions of fact
based on whether the farming practices are generally recognized by
experts for the area. The definition of ``generally recognized'' has
been added to make the definition of ``good farming practices'' more
objective and states that if there is a genuine dispute between
experts, the practice is not generally recognized. Therefore, either
the practice is or is not a good farming practice so there is no middle
ground that could be achieved through mediation.
Since the reconsideration process was already codified prior to the
proposed rule and FCIC did not propose any changes to the
reconsideration process, there was no ability to solicit comments in
the proposed rule. Any changes in the reconsideration process made in
this final rule are in response to comments received to the proposed
rule. If FCIC makes any other changes to the reconsideration process,
it will solicit comments. Since determinations of good farming
practices are based on the opinion of designated experts, the insured
should be able to obtain the opinion upon which the determination was
based and respond to the opinion in the reconsideration process. The
determinations of lettering or numbering in the CFR is dictated by the
Office of Federal Register and FCIC has
[[Page 37715]]
no authority to change such references. A final rule was published in
the Federal Register on March 22, 2002, to amend the appeal regulations
found in 7 CFR part 400, subpart J, to include the administrative
reviews for determinations of good farming practices. Therefore, all of
the regulations referenced within the proposed rule do exist and do not
reference ``reserved'' sections. FCIC is also publishing a technical
correction, concurrently with this final rule, to amend the appeal
procedure regulations found in 7 CFR part 400, subpart J, to clarify
determinations of good farming practices made by either the Agency or
private insurance companies are subject to administrative review and to
make other changes required in response to comments to the proposed
rule. One such change is to put all the good farming practice
reconsideration requirements in one section. FCIC has clarified section
20 to specify those provisions that are applicable to decisions made by
the insurance provider and those made by FCIC. FCIC has added
provisions to clarify that decisions with respect to good farming
practices do not include determinations of the amount of assigned
production for failure to use good farming practices.
Comment: A commenter asked why organic is a different unit when it
is just a different practice in section 34(c).
Response: Farming methods used in organic operations are subject to
specific criteria, separate from conventional practices. For example,
organic producers are prohibited from using certain substances for the
control of weeds, disease or insects and fertilizers that conventional
producers may use. Additionally, organic production must be kept
separate from conventional production to avoid losing its organic
status. Since producers maintain records of planted acreage and
harvested production for crops grown under an organic practice separate
from crops grown conventionally, FCIC believes separate optional units
are appropriate for organic acreage.
Comment: One commenter stated the language in section 36 does not
conform to the language of ARPA. Another commenter stated that this
language will supersede major portions of the Crop Insurance Handbook
and current Actual Production History procedures.
Response: ARPA only specifies that FCIC allow such election and
what the election consists of. These provisions in the rule are
consistent with ARPA. However, ARPA does not specify the manner or
timing for such election. Therefore, the manner and timing needed to be
included in the policy. Minor revisions will be required to the
existing yield adjustment procedures (yield substitution) contained in
the Crop Insurance Handbook to conform with the new language in the
Basic Provisions.
Comment: Several commenters stated the reference in section 36(a)
to ``* * * actual yields in your production history that, due to
insured causes of loss, are less than 60 percent of the applicable
transitional yield* * *'' indicates this applies to ANY insured cause
of loss, while section 13 of the 2003 Crop Insurance Handbook specifies
``* * *caused by drought, flood, or other natural disasters.'' The
commenters stated that while the end result may be the same, they
believe the difference in wording may lead to different
interpretations, therefore, they suggest this be clarified.
Response: FCIC agrees that the provisions should be the same and
will amend the Crop Insurance Handbook to be consistent.
Comment: Several commenters commented on the ending phrase in
section 36(a) which states, ``* * * you may elect to exclude one or
more of any such yields''. Several of the commenters believe the
language leads to confusion. They feel the word ``excludes'' suggests
these low actual yields are simply dropped from the Actual Production
History (APH) calculation rather than having substitute yields used in
their place. The commenters stated this is subsequently explained in
subsection (c), but they feel it might be preferable to eliminate any
confusion in the first paragraph. They recommended combining
subsections (a) and (c).
One of the commenters recommended that FCIC amend the language to
read: ``you may elect to exclude any of such actual or appraised
yields.''
Response: FCIC agrees that section 36(a) should also refer to the
replacement of yields and has modified the provision accordingly. FCIC
has added a definition of ``actual yields'' that includes both actual
and appraised yields. Therefore, no change is made.
Comment: A few commenters stated that while reference to ``one or
more'' of these low actual yields may be technically correct, they
believe it could be misunderstood. They believe that once yield
adjustment is elected, all qualifying low actual yields are eligible
for substitution, but actual implementation is on a database basis (at
production reporting time, depending on which of the various possible
yield adjustment methods result in the best approved Actual Production
History yield), not on an individual yield basis. The commenter stated
for example, one database for a crop/county policy may implement
substitute yields while other databases use ``cups'' or yield floors,
however within that first database, substitute yields would replace ALL
qualifying low actual yields, not just some.
Response: Section 105 of ARPA authorizes the exclusion and
substitution of any actual yield that was less than 60 percent of the
applicable transitional yield. The insured will now have the option of
excluding and replacing any individual qualifying actual yield within a
database instead of replacing all such yields within a database. The
provision has been revised for clarity.
Comment: Several commenters stated the language in section 36(b)
sounds as though once the yield substitution is elected it can never be
canceled, which is contrary to procedures contained in section 13A(4)
and 13B of the 2003 Crop Insurance Handbook. They recommended adding
``* * * unless canceled by the applicable cancellation date.''
Response: Since yield substitution election can be made on an
individual actual yield basis, FCIC agrees that the insured should be
able to cancel each election in the database. If an election is
cancelled, the actual yield will be used in the database. For example,
if the insured elected to substitute yields in its database for the
1998 and 2000 crop year, for any subsequent crop year, the insured can
elect to cancel the substitution for either or both years. The proposed
language was so modified and requires the election to be cancelled by
the applicable cancellation date.
Comment: A few commenters suggested the language in section 36(c)
that states, ``* * * a yield equal to 60 percent of the T-yield that is
applicable in the county * * *'' could be understood as always meaning
the published county ``T'' Yield from the actuarial documents. They
suggested replacing the language with the following: ``* * * a yield
equal to 60 percent of the applicable T-yield. * * *'' The commenters
believe this revision would be consistent with current procedural
references to the ``applicable ``T'' Yield'' since other Actual
Production History procedures may result in other types of ``T''
Yields, sometimes on a database basis, such as the simple average ``T''
Yield for added land, weighted average ``T'' Yields for perennials,
etc. They also suggested referring to ``T'' Yields rather than T-yields
to be consistent with the format used throughout the Crop Insurance
Handbook.
[[Page 37716]]
Response: FCIC agrees the provision should reference the applicable
T-yields and has revised sections 36(a) and (c) accordingly. With
respect to the reference to T-yields, the Crop Insurance Handbook will
be modified to conform with the Basic Provisions.
Comment: A few commenters suggested the parenthetical example in
section 36(c) be rewritten to make the intended point that the
substitute yields may vary by year. They believe as written, the
language suggests the election of substitute yields is by year (rather
than by crop/county with actual implementation by database).
Response: Section 36(a) and (c) clearly state that the producer may
elect to exclude any individual qualifying actual yield for a crop year
in the database. However, appropriate changes have been made to clarify
that a crop year's individual actual yield is replaced with a
percentage of the corresponding crop year's applicable T-yield.
Comment: Several commenters commented on section 36(d). A few of
the commenters stated the language indicates the yield substitution
election is not reversible. They believe this is contrary to current
procedure, which allows the continuous Yield Adjustment Election to be
elected and canceled on a crop/county basis, and also provides for the
insured to decide whether to implement yield substitution by database
each year the election is in place. The commenters stated an individual
database under the election may have the best approved Actual
Production History yield using substitute yields one year, but then
might be better with a yield floor the following year, however as
written, this now-irreversible election would preempt any subsequent
use of yield floors (and ``cupped'' yields, which currently are
preempted only the year following a year when substitute yields were
used) until all substituted yields have dropped off the database. They
believe an already complicated procedure for policyholders and agents
would become even more difficult as policyholders would have to try to
guess the long-term advantages and disadvantages of choosing this
election. They recommended this policy language be revised to reflect
current Crop Insurance Handbook procedure (without too much detail).
The commenters believe if this change really is intended, it may
explain why sections 36(a) and (c) are written to suggest that
substitute yields are elected by year instead of implemented by
database. They stated if that is the case, presumably carryover
policyholders who had the yield substitution election the year before
these new Basic Provisions become effective would be given the
opportunity to cancel that election rather than being bound by these
new rules that did not apply when they made the initial decision.
Response: FCIC agrees the election should be reversible and has
added language to 36(b) to allow the cancellation of each election, if
done not later than the applicable cancellation date.
Comment: One commenter asked for clarification of language in
section 36(e) that references ``* * * such other basis as determined
appropriate by FCIC to cover increased risk * * *''
Response: FCIC has not previously included its rating methodology
in the policy because such methodology is always subject to adjustment
to ensure actuarial soundness. Therefore, FCIC has revised the
provision to require that the premium adjustment reflect the risk
associated with the yield adjustment as mandated by ARPA.
Comment: A commenter stated there must be risk management tools and
policies to reflect the changing risks inherent in a different (organic
vs. conventional) agro-ecological system of management. The commenter
also believes many farmers do not understand the complexities of the
crop insurance programs. They stated although some new risk management
tools have recently become available, USDA needs to do more to help
support risk management tools for organic agriculture.
Response: FCIC has clarified the provisions to maximum extent
practicable. Further, RMA has established comprehensive risk management
education and outreach opportunities by providing on-going training to
producers in the use of futures, options, crop insurance, and other
risk management tools through which producers can manage their own
risks. New risk management tools are continuously being developed and
if anyone would like to submit a new policy for organic crops, they can
do so under section 508(h) of the Act.
Comment: A commenter stated that sustainable and organic are two
very different systems, one being natural continuous regeneration
(sustainable), while the other, is unnatural, managed and manmade
(organic). The commenter stated they had no idea what they are meant to
identify, as sustainable in an independent perspective, which is not
also organic, and that this should be clarified.
Response: FCIC agrees sustainable and organic farming practices are
two distinctly different farming methods and has defined the two terms
separately. Under the final provisions, organic farming practices will
be insured as a separate practice, while sustainable farming practices
will be insured under current conventional farming practices. FCIC does
not believe further clarification is necessary.
Comment: Several commenters stated they assume FCIC reviewed
procedure contained in the Organic Practice Handbook to ensure no
conflicts exist between that procedure and the proposed provisions.
Response: FCIC assumes the commenters are referencing the
procedures contained in the 2001 Organic Crop Insurance Underwriting
Guide. The procedures contained in the underwriting guide will be
revised to be consistent with the organic provisions and definitions
contained in this final rule.
Comment: A commenter stated any loss of production caused by
failure to follow ``all'' good farming practices, including necessary
pesticide applications to control insects, disease, or weeds will
result in an appraisal for uninsured causes. The commenter added
organic producers are not allowed by regulation to use pesticides and
they have better control of all three problems than many conventional
producers. The commenter stated it is a well-known fact at Land Grant
Universities that crop rotation is a solution to these problems.
Response: FCIC has revised the definition of ``good farming
practices'' to include production methods generally recognized by the
organic agricultural industry or contained in the organic plan for
organic practices. Therefore, failure of the organic methods that meet
the definition of good farming practice would not result in the
assessment of production for uninsured causes of loss.
Comment: A commenter urged FCIC to ensure data for organic
practices is included in all actuarial tables in all counties so
individual written agreements would not be necessary. Another commenter
stated FCIC should make affirmative efforts to expand the actuarial
tables by adding information from reputable, contemporary studies of
yields and expected market prices for organic and sustainably produced
crops. The commenter added under the proposal, insurance coverage will
only be available for sustainable and organic crops if there is enough
information specified in the actuarial table to determine the premium
rate.
Response: Separate organic practices cannot be listed in all
actuarial tables
[[Page 37717]]
until sufficient organic data for all crops and counties is available.
RMA has contracted independent studies to determine what reputable
organic data, including yields and pricing information, is available
that could be used to include separate organic practices in the Special
Provisions. Under the proposed provisions, sustainable farming
practices will be insured under the current conventional practices.
Therefore, separate data will not be required to establish a separate
sustainable farming practice in the Special Provisions. The proposed
rule allows organic practices to be approved by written agreement if
separate organic practices are not included in the Special Provisions.
Comment: Several commenters provided the following comments
regarding the use of written agreements to insure crops grown using
organic practices: (1) A few commenters asked why organic producers
have to sign a written agreement; (2) A commenter recommended
provisions be added allowing organic farming coverage without the need
for written agreements; (3) Some commenters objected to the organic
premium surcharge which they state is based on a perception of
additional risk in organic production systems. The commenters asked if
FCIC can come up with a scientific basis for the organic premium
surcharge. They do not believe FCIC's perception is backed by any
scientific evidence and, in fact, is directly contradicted by
independent research on the agronomic and economic benefits of organic
production systems; (4) Several of the commenters believe the extra
charge to organic farmers is discriminatory. They stated they are
paying more and receiving less coverage; (5) A commenter asked why a
producer can insure an organically grown crop under a Group Risk Plan
(GRP) policy without a written agreement, yet a written agreement is
required to insure an organically grown crop under all other policies
except Adjusted Gross Revenue (AGR); (6) A commenter stated separate
(100%) T-Yields used to establish APH yields for certified organic or
transitional acreage will be provided on the written agreement and
asked who will be setting these yields and on what information the
yields will be based; and (7) A few commenters stated while the
proposed rule does add the possibility of organic insurance based on
actuarial information in the future, in the meantime organic producers
will have to rely on written agreements in a biased and economically
discriminatory process (i.e., insure without any written agreements, or
go without insurance). They believe the proposed rule does little to
alleviate that position, despite the attempt by Congress to eliminate
such discrimination.
Response: Written agreements are needed where there is insufficient
data to include organic practices in the actuarial tables. Organic
practices cannot be insured under conventional practices because higher
yield variability may exist, particularly in catastrophic events. FCIC
has data that suggests that there is greater yield variability.
Therefore, it may be necessary to include a premium load because
premium rates are greatly dependent on the variability of yields and
the premium rate must be reflective of the risk involved to be
actuarially sound. The premium load will be based on the data FCIC has
for organic crops. If the commenters have independent data that proves
otherwise, FCIC recommends they provide the data to RMA for review.
FCIC does not agree that the premium charged for an organic practice is
discriminatory because it is based on the risk associated with the
practice as required by section 508(d) of the Act. The GRP and AGR
insurance programs differ significantly from the insurance provided
under the Common Crop Insurance Policy Basic Provisions. Indemnities
are paid to producers insured under GRP when a county loss is
triggered, regardless of whether or not the individual producer
suffered a loss. The AGR program provides insurance coverage based on
the producer's historical adjusted gross revenue for the farm. Since
neither of these insurance products provide coverage based on
individual crop losses, as crops under the Common Crop Insurance Policy
Basic Provisions do, organic crop practices do not materially alter the
risk or coverage provided under either AGR or GRP policies. FCIC will
be setting the T-yields for all practices based on the available data
for the practice. FCIC has eliminated the bias and discrimination by
considering whether the specific organic practice is a good farming
practice. If sufficient and credible data is available, organic
practices will be added to the actual documents. The organic industry
is encouraged to provide data regarding organic practices.
Comment: Many commenters stated the final rule should add a clear
statement that organic crop insurance coverage will not include
insurance premium surcharges.
Response: FCIC cannot make such a statement because, as previously
stated, the premium must be based on the risk associated with the
practice and in some cases, may result in higher premiums. Therefore,
no change has been made.
Comment: Some commenters stated if organic farmers need to keep and
submit four years of records, maybe all farmers should have to supply
four years of records.
Response: The record keeping requirements for written agreements
will be the same for all producers regardless of whether the producer
uses a conventional or organic practice. Further, the record keeping
requirements will be the same for producers of conventional and organic
practices in counties where conventional and organic practices are
provided in the actuarial documents. Therefore, organic producers are
not treated any differently than any other.
Comment: A commenter supported expansion of the AGR program to
include all states in order to ensure fair prices are paid to certified
organic growers and those using sustainable agricultural practices.
Response: FCIC cannot expand the AGR program in this rule. FCIC
will consider this request when deciding whether to expand the AGR
program in the future.
Comment: Many commenters were concerned about how organic prices
will be established. The comments are as follows: (1) Many commenters
stated the final rule should add a clear statement that organic crop
insurance coverage will include full recognition of organic price
premiums when making indemnity payments; (2) A commenter urged FCIC to
ensure data on organic premiums is included in all actuarial tables in
all counties so that fair returns for losses are paid to growers. They
also stated fair prices should take into consideration market premiums
for a given certified organic product; (3) Some commenters asked how
the actuarial organic pricing tables will be set and if the organic
industry will be given the opportunity to comment on the process and
sources used to set actuarial pricing information for organic
commodities; (4) Some commenters stated they are restricted to
conventional market prices. They understand the market values will be
changed in a couple of years, however until that time, they are asked
to accept the conventional prices. The commenters were concerned as to
who will establish the organic prices and how they will be determined;
(5) A few commenters recommended until actuarial information for
organic pricing is established, organic price premiums be based upon
individual crop pricing histories or in the absence of an
[[Page 37718]]
individual history, upon a county average or the averages of multiple
counties (to reach a critical mass, if necessary). They stated this
system is used for establishing a basis for yields and could be used in
the interim as actuarials are being developed; and (6) A commenter
recommended a system of county averages be used for producers
transitioning into organic production.
Response: FCIC cannot provide a statement that organic practices
will include a price premium because the price is determined based on
the projected market price at the time of harvest and there is no
guarantee that the projected price at harvest for organic crops will be
significantly different. If the projected market price at harvest for
an organic crop is higher, such price will be provided on the actuarial
table. FCIC will set organic prices in the same manner that prices are
set for all crops. FCIC does not allow an opportunity to comment on the
process or the sources of data used for setting any crop price. FCIC
has contracted studies to research pricing data throughout the organic
industry to determine if sufficient reliable pricing information is
available that could be used to establish organic prices separate from
conventional prices in the future. Until sufficient price data is
available, FCIC has no choice but to offer conventional prices for
organic crops. FCIC does not use individual crop pricing histories to
set the expected market price because it is an inaccurate measure of
such price. County averages may be used in the establishment of
expected market prices for organic crops if they provide an accurate
measure of the projected market price at the time of harvest.
Therefore, no change has been made.
Comment: Several commenters believe the organic premium surcharge,
coupled with the lack of insurance coverage based on organic prices,
creates bias against organic producers. The comments are as follows:
(1) A commenter stated the organic premium factor of 1.05 is not right
unless producers are paid the price premium they are receiving; (2)
Several commenters stated the crop insurance program is irrelevant to
organic producers because of the organic premium surcharge and the lack
of organic price premium; and (3) Several commenters stated over a year
ago the organic community raised two major issues, the organic premium
surcharge they feel is unreasonable and which they believe is based on
a perception of risk not backed by evidence, and the lack of organic
price premium, both of which are still not addressed in the proposed
rule. They added that although the proposed rule does add the
possibility of organic insurance based on actuarial information in the
future, the likelihood of organic policies based on anything but
written agreements in the near term is small. They stated most
producers are left with the unenviable choice of insuring under biased
and economically untenable written agreements, or insuring without
written agreement and facing continued bias against organic farming
practices despite the attempt by Congress to eliminate such
discrimination, or doing without insurance. They do not believe organic
producers should be expected to agree to insurance by written agreement
if they are forced to pay more than other producers and receive no
benefit from their price premium on claims. One of the commenters
stated they, as an organization, would continue to recommend organic
producers not agree to insurance by written agreement under these
conditions.
Response: The organic premium factor is not dependent on the price
received. Premium rates are greatly dependent on yield variability. As
stated above, a higher yield variability exists for organic practices
than for conventional practices, particularly in catastrophic events.
The 1.05 premium adjustment factor currently used for organic practice
written agreements reflects the data regarding the yield variability
risk for organic farming practices. FCIC is providing the maximum
coverage available based on the data it has. As stated above, the
premium is based on the risk determined from the data provided to FCIC.
Further, FCIC cannot provide separate organic prices until adequate
organic price data is obtained. FCIC has contracted studies to help
obtain such price data. FCIC sympathizes with the problems faced by
organic producers. However, without actuarially sufficient data, FCIC
cannot make the suggested changes. FCIC is working as expeditiously as
possible to collect this data and hopes to have separate prices for
organic crops in the actuarial in the near future. Therefore, no change
has been made.
Comment: A commenter stated for certified organic acreage, the
provisions in section 37(c) may be a problem for crops like alfalfa,
since reporting and crop insurance is different than for a grain crop.
The commenter stated producers carry the insurance through the winter
for winter kill. They believe provisions for alfalfa and forage crops
are needed.
Response: FCIC fails to see why the requirement to have
documentation proving the crop is grown organically when it is reported
as an organic practice should be a problem for perennial crop
producers. Producers of all insured crops must report their practice
and provide any necessary documentation, such as contracts, by the
acreage reporting date. The commenter failed to provide any information
upon which FCIC could make an exception to this requirement for organic
crops. No change has been made.
Comment: A commenter stated they had a problem with the provisions
in section 37(c) requiring the use of certifying agents for
transitional acreage, because many times a decision by a soil
consultant is in place until the end of the season (sometimes winter)
until certifying agents finally get time to review.
Response: To be insured as an organic practice, there must be
evidence that such practice is used. Such evidence is provided by the
certifying agent in the organic plan. If the transitional acreage is
not included in the organic plan, it would be difficult to verify that
an organic practice was used on the transitional acreage. Therefore, no
change has been made.
Comment: Many commenters commented on the provisions proposed in
section 37(g). Most of the commenters believe the crop insurance policy
should provide coverage for contamination by unintentional application
or drift of prohibited substances. The commenters provided the
following comments and questions: (1) A commenter stated pesticide and
genetic drift are among the most pervasive threats faced by sustainable
and organic farmers, yet the proposed rule specifically excludes
coverage for these risks for organic producers. The commenter believes
crop insurance is the only reliable means to spread the risk of
pesticide and genetic drift for sustainable and organic farmers, and
that spreading the risk is an essential function of crop insurance. The
commenter stated section 107 of ARPA requires the Corporation to offer
quality loss adjustment coverage for ``identity preserved'' crops on a
smaller than unit basis. The commenter stated the most relevant quality
loss for many identity preserved crops would be the loss of identity
due to the introduction of foreign genetic and chemical materials. The
commenter asked if this coverage is currently available, and if not,
when it will be made available; (2) A commenter asked what the
rationale is behind excluding coverage for contamination and asked if
that position is defensible in light of the purposes of the Federal
crop insurance program; (3) A
[[Page 37719]]
commenter was concerned with the directive that organic farmers
establish buffer areas to prevent contamination. The commenter has
spent much time working in the area of biotechnology and is aware of
the lack of scientific understanding of the mechanisms of drift and how
to prevent it; (4) A commenter stated RMA should responsibly address
liability issues regarding contamination of organic crops by
genetically engineered crops. The commenter stated it is a new concern,
with far-reaching consequences for all involved in the production,
distribution, marketing and consumption of food. They asked what
insurance is available to organic growers in the event of contamination
of their crops and from whom it would be available; (5) A few
commenters stated over a year ago, the organic community raised the
issue of the need for insurance against risks of drift and GMO
contamination, which are still not addressed in the proposed rule; (6)
A commenter stated failure to insure against a major price risk (drift
and GMO contamination) is unfortunate. The commenter understands
coverage of this type of loss could be difficult in terms of premium
structure and affordability; however, they believe the U.S. government
needs to continue to pursue ways to protect certified organic growers
from the economic risks of genetic contamination from genetically
modified varieties. They believe contamination of a crop in spite of
the presence of a buffer zone should be a covered loss under Federal
Crop Insurance regulations; (7) A commenter believes failure to cover
these perils is discriminatory and indefensible in light of the
purposes of the Federal crop insurance program; (8) A few commenters
stated the proposed rule specifically excludes insurance for the risks
of drift and contamination, despite their growing damage to organic
products. They stated this failure to insure against a major price risk
is expected, though unfortunate; and (9) A commenter believes the crop
insurance policy should provide this coverage for organic producers if
it is the result of a natural disaster, the same as it does for
conventional producers, because the producers cannot control it if it
happens. The commenter added yield loss should be exempted when
establishing the crop yield.
Response: FCIC agrees the risk of contamination by application or
drift of prohibited substances is a major risk to organic producers and
has significant economic implications. Unfortunately, under section
508(a) of the Act, FCIC can only insure losses due to natural causes.
It does not have authority under the Act to provide crop insurance
coverage for any loss of production directly caused by contamination of
prohibited substances because the contamination is the cause that
damages the crop and it is not a natural cause, even if the
contamination is spread by a natural cause. Section 107 of ARPA states
that all the conditions must be must be met for such additional quality
adjustment coverage to be provided. While they may meet the condition
of identity preserved, organic producers have not demonstrated that
they meet all the conditions. If all conditions can be met, the quality
loss adjustment will be applicable. In order to qualify for an organic
practice, the producer must have an organic plan. If the buffer zone is
required in the organic plan, FCIC does not have the authority to
change the requirement in the plan. Therefore, concerns with the buffer
zone should be directed to the certifying agency. For the reasons
stated above, FCIC cannot cover contamination from genetically
engineered crops. Such losses are not due to a natural cause. FCIC is
unaware of any insurance coverage currently available to cover
contamination from genetically engineered crops. While FCIC sympathizes
with the organic producers, unless the Act is revised, FCIC is unable
to provide coverage for this peril. FCIC cannot exempt yield loss
caused by contamination when establishing the crop yield. The Act
requires the APH yield be based on the actual production history for
the crop, if the crop was produced. Therefore no change has been made.
In addition to the changes described above, FCIC has made the
following changes:
1. Amended the definition of ``second crop'' to add provisions that
allow a replanting of the first crop to be considered a replanted crop
if replanting is required or it is specifically made optional in the
policy, and the insured elects to replant and insure as the first
insured crop. Policies, such as the small grains policy, state that
replanting of wheat after the failure of a winter wheat crop is
optional, not required. In these circumstances, FCIC does not want to
require replanting because the producer paid for a separate endorsement
to have the option to replant and continue insurance on a winter wheat
basis, replant and insure as a separate spring wheat crop, or continue
to care for the damaged winter wheat crop. If the producer elects to
replant and insure the crop under the first insured crop policy, such
replanting should not be considered as a second crop because the
producer does not get an indemnity for the first crop. If the producer
elects to replant and insures the replanted crop as a separate spring
wheat crop, the replanted crop would be considered a second crop. The
definition is also amended to include cover crops planted with the
intention of haying, grazing or otherwise harvesting at a later time.
The proposed definition included only those cover crops actually hayed,
grazed or otherwise harvested. This change will require cover crops
that are destroyed prior to being hayed, grazed or otherwise harvested
but that are covered under FSA's noninsured crop disaster assistance
program (NAP) or receive other USDA benefits associated with forage
crops, to be considered a second crop; and
2. Section 15(g) is revised to clarify indemnity payments,
prevented planting payments, and premium calculations in other parts of
the policy do not conflict with the reductions specified in section 15.
This section is also revised to remove the requirement to reduce an
indemnity when a volunteer or cover crop is harvested from acreage on
which a first crop was planted. Since the volunteer crop or cover crop
is not insurable, it could never sustain an insurable loss, which is a
prerequisite for an indemnity reduction for the first insured crop.
This section is also revised to require the prevented planting payment
reduction when a volunteer crop is harvested after the late planting
period (or after the final planting date if a late planting period is
not applicable) for the first insured crop.
3. Section 15(g)(3)(ii) is revised to clarify that a prevented
planting payment reduction will apply if the insured cash rents to
another person the acreage for which a prevented planting payment was
received. This addition is made to be consistent with the current
prevented planting provisions that specify that an insured is not
eligible for a prevented planting payment if the insured cash rents the
acreage that was prevented from being planted.
Good cause is shown to make this rule effective upon filing for
public inspection at the Office of the Federal Register. Good cause to
make the rule effective upon filing at the Office of the Federal
Register exists when the 30 day delay in the effective date is
impracticable, unnecessary, or contrary to the public interest. The
changes that remain in this rule are statutorily mandated.
With respect to the provisions of this rule, it would be contrary
to the public interest to delay its implementation.
[[Page 37720]]
Further, such changes regarding the inclusion of an informal
reconsideration process for determinations of good farming practices
and making determinations of good farming practices more objective are
in the public interest. This is because these changes provide the
producer with a less expensive mechanism to adjudicate disputes
regarding good farming practices and benefits both producers and the
insurance providers by providing more flexibility in the entities that
can evaluate the farming practices used, and setting a standard that
reduces the problems caused by a disagreement among experts.
Further, it is in the public interest because the changes regarding
the limitation on providing multiple benefits on the same acreage in
the same crop year will reduce program costs because producers will no
longer be able to collect numerous indemnity payments on the same
acreage in cases such as a continuing drought.
The public interest will also be served because this final rule
also provides the basis for extending and clarifying coverage for crops
produced under organic or sustainable farming practices. This provides
producers with more meaningful coverage by eliminating the denial of
coverage for failure to use the same good farming practices as used by
producers under conventional practices.
In addition, the public interest is served because insurance
providers will now be able to verify the cause of loss for prevented
planted acreage in a timely manner and ensure that claims are properly
paid. This should eliminate a significant program vulnerability and
reduce program costs.
The public interest is further served by allowing producer the
flexibility to determine which yields will be substituted on an annual
basis because it will allow such producers to tailor their coverage to
their individual risk management needs, which may change every year.
If FCIC is required to delay the implementation of this rule 30
days after the date it is published, the provisions of this rule could
not be implemented until the next crop year for those crops having a
contract change date of June 30, 2003. This would mean that the
affected producers and insurance providers would be without the
benefits described above for an additional year.
For the reasons stated above, good cause exists to make these
policy changes effective upon filing with the Office of the Federal
Register.
List of Subjects in 7 CFR Parts 400, 407, and 457
Administrative practice and procedure, Claims, Crop insurance,
Fraud, Reporting and recordkeeping requirements.
Conforming Amendment
0
Accordingly, as set forth in the preamble, the Federal Crop Insurance
Corporation amends 7 CFR part 400, subpart J to read as follows:
PART 400--GENERAL ADMINISTRATIVE REGULATIONS
0
1. The authority citation for 7 CFR part 400 continues to read as
follows:
Authority: 7 U.S.C. 1506(l), 1506(p).
Subpart J--Appeal Procedure
0
2. In Sec. 400.90, revise the definition of ``good farming
practices,'' and add the definition of ``insured'';
0
3. In Sec. 400.91:
0
a. Revise paragraph (a)(2); and
0
b. Revise paragraph (b)(2);
0
4. In Sec. 400.92, remove paragraph (c);
0
5. In Sec. 400.93, amend paragraph (a) by removing the second and
third sentences;
0
6. In Sec. 400.95, amend paragraph (a) by removing the words ``or
determination regarding good farming practices'' from the first
sentence;
0
7. In Sec. 400.96:
0
a. Remove the paragraph (a) designation and revise the introductory
text to read as follows: ``Except as provided in Sec. 400.98, with
respect to adverse determinations:'';
0
b. Redesignate paragraphs (a)(1), (2) and (3) as paragraphs (a), (b)
and (c), respectively;
0
c. Amend redesignated paragraph (c) by removing the words ``paragraphs
(a) and (b) of''; and
0
d. Remove paragraph (b); and
0
8. Add Sec. 400.98.
The revisions read as follows:
Sec. 400.90 Definitions.
* * * * *
Good farming practices. For agricultural commodities insured under
the terms contained in 7 CFR part 457 and all other crop insurance
policies authorized under the Act, except as provided herein, means the
good farming practices as defined at 7 CFR 457.8. For agricultural
commodities insured under the terms contained in 7 CFR part 407, means
the good farming practices as defined at 7 CFR 407.9.
Insured. An individual or entity that has applied for crop
insurance or who holds a crop insurance policy that was in effect for
the previous crop year and continues to be in effect for the current
crop year.
* * * * *
Sec. 400.91 Applicability.
* * * * *
(a) * * *
(1) * * *
(2) Determinations of good farming practices made by personnel of
the Agency or the reinsured company (see Sec. 400.98).
* * * * *
(b) * * *
(1) * * *
(2) Made by any private insurance company with respect to any
contract of insurance issued to any producer by the private insurance
company and reinsured by FCIC under the provisions of the Act, except
for determinations of good farming practices specified in Sec.
400.91(a)(2).
* * * * *
Sec. 400.98 Reconsideration process.
(a) This reconsideration process only applies to determinations of
good farming practices under Sec. 400.91(a)(2).
(b) There is no appeal to NAD of determinations or reconsideration
decisions regarding good farming practices.
(c) Only reconsideration is available for determinations of good
farming practices. Mediation is not available for determinations of
good farming practices.
(d) If the insured seeks reconsideration, the insured must file a
written request for reconsideration to the following: USDA/RMA/Deputy
Administrator for Insurance Services/Stop 0805, 1400 Independence
Avenue SW., Washington, DC 20250-0801.
(1) A request for reconsideration must be filed within 30 days of
receipt of written notice of the determination regarding good farming
practices. A request for reconsideration will be considered to have
been ``filed'' when personally delivered in writing to FCIC or when the
properly addressed request, postage paid, is postmarked.
(2) Notwithstanding paragraph (d)(1) of this section, an untimely
request for reconsideration may be accepted and acted upon if the
insured can demonstrate a physical inability to timely file the request
for reconsideration.
(3) The written request must state the basis upon which the insured
relies to show that:
(i) The decision was not proper and not made in accordance with
applicable program regulations and procedures; or
[[Page 37721]]
(ii) All material facts were not properly considered in such
decision.
(e) With respect to determinations of good farming practices, the
insured is not required to exhaust the administrative remedies in 7 CFR
part 11 before bringing suit against FCIC in a United States district
court. However, regardless of whether the Agency or the reinsured
company makes the determination, the insured must seek reconsideration
under Sec. 400.98 before bringing suit against FCIC in a United States
District Court. The insured cannot file suit against the reinsured
company for determinations of good farming practices.
(f) Any reconsideration decision by the Agency regarding good
farming practices shall not be reversed or modified as a result of
judicial review unless the reconsideration decision is found to be
arbitrary or capricious.
Final Rule
0
Accordingly, as set forth in the preamble, the Federal Crop Insurance
Corporation amends 7 CFR part 400, part 407 and 7 CFR part 457
effective for the 2004 and succeeding crop years for all crops with a
contract change date on or after the effective date of this rule, and
for the 2005 and succeeding crop years for all crops with a contract
change date prior to the effective date of this rule to read as
follows:
PART 400--GENERAL ADMINISTRATIVE REGULATIONS
0
9. The authority citation for 7 CFR part 400 continues to read as
follows:
Authority: 7 U.S.C. 1506(l), 1506(p).
Subpart T--Federal Crop Insurance Reform, Insurance Implementation
0
10. Revise the heading of subpart T to read as set forth above.
Sec. 400.650 [Amended]
0
11. In Sec. 400.650, remove ``limited coverage'' from the second
sentence.
0
12. In Sec. 400.651:
0
a. Revise the definitions of ``additional coverage'' and ``approved
yield'';
0
b. Remove ``limited,'' from the definition of ``administrative fee'';
and
0
c. Remove the definition of ``limited coverage''.
The revisions read as follows:
Sec. 400.651 Definitions.
* * * * *
Additional coverage. A level of coverage greater than catastrophic
risk protection.
* * * * *
Approved yield. The actual production history (APH) yield,
calculated and approved by the verifier, used to determine the
production guarantee by summing the yearly actual, assigned, adjusted
or unadjusted transitional yields and dividing the sum by the number of
yields contained in the database, which will always contain at least
four yields. The database may contain up to 10 consecutive crop years
of actual or assigned yields. The approved yield may have yield
adjustments elected under applicable policy provisions, or other
limitations according to FCIC approved procedures applied when
calculating the approved yield.
* * * * *
Sec. 400.652 [Amended]
0
13. In Sec. 400.652:
0
a. Remove ``,limited,'' from paragraph (a);
0
b. Remove the words ``Limited and'' from paragraph (b) and capitalize
the first letter in the word ``additional''; and
0
c. Remove the words ``limited and'' from paragraph (d).
Sec. 400.654 [Amended]
0
14. In Sec. 400.654:
0
a. Remove ``,limited'' from paragraph (a);
0
b. Remove the words ``limited or'' from paragraph (c)(6); and
0
c. Remove ``,limited,'' from paragraph (d).
PART 407--GROUP RISK PLAN OF INSURANCE REGULATIONS FOR THE 2004 AND
SUCCEEDING CROP YEARS
0
15. The authority citation for 7 CFR part 407 continues to read as
follows:
Authority: 7 U.S.C. 1506(l), 1506(p).
0
16. Amend part 407 by revising the part heading as set forth above.
0
17. Amend Sec. 407.9, as follows:
0
a. Revise the introductory text of the section;
0
b. Amend section 1--Definitions--by adding definitions of
``agricultural experts,'' ``area,'' ``certifying agent,''
``conventional farming practice,'' ``cover crop,'' ``double-crop,''
``first insured crop,'' ``generally recognized,'' ``organic
agricultural industry,'' ``organic farming practice,'' ``replanted
crop,'' ``second crop'' and ``sustainable farming practice'' and
revising the definition of ``good farming practices;''
0
c. Revise section 3(c);
0
d. Remove section 3(d);
0
e. Revise section 16; and
0
f. Add a new section 21 between the first paragraph of section 20 and
the example immediately following that paragraph.
The revised and added sections read as follows:
Sec. 407.9 Group risk plan common policy.
The provisions of the Group Risk Plan Common Policy for the 2004
and succeeding crop years are as follows:
* * * * *
1. Definitions.
* * * * *
Agricultural experts. Persons who are employed by the
Cooperative State Research, Education and Extension Service or the
agricultural departments of universities, or other persons approved
by FCIC, whose research or occupation is related to the specific
crop or practice for which such expertise is sought.
Area. Land surrounding the insured acreage with geographic
characteristics, topography, soil types and climatic conditions
similar to the insured acreage.
* * * * *
Certifying agent. A private or governmental entity accredited by
the USDA Secretary of Agriculture for the purpose of certifying a
production, processing or handling operation as organic.
Conventional farming practice. A system or process for producing
an agricultural commodity, excluding organic farming practices, that
is necessary to produce the crop that may be, but is not required to
be, generally recognized by agricultural experts for the area to
conserve or enhance natural resources and the environment.
* * * * *
Cover crop. A crop generally recognized by agricultural experts
as agronomically sound for the area for erosion control or other
reasons related to conservation or soil improvement. A cover crop
may be considered to be a second crop (see the definition of
``second crop'').
* * * * *
Double crop. Producing two or more crops for harvest on the same
acreage in the same crop year.
* * * * *
First insured crop. With respect to a single crop year and any
specific crop acreage, the first instance that an agricultural
commodity is planted for harvest or prevented from being planted and
is insured under the authority of the Act. For example, if winter
wheat that is not insured is planted on acreage that is later
planted to soybeans that are insured, the first insured crop would
be soybeans. If the winter wheat was insured, it would be the first
insured crop.
* * * * *
Generally recognized. When agricultural experts or the organic
agricultural industry, as applicable, are aware of the production
method or practice and there is no genuine dispute regarding whether
the production method or practice allows the crop to make normal
progress toward maturity.
Good farming practices. The production methods utilized to
produce the insured crop and allow it to make normal progress toward
maturity, which are: (1) For conventional or sustainable farming
practices, those generally recognized by agricultural experts for
the area; or (2) for organic farming practices, those generally
recognized by the organic
[[Page 37722]]
agricultural industry for the area or contained in the organic plan
that is in accordance with the National Organic Program published in
7 CFR part 205. We may, or you may request us to, contact FCIC to
determine whether or not production methods will be considered to be
``good farming practices.''
* * * * *
Organic agricultural industry. Persons who are employed by the
following organizations: Appropriate Technology Transfer for Rural
Areas, Sustainable Agriculture Research and Education or the
Cooperative State Research, Education and Extension Service, the
agricultural departments of universities, or other persons approved
by FCIC, whose research or occupation is related to the specific
organic crop or practice for which such expertise is sought.
Organic farming practice. A system of plant production practices
approved by a certifying agent in accordance with 7 CFR part 205.
* * * * *
Replanted crop. The same agricultural commodity replanted on the
same acreage as the first insured crop for harvest in the same crop
year if the replanting is specifically made optional by the policy
and you elect to replant the crop and insure it under the policy
covering the first insured crop, or replanting is required by the
policy.
Second crop. With respect to a single crop year, the next
occurrence of planting any agricultural commodity for harvest
following a first insured crop on the same acreage. The second crop
may be the same or a different agricultural commodity as the first
insured crop, except the term does not include a replanted crop. A
cover crop, planted after a first insured crop and planted for the
purpose of haying, grazing or otherwise harvesting in any manner or
that is hayed, grazed, or otherwise harvested, is considered a
second crop. A cover crop that is covered by FSA's noninsured crop
disaster assistance program (NAP) or receives other USDA benefits
associated with forage crops will be considered as planted for the
purpose of haying, grazing or otherwise harvesting. A crop meeting
the conditions stated herein will be considered to be a second crop
regardless of whether or not it is insured.
* * * * *
Sustainable farming practice. A system or process for producing
an agricultural commodity, excluding organic farming practices, that
is necessary to produce the crop and is generally recognized by
agricultural experts for the area to conserve or enhance natural
resources and the environment.
* * * * *
3. Insured and Insurable Acreage.
* * * * *
(c) We will not insure any acreage:
(1) Where the crop was destroyed or put to another use during
the crop year for the purpose of conforming with, or obtaining a
payment under, any other program administered by the USDA;
(2) Where you have failed to follow good farming practices for
the insured crop;
(3) Of a second crop if you elect not to insure such acreage
when there is an insurable loss for planted acreage of a first
insured crop and you intend to collect an indemnity payment that is
equal to 100 percent of the insurable loss for the first insured
crop acreage in accordance with section 21. In this case:
(i) You must provide written notice to us of your election not
to insure acreage of a second crop on or before the acreage
reporting date for the second crop if it is insured under this GRP
policy, or before planting the second crop if it is insured under
any other plan of insurance and if you fail to provide such notice,
the second crop acreage will be insured in accordance with policy
provisions and you must repay any overpaid indemnity for the first
insured crop;
(ii) In the event a second crop is planted and insured with a
different insurance provider, or planted and insured by a different
person, you must provide written notice to each insurance provider
that a second crop was planted on acreage on which you had a first
insured crop; and
(iii) You must report the crop acreage that will not be insured
on the applicable acreage report; or
(4) Of a crop planted following a second crop or following an
insured crop that is prevented from being planted after a first
insured crop, unless it is a practice that is generally recognized
by agricultural experts or the organic agricultural industry for the
area to plant three or more crops for harvest on the same acreage in
the same crop year, and additional coverage insurance provided under
the authority of the Act is offered for the third or subsequent crop
in the same crop year. Insurance will only be provided for a third
or subsequent crop as follows:
(i) You must provide records acceptable to us that show:
(A) You have produced and harvested the insured crop following
two other crops harvested on the same acreage in the same crop year
in at least two of the last four years in which you produced the
insured crop; or
(B) The applicable acreage has had three or more crops produced
and harvested on it in at least two of the last four years in which
the insured crop was grown on it; and
(ii) The amount of insurable acreage will not exceed 100 percent
of the greatest number of acres for which you provide the records
required in section 3(c)(4)(i)(A) or (B).
* * * * *
[FCIC Policy]
16. Determinations.
All determinations required by the policy will be made by us. If
you disagree with our determinations, you may:
(a) Except as provided in section 16(b), obtain administrative
review of or appeal those determinations in accordance with appeal
provisions published at 7 CFR part 400, subpart J or 7 CFR part 11.
(b) Request a reconsideration of our determination regarding
good farming practices in accordance with the reconsideration
process established for this purpose and published at 7 CFR part
400, subpart J. However, you must complete the reconsideration
process before filing suit against us in the United States district
court.
[Reinsured Policy]
16. Determinations.
(a) If you and we fail to agree on any factual determination
made by us, the disagreement will be resolved in accordance with the
rules of the American Arbitration Association.
(b) Except as provided in section 16(d), you may appeal any
determination made by FCIC in accordance with appeal provisions
published at 7 CFR part 400, subpart J or 7 CFR part 11.
(c) No award determined by arbitration, appeal, administrative
review or reconsideration process can exceed the amount of liability
established or which should have been established under the policy.
(d) If you do not agree with any determination made by us or
FCIC regarding whether you have used a good farming practice, you
may request reconsideration of this determination in accordance with
the review process established for this purpose and published at 7
CFR part 400, subpart J. However, you must complete the
reconsideration process before filing suit against FCIC in United
States district court. You cannot sue us for determinations of good
farming practices.
* * * * *
21. Indemnity and Premium Limitations.
(a) With respect to acreage where you are due a loss for your
first insured crop in the crop year, except in the case of double
cropping described in section 21(c):
(1) You may elect to not plant or to plant and not insure a
second crop on the same acreage for harvest in the same crop year
and collect an indemnity payment that is equal to 100 percent of the
insurable loss for the first insured crop; or
(2) You may elect to plant and insure a second crop on the same
acreage for harvest in the same crop year (you will pay the full
premium and if there is an insurable loss to the second crop,
receive the full amount of indemnity that may be due for the second
crop, regardless of whether there is a subsequent crop planted on
the same acreage) and:
(i) Collect an indemnity payment that is 35 percent of the
insurable loss for the first insured crop;
(ii) Be responsible for a premium for the first insured crop
that is commensurate with the amount of the indemnity paid for the
first insured crop; and
(iii) If the second crop does not suffer an insurable loss:
(A) Collect an indemnity payment for the other 65 percent of
insurable loss that was not previously paid under section
21(a)(2)(i); and
(B) Be responsible for the remainder of the premium for the
first insured crop that you did not pay under section 21(a)(2)(ii).
(b) The reduction in the amount of indemnity and premium
specified in section 21(a), as applicable, will apply:
(1) Notwithstanding the priority contained in the Agreement to
Insure section, which states that the Crop Provisions have priority
over the Basic Provisions when a conflict exists, to any premium
owed or indemnity
[[Page 37723]]
paid in accordance with the Crop Provisions, and any applicable
endorsement.
(2) Even if another person plants the second crop on any acreage
where the first insured crop was planted.
(3) If you fail to provide any records we require to determine
whether an insurable loss occurred for the second crop.
(c) You may receive a full indemnity for a first insured crop
when a second crop is planted on the same acreage in the same crop
year, regardless of whether or not the second crop is insured or
sustains an insurable loss, if each of the following conditions are
met:
(1) It is a practice that is generally recognized by
agricultural experts or the organic agricultural industry for the
area to plant two or more crops for harvest in the same crop year;
(2) The second or more crops are customarily planted after the
first insured crop for harvest on the same acreage in the same crop
year in the area;
(3) Additional coverage insurance offered under the authority of
the Act is available in the county on the two or more crops that are
double cropped; and
(4) You provide records acceptable to us of acreage and
production that show you have double cropped acreage in at least two
of the last four crop years in which the first insured crop was
planted, or that show the applicable acreage was double cropped in
at least two of the last four crop years in which the first insured
crop was grown on it.
(d) The receipt of a full indemnity on both crops that are
double cropped is limited to the number of acres for which you can
demonstrate you have double cropped or that have been historically
double cropped as specified in section 21(c).
* * * * *
PART 457--COMMON CROP INSURANCE REGULATIONS
0
18. The authority citation for 7 CFR part 457 continues to read as
follows:
Authority: 7 U.S.C. 1506(l), 1506(p).
0
19. Amend Sec. 457.8, Common Crop Insurance Policy Basic Provisions,
as follows:
0
a. Amend section 1 by adding definitions for ``Actual Production
History (APH),'' ``actual yield,'' ``agricultural experts,'' ``area,''
``average yield,'' ``buffer zone,'' ``certified organic acreage,''
``certifying agent,'' ``conventional farming practice,'' ``cover
crop,'' ``double-crop,'' ``first insured crop,'' ``generally
recognized,'' ``organic agricultural industry,'' ``organic farming
practice,'' ``organic plan,'' ``organic standards,'' ``prohibited
substance,'' ``replanted crop,'' ``second crop,'' ``sustainable farming
practice'' and ``transitional acreage;'' and revising the definitions
of ``approved yield,'' and ``good farming practices;''
0
b. Redesignate sections 3(e) through (h) as sections 3(f) through (i),
respectively and add new section 3(e);
0
c. Amend section 9(a)(5) by removing ``or'' at the end of the text;
0
d. Amend section 9(a)(6) by removing the period ``.'' at the end of the
text and replacing it with a semicolon ``;'';
0
e. Amend section 9(a) by adding new sections 9(a)(7) and (8);
0
f. Amend section 14 by revising (Your Duties) 14(d) and 14(d)(1),
redesignating section 14(f) as 14(g) and adding section 14(f);
0
g. Amend section 14 (Our Duties) by revising sections 14(a), and
14(a)(1) and (2);
0
h. Amend section 15 by revising the section heading, redesignating
section 15(e) as section 15(j), and adding new sections 15(e) through
(i);
0
i. Amend the first sentence of section 17(c) to add the words ``except
as specified in section 15(f)'' after the word ``acreage'' and before
the period at the end of the sentence;
0
j. Amend section 17(e)(1) by removing ``or (5)'' at the end of the
first sentence;
0
k. Amend the first sentence of section 17(e)(1)(i)(A) by replacing the
words ``substitute crop other than an approved cover'' with ``second''
and adding ``unless you meet the double cropping requirements in
section 17(f)(4)'' before the closing parentheses;
0
l. Revise sections 17(f)(4) and (5);
0
m. Remove current section 17(f)(6) and redesignate sections 17(f)(7)
through (12) as 17(f)(6) through (11) respectively;
0
n. Revise section 20. Appeals (For FCIC policies);
0
o. Revise section 20. Arbitration (For reinsured policies);
0
p. Amend section 34(c)(1) by removing ``and'' at the end of the text;
0
q. Amend section 34(c)(2) by replacing the period at the end of the
text with ``; and'';
0
r. Amend section 34(c) by adding section 34(c)(3);
0
s. Revise section 36; and
0
t. Add a new section 37.
The revised and added sections read as follows:
Sec. 457.8 The application and policy.
* * * * *
Terms and Conditions
Basic Provisions
1. Definitions.
* * * * *
Actual Production History (APH). A process used to determine
production guarantees in accordance with 7 CFR part 400, subpart
(G).
Actual yield. The yield per acre for a crop year calculated from
the production records or claims for indemnities. The actual yield
is determined by dividing total production (which includes harvested
and appraised production) by planted acres.
* * * * *
Agricultural experts. Persons who are employed by the
Cooperative State Research, Education and Extension Service or the
agricultural departments of universities, or other persons approved
by FCIC, whose research or occupation is related to the specific
crop or practice for which such expertise is sought.
* * * * *
Approved yield. The actual production history (APH) yield,
calculated and approved by the verifier, used to determine the
production guarantee by summing the yearly actual, assigned,
adjusted or unadjusted transitional yields and dividing the sum by
the number of yields contained in the database, which will always
contain at least four yields. The database may contain up to 10
consecutive crop years of actual or assigned yields. The approved
yield may have yield adjustments elected under section 36, revisions
according to section 3(d) or (e), or other limitations according to
FCIC approved procedures applied when calculating the approved
yield.
* * * * *
Area. Land surrounding the insured acreage with geographic
characteristics, topography, soil types and climatic conditions
similar to the insured acreage.
* * * * *
Average yield. The yield, calculated by summing the yearly
actual, assigned, adjusted or unadjusted transitional yields and
dividing the sum by the number of yields contained in the database,
prior to any adjustments, including those elected under section 36,
revisions according to section 3(d) or (e), or other limitations
according to FCIC approved procedures.
* * * * *
Buffer zone. A parcel of land, as designated in your organic
plan, that separates agricultural commodities grown under organic
practices from agricultural commodities grown under non-organic
practices, and used to minimize the possibility of unintended
contact by prohibited substances or organisms.
* * * * *
Certified organic acreage. Acreage in the certified organic
farming operation that has been certified by a certifying agent as
conforming to organic standards in accordance with 7 CFR part 205.
Certifying agent. A private or governmental entity accredited by
the USDA Secretary of Agriculture for the purpose of certifying a
production, processing or handling operation as organic.
* * * * *
Conventional farming practice. A system or process for producing
an agricultural commodity, excluding organic farming practices, that
is necessary to produce the crop that may be, but is not required to
be, generally recognized by agricultural experts for the area to
conserve or enhance natural resources and the environment.
* * * * *
Cover crop. A crop generally recognized by agricultural experts
as agronomically sound for the area for erosion control or other
purposes related to conservation or soil
[[Page 37724]]
improvement. A cover crop may be considered to be a second crop (see
the definition of ``second crop'').
* * * * *
Double crop. Producing two or more crops for harvest on the same
acreage in the same crop year.
* * * * *
First insured crop. With respect to a single crop year and any
specific crop acreage, the first instance that an agricultural
commodity is planted for harvest or prevented from being planted and
is insured under the authority of the Act. For example, if winter
wheat that is not insured is planted on acreage that is later
planted to soybeans that are insured, the first insured crop would
be soybeans. If the winter wheat was insured, it would be the first
insured crop.
* * * * *
Generally recognized. When agricultural experts or the organic
agricultural industry, as applicable, are aware of the production
method or practice and there is no genuine dispute regarding whether
the production method or practice allows the crop to make normal
progress toward maturity and produce at least the yield used to
determine the production guarantee or amount of insurance.
Good farming practices. The production methods utilized to
produce the insured crop and allow it to make normal progress toward
maturity and produce at least the yield used to determine the
production guarantee or amount of insurance, including any
adjustments for late planted acreage, which are: (1) For
conventional or sustainable farming practices, those generally
recognized by agricultural experts for the area; or (2) for organic
farming practices, those generally recognized by the organic
agricultural industry for the area or contained in the organic plan.
We may, or you may request us to, contact FCIC to determine whether
or not production methods will be considered to be ``good farming
practices.''
* * * * *
Organic agricultural industry. Persons who are employed by the
following organizations: Appropriate Technology Transfer for Rural
Areas, Sustainable Agriculture Research and Education or the
Cooperative State Research, Education and Extension Service, the
agricultural departments of universities, or other persons approved
by FCIC, whose research or occupation is related to the specific
organic crop or practice for which such expertise is sought.
Organic farming practice. A system of plant production practices
approved by a certifying agent in accordance with 7 CFR part 205.
Organic plan. A written plan, in accordance with the National
Organic Program published in 7 CFR part 205, that describes the
organic farming practices that you and a certifying agent agree upon
annually or at such other times as prescribed by the certifying
agent.
Organic standards. Standards in accordance with the Organic
Foods Production Act of 1990 (7 U.S.C. 6501 et seq.) and 7 CFR part
205.
* * * * *
Prohibited substance. Any biological, chemical, or other agent
that is prohibited from use or is not included in the organic
standards for use on any certified organic, transitional or buffer
zone acreage. Lists of such substances are contained at 7 CFR part
205.
Replanted crop. The same agricultural commodity replanted on the
same acreage as the first insured crop for harvest in the same crop
year if the replanting is specifically made optional by the policy
and you elect to replant the crop and insure it under the policy
covering the first insured crop, or replanting is required by the
policy.
* * * * *
Second crop. With respect to a single crop year, the next
occurrence of planting any agricultural commodity for harvest
following a first insured crop on the same acreage. The second crop
may be the same or a different agricultural commodity as the first
insured crop, except the term does not include a replanted crop. A
cover crop, planted after a first insured crop and planted for the
purpose of haying, grazing or otherwise harvesting in any manner or
that is hayed, grazed, or otherwise harvested, is considered a
second crop. A cover crop that is covered by FSA's noninsured crop
disaster assistance program (NAP) or receives other USDA benefits
associated with forage crops will be considered as planted for the
purpose of haying, grazing or otherwise harvesting. A crop meeting
the conditions stated herein will be considered to be a second crop
regardless of whether or not it is insured. Notwithstanding the
references to haying and grazing as harvesting in these Basic
Provisions, for the purpose of determining the end of the insurance
period, harvest of the crop will be as defined in the applicable
Crop Provisions.
* * * * *
Sustainable farming practice. A system or process for producing
an agricultural commodity, excluding organic farming practices, that
is necessary to produce the crop and is generally recognized by
agricultural experts for the area to conserve or enhance natural
resources and the environment.
* * * * *
Transitional acreage. Acreage on which organic farming practices
are being followed that does not yet qualify to be designated as
organic acreage.
* * * * *
3. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
(e) Unless you meet the double cropping requirements contained
in section 17(f)(4), if you elect to plant a second crop on acreage
where the first insured crop was prevented from being planted, you
will receive a yield equal to 60 percent of the approved yield for
the first insured crop to calculate your average yield for
subsequent crop years (not applicable to crops if the APH is not the
basis for the insurance guarantee). If the unit contains both
prevented planting and planted acreage of the same crop, the yield
for the unit will be determined by:
(1) Multiplying the number of insured prevented planting acres
by 60 percent of the approved yield for the first insured crop;
(2) Adding the totals from section 3(e)(1) to the amount of
appraised or harvested production for all of the insured planted
acreage; and
(3) Dividing the total in section 3(e)(2) by the total number of
acres in the unit.
* * * * *
9. Insurable Acreage.
(a) * * *
* * * * *
(7) Of a second crop if you elect not to insure such acreage
when there is an insurable loss for planted acreage of a first
insured crop and you intend to collect an indemnity payment that is
equal to 100 percent of the insurable loss for the first insured
crop acreage in accordance with section 15. In this case:
(i) You must provide written notice to us of your election not
to insure acreage of a second crop at the time the first insured
crop acreage is released by us or, if the first insured crop is
insured under the Group Risk Protection Plan of Insurance (7 CFR
part 407), before the second crop is planted, and if you fail to
provide such notice, the second crop acreage will be insured in
accordance with policy provisions and you must repay any overpaid
indemnity for the first insured crop;
(ii) In the event a second crop is planted and insured with a
different insurance provider, or planted and insured by a different
person, you must provide written notice to each insurance provider
that a second crop was planted on acreage on which you had a first
insured crop; and
(iii) You must report the crop acreage that will not be insured
on the applicable acreage report; or
(8) Of a crop planted following a second crop or following an
insured crop that is prevented from being planted after a first
insured crop, unless it is a practice that is generally recognized
by agricultural experts or the organic agricultural industry for the
area to plant three or more crops for harvest on the same acreage in
the same crop year, and additional coverage insurance provided under
the authority of the Act is offered for the third or subsequent crop
in the same crop year. Insurance will only be provided for a third
or subsequent crop as follows:
(i) You must provide records acceptable to us that show:
(A) You have produced and harvested the insured crop following
two other crops harvested on the same acreage in the same crop year
in at least two of the last four years in which you produced the
insured crop; or
(B) The applicable acreage has had three or more crops produced
and harvested on it in at least two of the last four years in which
the insured crop was grown on it; and
(ii) The amount of insurable acreage will not exceed 100 percent
of the greatest number of acres for which you provide the records
required in section 9(a)(8)(i)(A) or (B).
* * * * *
14. Duties in the Event of Damage or Loss.
Your Duties--
* * * * *
(d) You must:
(1) Provide a complete harvesting and marketing record of each
insured crop by
[[Page 37725]]
unit including separate records showing the same information for
production from any acreage not insured. In addition, if you insure
any acreage that may be subject to an indemnity reduction as
specified in section 15(e)(2) (for example, you planted a second
crop on acreage where a first insured crop had an insurable loss and
you do not qualify for the double cropping exemption), you must
provide separate records of production from such acreage for all
insured crops planted on the acreage. For example, if you have an
insurable loss on 10 acres of wheat and subsequently plant cotton on
the same 10 acres, you must provide records of the wheat and cotton
production on the 10 acres separate from any other wheat and cotton
production that may be planted in the same unit. If you fail to
provide such separate records, we will allocate the production of
each crop to the acreage in proportion to our liability for the
acreage or, if you fail to provide the records necessary to allow
allocation, the reduction specified in section 15 will apply; and
* * * * *
(f) In the event you are prevented from planting an insured crop
which has prevented planting coverage, you must notify us within 72
hours after:
(1) The final planting date, if you do not intend to plant the
insured crop during the late planting period or if a late planting
period is not applicable; or
(2) You determine you will not be able to plant the insured crop
within any applicable late planting period.
* * * * *
Our Duties--
(a) If you have complied with all the policy provisions, we will
pay your loss within 30 days after the later of:
(1) We reach agreement with you;
(2) Completion of arbitration, reconsideration of determinations
regarding good farming practices or any other appeal that results in
an award in your favor, unless we exercise our right to appeal such
decision; or
* * * * *
15. Production Included in Determining an Indemnity and Payment
Reductions.
* * * * *
(e) With respect to acreage where you have suffered an insurable
loss to planted acreage of your first insured crop in the crop year,
except in the case of double cropping described in section 15(h):
(1) You may elect to not plant or to plant and not insure a
second crop on the same acreage for harvest in the same crop year
and collect an indemnity payment that is equal to 100 percent of the
insurable loss for the first insured crop; or
(2) You may elect to plant and insure a second crop on the same
acreage for harvest in the same crop year (you will pay the full
premium and, if there is an insurable loss to the second crop,
receive the full amount of indemnity that may be due for the second
crop, regardless of whether there is a subsequent crop planted on
the same acreage) and:
(i) Collect an indemnity payment that is 35 percent of the
insurable loss for the first insured crop;
(ii) Be responsible for a premium for the first insured crop
that is commensurate with the amount of the indemnity paid for the
first insured crop; and
(iii) If the second crop does not suffer an insurable loss:
(A) Collect an indemnity payment for the other 65 percent of
insurable loss that was not previously paid under section
15(e)(2)(i); and
(B) Be responsible for the remainder of the premium for the
first insured crop that you did not pay under section 15(e)(2)(ii).
(f) With respect to acreage where you were prevented from
planting the first insured crop in the crop year, except in the case
of double cropping described in section 15(h):
(1) If a second crop is not planted on the same acreage for
harvest in the same crop year, you may collect a prevented planting
payment that is equal to 100 percent of the prevented planting
payment for the acreage for the first insured crop; or
(2) If a second crop is planted on the same acreage for harvest
in the same crop year (you will pay the full premium and, if there
is an insurable loss to the second crop, receive the full amount of
indemnity that may be due for the second crop, regardless of whether
there is a subsequent crop planted on the same acreage) and:
(i) Provided the second crop is not planted on or before the
final planting date or during the late planting period (as
applicable) for the first insured crop, you may collect a prevented
planting payment that is 35 percent of the prevented planting
payment for the first insured crop; and
(ii) Be responsible for a premium for the first insured crop
that is commensurate with the amount of the prevented planting
payment paid for the first insured crop.
(g) The reduction in the amount of indemnity or prevented
planting payment and premium specified in sections 15(e) and 15(f),
as applicable, will apply:
(1) Notwithstanding the priority contained in the Agreement to
Insure section, which states that the Crop Provisions have priority
over the Basic Provisions when a conflict exists, to any premium
owed or indemnity or prevented planting payment made in accordance
with the Crop Provisions, and any applicable endorsement.
(2) Even if another person plants the second crop on any acreage
where the first insured crop was planted or was prevented from being
planted, as applicable.
(3) For prevented planting only:
(i) If a volunteer crop or cover crop is hayed, grazed or
otherwise harvested from the same acreage, after the late planting
period (or after the final planting date if a late planting period
is not applicable) for the first insured crop in the same crop year;
or
(ii) If you receive cash rent for any acreage on which you were
prevented from planting.
(h) You may receive a full indemnity, or a full prevented
planting payment for a first insured crop when a second crop is
planted on the same acreage in the same crop year, regardless of
whether or not the second crop is insured or sustains an insurable
loss, if each of the following conditions are met:
(1) It is a practice that is generally recognized by
agricultural experts or the organic agricultural industry for the
area to plant two or more crops for harvest in the same crop year;
(2) The second or more crops are customarily planted after the
first insured crop for harvest on the same acreage in the same crop
year in the area;
(3) Additional coverage insurance offered under the authority of
the Act is available in the county on the two or more crops that are
double cropped;
(4) You provide records acceptable to us of acreage and
production that show you have double cropped acreage in at least two
of the last four crop years in which the first insured crop was
planted, or that show the applicable acreage was double cropped in
at least two of the last four crop years in which the first insured
crop was grown on it; and
(5) In the case of prevented planting, the second crop is not
planted on or prior to the final planting date or, if applicable,
prior to the end of the late planting period for the first insured
crop.
(i) The receipt of a full indemnity or prevented planting
payment on both crops that are double cropped is limited to the
number of acres for which you can demonstrate you have double
cropped or that have been historically double cropped as specified
in section 15(h).
* * * * *
17. Prevented Planting.
* * * * *
(f) * * *
(1) * * *
(2) * * *
(3) * * *
(4) On which the insured crop is prevented from being planted,
if you or any other person receives a prevented planting payment for
any crop for the same acreage in the same crop year, excluding share
arrangements, unless:
(i) It is a practice that is generally recognized by
agricultural experts or the organic agricultural industry in the
area to plant the second crop for harvest following harvest of the
first insured crop, and additional coverage insurance offered under
the authority of the Act is available in the county for both crops
in the same crop year;
(ii) You provide records acceptable to us of acreage and
production that show you have double cropped acreage in at least two
of the last four crop years in which the first insured crop was
planted, or that show the applicable acreage was double cropped in
at least two of the last four crop years in which the first insured
crop was grown on it; and
(iii) The amount of acreage you are double cropping in the
current crop year does not exceed the number of acres for which you
provide the records required in section 17(f)(4)(ii);
(5) On which the insured crop is prevented from being planted,
if:
(i) Any crop is planted within or prior to the late planting
period or on or prior to the final planting date if no late planting
period is applicable, unless you meet the double cropping
requirements in section 17(f)(4), or unless the crop planted was a
cover crop; or
(ii) Any volunteer or cover crop is hayed, grazed or otherwise
harvested within or prior to the late planting period or on or prior
to
[[Page 37726]]
the final planting date if no late planting period is applicable;
* * * * *
[For FCIC Policies]
20. Appeals and Administrative Review.
All determinations required by the policy will be made by us. If
you disagree with our determinations, you may:
(a) Except as provided in section 20(b), obtain an
administrative review of or appeal those determinations in
accordance with appeal provisions published at 7 CFR part 400,
subpart J or 7 CFR part 11. Disputes regarding the amount of
assigned production for uninsured causes for your failure to use
good farming practices must be resolved under this subsection.
(b) Request a reconsideration of our determination regarding
good farming practices in accordance with the reconsideration
process established for this purpose and published at 7 CFR part
400, subpart J. However, you must complete the reconsideration
process before filing suit against us in the United States district
court.
[For Reinsured Policies]
20. Arbitration, Appeals, and Administrative Review.
(a) If you and we fail to agree on any factual determination
made by us, the disagreement will be resolved in accordance with the
rules of the American Arbitration Association. Disputes regarding
the amount of assigned production for uninsured causes for your
failure to use good farming practices must be resolved under this
subsection.
(b) Except as provided in section 20(d), you may appeal any
determination made by FCIC in accordance with appeal provisions
published at 7 CFR part 400, subpart J or 7 CFR part 11.
(c) No award determined by arbitration, appeal, administrative
review or reconsideration process can exceed the amount of liability
established or which should have been established under the policy.
(d) If you do not agree with any determination made by us or
FCIC regarding whether you have used a good farming practice, you
may request reconsideration of this determination in accordance with
the review process established for this purpose and published at 7
CFR part 400, subpart J. However, you must complete the
reconsideration process before filing suit against FCIC in the
United States district court. You cannot sue us for determinations
of good farming practices.
* * * * *
34. Unit Division.
* * * * *
(c) * * *
(3) In addition to, or instead of, establishing optional units
by section, section equivalent or FSA farm serial number, or
irrigated and non-irrigated acreage, separate optional units may be
established for acreage of the insured crop grown and insured under
an organic farming practice. Certified organic, transitional and
buffer zone acreages do not individually qualify as separate units.
(See section 37 for additional provisions regarding acreage insured
under an organic farming practice).
* * * * *
36. Substitution of Yields.
(a) When you have actual yields in your production history
database that, due to an insurable cause of loss, are less than 60
percent of the applicable transitional yield (T-yield) you may
elect, on an individual actual yield basis, to exclude and replace
one or more of any such yields within each database.
(b) Each election made in section 36(a) must be made on or
before the sales closing date for the insured crop and each such
election will remain in effect for succeeding years unless cancelled
by the applicable cancellation date for the succeeding crop year. If
you cancel an election, the actual yield will be used in the
database. For example, if you elected to substitute yields in your
database for the 1998 and 2000 crop year, for any subsequent crop
year, you can elect to cancel the substitution for either or both
years.
(c) Each excluded actual yield will be replaced with a yield
equal to 60 percent of the applicable T-yield for the crop year in
which the yield is being replaced (For example, if you elect to
exclude a 2001 crop year actual yield, the T-yield in effect for the
2001 crop year in the county will be used. If you also elect to
exclude a 2002 crop year actual yield, the T-yield in effect for the
2002 crop year in the county will be used). The replacement yields
will be used in the same manner as actual yields for the purpose of
calculating the approved yield.
(d) Once you have elected to exclude an actual yield from the
database, the replacement yield will remain in effect until such
time as that crop year is no longer included in the database unless
this election is cancelled in accordance with section 36(b).
(e) Although your approved yield will be used to determine your
amount of premium owed, the premium rate will be increased to cover
the additional risk associated with the substitution of higher
yields.
* * * * *
37. Organic Farming Practices.
(a) In accordance with section 8(b)(2), insurance will not be
provided for any crop grown using an organic farming practice,
unless the information needed to determine a premium rate for an
organic farming practice is specified on the actuarial table, or
insurance is allowed by a written agreement.
(b) If insurance is provided for an organic farming practice as
specified in section 37(a), only the following acreage will be
insured under such practice:
(1) Certified organic acreage;
(2) Transitional acreage being converted to certified organic
acreage in accordance with an organic plan; and
(3) Buffer zone acreage.
(c) On the date you report your acreage, you must have:
(1) For certified organic acreage, a written certification in
effect from a certifying agent indicating the name of the entity
certified, effective date of certification, certificate number,
types of commodities certified, and name and address of the
certifying agent (A certificate issued to a tenant may be used to
qualify a landlord or other similar arrangement);
(2) For transitional acreage, a certificate as described in
section 37(c)(1), or written documentation from a certifying agent
indicating an organic plan is in effect for the acreage; and
(3) Records from the certifying agent showing the specific
location of each field of certified organic, transitional, buffer
zone, and acreage not maintained under organic management.
(d) If you claim a loss on any acreage insured under an organic
farming practice, you must provide us with copies of the records
required in section 37(c).
(e) If any acreage qualifies as certified organic or
transitional acreage on the date you report such acreage, and such
certification is subsequently revoked by the certifying agent, or
the certifying agent no longer considers the acreage as transitional
acreage for the remainder of the crop year, that acreage will remain
insured under the reported practice for which it qualified at the
time the acreage was reported. Any loss due to failure to comply
with organic standards will be considered an uninsured cause of
loss.
(f) Contamination by application or drift of prohibited
substances onto land on which crops are grown using organic farming
practices will not be an insured peril on any certified organic,
transitional or buffer zone acreage.
(g) In addition to the provisions contained in section 17(f),
prevented planting coverage will not be provided for any acreage
based on an organic farming practice in excess of the number of
acres that will be grown under an organic farming practice and shown
as such in the records required in section 37(c).
(h) In lieu of the provisions contained in section 17(f)(1) that
specify prevented planting acreage within a field that contains
planted acreage will be considered to be acreage of the same
practice that is planted in the field, prevented planting acreage
will be considered as organic practice acreage if it is identified
as certified organic, transitional, or buffer zone acreage in the
organic plan.
Signed in Washington, DC, on June 17, 2003.
Ross J. Davidson, Jr.,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 03-15627 Filed 6-18-03; 3:42 pm]
BILLING CODE 3410-08-P