This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

42037

Vol. 62, No. 150

Tuesday, August 5, 1997

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 400

RIN 0563–AB01

General Administrative Regulations;

Ineligibility for Programs Under the

Federal Crop Insurance Act

AGENCY: Federal Crop Insurance

Corporation.

ACTION: Final rule.

SUMMARY: The regulations contained in

this subpart are issued pursuant to the

Federal Crop Insurance Act, as amended

(7 U.S.C. 1501 et seq.) to prescribe the

procedures for determining eligibility

for program participation in any

program administered under the Federal

Crop Insurance Act, as amended, and

administering and maintaining an

ineligible tracking system. In addition,

this rule sets out the criteria for

reinstatement of program eligibility.

EFFECTIVE DATE: September 4, 1997.

FOR FURTHER INFORMATION CONTACT: Bill

Smith, Supervisory Insurance

Management Specialist, Research and

Development, Product Development

Division, Federal Crop Insurance

Corporation, United States Department

of Agriculture, 9435 Holmes Road,

Kansas City, MO 64131, telephone (816)

926–7743.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be

significant for the purposes of Executive

Order 12866, and, therefore, 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 address listed above. In

summary, the analysis finds that the

expected benefits of this action

outweigh the cost to society. By

allowing the efficient tracking of

ineligible individuals, the Federal

government will be able to collect about

$6 million annually in debts owed by

crop insurance policyholders. No

additional burden on policyholders will

result through implementation of the

tracking system. Information previously

provided by policyholders and required

to obtain benefits under the Federal

crop insurance program will be used to

establish and administer the tracking

system. The tracking system will cause

an additional burden for crop insurance

companies for reporting and retrieving

information to and from the tracking

system, creating new data processing

requirements. This burden is estimated

to be $250,000 for the first year and

$50,000 annually thereafter. Federal

costs for developing and maintaining

the data processing systems and

administrative processes for the tracking

system are estimated to be $20,000 for

the first year and $10,000 annually for

future years.

Paperwork Reduction Act of 1995

Following publication of the proposed

rule, the public was afforded 60 days to

submit written comments on

information collection requirements

under OMB number 0563–0047, through

November 30, 1999. No public

comments were received.

Unfunded Mandates Reform Act of

1995

Title II of the Unfunded Mandates

Reform Act of 1995 (UMRA), Public

Law 104–4, establishes requirements for

Federal agencies to assess the effects of

their regulatory actions on State, local,

and tribal governments and the private

sector. This rule contains no Federal

mandate (under the regulatory

provisions of Title II of the UMRA) for

State, local, and tribal governments or

the private sector. Thus, this rule is not

subject to the requirements of sections

202 and 205 of the UMRA.

Executive Order 12612

It has been determined under section

6(a) of Executive Order 12612,

Federalism, that this rule does not have

sufficient Federalism implications to

warrant the preparation of a Federalism

Assessment. The policies and

procedures contained in this rule will

not have a substantial direct effect on

States or their political subdivisions, or

on the distribution of power and

responsibilities among the various

levels of government.

Regulatory Flexibility Act

This regulation will not have a

significant impact on a substantial

number of small entities. The amount of

work required of insurance companies

should not increase because the

information used to determine

eligibility is already maintained at their

office. The amount of work required of

insurance companies may actually be

reduced because verification with FCIC

of a producer’s compliance with the

controlled substance regulations,

currently done manually, will be

automated. 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

The final rule has been reviewed in

accordance with Executive Order 12988.

The provisions of this rule will preempt

State and local laws to the extent such

State and local laws are inconsistent

herewith. The administrative appeal

provisions published at 7 CFR part 11

must be exhausted before action for

judicial review may be brought.

Environmental Evaluation

This action is not expected to have

any 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 Thursday, October 31, 1996, FCIC

published a proposed rule in the

Federal Register at 61 FR 56151–56155
42038 Federal Register / Vol. 62, No. 150 / Tuesday, August 5, 1997 / Rules and Regulations

to issue General Administrative

Regulations (7 CFR part 400, subpart U)

effective for the 1998 crop year (1999 for

Texas and Arizona/California

Production Citrus) and succeeding crop

years. Following publication of that

proposed rule, the public was afforded

60 days to submit written comments,

data, and opinions. A total of 62

comments were received from the crop

insurance industry, Farm Service

Agency, and FCIC. The comments

received, and FCIC responses, are as

follows:

Comment: Two comments received

from the crop insurance industry

questioned where provisions are to be

found for the administration of the

Ineligible Tracking System.

Response: Provisions for the

administration of the Ineligible Tracking

System will be contained in FCIC

procedures and will be issued when the

Ineligible Tracking System is activated.

Comment: One comment received

from the crop insurance industry asked

if the Ineligible Tracking System would

be part of the existing Policyholder

Tracking System or a separate tracking

system.

Response: The Ineligible Tracking

System’s purpose requires it to be

separate from the Policyholder Tracking

System. The Policyholder Tracking

System is basically used for

informational inquiries to FCIC’s data

systems containing insurance

experience and related information for

individual insureds. The Ineligible

Tracking System’s primary purpose is

the validation of a person’s eligibility to

receive insurance program benefits

based on records submitted by

insurance providers and to accept or

reject the person for insurance purposes

based on that eligibility determination.

Comment: One comment received

from the crop insurance industry

suggested the reference to ‘‘makes a

significant contribution’’ contained in

the definition of actively engaged in

farming, was too broad and subjective,

difficult to prove, and would work to

disadvantage of insurance provider and

program.

Response: FCIC agrees and will

change the definition from ‘‘a significant

contribution’’ to ‘‘a contribution,’’ to

avoid subjective determinations

associated with ‘‘significant.’’

Comment: One comment received

from the crop insurance industry

questioned if the definition of

authorized person should include past

as well as current individuals associated

with FCIC or an insurance provider,

since a former relationship would no

longer require access to the Ineligible

Tracking System.

Response: An individual could be

involved in judicial or administrative

proceedings after they have left the

employment of FCIC or the insurance

provider and require access to protected

information. For this reason, the

definition must provide access for both

current and past contractors, employees,

or other types of individual or business

associations. Therefore, no change will

be made.

Comment: One comment received

from the crop insurance industry

questioned if under the definition of

controlled substances, drug related

convictions not related to ‘‘planting and

harvesting’’ prohibited drug producing

plants would be a cause for ineligibility.

Response: The violation of controlled

substance provisions under this subpart

is limited to the planting, harvesting,

and storing of prohibited drug

producing plants. Violations related to

the sale or distribution of an illegal

drug, for example, would not be covered

under this definition unless the person

was also convicted of growing the plants

from which the drug was processed.

Comment: Two comments received

from FCIC stated that the spelling of the

species names for marijuana and opium

poppies is incorrect.

Response: FCIC agrees and will

correct the spelling.

Comment: Two comments received

from the crop insurance industry

concerning the definition of debt

questioned if an ‘‘appropriate agency

official’’ would only apply to FCIC and

if so the rule should specify position/

title. Would the determination be made

without regard to the appeal process,

the judicial system, NAD, or the Board

of Contract Appeals process.

Response: The appropriate agency

official will be an employee of the Risk

Management Agency. However, FCIC

believes that designating the responsible

official in this subpart unnecessarily

restricts administrative decisions of the

agency. FCIC will clarify the definition

of debt by stating any determination of

debt by an agency official will be based

on evidence provided by the insurance

provider. Any determination will be

subject to review, reconsideration,

appeal, judicial process, or other actions

in accordance with applicable

regulations governing such matters.

Comment: Three comments received

from the Farm Service Agency and crop

insurance industry recommended that

administrative fees under the

catastrophic risk protection (CAT)

program be specifically excluded under

the definition of debt and that the

reference to ‘‘ACT’’ be changed to

‘‘Act’’.

Response: FCIC agrees and will

amend the definition accordingly.

Comment: One comment received

from the crop insurance industry

questioned if the insured is responsible

for repayment of an overpaid indemnity

and does the reason for an overpayment

affect the insured’s responsibility to

make repayment.

Response: An overpayment is

included under the definition of debt. If

a determination of debt is made, the

insured is responsible for repayment,

whether the overpayment arose from an

indemnity or replant payment and

irrespective of the cause of the

overpayment.

Comment: One comment received

requested FCIC describe the time frame

in which it must determine that a debt

is delinquent.

Response: The crop insurance policy

and 7 CFR part 400, subpart K provides

the procedure and time frames for

determining when a debt is delinquent.

Comment: One comment received

from the crop insurance industry

suggested that if scheduled installment

payment agreement is entered into after

termination date, insurance coverage is

automatically reinstated even though

the policy had been terminated because,

‘‘The debt is not considered

delinquent.’’ (For example, the debt is

not paid for 1996 crop year and the

policy is terminated for the 1997 crop

year; a payment agreement is set up

after the termination date; insurance

coverage is reinstated for the 1997 crop

year).

Response: Once the policy has been

terminated for failure to pay a debt, the

policy remains terminated for the entire

crop year, regardless of whether the

producer subsequently pays the debt or

enters into an installment payment plan.

Reinstatement of eligibility simply

means that the producer may apply for,

and receive, insurance for the next crop

year. It does not mean reinstatement of

the policy. The corporation cannot be

placed in the position of having to

reinstate a policy after a loss has

occurred.

Comment: One comment received

from the crop insurance industry stated

that the definition of delinquent debt

did not adequately address bankruptcy

and establish that a premium unpaid on

the termination date is a prefiling debt

under the Chapter 12 umbrella and is

not a delinquent debt. Unless clarified,

there would be uncertainty about the

eligibility status for insurance coverage

for persons under these circumstances

and after discharge of applicable debts

under bankruptcy proceedings.

Response: The definition of

delinquent debt states that such debt
Federal Register / Vol. 62, No. 150 / Tuesday, August 5, 1997 / Rules and Regulations 42039

does not include debts discharged in

bankruptcy and other debts which are

legally barred from collection. If a

premium unpaid on the termination

date is considered a debt meeting either

condition, it cannot be considered in

making a determination of ineligibility.

It is also clear, that any debt discharged

in bankruptcy proceedings is not a

delinquent debt and will not limit a p

erson’s eligibility under this subpart.

Therefore, no change will be made.

Comment: One comment received

from the crop insurance industry

recommended the definition of

insurance provider be changed by

replacing ‘‘private insurance company

approved by FCIC’’ with ‘‘reinsured

company approved by FCIC.’’

Response: FCIC has amended the

definition to specify ‘‘A reinsured

company.’’

Comment: One comment received

from the crop insurance industry

questioned if, under the definitions of

scheduled installment payment

agreement and settlement, FCIC would

enter into an agreement or settlement

with a person with a crop insurance

policy with a reinsured company.

Response: FCIC will only enter

installment payment agreements with

persons with policies directly insured

by FCIC. Where the insurance provider

is a reinsured company, the agreements

will be between the reinsured company

and its insureds.

Comment: One comment received

from the crop insurance industry

recommended the definition of

substantial beneficial interest be

changed by replacing ‘‘Any person

having’’ with ‘‘An interest of at least ten

percent.’’ As currently written, the

interest is defined as person instead of

an amount of interest.

Response: FCIC agrees and will clarify

the definition.

Comment: One comment received

from the crop insurance industry

recommended specific language be

added to § 400.678 that would make the

Ineligible Tracking System apply to any

program developed privately and

reinsured by FCIC.

Response: FCIC agrees and will revise

§ 400.678 to add paragraph (c) which

will clearly state that privately

developed products reinsured by FCIC

are subject to this subpart.

Comment: One comment received

from the crop insurance industry

recommended eliminating the second

sentence that is contained in paragraphs

(a), (b), and (c) of § 400.679 or

consolidating it with the opening

sentence of the section. Also, the

respondent suggested that the sentence,

‘‘Delinquent debts are limited to those

that arise from crop insurance programs

administered by FCIC under the Act’’

contained in paragraph (a) be moved

and combined with the definition of

delinquent debt.

Response: FCIC does not believe the

suggested changes in § 400.679 (a), (b),

and (c) improve the structure or clarity

of the subpart. Therefore, no changes

will be made. FCIC agrees that the

requirement that delinquent debts arise

under the Act be included in the

definition of ‘‘delinquent debt’’ and has

amended the provision accordingly.

Comment: One comment received

from the crop insurance industry

suggested that ‘‘A person * * *’’

contained in the opening sentence of the

section be changed to ‘‘Any person

* * *’’; references to ‘‘* * * all

programs * * *’’ be changed to ‘‘* * *

any program * * *’’; and the plural case

for ‘‘ their’’ in the next to the last

sentence of paragraph (c) be corrected.

Response: FCIC agrees and will

amend the section accordingly.

Comment: One comment received

from the crop insurance industry

questioned if a person indebted to FCIC

or an approved insurance provider

disputes the debt and can ‘‘demonstrate

that the amount of debt is in dispute,

the person’s application will be

accepted or their insurance will remain

in effect but no indemnity will be made

until the dispute is resolved.’’ Will there

be similar language in the proposed rule

if the debt delinquency is disputed by

the producer or insured.

Response: The provision stated above

is contained in 7 CFR part 400, subpart

R. FCIC has amended § 400.679

paragraph (a) to reference subpart R to

ensure consistency between the

subparts.

Comment: One comment received

from the Farm Service Agency stated

that 7 CFR part 796 referenced in

§ 400.679(b) has been replaced by 7 CFR

part 718.

Response: FCIC agrees and will

amend the section accordingly.

Comment: One comment received

from the crop insurance industry

suggested that § 400.680 entitled

‘‘Determinations of ineligibility’’ should

be changed to Notification of

ineligibility.

Response: FCIC will change the

section’s title to ‘‘Determination and

notification of ineligibility.’’

Comment: One comment received

from the crop insurance industry

questioned if this subpart would apply

to all delinquent debts and violations or

only those which occur after the

effective date of this subpart.

Response: This subpart applies to all

delinquent debts and violations that

occur after the effective date of this

subpart. If this subpart is made effective

in the middle of a crop year for a crop,

those persons with delinquent debts or

violations will be ineligible effective for

the next crop year. For persons affected

by a delinquent debt or violation that

arose prior to the effective date of this

subpart, the insurance provider must

follow all procedures outlined in this

subpart before such persons may be

placed on the ineligible list.

Comment: Three comments received

from the crop insurance industry asked

that the term ‘‘evidence’’ be defined and

the title or office to which ineligibility

evidence is submitted be listed in

§ 400.680.

Response: FCIC will develop and

issue procedures which describe the

evidence requirements and provides

other information and instructions

necessary to administer this subpart.

Comment: One comment received

from the crop insurance industry asked

does the failure to make installment

payments in accordance with a

scheduled installment payment

agreement have the potential of causing

the individual to become ineligible.

Response: The failure to pay

installments under an approved

payment agreement will result in a

determination of ineligibility for the

person in accordance with the terms of

the agreement. The insurance provider

must notify FCIC of the person’s

payment default in order for this

determination to be made.

Comment: Two comments received

from the crop insurance industry

suggested that this section does not

make it clear that FCIC is solely

responsible for placing the

policyholders name on the Ineligible

Tracking System because of a

delinquent debt and that the reinsured

company should be protected from state

law in such determinations.

Response: FCIC is not solely

responsible. It is the insurance

provider’s responsibility to ensure that

the policyholder meets the criteria for

placement on the Ineligible Tracking

System and provide sufficient

information to support its

determination. FCIC’s responsibility is

to verify the information submitted

supports that the criteria have been met

and issue a Notice of Ineligibility. FCIC

is only responsible for the

determinations involving persons

insured through local Farm Service

Agency offices.

Comment: One comment received

from the Farm Service Agency

questioned whether the Notice of

Ineligibility will specify the crop year
42040 Federal Register / Vol. 62, No. 150 / Tuesday, August 5, 1997 / Rules and Regulations

(or reinsurance year) for which the

person is determined ineligible.

Response: The notice will specify the

crop year ineligibility will become

effective and the terms, if applicable.

Comment: Two comments received

from FCIC and the crop insurance

industry concerned whether an

insurance provider will receive a copy

of the Notice of Ineligibility, inquired if

the debtor appealed the ineligibility

determination would the company be

notified, and recommended that copies

of all notices be provided to the

insurance provider.

Response: When the insurance

provider submits evidence of

ineligibility and upon verification of the

evidence, FCIC will send the Notice of

Ineligibility to the policyholder and the

insurance provider. Section 400.680

will be amended to include the

insurance provider for notification

purposes. With respect to notices of

appeal, producers will only be able to

challenge the placement on the

ineligibility list under this subpart. If

the reason for placement on the list is

debt to a reinsured company, the

company will be notified of the appeal

hearing and may be given the

opportunity to participate if permitted

by 7 CFR part 11.

Comment: One comment received

from the crop insurance industry

questioned how a determination of

ineligibility would be affected if the

person does not receive a Notice of

Ineligibility and whether any

responsibility for such failure would be

borne by the insurance provider.

Response: FCIC will implement a

notification process employing

reasonable steps to assure notification of

affected persons, including

documentation of those efforts.

However, receipt of the notice by the

person cannot be guaranteed and is not

required in order to enforce a

determination of ineligibility. Insurance

providers are not responsible or

accountable for successfully notifying

persons under this subpart unless they

did not provide accurate name and

address information to FCIC which was

available to them.

Comment: One comment received

from the crop insurance industry

suggested that § 400.680 incorrectly

states that reconsideration of a

determination of ineligibility will be

made to the reinsured company. It also

suggests that the 30-day period to

request a reconsideration or file an

appeal was inconsistent with time

allowed under the regulation for

disputed determinations.

Response: FCIC agrees that any appeal

of a determination of ineligibility

should not be made to the reinsured

company. Only appeals related to

whether the person is correctly

identified as ineligible will be accepted.

Any challenge to the existence or

amount of the debt must be appealed

under the terms of the policy or 7 CFR

part 400, subpart K.

Comment: One comment received

from the crop insurance industry

recommended the term ‘‘provider of

insurance’’ used to identify the party to

which reconsiderations are submitted be

changed to ‘‘insurance provider.’’

Response: FCIC will correct this

section to state that appeals will be

submitted to the National Appeals

Division.

Comment: One comment received

from the crop insurance industry stated

that conflicts exist between the

reconsideration and appeals provisions

under this subpart and applicable

provisions contained in 7 CFR part 400,

subpart J and part 780. Also

determinations made by reinsured

companies are erroneously subject to

reconsideration and appeal provisions

of this subpart.

Response: This subpart specifies that

all appeals are governed by 7 CFR part

11. Therefore, the requirements of

subpart J and part 780 are not

applicable. Therefore, no conflict exists.

Comment: One comment received

from the crop insurance industry

suggested that the National Appeals

Division (NAD) notify the reinsured

company of appeal proceedings so that

it could participate and asked what the

effect to the company will be if the debt

is overturned.

Response: Only the listing on the

ineligible list is appealable to NAD

under this subpart, not the underlying

debt. However, the company will be

given notice of the appeal and may be

given an opportunity to participate if

permitted by 7 CFR part 11.

Comment: One comment received

from the Farm Service Agency asked

how individuals insured under

provisions contained in the CAT

endorsement for tobacco and undivided

interest landowners would be affected

under this subpart if the named insured

for such policies did not pay the

premium.

Response: There is no premium for

CAT. If the administrative fee is not

paid by the acreage reporting date, the

policy terminates for the crop year for

which the fee is not paid. Eligibility for

the following year is not affected.

Comment: Two comments received

from the crop insurance industry stated

that removing the ineligible person from

a policy and reducing the policyholder

share as provided in § 400.681(a) (3) and

(4) will result in entities creating false

share arrangements. A recommendation

to determine the corporation or other

business entity ineligible based on the

ineligibility of one of the individual

members was made.

Response: Removing an ineligible

person from the policy will not create

false share arrangements. The share of

the ineligible person is simply not

insurable and all other shares remain

the same. Therefore, no changes will be

made.

Comment: One comment received

from the crop insurance industry asked

when must the declared overpayment

referenced in § 400.681(a)(5) be paid.

Response: The crop insurance policy

states that an overpayment is considered

a delinquent debt if not paid within 30

days of the date a notice is issued to the

insured. Once the debt is determined

delinquent, all provisions of the policy

related to its repayment apply.

Comment: Two comments received

from the crop insurance industry

suggested that § 400.681(a)(6) provides

that a portion of the premium should be

retained to cover administrative costs

rather than refund the entire premium.

Response: FCIC agrees that retention

of a portion of the producer paid

premium by the insurance provider to

cover administrative costs is consistent

with 7 CFR 400.47 and will amend the

provision accordingly.

Comment: One comment received

from the crop insurance industry

expressed concern under § 400.681(b)(1)

that the spouse had to have a separate

farming operation prior to marriage to

maintain it separately for purposes of

ineligibility was contrary to existing

FCIC procedure and would be

impractical to verify.

Response: FCIC agrees that it is not

necessary that the spouse have had a

separate farming operation prior to

marriage since there are many instances

where the spouses legitimately maintain

separate farming operations. Insurance

providers will still be required to verify

that the farming operations are

legitimately separate. The provision is

also created to clarify that transfer of a

farming operation from one spouse to

another is not considered a separate

farming operation

Comment: One comment received

from the crop insurance industry

recommended section 400.681(c), which

describes a minor, be added to § 400.677

Definitions.

Response: FCIC agrees and will

amend the provision accordingly.

Further, FCIC will revise the definition

to allow persons who are under 18 years

of age but have been emancipated by the

courts, not to be considered a minor.
Federal Register / Vol. 62, No. 150 / Tuesday, August 5, 1997 / Rules and Regulations 42041

Comment: One comment received

from the crop insurance industry

recommended that § 400.681 (d) and (e)

be combined and the word ‘‘devise’’ in

paragraph (e)(2) be changed to ‘‘device.’’

Response: FCIC agrees and will

amend the section accordingly.

Comment: One comment received

from the crop insurance industry

questioned the distinction between

‘‘adopting a material scheme or device’’

and ‘‘fraud or misrepresentation’’

contained in § 400.681(e)(2) and (3), and

does the insurance provider decide the

period of time for disqualification.

Response: FCIC has removed the

references to scheme and device from

this subpart since the penalty for such

device is ineligibility to receive benefits

only for the crop year in which the

abuse occurred. It does not affect future

eligibility. These provisions will now be

treated under disqualifications under

section 506(n) of the Act which

encompasses fraud, misrepresentation,

and scheme and device. FCIC will

determine the length of disqualifications

through the administrative process.

Comment: One comment received

from the crop insurance industry

objected to the different periods of

ineligibility between a CAT

policyholder and a policyholder with

limited or additional coverage provided

under section 400.681 (e) (3).

Response: The periods of ineligibility

are specified in Act and 7 CFR part 400,

subpart R. Therefore, no change will be

made.

Comment: One comment received

from the crop insurance industry stated

the ‘‘scheduled installment payment

agreements’’ between private insurance

provider and policyholder as referenced

in the definition of ‘‘delinquent debt’’

are presently not reported to FCIC and

asked whether payment agreements

need to be reported to FCIC.

Response: If a person is listed in the

Ineligible Tracking System due to a

delinquent debt, notification will be

required if the person enters into a

payment agreement in order for the

person’s name to be removed from the

system and eligibility for insurance

coverage reinstated. If the person fails to

perform under the agreement, the

reinsured company will have to notify

FCIC in order for ineligibility to be

reinstated. No notification to FCIC is

required if the payment agreement is

approved by the company by the

termination date.

Comment: One comment received

from the crop insurance industry

pointed out under § 400.682 that the

second sentence of paragraph (a) refers

to ‘‘reinstated’’ while the second

sentence of paragraph (c) refers to

‘‘restored’’ and that the first sentence of

each paragraph could be shortened.

Also, the use of the words ‘‘may have’’

in the opening sentence of this section

and paragraph (c) versus ‘‘will be’’ in

paragraphs (a) and (b) as related to

reinstating eligibility was questioned.

Response: FCIC will change

‘‘restored’’ to ‘‘reinstated’’ and ‘‘will be’’

to ‘‘may be.’’ The latter change will

eliminate any possible conflict in

reinstating eligibility for the person if

more than one criteria for ineligibility

applies.

Comment: One comment received

from the crop insurance industry stated

the timing of reinstatement of insurance

coverage is a critical issue and suggested

procedures be developed to allow a

person to obtain immediate coverage

even after the applicable sales closing

date.

Response: Section 400.682 (d) states

that if eligibility is reinstated after the

applicable sales closing date for the crop

year, insurance coverage can not be

obtained until the following crop year.

The purpose of this provision is to

encourage insureds to pay their debt

and prevent the payment of a debt only

when the insured suspects a loss is

likely. Policies will only be reinstated

effective at the beginning of the crop

year if the producer prevails on appeal.

Therefore, no change will be made.

Comment: Two comments received

from the crop insurance industry stated

that § 400.682 (d) and (e) could be

combined, perhaps in reverse order.

Response: FCIC agrees and will

combine paragraph (e) with paragraph

(d).

Comment: One comment received

from the crop insurance industry

concerned whether all substantial

beneficial interest information currently

collected by insurance providers will

have to be transmitted to FCIC in

establishing the Ineligible Tracking

System.

Response: The insurance providers

will submit all substantial beneficial

interest information to FCIC to establish

a tracking system capable of properly

identifying persons who are ineligible to

participate in the crop insurance

program.

Comment: One comment received

from the crop insurance industry

questioned if FCIC is going to track the

dates of conviction for controlled

substance provision and fraud and

misrepresentation violations and for

purposes of determining future

eligibility.

Response: The date of conviction and

future date of eligibility will be entered

into the Ineligible Tracking System and

when the period of ineligibility has

expired, the person’s name will be

removed from the system’s active

ineligibility records.

Comment: One comment received

from the Farm Service Agency stated

that, ‘‘In case of controlled substance

violations, FSA would notify FCIC of

our determination and FCIC would

notify FSA of determinations by

reinsured companies, if applicable.’’

Response: FCIC agrees and will

develop procedures to facilitate the

interagency notification of controlled

substance violators.

Comment: Two comments received

from the crop insurance industry

recommended that references to

‘‘private companies’’ contained in

§ 400.683(a) (2) and (3) be replaced with

‘‘insurance provider.’’

Response: Since the Farm Service

Agency is encompassed by ‘‘Federal

agencies,’’ FCIC will amend paragraphs

(a) (2) and (3) to use the term ‘‘reinsured

company.

Comment: One comment received

from the crop insurance industry

questioned whether the information

contained in the Ineligible Tracking

System would be available to others

outside of the crop insurance program.

Response: Section 400.683 (a) (2)

states that information contained in the

system may be furnished to users, both

for purposes of administering programs

under the Act and for other purposes

determined appropriate or required by

law or regulation. The release, use, and

protection of such information will be

in accordance with these and other

appropriate laws and regulations.

Comment: One comment received

from the crop insurance industry

concerned what is considered

‘‘supporting documentation’’ that will

be maintained by FCIC for affected

persons under § 400.683 (a) (3).

Response: Paragraph (a) (3) provides

that supporting documentation

regarding a determination of

ineligibility may be maintained by FCIC,

FSA, reinsured companies, or others.

Such information will be described in

procedures developed by FCIC and

issued to insurance providers and will

indicate the parties responsible for

maintaining such documentation.

In addition to the changes described

above, FCIC has made the following

changes to this subpart:

1. Changed the effective year for this

subpart to 1998 crop year (1999 for

Texas and Arizona and California

Production Citrus).

2. Section 400.677. Add a definition

of ‘‘CAT’’ and ‘‘minor’’ for clarification.

Amend definition of ‘‘insurance

provider’’ to refer to a ‘‘reinsured

company’’ instead of a ‘‘private
42042 Federal Register / Vol. 62, No. 150 / Tuesday, August 5, 1997 / Rules and Regulations

insurance company reinsured by FCIC’’

to avoid the redundancy with the

definition of ‘‘reinsured company.’’

3. Revise § 400.681 to add a new

subsection (a) to clarify when the period

of ineligibility commences and combine

it with subsection (d) to clarify the term

of ineligibility. Redesignate the other

subsections accordingly.

List of Subjects in 7 CFR Part 400

Administrative practice and

procedure, Claims, Crop insurance;

Fraud, Reporting and recordkeeping

requirements.

Accordingly, as set forth in the

preamble, the Federal Crop Insurance

Corporation adds a new subpart U to 7

CFR part 400, to read as follows:

PART 400—GENERAL

ADMINISTRATIVE REGULATIONS

Subpart U—Ineligibility for Programs

Under the Federal Crop Insurance Act

Sec.

400.675 Purpose.

400.676 OMB control numbers.

400.677 Definitions.

400.678 Applicability.

400.679 Criteria for ineligibility.

400.680 Determination and notification of

ineligibility.

400.681 Effect of ineligibility.

400.682 Criteria for reinstatement of

eligibility.

400.683 Administration and maintenance.

Authority: 7 U.S.C. 1506(1), 1506(p).

§ 400.675 Purpose.

This rule prescribes conditions under

which a person may be determined to be

ineligible to participate in any program

administered by FCIC under the Federal

Crop Insurance Act, as amended. This

rule also establishes the criteria for

reinstatement of eligibility.

§ 400.676 OMB control numbers.

The collecting of information

requirements in this subpart has been

approved by the Office of Management

and Budget and assigned OMB control

number 0563–0047.

§ 400.677 Definitions.

Act. The Federal Crop Insurance Act,

as amended (7 U.S.C. 1501 et seq.).

Actively engaged in farming. Means a

person who, in return for a share of

profits and losses, makes a contribution

to the production of an insurable crop

in the form of capital, equipment, land,

personal labor, or personal management.

Applicant. A person who has

submitted an application for crop

insurance coverage under the Act.

Authorized person. Any current or

past officer, employee, elected official,

general agent, agent, contractor, or loss

adjuster of FCIC, the insurance provider,

or any other government agency whose

duties require access to the Ineligible

Tracking System to administer the Act.

CAT. The catastrophic risk protection

plan of insurance.

Controlled substance. Any prohibited

drug-producing plants including, but

not limited to, cacti of the genus

(lophophora), coca bushes

(erythroxylum coca), marijuana

(cannabis sativa), opium poppies

(papaver somniferum), and other drugproducing plants, the planting and

harvesting of which is prohibited by

Federal or state law.

Debt. An amount of money which has

been determined by an appropriate

agency official to be owed, by any

person, to FCIC or an insurance

provider under any program

administered under the Act based on

evidence submitted by the insurance

provider. The debt may have arisen

from an overpayment, premium nonpayment, interest, penalties, or other

causes but does not include nonpayment of CAT coverage

administrative fees.

Debtor. A person who owes a debt

and that debt is delinquent.

Delinquent debt. Any debt owed to

FCIC or the insurance provider, that

arises under any program administered

under the authority of the Act, that has

not been paid by the termination date

specified in the applicable contract of

insurance, or other due date for

payment contained in any other

agreement or notification of

indebtedness, or any overdue debt owed

to FCIC or the insurance provider which

is the subject of a scheduled installment

payment agreement which the debtor

has failed to satisfy under the terms of

such agreement. Such debt may include

any accrued interest, penalty, and

administrative charges for which

demand for repayment has been made,

or unpaid premium including any

accrued interest, penalty and

administrative charges (7 CFR 400.116).

A delinquent debt does not include

debts discharged in bankruptcy and

other debts which are legally barred

from collection.

EIN. An Employer Identification

Number as required under section 6109

of the Internal Revenue Code of 1986.

FCIC. The Federal Crop Insurance

Corporation, a wholly owned

government corporation within the

United States Department of

Agriculture.

FSA. The Farm Service Agency or a

successor agency.

Ineligible person. A person who is

denied participation in any program

administered by FCIC under the Act.

Insurance provider. A reinsured

company or FSA providing crop

insurance coverage to producers

participating in any Federal crop

insurance program administered under

the Act.

Minor. Any person under 18 years of

age. Court proceedings conferring

majority on an individual under 18

years of age will result in such persons

no longer being considered as a minor.

Person. An individual, partnership,

association, corporation, estate, trust, or

other legal entity, and wherever

applicable, a State, political

subdivision, or an agency of a State.

Policyholder. An applicant whose

properly completed application for

insurance under the crop insurance

program has been accepted by FCIC or

an insurance provider.

Reinsurance agreement. An

agreement between two parties by

which an insurer cedes to a reinsurer

certain liabilities arising from the

insurer’s sale of insurance policies.

Reinsured company. A private

insurance company having a Standard

Reinsurance Agreement, or other

reinsurance agreement, with FCIC,

whose crop insurance policies are

approved and reinsured by FCIC.

Scheduled installment payment

agreement. An agreement between a

person and FCIC or the insurance

provider to satisfy financial obligations

of the person under conditions which

modify the terms of the original debt.

Settlement. An agreement between a

person and FCIC or the insurance

provider to resolve a dispute arising

from a debt or other administrative

determination.

SSN. An individual’s Social Security

Number as required under section 6109

of the Internal Revenue Code of 1986.

Standard Reinsurance Agreement

(SRA). The primary reinsurance

agreement between the reinsured

company and FCIC.

Substantial beneficial interest. An

interest held by any person of at least 10

percent or more in the applicant or

policyholder.

System of records. Records

established and maintained by FCIC and

FSA containing SSN or EIN data, name,

address, city and State, applicable

policy numbers, and other information

related to Federal crop programs as

required by FCIC, from which

information is retrieved by a personal

identifier including the SSN, EIN, name,

or other unique identifier of a person.

§ 400.678 Applicability.

This subpart applies to any program

administered by FCIC under the Act,

including:
Federal Register / Vol. 62, No. 150 / Tuesday, August 5, 1997 / Rules and Regulations 42043

(a) The catastrophic risk protection

plan of insurance;

(b) The limited and additional

coverage plans of insurance as

authorized under sections 508(c) and

508(m) of the Act; and

(c) Private insurance products

authorized under section 508(h) of the

Act and reinsured by FCIC.

§ 400.679 Criteria for ineligibility.

Any person may be determined to be

ineligible to participate in any program

administered by FCIC under the

authority of the Act, if the person meets

one or more of the following criteria:

(a) Has a delinquent debt on a crop

insurance policy, issued or reinsured by

FCIC, or any delinquent debt due FCIC

under the Act. Any person with a

delinquent debt owed to FCIC or to the

insurance provider shall be ineligible to

participate in any program administered

under the authority of the Act. Such

determinations will be in accordance

with 7 CFR 400.459. The existence and

delinquency of the debt must be

verifiable.

(b) Has violated the controlled

substance (7 CFR part 718) provisions of

the Food Security Act of 1985, as

amended. Any person who violates the

controlled substance provisions of the

Food Security Act of 1985, as amended,

shall be ineligible to participate in any

program administered under the Act.

(c) Has been disqualified under

section 506(n) of the Act and 7 CFR part

400, subpart R. Any person who is

disqualified in any administrative

proceeding shall be ineligible to

participate in any program administered

under the Act. Ineligibility

determinations resulting from

administrative proceedings will not be

stayed pending review. However,

reversal of the determination will date

back to the time of determination.

§ 400.680 Determination and notification of

ineligibility.

(a) The insurance provider must send

a written notice of the debt to the

person, including the time frame in

which the debt must be paid, and

provide the person with a meaningful

opportunity to contest the amount or

existence of the debt. After the

insurance provider has evaluated the

person’s response, if any, and

determined that the debt is owed and

delinquent, the insurance provider

should submit the documentation

establishing the existence and amount

of the debt to FCIC, including any

response by the person.

(b) If an insurance provider or any

other authorized person has evidence

that a person meets any other criteria set

forth in § 400.679, they must submit the

evidence to FCIC.

(c) After FCIC verifies that the person

has met one or more of the criteria

stated in § 400.679, FCIC will issue a

Notice of Ineligibility and mail such

notice to the person’s last known

address and to the insurance provider.

(d) The Notice of Ineligibility will

state the criteria upon which the

determination of ineligibility has been

based, a brief statement of the facts to

support the determination, the time

period of ineligibility, and the persons

right to an appeal of the ineligibility

determination.

(e) Within 30 days of receiving the

Notice of Ineligibility, any person

receiving such a notice may appeal the

determination of ineligibility to the

National Appeals Division in

accordance with 7 CFR part 11.

(f) If the person appeals the

determination of ineligibility to the

National Appeals Division, the

insurance provider will be notified and

provided with an opportunity to

participate in the proceeding if

permitted by 7 CFR part 11.

§ 400.681 Effect of ineligibility.

(a) The period of ineligibility will be

effective:

(1) For ineligibility as a result of a

delinquent debt, the date the debt has

been determined to be delinquent until

the debt has been paid in full,

discharged in bankruptcy, or the person

has executed a scheduled installment

payment agreement;

(2) For ineligibility as a result of a

violation of the controlled substance

provisions of the Food Security Act of

1985, at the beginning of the crop year

in which the producer was convicted

and the four subsequent consecutive

crop years; and

(3) For ineligibility as a result of a

disqualification under section 506(n) of

the Act, the date that the Administrative

Law Judge signs the order disqualifying

the person until the period specified in

the order of disqualification has

expired.

(b) Once the person has been

determined to be ineligible:

(1) All policies in which the ineligible

person is the sole insured will be void

for the period specified in § 400.681(a);

(2) If the ineligible person is a general

partnership, all partners will be

individually ineligible and any policy in

which a partner has a 100 percent

interest will be void for the period

specified in § 400.681(a). The

partnership and all partners will be

removed from any policy in which they

have a substantial beneficial interest,

and the policyholder share under the

policies will be reduced commensurate

with the ineligible person’s share;

(3) If the applicant or policyholder is

a corporation, partnership, or other

business entity, and an ineligible person

has a substantial beneficial interest in

the applicant or policyholder, the

application may be accepted or existing

policies remain in effect, although the

ineligible person will be removed from

the policies and the policyholder share

under the policies will be reduced

commensurate with the ineligible

person’s share;

(4) If the applicant or policyholder is

a corporation, partnership, or other

business entity that was created to

conceal the interest of a person in the

farming operation or to evade the

ineligibility determination of a person

with a substantial beneficial interest in

the applicant or policyholder, the

corporation, partnership or other

business entity will be disregarded, the

individual shareholders or partners will

be personally responsible, and any

shareholder or partner that is ineligible

will be removed from the policy and the

policyholder share under the policies

will be reduced commensurate with the

ineligible person’s share;

(5) Any indemnities or payments

made on a voided policy, or on the

portion of the policy reduced because of

ineligibility, will be declared

overpayments and must be repaid; and

(6) If the policy is voided, all

producer paid premiums may be

refunded, or if an ineligible person is

removed from a policy, the portion of

the producer paid premium

commensurate with the ineligible

person’s share may be refunded, less a

reasonable amount for expense and

handling in accordance with 7 CFR

400.47.

(c) The spouse and minor children of

an individual are considered to be the

same as the individual for purposes of

this subpart except that:

(1) The spouse who was actively

engaged in farming in a separate farming

operation will be a separate person with

respect to that separate farming

operation so long as that operation

remains separate and distinct from any

farming operation conducted by the

other spouse (Transfers of interest in a

farming operation from one spouse to

another will not be considered as a

separate farming operation.);

(2) A minor child who is actively

engaged in farming in a separate farming

operation will be a separate person with

respect to that separate farming

operation if:

(i) The parent or other entity in which

the parent has a substantial beneficial

interest does not have any interest in the
42044 Federal Register / Vol. 62, No. 150 / Tuesday, August 5, 1997 / Rules and Regulations

minor’s separate farming operation or in

any production from such operation;

(ii) The minor has established and

maintains a separate household from the

parent;

(iii) The minor personally carries out

the farming activities with respect to the

minor’s farming operation; and

(iv) The minor establishes separate

accounting and record keeping for the

minor’s farming operation.

§ 400.682 Criteria for reinstatement of

eligibility.

A person who has been determined

ineligible may have eligibility reinstated

as follows:

(a) A delinquent debt owed on a crop

insurance policy insured or reinsured

by FCIC or any delinquent debt due

FCIC. Eligibility may be reinstated after

the debt is paid in full or discharged in

bankruptcy, or the person has executed

a scheduled installment payment

agreement accepted by FCIC or the

insurance provider. Eligibility may be

reinstated as of the date the debt is paid,

the date the agreement is accepted, or

the date the debt is discharged in

bankruptcy.

(b) Violations of the controlled

substance provisions of the Food

Security Act of 1985, as amended.

Eligibility may be reinstated after the

period of ineligibility stated in § 400.681

has expired.

(c) Disqualification under section

506(n) of the Act. Eligibility may be

reinstated when the period of

disqualification determined in the

administrative proceedings has expired

and payment of all penalties and

overpayments have been completed.

(d) Timing of reinstatement of

eligibility. After eligibility has been

reinstated, the person must complete a

new application for crop insurance

coverage on or before the applicable

sales closing date. If the date of

reinstatement of eligibility occurs after

the applicable sales closing date for the

crop year, the person may not

participate until the following crop year.

If the National Appeals Division

determines that the person should not

have been placed on the Ineligible

Tracking System, reinstatement will be

effective at the beginning of the crop

year for which the producer was listed

on the Ineligible Tracking System and

the person will be entitled to all

applicable benefits under the policy.

§ 400.683 Administration and

maintenance.

(a) Ineligible producer data will be

maintained in a system of records in

accordance with the Privacy Act, 5

U.S.C. 552a.

(1) The Ineligible Tracking System is

a record of all persons who have been

determined to be ineligible for

participation in any program pursuant

to this subpart. This system contains

identifying information of the ineligible

person including, but not limited to,

name, address, telephone number, SSN

or EIN, reason for ineligibility, and time

period for ineligibility.

(2) Information in the Ineligible

Tracking System may be used by

Federal agencies, FCIC employees,

contractors, and reinsured companies

and their personnel who require such

information in the performance of their

duties in connection with any program

administered under the Act. The

information may be furnished to other

users including, but not limited to, FCIC

contracted agencies; credit reporting

agencies and collection agencies; in

response to judicial orders in the course

of litigation; and other users as may be

appropriate or required by law or

regulation. The individual information

will be made available in the form of

various reports and notices produced

from the Ineligible Tracking System,

based on valid requests.

(3) Supporting documentation

regarding the determination of

ineligibility and reinstatement of

eligibility will be maintained by FCIC

and FSA, or its contractors, reinsured

companies, and Federal and State

agencies. This documentation will be

maintained consistent with the

electronic information contained within

the Ineligible Tracking System.

(b) Information may be entered into

the Ineligible Tracking System by FCIC

or FSA personnel.

(c) All persons applying for or

renewing crop insurance contracts

issued or reinsured by FCIC will be

subject to validation of their eligibility

status against the Ineligible Tracking

System. Applications or benefits

approved and accepted are considered

approved or accepted subject to review

of eligibility status in accordance with

this subpart.

Signed in Washington, D.C., July 30, 1997.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance

Corporation.

[FR Doc. 97–20503 Filed 8–4–97; 8:45 am]

BILLING CODE 3410–08–U

DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection

Service

9 CFR Part 77

[Docket No. 96–093–2]

Tuberculosis in Cattle and Bison; State

Designation

AGENCY: Animal and Plant Health

Inspection Service, USDA.

ACTION: Affirmation of interim rule as

final rule.

SUMMARY: We are adopting as a final

rule, without change, an interim rule

that amended the tuberculosis

regulations concerning the interstate

movement of cattle and bison by raising

the designation of Wisconsin from an

accredited-free (suspended) State to an

accredited-free State. We have

determined that Wisconsin meets the

criteria for designation as an accreditedfree State.

EFFECTIVE DATE: The interim rule was

effective on May 7, 1997.

FOR FURTHER INFORMATION CONTACT: Dr.

Mitchell A. Essey, Senior Staff

Veterinarian, National Animal Health

Programs, VS, APHIS, 4700 River Road,

Unit 36, Riverdale, MD 20737–1231,

(301) 734–7727; or e-mail:

messey@aphis.usda.gov.

SUPPLEMENTARY INFORMATION:

Background

In an interim rule effective and

published in the Federal Register on

May 7, 1997 (62 FR 24801–24802,

Docket No. 96–093–1), we amended the

tuberculosis regulations in 9 CFR part

77 by removing Wisconsin from the list

of accredited-free (suspended) States in

§ 77.1 and adding it to the list of

accredited-free States in that section.

Comments on the interim rule were

required to be received on or before July

7, 1997. We did not receive any

comments. The facts presented in the

interim rule still provide a basis for the

rule.

This action also affirms the

information contained in the interim

rule concerning Executive Order 12866

and the Regulatory Flexibility Act,

Executive Orders 12372 and 12988, and

the Paperwork Reduction Act.

Further, for this action, the Office of

Management and Budget has waived the

review process required by Executive

Order 12866.

List of Subjects in 9 CFR Part 77

Animal diseases, Bison, Cattle,

Reporting and recordkeeping