Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations 65321

(f) For the purpose of determining the

quantity of mature production:

(1) Commercial hybrid sorghum seed

production will be:

(i) Increased 0.12 percent for each 0.1

percentage point of moisture below 13.0

percent; or

(ii) Decreased 0.12 percent for each 0.1

percentage point of moisture in excess of 13.0

percent.

(2) When records of commercial hybrid

sorghum seed production provided by the

seed company have been adjusted to a basis

of 13.0 percent moisture and 56 pound

avoirdupois bushels, section 12(f)(1) above

will not apply to harvested production. In

such cases, records of the seed company will

be used to determine the amount of

production to count, provided that the

moisture and weight of such production are

calculated on the same basis as that used to

determine the approved yield.

13. Prevented Planting.

Your prevented planting coverage will be

60 percent of your amount of insurance for

timely planted acreage. If you have limited or

additional levels of coverage as specified in

7 CFR part 400, subpart T, and pay an

additional premium, you may increase your

prevented planting coverage to a level

specified in the actuarial documents.

Signed in Washington, D.C, on December

5, 1997.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance

Corporation.

[FR Doc. 97–32497 Filed 12–11–97; 8:45 am]

BILLING CODE 3410–08–P

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 422 and 457

Potato Crop Insurance Regulations;

and Common Crop Insurance

Regulations, Northern Potato Crop

Insurance Provisions, Central and

Southern Potato Crop Insurance

Provisions, Northern Potato Quality

Endorsement Crop Insurance

Provisions, Northern Processing

Potato Quality Endorsement Crop

Insurance Provisions, Certified Seed

Potato Endorsement Crop Insurance

Provisions, and Northern Potato

Storage Endorsement Crop Insurance

Provisions

AGENCY: Federal Crop Insurance

Corporation, USDA.

ACTION: Final rule.

SUMMARY: The Federal Crop Insurance

Corporation (FCIC) finalizes crop

provisions for the insurance of potatoes.

The provisions will be used in

conjunction with the Common Crop

Insurance Policy Basic Provisions,

which contain standard terms and

conditions common to most crops. The

intended effect of this action is to

provide policy changes to better meet

the needs of the insured, include the

current potato crop insurance

regulations with the Common Crop

Insurance Policy for ease of use and

consistency of terms, and to restrict the

effect of the current potato crop

insurance regulations to the 1997 and

prior crop years in counties in which

the Northern Potato Crop Provisions

will be used and to the 1998 and prior

crop years in all other states.

EFFECTIVE DATE: December 12, 1997.

FOR FURTHER INFORMATION CONTACT:

Rob Coultis, Insurance Management

Specialist, Product Development

Division, Federal Crop Insurance

Corporation, United States Department

of Agriculture, 9435 Holmes Road,

Kansas City, MO 64131, telephone (816)

926–7730.

SUPPLEMENTARY INFORMATION:

Executive Order No. 12866

The Office of Management and Budget

(OMB) has determined this rule to be

exempt for the purposes of Executive

Order No. 12866, and therefore, this rule

has not been reviewed by OMB.

Paperwork Reduction Act of 1995

Pursuant to the Paperwork Reduction

Act of 1995 (44 U.S.C. 3507), those

collections of information have been

approved by the Office of Management

and Budget (OMB) under control

number 0563–0053.

Unfunded Mandates Reform Act of

1995

Title II of the Unfunded Mandates

Reform Act of 1995 (UMRA), Public

Law 104–4, establishes requirements for

Federal agencies to assess the effects of

their regulatory actions on State, local,

and tribal governments and the private

sector. This rule contains no Federal

mandates (under the regulatory

provisions of title II of the UMRA) for

State, local, and tribal governments or

the private sector. Therefore, this rule is

not subject to the requirements of

sections 202 and 205 of the UMRA.

Executive Order No. 12612

It has been determined under section

6(a) of Executive Order No. 12612,

Federalism, that this rule does not have

sufficient federalism implications to

warrant the preparation of a Federalism

Assessment. The provisions contained

in this rule will not have a substantial

direct effect on States or their political

subdivisions, or on the distribution of

power and responsibilities among the

various levels of government.

Regulatory Flexibility Act

This regulation will not have a

significant economic impact on a

substantial number of small entities.

The amount of work required of

insurance companies will not increase

because the information used to

determine eligibility is already

maintained at their office and the other

information required is already being

gathered as a result of the present

policy. No additional actions are

required as a result of this action on the

part of either the producer or the

reinsured company. Additionally, the

regulation does not require any action

on the part of the small entities than is

required on the part of the large entities.

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 No. 12372

This program is not subject to the

provisions of Executive Order No.

12372, which require intergovernmental

consultation with State and local

officials. See the Notice related to 7 CFR

part 3015, subpart V, published at 48 FR

29115, June 24, 1983.

Executive Order No. 12988

This final rule has been reviewed in

accordance with Executive Order 12988

on civil justice reform. The provisions

of this rule will not have retroactive

effect. The provisions of this rule will

preempt State and local laws to the

extent such State and local laws are

inconsistent herewith. The

administrative appeal provisions

published at 7 CFR part 11 must be

exhausted before any action against

FCIC for judicial review may be brought.

Environmental Evaluation

This action is not expected to have a

significant impact on the quality of the

human environment, health, and safety.

Therefore, neither an Environmental

Assessment nor an Environmental

Impact Statement is needed.

National Performance Review

This regulatory action is being taken

as part of the National Performance

Review Initiative to eliminate

unnecessary or duplicative regulations

and improve those that remain in force.
65322 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations

Background

On Wednesday April 23, 1997, FCIC

published a proposed rule in the

Federal Register at 62 FR 19691–19701

to add to the Common Crop Insurance

Regulations (7 CFR part 457), new

sections: 7 CFR 457.142, Northern

Potato Crop Insurance Provisions; 7 CFR

457.143, Northern Potato Quality

Endorsement Crop Insurance

Provisions; 7 CFR 457.144, Northern

Processing Potato Quality Endorsement

Crop Insurance Provisions; 7 CFR

457.145, Certified Seed Potato

Endorsement Crop Insurance

Provisions; 7 CFR 457.146, Northern

Potato Storage Endorsement Crop

Insurance Provisions; and 7 CFR

457.147, Central and Southern Potato

Crop Insurance Provisions. The new

provisions will be effective for the 1998

and succeeding crop years in counties

in which the Northern Potato Crop

Provisions will be used and for the 1999

crop year in all other counties. These

provisions will replace and supersede

the current provisions for insuring

potatoes found at 7 CFR part 422 (Potato

Crop Insurance Regulations). FCIC also

has amended 7 CFR part 422 to limit its

effect to the 1997 and prior crop years

in counties in which the Northern

Potato Crop Provisions will be used and

to the 1998 crop year in all other

counties.

Following publication of the proposed

rule, the public was afforded 30 days to

submit written comments, data, and

opinions. A total of 71 comments were

received from producer groups,

reinsured companies and an insurance

service organization. The comments

received, and FCIC’s responses, are as

follows:

Comment: An insurance service

organization indicated it had heard the

revised Potato Crop Provisions would

not be effective in all states for the 1998

crop year, presumably because the Final

Rule would not be published by the

June 30 contract change date for

counties in south Florida. The

commentor questioned if it is the intent

to defer the Central and Southern Potato

Crop Policy in all states, or just those

counties with a contract change date

before the final rule is published. The

commentor also stated it had received

comments (for crops in general) that a

contract change date of 60 or 90 days

before the sales closing/cancellation

date does not provide enough time to

identify changes, prepare training

materials, provide training to staff and

agents, notify policyholders and solicit

new sales.

Response: FCIC will not implement

the Central and Southern Potato Crop

Provisions until the 1999 crop year in

all applicable counties. The Northern

Potato Crop Provisions and applicable

endorsements will be implemented in

all applicable counties for the 1998 crop

year. The 60 to 90 days before sales

closing allows FCIC the opportunity to

balance the need of the reinsured

company to train and inform the

insured, and the needs of FCIC and

insured, to have the most recent data to

enable FCIC to set rates, price, and other

terms of the contract. Therefore, no

change will be made.

Comment: A reinsured company

recommended delivery of the 1998 loss

adjustment manual 90 days prior to the

close of sales in order to adequately and

correctly advise agents and insureds

regarding purchase decisions.

Response: FCIC will make all

reasonable efforts to deliver supporting

procedural manuals as soon as

practicable after the contract change

date. However, the loss adjustment

manual cannot be finalized until the

terms of the policy have been finalized.

Comment: A reinsured company

recommended changing either the

definition of ‘‘certified seed’’ or section

7 (Insured Crop) to allow insurance to

attach to acreage planted with seed that

does not meet state certification

requirements. The comment cited Idaho

Seed Potato Regulations which state that

‘‘Idaho growers will only be allowed to

plant uncertified potatoes grown by

them provided that they are no more

than one generation from their own

certified parent seed potatoes.’’ Under

the definition by the State of Idaho it

appears that one generation past the

initial certified seed is considered

proper. The comment further stated that

as long as State rules are followed, it

should not matter if the seed is certified

by the state or by a private organization.

Response: Redesignated section 6 of

the Northern Potato Crop Provision and

section 7 of the Central and Southern

Potato Crop Provisions allows insurance

for acreage that is not planted with

certified seed if authorized by the

Special Provisions. FCIC’s Regional

Service Offices (RSO) will fully analyze

individual areas to determine whether

or not this practice should be allowed

and, then, include the authority in the

Special Provisions. Although certain

private organizations may be able to

duplicate State procedures, FCIC

believes the most logical way to

maintain consistent requirements

among producers is to rely on

authorized State agencies for the

certification process. Therefore, no

changes have been made in the

provisions.

Comment: A reinsured company and

an insurance service organization

indicated that cultural practices may

exist that are not recognized (or possibly

known) by the Cooperative State

Research, Education and Extension

Service. The comments indicated that

the definition of ‘‘Good farming

practices’’ is too restrictive since it

limits acceptable farming practices to

those recognized by the Cooperative

State Research, Education, and

Extension Service. The comments also

suggested changing the last word of the

definition from ‘‘county’’ to ‘‘area.’’

Response: FCIC believes that the

Cooperative State Research, Education,

and Extension Service (CSREES)

recognizes farming practices that are

considered acceptable for producing

potatoes. If a producer is following

practices currently not recognized as

acceptable by the CSREES, there is no

reason why such recognition from

CSREES cannot be sought by interested

parties. The term ‘‘area’’ is more

ambiguous than the term ‘‘county’’ and

would allow more subjective

determination, and less consistent

application of the provision. No

substantial change has been made in the

definition. However, the definition has

been moved to the Basic Provisions

since it is applicable to most crops.

Comment: An insurance service

organization suggested the definition of

‘‘harvest’’ in the Northern and Central

and Southern Crop Provisions be

clarified to indicate if it means

removing potatoes from the field or

lifting them to the soil surface.

Response: The definition has been

clarified to indicate that acreage will be

considered to be harvested when

potatoes are lifted to the soil surface.

Comment: A reinsured company

suggested adding the words ‘‘and

quality’’ after the words ‘‘providing the

quantity’’ in the definition of ‘‘Irrigated

practice’’ in the Northern and Central

and Southern Potato Crop Insurance

Provisions.

Response: FCIC agrees that water

quality is an important issue. However,

since no standards or procedures have

been developed to measure water

quality for insurance purposes, quality

cannot be included in the definition. No

substantial change has been made in the

definition. However, the definition has

been moved to the Basic Provisions

since it is applicable to most crops.

Comment: An insurance service

organization recommended the term

‘‘late blight’’ be defined.

Response: Late blight is a term

commonly used in the potato industry

and referenced in the U.S. Standards for

Grades of Potatoes which are
Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations 65323

incorporated herein by reference.

Therefore, it is not necessary to define

the term in the Crop Provisions.

Comment: An insurance service

organization indicated that the

definition of ‘‘marketable lot’’ contained

in the Central and Southern Crop

Provisions describes a ‘‘lot’’ and

recommended the definition be changed

to distinguish it as a ‘‘marketable lot.’’

For the definition to be useful, it should

specify that the production is saleable or

grades U.S. No. 2 or better so the grade

standard would be understood in all the

references to ‘‘marketable lots’’ in

section 12(e).

Response: The requirements of

marketability are clearly stated in

section 12(e) of the Central and

Southern Crop Provisions. However,

FCIC agrees that the definition

contained in the proposed rule

describes a ‘‘lot’’ rather than a

‘‘marketable lot’’ and has revised the

section to define the term ‘‘lot.’’

Comment: An insurance service

organization suggested clarifying the

definition of ‘‘Practical to replant’’ in

the Northern and Central and Southern

Crop Insurance Provisions by changing

the punctuation.

Response: FCIC has clarified the

definition by changing some of the

punctuation. The definition has also

been moved to the Basic Provisions

since it is applicable to most crops.

Comment: A reinsured company

suggested revising the definition of

‘‘replanting’’ in the Northern and

Central and Southern Crop Provisions

by replacing the wording ‘‘. . . replace

the potato seed and then replacing the

potato seed . . .’’ with ‘‘. . . planting

the potato seed and then replanting the

potato seed . . .’’

Response: The first reference to

‘‘replace the potato seed’’ refers to

preparation of the land, not planting. No

substantial change has been made in the

definition. However, the definition has

been moved to the Basic Provisions

since it is applicable to most crops.

Comment: An insurance service

organization recommended clarifying

the definition of ‘‘replanting’’ by

specifying the crop name as follows:

‘‘. . . with the expectation of growing a

successful potato crop.’’

Response: FCIC has revised the

definition of ‘‘replanting’’ to clarify a

‘‘successful crop’’ to mean at least the

approved yield for the unit. The

definition also has been moved to the

Basic Provisions since it is applicable to

most crops.

Comment: A reinsured company and

a producer organization opposed the

provisions in sections 3 (b) and (c) of

the Northern and Central and Southern

Crop Provisions that reduce the price

election for unharvested acreage. In

addition, an insurance service

organization had two comments from its

members favoring, and two opposing,

these provisions. The opposing

comments indicated that the

unharvested reduction provision was

removed from the peanut policy and is

being considered for removal from the

tobacco policy. Adding it to potatoes

would appear to discriminate against

potato producers who are unable to

harvest due to insured causes. The

opposing comments also indicated that

the reduced coverage would: (1) Be hard

to ‘‘sell’’ and explain to insureds; (2)

make settlement of claims more

difficult; (3) be inappropriate when

damage occurs just prior to harvest

because the insured has incurred most

normal input costs; (4) encourage

insureds to harvest damaged potatoes

that have no value just to collect 100

percent of the price election; and (5) be

unfair to producers with multi-unit

policies because, when freeze damage

occurs near the end of the harvest

season, several fields have already been

harvested and the costs have already

been incurred for the entire crop.

Producers with multi-unit policies pay

a 10 percent surcharge for the added

protection. Therefore, 100 percent

coverage is only fair. Because of the

objections received from its members,

the insurance service organization

recommended further study or a more

detailed explanation be provided.

Response: Prior to this rule, FCIC’s

price elections have not included

harvesting costs. This means that

producers have paid less premium than

otherwise would have been owed.

However, any loss from harvested acres

has been indemnified at that lower

expected market price. The Federal

Crop Insurance Act authorizes FCIC to

reduce the payment to producers for

acreage that is not harvested or for other

costs that are not incurred if the crop is

lost prior to harvest. FCIC has exercised

its authority to build harvesting costs

into the price election but only reduce

the price for those producers who do

not incur harvesting costs. The price

election reduction is limited to those

costs associated with harvest. If the

producer has already begun harvest

before the cause of loss occurred that

caused the discontinuance of harvest,

and the producer can prove that

harvesting costs have already been

incurred, no reduction will occur. The

change means that producers who

harvest their potatoes will receive a

higher price election. However, this

higher price election will result in

higher premiums than in the past.

Section 3 has been redesignated as

section 2 in the Northern Potato Crop

Provisions.

Comment: A reinsured company

requested that section 3(c) of the

Northern and Central and Southern

Crop Provisions be clarified.

Response: FCIC has clarified the

provisions in redesignated section 2(c)

of the Northern Potato Crop Provisions

and section 3(c) of the Central and

Southern Crop Provisions.

Comment: A reinsured company

asked two questions regarding the

following provision contained in section

3(c) of the Northern and Central and

Southern Crop Provisions.

(a) If the potatoes freeze before the

end of the insurance period, is the claim

settled by: (1) Using an appraisal at the

80 percent price election or (2) allowing

the frozen potatoes to be taken to

harvest, use the production to count,

and then apply the 80 percent price

election?

(b) If the potatoes have 12 percent wet

breakdown, a 100 percent loss would be

paid if production is discarded within

seven days of harvest. Will the

indemnity be based on the 80 percent

unharvested price if the neighbors

would have destroyed similar

production but did not do so because

they didn’t have that problem?

The comment also recommended that

the 80 percent price apply only when

none of the acreage in a unit could be

harvested because, once harvest on a

unit has begun, the producer will have

incurred costs regardless of the amount

of acreage harvested.

Response: This provision is intended

to recognize reduced input costs when

potatoes are not harvested. Therefore, in

the event that freeze damage is severe,

and a majority of producers would not

further care for the crop, the insurance

provider should determine the amount

of production to count in accordance

with applicable procedures, and settle

the claim using 80 percent of the elected

price. If similarly situated producers in

the area would continue to care for the

crop, and the producer elects to

continue to care for and harvests the

crop, the insurance provider should

determine the amount of production to

count and settle the claim using 100

percent of the elected price. FCIC will

only allow the 100 percent price to be

used if the producer has adequate proof

that he has already incurred and paid

the harvesting costs. A provision has

been added to allow the apportionment

of acreage within a unit as harvested

and unharvested and only unharvested

acreage will have the price election

reduced. Section 3 has been
65324 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations

redesignated as section 2 in the

Northern Potato Crop Provisions.

Comment: A reinsured company

suggested clarifying section 8(b) of the

Northern and Southern and Central

Potato Crop Provisions.

Response: FCIC has clarified the

provision in redesignated section 7(b) of

the Northern Potato Crop Provisions and

section 8(b) of the Central and Southern

Crop Provisions.

Comment: A producer group

recommended changing the date after

which frost/freeze would no longer be

covered in Minnesota and North Dakota

from September 30 to October 15. This

is referenced in section 10(b)(2) of the

Northern Potato Crop Provisions, but

the actual date is contained in the

Special Provisions.

Response: The Crop Provisions have

been written to permit these dates to

vary based on weather patterns and

growing conditions. Data collected thus

far by FCIC supports the current date of

September 30. However, FCIC will

review any additional information that

can be provided. No changes can be

made until such data are received and

analyzed. Section 10 has been

redesignated as section 9 in the

Northern Potato Crop Provisions.

Comment: An insurance service

organization indicated that the

calculation sequence in section

12(b)(1)–(7) of the Northern Potato and

Central and Southern Potato Crop

Provisions is difficult to follow because

it is so wordy. It seems unnecessary to

refer to the previous item by number as

if it were on another page.

Response: Since some of the

calculations involved are not performed

in sequential order, it is necessary to

refer to specific section numbers.

Removal of the section references would

make the provisions less clear.

However, an example has been added

for clarity to redesignated section 11 of

the Northern Potato Crop Provisions.

Comment: A reinsured company

stated that new quality adjustment

provisions contained in section 12 of

the Northern Potato Crop Provisions

would increase the amount of work

required of insurance providers and

greatly increase loss adjustment

expense. The comment indicated that

the policy is complex, contrary to

simplification efforts, and that previous

regulations and procedures did not

require grading or adjustment to the

amount of production to count when

less than 5 percent of the insured

production had soft rot, wet breakdown

or freeze damage.

Response: The previous potato policy

(without the Frost/Freeze Option) and

related procedures also provided for

reductions in the amount of production

to count when production had any

amount of soft rot, wet breakdown, or

freeze damage. Previous provisions and

procedures also required grading of the

production to determine appropriate

reductions in the amount of production

to count. The only changes in these

provisions are in the adjustment factors

which do not change the requirement to

grade damaged production or to adjust

to the amount of production to count.

Therefore, FCIC does not agree that

additional work or expense will be

incurred as a result of the changes, and

no change will be made. Section 12 has

been redesignated as section 11 in the

Northern Potato Crop Provisions.

Comment: An insurance service

organization recommended clarification

of ‘‘marketable lot’’ as used in section

12(e) of the Central and Southern Potato

Crop Provisions. As written, it seems

somewhat unclear whether all

marketable lots must grade U.S. No. 2 or

better, or only in certain cases, such as

unsold harvested or appraised

production in 12(e)(1)(iv).

Response: FCIC agrees that the

provisions can be clarified and has

revised section 12(e) to clearly indicate

that any lot of potatoes that is stored,

sold for seed, sold for human

consumption, etc. will be considered to

be a marketable lot.

Comment: An insurance service

organization received one comment

asking why, if quality adjustment has

been incorporated in section 12(e)

through (g) of the Northern Potato Crop

Provisions, the options remain separate

at the end of the proposed rule. As

written, there is a lot of unnecessary

duplication. The commenter would

prefer to see the quality adjustment

information included in the Crop

Provisions and eliminate the need for

endorsements and the resulting

complications.

Response: Quality adjustment for

tuber rot and freeze damage has been

incorporated into the base coverage in

redesignated section 11 of the Northern

Crop Provisions. However, coverage for

other types of quality losses (e.g.

internal and external defects) are not

included in the Crop Provisions because

many producers do not wish to pay the

premium amounts associated with these

types of quality losses. Although some

redundancy and complication results,

FCIC believes that the endorsements are

the best way to provide coverage for

certain quality deficiencies. Without the

endorsements, coverage of internal and

external defects would not be available,

or, if made a part of the base coverage,

would require substantial premium

increases for all insureds. Therefore, no

change will be made.

Comment: An insurance service

organization recommended using the

defined term ‘‘discarded’’ instead of

‘‘disposed of’’ in section 12(d)(1)(i)(D) of

the Northern Potato and Central and

Southern Potato Crop Provisions.

Response: ‘‘Discarded’’ is defined in

the policy as disposing of production by

the insured, or a person acting for the

insured, without received any value for

it. The term ‘‘disposed of’’ in

redesignated section 11(d)(1)(i)(D) of the

Northern Potato Crop Provisions and

section 12(d)(1)(i)(D) of the Central and

Southern Crop Provisions refers to any

disposition, including selling the

production and a definition for it has

been added. Therefore, the term

‘‘discarded’’ cannot be used as

recommended.

Comment: A reinsured company and

an insurance service organization

commented that subsection 12(d)(1)(iii)

of the Northern and Central and

Southern Crop Provisions, which

requires an increase in the amount of

production to count when harvest takes

place prior to full maturity, will be

difficult to administer. Insurance

providers would be required to track

harvested acreage on a daily basis in

order to apply proper percentages. This

would increase in complexity if

multiple units, with multiple planting

dates, were being harvested

simultaneously. This adjustment is

extremely subjective, which opens the

insurance provider’s decisions to

questioning and does serious harm to

the policy. Also, new tracking

requirements will increase loss

adjustment expense. Another reinsured

company concurred with the additional

production to count for potatoes

harvested prior to full maturity, but

recommended that a date for full

maturity be established by area and

variety. Fifty days prior to the calendar

date for the end of the insurance period

was recommended for most areas. The

insurance service organization asked

how and when will the ‘‘normal number

of days to full maturity’’ be determined,

and by whom and whether this will

vary each year depending on favorable

or adverse weather conditions. The

comment indicated that, if the date is

not allowed to vary from year to year,

the adjustment could apply even though

all the production in a given area

matures earlier than normal.

Response: This provision,

redesignated section 11(d)(1)(iii) of the

Northern Potato Crop provisions and

section 12(d)(1)(iii) of the Central and

Southern Crop Provisions, is intended

to take into account reduced production
Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations 65325

that is a result of harvest for the ‘‘new’’

or ‘‘B’’ potato market, for which small

potatoes are required. FCIC agrees that

this provision adds some complexity to

the loss adjustment process. However,

previous provisions did not provide any

consistent method of adjustment when

potatoes were harvested prior to full

maturity. To lessen the administrative

complications associated with this

adjustment, FCIC has changed the

provision to specify that full maturity

will be presumed to have been reached

45 days prior to the calendar date for the

end of the insurance period unless

specified otherwise in the Special

Provisions.

Comment: An insurance service

organization is concerned that section

12(d)(1)(v) of the Northern Potato and

Central and Southern Potato Crop

Provisions allows insureds to defer the

settlement of a claim. The policy should

not allow the insured to defer settlement

and wait for a later, generally lower,

appraisal, especially on crops that have

a short ‘‘shelf life.’’

Response: This provision allows

deferment of a claim only if the

insurance provider agrees that

representative samples can be left or if

the insured elects to continue to care for

the entire crop. In either case, if the

insured does not provide sufficient care

for the remaining crop samples, the

original appraisal will be used.

Therefore, no changes have been made.

Section 12 has been redesignated as

section 11 in the Northern Potato Crop

Provisions.

Comment: An insurance service

organization stated section

12(d)(1)(v)(A) of the Northern and

Central and Southern Potato Crop

Provisions should not refer to ‘‘stage

guarantee’’ since there are no stages in

this policy, only a price reduction for

unharvested acreage.

Response: FCIC agrees and has

corrected the provisions in redesignated

section 11(d)(1)(v)(A) of the Northern

Potato Crop Provisions and section

12(d)(1)(v)(A) of the Central and

Southern Crop Provisions.

Comment: An insurance service

organization asked if premium will be

increased to compensate for the

additional risk of adding quality

adjustment for freeze damage to the

Northern Crop Provisions.

Response: All changes in coverage,

including the addition of new freeze

damage adjustment provisions, will be

considered when premium rates are

established.

Comment: An insurance service

organization recommended combining

sections 12(e)(1) and (2) since they are

so similar. Combining the provisions

will avoid having to list the types of

covered damage twice and reduce the

chance of misinterpretation.

Response: FCIC agrees with the

comment and has combined the

provisions in redesignated section 11(e)

of the Northern Potato Crop Provisions

and section 12(e) of the Central and

Southern Crop Provisions.

Comment: A reinsured company, an

insurance service organization, and a

producer group indicated that, in many

situations, it will not be possible to

determine percentages of damage or to

complete grade inspections by the end

of the insurance period as section

12(e)(3) of the Northern Potato Crop

Provisions and the definition of ‘‘grade

inspection’’ in the Northern and Central

and Southern Potato Crop Provisions

require. Producers may harvest potatoes

near the end of the insurance period

and, depending on the amount of

potatoes in an area that require grading,

it may be two to three weeks before

grading of samples can be completed.

Response: FCIC agrees that the actual

percentage of damage may not be

obtainable prior to the end of the

insurance period in all situations.

Therefore, the definition of ‘‘grade

inspection’’ in the Northern and Central

and Southern Crop Provisions has been

changed to require that samples of

production be obtained prior to the sale,

storage, or disposal of the potatoes, and

to allow the actual grading of the

samples to take place at a later time.

Redesignated section 11(c) of the

Northern Potato Crop Provisions and

section 12(c) of the Central and

Southern Potato Crop Provisions has

also been changed to indicate that the

extent of any loss, including quality

adjustments, must be determined based

on samples obtained no later than the

time the potatoes are placed in storage,

if the production is stored prior to sale,

or the date it is delivered to a buyer,

wholesaler, packer, broker, or other

handler if it is not stored. Section

12(e)(3) of the Northern Potato Crop

Provisions has been deleted.

Comment: An insurance service

organization suggested changing the

language in section 12(f), 12(g)(1) and

12(g)(2)(ii)(B)(1) of Northern Crop

provisions from ‘‘will be adjusted 0.1

percent for each 0.1 percent of damage

through 5 percent’’ to ‘‘will be adjusted

by the same percentage’’ so the reader

doesn’t have to puzzle through the

calculation to figure out that 4.5 percent

damage means a 4.5 percent adjustment.

Also, the existing frost/freeze potato

option reduces production to count in 5

percent increments for damage from 6

percent to 20 percent. Changing this to

increments of a tenth of a percent for

each tenth of a percent damage is more

complicated, and indicates an

unrealistic degree of precision.

Response: The use of the language

‘‘0.1 percent for each 0.1 percent of

damage’’ is necessary to avoid any

ambiguity. Further, the use of 0.1

percent increments is intended to make

these determinations more accurate and

should not substantially complicate the

calculations. Therefore, no changes have

been made.

Comment: An insurance service

organization indicated that the language

in section 12(g)(2) (i), (ii) & (iii) of the

Northern Potato Crop Provisions is very

complicated and difficult to follow and

suggested that a chart might be

developed to assist in understanding.

Response: Section 12(g)(2)(i)

(redesignated 11(g)(2)(i)) indicates that

the price received for damaged

production is divided by a price

election to obtain an adjustment factor.

Including this information in a chart

will not improve clarity. Redesignated

sections 11(g)(2) (ii) and (iii) indicate

that 0.1 percent damage results in a 0.1

percent reduction in the amount of

production to count, that 0.2 percent

damage results in a 0.2 percent

reduction, etc. A chart indicating all

damage amounts in 0.1 percent

increments would be extremely

repetitive, result in additional policy

pages, and not improve understanding.

Therefore, no change has been made.

Comment: An insurance service

organization and a reinsured company

are concerned with moral hazards,

because in section 12(g)(2) of the

Northern Crop Provisions, there is a

different method of adjustment for

production that is sold or discarded

within 7 days and production that

remains in storage 8 days or more. The

comments indicated that a producer’s

production could have 11 percent

damage which would result in zero

production to count if it is kept more

than 7 days, but, if it is sold

immediately, a salvage value would

count against the guarantee. The

commenters also asked whether there is

a way to recover some salvage value

instead of showing zero production to

count if production with more than 11

percent damage is sold and processed

and whether the loss adjustment

procedure provides a way to restrict any

indemnity to the damaged acreage for a

unit which includes four separate fields,

and only one was damaged enough to

result in significant damage for the

whole unit.

Response: FCIC agrees that a salvage

value should be counted when an

insured elects to keep and use the

damaged crop for feed, starch, etc. and
65326 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations

has changed redesignated section

11(g)(2)(ii)(B) so that a minimum of 15

percent of the production will be

production to count in such instances.

This amount is consistent with the

value that is normally received for

potatoes that are sold for cattle feed,

starch, or other salvage uses. When only

one field of a unit is damaged, the

production from that field will be

adjusted in accordance with the policy

provisions, just as it would be for other

insured crops. If that amount of damage

reduces the production to count below

the guarantee for the unit, an indemnity

will be paid.

Comment: A reinsured company

recommended retaining current

procedures that allow a 60 day period

to determine the disposition of potatoes

with 5 percent or more tuber rot. If the

producer can sell the potatoes within 60

days of harvest, the salvage value

should be used to determine the loss.

Also, physiological disorders such as

hollow heart, leaf roll, etc., should be

covered in the same manner as

pathological diseases (tuber rot, soft rot,

late blight, etc.)

Response: FCIC agrees that 60 days is

an appropriate time period to allow for

disposition of potatoes with tuber rot.

However, many producers do not wish

to pay the additional premium

associated with the storage endorsement

60 day period. Also, many producers

have indicated that they do not want to

pay the additional premium associated

with coverage for hollow heart and

other defects. FCIC has elected to

provide coverage for both of these

circumstances via optional

endorsements. Therefore, no changes

have been made.

Comment: A reinsured company

stated that section 12(g) of the Northern

Crop Provisions does not indicate how

to determine the amount of production

to count when production has a

combination of freeze and soft rot. The

comment suggested determining freeze

damage and tuber rot separately and

using the one that yields the least

production to count.

Response: FCIC agrees that a

provision is needed to specify how a

combination of freeze and tuber rot

damage will be adjusted. However,

considering only the type of damage

that results in the least amount of

production to count could result in the

insurance provider ignoring what may

be a significant amount of either freeze

or tuber rot damage. Redesignated

section 11(h) has been added to specify

how production with more than one

type of damage will be adjusted.

Comment: A reinsured company

suggested that the language in section

12(g)(2)(i) of the Northern Potato Crop

Provisions, 4(a)(1) of the Northern

Potato Quality Endorsement, 6(a)(1)(i) of

the Northern Potato Processing Quality

Endorsement and 6(a) of the Northern

Potato Storage Endorsement be

strengthened to further define ‘‘sold’’ as

the ‘‘date of sale’’ without regard to

subsequent delivery or storage.

Response: Since only referring to the

amount of sold production; subsequent

delivery or storage is not relevant. The

provisions have been clarified

accordingly.

Comment: A reinsured company

indicated that the 7 day time period

provided in section 12(g)(2)(i) of the

Northern Potato Crop Provisions,

section 4(a)(1) of the Northern Potato

Quality Endorsement, and section

6(a)(1)(i) of the Northern Potato

Processing Quality Endorsement to sell

damaged production is not long enough.

The grading process often takes two or

three weeks to complete and the percent

damage cannot be determined until the

production is graded.

Response: FCIC agrees that a longer

time period is necessary and has

changed the relevant provisions to

reflect a time period of 21 days.

Comment: A reinsured company

recommended changing section

12(g)(2)(i) of the Northern Potato Crop

Provisions, and section 4(a)(1) of the

Northern Potato Quality Endorsement,

so that the value of damaged production

is compared to the producer’s price

election rather than the highest price

election available.

Response: This provision is intended

to compare the relative value of the

damaged production to the value of

undamaged production. If the elected

prices were used, insureds with

different price election percentages

could have different amounts of

production to count even though they

had the same amount of production and

crop value. Therefore, no change has

been made.

Comment: A reinsured company

recommended that the salvage value

provision (section 12(g)(2)(i)) applicable

to production with soft rot, wet

breakdown or other tuber rot condition

also be applicable to product damaged

by freeze.

Response: It would not be appropriate

to allow potatoes with low levels of

freeze damage (e.g., 5.1 percent) to be

adjusted based on value, especially in

years when the market value is low.

Freeze damaged production, if handled

correctly, can often be stored for long

periods of time, sorted, and sold at full

market value. In contrast, production

with soft rot levels above 5 percent is

much more difficult to store, sort and

sell and often must be sold soon after

harvest at a much reduced price.

Therefore, the suggested change has not

been made. However, FCIC has

determined that some salvage value

should be counted when an insured

elects to keep damaged production and

has changed redesignated section

11(g)(1) so that a minimum of 15

percent of production is counted in

such instances.

Comment: A reinsured company

suggested the word ‘‘with’’ be inserted

between ‘‘accordance’’ and ‘‘section’’ in

section 12(g)(2)(iii) of the Northern

Potato Crop Insurance Provisions.

Response: The provision in

redesignated section 11(g)(2)(iii) has

been revised accordingly.

Comment: A reinsured company

suggested that ‘‘human consumption’’

be spelled out in the Northern Potato

Crop Provisions. The commenter stated

human consumption defines that

potatoes are grown for consumption by

human beings and any potato crop not

qualifying for human consumption is a

total loss; and there should be no

production to count if such potatoes are

harvested. Counting production may

encourage a producer to leave potatoes

in the soil and this is simply a poor

farming practice.

Response: Potato production may be

adjusted for quality deficiencies

regardless of whether or not it is

harvested. Production will be

considered as production to count if it

could have been fit for human

consumption, not only if it was used or

sold for human consumption. Therefore,

no changes have been made.

Comment: A reinsured company

asked whether the Late Planting

Agreement Option is no longer available

and why late and prevented planting

provisions were not included as they

have been in other crops.

Response: Late and prevented

planting provisions will be included in

the Basic Provisions and will apply to

potatoes. Section 12 of the Northern

Potato Crop Provisions and section 13 of

the Central and Southern Crop

Provisions indicate the available

prevented planting coverage level

percentages.

Comment: An insurance service

organization and a reinsured company

suggested changing section 13(d) of the

Northern and Central and Southern

Crop Provisions to allow written

agreements to be valid for more than

one year. Some written unit agreements

are continuous unless there are

significant changes in the farming

operation and some other written

agreements should also be continuous.
Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations 65327

Response: Written agreements are

intended to permit insurance coverage

to be available in unusual or previously

unknown situations. If the situation

exists from year to year, it should be

incorporated into the crop provisions or

Special Provisions. It is important to

minimize exceptions to the policy to

ensure that the insured is well aware of

the specific terms of the policy. The

written agreement provisions have been

moved to the Basic Provisions since

they apply to most crops.

Comment: An insurance service

organization asked, with respect to the

proposed endorsements to the Northern

Crop Provisions, whether the provisions

will be printed continuously so that the

endorsements are after the written

agreement provisions, or whether

separate pages will be printed to be

inserted with the Crop Provisions when

chosen. The latter is preferable to ensure

policy holders don’t think the

endorsements automatically apply. The

commenter also asked whether FCIC

would authorize the insurance service

organization to add a statement before

the endorsements clarifying they only

apply if elected by the insured.

Response: Each endorsement is a

separate document and should be

included in an insured’s policy package

only when elected. Provisions in each

endorsement clearly state that

additional premium is necessary and

that the additional coverage must be

elected on or before the sales closing

date. An additional clarifying statement

is not necessary. Therefore, no change

will be made.

Comment: An insurance service

organization asked if the Northern

Potato Quality Endorsement rates would

be impacted since frost/freeze coverage

is now a part of the basic potato policy.

Response: Freeze damage was

previously covered under the Quality

Option. Removal of this coverage will be

considered when establishing premium

rates for the new Northern Quality

Endorsement.

Comment: Two reinsured companies,

an insurance service organization, and a

producer group disagreed with the

removal of provisions in the Northern

Quality Endorsement that allow

adjustment based on U.S. No. 1 quality

standards and that allow insureds to

base their own proven historical

percentage of U.S. No. 1’s or 2’s. The

commenter stated that a producer who

can prove better quality percentages

than the county average should be able

to do so. The commenter further

indicated that adjustment based on U.S.

No. 1 standards should be provided by

the policy, not just if allowed by the

actuarial documents or Special

Provisions, and that if adjustment based

on U.S. No. 1 standards is not allowed,

or if there is no quality endorsement for

seed producers, the new proposal may

be abused.

Response: Quality adjustment based

U.S. No. 1 standards will remain

available, as will the ability of

producers to certify historical quality

percentages. Provisions previously used

to indicate that this method of

establishing a percentage factor have

been added (see section 9 of the

Northern Quality Endorsement). FCIC

does not agree that potatoes grown for

seed should be eligible for coverage

under the Quality Endorsement. Seed

producers often utilize production

practices designed to produce small

tubers. Therefore, in many instances,

U.S. size standards are intentionally not

achieved. FCIC also does not agree that

quality adjustment based on the U.S.

No. 1 grade should be available in all

instances. Such coverage should not be

made available universally without first

determining that adequate rating

information is available for all counties

in which potato insurance is offered.

Comment: A reinsured company

asked with respect to coverage under

the Northern Quality Endorsement,

whether there will be only one

‘‘default’’ percentage factor per county;

whether a producer with good history

will be able to ‘‘prove up’’ an average

quality factor; and whether a quality

data base will be maintained and, if so,

will there be cups and caps.

Response: More than one percentage

factor will apply in counties where

coverage based on either U.S. No. 1 or

2 is available, or where separate

percentage factors are specified by

potato type. Producers will be able to

certify, subject to verification, past

records of percentages of potatoes

meeting applicable standards to

establish the factor.

Comment: Comments were received

regarding section 4(a) of the Northern

Potato Crop Insurance Quality

Endorsement. A reinsured company

indicated that the section requires

insurance providers to decide whether

or not potatoes with internal defects can

be separated from undamaged

production using methods normally

used by potato packers or processors. As

new separation methods are developed,

determination of ‘‘methods normally

used’’ becomes more and more

subjective. A producer group disagreed

with the provisions because equipment

used to sort internal defects is not

normally available to potato producers

during harvest and such defects should

be graded according to the United States

Standards for Grades of Potatoes (either

U.S. 1 or 2 as applicable).

Response: Although producers

generally do not have the equipment

needed to sort internal defects, it is

quite common for packers and

processors to have the equipment

needed to sort such defects. It would be

inappropriate for the insurance provider

to pay a total or near total loss for

production that is later sorted and sold

at full value. Therefore, no changes have

been made. FCIC agrees that the use of

new technology varies among packers

and processors, and that it would be

difficult to administer a provision that

requires the reinsured company to be

familiar with all methods. The provision

has been changed to indicate that the

potatoes with internal defects must not

be separable from undamaged

production by methods used by the

potato packers or processors to which

the insured person normally delivers

production.

Comment: A reinsured company

asked for clarification regarding

language in section 4(a) of the Northern

Potato Crop Insurance Quality

Endorsement that indicates internal

defects must exceed the tolerance

allowed for a certain U.S. grade. The

U.S. grade standards contain a 6 percent

tolerance. However, in another section

(‘‘Application of Tolerances’’), the

standards indicate that individual

samples cannot have more than double

the specified tolerance amount.

Response: The individual samples

referred to in the Application of

Tolerances are individual samples of a

lot that has been prepared for shipping

(bagged, boxed, etc.). The average of all

samples from the lot cannot exceed the

overall limits, but any of the samples

may contain defects exceeding the limit.

Section 4(a) specifies that tolerances are

on a lot basis, not an individual sample

basis.

Comment: An insurance service

organization suggested editorial changes

in section 4 of the Northern Quality

Endorsement and section 6 of the

Northern Processing Quality

Endorsement. The comment indicated

that, as proposed, the phase ‘‘. . . and

contains potatoes that grade less than

U.S. No. 2 due to’’ and subsequent items

(a)-(b)(3) could be read as applying only

to item (3) ‘‘that is marketed after a

grade inspection,’’ and not to items (1)

or (2). If this is not the intent, it would

help to insert a semicolon before this

phrase and change ‘‘and’’ to ‘‘that’’ to

separate it from (3).

Response: FCIC agrees and has made

the recommended changes.

Comment: An insurance service

organization suggested defining ‘‘lot’’ in
65328 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations

section 4(a) of the Northern Potato

Quality Endorsement since reference is

made to ‘‘lot basis’’ and it is not defined

in the Northern Potato Crop Provisions.

Response: FCIC has revised the

defined term ‘‘marketable lot’’ to ‘‘lot.’’

Comment: An insurance service

organization asked for clarification

regarding language in section 4(b)(1)-(3)

and (6)(b)(1)-(3) of the Northern Quality

and Processing Quality Endorsements

respectively. The comment suggested

the following language for clarity:

(1) ‘‘Remove production damaged by

freeze or a cause that results in soft rot

or wet breakdown from representative

samples;

(2) ‘‘Divide the remaining weight of

potatoes that grade U.S. No. 2 or better

by the total remaining weight;

(3) ‘‘Divide the resulting percentage

by the applicable percentage factor

contained in the Special Provisions.’’

The comment also indicated that

sections (2) and (3) could be combined

unless the preference is to keep separate

for each step.

Response: After further study, FCIC

has determined that the method of

determining the percentage of damage

contained in the proposed rule was

inaccurate. That method removed

production damaged by freeze or tuber

rot before determining applicable

percentages, thus reducing the sample

size. The percentage of potatoes that

grade U.S. No. 2 should be based on the

total sample weight, and, since freeze

damage and tuber rot are adjusted under

the Northern Crop Provisions, potatoes

with such damage should be considered

sound (No. 1 or 2, as applicable)

production for the purposes of the

Northern Quality and Processing

Quality Endorsements. Section 4(b) of

the Northern Quality Endorsement and

Section 6(b) of the Northern Processing

Quality Endorsement have been revised

accordingly.

Comment: A reinsured company

asked if section 4(b)(1) of the Northern

Quality Endorsement and section 6(b)(1)

of the Northern Processing Quality

Endorsement (Production damaged by

freeze or a cause that results in soft rot

or wet breakdown will be removed from

representative samples of the

production) would require the graders

to grade the sample twice, once for

freeze and tuber rot and once for all

other quality considerations after they

have removed the frost and tuber rot

potatoes from the sample. If so, more

time for grading will be required and the

process will be more complex.

Response: FCIC has revised these

provisions so that two separate grading

procedures will not be required.

Comment: A reinsured company

recommended discontinuing coverage

under the Northern Quality

Endorsement based on the U.S. No. 2

grade and redefining U.S. No. 1

standards to coincide with the new

potato commodities future market.

Response: The potato industry still

utilizes No. 2 grade standards in many

circumstances and this level of quality

protection provides adequate insurance

coverage for many insureds. Therefore,

no changes have been made.

Comment: A reinsured company

commented that the Northern

Processing Quality Endorsement needs

to be expanded to all counties in Idaho

that produce potatoes for processing.

Response: FCIC agrees that expansion

of the coverage provided by the

Northern Processing Quality

Endorsement should be studied. Several

Regional Service Offices, including the

office that would recommend new

counties in Idaho, are now considering

such expansion. If analysis proves that

adequate information is available, and

the coverage can be offered in an

actuarially sound manner, the coverage

provided by the endorsement will be

expanded to additional counties.

Comment: A reinsured company

recommended that, if the potato

producer does not sign a potato contract

by the acreage reporting date as

mandated by the Northern Potato Crop

Insurance Processing Quality

Endorsement, acreage automatically be

covered under the Northern Potato Crop

Insurance Quality Endorsement based

on the U.S. No. 1 grade. This method

would automatically protect the

producer against quality losses even

though a contract was not signed.

Response: FCIC agrees that a producer

who wants insurance against quality

deficiencies should have such coverage

when a processor contract is not

completed. The Northern Quality

Endorsement was designed so that the

coverage under it is automatically

applicable when a processor contract is

not completed by the acreage reporting

date. However, the grade upon which

coverage is based will be that selected

by the insured (U.S. No. 1 (if available

in the county) or U.S. No. 2).

Comment: An insurance service

organization suggested replacing the

reference to ‘‘specific gravity’’ in section

6(a) of the Northern Processing Quality

Endorsement with ‘‘percent solids.’’ The

term ‘‘specific gravity’’ may not appear

on settlement sheets.

Response: Most settlement sheets still

refer to ‘‘specific gravity.’’ For those that

do not, a conversion chart commonly

used in the potato industry will be

referenced in procedural handbooks.

Comment: An insurance provider

recommended that production covered

under the Northern Processing Quality

Endorsement be eligible for adjustment

if the specific gravity is less than 1.074.

Most processor contracts require a

specific gravity of 1.074 or higher.

Response: FCIC agrees and has

modified section 6(a)(1) (redesignated

6(a)) to indicate that production will be

eligible for adjustment if it has a specific

gravity that is less than the lower of

1.074 or the minimum acceptable value

under the terms of the processor

contract.

Comment: An insurance service

organization suggested a change in the

formatting of sections 6 (a) & (b) of the

Northern Processing Quality

Endorsement. Currently, there is no

(a)(2) following (a)(1).

Response: Section 6(a)(1) has been

redesignated as 6(a) and the following

sections have been redesignated

accordingly.

Comment: A reinsured company

indicated that the Northern Quality

Endorsement no longer provided quality

protection for production grown for

seed. This leaves the seed producer

without adequate protection against

losses in quality. The comment

suggested developing a new certified

seed endorsement based on the U.S.

Certified Seed Standards in order to

provide adequate protection for the seed

grower.

Response: FCIC agrees that seed

producers may need protection in

addition to that currently provided and

will work with any party interested in

developing such coverage.

Comment: A producer group

recommended revising the language in

section 4 of the Certified Seed

Endorsement from ‘‘The certified seed

acreage you insure in the current crop

year cannot be greater than 125 percent

of the average number of acres grown for

seed in the three previous years unless

we agree otherwise in writing’’ to ‘‘The

certified seed acreage you insure in the

current crop year cannot be greater than

125 percent of the average number of

acres entered into and passing

certification in the potato certified seed

program for the state in which the seed

was grown in the three previous years

unless we agree otherwise in writing.’’

The group further suggested that the

language in section 4(a) be changed

from ‘‘Multiply the average number of

acres grown for certified seed the three

previous years by 1.25 and divide this

result by the number of acres grown for

certified seed in the current crop year;

and * * *’’ to ‘‘Multiply the average

number of acres entered into and

passing certification in the potato
Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations 65329

certified seed program for the state in

which the seed was grown the three

previous years by 1.25 and divide this

result by the number of acres grown for

certified seed in the current crop year;

and * * *’’ This change should

adequately address previous program

abuse and limit indemnified acreage to

only that which is actually being

produced for seed. A reinsured

company and an insurance service

organization also recommended

clarifying whether ‘‘3 previous years’’

means ‘‘calendar’’ or ‘‘data base’’ years.

Response: FCIC has made the

recommended changes and clarified the

provisions to indicate the three previous

calendar years.

Comment: An insurance service

organization indicated section 4 of the

Potato Crop Insurance Certified Seed

Endorsement which limits the increase

to 125 percent in certified seed acreage

compared to the average of the previous

three years is a good idea. The comment

indicated that the overall reduction in

guarantee if excess acreage is reported

may be the simplest way to handle this

possibility, but asked if consideration

was given to allowing the insured to

designate which acres within the limit

would be insured as certified seed.

Response: Consideration was given to

allowing insureds to designate insurable

and uninsurable acreage. However, it

was not considered the best alternative

since identification of the source of

production would be difficult,

especially if insured and uninsured

acreage were in the same field.

Therefore, no change will be made.

Comment: A reinsured company

indicated that coverage for Certified

Seed should be made available in areas

from which the coverage was

withdrawn. The endorsement was put

on hold for review and has been under

review for several years. The

endorsement should be consistent with

certification requirements used by the

states of Montana and Idaho.

Response: Coverage for certified seed

was withdrawn in certain locations at

the request of grower groups and potato

industry representatives. FCIC will not

reinstate this coverage until these

groups and representatives agree that it

should again be made available. FCIC

believes that the endorsement is

consistent with certification

requirements used in Montana and

Idaho. Provisions in the endorsement

specify that potatoes must be produced

and managed in accordance with

standards, practices, and procedures

required for certification by the state’s

certifying agency and applicable

regulations. The endorsement cannot

contain the specific requirements of the

certifying agencies in Montana and

Idaho because the endorsement is also

used in other states. No changes have

been made.

Comment: An insurance service

organization questioned the language in

section 7 of the Potato Crop Insurance

Certified Seed Endorsement. The

comment stated the existing Certified

Seed Potato Option Amendment

specifies a payment of one dollar per

hundredweight (multiplied by the

guarantee and share) while the proposed

language refers to ‘‘the dollar amount

per hundredweight shown in the

Special Provisions.’’ The commenter

asks whether this dollar amount varies

by state or country, and if so, by how

much. The commenter also asks

whether the rates reflect any increase or

decrease.

Response: Depending upon available

price information for certified seed, the

dollar amount of coverage per

hundredweight could vary by state or

county. The amount of variation would

depend upon actual and expected prices

for see. Premium rate percentages

should not be impacted by variation in

this dollar amount since the risk of not

receiving certification due to an insured

cause should remain constant regardless

of the dollar amount of coverage per

hundredweight. However, the amount of

premium may increase if the price is

higher.

Comment: An insurance provider

recommended that the Northern Storage

Endorsement give producers time to

make decisions based on a grade that

was determined from sampling prior to

storage and if the grading showed

internal defects, then the producer

should be allowed the same choices

available under the Northern Quality

Endorsement (section 4(a)). The

comment further stated that the

Northern Storage Endorsement covers

quality problems that are communicable

(the problem will spread throughout the

storage facility, such as late blight or a

tuber rot condition). Internal defects are

not communicable and will not spread

to other potatoes. In all cases,

marketability and salvage will control

the losses. Regardless of the type of

problem in storage, salvage should

always apply unless the crop is

destroyed.

Response: FCIC agrees that when the

producer elects the Northern Quality

Endorsement, the coverage provided

will be extended to provide the same

coverage under the Northern Storage

Endorsement if the requirements of such

Endorsement are met. Salvage

provisions have been added.

Comment: A producer group stated

that the Northern Storage Coverage

Endorsement attaches to the basic

policy, but should also extend the

coverage provided under the Northern

Potato Quality Endorsement if that

endorsement is elected by the producer.

Response: FCIC agrees that coverage

under the Northern Quality

Endorsement should be extended when

the producer also elects a Northern

Storage Coverage Endorsement and has

modified the Northern Storage

Endorsement accordingly.

Comment: An insurance service

organization asked for clarification

regarding language in section 3 of the

Northern Potato Storage Coverage

Endorsement that indicates ‘‘all other

potato production insured under the

Northern Potato Crop Provisions must

be insured under this endorsement

unless the Special Provisions allow you

to exclude certain potato varieties, types

or groups from insurance under this

endorsement, and you elect to exercise

this option.’’ The commenter

understands this to mean that all

potatoes insured under the Northern

Potato Crop Provisions have to be

insured under the Northern Storage

Endorsement, unless a processor

contract requires delivery within three

days of harvest or if the producer elects

to exclude other production when

specifically allowed by the Special

Provisions. The comment recommended

starting the sentence with ‘‘If you elect

this endorsement’’ for clarity.

Response: The provision has been

clarified.

Comment: An insurance service

organization questioned why coverage

exclusions are required to be identified

annually as stated in section 3 of the

Northern Potato Storage Coverage

Endorsement. It would be more

consistent for such exclusions to remain

in effect until otherwise notified in

writing by either the insured producer

or the insurance provider.

Response: Since the acreage to which

exclusions apply is not likely to be

identical from year to year, FCIC

believes excluded varieties, types, or

groups should be identified on the

annual acreage report. Therefore, no

change will be made.

Comment: An insurance service

organization indicated that the word

‘‘prorata’’ in section 4 of the Northern

Storage Endorsement should be two

words. The comment also recommended

changing the language in the example to

account for the missing amount.

Recommended changing to: ‘‘the

production to count is 1,000

hundredweight because 500

hundredweight went bad.’’

Response: The editorial correction has

been made. However, the
65330 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations

recommendation regarding the ‘‘missing

amount of production’’ has not been

incorporated. The provision is clearly

stated without the recommended

change.

Comment: An insurance service

organization questioned how the

insurance provider will be able to verify

if notification was within 72 hours of

discovery of damage as indicated in

section 5(b) of the Northern Storage

Endorsement.

Response: As with any insured loss, it

is important that the insurance provider

receive timely notification of damage.

FCIC agrees that in many instances it is

difficult to determine the exact time the

insured person becomes aware of

damage and therefore, some flexibility is

required when administering this

provision. However, if it can be clearly

shown that an insured did not give

timely notice, any claim could be

denied.

Comment: An insurance service

organization suggested that section 5(a)

and 5(c) be combined in the Northern

Potato Storage Coverage Endorsement

since both refer to damage by an insured

cause other than freeze.

Response: FCIC agrees and has

combined the provisions in 5(c) with

section 5(a).

Comment: An insurance service

organization recommended that the

insured be required to have the Quality

Endorsement in order to take the

Northern Potato Storage Coverage

Endorsement.

Response: Since damage that may

later cause tuber rot is covered under

the Northern Crop Provisions, the

Northern Storage Endorsement should

be available to producers who elect

coverage under the Northern Crop

Provisions only. Therefore, no changes

have been made.

In addition to the changes indicated

above, FCIC has made the following

changes:

1. The term ‘‘tuber rot’’ is defined in

the Northern Crop Provisions to avoid

duplicating provisions in the Northern

Crop Provisions, Quality Endorsement,

Processing Quality Endorsement, and

Storage Endorsement. Added a

definition for ‘‘disposed’’ to the

Northern and Central and Southern

Crop Provisions for clarification. Added

definitions for the terms ‘‘buyer’’ and

‘‘reduction percentage’’ to the Northern

Crop Provisions for clarification. Also

removed definitions for ‘‘days’’ ‘‘FSA’’,

‘‘final planting date,’’ ‘‘interplanted,’’

‘‘irrigated practice,’’ ‘‘planted acreage,’’

and ‘‘production guarantee (per acre),’’

since definitions for these terms are now

contained in the Basic Provisions.

2. Section 2 of the Northern Crop

Provisions is removed and section 2 of

the Southern Crop Provisions is

modified because provisions previously

contained in section 2 regarding unit

division requirements and unit structure

by section, section equivalent, FSA farm

serial number, and irrigated and nonirrigated practices, have been moved to

the Basic Provisions.

3. Revised redesignated section

11(b)(2) of the Northern Crop Provisions

and section 12(b)(2) of the Central and

Southern Crop Provisions to clearly

indicate that the price use to determine

the amount of an indemnity may be

limited.

4. The initial paragraph of the Central

and Southern Crop Provisions has been

revised to add Arizona and Georgia as

states in which these provisions apply.

These states are also added in section 5

(Cancellation and Termination Dates)

and section 9 (Insurance Period) of the

Central and Southern Crop Provisions.

5. Sections 4 and 5 of the Central and

Southern Crop Provisions have been

revised to change the contract change

and cancellation/termination dates for

Pinellas, Hillsborough, Polk, Oseola,

and Brevard Counties, Florida, and all

counties lying south thereof to June 30

and September 30 respectively. These

dates were previously effective only in

Manatee, Hardee, Highlands,

Okeechobee, and St. Lucie Counties,

and all counties lying south thereof.

6. Section 4(a)(1) of the Northern

Quality Endorsement and section 6(a)(1)

of the Northern Processing Quality

Endorsement are revised to clarify that

a ‘‘price comparison’’ method of

adjustment will not be applicable if it

has already been performed under the

terms of redesignated section 11(g)(2)(i)

of the Northern Potato Crop Insurance

Provisions.

7. Removed provisions regarding

written agreements that are now

contained in the Basic Provisions.

8. Section 5 of the Northern

Processing Quality Endorsement is

clarified to indicate that the number of

acres insured under the endorsement

will not exceed the actual number of

acres planted to the potato types under

contract.

9. Section 6(a)(1) of the Northern

Processing Quality Endorsement is

revised by changing the price against

which the value of damaged production

is compared from the ‘‘base contract

price’’ to the ‘‘highest available price

election.’’ This change was made

because of variation in methods used to

establish base contract prices. Base

prices tend to be set low when

substantial incentives for good quality

are contained in the contract, and tend

to be set high when substantial

discounts for low quality are included.

Use of the price election will provide a

consistent means of quality adjustment

for all insureds.

10. Section 8 of the Northern Quality

Endorsement and section 9 of the

Northern Processing Quality

Endorsement are revised to indicate that

an insured may elect quality adjustment

based on U.S. No. 1 or 2 by type or

group, if both U.S. No. 1 and 2 are

provided in the actuarial documents

and if separate types or groups are

specified in the Special Provisions.

11. Section 4 of the Northern Storage

Endorsement is revised to clarify that

pro rata allocation of stored production

to units will be allowed only if

verifiable records of production placed

in storage are available by unit.

12. Section 6 of the Northern Storage

Endorsement is removed. The proposed

provisions duplicated those contained

in redesignated section 11 of the

Northern Crop Provisions.

Good cause is shown to make this rule

effective upon publication in the

Federal Register. This rule improves the

potato insurance coverage and brings it

under the Common Crop Insurance

Policy Basic Provisions for consistency

among policies. The earliest contract

change date that can be met for the 1998

crop year is December 31, 1997. It is

therefore imperative that these

provisions be made final before that

date so that the reinsured companies

and insured may have sufficient time to

implement these changes. Therefore,

public interest requires the agency to act

immediately to make these provisions

available for the 1998 crop year.

List of Subjects in 7 CFR Parts 422 and

457

Crop insurance, Potato crop insurance

regulations, Potatoes.

Final Rule

Accordingly, as set forth in the

preamble, the Federal Crop Insurance

Corporation hereby amends 7 CFR parts

422 and 457 as follows:

PART 422—POTATO CROP

INSURANCE REGULATIONS

1. The authority citation for 7 CFR

part 422 is amended to read as follows:

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

2. The heading preceding § 422.1 is

revised to read as follows: Subpart—

Regulations for the 1986 (1987 in certain

California counties and Florida) through

1997 Crop Years (1998 in Alabama;

Arizona; certain California counties;

Delaware; Florida; Maryland; Missouri;

New Jersey; New Mexico; North
Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations 65331

Carolina; Oklahoma; Texas; and

Virginia).

3. Section 422.7 is amended by

revising the introductory text of

paragraph (d) to read as follows:

§ 422.7 The application and policy.

* * * * *

(d) The application for the 1986 and

succeeding crop year is found at subpart

D of part 400—General Administrative

Regulations (7 CFR 400.37, 400.38). The

provisions of the Potato Crop Insurance

Policy for the 1986 (1987 in certain

California counties and Florida) through

1997 Crop Years (1998 in Alabama;

Arizona; certain California counties;

Delaware; Florida; Maryland; Missouri;

New Jersey; New Mexico; North

Carolina; Oklahoma; Texas; and

Virginia) are as follows:

* * * * *

PART 457—COMMON CROP

INSURANCE REGULATIONS;

REGULATIONS FOR THE 1994 AND

SUBSEQUENT CONTRACT YEARS

4. The authority citation for 7 CFR

part 457 continues to read as follows:

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

5. Section 457.142 is added to read as

follows:

§ 457.142 Northern Potato Crop Insurance

Provisions.

The Northern Potato Crop Insurance

Provisions for the 1998 and succeeding

crop years are as follows:

FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

Reinsured policies:

(Appropriate title for insurance provider)

Both FCIC and reinsured policies:

Northern Potato Crop Provisions

These provisions will be applicable in:

Alaska; Humboldt, Modoc, and Siskiyou

Counties, California; Colorado; Connecticut;

Idaho; Indiana; Iowa; Maine; Massachusetts;

Michigan; Minnesota; Montana; Nebraska;

Nevada; New York; North Dakota; Ohio;

Oregon; Pennsylvania; Rhode Island; South

Dakota; Utah; Washington; Wisconsin; and

Wyoming.

If a conflict exists among the policy

provisions, the order of priority is as follows:

(1) the Catastrophic Risk Protection

Endorsement, as applicable; (2) the Special

Provisions; (3) these Crop Provisions; and (4)

the Basic Provisions, with (1) controlling (2),

etc.

1. Definitions.

Buyer. A business entity in the business of

buying or processing potatoes, that possesses

all the licenses and permits required by the

state in which it operates, and has the

facilities to accept the potatoes purchased.

Certified seed. Potatoes for planting a

potato crop in a subsequent crop year that

have been found to meet the standards of the

public agency that is responsible for the seed

certification process within the state in

which they were grown.

Discard. Disposal of production by you, or

a person acting for you, without receiving

any value for it.

Disposed. Any disposition of the crop

including but not limited to sale or discard.

Grade inspection. An inspection in which

samples of production are obtained by us, or

a party approved by us, prior to the sale,

storage, or disposal of any lot of potatoes, or

any portion of a lot and the potatoes are

evaluated and quality (grade) determinations

are made by us, a laboratory approved by us,

or a potato grader licensed or certified by the

applicable State or the United States

Department of Agriculture, in accordance

with the United States Standards for Grades

of Potatoes.

Harvest. Lifting potatoes from within the

soil to the soil surface.

Hundredweight. One hundred (100)

pounds avoirdupois.

Local market. The area in which the

insured potatoes are normally sold.

Lot. A quantity of production that can be

separated from other quantities of production

by grade characteristics, load, location or

other distinctive features.

Processor contract. A written agreement

between the producer and a processor,

containing at a minimum:

(a) The producer’s commitment to plant

and grow potatoes, and to deliver the potato

production to the processor;

(b) The processor’s commitment to

purchase the production stated in the

contract; and

(c) A price that will be paid to the producer

for the production stated in the contract.

Reduction percentage. A factor determined

based on the weight of only freeze damaged

production in a sample of potatoes in

relationship to the total weight of the sample,

and the provisions in section 11(g)(1) of these

crop provisions; and that is used to

determine a quantity of potatoes that will not

be included as production to count.

Tuber rot. Any soft, mushy, or leaky

condition of potato tissue (soft rot or wet

breakdown as defined in the United States

Standards for Grades of Potatoes), including,

but not limited to, breakdown caused by

Southern Bacterial Wilt, Ring Rot, or Late

Blight.

2. Insurance Guarantees, Coverage Levels,

and Prices for Determining Indemnities.

(a) In addition to the requirements of

section 3 of the Basic Provisions, you may

select only one price election for all the

potatoes in the county insured under this

policy unless the Special Provisions provide

different price elections by type. If the

Special Provisions provide for different price

elections by type, you may select one price

election for each potato type designated in

the Special Provisions. The price elections

you choose for each type must have the same

percentage relationship to the maximum

price election offered by us for each type. For

example, if you choose 100 percent of the

maximum price election for one type, you

must also choose 100 percent of the

maximum price election for all other types.

(b) If the production from any acreage of

the insured crop is not harvested, the price

used to determine your indemnity will be 80

percent of your price election.

(c) Any acreage of potatoes damaged to the

extent that similarly situated producers in

the area would not normally further care for

the potatoes will be deemed to have been

destroyed even though you may continue to

care for the potatoes. The price election for

unharvested acreage will apply to such

acreage.

3. Contract Changes.

In accordance with section 4 of the Basic

Provisions, the contract change date is

November 30 preceding the cancellation

date.

4. Cancellation and Termination Dates.

In accordance with section 2 of the Basic

Provisions, the cancellation and termination

dates are March 15.

5. Annual Premium.

In lieu of the premium computation

method contained in section 7 of the Basic

Provisions, the annual premium amount (y)

is computed by multiplying (a) the

production guarantee by (b) the price election

for harvested acreage, by (c) the premium

rate, by (d) the insured acreage, by (e) your

share at the time of planting, and by (f) any

applicable premium adjustment factors

contained in the actuarial documents (a × b

× c × d × e × f = y).

6. Insured Crop.

In accordance with section 8 of the Basic

Provisions, the crop insured will be all the

potatoes in the county for which a premium

rate is provided by the actuarial documents:

(a) In which you have a share;

(b) Planted with certified seed (unless

otherwise permitted by the Special

Provisions);

(c) Planted for harvest as certified seed

stock, or for human consumption, (unless

specified otherwise in the Special

Provisions);

(d) That are not (unless allowed by the

Special Provision or by written agreement):

(1) Interplanted with another crop; or

(2) Planted into an established grass or

legume.

7. Insurable Acreage.

In addition to the provisions of section 9

of the Basic Provisions, we will not insure

any acreage that:

(a) Does not meet the rotation requirements

contained in the Special Provisions for the

crop; or

(b) Is damaged before the final planting

date to the extent that similarly situated

producers in the area would normally not

further care for the crop, unless it is

replanted or we agree that it is not practical

to replant.

8. Insurance Period.

In accordance with the provisions of

section 11 of the Basic Provisions, the

calendar date for the end of the insurance

period is the date immediately following

planting as follows (exceptions, if any, for

specific counties, varieties or types are

contained in the Special Provisions):

(a) October 1, in Alaska;

(b) October 10 in Nebraska and Wyoming;

(c) October 15 in Colorado; Indiana; Iowa;

Michigan; Minnesota; Montana; Nevada;
65332 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations

North Dakota; South Dakota; Utah; and

Wisconsin;

(d) October 20 in Maine; and

(e) October 31 in Humboldt, Modoc, and

Siskiyou Counties, California; Connecticut;

Idaho; Massachusetts; New York; Ohio;

Oregon; Pennsylvania; Rhode Island; and

Washington.

9. Causes of Loss.

(a) In accordance with the provisions of

section 12 of the Basic Provisions, insurance

is provided only against the following causes

of loss that occur within the insurance

period:

(1) Adverse weather conditions;

(2) Fire;

(3) Insects, but only if sufficient and proper

pest control measures are used;

(4) Plant disease, but only if sufficient and

proper disease control measures are used;

(5) Wildlife;

(6) Earthquake;

(7) Volcanic eruption; or

(8) Failure of the irrigation water supply,

if caused by an insured peril that occurs

during the insurance period (see section

9(a)(1) through (7)).

(b) In addition to the causes of loss not

insured against as contained in section 12 of

the Basic Provisions, we will not insure

against any loss of production due to:

(1) Damage that occurs or becomes evident

after the end of the insurance period,

including, but not limited to, damage that

occurs or becomes evident in storage; or

(2) Causes, such as freeze after certain

dates, as limited by the Special Provisions.

10. Duties in the Event of Damage or Loss.

(a) In accordance with the requirements of

section 14 of the Basic Provisions, you must

leave representative samples at least 10 feet

wide and extending the entire length of each

field in the unit if you are going to destroy

any acreage of the insured crop that will not

be harvested.

(b) We must be given the opportunity to

perform a grade inspection on the production

from any unit for which you have given

notice of damage.

11. Settlement of Claim.

(a) We will determine your loss on a unit

basis. In the event you are unable to provide

separate acceptable production records:

(1) For any optional units, we will combine

all optional units for which acceptable

production records were not provided; and

(2) For any basic units, we will allocate any

commingled production to such units in

proportion to our liability on the harvested

acreage for the units.

(b) In the event of loss or damage covered

by this policy, we will settle your claim by:

(1) Multiplying the insured acreage by its

respective production guarantee (If there is

unharvested acreage in the unit, the

harvested and unharvested acreage will be

determined separately);

(2) Multiplying each result in section

11(b)(1) by the respective price election (The

price election may be limited as specified in

section 3.);

(3) Totaling the results of section 11(b)(2);

(4) Multiplying the total production to be

counted of each type, if applicable (see

section 11(d)), by the respective price

election;

(5) Totaling the results of section 11(b)(4);

(6) Subtracting the results of section

11(b)(5) from the result in section 11(b)(3);

and

(7) Multiplying the result of section

11(b)(6) by your share.

For example:

You have a 100 percent share in 100

harvested acres of potatoes in the unit, with

a guarantee of 150 hundredweight per acre

and a price election of $4.00 per

hundredweight. You are only able to harvest

10,000 hundredweight. Your indemnity

would be calculated as follows:

(1) 100 acres × 150 hundredweight =

15,000 hundredweight guarantee;

(2) 15,000 hundredweight × $4.00 price

election = $60,000.00 value of guarantee;

(4) 10,000 hundredweight × $4.00 price

election = $40,000.00 value of production to

count;

(6) $60,000.00 ¥ $40,000.00 = $20,000.00

loss; and

(7) $20,000.00 × 100 percent = $20,000.00

indemnity payment.

You also have a 100 percent share in 100

unharvested acres of potatoes in the same

unit, with a guarantee of 150 hundredweight

per acre and a price election of $3.20 per

hundredweight. The price election for

unharvested acreage is 80.0 percent of your

elected price election ($4.00 × 0.80 = $3.20.)

This unharvested acreage was appraised at 35

hundredweight per acre for a total of 3500

hundredweight as production to count. Your

total indemnity for the harvested and

unharvested acreage would be calculated as

follows:

(1) 100 acres × 150 hundredweight =

15,000 hundredweight guarantee for the

harvested acreage, and 100 acres × 150

hundredweight = 15,000 hundredweight

guarantee for the unharvested acreage;

(2) 15,000 hundredweight guarantee ×

$4.00 price election = $60,000.00 value of

guarantee for the unharvested acreage, and

15,000 hundredweight guarantee × $3.20

price election = $48,000.00 value of

guarantee for the unharvested acreage;

(3) $60,000.00 + $48,000.00 = $108,000.00

total value of guarantee;

(4) 10,000 hundredweight × $4.00 price

election = $40,000.00 value of production to

count for the harvested acreage, and 3500

hundredweight × $3.20 = $11,200.00 value of

production to count for the unharvested

acreage;

(5) $40,000.00 + $11,200.00 = $51,200.00

total value of production to count;

(6) $108,000.00 ¥ $51,200.00 = $56,800.00

loss; and

(7) $56,800.00 loss × 100 percent =

$56,800.00 indemnity payment.

(c) The extent of any quality loss must be

determined based on samples obtained no

later than the time the potatoes are placed in

storage, if the production is stored prior to

sale, or the date they are delivered to a buyer,

wholesaler, packer, broker, or other handler

if production is not stored.

(d) The total production to count (in

hundredweight) from all insurable acreage on

the unit will include:

(1) All appraised production as follows:

(i) Not less than the production guarantee

per acre for acreage:

(A) That is abandoned;

(B) That is put to another use without our

consent;

(C) That is damaged solely by uninsured

causes;

(D) From which any production is

disposed of without a grade inspection; or

(E) For which you fail to provide

acceptable production records;

(ii) Production lost due to uninsured

causes;

(iii) Production lost due to harvest prior to

full maturity. Production to count from such

acreage will be determined by increasing the

amount of harvested production by 2 percent

per day for each day the potatoes were

harvested prior to the date the potatoes

would have reached full maturity. The date

the potatoes would have reached full

maturity will be considered to be 45 days

prior to the calendar date for the end of the

insurance period, unless otherwise specified

in the Special Provisions. This adjustment

will not be made if the potatoes are damaged

by an insurable cause of loss, and leaving the

crop in the field would either reduce

production or decrease quality;

(iv) Unharvested production (the value of

unharvested production will be calculated

using the reduced price election determined

in section 2(b) and unharvested production

may be adjusted in accordance with sections

11(e), (f), (g), and (h)); and

(v) Potential production on insured acreage

that you intend to put to another use or

abandon, if you and we agree on the

appraised amount of production. Upon such

agreement, the insurance period for that

acreage will end when you put the acreage

to another use or abandon the crop. If

agreement on the appraised amount of

production is not reached:

(A) If you do not elect to continue to care

for the crop, we may give you consent to put

the acreage to another use if you agree to

leave intact, and provide sufficient care for,

representative samples of the crop in

locations acceptable to us (The price used to

determine the amount of any indemnity will

be limited as specified in section 2 even if

the representative samples are harvested. The

amount of production to count for such

acreage will be based on the harvested

production or appraisals from the samples at

the time harvest should have occurred. If you

do not leave the required samples intact, or

fail to provide sufficient care for the samples,

our appraisal made prior to giving you

consent to put the acreage to another use will

be used to determine the amount of

production to count); or

(B) If you elect to continue to care for the

crop, the amount of production to count for

the acreage will be the harvested production,

or our reappraisal if additional damage

occurs and the crop is not harvested; and

(2) All harvested production from the

insurable acreage (the amount of production

prior to the sorting or discarding of any

production).

(e) Potato production is eligible for quality

adjustment if:

(1) The potatoes have freeze damage or

tuber rot that is evident at, or prior to, the

end of the insurance period; and

(2) A grade inspection is performed.
Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations 65333

(f) Potato production that is eligible for

quality adjustment, as specified in section

11(e), with 5 percent damage or less (by

weight) will be adjusted 0.1 percent for each

0.1 percent of damage through 5.0 percent.

(g) Potato production that is eligible for

quality adjustment, as specified in section

11(e), with 5.1 percent damage or more (by

weight) will be adjusted as follows:

(1) For potatoes damaged by freeze,

production will be reduced 0.1 percent for

each 0.1 percent of damage through 5.0

percent, 0.5 percent for each 0.1 percent of

damage from 5.1 through 15.0 percent, and

by 1.0 percent for each 0.1 percent of damage

from 15.1 through 19.5 percent. However, if

you do not discard any harvested production

within 21 days of the end of the insurance

period that has freeze damage in excess of

17.9 percent, we will include 15 percent of

such production when determining the

amount of production to count.

(2) For potatoes that have tuber rot due to

an insurable cause other than freeze,

production to count will be determined as

follows:

(i) For potatoes for which a price is agreed

upon between you and a buyer within 21

days (60 days if the Northern Potato Crop

Insurance Storage Coverage Endorsement is

applicable) if the end of the insurance period,

or that are delivered to a buyer within 21

days (60 days if the Northern Potato Crop

Insurance Storage Coverage Endorsement is

applicable) of the end of the insurance

period, by dividing the price received or that

will be received per hundredweight by the

highest price election designated in the

Special Provisions for the insured potato

type, and multiplying the result (not to

exceed 1.0) by the number of hundredweight

of sold production. If production is sold for

a price lower than the value appropriate to

and representative of the local market, we

will determine the value of the production

based on the price you could have received

in the local market;

(ii) For harvested potatoes discarded

within 21 days (60 days if the Northern

Potato Crop Insurance Storage Coverage

Endorsement is applicable) of the end of the

insurance period and appraised unharvested

production that could:

(A) Not have been sold, the production to

count will be zero; or

(B) Have been sold, the production will be

reduced as follows (all percentage points of

damage will be rounded to the nearest 0.1

percent):

(1) 0.1 percent for each 0.1 percent of

damage through 5.0 percent;

(2) 05. percent for each 0.1 percent of

damage from 5.1 percent through 6.0 percent;

(3) 1.0 percent for each 0.1 percent of

damage from 6.1 through 8.0 percent;

(4) 2.0 percent for each 0.1 percent of

damage from 8.1 through 9.0 percent; and

(5) 2.5 percent for each 0.1 percent of

damage from 9.1 through 10.4 percent.

(iii) For potatoes for which a price is not

agreed upon between you and a buyer within

21 days (60 days if the Northern Potato Crop

Insurance Storage Coverage Endorsement is

applicable) of the end of the insurance period

and that remain in storage 22 or more days

(61 or more days if the Northern Potato Crop

Insurance Storage Coverage Endorsement is

applicable) after the end of the insurance

period, adjustment will be made in

accordance with section 11(g)(2)(ii)(B).

(h) When a combination of freeze damage

or a tuber rot condition is 5.1 percent (by

weight) or greater, the amount of production

to count for production affected by tuber rot

will first be determined in accordance with

section 11(g)(2). If production is not sold

within the time frame specified in section

11(g)(2), this amount will be further adjusted

as follows:

(1) The percentage of potatoes with freeze

damage will be determined by dividing the

weight of potatoes with only freeze damage

in representatives samples of the production

by the total weight of the samples;

(2) The reduction percentage will be

determined based on the result of section

11(h)(1) and section 11(g)(1); and

(3) The reduction percentage determined in

section 11(h)(2) will be multiplied by the

amount of production determined in

accordance with section 11(g)(2).

12. Prevented Planting.

Your prevented planting coverage will be

25 percent of your production guarantee for

timely planted acreage. If you have limited or

additional coverage, as specified in 7 CFR

part 400, subpart T, and pay an additional

premium, you may increase your prevented

planting coverage to a level specified in the

actuarial documents.

6. Section 457.147 is added to read as

follows:

§ 457.147 Central and Southern Potato

Crop Insurance Provisions.

The Central and Southern Potato Crop

Insurance Provisions for the 1999 and

succeeding crop years are as follows:

FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

Reinsured policies:

(Appropriate title for insurance provider)

Both FCIC and reinsured policies:

Central and Southern Potato Crop Provisions

These provisions will be applicable in:

Alabama; Arizona; all California counties

except Humboldt, Modoc and Siskiyou;

Delaware; Florida; Georgia; Maryland;

Missouri; New Jersey; New Mexico; North

Carolina; Oklahoma; Texas; and Virginia.

If a conflict exists among the policy

provisions, the order of priority is as follows:

(1) The Catastrophic Risk Protection

Endorsement, as applicable; (2) the Special

Provisions; (3) these Crop Provisions; and (4)

the Basic Provisions, with (1) controlling (2),

etc.

1. Definitions.

Certified seed. Potatoes for planting a

potato crop in a subsequent crop year that

have been found to meet the standards of the

public agency that is responsible for the seed

certification process within the state in

which they were grown.

Discard. Disposal of production by you, or

a person acting for you, without receiving

any value for it.

Disposed. Any disposition of the crop

including but not limited to sale or discard.

Grade inspection. An inspection in which

samples of production are obtained by us, or

a party approved by us, prior to the sale,

storage or disposal of any lot of potatoes, or

any portion of a lot and the potatoes are

evaluated and quality (grade) determinations

are made by us, a laboratory approved by us,

or a potato grader licensed or certified by the

applicable State or the United States

Department of Agriculture, in accordance

with the United States Standards for Grades

of Potatoes.

Harvest. Lifting potatoes from within the

soil to the soil surface.

Hundredweight. One hundred (100)

pounds avoirdupois.

Lot. A quantity of production that can be

separated from other quantities of production

by grade characteristics, load, location or

other distinctive features.

Planting period. The period of time

between the calendar dates designated in the

Special Provisions for the planting of springplanted, summer-planted, fall-planted, or

winter-planted potatoes.

Practical to replant. In lieu of the

definition of ‘‘Practical to replant’’ contained

in section one of the Basic Provisions,

practical to replant is defined as our

determination, after loss or damage to the

insured crop, based on factors including, but

not limited to, moisture availability,

condition of the field, marketing windows,

and time to crop maturity, that replanting to

the insured crop will allow the crop to attain

maturity prior to the calendar date for the

end of the insurance period. It will not be

considered practical to replant after the end

of the late planting period, or the end of the

planting period in which initial planting took

place in counties for which the Special

Provisions designates separate planting

periods, unless replanting is generally

occurring in the area.

2. Unit Division.

A basic unit, as defined in section 1 of the

Basic Provisions, will be divided into

additional basic units by planting period.

3. Insurance Guarantees, Coverage Levels,

and Prices for Determining Indemnities.

(a) In addition to the requirements of

section 2 of the Basic Provisions, you may

select only one price election for all the

potatoes in the county insured under this

policy unless the Special Provisions provide

different price elections by type. If the

Special Provisions provide for different price

elections by type, you may select one price

election for each potato type designated in

the Special Provisions. The price elections

you choose for each type must have the same

percentage relationship to the maximum

price election offered by us for each type. For

example, if you choose 100 percent of the

maximum price election for one type, you

must also choose 100 percent of the

maximum price election for all other types.

(b) If the production from any acreage of

the insured crop is not harvested, the price

used to determine your indemnity will be 80

percent of your price election.

(c) Any acreage of potatoes damaged to the

extent that similarly situated producers in

the area would not normally further care for

the potatoes will be deemed to have been

destroyed even though you may continue to
65334 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations

care for the potatoes. The price election for

unharvested acreage will apply to such

acreage.

4. Contract Changes.

In accordance with section 4 of the Basic

Provisions, the contract change date is:

(a) June 30 preceding the cancellation date

for counties with a September 30

cancellation date;

(b) September 30 preceding the

cancellation date for counties with a

November 30 or December 31 cancellation

date; and

(c) November 30 preceding the cancellation

date for counties with a February 28 or

March 15 cancellation date.

5. Cancellation and Termination Dates.

In accordance with section 2 of the Basic

Provisions, the cancellation and termination

dates are:

State and county Dates

Pinellas, Hillsborough, Polk, Oseola, and Brevard Counties, Florida, and all Florida counties lying south thereof ................................ Sep. 30.

Arizona; all California counties; and all Texas counties except Bailey, Castro, Dallam, Deaf Smith, Floyd, Gaines, Hale, Hartley,

Haskell, Knox, Lamb, Parmer, Swisher, and Yoakum.

Nov. 30.

Alabama; Delaware; Georgia; Maryland; Missouri; New Jersey; North Carolina; Virginia; and all Florida counties except Pinellas,

Hillsborough, Polk, Oseola, and Brevard Counties, Florida, and all Florida counties to the south thereof.

Dec. 31.

Oklahoma; and Haskell and Knox Counties, Texas .................................................................................................................................. Feb. 28.

Bailey, Castro, Dallam, Deaf Smith, Floyd, Gaines, Hale, Hartley, Lamb, Parmer, Swisher, and Yoakum Counties, Texas; and New

Mexico.

Mar. 15.

6. Annual Premium.

In lieu of the premium computation

method contained in section 7 of the Basic

Provisions, the annual premium amount (y)

is computed by multiplying (a) the

production guarantee by (b) the price election

for harvested acreage, by (c) the premium

rate, by (d) the insured acreage, by (e) your

share at the time of planting, and by (f) any

applicable premium adjustment factors

contained in the actuarial documents (a x b

x c x d x e x f = y).

7. Insured Crop.

In accordance with section 8 of the Basic

Provisions, the crop insured will be all the

potatoes in the county for which a premium

rate is provided by the actuarial documents:

(a) In which you have a share;

(b) Planted with certified seed (unless

otherwise permitted by the Special

Provisions);

(c) Planted for harvest as certified seed

stock, or for human consumption, (unless

specified otherwise in the Special

Provisions);

(d) That are not (unless allowed by the

Special Provisions or by written agreement):

(1) Interplanted with another crop; or

(2) Planted into an established grass or

legume.

8. Insurable Acreage.

In addition to the provisions of section 9

of the Basic Provisions, we will not insure

any acreage that:

(a) Does not meet the rotation requirements

contained in the Special Provisions for the

crop; or

(b) Is damaged before the final planting

date or before the end of the applicable

planting period in counties for which the

Special Provisions designate separate

planting periods, to the extent that similarly

situated producers in the area would

normally not further care for the crop, unless

it is replanted or we agree that it is not

practical to replant.

9. Insurance Period.

In accordance with the provisions of

section 11 of the Basic Provisions, the

calendar date for the end of the insurance

period is the date immediately following

planting as follows (exceptions, if any, for

specific counties, varieties or types are

contained in the Special Provisions):

(a) July 15 in Missouri; North Carolina; and

all Texas counties except Bailey, Castro,

Dallam, Deaf Smith, Floyd, Gaines, Hale,

Haskell, Hartley, Knox, Lamb, Parmer,

Swisher, and Yoakum.

(b) July 25 in Arizona; and Virginia.

(c) August 15 in Oklahoma; and Haskell

and Knox Counties, Texas.

(d) In Alabama; California; Florida; and

Georgia; the dates established by the Special

Provisions for each planting period; and

(e) October 15 in Bailey, Castro, Dallam,

Deaf Smith, Floyd, Gains, Hale, Hartley,

Lamb, Parmer, Swisher, and Yoakum

Counties, Texas; Delaware; Maryland; New

Jersey; and New Mexico.

10. Causes of Loss.

(a) In accordance with the provisions of

section 12 of the Basic Provisions, insurance

is provided only against the following causes

of loss which occur within the insurance

period:

(1) Adverse weather conditions;

(2) Fire;

(3) Insects, but only if sufficient and proper

pest control measures are used;

(4) Plant disease, but only if sufficient and

proper disease control measures are used;

(5) Wildlife;

(6) Earthquake;

(7) Volcanic eruption; or

(8) Failure of the irrigation water supply,

if caused by an insured peril that occurs

during the insurance period (see section 10(a)

(1) through (7)).

(b) In addition to the causes of loss not

insured against as contained in section 12 of

the Basic Provisions, we will not insure

against any loss of production due to:

(1) Damage that occurs or becomes evident

after the end of the insurance period,

including, but not limited to, damage that

occurs after potatoes have been placed in

storage; or

(2) Causes, such as freeze after certain

dates, as limited by the Special Provisions.

11. Duties in the Event of Damage or Loss.

(a) In accordance with the requirements of

section 14 of the Basic Provisions, you must

leave representative samples at least 10 feet

wide and extending the entire length of each

field in the unit if you are going to destroy

any acreage of the insured crop that will not

be harvested.

(b) We must be given the opportunity to

perform a grade inspection on the production

from any unit for which you have given

notice of damage.

12. Settlement of Claim.

(a) We will determine your loss on a unit

basis. In the event you are unable to provide

separate acceptable production records:

(1) For any optional units, we will combine

all optional units for which acceptable

production records were not provided; and

(2) For any basic units, we will allocate any

commingled production to such units in

proportion to our liability on the harvested

acreage for the units.

(b) In the event of loss or damage covered

by this policy, we will settle your claim by:

(1) Multiplying the insured acreage by its

respective production guarantee (if there is

unharvested acreage in the unit, the

harvested and unharvested acreage will be

determined separately);

(2) Multiplying each result in section

12(b)(1) by the respective price election (the

price election may be limited as specified in

section 3.);

(3) Totaling the results of section 12(b)(2);

(4) Multiplying the total production to be

counted of each type, if applicable, (see

section 12(d)) by the respective price

election;

(5) Totaling the results of section 12(b)(4);

(6) Subtracting the results of section

12(b)(5) from the result in section 12(b)(3);

and

(7) Multiplying the result of section

12(b)(6) by your share.

For example:

You have a 100 percent share in 100

harvested acres of potatoes in the unit, with

a guarantee of 150 hundredweight per acre

and a price election of $4.00 per

hundredweight. You are only able to harvest

10,000 hundredweight. Your indemnity

would be calculated as follows:

(1) 100 acres × 150 hundredweight=15,000

hundredweight guarantee;

(2) 15,000 hundredweight × $4.00 price

election=$60,000.00 value of guarantee;

(4) 10,000 hundredweight × $4.00 price

election=$40,000.00 value of production to

count;

(6) $60,000.00¥$40,000.00=$20,000.00

loss; and

(7) $20,000.00×100 percent=$20,000.00

indemnity payment.

You also have a 100 percent share in 100

unharvested acres of potatoes in the same

unit, with a guarantee of 150 hundredweight

per acre and a price election of $3.20 per
Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations 65335

hundredweight. (The price election for

unharvested acreage is 80.0 percent of your

elected price election ($4.00×0.80=$3.20.)

This unharvested acreage was appraised at 35

hundredweight per acre for a total of 3,500

hundredweight as production to count. Your

total indemnity for the harvested and

unharvested acreage would be calculated as

follows:

(1) 100 acres × 150 hundredweight =

15,000 hundredweight guarantee for the

harvested acreage, and

100 acres × 150 hundredweight = 15,000

hundredweight guarantee for the unharvested

acreage;

(2) 15,000 hundredweight guarantee ×

$4.00 price election = $60,000.00 value of

guarantee for the harvested acreage, and

15,000 hundredweight guarantee × $3.20

price election = $48,000.00 value of

guarantee for the unharvested acreage;

(3) $60,000.00 + $48,000.00 = $108,000.00

total value of guarantee;

(4) 10,000 hundredweight × $4.00 price

election = $40,000.00 value of production to

count for the harvested acreage, and

3500 hundredweight × $3.20 = $11,200.00

value of production to count for the

unharvested acreage;

(5) $40,000.00 + $11,200.00 = $51,200.00

total value of production to count;

(6) $108,000.00 ¥ $51,200 = $56,800.00

loss; and

(7) $56,800.00 loss × 100 percent =

$56,800.00 indemnity payment.

(c) The extent of any quality loss must be

determined based on samples obtained no

later than the time potatoes are placed in

storage, if the production is stored prior to

sale, or the date they are delivered to a buyer,

wholesaler, packer, broker, or other handler

if production is not stored.

(d) The total production to count (in

hundredweight) from all insurable acreage on

the unit will include:

(1) All appraised production as follows:

(i) Not less than the production guarantee

per acre for acreage:

(A) That is abandoned;

(B) That is put to another use without our

consent;

(C) That is damaged solely by uninsured

causes;

(D) From which any production is

disposed of without a grade inspection; or

(E) For which you fail to provide

acceptable production records;

(ii) Production lost due to uninsured

causes;

(iii) Production lost due to harvest prior to

full maturity. Production to count from such

acreage will be determined by increasing the

amount of harvested production by 2 percent

per day for each day the potatoes were

harvested prior to the date the potatoes

would have reached full maturity. The date

the potatoes would have reached full

maturity will be considered to be 45 days

prior to the calendar date for the end of the

insurance period, unless otherwise specified

in the Special Provisions. This adjustment

will not be made if the potatoes are damaged

by an insurable cause of loss, and leaving the

crop in the field would either reduce

production or decrease quality.

(iv) Unharvested production (the value of

unharvested production will be calculated

using the reduced price election determined

in section 3(b) and unharvested production

may be adjusted in accordance with section

12(e)); and

(v) Potential production on insured acreage

that you intend to put to another use or

abandon, if you and we agree on the

appraised amount of production. Upon such

agreement, the insurance period for that

acreage will end when you put the acreage

to another use or abandon the crop. If

agreement on the appraised amount of

production is not reached:

(A) If you do not elect to continue to care

for the crop, we may give you consent to put

the acreage to another use if you agree to

leave intact, and provide sufficient care for,

representative samples of the crop in

locations acceptable to us (The price used to

determine the amount of any indemnity will

be limited as specified in section 3 even if

the representative samples are harvested. The

amount of production to count for such

acreage will be based on the harvested

production or appraisals from the samples at

the time harvest should have occurred. If you

do not leave the required samples intact, or

fail to provide sufficient care for the samples,

our appraisal made prior to giving you

consent to put the acreage to another use will

be used to determine the amount of

production to count); or

(B) If you elect to continue to care for the

crop, the amount of production to count for

the acreage will be the harvested production,

or our reappraisal if additional damage

occurs and the crop is not harvested; and

(2) All harvested production from the

insurable acreage determined in accordance

with section 12(e).

(e) With the exception of production with

external defects, only marketable lots of

mature potatoes will be production to count

for loss adjustment purposes. Production not

meeting the standards for grading U.S. No. 2

due to external defects will be determined on

an individual potato basis for all unharvested

potatoes and for any harvested potatoes if we

determine it is practical to separate the

damaged production. All determinations

must be based upon a grade inspection.

(1) Marketable lots of potatoes will include

any lot of potatoes that is:

(i) Stored;

(ii) Sold as seed;

(iii) Sold for human consumption; or

(iv) Harvested and not sold or that is

appraised if such lot meets the standards for

grading U.S. No. 2 or better on a sample

basis.

(2) Marketable lots will also include any

potatoes that we determine:

(i) Could have been sold for seed or human

consumption in the general marketing area;

(ii) Were not sold as a result of uninsured

causes including, but not limited to, failure

to meet chipper or processor standards for fry

color or specific gravity; or

(iii) Were disposed of without our prior

written consent and such disposition

prevented our determination of

marketability.

(3) Unless included in section 12(e) (1) or

(2), a potato lot will not be considered

marketable if, due to insurable causes of

damage, it:

(i) Is partially damaged, and is salvageable

only for starch, alcohol, or livestock feed;

(ii) Is left unharvested and does not meet

the standards for grading U.S. No. 2 or better

due to internal defects; or

(iii) does not meet the standards for

grading U.S. No. 2 or better due to external

defects, is harvested, and it is not practical

to separate the damaged production.

13. Prevented Planting.

Your prevented planting coverage will be

25 percent of your production guarantee for

timely planted acreage. If you have limited or

additional coverage, as specified in 7 CFR

part 400, subpart T, and pay an additional

premium, you may increase your prevented

planting coverage to a level specified in the

actuarial documents.

7. Section 457.143 is added to read as

follows:

§ 457.143 Northern Potato Crop

Insurance—Quality Endorsement.

The Northern Potato Crop Insurance

Quality Endorsement provisions for the

1998 and succeeding years are as

follows:

FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

Reinsured policies:

(Appropriate title for insurance provider)

Both FCIC and reinsured policies:

Northern Potato Crop Insurance Quality

Endorsement

1. In return for payment of the additional

premium designated in the actuarial

documents, this endorsement is attached to

and made part of your Northern Potato Crop

Provisions subject to the terms and

conditions described herein. In the event of

a conflict between the Northern Potato Crop

Provisions and this endorsement, this

endorsement will control.

2. You must elect this endorsement on or

before the sales closing date for the initial

crop year in which you wish to insure your

potatoes under this endorsement. This

endorsement will continue in effect until

canceled. It may be canceled by either you

or us for any succeeding crop year by giving

written notice to the other party on or before

the cancellation date.

3. All acreage of potatoes insured under the

Northern Potato Crop Provisions will be

insured under this endorsement except:

(a) Any acreage specifically excluded by

the actuarial documents; and

(b) Any acreage grown for seed.

4. We will adjust production to count

(determined in accordance with section 15 of

the Basic Provisions and section 11 of the

Northern Potato Crop Provisions) from (1)

unharvested acreage; (2) harvested acreage

that is stored after a grade inspection; or (3)

that is marketed after a grade inspection; and

that contains potatoes that grade less than

U.S. No. 2 due to:

(a) Internal defects (the number of potatoes

with such defects must be in excess of the

tolerance allowed for U.S. No. 2 grade

potatoes on a lot basis and must not be

separable from undamaged production using
65336 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations

methods used by the potato packers or

processors to whom you normally deliver

your potato production), will be adjusted as

follows:

(1) For potatoes for which a price is agreed

upon in writing between you and a buyer

within 21 days (60 days if the Northern

Potato Crop Insurance Storage Coverage

Endorsement is applicable) of the end of the

insurance period, or that are delivered to a

buyer within 21 days (60 days if the Northern

Potato Crop Insurance Storage Coverage

Endorsement is applicable) of the end of the

insurance period, by multiplying the

production to count by the factor (not to

exceed 1.0) that results from dividing the

price received or that will be received per

hundredweight of the damaged production

by the highest available price election. This

method of adjustment will not be performed

if it has already been performed under the

terms of section 11(g)(2)(i) of the Northern

Potato Crop Insurance Provisions. If

production is sold for a price lower than the

value appropriate to and representative of the

local market, we will determine the value of

the production based on the price you could

have received in the local market.

(2) For harvested potatoes discarded within

21 days (60 days if the Northern Potato Crop

Insurance Storage Coverage Endorsement is

applicable) of the end of the insurance period

and appraised unharvested production that

could:

(i) Not have been sold, the production to

count will be zero; or

(ii) Have been sold, the production to

count will be determined in accordance with

section 4(a)(1). The price used for the

damaged production will be the price you

could have received in the local market.

(3) For potatoes for which a price is not

agreed upon between you and a buyer within

21 days (60 days if the Northern Potato Crop

Insurance Storage Coverage Endorsement is

applicable) of the end of the insurance period

and that remain in storage 22 or more days

(61 or more days if the Northern Potato Crop

Insurance Storage Coverage Endorsement is

applicable) after the end of the insurance

period, production to count will be

determined in accordance with section 4(b).

(b) Factors other than those specified in

section 4(a), by multiplying by a factor (not

to exceed 1.0) that is determined as follows:

(1) The combined weight of sampled

potatoes that grade U.S. No. 2 or better and

that are damaged by freeze or tuber rot will

be divided by the total sample weight; and

(2) The percentage determined in section

4(b)(1) above will be divided by the

applicable percentage factor determined in

accordance with section 9.

5. Potatoes harvested or appraised prior to

full maturity that do not grade U.S. No. 2 due

solely to size will be considered to have met

U.S. No. 2 standards unless the potatoes are

damaged by an insurable cause of loss and

leaving the crop in the field would either

reduce production or decrease quality.

6. Production to count for potatoes

destroyed, stored or marketed without a

grade inspection will be 100 percent of the

gross weight of such potatoes.

7. All determinations must be based upon

a grade inspection.

8. The actuarial documents may provide

‘‘U.S. No. 1’’ in place of ‘‘U.S. No. 2’’ as used

in this endorsement. If both U.S. No. 1 and

2 are available in the actuarial documents,

you may elect U.S. No. 1 or 2 by potato type

or group, if separate types or groups are

specified in the Special Provisions.

9. Percentage factor means the historical

average percentage of potatoes grading U.S.

No. 2 or better, by type, determined from

your records. If at least 4 continuous years of

records are available, the percentage factor

will be the simple average of the available

records not to exceed 10 years. If less than

four years of records are available, the

percentage factor will be determined based

on a combination of your records and the

percentage factor contained in the Special

Provisions.

8. Section 457.144 is added to read as

follows:

§ 457.144 Northern Potato Crop

Insurance—Processing Quality

Endorsement

The Northern Potato Crop Insurance

Processing Quality Endorsement

provisions for the 1998 and succeeding

crop years are as follows:

FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

Reinsured policies:

(Appropriate title for insurance provider)

Both FCIC and reinsured policies:

Northern Potato Crop Insurance Processing

Quality Endorsement

1. In return for payment of the additional

premium designated in the actuarial

documents, this endorsement is attached to

and made part of your Northern Potato Crop

Provisions and Quality Endorsement subject

to the terms and conditions described herein.

In the event of a conflict between the

Northern Potato Crop Provisions or Quality

Endorsement and this endorsement, this

endorsement will control.

2. You must have a Northern Potato

Quality Endorsement in place and elect this

endorsement on or before the sales closing

date for the initial crop year in which you

wish to insure your potatoes under this

endorsement. This endorsement may be

canceled by either you or us for any

succeeding crop year by giving written notice

to the other party on or before the

cancellation date.

3. All terms of the Northern Potato Quality

Endorsement not modified by this

endorsement will be applicable to acreage

covered under this endorsement.

4. A processor contract must be executed

with a potato processor for the potato types

insured under this endorsement and a copy

submitted to us on or before the acreage

reporting date for potatoes. If you elect this

endorsement, all insurable acreage of

production under contract with the processor

must be insured under this endorsement.

5. When the processor contract requires the

processor to purchase a stated amount of

production, rather than all of the production

from a stated number of acres, the insurable

acreage will be determined by dividing the

stated amount of production by the approved

yield for the acreage. The number of acres

insured under this endorsement will not

exceed the actual number of acres planted to

the potato types and which are needed to

fulfill the contract.

6. In lieu of the provisions contained in

section 4 of the Northern Potato Quality

Endorsement, production that is rejected by

the processor will be adjusted as follows:

Production to count (determined in

accordance with section 15 of the Basic

Provisions and section 11 of the Northern

Potato Crop Provisions) from (1) unharvested

acreage; (2) harvested acreage that is stored

after a grade inspection; or (3) that is

marketed after a grade inspection; and that

contains potatoes that:

(a) Grade less than U.S. No. 2 due to

internal defects, a specific gravity lower than

the lesser of 1.074 or the minimum

acceptable amount specified in the processor

contract, or a fry color of No. 3 or darker due

to either sugar exceeding 10 percent or sugar

ends exceeding 19 percent (the number of

potatoes with such defects must be in excess

of the tolerance allowed for U.S. No. 2 grade

potatoes on a lot basis and must not be

separable from undamaged production using

methods used by the processors to which you

normally deliver your potato production),

will be adjusted as follows:

(1) For potatoes for which a price is agreed

upon in writing between you and a buyer

within 21 days (60 days if the Northern

Potato Crop Insurance Storage Coverage

Endorsement is applicable) of the end of the

insurance period, or that are delivered to a

buyer within 21 days (60 days if the Northern

Potato Crop Insurance Storage Coverage

Endorsement is applicable) of the end of the

insurance period, by multiplying the

production to count by the factor (not to

exceed 1.0) that results from dividing the

price received or that will be received per

hundredweight of the damaged production

by the highest available price election. This

method of adjustment will not be performed

if it has already been performed under the

terms of section 11(g)(2)(i) of the Northern

Potato Crop Insurance Provisions. If

production is sold for a price lower than the

value appropriate and representative of the

local market, we will determine the value of

the production based on the price you could

have received in the local market.

(2) For harvested potatoes discarded within

21 days (60 days if the Northern Potato Crop

Insurance Storage Coverage Endorsement is

applicable) of the end of the insurance period

and appraised unharvested production that

could:

(i) Not have been sold, the production to

count will be zero; or

(ii) Have been sold, the production to

count will be determined in accordance with

section 6(a)(1). The price used for the

damaged production will be the price you

could have received in the local market.

(3) For potatoes for which a price is not

agreed upon in writing between you and a

buyer within 21 days (60 days if the Northern

Potato Crop Insurance Storage Coverage

Endorsement is applicable) of the end of the

insurance period and that remain in storage
Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations 65337

22 or more days (61 or more days if the

Northern Potato Crop Insurance Storage

Coverage Endorsement is applicable) after the

end of the insurance period, production to

count will be determined in accordance with

section 6(b).

(b) Grade less than U.S. No. 2 due to factors

other than those specified in section 6(a) will

be multiplied by a factor (not to exceed 1.0)

that is determined as follows:

(1) The combined weight of sampled

potatoes that grade U.S. No. 2 or better and

that are damaged by freeze or tuber rot will

be divided by the total sample weight; and

(2) The percentage determined in section

6(b)(1) above will be divided by the

applicable percentage factor determined in

accordance with section 10.

7. All grade determinations for the

purposes of this endorsement will be made

using the United States Standards for Grades

of Potatoes for Processing or Chipping.

8. All determinations must be based upon

a grade inspection.

9. The actuarial documents may provide

‘‘U.S. No. 1’’ in place of ‘‘U.S. No. 2’’ as used

in this endorsement. If both U.S. No. 1 and

2 are available in the actuarial documents,

you may elect U.S. No. 1 or 2 by potato type

or group, if separate types or groups are

specified in the Special Provisions.

10. Percentage factor means the historical

average percentage of potatoes grading U.S.

No. 2 or better, by type, determined from

your records. If at least 4 continuous years of

records are available, the percentage factor

will be the simple average of the available

records not to exceed 10 years. If less than

four years of records are available, the

percentage factor will be determined based

on a combination of your records and the

percentage factor contained in the Special

Provisions.

9. Section 457.145 is added to read as

follows:

§ 457.145 Potato Crop Insurance—

Certified Seed Endorsement.

The Potato Crop Insurance Certified

Seed Endorsement provisions for the

1998 and succeeding years are as

follows:

FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

Reinsured policies:

(Appropriate title for insurance provider)

Both FCIC and reinsured policies:

Potato Crop Insurance Certified Seed

Endorsement

1. In return for payment of the additional

premium designated in the actuarial

documents, this endorsement is attached to

and made part of your Northern Potato Crop

Provisions subject to the terms and

conditions described herein. In the event of

a conflict between the Northern Potato

Provisions and this endorsement, this

endorsement will control.

2. For the purpose of this endorsement, the

term ‘‘potato certified seed program’’ means

the state program administered by the public

agency responsible for the seed certification

process within the state in which the seed is

produced.

3. You must elect this endorsement on or

before the sales closing date for the initial

crop year you wish to insure your potatoes

under this endorsement. This endorsement

will continue in effect until canceled. It may

be canceled by either you or us for any

succeeding crop year by giving written notice

to the other party on or before the

cancellation date.

4. All potatoes grown on insurable acreage

and that are entered into the potato seed

certification program administered by the

state in which the seed is grown must be

insured unless limited by section 5 below.

5. The certified seed acreage you insure in

the current crop year cannot be greater than

125 percent of your average number of acres

entered into and passing certification in the

potato certified seed program in the three

previous calendar years unless a written

agreement provides otherwise. If you enter

more than this number of acres into the

certification program, your certified seed

production guarantee for the current crop

year will be reduced as follows:

(a) Multiply the average number of your

acres entered into and passing certification in

the potato certified seed program the 3

previous calendar years by 1.25 and divide

this result by the number of acres grown by

you for certified seed in the current crop

year; and

(b) Multiply the result of section 5(a) (not

to exceed 1.0) by the production guarantee

for certified seed for the current crop year.

6. You must provide acceptable records of

your certified seed potato acreage and

production for the previous three years.

These records must clearly indicate the

number of your acres entered into the potato

seed certification program administered by

the state in which the seed is grown.

7. All potatoes insured for certified seed

production must be produced and managed

in accordance with standards, practices, and

procedures required for certification by the

state’s certifying agency and applicable

regulations.

8. If, due to insurable causes occurring

within the insurance period, potato

production does not qualify as certified seed

on any insured certified seed potato acreage

within a unit, we will pay you the dollar

amount per hundredweight contained in the

Special Provisions for that purpose,

multiplied by your production guarantee for

such acreage, multiplied by your share. Any

production that does not qualify as certified

seed because of varietal mixing or your

failure to follow the standard practices and

procedures required for certification will be

considered as lost due to uninsured causes.

9. You must notify us of any loss under

this endorsement not later than 14 days after

you receive notice from the state certification

agency that any acreage has failed

certification.

10. Section 457.146 is added to read

as follows:

§ 457.146 Northern Potato Crop

Insurance—Storage Coverage

Endorsement.

The Northern Potato Crop Insurance

Storage Coverage Endorsement

provisions for the 1998 and succeeding

years are as follows:

FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

Reinsured policies:

(Appropriate title for insurance provider)

Both FCIC and reinsured policies:

Northern Potato Crop Insurance Storage

Coverage Endorsement

1. In return for payment of the required

additional premium as contained in the

actuarial documents, this endorsement is

attached to and made part of your Northern

Potato Crop Provisions subject to the terms

and conditions described herein. In the event

of a conflict between the Northern Potato

Crop Provisions and this endorsement, this

endorsement will control.

2. You must elect this endorsement on or

before the sales closing date for the initial

crop year in which you wish to insure your

potatoes under this endorsement. This

endorsement will continue in effect until

canceled. It may be canceled by either you

or us for any succeeding crop year by giving

written notice to the other party on or before

the cancellation date.

3. Potato production grown under a

contract that requires the production to be

delivered to a buyer within three days of

harvest will not be insured under this

endorsement. When such contract requires

delivery of a stated amount of production,

rather than all of the production from a stated

amount of acres, the number of acres not

insured under this endorsement will be

determined by dividing the stated amount of

production by the approved yield for the

acreage. All other potato production insured

under the Northern Potato Crop Provisions

must be insured under this endorsement

unless the Special Provisions allow you to

exclude certain potato varieties, types, or

groups from this endorsement, and you elect

to exercise this option. If you elect this

endorsement, such exclusions must be

shown annually on your acreage report and

will be applicable to all acreage of the

excluded varieties, types, or groups for the

crop year.

4. When production from separate

insurance units, basic or optional, is

commingled in storage, the production to

count for each unit will be allocated pro rata

based on the production placed in storage

from each unit. Such allocation will be

allowed only if verifiable records of

production placed in storage are available by

unit. If you do not have verifiable records, all

units without verifiable records will be

combined in accordance with section 11 of

the Northern Potato Crop Provisions. For

example, if 500 hundredweight from one unit

are commingled with 1,500 hundredweight

from another unit and the production to

count from the stored production is 1,000

hundredweight, 250 hundredweight of
65338 Federal Register / Vol. 62, No. 239 / Friday, December 12, 1997 / Rules and Regulations

production to count will be allocated to the

unit contributing 500 hundredweight and

750 hundredweight to the unit contributing

1500 hundredweight to the stored

production. This provision does not

eliminate or change any other requirement

contained in this policy to provide or

maintain separate records of acreage or

production by unit.

5. The extended coverage provided by this

endorsement will be applicable only if:

(a) Insured potatoes are damaged within

the insurance period by an insured cause

other than freeze that later results in:

(1) Tuber rot as defined in the Northern

Potato Crop Provisions, to the extent that 5.1

percent (by weight) or more of the insured

production is affected;

(2) Internal defects to the extent that such

defects are in excess of the amount allowed

for the U.S. grade standard you elected for

purposes of coverage under the Northern

Potato Crop Insurance Quality Endorsement.

Such defects must not be separable from

undamaged production using methods used

by the packers or processors to which you

normally deliver your potato production.

This coverage is applicable only to

production covered under the Northern

Potato Crop Insurance Quality Endorsement;

or

(3) A specific gravity lower than the lesser

of 1.074 or the minimum acceptable amount

specified in the processor contract, or a fry

color of No. 3 or darker due to either sugar

exceeding 10 percent or sugar ends exceeding

19 percent. This coverage is applicable only

to production covered under the Northern

Potato Crop Insurance Processing Quality

Endorsement.

(b) You notify us within 72 hours of your

initial discovery of any damage that has or

that may later result in the quality

deficiencies specified in section 5(a);

(c) The percentage of production that has

any of the quality deficiencies specified in

section 5(a) is determined no later than 60

days after the end of the insurance period;

and

(d) The potatoes are evaluated and quality

(grade) determinations are made by us, a

laboratory approved by us, or a potato grader

licensed or certified by the applicable State

or the United States Department of

Agriculture, in accordance with the United

States Standards for Grades of Potatoes.

Samples of damaged production must be

obtained by us or party approved by us prior

to the sale or disposal of any lot of potatoes.

Or, if production is not sold or disposed of

within 60 days of the end of the insurance

period, samples must be obtained within 60

days of the end of the insurance period.

Signed in Washington, D.C., on December

5, 1997.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance

Corporation.

[FR Doc. 97–32491 Filed 12–11–97; 8:45 am]

BILLING CODE 3410–08–P

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 437 and 457

Sweet Corn Insurance Regulations;

and Common Crop Insurance

Regulations, Processing Sweet Corn

Crop Insurance Provisions

AGENCY: Federal Crop Insurance

Corporation, USDA.

ACTION: Final rule.

SUMMARY: The Federal Crop Insurance

Corporation (FCIC) finalizes specific

crop provisions for the insurance of

processing sweet corn. The provisions

will be used in conjunction with the

Common Crop Insurance Policy Basic

Provisions, which contain standard

terms and conditions common to most

crops. The intended effect of this action

is to provide policy changes to better

meet the needs of the insured, include

the current sweet corn crop insurance

regulations with the Common Crop

Insurance Policy for ease of use and

consistency of terms, and to restrict the

effect of the current sweet corn crop

insurance regulations to the 1997 and

prior crop years.

DATES: Effective December 12, 1997.

FOR FURTHER INFORMATION CONTACT:

Stephen Hoy, Insurance Management

Specialist, Research and Development,

Product Development Division, Federal

Crop Insurance Corporation, United

States Department of Agriculture, 9435

Holmes Road, Kansas City, MO 64131,

telephone (816) 926–7730.

SUPPLEMENTARY INFORMATION:

Executive Order No.12866

The Office of Management and Budget

(OMB) has determined this rule to be

exempt for the purposes of Executive

Order No. 12866, and, therefore, this

rule has not been reviewed by OMB.

Paperwork Reduction Act of 1995

Pursuant to the Paperwork Reduction

Act of 1995 (44 U.S.C. 3507), those

collections of information have been

approved by the Office of Management

and Budget (OMB) under control

number 0563–0053.

Unfunded Mandates Reform Act of

1995

Title II of the Unfunded Mandates

Reform Act of 1995 (UMRA), Pub. L.

104–4, establishes requirements for

Federal agencies to assess the effects of

their regulatory actions on State, local,

and tribal governments and the private

sector. This rule contains no Federal

mandates (under the regulatory

provisions of title II of the UMRA) for

State, local, and tribal governments or

the private sector. Therefore, this rule is

not subject to the requirements of

sections 202 and 205 of the UMRA.

Executive Order No. 12612

It has been determined under section

6(a) of Executive Order No. 12612,

Federalism, that this rule does not have

sufficient federalism implications to

warrant the preparation of a Federalism

Assessment. The provisions contained

in this rule will not have a substantial

direct effect on States or their political

subdivisions, or on the distribution of

power and responsibilities among the

various levels of government.

Regulatory Flexibility Act

This regulation will not have a

significant economic impact on a

substantial number of small entities.

The amount of work required of

insurance companies will not increase

because the information used to

determine eligibility is already

maintained at their office and the other

information required is already being

gathered as a result of the present

policy. No additional actions are

required as a result of this action on the

part of either the producer or the

reinsured company. Additionally, the

regulation does not require any action

on the part of the small entities than is

required on the part of the large entities.

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 No. 12372

This program is not subject to the

provisions of Executive Order No.

12372, which require intergovernmental

consultation with State and local

officials. See the Notice related to 7 CFR

part 3015, subpart V, published at 48 FR

29115, June 24, 1983.

Executive Order No. 12988

This final rule has been reviewed in

accordance with Executive Order No.

12988 on civil justice reform. The

provisions of this rule will not have a

retroactive effect. The provisions of this

rule will preempt State and local laws

to the extent such State and local laws

are inconsistent herewith. The

administrative appeal provisions

published at 7 CFR part 11 must be