[Federal Register Volume 83, Number 158 (Wednesday, August 15, 2018)]
[Rules and Regulations]
[Pages 40433-40438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17554]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

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Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / 
Rules and Regulations

[[Page 40433]]



DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

9 CFR Part 53

[Docket No. APHIS-2015-0061]
RIN 0579-AE14


Conditions for Payment of Highly Pathogenic Avian Influenza 
Indemnity Claims

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Final rule.

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SUMMARY: We are adopting as a final rule, with changes, an interim rule 
that amended the regulations pertaining to certain diseases of 
livestock and poultry to specify conditions for payment of indemnity 
claims for highly pathogenic avian influenza (HPAI). The interim rule 
provided a formula allowing us to split such payments between poultry 
and egg owners and parties with which the owners enter into contracts 
to raise or care for the eggs or poultry based on the proportion of the 
production cycle completed. That action was necessary to ensure that 
all contractors are compensated appropriately. The interim rule also 
clarified an existing policy regarding the payment of indemnity for 
eggs destroyed due to HPAI and required a statement from owners and 
contractors, unless specifically exempted, indicating that at the time 
of detection of HPAI in their facilities, they had in place and were 
following a biosecurity plan aimed at keeping HPAI from spreading to 
commercial premises.

DATES: Effective on August 15, 2018, we are adopting as a final rule 
the interim rule published at 81 FR 6745-6751, on February 9, 2016. The 
amendments in this final rule are effective on September 14, 2018.

FOR FURTHER INFORMATION CONTACT: Dr. Denise Brinson, Senior 
Coordinator, National Poultry Improvement Plan, VS, APHIS, 1506 
Klondike Road, Suite 101, Conyers, GA 30094-5104; (770) 922-3496.

SUPPLEMENTARY INFORMATION: 

Background

    In an interim rule \1\ effective and published in the Federal 
Register on February 9, 2016 (81 FR 6745-6751, Docket No. APHIS-2015-
0061), we amended the regulations pertaining to certain diseases of 
livestock and poultry to specify conditions for payment of indemnity 
claims for highly pathogenic avian influenza (HPAI). The interim rule 
provided a formula allowing us to split such payments between poultry 
and egg owners and parties with which the owners enter into contracts 
to raise or care for the eggs or poultry based on the proportion of the 
production cycle completed. That action was necessary to ensure that 
all contractors are compensated appropriately. The interim rule also 
provided for the payment of indemnity for eggs required to be destroyed 
due to HPAI, thus clarifying an existing policy. Finally, the interim 
rule required owners and contractors, unless specifically exempted, to 
provide a statement that at the time of detection of HPAI in their 
facilities, they had in place and were following a biosecurity plan 
aimed at keeping HPAI from spreading to commercial premises.
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    \1\ To view the interim rule, supporting document, and the 
comments we received, go to http://www.regulations.gov/#!docketDetail;D=APHIS-2015-0061.
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    Comments on the interim rule were required to be received on or 
before April 11, 2016. We received 18 comments by that date. They were 
from industry stakeholders, an animal welfare organization, and 
individuals. The issues raised by the commenters are discussed below.

Apportionment Formula

    A number of commenters expressed concerns about the methodology set 
out by the interim rule for determining how to apportion funds between 
owner and contractor. These concerns mostly pertained to equitability 
and transparency, with some addressing specific sectors of the poultry 
industry.
    Several commenters stated that the formula is flawed because it 
effectively apportions zero value to the preparatory work done by the 
contractor prior to the beginning of the production cycle. According to 
the commenters, contractors incur costs prior to receiving the birds, 
e.g., for bedding, fuel, and the labor required to prepare the 
facilities. An indemnity payment, even if made early in the production 
cycle, may not be sufficient for many contractors to recover these up-
front costs.
    The Animal Health Protection Act (7 U.S.C. 8301) authorizes the 
Animal and Plant Health Inspection Service (APHIS) to make payments for 
birds destroyed due to HPAI based on the fair market value of the 
birds. While owners and contractors may have additional costs 
associated with the raising of the birds, the determination of fair 
market value accounts for the production practices and the inputs 
necessary to raise the species of bird. The Animal Health Protection 
Act does not, however, authorize us to cover all losses from HPAI, so 
costs incurred for certain supplies and labor performed prior to 
confirmation of disease may not be covered.
    One of the commenters cited above further stated that, due to the 
initial costs contractors incur, losses for a contractor resulting from 
an outbreak may exceed the value of the flock. In the commenter's view, 
the distribution formula set out in the February 2016 interim rule does 
not accurately reflect the relative impacts of an HPAI outbreak on 
owner and contractor. The commenter recommended that, in determining 
the value of the loss to the contractor, APHIS should use a 5-flock 
average for each impacted contractor operation, based on the settlement 
sheets provided by the owner to the contractor.
    The February 2016 interim rule set out a formula whereby the 
apportionment of indemnity payments to owners and contractors was based 
on the duration in days of the contract, as signed prior to the disease 
outbreak. The interim rule did include a provision, however, stating 
that if determining the length of service contract is impractical or 
inappropriate, then APHIS may use other methods as deemed appropriate. 
This provision allows APHIS, when appropriate, to use previous flock 
averages to assist in determining the contractor's portion of the 
indemnity payment, as the commenter suggested.
    A commenter stated that contractors' loss of income resulting from 
bird disposal and cleanup following

[[Page 40434]]

depopulation should be factored into our formula. Noting that 
contractors are often directly involved with the bird disposal, the 
commenter stated that affected growers will lose not only the income 
from the flock affected by and destroyed because of HPAI, but also 
income from one or more flocks that cannot be raised on the premises 
due to the shutdown time required. While such a shutdown will also 
impact the owners somewhat, they can minimize economic losses by 
increasing placement with unaffected contractors. The contractor, who 
has no such recourse, therefore would bear the greater impact from such 
a shutdown, a difference that should be reflected in the apportionment 
of indemnity payments.
    Under the Animal Health Protection Act, APHIS can make indemnity 
payments of up to 100 percent of the fair market value for live birds 
that must be destroyed because of HPAI. Further, the Act also 
authorizes APHIS to pay for certain costs associated with cleanup, 
disinfection, and disposal of birds and materials, such as bedding and 
litter, as necessary to eliminate the virus. The regulations in 9 CFR 
53.2 and 53.7 also provide for such payments. While the Animal Health 
Protection Act does not allow APHIS to compensate owners and 
contractors directly for loss of income due to a shutdown of 
operations, the range of activities for which we do pay indemnities 
will go some way towards offsetting such costs.
    Commenters stated that our indemnity apportionment formula should 
take the type and age of the birds into account. A standard cost 
division for all poultry is not equitable, it was suggested, because 
some birds require more of an investment than others. One commenter 
stated that specific provisions should be added to the rule to address 
HPAI losses experienced by breeder hen and pullet contract growers 
because their flocks are kept for much longer durations than broiler 
flocks.
    These comments appear to be directed more toward our methodology 
for determining fair market value of the birds rather than the formula 
we use for apportioning indemnity payments between owners and 
contractors. The former is beyond the scope of the present rulemaking. 
That said, our formulas for determining the fair market value of 
destroyed poultry for the purpose of indemnifying owners and growers 
already take into account such factors as the type, age, and production 
potential of the birds. These formulas, also referred to as appraisal 
calculators, are developed specifically for each segment of the 
industry and species of bird.
    Transparency was another issue raised by the commenters. A 
commenter suggested that we needed to gather more data in order to 
devise a fair method of apportioning indemnity payments between owners 
and contractors. Another commenter suggested that we should update and 
make more transparent our formulas for calculating indemnities.
    We apportion indemnity payments between owner and contractor based 
on the terms of the contract between the two parties and the duration 
of the period during which the contractor possessed the birds or eggs. 
Thus, the amount of the indemnity received by the contractor from APHIS 
will depend largely on the terms of the contract. APHIS does not play a 
role in those contractual arrangements. Our indemnity calculation 
formulas, referred to by the second commenter above, are the means by 
which we determine the fair market value of birds and eggs destroyed 
due to HPAI and, thereby, the total amount of compensation due the 
indemnified party. As we have already noted, addressing these 
calculators is beyond the scope of the current rulemaking; however, the 
calculators are subject to continual review to ensure that the economic 
assumptions on which they are based are correct and that they 
adequately reflect standard industry practices.
    Finally, one commenter stated that APHIS should indemnify farms 
that are not infected with HPAI but are indirectly affected by an HPAI 
outbreak. The commenter suggested that such farms may be affected 
economically by being unable to restock if located in a quarantine or 
control zone.
    The Animal Health Protection Act authorizes APHIS to make payments 
for birds or eggs destroyed due to HPAI based on their fair market 
value. APHIS recognizes that some owners and contractors whose flocks 
do not have HPAI may still have limited ability to place birds or eggs 
due to movement control restrictions and, consequently, may face 
financial hardships. However, the Animal Health Protection Act only 
authorizes payment of indemnity to owners and contract growers of 
diseased birds or eggs that are destroyed and not to owners or 
contractors whose premises were only indirectly impacted.

Biosecurity

    The February 2016 interim rule contained a requirement stating 
that, in order to be eligible to receive indemnity payments, both 
poultry or egg owners and contractors had to provide to APHIS a 
statement that at the time of detection of HPAI in their facilities, 
they had in place and were following a biosecurity plan. A list of 
recommended biosecurity measures was also included, as well as 
exemptions from the biosecurity statement requirement for certain 
relatively small facilities. Some commenters questioned whether the 
requirements were sufficiently stringent overall, while others focused 
more specifically on the exemptions for smaller facilities.
    The various issues raised by these commenters, along with changes 
we are making in response to some comments, are discussed in detail 
below. One change we are making for the sake of clarity is to add a 
definition to Sec.  53.1 of poultry biosecurity plan, which we define 
in this final rule as a document utilized by an owner and/or contractor 
describing the management practices and principles that are used to 
prevent the introduction and spread of infectious diseases of poultry 
at a specific facility.
    One commenter stated that self-certification is not a reliable 
method for ensuring the use of best practices in biosecurity on 
poultry- or egg-producing premises because the self-certifying owners 
and growers will have an economic interest in ensuring their 
certifications. The commenter recommended that APHIS enforce 
biosecurity requirements by conducting unannounced spot inspections 
and, when violations are found, subjecting the violators to serious 
financial consequences.
    We believe the commenter has raised some legitimate concerns about 
the efficacy of self-certification. In this final rule, we are adding 
provisions for verifying that the owner and/or contractor does have a 
biosecurity plan in place and that the plan is, in fact, being 
implemented. Those provisions are discussed in greater detail below.
    Some commenters advocated for more rigorous biosecurity 
requirements. One commenter suggested that even if APHIS declines to do 
targeted inspections, it should at least require that there is a 
biosecurity plan in place prior to any HPAI outbreak or destruction of 
animals. The commenter stated that allowing owners and contractors to 
meet the requirement after an outbreak would provide a huge economic 
incentive to misrepresent the state of biosecurity planning at a 
facility in its attestation. Requiring a biosecurity statement prior to 
an outbreak, on the other hand, would motivate owners and contractors 
to address biosecurity planning earlier. Another commenter suggested 
that facilities subject to the requirement should have had a plan in 
place for 6 months prior to the outbreak,

[[Page 40435]]

have had no lapses during that period, have trained their employees in 
biosecurity, and be liable for penalties for submitting false claims.
    Since the publication of the February 2016 interim rule, we have 
taken steps to strengthen our biosecurity requirements. In a notice \2\ 
published in the Federal Register on May 5, 2017, and effective on July 
5, 2017 (82 FR 21187-21188, Docket No. APHIS-2016-0103), we advised the 
public of our determination to update the National Poultry Improvement 
Plan (NPIP) Program Standards. The NPIP Program Standards is a document 
that provides detailed information on how to meet the requirements 
contained in the NPIP regulations. The NPIP Standards can be amended 
via notice rather than through a lengthy rulemaking process, thereby 
providing us with the flexibility to ensure that program requirements 
remain in sync with current industry practices. The May 2017 final 
notice followed an earlier notice of availability, upon which we did 
not receive any public comments. Among other changes, our updates to 
the NPIP Program Standards included the addition of a set of 14 
biosecurity principles addressing such issues as training and 
biosecurity protocols for farm personnel; maintaining a line of 
separation between the poultry house(s) and the birds inside from any 
potential disease sources; control of birds, rodents, and insects; 
procedures for maintaining clean water supplies; and procedures for 
auditing biosecurity plans. A facility's biosecurity plan must address 
all 14 principles in order to ensure that it complies with our 
requirements.
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    \2\ To view the notices and the Program Standards, go to http://www.regulations.gov/#!docketDetail;D=APHIS-2016-0103.
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    The auditing process that we have developed as one of the 14 
biosecurity principles addresses concerns expressed by the commenters 
regarding the need to have a biosecurity plan in place before a 
facility is affected by HPAI. Facilities will be audited at least once 
every 2 years or a sufficient number of times during that period to 
satisfy their Official State Agency (OSA),\3\ a term we define in 9 CFR 
145.1 and 146.1 as the State authority we recognize as a cooperator in 
the administration of NPIP requirements, that the facility's 
biosecurity plan complies with our 14 biosecurity principles, i.e., 
with the NPIP Standards. The audit will include, but may not be limited 
to, an evaluation of the biosecurity plan itself and documentation 
showing that the plan is being implemented.
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    \3\ We note that the State of Hawaii does not participate in the 
NPIP or have an OSA as defined in Sec. Sec.  145.1 and 146.1. Audits 
on facilities in Hawaii may be performed by APHIS or an APHIS 
representative.
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    To be recognized as compliant with our biosecurity principles and 
eligible for indemnity, owners and/or contractors whose biosecurity 
plans fail the audit described above must have a check audit performed 
by a team appointed by the National NPIP Office and must demonstrate 
they have implemented applicable biosecurity measures.
    The auditing procedures are described in a new paragraph (e) that 
we are adding to Sec.  53.11 in this final rule and in greater detail 
in the NPIP Program Standards.
    A number of commenters opposed exempting smaller facilities from 
the biosecurity certification requirement. It was stated that weak 
biosecurity at a facility of any size may result in the spread of HPAI 
and that some facilities that the interim rule exempted from the 
biosecurity requirement were, in fact, affected during the 2014-2015 
HPAI outbreak. One commenter stated that the flock size thresholds for 
exempted facilities needed to be lowered considerably. According to the 
commenter, the bird density on some of the exempted facilities was 
still high enough to pose a risk of spreading HPAI.
    While it is true that weak biosecurity on a farm of any size could 
lead to spread of disease, the farms that were affected during the 
2014-2015 outbreak were overwhelming large commercial facilities. There 
are approximately 18,900 operations that will be subject to the 
biosecurity statement requirement, out of 233,770 poultry producers in 
the United States. Those 18,900 operations, however, produce or house 
approximately 99 percent of the poultry in the United States. Exempting 
the smaller facilities, therefore, allows us to focus our resources on 
the operations that raise or house 99 percent of the nation's poultry 
supply. While bird density on some smaller operations may be high 
enough to pose a risk of spreading HPAI due to environmental 
contamination when biosecurity is lacking, as noted above, 99 percent 
of the nation's poultry reside and are raised on non-exempt operations. 
Lowering the flock-size threshold would increase the regulatory burden 
on small producers, which were not a major contributing factor in 
disease spread during the 2014-2015 HPAI outbreak. In addition, if the 
small farms participate in the NPIP because they are selling poultry, 
they would have to have a biosecurity plan to comply with the NPIP 
Program Standards.
    In the preamble to February 2016 interim rule, we had stated that 
an additional reason for our focus on large facilities is that their 
operators had suffered the most devastating impacts during the 2014-
2015 outbreak. A commenter disputed that rationale, stating that 
because smaller contractors may have lost their entire flocks to 
depopulation, they may have been affected more adversely than the 
owners with whom they contracted, since the latter may have other, 
unaffected contractors with whom to place their products.
    While the loss of any size flock adversely affects the contractor, 
all flocks that were infected by HPAI during the 2014-2015 outbreak 
were completely depopulated, including those owned by large-scale 
producers. During the 2014-2015 HPAI outbreak, there were 21 infected 
backyard flocks totaling approximately 10,000 birds versus 211 
commercial flocks totaling approximately 50 million birds. In the 
aggregate, then, the impact on large commercial producers was much 
greater.
    Furthermore, in some cases, depopulation may also have greater 
impacts on individual commercial farms than on smaller facilities. 
Smaller flock owners and contractors are more likely to be diversified. 
A small contract grower with 500 birds is unlikely to be able to make a 
living on selling the eggs or the meat from those birds. For that 
reason, he or she may have other occupations or businesses or may raise 
other livestock. Commercial producers, on the other hand, focus on 
raising poultry, so depopulation of their flocks may leave them without 
immediate alternatives.
    A commenter questioned whether removing the exemption for smaller 
facilities would really place an undue regulatory burden on the owners 
and contractors operating such facilities. The commenter suggested that 
due to the lower bird density on smaller facilities, owners and 
contractors on small facilities may have to make fewer adaptations to 
their existing biosecurity procedures than would those on larger ones. 
That being the case, the commenter suggests, our biosecurity 
requirements may not place a greater regulatory burden on smaller 
facilities than on larger ones.
    In our view, the biosecurity requirements included in this final 
rule and the NPIP Program Standards would likely prove more burdensome 
for smaller facilities than for larger ones. Many smaller owners and 
contractors

[[Page 40436]]

raise free-range chickens. To mitigate the chance of exposure of their 
flocks to HPAI and comply with our biosecurity principles, small 
growers and contractors would likely have to construct enclosures to 
prevent exposure to wild birds and waterfowl. With fewer birds on their 
premises, smaller owners and contractors might have to spend more per 
bird to construct such enclosures than would larger ones.

Miscellaneous

    One commenter questioned our justification for publishing an 
interim rule. The commenter stated that we did not provide evidence 
that the Administrative Procedure Act's ``good cause'' exemption from 
the regular notice and comment rulemaking process should have applied 
to the interim rule. In the commenter's view, we did not clearly state 
what public interest was served by our issuing an interim rule on an 
emergency basis rather than a proposed rule followed by a final rule.
    In our view, emergency action was necessary due to the possibility 
of another HPAI outbreak occurring during the spring wild bird 
migration season. In order to prevent the spread of the disease, we 
needed to ensure timely and equable compensation to both owners and 
contractors for flocks destroyed due to HPAI.
    Finally, we are adding a new paragraph (f) to Sec.  53.11, 
describing the notice-based procedure we will use to update the 
biosecurity principles and other sections of the NPIP Program 
Standards. Proposed updates will be announced to the public through a 
Federal Register notice in accordance with the NPIP regulations in 9 
CFR 147.53(e).
    Therefore, for the reasons given in the interim rule and in this 
document, we are adopting the interim rule as a final rule, with the 
changes discussed in this document.
    This final rule also affirms the information contained in the 
interim rule concerning Executive Orders 12372 and 12988.

Executive Orders 12866, 13563, 13771 and Regulatory Flexibility Act

    This action has been determined to be significant for the purposes 
of Executive Order 12866 and, therefore, has been reviewed by the 
Office of Management and Budget.
    We have prepared an economic analysis for this rule. The economic 
analysis provides a cost-benefit analysis, as required by Executive 
Orders 12866 and 13563, which direct agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, and equity). Executive Order 13563 emphasizes the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility. The economic analysis 
is summarized below. Copies of the full analysis are available on the 
Regulations.gov website or by contacting the person listed under FOR 
FURTHER INFORMATION CONTACT.
    This final rule is considered an Executive Order 13771 regulatory 
action. In accordance with guidance on complying with Executive Order 
13771, the single primary estimate of the cost of this rule is $9.3 
million, the mid-point estimate annualized in perpetuity using a 7 
percent discount rate. Details on the estimated costs of this final 
rule can be found in the rule's economic analysis.

Regulatory Flexibility Act

    APHIS is adopting as a final rule, with changes, an interim rule 
that amended the regulations pertaining to certain diseases of 
livestock and poultry to specify conditions for payment of indemnity 
claims for HPAI. The interim rule provided a formula allowing us to 
split such payments between poultry and egg owners and parties with 
which the owners enter into contracts to raise or care for the eggs or 
poultry based on the proportion of the production cycle completed. The 
interim rule also clarified an existing policy regarding the payment of 
indemnity for eggs destroyed due to HPAI. The interim rule also 
required a statement from owners (including independent growers) and 
contractors (contract growers), unless exempt, indicating that at the 
time of detection of HPAI in their facilities, they had in place and 
were following a biosecurity plan aimed at keeping HPAI from spreading 
to commercial premises. Under this final rule, we are removing the 
self-certification and adding provisions for verifying that the owner 
and/or contractor does have a biosecurity plan in place and that the 
plan is, in fact, being implemented.
    At the time of the most recent outbreak, the regulations in part 53 
did not specify that the indemnity be split between owners and 
contractors. When APHIS pays to compensate owners and contractors for 
losses, that compensation should be distributed to parties who suffer 
losses based on the terms of the contract. The vast majority of 
contracts are expected to reflect the relative level of inputs or 
investments of the parties who suffer losses.
    Inadequate biosecurity measures may have led to HPAI introduction 
or spread within and among some commercial facilities. Therefore, this 
final rule also requires large owners and contractors to have in place, 
at the time of detection of HPAI, and have been following a poultry 
biosecurity plan that is compliant with the biosecurity standards 
outlined in the NPIP Program Standards, in order to receive 
compensation for claims arising out of the destruction of animals or 
eggs destroyed due to an outbreak of HPAI. Note that the NPIP is a 
cooperative Federal-State-Industry mechanism for controlling certain 
poultry diseases.
    The entities affected by this rule are U.S. facilities primarily 
engaged in breeding, hatching, and raising poultry for meat or egg 
production, and facilities primarily engaged in slaughtering poultry. 
There were about 18,900 farms that would be subject to the provisions 
of this rule in the 2012 Agricultural Census. Almost all commercial 
operations raising broilers are contract growers.<SUP>4 5</SUP>
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    \4\ MacDonald, J.M. Technology, Organization, and Financial 
Performance in U.S. Broiler Production, EIB-126 USDA Economic 
Research Service. June 2014.
    \5\ 2011 USDA Agricultural Resource Management Survey, Version 
4.
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    The United States is the world's largest poultry producer and the 
second-largest egg producer. The combined value of production from 
broilers, eggs, and turkeys, and the value of sales from chickens in 
2016 was $38.7 billion. In 2016, the United States exported poultry 
meat valued at about $3.3 billion. Following the first HPAI findings in 
December 2014, a number of trading partners imposed complete or partial 
bans on shipments of U.S. poultry and poultry products. All but one of 
these restrictions from the 2014-15 outbreak have since been lifted. 
United States poultry and poultry product exports declined by about 31 
percent from 2014 through 2016. Exports in 2017 were at approximately 
the same level as 2016.
    Broilers account for nearly all U.S. chicken consumption. Broiler 
production and processing primarily occurs within highly integrated 
production systems. Owners of the processing facilities also own the 
birds that are processed and contract with growers (contract growers) 
to raise those birds before processing. Expanded broiler production has 
been made possible to a large extent by the vertically integrated 
production system and through the use of production contracts.
    Under the system of production contracts, the contractor normally

[[Page 40437]]

supplies the grow-out house with all the necessary heating, cooling, 
feeding, and watering systems. The contractor also supplies the labor 
needed in growing the birds. The owner normally supplies the chicks, 
feed, veterinary medicines, and transportation. Contractors have 
exclusive contracts with an owner and receive payment for the services 
that they provide, with premiums and discounts tied to the efficiency 
with which feed is converted to live-weight broilers, the minimization 
of mortality, or the number of eggs produced. Specific contract terms 
and the period covered can vary.
    Embedded in the value of a bird at any point in time is the value 
of inputs by both owners and contractors. Contractors' costs are more 
or less fixed and are heavily committed early in the production cycle. 
Prior to the publication of the interim rule, indemnity payments went 
directly to the owner of the birds who, depending on the terms of the 
contractual arrangement, might or might not have compensated the 
contractor. It is important to finalize these regulations to share 
indemnity payments between poultry owners and contractors, both of whom 
have productive assets imbedded in the value of the bird.
    APHIS' determination of the total amount of indemnity will remain 
the same under the rule as before. However, to determine the 
appropriate payment split between owner and contractor, APHIS may have 
to examine contract specifics on a case-by-case basis. This rule does 
not change the total amount of compensation paid in a given situation, 
but will ensure equitable distribution of that compensation between the 
owner and contractor. This rule benefits contractors who otherwise may 
suffer uncompensated economic losses from participating in an 
eradication program.
    This rule also specifies the appropriate reference to eggs and a 
description of the appraisal of the value of eggs destroyed due to 
HPAI, simply clarifying existing practice for the indemnification of 
destroyed eggs and will not change the total amount of any compensation 
paid in a given future situation.
    This final rule requires large owners and contractors to follow 14 
industry-standard biosecurity principles. These principles are laid out 
in the NPIP Program Standards. The vast majority of contractors have 
some level of biosecurity in place on their operations, or were in the 
process of voluntarily adopting biosecurity measures prior to the 
implementation of the interim rule.
    There are approximately 18,900 poultry operations that will be 
subject to this requirement. There will be one-time costs and annual 
costs for some poultry operations associated with this rule. One-time 
costs include the development of a biosecurity plan, and equipment 
purchases for those facilities that need to implement structural 
biosecurity measures in order to be fully compliant with the NPIP 
biosecurity principles. In addition, some producers will incur 
additional recurring biosecurity training costs necessary to be 
compliant with these regulations.
    The biosecurity measures needed on a given operation are specific 
to that operation. The vast majority of operations already have some 
level of biosecurity in place on their operations, as a result of 
contractual obligations, participation in existing government/industry 
programs, compliance with existing regulations, or existing company 
policies, thereby reducing the need for many poultry operations to 
implement such measures from scratch. Most will be able to adhere to 
the NPIP biosecurity principles by making small operational changes and 
identifying and enumerating current standard operating procedures in 
their biosecurity plans. Some poultry operations will have to implement 
new operational or structural biosecurity measures in order to be fully 
compliant with the NPIP biosecurity principles. Based on discussions 
with industry, the measures that are most likely to involve changes for 
poultry operations concern the biosecurity categories of training, 
cleaning and disinfection of equipment, and the treatment of water. For 
the few poultry operations that need additional vehicle cleaning and 
disinfection, we estimate that the total one-time costs for equipment 
will be from about $48,000 to $439,000.
    The vast majority of affected poultry operations have access to 
municipal water or a sufficiently deep well to meet the standards laid 
out in the biosecurity principles. For poultry operations that need to 
treat water we estimate that total one-time costs for equipment will 
range from about $570,000 to $1.1 million. Many operations affected by 
this rule will need to review their existing biosecurity plans and some 
will need to develop new plans. We estimate that if 5 percent of 
affected poultry operations need to develop new biosecurity plans and 
95 percent need to review existing biosecurity plans, the total one-
time cost could be between $1.8 million and $2 million.
    We estimate that the total additional annual biosecurity training 
will cost from about $5.3 million to $9.3 million. In addition, annual 
costs of sanitizers used in vehicle cleaning and disinfection could 
range from about $2,550 to $10,200 in total for those few operations 
needing additional cleaning and disinfection. Annual costs of chemicals 
for water treatment could range from about $164,000 to $328,500 in 
total for those few operations needing water treatment. We estimate 
that the total cost of performing audits of the biosecurity plans at 
all affected facilities will be between $2.8 million and $3.3 million. 
Because these audits will be performed every 2 years, we assume that 
one half of this cost is incurred each year.
    This rule directly benefits poultry operations who otherwise may 
suffer uncompensated economic losses from participating in an HPAI 
eradication program. In addition, the development or revision of 
biosecurity requirements may help to avert future HPAI outbreaks or 
prevent the spread of disease during an outbreak. To the extent that 
the rule contributes to the elimination of HPAI, entities at all levels 
of the poultry industry as well as consumers will benefit over the long 
term.
    The 2015 HPAI outbreak had a substantial impact on the U.S. poultry 
sector. The birds lost during the outbreak accounted for about 12 
percent of the U.S. table-egg laying population and 8 percent of the 
estimated inventory of turkeys grown for meat. Losses in the egg 
sector, including layers and eggs, were estimated at nearly $1.04 
billion. Layers accounted for a large majority of the birds lost due to 
the outbreak with those losses compounded by extensive losses of layer 
pullets, young birds that mature into replacement layers. Turkey losses 
were magnified by the relatively large size of the birds and smaller 
inventory. Almost 600,000 breeding turkeys were lost. Market and 
breeding turkey losses due to the 2015 outbreak were estimated at $530 
million.
    Many destination markets for U.S. poultry commodities levied trade 
restrictions on U.S. poultry exports, distorting markets and 
exacerbating economic losses for all poultry sectors. Although very few 
broilers were affected by the outbreak, trade restrictions decreased 
overseas demand for broiler products and contributed to much lower 2015 
and 2016 broiler prices compared to pre-outbreak levels.
    APHIS paid indemnities for euthanized poultry and destroyed eggs as 
well as paying for the euthanasia, cleaning and disinfection of poultry 
premises and equipment, and testing for the HPAI virus to ensure 
poultry farms can be safely repopulated. In total, the U.S. Department 
of Agriculture spent about $850 million on these activities related to 
the 2015 outbreak.

[[Page 40438]]

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Federal agencies 
to consult and coordinate with Tribes on a government-to-government 
basis on policies that have Tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian Tribes, on the relationship between the Federal Government 
and Indian Tribes or on the distribution of power and responsibilities 
between the Federal Government and Indian Tribes.
    APHIS has assessed the impact of this rule on Indian Tribes and 
determined that this rule does not, to our knowledge, have Tribal 
implications that require Tribal consultation under Executive Order 
13175. If a Tribe requests consultation, APHIS will work with the 
Office of Tribal Relations to ensure meaningful consultation is 
provided where changes, additions and modifications identified herein 
are not expressly mandated by Congress.

Paperwork Reduction Act

    In accordance with section 3507(d) of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501 et seq.), the burden requirements included in 
this final rule will be approved by the Office of Management and Budget 
under control number 0579-0440.

E-Government Act Compliance

    The Animal and Plant Health Inspection Service is committed to 
compliance with the E-Government Act to promote the use of the internet 
and other information technologies, to provide increased opportunities 
for citizen access to Government information and services, and for 
other purposes. For information pertinent to E-Government Act 
compliance related to this rule, please contact Ms. Kimberly Hardy, 
APHIS' Information Collection Coordinator, at (301) 851-2483.

List of Subjects in 9 CFR Part 53

    Animal diseases, Indemnity payments, Livestock, Poultry and poultry 
products.

    Accordingly, the interim rule amending 9 CFR part 53 that was 
published at 81 FR 6745-6751, on February 9, 2016, is adopted as a 
final rule with the following changes:

PART 53--FOOT-AND-MOUTH DISEASE, PLEUROPNEUMONIA, RINDERPEST, AND 
CERTAIN OTHER COMMUNICABLE DISEASES OF LIVESTOCK OR POULTRY

0
1. The authority citation for part 53 continues to read as follows:

    Authority: 7 U.S.C. 8301-8317; 7 CFR 2.22, 2.80, and 371.4.


0
2. Section 53.1 is amended by adding a definition of Poultry 
biosecurity plan in alphabetical order to read as follows:


Sec.  53.1   Definitions.

* * * * *
    Poultry biosecurity plan. A document utilized by an owner and/or 
contractor describing the management practices and principles that are 
used to prevent the introduction and spread of infectious diseases of 
poultry at a specific facility.
* * * * *

0
3. Section 53.10 is amended as follows:
0
a. By removing paragraph (g) introductory text;
0
b. By revising paragraph (g)(1); and
0
c. By adding an OMB citation at the end of the section.
    The revision and addition read as follows:


Sec.  53.10  Claims not allowed.

* * * * *
    (g)(1) Except as provided in paragraph (g)(2) of this section, the 
Department will not allow claims arising out of the destruction of 
animals or eggs destroyed due to an outbreak of highly pathogenic avian 
influenza unless the owner of the animals or eggs and, if applicable, 
any party that enters into a contract with the owner to grow or care 
for the poultry or eggs, had in place, at the time of detection of 
highly pathogenic avian influenza, and was following a poultry 
biosecurity plan that meets the requirements of Sec.  53.11(e).
* * * * *

(Approved by the Office of Management and Budget under control 
number 0579-0440)


0
4. Section 53.11 is amended as follows:
0
a. By adding paragraphs (e) and (f); and
0
b. By adding an OMB citation at the end of the section.
    The additions read as follows:


Sec.  53.11   Highly pathogenic avian influenza; conditions for 
payment.

* * * * *
    (e)(1) The owner and, if applicable, the contractor, unless 
exempted under Sec.  53.10(g)(2), must have a poultry biosecurity plan 
that is approved by the Administrator. Approved biosecurity principles 
are listed in the NPIP Program Standards, as defined in Sec.  147.51 of 
this chapter. Alternative biosecurity principles may also be approved 
by the Administrator in accordance with Sec.  147.53(d)(2) of this 
chapter.
    (2)(i) The biosecurity plan shall be audited at least once every 2 
years or a sufficient number of times during that period to satisfy the 
owner and/or contractor's Official State Agency that the plan is in 
compliance with the biosecurity principles contained in the NPIP 
Program Standards. The audit will include, but may not be limited to, a 
review of the biosecurity plan, as well as documentation that it is 
being implemented.
    (ii) To be recognized as being in compliance with the biosecurity 
principles and eligible for indemnity, owners and contractors who fail 
the initial audit conducted by the NPIP Official State Agency must have 
a check audit performed by a team appointed by National NPIP Office and 
must demonstrate that they have implemented applicable biosecurity 
measures. The team will consist of an APHIS poultry subject matter 
expert, the Official State Agency, and a licensed, accredited, industry 
poultry veterinarian.
    (f) Proposed updates to the NPIP Program Standards will be 
announced to the public through a Federal Register notice, as described 
in Sec.  147.53(e) of this chapter.

(Approved by the Office of Management and Budget under control 
number 0579-0440)

    Done in Washington, DC, this 8th day of August 2018.
Greg Ibach,
Under Secretary for Marketing and Regulatory Programs.
[FR Doc. 2018-17554 Filed 8-14-18; 8:45 am]
 BILLING CODE 3410-34-P