This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

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

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

12067

Vol. 62, No. 50

Friday, March 14, 1997

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 401 and 457

General Crop Insurance Regulations;

Raisin Endorsement and Common

Crop Insurance Regulations; Raisin

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

raisins. 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 raisin endorsement under the

Common Crop Insurance Policy for ease

of use and consistency of terms, and to

restrict the effect of the current raisin

endorsement to the 1996 and prior crop

years.

EFFECTIVE DATE: March 14, 1997.

FOR FURTHER INFORMATION CONTACT: John

Meyer, Insurance Management

Specialist, Product Development

Division, Policy Development and

Standards Branch, 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

Following publication of the proposed

rule, 61 Federal Register, 55928, the

public was afforded 60 days to submit

written comments on information

collection requirements previously

approved by OMB under OMB control

number 0563–0003 through September

30, 1998. No public comments were

received.

Unfunded Mandates Reform Act of

1995

Title II of the Unfunded Mandates

Reform Act of 1995 (UMRA), Public

Law 104–4, establishes requirements for

Federal agencies to assess the effects of

their regulatory actions on State, local,

and tribal governments and the private

sector. This rule contains no Federal

mandates (under the regulatory

provisions of title II of the UMRA) for

State, local, and tribal governments or

the private sector. Thus, this rule is not

subject to the requirements of sections

202 and 205 of the UMRA.

Executive Order 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 impact on a substantial

number of small entities. New

provisions included in this rule will not

impact small entities to a greater extent

than large entities. Under the current

regulations, all producers are required

to complete an application and acreage

report. If the crop is damaged or

destroyed, insureds are required to give

notice of loss and provide the necessary

information to complete a claim for

indemnity. This regulation does not

alter those requirements. The amount of

work required of the insurance

companies delivering and servicing

these policies will not increase

significantly from the amount of work

currently required. This rule does not

have any greater or lesser impact on the

producer. Therefore, this action is

determined to be exempt from the

provisions of the Regulatory Flexibility

Act (5 U.S.C. 605), and no Regulatory

Flexibility Analysis was prepared.

Federal Assistance Program

This program is listed in the Catalog

of Federal Domestic Assistance under

No. 10.450.

Executive Order 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. 12778

The Office of the General Counsel has

determined that these regulations meet

the applicable standards provided in

sections 2(a) and 2(b)(2) of Executive

Order No. 12778. The provisions of this

rule will not have a retroactive effect

prior to the effective date. The

provisions of this rule will preempt

state and local laws to the extent such

state and local laws are inconsistent

herewith. The administrative appeal

provisions published at 7 CFR part 11

must be exhausted before any action for

judicial review may be brought.

Environmental Evaluation

This action is not expected to have a

significant impact on the quality of the

human environment, health, and safety.

Therefore, neither an Environmental

Assessment nor an Environmental

Impact Statement is needed.

National Performance Review

This regulatory action is being taken

as part of the National Performance

Review Initiative to eliminate

unnecessary or duplicative regulations

and improve those that remain in force.

Background

On Wednesday, October 30, 1996,

FCIC published a proposed rule in the

Federal Register at 61 FR 55928–55932

to add to the Common Crop Insurance

Regulations (7 CFR part 457), a new

section, 7 CFR 457.124, (Raisin Crop

Insurance Provisions). The new

provisions will replace and supersede

the current provisions for insuring

raisins found at 7 CFR section 401.142

and will be effective for the 1997 and

succeeding crop years. Section 401.142
12068 Federal Register / Vol. 62, No. 50 / Friday, March 14, 1997 / Rules and Regulations

will also be amended to restrict its effect

to the 1996 and prior crop years.

Following publication of the proposed

rule, the public was afforded 30 days to

submit written comments. A total of 20

comments were received from the crop

insurance industry, Office of Inspector

General (OIG), and FCIC Regional

Service Offices (RSO). The comments

received, and FCIC’s responses, follow:

Comment: One comment from the

insurance industry suggested definitions

be added for ‘‘insured tonnage,’’

‘‘uninsured tonnage,’’ and ‘‘guaranteed

tonnage.’’

Response: Insured tonnage is

throughly described and thereby

‘‘defined’’ in section 3 of the crop

provisions. Several policy provisions

are involved in determining tonnage

that may not be insurable. Adding a

definition to describe uninsured

tonnage would be duplicative of these

provisions. These provisions do not use

the term ‘‘guaranteed tonnage.’’ Instead,

a dollar guarantee is based on the

number of insured tons. This allows

damaged raisins to be valued and

subtracted from the amount of insurance

when determining the amount of an

indemnity. No change has been made to

the provisions.

Comment: One comment from the

insurance industry questioned whether

the definition of ‘‘non-contiguous land’’

should state ‘‘that it is land ownership

that does not touch at any point.’’

Response: Land ownership is not a

factor used to determine non-contiguous

land. Rather, it is the boundaries of the

land in which a producer has or will

have an insurable interest in the crop.

If the boundaries of such land do not

touch, the land is considered to be noncontiguous. FCIC believes the provision

is clearly stated. Therefore, no change

will be made.

Comment: One comment from the

insurance industry suggested changing

the language in section 2(a) from ‘‘may

be divided’’ to ‘‘will be divided.’’

Response: FCIC agrees with the

comment and has amended the

provisions accordingly.

Comments: Five comments, one from

an RSO, one from OIG, and three from

the crop insurance industry requested

that ‘‘optional’’ be removed from the

language in section 2(e). The comments

indicated that this provision should

apply to all units, both basic and

optional.

Response: FCIC agrees with the

comments and has amended the

provision accordingly.

Comment: One comment from the

insurance industry concerned the

reference to ‘‘your share’’ in subsection

3(b). The commenter wanted to know if

the reference applied to your share at

time of loss, at the time the raisins were

laid down for drying, or at some other

time.

Response: Share is defined in the

Basic Provisions. For the purpose of

determining the premium amount, it is

the share at the time insurance attaches.

For the purpose of determining the

amount of an indemnity, it is the lesser

of the share at the time of loss or the

share at the time insurance attaches.

Comment: One comment from the

insurance industry concerned the

determination of ‘‘Insured tonnage for

units damaged by rain’’ in section

3(c)(2). The commenter suggested that

adjusters should be allowed to

determine which procedure to use to

determine the total amount lost in the

vineyard: tray count (which has been

dropped), vine count, or both methods.

Response: Tray counts may not be

reliable for determining production

amounts. In some cases, it has been

found that the number of trays cannot

accurately be determined. However, the

number of vines in a vineyard normally

remains constant, and once production

per vine is determined, vine count

provides a more accurate method of

determining total production in the

vineyard. No change has been made to

these provisions.

Comment: One comment from the

insurance industry questioned how the

following situation would be treated. An

adjuster takes a sample to measure

moisture content, finds that it exceeds

24.3% and releases the crop. The

insured delays delivering the

production and the moisture content

decreases. The insured then delivers the

raisins. What would happen in this

situation and how could it be

prevented?

Response: FCIC approved procedure

prohibits an adjustor from releasing

raisins before it is determined whether

or not the crop can be reconditioned.

However, the provision has been

clarified to state that if any production

is delivered, the moisture content will

be determined at the time of delivery.

Improper claim handling can be avoided

with proper supervisory controls and by

following established claims procedures

as outlined in FCIC approved

procedure.

Comment: Two comments, one from

the insurance industry and one from

OIG suggested adding language in

section 3(c) indicating that an approved

method be used to determine the

number of tons lost in the vineyard in

the event no production is removed

from the vineyard. The Proposed Rule

deleted the use of tray weights to

establish insured tons when production

is not removed from the vineyard and

stated that when appraisal is required,

the amount of raisin tonnage lost will be

determined in sample areas. The

commenters stated that the policy, as

drafted, does not address these

situations. Also, when these situations

occur, the comparison to other acreage

from which raisins were removed is not

possible. Loss adjustment procedures

should contain a method for handling

these situations and state or define how

the production will be determined from

such sample areas or give a sampling

methodology as cited in the

‘‘Background’’ section. Determinations

for these situations would then be used

as necessary in valuing damaged raisins

under the provisions of section 13(f).

Response: FCIC agrees with the

comment and has added a provision to

state that when no raisins have been

removed from the vineyard, an appraisal

will be used to determine the insured

tonnage. FCIC approved procedures

provide the methods to be used to

determine tonnage lost in the vineyard

when no raisins are removed.

Comment: Six comments, one from

OIG, one from an RSO, and four from

the crop insurance industry suggested

the following language be added in

section 6(b) to address situations in

which the insured either adds or deletes

acreage after providing the required

report of intentions at sales closing date:

‘‘Acreage on which you intend to

produce raisins may be added to your

location report until the time you first

place raisins from the additional acreage

on trays for drying and it is agreed to by

us. Failure to report any insurable

acreage will result in under-reporting

penalties being applied in accordance

with the provisions contained in section

6 (Report of Acreage) of the Basic

Provisions (457.8). If you elect not to

produce raisins on any acreage included

on your location report, you must notify

us in writing on or before September 21

and provide any records we may require

to verify that raisins were not produced

on that acreage.’’ The comments

indicated this language is necessary to

address vulnerabilities associated with

reporting tonnage, and that the current

language is vague and will result in

unnecessary exposure.

Response: FCIC agrees with the

comments and has amended the

provisions to clarify the conditions

under which additional acreage may be

added to the acreage report.

Comments: Two comments from the

insurance industry indicated that

statements in item 6 of the summary of

changes section in the preamble and in

section 6(a) of the provisions appeared

to be in conflict. The background
Federal Register / Vol. 62, No. 50 / Friday, March 14, 1997 / Rules and Regulations 12069

summary section refers to ‘‘reporting

raisin acreage prior to the time

insurance attaches’’ whereas section 6(a)

requires this report to be submitted on

or before the sales closing date.

Response: FCIC agrees with the

comments. The background section

should have stated that raisin acreage

must be reported on or before the sales

closing date.

Comment: One comment from the

insurance industry favored having the

insured report the acreage and location

more timely but questioned: (1) Why the

guarantee can not be determined at this

time; (2) would a growing season

inspection be required if an insured

leases ground after insurance attaches;

and (3) what happens when there is a

forecast of rain and the insured notifies

the company that additional acreage has

been leased?

Response: The amount of insurance

cannot be calculated until the insured

tonnage can be determined. Insured

tonnage is not known until after the

crop is laid down to dry and the

production is delivered or determined

in the event of damage. Additional

acreage cannot be added after the raisins

have been laid down on the additional

acreage; so no new acreage can be added

after insurance has attached. If raisins

are leased after they have been laid

down, such raisins are only insurable if

the lessor had insurance and properly

executed a transfer of coverage and right

to indemnity. Further additional acreage

may only be added to the acreage report

after the sales closing date if the insurer

agrees. In the event rain is forecast, the

insurance provider may deny coverage

on the acreage.

Comment: One comment from the

insurance industry questioned why the

term ‘‘Location and Unit Report’’ was

used for what appears to be a

preliminary acreage report. The

commenter stated that, if there were

significant differences between the two

terms such that a different form is

required, the industry would like to

help develop such a form before the

Raisin Crop Insurance Provisions are

published as a Final Rule.

Response: ‘‘Location and unit report’’

was thought to be a more descriptive

term than ‘‘acreage report.’’ However,

after additional consideration, FCIC

believes that the current acreage report

form may be used to obtain all

information required by these Crop

Provisions. Therefore, the term

‘‘Location and unit report’’ has been

replaced with ‘‘acreage report.’’

Comments: Six comments, one from

OIG, one from an RSO, and four from

the crop insurance industry suggested

that section 8(b) which states ‘‘For the

purpose of determining the amount of

indemnity, your share will not exceed

the lower of your share at either the

time the raisins are first placed on trays

for drying or are removed from the

vineyards.’’ be revised to read ‘‘For the

purpose of determining the amount of

indemnity, your share will not exceed

your share at the time the insurance

attaches.’’ The comment also stated that

the insurance period for raisins lasts

only two or three weeks and changes in

share are uncommon once the crop is on

trays. Also, it was stated that if this

section is not revised, that consideration

be given to using ‘‘lesser of’’ in lieu of

‘‘lower of’’.

Response: FCIC understands that it is

uncommon for the share to change

within the insurance period. However,

in those cases where it does change, the

insurance provider should not pay for a

share in excess of the insured’s share at

the time of loss. FCIC has revised this

provision to indicate that the share will

not exceed the lesser of the share at the

time insurance attaches or at the time of

loss. For clarification, this provision

was moved to section 13(c) (Settlement

of Claim).

Comments: Seven comments, one

from OIG, one from an RSO, and five

from the crop insurance industry,

suggested the following be added to the

last sentence of section 11(a) ‘‘or

determine the number of tons meeting

RAC standards that could be obtained if

the production were reconditioned.’’ It

was indicated that this language is

necessary to be equitable to producers

who intend to sell rain-damaged raisins

through alternative market outlets.

Response: FCIC agrees with the

comments and has amended the

provision to indicate that the insurance

provider may determine the tons

meeting RAC standards that could be

obtained if the raisins were

reconditioned. Language has also been

added to clarify the circumstances

under which this action can be taken.

Comment: One comment questioned

whether all items of sub-section

11(c)(1)(2)&(3) must occur to get a

reconditioning payment, or, are

different combinations possible? If all

three are required, the ‘‘or’’ at the end

of (2) should be changed to ‘‘and’’, or

delete it and the ‘‘and’’ at the end of (1).

If all three occurrences are not required,

which combinations are acceptable?

Response: Two possible combinations

are acceptable. Either 11(c) (1) and (2)

are required, or 11(c) (1) and (3).

Comment: One comment from the

insurance industry expressed concern

that, since insured’s with catastrophic

risk protection (CAT) insurance are not

eligible for a reconditioning payment,

they may ‘‘drag their feet’’ in hopes of

collecting a regular production loss. Is

the reconditioning requirement

language in sub-section 11(a) strong

enough to discourage or prevent

possible abuse?

Response: FCIC believes that policy

provisions dealing with poor farming

practices and the valuation of damaged

production if the insured fails to

recondition the raisins should prevent

cases in which insureds may try to

inflate losses.

Comments: Five comments, one from

an RSO, and four from the insurance

industry suggested replacing the term

‘‘micro-contamination’’ in section

11(c)(2) with ‘‘other rain-caused

contamination determined by microanalysis * * *’’ The comment stated

this language would be more accurate

since insects infest rain damaged

raisins, and micro-analysis is used to

identify insects and insect parts that

will not be removed during normal

processing.

Response: FCIC agrees with the

comments and has amended the

provision accordingly.

Comment: One comment concerned

item 8 in the background section of the

preamble (substantive change

summary). This provision states that

‘‘raisins discarded or lost from trays as

part of normal handling will not be

considered production to count.’’ The

comment stated this would not be a

problem until it rains and the handlers

throw off moldy raisins and what

remains on the trays. Question is, would

this production not be used to

determine the guarantee and production

to count?

Response: Normal field handling does

not include raisins which are discarded

after a loss. If such raisins are discarded,

they should not be included in the

insured tonnage or the value of the

damaged production.

Comments: Two comments from the

crop insurance industry suggested

combining the provisions contained in

section 14(e) with the provisions in

section 14(a).

Response: The provisions are clearly

stated and have not been combined.

Comments: Two comments received

from the insurance industry suggested

the provision in section 14(d) stating

‘‘that written agreements are valid for

only one year’’ be removed. Terms of

the agreement should be stated in the

agreement to fit the particular situation

for the policy, or if no substantive

changes occur from one year to the next,

allow the written agreement to be

continuous.

Response: Written agreements are

intended to change policy terms or
12070 Federal Register / Vol. 62, No. 50 / Friday, March 14, 1997 / Rules and Regulations

permit insurance in unusual situations

where such changes will not increase

risk. If such practices continue year to

year, they should be incorporated into

the policy or Special Provisions. It is

important to keep non-uniform

exceptions to the minimum to ensure

that the insured is well aware of the

specific terms of the policy. Therefore,

no change will be made.

Good cause is shown to make this rule

effective upon publication in the

Federal Register. This rule improves the

raisin crop insurance coverage and

brings it under the Common Crop

Insurance Policy Basic Provisions for

consistency among policies. The

contract change date required for new

policies is April 30, 1997. It is therefore

imperative that these provisions be

made final before that date so that the

reinsured companies and insureds may

have sufficient time to implement the

new provisions.

Therefore, public interest requires the

agency to act immediately to make these

provisions available for the 1997 crop

year.

List of Subjects in 7 CFR Parts 401 and

457

Crop insurance, Raisin endorsement.

Final Rule

Accordingly, the Federal Crop

Insurance Corporation hereby amends 7

CFR parts 401 and 457 effective for the

1997 and succeeding crop years, as

follows:

PART 401—GENERAL CROP

INSURANCE REGULATIONS—

REGULATIONS FOR THE 1988 AND

SUBSEQUENT CONTRACT YEARS

1. The authority citation for 7 CFR

part 401 continues to read as follows:

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

§ 401.142 [Revised]

2. The introductory text of § 401.142

is revised to read as follows:

The provisions of the Raisin

Endorsement for the 1990 through 1996

crop years are as follows:

* * * * *

PART 457—COMMON CROP

INSURANCE REGULATIONS;

REGULATIONS FOR THE 1994 AND

SUBSEQUENT CONTRACT YEARS

3. The authority citation for 7 CFR

part 457 continues to read as follows:

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

4. Section 457.124 is added to read as

follows:

§ 457.124 Raisin crop insurance

provisions.

The Raisin Crop Insurance Provisions

for the 1997 and succeeding crop years

are as follows:

FCIC Policies

Department of Agriculture

Federal Crop Insurance Corporation

Reinsured Policies

(Appropriate title for insurance

provider)

Both FCIC and Reinsured Policies:

Raisin Crop Provisions

If a conflict exists among the Basic

Provisions (§ 457.8), these Crop

Provisions, and the Special Provisions;

the Special Provisions will control these

Crop Provisions and the Basic

Provisions; and these Crop Provisions

will control the Basic Provisions.

1. Definitions.

Crop year—In lieu of the definition of

‘‘Crop year’’ contained in section 1 of

the Basic Provisions (§ 457.8), the

calendar year in which the raisins are

placed on trays for drying.

Days—Calendar days.

Delivered ton—A ton of raisins

delivered to a packer, processor, buyer

or a reconditioner, before any

adjustment for U. S. Grade B and better

maturity standards, and after

adjustments for moisture over 16

percent and substandard raisins over 5

percent.

Non-contiguous land—Any two or

more tracts of land whose boundaries do

not touch at any point, except that land

separated only by a public or private

right-of-way, waterway, or an irrigation

canal will be considered as contiguous.

RAC—The Raisin Administrative

Committee, which operates under an

order of the United States Department of

Agriculture (USDA).

Raisins—The sun-dried fruit of

varieties of grapes designated insurable

by the Actuarial Table. These grapes

will be considered raisins for the

purpose of this policy when laid on

trays in the vineyard to dry.

Substandard—Raisins that fail to

meet the requirements of U.S. Grade C,

or layer (cluster) raisins with seeds that

fail to meet the requirements of U.S.

Grade B.

Reference maximum dollar amount—

The value per ton established by FCIC

and shown in the Actuarial Table.

Table grapes—Grapes grown for

commercial sale as fresh fruit on acreage

where appropriate cultural practices

were followed.

Ton—Two thousand (2,000) pounds

avoirdupois.

Tonnage report—A report used to

annually report, by unit, all the tons of

raisins produced in the county in which

you have a share.

Written agreement—A written

document that alters designated terms of

this policy in accordance with section

14.

2. Unit Division.

(a) In addition to the requirements of

a unit as defined in section 1

(Definitions) of the Basic Provisions

(§ 457.8), a basic unit will consist of

each grape variety you insure.

(b) Unless limited by the Special

Provisions, a basic unit may be divided

into optional units if, for each optional

unit you meet all the conditions of this

section or if a written agreement to such

division exists.

(c) Basic units may not be divided

into optional units on any basis

including, but not limited to,

production practice, type, and variety,

other than as described in this section.

(d) If you do not comply fully with

these provisions, we will combine all

optional units that are not in

compliance with these provisions into

the basic unit from which they were

formed. We will combine the optional

units at any time we discover that you

have failed to comply with these

provisions. If failure to comply with

these provisions is determined to be

inadvertent, and the optional units are

combined into a basic unit, that portion

of the additional premium paid for the

optional units that have been combined

will be refunded to you for the units

combined.

(e) All units you selected for the crop

year must be identified on the acreage

report for that crop year.

(f) The following requirements must

be met to qualify for separate optional

units.

(1) You must have records of

marketed production or measurement of

stored production from each optional

unit maintained in such a manner that

permits us to verify the production from

each optional unit, or the production

from each unit must be kept separate

until loss adjustment is completed by

us; and

(2) Separate optional units must be

located on non-contiguous land.

3. Amounts of Insurance and

Production Reporting .

In addition to the requirements of

section 3 (Insurance Guarantees,

Coverage Levels, and Prices for

Determining Indemnities) of the Basic

Provisions (§ 457.8):

(a) You may select only one coverage

level percentage for all the raisins in the

county insured under this policy.

(b) The amount of insurance for the

unit will be determined by multiplying

the insured tonnage by the reference
Federal Register / Vol. 62, No. 50 / Friday, March 14, 1997 / Rules and Regulations 12071

maximum dollar amount, by the

coverage level percentage you elect, and

by your share.

(c) Insured tonnage is determined as

follows:

(1) For units not damaged by rain—

The delivered tons; or

(2) For units damaged by rain—By

adding the delivered tons to any verified

loss of production due to rain damage.

When production from a portion of the

acreage within a unit is removed from

the vineyard and production from the

remaining acreage is lost in the

vineyard, the amount of production lost

in the vineyard will be determined

based on the number of tons of raisins

produced on the acreage from which

production was removed. When no

production has been removed from the

vineyard, the amount of production lost

in the vineyard will be determined

based on an appraisal.

(3) Insured tonnage will be adjusted

as follows:

(i) The insured tonnage will be

reduced 0.12 percent for each 0.10

percent of moisture in excess of 16.0

percent. For example, 10.0 tons of

raisins containing 18.0 percent moisture

will be reduced to 9.760 tons of raisins;

(ii) Insured tonnage used for dry

edible fruit will be reduced by 0.10

percent for each 0.10 percent of

substandard raisins in excess of 5.0

percent; and

(iii) When raisins contain moisture in

excess of 24.3 percent at the time of

delivery and are released for a use other

than dry edible fruit (e.g. distillery

material), they will be considered to

contain 24.3 percent moisture.

(4) If any raisins are delivered, the

moisture content will be determined at

the time of delivery.

(d) Section 3(c) of the Basic

Provisions is not applicable to this crop.

4. Contract Changes.

In accordance with section 4 (Contract

Changes) of the Basic Provisions

(§ 457.8), the contract change date is

April 30 preceding the cancellation

date.

5. Cancellation and Termination

Dates.

In accordance with section 2 (Life of

Policy, Cancellation and Termination)

of the Basic Provisions (§ 457.8), the

cancellation and termination dates are

July 31.

6. Acreage Report and Tonnage

Report.

In lieu of the provisions contained in

section 6 of the Basic Provisions

(§ 457.8):

(a) You must report by unit, and on

our form, the acreage on which you

intend to produce raisins for the crop

year. This acreage report must be

submitted to us on or before the sales

closing date, and contain the following

information:

(1) All acreage of the crop (insurable

and not insurable) in which you will

have a share;

(2) Your anticipated share at the time

coverage will begin;

(3) The variety; and

(4) The location of each vineyard.

(b) Acreage of the crop acquired after

the acreage was reported, may be

included on the acreage report if we

agree to accept the additional acreage.

Such additional acreage will not be

added to the acreage report after you

first place raisins from the additional

acreage on trays for drying. Failure to

report any acreage in which you have a

share will result in denial of liability. If

you elect not to produce raisins on any

part of the acreage included on your

acreage report, you must notify us in

writing on or before September 21, and

provide any records we may require to

verify that raisins were not produced on

that acreage.

(c) If you fail to file an acreage report

in a timely manner, or if the information

reported is incorrect, we may deny

liability on any unit.

(d) In addition to the acreage report,

you must annually submit a tonnage

report, on our form, which includes by

unit the number of delivered tons of

raisins, and, if damage has occurred, the

amount of any tonnage we determined

was lost due to rain damage in the

vineyard for each unit designated in the

acreage report.

(e) The tonnage report must be

submitted to us as soon as the

information is available, but not later

than March 1 of the year following the

crop year. Indemnities may be

determined on the basis of information

you submitted on this report. If you do

not submit this report by the reporting

date, we may, at our option, either

determine the insured tonnage and

share by unit or we may deny liability

on any unit. This report may be revised

only upon our approval. Errors in

reporting units may be corrected by us

at any time we discover the error.

7. Annual Premium.

In lieu of the premium computation

method contained in section 7 (Annual

Premium) of the Basic Provisions

(§ 457.8), the annual premium amount is

determined by multiplying the amount

of insurance for the unit at the time

insurance attaches by the premium rate

and then multiplying that result by any

applicable premium adjustment factors

that may apply.

8. Insured Crop.

(a) In accordance with section 8

(Insured Crop) of the Basic Provisions

(§ 457.8), the crop insured will be all the

raisins in the county of grape varieties

for which a premium rate is provided by

the Actuarial Table and in which you

have a share.

(b) In addition to the raisins not

insurable under section 8 (Insured Crop)

of the Basic Provisions (§ 457.8), we do

not insure any raisins:

(1) Laid on trays after September 8 in

vineyards with north-south rows in

Merced or Stanislaus Counties, or after

September 20 in all other counties;

(2) From table grape strippings; or

(3) From vines that received manual,

mechanical, or chemical treatment to

produce table grape sizing.

9. Insurance Period.

In lieu of the provisions of section 11

(Insurance Period) of the Basic

Provisions (§ 457.8), insurance attaches

on each unit at the time the raisins are

placed on trays for drying and ends the

earlier of:

(a) October 20;

(b) The date the raisins are removed

from the trays;

(c) The date the raisins are removed

from the vineyard;

(d) Total destruction of all raisins on

a unit;

(e) Final adjustment of a loss on a

unit; or

(f) Abandonment of the raisins.

10. Causes of Loss.

(a) In accordance with the provisions

of section 12 (Causes of Loss) of the

Basic Provisions (§ 457.8), insurance is

provided only against unavoidable loss

of production resulting from rain that

occurs during the insurance period and

while the raisins are on trays or in rolls

in the vineyard for drying.

(b) In addition to the causes of loss

excluded in section 12 (Causes of Loss)

of the Basic Provisions (§ 457.8), we will

not insure against damage or loss of

production due to inability to market

the raisins for any reason other than

actual physical damage from an

insurable cause specified in this section.

For example, we will not pay you an

indemnity if you are unable to market

due to quarantine, boycott, or refusal of

a person to accept production.

11. Reconditioning Requirements and

Payment.

(a) We may require you to recondition

a representative sample of not more

than 10 tons of damaged raisins to

determine if they meet standards

established by the RAC once

reconditioned. If such standards are

met, we may require you to recondition

all the damaged production. If we

determine that it is possible to

recondition any damaged production

and, if you do not do so, we will value

the damaged production at the reference
12072 Federal Register / Vol. 62, No. 50 / Friday, March 14, 1997 / Rules and Regulations

maximum dollar amount, except if your

damaged production undergoes a USDA

inspection and is stored by your packer

with other producer’s production to be

reconditioned at a later date. If we agree,

in writing, that it is not practical to

recondition the damaged production,

we will determine the number of tons

meeting RAC standards that could be

obtained if the production were

reconditioned.

(b) If the representative sample of

raisins that we require you to

recondition does not meet RAC

standards for marketable raisins after

reconditioning, the reconditioning

payment will be the actual cost you

incur to recondition the sample, not to

exceed an amount that is reasonable and

customary for such reconditioning,

regardless of the coverage level selected.

(c) A reconditioning payment, based

on the actual (unadjusted) weight of the

raisins, will be made if:

(1) Insured raisin production:

(i) Is damaged by rain within the

insurance period;

(ii) Is reconditioned by washing with

water and then drying;

(iii) Is insured at a coverage level

greater than that applicable to the

catastrophic risk protection plan of

insurance; and either

(2) The damaged production

undergoes an inspection by USDA and

is found to contain mold, embedded

sand, or other rain-caused

contamination determined by microanalysis in excess of standards

established by the RAC, or is found to

contain moisture in excess of 18

percent; or

(3) We give you consent to

recondition the damaged production.

(d) Your request for consent to any

wash-and-dry reconditioning must

identify the acreage on which the

production to be reconditioned was

damaged in order to be eligible for a

reconditioning payment.

(e) The reconditioning payment for

raisins that meet RAC standards for

marketable raisins after reconditioning

will be the lesser of your actual cost for

reconditioning or the amount

determined by:

(1) Multiplying the greater of $125.00

or the reconditioning dollar amount per

ton contained in the Special Provisions

by your coverage level;

(2) Multiplying the result of section

11(e)(1) by the actual number of tons of

raisins (unadjusted weight) that are

wash-and-dry reconditioned; and

(3) Multiplying the result of section

11(e)(2) by your share.

(f) Only one reconditioning payment

will be made for any lot of raisins

damaged during the crop year. Multiple

reconditioning payments for the same

production will not be made.

12. Duties In The Event of Damage or

Loss.

(a) In addition to the requirements of

section 14 (Duties in the Event of

Damage or Loss) of the Basic Provisions

(§ 457.8), the following will apply:

(1) If you intend to claim an

indemnity on any unit, you must give us

notice within 72 hours of the time the

rain fell on the raisins. We may reject

any claim for indemnity if such notice

is later. You must provide us the

following information when you give us

this notice:

(i) The grape variety;

(ii) The location of the vineyard and

number of acres; and

(iii) The number of vines from which

the raisins were harvested.

(2) We will not pay any indemnity

unless you:

(i) Authorize us in writing to obtain

all relevant records from any raisin

packer, raisin reconditioner, the RAC, or

any other person who may have such

records. If you fail to meet the

requirements of this subsection, all

insured production will be considered

undamaged and valued at the reference

maximum dollar value.

(ii) Upon our request, provide us with

records of previous years’’ production

and acreage. This information may be

used to establish the amount of insured

tonnage when insurable damage results

in discarded production.

(b) In lieu of the provisions in section

14 (Duties in the Event of Damage or

Loss) of the Basic Provisions (§ 457.8)

that require you to submit a claim for

indemnity not later than 60 days after

the end of the insurance period, any

claim for indemnity must be submitted

to us not later than March 31 following

the date for the end of the insurance

period.

13. Settlement of Claim.

(a) We will determine your loss on a

unit basis. In the event you are unable

to provide separate acceptable

production records:

(1) For any optional unit, we will

combine all optional units for which

such production records were not

provided; or

(2) For any basic unit, we will allocate

any commingled production to such

units in proportion to our liability on

the acreage from which raisins were

removed for each unit.

(b) In the event of loss or damage

covered by this policy, we will settle

your claim by:

(1) Multiplying the insured tonnage of

raisins by the reference maximum dollar

amount and your coverage level

percentage;

(2) Subtracting from the total in

section 13(b)(1) the total value of all

insured damaged and undamaged

raisins; and

(3) Multiplying the result of section

13(b)(2) by your share.

(c) For the purpose of determining the

amount of indemnity, your share will

not exceed the lesser of your share at the

time insurance attaches or at the time of

loss.

(d) Undamaged raisins or raisins

damaged solely by uninsured causes

will be valued at the reference

maximum dollar amount.

(e) Raisins damaged partially by rain

and partially by uninsured causes will

be valued at the highest prices

obtainable, adjusted for any reduction in

value due to uninsured causes.

(f) Raisins that are damaged by rain,

but that are reconditioned and meet

RAC standards for raisins, will be

valued at the reference maximum dollar

amount.

(g) The value to count for any raisins

produced on the unit that are damaged

by rain and not removed from the

vineyard will be the larger of the

appraised salvage value or $35.00 per

ton, except that any raisins that are

damaged and discarded from trays or

are lost from trays scattered in the

vineyard as part of normal handling will

not be considered to have any value.

You must box and deliver any raisins

that can be removed from the vineyard.

(h) At our sole option, we may acquire

all the rights and title to your share of

any raisins damaged by rain. In such

event, the raisins will be valued at zero

in determining the amount of loss and

we will have the right of ingress and

egress to the extent necessary to take

possession, care for, and remove such

raisins.

(i) Raisins destroyed, put to another

use without our consent, or abandoned

will be valued at the reference

maximum dollar amount.

14. Written Agreements.

Designated terms of this policy may

be altered by written agreement in

accordance with the following:

(a) You must apply in writing for each

written agreement no later than the sales

closing date, except as provided in

14(e);

(b) The application for a written

agreement must contain all variable

terms of the contract between you and

us that will be in effect if the written

agreement is not approved;

(c) If approved, the written agreement

will include all variable terms of the

contract, including, but not limited to,

crop type or variety, the amount of

insurance per ton, and premium rate;
Federal Register / Vol. 62, No. 50 / Friday, March 14, 1997 / Rules and Regulations 12073

1See 12 U.S.C. 1430(a)(1)–(4). Other acceptable

real estate related collateral includes, but is not

limited to: privately issued mortgage-backed

securities other than those eligible under category

1; second mortgage loans, including home equity

loans; commercial real estate loans; and mortgage

loan participations. See 12 CFR 935.9(a)(4)(ii). The

aggregate amount of outstanding advances secured

by such collateral may not exceed 30 percent of a

FHLBank member’s GAAP capital. See 12 U.S.C.

1430(a)(4); 12 CFR 935.9(a)(4)(iii).

2Congress enacted the Native American Housing

Assistance and Self Determination Act of 1996 in

October 1996. See Pub. L. 104–330, 101 Stat. 4016

(Oct. 26, 1996). The Act authorizes Indian tribes to

establish TDHEs to run their housing programs. See

id. sec. 102(c)(4)(K), 110 Stat. 4025. TDHEs include

all existing Indian Housing Authorities as well as

other entities created by Indian tribes to provide

assistance for affordable housing for tribal members.

See id. sec. 4(21), 110 Stat 4021.

(d) Each written agreement will only

be valid for one year (If the written

agreement is not specifically renewed

the following year, insurance coverage

for subsequent crop years will be in

accordance with the printed policy);

and

(e) An application for a written

agreement submitted after the sales

closing date may be approved if, after a

physical inspection of the acreage, it is

determined that no loss has occurred

and the crop is insurable in accordance

with the policy and written agreement

provisions.

Signed in Washington, DC, on March 6,

1997.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance

Corporation.

[FR Doc. 97–6520 Filed 3–13–97; 8:45 am]

BILLING CODE 3410–08–P

FEDERAL HOUSING FINANCE BOARD

12 CFR Part 935

[No. 97–18]

Advances to Nonmembers

AGENCY: Federal Housing Finance

Board.

ACTION: Final rule.

SUMMARY: The Board of Directors of the

Federal Housing Finance Board

(Finance Board) is amending its

regulation on Federal Home Loan Bank

(FHLBank) advances to nonmembers.

The rule establishes uniform eligibility

requirements and review criteria for

determining whether an entity may be

certified as a nonmember mortgagee

eligible to receive FHLBank advances

and devolves responsibility for making

that determination from the Finance

Board to the FHLBanks. The Finance

Board also is revising the definition of

the term ‘‘state housing finance agency’’

(SHFA) to include all tribally designated

housing entities (TDHEs). The rule is

part of the Finance Board’s continuing

effort to devolve management and

governance responsibilities to the

FHLBanks and is consistent with the

goals of the National Homeownership

Strategy and the Regulatory Reinvention

Initiative of the National Performance

Review.

EFFECTIVE DATE: The final rule will

become effective April 14, 1997.

FOR FURTHER INFORMATION CONTACT:

Christine M. Freidel, Associate Director,

Financial Management Division, Office

of Policy, 202/408–2976; Laura K. St.

Claire, Financial Analyst, Financial

Management Division, Office of Policy,

202/408–2811; or, Janice A. Kaye,

Attorney-Advisor, Office of General

Counsel, 202/408–2505, Federal

Housing Finance Board, 1777 F Street,

N.W., Washington, D.C. 20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

Section 10b of the Federal Home Loan

Bank Act (Bank Act) establishes the

requirements for access by nonmember

mortgagees to FHLBank advances. See

12 U.S.C. 1430b. In order to be certified

as a nonmember mortgagee, an entity

must: (1) Be approved by the

Department of Housing and Urban

Development (HUD) as a ‘‘mortgagee’’

under title II of the National Housing

Act; (2) be chartered under law and

have succession; (3) be subject to the

inspection and supervision of a

governmental agency; and (4) lend its

own funds as its principal activity in the

mortgage field. Id. 1430b(a).

Under section 10b(a) of the Bank Act,

advances to nonmember mortgagees are

not subject to the general collateral

requirements of section 10(a) of the

Bank Act. Id. Instead, a FHLBank may

make advances to nonmember

mortgagees only upon the security of

mortgages insured by the Federal

Housing Administration (FHA) of HUD

under title II of the National Housing

Act. Id. The amount of any advance may

not exceed 90 percent of the unpaid

principal of the collateral pledged as

security for the advance. Id.

The Bank Act imposes less restrictive

collateral requirements on certain

advances to nonmember mortgagees that

are SHFAs. Id. 1430b(b). Under section

10b(b) of the Bank Act, advances to

SHFA nonmember mortgagees that

facilitate mortgage lending to low- or

moderate-income individuals and

families (meeting the income

requirements in section 142(d) or 143(f)

of the Internal Revenue Code, generally

up to 115 percent of the area median

income) need not be secured by FHAinsured mortgage loans if the advances

otherwise meet the requirements of

section 10(a) of the Bank Act and any

real estate collateral pledged to secure

the advances is comprised of single- or

multi-family residential mortgages. Id.

1430b(b), 1430(a); 26 U.S.C. 142(d),

143(f). Under section 10(a), the four

categories of collateral are eligible to

secure advances to members are: (1)

Fully disbursed whole first mortgage

loans on improved residential real

property that are not more than 90 days

delinquent or securities representing a

whole interest in such mortgages; (2)

securities issued, insured, or guaranteed

by the United States government or any

agency thereof; (3) deposits of a

FHLBank; and (4) other real estate

related collateral if such collateral has a

readily ascertainable value and the

FHLBank can perfect its interest

therein.1

In October 1996, the Finance Board

published for comment a proposed rule

that would transfer the authority to

certify an entity as a nonmember

mortgagee eligible to receive FHLBank

advances from the Finance Board to the

FHLBanks subject to uniform review

criteria for determining compliance

with statutory and regulatory eligibility

requirements. See 61 FR 52727 (Oct. 8,

1996). The 60-day public comment

period closed on December 9, 1996. See

id. The Finance Board received a total

of 12 comments in response to the

proposed rule, 6 from FHLBanks, 4 from

trade associations, and 1 each from a

certified SHFA nonmember mortgagee

and a federal agency. All of the

commenters generally supported the

Finance Board’s proposal. Specific

comments are discussed in Part II of the

SUPPLEMENTARY INFORMATION.

II. Analysis of Public Comments and

the Final Rule

A. Definitions

The final rule amends the definition

of the term ‘‘state housing finance

agency’’ that appears in § 935.1 to

include TDHEs 2 established under both

tribal and state law as SHFAs. This will

permit every TDHE nonmember

mortgagee that makes mortgage loans to

low- and moderate-income members of

the Indian community to take advantage

of the more flexible collateral

requirements for securing advances to

SHFA nonmember mortgagees. See

supra part I; 12 U.S.C. 1430b(b). Each of

the eight commenters addressing this

issue expressly supported inclusion of

all TDHEs in the definition and it is

being adopted as proposed. A trade

association commenter suggested that

entities other than SHFAs should not be