[Federal Register Volume 63, Number 123 (Friday, June 26, 1998)]
[Rules and Regulations]
[Pages 34778-34784]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16968]



[[Page 34778]]

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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 435 and 457

RIN 0563-AB47


Tobacco (Quota Plan) Crop Insurance Regulations; and Common Crop 
Insurance Regulations; Quota Tobacco Crop Insurance Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes 
specific crop provisions for the insurance of quota tobacco. 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 tobacco (quota plan) crop insurance regulations with the Common 
Crop Insurance Policy for ease of use and consistency of terms, and to 
restrict the effect of the current tobacco (quota plan) crop insurance 
regulation to the 1998 and prior crop years.

EFFECTIVE DATE: July 27, 1998.

FOR FURTHER INFORMATION CONTACT: Gary Johnson, Insurance Management 
Specialist, Research and Development, Product Development Division, 
Federal Crop Insurance Corporation, United States Department of 
Agriculture, 9435 Holmes Road, Kansas City, MO, 64131, telephone (816) 
926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be exempt for the purposes of 
Executive Order 12866 and, therefore, has not been reviewed by the 
Office of Management and Budget (OMB).

Paperwork Reduction Act of 1995

    Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 
35), the collections of information for this rule have been approved by 
the Office of Management and Budget (OMB) under control number 0563-
0053 through October 31, 2000.

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 12612

    It has been determined under section 6(a) of Executive Order 12612, 
Federalism, that this rule does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions contained in this rule will not have a substantial direct 
effect on States or their political subdivisions, or on the 
distribution of power and responsibilities among the various levels of 
government.

Regulatory Flexibility Act

    This regulation will not have a significant economic impact on a 
substantial number of small entities. New provisions included in this 
rule will not impact small entities to a greater extent than large 
entities. Under the current regulations, a producer is required to 
complete an application and acreage report. If the crop is damaged or 
destroyed, the insured is required to give notice of loss and provide 
the necessary information to complete a claim for indemnity.
    The amount of work required of insurance companies delivering and 
servicing these policies will not increase significantly from the 
amount of work currently required. The 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 12372

    This program is not subject to the provisions of Executive Order 
12372 which require intergovernmental consultation with State and local 
officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115, June 24, 1983.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988 on civil justice reform. The provisions of this rule will not 
have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. The administrative appeal provisions published 
at 7 CFR part 11 must be exhausted before any action for judicial 
review of any determination made by FCIC 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 Tuesday, May 13, 1997, FCIC published a notice of proposed 
rulemaking in the Federal Register at 62 FR 26248-26252 to add to the 
Common Crop Insurance Regulations (7 CFR part 457), a new section, 7 
CFR 457.156, Quota Tobacco Crop Insurance Provisions. The new 
provisions will be effective for the 1999 and succeeding crop years. 
These provisions will replace and supersede the current provisions for 
insuring quota tobacco found at 7 CFR part 435 (Tobacco (Quota Plan) 
Crop Insurance Regulations). FCIC also amends 7 CFR part 435 to limit 
its effect to the 1985 through 1998 crop years.
    Following publication of the proposed rule, the public was afforded 
30 days to submit written comments and opinions. A total of 510 signed 
petitions were received from North Carolina and Virginia tobacco 
producers, and 88 comments were received from an insurance service 
organization and reinsured companies. The comments received and FCIC's 
responses are as follows:
    Comment: Two reinsured companies and an insurance service 
organization recommended that the definition of ``amount of insurance'' 
be revised to read, ``the dollar amount determined by multiplying the 
insured poundage quota by the current year's support price or the 
percentage of the current year's support price you select.'' This 
revision addresses the possibility of insureds selecting price 
elections of less than 100 percent.
    Response: FCIC agrees with the comment and has amended the 
definition accordingly. FCIC also has revised this definition to 
address the possible reduction in the amount of

[[Page 34779]]

insurance for late planted acreage in accordance with section 14.
    Comment: An insurance service organization recommended that FCIC 
either revise or delete the definition of ``approved yield.'' The 
commenter mentioned that since quota tobacco currently is not an Actual 
Production History (APH) crop, the definition will be questioned by 
insureds who do not receive a copy of the Code of Federal Regulations 
with their crop insurance policies.
    Response: ``Approved yield'' is referenced in section 3 of the crop 
provisions, so it must be defined. Section 3 clearly indicates that an 
approved yield is not necessary unless required by the Special 
Provisions. As written, if the FSA quota tobacco support price program 
is discontinued and quota tobacco becomes an APH crop in the future, 
the Special Provisions could be amended easily to require an approved 
yield. Therefore, no changes have been made.
    Comment: A reinsured company and an insurance service organization 
made the following recommendations to revise the definition of 
``effective poundage marketing quota'': (1) Remove the words ``minus 
the amount of any carryover tobacco'' because crop insurance is 
designed to cover the tobacco crop actually grown the current crop 
year, and the restriction of yield times acres in the definition of 
``insured poundage quota'' would take care of any allowance the 
producer made for carryover tobacco; (2) Clarify whether any additional 
poundage the producer intends to produce must be leased or if it can be 
grown without any marketing quota; (3) Add language to the definition 
of ``effective poundage marketing quota'' from section 7(b), which 
states that effective poundage marketing quota may not include any 
tobacco that would be subject to a marketing quota penalty under the 
United States Department of Agriculture (USDA) Tobacco Marketing Quota 
Regulations; and (4) Revise the definition to exclude the word 
``county'' because the farm marketing quota is established by the Farm 
Service Agency (FSA) on a Farm Serial Number (FSN) basis.
    Response: (1) Although, producers will normally reduce the number 
of acres grown in the current crop year to account for carryover 
production from the prior years, they may instead elect to reduce 
inputs (fertilizer, etc.), thereby producing fewer pounds per acre. To 
maintain the appropriate relationship between the number of planted 
acres and the effective poundage marketing quota, the amount of any 
carryover production should be removed from the effective poundage 
marketing quota. Therefore, no change has been made. (2) FCIC agrees 
with the recommendation and has clarified the definition of ``effective 
poundage marketing quota'' to include any additional (above quota) 
poundage as allowed by the USDA Tobacco Marketing Quota Regulations. 
Under current (FSA) procedures, a minimal percentage of additional 
poundage is allowed to be marketed. (3) FCIC agrees and has revised the 
definition of ``effective poundage marketing quota'' accordingly. (4) 
The definition has been clarified to refer to the FSA office for the 
county and the effective poundage marketing quota for the FSN.
    Comments: A reinsured company and an insurance service organization 
expressed concerns with the definition of ``good farming practices,'' 
which makes reference to ``cultural practices generally in use in the 
county * * *'' recognized by the Cooperative State Research, Education, 
and Extension Service as compatible with agronomic and weather 
conditions in the county.'' The commenters questioned whether cultural 
practices exist that are not necessarily recognized (or possibly not 
known) by the Cooperative State Research, Education, and Extension 
Service. The commenters also indicated that the term ``county'' in the 
definition of ``good farming practices'' should be changed to ``area.''
    Response: FCIC believes that the Cooperative State Research, 
Education, and Extension Service (CSREES) recognizes farming practices 
that are considered acceptable for producing quota tobacco. If a 
producer is following practices currently not recognized as acceptable 
by CSREES, there is no reason why such recognition cannot be sought by 
interested parties. The term ``area'' is less definitive than the term 
``county'' and would cause insurance providers to make determinations 
more subjective in nature. Therefore, no change has been made in 
response to this comment, except that the definition of ``good farming 
practices'' has been moved to the Basic Provisions.
    Comments: A reinsured company and an insurance service organization 
recommended revising the definition of ``harvest'' to include a 
requirement that at least 20 percent of the production guarantee must 
be cut on each acre to qualify as harvested. Commenters also 
recommended that a minimum appraisal of 35 percent of the amount of 
insurance be established to encourage producers to harvest damaged 
tobacco. In some cases, it will be difficult to verify unharvested 
production due to deterioration of the leaves before the adjuster works 
the final claim. The commenters believe that removal of these 
requirements from the current crop provisions will result in a 
significant increase in premium rates. Commenters expressed concern 
that FCIC may have overreacted if the changes were made because of one 
lawsuit.
    Response: FCIC has determined that the requirement that at least 20 
percent of the production guarantee be cut on each acre to qualify as 
harvested and the 35 percent minimum appraisal for unharvested acreage 
is too severe. Producers should not be forced to incur the costs 
associated with harvesting tobacco acres that may not be marketable. In 
addition, FCIC cannot ignore a court ruling that such provisions are 
unenforceable. Therefore, no change has been made in the final rule 
provisions.
    Comments: A reinsured company and an insurance service organization 
noted that the definition of ``harvest'' refers to the phrase 
``removing tobacco from the field.'' They believe this is a 
determination of when coverage ceases, which is already included in 
section 9(c) of these provisions.
    Response: Definitions are included in the crop provisions for 
clarification of policy provisions. The definition of harvest is needed 
because this term and its opposite ``unharvested'' are used repeatedly 
in section 12 (Settlement of Claim) (redesignated as section 13). The 
insurance period is defined in section 9 (redesignated as section 10). 
When the crop is harvested does not solely determine when coverage 
ceases. Therefore, no change has been made.
    Comments: An insurance service organization asked why the phrase 
``the average auction price * * *'' in the definition of ``market 
price'' was changed to ``the previous years' season average price 
published by National Agricultural Statistics Service * * *''
    Response: The phrase was changed for clarification. In practice the 
``average auction price'' has been interpreted consistently as the 
previous years'' season average price published by National Agriculture 
Statistics under the current crop provisions. Therefore, no change has 
been made.
    Comments: An insurance service organization recommended deleting 
``marketing window'' from the definition of ``practical to replant.'' 
The commenters stated that quota tobacco is unlike other crops, such as 
processor and fresh market crops, where the producer only has a certain 
amount of time to market the crop.
    Response: FCIC agrees that the concept of a ``marketing window'' is

[[Page 34780]]

most applicable to processor and fresh market crops and recognizes that 
quota tobacco is unlike these crops. However, the Federal Agriculture 
Improvement and Reform Act of 1996 mandated that FCIC consider 
marketing windows in determining whether it is feasible to require 
planting during a crop year. Therefore, no change has been made, except 
that the definition of ``practical to replant'' has been moved to the 
Basic Provisions.
    Comments: A reinsured company and an insurance service organization 
expressed concern about the terms ``replace'' and ``replacing'' in the 
definition of ``replanting.'' Commenters stated that the terms, as 
used, seem awkward and cumbersome.
    Response: FCIC believes that the definition of ``replanting'' 
clearly describes the steps required to replant the crop. However, FCIC 
has replaced the phrase ``growing a successful tobacco crop'' with 
``producing at least the quota,'' for clarity.
    Comments: An insurance service organization recommended that the 
definition of ``support price'' be amended to read ``type 31 tobacco'' 
since type 31 is the only type of tobacco that is insurable under these 
provisions.
    Response: FCIC believes that the definition is clearly stated. The 
term ``type'' is written for the flexibility of insuring other types of 
tobacco if designated in the Special Provisions.
    Comment: A reinsured company and an insurance service organization 
recommended moving the definition of ``unit'' to section 2 for 
consistency.
    Response: All policy definitions are contained in section 1 for 
uniformity. Therefore, no change has been made in this regard. FCIC has 
changed the term ``unit'' to ``Basic Unit,'' however, to conform to 
recent changes in the Basic Provisions.
    Comments: An insurance service organization and 510 growers 
recommended that the unit division guidelines of these provisions be 
the same as currently specified for Guaranteed Tobacco. Those 
provisions define basic units by share and optional units by Farm 
Serial Number (FSN). Commenters believe that this change would resolve 
the current conflict between basic units (by share) as defined for 
Catastrophic Risk Protection (CAT) and basic units (by FSN) for buy-up 
policyholders.
    Response: FCIC acknowledges that adopting the unit division rules 
contained in the Common Crop Insurance Policy for quota tobacco would 
resolve the conflict between unit definition for catastrophic coverage 
and additional coverage that now exists. However, the current unit 
definition for quota tobacco was adopted beginning with the 1985 crop 
year to resolve a vulnerability that exists in this program. Prior to 
that time, units were defined similarly for guaranteed and quota 
tobacco. Consider a landlord who share rents a portion of the quota to 
a tenant and also produces quota tobacco on the Farm Serial Number 
(FSN). Under the basic unit definition of the Common Crop Insurance 
Policy, two basic units are established for the landlord (a 100 percent 
share and the share with the tenant). One basic unit is established for 
the tenant. Under the definition contained in the Quota Tobacco Crop 
Provisions, one basic unit is established for each producer by FSN.
    The insured quantity under these provisions is the insured 
marketing quota, a quantity that is independent of acreage if a 
sufficient number of acres are planted. Premium is charged only on the 
amount of insured marketing quota. Under the ``Basic unit'' definition 
contained in the Quota Tobacco Crop Provisions, the landlord's share of 
all production from the FSN is counted against the landlord's share of 
the quota. Under the ``Basic unit'' definition contained in the Common 
Crop Insurance Provisions, there is greater opportunity to plant 
additional acreage and manipulate production within the FSN so that the 
entire quota may be produced and sold, yet a loss be paid on one unit. 
However, premium will not be collected on the additional acreage.
    Due to a large number of comments on this particular issue, FCIC 
will review any additional information that may support a different 
approach to establishing units for quota tobacco. All such information 
must specifically address the concern described herein and demonstrate 
how it will be alleviated by the proposed unit definition. Pending the 
submission of such information, FCIC will implement the basic unit 
definition contained in the proposed rule and will consider any changes 
at such date as the information may be available. If warranted, the 
unit definition can be changed for the 2000 or a subsequent crop year.
    Comment: A reinsured company and an insurance service organization 
recommended removing any references to ``annual production reports'' 
for the APH plan. The commenters contend that if the FSA quota tobacco 
support program is changed or eliminated, it will be necessary to 
revise several provisions of the policy.
    Response: Section 3 of these provisions requires annual production 
reports only when required by the Special Provisions. The current 
method of establishing farm yields will continue for the 1998 crop 
year. If the quota tobacco support price program is discontinued or 
modified in future years, these provisions provide an alternative 
method for establishing the production guarantee. Therefore, no change 
has been made. However, FCIC has amended the definition of ``support 
price'' to include the possibility that the tobacco support program may 
be changed. If there is no tobacco support program, FCIC will announce 
the average price per pound for the type of tobacco.
    Comments: A reinsured company and an insurance service organization 
recommended deleting the word ``carryover'' in section 6(a). Commenters 
stated that the basic premise of multiple peril crop insurance coverage 
is to insure actual planted acreage of the crop. Subtracting the 
carryover poundage would take coverage away from a planted crop which 
is legally insurable (i.e., the carryover poundage has value and is 
exposed to perils). This could have additional unwanted consequences by 
making the insurance providers responsible for tracking and placing 
value on carryover poundage.
    Response: Although producers normally reduce the number of acres 
grown in the current crop year to account for carryover production from 
the prior year, they may instead elect to reduce inputs (fertilizer, 
etc.), thereby producing fewer pounds per acre. Further, to maintain 
the appropriate relationship between the number of planted acres and 
the effective poundage marketing quota, the amount of any carryover 
production should be removed from the effective poundage marketing 
quota. Therefore, no change has been made.
    Comments: A reinsured company and an insurance service organization 
recommended that section 6(a) be revised to remove the phrase, ``once 
submitted, you may not revise the acreage report,'' because section 
6(c), now 6(d), of the Basic Provisions already states, ``* * *you may 
not revise this report after the acreage reporting date without our 
consent.'' The commenter inquired about the impact of changes in 
information between the time an acreage report is submitted and the 
actual acreage reporting date. The commenter stated that, if this 
sentence remains in the crop provisions, tobacco insureds will wait 
until the last day to report acreage.
    Response: FCIC agrees that section 6(d) of the Basic Provisions is 
adequate and has deleted this language from the Crop Provisions.

[[Page 34781]]

    Comments: A reinsured company and an insurance service organization 
recommended revising section 7(a) to read ``type 31 tobacco designated 
in the Special Provisions, in which you have a share.'' Commenters 
noted that the current quota policy refers to only type 31 tobacco.
    Response: FCIC agrees that the current quota tobacco policy only 
refers to type 31 tobacco. However, section 7(a) (redesignated as 
section 8(c)) is intended to allow the flexibility of insuring other 
types of tobacco if they are designated in the Special Provisions. 
Therefore, FCIC has not revised section 7(a). FCIC has changed section 
12(d) (redesignated as section 13(d)) to refer to ``U.S. Official 
Standard Grades for the insured type of tobacco,'' rather than ``U.S. 
Official Standard Grades, Burley Tobacco, U.S. Type 31,'' for 
consistency.
    Comments: A reinsured company and an insurance service organization 
asked if the provisions in section 8(c) are intended to allow written 
agreement requests for a type not rated in the actuarial documents.
    Response: Section 8(c) (redesignated as section 9(c)) only 
references a method of planting. Therefore, section 9(c) does not 
authorize written agreements for types not rated.
    Comments: A reinsured company and an insurance service organization 
questioned why section 9(a) is not as precise as section 11(a) of the 
Basic Provisions, which specifies ``total destruction * * * on the 
unit.''
    Response: FCIC has revised section 9(a) (redesignated as section 
10(a)) to refer to total destruction of the tobacco on the unit.
    Comment: A reinsured company and an insurance service organization 
asked if the current requirement that notice be given without delay if 
any tobacco is damaged and will not be sold through an auction 
warehouse was removed intentionally from section 11.
    Response: Section 14(a)(2) of the Basic Provisions states ``* * 
*you must * * *give us notice within 72 hours of your initial discovery 
of damage* * *'' FCIC believes this requirement is substantially the 
same as requiring a notice ``without delay,'' so the latter requirement 
of section 11 was removed in the proposed rule.
    Comment: Two reinsured companies and an insurance service 
organization recommended that section 12(b)(1) reference price 
elections less than 100 percent of the support price. The commenters 
indicated that the language as written could be taken to mean that the 
insured poundage quota will be multiplied by 100 percent of the support 
price even for CAT policies.
    Response: FCIC agrees with the recommendation and has amended 
section 12(b)(1) (redesignated as section 13(b)(1)) to read 
``multiplying the insured poundage quota by your elected percentage of 
the current year's support price.''
    Comments: Two reinsured companies and an insurance service 
organization recommended the following: (1) Add the word ``resulting'' 
in section 12 (b)(2); and (2) Remove the reference to ``section 
12(b)(2)'' from section 12(b)(3) because it is not necessary to 
reference the previous item by number.
    Response: The recommendations do not add any additional 
clarification to the provision. Therefore, no changes have been made.
    Comments: Two reinsured companies and an insurance service 
organization recommend removing the words ``acceptable production 
records'' from section 12(c)(1)(D), if these words relate to other APH 
references in these provisions.
    Response: As stated in earlier responses, section 12(c)(1)(D) 
(redesignated as section 13(c)(1)(D)) will only apply if annual 
production reports are required by the Special Provisions, and the 
provision has been so clarified.
    Comments: Two reinsured companies and an insurance service 
organization expressed concern that section 12(c)(1)(iii) of these 
provisions allows the insured to defer settlement and wait for a later, 
generally lower appraisal.
    Response: Section 12(c)(1)(iii) (redesignated as section 
13(c)(1)(iii)) allows deferment of a claim only if the insurance 
provider agrees that representative samples can be left or if the 
insured elects to continue to care for the entire crop. In either case, 
if the insured does not provide sufficient care for the remaining crop, 
appraisals for uninsured causes of loss may be made. Therefore, no 
change has been made.
    Comments: Two reinsured companies and an insurance service 
organization expressed concern that there are no instructions in 
section 12(c) and (d) on how to value appraised production.
    Response: Section 12(c)(1)(iv) (redesignated as section 
13(c)(1)(iii)(A)) has been rewritten to more clearly specify the 
valuation of harvested and appraised production.
    Comments: Two reinsured companies and an insurance service 
organization opposed any reference to the word ``carryover'' in section 
12(h).
    Response: Section 12(h) (redesignated as section 13(h)) eliminates 
the adjustment of next year's quota when the insurance provider agrees 
that any carryover or current years' tobacco has no market value due to 
an insured cause of loss. It also eliminates the opportunity to falsely 
report that carryover and current years' tobacco has no value and thus 
increase the indemnity payment. This provision is consistent with FSA's 
requirement that tobacco having no value be destroyed. Therefore, no 
change has been made.
    Comments: Two reinsured companies and an insurance service 
organization suggested that requiring a written agreement to be renewed 
each year should be removed in section 14(d). 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 temporary and intended to address 
unusual situations. If the condition creating a need for written 
agreement remains from year to year among producers it should be 
incorporated into the policy, the Special Provisions, or the actuarial 
documents. Therefore, no change has been made, except the provisions 
for written agreements have been moved to the Basic Provisions.
    Comments: Two reinsured companies and an insurance service 
organization asked: (1) Is the Late Planting Agreement Option no longer 
available; and (2) Why are the late and prevented planting language 
provisions not included in the proposed rule as they have been in other 
crops?
    Response: A new section 14 has been added to provide for late 
planting coverage. Under the new section 15, prevented planting 
coverage will not be provided for quota tobacco as set out in the Basic 
Provisions because the high cash value per acre and the hand labor 
required to transplant tobacco on relatively small acreage enables 
producers to plant sufficient acreage to maintain their effective 
poundage marketing quota even under extremely adverse conditions that 
would prevent planting of most other crops.
    In addition to the changes indicated above, FCIC has made the 
following changes:
    1. Section 1. Removed definitions of ``days,'' ``FSA,'' ``final 
planting date,'' and ``USDA,'' because these definitions were moved to 
the Basic Provisions. Changed the definition of ``unit'' to ``basic 
unit.''
    2. Section 7 (Annual Premium). Added to modify section 7 of the 
Basic Provisions to calculate premium, in part, based on the producer's 
amount of insurance. As defined in these crop provisions, the 
definition of ``amount of insurance'' takes into consideration the 
insured poundage quota, current year's

[[Page 34782]]

support price, and late planting adjustments unique to quota tobacco.
    3. Section 12(b) (redesignated as Section 13(b)). Revised for 
clarification. Also, added an example of an indemnity calculation for 
illustration purposes.

List of Subjects in 7 CFR Parts 435 and 457

    Crop insurance, Quota tobacco, Tobacco (quota plan) crop insurance 
regulations.

Final Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation hereby amends the Tobacco (Quota Plan) Crop 
Insurance Regulations (7 CFR part 435) and the Common Crop Insurance 
Regulations (7 CFR part 457) as follows:

PART 435--TOBACCO (QUOTA PLAN) CROP INSURANCE REGULATIONS; 
REGULATIONS FOR THE 1985 THROUGH 1998 CROP YEARS

    1. The authority citation for 7 CFR part 435 is revised to read as 
follows:

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

    2. The part heading is revised as set forth above.

Subpart Heading [Removed]

    3. The subpart heading ``Subpart--Regulations for the 1985 and 
Succeeding Crop Years'' is removed.
    4. Section 435.7 is amended by revising the introductory text of 
paragraph (d) to read as follows:


Sec. 435.7  The application and policy.

* * * * *
    (d) The application is found at subpart D of part 400--General 
Administrative Regulations (7 CFR 400.37, 400.38). The provisions of 
the Tobacco (Quota Plan) Insurance Policy for the 1985 through 1998 
crop years are as follows:
* * * * *

PART 457--COMMON CROP INSURANCE REGULATIONS; REGULATIONS FOR THE 
1998 AND SUBSEQUENT CONTRACT YEARS

    5. The authority citation for 7 CFR part 457 continues to read as 
follows:

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

    6. Section 457.156 is added to read as follows:


Sec. 457.156  Quota tobacco crop insurance provisions.

    The Quota Tobacco Crop Insurance Provisions for the 1999 and 
succeeding crop years are as follows:

    FCIC policies:

United States Department of Agriculture

Federal Crop Insurance Corporation

    Reinsured policies:

(Appropriate title for insurance provider)
    Both FCIC and reinsured policies:

Quota Tobacco Crop Insurance Provisions

    If a conflict exists among the policy provisions, the order of 
priority is as follows: (1) the Catastrophic Risk Protection 
Endorsement, if applicable; (2) the Special Provisions; (3) these 
Crop Provisions; and (4) the Basic Provisions with (1) controlling 
(2), etc.
    1. Definitions.
    Amount of insurance. The dollar amount determined by multiplying 
the insured poundage quota by the current year's support price or 
the percentage of the current year's support price you select less 
any adjustments for late planting as specified in section 14.
    Approved yield. The yield calculated in accordance with 7 CFR 
part 400, subpart G, if required by the Special Provisions.
    Basic unit. In lieu of the definition in the Basic Provisions, a 
basic unit is all insurable acreage of an insurable type of tobacco 
in the county in which you have a share on the date of planting for 
the crop year and that is identified by a single FSA farm serial 
number at the time insurance first attaches under these provisions 
for the crop year.
    Carryover tobacco. Any tobacco produced on the land identified 
by a FSA farm serial number in previous years that remained unsold 
at the end of the most recent marketing year.
    County. In lieu of the definition in the Basic Provisions, 
county is defined as the county or other political subdivision of a 
state shown on your accepted application including any land 
identified by a FSA farm serial number for such county but 
physically located in another county.
    Discount variety. Tobacco defined as such under the provisions 
of the United States Department of Agriculture tobacco price support 
program.
    Effective poundage marketing quota. The farm marketing quota as 
established and recorded by the local FSA office for the land 
identified by the FSA farm serial number plus any additional 
poundage, as allowed by the USDA Tobacco Marketing Quota 
Regulations, that you intend to produce for each unit in that crop 
year minus the amount of any carryover tobacco. The term may not 
include any tobacco that would be subject to a marketing quota 
penalty under USDA Tobacco Marketing Quota Regulations. For any crop 
year in which there are no effective USDA Tobacco Marketing Quota 
Regulations, the effective poundage marketing quota will be the 
pounds obtained by multiplying the applicable approved yield per 
acre by the lower of the reported or insured acreage on the basic 
unit, unless otherwise provided by the actuarial documents.
    Fair market value. The current year's tobacco season average 
price for the applicable type of tobacco obtained from the sale of 
the tobacco through a market other than an auction warehouse.
    Farm yield. The yield per acre used by FSA to establish the 
effective poundage marketing quota for land identified by a FSA farm 
serial number, unless we have estab lished a yield for that land in 
the actuarial documents.
    Harvest. Cutting and removing all insured tobacco from the field 
in which it was grown.
    Hydroponic plants. Seedlings grown in liquid nutrient solutions.
    Insured poundage quota. The lesser of:
    (1) The product (in pounds) obtained by multiplying the 
effective poundage marketing quota for the land identified by a FSA 
farm serial number by your selected coverage level; or
    (2) The farm yield or approved yield, as applicable, adjusted 
for late planting in accordance with section 14, if applicable, 
multiplied by the appropriate number of insured acres and by your 
selected coverage level.
    Late planting period. In lieu of the definition in section 1 of 
the Basic Provisions, the period that begins the day after the final 
planting date for the insured crop and ends 15 days after the final 
planting date, unless otherwise specified in the Special Provisions.
    Market price. The previous years' season average price published 
by National Agricultural Statistics Service for the applicable type 
of tobacco in the area.
    Marketing year. The marketing year published by National 
Agricultural Statistics Service for the applicable type of tobacco 
in the area.
    Planted acreage. Land in which tobacco seedlings, including 
hydroponic plants, have been transplanted by hand or machine from 
the tobacco bed to the field.
    Pound. Sixteen ounces avoirdupois.
    Replanting. In lieu of the definition in section 1 of the Basic 
Provisions, performing the cultural practices necessary to replace 
the tobacco plant, and then replacing the tobacco plant in the 
insured acreage with the expectation of producing at least the 
quota.
    Support price. The average price per pound for the type of 
tobacco as announced by the USDA under its tobacco price support 
program, or, if there is no such program, as announced by FCIC.
    Tobacco bed. An area protected from adverse weather, in which 
tobacco seeds are sown and seedlings are grown until transplanted 
into the tobacco field by hand or machine.
    2. Unit Division.
    A unit will be determined in accordance with the definition of 
basic unit contained in section 1 of these Crop Provisions. The 
provision in the Basic Provisions regarding optional units are not 
applicable, unless specified by the Special Provisions.
    3. Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities.
    In addition to section 3 of the Basic Provisions, a production 
report, if required by the Special Provisions, must be filed in 
accordance with section 3(c) of the Basic Provisions.
    4. Contract Changes.
    In accordance with section 4 of the Basic Provisions, the 
contract change date is November 30 preceding the cancellation date.
    5. Cancellation and Termination Dates.

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    In accordance with section 2 of the Basic Provisions, the 
cancellation and termination dates are March 15.
    6. Report of Acreage.
    In addition to the requirements of section 6 of the Basic 
Provisions:
    (a) You must report the effective poundage marketing quota and 
specify any amount of carryover tobacco, if applicable.
    (b) You must provide a copy of any written lease agreement 
between you and any landlord or tenant showing the amount of the 
effective poundage marketing quota allocated to you. The written 
lease agreement must:
    (1) Identify all other persons sharing in the effective poundage 
marketing quota; and
    (2) Be submitted to your local insurance provider's office on or 
before the acreage reporting date.
    (c) In the event of a loss, if the written lease agreement has 
been submitted timely, we will distribute the effective poundage 
marketing quota in accordance with the terms of the written lease 
agreement. If the written lease agreement is not submitted timely, 
we will prorate the effective poundage marketing quota across the 
FSA farm serial number to all insured and uninsured persons based on 
planted acres within land identified by the FSA farm serial number.
    7. Annual Premium.
    In lieu of paragraph (c) of section 7 of the Basic Provisions, 
your annual premium amount is determined by either:
    (a) Multiplying the amount of insurance by the rate, your share, 
and any premium adjustment percentages that may apply; or
    (b) If no support price program exists, multiplying the approved 
yield by the coverage level, the support price, the acres, your 
share, and any premium adjustment percentages that may apply.
    8. Insured Crop.
    (a) In accordance with section 8 of the Basic Provisions, the 
crop insured will be any of the tobacco types designated in the 
Special Provisions for the county, in which you have a share, that 
you elect to insure, and for which a premium rate is provided by the 
actuarial documents.
    (b) In addition to section 8 of the Basic Provisions, the crop 
insured will not include any poundage above the effective poundage 
marketing quota or the insured poundage quota.
    9. Insurable Acreage.
    In addition to the provisions of section 9 of the Basic 
Provisions, we will not insure any acreage under these crop 
provisions that is:
    (a) Planted to a discount variety;
    (b) Planted to a tobacco type for which no premium rate is 
provided by the actuarial documents;
    (c) Planted in any manner other than as provided in the 
definition of ``planted acreage'' in section 1 of these Crop 
Provisions, unless otherwise provided by the Special Provisions or 
by written agreement; or
    (d) Damaged before the final planting date to the extent that 
most of the producers of tobacco acreage with similar 
characteristics in the area would normally not further care for the 
crop, unless such crop is replanted or we agree that replanting is 
not practical.
    10. Insurance Period.
    In accordance with the provisions of section 11(b) of the Basic 
Provisions, insurance ceases at the earliest of:
    (a) Total destruction of the tobacco on the unit;
    (b) Weighing-in at the tobacco warehouse;
    (c) Removal of the tobacco from the field where grown except for 
curing, grading, packing, or immediate delivery to the tobacco 
warehouse; or
    (d) The February 28 immediately following the normal harvest 
period.
    11. Causes of Loss.
    In accordance with the provisions of section 12 of the Basic 
Provisions, insurance is provided only against the following causes 
of loss that occur during the insurance period:
    (a) Adverse weather conditions;
    (b) Fire;
    (c) Insects, but not damage due to insufficient or improper 
application of pest control measures;
    (d) Plant disease, but not damage due to insufficient or 
improper application of disease control measures;
    (e) Wildlife;
    (f) Earthquake;
    (g) Volcanic eruption; or
    (h) Failure of the irrigation water supply, if caused by a peril 
specified in section 11 (a) through (g) that occurs during the 
insurance period.
    12. Duties In The Event of Damage or Loss.
    In accordance with the requirements of section 14 of the Basic 
Provisions, any representative samples we may require of each 
unharvested tobacco type must be at least 5 feet wide (at least two 
rows) and extend the entire length of each field in the unit. The 
samples must not be harvested or destroyed until after our 
inspection.
    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, we 
will allocate any commingled production to such units in proportion 
to our liability on the harvested acreage 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 poundage quota by your elected 
percentage of the current year's support price.
    (2) Subtracting the total value of the production to be counted 
(see section 13(c)) from the amount of insurance; and
    (3) Multiplying the result in section 13(b)(1) by your share. 
For example:
    You have 100 percent share of type 31 quota tobacco in the unit, 
with an insurable poundage quota of 1,000 pounds and a support price 
of $1.73 per pound. The amount of insurance equals $1730.00 (1,000 
insurable poundage quota  x  $1.73 support price). You are only able 
to harvest 600 pounds. The value of the total production to count 
equals $1038.00 (600 harvested pounds  x  $1.73 support price). Your 
indemnity would be calculated as follows:
    (1) $1730.00 (amount of insurance)-$1038.00 (value of the total 
production to count) = $692.00 loss
    (2) $692.00 loss x 100 percent = $692.00 indemnity payment
    (c) The value of the total production to count (pounds of 
appraised or harvested production) for all insurable acreage on the 
unit will include:
    (1) All appraised production as follows:
    (i) Not less than the amount of insurance per insured acre for 
the unit for any acreage:
    (A) That is abandoned;
    (B) Put to another use without our consent;
    (C) That is damaged solely by uninsured causes; or
    (D) For which you fail to provide acceptable production records, 
if required by the Special Provisions;
    (ii) The value of production lost due to uninsured causes which 
is the number of pounds of such production multiplied by the support 
price;
    (iii) The value of potential production on unharvested insured 
acreage that you intend to put to another use with our consent, if 
you and we agree on the number of pounds of such production to count 
which will be multiplied by the support price. Upon such agreement, 
the insurance period for that acreage will end when you put the 
acreage to another use or abandon the crop. If agreement on the 
appraised amount of production is not reached:
    (A) If you do not elect to continue to care for the crop, we may 
allow you to put the acreage to another use if you agree to leave 
intact, and provide sufficient care for, representative samples of 
the crop in locations acceptable to us (The value of production to 
count for such acreage will be the number of pounds of harvested or 
appraised production taken from samples at the time harvest should 
have occurred multiplied by the support price. If you do not leave 
the required samples intact, or you fail to provide sufficient care 
for the samples, the value of production to count will be our 
appraisal made prior to giving you consent to put the acreage to 
another use multiplied by the support price); or
    (B) If you elect to continue to care for the crop, the value of 
production to count for the acreage will be the harvested 
production, or our reappraisal multiplied by the support price if 
additional damage occurs and the crop is not harvested;
    (2) All harvested production from insurable acreage multiplied 
by:
    (i) The average price for any tobacco sold on a warehouse floor; 
and
    (ii) Fair market value for all other tobacco sold or not sold.
    (d) Mature tobacco production that is damaged by insurable 
causes will be adjusted for quality based on the USDA Official 
Standard Grades for the insured type of tobacco.
    (e) To enable us to determine the fair market value of tobacco 
not sold through auction warehouses, you must give us the 
opportunity to inspect such tobacco before it is sold, contracted to 
be sold, or otherwise disposed. Failure to provide us the 
opportunity to inspect such tobacco may result in rejection of any 
claim for indemnity.
    (f) If we consider the best offer you receive for such tobacco 
to be inadequate, we may obtain additional offers on your behalf.
    (g) Once we agree that any carryover or current year's tobacco 
has no market value

[[Page 34784]]

due to insured causes, you must destroy it. If you disagree and 
refuse to destroy the tobacco with no value, we will determine the 
value and count it as production to count.
    14. Late Planting.
    (a) In lieu of late planting provisions in the Basic Provisions 
regarding acreage initially planted after the final planting date, 
insurance will be provided for acreage planted to the insured crop 
after the final planting date as follows:
    (1) For each acre or portion thereof planted during the first 10 
days after the final planting date, the farm yield will be reduced 
by 1 percent per day; and
    (2) For each acre or portion thereof planted during the 11th 
through the 15th day after the final planting date, the farm yield 
will be reduced by 2 percent per day.
    (b) If you plant enough acreage to fulfill the effective 
poundage marketing quota, there will be no reduction in the insured 
poundage quota as a result of any late planted acreage.
    15. Prevented Planting.
    The prevented planting provisions in the Basic Provisions are 
not applicable to quota tobacco.

    Signed in Washington, D.C., on June 19, 1998.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 98-16968 Filed 6-25-98; 8:45 am]
BILLING CODE 3410-08-P