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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

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Rules and Regulations Federal Register

13055 

Vol. 74, No. 57 

Thursday, March 26, 2009 

DEPARTMENT OF AGRICULTURE 

Federal Crop Insurance Corporation 

7 CFR Part 457 

RIN 0563–AB98 

Common Crop Insurance Regulations, 

Tobacco Crop Insurance Provisions 

AGENCY: Federal Crop Insurance 

Corporation, USDA. 

ACTION: Final rule. 

SUMMARY: The Federal Crop Insurance 

Corporation (FCIC) finalizes the 

Common Crop Insurance Regulations 

Tobacco Crop Provisions. The amended 

provisions removed the Quota Tobacco 

Crop Insurance Provisions, and revised 

the Guaranteed Tobacco Crop Insurance 

Provisions, and changed the title of the 

Guaranteed Tobacco Crop Insurance 

Provisions to Tobacco Crop Insurance 

Provisions. The intended effect of this 

action is to provide policy changes and 

clarify existing policy provisions to 

better meet the needs of insured 

producers. The changes will apply for 

the 2010 and succeeding crop years. 

DATES: This rule is effective May 26, 

2009. 

FOR FURTHER INFORMATION CONTACT: Gary 

Johnson, Risk Management Specialist, 

Product Management, Product 

Administration and Standards Division, 

Risk Management Agency, United States 

Department of Agriculture, P.O. Box 

419205, Stop 0812, Room 421, Kansas 

City, MO 64141–6205, telephone (816) 

926–7730. 

SUPPLEMENTARY INFORMATION: 

Executive Order 12866 

This rule has been determined to be 

non-significant for the purposes of 

Executive Order 12866 and, therefore, it 

has not been reviewed by the Office of 

Management and Budget (OMB). 

Paperwork Reduction Act of 1995 

Pursuant to the provisions of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. chapter 35), the collections of 

information in this rule have been 

approved by OMB under control 

number 0563–0053. 

E-Government Act Compliance 

FCIC is committed to complying with 

the E-Government Act of 2002, to 

promote the use of the Internet and 

other information technologies to 

provide increased opportunities for 

citizen access to Government 

information and services, and for other 

purposes. 

Unfunded Mandates Reform Act of 

1995 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA), Public 

Law 104–4, establishes requirements for 

Federal agencies to assess the effects of 

their regulatory actions on State, local, 

and tribal governments and the private 

sector. This rule contains no Federal 

mandates (under the regulatory 

provisions of title II of the UMRA) for 

State, local, and tribal governments or 

the private sector. Therefore, this rule is 

not subject to the requirements of 

sections 202 and 205 of UMRA. 

Executive Order 13132 

It has been determined under section 

1(a) of Executive Order 13132, 

Federalism, that this rule does not have 

sufficient implications to warrant 

consultation with the States. The 

provisions contained in this rule will 

not have a substantial direct effect on 

States, or on the relationship between 

the national government and the States, 

or on the distribution of power and 

responsibilities among the various 

levels of government. 

Regulatory Flexibility Act 

FCIC certifies that this regulation will 

not have a significant economic impact 

on a substantial number of small 

entities. Program requirements for the 

Federal crop insurance program are the 

same for all producers regardless of the 

size of their farming operation. For 

instance, all producers are required to 

submit an application and acreage 

report to establish their insurance 

guarantees and compute premium 

amounts, and all producers are required 

to submit a notice of loss and 

production information to determine the 

amount of an indemnity payment in the 

event of an insured cause of crop loss. 

Whether a producer has 10 acres or 

1000 acres, there is no difference in the 

kind of information collected. To ensure 

crop insurance is available to small 

entities, the Federal Crop Insurance Act 

authorizes FCIC to waive collection of 

administrative fees from limited 

resource farmers. FCIC believes this 

waiver helps to ensure small entities are 

given the same opportunities as large 

entities to manage their risks through 

the use of crop insurance. A Regulatory 

Flexibility Analysis has not been 

prepared since this regulation does not 

have an impact on small entities, and, 

therefore, this regulation is exempt from 

the provisions of the Regulatory 

Flexibility Act (5 U.S.C. 605). 

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. With respect to 

any direct action taken by FCIC or to 

require the insurance provider to take 

specific action under the terms of the 

crop insurance policy, the 

administrative appeal provisions 

published at 7 CFR part 11 must be 

exhausted before any action against 

FCIC for judicial review may be brought. 

Environmental Evaluation 

This action is not expected to have a 

significant economic impact on the 

quality of the human environment, 

health, or safety. Therefore, neither an 

Environmental Assessment nor an 

Environmental Impact Statement is 

needed. 

Background: 

13056 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

This rule finalizes changes to the 

Common Crop Insurance Regulations by 

removing the Quota Tobacco Crop 

Insurance Provisions and reserving 

§ 457.156. FCIC also changes the 

Guaranteed Tobacco Crop Insurance 

Provisions by changing the title to 

Tobacco Crop Insurance Provisions. The 

American Jobs Creation Act of 2004 

eliminated the tobacco quota support 

program and quota support price as 

administered by the Farm Service 

Agency (FSA). Prior to the American 

Jobs Creation Act of 2004, tobacco was 

sold in United States Department of 

Agriculture (USDA) auction 

warehouses. The prices paid by various 

auction warehouses by tobacco 

companies were based upon the quality 

and grade of the tobacco. Today the 

majority of tobacco is grown and sold 

under contract with a tobacco company. 

Therefore, a new environment exists for 

tobacco production and marketing and 

FCIC proposed to revise the tobacco 

policy to reflect this new environment. 

These changes were published by FCIC 

on Wednesday, May 23, 2007, as a 

notice of proposed rulemaking in the 

Federal Register at 72 FR 28895–28901. 

The public was afforded 60 days to 

submit written comments after the 

regulation was published in the Federal 

Register. 

A total of 207 public comments were 

received from 131 commenters. The 

commenters were insurance providers, 

agents, an insurance service 

organization, attorneys, trade 

associations, producers, grower 

associations, agriculture credit 

associations, State agricultural 

associations, State departments of 

agriculture, and other interested parties. 

Based on these public comments, 

FCIC will not require a tobacco 

producer to have a tobacco contract 

with a tobacco company for their 

tobacco to be eligible for crop insurance, 

nor will an insured with a contract be 

allowed to insure tobacco using a 

contract price. FCIC recognized the 

proposed rule requiring a tobacco 

contract could deny insurance coverage 

to tobacco producers in regions where a 

tobacco contract is traditionally not 

offered, such as the New England States. 

Also, FCIC recognized the proposed rule 

requiring a tobacco contract could deny 

insurance coverage for small tobacco 

producers in other regions who cannot 

obtain a tobacco contract. Since 

contracts are no longer required, all 

provisions related to the contracting 

requirement are also removed. This 

would include the use of a base price to 

determine the price election, 

requirements to sign contracts prior to 

the acreage reporting date and quality 

adjustment based on contractual 

standards. 

Due to statutory language contained 

in the Food, Conservation, and Energy 

Act of 2008, FCIC removed the ‘‘basic 

unit’’ definition in section 1 of the 

proposed rule and will retain the 

current ‘‘basic unit’’ definition in the 

current Guaranteed Tobacco Crop 

Provisions and Quota Tobacco Crop 

Provisions in this final rule. 

The public comments regarding the 

proposed rule and FCIC’s responses to 

the comments are listed below 

identifying issues and concerns, and the 

changes made, if any, to address the 

comments as follows: 

Comment: A commenter requested a 

clarification on the definition of 

‘‘average price received’’ in section 1. It 

appears the ‘‘average price received’’ is 

defined as the average price received for 

sold production. Also, this ‘‘average 

price received’’ is used in the 

calculation of quality adjustment in 

section 12(e)(4). Based on the definition, 

one would have to wait to quality adjust 

any tobacco until the production has 

actually been sold. In addition to 

waiting until the production is sold, it 

would not be possible to quality adjust 

mature appraised tobacco production. A 

change to the definition or an additional 

definition needs to be considered. 

Response: FCIC has removed the 

definition of ‘‘average price received’’ 

and will retain the existing policy 

definition of ‘‘average value,’’ which 

includes the average value of any 

production for the applicable tobacco 

type divided by the appraised pounds 

and/or harvested pounds without regard 

to discounts or incentives. Retention of 

the ‘‘average value’’ definition allows 

quality adjustment to be performed 

without waiting for the producer to sell 

the insured tobacco. 

Comment: A commenter questioned 

the phrase ‘‘without regard to discounts 

or incentives’’ in the definition of 

‘‘average price received’’ whether this 

means ‘‘excluding’’ discounts or 

incentives. 

Response: FCIC has removed the 

definition of ‘‘average price received’’ 

and will retain the existing policy 

definition of ‘‘average value’’. Therefore, 

discounts or incentives are not 

applicable. 

Comment: Comments were received 

opposing the definition of ‘‘basic unit’’ 

in section 1 and the provisions in 

section 2 that limits units by tobacco 

type. A few commenters agreed with the 

proposed rule ‘‘basic unit’’ definition to 

limit units by tobacco type, but stated 

FCIC should allow optional and 

enterprise units by the Special 

Provisions where appropriate. Other 

commenters stated division by basic or 

optional units by farm serial number 

(FSN) should be retained because of the 

occurrences of drastic weather patterns 

on one farm and not the other. Other 

commenters stated tobacco growers 

should be treated the same as producers 

of other Category B crops, which allows 

optional units by FSN or by section. 

Response: Due to statutory language 

in the Food, Conservation, and Energy 

Act of 2008, FCIC has removed the 

‘‘basic unit’’ definition in section 1 of 

the proposed rule and will retain the 

‘‘basic unit’’ definition in the current 

Guaranteed Tobacco Crop Provisions 

and Quota Tobacco Crop Provisions in 

this final rule. Section 2 of these Crop 

Provisions allows optional and 

enterprise units if authorized in the 

Special Provisions. 

Comment: A commenter suggested 

that if the definition of ‘‘commercial 

tobacco producer’’ is necessary, it 

should be included in the definition of 

‘‘tobacco contract’’ in reference to 

‘‘producer or entity’’. 

Response: FCIC is no longer requiring 

a tobacco producer to have a tobacco 

contract with a tobacco company for 

their tobacco to be eligible for crop 

insurance. Therefore, FCIC has removed 

the definition of ‘‘commercial tobacco 

producer’’ and all references to this term 

in this final rule. 

Comment: A commenter stated the 

definition of ‘‘contract price’’ needs to 

be clarified because tobacco contracts 

often contain multiple prices based on 

the type of tobacco grade and level of 

tobacco stalk position. 

Response: As stated above, FCIC is no 

longer requiring a tobacco producer to 

have a tobacco contract with a tobacco 

company for their tobacco to be eligible 

for crop insurance. Therefore, FCIC 

removed the definition of ‘‘contract 

price’’ and all references to this term in 

this final rule. 

Comment: A commenter stated the 

definition of ‘‘minimum acreage’’ needs 

clarification because the tobacco 

contract specifies the total pounds of 

tobacco to be delivered by the producer, 

plus the contract is not county specific. 

Response: As stated above, FCIC is no 

longer requiring a tobacco producer to 

have a tobacco contract with a tobacco 

company for their tobacco to be eligible 

for crop insurance. Therefore, FCIC 

removed the definition of ‘‘minimum 

acreage’’ and all references to this term 

in this final rule. 

Comment: A few comments were 

received regarding the definition of 

‘‘price election.’’ The commenters asked 

how would the price election be 

determined if an insured had multiple 

contracts for the same type of tobacco 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 13057 

within the unit. Another comment 

stated the definition does not recognize 

that contract prices will vary by the type 

and grade of tobacco. 

Response: As stated above, FCIC is no 

longer requiring a tobacco producer to 

have a tobacco contract with a tobacco 

company for their tobacco to be eligible 

for crop insurance. Since contracts are 

no longer required, contract prices will 

no longer be used. Therefore, FCIC 

removed the definition of ‘‘price 

election’’ in this final rule. The 

definition of ‘‘price election’’ contained 

in the Basic Provisions is applicable to 

these Tobacco Crop Insurance 

Provisions. 

Comment: A commenter noted FCIC 

deleted the definition of ‘‘production 

guarantee’’ and recommends FCIC 

should retain the old ‘‘production 

guarantee’’ definition in the policy and 

add the term ‘‘acres’’ multiplied by the 

approved yield, multiplied by the 

coverage level percentage selected. 

Response: Tobacco is an actual 

production history (APH) crop. 

Therefore, the definition of ‘‘production 

guarantee (per acre)’’ in the Basic 

Provisions is applicable to the Tobacco 

Crop Insurance Provisions and is 

consistent with other APH crops. No 

change has been made. 

Comment: A commenter questioned 

whether the definition of ‘‘tobacco bed’’ 

is relevant to today’s current tobacco 

farming operations. 

Response: Tobacco beds are still used 

by tobacco producers in their farming 

operations. Therefore, the definition of 

‘‘tobacco bed’’ is left in this final rule. 

Comment: A commenter 

recommended revising the definition of 

‘‘tobacco company’’ to include the terms 

‘‘tobacco company,’’ ‘‘commercial 

marketing association’’ and ‘‘tobacco 

handler’’ to reduce two other definitions 

into one. 

Response: As stated above, FCIC is no 

longer requiring a tobacco producer to 

have a tobacco contract with a tobacco 

company for their tobacco to be eligible 

for crop insurance. Therefore, FCIC 

removed the definitions of ‘‘tobacco 

company,’’ ‘‘commercial marketing 

association,’’ and ‘‘tobacco handler’’ and 

all references to these terms in this final 

rule. 

Comment: A few comments were 

received regarding the definition of 

‘‘tobacco contract’’. A commenter 

recommended revising the definition of 

‘‘tobacco contract’’ to state, ‘‘A written 

agreement between the insured 

producer or entity and a tobacco 

company.’’ This will clarify the insured 

must be a party to the underlying 

contract. Further, FCIC should revise 

subsections (a) and (b) accordingly. This 

revision is consistent with section 6(a), 

which requires the entity named on the 

tobacco contract to be the same as the 

entity named on the application for 

insurance. Another commenter stated 

tobacco companies will only give one 

contract name on their paperwork/ 

checks, even if a share exists. The 

proposed policy language and elsewhere 

needs additional review to address the 

problem of a tobacco contact being in 

one entity name but other entities (not 

named on the tobacco contract) also 

having a share they wish to insure. A 

commenter stated subsection (b) of the 

definition of ‘‘tobacco contract’’ 

includes the phrase, ‘‘(an option to 

purchase is not a commitment)’’ [to 

purchase the tobacco pounds specified]. 

This language was a problem before for 

another contract crop and suggested 

revising the language to comply with 

other contract crops. 

Response: As stated above, FCIC is no 

longer requiring a tobacco producer to 

have a tobacco contract with a tobacco 

company for their tobacco to be eligible 

for insurance. Therefore, FCIC removed 

the definition of ‘‘tobacco contract’’ and 

all references to this term in this final 

rule. 

Comment: A commenter stated, 

although tobacco types are defined in 

the Special Provisions, the definition of 

‘‘Tobacco types’’ should identify the 

various types of tobacco insured under 

the policy and include the caveat, not 

all types are insurable in all States. 

Response: It would be more confusing 

to add the insurable types to the policy 

because, as the commenter states, not all 

types are produced in all states. Further, 

new types may be developed that would 

require a revision to the policy to be 

effective. By including only the 

insurable tobacco types in a county in 

the Special Provisions, which are 

provided annually to the producer, 

there should be no confusion in any 

county what types are insurable. 

Therefore no change has been made. 

Comment: Comments were received 

opposing the proposed rule in section 2 

to limit units by type. A few 

commenters agreed with the unit 

division to limit basic units by type; but 

stated, if FCIC intends on limiting units 

by type, the inclusion of a Special 

Provision of Insurance statement will 

provide FCIC the flexibility if it later 

decides in certain instances, optional 

units or enterprise units are appropriate. 

Other commenters stated the unit 

division for basic and optional units by 

FSN contained in the current 

Guaranteed and Quota Tobacco Crop 

Provisions should be retained. Other 

commenters stated tobacco growers 

should be treated the same as producers 

of other Category B crops, which allows 

for optional units by FSN or by section. 

Response: Due to statutory language 

contained in the Food, Conservation, 

and Energy Act of 2008, FCIC removed 

the ‘‘basic unit’’ definition in section 1 

of the proposed rule and will retain the 

current ‘‘basic unit’’ definition in the 

current Guaranteed Tobacco Crop 

Provisions and Quota Tobacco Crop 

Provisions in this final rule. Section 2 

of these Crop Provisions allows optional 

and enterprise units by the Special 

Provisions. However, the program 

integrity problems that revising the 

definition of ‘‘basic unit’’ was intended 

to address still exist. The loss ratio 

remains high in many areas and there 

have been issues with producers 

shifting production between units and 

between policies. FCIC is examining 

other changes to the policy that will 

prevent such program vulnerabilities. 

Comment: A few commenters stated 

the term ‘‘sufficient acreage’’ as 

referenced in section 3(b) is a defined 

term and should be included in section 

1. A commenter asked why FCIC is 

imposing a set number of ‘‘sufficient 

acres’’ on an insured deemed to have 

acreage for producing their contract 

poundage and then reduce the 

production guarantee if the insured did 

not plant enough acreage to fill their 

contract. This language penalizes the 

insured for planting fewer acres than the 

required number of acres which would 

be expected to produce the contracted 

amount of production. This would be an 

issue between the insured and the 

tobacco company if the insured was not 

able to produce the number of pounds 

required to fulfill the contract. The 

commenter also states this provision is 

internally inconsistent and does not 

provide the basis upon which one can 

determine whether the acreage is 

sufficient. Another commenter 

suggested FCIC to reconsider section 3 

and recommend using language in the 

Loss Adjustment Manual (LAM) to 

address how the total production 

guarantee is computed for all other 

contracted crops. 

Response: As stated above, FCIC is no 

longer requiring a tobacco producer to 

have a tobacco contract with a tobacco 

company for their tobacco to be eligible 

for insurance. Therefore, there is no 

longer a ‘‘sufficient acreage’’ 

requirement and FCIC has removed all 

references to this term in this final rule. 

Comment: In reference to section 3(a), 

a commenter asked if Cigar Binder and 

Cigar Wrapper are tobacco types insured 

under the Tobacco Crop Insurance 

Provisions, and whether each insured 

tobacco type is insured as a separate 

crop, which is designated by a ‘‘crop 

13058 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

code’’ on the actuarial documents. Also, 

if a producer intends on insuring three 

types of tobacco, the commenter asks if 

the tobacco producer should be required 

to list all types separately on the 

application, will the tobacco producer 

be allowed to add a tobacco type at the 

acreage reporting date so long as the 

tobacco type is reported on their 

application, or with reference to the 

provision in subsection 7(a), are tobacco 

producers only allowed coverage if the 

specific tobacco type is timely applied 

for by sales closing date. 

Response: Cigar Binder and Cigar 

Wrapper and other insurable tobacco 

types listed on the Special Provisions 

are insured as separate crops under 

these Tobacco Crop Insurance 

Provisions. The tobacco producer must 

elect each tobacco type being insured by 

the sales closing date. The tobacco 

producer cannot add a tobacco type to 

the acreage report if the tobacco 

producer did not elect to insure the 

tobacco type by the sales closing date. 

Comment: A few comments were 

received regarding the requirement in 

section 6(a), which states the insured is 

to provide a copy of all tobacco 

contracts to the approved insurance 

provider on or before the acreage 

reporting date and the name on the 

tobacco contract match the insured 

entity name. The commenters ask 

whether it is FCIC’s intention the 

approved insurance provider, rather 

than the agent as designee/affiliate, 

must review each contract for this 

requirement. 

Response: As stated above, FCIC is no 

longer requiring a tobacco producer to 

have a tobacco contract with a tobacco 

company for their tobacco to be eligible 

for crop insurance. Therefore, no 

tobacco contracts have to be submitted 

by the insured producer. 

Comment: A few commenters 

questioned why section 6(b) is requiring 

a copy of a written lease agreement, if 

applicable, between the insured and any 

landlord or tenant identifying all 

persons sharing in the crop and must be 

provided on or before the acreage 

reporting date. 

Response: There have been issues in 

the past with the proper identification 

of persons with a share in the crop 

when leases have been involved and the 

amount of such shares. FCIC added this 

provision to assist insurance providers 

in properly determining and verifying 

who has an insurable interest and that 

the reported shares in the insured crop 

are accurate. 

Comment: A commenter stated the 

following: (1) The use of the phrase, 

‘‘elect to insure’’ in section 7(a) means 

an insured is not required to insure each 

tobacco type the insured grows in the 

county; (2) It is unclear when the 

insured must report all tobacco (insured 

or insurable) types produced in a 

county; and (3) Further, if the tobacco 

producer grows tobacco that is not 

insurable, i.e., not grown under a 

tobacco contract, the commenter asked 

whether the insured must report this 

tobacco too. 

Response: (1) FCIC agrees the use of 

the phrase, ‘‘elect to insure’’ in section 

7(a) means a tobacco producer is not 

required to insure all insurable tobacco 

types the tobacco producer grows in the 

county. (2) and (3) Section 6 of the Basic 

Provisions requires producers to report 

all acreage of the crop in the county, 

including insurable and uninsurable on 

or before the acreage reporting date. 

Since each type is considered a separate 

crop, all insurable and uninsurable 

acreage of each type the producer elects 

to insure must be reported. However, as 

stated above, the provisions regarding 

the requirement to have a contract with 

a tobacco company have been removed. 

Therefore, failure to have a contract no 

longer makes the tobacco uninsurable. 

Comment: A commenter stated the 

provision in section 7(a) provides 

insureds the option to elect which types 

of tobacco to insure by treating each 

tobacco type as a separate crop, and 

presumably a separate administrative 

fee would apply to each type insured. 

The commenter recommended the 

provisions in section 7(a) be revised to 

require all insurable tobacco types 

grown by the insured to be the crop 

insured. This would be similar to the 

Dry Beans Crop Provisions which 

requires all dry bean types to be the 

crop insured. 

Response: FCIC has always allowed 

tobacco types to be insured as separate 

crops with separate administrative fees. 

This provision simply provides a 

clarification of the existing requirement. 

This proposed change would be a 

substantive change for which the public 

was not provided the opportunity to 

comment. Therefore, no change can be 

made. 

Comment: Comments were received 

opposing the proposed rule that only 

tobacco grown under a tobacco contract 

is eligible for insurance. Commenters 

stated FCIC’s contention that the 

majority of tobacco is grown under 

contract with a tobacco company is not 

accurate as to all types of tobacco in all 

regions. Also, the commenter stated this 

requirement will adversely impact 

tobacco producers in the New England 

States, substantially all of whom grow 

the tobacco types for which tobacco 

contracts are not traditionally offered. 

A commenter disagreed with FCIC’s 

certification in the Regulatory 

Flexibility Act that the proposed rule 

regulation will not have significant 

impact on a substantial number of small 

entities. The requirement of a tobacco 

contract will effectively disqualify a 

significant number of Cigar Binder, 

Filler and Wrapper tobacco producers. 

For this reason the commenter believes 

FCIC is not in compliance with the 

Regulatory Flexibility Act. Some 

commenters agreed with the proposed 

rule requirement to insure only tobacco 

grown under contract for the majority of 

tobacco acreage, but FCIC should allow 

insurance for certain tobacco types 

grown without a tobacco contract via 

the Special Provisions. 

Response: As stated above, for many 

of the reasons cited by these 

commenters, FCIC is no longer requiring 

a tobacco producer to have a tobacco 

contract with a tobacco company for 

their tobacco to be eligible for crop 

insurance. Therefore, FCIC removed all 

references to this term ‘‘tobacco 

contract’’ in this final rule. 

Comment: A comment recommended 

adding language to section 8(b) to read, 

‘‘Failure to obtain plants for replanting 

is not an insurable reason not to 

replant’’. 

Response: The definition of ‘‘practical 

to replant’’ in the Basic Provisions states 

it will be considered ‘‘practical to 

replant’’ regardless of the availability of 

plants or seed. Thus, if the tobacco 

producer fails to obtain tobacco plants 

for any reason and does not replant the 

damaged acreage when it is practical to 

replant such acreage is not insured. 

Therefore, no change has been made. 

Comment: A few comments were 

received regarding changing the end of 

insurance period date in section 9(f) for 

Flue-Cured tobacco in the States of 

Alabama, Florida, Georgia, North 

Carolina, and Virginia, and moving 

dates for all other tobacco types to 15 

days earlier than currently indicated. 

Response: FCIC based the end of the 

insurance periods on agronomic 

conditions in those States. However, if 

the commenter has information to 

support changes to the end of insurance 

periods; such information can be 

submitted to the appropriate Risk 

Management Agency (RMA) Regional 

Office for consideration. The current 

policy provisions allow for exceptions 

to the end of insurance period dates by 

the Special Provisions. No change has 

been made. 

Comment: A commenter questioned 

in reference to section 10, who can, or 

is going to be required to prove or 

disprove a fire was caused by lightning. 

Voltage surges and short circuits can 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 13059 

leave the same physical evidence as 

lightning in mechanical devices. 

Lightning striking in the middle of a 

tobacco field or tobacco barn will leave 

no physical evidence of its cause. 

Response: In accordance with section 

14(e) of the Basic Provision, the burden 

of proof is on the insured to show that 

the loss was due to an insurable cause. 

This means to not only establish that a 

fire occurred, the insured must also 

establish that the fire was due to a 

naturally occurring event (i.e., 

lightning). Since fire can be caused by 

other naturally occurring events other 

than lightning, FCIC removed the terms 

‘‘if caused by lightning.’’ As long as the 

fire can be proven to be from any 

naturally occurring event, it is an 

insurable cause of loss. 

Comment: One commenter asked 

when representative samples are 

required in reference to section 11. Both 

the Basic Provisions and the Tobacco 

Crop Insurance Provisions indicate 

representative samples are required, but 

neither one says when. 

Response: Section 11(b) states that if 

a notice of damage is filed the stalks and 

stubble must be left intact. However, it 

does not state when samples must be 

left for unharvested acreage. Section 

11(a) is revised to require representative 

samples be left for any field that will not 

be harvested. 

Comment: A commenter stated 

section 12(a) refers to the commingling 

of production. The proposed rule 

permits insurance for basic units by 

type only. So, when there is 

commingled production by type, the 

commenter asks whether the 

commingled production is allocated on 

a pro rata basis. In the absence of 

optional units, FCIC must clarify the 

concept of commingled production. 

Response: Section 12(a) references the 

loss will be determined on a unit basis. 

Due to statutory language contained in 

the Food, Conservation, and Energy Act 

of 2008, FCIC removed the ‘‘basic unit’’ 

definition of section 1 of the proposed 

rule and will retain the current ‘‘basic 

unit’’ definition in the current 

Guaranteed Tobacco Crop Provisions 

and Quota Tobacco Crop Provisions in 

this final rule. Optional and enterprise 

units may be allowed by the Special 

Provisions. FCIC will also retain the 

current language in the section 

12(a)(1)(2) of the Guaranteed Tobacco 

Crop Provisions that addressed how 

commingled production is handled for 

basic and optional units in this final 

rule and makes these Tobacco Crop 

Provisions consistent with other crop 

policies. If production is commingled, 

the production will be allocated to the 

liability on the harvested acreage for 

each unit and in accordance with 

procedures approved by FCIC. 

Comment: A commenter stated if 

section 12(c) does not define 

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

approved insurance provider cannot 

enforce section 12(c)(1)(i). 

Response: The definition of 

‘‘production guarantee (per acre)’’ in the 

Basic Provisions is applicable to these 

Tobacco Crop Insurance Provisions. 

Therefore, there should be no difficulty 

in applying section 12(c)(1)(i). 

Comment: A commenter 

recommended adding a provision in 

section 12(c) stating production to count 

will be at least 35 percent of all 

unharvested acreage. This provision is 

warranted due to the costs for 

harvesting tobacco which would not be 

incurred for an unharvested crop. 

Response: FCIC did not propose 

changes regarding production to count 

on unharvested acreage so the public 

was not afforded an opportunity to 

provide comments. Therefore, no 

change can be made as a result of this 

comment. 

Comment: A commenter stated 

section 12(c)(1)(i)(E) is inconsistent with 

section 11. Accordingly, this provision 

should be amended to read, ‘‘Of any 

type of tobacco when the stalks and 

stubble have been destroyed in violation 

of section 11(b)’’. 

Response: FCIC has made the change 

for clarification. 

Comment: A few commenters stated 

they were not in favor of the addition 

of prevented planting coverage for 

tobacco and recommend that it be 

removed. 

Response: Prevented planting is a 

legitimate peril faced by tobacco 

producers. These provisions provide 

coverage for tobacco producers whose 

acreage is prevented from being planted 

due to an insured cause of loss. These 

provisions make the tobacco crop 

insurance program consistent with other 

crop programs. Therefore, FCIC will 

retain the prevented planting coverage 

provisions. 

In addition to the changes made 

above, FCIC will remove the paragraph 

immediately preceding section 1 which 

refers to the order of priority of 

provisions in the event of conflict. This 

information is contained in the Basic 

Provisions; therefore, it is duplicative 

and should be removed in the Tobacco 

Crop Insurance Provisions. 

FCIC has also added a new section 

12(e) that allows claims to be settled 

based on appraised production even if 

the acreage has been harvested unless 

we determine that the harvested 

production is inconsistent with 

appraised production and the producer 

cannot prove that an insurable cause of 

loss occurred between the appraisal and 

the end of the insurance period that 

could account for the reduction in 

production. Once tobacco has been 

harvested and removed from the field it 

is placed in a curing barn and loses its 

identity. This makes it difficult to 

determine the total production to count 

at the unit level. FCIC realizes this is a 

program vulnerability. This language 

allows approved insurance providers to 

settle tobacco claims based on appraised 

tobacco production in the field and 

helps ensure accuracy in determining 

production to count for claims 

purposes. The appraised production 

will be determined in accordance with 

loss adjustment procedures approved by 

FCIC. If the claim is settled on the 

appraised production, redesignated 

section 12(f) regarding quality 

adjustment is not applicable, since 

quality adjustment on tobacco can only 

be determined after the tobacco is cured. 

List of Subjects in 7 CFR Part 457 

Crop insurance, Tobacco, Reporting, 

and recordkeeping requirements. 

Final Rule 

■ Accordingly, as set forth in the 

preamble, the Federal Crop Insurance 

Corporation amends 7 CFR part 457 as 

follows: 

PART 457—COMMON CROP 

INSURANCE REGULATIONS 

■ 1. The authority citation for 7 CFR 

part 457 continues to read as follows: 

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

■ 2. Revise § 457.136 to read as follows: 

§ 457.136 Tobacco crop insurance 

provisions 

The Tobacco Crop Insurance 

Provisions for the 2010 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: 

Tobacco Crop Insurance Provisions 

1. Definitions. 

Average value. For appraised 

production, the value of such 

production divided by the appraised 

pounds for the tobacco types. For 

harvested production, the value of such 

production divided by the harvested 

pounds for the tobacco type. 

Basic unit. In lieu of the definition in 

the Basic Provisions, a basic unit is all 

13060 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

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 indentified by 

a single FSA farm serial number at the 

time insurance first attaches under these 

provisions for the crop year. 

Harvest. Cutting or priming and 

removing all insured tobacco from the 

unit. 

Hydroponic plants. Seedlings grown 

in liquid nutrient solutions. 

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. 

Planted acreage. In addition to the 

definition contained in the Basic 

provisions, 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. 

Priming. A method of harvesting 

tobacco by which one or more leaves are 

removed from the stalk as they mature. 

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. 

Tobacco types. Insurable tobacco as 

shown on the Special Provisions of 

Insurance. 

2. Unit Division. 

A basic unit will be determined in 

accordance with the definition of basic 

unit contained in section 1 of these Crop 

Provisions. Optional and enterprise 

units may be allowed by the Special 

Provisions of Insurance. 

3. Insurance Guarantees, Coverage 

Levels, and Prices for Determining 

Indemnities. 

In addition to the requirements of 

section 3 of the Basic Provisions, you 

must select only one price election 

percentage and coverage level for each 

tobacco type designated in the Special 

Provisions of Insurance that you elect to 

insure. 

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. 

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, you 

must provide a copy of any written lease 

agreement, if applicable, between you 

and any landlord or tenant. The written 

lease agreement must: 

(1) Identify all other persons sharing 

in the crop; and 

(2) Be submitted to us on or before the 

acreage reporting date. 

7. Insured Crop. 

(a) In accordance with section 8 of the 

Basic Provisions, the insured crop will 

be each tobacco type you elect to insure 

and for which a premium rate is 

provided by the actuarial documents: 

(1) In which you have a share; 

(2) That meets all rotation 

requirements on the Special Provisions 

of Insurance. 

(b) You will be considered to have a 

share in the insured crop if you retain 

control of the acreage on which the 

tobacco is grown and you are at risk of 

loss. 

8. Insurable Acreage. 

In addition to the provisions of 

section 9 of the Basic Provisions, we 

will not insure any acreage that is: 

(a) 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 of Insurance 

or by written agreement; or 

(b) Damaged before the final planting 

date to the extent that the majority of 

producers in the area would normally 

not further care for the tobacco crop, 

unless such crop is replanted or we 

agree that replanting is not practical. 

9. Insurance Period. 

In lieu of the provisions of section 11 

of the Basic Provisions, coverage ends at 

the earlier of: 

(a) Total destruction of the tobacco on 

the unit; 

(b) Removal of the tobacco from the 

unit where grown, except for curing, 

grading, and packing; 

(c) Abandonment of the crop on the 

unit; 

(d) Final adjustment of the loss on the 

unit; or 

(e) The calendar date for the end of 

the insurance period, which is the date 

immediately following planting and 

designated by tobacco types and states 

(or as otherwise stated on the Special 

Provisions of Insurance) as follows: 

(i) Flue cured—November 30 in North 

Carolina and Virginia; 

(ii) Flue cured—October 31 in 

Alabama, Florida, Georgia, and South 

Carolina; 

(iii) Burley—February 28 in all states; 

(iv) Dark air cured—March 15 in 

Kentucky, Tennessee, and Virginia; 

(v) Fire cured—April 15 in Kentucky, 

Tennessee, and Virginia; 

(vi) Cigar Binder, Cigar Filler, and 

Cigar Wrapper—April 30 in 

Connecticut, Massachusetts, 

Pennsylvania, and Wisconsin; and 

(vii) Maryland type—May 15 in 

Maryland and Pennsylvania. 

10. 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 due to a cause of loss specified 

in sections 10(a) through (g) that also 

occurs during the insurance period. 

11. Duties In The Event of Damage or 

Loss. 

(a) In accordance with section 14 of 

the Basic Provisions, you must maintain 

representative samples of each 

unharvested tobacco crop (type) for our 

inspection. The representative samples 

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. 

(b) If you have filed a notice of 

damage, you must leave all tobacco 

stalks and stubble in the unit intact for 

our inspection. The stalks and stubble 

must not be destroyed until we give you 

written consent to do so or until 30 days 

after the end of the insurance period, 

whichever is earlier. 

12. Settlement of Claim. 

(a) We will determine your loss on a 

unit basis. In the event you are unable 

to provide separate acceptable 

production records: 

(1) For any optional unit, we will 

combine all optional units for which 

such production records were not 

provided; or 

(2) For any basic units, we will 

allocate any commingled production to 

such units in proportion to our liability 

on the harvested acreage for the units. 

(b) In the event of loss or damage 

covered by this policy, we will settle 

your claim by: 

(1) Multiplying the number of insured 

acres by your applicable production 

guarantee (per acre); 

(2) Multiplying the result of section 

12(b)(1) by your price election; 

(3) Multiplying the total production to 

count determined in section 12(c) by 

your price election; 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 13061 

(4) Subtracting the result of section 

12(b)(3) from the result of section 

12(b)(2); and 

(5) Multiplying the result of section 

12(b)(4) by your share. 

For example: 

You have 100 percent share in a unit 

to produce 3,000 pounds of Burley 

tobacco, a production guarantee of 1,950 

pounds (APH yield of 3,000 pounds × 

.65 coverage level), you plant 1.0 acre, 

your price election is $1.50 per pound, 

and your production to count is 500 

pounds. Your indemnity would be 

calculated as follows: 

(1) 1.0 acre × 1,950 pounds 

production guarantee = 1,950 pounds; 

(2) 1,950 pounds × $1.50 price 

election = $2,925.00 value of the 

production guarantee; 

(3) 500 pounds production to count × 

$1.50 price election = $750.00 value of 

the production to count; 

(4) $2,925.00 value of the production 

guarantee—$750.00 value of the 

production to count = $2,175.00; and 

(5) $2,175.00 × 1.000 share = 

$2,175.00 indemnity. 

(c) The total production to count (in 

pounds) from all insurable acreage on 

the unit will include: 

(1) All appraised production as 

follows: 

(i) Not less than the production 

guarantee for acreage: 

(A) That is abandoned; 

(B) Put to another use without our 

consent; 

(C) That is damaged solely by 

uninsured causes; 

(D) For which you fail to provide 

records of production, that are 

acceptable to us; or 

(E) For any type of tobacco when the 

stalks and stubble have been destroyed 

without our consent under section 

11(b); 

(ii) Production lost due to uninsured 

causes. 

(iii) Potential production on insured 

acreage you intend to put to another use 

or abandon, if you and we agree on the 

appraised amount of production. Upon 

such agreement, the insurance period 

for that acreage will end when you put 

the acreage to another use or abandon 

the crop. If agreement on the appraised 

amount of production is not reached: 

(A) If you do not elect to continue to 

care for the crop, we may give you 

consent to put the acreage to another 

use if you agree to leave intact, and 

provide sufficient care for, 

representative samples of the crop in 

locations acceptable to us (The amount 

of production to count for such acreage 

will be based on the harvested 

production or appraisals from the 

samples at the time harvest should have 

occurred. If you do not leave the 

required samples intact, or fail to 

provide sufficient care for the samples, 

our appraisal made prior to giving you 

consent to put the acreage to another 

use will be used to determine the 

amount of production to count.); or 

(B) If you elect to continue to care for 

the crop, the amount of production to 

count for the acreage will be the 

harvested production, or our reappraisal 

if additional damage occurs and the 

crop is not harvested; and 

(2) All harvested production from 

insurable acreage. 

(d) Once we agree the current year’s 

tobacco has no average value due to an 

insured cause of loss, you must destroy 

it, and it will not be considered 

production to count. If you refuse to 

destroy such tobacco, we will include it 

as production to count and value it at 

the applicable price election. 

(e) In lieu of section 15(b) of the Basic 

Provisions, if we have conducted an 

appraisal of your insured crop and we 

determine that the harvested production 

you report is inconsistent with the 

appraised production and you cannot 

prove that an insurable cause of loss 

occurred between the appraisal and the 

end of the insurance period that can 

account for the reduction in production, 

your claim will be settled based on the 

appraised production on insured 

acreage, even if you have harvested the 

acreage. If we settle your claim based on 

your appraised production, section 12(f) 

regarding quality adjustment is not 

applicable. 

(f) Mature tobacco may be adjusted for 

quality deficiencies when production 

has been damaged by insurable causes. 

(1) You must contact us before any 

tobacco is disposed of so we can inspect 

the tobacco to determine the extent of 

the damage. 

(2) Our inspection will be used to 

determine whether the average value is 

reasonable. Based on amount of damage 

determined during the inspection, if the 

average value is: 

(i) Reasonable, such average value 

will be used to determine the quality 

adjustment in section 12(f)(5); 

(ii) Unreasonable, we may adjust the 

average value used to calculate the 

quality adjustment in section 12(f)(5). 

(3) If you dispose of any production 

without giving us the opportunity to 

have the tobacco inspected, you will not 

receive a quality adjustment for such 

tobacco, regardless of the average value 

of the production. 

(4) Production to count will only be 

reduced if the average value for 

damaged tobacco is less than 75 percent 

of your tobacco price election. You must 

provide us with records that are 

acceptable to us which clearly shows 

the number of pounds, price per pound, 

and the quality of such tobacco. 

(5) Any reduction in the production to 

count will be determined by: 

(i) Dividing the average value per 

pound as determined by us in 

accordance with section 12(f)(2) of these 

Crop Provisions by your applicable 

price election; and 

(ii) Multiplying this result by the 

number of pounds of damaged 

production. 

13. Late Planting. 

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: 

(a) The production guarantee (per 

acre) for acreage planted during the late 

planting period will be reduced by: 

(1) One percent per day for the 1st 

through the 10th day; and 

(2) Two percent per day for the 11th 

through the 15th day; 

(b) The premium amount for insurable 

acreage planted to the insured crop after 

the final planting date will be the same 

as that for timely planted acreage. If the 

amount of premium you are required to 

pay (gross premium less our subsidy) for 

acreage planted after the final planting 

date exceeds the liability on such 

acreage, coverage for those acres will 

not be provided (no premium will be 

due and no indemnity will be paid for 

such acreage). 

14. Prevented Planting. 

Your prevented planting coverage will 

be 35 percent of your production 

guarantee for timely planted acreage. 

Additional prevented planting coverage 

levels are not available for tobacco. 

§ 457.156 [Removed and Reserved] 

■ 3. Remove and reserve § 457.156. 

Signed in Washington, DC, on March 19, 

2009. 

William J. Murphy, 

Acting Manager, Federal Crop Insurance 

Corporation. 

[FR Doc. E9–6726 Filed 3–25–09; 8:45 am] 

BILLING CODE 3410–08–P