[Federal Register Volume 75, Number 164 (Wednesday, August 25, 2010)]
[Rules and Regulations]
[Pages 52218-52233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-20619]
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DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Part 457
RIN 0563-AC10
Common Crop Insurance Regulations; Apple Crop Insurance
Provisions
AGENCY: Federal Crop Insurance Corporation, USDA.
ACTION: Final rule.
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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the
Common Crop Insurance Regulations, Apple 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, and to reduce vulnerability to program fraud, waste, and
abuse. The changes will apply for the 2011 and succeeding crop years.
DATES: This rule is effective August 25, 2010.
FOR FURTHER INFORMATION CONTACT: Erin Albright, Risk Management
Specialist, Product Management, Product Administration and Standards
Division, Risk Management Agency, United States Department of
Agriculture, Beacon Facility--Mail Stop 0812, PO Box 419205, Kansas
City, MO 64141-6205, telephone (816) 926-7730.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
The Office of Management and Budget (OMB) has determined that this
rule is non-significant for the purposes of Executive Order 12866 and,
therefore, it has not been reviewed by 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 through March
31, 2012.
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)
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 that 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 final 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
This rule finalizes changes to the Common Crop Insurance
Regulations, Apple Crop Insurance Provisions that were published by
FCIC on September 8, 2009, as a notice of proposed rulemaking in the
Federal Register at 74 FR 46023--46026. The public was afforded 60 days
to submit written comments after the regulation was published in the
Federal Register. Based on comments received and specific requests to
extend the comment period, FCIC published a notice in the Federal
Register at 74 FR 59108 on November 17, 2009, extending the initial 60-
day comment period for an additional 30 days, until December 17, 2009.
A total of 193 comments were received from 39 commenters. The
[[Page 52219]]
commenters were members of the U.S. Congress, insurance providers,
State agricultural associations, agents, an insurance service
organization, producers, State departments of agriculture, grower
associations, agricultural credit associations, and other interested
parties.
The public comments received regarding the proposed rule and FCIC's
responses to the comments are as follows:
General
Comment: Several commenters urged FCIC to extend the comment
period. A few commenters stated due to the public comment period
overlapping with the apple harvest in some areas, sixty days was not
adequate to properly review the proposed changes. The very producers
the proposed amendment affected need ample time to study the changes
and make their comments when not in the middle of their busy harvest
season. An extended comment period would allow producers a fair chance
to engage themselves in an issue directly affecting their livelihood. A
commenter recommended extending the comment period six months and
delaying the changes until the 2011 crop year. Another commenter
recommended extending the comment period 30 days.
Response: FCIC elected to reopen the comment period for 30 days and
on November 17, 2009, a notice of reopening and extension of the
comment period was published in the Federal Register. Written comments
and opinions on the proposed rule were accepted until close of business
on December 17, 2009. The changes in this rule will be effective for
the 2011 crop year.
Comment: A commenter stated the changes listed in the proposed rule
seem reasonable. However, the commenter stressed the importance of
letting each producer insure by orchard block, and not just as a farm
entity. Each orchard block is in a different location and carries a
different variety, and therefore a different value of ``fresh apple
production.'' The location can also determine whether a certain block
is more prone to weather damage than another. Considering these
variables, it would be unreasonable to force apple producers to insure
as a farm entity rather than by block.
Response: Crop insurance is provided on a unit basis in accordance
with the Basic Provisions and section 2 of the Apple Crop Provisions,
not by block or farm entity. Therefore, policyholders must report
acreage of a crop on a unit basis because all insurable acreage of
apples within the unit is the basis for determining coverage, premium,
and indemnity. Apple acreage may be divided into optional units
according to section 34 of the Basic Provisions and section 2 of the
Apple Crop Insurance Provisions. Section 2 of the Apple Crop Insurance
Provisions allows optional units on noncontiguous land or for different
types. No change has been made.
Comment: A commenter requested that a packing house inspection on
apples not be added to the policy. The commenter stated that apples are
already a perishable product and delays can cost the producer a great
deal especially if the product has been damaged.
Response: The current Apple Crop Provisions do not reference
packing house inspections and no changes regarding packing house
inspections were proposed. No change has been made.
Comment: Several commenters urged FCIC to increase the price
election for processing apples. A few commenters stated they do not
spray, fertilize, prune, weed spray or thin differently for processing
apples or fresh market apples in their area, but realize this is not
the case in every State. Because of this, the commenters think the
processing apple price election is too low. A commenter stated their
reason for the requested price increase is the U.S. Standards for
processing apples, established on June 1, 1961, no longer reflects the
present industry standards that producers must meet. These new
standards are much higher and are more costly to meet. Comparing a
large apple processing plant's processing requirements to U.S.
1 Processing or U.S. 1, the quality requirements are
U.S. 1 not U.S. 1 Processing. This is especially true
in reference to peeling the apple. In another processor's standard, the
amount of allowable defects is 2 percent by weight not the 5 percent
allowed by U.S. 1 processing.
A commenter recommended the processing apple price be 50 percent of
the fresh market apple price. A few commenters recommended the
processing price election be $6.00 to $7.00 per bushel. A few
commenters stated the processing price election should be $5.50 per
bushel. Another commenter stated the average price received for
processing over the past three years in their area was $4.54 and
believes this should be a minimum price for processing apples.
Response: FCIC establishes the price for apples through the Special
Provisions because such prices must be set each year. Further, the
price is not based on the cost of producing the crop. The price is
based on the best estimate of the average price producers can expect to
receive for mature on-tree fruit ready for harvest. Since the Federal
Crop Insurance Act (Act) limits coverage to crops in the field, with
only a few exceptions, post-harvesting costs are excluded from the
price data used to arrive at the value of processing apples for crop
insurance purposes. Further, FCIC has no authority to arbitrarily set
the suggested price or set a minimum price. According to the Act, the
price election is the expected market price at the time of harvest. Any
change to price elections for apples will be stated in the Special
Provisions. No change has been made.
Section 1--Definitions
Comment: A few commenters stated the definition of ``damaged apple
production'' should be revised to indicate that U.S. Fancy or better
may be modified in the Special Provisions to make it clear that the
Special Provisions have the authority to change these grades (i.e.
Washington Fancy Grade, marketing orders, etc.).
Response: The definition of ``grade standards'' has language
referencing the Special Provisions to provide for the use of existing
or acceptable apple grade standards that are approved and enforced by
individual States, regions, or organizations. This is to prevent
producers from being penalized because their State or area uses a
slightly different standard. For example, Washington Fancy Grade is
comparable to U.S. Fancy Grade. However, for the purposes of
determining damage, only those standards provided in the Special
Provisions, which are comparable to U.S. No. 1 Processing Grade and
U.S. Fancy Grade, will be used. No change has been made.
Comment: A commenter stated the proposed definition of ``fresh
apple production'' stating policyholders must ``follow the recommended
cultural practices generally in use for fresh apple acreage in the
county as determined by agricultural experts'' is not practical.
According to the Common Crop Insurance Policy Basic Provisions,
agricultural experts are ``persons who are employed by the Cooperative
State Research, Education and Extension Service or the agricultural
departments of universities, or other person approved by FCIC.'' The
commenter believed the ``expert'' should be the crop adjuster using
guidelines to determine what apple variety is commonly grown for
processing (ex. Taylor Rome or York). The extension agent is charged to
help educate the commercial farmer using research based information.
The
[[Page 52220]]
commenter believed extension agents should not be a regulator/expert
for crop insurance.
Response: Due to frequent changes in apple cultural practices apple
growers used in different areas of the country, neither FCIC nor the
insurance providers have the knowledge necessary to determine the
recommended cultural practices generally used for the apple acreage in
the area and, therefore, has deferred such determinations to
agricultural experts who do have the knowledge to determine cultural
practices. FCIC has revised the phrase ``as determined by agricultural
experts'' to ``in a manner generally recognized by agricultural
experts'' to be consistent with the definition of ``good farming
practices'' in the Basic Provisions.
Comment: Several comments were received regarding subparagraph (4)
in the definition of ``fresh apple production.'' A few commenters
understood the necessity and rationale behind the proposed rule change
to the definition of ``fresh apple production.'' A commenter
appreciated FCIC taking steps to avoid fraud and abuse of crop
insurance. Another commenter was in favor of the proposal to clarify
the definition of ``fresh apple production.'' While the commenter
believed this will cause some concern in some of the apple growing
areas, they believe it is needed to improve program integrity.
Response: FCIC believes such changes are necessary to protect the
integrity of the program. No change has been made.
Comment: Several commenters stated that in North Carolina the
majority of apples orchards are sprayed, mowed and maintained to grow
fresh apple production. Many of the apple producers in North Carolina
have renewed their orchards over the past few years by planting new
varieties specifically for the fresh market. However, in the past five
years, North Carolina has received adverse weather conditions resulting
in damaged apple production. The result of these conditions has been
that apples originally grown for the fresh market have had to be
diverted for processing. The commenters stated because the proposed
rule requires ``verifiable'' proof that at least fifty-percent of the
fresh apple acreage was sold as fresh apples in one or more of the past
three years, many of North Carolina's largest producers would be locked
out of the market for fresh market apple insurance because of the
unique weather conditions they have experienced in the past three
years. The proposed amendments would basically eliminate crop insurance
for producers who have suffered losses beyond their control, at a time
when those same producers are most in need of a safety net to manage
risk (and to access credit for another crop year). A commenter
questioned what the proposed changes to the definition of ``fresh apple
production'' would do to a policyholder's fresh apple production
coverage if it was damaged three years in a row. It seems as though
that would be no fault of the policyholder (since due to an insurable
cause of loss) but would result in the policyholder not being able to
insure the apples as fresh. Therefore, the commenters urged FCIC to
take into account the weather related challenges apple producers have
encountered by lengthening the time period in which apple producers can
demonstrate in one of those years they have sold at least 50 percent of
their apple acreage in the fresh market. Several commenters recommended
lengthening the time period to at least five years, as opposed to
three. Another commenter recommended a threshold of two of the last
five years as this would be consistent with other coverage thresholds,
such as written agreements for grapes. A few commenters recommended
leaving the policy as it currently is and not making the proposed
changes.
Response: FCIC understands apple producers may be subject to
conditions that are out of their control. However, there have been
issues with respect to whether producers seeking insurance have the
experience or whether producers follow cultural practices appropriate
to produce fresh apples. Fresh apples receive a higher price than
processing apples and policyholders must demonstrate that they can
produce fresh apples to be eligible to insure their apple acreage as
fresh. However, FCIC agrees the proposed number of years in which
policyholders must demonstrate they have sold at least 50 percent of
their apple production as fresh to be eligible to insure their acreage
as fresh may be too restrictive. Therefore, FCIC has revised the
definition of ``fresh apple production'' by lengthening the time period
in which policyholders can demonstrate that they have sold at least 50
percent of their production from fresh apple acreage as fresh apples to
one of the last four crop years. This time period is consistent with
section 7 of the Apple Crop Provisions which requires apples be grown
on tree varieties that are adapted to the area and have, in at least
one of the previous four years, produced a certain amount of production
to be insured.
Comment: A few commenters stated the States in the Pacific
Northwest Region primarily produce apples only for the fresh market
and, therefore, this region should have more stringent requirements for
substantiating fresh production in the definition of ``fresh apple
production.'' The commenters recommended these requirements include
requiring the producer to have records to support two years in the past
four years or possibly even two years in the past three years. Also,
the producer must be able to provide pack-out records and the
percentage of fresh history should be greater than 50 percent.
A commenter stated apple producers are subject to a variety of
growing conditions that are uncontrollable and cannot be anticipated.
Additionally, apple producers across the country employ different
growing methods, face different growing challenges, and grow very
different produce. What complicates the issue even further is the fact
that FCIC would use an average of the previous three years sales for
determining if producers are able to buy all fresh insurance or a
mixture of fresh and processing insurance. Asking producers who have a
significant financial investment in their product to carry insurance
that would not cover their input costs is not sound policy.
Response: FCIC does not believe it is necessary to have more
stringent requirements for substantiating fresh production in the
Pacific Northwest Region. The intent of the provisions is just to
ensure that the apples are intended for a fresh market and that the
producer has the capability of producing fresh market apples. The final
provisions should accomplish these goals. Therefore, the fresh apple
production requirements will remain consistent from region to region.
No change has been made.
Comment: A few commenters stated there needs to be clarification in
subparagraph (4) of the definition of ``fresh apple production'' so
that events beyond the producer's control do not affect the designation
of acreage as fresh apple acreage. A commenter requested that any year
declared as an emergency by the Governor be excluded and replaced with
the next most recent year. Another commenter recommended adding to the
proposed policy: ``that any year when a Secretarial Disaster
Declaration is made will be excluded and replaced with the next most
recent year (provided that next most recent year was not also a
disaster declared year).'' Another commenter stated since the ultimate
use of many varieties depends so much on weather and markets, the 50
percent rule seems appropriate. However, due to multi-year losses
caused by adverse weather, the
[[Page 52221]]
commenter requested that in the event of multiple year claims, that a
loss year could be replaced by a prior year in order to comply with the
50 percent rule.
Response: FCIC understands multi-year losses caused by adverse
weather could make it difficult for some policyholders to prove they
have sold at least 50 percent of their production from fresh apple
acreage as fresh apples. However, replacing a year designated as a
disaster with the next most recent crop year would add unnecessary
complexity and confusion to the requirement. As stated above, FCIC has
revised the definition of ``fresh apple production'' by lengthening the
time period in which apple producers can demonstrate that they have
sold at least 50 percent of their production from fresh apple acreage
as fresh to one of the last four crop years. This change should lessen
the likelihood a policyholder would be unable to insure their apple
acreage as fresh due to multi-year losses and is less complex to
administer.
Comment: A few commenters stated subparagraph (4) of the definition
of ``fresh apple production'' is vague and needs to be clarified
something like: ``* * * You certify and, if requested by us, provide
verifiable records to show at least 50 percent of the production from
acreage reported as fresh apple acreage was sold as fresh apples in one
or more of the three most recent crop years from the specific acreage
to be insured.'' The commenters stated this needs to be in place to
prevent policyholders from moving records between units, which
undermines program integrity. Another commenter stated it is good the
requirement in the definition of ``fresh apple production'' to show 50
percent of the production from the acreage reported as fresh was sold
as fresh in one or more of the three most recent crop years is not tied
to either a unit basis or a whole-farm basis. This provides flexibility
and the leeway to help producers qualify as fresh market producers even
if they have damage on part of their farm that requires part of their
production to go to the processor. It also should encourage producers
to buy above a catastrophic level of coverage in order to have separate
units for fresh and processing apples even if the majority of their
acreage is for processing.
Response: FCIC agrees the policyholder should provide verifiable
records by unit to prevent producers from moving records from unit to
unit. Insurance coverage is provided on a unit basis. Therefore, it is
appropriate to require verifiable records by unit. FCIC has revised the
provisions to state that to qualify as fresh apple production a
policyholder must certify, and provide records if requested, that at
least 50 percent of the production from each unit reported as fresh
apple acreage, was sold as fresh apples.
Comment: A few comments were received regarding the term
``verifiable records'' used in subparagraph (4) of the definition of
``fresh apple production.'' A few commenters stated it is critical that
FCIC clearly define the term ``verifiable records'' in the proposed
amendments. Producers need to have a clear and concise explanation of
what constitutes ``verifiable records'' in order to properly comply
with the regulations.
A commenter stated the term ``verifiable records'' needs to be made
clear because of the multiple ways producers report their production.
At present, there are many different types of records being submitted
for reporting apple production. The producers need clear and specific
definition of what will be accepted. An example would be: Name of
buyers, date sold, quantity sold, grade, variety, and unit harvested
from.
Response: Subsequent to the proposed rule, FCIC published a final
rule amending the Common Crop Insurance Regulations, Basic Provisions
on March 30, 2010. A definition for the term ``verifiable records'' was
added to that final rule to refer the reader to the definition
contained in 7 CFR part 400, subpart G. Therefore, a definition of
``verifiable records'' is not needed in the Apple Crop Provisions since
the Common Crop Insurance Regulations Basic Provisions are a part of
the policy. No change has been made.
Comment: A commenter stated a significant number of apple producers
sell all or a portion of their apple production to the public as fresh
apples, without undergoing any change in its basic form. Because the
apple production is sold directly to the consumer without an
intermediary, they are required to have a pre-harvest production
appraisal completed prior to opening the orchard to the public. The
commenter recognized the ``Pre-Harvest Appraisal'' policy requirement
as a valuable element to the integrity of the program and that it
provides the means for direct-marketers to substantiate the disposal of
their apple production. An addition to the Apple Appraisal worksheet
that references how the crop is to be disposed of would provide the
supporting documentation necessary to meet this requirement.
A commenter stated direct market, retail, u-pick operations will
not be able to provide third party verifiable records to show that at
least 50 percent of the production was sold as fresh apples. All direct
market, retail, u-pick operations that sell directly to the consumer
without an intermediary are required to have a pre-harvest production
appraisal. The commenter recommended adding a section/box on the pre-
harvest appraisal that states, ``Crop Disposition: Fresh or
Processing'' could meet the requirement.
Response: Under the Apple Crop Provisions, for direct marketed
crops, pre-harvest and any verifiable records will be used to establish
the production to count. To the extent that there are not verifiable
records, production to count will be based on the appraisal. Although
pre-harvest appraisals establish the production to count, a pre-harvest
appraisal does not establish whether the production was sold as fresh
apple production. Therefore, pre-harvest appraisals cannot be used to
meet the requirements contained in paragraph (4) of the definition of
``fresh apple production.'' The direct market records can be used to
establish the production sold as fresh. No change has been made.
Comment: A commenter stated there should be a period of three years
the producer has to start keeping these records as most do not keep
this type of record now. The commenter recommended by the year 2015 a
producer should be able to produce a fresh apple production record.
Another commenter recommended a delay of the implementation date of
this rule would permit producers ample time to ensure that all
necessary records are being kept and that all requirements are being
met in the event they have to file a claim.
Response: As with all APH programs, there is a requirement to
certify yields based on actual records of production or transitional
yields. This means producers should already have these records of past
production. Therefore, the changes in this rule will be effective for
the 2011 crop year. No change has been made.
Comment: A few commenters stated a producer may have fresh quality
fruit grown in one of the past three years, but did not have a market
for that fresh quality fruit. Because the policy does not insure
against the inability to market the fruit, it should not limit the
producer's ability to have insurance for fresh apple production. The
commenters questioned whether this fresh acreage would not be covered
if they are unable to prove a history and the provisions do not include
language indicating when an appraisal is appropriate. The commenters
recommended subparagraph (4) of the definition of ``fresh apple
production'' should state verifiable records may also include
appraisals performed by the
[[Page 52222]]
insurance provider. Another commenter stated the requirement in
subparagraph (1) refers to production ``* * * sold, or could be sold *
* *'' The commenter questioned whether the requirement in subparagraph
(4) should have something similar to account for production that could
have been sold as fresh (with an appraisal as documentation of the
fresh quality) but was not.
A few commenters stated the definition of ``fresh apple
production'' needs to include language that will indicate the FCIC/
insurance provider action if the producer is not able to provide
records of fresh production being sold due to specific circumstances. A
commenter stated there would be a concern if the acreage would not be
insured in this situation as policyholders could then use this
provision to their advantage by not having to pay any premium after it
is apparent that they do not have a loss by indicating after the fact
that they do not have the necessary records to be insured as fresh
apple production. The commenter questioned whether there would be a
need for the type being insured for the current crop year to be changed
from fresh to processing in this situation. The commenter also
questioned whether a misreporting information factor would apply in
this type of situation and if additional language should be added to
clarify what would happen in this situation. The commenters also
recommended that the coverage be changed from fresh to processing in
these types of situations.
Response: Under paragraph (4) of the definition of ``fresh apple
production,'' for the acreage to qualify as for fresh fruit production,
at least 50 percent of the apples had to be sold as fresh fruit.
Therefore, the appraised production is not relevant to this particular
requirement. Paragraph (1) only pertains to the quality of the apples,
not whether they are sold or the quantity sold. Therefore, appraisals
could be used for that particular requirement. If a policyholder is
unable to find a market for their fresh quality apples as fresh apple
production in at least one of the four most recent crop years, it would
be questionable whether they were growing apples in an area conducive
to producing fresh quality apples. If there is no market for the fresh
fruit, then it must be considered as processing and should not be
eligible to receive the higher price election.
Subsequent to the proposed rule, FCIC published a final rule
amending the Common Crop Insurance Regulations, Basic Provisions on
March 30, 2010, which removed the misreporting information factor.
Therefore, the misreporting information factor would not apply in this
situation. If a producer is certifying that 50 percent of the apples
for the unit were sold as fresh, the producer is also certifying they
have the records in support. If the producer provides this
certification and does not have the records, this could be considered a
false statement, which carries several different sanctions including
voidance of the policy, denial of an indemnity for a possible scheme or
device, or administrative, civil or criminal sanctions. Once certified,
the producer cannot change the certification. No change has been made.
Comment: A commenter stated while verifiable sales records may not
appear to be a problem to FCIC in the definition of ``fresh apple
production,'' apple producers do not believe it is fair to entirely
depend on sales records to prove fresh apple production. The commenter
recommended FCIC consider additional data in cases where multiple years
of hail and/or weather related conditions damage an apple crop, that
was intended to be sold as fresh fruit, but then had to be sold as
processing fruit. In these cases, FCIC should consider asking apple
producers to provide a copy of their spray records to document it was
their intention to produce fresh apples. This requirement would be fair
to apple producers and would be consistent with FCIC's proposed rule
which stated ``FCIC also proposes to revise the definition to clarify
insureds must follow the recommended cultural practices generally in
use for fresh apple acreage in the county as determined by agricultural
experts.'' Using a combination of sales records and spray records will
help ensure the new apple policy is fair to apple producers who are
doing their best to produce a quality fresh apple and are also
following the cultural practices necessary to produce a quality fresh
apple. Apple producers understand and appreciate FCIC's intent to
clarify existing policy provisions and at the same time reduce
vulnerability to program fraud, waste and abuse. The commenter
requested that the new policy provide policyholders with an additional
reporting opportunity when hail and weather conditions ruin an apple
crop in three or more years. Giving the policyholder this additional
reporting opportunity will help document the cultural practices and the
additional expenses that are involved in bringing a fresh apple to
market.
Response: As stated above, FCIC has amended the requirement to
allow the acreage to qualify as fresh production if the producer sold
at least 50 percent of the production as fresh apple acreage in one or
more of the four most recent crop years. It is unlikely that weather
would prevent the sales of fresh apples for four consecutive years and,
if it does, it provides evidence that the area may not be conducive to
the production of fresh apples. Insurance for the fresh market can only
be provided if the producer can produce and market apples as fresh.
This requirement is simply a measure of that ability.
Comment: A commenter stated fresh cut apple slices are sold for
fresh consumption. These should be considered fresh apples in the
definition of ``fresh apple production,'' even though the apple
undergoes a change to its basic structure. It is consumed in the same
way most people would eat fresh apples.
Response: If a policyholder sells fresh apple production for the
purpose of apple slices, the apples would meet the requirements
contained in subparagraph (1) of the definition of ``fresh apple
production.'' FCIC does not consider simply slicing the apple to be a
change in basic form. However, to meet all the requirements of fresh
apple production the policyholder would still need to be able to
certify, and, if requested, provide records to show at least 50 percent
of the production from acreage reported as fresh apple acreage by unit,
was sold as fresh in one or more of the four most recent crop years. No
change has been made.
Comment: A few commenters stated the language in the definitions of
``fresh apple production'' and ``processing apple production'' stating
``or could be sold'' is very confusing and weakens these two
definitions. The commenters questioned what exactly is meant by ``could
be sold.'' The commenters recommended the language be changed to ``or
intended to be sold.''
Response: The Apple Crop Provisions do not insure against a
policyholders inability to sell their fresh apple production as fresh
apples. Assuming that the producer meets all the other requirements for
fresh production, if a policyholder has fresh apple production, but is
unable to market the fruit to sell as fresh, these apples should still
be counted as fresh apple production to count and valued at the fresh
apple price election. Therefore, the phrase ``could be sold'' should be
included in the definition. The suggested revision to the definition
cannot be adopted because use of the phrase ``or intended to be sold''
is vague and it is difficult to prove intent. No change has been made.
Comment: A few commenters stated the definitions of ``fresh apple
[[Page 52223]]
production'' and ``processing apple production'' changed ``Apple
production'' to ``Apples'' at the beginning (and ``is sold'' to ``are
sold'' to match) but subparagraph (1) still refers to a change in
``its'' basic form or structure, which no longer matches the plural
subject ``Apples.'' The commenters stated a possible solution would be
to delete the word ``its'' in each definition.
Response: FCIC agrees the word ``its'' no longer matches the plural
subject and has deleted the word ``its'' from the definitions of
``fresh apple production'' and ``processing apple production.''
Comment: A commenter stated the structure of the definition of
``fresh apple production'' indicates any apples that fail to meet all
four requirements would not be considered fresh apple production and
presumably, by default, would be considered processing apple
production. The first part of the definition of ``processing apple
production'' would support this, but the rest might not. For example,
apples that met subparagraphs (1) through (3) of the ``fresh apple
production'' definition, but did not have the records required in
subparagraph (4) that at least half were sold as fresh at least once in
the last three years would not meet the ``fresh apple production''
definition, but would not fall under either subparagraph (1) or (2) of
the ``processing apple production'' definition. The commenter stated if
the failure to meet any one of the four requirements for fresh means
the apple production will be considered processing, it would seem the
``processing apple production'' definition could end after ``Apples
from insurable acreage failing to meet the insurability requirements
for fresh apple production.'' However, that might leave open the
question of whether apples reported as fresh on the acreage report are
really to be considered and insured as processing. The commenter stated
these definitions need to be reviewed and probably rewritten.
Response: FCIC has clarified in the definition of ``fresh apple
production'' that if the acreage has production that does not meet all
of the requirements for fresh apples, the acreage must be designated on
the acreage report as acreage as processing apple production.
Therefore, such production will fall within paragraph (2) of the
definition of ``processing apple production.''
Comment: A few commenters stated the first word of subparagraph (1)
in the definitions of ``fresh apple production'' and ``processing apple
production'' does not need to be capitalized unless the numbered
subparts start a new line, in which case the first word of the other
subparts would need to be capitalized as well.
Response: FCIC has revised the definitions of ``fresh apple
production'' and ``processing apple production'' to create
subparagraphs and has capitalized the first word of each subparagraph.
Comment: A few commenters questioned if a policyholder reports
apple acreage as fresh on the acreage report, but ends up selling the
production for processing, whether that will require a retroactive
revised acreage report to change the insured type from fresh to
processing. Or, if the acreage remains insured under the intended fresh
type, the commenters questioned whether that year's acreage and
production will be certified as fresh (as reported) or processing (as
the production was disposed) to update the APH database for the
subsequent crop year. If so, this will present significant
difficulties, and even more so if different coverage levels are
involved.
Response: By designating the apples as fresh on the acreage report,
the policyholder is certifying they meet the requirements to qualify as
fresh apple production. If a policyholder reports apple acreage as
fresh on the acreage report, and meets the requirements to qualify as
fresh apple production, but has a loss in quality due to an insured
cause of loss and sells the production for processing; this will not
require a retroactive revised acreage report. The crop is still insured
as fresh apple production and the producer may be eligible for an
indemnity for the damaged production. If the production is not damaged,
it is included as fresh apple production to count. That production
would be reported on the subsequent year's production report.
Regardless of whether the apples are damaged, failure to sell the
production as fresh apple production may impact the ability to insure
the acreage as fresh market production in future crop years. No change
has been made.
Comment: A commenter stated the definitions of ``fresh apple
production'' and ``processing apple production'' contain requirements
that are very troubling when determining what production is used for
claim purposes. It currently appears that production produced from
acreage designated as fresh apples on the acreage report would not meet
the definition of fresh apple production and, therefore, could not be
included as production to count, if such production was sold after
undergoing a change in basic structure (i.e., processing apple). This
would be true even in cases where the production did not qualify as
damaged production.
Response: Under the base policy, production to count is determined
by whether the apple is marketable or whether it grades at least U.S.
No. 1 Processing, not on the disposition of the fruit. Therefore,
production from acreage that meets all the requirements for fresh apple
production that grades at least U.S. No. 1 Processing will be
considered as production to count, even if such production is sold for
processing. No change has been made.
Comment: A few commenters understood in the definition of ``type''
that replacing the specific definition of ``Fresh, processing, or
varietal group apples* * *'' with the generic ``A category of apples as
designated in the Special Provisions'' provides flexibility ``to allow
for type changes in the future'' as stated in the Background of the
proposed rule. In such cases, it would be helpful to provide a sample
Special Provisions for reference as to whether any type changes are
being proposed, presumably not immediately for Apples since the
Background refers to ``future'' changes. Such a generic definition also
makes it less clear than before as to what might constitute a type; it
becomes necessary to look up one or more of the county Special
Provisions to get some idea as to what ``types'' are involved when
referenced elsewhere in the Crop Provisions. A few commenters
questioned with the proposed rule eliminating the term ``varietal
group'' and revising the definition of ``type,'' will FCIC be utilizing
the existing numerical type codes as shown in the Special Provisions.
If FCIC is considering expanding to new type codes, the commenters
recommended the use of new type codes and not re-use of the existing
111 and 112 type codes, as well as the 114 and 115 type codes, as this
may create issues with converting existing data. The commenter stated
that if the proposed changes are implemented, it will be necessary to
change the Special Provisions, too. Because of the importance of the
Special Provisions, the commenter recommended that FCIC provide
insurance providers with a preview of the Special Provisions.
Response: The types and numerical type codes will not change for
the 2011 crop year. As stated in the proposed rule, a more generic
definition of ``type'' will allow for changes or additional types in
the future. FCIC agrees if type codes are expanded in the future, new
type codes may be used as opposed to using the existing type codes.
This is also consistent with other Crop Provisions and allows FCIC to
make changes in the Special Provisions, if applicable, and without
having to
[[Page 52224]]
promulgate regulations to revise, add or change type of apples. This
will allow insurance of new types much quicker than if rulemaking were
required, allowing FCIC to be more responsive to the risk management
needs of producers. By including only the insurable apple types in the
Special Provisions for a county, which are provided annually to the
producer, there should be no confusion in any county what types are
insurable. Because no new types are currently proposed to be added,
there is nothing available for preview. No change has been made.
Section 2--Unit Division
Comment: A few commenters stated it is difficult to comment on the
impact of this proposed change when the definition of ``type'' is
essentially deferred to the Special Provisions so the commenters cannot
be certain how many types there might be. If fresh, processing and
varietal groups continue to be separate types, then the proposed change
will allow separate optional units for fresh and processing apples as
well as for varietal groups and non-contiguous land, as before. This
probably would be a beneficial change for apple producers who produce
both fresh and processing, since the types are supposed to be kept
separate anyway. The commenters questioned if RMA has researched the
potential increased risk of allowing these additional optional units to
determine if the premium rates might need to be revised accordingly.
Response: As stated above, the types and numerical type codes will
not change for the 2011 crop year. FCIC agrees allowing separate
optional units by type will be a beneficial change for apple
policyholders who produce both fresh and processing apples. FCIC
reviewed the effect on losses due to allowing optional units by type
and determined this change should not have any adverse affect on
current premium rates. No change has been made.
Comment: A few commenters questioned when it will be determined
whether the apple production is considered fresh or processing: when it
is reported on the current year's acreage report; when final
disposition of the production is made; or when the acreage and
production is certified to update the next year's APH database. If
apple acreage is reported as fresh on the acreage report, but then sold
as processing, the commenters questioned what that will do to the
separate optional units for fresh and processing apples.
Response: Designation of apple acreage as fresh or processing
occurs on the acreage report based on the certification provided by the
producer. If the acreage is subsequently determined not to qualify as
fresh apple production, the policy and law provides for remedies. As
stated above, production to count is determined in accordance with the
claims provisions, not the disposition of the crop. The production to
count for the current crop year will be considered as the production to
be reported for the next crop year. Apple production, from apple
acreage designated as fresh on the acreage report, that is sold as
processing, could affect the producer's ability to qualify their apple
acreage as fresh for the subsequent crop year. If, in the subsequent
crop year, the producer is unable to prove that at least 50 percent of
the production from acreage reported as fresh apple acreage by unit was
sold as fresh apples in one or more of the four most recent crop years,
the acreage would not qualify as fresh for that year. No change has
been made.
Section 3--Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities
Comment: A commenter stated provisions that will allow optional
units by type, processing or fresh, and allow separate levels of
coverage by type should solve current policy inequities and encourage
proper separation of types. A few commenters stated section 3(a) may be
beneficial in some regions but the majority of apple production in the
Pacific Northwest is intended for fresh market only.
Response: FCIC agrees allowing optional units by type and allowing
different coverage levels for all fresh apple acreage in the county and
for all processing apple acreage in the county will encourage proper
separation of processing and fresh acreage. FCIC had received several
requests prior to the proposed rule to allow separate coverage levels
by fresh and processing apple acreage. Offering separate coverage
levels by fresh and processing apple acreage provides the apple
producers a better method to manage their risk. No change has been
made.
Comment: A few commenters did not agree with the intended effect of
the proposed provisions in section 3(a). It was the commenters'
recommendation that the policyholder continue to be allowed to choose a
single coverage level on a county basis and all insurable types in the
county would be insured on this basis. Another commenter stated if the
intent in the future is to allow different levels, prices and units by
variety (like occurred for grapes this year) in section 3(a), the
policy should be prepared for this. The commenter recommended the
language should state ``You may select only one coverage level by
type,'' rather than saying by fresh and by processing.
Response: FCIC did not intend to allow coverage levels by type. The
intent of the provisions in section 3(a) is to allow different coverage
levels for all fresh apple types in the county and for all processing
apple types in the county. Offering separate coverage levels by fresh
and processing apples provides the apple producers a better method to
manage their risk. No change has been made.
Comment: A few commenters stated they have concerns with making the
proposed change in section 3(a) since the different types are not
treated as separate crops (such as for California grapes where the
insureds would have to add all types/varieties by the sales closing
date with the chosen level and price) but are potentially separate
optional units that could end up being combined if the optional unit
requirements are not met. The commenters questioned what happens if
fresh apples are being insured and processing apples are added to the
acreage report (because all apples in the county must be insured) or it
is determined the apples do not qualify as fresh apple acreage during
the coverage period, when it is after the sales closing date deadline
to select a coverage level. These items need to be addressed in the
provisions.
Response: The intent of the proposed provisions in section 3(a) is
to allow separate coverage levels for all qualifying fresh apple
acreage in the county and for all processing apple acreage in the
county. Offering a separate coverage level by fresh apple acreage and
processing apple acreage does not automatically imply each type be
treated as a separate crop. FCIC has revised section 3 to include
provisions if the policyholder only has fresh apple acreage designated
on the acreage report and processing apple acreage is added after the
sales closing date, the insurance provider will assign a coverage level
equal to the coverage level the policyholder selected for their fresh
apple acreage. If the policyholder only has processing apple acreage
designated on the acreage report and fresh apple acreage is added after
the sales closing date, the insurance provider will assign a coverage
level equal to the coverage level the policyholder selected for their
processing apple acreage. The producer knows if the acreage qualifies
as fresh apple acreage by acreage reporting and if the information is
incorrectly
[[Page 52225]]
reported, there are remedies in the policy and by law.
Comment: A few commenters questioned in section 3(a) if the Special
Provisions continue to designate fresh, processing, and varietal groups
as separate types, would the acreage reported as fresh and the acreage
reported as processing within the same varietal group be allowed to
have different coverage levels although they may be required to have
the same price election.
Response: As stated above, the types and numerical type codes will
not change for the 2011 crop year. Varietal groups are identified as
fresh types in the Special Provisions. Therefore, any apple acreage
grown for processing must be designated as the processing apple type
and would not qualify as a fresh type. The price election is different
for fresh apple types and the processing apple types. Acreage reported
as fresh and the acreage reported as processing would be allowed to
have different coverage levels. No change has been made.
Comment: A few commenters questioned whether in section 3(a) an
apple producer would be able to elect catastrophic risk protection
(CAT) coverage on the processing apple acreage and buy-up coverage on
fresh apple acreage as long as the price percentage on the fresh was
the same as the CAT percentage. The commenters questioned if the option
to have different levels is intended to apply only to different buy-up
levels. Some Crop Provisions include a statement to the effect that if
CAT coverage is elected on any type/variety, then all types/varieties
must be CAT.
Response: If the policyholder elected the CAT level of insurance
for fresh apple acreage or processing apple acreage, the CAT level of
coverage will be applicable to all insured apple acreage (fresh and
processing) in the county. FCIC has revised the provisions accordingly.
Comment: A few commenters stated it was their understanding the
intent of the proposed section 3(a) was to allow the policyholder to
elect different coverage levels for fresh apple acreage versus
processing apple acreage. The language does not currently indicate this
intent as it only indicates one coverage level may be elected for each
of these different types of apples. If this is the intent, the
commenters stated the language needs to be clarified such as ``You may
select a different coverage level for fresh apple acreage and
processing apple acreage.'' This revised language addresses the fact
the coverage level could be different for each of these different types
versus previously being limited to the same coverage level percentage
for both types. When the language states one level may be selected for
each of these two types it is not clear whether it must be the same or
can vary between these two types. The language needs to be clarified so
it is clear as to what is being intended.
Response: Section 3(a) specifically states that it allows different
coverage levels for processing and fresh apples. It does not mention
``type'' at all so there should not be any confusion. FCIC has revised
the provisions to add an example to clarify a policyholder may select
one coverage level for all fresh apple acreage in the county and a
different coverage level for all processing apple acreage in the
county.
Comment: A commenter stated the first comma between the words
``including'' and ``interplanted'' in section 3(c) should be deleted.
Response: FCIC has revised the provisions accordingly.
Comment: A few commenters questioned using the word ``bearing'' in
redesignated section 3(c)(2). Producers are required to report their
uninsurable acres, and when trees are first planted, the trees will be
non-bearing. The commenters questioned whether it is really the intent
for producers to report zero trees on their uninsurable acres.
Response: The information that must be submitted in accordance with
section 3(c) is required in order to establish the producer's APH
approved yield and the amount of coverage. While section 3(c)(2) only
requires the bearing trees on insurable and uninsurable acreage to be
reported, the number of bearing and non-bearing trees on insurable and
uninsurable acreage must be reported on the Pre-acceptance Worksheet.
However, since non-bearing trees are not eligible for coverage under
the policy, the intent is to have the producer report zero if there are
no bearing trees in the unit. Since premium and indemnity payments are
based on the number of trees that meet eligibility requirements,
insurance providers are required to track bearing trees as outlined in
the Crop Provisions and the Crop Insurance Handbook. No change has been
made.
Comment: A few commenters questioned the need to know the planting
pattern in redesignated section 3(c)(3). This requires space on the
Pre-acceptance Worksheet that could better be used to ask if the
producer is ``intending to direct market'' any portion of their crop.
The commenters stated the insurance providers already capture tree
spacing and tree count, which is what is needed to determine if there
have been tree removals or acreage reductions.
Response: FCIC requires the policyholder to report the planting
pattern so the insurance provider can use this information to determine
if there is adequate tree spacing for the policyholder to carry out the
recommended orchard management practices. No change has been made.
Comment: A commenter was in favor of the language in section 3(d),
which allows the insurance provider to charge uninsured causes (rather
than lower the guarantee) if the producer fails to notify the insurance
provider of an event or cultural practice that reduces the yield
potential. This will provide incentive for the producer to report this
to the insurance providers rather than wait to see if they are caught
at loss time.
Response: FCIC agrees the language proposed in section 3(d) will
provide incentive for policyholders to notify their insurance provider
of an event or cultural practice that reduces the yield potential. No
change has been made.
Comment: A few commenters stated section 3(d) specifically states
the yield used to establish the production guarantee will be reduced.
Although much of this language exists in the current Apple Crop
Provisions, the commenters stated FCIC needs to clarify what the yield
will be reduced to or the procedures to be applied to reduce the yield.
Response: There are numerous possible situations and it is not
possible to list them all in the policy. For this reason, instructions
are provided in sections 7F(2)(c) through (f) of the Crop Insurance
Handbook. Since the preamble to the Basic Provisions already states
that the handbooks issued by FCIC apply to the policy, it is not
necessary for a specific reference to such procedures in this
provision. No change has been made.
Comment: A few commenters stated section 3(d), as written in the
proposed rule, now appears to require a yield reduction any time
anything happens that may reduce the approved APH yield. The commenters
recommended either retaining the phrase ``as necessary'' before the
phrase ``based on our estimate'' or changing ``We will * * * '' to ``We
may * * *''
Response: FCIC agrees and has retained the phrase ``as necessary''
before the phrase ``based on our estimate'' in section 3(d).
Comment: A few commenters stated the phrase ``as indicated below''
at the end of the first sentence of section 3(d) could be deleted since
the subsequent phrase ``If the event or action occurred:'' leads into
sections 3(d)(1) through (3).
[[Page 52226]]
Response: FCIC has revised the provisions accordingly.
Comment: A few commenters stated the reference to the phrase ``any
event or action of any of the items listed in sections 3(c)(1) through
(4)'' in section 3(d) should be changed to refer to section 3(c)(1), or
possibly sections 3(c)(1) and (4), since section 3(c)(2), number of
bearing trees, and section 3(c)(3), age of trees and planting pattern,
are not an ``event or action'' that will occur at a particular time and
potentially reduce the approved actual production history (APH) yield.
Response: FCIC agrees and has revised the provision to refer to any
``situation'' listed in sections 3(c)(1) through (4). This better
describes all of the possibilities.
In addition, FCIC has removed the phrase ``of any of the items'' in
section 3(d) because it is not needed.
Comment: A few commenters stated according to the Background of the
proposed rule, this proposed change is intended to eliminate
redundancy, but there is still a fair amount of repetition in sections
3(d)(1) through (3). As one example, section 3(d) begins ``We will
reduce the yield used to establish your production guarantee * * *''
but that phrase is repeated in each of sections 3(d)(1) through (3)
when perhaps it could be abbreviated to something like ``* * * the
yield will be reduced * * *''].
Response: FCIC has revised the provisions.
Comment: A few commenters recommended language be added to the last
sentence of section 3(d)(1) to read as follows: ``* * * If you fail to
notify us of any circumstance that may reduce your yields from previous
levels, we will reduce your production guarantee or assess uninsured
cause of loss against your claim at any time we become aware of the
circumstances.'' The phrase ``or assess uninsured cause of loss against
your claim'' is the additional suggested language being proposed. The
producers have a responsibility to report to us damage and removal of
trees, etc. If they report it to us timely, we can adjust their
production guarantee and premium. There should be a penalty if they do
not timely report this information and it is discovered by the adjuster
at claim time. Currently there is no penalty, so there is little
incentive to timely report this information to us.
Response: FCIC does not agree the additional suggested language
should be added. Section 3(d)(1) refers to circumstances that occur
before the beginning of the insurance period. Coverage can never be
provided for any damage occurring prior to the beginning of the
insurance period. Therefore, premium cannot be charged and there cannot
be any uninsured cause of loss appraisals for coverage that could never
be provided. No change has been made.
Comment: A commenter questioned, in proposed section 3(d)(1) for a
carryover policy, how this is even possible as the current crop year's
insurance period begins on the day immediately following the end of the
insurance period for the prior crop year (in most cases harvest of the
crop). It would appear in most cases if the insured had damage to the
prior year's crop on trees or damage to the trees themselves, the
insured would report a notice of loss.
Response: The insurance period ends when the crop is harvested, so
if the trees are thinned at the end of harvest but before it is
complete, this would be prior to the start of the insurance period.
However, because it does not affect the harvest, sections 3(d)(2) or
3(d)(3) would not be applicable and the provisions of section 3(d)(1)
would apply. No change has been made.
Comment: A few commenters questioned in sections 3(d)(2) and (3) if
insureds will always be aware of an event or action that ``may occur
after the beginning of the insurance period * * *'' in order to notify
the insurance provider of that potential event or action. The
commenters questioned how something unknown to the insured can be
reportable. A commenter recommended deleting the opening phrase ``Or
may occur'' in each of these subsections. And if such notification is
not provided, but the event or action does not occur, does section
3(d)(3) still require the insurance provider to do an appraisal and
reduce the approved APH yield. A commenter stated sections 3(d)(2) and
(3) indicate both the current year's APH and the subsequent crop year's
APH will be reduced; the commenters questioned whether this was the
intent.
Response: Generally, producers should be aware of what is going on
in their farming operations, including situations that may affect this
year's crop production that may occur after the beginning of the
insurance period (e.g., a planned orchard renovation). Therefore, the
producers should be able to timely notify their reinsured company. In
situations where a planned event (e.g., grafting of new varieties on
existing trees) does not occur, then no adjustments are made since the
situation did not occur. For situations impacting the yield used to
establish the production guarantee after insurance has attached but the
reinsured company was not notified, production lost due to uninsured
causes equal to the amount of the reduction in the yield used to
establish your production guarantee will be applied in determining any
indemnity. The yield used to establish the production guarantee is not
adjusted for the current crop year.
Section 5--Cancellation and Termination Dates
Comment: A few commenters recommended moving the phrase ``in
accordance with the terms of the policy'' in section 5(b) to the
beginning of the sentence to read: ``If, in accordance with the terms
of the policy, your apple policy is cancelled or terminated for any
crop year after insurance attached * * *'' The commenters also
recommended adding a comma before ``whichever is later'' or use
parentheses instead of commas. A commenter recommended changing
``insurance will be considered to have not attached'' to ``insurance
will be considered not to have attached''
Response: FCIC has revised the provisions accordingly.
Section 6--Report of Acreage
Comment: A few commenters stated the Background section of the
proposed rule indicates the second sentence of section 6 will be
revised ``* * * to clarify only acreage qualifying as fresh apple
production is eligible for the Optional Coverage for Fresh Fruit
Quality Adjustment provisions contained in section 14 * * *'' in order
to ``* * * help ensure processing apple production is not insured or
adjusted as fresh apple production.'' However, no actual proposed
language to replace that second sentence was provided in the proposed
rule. The commenters questioned whether the public will be given an
opportunity to review a draft of these proposed revisions.
The commenters also stated this language also indicates the insured
must designate all acreage by type by the acreage reporting date. As
indicated in the above comments, if different coverage levels are going
to be allowed between fresh apple acreage versus processing apple
acreage, these two types and levels will need to be timely reported by
the sales closing date in order to comply with the deadlines for adding
types and levels.
Response: The proposed language to replace the second sentence of
section 6 was in the amendatory language of the proposed rule with
request for comments. The amendatory language, which preceded the
regulatory text in the proposed rule, stated ``g. Amend section 6 by
removing the phrase `Blocks of apple acreage grown for
[[Page 52227]]
processing are' and adding the phrase `Any acreage not qualifying for
fresh apple production is' in its place in the second sentence.'' As
stated above, FCIC has revised section 3 to include provisions if the
policyholder only has fresh apple acreage designated on the acreage
report and processing apple acreage is added after the sales closing
date, the insurance provider will assign a coverage level equal to the
coverage level the policyholder selected for their fresh apple acreage.
If the policyholder only has processing apple acreage designated on the
acreage report and fresh apple acreage is added after the sales closing
date, the insurance provider will assign a coverage level equal to the
coverage level the policyholder selected for their processing apple
acreage.
Section 7--Insured Crop
Comment: A few commenters recommended deleting the ``or'' at the
end of section 7(b)(1) since it is not the second-to-last item listed.
Response: FCIC has revised the provisions accordingly.
Comment: A few commenters questioned whether it is necessary to add
section 7(d) to ``clarify'' the insured crop is apples ``(d) That are
grown for: (1) Fresh apple production; or (2) Processing apple
production.'' This would seem to be covered by the opening statement of
(d), ``* * * all apples in the county for which a premium rate is
provided by the actuarial table.'' If this remains as is, a commenter
recommended revising to ``and/or'' at the end of section 7(d)(1), as
both types of apples may be insured.
Response: While section 7(d) may not be strictly necessary, it is
provided to clarify the insured crop is not only for all apples in the
county, but apples grown for either fresh apple production or
processing apple production. The term ``and/or'' is synonymous with the
word ``or'' which means any combination of two options; one, the other
(either), or both. No change has been made.
Section 9--Insurance Period
Comment: A few commenters stated the first sentence of section
9(a)(1) gives the calendar date for the beginning of coverage for the
year of application in California only. The second sentence provides
the date for all other States, but does not specify this is also only
for the year of application, and then goes on to provide an exception
that applies to California as well. The commenters recommended revising
the language to read something like:
(1) ``For the year of application, coverage generally begins:''
``(i) In California, on February 1* * *''
``(ii) In all other States, on November 21* * *''
``However, if your application is received by us after * * *''
Response: FCIC has revised section 9(a)(1) to separate the calendar
dates for the beginning of the insurance period for the year of
application in California and all other States from the exceptions in
California and all other States.
Comment: A commenter stated the reference to ``insurance provider''
in section 9(a)(2) should be changed to ``approved insurance
provider''.
Response: The term ``insurance provider'' is consistent with the
Basic Provisions and other Crop Provisions. No change has been made.
Comment: A few commenters stated the words ``after an inspection''
should be removed from section 9(b)(1). If damage has not generally
occurred in the area where such acreage is located, the commenters
stated it should be up to the insurance provider's discretion to decide
whether the acreage needs an inspection to be considered acceptable.
The commenters also stated the last sentence of section 9(b)(1)
indicates ``There will be no coverage of any insurable interest
acquired after the acreage reporting date.'' The commenters recommended
this sentence be changed to allow insurance providers the opportunity
to inspect and insure such acreage if they wish to do so. Insurance
providers should have the opportunity to accept or deny coverage in
these types of situations. This would be similar to what is currently
allowed for acreage that is not reported per section 6(f) of the Basic
Provisions.
Response: FCIC does not agree with the commenters regarding removal
of the phrase ``after an inspection.'' The insurance provider must
inspect the acreage to ensure the newly-acquired acreage meets all
policy requirements. This requirement is consistent with other
perennial Crop Provisions, such as stonefruit, grapes and pears and
ensures that only acreage that meets the requirements for coverage is
insured. If left to the discretion of the insurance provider, there may
be instances where acreage that is not insurable is provided coverage,
creating a program integrity vulnerability.
Additionally, section 9(b)(1) is silent regarding allowing
insurance providers the opportunity to inspect and insure acreage that
was acquired after the acreage reporting date. Therefore, section 6(f)
of the Basic Provisions, which allows the insurance providers to
determine by unit the insurable crop acreage, share, type and practice,
or to deny liability if the producer failed to report all units, has
been applied in this situation under other Crop Provisions and would
apply here. The provisions in this final rule are consistent with
provisions in other Crop Provisions, such as Texas citrus fruit,
peaches and pears and to change them here would suggest section 6(f) of
the Basic Provisions would not be applicable to these other policies,
creating an unnecessary ambiguity. The Crop Insurance Handbook also
allows for insurance providers to revise an acreage report that
increases liability if the crop is inspected and the appraisal
indicates the crop will produce at least 90 percent of the yield used
to determine the guarantee or amount of insurance for the unit. No
change has been made.
Section 10--Causes of Loss
Comment: A commenter recommended the insured cause of loss in
section 10(a)(2) be clarified as ``Fire, due to natural causes, * * *''
(or ``Fire, if caused by lightning, * * *'', as in the proposed
revisions to the Tobacco Crop Provisions).
Response: FCIC disagrees with the commenter. Revising the insured
cause of loss to read ``Fire, due to natural causes'' is not necessary
since section 12 of the Basic Provisions states all insured causes of
loss must be due to a naturally occurring event. Further, the Federal
Crop Insurance Act also limits coverage to naturally occurring events.
To include this requirement for a single cause of loss in the Crop
Provisions will only create confusion regarding whether or not the
other listed causes must be naturally occurring. FCIC also disagrees
with revising the insured cause of loss to read ``Fire, if caused by
lightning * * *'' as in the proposed revisions to the Tobacco Crop
Provisions. ``Fire, if caused by lightning * * *'' was proposed in the
Tobacco Proposed Rule. However, due to public comments, the original
provision, ``Fire,'' was retained because there are naturally occurring
fires caused by other than lightning, such as animals getting stuck in
transformers causing sparks to trigger a fire. No change has been made.
Comment: A few commenters recommended adding a comma after the
phrase ``excess sun causing sunburn'' in section 10(a)(9) to separate
it from the phrase ``and frost and freeze causing russeting.''
Response: FCIC has revised the provision accordingly.
Section 12--Settlement of Claim
Comment: A few commenters stated since the proposed rule offers
different
[[Page 52228]]
coverage levels for fresh and processing, and separate optional units
by type, it would be more helpful to have a revised Basic Coverage
example that included separate units and different levels for the fresh
and processing types instead of this basic example with both types in
one basic unit. Additionally, as processing and fresh are two separate
types requiring separate APH databases, a commenter questioned the
likelihood of each type having the same guarantee. The commenter
recommended revising the example to be more reflective of an actual
situation.
Response: The claims provisions provide a step by step guide to
calculating the indemnity. Claim examples are provided to the
Settlement of Claim section to only provide a general illustration.
Since it is impossible to address every situation, more detailed
instructions are more appropriately provided in the Apple Loss
Adjustment Handbook. No change has been made.
Comment: A commenter recommended adding a comma before the phrase
``all grading U.S. No. 1 Processing or better'' in the second sentence
of the Basic Coverage example.
Response: FCIC has revised the provisions accordingly.
Comment: A commenter recommended adding hyphens in ``6,000-bushel
production guarantee'' and ``3,000-bushel production guarantee'' in
paragraphs (A) and (B) of the Basic Coverage Example.
Response: FCIC has revised the provisions accordingly.
Comment: A commenter stated the proposed section 12(d), which
states ``any apple production not graded prior to sale or storage will
be considered as production to count'' is not practical based on the
lack of USDA licensed graders in many apple growing areas. Production
sold from one producer to another is very common as well as roadside
stands that sell directly to the consumer. Implementation of this new
language will provide an unfair burden on the producer.
Response: The policy provides coverage for fresh and processing
apples. There is no way to know whether an apple is a fresh apple
unless it is graded. Further, failure to grade the apples will result
in producers grading their own and there is no way to prevent them from
reducing the grade to collect an indemnity. There must be an
independent third party establishing the grade of the apple. For
policyholders who sell production by direct marketing (i.e., one
producer to another, roadside stands, etc.), section 11(b) of the Apple
Crop Provisions requires notice of loss be given at least 15 days
before any production will be sold by direct marketing so an appraisal
can be made by the insurance provider. If damage occurs after this
appraisal, an additional appraisal will be made. The appraisals and any
acceptable production records will be used to determine production to
count. Since insurance is provided for direct marketed crops, and there
may not be any verifiable records associated with such sales, this
provision is necessary to more accurately determine production to
count. FCIC has revised section 12(d) to clarify a policyholder must
either have an appraisal or have their production graded prior to sale
or storage in response to another comment. No change has been made.
Comment: A commenter recommended in section 12(d) either deleting
the comma after `` * * * placed in storage * * * '' or adding a
matching comma after `` * * * or other handler * * * '' at the end of
that set-off phrase.
Response: FCIC has removed the comma after the phrase ``placed in
storage'' in sections 12(d) and 14(c).
Section 14--Optional Coverage for Fresh Fruit Quality Adjustment
Comment: A commenter recommended quality adjustment for processing
fruit, because the industry standard for processing fruit in North
Carolina is U.S. 1 not U.S. 1 Processing. A commenter
requested FCIC allow North Carolina producers to purchase the quality
adjustment option for any processed apples that meet U.S. Grade A apple
standards.
Response: Since the recommended changes were not proposed, and the
public was not provided an opportunity to comment, the recommendation
cannot be incorporated in the final rule. No change has been made.
Comment: A few commenters stated the background section of the
proposed rule states the intended effects of this policy are to clarify
existing policy provisions to better meet the needs of producers, to
reduce vulnerability to program fraud, waste, and abuse, and to
simplify program administration. However, the language concerning the
Optional Coverage for Fresh Fruit Quality Adjustment is so unclear and
contradictory that producers and insurance providers will likely incur
many hours in arbitration. This happens when the policy language is
vague and alludes to issues that are then totally changed via the Apple
Loss Adjustment Standards Handbook (LASH) and informational memorandums
after the policy has been finalized and issued to the policyholders.
This provides no opportunity for the apple producers to comment on the
procedure because these procedures are not a part of the proposed rule.
The intent of the policy language needs to be clearly spelled out in
the final version of the Apple Crop Insurance Provisions so as to
reduce the amount of clarification that needs to be made later in the
Apple LASH or informational memorandums.
Response: FCIC has made the policy as clear as possible. However,
without specifying particular provisions that the commenter believes
are ambiguous, FCIC is not able to adequately respond to make changes
to the provisions. No change has been made.
Comment: A commenter suggested going back to the old policy with
quality adjustment on frost, freeze, or hail. The commenter also stated
if FCIC would keep the current policy as is with the causes of loss the
same and does away with the sliding scale, it would be fair to all
involved. If a producer has a claim of 65 percent, it should stand at
65 percent; that way the producer would have their 35 percent of fresh
apple production to count back and it wouldn't automatically go to a
100 percent loss. The commenter stated this would be fair to the
producers, insurance companies, and government.
Response: Since the recommended changes were not proposed, and the
public was not provided an opportunity to comment, the recommendation
cannot be incorporated in the final rule. No change has been made.
Comment: A few commenters stated the background section of the
proposed rule indicates a proposed revision ``to specify insureds who
select the Optional Coverage for Fresh Fruit Quality Adjustment cannot
receive less than the indemnity due under section 12.'' However, no
actual proposed language was provided in the proposed rule. The
commenters questioned whether the public would be given an opportunity
to review a draft of these proposed revisions.
Response: The proposed language to replace the second sentence of
section 14(a) was in the amendatory language of the proposed rule with
request for comments. The amendatory language, which preceded the
regulatory text in the proposed rule, stated ``n. Amend section 14(a)
by adding at the end of the paragraph the following sentence, `Insureds
who select this option cannot receive less than the indemnity due under
section 12.' ''
Comment: A few commenters stated the background indicates the
proposed change in section 14(b)(4) is ``to clarify production to count
under the Optional Coverage for Fresh Fruit Quality Adjustment will
include all appraised
[[Page 52229]]
and harvested production from all of the fresh apple acreage in the
unit.'' This revision deletes the reference to production ``that grades
at least U.S. No. 1 Processing, adjusted in accordance with this
option.'' The commenters questioned whether the intention is to count
harvested unmarketable production, or should this specify ``all
appraised and harvested marketable production.''
Response: For the purposes of section 14(b)(4), production to count
should be all apples on the tree (i.e., unmarketable and marketable).
FCIC has added the phrase ``adjusted in accordance with this option''
back to the provisions in section 14(b)(4) to clarify the production to
count in section 14(b)(4) is adjusted in accordance with section
14(b)(5) for the purposes of the Optional Coverage for Fresh Fruit
Quality Option. Therefore, any apples that are unmarketable will be
removed from the production to count in the loss adjustment under
section 14. No change has been made.
Comment: A commenter stated as currently written in sections
14(b)(4) and 14(b)(5)(v), in a situation where an insured has elected
the option, but also has processing apples in the same unit; if the
production from the processing acreage is sold as U.S. Fancy, it is not
counted as production to count under the Optional Coverage for Fresh
Fruit Quality Adjustment and valued at the fresh apple production
price.
Response: If the acreage was designated as processing apple acreage
on the acreage report and the apple production was subsequently sold as
U.S. Fancy or better, it would not be considered production to count
under the Optional Coverage for Fresh Fruit Quality Adjustment because
processing apples are not covered under section 14. However, the sold
production would be counted as production to count under section 12 of
the Apple Crop Provisions and would be valued at the processing apple
production price. No change has been made.
Comment: A few commenters stated the phrase ``within the applicable
unit'' in section 14(b)(5) may be subject to misinterpretation. It
appears the intent of these added words are meant to clarify the
Optional Coverage for Fresh Fruit Quality Adjustment is administered on
a unit basis, however this new language could be misinterpreted. The
procedures outlined in the Apple LASH require the field grading to be
done by variety, by block, or by unit, as applicable, and then total
each individual production to count to determine the production to
count for the unit.
For example, a producer may have 10 acres of Goldens and 50 acres
of Reds within a unit. Assume a hail storm damaged the Goldens
resulting in a 50 percent loss and the Reds only incurred a 10 percent
loss. It would seem to be the intent the reduction would apply to the
Goldens to determine the production to count for the Goldens. The Reds
would not qualify as they do not meet the 20 percent damage deductible,
and all the Reds would count as production to count. The wording that
says ``within the applicable unit is damaged to the extent that more
than 20 percent'' could lead one to assume in this example the overall
unit did not sustain 20 percent damage, and no quality adjustment would
apply. Another example would be if producers harvested 80 percent of
their acreage prior to a hail storm, and then the storm came along and
totaled the remaining 20 percent of the acreage. The commenters assumed
the intent is that the loss adjuster would do a field grade on the
remaining acreage even though less than 20 percent damage was sustained
on a unit basis. The language, as proposed, might lead one to assume
loss adjusters would, instead, say no adjustment is made because the
producers have not incurred 20 percent damage across the whole unit. In
order to eliminate this confusion, the commenters recommended the words
`within the applicable unit' not be added to this section. This
language needs to be clarified so it is clear how this section of the
policy is intended to be applied.
Response: FCIC agrees the proposed language could be subject to
misinterpretation and has revised the provision to refer to ``for the
block or unit, as applicable.'' In accordance with the Apple LASH,
separate appraisals are required for each block within a unit and
adjusted in accordance with section 14. The adjusted production to
count from each block is added together to determine the total adjusted
production to count for the unit.
Comment: A few commenters stated the proposed rule does not amend
sections 14(b)(5)(i) through (iv). However, FCIC should revisit the
adjustments in the current Apple Crop Provisions and the Apple LASH to
determine whether the current salvage values merit reconsideration.
Response: If the commenters have any recommendations, they can
provide such information to FCIC for consideration at a future date.
FCIC is willing to work with any interested parties to revisit the
provisions in section 14(b)(5)(i) through (iv). No change has been
made.
Comment: Several comments were received regarding section
14(b)(5)(v). A commenter stated section 14(b)(5)(v) has been the most
significant concern of insurance providers and policyholders and should
be deleted as there are numerous other crop policies that allow similar
deductions for extensive damage amounts and/or poor quality, etc., such
that the production to count on the claim is reduced in excess of the
actual monetary reductions to the producer. If section 14(b)(5)(v)
remains in effect as written, FCIC should stop implying it is not their
intent for insurance providers to keep claims open until production in
storage was removed and then sold. Unless an insurance provider truly
waits until all of the unit production is sold, they will not know the
amount of production that was sold as U.S. Fancy or better.
A few commenters stated the language in section 14(b)(5)(v) that
was inserted into the Apple Crop Provisions (after the proposed rule)
for the 2005 crop year has been so problematic that the Apple LASH was
revised numerous times, and informational memorandums issued and then
incorporated into the Apple LASH long after the Apple Crop Provisions
were published as a final rule and policies were sold to producers.
Exhibit 2 of the Apple LASH has created a procedure whereby the
insurance provider must use the greater of the production that is sold
as fancy or better, or the amount of production that was determined as
production to count in the field. However, this language is nowhere to
be found in the 2005 Apple Crop Insurance Provisions or in this
proposed rule for the 2011 crop year provisions. Instead, there is
conflicting language with no explanation of how it is to be
administered.
The commenters stated in order to determine what is ``sold as fancy
or better'' and to comply with section 14(b)(5)(v), the insurance
provider would need to wait to receive the pack-out. However, the
example in the proposed rule makes no mention of waiting for the pack-
out to see what is sold as fancy for a comparison. The example deals
with the number of bushels ``harvested'' and number of bushels that
don't grade fancy or better based on the field grade and the damage
chart, AND NOT FROM THE PACK-OUT. The proposed rule even states in
section 14(c): ``Any apple production not graded prior to the earlier
of the time apples are placed in storage, or the date the apples are
delivered to a packer, processor, or other handler, will not be
considered damaged apple production and will be considered production
to count under this option.''
[[Page 52230]]
Since it is not possible for the warehouse to grade and sell all the
fruit the day it is delivered, one would need to presume the pack-out
should not apply ever at any time.
The commenters recommended section 14(b)(5)(v) be removed and the
language in the Optional Coverage for Fresh Fruit Quality Adjustment be
made simple, clear, and fair. If section 14(b)(5)(v) was removed, all
the confusing and contradictory language in the Apple LASH could also
be removed. The producers who elect this option pay a substantial price
for this coverage. It was designed to increase the claim payment when
there is a significant amount of damage because of the added expense of
dealing with a highly damaged crop. The removal of section 14(b)(v)
would give the producer freedom to decide whether: to try to salvage
some of the good fruit; to deliver it to a juicer or processor; or to
leave it unharvested. Producers should not be penalized for trying to
salvage their crop. It is unreasonable for FCIC to penalize producers
for attempting to salvage a part of their crop.
Another commenter recommended section 14(b)(5)(v) either be removed
or modified since it requires insurance providers to keep a claim open
until final disposition of the fruit (for policies with the quality
option), which can often take 12-13 months.
Response: FCIC has the legal authority to only cover a loss of
production or a reduction in price received due to an insured cause of
loss. Section 14(b)(5)(v) cannot be removed because if the policyholder
harvests apples that are undamaged and sells them as fresh apples and
receives at least the expected market price, those apples must be
counted as production to count. FCIC has a responsibility to ensure
policyholders only receive the amount of indemnity to which they are
entitled. Since the amount of sold production is included as production
to count, the insurance provider must establish the value of the sold
production based on the sales records when the crop is sold. FCIC
understands that this can result in a delay in the claim. However, FCIC
does not know of any other means to account for production that is
actually sold as U.S. Fancy or better. If the commenters have any
specific recommendations to address this issue, they can provide such
information to FCIC for consideration at a future date. FCIC is willing
to work with any interested parties to revisit the provisions in
section 14(b)(v) to improve the Optional Coverage for Fresh Fruit
Quality Adjustment. No change has been made.
Comment: A commenter suggested the addition of the words ``or
appraised'' to the first sentence of the new section 14(c), to read;
``Any apple production not graded or appraised prior to the time.'' The
reason for the suggested change is when apples are placed in storage,
the insurance coverage ends, and this could be confusing and unclear to
producers experiencing losses that result in claims. The commenter's
proposal helps clarify the claim procedure by specifically noting
producers with a potential loss claim must either have an appraisal or
have their production graded prior to placement in storage.
Response: FCIC has revised the provisions in sections 12(d) and
14(c) accordingly.
Comment: A few commenters recommended either deleting the comma
after the phrase ``placed in storage'' or adding a matching comma after
the phrase ``or other handler'' at the end of that set-off phrase in
section 14(c).
Response: As stated above, FCIC has removed the comma after the
phrase ``placed in storage'' in sections 12(d) and 14(c).
Comment: A few commenters recommended, identifying the example in
section 14 as an ``Optional Coverage for Fresh Fruit Quality Adjustment
example'' for clarity. The commenters also recommended adding hyphens
in the phrase ``6,000-bushel production guarantee''. The commenters
also recommended considering whether it is necessary to have ``[END OF
EXAMPLE]'' when this is the end of the Apple Crop Provisions (no other
policy provisions following the example).
Response: FCIC has revised the provisions accordingly.
Comment: A few commenters stated the example in section 14 shows
the bushels of fruit that grade U.S. Fancy or better with an adjustment
made on production to count based upon this grade. It should be
clarified in the example that in addition to the grading, if the
producer sells (X) amount of bushels at U.S. Fancy or better these will
or will not be adjusted based upon the percentage that grade U.S. Fancy
of better. It would reduce the confusion since there is an adjustment
used in the appraisal process based upon the percentage that grade U.S.
Fancy or better and producers do not understand what percentage is used
in the indemnity process using production sold as US Fancy or better.
Again, this information should be contained in the policy language as
well as this example. For example, for a farm that has 25 percent of
the production that grades US Fancy it would be considered zero
production to count of a full indemnity. If the producer can pack this
fruit and he packs out 20 percent US Fancy, those bushels are currently
taken off the claim. This action needs to be made clear in the
provisions. A few commenters stated the example in section 14 shows
5,000 bushels harvested and 2,350 bushels not grading fancy or better.
The example then goes on to show 47 percent actual damage equates to 61
percent actual damage and the example then shows the claim paid based
on 39 percent production to count, which equals 1,950 bushels. However,
if the producer has delivered the production to the warehouse, packed
the fruit, and the pack-out shows the exact amount of actual damage as
the field adjustment, 53 percent of the fruit would pack-out as U.S.
Fancy or better. Therefore, the greater of the production to count
would be 2,650. However, the example does not show this to be the case.
It shows the production to count to be 1,950 bushels. There is no
language about waiting for the pack-out and using the greater of the
production to count from the field appraisal or the amount of apples
sold as fancy or better.
Response: FCIC has revised the Optional Coverage for Fresh Fruit
Quality Adjustment Example in section 14 to clarify it provides only a
general explanation of how the indemnity payment would be calculated in
accordance with section 14 assuming the producer did not sell any of
their fresh apple production as U.S. Fancy.
In addition to the changes described above, FCIC has revised
section 12(b)(2), section 12(b)(4), the Basic Coverage Example, and the
Optional Coverage for Fresh Fruit Quality Adjustment Example to address
the applicability of the percent of price election.
Good cause is shown to make this rule effective less than 30 days
after publication in the Federal Register. Good cause to make a rule
effective less than 30 days after publication in the Federal Register
exists when the 30-day delay in the effective date is impracticable,
unnecessary, or contrary to the public interest.
With respect to the provisions of this rule, it would be contrary
to public interest to delay implementation because public interest is
served by improving the insurance product as follows: (1) Increasing
insurance flexibility by providing for separate by type; (2) allowing
different coverage levels for all fresh apple acreage in the county and
for all processing apple acreage in the county; and (3) providing
[[Page 52231]]
simplification and clarity to the apple crop insurance program.
If FCIC is required to delay the implementation of this rule 30
days after the date it is published, the provisions of this rule could
not be implemented until the 2012 crop year. This would mean the
affected producers would be without the benefits described above for an
additional year.
For the reasons stated above, good cause exists to make these
policy changes effective less than 30 days after publication in the
Federal Register.
List of Subjects in 7 CFR Part 457
Crop insurance, Apple, Reporting and recordkeeping requirements.
Final Rule
0
Accordingly, as set forth in the preamble, the Federal Crop Insurance
Corporation amends 7 CFR part 457 effective for the 2011 and succeeding
crop years as follows:
PART 457--COMMON CROP INSURANCE REGULATIONS
0
1. The authority citation for 7 CFR Part 457 is revised to read as
follows:
Authority: 7 U.S.C. 1506(l), 1506(o).
0
2. Amend Sec. 457.158 as follows:
0
a. Revise the introductory text;
0
b. Remove the paragraph immediately preceding section 1;
0
c. Add definitions in section 1 for ``fresh apple production'' and
``processing apple production;'' remove the definitions of ``fresh
apples,'' ``lot,'' ``processing apples,'' and ``varietal group;''
revise the definitions of ``apple production'' and ``type;'' and amend
the definition of ``damaged apple production'' by removing the phrase
``, within each lot, bin, bushel, or box, as applicable,'' from both
paragraphs (1) and (2);
0
d. Revise section 2(b);
0
e. Amend section 3 by redesignating paragraphs (a), (b), and (c) as
(b), (c), and (d) respectively, and adding a new paragraph (a);
0
f. Revise redesignated sections 3(c)(1) and 3(d);
0
g. Revise section 5(b);
0
h. Revise section 6;
0
i. Amend section 7(b)(1) by removing the word ``or'' after the
semicolon at the end;
0
j. Amend section 7(b)(3) by removing the word ``and'' after the
semicolon at the end;
0
k. Amend section 7(c) by removing the period at the end and replacing
it with ``; and'';
0
l. Add a new section 7(d);
0
m. Revise section 9(a)(1);
0
n. Amend section 10(a)(9) by adding a comma after the phrase ``excess
sun causing sunburn'';
0
o. Amend section 11 by redesignating paragraphs (a), (b), and (c) as
(1), (2), and (3) respectively, redesignating the introductory text as
paragraph (b), and adding a new paragraph (a);
0
p. Revise sections 12(b)(2) and 12(b)(4);
0
q. Revise the Basic Coverage Example in section 12 and move it to
follow section 12(b)(7);
0
r. Revise section 12(d);
0
s. Amend section 14(a) by adding at the end of the paragraph the
following sentence, ``Insureds who select this option cannot receive
less than the indemnity due under section 12.'';
0
t. Amend section 14(b)(3) by removing the phrase ``fresh apples'' and
adding the phrase ``fresh apple production'' in its place and removing
the phrase ``processing apples'' and adding the phrase ``processing
apple production'' in its place;
0
u. Revise section 14(b)(4);
0
v. Revise section 14(b)(5) introductory text;
0
w. Amend section 14(b)(5) (i), (ii), and (iii) by adding the word
``one'' after the phrase ``percent for each full'';
0
x. Amend section 14(b)(5)(v) by adding the phrase ``or better'' after
the phrase ``if you sell any of your fresh apple production as U.S.
Fancy'';
0
y. Add new sections 14(c) and (d) before the Optional Coverage for
Fresh Fruit Quality Adjustment Example; and
0
z. Revise the Optional Coverage for Fresh Fruit Quality Adjustment
Example.
The revised and added text reads as follows:
Sec. 457.158 Apple crop insurance provisions.
The apple crop insurance provisions for the 2011 and succeeding
crop years are as follows:
* * * * *
1. Definitions.
Apple production. All fresh apple production and processing apple
production from insurable acreage.
* * * * *
Fresh apple production. (1) Apples:
(i) That are sold, or could be sold, for human consumption without
undergoing any change in the basic form, such as peeling, juicing,
crushing, etc.;
(ii) From acreage that is designated as fresh apples on the acreage
report;
(iii) That follow the recommended cultural practices generally in
use for fresh apple acreage in the area in a manner generally
recognized by agricultural experts; and
(iv) From acreage that you certify, and, if requested by us provide
verifiable records to support, that at least 50 percent of the
production from acreage reported as fresh apple acreage from each unit,
was sold as fresh apples in one or more of the four most recent crop
years.
(2) Acreage with production not meeting all the requirements above
must be designated on the acreage report as processing apple
production.
* * * * *
Processing apple production. Apples from insurable acreage failing
to meet the insurability requirements for fresh apple production that
are:
(1) Sold, or could be sold for the purpose of undergoing a change
to the basic structure such as peeling, juicing, crushing, etc.; or
(2) From acreage designated as processing apples on the acreage
report.
* * * * *
Type. A category of apples as designated in the Special Provisions.
2. Unit Division.
* * * * *
(b) By type as specified in the Special Provisions.
* * * * *
3. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
* * * * *
(a) You may select only one coverage level for all fresh apple
acreage and only one coverage level for all processing apple acreage.
For example, if you choose the 55 percent coverage level for all your
fresh apple acreage (i.e., fresh, varietal group types), you may choose
the 75 percent coverage level for all your processing apple acreage.
However, if you elect the Catastrophic Risk Protection (CAT) level of
insurance for fresh apple acreage or processing apple acreage, the CAT
level of coverage will be applicable to all insured apple acreage in
the county. If you only have fresh apple acreage designated on your
acreage report and processing apple acreage is added after the sales
closing date, we will assign a coverage level equal to the coverage
level you selected for your fresh apple acreage. If you only have
processing apple acreage designated on your acreage report and fresh
apple acreage is added after the sales closing date, we will assign a
coverage level equal to the coverage level you selected for your
processing apple acreage.
* * * * *
(c) * * *
(1) Any event or action that could impact the yield potential of
the insured
[[Page 52232]]
crop including interplanted perennial crop, removal of trees, any
damage, change in practices, or any other circumstance that may reduce
the expected yield upon which the insurance guarantee is based, and the
number of affected acres;
* * * * *
(d) We will reduce the yield used to establish your production
guarantee, as necessary, based on our estimate of the effect of any
situation listed in sections 3(c)(1) through (c)(4). If the situation
occurred:
(1) Before the beginning of the insurance period, the yield used to
establish your production guarantee will be reduced for the current
crop year regardless of whether the situation was due to an insured or
uninsured cause of loss. If you fail to notify us of any circumstance
that may reduce your yields from previous levels, we will reduce the
yield used to establish your production guarantee at any time we become
aware of the circumstance;
(2) Or may occur after the beginning of the insurance period and
you notify us by the production reporting date, the yield used to
establish your production guarantee will be reduced for the current
crop year only if the potential reduction in the yield used to
establish your production guarantee is due to an uninsured cause of
loss; or
(3) Or may occur after the beginning of the insurance period and
you fail to notify us by the production reporting date, production lost
due to uninsured causes equal to the amount of the reduction in the
yield used to establish your production guarantee will be applied in
determining any indemnity (see section 12(c)(1)(ii)). We will reduce
the yield used to establish your production guarantee for the
subsequent crop year.
* * * * *
5. Cancellation and Termination Dates.
* * * * *
(b) If, in accordance with the terms of the policy, your apple
policy is canceled or terminated by us for any crop year after
insurance attached for that crop year, but on or before the
cancellation and termination dates, whichever is later, insurance will
be considered not to have attached for that crop year and no premium,
administrative fee, or indemnity will be due for such crop year.
* * * * *
6. Report of Acreage.
In addition to the requirements contained in section 6 of the Basic
Provisions, you must report and designate all acreage by type by the
acreage reporting date. Any acreage not qualifying for fresh apple
production is not eligible for the Optional Coverage for Fresh Fruit
Quality Adjustment option contained in section 14 of these Crop
Provisions. If you designate fresh apple acreage on the acreage report,
you are certifying at least 50 percent of the production from acreage
reported as fresh apple acreage, by unit, was sold as fresh apples in
one or more of the four most recent crop years in accordance with the
definition of ``fresh apple production'' and that you have the records
to support such production.
7. Insured Crop.
* * * * *
(d) That are grown for:
(1) Fresh apple production; or
(2) Processing apple production.
* * * * *
9. Insurance Period.
(a) * * *
(1) For the year of application, coverage begins on February 1 of
the calendar year the insured crop normally blooms in California and
November 21 of the calendar year prior to the calendar year the insured
crop normally blooms in all other States. Notwithstanding the previous
sentence, if your application is received by us after January 12 but
prior to February 1 in California, or after November 1 but prior to
November 21 in all other States, insurance will attach on the 20th day
after your properly completed application is received in our local
office, unless we inspect the acreage during the 20-day period and
determine that it does not meet insurability requirements. You must
provide any information that we require for the crop or to determine
the condition of the apple acreage.
* * * * *
11. Duties In the Event of Damage or Loss.
(a) In accordance with the requirements of section 14 of the Basic
Provisions, you must leave representative samples in accordance with
our procedures.
* * * * *
12. Settlement of Claim.
* * * * *
(b) * * *
(1) * * *
(2) Multiplying each result in section 12(b)(1) by the respective
price election and by the percent of price election;
* * * * *
(4) Multiplying the total production to count (see section 12(c)),
for each type as applicable, by the respective price election and by
the percent of price election;
* * * * *
(7) * * *
Basic Coverage Example:
You have a 100 percent share in one basic unit with 10 acres of
fresh apples and 5 acres of processing apples designated on your
acreage report, with a 600 bushel per acre production guarantee for
both fresh and processing apples, and you select 100 percent of the
price election on a price election of $9.10 per bushel for fresh
apples and $2.50 per bushel for processing apples. You harvest 5,000
bushels of fresh apples and 1,000 bushels of processing apples, all
grading U.S. No. 1 Processing or better. Your indemnity will be
calculated as follows:
A. 10 acres x 600 bushels = 6,000-bushel production guarantee of
fresh apples;
5 acres x 600 bushels = 3,000-bushel production guarantee of
processing apples;
B. 6,000-bushel production guarantee x $9.10 price election x
100 percent of price election = $54,600 value of production
guarantee for fresh apples;
3,000-bushel production guarantee x $2.50 price election x 100
percent of price election = $7,500 value of production guarantee for
processing apples;
C. $54,600 value of production guarantee for fresh apples +
$7,500 value of production guarantee for processing apples =
$62,100.00 total value of the production guarantee;
D. 5,000 bushels of fresh apple production to count x $9.10
price election x 100 percent of price election = $45,500 value of
fresh apple production to count;
1,000 bushels of processing apple production to count x $2.50
price election x 100 percent of price election = $2,500 value of
processing apple production to count;
E. $45,500 value of fresh apple production to count + $2,500
value of processing apple production to count = $48,000 total value
of production to count;
F. $62,100 total value of the production guarantee - $48,000
total value of production to count = $14,100.00 value of loss; and
G. $14,100 value of loss x 100 percent share = $14,100 indemnity
payment.
[END OF EXAMPLE]
* * * * *
(d) Any apple production not graded or appraised prior to the
earlier of the time apples are placed in storage or the date the apples
are delivered to a packer, processor, or other handler will not be
considered damaged apple production and will be considered production
to count.
* * * * *
14. Optional Coverage for Fresh Fruit Quality Adjustment.
* * * * *
(b) * * *
(4) In lieu of sections 12(c)(1)(iii), (iv) and (2), the production
to count will include all appraised and harvested production from all
of the fresh apple acreage in the unit, adjusted in accordance with
this option.
(5) If appraised or harvested fresh apple production for the block
or unit,
[[Page 52233]]
as applicable, is damaged to the extent that more than 20 percent of
the apple production does not grade U.S. Fancy or better the following
adjustments to the production to count will apply:
* * * * *
(c) Any apple production not graded or appraised prior to the
earlier of the time apples are placed in storage or the date the apples
are delivered to a packer, processor, or other handler will not be
considered damaged apple production and will be considered production
to count under this option.
(d) Any adjustments that reduce your production to count under this
option will not be applicable when determining production to count for
APH purposes.
Optional Coverage for Fresh Fruit Quality Adjustment Example:
You have a 100 percent share in 10 acres of fresh apples designated
on your acreage report, with a 600 bushel per acre guarantee, and you
select 100 percent of the price election on a price election of $9.10
per bushel. You harvest 5,000 bushels of apples from your designated
fresh apple acreage, but only 2,650 of those bushels grade U.S. Fancy
or better. Assuming you do not sell any of your fresh apple production
as U.S. Fancy or better, your indemnity would be calculated as follows:
A. 10 acres x 600 bushels per acre = 6,000-bushel production
guarantee of fresh apples;
B. 6,000-bushel production guarantee of fresh apples x $9.10 price
election x 100 percent of price election = $54,600 value of production
guarantee for fresh apple acreage;
C. The value of the fresh apple production to count is determined
as follows:
i. 5,000 bushels harvested - 2,650 bushels that graded U.S. Fancy
or better = 2,350 bushels of fresh apple production not grading U.S.
Fancy or better;
ii. 2,350/5,000 = 47 percent of fresh apple production not grading
U.S. Fancy or better;
iii. In accordance with section 14(b)(5)(ii): 47 percent - 40
percent = 7 percent in excess of 40 percent;
iv. 7 percent x 3 = 21 percent;
v. 40 percent + 21 percent = 61 percent;
vi. 5,000 bushels harvested x .61 (61 percent) = 3,050 bushels of
fresh apple production not grading U.S. Fancy or better;
vii. 5,000 bushels harvested - 3,050 bushels of fresh apple
production not grading U.S. Fancy or better = 1,950 bushels of adjusted
fresh apple production to count;
viii. 1,950 bushels of adjusted fresh apples production to count x
$9.10 price election x 100 percent of price election = $17,745 value of
fresh apple production to count;
D. $54,600 value of production guarantee for fresh apples - $17,745
value of fresh apple production to count = $36,855 value of loss;
E. $36,855 value of loss x 100 percent share = $36,855 indemnity
payment.
* * * * *
Signed in Washington, DC, on August 16, 2010.
William J. Murphy,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 2010-20619 Filed 8-24-10; 8:45 am]
BILLING CODE 3410-08-P