Common Crop Insurance Regulations; Nursery Crop Insurance Provisions, 37222-37247 [05-12644]

Agencies

• DEPARTMENT OF AGRICULTURE
• Federal Crop Insurance Corporation

[Federal Register Volume 70, Number 123 (Tuesday, June 28, 2005)]
[Rules and Regulations]
[Pages 37222-37247]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-12644]



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Part IV





Department of Agriculture





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Federal Crop Insurance Corporation



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7 CFR Part 457



Common Crop Insurance Regulations; Nursery Crop Insurance Provisions; 
Final Rule

Federal Register / Vol. 70, No. 123 / Tuesday, June 28, 2005 / Rules 
and Regulations

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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AB80


Common Crop Insurance Regulations; Nursery 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 
Nursery Crop Insurance Provisions to make container and field grown 
practices separate crops; provide coverage for plants in containers 
that are equal to or greater than 1 inch in diameter; provide separate 
basic units by share for all coverage levels and basic units by plant 
type when additional coverage is purchased; permit insureds to select 
one coverage level for each plant type basic unit when additional 
coverage is purchased; allow increases to the Plant Inventory Value 
Report (PIVR) up to 30 days before the end of the crop year; allow 
acceptance of an application for insurance for any current crop year up 
to 30 days before the end of the crop year; change the starting and 
ending dates for the crop year to June 1st and May 31st, respectively; 
and make other policy changes to improve coverage of nursery plants. 
FCIC also finalizes the Nursery Peak Inventory Endorsement to reflect 
changes made in the Nursery Crop Provisions and adds a new 
Rehabilitation Endorsement to provide a rehabilitation payment for 
field grown plants to compensate them for rehabilitation costs for 
plants that will recover from an insured cause of loss.

DATES: Effective Date: June 28, 2005.

FOR FURTHER INFORMATION CONTACT: For further information or a copy of 
the Cost-Benefit Analysis, contact Stephen Hoy, Risk Management 
Specialist, Research and Development, Product Development Division, 
Risk Management Specialist, United States Department of Agriculture, 
6501 Beacon Drive, Stop 0812, Room 421, Kansas City, MO, 641-4676, 
telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant for the purposes of 
Executive Order 12866 and, therefore, it has been reviewed by the 
Office of Management and Budget (OMB).

Cost-Benefit Analysis

    A Cost-Benefit Analysis has been completed and is available to 
interested persons at the Kansas City address listed above. In summary, 
the analysis finds the expected benefits associated with this proposed 
rule outweigh costs to the Government. The Nursery Policy changes will 
likely increase sales and encourage nursery growers to purchase higher 
levels of additional coverage.
    Government outlays were calculated based on, what were considered 
to be, the four most significant changes: (1) Insurability of plants in 
containers between 1 inch and 3 inches in diameter; (2) extension of 
the date for acceptance of an application for insurance; (3) extension 
of the date for acceptance of a revised PIVR; and (4) addition of a 
Rehabilitation Endorsement. The Cost-Benefit Analysis estimated, under 
the most likely scenario, these proposed policy changes would increase 
Government outlays by approximately 11.2 million dollars and would 
result in approximately 505 million dollars of increased liability 
purchased by nursery growers.
    Few problems are expected in servicing insurance policies and data 
reporting systems due to these policy changes.

Paperwork Reduction Act of 1995

    Pursuant to 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 November 30, 2007.

Government Paperwork Elimination Act (GPEA) Compliance

    In its effort to comply with GPEA, FCIC requires all reinsured 
companies delivering the crop insurance program to make all insurance 
documents available electronically and to permit producers to transact 
business electronically. Further, to the maximum extent practicable, 
FCIC transacts its business with reinsured companies electronically.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. This rule contains no Federal 
mandates (under the regulatory provisions of title II of 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, or a notice of loss and production information to 
determine an indemnity payment in the event of an insured cause of crop 
loss. Whether a producer has 10 acres or 1000 acres, there is no 
difference in the kind of information collected. To ensure crop 
insurance is available to small entities, the Federal Crop Insurance 
Act authorizes FCIC to waive collection of administrative fees from 
limited resource farmers. FCIC believes this waiver helps to ensure 
small entities are given the same opportunities to manage their risks 
through the use of crop insurance. A Regulatory Flexibility Analysis 
has not been prepared since this regulation does not have an impact on 
small entities, and, therefore, this regulation is exempt from the 
provisions of the Regulatory Flexibility Act (5 U.S.C. 605).

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order 12372

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

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988

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on civil justice reform. The provisions of this rule will not have a 
retroactive effect. The provisions of this rule preempts State and 
local laws to the extent such State and local laws are inconsistent 
herewith. With respect to any direct action taken by FCIC under the 
terms of the crop insurance policy, the administrative appeal 
provisions published at 7 CFR part 11 and 7 CFR part 400, subpart J for 
the informal administrative review process must be exhausted before any 
action for judicial review of any determination made by FCIC may be 
brought.

Environmental Evaluation

    This action is not expected to have a significant economic impact 
on the quality of the human environment, health, and safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

Background

    This rule finalizes changes to the Common Crop Insurance 
Regulations (7 CFR part 457) by revising 7 CFR 457.162 (Nursery crop 
insurance provisions) and 7 CFR 457.163 (Nursery peak inventory 
endorsement) and adds a new Nursery rehabilitation endorsement at 7 CFR 
457.164 as published by FCIC on August 9, 2004, at 69 FR 48166-48174.

1. Current Program

    Multiple peril crop insurance (MPCI) is available to wholesale 
nursery growers to assist in the management of nursery plant production 
risks against losses from specific perils. MPCI coverage for nursery 
has been available since 1989 and covered wholesale nurseries that 
received 50 percent or more of their gross income from the wholesale 
marketing of plants.
    The initial insurance program only covered container grown plants 
that were classified as woody, herbaceous, or foliage landscape plants. 
That program required nursery growers to provide a nursery plant 
inventory report with their application or prior to the start of the 
crop year that projected the amount of inventory in the nursery on a 
month-by-month basis. If an insured cause of loss occurred, the 
wholesale market value for the insurable plants in the unit immediately 
after the occurrence of a loss was subtracted from the lesser of: (1) 
Ninety percent of the wholesale market value for the insurable plants 
in the unit immediately prior to the occurrence of a loss; or (2) the 
highest monthly market value for the unit reported on the nursery plant 
inventory summary multiplied by 0.9.
    Between 1989 and 1999, the nursery crop insurance program was not 
utilized by a large number of growers. Effective for the 1999 and 
subsequent crop years, a new insurance program was offered that greatly 
expanded and modified coverage under the nursery policy, including 
expanding coverage to field grown nursery crops. These changes have 
resulted in liabilities increasing from approximately $ 803 million in 
1998 crop year to approximately $ 3.7 billion in the 2005 crop year.
    The current FCIC nursery program covers field grown and 
containerized nursery plants. Structures, equipment, supplies, etc. are 
not covered under this program. In contrast to many crop insurance 
programs (e.g., wheat, corn, soybeans, cotton, etc), coverage is not 
based on a yield guarantee that is established using an historical 
average crop yield per acre. Likewise, the nursery program is not a 
form of revenue insurance coverage (e.g., Adjusted Gross Revenue and 
Crop Revenue Coverage). No minimum income guarantee is established. 
Loss of revenue due to plant price fluctuation is not a covered 
component under the nursery program.
    The program functions as an asset-based form of insurance coverage. 
Each insured grower provides a plant inventory value report (PIVR) that 
establishes the plant inventory value for all plants in the basic unit. 
However, unlike the previous insurance program, nursery growers only 
report the plant inventory value for the plants in the unit once a year 
instead of projecting such values on a monthly basis. This 
significantly reduces the burden on growers to have to project the 
expected monthly values of their plants.
    For the year of application, coverage begins 30 days after the 
reinsured company receives a signed application. However, no 
application is accepted after May 31st of the crop year. If an 
application is submitted after May 31st, coverage will begin on October 
1st for the next crop year. Like other crop insurance policy, coverage 
is continuous from crop year to crop year, unless the coverage is 
cancelled or terminated, and coverage begins on October 1st.
    Insurance ends at the earliest of: (1) The date of final adjustment 
of a loss when the total indemnities due equal the amount of insurance; 
(2) removal of bare root nursery plant material from the field; (3) 
removal of all other insured plant material from the nursery; or (4) 
11:59 p.m. on September 30th. Therefore, the maximum time an insurance 
period can extend in a crop year is from October 1st of one calendar 
year to September 30th of the next calendar year. The crop year is 
designated by the calendar year in which it ends. Therefore, if the end 
of the insurance period is September 30, 2005, it is considered the 
2005 crop year.
    Both additional and catastrophic risk protection (CAT) coverage are 
available under the nursery program. Under additional coverage, the 
grower selects a coverage level percentage (50 percent to 75 percent in 
5 percent increments) and a percentage of the insurable price. CAT 
coverage provides 50 percent coverage at 55 percent of the insurable 
price. A dollar amount of insurance coverage is calculated by 
multiplying the grower's plant inventory value times the selected 
coverage level, times the selected price election, and times ownership 
share. This amount determines the maximum amount of losses paid in a 
year and the premium. For example:

    A nursery grower reports a plant inventory value on the PIVR of 
$1,000,000, selects the 75 percent coverage level, selects 100 
percent of the insurable price, and has a 100 percent ownership 
share in the nursery. The amount of insurance provided would be 
$750,000 ($1,000,000 plant inventory value x 0.75 coverage x 1.00 
price x 1.000 share), and the deductible would be $250,000 
($1,000,000 plant inventory value x (1-.75)). Accumulated insurable 
losses would be paid up to a maximum of $750,000 over the insurance 
period.

    To assist in valuing the plant inventory, FCIC publishes an 
Eligible Plant List and Plant Price Schedule (EPLPPS) that lists all 
insurable plants by genus, species, subspecies, variety, or cultivar. 
For the 2005 crop year, there are approximately 20,500 insurable plants 
on the EPLPPS. The insurable price for each plant is the lesser of the 
catalog or price list price or the maximum insurable price in the 
EPLPPS. Insurable plant prices are held constant over the crop year. 
The maximum insurable price is used to calculate the plant inventory 
value for the purposes of determining the amount of insurance and the 
amount of indemnity at time of loss.
    A maximum insurable price is established for each insurable plant 
to avoid the potential for large variations in price for the same plant 
between insured growers thereby affecting the amount of insurance 
provided. Establishing a maximum price also avoids potential abuse of 
the program through inflated plant values. For price verification 
purposes, two copies of the nursery's most recent wholesale catalog or 
price list must be submitted to the insurance agent each crop year.

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    All plants on the EPLPPS are categorized into one of thirteen 
insurable plant types for insurance pricing purposes. For each type, 
plants are further categorized by container size (volumetric 
measurement) for containerized plants, caliper size for field grown 
plants; or high/wide size for field grown plants. Plants not listed on 
the EPLPPS may be insurable under a written agreement approved by FCIC. 
However, bulbs, cut flowers, aquatic plants, and air plants are not 
insurable and written agreements are not available for these plants.
    Basic and optional unit are available under the policy, depending 
on the coverage level selected. Growers with additional coverage are 
provided basic units consisting of all insurable plants in the county 
for each practice (containerized or field grown). For additional 
premium, growers can divide basic units into separate optional units by 
plant type. The dollar amounts of loss on optional units are 
accumulated and applied against the amount of insurance on the 
insured's basic unit.
    Under CAT coverage, the basic unit is established on ownership 
share and not by practice; i.e., field grown and containerized plants 
are combined into one basic unit. The basic unit cannot be subdivided 
into optional units.
    Basic units are larger in size and usually have a reduced potential 
for loss. Insureds with only basic units are provided a ten percent 
discount to the base premium rates. Optional units are smaller and 
usually have a greater potential for loss due to the fact that 
indemnity payable is calculated independently on each optional unit.
    Growers with additional coverage may purchase up to two Peak 
Inventory Endorsements, although more than two endorsements may be 
purchased if one or more losses have occurred and the nursery is 
restocked. A Peak Inventory Endorsement allows growers to temporarily 
increase the dollar amount of inventory reported on their PIVR. The 
premium amount for the Peak Inventory Endorsement is prorated over the 
specified peak period, so a full year's premium is not paid on the Peak 
Inventory Endorsement amount. Growers declare the dollar amount of 
inventory value increase and the dates the Peak Inventory Endorsement 
is to begin and end. Peak Inventory Endorsements must be submitted on 
or before May 31st of the crop year.
    The nursery policy covers similar causes of loss as other crop 
insurance policies. However, nursery is unique in that multiple 
indemnity payments may be made during a crop year if there are multiple 
losses. This is because the plants are valued individually and plants 
that are not damaged in one loss occurrence may be damaged in another. 
However, the total amount of indemnities that can be paid in any crop 
year cannot exceed the amount of insurance.
    While trying to optimize coverage, there were several problems that 
had to be resolved. The first is fluctuating plant inventories during 
the crop year. This means that at time of loss, the total plant 
inventory values in the unit could be radically different than the 
amount of insurance. While the policy allows for increases to the plant 
inventory values if requested in writing by May 31st, insurance does 
not attach until 30 days after the request was received, and it did not 
totally solve the problem of fluctuating plant inventories.
    To solve this problem, like the previous nursery policy, 
indemnities are not established based on the amount of insurance. 
Indemnities are established using the total of the plant inventory 
values of the insurable plants in the unit immediately prior to the 
loss and after the loss. This ensures that indemnities are based on the 
actual amount of loss suffered by the grower for the plants present at 
the time the insurable cause of loss occurs.
    Another problem is that the premium is established based on the 
amount of insurance while losses are not. This means growers have an 
incentive to under-report their plant inventory values to pay less 
premium. FCIC solved this problem by including an under-report factor 
when calculating losses. This factor was determined by taking the 
lesser of 1.0 or the amount determined by taking the plant inventory 
value reported on the PIVR and subtracting any previous losses and 
dividing this total by the actual value of plants in the basic unit 
immediately prior to the loss occurrence. Use of the under-report 
factor provides an incentive for growers to avoid under-reporting their 
plant inventory values.
    An additional problem is the amount of insurance contains a 
reduction for the coverage level but the amount of insurance is not 
used to calculate losses. To remedy this situation, FCIC developed the 
loss occurrence deductible, which is the smaller of the crop year 
deducible (deductible percent times the total plant inventory values 
for the basic unit) or an amount determined by multiplying the 
deductible percent (100 percent--the coverage level selected) times the 
value of plants in the unit immediately prior to the loss occurrence. 
This allows the application of the coverage level when calculating 
losses.
    For example, a grower with 100 percent share reports a total plant 
inventory value of $100,000 and chooses a 75 percent coverage level and 
100 percent price election. At time of loss, the plant inventory value 
immediately prior to the loss is $125,000, and the plant inventory 
value after the loss is $80,000. The crop year deductible is $25,000 
($100,000 x 0.25). The loss would be calculated as follows:
    1. The under-report factor is 0.80 ($100,000/$125,000).
    2. The occurrence deductible is $25,000 ($125,000 x 0.25 x 0.80).
    3. The plant inventory value immediately prior to the loss--the 
plant inventory value after the loss is $45,000 ($125,000-$80,000).
    4. The result of (3) multiplied by the under-report-factor = 
$36,000 ($45,000 x .80).
    5. The result of (3)--the occurrence deductible = $11,000 ($36,000-
$25,000).
    6. Indemnity = $11,000 ($11,000 x 1.00 price election x 1.000 
share).

2. Major Changes

    Section 1--Definitions. A definition of ``liners'' is added to 
provide coverage for plants in containers that are equal to or greater 
than one inch in diameter. Also, the definition of ``standard nursery 
containers'' is amended to include containers equal to or greater than 
one inch in diameter.
    Most nursery plants are started as liners; i.e., small plants 
produced in nursery trays or flats. As a plant matures, it is usually 
repotted, or upgraded, into a larger container or placed into the 
ground. The current nursery program only insures plant in container 
that are three inches or greater at the widest point of the container 
interior. This limitation precludes a significant segment of the 
nursery industry from crop insurance coverage. Insuring plants in 
containers down to one inch in diameter will provide coverage to the 
majority of liner plants produced by the nursery industry.
    Section 2--Unit Division. Basic units are provided by share which 
may be further divided into basic units by plant type when additional 
coverage is purchased. Optional units are eliminated.
    Under the current Nursery Crop Provisions, a grower with additional 
coverage may elect optional units by plant types. However, it was 
discovered that it was possible for growers to receive coverage in 
excess of the coverage level selected because most calculations still 
occurred at the basic unit level even though optional units were 
selected. In some cases, growers

[[Page 37225]]

were able to obtain coverage that exceeded the amount permitted in the 
Act.
    Instead of by optional units, the new Nursery Crop Provisions allow 
basic units to be split into additional basic units by type if the 
grower has elected additional coverage. The policy now lists 14 plant 
types for field grown material and 15 plant types for container grown 
material, including liners. The number of plant types produced in most 
small to medium sized nursery operations is limited. However, large 
nursery operations often produce a number of different plant types. In 
meetings with FCIC, nursery growers indicated a preference to 
selectively insure by type, since risk of loss varies to some degree 
between plant types. However, insufficient data on degree of risk by 
plant type precluded designating the types as separate crops. This 
change will enhance coverage provided to growers with additional 
coverage and permit growers to better structure their risk management 
options. It will also permit FCIC to gather experience data on both the 
inventory and loss sides of the program, and adjust premium rate by 
plant type.
    Section 3--Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities. Growers may select a separate coverage level 
for each basic unit. Under the current Nursery Crop Provisions, only 
one coverage level can be selected and this same coverage level is 
applicable to all basic and optional units. However, nursery growers 
have indicated a preference to selectively insure plants by type, 
including selecting different price elections and coverage levels by 
type. FCIC considered both options in the proposed rule and, as a 
result of comments stated below, FCIC has elected to offer only 
different coverage levels by type. This will still provide growers 
ability to select the coverage level that best meets their risk 
management needs for the unit.
    Section 6--Plant Inventory Value Report. The provision that 
precludes revision of the PIVR after May 31st of the crop year is 
removed from these provisions, and premium will be prorated for a PIVR 
increase.
    The starting and ending dates of the crop year are being changed in 
these provisions, and growers will be permitted to apply for coverage 
up to 31 days before the end of the insurance period. In light of these 
changes, FCIC believes growers should have the option of increasing the 
PIVR up to 30 days before the end of the crop. Unlike the current 
provisions, growers will be limited to two PIVR revisions to minimize 
any burden to reinsured companies. Additional premium for the amount of 
PIVR increase will be prorated based on the time period remaining in 
the crop year and the additional amount of inventory reported. FCIC 
believes allowing two PIVR increases throughout the crop year and 
prorating premium for the additional reported amounts over the 
remainder of the crop year will significantly enhance risk management 
options for nursery growers.
    Section 8--Insured crop and Plants. The crop insured will be all 
insurable nursery plants in each practice; i.e., container grown or 
field grown.
    Wholesale nursery growers use specific management practices to grow 
container grown plants and field grown plants. Each practice is unique, 
requiring growers to use separate plant production methods to grow the 
plants to a marketable size. Because production methods vary between 
the two practices, risk of loss also varies accordingly. To reflect the 
separate and unique characteristics of each practice, FCIC has 
designated each practice as a separate nursery crop. This change 
structures the Nursery Crop Provisions to correspond with how the 
nursery industry views these practices. Nursery growers who utilize 
both practices in their operation will have the option of insuring one 
or both practices. Growers' risk management options will also be 
enhanced because of the ability to insure each practice at either the 
CAT level or an additional level of coverage.
    Section 9--Insurance Period. The starting and ending dates for the 
crop year are changed from October 1st and September 31st to June 1st 
and May 31st, respectively. Also, the provision that precludes 
acceptance of an application after May 31st is removed.
    The current crop year starting date of October 1st and ending date 
of September 30th of the next calendar year places the start and end of 
the crop year during the hurricane season. If a hurricane occurs in 
September, growers may not be able to provide an accurate PIVR for the 
next crop year by the October 1st due date. Since a PIVR can only be 
increased during the crop year, growers may be forced to under report 
inventory. Also, if plants are partially damaged, a grower must wait 
until the loss adjuster has valued these plants before reporting their 
value for the subsequent crop year. Changing the starting and ending 
dates to June 1st and May 31st, respectively, will eliminate a number 
of potential reporting problems for insured growers.
    For these and other less significant changes, the public was 
initially afforded a 60-day period to submit written comments and 
opinions after the proposed rule was filed in the Office of the Federal 
Register. Based on specific requests to extend the comment period, FCIC 
published a notice in the Federal Register at 69 FR 60320 on October 8, 
2004, extending the initial 60-day comment period for an additional 45 
days to November 22, 2004. A total of 187 comments were received from 
21 commenters. The commenters were nursery growers, reinsured 
companies, crop insurance agents, an insurance service organization, 
nursery trade associations, a State Department of Agriculture, and an 
interested party.
    The specific comments received and FCIC's responses are as follows:
Section 1--Definitions
    Comment: A nursery trade association stated the American Nursery 
and Landscape Association is identified by its old name, ``American 
Association of Nurserymen,'' in the definition of ``American Standards 
for Nursery Stock.''
    Response: FCIC has revised the definition to reference the American 
Nursery and Landscape Association or a subsequent successor 
organization.
    Comment: An insurance service organization recommended the 
sentences in the definition of ``container grown'' be combined to 
eliminate repetition.
    Response: The sentences have been combined to make clear that 
container grown applies to both plants in standard nursery containers 
above ground or grown in such containers in the ground.
    Comment: An insurance service organization recommended the word 
``it'' in the definition of ``crop year'' be clarified.
    Response: Although this provision was not included in the proposed 
changes, the requested change is insignificant and would provide 
greater clarity. Therefore, FCIC has replaced the word ``it'' with the 
phrase ``the insurance period'' to be consistent with other Crop 
Provisions.
    Comment: An insurance service organization recommended the last 
sentence in the definition of ``eligible plant list'' that states, ``A 
paper copy of the eligible plant list is also available from your 
agent'' be deleted.
    Response: Although this provision was not included in the proposed 
changes, the requested change is necessary because FCIC has not 
required agents to maintain a paper copy of the Eligible Plant List 
because, depending on location, the Eligible Plant List may contain 
from a few thousand to over

[[Page 37226]]

20,500 plants; therefore, size precludes use of a paper copy for 
distribution to insured growers. The provision is clarified to state 
that the Eligible Plant List is available on RMA's Web site and on 
compact disk from crop insurance agents.
    Comment: An insurance service organization and a reinsured company 
stated that contradictions exist between the definitions of ``container 
grown,'' ``fabric grow bag,'' and ``field grown'' regarding use of a 
fabric grow bag.
    Response: FCIC agrees a conflict exists between the definitions of 
``fabric grow bag'' and ``field grown'' in the proposed provisions 
because the proposed definition of ``fabric grow bag'' indicates the 
bag is a ``root control bag.'' The term ``root control bag'' is not 
applicable when a bag is placed in-ground; therefore, FCIC has removed 
the term ``root control bag'' from the definition of ``fabric grow 
bag.'' FCIC does not believe a conflict exists between the definition 
of ``container grown'' and the definitions of ``fabric grow bag'' and 
``field grown,'' because above ground fabric grow bags are considered 
standard nursery containers. It is only in-ground fabric grow bags that 
are excluded as standard nursery containers. The provisions have been 
clarified.
    Comment: An insurance service organization asked if fabric grow 
bags must be porous.
    Response: The definition of ``fabric grow bags'' requires there be 
adequate drainage. This can be accomplished through the use of porous 
bags or other appropriate means to permit such drainage, such as 
drainage holes.
    Comment: An insurance service organization recommended the period 
following the term ``fabric grow bag'' (in that definition) be moved to 
follow the term ``(root control bag).'' The same commenter also 
recommended that the phrase ``including a woven or matted bag'' be set 
off in parentheses rather than commas.
    Response: As stated above, FCIC has removed the phrase ``(root 
control bag)'' from the definition of ``fabric grown bag'' because it 
conflicts with the definition of ``field grown.'' FCIC has also added 
parentheses to set-off the phrase ``including a woven or matted bag 
with a plastic or fabric bottom'' in the definition of ``fabric grow 
bag.''
    Comment: An insurance service organization and a reinsured company 
recommended the definitions of ``field market value A,'' ``field market 
value B,'' and ``field market value C'' be revised to indicate these 
values are based on the lesser of: 1) the prices contained in the Plant 
Price Schedule, or 2) the prices contained in your wholesale catalog or 
price list.
    Response: Although this provision was not included in the proposed 
changes, section 6(e) of the Nursery Crop Provisions specifies that the 
plant values cannot be greater than those contained in the Plant Price 
Schedule. FCIC agrees that the policy needs to be revised to make it 
clearer that this means the plant values are based the lesser of the 
price in the Plant Price Schedule or the prices in the grower's 
wholesale catalog or price list and has revised the definitions 
accordingly.
    Comment: An insurance service organization recommended the phrase 
``optional or basic unit'' in the second sentence of the definition of 
``field market value A'' in the proposed rule be changed to ``basic or 
optional unit,'' and the same phrase be changed in the definition of 
``field market value B. The same commenter recommended the phrase ``for 
the purpose of determining'' in the last sentence of the definitions of 
``field market value A'' and ``field market value C'' in the proposed 
rule be changed to ``to determine.''
    Response: Although this provision was not included in the proposed 
changes, for the reasons stated more fully below, FCIC has elected to 
eliminate optional units to reduce the complexity of the policy and 
protect program integrity.
    Comment: An insurance service organization recommended capitalizing 
the term ``plant price schedule'' in the definition of ``field market 
value B'' in the current provisions.
    Response: Since ``plant price schedule'' is the title of a 
document, FCIC agrees and has capitalized this term throughout these 
provisions.
    Comment: Two insurance service organizations and a reinsured 
company recommended the under report factor be determined on the basic 
unit instead of the crop and recommended the definition of ``field 
market value C'' be revised to reflect this determination. The 
commenters stated the amount of insurance and other calculations are at 
the basic unit level. They stated that determining ``field market value 
C'' at the crop level would be time consuming and burdensome for 
adjusters, because adjusters would be required to determine the value 
of all undamaged plants in all basic units, even if a loss is not 
widespread, to correctly calculate ``field market value C'' on a crop 
basis.
    Response: Since losses are indemnified separately for each basic 
unit there is no need to determine the under report factor for basic 
units that may not involve a loss. FCIC has removed the definition of 
``field market value C'' because, as stated above, optional units have 
been eliminated.
    Comment: Three nursery trade associations recommended that the 
definition of ``good nursery practices'' be expanded to include ``best 
management practices'' for production nurseries.
    Response: Use of the term ``best management practices'' would 
suggest there is a single management practice that is needed to be 
considered a good nursery practice. This is not the case; any practice 
that would meet the standards in the definition of ``good nursery 
practices'' is permitted. FCIC has changed the word ``county'' to 
``area'' to correspond with language used in the definition of ``good 
farming practice'' in the Basic Provisions.
    Comment: An insurance service organization asked if organic farming 
practices need to be referenced in the definition of ``good nursery 
practices.''
    Response: FCIC has revised the definition of ``good nursery 
practices'' to include provisions for organic farming.
    Comment: An interested party and an insurance service organization 
recommended the definition of ``liners'' be clarified by adding the 
phrase ``in diameter'' after the word ``inch'' and enclosing the phrase 
``including trays containing 288 or fewer individual cells'' in 
parentheses.
    Response: FCIC agrees and has revised the definition of ``liners'' 
to add the phrase ``in diameter'' after the word ``inch.'' With respect 
to the 288 or fewer individual cells, FCIC has discovered that the use 
of a one inch limitation on cell size corresponds more closely to 200 
cells per tray, not 288 cells per tray. However, there may be some 
variability in nursery tray sizes so FCIC has revised the provisions to 
allow a different number of individual cells if permitted by the 
Special Provisions.
    Comment: A nursery trade association asked if the definition of 
``liners'' excluded rooted cuttings and seedlings grown in flats that 
have no individual cells.
    Response: To be insurable, the liner must have a standard nursery 
container size that is greater than one inch but less than three inches 
in diameter. This could include individual cell in trays, pots or other 
appropriate containers. However, since flats or trays without 
individual cells are not, by definition, considered standard nursery 
containers, they cannot be considered liners.
    Comment: A reinsured company asked if the definition of ``nursery 
crop'' will require the current crop code for nursery to be replaced by 
two crop codes.

[[Page 37227]]

    Response: To maintain consistency in data processing and record 
keeping, FCIC has retained the 0073 crop code for nursery. The 007 
field grown practice code and 008 container grown practice code are 
retained on the actuarial documents. However, now each of these 
practices will be treated as if it were a separate crop. To accomplish 
this, FCIC has: (1) Added a new section 8(a) to clarify the insured 
crop will be each practice in which the insured grower has a share that 
is insured and for which a premium rate is provided by the actuarial 
documents; and (2) removed the proposed definition of ``nursery crop.'' 
The term ``practice'' has been added back into the policy and specifies 
that plants grown in standard nursery containers and field grown are 
separate practices.
    Comment: A reinsured company asked if growers will have the options 
of selecting insurance coverage on one or both nursery crops and 
choosing buy-up coverage on one crop and CAT coverage on the other 
crop. The commenter also asked if all plant types within the crop must 
be insured.
    Response: As stated above, the term nursery crop is no longer used. 
The field grown practice and container grown practice are treated as 
separate crops, so the crop insured will be each practice the grower 
elects to insure. Because each practice is treated as a crop, a grower 
can select additional coverage on one practice and CAT coverage on the 
other practice. However, a grower that selects CAT for a practice must 
insure all plant types grown with that practice under such coverage. If 
a grower selects additional coverage for a practice, the growers must 
insure all plant types grown with that practice under additional 
coverage but the actual additional coverage level may vary by plant 
type.
    Comment: An insurance service organization and a reinsured company 
stated that removal of the term ``practice'' and separation of field 
grown and container grown plants into separate crops could result in 
adverse selection. One commenter stated that container grown material 
will be insured at higher coverage levels, while field grown material 
will not be insured or insured under CAT.
    Response: As stated above, the term practice has been added back to 
the policy but the separate practices are still considered separate 
crops and can be insured separately. However, the production methods 
and risks are considerably different between field grown and container 
grown plants. Because of these differences, producers must be given the 
option to select the coverage that best meets their risk management 
needs. To mitigate the potential for adverse selection, FCIC has 
adjusted premium rates considering the risks associated with field 
grown and container grown separately.
    Comment: An insurance service organization asked if the phrase ``in 
electronic format'' in the definition of ``Plant Price Schedule'' could 
be removed. The same commenter suggested removal of the last sentence 
in this same definition.
    Response: FCIC has revised the definition to eliminate the 
reference to electronic format but it does specify it is available on 
RMA's Web site and on compact disk from crop insurance agents. This 
provision is necessary because growers must be informed of where they 
can obtain the information. For clarity and consistency with the 
definition of ``Plant Price Schedule,'' the definition of ``Eligible 
Plant List'' is also revised to remove the reference to electronic 
format.
    Comment: An insurance service organization asked if the phrase 
``that is appropriate for the plant'' in the definition of ``standard 
nursery containers'' is intended to exclude different plant types 
together in one container.
    Response: Nothing in this definition is intended to address the 
issue of insurability for containers with different types of plants. 
Insurability for this practice has previously been excluded in the 
underwriting guidelines. However, this provision is more appropriately 
contained in the policy and FCIC has revised section 8 to add this 
exclusion. The phrase ``that is appropriate for the plant'' was 
intended to refer to the drainage requirements and is not necessary 
because the term ``adequate'' is sufficient to address the drainage 
requirements. Therefore, the phrase has been removed.
    Comment: An insurance service organization and a reinsured company 
recommended the term ``percentage'' in the definition of ``survival 
factor'' be defined in the Crop Provisions. One of the commenters asked 
if the survival factor will vary by region. The other commenter stated 
a grower may be unable to sell a flat if a certain percentage of the 
plants are destroyed, and a definition of ``percentage'' is needed to 
determine if an entire flat can be considered destroyed in order to 
accurately determine the survival factor.
    Response: FCIC does not insure flats that do not contain individual 
cells. FCIC only insures liners grown in individual containers. FCIC 
does not agree with the recommendation to consider all liners destroyed 
if a certain percentage of the plants are destroyed. Such plants can 
still be sold and, therefore, have value. Failure to consider this 
value when determining losses would increase indemnity payments on 
liners, negatively impact premium rates, and adversely affect program 
integrity. Therefore, the term ``percentage'' is given its common usage 
meaning and a definition is not necessary. FCIC is currently evaluating 
information on survival factors for liners, and, if there are 
variations by region, they will be reflected on the Special Provisions. 
No change has been made in response to this comment.
    Comment: An insurance service organization recommended inserting a 
hyphen between the words ``under'' and ``report'' or ``reporting'' or 
combining the two words into one word. The commenter recommended 
removal of the colon after the word ``of'' and removal of the semicolon 
after ``1.000'' for clarity.
    Response: FCIC agrees the term ``under report'' should be 
hyphenated. FCIC agrees that the punctuation is not correct in the 
third sentence in the definition of ``under factor.'' However, FCIC has 
elected to designate the two provisions as (a) and (b) so there is a 
clear distinction.
    Comment: A crop insurance agent recommended the definition of 
``wholesale'' include growers selling large quantities of plants at a 
reduced price to government offices.
    Response: FCIC agrees and has revised the definition of 
``wholesale'' to include a plant sale to end-users, including 
government offices, if the sale is for a large quantity of plants at a 
reduced price. The purpose of the provisions is to ensure that 
insurance is only provided for producers of the plants. Therefore, as 
long as the grower produces the plants and otherwise qualifies as a 
wholesale marketer (i.e., sells in large quantities at lower prices) 
there is no basis to deny insurance for such growers simply because 
they sell to end users.
    Comment: An insurance service organization recommended the 
definition of ``wholesale'' be restructured so the wording is not 
separated into subparagraphs. If the subparagraphs are retained, the 
commenter recommended capitalizing the first word in subparagraphs (b) 
and (c).
    Response: FCIC agrees and has revised the definition to eliminate 
the subparagraphs.
Section 2--Unit Division
    Comment: An insurance service organization recommended the phrase

[[Page 37228]]

``if the plants are not liners'' in proposed section 2(a)(1) be changed 
to ``for plants that are not liners.''
    Response: All references to liners are removed from section 2(a) 
because a type code for liners is required for reporting purposes. 
Instead, basic units may be established by plant type and FCIC has 
added liners as a plant type in section 2(c). Therefore, the 
recommended change is not necessary.
    Comment: An insurance service organization stated the phrase ``the 
basic unit'' in section 2(b) reflects only one basic unit in a county. 
The same commenter asked if the phrase in proposed section 2(b) that 
states ``the basic unit will be used to establish the amount of 
insurance, crop year deductible, premium, and the total amount of 
indemnity payable under this policy'' means that all optional units 
within one of these basic units will have the same guarantee, rate, 
etc.
    Response: There may be more than one basic unit in a county because 
basic units are now permitted by share and plant type. Section 2(b) 
specifies that each of these basic units may be divided into optional 
units as provided in section 2(d). However, FCIC agrees that it is 
difficult to ascertain how the amount of insurance, premium rates, 
deductibles determined at the basic unit level will apply to optional 
units. This level of complexity will make it difficult for agents to 
explain the policy to growers and reinsured companies to defend the 
policy provisions. For these reasons and those stated below, FCIC has 
elected to remove optional units from the policy and has redesignated 
the provisions in section 2 accordingly.
    Comment: An insurance service organization stated that limiting 
optional units by location to field grown material may not preclude 
balled and burlapped plants from being shifted between locations.
    Response: FCIC concurs that balled and burlapped plants could be 
shifted between locations. This would adversely affect program 
integrity. Because FCIC does not know of any reasonable means to 
eliminate this potential shifting of production, and for the other 
reasons stated above, FCIC has elected to eliminate optional unit.
    Comment: An insurance service organization asked if the language in 
section 2(d) precluded insuring organic and conventional nurseries as 
optional units.
    Response: For the reasons stated above, FCIC has elected to 
eliminate optional units. Therefore, this is no longer an issue.
    Comment: Three nursery trade associations stated that optional 
units should be offered by location for plants in containers in a 
manner that significantly mitigates the potential for shifting of 
container grown plants between growing locations to facilitate losses.
    Response: FCIC is not aware of any method or process that would 
significantly mitigate the potential for shifting plants between 
locations to facilitate a loss if optional units by location are 
offered for containerized plants. As stated above, since the risk 
associated with the shifting of production is so great and they add an 
increased level of complexity, FCIC cannot permit optional units at 
this time and has eliminated them from the policy. If the nursery trade 
associations have suggestions of how optional units may be offered 
without the risk of shifting production, they should provide them to 
their local Regional Office for future consideration.
    Comment: An insurance service organization recommended the premium 
rates be adjusted to reflect division of basic units by share and plant 
type.
    Response: FCIC contracted a study to evaluate the impact of these 
changes on the premium rates and will make appropriate adjustments. 
Also, as experience data are compiled for each crop, plant type, and 
coverage level, premium rates will be adjusted accordingly to maintain 
an actuarially sound program.
    Comment: Two insurance service organizations and two reinsured 
companies expressed concern on allowing basic units by plant type and 
all liners. Two of the commenters stated collecting PIVRs on basic 
units by plant type would require more work by the reinsured company, 
be burdensome to administer, and could make the loss adjustment process 
impossible to complete. One commenter recommended plant values continue 
to be aggregated on all container grown plants and all field grown 
plants, and plant types should remain optional units. Two of the 
commenters stated premium rates should be adjusted to reflect these 
changes.
    Response: Most nurseries have a limited number of plant types. 
Therefore, FCIC believes reporting the plant inventory value by plant 
type will, in most instances, not be overly burdensome to growers or 
reinsured companies to administer. It is true that more losses may have 
to be calculated. However, in some instances the amount of work 
required for loss adjustment will be reduced. If there are basic units 
by plant type, and not all types suffer a loss, field market value A 
and B and the under-report factors will only have to be calculated for 
the plant types with a loss. If there is a basic unit by container 
grown and field grown, field market values A and B would have to be 
calculated for all types in the unit, regardless of whether they had a 
loss. Further, reporting plant inventory values for each plant type 
will improve the accuracy of the PIVR, thereby increasing accuracy in 
determining the amount of insurance, premium owed, and indemnity 
payable. This will benefit growers and reinsured companies. To allow 
basic units by field grown and container plants and optional units by 
plant type would not significantly decrease the work load because field 
market value A and B would have done by type. As stated above, FCIC has 
contracted for a rate study, including units by plant type, and rates 
will be adjusted appropriately to reflect the risks. Section 2(a) is 
amended to specify that unless there is a premium rate for the type on 
the actuarial document, insurance is not provided. Further, as 
experience data are compiled for each plant type, premium rates will be 
adjusted to reflect the risks associated with insuring each type.
    Comment: A nursery grower recommended that palms and cycads be 
placed in a separate plant type.
    Response: FCIC agrees a separate plant type to include all plants 
classified as palms and cycads is appropriate because the morphological 
characteristics of these plants are unique and, therefore, they are 
more appropriately typed separately. Redesignated section 2(b) of these 
provisions is revised to reflect this additional plant type.
    Comment: A reinsured company stated that liners are not a plant 
type but are listed as a type for basic unit division purposes. The 
commenter recommended that liners be added to the plant type list in 
section 2(c) (redesignated as section 2(b)).
    Response: FCIC agrees that it is better to include liners as a 
plant type than to try to distinguish basic units by whether liners 
were present. Although liners may be a composite of a number of plant 
types, for insurance coverage and data processing purposes a single 
type code will be assigned for all liners. FCIC has added liners to the 
list of plant types in redesignated section 2(b).
    Comment: An insurance service organization asked if removal of the 
``other plant types listed in the Special Provisions'' from the list of 
plant types in section 2 would preclude using written agreements to 
insure plants not listed on the Eligible Plant List.

[[Page 37229]]

    Response: Use of a written agreement to insure a plant not listed 
on the Eligible Plant List is not affected by the plant types listed in 
redesignated section 2(b) of these provisions. However, information 
provided to FCIC by the nursery industry, subsequent to publication of 
the proposed rule, suggests that FCIC may need to add one or more new 
plant types to redesignated section 2(b) to enhance plant pricing 
accuracy. To expedite possible inclusion of a new plant type, FCIC has 
not removed ``other plant types listed in the Special Provisions'' from 
redesignated section 2(b).
Section 3--Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities
    Comment: Two insurance service organizations, two reinsured 
companies, and a crop insurance agent questioned the proposed provision 
that allows different coverage level and price election percentage for 
each basic unit. These commenters stated the nursery policy should not 
allow a different coverage level and price election percentage for each 
basic unit because it would lead to adverse selection. One commenter 
stated allowing a separate price election percentage for each plant 
type would create a vast opportunity for moral hazard. One commenter 
stated different coverage levels and price elections would add 
complexity to the use of Peak Endorsements and to the loss adjustment 
process. One commenter indicated different coverage levels and price 
election percentages by plant type would create administrative burdens.
    Response: FCIC agrees that different price election percentages 
should not be allowed by plant type. FCIC concurs with the commenter 
regarding the opportunity for moral hazard to increase significantly if 
the price election percentage is permitted to vary by plant type. Also, 
FCIC agrees that allowing price election to vary by plant type could 
increase the administrative burden on reinsured companies. Crop 
insurance experience data indicates insureds rarely elect less than 100 
percent of the insurable plant price. During the 2004 crop year, less 
than one percent of insureds with additional coverage selected a price 
election percentage that was less than 100 percent of the insurable 
plant price. Therefore, to reduce administrative burden and to be 
consistent with the large majority of crop policies providing coverage 
on a dollar amount of insurance, FCIC has removed the option of 
selecting less than 100 percent of the insurable plant price on nursery 
plants. However, growers with additional coverage and basic units by 
plant type should be permitted to select different coverage levels for 
plant types. The risks with each type may be different and growers 
should be able to select the appropriate coverage level to meet their 
risk management needs. Premium rates will be established for each 
practice, plant type and coverage level shown on the actuarial 
document. As experience data are compiled for each practice, plant 
type, and coverage level, premium rates will be adjusted accordingly to 
maintain an actuarially sound program. FCIC agrees that some additional 
work will be required of the reinsured company and loss adjuster. 
However, allowing separate coverage levels is not what increases the 
burden. The burden is increased because separate types are considered 
separate basic units. Further, most growers do not produce many 
different types so the burden should not be substantially increased.
    Comment: Three commenters stated clarification is needed to 
indicate whether each basic unit can have a separate coverage level and 
price election percentage or all basic units must have the same 
coverage level and price election percentage. Two commenters indicated 
clarity is needed regarding eligibility for the option of separate 
coverage level and price election percentage on an additional level of 
coverage and ability to vary coverage level and price election 
percentage on a basic unit level by share or plant type. One commenter 
recommended coverage level, if allowed by plant type, be identified on 
the application by crop or crop/type, since basic units are not 
identified on the application. One commenter stated establishing 
coverage level by plant type might be acceptable if premium rates are 
adequate. One commenter stated reinsured companies must be allowed to 
set fund designations by basic unit if insureds can select coverage 
level and price election by basic unit.
    Response: FCIC agrees additional clarification is needed to avoid 
confusion on selecting coverage level on a basic unit and has revised 
sections 3(c) of the proposed provisions to specify that different 
coverage levels only apply to plant types, not other types of basic 
units. FCIC also agrees that coverage level must also be included on 
the application so FCIC has revised section 3 to require growers to 
list each plant type and the coverage level selected for each type on 
the application. The Standard Reinsurance Agreement does not permit 
reinsured companies to select fund designations on a basic unit level. 
Therefore, FCIC cannot include this provision in these Crop Provisions.
    Comment: A reinsured company asked if the intent of the policy is 
to insure nursery crops similar to Idaho, Oregon, and Washington 
grapes. If this is the intent, the commenter indicated it should be 
stated more concisely.
    Response: The Grape Crop Provisions permit insured growers in 
Idaho, Oregon, and Washington to select a price election and coverage 
level for each grape varietal group specified in the Special 
Provisions. As stated above, the language in proposed section 3(b) is 
revised to clarify that a coverage level can be selected for each plant 
type insured under a practice. Operationally the Nursery Crop 
Provisions are similar to the Grape Crop Provisions in that separate 
types/varieties have separate units. However, under the Grape Crop 
Provisions applicable to all states except California, basic units are 
divided into optional units by variety. Under the Nursery Crop 
Provisions, basic units are divided into other basic units by plant 
type. The provisions have been revised to clarify that the insured crop 
is determined by the practice and, at the election of the grower, basic 
units can be established by plant type if additional coverage is 
elected.
    Comment: An insurance service organization recommended the word 
``policy'' not be used in proposed section 3(b) because container and 
field grown plants are separate crops and the word ``policy'' could be 
misleading. The commenter stated FCIC needed to review the terms 
``policy'' and ``crop'' in these provisions to make sure it fits the 
new definitions.
    Response: FCIC is not sure what the issue is because each different 
practice is considered a different crop. This means each practice would 
also be considered a different policy since only one crop is insured 
per policy. However, references to ``policy'' have been removed from 
section 3(b). FCIC will review other provisions to ensure that the term 
``policy'' is correctly used.
    Comment: An insurance service organization and a reinsured company 
asked if administrative fees would be charged for each plant type.
    Response: Pursuant to sections 508(b)(5) and 508(c)(10) of the 
Federal Crop Insurance Act, administrative fees are payable on a crop 
and county basis. Since different plant types are not considered 
different crops, separate administrative fees for each plant type would 
not be owed. However, each practice is considered a separate crop so 
section 3(b) of these provisions is revised to clarify an 
administrative fee

[[Page 37230]]

is owed for each practice (field grown and container grown) insured.
    Comment: An insurance service organization stated coverage under 
CAT needs clarification, since the policy language appears to restrict 
a grower from purchasing additional coverage for the rest of the 
nursery if CAT coverage is chosen for one type.
    Response: The policy is intended to restrict the grower from 
purchasing additional coverage for the rest of the practice if CAT 
coverage is chosen for one type. FCIC has revised proposed section 3(b) 
to state insureds may select either CAT or an additional level of 
coverage on each insured practice. This means a grower can select CAT 
coverage for field grown plants and additional coverage for 
containerized plants, or vice versa. However, growers who select CAT 
coverage on a practice must insure all plant types under that practice 
at the CAT coverage. An insured cannot select CAT for one or more plant 
types under a practice and select additional coverage on other plant 
types under the same practice.
    Comment: An insurance service organization asked if any other 
multiple peril crop policies permit coverage level and price election 
percentage to vary besides those crops listed in section 4A(4) of the 
Crop Insurance Handbook. This commenter asked if allowing coverage 
level and price election percentage to vary by basic unit would 
establish a precedent for other crops, and recommended leaving plant 
types as optional units.
    Response: As stated above, growers will no longer be able to select 
different price elections by plant type but growers will be permitted 
to select different coverage levels by plant type. Section 4A(4) of the 
Crop Insurance Handbook lists Crop Provisions with more than one 
insurable crop. The Grape Crop Provisions applicable to all states 
except California permit variation in coverage level and price election 
by varietal group with all insurable varieties being designated as one 
crop. Therefore, allowing coverage level to vary by basic units of the 
same crop in the Nursery Crop Provisions does not establish a 
precedent. Such precedent was already set.
    Comment: An insurance service organization recommended language be 
considered to address what coverage level and price election percentage 
should be used for new plant types added on a revised PIVR.
    Response: As stated above, price elections will not be permitted to 
differ between plant types but coverage levels will. Section 3(c) is 
revised to specify that if an insured with an additional level of 
coverage submits a revised PIVR or Peak Inventory Endorsement that 
includes a plant that is categorized under a plant type (basic unit) 
not on the initial PIVR, the insured must select the coverage level for 
insuring the new plant type. Language that precludes coverage level 
changes after the sales closing date is not applicable, because 
selecting a coverage level for a new plant type is not a change to an 
existing coverage level.
    Comment: An insurance service organization recommended revising 
proposed section 3(c)(1) and (2) to read as follows:
    (1)``For the initial crop year, after the date of application; and
    (2) For subsequent crop years, after September 30th.''
    Response: FCIC cannot accept the suggestions. Sections 3(c)(1) and 
(2) (now redesignated as sections 3(d)(1) and (2)) apply to the first 
crop year the provisions are in effect because at that time some 
producers will be new applicants and others will have carryover 
policies. Since the insurance period is changing, the first year there 
needs to be an interim date by which changes may be made. However, FCIC 
has revised redesignated section 3(d) to clarify that the September 30 
date applies to the first crop year the provisions take effect and the 
sales closing date applies to all subsequent crop years.
    Comment: An insurance service organization recommended that 
language in proposed section 3(f) be revised to clarify an increase to 
the insured's coverage level must be requested on or before September 
30th prior to the start of the crop year. The commenter also 
recommended combining proposed sections (c) and (f) or moving section 
(f) to follow section (c). The commenter also recommended removing the 
phrase ``whichever is later,'' in proposed section 3(f) and adding the 
phrase ``the later of'' between the words ``on'' and ``October.''
    Response: FCIC has removed proposed section 3(f) because,