Common Crop Insurance Regulations, Tobacco Crop Insurance Provisions, 28895-28901 [E7-9775]

Agencies

• DEPARTMENT OF AGRICULTURE
• Federal Crop Insurance Corporation

[Federal Register Volume 72, Number 99 (Wednesday, May 23, 2007)]
[Proposed Rules]
[Pages 28895-28901]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-9775]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 72, No. 99 / Wednesday, May 23, 2007 / 
Proposed Rules

[[Page 28895]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AB98


Common Crop Insurance Regulations, Tobacco Crop Insurance 
Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Proposed rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes to 
amend the Common Crop Insurance Regulations by removing the Quota 
Tobacco Crop Insurance Provisions, revising the Guaranteed Tobacco Crop 
Insurance Provisions, and changing the title of the Guaranteed Tobacco 
Crop Insurance Provisions to Contracted Tobacco Crop Insurance 
Provisions. The intended effect of this action is to provide policy 
changes and clarify existing policy provisions to better meet the needs 
of insured producers. The changes will apply for the 2008 and 
succeeding crop years.

DATES: Written comments and opinions on this proposed rule will be 
accepted until close of business July 23, 2007, and will be considered 
when the rule is to be made final.

ADDRESSES: Interested persons are invited to submit comments, titled 
``Tobacco Crop Insurance Provisions'', by any of the following methods:
     By Mail to: Director, Product Administration and Standards 
Division, Risk Management Agency, United States Department of 
Agriculture, 6501 Beacon Drive, Stop 0812, Room 421, Kansas City, MO 
64133-4676.
     E-mail: DirectorPDD@rma.usda.gov.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.

A copy of each response will be available for public inspection and 
copying from 7 a.m. to 4:30 p.m., CDT. Monday through Friday, except 
holidays, at the above address.

FOR FURTHER INFORMATION CONTACT: Gary Johnson, Risk Management 
Specialist, Product Management, Product Administration and Standards 
Division, Risk Management Agency, at the Kansas City, Mo, address 
listed above, telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

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

Paperwork Reduction Act of 1995

    Pursuant to the provisions of the Paperwork Reduction Act of 1995 
(44 U.S.C. chapter 35), the collections of information in this rule 
have been approved by OMB under control number 0563-0053 through 
November 30, 2007.

E-Government Act Compliance

    FCIC is committed to complying with the E-Government Act, to 
promote the use of the Internet and other information technologies to 
provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. This rule contains no Federal 
mandates (under the regulatory provisions of title II of the UMRA) for 
State, local, and tribal governments or the private sector. Therefore, 
this rule is not subject to the requirements of sections 202 and 205 of 
UMRA.

Executive Order 13132

    It has been determined under section 1(a) of Executive Order 13132, 
Federalism, that this rule does not have sufficient implications to 
warrant consultation with the States. The provisions contained in this 
rule will not have a substantial direct effect on States, or on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Regulatory Flexibility Act

    FCIC certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. Program 
requirements for the Federal crop insurance program are the same for 
all producers regardless of the size of their farming operation. For 
instance, all producers are required to submit an application and 
acreage report to establish their insurance guarantees and compute 
premium amounts, and all producers are required to submit a notice of 
loss and production information to determine the amount of an indemnity 
payment in the event of an insured cause of crop loss. Whether a 
producer has 10 acres or 1000 acres, there is no difference in the kind 
of information collected. To ensure crop insurance is available to 
small entities, the Federal Crop Insurance Act authorizes FCIC to waive 
collection of administrative fees from limited resource farmers. FCIC 
believes this waiver helps to ensure small entities are given the same 
opportunities as large entities to manage their risks through the use 
of crop insurance. A Regulatory Flexibility Analysis has not been 
prepared since this regulation does not have an impact on small 
entities, and, therefore, this regulation is exempt from the provisions 
of the Regulatory Flexibility Act (5 U.S.C. 605).

Federal Assistance Program

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

Executive Order 12372

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

Executive Order 12988

    This proposed 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

[[Page 28896]]

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

    FCIC proposes to amend the Common Crop Insurance Regulations by 
removing the Quota Tobacco Crop Insurance Provisions and reserving 
Sec.  457.156. The American Jobs Creation Act of 2004 eliminated the 
tobacco quota support program and quota support price as administrated 
by the Farm Service Agency (FSA). FCIC also proposes to revise the 
Guaranteed Tobacco Crop Insurance Provisions and change the title to 
Contracted Tobacco Crop Insurance Provisions. Under the new provisions, 
insurance will only be available for tobacco grown under a contract 
with a tobacco company. The entity named on the tobacco contract must 
be the same as the entity named on the application to indicate an 
insurable share.
    Prior to the American Jobs Creation Act of 2004, tobacco was sold 
in United States Department of Agriculture (USDA) auction warehouses. 
The prices paid to the auction warehouses by tobacco companies were 
based upon the quality and grade of the tobacco. Today the majority of 
tobacco is grown under contract with a tobacco company. Therefore, a 
new environment exists for tobacco production and marketing and FCIC is 
proposing to revise the tobacco policy to reflect this new environment.
    The proposed changes are as follows:
    1. FCIC proposes to remove the paragraph immediately preceding 
section 1 which refers to the order of priority of provisions in the 
event of conflict. This same information is contained in the Basic 
Provisions; therefore, it is duplicative and should be removed in the 
Crop Provisions.
    2. Section 1--Definitions--Add definitions of ``average price 
received,'' ``commercial tobacco producer,'' ``contract price,'' 
``minimum acreage,'' ``price election,'' ``tobacco company or 
commercial marketing association (CMA),'' ``tobacco contract,'' 
``tobacco handler,'' and ``tobacco types'' since these terms are 
required to provide insurance under a tobacco company contract.
    FCIC proposes to revise the definition of ``basic unit'' so that a 
basic unit will be all insurable acreage of each tobacco type grown in 
the county for the crop year. Previously, basic units were available by 
farm serial number (FSN). However, due to the elimination of the 
tobacco quota and support program and the tobacco quota support price, 
the majority of tobacco is now sold under a contract with a tobacco 
company. The tobacco company contract indicates only the total quantity 
of tobacco production by tobacco type the producer agrees to deliver 
regardless of who shares in the production or from what FSN the tobacco 
production was produced. Basic units by tobacco types are more 
appropriate because tobacco types are planted, harvested and cured 
separately by growers. The types are graded, and purchased separately 
by tobacco companies. Therefore, verifiable production records will 
most likely be kept by type. Under the APH plan of insurance the 
producer is responsible for supplying verifiable production records for 
APH purposes.
    FCIC is proposing to revise the definition of ``priming'' to 
clarify that priming applies to one or more leaf, not just each leaf.
    FCIC proposes to remove the definitions of ``average value,'' 
``carryover tobacco,'' ``discount variety,'' ``fair market value,'' 
``market price,'' ``season average market price,'' and ``support 
price.'' These definitions are no longer necessary since the price 
support program has been eliminated.
    FCIC proposes to remove the definition of ``adequate stand'' 
because even though the definition was added in 1999, the term was 
never used in the Crop Provisions.
    FCIC proposes to remove the definition of ``approved yield,'' and 
``replanting.'' These terms are defined in the Common Crop Insurance 
Policy Basic Provisions and do not require modification for the purpose 
of these Crop Provisions. FCIC also proposes to remove the definition 
of ``production guarantee (per acre)'' because the elimination of the 
quota tobacco program means that production will now be based on the 
actual production history of the producer, not the pounds on the 
actuarial documents or approved yield in the Special Provisions. 
Therefore, the definition in the Basic Provisions is appropriate.
    3. Section 2--FCIC is proposing to revise section 2 by removing the 
sentence that states, ``The provisions in the Basic Provisions 
regarding optional units are not applicable, unless specified by the 
Special Provisions.'' FCIC is proposing only basic units by type be 
available to producers. Previously, optional units were available by 
farm serial number (FSN) for certain types of tobacco in certain areas 
as specified by the Special Provisions. Also, enterprise units were 
available by certain types of tobacco in certain areas as specified by 
the Special Provisions. However, due to the elimination of the tobacco 
quota and support program and the tobacco quota support price, the 
majority of tobacco is now sold under a contract with a tobacco 
company. The tobacco company contract indicates only the total quantity 
of tobacco production by tobacco type the producer agrees to deliver 
regardless of who shares in the production or from what FSN the tobacco 
production was produced. Optional and enterprise units will not be 
available to any producer. Basic units by tobacco types are more 
appropriate because tobacco types are planted, harvested and cured 
separately by growers. The types are graded, and purchased separately 
by tobacco companies. Therefore, verifiable production records will 
most likely be kept by type. Under the APH plan of insurance the 
producer is responsible for supplying verifiable production records for 
APH purposes.
    4. Section 3--FCIC is proposing to revise section 3(a) by removing 
the word ``guaranteed'' because the tobacco quota support program 
through the FSA has been abolished so there is no longer guaranteed 
tobacco. FCIC is also proposing to add the word ``percentage'' after 
the phrase ``price election'' to clarify that producers actually select 
the percentage of the price election that is announced by FCIC.
    FCIC proposes to remove section 3(b). Once the American Jobs 
Creation Act of 2004 eliminated the tobacco quota support program and 
quota support price, the guarantee became based on the actual 
production history of the producer. Therefore, the production report 
must be filed annually.
    FCIC proposes to add a new section 3(b) to specify the producer's 
production guarantee will be adjusted if the producer has not planted a 
sufficient number of acres to produce the amount of tobacco necessary 
to fulfill the contracts. Whether sufficient acres have been planted is 
determined by dividing the pounds specified in the producer's tobacco 
contracts in the county by the applicable approved yield. If the 
producer does not plant the minimum acreage, the production guarantee 
will be reduced proportionately. These provisions are necessary to 
prevent the producer from over-insuring the tobacco.

[[Page 28897]]

    5. Section 6--FCIC proposes to remove the provision requiring the 
producer to report any carryover tobacco from previous years because 
carryover production no longer needs to be reported since the tobacco 
quota support program has been eliminated. FCIC proposes the new 
paragraph (a) specify that a copy of all tobacco contracts must be 
provided to the approved insurance provider on or before the acreage 
reporting date and the entity named on the tobacco contract must be the 
same as the entity named on the application. This is consistent with 
other Crop Provisions that cover crops under contract. However, FCIC 
added the requirement that the name on the tobacco contract must be the 
same name on the application in order to be able to verify that the 
producer has an insurable interest in the crop.
    FCIC proposes to add a new section 6(b) to specify that a copy of 
any written lease agreement, if applicable, between the insured and any 
landlord or tenant must identify all other persons sharing in the crop 
and be provided to the approved insurance provider on or before the 
acreage reporting date. This provision would permit the approved 
insurance provider to properly determine the appropriate share in the 
crop.
    6. Section 7--FCIC is proposing to restructure section 7 and add 
new paragraphs (a) and (b). FCIC is proposing a new paragraph (a) that 
specifies that the insured tobacco crop must meet all rotation 
requirements on the Special Provisions, be grown in accordance with the 
requirements of the tobacco contract executed on or before the acreage 
reporting date, and not be excluded from the tobacco contract at any 
time during the insurance period. These requirements are consistent 
with the requirements of other Crop Provisions covering crops under 
contract and ensure that the coverage is only provided if the crop 
remains contracted throughout the insurance period. This will prevent a 
shifting of costs to the government if there has been an over-
contracting of production.
    FCIC is proposing to add a new section 7(b) to specify a tobacco 
company or commercial marketing association that produces its own 
tobacco may establish an insurable share if they comply with the Crop 
Provisions; the Board of Directors or officers of the tobacco company 
or commercial marketing association, or tobacco handler executes and 
adopts a resolution prior to the sales closing date that contains the 
same terms as an acceptable tobacco contract; and the approved 
insurance provider's inspection determines the processing facilities 
comply with the definition of a tobacco company or commercial marketing 
association. These requirements are consistent with the requirements of 
other Crop Provisions covering crops under contract and protect program 
integrity by ensuring that the persons responsible for decisions of the 
business determine the terms and conditions of the contract.
    7. Section 8--FCIC is proposing to revise section 8 by removing 
paragraphs (a) and (b). Paragraph (a) is not necessary because the 
quota price support program has been eliminated. Paragraph (b) is not 
necessary because it was redundant with section 7, which specifies the 
premium rate for the tobacco type must be provided by the actuarial 
documents. Paragraph (c) and (d) have been redesignated as paragraphs 
(a) and (b) respectively. FCIC proposes to revise redesignated 
paragraph (b) to specify that acreage is not insured if it is damaged 
before the final planting date to the extent that a majority of the 
producers in the area would normally not care for the crop. Previously, 
the provision referred to ``most'' producers but FCIC has since been 
using the term ``majority'' in its other Crop Provisions because it 
provides a more determinable standard.
    8. Section 9--FCIC proposes to revise the introductory paragraph to 
specify that section 9 is in lieu of the provisions in section 11 of 
the Basic Provisions. FCIC proposes to remove section 9(b) because 
tobacco under contract may no longer be weighed at a tobacco warehouse 
like it was under the previous tobacco quota program. FCIC proposes to 
redesignate sections 9(c) and (d) as sections 9(b) and (f), 
respectively and revise redesignated section 9(b) to remove the 
reference to delivery to the warehouse for the same reason as stated 
above. FCIC proposes to add new sections 9(c), (d), and (e) to 
incorporate the events that trigger the end of the insurance period 
from section 11 of the Basic Provisions that are still applicable and 
add a new event, which is the date the producer delivers sufficient 
production to fulfill all tobacco contracts in the county. This is 
consistent with other Crop Provisions covering crops under contract.
    FCIC is proposing to revise redesignated section 9(f) to clarify 
that the end of insurance period is the date immediately following 
planting and it is designated by specific tobacco types and states, 
unless otherwise provided on the Special Provisions. This proposed 
revision changes the tobacco type from an assigned number to a specific 
name.
    9. Section 10--FCIC is proposing to revise section 10(b) to clarify 
fire is a cause of loss if it is caused by lightning. Currently, the 
provisions provide for tobacco to be insured in the tobacco barn and 
fire is listed as a cause of loss. FCIC has received many inquiries 
asking if fire is an insurable cause of loss when the barn burns and 
there is no proof the fire was caused by a naturally occurring event. 
Since coverage can only be provided for naturally occurring events, 
FCIC is removing all ambiguity regarding what causes of the fire are 
covered.
    FCIC is proposing to revise section 10(h) for clarity and to be 
consistent with other Crop Provisions. No substantive change has been 
made.
    10. Section 11--FCIC proposes to revise section 11(a) to be 
consistent with the format of other similar Crop Provisions. No 
substantive change has been made.
    FCIC proposes to revise section 11(b) to require producers who have 
filed a notice of damage to leave all tobacco stalks and stubble on the 
unit intact for the approved insurance provider's inspection. 
Previously this requirement only applied to specific tobacco types but 
FCIC has determined that inspection of the stalks and stubble can be 
useful in the adjustment of all types of tobacco.
    11. Section 12--FCIC proposes to revise section 12(a) to remove the 
consequences for failure to provide acceptable records for optional 
units since such units are no longer available under the policy. As 
stated above, only basic units are available because the tobacco 
company contract indicates the total quantity of tobacco production the 
producer will deliver regardless of who shares in the production or 
from what FSN the tobacco production was grown. The consequences for 
failure to provide acceptable records by basic unit remains the same.
    FCIC proposes to revise section 12(b) to remove the references to 
different types because now separate basic units are available by type. 
The loss calculation example has also been revised to remove the 
references to the type by number of guaranteed tobacco since types are 
proposed to be designated by name, not number, and the tobacco is not 
longer guaranteed because of the elimination of the quotas.
    FCIC proposes to revise section 12(c) to be consistent with other 
Crop Provisions. FCIC also proposes to remove language in section 
12(c)(1)(D) referring to specific tobacco types because FCIC is 
proposing that the requirement to leave all stubble and stalks intact 
be applicable to all tobacco. FCIC is proposing to remove the

[[Page 28898]]

references to the value of the production to count in section 
12(c)(1)(E)(A) because there is no support price. The provision will 
now refer to the amount of production to count instead of the value of 
such production.
    FCIC proposes to remove sections 12(e) through (g) since the 
tobacco quota support program has been eliminated.
    FCIC proposes to redesignate section 12(d) as section 12(e) and add 
a new section 12(d) to specify the producer must destroy the production 
in those situations where an agreement is reached between the approved 
insurance provider and the insured that the current year's tobacco has 
no market value due to an insured cause of loss. FCIC is also proposing 
that failure to destroy such tobacco will result in the production 
considered as production to count valued at the price election.
    FCIC proposes to revise redesignated section 12(e). Previously, 
quality deficiencies for tobacco were determined by using USDA Official 
Grade Standards at the tobacco warehouses. This allowed an objective 
third party to inspect the tobacco. However, most of the tobacco is now 
sold under contract and the elimination of the quota tobacco program 
has eliminated the need for tobacco warehouses. Therefore, there is no 
longer this disinterested third party available to grade and value the 
tobacco. Further, FCIC has not discovered any party other than the 
tobacco company, commercial marketing association, or tobacco handler 
who grades or values tobacco. This creates a serious program 
vulnerability because the person who would be grading and valuing the 
tobacco will be the same person who is purchasing it. This means there 
exists an incentive to undervalue the production, reduce the price the 
tobacco company, commercial marketing association, or tobacco handler 
has to pay the producer, and shift the costs to FCIC to pay the 
difference. There have been similar situations in other crop policies 
and there has been significant fraud and abuse.
    One solution is the removal of the quality adjustment provisions 
but producers claim that the value of the insurance is seriously 
diminished without this coverage. FCIC recognizes its value and is not 
ready to remove the coverage in this rule. However, FCIC is proposing 
that insured producers, with damaged tobacco, will be required to 
notify approved insurance providers before any tobacco is delivered to 
the tobacco company, commercial marketing association, or tobacco 
handler so that at the approved insurance providers option they may 
inspect the tobacco to determine and document the extent of the damage. 
Without the opportunity to inspect the damaged tobacco, such tobacco is 
not eligible for quality adjustment. Such inspection will assist the 
approved insurance provider in determining the extent of damage and if 
the price for the damaged tobacco received by the producer is 
reasonable based on the quality of the tobacco observed by the approved 
insurance provider. If the price is not reasonable, the approved 
insurance provider will have the authority to adjust the price. FCIC is 
also proposing quality adjustment will apply only when the average 
price per pound received for the damaged tobacco is less than 75 
percent of the producer's contract price. This will reduce the 
administrative burdens associated with minor quality adjustments. FCIC 
realizes that this is not a perfect solution and is seeking comments on 
alternative methods to ensure the integrity of the program. If the 
proposed solution is not workable or effective, and there are no viable 
alternatives, FCIC may be required to remove the quality adjustment 
provisions from the policy.
    12. Section 13--FCIC is proposing to revise section 13 to remove 
the numeric figures and parenthesis surrounding such figures to be 
consistent with the other Crop Provisions. No substantive change has 
been made.
    13. Section 14--FCIC is proposing to revise section 14 to add 
prevented planting coverage. Previously, prevented planting coverage 
was not available at all for tobacco. FCIC is proposing the producer's 
prevented panting coverage be 35 percent of the producer's production 
guarantee for timely planted acreage. However, no additional prevented 
planting coverage will be available.

List of Subjects in 7 CFR Part 457

    Crop insurance, Tobacco, Reporting and recordkeeping requirements.

Proposed Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation proposes to amend 7 CFR part 457 to read as 
follows:

PART 457--COMMON CROP INSURANCE REGULATIONS

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

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

PART 457--[AMENDED]


Sec.  457.156  [Removed and Reserved]

    2. Remove and reserve Sec.  457.156.
    3. Revise Sec.  457.136 to read as follows:


Sec.  457.136  Contracted tobacco crop insurance provisions.

    The contracted tobacco crop insurance provisions for the 2008 and 
succeeding crop years are as follows:
    FCIC policies: United States Department of Agriculture, Federal 
Crop Insurance Corporation.
    Reinsured policies: (Appropriate title for insurance provider).
    Both FCIC and reinsured policies:
Contracted Tobacco Crop Insurance Provisions
    1. Definitions.
    Average price received. The price per pound for tobacco sold under 
contract by type, and is determined by dividing total receipts for the 
tobacco type sold by the number of pounds of the tobacco type sold, 
without regard to discounts or incentives. Failure to provide 
acceptable receipts will result in the average price received being the 
same as the price election.
    Basic unit. In lieu of the definition in the Basic Provisions, a 
basic unit is all insurable acreage of each tobacco type grown in the 
county for the crop year.
    Commercial tobacco producer. A producer who grows tobacco under a 
contract with tobacco company, commercial marketing association, or 
tobacco handler.
    Contract price. The price for each type of tobacco specified in the 
tobacco contract without regard to discounts or incentives.
    Harvest. Cutting or priming and removing all insured tobacco from 
the unit.
    Hydroponic plants. Seedlings grown in liquid nutrient solutions.
    Late planting period. In lieu of the definition in section 1 of the 
Basic Provisions, the period that begins the day after the final 
planting date for the insured crop and ends 15 days after the final 
planting date, unless otherwise specified in the Special Provisions.
    Minimum acreage. The minimum number of acres required to be planted 
to produce the number of pounds of tobacco under contract, determined 
by dividing the pounds specified in your tobacco contract by the 
applicable approved yield.
    Planted acreage. In addition to the definition contained in the 
Basic provisions, land in which tobacco seedlings, including hydroponic 
plants, have been transplanted by hand or machine from the tobacco bed 
to the field.
    Pound. Sixteen ounces avoirdupois.
    Price election. In lieu of the definition in the Basic Provisions, 
the price election will be the contract price multiplied by the 
percentage you elect.

[[Page 28899]]

    Priming. A method of harvesting tobacco by which one or more leaves 
are removed from the stalk as they mature.
    Tobacco bed. An area protected from adverse weather in which 
tobacco seeds are sown and seedlings are grown until transplanted into 
the tobacco field by hand or machine.
    Tobacco company or commercial marketing association (CMA). Any 
business enterprise regularly engaged in buying and processing tobacco 
for human use, that possesses all licenses and permits for processing 
tobacco required by the state in which it operates, possesses 
facilities, or has contractual access to such facilities, with enough 
equipment to accept and process contracted tobacco within a reasonable 
amount of time after harvest.
    Tobacco contract. A written agreement between the producer or 
entity and a tobacco company or commercial marketing association, or 
between the producer and a tobacco handler, containing at a minimum:
    (a) The producer or entity's commitment to plant and grow tobacco 
of an insurable type and practice, and to deliver the amount of 
production stated in the contract to the tobacco company, commercial 
marketing association, or tobacco handler;
    (b) The tobacco company's, commercial marketing association's, or 
tobacco handler's commitment to purchase the specified number of pounds 
of tobacco stated in the contract (an option to purchase is not a 
commitment); and
    (c) A contract price.
    Tobacco handler. A business enterprise that has all the licenses 
and permits required by the state in which it operates, and has an 
agreement in writing with a tobacco company or commercial marketing 
association to purchase and deliver tobacco.
    Tobacco types. Insurable types as shown on the Special Provisions.
    2. Unit Division.
    A unit will be determined in accordance with the definition of 
basic unit contained in section 1 of these Crop Provisions. Enterprise 
and optional units are not available.
    3. Insurance Guarantees, Coverage Levels, and Prices for 
Determining Indemnities.
    In addition to the requirements of section 3 of the Basic 
Provisions:
    (a) You must select only one price election percentage and coverage 
level for each tobacco type designated in the Special Provisions that 
you elect to insure.
    (b) Your total production guarantee will be the number of pounds in 
your tobacco contract multiplied by your selected coverage level, 
provided you have planted sufficient acreage of tobacco to fulfill all 
of your tobacco contracts in the county.
    (1) Sufficient acreage is determined by dividing the pounds 
specified in your tobacco contracts in the county by the applicable 
approved yields. For example, you have three contracts for tobacco, 
each to deliver 2,000 pounds, and your approved yield is 1,700 pounds. 
You must plant at least 3.5 acres (6,000 / 1,700).
    (2) If you do not plant sufficient acreage, your production 
guarantee (per acre) will be reduced proportionately. For example, 
using the example in paragraph (2), you only plant 2.5 acres. This 
means you could only produce 4,250 pounds (1,700 x 2.5), which is 71 
percent of the pounds specified in your tobacco contracts. Therefore, 
your production guarantee (per acre) will be reduced to 1207 pounds 
(.71 x 1,700).
    4. Contract Changes.
    In accordance with section 4 of the Basic Provisions, the contract 
change date is November 30 preceding the cancellation date.
    5. Cancellation and Termination Dates.
    In accordance with section 2 of the Basic Provisions, the 
cancellation and termination dates are March 15.
    6. Report of Acreage.
    In addition to the requirements of section 6 of the Basic 
Provisions, you must:
    (a) Provide a copy of all tobacco contracts to us on or before the 
acreage reporting date. The entity named on the tobacco contract must 
be the same as the entity named on your application for you to have an 
insurable interest; and
    (b) Provide a copy of any written lease agreement, if applicable, 
between you and any landlord or tenant. The written lease agreement 
must:
    (1) Identify all other persons sharing in the crop; and
    (2) Be submitted to us on or before the acreage reporting date.
    7. Insured Crop.
    (a) In accordance with section 8 of the Basic Provisions, the 
insured crop will be each tobacco type you elect to insure and for 
which a premium rate is provided by the actuarial documents:
    (1) In which you have a share;
    (2) That meets all rotation requirements on the Special Provisions; 
and
    (3) That is grown and insured in accordance with the requirements 
of your tobacco contract executed on or before the acreage reporting 
date and the tobacco is not excluded from the tobacco contract at any 
time during the insurance period.
    (b) You will be considered to have a share in the insured crop if 
you retain control of the acreage on which the tobacco is grown and you 
are at risk of loss.
    (c) A commercial tobacco producer who is also a tobacco company, 
commercial marketing association, or tobacco handler may establish an 
insurable interest if the following requirements are met:
    (1) You must comply with these Crop Provisions;
    (2) Prior to the sales closing date, the Board of Directors or 
officers of the tobacco company, commercial marketing association, or 
tobacco handler must execute and adopt a resolution that contains the 
same terms as an acceptable tobacco contract. Such resolution will be 
considered a tobacco contract under this policy; and
    (3) Our inspection determines the processing facilities comply with 
the definition of a tobacco company or commercial marketing association 
contained in these Crop Provisions.
    8. Insurable Acreage.
    In addition to the provisions of section 9 of the Basic Provisions, 
we will not insure any acreage that is:
    (a) Planted in any manner other than as provided in the definition 
of ``planted acreage'' in section 1 of these Crop Provisions, unless 
otherwise provided by the Special Provisions or by written agreement; 
or
    (b) Damaged before the final planting date to the extent that the 
majority of producers in the area would normally not further care for 
the tobacco crop, unless such crop is replanted or we agree that 
replanting is not practical.
    9. Insurance Period.
    In lieu of the provisions of section 11 of the Basic Provisions, 
coverage ends at the earlier of:
    (a) Total destruction of the tobacco on the unit;
    (b) Removal of the tobacco from the unit where grown, except for 
curing, grading, and packing;
    (c) Abandonment of the crop on the unit;
    (d) The date you deliver sufficient production to fulfill your 
tobacco contract with the tobacco company, commercial marketing 
association, or tobacco handler;
    (e) Final adjustment of the loss on the unit; or
    (f) The calendar date for the end of the insurance period, which is 
the date immediately following planting and designated by tobacco types 
and states (or as otherwise stated on the Special Provisions) as 
follows:
    (i) Flue cured--November 30 in North Carolina and Virginia;

[[Page 28900]]

    (ii) Flue cured--October 31 in Alabama, Florida, Georgia, and South 
Carolina;
    (iii) Burley--February 28 in all states;
    (iv) Dark air cured--March 15 in Kentucky, Tennessee, and Virginia;
    (v) Fire cured--April 15 in Kentucky, Tennessee, and Virginia;
    (vi) Cigar Binder, Cigar Filler, and Cigar Wrapper--April 30 in 
Connecticut, Massachusetts, Pennsylvania, and Wisconsin; and
    (vii) Maryland type--May 15 in Maryland and Pennsylvania.
    10. Causes of Loss.
    In accordance with the provisions of section 12 of the Basic 
Provisions, insurance is provided only against the following causes of 
loss that occur during the insurance period:
    (a) Adverse weather conditions;
    (b) Fire, if caused by lightning;
    (c) Insects, but not damage due to insufficient or improper 
application of pest control measures;
    (d) Plant disease, but not damage due to insufficient or improper 
application of disease control measures;
    (e) Wildlife;
    (f) Earthquake;
    (g) Volcanic eruption; or
    (h) Failure of the irrigation water supply due to a cause of loss 
specified in sections 10(a) through (g) that also occurs during the 
insurance period.
    11. Duties In The Event of Damage or Loss.
    (a) In accordance with section 14 of the Basic Provisions, any 
representative sample we require of each unharvested tobacco type must 
be at least 5 feet wide (at least two rows), and extend the entire 
length of each field in the unit. The samples must not be harvested or 
destroyed until after our inspection.
    (b) If you have filed a notice of damage, you must leave all 
tobacco stalks and stubble in the unit intact for our inspection. The 
stalks and stubble must not be destroyed until we give you written 
consent to do so or until 30 days after the end of the insurance 
period, whichever is earlier.
    12. Settlement of Claim.
    (a) We will determine your loss on a unit basis. In the event you 
are unable to provide records of production that are acceptable to us 
for any basic unit, we will allocate any commingled production to such 
units in proportion to our liability on the harvested acreage for each 
unit.
    (b) In the event of loss or damage covered by this policy, we will 
settle your claim by:
    (1) Multiplying the number of insured acres by your applicable 
production guarantee (per acre), as adjusted in accordance with section 
3(b), if applicable;
    (2) Multiplying the result of section 12(b)(1) by your price 
election;
    (3) Multiplying the total production to count determined in section 
12(c) by your price election;
    (4) Subtracting the result of section 12(b)(3) from the result of 
section 12(b)(2); and
    (5) Multiplying the result of section 12(b)(4) by your share.
    For example:
    You have 100 percent share in a tobacco contract to produce 3,000 
pounds of Burley tobacco, a production guarantee of 1,950 pounds (APH 
yield of 3,000 pounds x .65 coverage level), you will plant 1.0 acre 
(which is the minimum acreage requirement in this situation), your 
price election is $1.50 per pound, and your production to count is 500 
pounds. Your indemnity would be calculated as follows:
    (1) 1.0 acre x 1,950 pound production guarantee = 1,950 pounds;
    (2) 1,950 pounds x $1.50 price election = $2,925.00 value of the 
production guarantee;
    (3) 500 pound production to count x $1.50 price election = $750.00 
value of the production to count;
    (4) $2,925.00 value of the production guarantee--$750.00 value of 
the production to count = $2,175.00; and
    (5) $2,175.00 x 1.000 share = $2,175.00 indemnity.
    (c) The total production (pounds) to count from all insurable 
acreage on the unit will include:
    (1) All appraised production as follows:
    (i) Not less than the production guarantee for acreage:
    (A) That is abandoned;
    (B) Put to another use without our consent;
    (C) That is damaged solely by uninsured causes;
    (D) For which you fail to provide records of production, that are 
acceptable to us; or
    (E) Of any type of tobacco when the stalks and stubble have been 
destroyed without our consent;
    (ii) Production lost due to uninsured causes.
    (iii) Potential production on insured acreage you intend to put to 
another use or abandon, if you and we agree on the appraised amount of 
production. Upon such agreement, the insurance period for that acreage 
will end when you put the acreage to another use or abandon the crop. 
If agreement on the appraised amount of production is not reached:
    (A) If you do not elect to continue to care for the crop, we may 
give you consent to put the acreage to another use if you agree to 
leave intact, and provide sufficient care for, representative samples 
of the crop in locations acceptable to us (The amount of production to 
count for such acreage will be based on the harvested production or 
appraisals from the samples at the time harvest should have occurred. 
If you do not leave the required samples intact, or fail to provide 
sufficient care for the samples, our appraisal made prior to giving you 
consent to put the acreage to another use will be used to determine the 
amount of production to count.); or
    (B) If you elect to continue to care for the crop, the amount of 
production to count for the acreage will be the harvested production, 
or our reappraisal if additional damage occurs and the crop is not 
harvested; and
    (2) All harvested production from insurable acreage.
    (d) Once we agree the current year's tobacco has no market value 
due to an insured cause of loss, you must destroy it, and it will not 
be considered production to count. If you refuse to destroy such 
tobacco, we will include it as production to count and value it at your 
applicable price election.
    (e) Mature tobacco may be adjusted for quality deficiencies when 
production has been damaged by insurable causes.
    (1) You must contact us before any tobacco is delivered to the 
tobacco company, commercial marketing association, or tobacco handler 
so that at our option we may inspect the tobacco to determine and 
document the extent of the damage.
    (2) Our inspection will be used to assist in determining whether 
the price paid for the quality deficient tobacco by the tobacco 
company, commercial marketing association, or tobacco handler is 
reasonable. Based on the degree of damage documented by the tobacco 
company compared to our inspection, if the price adjusted for quality 
is:
    (i) Reasonable, such price will be used to determine the quality 
adjustment in section 12(e)(5);
    (ii) Unreasonable, we may adjust the price used to calculate the 
quality adjustment in section 12(e)(5).
    (3) If you deliver any production to the tobacco company, 
commercial marketing association, or tobacco handler without giving us 
the opportunity to inspect the tobacco you will not receive a quality 
adjustment for such tobacco, regardless of the price received by the 
tobacco company, commercial marketing association, or tobacco handler.
    (4) Production to count will only be reduced if the average price 
received for damaged tobacco is less than 75 percent

[[Page 28901]]

of your tobacco contract price. You must provide us with a marketing 
record acceptable to us which clearly shows the number of pounds, price 
per pound, and the quality of such tobacco.
    (5) Any reduction in the production to count will be determined by:
    (i) Dividing the price per pound as determined by us in accordance 
with section 12(e)(2) of these Crop Provisions by your applicable 
tobacco contract price; and
    (ii) Multiplying this result by the number of pounds of damaged 
production.
    13. Late Planting.
    In lieu of late planting provisions in the Basic Provisions 
regarding acreage initially planted after the final planting date, 
insurance will be provided for acreage planted to the insured crop 
after the final planting date as follows:
    (a) The production guarantee (per acre) for acreage planted during 
the late planting period will be reduced by:
    (1) One percent per day for the 1st through the 10th day; and
    (2) Two percent per day for the 11th through the 15th day;
    (b) The premium amount for insurable acreage planted to the insured 
crop after the final planting date will be the same as that for timely 
planted acreage. If the amount of premium you are required to pay 
(gross premium less our subsidy) for acreage planted after the final 
planting date exceeds the liability on such acreage, coverage for those 
acres will not be provided (no premium will be due and no indemnity 
will be paid for such acreage).
    14. Prevented Planting.
    Your prevented planting coverage will be 35 percent of your 
production guarantee for timely planted acreage. Additional prevented 
planting coverage levels are not available for tobacco.

    Signed in Washington, DC, on May 15, 2007.
Eldon Gould,
Manager, Federal Crop Insurance Corporation.
[FR Doc. E7-9775 Filed 5-22-07; 8:45 am]
BILLING CODE 3410-08-P