Common Crop Insurance Regulations; Coverage Enhancement Option, 31199-31202 [E7-10825]
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Federal Register / Vol. 72, No. 108 / Wednesday, June 6, 2007 / Proposed Rules
(1) 100 acres × 400 pounds = 40,000
pound guarantee;
(2) 40,000 pounds × $1.00/pound
price election = $40,000 value of
guarantee;
(3) 20,000 pounds × $1.00/pound
price election = $20,000 value of
production to count;
(4) $40,000¥$20,000 = $20,000 loss;
and
(5) $20,000 × 100 percent share =
$20,000 indemnity payment.
(c) The total production (finished
weight) 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) Damaged solely by uninsured
causes; or
(D) For which you fail to provide
records of production that are
acceptable to us;
(ii) Production lost due to uninsured
causes;
(iii) Unharvested production (mature
unharvested green weight production
must be adjusted in accordance with
section 11(d)); and
(iv) Potential production on insured
acreage that 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 the
insurable acreage.
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(d) Mature green weight for appraised
or harvested production will be
multiplied by the recovery percentage
subject to the following:
(1) We may obtain samples of the
production to determine the recovery
percentage.
(2) The determined recovery
percentage will be used to calculate
your loss only if:
(i) All determined recovery
percentages are established using
samples of green weight production
obtained by us or by the processor for
sold or processed production; and
(ii) The samples are analyzed by an
approved laboratory.
(3) If the conditions of section 11(d)(2)
are not met, the standard recovery
percentage will be used.
12. Late Planting
The provisions of section 16 of the
Basic Provisions are not applicable.
13. Prevented Planting
The provisions of section 17 of the
Basic Provisions are not applicable.
Signed in Washington, DC, on May 30,
2007.
Eldon Gould,
Manager, Federal Crop Insurance
Corporation.
[FR Doc. E7–10824 Filed 6–5–07; 8:45 am]
BILLING CODE 3410–08–P
31199
option for the 2008 and subsequent crop
years.
DATES: Written comments and opinions
on this proposed rule will be accepted
until close of business August 6, 2007
and will be considered when the rule is
to be made final.
ADDRESSES: Interested persons are
invited to submit comments, titled
‘‘Coverage Enhancement Option
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 from 7
a.m. to 4:30 p.m., CDT, Monday through
Friday except holidays at the above
address.
FOR FURTHER INFORMATION CONTACT:
William Klein, 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
DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Part 457
The Office of Management and Budget
(OMB) has determined that this rule is
non-significant for the purpose of
Executive Order 12866 and, therefore, it
has not been reviewed by OMB.
RIN 0563–AC01
Paperwork Reduction Act of 1995
Common Crop Insurance Regulations;
Coverage Enhancement Option
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
previously approved by OMB under
control number 0563–0053 through
November 30, 2007.
Federal Crop Insurance
Corporation, USDA.
ACTION: Proposed rule with request for
comments.
AGENCY:
SUMMARY: The Federal Crop Insurance
Corporation (FCIC) proposes to add to 7
CFR part 457 a new § 457.172 Coverage
Enhancement Option (CEO) that
provides additional coverage to
applicable crop provisions. The CEO
will be used in conjunction with the
Common Crop Insurance Policy Basic
Provisions, which contain standard
terms and conditions common to most
crops and with the crop provisions for
which it is approved. At this time, RMA
has no plans to expand CEO to crops
other than Texas Citrus Trees. The
intended effect of this action is to
convert the pilot CEO to a permanent
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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) establishes
requirements for Federal agencies to
assess the effects of their regulatory
actions on State, local, and tribal
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Federal Register / Vol. 72, No. 108 / Wednesday, June 6, 2007 / Proposed Rules
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.
rmajette on PROD1PC64 with PROPOSALS
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 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
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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
crop insurance policy, the
administrative appeal provisions
published at 7 CFR part 11 or 7 CFR part
400, subpart J for the informal
administrative review process of good
farming practices as applicable, must be
exhausted before any action against
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
The Pilot Coverage Enhancement
Option (CEO) was implemented
beginning with the 2000 crop year for
all counties for apples and grapes in
Pennsylvania and Washington; canola
in North Dakota; citrus Trees in Texas;
cranberries in Massachusetts; potatoes
in Idaho, Maine and Pennsylvania; rice
in Arkansas, Louisiana, and Mississippi;
stonefruit in California; and walnuts in
California. For the 2001 crop year, CEO
was expanded to citrus fruit in Florida
and Texas. Citrus and stonefruit policies
define additional ‘‘crops’’ by fruit type,
for example, stonefruit includes fresh
apricots, fresh peaches etc., so for
insurance purposes, CEO was approved
for 25 crops.
CEO was developed because
producers expressed concern that the
crop insurance program does not, in
some cases, provide an adequate
amount of coverage. The 75 percent
coverage level, for many crops, is the
highest coverage level offered, and some
producers believed the cost for that
coverage level was too expensive. They
expressed a desire for higher amounts of
coverage, without proportional
premium rate increases affiliated with
higher coverage levels. The CEO
premium rate is set at the same rate as
that of the underlying multiple peril
crop insurance (MPCI) policy. CEO
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coverage levels available are from 55
percent through 85 percent, in 5 percent
increments.
To be eligible for the program,
producers must have an additional
coverage level MPCI policy in force,
with a price election of 100 percent for
the insured crop and select the CEO by
the sales closing date. They must choose
a CEO coverage level of at least 5
percent higher than the MPCI base
coverage level up to the maximum
available CEO coverage level of 85
percent.
An indemnity does not trigger under
CEO until the deductible of the
underlying MPCI policy is met. For
example, if the MPCI coverage level is
50 percent and the CEO option coverage
level is 85 percent, the insured would
have to sustain damage on the crop in
excess of 50 percent before an
indemnity would be paid under CEO.
RMA contracted for a review of CEO
three years after it was implemented,
and the contractor’s final evaluation
report was submitted on December 10,
2003. There were 25 crops approved for
CEO, more than two-thirds of which
were citrus tree and fruit crops insured
in California, Florida, and Texas. Seven
crops, most with minimal participation,
had no losses since CEO was a pilot
program, sixteen crops had minimal
CEO participation and losses, and two
crops had no CEO participation.
Nationwide, the percentage of acreage
insured under CEO between 2000 and
2003 was low, except for Texas citrus
trees, which had a high participation
rate but no losses. The contractor
determined apples, canola, grapes,
potatoes, and rice had sufficient CEO
participation and loss experience for a
meaningful analysis. A comparison of
the CEO losses relative to the non-CEO
losses for these crops analyzed
indicated a possible increase of poor or
high-risk producers using CEO to obtain
a higher amount of coverage, especially
for apples and rice. The final report
indicated further review was needed in
order to draw a conclusion as to
whether or not CEO is a greater
insurance risk.
The contractor’s recommendation was
to terminate CEO for all crops except
Texas citrus trees, due in part to the
high level of CEO participation in the
Texas citrus tree crop insurance
program. The contractor found that CEO
for Texas Citrus Trees provides
additional coverage at a reasonable cost
for a crop where the opportunity for
adverse selection is limited by the
design of the underlying policy. The
contractor’s recommendation was
supported by the Federal Crop
Insurance Corporation Board of
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rmajette on PROD1PC64 with PROPOSALS
Federal Register / Vol. 72, No. 108 / Wednesday, June 6, 2007 / Proposed Rules
Directors on July 29, 2004. At that time,
continuance of the CEO was approved
for Texas citrus trees through the 2008
crop year. In order for CEO to be
available for to Texas citrus tree
producers for the 2009 crop year, it
needs to be made permanent before the
August 31, 2008, contract change date
for Texas citrus trees. While the latest
date RMA must convert CEO to a
permanent program is August 31, 2008,
RMA has targeted August 31, 2007, for
conversion to a permanent program.
For the 2006 crop year, there were a
total of 809 policies under the Texas
Citrus Tree Crop Insurance Provisions,
714 buy-up and 95 Catastrophic Risk
Protection (CAT) policies. There were
333 producers with CEO options,
accounting for $45.2 million in liability
and $2.4 million in premium. Forty-one
percent of all Texas citrus tree insureds
opted for CEO, accounting for 68
percent of the insured acreage for Texas
citrus trees, 74 percent of the liability,
and 75 percent of the premium.
FCIC is proposing to make changes to
the pilot CEO policy. In section 1, FCIC
is proposing to revise the definitions of
‘‘MPCI dollar amount of insurance,’’
‘‘MPCI indemnity factor,’’ ‘‘option
dollar amount of insurance,’’ and
‘‘option coverage level.’’ Previously, the
definition of ‘‘MPCI dollar amount of
insurance’’ did not explain how the
value was determined for policies that
are based on the actual production
history so this will be clarified in the
proposed definition. Further, the
definition of ‘‘MPCI indemnity factor’’
did not explain that such factor is
necessary to prorate losses in those
cases where the producer does not
suffer a total loss to the crop. The
definition of ‘‘option dollar amount of
insurance’’ did not accurately reflect
how such amounts are calculated. FCIC
is proposing to revise the provision to
specify that such amount is determined
by multiplying the option coverage level
by the total value of the crop and
subtracting the MPCI dollar amount of
insurance (for example, if the coverage
option selected is 80 percent and the
MPCI dollar amount of insurance is
$10,000 at the 50 percent coverage level,
the option dollar coverage level would
be $6,000 ($10,000 × 2 = $20,000 total
value of the crop × .80 option coverage
level = $16,000 combined MPCI and
option dollar amounts of insurance—
$10,000 MPCI dollar amount of
insurance). In addition, the definition of
‘‘option coverage level’’ failed to discuss
the relationship between the MPCI
coverage level and the option coverage
level. FCIC is proposing to revise the
definition to specify that the effect of
the option coverage level is to increase
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the coverage level under the MPCI
policy from the MPCI coverage level to
the option coverage level once a loss has
been triggered under the MPCI policy.
FCIC is also proposing to add a
definition of ‘‘total value of the insured
crop,’’ which states that the total value
is the MPCI dollar amount of insurance
divided by the MPCI coverage level.
This will determine what is the actual
potential value of an undamaged crop
and measure the total amount the
producer will lose if there is a total loss.
FCIC is proposing to add a new
section 2 to clarify that the option is
only available for those insured crops
that contain option coverage levels on
the actuarial documents. This change is
needed because the option will not be
available in all areas where it was
available as a pilot program. Therefore,
producers must check the actuarial
documents to see if the option is
available in their area. The subsequent
sections are redesignated as sections 3
through 7.
FCIC is proposing to revise
redesignated section 4 to clarify that the
option is now continuous and will
remain in effect for as long as the
producer continues to have a MPCI
policy in effect for the insured crop, an
option coverage level percent is
contained in the actuarial documents, or
it is cancelled by the producer or
terminated by the approved insurance
provider on or before the cancellation or
termination date, as applicable.
FCIC is proposing to revise
redesignated section 6 to clarify the
coverage provided under the option. It
effectively offers coverage that causes a
portion of the deductible to disappear
under the MPCI portion of the policy
once the deductible has been met.
However, the deductible disappears
proportional to the amount of the loss,
less the deductible required for the
option coverage level (cannot exceed 85
percent, which creates a secondary
deductible to 15 percent). This means
that if the loss were 100 percent, the
producer would receive an indemnity
under the MPCI policy and option equal
to the option coverage level times the
total value of the crop (In the above
stated example, this would equate to
$16,000, a complete loss) but if the
losses were less than 100 percent, less
of the deductible is covered.
FCIC is proposing to add a new
section 6(c) that clarifies that an
indemnity is not payable under this
option until after the underlying MPCI
deductible (1—MPCI coverage level) is
met, triggering an MPCI indemnity. The
previous redesignated sections 6(c) and
(d) are now designated as sections 6(d)
and (e).
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31201
FCIC is proposing to revise the
indemnity formula in section 7 to
remove the references to determining
the option dollar amount of insurance
and the option coverage factor because
FCIC is proposing to revise the
definition of option dollar amount of
insurance to include a means to
calculate the amount.
FCIC also made technical changes for
clarity but such changes do not change
the coverage provided under the option.
FCIC proposes to amend the Common
Crop Insurance Regulations (7 CFR part
457) by adding 7 CFR 457.172 (Coverage
Enhancement Option) to make the CEO
a permanent option, thus remaining
available for Texas Citrus Tree
policyholders and to allow for use in
other appropriate crop programs as
determined by FCIC. The proposed
changes are as follows:
List of Subjects in 7 CFR Part 457
Crop insurance, Coverage
enhancement option.
Proposed Rule
Accordingly, as set forth in the
preamble, the Federal Crop Insurance
Corporation proposes to amend 7 CFR
part 457, Common Crop Insurance
Regulations effective for the 2008 and
succeeding crop years, 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).
2. Section 457.172 is added to read as
follows:
§ 457.172 Coverage enhancement option
insurance provisions.
This option is available for the 2008
and succeeding years.
The Coverage Enhancement Option
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:
Coverage Enhancement Option
Insurance Provisions
1. Definitions
MPCI—Multiple Peril Crop Insurance,
the plan of insurance offered by the
Federal Crop Insurance Corporation as
published at 7 CFR part 457.
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Federal Register / Vol. 72, No. 108 / Wednesday, June 6, 2007 / Proposed Rules
MPCI coverage level—The coverage
level percentage you selected in the
underlying MPCI policy to which this
option is attached.
MPCI dollar amount of insurance—
The value of the insurance coverage for
the unit provided under the MPCI
policy (the amount of insurance selected
by you for dollar or similar plans of
insurance or the amount determined by
multiplying the production guarantee
(per acre) times the price election, times
the number of acres in the unit, times
the MPCI coverage level you selected).
MPCI indemnity—The indemnity
determined for each unit under the
MPCI policy to which this option is
attached, not including replant and
prevented planting indemnities or any
indemnity payable under this option.
MPCI indemnity factor—A factor
determined by dividing the MPCI
indemnity by the MPCI dollar amount of
insurance for a unit. This factor is used
to ensure that the indemnity paid under
this option is proportional to the
amount of loss and indemnity paid
under the MPCI policy.
Option Dollar Amount of Insurance—
The value of the additional insurance
coverage for the unit provided by this
option, which is determined by
multiplying the option coverage level by
the total value of the crop and
subtracting the MPCI dollar amount of
insurance.
Option Coverage Level—The coverage
level percentage selected under this
option. This percentage effectively
becomes the coverage level under the
MPCI policy when the losses under
such policy exceed the deductible and
an indemnity is owed.
Total value of the insured crop—The
value of the crop that is determined by
dividing the MPCI dollar amount of
insurance by the MPCI coverage level.
2. This option is only available for
insured crops that contain an option
coverage level percent in the actuarial
documents.
3. To be eligible for this coverage, you
must have an MPCI policy in force for
the insured crop (or for citrus fruit,
citrus trees, and stone fruit, as
applicable, the insured type) in
accordance with the applicable Crop
Provisions for the insured crop. You
must choose an option coverage level
percentage that is shown in the actuarial
documents, by the sales closing date.
4. You must elect this option in
writing on or before the crop sales
closing date for the crop insured. This
option is continuous and will remain in
effect for as long as you continue to
have a MPCI policy in effect for the
insured crop, an option coverage level
percent is contained in the actuarial
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documents, or it is cancelled by you or
terminated by us on or before the
cancellation or termination date, as
applicable.
5. This option is not available if you
have chosen the Catastrophic Risk
Protection (CAT) level of coverage or a
price election less than 100 percent.
6. If you elect this option and a MPCI
indemnity is paid on any unit, your
deductible will disappear in proportion
to the amount of such loss and
indemnity paid. For example, if you
selected a 50 percent MPCI coverage
level, select an 85 percent option
coverage level, and had a total loss, the
amount of indemnity paid under both
the MPCI policy and this option would
be equal to 85 percent of the total value
of the insured crop. The amount of the
additional indemnity and related terms
and conditions are described below:
(a) All acreage of the insured crop
insured under your MPCI policy will be
covered under this option;
(b) The amount of any replant or
prevented planting payment that is
payable under the MPCI policy will not
be affected by this option.
(c) An indemnity will be payable
under this option only after the
underlying MPCI deductible is met and
an MPCI indemnity is paid.
(d) The total indemnity for each unit
(MPCI coverage plus this option) cannot
exceed the combination of both the
MPCI and option dollar amounts of
insurance.
(e) Your premium will be determined
by:
(i) Totaling the MPCI dollar amount of
insurance and the option dollar amount
of insurance; and
(ii) Multiplying the result of section
6(e)(i) by the premium rate for the
insured crop applicable to your MPCI
coverage level.
7. In addition to the settlement of
claim section for the applicable Crop
Provisions, your indemnity will be
computed on a unit basis as follows:
(a) Determine the MPCI indemnity
factor;
(b) Multiply the MPCI indemnity
factor times the Option Dollar Amount
of Insurance to determine the indemnity
under this option.
Example: Assume a policy with one unit;
an MPCI coverage level of 50 percent and an
option coverage level of 85 percent; 100%
share; a $120,000 MPCI dollar amount of
insurance; and a $40,000 payable indemnity
under the MPCI portion of the policy.
Your indemnity would be calculated
for each unit as follows:
(a) $40,000 loss ÷ by $120,000 MPCI
dollar amount of insurance = .33333
MPCI indemnity factor.
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(b) .33333 MPCI indemnity factor ×
$84,000 option dollar amount of
insurance = $28,000 indemnity under
this option.
Note: The total unit indemnity is $68,000
($40,000 MPCI indemnity plus $28,000
option indemnity)
Signed in Washington, DC, on May 30,
2007.
Eldon Gould,
Manager, Federal Crop Insurance
Corporation.
[FR Doc. E7–10825 Filed 6–5–07; 8:45 am]
BILLING CODE 3410–08–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2007–28355; Directorate
Identifier 2007–NM–062–AD]
RIN 2120–AA64
Airworthiness Directives; Boeing
Model 737–600, –700, –700C, –800 and
–900 Series Airplanes
Federal Aviation
Administration (FAA), Department of
Transportation (DOT).
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
SUMMARY: The FAA proposes to adopt a
new airworthiness directive (AD) for
certain Boeing Model 737–600, –700,
–700C, –800 and –900 series airplanes.
This proposed AD would require
inspecting ground blocks GD261 and
GD264 for corrosion, measuring the
electrical bond resistance between the
ground blocks and the airplane
structure, separating the ground wires
for the fuel boost pump circuit between
ground blocks GD261 and GD264, and
doing corrective actions if necessary.
This proposed AD results from a report
of random flashes of the six fuel pump
low pressure lights and intermittent
operation of the fuel boost pumps. We
are proposing this AD to prevent the
simultaneous malfunction of all six fuel
boost pumps, which could cause the
engines to operate on suction feed and
potentially flame out.
DATES: We must receive comments on
this proposed AD by July 23, 2007.
ADDRESSES: Use one of the following
addresses to submit comments on this
proposed AD.
• DOT Docket Web site: Go to
https://dms.dot.gov and follow the
instructions for sending your comments
electronically.
• Government-wide rulemaking Web
site: Go to https://www.regulations.gov
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Agencies
[Federal Register Volume 72, Number 108 (Wednesday, June 6, 2007)]
[Proposed Rules]
[Pages 31199-31202]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-10825]
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DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Part 457
RIN 0563-AC01
Common Crop Insurance Regulations; Coverage Enhancement Option
AGENCY: Federal Crop Insurance Corporation, USDA.
ACTION: Proposed rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes to add
to 7 CFR part 457 a new Sec. 457.172 Coverage Enhancement Option (CEO)
that provides additional coverage to applicable crop provisions. The
CEO will be used in conjunction with the Common Crop Insurance Policy
Basic Provisions, which contain standard terms and conditions common to
most crops and with the crop provisions for which it is approved. At
this time, RMA has no plans to expand CEO to crops other than Texas
Citrus Trees. The intended effect of this action is to convert the
pilot CEO to a permanent option for the 2008 and subsequent crop years.
DATES: Written comments and opinions on this proposed rule will be
accepted until close of business August 6, 2007 and will be considered
when the rule is to be made final.
ADDRESSES: Interested persons are invited to submit comments, titled
``Coverage Enhancement Option 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
from 7 a.m. to 4:30 p.m., CDT, Monday through Friday except holidays at
the above address.
FOR FURTHER INFORMATION CONTACT: William Klein, 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
The Office of Management and Budget (OMB) has determined that this
rule is non-significant for the purpose of Executive Order 12866 and,
therefore, it has not been reviewed by OMB.
Paperwork Reduction Act of 1995
Pursuant to the provisions of the Paperwork Reduction Act of 1995
(44 U.S.C. chapter 35), the collections of information in this rule
have been previously 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)
establishes requirements for Federal agencies to assess the effects of
their regulatory actions on State, local, and tribal
[[Page 31200]]
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 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 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 crop insurance policy, the administrative appeal
provisions published at 7 CFR part 11 or 7 CFR part 400, subpart J for
the informal administrative review process of good farming practices as
applicable, must be exhausted before any action against 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
The Pilot Coverage Enhancement Option (CEO) was implemented
beginning with the 2000 crop year for all counties for apples and
grapes in Pennsylvania and Washington; canola in North Dakota; citrus
Trees in Texas; cranberries in Massachusetts; potatoes in Idaho, Maine
and Pennsylvania; rice in Arkansas, Louisiana, and Mississippi;
stonefruit in California; and walnuts in California. For the 2001 crop
year, CEO was expanded to citrus fruit in Florida and Texas. Citrus and
stonefruit policies define additional ``crops'' by fruit type, for
example, stonefruit includes fresh apricots, fresh peaches etc., so for
insurance purposes, CEO was approved for 25 crops.
CEO was developed because producers expressed concern that the crop
insurance program does not, in some cases, provide an adequate amount
of coverage. The 75 percent coverage level, for many crops, is the
highest coverage level offered, and some producers believed the cost
for that coverage level was too expensive. They expressed a desire for
higher amounts of coverage, without proportional premium rate increases
affiliated with higher coverage levels. The CEO premium rate is set at
the same rate as that of the underlying multiple peril crop insurance
(MPCI) policy. CEO coverage levels available are from 55 percent
through 85 percent, in 5 percent increments.
To be eligible for the program, producers must have an additional
coverage level MPCI policy in force, with a price election of 100
percent for the insured crop and select the CEO by the sales closing
date. They must choose a CEO coverage level of at least 5 percent
higher than the MPCI base coverage level up to the maximum available
CEO coverage level of 85 percent.
An indemnity does not trigger under CEO until the deductible of the
underlying MPCI policy is met. For example, if the MPCI coverage level
is 50 percent and the CEO option coverage level is 85 percent, the
insured would have to sustain damage on the crop in excess of 50
percent before an indemnity would be paid under CEO.
RMA contracted for a review of CEO three years after it was
implemented, and the contractor's final evaluation report was submitted
on December 10, 2003. There were 25 crops approved for CEO, more than
two-thirds of which were citrus tree and fruit crops insured in
California, Florida, and Texas. Seven crops, most with minimal
participation, had no losses since CEO was a pilot program, sixteen
crops had minimal CEO participation and losses, and two crops had no
CEO participation.
Nationwide, the percentage of acreage insured under CEO between
2000 and 2003 was low, except for Texas citrus trees, which had a high
participation rate but no losses. The contractor determined apples,
canola, grapes, potatoes, and rice had sufficient CEO participation and
loss experience for a meaningful analysis. A comparison of the CEO
losses relative to the non-CEO losses for these crops analyzed
indicated a possible increase of poor or high-risk producers using CEO
to obtain a higher amount of coverage, especially for apples and rice.
The final report indicated further review was needed in order to draw a
conclusion as to whether or not CEO is a greater insurance risk.
The contractor's recommendation was to terminate CEO for all crops
except Texas citrus trees, due in part to the high level of CEO
participation in the Texas citrus tree crop insurance program. The
contractor found that CEO for Texas Citrus Trees provides additional
coverage at a reasonable cost for a crop where the opportunity for
adverse selection is limited by the design of the underlying policy.
The contractor's recommendation was supported by the Federal Crop
Insurance Corporation Board of
[[Page 31201]]
Directors on July 29, 2004. At that time, continuance of the CEO was
approved for Texas citrus trees through the 2008 crop year. In order
for CEO to be available for to Texas citrus tree producers for the 2009
crop year, it needs to be made permanent before the August 31, 2008,
contract change date for Texas citrus trees. While the latest date RMA
must convert CEO to a permanent program is August 31, 2008, RMA has
targeted August 31, 2007, for conversion to a permanent program.
For the 2006 crop year, there were a total of 809 policies under
the Texas Citrus Tree Crop Insurance Provisions, 714 buy-up and 95
Catastrophic Risk Protection (CAT) policies. There were 333 producers
with CEO options, accounting for $45.2 million in liability and $2.4
million in premium. Forty-one percent of all Texas citrus tree insureds
opted for CEO, accounting for 68 percent of the insured acreage for
Texas citrus trees, 74 percent of the liability, and 75 percent of the
premium.
FCIC is proposing to make changes to the pilot CEO policy. In
section 1, FCIC is proposing to revise the definitions of ``MPCI dollar
amount of insurance,'' ``MPCI indemnity factor,'' ``option dollar
amount of insurance,'' and ``option coverage level.'' Previously, the
definition of ``MPCI dollar amount of insurance'' did not explain how
the value was determined for policies that are based on the actual
production history so this will be clarified in the proposed
definition. Further, the definition of ``MPCI indemnity factor'' did
not explain that such factor is necessary to prorate losses in those
cases where the producer does not suffer a total loss to the crop. The
definition of ``option dollar amount of insurance'' did not accurately
reflect how such amounts are calculated. FCIC is proposing to revise
the provision to specify that such amount is determined by multiplying
the option coverage level by the total value of the crop and
subtracting the MPCI dollar amount of insurance (for example, if the
coverage option selected is 80 percent and the MPCI dollar amount of
insurance is $10,000 at the 50 percent coverage level, the option
dollar coverage level would be $6,000 ($10,000 x 2 = $20,000 total
value of the crop x .80 option coverage level = $16,000 combined MPCI
and option dollar amounts of insurance--$10,000 MPCI dollar amount of
insurance). In addition, the definition of ``option coverage level''
failed to discuss the relationship between the MPCI coverage level and
the option coverage level. FCIC is proposing to revise the definition
to specify that the effect of the option coverage level is to increase
the coverage level under the MPCI policy from the MPCI coverage level
to the option coverage level once a loss has been triggered under the
MPCI policy.
FCIC is also proposing to add a definition of ``total value of the
insured crop,'' which states that the total value is the MPCI dollar
amount of insurance divided by the MPCI coverage level. This will
determine what is the actual potential value of an undamaged crop and
measure the total amount the producer will lose if there is a total
loss.
FCIC is proposing to add a new section 2 to clarify that the option
is only available for those insured crops that contain option coverage
levels on the actuarial documents. This change is needed because the
option will not be available in all areas where it was available as a
pilot program. Therefore, producers must check the actuarial documents
to see if the option is available in their area. The subsequent
sections are redesignated as sections 3 through 7.
FCIC is proposing to revise redesignated section 4 to clarify that
the option is now continuous and will remain in effect for as long as
the producer continues to have a MPCI policy in effect for the insured
crop, an option coverage level percent is contained in the actuarial
documents, or it is cancelled by the producer or terminated by the
approved insurance provider on or before the cancellation or
termination date, as applicable.
FCIC is proposing to revise redesignated section 6 to clarify the
coverage provided under the option. It effectively offers coverage that
causes a portion of the deductible to disappear under the MPCI portion
of the policy once the deductible has been met. However, the deductible
disappears proportional to the amount of the loss, less the deductible
required for the option coverage level (cannot exceed 85 percent, which
creates a secondary deductible to 15 percent). This means that if the
loss were 100 percent, the producer would receive an indemnity under
the MPCI policy and option equal to the option coverage level times the
total value of the crop (In the above stated example, this would equate
to $16,000, a complete loss) but if the losses were less than 100
percent, less of the deductible is covered.
FCIC is proposing to add a new section 6(c) that clarifies that an
indemnity is not payable under this option until after the underlying
MPCI deductible (1--MPCI coverage level) is met, triggering an MPCI
indemnity. The previous redesignated sections 6(c) and (d) are now
designated as sections 6(d) and (e).
FCIC is proposing to revise the indemnity formula in section 7 to
remove the references to determining the option dollar amount of
insurance and the option coverage factor because FCIC is proposing to
revise the definition of option dollar amount of insurance to include a
means to calculate the amount.
FCIC also made technical changes for clarity but such changes do
not change the coverage provided under the option.
FCIC proposes to amend the Common Crop Insurance Regulations (7 CFR
part 457) by adding 7 CFR 457.172 (Coverage Enhancement Option) to make
the CEO a permanent option, thus remaining available for Texas Citrus
Tree policyholders and to allow for use in other appropriate crop
programs as determined by FCIC. The proposed changes are as follows:
List of Subjects in 7 CFR Part 457
Crop insurance, Coverage enhancement option.
Proposed Rule
Accordingly, as set forth in the preamble, the Federal Crop
Insurance Corporation proposes to amend 7 CFR part 457, Common Crop
Insurance Regulations effective for the 2008 and succeeding crop years,
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).
2. Section 457.172 is added to read as follows:
Sec. 457.172 Coverage enhancement option insurance provisions.
This option is available for the 2008 and succeeding years.
The Coverage Enhancement Option 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:
Coverage Enhancement Option Insurance Provisions
1. Definitions
MPCI--Multiple Peril Crop Insurance, the plan of insurance offered
by the Federal Crop Insurance Corporation as published at 7 CFR part
457.
[[Page 31202]]
MPCI coverage level--The coverage level percentage you selected in
the underlying MPCI policy to which this option is attached.
MPCI dollar amount of insurance--The value of the insurance
coverage for the unit provided under the MPCI policy (the amount of
insurance selected by you for dollar or similar plans of insurance or
the amount determined by multiplying the production guarantee (per
acre) times the price election, times the number of acres in the unit,
times the MPCI coverage level you selected).
MPCI indemnity--The indemnity determined for each unit under the
MPCI policy to which this option is attached, not including replant and
prevented planting indemnities or any indemnity payable under this
option.
MPCI indemnity factor--A factor determined by dividing the MPCI
indemnity by the MPCI dollar amount of insurance for a unit. This
factor is used to ensure that the indemnity paid under this option is
proportional to the amount of loss and indemnity paid under the MPCI
policy.
Option Dollar Amount of Insurance--The value of the additional
insurance coverage for the unit provided by this option, which is
determined by multiplying the option coverage level by the total value
of the crop and subtracting the MPCI dollar amount of insurance.
Option Coverage Level--The coverage level percentage selected under
this option. This percentage effectively becomes the coverage level
under the MPCI policy when the losses under such policy exceed the
deductible and an indemnity is owed.
Total value of the insured crop--The value of the crop that is
determined by dividing the MPCI dollar amount of insurance by the MPCI
coverage level.
2. This option is only available for insured crops that contain an
option coverage level percent in the actuarial documents.
3. To be eligible for this coverage, you must have an MPCI policy
in force for the insured crop (or for citrus fruit, citrus trees, and
stone fruit, as applicable, the insured type) in accordance with the
applicable Crop Provisions for the insured crop. You must choose an
option coverage level percentage that is shown in the actuarial
documents, by the sales closing date.
4. You must elect this option in writing on or before the crop
sales closing date for the crop insured. This option is continuous and
will remain in effect for as long as you continue to have a MPCI policy
in effect for the insured crop, an option coverage level percent is
contained in the actuarial documents, or it is cancelled by you or
terminated by us on or before the cancellation or termination date, as
applicable.
5. This option is not available if you have chosen the Catastrophic
Risk Protection (CAT) level of coverage or a price election less than
100 percent.
6. If you elect this option and a MPCI indemnity is paid on any
unit, your deductible will disappear in proportion to the amount of
such loss and indemnity paid. For example, if you selected a 50 percent
MPCI coverage level, select an 85 percent option coverage level, and
had a total loss, the amount of indemnity paid under both the MPCI
policy and this option would be equal to 85 percent of the total value
of the insured crop. The amount of the additional indemnity and related
terms and conditions are described below:
(a) All acreage of the insured crop insured under your MPCI policy
will be covered under this option;
(b) The amount of any replant or prevented planting payment that is
payable under the MPCI policy will not be affected by this option.
(c) An indemnity will be payable under this option only after the
underlying MPCI deductible is met and an MPCI indemnity is paid.
(d) The total indemnity for each unit (MPCI coverage plus this
option) cannot exceed the combination of both the MPCI and option
dollar amounts of insurance.
(e) Your premium will be determined by:
(i) Totaling the MPCI dollar amount of insurance and the option
dollar amount of insurance; and
(ii) Multiplying the result of section 6(e)(i) by the premium rate
for the insured crop applicable to your MPCI coverage level.
7. In addition to the settlement of claim section for the
applicable Crop Provisions, your indemnity will be computed on a unit
basis as follows:
(a) Determine the MPCI indemnity factor;
(b) Multiply the MPCI indemnity factor times the Option Dollar
Amount of Insurance to determine the indemnity under this option.
Example: Assume a policy with one unit; an MPCI coverage level
of 50 percent and an option coverage level of 85 percent; 100%
share; a $120,000 MPCI dollar amount of insurance; and a $40,000
payable indemnity under the MPCI portion of the policy.
Your indemnity would be calculated for each unit as follows:
(a) $40,000 loss / by $120,000 MPCI dollar amount of insurance =
.33333 MPCI indemnity factor.
(b) .33333 MPCI indemnity factor x $84,000 option dollar amount of
insurance = $28,000 indemnity under this option.
Note: The total unit indemnity is $68,000 ($40,000 MPCI
indemnity plus $28,000 option indemnity)
.Signed in Washington, DC, on May 30, 2007.
Eldon Gould,
Manager, Federal Crop Insurance Corporation.
[FR Doc. E7-10825 Filed 6-5-07; 8:45 am]
BILLING CODE 3410-08-P