Common Crop Insurance Regulations, Basic Provisions, 61013-61018 [E9-27987]

Agencies

• DEPARTMENT OF AGRICULTURE
• Federal Crop Insurance Corporation

[Federal Register Volume 74, Number 224 (Monday, November 23, 2009)]
[Rules and Regulations]
[Pages 61013-61018]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-27987]



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Federal Register / Vol. 74, No. 224 / Monday, November 23, 2009 / 
Rules and Regulations

[[Page 61013]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AC23


Common Crop Insurance Regulations, Basic Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the 
Common Crop Insurance Regulations, Basic Provisions to revise 
enterprise unit provisions to protect the program from potential abuse 
as a result of the increased premium subsidies for enterprise and whole 
farm units provided by the Food, Conservation, and Energy Act of 2008 
(2008 Farm Bill).

DATES: Effective Date: This rule is effective December 23, 2009.
    Applicability Date: The changes to the Common Crop Insurance 
Regulations, Basic Provisions required by this rule will apply for the 
2011 and succeeding crop years for all crops with a 2011 contract 
change date on or after March 31, 2010, and for the 2012 and succeeding 
crop years for all crops with a 2011 contract change date prior to 
March 31, 2010.

FOR FURTHER INFORMATION CONTACT: Erin Albright, Risk Management 
Specialist, Product Management, Product Administration and Standards 
Division, Risk Management Agency, United States Department of 
Agriculture, Beacon Facility--Mail Stop 0812, P.O. Box 419205, Kansas 
City, MO 64141-6205, telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION: 

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
rule is non-significant for the purposes of Executive Order 12866 and, 
therefore, it has not been reviewed by OMB.

Paperwork Reduction Act of 1995

    Pursuant to the provisions of the Paperwork Reduction Act of 1995 
(44 U.S.C. chapter 35), the collections of information in this rule 
have been approved by OMB under control number 0563-0053 through March 
31, 2012.

E-Government Act Compliance

    FCIC is committed to complying with the E-Government Act of 2002, 
to promote the use of the Internet and other information technologies 
to provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Unfunded Mandates Reform Act of 1995

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

Executive Order 13132

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

Regulatory Flexibility Act

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

Federal Assistance Program

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

Executive Order 12372

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

Executive Order 12988

    This final rule has been reviewed in accordance with Executive 
Order 12988 on civil justice reform. The provisions of this rule will 
not have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. With respect to any direct action taken by FCIC 
or to require the insurance provider to take specific action under the 
terms of the crop insurance policy, the administrative appeal 
provisions published at 7 CFR part 11 must be exhausted before any 
action against FCIC for judicial review may be brought.

[[Page 61014]]

Environmental Evaluation

    This action is not expected to have a significant economic impact 
on the quality of the human environment, health, or safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.
    Background:
    This rule finalizes changes to the Common Crop Insurance 
Regulations, Basic Provisions that were published by FCIC on June 15, 
2009, as a notice of interim rulemaking in the Federal Register at 74 
FR 28154-28156. The public was afforded 60 days to submit written 
comments and opinions.
    A total of 14 comments were received from five commenters. The 
commenters were a reinsured company, an insurance service organization, 
and state departments of agriculture. The comments received and FCIC's 
responses are as follows:
    Comment: A few commenters concurred with the intent to preserve 
program integrity and prevent abuse of the enterprise unit provisions. 
However, the commenters were concerned there may be unintended 
consequences from the added requirement that an enterprise unit have at 
least the lesser of 20 acres or 20 percent of the enterprise unit 
insured crop acreage in at least two sections, section equivalents, 
Farm Serial Numbers (FSNs), or units by written agreement, as allowed 
in the Common Crop Insurance Policy Basic Provisions. For example, a 
farmer with 10 acres planted in each of two sections would meet the 20 
acre or 20 percent requirement for an enterprise unit, while another 
farmer with 10 acres planted in each of 10 sections would not. The 
added requirement might actually encourage farmers in the second 
situation to ``* * * manipulate their unit structure by making slight 
changes in their farming operation to gain additional benefits from the 
increased premium subsidy,'' shifting where they plant their acreage so 
as to have at least 20 acres or 20 percent of the insured crop acreage 
in at least two of the ten sections.
    The commenters agreed some version of the 20 acre or 20 percent 
requirement is needed, though perhaps with some revision. One 
suggestion was for it to apply when the enterprise unit is comprised of 
only two separate sections (or other legal descriptions, as applicable) 
with planted acreage, but not when there are more (so it is unlikely 
the insured intentionally planted a few acres in a second section just 
to qualify). The commenters asked if RMA will review 2009 data to 
determine how many producers were affected by the new 20 acre or 20 
percent requirement, and how they were affected, before this rule is 
incorporated into the forthcoming ``Combination'' Crop Insurance 
Policy.
    Response: The intent of this provision was to prevent producers who 
usually produce the crop in one section from planting on a small number 
of acres in another section for the sole purpose to qualify for the 
enterprise unit and the new subsidy. For example, without the proposed 
revisions, a producer with 40 acres in one section could qualify for an 
enterprise unit by planting one acre or less in another section. The 
additional subsidy is intended to encourage producers to consolidate 
their acreage into larger units, which reduces the risk. The planting 
of a small number of acres in a separate section simply to obtain the 
subsidy defeats this purpose. However, this provision was never 
intended to prevent the producer that usually produces the crop on 
small acreages in a number of sections from qualifying for the 
enterprise unit. Therefore, FCIC agrees the provisions should allow 
enterprise units for producers who plant acreage in more than two 
sections, section equivalents, etc. and have acreage dispersed similar 
to producers who only have planted acreage in two sections. FCIC has 
revised the provisions to allow producers who plant in more than two 
sections, section equivalents, etc. to qualify for an enterprise unit 
if aggregating acreage in the sections, section equivalents, etc. would 
meet the minimum acreage requirement. FCIC cannot simply make the 20 
acre or 20 percent requirement applicable only when the unit only has 
two sections because there may be situations where even the aggregation 
of acreage would not meet this minimum standard.
    Comment: A few commenters opposed the new 20 acre or 20 percent 
requirement. A commenter stated it is another obstacle that could 
adversely impact small producers. Another commenter stated the changes 
were not in the best interest of farmers in certain states which have a 
large number of small farms, and will discriminate against small 
farmers and farmers who farm multiple small tracts of land. Another 
commenter stated the restrictions are viewed as discriminatory and are 
counterproductive when trying to increase participation in the crop 
insurance program, especially in Targeted States. The commenters 
recommended eliminating the current requirement to have at least 50 
acres in an enterprise unit.
    Response: As stated in the Interim Rule, without a requirement that 
a minimum amount of acreage be planted in at least two sections, 
section equivalents, FSA farm serial numbers, or units established by 
written agreement, the program is vulnerable to program abuse by 
producers who will plant only a small amount of acreage in an 
additional section, FSA farm serial number, etc., solely for the 
purpose of qualifying for an enterprise unit and the increased premium 
subsidy. A minimum acreage requirement in at least two separate parcels 
of land protects program integrity and helps ensure a certain level of 
risk reduction.
    FCIC does not believe the 20 acre or 20 percent requirement 
discriminates against producers who farm a very small number of acres. 
While drafting the Interim Rule, FCIC considered the impact on 
producers who farm a small number of acres. FCIC opted to use the 
requirement of ``the lesser of 20 acres or 20 percent of the acreage'' 
with those producers in mind. Under this rule, a producer who only 
farms 10 acres (for example, five acres in two separate sections) would 
only have to have planted two acres in two sections or two aggregated 
parcels, while a producer who farmed a large number of acres would have 
to have planted at least 20 acres in two sections or two aggregated 
parcels.
    The Interim Rule amended the Common Crop Insurance Policy Basic 
Provisions, and does not contain a minimum 50 acre requirement. The 
Crop Revenue Coverage (CRC) policies are the only policies under the 
Federal crop insurance program that require a minimum 50 acres to 
qualify for an enterprise unit, and those policies are not included in 
this rule. Therefore, no change is made in this Final Rule in response 
to this comment. However, FCIC will review the minimum 50 acre 
requirement contained in the current CRC policies, giving consideration 
to the impact on producers of small acreage and Targeted States, and 
make any changes that are necessary.
    Comment: A commenter did not take issue with FCIC using the policy 
definition(s) (i.e., requiring consolidation that would otherwise be 
separate basic or optional units located in different sections and FSA 
farm serial numbers, etc.) and requiring greater than 50 acres for the 
actuarial discounts listed on the actuarial tables, in order for a 
producer to qualify for the acreage consolidation discounts listed on 
the actuarial table. However, in view of the emphasis, throughout the 
Farm Bill, to be more helpful to many non-traditional growers (i.e., 
organic, direct marketing

[[Page 61015]]

etc.), the commenter urged FCIC to make it easier for them to qualify 
for the enterprise and whole farm unit premium subsidy.
    Response: As stated above, FCIC has added the flexibility of being 
able to aggregate acreage when the unit contains acreage in more than 
two sections. This should assist producers who farm a small amount of 
acreage and non-traditional producers. Further, the 50 acre minimum is 
not applicable under this rule.
    Comment: A few commenters stated the restrictions reach beyond the 
requirements of the authorizing legislative language.
    Response: The 20 acre or 20 percent requirement does not go beyond 
the legislative authority. The Federal Crop Insurance Act (Act) allows 
the increased premium subsidies for enterprise units, but does not 
specify how enterprise units are to be established. As stated in the 
Interim Rule, FCIC became aware that a program vulnerability existed in 
cases where producers were planting a small amount of acreage in one 
additional parcel of land, solely to benefit from the higher enterprise 
unit premium subsidy. FCIC has an obligation under the Act to protect 
program integrity and maintain actuarial soundness. No change has been 
made.
    Comment: A commenter recommended allowing the enhanced premium 
subsidy only on CRC and Revenue Assurance (RA) policies. Another 
commenter recommended allowing the enterprise unit premium subsidy for 
all insurance plans.
    Response: FCIC does not agree the enhanced premium subsidy for 
enterprise units should be allowed only for CRC and RA policies. The 
2008 Farm Bill did not limit the availability of the increased premium 
subsidy for enterprise units to any particular plan of insurance and 
FCIC is unaware of a rational basis to limit the benefit to only CRC 
and RA policies, especially as such policies are in the process of 
being combined with the production based plans of insurance. The 
increased premium subsidy is available for any plan of insurance that 
offers enterprise units. To the extent that a plan of insurance may not 
currently have enterprise units available, FCIC will review such plans 
the next time they are revised to determine the feasibility of adding 
such enterprise units. No change has been made.
    Comment: A commenter stated at a time when we are mandated to 
establish programs for under-served producers, it makes good sense to 
extend the option of enterprise units (without acreage and other 
current limitations) and the corresponding premium subsidy to these 
producers. Having crop insurance could guarantee some level of success 
for small and/or new producers and providing enterprise units with the 
increased federal premium subsidy could result in: (1) Insurance 
affordability for more producers; (2) more producers eligible for SURE; 
(3) higher levels of coverage which results in better crop insurance 
protection and higher SURE guarantees; and (4) producers considering 
crop insurance as more of an insurance plan instead of a Federal 
payout.
    A commenter stated all producers believe they should be eligible 
for enterprise units by merely choosing to combine acreage of a crop 
that would otherwise qualify for two or more basic or optional units 
into one, regardless of the crop or insurance plan. The commenter added 
producers reason that they do not control which plans of insurance are 
available to them for the various crops and therefore should not miss 
out on the higher premium subsidy for enterprise units. The commenter 
stated if a decision is made to generally continue the additional 
restrictions to qualify for the additional premium subsidy on 
enterprise and whole farm insurance units, that a pilot program should 
be implemented in Targeted States that would remove the minimum 50 acre 
requirement and make it easier for producers to qualify for the 
enterprise and whole farm unit premium subsidy. The commenter believes 
doing so would greatly enhance the success of the educational mandate 
of the Farm Bill and as included in RMA, RME Crop Insurance Education 
Requirements Announcement for Targeted States.
    Another commenter recommends Targeted States be subject to a pilot 
program that removes the minimum 50 acre and 20 acre or 20 percent 
requirement.
    A commenter stated they seem to have hit a plateau in participation 
rates in their State. They feel this is not so much due to policy 
issues as it is in unaffordable premium cost. They believe enterprise 
units (with up to an 80 percent premium subsidy) is probably the single 
most important thing that could have broad sweeping results by making 
crop insurance more affordable for these targeted groups.
    Response: FCIC is trying to reach under-served producers and 
Targeted States to meet their risk management needs. However, as stated 
above, the requirement that a minimum amount of acreage be planted in 
at least two sections, FSA farm serial numbers, etc. is necessary to 
protect program integrity. Therefore, the limitations cannot be removed 
but as stated above, they have been revised to provide more flexibility 
to qualify for enterprise units. Further, since FCIC chose to use the 
``lesser of 20 acres or 20 percent'' producers of small farms should 
not be impacted to any greater degree than producers of large farms. 
The 50 acre limitation does not apply to this rule. It only applies to 
the CRC policy, which is not affected by this rule. However, FCIC will 
consider the current 50 acre requirement contained in the CRC policies 
and the impact on producers of small acreage, and those in Targeted 
States, and will make necessary changes.
    Comment: A commenter requested an exception for a Targeted State 
that would reduce the 50 acre minimum requirement to 20 acres. The 
commenter also requested the 20 acre or 20 percent requirement be 
reduced to 10 acres or 10 percent, which in Targeted States, will 
uphold the program intent sought by the FCIC and at the same time 
provide equality for beginning, socially disadvantaged and farmers in 
transition in converting production or marketing systems. The commenter 
stated the underlying factor in support of this request is the high 
percentage of farms under the 50 acre minimum and the number of limited 
resource farms in their State.
    Response: As stated above, the 50 acre requirement is not contained 
in or part of this rule. However, FCIC will consider the impact of the 
50 acre requirement that is currently contained in the CRC policies and 
make any necessary changes. Also, as stated above, FCIC does not 
believe the 20 acre or 20 percent requirement will adversely impact 
producers who farm small amounts of acreage, or beginning, socially 
disadvantaged, or limited resource farmers. The purpose of enterprise 
units is to reduce the risk through the consolidation of acreage into 
larger units. FCIC did not consider 10 acres or 10 percent of the acres 
in a unit to be sufficient to achieve the desired result. No change has 
been made.
    Comment: A commenter stated although the 50 acre minimum 
requirement for an enterprise unit under the CRC plan of insurance is 
not a part of the enterprise unit changes in this Interim Rule (perhaps 
because it is not in the enterprise unit provisions of the Common Crop 
Insurance Policy Basic Provisions), the commenter suggested that 
consideration be given to including it in the ``Combo'' Policy, 
although some adjustments would be needed for small-acreage crops such 
as tobacco.

[[Page 61016]]

    Response: The commenter is correct that the 50 acre minimum 
requirement is not a part of this rule. FCIC published a proposed rule 
with request for comments in the Federal Register on July 14, 2006, to 
combine various plans of insurance into one single policy commonly 
referred to as the ``Combo'' policy. Since FCIC has not yet published 
that Final Rule, FCIC cannot comment on that rule at this time.
    Comment: A few commenters stated some clarification is needed 
regarding the statement ``At least two of the sections, section 
equivalents, FSA farm serial numbers, or units established by written 
agreement making up the basic or optional units * * *rdquo; The 
commenters noted that based on answers to questions regarding unit 
structure in an Arkansas county that has sections under the Rectangular 
Survey System but where a Special Provisions statement establishes 
optional units by FSN instead of by section, it was determined that 
insureds could qualify for an enterprise unit by having planted acreage 
(20 acres or 20 percent, as applicable) in at least two sections, even 
though the underlying optional units are by FSN rather than by section 
and that planted acreage in at least two FSNs also would qualify for 
the enterprise unit. The commenters stated they have also been advised 
that the reverse is also true. For example:
     In an Iowa county where optional units are established by 
section, insureds would be able to qualify for enterprise unit coverage 
if they have one basic unit with planted acreage all in one section but 
there are at least 20 acres or 20 percent of the insured crop acreage 
in two separate FSNs within that section.
     Insureds who previously established optional units by 
written unit agreement (or a Unit Division Option) would be able to 
qualify for enterprise unit with 20 acres or 20 percent of the insured 
crop acreage in at least two FSNs or regular sections, even though 
those are not the basis of the underlying optional units.
    The commenters stated the rationale behind this answer was that 
paragraph (1)(i) of the definition of ``enterprise unit'' refers to 
``One or more basic units that are LOCATED IN two or more separate 
sections, section equivalents, FSA farm serial numbers, or units 
established by written agreement'' [emphasis added], unlike (1)(ii), 
which requires ``Two or more optional units ESTABLISHED BY * * *'' 
those legal descriptions [emphasis added]. Therefore, the subdivisions 
of the basic units do not have to be the same as those on which the 
underlying optional units must be based.
    The commenters believed this needs to be reconsidered and/or 
clarified, since it is likely that most people reading the enterprise 
unit provisions would have expected the 20 acre or 20 percent 
requirement to be based on the applicable legal description on which 
the underlying optional units would be based (in the Arkansas example, 
requiring 20 acres or 20 percent of the insured crop acreage in at 
least two FSNs, not two sections).
    A commenter stated allowing use of other legal descriptions that 
are available in the county seems counterintuitive since it brings in 
something other than what is the basis of the underlying unit 
structures from optional to basic to enterprise. The commenter stated 
it also adds complexity to the process of determining whether a policy 
qualifies for an enterprise unit since the 20 acre or 20 percent 
requirement would have to be applied to all available legal 
descriptions for the crop/county, separate from (and possibly unrelated 
to) establishing and/or updating the APH databases for any underlying 
basic/optional units.
    The commenter suggested that if all of these are allowed, it might 
help to revise paragraph (2) of the definition of ``enterprise unit'' 
[as in the Interim Rule] to clarify that ``At least two of the 
available sections, section equivalents, FSA farm serial numbers, or 
units established by written agreement making up the basic or optional 
units in paragraph (1) of this definition must each have * * *'' [or 
perhaps ``At least two of the sections, * * * making up the basic or 
optional units in paragraph (1) of this definition (as available) must 
each have * * *'']. The commenter stated that if it is not intended to 
allow use of whatever legal descriptions are available in a county, 
then paragraph (2) might be clarified as ``At least two of the 
applicable sections * * *,'' etc. The commenter believes this would 
seem to be the more logical application of the underlying unit 
structures.
    Response: FCIC agrees the provision should be reconsidered and 
clarified. After additional consideration, FCIC agrees the basis used 
to qualify for an enterprise unit should be the same as that used to 
establish optional units where the insured acreage is located. The 
provisions have been revised accordingly. For example, if sections are 
the basis for optional units where the insured acreage is located, a 
producer must have at least two sections with the required minimum 
number of planted acres in each section to qualify for an enterprise 
unit. In addition, FCIC has revised the provisions to allow 
qualification for an enterprise unit when a producer has only one 
section, section equivalent, or FSA farm serial number provided there 
are at least 660 planted acres of the insured crop in such section, 
section equivalent, or FSA farm serial number. To ensure equitable 
treatment to all producers and in particular those that may have only 
one large section, section equivalent or FSA farm serial number, FCIC 
determined that by assuring there were at least 660 planted acres there 
would be more than a standard section which is generally 640 acres and 
it would be equivalent to assuring there are at least 20 planted acres 
in more than one parcel (i.e. equivalent to two sections).
    Comment: A commenter stated regarding the enterprise unit 
requirement in the Common Crop Insurance Policy Basic Provisions and 
Revenue Assurance (RA) Basic Provisions of one or more basic units (as 
opposed to the Crop Revenue Coverage (CRC) Basic Provisions, which 
requires two or more basic units), it is unclear why an insured with 
one basic unit, who chooses NOT to subdivide that basic unit into two 
or more optional units by section or applicable legal description, 
should be allowed to call that single unit an enterprise unit rather 
than a basic unit, and get an additional enterprise unit discount when 
no additional risk has been given up in exchange. The commenter stated 
that the ``Background'' section of the Interim Rule states that, ``The 
new premium subsidy amounts are intended only for producers who are 
willing to combine optional or basic units, not for those who 
manipulate unit structures solely to benefit from the higher premium 
subsidy. * * *'' The additional 20 acre or 20 percent requirement was 
added `` * * * to protect program integrity * * *'' The commenter 
questioned if an insured who could qualify for optional units by 
section, and plants acres in two sections but chooses to insure all the 
acreage as one unit, shouldn't have a basic unit, rather than skipping 
over the basic unit designation and calling it an enterprise unit. The 
commenter stated that if the ``Combo'' Policy adopts the CRC 
requirement of two or more basic units, this will no longer be an 
issue, but the 7/14/06 Proposed Rule still required only one or more 
basic units.)
    The commenter stated perhaps the requirement of ``one or more basic 
units'' (with planted acreage in at least two sections, etc.) is 
intended to allow a farmer with 100% share in the entire farming 
operation to qualify for enterprise unit as long as he/she has

[[Page 61017]]

planted acres in at least two sections, instead of reserving enterprise 
unit coverage for farmers with different share arrangements who might 
have fewer acres overall but can meet the enterprise unit requirements. 
But if that is the case, it would appear the purpose of the enterprise 
unit is to encompass acreage in different sections, etc. rather than to 
combine units, especially if it is allowed to count any of the 
available legal descriptions and not just the one on which optional 
units are based for the crop/county.
    The commenter stated if the enterprise unit is supposed to build on 
top of the same unit structure pyramid of the underlying basic units 
that in turn could be divided into optional units by the applicable 
legal description for the crop/county (which is the logical sequence), 
then an enterprise unit should be comprised of at least two basic 
units. An enterprise unit that contains only one basic unit, with 
planted acreage in at least two sections, is no different than the 
actual basic unit (with the insured choosing not to have optional 
units); however, the insured receives the additional enterprise unit 
discount without giving up any more separate units.
    Response: The question of reduced risk for enterprise units 
involves dispersion of the risk over a wider area. This is embodied in 
the definition of an enterprise unit which requires acreage in separate 
sections or other legal descriptions. However, it is possible that 
producers may have basic units that qualify for enterprise units but 
for some reason the producer has not established the enterprise unit 
and taken advantage of the premium discount to which they could be 
entitled. For example, if a producer owns all the acreage farmed in the 
county, the acreage qualifies as a single basic unit. If the acreage is 
dispersed into qualifying legal descriptions that would qualify for an 
enterprise unit, the risk is still reduced. To penalize the producer 
because the producer failed to establish smaller units would be 
discriminatory. If the insured acreage qualifies as an enterprise unit, 
the producer should be able to establish the enterprise unit. In 
addition, and as stated above, producers who have only one large 
section, section equivalent or FSA farm serial number should also be 
able to qualify for an enterprise unit provided there are at least 660 
planted acres in such parcel. Because 660 acres is more than a standard 
section which is generally 640 acres, it would be equivalent to 
assuring there are at least 20 planted acres in more than one parcel 
(i.e. equivalent to two sections) and would have adequate dispersion. 
No change has been made in response to this comment.
    Comment: A commenter stated a point that needs consideration and 
possible revision is when land is farmed across a section line. The 
current interpretation is that, although the acreage is farmed as one 
field, it is (according to a literal reading of the policy language) 
LOCATED in two separate sections and therefore would meet the 
requirement of having one basic unit with planted acreage in at least 
two separate sections to qualify for an enterprise unit. But since this 
field cannot qualify as two separate optional units (because it is 
farmed as one field), logic would dictate that it should not count as 
two sections for enterprise unit purposes.
    Response: As stated above, a producer with one basic unit can 
qualify for an enterprise unit by having acreage located in two 
separate sections, FSA farm serial numbers, etc., provided such 
division is the basis for optional units where the insured acreage is 
located. However, when determining whether acreage qualifies for an 
enterprise unit, it is necessary to determine if at least two of the 
sections, FSA farm serial numbers, etc. contains at least 20 acres or 
20 percent of the planted acreage in the unit. This means that the 
field that is located in two sections must have at least 20 acres or 20 
percent of the acreage located in each of the sections. If it is 
unclear where the section line is in the field and this determination 
cannot be made, the acreage does not qualify for an enterprise unit. No 
change has been made in response to this comment.
    Comment: A commenter stated the policy and procedure need to 
clarify when/if prevented planting acres count toward the enterprise 
unit requirements and the calculations for the enterprise unit discount 
and the 20 acre or 20 percent requirement.
    The commenter stated some of the current language indicates the 
enterprise unit discount applies only to planted acreage, but this 
conflicts with section 17(c) of the Common Crop Insurance Policy Basic 
Provisions, which states ``The premium amount for acreage that is 
prevented from being planted will be the same as that for timely 
planted acreage except as specified in section 15(f). * * *'' and the 
conflict was resolved in favor of the insured. The commenter hoped the 
language in the ``Combo'' Policy is revised one way or the other to 
eliminate that conflict. The commenter noted that the proposed Combo 
Policy included some changes that might address this, including adding 
a reference in section 17(c) to new section 34(f) as well, stating 
``Any unit discounts contained in the actuarial documents will only 
apply to planted acreage in the applicable unit. A unit discount will 
not apply to any prevented planting acreage.'' However, the commenter 
is concerned that a lot could have changed since then.
    The commenter stated this also has led to questions as to whether 
the enterprise unit discount is determined based on prevented planting 
as well as planted acres. Based on the policy and procedure language, 
FCIC has confirmed that the answer is no. Any clarification of the 
policy and procedure language should be sure to keep this in line 
accordingly. This would apply as well to the question of whether or not 
prevented planting acreage should count toward the 20 acre or 20 
percent requirement, and the language revised as needed.
    The commenter stated some feel strongly that prevented planting 
acreage should never get the enterprise unit discount (and presumably 
the same would apply regarding the 20 acre or 20 percent requirement). 
Prevented planting acres always involve a loss so they do not lessen 
the risk for loss. In fact, in some respects they increase the chance 
of a payable loss because of the 20 acre or 20 percent requirement. 
Therefore, the enterprise unit discount should apply only to planted 
acres (which would require some revision to the existing prevented 
planting provision in section 17(c), as noted above).
    Response: The interim rule is clear that at least the lesser of 20 
acres or 20 percent of the insured crop acreage in the enterprise unit 
must be planted. Therefore, prevented planting acreage will not be 
considered when determining whether the 20 acre or 20 percent 
requirement has been met. Provisions currently contained in section 
34(a)(2)(vii) of the Basic Provisions specify the enterprise unit 
discount will only apply to acreage in the enterprise unit that has 
been planted. However, FCIC determined the provision conflicts with 
other provisions currently contained in sections 16(c) and 17(c) of the 
Basic Provisions, which specify the premium for late planted and 
prevented planting acreage will be the same as that for timely planted 
acreage. Therefore, FCIC issued Informational Memorandum R&D-05-028 
stating the enterprise unit discount will apply to both planted and 
prevented planting acres. Once the 20 acre or 20 percent requirement 
has been met, all acreage in the enterprise unit will receive the 
enterprise unit discount

[[Page 61018]]

and premium subsidy, including both the planted and prevented planting 
acreage. Currently, the discount for an enterprise unit is based on the 
total number of acres in the enterprise unit (both planted and 
prevented planting acres). FCIC has determined there is no clear 
rational basis there should be a difference in the unit discount 
provided for prevented planting acreage and planted acreage. Therefore, 
FCIC has removed section 34(a)(2)(vii) in this rule. When finalizing 
the proposed ``combo'' policy, FCIC will ensure that all provisions are 
consistent.

List of Subjects in 7 CFR Part 457

    Crop insurance, Reporting and recordkeeping requirements.

Final Rule

0
Accordingly, as set forth in the preamble, the Federal Crop Insurance 
Corporation adopts as final the interim rule published at 74 FR 28154 
on June 15, 2009, as final with the following changes:

PART 457--COMMON CROP INSURANCE REGULATIONS

0
1. The authority citation for 7 CFR part 457 continues to read as 
follows:

    Authority:  7 U.S.C. 1506(1), 1506(o).

0
2. In Sec.  457.8, paragraph (b) is amended as follows:
0
a. By revising the definition of ``Enterprise unit'' in section 1;
0
b. By removing ``; and'' and adding ``.'' in its place in section 
34(a)(2)(vi); and
0
c. By removing section 34(a)(2)(vii).
    The revised text reads as follows:


Sec.  457.8  The application and policy.

* * * * *
    (b) * * *
    1. Definitions.
* * * * *
    Enterprise unit. All insurable acreage of the insured crop in the 
county in which you have a share on the date coverage begins for the 
crop year. To qualify:
    (1) An enterprise unit must contain all of the insurable acreage of 
the same insured crop in:
    (i) Two or more sections, if sections are the basis for optional 
units where the insured acreage is located;
    (ii) Two or more section equivalents determined in accordance with 
FCIC issued procedures, if section equivalents are the basis for 
optional units where the insured acreage is located or are applicable 
to the insured acreage;
    (iii) Two or more FSA farm serial numbers, if FSA farm serial 
numbers are the basis for optional units where the insured acreage is 
located;
    (iv) Any combination of two or more sections, section equivalents, 
or FSA farm serial numbers, if more than one of these are the basis for 
optional units where the acreage is located or are applicable to the 
insured acreage (e.g., if a portion of your acreage is located where 
sections are the basis for optional units and another portion of your 
acreage is located where FSA farm serial numbers are the basis for 
optional units, you may qualify for an enterprise unit based on a 
combination of these two parcels);
    (v) One section, section equivalent, or FSA farm serial number that 
contains at least 660 planted acres of the insured crop. You may 
qualify under this paragraph based only on the type of parcel that is 
utilized to establish optional units where your insured acreage is 
located (e.g., if having two or more sections is the basis for optional 
units where the insured acreage is located, you may qualify for an 
enterprise unit if you have at least 660 planted acres of the insured 
crop in one section); or
    (vi) Two or more units established by written agreement; and
    (2) At least two of the sections, section equivalents, FSA farm 
serial numbers, or units established by written agreement in paragraphs 
(1)(i), (ii), (iii), (iv), or (vi) of this definition must each have 
planted acreage that constitutes at least the lesser of 20 acres or 20 
percent of the insured crop acreage in the enterprise unit. If there is 
planted acreage in more than two sections, section equivalents, FSA 
farm serial numbers or units established by written agreement in 
paragraphs (1)(i), (ii), (iii), (iv), or (vi), these can be aggregated 
to form at least two parcels to meet this requirement. For example, if 
sections are the basis for optional units where the insured acreage is 
located and you have 80 planted acres in section one, 10 planted acres 
in section two, and 10 planted acres in section three, you may 
aggregate sections two and three to meet this requirement.
* * * * *

    Signed in Washington, DC, on November 16, 2009.
William J. Murphy,
Manager, Federal Crop Insurance Corporation.
[FR Doc. E9-27987 Filed 11-20-09; 8:45 am]
BILLING CODE 3410-08-P