Farm Storage Facility Loan (FSFL) Program; Portable Storage Facilities and Reduced Down Payment for FSFL Microloans, 25587-25595 [2016-09949]

Agencies

• DEPARTMENT OF AGRICULTURE
• Commodity Credit Corporation

[Federal Register Volume 81, Number 83 (Friday, April 29, 2016)]
[Rules and Regulations]
[Pages 25587-25595]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09949]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1436

RIN 0560-AI35


Farm Storage Facility Loan (FSFL) Program; Portable Storage 
Facilities and Reduced Down Payment for FSFL Microloans

AGENCY: Commodity Credit Corporation and Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: The Farm Service Agency (FSA) administers the FSFL Program on 
behalf of the Commodity Credit Corporation (CCC). This rule amends the 
FSFL Program regulations to add eligibility for portable storage 
structures, portable equipment, and storage and handling trucks, and to 
reduce the down payment and documentation requirements for a new 
``microloan'' category of FSFLs up to $50,000. These changes are 
intended to address the needs of smaller farms and specialty crop 
producers. This rule also includes technical and clarifying changes 
that are consistent with how the FSFL Program is already implemented, 
including specifying commodities that are already eligible for FSFLs 
but are not currently listed in the regulations, and changing the 
required life span of the storage facility from a minimum of 15 years 
to a minimum of the FSFL term, plus any extensions.

DATES: Effective: April 29, 2016.

FOR FURTHER INFORMATION CONTACT: Toni Williams; phone (202) 720-2270.

[[Page 25588]]

Persons with disabilities who require alternative means of 
communication should contact the USDA Target Center at (202) 720-2600 
(voice).

SUPPLEMENTARY INFORMATION: 

Background on the FSFL Program

    The FSFL Program is a CCC program administered by FSA. As specified 
in the CCC Charter Act (15 U.S.C. 714b), the goal of the FSFL Program 
is to increase producer-owned storage capacity to alleviate national, 
regional, and local shortages in the storage of eligible commodities. 
FSFLs are available in amounts up to $500,000 for terms not to exceed 
12 years.
    The FSFL Program provides low-cost financing for producers to build 
or upgrade on-farm storage and handling facilities. FSFLs can be used 
for items such as drying and cooling equipment, safety equipment, and 
new concrete foundations, as well as for storage buildings and grain 
bins. The FSFL Program benefits producers who lack local commercial 
storage options or have limited marketing options for their commodities 
at harvest time. This rule does not change the basic administrative 
structure and nature of the FSFL Program.
    Having on-farm storage helps producers to sell their crop at a time 
when the market is favorable for them, rather than being forced to sell 
immediately after harvest or pay for commercial storage. Producers can 
use on-farm storage to store livestock feed grown on-farm, rather than 
buying feed. On-farm storage allows producers to better serve their 
customers that buy commodities throughout the year. FSFLs are for 
storage and handling facilities and equipment only; FSFLs are not made 
for crop production equipment. For example, cold storage facilities to 
store aquaculture products are eligible for FSFLs, but not tanks in 
which to raise live aquaculture species.
    Eligible commodities for which an FSFL is available include:
     Aquaculture;
     Floriculture;
     Fruits (including nuts) and vegetables;
     Harvested as whole grain: Corn, grain sorghum, rice, 
soybeans, oats, wheat, sugar, peanuts, barley, and minor oilseeds;
     Harvested as other-than-whole grain: Corn, grain sorghum, 
wheat, oats, and barley;
     Hay;
     Honey;
     Hops;
     Maple sap;
     Meat and poultry;
     Milk;
     Other grains (triticale, spelt, and buckwheat);
     Pulse crops (lentils, chickpeas, and dry peas);
     Renewable biomass;
     Rye;
     Eggs; and
     Cheese, butter and yogurt.
    As part of the application process, FSFL borrowers must demonstrate 
a satisfactory credit history and an ability to repay the debt. All 
FSFLs are secured by the facility or equipment for which the FSFL is 
made. Each FSFL must be secured by a promissory note and security 
agreement. FSFLs greater than $100,000 require additional security, 
which typically is a lien on the real estate parcel on which the 
structure is located or another form of security acceptable to USDA, 
such as a deed of trust or irrevocable letter of credit. As part of the 
application process, borrowers must demonstrate their need for storage 
capacity based on their historical production of eligible commodities.

Intended Impact of This Rule

    As part of an ongoing effort to improve the effectiveness of our 
programs, FSA evaluated the needs of smaller farms and identified 
potential barriers to their eligibility for FSFLs. Smaller farms and 
specialty crop producers typically have limited commercial financing 
options to purchase or upgrade storage and handling facilities that 
would allow them to expand their business, and with limited capital 
resererves, may struggle to meet the down payment requirements for 
FSFLs. Beginning farmers sometimes do not have the production history 
to demonstrate the need for additional storage capacity. Specialty crop 
producers have a need for portable equipment such as storage trucks to 
store and deliver fresh commodities to farmers markets, and need 
financing to own rather than rent that equipment.
    The changes in the rule are primarily intended to help smaller 
farms and specialty crop producers who have not previously participated 
in the FSFL Program. Traditional grain producers and large farm 
operations who have historically been the key customers for the FSFL 
Program may also benefit if they have a need for portable equipment and 
portable storage such as portable grain handling equipment and scales, 
which were not previously eligible for FSFL.

Reduced Down Payment and Documentation Requirements for FSFL Microloans

    This rule defines ``FSFL microloan'' as a new category of the FSFL 
program. An FSFL microloan is a loan for which the producer's total 
outstanding balance for all of their outstanding FSFLs is less than or 
equal to $50,000 at the time of loan application and disbursement. This 
rule defines the down payment and documentation requirements for an 
FSFL microloan. Some of the requirements for the FSFL microloan 
category are different from the existing requirements that will 
continue to apply to all loans greater than $50,000. Producers can have 
more than one FSFL outstanding at a time, so the definition is based on 
the ``aggregate'' or total outstanding balance to the borrower. For 
example, a new FSFL of $50,000 would be an FSFL microloan if the 
producer didn't have any other outstanding FSFLs. A producer with an 
outstanding balance of $20,000 on an existing FSFL could get an 
additional FSFL for $30,000 and that second FSFL would be considered an 
FSFL microloan. However, if the second FSFL was for $40,000, then it 
would not be considered an FSFL microloan because the aggregate total 
of the two FSFLs would be $60,000, which exceeds the $50,000 FSFL 
microloan aggregate outstanding balance threshold.
    The $50,000 limit for FSFL microloans is consistent with the FSA 
Farm Loan Programs Microloan Program limit established as specified in 
section 5106 of the Agricultural Act of 2014 (Pub. L. 113-79, referred 
to as the 2014 Farm Bill), amending the Consolidated Farm and Rural 
Development Act of 1972 (Pub. L. 92-419) (7 U.S.C. 1943), to set the 
limit of $50,000 for the total microloan indebtedness outstanding at 
any one time to any single borrower.
    This rule specifies a smaller down payment for FSFL microloans than 
for loans over $50,000 and also specifies different documentation 
requirements. The smaller down payment requirement for FSFL microloans 
is intended to help small farm operations, such as beginning farmers, 
niche and non-traditional farm operations. Currently, the FSFL minimum 
down payment requirement of the net cost of the storage facility is 15 
percent, which may be a difficult requirement for small farms or new 
farm operations. The rule establishes the down payment requirement for 
an FSFL microloan at 5 percent of the net cost of the eligible storage 
facility (costs that may be included in the net cost are specified in 
Sec.  1436.9(b)) for producers who have no

[[Page 25589]]

more than $50,000 in total outstanding FSFL indebtedness when the FSFL 
microloan is made and disbursed. For example, on a $35,000 FSFL to 
purchase a bulk milk storage tank, the minimum down payment required 
under these new rules would now be $1,750 instead of $5,250.
    For FSFL applications in the new microloan category, this rule also 
does not require that producers demonstrate storage needs based on 3 
years of production history. Instead, the producer applying for an FSFL 
microloan will have the option to self-certify the farm's storage needs 
at the time of application, and will not be required to file acreage 
reporting on an FSA-578 to qualify for an FSFL microloan. (Many 
producers will need to continue to file an FSA-578 to establish 
eligibility for other FSA programs.) This distinction for FSFL 
microloans as compared to regular FSFLs allows applicants for FSFL 
microloans to self-certify their commodity storage and handling needs. 
The change is intended to assist smaller start-up farm operations, 
which may not be able to meet the existing 3-year production 
requirement. The self-certified information will be used by FSA county- 
and State-level personnel to determine FSFL eligibility and 
feasibility. The requirement to document 3 years of production history 
to justify storage needs will remain for non-microloan FSFLs to 
borrowers with an aggregate outstanding FSFL indebtedness above 
$50,000. FSFL microloans will be for a term of 3, 5 or 7 years, with 
the loan term selected by the producer at the time of application. The 
loan term for used equipment will be 3 or 5 years.

Portable Storage and Handling Equipment, and Storage and Handling 
Trucks

    This rule expands the FSFL program to include new and used portable 
storage and handling equipment and storage and handling trucks. 
Portable or used storage and handling equipment have not previously 
been eligible for an FSFL. This rule adds definitions for ``portable 
storage and handling equipment'' and ``storage and handling trucks.'' 
This rule revises the definition of ``collateral'' to include these new 
types of equipment. Approval requirements for portable storage and 
handling equipment and those requirements for storage and handling 
trucks will be specified in the FSA Handbook.
    In Sec.  1436.6, ``Eligible storage and handling equipment,'' this 
rule adds new provisions for new and used portable storage and handling 
equipment. Portable storage and handling equipment includes components 
such as, but not limited to: Conveyors, augers, vacuums, pilers, 
scales, batch dryers, storage containers, and other necessary equipment 
used to handle and maintain eligible commodities being stored. The new 
provisions ensure efficient operation of the storage and handling of 
eligible commodities and provides affordable financing so producers can 
obtain the necessary equipment. For example, if the producer's eligible 
commodities are fruits and vegetables that sell in farmers markets, the 
producer will be able to use the FSFL to purchase equipment to weigh 
vegetables, forklifts to handle the fruits and vegetables, and portable 
storage containers to store fruits and vegetables for short or extended 
periods of time. Eligible portable storage facilities include 
manufactured storage containers that may be used when transported, 
hitched, or mounted on a trailer or truck for the purpose of storing 
and handling eligible commodities. All storage and handling trucks must 
be registered with the applicable State Motor Vehicle Administration 
(MVA) and all State and local MVA laws, insurance, and title provisions 
must be adhered to before loan disbursement. The minimum requirement 
for insurance will require that the producer must obtain insurance 
equal to the value of the security at the time of loan closing and 
maintain that insurance for the term of the loan. The insurance 
obtained by the applicant should be the standard insurance policy for 
the locality in which the property is located and CCC will be listed as 
loss payee.
    Portable handling equipment for eligible storage commodities will 
allow a producer to use equipment for more than one storage facility 
located on the farm. Portable handling equipment includes, but is not 
limited to, hydraulic self-propelled fork lifts, wheel loaders, 
grippers, skid steers, front-end loader attachments, or 3-point hitch 
lifts. Portable handling equipment for eligible storage commodities is 
often less expensive than affixed equipment, which is especially 
beneficial to smaller farm operations that may have lower gross incomes 
available to repay FSFLs.
    FSA will add certain details and examples in program related 
handbooks, that will further explain requirements for types of eligible 
portable equipment that are being added by this rule. The promise to 
pay and security requirements for FSFL microloans and other types of 
FSFL will be outlined in the Promissory Note and Security Agreement, 
which FSA will provide to the borrower before loan closing. 
Requirements for how and where to apply for a loan are not changing, 
and are specified in Sec.  1436.4, ``Application for Loans.'' 
Additionally, in order to protect FSA's security interest, throughout 
the loan term, the Promissory Note and Security Agreement will specify 
that FSA must have access, which is consistent with the requirement in 
Sec.  1436.15(e), to the portable collateral to ensure the equipment is 
being used for its intended purpose and required compliance 
inspections.
    The specific procedures for portable collateral liens, which are 
applicable to State and local laws for perfecting liens, and allowing 
FSA physical access to inspect portable collateral to ensure the 
collateral is being used for its intended purpose will be specified in 
FSA program related handbooks and in the Promissory Note and Security 
Agreement. For example, CCC seals with identifiable numbers may be 
placed on the FSFL portable collateral and storage and handling trucks, 
and a CCC lien will be recorded at the State or county courthouse for 
the collateral and with the State MVA for storage and handling trucks, 
according to State and local laws. This is consistent with current FSFL 
practice for liens on other types of storage facilities and equipment 
when the FSFL is $100,000 or less: There is a lien on the collateral 
(the building or equipment), but no additional security required. Most 
FSFLs for portable equipment and storage and handling trucks, in 
general, are expected to be under $100,000, have a maximum of four 
axles, and have a gross vehicle weight rating of 60,000 lbs. or less.
    New and used portable equipment determined to be eligible for an 
FSFL by the FSA Deputy Administrator for Farm Programs include, but are 
not limited to, bulk tanks, conveyors, augers, scales, vacuums, pilers, 
scales, batch dryers, and storage containers. The FSFL request for 
portable storage and handling equipment will be processed using the 
existing FSFL process; FSA county office reviewers will review FSFL 
applications to determine the producer's on-farm production and storage 
and handling needs for eligible commodities. Loans associated with 
portable storage and handling equipment and storage and handling trucks 
may be applied for under an FSFL microloan or regular FSFL request. 
However, loans for defined used storage and handling equipment or 
trucks may not have a loan term greater than 5 years.

[[Page 25590]]

FSFL Terms and Extensions

    This rule provides flexibility to the FSA Deputy Administrator for 
Farm Programs to establish new loan terms, for commodities other than 
sugar, not to exceed 12 years based on the FSFL principal and request 
type. With the addition of FSFLs for portable storage and handling 
equipment and trucks, new or used, and the new provisions for FSFL 
microloans, we anticipate that the FSFL Program will make a greater 
number of FSFLs with smaller loan amounts than in the past. Shorter 
loan terms of 3 or 5 years for example, may be more appropriate for 
these smaller FSFLs and more specifically, for used portable storage 
and handling equipment and trucks; in the past, producers have 
requested a shorter loan term, but that option had not previously been 
available. For example, producers have asked FSA for shorter loan terms 
on FSFLs with larger loan amounts so that their real estate collateral 
does not have a lien for many years.
    Prior to this rule, the regulations have specified that no 
extensions of the loan term (refinancing to extend the maturity date) 
are possible, and that the FSFL must be repaid in full at the end of 
the loan term. In order to permit consideration of external factors 
that may warrant discretion to extend the loan term, this rule allows 
extensions when, at the discretion of the Deputy Administrator, 
unforeseen weather events, unexpected changes to a farming operation 
(such as unexpected or unplanned departure of a member or partner), 
unexpected low commodity prices, or other matters, as determined 
appropriate by the Deputy Administrator, adversely impact the 
borrower's ability to repay the FSFL by the end of the loan's term. The 
borrower agrees to the loan term (maturity date of the loan) through 
the Promissory Note at the time of loan distribution. Borrowers who 
have already agreed to a loan's term have no right to an extension or 
even the consideration of a request for extension; however, the 
regulation will permit the Deputy Administrator to exercise discretion 
to consider a request to extend a loan's term. This will allow FSA to 
better manage potentially delinquent debt in the portfolio. It is 
expected that extensions would be for 1 or 2 years, to be decided on a 
case by case basis.
    Although the rule will now allow the Deputy Administrator the 
discretion to consider extension requests, if the Deputy Administrator 
chooses not to consider the extension request, then there are no appeal 
rights because the borrower is not entitled to an extension at any 
time. However, if the Deputy Administration does consider an extension 
request and makes a decision to deny the extension or grant a shorter 
than requested extension, then the borrower may appeal that 
determination.

Miscellaneous and Clarifying Changes

    In addition to the substantive provisions discussed above, this 
rule makes a number of clarifying and housekeeping changes to make the 
rules clear and consistent with how the FSFL Program is currently 
implemented.
    This rule adds a definition for ``facility'' to specify that a 
facility includes any on-farm storage and handling facility or 
structure, storage and handling equipment, or storage and handling 
truck.
    This rule adds a definition for ``off farm paid labor.'' This 
definition is needed to clarify that paying workers who are not regular 
or seasonal employees, but are only hired to construct or install the 
storage facility, is an eligible FSFL expense.
    This rule specifies the full list of currently eligible commodities 
in the definition of ``facility loan commodity.'' The CCC Charter Act, 
in 15 U.S.C. 714b, authorizes CCC to make FSFLs to grain producers 
needing grain storage facilities in areas where the Secretary 
determines a deficiency of such storage exists. The Food, Conservation, 
and Energy Act of 2008 (Pub. L. 110-246, referred to as the 2008 Farm 
Bill) provides discretionary authority to the Secretary to add 
additional storable commodities to the list of eligible crops for the 
FSFL Program. FSA's intent for adding new FSFL commodities is to 
provide increased access to capital to smaller and specialty producers 
to purchase and erect storage, drying, and handling facilities for 
their commodities.
    FSA has used this authority, as delegated by the Secretary, to add 
eligible commodities through notices to the field and handbook changes.
    This rule therefore changes the definition of ``facility loan 
commodity'' to add the discretionary additional commodities that are 
already eligible for FSFLs, but are not listed in the regulations. 
These commodities include specialty grains (triticale, spelt, and 
buckwheat), floriculture (flowers and ornamental plants), honey, maple 
sap, hops, rye, milk, cheese, butter, yogurt, meat, poultry, eggs, and 
aquaculture. A conforming change is made in Sec.  1436.2, 
``Administration,'' to include the additional eligible commodities. In 
multiple sections, specific references to fruits, vegetables, and 
grains are removed, since many other types of commodities are eligible 
for the FSFL Program.
    This rule amends the regulations in Sec.  1436.9, ``Loan Amount and 
Loan Application Approvals,'' to change the expiration of the 4 month 
FSFL approval period to 6 months, which was already implemented 
administratively. As part of the FSFL application process, the county 
committee determination form is provided to the applicant as part of 
the application package; on that form, it specifies the 6 month 
expiration date of the approval and specifies that loan funds will not 
be disbursed, except for any partial loan disbursement as allowed under 
the regulation, until the structure has been constructed, assembled, or 
installed and inspected. As indicated in the county committee 
determination form and this rule, as amended, 6 months is the 
timeframe, from approval to expiration, during which the facility must 
be completely and fully delivered, erected, constructed, assembled, or 
installed and a CCC representative has inspected and approved the 
facility. As specified in Sec.  1436.9(a), the cost on which the FSFL 
is based is the net cost of the eligible facility, accessories, and 
services; those costs are not known until the FSFL construction or 
acquisition project is completed. Changing the expiration of the 
approval period to 6 months helps producers who have difficulty 
completing their FSFL project in 4 months. For various reasons, such as 
weather conditions, equipment delivery, or construction scheduling, FSA 
determined it usually takes more than 4 months for an FSFL construction 
project to be completed or equipment to be installed. Over a 2-year 
period, FSA piloted an FSFL approval change from 4 months to 6 months 
and confirmed the change was beneficial to producers and FSA staff. 
FSFL producers may also request an additional FSFL approval extension 
beyond 6 months, if it is determined necessary for the producer to 
complete the FSFL construction project. For example, if the FSFL 
request was approved on January 4 and was recorded as having an FSFL 
loan approval expiration date of July 4, then the producer would need 
to finish the FSFL project and have receipts from all the suppliers by 
July 4th. However, the producer may request an additional 6 months for 
a loan approval extension in June, before the loan approval window 
expires. After approval by the State or County Office Committee, the 
loan approval period in this example would be extended to January 4 of 
the following year.

[[Page 25591]]

    Current FSFL provisions require that the storage facility or 
equipment must have a useful life of at least 15 years. That may not be 
a realistic requirement for portable equipment, so this rule changes 
the requirement for all FSFL storage and handling equipment, trucks and 
structures to have a useful life of at least the term of the loan and 
any authorized loan term extensions.
    This rule revises the provisions in Sec.  1436.1, 
``Applicability,'' to specify that unless otherwise specified in the 
regulation all of the provisions of 7 CFR part 1436 apply to FSFL 
microloans. This rule also revises the provisions in Sec.  1436.4, 
``Application for Loans,'' to specify where the FSFL application must 
be submitted.

Availability of FSFL for Aquaculture

    Aquaculture is one of the eligible commodities added to the 
definition of ``facility loan commodity.'' Aquaculture species, for 
FSFL purposes, are defined as any species of aquatic organism grown as 
food for human consumption, or fish raised as feed for fish that are 
consumed by humans. Aquaculture species are perishable commodities and 
their quality can only be maintained for a limited period of time. The 
FSFL program provides cold storage facilities which may extend this 
period of time. The aquaculture storage capacity will be determined 
based on production for 1 year. All applicable State laws must be 
followed by the producer for storing aquaculture in the FSFL storage 
facility.
    Pending a completed Environmental Assessment (EA), consistent with 
the National Environmental Policy Act (NEPA, 42 U.S.C. 4321-4347), and 
the Clean Water Act, FSA will consider whether the FSFL program could 
authorize holding or storage structures that will have uptake or 
discharge water that comes from natural sources, tributaries, coastal 
and ocean waters, or perennial waterways. FSA is currently making 
preparations to have the Environmental Assessment (EA) completed. Once 
the EA is completed, the findings will be posted on the FSA Web site at 
https://www.fsa.usda.gov/programs-and-services/environmental-cultural-resource/nepa/current-nepa-documents/index. A notice of the EA 
availability will be published in the Federal Register. Any substantive 
change to FSFL policy for aquaculture FSFL as a result of the EA will 
made through future rulemaking.

Flexibility in Implementation

    This rule provides flexibility for the FSA Deputy Administrator, 
Farm Programs, or a State Committee to rescind authorization for self-
certification of storage needs for FSFL microloans or provisions 
authorizing eligibility of portable collateral, such as storage and 
handling equipment and storage and handling trucks when it is 
determined such actions are having an adverse effect on the financial 
integrity of the FSFL Program. For example, if the FSFL default rate 
rises for smaller FSFLs or storage and handling equipment and trucks, 
specifically, portable facility FSFLs, FSA would have the ability to 
remove or implement additional administrative provisions, such as 
requiring additional security at a determined threshold, but not less 
than $50,000, to protect CCC's financial interest at the State or the 
national level. The authority can only be exercised at the State or 
national level; it cannot be used to disapprove or to add documentation 
requirements for individual FSFLs.

Notice and Comment

    In general, the Administrative Procedure Act (5 U.S.C. 553) 
requires that a notice of proposed rulemaking be published in the 
Federal Register and interested persons be given an opportunity to 
participate in the rulemaking through submission of written data, 
views, or arguments with or without opportunity for oral presentation, 
except when the rule involves a matter relating to public property, 
loans, grants, benefits, or contracts. This rule involves loans, in 
addition, the regulations for this program are exempt from the notice 
and comment provisions of 5 U.S.C. 553 and the Paperwork Reduction Act 
(44 U.S.C. chapter 35), as specified in section 1601(c) of the 2008 
Farm Bill, which allows that the regulations be promulgated and 
administered without regard to the notice and comment requirements in 5 
U.S.C. 553.

Effective Date

    The Administrative Procedure Act (5 U.S.C. 553) provides generally 
that before rules are issued by Government agencies, the rule must be 
published in the Federal Register, and the required publication of a 
substantive rule is to be not less than 30 days before its effective 
date. However, noted above, one of the exceptions is that section 553 
does not apply to rulemaking that involves a matter relating to loans. 
Therefore, because this rule relates to loans, the 30 day effective 
period requirement in section 553 does not apply. This final rule is 
effective when published in the Federal Register. This will allow us to 
provide greater access to capital for small farms as soon as possible 
before the 2016 planting or harvesting season.

Executive Order 12866 and 13563

    Executive Order 12866, ``Regulatory Planning and Review,'' and 
Executive Order 13563, ``Improving Regulation and Regulatory Review,'' 
direct agencies to assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). Executive Order 13563 emphasizes the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility.
    The Office of Management and Budget (OMB) designated this final 
rule as not significant under Executive Order 12866 and, therefore, OMB 
did not review this final rule.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA), generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to the notice and comment 
rulemaking requirements under the Administrative Procedure Act (5 
U.S.C. 553) or any other statute, unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities. This rule is not subject to the Regulatory 
Flexibility Act because CCC is not required by any law to publish a 
proposed rule for public comments for this rulemaking.

Environmental Review

    The environmental impacts of this rule have been considered in a 
manner consistent with the provisions of NEPA, the regulations of the 
Council on Environmental Quality (40 CFR parts 1500-1508), and the FSA 
regulations for compliance with NEPA (7 CFR 799). Previous changes to 
the FSFL Program were analyzed and evaluated in a Programmatic 
Environmental Assessment and subsequent Finding of No Significant 
Impact (74 FR 71674) after the 2008 Farm Bill. FSA has determined that 
the provisions defined herein will not have a significant impact on the 
quality of the human environment either individually or cumulatively. 
Therefore, no Environmental Assessment or Environmental Impact 
Statement will be prepared for these regulatory changes. To consider 
additional FSFL provisions for aquaculture beyond those included in 
this rule, an Environmental

[[Page 25592]]

Assessment is being prepared to determine if any significant adverse 
impacts would be anticipated.

Executive Order 12372

    Executive Order 12372, ``Intergovernmental Review of Federal 
Programs,'' requires consultation with State and local officials that 
would be directly affected by proposed Federal financial assistance. 
The objectives of the Executive Order are to foster an 
intergovernmental partnership and a strengthened Federalism, by relying 
on State and local processes for State and local government 
coordination and review of proposed Federal Financial assistance and 
direct Federal development. For reasons specified in the final rule 
related notice to 7 CFR part 3015, subpart V (48 FR 29115, June 24, 
1983), the programs and activities within this rule are excluded from 
the scope of Executive Order 12372.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988, ``Civil Justice Reform.'' This rule will not preempt State or 
local laws, regulations, or policies unless they present an 
irreconcilable conflict with this rule. This rule will not have 
retroactive effect. Before any judicial action may be brought regarding 
the provisions of this rule, the administrative appeal provisions of 7 
CFR parts 11 and 780 are to be exhausted.

Executive Order 13132

    This rule has been reviewed under Executive Order 13132, 
``Federalism.'' The policies contained in this rule do not have any 
substantial direct effect on States, on the relationship between the 
national government and the States, or on the distribution of power and 
responsibilities among the various levels of government, except as 
required by law. Nor will this rule impose substantial direct 
compliance costs on State and local governments. Therefore, 
consultation with the States is not required.

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Federal agencies 
to consult and coordinate with tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal government 
and Indian tribes or on the distribution of power and responsibilities 
between the Federal government and Indian tribes.
    FSA has assessed the impact of this rule on Indian tribes and 
determined that this rule does not, to our knowledge, have tribal 
implications that require tribal consultation under Executive Order 
13175. If a Tribe requests consultation, FSA will work with the USDA 
Office of Tribal Relations to ensure meaningful consultation is 
provided.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 
104-4) requires Federal agencies to assess the effects of their 
regulatory actions on State, local, and Tribal governments or the 
private sector. Agencies generally must prepare a written statement, 
including a cost benefit analysis, for proposed and final rules with 
Federal mandates that may result in expenditures of $100 million or 
more in any 1 year for State, local, or Tribal governments, in the 
aggregate, or to the private sector. UMRA generally requires agencies 
to consider alternatives and adopt the more cost effective or least 
burdensome alternative that achieves the objectives of the rule. This 
rule contains no Federal mandates, as defined in Title II of UMRA, for 
State, local, or tribal governments or the private sector. Therefore, 
this rule is not subject to the requirements of sections 202 and 205 
the UMRA.

SBREFA Congressional Review

    This rule is not a major rule under SBREFA (Pub. L. 104-121). 
Therefore, there is no requirement to delay the effective date for 60 
days from the date of publication to allow for Congressional review. 
This rule is effective on the date of publication in the Federal 
Register.

Federal Assistance Programs

    The title and number of the Federal Domestic Assistance Program in 
the Catalog of Federal Domestic Assistance to which this rule applies 
is the Farm Storage Facility Loans--10.056.

Paperwork Reduction Act

    The regulations in this rule are exempt from requirements of the 
Paperwork Reduction Act (44 U.S.C. Chapter 35), as specified in section 
1601(c)(2) of the 2008 Farm Bill, which provides that the regulations 
for the programs in Title I of the 2008 Farm Bill be promulgated and 
administered without regard to the Paperwork Reduction Act.

E-Government Act Compliance

    FSA 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.

List of Subjects in 7 CFR Part 1436

    Administrative practice and procedure, Loan programs-agriculture, 
Penalties, Price support programs, Reporting and recordkeeping 
requirements.

    For the reasons discussed above, CCC amends 7 CFR part 1436 as 
follows:

PART 1436--FARM STORAGE FACILITY LOAN PROGRAM REGULATIONS

0
1. The authority for part 1436 continues to read as follows:

    Authority:  7 U.S.C. 7971 and 8789; and 15 U.S.C. 714-714p.


0
2. In Sec.  1436.1, designate the text as paragraph (a) and add 
paragraph (b) to read as follows:


Sec.  1436.1  Applicability.

* * * * *
    (b) Unless specified otherwise in this part, for FSFL microloans, 
all provisions of this part apply.

0
3. In Sec.  1436.2, revise paragraph (g) to read as follows:


Sec.  1436.2  Administration.

* * * * *
    (g) The purpose of the Farm Storage Facility Loan Program is to 
provide CCC funded loans for producers of grains, oilseeds, pulse 
crops, sugar, hay, renewable biomass, fruits and vegetables (including 
nuts), aquaculture, butter, cheese, eggs, floriculture, honey, hops, 
maple sap, meat, milk, poultry, rye, yogurt, and other grains and 
storable commodities, as determined by the Secretary, to construct or 
upgrade storage and handling facilities for the eligible facility loan 
commodities they produce.

0
4. Amend Sec.  1436.3 as follows:
0
a. Add in alphabetical order definitions for ``Aquaculture,'' ``ARS,'' 
and ``CCC;''
0
b. Revise the definition of ``Collateral;''
0
c. In the definition of ``Commercial facility,'' remove the words 
``means any structure'' and add the words ``means any facility'' in 
their place;

[[Page 25593]]

0
d. Add in alphabetical order definitions for ``Deputy Administrator'' 
and ``Facility;''
0
e. Revise the definition of ``Facility loan commodity;'' and
0
f. Add in alphabetical order definitions for, ``FSA'', ``FSFL'', ``FSFL 
microloan'', ``NAP'', ``NEPA'', ``NIFA'', ``Off-farm paid labor'', 
``OSHA'', ``Portable equipment and storage structures'', ``Storage and 
handling truck'', and ``USDA.''
    The additions and revisions read as follows:


Sec.  1436.3  Definitions.

* * * * *
    Aquaculture, for FSFL purposes, means any species of aquatic 
organism grown as food for human consumption, or fish raised as feed 
for fish that are consumed by humans.
* * * * *
    ARS means the Agricultural Research Service of the USDA.
* * * * *
    CCC means the Commodity Credit Corporation.
* * * * *
    Collateral means the facility and any real estate used to secure 
the loan.
* * * * *
    Deputy Administrator means the Deputy Administrator for Farm 
Programs, Farm Service Agency, including any designee.
    ERS means the Economic Research Service, which is an agency of U.S. 
Department of Agriculture that is a primary source of economic 
information and research in the U. S. Department of Agriculture.
    Facility means any on-farm storage and handling facility or 
structure, storage and handling equipment, or storage and handling 
truck, for which a producer may receive FSFL financing to acquire or 
upgrade. Such facilities can be new or used, fixed or portable.
    Facility loan commodity means corn, grain sorghum, oats, wheat, 
barley, rice, raw or refined sugar, soybeans, sunflower seed, canola, 
rapeseed, safflower, flaxseed, mustard seed, crambe, sesame seed, other 
grains and oilseeds as determined and announced by CCC, dry peas, 
lentils, or chickpeas harvested as whole grain, peanuts, hay, renewable 
biomass, fruits and vegetables (including nuts), aquaculture, 
floriculture, hops, milk, rye, maple sap, honey, meat, poultry, eggs, 
cheese, butter, yogurt, and other storable commodities as determined by 
the Secretary. Corn, grain sorghum, wheat, and barley are included 
whether harvested as whole grain or other than whole grain.
* * * * *
    FSA means the Farm Service Agency of the USDA.
    FSFL means Farm Storage Facility Loan.
    FSFL microloan means a loan for which the producer's aggregate 
outstanding FSFL balance will be equal to or less than $50,000 at the 
time of loan application and disbursement.
* * * * *
    NAP means the Noninsured Crop Disaster Assistance Program.
    NASS means the National Agricultural Statistics Service, which is 
an agency of U.S. Department of Agriculture that is a primary source of 
statistical information in the U. S. Department of Agriculture.
    NEPA means the National Environmental Policy Act.
    NIFA means the National Institute of Food and Agriculture of the 
USDA.
* * * * *
    Off-farm paid labor means any laborer that does not work for the 
applicant on a regular basis and who is not hired as a seasonal worker.
    OSHA means the Occupational Safety and Health Administration of the 
U.S. Department of Labor.
    Portable equipment and storage structures means non-affixed 
equipment and storage containers that are manufactured to be mounted, 
hitched, or transported with a farm vehicle, truck, or trailer and its 
primary function is to store or handle eligible facility loan 
commodities at different farm, market, or storage locations. Examples 
of portable equipment include, but are not limited to, bulk tanks, 
conveyors, augers, scales, vacuums, pilers, scales, batch dryers, and 
storage containers.
* * * * *
    Storage and handling truck means a CCC-approved commodity storage 
truck or van designed to carry eligible commodities and may be equipped 
with a variety of mechanical refrigeration systems and will be used to 
store, handle, and move eligible commodities from the producer's farm 
location to market or storage.
* * * * *
    Term of loan means the duration, in years, of a loan payable in a 
fixed number of equal installments as specified in section 1436.7. The 
terms for an FSFL are 3, 5, 7, 10, or 12 years.
    USDA means the United States Department of Agriculture.

0
5. Amend Sec.  1436.4 by revising paragraph (a) and adding paragraph 
(e) to read as follows:


Sec.  1436.4  Application for loans.

    (a) An application for an FSFL must be submitted to the 
administrative FSA county office that maintains the records of the farm 
or farms to which the applicant applies. If some or all of the land 
does not have farm records established, the application may be 
submitted to the FSA county office that services the county where the 
FSFL financed equipment or facility will be primarily located.
* * * * *
    (e) The application must include documentation of the need for 
storage, or for FSFL microloans self-certification, as specified in 
Sec.  1436.9.

0
6. Amend Sec.  1436.6 as follows:
0
a. Revise paragraph (a);
0
b. In paragraph (b) introductory text, remove the words ``and fruits 
and vegetables'';
0
c. Revise paragraph (b)(1);
0
d. In paragraph (c) introductory text, remove the words ``and fruits 
and vegetables'';
0
e. Remove paragraphs (c)(1), (3), and (6);
0
f. Redesignate paragraphs (c)(2), (4), and (5) as paragraphs (c)(1) 
through (3), respectively;
0
g. In newly redesignated paragraph (c)(2), add the word ``or'' at the 
end;
0
h. In newly redesignated paragraph (c)(3), remove ``; and'' and add a 
period in its place;
0
i. Revise paragraphs (d) and (e);
0
j. In paragraph (f)(1)(i), remove the words ``New conventional-type'' 
and add the words ``Conventional-type'' in their place;
0
k. In paragraph (f)(1)(ii), remove the words ``New flat-type'' and add 
the words ``Flat-type'' in their place;
0
l. In paragraph (f)(1)(iii), remove the words ``New storage'' and add 
the word ``Storage'' in their place;
0
m. Remove paragraphs (f)(3)(i) and (iii);
0
n. Redesignate paragraphs (f)(3)(ii), (iv), and (v) as paragraphs 
(f)(3)(i), (ii), and (iii), respectively;
0
o. In newly redesignated paragraph (f)(3)(ii), add the word ``or'' at 
the end;
0
p. In paragraph (g) introductory text, remove the words ``fruit and 
vegetable'';
0
q. In paragraph (g)(1), in the second sentence, remove the words 
``permanently installed'';
0
r. Revise paragraphs (g)(2)(i) through (iv) and (g)(3) and (4); and
0
s. Add paragraphs (h) and (i).
    The revisions and additions read as follows:


Sec.  1436.6  Eligible storage and handling equipment.

    (a) All eligible storage and handling facilities must be one of the 
following types:

[[Page 25594]]

    (1) Conventional-type cribs or bins designed and engineered for 
whole grain storage and having a useful life of at least the entire 
term of the loan;
    (2) Oxygen-limiting storage structures or remanufactured oxygen-
limiting storage structures built to the original manufacturer's design 
specifications using original manufacturer's rebuild kits or kits from 
a supplier approved by the Deputy Administrator, Farm Programs, and 
other upright silo-type structures designed for whole grain storage or 
other than whole grain storage and with a useful life of at least the 
entire term of the loan;
    (3) Flat-type storage structures including a permanent concrete 
floor, designed for and primarily used to store facility loan 
commodities for the term of the loan and having a useful life of at 
least the entire term of the loan;
    (4) Structures that are bunker-type, horizontal, or open silo 
structures designed for whole grain storage or other than whole grain 
storage and having a useful life of at least the entire term of the 
loan;
    (5) Structures suitable for storing hay that are built according to 
acceptable design guidelines from the National Institute of Food and 
Agriculture (NIFA) or land-grant universities and with a useful life of 
at least the entire term of the loan;
    (6) Structures suitable for storing renewable biomass that are 
built according to acceptable industry guidelines and with a useful 
life of at least the entire term of the loan; or
    (7) Bulk storage tanks, as approved by the Deputy Administrator, 
suitable for storing any eligible loan commodity, as determined 
appropriate by county committees and having a useful life of at least 
the entire term of the loan.
    (b) * * *
    (1) Drying and handling equipment, including perforated floors 
determined by the FSA approving committee to be needed and essential to 
the proper functioning of the storage system;
* * * * *
    (d) Loans for all eligible facility loan commodities, except sugar, 
may be approved for financing additions to or modifications of an 
existing storage facility with an expected useful life of at least the 
entire term of the loan if the county committee determines there is a 
need for the capacity of the structure, but loans will not be approved 
solely for the replacement of worn out items such as motors, fans, or 
wiring.
    (e) Loans for all eligible facility loan commodities, except sugar, 
may be approved for facilities provided the completed facility has a 
useful life of at least the entire term of the loan. The pre-owned 
facility must be purchased and moved to a new location. Eligible items 
for such a loan include costs such as bin rings or roof panels needed 
to make a purchased pre-owned structure useable, aeration systems, site 
preparation, construction off-farm paid labor cost, foundation material 
and off-farm paid labor. Ineligible items for such a loan include the 
cost of purchasing and moving the used structure.
* * * * *
    (g) * * *
    (2) * * *
    (i) A cold storage facility of wood pole and post construction, 
steel, or concrete, that is suitable for storing cold storage 
commodities produced by the borrower and having a useful life of at 
least the entire term of the loan;
    (ii) Walk-in prefabricated cold storage coolers that are suitable 
for storing the producer's cold storage commodities and having a useful 
life of at least the entire term of the loan;
    (iii) Equipment necessary for a cold storage facility such as 
refrigeration units or system and circulation fans;
    (iv) Equipment to maintain or monitor the quality of commodities 
stored in a cold storage facility;
* * * * *
    (3) FSFLs may be approved for financing additions or modifications 
to an existing storage facility having an expected useful life of at 
least the entire term of the loan if CCC determines there is a need for 
the capacity of the cold storage facility.
    (4) FSFLs will not be made for structures or equipment that are not 
suitable for facility loan commodities that require cold storage.
* * * * *
    (h) Storage and handling trucks for facility loan commodities are 
authorized according to guidelines established by the Deputy 
Administrator. Storage and handling trucks may include, but are not 
limited to, cold storage reefer trucks, grain haulers, and may also 
include storage trucks with a chassis unit. The Deputy Administrator, 
Farm Programs, or a State Committee may rescind this provision on a 
Statewide basis if it is determined that allowing loans for storage and 
handling trucks has increased loan defaults and is not in the best 
interest of CCC.
    (i) The loan collateral must be used for the purpose for which it 
was delivered, erected, constructed, assembled, or installed for the 
entire term of the loan.

0
7. Amend Sec.  1436.7 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  1436.7  Loan term.

    (a) For eligible facility loan commodities other than sugar, the 
term of the loan will not exceed 12 years, based on the total loan 
principal and loan request type, from the date a promissory note and 
security agreement is completed on both the partial and final loan 
disbursement. As determined by the Deputy Administrator, used equipment 
FSFLs may have a loan term of 3 or 5 years. The applicant will choose a 
loan term, based on the loan request type at the time of submitting the 
loan application and total cost estimates. Available loan terms are 3, 
5, 7, 10, or 12 years; available terms for a specific loan will be 
based on the loan principal and facility or equipment type.
    (b) The Deputy Administrator has the discretion and authority to 
extend loan terms for 1 or 2 years, on a case by case basis. Loan term 
extensions will only be granted after a written request is received 
from the producer before loan term expires and when determined 
appropriate by Deputy Administrator to assist borrowers with additional 
loan servicing options. Producers and participants who have already 
agreed to the loan term (maturity date) have no right to an extension 
of the loan term. The borrower agrees to the loan term through the 
Promissory Note at the time of distribution. The Deputy Administrator's 
refusal to exercise discretion to consider an extension will not be 
considered an adverse decision or a failure to act under any law or 
regulation and, therefore, is not appealable. Participants are not 
entitled to extensions or the consideration of a request for extension.
* * * * *

0
8. Amend Sec.  1436.8 as follows:
0
a. In paragraph (a) introductory text, remove the words ``farm 
storage'';
0
b. In paragraph (a)(2), in the last sentence, remove the word 
``storage'';
0
c. Add paragraph (a)(3);
0
d. In paragraph (b) introductory text, in the first sentence, remove 
the word ``storage'';
0
e. Revise paragraph (b)(1); and
0
f. In paragraph (c) introductory text, in the first sentence, remove 
the words ``farm storage''.
    The addition and revision read as follows:


Sec.  1436.8  Security for loan.

    (a) * * *
    (3) CCC will hold title in accordance to applicable State laws and 
motor vehicle administration title provisions, to all eligible 
equipment, structures, components and storage and handling

[[Page 25595]]

trucks acquired using loan proceeds under this part.
    (b) * * *
    (1) Agree to increase the down payment on the facility loan from 15 
percent to 20 percent, except for an FSFL microloan; or
* * * * *

0
9. Amend Sec.  1436.9 as follows:
0
a. Revise paragraph (b) introductory text;
0
b. In paragraph (b)(1), remove ``new'' and add ``recently required'' in 
its place;
0
c. Revise paragraph (c);
0
d. In paragraph (d)(1) introductory text, remove ``sugar and fruits and 
vegetables'' and add ``sugar, cold storage commodities, maple sap, and 
milk'' in their place;
0
e. In paragraph (d)(3) introductory text, remove ``for fruits and 
vegetables'';
0
f. Revise paragraphs (d)(3)(i) and (d)(4);
0
g. Add paragraph (d)(5); and
0
h. Revise paragraph (h).
    The revisions and addition read as follows:


Sec.  1436.9  Loan amount and loan application approvals.

* * * * *
    (b) The net cost for all facilities:
* * * * *
    (c) The maximum total principal amount of the FSFL, except for FSFL 
microloans, is 85 percent of the net cost of the applicant's needed 
facility, not to exceed $500,000 per loan. For FSFL microloans the 
maximum total principal amount of the farm storage facility loan is 95 
percent of the net costs of the applicant's needed storage, handling 
facility, including drying and handling equipment, or storage and 
handling trucks, not to exceed an aggregate outstanding balance of 
$50,000.
* * * * *
    (d) * * *
    (3) * * *
    (i) Multiply the average of the applicant's share of production or 
of acres farmed for the most recent 3 years for each eligible commodity 
requiring cold storage at the proposed facility;
* * * * *
    (4) For all eligible facility loan commodities, except sugar, if 
acreage data is not practicable or available for State and County 
Committees or authorized FSA staff to determine the storage need, 
specifically, but not limited to, maple sap, eggs, butter, cheese, 
yogurt, milk, meat and poultry, a reasonable production yield, such as 
ERS or NASS data may be used to determine the storage capacity need. A 
reasonable production yield may also be used for newly acquired farms, 
specialty farming, changes in cropping operations, prevented planted 
acres, or for facility loan commodities being grown for the first time.
    (5) For FSFL microloans if the FSA State and county committees 
determine that self-certification is practicable based on the 
applicant's farm operation, then CCC may allow applicants to self-
certify to the storage capacity need. The Deputy Administrator, Farm 
Programs, or an FSA State committee may rescind the FSFL microloan 
provision on a Statewide basis if it is determined that allowing FSFL 
microloans has increased the likelihood of loan defaults and is not in 
the best interest of CCC.
* * * * *
    (h) The Farm storage facility loan approval period, which is the 
timeframe, from approval until expiration, during which the facility 
must be completely and fully delivered, erected, constructed, 
assembled, or installed and a CCC representative has inspected and 
approved such facility for all eligible facility loan commodities 
except sugar, will expire 6 months after the date of approval unless 
extended in writing for an additional 6 months by the FSA State 
Committee. A second 6 month extension, for a total of 18 months from 
the original approval date, may be approved by the FSA State Committee. 
This authority will not be re-delegated. Sugar storage facility loan 
approvals will expire 8 months after the date of approval unless 
extended in writing for an additional 4 months by the FSA State 
Committee.
* * * * *

0
10. Amend Sec.  1436.10 as follows:
0
a. In paragraph (a), remove the word ``storage''; and
0
b. Add paragraph (d).
    The addition reads as follows:


Sec.  1436.10  Down payment.

* * * * *
    (d) The minimum down payment for an FSFL will be 5 percent for an 
FSFL microloan and 15 percent for all other FSFLs, with the down 
payment to be calculated as a percentage of net cost as specified in 
Sec.  1436.9. As specified in Sec.  1436.8, a larger down payment may 
be required to meet security requirements.


Sec.  1436.11  [Amended]

0
11. Amend Sec.  1436.11(a)(3) by removing the words ``farm storage''.

0
12. Amend Sec.  1436.15 as follows:
0
a. Revise paragraph (a);
0
b. In paragraph (b), remove the word ``loan'' both times it appears;
0
c. In paragraph (d), remove the words ``Structures must'' and add the 
words ``Facilities must'' in their place, and remove the words 
``structure'' and ``structural'';
0
c. In paragraph (e), remove the words ``of ingress and egress'' add the 
words ``to enter, leave, and return to the property'' in their place.
    The revision reads as follows:


Sec.  1436.15  Maintenance, liability, insurance, and inspections.

    (a) The borrower must maintain the loan collateral in a condition 
suitable for the storage or handling of one or more of the facility 
loan commodities.


Sec.  1436.16  [Amended]

0
13. Amend Sec.  1436.16(c) by removing the words ``or other property''.

Val Dolcini,
Administrator, Farm Service Agency, and Executive Vice President, 
Commodity Credit Corporation.
[FR Doc. 2016-09949 Filed 4-28-16; 8:45 am]
 BILLING CODE 3410-05-P