[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2004 Edition]
[From the U.S. Government Printing Office]



[[Page 1]]



                    7


          Parts 700 to 899

                         Revised as of January 1, 2004

Agriculture





          Containing a codification of documents of general 
          applicability and future effect
          As of January 1, 2004
          With Ancillaries
          Published by:
          Office of the Federal Register
          National Archives and Records
          Administration

A Special Edition of the Federal Register

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                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2004



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[[Page iii]]




                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 7:
    Subtitle B--Regulations of the Department of Agriculture 
      (Continued)
          Chapter VII--Farm Service Agency, Department of 
          Agriculture                                                5
          Chapter VIII--Grain Inspection, Packers and 
          Stockyard Administration (Federal Grain Inspection 
          Service), Department of Agriculture                      349
  Finding Aids:
      Material Approved for Incorporation by Reference........     505
      Table of CFR Titles and Chapters........................     507
      Alphabetical List of Agencies Appearing in the CFR......     525
      List of CFR Sections Affected...........................     535

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                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 7 CFR 700.1 refers 
                       to title 7, part 700, 
                       section 1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
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name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

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HOW TO USE THE CODE OF FEDERAL REGULATIONS

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OMB CONTROL NUMBERS

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collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
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OBSOLETE PROVISIONS

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INCORPORATION BY REFERENCE

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This material, like any other properly issued regulation, has the force 
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    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    Properly approved incorporations by reference in this volume are 
listed in the Finding Aids at the end of this volume.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed in 
the Finding Aids of this volume as an approved incorporation by 
reference, please contact the agency that issued the regulation 
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the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

[[Page vii]]


REPUBLICATION OF MATERIAL

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                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

January 1, 2004.

[[Page ix]]



                               THIS TITLE

    Title 7--Agriculture is composed of fifteen volumes. The parts in 
these volumes are arranged in the following order: parts 1-26, 27-52, 
53-209, 210-299, 300-399, 400-699, 700-899, 900-999, 1000-1199, 1200-
1599, 1600-1899, 1900-1939, 1940-1949, 1950-1999, and part 2000 to end. 
The contents of these volumes represent all current regulations codified 
under this title of the CFR as of January 1, 2004.

    The Food and Nutrition Service current regulations in the volume 
containing parts 210-299, include the Child Nutrition Programs and the 
Food Stamp Program. The regulations of the Federal Crop Insurance 
Corporation are found in the volume containing parts 400-699.

    All marketing agreements and orders for fruits, vegetables and nuts 
appear in the one volume containing parts 900-999. All marketing 
agreements and orders for milk appear in the volume containing parts 
1000-1199. Part 900--General Regulations is carried as a note in the 
volume containing parts 1000-1199, as a convenience to the user.

[[Page x]]




[[Page 1]]



                          TITLE 7--AGRICULTURE




                  (This book contains parts 700 to 899)

  --------------------------------------------------------------------

  SUBTITLE B--Regulations of the Department of Agriculture (Continued)

                                                                    Part

chapter vii--Farm Service Agency, Department of Agriculture.         700

chapter viii--Grain Inspection, Packers and Stockyard 
  Administration (Federal Grain Inspection Service), 
  Department of Agriculture.................................         800

[[Page 3]]

  Subtitle B--Regulations of the Department of Agriculture (Continued)

[[Page 5]]



                            CHAPTER VII--FARM






                SERVICE AGENCY, DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------


  Editorial Note: 1. Nomenclature changes to chapter VII appear at 59 FR 
60299, Nov. 23, 1994, as corrected at 59 FR 66438, Dec. 27, 1994.

  2. Nomenclature changes to chapter VII appear at 60 FR 64297, Dec. 15, 
1995.

             SUBCHAPTER A--AGRICULTURAL CONSERVATION PROGRAM
Part                                                                Page
700             Experimental Rural Clean Water Program......           7
701             Conservation and environmental programs.....          21
702             Colorado River Basin Salinity (CRSC) Control 
                    Program.................................          40
707             Payments due persons who have died, 
                    disappeared, or have been declared 
                    incompetent.............................          49
708             Record retention requirements--all programs.          51
SUBCHAPTER B--FARM MARKETING QUOTAS, ACREAGE ALLOTMENTS, AND PRODUCTION 
                               ADJUSTMENT
711             Marketing quota review regulations..........          53
714             Refunds of penalties erroneously, illegally, 
                    or wrongfully collected.................          62
717             Holding of referenda........................          65
718             Provisions applicable to multiple programs..          78
723             Tobacco.....................................          98
729             Peanuts marketing quotas....................         185
                SUBCHAPTER C--REGULATIONS FOR WAREHOUSES
735             Regulations for the United States Warehouse 
                    Act.....................................         186
743             [Reserved]

                     SUBCHAPTER D--SPECIAL PROGRAMS
750             Soil Bank [Note]............................         200
752             Water Bank Program..........................         200
755             Regional programs...........................         207
760             Indemnity payment programs..................         215
761             General and administrative..................         223

[[Page 6]]

762             Guaranteed farm loans.......................         224
764             Emergency farm loans........................         266
770             Indian tribal land aquisition loans.........         276
771             Boll Weevil Era Dication Loan Program.......         280
772             Servicing Minor Program loans...............         283
773             Special Apple Loan Program..................         288
774             Emergency Loan for Seed Producers Program...         293
780             Appeal regulations..........................         295
781             Disclosure of foreign investment in 
                    agricultural land.......................         298
782             End-Use Certificate Program.................         304
784             Lamb Meat Adjustment Assistance Program.....         310
785             Certified state mediation program...........         317
        SUBCHAPTER E--PROVISIONS COMMON TO MORE THAN ONE PROGRAM
792             Debt settlement policies and procedures.....         324
795             Payment limitation..........................         333
                      SUBCHAPTER F--PUBLIC RECORDS
798             Availability of information to the public...         340
                 SUBCHAPTER G--ENVIRONMENTAL PROTECTION
799             Environmental quality and related 
                    environmental concerns--compliance with 
                    the National Environmental Policy Act...         342

[[Page 7]]



             SUBCHAPTER A_AGRICULTURAL CONSERVATION PROGRAM





PART 700_EXPERIMENTAL RURAL CLEAN WATER PROGRAM--Table of Contents




                            Subpart A_General

Sec.
700.1 Purpose and scope.
700.2 Objective.
700.3 Administration.
700.4 Definitions.
700.5 Responsibilities.
700.6 Officials not precluded from exercising authority.

               Subpart B_Project Authorization and Funding

700.10 Applicability.
700.11 Availability of funds.
700.12 Eligible project areas.
700.13 Project applications.
700.14 Review and approval of project applications.
700.15 Transfer of funds.
700.16 Termination of project funding.

                 Subpart C_Participant's RCWP Contracts

700.20 Eligible land.
700.21 Eligible person (participant).
700.22 Application for assistance.
700.23 Water quality plan.
700.24 Cost-sharing.
700.25 RCWP contract.
700.26 Contract modifications.
700.27 Cost-share payment.
700.28 Appeals.
700.29 Contract violations.

                   Subpart D_Monitoring and Evaluation

700.40 General program monitoring and evaluation.
700.41 Comprehensive USDA/EPA joint project water, quality monitoring, 
          evaluation and analysis.
700.42 Program evaluation.
700.43 Public benefits when installing BMP's.

    Authority: Pub. L. 96-108, 93 Stat. 821, 835.

    Source: 45 FR 14009, Mar. 4, 1980, unless otherwise noted.



                            Subpart A_General



Sec. 700.1  Purpose and scope.

    (a) The purpose of this part is for the U.S. Department of 
Agriculture (USDA), with certain concurrences by the U.S. Environmental 
Protection Agency (EPA), to set forth regulations to carry out an 
experimental Rural Clean Water Program (RCWP) as authorized by the 
Agriculture, Rural Development and Related Agencies Appropriations Act, 
fiscal year 1980, Pub. L. 96-108 (hereinafter referred to as the ``1980 
Appropriations Act'') and subsequent appropriations.
    (b) The RCWP will provide financial and technical assistance to 
private land owners and operators (participants) having control of 
agricultural land. The assistance is provided through long-term 
contracts of 3 to 10 years to install best management practices (BMPs) 
in approved project areas which have critical water quality problems 
resulting from agricultural activities. The project area must reflect 
the water quality priority concerns developed through the established 
water quality management program process. Participation RCWP is 
voluntary.
    (c) This is a new USDA program using the experiences under various 
on-going USDA programs and the established water quality management 
program of EPA.

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981]



Sec. 700.2  Objective.

    The objectives of the RCWP are to:
    (a) Improve impaired water use and quality in the approved project 
area in the most cost-effective manner possible in keeping with the 
provision of adequate supplies of food, fiber, and a quality 
environment.
    (b) Assist agricultural land owners and operators to reduce 
agricultural nonpoint source water pollutants and to improve water 
quality in rural areas to meet water quality standards or water quality 
goals.
    (c) Develop and test programs, policies and procedures for the 
control of agricultural nonpoint source pollution.

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981]

[[Page 8]]



Sec. 700.3  Administration.

    At the national level, the Secretary of Agriculture will administer 
the RCWP in consultation with the Administrator, EPA, including EPA's 
concurrence in the selection of the BMPs, as provided in the 1980 
Appropriations Act and subsequent appropriations. Authority to approve 
projects is reserved to the Secretary. The Secretary of Agriculture 
hereby delegates responsibility for administration of the program to the 
Administrator, Farm Service Agency (FSA) and the coordination of 
technical assistance to the Chief, Soil Conservation Service (SCS). FSA 
will be assisted by other USDA agencies in accordance with existing 
authorities.
    (a) A National Rural Clean Water Coordinating Committee (NCC), 
chaired by the Administrator, FSA, will assist in carrying out the RCWP.
    (b) A State Rural Clean Water Coordinating Committee (SCC) will 
assist the State ASC Committee in administering the program. The State 
ASC Committee Chairperson will chair the SCC. Where two or more States 
are involved in a project area the Deputy Administrator, State and 
County Operations (DASCO), FSA, shall develop a coordinating process.
    (c) A Local Rural Clean Water Coordinating Committee (LCC) will be 
established to assure coordination at the project level. The LCC 
committee will be chaired by the County ASC Committee Chairperson and 
will assist the County ASC Committee as provided in these regulations 
and as otherwise developed by the SCC and the LCC. Where two or more 
counties are involved in a project area, the SCC shall develop a 
coordination process.

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981 59 
FR 60299, Nov. 23, 1994]



Sec. 700.4  Definitions.

    (a) Adequate Level of Participation. An adequate level of 
participation is reached when participants having control of 75 percent 
(unless a different level is approved by the Administrator, FSA, with 
the concurrence of the NCC), of the identified critical area(s) or 
source(s) of the agricultural nonpoint source pollution problem in the 
project area, are under contract.
    (b) Administrative Services. The administration of the RCWP except 
for the technical phases as assigned in Sec. 700.5 of these 
regulations.
    (c) Agricultural Land. That portion(s) of a farm or ranch used to 
produce: Grains, row crops, seed crops, vegetables, hay, pasture, 
orchards, vineyards, trees, field grown ornamentals, livestock or other 
agricultural commodities.
    (d) Agricultural Nonpoint Source Pollution. Pollution originating 
from diffuse sources, including, but not limited to, land areas and 
return flows from agricultural lands such as:
    (1) Animal waste areas and land used for livestock and/or crop 
production, or
    (2) Lands with silviculturally related pollution.
    (3) Concentrated animal feeding operations defined as point sources 
in 40 CFR 125.1 and 125.51, are not eligible for assistance under RCWP.
    (e) Applicant. A person in an approved project area who applies for 
RCWP assistance.
    (f) Average Cost. The calculated cost, determined by recent actual 
local costs and current cost estimates, considered necessary for 
carrying out BMPs or an identifiable unit thereof.
    (g) Best Management Practice (BMP). A single practice or a system of 
practices to improve water quality included in the approved RCWP 
application that reduces or prevents agricultural nonpoint source 
pollution.
    (h) BMP Costs. The amount of money actually paid or obligated to be 
paid by the participant for equipment use, materials and services for 
carrying out BMPs or an identifiable unit of a BMP. Loss of income from 
crops during the first twelve months following the conversion of 
productive cropland to permanent vegetative cover or trees may be 
considered a part of the BMP cost for a project where it is determined 
that harvesting or grazing restrictions are necessary in order to 
establish properly the practice and the reimbursement for loss of income 
is necessary to provide incentives to achieve an adequate level of 
participation as defined in 7 CFR 700.4(a). If the participant uses 
personal resources, the cost

[[Page 9]]

includes the computed value of personal labor, equipment use, and 
materials.
    (i) BMP Life Span. Each BMP shall have a life span of not less than 
5 years unless otherwise approved by the Administrator, FSA.
    (j) Conservation District (CD). A subdivision of a State or 
territory organized pursuant to the State Soil Conservation District 
Law, as amended. In some States these are called soil conservation 
districts, soil and water conservation districts, resource conservation 
districts, or natural resource districts.
    (k) Contract. The document that includes the water-quality plan and 
is executed by the participant and approved by the County ASC Committee. 
Such document evidences the agreement between parties for carrying out 
BMPs on the participant's land.
    (l) Contract Period. That period of time, 3 to 10 years, established 
as necessary to implement the BMPs needed to solve the water quality 
problems in the contract.
    (m) Cost-Share Level. That percentage of the total cost of 
installing a BMP which is to be borne by the government under the RCWP.
    (n) Cost Share Rate. The amount of money per unit (cubic yard, acre, 
etc.) to be paid for carrying out BMPs under the RCWP.
    (o) County ASC Committee. The County ASC Committee elected by the 
farmers/ranchers in the county as provided for under section 8(b) of the 
Soil Conservation and Domestic Allotment Act (16 U.S.C. 590h(b)).
    (p) Critical Areas or Sources. Those designated areas or sources of 
agricultural nonpoint source pollutants identified in the project area 
as having the most significant impact on the impaired use of the 
receiving waters.
    (q) Direct Costs. The costs that can be specifically identified with 
the program.
    (r) Farmer/Rancher. An owner and/or operator who has a vested 
interest in the operation of the farm or ranch.
    (s) Federal Funds Authorized. The total amount of funds authorized 
to approved projects.
    (t) Fiscal Year. The fiscal year beginning October 1 and ending 
September 30.
    (u) Identifiable Unit. A part of a BMP that can be clearly 
identified as a separate component in carrying out BMPs in the water 
quality plan.
    (v) Implementation. The act of carrying out or executing a water 
quality plan, including both installation and maintenance of BMPs.
    (w) Maximum Payment Limitation. The total amount of RCWP payments 
which a participant may receive for the full contract period. The total 
amount of such payments shall not exceed $50,000.
    (x) Offsite Benefits. Favorable effects of BMPs that occur away from 
the land of the participant receiving RCWP assistance and which accrue 
to the public.
    (y) Participant. A land owner and/or operator who is an agricultural 
producer and applies for and receives assistance under RCWP.
    (z) Participant's Water Quality Plan. The plan that identifies 
critical agricultural nonpoint sources of pollution, identifies water 
quality problems and schedules the application of BMPs which contribute 
to meeting the water quality objectives of the project.
    (aa) Plan of Work. A written strategy for implementing the approved 
project, outlining the actions needed and to be taken by various USDA, 
State and local agencies and interested groups.
    (bb) Pooling Agreement. An agreement between two or more 
participants or ranchers to pool their resources to treat a common 
critical area or source.
    (cc) Privately-Owned Rural Land. Lands not owned by Federal, State, 
or local governments that include cropland, pastureland, forest land, 
rangeland, and other associated lands.
    (dd) Project Area. The geographic determination included in the 
project application as agreed upon by the SCC and LCC, and approved by 
the Secretary, utilizing the water quality planning process which 
identifies agricultural nonpoint source water quality problems.
    (ee) Project Life Span. The maximum total life span of a project 
shall be not greater than fifteen (15) years from the date RCWP funds 
are first made available for the project.

[[Page 10]]

    (ff) RCWP Project. The total system of BMPs, administrative support, 
institutional arrangements, cost-sharing, technical and community 
support that are authorized in a RCWP project application.
    (gg) Secretary. The Secretary of the U.S. Department of Agriculture.
    (hh) Silvicultural. The science and art of cultivating (growing and 
tending) forest crops based on the knowledge of forestry. Silviculture-
related pollution is included as agriculture nonpoint source pollution 
in the RCWP.
    (ii) Standards and Specifications. Requirements that establish the 
minimum acceptable quality level for planning, designing, installing, 
and maintaining BMPs.
    (jj) State ASC Committee (STC). The State ASC Committee appointed by 
the Secretary in accordance with Section 8 b of the Soil Conservation 
and Domestic Allotment Act, as amended.
    (kk) Technical Assistance. The preparation of the participant's 
water quality plan, the design, layout and implementation of BMPs to 
accomplish the purposes of the water quality plan, and water quality 
monitoring and evaluation.
    (ll) Water Quality Management Program. A Federal-state-local program 
for addressing and solving point and non-point source pollution problems 
consistent with national clean water goals. The basic authority for this 
program is in section 208 of the Federal Water Pollution Control Act, as 
amended, (Pub. L. 92-500).

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981]



Sec. 700.5  Responsibilities.

    (a) The United States Department of Agriculture (USDA) shall:
    (1) Administer the RCWP by entering into contracts with land owners 
and operators to install and maintain BMPs to control agricultural 
nonpoint source pollution for improved water quality and:
    (i) Consult with EPA in the selection of projects;
    (ii) Obtain concurrence from EPA in approval of BMPs; and
    (iii) Insure an adequate joint USDA/EPA monitoring and evaluation 
plan is carried out on selected projects.
    (2) Provide technical assistance and share the cost of carrying out 
BMPs as specified in the contracts.
    (3) Evaluate the overall effectiveness of the program in improving 
water quality.
    (b) The Environmental Protection Agency (EPA) will:
    (1) Participate on the NCC, SCC and LCC.
    (2) Furnish information from the water quality management planning 
process which can assist in identifying areas with the most critical 
water quality problems for project applications.
    (3) Participate in the approval of project applications for funding.
    (4) Concur with the Secretary on BMPs recommended by the County and 
State ASC Committees and approved by the Secretary for funding, or 
recommended by the Secretary, with concurrence of the Administrator, 
EPA, and approved by the State and County ASC Committees.
    (5) Assist USDA in evaluating the effectiveness of the program in 
improving water quality, including concurrence on projects selected for 
comprehensive monitoring and evaluation and development of the criteria 
for the comprehensive, joint USDA/EPA water quality monitoring, 
evaluation, and analysis program.
    (c) The Farm Service Agency shall:
    (1) Serve as chairperson of the NCC, SCC and LCC and be responsible 
for developing and administering the RCWP.
    (2) Provide to the Secretary those project applications recommended 
for approval, including the recommendations of the NCC.
    (3) Through County FSA Offices, provide the administrative support 
in all approved RCWP projects, such as accepting applications, preparing 
and approving contracts, carrying out funds control, issuing cost-share 
payments, otherwise administering contracts and payments, provide 
compliance oversight, maintain records and develop reports.
    (4) Enter into agreements with Federal, State and local agencies and 
others as needed for support to be provided in an approved RCWP project.

[[Page 11]]

    (5) Through County and Community ASC Committees work with landowners 
and operators in the project area to encourage participation.
    (6) Develop cost-share rates for installing needed BMPs.
    (7) Assure that RCWP is in addition to and is coordinated with other 
related programs.
    (8) Provide guidance to State and County ASC Committees and 
coordinate the Agricultural Conservation Program (ACP), the Forestry 
Incentives Program (FIP), and related conservation programs, with RCWP.
    (9) Allocate project funds to County ASC Committees in the approved 
proj ect areas.
    (10) Designate the State ASC Chairperson where a project area 
involves a part(s) of two or more States to chair the SCC, for that 
project.
    (d) The Soil Conservation Service (SCS) shall:
    (1) Participate on the NCC, SCC and LCC.
    (2) Coordinate technical assistance and recommend appropriate agency 
or group to provide technical assistance on a project by project basis.
    (3) Provide technical assistance for the appropriate BMPs.
    (4) Assist the LCC in developing criteria for use by the County ASC 
Committees and the Conservation Districts in determining priorities of 
assistance among individual applicants for developing the water quality 
plan.
    (5) Provide technical assistance in developing and certifying the 
technical adequacy of the participant's water quality plan.
    (e) The Forest Service (FS) shall:
    (1) Participate on the NCC and as appropriate, SCC and LCC.
    (2) Have technical responsibility for forestry.
    (3) Provide technical assistance for appropriate BMPs, by providing 
technical assistance through the State Forestry Agency (State Forester 
as appropriate) for planning, applying and maintaining forestry BMPs.
    (4) Participate in the monitoring and evaluation as appropriate.
    (5) As appropriate, assist in developing the water quality plan to 
assure that the most critical water quality problems are addressed.
    (f) The Science and Education Administration (SEA), through the 
State and County Extension Services, Appropriate, shall:
    (1) Participate on the NCC, SCC and LCC.
    (2) Develop, implement, and coordinate informational and educational 
programs for agricultural nonpoint source water pollution control.
    (3) Encourage the State and County Extension Services to develop and 
carry out a comprehensive educational and informational program.
    (4) Provide technical assistance for appropriate BMPs including, but 
not limited to, fertilizer management, pest management, conservation 
tillage, and animal waste as appropriate.
    (g) The Economics and Statistics Service (ESS) shall:
    (1) Participate on the NCC and as appropriate, SCC and LCC.
    (2) Assist in the economic evaluation of RCWP projects and BMPs.
    (3) Make data available from existing and planned ESS surveys 
relating to water quality and related matters.
    (4) Conduct socioeconomic research, within ESS authorities and 
funds, on relevant policy and program issues pertinent to RCWP.
    (5) Assist in the annual program evaluation and be responsible for 
the economic component of the comprehensive evaluation of selected 
projects.
    (h) The Farmers Home Administration (FmHA) shall:
    (1) Participate on the NCC, SCC and LCC.
    (2) Provide assistance and coordinate their farm loan and grant 
programs with RCWP.
    (3) Assist in the annual program evaluation.
    (i) The National Rural Clean Water Coordinating Committee (NCC). The 
NCC is chaired by the Administrator, FSA. Other members of the National 
Committee are Director, Office of Environmental Quality, the 
Administrators of, FmHA, and ESS: the Chief of FS, SCS; the Director of 
SEA; and the Assistant Administrator for Water and Waste Management, 
EPA. Nonfederal agencies such as Conservation Districts, State soil and 
water conservation agencies, State water quality management agencies, 
and other organizations

[[Page 12]]

may attend as observers. The duties of the NCC are to:
    (1) Assist the Administrator, FSA, in developing the program 
regulations and procedures.
    (2) Recommend to the Administrator, FSA, the project applications to 
be approved.
    (3) Advise the Secretary on the maximum Federal contribution to the 
total cost of the project and establish the maximum cost-share levels of 
BMPs.
    (4) Assist in coordinating individual agency programs with the RCWP.
    (5) Make recommendations as appropriate on the technical aspects of 
the program.
    (6) Recommend project areas and criteria for comprehensive joint 
USDA/EPA water quality monitoring, evaluation, and analysis.
    (7) Annually review the plans of work and recommend changes in the 
projects.
    (8) Annually review the progress in each project and periodically 
advise the Secretary, the Under Secretary for International Affairs and 
Commodity Programs, and Assistant Secretary for Natural Resources and 
the Environment on program and policy issues.
    (j) The State Rural Clean Water Coordinating Committee (SCC). The 
SCC is chaired by the STC chairperson. Members include a representative 
of the agency members on the NCC or their designee. Other members are 
the State water quality agency having responsibility for the water 
quality management program, the State soil and water conservation 
agency, the State Director, Cooperative Extension Service, and others, 
including those recommended by the Governor, and approved by the 
Chairperson of SCC. Other State and local agencies, and organizations, 
or individuals may attend as observers. The duties of the committee are 
to:
    (1) Submit its recommendations for approval of project 
application(s) to the State ASC Committee for forwarding to the NCC, 
through the Administrator, FSA.
    (2) Insure that each project application referred to the state ASC 
committee includes a water quality monitoring plan which specifies the 
organization(s) responsible for general monitoring, including cost and 
budget breakdown by organization(s).
    (3) Assure coordination of activities at the project level by 
assisting in determining the composition and responsibilities of the 
LCC.
    (4) Assure adequate public participation, including public 
meeting(s), and appropriate environmental evaluation in the preparation 
of RCWP applications.
    (5) Provide oversight for the RCWP in the State and to assist USDA 
and EPA in their comprehensive, joint water quality monitoring and 
evaluation of selected project areas, including coordination with the 
LCC.
    (6) Develop procedures for coordination between the RCWP and other 
water quality programs.
    (7) Assist the State ASC Committee in developing the membership of 
the LCC. For multi county projects, there will be one LCC.
    (8) Annually review and approve the plan(s) of work and changes 
proposed by the LCC and forward a copy to the NCC through the 
administrator, FSA.
    (k) The Local Rural Clean Water Coordinating Committee (LCC). The 
LCC is chaired by the County ASC Committee Chairperson. Other members 
include a representative of the agency members on the NCC, or their 
designee, where applicable, and a representative of the soil and water 
conservation district, the designated water quality management agency, 
State forestry agency, the Director, County Extension Service, and 
others recommended by the LCC and approved by the STC. (Where more than 
one county is in a project area only one LCC will be established in the 
proj ect area.) The duties of the committee are to ensure that a process 
exists and actions are taken to implement any approved project. The 
duties will include, among others which may be outlined by the SCC, the 
following:
    (1) Assure an adequate level of public participation in implementing 
the project.
    (2) Provide project coordination, including development of the plan 
of work for implementing the approved project using various USDA 
agencies, local agencies and interested groups.
    (i) Enlist resources from other agencies and local groups.

[[Page 13]]

    (ii) Conduct informational and educational activities relating to 
the proj ect.
    (iii) Develop criteria with the SCC for use by the County ASC 
Committee and the soil conservation district to establish priorities 
among individual applications for developing water quality plans.
    (iv) Assure the development of an adequate plan for project 
monitoring and evaluation.
    (3) Consult with SCC for coordination with USDA State officials, 
State water quality official, and EPA regional representatives to 
develop criteria for project plan of work and project coordination.
    (4) Review the project Plan of Work annually and recommend changes 
in the approved project to the SCC.
    (l) State ASC Committee shall:
    (1) Provide the chairperson for the SCC and be responsible for 
administration of the RCWP project(s) in the State.
    (2) Submit those project applications recommended by the SCC to the 
Administrator, FSA.
    (3) Provide overall administrative support for the RCWP through the 
County ASC Committee(s).
    (4) Designate a County ASC Committee Chairperson to serve as 
Chairperson of the LCC in multi-county projects.
    (5) Approve the BMPs for inclusion in project applications.
    (6) Be responsible for all other administrative functions as 
provided in these regulations.
    (m) The Governor of each State, at the Governor's option, may:
    (1) Recommend to the SCC Chairperson appropriate additional 
individuals for membership on the SCC.
    (2) Furnish to the SCC a listing of the water quality priority areas 
in the State which are to be used by the SCCs and LCCs in considering 
and developing project applications.
    (n) the State soil and water conservation agency will:
    (1) Participate on the SCC.
    (2) Assist in preparing and submitting RCWP project applications.
    (3) Carry out responsibilities of soil conservation districts, 
including participation on the LCC, where no soil conservation district 
exists.
    (o) The State water quality agency will:
    (1) Participate on the SCC.
    (2) Provide expertise in preparing RCWP project applications.
    (3) Assist in monitoring and evaluating the effectiveness of the 
water quality projects.
    (p) The County ASC Committee shall:
    (1) Be responsible for administration of the RCWP at the local 
level.
    (2) Provide the chairperson of the LCC.
    (3) Provide overall administrative support for the RCWP approved 
proj ect through the FSA County Office, including accepting 
applications, administering the contracts and making payments and 
preparing reports.
    (4) Recommend approval of BMP's.
    (5) Together with the Soil Conservation District, determine the 
priority for technical assistance among individual applicants for water 
quality plans bases on criteria developed by the LCC to assure that the 
most critical water quality problems are addressed.
    (6) Establish the recommended cost share level for BMP's in the RCWP 
project applications in consultation with the LCC.
    (7) Utilize the Community ASC Committee(s) and LCC in encouraging 
farmers in the project area to install needed BMPs on the priority basis 
developed by the LCC.
    (8) Be responsible for developing, and annually reviewing, and 
carrying out the plan of work for the approved project.
    (q) The Soil Conservation District will:
    (1) Participate on the LCC.
    (2) Assist in the preparation and submission of applications for the 
RCWP.
    (3) Assist in the promotion of the approved RCWP project.
    (4) Together with the County ASC Committee, determine the priority 
of technical assistance among individual applicants for water quality 
plans based on criteria developed by the LCC to assure that the most 
critical water quality problems are addressed.

[[Page 14]]

    (5) Approve applicants' water quality plans and revisions.

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981; 59 
FR 60299, Nov. 23, 1994]



Sec. 700.6  Officials not precluded from exercising authority.

    Nothing in these regulations shall preclude the Secretary; 
Administrator, FSA; NCC; or Deputy Administrator, State and County 
Operations, FSA; from administering any or all phases of the RCWP 
programs delegated to the LCC, County ASC Committee, SCC, State ASC 
Committee or any employee(s) where the committee or employee fails to 
perform a function required in these regulations. In exercising this 
authority either the Secretary, Administrator, FSA, or Deputy 
Administrator, FSA, may delegate a person or persons to be in charge 
with full authority to carry out the program or other function(s) 
without regard to the LCC, ASC committee(s), or employee(s) for such 
period of time as is deemed necessary.

[59 FR 60299, Nov. 23, 1994]



               Subpart B_Project Authorization and Funding



Sec. 700.10  Applicability.

    The RCWP is applicable in project areas that meet the criteria for 
eligibility contained in Sec. 700.12 and are authorized for funding by 
the Secretary.



Sec. 700.11  Availability of funds.

    (a) The allocation of funds to the County ASC Committee(s) in a 
project area is to be made on the basis of the total funds needed to 
carry out the approved project.
    (b) The obligation of Federal funds for RCWP contracts with 
participants is to be made on the basis of the total contract costs.



Sec. 700.12  Eligible project areas.

    (a) Only those project areas which reflect the water quality 
priority concerns developed through the established water quality 
management program planning process and have identified agricultural 
nonpoint source water quality problems are eligible for authorization 
under RCWP. Only those critical areas or sources of pollutants 
significantly contributing to the water quality problems are eligible 
for financial and technical assistance.
    (b) An RCWP project area is a hydrologically related land area. 
Exceptions may be made for ease of administration, or to focus on 
concentrated critical areas. To be designated as an RCWP project area 
eligible for authorization, the area's water quality problems must be 
related to agricultural nonpoint source pollutants, including but not 
limited to, sediment, animal waste, irrigation return flows, runoff, or 
leachate that contain high concentrations of nitrogen, phosphorus, 
dissolved solids, toxics (pesticides and heavy metals), or high pathogen 
levels.



Sec. 700.13  Project applications.

    Existing and subsequent project applications submitted for 
consideration must contain adequate information on each item specified 
in Sec. 700.14. Instructions on such information requirements will be 
issued by the Administrator, FSA. Opportunity will be provided prior to 
final approval of a project for the LCC and the SCC, in consultation 
with the Govenor, through the applicable County and State ASC 
Committees, for modification necessary to bring them into conformance 
with the provisions of these regulations.



Sec. 700.14  Review and approval of project applications.

    (a) In reviewing applications and recommending priorities, the NCC 
will consider the following:
    (1) Severity of the water quality problem caused by agricultural and 
silvicultural related pollutants, including:
    (i) State designated uses of the water affected.
    (ii) Kinds, sources, and effects of pollutants.
    (iii) Miles of stream or acres of water bodies affected, extent of 
groundwater contamination.
    (2) Demonstration of public benefits from the project, including:
    (i) Effects on human health.

[[Page 15]]

    (ii) Population benefited by improved water quality.
    (iii) Effects on the natural environment.
    (iv) Additional beneficial uses of the waters that result from 
improvement of the water quality.
    (3) Economic, and technical feasibility to control water quality 
problems within the life of the project, including:
    (i) Size of the area and extent of BMPs needed.
    (ii) Cost per participant and cost per acre or source for solution 
of problem.
    (iii) Cost effectiveness of BMPs.
    (iv) Adequacy of planned actions to meet the project's objectives.
    (4) Suitability of the project for the experimental RCWP in the 
testing of programs, policies and procedures for the control of 
agricultural non-point source pollution, including:
    (i) A project representative of a geographic area with significant 
water quality problems.
    (ii) The potential of the project for monitoring and evaluation, 
including existing base line data.
    (5) State, local and other input in the project area, including:
    (i) Funds for cost-sharing general monitoring and technical 
assistance.
    (ii) Commitment of local leadership to promote the program.
    (iii) Commitment of farmers and ranchers to participate in RCWP.
    (6) The project's contribution to meeting the national water quality 
goals taking into consideration of other major sources of pollutants 
which affect the water quality in or near the project area.
    (b) Based on the project application, the NCC is to recommend an 
upper limit of the Federal contribution to the total cost of the 
project. This includes both BMP cost-share and technical assistance 
costs.
    (c) All project applications will be reviewed by EPA. BMPs approval 
for funding require EPA concurrence, except that the Secretary may 
assume EPA's concurrence, if EPA does not act within 15 days following 
receipt of the request for concurrence.
    (d) The Secretary will approve proj- ects for funding taking into 
consideration the recommendations of the NCC and consultation with EPA. 
The Chairperson, State ASC Committee, through the SCC, will assure that 
involved Federal, State, and local agencies are informed of the project 
approval.



Sec. 700.15  Transfer of funds.

    (a) Upon approval of a project, the Administrator, FSA, will 
transfer funds to the State(s) ASC Committee for funding the project. 
The State committee will transfer funds to the County ASC Committee(s) 
for the county or counties in an approved proj ect.
    (b) FSA will transfer funds to the applicable agency or organization 
providing specific technical assistance and/or expanded information and 
education. The transfer will be made on a project by project basis.

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981]



Sec. 700.16  Termination of project funding.

    (a) Based on evidence of failure to accomplish the approved project 
objectives, including inadequate level of participation, the 
Administrator, FSA, may issue a termination notice after conferring with 
the Administrator, EPA, and the NCC.
    (b) The State ASC Committee shall give 10-day written notice to the 
applicable County ASC Committee of intent to terminate project funding. 
The termination shall establish the effective date of termination and 
the date for return of funds.
    (c) After receipt of a project termination, the County ASC Committee 
shall not make any new commitments or enter into any new RCWP contracts. 
Those contracts in force at the time of project termination will remain 
in force until completed.



                 Subpart C_Participant's RCWP Contracts



Sec. 700.20  Eligible land.

    RCWP is only applicable to privately owned agricultural lands in 
approved project areas. Indian tribal lands and lands owned by 
irrigation districts are eligible lands.

[[Page 16]]



Sec. 700.21  Eligible person (participant).

    (a) Any land owner or operator whose land or activities in a project 
area is contributing to the area's agricultural nonpoint source water 
quality problems and who has an approved water quality plan is eligible 
to enter into an RCWP contract. For the purpose of this section, an 
eligible person is an individual, partnership, corporation (except 
corporations whose stock is publicly traded), Indian tribe, irrigation 
district or other entity.
    (b) Federal, State or local governments, or subdivisions thereof 
(except irrigation districts), are not considered as an eligible person 
for RCWP contracts.
    (c) This program will be conducted in compliance with all 
requirements respecting nondiscrimination as contained in the Civil 
Rights Act of 1964 and amendments thereto and the Regulations of the 
Secretary of Agriculture (7 CFR 15.1 through 15.12)

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981]



Sec. 700.22  Application for assistance.

    (a) Land owners or operators in an approved project area must apply 
for RCWP assistance through the office of the County ASC Committee(s) by 
completing the prescribed application form.
    (b) The priority for developing water quality plans among applicants 
is to be determined by the County ASC Committee and the soil 
conservation district based on the criteria developed by the LCC in 
consultation with the SCC, with technical assistance from SCS.



Sec. 700.23  Water quality plan.

    (a) The participant's water quality plan, developed with technical 
assistance and certification by the SCS or its designee and approved by 
the CD, is to include appropriate approved BMPs. Such BMPs must reduce 
the amount of pollutants that enter a stream, aquifer, or lake by:
    (1) Methods such as reducing the application rates or changing the 
application methods or potential pollutants.
    (2) Methods such as practices or combinations of practices which 
prevent potential pollutants from leaving source areas or reduce the 
amount of potential pollutants that reach a stream or lake after leaving 
a source area.
    (b) Participants' water quality plans shall include BMPs for the 
treatment of all critical areas or sources on the farm on that land 
within the project area regardless of eligibility for cost-sharing with 
RCWP funds. Management type BMPs which are not cost-shared but for which 
technical advice will be given project participants shall be listed in 
the plan. A water quality plan is not required for that portion of a 
farm that does not include a critical area or source.
    (c) The participant is responsible for compliance with all 
applicable Federal, State, and local laws including those relating to 
the environment, in installing BMPs to solve the nonpoint source water 
quality problems.
    (d) Time schedules for implementing BMPs are to be provided in the 
participant's water quality plan.
    (e) The SCS or its designee shall make an annual status review to 
assure the technical adequacy of the implementation of the water quality 
plan.



Sec. 700.24  Cost-sharing.

    (a) The maximum cost-share for each project will be approved by the 
Secretary, taking into consideration the recommendation of the NCC. The 
Federal cost-share for each BMP shall not exceed 75 percent of the cost 
of carrying out the practice unless otherwise approved by the 
Administrator, FSA.
    (b) The combined cost-sharing by Federal, State, or Subdivision 
thereof shall not exceed 100% of the cost of carrying out the BMP.
    (c) The County ASC Committee(s) in consultation with the LCC will 
annually set maximum individual BMP cost-share rates for the project 
area.
    (d) BMPs to be cost shared must have a positive effect on water 
quality.
    (e) Cost sharing is not to be made available for measures installed 
primarily for:
    (1) Bringing additional land into crop production.
    (2) Increasing production on existing crop land.
    (3) Flood protection.

[[Page 17]]

    (4) Structural measures authorized for installation under Pub. L. 
83-566, Watershed Protection and Flood Prevention Act.

[45 FR 14009, Mar. 4, 1980, as amended at 46 FR 29454, June 2, 1981]



Sec. 700.25  RCWP contract.

    (a) In order to participate in the RCWP, each landowner, operator, 
or person who controls or shares in the control of a tract of land on 
which one or more of the BMP's will be performed must execute the RCWP 
contract in which they agree to carry out the water quality plan.
    (b) The participant must furnish satisfactory evidence of his or her 
control of the tract of land on which one or more of the BMP's will be 
performed.
    (c) Cost-sharing payments cannot be provided for any measure that is 
initiated before the contract is approved by the County ASC Committee.
    (d) RCWP contracts shall include the basic contract document, the 
participant's water-quality plan, schedule of operations, and special 
provisions as needed.
    (e) Technical assistance will be provided to participants to develop 
the water quality plan and to install BMPs.
    (f) SCS or its designee shall approve the technical adequacy of the 
Water Quality Plan.
    (g) Participants shall install BMPs according to the specifications 
that are applicable at the time the contract is signed or the measures 
are installed.
    (h) The contract period is to be not less than 3 and not more than 
10 years. A contract is to extend for at least 1 year after the 
application of the last cost-shared BMPs. All contract items are to be 
accomplished prior to contract expiration.
    (i) BMPs are to be maintained by the participant at no cost to the 
RCWP.
    (j) All BMPs in the water-quality plan shall be maintained for the 
established life span of the BMP.
    (k) The County ASC Committee in consultation with the LCC shall 
establish a BMP life span for each BMP offered in the approved project 
area. Each BMP cost-shared shall have a life span of at least 5 years, 
unless otherwise approved by the Administrator, FSA.
    (l) A participant may enter into a pooling agreement with other 
participants to solve mutual water quality problems.
    (m) Participants are responsible for:
    (1) Accomplishing the water quality plan.
    (2) Obtaining and maintaining any required permits and easements 
necessary to perform the planned work.
    (3) Applying or arranging for the application of BMPs, as scheduled 
in the plan, according to approved standards and specifications.
    (4) The operation and maintenance of BMPs installed during the 
contract period.
    (5) Obtaining the authorities, rights, easements, or other approvals 
necessary to maintain BMPs in keeping with applicable laws and 
regulations.
    (n) Unless otherwise approved by the NCC, the County ASC Committees 
shall not enter into any new RCWP contracts after five (5) years from 
the date when RCWP funds are first made available to the project.

(Pub. L. 96-108, 98 Stat. 821, 835 and Pub. L. 96-528, 94 Stat. 3095, 
3111)

[45 FR 14009, Mar. 4, 1980, as amended at 48 FR 42803, Sept. 20, 1983]



Sec. 700.26  Contract modifications.

    (a) The County ASC Committee by mutual agreement with the landowner 
or operator, may modify contracts previously entered into if it is 
determined to be desirable to carry out the purposes of the program, 
facilitate the practical administration thereof, or to accomplish 
equitable treatment with respect to other conservation, land-use, and/or 
water quality programs.
    (b) Requirements of active contracts may be modified by the County 
ASC Committee only if such modifications are specifically provided for 
in these regulations. The concurrence of SCS or its designee and the CD 
are necessary when modifications involve a technical aspect of the 
participant's water quality plan. A contract may be modified only if it 
is determined that such modifications are desirable to carry out 
purposes of the program or to facilitate the program's practical 
administration.

[[Page 18]]

    (c) Contracts may be modified when the participants add or delete 
land to the farm.
    (d) Contracts may be modified to add, delete, or substitute BMPs 
when:
    (1) The installed measure failed to achieve the desired results 
through no fault of the participant.
    (2) The installed measure deteriorated because of conditions beyond 
the control of the participant.
    (3) Another BMP will achieve the desired results.
    (4) The extent of the BMP is changed.
    (e) Contract modifications are not required when items of work are 
accomplished prior to scheduled completion or within 1 year following 
the year of scheduled completion. Other time schedule revisions will 
require modification.
    (f) If, during the contract period, all or part of the right and 
interest in the land is transferred by sale or other transfer action, 
the contract is terminated on that portion of the contract, the 
participant:
    (1) Forfeits all right to any future cost-share payments on the 
transferred portion.
    (2) Must refund all cost-share payments that have been made on the 
transferred land unit unless the new land owner or operator becomes a 
party to the contract, except the payment may be retained where it is 
determined by the County ASC Committee after consultation with the 
technical agency and the CD, that the established BMPs will provide 
water quality benefits for the designed life of the BMP.
    (g) If the new land owner or operator becomes a party to the 
contract:
    (1) Payment which has been earned, may be made to the participant 
who applied the BMPs and had control prior to the transfer.
    (2) The new land owner or operator is to assume all obligations of 
the previous participant with respect to the transferred land.
    (3) The contract with the new participant is to remain in effect 
with the original terms and conditions, except that;
    (4) The original contract is to be modified in writing to show the 
changes caused by the transfer. If the modification is not acceptable to 
the County ASC Committee, the provisions of paragraphs (f)(1) and (2) of 
this section apply.



Sec. 700.27  Cost-share payment.

    (a) General. Participants are to obtain or contract for materials or 
services as needed to install BMPs. Federal cost-share payments are to 
be made by the County ASC Committee upon certification by the District 
Conservationist, SCS, or designee, that the BMPs, or an identifiable 
unit thereof, have been properly carried out and meet the appropriate 
standards and specifications.
    (b) Payment maximum. The maximum RCWP cost-share payment to a 
participant shall be limited to $50,000.
    (c) Basis for cost-share payment. (1) Cost-share payments are to be 
made by the County ASC Committee at the cost-share percentage specified 
in the project approval notice and by one of the following methods as 
set out in the contract:
    (i) Average cost; or
    (ii) Actual cost but not to exceed the average cost.
    (2) If the average cost at the time of starting the installation of 
a BMP or identifiable unit is less than the costs specified in the 
contract, payment is to be at the lower rate. If the costs at the start 
of installation are higher, payment may be made at the higher rate. A 
modification will be necessary if the higher cost results in a 
significant increase in the total cost-share obligation. Cost-share 
payment is not to be made until the modification reflecting the increase 
is approved.
    (d) Average cost development. Average costs are to be developed by 
the County ASC Committee for each proj ect using cost data from the 
local area. These costs shall be reviewed by the SCC for consistency 
with average costs in other USDA programs. These average costs shall be 
updated annually by the County ASC Committee in consultation with the 
LCC.
    (e) Application for payment. Cost-share payments shall be made by 
the County ASC Committee after a participant has completed a BMP or an 
identifiable unit of a BMP and it is determined to

[[Page 19]]

meet standards and specifications. Application for payment must be 
submitted to the County ASC Committee, on the prescribed form and be 
supported by such cost receipts as are required by the County ASC 
Committee. It is the participant's responsibility to apply for payments.
    (f) Authorizations for payments to suppliers. (1) The contract may 
authorize that part or all of the Federal cost share for a BMP or an 
identifiable unit be made directly to suppliers of materials or 
services. The materials or services must be delivered or performed 
before payment is made.
    (2) Federal cost shares will not be in excess of the cost share 
attributable to the material or service used or not in excess of the 
cost share for all identifiable units as may be requested by the 
participant.
    (g) Material inspection and analysis. When authorizations for 
payments to suppliers are specified, the County ASC Committee, its 
representatives, or the Federal Government reserve the right to inspect, 
sample, and analyze materials or services prior to their use.
    (h) Assignments, set-offs, and claims. (1) Any person who may be 
entitled to any cost-share may assign rights thereto in accordance with 
regulations governing the assignments of payments. (31 U.S.C. 203, as 
amended, and 41 U.S.C. 15, as amended.)
    (2) If any participant to whom compensation is payable under RCWP is 
indebted to the United States and such indebtedness is listed on the 
county register of indebtedness maintained by the County ASC Committee, 
the compensation due the participant must be used (set-off) to reduce 
that indebtedness. Indebtedness to USDA is to be given first 
consideration. Set offs made pursuant to this section are not to deprive 
the participant of any right to contest the justness of the indebtedness 
involved. (See 7 CFR part 13.)
    (3) Any cost-share payment due any participant shall be allowed 
without deduction of claims for advances except as provided for above 
and without regard to any claim or lien against any crop, or proceeds 
thereof, in favor of the participant or any other creditor.
    (i) Access to land unit and records. The County ASC Committee, the 
agency providing technical assistance or representatives thereof, shall 
have the right of access at reasonable times to land under application 
or contract, and the right to examine any program records to ascertain 
the accuracy of any representations made in the applications or 
contract.
    (j) Suspension of payments. No cost-share payments will be made 
pending a decision on whether or not a contract violation has occurred.
    (k) Ineligible payments. The filing of requests for payment for BMPs 
not carried out, or for BMPs carried out in such a manner that they do 
not meet the contract specifications, constitutes a violation of the 
contract.



Sec. 700.28  Appeals.

    (a) The applicant may, prior to execution of the contract, request 
that the County ASC Committee review or reconsider administrative 
criteria being used in developing his or her contract.
    (1) The applicant shall make a written request to the County ASC 
Committee setting forth the basis for the appeal.
    (2) The County ASC Committee shall have 30 days in which to make a 
decision and notify the applicant in writing.
    (3) The decision of the County ASC Committee may be appealed to the 
State ASC Committee.
    (4) The State ASC Committee decision shall be final.
    (b) The applicant/participant may request and receive a review by 
the SCS State Conservationist of criteria used in developing the water 
quality plan or BMP specifications.
    (c) After the contract has been executed, the participant may 
request and receive a review of administrative procedures under the FSA 
appeals procedures set out in 7 CFR part 780.



Sec. 700.29  Contract violations.

    (a) The following actions constitute a violation of the RCWP 
contract by a participant:
    (1) Knowingly or negligently damaging or causing BMPs to become 
impaired.
    (2) Failing to comply with the terms of the contract.
    (3) Filing a false claim.

[[Page 20]]

    (4) Misusing conservation materials or services.
    (5) Adopting a land use or practice during the contract period which 
tends to defeat the purposes of the program.
    (b) Contract termination as a result of violations. (1) The 
participant agrees to forfeit all rights to further cost-sharing 
payments under a contract and to refund all cost-share payments received 
if the County ASC Committee with the concurrence of the State ASC 
Committee, determines that:
    (i) There was a violation of the contract during the time the 
participant had control of the land.
    (ii) The violation was of such a nature as to warrant termination of 
the contract.
    (2) The participant shall be obligated to refund all cost-share 
payments, including those paid to vendors for materials and services.
    (c) Payment adjustments and refunds resulting from violations. (1) 
The participant agrees to refund cost-share payments received under the 
contract or to accept payment adjustments if the County ASC Committee 
determines and the State ASC Committee concurs that:
    (i) There was a violation of the contract during the time the 
participant had control of the land.
    (ii) The nature of the violation does not warrant termination of the 
contract.
    (2) Payment adjustments may include decreasing the rate of the cost 
share, or deleting from the contract a cost-share commitment, or 
withholding cost-share payments earned but not paid. The participant who 
signs the contract may be obligated to refund cost-share payments.



                   Subpart D_Monitoring and Evaluation



Sec. 700.40  General program monitoring and evaluation.

    (a) Requirement. All approved RCWP projects will be monitored in 
sufficient detail to determine BMP application progress and to generally 
document water quality improvement trends through the life of the 
project. This will include, among others, data on BMP installation 
progress, payments made, refunds and periodic water quality monitoring 
for addressing short and long-term trends in water quality.
    (b) Monitoring Report. A water quality monitoring report will be 
submitted as a part of the annual progress report. The initial report 
will include:
    (1) A description of water quality monitoring strategy for the area.
    (2) Data collection schedule.
    (3) Parameters being monitored (and baseline values).
    (4) Collection and analytical methods.
    (5) A summary of existing data and trends.

Subsequent reports will update the initial data and report any 
significant changes in water quality land use.
    (c) Program Monitoring Funding. The project application and the 
proposed monitoring plan are to include an estimate of the local and 
State financial and technical support. General monitoring will not be 
financed with RCWP funds.



Sec. 700.41  Comprehensive USDA/EPA joint project water quality 
monitoring, evaluation, and analysis.

    (a) Requirement. The Secretary and Administrator, EPA will jointly 
select a limited number of projects to be comprehensively monitored and 
evaluated from a list of projects recommended by the NCC. The NCC will 
develop criteria for selecting the project areas.
    (b) Project Selection. The NCC will recommend projects for this 
comprehensive program. The project areas are to be representative of the 
agricultural and silvicultural nonpoint source pollution problems.
    (c) Plan Development. After a proj ect is selected for the 
comprehensive monitoring and evaluation, the SCC is to submit within 90 
days, a plan for USDA-EPA review and approval. USDA and EPA will have 30 
days for the plan review and approval process.
    (d) Plan Requirements. In general, the comprehensive monitoring plan 
will address and include the following:
    (1) Objective. Define the purpose and scope of the monitoring 
program and establish clear objectives for each activity proposed.
    (2) Monitoring Strategy. Define the basic hydrological and 
meteorological

[[Page 21]]

factors within the proposed RCWP project area and identify the strategy 
and parameters to be used to identify the changes in water quality 
attributable to the installation of BMPs. Wherever possible, identify 
and quantify changes in land use, land use patterns and farming 
practices that will affect the quantity, quality or timing of nonpoint 
source pollutants reaching an aquatic system and detail information as 
to number and location of sampling stations and the frequency of sample 
collection.
    (3) Socioeconomic Impacts. Identify the positive and negative 
impacts on the landowners in the project area and estimate the community 
or off-site benefits expected of the project if completed as planned.
    (4) Institutional Aspects. Identify and clearly define the role and 
responsibility for each participating agency including, where 
appropriate fiscal and manpower commitments.
    (5) Educational Aspects. Clearly define the approache(s) to be used 
to inform and educate individual landowners. Include procedures for 
periodic evaluation of this effort so the mid-course corrections can be 
made if needed.
    (6) Quality Assurance. To insure that the data collected is usable 
to make National projections, a quality assurance program must be 
included that is consistent with that of the EPA Region within which the 
project is located.
    (7) Data Storage. The data collected on comprehensive monitoring 
projects must be available to USDA and EPA RCWP user groups.
    (e) Reporting. Reports for these projects are to be made at least 
annually to the NCC based on guidance sent to the SCC by the 
Administrator, FSA.
    (f) Funding. Funding for the comprehensive monitoring will be 
provided from RCWP funds and other authorizations.



Sec. 700.42  Program evaluation.

    (a) The RCWP will be evaluated annually by the USDA. The evaluation 
will be based on the reports provided in these regulations and on 
special studies undertaken by USDA or EPA as part of the RCWP program.
    (b) The USDA Deputy Under Secretary for International Affairs and 
Commodity Program will have the responsibility for coordinating the 
program evaluation and preparing an annual report for transmittal to the 
Secretary of Agriculture and the Administrator of EPA. The Deputy 
Assistant Secretary for Natural Resources and the Director of Economics, 
Policy Analysis and Budget, USDA, and the Assistant Administrator for 
Water and Waste Management, EPA will assist in this effort.



Sec. 700.43  Public benefits when installing BMP's.

    All BPM's implemented under this program shall be in compliance with 
regulations promulgated under part 799 on environmental quality and 
related environmental concerns or similar regulations issued by a 
technical agency. Persons responsible for any aspect of performing BMPs 
shall carry out their responsibilities in such a way as to promote 
public benefits:
    (a) By improving or preserving environmental quality and ecological 
balance.
    (b) By preventing or abating pollution and other environmental 
degradation.
    (c) Benefiting the community by means such as preserving open space 
or enhancing the appearance of the area.
    (d) Benefiting wildlife and other desirable life forms.
    (e) Preserving historic, archaeological, or scenic sites, wetlands, 
ecologically critical areas and prime farmland.
    (f) Avoiding the creation of hazards to persons or animals.
    (g) Avoiding actions that may adversely affect an endangered or 
threatened species and flood plains.



PART 701_CONSERVATION AND ENVIRONMENTAL PROGRAMS--Table of Contents




Sec.
701.1 Background.
701.2 Definitions.

                Subpart_Agricultural Conservation Program

701.3 Program objective.
701.4 State funds.
701.5 County funds.
701.6 Availability of funds.

[[Page 22]]

701.7 Eligible person.
701.8 Eligible land.
701.9 Conservation practices.
701.10 County programs.
701.11 State programs.
701.12 Selection of practices.
701.13 Levels and rates of cost-sharing.
701.14 Starting of practices.
701.15 Method of approval.
701.16 Long-term agreements.
701.17 Replacement, enlargement, or restoration.
701.18 Pooling agreements.
701.19 Special provisions for low-income farmers and ranchers.
701.20 Encumbering land.
701.21-701.22 [Reserved]
701.23 Maximum cost-share limitation.
701.24 Completion of practices.
701.25 Time of filing payment application.
701.26 Other program provisions.

                   Subpart_Forestry Incentives Program

701.27 Program objective.
701.28 [Reserved]
701.29 Designated counties.
701.30 Eligible person, land, and ownerships.
701.31 Program funds.
701.32 Eligible practices and cost-share requirements.
701.33 The National program.
701.34 Development of State programs.
701.35 Development of county programs.
701.36 Adaptation of practices.
701.37 Levels and rates of cost-sharing.
701.38 Prior approval for cost-sharing.
701.39 Methods of approval.
701.40 Long-term agreements.
701.41 Restoration of practices.
701.42 Maximum cost-share limitations.
701.43 Completion of practice.
701.44 Time of filing payment application.
701.45 Other program provisions.

                 Subpart_Emergency Conservation Program

701.46 Program objective.
701.47 Program availability.
701.48 Eligibility of person and land.
701.49 Emergency conservation program practices.
701.50 Practice approval.
701.51 Extent of cost-sharing.
701.52 Eligible costs.
701.53 Filing requests.
701.54 Approving requests.
701.55 Pooling agreements.
701.56 Payment approval.
701.57 Other program provisions.

                       Subpart_General Provisions

701.58 Restriction on program eligibility.
701.59 Delegation of authority.
701.60 Practice specifications.
701.61 Responsibility for technical phases of practices.
701.62 Items of cost on which rates of cost-sharing may be based.
701.63 Handbook, bulletins, instructions, and forms.
701.64 Opportunity for requesting cost-shares.
701.65 Repair, upkeep and maintenance of practices.
701.66 Public benefits when installing practices.
701.67 Payments for uncompleted practices.
701.68 Practices involving the establishment or improvement of 
          vegetative cover.
701.69 Failure to meet minimum requirements or failure to comply fully 
          with program provisions.
701.70 Practices carried out with aid from ineligible persons.
701.71 Division of cost-shares.
701.72 Death, incompetency, or disappearance.
701.73 Applying cost-share limitations.
701.74 Persons eligible to file application for payment of cost-shares.
701.75 Time and manner of filing application and required information.
701.76 Appeals.
701.77 Performance based on advice or action of county or State 
          committee.
701.78 Compliance with regulatory measures.
701.79 Maintenance and use of practice.
701.80 Actions defeating purpose of program.
701.81 Depriving others of cost-shares.
701.82 Filing of false claims.
701.83 Cost-shares not subject to claims.
701.84 Assignments.
701.85 Environmental considerations.
701.86 Information collection requirements.

    Authority: 16 U.S.C. 590d, 590g-590o, 590p(a), 590q, 1501-1510, 
1606, 2101-2111, 2201-2205; 48 U.S.C. 1469d(c).

    Source: 45 FR 49522, July 25, 1980, unless otherwise noted.



Sec. 701.1  Background.

    (a) Through the conservation and environmental programs administered 
by the Department of Agriculture, the Federal Government will share with 
farmers, ranchers, and other eligible private landowners in the United 
States and the applicable territories and possessions of the United 
States, the cost of carrying out:
    (1) Approved soil and water conservation and pollution abatement 
practices, including related wildlife conservation practices.
    (2) Approved forestry practices.

[[Page 23]]

    (3) Emergency conservation measures, in accordance with the 
provisions of this part and such modifications there of as may hereafter 
be made.
    (b) Cost-sharing may be made available to eligible program 
participants by the Farm Service Agency for:
    (1) Soil and water conservation and pollution abatement practices 
under the Agricultural Conservation Program.
    (2) Forestry practices under the Agricultural Conservation Program 
or Forestry Incentives Program.
    (3) Practices to correct damage to land or conservation practices 
caused by natural disaster under the Emergency Conservation Program.
    (4) Installation of water conservation measures under the Emergency 
Conservation Program during periods of severe drought.
    (c) Information on the practices for which costs will be shared, the 
exact specifications and rates of cost-sharing for such practices, and 
the eligibility requirements for participating in the programs, may be 
obtained from the Agricultural Stabilization and Conservation county 
committee (hereinafter referred to as ``county committee'') for the 
county in which the farm, ranch or other eligible land is located or 
from the Agricultural Stabilization and Conservation State committee 
(hereinafter referred to as ``State committee''), for the State in which 
such county is located.



Sec. 701.2  Definitions.

    (a) County conservation review group consists of the county 
committee; the county extension agent; a representative of the Soil 
Conservation Service; a representative of the U.S. Forest Service; a 
representative of the Farmers Home Administration; a representative of 
the State forestry agency or its equivalent, when the representative 
accepts an invitation to be a member of the group; and a representative 
of the conservation district in the county, where the governing board of 
the district accepts an invitation to designate a representative (if 
there is more than one district in the county, the governing boards of 
the districts may jointly designate only one person to represent all of 
the districts). The county conservation review group shall have the 
responsibilities as provided for in Sec. Sec. 701.10 and 701.35.
    (b) Farm or ranch means that area of land considered as a farm under 
the regulations governing reconstitution of farms, allotments, and 
bases, part 719 of this chapter, as amended, and, for the forestry 
incentives program, ``farm'' or ``ranch'' means eligible land (or 
ownership tracts) as provided in Sec. 701.30.
    (c) National conservation review group consists of representatives 
of the Farm Service Agency; Soil Conservation Service; U.S. Forest 
Service; Science and Education Administration; Economics, Statistics, 
and Cooperatives Service; Farmers Home Administration; Office of the 
General Counsel, U.S. Department of Agriculture; Office of Budget 
Planning and Evaluation, U.S. Department of Agriculture; Environmental 
Protection Agency; and Office of Management and Budget. The national 
conservation review group is responsible for recommending changes in 
program administrative procedures and policy guidelines, and evaluations 
of program effectiveness and operating arrangements.
    (d) Program year means the Federal fiscal year for accounting 
purposes.
    (e) State means any one of the United States, Puerto Rico, the 
Virgin Islands, and (1) In the case of the Agricultural Conservation 
Program and the Emergency Conservation Program, Guam and the 
Commonwealth of the Northern Mariana Islands; and (2) In the case of the 
Forestry Incentives Program, Guam, American Samoa, the Commonwealth of 
the Northern Mariana Islands, the Trust Territory of the Pacific Islands 
and the Territories and possessions of the United States.
    (f) State conservation review group consists of the State committee, 
the State Director of Extension; the State Conservationist of the Soil 
Conservation Service; a representative of the U.S. Forest Service; a 
representative of the Farmers Home Administration; a representative of 
the State forestry agency, or its equivalent, when the representative 
accepts an invitation to be a member of the group; a representative of 
the State Soil Conservation Committee, or its equivalent, when the

[[Page 24]]

representative accepts an invitation to be a member of the group; and a 
representative of the State Water Quality Agency, or its equivalent when 
it accepts an invitation to be a member of the group. The State 
conservation review group has the responsibility provided for in Sec. 
701.11.
    (g) State forestry committee, or its equivalent, consists of the 
State forester or equivalent State official, who serves as chairperson; 
and a head or representative at the State level of the following USDA 
agencies: Farm Service Agency; U.S. Forest Service; Science and 
Education Administration; Farmers Home Administration; Soil Conservation 
Service. At the discretion of the committee, State and local interests 
may also be involved. The function of the State forestry committee is to 
coordinate forestry budget proposals, agency roles in education, 
technical assistance, technology transfers, and forestry incentives.
    (h) In the regulations in this part and in all instructions, forms, 
and documents in connection therewith, all other words and phrases 
specifically relating to FSA operations shall, unless the context or 
subject matter otherwise requires, have the meanings assigned to them in 
the regulations governing reconstitution of farms, allotments and bases, 
part 719 of this chapter, as amended.

[45 FR 49522, July 25, 1980, as amended at 47 FR 46998, Oct. 22, 1982; 
53 FR 15657, May 3, 1988]



                Subpart_Agricultural Conservation Program



Sec. 701.3  Program objective.

    (a) The objective of the Agricultural Conservation Program 
(hereinafter referred to in this subpart as the ``program'') is to 
assure the continued supply of food and fiber necessary for the 
maintenance of a strong and healthy people and economy, and to provide 
for environmental conservation or enhancement.
    (b) This will be accomplished through a program that has been 
formulated and is to be carried out, taking into consideration:
    (1) The need to control erosion and sedimentation from agricultural 
land and conserve the water resources on such land.
    (2) The need to control pollution from animal wastes.
    (3) The need to facilitate sound resource management systems through 
soil and water conservation.
    (4) The need to encourage voluntary compliance by agricultural 
producers with Federal and State requirements to solve point and non-
point sources of pollution.
    (5) National priorities reflected in the National Environmental 
Policy Act of 1969 and other congressional and administrative actions.
    (6) The degrees to which the measures contribute to the national 
objective of assuring a continuous supply of food and fiber necessary 
for the maintenance of a strong and healthy people and economy.
    (7) The type of conservation measures needed to improve water 
quality in rural America.
    (8) The types of conservation measures needed that have significant 
energy conserving benefits.

[45 FR 49522, July 25, 1980, as amended at 47 FR 939, Jan. 8, 1982]



Sec. 701.4  State funds.

    Funds available for practices to be performed under the program will 
be distributed among the States in accordance with conservation needs as 
determined by the Secretary.



Sec. 701.5  County funds.

    The State committee will allocate the funds available for practices 
among the counties within the State consistent with the program 
objective, and will give particular consideration to the furtherance of 
special projects, watershed conservation projects, resources 
conservation development projects, approved State water quality plans, 
and other conservation and pollution abatement projects sponsored by 
local people and organizations.



Sec. 701.6  Availability of funds.

    (a) The provisions of the program are subject to such legislation as 
the Congress of the United States may hereafter enact; the paying of the 
cost-shares provided herein is contingent

[[Page 25]]

upon such appropriation as the Congress may provide for such purpose; 
and the amounts of such cost-shares will be within the limits finally 
determined by such appropriation.
    (b) Funds available for the Agricultural Conservation Program may be 
made available as needed for practices to be performed under the Naval 
Stores Conservation Program, in accordance with instructions issued by 
the Deputy Administrator, State and County Operations.



Sec. 701.7  Eligible person.

    An eligible person is a farmer or rancher who as an individual, 
partnership, association, corporation, estate, trust, or other business 
enterprise, or other legal entity (excluding districts which have taxing 
authority, Federal agencies, States and State agencies, but not 
excluding political subdivisions of a State) and, as an owner, landlord, 
tenant, or sharecropper, participates in the operation of a farm or 
ranch.



Sec. 701.8  Eligible land.

    (a) The program is applicable to:
    (1) Privately-owned lands;
    (2) Land owned by a State or political subdivision of a State;
    (3) Lands owned by corporations which are partly owned by the United 
States;
    (4) Lands temporarily owned by the United States or a corporation 
wholly owned by it, which were not acquired or reserved for conservation 
purposes, including lands administered by the Farmers Home 
Administration, the U.S. Department of Defense, or by any other 
government agency designated by the Deputy Administrator, State and 
County Operations;
    (5) Any cropland farmed by private persons which is owned by the 
United States or a corporation wholly owned by it;
    (6) Indian lands, except that where grazing operations are carried 
out on Indian lands administered by the Department of the Interior, such 
lands are within the scope of the program only if covered by a written 
agreement approved by the Department of the Interior giving the operator 
an interest in the grazing and forage growing on the land and a right to 
occupy the land in order to carry out the grazing operations; and
    (7) Noncropland owned by the United States on which practices are 
performed by private persons where such practices directly conserve or 
benefit nearby or adjoining privately-owned lands of the persons 
performing the practices and such persons maintain and use such 
federally-owned noncropland under agreement with the Federal agency 
having jurisdiction thereof.
    (b) The program is not applicable to:
    (1) Noncropland owned by the United States which was acquired or 
reserved for conservation purposes, or which is to be retained 
permanently under Government ownership, including, but not limited to, 
grazing lands administered by the Forest Service of the U.S. Department 
of Agriculture, or by the Bureau of Land Management (including lands 
administered under the Taylor Grazing Act), or the Fish and Wildlife 
Service of the U.S. Department of the Interior, except as indicated in 
paragraph (a)(7) of this section.
    (2) Nonprivate persons for performance of practices on any land 
owned by the United States or a corporation wholly owned by it.



Sec. 701.9  Conservation practices.

    Conservation practices as specified by the Deputy Administrator, 
State and County Operations, FSA, are made available nationally under 
the Agricultural Conservation Program and may be included in the State 
and county programs. Practices shall not be primarily production 
oriented or have little or no conservation or pollution abatement 
benefits. The practices are designed to be consistent with the 
agricultural conservation policy stated in section 7 of the Soil 
Conservation and Domestic Allotment Act, as amended, and national 
program policy, and are developed primarily to meet a definite need to 
accomplish one or more of the following:
    (a) Establish long-lasting protective cover.
    (b) Improve or sustain existing protective cover.
    (c) Conserve or safely dispose of water.
    (d) Benefit wildlife.

[[Page 26]]

    (e) Establish or improve stands of forest trees.
    (f) Give protection against soil erosion.
    (g) Prevent or abate agricultural-related pollution of water, land, 
and air.
    (h) Meet special State or county conservation needs.
    (i) Encourage energy conservation practices.

[45 FR 49522, July 25, 1980, as amended at 47 FR 939, Jan. 8, 1982]



Sec. 701.10  County programs.

    (a) A program shall be developed in each county by the county 
committee, in consultation with the county conservation review group, in 
accordance with the National and State development guidelines and 
policies provided. At least one public meeting per year shall be held 
for this purpose.
    (b) The county program shall be that approved by the State committee 
and the Secretary or designee.

[45 FR 49522, July 25, 1980, as amended at 47 FR 46998, Oct. 22, 1982]



Sec. 701.11  State programs.

    (a) The State committee, in consultation with the State conservation 
review group, shall develop recommendations for the State program. The 
chairperson of the State conservation review group may also invite 
others with conservation or water quality interests to participate in 
such deliberations. At least one public meeting per year shall be held 
for this purpose.
    (b) The State program shall consist of the guidelines and practices 
selected by the State committee after considering the recommendations 
submitted by the county committee to the State review group and approved 
by the Secretary or designee.

[45 FR 49522, July 25, 1980, as amended at 47 FR 46999, Oct. 22, 1982]



Sec. 701.12  Selection of practices.

    The practices to be included in the State or county program shall be 
only those practices for which cost-sharing is essential to permit 
accomplishment of the program objective.



Sec. 701.13  Levels and rates of cost-sharing.

    (a) The maximum level of cost-sharing for each practice shall be the 
percentage of the average cost of performing the practice considered 
necessary to obtain the needed performance of the practice, but at a 
level such that the participant will make a significant contribution to 
the cost of performing the practice.
    (b) Levels of cost-sharing under annual agreements for each practice 
shall not be in excess of 75 percent of the average cost of carrying out 
the practice as determined by the county committee. However, where the 
Deputy Administrator, State and County Operations, determines a higher 
level of cost-sharing is necessary to provide adequate incentive for 
producer to carry out a conservation practice, the Deputy Administrator, 
State and County Operations, may specifically authorize a higher level. 
(See Sec. 701.19 for special provision for low-income farmers.)
    (c) Levels of cost-sharing under long term agreements shall not be 
in excess of 75 percent nor less than 50 percent of the average cost for 
each practice as determined by the county committee.
    (d) For the purpose of establishing rates of cost-sharing, the 
average cost of performing a practice may be the average cost for a 
county or a part of a county, as determined by the county committee.

[45 FR 49522, July 25, 1980, as amended at 47 FR 939, Jan. 8, 1982]



Sec. 701.14  Starting of practices.

    Costs will not be shared for practices or components of practices 
that are started before a formal approval is given by the county 
committee.

[47 FR 939, Jan. 8, 1982]



Sec. 701.15  Method of approval.

    The county committee will determine the extent to which Federal 
funds will be made available to share the cost of each approved 
practice, taking into consideration the county allocation, the 
conservation and environmental problems in the county, the land 
involved, and the practices for

[[Page 27]]

which requested cost-sharing is considered by the county committee as 
most needed. The method approved shall provide for the issuance of 
notices of approval showing for each approved practice the number of 
units of the practice for which the Federal Government will share in the 
cost and the amount of the cost-share for the performance of that number 
of units of the practice. To the extent practicable, notices of approved 
practices shall be issued before performance of the practice is started. 
No practice may be approved for cost-sharing except as authorized by the 
county program, or in accordance with procedures incorporated therein. 
Available funds for cost-sharing shall not be allocated on a pro-rata 
basis, but shall be directed to the accomplishment of the most enduring 
benefits attainable.
    (a) Cost-sharing may be approved under annual agreements or long-
term agreements.
    (b) Annual agreements may be approved in all counties. Long-term 
agreements are limited to farms or ranches which are within Soil 
Conservation Districts (or comparable districts) through which the Soil 
Conservation Service provides planning and technical services, except:
    (1) Farms and ranches located within a county designated for the 
Great Plains Conservation Program are only eligible for long-term 
agreements that cover part of a farm. Long-term agreements that cover 
whole farms shall not be approved in these counties.
    (2) Farms and ranches not located within a Soil Conservation 
District (or comparable district) may be eligible for a long-term 
agreement, provided conservation plans of operations are developed by 
the farmer or rancher in cooperation with the Soil Conservation Service 
and approved by an appropriate State official or, in cases where an 
appropriate State official is not available, approved by the Soil 
Conservation Service.



Sec. 701.16  Long-term agreements.

    (a) The period of a long-term agreement will be for not less than 
three (3) program years nor more than ten (10) program years. The county 
committee and the signatories to the agreement in consultation with the 
Soil Conservation Service representative, will mutually determine the 
period of the agreement.
    (b) The long-term agreement will be based on a conservation plan of 
operations for the farm or ranch or portion thereof which has been 
approved by the Soil Conservation District (or comparable district) or, 
for farms or ranches not located in a Soil Conservation District (or 
comparable district), by an appropriate State Official or the Soil 
Conservation Service, as applicable.
    (c) The long-term agreement will provide that the farmer or rancher 
will carry out those measures in the conservation plan of operations 
which are determined to be essential to meeting the basic conservation 
needs of the farm or ranch, or portion thereof, whether or not cost-
sharing is approved for such measures.
    (d) The owner of the farm or ranch will be required to be a 
signatory to a long-term agreement, whether or not that person 
contributes to the cost of approved practices thereon.
    (e) Any signatory to a long-term agreement who is not an owner of 
the farm or ranch must provide assurance of control of the land for the 
duration of the period of the agreement.
    (f) The level of cost-sharing, as provided in Sec. 701.13, in 
effect for practices in all years of a long-term agreement shall be the 
level in effect for the beginning year of the agreement. The rate of 
cost-sharing for payment purposes for such practice will be based on the 
average cost of performing the practice at the time the practice is 
performed.
    (g) A long-term agreement may be cancelled for failure to comply 
with the terms of the agreement if, after consulting with the Soil 
Conservation District (or comparable district) board or, if none exists, 
with a representative of the Soil Conservation Service, the county 
committee and State committee find that the seriousness of the 
irregularities warrant such action. If the agreement is cancelled, the 
signatories to the agreement are jointly and severally responsible for 
refunding all cost-shares paid and will forfeit all rights to further 
payments under the

[[Page 28]]

agreement. In such a case, no other refund or forfeiture provisions of 
these regulations apply.
    (h) A long-term agreement may be revised in accordance with 
instructions issued by the Deputy Administrator, State and County 
Operations, by mutual agreement between the signatories to the agreement 
and the county committee based on approved changes in the Conservation 
plan of operations for the farm or ranch.
    (i) An eligible person who acquires control of land under an 
approved agreement may elect to become a successor in interest under 
such agreement.
    (j) An agreement will be terminated with respect to land for which 
loss of control has occurred and where the person acquiring control of 
such land elects not to become a successor in interest under the 
agreement. If the loss of control is for reasons beyond the control of 
the signatories to the agreement, the county committee will determine 
whether or not any cost-shares previously paid shall be refunded, but in 
no event shall the refund be greater than would be required in cases 
where loss of control is voluntary. If the loss of control is voluntary 
on the part of the signatories to the agreement, the signatories will be 
jointly and severally responsible for refunding all cost-shares paid and 
will forfeit all rights to further payments, with respect to the land 
for which control is lost. However, a refund will not be required for 
cost-shares where, the county committee and the State committee 
determine, after consulting with a representative of the Soil 
Conservation Service, that failure to perform the remaining practices in 
the agreement will not impair the effectiveness of the practices which 
have been performed and that the completed practices have provided 
conservation benefits consistent with the cost-shares which have been 
paid.
    (k) An agreement may be terminated by the county committee, after 
considering the recommendation of the Soil Conservation District (or 
comparable district) board or, if none exists, with a representative of 
the Soil Conservation Service, if such action is in the public interest. 
The county committee will determine the amount of cost-shares previously 
paid that shall be refunded.
    (l) An agreement may be terminated by the county committee upon the 
written request of the participant(s) to an agreement where no cost-
shares have been paid for any of the scheduled practices and where the 
participant(s) does(do) not intend to perform any of the scheduled 
practices.



Sec. 701.17  Replacement, enlargement, or restoration.

    The establishment or installation of a practice, for the purposes of 
the program shall be deemed to include the replacement, enlargement, or 
restoration of a practice for which cost-sharing has been allowed if the 
practice has served for its normal lifespan, or if all of the following 
conditions exist:
    (a) Replacement, enlargement, or restoration of the practice is 
needed to solve the problem.
    (b) The failure of the original practice was not due to the lack of 
proper maintenance by the current operator.
    (c) The county committee believes that the replacement, enlargement 
or restoration of the practice merits consideration under the program to 
an equal extent with other practices.



Sec. 701.18  Pooling agreements.

    Farmers, ranchers, or eligible landowners in any local area may 
agree in writing, with the approval of the county committee, to perform 
designated practices which, by conserving or improving resources of the 
community, will solve a mutual conservation, pollution, or other 
environmental problem on the land of the participants. For purposes of 
eligibility for cost-sharing, practices carried out under such an 
approved written agreement shall be regarded as having been carried out 
on the land of the persons who performed the practices.



Sec. 701.19  Special provisions for low-income farmers and ranchers.

    (a) Except as otherwise provided in Sec. 701.13(c), the county 
committee may approve, in the case of low-income farmers and ranchers as 
defined in this section, level of cost-sharing of up to 80 percent of 
the average cost of performing practices.

[[Page 29]]

    (b) A low-income farmer or rancher is one who, as determined by the 
county committee, is a small producer whose livelihood is largely 
dependent on the farm or ranch and whose prospective income and 
financial resources for the current year are such that the farmer or 
rancher could not reasonably be expected to perform needed conservation 
practices at levels of cost-sharing applicable to other persons in the 
county.
    (c) In approving requests for cost-sharing the county committee 
shall give special consideration to requests filed by low-income farmers 
and ranchers.

[45 FR 49522, July 25, 1980, as amended at 47 FR 939, Jan. 8, 1982]



Sec. 701.20  Encumbering land.

    In order to receive cost-share assistance for a conservation 
practice in a Salinity Control Project area, a person participating in 
the program shall agree, as a condition of eligibility to receive such 
assistance, that a recordable encumbrance may be filed by FSA with 
respect to the land on which the conservation practice is installed. 
Such encumbrance shall reflect the amount of the cost-share assistance 
which is received by the program participant for the practice and shall 
continue until such time as the established lifespan for the practice 
has expired. Notwithstanding the foregoing, this requirement may be 
waived by the county committee if such committee determines, with the 
concurrence of the State committee and after consultation with 
appropriate Federal, State and local authorities, that the land will not 
likely be converted to a nonagricultural use within the next five years.

[48 FR 33847, July 26, 1983]



Sec. Sec. 701.21-701.22  [Reserved]



Sec. 701.23  Maximum cost-share limitation.

    For each program year the total amount which may be received by any 
person under this subpart for approved practices shall not exceed $3,500 
except that (a) the total amount received for approved practices, 
including those carried out under pooling agreements, shall not exceed 
$10,000 and (b) the total amount received under an ACP long-term 
agreement (LTA) shall not exceed the annual payment limitation ($3,500) 
multiplied by the number of years of the LTA.

[52 FR 19716, May 27, 1987]



Sec. 701.24  Completion of practices.

    Cost-sharing for the practices contained in this part is conditioned 
upon the performance of the practice in accordance with all applicable 
specifications and program provisions.



Sec. 701.25  Time of filing payment application.

    Payment of cost-shares will be made only upon application submitted 
on the prescribed form to the county office by a date established by the 
county committee. Any application for payment may be rejected if any 
form or information required of the applicant is not submitted to county 
office within the applicable time limit.



Sec. 701.26  Other program provisions.

    Other provisions as contained in Sec. Sec. 701.1 and 701.2 and in 
the subpart, General Provisions, apply to the Agricultural Conservation 
Program.



                   Subpart_Forestry Incentives Program



Sec. 701.27  Program objective.

    The objective of the Forestry Incentives Program (hereinafter 
referred to in this subpart as the ``program'') is to help assure a 
future supply of timber. This will be accomplished by encouraging 
landowners to apply forestry practices for the following:
    (a) Production of softwood and hardwood timber and other forest-
resources associated therewith to increase afforestation of suitable 
open lands.
    (b) Reforestation of cutover and understocked forest lands.
    (c) Timber stand improvement.
    (d) Intensive multipurpose management.
    (e) Protection of forest resources.

[[Page 30]]



Sec. 701.28  [Reserved]



Sec. 701.29  Designated counties.

    The State committee in consultation with the State Forester, will 
designate the counties or parts of counties in which the program will be 
operated. The following will be considered in making the selections:
    (a) The total acreage in the county devoted to desirable types of 
softwood and hardwood timber.
    (b) The estimated area in the county that is under eligible 
ownership.
    (c) The estimated acreage suitable for the production of forest 
products.
    (d) The availability of funds.
    (e) The enhancement of other forest resources.



Sec. 701.30  Eligible person, land, and ownerships.

    (a) An eligible person is a private individual, group, Indian Tribe 
or other native group, association, corporation excluding corporations 
whose stocks are publicly traded, or other legal entity which owns 
eligible land. Firms principally engaged in the manufacture of wood 
products are not eligible. However, forest landowners who manufacture 
forest products on a part-time or irregular basis, are eligible.
    (b) Eligible land is ``nonindustrial'' private forest land capable 
of producing at least 50 cubic feet of wood per acre per year.
    (c) Eligible farms are those not exceeding a total of 1,000 acres of 
eligible private nonindustrial forest land in the United States or any 
commonwealth, territory or possession of the United States. The State 
Committee with the concurrence of the State Forester may approve cost-
sharing with landowners owning more than 1,000 but not more than 5,000 
acres of eligible forest land where it is deemed to be to the public's 
significant benefit.
    (d) Significant public benefits are primarily those resulting from 
cost-effective timber production, with related benefits to aesthetics, 
recreation, other resource values, watershed protection and erosion 
reduction.



Sec. 701.31  Program funds.

    (a) State and counties. Each designated State and county will 
receive a share of the funds provided nationally for the program. Funds 
will be distributed on the basis of the forest production opportunities 
in each State, considering the acreage of private nonindustrial forest 
lands, the number of eligible owners, the potential productivity of such 
lands and the need for reforestation, timber stand improvement, other 
forestry management needs, and the enhancement of other forest 
resources. The Director, Conservation and Environmental Protection 
Division, FSA, will allocate funds after consultation with 
representatives of the U.S. Forest Service and a committee of not less 
than five State foresters or equivalent State officials selected by a 
majority of the State foresters or equivalent State officials. The State 
committee will consult with the State forester when determining the 
allocation of such funds to the designated counties.
    (b) A limitation on the amount of funds which may be obligated under 
long-term agreements shall be established by the State committee in 
accordance with guidelines provided by the Deputy Administrator, State 
and County Operations.



Sec. 701.32  Eligible practices and cost-share requirements.

    (a) Cost-sharing may be available for the following National 
practices and authority:
    (1) Practice FP1. Planting Trees.
    (2) Practice FP2. Improving a Stand of Forest Trees.
    (3) Practice authority--SF Practice. Special Forestry Practices. The 
Director, Conservation and Environmental Protection Division, FSA, after 
consultation with the Forest Service, may approve special forestry 
practices needed to solve a significant and unique local condition for 
which the National practices are not adequate. Such practices may be 
approved for inclusion in a county program after consultation with the 
program development group, and the recommendation of the county 
committee, the service forester, the State committee and the State 
forester.
    (b) A forest management plan is required as a condition of cost-
sharing.

[[Page 31]]

The plan will be developed in consultation with the landowner, approved 
by the service forester, and will contain information for accurate 
evaluation of practice effectiveness. The participant will be required 
to perform those measures in the plan which are essential to the 
effectiveness of the practice for which costs are shared. In the 
development of the plan, consideration will be given to wildlife, 
watershed protection, recreation, erosion control, aesthetics, and other 
associated forest resources values as well as cost-effective timber 
production.



Sec. 701.33  The National program.

    The National program is based on recommendations developed by the 
Director, Conservation and Environmental Protection Division, FSA, in 
consultation with representatives of the U.S. Forest Service and the 
committee of State foresters provided for in Sec. 701.31.



Sec. 701.34  Development of State programs.

    (a) A State program shall be developed in each State in accordance 
with the provisions contained in this part and in the National program 
and such modifications thereof as may thereafter be made. The program 
shall be developed by the State forestry committee as provided in Sec. 
701.2.
    (b) The program for the State shall be that recommended by the State 
committee and State forester and approved by the Director, Conservation 
and Environmental Protection Division, FSA, after consulting the U.S. 
Forest Service.



Sec. 701.35  Development of county programs.

    (a) A county program shall be developed in each designated county in 
accordance with the provisions of the State program and such 
modifications thereof as may be made. The county program shall be 
developed by the county conservation review group. The county 
conservation review group, working with the governing body of the 
conservation district, the State forestry agency representatives, the 
county supervisor of the Farmers Home Administration, and others with 
conservation and environmental interest, shall develop recommendations 
for the county program.
    (b) The program for the county shall be that recommended by the 
county committee and service forester and approved by the State 
committee and State forester.

[45 FR 49522, July 25, 1980, as amended at 47 FR 46999, Oct. 22, 1982]



Sec. 701.36  Adaptation of practices.

    (a) The practices included in the State program meet the conditions 
and requirements of the National program. National program provisions 
may be modified or deleted to make practices more restrictive where such 
changes meet the objectives of the program.
    (b) The practices included in the county program must meet the 
conditions and requirements of the State program. State program 
provisions may be modified or deleted to make practices more restrictive 
where such changes will still result in the practices effectively 
meeting the objectives of the program.



Sec. 701.37  Levels and rates of cost-sharing.

    (a) The maximum cost-share for each practice shall be the percentage 
of the actual cost of performing the practice considered necessary to 
obtain the needed performance of the practice, but which will be such 
that the participant will make a significant contribution to the cost of 
performing the practice.
    (b) Levels of cost-sharing shall be approved by the State ASC 
committee and shall not be in excess of 65 percent of actual costs 
incurred by the landowners.
    (c) For the purpose of establishing rates of cost-sharing, the 
average cost of performing a practice may be the average cost for a 
State, a county or a part of a county, as determined by the State 
committee.
    (d) The rates of cost-sharing for practices included in the county 
program may be lower than the rates approved for general use in the 
State.

[45 FR 49522, July 25, 1980, as amended at 47 FR 20109, May 11, 1982]

[[Page 32]]



Sec. 701.38  Prior approval for cost-sharing.

    Costs will be shared only for those practices, or components of 
practices, for which cost-sharing is requested and approval issued 
before performance thereof is started.



Sec. 701.39  Methods of approval.

    The county committee will determine the extent to which Federal 
funds will be made available to share the cost of each approved 
practice. Approvals shall be made based on consideration of the county 
allocation, cost-effective opportunities for increasing timber 
production, potential for enhancing other forest resources, the forestry 
needs in the county, and the practices for which requested cost-sharing 
is considered by the county committee as most needed. The method 
approved shall provide for the issuance of notices of approval showing 
for each approved practice the number of units of the practice for which 
the Federal Government will share in the cost and the amount of the 
cost-share for the performance of that number of units of the practice. 
Notices of appeared practices shall be issued before performance of the 
practice may be started. No practice may be approved for cost-sharing 
except as authorized by the National, State or county program, or in 
accordance with procedures incorporated therein. Available funds for 
cost-sharing shall not be allocated on a pro-rata basis, but shall be 
directed to the accomplishment of the most production attainable.
    (a) Cost-sharing may be approved under annual agreements or long-
term agreements.
    (b) Land covered by a Great Plains Conservation Program contract is 
not excluded from an annual or long-term agreement if otherwise eligible 
and is approved by both the Forest Service and the Soil Conservation 
Service.
    (c) The same practices, cost-share levels and general program 
provisions apply to both annual agreements and long-term agreements.



Sec. 701.40  Long-term agreements.

    (a) The period of a long-term agreement will be for not less than 
three (3) years nor more than 10 (10) years. The county committee and 
the signatories to the agreement in consultation with the State forestry 
representative, will mutually determine the scheduling of essential 
practices and practice cost-sharing over the period of the agreement.
    (b) The long-term agreement will be based on a forest management 
plan for the land which has been developed by the service forester.
    (c) The long-term agreement will provide that the owner will carry 
out those measures in the forest management plan which are determined to 
be essential whether or not cost-sharing is approved for such measures.
    (d) The level of cost-sharing in effect for practices in all years 
of a long-term agreement shall be the level in effect for the beginning 
year of the agreement. The rate of cost-sharing for payment purposes for 
such practice will be based on the average cost of performing the 
practice at the time the practice is performed.
    (e) A long-term agreement may be canceled for failure to comply with 
the terms of the agreement if, after consulting with the service 
forester, the county committee and State committee find that the 
seriousness of the irregularities warrant such action. If the agreement 
is canceled, the signatories to the agreement are jointly and severally 
responsible for refunding all cost-shares paid and will forfeit all 
rights to further payments under the agreement. In such a case no other 
refund or forfeiture provisions of these regulations apply.
    (f) A long-term agreement may be revised in accordance with 
instructions issued by the Deputy Administrator, State and County 
Operations, where there is a change in status of the participants or the 
land under agreement.
    (g) An eligible person who acquires control of land under an 
approved agreement may elect to become a successor in interest under 
such agreement.
    (h) An agreement will be terminated with respect to land for which 
loss of control has occurred and where the person acquiring control of 
such land elects not to become a successor in interest under the 
agreement. If the loss of control is for reasons beyond the

[[Page 33]]

control of the signatories to the agreement, the county committee will 
determine whether or not any cost-shares previously paid shall be 
refunded, but in no event shall the refund be greater than would be 
required in cases where loss of control is voluntary. If the loss of 
control is voluntary on the part of the signatories, they will be 
jointly and severally responsible for refunding all cost-shares paid and 
will forfeit all rights to further payments, with respect to the land 
for which control is lost. A refund will not be required for cost-shares 
where, the county committee and the State committee determine, after 
consulting with the service forester, that failure to perform the 
remaining practices in the agreement will not impair the effectiveness 
of the practices which have been performed and that the completed 
practices will provide forestry benefits consistent with the cost-shares 
which have been paid.
    (i) An agreement may be terminated if, after considering the 
recommendation of the service forester, the county committee recommends 
and the State committee concurs that such action is in the public 
interest.



Sec. 701.41  Restoration of practices.

    (a) Cost-sharing may be authorized under the program only for the 
establishment or installation of the practices contained in this part. 
Cost-sharing may not be authorized for repeating any of the practices in 
this part with the same owner on the same acreage, except as provided in 
paragraph (b) or (c) of this section.
    (b) Cost-sharing may be authorized for the replacement, enlargement, 
or restoration of practices for which cost-sharing has been allowed 
under the program only if all of the following conditions exist:
    (1) Replacement or restoration of the practice is needed to solve 
the problem.
    (2) The failure of the original practice was not due to the lack of 
proper maintenance by the current operator.
    (3) The county committee believes that the replacement or 
restoration of the practice merits consideration under the program to an 
equal extent with other practices cost-shared.
    (c) Cost-sharing may be authorized for timber stand improvement 
measures carried out in repetitive steps where, in the judgment of the 
service forester, the stand treatment warrants such silvicultural 
practice.



Sec. 701.42  Maximum cost-share limitations.

    For each fiscal year the total of all cost-shares paid to any 
eligible person shall not exceed the sum of $10,000 with respect to 
eligible ownerships (Sec. 701.30(b)) in the United States or any 
commonwealth, territory or possessions of the United States for approved 
practices carried out under annual and/or long-term agreements.



Sec. 701.43  Completion of practice.

    Cost-sharing for the practices contained in this subpart is 
conditioned upon the performance of the practices in accordance with all 
applicable specifications and program provisions.



Sec. 701.44  Time of filing payment application.

    Payment of cost-shares will be made only upon application submitted 
on the prescribed form to the county office by the prescribed time limit 
or any authorized extension thereof. Any application for payment may be 
rejected if any form or information required of the applicant is not 
submitted to the county office within the applicable time limit.



Sec. 701.45  Other program provisions.

    Other provisions as contained in Sec. Sec. 701.1 and 701.2 and in 
the subpart, General Provisions, apply to the Forestry Incentives 
Program. st



                 Subpart_Emergency Conservation Program



Sec. 701.46  Program objective.

    The objective of the Emergency Conservation Program is to cost-share 
with eligible persons to rehabilitate farmlands damaged by wind and 
water erosion, floods, hurricanes, or other natural disasters and to 
provide water conservation or water enhancement measures during periods 
of severe drought.

[[Page 34]]



Sec. 701.47  Program availability.

    (a) The county committee may implement the program subject to the 
availability of funds where new conservation problems have been created 
on farmland by a natural disaster or wind erosion which, if not treated; 
will:
    (1) Impair or endanger the land or water resource.
    (2) Materially affects the productive capacity of the land or water 
resource.
    (3) Represent damage which is unusual in character and, except for 
wind erosion, shall not be the type that would recur frequently in the 
same area.
    (4) Be so costly to rehabilitate that Federal assistance is or will 
be required to return the land to productive agricultural use.
    (b) Subject to the availability of funds, the county committee with 
the concurrence of the State committee and approval of the Deputy 
Administrator, State and County Operations may implement the program to 
carry out emergency water conservation and water enhancement measures 
during periods of severe drought.



Sec. 701.48  Eligibility of person and land.

    Eligibility of person and land is the same as for the Agricultural 
Conservation Program as provided in Sec. Sec. 701.7 and 701.8.



Sec. 701.49  Emergency conservation program practices.

    (a) Except for severe drought and wind erosion, cost-sharing may be 
offered for emergency conservation practices only to replace or restore 
farmland to a condition similar to that existing prior to the natural 
disaster. Cost-sharing may not be offered for the solution of 
conservation problems existing prior to the disaster.
    (b) Emergency Conservation Program practices for which cost-sharing 
may be authorized are generally:
    (1) Removing debris from farmland.
    (2) Grading, shaping, releveling or similar measures.
    (3) Restoring permanent fences.
    (4) Restoring structures and other installations.
    (5) Emergency wind control measures.
    (6) Drought emergency measures.
    (7) Other emergency conservation measures.



Sec. 701.50  Practice approval.

    Practices listed in Sec. 701.49(b)(1) through (5) may be approved 
by the county committees. Practices (6) and (7) of Sec. 701.49(b) must 
be approved by the Deputy Administrator, State and County Operations.



Sec. 701.51  Extent of cost-sharing.

    (a) The maximum payment under this subpart per person, per disaster, 
is limited to $200,000, including the amount of any payment received by 
such person as the result of a disaster under a pooling agreement.
    (b) The cost-share payments which may be made by FSA for a practice 
under the program shall, subject to the maximum payment amount specified 
in paragraph (a) of this section and any other limitation as may apply, 
be further limited to the level of cost-share assistance established by 
the county committee not to exceed the following amounts:
    (1) 64 percent of the first $62,500 of eligible reimbursable costs; 
plus
    (2) 40 percent of the second $62,500 of eligible reimbursable costs; 
plus
    (3) 20 percent of the remaining eligible reimbursable costs up to 
such amount as would produce a cost-share not in excess of the 
limitation in paragraph (a) of this section.



Sec. 701.52  Eligible costs.

    Upon determination that a person is eligible for Emergency 
Conservation Program assistance, cost-sharing shall be granted for all 
reasonable costs incurred in the completion of the practice. Such costs 
may include personal labor, equipment, and other such costs which are 
determined by the county committee to be related to the costs of 
carrying out the practice. County committees shall limit costs for the 
use of personal equipment to an amount that reflects out-of-pocket 
expenses. Expenses for personal labor and personal equipment should be 
less than rates charged by contractors who expect to make a profit for 
their efforts.

[[Page 35]]



Sec. 701.53  Filing requests.

    The county committee shall establish a sign up period for filing 
cost-sharing requests immediately after the county committee's decision 
has been made (by the Deputy Administrator, State and County Operations, 
in cases of drought) to implement the Emergency Conservation Program in 
the county. Such periods should be at least 30 days in length. Late 
filed requests may be accepted by the county committee in justifiable 
cases.



Sec. 701.54  Approving requests.

    County committees will issue practice approvals only when the 
requested practice has been determined eligible for cost-sharing 
assistance and the eligible person has indicated he/she is ready to 
start the practice.



Sec. 701.55  Pooling agreements.

    Pooling agreements may be used on the same basis as provided for in 
the Agricultural Conservation Program in Sec. 701.18.



Sec. 701.56  Payment approval.

    The county committee is authorized to approve payments not to exceed 
$10,000 per person, per disaster. Cost-share assistance in excess of 
$10,000 must be approved by the Deputy Administrator, State and County 
Operations, or designee.



Sec. 701.57  Other program provisions.

    Other provisions of this part as provided for in Sec. Sec. 701.1 
and 701.2 and in the subpart, General Provisions, apply to the Emergency 
Conservation Program.



                       Subpart_General Provisions



Sec. 701.58  Restriction on program eligibility.

    The regulations in part 796 of this chapter prohibiting the making 
of payments to program participants who harvest or knowingly permit to 
be harvested for illegal use, marijuana or other such prohibited drug-
producing plants on any part of the land owned or controlled by them are 
applicable to these programs.



Sec. 701.59  Delegation of authority.

    No delegation of authority contained in these programs to a State or 
county committee shall preclude the Deputy Administrator, State and 
County Operations or designee, from determining any question arising 
under these programs or from reversing or modifying any determination 
made by a State or county committee.



Sec. 701.60  Practice specifications.

    (a) Minimum specifications that practices must meet to be eligible 
for cost-sharing shall be set forth in the county program, or 
incorporated therein by specific reference to a standard publication or 
other written document containing such specifications.
    (b) Practice specifications shall represent those levels of 
performance which are needed in order for the practice to be effective 
in meeting the program objective and which are not in excess of levels 
for which cost-sharing can be justified.



Sec. 701.61  Responsibility for technical phases of practices.

    The Soil Conservation Service and the U.S. Forest Service are 
responsible for technical phases of the practice as assigned and such 
assignment will be specified in State and county programs.
    (a) The State conservationist of the Soil Conservation Service may 
utilize assistance from private, State or Federal agencies in carrying 
out the assigned responsibilities. No responsibilities will be assigned 
for counties when the Deputy Administrator, State and County Operations 
and the Administrator, SCS, determines that it would not be 
administratively practicable for the Soil Conservation Service to 
discharge such responsibilities. In such counties, these 
responsibilities shall be assumed by the county committees. The Soil 
Conservation Service may utilize to the fullest extent available 
resources of the State forestry agencies in carrying out assigned 
responsibilities for practices involving the establishment of wind-
breaks or shelterbelts on farmland to prevent wind erosion.

[[Page 36]]

    (b) The U.S. Forest Service is responsible for the technical phases 
of practices or components of practices involving the planting of trees 
for forestry purposes and those involving the improving or protecting of 
a stand of forest trees, as specified in State and county programs. The 
U.S. Forest Service may utilize the assistance of private, State or 
Federal agencies in carrying out these assigned responsibilities, but 
services of State forestry agencies will be utilized to the extent that 
such services are available.
    (c) The technical assistance to be furnished in servicing assigned 
practices will include, where appropriate, the following technical 
phases:
    (1) Determining whether the practice is needed and practicable;
    (2) Selecting the site (if necessary), complying with environmental 
and cultural regulations, determining the specific measures needed, and 
performing any required layout work for the practice;
    (3) Supervising the installation of the practice if needed to assure 
conformity with specifications; and
    (4) Certifying the extent performed and whether the specifications 
for the practice have been met. The technical agency shall perform all 
four phases for all assigned practices in State and county programs, 
except as may be provided in instructions issued by the Deputy 
Administrator, State and County Operations.



Sec. 701.62  Items of cost on which rates of cost-sharing may be based.

    Except as otherwise provided by the specific FSA procedural 
handbooks, notices, and regulations, the cost of any direct and 
significant factor in the performance of a practice may be considered in 
establishing the rate of cost-sharing for the practice.



Sec. 701.63  Handbook, bulletins, instructions, and forms.

    The Deputy Administrator, State and County Operations is authorized 
to prepare and issue handbooks, bulletins, instructions, and forms, 
required in administering these programs. Copies of handbooks, 
bulletins, instructions and forms, containing detailed information on 
these programs as they apply to specific States, counties, areas, farms, 
ranches and other eligible ownerships, will be available in the office 
of the State committee and the office of the county committee.



Sec. 701.64  Opportunity for requesting cost-shares.

    Farmers, ranchers, eligible landowners, or eligible persons, 
regardless of race, sex, religion, color, or national origin, shall be 
given an opportunity to request that the Federal Government share in the 
cost of those practices they consider to be needed on their farm, ranch, 
or other eligible land. The county committee shall direct the available 
funds for cost-sharing to those practices where cost-sharing is 
considered most essential to the accomplishment of the program 
objective.



Sec. 701.65  Repair, upkeep and maintenance of practices.

    Cost-sharing is not authorized for repairs or for normal upkeep or 
maintenance of any practice.



Sec. 701.66  Public benefits when installing practices.

    Persons responsible for any aspect of performing practices are to be 
encouraged to install the practices in such a way to promote public 
benefits by improving or preserving environmental quality and ecological 
balance by preventing or abating pollution and other environmental 
degradation; benefiting the community by such means as preserving open 
space, or enhancing the appearance of the area; benefiting wildlife and 
other desirable life forms; preserving historic, archeological, or 
scenic sites, wetlands, ecologically critical areas and prime farmlands; 
avoiding the creation of hazards to persons or animals and avoiding 
actions that may adversely affect an endangered or threatened species 
and flood plains.



Sec. 701.67  Payments for uncompleted practices.

    Cost-shares approved under these programs will not be considered as 
earned until all components of the approved practice are completed in 
accordance with applicable specifications and program provisions. Cost-
shares

[[Page 37]]

for completed components may be paid only on the condition that the 
farmers, ranchers, or eligible landowners, will complete the remaining 
components of the practice within the time prescribed by the county 
committee regardless of whether cost-sharing is offered for them, unless 
they are prevented from doing so because of reasons beyond their 
control.



Sec. 701.68  Practices involving the establishment or improvement of 
vegetative cover.

    (a) Costs for practices involving the establishment or improvement 
of vegetative cover, including trees may be shared even though a good 
stand is not established, if the country committee determines, in 
accordance with standards approved by the State committee, that the 
practice was carried out in a manner which could normally result in the 
establishment of a good stand, and that failure to establish a good 
stand was due to weather or other conditions beyond the control of the 
operator. The county committee may require as a condition of cost-
sharing in such cases that the area be reseeded or replanted or that 
other needed protective measures be carried out. Cost-sharing in such 
cases may be approved also for repeat applications of measures 
previously carried out or for additional eligible measures. Cost-sharing 
for such measures shall be approved to the extent such measures are 
needed to assure a good stand even though less than that required by the 
applicable practice wording for initial approvals.
    (b) In the case of Foresty Incentives Program, replanting of trees 
is required where the landowner received cost-sharing for site 
preparation.



Sec. 701.69  Failure to meet minimum requirements or failure to comply 
fully with program provisions.

    (a) Notwithstanding other provisions of these programs, costs may be 
shared for performance actually rendered even though the minimum 
requirements for a practice are not met, if the farmer, rancher, 
eligible landowner, or eligible person establishes to the satisfaction 
of the county committee and the county representative of any other 
agency having responsibility for technical phases of the practice that a 
reasonable effort was made to meet the minimum requirements and that the 
practice as performed adequately solves the problem.
    (b) Notwithstanding the provisions in paragraph (a) of this section, 
the terms and conditions of contracts entered into pursuant to programs 
in this part may be modified to grant relief when the Deputy 
Administrator, State and County Operations, determines that a person 
acting in good faith failed to fully comply with the program provisions.



Sec. 701.70  Practices carried out with aid from ineligible persons.

    (a) Except as provided in paragraph (b) of this section, financial 
assistance which is made available, or will be made available, to a 
program participant from a person ineligible for cost-share assistance 
under this part for the practice, including aid from a State or Federal 
agency other than assistance made available under this part, shall be 
deducted from the program participant's total costs incurred for the 
practice for purposes of determining the applicant's eligible 
reimbursable costs under this part.
    (b) Third party contributions need not be deducted under paragraph 
(a) of this section where it is determined by the State ASC Committee, 
in accordance with instructions of the Deputy Administrator, State and 
County Operations (DASCO), FSA, that an exception would be in 
furtherance of program objectives. However, the total cost-share paid 
may not, in any case, exceed the net contribution (exclusive of any 
contribution by ineligible persons) otherwise made by the applicant to 
the cost of carrying out the practice.

[56 FR 46368, Sept. 12, 1991]



Sec. 701.71  Division of cost-shares.

    (a) The cost-share for a practice shall be credited to the person 
who carried out the practice. If more than one person contributed to the 
carrying out of the practice, the cost-share for the practice shall be 
divided among those persons in the proportion that the county committee 
determines they contributed to the carrying out of the

[[Page 38]]

practice. In making this determination, the county committee shall take 
into consideration the value of the labor, equipment, or material 
contributed by each person toward the carrying out of the practice, and 
shall assume that each contributed equally unless the county committee 
is satisfied that their respective contributions were not in equal 
proportion. Any advances made by FSA toward the cost of materials or 
services under Sec. 701.21, the furnishing of land, and the furnishing 
of the right to use water, will not be considered as a contribution to 
the carrying out of any practice.
    (b) The allowance by an eligible person of a credit to another 
eligible person in the form of an adjustment in rental, an exchange of 
cash, or other consideration, will not be considered as a contribution 
to the carrying out of any practice, unless the county committee is 
satisfied that such credit is directly related to the cost or cost-share 
of the practice. A person will not be considered as having contributed 
to the carrying out of a practice if the county committee determines 
that a person has been, or is to be, fully reimbursed for contributions 
made to the performance of the practice, through an adjustment in 
rental, an exchange of cash, or other consideration.



Sec. 701.72  Death, incompetency, or disappearance.

    In case of death, incompetency, or disappearance of any person, any 
cost-shares due shall be paid to the successor, determined in accordance 
with provisions of the regulations in part 707 of this chapter, as 
amended.



Sec. 701.73  Applying cost-share limitations.

    (a) All or any part of cost-share which otherwise would be due any 
person for a program year may be withheld, or required to be refunded, 
if, with respect to that program year, the person has adopted, or 
participated in adopting, any scheme or device, including the 
dissolution, reorganization, revival, formation, or use of any 
corporation, partnership, estate, trust, or any other means, designed to 
evade a maximum cost-share limitation.
    (b) The rules set forth in 7 CFR 795.3 through 795.22 shall apply in 
determining whether certain individuals or other entities are to be 
considered as separate persons for the purpose of applying any maximum 
payment limitations provided for in this part. In cases where more than 
one rule would appear to be applicable, the rule which is most 
restrictive as to number of persons shall apply.

[45 FR 49522, July 25, 1980, as amended at 51 FR 12985, Apr. 17, 1986]



Sec. 701.74  Persons eligible to file application for payment of cost-shares.

    Any eligible person who bore a part of the cost of an approved 
practice is eligible to file an application for payment of cost-shares 
due.



Sec. 701.75  Time and manner of filing application and required information.

    It shall be the responsibility of persons participating in these 
programs to submit to the county office forms and information needed to 
establish the extent of the performance of approved practices and 
compliance with applicable program provisions. The time limits for 
submission of such forms and information shall be established where 
necessary for efficient administration of the programs. Such time limits 
shall afford a full and fair opportunity to those eligible to file the 
forms and information within the period prescribed. At least 2 weeks 
notice of any general time limits prescribed shall be given to the 
public. The notice shall be given by mailing notice to the office of 
each county committee and making copies available to the press. Other 
means of notification; including radio announcements and individual 
notices to person(s) affected, shall be used to the extent practicable. 
Notice of such time limits which are applicable to individual persons, 
such as time limits for reporting performance of approved practices, 
shall be issued in writing to the person(s) affected. Exceptions to the 
time limits may be made in cases where failure to submit required forms 
and information within the applicable time limits is due to reasons 
beyond the control of the farmer or rancher.

[[Page 39]]



Sec. 701.76  Appeals.

    Any person may obtain review of determinations affecting 
participation in:
    (a) The Forestry Incentive Program, in accordance with part 614 of 
this title; and
    (b) All other programs within this part, in accordance with part 780 
of this title.

[60 FR 67316, Dec. 29, 1995]



Sec. 701.77  Performance based on advice or action of county or State committee.

    Cases involving performance rendered in good faith in reliance upon 
action or advice of an authorized representative of a county or State 
committee shall be handled in accordance with part 790 of this chapter.



Sec. 701.78  Compliance with regulatory measures.

    Persons who carry out practices under these programs shall be 
responsible for obtaining the authorities, rights, easements, or other 
approvals necessary to the performance and maintenance of the practices 
in keeping with applicable laws and regulations. The person with whom 
the cost of the practice is shared shall be responsible to the Federal 
Government for any losses it may sustain because such persons infringe 
on the rights of others or fail to comply with applicable laws or 
regulations.



Sec. 701.79  Maintenance and use of practice.

    Each person receiving cost-share assistance under these programs is 
responsible for the maintenance and proper use of the practice. Each 
practice shall have an established lifespan or minimum period of time 
that it is expected to function as a conservation practice with proper 
maintenance. If it is determined that a practice has not been properly 
maintained for the established lifespan, the person receiving the cost-
share assistance shall refund all or any part of such cost-share 
assistance as determined to be appropriate by the county committee. 
Further, any agreement providing for cost-share assistance will be 
terminated with respect to the land on which the practice is located if 
there is voluntary loss of control of the land by the person receiving 
the cost-share assistance and the person acquiring control of such land 
elects not to become a successor in interest to the agreement. If the 
agreement providing for cost-share assistance is terminated as a result 
of the voluntary loss of control of the land, each person receiving 
cost-share assistance under that agreement shall be liable for refunding 
to FSA any cost-share assistance which has been received with respect to 
the practice. In addition, such person shall forfeit any right to 
receive any further cost-share assistance with respect to the land on 
which the practice is located.

[48 FR 33848, July 26, 1983]



Sec. 701.80  Actions defeating purpose of program.

    If the county committee finds with the concurrence of the State 
committee, or if the State committee finds, that a person has taken any 
action which tends to defeat the purposes of these programs, it may 
withhold or require a refund of all or part of any of these program 
payments otherwise due or paid that person during the program year. 
These actions include, but are not limited to, failure to properly 
maintain or deliberately destroying a practice carried out under a 
previous program year.



Sec. 701.81  Depriving others of cost-shares.

    If the State committee finds that any person has employed any scheme 
or device to deprive any other person of cost-shares, it may impose a 
penalty. The State committee may withhold or require a refund of all or 
part of any of these program payments otherwise due or paid that person 
during the program year. A scheme or device includes, but is not limited 
to, coercion, fraud or misrepresentation.



Sec. 701.82  Filing of false claims.

    If the State committee finds that any person has knowingly supplied 
false information or has knowingly filed a false claim, that person is 
ineligible for cost-sharing under the program year with respect to which 
information or

[[Page 40]]

claim is filed. False information or false claims include a claim for 
payment for a practice not carried out or for practices which do not 
meet the required specifications. Any amounts paid under these 
circumstances shall be refunded and any amounts otherwise due the person 
shall be withheld. The withholding or refunding of cost-shares will be 
in addition to any other penalty or liability otherwise imposed by law.



Sec. 701.83  Cost-shares not subject to claims.

    Any cost-share or portion thereof due any person shall be allowed 
without regard to questions of title under State law, and without regard 
to any claim or lien against the crop, or proceeds thereof, in favor of 
the owner or any other creditor except agencies of the U.S. Government. 
The regulations issued by the Secretary governing set-offs and 
withholdings, part 13 of this title, as amended, shall be applicable to 
these programs.



Sec. 701.84  Assignments.

    Any person who may be entitled to any cost-share under these 
programs may assign the right thereto, in whole or in part, in 
accordance with the regulations governing the assignment of payments at 
7 CFR part 709.



Sec. 701.85  Environmental considerations.

    All actions implemented under the programs in this part shall be in 
compliance with regulations issued as part 799--Environmental Quality 
and Related Environmental concerns which includes the procedures for 
complying with the National Environmental Policy Act, for Floodplain 
Management and Wetland Protection and for other environmental concerns.



Sec. 701.86  Information collection requirements.

    Information collection requirements contained in this part have been 
approved by the Office of Management and Budget under the provisions at 
44 U.S.C. Chapter 35 and have been assigned OMB Numbers 0560-0078, 0560-
0079, and 0560-0082.

[54 FR 41819, Oct. 12, 1989]



PART 702_COLORADO RIVER BASIN SALINITY (CRSC) CONTROL PROGRAM--Table of Contents




Sec.
702.1 General.
702.2 Definitions.
702.3 Administration.
702.4 Applicability.
702.5 Eligible land.
702.6 Eligible entity.
702.7 Salinity control plan.
702.8 Eligible salinity reduction practices (SRP's).
702.9 CRSC Contract and obligations of the participant.
702.10 Operation and maintenance agreements.
702.11 Obligations of USDA.
702.12 Availability of cost-share payments.
702.13 Levels and rates of cost-share payments.
702.14 Assignments.
702.15 Payments not subject to claims.
702.16 Maximum amount of cost-share payments.
702.17 Transfers of land and contract modifications.
702.18 Violations.
702.19 CRSC Contracts and operation and maintenance agreements not in 
          conformity with regulations.
702.20 Appeals.
702.21 Access to land.
702.22 Performance based upon advice or action of representatives of the 
          Department or a CD.
702.23 Filing of false claims.
702.24 Depriving others of payments.
702.25 Miscellaneous.
702.26 Paperwork Reduction Act assigned numbers.

    Authority: Sec. 201, Pub. L. 93-320, 88 Stat. 271; Sec. 2, Pub. L. 
98-569, 98 Stat. 2933 (43 U.S.C. 1592(c)).

    Source: 52 FR 16741, May 5, 1987, unless otherwise noted.



Sec. 702.1  General.

    The regulations in this part set forth the terms and conditions of 
the Colorado River Salinity Control (CRSC) Program authorized by section 
202 of the Colorado River Basin Salinity Control Act, as amended (43 
U.S.C. 1592) (the Act). Under the Act the Secretary is authorized to:
    (a) Identify salt-source areas in the Colorado River Basin;
    (b) Develop plans for implementing conservation measures that will 
reduce the salt load in the Colorado River, including the voluntary 
replacement of

[[Page 41]]

incidental fish and wildlife values foregone;
    (c) Share the cost of establishing such conservation measures and 
practices;
    (d) Provide technical assistance;
    (e) Monitor and evaluate changes in salt contributions to the 
Colorado River; and
    (f) Carry out related research, demonstration and education 
activities.



Sec. 702.2  Definitions.

    (a) The following definitions shall be applicable for the purposes 
of this part:
    (1) Applicant means an entity who has offered to enter into a CRSC 
Contract in accordance with the provisions of this part;
    (2) Actual cost means the direct costs of establishing a salinity 
reduction practice, and includes the cost of labor, supplies, and other 
necessary activities;
    (3) Average cost means the cost, determined by averaging actual 
costs and current cost estimates, considered to be necessary for a 
participant to carry out a salinity reduction practice, a designated 
component of a salinity reduction practice, or a system of practices;
    (4) Conservation District (CD) means a subdivision of a State 
organized pursuant to applicable State law. The term includes bodies 
variously known in the States as conservation district, soil 
conservation district, soil and water conservation district, natural 
resource district, resource conservation district, or natural resource 
conservation district;
    (5) Components means measurable units of a salinity reduction 
practice which, when completed by the program participant, can be 
certified by the Soil Conservation Service (SCS) as reasonable, 
identifiable progress toward completion of the practice with respect to 
which cost-share payment is being made under the CRSC program;
    (6) Conservation treatment means the combination of salinity 
reduction practices that will provide the salinity control treatment 
required to reduce seepage and improve irrigation water management in 
order to achieve the projected salt load reductions indicated in the 
applicable published USDA Salinity Control Report. Such treatment may 
include replacement of incidental fish and wildlife values foregone as a 
result of salinity control treatment applied by the participant under 
the CRSC program.
    (7) CRSC Contract means the contract including the salinity control 
plan, entered into in writing between the local Agricultural 
Stabilization and Conservation Committee (COC) and the participant which 
sets forth the terms and conditions for participation in the CRSC 
Program established in accordance with this part.
    (8) Cost-effective means maximization of the CRSC Program on-farm 
and offsite benefits at the least Federal cost per unit of salinity 
reduction.
    (9) Cost-share assistance means the providing of financial resources 
to assist program participants in establishing conservation treatment 
identified in participants' contracts;
    (10) Cost-share rate means a fixed amount of cost-share funds paid 
per unit for carrying out certain salinity reduction practices.
    (11) Deputy Administrator means the FSA Deputy Administrator for 
State and County Operations, or designee.
    (12) Entity means an individual or group of individuals, Indian 
tribe, partnership, firm, joint-stock company, corporation, association, 
trust, estate, irrigation district/company, or other public or nonpublic 
entity (except federal agencies), and wherever applicable, a State, a 
political subdivision of a State, or any agency thereof;
    (13) Fish and wildlife values foregone means incidental fish and 
wildlife habitats that may be affected adversely by salinity reduction 
practices applied by the program participant;
    (14) Irrigation district/company means a group of individuals 
(private or public) associated together in a locality, that has a vested 
interested in the operation of an irrigation distribution system that 
serve as a specific area. This definition includes irrigation districts, 
mutual water companies or districts, water conservancy districts, canal 
companies, and other similar entities;
    (15) Lifespan means the period of time during which a salinity 
reduction practice is expected to effectively achieve

[[Page 42]]

or provide the results for which it was developed and implemented.
    (16) Offsite benefits means those benefits which accrue downstream 
as a result of reduced salinity concentrations in the Colorado River by 
the salt load reductions achieved through implementation of the CRSC 
Program and/or its constituent practices and treatments;
    (17) On-farm benefits means those benefits which accrue on a farm 
from improved irrigation systems and efficiencies, including reduced 
production costs, reduced labor costs, reduced operation and maintenance 
costs, and improved crop yields;
    (18) Operation and Maintenance Agreement means the agreement entered 
into between the COC and the participant which sets forth the terms and 
conditions requiring the participant to use and maintain the salinity 
reduction practices for their effective lifespans as set forth in the 
agreement;
    (19) Participant means any entity who has entered into an approved 
CRSC Contract with the COC to participate in the CRSC Program;
    (20) Project implementation plan means a plan of operations 
developed by Farm Service Agency, Extension Service and Soil 
Conservation Service, in consultation with local officials for the 
purpose of implementing a project plan for a specific salt source area;
    (21) Project plan means that plan of conservation treatment that is 
identified in the applicable USDA Salinity Control Report as the 
preferred plan for implementation of salinity reduction practices in a 
specific salt source area. The project plan will identify cost-effective 
salinity reduction practices, the land which should receive conservation 
treatment on a priority basis in relation to other land in the specific 
salt source area, and the levels of conservation treatment needed in the 
specific salt source area in order to achieve the most cost-effective 
salinity control objectives for the particular area to be achieved;
    (22) Salinity control plan means the plan and schedule of operations 
that sets forth salinity reduction practices that must be establish on a 
specific unit of land. The salinity control plan shall be developed by 
the applicant with assistance from the SCS and must be approved by the 
CD;
    (23) Salinity Reduction Practice (SRP) means a specific conservation 
practice designed to reduce salt loading from a salt source area or to 
replace incidental fish and wildlife values foregone that is identified 
in a project plan and project implementation plan for a salt-source 
area;
    (24) Salt-source area means a geographical area within the Colorado 
River Basin that has been identified by SCS as a significant 
contributing source of salt to the Colorado River;
    (25) Specifications means minimum quantity and quality requirements 
established by SCS to meet the standard for a specific conservation 
practice;
    (26) State Conservationist means the SCS official in charge of 
agency operations within a state, as set forth in part 600 of this 
chapter;
    (27) Technical assistance means use of personnel and financial 
resources to identify salt-source areas, develop project plans, prepare 
salinity control plans, contracts, and designs, supervise plan 
installation, and carry out research, demonstration, education, 
monitoring, and evaluation activities;
    (28) USDA Salinity Control Report means a report that identifies 
salt source areas in the Colorado River Basin and establishes a cost-
effective project plan for such areas designed to reduce the salinity 
levels in the Colorado River. The USDA Salinity Control Report is 
prepared and published by the Soil Conservation Service with provision 
for public comment;
    (29) Technical guide means a document on file in the local SCS 
office containing technical information and specifications for the 
conservation of soil, water, plant, animal, and related natural 
resources specifically applicable to the area for which it is prepared.
    (b) In the regulations in this part and in all instructions, forms, 
and documents in connection therewith, all other words and phrases 
shall, unless the context of subject matter otherwise requires, have the 
meanings assigned to them in the regulations governing reconstitutions 
of farms, allotments and bases, 7 CFR part 719.

[52 FR 16741, May 5, 1987, as amended at 58 FR 11785, Mar. 1, 1993]

[[Page 43]]



Sec. 702.3  Administration.

    (a) Farm Service Agency. (1) The Farm Service Agency (FSA), under 
the general supervision of the Administrator, FSA, shall administer the 
program established by this part. This program shall be carried out in 
the field by State ASC committees (STC) and local county ASC committees 
(COC).
    (2) Except as provided in paragraph (b) of this section, the Deputy 
Administrator, State and County Operations, FSA (Deputy Administrator), 
may determine any question arising under the program provided for in 
this part, may reverse or modify any determination made by an STC or COC 
in connection with this program, and may administer any and all phases 
of this program delegated to the COC, STC, or any employee(s) where the 
COC, STC, or any employee fails to perform a function required in these 
regulations. In exercising this authority, the Deputy Administrator may 
authorize a person or persons to carry out this program for such period 
of time as is deemed necessary.
    (b) Soil Conservation Service. (1) The Soil Conservation Service 
(SCS) shall:
    (i) Identify salt source areas in the Colorado River Basin;
    (ii) Develop USDA Salinity Control Reports;
    (iii) Assist participants in developing salinity control plans; and
    (iv) Provide such other technical assistance in the implementation 
of the CRSC Program as is determined to be necessary.
    (2) The Chief, SCS, may determine any question arising under the 
CRSC Program with respect to the activities of SCS, State 
Conservationists, and conservation districts.
    (3) In developing the USDA Salinity Control Report and implementing 
the project plan, SCS shall coordinate with other agencies of the U.S. 
Department of Agriculture, the United States Department of the Interior, 
and the Environmental Protection Agency.
    (c) The Extension Service (ES) shall develop and coordinate 
information and educational programs and may provide other technical 
support to carry out the program provided for by this part.
    (d) Other USDA agencies such as Cooperative State Research Service 
(CSRS) and the Agricultural Research Service (ARS) may conduct research 
and may provide other technical support needed to carry out the CRSC 
Program.



Sec. 702.4  Applicability.

    (a) The provision of this part shall be applicable to areas within 
the Colorado River Basin that have been identified by SCS as salt source 
areas.
    (b) The program provided for by this part shall be applicable to 
private lands, Indian tribal lands, lands owned or controlled by 
irrigation districts or companies, Federal land under the control of the 
USDA, and State and local government lands.



Sec. 702.5  Eligible land.

    For the purposes of this part, eligible land is land that is within 
the Colorado River Basin area which:
    (a) Has been identified by SCS as a salt source area;
    (b) Is the subject of a published USDA Salinity Control Report and 
an approved project implementation plan;
    (c) Has been irrigated at least two years during the period between 
1982 and 1986, inclusive; and
    (d) Notwithstanding the criteria articulated in paragraphs (a) 
through (c) of this section, the Deputy Administrator has final 
authority to approve land for CRSC program eligibility if one of the 
following conditions is satisfied:
    (1) If it is determined impossible to reorganize the existing 
irrigation system to increase irrigation efficiencies to obtain salt 
load reduction, irrigated land may be exchanged for nonirrigated land.
    (2) Nonirrigated wildlife areas devoted to replacing incidental fish 
and wildlife values foregone because of the CRSC program.
    (3) Incidental land, which in the course of improving or 
reorganizing the existing irrigation system, becomes irrigable.

[52 FR 16741, May 5, 1987, as amended at 58 FR 11785, Mar. 1, 1993]

[[Page 44]]



Sec. 702.6  Eligible entity.

    In order to be eligible to enter into a CRSC Contract, an entity 
must own or have control over eligible land.



Sec. 702.7  Salinity control plan.

    (a) The applicant, in consultation with SCS, shall develop the 
salinity control plan which is the most cost-effective consistent with 
the project plan.
    (b) All salinity control plans must be approved by the CD in order 
for the SRP's contained therein to be eligible for cost-share 
assistance.
    (c) When approving salinity control plans, the CD shall ensure that 
the salinity control plan is consistent with the approved project plan 
and cost-effective SRP's identified in the approved project 
implementation plan for the area.



Sec. 702.8  Eligible salinity reduction practices (SRP's).

    (a) Eligible SRP's are those practices specified in the project 
implementation plan and the participant's salinity control plan that:
    (1) Significantly reduce the salt loading from a unit of land; or
    (2) Replace incidental fish and wildlife values foregone; or
    (3) Reduce erosion or seepage to a degree which significantly 
benefits salinity control.
    (b) Notwithstanding the foregoing provisions of this section, the 
following practices shall not be considered to be eligible SRP's:
    (1) Practices installed primarily for the purpose of bringing 
additional land into production, for increasing production above that 
which is incidental to application of conservation treatment for 
salinity control, or for flood protection; and
    (2) Practices which are installed or commenced before the contract 
for cost-share assistance has been approved.



Sec. 702.9  CRSC Contract and obligations of the participant.

    (a) In order to receive cost-share assistance in accordance with 
this part, an eligible entity must enter into a CRSC Contract with a COC 
and, if required by the COC, enter into separate operation and 
maintenance agreements in accordance with Sec. 702.10 of this part.
    (b) The CRSC Contract will be comprised of:
    (1) The terms and conditions of the contract; and
    (2) The salinity control plan.
    (c) All CRSC Contracts shall have a term of not less than 3 nor more 
than 10 years.
    (d) Eligible entities may offer to enter into a CRSC Contract in 
accordance with this part through the COC located in the same county as 
the eligible land or such other COC designated to administer contracts 
in the project area.
    (e) By entering into a CRSC Contract, the participant agrees to:
    (1) Carry out the terms and conditions of the CRSC Contract;
    (2) Implement the salinity control plan:
    (i) In accordance with the schedule of completion dates included in 
such plan, unless an extension of time is granted by the COC in 
consultation with the CD; and
    (ii) Install all SRP's included in the salinity control plan in 
accordance with the SCS field office technical guide, regardless of 
whether the applicant receives cost-share assistance with respect to a 
SRP;
    (3) Acquire all authorities, rights, easements, permits or other 
approvals necessary to install and maintain the SRP's and for compliance 
with applicable Federal, State, and local laws and regulations;
    (4) Hold the Federal government harmless for any losses it may 
sustain if the participant infringes on the rights of others or fails to 
comply with applicable Federal, State, or local laws or regulations;
    (5) Operate and maintain, at no cost to the Federal government, the 
SRP's as specified in the salinity control plan and ACP-245, Practice 
Approval and Payment Application, or as specified in separate operation 
and maintenance agreements entered into by the participant for the 
effective lifespan of the SRP's, as determined by SCS; and
    (6) Not undertake any action on the land subject to the CRSC 
Contract that tends to defeat the purposes of the program provided for 
by this part.

[[Page 45]]

    (f) All entities who have a present possessory interest in the land, 
to be eligible for CRSC cost share, must sign a CRSC contract.
    (g) The participant and each entity signing the CRSC Contract shall 
be jointly and severally responsible for compliance with the contract 
and the provisions of this part and for any refunds or payments which 
may be required for violation of any of the terms and conditions of the 
CRSC Contract and the provisions of this part.
    (h) The CRSC contract may require that all participants and/or 
landowners, as a condition of eligibility for cost-share assistance, 
grant to the Secretary a recordable security interest in the property or 
equipment of the SRP's that are installed, with the value of the granted 
interest to be determined by FSA.
    (i) The Deputy Administrator, or the Deputy Administrator's 
designee, may, in consultation with SCS and the CD, accept or reject 
offers to enter into a CRSC Contract.
    (j) CRSC Contracts shall be implemented, and salinity control plans 
shall be developed, in the order of priority within the applicable salt 
source area that is established by the COC and CD in consultation with 
SCS.

[52 FR 16741, May 5, 1987, as amended at 58 FR 11785, Mar. 1, 1993]



Sec. 702.10  Operation and maintenance agreements.

    (a) The participant shall enter into with the COC any operation and 
maintenance agreements determined to be necessary by the COC in order to 
ensure proper operation and maintenance of the SRP's provided for in the 
CRSC Contract.
    (b) The operation and maintenance agreement will be comprised of:
    (1) The terms and conditions of the agreement; and
    (2) An operation and maintenance plan prepared by SCS.
    (c) By entering in a operation and maintenance agreement, the 
participant agrees to:
    (1) Carry out the terms and conditions of the operation and 
maintenance agreement;
    (2) Operate and maintain, at no cost to the Federal government, the 
SRP's for the effective lifespan of all SRP's included in the operation 
and maintenance agreement;
    (3) Operate, maintain and inspect the SRP's in accordance with the 
operation and maintenance plan;
    (4) Obtain prior COC and SCS approval of all plans, designs, and 
specifications for any alteration to the SRP's;
    (5) Prohibit the installation of any structure or facility that will 
interfere with the operation and maintenance of the SRP's;
    (6) Notify the COC and SCS of any agreement to be entered into with 
other parties for the operation and maintenance of all or part of SRP's 
and provide the COC and SCS with a copy of such agreement when it has 
been signed by the participant and the other party; and
    (7) Not undertake any action on the land subject to the operation 
and maintenance agreement that tends to defeat the purposes of the CRSC 
program;
    (d) The participant and each person signing the operation and 
maintenance agreement shall be jointly and severally responsible for 
compliance with the operation and maintenance agreement and the 
provisions of this part and for any refunds or payment adjustments that 
may be required for violation of any of the terms and conditions of the 
operation and maintenance agreement and provisions of this part.



Sec. 702.11  Obligations of USDA.

    FSA shall, subject to the availability of funds, share the cost with 
participants of establishing eligible SRP's specified in the salinity 
control plan at the levels and rates of cost-sharing determined in 
accordance with the provisions of Sec. 702.13 and SCS shall provide 
such technical assistance as may be necessary to assist the participant 
in carrying out the CRSC Contract.



Sec. 702.12  Availability of cost-share payments.

    (a) Cost-share payments shall be made available to a participant in 
a CRSC Contract upon a determination by the COC that SCS has certified 
that

[[Page 46]]

the eligible SRP or an identifiable portion thereof has been established 
in accordance with the appropriate standards and specifications and that 
such SRP would serve the functional purposes for which the practice is 
intended.
    (b) Cost-share payments may be made available under this part only 
for the establishment or installation of an eligible SRP.
    (c) Cost-share assistance may be approved for the replacement, 
enlargement, or restoration of SRP's installed under a CRSC Contract if 
such practices, as originally installed, failed to achieve the desired 
salinity reduction and if:
    (1) The replacement, enlargement, or restoration of the SRP is 
required to solve identified problems or to achieve salt reduction 
benefits;
    (2) The approved specifications for the SRP were met in the original 
installation of the practice; and
    (3) The failure of the SRP to solve the identified problem or to 
achieve salt reduction benefits was caused by circumstances beyond the 
control of the participant.
    (d) If a participant has taken any action which tends to defeat the 
purposes of the program provided for by this part, the COC may withhold 
or require a refund of all or part of any payments otherwise due or paid 
that participant in accordance with this part. Such actions include, but 
are not limited to, failure to properly maintain or deliberately 
destroying a SRP.



Sec. 702.13  Levels and rates of cost-share payments.

    (a) The level of Federal cost-share assistance for the required 
SRP's for the project shall be determined by formulas as established in 
the USDA Salinity Control Report.
    (b) Except as provided in paragraph (c) of this section, cost-share 
payments shall not exceed the lesser of 70 percent of the average cost 
or 70 percent of the actual cost of the installation of the SRP.
    (c) The Deputy Administrator, in consultation with the USDA Salinity 
Control Coordinating Committee, may approve cost-share levels in excess 
of 70 percent of the average or actual cost of installation of the SRP 
or in excess of the level based on the ratio of on-farm and offsite 
benefits if such increased assistance is necessary to obtain acceptable 
program participation. Higher cost-share levels shall be considered only 
when one or more of the following apply, unless the Secretary finds at 
his descretion that such cost-sharing requirement would result in a 
failure to proceed with needed on-farm measures:
    (1) On-farm benefits that are low relative to offsite benefits;
    (2) Higher degree of project cost-effectiveness and magnitude of 
salinity reduction benefits to be achieved relative to other projects;
    (3) The need for and the cost of implementing voluntary SRP's to 
replace incidental fish and wildlife values foregone;
    (d) The combined cost-share assistance provided by Federal, State, 
and local governments or subdivisions thereof shall not exceed 100 
percent of the cost of installing the SRP.

[52 FR 16741, May 5, 1987, as amended at 58 FR 11786, Mar. 1, 1993]



Sec. 702.14  Assignments.

    Any participant entitled to cost-share payments under this program 
may assign the right to receive such payment, in whole or in part, as 
provided in the regulations at 7 CFR part 709, Assignment of Payment, or 
as provided in instructions issued by the Deputy Administrator.



Sec. 702.15  Payments not subject to claims.

    Subject to the regulations found at 7 CFR part 13, any cost-share 
payment or portion thereof due any entity shall be allowed without 
regard to questions of title under State law, and without regard to any 
claim or lien against the practice in favor of the owner or any other 
creditor, except agencies of the United States Government.



Sec. 702.16  Maximum amount of cost-share payments.

    (a) Maximum payments for on-farm SRP's.
    (1) Except as provided in paragraph (a)(2) of this section, the 
maximum amount of cost-share payments that a

[[Page 47]]

COC may approve for the establishment of on-farm SRP's on all land owned 
or controlled by a participant for the life of the program provided for 
by this part shall not exceed $100,000.
    (2) The Deputy Administrator may approve cost-share payments to a 
participant for the establishment of on-farm SRP's in excess of 
$100,000.
    (b) Except as provided in paragraphs (b)(1) and (b)(2) of this 
section, the maximum program cost-share payment that a COC may approve 
for implementing required SRP's for installing and improving canals and 
laterals on all land owned and controlled by a participant for the life 
of the program shall not exceed $200,000.
    (1) Upon the request of the COC, the STC may authorize the COC to 
approve cost-share payments to a participant for the establishment of 
canal and lateral improvements in an amount that exceeds, $200,000 but 
not greater than $400,000.
    (2) Upon the request of the COC, the Deputy Administrator may 
authorize the COC to approve cost-share payments to a participant for 
the establishment of canal and laterals improvements in amounts 
exceeding $400,000.
    (c) Cost-sharing payments in excess of $100,000 shall be considered 
only when such payment will result in greater total offsite benefits, 
because the offsite benefits for the participants SCP, are greater than 
those of other participants under consideration at the same time and one 
or more of the following conditions exist:
    (1) The cost of establishing required SRP's on the participant's 
land is high relative to the cost of installing practices on other 
similar land because of barriers or limitations imposed by nature or by 
man through past irrigation system practices;
    (2) The extent of SRP's that must be established on a participant's 
land; and
    (3) Increases in the cost of conservation materials and services 
that are beyond the participant's control.



Sec. 702.17  Transfers of land and contract modifications.

    (a) CRSC Contracts may be transferrred or modified with the 
agreement of all parties to the contract. The transferee shall assume 
full responsibility for performance under the CRSC Contract, including 
the implementation of scheduled SRP's and the operation and maintenance 
of existing and scheduled SRP's.
    (b) A participant who sells or loses control of the land under a 
CRSC Contract or any related operation and maintenance agreement to a 
new owner who refuses to perform the provisions of the CRSC Contract or 
operation and maintenance agreement or a participant who sells the water 
rights before there is compliance with all of the terms and conditions 
of a CRSC Contract or operation and maintenance agreement may be 
required to refund all or a portion of the cost-share assistance earned 
under the program.



Sec. 702.18  Violations.

    (a)(1) If a participant violates the CRSC Contract or any related 
operations and maintenance agreement, the COC may, after considering the 
recommendations of the CD and SCS, terminate the CRSC Contract and 
operation and maintenance agreement.
    (2) If the CRSC Contract is terminated by the COC in accordance with 
this section, the participant shall forfeit all rights to further cost-
share payments under the CRSC Contract and shall refund all or part of 
the payments received as determined by the COC.
    (b) The following actions constitute a violation of the CRSC 
Contract or any related operation and maintenance agreement by a 
participant:
    (1) Destruction of a SRP on land which is the subject of a CRSC 
Contract, unless prior approval in writing is granted by FSA with SCS 
concurrence;
    (2) Failure to comply with the terms and conditions of the CRSC 
Contract and any related operation and maintenance agreements;
    (3) Filing of a false claim;
    (4) Undertaking any action during the CRSC Contract or any operation 
and maintenance agreement period that tends to defeat the purpose of the 
program, including the destruction of any existing conservation 
practices that were established under any other cost-share program 
unless the participant provides evidence that all of the

[[Page 48]]

participant's obligations under such other program have been met; or
    (5) Employment of any scheme or device to obtain cost-share 
assistance or additional cost-share assistance, or to deprive any other 
land user of cost-share assistance or the right to participate in the 
program.
    (c) The Deputy Administrator may terminate any CRSC Contract and any 
related operation and maintenance agreements by mutual agreement with 
the paticipant based upon recommendations from COC, STC, SCS, and CD, if 
the termination of the CRSC Contract and operation and maintenance 
agreement is determined to be in the best interest of the public.
    (d) If the participant fails to perform the terms and conditions of 
the CRSC contract and the Deputy Administrator determines, after 
considering the recommendations of the CD and SCS, that such failure 
does not warrant termination of the CRSC contract, the Deputy 
Administrator may require such participant to refund all or part of the 
payments received under the CRSC contract, or to accept such adjustments 
in the payment as are determined to be appropriate by the Deputy 
Administrator.

[52 FR 16741, May 5, 1987, as amended at 58 FR 11786, Mar. 1, 1993]



Sec. 702.19  CRSC Contracts and operation and maintenance agreements 
not in conformity with regulations.

    If, after a CRSC Contract and related operation and maintenance 
agreement are entered in by the COC with a participant, it is discovered 
that such contract and operation and maintenance agreement are not in 
conformity with the provisions of this part as the result of a 
misunderstanding of the program procedures by a signatory to the 
contract and operation and maintenance agreement, a modification of the 
contract and operation and maintenance agreement may be made by mutual 
agreement. If the parties to the CRSC Contract and operation and 
maintenance agreement cannot reach agreement with respect to such 
modification, the contract and operation and maintenance agreement shall 
be terminated and all payments paid or payable under the contract shall 
be forfeited or refunded to the Federal government, except as may 
otherwise be allowed in accordance with the provisions of Sec. 702.18 
of this part.



Sec. 702.20  Appeals.

    The participant may obtain a review, in accordance with the 
provisions of 7 CFR part 614 and 7 CFR part 11, of any administrative 
decision made under the provisions of this part.

[60 FR 67316, Dec. 29, 1995]



Sec. 702.21  Access to land.

    The COC, SCS or other agency providing technical services or 
representatives thereof shall have the right of access to land for which 
application to enter into a CRSC Contract has been made or for which a 
CRSC Contract has been entered into and the right to examine any program 
records to ascertain the accuracy of any representation made in the 
application or to determine compliance with the contract.



Sec. 702.22  Performance based upon advice or action of representatives 
of the Department or a CD.

    Notwithstanding any other provision of law, performance rendered in 
good faith in reliance upon the action or advice of any authorized 
representative of a CD, a representative of SCS or the STC or COC may be 
accepted by the Chief of SCS or the Deputy Administrator, as applicable, 
as meeting the requirements of this program. SCS or the Deputy 
Administrator, respectively, may grant relief because of such good faith 
reliance to the extent it is deemed necessary to provide fair and 
equitable treatment.



Sec. 702.23  Filing of false claims.

    (a) If it is determined by the COC, with STC concurrence, that any 
participant has knowingly submitted false information or filed a false 
claim, such participant shall be ineligible for payments under the 
provisions of this part with respect to the calendar year in which the 
false information or claim was filed.
    (b) False information or false claims include a claim for payment 
for a SRP not carried out or for the establishment of SRP's which do not 
meet the required specifications. Any amounts

[[Page 49]]

paid under these circumstances shall be refunded and any amounts 
otherwise due the participant shall be withheld. The withholding or 
refunding of such payments will be in addition to any other penalty or 
liability otherwise imposed by law.



Sec. 702.24  Depriving others of payments.

    If the COC with STC concurrence finds that any participant has 
employed any scheme or device to deprive any other person of payments 
under this part, it may withhold or require a refund of all or part of 
any program payment otherwise due or paid that person in accordance with 
the CRSC Contract. A scheme or device includes, but is not limited to, 
coercion, fraud, or misrepresentation.



Sec. 702.25  Miscellaneous.

    (a) In accordance with the regulations set forth at 7 CFR part 796:
    (1) No payment shall be made to any participant who harvests or 
knowingly permits to be harvested for illegal use, marihuana or other 
such prohibited drug-producing plants on any part of the lands owned or 
controlled by such participants; and
    (2) Any participant who is convicted under Federal or State law of 
planting, cultivating, growing, producing, harvesting, or storing a 
controlled substance in any crop year shall be ineligible for any 
payments under this part during that crop year and the four (4) 
succeeding crop years.
    (b) In case of death, incompetency, or disappearance of any 
participant, any cost-share payment due shall be paid to the 
participant's successor in accordance with provisions of 7 CFR part 707.



Sec. 702.26  Paperwork Reduction Act assigned numbers.

    The Office of Management and Budget has approved the information 
collection requirements contained in these regulations under the 
provisions of 44 U.S.C. Chapter 33 and OMB number 0560-0128 has been 
assigned.



PART 707_PAYMENTS DUE PERSONS WHO HAVE DIED, DISAPPEARED, OR HAVE 
BEEN DECLARED INCOMPETENT--Table of Contents




Sec.
707.1 Applicability.
707.2 Definitions.
707.3 Death.
707.4 Disappearance.
707.5 Incompetency.
707.6 Death, disappearance, or incompetency of one eligible to apply for 
          payment pursuant to the regulations in this part.
707.7 Form of application.

    Authority: 54 Stat. 728, as amended, sec. 121, 70 Stat. 197, sec. 
375, 52 Stat. 66, as amended, sec. 124(i), 75 Stat. 300, sec. 307(h), 76 
Stat. 617, sec. 318, 76 Stat. 622, sec. 324(2), 76 Stat. 630, sec. 704, 
68 Stat. 911, secs. 4, 8(b), 49 Stat. 164, 1149, as amended, sec. 
101(4), 76 Stat. 606, sec. 3, 77 Stat. 45, sec. 4, 62 Stat. 1070; 5 
U.S.C. 301, 7 U.S.C. 1334 note, 1339, 1375, 1379j, 1385, 1783, 1809; 16 
U.S.C. 590d, 590h(b), 590(e), 590p(h), 15 U.S.C. 714b(d)(j)(k).

    Source: 30 FR 6246, May 5, 1965, unless otherwise noted.



Sec. 707.1  Applicability.

    This part applies to all programs in title 7 of the Code of Federal 
Regulations which are administered by the Farm Service Agency under 
which payments are made to eligible program participants. This part also 
applies to all other programs to which this part is applicable by the 
individual program regulations.



Sec. 707.2  Definitions.

    ``Person'' when relating to one who dies, disappears, or becomes 
incompetent, prior to receiving payment, means a person who has earned a 
payment in whole or in part pursuant to any of the programs to which 
this part is applicable. ``Children'' shall include legally adopted 
children who shall be entitled to share in any payment in the same 
manner and to the same extent as legitimate children of natural parents. 
``Brother'' or ``sister'', when relating to one who, pursuant to the 
regulations in this part, is eligible to apply for the payment which is 
due a person who

[[Page 50]]

dies, disappears, or becomes incompetent prior to the receipt of such 
payment, shall include brothers and sisters of the half blood who shall 
be considered the same as brothers and sisters of the whole blood. 
``Payment'' means a payment by draft, check or certificate pursuant to 
any of the Programs to which this part is applicable. Payments shall not 
be considered received for the purposes of this part until such draft, 
check or certificate has been negotiated or used.



Sec. 707.3  Death.

    (a) Where any person who is otherwise eligible to receive a payment 
dies before the payment is received, payment may be made upon proper 
application therefor, without regard to claims of creditors other than 
the United States, in accordance with the following order of precedence:
    (1) To the administrator or executor of the deceased person's 
estate.
    (2) To the surviving spouse, if there is no administrator or 
executor and none is expected to be appointed, or if an administrator or 
executor was appointed but the administration of the estate is closed 
(i) prior to application by the administrator or executor for such 
payment or (ii) prior to the time when a check, draft, or certificate 
issued for such payment to the administrator or executor is negotiated 
or used.
    (3) If there is no surviving spouse, to the sons and daughters in 
equal shares. Children of a deceased son or daughter of a deceased 
person shall be entitled to their parent's share of the payment, share 
and share alike. If there are no surviving direct descendants of a 
deceased son or daughter of such deceased person, the share of the 
payment which otherwise would have been made to such son or daughter 
shall be divided equally among the surviving sons and daughters of such 
deceased person and the estates of any deceased sons or daughters where 
there are surviving direct descendants.
    (4) If there is no surviving spouse and no direct descendant, 
payment shall be made to the father and mother of the deceased person in 
equal shares, or the whole thereof to the surviving father or mother.
    (5) If there is no surviving spouse, no direct descendant, and no 
surviving parent, payment shall be made to the brothers and sisters of 
the deceased person in equal shares. Children of a deceased brother or 
sister shall be entitled to their parent's share of the payment, share 
and share alike. If there are no surviving direct descendants of the 
deceased brother or sister of such deceased person, the share of the 
payment which otherwise would have been made to such brother or sister 
shall be divided equally among the surviving brothers and sisters of 
such deceased person and the estates of any deceased brothers or sisters 
where there are surviving direct descendants.
    (6) If there is no surviving spouse, direct descendant, parent, or 
brothers or sisters or their descendants, the payment shall be made to 
the heirs-at-law in accordance with the law of the State of domicile of 
the deceased person.
    (b) If any person who is entitled to payment under the above order 
of prec edence is a minor, payment of his share shall be made to his 
legal guardian, but if no legal guardian has been appointed payment 
shall be made to his natural guardian or custodian for his benefit, 
unless the minor's share of the payment exceeds $1,000, in which event 
payment shall be made only to his legal guardian.
    (c) Any payment which the deceased person could have received may be 
made jointly to the persons found to be entitled to such payment or 
shares thereof under this section or, pursuant to instructions issued by 
the Farm Service Agency, a separate payment may be issued to each person 
entitled to share in such payment.



Sec. 707.4  Disappearance.

    (a) In case any person otherwise eligible to receive payment 
disappears before receiving the payment, such payment may be made upon 
proper application therefor, without regard to claims of creditors other 
than the United States, to one of the following in the order mentioned:
    (1) The conservator or liquidator of his estate, if one be duly 
appointed.
    (2) The spouse.
    (3) An adult son or daughter or grandchild for the benefit of his 
estate.

[[Page 51]]

    (4) The mother or father for the benefit of his estate.
    (5) An adult brother or sister for the benefit of his estate.
    (6) Such person as may be authorized under State law to receive 
payment for the benefit of his estate.
    (b) A person shall be deemed to have disappeared if (1) he has been 
missing for a period of more than 3 months, (2) a diligent search has 
failed to reveal his whereabouts, and (3) such person has not 
communicated during such period with other persons who would be expected 
to have heard from him. Evidence of such disappearance must be presented 
to the county committee in the form of a statement executed by the 
person making the application for payment, setting forth the above 
facts, and must be substantiated by a statement from a disinterested 
person who was well acquainted with the person who has disappeared.



Sec. 707.5  Incompetency.

    (a) Where any person who is otherwise eligible to receive a payment 
is adjudged incompetent by a court of competent jurisdiction before the 
payment is received, payment may be made, upon proper application 
therefor, without regard to claims of creditors other than the United 
States, to the guardian or committee legally appointed for such 
incompetent person. In case no guardian or committee has been appointed, 
payment, if not more than $1,000, may be made without regard to claims 
of creditors other than the United States, to one of the following in 
the order mentioned for the benefit of the incompetent person:
    (1) The spouse.
    (2) An adult son, daughter, or grandchild.
    (3) The mother or father.
    (4) An adult brother or sister.
    (5) Such person as may be authorized under State law to receive 
payment for him (see standard procedure prescribed for the respective 
region).
    (b) In case payment is more than $1,000, payment may be made only to 
such person as may be authorized under State law to receive payment for 
the incompetent.



Sec. 707.6  Death, disappearance, or incompetency of one eligible to 
apply for payment pursuant to the regulations in this part.

    In case any person entitled to apply for a payment pursuant to the 
provisions of Sec. 707.3, Sec.  707.4, Sec.  707.5, or this section, 
dies, disappears, or is adjudged incompetent, as the case may be, after 
he has applied for such payment but before the payment is received, 
payment may be made upon proper application therefor, without regard to 
claims of creditors other than the United States, to the person next 
entitled thereto in accordance with the order of precedence set forth in 
Sec. 707.3, Sec.  707.4, or Sec.  707.5, as the case may be.



Sec. 707.7  Form of application.

    Persons desiring to claim payment in accordance with this part 707 
may do so on Form FSA-325, ``Application for Payment of Amounts Due 
Persons Who Have Died, Disappeared, or Have Been Declared Incompetent''. 
If the person who died, disappeared, or was declared incompetent did not 
apply for payment by filing the applicable program application for 
payment form, such program application for payment must also be filed in 
accordance with applicable regulations. If the payment is made under the 
Naval Stores Conservation Program, Part II of the Form FSA-325 shall be 
executed by the local District Supervisor of the U.S. Forest Service. In 
connection with applications for payment under all other programs 
itemized in Sec. 707.1, Form FSA-325, and program applications for 
payments where required, shall be filed with the FSA county office where 
the person who earned the payment would have been required to file his 
application.



PART 708_RECORD RETENTION REQUIREMENTS_ALL PROGRAMS--Table of Contents




    Authority: Sec. 4, 49 Stat. 164, secs. 7-17, 49 Stat. 1148, as 
amended; 16 U.S.C. 590d, 590g-590q.



Sec. 708.1  Record retention period.

    For the purposes of the programs in this chapter, no receipt, 
invoice, or other record required to be retained by any agricultural 
producer as evidence

[[Page 52]]

tending to show performance of a practice under any such program needs 
to be retained by such producer more than two years following the close 
of the program year of the program.

[25 FR 105, Jan. 7, 1960. Redesignated at 26 FR 5788, June 29, 1961]

[[Page 53]]



 SUBCHAPTER B_FARM MARKETING QUOTAS, ACREAGE ALLOTMENTS, AND PRODUCTION 
                               ADJUSTMENT





PART 711_MARKETING QUOTA REVIEW REGULATIONS--Table of Contents




                                 General

Sec.
711.1 Effective date.
711.2 Expiration of time limitations.
711.3 Definitions.
711.4 Forms.
711.5 Public information.

                            Review Committee

711.6 Eligibility as member of a panel.
711.7 Appointment of members of a panel.
711.8 Oath of office.
711.9 Composition of review committee.
711.10 Term of office.
711.11 Compensation.
711.12 Effect of change in composition of review committee.

                              Jurisdiction

711.13 Areas of venue and jurisdiction.

                     Application for Review of Quota

711.14 Application for review.
711.15 Matters subject to review.
711.16 County committee answer.
711.17 Amendments.

                        Hearing and Determination

711.18 Place and schedule of hearing.
711.19 Notice of hearing.
711.20 Continuances.
711.21 Conduct of hearing.
711.22 Nonappearance of applicant.
711.23 Determination by review committee.
711.24 Service of determination.
711.25 Reopening of hearing.
711.26 Record of hearing.

                            Court Proceedings

711.27 Procedure in the case of court proceedings.

                               Puerto Rico

711.28 Special provisions applicable to Puerto Rico.

                           OMB Control Numbers

711.29 OMB control numbers assigned pursuant to the Paperwork Reduction 
          Act.

    Authority: Secs. 301, 363-368, 371, 374, 375, 379, 52 Stat. 38, as 
amended, 63-66, amended, 79 Stat. 1211, as amended; 7 U.S.C. 1301, 1363-
1368, 1371, 1374, 1375, 1379.

    Source: 35 FR 15355, Oct. 2, 1970, unless otherwise noted.

                                 General



Sec. 711.1  Effective date.

    The Marketing Quota Review Regulations (26 FR 10204, 27 FR 4831, 
6539, 28 FR 3913, 31 FR 4271, 5663, 32 FR 15704) shall remain in effect 
and shall apply to all actions and proceedings taken prior to October 
15, 1970, and such regulations are superseded as of midnight, October 
14, 1970. The provisions of Sec. Sec. 711.1 to 711.50 are effective 
October 15, 1970.



Sec. 711.2  Expiration of time limitations.

    The provisions of part 720 of this chapter concerning the expiration 
of time limitations shall apply to this part.



Sec. 711.3  Definitions.

    (a) General terms. In determining the meaning of the provisions of 
this part, unless the context indicates otherwise, words importing the 
singular include and apply to several persons or things, words importing 
the plural include the singular, words importing the masculine gender 
include the feminine as well, and words used in the present tense 
include the future as well as the present. The definitions in part 719 
of this chapter shall apply to this part.
    (b) Act. Act means the Agricultural Adjustment Act of 1938, and any 
amendments or supplements thereto.
    (c) Applicant. Applicant means the farmer who filed an application 
for review of a farm marketing quota and if a hearing involves the quota 
of a farm resulting from the reconstitution by division of a parent 
farm, the farm operator of each farm resulting from such reconstitution 
shall be considered an applicant for purposes of this part.
    (d) Clerk. Clerk means the county executive director for the county 
in which the application for review is filed unless another employee of 
the county or State office is designated by the State executive director 
to serve as clerk to the review committee.
    (e) Review committee. Review committee means three farmers 
designated

[[Page 54]]

to review a quota by the State executive director from the panel of 
farmers appointed by the Secretary under section 363 of the Act.
    (f) Quota. Quota means the farm marketing quota established under 
the Act for a farm during a year in which quotas are approved in the 
national referendum for a commodity, including any of the following 
factors:
    (1) Farm acreage allotment, farm marketing quota, and any 
adjustments in such allotment and quota resulting from: (i) Program 
violations; (ii) lease and transfer; (iii) sale and purchase; (iv) 
overmarketing and undermarketing; (v) release and reapportionment; (vi) 
eminent domain transactions; and (vii) forfeiture and reallocation.
    (2) Farm preliminary yield, farm normal yield and farm yield.
    (3) A determination of the land constituting a farm for which a farm 
acreage allotment or farm marketing quota is established, including the 
following: (i) Land devoted to nonagricultural use, (ii) land used for 
agricultural purposes, (iii) cropland acreage; and (iv) tillable 
cropland.
    (4) Acreage planted to the commodity on the farm.
    (5) Actual production for the farm.
    (6) Farm marketing excess (acres or pounds).
    (7) Marketing quota penalties, including but not limited to, 
assessments for marketing quota violations involving: (i) False 
identification, (ii) failure to account for production and disposition, 
(iii) failure to file a report, and (iv) the filing of a false report.

(Secs. 301, 363-368, 371, 374, 375, 379, 52 Stat. 38 as amended, 63-64, 
as amended, 66, as amended; 7 U.S.C. 1301, 1363-1368, 1375)

[35 FR 15355, Oct. 2, 1970, as amended by Amdt. 9, 45 FR 37398, June 3, 
1980; 49 FR 38240, Sept. 28, 1984]



Sec. 711.4  Forms.

    The following general forms, as revised from time to time, are 
prescribed for use in connection with review proceedings;
    (a) MQ-53 Application for Review of Farm Marketing Quota.
    (b) MQ-54 Notice of Untimely Filing of Review Application.
    (c) MQ-56 Notice of Hearing of Review Application.
    (d) MQ-58 Determination of Review Committee Farm Marketing Quota.
    (e) MQ-59 Oath of Review Committeeman.



Sec. 711.5  Public information.

    The clerk shall maintain a record of applications and review 
committee proceedings which shall be available at the office of the 
clerk for public inspection and copying in accordance with part 798 of 
this chapter.

                            Review Committee



Sec. 711.6  Eligibility as member of a panel.

    Any farmer who meets the eligibility requirements for county 
committeeman prescribed in the regulations in part 7 of subtitle A of 
this title, as amended, in a county within the area of venue for which 
he is to be appointed shall be eligible for appointment as a member of a 
review committee panel for such area of venue. If the area of venue 
consists of only one county or a part of a county, these eligibility 
requirements must be met in such county or in a nearby county. No farmer 
whose legal residence is in one State shall be eligible for appointment 
as a member of a review committee panel for an area of venue in another 
State.



Sec. 711.7  Appointment of members of a panel.

    The Secretary shall appoint six or more eligible farmers to serve as 
members of a review committee panel in each area of venue. Notice of 
appointment shall be sent to the State committee, which shall notify the 
farmers so appointed. Appointments may be made before, during, or after 
the period in which applications for review of quotas are required to be 
filed. Notwithstanding the foregoing, the Secretary shall have the 
continuing power to revoke or suspend any appointment made pursuant to 
the regulations in this part, and subject to the provisions of the act, 
to make such other appointment deemed proper.

[[Page 55]]



Sec. 711.8  Oath of office.

    Each farmer appointed to serve as a member of a review committee 
panel shall, as soon as possible after appointment, execute an oath of 
office on such form as may be prescribed by the Deputy Administrator, 
duly subscribed and sworn to or affirmed before a notary public. No 
farmer shall serve on a review committee unless such oath of office has 
been duly executed and filed with the State executive director or the 
clerk. A farmer appointed for consecutive terms to serve as a member of 
a review committee panel shall not be required to file a new oath of 
office after the original filing. If the form of oath of office is 
materially changed, a new oath of office shall be executed if required 
by the Deputy Administrator.



Sec. 711.9  Composition of review committee.

    (a) Three designated members from the panel constitute a review 
committee. Three members from the panel shall act as a review committee 
to hear applications for review for the prescribed area of venue. The 
State executive director shall designate from the panel of members for 
the prescribed area of venue three members who shall act as a review 
committee to hear specific applications and shall designate one of these 
three members as chairman of the review committee and another member as 
vice-chairman. Where the number of applications pending require two or 
more review committees for prompt disposition of such applications, the 
State executive director shall designate the members of each review 
committee, the chairman and vice chairman thereof, and the specific 
application to be heard by each review committee. Two or more review 
committees may hear applications concurrently in an area of venue. In 
the absence of the chairman, the vice chairman shall perform the duties 
and exercise the powers of the chairman. The State executive director 
shall notify members of each review committee of the schedule of 
hearings. No member shall serve in any case in which a quota will be 
reviewed for a farm in which such member, any of his relatives or 
business associates, is interested, nor shall any member serve where he 
had acted as State, county, or community committee member on a quota to 
be reviewed by the review committee.
    (b) Only two members present to commence hearing. Where only two 
members of a review committee are present to commence a hearing, 
although three members were scheduled to hear the application, at the 
request of or with the consent of the applicant in writing, a hearing 
conducted by two members of the review committee shall be deemed to be a 
regular hearing of the review committee as to such application. The 
determination made by such members shall constitute the determination of 
the review committee. In the event such members cannot agree upon a 
determination, such fact shall be set forth in writing and a new hearing 
scheduled by the State executive director. If the applicant does not 
consent in writing to a hearing conducted by two members of the review 
committee, the hearing shall be rescheduled.
    (c) Only two members remain to complete a hearing. Where only two 
members of a review committee remain to complete a hearing commenced 
with three members, due to serious illness, death, or other cause which 
prevents one of the members from completing the hearing within a 
reasonable time, at the request or with the consent of the applicant in 
writing, the remaining two members of the review committee shall 
henceforth constitute an entire review committee for the purpose of such 
hearing. In the event such members cannot agree upon a determination, 
such fact shall be set forth in writing and a new hearing scheduled by 
the State executive director. If the applicant does not consent in 
writing to completion of the hearing by two members of the review 
committee, the hearing shall be rescheduled.
    (d) Reopened or remanded hearings. In the case of a reopened or 
remanded hearing, if any member of the review committee is no longer in 
office because of death, resignation, or ineligibility, the State 
executive director shall designate another member of the review 
committee panel to serve on the review committee. If a hearing held 
pursuant to paragraph (b) or (c) of this section is reopened or remanded 
and

[[Page 56]]

only one review committee member is available to hear such reopened or 
remanded hearing, the State executive director shall designate two 
additional members from the review committee panel to serve on the 
review committee.



Sec. 711.10  Term of office.

    Appointment as a member of a review committee panel shall be for a 
term of 3 calendar years. A member may be reappointed for succeeding 
terms. Notwithstanding the foregoing, a review committee shall continue 
in office to conclude hearings before it which are begun during such 3-
year term and make final determinations thereof, or to hold a reopened 
hearing, or to conclude a hearing remanded to it by a court.

[Amdt. 3, 38 FR 967, Jan. 8, 1973]



Sec. 711.11  Compensation.

    The members designated as review committeemen shall receive 
compensation when serving at the same rate as that received by the 
members of the county committee which established the quotas sought to 
be reviewed. No member of a review committee shall be entitled to 
receive compensation for services as such member for more than 30 days 
in any one year. Payment of compensation, reimbursement for travel 
expenses and rates therefor, shall be made under such conditions as may 
be prescribed by the Deputy Administrator.



Sec. 711.12  Effect of change in composition of review committee.

    Nothing contained in Sec. Sec. 711.6 to 711.11 relating to any 
vacancy or revocation or suspension of appointment and nothing done 
pursuant thereto shall be construed as affecting the validity of any 
prior hearing conducted or determination made in accordance with the 
regulations in this part, in which the member of the review committee 
whose office has become vacant participated, or as affecting in any way 
court proceeding which may be instituted to review such determination.

                              Jurisdiction



Sec. 711.13  Areas of venue and jurisdiction.

    (a) Areas of venue. The State committee shall establish one or more 
areas of venue in the State. An area of venue may consist of all or part 
of a county, or more than one county within a State. In establishing 
areas of venue, the State committee shall take into consideration the 
requirements of section 363 of the Act as to eligibility of review 
committee members, the prompt handling of applications for review, 
transportation problems and the limit of 30-day service by review 
committeemen in any one year.
    (b) Jurisdiction. A review committee shall have jurisdiction within 
the area of venue for which it is established to hear applications 
respecting quotas established or denied by written notice issued by the 
county committee or other authorized official for farms within its area 
of venue, in accordance with this part.
    (c) A listing of the areas of venue within a State shall be 
available from the State FSA office and the Deputy Administrator.

[35 FR 15355, Oct. 2, 1970, as amended at 49 FR 38240, Sept. 28, 1984]

                     Application for Review of Quota



Sec. 711.14  Application for review.

    (a) Manner and time of filing. Any farmer who is dissatisfied with 
his quota may, within 15 days after the date of mailing to him of notice 
of such quota, file a written application for review thereof by the 
review committee. Such 15-day period is prescribed in accordance with 
section 363 of the Act. Unless application for review is timely filed, 
as determined under this section, the quota established by the notice 
shall not be subject to review by the review committee. Notice of quota 
subject to review under this part includes an official written notice as 
to the land constituting the farm. For example, a notice denying a 
request for farm reconstitution would be such a reviewable notice of 
quota. An application shall be in writing and addressed to, and filed 
with, the county executive director for the county from which the

[[Page 57]]

notice of quota was received. Any application (Form MQ-53 available on 
request) whether made on Form MQ-53 or not, shall contain the following:
    (1) Date of application and commodity (including type where 
applicable, e.g. Upland cotton, Flue-cured tobacco).
    (2) Correct full name and address of applicant.
    (3) Brief statement of each ground upon which the application is 
based.
    (4) A statement of the amount of quota which it is claimed should 
have been established.
    (5) Signature of applicant.

In any case where an application is timely filed for review of a quota 
on a farm which was reconstituted by division of a parent farm into two 
or more farms, such application shall be considered an application for 
review of the reconstitution of the parent farm. In any such case the 
farm operator of each farm resulting from such reconstitution shall be 
considered an applicant for purposes of this part with all the rights 
and privileges provided in this part. If an action may be taken by an 
applicant which affects the rights of any other applicant in the case, 
the other applicants shall be given the opportunity to concur in such 
action or to oppose such action.
    (b) Procedure where application is not timely filed. The county 
committee shall examine each application for review. If the application 
is not filed within the prescribed 15-day period, the county executive 
director shall send a notice of untimely filing on Form MQ-54 by 
certified mail to the applicant at the address shown on the application. 
The applicant may file a request in writing with the county executive 
director within 15 days after the date of mailing such notice to him 
requesting a review committee hearing on the sole issue of whether the 
application was filed within the prescribed 15-day period. In the 
absence of timely request in writing for such review committee hearing, 
the application shall be deemed withdrawn by the applicant. If timely 
request in writing for such review committee hearing is filed, a copy of 
the application and request shall be forwarded by the county executive 
director to the State executive director with a request that a hearing 
on the sole issue of timely filing be scheduled before the review 
committee. In cases involving the sole issue of timely filing of an 
application, the review committee shall determine whether the date the 
application was filed, or the postmark date in case of mailing by the 
applicant, was within the 15-day period. If the review committee 
determines that the application was timely filed, a hearing on the 
merits of the application shall be held. In addition, a hearing on the 
merits shall be conducted and the application treated as timely filed in 
any case where the review committee determines that the applicant in 
good faith requested review of his quota by the county or State 
committee under the regulations in part 780 of this chapter in reliance 
upon action or advice of any authorized representative of a county or 
State committee and subsequently filed application for review under this 
part within a reasonable time after he learns that the quota is subject 
to review committee jurisdiction.
    (c) Withdrawal of application. An application may be withdrawn upon 
the written request of the applicant. Any application so withdrawn or 
deemed withdrawn under paragraph (b) of this section shall be endorsed 
by the clerk ``Dismissed by the applicant''.
    (d) Procedure where application is timely filed. The county 
committee shall examine each application for review and where an 
application is found to be timely filed, the county executive director 
shall forward a copy of the application to the State executive director 
with a request that a hearing on the merits be scheduled before the 
review committee.



Sec. 711.15  Matters subject to review.

    In all cases, the review committee shall consider only such factors 
as, under applicable provisions of law and regulations, are required or 
permitted to be considered by the county committee in the establishment 
of the quota being reviewed. The establishment of national marketing 
quotas and apportionment of national acreage allotments and marketing 
quotas among States and counties and the establishment of reserve 
acreages and quotas at

[[Page 58]]

the national level and apportionment of such reserves among States and 
counties are not subject to review by a review committee. Review of a 
quota may include any of the factors which enter into the establishment 
of such quota for the farm and crop year as set forth in Sec. 711.3(f): 
Provided, however, That any factor of such quota considered by a review 
committee in a prior determination for the farm and crop year shall not 
be considered in a subsequent review proceeding. For example, a 
determination of the farm acreage allotment by the review committee 
would not be reconsidered upon any application for review of the farm 
marketing excess for the same farm and crop year.

[49 FR 38240, Sept. 28, 1984]



Sec. 711.16  County committee answer.

    (a) The county committee shall prepare a written answer to each 
application scheduled for hearing setting forth the pertinent facts, the 
applicable regulations, the data used in establishing the quota and any 
other matters deemed pertinent:
    (b) Provided, That the answer may be limited to the issue of timely 
filing where the hearing is limited to that issue. If the county 
committee determines that the increase, adjustment or other 
determination requested in the application is proper in whole or in 
part, the written answer shall set forth the proposed determination and 
in such cases, the applicant shall be notified by the county committee 
of such proposed determination prior to the scheduled review hearing if 
practicable to do so. In the event the applicant is satisfied with the 
proposed determination, the county committee shall, upon the withdrawal 
of the application, take the necessary action to revise the quota within 
the limits of the Act and applicable commodity regulations if the 
required amount of acreage allotment or marketing quota is available in 
the county. The State executive director may perform the functions of 
the county committee under this section and the functions of the county 
committee and county executive director under Sec. 711.14 (b) and (d) 
in any case where the application for review involves a notice of farm 
marketing quota issued by officials other than the county committee.

[35 FR 15355, Oct. 2, 1970, as amended at 49 FR 38240, Sept. 28, 1984]



Sec. 711.17  Amendments.

    Upon due request, and within the discretion of the review committee, 
the right to amend the application and all procedural documents in 
connection with any hearing, shall be granted upon such reasonable terms 
as the review committee may deem right and proper.

                        Hearing and Determination



Sec. 711.18  Place and schedule of hearing.

    The place of hearing shall be in the office of the county committee 
through which the quota sought to be reviewed was established, or such 
other appropriate place in the county as may be designated by the State 
executive director or by the review committee in cases arising under 
Sec. 711.21: Provided, however, That the place of hearing may be in 
some other county if agreed to in writing by the applicant. The State 
executive director shall schedule applications for hearings and forward 
such schedule to the clerk.



Sec. 711.19  Notice of hearing.

    The clerk shall give written notice on Form MQ-56 to the applicant 
by depositing such notice in the U.S. mail, certified and addressed to 
the last known address of the applicant at least 10 days prior to the 
time appointed for the hearing and copies of such notice shall also be 
sent to the county committee and the State office. If the applicant 
requests waiver of such 10-day period, the hearing may be scheduled 
earlier upon consent of the other interested parties. The notice of the 
hearing shall specify the time and place of the hearing, contain a 
statement of the statutory authority for the hearing, state that the 
application will be heard by the review committee duly appointed for the 
area of venue in which the applicant's farm is located, and that a 
verbatim transcript may be obtained by the applicant if he makes 
arrangement therefor before the hearing and pays the expense thereof.

[[Page 59]]



Sec. 711.20  Continuances.

    Hearings shall be held at the time and place set forth in the notice 
of hearing or in any subsequent notice amending or superseding the prior 
notice, but may without notice other than an announcement at the hearing 
by the chairman of the review committee, be continued from day to day or 
adjourned to a different place in the county or to a later date or to a 
date and place to be fixed in a subsequent notice to be issued pursuant 
to Sec. 711.19. In the event a full committee of three is not present, 
those members present, or in the absence of the entire committee, the 
clerk, shall postpone the hearing unless the hearing is held pursuant to 
Sec. 711.9 (b) or (c). There shall not be a continuance for lack of a 
full committee in the case of a reopened or remanded hearing where the 
hearing was initially held pursuant to Sec. 711.9 (b) or (c) and the 
two review committeemen who previously held the hearing are present and 
eligible to serve.



Sec. 711.21  Conduct of hearing.

    (a) Open to public. Except as otherwise provided in Sec. Sec. 711.1 
to 711.50, each hearing shall take place before the entire review 
committee and shall be presided over by the chairman of such committee. 
The hearing shall be open to the public and shall be conducted in a fair 
and impartial manner and in such a way as to afford the applicant, 
members of the appropriate county and community committees, and 
appropriate officers and agents of the Department of Agriculture, and 
all persons appearing on behalf of such parties, reasonable opportunity 
to give and produce evidence relevant to the quota being reviewed.
    (b) Consolidation of hearings. Wherever practicable, two or more 
applications relating to the same commodity and the same farm shall be 
consolidated by the review committee on its own motion or at the request 
of the State executive director and heard at the same time on the same 
record. In any case involving two or more farms resulting from 
reconstitution by division of a parent farm, the hearing shall be 
consolidated.
    (c) Representation. The applicant and the Secretary may be 
represented at the hearing. The county committee shall be present or 
represented at the hearing.
    (d) Order of procedure. At the commencement of the hearing, the 
chairman of the review committee shall read or cause to be read the 
pertinent portions of the application for review. The written answer of 
the county committee shall be submitted and shall be made a part of the 
record of the hearing. If the applicant asserts and shows to the 
satisfaction of the review committee that he has not been informed of 
the county committee's position in time to afford him adequate 
opportunity to prepare and present his case, the review committee shall 
continue the hearing, without notice other than announcement thereof at 
the hearing, for such period of time as will afford the applicant 
reasonable opportunity to meet the issues of fact and law involved. 
After answer by the county committee and following such continuance, if 
any, as may be granted by the review committee, evidence shall be 
received with respect to the matters relevant to the quota under review 
in such order as the chairman of the review committee shall prescribe. 
The review committee may take official notice of relevant publications 
of the Department of Agriculture and regulations of the Secretary.
    (e) Submission of evidence. The burden of proof shall be upon the 
applicant as to all issues of fact raised by him. Each witness shall 
testify under oath or affirmation administered by the member of the 
review committee who is presiding at the hearing. The review committee 
shall confine the evidence to pertinent matters and shall exclude 
irrelevant, immaterial, or unduly repetitious evidence. Interested 
persons shall be permitted to present oral and documentary evidence, to 
submit rebuttal evidence and to conduct such cross-examination as may be 
required for a full and true disclosure of the facts. The hearing shall 
be concluded within such reasonable time as may be determined by the 
review committee.
    (f) Transcript of testimony. The review committee shall provide for 
the taking of such notes including but not limited to stenographic 
reports or recordings at the hearing as will enable it to make

[[Page 60]]

a summary of the proceedings and the testimony received at the hearing. 
The testimony received at the hearing shall be reported verbatim by a 
representative of a private firm under an existing Departmental contract 
for such services if the review committee, the State Executive Director, 
or the applicant, requests such transcript be made. If such transcript 
is so requested, the State Executive Director shall advise the Deputy 
Administrator, State and County Operations, prior to the hearing date 
who will then arrange for the service. A copy of such transcript shall 
be furnished to each of the following: The review committee, the State 
Executive Director, and the Regional Attorney, Office of the General 
Counsel, United States Department of Agriculture. The applicant or his 
representative may obtain a copy from the firm at his own expense.
    (g) Written arguments and proposed findings. The review committee 
shall permit the applicant, the members of the appropriate county and 
community committees, and appropriate officers and agents of the 
Department of Agriculture to file written arguments and proposed 
findings of fact and conclusions, based on the evidence adduced at the 
hearing, for the consideration of the review committee within such 
reasonable time after the conclusion of the hearing as may be prescribed 
by the review committee. Such written arguments and proposed findings 
shall be filed in triplicate with the clerk and an additional copy 
thereof shall be provided to the other party.

[35 FR 15355, Oct. 2, 1970, as amended by Amdt. 5, 38 FR 16989, June 28, 
1973]



Sec. 711.22  Nonappearance of applicant.

    (a) Original hearing. If, at the time of the hearing, the applicant 
is absent and no appearance is made on his behalf, the review committee 
shall, after a lapse of such period of time as it may consider proper 
and reasonable, have the name of the absent applicant called in the 
hearing room. If, upon such call, there is no response, and no 
appearance on behalf of such applicant and no continuance has been 
requested by the applicant, the review committee shall thereupon close 
the hearing, as to such applicant, and, without further proceedings in 
the case, make a determination dismissing the application.
    (b) Reopened or remanded hearing. If, at a hearing which is reopened 
pursuant to Sec. 711.25 or remanded by a court, the applicant is absent 
and no appearance is made on his behalf, the review committee shall 
continue the hearing for a reasonable period of time and if the 
applicant does not appear at such continued hearing, the review 
committee shall make a determination.



Sec. 711.23  Determination by review committee.

    As soon as practicable after hearing on an application, including a 
hearing on the sole issue of timely filing, the review committee shall 
make a determination upon the application. If it is determined by the 
review committee that the application should be dismissed for untimely 
filing or denied, the review committee shall so indicate. If it is 
determined that the application should be granted in whole or in part, 
the review committee shall establish the quota which it finds to be 
proper. Each determination made by the review committee shall be in 
writing, shall contain specific findings of fact and conclusions 
together with the reasons or basis therefor, and shall be based upon and 
made in accordance with reliable, probative, and substantial evidence 
adduced at the hearing. The concurrence of two members of the review 
committee shall be sufficient to make a determination. The written 
determination shall contain such subscription by each member of the 
review committee as will indicate his concurrence therein or his dissent 
therefrom. In case of an increase in the quota, the review committee 
shall specifically state in the determination in what respect, if any, 
the county committee has failed properly to apply the act and 
regulations thereunder. If such increase is based upon evidence not 
available to the county committee, the findings of the review committee 
shall so indicate. The appropriate county executive director shall make 
available to the review committee such clerical and stenographic 
assistance as may be required.

[[Page 61]]



Sec. 711.24  Service of determination.

    A copy of the determination, certified by the clerk as a true and 
correct copy of the signed original, shall be served upon the applicant 
by sending the same by certified mail addressed to the applicant at his 
last known address. The copy of the determination shall contain at the 
top thereof substantially the following statement: ``To all persons who, 
as operator, landlord, tenant, or sharecropper, are or will be 
interested in the above-named commodity on the farm identified below in 
the year for which the marketing quota being reviewed is established'' 
and such statement shall constitute notice to all such persons. The 
clerk shall make a notation on the original determination of the date 
and place of such mailing. The clerk forthwith shall forward two copies 
of such determination to the State office, and one copy to the county 
committee. The determination of the review committee does not become 
final until the period for reopening of hearing under Sec. 711.25 has 
expired without any reopening; or if reopened thereunder, such 
determination becomes final upon issuance of a new determination 
pursuant to the reopened hearing, subject to further appeal to a court 
by the applicant.



Sec. 711.25  Reopening of hearing.

    (a) Upon motion of review committee. Upon its own motion within 15 
days from the date of mailing to the applicant of a copy of the 
determination of the review committee, the review committee may reopen a 
hearing for the purpose of taking additional evidence or of adding any 
relevant matter or document.
    (b) Upon written request based on new evidence. Upon written request 
by the applicant, the county committee, the State executive director, or 
other interested parties, to the review committee within 15 days from 
the date of mailing to the applicant of a copy of the determination of 
the review committee, the review committee shall reopen the hearing for 
the purpose of taking additional evidence or of adding any relevant 
matter or document if the review committee finds that such evidence or 
documents constitute new evidence not available to the parties at the 
time of the hearing.
    (c) Upon written notice by the Secretary. Upon written notice by the 
Secretary or on his behalf by the Deputy Administrator to the review 
committee within 45 days from the date of mailing to the applicant of a 
copy of the determination of the review committee on Form MQ-58, the 
hearing shall be deemed reopened and the State executive director shall 
schedule the reopened hearing.
    (d) Schedule of reopened hearing. Schedule of and notice of any 
reopened hearing shall follow the requirements of Sec. Sec. 711.18 and 
711.19 insofar as practicable. Notwithstanding the provisions of 
paragraphs (a), (b), and (c) of this section, no hearing shall be 
reopened after an appeal to a court pursuant to section 365 of the act 
has been timely filed by the applicant. No special hearing to contest a 
reopening of a hearing shall be scheduled; however, the applicant may 
present evidence and arguments to contest the reopening when the 
reopened hearing is held.



Sec. 711.26  Record of hearing.

    The record of the proceedings shall be prepared by the clerk and 
shall consist of the following:
    (a) All procedural documents in the case under review, including the 
application and written notices of quota and hearing and any other 
written notice in connection with the application.
    (b) Copies of regulations presented at the hearing.
    (c) The answer of the county committee or the State executive 
director.
    (d) The summary of the proceedings and the testimony prepared by the 
review committee if a verbatim transcript is not made, or a transcript 
of the testimony where a verbatim transcript is made, in accordance with 
Sec. 711.21(f), to which shall be annexed any documentary evidence 
received at the hearing.
    (e) Any written arguments or proposed findings of fact and 
conclusions filed in connection with the hearing.
    (f) The written determination of the review committee.
    (g) A list of all papers included in the record and a certificate by 
the clerk

[[Page 62]]

stating that such record is true, correct and complete.

                            Court Proceedings



Sec. 711.27  Procedure in the case of court proceedings.

    Upon the institution of any suit against the review committee for 
the purpose of reviewing its determination upon any application for 
review, the review committee is required by section 365 of the Act to 
certify and file in court a transcript of the record upon which the 
determination was made, together with the findings of fact made by the 
review committee. Any suit for review is required to be instituted by 
the applicant within 15 days after a notice of the review committee's 
determination is mailed to him. Such suit may be instituted in the U.S. 
District Court or in any court of record of the State having general 
jurisdiction, sitting in the county of the district in which the 
applicant's farm is located. The bill of complaint in such proceeding 
may be served by delivering a copy thereof to any member of the review 
committee. Any member of the review committee served with papers in such 
suit shall immediately forward such papers to the clerk. No member of 
the review committee shall appear or permit any appearance in his behalf 
or in behalf of the review committee, or take any action in respect to 
the defense of such suit, except in accordance with the instructions 
from the Deputy Administrator.

                               Puerto Rico



Sec. 711.28  Special provisions applicable to Puerto Rico.

    Notwithstanding the provisions of Sec. Sec. 711.1 to 711.50, the 
Caribbean Area Agricultural Stabilization and Conservation Committee 
(hereinafter referred to as the ``ASC Committee'') shall perform, 
insofar as applicable, the duties and assume such responsibilities and 
be subject to the limitations as are otherwise required of State and 
county committees except as provided herein. The Director, Caribbean 
Area FSA office, shall recommend members of the review committee panel, 
the areas of venue, and perform the functions of the State executive 
director. Any farmer who is eligible to vote in a referendum for which a 
quota has been proclaimed shall be eligible for appointment as a member 
of a review committee panel. The clerk shall be the ASC district 
supervisor of the district in which the review committee will hold its 
hearings. Where it is impractical or impossible to use the United States 
mail to serve the applicant with notice of hearing or determination, use 
shall be made of such other method of service as is available. However, 
when such other method is used, the ASC Committee shall make provision 
for keeping an accurate record of the date and method of delivery to the 
applicant.

                           OMB Control Numbers



Sec. 711.29  OMB control numbers assigned pursuant to the Paperwork Reduction Act.

    The information collection requirements contained in these 
regulations (7 CFR part 711) have been approved by the Office of 
Management and Budget (OMB) in accordance with the provisions of the 44 
U.S.C. Chapter 35 and have been assigned OMB control number 0560-0068.

[49 FR 38240, Sept. 28, 1984]



PART 714_REFUNDS OF PENALTIES ERRONEOUSLY, ILLEGALLY, OR WRONGFULLY 
COLLECTED--Table of Contents




Sec.
714.35 Basis, purpose, and applicability.
714.36 Definitions.
714.37 Instructions and forms.
714.38 Who may claim refund.
714.39 Manner of filing.
714.40 Time of filing.
714.41 Statement of claim.
714.42 Designation of trustee.
714.43 Recommendation by county committee.
714.44 Recommendation by State committee.
714.45 Approval by Deputy Administrator.
714.46 Certification for payment.

    Authority: Secs. 372, 375, 52 Stat. 65, as amended, 66, as amended; 
7 U.S.C. 1372, 1375.

    Source: 35 FR 12098, July 29, 1970, unless otherwise noted.

[[Page 63]]



Sec. 714.35  Basis, purpose, and applicability.

    (a) Basis and purpose. The regulations set forth in this part are 
issued pursuant to the Agricultural Adjustment Act of 1938, as amended, 
for the purpose of prescribing the provisions governing refunds of 
marketing quota penalties erroneously, illegally, or wrongfully 
collected with respect to all commodities subject to marketing quotas 
under the Act.
    (b) Applicability. This part shall apply to claims submitted for 
refunds of marketing quota penalties erroneously, illegally, or 
wrongfully collected on all commodities subject to marketing quotas 
under the Act. It shall not apply to the refund of penalties which are 
deposited in a special deposit account pursuant to sections 314(b), 
346(b), 356(b), or 359 of the Agricultural Adjustment Act of 1938, as 
amended, or paragraph (3) of Pub. L. 74, 77th Congress, available for 
the refund of penalties initially collected which are subsequently 
adjusted downward by action of the county committee, review committee, 
or appropriate court, until such penalties have been deposited in the 
general fund of the Treasury of the United States after determination 
that no downward adjustment in the amount of penalty is warranted. All 
prior regulations dealing with refunds of penalties which were contained 
in this part are superseded upon the effective date of the regulations 
in this part.



Sec. 714.36  Definitions.

    (a) General terms. In determining the meaning of the provisions of 
this part, unless the context indicates otherwise, words imparting the 
singular include and apply to several persons or things, words imparting 
the plural include the singular, words imparting the masculine gender 
include the feminine as well, and words used in the present tense 
include the future as well as the present. The definitions in part 719 
of this chapter shall apply to this part. The provisions of part 720 of 
this chapter concerning the expiration of time limitations shall apply 
to this part.
    (b) Other terms applicable to this part. The following terms shall 
have the following meanings:
    (1) ``Act'' means the Agricultural Adjustment Act of 1938, and any 
amendments or supplements thereto.
    (2) ``Claim'' means a written request for refund of penalty.
    (3) ``Claimant'' means a person who makes a claim for refund of 
penalty as provided in this part.
    (4) ``County Office'' means the office of the Agricultural 
Stabilization and Conservation County Committee.
    (5) ``Penalty'' means an amount of money collected, including 
setoff, from or on account of any person with respect to any commodity 
to which this part is applicable, which has been covered into the 
general fund of the Treasury of the United States, as provided in 
section 372(b) of the Act.
    (6) ``State office'' means the office of the Agricultural 
Stabilization and Conservation State Committee.



Sec. 714.37  Instructions and forms.

    The Deputy Administrator shall cause to be prepared and issued such 
instructions and forms as are necessary for carrying out the regulations 
in the part.



Sec. 714.38  Who may claim refund.

    Claim for refund may be made by:
    (a) Any person who was entitled to share in the price or 
consideration received by the producer with respect to the marketing of 
a commodity from which a deduction was made for the penalty and bore the 
burden of such deduction in whole or in part.
    (b) Any person who was entitled to share in the commodity or the 
proceeds thereof, paid the penalty thereon in whole or in part and has 
not been reimbursed therefor.
    (c) Any person who was entitled to share in the commodity or the 
proceeds thereof and bore the burden of the penalty because he has 
reimbursed the person who paid such penalty.
    (d) Any person who, as buyer, paid the penalty in whole or in part 
in connection with the purchase of a commodity, was not required to 
collect or pay such penalty, did not deduct the amount of such penalty 
from the price paid the producer, and has not been reimbursed therefor.
    (e) Any person who paid the penalty in whole or in part as a surety 
on a

[[Page 64]]

bond given to secure the payment of penalties and has not been 
reimbursed therefor.
    (f) Any person who paid the whole or any part of the sum paid as a 
penalty with respect to a commodity included in a transaction which in 
fact was not a marketing of such commodity and has not been reimbursed 
therefor.



Sec. 714.39  Manner of filing.

    Claim for refund shall be filed in the county office on a form 
prescribed by the Deputy Administrator. If more than one person is 
entitled to file a claim, a joint claim may be filed by all such 
persons. If a separate claim is filed by a person who is a party to a 
joint claim, such separate claim shall not be approved until the 
interest of each person involved in the joint claim has been determined.



Sec. 714.40  Time of filing.

    Claim shall be filed within 2 years after the date payment was made 
to the Secretary. The date payment was made shall be deemed to be the 
date such payment was deposited in the general fund of the Treasury as 
shown on the certificate of deposit on which such payment was scheduled.



Sec. 714.41  Statement of claim.

    The claim shall show fully the facts constituting the basis of the 
claim; the name and address of and the amount claimed by every person 
who bore or bears any part or all of the burden of such penalty; and the 
reasons why such penalty is claimed to have been erroneously, illegally, 
or wrongfully collected. It shall be the responsibility of the county 
committee to determine that any person who executes a claim as agent or 
fiduciary is properly authorized to act in such capacity. There should 
be attached to the claim all pertinent documents with respect to the 
claim or duly authenticated copies thereof.



Sec. 714.42  Designation of trustee.

    Where there is more than one claimant and all the claimants desire 
to appoint a trustee to receive and disburse any payment to be made to 
them with respect to the claim, they shall be permitted to appoint a 
trustee. The person designated as trustee shall execute the declaration 
of trust.



Sec. 714.43  Recommendation by county committee.

    Immediately upon receipt of a claim, the date of receipt shall be 
recorded on the face thereof. The county committee shall determine, on 
the basis of all available information, if the data and representations 
on the claim are correct. The county committee shall recommend approval 
or disapproval of the claim, and attach a statement to the claim, signed 
by a member of the committee, giving the reasons for their action. After 
the recommendation of approval or disapproval is made by the county 
committee, the claim shall be promptly sent to the State committee.



Sec. 714.44  Recommendation by State committee.

    A representative of the State committee shall review each claim 
referred by the county committee. If a claim is sent initially to the 
State committee, it shall be referred to the appropriate county 
committee for recommendation as provided in Sec. 714.43 prior to action 
being taken by the State committee. Any necessary investigation shall be 
made. The State committee shall recommend approval or disapproval of the 
claim, attaching a statement giving the reasons for their action, which 
shall be signed by a representative of the State committee. After 
recommending approval or disapproval, the claim shall be promptly sent 
to the Deputy Administrator.



Sec. 714.45  Approval by Deputy Administrator.

    The Deputy Administrator shall review each claim forwarded to him by 
the State committee to determine whether, (a) the penalty was 
erroneously, illegally, or wrongfully collected, (b) the claimant bore 
the burden of the payment of the penalty, (c) the claim was timely 
filed, and (d) under the applicable law and regulations the claimant is 
entitled to a refund. If a claim is filed initially with the Deputy 
Administrator, he shall obtain the recommendations of the county 
committee and the State committee if he deems such action necessary in

[[Page 65]]

arriving at a proper determination of the claim. The claimant shall be 
advised in writing of the action taken by the Deputy Administrator. If 
disapproved, the claimant shall be notified with an explanation of the 
reasons for such disapproval.



Sec. 714.46  Certification for payment.

    An officer or employee of the Department of Agriculture authorized 
to certify public vouchers for payment shall, for and on behalf of the 
Secretary of Agriculture, certify to the Secretary of the Treasury of 
the United States for payment all claims for refund which have been 
approved.



PART 717_HOLDING OF REFERENDA--Table of Contents




                                 General

Sec.
717.1 Definitions.
717.2 Supervision of referenda and prescribed method of balloting.
717.3 Voting eligibility.
717.4 Register of eligible voters.

                   Holding Referenda at Polling Places

717.5 Community referendum committees.
717.6 Place for balloting.
717.7 Time of voting.
717.8 Notice of referendum.
717.9 Manner of voting.
717.10 Local arrangements for holding the referendum.
717.11 Issuing ballots.
717.12 Community referendum committee's canvass of ballots.
717.13 Community committee's reporting and record of results of 
          referendum.
717.14 County committee's canvass of ballots.
717.15 County committee's reporting and record of results of the 
          referendum.
717.16 Investigation as to correctness of summary of the referendum.
717.17 State committee's reporting and record of result of the 
          referendum.

                    Holding Referenda by Mail Ballot

717.18 Issuing ballots.
717.19 Manner of voting.
717.20 Receiving and tabulating voted ballots.
717.21 Canvassing voted ballots.
717.22 Reporting and record of result of the referendum.

                              Miscellaneous

717.23 Applicability of this part to Puerto Rico.
717.24 Result of referendum.
717.25 Disposition of ballots and records.
717.26 Applicability.

    Authority: Secs. 312, 317, 336, 343, 344a, 358, 376, 52 Stat. 46, as 
amended; 79 Stat. 66, as amended; 52 Stat. 55, as amended, 56, as 
amended; 79 Stat. 1197, as amended; 55 Stat. 88 as amended; 52 Stat. 66, 
as amended; 7 U.S.C. 1312, 1314c, 1336, 1343, 1344b, 1358, 1376.

    Source: 33 FR 18345, Dec. 11, 1968, unless otherwise noted.

                                 General



Sec. 717.1  Definitions.

    In determining the meaning of the provisions in this part, unless 
the context indicates otherwise, words importing the singular include 
and apply to several persons or things, words importing the plural 
include the singular, words importing the masculine gender include the 
feminine as well, and words used in the present tense include the future 
as well as the present.
    (a) General terms. The definitions in part 719 of this chapter shall 
apply to this part. The provisions of part 720 of this chapter 
concerning the expiration of time limitations shall apply to this part.
    (b) Act. The Agricultural Adjustment Act of 1938 and any amendments 
or supplements thereto.
    (c) Referendum community. For referenda conducted by mail ballot, 
the entire county shall be the referendum community. For referenda 
conducted at polling places, the referendum community shall conform with 
the community established by the State committee for purposes of 
elective areas under the regulations in the subpart--Selection and 
Functions of Agricultural Stabilization and Conservation County and 
Community Committees in part 7, subtitle A, of this title (Sec. 7.7, 33 
FR 12955), as amended from time to time: Provided, That a referendum 
community may be composed of an area differing from the community so 
established in the following cases:
    (1) A referendum community may be established by the county 
committee, with the approval of a representative of the State committee, 
to conform to a

[[Page 66]]

political township, a local voting precinct for purposes of general 
elections, or a combination of such townships or precincts;
    (2) A referendum community may be established by the county 
committee, if it determines eligible producers will be given a 
convenient place to vote, which consists of a combination of a community 
with less than 25 farms on which there are producers eligible to vote, 
with one or more communities; and
    (3) The entire county shall be the referendum community in counties 
with less than 100 farms on which there are producers eligible to vote 
unless the county committee, with the approval of the State committee, 
determines that more than one referendum community is needed in the 
county.

The county committee shall maintain in the county office, and make 
available for public inspection, a descriptive list of the referendum 
communities established for the county for referenda conducted at 
polling places.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 1, 34 FR 12940, Aug. 9, 
1969]



Sec. 717.2  Supervision of referenda and prescribed method of balloting.

    (a) Supervision of referenda. The Deputy Administrator shall be in 
charge of and responsible for conducting each referendum required by the 
Act. Each State committee shall be in charge of and responsible for 
conducting such referendum in its State. Each county committee shall be 
responsible for the proper holding of such referendum in its county. It 
shall be the duty of the Deputy Administrator and of each committee to 
conduct each referendum by secret ballot in a fair, unbiased, and 
impartial manner in accordance with this part.
    (b) Prescribed method of balloting. Each referendum held under this 
part shall be by mail ballot unless the Administrator, FSA, or the 
Deputy Administrator prescribes that a particular referendum shall be 
held at polling places.



Sec. 717.3  Voting eligibility.

    (a) Statutory requirements--(1) Tobacco quotas proclaimed on an 
acreage basis under section 312(a) of the Act. Within 30 days after the 
proclamation under section 312(a) of the Act of national marketing 
quotas on an acreage basis for any kind of tobacco for the next 3 
succeeding marketing years, there shall be a referendum under section 
312(c) of the Act of farmers engaged in the production of the crop of 
such tobacco harvested immediately prior to the holding of the 
referendum to determine whether such farmers are in favor of or opposed 
to such quotas for the 3-year period. If more than one-third of the 
farmers voting oppose such quotas, the quotas so proclaimed for the 3-
year period shall not be in effect: Provided, That such referendum 
result shall not preclude the proclamation of national marketing quotas 
for such kind of tobacco for the next 3 succeeding marketing years 
subject to a referendum as required under this paragraph. If the 
referendum results in approval of quotas for the 3-year period, no 
further referendum applicable to such quotas shall be held (i) unless a 
new proclamation during the 3-year period is made pursuant to 
subdivision (3) of section 312(a) of the Act in which case a referendum 
shall be held as provided in this paragraph (a)(1)(i) of this section, 
or (ii) unless quotas on an acreage-poundage basis are established 
pursuant to section 317(c) of the Act, in which case a special 
referendum shall be held as provided in paragraph (a)(2) of this 
section.
    (2) Tobacco quotas proclaimed on an acreage-poundage basis under 
section 317(c) of the Act. During the first or second marketing year of 
the 3-year period for which marketing quotas for any kind of tobacco are 
in effect on an acreage basis, if the Secretary, under section 317(c) of 
the Act, determines that marketing quotas on an acreage-poundage basis 
would result in a more effective program, at the time of the next 
announcement of the amount of the marketing quota on an acreage basis, 
the Secretary shall also announce the national acreage allotment and 
national average yield goal. Within 45 days after such announcement of 
acreage-poundage quotas there shall be a special referendum under 
section 317(c) of the Act of farmers engaged in the production of the 
kind of tobacco of the most recent crop to determine

[[Page 67]]

whether such farmers favor the establishment of marketing quotas on an 
acreage-poundage basis for the next 3 marketing years. If more than two-
thirds of the farmers voting in the special referendum favor marketing 
quotas on an acreage-poundage basis, such quotas shall be in effect for 
the next 3 marketing years and the marketing quotas on an acreage basis 
shall cease to be in effect at the beginning of such 3-year period and 
no further special referendum applicable to such 3-year period shall be 
held. If marketing quotas on an acreage-poundage basis are not favored 
by more than two-thirds of the farmers voting in the special referendum, 
marketing quotas on an acreage basis as previously proclaimed shall 
continue in effect.
    (3) Tobacco quotas proclaimed on an acreage-poundage basis under 
section 317(d) of the Act. If marketing quotas on an acreage-poundage 
basis have been made effective for a kind of tobacco, the Secretary 
shall proclaim a national marketing quota for such kind of tobacco for 
the next 3 succeeding marketing years if the marketing year is the last 
year of 3 consecutive years for which marketing quotas previously 
proclaimed will be in effect. Such proclamation may be on an acreage-
poundage basis or on an acreage basis. Within 30 days after such 
proclamation, there shall be a referendum under section 312(c) of the 
Act of farmers engaged in the production of the crop of such kind of 
tobacco harvested immediately prior to the holding of the referendum to 
determine whether such farmers are in favor of or opposed to such quotas 
for the next 3 succeeding marketing years. If more than one-third of the 
farmers voting oppose such quotas, the quotas so proclaimed for the 3-
year period shall not be in effect: Provided, That such referendum 
result shall not preclude the proclamation of national marketing quotas 
for such kind of tobacco for the next 3 succeeding marketing years under 
section 312(a) of the Act subject to a referendum thereon as provided in 
paragraph (a)(1) of this section. If a referendum results in approval of 
quotas for 3 marketing years on an acreage basis, no further referendum 
applicable to such 3 marketing years shall be held except as may be 
required under section 317(c) of the Act. If a referendum results in 
approval of quotas for 3 marketing years on an acreage-poundage basis, 
no further referendum applicable to such 3 marketing years shall be 
held.
    (4) Tobacco quotas proclaimed but disapproved in 3 successive years. 
Under section 312(a)(4) of the Act, if producers have disapproved 
national marketing quotas for a kind of tobacco in referenda held in 3 
successive years subsequent to 1952, a national marketing quota shall 
not be proclaimed for any marketing year within the 3-year period for 
which quotas were disapproved unless prior to November 10 of the 
marketing year, one-fourth or more of the farmers engaged in the 
production of the crop of tobacco harvested in the calendar year in 
which such marketing year begins petition the Secretary to proclaim a 
national marketing quota for each of the next 3 succeeding marketing 
years.
    (5) [Reserved]
    (6) Extra long staple cotton quotas. Not later than December 15 
following the proclamation of a national quota for extra long staple 
cotton there shall be a referendum under section 343 of the Act, of 
farmers engaged in the production of extra long staple cotton in the 
calendar year in which the referendum is held to determine whether such 
farmers are in favor of or opposed to the quota for the next marketing 
year. If more than one-third of the farmers voting in the referendum 
oppose the quota, such quota shall not be in effect.
    (7) [Reserved]
    (8) Rice quotas. Within 30 days after the proclamation of a national 
marketing quota for rice there shall be a referendum under section 
354(b) of the Act of farmers engaged in the production of the 
immediately preceding crop of rice to determine whether such farmers are 
in favor of or opposed to the quota for the next marketing year. If more 
than one-third of the farmers voting in the referendum oppose the quota, 
such quota shall not be in effect.
    (9) Peanut quotas. Not later than December 15 of each calendar year 
there shall be a referendum under section 358(b) of the Act of farmers 
engaged in

[[Page 68]]

the production of peanuts in the calendar year in which the referendum 
is held to determine whether such farmers are in favor of or opposed to 
marketing quotas with respect to the crops of peanuts produced in the 3 
calendar years immediately following the year in which the referendum is 
held. If more than one-third of the farmers voting in the referendum 
oppose such quotas, the quotas so proclaimed shall not be in effect: 
Provided, That such referendum result shall not preclude the 
proclamation of quotas in the next calendar year for a 3-year period 
subject to a referendum as required under this paragraph. If quotas are 
favored, no further referendum with respect to the 3-year period shall 
be held.
    (b) Farmers engaged in the production of a commodity. For purposes 
of referenda with respect to marketing quotas for tobacco, extra long 
staple cotton, rice and peanuts the phrase ``farmers engaged in the 
production of a commodity'' includes any person who is entitled to share 
in a crop of the commodity, or the proceeds thereof because he shares in 
the risks of production of the crop as an owner, landlord, tenant, or 
sharecropper (landlord whose return from the crop is fixed regardless of 
the amount of the crop produced is excluded) on a farm on which such 
crop is planted in a workmanlike manner for harvest: Provided, That any 
failure to harvest the crop because of conditions beyond the control of 
such person shall not affect his status as a farmer engaged in the 
production of the crop. In addition, the phrase ``farmers engaged in the 
production of a commodity'' also includes each person who it is 
determined would have had an interest as a producer in the commodity on 
a farm for which a farm allotment for the crop of the commodity was 
established and no acreage of the crop was planted but an acreage of the 
crop was regarded as planted for history acreage purposes under the 
applicable commodity regulations.
    (c) Special conditions applicable to peanuts and rice--(1) Peanuts. 
In the case of a referendum for marketing quotas for peanuts, farmers 
engaged in the production of peanuts as determined under paragraph (b) 
of this section shall not be eligible to vote in the referendum if the 
farm does not have any production of peanuts subject to marketing 
quotas. Under section 359(b) of the Act, marketing quotas are not 
applicable to peanuts produced on any farm on which the acreage 
harvested for nuts is 1 acre or less provided the producers who share in 
the peanuts produced on such farm do not share in the peanuts produced 
on any other farm. Under section 359(b) of the Act, marketing quotas are 
not applicable to peanuts which it is established (i) were not picked or 
threshed either before or after marketing from the farm, or (ii) were 
marketed by the producer before drying or removal of moisture from such 
peanuts either by natural or artificial means for consumption 
exclusively as boiled peanuts.
    (2) Rice. In the case of a referendum for a marketing quota for 
rice, farmers engaged in the production of rice as determined under 
paragraph (b) of this section shall not be eligible to vote in the 
referendum if the farm is not subject to marketing quotas. Under section 
353(d) of the Act, marketing quotas are not applicable (i) to 
nonirrigated rice produced on any farm on which the acreage planted to 
nonirrigated rice does not exceed 3 acres, or (ii) to rice produced 
outside the continental United States.
    (d) [Reserved]
    (e) One vote limitation. Each person eligible to vote in a 
particular marketing quota referendum shall be entitled to only one vote 
in such referendum regardless of the number of farms in which such 
person is interested or the number of communities, counties, or States 
in which farms are located in which farms such person is interested: 
Provided, That:
    (1) The individual members of a partnership shall each be entitled 
to one vote, but the partnership as an entity shall not be entitled to 
vote;
    (2) An individual eligible voter shall be entitled to one vote even 
though he is interested in an entity (including but not limited to a 
corporation) which entity is also eligible to vote;
    (3) A person shall also be entitled to vote in each instance of his 
capacity as a fiduciary (including but not limited to a guardian, 
administrator, executor or trustee) if in such fiduciary capacity

[[Page 69]]

he is eligible to vote but the person for whom he acts as a fiduciary 
shall not be eligible to vote.
    (f) Joint and family interest. Where several persons, such as 
members of a family, have participated or will participate in the 
production of a commodity under the same lease or cropping agreement, 
only the person or persons who signed the lease or agreement, or agreed 
to an oral lease or agreement, shall be eligible to vote. Where two or 
more persons have produced or will produce a commodity as joint tenants, 
tenants in common, or owners of community property, each such person 
shall be entitled to one vote if otherwise eligible. The eligibility of 
one spouse does not affect the eligibility of the other spouse.
    (g) Minors. A minor shall be entitled to one vote if he is otherwise 
eligible and is 18 years of age or older when he votes.
    (h) [Reserved]
    (i) Interpretation. In the case of any commodity on a farm where no 
acreage of the commodity is actually planted but an acreage of the 
commodity is regarded as planted under applicable regulations of the 
Department, persons on the farm who it is determined would have had an 
interest in the commodity as a producer if an acreage of the commodity 
had been actually planted shall be eligible to vote in the referendum.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 2, 36 FR 12730, July 7, 
1971]



Sec. 717.4  Register of eligible voters.

    Prior to the date of the referendum a register shall be prepared by 
the county office manager listing the name and address of each known 
eligible voter. For referenda conducted at polling places a register 
shall be prepared for each referendum community. For referenda conducted 
by mail ballot the entire county is considered to be the referendum 
community and one register shall be prepared for the county.

                   Holding Referenda at Polling Places



Sec. 717.5  Community referendum committees.

    (a) Where one referendum is to be conducted. Except where the entire 
county is to be considered a referendum community, the county committee 
shall designate a community referendum committee for each referendum 
community. Each referendum committee shall consist of at least three 
regular members and one alternate. The membership of the referendum 
committee shall be chosen from among the farmers who reside in the 
community and who are eligible to vote in the referendum or who are 
community committeemen elected pursuant to the regulations in the 
subpart--Selection and Functions of Agricultural Stabilization and 
Conservation County and Community committees (part 7 of this title). The 
county committee shall name one member of the community referendum 
committee as chairman and another member thereof as vice chairman. The 
vice chairman shall act as the chairman in the event of the absence or 
incapacity of the chairman and the alternate shall serve on the 
committee in the place of any regular member who cannot serve. The 
community referendum committee shall be responsible for the proper 
holding of the referendum in its community in a fair, unbiased and 
impartial manner in accordance with this part. In counties where the 
entire county is treated as one referendum community, the county 
committee shall perform, in addition to its other duties, the duties of 
the community referendum committee.
    (b) Where two or more referenda are to be conducted. Where two or 
more referenda are to be held in the county on the same day, the 
provisions of paragraph (a) of this section shall be applicable except 
that (1) the total number of farms on which there are producers eligible 
to vote in any one or more of such referenda shall be used to determine 
whether there are 100 or

[[Page 70]]

more farms on which there are producers who are eligible to vote in the 
referenda, and (2) each community referendum committee shall be chosen 
from among the farmers who reside in the community and who are eligible 
to vote in any of such referenda or who are community committeemen 
elected pursuant to the regulations in the subpart--Selection and 
Functions of Agricultural Stabilization and Conservation County and 
Community committees (part 7 of this title).



Sec. 717.6  Place for balloting.

    The county committee shall designate only one polling place for 
balloting in each referendum community. The polling place shall be one 
well known to and readily accessible to the persons in the community and 
shall be equipped and arranged so that each voter can mark and cast his 
ballot in secret and without coercion, duress, or interference of any 
sort whatsoever. Subject to the provisions of Sec. 717.9(c) for 
absentee ballots, a farmer or producer eligible to vote, shall vote only 
at a polling place designated for the referendum community in which he 
was engaged in the production of the commodity for which the referendum 
is held.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 2, 36 FR 12730, July 7, 
1971]



Sec. 717.7  Time of voting.

    There shall be no voting except on the day fixed for the holding of 
the referendum (except as provided in Sec. 717.9(c) in the case of 
absentee ballots) and the day fixed for the holding of the referendum 
shall be the same in all neighborhoods, communities, counties, and 
States. The date for holding the referendum shall be determined by the 
Secretary in accordance with the provisions of law applicable thereto 
and stated in the notice of the referendum prescribed by him. The time 
that polls shall be opened and closed on the date fixed for holding the 
referendum in the States and Puerto Rico is as follows:

------------------------------------------------------------------------
                                                                Polls to
                       State                         Polls to    close
                                                    open a.m.     p.m.
------------------------------------------------------------------------
Alabama...........................................       7:00       7:00
Alaska............................................       8:00       6:00
Arizona...........................................       8:00       6:00
Arkansas..........................................       8:00       6:30
California........................................       8:00       6:00
Colorado..........................................       7:00       7:00
Connecticut.......................................       8:00       6:00
Delaware..........................................       8:00       6:00
Florida...........................................       7:00       7:00
Georgia...........................................       7:00       7:00
Idaho.............................................       8:00       8:00
Illinois..........................................       8:00       6:00
Indiana...........................................       8:00       6:00
Iowa..............................................       8:00       8:00
Kansas............................................       8:00       8:00
Kentucky..........................................       8:00       6:00
Louisiana.........................................       8:00       6:00
Maine.............................................       8:00       6:00
Maryland..........................................       8:00       6:00
Massachusetts.....................................       8:00       6:00
Michigan..........................................       8:00       8:00
Minnesota.........................................       8:00       8:00
Mississippi.......................................       8:00       6:00
Missouri..........................................       8:00       6:00
Montana...........................................       8:00       7:00
Nebraska..........................................       8:00       8:00
Nevada............................................       8:00       6:00
New Hampshire.....................................       8:00       6:00
New Jersey........................................       8:00       6:00
New Mexico........................................       8:00       6:00
New York..........................................       8:00       6:00
North Carolina....................................       7:00       7:00
North Dakota......................................       8:00       9:00
Ohio..............................................       8:00       6:00
Oklahoma..........................................       8:00       6:00
Oregon............................................       8:00       8:00
Pennsylvania......................................       8:00       9:00
Rhode Island......................................       8:00       6:00
South Carolina....................................       7:00       7:00
South Dakota......................................       8:00       8:00
Tennessee.........................................       8:00       7:00
Texas.............................................       8:00       7:00
Utah..............................................       8:00       6:00
Vermont...........................................       8:00       6:00
Virginia..........................................       7:00       7:00
Washington........................................       8:00       8:00
West Virginia.....................................       8:00       8:00
Wisconsin.........................................       8:00       8:00
Wyoming...........................................       8:00       8:00
Puerto Rico.......................................       8:00       6:00
------------------------------------------------------------------------


The times listed in this section shall be the local time in effect for 
the area in which the polling place is located.



Sec. 717.8  Notice of referendum.

    (a) Posting a notice. The county committee shall give public notice 
of the referendum in each referendum community by posting a notice at 
one or more places open to the public within such community prior to the 
date of the referendum. Such notice shall be on a form prescribed by the 
Deputy Administrator and shall state the commodity or commodities and 
marketing year, or years, or crops for which the referendum is to be 
held, the location of the polling place in the community, the date of 
the referendum, and the

[[Page 71]]

hours when the polls will be opened and closed. The county executive 
director is authorized to sign such notice on behalf of the county 
committee.
    (b) Use of agencies of public information. The county committee and 
community referendum committees shall utilize, to the extent practicable 
(without advertising expense), all available agencies of public 
information, including newspapers, radio, television and other means, to 
give persons in the county public notice of the day and hours of voting, 
the location of polling places, and the rules governing eligibility to 
vote. Such notice should be given as soon as practicable after the 
arrangements for holding the referendum in the county have been made.



Sec. 717.9  Manner of voting.

    (a) Secret ballot. The voting in the referendum shall be by secret 
ballot. Each voter shall, at the time he is handed the form on which to 
cast his ballot, be instructed to mark his ballot form so as to indicate 
clearly how he votes and in such manner that no one else shall see how 
he votes and then to fold his ballot and place it in the ballot box 
without allowing anyone else to see how he voted. A suitable place where 
each voter may mark and cast his ballot in secret and without coercion, 
duress, or interference of any sort whatever, shall be provided in each 
polling place. Every unchallenged ballot shall be placed in the ballot 
box by the person who voted it. The fact that a voter fails to fold a 
ballot placed in the ballot box shall not invalidate it. It shall be the 
duty of each community referendum committee to see that no device of any 
sort whatever is used whereby any voter's ballot may be identified 
except as provided in this part in the case of a challenged ballot or an 
absentee ballot.
    (b) Voting by proxy prohibited. There shall be no voting by proxy or 
agent, or in any manner except by the eligible voter (or the challenged 
voter under paragraph (d) of this section) personally depositing in the 
ballot box his ballot as marked by him (except as provided in the case 
of an absentee ballot), but a duly authorized officer of a corporation, 
association, or other legal entity, may cast its vote.
    (c) Absentee ballots. Any person who will not be present on the day 
of the referendum in the county in which he is eligible to vote or who 
will be prevented from voting in person on the day of the referendum 
because of physical incapacity, or whose religious belief forbids him 
from voting on the day of the referendum, may obtain prior to the date 
of the referendum, one ballot from a State or county FSA office 
conveniently situated for him, or from the Commodity Programs Division, 
FSA, Department of Agriculture, Washington, D.C., and cast an absentee 
ballot. The office so issuing the ballot form shall endorse on the 
reverse side thereof a statement in substantially the following form 
identifying the place in which it was issued and the county to which it 
will be mailed or delivered, initialed and dated by the person issuing 
such form.
    Issued in -------- County -------- State, or by ---------------- 
State FSA Office, or by ---------------- Division, FSA, Washington, 
D.C., for use in -------- County, -------- State.

The issuing office shall keep a register showing for each ballot form so 
issued by it to be voted absentee, the name and address to whom issued, 
the date of issuance, and the county and State in which the ballot is to 
be voted, and the name and title of the person who issued the ballot. 
The person to whom the ballot is issued shall mark the ballot so as to 
indicate clearly how he votes and place the ballot in a plain envelope 
which shall be marked clearly with the words ``Absentee Ballot,'' sealed 
and inserted in another envelope which shall be marked clearly with the 
voter's name and return address, sealed and delivered, or mailed, 
postage paid, to the county committee for the county in which he is 
eligible to vote. All absentee ballots must, in order to be accepted, 
reach the county office for the county in which the voter is eligible to 
vote by not later than the hour for closing the polls in the county on 
the day of the referendum. No such ballot shall be counted unless the 
voter's name and address appear on the envelope and it is determined 
that he is eligible to vote.

[[Page 72]]

    (d) Challenged ballots. The community referendum committee or any 
member thereof shall challenge the eligibility of any person to vote in 
the referendum where (1) the community referendum committee or any 
member thereof is unable to determine that the person is eligible to 
vote in the referendum in the community, or (2) the community referendum 
committee or any member thereof has reason to believe that such person 
has previously voted in the referendum in another community in the same 
or another county in person or by mail, or (3) the person's name and 
address have not been entered on the register of eligible voters, prior 
to its delivery to the referendum committee, unless the referendum 
committee is satisfied that the person is eligible to vote. In every 
case where the eligibility of the voter is challenged, his ballot form, 
after being marked by the challenged person so as to show how he votes, 
but in such manner that no one else sees how he votes, shall be folded 
and placed by him (or by a member of the committee if he refuses) in an 
envelope, which shall then be sealed and placed in another envelope, 
identified with his name and address, the word ``Challenged'' and a 
statement of the reason for the challenge, and shall then be placed in 
the ballot box. The county committee shall make an investigation in each 
case of controversy or dispute regarding the eligibility of a voter to 
vote in the referendum. In each case of a challenged ballot the 
eligibility of the person to vote in the referendum shall be determined 
by the county committee as soon as may be possible after the polls are 
closed and before the time for forwarding to the State committee the 
county summary of ballots. If it is determined that the person whose 
vote was challenged is eligible to vote, the sealed envelope containing 
the ballot shall be placed with the challenged ballot of every other 
person found to be eligible to vote until all challenged ballots have 
been passed upon by the county committee. If it is determined that the 
person whose vote was challenged is not eligible, the sealed envelope 
shall be marked ``Not eligible'' and signed by a member of the county 
committee and shall not be opened. When all of the challenged ballots 
have been passed upon by the county committee, the challenged ballots 
which were cast by eligible voters shall be opened and tabulated on the 
county summary of ballots, but no disclosure shall be made as to how any 
particular person voted.
    (e) Ballot box. Each polling place shall be furnished with a 
suitable ballot box. Any container of sufficient size so arranged that 
no ballot can be read or removed without breaking seals on the container 
will be suitable. When strip adhesive paper or corresponding seals are 
used on the ballot box, such seals shall be signed or initialed by the 
chairman or a member of the community referendum committee so that 
breaking or replacing the seal will so destroy or affect the identifying 
marks as to show that the seal has been tampered with.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 1, 34 FR 12940, Aug. 9, 
1969]



Sec. 717.10  Local arrangements for holding the referendum.

    The county committee shall make all arrangements for the proper 
holding of the referendum in accordance with this part prior to the date 
of the referendum. The county committee shall instruct each community 
referendum committee concerning its duties so that each member of the 
committee understands his duties and the duties of the committee in all 
respects, with particular emphasis as to (a) issuing ballot forms, (b) 
challenged ballots, (c) recording votes, (d) tabulating ballots, and (e) 
certifying results of the referendum in the referendum community. The 
county executive director shall furnish each community referendum 
committee an adequate supply of forms prior to the time the polls in the 
county are opened for the acceptance of ballots, by delivering the 
ballot forms and the forms for the community summary of ballots to each 
chairman of the several community referendum committees.



Sec. 717.11  Issuing ballots.

    The community referendum committee shall open the polling place for 
the issuance of ballot forms and the casting of ballots at the time 
designated and shall thereafter until the

[[Page 73]]

time when the polls are required to be closed and the casting of ballots 
discontinued issue a ballot to each person who is eligible to vote and 
applies for a ballot and to each person who claims to be eligible to 
vote and insists upon voting even though his eligibility to vote is 
challenged by a member of the committee. The community referendum 
committeeman who issued the ballot form shall immediately enter on the 
register of voters opposite the name and address of the person voting, a 
record of the issuance of the ballot, the casting of the ballot, and any 
challenge of the eligibility of the person casting the ballot. Ballot 
forms shall be issued and ballots placed in the ballot box while at 
least two members serving on the community referendum committee are 
physically present in the polling place and in position to see each 
ballot form as it is issued and each ballot as it is placed in the 
ballot box.



Sec. 717.12  Community referendum committee's canvass of ballots.

    Immediately after the polls are closed, the community referendum 
committee shall open the ballot box and canvass the ballots cast. The 
canvass of the ballots shall be kept open to the public. A ballot shall 
be considered as a spoiled ballot if it is mutilated or marked in such a 
way that it is not possible to determine with certainty how the ballot 
was intended to be counted on a particular question. The envelope 
containing the challenged ballots shall not be opened. The total number 
of ballots issued as shown on the register of voters shall be determined 
and the total number of ballots cast, including the spoiled and 
challenged ballots, shall be determined. The number of ballots cast in 
favor of and the number of ballots cast in opposition to the question on 
which the referendum was held shall be determined. The spoiled ballots 
and challenged ballots shall not be considered in favor of or against 
the question. If any member of the community referendum committee should 
see or learn how any person besides himself voted, whether or not the 
ballot was challenged, spoiled, or otherwise, he shall not disclose such 
knowledge to a fellow committeeman or any other person except in an 
investigation conducted under this part.



Sec. 717.13  Community committee's reporting and record of results of referendum.

    The community referendum committee shall notify the county committee 
by telephone, telegraph, messenger, or in person of the preliminary 
count of the votes on each question and of the number of spoiled and 
challenged ballots, as soon as may be possible. All the spoiled ballots 
shall be placed in an envelope and sealed and marked with the initials 
of the chairman (or vice chairman) of the community referendum committee 
and the designation ``Spoiled Ballots'' followed by the number of 
spoiled ballots and the names of the community, the county and the 
State. The community referendum committee shall execute the 
certification as to the accuracy of the register of eligible voters and 
ballots cast. The community referendum committee shall then prepare and 
execute the community summary of ballots and post one copy thereof, as 
soon as it is executed, in a conspicuous place at the polling place, so 
that it will remain posted and accessible to the public for at least 3 
calendar days after the holding of the referendum. The community 
referendum committee shall seal the voted ballots, including those 
challenged and spoiled, the register of eligible voters and ballots 
cast, and the community summary of ballots, in one or more envelopes 
appropriately identified by the names of the community, the county, and 
the State, and the nature of the referendum and the date on which it was 
held, and deliver them to the county committee not later than 9 a.m., 
local time, on the second calendar day after the date of the referendum, 
together with the unused ballot and other forms. The chairman (or vice 
chairman) of the community referendum committee shall be responsible for 
the safe delivery of such reports, ballots, and forms to the county 
committee.

[[Page 74]]



Sec. 717.14  County committee's canvass of ballots.

    The county committee, after the closing of the polls, shall open and 
canvass the absentee ballots received and determine the eligibility of 
each voter. If any person voting absentee is found to be ineligible to 
vote, or the ballot is so mutilated or marked that it is not possible to 
determine with certainty how the person intended to vote, such ballot 
shall not be counted as for or against the question in the referendum. 
The county committee shall meet and pass upon the challenged ballots as 
soon as may be reasonably possible after the challenged ballots are 
received from the community referendum committees, but not later than 4 
calendar days after the day of the referendum. The result of the 
referendum in each community shall be reviewed and summarized as soon as 
may be reasonably possible after the records, ballots, and forms are 
received from the several community referendum committees. Every meeting 
of the county committee for the purpose of canvassing the ballots cast 
and reviewing and tabulating the results of the referendum shall be open 
to the public. No member of the county committee who learns how any 
person besides himself voted, whether the ballot was an absentee ballot, 
challenged, spoiled, or otherwise, shall disclose such knowledge to any 
fellow committeeman or other person except in an investigation conducted 
under this part.



Sec. 717.15  County committee's reporting and record of results of the referendum.

    The county committee shall notify the State committee by telephone, 
telegraph, or messenger (who may be a member of the county committee), 
as to the preliminary count of the votes on each question and the number 
of challenged ballots by the several community referendum committees as 
soon as possible. The county committee shall, as soon as may be 
reasonably possible, but in no event later than 4 calendar days after 
the date of the referendum, have prepared and certified the county 
summary of ballots. Such summary shall be prepared and certified in 
triplicate, one copy of which shall be sent to the State committee, one 
copy posted for 30 calendar days in a conspicuous place accessible to 
the public in or near the office of the county committee, and one copy 
filed in the office of the county committee and kept available for 
public inspection. One copy of each community summary shall likewise be 
posted for 30 calendar days in a conspicuous place accessible to the 
public in or near the office of the county committee.



Sec. 717.16  Investigation as to correctness of summary of the referendum.

    The county committee shall make an investigation in each case of a 
dispute or challenge regarding the correctness of the summary of the 
referendum in a community. No dispute or challenge shall be investigated 
by the county committee unless it is brought to its attention within 3 
calendar days after the date on which the referendum was held. The 
county committee shall promptly decide the dispute or the challenge and 
report its findings to the State committee within 5 calendar days after 
the holding of the referendum and send by certified mail, or deliver in 
person, to the office of the State committee all voted ballots, register 
forms, and community summary sheets involved in the dispute or 
challenge.



Sec. 717.17  State committee's reporting and record of result of the referendum.

    The State committee for each State shall notify the Deputy 
Administrator by telegraph or telephone as to the preliminary count of 
the votes in the State as soon as the preliminary results of the 
referendum are made known to the State committee. The county summaries 
of ballots shall be summarized on the State summary of ballots as soon 
as possible, but in no event later than 7 calendar days after the date 
of the referendum, unless there is a dispute or challenge regarding the 
correctness of the summary for any county, in which case the State 
committee shall complete its investigation thereof, decide the dispute 
or challenge, and prepare the State summary accordingly within 14 
calendar

[[Page 75]]

days after the date of the referendum. The State summary shall be 
prepared in triplicate and certified to by the State executive director. 
The original and one copy of the State summary shall be forwarded to the 
Director of the FSA Division having the responsibility for the commodity 
for which the referendum was held. One copy of the State summary shall 
be filed for a period of 5 years in the office of the State committee 
available for public inspection.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 1, 34 FR 12940, Aug. 9, 
1969]

                    Holding Referenda by Mail Ballot



Sec. 717.18  Issuing ballots.

    The county committee shall furnish each person who is eligible to 
vote in a particular referendum a ballot suitable for mailing back to 
the office of the county committee. If a person who is eligible to vote 
in a particular referendum is not furnished a ballot, he may obtain one 
during the referendum period from the office of the county committee for 
the county in which he is eligible to vote or from any other FSA office 
where ballots are available, including the Commodity Programs Division, 
FSA, Department of Agriculture, Washington, D.C. When a ballot is issued 
from an FSA office other than the FSA office in the county in which the 
producer is eligible to vote in a particular referendum, the issuing 
office shall keep a register showing to whom it was issued, the person's 
address, the county and State in which the ballot is to be voted, and 
the name and title of the person who issued the ballot.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 1, 34 FR 12940, Aug. 9, 
1969]



Sec. 717.19  Manner of voting.

    (a) Voting procedure. Each person to whom a ballot is issued by mail 
or in person may vote in the referendum by marking the ballot so as to 
indicate clearly how the vote is cast, placing the ballot in a plain 
envelope, sealing the envelope provided by FSA which is marked clearly 
with the voter's name and return address, signing the certification on 
such envelope or making his mark thereto (which mark shall be 
witnessed), sealing such envelope, and delivering or mailing the 
envelope to the offfice of the county committee for the county in which 
the person is eligible to vote.
    (b) Voting by proxy prohibited. There shall be no voting by proxy or 
agent except as provided in Sec. 717.3.

(Secs. 312, 317, 336, 343, 344, 354, 358, 375, 52 Stat. 46, as amended, 
79 Stat. 66, 52 Stat. 55, as amended, 56, as amended, 79 Stat. 1197, 52 
Stat. 61, as amended, 55 Stat. 88, as amended, 52 Stat. 66, as amended; 
7 U.S.C. 1312, 1314c, 1336, 1343, 1344b, 1354, 1356, 1375)

[Amdt. 2, 36 FR 12730, July 7, 1971, as amended by Amdt. 4, 49 FR 24371, 
June 13, 1984]



Sec. 717.20  Receiving and tabulating voted ballots.

    Ballots received at the county FSA office during the referendum 
period shall be placed immediately in a ballot box provided by the 
county executive director and so arranged that ballots cannot be read or 
removed without breaking the seal on the container. Voted ballots 
received by the county committee of the county in which the voter is 
eligible to vote during the period established for holding a particular 
referendum, shall be tabulated by the county committee. A ballot shall 
be considered to have been received during the referendum period if (a) 
in the case of a ballot delivered to the county committee, it was 
received in the office prior to the close of the work day on the final 
day of the referendum period, or (b) in the case of a mailed ballot, it 
was postmarked not later than midnight of the final day of the 
referendum period and was received in the county office prior to the 
start of canvassing the ballots. However, no such ballot shall be 
counted unless the voter signs the certification or his mark is 
witnessed on the returned envelope, and it is determined that he is 
eligible to vote in the particular referendum.

(Secs. 312, 317, 336, 343, 344, 354, 358, 375, 52 Stat. 46, as amended, 
79 Stat. 66, 52 Stat. 55, as amended, 56, as amended, 79 Stat. 1197, 52 
Stat. 61, as amended, 55 Stat. 88, as amended, 52 Stat. 66, as amended; 
7 U.S.C. 1312, 1314c, 1336, 1343, 1344b, 1354, 1356, 1375)

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 4, 49 FR 24371, June 
13, 1984]

[[Page 76]]



Sec. 717.21  Canvassing voted ballots.

    (a) Time of canvassing. The canvassing of voted ballots shall take 
place at the opening of the county office on the fifth day after the 
close of the referendum period. Ballots received after the start of 
tabulation, even though contained in envelopes that were post-marked 
prior to midnight of the final day of the referendum period, shall not 
be counted.
    (b) Canvassing by county committee. The canvassing shall be in the 
presence of at least two members of the county committee and open to the 
public: Provided, That if two or more counties have been combined and 
are served by one county office, the canvassing of ballots shall be 
conducted by at least one member of the county committee from each 
county served by the county office: Provided further, That the State 
committee, or the State executive director if authorized by the State 
committee, may (1) designate the county executive director and a county 
or State FSA office employee to canvass the ballots and report the 
results, as provided in paragraph (c) and Sec. 717.22, instead of two 
members of the county committee, when it is determined that the number 
of eligible voters for the commodity for which the referendum is being 
conducted is so limited that having two members of the county committee 
present for this function is impractical and (2) designate the county 
Executive Director and/or another county or State FSA office employee to 
canvass ballots in any emergency situation precluding at least two 
members of the county committee from being present to carry out the 
functions required in this section.
    (c) Manner of canvassing. The canvassing of ballots shall follow the 
following procedure:
    (1) The ballot box shall be opened;
    (2) The envelopes from the ballot box shall be separated into three 
groups consisting of (i) unopened certification envelopes which do not 
have a proper signed certification, (ii) unopened certification 
envelopes from ineligible voters, and (iii) unopened certification 
envelopes from eligible voters;
    (3) The unopened certification envelopes from eligible voters shall 
be opened and plain envelopes removed and then shuffled to preserve the 
secrecy of the ballots contained in such plain envelopes;
    (4) The ballots shall be removed from such plain envelopes and 
tabulated. A ballot shall be considered as a spoiled ballot if it is 
mutilated or marked in such a way that it is not possible to determine 
with certainty how the ballot was intended to be counted on a particular 
question. The spoiled ballots shall not be considered in favor of or 
against the question.
    (5) The unopened certification envelopes which do not have a proper 
signed certification shall not be opened and shall not be considered in 
favor of or against the question.
    (6) The unopened certification envelopes from ineligible voters 
shall be considered as challenged ballots. The county committee shall 
determine the eligibility of the person to vote in the referendum. If 
determined to be eligible such envelopes shall be handled as provided 
under paragraphs (c)(3) and (4) of this section. If determined not to be 
eligible, such envelopes shall not be opened and shall not be considered 
in favor of or against the question.
    (d) Dispute or challenge. A dispute or challenge with respect to any 
referendum held by mail ballot shall not be considered unless 
notification of such dispute or challenge is filed in writing with the 
county executive director of the county in which the alleged 
irregularity occurred within 3 days after the date of the canvassing of 
voted ballots. Such written notification of a dispute or challenge must 
identify each alleged instance in which the county committee erred when 
canvassing the ballots or tabulating the referendum results. The county 
committee shall determine the validity of the dispute or challenge and 
report its findings to the State committee within 3 working days after 
the final date for filing a dispute or challenge.

[33 FR 18345, Dec. 11, 1968, as amended by Amdt. 2, 36 FR 12730, July 7, 
1971; Amdt. 3, 38 FR 12891, May 17, 1973; 51 FR 10609, Mar. 28, 1986; 52 
FR 10727, Apr. 3, 1987]

[[Page 77]]



Sec. 717.22  Reporting and record of result of the referendum.

    (a) County committee. The county committee shall notify the State 
committee by telephone, telegraph, or messenger (who may be a member of 
the county committee), as to the preliminary count of the votes on each 
question and the number of challenged ballots as soon as possible. The 
county committee shall, as soon as may be reasonably possible, but in no 
event later than 4 calendar days after canvassing of the ballots, have 
prepared and certified the county summary of ballots. Such summary shall 
be prepared and certified in triplicate, one copy of which shall be sent 
to the State committee, one copy posted for 30 calendar days in a 
conspicuous place accessible to the public in or near the office of the 
county committee, and one copy filed in the office of the county 
committee and kept available for public inspection.
    (b) State committee. The State committee for each State shall notify 
the Deputy Administrator by telephone or telegraph as to the preliminary 
count of the votes in the State as soon as the preliminary results of 
the referendum are made known to the State committee. The county 
summaries of ballots shall be summarized on the State summary of ballots 
as soon as possible, but in no event later than 7 calendar days after 
canvassing of the ballots, unless there is a dispute or challenge 
regarding the correctness of the summary for any county, in which case 
the State committee shall complete its investigation thereof, decide the 
dispute or challenge, and prepare the State summary accordingly within 
14 calendar days after canvassing of the ballots. The State summary 
shall be prepared in triplicate and certified to by the State executive 
director. The original and one copy of the State summary shall be 
forwarded to the Director of the FSA Division having the responsibility 
for the commodity for which the referendum was held. One copy of the 
State summary shall be filed for a period of 5 years in the office of 
State committee available for public inspection.

[Amdt. 1, 34 FR 12940, Aug. 9, 1969]

                              Miscellaneous



Sec. 717.23  Applicability of this part to Puerto Rico.

    The Caribbean Area Agricultural Stabilization and Conservation 
Committee shall be in charge of and responsible for conducting in Puerto 
Rico each referendum required by the Act. Insofar as applicable, the 
Caribbean Area ASC Committee shall perform all the duties and assume all 
the responsibilities otherwise required of State and county committees 
as provided in this part, except that (a) the Director, Agricultural 
Stabilization and Conservation Caribbean Area Office shall nominate for 
appointment by the Caribbean Area ASC Committee the members and 
alternates to serve on community referendum committees and shall 
establish the boundaries of referendum communities in such a manner that 
polling places therein will be conveniently located for the farmers 
eligible to vote in the referendum, and (b) following the canvass of the 
ballots, results of the referendum shall be reported to the Caribbean 
Area ASC Committee.



Sec. 717.24  Result of referendum.

    (a) Proclamation of result. The final and official tabulation of the 
votes cast in the referendum shall be made by the Deputy Administrator 
and the result of the referendum will be publicly proclaimed and 
published in the Federal Register. The State summaries and related 
papers shall be filed with such tabulation for a period of 5 years 
available for public inspection in the Department of Agriculture.
    (b) Unofficial announcements of result. Each county committee is 
authorized to issue unofficial reports of the total ``Yes'' and ``No'' 
votes in its county to the press and the public. Each State committee is 
authorized to issue to the press and the public the unofficial result of 
the referendum in its State by counties as rapidly as the votes in the 
various counties are reported to it.
    (c) Investigations. If the Deputy Administrator or the Secretary 
deems it necessary, the report of any community referendum committee, 
county committee, or State committee shall be reexamined and checked by 
such

[[Page 78]]

persons or agents as may be designated.



Sec. 717.25  Disposition of ballots and rec ords.

    The county committee shall seal the voted ballots, challenged 
ballots found to be ineligible, spoiled ballots, unopened certification 
envelopes, register sheets, and community summaries for the county in 
one or more envelopes or packages, plainly marked with the 
identification of the referendum, the date, and the names of the county 
and State, and place them under lock in a safe place under the custody 
of the county office manager for a period of 30 calendar days after the 
date of the referendum. If no notice to the contrary is received by the 
end of such time, the voted ballots, challenged ballots, spoiled 
ballots, and unopened certification envelopes shall be destroyed, but 
the registers and community and county summary sheets and the register 
of absentee ballots shall be filed for a period of 5 years in the office 
of the county committee.



Sec. 717.26  Applicability.

    The regulations contained in this part shall be applicable to all 
referenda held pursuant to the Agricultural Adjustment Act of 1938, as 
amended.



PART 718_PROVISIONS APPLICABLE TO MULTIPLE PROGRAMS--Table of Contents




                      Subpart A_General Provisions

Sec.
718.1 Applicability.
718.2 Definitions.
718.3 State committee responsibilities.
718.4 Authority for farm entry and providing information.
718.5 Rule of fractions.
718.6 Controlled substance.
718.7 Furnishing maps.
718.8 Administrative county.
718.9 Signature requirements.
718.10 Time limitations.
718.11 Disqualification due to federal crop insurance fraud.

            Subpart B_Determination of Acreage and Compliance

Sec.
718.101 Measurements.
718.102 Acreage reports.
718.103 Late-filed reports.
718.104 Revised reports.
718.105 Tolerances, variances, and adjustments.
718.106 Non-compliance and fraudulent acreage reports.
718.107 Acreages.
718.108 Measuring acreage including skip row acreage
718.109 Deductions.
718.110 Adjustments.
718.111 Notice of measured acreage.
718.112 Redetermination.

    Subpart C_Reconstitution of Farms, Allotments, Quotas, and Bases

Sec.
718.201 Farm constitution.
718.202 Determining the land constituting a farm.
718.203 County committee action to reconstitute a farm.
718.204 Reconstitution of allotments, quotas, and bases.
718.205 Substantive change in farming operation, and changes in related 
          legal entities.
718.206 Determining farms, tracts, allotments, quotas, and bases when 
          reconstitution is made by division.
718.207 Determining allotments, quotas, and bases when reconstitution is 
          made by combination.

              Subpart D_Equitable Relief From Ineligibility

Sec.
718.301 Applicability.
718.302 Definitions and abbreviations.
718.303 Reliance on incorrect actions or information.
718.304 Failure to fully comply.
718.305 Forms of relief.
718.306 Finality.
718.307 Special relief approval authority for State Executive Directors.

    Authority: 7 U.S.C. 1311 et seq., 1501 et seq., 1921 et seq., 7201 
et seq., 15 U.S.C. 714b.

    Source: 61 FR 37552, July 18, 1996, unless otherwise noted.



                      Subpart A_General Provisions

    Source: 68 FR 16172, Apr. 3, 2003, unless otherwise noted.



Sec. 718.1  Applicability.

    (a) This part is applicable to all programs set forth in chapters 
VII and XIV of this title which are administered by the Farm Service 
Agency (FSA). This rule governs how FSA monitors marketing quotas, 
allotments, base acres and acreage reports.

[[Page 79]]

The regulations affected are those that establish procedures for 
measuring allotments and program eligible acreage, and determining 
program compliance.
    (b) The provisions of this part will be administered under the 
general supervision of the Administrator, FSA, and shall be carried out 
in the field by State and county FSA committees (State and county 
committees).
    (c) State and county committees, and representatives and employees 
thereof, do not have authority to modify or waive any regulations in 
this part.
    (d) No provisions or delegation herein to a State or county 
committee shall preclude the Administrator, FSA, or a designee, from 
determining any question arising under the program or from reversing or 
modifying any determination made by a State or county committee.
    (e) The Deputy Administrator may authorize State and county 
committees to waive or modify deadlines and other requirements in cases 
where lateness or failure to meet such other requirements does not 
adversely affect the operation of the program.



Sec. 718.2  Definitions.

    Except as provided in individual parts of chapters VII and XIV of 
this title, the following terms shall be as defined herein:
    Administrative variance (AV) means the amount by which the 
determined acreage of tobacco may exceed the effective allotment and be 
considered in compliance with program regulations.
    Allotment means an acreage for a commodity allocated to a farm in 
accordance with the Agricultural Adjustment Act of 1938, as amended.
    Allotment crop means any tobacco crop for which acreage allotments 
are established pursuant to part 723 of this chapter.
    Barley means barley that follows the standard planting and 
harvesting practice of barley for the area in which the barley is grown.
    Base acres means the quantity of acres established according to part 
1413 of this title.
    CCC means the Commodity Credit Corporation.
    Combination means consolidation of two or more farms or parts of 
farms, having the same operator, into one farm.
    Common ownership unit means a distinguishable parcel of land 
consisting of one or more tracts of land with the same owners, as 
determined by FSA.
    Constitution means the make-up of the farm before any change is made 
because of change in ownership or operation.
    Controlled substances means the term set forth in 21 CFR part 1308.
    Corn means field corn or sterile high-sugar corn that follows the 
standard planting and harvesting practices for corn for the area in 
which the corn is grown. Popcorn, corn nuts, blue corn, sweet corn, and 
corn varieties grown for decoration uses are not corn.
    County means the county or parish of a state. For Alaska, Puerto 
Rico and the Virgin Islands, a county shall be an area designated by the 
State committee with the concurrence of the Deputy Administrator.
    County committee means the FSA county committee.
    Crop reporting date means the latest date the Administrator, FSA 
will allow the farm operator, owner, or their agent to submit a crop 
acreage report in order for the report to be considered timely.
    Cropland. (a) Means land which the county committee determines meets 
any of the following conditions:
    (1) Is currently being tilled for the production of a crop for 
harvest. Land which is seeded by drilling, broadcast or other no-till 
planting practices shall be considered tilled for cropland definition 
purposes;
    (2) Is not currently tilled, but it can be established that such 
land has been tilled in a prior year and is suitable for crop 
production;
    (3) Is currently devoted to a one-row or two-row shelter belt 
planting, orchard, or vineyard;
    (4) Is in terraces that, were cropped in the past, even though they 
are no longer capable of being cropped;
    (5) Is in sod waterways or filter strips planted to a perennial 
cover;
    (6) Is preserved as cropland in accordance with part 1410 of this 
title; or
    (7) Is land that has newly been broken out for purposes of being 
planted to a crop that the producer intends to,

[[Page 80]]

and is capable of, carrying through to harvest, using tillage and 
cultural practices that are consistent with normal practices in the 
area; provided further that, in the event that such practices are not 
utilized other than for reasons beyond the producer's control, the 
cropland determination shall be void retroactive to the time at which 
the land was broken out.
    (b) Land classified as cropland shall be removed from such 
classification upon a determination by the county committee that the 
land is:
    (1) No longer used for agricultural production;
    (2) No longer suitable for production of crops;
    (3) Subject to a restrictive easement or contract that prohibits its 
use for the production of crops unless otherwise authorized by the 
regulation of this chapter;
    (4) No longer preserved as cropland in accordance with the 
provisions of part 1410 of this title and does not meet the conditions 
in paragraphs (a)(1) through (a)(6) of this definition; or
    (5) Converted to ponds, tanks or trees other than those trees 
planted in compliance with a Conservation Reserve Program contract 
executed pursuant to part 1410 of this title, or trees that are used in 
one-or two-row shelterbelt plantings, or are part of an orchard or 
vineyard.
    Current year means the year for which allotments, quotas, acreages, 
and bases, or other program determinations are established for that 
program. For controlled substance violations, the current year is the 
year of the actual conviction.
    Deputy Administrator means Deputy Administrator for Farm Programs, 
Farm Service Agency, U.S. Department of Agriculture or their designee.
    Determination means a decision issued by a State, county or area FSA 
committee or its employees that affects a participant's status in a 
program administered by FSA.
    Determined acreage means that acreage established by a 
representative of the Farm Service Agency by use of official acreage, 
digitizing or planimetering areas on the photograph or other 
photographic image, or computations from scaled dimensions or ground 
measurements.
    Direct and counter-cyclical program (DCP) cropland means land that 
currently meets the definition of cropland, land that was devoted to 
cropland at the time it was enrolled in a production flexibility 
contract in accordance with part 1413 of this title and continues to be 
used for agricultural purposes, or land that met the definition of 
cropland on or after April, 4, 1996, and continues to be used for 
agricultural purposes and not for nonagricultural commercial or 
industrial use.
    Division means the division of a farm into two or more farms or 
parts of farms.
    Entity means a corporation, joint stock company, association limited 
partnership, irrevocable trust, estate, charitable organization, or 
other similar organization including any such organization participating 
in the farming operation as a partner in a general partnership, a 
participant in a joint venture, a grantor of a revocable trust, or as a 
participant in a similar organization.
    Extra Long Staple (ELS) Cotton means cotton that follows the 
standard planting and harvesting practices of the area in which the 
cotton is grown, and meets all of the following conditions:
    (1) American-Pima, Sea Island, Sealand, all other varieties of the 
Barbandense species of cotton and any hybrid thereof, and any other 
variety of cotton in which 1 or more of these varieties is predominant; 
and,
    (2) The acreage is grown in a county designated as an ELS county by 
the Secretary; and,
    (3) The production from the acreage is ginned on a roller-type gin.
    Family member means an individual to whom a person is related as 
spouse, lineal ancestor, lineal descendant, or sibling, including:
    (1) Great grandparent;
    (2) Grandparent;
    (3) Parent;
    (4) Child, including a legally adopted child;
    (5) Grandchild
    (6) Great grandchildren;
    (7) Sibling of the family member in the farming operation; and

[[Page 81]]

    (8) Spouse of a person listed in paragraphs (1) through (7) of this 
definition.
    Farm means a tract, or tracts, of land that are considered to be a 
separate operation under the terms of this part provided further that 
where multiple tracts are to be treated as one farm, the tracts must 
have the same operator and must also have the same owner except that 
tracts of land having different owners may be combined if all owners 
agree to the treatment of the multiple tracts as one farm for these 
purposes.
    Farm inspection means an inspection by an authorized FSA 
representative using aerial or ground compliance to determine the extent 
of producer adherence to program requirements.
    Farm number means a number assigned to a farm by the county 
committee for the purpose of identification.
    Farmland means the sum of the DCP cropland, forest, acreage planted 
to an eligible crop acreage as specified in 1437.3 of this title and 
other land on the farm.
    Field means a part of a farm which is separated from the balance of 
the farm by permanent boundaries such as fences, permanent waterways, 
woodlands, and croplines in cases where farming practices make it 
probable that such cropline is not subject to change, or other similar 
features.
    GIS means Geographic Information System or a system that stores, 
analyzes, and manipulates spatial or geographically referenced data. GIS 
computes distances and acres using stored data and calculations.
    GPS means Global Positioning System or a positioning system using 
satellites that continuously transmit coded information. The information 
transmitted from the satellites is interpreted by GPS receivers to 
precisely identify locations on earth by measuring distance from the 
satellites.
    Grain sorghum means grain sorghum of a feed grain or dual purpose 
variety (including any cross that, at all stages of growth, having 
characteristics of a feed grain or dual purpose variety) that follows 
the standard planting and harvesting practice for grain sorghum for the 
area in which the grain sorghum was planted. Sweet sorghum is not 
considered a grain sorghum.
    Ground measurement means the distance between 2 points on the 
ground, obtained by actual use of a chain tape, GPS with an minimum 
accuracy level as determined by the Deputy Administrator, or other 
measuring device.
    Joint operation means a general partnership, joint venture, or other 
similar business organization.
    Landlord means one who rents or leases farmland to another.
    Measurement service means a measurement of acreage or farm-stored 
commodities performed by a representative of FSA and paid for by the 
producer requesting the measurement.
    Measurement service after planting means determining a crop or 
designated acreage after planting but before the farm operator files a 
report of acreage for the crop.
    Measurement service guarantee means a guarantee provided when a 
producer requests and pays for an authorized FSA representative to 
measure acreage for FSA and CCC program participation unless the 
producer takes action to adjust the measured acreage. If the producer 
has taken no such action, and the measured acreage is later discovered 
to be incorrect, the acreage determined pursuant to the measurement 
service will be used for program purposes for that program year.
    Minor child means an individual who is under 18 years of age. State 
court proceedings conferring majority on an individual under 18 years of 
age will not change such an individual's status as a minor.
    Nonagricultural commercial or industrial use means land that is no 
longer suitable for producing annual or perennial crops, including 
conserving uses, or forestry products.
    Normal planting period means that period during which the crop is 
normally planted in the county, or area within the county, with the 
expectation of producing a normal crop.
    Normal row width means the normal distance between rows of the crop 
in the field, but not less than 30 inches for all crops.

[[Page 82]]

    Oats means oats that follows the standard planting and harvesting 
practice of oats for the area in which the oats are grown.
    Operator means an individual, entity, or joint operation who is 
determined by the FSA county committee to be in control of the farming 
operations on the farm.
    Owner means one who has legal ownership of farmland, including:
    (1) Any agency of the Federal Government, however, such agency shall 
not be eligible to receive any payment pursuant to such contract;
    (2) One who is buying farmland under a contract for deed;
    (3) One who has a life-estate in the property; or
    (4) For purposes of enrolling a farm in a program authorized by 
chapters VII and XIV of this title:
    (i) One who has purchased a farm in a foreclosure proceeding; and
    (A) The redemption period has not passed; and
    (B) The original owner has not redeemed the property.
    (ii) One who meets the provisions of paragraph (d)(1)(i) of this 
definition shall be entitled to receive benefits in accordance with an 
agency program only to the extent the owner complies with all program 
requirements.
    (5) One who is an heir to property but cannot provide legal 
documentation to confirm ownership of the property, if such heir 
certifies to the ownership of the property and the certification is 
considered acceptable, as determined by the Deputy Administrator. Upon a 
false or inaccurate certification the Deputy Administrator may impose 
liability on the certifying party for additional cost that results--
however such a certification may be taken by the Deputy Administrator as 
a bar to other claims where there has been a failure of other persons 
claiming an interest in the property to act promptly to protect or 
declare their interest or where the current public records do not 
accurately set out the current ownership of the farm.
    Partial reconstitution means a reconstitution that is made effective 
in the current year for some crops, but is not made effective in the 
current year for other crops. This results in the same farm having two 
or more farm numbers in one crop year.
    Participant means one who participates in, or receives payments or 
benefits in accordance with any of the programs administered by FSA.
    Pasture means land that is used to, or has the potential to, produce 
food for grazing animals.
    Person means an individual, or an individual participating as a 
member of a joint operation or similar operation, a corporation, joint 
stock company, association, limited stock company, limited partnership, 
irrevocable trust, revocable trust together with the grantor of the 
trust, estate, or charitable organization including any entity 
participating in the farming operation as a partner in a general 
partnership, a participant in a joint venture, a grantor of a revocable 
trust, or a participant in a similar entity, or a State, political 
subdivision or agency thereof. To be considered a separate person for 
the purpose of this part, the individual or other legal entity must:
    (1) Have a separate and distinct interest in the land or the crop 
involved;
    (2) Exercise separate responsibility for such interest; and
    (3) Be responsible for the cost of farming related to such interest 
from a fund or account separate from that of any other individual or 
entity.
    Producer means an owner, operator, landlord, tenant, or 
sharecropper, who shares in the risk of producing a crop and who is 
entitled to share in the crop available for marketing from the farm, or 
would have shared had the crop been produced. A producer includes a 
grower of hybrid seed.
    Quota means the pounds allocated to a farm for a commodity in 
accordance with the Agricultural Adjustment Act of 1938, as amended.
    Random inspection means an examination of a farm by an authorized 
representative of FSA selected as a part of an impartial sample to 
determine the adherence to program requirements.
    Reconstitution means a change in the land constituting a farm as a 
result of combination or division.
    Reported acreage means the acreage reported by the farm operator, 
farm owner, farm producer, or their agent on a Form prescribed by the 
FSA.

[[Page 83]]

    Required inspection means an examination by an authorized 
representative of FSA of a farm specifically selected by application of 
prescribed rules to determine adherence to program requirements or to 
verify the farm operator's, farm owner's, farm producer, or agent's 
report.
    Rice means rice that follows the standard planting and harvesting 
practices of the area excluding sweet, glutinous, or candy rice such as 
Mochi Gomi.
    Secretary means the Secretary of Agriculture of the United States, 
or a designee.
    Sharecropper means one who performs work in connection with the 
production of a crop under the supervision of the operator and who 
receives a share of such crop for its labor.
    Skip-row or strip-crop planting means a cultural practice in which 
strips or rows of the crop are alternated with strips of idle land or 
another crop.
    Staking and referencing means determining an acreage before planting 
by:
    (1) Measuring or computing a delineated area from ground 
measurements and documenting the area measured; and, (2) Staking and 
referencing the area on the ground.
    Standard deduction means an acreage that is excluded from the gross 
acreage in a field because such acreage is considered as being used for 
farm equipment turn-areas. Such acreage is established by application of 
a prescribed percentage of the area planted to the crop in lieu of 
measuring the turn area.
    State means each of the 50 States, the District of Columbia, the 
Commonwealth of Puerto Rico, Guam, the Virgin Islands of the United 
States, American Samoa, the Commonwealth of the Northern Mariana 
Islands, or the Trust Territory of the Pacific Islands.
    Subdivision means a part of a field that is separated from the 
balance of the field by temporary boundary, such as a cropline which 
could be easily moved or will likely disappear.
    Tenant means:
    (1) One who rents land from another in consideration of the payment 
of a specified amount of cash or amount of a commodity; or
    (2) One (other than a sharecropper) who rents land from another 
person in consideration of the payment of a share of the crops or 
proceeds therefrom.
    Tolerance means a prescribed amount within which the reported 
acreage and/or production may differ from the determined acreage and/or 
production and still be considered as correctly reported.
    Tract means a unit of contiguous land under one ownership, which is 
operated as a farm, or part of a farm.
    Tract combination means the combining of two or more tracts if the 
tracts have common ownership and are contiguous.
    Tract division means the dividing of a tract into two or more tracts 
because of a change in ownership or operation.
    Turn-area means the area across the ends of crop rows which is used 
for operating equipment necessary to the production of a row crop (also 
called turn row, headland, or end row).
    Upland cotton means planted and stub cotton that is not considered 
extra long staple cotton, and that follows the standard planting and 
harvesting practices of the area and is produced from other than pure 
strain varieties of the Barbadense species, any hybrid thereof, or any 
other variety of cotton in which one or more of these varieties 
predominate. For program purposes, brown lint cotton is considered 
upland cotton.
    Wheat means wheat for feed or dual purpose variety that follows the 
standard planting and harvesting practice of wheat for the area in which 
the wheat is grown.

[68 FR 16172, Apr. 3, 2003; 69 FR 249, Jan. 5, 2004]



Sec. 718.3  State committee responsibilities.

    (a) The State committee shall, with respect to county committees:
    (1) Take any action required of the county committee, which the 
county committee fails to take in accordance with this part;
    (2) Correct or require the county committee to correct any action 
taken by such committee, which is not in accordance with this part;
    (3) Require the county committee to withhold taking any action which 
is not in accordance with this part;

[[Page 84]]

    (4) Review county office rates for producer services to determine 
equity between counties;
    (5) Determine, based on cost effectiveness, which counties will use 
aerial compliance methods and which counties will use ground measurement 
compliance methods; or
    (6) Adjust the per acre rate for acreage in excess of 25 acres to 
reflect the actual cost involved when performing measurement service 
from aerial slides or digital images.
    (b) The State committee shall submit to the Deputy Administrator 
requests to deviate from deductions prescribed in Sec. 718.108, or the 
error amount or percentage for refunds of redetermination costs as 
prescribed in Sec. 718.111.



Sec. 718.4  Authority for farm entry and providing information.

    (a) This section applies to all farms that have a tobacco allotment 
or quota under part 723 of this chapter and all farms that are currently 
participating in programs administered by FSA.
    (b) A representative of FSA may enter any farm that participates in 
an FSA or CCC program in order to conduct a farm inspection as defined 
in this part. A program participant may request that the FSA 
representative present written authorization for the farm inspection 
before granting access to the farm. If a farm inspection is not allowed 
within 30 days of written authorization:
    (1) All FSA and CCC program benefits for that farm shall be denied;
    (2) The person preventing the farm inspection shall pay all costs 
associated with the farm inspection;
    (3) The entire crop production on the farm will be considered to be 
in excess of the quota established for the farm; and
    (4) For tobacco, the farm operator must furnish proof of disposition 
of:
    (i) All tobacco which is in addition to the production shown on the 
marketing card issued with respect to such farm; and
    (ii) No credit will be given for disposing of excess tobacco other 
than that identified by a marketing card unless disposed of in the 
presence of FSA in accordance with Sec. 718.109 of this part.
    (c) If a program participant refuses to furnish reports or data 
necessary to determine benefits in accordance with paragraph (a) of this 
section, or FSA determines that the report or data was erroneously 
provided through the lack of good faith, all program benefits relating 
to the report or data requested will be denied.



Sec. 718.5  Rule of fractions.

    (a) Fractions shall be rounded after completion of the entire 
associated computation. All mathematical calculations shall be carried 
to two decimal places beyond the number of decimal places required by 
the regulations governing each program. In rounding, fractional digits 
of 49 or less beyond the required number of decimal places shall be 
dropped; if the fractional digits beyond the required number of decimal 
places are 50 or more, the figure at the last required decimal place 
shall be increased by ``1'' as follows:

------------------------------------------------------------------------
          Required decimal                 Computation          Result
------------------------------------------------------------------------
Whole numbers......................  6.49 (or less)........            6
                                     6.50 (or more)........            7
Tenths.............................  7.649 (or less).......          7.6
                                     7.650 (or more).......          7.7
Hundredths.........................  8.8449 (or less)......         8.84
                                     8.8450 (or more)......         8.85
Thousandths........................  9.63449 (or less).....        9.634
                                     9.63450 (or more).....        9.635
0 thousandths......................  10.993149 (or less)...      10.9931
                                     10.993150 (or more)...      10.9932
------------------------------------------------------------------------

    (b) The acreage of each field or subdivision computed for tobacco 
and CCC disaster assistance programs shall be recorded in acres and 
hundredths of an acre, dropping all thousandths of an acre. The acreage 
of each field or subdivision computed for crops, except tobacco, shall 
be recorded in acres and tenths of an acre, rounding all hundredths of 
an acre to the nearest tenth.



Sec. 718.6  Controlled substance.

    (a) The following terms apply to this section:
    (1) USDA benefit means the issuance of any grant, contract, loan, or 
payment by appropriated funds of the United States.
    (2) Person means an individual.
    (b) Notwithstanding any other provision of law, any person convicted 
under Federal or State law of:

[[Page 85]]

    (1) Planting, cultivating, growing, producing, harvesting, or 
storing a controlled substance in any crop year shall be ineligible for 
any payment made under any Act, with respect to any commodity produced 
during the crop year of conviction and the four succeeding crop years, 
by such person.
    (2) Possession of a controlled substance, or trafficking in a 
controlled substance, shall, in addition to any ineligibility under 
paragraph (b)(1) of this section, be ineligible for any or all USDA 
benefits, to the extent that a court shall determine to impose such 
ineligibility pursuant to applicable Federal law, in which case the 
ineligibility shall be for such period of time as is imposed by the 
court, pursuant to such law, at the discretion of the court.
    (c) USDA benefits subject to paragraph (b) of this section include:
    (1) Any payments or benefits under the Direct and Counter Cyclical 
Program (DCP) in accordance with part 1413 of this title;
    (2) Any payments or benefits for losses to trees, crops, or 
livestock covered under disaster programs administered by FSA;
    (3) Any price support loan available in accordance with part 1464 of 
this title;
    (4) Any price support or payment made under the Commodity Credit 
Corporation Charter Act;
    (5) A farm storage facility loan made under section 4(h) of the 
Commodity Credit Corporation Charter Act or any other Act;
    (6) Crop Insurance under the Federal Crop Insurance Act;
    (7) A loan made or guaranteed under the Consolidated Farm and Rural 
Development Act or any other law formerly administered by the Farmers 
Home Administration; or
    (d) If a person denied benefits under this section is a shareholder, 
beneficiary, or member of an entity or joint operation, benefits for 
which the entity or joint operation is eligible shall be reduced, for 
the appropriate period, by a percentage equal to the total interest of 
the shareholder, beneficiary, or member.

[68 FR 16172, Apr. 3, 2003; 69 FR 249, Jan. 5, 2004]



Sec. 718.7  Furnishing maps.

    A reasonable number, as determined by FSA, of reproductions of 
photographs, mosaics and maps shall be available to the owner of a farm 
insurance companies reinsured by the Federal Crop Insurance Corporation 
(FCIC), private party contractors performing their official duties on 
behalf of FSA, CCC, and other USDA agencies. To all others, 
reproductions shall be made available at the rate FSA determines will 
cover the cost of making such items available.



Sec. 718.8  Administrative county.

    (a) If all land on the farm is physically located in one county, the 
farm shall be administratively located in such county. If there is no 
FSA office in the county or the county offices have been consolidated, 
the farm shall be administratively located in the contiguous county most 
convenient for the farm operator.
    (b) If the land on the farm is located in more than one county, the 
farm shall be administratively located in either of such counties as the 
county committees and the farm operator agree. If no agreement can be 
reached, the farm shall be administratively located in the county where 
the principal dwelling is situated, or where the major portion of the 
farm is located if there is no dwelling.
    (c) The State committee shall submit all requests to deviate from 
regulations specified in this section to the Deputy Administrator.



Sec. 718.9  Signature requirements.

    (a) When a program authorized by this chapter or Chapter XIV of this 
title requires the signature of a producer; landowner; landlord; or 
tenant, a husband or wife may sign all such FSA or CCC documents on 
behalf of the other spouse, unless such other spouse has provided 
written notification to FSA and CCC that such action is not authorized. 
The notification must be provided to FSA with respect to each farm.
    (b) Except a husband or wife may not sign a document on behalf of a 
spouse with respect to:

[[Page 86]]

    (1) Program document required to be executed in accordance with part 
3 of this title;
    (2) Easements entered into under part 1410 of this title;
    (3) Power of attorney;
    (4) Such other program documents as determined by FSA or CCC.
    (c) An individual; duly authorized officer of a corporation; duly 
authorized partner of a partnership; executor or administrator of an 
estate; trustee of a trust; guardian; or conservator may delegate to 
another the authority to act on their behalf with respect to FSA and CCC 
programs administered by USDA service center agencies by execution of a 
Power of Attorney, or such other form as approved by the Deputy 
Administrator. FSA and CCC may, at their discretion, allow the 
delegations of authority by other individuals through use of the Power 
of Attorney or such other form as approved by the Deputy Administrator.
    (d) Notwithstanding another provision of this regulation or any 
other FSA or CCC regulation in this title, a parent may execute 
documents on behalf of a minor child unless prohibited by a statute or 
court order.
    (e) Notwithstanding any other provision in this title, an authorized 
agent of the Bureau of Indian Affairs (BIA) of the United States 
Department of Interior may sign as agent for landowners with properties 
affiliated with or under the management or trust of the BIA. For 
collection purposes, such payments will be considered as being made to 
the persons who are the beneficiaries of the payment or may, 
alternatively, be considered as an obligation of all persons on the farm 
in general. In the event of a need for a refund or other claim may be 
collected, among other means, by other monies due such persons or the 
farm.

[68 FR 16172, Apr. 3, 2003; 69 FR 249, Jan. 5, 2004]



Sec. 718.10  Time limitations.

    Whenever the final date prescribed in any of the regulations in this 
title for the performance of any act falls on a Saturday, Sunday, 
national holiday, State holiday on which the office of the county or 
State Farm Service Agency committee having primary cognizance of the 
action required to be taken is closed, or any other day on which the 
cognizant office is not open for the transaction of business during 
normal working hours, the time for taking required action shall be 
extended to the close of business on the next working day. Or in case 
the action required to be taken may be performed by mailing, the action 
shall be considered to be taken within the prescribed period if the 
mailing is postmarked by midnight of such next working day. Where the 
action required to be taken is with a prescribed number of days after 
the mailing of notice, the day of mailing shall be excluded in computing 
such period of time.



Sec. 718.11  Disqualification due to federal crop insurance fraud.

    (a) Section 515(h) of the Federal Crop Insurance Act (FCIA) provides 
that a person who willfully and intentionally provides any false or 
inaccurate information to the Federal Crop Insurance Corporation (FCIC) 
or to an approved insurance provider with respect to a policy or plan of 
FCIC insurance after notice and an opportunity for a hearing on the 
record, will be subject to one or more of the sanctions described in 
section 515(h)(3). In section 515(h)(3), the FCIA specifies that in the 
case of a violation committed by a producer, the producer may be 
disqualified for a period of up to 5 years from receiving any monetary 
or non-monetary benefit under a number of programs. The list includes, 
but is not limited to, benefits under:
    (1) Title V of the FCIA.
    (2) The Agricultural Market Transition Act (7 U.S.C. 7201 et seq.), 
including the Noninsured Crop Disaster Assistance Program under section 
196 of that Act (7 U.S.C. 7333).
    (3) The Agricultural Act of 1949 (7 U.S.C. 1421 et seq.).
    (4) The Commodity Credit Corporation Charter Act (15 U.S.C. 714 et 
seq).
    (5) The Agricultural Adjustment Act of 1938 (7 U.S.C. 1281 et seq.).
    (6) Title XII of the Food Security Act of 1985 (16 U.S.C. 3801 et 
seq.).

[[Page 87]]

    (7) Any law that provides assistance to a producer of an 
agricultural commodity affected by a crop loss or a decline in prices of 
agricultural commodities.
    (b) Violation determinations are made by FCIC. However, upon notice 
from FCIC to FSA that a producer has been found to have committed a 
violation to which paragraph (a) of this section applies, that person 
shall be considered ineligible for payments under the programs specified 
in paragraph (a) of this section that are funded by FSA for the same 
period of time for which, as determined by FCIC, the producer will be 
ineligible for crop insurance benefits of the kind referred to in 
paragraph (a)(1) of this section. Appeals of the determination of 
ineligibility will be administered under the rules set by FCIC.
    (c) Other sanctions may also apply.

[68 FR 39448, July 2, 2003]



            Subpart B_Determination of Acreage and Compliance

    Source: 68 FR 16176, Apr. 3, 2003, unless otherwise noted.



Sec. 718.101  Measurements.

    (a) Measurement services include, but are not limited to, measuring 
land and crop areas, quantities of farm-stored commodities, and 
appraising the yields of crops in the field when required for program 
administration purposes. The county committee shall provide measurement 
service if the producer requests such service and pays the cost, except 
that service shall not be provided to determine total acreage or 
production of a crop when the request is made:
    (1) After the established final reporting date for the applicable 
crop, unless a late filed report is accepted as provided in Sec. 
718.103;
    (2) After the farm operator has furnished production evidence when 
required for program administration purposes except as provided in this 
subpart; or
    (3) In connection with a late-filed report of acreage, unless there 
is evidence of the crop's existence in the field and use made of the 
crop, or the lack of the crop due to a disaster condition affecting the 
crop.
    (b) The acreage requested to be measured by staking and referencing 
shall not exceed the effective farm allotment for marketing quota crops 
or acreage of a crop that is limited to a specific number of acres to 
meet any program requirement.
    (c) When a producer requests, pays for, and receives written notice 
that measurement services have been furnished, the measured acreage 
shall be guaranteed to be correct and used for all program purposes for 
the current year even though an error is later discovered in the 
measurement thereof, if the producer has taken action with an economic 
significance based on the measurement service, and the entire crop 
required for the farm was measured. If the producer has not taken action 
with an economic significance based on the measurement service, the 
producer shall be notified in writing that an error was discovered and 
the nature and extent of such error. In such cases, the corrected 
acreage will be used for determining program compliance for the current 
year.
    (d) When a measurement service reveals acreage in excess of the 
permitted acreage and the allowable tolerance as defined in this part, 
the producer must destroy the excess acreage and pay for FSA to verify 
destruction, in order to keep the measurement service guarantee.



Sec. 718.102  Acreage reports.

    (a) In order to be eligible for benefits, participants in the 
programs specified in paragraphs (b)(1) through (b)(6) of this section 
must annually submit accurate information as required by these 
provisions.
    (b)(1) Participants in the programs governed by part 1412 of this 
title must report the acreage of fruits and vegetables planted for 
harvest on a farm enrolled in such program;
    (2) Participants in the programs governed by parts 1421 and 1427 of 
this title must report the acreage planted to a commodity for harvest 
for which a marketing assistance loan or loan deficiency payment is 
requested;

[[Page 88]]

    (3) Participants in the programs governed by part 1410 of this title 
must report the use of land enrolled in such programs;
    (4) All participants in the programs governed by part 1437 of this 
title must report all acreage in the county of the eligible crop in 
which the producer has a share;
    (5) Participants in the programs governed by part 723 of this 
chapter and part 1464 of this title must report the acreage planted to 
tobacco by kind on all farms that have an effective allotment or quota 
greater than zero;
    (6) All participants in the programs governed by parts 1412, 1421, 
and 1427 of this title must report the use of all cropland on the farm.
    (c) The reports required under paragraph (a) of this section shall 
be timely filed by the farm operator, farm owner, producer of the crop 
on the farm, or a duly authorized representative with the county 
committee by the final reporting date applicable to the crop as 
established by the county committee and State committee.



Sec. 718.103  Late-filed reports.

    (a) A report may be accepted after the required date if the crop or 
identifiable crop residue is in the field.
    (b) The farm operator shall pay the cost of a farm inspection unless 
the County Committee determines that failure to report in a timely 
manner was beyond the producer's control.



Sec. 718.104  Revised reports.

    (a) The farm operator may revise a report of acreage with respect to 
2002 and subsequent years to change the acreage reported if:
    (1) The county committee determines that the revision does not have 
an adverse impact on the program;
    (2) The acreage has not already been determined by FSA; and
    (3) Actual crop or residue is present in the field.
    (b) Revised reports shall be filed and accepted:
    (1) At any time for all crops if the crop or residue still exists in 
the field for inspection to verify its existence and use made of the 
crop, the lack of the crop, or a disaster condition affecting the crop; 
and
    (2) If the requirements of paragraph (a) of this section have been 
met and the producer was in compliance with all other program 
requirements at the reporting date.



Sec. 718.105  Tolerances, variances, and adjustments.

    (a) Tolerance is the amount by which the determined acreage for a 
crop may differ from the reported acreage or allotment for the crop and 
still be considered in compliance with program requirements under 
Sec. Sec. 718.102(b)(1), (b)(3) and (b)(5).
    (b) Tolerance rules apply to those fields for which a staking and 
referencing was performed but such acreage was not planted according to 
those measurements or when a measurement service is not requested for 
acreage destroyed to meet program requirements.
    (c) Tolerance rules do not apply to:
    (1) Program requirements of Sec. Sec. 718.102(b)(2), (b)(4) and 
(b)(6);
    (2) Official fields when the entire field is devoted to one crop;
    (3) Those fields for which staking and referencing was performed and 
such acreage was planted according to those measurements; or
    (4) The adjusted acreage for farms using measurement after planting 
which have a determined acreage greater than the marketing quota crop 
allotment.
    (d) An administrative variance is applicable to all allotment crop 
acreages. Allotment crop acreages as determined in accordance with this 
part shall be deemed in compliance with the effective farm allotment or 
program requirement when the determined acreage does not exceed the 
effective farm allotment by more than an administrative variance 
determined as follows:
    (1) For all kinds of tobacco subject to marketing quotas, except 
dark air-cured and fire-cured the larger of 0.1 acre or 2 percent of the 
allotment; and
    (2) For dark air-cured and fire-cured tobacco, an acreage based on 
the effective acreage allotment as provided in the table as follows:

------------------------------------------------------------------------
                                                         Administrative
   Effective acreage allotment is within this range         variance
------------------------------------------------------------------------
0.01 to 0.99.........................................               0.01
1.00 to 1.49.........................................               0.02
1.50 to 1.99.........................................               0.03

[[Page 89]]

 
2.00 to 2.49.........................................               0.04
2.50 to 2.99.........................................               0.05
3.00 to 3.49.........................................               0.06
3.50 to 3.99.........................................               0.07
4.00 to 4.49.........................................               0.08
4.50 and up..........................................               0.09
------------------------------------------------------------------------

    (e) A tolerance applies to tobacco, other than flue-cured or burley, 
if the measured acreage exceeds the allotment by more than the 
administrative variance but by not more than the tolerance. Such excess 
acreage of tobacco may be adjusted to the effective farm acreage 
allotment to avoid marketing quota penalties or receive price support.
    (f) If the acreage report for a crop is outside the tolerance for 
that crop:
    (1) FSA may consider the requirements of Sec. Sec. 718.102 (b)(1), 
(b)(3) and (b)(5) not to have been met, and;
    (2) Participants may be ineligible for all or a portion of payments 
or benefits subject to the requirements of Sec. Sec. 718.102 (b)(1), 
(b)(3) and (b)(5).



Sec. 718.106  Non-compliance and fraudulent acreage reports.

    Participants that knowingly and willfully provide false or 
inaccurate acreage reports may be ineligible for some or all payments or 
benefits subject to the requirements of Sec. Sec. 718.102 (b)(1), 
(b)(3) and (b)(5):
    (a) The county committee determines that the acreage report filed 
according to Sec. Sec. 718.102 (b)(1), (b)(3) and (b)(5) is inaccurate, 
and;
    (b) A good-faith effort to accurately report the acreage was not 
made because the report was knowingly and willfully falsified.



Sec. 718.107  Acreages.

    (a) If an acreage has been established by FSA for an area delineated 
on an aerial photograph or within a GIS, such acreage will be recognized 
by the county committee as the acreage for the area until such time as 
the boundaries of such area are changed. When boundaries not visible on 
the aerial photograph are established from data furnished by the 
producer, such acreage shall not be recognized as official acreage until 
an authorized representative of FSA verifies the boundaries.
    (b) Measurements of any row crop shall extend beyond the planted 
area by the larger of 15 inches or one-half the distance between the 
rows.
    (c) The entire acreage of a field or subdivision of a field devoted 
to a crop shall be considered as devoted to the crop subject to a 
deduction or adjustment except as otherwise provided in this part.



Sec. 718.108  Measuring acreage including skip row acreage.

    (a) When one crop is alternating with another crop, whether or not 
both crops have the same growing season, only the acreage that is 
actually planted to the crop being measured will be considered to be 
acreage devoted to the measured crop.
    (b) Subject to the provisions of this paragraph and section, whether 
planted in a skip row pattern or without a pattern of skipped rows, the 
entire acreage of the field or subdivision may be considered as devoted 
to the crop only where the distance between the rows, for all rows, is 
40 inches or less. If there is a skip that creates idle land wider than 
40 inches, or if the distance between any rows is more than 40 inches, 
then the area planted to the crop shall be considered to be that area 
which would represent the smaller of; a 40 inch width between rows, or 
the normal row spacing in the field for all other rows in the field--
those that are not more than 40 inches apart. The allowance for 
individual rows would be made based on the smaller of actual spacing 
between those rows or the normal spacing in the field. For example, if 
the crop is planted in single, wide rows that are 48 inches apart, only 
20 inches to either side of each row (for a total of 40 inches between 
the two rows) could, at a maximum, be considered as devoted as the crop 
and normal spacing in the field would control. Half the normal distance 
between rows will also be allowed beyond the outside planted rows not to 
exceed 20 inches and will reflect normal spacing in the field.
    (c) In making calculations under this section, further reductions 
may be made in the acreage considered planted if it is determined that 
the acreage is more sparsely planted than normal

[[Page 90]]

using reasonable and customary full production planting techniques.
    (d) The Deputy Administrator has the discretionary authority to 
allow row allowances other than those specified in this section in those 
instances in which crops are normally planted with spacings greater or 
less than 40 inches, such as in case of tobacco, or where other 
circumstances are present which the Deputy Administrator finds justifies 
that allowance.
    (e) Paragraphs (a) through (d) of this section shall apply with 
respect to the 2003 and subsequent crops. For preceding crops, the rules 
in effect on January 1, 2002, shall apply.



Sec. 718.109  Deductions.

    (a) Any contiguous area which is not devoted to the crop being 
measured and which is not part of a skip-row pattern under Sec. 718.108 
shall be deducted from the acreage of the crop if such area meets the 
following minimum national standards or requirements:
    (1) A minimum width of 30 inches;
    (2) For tobacco--three-hundredths (.03) acre. Turn areas, terraces, 
permanent irrigation and drainage ditches, sod waterways, non-cropland, 
and subdivision boundaries each of which is at least 30 inches in width 
may be combined to meet the 0.03-acre minimum requirement; or
    (3) For all other crops and land uses--one-tenth (.10) acre. Turn 
areas, terraces, permanent irrigation and drainage ditches, sod 
waterways, non-cropland, and subdivision boundaries each of which is at 
least 30 inches in width and each of which contain 0.1 acre or more may 
be combined to meet any larger minimum prescribed for a State in 
accordance with this subpart.
    (b) If the area not devoted to the crop is located within the 
planted area, the part of any perimeter area that is more than 217.8 
feet (33 links) in width will be considered to be an internal deduction 
if the standard deduction is used.
    (c) A standard deduction of 3 percent of the area devoted to a row 
crop and zero percent of the area devoted to a close-sown crop may be 
used in lieu of measuring the acreage of turn areas.



Sec. 718.110  Adjustments.

    (a) The farm operator or other interested producer having excess 
tobacco acreage (other than flue-cured or burley) may adjust an acreage 
of the crop in order to avoid a marketing quota penalty if such person:
    (1) Notifies the county committee of such election within 15 
calendar days after the date of mailing of notice of excess acreage by 
the county committee; and
    (2) Pays the cost of a farm inspection to determine the adjusted 
acreage prior to the date the farm visit is made.
    (b) The farm operator may adjust an acreage of tobacco (except flue-
cured and burley) by disposing of such excess tobacco prior to the 
marketing of any of the same kind of tobacco from the farm. The 
disposition shall be witnessed by a representative of FSA and may take 
place before, during, or after the harvesting of the same kind of 
tobacco grown on the farm. However, no credit will be allowed toward the 
disposition of excess acreage after the tobacco is harvested but prior 
to marketing, unless the county committee determines that such tobacco 
is representative of the entire crop from the farm of the kind of 
tobacco involved.



Sec. 718.111  Notice of measured acreage.

    Notice of measured acreage shall be provided by FSA and mailed to 
the farm operator. This notice shall constitute notice to all parties 
who have ownership, leasehold interest, or other, in such farm.



Sec. 718.112  Redetermination.

    (a) A redetermination of crop acreage, appraised yield, or farm-
stored production for a farm may be initiated by the county committee, 
State committee, or Deputy Administrator at any time. Redetermination 
may be requested by a producer with an interest in the farm if they pay 
the cost of the redetermination. The request must be submitted to FSA 
within 15 calendar days after the date of the notice described in 
Sec. Sec. 718.110 or 718.111, or within 5 calendar days after the 
initial appraisal of the yield of a crop, or before the farm-stored 
production is removed from storage. A redetermination shall

[[Page 91]]

be undertaken in the manner prescribed by the Deputy Administrator. A 
redetermination shall be used in lieu of any prior determination.
    (b) The county committee shall refund the payment of the cost for a 
redetermination when, because of an error in the initial determination:
    (1) The appraised yield is changed by at least the larger of:
    (i) Five percent or 5 pounds for cotton;
    (ii) Five percent or 1 bushel for wheat, barley, oats, and rye; or
    (iii) Five percent or 2 bushels for corn and grain sorghum; or
    (2) The farm stored production is changed by at least the smaller of 
3 percent or 600 bushels; or
    (3) The acreage of the crop is:
    (i) Changed by at least the larger of 3 percent or 0.5 acre; or
    (ii) Considered to be within program requirements.



    Subpart C_Reconstitution of Farms, Allotments, Quotas, and Bases

    Source: 68 FR 16178, Apr. 3, 2003, unless otherwise noted.



Sec. 718.201  Farm constitution.

    (a) In order to implement agency programs and monitor farmer 
compliance with regulations, the agency must have records on what land 
is being farmed by a particular producer. This is accomplished by a 
determination of what land or groups of land `constitute' an individual 
unit or farm. Land, which has been properly constituted under prior 
regulations, shall remain so constituted until a reconstitution is 
required under paragraph (c) of this section. The constitution and 
identification of land as a farm for the first time and the subsequent 
reconstitution of a farm made hereafter, shall include all land operated 
by an individual entity or joint operation as a single farming unit 
except that it shall not include:
    (1) Land under separate ownership unless the owners agree in writing 
and the labor, equipment, accounting system, and management are operated 
in common by the operator but separate from other tracts;
    (2) Land under a lease agreement of less than 1 year duration;
    (3) Land in different counties when the tobacco allotments or quotas 
established for the land involved cannot be transferred from one county 
to another county by lease, sale, or owner. However, this paragraph 
shall not apply if:
    (i) All of the land is contiguous;
    (ii) The land is located in counties that are contiguous in the same 
State if:
    (A) A burley or flue-cured tobacco quota is established for one or 
more of the tracts; and
    (B) The county committee determines that the tracts will be operated 
as a single farming unit as set forth in Sec. 718.202; or
    (iii) Because of a change in operation, tracts or parts of tracts 
will be divided from the parent farm that currently has land in more 
than one county, and there is no change in operation and ownership of 
the remainder of the farm, or if there is a change in ownership, the new 
owner agrees in writing to the constitution of the farm.
    (4) Federally-owned land;
    (5) State-owned wildlife lands unless the former owner has 
possession of the land under a leasing agreement; and
    (6) Land constituting a farm which is declared ineligible to be 
enrolled in a program under the regulations governing the program; and
    (7) For acreage base crops, land located in counties that are not 
contiguous. However, this paragraph shall not apply if:
    (i) Counties are divided by a river;
    (ii) Counties do not touch because of a correction line adjustment; 
or
    (iii) The land is within 20 miles, by road, of other land that will 
be a part of the farming unit.
    (b)(1) If all land on the farm is physically located in one county, 
the farm shall be administratively located in such county. If there is 
no FSA office in the county or the county offices have been 
consolidated, the farm shall be administratively located in the 
contiguous county most convenient for the farm operator.
    (2) If the land on the farm is located in more than one county, the 
farm

[[Page 92]]

shall be administratively located in either of such counties as the 
county committees and the farm operator agree. If no agreement can be 
reached, the farm shall be administratively located in the county where 
the principal dwelling is situated, or where the major portion of the 
farm is located if there is no dwelling.
    (c) A reconstitution of a farm either by division or by combination 
shall be required whenever:
    (1) A change has occurred in the operation of the land after the 
last constitution or reconstitution and as a result of such change the 
farm does not meet the conditions for constitution of a farm as set 
forth in paragraph (a) of this section except that no reconstitution 
shall be made if the county committee determines that the primary 
purpose of the change in operation is to establish eligibility to 
transfer allotments subject to sale or lease, or increase amount of 
program benefits received;
    (2) The farm was not properly constituted the previous time;
    (3) An owner requests in writing that the land no longer be included 
in a farm composed of tracts under separate ownership;
    (4) The county committee determines that the farm was reconstituted 
on the basis of false information;
    (5) The county committee determines that tracts included in a farm 
are not being operated as a single farming unit.
    (d) Reconstitution shall not be approved if the county committee 
determines that the primary purpose of the reconstitution is to:
    (1) Circumvent the provisions of part 12 of this title; or
    (2) Circumvent any other chapter of this title.



Sec. 718.202  Determining the land constituting a farm.

    (a) In determining the constitution of a farm, consideration shall 
be given to provisions such as ownership and operation. For purposes of 
this part, the following rules shall be applicable to determining what 
land is to be included in a farm.
    (b) A minor shall be considered to be the same owner or operator as 
the parent, court-appointed guardian, or other person responsible for 
the minor child, unless the parent or guardian has no interest in the 
minor's farm or production from the farm, and the minor:
    (1) Is a producer on a farm;
    (2) Maintains a separate household from the parent or guardian;
    (3) Personally carries out the farming activities; and
    (4) Maintains a separate accounting for the farming operation.
    (c) A minor shall not be considered to be the same owner or operator 
as the parent or court-appointed guardian if the minor's interest in the 
farming operation results from being the beneficiary of an irrevocable 
trust and ownership of the property is vested in the trust or the minor.
    (d) A life estate tenant shall be considered to be the owner of the 
property for their life.
    (e) A trust shall be considered to be an owner with the beneficiary 
of the trust; except a trust can be considered a separate owner or 
operator from the beneficiary, if the trust:
    (1) Has a separate and distinct interest in the land or crop 
involved;
    (2) Exercises separate responsibility for the separate and distinct 
interest; and
    (3) Maintains funds and accounts separate from that of any other 
individual or entity for the interest.
    (f) The county committee shall require specific proof of ownership.
    (g) Land owned by different persons of an immediate family living in 
the same household and operated as a single farming unit shall be 
considered as being under the same ownership in determining a farm.
    (h) All land operated as a single unit and owned and operated by a 
parent corporation and subsidiary corporations of which the parent 
corporation owns more than 50 percent of the value of the outstanding 
stock, or where the parent is owned and operated by subsidiary 
corporations, shall be constituted as one farm.



Sec. 718.203  County committee action to reconstitute a farm.

    Action to reconstitute a farm may be initiated by the county 
committee, the farm owner, or the operator with the

[[Page 93]]

concurrence of the owner of the farm. Any request for a farm 
reconstitution shall be filed with the county committee.



Sec. 718.204  Reconstitution of allotments, quotas, and bases.

    (a) Farms shall be reconstituted in accordance with this subpart 
when it is determined that the land areas are not properly constituted 
and, to the extent practicable, shall be based on the facts and 
conditions existing at the time the change requiring the reconstitution 
occurred.
    (b) Reconstitutions of farms subject to a direct and counter-
cyclical program contract in accordance with part 1413 of this title 
will be effective for the current year if initiated on or before August 
1 or prior to the issuance of DCP payments for the farm or farms being 
reconstituted.
    (c) For tobacco farms, a reconstitution will be effective for the 
current year for each crop for which the reconstitution is initiated 
before the planting of such crop begins or would have begun.
    (d) Notwithstanding the provisions of paragraph (c) of this section, 
a reconstitution may be effective for the current year if the county 
committee determines, and the State committee concurs, that the purpose 
of the request for reconstitution is not to perpetrate a scheme or 
device designed to evade the requirements governing programs found in 
this title.



Sec. 718.205  Substantive change in farming operation, and changes 
in related legal entities.

    (a) Land that is properly constituted as a farm shall not be 
reconstituted if:
    (1) The reconstitution request is based upon the formation of a 
newly established legal entity which owns or operates the farm or any 
part of the farm and the county committee determines there is not a 
substantive change in the farming operation;
    (2) The county committee determines that the primary purpose of the 
request for reconstitution is to:
    (i) Obtain additional benefits under one or more commodity programs;
    (ii) Avoid damages or penalties under a contract or statute;
    (iii) Correct an erroneous acreage report; or
    (iv) Circumvent any other program provisions. In addition, no farm 
shall remain as constituted when the county committee determines that a 
substantive change in the farming operation has occurred which would 
require a reconstitution, except as otherwise approved by the State 
committee with the concurrence of the Deputy Administrator.
    (b) In determining whether a substantive change has occurred with 
respect to a farming operation, the county committee shall consider 
factors such as the composition of the legal entities having an interest 
in the farming operation with respect to management, financing, and 
accounting. The county committee shall also consider the use of land, 
labor, and equipment available to the farming operations and any other 
relevant factors that bear on the determination.
    (c) Unless otherwise approved by the State committee with the 
concurrence of the Deputy Administrator, when the county committee 
determines that a corporation, trust, or other legal entity is formed 
primarily for the purpose of obtaining additional benefits under the 
commodity programs of this title, the farm shall remain as constituted, 
or shall be reconstituted, as applicable, when the farm is owned or 
operated by:
    (1) A corporation having more than 50 percent of the stock owned by 
members of the same family living in the same household;
    (2) Corporations having more than 50 percent of the stock owned by 
stockholders common to more than one corporation; or
    (3) Trusts in which the beneficiaries and trustees are family 
members living in the same household.
    (d) Application of the provisions of paragraph (c) of this section 
shall not limit or affect the application of paragraphs (a) and (b) of 
this section.



Sec. 718.206  Determining farms, tracts, allotments, quotas, and bases 
when reconstitution is made by division.

    (a) The methods for dividing farms, tracts, allotments, quotas, and 
bases in order of precedence, when applicable, are estate, designation 
by landowner,

[[Page 94]]

contribution, cropland, DCP cropland, default, and history. The proper 
method shall be determined on a crop by crop basis.
    (b)(1) The estate method is the pro-rata distribution of allotments, 
quotas, and bases for a parent farm among the heirs in settling an 
estate. If the estate sells a tract of land before the farm is divided 
among the heirs, the allotments, quotas, and bases for that tract shall 
be determined according to paragraphs (c) through (h) of this section.
    (2) Allotments, quotas, and bases shall be divided in accordance 
with a will, but only if the county committee determines that the terms 
of the will are such that a division can reasonably be made by the 
estate method.
    (3) If there is no will or the county committee determines that the 
terms of a will are not clear as to the division of allotments, quotas, 
and bases, such allotments, quotas, and bases shall be apportioned in 
the manner agreed to in writing by all interested heirs or devisees who 
acquire an interest in the property for which such allotments, quotas, 
and bases have been established. An agreement by the administrator or 
executor shall not be accepted in lieu of an agreement by the heirs or 
devisees.
    (4) If allotments, quotas, and bases are not apportioned in 
accordance with the provisions of paragraphs (b)(2) or (b)(3) of this 
section, the allotments, quotas, and bases shall be divided pursuant to 
paragraphs (d) through (h) of this section, as applicable.
    (c)(1) If the ownership of a tract of land is transferred from a 
parent farm, the transferring owner may request that the county 
committee divide the allotments, quotas, and bases, including historical 
acreage that has been double cropped, between the parent farm and the 
transferred tract, or between the various tracts if the entire farm is 
sold to two or more purchasers, in a manner designated by the owner of 
the parent farm subject to the conditions set forth in paragraph (c)(3) 
of this section.
    (2) If the county committee determines that allotments, quotas, and 
bases cannot be divided in the manner designated by the owner because of 
the conditions set forth in paragraph (c)(3) of this section, the owner 
shall be notified and permitted to revise the designation so as to meet 
the conditions in paragraph (c)(3) of this section. If the owner does 
not furnish a revised designation of allotments, quotas, and bases 
within a reasonable time after such notification, or if the revised 
designation does not meet the conditions of paragraph (c)(3) of this 
section, the county committee will divide the allotments, quotas, and 
bases in a pro-rata manner in accordance with paragraphs (d) through (h) 
of this section.
    (3) A landowner may designate a manner in which allotments, quotas, 
and bases are divided according to this paragraph.
    (i) The transferring owner and transferee shall file a signed 
written memorandum of understanding of the designation with the county 
committee before any CCC or FSA prescribed form, letter or contract 
providing an allotment, base or quota is issued and before a subsequent 
transfer of ownership of the land. The landowner shall designate the 
allotments, quotas, and bases that shall be permanently reduced when the 
sum of the allotments, quotas, and bases exceeds the cropland for the 
farm.
    (ii) Where the part of the farm from which the ownership is being 
transferred was owned for a period of less than 3 years, the designation 
by landowner method shall not be available with respect to the transfer 
unless the county committee determines that the primary purpose of the 
ownership transfer was other than to retain or to sell allotments, 
quotas, or bases. In the absence of such a determination, and if the 
farm contains land which has been owned for less than 3 years, that part 
of the farm which has been owned for less than 3 years shall be 
considered as a separate farm and the allotments, quotas, or bases, 
shall be assigned to that part in accordance with paragraphs (d) through 
(h) of this section. Such apportionment shall be made prior to any 
designation of allotments, quotas, and bases with respect to the part 
that has been owned for 3 years or more.
    (4) The designation by landowner method is not applicable to crop 
allotments or quotas which are restricted to

[[Page 95]]

transfer within the county by lease, sale, or by owner, when the land on 
which the farm is located is in two or more counties.
    (5) The designation by landowner method may be applied at the 
owner's request to land owned by any Indian Tribal Council which is 
leased to two or more producers for the production of any crop of a 
commodity for which an allotment, quota, or base has been established. 
If the land is leased to two or more producers, an Indian Tribal Council 
may request that the county committee divide the allotments, quotas, and 
bases between the applicable tracts in the manner designated by the 
Council. The use of this method shall not be subject to the conditions 
of paragraph (c)(3) of this section.
    (d)(1) The contribution method is the pro-rata distribution of a 
parent farm's allotments and quotas to each tract as the tract 
contributed to the allotments and quotas at the time of combination and 
may be used when the provisions of paragraphs (b) and (c) of this 
section do not apply.
    (2) The county committee determines and the State committee or a 
representative thereof concurs, that the use of the contribution method 
would not result in an equitable distribution of allotments and quotas, 
considering available land, cultural operations, and changes in type of 
farming.
    (e) The cropland method is the pro-rata distribution of allotments 
and quotas to separate tracts proportionately to the tract's 
contribution to the cropland for the parent tract. This method shall be 
used if paragraphs (b) through (d) of this section do not apply unless 
the county committee determines that division by the history method 
would result in more representative allotments and quotas than the 
cropland method, taking into consideration the operation normally 
carried out on each tract for the commodities produced on the farm.
    (f)(1) The history method is the pro-rata distribution of allotments 
and quotas to separate tracts on the basis of the operation normally 
carried out on each tract of the parent farm. The county committee may 
use the history method of dividing allotments and quotas when it:
    (i) Determines that this method would result in a more accurate pro-
rata distribution of allotments and quotas based on actual contribution 
of the tract to the totals of the parent farm than the cropland method 
would; and
    (ii) Obtains written consent of all owners to use the history 
method.
    (2) The county committee may waive the requirement for written 
consent of the owners for dividing allotments and quotas if the county 
committee determines that the use of the cropland method would result in 
an inequitable division of the parent farm's allotments and quotas and 
the use of the history method would provide more favorable results for 
all owners.
    (g) The DCP cropland method is the pro-rata distribution of bases to 
the resulting tracts in the same proportion to the DCP cropland that 
each resulting tract bears to the DCP cropland for the parent tract. 
This method of division shall be used if paragraphs (b) and (c) of this 
section do not apply.
    (h) The default method is the separation of tracts from a farm with 
each tract maintaining the bases attributed to the tract when the 
reconstitution is initiated.
    (i)(1) Allotments, quotas, and bases apportioned among the resulting 
farms pursuant to paragraphs (d) through (h) of this section may be 
increased or decreased with respect to a farm by as much as 10 percent 
of the parent farm's allotment, quota, or base determined under such 
subsections for the parent farm if:
    (i) The owners agree in writing; and
    (ii) The county committee determines the method used did not provide 
an equitable distribution considering available land, cultural 
operations, and changes in the type of farming conducted on the farm. 
Any increase in an allotment, quota, or base with respect to a tract 
pursuant to this paragraph shall be offset by a corresponding decrease 
for such allotments, quotas or bases established with respect to the 
other tracts which constitute the farm.
    (2) Farm program payment yields calculated for the resulting farms 
of a division may be increased or decreased if the county committee 
determines

[[Page 96]]

the method used did not provide an equitable distribution considering 
available land, cultural operations, and changes in the type of farming 
conducted on the farm. Any increase in a farm program payment yield on a 
resulting farm shall be offset by a corresponding decrease on another 
resulting farm of the division.
    (j) If a farm with burley tobacco quota is divided through 
reconstitution and one or more of the farms resulting from the division 
are apportioned less than 1,000 pounds of burley tobacco quota, the 
owners of such farms shall take action as provided in part 723 of this 
chapter to comply with the 1,000 pound minimum by July 1 of the current 
year or the quota shall be dropped. Exceptions to this are farms 
divided:
    (1) Among family members;
    (2) By the estate method; and
    (3) When no sale or change in ownership of land occurs; or
    (4) With one resulting farm receiving all of the quota.



Sec. 718.207  Determining allotments, quotas, and bases when 
reconstitution is made by combination.

    When two or more farms or tracts are combined for a year, that 
year's allotments, quotas, and bases, with respect to the combined farm 
or tract, as required by applicable commodity regulations, shall not be 
greater than the sum of the allotments, quotas, and bases for each of 
the farms or tracts comprising the combination, subject to the 
provisions of Sec. 718.204.



              Subpart D_Equitable Relief From Ineligibility

    Source: 67 FR 66307, Oct. 31, 2002, unless otherwise noted.



Sec. 718.301  Applicability.

    (a) This subpart is applicable to programs administered by the Farm 
Service Agency under chapters VII and XIV of this title, except for an 
agricultural credit program carried out under the Consolidated Farm and 
Rural Development Act (7 U.S.C. 1921 et seq.). Administration of this 
subpart shall be under the supervision of the Deputy Administrator, 
except that such authority shall not limit the exercise of authority 
allowed State Executive Directors of the Farm Service agency as provided 
for in Sec. 718.307.
    (b) Sections 718.303, 718.304, and 718.307 do not apply where the 
action for which relief is requested occurred before May 13, 2002. In 
such cases, authority that was effective prior to May 13, 2002, may be 
applied.
    (c) Section 718.306 does not apply to a function performed under 
either section 376 of the Consolidated Farm and Rural Development Act 
(7U.S.C. 1921 et seq.), or a conservation program administered by the 
Natural Resources Conservation Service of the United States Department 
of Agriculture.



Sec. 718.302  Definitions and abbreviations.

    In addition to the definitions provided in Sec. 718.2 of this part, 
the following terms apply to this subpart:
    Agricultural commodity means any agricultural commodity, food, feed, 
fiber, or livestock that is subject to a covered program.
    Covered program means a program specified in Sec. 718.301 of this 
subpart.
    FSA means the Farm Service Agency of the United States Department of 
Agriculture.
    OGC means the Office of the General Counsel of the United States 
Department of Agriculture.
    SED means, for activities within a particular state, the State 
Executive Director of the United States Department of Agriculture, FSA, 
for that state.



Sec. 718.303  Reliance on incorrect actions or information.

    (a) Notwithstanding any other law, action or inaction by a 
participant in a covered program that is to the detriment of the 
participant, and that is based upon good faith reliance on the action or 
advice of an authorized representative of a County or State FSA 
Committee, may be approved by the Administrator, FSA or the Executive 
Vice President,CCC, as applicable, or their designee, as meeting the 
requirements of the program, and benefits may be extended or payments 
made in accordance with Sec. 718.305.
    (b) This section applies only to a participant who relied upon the 
action of,

[[Page 97]]

or information provided by, a county or State FSA committee or an 
authorized representative of such committee and the participant acted, 
or failed to act, as a result of the Agency action or information. This 
part does not apply to cases where the participant had sufficient reason 
to know that the action or information upon which they relied was 
improper or erroneous or where the participant acted in reliance on 
their own misunderstanding or misinterpretation of program provisions, 
notices or information.



Sec. 718.304  Failure to fully comply.

    (a) Under a covered program, when the failure of a participant to 
fully comply with the terms and conditions of a program authorized by 
this chapter precludes the providing of payments or benefits, relief may 
be authorized in accordance with Sec. 718.305 if the participant made a 
good faith effort to comply fully with the requirements of the covered 
program.
    (b) This section only applies to participants who are determined by 
the FSA approval official to have made a good faith effort to comply 
fully with the terms and conditions of the program and rendered 
substantial performance.



Sec. 718.305  Forms of relief.

    (a) The Administrator of FSA, Executive Vice President of CCC, or 
their designee, may authorize a participant in a covered program to:
    (1) Retain loans, payments, or other benefits received under the 
covered program;
    (2) Continue to receive loans, payments, and other benefits under 
the covered program;
    (3) Continue to participate, in whole or in part, under any contract 
executed under the covered program;
    (4) In the case of a conservation program, re-enroll all or part of 
the land covered by the program; and
    (5) Receive such other equitable relief as determined to be 
appropriate.
    (b) As a condition of receiving relief under this subpart, the 
participant may be required to remedy their failure to meet the program 
requirement, or mitigate its affects.



Sec. 718.306  Finality.

    (a) A determination by a State or county FSA committee made on or 
after October 13, 1994, becomes final and binding 90 days from the date 
the application for benefits has been filed, and supporting 
documentation required to be supplied by the producer as a condition for 
eligibility for the particular program has been filed, unless one of the 
following conditions exist:
    (1) The participant has requested an administrative review of the 
determination in accordance with part 780 of this chapter;
    (2) The determination was based on misrepresentation, false 
statement, fraud, or willful misconduct by or on behalf of the 
participant;
    (3) The determination was modified by the Administrator, FSA, or in 
the case of CCC programs conducted under Chapter XIV of this title, the 
Executive Vice President, CCC; or
    (4) The participant had reason to know that the determination was 
erroneous.
    (b) Should an erroneous determination become final under the 
provisions of this section, it shall only be effective through the year 
in which the error was found and communicated to the participant.



Sec. 718.307  Special relief approval authority for State Executive Directors.

    (a) General nature of the special authority. Notwithstanding 
provisions in this subpart providing supervision and relief authority to 
other officials, an SED without further review by other officials (other 
than the Secretary) may grant relief to a participant under the 
provisions of Sec. Sec. 718.303 and 718.304 as if the SED were the 
final arbiter within the agency of such matters so long as:
    (1) The program matter with respect to which the relief is sought is 
a program matter in a covered program which is operated within the State 
under the control of the SED;
    (2) The total amount of relief which will be provided to the 
person(that is, to the individual or entity that applies for the relief) 
by thatSED under this special authority for errors during that year is 
less than$20,000 (including in that calculation, any loan amount or

[[Page 98]]

other benefit of any kind payable for that year and any other year);
    (3) The total amount of such relief which has been previously 
provided to the participant using this special authority for errors in 
that year, as calculated above, is not more than $5,000;
    (4) The total amount of loans, payments, and benefits of any kind 
for which relief is provided to similarly situated participants by the 
SED (or the SED's predecessor) for errors for any year under the 
authority provided in this section, as calculated above, is not more 
than $1,000,000.
    (b) Report of the exercise of the power. A grant of relief shall be 
considered to be under this section and subject to the special finality 
provided in this section only if the SED grants the relief in writing 
when granting the relief to the party who will receive the benefit of 
such relief and only if, in that document, the SED declares that they 
are exercising that power. The SED must report the exercise of that 
power to the Deputy Administrator so that a full accounting may be made 
in keeping with the limitations of this section. Absent such a report, 
relief will not be considered to have been made under this section.
    (c) Additional limits on the authority. The authority provided under 
this section does not extend to:
    (1) The administration of payment limitations under part 1400 of 
this chapter (Sec. Sec. 1001 to 1001F of 7 U.S.C. 1308 et seq.);
    (2) The administration of payment limitations under a conservation 
program administered by the Secretary; or
    (3) Highly erodible land and wetland conservation requirements under 
subtitles B or C of Title XII of the Food Security Act of 1985 (16 
U.S.C.3811 et seq.) as administered under 7 CFR part 12.
    (d) Relief may not be provided by the SED under this section until a 
written opinion or written acknowledgment is obtained from OGC that 
grounds exist for determination that the program participant has, in 
good faith, detrimentally relied on the guidance or actions of an 
authorized FSA representative in accordance with the provisions of this 
subpart, or that the producer otherwise failed, in good faith, to fully 
comply with the requirements of the program and that the granting of the 
relief is within the lawful authority of the SED.
    (e) Relation to other authorities. The authority provided under this 
section is in addition to any other applicable authority that may allow 
relief. Generally, the SED may, without consultation other than with 
OGC, decide all matters under $20,000 but those decisions shall not be 
subject to modification within the Farm Service Agency to the extent 
provided for under the rules of this section.



PART 723_TOBACCO--Table of Contents




                      Subpart A_General Provisions

Sec.
723.101 OMB control numbers assigned pursuant to the Paperwork Reduction 
          Act.
723.102 Applicability.
723.103 Administration.
723.104 Definitions.
723.105 Extent of determinations, computations, and rule for rounding 
          fractions.
723.106 Location of farm for administrative purposes.
723.107-723.110 [Reserved]
723.111 Flue-cured (types 11-14) tobacco.
723.112 Burley (type 31) tobacco.
723.113 Fire-cured (type 21) tobacco.
723.114 Fire-cured (types 22-23) tobacco.
723.115 Dark air-cured (types 35-36) tobacco.
723.116 Sun-cured (type 37) tobacco.
723.117 Cigar-filler and binder (types 42-44 and 53-55) tobacco.
723.118 Cigar-filler (type 46) tobacco.
723.119-723.121 [Reserved]

      Subpart B_Allotments, Quotas, Yields, Transfers, Release and 
           Reapportionment, History Acreages, and Forfeitures

723.201 Determination of preliminary farm acreage allotments and 
          preliminary farm marketing quotas.
723.202 Determining farm acreage allotment, except for flue-cured 
          tobacco.
723.203 Determination of flue-cured tobacco preliminary farm yields.
723.204 Determination of farm yields and normal yields.
723.205 Determination of farm acreage allotments and effective farm 
          acreage allotments for flue-cured tobacco.
723.206 Determining farm marketing quotas and effective farm marketing 
          quotas.
723.207 Determination of acreage allotments or burley marketing quotas 
          for new farms.

[[Page 99]]

723.208 Determination of acreage allotments, marketing quotas, and 
          yields for divided farms.
723.209 Determination of acreage allotments, marketing quotas, yields 
          for combined farms; and special tobacco combinations.
723.210 Corrections of errors and adjusting inequities in acreage 
          allotments and marketing quotas for old farms.
723.211 Allotments, quotas, and yields for farms acquired under right of 
          eminent domain.
723.212 Time for making reduction of farm marketing quotas or acreage 
          allotments for violation of the marketing quota or acreage 
          allotment regulations for a prior marketing year.
723.213 Approval of acreage allotments and marketing quotas and notices 
          to farm operators.
723.214 Application for review.
723.215 Transfer of tobacco farm acreage allotment or farm marketing 
          quota that cannot be planted or replanted due to a natural 
          disaster.
723.216 Transfer of tobacco acreage allotment or marketing quota by 
          sale, lease, or owner.
723.217 Release and reapportionment of old farm acreage allotments for 
          Cigar-filler and Binder (types 42, 43, 44, 54, and 55) 
          tobacco.
723.218 Determining tobacco history acreage.
723.219 Forfeiture of burley tobacco marketing quota.
723.220 Forfeiture of flue-cured tobacco acreage allotment and marketing 
          quota.
723.221 Eminent domain acquisitions.
723.222 Exempting Federal prison farms and Federal wildlife refuges.
723.223 Transfer of allotments and quotas--State public lands.

 Subpart C_Tobacco Subject to Quota, Exemptions From Quotas, Marketing 
                  Cards, and General Penalty Provisions

723.301 Identification of tobacco subject to quota.
723.302 Tobacco for experimental purposes.
723.303 Production of registered or certified flue-cured tobacco seed.
723.304 Determination of discount varieties.
723.305 Issuance of marketing cards.
723.306 Claim stamping and replacing marketing cards.
723.307 Invalid cards.
723.308 Rate of penalty.
723.309 Persons to pay penalty.
723.310 Date penalty is due.
723.311 Lien for penalty; liability of persons who are affiliated with 
          indebted person or who permit the indebted person to use their 
          identification card.
723.312 Request for refund of penalty.
723.313 Identification of marketings.

 Subpart D_Recordkeeping, Reporting Requirements, Marketing Penalties, 
                           and Other Penalties

723.401 Registration of burley and flue-cured warehouse operators and 
          dealers.
723.402 Warehouse authorized to retain producer marketing cards between 
          sales.
723.403 Auction warehouse operators' records and reports.
723.404 Dealer's records and reports, excluding cigar tobacco buyers.
723.405 Dealers exempt from regular records and reports on MQ-79; and 
          season report for dealers.
723.406 Provisions applicable to damaged tobacco or to purchases of 
          tobacco from processors or manufacturers.
723.407 Cigar tobacco buyer's records and reports.
723.408 Producer's records and reports.
723.409 Producer violations, penalties, false identification collections 
          and remittances by dealers, buyers, handlers, warehouses, and 
          other parties; related issues.
723.410 Penalties considered to be due from warehouse operators, 
          dealers, buyers, and others excluding the producer.
723.411 Records and reports regarding hauling, processing, and storage 
          of tobacco.
723.412 Separate records and reports from persons engaged in tobacco 
          related businesses.
723.413 Length of time records and reports are to be kept.
723.414 Failure to keep records and make reports or making false report 
          or record.
723.415 Examination of records and reports.
723.416 Information confidential.

Subpart E_Establishing Burley and Flue-Cured Tobacco National Marketing 
                                 Quotas

723.501 Scope.
723.502 Definitions.
723.503 Establishing the quotas.
723.504 Manufacturer's intentions; penalties.

    Authority: 7 U.S.C. 1301 et seq.; 7 U.S.C. 1421; 7 U.S.C. 1445-1 and 
1445-2.

    Source: 55 FR 39914, Oct. 1, 1990, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 723 appear at 62 FR 
15600, Apr. 2, 1997, and at 63 FR 11585, Mar. 10, 1998.

[[Page 100]]



                      Subpart A_General Provisions



Sec. 723.101  OMB control numbers assigned pursuant to the Paperwork Reduction Act.

    The information collection requirements contained in these 
regulations (7 CFR part 723) have been approved by the Office of 
Management and Budget (OMB) in accordance with the provisions of U.S.C. 
chapter 35 and have been assigned OMB control numbers 0560-0058 and 
0560-0006.



Sec. 723.102  Applicability.

    The regulations contained in this subpart are applicable to the 1990 
and subsequent crops of burley; flue-cured; fire-cured; dark air-cured; 
Virginia sun-cured; cigar-filler and binder (types 42, 43, 44, 54, and 
55); and Cigar filler (type 46) tobacco. These regulations govern the 
establishment of farm marketing quotas and acreage allotments, the 
issuance of marketing cards, the identification of marketings of 
tobacco, the collection and refund of penalties and the keeping of 
records and making of reports. All of the provisions of these 
regulations apply to each kind of tobacco for which marketing quotas are 
in effect unless the wording of the text indicates otherwise.



Sec. 723.103  Administration.

    (a) The regulations in this part will be administered under the 
general supervision of the Administrator, Farm Service Agency (``FSA'') 
and shall be carried out in the field by State and county Agricultural 
Stabilization and Conservation committees (``State and county FSA 
committees'').
    (b) State and county FSA committees, and representatives and 
employees thereof do not have the authority to modify or waive any of 
the provisions of the regulations of this part.
    (c) The State FSA committee shall take any action required by these 
regulations which has not been taken by the county FSA committee. The 
State FSA committee shall also:
    (1) Correct, or require a county FSA committee to correct any action 
taken by such county FSA committee which is not in accordance with the 
regulations of this part, or
    (2) Require a county FSA committee to withhold taking any action 
which is not in accordance with the regulations of this part.
    (d) No provision or delegation herein to a State or county FSA 
committee shall preclude the Administrator, FSA, or a designee, from 
determining any question arising under the regulations of this part or 
from reversing or modifying any determination made by a State or county 
FSA committee. Further, the Administrator or the Administrator's 
designee may modify any deadline or other provisions of this part to the 
extent that doing so is determined by such person to be appropriate and 
not inconsistent with the purposes of the program administered under 
this part.

[55 FR 39914, Oct. 1, 1990, as amended at 63 FR 9128, Feb. 24, 1998]



Sec. 723.104  Definitions.

    (a) Applicability. The definitions set forth in this section shall 
be applicable for all purposes of program administration for all kinds 
of tobacco except as may otherwise be indicated. The definitions in and 
provisions of parts 718 and 720 of this chapter are hereby incorporated 
by reference in these regulations unless the context or subject matter 
or the provisions of these regulations require otherwise.
    (b) Terms. The following terms shall be defined as set forth in this 
paragraph.
    Act. The Agricultural Adjustment Act of 1938, as amended.
    Active burley and flue-cured tobacco producer. (1) Any person who 
shared in the risk of producing a crop of burley or flue-cured tobacco 
in at least one of the three years preceding the current year, or
    (2) Any person who intends to become a burley or flue-cured tobacco 
producer in the current year by sharing in the risk of producing the 
crop and who provides a certification of such intentions on a form 
approved by the Deputy Administrator.
    Allowable floor sweepings. The quantity of floor sweepings 
determined by multiplying 0.0024 times the total producer first sales of 
the respective kind of tobacco at auction for the season for the 
warehouse involved.

[[Page 101]]

    Auction sale. A marketing of tobacco by a sale at public auction 
through a warehouse in the regular course of business including sale of 
all lots of tobacco at public auction in sequence at a given time.
    Base Period. The 5 calendar years immediately preceding the year for 
which farm acreage allotments or marketing quotas are currently being 
established. For burley tobacco marketing quotas established effective 
for the 1994 and subsequent crop years, the base period shall be the 3 
calendar years immediately preceding the year for which farm marketing 
quotas are currently being established. For all other kinds of tobacco 
the five year base period shall remain in effect.
    Buyer. A person who engages to any extent in acquiring or marketing 
tobacco in the form normally marketed by producers.
    Buyers corrections account. The warehouse account of tobacco 
purchased at auction by the buyer but not delivered to the buyer, or any 
tobacco returned by the buyer, lost ticket, or any other valid reason, 
which is turned back to the warehouse operator and supported by an 
adjustment invoice from the buyer. This account shall include the pounds 
deducted resulting from returned lots, short lots, and short weights, 
and pounds added resulting from long lots and long weights, which buyers 
debit or credit to the warehouse operator and support with adjustment 
invoices.
    Carryover tobacco. Tobacco produced prior to the current calendar 
year which has not been marketed or otherwise disposed of prior to the 
beginning of the marketing year for the current crop.
    Common ownership unit. A common ownership unit is a distinguishable 
part of a farm, consisting of one or more tracts of land with the same 
owners, as determined by FSA.
    Considered planted acreage. An acreage that is used for determining 
an old farm's history acreage for a kind of tobacco when the acreage 
planted on the farm to the kind of tobacco in the current year is less 
than the farm acreage allotment established for such farm in the current 
year. With respect to:
    (1) Flue-cured tobacco. If flue-cured tobacco was marketed from the 
farm during the current year, the considered planted acreage is an 
acreage determined by subtracting the planted acres from the farm 
acreage allotment. If flue-cured tobacco was not marketed from the farm 
in the current year, the considered planted acreage is an acreage, not 
to exceed the farm's acreage allotment, that is equal to the sum of the 
acreage:
    (i) That could not be planted to flue-cured tobacco because of a 
natural disaster,
    (ii) Computed for pounds leased from the farm,
    (iii) In the eminent domain pool,
    (iv) Reduced for overmarketing,
    (v) Reduced for violation of marketing quota regulations, and
    (vi) Converted from the production of flue-cured tobacco during the 
respective crop year in accordance with part 704 of this chapter.
    (2) A kind of tobacco other than burley or flue-cured tobacco. The 
considered planted acreage for a farm is an acreage, not to exceed the 
farm's acreage allotment, that is equal to the sum of the acreage:
    (i) That could not be planted to the kind of tobacco because of a 
natural disaster.
    (ii) Temporarily transferred from the farm.
    (iii) Temporarily released.
    (iv) Converted from production of the kind of tobacco in accordance 
with part 704 of this chapter.
    (v) In the eminent domain pool.
    (vi) Reduced for violation of the regulations set forth in this 
part.
    Container. A package in which tobacco is marketed, packed, and 
stored.
    Current crop. The crop planted in the current year.
    Current year. The calendar year for which acreage allotments are 
being established, or tobacco history acreage and yields are being 
determined, or the farm is being considered under the provisions of the 
marketing quota program.
    Damaged tobacco. Any tobacco that has suffered a loss of value due 
to deterioration resulting from a cause such as rot, separation of 
leaves from stems, fire, smoke, water, or other conditions

[[Page 102]]

that would cause such tobacco to be distinguishably different from that 
normally marketed in trade channels.
    Dealer. A person who engages to any extent in acquiring or marketing 
tobacco in the form normally marketed by producers.
    Director. The Director, or Acting Director, Tobacco and Peanuts 
Division, Farm Service Agency, U.S. Department of Agriculture.
    Effective farm acreage allotment. The effective farm acreage 
allotment for flue-cured tobacco is the allotment determined under Sec. 
723.205 of this part.
    Effective farm marketing quota. The effective farm marketing quota 
is the current year farm marketing quota plus or minus any temporary 
quota adjustments.
    Excess tobacco for a farm. (1) For burley and flue-cured tobacco. 
The quantity of tobacco marketed above 103 percent of the effective farm 
marketing quota.
    (2) For kinds of tobacco other than burley or flue-cured. That 
quantity of tobacco which is equal to the average yield per acre of the 
entire acreage of tobacco harvested on the farm times the number of 
acres harvested in excess of the farm acreage allotment, plus any 
carryover excess tobacco.
    Experimental tobacco. Tobacco grown by or under the direction of a 
publicly owned agricultural experiment station for experimental purposes 
only.
    False identification. False identification occurs if:
    (1) Tobacco was marketed or was permitted to be marketed in any 
marketing year as having been produced on any farm when, in fact, it was 
produced on another farm; or
    (2) Tobacco was marketed or was permitted to be marketed in any 
marketing year from a farm and was not identified by a tobacco marketing 
card for the farm; or
    (3) The farm operator or any other producer on a farm permits the 
use of the tobacco marketing card for the farm to record a marketing of 
tobacco when, in fact, no tobacco was marketed from the farm.
    (4) A tobacco marketing card issued to market a kind of tobacco is 
used to market another kind of tobacco produced on the same farm.
    Family farm corporation. A corporation for which:
    (1) Not less than 50 percent of the stock is owned by:
    (i) An individual or;
    (ii) An individual in combination with:
    (A) The spouse of such individual; or
    (B) The parent, aunt, uncle, child, grandchild, or cousin of such 
individual; or
    (C) A spouse of any individual specified in paragraph (1)(ii)(B) 
and;
    (2) One or more of the individuals specified in paragraph (1) 
participates in the direct management of the day to day operations of 
the corporation.
    Farm acreage allotment. For flue-cured tobacco, the allotment 
established in accordance with Sec. 723.205 of this chapter.
    Farm marketing quota. (1) For burley tobacco, old farms. The pounds 
determined by multiplying the preliminary farm marketing quota by the 
national factor and adjusting the result for any permanent quota 
adjustment.
    (2) For burley tobacco, new farms. The pounds for the farm 
determined by the county FSA committee with the approval of the State 
FSA committee.
    (3) For flue-cured tobacco. The pounds determined by multiplying the 
farm acreage allotment by the farm yield.
    (4) For kinds of tobacco other than burley or flue-cured. The actual 
production of tobacco on the farm acreage allotment, which shall be the 
average yield per acre for the entire acreage of tobacco harvested on 
the farm times the farm acreage allotment.
    Farm Service Agency. An agency within the U.S. Department of 
Agriculture.
    Farm yield. The yield determined as provided in Sec. 723.204 of 
this part.
    Floor sweepings. The scraps or leaves of tobacco which accumulate on 
the warehouse floor in the regular course of business.
    FSA. The Farm Service Agency.
    Green weight. The weight of tobacco which is in the form normally 
marketed by farmers prior to being redried, or processed.
    Leaf account tobacco. The quantity of tobacco purchased or otherwise 
acquired by or for the account of a warehouse operator, including floor 
sweepings purchased from another

[[Page 103]]

warehouse operator or dealer, as adjusted by the debits and credits to 
the buyers correction account. Such quantity shall not include tobacco 
in the form not normally marketed by producers, including tobacco 
pickings, and floor sweepings which accumulate on the warehouse floor.
    Market. The disposition of tobacco in raw or processed form by 
voluntary or involuntary sale, barter, or exchange, or by gift between 
living persons. ``Marketing'' and ``marketed'' shall have corresponding 
meaning to the term ``market.''
    Marketing recorder. Any employee of the U.S. Department of 
Agriculture, or any employee of an Farm Service Agency county (FSA) 
office, whose duties involve the preparation and handling of the records 
and reports pertaining to the identification of marketing of tobacco.
    Marketing year. (1) For flue-cured tobacco, the period beginning 
July 1 of the current year and ending June 30 of the following year.
    (2) For kinds of tobacco other than flue cured. The period beginning 
October 1 of the current year and ending September 30 of the following 
year.
    New farm. A farm for which an acreage allotment or marketing quota 
is established for the current year from the national reserve that is 
set aside for such purpose from the national acreage allotment or 
marketing quota established for the kind of tobacco.
    Nonauction sale. Any marketing of tobacco other than at an auction 
sale.
    Old farm. (1) For burley tobacco. A farm which had burley tobacco 
planted or considered planted in one or more years of the base period.
    (2) For tobacco other than burley. A farm on which there is tobacco 
history acreage in one or more years of the base period.
    Overmarketings. The pounds by which the pounds marketed exceed the 
effective farm marketing quota.
    Planted or considered planted credit. For burley tobacco, credit 
that is assigned in the current year for a farm with an established farm 
marketing quota when:
    (1) Burley tobacco is planted on the farm.
    (2) Burley tobacco could not be planted because of a natural 
disaster.
    (3) Quota is:
    (i) Leased and transferred from the farm, or
    (ii) In the eminent domain pool.
    (4) A restrictive lease on federally owned land is in effect 
prohibiting tobacco production.
    (5) Effective quota is zero because of overmarketings or a violation 
of regulations, or
    (6) Acreage is converted from production of burley tobacco in 
accordance with part 704 of this chapter.
    Pound. The amount of tobacco which, if weighed in its unstemmed form 
and in the condition in which it is normally marketed by a producer, 
would equal 1 pound standard weight.
    Preceding year. The calendar year immediately preceding the year for 
which the allotments and quotas are established, or the marketing year 
preceding the marketing year for which the allotments and quotas are 
established.
    Preliminary farm marketing quota. For burley tobacco, the farm 
marketing quota for the preceding year.
    Preliminary farm yield. For flue-cured tobacco, the yield determined 
for a farm as provided in Sec. 723.203 of this part.
    Processed, Processing. A method of preparing green weight tobacco 
for storage in which the tobacco may be redried, stemmed, tipped or 
threshed and the resulting product packed in a container.
    Production record. A record prepared by a processor to account for 
the processing of tobacco.
    Quota adjustments. For burley tobacco:
    (1) Temporary. Adjustments for:
    (i) Effective undermarketings,
    (ii) Overmarketings from any prior year,
    (iii) Reapportioned quota from quota released from farms in the 
eminent domain pool,
    (iv) Quota transferred by lease or by owner,
    (v) Pounds in violation of the regulations for a prior year, and
    (vi) Pounds reduced from the burley tobacco quota during the current 
year in accordance with part 704 of this chapter.

[[Page 104]]

    (2) Permanent. Adjustments for:
    (i) Old farm adjustment from reserve,
    (ii) Pounds of quota transferred to the farm from the eminent domain 
pool,
    (iii) Pounds of quota transferred to or from the farm by sale,
    (iv) Pounds of quota transferred to the farm from the forfeiture 
pool, or
    (v) Pounds of forfeited quota.
    Resale. The disposition by sale, barter, exchange, or gift between 
living persons, of tobacco which has been marketed previously.
    Sale. The first marketing of tobacco on which the gross amount of 
the sale price therefore has been or could be readily determined.
    Sale date. The date on which the gross amount of the sale price of 
tobacco is determined.
    Sale day. The period at the end of which the warehouse operator 
bills to buyers the tobacco purchased by them during such period.
    Scrap tobacco. The residue which accumulates in the course of 
preparing tobacco for market, consisting chiefly of portions of tobacco 
leaves and leaves of poor quality.
    Shared in the risk of production. For burley or flue-cured tobacco, 
involvement in the production of the respective kind of tobacco by a 
person who:
    (1) Invests in the production of a crop of the respective kind of 
tobacco in an amount which is not less than 20 percent of the proceeds 
of the sale of the crop;
    (2) Depends solely on a share of the proceeds from the marketing of 
the tobacco for the return on the investment;
    (3) Waits until such crop of tobacco is marketed to receive any 
return on the investment; and
    (4) Maintains records, for a period of 3 years after the end of the 
marketing year in which the tobacco is sold, which may be used to verify 
that the provisions of this definition have been met.
    Strip, scrap, stem. Types of products resulting from processing of 
tobacco.
    Suspended sale. Any marketing of tobacco at auction for which the 
sale is not identified by a producer marketing card or a dealer's 
identification card by the end of the sale day on which such marketing 
occurred.
    Tillable cropland. With respect to flue-cured tobacco only, cropland 
(excluding orchards, vineyards, land devoted to trees, and land being 
prepared for non-agricultural uses) which the county FSA committee 
determines can be planted to crops without unusual preparation or 
cultivation.
    Tobacco. Kinds of tobacco that are subject to marketing quotas as 
follows: Burley tobacco, (type 31); Flue-cured tobacco, (types 11, 12, 
13, and 14); Fire-cured tobacco (types 21, 22, and 23); Dark air-cured 
tobacco (types 35 and 36); Virginia sun-cured tobacco (type 37); Cigar 
filler (type 46); and Cigar-filler and binder tobacco (types 42, 43, 44, 
54, and 55) as classified by the Agricultural Marketing Service at part 
30 of this title.
    Tobacco available for marketing. All tobacco produced on a farm 
which has not been marketed and which has not been disposed of so that 
it cannot be marketed.
    Tobacco in the form not normally marketed by producers. Tobacco 
leaves, stems, strips, scrap or parts thereof that are the result of 
green tobacco having been redried, stemmed, tipped, threshed or 
otherwise processed.
    Tobacco pickings. The residue which accumulates in the course of 
processing tobacco prior to the redrying of such tobacco, consisting of 
scrap, stems, portions of leaves, and leaves of poor quality shall be 
considered to be tobacco in the form not normally marketed by producers.
    Trucker. A person who trucks, or who otherwise hauls tobacco for a 
producer, or for any other person.
    Undermarketings. For burley or flue-cured tobacco, the actual 
undermarketings are the pounds by which the effective farm marketing 
quota is more than the pounds of the respective kind of tobacco 
marketed, and the effective undermarketings are the smaller of actual 
undermarketings or the sum of the previous year's farm marketing quota 
plus pounds of quota temporarily transferred to the farm for the 
previous year. However, with respect to the 1989 crop, actual 
undermarketings are the number of pounds by which the effective farm 
marketing quota is more than the sum of the number of pounds of tobacco 
marketed and number of

[[Page 105]]

pounds for which a disaster payment was made on the 1989 crop of tobacco 
under part 1477 of this title.
    Warehouse operator. A person who engages in the business of 
conducting a sale of tobacco at public auction.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21441, May 9, 1991; 57 
FR 43581, Sept. 21, 1992; 63 FR 11582, Mar. 10, 1998]

    Editorial Note: At 65 FR 7953, Sec. 723.104(h) was amended by 
removing the definition of Tillable cropland. However, there is no 
paragraph (h) in Sec. 723.104.



Sec. 723.105  Extent of determinations, computations, and rule for 
rounding fractions.

    (a) General. All rounding herein shall be in accordance with the 
provisions of part 793 of this chapter.
    (b) Allotments. Farm acreage allotments shall be determined in 
hundredths of acres.
    (c) Percent excess. The percentage of excess tobacco available for 
marketing from a farm, hereinafter referred to as the ``percent 
excess,'' shall be determined in tenths of a percent.
    (d) Converted rate of penalty. For tobacco other than burley or 
flue-cured, the amount of penalty per pound upon marketings of tobacco 
subject to penalty, hereinafter referred to as the ``converted rate of 
penalty,'' shall be determined in tenths of a cent.
    (e) Percentage reduction for violation. A percentage of reduction in 
an allotment due to a violation shall be determined in tenths of a 
percent.
    (f) Yields and quotas. Yields and quotas shall be determined in 
whole pounds.



Sec. 723.106  Location of farm for administrative purposes.

    The location of a farm in a county for administrative purposes shall 
be as provided in part 718 of this chapter.



Sec. Sec. 723.107-723.110  [Reserved]



Sec. 723.111  Flue-cured (types 11-14) tobacco.

    (a) The 1993-crop national marketing quota is 891.8 million pounds.
    (b) The 1994-crop national marketing quota is 802.6 million pounds.
    (c) The 1995-crop national marketing quota is 934.6 million pounds.
    (d) The 1996-crop national marketing quota is 873.6 million pounds.
    (e) The 1997-crop national marketing quota is 973.8 million pounds.
    (f) The 1998-crop national marketing quota is 807.6 million pounds.
    (g) The 1999-crop national marketing quota is 666.2 million pounds.
    (h) The 2000 crop national marketing quota is 543.0 million pounds.
    (i) The 2001 crop national marketing quota is 548.9 million pounds.
    (j) The 2002 crop national marketing quota is 582.0 millions pounds.

[58 FR 11962, Mar. 2, 1993, as amended at 59 FR 6866, Feb. 14, 1994; 60 
FR 22460, May 8, 1995; 61 FR 37673, July 19, 1996; 62 FR 24800, May 7, 
1997; 63 FR 55938, Oct. 20, 1998; 64 FR 66718, Nov. 30, 1999; 68 FR 
34779, June 11, 2003]



Sec. 723.112  Burley (type 31) tobacco.

    (a) The 1993-crop national marketing quota is 603.0 million pounds.
    (b) The 1994-crop national marketing quota is 542.7 million pounds.
    (c) The 1995-crop national marketing quota is 549.0 million pounds.
    (d) The 1996-crop national marketing quota is 633.8 million pounds.
    (e) The 1997-crop national marketing quota is 704.5 million pounds.
    (f) The 1998-crop national marketing quota is 637.8 million pounds.
    (g) [Reserved]
    (h) The 2000-crop national marketing quota is 247.4 million pounds.

[58 FR 36859, July 9, 1993, as amended at 59 FR 22725, May 3, 1994; 60 
FR 27868, May 26, 1995; 61 FR 50425, Sept. 26, 1996; 62 FR 30230, June 
3, 1997; 63 FR 55940, Oct. 20, 1998; 65 78407, Dec. 15, 2000]



Sec. 723.113  Fire-cured (type 21) tobacco.

    (a) The 1993-crop national marketing quota is 1.975 million pounds.
    (b) The 1994-crop national marketing quota is 2.15 million pounds.
    (c) The 1995-crop national marketing quota is 1.95 million pounds.
    (d) The 1996-crop national marketing quota is 1.97 million pounds.
    (e) The 1997-crop national marketing quota is 2.395 million pounds.
    (f) The 1998-crop national marketing quota is 2.725 million pounds.
    (g) The 1999-crop national marketing quota is 2.6 million pounds.

[[Page 106]]

    (h) The 2000-crop national marketing quota is 2.138 million pounds.

[58 FR 36857, July 9, 1993, as amended at 59 FR 27220, May 26, 1994; 60 
FR 38234, July 26, 1995; 61 FR 63702, Dec. 2, 1996; 62 FR 43922, Aug. 
18, 1997; 64 FR 15295, Mar. 31, 1999; 65 FR 41556, July 6, 2000; 65 FR 
64594, Oct. 30, 2000]



Sec. 723.114  Fire-cured (types 22-23) tobacco.

    (a) The 1993-crop national marketing quota is 38.2 million pounds.
    (b) The 1994-crop national marketing quota is 40.4 million pounds.
    (c) The 1995-crop national marketing quota is 39.8 million pounds.
    (d) The 1996-crop national marketing quota is 40.6 million pounds.
    (e) The 1997-crop national marketing quota is 43.4 million pounds.
    (f) The 1998-crop national marketing quota is 44.6 million pounds.
    (g) The 1999-crop national marketing quota is 41.4 million pounds.
    (h) The 2000-crop national marketing quota is 42.9 million pounds.

[58 FR 36857, July 9, 1993, as amended at 59 FR 27220, May 26, 1994; 60 
FR 38234, July 26, 1995; 61 FR 63702, Dec. 2, 1996; 62 FR 43922, Aug. 
18, 1997; 64 FR 15295, Mar. 31, 1999; 65 FR 41556, July 6, 2000; 65 FR 
64594, Oct. 30, 2000]



Sec. 723.115  Dark air-cured (types 35-36) tobacco.

    (a) The 1993-crop national marketing quota is 11.16 million pounds.
    (b) The 1994-crop national marketing quota is 10.6 million pounds.
    (c) The 1995-crop national marketing quota is 9.6 million pounds.
    (d) The 1996-crop national marketing quota is 9.2 million pounds.
    (e) The 1997-crop national marketing quota is 9.88 million pounds.
    (f) The 1998-crop national marketing quota is 11.15 million pounds.
    (g) The 1999-crop national marketing quota is 12.8 million pounds.
    (h) The 2000-crop national marketing quota is 12.75 million pounds.

[58 FR 36857, July 9, 1993, as amended at 59 FR 27220, May 26, 1994; 60 
FR 38234, July 26, 1995; 61 FR 63702, Dec. 2, 1996; 62 FR 43922, Aug. 
18, 1997; 64 FR 15295, Mar. 31, 1999; 65 FR 41556, July 6, 2000; 65 FR 
64594, Oct. 30, 2000]



Sec. 723.116  Sun-cured (type 37) tobacco.

    (a) The 1993-crop national marketing factor is 128,000 pounds.
    (b) The 1994-crop national marketing quota is 131,000 pounds.
    (c) The 1995-crop national marketing quota is 130,000 pounds.
    (d) The 1996-crop national marketing quota is 148,000 pounds.
    (e) The 1997-crop national marketing quota is 156,400 pounds.
    (f) The 1998-crop national marketing quota is 163,000 pounds.
    (g) The 1999-crop national marketing quota is 171,000 pounds.
    (h) The 2000-crop national marketing quota is 171,000 pounds.

[58 FR 36857, July 9, 1993, as amended at 59 FR 27220, May 26, 1994; 60 
FR 38234, July 26, 1995; 61 FR 63702, Dec. 2, 1996; 62 FR 43922, Aug. 
18, 1997; 64 FR 15295, Mar. 31, 1999; 65 FR 41556, July 6, 2000; 65 FR 
64594, Oct. 30, 2000]



Sec. 723.117  Cigar-filler and binder (types 42-44 and 53-55) tobacco.

    (a) The 1993-crop national marketing quota is 14 million pounds.
    (b) The 1994-crop national marketing quota is 9.3 million pounds.
    (c) The 1995-crop national marketing quota is 9.0 million pounds.
    (d) The 1996-crop national marketing quota is 8.9 million pounds.
    (e) The 1997-crop national marketing quota is 8.4 million pounds.
    (f) The 1998-crop national marketing quota is 6.63 million pounds.
    (g) The 1999-crop national marketing quota is 4.5 million pounds.
    (h) The 2000-crop national marketing quota is 3.64 million pounds.

[58 FR 36857, July 9, 1993, as amended at 59 FR 27220, May 26, 1994; 60 
FR 38234, July 26, 1995; 61 FR 63702, Dec. 2, 1996; 62 FR 43922, Aug. 
18, 1997; 64 FR 15295, Mar. 31, 1999; 65 FR 41556, July 6, 2000; 65 FR 
64594, Oct. 30, 2000]



Sec. 723.118  Cigar-filler (type 46) tobacco.

    (a) The 1993-crop national marketing quota is zero pounds.
    (b) The 1994-crop national marketing quota is zero pounds.
    (c) The 1995-crop national marketing quota is 0.0 million pounds.
    (d) There shall be no national or individual marketing quotas for 
the 1996 and subsequent marketing years for this type (46).

[58 FR 36857, July 9, 1993, as amended at 59 FR 27220, May 26, 1994; 60 
FR 38234, July 26, 1995; 61 FR 63702, Dec. 2, 1996]

[[Page 107]]



Sec. Sec. 723.119-723.121  [Reserved]



      Subpart B_Allotments, Quotas, Yields, Transfers, Release and 
           Reapportionment, History Acreages, and Forfeitures



Sec. 723.201  Determination of preliminary farm acreage allotments 
and preliminary farm marketing quotas.

    (a) Flue-cured tobacco. A preliminary farm acreage allotment shall 
be determined for the current year for each farm which has flue-cured 
tobacco history acreage for the base period. The preliminary farm 
acreage allotment shall be the same as the farm acreage allotment 
established for the preceding year.
    (b) Burley tobacco. The preceding year's farm marketing quota shall 
be the current year's preliminary farm marketing quota for each old farm 
except that the preliminary farm marketing quota shall be zero if:
    (1) The farm or all of cropland has gone out of agricultural 
production and eminent domain procedure of part 718 of this chapter does 
not apply.
    (2) Quota that was pooled under the provisions of part 718 of this 
chapter has been canceled.
    (3) A new farm quota that was established in a prior year is 
canceled.
    (4) There was no acreage of burley tobacco planted or considered 
planted for any year of the base period.
    (5) All the cropland on the farm has been determined by the county 
FSA committee to be no longer suitable for the production of a crop and 
provisions of part 704 of this chapter do not apply.
    (6) Beginning with the 1994 crop year there was no acreage of burley 
tobacco planted or considered planted in 2 out of the 3 immediate 
preceding years.
    (c) Kinds of tobacco other than flue-cured and burley. A preliminary 
farm acreage allotment shall be determined for each farm which has 
tobacco history acreage, as established under paragraph Sec. 723.218 of 
this part in the base period. If the history acreage for the previous 
year is the same as the basic allotment, the preliminary allotment shall 
be the same as the previous year's basic allotment. Otherwise, the 
preliminary allotment shall be the simple average of the sum of the 
basic allotment and history acreage for the preceding year.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21441, May 9, 1991]



Sec. 723.202  Determining farm acreage allotment, except for flue-cured tobacco.

    With respect to each kind of tobacco, the preliminary allotments 
determined for all old farms shall be adjusted uniformly so that the 
total of such allotments for old farms plus the reserve acreage 
available for establishing new farm allotments, adjusting inequities in 
acreage allotments for old farms, and for correcting errors in old farm 
allotments shall not exceed the national acreage allotment established 
for such kind of tobacco.



Sec. 723.203  Determination of flue-cured tobacco preliminary farm yields.

    (a) Old farms. The preliminary farm yield for a flue-cured tobacco 
old farm for the current year shall be determined as follows:
    (1) Farm having preliminary farm acreage allotment. The preliminary 
farm yield established for the farm shall be the same preliminary farm 
yield as was in effect for the preceding year.
    (2) Farm not having preliminary farm acreage allotment. The 
preliminary farm yield shall be determined by dividing the farm yield by 
the national yield factor.
    (b) New Farms. The preliminary farm yield for a new farm shall be 
determined by dividing the farm yield determined in accordance with 
Sec. 723.204 of this part for such farm by the national yield factor 
applicable for the year in which the new farm allotment was established.



Sec. 723.204  Determination of farm yields and normal yields.

    (a) Flue-cured tobacco. The farm yield for an old farm shall be 
determined by multiplying the preliminary farm yield, if the farm has 
such a yield, by the national yield factor for the current year. The 
farm yield for new farms and old farms that do not have a preliminary 
yield shall be that yield, which the county FSA committee determines for 
the farm taking into consideration:

[[Page 108]]

    (1) The soil and other physical factors affecting the production of 
tobacco on the farm, and
    (2) The farm yields determined for other farms on which the soil and 
other physical factors affecting the production of tobacco are similar.
    (b) Burley tobacco. The farm yield for a farm on which a farm yield 
has been established shall be the same in the current year as the farm 
yield previously established for the farm. For any farm not having a 
previously established yield, the county FSA committee shall establish a 
yield based on similar farms having a farm yield; however, such yield 
shall not exceed 3500 pounds.
    (c) All kinds of tobacco except burley and flue-cured. The normal 
yield for a farm shall be that yield which the county FSA committee 
determines is normal for the farm taking into consideration the yields 
obtained on the farm during any of the years of the base period for 
which data are available, the soil and other physical factors affecting 
the production of tobacco on the farm, and the yields obtained on other 
farms in the locality which are similar with respect to such factors. 
The normal yield first determined for a farm for any year in accordance 
with the foregoing provision shall serve as the normal yield for the 
farm for all purposes in connection with the tobacco marketing program 
for the year for which such normal yield is determined.



Sec. 723.205  Determination of farm acreage allotments and effective 
farm acreage allotments for flue-cured tobacco.

    (a) Farm acreage allotments. The farm acreage allotment shall be 
determined by multiplying the national acreage factor as determined by 
the Secretary for the current year by the preliminary farm acreage 
allotment for the current year and adjusting the result by:
    (1) Upward adjustment. Adding the:
    (i) Acreage approved in accordance with the provisions of Sec. 
723.210 of this part in order to adjust for an inequity or to correct an 
error;
    (ii) Acreage determined by dividing the pounds of quota which are 
purchased in the current year by the farm yield; and
    (iii) Acreage determined by dividing the pounds of forfeited quota 
which are approved for adjustment from the forfeiture pool by the farm 
yield.
    (2) Downward Adjustment. Subtracting the:
    (i) Acreage determined by dividing the pounds of quota sold in the 
current year by the farm yield; and
    (ii) Acreage of forfeited allotment.
    (b) Effective farm acreage allotment. The effective farm acreage 
allotment for the current year shall be determined by dividing by the 
effective farm marketing quota by the farm yield.



Sec. 723.206  Determining farm marketing quotas and effective farm 
marketing quotas.

    (a) Burley tobacco. The burley farm marketing quota shall be 
determined by multiplying the national factor as determined by the 
Secretary for the current year by the preliminary farm marketing quota 
for the current year and adjusting the result for permanent quota 
adjustments.
    (b) Flue-cured tobacco. The flue-cured farm marketing quota shall be 
determined by multiplying the farm acreage allotment by the farm yield.
    (c) Burley or flue-cured tobacco. The effective farm marketing quota 
shall be the farm marketing quota adjusted by:
    (1) Upward adjustments. Adding the:
    (i) Effective under marketings from the preceding marketing year, 
but effective for the 2002 and subsequent marketing years, the aggregate 
amount for all farms of under marketings of burley tobacco for all farms 
that can be carried over shall be limited to 10 percent of the national 
basic quota of the preceding year. If needed, factoring will be 
undertaken to insure that the limit of the preceding sentence is not 
exceeded.
    (ii) The pounds of quota which are temporarily transferred to the 
farm in the current year.
    (2) Downward adjustments. Subtracting the pounds of quota that are:
    (i) Overmarketed from the preceding marketing year,
    (ii) Overmarketed from any year before the preceding year but have 
not been subtracted when determining the

[[Page 109]]

effective farm marketing quota in a prior year.
    (iii) Temporarily transferred from the farm in the current year.
    (iv) Reduced in the current year as a result of a violation in a 
prior year as provided for in Sec. 723.408 of this part.
    (v) [Reserved]
    (vi) Determined, for flue-cured tobacco only, by multiplying the 
farm yield by the acres reduced from the flue-cured tobacco acreage 
allotment during the current year in accordance with part 704 of this 
chapter.
    (vii) For burley tobacco only, designated for reduction under a 
Conservation Reserve Program contract in accordance with part 704 of 
this chapter.

[55 FR 39914, Oct. 1, 1990, as amended at 66 FR 53509, Oct. 23, 2001; 66 
FR 59675, Nov. 30, 2001]



Sec. 723.207  Determination of acreage allotments or burley marketing 
quotas for new farms.

    (a)(1) All kinds of tobacco. The acreage allotment or burley 
marketing quota established in any crop year for all new farms shall not 
exceed the national acreage or poundage, as applicable, reserved for new 
farms for the respective kind of tobacco. The acreage allotment or 
burley marketing quota for a new farm shall be that acreage or burley 
marketing quota which the county FSA committee, with the approval of the 
State FSA committee, determines is fair and reasonable for the farm, 
taking into consideration the past tobacco experience of the farm 
operator; the land, labor, and equipment available for the production of 
tobacco; crop rotation practices; and the soil and other physical 
factors affecting the production of tobacco. Such acreage allotments or 
burley marketing quota shall not exceed 50 percent (75 percent for 
Cigar-filler and Binder tobacco) of the average of the applicable 
acreage allotments or burley marketing quotas established for at least 
two but not more than five old farms which are similar with respect to 
land, labor; and equipment available for the production of tobacco; crop 
rotation practices; and the soil and other physical factors affecting 
the production of tobacco; and with respect to flue-cured tobacco 
acreage allotments, shall not exceed one acre.
    (2) Kinds of tobacco, except burley and flue-cured. If the acreage 
planted to tobacco on a new tobacco farm is less than 75 percent of the 
tobacco acreage allotment otherwise established for the farm pursuant to 
this section, such allotment shall be automatically reduced to the sum 
of the tobacco planted acreage and the prevented planted tobacco acreage 
as determined under part 718 of this chapter for the farm.
    (b)(1) Written application. The farm operator must file an 
application for a new farm acreage allotment or marketing quota at the 
office of the county FSA committee where the farm is administratively 
located on or before February 15 of the year for which the new farm 
acreage allotment or marketing quota is requested.
    (2) Operator requirements. The operator requesting a new farm 
acreage allotment or marketing quota must be the sole owner of the farm, 
except for Cigar-filler and Binder tobacco, the operator need not own 
the farm. The farm operator shall not own or have an ownership interest 
in or operate any other farm in the United States for which a tobacco 
allotment or quota for any kind of tobacco is established for the 
current year.
    (3) Availability of equipment and facilities. The operator must own, 
or have readily available, adequate equipment and any other facilities 
of production necessary to the production of tobacco on the farm.
    (4)(i) Income from farming. The operator must expect to obtain 
during the current year more than 50 percent of the producer's income 
from the production of agricultural commodities or products. The 
following shall be considered in computing the operator's income:
    (A) Farm income. Income from farming shall include the estimated 
return from home gardens, livestock and livestock products, poultry, or 
other agricultural products produced for home consumption or other use 
on the farm(s). The estimated return from the production of the 
requested new farm allotment or quota shall not be included.

[[Page 110]]

    (B) Non-farm income. Non-farming income shall include but not 
limited to salaries, commissions, pensions, social security payments, 
and unemployment compensation.
    (C) Spousal income. The spouse's farm and non-farm income shall be 
included in the computation.
    (ii) Operator a partnership. If the operator is a partnership, each 
partner must expect to obtain more than 50 percent of their current year 
income from farming.
    (iii) Operator a corporation. If the operator is a corporation, it 
must have no other major corporate purpose other than ownership or 
operation of the farm(s). Farming must provide its officers and general 
manager with more than 50 percent of their expected income. Salaries and 
dividends from the corporation shall be considered as income from 
farming.
    (iv) Special provisions for low-income farmers. The county FSA 
committee may waive the income provisions in this section provided they 
determine that the farm operator's income, from both farm and non-farm 
sources is so low that it will not provide a reasonable standard of 
living for the operator and the operator's family, and a State FSA 
committee representative approves such action. In making their 
determination, the county FSA committee shall consider such factors as 
size and type of farming operations, estimated net worth, estimated 
gross family income, estimated family off-farm income, number of 
dependents, and other factors affecting the individual's ability to 
provide a reasonable standard of living.
    (5) Experience. The operator must have had experience in producing, 
harvesting, and marketing the kind of tobacco requested. Such experience 
must have been gained by being a sharecropper, tenant, or farm operator 
(bona fide tobacco production experience gained by a person as a member 
of a partnership shall be accepted as experience gained in meeting this 
requirement) during at least 2 of the 5 years immediately preceding the 
year for which the new farm allotment is requested. The experience must 
have been gained on a farm having a tobacco allotment for such years for 
the kind of tobacco requested in the application. However, for Cigar-
filler and binder tobacco only, the operator must have experience in any 
prior year in the production of tobacco as a farm owner, farm operator, 
sharecropper, tenant, warehouse operator, or laborer on a farm which 
produced Cigar-filler and binder tobacco.
    (6) Operator has not sold or forfeited allotment. For flue-cured 
tobacco only, during the current or the 4 preceding years, the operator 
must not have sold or forfeited any flue-cured tobacco allotment from 
any farm.
    (c) Eligibility requirements for the farm. A new farm acreage 
allotment or marketing quota may be established if each of the following 
conditions is met:
    (1) Current allotment or quota. The farm must not have on the date 
of approval of a new farm acreage allotment, an allotment or quota for 
any kind of tobacco.
    (2) Availability of land, type of soil, and topography. The 
available land, type of soil, and topography of the land on the farm 
must be suitable for tobacco production. Also, continuous production of 
tobacco must not result in an undue erosion hazard.
    (3) Eminent domain acquisition. A farm which includes land acquired 
by an agency having the right of eminent domain for which the entire 
tobacco allotment was pooled pursuant to part 718 of this chapter, which 
is subsequently returned to agricultural production shall not be 
eligible for a new farm allotment or marketing quota for a period of 5 
years from the date the former owner was displaced.
    (4) Farm includes land previously having a tobacco acreage 
allotment. A farm which includes land which has no tobacco allotment 
because the owner did not designate an allotment for such land when the 
parent farm was reconstituted pursuant to part 718 of this chapter shall 
not be eligible for a new farm acreage allotment for a period of 5 years 
beginning with the year in which the reconstitution became effective.
    (5) Entire quota sold. A new farm tobacco acreage allotment may not 
be established for a farm if, during the current year or the 4 preceding 
years, the farm was constituted as any part of a

[[Page 111]]

farm for which an acreage allotment or marketing quota had been 
established and for which the current or a former owner sold or 
permanently transferred all of the tobacco acreage allotment or 
marketing quota.
    (d) False information. Any new farm acreage allotment or marketing 
quota which was determined by the county FSA committee on the basis of 
incomplete or inaccurate information knowingly furnished by the 
applicant, shall be canceled by the county FSA committee as of the date 
the allotment or quota was established. When incomplete or inaccurate 
information was unknowingly furnished by the applicant, the allotment or 
quota shall be canceled effective for the current crop year.
    (e) Failure to plant. A new farm acreage allotment or marketing 
quota shall be reduced to zero if no tobacco is planted on the farm the 
first year.



Sec. 723.208  Determination of acreage allotments, marketing quotas, 
and yields for divided farms.

    (a) Flue-cured tobacco. The farm acreage allotment for the divided 
farm shall be divided pursuant to the provisions of part 718 of this 
chapter. History acreages and other basic data shall be apportioned 
among the divided tracts as provided in part 718 of this chapter.
    (b) Burley tobacco. (1) Division of farm marketing quota. The farm 
marketing quota for the divided farm shall be divided according to part 
718 of this chapter. Other basic data shall be apportioned among the 
resulting farms in the same proportion as the farm marketing quota.
    (2) Divided burley tobacco farms with less than 1,000 pounds of 
quota. If a farm is divided through reconstitution and the burley 
tobacco poundage quota which transfers with the resulting farms receive 
less than 1,000 pounds of quota, the owners of such farms shall take 
action by July 1 of the current crop year to increase the quota to a 
minimum of 1,000 pounds or the quota shall be reduced to zero. The quota 
on the divided farms may be increased by:
    (i) Combining the farm having less than 1,000 pounds with other land 
owned by the same person so that the combined farm has a minimum of 
1,000 pounds of farm marketing quota, or
    (ii) Purchasing a sufficient amount of quota so that the farm has at 
least 1,000 pounds of quota.
    (3) Sale of Quota. If the owners of the divided farms fail to 
increase the quota on such farms to a minimum of 1,000 pounds as 
provided in paragraph (b)(2), the owner must sell the quota by July 1 of 
the current crop year.
    (4) Effective Quota. For the current crop year, the effective farm 
marketing quota on the divided farms shall be considered to be zero for 
leasing and planting purposes until the farm complies with the 1,000 
pound minimum quota.
    (5) Reduction of Quota. The county FSA committee shall reduce the 
quota to zero on the divided farms if the owners of such farms fail to 
take action as provided in paragraph (b)(2) and (3) of this section.
    (6) Farm Exemptions. Farms exempt from the 1,000 pound minimum quota 
limitation are farm divisions:
    (i) among immediate family members,
    (ii) through probate or,
    (iii) when no sale or change in ownership of land occurs or,
    (iv) when the buyer and purchaser can furnish proof acceptable to 
the county FSA committee, in accordance with guidelines provided by the 
Deputy Administrator, that the transaction was finalized prior to 
November 15, 1990.
    (v) when the individual tract or farm with less than 1,000 pounds of 
quota could be combined with another tract or farm with sufficient quota 
to reach 1,000 pounds but for the existence of a production flexibility 
contract on one of the farms.
    (c) Burley and flue-cured tobacco. (1) Tract yield. The tract yield 
for the tracts divided from a parent farm shall be the same as the tract 
yield established for the tracts before the division of the parent farm. 
If a tract is divided, the tract yields for the resulting tracts shall 
be the same as the tract yield established for the tract before it was 
divided.
    (2) Single tract farm. If a tract that is divided from a parent farm 
becomes a single tract farm, the tract yield shall

[[Page 112]]

become the preliminary farm yield and the farm yield for the farm shall 
be determined by multiplying the preliminary farm yield by the national 
yield factor for the current year.
    (3) Carryover tobacco. Where carryover tobacco produced on a parent 
farm is marketed after the effective date of a reconstitution, such 
marketings shall be charged to the divided tracts in the same ratio as 
the marketing quotas are established for the divided tracts or as the 
county FSA committee determines that:
    (i) The proceeds from such marketings are received by the owner or 
operator of one or more of the divided tracts, or
    (ii) The owners of the divided tracts agree.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21441, May 9, 1991; 62 
FR 15600, Apr. 2, 1997]



Sec. 723.209  Determination of acreage allotments, marketing quotas, 
yields for combined farms; and special tobacco combinations.

    (a) Burley tobacco. The farm yield for a combined burley farm shall 
be the weighted average of the tract yields for the tracts being 
combined. The weighted average shall be the summation of the extensions 
of each respective tract's contribution percentage times the tract's 
yield.
    (b) Flue-cured tobacco. Flue-cured farm acreage allotments, history 
acreages, and other basic data for combined farms shall be computed for 
the base period in accordance with part 718 of this chapter, except that 
the preliminary farm yield for a combined farm shall be the weighted 
average of the tract yields for the tracts that comprise the 
combination. The weighted average shall be the summation of the 
extensions of each respective tract's contribution percentage times the 
tract's yield. The farm yield for the combined farm shall be determined 
by multiplying the preliminary farm yield for the combined farm by the 
national yield factor for the current year.
    (c) Special tobacco combinations. Notwithstanding other provision of 
this title, the Deputy Administrator may, upon proper application and to 
the extent deemed consistent with other obligations, permit farms, with 
respect to tobacco allotments and tobacco quotas, to be considered 
combined for purposes of this part and part 1464 of this title only 
without being combined for other purposes. This allowance shall apply 
for tobacco of all kinds and types and with respect to all farms even if 
one or more of the farms to be combined is the subject of a production 
flexibility contract (PFC) executed in connection with the program 
operated under the provisions of 7 CFR part 1412. Such special, limited 
combinations must otherwise meet the requirements of 7 CFR part 718 for 
combinations, except the signature (consent) requirements of Sec. 
718.201(a)(2) of that part. The Deputy Administrator may set such 
consent requirements for special farm combinations under this section as 
the Deputy Administrator believes necessary or appropriate. Further, in 
any case in which one of the farms is a PFC farm, none of the land on 
any PFC farm that would have been used for the production of tobacco can 
be used for the production of a ``PFC commodity'' as defined in this 
section. Such permission shall be conditioned upon the agreement of all 
interested parties that land on the PFC allotment or quota farm that 
would have been used for the production of tobacco shall not be used for 
the production of any PFC commodity. In the event that such production 
nonetheless occurs, the special tobacco combination may be made void, 
retroactive to the date of original approval. Such curative action will 
likely result in a finding of excess tobacco plantings and sanctions and 
remedies, which would likely include liability for penalties and other 
sanctions for excess marketings of tobacco. The Deputy Administrator may 
set such other conditions on the combinations as needed or deemed 
appropriate to serve the goals of the tobacco program and the goals of 
the PFC. The term PFC commodity for purposes of this section means 
wheat, corn, grain sorghum, barley, oats, upland cotton, and rice.

[55 FR 39914, Oct. 1, 1990, as amended at 62 FR 15600, Apr. 2, 1997; 63 
FR 9128, Feb. 24, 1998; 63 FR 26714, May 14, 1998]

[[Page 113]]



Sec. 723.210  Corrections of errors and adjusting inequities in 
acreage allotments and marketing quotas for old farms.

    (a)(1) General. The allotment or quota for a farm under a long-term 
land use program agreement shall be given the same consideration under 
this section as the allotment or quota for any other old farm. 
Notwithstanding the limitations contained in any other section of this 
part, the farm acreage allotment or marketing quota for each kind of 
tobacco established for an old farm may be increased to correct an error 
or adjust an inequity if the county FSA committee determines, with the 
approval of a representative of the State FSA committee, that the 
increase is necessary to establish an allotment or quota for such farm 
which is fair and equitable in relation to the allotment or quota for 
other old farms in the county in which the farm is located. Correction 
of errors shall be made out of that portion of the national reserve held 
at the national level.
    (2) Burley tobacco. The reserve for adjusting inequities under this 
paragraph will be prorated to States based on the relationship of the 
total of the preliminary farm marketing quotas in each State to the 
national total of preliminary farm marketing quotas.
    (3) All kinds of tobacco except burley tobacco. The reserve for 
adjusting inequities under this paragraph will be prorated to States 
based on the relationship of the total preliminary farm acreage 
allotments in each State to the national total of preliminary farm 
acreage allotments.
    (b) Basis for adjustment. Increases to adjust inequities in acreage 
allotments or marketing quotas shall be made on the basis of the past 
farm acreage, yields, and farm acreage allotments of tobacco, making due 
allowances for failed acreage and acreage prevented from being planted 
because of a natural disaster as determined under part 718 of this 
chapter; land, labor, and equipment available for the production of 
tobacco; crop rotation practices; and the soil and other physical 
factors affecting the production of tobacco. The total of all 
adjustments in old farm allotments or quotas under this paragraph shall 
not exceed the pounds apportioned to the county for such purpose.
    (c)(1) Burley tobacco. Adjustments in a farm marketing quota under 
this paragraph shall become a part of the farm marketing quota.
    (2) Flue-cured tobacco. Acreage apportioned to a farm under this 
section becomes a part of the farm acreage allotment. The farm marketing 
quota for such a farm shall be adjusted by multiplying the adjusted farm 
acreage allotment by the farm yield.
    (3) All other kinds of tobacco. For all other kinds of tobacco, 
acreage approved for a farm under this section becomes a part of the 
farm acreage allotment.
    (d) Making certain adjustments on a common ownership unit basis. 
Notwithstanding other provisions of this section, inequity adjustments 
may be allotted by common ownership unit rather than by farm when it is 
determined by the county FSA committee that the making of the allocation 
on that basis provides greater equity.

[55 FR 39914, Oct. 1, 1990, as amended at 63 FR 11582, Mar. 10, 1998]



Sec. 723.211  Allotments, quotas, and yields for farms acquired under 
right of eminent domain.

    (a) Determination of acreage allotments and marketing quotas. The 
determination of farm acreage allotments and marketing quotas for farms 
acquired by an agency having the right of eminent domain, the transfer 
of such allotments or quotas to a pool, and reallocation from the pool 
shall be administered as provided in part 718 of this chapter. Where all 
or a part of an allotment or quota is pooled, all or a proportionate 
part of the farm acreage allotment or marketing quota shall be pooled.
    (b) Closing dates. The State FSA committee shall establish, in 
accordance with instructions issued by the Deputy Administrator, a final 
date for:
    (1) Release. Releasing pooled farm acreage allotment or farm 
marketing quota to the county FSA committee for reapportionment to other 
farms in the county having allotments or quotas for the same kinds of 
tobacco.
    (2) Request for reapportionment. Filing a request to receive 
reapportioned

[[Page 114]]

acreage or quota from the county FSA committee for the current year.
    (c) Displaced owner release. The displaced owner of a farm may, not 
later than the final release date established by the State FSA committee 
for the current year, release in writing to the county FSA committee for 
the current year, all or any part of the acreage allotment or burley 
tobacco marketing quota for the farm in a pool under part 718 of this 
chapter for reapportionment for the current year by the county committee 
to other farms in the county having allotments or marketing quotas for 
the same kind of tobacco.
    (d) Reapportionment. The county FSA committee may reapportion, not 
later than 30 days after the final date established by the State FSA 
committee for requesting reapportioned acreage or marketing quota for 
the current year, the released acreage or quota or any part thereof to 
other farms in the county on the basis of the past farm acreage or 
marketings and the past farm acreage allotments or quotas for the same 
kind of tobacco; land, labor, and equipment available for the production 
of such kind of tobacco; crop rotation practices; and soil and other 
physical factors affecting the production of such kind of tobacco.
    (e) Effect of reapportionment. For purposes of establishing future 
farm allotments or quotas, any reapportioned allotment or quota shall 
not be considered as planted on the farm to which the allotment or quota 
was reapportioned.
    (f) Burley or flue-cured tobacco provisions. For burley or flue-
cured tobacco:
    (1) Farm yield. The farm yield for a farm to which a pooled 
marketing quota is transferred shall be determined in accordance with 
instructions issued by the Deputy Administrator.
    (2) Undermarketings or overmarketings. The undermarketings of a farm 
acquired by eminent domain shall be added to the marketing quota for the 
receiving farm and the overmarketings of the acquired farm shall be 
subtracted from the marketing quota of the receiving farm.
    (3) Undermarketings while in eminent domain pool. The pooled quota 
is considered planted while in the pool. Therefore, for the purpose of 
determining undermarketings during the time the quota is pooled, the 
effective quota is considered to be zero.



Sec. 723.212  Time for making reduction of farm marketing quotas or 

acreage allotments for violation of the marketing quota or acreage 
allotment regulations for a prior marketing year.

    Any reduction made in a farm acreage allotment or farm marketing 
quota for the current year for any of the reasons provided for in Sec. 
723.408 of this part, shall be made no later than April 1 of the current 
year in the States of Alabama, Florida, Georgia, North Carolina, South 
Carolina, and Virginia; or May 1 in all other States. If the reduction 
cannot be made by such dates for the current year, the reduction shall 
be made in the farm acreage allotment or farm marketing quota next 
established for the farm, but no later than by corresponding dates in a 
later year. No reduction shall be made in the farm acreage allotment or 
farm marketing quota for any farm for a violation if the farm acreage 
allotment or marketing quota for such farm for any prior year was 
reduced because of the same violation.



Sec. 723.213  Approval of acreage allotments and marketing quotas and 
notices to farm operators.

    (a) Review by State FSA committee. All farm yields, acreage 
allotments, and marketing quotas shall be determined by the county FSA 
committee of the county in which the farm is located and shall be 
reviewed by a representative of the State FSA committee.
    (b) Notice to farm operator. An official notice of the effective 
farm acreage allotment or farm marketing quota shall be mailed to the 
operator of each farm shown by the records of the county FSA committee 
to be entitled to an allotment or quota. The notice to the operator of 
the farm shall constitute notice to all persons who as operator, 
landlord, tenant, or sharecropper are interested in the farm for which 
the allotment or quota is established. Insofar as practicable, all 
notices shall be mailed in time to be received prior to the date of any 
tobacco marketing

[[Page 115]]

quota or acreage allotment referendum. A copy of such notice containing 
the date of mailing or a printout summary of such data shall be 
maintained for not less than 30 days in a conspicuous place in the 
county FSA office and shall thereafter be kept available for public 
inspection in the office of the county FSA committee. A copy of the 
notice of acreage allotment or marketing quota certified as true and 
correct shall be furnished to any person interested in the farm for 
which the allotment or quota is established.
    (c) Marketing quota erroneous notice. (1) If the official written 
notice of the farm acreage allotment and marketing quota issued for any 
farm erroneously stated an acreage allotment or marketing quota larger 
than the correct effective farm acreage allotment or marketing quota, 
the acreage allotment or marketing quota shown on the erroneous notice 
shall be deemed to be the tobacco acreage allotment or marketing quota 
for the farm for the current year only, if the county FSA committee 
determines (with the approval of the State Executive Director) that the:
    (i) Error was not so gross as to place the operator on notice 
thereof, and
    (ii) Operator, relying upon such notice and acting in good faith, 
materially changes the operator's position with respect to the 
production of the crop.
    (2) Undermarketings and overmarketings for farms for which the 
erroneous notice of marketing quota is applied shall be determined based 
on the correct effective farm marketing quota.
    (3) For purposes of determining history acreage the correct acreage 
allotment shall be used, in determining whether or not 75 percent of the 
allotment has been planted.

[55 FR 39914, Oct. 1, 1990, as amended at 63 FR 11582, Mar. 10, 1998]



Sec. 723.214  Application for review.

    Any producer who is dissatisfied with the farm acreage allotment and 
marketing quota established for the producer's farm may, within 15 days 
after mailing of the official notice of the farm acreage allotment and 
marketing quota, file application in writing with the county FSA office 
to have such allotment and marketing quota reviewed by a review 
committee in accordance with part 711 of this chapter.



Sec. 723.215  Transfer of tobacco farm acreage allotment or farm 
marketing quota that cannot be planted or replanted due to a natural disaster.

    (a) Designation of counties affected by a natural disaster. The 
State FSA committee shall determine those counties affected by a natural 
disaster (including but not limited to hurricane, rain, flash flood, 
hail, drought, and any other severe weather) which prevents the timely 
planting or replanting of any of the tobacco acreage allotment or 
marketing quota for any farm in the county. The county FSA committee of 
each county affected by the determination shall publicize the 
determination.
    (b) Application for transfer. The owner or operator of a farm in a 
county designated for any year under paragraph (a) of this section may 
file a written application for transfer of tobacco acreage with the farm 
acreage allotment or marketing quota for such year to another farm or 
farms in the same county or in any other nearby county in the same or 
another State if such acreage cannot be planted or replanted because of 
the natural disaster determined for such year. The application shall be 
filed with the county FSA committee for the county in which the farm 
affected by such disaster is located. If the application involves a 
transfer to a nearby county, the county FSA committee for the nearby 
county shall be consulted before action is taken by the county FSA 
committee receiving the application.
    (c)(1) Amount of burley tobacco transfer. The burley quota to be 
transferred shall not exceed the smaller of:
    (i) The effective farm quota established under this part less such 
quota planted to tobacco and not destroyed by the natural disaster, or
    (ii) The quota requested to be transferred.
    (2) Amount of transfer for other than burley tobacco. The allotment 
to be transferred shall not exceed the smaller of:

[[Page 116]]

    (i) The farm allotment established under this part less such acreage 
planted to tobacco and not destroyed by the natural disaster, or
    (ii) The allotment requested to be transferred.
    (d) County FSA committee approval. The county FSA committee shall 
approve the transfer if it finds that:
    (1) All or part of the farm acreage allotment or marketing quota for 
the transferring farm could not be timely planted or replanted because 
of the natural disaster.
    (2) One or more of the producers of tobacco on the transferring farm 
will be a bona fide producer engaged in the production of tobacco on the 
receiving farm and will share in the proceeds of the tobacco.
    (e) Cancellation of transfer. If a transfer is approved under this 
section and it is later determined that the conditions in paragraph (d) 
of this section have not been met, the county FSA committee, or the 
Deputy Administrator may cancel such transfer. Action by the county FSA 
committee to cancel a transfer shall be subject to the approval of the 
State FSA committee or its representative.
    (f) Acreage history credits. Any acreage transferred under this 
paragraph shall be considered for the purpose of determining future 
allotments or quotas to have been planted to tobacco on the farm from 
which such allotment or quota is transferred.
    (g) Closing dates. The closing date for filing applications for 
transfers with the county FSA committee shall be July 15 of the current 
year. Notwithstanding such closing date requirement, the county FSA 
committee may accept applications filed after the closing date upon a 
determination by the county FSA committee that the failure to timely 
file an application was the result of conditions beyond the control of 
the applicant and a representative of the State FSA committee approves 
such determination.



Sec. 723.216  Transfer of tobacco acreage allotment or marketing quota 
by sale, lease, or owner.

    (a) General. The allotment or quota established for a farm may be 
transferred to another farm to the extent provided for in this section. 
For transfers by sale, common ownership units on a farm may be 
considered to be separate farms. Transfers are not permitted for cigar 
binder (types 54 and 55) tobacco allotments.
    (1) Types of transfers. With respect to:
    (i) Cigar-filler (type 46) and cigar-filler (types 42, 43, and 44), 
tobacco transfers may be by lease only.
    (ii) Flue-cured tobacco, transfers may be by:
    (A) Sale, or
    (B) Lease under certain natural disaster conditions provided in this 
section.
    (iii) Burley tobacco, transfers may be by:
    (A) Lease
    (B) Owner, or
    (C) Sale.
    (iv) Fire-cured, dark air-cured, and Virginia sun-cured tobacco, 
transfers may be by:
    (A) Lease,
    (B) Owner, or
    (C) Sale.
    (2) Transfer agreement. In order to transfer a marketing quota or 
allotment between two eligible farms, including a marketing quota or 
allotment that is pooled in accordance with part 718 of this chapter, 
the transfer must be recorded on Form FSA-375 and:
    (i) Where to file. Filed in the county FSA office which serves the 
county in which the transferring farm is located for administrative 
purposes.
    (ii) Signature-burley tobacco. Signed by, for burley tobacco only:
    (A) Leases. The owner and operator of the transferring farm and the 
owner or operator of the receiving farm. For leases made under the 
disaster provisions of this section, the signature of the owner of the 
transferring farm will not be required if the FSA determines that the 
farm is cash leased for the current crop year and that the owner does 
not share in the crop.
    (B) Sales. The owner of the selling farm and an active burley 
tobacco producer who is the buyer. If the buyer is neither owner nor 
operator of the farm to which the quota will be assigned, the owner or 
operator of the farm must give written consent for the quota to be 
assigned to the farm.

[[Page 117]]

    (C) Owner transfers. The owner of the transferring farm, who also 
must be the owner or operator of the receiving farm.
    (iii) Signature-flue-cured tobacco. Signed by, for flue-cured 
tobacco only:
    (A) Leases. The owner of the transferring farm and the owner or 
operator of the receiving farm. For leases made under the disaster 
provisions of this section, the signature of the owner of the 
transferring farm will not be required if the FSA determines that the 
farm is cash leased for the current crop year and that the owner does 
not share in the crop.
    (B) Sales. The owner of the selling farm and an active flue-cured 
tobacco producer who is the buyer. If the buyer is neither owner nor 
operator of the farm to which allotment and quota will be assigned, the 
owner or operator of the farm must be given written consent for the 
allotment and quota to be assigned to the farm.
    (iv) Signatures--except burley and flue-cured tobacco. Signed by, 
for all kinds of tobacco other than burley and flue-cured tobacco, the 
owner and operator of the transferring farm and the owner or operator of 
the receiving farm.
    (v) Witness. Each person whose signature is required by paragraphs 
(a)(2)(ii), (iii), or (iv) of this section must sign Form FSA-375 in the 
presence of a State or county FSA committee member or employee who shall 
sign Form FSA-375 as a witness, except that when both the owner and the 
operator of a transferring farm must sign, such witness is required for 
the signature of either the owner or operator, but not both. If such 
signatures cannot be witnessed in the county FSA office where the farm 
is administratively located, they may be witnessed in any State or 
county FSA office convenient to the owner or operator's residence. The 
requirement that signatures be witnessed for producers that are ill, 
infirm, reside in distant areas, or are in similar hardship situations 
or may be unduly inconvenienced may be waived provided the county FSA 
office mails Form FSA-375 for the required signatures;
    (b) Effective date. In order for the transfer to be effective for 
the current year, the Form FSA-375 shall be filed:
    (1) When to file--burley tobacco. For burley tobacco:
    (i) On or before July 1 of the current year, except as provided in 
paragraph (b)(1)(ii) of this section. An agreement to transfer quota by 
lease may be considered to have been filed on July 1 of the current year 
if such transfer agreement is filed not later than the end of the 
marketing year that begins during the current year and the county FSA 
committee, with the concurrence of the State FSA committee, determines 
that on or before July 1 of the current year the lessee and lessor 
agreed to such lease and transfer of quota and the failure to file such 
transfer agreement did not result from gross negligence on the part of 
any party to such lease and transfer.
    (ii) After July 1 of the current crop year and before February 16 of 
the following calendar year when the transfer is by lease and the 
transferring farm has suffered a loss of production of burley tobacco 
due to hail, drought, excessive rain, wind, tornado, or other natural 
disasters as determined by the Deputy Administrator.
    (2) When to file--flue-cured tobacco. For flue-cured tobacco:
    (i) On or before June 15 if the transfer is by sale.
    (ii) After June 30 and on or before November 15 for a transfer by 
lease when the transferring farm has suffered a loss of production of 
flue-cured tobacco due to drought, excessive rain, hail, wind, tornado, 
or other natural disasters as determined by the Deputy Administrator.
    (3) When to file--except burley and flue-cured tobacco. For all 
other kinds of tobacco, by the date established by the State FSA 
committee, except that a lease shall be effective if the county FSA 
committee, with the approval of a State FSA committee representative, 
finds that the producer was prevented from timely filing the transfer 
agreement due to reasons beyond the control of the producer.
    (c) Approval or disapproval. A transfer agreement shall not be 
approved before the period for filing an application for review of the 
initial notice of allotment or quota has expired. The county FSA 
committee or its designee shall approve each transfer agreement that

[[Page 118]]

meets the eligibility requirements of this section. The county FSA 
committee shall disapprove any transfer agreement that does not meet the 
eligibility requirement of this section. Any approval or disapproval of 
a transfer agreement shall to the extent possible be made within 30 days 
after the transfer agreement is filed with the county FSA committee 
unless additional time is required as the result of conditions beyond 
the control of the county FSA committee. However;
    (1) Burley tobacco. If an agreement is filed after July 1 which 
provides for the sale of quota, a transfer agreement shall not be 
approved until the next year's quota is computed for the selling farm. 
In addition, if marketing quota referendum will be conducted to 
determine whether or not quotas will be in effect for the crop, a 
transfer agreement shall not be approved until the Secretary announces 
that quotas have been approved by referendum.
    (2) Flue-cured tobacco. If an agreement is filed after June 15 which 
provides for the sale of an allotment and quota, a transfer agreement 
shall not be approved until next year's allotment and quota is computed 
for the selling farm. In addition, if a marketing quota referendum will 
be conducted to determine whether or not quotas will be in effect for 
the crop, a transfer agreement shall not be approved until the Secretary 
announces that quotas have been approved by referendum.
    (d) Time of determination. An approved transfer agreement shall 
become effective for the then current crop year, except that if an 
agreement that is filed after June 15 for the sale of flue-cured tobacco 
quota or after July 1 for the sale of burley tobacco quota, such 
approved agreement shall become effective for the next crop year.
    (e) Burley tobacco. For burley tobacco only:
    (1) Basis for transfer by sale. If the transfer of a quota is by 
sale, the transfer shall be based on part or all of the farm poundage 
quota.
    (2) Basis for transfer by lease or owner. If the transfer of a quota 
is by lease or by the owner, transfer shall be based on a part of or all 
of the effective farm poundage quota.
    (3) Accumulation of quota. A transfer by lease or by owner shall not 
be approved if the county FSA committee determines that the primary 
purpose of the transfer is to accumulate the quota on the farm (i.e., 
alternately transferring to and from the farm for 2 or more years to 
maintain the quota without satisfactory evidence of plans for producing 
the quota on the receiving farm).
    (4) Subleasing. In order to determine whether there is any 
subleasing of a burley farm marketing quota, the current year is divided 
into two periods, the period up to and including July 1, and the period 
after July 1. The county FSA committee shall not approve a transfer 
during either period if the effect would be both a transfer to and from 
the farm during the same period. However, a transfer may be approved 
within any crop year if quota is transferred from a farm for one or more 
years and the farm subsequently is combined with another farm that 
otherwise is eligible to receive quota by lease or by the owner.
    (5) Transferring farm restrictions. An agreement to transfer quota 
from a farm by lease or by the owner shall not be approved:
    (i) Limitation. If the pounds of quota being transferred exceed the 
difference obtained by subtracting from the effective farm marketing 
quota the total pounds of quota purchased and/or reallocated from 
forfeited quota in the current and two preceding years, as adjusted to 
reflect changes in national quota factors which have occurred since each 
respective purchase and/or reallocation of quota. However, this 
provision shall not be applicable to transfer agreements that are filed 
after July 1.
    (ii) New farm. If the farm is a new farm.
    (iii) Reduction pending. If consideration of a marketing quota 
violation is pending which may result in a quota reduction for the farm 
for the current year. However, if the county FSA committee determines 
that a decision will not be made on the pending case on or before the 
date specified in Sec. 723.212 of this part, a 1-year transfer will be 
approved if otherwise eligible.

[[Page 119]]

    (iv) Filed on or before July 1. Unless the receiving farm is 
administratively located in the same county as the transferring farm. 
However, burley tobacco producers in the States of Tennessee, Ohio and 
Indiana shall, irrespective of the preceding sentence, be permitted to 
lease and transfer burley tobacco quota from one farm in a State to any 
other farm in the State if other conditions for the transfer are met.
    (v) Filed after July 1. If the transfer agreement is filed after 
July 1, unless the county FSA committee in the county in which the farm 
is located for administrative purposes determines that the:
    (A) Farm's expected production of burley tobacco is less than 80 
percent of the farm's effective marketing quota as a result of a flood, 
hail, wind, drought, excessive rain, tornado, or other natural disaster.
    (B) Acreage planted to burley tobacco on the farm was sufficient to 
produce, under average conditions, an amount of tobacco which, when 
added to any carryover tobacco from the previous marketing year, would 
equal the farm's effective farm marketing quota.
    (C) Lessor made reasonable and customary efforts to produce the 
effective farm marketing quota;
    (D) Producers on the farm qualify for price support in accordance 
with the provisions of part 1464 of this title; and
    (E) Receiving farm is administratively located in the same State as 
the transferring farm.
    (vi) Consent of lien holder. For a multiple year transfer, if the 
farm is subject to lien, unless the lien holder agrees in writing to the 
transfer; and
    (vii) Claim for marketing quota penalty. If a claim has been filed 
against the lessor for a tobacco marketing quota penalty and the claim 
remains unpaid; However, this provision shall not apply if the claim is 
paid or the entire proceeds of the lease of the quota are applied 
against the claim and the county FSA committee determines that the 
amount paid for the lease represents a reasonable price for the pounds 
of quota being leased.
    (viii) Forfeiture pending. To the extent that forfeiture of such 
quota is expected to become final before July 1.
    (ix) Divided farms with less than 1,000 pounds of quota. If the farm 
has been divided by reconstitution and the divided farm has a farm 
marketing quota of less than 1,000 pounds subject to being reduced to 
zero pursuant to section 723.208(b).
    (6) Receiving farm restrictions. An agreement to transfer quota to a 
farm by lease or by owner shall not be approved:
    (i) Filed on or before July 1. If the transfer agreement is filed on 
or before July 1:
    (A) Unless the receiving farm is administratively located in the 
same county as the transferring farm and the provisions of paragraph 
(e)(5)(iv) of this section are not applicable.
    (B) If the pounds of quota being transferred to the farm exceed the 
smaller of 30,000 pounds or the difference between the farm marketing 
quota and one-half the result obtained by multiplying the acres of 
cropland on the farm by the farm yield.
    (ii) Filed after July 1. If the transfer agreement is filed after 
July 1, unless the:
    (A) Producers on the farm qualify for price support in accordance 
with the provisions of part 1464 of this title; and
    (B) Pounds of quota to be transferred to the lessee farm do not 
exceed the difference obtained by subtracting the effective farm 
marketing quota (before the filing of the transfer agreement) for the 
lessee farm from the total pounds of tobacco marketed and/or available 
for marketing (based on estimated pounds of tobacco on hand and/or in 
the process of being produced) from the farm in the current year. 
However, the total quantity of tobacco that can be leased or transferred 
to a farm during a crop year may not exceed that quantity which equals 
15 percent of the effective quota on the farm prior to any leases or 
transfers filed after July 1 of the crop year.
    (C) Transferring farm is administratively located in the same State 
as the receiving farm.
    (7) Selling farm restrictions. A transfer of quota from a farm by 
sale shall not be approved:
    (i) Previously purchased and/or reallocated quota. If the farm 
marketing quota was bought and/or reallocated

[[Page 120]]

from quota previously forfeited as provided in Sec. 723.219(i)(1), and 
the purchase and/or reallocation became effective within the current or 
any of the three preceding years; if the purchased and/or reallocated 
quota was obtained from quota purchased and/or reallocated as provided 
in paragraph (b) of this section within the four preceding years. 
However, this provision shall not be applicable if:
    (A) The quota was purchased and/or reallocated to the farm during 
four preceding years; and
    (B) The county FSA committee, with the concurrence of a 
representative of the State FSA committee, determines that the failure 
to permit the sale of quota, to the extent otherwise permitted by this 
section, would cause an undue hardship on the seller and the:
    (1) Sale is in connection with the settlement of an estate which 
includes the farm for which the quota was established;
    (2) Owner of the quota is experiencing financial distress to the 
extent that current year financing is unlikely;
    (3) Owner of the quota is disabled due to health reasons to the 
extent that such person can no longer continue to share in the risk of 
production of the purchased and/or reallocated quota; or
    (4) Owner of the quota is sharing in the risk of production as an 
investing producer and loses resources necessary to produce the crop due 
to reasons beyond such owner's control such as the loss of a tenant or 
sharecropper and a replacement cannot be obtained.
    (ii) Location of farms. Unless both the selling farm and the buying 
farm are administratively located in the same county.
    (iii) Pounds for sale. The pounds transferred by sale shall be based 
on part of all of the farm poundage quota.
    (iv) Reduction pending. If consideration of an indicated marketing 
quota violation is pending which may result in quota reduction for the 
farm for the current year. However, if the county FSA committee 
determines that a decision will not be made on the pending case on or 
before the date specified in Sec. 723.212 of this part, a transfer will 
be approved if otherwise eligible.
    (v) Forfeiture pending. If the agreement for transfer by sale is 
filed subsequent to the final date which is permitted for the sale of 
the quota in order to prevent forfeiture.
    (vi) Claim for marketing quota penalty. If a claim has been filed 
against the seller for a tobacco marketing quota penalty and the claim 
remains unpaid: However, this provision shall not be applicable if the 
claim for such penalty is paid or the entire proceeds of the sale of the 
quota are applied against the claim and the county FSA committee 
determines that the amount paid represents a reasonable selling price 
for the pounds of quota being sold.
    (vii) Consent of lien holder. Requires consent of the lien holder, 
if the farm is subject to a lien, unless the lien holder agrees in 
writing to the transfer. However, consent of a lien holder is not 
required for a transfer of the pounds of quota from a farm for which 
forfeiture is required in accordance with the provisions of Sec. 
723.219.
    (viii) Quota is subject to an approved Conservation Reserve Program 
Contract. If the quota has been reduced because of an approved 
Conservation Reserve Program contract according to part 704 of this 
chapter unless forfeiture is otherwise required.
    (8) Restrictions on buying farm. A transfer of quota to a farm by 
purchase shall not be approved:
    (i) Active producers. Unless the buyer is an active burley tobacco 
producer.
    (ii) Cropland limitation. If the sum of the pounds of quota being 
transferred exceeds the difference between the farm marketing quota and 
one-half the result obtained by multiplying the acres of cropland on the 
farm by the farm yield.
    (iii) Quota previously sold. If quota was sold from the farm in the 
current or either of the two preceding years.
    (iv) Unless both the buying farm and the selling farm are 
administratively located in the same county.
    (v) Quota limitation. If the sum of the pounds of quota being 
transferred in the current year exceeds the larger of: (A) 30 percent of 
the receiving farm's existing quota, or (B) 20,000 pounds.
    (9) Period of transfer. A transfer by lease or by owner may be for a 
period of one to five years: However, an agreement to transfer quota by 
lease shall be limited to the current crop year if

[[Page 121]]

the transfer is filed after July 1 in accordance with the natural 
disaster provisions of this section.
    (10) Redetermination of quota after transfer by lease or by the 
owner. After a transfer by lease or by the owner, the effective farm 
marketing quota shall be redetermined for both the transferring farm and 
the receiving farm.
    (11) Apportionment of data-selling farm. The pounds of farm 
marketing quota retained on the selling farm after the sale of quota 
shall be divided by the farm marketing quota established for the selling 
farm before the sale to determine a factor for apportioning farm data. 
The data to be retained on the selling farm shall be determined by 
multiplying the factor by the following data:
    (i) The amount of any overmarketings which have not been subtracted 
when a determination is made of the effective farm marketing quota of 
the selling farm;
    (ii) The pounds of quota which have been transferred from the 
selling farm by lease or by the owner in the current year;
    (iii) The pounds of quota which have been reduced in the current 
year as the result of a marketing quota violation in a prior year;
    (iv) The pounds of quota transferred to the farm by lease or by 
owner in the previous year;
    (v) The previous year's farm marketing quota; and
    (vi) The previous year's effective farm marketing quota.
    (12) Apportionment of data-buying farm. The buying farm's share of 
each respective item of farm data shall be determined by subtracting the 
pounds which are retained on the selling farm for the respective item 
from the pounds which were established for the selling farm for the 
respective item before the current sale of quota. However, the pounds of 
quota transferred from the selling farm by lease or by the owner and/or 
the pounds of quota reduction resulting from a marketing quota violation 
on the selling farm may be apportioned between the farms in accordance 
with a written agreement between the buyer and the seller if the farm 
marketing quota retained on the selling farm is sufficient to satisfy 
the pounds of quota which were transferred by lease or by the owner, the 
pounds of quota which have been reduced as the result of a marketing 
quota violation, and the overmarketings for the farm, if any. The data 
determined in accordance with this paragraph shall he added to any 
previous data for the buying farm.
    (13) Redetermination quota after sale or purchase of quota. After 
adjusting the data in accordance with the provisions of this section, 
the effective farm marketing quota shall be determined for both the 
buying and selling farm.
    (14) Farm division after transfer by lease. If a farm is divided 
after there has been a transfer of a marketing quota to the farm by 
lease, the transferred quota shall be divided in the manner which is 
designated in writing by the lessee. In the absence of a written 
designation, the leased quota shall be apportioned in the same manner as 
the farm marketing quota of the parent farm.
    (15) Multiple year transfer by lease or by owner. The effective farm 
marketing quota on a receiving farm having a multiple-year transfer 
agreement in effect shall be adjusted for each year for which such 
transfer agreement is in effect to reflect any decrease in the national 
quota factor which causes the farm marketing quota established for the 
transferring farm to be less than the pounds of quota which have been 
transferred to the receiving farm.
    (16) Considered planted credit. Considered planted credit shall be 
given to the transferring farm when tobacco quota is transferred from 
the farm by lease or by owner.
    (f) Flue-cured tobacco. For flue-cured tobacco only:
    (1) Location of buying and selling farms. Marketing quota 
transferred by sale must be to a farm administratively located within 
the same county. However, beginning with the 2002 and subsequent crops, 
flue-cured tobacco owners in the States of Florida and Georgia shall be 
permitted to sell flue-cured tobacco marketing quota to any other farm 
in their respective State if all other conditions for such a sale are 
met.
    (2) Maximum quota to be transferred by sale. If the transfer is by 
sale, the

[[Page 122]]

transfer shall be based on part or all of the farm poundage quota. the 
maximum quota that may be transferred by sale is the farm poundage 
quota.
    (3) Transfer by lease-involvement of outside parties. If the 
transfer is by lease, only the lessor and lessee (or any attorney, 
trustee, bank, or other agent who regularly represents either the lessor 
or lessee in business transactions unrelated to the production or 
marketing of tobacco) may be parties to, or involved in the arrangements 
for such transfer. The transfer shall be based on a portion or all of 
the effective farm poundage quota. The maximum quota that may be 
transferred by lease is the effective farm poundage quota.
    (4) Lessor farm restrictions. A transfer of quota from a farm by 
lease shall not be approved:
    (i) New farm. If the farm is a new farm.
    (ii) Natural disaster. Unless the county FSA committee in the county 
in which the farm is located for administrative purposes determines that 
the:
    (A)(1) The farm has planted an acreage equal to or more than 90 
percent of the effective farm acreage allotment, or
    (2) In accordance with guidelines issued by the Deputy 
Administrator, the planted acreage of flue-cured tobacco on the farm is 
sufficient to produce, under average conditions, an amount of tobacco 
which, when added to any carryover tobacco from the previous marketing 
year, would equal the farm's effective farm marketing quota;
    (B) Lessor made reasonable and customary efforts to produce the 
effective farm marketing quota;
    (C) Producers on the farm qualify for price support in accordance 
with the provisions of part 1464 of this title; and
    (D) Farm's expected production of flue-cured tobacco is less than 80 
percent of the farm's effective marketing quota as a result of a 
drought, excessive rain, hail, wind, tornado, or other natural disaster 
as determined by the Deputy Administrator.
    (iii) Claim for tobacco marketing quota penalty. If a claim has been 
filed against the lessor for tobacco marketing quota penalty and the 
claim remains unpaid unless the claim is paid or the entire proceeds of 
the lease of the allotment and quota are applied against the claim and 
the county FSA committee determines that the amount of the lease 
represents a reasonable price for the pounds of quota being leased.
    (iv) Located in the same State. Unless the lessor farm is 
administratively located in the same State as the lessee farm.
    (5) Lessee farm restrictions. A transfer of quota to a farm by lease 
shall not be approved:
    (i) Price support eligibility. Unless the producers on the farm 
qualify for price support under the provisions of part 1464 of this 
title; and
    (ii) Limitation. If the pounds of quota to be transferred to the 
lessee farm exceed the difference obtained by subtracting the effective 
farm marketing quota (before the filing of the transfer agreement) for 
the lessee farm from the total pounds of tobacco marketed and/or 
available for marketing (based on estimated pounds of tobacco on hand 
and/or in the process of being produced) from the farm in the current 
year.
    (iii) Located in same State. Unless the lessee farm is 
administratively located in the same State as the lessor farm.
    (6) Selling farm restrictions. A transfer of quota from a farm by 
sale shall not be approved:
    (i) Previously purchased and/or reallocated quota. If a farm 
marketing quota includes quota that was purchased and/or reallocated 
from the quota which has been forfeited and the purchase and/or 
reallocation became effective in the current or any of the three 
preceding years. However, this provision shall not be applicable if:
    (A)(1) The quota being sold was purchased in such period, if 
forfeiture of such quota is required by Sec. 723.220 of this part, and 
the amount of quota being transferred does not exceed the amount of 
quota for which forfeiture otherwise is required in accordance with the 
provisions of Sec. 723.220 of this part; or
    (2) The county FSA committee, with the concurrence of a 
representative of the State FSA committee, determines that the failure 
to approve the sale would cause an undue hardship on the seller and:

[[Page 123]]

    (B) The sale is in connection with the settlement of an estate which 
includes the farm for which the quota was established;
    (C) The owner of the quota is experiencing financial distress to the 
extent that current year financing is unlikely;
    (D) The owner of the quota is disabled due to health reasons to the 
extent that such person can no longer continue to share in the risk of 
production of the purchased and/or reallocated quota; or
    (E) The owner of the quota is sharing in the risk of production as 
an investing producer and loses resources necessary to produce the crop 
due to reasons beyond such owner's control such as the loss of a tenant 
or share cropper and a replacement cannot be obtained.
    (ii) Reduction pending. If consideration of an indicated violation 
is pending which may result in an allotment and quota reduction for the 
farm for the current year. However, if the county FSA committee 
determines that a decision will not be made on the pending case on or 
before April 1, a transfer may be approved.
    (iii) Forfeiture pending. If the agreement for transfer by sale is 
filed subsequent to the final date which is permitted for the sale of 
the allotment and quota in order to prevent forfeiture.
    (iv) Consent of lien holder. If the farm is subject to a lien unless 
the lien holder agrees in writing to the transfer: However, consent of a 
lien holder is not required for a transfer of the pounds of quota for 
which forfeiture is required in accordance with the provisions of Sec. 
723.220 of this part.
    (v) Claim for marketing quota penalty. If a claim has been filed 
against the seller for a tobacco marketing quota penalty and the claim 
remains unpaid: However, this provision shall not be applicable if the 
claim for such penalty is paid or the entire proceeds of the sale of the 
allotment and quota are applied against the claim and the county FSA 
committee determines that the amount paid represents a reasonable 
selling price for the pounds of quota being sold.
    (vi) Allotment and quota subject to an approved Conservation Reserve 
Program contract. If the allotment and quota is subject to an approved 
Conservation Reserve Program contract, unless forfeiture otherwise would 
be required in accordance with the provisions of Sec. 723.220 of this 
part.
    (7) Buying farm restrictions. A transfer of quota to a farm by 
purchase shall not be approved:
    (i) Active producer. Unless the buyer is an active flue-cured 
tobacco producer.
    (ii) [Reserved]
    (iii) Quota previously sold. If the farm owner sold quota from a 
farm during the current or any of two preceding years.
    (iv) Installment payment option. Unless the buyer of the flue-cured 
tobacco acreage allotment and marketing quota has been afforded an 
option to pay for such allotment and quota in two to five equal annual 
installments payable each fall beginning with the fall of the crop year 
in which the transfer becomes effective and such buyer certifies on a 
form prescribed by the Deputy Administrator that such option has been 
made available to the buyer.
    (8) Allotment and quota after transfer by lease. The effective farm 
acreage allotment and the effective farm marketing quota shall be 
determined for both the lessee farm and the lessor farm in accordance 
with the provisions of Sec. Sec. 723.205 and 723.206 of this part, 
respectively.
    (9) Apportionment of data after transfer of quota by sale-selling 
farm. The pounds of farm marketing quota retained on the selling farm 
after the sale of quota shall be divided by the farm marketing quota 
established for the selling farm before the sale to determine a factor 
for apportioning farm data for the current year and for the base period. 
The data to be retained on the selling farm shall be determined by 
multiplying the factor by the following data:
    (i) The planted and considered planted acres for the base period;
    (ii) The history acres for the base period;
    (iii) The farm acreage allotment for the current year and for the 
base period;
    (iv) The amount of any overmarketings which have not been subtracted 
when a determination is made

[[Page 124]]

of the effective farm marketing quota of the selling farm;
    (v) The pounds of quota which have been transferred from the selling 
farm by lease in the current year;
    (vi) The acres of allotment which have been reduced in the current 
year as the result of a marketing quota violation in a prior year;
    (vii) The pounds of quota transferred to the farm by lease in the 
previous year;
    (viii) The previous year's farm marketing quota;
    (ix) The previous year's effective farm marketing quota; and
    (x) The previous year's marketings.
    (10) Apportionment of data-buying farm. The pounds of farm marketing 
quota which have been purchased shall be divided by the farm yield for 
the buying farm in order to determine the farm acreage allotment for the 
buying farm. The buying farm's share of other farm data shall be 
determined by subtracting the acres or pounds, as applicable, which are 
retained on the selling farm from the acres or pounds which were 
established for the selling farm before the current sale of quota: 
However, the acres computed for the acres of reduction resulting from a 
marketing quota violation for the buying farm shall be multiplied by a 
factor determined by dividing the farm yield of the selling farm by the 
farm yield of the buying farm in order to determine the acres of 
reduction from the buying farm for the current year. The pounds of quota 
transferred from the selling farm by lease and/or the acres of allotment 
reduction resulting from a marketing quota violation on the selling farm 
may be apportioned between the farms in accordance with a written 
agreement between the buyer and the seller if the farm marketing quota 
retained on the selling farm is sufficient to satisfy the pounds of 
quota which are leased, the pounds of quota which have been reduced as 
the result of a marketing quota violation, and the overmarketings for 
the farm, if any. The data determined in accordance with this paragraph 
shall be added to any previous data for the buying farm.
    (11) Allotment and quota. After adjusting the data in accordance 
with the provisions of this section, the farm acreage allotment, the 
effective farm acreage allotment, and the effective farm marketing quota 
shall be determined for both the buying and the selling farm.
    (12) Effect of price support eligibility. If a lease agreement is 
filed after the farm operator reports the acreage of tobacco on the farm 
in the current year, the effective farm acreage allotment which has been 
determined prior to the approval of the transfer will be used in 
determining price support eligibility for the farm.
    (13) Violation of lease provisions. (i) If, after a lease agreement 
is approved, information is brought to the attention of the county FSA 
committee which indicates that either the lessor or the lessee, or both, 
knowingly filed a false certification with respect to a transfer of 
quota by lease, the county FSA committee shall schedule a hearing, 
notify such person of the time and place of the hearing, and present 
evidence at the hearing with respect to the allegation of false 
certification. If, as a result of the evidence presented, the county FSA 
committee determines that such person knowingly made a false 
certification, the county FSA committee shall notify the person of the 
determination and afford such person 15 days after the mailing of the 
notice to request a review of the determination by a review committee as 
provided for by part 711 of this chapter.
    (ii) If it is determined that the lessor knowingly made a false 
certification, the next flue-cured tobacco acreage allotment and 
marketing quota established for the lessor's farm shall be reduced by 
that percentage which the leased quota was of the total flue-cured 
tobacco farm marketing quota established for the farm in the year of the 
lease.
    (iii) If it is determined that the lessee knowingly made a false 
certification, the lease agreement for purposes of the flue-cured 
tobacco marketing quota program with respect to the lessee's farm shall 
be considered to be null and void as of the date approved by the county 
FSA committee.
    (14) Considered planted credit. Considered planted credit shall be 
given to the lessor farm for the tobacco acreage

[[Page 125]]

allotment which is deducted as the result of the transfer of quota from 
the farm by lease.
    (15) Sale of quota with installment payment option. Notwithstanding 
any other provision of this section the owner of a farm who sells any 
flue-cured tobacco acreage allotment and marketing quota may:
    (i) Negotiate with more than one prospective buyer before selling 
such allotment and quota; or
    (ii) Sell such allotment and quota to any eligible buyer whom such 
owner may select; or
    (iii) Sell such allotment and quota for a single payment; or
    (iv) Include provisions in the agreement of sale to protect the 
seller's interest if the buyer fails to make full payment. Such 
provisions may not include the use of such allotment and quota as 
collateral for purposes of protecting the seller's interest in the 
allotment and quota.
    (v) Flue-cured tobacco acreage allotment and marketing quota 
purchased in accordance with this subparagraph shall not revert to the 
seller's farm but shall remain with the farm to which assigned at the 
time of purchase even though the buyer fails to make full payment to the 
seller for such allotment and quota.
    (g) Burley and flue-cured tobacco. For burley or flue-cured tobacco:
    (1) Carryover tobacco. If tobacco is marketed after the entire farm 
marketing quota of the producing farm has been transferred by sale, the 
tobacco shall be considered as having been marketed on each farm to 
which farm marketing quota was transferred by sale in accordance with a 
transfer agreement filed after June 15 for flue-cured tobacco, or July 1 
for burley tobacco, of the last year in which a farm marketing quota was 
established for the producing farm. Such marketing shall be prorated to 
each farm in proportion to the pounds of farm poundage quota purchased 
by each farm. If there was more than one farm to which a farm marketing 
quota was transferred by sale, the marketing may be assigned to the 
farms in the manner agreed to in writing by each of the buyers of such 
farm marketing quota.
    (2) Cancellation of transfer. A transfer of flue-cured allotment and 
quota, or burley quota, under this section which was approved in error 
or on the basis of incorrect information furnished by the parties to the 
agreement shall be canceled by the county FSA committee. For the purpose 
of determining any overmarketings and undermarketings from the farms, 
and for the purpose of determining eligibility for price support and 
marketing quota penalties, the cancellation shall be effective as of the 
date of approval. However, such cancellation shall not be effective for 
the current marketing year for price support and marketing quota penalty 
purposes if the:
    (i) Transfer approval was made in error or on the basis of incorrect 
information which had been unknowingly furnished by the parties to the 
agreement; and
    (ii) Parties to the transfer agreement were not notified of the 
cancellation before the marketing for the receiving farm exceeded the 
correct effective farm marketing quota.
    (3) Canceled because of fraud. If a transfer of a flue-cured 
allotment and quota, or burley quota, is canceled because of fraud on 
the part of the owner of the transferring farm but no fraud is 
attributable to either the owner or operator of the receiving farm, such 
cancellation shall be effective as of the date of approval of the 
transfer except for purposes of determining eligibility for price 
support and marketing quota penalties for the receiving farm. In such 
case, the overmarketings shall be charged against the farm from which 
the transfer was made if the farm, after any reconstitution which may be 
necessary as a result of fraud, is assigned a flue-cured allotment and 
quota, or burley quota, against which the overmarketings could be 
charged. Otherwise, the overmarketings shall be charged against any 
other farm involved in the fraud having a flue-cured allotment and 
quota, or burley quota, after any reconstitution required by such fraud. 
Notwithstanding the foregoing, any overmarketings on the receiving farm 
which are in excess of the amount of quota involved in the canceled 
transfer shall be charged against the receiving farm.

[[Page 126]]

    (4) Dissolution or revision of a transfer agreement. A transfer 
agreement may be dissolved or minor revisions made with respect to such 
agreement if a written request by all parties to the agreement is made 
to the county FSA committee by November 15 of the current marketing year 
for flue-cured tobacco, or by February 15 of the current marketing year 
for burley tobacco. After any such dissolution or revision of a transfer 
agreement, an official notice of the flue-cured acreage allotment and 
marketing quota, or burley quota, shall be issued by the county FSA 
committee to each of the operators involved in the transfer agreement.
    (h) Cigar tobacco. For cigar-filler (type 46) and cigar-filler 
(types 42, 43, and 44) tobacco only, the provisions of paragraph (j) of 
this section are applicable in addition to the following:
    (1) Farm eligible. The owner and operator (acting together if 
different person) of any farm for which an old farm tobacco acreage 
allotment is established for the current year may lease and transfer all 
or any part of the farm acreage allotment established for such farm to 
any other owner or operator of a farm in the same county with a current 
year's allotment (old or new farm) for the same kind of tobacco for use 
on such farm. Transfer of allotments by lease shall not exceed 5 years.
    (2) Transfer approved acre per acre. The lease and transfer shall be 
approved acre per acre.
    (3) Considered planted credit. The amount of allotment acreage which 
is leased from a farm shall be considered for the purpose of determining 
future allotments (and tobacco history acreage) to have been planted to 
tobacco on such farm. The amount of allotment acreage which is leased 
and transferred to a farm shall not be taken into account in 
establishing allotments for subsequent years for such farms.
    (4) Limitation on acreage transferred. The total acreage allotted to 
any farm after the transfer by lease of tobacco acreage allotment to the 
farm shall not exceed 50 percent of the acreage of cropland in the farm, 
except that in the case of cigar-filler (types 42, 43, 44, and 46) 
transfers, such transfers shall be limited to a total of 10 acres.
    (5) Transfer from the pool. Allotments in a pool pursuant to part 
718 of this chapter may be eligible for lease and transfer during the 3-
year life of the pooled allotment. An agreement to lease and transfer 
shall not serve to extend the life of such pooled allotment.
    (i) Fire-cured, Dark air-cured, and Virginia sun-cured tobacco. For 
Fire-cured, Dark air-cured, and Virginia sun-cured tobacco, only, the 
provisions of this section are applicable in addition to the following:
    (1) Persons eligible to file a record of transfer (FSA-375)--sale or 
lease. The owner and operator of any old farm for which a Fire-cured, 
Dark air-cured, or Virginia sun-cured tobacco allotment is established 
for the current year may sell or lease all or any part of such allotment 
to any other owner or operator of a farm in the same county, and in the 
same State for Virginia fire-cured (type 21) or Virginia sun-cured (type 
37) tobaccos. The receiving farm need not be an old farm. In the case of 
a permanent transfer, a statement signed by all parties to the 
transaction confirming that the sale has been made shall be filed with 
the county FSA committee.
    (2) By owner. The owner of any old tobacco farm for which a Fire-
cured, Dark air-cured, or Virginia sun-cured tobacco allotment is 
established for the current year may transfer any or all of such 
allotment permanently, or for a term of years designated by the owner, 
to another farm in the same county (within the same State for Virginia 
fire-cured and Virginia sun-cured tobacco) owned or controlled by such 
owner.
    (3) Maximum period of transfer by lease. Transfer of allotments by 
lease shall not exceed 5 years.
    (4) Basis for transfer. The transfer shall be approved acre for 
acre.
    (5) Adjustments in farm history acreage. The farm history acreage 
for the immediately preceding 5 years on farms from which and to which 
permanent transfer of allotment is made shall be adjusted by the county 
FSA committee for each of the base years to correspond with the amount 
of allotment transferred between the farms. In the case of temporary 
transfers of allotment for 1 or more years by lease or by owner, the

[[Page 127]]

farm history acreage shall not be reduced on the farm from which the 
transfer is made and farm history acreage shall not be transferred to 
the receiving farm.
    (6) Limitation on acreage transferred. The total of the Fire-cured, 
Dark air-cured, or Virginia sun-cured tobacco allotment which may be 
transferred for each kind of tobacco, by sale, lease, or by owner, to a 
farm shall not exceed 50 percent of the acreage of cropland on the farm. 
The cropland in the farm for the current year for purposes of such 
transfers shall be the total cropland as defined in Part 718 of this 
chapter.
    (7) Prohibition on permanent transfer. A permanent transfer by sale 
or by owner shall not be approved from any farm to which an allotment 
was permanently transferred by sale or by owner within the 3 immediately 
preceding crop years.
    (8) Temporary transfer to non-owned farm. A transfer requested on a 
temporary basis to a farm controlled but not owned by the applicant 
shall be approved only if the applicant will be the operator of the farm 
to which the transfer is to be made for each year of the period for 
which the transfer is requested. When the applicant for whom such 
transfer has been approved no longer is the operator of the receiving 
farm due to conditions beyond such operator's control, the transfer 
shall remain in effect unless the transfer is terminated under the 
provisions of paragraph (j) of this section. Conditions beyond the 
operator's control shall include, but not be limited to, death, illness, 
incompetence, or bankruptcy of such person.
    (9) Transfer of pooled allotment. Allotments established for a farm 
as pooled allotment under part 718 of this chapter may be transferred on 
a:
    (i) Permanent basis during the 3-year life of a pooled allotment, or
    (ii) Temporary basis for a term of years not to exceed the remaining 
number of crop years of such 3-year period. A temporary agreement to 
transfer shall not serve to extend the life of such pooled allotment.
    (10) New farm eligibility. Any farm from which the entire farm 
allotment is sold or permanently transferred by the owner shall not be 
eligible for a new farm tobacco allotment for the kind transferred 
during the 5 years following the year in which such transfer is made.
    (11) Transfer of history acreage. Permanent transfer of allotment 
shall have the effect of transferring history acreage, farm base, and 
marketing quota attributable to such allotment. In the case of a 
transfer by lease, the transferred allotment shall be considered for 
purposes of establishing future allotments to have been planted on the 
farm from which such allotment was transferred.
    (j) Tobacco except burley, flue-cured, and cigar (types 54 and 55). 
For tobacco that may be transferred in accordance with the provisions of 
paragraph (h) or (i) of this section, the following provisions shall 
also apply:
    (1) New farm allotment. A new farm allotment shall not be 
transferred.
    (2) Tobacco allotment subject to an approved Conservation Reserve 
Program contract. A transfer of allotment designated for reduction under 
a Conservation Reserve Program contract shall not be approved.
    (3) Subleasing prohibited. A transfer of allotment from a farm shall 
not be approved during the period for which a current temporary transfer 
agreement is in effect that transferred quota to the same farm.
    (4) Limitation on transfer to and from a farm in the same year. If a 
transfer agreement is in effect for the current crop year for a farm, a 
transfer of allotment shall not be approved during the same crop year:
    (i) From such farm receiving allotment by transfer for such year, or
    (ii) To such farm which had allotment transferred from it for such 
year.
    (5) Farm in violation. If consideration of a violation is pending 
which may result in an allotment reduction for a farm for the current 
year, the county FSA committee shall delay approval of any transfer of 
allotment from or to the farm until the violation is cleared or the 
allotment reduction is made. However, if the allotment reduction in such 
case cannot be made effective for the current crop year before the final 
date for reducing allotments for violations, the transfer may be 
approved by the county FSA committee. In any

[[Page 128]]

case, if, after a transfer of a tobacco acreage allotment has been 
approved by the county FSA committee, it is determined that the 
allotment for the farm from which or to which such acreage is 
transferred is to be reduced for a violation, the allotment reduction 
for such farm shall be delayed until the following year.
    (6) Claim for tobacco marketing quota penalty. A transfer of acreage 
allotment from a farm shall not be approved if a claim has been filed 
against the lessor, seller, or transferring owner for a tobacco 
marketing quota penalty and the claim remains unpaid. However, this 
provision shall not apply if the claim is paid or the entire proceeds of 
the lease or sale of the allotment are applied against the claim and the 
county FSA committee determines that the amount paid for the lease or 
sale represents a reasonable price for the acres of allotment being 
transferred.
    (7) Approval after review period. A transfer of allotment shall not 
be approved by the county FSA committee for any farm before the time of 
filing an application for review, as shown on the original allotment 
notice for the farm, has expired. If an application for review is filed 
for a farm involved in a transfer agreement, such agreement shall not be 
approved by the county FSA committee until the allotment for such farm 
is finally determined pursuant to part 711 of this chapter.
    (8) Acreage allotment after lease and transfer. The acreage 
allotment determined after a temporary transfer for a farm under the 
provisions of this section shall be the allotment of such farm for the 
current year only for the purpose of determining:
    (i) Excess acreage,
    (ii) The amount of penalty to be collected on marketings of excess 
tobacco including absorption of carryover penalty tobacco,
    (iii) Eligibility for price support, and
    (iv) The farm marketing quota and the percentage reduction for a 
violation in the allotment for the farm.
    (9) Cancellation of transfer. Any transfer of allotment under this 
section which was approved by the county FSA committee in error or on 
the basis of incorrect information furnished by the parties to the 
agreement shall be canceled by the county FSA committee. Such 
cancellation shall be effective as of the date of approval for purposes 
of determining eligibility for price support and marketing quota 
penalties except that such cancellation shall not be effective for the 
current marketing year for price support and marketing quota penalty 
purposes, if:
    (i) The transfer approval was made in error or on the basis of 
incorrect information unknowingly furnished by the parties to the 
transfer agreement; and
    (ii) The parties to the transfer agreement were not notified of the 
cancellation before the tobacco was planted.
    (10) Dissolution or revision. A transfer agreement may be dissolved 
or minor revisions made where a request by all parties to the agreement 
is made in writing to the county FSA committee. Such written 
notification shall be filed prior to planting the tobacco. A late filed 
request to dissolve or revise the transfer may be effective for the 
current year if the county FSA committee with approval of a 
representative of the State FSA committee determines that the producer 
was prevented from timely filing for reasons beyond such producer's 
control.
    (11) Reconstituted farm. The allotment for a farm being divided or 
combined in the current year shall be the allotment after the transfer 
has been approved. Notwithstanding the above, in the case of a division, 
the county FSA committee shall allocate the acreage that was transferred 
by lease to the tracts involved in the division as the parent farm 
owners and operators designate in writing. In the absence of such 
designation, the county FSA committee shall apportion the leased 
acreage.
    (12) Consent of lien holder. A transfer of allotment other than by 
annual lease shall not be approved from a farm subject to a mortgage or 
other lien unless the transfer is agreed to in writing by the lien 
holder.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21441, May 9, 1991; 58 
FR 11960, Mar. 2, 1993; 63 FR 11582, Mar. 10, 1998; 65 FR 7953, Feb. 16, 
2000; 66 FR 53509, Oct. 23, 2001; 67 FR 41310, June 18, 2002]

[[Page 129]]



Sec. 723.217  Release and reapportionment of old farm acreage allotments 
for Cigar-filler and Binder (types 42, 43, 44, 54, and 55) tobacco.

    (a) Annual or permanent release of acreage allotments to State 
committee. Except as provided in this paragraph, all or any part of a 
farm acreage allotment on which Cigar-filler and Binder (types 42, 43, 
44, 54, and 55) tobacco will not be produced and which the operator of 
the farm voluntarily releases on an annual basis, or both the owner and 
operator voluntarily releases on a permanent basis, in writing to the 
State FSA committee by not later than the final date for filing releases 
established by the State FSA committee for the current year shall be 
deducted from the allotment of such farm.
    (1) For the farm voluntarily releasing tobacco farm acreage 
allotment on an annual basis, such acreage will be considered as having 
been planted on the releasing farm for the purpose of establishing 
allotments for subsequent years. For the farm receiving such annual 
released acreage, such acreage shall not be taken into account in 
establishing future allotments for the farm. The tobacco history acreage 
for a farm releasing on a permanent basis shall not be taken into 
account in establishing future allotments for the farm. The tobacco 
history acreage for a farm releasing on a permanent basis shall be 
adjusted to reflect the acreage permanently released.
    (2) An acreage allotment shall not be released either annually or 
permanently:
    (i) From the eminent domain allotment pool if an application for 
transfer from the pool has been filed in accordance with part 718 of 
this chapter;
    (ii) From a new farm; or
    (iii) To the extent such acreage is designated for reduction under a 
Conservation Reserve Program contract.
    (b) Reapportionment of released acreage allotment. The acreage 
voluntarily released on an annual or permanent basis for the current 
year may be reapportioned by the State FSA committee to any farm in any 
county in the State including a farm receiving a new farm allotment. The 
State FSA committee shall select the counties to which the released 
acreage will be reapportioned. The county FSA committee shall select the 
farms to which the released acreage will be reapportioned. The State FSA 
committee shall keep records on both an annual and permanent basis of 
the source of acreage released. Any acreage released for the current 
year on a permanent basis which is not reapportioned by the State FSA 
committee in the current year may be reapportioned in the following 
year. The county FSA committee for the county receiving released acreage 
may reapportion the tobacco allotment acreage on an annual or permanent 
basis to other farms in the county in amounts determined by the county 
FSA committee to be fair and reasonable on the basis of land, labor, and 
equipment available for production of Cigarfiller and binder (types 42, 
43, 44, 54, and 55) tobacco; crop rotation practices; and the soil and 
other physical factors affecting the production of tobacco. Released 
acreage should not be reapportioned on a temporary or permanent basis to 
any farm unless there is assurance from the operator to the county FSA 
committee that the released acreage being received will be produced. 
Allotment reapportioned to a farm on an annual basis can only be used by 
the receiving farm for increased production during the current year. 
Allotment reapportioned to a farm on a permanent basis shall be added to 
the current year allotment or shall serve to establish an allotment for 
a farm without a current allotment. A farm shall be eligible to receive 
reapportionment of released acreage on either or both an annual or 
permanent basis only if a written request is filed by the farm owner or 
operator at the office of the county FSA committee not later than the 
final date for filing such requests established by the State FSA 
committee for the current year.



Sec. 723.218  Determining tobacco history acreage.

    With respect to each respective kind of tobacco, the tobacco history 
acreage shall be determined for each farm for which a tobacco acreage 
allotment was established for such kind of tobacco for the current year.

[[Page 130]]

    (a) The history acreage shall be the same as the farm acreage 
allotment for the respective kind of tobacco if in the current year, or 
either of the two preceding years, the sum of the planted and considered 
planted acreage of such kind of tobacco was as much as 75 percent of the 
farm acreage allotment. Otherwise, the history acreage shall be the sum 
of the planted and considered planted acreage of such kind of tobacco.
    (b) Notwithstanding any other provision of this section, for the 
respective kind of tobacco, the history acres for the current year and 
for each year of the base period shall be reduced to zero if:
    (1) A new farm allotment was canceled;
    (2) The allotment was in a pool established in accordance with the 
eminent domain provision of part 718 of this chapter and the period of 
eligibility has expired for transferring the allotment from the pool; or
    (3) The county FSA committee determines that the farm has been 
retired from agricultural production and the allotment is not eligible 
for pooling in accordance with the eminent domain provisions of part 718 
of this chapter.



Sec. 723.219  Forfeiture of burley tobacco marketing quota.

    (a) Determination of quota subject to forfeiture. (1) For purposes 
of paragraph (b) of this section, the phrase ``owns a farm'' means 
ownership of:
    (i) A farm as constituted under part 718 of this chapter, if the 
entire farm shares a common ownership; or
    (ii) All of the land within a farm which shares a common ownership 
if the parent farm consists of tracts of land having separate 
ownerships.
    (2) For purposes of paragraph (b) of this section, the county FSA 
committee shall apportion, in accordance with the provisions of part 718 
of this chapter, the burley tobacco quota assigned to a farm between the 
various tracts of land which are separately owned by:
    (i) A person not using the land on the farm for which a burley 
tobacco marketing quota is established for agricultural purposes.
    (ii) A person who uses the land on the farm for which the burley 
tobacco marketing quota is established for agricultural purposes or for 
educational, instructional, or demonstrational purposes.
    (3) The farm marketing quota determined under this section for each 
farm or tract, as applicable, shall be the amount of quota subject to 
forfeiture under this section.
    (b) Person who does not use the land on the farm for which the 
marketing quota is established for agricultural purposes or does not use 
such marketing quota for educational, instructional, or demonstrational 
purposes. For purposes of this paragraph, the term ``person'' means a 
person as defined in part 718 of this chapter, including any 
governmental entity, public utility, educational institution, religious 
institution or joint venture (but not including any farming operation 
involving only spouses), but excluding any individual.
    (1) Required forfeiture. With respect to any person owning a farm 
for which a burley tobacco marketing quota is established, if the county 
FSA committee determines that such person does not use the land on such 
farm for agricultural purposes, or does not use such burley tobacco 
marketing quota for educational, instructional, or demonstrational 
purposes, such person shall forfeit such quota which is not sold on or 
before December 1 of the year after any year for which the county FSA 
committee makes such determination.
    (2) Agricultural purposes. Land on the farm for which a burley 
tobacco marketing quota is established shall be considered to be used 
for agricultural purposes if the county FSA committee determines that:
    (i) In the current year or either of the 2 preceding years such land 
is used for the production of:
    (A) Row crops of any type;
    (B) Livestock or poultry (including pasture and forage for 
livestock);
    (C) Trees (including orchards and vineyards); or
    (D) Hay or native grasses on open land; or
    (ii) In the current year such farm is owned by an educational 
institution

[[Page 131]]

which uses such burley tobacco marketing quota solely for educational, 
instructional, or demonstrational purposes.
    (3) Documentation. Within 30 days after a written request is made by 
the county FSA committee, or within such extended time as may be granted 
by the county FSA committee, a person must submit such documentation as 
may be requested to support a determination that the provisions of 
paragraph (b)(1) of this section have been met with respect to such 
person. Upon failure of such person to timely respond to this request, 
the county FSA committee shall determine that the person does not use 
the land on the farm for agricultural purposes, or does not use the 
burley tobacco marketing quota for educational, instructional, or 
demonstrational purposes.
    (c) Buyers of quota fail to share in the risk of production.
    (1) Forfeiture required. If any person buys burley tobacco quota and 
such person fails to share in the risk of producing the tobacco which 
was planted subject to such quota during any of the 3 crop years 
beginning with the crop year for which the purchase became effective, 
such person shall forfeit the purchased quota if it is not sold on or 
before December 31 of the year after the crop year in which such crop 
was planted. However, any purchaser or subsequent purchaser of quota 
required to be sold under the mandatory sale to prevent forfeiture, 
provisions of paragraph (b) of this section shall be required to share 
in the risk of production of such quota for five crop years beginning 
with the crop year for which the purchase became effective.
    (2) Failure to utilize purchased quota for the production of tobacco 
shall not result in the forfeiture of such quota, but the three year 
period and the five year period which is specified in paragraph (c)(1) 
of this section shall be extended 1 year for each year for which the 
quota is not utilized.
    (3) Reduction for failure to share in the risk of production. The 
effective quota shall be reduced, but not below zero pounds, for leasing 
and marketing quota purposes only, to the extent of the purchased quota 
for each crop after the crop year in which the buyer of such quota fails 
to share in the risk of producing a crop of tobacco which is subject to 
such quota.
    (4) Determining forfeited amount. If only part of the quota on a 
farm is attributable to a purchased quota, the amount of the farm 
marketing quota which must be forfeited under paragraph (c) of this 
section shall be determined by increasing or decreasing each respective 
purchase of farm marketing quota for the farm to reflect changes in 
national quota factors since the purchase occurred and subtracting the 
pounds of quota which have been sold to prevent forfeiture.
    (d) Hearing. Before any forfeiture of quota becomes effective under 
the provisions of this section, the county FSA committee shall:
    (1) Schedule a hearing for the affected person.
    (2) Notify the affected person of the hearing at least 10 days in 
advance of the hearing.
    (3) Make a determination, on the basis of the evidence presented at 
the hearing by or on behalf of the affected person and by or on behalf 
of the county FSA committee as to whether or not:
    (i) Any of the conditions for forfeiture specified in this section 
exist; and
    (ii) The affected person knowingly failed to take steps to prevent 
forfeiture of allotment and quota when such forfeiture conditions have 
been determined to exist with respect to the provisions of paragraph (b) 
of this section.
    (iii) The affected person knowingly failed to take steps to prevent 
forfeiture of burley tobacco quota.
    (4) Notify the affected persons of the county FSA committee 
determination and, if forfeiture of quota is to be required, afford such 
person an opportunity to appeal to a review committee in accordance with 
the provision of part 711 of this chapter.
    (e) Apportionment of data and determination of quota after 
forfeiture. (1) Apportionment of data. The pounds of farm marketing 
quota retained on the forfeiting farm after the forfeiture shall be 
divided by the farm marketing quota established for the farm before the 
forfeiture to determine a factor for

[[Page 132]]

apportioning farm data. The data to be retained on the forfeiting farm 
shall be determined by multiplying the factor by the following data for 
the forfeiting farm:
    (i) Overmarketings which have been subtracted when determining the 
effective farm marketing quota of the forfeiting farm.
    (ii) Pounds of quota transferred from the forfeiting farm by lease 
or by the owner in the current year.
    (iii) Pounds of quota reduced in the current year for a marketing 
quota violation in a prior year.
    (iv) Previous year's effective farm marketing quota.
    (v) Previous year's marketings.
    (vi) Previous year's farm marketing quota.
    (vii) Pounds of quota transferred to the farm by lease or by owner 
in the previous year.

The portion of the forfeiting farm data which shall be included in a 
forfeiture pool for the county shall be determined by subtracting the 
pounds of each respective item of farm data which are retained on the 
forfeiting farm from the pounds of the respective item of data which 
were established for the forfeiting farm before forfeiture.
    (2) Forfeiture pool. The data for the forfeiture pool shall be added 
to any previous data in the forfeiture pool.
    (3) Quota after forfeiture. After adjustment of data, the effective 
farm marketing quota shall be determined in accordance with the 
provisions of Sec. 723.206 of this part for the forfeiting farm.
    (f) Forfeiture pool. (1) Establishing forfeiture pool. A forfeiture 
pool shall be established in each county in which a forfeiture of quota 
occurs. The forfeiture pool shall be increased to include data for each 
forfeiture and shall be decreased for each reallocation in order to 
reflect any forfeited or reallocated amounts of:
    (i) Farm marketing quota for the current year.
    (ii) Quota reduced for marketing quota violations.
    (iii) Quota transferred from the forfeiting farm by lease or by the 
owner.
    (iv) Previous year's effective farm marketing quota.
    (v) Previous year's marketings.
    (2) Adjustment of data in forfeiture pool. At the beginning of the 
current year, the data in the forfeiture pool shall be adjusted by the 
factor used in determining quotas for old farms. Quota data in the 
forfeiture pool shall be decreased each time any burley tobacco quota is 
reallocated from the forfeiture pool. Such decrease in the quota data 
will be made in the same proportion as the pounds of quota which are 
reallocated from the pool are to the pounds of quota which were in the 
pool before the reallocation.
    (g) Reallocation of quota from forfeiture pool. (1) Application. In 
order to establish eligibility to receive quota from the forfeiture pool 
in the current year, an application must be made on a form approved by 
the Deputy Administrator. Such application must be filed:
    (i) Who may file. By an active producer.
    (ii) When to file. On or before April 30. The State FSA committee 
may establish an earlier date if notice of such earlier date is given in 
time for interested applicants to file an application by the earlier 
date.
    (iii) Where to file. At the county FSA office which serves the farm 
for which the application is filed.
    (2) Eligibility of applicant. In order for an applicant to be 
eligible for quota from the forfeiture pool, the county FSA committee 
must determine that:
    (i) The application was filed timely.
    (ii) The applicant is an active tobacco producer.
    (iii) During the current year or during the 4 years preceding the 
current year, the applicant has not sold or forfeited quota from any 
farm.
    (3) Time to reallocate. The county FSA committee shall:
    (i) Not reallocate any quota from the forfeiture pool until the time 
has passed for filing an application for forfeited quota for the current 
year.
    (ii) Reallocate any quota from the forfeiture pool only during the 
30-day period beginning on the day after the final day for filing an 
application for quota from the forfeiture pool.
    (4) Reallocation by county FSA committee. Reallocation of any burley 
tobacco quota shall be made by the county FSA committee. In making its 
determination of the amounts of quota to

[[Page 133]]

reallocate, the county FSA committee may consider the size of the 
current quotas on the farms of the eligible applicants, the length of 
time the applicants have been farming tobacco, the type of farming done 
by the applicants (i.e., livestock, grain, or other commodities), 
previous leasing history of the applicants, and such other factors which 
in the judgment of the county FSA committee should be considered. A 
burley tobacco quota may be reallocated to a farm which currently does 
not have a burley tobacco quota. A factor shall not be used to 
reallocate quota between all eligible applicants.
    (5) Basis for reallocation from forfeiture pool. Reallocation from 
the forfeiture pool shall be on the basis of pounds of farm marketing 
quota.
    (6) Amount of quota to be reallocated. The county FSA committee may 
reallocate all or part of the quota in the forfeiture pool. The minimum 
amount of quota which may be reallocated to an eligible applicant is the 
total amount of quota in the pool or 100 pounds, whichever is less. The 
maximum amount is 500 pounds. However, up to 1,500 pounds may be 
allocated with State FSA committee concurrence.
    (7) Data for receiving farm. All data for the forfeiture pool shall 
be apportioned to the receiving farm in the proportion that the 
reallocated farm marketing quota is to the total farm marketing quota in 
the forfeiture pool before the reallocation. The data determined for the 
receiving farm in accordance with the provisions of this paragraph shall 
be added to any previous data for the receiving farm.
    (8) Quota for receiving farm. After any adjustments which are made 
in accordance with the provisions of this section, the effective farm 
marketing quota shall be determined for the receiving farm.
    (h) Forfeiture of reallocated quota. Any burley tobacco quota which 
is reallocated in accordance with the provisions of this section shall 
be forfeited if the applicant to whom the quota is reallocated fails to 
share in the risk of producing a crop of tobacco which is subject to 
such quota during any of the 3 years beginning with the crop year during 
which the quota is reallocated. The amount of farm marketing quota which 
must be forfeited shall be determined in the same manner which is 
specified in paragraph (c)(4) of this section with respect to the 
forfeiture of purchased quota. Any forfeiture of quota shall occur on 
December 1 of the year in which the applicant fails to share in the risk 
of production of tobacco which is produced subject to such quota. While 
the failure to utilize a quota shall not subject the quota to 
forfeiture, the 3 year period which is specified in this paragraph shall 
be extended by 1 year for each year in which the quota is not utilized.
    (i) Successor-in-interest. A successor-in-interest shall be subject 
to the provisions of this section in the same manner and to the same 
extent as would be applicable to the person whose interest has been 
assumed by such successor-in-interest.
    (1) New owner of farm. The new owner of a farm on which a portion or 
all of the farm marketing quota for such farm was either purchased and/
or was reallocated from forfeited quota shall become the successor-in-
interest to the previous owner of the farm. However, if a farm is 
acquired by a new owner on or before June 30 of the current crop year 
and such owner would otherwise be required to sell or forfeit the farm 
marketing quota because in the preceding crop year the owner of such 
quota did not share in the risk of producing a crop of tobacco which was 
subject to such purchased or reallocated quota, the new owner may be 
considered the buyer of the quota instead of being considered as a 
successor-in-interest to the previous owner of the farm. However, the 
new owner must furnish to the county FSA committee on or before June 30 
of the current year a certification that such owner intends to become an 
active burley tobacco producer. Any purchased or reallocated quota, 
which is acquired by a new owner who is not considered to be the buyer 
of the quota in accordance with the provisions of this paragraph, shall 
be subject to the same terms and conditions with respect to forfeiture 
which would be applicable if the new owner actually had purchased the 
quota at the time the farm was acquired.

[[Page 134]]

    (2) Buyer no longer shares in risk of production. The owner of a 
farm shall become the successor-in-interest to the buyer of burley 
tobacco quota which was transferred to a farm but which was not owned by 
such buyer if the buyer ceases to share in the risk of production of 
burley tobacco produced on the farm.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21442, May 9, 1991]



Sec. 723.220  Forfeiture of flue-cured tobacco acreage allotment and marketing quota.

    (a) Determination of allotment and quota subject to forfeiture. (1) 
For purposes of paragraphs (b) and (c) of this section, the phrase 
``owns a farm'' means ownership of:
    (i) A farm as constituted under part 718 of the chapter if the 
entire farm shares a common ownership; or
    (ii) All of the land within a common ownership if the parent farm 
consists of separate ownership tracts of land.
    (2) For purposes of paragraphs (b) and (c) of this section, the 
county FSA committee shall, in accordance with the provisions of part 
718 of this chapter, apportion the flue-cured tobacco acreage allotment 
and marketing quota assigned to a farm between:
    (i) All land which is owned by any person which is not significantly 
involved in the management or use of land for agricultural purposes, as 
described in paragraph (b) of this section; and
    (ii) Each common ownership tract of land in the farm other than that 
described in paragraph (a)(2)(i) of this section.
    (3) With respect to the provisions of paragraph (c) of this section, 
an acreage allotment and marketing quota shall be determined for a tract 
in accordance with paragraph (a)(2)(ii) of this section only to the 
extent that records are available to show the contribution which the 
tract made to the flue-cured tobacco acreage allotment of the parent 
farm.
    (4) The farm acreage allotment and farm marketing quota determined 
under this section for each farm or tract, as applicable, will be the 
amount of allotment and quota subject to forfeiture under this section.
    (b) Persons not significantly involved in management or use of land 
for agricultural purposes. For purposes of this paragraph, the term 
``person'' means a person as defined in part 718 of this chapter, 
including any: Governmental entity, public utility, educational 
institution, or religious institution, but not including any: 
Individual, partnership, joint venture, family farm corporation, trust, 
estate, or similar fiduciary account with respect to which 50 percent or 
more of the beneficial interest is in one or more individuals; or 
educational institution that uses a flue-cured tobacco acreage allotment 
and marketing quota for instruction or demonstrational purposes.
    (1) Required forfeiture. If at any time the county FSA committee 
determines that any person which owns farm for which a flue-cured 
tobacco acreage allotment and marketing quota are established is not 
significantly involved in the management or use of land for agricultural 
purposes, such person shall forfeit such allotment and quota which is 
not sold on or before December 1 of the year for which the county FSA 
committee makes such a determination.
    (2) Owner ceases to be significantly involved. A person shall be 
considered to be significantly involved in the management or use of land 
for agricultural purposes if the county FSA committee determines that:
    (i) For the 3 preceding years, more than 20 percent of the gross 
income of the person has been derived from the management or use of land 
for the production of crops which are planted and harvested annually, 
and/or livestock, including pasture and forage for livestock; and
    (ii) Any other person or all other persons which in combination own 
more than 50 percent of the assets of the owner of the flue-cured 
tobacco allotment and marketing quota also meet the criteria specified 
in paragraph (b)(2)(i) of this section.
    (3) Documentation. Within 30 days after a written request is made by 
the county FSA committee, or within such extended time as may be granted 
by the county FSA committee, a person must submit such documentation as

[[Page 135]]

may be requested to support a determination that the provisions of 
paragraph (b)(2) of this section have been met with respect to such 
person. Upon failure of such person to timely respond to such request, 
the county FSA committee shall determine that the person is not 
significantly involved in the management or use of land for agricultural 
purposes.
    (c)-(d) [Reserved]
    (e) Buyers of allotment fail to share in the risk of production.
    (1) Forfeiture required. If any person buys flue-cured acreage 
allotment and quota and such person fails to share in the risk of 
producing the tobacco which was planted subject to such quota during any 
of the three crop years beginning with the crop year for which the 
purchase became effective such person shall forfeit the purchased quota 
if it is not sold on or before December 31 of the year after the crop 
year in which such crop was planted.
    (2) Failure to utilize purchased allotment and quota. Failure to 
utilize purchased allotment and quota for the production of tobacco 
shall not result in the forfeiture of such quota, but the 3 year period 
which is specified in paragraph (e)(1) of this section shall be extended 
1 year for each year for which the quota is not utilized.
    (3) Reduction for failure to share in risk of production. The 
effective allotment and quota shall be reduced, but not below zero acres 
or pounds, for planting, leasing, and marketing quota purposes only, to 
the extent of purchased allotment and quota for each crop year after the 
crop year in which the buyer of such allotment and quota fails to share 
in the risk of producing a crop of tobacco planted under such allotment 
and quota.
    (4) Determining forfeited amount. If only part of the allotment and 
quota on a farm resulted from purchased allotment or quota, the amount 
of farm marketing quota which must be forfeited under paragraph (e) of 
this section shall be determined by:
    (i) Increasing or decreasing each respective purchase of farm 
marketing quota for the farm to reflect any annual changes in national 
acreage and national yield factors subsequent to the year of purchase.
    (ii) Adding the amounts determined in paragraph (e)(4)(i) of this 
section, multiplying the result by the farm yield for the farm, and 
subtracting the pounds of quota which have been sold to prevent 
forfeiture.
    (f) Tobacco not planted nor considered planted. Notwithstanding any 
other provision of this part, any person who owns a farm for which a 
flue-cured tobacco acreage allotment and marketing quota are 
established, shall forfeit such allotment and quota after February 15 of 
any year immediately following the 1st year of the 3-year period 
immediately preceding the year for which the county FSA committee 
determines that flue-cured tobacco was not planted nor considered 
planted on such farm during at least 2 years of such 3-year period.
    (g) Hearing. Before any forfeiture of allotment and quota becomes 
effective under the provisions of this section, the county FSA committee 
shall:
    (1) Schedule a hearing for the affected person.
    (2) Notify the affected person of the hearing at least 10 days in 
advance of the hearing.
    (3) Make a determination, on the basis of evidence presented at the 
hearing by or on behalf of the affected person and by or on behalf of 
the county FSA committee as to whether:
    (i) Any of the conditions of requiring forfeiture as specified in 
this section exist; and
    (ii) The affected person knowingly failed to take steps to prevent 
forfeiture of a flue-cured tobacco acreage allotment and marketing 
quota.
    (4) Notify the affected person of the county FSA committee 
determination and, if forfeiture of allotment and quota is to be 
required, afford such person an opportunity to appeal to a review 
committee under the provision of part 711 of this chapter.
    (5) Wait until the period has passed for the affected person to 
appeal the county FSA committee or review committee determination that 
allotment and quota must be forfeited under the provisions of this 
section.
    (h) Apportionment of data and determination of allotment and quota 
after forfeiture. (1) Apportionment of data. The

[[Page 136]]

pounds of farm marketing quota retained on the forfeiting farm after the 
forfeiture shall be divided by the farm marketing quota established for 
the forfeiting farm before the forfeiture to determine a factor for 
apportioning farm data for the current year and for the base period. The 
data to be retained on the forfeiting farm shall be determined by 
multiplying the factor by the following data of the forfeiting farm, 
the:
    (i) Planted and considered planted acres for the base period.
    (ii) History acres for the base period.
    (iii) Farm acreage allotment for the base period.
    (iv) Overmarketings which have not been subtracted when determining 
the effective farm marketing quota of the forfeiting farm.
    (v) Acres of allotment reduced in the current year for a marketing 
quota violation in a prior year.
    (vi) Previous year's effective farm marketing quota.
    (vii) Previous year's marketings.
    (viii) Previous year's farm marketing quota.
    (ix) Pounds of quota transferred from the forfeiting farm by lease 
in the current year.
    (x) Pounds of quota transferred to the farm by lease in the previous 
year.

The portion of the forfeiting farm data which shall be included in a 
forfeiture pool for the county shall be determined by subtracting the 
acres or pounds which are retained on the forfeiting farm from the acres 
or pounds established for the forfeiting farm before forfeiture.
    (2) Forfeiture pool. The data for the forfeiture pool shall be added 
to any previous data in the forfeiture pool.
    (3) Allotment and quota after forfeiture. After adjustment of data, 
the effective farm acreage allotment and the effective farm marketing 
quota shall be determined in accordance with Sec. 723.205 and 723.206 
of this part, respectively, for the forfeiting farm.
    (i) Forfeiture pool. (1) Establishing forfeiture pool. A forfeiture 
pool shall be established in each county in which a forfeiture of 
allotment and quota occurs. The forfeiture pool shall be increased to 
include data for each forfeiture and shall be decreased for each 
reallocation in order to reflect any forfeited or reallocated amounts of 
the:
    (i) Farm acreage allotment for the current year and for the base 
period.
    (ii) Farm marketing quota for the current year and for the base 
period.
    (iii) Acres reduced for violation.
    (iv) Planted and considered planted acres for the base period.
    (v) History acres for the base period.
    (vi) Previous year's effective farm marketing quota.
    (vii) Previous year's marketing.
    (viii) Quota transferred from the forfeiting farm by lease.
    (2) Yield for forfeiture pool. The farm yield for the forfeiture 
pool shall be determined by dividing the farm marketing quota in the 
forfeiture pool by the farm acreage allotment in the forfeiture pool. 
The preliminary farm yield for the forfeiture pool shall be determined 
by dividing the farm yield by the national yield factor.
    (3) Adjustment of data in forfeiture pool. At the beginning of the 
current year, the data in the forfeiture pool shall be adjusted by the 
factors used in determining yields, allotments, and quotas for old 
farms. Acreage and quota data in the forfeiture pool shall be decreased 
each time quota is reallocated from the forfeiture pool, such decrease 
to be made in the same proportion as the pounds of quota which are 
reallocated from the pool are to the pounds of quota which were in the 
pool before the reallocation.
    (j) Reallocation of allotment and quota from forfeiture pool. (1) 
Application. In order to establish eligibility to receive allotment and 
quota from the forfeiture pool in the current year, an application must 
be made on a form approved by the Deputy Administrator. Such application 
must be filed:
    (i) Who may file. By an active producer.
    (ii) When to file. On or before March 31. The State FSA committee 
may establish an earlier date if notice of such earlier date is given in 
time for interested applicants to file an application by the earlier 
date.
    (iii) Where to file. At the county FSA office which serves the farm 
for which the application is filed.

[[Page 137]]

    (2) Eligibility of applicant. In order for an applicant to be 
eligible for allotment and quota from the forfeiture pool, the county 
FSA committee must determine that:
    (i) The application was filed timely.
    (ii) The applicant is an active producer.
    (iii) During the current year or during the 4 years preceding the 
current year, the applicant has not:
    (A) Sold or forfeited allotment and quota from any farm.
    (B) Used the designation method of division to retain less allotment 
than the farm would have retained by another method of division.
    (3) Time to reallocate. The county FSA committee shall:
    (i) Not reallocate any allotment and quota from the forfeiture pool 
until the time has passed for filing an application for forfeited 
allotment and quota for the current year.
    (ii) Reallocate any allotment and quota from the forfeiture pool 
only during the 30-day period beginning on the day after the final day 
for filing an application for allotment and quota from the forfeiture 
pool.
    (4) Reallocation by county FSA committee. Reallocation of any 
allotment and quota shall be made by the county FSA committee. In making 
its determination of the amounts to reallocate, the county FSA committee 
may consider the size of the current allotments on the farms of the 
eligible applicants, the length of time the applicants have been farming 
tobacco, the type of farming done by the applicants (i.e., livestock, 
grain, or other commodities), and other factors which in the judgment of 
the county FSA committee should be considered. Allotment and quota may 
be reallocated to a farm which currently does not have a flue-cured 
tobacco allotment. A factor shall not be used to reallocate allotment 
and quota between all eligible applicants.
    (5) Basis for reallocation from forfeiture pool. Reallocation from 
the forfeiture pool shall be on the basis of pounds of farm marketing 
quota.
    (6) Amount of quota to reallocate. The county FSA committee may 
reallocate all or part of the quota in the forfeiture pool.
    (i) Minimum. The minimum amount of quota which may be reallocated to 
an eligible applicant is the total amount of quota in the pool or 200 
pounds, whichever is less.
    (ii) Maximum. The maximum amount of quota which may be reallocated 
to an eligible applicant is 1,000 pounds. However, with State FSA 
committee approval, up to 2,500 pounds may be allocated.
    (7) Data for receiving farm. All data for the forfeiture pool shall 
be apportioned to the receiving farm in the proportion that the 
reallocated farm marketing quota is to the total farm marketing quota in 
the forfeiture pool before the reallocation. The pounds of farm 
marketing quota reallocated to a farm shall be divided by the farm yield 
for the farm to determine the amount of reallocated farm acreage 
allotment. The data determined for the receiving farm in accordance with 
the provisions of this paragraph shall be added to any previous data for 
the receiving farm.
    (8) Allotment and quota for receiving farm. After any adjustments 
which are made in accordance with the provisions of this section, the 
farm acreage allotment, the effective farm acreage allotment, and the 
effective farm marketing quota shall be determined for the receiving 
farm according to Sec. Sec. 723.205 and 723.206, respectively, of this 
part.
    (k) Forfeiture of reallocated allotment and quota. Allotment and 
quota which is reallocated in accordance with the provisions of this 
section shall be forfeited if the applicant to whom the quota is 
reallocated fails to share in the risk of producing a crop of tobacco 
which is subject to such quota during any of the 3 years beginning with 
the crop year during which the quota is reallocated. The amount of farm 
marketing quota which must be forfeited shall be determined in the same 
manner which is specified in paragraph (e)(4) of this section with 
respect to the forfeiture of purchased quota. Any forfeiture of quota 
shall occur on December 1 of the year in which the applicant fails to 
share in the risk of production of tobacco which is produced subject to 
such quota. While the failure to utilize a quota shall not subject the 
quota to forfeiture, the 3 year period which is

[[Page 138]]

specified in this paragraph shall be extended by 1 year for each year in 
which the quota is not utilized.
    (l) Successor-in-interest. The successor-in-interest shall be 
subject to the provisions of this section in the same manner and to the 
same extent as would be applicable to the person whose interest was 
assumed.
    (1) New owner. The new owner of a farm on which a portion or all of 
the farm acreage allotment and farm marketing quota for such farm was 
either purchased and/or was reallocated from forfeited allotment and 
quota shall become the successor-in-interest to the previous owner of 
the farm. However, if a farm is acquired by a new owner on or before 
June 15 of the current crop year and such owner would otherwise be 
required to sell or forfeit the farm acreage allotment and farm 
marketing quota because in the preceding crop year the owner of such 
allotment and quota did not share in the risk of producing a crop of 
tobacco which was subject to such purchased or reallocated allotment and 
quota, the new owner may be considered the buyer of the allotment and 
quota instead of being considered as a successor-in-interest to the 
previous owner of the farm. However, the new owner must furnish to the 
county FSA committee on or before June 15 of the current year a 
certification that such owner intends to become an active flue-cured 
tobacco producer. Any purchased or reallocated allotment and quota, 
which is acquired by a new owner who is considered to be the buyer of 
the allotment and quota in accordance with the provisions of this 
paragraph, shall be subject to the same terms and conditions with 
respect to forfeiture which would be applicable if the new owner 
actually had purchased the allotment and quota at the time the farm was 
acquired.
    (2) Buyer no longer shares in risk of production. The owner of a 
farm shall become the successor-in-interest to the buyer of allotment 
and quota which was transferred to a farm but which was not owned by 
such buyer if the buyer ceases to share in the risk of the production of 
tobacco produced on the farm.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21442, May 9, 1991; 65 
FR 7953, Feb. 16, 2000]



Sec. 723.221  Eminent domain acquisitions.

    (a) This section provides a uniform method for reallocating tobacco 
with respect to land involved in eminent domain acquisitions. An eminent 
domain acquisition is a taking of title to land, an easement to impound 
water on the land (impoundment), or an easement to flood the land 
(flowage), under the power of a Federal, State, or other agency. 
Acquisition may be by court condemnation of the land or by negotiation 
between the agency and the owner. This section does not apply to 
acquisition of land by an agency by a method other than eminent domain 
acquisition. All land acquired, including surrounding land acquired as a 
package acquisition, shall be considered an eminent domain acquisition 
if the agency expended funds using its power of eminent domain.
    (b) In this section, owner means a person having title to the land 
for a period of at least 12 months immediately before the date of 
transfer of title or grant of the impoundment or flowage easement under 
the eminent domain acquisition. If a person has owned the land for less 
than such 12-month period, they may still be considered the owner if the 
State committee determines they acquired the land for farming and not 
for obtaining status as an owner under this section. However, no person 
shall be considered the owner if he acquired the land subject to a 
pending eminent domain acquisition contract to an agency or an option by 
an agency or subject to pending condemnation proceedings. When the 
current titleholders are not the owner according to this section, the 
State committee shall determine who previously had title to the land and 
who is the owner according to this paragraph.
    (c) Tobacco may be pooled for the benefit of an owner whose farm is 
acquired by eminent domain. Pooling shall be for a 3-year period from 
the date of displacement or during a period. The displaced owner may 
request transfer of allotments and quotas from the pool to other farms 
owned by such person.
    (d) The owner shall be considered displaced from a farm by eminent 
domain acquisition on the date:

[[Page 139]]

    (1) The owner loses possession of the land;
    (2) The owner is voluntarily displaced if a binding contract for 
acquisition has been executed;
    (3) The owner, in the case of a flowage easement, determines it is 
no longer practical to conduct farming operations on the land; or
    (4) The owner loses possession of the land as lessee under a lease 
from the agency that provided uninterrupted possession to the owner from 
the date of acquisition to the end of the lease.
    (e) The owner shall notify the county committee in writing of the 
eminent domain acquisition and furnish the date of displacement within 
30 days so that tobacco may be pooled in accordance with this section. 
Failure to so notify the county committee shall result in the loss of 
the ability of the owner to extend the 3-year period provided in 
paragraph (c) of this section.
    (f) If the county committee is notified or otherwise determines that 
an owner has been displaced from the farm, the county committee shall 
establish a pool for the tobacco eligible under this section for a 3-
year period beginning on the date of displacement. Pooled tobacco shall 
be considered fully planted and, for each year in the pool, shall be 
established in accordance with applicable regulations.
    (g) There shall be no pooling of an tobacco if:
    (1) The county committee determines that an agency has eminent 
domain power to acquire a farm for the continued production of an 
tobacco, and
    (i) The agency acquires a farm only for such purpose; and
    (ii) The agency files a written notice with the county committee 
designating the tobacco to be produced on the farm.
    (2) An agency acquires and retains the land in an agricultural or 
related activity. The tobacco for such land will be in accordance with 
applicable regulations.
    (3) A displaced owner voluntarily waives the right to have all the 
tobacco or any part pooled and requests that the tobacco be retained on 
the agency acquired land;
    (4) Agency acquired cropland will not be farmed and represents less 
than 15 percent of the total cropland on the farm. The tobacco shall be 
retained on the portion of the farm not acquired by the agency.
    (5) An agency acquires land that will not be farmed and the cropland 
it contains is less than 15 percent of the total on the farm, the entire 
tobacco for the acquired land shall be retained on the land not acquired 
by the agency. The owner must file a written request with the county 
committee for such retention. The tobacco to be retained on the farm 
cannot exceed the land devoted to an agriculture related activity. 
Tobacco that is not retained shall be pooled; or
    (6) If, prior to pooling, an owner requests transfer of the tobacco 
to other farms they own in the same county, the county committee may 
approve a transfer without establishment of a pool, subject to the 
requirements of paragraph (j) of this section. This paragraph shall 
govern the release and reapportionment of pooled tobacco notwithstanding 
other provisions of applicable commodity regulations.
    (h) Pooled tobacco may be released on an annual basis by the owner 
to a county committee during any year in which tobacco is pooled and not 
otherwise transferred from the pool. The county committee may 
reapportion the released tobacco to other farms in the same county that 
have tobacco for the same commodity. Pooled tobacco shall not be 
released on a permanent basis or surrendered after release to the State 
committee for reapportionment in other counties. Reapportionment shall 
be on the basis of past acreage of the commodity, land, labor, and 
equipment available for the production of the commodity, crop rotation 
practices, and other physical factors affecting the production of the 
commodity. Pooled tobacco that is released shall be considered to have 
been fully planted in the pool and not on the farm to which such tobacco 
is reapportioned.
    (i) Pooled tobacco that may be transferred on a permanent or 
temporary basis by sale, lease, or by owner designation may be 
transferred permanently from the pool by the owner or temporarily for 
the duration of the pooled tobacco, subject to the terms and conditions 
for such transfers in the

[[Page 140]]

applicable commodity regulations. The transfer of tobacco acreage 
allotment or marketing quota shall be approved acre for acre.
    (j)(1) Displaced owners may request a transfer of all or part of the 
pooled tobacco to any other farm in the United States that is owned by 
the displaced owner, but only if there are farms in the receiving county 
with tobacco, for the particular commodity or, if there are no such 
farms, the county committee determines that farms in the receiving 
county are suited for the production of the commodity. For purposes of 
this paragraph:
    (i) Receiving farm means the farm to which transfer from the pool is 
to be made;
    (ii) Receiving State and county committee mean those committees for 
the State and county in which the receiving farm is located; and
    (iii) Transferring State and county committees mean those committees 
for the State and county in which the agency acquired farm is located.
    (2) The displaced owner shall file with the receiving county 
committee written application for transfer of tobacco from the pool 
within 3 years after the date of displacement. The application shall 
contain a certification from the owner that no agreement has been made 
with any person for the purpose of obtaining tobacco from the pool for a 
person other than for the displaced owner. The owner shall attach to the 
application all pertinent documents pertaining to the current ownership 
or purchase of land and any leasing arrangements, such as the deed of 
trust or mortgage, a warranty deed, a note, sales agreement, and lease.
    (3) The receiving county committee shall consider each application 
and determine whether the transfer from the pool shall be approved. 
Before an application is acted upon by the receiving county committee, 
the owner shall personally appear before the receiving county committee 
after reasonable notice, bring any additional pertinent documents as may 
be requested for examination by the receiving county committee, and 
answer all pertinent questions bearing on the proposed transfer. Such 
personal appearance requirement may be waived if the receiving county 
committee determines from facts presented to it on behalf of the owner 
that such personal appearance would unduly inconvenience the owner on 
account of illness or other good cause and such personal appearance 
would serve no useful purpose. Any action by the receiving county 
committee shall be subject to the approval required under paragraph 
(j)(5) of this section.
    (4) The transfer from the pool will be approved by the receiving 
county committee only if the county committee determines that the owner 
has made a normal acquisition of the receiving farm for the purpose of 
bona fide ownership to reestablish farming operations. The elements of 
such an acquisition shall include, but are not limited to, the 
following:
    (i) Appropriate legal documents must establish title to the 
receiving farm;
    (ii) If the displaced owner was the operator of the acquired farm at 
the date of displacement, such owner must personally operate and be the 
operator of the receiving farm for the first year that the tobacco is 
transferred;
    (iii) If the displaced owner was not the operator of the acquired 
farm at the date of displacement and was not a producer on that farm 
because the leasing or rental agreement provided for cash, fixed rent, 
or standing rent payment, such owner shall not be required to operate 
personally and be the operator of the receiving farm, but at least 75 
percent of the allotments for the receiving farm must be planted on the 
receiving farm during the first year of the transfer. With respect to a 
commodity for which a quota is applicable but for which there is no 
acreage allotment, an acreage that is equal to the result of dividing 
the quota transferred to the receiving farms by the receiving farm's 
yield, multiplied by 75 percent must be planted during the first year of 
the transfer;
    (iv) If the displaced owner was not the operator of the acquired 
farm at the date of displacement but was a producer on that farm at the 
date of displacement as the result of having received a share of the 
crops produced on the acquired farm, such displaced owner shall not be 
required to be the operator of the receiving farm but

[[Page 141]]

must be a producer on the receiving farm during the first year that 
tobacco is transferred;
    (v) The agreement between the displaced owner and the seller of the 
receiving farm must not contain a requirement that the receiving farm be 
leased to the seller or a person designated by or subject to the control 
of the seller. The seller or a person designated by or subject to the 
control of the seller may not lease the receiving farm for the first 
year the tobacco is transferred; and
    (vi) The agreement under which the receiving farm was purchased or 
leased must be customary in the community where the receiving farm is 
located with respect to purchase price and timing and amount of purchase 
or rental payments.
    (5) The approval by the receiving county committee of a transfer 
from the pool under this paragraph shall be effective upon concurrence 
by the State committee of the receiving State. The receiving State 
committee may authorize a transfer from the pool in any case where the 
owner presents evidence satisfactory to the receiving State committee 
that:
    (i) The eligibility requirements of paragraphs (j)(4)(ii) through 
(j)(4)(iv) of this section cannot be met without substantial hardship 
because of illness, old age, multiple farm ownership, or lack of a 
dwelling on the farm to which an allotment or quota is to be 
transferred; or
    (ii) The owner has made a normal acquisition of the receiving farm 
for the purpose of bona fide ownership to reestablish farming operations 
for the displaced owner, even if the farm is leased to the seller of the 
farm for the first year for which the tobacco is transferred.
    (6) Upon approval under this paragraph, the receiving county 
committee shall issue a notice of tobacco under the applicable commodity 
regulations, taking into consideration the land, labor, and equipment 
available for the production of the commodity, crop rotation practices, 
and the soil and other physical factors. In determining the tobacco 
available for transfer, the receiving county committee shall consider 
the receiving tract as a separate ownership. The acreage transferred 
from the pool shall not exceed the tobacco most recently established for 
the acquired farm placed in the pool. When all or a part of the tobacco 
placed in the pool is transferred and used to establish or increase the 
tobacco for other farms owned or purchased by the owner, all of the 
proportionate part of the past acreage history for the acquired farm 
shall be transferred to and considered for purposes of future tobacco to 
have been planted on the receiving farm for which tobacco, are 
established or increased under this section. If only a part of the 
available tobacco is transferred from the pool, the remaining part of 
the tobacco, shall remain in the pool for transfer to other farms of the 
owner until all such tobacco has been transferred or until the period of 
eligibility for establishing or increasing tobacco under this section 
has expired.
    (7) If any tobacco is transferred under this section and it is later 
determined by the receiving county or State committee, or by the Deputy 
Administrator, that the transfer was obtained by misrepresentation, or 
that the conditions of paragraph (j)(4) of this section are not met, the 
tobacco for the receiving farm shall be reduced for each year the 
transfer purportedly was in effect by the amount attributable to the 
tobacco transferred from the pool. If the time for the transfer of the 
tobacco from the pool has not expired, the tobacco initially transferred 
from the pool shall be returned to the pool after the period of time has 
expired in which the displaced owner could request administrative 
review. Cancellation of the transfer of tobacco by the receiving county 
committee requires approval by the receiving State committee. The 
receiving county committee shall issue a notice of marketing quota and 
penalty in accordance with applicable commodity regulations.
    (8) If the displaced owner requests transfer of pooled tobacco, 
within the prescribed period, but the request for transfer is filed 
during a year or a part of the pooled tobacco was released to the 
transferring county committee pursuant to paragraph (h), the request 
will be processed in the usual manner

[[Page 142]]

but the amount released shall not be effective until the succeeding 
year. When a request for transfer of pooled tobacco involves a transfer 
from one State to another, the receiving State committee shall ask the 
transferring State committee whether any of the tobacco for which 
transfer is requested has been released to the transferring county 
committee for the current year.
    (k)(1) When the displaced owner leases part but not all of the 
agency acquired land, such part shall be constituted as a separate farm 
on the date of the displacement of the owner from the land not so 
leased.
    (2) If a parent farm consists of separate ownership tracts, each 
such tract being acquired in whole or in part shall be considered as a 
separate farm for purposes of paragraphs (g)(3) and (g)(4) of this 
section.
    (3) If a portion of a farm is acquired by an agency and the owner is 
displaced therefrom, the acquired portion shall be constituted as a 
separate farm on the date of displacement unless the tobacco is retained 
on the portion not acquired as provided in paragraphs (g)(3) and (g)(4) 
of this section, in which case the farm shall not be reconstituted but 
the farmland and cropland data shall be corrected on all appropriate 
records for the parent farm.
    (l)(1) The displaced owner may request from the county committee a 
written designation of beneficiary of the rights in the tobacco 
attributable to the acquired land in the event of the death of the 
displaced owner, and may revise such designation from time to time. The 
beneficiary of a deceased owner may continue a lease or negotiate a 
lease with the agency, transfer rights with respect to farms owned by 
the beneficiary, and release, sale, lease, and owner transfer rights 
under this section.
    (2) If the displaced owner does not file a designation of 
beneficiary under paragraph (l)(1) of this section and the displaced 
owner dies before displacement or after pooling occurs, the following 
persons shall be considered the beneficiary with applicable rights:
    (i) The surviving joint owner of the farm where two persons own the 
farm as joint tenants with right of survivorship; and
    (ii) The persons who succeed to the deceased displaced owner's 
interest under a will or by intestate succession. However, in the case 
of intestate succession, the person shall be limited to the surviving 
spouse, parent, sibling or child of the deceased displaced owner. In the 
settlement of the estate of the deceased displaced owner, the heirs may 
file a written agreement with the county committee for the division of 
the deceased displaced owner's rights under this section.
    (m)(1) No transfer from the pool under paragraphs (h), (i), or (j) 
of this section shall be approved if there remains any unpaid marketing 
quota penalty due with respect to the marketing of the commodity from 
the acquired farm by the displaced owner, or if any of the commodity 
produced on the agency acquired farm has not been accounted for as 
required under applicable regulations.
    (2) If tobacco for an acquired farm next established after the date 
of displacement would have been reduced because of false or improper 
identification of the commodity produced on or marketed from the farm, 
or as the result of a false acreage report, the tobacco shall be reduced 
in the pool accordance to applicable regulations.

[68 FR 16181, Apr. 3, 2003]



Sec. 723.222  Exempting Federal prison farms and Federal wildlife refuges.

    A marketing penalty shall not be assessed with respect to any 
commodity that is produced on a Federal prison farm or Federal wildlife 
refuge. This exception does not apply to penalties incurred by an 
individual who has a separate interest in a crop that is subject to 
marketing quotas and was produced on a Federal prison farm or Federal 
wildlife refuge.

[68 FR 16181, Apr. 3, 2003]



Sec. 723.223  Transfer of allotments and quotas--State public lands.

    (a) Transfers of allotments and quotas between farms in the same 
county may be permitted where both farms are lands owned by the State.
    (b) An application requesting the transfer of one or more of the 
allotments and quotas on a farm entirely

[[Page 143]]

comprised of lands owned by a State shall be filed with the county 
committee by the State. The application shall identify the farms as 
being within the same county, show that each farm is entirely comprised 
of lands owned by the State, and list the allotments and quotas 
requested to be transferred. Additional information about the farm 
operations, including leases, shall also be included in the application.
    (c) The State committee shall establish the closing date for filing 
applications under paragraph (b) of this section, for each year, which 
shall be no later than the general planting date in the county for the 
commodity involved in the transfer.
    (d)(1) Each transfer of an allotment and quota shall be adjusted for 
differences in farm productivity if the yield projected for the year the 
transfer is to take effect for the farm to which transfer is made 
exceeds by more than ten percent the yield projected for the year the 
transfer is to take effect for the farm from which transfer is made. The 
county committee shall determine the amount of the allotment and quota 
to be transferred where a productivity adjustment is required to be made 
by dividing:
    (i) The product of the yield for the farm from which the transfer is 
made and the acreage to be transferred from such farm, by
    (ii) The yield for the farm to which the transfer is made.
    (2) Acreage for the farm receiving the allotment or quota shall be 
adjusted by the same percentage as the allotment or quota being 
transferred is adjusted. The allotment and quota and related acreage 
transferred from the farm from which the transfer is made shall be the 
full amount, but the amount of all allotment or quota and related 
acreage for the farm to which the transfer is made shall be the adjusted 
amount.
    (e) The amount of allotment and quota on a farm after a transfer 
under this section is made shall not exceed the average amount of 
allotment or quota of at least three farms with acreage of cropland 
similar to the farm receiving the transfer in the community having the 
applicable allotment acreage and quota on these farms.
    (f) Each transfer of any allotment and quota shall be require that 
acreage equal to the allotment and quota transferred shall be devoted to 
and maintained in permanent vegetative cover on the farm from which the 
transfer is made before any productivity adjustment. The acreage to be 
devoted to and maintained in permanent vegetative cover with respect to 
quota crops shall be determined by dividing the quota transferred by the 
yield of the farm from which the quota is transferred.
    (g) Transfer of an allotment and quota under this section shall only 
be approved if:
    (1) The county committee determines that a timely filed application 
has been received and that the provisions of this section have been met; 
and
    (2) A representative of the State committee also determines that the 
provisions of this section have been met. If a transfer is approved, the 
county committee shall issue revised notices of the allotment or quota 
for each farm affected. If a county committee determines that 
requirements for a transfer were not met, a report shall be provided to 
the State committee. If the State committee agrees that requirements 
were not met, the transfer will be canceled, and the allotment and quota 
shall be transferred back to the original farm. Where a cancellation and 
transfer back is required, the county committee shall issue revised 
notices of the allotment or quota showing the reasons for the 
cancellation.

[68 FR 16181, Apr. 3, 2003]



 Subpart C_Tobacco Subject to Quota, Exemptions From Quotas, Marketing 
                  Cards, and General Penalty Provisions



Sec. 723.301  Identification of tobacco subject to quota.

    (a) Except as provided in paragraphs (b) and (c) of this section, 
any tobacco which is determined by a representative of the State FSA 
committee or county FSA committee to have the same appearance and 
characteristics as a kind of tobacco for which marketing quotas are in 
effect shall be deemed to

[[Page 144]]

be a quota kind of tobacco. Such tobacco shall continue to be deemed a 
quota kind of tobacco unless it has been certified by the Agricultural 
Marketing Service, U.S. Department of Agriculture, under the Tobacco 
Inspection Act (7 U.S.C. 511) and implementing regulations (7 CFR part 
30), prior to removal of the tobacco from the State where it was 
produced, as a kind of tobacco not subject to marketing quotas.
    (b) Any kind of tobacco for which marketing quotas are not in effect 
that is produced in a State where marketing quotas are in effect for any 
kind of tobacco shall be subject to the quota for the kind of tobacco 
for which marketing quotas are in effect in that State. If marketing 
quotas are in effect in a State for more than one kind of tobacco, 
nonquota tobacco produced in the State shall be subject to the quota for 
the kind of quota tobacco produced in the State having the highest price 
support under the Agricultural Act of 1949.
    (c) Paragraph (b) of this section shall not apply to:
    (1) Maryland (type 32) tobacco when it is nonquota tobacco and 
produced on a farm for which a marketing quota for Maryland (type 32) 
tobacco was established when marketing quotas for such kind of tobacco 
were last in effect (1965);
    (2) Cigar-filler (type 41) tobacco when it is nonquota tobacco and 
produced in Pennsylvania;
    (3) Cigar-wrapper (types 61 and 62) tobacco when it is nonquota 
tobacco and produced in Connecticut, Massachusetts, Georgia or Florida;
    (4) Tobacco produced in a quota State that is represented to be 
nonquota tobacco and that is readily and distinguishably different from 
all kinds of quota tobacco, as determined by the Agricultural Marketing 
Service, U.S. Department of Agriculture, through application of the 
standards issued by the Secretary for the inspection and identification 
of tobacco. Such inspection and identification shall be made prior to 
removal of the tobacco from the State where it was produced; and
    (5) Tobacco which is nonquota tobacco and produced in a quota area 
in which the total of the acreage allotments for quota tobacco 
established for farms is less than twenty acres.



Sec. 723.302  Tobacco for experimental purposes.

    For farms on which tobacco is being grown for experimental purposes 
by or under the direction of a publicly owned agricultural experiment 
station, such tobacco shall be exempt from any penalties otherwise 
required by this part if, before the beginning of the harvesting of 
tobacco from any farm on which experimental tobacco is being grown, the 
director of such publicly owned agricultural experimental station 
furnishes a report, to the State Executive Director for the State in 
which the farm is located, that includes the following information:
    (a) Name and address of the publicly owned agricultural experiment 
station.
    (b) Name of the owner, and name of the operator if different from 
the owner, and the farm number of each farm on which tobacco is grown 
for experimental purposes only.
    (c) The acreage or poundage of tobacco that is to be grown on each 
farm for experimental purposes only.
    (d) A certification signed by the director of the publicly owned 
agricultural experiment station to the effect that such acreage or 
poundage of tobacco is being grown for each farm for experimental 
purposes only, the tobacco is being grown under the auspices of such 
director, and the acreage of each plot was considered necessary for 
carrying out the experiment.



Sec. 723.303  Production of registered or certified flue-cured tobacco seed.

    Producers of registered or certified flue-cured tobacco seed may 
devote flue-cured tobacco acreage in excess of the effective allotment 
to seed production without such acreage of tobacco causing a ``No Price 
Support'' entry on the marketing card issued for the farm if an 
agreement is signed by the farm operator, and the producer, if different 
from the operator, which provides:
    (a) Destruction prior to harvest. For the destruction prior to 
harvest of all tobacco produced on the acreage designated for seed 
production.
    (b) Producer payment of compliance costs. That the producers shall 
pay the

[[Page 145]]

cost of compliance visits to a farm by representatives of the county FSA 
committee for the purposes of:
    (1) Designating and determining the acreage of seed production, and
    (2) Determining that no tobacco has been harvested from the acreage 
designated for seed production and to witness destruction of tobacco 
leaves.
    (c) Agreement. That the producer(s) signing the agreement shall 
agree to timely notify the county FSA office when the tobacco seed has 
been harvested.
    (d) No history credit. That the planting of the tobacco acreage for 
seed production will not create history acreage for the purpose of 
establishing future farm allotments.
    (e) Cancellation of marketing cards. That if the county FSA 
committee determines that any of the terms and conditions of the 
agreement have been violated or any material misrepresentation has been 
made, any marketing card issued for the farm in recognition of the 
agreement shall be recalled and canceled, and a marketing card shall be 
issued to reflect that tobacco produced on the farm is not eligible for 
price support.



Sec. 723.304  Determination of discount varieties.

    (a) Definition. Discount variety means any of the flue-cured tobacco 
seed varieties designated as Coker 139, Coker 140, Coker 316, Reams 64, 
Reams 266, or Dixie Bright 244, or a mixture or strain of such seed 
varieties, or any breeding line of flue-cured tobacco seed varieties, 
including, but not limited to, 187-Golden Wilt (also designated by such 
names as No-Name, XYZ, Mortgage Lifter, Super XyZ), having the quality 
and chemical characteristics of the seed varieties designated as Coker 
139, Coker 140, Coker 316, Reams 64, Reams 266, or Dixie Bright 244. 
However, where there is growing in a field offtype plants of not more 
than 2 percent, such offtype plants shall not be considered in 
certifying the flue-cured tobacco variety being produced. Flue-cured 
tobacco variety which is not certified to be discount variety shall be 
considered as ``acceptable variety.''
    (b) Producer report. The operator, or any producer, on each farm 
producing flue-cured tobacco shall file with the county FSA office a 
report on MQ-32 showing whether or not discount variety tobacco was 
planted on the farm.
    (c) Failure to file report. If the operator of a farm on which flue-
cured tobacco is being produced in the current year fails or refuses, 
within 7 days after a request of the county FSA committee on MQ-34-1, 
Notice of Action Required Regarding Determination of Seed Varieties of 
Flue-Cured Tobacco, to file a report on MQ-32, showing whether or not 
there was planted any of the discount varieties of flue-cured tobacco on 
such farm, all flue-cured tobacco produced on such farm shall be 
considered by the county FSA committee to be discount variety tobacco 
unless the county FSA committee finds that failure to comply with the 
request was due to circumstances beyond the control of the farm 
operator.
    (d) Notice to farm operator. The farm operator having discount 
variety tobacco shall be given written notice by certified mail on MQ-
34-2, Notice of Determination of Discount Variety of Flue-Cured Tobacco. 
This notice to the farm operator shall constitute notice to all persons 
who, as owner, operator, landlord, tenant, or sharecropper, are 
interested in the tobacco grown on the farm.
    (e) Producer's right to recertify. Any producer on a farm who 
received a Form MQ-34-2 notifying such producer that the farm has 
discount variety tobacco when in fact an acceptable variety is being 
produced may recertify on Form MQ-32.
    (f) Issuance of marketing cards. (1) If a farm is considered to have 
discount variety tobacco available for marketing and the farm is 
eligible for price support, the county FSA executive director shall 
issue MQ-76, bearing the notation ``Discount Variety-Limited Price 
Support.'' If the farm is considered to have discount variety tobacco 
but it is not eligible for price support, the county FSA executive 
director shall issue MQ-76, bearing the notation ``Discount Variety-No 
Price Support.''
    (2)(i) Where an MQ-76, bearing the notation, ``Discount Variety-
Limited Price Support'' is issued for a farm, the card may be exchanged 
at the county

[[Page 146]]

FSA office for an MQ-76, without the notation, or
    (ii) Where an MQ-76, bearing the notation ``Discount Variety-No 
Price Support'' is issued for a farm the card may be exchanged at the 
county FSA office for MQ-76 with the notation ``No Price Support.'' 
However, the farm operator shall establish to the satisfaction of the 
county FSA committee that there has been no commingling or substitution 
of discount variety tobacco produced on the farm or on any other farm 
operated by such operator, and that all discount variety tobacco has 
been marketed or satisfactorily disposed of, or accounted for.
    (3) MQ-76 issued to identify marketings of tobacco grown for 
experimental purposes by or for publicly owned experiment stations shall 
bear the notation ``Discount Variety-Limited Price Support'' if such 
tobacco is discount variety tobacco.
    (g) Identification of flue-cured leaf account tobacco as acceptable 
variety--(1) Whenever the Director determines there is a significant 
amount of discount variety tobacco available for marketing in any 
marketing year, the Director may cause to be initiated the provisions of 
this paragraph. In addition, the Director may terminate any action 
initiated hereunder when it is determined that no discount variety of 
flue-cured tobacco remains available for sale during the remainder of 
the current marketing season. Notification to warehouse operators of 
action required under this paragraph shall be by the State FSA executive 
director.
    (2)(i) Each warehouse operator who offers for auction sale any leaf 
account flue-cured tobacco on a warehouse floor other than such 
operator's own floor, and who requests the other warehouse operator to 
identify such tobacco as being ``acceptable variety'' shall execute MQ-
79-1 (Flue-Cured), Dealer's Certification-Resale Tobacco.
    (ii) Each warehouse operator who is participating in the Commodity 
Credit Corporation price support program, and who identifies resale 
tobacco indicating that such tobacco with a ``certified'' lot ticket 
indicating that such tobacco is covered by an executed MQ-79-1.
    (iii) Each executed MQ-79-1 (Flue-Cured) shall show the following 
information with respect to each lot of resale tobacco:
    (A) Crop year.
    (B) Name and address of warehouse where the tobacco is being offered 
for sale.
    (C) Tobacco sale bill number and date.
    (D) Date, signature of dealer and current address, and dealer 
identification number.
    (3)(i) Each dealer or any other person who offers for auction sale 
any resale flue-cured tobacco on a warehouse floor which is 
participating in the Commodity Credit Corporation price support program 
and on which floor eligible resale flue-cured tobacco is identified with 
a ``certified'' lot ticket, and who requests the warehouse operator to 
identify such operator's tobacco as being an ``acceptable variety,'' 
shall execute MQ-79-1 (Flue-Cured), Dealer's Certification-Resale 
Tobacco.
    (ii) Each executed MQ-79-1 (Flue-Cured) shall show the following 
information with respect to resale tobacco:
    (A) Crop year.
    (B) Name and address of warehouse where the tobacco is being offered 
for sale.
    (C) Date, signature of dealer and current address and dealer 
identification number.
    (D) Tobacco sale bill number and date.
    (iii) Each dealer or any person who acquires acceptable variety 
tobacco in a manner which would make it eligible for certification on 
MQ-79-1, or who has on hand both discount variety tobacco and acceptable 
variety tobacco, and desires to dispose of acceptable variety tobacco 
prior to disposing of the discount variety tobacco, may apply in writing 
to the State FSA executive director for a special authorization to have 
the acceptable variety tobacco certified when offered for auction sale.
    (h) Estimate of production. For any farm on which discount variety 
tobacco is being grown, a Form MQ-92, Estimate of Production, shall be 
obtained.

[[Page 147]]



Sec. 723.305  Issuance of marketing cards.

    (a) General. Each marketing of tobacco from a farm in a quota area 
shall be identified by a valid marketing card unless prior to marketing 
an AMS certification is issued for such tobacco to indicate that such 
tobacco is a nonquota kind of tobacco.
    (1) A marketing card (MQ-76 or MQ-77) shall be issued for the 
current marketing year for each farm having quota tobacco available for 
marketing. Cards shall be issued in the name of the farm operator except 
that:
    (i) Cards issued for tobacco grown for experimental purposes only 
shall be issued in the name of the experiment station,
    (ii) Cards issued to a successor-in-interest shall be issued in the 
name of the successor-in-interest,
    (iii) For kinds of tobacco other than flue-cured and burley, if a 
part of a farm which includes the tobacco acreage on the farm is cash 
leased to such producer, cards shall be issued in the name of such 
producer. The face of the marketing card may show the name of other 
interested producers. A marketing card may be issued in the name of a 
producer who is not the farm operator if the county FSA committee 
determines pursuant to the procedure in paragraph (a)(2) of this section 
that such producer has been or likely will be deprived of the right to 
use the marketing card issued for the farm to market such producer's 
proportionate share of the crop.
    (2) If the county FSA committee has reason to believe that one or 
more producers on the farm have been or likely will be deprived of the 
right to use such marketing card to market such producer's proportionate 
share of the crop, a hearing shall be scheduled by the county FSA 
committee and the operator of the farm and the producer or producers 
involved shall be invited to be present, or to be represented, at which 
time they shall be given the opportunity to substantiate their claims 
concerning the use of the farm marketing card to market each such 
producer's proportionate share of the effective farm marketing quota for 
such crop. At least two members of the county FSA committee shall be 
present at the hearing. The hearing shall be held at the time and place 
named in the notice. A summary of the evidence presented at the hearing 
shall be prepared for use of the county FSA committee. If the farm 
operator or other producer(s) on the farm do not attend the hearing, or 
are not represented, the county FSA committee shall make its decision on 
the basis of information available to such committee. If the county FSA 
committee finds that any producer on the farm has been or likely will be 
deprived of the right to use the marketing card issued for the farm to 
market such producer's proportionate share of the crop, a separate 
marketing card shall be issued to such producer. With respect to burley 
and flue-cured tobacco, the marketing card issued for the farm shall be 
recalled and a separate marketing card, showing 103 percent of the 
producer's proportionate share of the effective farm marketing quota 
shall be issued to each such producer who it is determined has been or 
likely will be deprived of the opportunity to market such producer's 
proportionate share of the crop and another card (or other cards if 
considered preferable by the county FSA committee) shall be issued 
showing 103 percent of the effective farm marketing quota to enable the 
other producers on the farm to market their proportionate shares. The 
marketing cards issued pursuant to this subparagraph shall reflect the 
proportionate pounds, if any, already marketed by each producer.
    (3) The procedure in paragraph (a)(2) of this section shall not 
apply to a person who was a producer on the farm in a prior year but who 
is not a producer in the current crop year.
    (b) Person authorized to issue marketing cards. The county FSA 
executive director shall be responsible for the issuance of marketing 
cards. For kinds of tobacco other than burley and flue-cured tobacco, 
each marketing card shall bear the actual or facsimile signature of the 
county FSA executive director who issued the card.
    (c) Rights of producers and successors-in-interest. (1) Each 
producer having a share in tobacco available for marketing from a farm 
shall be entitled to

[[Page 148]]

the use of the marketing card for marketing such producer's 
proportionate share.
    (2) Any person who succeeds, other than a dealer, in whole or in 
part to the share of a producer in the tobacco available for marketing 
from a farm, shall, to the extent of such succession, have the same 
right to the use of the marketing card and bear the same liability for 
penalties as the original producer.
    (d) No price support-burley and flue-cured tobacco. For burley and 
flue-cured tobacco, the notation ``No Price Support'' shall be entered 
on each marketing card issued for the use of:
    (1) Farm. The farm if any producer on the farm is ineligible for 
price support under the provisions of part 1464 of this title.
    (2) Producer. The producer on a farm if the producer is ineligible 
for price support under the provisions of part 1464 of this title.
    (e) Farm quota data entered on marketing card and supplemental card 
for burley or flue-cured tobacco:
    (1) Any marketing card issued to market burley or flue-cured tobacco 
shall show when issued, in the space provided on the reverse side, the 
pounds computed by multiplying 103 percent times the effective farm 
marketing quota.
    (2) Notwithstanding paragraph (e)(1) of this section, if the tobacco 
available for marketing from the farm is determined by the county FSA 
committee or the county FSA executive director to be less than the 
effective farm marketing quota, for purposes of issuing a marketing card 
and showing thereon the farm's 103 percent of the effective quota, the 
effective farm marketing quota for the farm shall be considered to be 
the pounds determined to be available for marketing from the farm. If 
any producer on the farm satisfies the county FSA committee or county 
FSA executive director that the quantity of tobacco produced on the farm 
in the current year, plus any carryover tobacco from a prior year, is 
greater than the previously determined pounds of tobacco available for 
marketing from the farm, the pounds shown on the marketing card shall be 
increased accordingly, but not to exceed an amount which would cause the 
total pounds shown on the marketing card to equal 103 percent of the 
effective farm marketing quota.
    (3) Upon request by the farm operator, a supplemental marketing card 
bearing the same name and identification as shown on the original 
marketing card may be issued for a farm upon return to the county FSA 
office of an original marketing card or a supplemental marketing card. 
The pounds computed as the balance of 103 percent of quota from a prior 
marketing card shall be shown in the first space on the reverse side of 
the marketing card.
    (4) Upon written request of the farm operator two or more marketing 
cards may be issued for a farm if the farm operator specifies the number 
of pounds of quota to be assigned to each marketing card. In such case, 
the total pounds of quota specified in the entry, ``103 percent of 
quota,'' on all marketing cards issued for the farm may not exceed 103 
percent of the effective farm marketing quota.
    (f) Farm quota data entered on marketing card and supplemental card 
for any kind of tobacco other than burley or flue-cured: (1) Within 
quota marketing card. A within quota marketing card, MQ-76, indicating 
the tobacco is eligible for price support shall be issued for use in 
identifying the kind of tobacco that is available for marketing from a 
farm when such tobacco:
    (i) Is eligible for price support according to the provisions of 
part 1464 of this title.
    (ii) Was grown for experimental purposes by a publicly owned 
agricultural experiment station.
    (2) Excess marketing card. An excess marketing card (MQ-77) shall be 
issued for a farm for marketing a kind of tobacco that is ineligible for 
price support. Before the MQ-77 is issued the county FSA executive 
director shall enter on such marketing card the rate of any penalty that 
is to be deducted from the proceeds from any marketing of tobacco 
identified by such marketing card. An MQ-77 shall be issued for each 
farm for each kind of tobacco for which:
    (i) There is excess tobacco available for marketing from the farm; 
or

[[Page 149]]

    (ii) The producer is not an eligible producer or the tobacco is not 
eligible tobacco as determined in accordance with part 1464 of this 
title.
    (3) Full penalty rate. The full penalty rate shall be entered on 
each MQ-77 issued to identify tobacco produced on a farm for which:
    (i) An acreage allotment was not established;
    (ii) The farm operator or another producer on the farm prevents the 
county FSA committee from obtaining information necessary to determine 
the correct acreage of tobacco on the farm;
    (iii) The farm operator fails in accordance with part 718 of this 
chapter to provide a certification of acreage planted to tobacco, or
    (iv) The farm operator or another producer on the farm has not 
agreed to make contributions to the No Net Cost Fund or pay assessments 
to the No Net Cost Account, as applicable, in accordance with part 1464 
of this title.
    (4) Converted penalty rate. Except as provided in paragraph (f)(3) 
of this section, a converted penalty rate shall be entered on each MQ-77 
issued to identify tobacco produced on a farm from which there is excess 
tobacco available for marketing and the percentage of excess is less 
than 100 percent. For the purpose of determining the penalty due on each 
marketing by a producer of tobacco subject to penalty, the converted 
rate of penalty per pound shall be determined by multiplying the 
applicable rate of penalty for the current crop by the percent excess 
determined according to this paragraph. For a farm without carryover 
tobacco from a prior year, the percent excess shall be determined by 
dividing the excess acreage of tobacco by the harvested acreage of 
tobacco for the farm. For a farm having carryover tobacco from a prior 
year, the percent excess shall be determined as follows:
    (i) Determine the number of ``carryover'' acres by dividing the 
number of pounds of carryover tobacco from the prior year by the normal 
yield for the farm for that year. Reduce such ``carryover'' acres by the 
amount determined by subtracting the harvested acreage from the 
allotment in the current year. If the ``carryover'' acres are entirely 
offset by the underharvested acreage, the percent excess will be zero 
and a MQ-76 may be issued if the farm otherwise is eligible for price 
support and the remainder of this paragraph (f)(4) of this section are 
inapplicable.
    (ii) Determine the number of ``within quota carryover acres'' by 
multiplying the ``carryover acres'' by the ``percent within quota'' 
(i.e., 100 percent minus the percent excess) for the year in which the 
carryover tobacco was produced.
    (iii) Determine the ``total acres'' of tobacco by adding the 
``carryover acres'' and the acreage of tobacco harvested in the current 
year.
    (iv) Determine the ``excess acres'' by subtracting from the ``total 
acres'' the sum of the current year's allotment and the ``within quota 
carryover acres.''
    (v) Determine the percent excess by dividing the ``excess acres'' by 
the ``total acres.''
    (5) Except as provided in paragraphs (f)(3) and (4) of this section, 
a zero penalty rate shall be entered on any MQ-77 issued in accordance 
with this section.
    (g) Other marketing card data. Other data specified in instructions 
issued by the Deputy Administrator shall be entered on the marketing 
card.



Sec. 723.306  Claim stamping and replacing marketing cards.

    (a) Claim stamping. If a person is indebted to the United States and 
such indebtedness has been recorded on the county debt record, any 
marketing card issued for the farm on which the person has a producer 
interest shall bear the notation ``U.S. Claim'' followed by the amount 
of the indebtedness. The name of the debtor-producer, if different from 
the farm operator, shall be recorded directly under the claim notation. 
The notation ``TMQ'' indicating tobacco marketing quota as the type of 
indebtedness shall constitute notice to any buyer that until the amount 
of penalty is paid, the United States has a lien with respect to any 
crop of tobacco in which the debtor-producer has an interest. A claim 
notation other than ``TMQ'' shall constitute notice to any buyer that 
subject to prior liens, the net proceeds from any tobacco pledged as 
collateral

[[Page 150]]

for a price support loan shall be paid to the ``Farm Service Agency, 
USDA'' to the extent of the indebtedness shown. The acceptance and use 
of a marketing card bearing a notation and information concerning an 
indebtedness to the United States shall not constitute a waiver by the 
debtor-producer of any right to contest the validity of such 
indebtedness by appropriate appeal. As claim collections are made, the 
amount of the claim shown on the card shall be revised to show the claim 
balance. If requested by the producer, the county FSA executive director 
who issued the marketing card shall issue a claim-free marketing card 
when the claim has been paid.
    (b) Replacing, exchanging, or issuing additional marketing cards. 
Subject to the approval of the county FSA executive director, two or 
more marketing cards may be issued for any farm. Upon the return to the 
county FSA office of a marketing card which had been used in its 
entirety and before the marketing of tobacco from the farm has been 
completed, a new marketing card bearing the same name, information, and 
identification as the used card shall be issued for the farm. A new 
marketing card shall be issued to replace a card which has been 
determined by the county FSA executive director who issued the card to 
have been lost, destroyed, or stolen.



Sec. 723.307  Invalid cards.

    (a) Reasons for being invalid. A marketing card shall be invalid if:
    (1) It is not issued or delivered in the manner prescribed;
    (2) An entry is omitted or is incorrect;
    (3) It is lost, destroyed, stolen, or becomes illegible; or,
    (4) Any erasure or alteration has been made and not properly 
initialed by the county FSA executive director.
    (b) Validating invalid cards. If any entry is not made on a 
marketing card as required, either through omission or incorrect entry, 
and the proper entry is made and initialed by the county FSA executive 
director who issued the card, or by a marketing recorder, then such card 
shall become valid.
    (c) Returning invalid cards. In the event any marketing card becomes 
invalid (other than by loss, destruction or theft, or by omission, 
alteration, or incorrect entry, which has not been corrected by the 
county FSA executive director who issued the card, or by a marketing 
recorder), the farm operator, or the person in possession of the card, 
shall return it to the county FSA office at which it was issued.



Sec. 723.308  Rate of penalty.

    The rate of penalty for a marketing year shall be equal to seventy-
five (75) percent of the average market price for the kind of tobacco 
for the immediately preceding marketing year as determined and announced 
annually by the U.S. Department of Agriculture.

[55 FR 39914, Oct. 1, 1990, as amended at 63 FR 11582, Mar. 10, 1998]



Sec. 723.309  Persons to pay penalty.

    Subject to any additional requirements or provisions for remittances 
which are contained in Sec. 723.409 of this part, the persons to pay 
the penalty due on any marketing of tobacco subject to penalty shall be 
determined as follows:
    (a) Auction sale. The penalty due on marketings by a producer or 
dealer through an auction sale shall be paid by the warehouse operator 
who may deduct an amount equivalent to the penalty from the price paid 
to the producer or dealer.
    (b) Nonauction sale. The penalty due on tobacco acquired directly 
from a producer or dealer, other than at an auction sale, shall be paid 
by the person acquiring the tobacco who may deduct an amount equivalent 
to the penalty from the price paid to the producer or dealer in the case 
of a sale.
    (c) Marketing outside the United States. The penalty due on 
marketings by a producer or dealer directly to any person outside the 
United States shall be paid by the producer or dealer making the sale.

[55 FR 39914, Oct. 1, 1990, as amended at 63 FR 11582, Mar. 10, 1998]



Sec. 723.310  Date penalty is due.

    (a) Payment of penalty. Penalties shall become due at the time the 
tobacco is marketed, except that in the case of

[[Page 151]]

false identification or failure to account for disposition, the penalty 
shall be due on the date of such false identification or failure to 
account for disposition. The penalty shall be paid by remitting the 
amount due to the State FSA office not later than the end of the 
calendar week in which the tobacco becomes subject to penalty. A draft, 
money order, or check drawn payable to the Farm Service Agency may be 
used to pay any penalty, but any such draft or check shall be received 
subject to payment at par.
    (b) Auction sale net proceeds. If the penalty due on any auction 
sale of tobacco by a producer is in excess of the net proceeds of such 
sale (gross amount for all lots included in the sale less usual 
warehouse charges), the amount of the net proceeds accompanied by a copy 
of the tobacco sale bill covering such sale may be remitted as the full 
penalty due. Usual warehouse charges shall not include the following:
    (1) Advances to producers,
    (2) Charges for hauling, or
    (3) Any other charges not usually incurred by producers in marketing 
tobacco through a warehouse.
    (c) Nonauction sales. Nonauction sales of excess tobacco shall be 
subject to the full rate of penalty and shall be paid in full even 
though the penalty may exceed the proceeds for the sale of tobacco.



Sec. 723.311  Lien for penalty; liability of persons who are affiliated 

with indebted person or who permit the indebted person to use their 
identification card.

    (a) Lien on tobacco. Until the amount of any marketing quota penalty 
imposed under this part is paid, a lien shall exist in favor of the 
United States for the amount of the penalty on:
    (1) The tobacco with respect to which such penalty is incurred; and
    (2) Any other tobacco subject to marketing quotas in which the 
person liable for payment of the penalty has an interest and which is 
marketed in the same or a subsequent marketing year.
    (b) Lien precedence. The lien, described in paragraph (a) of this 
section, attaches at the time that the penalty is assessed. As to third 
parties, in the event of a lack of actual notice of the lien, then 
notice shall be deemed to occur when:
    (1) In the case of indebted producers, the debt is entered on the 
debt record maintained by the county FSA office of the county in which 
the tobacco was grown;
    (2) In the case of an indebted warehouse operator, the debt is 
entered on the debt record of the State FSA office for the State in 
which the warehouse is located; and
    (3) In the case of an indebted dealer, the debt is entered on the 
debt record of the State FSA office for the State in which the dealer is 
required to file reports.
    (c) Availability of list of marketing quota penalty debts. Each 
county and State FSA office shall maintain a list of tobacco marketing 
penalty debts which have been entered on the debt record in their 
office. The list shall be available for examination upon request by any 
interested person.
    (d) Liability for penalty owed by another person. (1) When a penalty 
in excess of $10,000 is incurred under this part by an entity, all 
persons who have a substantial ownership interest in the entity shall be 
jointly and severally liable with the entity for the payment of such 
penalty, unless it is demonstrated to the satisfaction of the Deputy 
Administrator that the violation was inadvertent. Substantial ownership 
interest shall be deemed to be any ownership interest greater than ten 
percent.
    (2) A dealer or warehouse operator who permits an indebted person to 
use such dealer's or warehouse operator's identification card to market 
tobacco shall be liable for the amounts due by the indebted person to 
the United States under this part up to the amount of the value of the 
tobacco so marketed. In addition, unless the Deputy Administrator 
determines otherwise, any persons or person, who as a warehouse operator 
or dealer becomes affiliated with any person who at the time of 
affiliation is indebted under this part to the United States, shall be 
liable for the amount of the debt owed to the United States by the 
person with whom such person or persons become affiliated up to the 
amount of the value of any tobacco which is marketed by

[[Page 152]]

such affiliated warehouse operator or dealer during the time of the 
affiliation with the indebted person. Affiliation may include any 
relationship in which the parties have a common interest in tobacco, or 
in an enterprise or entity involved in the marketing, processing, or 
handling of tobacco, or where the parties both hold a position of 
responsibility or ownership in such an enterprise or entity, or where 
there is common ownership of a business involved in the transaction. A 
warehouse operator or dealer may also be considered to be affiliated 
with an indebted person when such warehouse operator or dealer is 
associated with a person who is both:
    (i) An employee or otherwise authorized to buy and sell tobacco for 
such warehouse operator or dealer; and
    (ii) An indebted person or at the time of indebtedness incurred by 
an entity was a substantial owner or an officer of the indebted entity.

Affiliation may also be deemed to occur where parties have traded in 
tobacco under circumstances which indicate that there may be a lack of 
arm's length trading between the parties such as where the parties 
engage in casual or undocumented transactions in significant quantities 
of tobacco, or where the parties have traded in tobacco with each other 
without a movement of the tobacco, or where there is a trading in 
tobacco without documentation of a significant exchange of money, or 
other circumstances which indicate an affiliation. Where questions of 
affiliation arise, it shall be the burden on the parties involved to 
show that trading in such tobacco was conducted in accordance with 
normal trade practices and was not part of a scheme or device to avoid 
payments of sums due the United States or the CCC.
    (e) TMQ lien notation. Upon notification that a TMQ lien has been 
established, the producer marketing card (MQ-76) or dealer 
identification card (MQ-79-2) shall be returned immediately to the 
issuing office for recording the TMQ lien. Failure to immediately return 
the applicable card will result in FSA notifying all registered 
warehouse operators and dealers of the TMQ lien information and of their 
responsibilities for collecting the TMQ lien. The card shall be promptly 
returned to the producer or dealer after it is annotated with the TMQ 
lien.

[57 FR 43581, Sept. 21, 1992]



Sec. 723.312  Request for refund of penalty.

    Any person who paid any penalty may request the return of the amount 
of any such payment which is in excess of the amount required to be 
paid. Such request shall be filed on Form MQ-85, Farm Record and 
Account, with the county FSA office within 2 years after the payment of 
the penalty. Approval of return shall be by the county FSA committee, 
subject to the approval of the State FSA executive director.



Sec. 723.313  Identification of marketings.

    (a) Burley or flue-cured tobacco. With respect to:
    (1) Identification of producer marketings. Each auction and 
nonauction marketing of burley or flue-cured tobacco shall be identified 
by a valid marketing card, Form MQ-76, issued for the farm. The reverse 
side of the marketing card shall show in pounds:
    (i) 103 percent of quota,
    (ii) Balance of 103 percent of quota after each sale, and
    (iii) Date of each sale.
    (2) Cross-references of tobacco sale bill number to prior sale bill. 
Each warehouse operator, for each lot of tobacco weighed in on the 
warehouse floor for sale the same day, shall cross-reference the tobacco 
sale bill to each prior tobacco sale bill for tobacco identified by the 
same marketing card. To accomplish the cross-reference, each other 
tobacco sale bill number shall be entered by the warehouse operator in 
the ``Remarks'' space on the tobacco sale bill, on all copies, at the 
time such tobacco is weighed at the warehouse.
    (3) Recording producer sale. Each producer sale at auction shall be 
recorded on Form MQ-72-1, Report of Tobacco Auction Sale, and each 
producer sale at nonauction shall be recorded on a Form MQ-72-2, Report 
of Tobacco Nonauction Purchase. For producer sales at nonauction, the 
dealer purchaser shall execute Form MQ-72-2 and shall enter the data on 
Form MQ-76. For producer sales at auction, Form 72-1

[[Page 153]]

and Form MQ-76 shall be executed only by the FSA marketing recorder.
    (4) Identification of dealer marketings of resale tobacco. Each 
auction and nonauction marketing of resale tobacco in the current year, 
such tobacco shall be identified by a dealer identification card, Form 
MQ-79-2, issued to the dealer for use in the current marketing year.
    (b) Dark air-cured, fire-cured, or Virginia sun-cured tobacco. With 
respect to dark air-cured, fire-cured, or Virginia sun-cured tobacco:
    (1) Identification of producer marketings. Each marketing of such 
kind of tobacco from a farm shall be identified by a valid marketing 
card issued for the farm for the respective kind of a tobacco, either an 
MQ-76 or MQ-77 (including sale memo). With respect to each nonauction 
sale from:
    (i) A within quota farm a check mark shall be entered on the inside 
of MQ-76, and
    (ii) An excess farm for which an MQ-77 is issued, an executed bill 
of nonauction sale shall be prepared, and such bill of nonauction sale 
shall be delivered to a marketing recorder or other person who is 
authorized to issue sale memos.
    (2) Suspended sale and sales without marketing cards. Any suspended 
sale, which is not identified by an MQ-76 or MQ-77 (including a sale 
memo) on or before the last warehouse sale day of the marketing season, 
or within 4 weeks after the date of marketing, whichever comes first, 
shall be identified by MQ-82, Sale Without Marketing Card, as a 
marketing of excess tobacco. Form MQ-82 shall be executed only by a 
marketing recorder or other representative of the State FSA executive 
director.
    (3) Other persons authorized to execute MQ-76 or MQ-77 (including 
sale memo). (i) A warehouse operator who has been authorized during the 
current marketing year on MQ-78, Tobacco Warehouse Organization, may 
record a sale on MQ-76 or MQ-77 (including the issuance of a sale memo) 
to identify a sale for a farm if a marketing recorder is not available 
at the warehouse when the marketing card is presented.
    (ii) Any warehouse operator, or dealer, who engages in the business 
of acquiring scrap tobacco from farmers, and who has been authorized on 
MQ-78, may for each purchase of scrap tobacco execute an MQ-76, or MQ-77 
(including a sale memo if the bill of nonauction sale has been 
executed).
    (4) Verification of sales processed during the absence of marketing 
recorder. Any person authorized on MQ-78 to act as a marketing recorder 
shall promptly present to a marketing recorder for verification each 
warehouse bill (floor sheet) processed and identified by an MQ-76 or MQ-
77 (including any sale memos) executed in the absence of a marketing 
recorder.
    (5) Withdrawal of approval to act as marketing recorder. The 
authorization on MQ-78 for persons may be withdrawn by the State FSA 
executive director if such action is determined to be necessary to 
properly enforce the regulations in this part.
    (c) Separate display on auction warehouse floor. Any warehouse 
operator upon whose floor more than one kind of tobacco is offered for 
sale at public auction shall for each respective kind of tobacco:
    (1) Display it in separate areas on the auction warehouse floor.
    (2) Use a lot ticket that is distinguishably different from the lot 
ticket used to identify any other kind of tobacco.
    (3) Identify each lot by a lot ticket clearly showing the kind of 
tobacco. However, if where the tobacco is represented to be a nonquota 
kind the lot ticket shall have imprinted thereon the type designation 
for the kind of quota tobacco normally marketed in the area.
    (4) Make and keep records that will ensure a separate accounting and 
reporting of each of such kinds of tobacco (quota and nonquota) sold at 
auction over the warehouse floor.
    (d) Identification of returned first sale (producer) tobacco. When 
resold at auction, tobacco which has been previously sold and returned 
to the warehouse by the buyer is resale tobacco. When such tobacco is 
resold by the warehouse operator, it shall be identified as leaf account 
resale tobacco.
    (e) Verification of penalties by warehouse operators or dealers. 
Each sale of tobacco by a producer which is subject

[[Page 154]]

to penalty and which has been recorded by a marketing recorder shall be 
verified by a warehouse operator or dealer to determine whether the 
amount of penalty shown to be due has been correctly computed. Such 
warehouse operator shall not be relieved of any liability for the amount 
of penalty due because of any error which may occur in computing the 
penalty and recording the sale.
    (f) Check register. The serial number of the tobacco sale bill(s) 
shall be recorded by the warehouse operator on the check register or 
check stub for the check written covering the auction sale of tobacco by 
a producer.
    (g) Marketing card and sale memo for cigar tobacco. With respect to 
cigar tobacco:
    (1) If a sale of producer's cigar tobacco to a buyer is not 
identified with a marketing card (MQ-76 or MQ-77) issued for the farm, 
including a sale memo from MQ-77, by the end of the sale day and 
recorded and reported on MQ-79 (CF&B), Buyers Record, by the tenth day 
of the calendar month next following the month during which the sale 
occurred, the marketing shall be identified on MQ-79 (CF&B) as a 
marketing of excess tobacco and reported not later than the tenth day of 
the calendar month next following the month during which the sale date 
occurred, the marketing shall be identified on MQ-79 (CF&B) as a 
marketing of excess tobacco, and reported not later than the tenth day 
of the calendar month next following the month during which the sale day 
occurred.
    (2) Verification of penalty by buyer. Each excess sale memo issued 
by a buyer shall be verified by the buyer to determine whether the 
amount of penalty shown to be due has been correctly computed and such 
buyer shall not be relieved of any liability with respect to the amount 
of penalty due because of any error which may occur in issuing the sale 
memo.



 Subpart D_Recordkeeping, Reporting Requirements, Marketing Penalties, 
                           and Other Penalties



Sec. 723.401  Registration of burley and flue-cured tobacco warehouse 
operators and dealers.

    (a) Warehouse registration. For burley and flue-cured tobacco, any 
warehouse operator dealing in either flue-cured or burley tobacco shall 
be registered with the U.S. Department of Agriculture. Such registration 
will be handled by the North Carolina State FSA Office, Raleigh, North 
Carolina.
    (b) Dealer registration. Each person who expects to deal in burley 
or flue-cured tobacco during a marketing year shall complete a Dealer 
Application and Agreement (MQ-79-2-A) annually, except dealers who are 
exempt from maintaining or filing records and reports as provided in 
Sec. 723.405. The application must be filed after March 1 of the 
calendar year in which the marketing year begins, and shall be filed 
with the State FSA office or, if designated by the State Executive 
Director, the county FSA office for the county where the dealer resides 
or where the dealer's principal business is located. The applicant shall 
provide the names, and such other information as required by the Deputy 
Administrator, of all other persons who will be authorized to use the 
dealer identification card (MQ-79-2). A dealer entity is limited to one 
dealer registration number. Persons affiliated with another dealer of 
the same household shall not be eligible for a dealer registration 
number unless the Deputy Administrator determines that the entities or 
individuals are separate and independent.
    (c) Approval of application and agreement. The State Executive 
Director of the State FSA office shall, under the direction of the 
Deputy Administrator, be the approving official for the Dealer 
Application and Agreement. If the approving official has reason to doubt

[[Page 155]]

that the applicant is a bona fide dealer or intends to become a bona 
fide dealer, the application may be disapproved until such time as the 
applicant furnishes information satisfactory to the State FSA committee 
that the application is bona fide. An application shall also be 
disapproved for any person who has failed to file reports or permit 
inspections required in Sec. 723.404(d)(9). A person whose application 
is disapproved shall be provided with the opportunity to appeal the 
disapproval and to furnish information to substantiate the application 
or to comply with other requirements in Sec. 723.404.
    (d) Letter of credit or bond--(1) General requirements. Effective 
with the beginning of the 1992 marketing year for burley tobacco and 
with the 1993 marketing year for flue-cured tobacco, in order to secure 
the payment of penalties as may be incurred by a dealer during the 
marketing year for which approval as a dealer is sought, each dealer, as 
a condition for final approval to handle tobacco, must present a letter 
of credit or bond which is determined by the Deputy Administrator to be 
acceptable security and which meets the dollar requirements of this 
section. The letter of credit or bond shall be submitted to the State 
FSA office where the dealer is registered. A letter of credit must have 
been issued by a commercial bank insured by the Federal Deposit 
Insurance Corporation. A bond must be a surety bond insured by a bonding 
company or agent licensed in the State where the dealer is registered. 
The letter of credit or bond must be in the form and have the content 
specified by the Deputy Administrator. A letter of credit or bond shall 
be furnished annually after initial approval of the dealer's application 
and notification of the amount required. The dealer identification card 
shall not be issued until it is determined that acceptable security has 
been presented.
    (2) Amount required. The base amount of the letter of credit or bond 
shall be the larger of:
    (i) $25,000 or
    (ii) the sum of the amounts determined by multiplying the respective 
pounds of burley and flue-cured tobacco purchased by the dealer during 
the preceding marketing year by 10 percent of the marketing year penalty 
rate for the respective kind of tobacco involved for the relevant year 
with the resulting amount not to exceed $100,000.

A dealer shall submit the letter of credit or bond for the base amount 
plus an amount equal to the amount of any unpaid tobacco marketing quota 
penalty owed by such dealer. The amount shall also be increased by 
$5,000 for each 10,000 pounds of tobacco for which the dealer has failed 
to file reports or filed false reports in violation of Sec. 723.404 for 
the 3 previous marketing years. The Deputy Administrator may reduce the 
amount of security required in order to avoid undue hardship and shall 
make provision for release of the letter of credit or bond at the 
appropriate time.
    (e) Suspension and surrender of dealer card. The dealer 
identification card shall be surrendered upon demand of the FSA. Failure 
to comply with the provisions of Sec. Sec. 723.404 or 723.414 or with 
other material provisions of this part shall be cause for suspension of 
the dealer identification card and the dealer shall be given 15 days to 
complete all necessary compliance measures or to show cause why the card 
should not remain suspended.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21443, May 9, 1991; 57 
FR 43581, Sept. 21, 1992]



Sec. 723.402  Warehouse authorized to retain producer marketing cards 
between sales.

    (a) General. Notwithstanding any other provisions of this part, to 
facilitate the scheduling of farmer's tobacco to the warehouse, 
marketing cards, with the permission of the producer, may be retained at 
the warehouse between sales even though no producer on the farm for 
which the card is issued has tobacco on the floor for sale or to be 
settled for, as provided in this section.
    (b) Warehouse eligible to retain producers marketing cards between 
sales. A warehouse shall be eligible to retain producer marketing cards 
between sales if the operator thereof shall:
    (1) Execute and file on a form approved by FSA a written request 
with the State FSA committee (or county

[[Page 156]]

FSA committee if designated by the State FSA committee).
    (2) Agree to be responsible to FSA for an amount of money equal to 
that amount that may be assessed against any producer as marketing quota 
penalties, if the marketing that is the basis of assessment of penalty 
occurred while the warehouse was authorized to have custody of the 
marketing card, for:
    (i) Burley or flue-cured tobacco for any overmarketing resulting 
from errors made at the warehouse in entering ``balance after sale'' 
pounds on the producer's marketing card or failure to deduct pounds sold 
on producer's marketing card.
    (ii) Tobacco falsely identified for marketing by use of the 
producer's marketing card.
    (iii) Producer's failure to account for any tobacco marketed by use 
of the producer's marketing card.
    (iv) Any burley or flue-cured tobacco marketed at the warehouse in 
excess of 103 percent of quota as shown on the producer's marketing 
card.
    (3) Agree to maintain an accurate and up-to-date journal containing 
a listing of all producer marketing cards retained by the warehouse to 
facilitate the scheduling of farmer's tobacco. The journal shall show 
for each card retained the:
    (i) Name of the operator;
    (ii) Serial number of farm;
    (iii) Marketing card number, if applicable;
    (iv) Date marketing card obtained from producer; and
    (v) Date marketing card returned to producer.

Such journals shall be maintained for the length of time and under the 
conditions required for other warehouse records.
    (4) Agree to return the marketing card to the producer at any time 
the producer may so request, or in the absence of a request, return it 
to the producer within 7 days after the close of the warehouse for the 
season.
    (5) Agree that this authorization may be terminated by FSA for 
failure to comply with provisions of this agreement.
    (c) Penalties considered to be the responsibility of warehouse 
operators. Notwithstanding any other provision of this part, a warehouse 
operator who executes and files a written request with the State FSA 
committee (or county FSA committee if designated by the State FSA 
committee) for authorization to retain producer's marketing cards at the 
warehouse, with grower permission, shall be responsible to FSA for an 
amount of money equal to the amount that may be assessed against the 
producer as marketing quota penalties if the marketing that is the basis 
of such assessment occurred while the warehouse was authorized to have 
custody of the marketing card, for:
    (1) Any burley or flue-cured tobacco overmarketings resulting from 
errors made at the warehouse in entering ``balance after sale'' pounds 
on the burley or flue-cured producer's marketing card or failure to 
deduct pounds sold on the producer's marketing card. However, the 
warehouse operator shall not be responsible for any penalty under this 
subparagraph, if such penalty would not have been assessed against the 
producer in accordance with Sec. 723.409(e) of this part.
    (2) Tobacco falsely identified for marketing by use of the 
producer's marketing card.
    (3) Producer's failure to account for any tobacco marketed by use of 
such producer's marketing card.
    (4) With respect to burley or flue-cured producers, tobacco marketed 
at the warehouse in excess of 103 percent of quota as shown on the 
producer's marketing card.



Sec. 723.403  Auction warehouse operators' records and reports.

    (a) Report on Form MQ-78, Tobacco Warehouse organization. Each 
warehouse operator shall annually, prior to opening of auction markets, 
furnish FSA an executed Form MQ-78 showing:
    (1) Form of business organization.
    (2) Names and addresses of warehouse officials and bookkeeper.
    (3) Names and addresses of other warehouses in which the officials 
and bookkeepers have a financial interest.
    (4) Names and addresses of custodians of warehouse records, 
including their location.

[[Page 157]]

    (b) Separate records and reports. Each auction warehouse operator 
shall keep the records and make the reports separately for each quota or 
nonquota kind of tobacco as provided in this section.
    (c) Record of marketing. Each warehouse operator shall:
    (1) Auction or nonauction sale. Keep such records as will enable the 
warehouse operator to furnish the following information to State FSA 
office with respect to each sale of tobacco made at such person's 
warehouse:
    (i) The name of the operator of the farm on which the tobacco was 
produced and the name of the producer, in the case of a sale by a 
producer.
    (ii) The name of the seller in the case of a resale.
    (iii) Date of sale.
    (iv) Number of pounds sold.
    (v) Amount of any penalty and the amount of any deduction for such 
penalty from the price paid the producer.
    (vi) With respect to each individual lot of tobacco constituting an 
auction sale, the:
    (A) Name of purchaser.
    (B) Number of pounds sold.
    (C) Gross sale price.
    (2) Separate account records. Maintain records of all purchases and 
resales of tobacco by the warehouse operator to show a separate account 
for:
    (i) Nonauction purchases by or on behalf of the warehouse operator 
of farmer-owned tobacco.
    (ii) Purchases and resales of:
    (A) Leaf account tobacco.
    (B) Floor sweeping tobacco.
    (d) Tobacco sale bill for burley and flue-cured tobacco. (1) Each 
burley or flue-cured tobacco warehouse operator shall use tobacco sales 
bills furnished at the warehouse operator's expense showing, as a 
minimum, the following information:
    (i) Tobacco sale bill number;
    (ii) For flue-cured tobacco only, registration number assigned the 
warehouse by the Department;
    (iii) Name and address of warehouse where sale is held;
    (iv) For flue-cured tobacco only, the identification of other 
producers having an interest in the tobacco;
    (v) Date of sale;
    (vi) Number of pounds in each lot;
    (vii) Name and address of seller; and
    (A) Farm number (including State and county codes) for producer 
tobacco, and
    (B) Dealer registration number for resale tobacco;
    (viii) Identification number, if available, for each lot of tobacco 
to be offered for sale;
    (ix) Poundage balance before sale for producer tobacco based on 103 
percent of farm quota;
    (x) Name or symbol of purchaser of each lot which is sold;
    (xi) Gross number of pounds sold;
    (xii) Sale price for each lot and gross sale price for all lots 
sold;
    (xiii) Nonauction purchases by the warehouse holding the sale;
    (xiv) Tobacco grade for tobacco consigned to price support;
    (xv) The buyer's grade symbol for tobacco bought by private buyers.
    (xvi) The letters ``N/A'' in the buyer and grade space for 
nonauction purchases by the warehouse.
    (xvii) Marketing quota penalty collected; and
    (xviii) Amount withheld from sale to cover claims due the United 
States.
    (2) At the end of each sale day, the tobacco sale bills shall be 
sorted and filed in numerical order by sale dates, and lot tickets shall 
be filed in an orderly manner by sale dates or by numerical order.
    (e) Identification of tobacco for marketing--(1) Marketing card. 
Each marketing of tobacco from a farm in any State for which a farm 
marketing quota has been established for any kind of tobacco shall be 
identified by a marketing card issued for the farm on which such tobacco 
was produced (unless prior to the marketing of such tobacco an AMS 
inspection certificate is obtained showing that the tobacco offered for 
sale is a kind of tobacco not subject to marketing quotas).
    (2) Recording farm identification. For burley or flue-cured tobacco, 
at the time the tobacco is weighed in, the warehouse operator shall 
record on the tobacco sale bill, the State and county codes and the farm 
serial number from the marketing card issued for the farm from which the 
tobacco is to be marketed.
    (3) Return of marketing card. For tobacco that is to be sold at 
auction, the

[[Page 158]]

warehouse operator shall retain the marketing card until the producer 
has been paid for the sale of the tobacco or the tobacco is removed from 
the warehouse by the producer at which time the marketing card shall be 
returned to the producer. In any case where a producer's marketing card 
is found in the possession of a warehouse operator, and no producer on 
the farm for which the card is issued has tobacco on the floor for sale, 
or tobacco for which settlement is not yet completed, such card will be 
picked up by an FSA representative for return to the producer. The 
warehouse operator shall be responsible for the safekeeping and proper 
use of the marketing card during such person's retention of the 
marketing card.
    (4) No price support. For burley or flue-cured tobacco, if tobacco 
is to be marketed at auction from a farm for which a marketing card is 
issued bearing the notation ``No Price Support'', the warehouse operator 
shall enter the same notation on the tobacco sale bill at the time the 
tobacco is weighed in for sale. The warehouse operator shall prepare a 
separate tobacco sale bill to cover any tobacco which represents more 
than 103 percent of the effective farm marketing quota and the notation 
``No Price Support'' shall be shown on such tobacco sale bill. The sale 
of such tobacco shall be considered a separate sale.
    (5) Nonauction purchase. The warehouse operator shall enter the 
letters ``NA'' on each line of a tobacco sale bill on which there is 
recorded tobacco purchased by or for the warehouse at nonauction sale 
and shall record on all such tobacco sale bills:
    (i) For burley or flue-cured tobacco, the farm serial number from 
the marketing card that is used to identify the tobacco at the time of 
the nonauction purchase.
    (ii) For tobacco other than burley or flue-cured, the serial number 
of the marketing card that is used to identify the tobacco at the time 
of the nonauction purchase.
    (6) Copy of sale bill. The warehouse operator shall furnish to the 
producer a copy of the tobacco sale bill bearing the letters ``NA'' for 
any lot of such tobacco purchased by the warehouse operator.
    (7) Lot ticket. At the time tobacco is weighed for marketing, the 
warehouse operator shall record the weight of the lot of tobacco on the 
tobacco sale bill and on the lot ticket. The sale bill number on which 
the lot of tobacco is recorded shall be recorded on the lot ticket. If 
the marketing card which is presented to identify the tobacco at weigh-
in bears the notation ``No Price Support,'' the same notation shall be 
entered by the warehouse operator on the lot ticket for each lot of 
tobacco which is identified with the same marketing card.
    (8) Recording serial number of marketing card. For tobacco other 
than burley or flue-cured, before the tobacco is offered for sale, the 
warehouse operator shall record, on the sale bill, the serial number of 
the Form MQ-76 or MQ-77 issued for the farm from which the tobacco is to 
be marketed at auction.
    (9) Recording sale bill number. For tobacco other than burley or 
flue-cured, the serial number of the sale bill shall be recorded:
    (i) By the warehouse operator on the check register or check stub 
from the check written to cover an auction sale of tobacco by a 
producer.
    (ii) On the inside of the marketing card by the marketing recorder 
or warehouse operator for each sale of tobacco by a producer.
    (10) Burley or flue-cured marketings. A marketing card used to cover 
a sale of burley or flue-cured tobacco shall show on the reverse side 
the poundage balance of the ``103 percent of quota.''
    (i) Auction sale. At the time of weigh-in the tobacco sale bill 
shall show the poundage balance of 103 percent of the farm's quota. The 
tobacco sale bill shall show the pounds on which penalty is due, and the 
amount of penalty.
    (ii) Nonauction sale to a warehouse operator at the warehouse. If 
the tobacco sale bill includes both an auction sale and a nonauction 
sale such combined pounds shall be used to compute and reflect the 
balance of the ``103 percent of quota.'' The tobacco sale bill shall 
show the pounds on which penalty is due and the amount of the penalty.

[[Page 159]]

    (iii) Nonauction country purchase by a warehouse operator. The 
warehouse operator shall deduct, from the balance of the ``103 percent 
of quota'' entry on the marketing card, the pounds of tobacco purchased 
as a nonauction country purchase. In addition, each warehouse operator 
shall record on Form MQ-79 and on Form MQ-72-2, Report of Tobacco 
Nonauction Purchase, each nonauction country purchase of tobacco made by 
such warehouse operator. The data to be reported on Form MQ-72-2 is set 
forth in Sec. 723.404 of this part.
    (11) Sale memo and bill of nonauction sales. For tobacco other than 
burley or flue-cured, a record of sales on Forms MQ-76, MQ-77, or MQ-82, 
Sale Without Marketing Card (including sale memo from MQ-77 or MQ-82), 
shall be obtained by a warehouse operator to cover each marketing of 
tobacco from a farm through a warehouse and each nonauction sale of 
tobacco purchased by or for the warehouse operator including scrap 
tobacco obtained as a result of providing curing space or stripping 
space for farmers. Each MQ-76 and MQ-77 (including sale memo) shall be 
executed as follows:
    (i) Auction sale. An auction sale identified by MQ-76 shall show in 
the spaces provided thereon, the sale bill number, check-mark to show 
the sale was by auction, a check-mark to show nonauction for purchases 
identified ``NA'' on the sale bill, pounds sold, name and address of 
warehouse, and date of sale. In addition, each sale memo issued from MQ-
77 to cover an auction sale shall show on the first page thereof in all 
of the spaces provided therefor, the warehouse bill number, pounds sold, 
amount of penalty due, name and address of warehouse, and date of sale.
    (ii) Nonauction sale to a warehouse operator who does not prepare a 
sale bill. An MQ-76 used to cover a nonauction sale of tobacco to a 
warehouse operator who does not prepare a sale bill to cover the sale 
shall show, a check-mark to indicate sale was by nonauction, pounds 
sold, name and address of the warehouse, and date of sale. When an MQ-77 
is used under this paragraph, a sale memo shall be executed, including 
the signature of the producer on the reverse side.
    (iii) Nonauction sale to a warehouse operator who prepares a sale 
bill. When a warehouse operator purchases:
    (A) All the delivery of a producer's tobacco at a nonauction sale 
and prepares a sale bill to cover the purchase, on MQ-76 there shall be 
shown the bill number, check-mark to show nonauction purchases, pounds 
sold, name and address of warehouse, and date of sale. When an MQ-77 is 
used a sale memo shall be executed, including the signature of the 
producer on the reverse side.
    (B) Part of a delivery of a producer's tobacco as a nonauction 
purchase and the remainder of the tobacco is sold at auction, if such 
tobacco is identified by an MQ-76 the Record of Sales shall be completed 
to show the name and address of the warehouse, the date of sale, the 
sale bill number, check-mark under both auction and nonauction, and, 
under ``Lbs. Sold,'' the total number of pounds covered by the entire 
delivery. If the sale is identified by an MQ-77, the sale memo (front) 
shall be completed to show the sale bill number, the total number of 
pounds covered by the entire delivery under ``Lbs. Sold,'' the amount of 
penalty due, name and address of the warehouse, and the date of sale. In 
addition, the reverse side of the sale memo shall show the number of 
pounds sold at nonauction.
    (f) Nonquota tobacco or quota tobacco of a different kind. If 
tobacco is presented for sale that is represented to be nonquota tobacco 
or should there be a question as to what kind of quota tobacco is being 
offered for sale, an inspection shall be obtained from the Agricultural 
Marketing Service of this Department (AMS) after the tobacco is weighed 
and in line for sale. The lot ticket for the tobacco shall be cross-
referenced to the sale bill by sale bill number and date. The sale bill 
shall show the producer's name and address and the State and county code 
and farm number of the farm on which the tobacco was produced. If an AMS 
inspection shows that a lot of tobacco is of a different kind than that 
identified by the lot ticket, such tobacco shall be deleted from the 
original sale bill and a revised sale bill prepared. Copies of

[[Page 160]]

the lot ticket and sale bill shall be furnished to the State FSA office 
at the end of the sale day.
    (g) Labeling tobacco sale bill for resale tobacco. In the case of 
resales, each sale bill shall show ``resale'' and;
    (1) For dealers, the name of the dealer making each resale; and
    (2) For the warehouse, the name of the warehouse and either ``floor 
sweepings'' or ``leaf account'' tobacco.
    (h) Suspended sale record. (1) Any tobacco sale bill covering sale 
of tobacco for which a valid marketing card or dealer identification 
card was not presented at the end of the sale day shall be given to a 
marketing recorder who shall stamp such bills, ``Suspended'', and shall 
handle according to instructions provided by the Deputy Administrator.
    (2) When cleared, such suspended sale shall show ``suspended-
cleared'' and date cleared. If a suspended sale is not cleared from 
suspension by the last auction sale day for the warehouse for the season 
(or for burley tobacco only, within 7 days of the sale if such date is 
earlier), it shall be considered a sale of excess tobacco and penalty at 
the full rate shall be remitted by the warehouse operator.
    (i) Payee to be shown on auction warehouse check. Any auction 
warehouse which issues a check to cover the auction or nonauction sale 
of tobacco shall issue such check only in the name of the payee. A 
warehouse check shall not be issued in the name of the seller and 
bearer, for example ``John Doe or Bearer.''
    (j) Warehouse entries on other dealer's reports. Each warehouse 
operator shall record, or have the dealer record, on a Form MQ-79 the 
total purchases and resales made by each such dealer or other warehouse 
operator during each sale day at the warehouse. Warehouse operators 
shall sign the Form MQ-79 on the same line as the transaction is 
recorded when a dealer resells tobacco at the warehouse. If any tobacco 
resold by the dealer and carried over by the dealer from a crop produced 
prior to the current crop, an entry shall be made on the MQ-79 to 
clearly show such fact.
    (k) Warehouse data for burley or flue-cured tobacco. (1) Each 
operator of a burley or flue-cured tobacco auction warehouse shall 
prepare at the end of each sale day a report on MQ-80, Daily Warehouse 
Sales Summary, showing for each sale day:
    (i) For each manufacturer, buyer, order buyer, and any tobacco 
cooperative, pounds of tobacco purchased at auction (consigned in the 
case of tobacco cooperatives).
    (ii) The sum of the items for paragraph (k)(1)(i) of this section.
    (iii) Resales at auction for each person listed under paragraph 
(k)(1)(i) of this section.
    (iv) For each dealer subject to reporting purchases and resales on 
MQ-79, as originally billed, the total pounds of tobacco purchased at 
auction, and resales at auction.
    (v) The total pounds purchased at auction at the warehouse for the 
leaf account.
    (vi) The total pounds purchased at nonauction at the warehouse for 
the leaf account.
    (vii) The sum of the total pounds for paragraphs (k)(v) and (vi) of 
this section.
    (viii) The total leaf account resales.
    (ix) The total floor sweeping resales.
    (x) The sum of the total purchases for paragraphs (k)(1)(ii), (iv), 
and (vii) of this section.
    (xi) The sum of the total resales for paragraphs (k)(1)(ii), (iv), 
(viii) and (ix) of this section.
    (xii) The totals of the purchases column on the Form MQ-79 
representing the nonauction purchases for the warehouse leaf account.
    (xiii) The totals of the resales column on Form MQ-79 representing 
the nonauction resales (including floor sweepings nonauction sales) by 
the warehouse.
    (xiv) For each warehouse sale of excess tobacco from a farm, the 
applicable farm number with daily remittance of the penalty due to 
accompany Form MQ-72-1.
    (xv) For each dealer, at the time of settlement having excess resale 
tobacco, the applicable dealer identification number with daily 
remittance of the penalty due.
    (2) As to the information required to be entered on MQ-80, Daily 
Warehouse Sales Summary, by the marketing recorder, the warehouse 
operator shall

[[Page 161]]

keep and make available such records as will enable the marketing 
recorder to enter thereon:
    (i) The total number of Forms MQ-72-1 for the sale day and the sum 
of pounds sold, and
    (ii) The total number of suspended sale bills and the sum of such 
pounds sold.
    (3) At the end of the season, each warehouse operator shall:
    (i) Report on the final MQ-80 for the season the quantity of leaf 
account tobacco and floor sweepings, if any, on hand and its location, 
provided further that if on inspection it is determined that there is 
damaged tobacco in the warehouse or otherwise on hand, no carryover 
credit for the next marketing year shall be allowed for the damaged 
tobacco and the amount of pounds of damaged tobacco shall be deducted 
from the operator's purchase credit for the current year,
    (ii) Permit its inspection by a representative of FSA, and
    (iii) Provide for the weighing of such tobacco, to be witnessed by 
an FSA representative, and furnish to such representative a 
certification as to the actual weight of such tobacco. After the weight 
of such tobacco has been obtained, it shall be considered as the 
official weight for comparing purchases and resales for the purpose of 
determining the amount of penalty, if penalty is due.
    (4) The warehouse operator shall furnish to the marketing recorder a 
copy of each executed MQ-80.
    (5) Before the next marketing season begins, carryover tobacco 
reported by the warehouse operator as provided in paragraph (k)(3) of 
this section shall be reinspected by a representative of FSA.
    (i) If the reinspection indicates an amount of carryover tobacco 
different from that amount determined by the initial inspection, the 
warehouse operator shall:
    (A) Provide for the weighing of such tobacco which shall be 
witnessed by a representative of FSA.
    (B) Furnish to such representative at the time of weighing a 
certification as to the actual weight of the tobacco.
    (ii) If the FSA representative determines that the weight of the 
tobacco is different, by reweighing, than the amount reported on the 
initial certification, the initial weight, together with the reweighed 
quantity after taking into consideration any purchases and resales that 
occurred subsequent to the initial certification as provided in 
paragraph (k)(3) of this section, shall be used for the purpose of 
determining the amount of penalty, if penalty is due.
    (iii) The reweighed quantity shall be the official pounds to be 
credited to the account as carryover tobacco.
    (iv) If upon reinspection by a representative of FSA, there is an 
amount of tobacco determined to be damaged tobacco, the pounds of 
damaged tobacco shall be deducted from the purchase credit, if not done 
so previously, and no carryover credit shall be allowed for such damaged 
tobacco for the next marketing year.
    (l) Warehouse data for tobacco other than burley or flue-cured. (1) 
Each operator of a tobacco auction warehouse, other than the operator of 
a burley or flue-cured auction warehouse, shall prepare and promptly 
forward at the end of each sale day to the State FSA office a report on 
MQ-80, Daily Auction Warehouse Report, showing for each sale day, unless 
otherwise stated below:
    (i) For each dealer or buyer as originally billed, the total pounds 
of tobacco purchased at auction and resales at auction on the warehouse 
floor.
    (ii) For any association as originally billed, the total pounds and 
gross amount of loan tobacco acquired at auction, and resales at 
auction, if any, on the warehouse floor.
    (iii) The total pounds of:
    (A) Leaf account purchases at auction on the warehouse operator's 
own floor,
    (B) Leaf account purchases at nonauction sale for which a floor 
sheet is prepared,
    (C) All leaf account resales at auction on the warehouse operator's 
own floor, including resales of tobacco from the warehouse operator's 
buyers corrections account, and
    (D) All resales at auction on the warehouse operator's own floor of 
floor sweepings which accumulated on the warehouse operator's own floor.

[[Page 162]]

    (iv) The respective sums of the purchases, including loan tobacco, 
and resales for paragraphs (l)(1)(i), (ii), and (iii) of this section.
    (v) The computed total of first sales at auction on the warehouse 
floor.
    (vi) The warehouse gross sale pounds for the day as billed to 
buyers.
    (vii) The pounds on warehouse check register if shown thereon, and
    (viii) The total pounds of the resales,
    (ix) On the report for the last sale day for the season, the pounds 
of all tobacco on hand whether such tobacco represents leaf account 
tobacco or floor sweepings which accumulated on the warehouse operator's 
own floor.
    (x) For each warehouse sale of excess tobacco from a farm, the 
applicable sale memo and numbers thereof with remittance of the penalty 
due as shown thereon.
    (2) As to information required to be entered on MQ-80, Daily Auction 
Warehouse Report, by the marketing recorder, the warehouse operator 
shall keep and make available such records as will enable the marketing 
recorder to enter thereon:
    (i) For each sale identified by an MQ-76, MQ-77 (including sale 
memo), or MQ-82, Sale Without Marketing Card, the pounds sold;
    (ii) For each sale suspended, the warehouse bill(s) number and 
pounds sold;
    (iii) For each sale cleared from suspension, the MQ-76 number or, 
for MQ-77 or MQ-82, the sale memo number and the date of clearance.
    (3) When a producer rejects the sale of a lot of tobacco, and the 
tobacco has been billed out and the bills presented to the buyer, the 
warehouse operator shall not change the marketing card, or Form MQ-80 on 
which the sale was reported. If the warehouse operator gains possession 
of the tobacco and it is resold by such warehouse operator, it shall be 
identified as resale tobacco.
    (4) In balancing first sales (represented by marketing recorder's 
total) with computed first sales (bill-out total minus resales as 
reported by the warehouse operator) the State FSA executive director is 
authorized to approve reports with variance not to exceed one-half of 1 
percent of such pounds.
    (5) At the end of the season, each warehouse operator shall:
    (i) Report on the final MQ-80 for the season the quantity of leaf 
account tobacco and floor sweepings, if any, on hand and its location,
    (ii) Permit its inspection by a representative of FSA, and
    (iii) Provide for the weighing of such tobacco (to be witnessed by a 
representative of FSA) and furnish to such representative a 
certification as to the actual weight of such tobacco. After the weight 
of such tobacco has been obtained, it shall be considered as the 
official weight for comparing purchases and resales for the purpose of 
determining the amount of penalty, if penalty is due. Separate data 
shall be reported for floor sweeping tobacco.
    (m) Bill-out invoice. For flue-cured tobacco when the tobacco has 
been sold at auction, the bill-out invoice to the buyer shall include 
the warehouse registration number (warehouse code), sale bill number, 
and line number on which the lot of tobacco was recorded on the sale 
bill.
    (n) Maintaining copies of bill-out invoices to purchaser or daily 
summary journal sheet to reflect daily transactions. For each marketing 
year, the warehouse operator shall maintain copies of the bill-out 
invoice to the purchaser by grades showing the pounds purchased. In lieu 
of this requirement, the warehouse operator may prepare and maintain for 
each sale day on a current basis a daily summary journal sheet to 
reflect for each purchaser (including warehouse leaf account or other 
similar account) pounds and dollar amounts for:
    (1) Tobacco originally billed to the purchaser.
    (2) Mathematical billing errors and corrections (added and deducted) 
from purchaser's adjustment invoices.
    (3) Short (deducted) and long (added) weights from purchaser's 
adjustment invoices.
    (4) Short (deducted) and long (added) lots from purchaser's 
adjustment invoices.
    (5) Net tobacco received and paid for by purchase.
    (o) Handling rejected (producer) sale after bill-out. Where a 
producer rejects

[[Page 163]]

the sale of a lot of tobacco, and the tobacco has been billed-out and 
bills presented to the buyer, the warehouse operator shall not change 
the MQ-76 or MQ-80 on which the sale was reported. If the warehouse 
operator gains possession of the tobacco, and it is resold by such 
warehouse operator, it shall be identified as resale tobacco.
    (p) Report to county FSA office of long weights and long lots. Each 
warehouse operator shall report to the county FSA office or marketing 
recorder long weights and long lots of producer tobacco (first sales) 
for which the farmer has been paid.
    (q) Record and report of warehouse operator's leaf account purchases 
and resales not on such warehouse operator's floor. (1) Each warehouse 
operator shall keep a record and make reports on MQ-79, Dealer's Report, 
showing:
    (i) All nonauction purchases of tobacco, except nonauction purchases 
at such warehouse operator's warehouse which are reported on MQ-80.
    (ii) All purchases and resales of tobacco at public auction through 
warehouses other than such operator's own warehouse.
    (iii) All nonauction resales of tobacco.
    (2) Form MQ-79 shall be prepared and a copy, including copies of 
Form MQ-72-2 for all nonauction purchases of burley or flue-cured 
tobacco, forwarded to the State FSA office not later than the end of the 
calendar week (at the end of each sale day during the auction season for 
such warehouse) in which such tobacco was purchased or resold.
    (3) If tobacco is purchased prior to the opening of the local 
auction market, an MQ-79 shall be prepared and a copy, together with 
copies of MQ-72-2 for all nonauction purchases of burley or flue-cured 
tobacco, forwarded to the State FSA office not later than the end of the 
calendar week which would include the first sale day of the local 
auction markets.
    (4) A remittance for all penalties shown by the entries on Form MQ-
79 and Form MQ-72-2 to be due shall be forwarded to the State FSA office 
with the original copy of MQ-79.
    (5) Resales of floor sweepings shall be reported separately from 
leaf account tobacco.
    (r) Buyers corrections account. Each warehouse operator shall keep 
such records including negative adjustment invoices as will enable the 
warehouse operator to furnish a weekly report on Form MQ-71 to the State 
FSA office showing the total pounds of the debits (for returned lots, 
short lots, and short weights of tobacco) and the credits (for long lots 
and long weights of tobacco) to the buyers corrections account. Where 
the warehouse operator returns to the seller tobacco debited to the 
buyers corrections account, the warehouse operator shall prepare an 
adjustment invoice to the seller. This invoice shall be the basis for a 
credit entry for the warehouse in the buyers corrections account and a 
corresponding purchase (debit entry) in the case of a dealer on such 
dealer's MQ-79, Dealer's Report. Any balancing figure reflected on the 
warehouse operator's summary of bill-outs shall not be included in the 
buyers corrections account.
    (s) Reporting of processed leaf account tobacco. Any warehouse 
operator who delivers tobacco to a firm for the purpose of redrying, 
processing, or stemming of such tobacco shall, by the end of the week in 
which such tobacco was delivered, report to the State FSA office on MQ-
79, Dealer's Report:
    (1) The date delivered;
    (2) Name and address of the firm to which the tobacco was delivered, 
and
    (3) The pounds of tobacco (green weight) delivered which shall be 
entered in the resales pounds column. Such tobacco shall be considered a 
resale on the date of delivery for the purpose of balancing the 
warehouse account and collection of penalties where penalties are due.
    (t) Report of farm scrap resulting from grading tobacco for farmers. 
Any warehouse operator or any other person who grades tobacco for 
farmers shall maintain records which will enable such person to furnish 
the State FSA office the name of the farm operator and the approximate 
amount of scrap tobacco obtained from the grading of tobacco from each 
farm.
    (u) Report of farm scrap resulting from furnishing stripping space 
for farmers. Any warehouse operator or any other person who provides 
tobacco curing space or stripping space for farmers

[[Page 164]]

shall maintain records which will enable such person to furnish the 
State FSA office the name of the farm operator and the approximate 
amount of scrap tobacco obtained from each farm resulting from providing 
such space.
    (v) Producer tobacco. Producer tobacco (first sale) in possession of 
a warehouse operator, resulting from long weights and long lots, which 
has not previously been identified by a sale shall be recorded and 
reported in the same manner as a nonauction sale to a warehouse operator 
who does not prepare a warehouse bill (floor sheet) and shall be 
reported on MQ-79, Dealer's Record. Penalty shall be due on this tobacco 
at the full penalty rate for the respective kind of tobacco or, if the 
kind is not known, at the penalty rate for the kind of tobacco generally 
marketed through the warehouse.

[55 FR 39914, Oct. 1, 1990, as amended at 57 FR 43582, Sept. 21, 1992]



Sec. 723.404  Dealer's records and reports, excluding cigar tobacco buyers.

    (a) General. This section is applicable to all kinds of tobacco 
except cigar tobacco.
    (1) Each dealer, except as provided in Sec. 723.405 of this part 
shall keep by kinds of tobacco the records and make the reports 
separately for each kind (quota and nonquota) of tobacco as provided in 
this section. Adjustment invoices, including the adjustment invoices for 
any sale day for which there is no adjustment to be made, required to be 
furnished to an auction warehouse shall be identified by the warehouse 
identification number (if applicable) and the reporting dealer's 
identification number (if applicable) as well as the names of the 
warehouse and dealers involved in the transaction.
    (2) Each dealer shall properly execute the ``Receipt for Dealer's 
Record'' contained in MQ-79, which is issued to the dealer, and shall 
transmit such receipt to the applicable State FSA office.
    (b) Record of marketings. A dealer shall keep records which provide 
the following information for each lot of tobacco, including scrap 
tobacco, purchased or sold by the dealer:
    (1) Purchases. (i) The name of:
    (A) The warehouse through which the tobacco was purchased, if 
purchased at a warehouse auction; or
    (B) The operator of the farm on which the tobacco was produced, if 
purchased from a producer as a nonauction purchase, and the name of the 
producer of the tobacco, if different from the operator; or
    (C) The seller if purchased as a nonauction purchase from a 
warehouse operator or dealer.
    (ii) The identification number of the warehouse, farm, or dealer, as 
applicable, at/from which the tobacco was purchased.
    (iii) The address, the producer association number, if applicable, 
and percentage share of the proceeds of the farm operator and any other 
producer from whom tobacco was purchased as a nonauction purchase.
    (iv) The date of purchase.
    (v) The pounds of tobacco purchased.
    (vi) The gross purchase price.
    (vii) The amount of penalty.
    (viii) The amounts remitted for the No Net Cost and the Tobacco 
Marketing Assessments.
    (ix) The quantity of tobacco purchased from a prior crop and carried 
over for marketing in a subsequent crop year.
    (2) Sales. (i) The name and identification number of the:
    (A) Warehouse through which the tobacco was sold, if sold at a 
warehouse auction, or
    (B) Buyer if the tobacco was sold at a nonauction sale.
    (ii) The date of sale.
    (iii) The pounds of tobacco sold.
    (iv) The gross sale price.
    (c) Nonauction purchase. (1) Each purchase of tobacco from a 
producer from a quota producing area shall be identified by a marketing 
card, issued for the farm on which the tobacco was produced unless an 
AMS inspection is obtained prior to purchase which shows that tobacco 
being offered for sale is a kind not subject to marketing quotas.
    (2) For burley and flue-cured tobacco:
    (i) After each nonauction purchase, the dealer shall enter a 
declining balance of ``103 percent of quota'' on the reverse side of the 
marketing card. The declining balance shall be determined by reducing 
the previous ``103 percent

[[Page 165]]

of quota'' entry on the marketing card by the number of pounds of 
tobacco purchased. The date the tobacco was purchased also shall be 
entered on the marketing card at the time each lot of tobacco is 
purchased.
    (ii) After each nonauction purchase, the dealer shall prepare a form 
MQ-72-2 which shall set forth the following:
    (A) The date of the purchase.
    (B) The registration number of the dealer.
    (C) The name and address of the person selling the tobacco.
    (D) The identification number (farm number, warehouse code, or 
dealer number, as applicable) of the person selling the tobacco.
    (E) The pounds of tobacco purchased.
    (F) The amount of penalty collected.
    (G) The method (estimating or weighing) of determining the pounds of 
tobacco marketed.
    (H) The signature of the seller and the date signed.
    (iii) For nonauction purchases which are made by the dealer from 
producers, the dealer shall remit the producer's and the dealer's share 
of the No Net Cost and Tobacco Marketing Assessments as provided in part 
1464 of this title. The dealer may deduct the producer's share of each 
assessment from the price paid for the tobacco. However, the No Net Cost 
Assessment shall not be remitted from a producer who identifies the 
tobacco for marketing with a marketing card which has zero pounds as the 
103 percent entry on the marketing card. A marketing penalty at the full 
rate shall be collected on the marketings identified by such card. The 
amount of the No Net Cost and the Tobacco Marketing Assessments which is 
applicable to tobacco marketed during each marketing year will be the 
amount per pound which is approved and announced by the Secretary.
    (3) For all other kinds of tobacco:
    (i) When a Form MQ-77 Marketing Card is used to identify a 
nonauction sale, the producer's signature shall be obtained on the 
reverse side of a sale memo which is a part of the Form MQ-77. A 
nonauction sale not identified by a marketing card shall be identified 
by a Form MQ-82 executed by a marketing recorder or other representative 
of the State FSA committee. The dealer shall record each nonauction 
purchase of tobacco on Form MQ-79, Dealer's Record.
    (ii) For nonauction purchases which are made by the dealer from 
producers, the dealer shall remit the producer's and the dealer's share 
of the No Net Cost and Tobacco Marketing Assessments as provided in part 
1464 of this title. The dealer may deduct the producer's share of each 
assessment from the price paid for the tobacco. However, the No Net Cost 
Assessment shall not be remitted from a producer if the marketing card 
used to identify a kind of tobacco shows a converted penalty rate of 100 
percent. A marketing penalty at the full rate shall be collected on the 
marketings identified by such card. The amount of the No Net Cost and 
the Tobacco Marketing Assessments which is applicable for each kind of 
tobacco marketed during each marketing year will be the amount per pound 
which is approved and announced by the Secretary.
    (d) Record and report of purchases and resales. (1) For burley and 
flue-cured tobacco, each dealer shall keep a record and make reports on 
Form MQ-79 showing all purchases and resales, excluding tobacco not in 
the form normally marketed by producers. After each transaction is 
entered on the Form MQ-79, each dealer shall enter a balance to reflect 
the pounds of tobacco remaining that may be sold without causing prior 
resales to exceed prior purchases. Any tobacco sold in excess of such 
balance shall be considered excess tobacco and subject to a marketing 
quota penalty at the full penalty rate. The purchaser shall sign the 
Form MQ-79 on the same line as the transaction is recorded by the dealer 
who is offering such tobacco for resale. In the event of a purchase or 
resale of tobacco which is purchased by the dealer from a crop of 
tobacco produced prior to the current crop, the Form MQ-79 shall be 
annotated to indicate that such tobacco was so purchased and carried 
over from a crop produced prior to the current crop.
    (2) For all other kinds of tobacco, each dealer shall keep a record 
and make reports on Form MQ-79 showing all purchases and resales of 
tobacco made by or for the dealer and, in the event of a purchase or 
resale of tobacco

[[Page 166]]

which is purchased prior to the current crop, the fact that such tobacco 
was so purchased and carried over from a crop produced prior to the 
current crop.
    (3) A Form MQ-79 shall be prepared and a copy (together with 
executed copies of Form MQ-72-2 for all nonauction purchases of burley 
and flue-cured tobacco) shall be forwarded to the State FSA office not 
later than the end of the calendar week in which such tobacco was 
purchased or resold. However, if tobacco is purchased prior to the 
opening of the local auction market, a Form MQ-79 shall be prepared and 
a copy, together with executed copies of Form MQ-72-2 for all nonauction 
purchases, shall be forwarded to the State FSA office not later than the 
end of the calendar week which would include the first sale date of the 
local auction markets. In addition, if tobacco is resold in a State 
other than where the tobacco is produced and the auction markets at such 
location open earlier than the auction market where the tobacco normally 
would be sold at auction by farmers, reports together with executed 
copies of Form MQ-72-2 for all nonauction purchases shall be prepared 
and forwarded to the State FSA office not later than the end of the 
calendar week which would include the first day of the local auction 
market where the resale takes place.
    (4) The data to be entered on Form MQ-72-2 for nonauction purchases 
from a producer shall be the data which is enumerated in accordance with 
the provisions of paragraph (c)(2) of this section.
    (5) At the end of the dealer's marketing operation, but not later 
than April 1 for tobacco other than flue-cured and January 15 for flue-
cured tobacco, such dealer shall for each kind of tobacco:
    (i) Show the word ``final'' on the Dealer's Report, MQ-79, for the 
season,
    (ii) Report on such ``final'' MQ-79 for the season the quantity of 
tobacco on hand and its location,
    (iii) Permit its inspection by a representative of FSA, and
    (iv) Provide for weighing of such tobacco (to be witnessed by a 
representative of FSA) and furnish a certification as to the actual 
weight of such tobacco. After the weight of such tobacco has been 
determined as provided in this section, it shall be considered as the 
official weight for comparing purchases and resales for the purpose of 
determining the amount of penalty, if penalty is due.
    (v) If upon inspection by a representative of FSA, there is an 
amount of tobacco determined to be damaged tobacco according to Sec. 
723.104, such amount of pounds shall be deducted from the purchase 
credit and no carryover credit shall be allowed for such damaged tobacco 
for the next marketing year.
    (6) Notwithstanding the provisions of paragraph (d)(5) of this 
section, any dealer having tobacco transactions after January 15 for 
flue-cured and April 1 for other than flue-cured shall make reports on 
Form MQ-79 at the end of each week, as provided in paragraph (d)(3) of 
this section.
    (7) For burley and flue-cured tobacco, before the next marketing 
season begins, carryover tobacco reported by the dealer as provided in 
paragraph (d)(5) of this section shall be reinspected by a 
representative of FSA. When the reinspection indicates an amount of 
carryover tobacco different from that amount determined by the initial 
inspection, the dealer shall provide for the weighing of such tobacco 
which shall be witnessed by an FSA representative. The dealer shall 
furnish to such representative at the time of weighing a certification 
as to the actual weight of such tobacco. If an FSA representative 
determines that the weight of the tobacco is different, by reweighing, 
than the amount reported on the initial weight together with the 
reweighed quantity after taking into consideration any purchases and 
resales that occurred subsequent to the initial certification as 
provided in paragraph (d)(5) of this section shall be used for the 
purpose of determining penalty, if penalty is due. Penalty shall be 
assessed, after the initial certification and reconciliation, when the 
redetermined pounds exceed the amount determined by taking the initial 
pounds of carryover tobacco plus purchases, minus resales. The 
redetermined pounds shall be the official pounds to be credited to the 
account as carryover. If upon reinspection by a

[[Page 167]]

representative of FSA, there is an amount of tobacco determined to be 
damaged tobacco under Sec. 723.104, such amount of pounds shall be 
deducted from the purchase credit and no carryover credit shall be 
allowed for such damaged tobacco for the next marketing year.
    (8) In addition to forms MQ-79 and MQ-72-2, if applicable, form MQ-
79 (Supplemental) shall be executed to record information relating to 
each nonauction purchase of tobacco for which the No Net Cost and 
Tobacco Marketing Assessments are due from producers and dealers. The 
form MQ-79 (Supplemental) shall be forwarded to the State FSA office at 
the same time as the purchase is reported on the MQ-79. A check, draft, 
or money order in the amount of the collections recorded on form MQ-79 
(Supplemental) and made payable to Commodity Credit Corporation shall be 
submitted to the State FSA office along with the forms MQ-79 and MQ-79 
(Supplemental).
    (9) Any flue-cured or burley dealer who fails to comply with all 
provisions of paragraph (d)(5) of this section by January 15 for flue-
cured and April 1 for burley tobacco will be issued a notice of 
noncompliance and the dealer shall be given 15 days to either comply or 
show cause why compliance is not feasible. Failure to complete all 
required actions within 15 days from date of such notice shall result in 
such dealer not being issued a MQ-79-2 for the marketing year 
immediately following the marketing year in which the dealer failed to 
conform with the deadline of January 15 for flue-cured and April 1 for 
burley tobacco.
    (e) Daily report to warehouse operator for buyers correction 
account. Notwithstanding the provisions of Sec. 723.405 of this part, 
reports shall be made as follows:
    (1) Any dealer, buyer, or any other person receiving tobacco from or 
through a warehouse operator at an auction sale or otherwise, which is 
not invoiced to such person or which is incorrectly invoiced to such 
person by the warehouse operator, shall furnish to the warehouse 
operator on a daily sales basis an adjustment invoice or buyers 
settlement sheet.
    (2) Each dealer who purchases tobacco on a warehouse floor for any 
sale day in which there is no adjustment required in the account as 
shown on the warehouse bill-out invoice for that sale day, shall file a 
negative report with the warehouse operator for that sale day.
    (3) Such reports as required under paragraphs (d)(1) and (2) of this 
section shall be furnished daily, if practicable (otherwise, they shall 
be furnished at the end of each week), and shall show the identification 
number of the warehouse where the purchase was made.
    (f) Reporting of processed tobacco. Any dealer who delivers tobacco 
to a firm for the purpose of redrying, processing or stemming of such 
tobacco shall, by the end of the week in which such tobacco was 
delivered, report to the State FSA office on MQ-79, Dealer's Report:
    (1) The date delivered;
    (2) Name and address of the firm to which the tobacco was delivered; 
and
    (3) Pounds of tobacco (green weight) delivered which shall be 
entered in the resales pounds column. Such tobacco shall be considered 
as a resale on the date of delivery for the purpose of balancing the 
dealer account and collection of penalties where penalties are due.
    (g) Tobacco represented to be a nonquota kind. Any dealer who plans 
to purchase tobacco that was produced on a farm in a quota area shall 
treat such tobacco as a quota kind of tobacco according to the 
provisions of this part 723 unless prior to the purchase a certification 
is obtained from an AMS inspector to indicate that such tobacco is a 
nonquota kind of tobacco. In such case, the dealer shall mail or 
otherwise deliver to the State FSA office, on the date of the purchase, 
a copy of the AMS certification and a statement signed by the AMS 
inspector, the producer, and the dealer to indicate the:
    (1) State and county code and farm number of the farm on which the 
tobacco was produced.
    (2) Name and address of the producer.
    (3) Name and address of the dealer.
    (4) Weight of the tobacco.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21443, May 9, 1991; 57 
FR 43582, Sept. 21, 1992]

[[Page 168]]



Sec. 723.405  Dealers exempt from regular records and reports on MQ-79; 
and season report for dealers.

    (a) Any dealer or buyer who acquires tobacco in the form in which 
tobacco ordinarily is sold by farmers and resells 5 percent or less of 
any such tobacco shall not be subject to the requirements of Sec. 
723.404 of this part except for the requirements which relate to the 
reporting of nonauction purchases from producers and the requirements of 
Sec. 723.404(e) of this part. A dealer or buyer whose resales in the 
form normally marketed by producers farmers exceed 5 percent of their 
purchases as a direct result of order buying for another dealer for a 
service fee may report under paragraph (b) of this section in lieu of 
Sec. 723.404 of this part (except for requirements which relate to 
nonauction purchases from producers and requirements of Sec. 723.404(e) 
of this part.
    (b)(1) This paragraph is applicable only to burley and flue-cured 
tobacco. Each dealer or buyer shall make a report to the Director, not 
later than February 1 of each year for flue-cured and April 1 for burley 
tobacco, showing by States where acquired, source and pounds of all 
tobacco, in the form normally marketed by producers, purchased at 
auction or nonauction including tobacco received which was not billed to 
the dealer or buyer. Any acquisition of tobacco in the form normally 
marketed by producers by the dealer or buyer during the marketing year 
(October 1 through September 30 for burley tobacco and July 1 through 
June 30 for flue-cured tobacco) which is not included in the initial 
report shall be reported in like manner no later than the end of the 
calendar week following the week in which the tobacco was acquired. The 
report shall show:
    (2) For purchases at auction for each warehouse;
    (i) USDA registration number (warehouse code),
    (ii) Name and address of warehouse,
    (iii) Gross pounds originally billed to the buyer,
    (iv) Gross pounds billed to the buyer for which payment was made,
    (v) Gross pounds from the company correction account deducted for 
short lots and short weights and returned lots, and
    (vi) Gross pounds from the company correction account added for long 
lots and long weights.
    (3) For purchases at nonauction;
    (i) Name and address of seller (dealer or farmer),
    (ii) Seller's number (dealer's registration number or farm number, 
including State and county code), and
    (iii) Pounds purchased.



Sec. 723.406  Provisions applicable to damaged tobacco or to purchases 
of tobacco from processors or manufacturers.

    (a) Damaged tobacco. Any dealer, warehouse operator, or other person 
who intends to purchase damaged tobacco shall notify the State FSA 
office where the warehouse operator or dealer is registered or should be 
registered. Such report must be made at least 2 business days in advance 
of the purchase so as to allow for inspection arrangements to be made. 
The inspection shall be conducted by an FSA representative and no 
purchase credit shall be allowed the buyer for the quantity determined 
to be damaged tobacco. Damaged tobacco may be disposed of without 
incurring a penalty only if the tobacco is destroyed and the destruction 
is witnessed by an FSA representative or the tobacco is sold directly to 
a processor or manufacturer and such sale is reported to the same State 
FSA office. Any tobacco not disposed of in that manner shall be deemed 
to have been a marketing of excess tobacco and will be subject to a 
penalty at the full penalty rate for the quantity of tobacco involved.
    (b) Purchase from processor or manufacturer. Any tobacco purchased 
by a dealer, warehouse operator, or other person from a processor or 
manufacturer shall be considered to be tobacco in the form not normally 
marketed by producers unless the purchaser obtains from the processor or 
manufacturer a certification stating that such purchased tobacco is in 
the form normally marketed by producers. The certification by the 
processor or manufacturer shall be on a form prescribed by the Deputy 
Administrator certifying to FSA that the tobacco involved in the 
transfer of ownership is in the form normally marketed by producers. No

[[Page 169]]

purchase credit shall be given to a dealer, warehouse operator, or other 
person on MQ-79, Dealer's Record Book, for any purchase of tobacco which 
is not in the form normally marketed by producers. Tobacco which meets 
the definition of pickings as defined in this part shall be considered 
tobacco in the form not normally marketed by producers.
    (c) Report by dealer or warehouse operator. Any dealer, warehouse 
operator or other person who plans to purchase tobacco in the form 
normally marketed by producers from a processor or manufacturer shall, 
prior to purchase, report such plans to the State FSA office issuing 
form MQ-79, Dealer's Record Book, to such person. Such report shall be 
made timely so that a representative of FSA may inspect the tobacco to 
determine its marketable value and whether the tobacco is in the form 
normally marketed by producers. Any tobacco purchased from processors or 
manufacturers before such plans are reported to the state FSA office and 
before the tobacco is inspected by an FSA representative or an 
inspection is declined by an FSA representative shall be deemed excess 
tobacco and the penalty at the full rate shall be due.
    (d) Report by processor or manufacturer. Each processor or 
manufacturer shall make a report to the Director, showing the quantity 
of tobacco sold in the form not normally marketed by producers to 
dealers and buyers other than processor or manufacturers. The report 
shall be filed no later than the end of the calendar week following the 
week in which such tobacco was sold and shall show the name of the 
purchaser, the date of the sale and the pounds sold.
    (e) Dealer records and reports. (1) Any dealer, warehouse operator 
or other persons who purchased tobacco classified as not in the form 
normally marketed by producers shall keep such records as will enable 
such person to report to the State FSA office the following:
    (i) Name of seller, pounds purchased, and date of purchase.
    (ii) The disposition of such tobacco including name of buyer, pounds 
sold, date of sale,
    (2) Upon request by the State FSA office such person shall provide 
for the inspection and weighting of the tobacco to be witnessed by an 
FSA representative.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21443, May 9, 1991; 57 
FR 43582, Sept. 21, 1992]



Sec. 723.407  Cigar tobacco buyer's records and reports.

    (a) This section is applicable to buyers of cigar tobacco--(1) 
Definition of cigar buyer. With respect to this section, a buyer is any 
person who buys cigar tobacco including an association or cooperation 
that receives tobacco from producers for the purpose of:
    (i) Selling it for the producers, or
    (ii) Placing it under price-support loan through Commodity Credit 
Corporation.
    (2) Report of buyer's name and address. Each buyer shall properly 
execute, detach, and promptly forward to the State FSA office, ``Receipt 
for Buyer's Record'' contained in MQ-79 (CF&B), which is issued to the 
buyer.
    (b) Record of purchases. A buyer shall keep records which provide 
the following information for each lot of each kind of tobacco purchased 
or sold by the buyer, including tobacco obtained from grading tobacco 
for producers or furnishing curing space, or stripping space:
    (1) The name of:
    (i) The operator of the farm on which the tobacco was produced; or
    (ii) The name and address of the seller, in the case of a sale by a 
person other than the farm operator.
    (2) The identification number of the farm at/from which the tobacco 
was purchased.
    (3) The date of purchase.
    (4) The pounds of tobacco purchased.
    (5) The gross purchase price.
    (6) The amount of penalty.
    (7) The amounts remitted for the No Net Cost and Tobacco Marketing 
Assessments.
    (c) Report of sales. Each buyer shall maintain records which will 
show, by kind of tobacco, the disposition of tobacco purchased under 
paragraph (b) of this section.
    (d) The dealer shall remit the producer's and the dealer's share of 
the No

[[Page 170]]

Net Cost and Tobacco Marketing Assessments as provided in part 1464 of 
this title. The dealer may deduct the producer's share of each 
assessment from the price paid for the tobacco. The No Net Cost 
Assessment shall not be collected from a producer who identifies the 
tobacco for marketing with a marketing card which has a converted 
penalty rate of 100 percent on the marketing card. A marketing penalty 
at the full rate shall be collected on the marketings identified by such 
card. The amount of the No Net Cost and the Tobacco Marketing 
Assessments which is applicable to tobacco marketed during each 
marketing year will be the amount per pound which is approved and 
announced by the Secretary.
    (e) Identification of sale or marketing card memo and buyers 
records. Each MQ-76 and each sale memo from an MQ-77 used to identify 
each sale of tobacco by a producer shall be properly executed by the 
buyer. The serial number of the MQ-76 marketing card or sale memo from 
an HQ-77 to identify such tobacco, shall be recorded on the buyer's copy 
of the MQ-79 (CF&B) and on the check register or check stub for the 
check written with respect to such tobacco.
    (f) Record and report of purchases of tobacco from producers. (1) 
Each buyer shall keep a record and make reports on MQ-79 (CF&B), Buyer's 
Record, showing by kinds of tobacco purchased by or for such buyer from 
producers. Such record and report shall show for each sale the sale 
date, the name of the farm operator, (and the name and address of the 
person selling the tobacco if other than the operator), the serial 
number of the within quota marketing card (MQ-76), and from each excess 
card (MQ-77), the sale memo number used to identify the sale, the pounds 
of tobacco represented in the sale, the rate of penalty shown on the 
sale memo (MQ-77), and the amount of penalty. If a marketing card is not 
presented by the producer, the buyer shall record and report the 
purchase as provided above except that the buyer shall enter the word 
``None'' in the space for the serial number of the marketing card (MQ-
76) or sale memo (MQ-77), the applicable rate of penalty per pound in 
the space for rate of penalty, and shall show the name and address of 
the seller in the space for the seller's name.
    (2) The original of MQ-79 (CF&B), excess sale memos (MQ-77), and a 
remittance for all penalties shown by entries on MQ-79 (CF&B) and on the 
excess sale memos (MQ-77) to be due shall be forwarded to the State FSA 
office not later than the 10th day of the calendar month next following 
the month during which the sale date occurred.
    (3) In addition to forms MQ-79 and MQ-72-2, if applicable, form MQ-
79 (Supplemental) shall be executed to record information relating to 
each nonauction purchase of tobacco for which the No Net Cost and 
Tobacco Marketing Assessments are due from producers and dealers. The 
form MQ-79 (Supplemental) shall be forwarded to the State FSA office at 
the same time as the purchase is reported on the MQ-79. A check, draft, 
or money order in the amount of the collections recorded on form MQ-79 
(Supplemental) and made payable to Commodity Credit Corporation shall be 
submitted to the State FSA office along with the forms MQ-79 and MQ-79 
(Supplemental).

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21443, May 9, 1991]



Sec. 723.408  Producer's records and reports.

    (a) Failure to file reports or filing false reports. (1) With 
respect to any kind of tobacco, if the producer on a farm files an 
incomplete or incorrect report, fails to file a report, or files or aids 
or acquiesces in the filing of any false report with respect to the 
amount of such kind of tobacco produced on or marketed from the farm, 
applicable tobacco acreage allotment or burley farm marketing quota next 
established for such farm shall be reduced, unless the county and State 
FSA committees determine, according to instructions issued by the Deputy 
Administrator, that such reduction is not required.
    (2) For all kinds of tobacco except burley tobacco, if a farm 
operator files a report of acreage of the applicable kind of tobacco on 
the farm and, after a determination of the acreage, it is determined by 
the county FSA committee (with approval of the State FSA committee) that 
the report was false (either significantly under reported or

[[Page 171]]

significantly over reported by more than the tolerance for reporting as 
provided in part 718 of this chapter) in what amounts to a scheme or 
device to defeat the purpose of the program, the allotment next 
established for the farm shall be reduced by an amount determined by 
multiplying the acreage falsely reported (difference between reported 
and determined acreage) by:
    (i) With respect to flue-cured tobacco, the farm yield established 
for the farm for the year in which the false report was filed, or
    (ii) For any other kind of tobacco, the actual yield per acre for 
the year in which the false report was filed.
    (3) Any report of a marketing of tobacco by a producer or any use of 
producer's marketing card to sell the tobacco or the pledge the tobacco 
for a price support loan shall be considered the filing of a false 
report by the producer and, in addition to other remedies as may apply, 
the remedies provided in paragraph (a)(1) of this section shall apply, 
if, under the provisions of part 1464 of this title, the producer was 
not considered to have been an ``eligible producer'' with respect to 
such marketing or other disposition of tobacco.
    (b) Harvesting second crop tobacco from the same farm. For all kinds 
of tobacco except burley, if in the same calendar year more than one 
crop of tobacco was grown from:
    (1) The same tobacco plants, or
    (2) Different tobacco plants, and is harvested for marketing from 
the same acreage of a farm, the acreage allotment next established for 
such farm shall be reduced by an amount equivalent to the acreage from 
which more than one crop of tobacco was so grown and harvested.
    (c) False identification. If there is false identification of any 
kind of tobacco, the applicable farm acreage allotment or farm marketing 
quota next established for the farm and kind of tobacco involved shall 
be reduced, except that such reduction for any such farm shall not be 
made if the county and State FSA committees determine, according to 
instructions issued by the Deputy Administrator, that such reduction is 
not required.
    (d) Report on marketing card. (1) The operator of each farm on which 
tobacco is produced shall return to the county FSA office each marketing 
card issued for the farm whenever marketings from the farm are completed 
and, in no event, later than,
    (i) June 1 of the marketing year in the case of cigar tobacco, and
    (ii) For all other kinds of tobacco, not later than 20 days after 
the close of the tobacco auction markets for the marketing year for the 
locality in which the farm is located. Failure to return the marketing 
card within 15 days after written request by certified mail from the 
county FSA executive director shall constitute failure to account for 
disposition of all tobacco marketed from the farm unless disposition of 
tobacco marketed from the farm is otherwise accounted for to the 
satisfaction of the county FSA committee.
    (2) For all kinds of tobacco except burley and flue-cured:
    (i) At the time the marketing card is returned to the county FSA 
office, the farm operator must certify with respect to each:
    (A) MQ-77, to the quantity of tobacco on hand and its location.
    (B) MQ-76, to the accuracy of the Record of Sales recorded on the 
card.
    (ii) Failure of the farm operator to make the applicable 
certification shall constitute failure to satisfactorily account for the 
disposition of tobacco marketed from the farm.
    (3) Upon failure to satisfactorily account to the county FSA 
committee for disposition of tobacco marketed from the farm the 
allotment or quota next established for such farm and such kind of 
tobacco shall be reduced, except that such reduction for any such farm 
shall not be made if it is established to the satisfaction of the county 
FSA committee and a representative of the State FSA committee that the 
failure to furnish such proof of disposition was unintentional and no 
producer on such farm could reasonably have been expected to furnish 
such proof of disposition. However, such failure will be construed as 
intentional unless such proof of disposition is furnished and payment of 
all additional penalty is made, or no person connected with

[[Page 172]]

such farm for the year for which the acreage allotment or quota is being 
established caused, aided, or acquiesced in the failure to furnish such 
proof.
    (e) Report of production and disposition. (1) In addition to any 
other reports which may be required by this subpart, the operator or any 
producer on a farm (even though the harvested acreage does not exceed 
the acreage allotment or even though no farm acreage allotment or farm 
marketing quota was established for the farm) shall, upon written 
request by certified mail from the State or county FSA committee, 
furnish on MQ-108, Report of Production and Disposition, a written 
report of the acreage, production and disposition of all tobacco 
produced on the farm by sending the same to the State or county FSA 
committee within 15 days after the request was mailed showing as to the 
farm at the time of filing such report with respect to the applicable 
kind of tobacco the:
    (i) Total harvested acres,
    (ii) Total amount of tobacco on hand and its location,
    (iii) Total pounds of tobacco produced,
    (iv) Name and address of the warehouse operator, dealer, or other 
person to or through whom tobacco was marketed, and the number of pounds 
marketed, the gross price paid and the date of the marketings, and
    (v) Complete details as to any tobacco disposed of other than by 
sale.
    (2) With respect to any farm on which burley or flue-cured tobacco 
was produced or available for marketing from carryover tobacco, the 
operator or any producer on the farm (even though the harvested acreage 
does not exceed the flue cured farm acreage allotment or even though no 
farm acreage allotment or farm marketing quota was established for the 
farm) shall, upon written request from the county FSA committee, furnish 
on Form MQ-108-1, Report of Unmarketed Tobacco, a written report of the 
amount and location of the applicable kind of tobacco produced on the 
farm which is unmarketed at the end of the marketing season and the 
amount the applicable kind of tobacco produced by such operator or 
producer on any other farm, which is unmarketed at the end of the 
marketing season and which is stored on the farm, by sending the report 
to the county FSA committee within 15 days after the request was mailed 
to such person at such person's last known address.
    (3) Failure to file the MQ-108 or MQ-108-1 as requested, or the 
filing of MQ-108 or MQ-108-1 which is found by the State or county FSA 
committee to be incomplete or incorrect shall, to the extent that it 
involves tobacco produced on the farm, constitute failure to account for 
the disposition of tobacco produced on the farm and the allotment or 
quota next established for such farm shall be reduced, except that such 
reduction shall not be made if it is established to the satisfaction of 
the county or State FSA committee that failure to furnish such proof of 
disposition was unintentional and no producer on such farm could 
reasonably have been expected to furnish such proof of disposition: 
However, such failure will be construed as intentional unless such proof 
of disposition is furnished and payment of all additional penalty is 
made, or no person connected with such farm for the year for which the 
farm acreage allotment or farm marketing quota is being established 
caused, aided, acquiesced in the failure to furnish such proof.
    (f) Reports by producer-manufacturers. (1) For all kinds of tobacco 
except burley and flue-cured tobacco, each producer who manufactures 
tobacco products from tobacco produced by or for such person as a 
producer, shall report to the State FSA office with respect to each farm 
on which such tobacco is produced and as soon as all tobacco from the 
farm has been weighed as follows:
    (i) If the harvested acreage is within the allotment, the producer-
manufacturer shall report the total pounds of tobacco produced, the 
date(s) on which such tobacco was weighed, the farm serial number of the 
farm on which it was produced, and the estimated value of such tobacco.
    (ii) If the harvested acreage is in excess of the allotment, the 
producer-manufacturer shall report the total pounds of tobacco produced 
on the farm, the date(s) on which the tobacco was weighed, the farm 
serial number of

[[Page 173]]

the farm on which it was produced, the estimated value of the tobacco, 
and the location of the tobacco. If the required reports are not made, 
penalty shall be paid on the tobacco by the producer-manufacturer, at 
the converted rate of penalty shown on the marketing card issued for the 
farm, when it is moved from the place where it can be conveniently 
inspected by the county FSA committee at any time separate and apart 
from any other tobacco.
    (2) If the producer-manufacturer has excess tobacco and does not pay 
the penalty thereon at the converted rate of penalty shown on the 
marketing card, such producer-manufacturer shall notify in writing the 
buyer of the manufactured product or the buyer of any residue resulting 
from processing the tobacco, at time of sale of such product or residue, 
of the precise amount of penalty due on such manufactured product or 
residue. In such event, the producer-manufacturer shall immediately 
notify the State FSA executive director and shall account for the 
disposition of such tobacco by furnishing the State FSA executive 
director a report on a form to be furnished by such State FSA executive 
director, showing the name and address of the buyer of the manufactured 
products or residue, a detailed account of the disposition of such 
tobacco and the exact amounts of penalty due with respect to each such 
sale of such products or residue to indicate, together with copies of 
the written notice that was given to the buyer of such products or 
residue to indicate the exact amount of the penalty due.
    (3) Failure to file the report required in paragraph (f)(2) of this 
section, or the filing of a report which is found by the State FSA 
committee to be incomplete or incorrect, shall be considered failure of 
the producer-manufacturer to account for the disposition of tobacco 
produced on the farm and the allotment next established for the farm 
shall be reduced for such failure, except that such reduction for any 
such farm shall not be made if it is established to the satisfaction of 
the county and State FSA committees, that:
    (i) The failure to furnish such report of disposition was 
unintentional and the producer-manufacturer on such farm could not 
reasonably have been expected to furnish such report of disposition. 
However such failure will be construed as intentional unless such report 
of disposition is furnished and payment of all additional penalty is 
made, or
    (ii) No person connected with such farm for the year for which the 
allotment is being established caused, aided, or acquiesced in the 
failure to furnish such report. The producer-manufacturer shall be 
liable for the payment of penalty.
    (g) Amount of allotment or quota reductions--(1) Burley tobacco. For 
burley tobacco, the farm marketing quota determined for a farm for the 
current year shall be reduced by that amount of tobacco which is 
involved in a marketing quota violation as described in paragraphs (a), 
(b), (c), (d), or (e), of this section which occurred in any prior year. 
However, the amount of such reduction shall not exceed the current year 
farm marketing quota. The county FSA committee shall determine the 
amount of tobacco involved in the marketing quota violation. If the 
actual quantity of tobacco involved in such violation is unknown, the 
county FSA committee shall determine the quantity by considering both 
the condition of the crop during production, if known, and such other 
information as is available.
    (2) Kinds of tobacco except burley tobacco. The amount of reduction 
in the allotment for the current year for a violation described in 
paragraphs (a), (c), (d), (e), or (f) of this section shall be that 
percentage, but not to exceed 100 percent, which the amount of the 
tobacco involved in the violation is of the respective farm marketing 
quota for the farm for the year in which the violation occurred times 
the current year farm acreage allotment. The quantity of tobacco in 
violation shall be determined by the county FSA committee. If known, the 
actual quantity shall be determined by the county FSA committee to be 
the amount of tobacco involved in the violation. If the actual quantity 
is unknown, determine the quantity by taking into consideration the 
condition of the crop during production, if known, and such other 
information that is available.

[[Page 174]]

    (h) Allotment or quota reduction for combined farms. If the farm 
involved in the violation is combined with another farm prior to the 
reduction, the allotment or quota reduction shall be applied as 
heretofore provided in this section to that portion of the farm acreage 
allotment or farm marketing quota for which a reduction is required.
    (i) Allotment or quota reduction for divided farms. If the farm 
involved in the violation has been divided prior to the reduction, the 
reduction shall be applied as heretofore provided in this section to the 
allotments or quota for the divided farms required to be reduced.
    (j) Quota reductions for flue-cured tobacco. For flue-cured tobacco 
only, if an acreage allotment reduction is made under this section, the 
marketing quota shall be reduced to reflect such reduction in an amount 
determined by multiplying the acreage reduction by the farm yield.
    (k) County administrative hearing in connection with violations. 
Except for the failure to return a marketing card, the allotment or 
quota for any farm shall not be reduced for a violation under this 
section until the operator of the farm has been afforded an opportunity 
to discuss the nature and extent of the violation with the county FSA 
committee. If after having been afforded an opportunity to discuss a 
violation with the county FSA committee the farm operator fails or 
refused to discuss the violation, the county FSA committee shall take 
action as required by this part.
    (l) Sequence of allotment or quota reductions. For burley and flue-
cured tobacco, if the tobacco farm acreage allotment or farm marketing 
quota for a farm is to be reduced in the current year because of both:
    (1) A violation, and
    (2) Overmarketings in a prior year, the reduction in the farm 
acreage allotment or farm marketing quota for the violation shall be 
made before making the reduction for overmarketings.
    (m) Correction of farm records. For burley and flue-cured tobacco, 
where farm data for actual marketings are determined to be incorrect 
because of a violation, the records shall be corrected for each farm on 
which the tobacco was produced, and for each farm whose card was used to 
identify marketings.
    (n) Report on Form MQ-92, Estimate of Production. An estimate of 
production, Form MQ-92, shall be prepared immediately prior to harvest 
for each farm for which the county or State FSA committee or a 
representative of the county or State FSA committee believes than an MQ-
92 for the farm would be in the best interests of the program. The 
county FSA committee shall have the authority to visit any farm for the 
purposes of making an estimate of production or determination of planted 
acreage needed to complete an estimate of production.
    (o) Effect of false identification on establishing future farm 
marketing quotas. Notwithstanding any other provision of this section, 
with respect to burley or flue-cured tobacco, if a producer falsely 
identifies such tobacco as having been produced on or marketed from a 
farm, the quantity of the tobacco which is falsely identified shall be 
considered, for the purpose of establishing future farm marketing 
quotas, as having been produced on both the farm for which it was 
identified as having been produced, and the farm of actual production, 
if known, or, as the case may be, such quantity of tobacco shall be 
considered as actually marketed from the farm.

[55 FR 39914, Oct. 1, 1990, as amended at 57 FR 43582, Sept. 21, 1992]



Sec. 723.409  Producer violations, penalties, false identification 

collections and remittances by dealers, buyers, handlers, warehouses, 
and other parties; related issues.

    (a) Generally--(1) Circumstances in which penalties are due. A 
penalty shall be due on all marketings from a farm which are:
    (i) In excess of the applicable quota or allotment;
    (ii) Made without a valid marketing card;
    (iii) Made under circumstances where a buyer or dealer, or their 
agents, know, or have reason to know, that the tobacco was, or is, 
marketed in a manner which by itself or in combination with other 
marketings is designed to, or has the effect of, defeating the purposes 
of the tobacco price support and

[[Page 175]]

production adjustment program, avoiding marketing quota limitations, or 
otherwise avoiding provisions of this part or part 1464 of this title;
    (iv) Falsely identified; or,
    (v) Marketings for which the producer or other party fails to make a 
proper account as required by the provisions of this part.
    (2) Amount of the penalty. The amount of the penalty shall be the 
amount computed by multiplying the penalty rate by the penalty quantity.
    (3) Penalty rate. The penalty rate for purposes of this section is 
that rate which is computed as the penalty rate per pound for the 
applicable kind of tobacco under Sec. 723.308, except to the extent 
that a converted penalty rate may be used as provided for in this 
section.
    (4) Penalty quantity. The penalty quantity for purposes of this 
section is the quantity of tobacco that is determined by the county FSA 
committee subject to the Director's review to be subject to penalty, 
provided further that:
    (i) For burley and flue-cured tobacco, the penalty quantity for 
purposes of this section shall be the amount of marketings from the farm 
in excess of 103 percent of the farm's effective marketing quota for 
that year, except that if the violation involves false identification or 
a failure to account for tobacco, the FSA may, in its discretion, 
depending on the nature of the violations, use as the penalty quantity 
an amount up to 25 percent of the farm's effective marketing quota plus 
100 percent of the farm yield on any excess acreage for the farm 
(acreage planted in excess of the allotted acres, as estimated or 
determined).
    (ii) For tobacco other than burley and flue-cured tobacco, the 
penalty quantity shall be the amount of marketings from the farm in 
excess of the farm's marketing quota provided further, that in order to 
aid in the collection of the penalty the FSA may endeavor, to the extent 
practicable, to apply the penalty to all of the farm's marketing by 
converting the full penalty rate to a converted proportionate penalty 
rate which rate may be identified on the producer's marketing card and 
collected and remitted accordingly. In making the calculation of the 
converted penalty rate, the agency shall take into account any carryover 
tobacco applicable for the farm. If an erroneous penalty rate is shown 
on the marketing card, then the producer of the tobacco and the producer 
who marketed the tobacco shall be liable for any balance due.
    (5) Limitations on reduced penalty quantities. No penalty shall be 
assessed at less than the maximum amount unless it is determined by the 
county FSA committee, with the concurrence of the State FSA committee, 
that all of the following exist with respect to such violation:
    (i) The violation was inadvertent and unintentional;
    (ii) All of the farm's production has been accounted for and there 
are no excess marketings for which there are penalties outstanding;
    (iii) The records for all involved farms have been corrected to show 
the marketings involved; and
    (iv) The false identification or failure to account did not give the 
producer an advantage under the program.
    (6) Effect of improper, invalid, deceptive or unaccounted for 
marketings on penalty quantity calculation. Any marketing made without a 
valid marketing card, falsely identified, or unaccounted for in 
accordance with the requirements of this part, or made under 
circumstances which are designed to, or have the effect of, defeating 
the purpose of the tobacco marketing quota and price support program, 
avoiding any limitation on marketings, avoiding a penalty, or avoiding 
compliance with, or the requirements of, any regulation under this part 
or under part 1464 of this title, shall be considered an excess 
marketing of tobacco. Further, such marketings shall, unless shown to 
the satisfaction of the county FSA committee to be otherwise, be 
considered, where relevant, to be in excess of 103 percent of the 
applicable marketing quota for the farm, and shall be subject to a 
penalty at the full penalty rate for each pound so marketed.
    (7) Pledging of tobacco by an ineligible producer. In addition to 
any other circumstances in which a penalty may be assessed under this 
part, the marketing or pledging for a price support loan of any tobacco 
when the producer is not

[[Page 176]]

considered to be an ``eligible producer'' under the provisions of part 
1464 of this title, shall be considered to be a false identification of 
tobacco and shall be dealt with accordingly. This remedy shall be in 
addition to all others as may apply.
    (8) Failures to make certain reports. If any producer who 
manufactures tobacco products from tobacco produced by such person or 
another fails to make the report required by Sec. 723.408(f) or 
otherwise required by this part, or makes a false report, such producer 
shall be deemed to have failed to account for the disposition of tobacco 
produced on the farm(s) involved. The filing of a report by a producer 
under Sec. 723.408 of this part which the State FSA committee finds to 
be incomplete or incorrect shall constitute a failure to account for the 
disposition of tobacco produced on the farm.
    (b) Special provisions for tobacco buyers, dealers, handlers, 
warehouse operators and others who acquire, handle, or facilitate the 
marketing of tobacco. Notwithstanding the provisions of paragraph (a) of 
this section and other provisions of this part:
    (1) Unless such amount has been remitted by another in accord with 
the provisions of this part, a dealer, buyer, warehouse operator or 
other person handling tobacco shall collect, and remit to FSA, an amount 
equal to the full penalty rate provided for in Sec. 723.208 times the 
quantity of tobacco involved where the tobacco is not identified with a 
valid producer or dealer card, the tobacco is sold under suspicious 
circumstances, or when there is reason to suspect that the tobacco may 
be subject to a penalty for any reason or may be marketed in derogation 
of the goals and purposes of the tobacco support program. For purposes 
of the preceding sentence ``handling'' shall include any services 
provided with respect to the tobacco, and any facilitation of the 
marketing of tobacco regardless of the level or amount of contact, if 
any, that the party may actually have with the tobacco.
    (2) The amount of the penalty required to be collected may be 
deducted from the proceeds due a seller and all parties chargeable under 
paragraph (b)(1) of this section shall be jointly and severally liable 
for insuring that the monies are remitted to FSA except to the extent 
that the Director shall allow for an exemption to facilitate the 
marketing of tobacco, or for some other reason.
    (3) The collection and remittance of penalty shall be in addition to 
any other obligations that such person may have to collect other 
amounts, including other penalties or assessments due on such 
marketings.
    (4) If a penalty is collected and remitted by a buyer, dealer, or 
warehouse operator that is shown not to be due or only partially due, 
then the overpayment shall be refunded to the appropriate party. It is 
the responsibility of the person that collected the penalty and the 
person that sold the tobacco involved to show to the satisfaction of the 
FSA that such penalty is not due in the full amount collected.
    (c) Canceled allotment or quota. If part or all of the tobacco 
produced on a farm has been marketed and the farm acreage allotment or 
farm marketing quota for the farm is canceled, any penalty due on the 
marketings shall be paid by the producers.
    (d) Overmarketing proportionate share of effective farm marketing 
quota-burley or flue-cured tobacco. With respect to burley or flue cured 
tobacco, if the county FSA committee determines that the farm operator 
or another producer on the farm has marketed more than 103 percent of 
such operator's or producer's share of the effective farm marketing 
quota with intent to deprive some other producer on the farm from 
marketing such producer's proportionate share of the same crop of 
tobacco, such operator or other producer shall be liable for marketing 
penalties at the full rate per pound for each pound of tobacco marketed 
above 103 percent of such producer's share of the effective farm 
marketing quota. However, the sum of such penalties shall not exceed the 
total penalties due on total marketings above 103 percent of the 
effective farm marketing quota for the farm on which such tobacco was 
produced. Before assessment of penalty pursuant to this paragraph, a 
hearing shall be scheduled by the county FSA committee and the operator 
and affected producers shall be invited to be

[[Page 177]]

present, or to be represented, to determine whether the operator or 
another producer on the farm has marketed more than 103 percent of such 
person's proportionate share of the effective farm marketing quota. The 
notice of the hearing shall request the farm operator and affected 
producers to bring to the hearing floor sheets and other relevant 
supporting documents. At least two members of the county FSA committee 
shall be present at the hearing. The hearing shall be held at the time 
and place named in the notice and any action taken to impose penalty 
shall be taken after the hearing. If the farm operator or other affected 
producer does not attend the hearing, or is not represented, the county 
FSA committee shall make a determination on the basis of available 
records and shall assess any penalties that may be required against the 
applicable person.
    (e) Penalties not to be assessed-burley or flue-cured tobacco. With 
respect to burley or flue-cured tobacco, if the operator or another 
producer on the farm markets a quantity of tobacco above 103 percent of 
the effective farm marketing quota for the farm and such overage is 
found to have been caused by the failure to record or improper recording 
of tobacco poundage data on the marketing card, that amount of the 
penalty as was due to such failure to record or improper recording will 
not be required to be paid by the farm operator or other producer if:
    (1) For amounts of $100 or less, the county FSA committee, and
    (2) For amounts over $100, the county FSA committee with approval of 
the State FSA committee determines that each of the following conditions 
is applicable:
    (i) The failure to record or incorrect recording resulted from 
action or inaction of a marketing recorder or another FSA employee, and
    (ii) The farm operator or another producer on the farm had no 
knowledge of such failure or error. Overmarketings for a farm for which 
the marketing penalty will not be paid pursuant to the provisions of 
this paragraph shall be determined based upon the correct effective farm 
marketing quota and correct actual marketings of tobacco from the farm.
    (f) Refusal to contribute required assessments. A marketing penalty 
at the full rate per pound is due on each pound of tobacco marketed from 
a farm when the farm operator or producers refuse to pay no-net-cost or 
marketing assessments as provided in part 1464 of this title. In all 
such cases, the farm from which the tobacco has been produced shall be 
considered to have a marketing quota of zero pounds and an allotment of 
zero acres.

[55 FR 39914, Oct. 1, 1990, as amended at 57 FR 43583, Sept. 21, 1992; 
63 FR 11582, Mar. 10, 1998]



Sec. 723.410  Penalties considered to be due from warehouse operators, 
dealers, buyers, and others excluding the producer.

    Subject to any additional requirements or provisions for remittances 
which are contained in Sec. 723.409 of this part, any marketing of 
tobacco under one of the following conditions shall be considered to be 
a marketing of excess tobacco.
    (a) Auction sale without burley or flue-cured tobacco marketing 
card. For burley and flue-cured tobacco, any first marketing of tobacco 
at an auction sale by a producer which is not identified by a valid 
marketing card at the time of marketing shall be considered to be a 
marketing of excess tobacco and the penalty thereon shall be collected 
and remitted by the warehouse operator unless prior to marketing, an AMS 
inspection certificate is obtained showing that the tobacco is of a kind 
not subject to marketing quotas.
    (b) Auction sale without dark air-cured, fire-cured, or Virginia 
sun-cured tobacco marketing card. For dark air-cured, fire-cured, or 
Virginia sun-cured tobacco, any first marketing of tobacco at an auction 
sale by a producer which is not identified by a valid marketing card 
(MQ-76 or MQ-77 (including sale memo)) on or before the last warehouse 
sale day of the marketing season, or within 4 weeks following the date 
of marketing, whichever comes first, shall be identified by an MQ-82, 
and shall be presumed, subject to rebuttal, to be a marketing of excess 
tobacco. The penalty thereon shall be paid by the warehouse operator.
    (c) Burley or flue-cured tobacco nonauction sale. For burley and 
flue-cured

[[Page 178]]

tobacco, any nonauction marketing of tobacco which:
    (1) Is not identified by a valid marketing card and recorded at the 
time of marketing on MQ-79, Dealer's Report, the marketing card, and MQ-
72-2, Report of Tobacco Nonauction Purchase; or,
    (2) If purchased prior to the opening of the local auction market 
for the current year, it is not identified by a valid marketing card and 
recorded on MQ-79, the marketing card, and MQ-72-2, Report of Tobacco 
Nonauction Purchase not later than the end of the calendar week which 
includes the first sale day of the local auction markets, shall be 
considered a marketing of excess tobacco. The penalty thereon shall be 
collected by the purchaser of such tobacco, and remitted with MQ-79, 
unless prior to marketing an AMS inspection certificate is obtained 
showing that the tobacco is of a kind not subject to marketing quotas.
    (d) Nonauction sale, except burley, flue-cured, and cigar tobacco. 
For dark air-cured, fire-cured, or Virginia sun-cured tobacco, any 
nonauction sale of tobacco which:
    (1) Is not identified by an MQ-76 or MQ-77 (including a valid sale 
memo); and
    (2) Recorded on MQ-79, Dealer's Record, not later than the end of 
the calendar week in which the tobacco was purchased; or
    (3) If purchased prior to the opening of the local auction market 
for the current year, is not identified by an MQ-76 or MQ-77 (including 
a valid sale memo) and recorded on MQ-79 not later than the end of the 
calendar week which includes the first day of the local auction markets, 
shall be presumed, subject to rebuttal, to be a marketing of excess 
tobacco. The penalty thereon shall be paid by the purchaser of such 
tobacco.
    (e) Failure to obtain an MQ-76 and sale memo, and failure to record 
a sale on MQ-76-cigar tobacco. Any sale of cigar tobacco for which a 
dealer:
    (1) If within quota, fails to record the sale on the marketing card 
issued for the farm, or
    (2) If the tobacco was produced on a farm for which an excess 
marketing card was issued, fails to obtain a valid sale memo by the end 
of the sale date, shall be presumed, subject to rebuttal, to be a 
marketing of excess tobacco. The penalty thereon shall be paid by the 
buyer who fails to make the required record.
    (f) Leaf account tobacco. If warehouse resales exceed prior leaf 
account purchases, such marketings shall be considered to be a marketing 
of excess tobacco unless such warehouse operator furnishes evidence 
acceptable to the State FSA committee showing that such marketing is not 
a marketing of excess tobacco. However, evidence acceptable to the State 
FSA committee shall not be based on the warehouse operator's proof of 
purchase of tobacco that is not in the form normally marketed by 
producers even though such evidence indicates that resales exceed prior 
leaf account purchases as a result of the blending of tobacco, which was 
not in the form normally marketed by producers, with the warehouse 
operator's prior purchases of leaf account tobacco.
    (g) Dealer tobacco--burley and flue-cured. The burley or flue-cured 
tobacco resales by a dealer (as shown or due to be shown on Form MQ-79), 
which are in excess of such dealer's total prior purchases of the 
respective kind of tobacco shall be considered to be a marketing of 
excess tobacco and penalty thereon shall be due at the time the 
marketing takes place which results in the excess. If the resale which 
results in penalty being due is made at auction, the warehouse shall 
deduct the penalty from the proceeds of the sale and shall remit the 
penalty to the marketing recorder. If the resale which results in 
penalty being due is made at nonauction, the purchaser shall deduct the 
penalty from the proceeds of the sale and shall remit the penalty to the 
applicable State FSA office.
    (h) Resales not reported. Any resale of tobacco which is required to 
be reported by a warehouse operator or dealer, but which is not reported 
within the time and in the manner required, shall be considered to be a 
marketing of excess tobacco, unless and until such warehouse operator or 
dealer furnishes proof of such resale which is acceptable to the State 
FSA executive director. The penalty thereon shall

[[Page 179]]

be paid by the warehouse operator or dealer who fails to make the report 
as required.
    (i) Marketing falsely identified by a person other than the producer 
of the tobacco. If any marketing of tobacco by a person other than the 
producer is identified by a marketing card other than the marketing card 
issued for the farm on which the tobacco was produced, and the source of 
production of the tobacco is unknown, such marketing shall be presumed, 
subject to rebuttal, to be a marketing of excess tobacco. The marketing 
quota penalty shall be paid by the person who marketed the tobacco.
    (j) Carryover tobacco, except cigar tobacco. Any tobacco on hand, 
except for cigar tobacco, and reported or due to be reported under Sec. 
723.403 of this part for warehouse operators and Sec. 723.404 of this 
part for dealers shall be included as a resale in determining whether an 
account for a kind of tobacco has excess resales. Unless the warehouse 
operator furnishes proof acceptable to the State FSA committee and 
unless the dealer furnishes proof acceptable to the State FSA executive 
director, showing that such account does not represent excess tobacco, 
penalty at the full rate for the respective kind of tobacco shall be 
paid thereon by such warehouse operator or dealer.
    (k) Unrecorded sale of cigar tobacco. Any sale of cigar tobacco 
which is not recorded on MQ-79 (CF&B), Buyer's Record Book, by the 10th 
day of the month following the month during which the sale dated 
occurred shall be presumed, subject to rebuttal, to be a marketing of 
excess tobacco. The penalty thereon shall be paid by the buyer who fails 
to make the record.
    (l) Floor sweepings. Any person who markets floor sweepings in 
excess of allowable floor sweepings shall be subject to a civil penalty 
of 150 percent of the average market price for the immediately preceding 
marketing year, as determined by the U.S. Department of Agriculture. The 
calculated penalty rate shall be rounded to the nearest whole cent. Any 
floor sweepings on hand more than 30 days (15 days with respect to flue-
cured tobacco) after the warehouse closes for the auction season shall 
be considered marketed. The floor sweepings on hand shall be weighed by 
the warehouse operator and the weight shall be certified by the 
warehouse operator, such weighing to be done in the presence of a 
representative of either the county FSA committee or State FSA 
committee. Floor sweepings which are destroyed in the presence of a 
representative of the county FSA committee, within 30 days (15 days with 
respect to flue-cured tobacco) after the warehouse closes shall not be 
considered as marketed when determining the quantity of floor sweepings 
marketed. If the county FSA committee determines, after the warehouse 
has been closed for the auction season for more than 30 days (15 days 
with respect to flue-cured tobacco), that the cumulative quantity of 
floor sweepings marketed and considered marketed in the current 
marketing year is in excess of the allowable floor sweepings, the person 
responsible for such marketings shall be given notice of the 
determination and shall be afforded an opportunity to request 
reconsideration of such determination in accordance with the provisions 
of part 780 of this chapter. A determination that a civil penalty is due 
for marketing floor sweepings in excess of the allowable floor sweepings 
shall not become final and shall not be assessed until such person has 
been afforded an opportunity for a hearing and such person has exhausted 
the applicable administrative remedies. The notice of assessment shall 
require such person to pay the civil penalty to the ``Farm Service 
Agency, USDA'' within 15 days after the mailing of the notice.
    (m) Blending tobacco not in the form normally marketed by 
producers--burley and flue-cured tobacco. Tobacco purchased from 
processors or manufacturers that is considered not in the form normally 
marketed by producers that is blended with tobacco in the form normally 
marketed by producers shall not be credited as a purchase to the 
dealer's or warehouse operator's account by the State FSA committee when 
reconciling the warehouse operator's leaf account or the dealer's 
purchases and resales. Tobacco not in the form normally marketed by 
producers that is blended with other tobacco shall be deemed to be 
excess tobacco

[[Page 180]]

and penalty shall be due on the pounds of tobacco by which a warehouse 
operator's or dealer's resales exceed prior purchases.
    (n) Advances and other cases in which the producer's marketing card 
is used improperly. For tobacco of any kind to which this part applies, 
if tobacco is marketed by a person by using the producer's marketing 
card or the tobacco is pledged for a price support loan by using that 
card, but under the provisions of part 1464 of this title, the producer 
is deemed to have not been an ``eligible producer'' with respect to the 
disposition of that tobacco at the time because of an advance or other 
preauction arrangement, such disposition of the tobacco shall be 
considered a false identification of the tobacco and may be considered 
to be a marketing of excess tobacco. In such cases, the person who paid 
the advance, took possession of the tobacco, or made the agreement with 
the producer which made the producer no longer an ``eligible producer'' 
with respect to the tobacco, shall be jointly and severally liable with 
the producer for any penalty with respect to such disposition which is 
levied against the producer under the provisions of this part and 
additionally, if such disposition is determined to be a marketing of 
excess tobacco, shall be liable for a penalty calculated by using the 
penalty rate for the tobacco involved multiplied by the pounds of 
tobacco involved. These remedies shall be in addition to any other 
remedies which may apply, including but not limited to, any liability 
for a refund of any price support loan advances which were paid in the 
name of, or for the account of, the producer of the tobacco.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21444, May 9, 1991; 57 
FR 43583, Sept. 21, 1992; 63 FR 11583, Mar. 10, 1998]



Sec. 723.411  Records and reports regarding hauling, processing, and 
storage of tobacco.

    (a) Trucker records. Each trucker shall keep such records as will 
enable such trucker to furnish the State FSA office a report with 
respect to each lot of tobacco received by such trucker showing.
    (1) The name and address of the producer;
    (2) The date of receipt of the tobacco;
    (3) The number of pounds received;
    (4) The location where received; and
    (5) The name and address of the person to whom it was delivered.
    (b) Processor records. Each firm engaged in the business of 
processing tobacco shall keep records with respect to each lot of 
tobacco received by such firm showing:
    (1) The name and address of producer, dealer, warehouse operator, or 
other person for whom the tobacco was received.
    (2) The date of receipt of tobacco.
    (3) The number of pounds (green weight) received.
    (4) The purpose for which tobacco was received (redrying or 
stemming).
    (5) The amount of any advance or loan made by such person on the 
tobacco.
    (6) The disposition of the tobacco including the net weight of the 
tobacco processed and the number of containers by classification 
(strips, stems, scrap or leaf).
    (7) Person to whom delivered and pounds involved.
    Any such firm shall report this information to the State FSA office 
of the State in which the business is located within 15 days of the end 
of the marketing year, except for tobacco handled for an association 
operating the price support program and tobacco purchased at auction or 
tobacco which was previously reported on Form MQ-79. Where such firm 
qualifies for the exemption in Sec. 723.405 of this part, such firm is 
required to report only such tobacco received that does not belong to 
such firm.
    (c) Records for stored tobacco. Each firm engaged in storing 
unprocessed tobacco shall keep records with respect to each lot of 
unprocessed tobacco received by such firm showing:
    (1) The name and address of producer, dealer, warehouse operator, 
marketing agent or other person for whom the tobacco was received;
    (2) The date and receipt of the tobacco;
    (3) The number of pounds received;
    (4) The amount of any advance or loan made by such firm;

[[Page 181]]

    (5) The disposition of the tobacco; and
    (6) The person to whom delivered and the pounds involved.
    Any such firm shall report this information to the State FSA office 
of the State in which the business is located within 15 days of the end 
of the marketing year, except for tobacco handled for an association 
operating the price support program and tobacco purchased by such firm 
at auction or for which such firm had previously reported on Form MQ-79. 
Where such firm qualifies for the exemption in Sec. 723.405 of this 
part, the firm is only required to report such tobacco received for 
storage that does not belong to such firm.



Sec. 723.412  Separate records and reports from persons engaged in 
tobacco related businesses.

    Any person who is required to keep any record or make any report as 
a warehouse operator, dealer, buyer, trucker, or as a person engaged in 
the hauling, processing, or storage of tobacco, and who is engaged in 
more than one such business, shall keep such records as will enable such 
person to make separate reports for each such business in which such 
person is engaged to the same extent for each such business as if the 
person were engaged in no other business.



Sec. 723.413  Length of time records and reports are to be kept.

    Records to be kept and copies of the reports required to be made by 
any person under this subpart shall be on a marketing year basis and 
shall be retained for 3 years after the end of the marketing year. 
Records shall be kept for such longer period of time as may be requested 
in writing by the State FSA executive director, or the Director.



Sec. 723.414  Failure to keep records and make reports or making false 
report or record.

    (a)(1) Failure to keep records and make reports. Under the 
provisions of section 373(a) of the Act, any warehouse operator, 
processor, buyer, dealer, trucker, or person engaged in the business of 
sorting, redrying, stemming, packing, or otherwise processing tobacco 
who fails to make any report or keep any record as required, or who 
makes any false report or record, is guilty of a misdemeanor, and upon 
conviction shall be subject to a fine of not more than $500 for each 
offense. In addition, any tobacco warehouse operator, dealer, or buyer 
who fails, upon being requested to do so, to remedy a violation by 
submitting complete reports and keeping accurate records shall be 
subject to an additional fine, not to exceed $5,000.
    (2) Failure to obtain producer marketing card or sale memo. The 
failure of any dealer or warehouse operator to obtain a:
    (i) Producer's marketing card, MQ-76 and MQ-77, to identify a sale 
of producer tobacco, or
    (ii) Dealer identification card, MQ-79-2, to cover a resale of 
tobacco, shall constitute a failure to make a report.
    (b) False representation--warehouse operators, dealers, and 
processors. The monetary penalties described in this part are in 
addition to penalties prescribed by other criminal statutes including 18 
U.S.C. 231 which provides for a fine of not more than $10,000 or 
imprisonment for not more than 5 years, or both, for a person convicted 
of knowingly and willingly committing such acts as making a false 
acreage report, altering a marketing card, falsely identifying tobacco 
or buying and selling unused ``103 percent of quota poundage'' on 
marketing cards.
    (c) Misrepresentation and scheme or device. A warehouse operator or 
dealer who is determined by FSA to have knowingly:
    (1) Adopted any scheme or device which tends to defeat the purpose 
of the tobacco program.
    (2) Made any fraudulent representation,
    (3) Misused a MQ-76 or MQ-79-2, or
    (4) Sold excess tobacco, shall pay a marketing quota penalty as 
prescribed in this part.

[55 FR 39914, Oct. 1, 1990, as amended at 56 FR 21444, May 9, 1991]



Sec. 723.415  Examination of records and reports.

    For the purpose of ascertaining the correctness of any report made 
or

[[Page 182]]

record kept, or of obtaining the information required to be furnished, 
in any report, but not so furnished, any warehouse operator, processor, 
dealer, buyer, trucker, or person engaged in the business of sorting, 
redrying, stemming, picking, or otherwise processing tobacco for 
producers, shall make available at one place for examination by 
representatives of the State FSA executive director and by employees of 
the Office of Investigation and Office of Audit, and of the Tobacco and 
Peanuts Division of the Farm Service Agency, U.S. Department of 
Agriculture upon written request by the State FSA executive director, 
all such books, papers, records, lot tickets, tobacco sale bills, buyer 
adjustment invoices, accounts, canceled checks, check register, check 
stubs, correspondence, contracts, documents, warehouse bill-out invoices 
or daily summary journal sheet, the tissue copy of Form MQ-72-l, Report 
of Tobacco Auction Sale, journal of producer marketing cards retained at 
warehouse and memoranda as the State FSA executive director has reason 
to believe are relevant and are within the control of such person.



Sec. 723.416  Information confidential.

    All data reported to or acquired by the Secretary pursuant to the 
provisions of this subpart shall be kept confidential by all officers 
and community committees, and all county FSA office employees. Only such 
data so reported or acquired as the Deputy Administrator deems relevant 
shall be disclosed by them, and then only in a suit or administrative 
hearing under title III of the Act. The provisions of this section shall 
not be deemed to prohibit the issuance of general statements based upon 
the report of a number of parties which statements do not identify the 
information furnished by any person.



Subpart E_Establishing Burley and Flue-Cured Tobacco National Marketing 
                                 Quotas

    Source: 63 FR 11583, Mar. 10, 1998, unless otherwise noted.



Sec. 723.501  Scope.

    This subpart sets out regulations for setting annual national 
marketing quotas for burley and flue-cured tobacco based on the purchase 
intentions of certain manufacturers of cigarettes and on other factors. 
It also sets out penalty provisions for manufacturers who fail to 
purchase, within the tolerances set in this part, the amount of domestic 
tobacco, by kind, reflected in the stated intention as accounted for in 
accordance with this subpart.



Sec. 723.502  Definitions.

    In addition to the definitions set forth at Sec. 723.104, the 
definitions set forth in this section shall be applicable for purposes 
of administering the provisions of this subpart.
    CCC. The Commodity Credit Corporation, an instrumentality of the 
USDA.
    Domestic manufacturer. A domestic manufacturer of cigarettes.
    Domestic manufacturer of cigarettes. A manufacturer, who as 
determined by the Director, produces and sells more than 1 percent of 
the cigarettes produced and sold in the United States annually.
    Price support inventory. The inventory of tobacco which, with 
respect to a particular kind of tobacco, has been pledged as collateral 
for a price support loan made by CCC through a producer-owned 
cooperative marketing association.
    Producer owned cooperative marketing associations. Those 
associations or their successors, which by law act as agents for 
producers for price support loans for tobacco, and which were, as of 
January 1, 1996, for burley and flue-cured tobacco, the Burley Tobacco 
Growers Cooperative Association, the Burley Stabilization Corporation, 
and the Flue-Cured Tobacco Cooperative Stabilization Corporation.
    Unmanufactured tobacco. Stemmed and unstemmed leaf tobacco, stems, 
trimmings, and scrap tobacco.



Sec. 723.503  Establishing the quotas.

    (a) General. Subject to the 3-percent adjustment provided for in 
paragraph (b) of this section, the annual marketing quotas for burley 
and flue-cured tobacco shall be calculated for each

[[Page 183]]

marketing year for each kind separately as follows:
    (1) Domestic manufacturer purchase intentions. First, for each kind 
and year, the Director shall calculate the aggregate relevant purchaser 
intentions as declared or set under this section.
    (2) Exports. Next, the Director shall add to the total determined 
under paragraph (a)(1) of this section the amount which is equal to the 
Director's determination of the average quantity of exported domestic 
leaf tobacco of the applicable kind for the past 3 marketing years. For 
this purpose, exports include unmanufactured tobacco only, including, 
but not limited to, stemmed and unstemmed leaf tobacco, stems, 
trimmings, and scrap tobacco, and excludes tobacco contained in 
manufactured products including, but not limited to, cigarettes, cigars, 
smoking tobacco, chewing tobacco, snuff and semi-processed bulk smoking 
tobacco. The quantity of exports for the most recent year, as needed, 
may be estimated.
    (3) Reserve stock level adjustment. The total calculated by adding 
the sums of paragraphs (a)(1) and (a)(2) of this section may be adjusted 
by the Director as necessary to maintain inventories of producer loan 
associations for burley and flue-cured tobacco at the reserve stock 
level. For burley, the reserve stock level is the larger of 50 million 
pounds farm sales weight or 15 percent of the previous year's national 
market quota. For flue-cured, the reserve stock level is the larger of 
60 million pounds or 10 percent of the previous year's quota. The 
Director shall consider supply conditions when making any adjustment and 
a downward adjustment for burley tobacco may not exceed either 35 
million pounds farm sales weight or 50 percent of the amount by which 
loan inventories exceed the reserve stock level, whichever is larger. If 
the uncommitted pool stocks of burley tobacco for 2001 and subsequent 
crops equal or are less than the reserve stock level, then the downward 
adjustment in quota for that year may be made based on the reserve stock 
level for that kind of tobacco, with no downward limitation.
    (b) Additional 3-percent adjustment. The amount otherwise calculated 
under paragraph (a) of this section may be adjusted by the Director by 3 
percent of the total. This adjustment is discretionary and may be made 
irrespective of whether any adjustment has been made under paragraph 
(a)(3) of this section and may be made to the extent the Director deems 
such an adjustment is in the best interest of the program.
    (c) Dates of announcement. For flue-cured tobacco, the quota 
determination should be announced by December 15 preceding the marketing 
year. For burley, the announcement should be made by February 1 
preceding the marketing year.

[63 FR 11583, Mar. 10, 1998, as amended at 66 FR 53509, Oct. 23, 2001; 
67 FR 62871, Oct. 9, 2002]



Sec. 723.504  Manufacturers' intentions; penalties.

    (a) Generally. Each domestic manufacturer shall, for each marketing 
year, for burley and flue-cured tobacco separately, submit a statement 
of its intended purchases of eligible tobacco by the date prescribed in 
paragraph (d) of this section; further, at the end of the marketing 
year, each such manufacturer shall submit a statement of its actual 
countable purchases of eligible tobacco for that marketing year, by 
kind, for burley and flue-cured tobacco. For these purposes, countable 
purchases of eligible tobacco shall be as defined in, and determined 
under, paragraph (b) of this section. If a domestic manufacturer fails 
to file a statement of intentions, the Director shall declare the amount 
which will be considered that manufacturer's intentions for the 
marketing year. That declaration by the Director shall be based on the 
domestic manufacturer's previous reports, or such other information as 
is deemed appropriate by the Director in the Director's discretion. 
Notice of the amount so declared shall be forwarded to the domestic 
manufacturer. If the domestic manufacturer fails to file a year-end 
report or files an inaccurate or incomplete report, then the Director 
may deem that the manufacturer has no purchases to report or take such 
other action as the Director believes is appropriate to fulfill the 
goals of this section. Intentions and purchases of

[[Page 184]]

countable tobacco will be compared for purposes of determining whether a 
penalty is due from the domestic manufacturer.
    (b) Eligible tobacco for statements of intentions and countable 
purchases toward those intentions. For reports and determinations under 
this section, eligible tobacco for purposes of determining the countable 
purchases under paragraph (a) of this section will be unmanufactured 
domestic tobacco of the relevant kind for use to manufacture, for 
domestic or foreign consumption, cigarettes, semi-processed bulk smoking 
tobacco and other tobacco products. Eligible tobacco for these purposes 
does not include tobacco purchased for export as leaf tobacco, stems, 
trimmings, or scrap. Countable purchases of eligible tobacco shall 
include purchases of eligible tobacco made by domestic manufacturers 
directly from the producers, from a regular auction market, or from the 
price support loan inventory, and shall also include purchases by the 
manufacturer where the manufacturer purchases or acquires the tobacco 
from dealers or buyers who purchased the tobacco for the domestic 
manufacturer during the relevant marketing year directly from a 
producer, at a regular auction market, or from the price support loan 
inventory.
    (c) Weight basis and nature of reports. The weight basis used for 
all reports and comparisons shall be a farm sales weight basis unless 
the Director permits otherwise and all reports will be considered to 
have been made on that basis unless the report clearly states otherwise. 
Submitted reports shall be assumed to cover countable purchases of 
eligible tobacco only, absent indications to the contrary.
    (d) Due dates and addresses for reports. For flue-cured tobacco, the 
domestic manufacturer's statement of intentions shall be submitted by 
December 1 before the marketing year and the year-end report shall be 
submitted by August 20 following the end of the marketing year. Those 
respective dates for burley tobacco shall be January 15 before the 
burley tobacco marketing year and November 20 after the burley tobacco 
marketing year. Reports shall be mailed or delivered to the Director, 
Tobacco and Peanuts Division, STOP 0514, 1400 Independence Avenue, SW, 
Washington, DC 20250-0514.
    (e) Penalties. A domestic manufacturer shall be liable for a penalty 
equal to twice the purchaser's no-net-cost assessment rate per pound for 
the applicable kind of tobacco for the relevant marketing year, if the 
manufacturer's purchases of either burley or flue-cured tobacco for the 
marketing year do not equal or exceed, as determined by the Director, 90 
percent of their stated purchase intentions for that kind of tobacco for 
the relevant marketing year. The Director shall adjust the domestic 
manufacturer's intentions, however, to the extent, that producers have 
not produced the full amount of the national quota for the relevant 
marketing year for the particular kind of tobacco. The burden of 
establishing all purchases shall be with the domestic manufacturer and 
the Director may, in the case of indirect purchases for the 
manufacturer, require that the manufacturer obtain verification of the 
purchases by the dealer who made the purchase from the producer, at a 
regular auction market, or from the price support loan inventory, in 
order to assure that the tobacco is, to the manufacturer, a countable 
purchase. The Director may require such additional information as 
determined needed to enforce this subpart.
    (f) Penalty notice and penalty remittance. Penalties will be 
assessed after notice and an opportunity for hearing before the 
Director. Remittances are to be made to the CCC and will be credited to 
the applicable producer loan association's no-net-cost fund or account 
as provided for in part 1464 of this title.
    (g) Maintenance and examination of records. Each domestic 
manufacturer shall keep all relevant records of purchases, by kind, of 
burley and flue-cured tobacco for a period of at least 3 years. The 
Director, Office of Inspector General, or other duly authorized 
representative of the United States may examine such records, receipts, 
computer files, or other information held by a domestic manufacturer 
that may be used to verify or audit such manufacturer's reports. The 
reasonable cost of such examination or audit may be charged to the 
domestic manufacturer

[[Page 185]]

who is the subject of the examination or audit. All records examined or 
received under this part by officials of the Department of Agriculture 
shall be kept confidential to the extent required by law.



PART 729_PEANUT MARKETING QUOTAS--Table of Contents




    Authority: 7 U.S.C. 7271; 15 U.S.C. 714b-c; 7 U.S.C. 7959.

    Source: 62872, Oct. 9, 2002, unless otherwise noted.



Sec. 729.1  Applicablity to 1996 through 2001 crops of peanuts.

    Sections 1309 and 1310 of the Farm Security Rural Investment Act of 
2002 terminated, beginning with the 2002 crop, the marketing quota and 
price support program for peanuts. However, 7 CFR part 729, revised as 
of January 1, 2002 continues to apply to the 1996 through 2001 crops of 
peanuts.

[[Page 186]]



                 SUBCHAPTER C_REGULATIONS FOR WAREHOUSES





PART 735_REGULATIONS FOR THE UNITED STATES WAREHOUSE ACT--Table of Contents




                      Subpart A_General Provisions

Sec.
735.1 Applicability.
735.2 Administration.
735.3 Definitions.
735.4 Fees.
735.5 Penalties.
735.6 Suspension, revocation and liquidation.
735.7 Return of suspended or revoked certificates of licensing or 
          certificates of authorization.
735.8 Appeals.
735.9 Dispute resolution and arbitration of private parties.
735.10 Posting of certificates of licensing, certificates of 
          authorization or other USWA documents.
735.11 Lost or destroyed certificates of licensing, authorization or 
          agreements.
735.12 Safe keeping of records.
735.13 Information of violations.
735.14 Bonding and other financial assurance requirements.

                      Subpart B_Warehouse Licensing

735.100 Application.
735.101 Financial records and reporting requirements.
735.102 Financial assurance requirements.
735.103 Amendments to license.
735.104 Insurance requirements.
735.105 Care of agricultural products.
735.106 Excess storage and transferring of agricultural products.
735.107 Warehouse charges and tariffs.
735.108 Inspections and examinations of warehouses.
735.109 Disaster loss to be reported.
735.110 Conditions for delivery of agricultural products.
735.111 Fair treatment.
735.112 Terminal and futures contract markets

        Subpart C_Inspectors, Samplers, Classifiers, and Weighers

735.200 Service licenses.
735.201 Agricultural product certificates; format.
735.202 Standards of grades for other agricultural products.

                      Subpart D_Warehouse Receipts

735.300 Warehouse receipt requirements.
735.301 Notification requirements.
735.302 Paper warehouse receipts.
735.303 Electronic warehouse receipts.

                     Subpart E_Electronic Providers

735.400 Administration.
735.401 Electronic warehouse receipt and USWA electronic document 
          providers.
735.402 Providers of other electronic documents.
735.403 Audits.
735.404 Schedule of charges and rates.

    Authority: 7 U.S.C. 241 et seq.

    Source: 67 FR 50763, Aug. 5, 2002, unless otherwise noted.



                      Subpart A_General Provisions



Sec. 735.1  Applicability.

    (a) The regulations of this part set forth the terms and conditions 
under which the Secretary of Agriculture through the Farm Service Agency 
(FSA) will administer the United States Warehouse Act (USWA or the Act) 
and sets forth the standards and the terms and conditions a participant 
must meet for eligibility to act under the USWA. The extent the 
provisions of this part are more restrictive, or more lenient, with 
respect to the same activities governed by State law, the provisions of 
this part shall prevail.
    (b) Additional terms and conditions may be set forth in applicable 
licensing agreements, provider agreements and other documents.
    (c) Compliance with State laws relating to the warehousing, grading, 
weighing, storing, merchandising or other similar activities is not 
required with respect to activities engaged in by a warehouse operator 
in a warehouse subject to a license issued in accordance with this part.



Sec. 735.2  Administration.

    (a) FSA will administer all provisions and activities regulated 
under the Act under the general direction and supervision of the FSA's 
Deputy Administrator, Commodity Operations (DACO), or a designee.
    (b) DACO may waive or modify the licensing or authorization 
requirements or deadlines in cases where lateness or

[[Page 187]]

failure to meet such requirements does not adversely affect the 
licensing or authorizations operated under the Act.
    (c) DACO will provide affected licensees or authorized providers 
with changes to their licensing or provider agreements before the 
effective date.
    (d) Licensing and authorization agreement updates will be available 
at:
    (1) DACO's USWA website, and
    (2) The following address: Deputy Administrator, Commodity 
Operations, Farm Service Agency, United States Department of 
Agriculture, STOP 0550, 1400 Independence Avenue, SW, Washington, DC 
20250-0550.



Sec. 735.3  Definitions.

    Words used in this part will be applicable to the activities 
authorized by this part and will be used in all aspects of administering 
the Act.
    Access means the ability, when authorized, to read, change, and 
transfer warehouse receipts or other applicable document information 
retained in a central filing system.
    Agricultural product means an agriculturally-produced product stored 
or handled for the purposes of interstate or foreign commerce, including 
a processed product of such agricultural product, as determined by DACO.
    Central filing system (CFS) means an electronic system operated and 
maintained by a provider, as a disinterested third party, authorized by 
DACO where information relating to warehouse receipts, USWA documents 
and other electronic documents is recorded and maintained in a 
confidential and secure fashion independent of any outside influence or 
bias in action or appearance.
    Certificate means a USWA document that bears specific assurances 
under the Act or warrants a person to operate or perform in a certain 
manner and sets forth specific responsibilities, rights, and privileges 
granted to the person under the Act.
    Control of the facility means ultimate responsibility for the 
operation and integrity of a facility by ownership, lease, or operating 
agreement.
    Department means the Department of Agriculture.
    Electronic document means any document that is generated, sent, 
received, or stored by electronic, optical, or similar means, including, 
but not limited to, electronic data interchange, advanced communication 
methods, electronic mail, telegram, telex, or telecopy.
    Electronic warehouse receipt (EWR) means a warehouse receipt that is 
authorized by DACO to be issued or transmitted under the Act in the form 
of an electronic document.
    Examiner means an individual designated by DACO for the purpose of 
examining warehouses or for any other activities authorized under the 
Act.
    Financial assurance means the surety or other financial obligation 
authorized by DACO that is a condition of receiving a license or 
authorization under the Act.
    Force majeure means severe weather conditions, fire, explosion, 
flood, earthquake, insurrection, riot, strike, labor dispute, act of 
civil or military, non-availability of transportation facilities, or any 
other cause beyond the control of the warehouse operator or provider 
that renders performance impossible.
    Holder means a person that has possession in fact or by operation of 
law of a warehouse receipt, USWA electronic document, or any electronic 
document.
    License means a license issued under the Act by DACO.
    Licensing agreement means the document and any amendment or addenda 
to such agreement executed by the warehouse operator and FSA specifying 
licensing terms and conditions specific to the warehouse operator and 
the agricultural product licensed to be stored.
    Non-storage agricultural product means an agricultural product 
received temporarily into a warehouse for conditioning, transferring or 
assembling for shipment, or lots of an agricultural product moving 
through a warehouse for current merchandising or milling use, against 
which no warehouse receipts are issued and no storage charges assessed.
    Official Standards of the United States means the standards of the 
quality or condition for an agricultural product, fixed and established 
under (7 U.S.C. 51) the United States Cotton Standards Act, (7 U.S.C. 
71) the United States

[[Page 188]]

Grain Standards Act, (7 U.S.C. 1622) the Agricultural Marketing Act of 
1946, or other applicable official United States Standards.
    Other electronic documents (OED) means those electronic documents, 
other than an EWR or USWA electronic document, that may be issued or 
transferred, related to the shipment, payment or financing of 
agricultural products that DACO has authorized for inclusion in a 
provider's CFS.
    Person means a person as set forth in 1 U.S.C. 1, a State; or a 
political subdivision of a State.
    Provider means a person authorized by DACO, as a disinterested third 
party, which maintains one or more confidential and secure electronic 
systems independent of any outside influence or bias in action or 
appearance.
    Provider agreement means the document and any amendment or addenda 
to such agreement executed by the provider and FSA that sets forth the 
provider's responsibilities concerning the provider's operation or 
maintenance of a CFS.
    Receipt means a warehouse receipt issued in accordance with the Act, 
including an electronic warehouse receipt.
    Schedule of charges means the tariff or uniform rate or amount 
charged by an authorized person for specific services offered or 
rendered under the Act.
    Schedule of fees means the fees charged and assessed by FSA for 
licensing, provider agreements or services furnished under the Act to 
help defray the costs of administering the Act, and as such are shown in 
a schedule of fees attached to the licensing or provider agreement.
    Service license means the document and any amendment to such 
document, issued under the Act by DACO to individuals certified 
competent by the licensed warehouse operator to perform inspection, 
sampling, grading classifying, or weighing services according to 
established standards and procedures, set forth in Sec. 735.202, at the 
specific warehouse license.
    Stored agricultural products means all agricultural products 
received into, stored within, or delivered out of the warehouse that are 
not classified as a non-storage agricultural product under this part.
    User means a person that uses a provider's CFS.
    USWA electronic document means a USWA electronic document initiated 
by DACO to be issued, transferred or transmitted that is not identified 
as an EWR or OED in the appropriate licensing or provider agreement or 
as determined by DACO.
    Warehouse means a structure or other authorized storage facility, as 
determined by DACO, in which any agricultural product may be stored or 
handled for the purpose of interstate or foreign commerce.
    Warehouse capacity means the maximum quantity of an agricultural 
product that the warehouse will accommodate when stored in a manner 
customary to the warehouse as determined by DACO.
    Warehouse operator means a person lawfully engaged in the business 
of storing or handling agricultural products.
    Warehousing activities and practices means any legal, operational, 
managerial or financial duty that a warehouse operator has regarding an 
agricultural product.



Sec. 735.4  Fees.

    (a) FSA will assess persons covered by the Act fees to cover the 
costs of administering the Act.
    (b) Warehouse operators, licensees, applicants, or providers must 
pay:
    (1) An annual fee as provided in the applicable licensing or 
provider agreement; and
    (2) Fees that FSA assesses for specific services, examinations and 
audits, or as provided in the applicable licensing or provider 
agreement.
    (c) The schedule of fees showing the current fees or any annual fee 
changes will be provided as an addendum to the applicable licensing or 
provider agreement or/and:
    (1) Will be available at DACO's USWA Web site, or
    (2) May be requested at the following address: Deputy Administrator, 
Commodity Operations, Farm Service Agency, United States Department of

[[Page 189]]

Agriculture, STOP 0550, 1400 Independence Avenue, SW., Washington, DC 
20250-0550.
    (d) At the sole discretion of DACO, these fees may be waived.



Sec. 735.5  Penalties.

    If a person fails to comply with any requirement of the Act, the 
regulations set forth in this part or any applicable licensing or 
provider agreement, DACO may assess, after an opportunity for a hearing 
as provided in Sec. 735.8, a civil penalty:
    (a) Of not more than $25,000 per violation, if an agricultural 
product is not involved in the violation; or
    (b) Of not more than 100 percent of the value of the agricultural 
product, if an agricultural product is involved in the violation.



Sec. 735.6  Suspension, revocation and liquidation.

    (a) DACO may, after an opportunity for a hearing as provided in 
Sec. 735.8, suspend, revoke or liquidate any license or agreement 
issued under the Act, for any violation of or failure to comply with any 
provision of the Act, regulations or any applicable licensing or 
provider agreement.
    (b) The reasons for a suspension, revocation or liquidation under 
this part include, but are not limited to:
    (1) Failure to perform licensed or authorized services as provided 
in this part or in the applicable licensing or provider agreement;
    (2) Failure to maintain minimum financial requirements as provided 
in the applicable licensing or provider agreement;
    (3) Failure to submit a proper annual financial statement within the 
established time period as provided in the applicable licensing or 
provider agreement.
    (4) Failure to maintain control of the warehouse or provider system.
    (5) The warehouse operator or provider requests closure, 
cancellation or liquidation. and
    (6) Commission of fraud against FSA, any depositor, EWR or OED 
holder or user, or any other function or operation under this part.
    (c) FSA retains USWA's full authority over a warehouse operator or 
provider for one year after such license revocation or provider 
agreement termination or until satisfaction of any claims filed against 
such warehouse operator or provider are resolved, whichever is later.
    (d) Upon DACO's determination that continued operation of a 
warehouse by a warehouse operator or an electronic provider system by a 
provider is likely to result in probable loss of assets to storage 
depositors, or loss of data integrity to EWR or OED holders and users. 
DACO may immediately suspend, close, or take control and begin an 
orderly liquidation of such warehouse inventory or provider system data 
as provided in this part or in the applicable licensing or provider 
agreement.
    (e) Any disputes involving probable loss of assets to storage 
depositors, or loss of data integrity to EWR or OED holders and users 
will be determined by DACO for the benefit of the depositors, or EWR or 
OED holders and users and such determinations shall be final.



Sec. 735.7  Return of suspended or revoked certificates of licensing 
or certificates of authorization.

    (a) When a license issued to a warehouse operator or service license 
ends or is suspended or revoked by DACO, such certificates of licensing 
and applicable licensing agreement and certificates of authorization 
must be immediately surrendered and returned to DACO.
    (b) When an agreement with a provider ends or is suspended or 
revoked by DACO, such certificates of authorization and applicable 
provider agreement must be immediately surrendered to DACO



Sec. 735.8  Appeals.

    (a) Any person who is subject to an adverse determination made under 
the Act may appeal the determination by filing a written request with 
DACO at the following address: Deputy Administrator, Commodity 
Operations, Farm Service Agency, United States Department of 
Agriculture, STOP 0550, 1400 Independence Avenue, SW., Washington, DC 
20250-0550.
    (b) Any person who believes that they have been adversely affected 
by a

[[Page 190]]

determination under this part must seek review by DACO within twenty-
eight calendar days of such determination, unless provided with notice 
by DACO of a different deadline.
    (c) The appeal process set forth in this part is applicable to all 
licensees and providers under any provision of the Act, regulations or 
any applicable licensing agreement as follows:
    (1) DACO will notify the person in writing of the nature of the 
suspension, revocation or liquidation action;
    (2) The person must notify DACO of any appeal of its action within 
twenty-eight calendar days;
    (3) The appeal and request must state whether:
    (i) A hearing is requested,
    (ii) The person will appear in person at such hearing, or
    (iii) Such hearing will be held by telephone;
    (4) DACO will provide the person a written acknowledgment of their 
request to pursue an appeal;
    (5) When a person requests an appeal and does not request a hearing 
DACO will allow that person:
    (i) To submit in writing the reasons why they believe DACO's 
determination to be in error,
    (ii) Twenty-eight calendar days from the receipt of the 
acknowledgment to file any statements and documents in support of their 
appeal, unless provided with notice by DACO of a different deadline, and
    (iii) An additional fourteen calendar days to respond to any new 
issues raised by DACO in response to the person's initial submission, 
unless provided with notice by DACO of a different deadline;
    (6) If the person requests to pursue an appeal and requests a 
hearing, DACO will:
    (i) Notify the person of the date of the hearing,
    (ii) Determine the location of the hearing, when the person asks to 
appear in person,
    (iii) Notify the person of the location of the hearing,
    (iv) Afford the person twenty-eight calendar days from the receipt 
of the notification of the scheduling of the hearing to submit any 
statements and documents in support of the appeal, unless provided with 
notice by DACO of a different deadline, and
    (v) Allow the person an additional fourteen calendar days from the 
date of the hearing to submit any additional material, unless provided 
with notice by DACO of a different deadline;
    (7) Determinations of DACO will be final and no further appeal 
within USDA will be available except as may be specified in the final 
determination of DACO; and
    (8) A person may not initiate an action in any court of competent 
jurisdiction concerning a determination made under the Act prior to the 
exhaustion of the appeal process set forth in this section.



Sec. 735.9  Dispute resolution and arbitration of private parties.

    (a) A person may initiate legal action in any court of competent 
jurisdiction concerning a claim for noncompliance or an unresolved 
dispute with respect to activities authorized under the Act.
    (b) Any claim for noncompliance or an unresolved dispute between a 
warehouse operator or provider and another party with respect to 
activities authorized under the Act may be resolved by the parties 
through mutually agreed-upon arbitration procedures or as may be 
prescribed in the applicable licensing or provider agreement. No 
arbitration determination or award will affect DACO's authority under 
the Act.
    (c) In no case will USDA provide assistance or representation to 
parties involved in an arbitration proceeding arising with respect to 
activities authorized under the Act.



Sec. 735.10  Posting of certificates of licensing, certificates of authorization or other USWA documents.

    (a) The warehouse operator must post, in a conspicuous place in the 
principal place where warehouse receipts are issued, any applicable 
certificate furnished by DACO that the warehouse operator is an 
authorized licensee under the Act.
    (b) Immediately upon receipt of their certificate of service 
licensing or any modification or extension thereof under the Act, the 
licensee and warehouse operator must jointly post the

[[Page 191]]

same, and thereafter, except as otherwise provided in the regulations in 
this part or as prescribed in the applicable licensing agreement, keep 
such certificate of licensing conspicuously posted in the office where 
all or most of the services are done, or in such place as may be 
designated by DACO.
    (c) The provider must post, in a conspicuous place in the principal 
place of business, any applicable certificate of authorization furnished 
by DACO that the provider is authorized to offer and provide specific 
services under the Act.



Sec. 735.11  Lost or destroyed certificates of licensing, authorization 
or agreements.

    FSA will replace lost or destroyed certificates of licensing, 
certificate of authorization or applicable agreement upon satisfactory 
proof of loss or destruction. FSA will mark such certificates or 
agreements as duplicates.



Sec. 735.12  Safe keeping of records.

    Each warehouse operator or provider must take necessary precautions 
to safeguard all records, either paper or electronic format, from 
destruction.



Sec. 735.13  Information of violations.

    Every person licensed or authorized under the Act must immediately 
furnish DACO any information they may have indicating that any provision 
of the Act or the regulations in this part has been violated.



Sec. 735.14  Bonding and other financial assurance requirements.

    (a) As a condition of receiving a license or authorization under the 
Act, the person applying for the license or authorization must execute 
and file with DACO a bond or provide such other financial assurance as 
DACO determines appropriate to secure the person's compliance with the 
Act.
    (b) Such bond or assurance must be for a period of not less than one 
year and in such amount as required by DACO.
    (c) Failure to provide for, or renew, a bond or a financial 
assurance instrument will result in the immediate and automatic 
revocation of the warehouse operator's license or provider's agreement.
    (d) If DACO determines that a previously accepted bond or other 
financial assurance is insufficient, DACO may immediately suspend or 
revoke the license or authorization covered by the bond or other 
financial assurance if the person that filed the bond or other financial 
assurance does not provide such additional bond or other financial 
assurance as DACO determines appropriate.
    (e) To qualify as a suitable bond or other financial assurance, the 
entity issuing the bond or other financial assurance must be subject to 
service of process in lawsuits or legal actions on the bond or other 
financial assurance in the State in which the warehouse is located.



                      Subpart B_Warehouse Licensing



Sec. 735.100  Application.

    (a) An applicant for a license must submit to DACO information and 
documents determined by DACO to be sufficient to conclude that the 
applicant can comply with the provisions of the Act. Such documents must 
include a current review or an audit-level financial statement prepared 
according to generally accepted accounting standards as defined by the 
American Institute of Certified Public Accountants. For any entity that 
is not an individual, a document that establishes proof of the existence 
of the entity, such as:
    (1) For a partnership, an executed partnership agreement; and
    (2) For a corporation:
    (i) Articles of incorporation certified by the Secretary of State of 
the applicable State of incorporation;
    (ii) Bylaws; and
    (iii) Permits to do business; and
    (3) For a limited partnership, an executed limited partnership 
agreement; and
    (4) For a limited liability company:
    (i) Articles of organization or similar documents; and
    (ii) Operating agreement or similar agreement.
    (b) The warehouse facilities of an operator licensed under the Act 
must, as determined by DACO, be:

[[Page 192]]

    (1) Physically and operationally suitable for proper storage of the 
applicable agricultural product or agricultural products specified in 
the license;
    (2) Operated according to generally accepted warehousing activities 
and practices in the industry for the applicable agricultural product or 
agricultural products stored in the facility; and
    (3) Subject to the warehouse operator's control of the facility 
including all contiguous storage space with respect to such facilities.
    (c) As specified in individual licensing agreements, a warehouse 
operator must:
    (1) Meet the basic financial requirements determined by DACO; and
    (2) Meet the net worth requirements determined by DACO;
    (d) In order to obtain a license, the warehouse operator must 
correct any exceptions made by the warehouse examiner at the time of the 
original warehouse examination.
    (e) DACO may issue a license for the storage of two or more 
agricultural products in a single warehouse as provided in the 
applicable licensing agreements. The amount of the bond or financial 
assurance, net worth, and inspection and license fees will be determined 
by DACO in accordance with the licensing agreements applicable to the 
specific agricultural product, based upon the warehouses' total capacity 
for storing such product, that would require:
    (1) The largest bond or financial assurance;
    (2) The greatest amount of net worth; and
    (3) The greatest amount of fees.



Sec. 735.101  Financial records and reporting requirements.

    (a) Warehouse operators must maintain complete, accurate, and 
current financial records that must be available to DACO for review or 
audit at DACO's request as may be prescribed in the applicable licensing 
agreement.
    (b) Warehouse operators must, annually, present a financial 
statement as may be prescribed in the applicable licensing agreement to 
DACO.



Sec. 735.102  Financial assurance requirements.

    (a) Warehouse operators must file with DACO financial assurances 
approved by DACO consisting of:
    (1) A warehouse operator's bond; or
    (2) Obligations that are unconditionally guaranteed as to both 
interest and principal by the United States, in a sum equal at their par 
value to the amount of the bond otherwise required to be furnished, 
together with an irrevocable power of attorney authorizing DACO to 
collect, sell, assign and transfer such obligations in case of any 
default in the performance of any of the conditions required in the 
licensing agreement; or
    (3) An irrevocable letter of credit issued in the favor of DACO with 
a term of not less than two years; or
    (4) A certificate of participation in, and coverage by, an indemnity 
or insurance fund as approved by DACO, established and maintained by a 
State, backed by the full faith and credit of the applicable State, 
which guarantees depositors of the licensed warehouse full 
indemnification for the breach of any obligation of the licensed 
warehouse operator under the terms of the Act. If a warehouse operator 
files a bond or financial assurance in the form of a certification of 
participation in an indemnity or insurance fund, the certification may 
only be used to satisfy any deficiencies in assets above the minimum net 
worth requirement as prescribed in the applicable licensing agreement. A 
certificate of participation and coverage in this fund must be furnished 
to DACO annually; or
    (5) Other alternative instruments and forms of financial assurance 
approved by DACO as may be prescribed in the applicable licensing 
agreement.
    (b) The warehouse operator may not withdraw obligations required 
under this section until one year after license termination or until 
satisfaction of any claims against the obligations, whichever is later.



Sec. 735.103  Amendments to license.

    FSA will issue an amended license upon:
    (a) Receipt of forms prescribed and furnished by DACO outlining the 
requested changes to the license;

[[Page 193]]

    (b) Payment of applicable licensing and examination fees;
    (c) Receipt of bonding or other financial assurance if required in 
the applicable licensing agreement; and
    (d) Receipt of a report on the examination of the proposed 
facilities pending inclusion or exclusion, if determined necessary by 
DACO.



Sec. 735.104  Insurance requirements.

    Each warehouse operator must comply fully with the terms of 
insurance policies or contracts covering their licensed warehouse and 
all products stored therein, and must not commit any acts, nor permit 
others to do anything, that might impair or invalidate such insurance.



Sec. 735.105  Care of agricultural products.

    Each warehouse operator must at all times, including during any 
period of suspension of their license, exercise such care in regard to 
stored and non-storage agricultural products in their custody as 
required in the applicable licensing agreement.



Sec. 735.106  Excess storage and transferring of agricultural products.

    (a) If at any time a warehouse operator stores an agricultural 
product in a warehouse subject to a license issued under the Act in 
excess of the warehouse capacity for which it is licensed, such 
warehouse operator must immediately notify DACO of such excess storage 
and the reason for the storage.
    (b) A warehouse operator who desires to transfer stored agricultural 
products to another warehouse may do so either by physical movement, by 
other methods as may be provided in the applicable licensing agreement, 
or as authorized by DACO.



Sec. 735.107  Warehouse charges and tariffs.

    (a) A warehouse operator must not make any unreasonable or 
exorbitant charge for services rendered.
    (b) A warehouse operator must follow the terms and conditions for 
each new or revised warehouse tariff or schedule of charges and rates as 
prescribed in the applicable licensing agreement.



Sec. 735.108  Inspections and examinations of warehouses.

    (a) Warehouse operators must permit any agent of the Department to 
enter and inspect or examine, on any business day during the usual hours 
of business, any licensed warehouse, the offices of the warehouse 
operator, the books, records, papers, and accounts.
    (b) Routine and special inspections and examinations will be 
unannounced.
    (c) Warehouse operators must provide safe access to all storage 
facilities.
    (d) Warehouse operators must inform any agent of the Department, 
upon arrival, of any hazard.
    (e) Agents of the Department must accomplish inspections and 
examinations of warehouses in a manner that is efficient and cost-
effective without jeopardizing any inspection and examination integrity.



Sec. 735.109  Disaster loss to be reported.

    If at any time a disaster or loss occurs at or within any licensed 
warehouse, the warehouse operator must report immediately the occurrence 
of the disaster or loss and the extent of damage, to DACO.



Sec. 735.110  Conditions for delivery of agricultural products.

    (a) In the absence of a lawful excuse, a warehouse operator will, 
without unnecessary delay, deliver the agricultural product stored or 
handled in the warehouse on a demand made by:
    (1) The holder of the warehouse receipt for the agricultural 
product; or
    (2) The person that deposited the agricultural product, if no 
warehouse receipt has been issued.
    (b) Prior to delivery of the agricultural product, payment of the 
accrued charges associated with the storage or handling of the 
agricultural product, including satisfaction of the warehouse operator's 
lien, must be made if requested by the warehouse operator.
    (c) When the holder of a warehouse receipt requests delivery of an 
agricultural product covered by the warehouse receipt, the holder must 
surrender the warehouse receipt to the warehouse operator before 
obtaining the agricultural product.
    (d) A warehouse operator must cancel each warehouse receipt 
surrendered to

[[Page 194]]

the warehouse operator upon the delivery of the agricultural product for 
which the warehouse receipt was issued and in accordance with the 
applicable licensing agreement.
    (e) For the purpose of this part, unless prevented from doing so by 
force majeure, a warehouse operator will deliver or ship such 
agricultural products stored or handled in their warehouse as prescribed 
in the applicable licensing agreement.



Sec. 735.111  Fair treatment.

    (a) Contingent upon the capacity of a warehouse, a warehouse 
operator will deal in a fair and reasonable manner with persons storing, 
or seeking to store, an agricultural product in the warehouse if the 
agricultural product is:
    (1) Of the kind, type, and quality customarily stored or handled in 
the area in which the warehouse is located;
    (2) Tendered to the warehouse operator in a suitable condition for 
warehousing; and
    (3) Tendered in a manner that is consistent with the ordinary and 
usual course of business.
    (b) Nothing in this section will prohibit a warehouse operator from 
entering into an agreement with a depositor of an agricultural product 
to allocate available storage space.



Sec. 735.112  Terminal and futures contract markets.

    (a) DACO may issue service licenses to weigh-masters or their 
deputies to perform services relating to warehouse receipts that are 
deliverable in satisfaction of futures contracts in such contract 
markets or as may be prescribed in any applicable licensing agreement.
    (b) DACO may authorize a registrar of warehouse receipts issued for 
an agricultural product in a warehouse licensed under the Act that 
operates in any terminal market or in any futures contract market the 
official designated by officials of the State in which such market is 
located if such individual is not:
    (1) An owner or employee of the licensed warehouse;
    (2) The owner of, or an employee of the owner of, such agricultural 
product deposited in any such licensed warehouse; or
    (3) As may be prescribed in any applicable licensing or provider 
agreement.



        Subpart C_Inspectors, Samplers, Classifiers, and Weighers



Sec. 735.200  Service licenses.

    (a) FSA may issue to a person a license for:
    (1) Inspection of any agricultural product stored or handled in a 
warehouse subject to the Act;
    (2) Sampling of such an agricultural product;
    (3) Classification of such an agricultural product according to 
condition, grade, or other class and certify the condition, grade, or 
other class of the agricultural product;
    (4) Weighing of such an agricultural product and certify the weight 
of the agricultural product; or
    (5) Performing two or more services specified in paragraphs (a)(1), 
(a)(2), (a)(3) or (a)(4) of this section.
    (b) Each person seeking a license to perform activities described in 
this section must submit an application on forms furnished by DACO that 
contain, at a minimum, the following information:
    (1) The name, location and license number of the warehouses where 
the applicant would perform such activities;
    (2) A statement from the warehouse operator that the applicant is 
competent and authorized to perform such activities at specific 
locations; and
    (3) Evidence that the applicant is competent to inspect, sample, 
classify, according to grade or weigh the agricultural product.
    (c) The warehouse operator will promptly notify DACO in writing of 
any changes with respect to persons authorized to perform such 
activities at the licensed warehouse.



Sec. 735.201  Agricultural product certificates; format.

    Each inspection, grade, class, weight or combination certificate 
issued under the Act by a licensee to perform such services must be:
    (a) In a format prescribed by DACO;

[[Page 195]]

    (b) Issued and maintained in a consecutive order; and
    (c) As prescribed in the applicable licensing or provider agreement 
and authorized by DACO.



Sec. 735.202  Standards of grades for other agricultural products.

    Official Standards of the United States for any kind, class or grade 
of an agricultural product to be inspected must be used if such 
standards exist. Until Official Standards of the United States are fixed 
and established for the kind of agricultural product to be inspected, 
the kind, class and grade of the agricultural product must be stated, 
subject to the approval of DACO. If such standards do not exist for such 
an agricultural product, the following will be used:
    (a) State standards established in the State in which the warehouse 
is located, (b) In the absence of any State standards, in accordance 
with the standards, if any, adopted by the local board of trade, chamber 
of commerce, or by the agricultural product trade generally in the 
locality in which the warehouse is located, or
    (c) In the absence of the standards set forth in paragraphs (a) and 
(b) of this section, in accordance with any standards approved for the 
purpose by DACO.



                      Subpart D_Warehouse Receipts



Sec. 735.300  Warehouse receipt requirements.

    (a) Warehouse receipts may be:
    (1) Negotiable or non-negotiable;
    (2) For a single unit, multiple units, identity preserved or 
commingled lot; and
    (3) In a paper or electronic format that, besides complying with the 
requirements of the Act, must be in a format as prescribed in the 
applicable licensing or provider agreement and authorized by DACO.
    (b) The warehouse operator must:
    (1) At the request of a depositor of an agricultural product stored 
or handled in a warehouse licensed under the Act, issue a warehouse 
receipt to the depositor;
    (2) Not issue a warehouse receipt for an agricultural product unless 
the agricultural product is actually stored in their warehouse at the 
time of issuance;
    (3) Not issue a warehouse receipt until the quality, condition and 
weight of such an agricultural product is ascertained by a licensed 
inspector and weigher;
    (4) Not directly or indirectly compel or attempt to compel the 
depositor to request the issuance of a warehouse receipt omitting the 
statement of quality or condition;
    (5) Not issue an additional warehouse receipt under the Act for a 
specific identity-preserved or commingled agricultural product lot (or 
any portion thereof) if another warehouse receipt representing the same 
specific identity-preserved or commingled lot of the agricultural 
product is outstanding. No two warehouse receipts issued by a warehouse 
operator may have the same warehouse receipt number or represent the 
same agricultural product lot;
    (6) When issuing a warehouse receipt and purposefully omitting any 
information, notate the blank to show such intent;
    (7) Not deliver any portion of an agricultural product for which 
they have issued a negotiable warehouse receipt until the warehouse 
receipt has been surrendered to them and canceled as prescribed in the 
applicable licensing agreement;
    (8) Not deliver more than 90% of the receipted quantity of an 
agricultural product for which they have issued a non-negotiable 
warehouse receipt until such warehouse receipt has been surrendered or 
the depositor or the depositor's agent has provided a written order for 
the agricultural product and the warehouse receipt surrendered upon 
final delivery; and
    (9) Deliver, upon proper presentation of a warehouse receipt for any 
agricultural product, and payment or tender of all advances and charges, 
to the depositor or lawful holder of such warehouse receipt the 
agricultural product of such identity, quantity, grade and condition as 
set forth in such warehouse receipt.
    (c) In the case of a lost or destroyed warehouse receipt, a new 
warehouse receipt upon the same terms, subject to the same conditions, 
and bearing on its

[[Page 196]]

face the number and the date of the original warehouse receipt may be 
issued.



Sec. 735.301  Notification requirements.

    Warehouse operators must file with DACO the name and genuine 
signature of each person authorized to sign warehouse receipts for the 
licensed warehouse operator, and will promptly notify DACO of any 
changes with respect to persons authorized to sign.



Sec. 735.302  Paper warehouse receipts.

    Paper warehouse receipts must be issued as follows:
    (a) On distinctive paper specified by DACO;
    (b) Printed by a printer authorized by DACO; and
    (c) Issued, identified and maintained in a consecutive order.



Sec. 735.303  Electronic warehouse receipts.

    (a) Warehouse operators issuing EWR under the Act may issue EWR's 
for the agricultural product stored in their warehouse. Warehouse 
operators issuing EWR's under the Act must:
    (1) Only issue EWR's through one FSA-authorized provider annually;
    (2) Inform DACO of the identity of their provider, when they are a 
first time user of EWR's, 60 calendar days in advance of issuing an EWR 
through that provider. DACO may waive or modify this 60-day requirement 
as set forth in Sec. 735.2(b);
    (3) Before issuing an EWR, request and receive from FSA a range of 
consecutive warehouse receipt numbers that the warehouse will use 
consecutively for issuing their EWR's;
    (4) When using an authorized provider, issue and cancel all 
warehouse receipts as EWR's;
    (5) Cancel an EWR only when they are the holder of the warehouse 
receipt;
    (6) Be the holder of an EWR to correct information contained within 
any required data field;
    (7) Receive written authorization from FSA at least 30 calendar days 
before changing providers. Upon authorization, they may request their 
current provider to transfer their EWR data from its Central Filing 
System (CFS) to the CFS of the authorized provider whom they select; and
    (8) Notify all holders of EWR's by inclusion in the CFS at least 30 
calendar days before changing providers, unless otherwise required or 
allowed by FSA.
    (b) An EWR establishes the same rights and obligations with respect 
to an agricultural product as a paper warehouse receipt and possesses 
the following attributes:
    (1) The holder of an EWR will be entitled to the same rights and 
privileges as the holder of a paper warehouse receipt.
    (2) Only the current holder of the EWR may transfer the EWR to a new 
holder.
    (3) The identity of the holder must be confidential and included as 
information for every EWR.
    (4) Only one person may be designated as the holder of an EWR at any 
one time.
    (5) A warehouse operator may not issue an EWR on a specific 
identity-preserved or commingled lot of agricultural product or any 
portion thereof while another valid warehouse receipt representing the 
same specific identity-preserved or commingled lot of agricultural 
product remains not canceled. No two warehouse receipts issued by a 
warehouse operator may have the same warehouse receipt number or 
represent the same agricultural product lot.
    (6) An EWR may only be issued to replace a paper warehouse receipt 
if requested by the current holder of the paper warehouse receipt.
    (7) Holders and warehouse operators may authorize any other user of 
their provider or the provider itself to act on their behalf with 
respect to their activities with this provider. This authorization must 
be in writing, and acknowledged and retained by the warehouse operator 
and provider.
    (c) A warehouse operator not licensed under the Act may, at the 
option of the warehouse operator, issue EWRs in accordance with this 
subpart, except this option does not apply to a warehouse operator that 
is licensed under State law to store agricultural products in a 
warehouse if the warehouse operator elects to issue an EWR under State 
law.

[[Page 197]]



                     Subpart E_Electronic Providers



Sec. 735.400  Administration.

    This subpart sets forth the regulations under which DACO may 
authorize one or more electronic systems under which:
    (a) Electronic documents relating to the shipment, payment, and 
financing of the sale of agricultural products may be issued or 
transferred; or
    (b) Electronic receipts may be issued and transferred.



Sec. 735.401  Electronic warehouse receipt and USWA electronic document 
providers.

    (a) To establish a USWA-authorized system to issue and transfer 
EWR's and USWA electronic documents, each applicant must submit to DACO 
information and documents determined by DACO to be sufficient to 
determine that the applicant can comply with the provisions of the Act. 
Each provider operating pursuant to this section must meet the following 
requirements:
    (1) Have and maintain a net worth as specified in the applicable 
provider agreement;
    (2) Maintain two insurance policies; one for ``errors and 
omissions'' and another for ``fraud and dishonesty.'' Each policy's 
minimum coverage and maximum deductible amounts and applicability of 
other forms of financial assurances as set forth in Sec. 735.14 will be 
prescribed in the applicable provider agreement. Each policy must 
contain a clause requiring written notification to FSA 30 days prior to 
cancellation or as prescribed by FSA;
    (3) Submit a current review or an audit level financial statement 
prepared according to generally accepted accounting standards as defined 
by the American Institute of Certified Public Accountants;
    (4) For any entity that is not an individual, a document that 
establishes proof of the existence, such as:
    (i) For a partnership, an executed partnership agreement; and
    (ii) For a corporation:
    (A) Articles of incorporation certified by the Secretary of State of 
the applicable State of incorporation;
    (B) Bylaws; and
    (C) Permits to do business; and
    (iii) For a limited partnership, an executed limited partnership 
agreement; and
    (iv) For a limited liability company:
    (A) Articles of organization or similar documents; and
    (B) Operating agreement or similar agreement.
    (5) Meet any additional financial requirements as set forth in the 
applicable provider agreement;
    (6) Pay user fees annually to FSA, as set and announced annually by 
FSA prior to April 1 of each calendar year; and
    (7) Operate a CFS as a neutral third party in a confidential and 
secure fashion independent of any outside influence or bias in action or 
appearance.
    (b) The provider agreement will contain, but not be limited to, 
these basic elements:
    (1) Scope of authority;
    (2) Minimum document and warehouse receipt requirements;
    (3) Liability;
    (4) Transfer of records protocol;
    (5) Records;
    (6) Conflict of interest requirements;
    (7) USDA common electronic information requirements;
    (8) Financial requirements
    (9) Terms of insurance policies or assurances;
    (10) Provider's integrity statement;
    (11) Security audits; and
    (12) Submission, authorization, approval, use and retention of 
documents.
    (c) DACO may suspend or terminate a provider's agreement for cause 
at any time.
    (1) Hearings and appeals will be conducted in accordance with 
procedures as set forth in Sec. Sec. 735.6 and 735.8.
    (2) Suspended or terminated providers may not execute any function 
pertaining to USDA, USWA documents, or USWA or State EWR's during the 
pendency of any appeal or subsequent to this appeal if the appeal is 
denied, except as authorized by DACO.
    (3) The provider or DACO may terminate the provider agreement 
without cause solely by giving the other party written notice 60 
calendar days prior to termination.
    (d) Each provider agreement will be automatically renewed annually 
on

[[Page 198]]

April 30th as long as the provider complies with the terms contained in 
the provider agreement, the regulations in this subpart, and the Act.



Sec. 735.402  Providers of other electronic documents.

    (a) To establish a USWA-authorized system to issue and transfer OED, 
each applicant must submit to DACO information and documents determined 
by DACO to be sufficient to determine that the applicant can comply with 
the provisions of the Act. Each provider operating pursuant to this 
section must meet the following requirements:
    (1) Have and maintain a net worth as specified in the applicable 
provider agreement;
    (2) Maintain two insurance policies; one for 'errors and omissions' 
and another for 'fraud and dishonesty'. Each policy's minimum coverage 
and maximum deductible amounts and applicability of other forms of 
financial assurances as set forth in Sec. 735.14 will be prescribed in 
the applicable provider agreement. Each policy must contain a clause 
requiring written notification to FSA 30 days prior to cancellation or 
as prescribed by FSA;
    (3) Submit a current review or an audit level financial statement 
prepared according to generally accepted accounting standards as defined 
by the American Institute of Certified Public Accountants;
    (4) For any entity that is not an individual, a document that 
establishes proof of the existence, such as:
    (i) For a partnership, an executed partnership agreement; and
    (ii) For a corporation:
    (A) Articles of incorporation certified by the Secretary of State of 
the applicable State of incorporation;
    (B) Bylaws; and
    (C) Permits to do business; and
    (iii) For a limited partnership, an executed limited partnership 
agreement; and
    (iv) For a limited liability company:
    (A) Articles of organization or similar documents; and
    (B) Operating agreement or similar agreement.
    (5) Meet any additional financial requirements as set forth in the 
applicable provider agreement;
    (6) Pay user fees annually to FSA, as set and announced annually by 
FSA prior to April 1 of each calendar year; and
    (7) Operate a CFS as a neutral third party in a confidential and 
secure fashion independent of any outside influence or bias in action or 
appearance.
    (b) The provider agreement will contain, but not be limited to, 
these basic elements:
    (1) Scope of authority;
    (2) Minimum document and warehouse receipt requirements;
    (3) Liability;
    (4) Transfer of records protocol;
    (5) Records;
    (6) Conflict of interest requirements;
    (7) USDA common electronic information requirements;
    (8) Financial requirements;
    (9) Terms of insurance policies or assurances;
    (10) Provider's integrity statement;
    (11) Security audits; and
    (12) Submission, authorization, approval, use and retention of 
documents.
    (c) DACO may suspend or terminate a provider's agreement for cause 
at any time.
    (1) Hearings and appeals will be conducted in accordance with 
procedures as set forth in Sec. Sec. 735.6 and 735.8.
    (2) Suspended or terminated providers may not execute any function 
pertaining to USDA, USWA documents, USWA or State EWR's or OED's during 
the pendency of any appeal or subsequent to this appeal if the appeal is 
denied, except as authorized by DACO.
    (d) Each provider agreement will be automatically renewed annually 
on April 30th as long as the provider complies with the terms contained 
in the provider agreement, the regulations in this subpart, and the Act.
    (e) In addition to audits prescribed in this section the provider 
must submit a copy of any audit, examination or investigative report 
prepared by any Federal regulatory agency with respect to the provider 
including agencies such as, but not limited to, the Comptroller of the 
Currency, Department of the Treasury, the Federal Trade Commission, and 
the Commodity Futures Trading Commission.

[[Page 199]]



Sec. 735.403  Audits.

    (a) No later than 120 calendar days following the end of the 
provider's fiscal year, the provider authorized under Sec. Sec. 735.401 
and 735.402 must submit to FSA an annual audit level financial statement 
and an electronic data processing audit that meets the minimum 
requirements as provided in the applicable provider agreement. The 
electronic data processing audit will be used by DACO to evaluate 
current computer operations, security, disaster recovery capabilities of 
the system, and compatibility with other systems authorized by DACO.
    (b) Each provider will grant the Department unlimited, free access 
at any time to all records under the provider's control relating to 
activities conducted under this part and as specified in the applicable 
provider agreement.



Sec. 735.404  Schedule of charges and rates.

    (a) A provider authorized under Sec. Sec. 735.401 or 735.402 must 
furnish FSA with copies of its current schedule of charges and rates for 
all services as they become effective.
    (b) Charges and rates assessed any user by the provider must be in 
effect for a minimum period of one year.
    (c) Providers must furnish FSA and all users a 60-calendar day 
advance notice of their intent to change any charges and rates.

                           PART 743 [RESERVED]

[[Page 200]]



                      SUBCHAPTER D_SPECIAL PROGRAMS





PART 750_SOIL BANK--Table of Contents




    Editorial Note: Part 750 (formerly part 485 of title 6), published 
at 21 FR 6289, Aug. 22, 1956, and redesignated at 26 FR 5788, June 29, 
1961, is no longer carried in the Code of Federal Regulations. This 
deletion does not relieve any person of any obligation or liability 
incurred under these regulations, nor deprive any person of any rights 
received or accrued under the provisions of this part. For Federal 
Register citations affecting this part, see the ``List of CFR Sections 
Affected, 1949-1963, 1964-1972, and 1973-1985,'' published in seven 
separate volumes.



PART 752_WATER BANK PROGRAM--Table of Contents




Sec.
752.1 Program objective.
752.2 Definitions.
752.3 Administration.
752.4 Geographical applicability.
752.5 Eligible farm.
752.6 Land eligible for designation.
752.7 Use of designated acreage.
752.8 Water bank program agreement.
752.9 Agreement period.
752.10 Awarding water bank agreements.
752.11 Responsibility of agreement signers.
752.12 Provisions relating to tenants and sharecroppers.
752.13 Determination of compliance.
752.14 Annual payments.
752.15 Adjustment of annual rates.
752.16 Refunds or forfeitures for noncompliance.
752.17 Actions defeating purposes of program.
752.18 Filing of false claims.
752.19 Depriving others of payments.
752.20 Modification of an agreement.
752.21 Termination of agreements.
752.22 Transfer of interest in an agreement.
752.23 Successors-in-interest.
752.24 Agreement not in conformity with regulations.
752.25 Performance based upon advice or action of county or State 
          committee.
752.26 Setoffs and withholdings.
752.27 Debt collection.
752.28 Appeals.
752.29 Payments not subject to claims.
752.30 Prohibition against payments.
752.31 Delegation of authority.
752.32 Paperwork Reduction Act assigned numbers.

    Authority: Secs. 2-12, 84 Stat. 1468-1471, as amended (16 U.S.C. 
1301-1311).

    Source: 48 FR 45528, Oct. 6, 1983, unless otherwise noted.



Sec. 752.1  Program objective.

    (a) The regulations in this part set forth the terms and conditions 
for the Water Bank Program. The Secretary is authorized to enter into 
agreements and make payments to eligible persons in important migratory 
waterfowl nesting and breeding areas. Specified wetlands identified for 
the conservation of water or related uses on a conservation plan shall 
be developed in cooperation with the Soil and Water Conservation 
District in which the lands are located.
    (b) The objective of the Water Bank Program (hereinafter referred to 
in this part as the ``program'') is to preserve, restore, and improve 
the wetlands of the Nation, and thereby: (1) Conserve surface waters, 
(2) preserve and improve habitat for migratory waterfowl and other 
wildlife resources, (3) reduce runoff, soil and wind erosion, (4) 
contribute to flood control, (5) contribute to improved water quality 
and reduce stream sedimentation, (6) contribute to improved subsurface 
moisture, (7) reduce acres of new land coming into production and to 
retire lands now in agricultural production, (8) enhance the natural 
beauty of the landscape, and (9) promote comprehensive and total water 
management planning.



Sec. 752.2  Definitions.

    (a) Adjacent land means land on a farm which adjoins designated 
types 1 through 7 wetlands and is considered essential for the 
protection of the wetland or for the nesting, breeding, or feeding of 
migratory waterfowl. Adjacent land need not be contiguous to the land 
designated as wetland, but cannot be located more than one quarter of a 
mile away. Types 1 and 2 wetlands may be designated as adjacent land 
rather than wetland if located not more than one quarter mile from types 
3 through 7 wetlands.
    (b) Administrator means the Administrator or Acting Administrator of 
the

[[Page 201]]

Farm Service Agency (FSA), U.S. Department of Agriculture.
    (c) Agreement means a water bank agreement.
    (d) Conservation plan means a written record of the land user's 
decisions on the use and management of the wetland and adjacent areas 
covered by the agreement. The conservation plan is the basis for the 
agreement. It includes a schedule of conservation treatment and 
management required to improve, protect, or restore the wetland and to 
maintain the wetland and adjacent land as a functional wetland unit for 
the life of the agreement. Conservation treatment and management of the 
vegetation for wetland protection, wildlife habitat, or other authorized 
objectives are consistent with the program objectives and priorities.
    (e) Wetlands means the inland fresh areas described as types 1 
through 7 in Circular 39, Wetlands of the United States, as published by 
the United States Department of the Interior.
    (f) In the regulations in this part and in all instructions, forms, 
and documents in connection therewith, all other words and phrases 
specifically relating to FSA operation shall, unless the context of 
subject matter otherwise requires, have the meanings assigned to them in 
the regulations governing reconstitution of farms, allotments and bases, 
part 719 of this chapter, as amended.

[48 FR 45528, Oct. 6, 1983, as amended at 50 FR 7744, Feb. 26, 1985]



Sec. 752.3  Administration.

    (a) The program will be administered under the general supervision 
of the Administrator, in consultation with the Secretary of the Interior 
or his designee, and shall be carried out in the field by FSA State and 
county committees.
    (b) Members of county committees are authorized to approve water 
bank agreements on behalf of the Secretary of Agriculture.
    (c) State and county committees do not have authority to modify or 
waive any of the provisions of these regulations, or any amendment, 
supplement, or revision thereto. They do not have authority to modify or 
waive any of the provisions of any agreement entered into hereunder 
except to the extent specifically authorized in this part.

[48 FR 45528, Oct. 6, 1983, as amended at 50 FR 7744, Feb. 26, 1985]



Sec. 752.4  Geographical applicability.

    The program will be applicable in States and counties designated by 
the Deputy Administrator, State and County Operations, FSA (hereinafter 
referred to as the ``Deputy Administrator'') after consultation with the 
United States Fish and Wildlife Service, United States Department of the 
Interior.



Sec. 752.5  Eligible farm.

    A farm is eligible for participation in the program if: (a) At the 
time the request for an agreement is filed, land on the farm is not 
covered by a Water Bank Program agreement; (b) the farm contains at 
least one of the types 3 through 7 wetlands which are identified in a 
conservation plan developed in cooperation with the Soil and Water 
Conservation District in which the farm is located; and (c) the farm 
meets the other requirements specified in this part.



Sec. 752.6  Land eligible for designation.

    (a) Land placed under an agreement shall be specifically identified 
and designated for the period of the agreement.
    (b) Land eligible for designation must be: (1) Privately owned 
inland fresh wetland areas of types 1 through 7 of which at least 2 
acres must be types 3 through 7 wetlands with respect to which, in the 
absence of inclusion in the program, destruction of the wetland 
character could reasonably be expected; (2) privately owned inland fresh 
wetland areas of types 1 through 7, which are under a drainage easement 
with the U.S. Department of the Interior or with a State government 
which permits agricultural use; or (3) other privately owned land which 
is adjacent to or within one quarter mile of designated types 1 through 
7 wetlands and which is determined by the county committee to be 
essential for the nesting, breeding, or feeding of migratory waterfowl, 
or for the protection of wetland.

[[Page 202]]

    (c) The following land is not eligible for designation: (1) Land on 
which the ownership has changed during the 2-year period preceding the 
first year of the agreement period unless: (i) The new ownership was 
acquired by will or succession as a result of the death of the previous 
owner, or (ii) the land was acquired by the owner or operator to replace 
eligible land from which he was displaced because of its acquisition by 
any Federal, State, or other agency having the right of eminent domain. 
However a new owner shall not be prohibited from entering into an 
agreement if the person has operated the land to be designated for as 
long as 2 years preceding the first year of the agreement and has 
control of such land for the agreement period. The provisions of this 
subparagraph shall not prohibit the continuation of an agreement by a 
new owner after an agreement has once been entered into under this part.
    (2) Land which is set aside or diverted under any other program 
administered by the Department of Agriculture.
    (3) Land which is owned by the United States or a State or local 
government or political subdivision thereof.
    (4) Land which is harvested in the first year of the agreement 
period prior to being designated, except for land on which timber is 
harvested in accordance with Sec. 752.7(g).
    (5) Types 1 through 7 wetlands which are common to more than one 
farm unless the portion of a wetland area located on the farm which 
controls the potential outlet for drainage is placed under agreement. 
After an agreement has been approved for the farm controlling the outlet 
for drainage, an agreement may be entered into with any or all other 
farms for other portions of the common wetland area if all agreements 
have the same beginning date as the farm controlling the outlet for 
drainage.

[48 FR 45528, Oct. 6, 1983, as amended at 50 FR 7744, Feb. 26, 1985]



Sec. 752.7  Use of designated acreage.

    (a) The acreage designated under an agreement shall be maintained 
for the agreement period in a manner which will preserve, restore or 
improve the wetland character of the land. Persons entering into an 
agreement shall devote the adjacent land to conservation uses as 
specified in the agreement.
    (b) The designated acreage shall not be drained, burned, filled, or 
otherwise used in a manner which would destroy the wetland character of 
the acreage, except that the provisions of this paragraph shall not 
prohibit the carrying out of management practices which are specified in 
a conservation plan for the farm which is developed in cooperation with 
the Soil and Water Conservation District in which the farm is located.
    (c) The designated acreage shall not be used as a dumping area for 
draining other wetlands. However, the county committee may authorize the 
use of the designated area to receive limited drainage waters upon a 
determination that such use is consistent with the sound management of 
wetlands and is specified in the conservation plan for the farm.
    (d) The designated acreage shall not be used: (1) As a source of 
irrigation water or as acreage for a set-aside, land diversion, acreage 
reduction or other program, or (2) to meet the conserving base acreage 
requirement for any other program.
    (e) No crop shall be harvested from the designated acreage and such 
acreage shall not be grazed, except as may be specified in the 
conservation plan for the farm except that the designated acreage may be 
grazed in the first year of the agreement period prior to the date the 
agreement is approved.
    (f) During periods of severe drought, haying of the designated 
acreage may be approved under specified conditions which are prescribed 
by the Deputy Administrator in consultation with the Secretary of 
Interior or his designee.
    (g) The harvesting of timber products may be permitted but only in 
accordance with a Forest Management Plan which is included in the 
conservation plan and which is approved by the State forester or 
equivalent State official.

[48 FR 45528, Oct. 6, 1983, as amended at 50 FR 7744, Feb. 26, 1985]

[[Page 203]]



Sec. 752.8  Water bank program agreement.

    (a) An agreement shall be executed for each participating farm. The 
agreement shall be signed by the owner of the designated acreage and any 
other person who, as landlord, tenant, or share cropper, will share in 
the payment or has an interest in the designated acreage.
    (b) There may be more than one agreement for a farm.
    (c) Each agreement shall be signed by a member of the county 
committee on behalf of the Secretary.

[48 FR 45528, Oct. 6, 1983, as amended at 50 FR 7744, Feb. 26, 1985]



Sec. 752.9  Agreement period.

    (a) The agreement period shall be 10 years. The agreement shall 
become effective on January 1 of the year in which the agreement is 
approved except that the agreement shall become effective on January 1 
of the next succeeding year in cases where, at the time the agreement is 
approved, the county committee determines that the agreement signers 
will be unable to comply with the provisions of Sec. 752.7 relating to 
the use of designated acreage in the year in which such agreement is 
approved.
    (b) Subject to a modification of payment rates and such other 
provisions which may be determined to be desirable, agreements may be 
renewed for additional periods of 10 years each.



Sec. 752.10  Awarding water bank agreements.

    (a) Persons wishing to be considered for an agreement shall file a 
request with the county committee indicating the acreage which is to be 
designated under the agreement. In order to be eligible for 
participation in the program, such persons must agree to designate: (1) 
2 or more acres of types 3 through 7 wetlands, and (2) a total of at 
least 10 acres consisting of types 1 through 7 wetlands or adjacent 
land, or any combination thereof, identified in a conservation plan 
developed in cooperation with the Soil and Water Conservation District 
in which the farm is located. In addition, the Soil Conservation Service 
(SCS) must certify that the designated acreage constitutes a viable 
wetland unit, contains sufficient adjacent land to protect the wetland, 
and provides essential habitat for the nesting, breeding or feeding of 
migratory waterfowl. An acreage of less than 10 acres may be designated 
if the SCS representative recommends acceptance of the acreage and 
certifies that the area offered for agreement is a good, viable wetland 
unit and that the acceptance of the acreage would be in accord with the 
purposes of the program.
    (b) Persons desiring to participate in the program may agree to 
designate any additional amount to types 1 through 7 wetlands and 
adjacent land. However, the maximum acreage of adjacent land which is 
designated under the agreement with respect to which payment shall be 
based cannot exceed four times the total acreage of types 3 through 7 
wetlands which is designated under the agreement. This maximum acreage 
restriction may be waived by the State committee if such waiver would 
further the program objectives.
    (c) Where funds allocated to the county do not permit accepting all 
requests which are filed, the county committee may limit the approval of 
requests for agreements in accordance with instructions issued by the 
Deputy Administrator.



Sec. 752.11  Responsibility of agreement signers.

    (a) The owner of the designated acreage is responsible for 
compliance with the agreement and for any refunds or deductions for 
failure to comply fully with the terms of the agreement while a party to 
such agreement.
    (b) Each other person signing the agreement is jointly and severally 
responsible with the owner for compliance with the agreement and for any 
refunds or payment reductions which may be required for failure to 
comply fully with the terms of the agreement while a party to such 
agreement.



Sec. 752.12  Provisions relating to tenants and sharecroppers.

    (a) No agreement shall be approved if it appears that the owner, 
landlord, or

[[Page 204]]

operator has (1) not afforded the tenants and sharecroppers having an 
interest in the designated acreage an opportunity to participate in the 
program, or (2) adopted any device or scheme for the purpose of 
depriving any tenant or sharecropper of their payment or any other right 
under the program.
    (b) The agreement shall be deemed to be in noncompliance if any of 
the conditions set forth in paragraph (a) of this section occur after 
the approval of the agreement.



Sec. 752.13  Determination of compliance.

    (a) Determination of the acreage designated under the agreement 
shall be made in accordance with part 718 of this chapter, as amended.
    (b) A representative of the county or State committee or any 
authorized representative of the Secretary shall have the right at any 
reasonable time to enter a farm concerning which representations have 
been made on any forms filed under the program in order to measure the 
designated acreage, to examine any records pertaining thereto, and to 
otherwise determine the accuracy of any representations and the 
performance of any obligations by the signatories of a WBP agreement.



Sec. 752.14  Annual payments.

    (a) Persons on the farm having an interest in the designated acreage 
shall be eligible for an annual payment.
    (b) The annual per acre payment rates for wetlands and for adjacent 
land shall be those rates which are recommended by the county and State 
committee and approved for each county by the Deputy Administrator. If 
the wetlands are subject to a drainage easement with the United States 
Department of the Interior or a state governmental entity, the payment 
rates for such wetlands will be 80 percent of the approved county rates 
which are applicable to wetlands in the county. A listing of all 
approved rates shall be available for inspection at the county FSA 
office.
    (c) The payment shall be divided among the owner of the designated 
acreage and any other person having an interest in such acreage, 
including tenants and sharecroppers, in the manner agreed upon by them 
as representing their respective contributions to compliance with the 
agreement. The county committee shall refuse to approve an agreement if 
it determines that the proposed division of payment is not fair and 
equitable. The annual payment and the division of the payment shall be 
specified in the agreement.



Sec. 752.15  Adjustment of annual rates.

    (a) The county committee shall reexamine the payment rates with 
respect to each agreement at the beginning of the fifth year of any ten-
year initial or renewal period and before the renewal period expires.
    (b) An adjustment in the payment rates shall be made for any initial 
or renewal period taking into consideration the current land rental 
rates and crop values in the area. No adjustment shall be made in a 
payment rate which will result in a reduction of an annual payment rate 
from the rate which is specified in the initial agreement.



Sec. 752.16  Refunds or forfeitures for noncompliance.

    (a) Except as otherwise provided in paragraph (b) of this section, 
no payment shall be made to any person for any year with respect to any 
agreement for which it is determined that for such year:
    (1) There has been a failure to maintain the wetland character of 
the designated acreage and devote the adjacent land to the use specified 
in the agreement as provided in Sec. 752.7. (a);
    (2) There has been a failure to comply with the prohibition against 
draining, burning, filling, or otherwise using the designated acreage in 
a manner which would destroy the wetland character of the acreage as 
provided in Sec. 752.7 (b);
    (3) There has been a failure to comply with the prohibition against 
using the designated acreage as a dumping area for draining other 
wetlands as provided in Sec. 752.7 (c);
    (4) There has been a failure to comply with the prohibition against 
using the designated acreage as a source of irrigation water or as 
acreage for a set-aside, land diversion, acreage reduction or other 
program, or to meet the conserving base acreage requirement for

[[Page 205]]

any other program as provided in Sec. 752.7 (d);
    (5) There has been a failure to comply with the prohibition against 
harvesting a crop from or grazing the designated acreage as provided in 
Sec. 752.7(e);
    (6) There has been a failure to comply with the provisions relating 
to haying the designated acreage during periods of severe drought as 
provided in Sec. 752.7(f);
    (7) There has been a failure to comply with the provisions relating 
to the harvesting of timber products as provided in Sec. 752.7(g); or
    (8) There has been a failure to comply with the provisions relating 
to tenants and sharecroppers as provided in Sec. 752.12.
    (b) The regulations governing the making of payments when there has 
been a failure to comply fully with the provisions of the program, part 
791 of this chapter, are applicable to the WBP.
    (c) The agreement shall be terminated in any case in which the 
failure to comply with the provisions of this part requires a refund or 
forfeiture of the entire annual payment under the agreement for the year 
and it is determined that the failure to comply is of such a nature as 
to warrant termination of the agreement. If an agreement is terminated, 
the persons signing the agreement shall forfeit all rights to further 
payments under the agreement and shall refund all payments received 
under the agreement.



Sec. 752.17  Actions defeating purposes of program.

    If the county committee with the concurrence of the State committee, 
or the State committee, finds that any person has taken any action which 
tends to defeat the purposes of the program, all or any part of the 
annual payment which otherwise would be due under the program may be 
withheld or be required to be refunded.



Sec. 752.18  Filing of false claims.

    The making of a fraudulent representation by a person in the payment 
documents or otherwise for the purpose of obtaining a payment from the 
county committee shall render the person liable, in addition to any 
liability under applicable Federal criminal and civil fraud statutes, 
for a refund of any payments received by such person as the result of 
the fraudulent representation.



Sec. 752.19  Depriving others of payments.

    If the State committee finds that any person has employed any scheme 
or device (including coercion, fraud, or misrepresentation) which 
deprives any other person of a payment to which such person is otherwise 
entitled under the program, the State committee may withhold or require 
a refund of all or any part of the program payment which otherwise would 
be due to the person who employed such scheme or device.



Sec. 752.20  Modification of an agreement.

    (a) Any reconstitution of farms shall be made in accordance with the 
regulations governing reconstitution of farms, part 719 of this chapter, 
as amended.
    (b) If the farm is reconstituted because of purchase, sale, change 
of operation, or otherwise, the agreement shall be modified in 
accordance with instructions issued by the Deputy Administrator with 
respect to any reconstituted farm which contains all or any part of the 
original designated acreage. The modified agreement or agreements shall 
reflect the changes in the number of acres in any reconstituted farm, 
the designated acreage, interested persons, and division of payments. If 
persons who were not signatories to the original agreement are required 
to execute such modified agreement or agreements in accordance with the 
provisions of Sec. 752.8, but such persons are not willing to become 
parties to the modified agreement or for any other reason a modified 
agreement is not executed, the agreement shall be terminated with 
respect to the designated acreage which is not continued in the program, 
and all unearned payments shall be forfeited or refunded to FSA. The 
annual payment for the year in which a reconstitution occurs shall not 
be considered earned unless the designated acreage is continued in the 
program and there is a compliance with the agreement for the full 
agreement year. The persons on the farm prior to the reconstitution who 
were signatories to the agreement

[[Page 206]]

shall be jointly and severally responsible for refunding the unearned 
payments previously made.
    (c) Except with respect to a farm which is reconstituted, if the 
ownership or operation of the farm changes in such a manner that the 
agreement no longer contains the signatures of persons required to sign 
the agreement in accordance with Sec. 752.8, the agreement shall be 
modified in accordance with instructions issued by the Deputy 
Administrator to reflect the new interested persons and new divisions of 
payments. If such persons are not willing to become parties to the 
modified agreement or for any other reason a modified agreement is not 
executed, the agreement shall be terminated and all unearned payments 
shall be forfeited or refunded. The annual payment for the year in which 
the change of ownership or operation occurs shall not be considered to 
have been earned unless the designated acreage is continued in the 
program and there is compliance with the agreement for the full 
agreement year. The persons on the farm prior to the change of ownership 
or operation who were signatories to the agreement shall be jointly and 
severally responsible for refunding the unearned payments previously 
made.
    (d) The Deputy Administrator may authorize other agreement 
modifications which are determined to be desirable to carry out the 
purposes of the program or to facilitate its administration.



Sec. 752.21  Termination of agreements.

    The Deputy Administrator may, by mutual agreement with the parties 
to the agreement, consent to the termination of an agreement where: (a) 
The operator of the farm is physically handicapped and could not 
reasonably be expected to comply with the terms and conditions of the 
agreement; (b) the operator is or was mentally unstable at the time of 
the signing of the agreement and could not reasonably be expected to 
comply with the terms and conditions of the agreement; (c) the parties 
to the agreement are unable to comply with the terms of the agreement as 
the result of conditions beyond their control; (d) compliance with the 
terms of the agreement would work a severe hardship on the parties to 
the agreement; or (e) termination of the agreement would be in the 
public interest. If an agreement is terminated in accordance with the 
provisions of this section, the annual payment for the year in which the 
agreement is terminated shall not be considered to have been earned 
unless there is compliance with the terms and conditions of the 
agreement for the entire calendar year.



Sec. 752.22  Transfer of interest in an agreement.

    (a) If a person acquires an interest in the designated acreage 
during the period covered by an agreement, such person may, with the 
consent of the other parties to the agreement and with approval of the 
county committee, become a party to the agreement and share in payments 
thereunder. A person, by becoming a party to the agreement, shall be 
jointly and severally responsible with the other signatories to the 
agreement for compliance with the terms and conditions of the agreement. 
In addition, such person shall be liable for any payment reductions or 
refunds which may be required as the result of the failure to comply 
with the terms and conditions of such agreement after becoming a party 
to the agreement.
    (b) If a signatory to an agreement ceases to have an interest in the 
designated acreage, such person thereby ceases to be a party to the 
agreement. However, such person will not be relieved of any liability 
for deductions and refunds for failure to comply with the terms and 
conditions of the agreement while a party to the agreement.



Sec. 752.23  Successors-in-interest.

    In case of death, incompetency, or disappearance of any person, any 
payment due shall be paid to the successor as determined in accordance 
with provisions of the regulations in part 707 of this chapter, as 
amended.



Sec. 752.24  Agreement not in comformity with regulations.

    If, after an agreement is approved by the county committee, it is 
discovered

[[Page 207]]

that such agreement is not in conformity with the regulations as the 
result of a misunderstanding of the program procedures by a signatory to 
the agreement, a modification of the agreement may be made by mutual 
agreement. If persons who are currently eligible to execute the 
corrected agreement are unwilling to do so, the agreement shall be 
terminated and all payments paid or payable under the agreement shall be 
forfeited or refunded, except as may be allowed by the Deputy 
Administrator in accordance with the provisions of Sec. 752.25.



Sec. 752.25  Performance based upon advice or action of county or State committee.

    The provisions of part 790 of this chapter, as amended, relating to 
performance based upon action or advice of an authorized representative 
of the Secretary shall be applicable to this program.



Sec. 752.26  Setoffs and withholdings.

    The regulations issued by the Secretary governing setoffs and 
withholdings, part 13 of this title, as amended, shall be applicable to 
this program.



Sec. 752.27  Debt collection.

    Any debts arising under this program are governed with respect to 
their collection by the Federal Claims Collection Act of 1966 (31 U.S.C. 
3701) and the regulations found at chapter II of 4 CFR.



Sec. 752.28  Appeals.

    Any person may obtain review of determinations affecting 
participation in this program in accordance with part 614 of this title.

[60 FR 67316, Dec. 29, 1995]



Sec. 752.29  Payments not subject to claims.

    Any payments due any person shall be determined and allowed without 
regard to State law and without regard to any claim or lien against any 
crop, or proceeds thereof, which may be asserted by any creditor, except 
as provided in Sec. 752.26.



Sec. 752.30  Prohibition against payments.

    The regulations in part 796 of this chapter prohibiting the making 
of payments to program participants who harvest or knowingly permit to 
be harvested for illegal use marijuana or other such prohibited drug-
producing plants on any part of the lands owned or controlled by them 
are applicable to this program.



Sec. 752.31  Delegation of authority.

    No delegation herein to a State or county committee shall preclude 
the Administrator, or his designee, from determining any question 
arising under the program or from reversing or modifying any 
determination made by a State or county committee.



Sec. 752.32  Paperwork Reduction Act assigned numbers.

    The Office of Management and Budget has approved the information 
collection requirements contained in these Regulations (Sec. Sec. 
752.8, 752.10 and 752.13) under the provisions of 44 U.S.C. Chapter 35 
and OMB number 0560-0062 has been assigned.



PART 755_REGIONAL PROGRAMS--Table of Contents




     Subpart_Appalachian Land Stabilization and Conservation Program

Sec.
755.1 Definitions.
755.2 Purposes and objectives.
755.3 Geographical applicability.
755.4 General.
755.5 State programs.
755.6 Cost-share contract.
755.7 Cost-share payments.
755.8 Modification of contract.
755.9 Termination of contracts.
755.10 Noncompliance.
755.11 Signatures.
755.12 Filing of false claims.
755.13 Delegation of authority.
755.14 Reporting performance.
755.15 Handling exceptional cases.
755.16 Access to farms and to farm records.
755.17 Preservation of cropland, crop acreage and allotment history.
755.18 Appeals.
755.19 Availability of funds.
755.20 Rural community development proj ects.

    Authority: Sec. 208, 79 Stat. 5, 12; 40 U.S.C. App. 1, 2, 203.

[[Page 208]]


    Source: 30 FR 8669, July 9, 1965, unless otherwise noted.



     Subpart_Appalachian Land Stabilization and Conservation Program



Sec. 755.1  Definitions.

    As used in this subpart the following terms shall have the following 
meanings:
    (a) Act means the Appalachian Regional Development Act of 1965.
    (b) Appalachian Region or the Region means that area of the Eastern 
United States consisting of the following counties (including any 
political subdivision located within such area):
    In Alabama, the counties of Bibb, Blount, Calhoun, Chambers, 
Cherokee, Chilton, Clay, Cleburne, Colbert, Coosa, Cullman, De Kalb, 
Elmore, Etowah, Fayette, Franklin, Jackson, Jefferson, Lamar, 
Lauderdale, Lawrence, Limestone, Madison, Marion, Marshall, Morgan, 
Pickens, Randolph, Saint Clair, Shelby, Talladega, Tallapoosa, 
Tuscaloosa, Walker, and Winston;
    In Georgia, the counties of Banks, Barrow, Bartow, Carroll, Catoosa, 
Chattooga, Cherokee, Dade, Dawson, Douglas, Fannin, Floyd, Forsyth, 
Franklin, Gilmer, Gordon, Gwinnett, Habersham, Hall, Haralson, Heard, 
Jackson, Lumpkin, Madison, Murray, Paulding, Pickens, Polk, Rabun, 
Stephens, Towns, Union, Walker, White, and Whitfield;
    In Kentucky, the counties of Adair, Bath, Bell, Boyd, Breathitt, 
Carter, Casey, Clark, Clay, Clinton, Cumberland, Elliott, Estill, 
Fleming, Floyd, Garrard, Green, Greenup, Harlan, Jackson, Johnson, 
Knott, Knox, Laurel, Lawrence, Lee, Leslie, Letcher, Lewis, Lincoln, 
McCreary, Madison, Magoffin, Martin, Menifee, Monroe, Montgomery, 
Morgan, Owsley, Perry, Pike, Powell, Pulaski, Rockcastle, Rowan, 
Russell, Wayne, Whitley, and Wolfe;
    In Maryland, the counties of Allegany, Garrett, and Washington;
    In Mississippi, the counties of Alcorn, Benton, Chickasaw, Choctaw, 
Clay, Itawamba, Kemper, Lee, Lowndes, Marshall, Monroe, Noxubee, 
Oktibbeha, Pontotoc, Prentiss, Tippah, Tishomingo, Union, Webster, and 
Winston;
    In New York, the counties of Allegany, Broome, Cattaraugus, 
Chautauqua, Chemung, Chenango, Cortland, Delaware, Otsego, Schoharie, 
Schuyler, Steuben, Tioga, and Tompkins;
    In North Carolina, the counties of Alexander, Alleghany, Ashe, 
Avery, Buncombe, Burke, Caldwell, Cherokee, Clay, Davie, Forsyth, 
Graham, Haywood, Henderson, Jackson, McDowell, Macon, Madison, Mitchell, 
Polk, Rutherford, Stokes, Surry, Swain, Transylvania, Watauga, Wilkes, 
Yadkin, and Yancey;
    In Ohio, the counties of Adams, Athens, Belmont, Brown, Carroll, 
Clermont, Coshocton, Gallia, Guernsey, Harrison, Highland, Hocking, 
Holmes, Jackson, Jefferson, Lawrence, Meigs, Monroe, Morgan, Muskingum, 
Noble, Perry, Pike, Ross, Scioto, Tuscarawas, Vinton, and Washington;
    In Pennsylvania, the counties of Allegheny, Armstrong, Beaver, 
Bedford, Blair, Bradford, Butler, Cambria, Cameron, Carbon, Centre, 
Clarion, Clearfield, Clinton, Columbia, Crawford, Elk, Erie, Fayette, 
Forest, Fulton, Greene, Huntingdon, Indiana, Jefferson, Juniata, 
Lackawanna, Lawrence, Luzerne, Lycoming, McKean, Mercer, Mifflin, 
Monroe, Montour, Northumberland, Perry, Pike, Potter, Schuylkill, 
Snyder, Somerset, Sullivan, Susquehanna, Tioga, Union, Venango, Warren, 
Washington, Wayne, Westmoreland, and Wyoming;
    In South Carolina, the counties of Anderson, Cherokee, Greenville, 
Oconee, Pickens, and Spartanburg;
    In Tennessee, the counties of Anderson, Bledsoe, Blount, Bradley, 
Campbell, Cannon, Carter, Claiborne, Clay, Cocke, Coffee, Cumberland, 
DeKalb, Fentress, Franklin, Grainger, Greene, Grundy, Hamblen, Hamilton, 
Hancock, Hawkins, Jackson, Jefferson, Johnson, Knox, Loudon, McMinn, 
Macon, Marion, Meigs, Monroe, Morgan, Overton, Pickett, Polk, Putnam, 
Rhea, Roane, Scott, Sequatchie, Sevier, Smith, Sullivan, Unicoi, Union, 
Van Buren, Warren, Washington, and White;
    In Virginia, the counties of Alleghany, Bath, Bland, Botetourt, 
Buchanan, Carroll, Craig, Dickenson, Floyd, Giles, Grayson, Highland, 
Lee, Pulaski, Russell, Scott, Smyth, Tazewell, Washington, Wise, and 
Wythe;
    All the counties of West Virginia.
    (c) Secretary means the Secretary of Agriculture of the United 
States or any officer or employee of the United States Department of 
Agriculture to whom authority has been delegated, or to whom authority 
may hereafter be delegated, to act in his stead.
    (d) Administrator means the Administrator or Acting Administrator of 
the Farm Service Agency, United States Department of Agriculture.
    (e) Deputy Administrator means the Deputy Administrator or Acting 
Deputy Administrator for State and County Operations, Farm Service 
Agency, United States Department of Agriculture.

[[Page 209]]

    (f) Director means the Director or Acting Director of the Farmer 
Programs Division, Farm Service Agency, United States Department of 
Agriculture.
    (g) State means any one of the States in the Appalachian Region.
    (h) State committee means the persons in a State designated by the 
Secretary as the Agricultural Stabilization and Conservation State 
Committee under section 8(b) of the Soil Conservation and Domestic 
Allotment Act, as amended.
    (i) County means a political subdivision of a State identified as a 
county.
    (j) County committee means the persons elected within a county as 
the county committee pursuant to regulations governing the selection and 
functions of Agricultural Stabilization and Conservation county and 
community committees under section 8(b) of the Soil Conservation and 
Domestic Allotment Act, as amended.
    (k) Operator means the person who is in charge of the supervision 
and conduct of the farming operations on the entire farm.
    (l) Occupier means any person other than the owner or operator who 
has an interest as tenant or sharecropper in the acreage covered by the 
contract.
    (m) Farm means that area of land defined as a farm under the 
regulations governing Reconstitution of Farms, Allotments, and Bases, 
part 719 of this chapter, as amended, or, for purposes of contracts 
entered into pursuant to Sec. 755.20, the land covered by the contract.
    (n) Cropland means that land considered as cropland under the 
regulations governing Reconstitution of Farms, Allotments, and Bases, 
part 719 of this chapter, as amended.
    (o) Contract means a Cost-Share Contract, Appalachian Land 
Stabilization and Conservation Program.
    (p) Commission means the Appalachian Regional Commission which is 
composed of one Federal member (Federal Cochairman) and one member from 
each participating State in the Appalachian region.
    (q) Federal Cochairman means the Federal Cochairman of the 
Appalachian Regional Commission.
    (r) State Cochairman means the State Cochairman of the Appalachian 
Regional Commission as elected by the State members of the Commission 
from among their number.

[30 FR 8669, July 9, 1965, as amended by Amdt. 2, 30 FR 14099, Nov. 9, 
1965; Amdt. 4, 33 FR 16141, Nov. 5, 1968; Amdt. 5, 35 FR 8442, May 29, 
1970]



Sec. 755.2  Purposes and objectives.

    The general purposes and objectives of the Appalachian Land 
Stabilization and Conservation Program are to promote economic growth of 
the Region and to promote the conservation and development of the 
Region's soil and water resources. This program is a long-term program 
designed to carry out the policy of the Act by assisting landowners, 
operators, or occupiers through contracts providing for land 
stabilization, erosion and sediment control, reclamation through changes 
in land use, and the establishment of practices and measures for the 
conservation and development of the Region's soil, water, woodland, 
wildlife, and recreation resources.



Sec. 755.3  Geographical applicability.

    The Appalachian Land Stabilization and Conservation Program will be 
limited to the States and counties designated as part of the Appalachian 
Region as defined in Sec. 755.1 of the regulations of this part, and 
then only in counties or areas specifically approved in the State 
program developed hereunder.



Sec. 755.4  General.

    (a) The Appalachian Land Stabilization and Conservation Program will 
be administered in the field by State and county committees under the 
general direction and supervision of the Administrator. Members of 
county committees are hereby authorized to sign contracts on behalf of 
the Secretary. State and county committees do not have authority to 
modify or waive any of the provisions of these regulations, or any 
amendment, supplement, or revision thereto.
    (b) Landowners, operators, and occupiers desiring to share in the 
accomplishment of the purposes and objectives of the program will be 
given an

[[Page 210]]

opportunity to participate in the program in accordance with the 
provisions of the program as set forth in this subpart. An applicant, as 
a part of his application for assistance, will file an acceptable 
conservation and development plan for the acreage to be included in his 
contract, and the measures specified in the plan must be carried out 
irrespective of whether cost-sharing is offered. The county committee 
will determine the practices and extent of such practices to be approved 
for cost-sharing to assist the applicant in carrying out his acceptable 
plan. A contract shall be entered into setting forth the extent of the 
approved assistance. An acceptable conservation and development plan 
will be a plan developed for the land proposed to be placed under 
contract, on a form prescribed by the Administrator, with technical 
planning assistance by technicians of the Soil Conservation Service, 
except in cases where the proposed treatment involves only a single 
practice of pasture renovation or timber stand improvement or conversion 
of less than 10 acres of land to grass or trees and such use does not 
involve critical areas or unusual costs and the conservation and 
development plan is acceptable to the county committee. In approving 
contracts, the county committees shall give preference to needy 
landowners, operators, and occupiers to the extent that such preference 
is consistent with the development of land treatment programs in the 
project area.
    (c) Detailed information concerning the program as it applies to an 
individual farm may be obtained from the county FSA office for the 
county in which the farm is located or from the State FSA office.

[30 FR 8669, July 9, 1965, as amended by Amdt. 4, 33 FR 16141, Nov. 5, 
1968]



Sec. 755.5  State programs.

    (a) The State program shall be developed by the State or a political 
subdivision thereof in accordance with the regulations contained in this 
subpart. The Farm Service Agency and other applicable agencies of the 
Department of Agriculture shall cooperate with the State governmental 
officials in the development of the program. The chairman of the State 
committee as the chairman of the State Agricultural Conservation Program 
Development Group shall be the point of contact with the State 
governmental officials. The State Agricultural Conservation Program 
Development Group, which consists of the State ASC Committee (including 
the State Director of Extension), the State conservationist of the Soil 
Conservation Service, and the Forest Service official having 
jurisdiction over farm forestry in the State, shall consult with 
organizations and agencies within the State that have conservation 
interests and responsibilities. Upon request of the Governor of the 
State, a person selected as a direct representative of the Governor may 
be designated by the Secretary as an additional member of the ACP 
Development Group with equal authority with other members of the Group 
in the development of the State program.
    (b) The State program shall include the following provisions: (1) 
Identification of program objectives and areas in the State where the 
program will be applicable; (2) the designation of practices for which 
cost-share assistance is requested for each designated area, including 
specifications for each proposed practice; and (3) the proposed cost-
share rates for each practice.
    (c) Minimum specifications which practices must meet to be eligible 
for Federal cost-sharing shall be set forth in the State program, or be 
incorporated therein by specific reference to a standard publication or 
other written document containing such specifications. For practices 
involving the establishment or improvement of vegetative cover, the 
specifications shall include, where appropriate, liming fertilization, 
and seeding rates, eligible seeds and mixtures, seeding dates, 
requirements for cultural operations and inoculation, and other steps 
essential to the successful establishment or improvement of the 
vegetative cover. For mechanical or construction type practices, the 
specifications shall include, where appropriate, the types and sizes of 
material, installation or construction requirements, and other steps 
essential to the proper functioning of the structure. For other 
practices, the specifications shall include those steps essential to the 
successful performance

[[Page 211]]

of the practice. Practice specifications may provide minimum performance 
requirements which will qualify the practice for cost-sharing and 
maximum limits of performance which will be eligible for cost-sharing. 
For practices which authorize Federal cost-sharing for applications of 
liming materials and commercial fertilizers, the minimum applications 
and maximum applications on which cost-sharing is authorized shall be 
determined on the basis of a current soil test: Provided, however, That 
if available facilities are not adequate to permit the desired use of 
soil tests under the program, an alternative basis for determination by 
the county committee of such application shall be authorized to the 
extent necessary.
    (d) The following practices and uses are authorized:
    (1) Establishment of permanent sod waterways to dispose of excess 
water without causing erosion.
    (2) Establishment of a permanent vegetative cover for soil 
protection or as a needed land use adjustment.
    (3) Constructing terraces to detain or control the flow of water and 
check soil erosion.
    (4) Constructing diversion terraces, ditches, or dikes to intercept 
runoff and divert excess water to protected outlets.
    (5) Constructing erosion control, detention, or sediment retention 
dams, pits, or ponds to prevent or heal gullying or to retard or reduce 
runoff of water.
    (6) Constructing channel lining, chutes, drop spillways, pipe drops, 
drop inlets, or similar structures for the protection of outlets and 
water channels that dispose of excess water.
    (7) Streambank or shore protection, channel clearance, enlargement 
or realinement, or construction of floodways, levees, or dikes, to 
prevent erosion or flood damage to farmland.
    (8) Establishment of a stand of trees or shrubs to prevent erosion.
    (9) Establishment of a stand of forest trees or shrubs on farmland 
for purposes other than the prevention of erosion.
    (10) Improvement of a stand of forest trees.
    (11) Establishment of contour strip-cropping to protect soil from 
erosion.
    (12) Constructing or sealing dams, pits, or ponds as a means of 
protecting vegetative cover or to make practicable the utilization of 
the land for vegetative cover.
    (13) Developing springs or seeps for livestock water as a means of 
protecting vegetative cover or to make practicable the utilization of 
the land for vegetative cover.
    (14) Controlling competitive shrubs to permit growth of adequate 
desirable vegetative cover.
    (15) Improvement of an established vegetative cover for soil or 
watershed protection.
    (16) Treatment of farmland to permit the use of legumes and grasses 
for soil improvement and protection.
    (17) Construction of water facilities for wildlife habitat or 
protection.
    (18) Establishment of vegetative cover to provide habitat, food, or 
shelter for wildlife.
    (19) Conservation practices to develop recreation resources--
establishment of picnic and sports area; establishment of camping and 
nature recreation areas; establishment of hunting and shooting preserve 
area; establishment of fishing area; establishment of summer water 
sports area; establishment of winter sports area.
    (20) Other practices not covered above which are determined to be 
needed to accomplish the purpose of the program.
    (e) The Soil Conservation Service shall have the same technical 
responsibility for Appalachian Land Stabilization and Conservation 
Program practices as it has for the same or similar Agricultural 
Conservation Program Practices including applicable components of 
approved recreation practices. The Forest Service is responsible for the 
technical phases of forestry practices.
    (f) Each proposed State program shall be submitted to the Commission 
by the member thereof representing such State. The estimated amount of 
funds needed to accomplish the objectives of such program shall be 
stated in the submission of the proposed program to the Commission. If 
approved by the Commission, the proposed State

[[Page 212]]

program shall be submitted to the Secretary by the Federal Cochairman. 
Responsibility is assigned to the Farmer Programs Division, FSA for 
review and recommendation for approval or disapproval by the Secretary.
    (g) Copies of bulletins setting forth the State program as approved 
by the Secretary shall be available in the office of the county 
committee.

[30 FR 8669, July 9, 1965, as amended by Amdt. 2, 30 FR 14099, Nov. 9, 
1965]



Sec. 755.6  Cost-share contract.

    (a) Filing requests. (1) Landowners, operators, or occupiers in 
eligible counties shall be furnished information with respect to the 
program and afforded an opportunity to request a cost-share contract 
covering those practices which would accomplish the objectives of the 
program on the farm.
    (2) The request shall be on a form and in accordance with 
instructions prescribed by the Administrator.
    (b) Entering into a contract. (1) The county committee is authorized 
to approve the contract on behalf of the Secretary.
    (2) The contract must be signed by the owner of the land on which 
cost-share payments are provided under the contract and by the operator 
of the farm. The contract shall also be signed by any occupiers who will 
share in payments in one or more years of the contract period.
    (3) There shall be only one contract for a farm.
    (4) The final date for signing the contract shall be the date 
announced by the Administrator.
    (c) Contract period. (1) The period to be covered by a contract 
shall be not less than 3 years or longer than 10 years as agreed to by 
the contract signers and the county committee.
    (2) The first year of the contract period shall begin on the date of 
the approval of the contract and shall end on December 31 of such year. 
Each subsequent year of the contract period shall be on a calendar year 
basis.



Sec. 755.7  Cost-share payments.

    (a) Subject to the conditions and limitations in this subpart, cost-
sharing may be authorized for practices needed during the period of the 
contract to conserve and develop soil, water, woodland, wildlife, and 
recreation resources. Payment of the cost-shares shall be made only upon 
application submitted on a form prescribed by the Administrator. 
Practices required to be established under the contract which are 
started after a request for a contract is filed shall be considered as 
started during the contract period.
    (b) Cost-share rates shall not exceed 80 per centum of the average 
cost of carrying out the land treatment measures or such lower rate as 
the county committee determines will accomplish the objectives of the 
program. As a further limitation, cost-sharing may not be authorized in 
excess of a total amount computed by multiplying the number of acres 
designated under contract times $50, unless a representative of the 
State committee approves an amount in excess of this limitation on the 
basis that the income potential and benefits derived from expenditures 
of the additional money warrant the higher limit.
    (c) Cost-sharing shall not be approved for more than 50 acres per 
farm.
    (d) The total acreage with respect to which any landowner, operator, 
or occupier receives cost-sharing payments shall not exceed 50 acres 
under all contracts in which he has an interest.
    (e) Cost-sharing for the practices or components thereof contained 
in the approved State program is conditioned upon the establishment, 
maintenance, and performance of the practices in accordance with all 
applicable specifications and program provisions. The county committee 
shall specify on the practice approval the date by which the practice 
must be completed. Subject to the availability of funds, cost-sharing 
may be authorized for the restoration or replacement of any needed 
conservation measure if during the contract period the original 
conservation use is destroyed or rendered unsuitable through no fault of 
the contract signers.
    (f) In addition to the provisions contained in this subpart, cost-
sharing payments shall also be subject to the following regulations of 
the Agricultural Conservation Program (7 CFR 701.1-701.93, as amended):

[[Page 213]]

Section 701.24 Failure to meet minimum requirements,
Section 701.25 Conservation materials and services,
Section 701.26 Practices carried out with aid for ineligible persons,
Section 701.27 Division of Federal cost-share,
Section 701.33 Compliance with regulatory measures,
Section 701.36 Depriving others of Federal cost-sharing,
Section 701.38 Misuse of purchase orders,
Section 701.39 Federal cost-shares not subject to claims, and
Section 701.40 Assignments.

The Agricultural Conservation Program regulations referred to above 
shall mean the Agricultural Conservation Program regulations applicable 
to the year in which the contract is approved.
    (g) Cost-share payments shall not be made under the program with 
respect to land owned by the Federal Government, a State, or a political 
subdivision thereof.

[30 FR 8669, July 9, 1965, as amended by Amdt. 1, 30 FR 9758, Aug. 5, 
1965; Amdt. 4, 33 FR 16141, Nov. 5, 1968]



Sec. 755.8  Modification of contract.

    (a) If the farm is reconstituted in accordance with the regulations 
governing Reconstitution of Farms, Allotments, and Bases, part 719 of 
this chapter, as amended, or if there is any change in the land covered 
by a contract entered into pursuant to Sec. 755.20, because of 
purchase, sale, change of operation, or otherwise, the contract shall be 
modified. Such modified contract or contracts shall reflect the changes 
in the number of acres in any resulting farm, the acreage covered by the 
contract, interested persons, and practices called for under the 
original contract. If persons who were not signatories to the original 
contract are eligible and required to sign such modified contract or 
contracts but are not willing to become parties to the modified contract 
or for any other reason a modified contract is not entered into, cost-
share payments for practices which have not been carried out shall be 
forfeited with respect to acreage not continued in the program. In 
addition, with respect to acreage not continued in the program, cost-
share payments paid for practices (or components thereof) which have 
been carried out shall be refunded by the owner of such acreage prior to 
reconstitution unless the county committee with the approval of the 
State committee determines that the failure to carry out all of the 
practices called for by the original contract will not impair the 
practices which have been carried out and the completed practices will 
provide conservation benefits consistent with the cost-shares which have 
been paid. Notwithstanding the foregoing, if control of land was lost 
through eminent domain proceedings or to an agency having the right of 
eminent domain, any cost-share payments paid under the contract with 
respect to such land are not required to be refunded.
    (b) Except in cases covered by paragraph (a) of this section, if the 
ownership or operation of the farm or the land covered by the contract 
changes in such a manner that the contract no longer contains the 
signatures of persons required to sign the contract as provided in Sec. 
755.6, the contract shall be modified to reflect the new interested 
persons. If such persons are not willing to become parties to the 
modified contract, or for any other reason a modified contract is not 
entered into, cost-share payments shall be forfeited and refunded in 
accordance with the rules in paragraph (a) of this section.
    (c) Upon request of the contract signers and approval of the county 
committee, a contract may be modified to change or add practices, or to 
make other changes which are consistent with this subpart, the State 
program, and the conservation and development plan.
    (d) Upon request of the contract signers, a contract which would 
otherwise be in a noncompliance status at the end of the contract period 
under the provisions of Sec. 755.10(a) of these regulations may be 
modified to extend the contract period not to exceed a total period of 
10 years if the county committee determines that failure to establish 
the practices specified in the contract was not the result of the fault 
or negligence of the contract signers.

[30 FR 8669, July 9, 1965, as amended by Amdt. 5, 35 FR 8442, May 29, 
1970]

[[Page 214]]



Sec. 755.9  Termination of contracts.

    The Deputy Administrator may consent to the termination of a 
contract in cases where the parties to the contract are unable to comply 
with the terms of the contract due to conditions beyond their control, 
in cases where compliance with the terms of the contract would work a 
severe hardship on the parties to the contract, or in cases where 
termination of the contract would be in the public interest, provided 
the parties to the contract refund such part of the cost-share payments 
made under the contract as the Deputy Administrator determines 
appropriate.



Sec. 755.10  Noncompliance.

    (a) Failure to establish the practices specified in the contract 
within the time specified by the county committee shall be a violation 
of the contract and all payments under the contract shall be forfeited 
and refunded.
    (b) Failure to maintain a practice for the contract period or the 
normal lifespan of the practice, whichever is shorter, in accordance 
with good farming practices shall be a violation of the contract and any 
payment made in connection with such practice shall be refunded unless 
the practice is restored within the time prescribed by the county 
committee. The normal lifespan of a practice shall be determined by the 
county committee.
    (c) If the county committee finds that any person has adopted or 
participated in any practice which tends to defeat the purposes of the 
program, it may withhold, or require to be refunded, all or any part of 
cost-share payments paid or payable under the program. It shall be 
considered a practice defeating the purposes of the program if the 
contract signers do not make available for public use a recreation 
resource development for which costs are shared. The regulations 
governing nondiscrimination in federally assisted programs of the 
Department of Agriculture, part 15 of this title, shall be applicable to 
this program.

[30 FR 8669, July 9, 1965, as amended by Amdt. 3, 32 FR 12938, Sept. 12, 
1967]



Sec. 755.11  Signatures.

    Signatures to contracts and related forms shall be in conformity 
with the instructions on signatures and authorizations applicable to the 
Agricultural Conservation Program.



Sec. 755.12  Filing of false claims.

    The making of a fraudulent representation by a person in the payment 
documents or otherwise for the purpose of obtaining a payment from the 
county committee shall render the person liable, aside from any 
additional liability under criminal and civil frauds statutes, for a 
refund of the payments received by him with respect to which the 
fraudulent representation was made.



Sec. 755.13  Delegation of authority.

    No delegation in this subpart to a State or county committee shall 
preclude the Administrator, or his designee, from determining any 
question arising under the program or reversing or modifying any 
determinations made by a State or county committee.



Sec. 755.14  Reporting performance.

    The Operator of the farm, in accordance with instructions issued by 
the Deputy Administrator, shall report to the county committee on Form 
ACP-245 the extent of compliance with the terms of the contract.



Sec. 755.15  Handling exceptional cases.

    The Deputy Administrator may allow payment for performance not 
meeting all program requirements, where not prohibited by statute, if in 
his judgment such action is needed to permit a proper disposition of the 
case. Such action may be taken only where the person acted in good faith 
and in reasonable reliance on any instruction or commitment of any 
member, or employee of the State or county committee or representatives 
of other Federal agencies assigned responsibility under the program, in 
meeting his obligations under the contract and in so doing reasonably 
accomplished the purposes of the contract. The amount of the payment 
shall be based on the actual performance and shall not exceed the amount 
to which the person

[[Page 215]]

would have been entitled if the performance rendered had met all 
requirements.



Sec. 755.16  Access to farms and to farm rec ords.

    County committeemen or their authorized representatives, or any 
authorized representative of the Secretary of Agriculture, shall have 
such access to farms and to records pertaining thereto as is necessary 
to make acreage determinations and to determine the extent of compliance 
with the terms of the contract.



Sec. 755.17  Preservation of cropland, crop acreage and allotment history.

    The cropland, crop acreage, and allotment history applicable to the 
designated acreage shall be preserved, for any Federal program under 
which such history is used as a basis for an allotment or other 
limitation on the production of such crop, for the period covered by the 
contract and an equal period thereafter so long as the approved practice 
is maintained on the land.



Sec. 755.18  Appeals.

    Any person may obtain reconsideration and review of determinations 
made under this subpart in accordance with the Appeal Regulations, part 
780 of this chapter (29 FR 8200), as amended.



Sec. 755.19  Availability of funds.

    The provisions of this program are necessarily subject to such 
legislation as the Congress of the United States may hereafter enact; 
the payments provided for in this subpart are contingent upon such 
appropriations as the Congress has or may hereafter provide for such 
purpose, and the amount of such payments must necessarily be within the 
limits finally determined by such appropriations.



Sec. 755.20  Rural community development projects.

    (a) Notwithstanding any other provision of this subpart, the county 
committee, in accordance with instructions issued by the Deputy 
Administrator, may enter into a contract with a State, county, city, 
town, or subdivision thereof, or a group acting for such a body, which 
owns, operates, or occupies land in the Appalachian Region. The 
contracts approved under this section shall be for projects which 
promote rural community development and conservation of the soil and 
water resources of the region.
    (b) Cost-sharing approved under this section shall not exceed 80 per 
centum of the cost of carrying out the approved land uses and 
conservation treatment on 50 acres of land occupied by such owner, 
operator, or occupier.

[35 FR 8442, May 29, 1970]



PART 760_INDEMNITY PAYMENT PROGRAMS--Table of Contents




                 Subpart_Dairy Indemnity Payment Program

                           Program Operations

Sec.
760.1 Administration.
760.2 Definitions.

                   Payments to Dairy Farmers for Milk

760.3 Indemnity payments on milk.
760.4 Normal marketings of milk.
760.5 Fair market value of milk.
760.6 Information to be furnished.
760.7 Other requirements for affected farmers.
760.8 Application for payments for milk.
760.9 Other legal recourse.

            Payments to Manufacturers Affected by Pesticides

760.20 Payments to manufacturers of dairy products.
760.21 Application for payments by manufacturers.
760.22 Information to be furnished by manufacturer.
760.23 Other requirements for manufacturers.

                           General Provisions

760.24 Limitation of authority.
760.25 Estates and trusts; minors.
760.26 Appeals.
760.27 Setoffs.
760.28 Overdisbursement.
760.29 Death, incompetency, or disappearance.
760.30 Records and inspection thereof.
760.31 Assignment.
760.32 Instructions and forms.
760.33 Availability of funds.
760.34 Paperwork Reduction Act assigned numbers.

[[Page 216]]

Subpart--Beekeeper Indemnity Payment Program (1978-80) [Reserved]



                 Subpart_Dairy Indemnity Payment Program

    Authority: Pub. L. 106-387, 114 Stat. 1549, and Pub. L. 107-76, 115 
Stat. 704.

    Source: 43 FR 10535, Mar. 14, 1978, unless otherwise noted.

                           Program Operations



Sec. 760.1  Administration.

    This indemnity payment program will be carried out by FSA under the 
direction and supervision of the Deputy Administrator. In the field, the 
program will be administered by the State and county committees.



Sec. 760.2  Definitions.

    For purposes of this subject, the following terms shall have the 
meanings specified:
    (a) Secretary means the Secretary of Agriculture of the United 
States or any officer or employee of the U.S. Department of Agriculture 
to whom he has delegated, or to whom he may hereafter delegate, 
authority to act in his stead.
    (b) FSA means the Farm Service Agency, U.S. Department of 
Agriculture.
    (c) Deputy Administrator means the Deputy Administrator, State and 
County Operations, FSA.
    (d) State committee means the Agricultural Stabilization and 
Conservation State committee.
    (e) County committee means the Agricultural Stabilization and 
Conservation county committee.
    (f) Pesticide means an economic poison which was registered pursuant 
to the provisions of the Federal Insecticide, Fungicide, and Rodenticide 
Act, as amended (7 U.S.C. 135 through 135k), and approved for use by the 
Federal Government.
    (g) Chemicals or Toxic Substances means any chemical substance or 
mixture as defined in the Toxic Substances Control Act (15 U.S.C. 2602).
    (h) Nuclear Radiation or Fallout means contamination from nuclear 
radiation or fallout from any source.
    (i) Violating Substance means one or more of the items defined in 
paragraphs (f), (g), and (h) of this section.
    (j) Public agency means any Federal, State or local public 
regulatory agency.
    (k) Affected farmer means a person who produces whole milk which is 
removed from the commerical market any time from:
    (1) Pursuant to the direction of a public agency because of the 
detection of pesticide residues in such whole milk by tests made by a 
public agency or under a testing program deemed adequate for the purpose 
by a public agency, or
    (2) Pursuant to the direction of a public agency because of the 
detection of other residues of chemicals or toxic substances residues, 
or contamination from nuclear radiation or fallout in such whole milk by 
tests made by a public agency or under a testing program deemed adequate 
for the purpose by a public agency.
    (l) Affected manufacturer means a person who manufactures dairy 
products which are removed from the commercial market pursuant to the 
direction of a public agency because of the detection of pesticide 
residue in such dairy products by tests made by a public agency or under 
a testing program deemed adequate for the purpose by a public agency.
    (m) Milk handler means the marketing agency to or through which the 
affected dairy farmer marketed his whole milk at the time he was 
directed by the public agency to remove his whole milk from the 
commercial market.
    (n) Person means an individual, partnership, association, 
corporation, trust, estate, or other legal entity.
    (o) Application period means any period during which an affected 
farmer's whole milk is removed from the commercial market pursuant to 
direction of a public agency for a reason specified in paragraph (k) of 
this section and for which application for payment is made.
    (p) Pay period means (1) in the case of an affected farmer who 
markets his whole milk through a milk handler, the period used by the 
milk handler in settling with the affected farmer for

[[Page 217]]

his whole milk, usually biweekly or monthly, or (2) in the case of an 
affected farmer whose commercial market consists of direct retail sales 
to consumers, a calendar month.
    (q) Whole milk means milk as it is produced by cows.
    (r) Commercial market means (1) the market to which the affected 
farmer normally delivers his whole milk and from which it was removed 
because of detection therein of a residue of a violating substance(s) or 
(2) the market to which the affected manufacturer normally delivers his 
dairy products and from which they were removed because of detection 
therein of pesticide residue.
    (s) Removed from the commercial market means (1) produced and 
destroyed or fed to livestock, (2) produced and delivered to a handler 
who destroyed it or disposed of it as salvage (such as separating whole 
milk, destroying the fat, and drying the skim milk), or (3) produced and 
otherwise diverted to other than the commercial market.
    (t) Payment subject to refund means a payment which is made by a 
milk handler to an affected farmer, and which such farmer is obligated 
to refund to the milk handler.
    (u) Base period means the calendar month or 4-week period 
immediately preceding removal of milk from the market.

[43 FR 10535, Mar. 14, 1978, as amended by Amdt. 1, 44 FR 36360, July 
22, 1979; 52 FR 17935, May 13, 1987; 53 FR 44001, Nov. 1, 1988; 56 FR 
1358, Jan. 14, 1991; 61 FR 18485, Apr. 26, 1996]

                   Payments to Dairy Farmers for Milk



Sec. 760.3  Indemnity payments on milk.

    An indemnity payment for milk may be made to an affected farmer who 
is determined by the county committee to be in compliance with all the 
terms and conditions of this subpart in the amount of the fair market 
value of his normal marketings for the application period, as determined 
in accordance with Sec. Sec. 760.4 and 760.5, less (a) any amount he 
received for whole milk marketed during the applications period, and (b) 
any payment not subject to refund which he received from a milk handler 
with respect to whole milk removed from the commercial market during the 
application period.

[43 FR 10535, Mar. 14, 1978, as amended at 47 FR 24689, June 8, 1982]



Sec. 760.4  Normal marketings of milk.

    (a) The county committee shall determine the affected farmer's 
normal marketings which, for the purposes of this subpart, shall be the 
sum of the quantities of whole milk which such farmer would have sold in 
the commercial market in each of the pay periods in the application 
period but for the removal of his whole milk from the commercial market 
because of the detection of a residue of a violating substance.
    (b) Normal marketings for each pay period are based on the average 
daily production during the base period.
    (c) Normal marketings determined in paragraph (b) of this section 
are adjusted for any change in the daily average number of cows milked 
during each pay period the milk is off the market compared with the 
average number of cows milked daily during the base period.
    (d) If only a portion of a pay period falls within the application 
period, normal marketings for such pay period shall be reduced so that 
they represent only that part of such pay period which is within the 
application period.

[43 FR 10535, Mar. 14, 1978, as amended by Amdt. 1, 44 FR 36360, July 
22, 1979]



Sec. 760.5  Fair market value of milk.

    (a) The county committee shall determine the fair market value of 
the affected farmer's normal marketings, which, for the purposes of this 
subpart, shall be the sum of the net proceeds such farmer would have 
received for his normal marketings in each of the pay periods in the 
application period.
    (b) The county committee shall determine the net proceeds the 
affected farmer would have received in each of the pay periods in the 
application period (1) in the case of an affected farmer who markets his 
whole milk through a milk handler, by multiplying the affected farmer's 
normal marketings for each such pay period by the average net price per 
hundred-weight of whole milk paid during the pay period by

[[Page 218]]

such farmer's milk handler in the same area for whole milk similar in 
quality and butterfat test to that marketed by the affected farmer in 
the base period used to determine his normal marketings, or (2) in the 
case of an affected farmer whose commercial market consists of direct 
retail sales to consumers, by multiplying the affected farmer's normal 
marketings for each such pay period by the average net price per 
hundredweight of whole milk, as determined by the county committee, 
which other producers in the same area who marketed their whole milk 
through milk handlers received for whole milk similar in quality and 
butterfat test to that marketed by the affected farmer during the base 
period used to determine his normal marketings.
    (c) In determining the net price for whole milk, the county 
committee shall deduct from the gross price therefor any transportation, 
administrative, and other costs of marketing which it determines are 
normally incurred by the affected farmer but which were not incurred 
because of the removal of his whole milk from the commercial market.



Sec. 760.6  Information to be furnished.

    The affected farmer shall furnish to the county committee complete 
and accurate information sufficient to enable the county committee or 
the Deputy Administrator to make the determinations required in this 
subpart. Such information shall include, but is not limited to:
    (a) A copy of the notice from, or other evidence of action by, the 
public agency which resulted in the removal of the affected farmer's 
whole milk from the commercial market.
    (b) The specific name of the violating substance causing the removal 
of his whole milk from the commercial market, if not included in the 
notice or other evidence of action furnished under paragraph (a) of this 
section.
    (c) The quantity and butterfat test of whole milk produced and 
marketed during the base period. This information must be a certified 
statement from the affected farmer's milk handler or any other evidence 
the county committee accepts as an accurate record of milk production 
and butterfat tests during the base period.
    (d) The average number of cows milked during the base period and 
during each pay period in the application.
    (e) If the affected farmer markets his whole milk through a milk 
handler, a statement from the milk handler showing, for each pay period 
in the application period, the average price per hundred-weight of whole 
milk similar in quality to that marketed by the affected farmer during 
the base period used to determine his normal marketings. If the milk 
handler has information as to the transportation, administrative, and 
other costs of marketing which are normally incurred by producers who 
market through the milk handler but which the affected farmer did not 
incur because of removal of his whole milk from the market, the average 
price stated by the milk handler shall be the average gross price paid 
producers less any such costs. If the milk handler does not have such 
information, the affected farmer shall furnish a statement setting forth 
such costs, if any.
    (f) The amount of proceeds, if any, received by the affected farmer 
from the marketing of whole milk produced during the application period.
    (g) The amount of any payments not subject to refund made to the 
affected farmer by the milk handler with respect to the whole milk 
produced during the application period and remove from the commercial 
market.
    (h) To the extent that such information is available to the affected 
farmer, the name of any pesticide, chemical, or toxic substance used on 
the farm within 24 months prior to the application period, the use made 
of the pesticide, chemical, or toxic substance, the approximate date of 
such use, and the name of the manufacturer and the registration number, 
if any, on the label on the container of the pesticide, chemical, or 
toxic substance.
    (i) To the extent possible, the source of the pesticide, chemical, 
or toxic substance that caused the contamination of the whole milk, and 
the results of any laboratory tests on the feed supply.

[[Page 219]]

    (j) Such other information as the county committee may request to 
enable the county committee or the Deputy Administrator to make the 
determinations required in this subpart.

[43 FR 10535, Mar. 14, 1978, as amended by Amdt. 1, 44 FR 36360, June 
22, 1979]



Sec. 760.7  Other requirements for affected farmers.

    An indemnity payment for milk may be made under this subpart to an 
affected farmer only under the following conditions:
    (a) If the pesticide, chemical, or toxic substance, contaminating 
the milk was used by the affected farmer, he established each of the 
following:
    (1) That the pesticide, chemical or toxic substance, when used, was 
registered (if applicable) and approved for use as provided in Sec. 
760.2(f);
    (2) That the contamination of his milk was not the result of his 
failure to use the pesticide, chemical, or toxic substance, according to 
the directions and limitations stated on the label;
    (3) That the contamination of his milk was not otherwise his fault.
    (b) If the pesticide, chemical, or toxic substance contaminating the 
milk was not used by the affected farmer, he establishes each of the 
following:
    (1) He did not know or have reason to believe that any feed which he 
purchased and which contaminated his milk contained a harmful residue of 
a pesticide, a chemical, or a toxic substance or was contaminated by 
nuclear radiation or fallout.
    (2) None of the milk was produced by dairy cattle which he knew, or 
had reason to know at the time he acquired them, were contaminated with 
residues of pesticides, chemicals or toxic substances, or by nuclear 
radiation or fallout.
    (3) The contamination of his milk was not otherwise his fault.
    (c) The affected farmer has adopted recommended practices for 
eliminating residues of pesticides, chemicals, or toxic substances or 
contamination from nuclear radiation or fallout from his milk as soon as 
practicable following the discovery of the initial contamination.

[43 FR 10535, Mar. 14, 1978, as amended at 47 FR 24689, June 8, 1982]



Sec. 760.8  Application for payments for milk.

    The affected farmer or his legal representative, as provided in 
Sec. Sec. 760.25 and 760.29, must sign and file an application for 
payment on a form which is approved for that purpose by the Deputy 
Administrator. The form must be filed with the county FSA office for the 
county where the farm headquarters are located no later than December 31 
following the end of the fiscal year in which the loss occurred, or such 
later date as the Deputy Administrator may specify. The application for 
payment shall cover application periods of at least 28 days, except 
that, if the entire application period, or the last application period, 
is shorter than 28 days, applications for payment may be filed for such 
shorter period. The application for payment shall be accompanied by the 
information required by Sec. 760.6 as well as any other information 
which will enable the county committee to determine whether the making 
of an indemnity payment is precluded for any of the reasons set forth in 
Sec. 760.7. Such information shall be submitted on forms approved for 
the purpose by the Deputy Administrator.

[43 FR 10535, Mar. 14, 1978, as amended at 51 FR 12986, Apr. 17, 1986; 
52 FR 17935, May 13, 1987]



Sec. 760.9  Other legal recourse.

    (a) No indemnity payment shall be made for contaminated milk 
resulting from residues of chemicals or toxic substances if, within 30 
days after receiving a complete application, the Deputy Administrator 
determines that other legal recouse is available to the farmer. An 
application shall not be deemed complete unless it contains all 
information necessary to make a determination as to whether other legal 
recourse is available to the farmer. However, notwithstanding such a 
determination, the Deputy Administrator may reopen the case at a later 
date and make a new determination on the merits of the case as may be 
just and equitable.
    (b) In the event that a farmer receives an indemnity payment under 
this subpart, and such farmer is later compensated for the same loss by 
the

[[Page 220]]

person (or the representative or successor in interest of such person) 
responsible for such loss, the indemnity payment shall be refunded by 
the farmer to the Department of Agriculture: Provided, That the amount 
of such refund shall not exceed the amount of other compensation 
received by the farmer.

[Amdt. 1, 44 FR 36361, June 22, 1979]

            Payments to Manufacturers Affected by Pesticides



Sec. 760.20  Payments to manufacturers of dairy products.

    An indemnity payment may be made to the affected manufacturer who is 
determined by the Deputy Administrator to be in compliance with all the 
terms and conditions of this subpart in the amount of the fair market 
value of the product removed from the commercial market because of 
pesticide residues, less any amount the manufacturer receives for the 
product in the form of salvage.
    Note: Manufacturers are not eligible for payment when dairy products 
are contaminated by chemicals, toxic substances (other than pesticides) 
or nuclear radiation or fallout.

[43 FR 10535, Mar. 14, 1978, as amended at 47 FR 24689, June 8, 1982]



Sec. 760.21  Application for payments by manufacturers.

    The affected manufacturer, or his legal representatives, shall file 
an application for payment with the Deputy Administrator, FSA, 
Washington, D.C., through the county office serving the county where the 
contaminated product is located. The application for payment may be in 
the form of a letter or memorandum. Such letter or memorandum, however, 
must be accompanied by acceptable documentation to support such 
application for payment.



Sec. 760.22  Information to be furnished by manufacturer.

    The affected manufacturer shall furnish the Deputy Administrator, 
through the county committee, complete and accurate information 
sufficient to enable him to make the determination as to the 
manufacturer's eligibility to receive an indemnity payment. Such 
information shall include, but is not limited to:
    (a) A copy of the notice or other evidence of action by the public 
agency which resulted in the product being removed from the commerical 
market.
    (b) The name of the pesticide causing the removal of the product 
from the commerical market and, to the extent possible, the source of 
the pesticide.
    (c) A record of the quantity of milk or butterfat used to produce 
the product for which an indemnity payment is requested.
    (d) The identity of any pesticide used by the affected manufacturer.
    (e) Such other information as the Deputy Administrator may request 
to enable him to make the determinations required in this subpart.



Sec. 760.23  Other requirements for manufacturers.

    An indemnity payment may be made under this subpart to an affected 
manufacturer only under the following conditions:
    (a) If the pesticide contaminating the product was used by the 
affected manufacturer, he establishes each of the following: (1) That 
the pesticide, when used, was registered and recommended for such use as 
provided in Sec. 760.2(f); (2) that the contamination of his product 
was not the result of his failure to use the pesticide in accordance 
with the directions and limitations stated on the label of the 
pesticide; and (3) that the contamination of his product was not 
otherwise his fault.
    (b) If the pesticide contaminating the product was not used by the 
affected manufacturer: (1) He did not know or have reason to believe 
that the milk from which the product was processed contained a harmful 
level of pesticide residue, and (2) the contamination of his product was 
not otherwise his fault.
    (c) In the event that a manufacturer receives an indemnity payment 
under this subpart, and such manufacturer is later compensated for the 
same loss by the person (or the representative or successor in interest 
of such person) responsible for such loss, the indemnity payment shall 
be refunded by the manufacturer to the Department of Agriculture: 
Provided, That the amount of such refund shall not exceed the

[[Page 221]]

amount of other compensation received by the manufacturer.

[43 FR 10535, Mar. 14, 1978, as amended at 47 FR 24689, June 8, 1982; 51 
FR 12987, Apr. 17, 1986; 52 FR 17935, May 13, 1987]

                           General Provisions



Sec. 760.24  Limitation of authority.

    (a) County executive directors and State and county committees do 
not have authority to modify or waive any of the provisions of the 
regulations in this subpart.
    (b) The State committee may take any action authorized or required 
by the regulations in this subpart to be taken by the county committee 
when such action has not been taken by the county committee. The State 
committee may also:
    (1) Correct, or require a county committee to correct, any action 
taken by such county committee which is not in accordance with the 
regulations in this subpart, or (2) require a county committee to 
withhold taking any action which is not in accordance with the 
regulations in this subpart.
    (c) No delegation herein to a State or county committee shall 
preclude the Deputy Administrator or his designee from determining any 
question arising under the regulations in this subpart or from reversing 
or modifying any determination made by a State or county committee.



Sec. 760.25  Estates and trusts; minors.

    (a) A receiver of an insolvent debtor's estate and the trustee of a 
trust estate shall, for the purpose of this subpart, be considered to 
represent an insolvent affected farmer or manufacturer and the 
beneficiaries of a trust, respectively, and the production of the 
receiver or trustee shall be considered to be the production of the 
person or manufacturer he represents. Program documents executed by any 
such person will be accepted only if they are legally valid and such 
person has the authority to sign the applicable documents.
    (b) An affected dairy farmer or manufacturer who is a minor shall be 
eligible for indemnity payments only if he meets one of the following 
requirements:
    (1) The right of majority has been conferred on him by court 
proceedings or by statute; (2) a guardian has been appointed to manage 
his property and the applicable program documents are signed by the 
guardian; or (3) a bond is furnished under which the surety guarantees 
any loss incurred for which the minor would be liable had he been an 
adult.
    (2) [Reserved]



Sec. 760.26  Appeals.

    The appeal regulations issued by the Administrator, FSA, part 780 of 
this chapter, shall be applicable to appeals by dairy farmers or 
manufacturers from determinations made pursuant to the regulations in 
this subpart.



Sec. 760.27  Setoffs.

    (a) If the affected farmer or manufacturer is indebted to any agency 
of the United States and such indebtedness is listed on the county debt 
record, indemnity payments due the affected farmer or manufacturer under 
the regulations in this part shall be applied, as provided in the 
Secretary's setoff regulations, part 13 of this title, to such 
indebtedness.
    (b) Compliance with the provisions of this section shall not deprive 
the affected farmer or manufacturer of any right he would otherwise have 
to contest the justness of the indebtedness involved in the setoff 
action, either by administrative appeal or by legal action.



Sec. 760.28  Overdisbursement.

    If the indemnity payment disbursed to an affected farmer or to a 
manufacturer exceeds the amount authorized under the regulations in this 
subpart, the affected farmer or manufacturer shall be personally liable 
for repayment of the amount of such excess.



Sec. 760.29  Death, incompetency, or disappearance.

    In the case of the death, incompetency, or disappearance of any 
affected farmer or manufacturer who would otherwise receive an indemnity 
payment, such payment may be made to the person or persons specified in 
the regulations contained in part 707 of this chapter. The person 
requesting

[[Page 222]]

such payment shall file Form FSA-325, ``Application for Payment of 
Amounts Due Persons Who Have Died, Disappeared, or Have Been Declared 
Incompetent,'' as provided in that part.

[43 FR 10535, Mar. 14, 1978, as amended at 47 FR 24689, June 8, 1982]



Sec. 760.30  Records and inspection thereof.

    (a) The affected farmer, as well as his milk handler and any other 
person who furnished information to such farmer or to the county 
committee for the purpose of enabling such farmer to receive a milk 
indemnity payment under this subpart, shall maintain any existing books, 
records, and accounts supporting any information so furnished for 3 
years following the end of the year during which the application for 
payment was filed. The affected farmer, his milk handler, and any other 
person who furnishes such information to the affected farmer or to the 
county committee shall permit authorized representatives of the 
Department of Agriculture and the General Accounting Office, during 
regular business hours, to inspect, examine, and make copies of such 
books, rec ords, and accounts.
    (b) The affected manufacturer or any other person who furnishes 
information to the Deputy Administrator for the purposes of enabling 
such manufacturer to receive an indemnity payment under this subpart 
shall maintain any books, records, and accounts supporting any 
information so furnished for 3 years following the end of the year 
during which the application for payment was filed. The affected 
manufacturer or any other person who furnishes such information to the 
Deputy Administrator shall permit authorized representatives of the 
Department of Agriculture and the General Accounting Office, during 
regular business hours, to inspect, examine, and make copies of such 
books, records, and accounts.



Sec. 760.31  Assignment.

    No assignment shall be made of any indemnity payment due or to come 
due under the regulations in this subpart. Any assignment or attempted 
assignment of any indemnity payment due or to come due under this 
subpart shall be null and void.



Sec. 760.32  Instructions and forms.

    The Deputy Administrator shall cause to be prepared such forms and 
instructions as are necessary for carrying out the regulations in this 
subpart. Affected farmers and manufacturers may obtain information 
necessary to make application for a dairy indemnity payment from the 
county FSA office. Form FSA-373--Application for Indemnity Payment, is 
available at the county ASC office.

[43 FR 10535, Mar. 14, 1978, as amended at 47 FR 24689, June 8, 1982]



Sec. 760.33  Availability of funds.

    Payment of indemnity claims will be contingent upon the availability 
of funds to the Department to pay such claims. With respect to claims 
filed after October 1, 1982, if the Department determines that the 
amount of claims to be filed under the program will exceed the funds 
available to the Department, to pay such claims payments will be made so 
that each eligible claimant will receive a pro rata share of the 
remaining funds available to the Department to pay dairy indemnity 
claims.

(Approved by the Office of Management and Budget under control number 
0560-0045)

[48 FR 40367, Sept. 7, 1983 and 49 FR 8906, Mar. 9, 1984]



Sec. 760.34  Paperwork Reduction Act assigned numbers.

    The information collection requirements contained in these 
regulations (7 CFR part 760) have been approved by the Office of 
Management and Budget (OMB) under the provisions of 44 U.S.C. Chapter 35 
and have been assigned OMB control number 0560-0045.

[49 FR 29564, July 23, 1984]

Subpart--Beekeeper Indemnity Payment Program (1978-80) [Reserved]

[[Page 223]]



PART 761_GENERAL AND ADMINISTRATIVE--Table of Contents




                      Subpart A_General Provisions

Sec.
761.1-761.6 [Reserved]
761.7 Appraisals.
761.8 Loan limitations.

    Authority: 5 U.S.C. 301, 7 U.S.C. 1989.

    Source: 64 FR 62567, Nov. 17, 1999, unless otherwise noted.



Sec. Sec. 761.1-761.6  [Reserved]



Sec. 761.7  Appraisals.

    (a) General. This section describes requirements for:
    (1) Real estate and chattel appraisals made in connection with the 
making and servicing of direct Farm Loan Program and nonprogram loans; 
and,
    (2) Appraisal reviews conducted on appraisals made in connection 
with the making and servicing of direct and guaranteed Farm Loan Program 
and nonprogram loans.
    (b) Definitions.
    Administrative appraisal review means a review of an appraisal to 
determine if the appraisal:
    (1) Meets applicable Agency requirements; and
    (2) Is accurate outside the requirements of standard 3 of USPAP.
    Agency means the Farm Service Agency, including its employees and 
state and area committee members, and any successor agency.
    Farm Loan Programs (FLP) loans refers to Farm Ownership (FO), Soil 
and Water (SW), Recreation (RL), Economic Opportunity (EO), Operating 
(OL), Emergency (EM), Economic Emergency (EE), Softwood Timber (ST), and 
Rural Housing loans for farm service buildings (RHF).
    Technical appraisal review means a review of an appraisal to 
determine if such appraisal meets the requirements of USPAP pursuant to 
standard 3 of USPAP.
    USPAP (Uniform Standards of Professional Appraisal Practice) means 
standards governing the preparation, reporting, and reviewing of 
appraisals established by the Appraisal Foundation pursuant to the 
Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
    (c) Appraisal standards. (1) Real estate. Real estate appraisals, 
technical appraisal reviews of real estate appraisals, and their 
respective forms must comply with the standards contained in USPAP, as 
well as applicable Agency regulations and procedures for the specific 
Farm Loan Program activity involved. A current copy of USPAP along with 
other applicable appraisal procedures and regulations is available for 
review in each Agency State Office.
    (2) Chattel. An appraisal of chattel property may be completed on an 
applicable Agency form (available in each Agency State Office) or other 
format containing the same information.
    (d) Use of an existing real estate appraisal. The Agency may use an 
existing real estate appraisal to reach a loan making or servicing 
decision under either of the following conditions:
    (1) The appraisal was completed within the previous 12 months and 
the Agency determines that:
    (i) The appraisal meets the provisions of this section and the 
applicable Agency loan making or servicing requirements, and
    (ii) Current market values have remained stable since the appraisal 
was completed; or
    (2) The appraisal was not completed in the previous 12 months, but 
has been updated by the appraiser or appraisal firm that completed the 
appraisal, and both the update and original appraisal were completed in 
accordance with USPAP.
    (e) Appraisal reviews. (1) Real estate appraisals. With respect to a 
real estate appraisal, the Agency may conduct a technical appraisal 
review or an administrative appraisal review, or both.
    (2) Chattel appraisals. With respect to a chattel appraisal, the 
Agency may conduct an administrative appraisal review.

[64 FR 62567, Nov. 17, 1999; 64 FR 69322, Dec 10, 1999; 65 FR 14433, 
Mar. 17, 2000]



Sec. 761.8  Loan limitations.

    (a) Dollar limits. The outstanding principal balances for a farm 
loan applicant or anyone who will sign the

[[Page 224]]

promissory note cannot exceed any of the following:
    (1) Farm Ownership loans, Beginning Farmer Down payment loans and 
Soil and Water loans:
    (i) Direct--$200,000;
    (ii) Guaranteed--$700,000 (for fiscal year 2000 and increased at the 
beginning of each fiscal year in accordance with paragraph (b) of this 
section);
    (iii) Any combination of a direct Soil and Water loan, direct Farm 
Ownership loan, guaranteed Soil and Water loan, and guaranteed Farm 
Ownership loan--$700,000 (for fiscal year 2000 and increased each fiscal 
year in accordance with paragraph (b) of this section);
    (2) Operating loans:
    (i) Direct--$200,000;
    (ii) Guaranteed--$700,000 (for fiscal year 2000 and increased each 
fiscal year in accordance with paragraph (b) of this section);
    (iii) Any combination of a direct Operating loan and guaranteed 
Operating loan--$700,000 (for fiscal year 2000 and increased each fiscal 
year in accordance with paragraph (b) of this section);
    (3) Any combination of guaranteed Farm Ownership loan, guaranteed 
Soil and Water loan, and guaranteed Operating loan--$700,000 (for fiscal 
year 2000 and increased each fiscal year in accordance with paragraph 
(b) of this section);
    (4) Any combination of direct Farm Ownership loan, direct Soil and 
Water loan, direct Operating loan, guaranteed Farm Ownership loan, 
guaranteed Soil and Water loan, and guaranteed Operating loan--the 
amount in paragraph (a)(1)(ii) of this section plus $200,000;
    (5) Emergency loans--$500,000;
    (6) Any combination of direct Farm Ownership loan, direct Soil and 
Water loan, direct Operating loan, guaranteed Farm Ownership loan, 
guaranteed Soil and Water loan, guaranteed Operating loan, and Emergency 
loan--the amount in paragraph (a)(1)(ii) of this section plus $700,000.
    (b) The dollar limits of guaranteed loans will be increased each 
fiscal year based on the percentage change in the Prices Paid by Farmers 
Index as compiled by the National Agricultural Statistics Service, USDA. 
The maximum loan limits for the current fiscal year are available in any 
FSA office and on the FSA website at http://www.fsa.usda.gov.
    (c) Line of credit advances. The total dollar amount of guaranteed 
line of credit advances and income releases cannot exceed the total 
estimated expenses, less interest expense, as indicated on the 
borrower's cash flow budget, unless the cash flow budget is revised and 
continues to reflect a feasible plan.

[66 FR 7566, Jan. 24, 2001, as amended at 67 FR 41312, June 18, 2002]



PART 762_GUARANTEED FARM LOANS--Table of Contents




Sec.
762.1-762.100 [Reserved]
762.101 Introduction.
762.102 Abbreviations and definitions.
762.103 Full faith and credit.
762.104 Appeals.
762.105 Eligibility and substitution of lenders.
762.106 Preferred and certified lender programs.
762.107-762.109 [Reserved]
762.110 Loan application.
762.111-762.119 [Reserved]
762.120 Loan applicant eligibility.
762.121 Loan purposes.
762.122 Loan limitations.
762.123 Insurance and farm inspection requirements.
762.124 Interest rates, terms, charges, and fees.
762.125 Financial feasibility.
762.126 Security requirements.
762.127 Appraisal requirements.
762.128 Environmental and special laws.
762.129 Percent of guarantee and maximum loss.
762.130 Loan approval and issuing the guarantee.
762.131-762.139 [Reserved]
762.140 General servicing responsibilities.
762.141 Reporting requirements.
762.142 Servicing related to collateral.
762.143 Servicing distressed accounts.
762.144 Repurchase of guaranteed portion from a secondary market holder.
762.145 Restructuring guaranteed loans.
762.146 Other servicing procedures.
762.147 Servicing shared appreciation agreements.
762.148 Bankruptcy.
762.149 Liquidation.
762.150 Interest assistance program.
762.151-762.159 [Reserved]
762.160 Sale, assignment and participation.

    Authority: 5 U.S.C. 301, 7 U.S.C. 1989.

[[Page 225]]


    Source: 64 FR 7378, Feb. 12, 1999, unless otherwise noted.



Sec. Sec. 762.1-762.100  [Reserved]



Sec. 762.101  Introduction.

    (a) Scope. This subpart contains regulations governing Operating 
Loans and Farm Ownership loans guaranteed by the Farm Service Agency. 
This subpart applies to lenders, holders, borrowers, Agency personnel, 
and other parties involved in making, guaranteeing, holding, servicing, 
or liquidating such loans.
    (b) Policy. The Agency issues guarantees on loans made to qualified 
loan applicants without regard to race, color, religion, sex, national 
origin, marital status, or age, provided the loan applicant can enter 
into a legal and binding contract, or whether all or part of the 
applicant's income derives from any public assistance program or whether 
the applicant, in good faith, exercises any rights under the Consumer 
Protection Act.
    (c) Lender list and classification. (1) The Agency maintains a 
current list of lenders who express a desire to participate in the 
guaranteed loan program. This list is made available to farmers upon 
request.
    (2) Lenders who participate in the Agency guaranteed loan program 
will be classified into one of the following categories:
    (i) Standard Eligible Lender under Sec. 762.105,
    (ii) Certified Lender, or
    (iii) Preferred Lender under Sec. 762.106.
    (3) Lenders may continue to make loans under Approved Lender Program 
(ALP) agreements until they expire; however, these agreements will not 
be renewed when they expire. All ALP agreements with farm credit 
institutions will expire on February 12, 2001.
    (d) Type of guarantee. Guarantees are available for both a loan note 
or a line of credit. A loan note is used for a loan of fixed amount and 
term. A line of credit has a fixed term, but no fixed amount. The 
principal amount outstanding at any time, however, may not exceed the 
line of credit ceiling contained in the contract. Both guarantees are 
evidenced by the same loan guarantee form.
    (e) Termination of loan guarantee. The loan guarantee will 
automatically terminate as follows:
    (1) Upon full payment of the guaranteed loan. A zero balance within 
the period authorized for advances on a line of credit will not 
terminate the guarantee;
    (2) Upon payment of a final loss claim; or
    (3) Upon written notice from the lender to the Agency that a 
guarantee is no longer desired provided the lender holds all of the 
guaranteed portion of the loan. The loan guarantee will be returned to 
the Agency office for cancellation within 30 days of the date of the 
notice by the lender.



Sec. 762.102  Abbreviations and definitions.

    (a) Abbreviations.
    ALP--Approved lender program
    CLP--Certified lender program
    CONACT--Consolidated Farm and Rural Development Act (7 U.S.C. 1921 
et seq.)
    EPA--Environmental Protection Agency
    EIS--Environmental impact statement
    EM--Emergency loans
    FO--Farm ownership loans
    FSA--Farm Service Agency
    OL--Operating loans
    PLP--Preferred lender program
    SW--Soil and water
    USDA--United States Department of Agriculture
    (b) Definitions.
    Additional security. Collateral in excess of that needed to fully 
secure the loan.
    Agency. The Farm Service Agency, including its employees and state 
and area committee members, and any successor agency.
    Allonge. An attachment or an addendum to a note.
    Applicant. For guaranteed loans, the lender requesting a guarantee 
is the applicant. The party applying to the lender for a loan will be 
considered the loan applicant.
    Aquaculture. The husbandry of aquatic organisms in a controlled or 
selected environment. An aquatic organism is any fish, amphibian, 
reptile, or aquatic

[[Page 226]]

plant. An aquaculture operation is considered to be a farm only if it is 
conducted on the grounds which the loan applicant owns, leases, or has 
an exclusive right to use. An exclusive right to use must be evidenced 
by a permit issued to the loan applicant and the permit must 
specifically identify the waters available to be used by the loan 
applicant only.
    Assignment of guaranteed portion. A process by which the lender 
transfers the right to receive payments or income on the guaranteed loan 
to another party, usually in return for payment in the amount of the 
loan's guaranteed principal. The lender retains the unguaranteed portion 
in its portfolio and receives a fee from the purchaser or assignee to 
service the loan, and receive and remit payments according to a written 
assignment agreement. This assignment can be reassigned or sold multiple 
times.
    Average farm customers. Those conventional farm borrowers who are 
required to pledge their crops, livestock, and other chattel and real 
estate security for the loan. This does not include those high-risk 
farmers with limited security and management ability who are generally 
charged a higher interest rate by conventional agricultural lenders. 
Also, this does not include those low-risk farm customers who obtain 
financing on a secured or unsecured basis, who have as collateral such 
items as savings accounts, time deposits, certificates of deposit, 
stocks and bonds, and life insurance, which they are able to pledge for 
the loan.
    Basic Security. All farm machinery, equipment, vehicles, foundation 
and breeding livestock herds and flocks, including replacements, and 
real estate which serves as security for a loan guaranteed by the 
Agency.
    Beginning farmer or rancher. A beginning farmer or rancher is an 
individual or entity who:
    (1) Meets the loan eligibility requirements for OL or FO assistance, 
as applicable, in accordance with this subpart;
    (2) Has not operated a farm or ranch, or who has operated a farm or 
ranch for not more than 10 years. This requirement applies to all 
members of an entity;
    (3) Will materially and substantially participate in the operation 
of the farm or ranch:
    (i) In the case of a loan made to an individual, individually or 
with the immediate family, material and substantial participation 
requires that the individual provide substantial day-to-day labor and 
management of the farm or ranch, consistent with the practices in the 
county or State where the farm is located.
    (ii) In the case of a loan made to an entity, all members must 
materially and substantially participate in the operation of the farm or 
ranch. Material and substantial participation requires that the 
individual provide some amount of the management, or labor and 
management necessary for day-to-day activities, such that if the 
individual did not provide these inputs, operation of the farm or ranch 
would be seriously impaired;
    (4) Agrees to participate in any loan assessment and financial 
management programs required by Agency regulations;
    (5) Does not own real farm or ranch property or who, directly or 
through interests in family farm entities, owns real farm or ranch 
property, the aggregate acreage of which does not exceed 30 percent of 
the average farm or ranch acreage of the farms or ranches in the county 
where the property is located. If the farm is located in more than one 
county, the average farm acreage of the county where the loan 
applicant's residence is located will be used in the calculation. If the 
applicant's residence is not located on the farm or if the loan 
applicant is an entity, the average farm acreage of the county where the 
major portion of the farm is located will be used. The average county 
farm or ranch acreage will be determined from the most recent Census of 
Agriculture developed by the U.S. Department of Commerce, Bureau of the 
Census or USDA;
    (6) Demonstrates that the available resources of the loan applicant 
and spouse (if any) are not sufficient to enable the loan applicant to 
enter or continue farming or ranching on a viable scale; and
    (7) In the case of an entity:

[[Page 227]]

    (i) All the members are related by blood or marriage; and
    (ii) All the stockholders in a corporation are beginning farmers or 
ranchers.
    Borrower. An individual or entity which has outstanding obligations 
to the lender under any Agency loan or loan guarantee program. A 
borrower includes all parties liable for Agency debt, including 
collection-only borrowers, except those whose total loan and accounts 
have been voluntarily or involuntarily foreclosed or liquidated, or who 
have been discharged of all Agency debt.
    Capital leases. Agreements under which the lessee effectively 
acquires ownership of the asset being leased. A lease is a capital lease 
if it meets any one of the following criteria:
    (1) The lease transfers ownership of the property to the lessee at 
the end of the lease term.
    (2) The lessee has the right to purchase the property for 
significantly less than its market value at the end of the lease.
    (3) The term of the lease is at least 75 percent of the estimated 
economic life of the leased property.
    (4) The present value of the minimum lease payments equals or 
exceeds 90 percent of the fair market value of the leased property.
    Cash flow budget. A projection listing all anticipated cash inflows 
(including all farm income, nonfarm income and all loan advances) and 
all cash outflows (including all farm and nonfarm debt service and other 
expenses) to be incurred by the borrower during the period of the 
budget. Cash flow budgets for loans under $50,000 do not require income 
and expenses itemized by categories. Cash flow budgets for loans under 
$125,000 do not require income and expenses itemized by categories. It 
may also be prepared with a breakdown of cash inflows and outflows for 
each month of the review period and includes the expected outstanding 
operating credit balance for the end of each month. The latter type is 
referred to as a ``monthly cash flow budget''.
    Collateral. Property pledged as security for a loan to ensure 
repayment of an obligation.
    Conditional commitment. The Agency's commitment to the lender that 
the material it has submitted is approved subject to the completion of 
all conditions and requirements contained therein.
    Consolidation. The combination of outstanding principal and interest 
balance of two or more OL loans.
    Controlled. When a director or employee has more than a 50 percent 
ownership in the entity or, the director or employee, together with 
relatives of the director or employee, have more than a 50 percent 
ownership.
    Cooperative. An entity which has farming as its purpose and whose 
members have agreed to share the profits of the farming enterprise. The 
entity must be recognized as a farm cooperative by the laws of the State 
in which the entity will operate a farm.
    Cosigner. A party who joins in the execution of a promissory note to 
assure its repayment. The cosigner becomes jointly and severally liable 
to comply with the terms of the note. In the case of an entity 
applicant, the cosigner cannot be a member, partner, joint operator, or 
stockholder of the entity.
    County average yield. The historical average yield for a commodity 
in a particular political subdivision, as determined or published by a 
government entity or other recognized source.
    Debt writedown. To reduce the amount of the borrower's debt to that 
amount that is determined to be collectible based on an analysis of the 
security value and the borrower's ability to pay.
    Deferral. A postponement of the payment of interest or principal or 
both. Principal may be deferred in whole or in part, interest may only 
be partially deferred.
    Depreciation and amortization expenses. An annual allocation of the 
cost or other basic value of tangible capital assets, less salvage 
value, over the estimated life of the unit (which may be a group of 
assets), in a systematic and rational manner.
    Direct loan. A loan serviced by the Agency as lender.
    Entity. Cooperatives, corporations, partnerships, joint operations, 
trusts, or limited liability companies.
    Family farm. A farm which:
    (1) Produces agricultural commodities for sale in sufficient 
quantities so

[[Page 228]]

that it is recognized in the community as a farm rather than a rural 
residence;
    (2) Provides enough agricultural income by itself, including rented 
land, or together with any other dependable income to enable the 
borrower to:
    (i) Pay necessary family living and operating expenses;
    (ii) Maintain essential chattel and real property; and
    (iii) Pay debts;
    (3) Is managed by:
    (i) The borrower when a loan is made to an individual; or,
    (ii) The members, stockholders, partners, or joint operators 
responsible for operating the farm when a loan is made to an entity;
    (4) Has a substantial amount of the labor requirement for the farm 
and nonfarm enterprise provided by:
    (i) The borrower and the borrower's immediate family for a loan made 
to an individual; or
    (ii) The members, stockholders, partners, or joint operators 
responsible for operating the farm, along with the families of these 
individuals, for a loan made to an entity; and
    (5) May use a reasonable amount of full-time hired labor and 
seasonal labor during peak load periods.
    Family living expenses. Any withdrawals from income to provide for 
needs of family members.
    Family members. The immediate members of the family residing in the 
same household with the individual borrower, or, in the case of an 
entity, with the operator.
    Farm. A tract or tracts of land, improvements, and other 
appurtenances which are used or will be used in the production of crops, 
livestock, or aquaculture products for sale in sufficient quantities so 
that the property is recognized as a farm rather than a rural residence. 
The term ``farm'' also includes any such land and improvements and 
facilities used in a nonfarm enterprise. It may also include the 
residence which, although physically separate from the farm acreage, is 
ordinarily treated as part of the farm in the local community.
    Feasible plan. A plan is feasible when a borrower or applicant's 
cash flow budget indicates that there is sufficient cash inflow to pay 
all cash outflow each year during the term of the loan. If a loan 
approval or restructuring action exceeds one production cycle and the 
planned cash flow budget is atypical due to cash or inventory on hand, 
new enterprises, carryover debt, atypical planned purchases, important 
operating changes, or other reasons, a cash flow budget must be prepared 
that reflects a typical cycle. If the request is for only one cycle, a 
feasible plan for only one cycle is required for approval.
    Financially viable operation. An operation which, with Agency 
assistance, is projected to improve its financial condition over a 
period of time to the point that the operator can obtain commercial 
credit without further Agency direct or guaranteed assistance. A 
borrower that will meet the Agency classification of ``commercial,'' as 
defined in Agency Instruction 2006-W, available in any Agency office, 
will be considered to be financially viable. Such an operation must 
generate sufficient income to:
    (1) Meet annual operating expenses and debt payments as they become 
due;
    (2) Meet basic family living expenses to the extent they are not met 
by dependable nonfarm income;
    (3) Provide for replacement of capital items; and
    (4) Provide for long-term financial growth.
    Fish. Any aquatic, gilled animal commonly known as ``fish'' as well 
as mollusks, or crustaceans (or other invertebrates) produced under 
controlled conditions (that is, feeding, tending, harvesting, and such 
other activities as are necessary to properly raise and market the 
products) in ponds, lakes, streams, artificial enclosures, or similar 
holding areas.
    Fixture. An item of personal property attached to real estate in 
such a way that it cannot be removed without defacing or dismantling the 
structure, or substantially damaging the structure itself.
    Graduation. The Agency's determination that a borrower of a direct 
loan, is financially stable enough to refinance that loan with a 
commercial lender with or without a guarantee.
    Guaranteed loan. A loan made and serviced by a lender for which the 
Agency has entered into a lenders

[[Page 229]]

agreement and for which the Agency has issued a loan note guarantee. 
This term also includes lines of credit except where otherwise 
indicated.
    Hazard insurance. Includes fire, windstorm, lightning, hail, 
explosion, riot, civil commotion, aircraft, vehicles, smoke, builder's 
risk, public liability, property damage, flood or mudslide, workers 
compensation, or any similar insurance that is available and needed to 
protect the security, or that is required by law.
    Holder. The person or organization other than the lender who holds 
all or a part of the guaranteed portion of an Agency guaranteed loan but 
who has no servicing responsibilities. When the lender assigns a part of 
the guaranteed loan to an assignee by way of execution of an assignment 
form, the assignee becomes a holder.
    In-house expenses. Expenses associated with credit management and 
loan servicing by the lender and the lender's contractor. In-house 
expenses include, but are not limited to: employee salaries, staff 
lawyers, travel, supplies, and overhead.
    Interest assistance agreement. The signed agreement between the 
Agency and the lender setting forth the terms and conditions of the 
interest assistance.
    Interest assistance anniversary date. Date on which interest 
assistance reviews and claims will be effective. This date is 
established by the lender. Once established, it will not change unless 
the loan is restructured.
    Interest assistance review. The yearly review process which includes 
an analysis of the borrower or applicant's farming operation and need 
for continued interest assistance, completion of the needs test and 
request for continuation of interest assistance.
    Joint operation. Individuals that have agreed to operate a farm or 
farms together as a business unit. The real and personal property may be 
owned separately or jointly by the individuals.
    Land development. Items such as terracing, clearing, leveling, 
fencing, drainage and irrigation systems, ponds, forestation, permanent 
pastures, perennial hay crops, basic soil amendments, and other items of 
land improvements which conserve or permanently enhance productivity.
    Lender. The organization making and servicing the loan or advancing 
and servicing the line of credit which is guaranteed under the 
provisions of Agency regulations. The lender is also the party 
requesting a guarantee.
    Lender's agreement. The appropriate Agency form executed by the 
Agency and the lender setting forth the loan responsibilities of the 
lender and agency when the loan guarantee is issued.
    Lien.A legally enforceable hold or claim on the property of another 
obtained as security for the repayment of indebtedness or an encumbrance 
on property to enforce payment of an obligation.
    Liquidation expenses. The cost of an appraisal, due diligence 
evaluation, environmental assessment, outside attorney fees and other 
costs incurred as a direct result of liquidating the security for the 
guaranteed loan. Liquidation fees do not include in-house expenses.
    Loan or line of credit agreement. A document which contains certain 
lender and borrower agreements, conditions, limitations, and 
responsibilities for credit extension and acceptance in a loan format 
where loan principal balance may fluctuate throughout the term of the 
document.
    Loan applicant. The party applying to a lender for a guaranteed loan 
or line of credit.
    Loan transaction. Any loan approval or servicing action.
    Loss claim. A request made to the Agency by a lender to receive a 
reimbursement based on a percentage of the lender's loss on a loan 
covered by an Agency guarantee.
    Loss rate. The net amount of guaranteed OL, FO, and SW loss claims 
paid on loans made in the past 7 years divided by the total loan amount 
of OL, FO, and SW made in the past 7 years.
    Major deficiency. A deficiency that directly affects the soundness 
of the loan.
    Majority interest. Any individual or a combination of individuals 
owning more than a 50 percent interest in a cooperative, corporation, 
joint operation, or partnership.
    Market value. The amount which an informed and willing buyer would 
pay

[[Page 230]]

an informed and willing, but not forced, seller in a completely 
voluntary sale.
    Minor deficiency. A deficiency that violates Agency regulations, but 
does not affect the soundness of a loan.
    Mortgage. A legal instrument giving the lender a security interest 
or lien on real or personal property of any kind.
    Negligent servicing. The failure to perform those services which 
would be considered normal industry standards of loan management or 
failure to comply with any servicing requirement of this subpart or the 
lenders agreement or the guarantee. The term includes the concept of a 
failure to act or failure to act timely consistent with actions of a 
reasonable lender in loan making, servicing, and collection.
    Net farm operating income. The gross income generated by a farming 
operation annually, minus all yearly operating expenses (including 
withdrawals from entities for living expenses), operating loan interest, 
interest on term debt and capital lease payments, and depreciation and 
amortization expenses. Net farm operating income does not include off-
farm income and social security taxes, carryover debt and delinquent 
interest.
    Net recovery value. The market value of the security property 
assuming that it will be acquired by the lender, and sold for its 
highest and best use, less the lender's costs of property acquisition, 
retention, maintenance, and liquidation.
    Nonessential asset. Assets in which the borrower has an ownership 
interest that do not contribute an income to pay essential family living 
expenses or maintain a sound farming operation, and are not exempt from 
judgment creditors.
    Normal income security. All security not considered basic security.
    Participation. A loan arrangement where a primary or lead lender is 
typically the lender of record but the loan funds may be provided by one 
or more other lenders due to loan size or other factors. Typically, 
participating lenders share in the interest income or profit on the loan 
based on the relative amount of the loan funds provided after deducting 
the servicing fees of the primary or lead lender.
    Partnership. Any entity consisting of two or more individuals who 
have agreed to operate a farm as one business unit. The entity must be 
recognized as a partnership by the laws of the State in which the entity 
will operate and must be authorized to own both real estate and personal 
property and to incur debts in its own name.
    Potential liquidation value. The amount of the lender's protective 
bid at the foreclosure sale. Potential liquidation value is determined 
by an independent appraiser using comparables from other forced 
liquidation sales.
    Present value. The present worth of a future stream of payments 
discounted to the current date.
    Primary security. The minimum amount of collateral needed to fully 
secure a proposed loan.
    Principals of borrowers. Includes owners, officers, directors, 
entities and others directly involved in the operation and management of 
a business.
    Protective advances. Advances made by a lender to protect or 
preserve the collateral itself from loss or deterioration. Protective 
advances include but are not limited to:
    (1) Payment of delinquent taxes,
    (2) Annual assessments,
    (3) Ground rents,
    (4) Hazard or flood insurance premiums against or affecting the 
collateral,
    (5) Harvesting costs,
    (6) Other expenses needed for emergency measures to protect the 
collateral.
    Recapture. The amount that a guaranteed lender is entitled to 
recover from a guaranteed loan borrower in consideration for the lender 
writing down a portion of their guaranteed loan debt when that loan was 
secured by real estate and that real estate increases in value. Also, 
the act of collecting shared appreciation.
    Related by blood or marriage. Individuals who are connected to one 
another as husband, wife, parent, child, brother, or sister.
    Relative. An individual or spouse and anyone having the following 
relationship to either: parent, son, daughter, sibling, stepparent, 
stepson, stepdaughter, stepbrother, stepsister, half

[[Page 231]]

brother, half sister, uncle, aunt, nephew, niece, grandparent, 
granddaughter, grandson, and the spouses of the foregoing.
    Rescheduling. To rewrite the rates and terms of a single note or 
line of credit agreement.
    Restructuring. Changing terms of a debt through either a 
rescheduling, deferral, or writedown or a combination thereof.
    Sale of guaranteed portion. See assignment of guaranteed portion.
    Security. Property of any kind subject to a real or personal 
property lien. Any reference to ``collateral'' or ``security property'' 
shall be considered a reference to the term ``security.''
    Shared appreciation agreement. An agreement between a guaranteed 
lender and borrower that requires a borrower that has received a write 
down on a guaranteed loan secured by real estate to repay the lender 
some or all of the writedown received, based on a percentage of any 
increase in the value of that real estate at some future date, if 
certain conditions exist.
    State. The major political subdivision of the United States and the 
organization of program delivery for the Agency.
    Subordination. A document executed by a lender to relinquish their 
priority of lien in favor of another lender that provides the other 
lender with a priority right to collect a debt of a specific dollar 
amount from the sale of the same collateral.
    Subsequent loans. Any loans processed by the Agency after an initial 
loan has been made to the same borrower.
    Transfer and assumption. The conveyance by a debtor to an assuming 
party of the assets, collateral, and liabilities of the loan in return 
for the assuming party's binding promise to pay the debt outstanding.
    Typical plan. A projected income and expense statement listing all 
anticipated cash flows for a typical 12-month production cycle; 
including all farm and nonfarm income and all expenses (including debt 
service) to be incurred by the borrower during such period.
    Unaccounted for security. Items, as indicated on the lender's loan 
application, request for guarantee, or any interim agreements provided 
to the Agency, that are security for the guaranteed loan that were 
misplaced, stolen, sold, or otherwise missing, where replacement 
security was not obtained or the proceeds from their sale have not been 
applied to the loan.
    United States. The United States itself, each of the several States, 
the Commonwealth of Puerto Rico, the Virgin Islands of the United 
States, Guam, American Samoa, and the Commonwealth of the Northern 
Mariana Islands.
    Veteran. Any person who served in the military, naval, or air 
service during any war as defined in section 101(12) of title 38, United 
States Code.

[64 FR 7378, Feb. 12, 1999, as amended at 66 FR 7567, Jan. 24, 2001; 68 
FR 7695, Feb. 18, 2003]



Sec. 762.103  Full faith and credit.

    (a) Fraud and misrepresentation. The loan guarantee constitutes an 
obligation supported by the full faith and credit of the United States. 
The Agency may contest the guarantee only in cases of fraud or 
misrepresentation by a lender or holder, in which:
    (1) The lender or holder had actual knowledge of the fraud or 
misrepresentation at the time it became the lender or holder, or
    (2) The lender or holder participated in or condoned the fraud or 
misrepresentation.
    (b) Lender violations. The loan guarantee cannot be enforced by the 
lender, regardless of when the Agency discovers the violation, to the 
extent that the loss is a result of:
    (1) Violation of usury laws;
    (2) Negligent servicing;
    (3) Failure to obtain the required security; or,
    (4) Failure to use loan funds for purposes specifically approved by 
the Agency.
    (c) Enforcement by holder. The guarantee and right to require 
purchase will be directly enforceable by the holder even if:
    (1) The loan guarantee is contestable based on the lender's fraud or 
misrepresentation; or
    (2) The loan note guarantee is unenforceable by the lender based on 
a lender violation.

[[Page 232]]



Sec. 762.104  Appeals.

    (a) The loan applicant or borrower and lender must jointly execute 
the written request for review of an alleged adverse decision made by 
the Agency. However, in cases where the Agency has denied or reduced the 
amount of the final loss payment, the decision may be appealed by the 
lender only.
    (b) A decision made by the lender adverse to the borrower is not a 
decision by the Agency, whether or not concurred in by the Agency, and 
may not be appealed.
    (c) The lender or Agency may request updated information from the 
borrower to implement an appeal decision.
    (d) Appeals will be handled in accordance with parts 11 and 780 of 
this title.



Sec. 762.105  Eligibility and substitution of lenders.

    (a) General. To participate in FSA guaranteed farm loan programs, a 
lender must meet the eligibility criteria in this part. The standard 
eligible lender must demonstrate eligibility and provide such evidence 
as the Agency may request.
    (b) Standard eligible lender eligibility criteria. (1) A lender must 
have experience in making and servicing agricultural loans and have the 
capability to make and service the loan for which a guarantee is 
requested;
    (2) The lenders must not have losses or deficiencies in processing 
and servicing guaranteed loans above a level which would indicate an 
inability to properly process and service a guaranteed agricultural 
loan.
    (3) A lender must be subject to credit examination and supervision 
by an acceptable State or Federal regulatory agency;
    (4) The lender must maintain an office near enough to the 
collateral's location so it can properly and efficiently discharge its 
loan making and loan servicing responsibilities or use Agency approved 
agents, correspondents, branches, or other institutions or persons to 
provide expertise to assist in carrying out its responsibilities. The 
lender must be a local lender unless it:
    (i) Normally makes loans in the region or geographic location in 
which the loan applicant's operation being financed is located, or
    (ii) Demonstrates specific expertise in making and servicing loans 
for the proposed operation.
    (5) The lender, its officers, or agents must not be debarred or 
suspended from participation in Government contracts or programs or be 
delinquent on a Government debt.
    (c) Substitution of lenders. A new eligible lender may be 
substituted for the original lender, upon the original lender's 
concurrence, under the following conditions:
    (1) The Agency approves of the substitution in writing by executing 
a modification of the guarantee to identify the new lender, the amount 
of debt at the time of the substitution and any new loan terms if 
applicable.
    (2) The new lender agrees in writing to:
    (i) Assume all servicing and other responsibilities of the original 
lender and to acquire the unguaranteed portion of the loan;
    (ii) Execute a lender's agreement if one is not in effect;
    (iii) [Reserved]
    (iv) Give any holder written notice of the substitution. If the rate 
and terms are changed, written concurrence from the holder is required.
    (3) The original lender will:
    (i) Assign their promissory note, lien instruments, loan agreements, 
and other documents to the new lender.
    (ii) If the loan is subject to an existing interest assistance 
agreement, submit a request for subsidy for the partial year that it has 
owned the loan.
    (d) Lender name or ownership changes.
    (1) When a lender begins doing business under a new name or 
undergoes an ownership change the lender will notify the Agency.
    (2) The lender's CLP or PLP status is subject to reconsideration 
when ownership changes.
    (3) The lender will execute a new lender's agreement when ownership 
changes.

[64 FR 7378, Feb. 12, 1999, as amended at 66 FR 7567, Jan. 24, 2001]



Sec. 762.106  Preferred and certified lender programs.

    (a) General. (1) Lenders who desire PLP or CLP status must prepare a 
written request addressing:

[[Page 233]]

    (i) The States in which they desire to receive PLP or CLP status and 
their branch offices which they desire to be considered by the Agency 
for approval; and
    (ii) Each item of the eligibility criteria for PLP or CLP approval 
in this section, as appropriate.
    (2) The lender may include any additional supporting evidence or 
other information the lender believes would be helpful to the Agency in 
making its determination.
    (3) The lender must send its request to the Agency State office for 
the State in which the lender's headquarters is located.
    (4) The lender must provide any additional information requested by 
the Agency to process a PLP or CLP request if the lender continues with 
the approval process.
    (b) CLP criteria. The lender must meet the following requirements to 
obtain CLP status:
    (1) Qualify as a standard eligible lender under Sec. 762.105;
    (2) Have a lender loss rate not in excess of the maximum CLP loss 
rate established by the Agency and published periodically in a Federal 
Register Notice. The Agency may waive the loss rate criteria for those 
lenders whose loss rate was substantially affected by a disaster as 
defined in part 1945, subpart A, of this title.
    (3) Have proven an ability to process and service Agency guaranteed 
loans by showing that the lender:
    (i) Submitted substantially complete and correct guaranteed loan 
applications; and
    (ii) Serviced all guaranteed loans according to Agency regulations;
    (4) Have made the minimum number of guaranteed OL, FO, or Soil and 
Water (SW) loans established by the Agency and published periodically in 
a Federal Register Notice.
    (5) Not be under any regulatory enforcement action such as a cease 
and desist order, written agreement, or an appointment of conservator or 
receiver, based upon financial condition;
    (6) Designate a qualified person or persons to process and service 
Agency guaranteed loans for each of the lender offices which will 
process CLP loans. To be qualified, the person must meet the following 
conditions:
    (i) Have attended Agency sponsored training in the past 12 months or 
will attend training in the next 12 months; and
    (ii) Agree to attend Agency sponsored training each year;
    (7) Use forms acceptable to the Agency for processing, analyzing, 
securing, and servicing Agency guaranteed loans and lines of credit;
    (8) Submit to the Agency copies of financial statements, cash flow 
plans, budgets, promissory notes, analysis sheets, collateral control 
sheets, security agreements and other forms to be used for farm loan 
processing and servicing;
    (c) PLP criteria. The lender must meet the following requirements to 
obtain PLP status:
    (1) Meet the CLP eligibility criteria under this section.
    (2) Have a credit management system, satisfactory to the Agency, 
based on the following:
    (i) The lender's written credit policies and underwriting standards;
    (ii) Loan documentation requirements;
    (iii) Exceptions to policies;
    (iv) Analysis of new loan requests;
    (v) Credit file management;
    (vi) Loan funds and collateral management system;
    (vii) Portfolio management;
    (viii) Loan reviews;
    (ix) Internal credit review process;
    (x) Loan monitoring system; and
    (xi) The board of director's responsibilities.
    (3) Have made the minimum number of guaranteed OL, FO, or SW loans 
established by the Agency and published periodically in a Federal 
Register Notice.
    (4) Have a lender loss rate not in excess of the rate of the maximum 
PLP loss rate established by the Agency and published periodically in a 
Federal Register Notice. The Agency may waive the loss rate criteria for 
those lenders whose loss rate was substantially affected by a disaster 
as defined in part 1945, subpart A, of this title.
    (5) Show a consistent practice of submitting applications for 
guaranteed

[[Page 234]]

loans containing accurate information supporting a sound loan proposal.
    (6) Show a consistent practice of processing Agency guaranteed loans 
without recurring major or minor deficiencies.
    (7) Demonstrate a consistent, above average ability to service 
guaranteed loans based on the following:
    (i) Borrower supervision and assistance;
    (ii) Timely and effective servicing; and
    (iii) Communication with the Agency.
    (8) Designate a person or persons, approved by the Agency, to 
process and service PLP loans for the Agency.
    (d) CLP and PLP approval. (1) If a lender applying for CLP or PLP 
status is or has recently been involved in a merger or acquisition, all 
loans and losses attributed to both lenders will be considered in the 
eligibility calculations.
    (2) The Agency will determine which branches of the lender have the 
necessary experience and ability to participate in the CLP or PLP 
program based on the information submitted in the lender application and 
on Agency experience.
    (3) Lenders who meet the criteria will be granted CLP or PLP status 
for a period not to exceed 5 years.
    (4) PLP status will be conditioned on the lender carrying out its 
credit management system as proposed in its request for PLP status and 
any additional loan making or servicing requirements agreed to and 
documented the PLP lender's agreement. If the PLP lender's agreement 
does not specify any agreed upon process for a particular action, the 
PLP lender will act according to regulations governing CLP lenders.
    (e) Monitoring CLP and PLP lenders. CLP and PLP lenders will provide 
information and access to records upon Agency request to permit the 
Agency to audit the lender for compliance with these regulations.
    (f) Renewal of CLP or PLP status. (1) PLP or CLP status will expire 
within a period not to exceed 5 years from the date the lender's 
agreement is executed, unless a new lender's Agreement is executed.
    (2) Renewal of PLP or CLP status is not automatic. A lender must 
submit a written request for renewal of a lender's agreement with PLP or 
CLP status which includes information:
    (i) Updating the material submitted in the initial application; and,
    (ii) Addressing any new criteria established by the Agency since the 
initial application.
    (3) PLP or CLP status will be renewed if the applicable eligibility 
criteria under this section are met, and no cause exists for denying 
renewal under paragraph (g) of this section.
    (g) Revocation of PLP or CLP status. (1) The Agency may revoke the 
lender's PLP or CLP status at any time during the 5 year term for cause.
    (2) Any of the following instances constitute cause for revoking or 
not renewing PLP or CLP status:
    (i) Violation of the terms of the lender's agreement;
    (ii) Failure to maintain PLP or CLP eligibility criteria;
    (iii) Knowingly submitting false or misleading information to the 
Agency;
    (iv) Basing a request on information known to be false;
    (v) Deficiencies that indicate an inability to process or service 
Agency guaranteed farm loan programs loans in accordance with this 
subpart;
    (vi) Failure to correct cited deficiencies in loan documents upon 
notification by the Agency;
    (vii) Failure to submit status reports in a timely manner;
    (viii) Failure to use forms, or follow credit management systems 
(for PLP lenders) accepted by the Agency; or
    (ix) Failure to comply with the reimbursement requirements of Sec. 
762.144(c)(7).
    (3) A lender which has lost PLP or CLP status must be reconsidered 
for eligibility to continue as a Standard Eligible Lender (for former 
PLP and CLP lenders), or as a CLP lender (for former PLP lenders) in 
submitting loan guarantee requests. They may reapply for CLP or PLP 
status when the problem causing them to lose their status has been 
resolved.

[64 FR 7378, Feb. 12, 1999; 64 FR 38298, July 16, 1999]

[[Page 235]]



Sec. Sec. 762.107-762.109  [Reserved]



Sec. 762.110  Loan application.

    (a) Loans for $125,000 or less. All lenders except PLP lenders will 
submit the following items:
    (1) A complete application for loans of $125,000 or less must, at 
least, consist of:
    (i) The application form;
    (ii) Loan narrative;
    (iii) Balance sheet;
    (iv) Cash flow budget;
    (v) Credit report;
    (vi) A plan for servicing the loan.
    (2) In addition to the minimum requirements, the lender will perform 
at least the same level of evaluation and documentation for a guaranteed 
loan that the lender typically performs for non-guaranteed loans of a 
similar type and amount.
    (3) The $125,000 threshold includes any single loan, or package of 
loans submitted for consideration at any one time. A lender must not 
split a loan into two or more parts to meet the threshold thereby 
avoiding additional documentation.
    (4) The Agency may require lenders with a lender loss rate in excess 
of the rate for CLP lenders to assemble additional documentation from 
paragraph (b) of this section.
    (b) Loans over $125,000. A complete application for loans over 
$50,000 will consist of the items required in paragraph (a) of this 
section plus the following:
    (1) Verification of income;
    (2) Verification of debts over $1,000;
    (3) Three years financial history;
    (4) Three years of production history (for standard eligible lenders 
only);
    (5) Proposed loan agreements; and,
    (6) If construction or development is planned, a copy of the plans, 
specifications, and development schedule.
    (c) Applications from PLP lenders. Notwithstanding paragraphs (a) 
and (b) of this section, a complete application for PLP lenders will 
consist of at least:
    (1) An application form;
    (2) A loan narrative; and
    (3) Any other items agreed to during the approval of the PLP 
lender's status and contained in the PLP lender agreement.
    (d) Submitting applications. (1) All lenders must compile and 
maintain in their files a complete application for each guaranteed loan. 
See paragraphs (a), (b), and (c) of this section.
    (2) The Agency will notify CLP lenders which items to submit to the 
Agency.
    (3) PLP lenders will submit applications in accordance with their 
agreement with the Agency for PLP status.
    (4) CLP and PLP lenders must certify that the required items, not 
submitted, are in their files.
    (5) The Agency may request additional information from any lender or 
review the lender's loan file as needed to make eligibility and approval 
decisions.
    (e) Incomplete applications. If the lender does not provide the 
information needed to complete its application by the deadline 
established in an Agency request for the information, the application 
will be considered withdrawn by the lender.
    (f) Conflict of interest. (1) When a lender submits the application 
for a guaranteed loan, the lender will inform the Agency in writing of 
any relationship which may cause an actual or potential conflict of 
interest.
    (2) Relationships include:
    (i) The lender or its officers, directors, principal stockholders 
(except stockholders in a Farm Credit System institution that have stock 
requirements to obtain a loan), or other principal owners having a 
financial interest (other than lending relationships in the normal 
course of business) in the loan applicant or borrower.
    (ii) The loan applicant or borrower, a relative of the loan 
applicant or borrower, anyone residing in the household of the loan 
applicant or borrower, any officer, director, stockholder or other owner 
of the loan applicant or borrower holds any stock or other evidence of 
ownership in the lender.
    (iii) The loan applicant or borrower, a relative of the loan 
applicant or borrower, or anyone residing in the household of the loan 
applicant or borrower is an Agency employee.
    (iv) The officers, directors, principal stockholders (except 
stockholders in a Farm Credit System institution that have stock 
requirements to obtain a loan), or other principal owners of the

[[Page 236]]

lender have substantial business dealings (other than in the normal 
course of business) with the loan applicant or borrower.
    (v) The lender or its officers, directors, principal stockholders, 
or other principal owners have substantial business dealings with an 
Agency employee.
    (3) The lender must furnish additional information to the Agency 
upon request.
    (4) The Agency will not approve the application until the lender 
develops acceptable safeguards to control any actual or potential 
conflicts of interest.

[64 FR 7378, Feb. 12, 1999, as amended at 68 FR 7695, Feb. 18, 2003]



Sec. Sec. 762.111-762.119  [Reserved]



Sec. 762.120  Loan applicant eligibility.

    Loan applicants must meet all of the following requirements to be 
eligible for a guaranteed OL or a guaranteed FO:
    (a) Agency loss. The loan applicant, and anyone who will execute the 
promissory note, have not caused the Agency a loss by receiving debt 
forgiveness on more than three occasions on or prior to April 4, 1996, 
or on any occasion after April 4, 1996, on all or a portion of any 
direct or guaranteed loan made under the authority of the CONACT by debt 
write-down, write-off, compromise under the provisions of section 331 of 
the CONACT, adjustment, reduction, charge-off, or discharge in 
bankruptcy or through any payment of a guaranteed loss claim under the 
same circumstances. Notwithstanding the preceding sentence, applicants 
who receive a write-down under section 353 of the CONACT, or are current 
on payments under a confirmed bankruptcy reorganization plan, may 
receive direct and guaranteed OL loans to pay annual farm and ranch 
operating expenses, which include family subsistence, if the applicant 
meets all other requirements for the loan.
    (b) Delinquent Federal debt. The loan applicant, and anyone who will 
execute the promissory note, is not delinquent on any Federal debt, 
other than a debt under the Internal Revenue Code of 1986. (Any debt 
under the Internal Revenue Code of 1986 may be considered by the lender 
in determining cash flow and creditworthiness.)
    (c) Outstanding judgments. The loan applicant, and anyone who will 
execute the promissory note, have no outstanding unpaid judgment 
obtained by the United States in any court. Such judgments do not 
include those filed as a result of action in the United States Tax 
Courts.
    (d) Citizenship. (1) The applicant must be a citizen of the United 
States, a United States non-citizen national, or a qualified alien under 
applicable Federal immigration laws. For an entity applicant, the 
majority interest of the entity must be held by members who are United 
States citizens, United States non-citizen nationals, or qualified 
aliens under applicable Federal immigration laws.
    (2) United States non-citizen nationals and qualified aliens must 
provide the appropriate documentation as to their immigration status as 
required by the United States Department of Homeland Security, Bureau of 
Citizenship and Immigration Services.
    (e) Legal capacity. The loan applicant and all borrowers on the loan 
must possess the legal capacity to incur the obligations of the loan.
    (f) False or misleading information. The loan applicant, in past 
dealings with the Agency, must not have provided the Agency with false 
or misleading documents or statements.
    (g) Credit history. (1) The individual or entity loan applicant and 
all entity members must have acceptable credit history demonstrated by 
debt repayment.
    (2) A history of failures to repay past debts as they came due when 
the ability to repay was within their control will demonstrate 
unacceptable credit history.
    (3) Unacceptable credit history will not include:
    (i) Isolated instances of late payments which do not represent a 
pattern and were clearly beyond their control; or,
    (ii) Lack of credit history.

[[Page 237]]

    (h) Test for credit. (1) The loan applicant is unable to obtain 
sufficient credit elsewhere without a guarantee to finance actual needs 
at reasonable rates and terms.
    (2) The potential for sale of any significant nonessential assets 
will be considered when evaluating the availability of other credit.
    (3) Ownership interests in property and income received by an 
individual or entity loan applicant, and any entity members as 
individuals will be considered when evaluating the availability of other 
credit to the loan applicant.
    (i) For OLs:
    (1) The individual or entity loan applicant must be an operator of 
not larger than a family farm after the loan is closed.
    (2) In the case of an entity borrower:
    (i) The entity must be authorized to operate, and own if the entity 
is also an owner, a farm in the State or States in which the farm is 
located; and
    (ii) If the entity members holding a majority interest are related 
by marriage or blood, at least one member of the entity must operate the 
family farm; or,
    (iii) If the entity members holding a majority interest are not 
related by marriage or blood, the entity members holding a majority 
interest must also operate the family farm.
    (j) For FOs:
    (1) The individual must be the operator and owner of not larger than 
a family farm after the loan is closed.
    (2) In the case of an entity borrower:
    (i) The entity must be authorized to own and operate a farm in the 
state or states in which the farm is located; and
    (ii) If the entity members holding a majority interest are related 
by marriage or blood, at least one member of the entity also must 
operate the family farm and at least one member of the entity or the 
entity must own the family farm; or,
    (iii) If the entity members holding a majority interest are not 
related by marriage or blood, the entity members holding a majority 
interest must operate the family farm and the entity members holding a 
majority interest or the entity must own the family farm.
    (k) For entity loan applicants. Entity loan applicants must meet the 
following additional eligibility criteria:
    (1) Each entity member's ownership interest may not exceed the 
family farm definition limits;
    (2) The collective ownership interest of all entity members may 
exceed the family farm definition limits only if the following 
conditions are met:
    (i) All of the entity members are related by blood or marriage;
    (ii) All of the members are or will be operators of the entity; and,
    (iii) The majority interest holders of the entity must meet the 
requirements of paragraphs (d), (f), (g), and (i) through (j) of this 
section;
    (3) The entity must be controlled by farmers or ranchers engaged 
primarily and directly in farming or ranching in the United States after 
the loan is made; and
    (4) The entity members are not themselves entities.
    (l) Neither the applicant nor any entity member has been convicted 
of planting, cultivating, growing, producing, harvesting, or storing a 
controlled substance under Federal or state law within the last five 
crop years. ``Controlled substance'' is defined at 21 CFR 1308. 
Applicants must certify on the application that it and its members, if 
an entity, have not been convicted of such a crime within the relevant 
period. If the lender uses the lender's Agency approved forms, the 
certification may be an attachment to the form.

[64 FR 7378, Feb. 12, 1999, as amended at 68 FR 62223, Nov. 3, 2003]



Sec. 762.121  Loan purposes.

    (a) Operating Loan purposes. (1) Loan funds disbursed under an OL 
guarantee may only be used for the following purposes:
    (i) Payment of costs associated with reorganizing a farm or ranch to 
improve its profitability;
    (ii) Purchase of livestock, including poultry, and farm or ranch 
equipment or fixtures, quotas and bases, and cooperative stock for 
credit, production, processing or marketing purposes;
    (iii) Payment of annual farm or ranch operating expenses, examples 
of

[[Page 238]]

which include feed, seed, fertilizer, pesticides, farm or ranch 
supplies, repairs and improvements which are to be expensed, cash rent 
and family subsistence;
    (iv) Payment of scheduled principal and interest payments on term 
debt provided the debt is for authorized FO or OL purposes;
    (v) Other farm and ranch needs;
    (vi) Payment of costs associated with land and water development for 
conservation or use purposes;
    (vii) Refinancing indebtedness incurred for any authorized OL 
purpose, when the lender and loan applicant can demonstrate the need to 
refinance;
    (viii) Payment of loan closing costs;
    (ix) Payment of costs associated with complying with Federal or 
State-approved standards under the Occupational Safety and Health Act of 
1970 (29 U.S.C. 655, 667). This purpose is limited to applicants who 
demonstrate that compliance with the standards will cause them 
substantial economic injury; and
    (x) Payment of training costs required or recommended by the Agency.
    (2) Loan funds under a line of credit may be advanced only for the 
following purposes:
    (i) Payment of annual operating expenses, family subsistence, and 
purchase of feeder animals;
    (ii) Payment of current annual operating debts advanced for the 
current operating cycle; (Under no circumstances can carry-over 
operating debts from a previous operating cycle be refinanced);
    (iii) Purchase of routine capital assets, such as replacement of 
livestock, that will be repaid within the operating cycle;
    (iv) Payment of scheduled, non-delinquent, term debt payments 
provided the debt is for authorized FO or OL purposes.
    (v) Purchase of cooperative stock for credit, production, processing 
or marketing purposes; and
    (vi) Payment of loan closing costs.
    (b) Farm ownership loan purposes. Guaranteed FO are authorized only 
to:
    (1) Acquire or enlarge a farm or ranch; examples include, but are 
not limited to, providing down payments, purchasing easements for the 
loan applicant's portion of land being subdivided, and participating in 
the beginning farmer downpayment FO program under part 1943, subpart A, 
of this title;
    (2) Make capital improvements; examples include, but are not limited 
to, the construction, purchase, and improvement of a farm dwelling, 
service buildings and facilities that can be made fixtures to the real 
estate, (Capital improvements to leased land may be financed subject to 
the limitations in Sec. 762.122);
    (3) Promote soil and water conservation and protection; examples 
include the correction of hazardous environmental conditions, and the 
construction or installation of tiles, terraces and waterways;
    (4) Pay closing costs, including but not limited to, purchasing 
stock in a cooperative and appraisal and survey fees; and
    (5) Refinancing indebtedness incurred for authorized FO and OL 
purposes, provided the lender and loan applicant demonstrate the need to 
refinance the debt.
    (c) Highly erodible land or wetlands conservation. Loans may not be 
made for any purpose which contributes to excessive erosion of highly 
erodible land or to the conversion of wetlands to produce an 
agricultural commodity. A decision by the Agency to reject an 
application for this reason may be appealable. An appeal questioning 
whether the presence of a wetland, converted wetland, or highly erodible 
land on a particular property must be filed directly with the USDA 
agency making the determination in accordance with the agency's appeal 
procedures.
    (d) Judgment debts. Loans may not be used to satisfy judgments 
obtained in the United States District courts. However, Internal Revenue 
Service judgment liens may be paid with loan funds.



Sec. 762.122  Loan limitations.

    (a) OL term limitations. (1) No guaranteed OL shall be made to any 
loan applicant after the 15th year that a loan applicant, or any 
individual signing the promissory note, received a direct or guaranteed 
OL.
    (2) Notwithstanding paragraph (c)(1) of this section, if a borrower 
had any

[[Page 239]]

combination of direct or guaranteed OL closed in 10 or more prior 
calendar years prior to October 28, 1992, eligibility to receive new 
guaranteed OL is extended for 5 additional years from October 28, 1992, 
and the years need not run consecutively. However, in the case of a line 
of credit, each year in which an advance is made after October 28, 1992, 
counts toward the 5 additional years. Once determined eligible, a loan 
or line of credit may be approved for any authorized term.
    (b) Leased land. When FO funds are used for improvements to leased 
land the terms of the lease must provide reasonable assurance that the 
loan applicant will have use of the improvement over its useful life, or 
provide compensation for any unexhausted value of the improvement if the 
lease is terminated.
    (c) Tax-exempt transactions. The Agency will not guarantee any loan 
made with the proceeds of any obligation the interest on which is 
excluded from income under section 103 of the Internal Revenue Code of 
1986. Funds generated through the issuance of tax-exempt obligations may 
not be used to purchase the guaranteed portion of any Agency guaranteed 
loan. An Agency guaranteed loan may not serve as collateral for a tax-
exempt bond issue.
    (d) Floodplain restrictions. The Agency will not guarantee any loan 
to purchase, build, or expand buildings located in a special 100 year 
floodplain as defined by FEMA flood hazard area maps unless flood 
insurance is available and purchased.

[64 FR 7378, Feb. 12, 1999; 64 FR 38298, July 16, 1999, as amended at 66 
FR 7567, Jan. 24, 2001]



Sec. 762.123  Insurance and farm inspection requirements.

    (a) Insurance. (1) Lenders must require borrowers to maintain 
adequate property, public liability, and crop insurance to protect the 
lender and Government's interests.
    (2) By loan closing, loan applicants must either:
    (i) Obtain at least the catastrophic risk protection (CAT) level of 
crop insurance coverage, if available, for each crop of economic 
significance, as defined by part 402 of this title, or
    (ii) Waive eligibility for emergency crop loss assistance in 
connection with the uninsured crop. EM loan assistance under part 1945, 
subpart D, of this title is not considered emergency crop loss 
assistance for purposes of this waiver and execution of the waiver does 
not render the borrower ineligible for EM loans.
    (3) Loan applicants must purchase flood insurance if buildings are 
or will be located in a special flood hazard area as defined by FEMA 
flood hazard area maps and if flood insurance is available.
    (4) Insurance, including crop insurance, must be obtained as 
required by the lender or the Agency based on the strengths and 
weaknesses of the loan.
    (b) Farm inspections. Before submitting an application the lender 
must make an inspection of the farm to assess the suitability of the 
farm and to determine any development that is needed to make it a 
suitable farm.



Sec. 762.124  Interest rates, terms, charges, and fees.

    (a) Interest rates. (1) The interest rate on a guaranteed loan or 
line of credit may be fixed or variable as agreed upon between the 
borrower and the lender. The lender may charge different rates on the 
guaranteed and the non-guaranteed portions of the note. The guaranteed 
portion may be fixed while the unguaranteed portion may be variable, or 
vice versa. If both portions are variable, different bases may be used.
    (2) If a variable rate is used, it must be tied to a rate 
specifically agreed to between the lender and borrower in the loan 
instruments. Variable rates may change according to the normal practices 
of the lender for its average farm customers, but the frequency of 
change must be specified in the loan or line of credit instrument.
    (3) Neither the interest rate on the guaranteed portion nor the 
unguaranteed portion may exceed the rate the lender charges its average 
agricultural loan customer. At the request of the Agency, the lender 
must provide evidence of the rate charged the average agricultural loan 
customer. This evidence may consist of

[[Page 240]]

average yield data, or documented administrative differential rate 
schedule formulas used by the lender.
    (4) Interest must be charged only on the actual amount of funds 
advanced and for the actual time the funds are outstanding. Interest on 
protective advances made by the lender to protect the security will be 
charged at the note rate but limited to paragraph (a)(3) of this 
section.
    (5) The lender and borrower may collectively obtain a temporary 
reduction in the interest rate through the interest assistance program 
in accordance with Sec. 762.150.
    (b) OL terms. (1) Loan funds or advances on a line of credit used to 
pay annual operating expenses will be repaid when the income from the 
year's operation is received, except when the borrower is establishing a 
new enterprise, developing a farm, purchasing feed while feed crops are 
being established, or recovering from disaster or economic reverses.
    (2) The final maturity date for each loan cannot exceed 7 years from 
the date of the promissory note or line of credit agreement. Advances 
for purposes other than for annual operating expenses will be scheduled 
for repayment over the minimum period necessary considering the loan 
applicant's ability to repay and the useful life of the security, but 
not in excess of 7 years.
    (3) All advances on a line of credit must be made within 5 years 
from the date of the Loan Guarantee.
    (c) FO terms. Each loan must be scheduled for repayment over a 
period not to exceed 40 years from the date of the note or such shorter 
period as may be necessary to assure that the loan will be adequately 
secured, taking into account the probable depreciation of the security.
    (d) Balloon installments under loan note guarantee. Balloon payment 
terms are permitted on FO or OL subject to the following:
    (1) Extended repayment schedules may include equal, unequal, or 
balloon installments if needed on any guaranteed loan to establish a new 
enterprise, develop a farm, or recover from a disaster or an economical 
reversal.
    (2) Loans with balloon installments must have adequate collateral at 
the time the balloon installment comes due. Crops, livestock other than 
breeding livestock, or livestock products produced are not sufficient 
collateral for securing such a loan.
    (3) The borrower must be projected to be able to refinance the 
remaining debt at the time the balloon payment comes due based on the 
expected financial condition of the operation, the depreciated value of 
the collateral, and the principal balance on the loan.
    (e) Charges and Fees. (1) The lender may charge the loan applicant 
and borrower fees for the loan provided they are no greater than those 
charged to unguaranteed customers for similar transactions. Similar 
transactions are those involving the same type of loan requested (for 
example, operating loans or farm real estate loans).
    (2) Late payment charges (including default interest charges) are 
not covered by the guarantee. These charges may not be added to the 
principal and interest due under any guaranteed note or line of credit. 
However, late payment charges may be made outside of the guarantee if 
they are routinely made by the lender in similar types of loan 
transactions.
    (3) Lenders may not charge a loan origination and servicing fee 
greater than 1 percent of the loan amount for the life of the loan when 
a guaranteed loan is made in conjunction with a down payment FO for 
beginning farmers under part 1943, subpart A, of this title.



Sec. 762.125  Financial feasibility.

    (a) General. (1) Notwithstanding any other provision of this 
section, PLP lenders will follow their internal procedures on financial 
feasibility as agreed to by the Agency during PLP certification.
    (2) The loan applicant's proposed operation must project a feasible 
plan as defined in Sec. 762.102(b).
    (3) For standard eligible lenders, the projected income and expenses 
of the borrower and operation used to determine a feasible plan must be 
based on the loan applicant's proven record of production and financial 
management.

[[Page 241]]

    (4) For CLP lenders, the projected income and expenses of the 
borrower and the operation must be based on the loan applicant's 
financial history and proven record of financial management.
    (5) For those farmers without a proven history, a combination of any 
actual history and any other reliable source of information that are 
agreeable with the lender, the loan applicant, and the Agency will be 
used.
    (6) The cash flow budget analyzed to determine a feasible plan must 
represent the predicted cash flow of the operating cycle.
    (7) Lenders must use price forecasts that are reasonable and 
defensible. Sources must be documented by the lender and acceptable to 
the Agency.
    (8) When a feasible plan depends on income from other sources in 
addition to income from owned land, the income must be dependable and 
likely to continue.
    (9) The lender will analyze business ventures other than the farm 
operation to determine their soundness and contribution to the 
operation. Guaranteed loan funds will not be used to finance a nonfarm 
enterprise. Nonfarm enterprises include, but are not limited to: raising 
earthworms, exotic birds, tropical fish, dogs, or horses for nonfarm 
purposes; welding shops; boarding horses; and riding stables.
    (10) When the loan applicant has or will have a cash flow budget 
developed in conjunction with a proposed or existing Agency direct loan, 
the two cash flow budgets must be consistent.
    (b) Estimating production. (1) Standard eligible lenders must use 
the best sources of information available for estimating production in 
accordance with this subsection when developing cash flow budgets.
    (2) Deviations from historical performance may be acceptable, if 
specific to changes in operation and adequately justified and acceptable 
to the Agency.
    (3) For existing farmers, actual production for the past 3 years 
will be utilized.
    (4) For those farmers without a proven history, a combination of any 
actual history and any other reliable source of information that are 
agreeable with the lender, the loan applicant, and the Agency will be 
used.
    (5) When the production of a growing commodity can be estimated, it 
must be considered when projecting yields.
    (6) When the loan applicant's production history has been so 
severely affected by a declared disaster that an accurate projection 
cannot be made, the following applies:
    (i) County average yields are used for the disaster year if the loan 
applicant's disaster year yields are less than the county average 
yields. If county average yields are not available, State average yields 
are used. Adjustments can be made, provided there is factual evidence to 
demonstrate that the yield used in the farm plan is the most probable to 
be realized.
    (ii) To calculate a historical yield, the crop year with the lowest 
actual or county average yield may be excluded, provided the loan 
applicant's yields were affected by disasters at least 2 of the previous 
5 consecutive years.
    (c) Refinancing. Loan guarantee requests for refinancing must ensure 
that a reasonable chance for success still exists. The lender must 
demonstrate that problems with the loan applicant's operation that have 
been identified, can be corrected, and the operation returned to a sound 
financial basis.

[64 FR 7378, Feb. 12, 1999, as amended at 66 FR 7567, Jan. 24, 2001]



Sec. 762.126  Security requirements.

    (a) General. (1) The lender is responsible for ensuring that proper 
and adequate security is obtained and maintained to fully secure the 
loan, protect the interest of the lender and the Agency, and assure 
repayment of the loan or line of credit.
    (2) The lender will obtain a lien on additional security when 
necessary to protect the Agency's interest.
    (b) Guaranteed and unguaranteed portions. (1) All security must 
secure the entire loan or line of credit. The lender may not take 
separate security to secure only that portion of the loan or line of 
credit not covered by the guarantee.
    (2) The lender may not require compensating balances or certificates 
of deposit as means of eliminating the lender's exposure on the 
unguaranteed

[[Page 242]]

portion of the loan or line of credit. However, compensating balances or 
certificates of deposit as otherwise used in the ordinary course of 
business are allowed for both the guaranteed and unguaranteed portions.
    (c) Identifiable security. The guaranteed loan must be secured by 
identifiable collateral. To be identifiable, the lender must be able to 
distinguish the collateral item and adequately describe it in the 
security instrument.
    (d) Type of security. (1) Guaranteed loans may be secured by any 
property if the term of the loan and expected life of the property will 
not cause the loan to be undersecured.
    (2) For loans with terms greater than 7 years, a lien must be taken 
on real estate.
    (3) Loans can be secured by a mortgage on leasehold properties if 
the lease has a negotiable value and is subject to being mortgaged.
    (4) The lender or Agency may require additional personal and 
corporate guarantees to adequately secure the loan. These guarantees are 
separate from, and in addition to, the personal obligations arising from 
members of an entity signing the note as individuals.
    (e) Lien position. All guaranteed loans will be secured by the best 
lien obtainable. Provided that:
    (1) When the loan is made for refinancing purposes, the guaranteed 
loan must hold a security position no lower than on the refinanced loan.
    (2) Any chattel-secured guaranteed loan must have a higher lien 
priority (including purchase money interest) than an unguaranteed loan 
secured by the same chattels and held by the same lender.
    (3) Junior lien positions are acceptable only if the equity position 
is strong. Junior liens on crops, or livestock products will not be 
relied upon for security unless the lender is involved in multiple 
guaranteed loans to the same borrower and also has the first lien on the 
collateral.
    (4) When taking a junior lien, prior lien instruments will not 
contain future advance clauses (except for taxes, insurance, or other 
reasonable costs to protect security), or cancellation, summary 
forfeiture, or other clauses that jeopardize the Government's or the 
lender's interest or the borrower's ability to pay the guaranteed loan, 
unless any such undesirable provisions are limited, modified, waived or 
subordinated by the lienholder for the benefit of the Agency and the 
lender.
    (f) Additional security, or any loan of $10,000 or less may be 
secured by the best lien obtainable on real estate without title 
clearance or legal services normally required, provided the lender 
believes from a search of the county records that the loan applicant can 
give a mortgage on the farm and provided that the lender would, in the 
normal course of business, waive the title search. This exception to 
title clearance will not apply when land is to be purchased.
    (g) Multiple owners. If security has multiple owners, all owners 
must execute the security documents for the loan.
    (h) Exceptions. The Deputy Administrator for Farm Loan Programs has 
the authority to grant an exception to any of the requirements involving 
security, if the proposed change is in the best interest of the 
Government and the collection of the loan will not be impaired.



Sec. 762.127  Appraisal requirements.

    (a) General. The Agency may require a lender to obtain an appraisal 
based on the type of security, loan size, and whether it is primary or 
additional security. Except for authorized liquidation expenses, the 
lender is responsible for all appraisal costs, which may be passed on to 
the borrower, or a transferee in the case of a transfer and assumption.
    (b) Exception. Notwithstanding other provisions of this section, an 
appraisal is not required for any additional security, or for loans of 
$50,000 or less if a strong equity position exists.
    (c) Chattel appraisals. A current appraisal (not more than 12 months 
old) of primary chattel security is generally required on all loans. An 
appraisal for loans or lines of credit for annual production purposes 
that are secured by crops is only required when a guarantee is requested 
late in the current production year and actual yields can be reasonably 
estimated. The appraised value of chattel property will be based

[[Page 243]]

on public sales of the same, or similar, property in the market area. In 
the absence of such public sales, reputable publications reflecting 
market values may be used. Appraisal reports may be on the Agency's 
appraisal of chattel property form or on any other appraisal form 
containing at least the same information. Chattel appraisals will be 
performed by appraisers who possess sufficient experience or training to 
establish market (not retail) values as determined by the Agency.
    (d) Real estate appraisals. A current real estate appraisal is 
required when real estate will be primary security. Agency officials may 
accept an appraisal that is not current if there have been no 
significant changes in the market or on the subject real estate and the 
appraisal was either completed within the past 12 months or updated by a 
qualified appraisal if not completed within the past 12 months.
    (1) Appraiser qualifications. On loan transactions of $250,000 or 
less, the lender must demonstrate to the Agency's satisfaction that the 
appraiser possesses sufficient experience or training to estimate the 
market value of agricultural property. On loan transactions greater than 
$250,000, which includes principal plus accrued interest through the 
closing date, the appraisal must be completed by a State certified 
general appraiser.
    (2) Appraisals. Real estate appraisals must be completed in 
accordance with the Uniform Standards of Professional Appraisal 
Practice. Appraisals may be either a complete or limited appraisal 
provided in a self-contained or summary format. Restricted reports, as 
defined in the Uniform Standards of Professional Appraisal Practice, are 
not acceptable.

[64 FR 7378, Feb. 12, 1999, as amended at 64 FR 62568, Nov. 17, 1999; 65 
FR 14433, Mar. 17, 2000]



Sec. 762.128  Environmental and special laws.

    (a) Environmental requirements. The requirements found in part 1940, 
subpart G, of this title must be met for guaranteed OL and FO. CLP and 
PLP lenders may certify that they have documentation in their file to 
demonstrate compliance with paragraph (c) of this section. Standard 
eligible lenders must submit evidence supporting compliance with this 
section.
    (b) Determination. The Agency determination of whether an 
environmental problem exists will be based on:
    (1) The information supplied with the application;
    (2) The Agency Official's personal knowledge of the operation;
    (3) Environmental resources available to the Agency including, but 
not limited to, documents, third parties, and governmental agencies;
    (4) A visit to the farm operation when the available information is 
insufficient to make a determination;
    (5) Other information supplied by the lender or loan applicant upon 
Agency request. If necessary, information not supplied with the 
application will be requested by the Agency.
    (c) Special requirements. Lenders will assist in the environmental 
review process by providing environmental information. In all cases, the 
lender must retain documentation of their investigation in the loan 
applicant's case file.
    (1) A determination must be made as to whether there are any 
potential impacts to a 100 year floodplain as defined by Federal 
Emergency Management Agency floodplain maps, Natural Resources 
Conservation Service data, or other appropriate documentation.
    (2) The lender will assist the borrower in securing any applicable 
permits or waste management plans. The lender may consult with the 
Agency for guidance on activities which require consultation with State 
regulatory agencies, special permitting or waste management plans.
    (3) The lender will examine the security property to determine if 
there are any structures or archeological sites which are listed or may 
be eligible for listing in the National Register of Historic Places. The 
lender may consult with the Agency for guidance on which situations will 
need further review in accordance with the National Historical 
Preservation Act and part 1940, subpart G, and part 1901, subpart F, of 
this title.
    (4) The loan applicant must certify they will not violate the 
provisions of Sec. 363 of the CONACT, the Food Security

[[Page 244]]

Act of 1985, and Executive Order 11990 relating to Highly Erodible Land 
and Wetlands.
    (5) All lenders are required to ensure that due diligence is 
performed in conjunction with a request for guarantee of a loan 
involving real estate. Due diligence is the process of evaluating real 
estate in the context of a real estate transaction to determine the 
presence of contamination from release of hazardous substances, 
petroleum products, or other environmental hazards and determining what 
effect, if any, the contamination has on the security value of the 
property. The Agency will accept as evidence of due diligence the most 
current version of the American Society of Testing Materials (ASTM) 
transaction screen questionnaire available from 100 Barr Harbor Drive, 
West Conshohocken, Pennsylvania 19428-2959, or similar documentation, 
approved for use by the Agency, supplemented as necessary by the ASTM 
phase I environmental site assessments form.
    (d) Equal opportunity and nondiscrimination. (1) With respect to any 
aspect of a credit transaction, the lender will not discriminate against 
any applicant on the basis of race, color, religion, national origin, 
sex, marital status, or age, provided the applicant can execute a legal 
contract. Nor will the lender discriminate on the basis of whether all 
or a part of the applicant's income derives from any public assistance 
program, or whether the applicant in good faith, exercises any rights 
under the Consumer Protection Act.
    (2) Where the guaranteed loan involves construction, the contractor 
or subcontractor must file all compliance reports, equal opportunity and 
nondiscrimination forms, and otherwise comply with all regulations 
prescribed by the Secretary of Labor pursuant to Executive Orders 11246 
and 11375.
    (e) Other Federal, State and local requirements. Lenders are 
required to coordinate with all appropriate Federal, State, and local 
agencies and comply with special laws and regulations applicable to the 
loan proposal.



Sec. 762.129  Percent of guarantee and maximum loss.

    (a) General. The percent of guarantee will not exceed 90 percent 
based on the credit risk to the lender and the Agency both before and 
after the transaction. The Agency will determine the percentage of 
guarantee.
    (b) Exceptions. The guarantee will be issued at 95 percent in any of 
the following circumstances:
    (1) The sole purpose of a guaranteed FO or OL is to refinance an 
Agency direct farm loan. When only a portion of the loan is used to 
refinance a direct Agency farm credit program loan, a weighted 
percentage of a guarantee will be provided;
    (2) When the purpose of an FO guarantee is to participate in the 
downpayment loan program;
    (3) When a guaranteed OL is made to a farmer or rancher who is 
participating in the Agency's down payment loan program. The guaranteed 
OL must be made during the period that a borrower has the down payment 
loan outstanding; or
    (4) When a guaranteed OL is made to a farmer or rancher whose farm 
or ranch land is subject to the jurisdiction of an Indian tribe and 
whose loan is secured by one or more security instruments that are 
subject to the jurisdiction of an Indian tribe.
    (c) CLP and PLP guarantees. All guarantees issued to CLP or PLP 
lenders will not be less than 80 percent.
    (d) Maximum loss. The maximum amount the Agency will pay the lender 
under the loan guarantee will be any loss sustained by such lender on 
the guaranteed portion including:
    (1) The pro rata share of principal and interest indebtedness as 
evidenced by the note or by assumption agreement;
    (2) Any loan subsidy due and owing;
    (3) The pro rata share of principal and interest indebtedness on 
secured protective and emergency advances made in accordance with this 
subpart; and
    (4) Principal and interest indebtedness on recapture debt pursuant 
to a shared appreciation agreement. Provided that the lender has paid 
the

[[Page 245]]

Agency its pro rata share of the recapture amount due.

[64 FR 7378, Feb. 12, 1999, as amended at 68 FR 7695, Feb. 18, 2003]



Sec. 762.130  Loan approval and issuing the guarantee.

    (a) Processing timeframes. (1) Standard Eligible Lenders. Complete 
applications from Standard Eligible Lenders will be approved or 
rejected, and the lender notified in writing, no later than 30 calendar 
days after receipt.
    (2) CLP and PLP lenders.
    (i) Complete applications from CLP or PLP lenders will be approved 
or rejected not later than 14 calendar days after receipt.
    (ii) For PLP lenders, if this time frame is not met, the proposed 
guaranteed loan will automatically be approved, subject to funding, and 
receive an 80 or 95 percent guarantee, as appropriate.
    (3) Complete applications. For purposes of determining the 
application processing timeframes, an application will be not be 
considered complete until all information required to make an approval 
decision, including the information for an environmental review, is 
received by the Agency.
    (4) The Agency will confirm the date an application is received with 
a written notification to the lender.
    (b) Funding preference. Loans are approved subject to the 
availability of funding. When it appears that there are not adequate 
funds to meet the needs of all approved loan applicants, applications 
that have been approved will be placed on a preference list according to 
the date of receipt of a complete application. If approved applications 
have been received on the same day, the following will be given 
priority:
    (1) An application from a veteran
    (2) An application from an Agency direct loan borrower
    (3) An application from a loan applicant who:
    (i) Has a dependent family,
    (ii) Is an owner of livestock and farm implements necessary to 
successfully carry out farming operations, or
    (iii) Is able to make down payments.
    (4) Any other approved application.
    (c) Conditional commitment. (1) The lender must meet all of the 
conditions specified in the conditional commitment to secure final 
Agency approval of the guarantee.
    (2) The lender, after reviewing the conditions listed on the 
conditional commitment, will complete, execute, and return the form to 
the Agency. If the conditions are not acceptable to the lender, the 
Agency may agree to alternatives or inform the lender and the loan 
applicant of their appeal rights.
    (d) Lender requirements prior to issuing the guarantee. (1) Lender 
certification. The lender will certify as to the following on the 
appropriate Agency form:
    (i) No major changes have been made in the lender's loan or line of 
credit conditions and requirements since submission of the application 
(except those approved in the interim by the Agency in writing);
    (ii) Required hazard, flood, crop, worker's compensation, and 
personal life insurance (when required) are in effect;
    (iii) Truth in lending requirements have been met;
    (iv) All equal employment and equal credit opportunity and 
nondiscrimination requirements have been or will be met at the 
appropriate time;
    (v) The loan or line of credit has been properly closed, and the 
required security instruments have been obtained, or will be obtained, 
on any acquired property that cannot be covered initially under State 
law;
    (vi) The borrower has marketable title to the collateral owned by 
the borrower, subject to the instrument securing the loan or line of 
credit to be guaranteed and subject to any other exceptions approved in 
writing by the Agency. When required, an assignment on all USDA crop and 
livestock program payments has been obtained;
    (vii) When required, personal, joint operation, partnership, or 
corporate guarantees have been obtained;
    (viii) Liens have been perfected and priorities are consistent with 
requirements of the conditional commitment;
    (ix) Loan proceeds have been, or will be disbursed for purposes and 
in amounts consistent with the conditional commitment and as specified 
on the loan application. In line of credit cases, if any advances have 
occurred,

[[Page 246]]

advances have been disbursed for purposes and in amounts consistent with 
the conditional commitment and line of credit agreements;
    (x) There has been no material adverse change in the borrower's 
condition, financial or otherwise, since submission of the application; 
and
    (xi) All other requirements specified in the conditional commitment 
have been met.
    (2) Inspections. The lender must notify the Agency of any scheduled 
inspections during construction and after the guarantee has been issued. 
The Agency may attend these field inspections. Any inspections or review 
performed by the Agency, including those with the lender, are solely for 
the benefit of the Agency. Agency inspections do not relieve any other 
parties of their inspection responsibilities, nor can these parties rely 
on Agency inspections for any purpose.
    (3) Execution of lender's agreement. The lender must execute the 
Agency's lender's agreement and deliver it to the Agency.
    (4) Closing report and guarantee fees.
    (i) The lender must complete an Agency closing report form and 
return it to the Agency along with any guarantee fees.
    (ii) Guarantee fees are 1 percent and are calculated as follows: 
Fee=Loan Amountx% Guaranteedx.01. The nonrefundable fee is paid to the 
Agency by the lender. The fee may be passed on to the borrower and 
included in loan funds.
    (iii) The following guaranteed loan transactions are not charged a 
fee:
    (A) Loans involving interest assistance;
    (B) Loans where a majority of the funds are used to refinance an 
Agency direct loan; and
    (C) Loans to beginning farmers or ranchers involved in the direct 
beginning farmer downpayment program.
    (e) Promissory notes, line of credit agreements, mortgages, and 
security agreements. The lender will use its own promissory notes, line 
of credit agreements, real estate mortgages (including deeds of trust 
and similar instruments), and security agreements (including chattel 
mortgages in Louisiana and Puerto Rico), provided:
    (1) The forms meet Agency requirements;
    (2) Documents comply with State law and regulation;
    (3) The principal and interest repayment schedules are stated 
clearly in the notes and are consistent with the conditional commitment;
    (4) The note is executed by the individual liable for the loan. For 
entities, the note is executed by the member who is authorized to sign 
for the entity, and by all members of the entity as individuals. 
Individual liability can be waived by the Agency for members holding 
less than 10 percent ownership in the entity if the collectability of 
the loan will not be impaired; and
    (5) When the loan purpose is to refinance or restructure the 
lender's own debt, the lender may continue to use the existing debt 
instrument and attach an allonge that modifies the terms of the original 
note.
    (f) Replacement of loan guarantee, or assignment guarantee 
agreement. If the guarantee or assignment guarantee agreements are lost, 
stolen, destroyed, mutilated, or defaced, except where the evidence of 
debt was or is a bearer instrument, the Agency will issue a replacement 
to the lender or holder upon receipt of acceptable documentation 
including a certificate of loss and an indemnity bond.



Sec. Sec. 762.131-762.139  [Reserved]



Sec. 762.140  General servicing responsibilities.

    (a) General. (1) Lenders are responsible for servicing the entire 
loan in a reasonable and prudent manner, protecting and accounting for 
the collateral, and remaining the mortgagee or secured party of record.
    (2) The lender cannot enforce the guarantee to the extent that a 
loss results from a violation of usury laws or negligent servicing.
    (b) Borrower supervision. The lender's responsibilities regarding 
borrower supervision include, but are not limited to the following:
    (1) Ensuring loan funds are not used for unauthorized purposes.
    (2) Ensuring borrower compliance with the covenants and provisions 
contained in the promissory note, loan

[[Page 247]]

agreement, mortgage, security instruments, any other agreements, and 
this part. Any violations which indicate non-compliance on the part of 
the borrower must be reported, in writing, to both the Agency and the 
borrower.
    (3) Ensuring the borrower is in compliance with all laws and 
regulations applicable to the loan, the collateral, and the operations 
of the farm.
    (4) Receiving all payments of principal and interest on the loan as 
they fall due and promptly disbursing to any holder its pro-rata share 
according to the amount of interest the holder has in the loan, less 
only the lender's servicing fee.
    (5) Performing an annual analysis of the borrower's financial 
condition to determine the borrower's progress. The annual analysis will 
include:
    (i) For loans secured by real estate only, the analysis for standard 
eligible lenders must include an analysis of the borrower's balance 
sheet. CLP lenders will determine the need for the annual analysis based 
on the financial strength of the borrower and document the file 
accordingly. PLP lenders will perform an annual analysis in accordance 
with the requirements established in the lender's agreement.
    (ii) For loans secured by chattels, all lenders will review the 
borrower's progress regarding business goals, trends and changes in 
financial performance, and compare actual to planned income and expenses 
for the past year.
    (iii) An account of the whereabouts or disposition of all 
collateral.
    (iv) A discussion of any observations about the farm business with 
the borrower.
    (c) Monitoring of development. The lender's responsibilities 
regarding the construction, repairs, or other development include, but 
are not limited to:
    (1) Determining that all construction is completed as proposed in 
the loan application;
    (2) Making periodic inspections during construction to ensure that 
any development is properly completed within a reasonable period of 
time; and
    (3) Verification that the security is free of any mechanic's, 
materialmen's, or other liens which would affect the lender's lien or 
result in a different lien priority from that proposed in the request 
for guarantee.
    (d) The guaranteed loan installments will be paid before 
unguaranteed loans held by the same lender.



Sec. 762.141  Reporting requirements.

    Lenders are responsible for providing the local Agency credit 
officer with all of the following information on the loan and the 
borrower:
    (a) When the guaranteed loan becomes 30 days past due, and following 
the lender's meeting or attempts to meet with the borrower, all lenders 
will submit the appropriate Agency form showing guaranteed loan borrower 
default status. The form will be resubmitted every 60 days until the 
default is cured either through restructuring or liquidation.
    (b) All lenders will submit the appropriate guaranteed loan status 
reports as of March 31 and September 30 of each year;
    (c) CLP lenders also must provide the following:
    (1) A written summary of the lender's annual analysis of the 
borrower's operation. This summary should describe the borrower's 
progress and prospects for the upcoming operating cycle. This annual 
analysis may be waived or postponed if the borrower is financially 
strong. The summary will include a description of the reasons an 
analysis was not necessary.
    (2) For lines of credit, an annual certification stating that a cash 
flow projecting at least a feasible plan has been developed, that the 
borrower is in compliance with the provisions of the line of credit 
agreement, and that the previous year income and loan funds and security 
proceeds have been accounted for.
    (d) In addition to the requirements of paragraphs (a), (b), and (c) 
of this section, the standard eligible lender also will provide:
    (1) Borrower's balance sheet, and income and expense statement for 
the previous year.
    (2) For lines of credit, the cash flow for the borrower's operation 
that projects a feasible plan or better for the upcoming operating 
cycle. The standard eligible lender must receive

[[Page 248]]

approval from the Agency before advancing future years' funds.
    (3) An annual farm visit report or collateral inspection.
    (e) PLP lenders will submit additional reports as required in their 
lender's agreement.
    (f) A lender receiving a final loss payment must complete and return 
an annual report on its collection activities for each unsatisfied 
account for 3 years following payment of the final loss claim.



Sec. 762.142  Servicing related to collateral.

    (a) General. The lender's responsibilities regarding servicing 
collateral include, but are not limited to, the following:
    (1) Obtain income and insurance assignments when required.
    (2) Ensure the borrower has or obtains marketable title to the 
collateral.
    (3) Inspect the collateral as often as deemed necessary to properly 
service the loan.
    (4) Ensure the borrower does not convert loan security.
    (5) Ensure the proceeds from the sale or other disposition of 
collateral are accounted for and applied in accordance with the lien 
priorities on which the guarantee is based or used for the purchase of 
replacement collateral.
    (6) Ensure the loan and the collateral are protected in the event of 
foreclosure, bankruptcy, receivership, insolvency, condemnation, or 
other litigation.
    (7) Ensure taxes, assessments, or ground rents against or affecting 
the collateral are paid.
    (8) Ensure adequate insurance is maintained.
    (9) Ensure that insurance loss payments, condemnation awards, or 
similar proceeds are applied on debts in accordance with lien priorities 
on which the guarantee was based, or used to rebuild or acquire needed 
replacement collateral.
    (b) Partial releases. (1) A lender may release guaranteed loan 
security without FSA concurrence as follows:
    (i) When the security item is being sold for market value and the 
proceeds will be applied to the loan in accordance with lien priorities. 
In the case of term loans, proceeds will be applied as extra payments 
and not as a regular installment on the loan.
    (ii) The security item will be used as a trade-in or source of down 
payment funds for a like item that will be taken as security.
    (iii) The security item has no present or prospective value.
    (2) A partial release of security may be approved in writing by the 
Agency upon the lender's request when:
    (i) Proceeds will be used to make improvements to real estate that 
increase the value of the security by an amount equal to or greater than 
the value of the security being released.
    (ii) Security will be released outright with no consideration, but 
the total unpaid balance of the guaranteed loan is less than or equal to 
75 percent of the value of the security for the loan after the release, 
excluding the value of growing crops or planned production, based on a 
current appraisal of the security.
    (iii) Significant income generating property will not be released 
unless it is being replaced and business assets will not be released for 
use as a gift or any similar purpose.
    (iv) Agency concurrence is provided in writing to the lender's 
written request. Standard eligible lenders and CLP lenders will submit 
the following to the Agency:
    (A) A current balance sheet on the borrower; and
    (B) A current appraisal of the security. Based on the level of risk 
and estimated equity involved, the Agency will determine what security 
needs to be appraised. Any required security appraisals must meet the 
requirements of Sec. 762.127; and
    (C) A description of the purpose of the release; and
    (D) Any other information requested by the Agency to evaluate the 
proposed servicing action.
    (3) The lender will provide the Agency copies of any agreements 
executed to carry out the servicing action.
    (4) PLP lenders will request servicing approval in accordance with 
their agreement with the Agency at the time of PLP status certification.

[[Page 249]]

    (c) Subordinations. (1) The Agency may subordinate its security 
interest on a direct loan when a guaranteed loan is being made if the 
requirements of the regulations governing Agency direct loan 
subordinations are met and only in the following circumstances:
    (i) To permit a guaranteed lender to advance funds and perfect a 
security interest in crops, feeder livestock, livestock offspring, or 
livestock products;
    (ii) When the lender requesting the guarantee needs the 
subordination of the Agency's lien position to maintain its lien 
position when servicing or restructuring;
    (iii) When the lender requesting the guarantee is refinancing the 
debt of another lender and the Agency's position on real estate security 
will not be adversely affected; or
    (iv) To permit a line of credit to be advanced for annual operating 
expenses.
    (2) The Agency may subordinate its basic security in a direct loan 
to permit guaranteed line of credit only when both of the following 
additional conditions are met:
    (i) The total unpaid balance of the direct loans is less than or 
equal to 75 percent of the value of all of the security for the direct 
loans, excluding the value of growing crops or planned production, at 
the time of the subordination. The direct loan security value will be 
determined by an appraisal. The lender requesting the subordination and 
guarantee is responsible for providing the appraisal and may charge the 
applicant a reasonable appraisal fee.
    (ii) The applicant cannot obtain sufficient credit through a 
conventional guaranteed loan without a subordination.
    (3) The lender may not subordinate its interest in property which 
secures a guaranteed loan except as follows:
    (i) The lender may subordinate its security interest in crops, 
feeder livestock, livestock offspring, or livestock products when no 
funds have been advanced from the guaranteed loan for their production, 
so a lender can make a loan for annual production expenses; or
    (ii) The Agency's national office may provide an exception to the 
subordination prohibition if such action is in the Agency's best 
interest. However, in no case can the loan made under the subordination 
include tax exempt financing.
    (d) Transfer and assumption. Transfers and assumptions are subject 
to the following conditions:
    (1) For standard eligible and CLP lenders, the servicing action must 
be approved by the Agency in writing.
    (2) For standard eligible and CLP lenders, the transferee must apply 
for a loan in accordance with Sec. 762.110, including a current 
appraisal, unless the lien position of the guaranteed loan will not 
change, and any other information requested by the Agency to evaluate 
the transfer and assumption.
    (3) PLP lenders may process transfers and assumptions in accordance 
with their agreement with the Agency.
    (4) Any required security appraisals must meet the requirements of 
Sec. 762.127.
    (5) The Agency will review, approve or reject the request in 
accordance with the time frames in Sec. 762.130.
    (6) The transferee must meet the eligibility requirements and loan 
limitations for the loan being transferred, all requirements relating to 
loan rates and terms, loan security, feasibility, and environmental and 
other laws applicable to a loan applicant under this part.
    (7) The lender will use its own assumption agreements or conveyance 
instruments, providing they are legally sufficient to obligate the 
transferee for the total outstanding debt. The lender will provide the 
Agency copies of any agreements executed to carry out the servicing 
action.
    (8) The Agency approves the transfer and assumption by executing a 
modification of the guarantee to designate the party that assumed the 
guaranteed debt, the amount of debt at the time of the assumption, 
including interest that is being capitalized, and any new loan terms, if 
applicable.
    (9) The lender must give any holder notice of the transfer. If the 
rate and terms are changed, written concurrence from the holder is 
required.
    (10) The Agency will agree to releasing the transferor or any 
guarantor

[[Page 250]]

from liability only if the requirements of Sec. 762.146(c) are met.

[64 FR 7378, Feb. 12, 1999, as amended at 66 FR 7567, Jan. 24, 2001]



Sec. 762.143  Servicing distressed accounts.

    (a) A borrower is in default when 30 days past due on a payment or 
in violation of provisions of the loan documents.
    (b) In the event of a borrower default, SEL and CLP lenders will:
    (1) Report to the Agency in accordance with Sec. 762.141.
    (2) Determine whether it will repurchase the guaranteed portion from 
the holder in accordance with Sec. 762.144, if the guaranteed portion 
of the loan was sold on the secondary market.
    (3) Arrange a meeting with the borrower within 15 days of default 
(45 days after payment due date for monetary defaults) to identify the 
nature of the delinquency and develop a course of action that will 
eliminate the delinquency and correct the underlying problems. Non-
monetary defaults will be handled in accordance with the lender's note, 
loan agreements and any other applicable loan documents.
    (i) The lender and borrower will prepare a current balance sheet and 
cash flow projection in preparation for the meeting. If the borrower 
refuses to cooperate, the lender will compile the best financial 
information available.
    (ii) The lender or the borrower may request the attendance of an 
Agency credit officer. If requested, the Agency credit officer will 
assist in developing solutions to the borrower's financial problems.
    (iii) The lender will summarize the meeting and proposed solutions 
on the Agency form for guaranteed loan borrower default status completed 
after the meeting. The lender will indicate the results on this form for 
the lender's consideration of the borrower for interest assistance in 
conjunction with rescheduling under Sec. 762.145(b).
    (iv) The lender must decide whether to restructure or liquidate the 
account within 90 days of default, unless the lender can document 
circumstances that justify an extension by the Agency.
    (v) The lender may not initiate foreclosure action on the loan until 
60 days after eligibility of the borrower to participate in the interest 
assistance programs has been determined by the Agency. If the lender or 
the borrower does not wish to consider servicing options under this 
section, this should be documented, and liquidation under Sec. 762.149 
should begin.
    (vi) If a borrower is current on a loan, but will be unable to make 
a payment, a restructuring proposal may be submitted in accordance with 
Sec. 762.145 prior to the payment coming due.
    (c) PLP lenders will service defaulted loans according to their 
lender's agreement.



Sec. 762.144  Repurchase of guaranteed portion from a secondary market holder.

    (a) Request for repurchase. The holder may request the lender to 
repurchase the unpaid guaranteed portion of the loan when:
    (1) The borrower has not made a payment of principal and interest 
due on the loan for at least 60 days; or
    (2) The lender has failed to remit to the holder its pro-rata share 
of any payment made by the borrower within 30 days of receipt of a 
payment.
    (b) Repurchase by the lender. (1) When a lender is requested to 
repurchase a loan from the holder, the lender must consider the request 
according to the servicing actions that are necessary on the loan. In 
order to facilitate servicing and simplified accounting of loan 
transactions, lenders are encouraged to repurchase the loan upon the 
holder's request.
    (2) The repurchase by the lender will be for an amount equal to the 
portion of the loan held by the holder plus accrued interest.
    (3) The guarantee will not cover separate servicing fees that the 
lender accrues after the repurchase.
    (c) Repurchase by the Agency. (1) If the lender does not repurchase 
the loan, the holder must inform the Agency in writing that demand was 
made on the lender and the lender refused. Following the lender's 
refusal, the holder may continue as holder of the guaranteed portion of 
the loan or request that the Agency purchase the guaranteed

[[Page 251]]

portion. Within 30 days after written demand to the Agency from the 
holder with required attachments, the Agency will forward to the holder 
payment of the unpaid principal balance, with accrued interest to the 
date of repurchase. If the holder does not desire repurchase or purchase 
of a defaulted loan, the lender must forward the holder its pro-rata 
share of payments, liquidation proceeds and Agency loss payments.
    (2) With its demand on the Agency, the holder must include:
    (i) A copy of the written demand made upon the lender.
    (ii) Originals of the guarantee and note properly endorsed to the 
Agency, or the original of the assignment of guarantee.
    (iii) A copy of any written response to the demand of the holder by 
the lender.
    (iv) An account to which the Agency can forward the purchase amount 
via electronic funds transfer.
    (3) The amount due the holder from the Agency includes unpaid 
principal, unpaid interest to the date of demand, and interest which has 
accrued from the date of demand to the proposed payment date.
    (i) Upon request by the Agency, the lender must furnish upon Agency 
request a current statement, certified by a bank officer, of the unpaid 
principal and interest owed by the borrower and the amount due the 
holder.
    (ii) Any discrepancy between the amount claimed by the holder and 
the information submitted by the lender must be resolved by the lender 
and the holder before payment will be approved by the Agency. The Agency 
will not participate in resolution of any such discrepancy. When there 
is a discrepancy, the 30 day Agency payment requirement to the holder 
will be suspended until the discrepancy is resolved.
    (iii) In the case of a request for Agency purchase, the government 
will only pay interest that accrues for up to 90 days from the date of 
the demand letter to the lender requesting the repurchase. However, if 
the lender requested repurchase from the Agency within 60 days of the 
request to the holder and for any reason not attributable to the holder 
and the lender, the Agency cannot make payment within 30 days of the 
holder's demand to the Agency, the holder will be entitled to interest 
to the date of the payment.
    (4) At the time of purchase by the Agency, the original assignment 
of guarantee will be assigned by the holder to the Agency without 
recourse, including all rights, title, and interest in the loan.
    (5) Purchase by the Agency does not change, alter, or modify any of 
the lender's obligations to the Agency specified in the lender's 
agreement or guarantee; nor does the purchase waive any of the Agency's 
rights against the lender.
    (6) The Agency succeeds to all rights of the holder under the 
Guarantee including the right of set-off against the lender.
    (7) Within 180 days of the Agency's purchase, the lender will 
reimburse the Agency the amount of repurchase, with accrued interest, 
through one of the following ways:
    (i) By liquidating the loan security and paying the Agency its pro-
rata share of liquidation proceeds; or
    (ii) Paying the Agency the full amount the Agency paid to the holder 
plus any accrued interest.
    (8) The lender will be liable for the purchase amount and any 
expenses incurred by the Agency to maintain the loan in its portfolio or 
liquidate the security. While the Agency holds the guaranteed portion of 
the loan, the lender will transmit to the Agency any payment received 
from the borrower, including the pro-rata share of liquidation or other 
proceeds.
    (9) If the borrower files for reorganization under the provisions of 
the bankruptcy code or pays the account current while the purchase by 
the Government is being processed, the Agency may hold the loan as long 
it determines this action to be in the Agency's interest. If the lender 
is not proceeding expeditiously to collect the loan or reimbursement is 
not waived under this paragraph, the Agency will demand payment by the 
lender and collect the purchase amount through administrative offset of 
any claims due the lender.
    (10) The Agency may sell a purchased guaranteed loan on a non-
recourse

[[Page 252]]

basis if it determines that selling the portion of the loan that it 
holds is in the Government's best interest. A non-recourse purchase from 
the Agency requires a written request to the Agency from the party that 
wishes to purchase it, and written concurrence from the lender;
    (d) Repurchase for servicing. (1) If, due to loan default or 
imminent loan restructuring, the lender determines that repurchase is 
necessary to adequately service the loan, the lender may repurchase the 
guaranteed portion of the loan from the holder, with the written 
approval of the Agency.
    (2) The lender will not repurchase from the holder for arbitrage 
purposes. With its request for Agency concurrence, the lender will 
notify the Agency of its plans to resell the guaranteed portion 
following servicing.
    (3) The holder will sell the guaranteed portion of the loan to the 
lender for an amount agreed to between the lender and holder.



Sec. 762.145  Restructuring guaranteed loans.

    (a) General. (1) To restructure guaranteed loans standard eligible 
lenders must:
    (i) Obtain prior written approval of the Agency for all 
restructuring actions; and,
    (ii) Provide the items in paragraph (b) and (e) of this section to 
the Agency for approval.
    (2) If the standard eligible lender's proposal for servicing is not 
agreed to by the Agency, the Agency approval official will notify the 
lender in writing within 14 days of the lender's request.
    (3) To restructure guaranteed loans CLP lenders must:
    (i) Obtain prior written approval of the Agency only for debt write 
down under this section.
    (ii) Submit all calculations required in paragraph (e) of this 
section for debt writedown.
    (iii) For restructuring other than write down, provide FSA with a 
certification that each requirement of this section has been met, a 
narrative outlining the circumstances surrounding the need for 
restructuring, and copies of any applicable calculations.
    (4) PLP lenders will restructure loans in accordance with their 
lender's agreement.
    (5) All lenders will submit copies of any restructured notes or 
lines of credit to the Agency.
    (b) Requirements. For any restructuring action, the following 
conditions apply:
    (1) The borrower meets the eligibility criteria of Sec. 762.120, 
except the provisions regarding prior debt forgiveness and delinquency 
on a federal debt do not apply.
    (2) The borrower's ability to make the amended payment is documented 
by the following:
    (i) A feasible plan (see Sec. 762.102(b)). If interest assistance 
is required to achieve a feasible plan, the items required by Sec. 
762.150(d) must be submitted with a restructuring request. Feasible plan 
is defined in Sec. 762.102(b).
    (ii) Current financial statements from all liable parties.
    (iii) Verification of nonfarm income.
    (iv) Verification of all debts of $1,000 or more.
    (v) Applicable credit reports.
    (vi) Financial history (and production history for standard eligible 
lenders) for the past 3 years to support the cash flow projections.
    (3) A final loss claim may be reduced, adjusted, or rejected as a 
result of negligent servicing after the concurrence with a restructuring 
action under this section.
    (4) Balloon payments are prohibited; however, the loan can be 
restructured with unequal installments, provided that, in addition to a 
feasible plan for the upcoming operating cycle, a feasible plan can be 
reasonably projected after the installments increase. Feasible plan is 
defined in Sec. 762.102(b).
    (5) If a borrower is current on a loan, but will be unable to make a 
payment, a restructuring proposal may be submitted prior to the payment 
coming due.
    (6) The lender may capitalize the outstanding interest when 
restructuring the loan as follows:
    (i) As a result of the capitalization of interest, a rescheduled 
promissory note may increase the amount of principal which the borrower 
is required to pay. However, in no case will such principal

[[Page 253]]

amount exceed the statutory loan limits contained in Sec. 762.122.
    (ii) When accrued interest causes the loan amount to exceed the 
statutory loan limits, rescheduling may be approved without 
capitalization of the amount that exceeds the limit. Noncapitalized 
interest may be scheduled for repayment over the term of the rescheduled 
note.
    (iii) Only interest that has accrued at the rate indicated on the 
borrower's original promissory notes may be capitalized. Late payment 
fees or default interest penalties that have accrued due to the 
borrower's failure to make payments as agreed are not covered under the 
guarantee and may not be capitalized.
    (iv) The Agency will execute a modification of guarantee form to 
identify the new loan principal and the guaranteed portion if greater 
than the original loan amounts, and to waive the restriction on 
capitalization of interest, if applicable, to the existing guarantee 
documents. The modification form will be attached to the original 
guarantee as an addendum.
    (v) Approved capitalized interest will be treated as part of the 
principal and interest that accrues thereon, in the event that a loss 
should occur.
    (7) The lender's security position will not be adversely affected 
because of the restructuring. New security instruments may be taken if 
needed, but a loan does not have to be fully secured in order to be 
restructured.
    (8) Any holder agrees in writing to any changes in the original loan 
terms, including the approval of interest assistance. If the holder does 
not agree, the lender must repurchase the loan from the holder for any 
loan restructuring to occur.
    (9) After a guaranteed loan is restructured, the lender must provide 
the Agency with a copy of the restructured promissory note.
    (c) Rescheduling. The following conditions apply when a guaranteed 
loan is rescheduled or reamortized:
    (1) Payments will be rescheduled within the following terms:
    (i) FO and existing SW may be amortized over the remaining term of 
the note or rescheduled with an uneven payment schedule. The maturity 
date cannot exceed 40 years from the date of the original note.
    (ii) OL notes must be rescheduled over a period not to exceed 15 
years from the date of the rescheduling. An OL line of credit may be 
rescheduled over a period not to exceed 7 years from the date of the 
rescheduling or 10 years from the date of the original note, whichever 
is less. Advances cannot be made against a line of credit loan that has 
had any portion of the loan rescheduled.
    (2) The interest rate for a rescheduled loan is the negotiated rate 
agreed upon by the lender and the borrower at the time of the action, 
subject to the loan limitations for each type of loan.
    (3) A new note is not necessary when rescheduling occurs. However, 
if a new note is not taken, the existing note or line of credit 
agreement must be modified by attaching an allonge or other legally 
effective amendment, evidencing the revised repayment schedule and any 
interest rate change. If a new note is taken, the new note must 
reference the old note and state that the indebtedness evidenced by the 
old note or line of credit agreement is not satisfied. The original note 
or line of credit agreement must be retained.
    (d) Deferrals. The following conditions apply to deferrals:
    (1) Payments may be deferred up to 5 years, but the loan may not be 
extended beyond the final due date of the note.
    (2) The principal portion of the payment may be deferred either in 
whole or in part.
    (3) Interest may be deferred only in part. Payment of a reasonable 
portion of accruing interest as indicated by the borrower's cash flow 
projections is required for multi-year deferrals.
    (4) There must be a reasonable prospect that the borrower will be 
able to resume full payments at the end of the deferral period.
    (e) Debt writedown. The following conditions apply to debt 
writedown:
    (1) A lender may only write down a delinquent guaranteed loan or 
line of credit in an amount sufficient to permit the borrower to develop 
a feasible plan as defined in Sec. 762.102(b).

[[Page 254]]

    (2) The lender will request other creditors to negotiate their debts 
before a writedown is considered.
    (3) The borrower cannot develop a feasible plan after consideration 
is given to rescheduling and deferral under this section.
    (4) The present value of the loan to be written down, based on the 
interest rate of the rescheduled loan, will be equal to or exceed the 
net recovery value of the loan collateral.
    (5) The loan will be restructured with regular payments at terms no 
shorter than 5 years for a line of credit and OL note and no shorter 
than 20 years for FO, unless required to be shorter by Sec. 
762.145(c)(1)(i) and (ii).
    (6) No further advances may be made on a line of credit that is 
written down.
    (7) Loans may not be written down with interest assistance. If a 
borrower's loan presently on interest assistance requires a writedown, 
the writedown will be considered without interest assistance.
    (8) The writedown is based on writing down the shorter-term loans 
first.
    (9) When a lender requests approval of a writedown for a borrower 
with multiple loans, the security for all of the loans will be cross-
collateralized and continue to serve as security for the loan that is 
written down. If a borrower has multiple loans and one loan is written 
off entirely through debt writedown, the security for that loan will not 
be released and will remain as security for the other written down debt. 
Additional security instruments will be taken if required to cross-
collateralize security and maintain lien priority.
    (10) The writedown will be evidenced by an allonge or amendment to 
the existing note or line of credit reflecting the writedown.
    (11) The borrower executes an Agency shared appreciation agreement 
for loans which are written down and secured by real estate.
    (i) The lender will attach the original agreement to the 
restructured loan document.
    (ii) The lender will provide the Agency a copy of the executed 
agreement, and
    (iii) Security instruments must ensure future collection of any 
appreciation under the agreement.
    (12) The lender will prepare and submit the following to the Agency:
    (i) A current appraisal of all security in accordance with Sec. 
762.127.
    (ii) A completed report of loss on the appropriate Agency form for 
the proposed writedown loss claim.
    (iii) Detailed writedown calculations as follows:
    (A) Calculate the present value.
    (B) Determine the net recovery value.
    (C) If the net recovery value exceeds the present value, writedown 
is unavailable; liquidation becomes the next servicing consideration. If 
the present value equals or exceeds the net recovery value, the debt may 
be written down to the present value.
    (iv) The lender will make any adjustment in the calculations as 
requested by the Agency.

[64 FR 7378, Feb. 12, 1999; 64 FR 38298, July 16, 1999, as amended at 66 
FR 7567, Jan. 24, 2001]



Sec. 762.146  Other servicing procedures.

    (a) Additional loans and advances. (1) Notwithstanding any provision 
of this section, the PLP lender may make additional loans or advances in 
accordance with the lender's agreement with the Agency.
    (2) SEL and CLP lenders must not make additional loans or advances 
without prior written approval of the Agency, except as provided in the 
borrower's loan or line of credit agreement.
    (3) In cases of a guaranteed line of credit, lenders may make an 
emergency advance when a line of credit has reached its ceiling. The 
emergency advance will be made as an advance under the line and not as a 
separate note. The lender's loan documents must contain sufficient 
language to provide that any emergency advance will constitute a debt of 
the borrower to the lender and be secured by the security instrument. 
The following conditions apply:
    (i) The loan funds to be advanced are for authorized operating loan 
purposes;
    (ii) The financial benefit to the lender and the Government from the 
advance will exceed the amount of the advance; and

[[Page 255]]

    (iii) The loss of crops or livestock is imminent unless the advance 
is made.
    (4) Protective advance requirements are found in Sec. 762.149.
    (b) Release of liability upon withdrawal. An individual who is 
obligated on a guaranteed loan may be released from liability by a 
lender, with the written consent of the Agency, provided the following 
conditions have been met:
    (1) The individual to be released has withdrawn from the farming or 
ranching operation;
    (2) A divorce decree or final property settlement does not hold the 
withdrawing party responsible for the loan payments;
    (3) The withdrawing party's interest in the security is conveyed to 
the individual or entity with whom the loan will be continued;
    (4) The ratio of the amount of debt to the value of the remaining 
security is less than or equal to .75, or the withdrawing party has no 
income or assets from which collection can be made; and
    (5) Withdrawal of the individual does not result in legal 
dissolution of the entity to which the loans are made. Individually 
liable members of a general or limited partnership may not be released 
from liability.
    (6) The remaining liable party projects a feasible plan (see Sec. 
762.102(b)).
    (c) Release of liability after liquidation. After a final loss claim 
has been paid on the borrower's account, the lender may release the 
borrower or guarantor from liability if;
    (1) The Agency agrees to the release in writing;
    (2) The lender documents its consideration of the following factors 
concerning the borrower or guarantors:
    (i) The likelihood that the borrower or guarantor will have a 
sufficient level of income in the reasonably near future to contribute 
to a meaningful reduction of the debt;
    (ii) The prospect that the borrower or guarantor will inherit assets 
in the near term that may be attached by the Agency for payment of a 
significant portion of the debt;
    (iii) Whether collateral has been properly accounted for, and 
whether liability should be retained in order to take action against the 
borrower or a third party for conversion of security;
    (iv) The availability of other income or assets which are not 
security;
    (v) The possibility that assets have been concealed or improperly 
transferred;
    (vi) The effect of other guarantors on the loan; and
    (vii) Cash consideration or other collateral in exchange for the 
release of liability.
    (3) The lender will use its own release of liability documents.
    (d) Interest rate changes. (1) The lender may change the interest 
rate on a performing (nondelinquent) loan only with the borrower's 
consent.
    (2) If the loan has been sold on the secondary market, the lender 
must repurchase the loan or obtain the holder's written consent.
    (3) To change a fixed rate of interest to a variable rate of 
interest or vice versa, the lender and the borrower must execute a 
legally effective allonge or amendment to the existing note.
    (4) If a new note is taken, it will be attached to and refer to the 
original note.
    (5) The lender will inform the Agency of the rate change.
    (e) Consolidation. Two or more Agency guaranteed loans may be 
consolidated, subject to the following conditions:
    (1) The borrower must project a feasible plan after the 
consolidation. See Sec. 762.102(b) for definition of feasible plan.
    (2) Only OL may be consolidated.
    (3) Existing lines of credit may only be consolidated with a new 
line of credit if the final maturity date and conditions for advances of 
the new line of credit are made the same as the existing line of credit.
    (4) Guaranteed OL may not be consolidated with a line of credit, 
even if the line of credit has been rescheduled.
    (5) Guaranteed loans made prior to October 1, 1991, cannot be 
consolidated with those loans made on or after October 1, 1991.
    (6) OL secured by real estate or with an outstanding interest 
assistance agreement or shared appreciation agreement cannot be 
consolidated.

[[Page 256]]

    (7) A new note or line of credit agreement will be taken. The new 
note or line of credit agreement must describe the note or line of 
credit agreement being consolidated and must state that the indebtedness 
evidenced by the note or line of credit agreement is not satisfied. The 
original note or line of credit agreement must be retained.
    (8) The interest rate for a consolidated OL loan is the negotiated 
rate agreed upon by the lender and the borrower at the time of the 
action, subject to the loan limitations for each type of loan.
    (9) The Agency approves the consolidation by executing a 
modification of guarantee. The modification will indicate the 
consolidated loan amount, new terms, and percentage of guarantee, and 
will be attached to the originals of the guarantees being consolidated. 
If loans with a different guarantee percentage are consolidated, the new 
guarantee will be at the lowest percentage of guarantee being 
consolidated
    (10) Any holders must consent to the consolidation, or the 
guaranteed portion must be repurchased by the lender.

[64 FR 7378, Feb. 12, 1999, as amended at 66 FR 7567, Jan. 24, 2001]



Sec. 762.147  Servicing shared appreciation agreements.

    (a) Lender responsibilities. The lender is responsible for:
    (1) Monitoring the borrower's compliance with the shared 
appreciation agreement;
    (2) Notifying the borrower of the amount of recapture due; and,
    (3) Beginning October 1, 1999, a notice of the agreement's 
provisions not later than 12 months before the end of the agreement; and
    (4) Reimbursing the Agency for its pro-rata share of recapture due.
    (b) Recapture. (1) Recapture of any appreciation of real estate 
security will take place at the end of the term of the agreement, or 
sooner if the following occurs:
    (i) On the conveyance of the real estate security (or a portion 
thereof) by the borrower.
    (A) If only a portion of the real estate is conveyed, recapture will 
only be triggered against the portion conveyed. Partial releases will be 
handled in accordance with Sec. 762.141(b).
    (B) Transfer of title to the spouse of the borrower on the death of 
such borrower will not be treated as a conveyance under the agreement.
    (ii) On repayment of the loan; or
    (iii) If the borrower ceases farming.
    (2) Calculating recapture.
    (i) The amount of recapture will be based on the difference between 
the value of the security at the time recapture is triggered and the 
value of the security at the time of writedown, as shown on the shared 
appreciation agreement.
    (ii) Security values will be determined through appraisals obtained 
by the lender and meeting the requirements of Sec. 762.127.
    (iii) All appraisal fees will be paid by the lender.
    (iv) The amount of recapture will not exceed the amount of writedown 
shown on the shared appreciation agreement.
    (v) If recapture is triggered within 4 years of the date of the 
shared appreciation agreement, the lender shall recapture 75 percent of 
any positive appreciation in the market value of the property securing 
the loan or line of credit agreement.
    (vi) If recapture is triggered after 4 years from the date of the 
shared appreciation agreement, the lender shall recapture 50 percent of 
any positive appreciation in the market value of the property securing 
the loan or line of credit agreement.
    (3) Servicing recapture debt.
    (i) If recapture is triggered under the shared appreciation 
agreement and the borrower is unable to pay the recapture in a lump sum, 
the lender may:
    (A) Reschedule the recapture debt with the consent of the Agency, 
provided the lender can document the borrower's ability to make 
amortized payments on the recapture debt, plus pay all other 
obligations. In such case, the recapture debt will not be covered by the 
guarantee;
    (B) Pay the Agency its pro rata share of the recapture due. In such 
case, the recapture debt of the borrower will be covered by the 
guarantee; or
    (C) Service the account in accordance with Sec. 762.149.

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    (ii) If recapture is triggered, and the borrower is able but 
unwilling to pay the recapture in a lump sum, the lender will service 
the account in accordance with Sec. 762.149.
    (4) Paying the Agency. Any shared appreciation recaptured by the 
lender will be shared on a pro-rata basis between the lender and the 
Agency.



Sec. 762.148  Bankruptcy.

    (a) Lender responsibilities. The lender must protect the guaranteed 
loan debt and all collateral securing the loan in bankruptcy 
proceedings. The lender's responsibilities include, but are not limited 
to:
    (1) Filing a proof of claim where required and all the necessary 
papers and pleadings;
    (2) Attending, and where necessary, participating in meetings of the 
creditors and court proceedings;
    (3) Protecting the collateral securing the guaranteed loan and 
resisting any adverse changes that may be made to the collateral;
    (4) Seeking a dismissal of the bankruptcy proceeding when the 
operation as proposed by the borrower to the bankruptcy court is not 
feasible;
    (5) When permitted by the bankruptcy code, requesting a modification 
of any plan of reorganization if it appears additional recoveries are 
likely.
    (6) Monitor confirmed plans under chapters 11, 12 and 13 of the 
bankruptcy code to determine borrower compliance. If the borrower fails 
to comply, the lender will seek a dismissal of the reorganization plan; 
and
    (7) Keeping the Agency regularly informed in writing on all aspects 
of the proceedings.
    (i) The lender will submit a default status report when the borrower 
defaults and every 60 days until the default is resolved or a final loss 
claim is paid.
    (ii) The default status report will be used to inform the Agency of 
the bankruptcy filing, the reorganization plan confirmation date and 
effective date, when the reorganization plan is complete, and when the 
borrower is not in compliance with the reorganization plan.
    (b) Bankruptcy expenses. (1) Reorganization.
    (i) Expenses, such as legal fees and the cost of appraisals incurred 
by the lender as a direct result of the borrower's chapter 11, 12, or 13 
reorganization, are covered under the guarantee, provided they are 
reasonable, customary, and provide a demonstrated economic benefit to 
the lender and the Agency.
    (ii) Lender's in-house expenses, which are those expenses which 
would normally be incurred for administration of the loan, including in-
house lawyers, are not covered by the guarantee.
    (2) Liquidation expenses in bankruptcy.
    (i) Reasonable and customary liquidation expenses may be deducted 
from the proceeds of the collateral in liquidation bankruptcy cases.
    (ii) In-house expenses are not considered customary liquidation 
expenses, may not be deducted from collateral proceeds, and are not 
covered by the guarantee.
    (c) Estimated loss claims in reorganization. (1) At confirmation. 
The lender may submit an estimated loss claim upon confirmation of the 
reorganization plan in accordance with the following:
    (i) The estimated loss payment will cover the guaranteed percentage 
of the principal and accrued interest written off, plus any allowable 
costs incurred as of the effective date of the plan.
    (ii) The lender will submit supporting documentation for the loss 
claim, and any additional information requested by the Agency, including 
justification for the legal fees included on the claim.
    (iii) The estimated loss payment may be revised as consistent with a 
court-approved reorganization plan.
    (iv) Protective advances made and approved in accordance with Sec. 
762.149 may be included in an estimated loss claim associated with a 
reorganization, if:
    (A) They were incurred in connection with the initiation of 
liquidation action prior to bankruptcy filing; or
    (B) The advance is required to provide repairs, insurance, etc. to 
protect the collateral as a result of delays in the case, or failure of 
the borrower to maintain the security.
    (2) Interest only losses. The lender may submit an estimated loss 
claim for interest only after confirmation of the

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reorganization plan in accordance with the following:
    (i) The loss claims may cover interest losses sustained as a result 
of a court-ordered, permanent interest rate reduction.
    (ii) The loss claims wi