[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2006 Edition]
[From the U.S. Government Printing Office]



[[Page i]]



          7


          Parts 700 to 899

                         Revised as of January 1, 2006


          Agriculture
          
          


________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2006
          With Ancillaries
                    Published by:
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

[[Page ii]]

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                            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                      257
  Finding Aids:
      Material Approved for Incorporation by Reference........     411
      Table of CFR Titles and Chapters........................     413
      Alphabetical List of Agencies Appearing in the CFR......     431
      List of CFR Sections Affected...........................     441

[[Page iv]]





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

                     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 
regulation. Each title is divided into chapters which usually bear the 
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.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
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    To determine whether a Code volume has been amended since its 
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EFFECTIVE AND EXPIRATION DATES

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OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
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OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
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1963, 1964-1972, 1973-1985, or 1986-2000, published in 11 separate 
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INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
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This material, like any other properly issued regulation, has the force 
of law.
    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 
containing that incorporation. If, after contacting the agency, you find 
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20408, or call 202-741-6010.

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This index is based on a consolidation of the ``Contents'' entries in 
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, 2006.

[[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, 2006.

    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.

    For this volume, Robert J. Sheehan was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Frances D. McDonald, assisted by Alomha S. Morris.

[[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, and at 
60 FR 64297, Dec. 15, 1995.

             SUBCHAPTER A--AGRICULTURAL CONSERVATION PROGRAM
Part                                                                Page
700             Experimental Rural Clean Water Program......           7
701             Emergency Conservation Program and certain 
                    related programs previously administered 
                    under this part.........................          21
702             Colorado River Basin Salinity (CRSC) Control 
                    Program.................................          29
707             Payments due persons who have died, 
                    disappeared, or have been declared 
                    incompetent.............................          38
708             Record retention requirements--all programs.          41
SUBCHAPTER B--FARM MARKETING QUOTAS, ACREAGE ALLOTMENTS, AND PRODUCTION 
                               ADJUSTMENT
711             Marketing quota review regulations..........          42
714             Refunds of penalties erroneously, illegally, 
                    or wrongfully collected.................          51
717             Holding of referenda........................          54
718             Provisions applicable to multiple programs..          67
729             Peanuts marketing quotas....................          87
                SUBCHAPTER C--REGULATIONS FOR WAREHOUSES
735             Regulations for the United States Warehouse 
                    Act.....................................          88
743             [Reserved]

                     SUBCHAPTER D--SPECIAL PROGRAMS
750             Soil Bank [Note]............................         102
752             Water Bank Program..........................         102
755             Regional programs...........................         109
760             Indemnity payment programs..................         117
761             General and administrative..................         125
762             Guaranteed farm loans.......................         126
764             Emergency farm loans........................         168

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770             Indian tribal land aquisition loans.........         179
771             Boll Weevil Era Dication Loan Program.......         182
772             Servicing minor program loans...............         186
773             Special Apple Loan Program..................         191
774             Emergency Loan for Seed Producers Program...         195
780             Appeal regulations..........................         198
781             Disclosure of foreign investment in 
                    agricultural land.......................         205
782             End-Use Certificate Program.................         211
783             Tree Assistance Program.....................         217
784             2004 ewe lamb replacement and retention 
                    payment program.........................         220
785             Certified state mediation program...........         225
        SUBCHAPTER E--PROVISIONS COMMON TO MORE THAN ONE PROGRAM
792             Debt settlement policies and procedures.....         232
795             Payment limitation..........................         241
                      SUBCHAPTER F--PUBLIC RECORDS
798             Availability of information to the public...         248
                 SUBCHAPTER G--ENVIRONMENTAL PROTECTION
799             Environmental quality and related 
                    environmental concerns--compliance with 
                    the National Environmental Policy Act...         250

[[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_EMERGENCY CONSERVATION PROGRAM AND CERTAIN RELATED PROGRAMS 
PREVIOUSLY ADMINISTERED UNDER THIS PART--Table of Contents




Sec.
701.1 Administration.
701.2 Definitions.
701.3 Scope.
701.4 Producer eligibility.
701.5 Land eligibility.
701.6-701.9 [Reserved]

[[Page 22]]

701.10 Qualifying minimum cost of restoration.
701.11 Prohibition on duplicate payments.
701.12 Eligible ECP practices.
701.13 Submitting requests.
701.14 Onsite inspections.
701.15 Starting practices before cost-share request is submitted; non-
          entitlement to payment; payment subject to the availability of 
          funds.
701.16 Practice approval.
701.17-701.20 [Reserved]
701.21 Filing payment application.
701.22 Eligibility to file for cost-share assistance.
701.23 Eligible costs.
701.24 Dividing cost-share among more than one participant.
701.25 Practices carried out with aid from ineligible persons.
701.26 Maximum cost-share percentage.
701.27 Maximum ECP payments per person.
701.28-701.30 [Reserved]
701.31 Maintenance and proper use of practices.
701.32 Failure to comply with program provisions.
701.33 Death, incompetency, or disappearance.
701.34 Appeals.
701.35 Compliance with regulatory measures.
701.36 Schemes and devices and claims avoidances.
701.37 Loss of control of property during the practice life span.
701.38-701.40 [Reserved]
701.41 Cost-share assistance not subject to claims.
701.42 Assignments.
701.43 Information collection requirements.
701.44 Agricultural Conservation Program (ACP) contracts.
701.45 Forestry Incentives Program (FIP) contracts.

    Authority: Pub. L. 95-334, 92 Stat. 420, 16 U.S.C. 2201 et seq.

    Source: 69 FR 10302, Mar. 4, 2004, unless otherwise noted.



Sec. 701.1  Administration.

    (a) Subject to the availability of funds, this part provides the 
terms, conditions and requirements of the Emergency Conservation Program 
(ECP) administered by the Farm Service Agency (FSA).
    (b) ECP is administered by the Administrator, FSA through the Deputy 
Administrator, FSA, and shall be carried out in the field by State and 
county FSA committees (State and county committees), subject to the 
availability of funds. Except as otherwise provided in this rule, 
discretionary determinations to be made under this rule will be made by 
the Deputy Administrator. Matters committed to the discretion of the 
Deputy Administrator shall be considered in all cases to be permissive 
powers and no person shall, under any circumstances, be considered to be 
entitled to an exercise of such power in their favor.
    (c) State and county committees, and representatives and employees, 
do not have authority to modify or waive any regulations in this part.
    (d) The State committee may take any action authorized or required 
of the county committee by this part, but which the county committee has 
not taken, such as:
    (1) Correct or require a county committee to correct any action 
taken by such county committee that is not in accordance with this part; 
or
    (2) Require a county committee to withhold taking any action that is 
not in accordance with this part.
    (e) No provision 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.
    (f) 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.
    (g) The Deputy Administrator may limit the authority of state and 
county committees to approve cost share in excess of specified amounts.
    (h) Data furnished by the applicants will be used to determine 
eligibility for program benefits. Furnishing the data is voluntary; 
however, the failure to provide data could result in program benefits 
being withheld or denied.
    (i) FSA may consult with any other USDA agency for such assistance 
as is determined by FSA to be necessary to implement the ECP. FSA is 
responsible for the technical aspects of ECP but may enter into a 
Memorandum of

[[Page 23]]

Agreement with another party to provide technical assistance. If this 
limitation results in significant hardship to producers in a county the 
State committee may request in writing that the Deputy Administrator 
waive this requirement for that county.
    (j) The provisions in this part shall not create an entitlement in 
any person to any ECP cost share or claim or any particular notice or 
form or procedure.
    (k) Additional terms and conditions may be set forth in the 
application or the forms participants will be required to sign for 
participation in the ECP.



Sec. 701.2  Definitions.

    (a) The terms defined in part 718 of this chapter shall be 
applicable to this part and all documents issued in accordance with this 
part, except as otherwise provided in this section.
    (b) The following definitions shall apply to this part:
    Agricultural producer means an owner, operator, or tenant of a farm 
or ranch used to produce for food or fiber, crops (including but not 
limited to, grain or row crops; seed crops; vegetables or fruits; hay 
forage or pasture; orchards or vineyards; flowers or bulbs; or field 
grown ornamentals) or livestock (including but not limited to, dairy or 
beef cattle; poultry; swine; sheep or goats; fish or other animals 
raised by aquaculture; other livestock or fowl) for commercial 
production. Producers of animals raised for recreational uses only are 
not considered agricultural producers.
    Annual agricultural production means production of crops for food or 
fiber in a commercial operation that occurs on an annual basis under 
normal conditions.
    Applicant means a person who has submitted to FSA a request to 
participate in the ECP.
    Cost-share payment means the payment made by FSA to assist a program 
participant under this part to establish practices required to address 
qualifying damage suffered in connection with a qualifying disaster.
    Deputy Administrator means the Deputy Administrator for Farm 
Programs, FSA, the ECP Program Manager, or designee.
    Farmland means land devoted to agricultural production, including 
land used for aquaculture, or other land as may be determined by the 
Deputy Administrator.
    Program year means the applicable Federal fiscal year.



Sec. 701.3  Scope.

    (a) FSA will provide cost-share assistance to farmers and ranchers 
to rehabilitate farmland damaged by wind erosion, floods, hurricanes, or 
other natural disasters as determined by the Deputy Administrator, and 
to carry out emergency water conservation measures during periods of 
severe drought.
    (b) The objective of the ECP is to make cost-share assistance 
available to eligible participants on eligible land for certain 
practices, to rehabilitate farmland damaged by floods, hurricanes, wind 
erosion, or other natural disasters, and for the installation of water 
conservation measures during periods of severe drought.
    (c) Payments may also be made under this part for:
    (1) Emergency water conservation or water enhancement measures 
(including measures to assist confined livestock) during periods of 
severe drought; and
    (2) Floodplain easements for runoff and other emergency measures 
that the Deputy Administrator determines is necessary to safeguard life 
and property from floods, drought, and the products of erosion on any 
watershed whenever fire, flood, or other natural occurrence is causing 
or has caused, a sudden impairment of the watershed.
    (d) Payments under this part are subject to the availability of 
appropriated funds and any limitations that may otherwise be provided 
for by Congress.



Sec. 701.4  Producer eligibility.

    (a) To be eligible to participate in the ECP the Deputy 
Administrator must determine that a person is an agricultural producer 
with an interest in the land affected by the natural disaster, and that 
person must be liable for or have paid the expense that is the subject 
of the cost share. The applicant must be a landowner or user in the

[[Page 24]]

area where the qualifying event has occurred, and must be a party who 
will incur the expense that is the subject of the cost share.
    (b) Federal agencies and States, including all agencies and 
political subdivisions of a State, are ineligible to participate in the 
ECP.
    (c) All producer eligibility is subject to the availability of funds 
and an application may be denied for any reason.



Sec. 701.5  Land eligibility.

    (a) For land to be eligible, the Deputy Administrator must determine 
that land that is the subject of the cost share:
    (1) Will have new conservation problems caused as a result of a 
natural disaster that, if not treated, would:
    (i) Impair or endanger the land;
    (ii) Materially affect the productive capacity of the land;
    (iii) Represent unusual damage that, except for wind erosion, is not 
of the type likely to recur frequently in the same area; and
    (iv) Be so costly to repair that Federal assistance is or will be 
required to return the land to productive agricultural use. Conservation 
problems existing prior to the disaster are not eligible for cost-share 
assistance.
    (2) Be physically located in a county in which the ECP has been 
implemented; and
    (3) Be one of the following:
    (i) Land expected to have annual agricultural production,
    (ii) A field windbreak or a farmstead shelterbelt on which the ECP 
practice to be implemented involves removing debris that interferes with 
normal farming operations on the farm and correcting damage caused by 
the disaster; or
    (iii) A farm access road on which debris interfering with the normal 
farming operation needs to be removed.
    (b) Land is ineligible for cost share if the Deputy Administrator 
determines that it is, as applicable:
    (1) Owned or controlled by the United States;
    (2) Owned or controlled by States, including State agencies or other 
political subdivisions of a State;
    (3) Protected by a levee or dike that was not effectively and 
properly functioning prior to the disaster, or is protected, or intended 
to be protected, by a levee or dike not built to U.S. Army Corps of 
Engineers, NRCS, or comparable standards;
    (4) Adjacent to water impoundment reservoirs that are subject to 
inundation when the reservoir is filled to capacity;
    (5) Land on which levees or dikes are located;
    (6) Subject to frequent damage or susceptible to severe damage 
according to paragraph (c) of this section;
    (7) Subject to flowage or flood easements and inundation when water 
is released in normal operations;
    (8) Between any levee or dike and a stream, river, or body of water, 
including land between two or more levees or dikes;
    (9) Located in an old or new channel of a stream, creek, river or 
other similar body of water, except that land located within or on the 
banks of an irrigation canal may be eligible if the Deputy Administrator 
determines that the canal is not a channel subject to flooding;
    (10) In greenhouses or other confined areas, including but not 
limited to, land in corrals, milking parlors, barn lots, or feeding 
areas;
    (11) Land on which poor farming practices, such as failure to farm 
on the contour, have materially contributed to damaging the land;
    (12) Unless otherwise provided for, not considered to be in annual 
agricultural production, such as land devoted to stream banks, channels, 
levees, dikes, native woodland areas, roads, and recreational uses; or
    (13) Devoted to trees including, but not limited to, timber 
production.
    (c) To determine the likely frequency of damage and of the 
susceptibility of the land to severe damage under paragraph (b)(6) of 
this section, FSA will consider all relevant factors, including, but not 
limited to, the location of the land, the history of damage to the land, 
and whether the land was or could have been protected by a functioning 
levee or dike built to U. S. Army Corps of Engineers, NRCS, or 
comparable standards. Further, in making such determinations, 
information may be obtained and used from

[[Page 25]]

the Federal Emergency Management Agency or any other Federal, State 
(including State agencies or political subdivisions), or other entity or 
individual providing information regarding, for example, flood 
susceptibility for the land, soil surveys, aerial photographs, or flood 
plain data or other relevant information.



Sec. Sec. 701.6-701.9  [Reserved]



Sec. 701.10  Qualifying minimum cost of restoration.

    (a) To qualify for assistance under Sec. 701.3(a), the eligible 
damage must be so costly that Federal assistance is or will be required 
to return the land to productive agricultural use or to provide 
emergency water for livestock.
    (b) The Deputy Administrator shall establish the minimum qualifying 
cost of restoration. Each affected State may be allowed to establish a 
higher minimum qualifying cost of restoration.
    (c) A producer may request a waiver of the qualifying minimum cost 
of restoration. The waiver request shall document how failure to grant 
the waiver will result in environmental damage or hardship to the 
producer and how the waiver will accomplish the goals of the program.

[69 FR 10302, Mar. 4, 2004; 69 FR 22377, Apr. 26, 2004]



Sec. 701.11  Prohibition on duplicate payments.

    (a) Duplicate payments. Participants are not eligible to receive 
funding under the ECP for land on which the participant has or will 
receive funding under:
    (1) The Wetland Reserve Program (WRP) provided for in 7 CFR part 
1467;
    (2) The Emergency Wetland Reserve Program (EWRP) provided for in 7 
CFR part 623;
    (3) The Emergency Watershed Protection Program (EWP) provided for in 
7 CFR part 624; or
    (4) Any other program that covers the same or similar expenses so as 
to create duplicate payments, or, in effect, a higher rate of cost share 
than is allowed under this part.
    (b) Refund. Participants who receive any duplicate funds, payments, 
or benefits shall refund any ECP payments received.



Sec. 701.12  Eligible ECP practices.

    (a) Cost-share assistance may be offered for ECP practices to 
replace or restore farmland, fences, or conservation structures to a 
condition similar to that existing before the natural disaster. No 
relief under this part shall be allowed to address conservation problems 
existing before the disaster.
    (b) The practice or practices made available when the ECP is 
implemented shall be only those practices authorized by FSA for which 
cost-share assistance is essential to permit accomplishment of the 
program goals.
    (c) Cost-share assistance may be provided for permanent vegetative 
cover, including establishment of the cover where needed, only in 
conjunction with eligible structures or installations where cover is 
needed to prevent erosion and/or siltation or to accomplish some other 
ECP purpose.
    (d) Practice specifications shall represent the minimum levels of 
performance needed to address the ECP need.



Sec. 701.13  Submitting requests.

    (a) Subject to the availability of funds, the Deputy Administrator 
shall provide for an enrollment period for submitting ECP cost-share 
requests.
    (b) Requests may be accepted after the announced enrollment period, 
if such acceptance is approved by the Deputy Administrator and is in 
accordance with the purposes of the program.



Sec. 701.14  Onsite inspections.

    An onsite inspection must be made before approval of any request for 
ECP assistance.



Sec. 701.15  Starting practices before cost-share request is submitted; 
non-entitlement to payment; payment subject to the availability of funds.

    (a) Subject to paragraphs (b) and (c) of this section, costs will 
not be shared for practices or components of practices that are started 
before a request for cost share under this part is submitted with the 
applicable county FSA office.

[[Page 26]]

    (b) Costs may be shared for drought and non-drought ECP practices or 
components of practices that are started before a request is submitted 
with the county FSA office, only if:
    (1) Considered and approved on a case-by-case basis in accordance 
with instructions of the Deputy Administrator;
    (2) The disaster that is the basis of a claim for cost-share 
assistance created a situation that required the producer to take 
immediate action to prevent further losses;
    (3) The Deputy Administrator determines that the request for 
assistance was filed within a reasonable amount of time after the start 
of the enrollment period; and
    (4) The practice was started no more than 60 days before the ECP 
designation was approved for the applicable county office.
    (c) Any action taken prior to approval of a claim is taken at the 
producer's own risk.
    (d) An application for relief may be denied for any reason.
    (e) All payments under this part are subject to the availability of 
funds.



Sec. 701.16  Practice approval.

    (a) Requests shall be prioritized before approval based on factors 
deemed appropriate by FSA, which include, but are not limited to:
    (1) Type and degree of damage;
    (2) Type of practices needed to address the problem;
    (3) Availability of funds;
    (4) Availability of technical assistance;
    (5) Environmental concerns;
    (6) Safety factors; or
    (7) Welfare of eligible livestock.
    (b) Requests for cost-share assistance may be approved if:
    (1) Funds are available; and
    (2) The requested practice is determined eligible.



Sec. Sec. 701.17-701-20  [Reserved]



Sec. 701.21  Filing payment application.

    Cost-share assistance is conditioned upon the availability of funds 
and the performance of the practice in compliance with all applicable 
specifications and program regulations.
    (a) Completion of practice. After completion of the approved 
practice, the participant must certify completion and request payment by 
the payment request deadline. FSA will provide the participant with a 
form or another manner to be used to request payment.
    (b) Proof of completion. Participants shall submit to FSA, at the 
local county office, the information needed to establish the extent of 
the performance of approved practices and compliance with applicable 
program provisions.
    (c) Payment request deadline. The time limits for submission of 
information shall be determined by the Deputy Administrator. The payment 
request deadline for each ECP practice will be provided in the agreement 
after the application is approved. Time limits may be extended where 
failure to submit required information within the applicable time limits 
is due to reasons beyond the control of the participant.



Sec. 701.22  Eligibility to file for cost-share assistance.

    Any eligible participant, as defined in this part, who paid part of 
the cost of an approved practice may file an application for cost-share 
payment.



Sec. 701.23  Eligible costs.

    (a) Cost-share assistance may be authorized for all reasonable costs 
incurred in the completion of the practice, up to the maximums provided 
in Sec. Sec. 701.26 and 701.27.
    (b) Eligible costs shall be limited as follows:
    (1) Costs for use of personal equipment shall be limited to those 
incurred beyond the normal operation of the farm or ranch.
    (2) Costs for personal labor shall be limited to personal labor not 
normally required in the operation of the farm or ranch.
    (3) Costs for the use of personal equipment and labor must be less 
than that charged for such equipment and labor by commercial contractors 
regularly employed in such areas.
    (4) Costs shall not exceed those needed to achieve the minimum 
performance necessary to resolve the problem being corrected by the 
practice. Any costs above those levels shall not be

[[Page 27]]

considered to be eligible costs for purposes of calculations made under 
this part.
    (c) Costs shall not exceed the practice specifications in Sec. 
701.12(d) for cost-share calculations.
    (d) The gross amount on which the cost-share eligibility may be 
computed will not include any costs that were reimbursed by a third 
party including, but not limited to, an insurance indemnity payment.
    (e) Total cost-share payments from all sources shall not exceed the 
total of eligible costs of the practice to the applicant.



Sec. 701.24  Dividing cost-share among more than one participant.

    (a) For qualifying cost-share assistance under this part, the cost 
shall be credited to the participant who personally performed the 
practice or who paid to have it performed by a third party. If a payment 
or credit was made by one participant to another potential participant, 
paragraph (c) of this section shall apply.
    (b) If more than one participant contributed to the performance of 
the practice, the cost-share assistance for the practice shall be 
divided among those eligible participants in the proportion they 
contributed to the performance of the practice. FSA may determine what 
proportion was contributed by each participant by considering the value 
of the labor, equipment, or material contributed by each participant and 
any other factors deemed relevant toward performance.
    (c) Allowance by a participant of a credit to another participant 
through adjustment in rent, cash or other consideration, may be 
considered as a cost of a practice to the paying party only if FSA 
determines that such credit is directly related to the practice. An 
applicant who was fully reimbursed shall be considered as not having 
contributed to the practice performance.



Sec. 701.25  Practices carried out with aid from ineligible persons.

    Any assistance provided by someone other than the eligible 
participant, including assistance from a State or Federal agency, shall 
be deducted from the participant's total costs incurred for the practice 
for the purpose of computing ECP cost shares. If unusual conditions 
exist, the Deputy Administrator may waive deduction of such 
contributions upon a request from the State committee and demonstration 
of the need for such a waiver.



Sec. 701.26  Maximum cost-share percentage.

    (a) In addition to other restrictions that may be applied by FSA, an 
ECP participant shall not receive more than 75 percent of the lesser of 
the participant's total actual cost or of the total allowable costs, as 
determined by this part, to perform the practice.
    (b) However, notwithstanding paragraph (a) of this section, a 
qualified limited resource producer that participates in the ECP may 
receive no more than 90 percent of the participant's actual cost to 
perform the practice or 90 percent of the total allowable costs for the 
practice as determined under this part.
    (c) In addition to other limitations that apply, in no case shall 
the ECP payment exceed 50 percent of what the Deputy Administrator has 
determined is the agricultural value of the affected land.



Sec. 701.27  Maximum ECP payments per person.

    A person, as defined in part 1400 of this title, is limited to a 
maximum cost-share of $200,000 per person, per disaster.



Sec. Sec. 701.28-701.30  [Reserved]



Sec. 701.31  Maintenance and proper use of practices.

    (a) Each participant receiving cost-share assistance is responsible 
for the required maintenance and proper use of the practice. Some 
practices have an established life span or minimum period of time during 
which they are expected to function as a conservation practice with 
proper maintenance. Cost-share assistance shall not be authorized for 
normal upkeep or maintenance of any practice.
    (b) If a practice is not properly maintained for the established 
life span, the participant may be required to refund

[[Page 28]]

all or part of cost-share assistance received. The Deputy Administrator 
will determine what constitutes failure to maintain a practice and the 
amount that must be refunded.



Sec. 701.32  Failure to comply with program provisions.

    Costs may be shared for performance actually rendered even though 
the minimum requirements otherwise established for a practice have not 
been satisfied if a reasonable effort was made to satisfy the minimum 
requirements and if the practice, as performed, will adequately address 
the need for the practice.



Sec. 701.33  Death, incompetency, or disappearance.

    In case of death, incompetency, or disappearance of any participant, 
any cost-share payment due shall be paid to the successor, as determined 
in accordance with part 707 of this chapter.



Sec. 701.34  Appeals.

    Part 11 of this title and part 780 of this chapter apply to 
determinations made under this part.



Sec. 701.35  Compliance with regulatory measures.

    Participants who perform practices shall be responsible for 
obtaining the authorities, permits, rights, easements, or other 
approvals necessary to the performance and maintenance of the practices 
according to applicable laws and regulations. The ECP participant shall 
be wholly responsible for any actions taken with respect to the project 
and shall, in addition, be responsible for returning and refunding any 
ECP cost shares made, where the purpose of the project cannot be 
accomplished because of the applicants' lack of clearances or other 
problems.



Sec. 701.36  Schemes and devices and claims avoidances.

    (a) If FSA determines that a participant has taken any action 
designed to defeat, or has the effect of defeating, the purposes of this 
program, the participant shall be required to refund all or part of any 
of the program payments otherwise due or paid that participant or 
related person for that particular disaster. These actions include, but 
are not limited to, failure to properly maintain or deliberately 
destroying a practice and providing false or misleading information 
related to practices, costs, or arrangements between entities or 
individuals that would have an effect on ``person'' determinations made 
under this part.
    (b) All or any part of cost-share assistance that otherwise would be 
due any participant may be withheld, or required to be refunded, if the 
participant has adopted, or participated in, any scheme or device 
designed to evade the maximum cost-share limitation that applies to the 
ECP or to evade any other requirement or provision of the program or 
this part.
    (c) If FSA determines that a participant has employed any scheme or 
device to deprive any other person of cost-share assistance, or engaged 
in any actions to receive payments under this part that also were 
designed to avoid claims of the United States or its instrumentalities 
or agents against that party, related parties, or third parties, the 
participant shall refund all or part of any of those program payments 
paid to that participant for the project.
    (d) For purposes of this section, a scheme or device can include, 
but is not limited to, instances of coercion, fraud, or 
misrepresentation regarding the claim for ECP assistance and the facts 
and circumstances surrounding such claim.
    (e) A participant who has knowingly supplied false information or 
filed a false claim shall be ineligible for cost-share assistance 
related to the disaster for which the false information was filed, or 
for any period of time FSA deems appropriate. False information or a 
false claim includes, but is not limited to, a request for payment for a 
practice not carried out, a false billing, or a billing for practices 
that do not meet required specifications.



Sec. 701.37  Loss of control of the property during the practice life 
span.

    In the event of voluntary or involuntary loss of control of the land 
by the ECP cost-share recipient during the

[[Page 29]]

practice life-span, if the person acquiring control elects not to become 
a successor to the ECP agreement and the practice is not maintained, 
each participant who received cost-share assistance for the practice may 
be jointly and severally liable for refunding any ECP cost-share 
assistance related to that practice. The practice life span, for 
purposes of this section, includes any maintenance period that is 
essential to its success.



Sec. Sec. 701.38-701.40  [Reserved]



Sec. 701.41  Cost-share assistance not subject to claims.

    Any cost-share assistance or portion thereof due any participant 
under this part shall be allowed without regard to questions of title 
under State law, and without regard to any claim or lien against any 
crop or property, or proceeds thereof, except liens and other claims of 
the United States or its instrumentalities. The regulations governing 
offsets and withholdings at parts 792 and 1403 of this title shall be 
applicable to this program and the provisions most favorable to a 
collection of the debt shall control.



Sec. 701.42  Assignments.

    Participants may assign ECP cost-share assistance payments, in whole 
or in part, according to part 1404 of this title.



Sec. 701.43  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 Number 0560-0082.



Sec. 701.44  Agricultural Conservation Program (ACP) contracts.

    Contracts for ACP that are, or were, administered under this part or 
similar contracts executed in connection with the Interim Environmental 
Quality Incentives Program, shall, unless the Deputy Administrator 
determines otherwise, be administered under, and be subject to, the 
regulations for ACP contracts and the ACP program that were contained in 
the 7 CFR, parts 700 to 899, edition revised as of January 1, 1998, and 
under the terms of the agreements that were entered into with 
participants.



Sec. 701.45  Forestry Incentives Program (FIP) contracts.

    The regulations governing the FIP as of July 31, 2002, and contained 
in the 7 CFR, parts 700 to 899, edition revised as of January 1, 2002, 
shall continue to apply to FIP contracts in effect as of that date, 
except as provided in accord with a delegation of the administration of 
that program and such delegation and actions taken thereunder shall 
apply to any other FIP matters as may be at issue or in dispute.



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.


[[Page 30]]


    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 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

[[Page 31]]

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 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

[[Page 32]]

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]



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)

[[Page 33]]

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]



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

[[Page 34]]

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.
    (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 an 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

[[Page 35]]

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 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.

[[Page 36]]



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 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:

[[Page 37]]

    (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 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

[[Page 38]]

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 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,

[[Page 39]]

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 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.

[[Page 40]]



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.
    (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.

[[Page 41]]



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 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 42]]



 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 43]]

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 44]]



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 45]]

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 46]]

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 47]]

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 48]]



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 49]]

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 50]]



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 51]]

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 52]]



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 53]]

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 54]]

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 55]]

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 56]]

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 57]]

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 58]]

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 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

[[Page 59]]

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 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

[[Page 60]]

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.
    (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

[[Page 61]]

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 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

[[Page 62]]

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.



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

[[Page 63]]

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 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

[[Page 64]]

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]



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

[[Page 65]]

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]



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

[[Page 66]]

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 persons or agents as may be designated.

[[Page 67]]



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

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

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

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. The regulations affected are 
those that

[[Page 68]]

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 69]]

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 70]]

    (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 a 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 71]]

    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 72]]

    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 250, 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 73]]

    (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 74]]

    (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 250, 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 75]]

    (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 250, 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 76]]

    (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 77]]

    (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 78]]

 
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 79]]

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 80]]

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 81]]

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 82]]

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 83]]

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 84]]

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 85]]

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 (7 
U.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 86]]

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 
that SED under this special authority for errors during that year is 
less than $20,000 (including in that calculation, any loan amount or

[[Page 87]]

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 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 88]]



                 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 89]]

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 90]]

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 91]]

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 92]]

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 93]]

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 94]]

    (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 95]]

    (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 96]]

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 97]]

    (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 98]]

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 99]]



                     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 100]]

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 101]]



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 102]]



                      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 Farm Service Agency (FSA), U.S. Department of Agriculture.

[[Page 103]]

    (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 104]]

    (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 105]]



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 106]]

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 107]]

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 108]]

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 109]]

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 110]]


    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 111]]

    (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 112]]

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 113]]

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 114]]

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 115]]

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 116]]



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 117]]

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 118]]

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 119]]

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 120]]

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 121]]

    (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 122]]

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 123]]

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 124]]

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 125]]



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 126]]

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.
762.151-762.158 [Reserved]
762.159 Pledging of guarantee.
762.160 Assignment of guarantee.

    Authority: 5 U.S.C. 301, 7 U.S.C. 1989.

[[Page 127]]


    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 128]]

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:

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    (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

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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.
    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 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.

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    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 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.

[[Page 132]]

    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.
    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.
    Presidentially-designated emergency. A major disaster or emergency 
designated by the President under the Robert T. Stafford Disaster Relief 
and Emergency Assistance Act (42 U.S.C. 5121 et seq.)
    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 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.
    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

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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; 69 FR 5262, Feb. 4, 2004; 70 FR 56107, Sept. 26, 
2005]



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.



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

[[Page 134]]

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:
    (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:

[[Page 135]]

    (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;
    (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 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, either by name, title, or 
position within the organization, to process and service PLP loans 
forthe 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.

[[Page 136]]

    (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, as amended at 70 
FR 56107, Sept. 26, 2005]



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

[[Page 137]]

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 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. (1) Except as provided in paragraph (a)(2) of this 
section, the applicant, and anyone who will execute the promissory note, 
has not caused

[[Page 138]]

the Agency a loss by receiving debt forgiveness on all or a portion of 
any direct or guaranteed loan made under the authority of the CONACT by 
debt write-down or write-off; compromise, adjustment, reduction, or 
charge-off under the provisions of section 331 of the CONACT; discharge 
in bankruptcy; or through payment of a guaranteed loss claim on:
    (i) More than three occasions on or prior to April 4, 1996; or
    (ii) Any occasion after April 4, 1996.
    (2) The applicant may receive a guaranteed OL to pay annual farm and 
ranch operating and family living expenses, provided the applicant meets 
all other requirements for the loan, if the applicant and anyone who 
will execute the promissory note:
    (i) Received a write-down under section 353 of the CONACT;
    (ii) Is current on payments under a confirmed reorganization plan 
under chapter 11, 12, or 13 of title 11 of the United States Code; or
    (iii) Received debt forgiveness on not more than one occasion after 
April 4, 1996, resulting directly and primarily from a Presidentially-
designated emergency for a county or contiguous county in which the 
applicant operates. Only applicants who were current on all existing 
direct and guaranteed FSA loans prior to the beginning date of the 
incidence period for a Presidentially-designated emergency and received 
debt forgiveness on that debt within three years after the designation 
of such emergency meet this exception.
    (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.
    (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:

[[Page 139]]

    (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; 69 
FR 5262, Feb. 4, 2004]



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 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;

[[Page 140]]

    (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 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

[[Page 141]]

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.

[64 FR 7378, Feb. 12, 1999, as amended at 70 FR 56107, Sept. 26, 2005]



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 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.

[[Page 142]]

    (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.
    (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.

[[Page 143]]

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 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.

[[Page 144]]

    (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) 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.
    (2) Junior lien positions are acceptable only if the total amount of 
debt with liens on the security, including the debt in junior lien 
position, is less than or equal to 85 percent of the value of the 
security. 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.
    (3) 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.

[64 FR 7378, Feb. 12, 1999, as amended at 70 FR 56107, Sept. 26, 2005]



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 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

[[Page 145]]

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 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,

[[Page 146]]

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 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.

[[Page 147]]

    (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, 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

[[Page 148]]

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 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.

[[Page 149]]

    (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) Loan installments. When a lender receives a payment from the 
sale of encumbered property, loan installments will be paid in the order 
of lien priority. When a payment is received from the sale of 
unencumbered property or other sources of income, loan installments will 
be paid in order of their due date. Agency approval is required for any 
other proposed payment plans.

[64 FR 7378, Feb. 12, 1999, as amended at 69 FR 44579, July 27, 2004]



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 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.

[[Page 150]]

    (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.
    (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:

[[Page 151]]

    (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 lender may, with written Agency approval, subordinate its 
interest in basic security in cases where the subordination is required 
to allow another lender to refinance an existing prior lien, no 
additional debt is being incurred, and the lender's security position 
will not be adversely affected by the subordination.
    (iii) 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 152]]

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; 69 
FR 44579, July 27, 2004]



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 153]]

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 Agency 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 
holder requested repurchase from the Agency within 60 days of the 
request to the lender 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 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 154]]

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.

[64 FR 7378, Feb. 12, 1999, as amended at 69 FR 44579, July 27, 2004]



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) Loans secured by real estate and/or equipment can be 
restructured using a balloon payment, equal installments, or unequal 
installments. Under no circumstances may livestock or crops alone be 
used as security for a loan to be rescheduled using a balloon payment. 
If a balloon payment is used, the projected value of the real estate 
and/or equipment security must indicate that the loan will be fully 
secured when the balloon payment becomes due. The projected value will 
be derived from a current appraisal adjusted for depreciation of 
depreciable property, such as buildings and other improvements, that 
occurs until the balloon payment is due. For equipment security, a 
current appraisal is required.

[[Page 155]]

The lender is required to project the security value of the equipment at 
the time the balloon payment is due based on the remaining life of the 
equipment, or the depreciation schedule on the borrower's Federal income 
tax return. Loans restructured with a balloon payment that are secured 
by real estate will have a minimum term of 5 years, and other loans will 
have a minimum term of 3 years before the scheduled balloon payment. If 
statutory limits on terms of loans prevent the minimum terms, balloon 
payments may not be used. If the loan is rescheduled with unequal 
installments, a feasible plan, as defined in Sec. 762.102(b), must be 
projected for when installments are scheduled to increase.
    (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 the borrower is 
required to pay. However, in no case will such principal amount exceed 
the statutory loan limits contained in Sec. 761.8 of this chapter.
    (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, unless it is restructured with a balloon payment. When a 
loan is restructured using a balloon payment the lender must take a lien 
on all assets and project the loan to be fully secured at the time the 
balloon payment becomes due, in accordance with paragraph (b)(4) of this 
section.
    (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.

[[Page 156]]

    (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).
    (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.

[[Page 157]]

    (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; 69 FR 44579, July 27, 2004; 70 FR 56107, Sept. 
26, 2005]



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
    (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.

[[Page 158]]

    (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.
    (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.

[[Page 159]]

    (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.
    (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.

[[Page 160]]

    (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 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 will be processed annually on the anniversary 
date of the effective date of the reorganization plan.
    (iii) If the borrower performs under the terms of the reorganization 
plan, annual interest reduction loss claims will be submitted on or near 
the same date, beyond the period of the reorganization plan.
    (3) Actual loss.
    (i) Once the reorganization plan is complete, the lender will 
provide the Agency with documentation of the actual loss sustained.
    (ii) If the actual loss sustained is greater than the prior 
estimated loss payment, the lender may submit a revised estimated loss 
claim to obtain payment of the additional amount owed by the Agency 
under the guarantee.
    (iii) If the actual loss is less than the prior estimated loss, the 
lender will reimburse the Agency for the overpayment plus interest at 
the note rate from the date of the payment of the estimated loss.
    (4) Payment to holder. In reorganization bankruptcy, if a holder 
makes demand upon the Agency, the Agency will pay the holder interest to 
the plan's effective date. Accruing interest thereafter will be based 
upon the provisions of the reorganization plan.
    (d) Liquidation under the bankruptcy code. (1) Upon receipt of 
notification that a borrower has filed for protection under Chapter 7 of 
the bankruptcy code, or a liquidation plan under chapter 11, the lender 
must proceed according to the liquidation procedures of this part.
    (2) If the property is abandoned by the trustee, the lender will 
conduct the liquidation according to Sec. 762.149.
    (3) Proceeds received from partial sale of collateral during 
bankruptcy may be used by the lender to pay reasonable costs, such as 
freight, labor and sales commissions, associated with the partial sale. 
Reasonable use of proceeds for this purpose must be documented with the 
final loss claim in accordance with Sec. 762.149(a)(vi).



Sec. 762.149  Liquidation.

    (a) Mediation. When it has been determined that default cannot be 
cured through any of the servicing options available, or if the lender 
does not wish to utilize any of the authorities provided in this part, 
the lender must:
    (1) Participate in mediation according to the rules and regulations 
of any State which has a mandatory farmer-creditor mediation program;

[[Page 161]]

    (2) Consider private mediation services in those States which do not 
have a mandatory farmer-creditor mediation program; and
    (3) Not agree to any proposals to rewrite the terms of a guaranteed 
loan which do not comply with this part. Any agreements reached as a 
result of mediation involving defaults and or loan restructuring must 
have written concurrence from the Agency before they are implemented.
    (b) Liquidation plan. If a default cannot be cured after considering 
servicing options and mediation, the lender will proceed with 
liquidation of the collateral in accordance with the following:
    (1) Within 30 days of the decision to liquidate, standard eligible 
and CLP lenders will submit a written liquidation plan to the Agency 
which includes:
    (i) Current balance sheets from all liable parties or, if the 
parties are not cooperative, the best information available, or in 
liquidation bankruptcies, a copy of the bankruptcy schedules or 
discharge notice;
    (ii) A proposed method of maximizing the collection of debt which 
includes specific plans to collect any remaining loan balances on the 
guaranteed loan after loan collateral has been liquidated, including 
possibilities for judgment;
    (A) If the borrower has converted loan security, the lender will 
determine whether litigation is cost effective. The lender must address, 
in the liquidation plan, whether civil or criminal action will be 
pursued. If the lender does not pursue the recovery, the reason must be 
documented when an estimated loss claim is submitted.
    (B) Any proposal to release the borrower from liability will be 
addressed in the liquidation plan in accordance with Sec. 
762.146(c)(2);
    (iii) An independent appraisal report on all collateral securing the 
loan that meets the requirements of Sec. 762.127 and a calculation of 
the net recovery value of the security as defined in Sec. 762.102. The 
appraisal requirement may be waived by the Agency in the following 
cases:
    (A) The bankruptcy trustee is handling the liquidation and the 
lender has submitted the trustee's determination of value;
    (B) The lender's proposed method of liquidation rarely results in 
receipt of less than market value for livestock and used equipment; or
    (C) A purchase offer has already been received for more than the 
debt;
    (iv) An estimate of time necessary to complete the liquidation;
    (v) An estimated loss claim if the liquidation period is expected to 
exceed 90 days.
    (vi) An estimate of reasonable liquidation expenses; and
    (vii) An estimate of any protective advances.
    (2) PLP lenders will submit a liquidation plan as required by their 
lender's agreement.
    (c) Agency approval of the liquidation plan. (1) CLP lender's or 
standard eligible lender's liquidation plan, and any revisions of the 
plan, must be approved by the Agency.
    (2) If, within 20 calendar days of the Agency's receipt of the 
liquidation plan, the Agency fails to approve it or fails to request 
that the lender make revisions, the lender may assume the plan is 
approved. The lender may then proceed to begin liquidation actions at 
its discretion as long as it has been at least 60 days since the 
borrower's eligibility for interest assistance was considered.
    (3) At its option, the Agency may liquidate the guaranteed loan as 
follows:
    (i) Upon Agency request, the lender will transfer to the Agency all 
rights and interests necessary to allow the Agency to liquidate the 
loan. The Agency will not pay the lender for any loss until after the 
collateral is liquidated and the final loss is determined; and
    (ii) If the Agency conducts the liquidation, interest accrual will 
cease on the date the Agency notifies the lender in writing that it 
assumes responsibility for the liquidation.
    (d) Estimated loss claims. An estimated loss claim will be submitted 
by the lender with the liquidation plan if the liquidation is expected 
to exceed 90 days. The estimated loss will be based on the following:
    (1) The Agency will pay the lender the guaranteed percentage of the 
total

[[Page 162]]

outstanding debt, less the net recovery value of the remaining security, 
less any unaccounted for security; and
    (2) The lender will discontinue interest accrual on the defaulted 
loan at the time the estimated loss claim is paid by the Agency. If the 
lender estimates that there will be no loss after considering the costs 
of liquidation, interest accrual will cease 90 days after the decision 
to liquidate or an estimated loss of zero will be submitted.
    (3) Packager fees and outside consultant fees for servicing of 
guaranteed loans are not covered by the guarantee, and will not be paid 
in an estimated loss claim.
    (e) Protective advances. (1) Prior written authorization from the 
Agency is required for all protective advances in excess of $5,000 for 
CLP lenders and $3,000 for standard eligible lenders. The dollar amount 
of protective advances allowed for PLP lenders will be specified when 
PLP status is awarded by the Agency or as contained in the lender's 
agreement.
    (2) The lender may claim recovery for the guaranteed portion of any 
loss of monies advanced as protective advances as allowed in this part, 
plus interest that accrues on the protective advances.
    (3) Payment for protective advances is made by the Agency when the 
final loss claim is approved, except in bankruptcy actions.
    (4) Protective advances are used only when the borrower is in 
liquidation, liquidation is imminent, or when the lender has taken title 
to real property in a liquidation action.
    (5) Legal fees are not a protective advance.
    (6) Protective advances may only be made when the lender can 
demonstrate the advance is in the best interest of the lender and the 
Agency.
    (7) Protective advances must constitute a debt of the borrower to 
the lender and be secured by the security instrument.
    (8) Protective advances must not be made in lieu of additional 
loans.
    (f) Unapproved loans or advances. The amount of any payments made by 
the borrower on unapproved loans or advances outside of the guarantee 
will be deducted from any loss claim submitted by the lender on the 
guaranteed loan, if that loan or advance was paid prior to, and to the 
detriment of, the guaranteed loan.
    (g) Acceleration. (1) If the borrower is not in bankruptcy, the 
lender shall send the borrower notice that the loan is in default and 
the entire debt has been determined due and payable immediately after 
other servicing options have been exhausted.
    (2) The loan cannot be accelerated until after the borrower has been 
considered for interest assistance and the conclusion of mandatory 
mediation in accordance with Sec. 762.149.
    (3) The lender will submit a copy of the acceleration notice or 
other document to the Agency.
    (h) Foreclosure. (1) The lender is responsible for determining the 
necessary parties to any foreclosure action, or who should be named on a 
deed of conveyance taken in lieu of foreclosure.
    (2) When the property is liquidated, the lender will apply the net 
proceeds to the guaranteed loan debt.
    (3) When it is necessary to enter a bid at a foreclosure sale, the 
lender may bid the amount that it determines is reasonable to protect 
its and the Agency's interest. At a minimum, the lender will bid the 
lesser of the net recovery value or the unpaid guaranteed loan balance.
    (i) Final loss claims. (1) Lenders may submit a final loss claim 
when the security has been liquidated and all proceeds have been 
received and applied to the account.
    (2) If a lender acquires title to property either through voluntary 
conveyance or foreclosure proceeding, the lender will submit a final 
loss claim after disposing of the property. The lender may pay 
reasonable maintenance expenses to protect the value of the property 
while it is owned by the lender. These may be paid as protective 
advances or deducted as liquidation expenses from the sales proceeds 
when the lender disposes of the property. The lender must obtain Agency 
written concurrence before incurring maintenance expenses which exceed 
the amounts allowed in Sec. 762.149(e)(1). Packager fees and outside 
consultant fees for servicing of guaranteed loans are

[[Page 163]]

not covered by the guarantee, and will not be paid in a final loss 
claim.
    (3) The lender will make its records available to the Agency for the 
Agency's audit of the propriety of any loss payment.
    (4) All lenders will submit the following documents with a final 
loss claim:
    (i) An accounting of the use of loan funds;
    (ii) An accounting of the disposition of loan security and its 
proceeds;
    (iii) A copy of the loan ledger indicating loan advances, interest 
rate changes, protective advances, and application of payments, rental 
proceeds, and security proceeds, including a running outstanding balance 
total; and
    (iv) Documentation, as requested by the Agency, concerning the 
lender's compliance with the requirements of this part.
    (5) The Agency will notify the lender of any discrepancies in the 
final loss claim or, approve or reject the claim within 40 days.
    (6) The Agency will reduce a final loss claim based on its 
calculation of the dollar amount of loss caused by the lender's 
negligent servicing of the account. Loss claims may be reduced or 
rejected as a result of the following:
    (i) A loss claim may be reduced by the amount caused by the lender's 
failure to secure property after a default, and will be reduced by the 
amount of interest that accrues when the lender fails to contact the 
borrower or takes no action to cure the default, once it occurs. Losses 
incurred as a result of interest accrual during excessive delays in 
collection, as determined by the Agency, will not be paid.
    (ii) Unauthorized release of security proceeds, failure to verify 
ownership or possession of security to be purchased, or failure to 
inspect collateral as often required so as to ensure its maintenance.
    (7) Losses will not be reduced for the following:
    (i) Servicing deficiencies that did not contribute materially to the 
dollar amount of the loss.
    (ii) Unaccounted security, as long as the lender's efforts to locate 
and recover the missing collateral was equal to that which would have 
been expended in the case of an unguaranteed loan in the lender's 
portfolio.
    (8) Default interest, late charges, and loan servicing fees are not 
payable under the loss claim.
    (9) The final loss will be the remaining outstanding balance after 
application of the estimated loss payment and the application of 
proceeds from the liquidation of the security.
    (10) If the final loss is less than the estimated loss, the lender 
will reimburse the Agency for the overpayment, plus interest at the note 
rate from the date of the estimated loss payment.
    (11) The lender will return the original guarantee marked paid after 
receipt of a final loss claim.
    (j) Future Recovery. The lender will remit any recoveries made on 
the account after the Agency's payment of a final loss claim to the 
Agency in proportion to the percentage of guarantee, in accordance with 
the lender's agreement, until the account is paid in full or otherwise 
satisfied.
    (k) Overpayments. The lender will repay any final loss overpayment 
determined by the Agency upon request.
    (l) Electronic funds transfer. The lender will designate one or more 
financial institutions to which any Agency payments will be made via 
electronic funds transfer.
    (m) Establishment of Federal debt. Any amounts paid by the Agency on 
account of liabilities of the guaranteed loan borrower will constitute a 
Federal debt owing to the Agency by the guaranteed loan borrower. In 
such case, the Agency may use all remedies available to it, including 
offset under the Debt Collection Improvement Act of 1996, to collect the 
debt from the borrower. Interest charges will be established at the note 
rate of the guaranteed loan on the date the final loss claim is paid.

[64 FR 7378, Feb. 12, 1999, as amended at 67 FR 44016, July 1, 2002; 69 
FR 44580, July 27, 2004]



Sec. 762.150  Interest assistance program.

    (a) Requests for interest assistance. (1) To apply for interest 
assistance in conjunction with a new request for guarantee, the lender 
will submit the following:

[[Page 164]]

    (i) A completed cash flow budget and interest assistance needs 
analysis portion of the application form. Interest assistance can be 
applied to each loan, only to one loan or any distribution the lender 
selects; however, interest assistance is only available on as many loans 
as necessary to achieve a feasible plan.
    (ii) For loans with unequal payments, a proposed debt repayment 
schedule which shows principal and interest payments for the subject 
loan, in each year of the loan.
    (2) To request interest assistance on an existing guaranteed loan, 
the lender must submit to the Agency the following:
    (i) A completed cash flow projection and interest assistance needs 
analysis portion of the application form. Interest assistance can be 
applied to each loan, only to one loan or any distribution the lender 
selects as required to achieve a feasible plan.
    (ii) For loans with unequal payments, a proposed debt repayment 
schedule which shows scheduled payments for the subject loan in each of 
the remaining years of the loan.
    (iii) Cash flow budgets and supporting justification to document 
that the request meets the requirements outlined in paragraph (b) of 
this section. This will include a typical cash flow if the projected 
cash flow budget is atypical.
    (3) Requests for interest assistance on lines of credit or loans 
made for annual operating purposes must be accompanied by a projected 
monthly cash flow budget.
    (b) Requirements. (1) The typical term of scheduled loan repayment 
will not be reduced solely for the purpose of maximizing eligibility for 
interest assistance. To be eligible for interest assistance, a loan must 
be scheduled over the maximum terms typically used by lenders for 
similar type loans within the limits set by Sec. 762.124 of this part. 
At a minimum, loans will be scheduled for repayment over the terms 
listed below, but for OL not to exceed the life of the security:
    (i) An OL for the purpose of providing annual operating and living 
expenses will be scheduled for repayment when the income is scheduled to 
be received from the sale of the crops, livestock, and livestock 
products which will serve as security for the loan.
    (ii) OL for purposes other than annual operating and living expenses 
(i.e. equipment, livestock, refinancing of existing debt) will be 
scheduled over 7 years from the effective date of the proposed interest 
assistance agreement.
    (iii) FO and SW secured by real estate will be scheduled for 20 
years from the closing date of the original note covered by the 
guarantee.
    (2) The lender must document that a feasible plan, as defined in 
Sec. 762.102(b), is not possible without reducing the interest rate on 
the borrower's loan and with the debt restructured over the term of 
repayment.
    (3) The lender must determine whether the borrower, including 
members of an entity, owns any significant assets that do not contribute 
directly to essential family living or farm operations. The lender must 
determine the market value of these assets and prepare a cash flow 
budget based on the assumption that the value of these assets will be 
used for debt reduction. If a feasible plan can then be achieved, the 
borrower is not eligible for interest assistance. All interest 
assistance calculations will be based on the cash flow budget which 
assumes that the assets will be sold.
    (4) A borrower's new guaranteed loan is eligible for interest 
assistance if all the following conditions are met:
    (i) The applicant needs interest assistance in order to achieve a 
feasible plan.
    (ii) If significant changes in the borrower's cash flow budget are 
anticipated after the initial 12 months, then the typical cash flow 
budget must demonstrate that the borrower will still have a feasible 
plan, following the anticipated changes, with or without interest 
assistance.
    (iii) If a feasible plan cannot be achieved, even with other 
creditors voluntarily adjusting their debts and with the interest 
assistance, the interest assistance request will not be approved.
    (5) An existing guaranteed loan is eligible for interest assistance 
if the borrower needs interest assistance to achieve a feasible plan as 
defined in

[[Page 165]]

Sec. 762.102(b), and the borrower meets the eligibility criteria of 
Sec. 762.120, except the provision regarding prior debt forgiveness. If 
a feasible plan cannot be achieved, even with other creditors 
voluntarily adjusting their debts and with the interest assistance, the 
interest assistance request will not be approved. If a borrower has 
multiple loans, interest assistance may be provided on one or each loan, 
as available, to the extent necessary to achieve a feasible plan.
    (6) The term of the interest assistance agreement under this section 
shall not exceed 10 years from the date of the first interest assistance 
agreement signed by the loan applicant, including entity members, or the 
outstanding term of the loan, as limited by this section, whichever is 
less.
    (7) The lender may charge a fixed or variable interest rate. The 
type of rate must be the same as the type of rate in the underlying note 
or line of credit agreement. The lender will reduce the interest rate 
charged the borrower's account by at least the amount of interest 
assistance.
    (8) The borrower must be an operator of not larger than a family 
size farm.
    (c) Interest assistance closing. (1) Initial guaranteed loans will 
be closed in accordance with Sec. 762.130.
    (2) The lender will then prepare and deliver to the Agency a closing 
report for each initial and existing guaranteed loan which has been 
granted interest assistance.
    (3) When all requirements have been met, the lender and the Agency 
will execute an interest assistance agreement.
    (d) Interest assistance claims and payments. (1) The interest 
assistance claim will be prepared by the lender. The following 
conditions apply to the claims process:
    (i) No claim period can exceed 12 months. The initial and final 
claim periods may be less than 12 months. In such claims, the 4 percent 
payment will be prorated over the number of months in the claim period. 
The period for all other claims must be 12 months.
    (ii) To permit the borrower to prepare for the upcoming year, a 
claim should be filed within 60 days of each anniversary date. Claims 
not filed within 1 year of the anniversary date will not be paid and the 
amount due the lender is permanently forfeited.
    (iii) If a claim is submitted without an interest assistance review 
in accordance with Sec. 762.102, when it is required, the claim will 
not be processed until the review is submitted by the lender.
    (iv) Upon full payment of the note or line of credit, the lender 
will immediately prepare the request for interest assistance payment and 
submit it to the Agency.
    (v) Interest assistance payments shall cease upon the assumption and 
transfer of the loan if the transferee was not liable for the debt on 
the effective date of the interest assistance agreement. The lender 
shall request payment through the date of the transfer or assumption. 
The claim must be submitted within 1 year or it will be denied and the 
payment permanently forfeited.
    (vi) All claims will be supported by detailed calculations of 
average daily principal balances during the claim period.
    (vii) The Agency will review the claim and the supporting 
documentation. If the information and the supporting documentation is 
not complete and correct, the reviewing official will notify the lender 
in writing, of the actions needed to correct the request.
    (viii) If there is a substitution of lender, a claim for the first 
lender's interest assistance, through the effective date of the 
substitution, will be submitted by the first lender and processed at the 
time of the substitution.
    (ix) Interest assistance claims shall be submitted concurrently with 
the submission of estimated loss claims where interest accrual ceases, 
or final loss claims that are not preceded by an estimated loss claim.
    (2) [Reserved]
    (e) Request for continuation of interest assistance. (1) For all 
interest assistance agreements exceeding 12 months, the lender will 
perform an analysis of the applicant's farming operation and need for 
continued interest assistance. The following information will be 
submitted to the Agency:
    (i) A summary of the operation's actual financial performance in the 
previous year, including a detailed income and expense statement.

[[Page 166]]

    (ii) A narrative description of the causes of any major differences 
between the previous year's projections and actual performance.
    (iii) A current balance sheet.
    (iv) A cash flow budget for the period being planned. A monthly cash 
flow budget is required for all lines of credit and operating loans made 
for annual operating purposes. All other loans may include either an 
annual or monthly cash flow budget.
    (v) A copy of the interest assistance needs analysis portion of the 
application form which has been completed based on the planned period's 
cash flow budget.
    (2) The loan will be eligible for continuation of interest 
assistance if the cash flow budget projects a feasible plan with 
interest assistance applied. However, interest assistance can be applied 
only to as many loans as necessary to achieve a positive cash flow for 
the plan period. If the cash flow budget indicates that the borrower 
requires a level of interest assistance greater than 4 percent to 
project a feasible plan, then the Agency will deny the continuation of 
interest assistance. Interest assistance will be reduced to zero during 
that period. See Sec. 762.102(b) for the definition of feasible plan.
    (3) The documentation listed above will be provided to the Agency 
concurrently with the lender's submission of its request for interest 
assistance payment. This information will be provided to the Agency 
within 60 days after the review date specified on the interest 
assistance agreement.
    (4) A request for continuation of interest assistance will be 
completed for 12 month periods, effective on the anniversary date.
    (5) The initial review may be submitted in conjunction with any 
claim within the initial 12 month period. The anniversary date and 
length of the review period will be stated on the interest assistance 
agreement. Any request for interest assistance adjustment submitted 
effective any time other than the review date will be denied, except for 
those cases where it is necessary to service the loan with rescheduling, 
reamortization, deferral or writedown.
    (6) If the review is not completed and submitted to the Agency 
within 1 year of the review date, no claim will be paid for that period.
    (f) Notification of Adverse Action. The lender will be notified in 
writing of all Agency decisions in which a request for interest 
assistance, a request for continuation of interest assistance or 
lender's claim for interest assistance are denied. The notification 
letter will provide specific reasons for the decision and appeals will 
be handled in accordance with parts 11 and 780 of this title.
    (g) Servicing of loans covered by an interest assistance agreement. 
(1) Loans covered by interest assistance agreements cannot be 
consolidated.
    (2) The loan will be transferred with the interest assistance 
agreement only in cases where the transferee was liable for the debt at 
the time interest assistance was granted. Under no other circumstances 
will the interest assistance be transferred. If interest assistance is 
necessary for the transferee to achieve a feasible plan, the lender may 
request such assistance, which may be approved if interest assistance 
funds are available and the applicant is eligible. The maximum length of 
the agreement will be 10 years from the date of the first agreement 
covering a loan for which the transferee was liable. If interest 
assistance is necessary for a feasible plan and funds are not available, 
the request for assumption of the Agency guaranteed debt will be denied.
    (3) When consideration is given to using a debt writedown to service 
a delinquent account, the subsidy level will be recalculated prior to 
any writedown. If a feasible plan can be obtained using interest 
assistance and funds are available, then the interest assistance will be 
authorized and no writedown will be approved. If a feasible plan cannot 
be achieved using 4 percent interest assistance, all further 
calculations for determining debt writedown eligibility and amounts to 
be written down will be based on the borrower receiving no interest 
assistance. If debt writedown is approved, the interest assistance claim 
for the previous review period will be processed in conjunction with the 
writedown loss claim. The interest assistance agreement will not be 
canceled and the anniversary date can remain the same or be re-
established

[[Page 167]]

under the same guidelines that it was originally established. If the 
lender determines through its annual analysis that interest assistance 
is necessary for a feasible plan, a request to reinstate the subsidy in 
a subsequent review period may be submitted in accordance with paragraph 
(e) of this section.
    (4) In the event of rescheduling or deferral of loans with interest 
assistance, interest assistance will remain available for that loan 
under the terms of the existing interest assistance agreement. 
Additional years of interest assistance and/or increases in the 
restructured loan amount will require additional funding. If the 
additional interest assistance is needed in order to produce a feasible 
plan throughout the life of the rescheduled loan and funds are not 
available for the additional interest assistance, then the rescheduling 
will not be approved by the Agency. In no case will the subsidy be 
extended more than 10 years from the effective date of the first 
interest assistance agreement signed by the loan applicant or by anyone 
who signed the note or line of credit agreement.
    (5) In cases where the interest on a loan covered by an interest 
assistance agreement is reduced by court order in a reorganization plan 
under the bankruptcy code, interest assistance agreement will be 
terminated effective on the date of the court ordered interest 
reduction. The lender will file a claim due through the effective date 
of the court ordered interest reduction. Guaranteed loans which have had 
their interest reduced by bankruptcy court order are not eligible to 
receive interest assistance.
    (6) For Loan Guarantees held by holders, Agency purchase of the 
guaranteed portion of a loan will stop interest assistance payments on 
that portion. Interest assistance payments will cease upon termination 
of the Loan Guarantee, upon reaching the expiration date contained in 
the agreement or upon cancellation by the Agency.
    (7) When a borrower defaults on a loan, interest assistance may be 
considered in conjunction with a rescheduling action in accordance with 
Sec. 762.145(b). After the meeting required by Sec. 762.143(b)(3) and 
consideration of actions to correct the delinquency, the lender will 
notify the Agency of the results of the meeting. If the restructuring 
proposal includes interest assistance, the lender will provide the items 
required by paragraph (d) of this section in addition to those items 
required by Sec. 762.145. Liquidation must not be initiated, except in 
accordance with Sec. 762.143(b)(3)(v).
    (h) Cancellation of interest assistance agreement. The interest 
assistance agreement is incontestable except for fraud or 
misrepresentation, of which the lender and borrower have actual 
knowledge at the time that the interest assistance agreement is 
executed, or which the lender or borrower participates in or condones.
    (i) Adjustment of assistance level between review dates. After the 
initial or renewal request for interest assistance is processed, no 
adjustments can be made until the next review or adjustment date except 
when necessary to service the loan with a rescheduling or deferral.
    (j) Excessive interest assistance. Upon written notice to the 
lender, borrower and any holder, the Agency may amend or cancel the 
interest assistance agreement and collect from the lender any amount of 
interest Assistance granted which resulted from incomplete or inaccurate 
information, an error in computation, or any other reason which resulted 
in payment that the lender was not entitled to receive.
    (k) The Deputy Administrator for Farm Loan Programs has the 
authority to grant an exception to any requirement involving interest 
Assistance if it is in the best interest of the Government.

[64 FR 7378, Feb. 12, 1999; 64 FR 38298, July 16, 1999, as amended at 66 
FR 7567, Jan. 24, 2001]



Sec. Sec. 762.151-762.158  [Reserved]



Sec. 762.159  Pledging of guarantee.

    A lender may pledge all or part of the guaranteed or unguaranteed 
portion of the loan as security to a Federal Home Loan Bank, a Federal 
Reserve Bank, a Farm Credit System Bank, or any other funding source 
determined acceptable by the Agency.

[70 FR 56107, Sept. 26, 2005]

[[Page 168]]



Sec. 762.160  Assignment of guarantee.

    (a) The following general requirements apply to assigning guaranteed 
loans:
    (1) Subject to Agency concurrence, the lender may assign all or part 
of the guaranteed portion of the loan to one or more holders at or after 
loan closing, if the loan is not in default. However, a line of credit 
cannot be assigned. The lender must always retain the unguaranteed 
portion in their portfolio, regardless of how the loan is funded.
    (2) The Agency may refuse to execute the Assignment of Guarantee and 
prohibit the assignment in case of the following:
    (i) The Agency purchased and is holder of a loan that was assigned 
by the lender that is requesting the assignment.
    (ii) The lender has not complied with the reimbursement requirements 
of Sec. 762.144(c)(7), except when the 180 day reimbursement or 
liquidation requirement has been waived by the Agency.
    (3) The lender will provide the Agency with copies of all 
appropriate forms used in the assignment.
    (4) The guaranteed portion of the loan may not be assigned by the 
lender until the loan has been fully disbursed to the borrower.
    (5) The lender is not permitted to assign any amount of the 
guaranteed or unguaranteed portion of the loan to the loan applicant or 
borrower, or members of their immediate families, their officers, 
directors, stockholders, other owners, or any parent, subsidiary, or 
affiliate.
    (6) Upon the lender's assignment of the guaranteed portion of the 
loan, the lender will remain bound to all obligations indicated in the 
Guarantee, Lender's Agreement, the Agency program regulations, and to 
future program regulations not inconsistent with the provisions of the 
Lenders Agreement. The lender retains all rights under the security 
instruments for the protection of the lender and the United States.
    (b) The following will occur upon the lender's assignment of the 
guaranteed portion of the loan:
    (1) The holder will succeed to all rights of the Guarantee 
pertaining to the portion of the loan assigned.
    (2) The lender will send the holder the borrower's executed note 
attached to the Guarantee.
    (3) The holder, upon written notice to the lender and the Agency, 
may assign the unpaid guaranteed portion of the loan. The holder must 
assign the guaranteed portion back to the original lender if requested 
for servicing or liquidation of the account.
    (4) The Guarantee or Assignment of Guarantee in the holder's 
possession does not cover:
    (i) Interest accruing 90 days after the holder has demanded 
repurchase by the lender, except as provided in the Assignment of 
Guarantee and Sec. 762.144(c)(3)(iii).
    (ii) Interest accruing 90 days after the lender or the Agency has 
requested the holder to surrender evidence of debt repurchase, if the 
holder has not previously demanded repurchase.
    (c) Negotiations concerning premiums, fees, and additional payments 
for loans are to take place between the holder and the lender. The 
Agency will participate in such negotiations only as a provider of 
information.

[70 FR 56107, Sept. 26, 2005]



PART 764_EMERGENCY FARM LOANS--Table of Contents




Sec.
764.1 Purpose.
764.2 Definitions.
764.3 Emergency loan funds uses.
764.4 Eligibility requirements.
764.5 Limitations.
764.6 Interest rate.
764.7 Loan terms.
764.8 Repayment and security requirements.
764.9 Appraisal and valuation requirements.
764.10 Insurance for loan security.
764.11 Charges and fees.

    Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.

    Source: 67 FR 795, Jan. 8, 2002, unless otherwise noted.



Sec. 764.1  Purpose.

    The purpose of the Emergency Loan Program is to provide financial 
assistance to family farmers who have suffered losses as the result of a 
disaster so that they can return to normal farming operations as soon as 
possible after the disaster. Specifically, this

[[Page 169]]

part describes the policies and procedures of the Agency for making 
Emergency loans to operators of such farms.



Sec. 764.2  Definitions.

    Act means the Consolidated Farm and Rural Development Act (7 U.S.C. 
1921 et seq.).
    Additional security means property that provides security in excess 
of the amount of security value equal to the loan amount, excluding 
security described in Sec. 764.8(g).
    Adequate security means property that provides a security value at 
least equal to the loan amount.
    Agency means the Farm Service Agency, including its employees, any 
predecessor agency, and any successor agency.
    Agricultural commodity means livestock, grains, cotton, oilseeds, 
dry beans, tobacco, peanuts, sugar beets, sugar cane, fruit, vegetable, 
forage, tree farming, nursery crops, nuts, aquacultural species, and 
other plant or animal production as determined by the Agency.
    Allowable costs means those costs for replacement or repair that are 
supported by acceptable documentation, including but not limited to 
written estimates, invoices, and bills.
    Applicant means an individual or entity (including each owner of the 
entity unless specified otherwise) operating a farming operation at the 
time of the disaster, who is requesting assistance from the Agency under 
this part. All requirements of applicants apply to owners of the entity 
individually and collectively unless specified otherwise.
    Aquacultural species means aquatic organisms (including fish, 
mollusks, crustaceans or other invertebrates, amphibians, reptiles, or 
aquatic plants) raised in a controlled or selected environment which the 
applicant has exclusive rights to use.
    Basic part of an applicant's total farming operation means any 
single agricultural commodity or livestock production enterprise of an 
applicant's farming operation which normally generates sufficient income 
to be considered essential to the success of such farming operation.
    Borrower means an individual or entity which has an outstanding 
obligation to the Agency under any Farm Loan Program loan, without 
regard to whether the loan has been accelerated. A borrower includes all 
parties liable for such obligation owed to the Agency, including 
collection-only borrowers, except for debtors whose total loans and 
accounts have been voluntarily or involuntarily foreclosed, sold, or 
conveyed; or who have been discharged of all such obligations owed to 
the Agency.
    Chattel means any property that is not real estate.
    Chattel or real estate essential to the farming operation means 
chattel or real estate that would be necessary for the applicant to 
continue operating the farm on and after the disaster in a manner 
similar to the manner in which the farm was operated immediately prior 
to the disaster, as determined by the Agency.
    Corporation means a private domestic entity recognized as a 
corporation and authorized as a corporation under the laws of the State 
or States in which the entity does business.
    County means a local administrative subdivision of a State or 
similar political subdivision of the United States.
    Debt forgiveness means reducing or terminating a debt under the Act 
in a manner that results in a loss to the Agency (excluding a 
consolidation, rescheduling, reamortization, or deferral), through:
    (1) Writing down or writing off a debt pursuant to 7 U.S.C. 2001;
    (2) Compromising, adjusting, reducing, or charging off a debt or 
claim pursuant to 7 U.S.C. 1981; or
    (3) Paying a loss pursuant to 7 U.S.C. 2005 on a Farm Loan Program 
loan guaranteed by the Agency.
    Disaster means an event of unusual and adverse weather conditions, 
other natural phenomena, or quarantine, that has substantially affected 
producers of agricultural commodities by causing physical property or 
production losses in a county, or similar political subdivision, that 
triggered the inclusion of such county or political subdivision in the 
disaster area designated by the Agency.
    Disaster area means the county, declared or designated as a disaster 
area

[[Page 170]]

for Emergency loan assistance as a result of disaster related losses and 
counties contiguous to those counties declared or designated as disaster 
areas.
    Disaster yield means the per-acre yield of an agricultural commodity 
for the farming operation during the production period when the disaster 
occurred.
    Entity means a partnership, corporation, cooperative, joint 
operation, trust or limited liability company that is an operator of an 
operation engaged in farming, ranching, or aquaculture activities at the 
time the disaster occurs.
    Essential family household expenses means the expenses associated 
with providing food, clothing, and shelter necessary to maintain the 
borrower and the immediate family of the borrower.
    Established farmer means a farmer who is an operator of the farming 
operation (in the case of a farming operation operated by an entity, its 
owners as a group) who:
    (1) Actively participated in the operation and the management, 
including but not limited to, exercising control over, making decisions 
regarding, and establishing the direction of the farming operation at 
the time of the disaster;
    (2) Spends a substantial portion of time in carrying out the farming 
operation;
    (3) Planted the crop, or purchased or produced the livestock on the 
farming operation;
    (4) In the case of an entity, is primarily engaged in farming and 
has over 50 percent of its gross income from all sources from its 
farming operation based on the farming operation's projected cash flow 
for the next crop year or the next 12 month period, as mutually 
determined; and
    (5) Is not:
    (i) A corporation with an ownership interest of 50 percent or more 
held by one or more estates, trusts, other corporations, partnerships, 
or joint operations;
    (ii) A partnership or joint operation with an ownership interest of 
50 percent or more held by one of more estates, trusts, corporations, 
other partnerships or other joint operations;
    (iii) An integrated livestock, poultry, or fish processor who 
operates primarily and directly as a commercial business through 
contracts or business arrangements with farmers, except a grower under 
contract with an integrator or processor may be considered an 
established farmer, provided the operation is not managed by an outside 
full-time manager or management service and such loans shall be based on 
the applicant's share of the agricultural production as contained in the 
contract; or
    (iv) An operation that employs a full-time farm manager.
    Family farm means a farm that:
    (1) Produces agricultural commodities for sale in sufficient 
quantities so 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 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.
    (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 requirements for the farm 
enterprise provided by:
    (i) The borrower and family members for a loan made to an 
individual.
    (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.
    (5) May use a reasonable amount of full-time hired labor and 
seasonal labor during peak load periods.
    Farm Loan Program loan means a Farm Ownership loan, Operating loan, 
Emergency loan, Soil and Water loan, or Economic Emergency loan made or 
guaranteed by the Agency pursuant to the Act.
    Farmer means individuals, cooperatives, corporations, partnerships 
or joint operations who are farmers,

[[Page 171]]

ranchers, or aquaculture operators actively engaged in their operation 
at the time a disaster occurs.
    Feasible plan means a plan based upon the applicant's records that 
show the farming operation's actual production and expenses. These 
records will be used along with realistic anticipated prices, including 
farm program payments when available, to determine that the income from 
the farming operation, along with any other reliable off-farm income, 
will provide the income necessary for an applicant to at least be able 
to:
    (1) Pay all operating expenses and all taxes that are due during the 
projected farm budget period;
    (2) Meet necessary payments on all debts; and
    (3) Provide living expenses for family members of an individual 
borrower or a wage of the farm operator in the case of an entity 
borrower which is in accordance with the essential family needs. Family 
members include the individual borrower, or farm operator in the case of 
an entity, and the immediate members of the family who reside in the 
same household.
    Hazard insurance means coverage against losses due to fire, 
windstorm, lightning, hail, explosion, business interruption, riot, 
civil commotion, aircraft, land vehicles, marine vehicles, smoke, 
builders risk, public liability, property damage, flood or mudslide, 
workman's compensation, or any similar insurance that is available and 
needed to protect the security, or that is required by law.
    Household contents means the essential household items necessary to 
maintain viable living quarters such as: stove, refrigerator, furnace, 
couch, chairs, tables, beds, lamps, clothes, etc. The term excludes all 
luxury items including jewelry, furs, antiques, paintings, etc.
    Livestock means a member of the animal kingdom, or product thereof, 
as determined by the Agency.
    Majority interest means an ownership interest of more than 50 
percent of the entity.
    Non-essential asset means those assets in which the applicant has an 
ownership interest that do not contribute a net income to pay essential 
family living expenses or to maintain a sound farming operation and are 
not exempt from judgment creditors or in a bankruptcy action.
    Nonfarm enterprise means any nonfarm business enterprise, including 
recreation, that is closely associated with the farm operation and 
located on or adjacent to the farm and provides income to supplement 
farm income. This may include, but is not limited to, such enterprises 
as raising earthworms, exotic birds, tropical fish, dogs, and horses for 
nonfarm purposes, welding shops, roadside stands, boarding horses and 
riding stables.
    Normal production yield means:
    (1) The per-acre actual production history of the crops produced by 
the farming operation used to determine Federal crop insurance payments 
or payment under the Non-Insured Assistance Program for the production 
year during which the disaster occurred;
    (2) When the actual production history is not available, the 
applicant's own production records for the previous three years will be 
used. If the applicant's production records are not available, the 
records of production on which FSA farm program payments are made that 
are contained in the applicant's farm program file, for the previous 
three years will be used;
    (3) When the production records outlined in paragraphs (a) and (b) 
of this definition are not available, the county average production 
yield will be used.
    Owner means those persons with an interest in the entity as a 
stockholder, partner, member, or joint operator.
    Physical loss means verifiable damage or destruction with respect to 
real estate or chattel, excluding annual growing crops.
    Production loss means verifiable damage or destruction with respect 
to annual growing crops.
    Quarantine means a quarantine imposed by the Secretary under the 
Plant Protection Act or animal quarantine laws (as defined in section 
2509 of the Food, Agriculture, Conservation and Trade Act of 1990).
    Security value means the Agency-established market value of property 
(less the value of any prior liens) used as security for a loan under 
this part as of the date of the closing of the loan.

[[Page 172]]

    United States means 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.
    Working capital means cash available to conduct normal daily farming 
or ranching operations including, but not limited to, feed, seed, 
fertilizer, pesticides, farm or ranch supplies, cooperative stock, and 
cash rent.

[67 FR 795, Jan. 8, 2002; 67 FR 7941, Feb. 21, 2002, as amended at 68 FR 
7695, Feb. 18, 2003]



Sec. 764.3  Emergency loan funds uses.

    (a) Physical losses--(1) Real estate losses. Emergency loans may be 
used to address the needs of the farming operation associated with 
physical losses of essential real estate that were the result of a 
disaster to:
    (i) Acquire or enlarge the farm, as specified in Sec. 1943.16(a) of 
this title, as long such acquisition or enlargement does not cause the 
farm to exceed the requirements for a family farm;
    (ii) Replace or repair buildings or other structures which are 
essential to the ongoing viability of the operation. The Agency will 
finance such replacement or repair only to the extent that the 
structures conform to industry standards and meet the needs of the 
operation and intended purposes of the structure.
    (iii) Pay for activities to promote soil and water conservation and 
protection on the family farm as specified in Sec. 1943.16(c) of this 
title;
    (iv) Pay loan closing costs related to acquiring, enlarging, or 
improving the family farm as specified in Sec. 1943.16(d) of this 
title, that an applicant cannot pay from other sources;
    (v) Replace land or water resources on the family farm which 
resources cannot be restored;
    (vi) Pay costs associated with land and water development for 
conservation or use purposes;
    (vii) Establish a new site for farm dwelling and service buildings 
outside of a flood or mudslide area; and
    (viii) Replace land from the family farm that was sold or conveyed 
as a direct result of the disaster, if such land is necessary for the 
farming operation to be effective.
    (2) Chattel losses. Emergency loans may be used to address the needs 
of the farming operation associated with the physical losses of 
essential chattel that were the result of a disaster to:
    (i) Purchase livestock and farm equipment, including but not limited 
to quotas, and cooperative stock for credit, production, processing, or 
marketing purposes;
    (ii) Pay customary costs associated with obtaining, planning, and 
closing a loan that an applicant cannot pay from other sources (e.g. 
fees for legal, architectural, and other technical services, but not 
fees for agricultural management consultation and preparation of Agency 
forms);
    (iii) Repair or replace essential household contents damaged in the 
disaster;
    (iv) Pay the costs to restore perennials that produce an 
agricultural commodity, to the stage of development the damaged 
perennials had obtained prior to the disaster;
    (v) In the case of a farming operation that has suffered livestock 
losses not from breeding stock, pay essential farm operating and family 
household expenses; and
    (vi) Refinance debt (in the case of Farm Loan Program loan debt, as 
long as the applicant has not refinanced the loan more than 4 times).
    (b) Production losses. Emergency loans may be used to address the 
losses of the farming operation associated with production of 
agricultural commodities (except the losses associated with the loss of 
livestock) of the farming operation that were the result of a disaster 
to:
    (1) Pay costs associated with reorganizing the family farm to 
improve its profitability except that such costs shall not include the 
payment of bankruptcy expenses;
    (2) Pay annual operating expenses, which include, but are not 
limited to, feed, seed, fertilizer, pesticides, farm or ranch supplies, 
cooperative stock, and cash rent;
    (3) Pay costs associated with Federal or State-approved standards 
under the Occupational Safety and Health Act of 1970 (29 U.S.C. 655 and 
667) if the applicant can show that compliance or non-compliance with 
the standards will cause substantial economic injury;

[[Page 173]]

    (4) Pay training costs required or recommended by the Agency;
    (5) Pay essential family household expenses;
    (6) Refinance debt (in the case of Farm Loan Program loan debt, as 
long as the applicant has not refinanced the loan more than 4 times); 
and
    (7) Replace lost working capital.



Sec. 764.4  Eligibility requirements.

    (a) General borrower eligibility requirements. An applicant for an 
Emergency loan must meet the following requirements:
    (1) Legal capacity. The applicant must have the legal capacity to 
incur the obligation of the loan.
    (2) Citizenship. (i) 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.
    (ii) 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.
    (3) Family farm and nonfarm enterprise. The applicant's farming 
operation must qualify as a family farm and must not be a nonfarm 
enterprise.
    (4) Established farmer. An applicant must be an established farmer.
    (5) Owner and operator requirements--(i) Loans for physical losses 
to real estate. In the case of a loan for a purpose specified in Sec. 
764.3(a)(1), an applicant must be:
    (A) The owner and operator of the farming operation; or
    (B) An operator of the farming operation whose lease on the affected 
real estate would exceed the term of the loan and give the Agency prior 
notification of the termination of the lease during the term of the 
loan, and whose lessor would provide the Agency a mortgage on the real 
estate as security for the loan.
    (ii) Loans for physical losses to chattel. In the case of a loan for 
a purpose specified in Sec. 764.3(a)(2), an applicant must be the 
operator of the farming operation.
    (iii) Loans for production losses. In the case of a loan for a 
purpose specified in Sec. 764.3(b), an applicant must be the operator 
of the farming operation.
    (6) Entity applicants. For entity applicants:
    (i) If the owners holding a majority interest in the entity 
applicant are related by blood or marriage, at least one of such related 
owners must operate the family farm.
    (ii) If the owners holding a majority interest in the entity 
applicant are not related by blood or marriage, the majority interest 
holders must all operate the family farm.
    (iii) If the entity applicant has an operator interest in any other 
farming operation, that farming operation must not exceed the 
requirements of a family farm.
    (7) Intent to continue farming. The applicant must demonstrate the 
intent to continue the farm operation after the disaster.
    (8) Credit history. The applicant must demonstrate a credit history 
satisfactory to the Agency. As part of the credit history the Agency 
will determine whether the applicant has dealt with the Agency in good 
faith. This includes the applicant providing current, complete, and 
truthful information when applying for assistance and in all past 
dealings with the Agency. The Agency will also examine whether the 
applicant has properly fulfilled its obligations to other parties, 
including other Federal agencies. The Agency may use credit reports or 
any other available information to evaluate credit history.
    (9) Availability of credit elsewhere. The applicant must be unable 
to obtain sufficient credit elsewhere at reasonable rates and terms. To 
establish this, the applicant must obtain written declinations of credit 
from legally organized commercial lending institutions within reasonable 
proximity of the applicant that specify the reasons for the declination 
as follows:
    (i) In the case of a loan for $300,000 or more, two written 
declinations of credit are required;

[[Page 174]]

    (ii) In the case of a loan of less than $300,000, one written 
declination of credit is required; and
    (iii) In the case of a loan of $100,000 or less, the Agency may 
waive the requirement for obtaining a written declination of credit if 
the Agency determines that it would pose an undue burden on the 
applicant, the applicant certifies that they cannot get credit 
elsewhere, and based on the applicant's circumstances credit is not 
likely to be available;
    (iv) Notwithstanding the applicant's submission of the required 
written declinations of credit, the Agency may contact other commercial 
lending institutions within reasonable proximity of the applicant and 
make an independent determination of the applicant's ability to obtain 
credit elsewhere.
    (10) Prior debt forgiveness. The applicant must not have received 
debt forgiveness from the Agency on more than one occasion on or before 
April 4, 1996, or any time after April 4, 1996.
    (11) Federal judgment lien. The applicant's property must not be 
subject to a Federal judgment lien (other than a United States Tax Court 
lien).
    (12) Managerial ability. The applicant must have sufficient 
managerial ability to assure reasonable prospects of loan repayment, as 
determined by the Agency. The applicant must demonstrate this managerial 
ability by education, on-the-job training, or farming experience within 
the last 5 years that covers an entire production cycle.
    (13) Borrower training. The applicant must agree to meet the 
borrower training requirements in accordance with Sec. 1924.74 of this 
title.
    (14) Prior drug convictions. The applicant cannot have been 
convicted under Federal or State law of planting, cultivating, growing, 
producing, harvesting, or storing a controlled substance, as defined in 
21 CFR part 1308, during the current crop year or the previous 4 crop 
years.
    (15) Recovery of duplicative benefits. The applicant must agree to 
repay any duplicative Federal assistance to the agency providing such 
assistance. A person receiving Federal assistance for a major disaster 
or emergency is liable to the United States to the extent that the 
assistance duplicates benefits available to the person for the same 
purpose from another source.
    (b) Additional Emergency loan eligibility requirements--(1) Timely 
loan application. A loan application must be received by the Agency not 
later than 8 months after the date the disaster is declared or 
designated in the county of the applicant's farming operation.
    (2) Qualifying losses--(i) Loss must occur in a disaster area. The 
applicant may seek an Emergency loan only with respect to a family farm 
that had production or physical losses as a result of a disaster in a 
disaster area.
    (ii) Eligible production loss. For production loss loans, the 
applicant must have a disaster yield that is at least 30 percent below 
the normal production yield of any single crop, as determined by the 
Agency, that comprises a basic part of an applicant's total farming 
operation.
    (iii) Eligible physical loss. For physical loss loans, the applicant 
must have suffered disaster-related damage to chattel or real estate 
essential to the farming operation, to household items that must be 
repaired or replaced, to harvested or stored crops, or to perennial 
crops.
    (3) Changes in ownership structure. The ownership structure of a 
family farm may change between the time of a qualifying loss and the 
time an Emergency loan is closed. In such case, all of the following 
requirements must be met:
    (i) The applicant, in its new form, including all owners must meet 
all applicable eligibility requirements contained in this section;
    (ii) The new individual applicant, or all owners of a new entity 
applicant must have had an ownership interest in the farming operation 
at the time of the disaster; and
    (iii) The amount of the loan will be based on the percentage of the 
former farming operation transferred to the new applicant and in no 
event will the individual portions, aggregated, equal more than would 
have been authorized for the former farming operation.
    (4) Insurance requirement. Emergency loan funds may not be used for 
physical loss purposes (excluding losses to livestock) unless that 
physical property

[[Page 175]]

was covered by general hazard insurance at the time that the damage 
caused by the natural disaster occurred. The level of the coverage in 
effect at the time of the disaster must have been the tax or cost 
depreciated value, whichever is less. Chattel property must have been 
covered at the tax or cost depreciated value, whichever is less, when 
such insurance was readily available and the benefits of the coverage 
(i.e. the amount of coverage equaling the lesser of the property's tax 
or cost depreciated value) justify the cost of the insurance.

[67 FR 795, Jan. 8, 2002, as amended at 68 FR 62223, Nov. 3, 2003]



Sec. 764.5  Limitations.

    (a) General limitations--(1) Highly erodible soil and wetlands 
conservation. The Agency will not make a loan under this part for any 
purpose that contributes to erosion of highly-erodible land or the 
conversion of wetlands to produce an agricultural commodity.
    (2) Construction. Any construction financed by the Agency must 
comply with applicable Federal, State, local, and industry building 
standards and subpart A of part 1924 of this title.
    (3) Refinancing. Emergency loan funds may not be used to refinance 
consumer debt, such as automobile loans, or credit card debt unless such 
credit card debt is directly attributable to the farming operation.
    (b) Restriction on loan amount. An Emergency loan may not exceed the 
lesser of:
    (1) The amount of credit necessary to restore the family farming 
operation to its pre-disaster condition;
    (2) In the case of a physical loss loan, the total eligible physical 
losses caused by the disaster; or
    (3) In the case of a production loss loan, 100 percent of the total 
actual production loss sustained by the applicant calculated pursuant to 
paragraph (d) of this section.
    (c) Maximum cumulative loan principal. The maximum cumulative 
Emergency loan principal that any individual or entity may have 
outstanding is $500,000.
    (d) Production losses. The applicant's actual production loss with 
respect to a crop is calculated as follows:
    (1) Subtract the applicant's disaster yield from the applicant's 
normal production yield to determine the applicant's per acre production 
loss;
    (2) Multiply the applicant's per acre production loss by the number 
of acres of the farming operation devoted to the crop to determine the 
volume of the production loss;
    (3) Multiply the volume of the applicant's production loss by the 
market price for such crop as determined by the Agency to determine the 
dollar value for the production loss; and
    (4) Subtract any other disaster related compensation or insurance 
indemnities received or to be received by the applicant for the 
production loss.
    (e) Physical loss--(1) Amount of loss. The applicant's total 
eligible physical loss is calculated as follows:
    (i) Add the allowable costs associated with replacing or repairing 
chattel covered by hazard insurance (excluding labor, machinery, 
equipment, or materials contributed by the applicant to repair or 
replace chattel);
    (ii) Add the allowable costs associated with repairing or replacing 
real estate, covered by hazard insurance;
    (iii) Add the value of livestock and livestock products (such 
valuation will be based on a national or regional valuation of species 
or product classification, whichever the Agency determines is more 
accurate);
    (iv) Add the allowable costs to restore perennials, which produce an 
agricultural commodity, to the stage of development the damaged 
perennials had obtained prior to the disaster;
    (v) Add, in the case of an applicant that is an individual, the 
allowable costs associated with repairing or replacing essential 
household contents, not to exceed $20,000; and
    (vi) Subtract any other disaster-related compensation or insurance 
indemnities received or to be received by the applicant for the loss or 
damage to the chattel or real estate.
    (2) Documentation. In the case of physical losses associated with 
livestock, the applicant must have written documentation of the 
inventory of livestock and records of livestock product sales sufficient 
to allow the Agency to value such livestock or livestock products just 
prior to the loss.

[[Page 176]]



Sec. 764.6  Interest rate.

    The interest rate applicable for an Emergency loan will be the lower 
of the interest rate at the time of either loan approval or loan closing 
and in no event shall exceed 8 percent annually.



Sec. 764.7  Loan terms.

    (a) Basis for repayment. The Agency schedules repayment of Emergency 
loans based on the useful life of the loan security, the applicant's 
repayment ability, and the type of loss.
    (b) Minimum payment requirement. The repayment schedule must include 
at least one payment every year.
    (c) Repayment of loans for annual operating expenses. Emergency 
loans for annual operating expenses, except those expenses associated 
with establishing a perennial crop, must be repaid within 12 months. The 
Agency, however, may extend this term to not more than 18 months to 
accommodate the production cycle of the agricultural commodities of the 
farming operation.
    (d) Repayment of loans for production or physical losses to chattel. 
The repayment schedule for loans for production losses or physical 
losses to chattel (including but not limited to assets with an expected 
life between 1 and 7 years) may not exceed 7 years. If necessary to 
improve the repayment ability of the loan and real estate security is 
available, the term of the loan may be extended up to a total length not 
to exceed 20 years.
    (e) Repayment of loans for physical losses to real estate. The 
repayment schedule for loans for physical losses to real estate is based 
on repayment ability of the applicant and the useful life of the 
security, but in no case will the term of repayment exceed 40 years.



Sec. 764.8  Repayment and security requirements.

    (a) General requirements--(1) Ability to repay. The applicant must 
submit a feasible plan that demonstrates the applicant's ability to 
repay the loan. The plan also must demonstrate that the applicant will 
meet all other credit needs and obligations, including judgments, for 
which the applicant is legally responsible.
    (2) Sufficient equity. The applicant must have sufficient equity in 
the security pledged for an Emergency loan to provide adequate security 
for the loan except as permitted in paragraph (f) of this section. The 
applicant must provide additional security, if available, not to exceed 
150 percent of the loan amount.
    (3) Interests in property not owned by the applicant. Interests in 
property not owned by the applicant (such as leases that provide a 
mortgageable value, water rights, easements, mineral rights, and 
royalties) can be offered as security for the loan and will be 
considered in determining whether adequate security is available.
    (b) Real estate loans. In the case of an Emergency loan for real 
estate losses, the loan shall be secured at a minimum by the real estate 
that is being purchased, repaired, replaced, or improved with the loan 
funds.
    (c) Chattel and production loans. In the case of an Emergency loan 
for chattel and production losses, the loan shall be secured, at a 
minimum, by the chattel that is being purchased, repaired, replaced, 
refinanced, or produced with the loan funds.
    (d) Agency lien position--(1) Real estate security. If real estate 
is pledged as security for a loan, the Agency must obtain a first lien, 
if available, on the real estate. When a first lien is not available, 
the Agency may take a junior lien under the following conditions:
    (i) The prior lien does not contain any provision that may 
jeopardize the Agency's interest or the applicant's ability to repay the 
loan to the Agency;
    (ii) Prior lienholders agree to notify the Agency of acceleration 
and foreclosure whenever State law or other arrangements do not require 
such notice; and
    (iii) The applicant must agree to obtain permission from the Agency 
prior to granting any additional security interests in the real estate.
    (2) Real estate held under a purchase contract. If the real estate 
offered as security is held under a recorded purchase contract:
    (i) The applicant must provide a security interest in the real 
estate;
    (ii) The applicant and the purchase contract holder must agree in 
writing that any insurance proceeds received

[[Page 177]]

to compensate for real estate losses will be used only to replace or 
repair the damaged real estate;
    (iii) The applicant must refinance the existing purchase contract, 
or demonstrate that financing is not available, if an acceptable 
contract of sale cannot be negotiated or the purchase contract holder 
refuses to agree to apply all the insurance proceeds to repair or 
replace the damaged real estate and wants to retain some of the proceeds 
as an extra payment on the balance owed;
    (iv) The purchase contract must not be subject to summary 
cancellation on default and must not contain any provisions that are 
contrary to the Agency's best interests; and
    (v) The contract holder must agree in writing to notify the Agency 
of any breach by the purchaser, and give the Agency the option to 
rectify the conditions that amount to a breach within 30 days after the 
date the Agency receives written notice of the breach.
    (3) Chattel security. If chattel property is pledged as security for 
a loan the Agency must obtain a first lien on the chattel that is being 
purchased, repaired, replaced, refinanced, or produced with the loan 
funds.
    (e) Same security for multiple loans. The same property may be 
pledged as security for more than one Farm Loan Program loan.
    (f) Lack of adequate security. When adequate security is not 
available because of the disaster, the loan application may be approved 
if the Agency determines, based on the plan required in paragraph (a)(1) 
of this section, that there is a reasonable assurance that the applicant 
has the ability to repay the loan (based on an on-going operational 
basis, excluding special one-time sources of income or expenses) 
provided:
    (1) The applicant has pledged as collateral for the loan, all 
available personal and business collateral, except those items listed in 
paragraphs (h)(1) and (h)(2) of this section;
    (2) The feasible plan, approved by the Agency, indicates the loan 
will be repaid based upon the applicant's production and income history 
and addresses applicable pricing risks through the use of marketing 
contracts, hedging, options, revenue insurance or similar risk 
management practices;
    (3) The applicant has had positive net cash farm income in at least 
3 of the past 5 years; and
    (4) The applicant has given the Agency an assignment on any USDA 
program payments to be received.
    (g) Conditions for taking other assets as security--(1) Conditions. 
In addition to the requirements for adequate and additional security, 
the Agency will take a security interest in other assets (other than 
assets listed under the exceptions in paragraph (h) of this section), if 
available, when:
    (i) An applicant has non-essential assets that are not being 
converted to cash to reduce the loan amount; or
    (ii) The real estate security and chattel security do not provide 
adequate security for the loan.
    (2) List of other assets. Other assets may include:
    (i) A pledge of real estate or chattel by a third party;
    (ii) Patents, copyrights, life insurance, stocks, other securities, 
and membership in cooperatives, owned by the applicant;
    (iii) Assets owned by an applicant that cannot be converted to cash 
without jeopardizing the farm operation; and
    (iv) Non-essential assets owned by the applicant with an aggregate 
value in excess of $5,000.
    (h) Exceptions to security requirements. The Agency will not take a 
security interest in certain property in the following situations:
    (1) The property proposed as security has environmental 
contamination, restrictions, or historical impact that could impair the 
value or expose the Agency to potential liability;
    (2) The Agency cannot obtain a valid lien on the security;
    (3) The applicant's personal residence and appurtenances are on a 
parcel of land separate and apart from that real estate being used as 
adequate security for the loan; or
    (4) The applicant's other assets are used for farming or for 
essential living expenses and are not needed for security purposes, 
including but not limited to, subsistence livestock, cash or

[[Page 178]]

special cash collateral accounts, retirement accounts, personal 
vehicles, household goods, and small tools and equipment such as hand 
tools, power lawn mowers.
    (i) Requirements for security. (1) For loans over $25,000, title 
clearance is required when real estate is taken as security.
    (2) For loans of $25,000 or less, when real estate is taken as 
security, a certification of ownership in real estate is required. 
Certification of ownership may be in the form of an affidavit which is 
signed by the applicant, naming the record owner of the real estate in 
question and listing the balances due on all known debts against the 
real estate. Whenever the loan approving official is uncertain of the 
record owner or debts against the real estate security, a title search 
is required.
    (j) Taking Indian Trust lands as security. The Agency may take a 
lien on Indian Trust lands as security provided that the requirements of 
Sec. 1943.19(a)(7) of this title are satisfied.



Sec. 764.9  Appraisal and valuation requirements.

    (a) Establishing value for real estate. Real estate appraisals 
conducted pursuant to this part may be completed by designated 
appraisers or contract appraisers and shall conform to the Uniform 
Standards of Professional Appraisal Practice guidelines and standards in 
accordance with Sec. 761.7 of this chapter.
    (b) Establishing value for agricultural commodities and equipment. 
Valuations of agricultural commodities and equipment shall be 
established as follows:
    (1) The security value of the annual agricultural commodities 
production (excluding livestock) will be 100 percent of the amount 
loaned for annual operating and essential family household expenses, or 
the amount of expected crop revenue, excluding farm program and 
insurance payments, whichever is lower.
    (2) The value of livestock and equipment will be the market value as 
determined by the Agency in accordance with Sec. 761.7 of this chapter.
    (c) Assets damaged by the disaster. In the case of farm assets 
damaged by the disaster, the value of such security shall be established 
as of the day before the disaster occurred.

[67 FR 795, Jan. 8, 2002; 67 FR 7942, Feb. 21, 2002]



Sec. 764.10  Insurance for loan security.

    (a) Adequacy of insurance. An applicant must obtain insurance, 
consistent with this section, equal to the lesser of the value of the 
security at the time of loan closing, or the principal of the loan.
    (b) Hazard insurance. All security (except growing crops) must be 
covered by hazard insurance if it is readily available (i.e. sold by 
insurance agents in the applicants normal trade area) and economically 
feasible.
    (c) Flood or mudslide insurance. Real estate security located in 
flood or mudslide prone areas, as determined by the Agency, must be 
covered by flood or mudslide insurance.
    (d) Crop insurance--(1) Requirement to obtain crop insurance. Except 
as provided in paragraph (d)(2) of this section, prior to closing the 
loan, the applicant must have obtained at least the catastrophic risk 
protection level of crop insurance coverage for the crop during the crop 
year for which the loan is sought for each crop which is a basic part of 
an applicant's total farming operation, if such insurance is available, 
unless the applicant executes a written waiver of any emergency crop 
loss assistance with respect to such crop.
    (2) Exception. Growing crops used to provide adequate security must 
be covered by crop insurance if such insurance is available.
    (e) Indemnities. A borrower must:
    (1) List the Agency as loss payee for the insurance indemnity 
payment or as a beneficiary of a mortgagee loss payable clause; and
    (2) In the case of crop insurance, execute an assignment of 
indemnity in favor of the Agency.



Sec. 764.11  Charges and fees.

    The applicant must pay all filing, recording, notary, and lien 
search fees necessary to process and close a loan. The applicant may pay 
or be reimbursed for these fees from Emergency loan funds.

[[Page 179]]



PART 770_INDIAN TRIBAL LAND ACQUISITION LOANS--Table of Contents




Sec.
770.1 Purpose.
770.2 Abbreviations and definitions.
770.3 Eligibility requirements.
770.4 Authorized loan uses.
770.5 Loan limitations.
770.6 Rates and terms.
770.7 Security requirements.
770.8 Use of acquired land.
770.9 Appraisals.
770.10 Servicing.

    Authority: 5 U.S.C. 301, 25 U.S.C. 490.

    Source: 66 FR 1567, Jan. 9, 2001, unless otherwise noted.



Sec. 770.1  Purpose.

    This part contains the Agency's policies and procedures for making 
and servicing loans to assist a Native American tribe or tribal 
corporation with the acquisition of land interests within the tribal 
reservation or Alaskan community.



Sec. 770.2  Abbreviations and definitions.

    (a) Abbreviations.
    FSA Farm Service Agency, an Agency of the United States Department 
of Agriculture, including its personnel and any successor Agency.
    ITLAP Indian Tribal Land Acquisition Program.
    USPAP Uniform Standards of Professional Appraisal Practice.
    (b) Definitions.
    Administrator is the head of the Farm Service Agency.
    Agency is Farm Service Agency (FSA).
    Appraisal is an appraisal for the purposes of determining the market 
value of land (less value of any existing improvements that pass with 
the land) that meets the requirements of part 761 of this chapter.
    Applicant is a Native American tribe or tribal corporation 
established pursuant to the Indian Reorganization Act seeking a loan 
under this part.
    Loan funds refers to money loaned under this part.
    Native American tribe is:
    (1) An Indian tribe recognized by the Department of the Interior; or
    (2) A community in Alaska incorporated by the Department of the 
Interior pursuant to the Indian Reorganization Act.
    Rental value is the potential annual rental income of a parcel of 
real estate as determined by a market analysis of annual rental incomes 
of like real estate in the subject property area.
    Reservation is lands or interests in land within:
    (1) The Native American tribe's reservation as determined by the 
Department of the Interior; or
    (2) A community in Alaska incorporated by the Department of the 
Interior pursuant to the Indian Reorganization Act.
    Reserve is an account established for loans approved in accordance 
with regulations in effect prior to February 8, 2001 which required that 
an amount equal to 10 percent of the annual payment be set aside each 
year until at least one full payment is available.
    Tribal corporation is a corporation established pursuant to the 
Indian Reorganization Act.

[66 FR 1567, Jan. 9, 2001, as amended at 70 FR 7167, Feb. 11, 2005]



Sec. 770.3  Eligibility requirements.

    An applicant must:
    (a) Submit a completed Agency application form;
    (b) Except for refinancing activities authorized in Sec. 770.4(c), 
obtain an option or other acceptable purchase agreement for land to be 
purchased with loan funds;
    (c) Be a Native American tribe or a tribal corporation of a Native 
American tribe without adequate uncommitted funds, based on Generally 
Accepted Accounting Principles, or another financial accounting method 
acceptable to Secretary of Interior to acquire lands or interests 
therein within the Native American tribe's reservation for the use of 
the Native American tribe or tribal corporation or the members of 
either;
    (d) Be unable to obtain sufficient credit elsewhere at reasonable 
rates and terms for purposes established in Sec. 770.4;
    (e) Demonstrate reasonable prospects of success in the proposed 
operation of the land to be purchased with funds provided under this 
part by providing:

[[Page 180]]

    (1) A feasibility plan for the use of the Native American tribe's 
land and other enterprises and funds from any other source from which 
payment will be made;
    (2) A satisfactory management and repayment plan; and
    (3) A satisfactory record for paying obligations.
    (f) Unless waived by the FSA Administrator, not have any outstanding 
debt with any Federal Agency (other than debt under the Internal Revenue 
Code of 1986) which is in a delinquent status.
    (g) Not be subject to a judgment lien against the tribe's property 
arising out of a debt to the United States.
    (h) Have not received a write-down as provided in Sec. 770.10(e) 
within the preceding 5 years.

[66 FR 1567, Jan. 9, 2001, as amended at 70 FR 7167, Feb. 11, 2005]



Sec. 770.4  Authorized loan uses.

    Loan funds may only be used to:
    (a) Acquire land and interests therein (including fractional 
interests, rights-of-way, water rights, easements, and other 
appurtenances (excluding improvements) that would normally pass with the 
land or are necessary for the proposed operation of the land) located 
within the Native American tribe's reservation which will be used for 
the benefit of the tribe or its members.
    (b) Pay costs incidental to land acquisition, including but not 
limited to, title clearance, legal services, land surveys, and loan 
closing.
    (c) Refinance non-United States Department of Agriculture 
preexisting debts the applicant incurred to purchase the land provided 
the following conditions exist:
    (1) Prior to the acquisition of such land, the applicant filed a 
loan application regarding the purchase of such land and received the 
Agency's approval for the land purchase;
    (2) The applicant could not acquire an option on such land;
    (3) The debt for such land is a short term debt with a balloon 
payment that cannot be paid by the applicant and that cannot be extended 
or modified to enable the applicant to satisfy the obligation; and
    (4) The purchase of such land is consistent with all other 
applicable requirements of this part.
    (d) Pay for the costs of any appraisal conducted pursuant to this 
part.



Sec. 770.5  Loan limitations.

    (a) Loan funds may not be used for any land improvement or 
development purposes, acquisition or repair of buildings or personal 
property, payment of operating costs, payment of finder's fees, or 
similar costs, or for any purpose that will contribute to excessive 
erosion of highly erodible land or to the conversion of wetlands to 
produce an agriculture commodity as further established in exhibit M to 
subpart G of part 1940 of this title.
    (b) The amount of loan funds used to acquire land may not exceed the 
market value of the land (excluding the value of any improvements) as 
determined by a current appraisal.
    (c) Loan funds for a land purchase must be disbursed over a period 
not to exceed 24 months from the date of loan approval.
    (d) The sale of assets that are not renewable within the life of the 
loan will require a reduction in loan principal equal to the value of 
the assets sold.



Sec. 770.6  Rates and terms.

    (a) Term. Each loan will be scheduled for repayment over a period 
not to exceed 40 years from the date of the note.
    (b) Interest rate. The interest rate charged by the Agency will be 
the lower of the interest rate in effect at the time of the loan 
approval or loan closing, which is the current rate available in any FSA 
office. Except as provided in Sec. 770.10(b) the interest rate will be 
fixed for the life of the loan.



Sec. 770.7  Security requirements.

    (a) The applicant will take appropriate action to obtain and provide 
security for the loan.
    (b) A mortgage or deed of trust on the land to be purchased by the 
applicant will be taken as security for a loan, except as provided in 
paragraph (c) of this section.
    (1) If a mortgage or deed of trust is to be obtained on trust or 
restricted land and the applicant's constitution or charter does not 
specifically authorize

[[Page 181]]

mortgage of such land, the mortgage must be authorized by tribal 
referendum.
    (2) All mortgages or deeds of trust on trust or restricted land must 
be approved by the Department of the Interior.
    (c) The Agency may take an assignment of income in lieu of a 
mortgage or deed of trust provided:
    (1) The Agency determines that an assignment of income provides as 
good or better security; and
    (2) Prior approval of the Administrator has been obtained.



Sec. 770.8  Use of acquired land.

    (a) General. Subject to Sec. 770.5(d) land acquired with loan 
funds, or other property serving as the security for a loan under this 
part, may be leased, sold, exchanged, or subject to a subordination of 
the Agency's interests, provided:
    (1) The Agency provides prior written approval of the action;
    (2) The Agency determines that the borrower's loan obligations to 
the Agency are adequately secured; and
    (3) The borrower's ability to repay the loan is not impaired.
    (b) Title. Title to land acquired with a loan made under this part 
may, with the approval of the Secretary of the Interior, be taken by the 
United States in trust for the tribe or tribal corporation.



Sec. 770.9  Appraisals.

    (a) The applicant or the borrower, as appropriate, will pay the cost 
of any appraisal required under this part.
    (b) Appraisals must be completed in accordance with Sec. 761.7 of 
this chapter.



Sec. 770.10  Servicing.

    (a) Reamortization--(1) Eligibility. The Agency may consider 
reamortization of a loan provided:
    (i) The borrower submits a completed Agency application form; and
    (ii) The account is delinquent due to circumstances beyond the 
borrower's control and cannot be brought current within 1 year; or
    (iii) The account is current, but due to circumstances beyond the 
borrower's control, the borrower will be unable to meet the annual loan 
payments.
    (2) Terms. The term of a loan may not be extended beyond 40 years 
from the date of the original note.
    (i) Reamortization within the remaining term of the loan will be 
predicated on a projection of the tribe's operating expenses indicating 
the ability to meet the new payment schedule; and
    (ii) No intervening lien exists on the security for the loan which 
would jeopardize the Government's security priority.
    (3) Consolidation of notes. If one or more notes are to be 
reamortized, consolidation of the notes is authorized.
    (b) Interest rate reduction. The Agency may consider a reduction of 
the interest rate for an existing loan to the current interest rate as 
available from any Agency office provided:
    (1) The borrower submits a completed Agency application form;
    (2) The loan was made more than 5 years prior to the application for 
the interest reduction; and
    (3) The Department of the Interior and the borrower certify that the 
borrower meets at least one of the criteria contained in paragraph 
(e)(2) of this section.
    (c) Deferral. The Agency may consider a full or partial deferral for 
a period not to exceed 5 years provided:
    (1) The borrower submits a completed Agency application form;
    (2) The borrower presents a plan which demonstrates that due to 
circumstances beyond their control, they will be unable to meet all 
financial commitments unless the Agency payment is deferred; and
    (3) The borrower will be able to meet all financial commitments, 
including the Agency payments, after the deferral period has ended.
    (d) Land exchanges. In the cases where a borrower proposes to 
exchange any portion of land securing a loan for other land, title 
clearance and a new mortgage on the land received by the borrower in 
exchange, which adequately secures the unpaid principal balance of the 
loan, will be required unless the Agency determines any remaining land 
or other loan security is adequate security for the loan.

[[Page 182]]

    (e) Debt write-down--(1) Application. The Agency will consider debt 
write-down under either the land value option or rental value option, as 
requested by the borrower.
    (i) The borrower must submit a completed Agency application form;
    (ii) If the borrower applies and is determined eligible for a land 
value and a rental value write-down, the borrower will receive a write-
down based on the write-down option that provides the greatest debt 
reduction.
    (2) Eligibility. To be eligible for debt write-down, the borrower 
(in the case of a tribal corporation, the Native American tribe of the 
borrower) must:
    (i) Be located in a county which is identified as a persistent 
poverty county by the United States Department of Agriculture, Economic 
Research Service pursuant to the most recent data from the Bureau of the 
Census; and
    (ii) Have a socio-economic condition over the immediately preceding 
5 year period that meets the following two factors as certified by the 
Native American tribe and the Department of the Interior:
    (A) The Native American tribe has a per capita income for individual 
enrolled tribal members which is less than 50 percent of the Federally 
established poverty income rate established by the Department of Health 
and Human Services;
    (B) The tribal unemployment rate exceeds 50 percent;
    (3) Land value write-down. The Agency may reduce the unpaid 
principal and interest balance on any loan made to the current market 
value of the land that was purchased with loan funds provided:
    (i) The market value of such land has declined by at least 25 
percent since the land was purchased as established by a current 
appraisal;
    (ii) Land value decrease is not attributed to the depletion of 
resources contained on or under the land;
    (iii) The loan was made more than 5 years prior to the application 
for land value write-down;
    (iv) The loan has not previously been written down under paragraph 
(e)(4) of this section and has not been written down within the last 5 
years under this paragraph, and
    (v) The borrower must meet the eligibility requirements of 
paragraphs (a)(1)(ii) or (iii) of this section.
    (4) Rental value write-down. The Agency may reduce the unpaid 
principal and interest on any loan, so the annual loan payment for the 
remaining term of each loan equals the average of annual rental value of 
the land purchased by each such loan for the immediately preceding 5-
year period provided:
    (i) The loan was made more than 5 years prior to the rental value 
writedown;
    (ii) The description of the land purchased with the loan funds and 
the rental values used to calculate the 5 year average annual rental 
value of the land have been certified by the Department of the Interior;
    (iii) The borrower provides a current market value rent study report 
for the land for the preceding 5 years, which identifies the average 
rental value. The report must be prepared by a certified general 
appraiser and meet the requirements of USPAP;
    (iv) The borrower has not previously received a write-down under 
this paragraph and has not had a loan written down within the last 5 
years under paragraph (e)(3) of this section, and
    (v) The borrower must meet the eligibility requirements of paragraph 
(a)(1)(ii) or (iii) of this section.
    (f) Release of reserve. Existing reserve accounts may be released 
for the purpose of making ITLAP loan payments or to purchase additional 
lands, subject to the following:
    (1) A written request is received providing details of the use of 
the funds;
    (2) The loan is not delinquent;
    (3) The loan adequately secured by a general assignment of tribal 
income.

[66 FR 1567, Jan. 9, 2001; 66 FR 47877, Sept. 14, 2001, as amended at 70 
FR 7167, Feb. 11, 2005]



PART 771_BOLL WEEVIL ERADICATION LOAN PROGRAM--Table of Contents




Sec.
771.1 Introduction.
771.2 Abbreviations and definitions.
771.3 [Reserved]
771.4 Eligibility requirements.
771.5 Loan purposes.
771.6 Environmental requirements.
771.7 Equal opportunity and non-discrimination requirements.

[[Page 183]]

771.8 Other Federal, State, and local requirements.
771.9 Interest rates, terms, security requirements, and repayment.
771.10 [Reserved]
771.11 Application.
771.12 Funding applications.
771.13 Loan closing.
771.14 Loan monitoring.
771.15 Loan servicing.

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; and Pub. L. 104-180, 110 
Stat. 1569.

    Source: 67 FR 59771, Sept. 24, 2002, unless otherwise noted.



Sec. 771.1  Introduction.

    The regulations in this part set forth the terms and conditions 
under which loans are made through the Boll Weevil Eradication Loan 
Program. The regulations in this part are applicable to applicants, 
borrowers, and other parties involved in the making, servicing, and 
liquidation of these loans. The program's objective is to assist 
producers and state government agencies in the eradication of boll 
weevils from cotton producing areas.



Sec. 771.2  Abbreviations and definitions.

    The following abbreviations and definitions apply to this part:
    (a) Abbreviations:
    APHIS means the Animal and Plant Health Inspection Service of the 
United States Department of Agriculture, or any successor Agency.
    FSA means the Farm Service Agency, its employees, and any successor 
agency.
    (b) Definitions:
    Extra payment means a payment derived from the sale of property 
serving as security for a loan, such as real estate or vehicles. 
Proceeds from program assessments and other normal operating income, 
when remitted for payment on a loan, will not be considered as an extra 
payment.
    Non-profit corporation means a private domestic corporation created 
and organized under the laws of the State(s) in which the entity will 
operate whose net earnings are not distributable to any private 
shareholder or individual, and which qualifies under the Internal 
Revenue Service code.
    Restructure means to modify the terms of a loan. This may include a 
modification of the interest rate and/or repayment terms of the loan.
    Security means assets pledged as collateral to assure repayment of a 
loan in the event of default on the loan.
    State organization means a quasi-state run public operation 
exclusively established and managed by state and/or non-state employees, 
with all employees currently dedicated to the specific task of 
eliminating the boll weevil from the cotton growing area of the state.



Sec. 771.3  [Reserved]



Sec. 771.4  Eligibility requirements.

    (a) An eligible applicant must:
    (1) Meet all requirements prescribed by APHIS to qualify for cost-
share grant funds as determined by APHIS, (FSA will accept the 
determination by APHIS as to an organization's qualification);
    (2) Have the appropriate charter and/or legal authority as a non-
profit corporation or as a State organization specifically organized to 
operate the boll weevil eradication program in any State, biological, or 
geographic region of any State in which it operates;
    (3) Possess the legal authority to enter into contracts, including 
debt instruments;
    (4) Operate in an area in which producers have approved a referendum 
authorizing producer assessments and in which an active eradication or 
post-eradication program is underway or scheduled to begin no later than 
the fiscal year following the fiscal year in which the application is 
submitted;
    (5) Have the legal authority to pledge producer assessments as 
security for loans from FSA.
    (b) Individual producers are not eligible for loans.



Sec. 771.5  Loan purposes.

    (a) Loan funds may be used for any purpose directly related to boll 
weevil eradication activities, including, but not limited to:
    (1) Purchase or lease of supplies and equipment;
    (2) Operating expenses, including but not limited to, travel and 
office operations;
    (3) Salaries and benefits.

[[Page 184]]

    (b) Loan funds may not be used to pay expenses incurred for 
lobbying, public relations, or related activities, or to pay interest on 
loans from the Agency.



Sec. 771.6  Environmental requirements.

    No loan will be made until all Federal and state statutory and 
regulatory environmental requirements have been complied with.



Sec. 771.7  Equal opportunity and non-discrimination requirements.

    No recipient of a boll weevil eradication loan shall directly, or 
through contractual or other arrangement, subject any person or cause 
any person to be subjected to discrimination on the basis of race, 
religion, color, national origin, gender, or other prohibited basis. 
Borrowers must comply with all applicable Federal laws and regulations 
regarding equal opportunity in hiring, procurement, and related matters.



Sec. 771.8  Other Federal, State, and local requirements.

    (a) In addition to the specific requirements in this subpart, loan 
applications will be coordinated with all appropriate Federal, State, 
and local agencies.
    (b) Borrowers are required to comply with all applicable:
    (1) Federal, State, or local laws;
    (2) Regulatory commission rules; and
    (3) Regulations which are presently in existence, or which may be 
later adopted including, but not limited to, those governing the 
following:
    (i) Borrowing money, pledging security, and raising revenues for 
repayment of debt;
    (ii) Accounting and financial reporting; and
    (iii) Protection of the environment.



Sec. 771.9  Interest rates, terms, security requirements, and repayment.

    (a) Interest rate. The interest rate will be fixed for the term of 
the loan. The rate will be established by FSA, based upon the cost of 
Government borrowing for instruments on terms similar to that of the 
loan requested.
    (b) Term. The loan term will be based upon the needs of the 
applicant to accomplish the objectives of the loan program as determined 
by FSA, but may not exceed 10 years.
    (c) Security requirements. (1) Loans must be adequately secured as 
determined by FSA. FSA may require certain security, including but not 
limited to the following:
    (i) Assignments of assessments, taxes, levies, or other sources of 
revenue as authorized by State law;
    (ii) Investments and deposits of the applicant; and
    (iii) Capital assets or other property of the applicant or its 
members.
    (2) In those cases in which FSA and another lender will hold 
assignments of the same revenue as collateral, the other lender must 
agree to a prorated distribution of the assigned revenue. The 
distribution will be based upon the proportionate share of the 
applicant's debt the lender holds for the eradication zone from which 
the revenue is derived at the time of loan closing.
    (d) Repayment. The applicant must demonstrate that income sources 
will be sufficient to meet the repayment requirements of the loan and 
pay operating expenses.



Sec. 771.10  [Reserved]



Sec. 771.11  Application.

    A complete application will consist of the following:
    (a) An application for Federal assistance (available in any FSA 
office);
    (b) Applicant's financial projections including a cash flow 
statement showing the plan for loan repayment;
    (c) Copies of the applicant's authorizing State legislation and 
organizational documents;
    (d) List of all directors and officers of the applicant;
    (e) Copy of the most recent audited financial statements along with 
updates through the most recent quarter;
    (f) Copy of the referendum used to establish the assessments and a 
certification from the Board of Directors that the referendum passed;
    (g) Evidence that the officers and employees authorized to disburse 
funds are covered by an acceptable fidelity bond;
    (h) Evidence of acceptable liability insurance policies;

[[Page 185]]

    (i) Statement from the applicant addressing any current or pending 
litigation against the applicant as well as any existing judgments;
    (j) A copy of a resolution passed by the Board of Directors 
authorizing the officers to incur debt on behalf of the borrower;
    (k) Any other information deemed to be necessary by FSA to render a 
decision.



Sec. 771.12  Funding applications.

    Loan requests will be processed based on the date FSA receives the 
application. Loan approval is subject to the availability of funds. 
However, when multiple applications are received on the same date and 
available funds will not cover all applications received, applications 
from active eradication areas, which FSA determines to be most critical 
for the accomplishment of program objectives, will be funded first.



Sec. 771.13  Loan closing.

    (a) Conditions. The applicant must meet all conditions specified by 
the loan approval official in the notification of loan approval prior to 
closing.
    (b) Loan instruments and legal documents. The borrower, through its 
authorized representatives will execute all loan instruments and legal 
documents required by FSA to evidence the debt, perfect the required 
security interest in property and assets securing the loan, and protect 
the Government's interest, in accordance with applicable State and 
Federal laws.
    (c) Loan agreement. A loan agreement between the borrower and FSA 
will be required. The agreement will set forth performance criteria and 
other loan requirements necessary to protect the Government's financial 
and programmatic interest and accomplish the objectives of the loan. 
Specific provisions of the agreement will be developed on a case-by-case 
basis to address the particular situation associated with the loan being 
made. However, all loan agreements will include at least the following 
provisions:
    (1) The borrower must submit audited financial statements to FSA at 
least annually;
    (2) The borrower will immediately notify FSA of any adverse actions 
such as:
    (i) Anticipated default on FSA debt;
    (ii) Potential recall vote of an assessment referendum; or
    (iii) Being named as a defendant in litigation;
    (3) Submission of other specific financial reports for the borrower;
    (4) The right of deferral under 7 U.S.C. 1981a; and
    (5) Applicable liquidation procedures upon default.
    (d) Fees. The borrower will pay all fees for recording any legal 
instruments determined to be necessary and all notary, lien search, and 
similar fees incident to loan transactions. No fees will be assessed for 
work performed by FSA employees.



Sec. 771.14  Loan monitoring.

    (a) Annual and periodic reviews. At least annually, the borrower 
will meet with FSA representatives to review the financial status of the 
borrower, assess the progress of the eradication program utilizing loan 
funds, and identify any potential problems or concerns.
    (b) Performance monitoring. At any time FSA determines it necessary, 
the borrower must allow FSA or its representative to review the 
operations and financial condition of the borrower. This may include, 
but is not limited to, field visits, and attendance at Foundation Board 
meetings. Upon FSA request, a borrower must submit any financial or 
other information within 14 days unless the data requested is not 
available within that time frame.



Sec. 771.15  Loan servicing.

    (a) Advances. FSA may make advances to protect its financial 
interests and charge the borrower's account for the amount of any such 
advances.
    (b) Payments. Payments will be made to FSA as set forth in loan 
agreements and debt instruments. The funds from extra payments will be 
applied entirely to loan principal.
    (c) Restructuring. The provisions of 7 CFR part 1951, subpart S, are 
not applicable to loans made under this section. However, FSA may 
restructure loan debts; provided:

[[Page 186]]

    (1) The Government's interest will be protected;
    (2) The restructuring will be performed within FSA budgetary 
restrictions; and
    (3) The loan objectives cannot be met unless the loan is 
restructured.
    (d) Default. In the event of default, FSA will take all appropriate 
actions to protect its interest.



PART 772_SERVICING MINOR PROGRAM LOANS--Table of Contents




Sec.
772.1 Policy.
772.2 Abbreviations and definitions.
772.3 Compliance.
772.4 Environmental requirements.
772.5 Security maintenance.
772.6 Subordination of security.
772.7 Leasing minor program loan security.
772.8 Sale or exchange of security property.
772.9 Releases.
772.10 Transfer and assumption--AMP loans.
772.11 Transfer and assumption--IMP loans.
772.12 Graduation.
772.13 Delinquent account servicing.
772.14 Reamortization of AMP loans.
772.15 Protective advances.
772.16 Liquidation.
772.17 Equal Opportunity and non-discrimination requirements.
772.18 Exception authority.

    Authority: 5 U.S.C. 301, 7 U.S.C. 1989, 25 U.S.C. 490.

    Source: 68 FR 69949, Dec. 16, 2003, unless otherwise noted.



Sec. 772.1  Policy.

    (a) Purpose. This part contains the Agency's policies and procedures 
for servicing Minor Program loans which include: Grazing Association 
loans, Irrigation and Drainage Association loans, and Non-Farm 
Enterprise and Recreation loans to individuals.
    (b) Appeals. The regulations at 7 CFR parts 11 and 780 apply to 
decisions made under this part.



Sec. 772.2  Abbreviations and Definitions.

    (a) Abbreviations.

AMP Association-Type Minor Program loan;
CFR Code of Federal Regulations;
FO Farm Ownership Loan;
FSA Farm Service Agency;
IMP Individual-Type Minor Program loan;
OL Operating Loan;
USDA United States Department of Agriculture.
    (b) Definitions.
    Association-Type Minor Program loans (AMP): Loans to Grazing 
Associations and Irrigation and Drainage Associations.
    Entity: Cooperative, corporation, partnership, joint operation, 
trust, or limited liability company.
    Graduation: The requirement contained in loan documents that 
borrowers pay their FSA loan in full with funds received from a 
commercial lending source as a result of improvement in their financial 
condition.
    Individual-type Minor Program loans (IMP): Non-Farm Enterprise or 
Recreation loans to individuals.
    Member: Any individual who has an ownership interest in the entity 
which has received the Minor Program loan.
    Minor Program: Non-Farm Enterprise, Individual Recreation, Grazing 
Association, or Irrigation and Drainage loan programs administered or to 
be administered by FSA
    Review official: An agency employee, contractor or designee who is 
authorized to conduct a compliance review of a Minor Program borrower 
under this part.



Sec. 772.3  Compliance.

    (a) Requirements. No Minor Program borrower shall directly, or 
through contractual or other arrangement, subject any person or cause 
any person to be subjected to discrimination on the basis of race, 
color, national origin, or disability. Borrowers must comply with all 
applicable Federal laws and regulations regarding equal opportunity in 
hiring, procurement, and related matters. AMP borrowers are subject to 
the nondiscrimination provisions applicable to Federally assisted 
programs contained in 7 CFR part 15, subparts A and C, and part 15b. IMP 
loans are subject to the nondiscrimination provisions applicable to 
federally conducted programs contained in 7 CFR parts 15d and 15e.
    (b) Reviews. In accordance with Title VI of the Civil Rights Act of 
1964, the Agency will conduct a compliance review of all Minor Program 
borrowers, to determine if a borrower has directly,

[[Page 187]]

or through contractual or other arrangement, subjected any person or 
caused any person to be subjected to discrimination on the basis of 
race, color, or national origin. The borrower must allow the review 
official access to their premises and all records necessary to carry out 
the compliance review as determined by the review official.
    (c) Frequency and timing. Compliance reviews will be conducted no 
later than October 31 of every third year until the Minor Program loan 
is paid in full or otherwise satisfied.
    (d) Violations. If a borrower refuses to provide information or 
access to their premises as requested by a review official during a 
compliance review, or is determined by the Agency to be not in 
compliance in accordance with this section or Departmental regulations 
and procedures, the Agency will service the loan in accordance with the 
provisions of Sec. 772.16 of this part.



Sec. 772.4  Environmental requirements.

    Servicing activities such as transfers, assumptions, subordinations, 
sale or exchange of security property, and leasing of security will be 
reviewed for compliance with 7 CFR part 1940, subpart G and the exhibits 
to that subpart and 7 CFR part 799.



Sec. 772.5  Security maintenance.

    (a) General. Borrowers are responsible for maintaining the 
collateral that is serving as security for their Minor Program loan in 
accordance with their lien instruments, security agreement and 
promissory note.
    (b) Security inspection. The Agency will inspect real estate that is 
security for a Minor Program loan at least once every 3 years, and 
chattel security at least annually. More frequent security inspections 
may be made as determined necessary by the Agency. Borrowers will allow 
representatives of the Agency, or any agency of the U.S. Government, in 
accordance with statutes and regulations, such access to the security 
property as the agency determines is necessary to document compliance 
with the requirements of this section.
    (c) Violations. If the Agency determines that the borrower has 
failed to adequately maintain security, made unapproved dispositions of 
security, or otherwise has placed the repayment of the Minor Program 
loan in jeopardy, the Agency will:
    (1) For chattel security, service the account according to 7 part 
1962, subpart A. If any normal income security as defined in that 
subpart secures a Minor Program loan, the reporting, approval and 
release provisions in that subpart shall apply.
    (2) For real estate security for AMP loans, contact the Regional 
Office of General Counsel for advice on the appropriate servicing 
including liquidation if warranted.
    (3) For real estate security for IMP loans, service the account 
according to 7 CFR part 1965, subpart A.



Sec. 772.6  Subordination of security.

    (a) Eligibility. The Agency shall grant a subordination of Minor 
Program loan security when the transaction will further the purposes for 
which the loan was made, and all of the following are met:
    (1) The loan will still be adequately secured after the 
subordination, or the value of the loan security will be increased by 
the amount of advances to be made under the terms of the subordination.
    (2) The borrower can document the ability to pay all debts including 
the new loan.
    (3) The action does not change the nature of the borrower's 
activities to the extent that they would no longer be eligible for a 
Minor Program loan.
    (4) The subordination is for a specific amount.
    (5) The borrower is unable, as determined by the Agency, to 
refinance its loan and graduate in accordance with this subpart.
    (6) The loan funds will not be used in such a way that will 
contribute to erosion of highly erodible land or conversion of wetlands 
for the production of an agricultural commodity according to 7 CFR part 
1940, subpart G.
    (7) The borrower has not been convicted of planting, cultivating, 
growing, producing, harvesting or storing a controlled substance under 
Federal or state law. ``Borrower,'' for purposes of this subparagraph, 
specifically includes

[[Page 188]]

an individual or entity borrower and any member of an entity borrower. 
``Controlled substance,'' for the purpose of this subparagraph, is 
defined at 21 CFR part 1308. The borrower will be ineligible for a 
subordination for the crop year in which the conviction occurred and the 
four succeeding crop years. An applicant must attest on the Agency 
application form that it, and its members if an entity, have not been 
convicted of such a crime.
    (b) Application. To request a subordination, a Minor Program 
borrower must make the request in writing and provide the following:
    (1) The specific amount of debt for which a subordination is needed;
    (2) An appraisal prepared in accordance with Sec. 761.7 of this 
chapter, if the request is for a subordination of more than $10,000, 
unless a sufficient appraisal report, as determined by the Agency, that 
is less than one year old, is on file with the Agency; and
    (3) Consent and subordination, as necessary, of all other creditors' 
security interests.



Sec. 772.7  Leasing minor program loan security.

    (a) Eligibility. The Agency may consent to the borrower leasing all 
or a portion of security property for Minor Program loans to a third 
party when:
    (1) Leasing is the only feasible way to continue to operate the 
enterprise and is a customary practice;
    (2) The lease will not interfere with the purpose for which the loan 
was made;
    (3) The borrower retains ultimate responsibility for the operation, 
maintenance and management of the facility or service for its continued 
availability and use at reasonable rates and terms;
    (4) The lease prohibits amendments to the lease or subleasing 
arrangements without prior written approval from the Agency;
    (5) The lease terms provide that the Agency is a lienholder on the 
subject property and, as such, the lease is subordinate to the rights 
and claims of the Agency as lienholder; and
    (6) The lease is for less than 3 years and does not constitute a 
lease/purchase arrangement, unless the transfer and assumption 
provisions of this subpart are met.
    (b) Application. The borrower must submit a written request for 
Agency consent to lease the property.



Sec. 772.8  Sale or exchange of security property.

    (a) For AMP loans.
    (1) Sale of all or a portion of the security property may be 
approved when all of the following conditions are met:
    (i) The property is sold for market value based on a current 
appraisal prepared in accordance with Sec. 761.7 of this chapter.
    (ii) The sale will not prevent carrying out the original purpose of 
the loan. The borrower must execute an Assurance Agreement as prescribed 
by the Agency. The covenant involved will remain in effect as long as 
the property continues to be used for the same or similar purposes for 
which the loan was made. The instrument of conveyance will contain the 
following nondiscrimination covenant:

The property described herein was obtained or improved with Federal 
financial assistance and is subject to the non-discrimination provisions 
of title VI of the Civil Rights Act of 1964, title IX of the Education 
Amendments of 1972, section 504 of the Rehabilitation Act of 1973, and 
other similarly worded Federal statutes, and the regulations issued 
pursuant thereto that prohibit discrimination on the basis of race, 
color, national origin, handicap, religion, age, or sex in programs or 
activities receiving Federal financial assistance. Such provisions apply 
for as long as the property continues to be used for the same or similar 
purposes for which the Federal assistance was extended, or for so long 
as the purchaser owns it, whichever is later.
    (iii) The remaining security for the loan is adequate or will not 
change after the transaction.
    (iv) Sale proceeds remaining after paying any reasonable and 
necessary selling expenses are applied to the Minor Program loan 
according to lien priority.
    (2) Exchange of all or a portion of security property for an AMP 
loan may be approved when:
    (i) The Agency will obtain a lien on the property acquired in the 
exchange;
    (ii) Property more suited to the borrower's needs related to the 
purposes of

[[Page 189]]

the loan is to be acquired in the exchange;
    (iii) The AMP loan will be as adequately secured after the 
transaction as before; and
    (iv) It is necessary to develop or enlarge the facility, improve the 
borrower's debt-paying ability, place the operation on a more sound 
financial basis or otherwise further the loan objectives and purposes, 
as determined by the Agency.
    (b) For IMP loans.
    (1) A sale or exchange of chattel that is serving as security is 
governed by 7 CFR part 1962, subpart A.
    (2) A sale or exchange of real estate that is serving as security 
for an IMP loan is governed by 7 CFR part 1965, subpart A.

[68 FR 69949, Dec. 16, 2003, as amended at 69 FR 18741, Apr. 8, 2004]



Sec. 772.9  Releases.

    (a) Security. Minor Program liens may be released when:
    (1) The debt is paid in full;
    (2) Security property is sold for market value and sale proceeds are 
received and applied to the borrower's creditors according to lien 
priority; or
    (3) An exchange in accordance with Sec. 772.8 has been concluded.
    (b) Borrower liability. The Agency may release a borrower from 
liability when the Minor Program loan, plus all administrative 
collection costs and charges are paid in full. IMP borrowers who have 
had previous debt forgiveness on a farm loan program loan as defined in 
7 CFR 1951.906, however, cannot be released from liability by FSA until 
the previous loss to the Agency has been repaid with interest from the 
date of debt forgiveness. An AMP borrower may also be released in 
accordance with Sec. 772.10 in conjunction with a transfer and 
assumption.
    (c) Servicing of debt not satisfied through liquidation. Balances 
remaining after sale or liquidation of the security will be subject to 
administrative offset in accordance with 7 CFR part 3, Department of 
Treasury Offset Program (TOP) and Treasury Cross-Servicing regulations 
at 31 CFR part 285 and Federal Claims Collections Standards at 31 CFR 
parts 900-904. Thereafter the debt settlement provisions in 7 CFR part 
1956, subpart B of chapter XVIII of the Code of Federal Regulations or 
successor regulation apply.

[68 FR 69949, Dec. 16, 2003, as amended at 69 FR 7679, Feb. 19, 2004]



Sec. 772.10  Transfer and assumption--AMP loans.

    (a) Eligibility. The Agency may approve transfers and assumptions of 
AMP loans when:
    (1) The present borrower is unable or unwilling to accomplish the 
objectives of the loan;
    (2) The transfer will not harm the Government or adversely affect 
the Agency's security position;
    (3) The transferee will continue with the original purpose of the 
loan;
    (4) The transferee will assume an amount at least equal to the 
present market value of the loan security;
    (5) The transferee documents the ability to pay the AMP loan debt as 
provided in the assumption agreement and has the legal capacity to enter 
into the contract;
    (6) If there is a lien or judgment against the Agency security being 
transferred, the transferee is subject to such claims. The transferee 
must document the ability to repay the claims against the land; and
    (7) If the transfer is to one or more members of the borrower's 
organization and there is no new member, there must not be a loss to the 
Government.
    (b) Withdrawal. Withdrawal of a member and transfer of the 
withdrawing member's interest in the Association to a new eligible 
member may be approved by the Agency if all of the following conditions 
are met:
    (1) The entire unpaid balance of the withdrawing member's share of 
the AMP loan must be assumed by the new member;
    (2) In accordance with the Association's governing articles, the 
required number of remaining members must agree to accept any new 
member; and
    (3) The transfer will not adversely affect collection of the AMP 
loan.
    (c) Requesting a transfer and assumption. The transferor/borrower 
and transferee/applicant must submit:
    (1) The written consent of any other lienholder, if applicable.

[[Page 190]]

    (2) A current balance sheet and cash flow statement.
    (d) Terms. The interest rate and term of the assumed AMP loan will 
not be changed. Any delinquent principal and interest of the AMP loan 
must be paid current before the transfer and assumption will be approved 
by the Agency.
    (e) Release of liability. Transferors may be released from liability 
with respect to an AMP loan by the Agency when:
    (1) The full amount of the loan is assumed; or
    (2) Less than the full amount of the debt is assumed, and the 
balance remaining will be serviced in accordance with Sec. 772.9(c).



Sec. 772.11  Transfer and assumption--IMP loans.

    Transfers and assumptions for IMP loans are processed in accordance 
with 7 CFR part 1962, subpart A, for chattel secured loans and 7 CFR 
part 1965, subpart A, for real estate secured loans. Any remaining 
transferor liability will be serviced in accordance with Sec. 772.9(c) 
of this subpart.



Sec. 772.12  Graduation.

    (a) General. This section only applies to Minor Program borrowers 
with promissory notes which contain provisions requiring graduation.
    (b) Graduation reviews. Borrowers shall provide current financial 
information when requested by the Agency or its representatives to 
conduct graduation reviews.
    (1) AMP loans shall be reviewed at least every two years. In the 
year to be reviewed, each borrower must submit, at a minimum, a year-end 
balance sheet and cash flow projection for the current year.
    (2) All IMP borrowers classified as ``commercial'' or ``standard'' 
in accordance with 7 CFR part 1951, subpart F, shall be reviewed at 
least every 2 years. In the year to be reviewed, each borrower must 
submit a year-end balance sheet, actual financial performance for the 
most recent year, and a projected budget for the current year.
    (c) Criteria. Borrowers must graduate from the Minor Programs as 
follows:
    (1) Borrowers with IMP loans that are classified as ``commercial'' 
or ``standard'' must apply for private financing within 30 days from the 
date the borrower is notified of lender interest, if an application is 
required by the lender. For good cause, the Agency may grant the 
borrower a reasonable amount of additional time to apply for 
refinancing.
    (2) Borrowers with AMP loans will be considered for graduation at 
least every two years or more frequently if the Agency determines that 
the borrower's financial condition has significantly improved.



Sec. 772.13  Delinquent account servicing.

    (a) AMP loans. If the borrower does not make arrangements to cure 
the default after notice by the Agency and is not eligible for 
reamortization in accordance with Sec. 772.14, the Agency will 
liquidate the account according to Sec. 772.16.
    (b) IMP loans. Delinquent IMP borrowers will be serviced according 
to 7 CFR part 1951, subpart S, and parts 3 and 1951, subpart C, 
concerning internal agency offset and referral to the Department of 
Treasury Offset Program and Treasury Cross-Servicing (or successor 
regulations).



Sec. 772.14  Reamortization of AMP loans.

    The Agency may approve reamortization of AMP loans provided:
    (a) There is no extension of the final maturity date of the loan;
    (b) No intervening lien exists on the security for the loan which 
would jeopardize the Government's security position;
    (c) If the account is delinquent, it cannot be brought current 
within one year and the borrower has presented a cash flow budget which 
demonstrates the ability to meet the proposed new payment schedule; and
    (d) If the account is current, the borrower will be unable to meet 
the annual loan payments due to circumstances beyond the borrower's 
control.



Sec. 772.15  Protective advances.

    (a) The Agency may approve, without regard to any loan or total 
indebtedness limitation, vouchers to pay costs,

[[Page 191]]

including insurance and real estate taxes, to preserve and protect the 
security, the lien, or the priority of the lien securing the debt owed 
to the Agency if the debt instrument provides that the Agency may 
voucher the account to protect its lien or security.
    (b) The Agency may pay protective advances only when it determines 
it to be in the Government's best financial interest.
    (c) Protective advances are immediately due and payable.



Sec. 772.16  Liquidation.

    When the Agency determines that continued servicing will not 
accomplish the objectives of the loan and the delinquency or financial 
distress cannot be cured by the options in Sec. 772.13, or the loan is 
in non-monetary default, the borrower will be encouraged to dispose of 
the Agency security voluntarily through sale or transfer and assumption 
in accordance with this part. If such a transfer or voluntary sale is 
not carried out, the loan will be liquidated according to 7 CFR part 
1955, subpart A. For AMP loans, appeal rights under 7 CFR part 11 are 
provided in the notice of acceleration. For IMP loans, appeal rights 
must be exhausted before acceleration, and the notice of acceleration is 
not appealable.



Sec. 772.17  Equal opportunity and non-discrimination requirements.

    With respect to any aspect of a credit transaction, the Agency will 
comply with the requirements of the Equal Credit Opportunity Act as 
implemented in 7 CFR 1910.2, and the Department's civil rights policy in 
7 CFR part 15d.



Sec. 772.18  Exception authority.

    Exceptions to any requirement in this subpart can be approved in 
individual cases by the Administrator if application of any requirement 
or failure to take action would adversely affect the Government's 
financial interest. Any exception must be consistent with the 
authorizing statute and other applicable laws.



PART 773_SPECIAL APPLE LOAN PROGRAM--Table of Contents




Sec.
773.1 Introduction.
773.2 Definitions.
773.3 Appeals.
773.4-773.5 [Reserved]
773.6 Eligibility requirements.
773.7 Loan uses.
773.8 Limitations.
773.9 Environmental compliance.
773.10 Other Federal, State, and local requirements.
773.11-773.17 [Reserved]
773.18 Loan application.
773.19 Interest rate, terms, security requirements, and repayment.
773.20 Funding applications.
773.21 Loan decision, closing and fees.
773.22 Loan servicing.
773.23 Exception.

    Authority: Pub. L. 106-224.

    Source: 65 FR 76117, Dec. 6, 2000, unless otherwise noted.



Sec. 773.1  Introduction.

    This part contains the terms and conditions for loans made under the 
Special Apple Loan Program. These regulations are applicable to 
applicants, borrowers, and other parties involved in making, servicing, 
and liquidating these loans. The program objective is to assist 
producers of apples suffering from economic loss as a result of low 
apple prices.



Sec. 773.2  Definitions.

    As used in this part, the following definitions apply:
    Agency is the Farm Service Agency, its employees, and any successor 
agency.
    Apple producer is a farmer in the United States or its territories 
that produced apples, on not less than 10 acres, for sale in 1999 or 
2000.
    Applicant is the individual or business entity applying for the 
loan.
    Business entity is a corporation, partnership, joint operation, 
trust, limited liability company, or cooperative.
    Cash flow budget is 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

[[Page 192]]

during the period of the budget. A cash flow budget may be completed 
either for a 12 month period, a typical production cycle or the life of 
the loan, as appropriate.
    Domestically owned enterprise is an entity organized in the United 
States under the law of the state or states in which the entity operates 
and a majority of the entity is owned by members meeting the citizenship 
test.
    False information is information provided by an applicant, borrower, 
or other source to the Agency which information is known by the provider 
to be incorrect, and was given to the Agency in order to obtain benefits 
for which the applicant or borrower would not otherwise have been 
eligible.
    Feasible plan is a plan that demonstrates that the loan will be 
repaid as agreed, as determined by the Agency.
    Security is real or personal property pledged as collateral to 
assure repayment of a loan in the event there is a default on the loan.
    USPAP is Uniform Standards of Professional Appraisal Practice.



Sec. 773.3  Appeals.

    A loan applicant or borrower may request an appeal or review of an 
adverse decision made by the Agency in accordance with 7 CFR part 11.



Sec. Sec. 773.4-773.5  [Reserved]



Sec. 773.6  Eligibility requirements.

    Loan applicants must meet all of the following requirements to be 
eligible for a Special Apple Program Loan:
    (a) The loan applicant must be an apple producer;
    (b) The loan applicant must be a citizen of the United States or an 
alien lawfully admitted to the United States for permanent residence 
under the Immigration and Nationalization Act. For a business entity 
applicant, the majority of the business entity must be owned by members 
meeting the citizenship test or, other entities that are domestically 
owned. Aliens must provide the appropriate Immigration and 
Naturalization Service forms to document their permanent residency;
    (c) The loan applicant and anyone who will execute the promissory 
note must possess the legal capacity to enter into contracts, including 
debt instruments;
    (d) At loan closing the loan applicant and anyone who will execute 
the promissory note must not be delinquent on any Federal debt, other 
than a debt under the Internal Revenue Code of 1986;
    (e) At loan closing the loan applicant and anyone who will execute 
the promissory note must not have any outstanding unpaid judgments 
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;
    (f) The loan applicant, in past or present dealings with the Agency, 
must not have provided the Agency with false information; and
    (g) The individual or business entity loan applicant and all entity 
members must have acceptable credit history demonstrated by debt 
repayment. A history of failure to repay past debts as they came due 
(including debts to the Internal Revenue Service) when the ability to 
repay was within their control will demonstrate unacceptable credit 
history. Unacceptable credit history will not include isolated instances 
of late payments which do not represent a pattern and were clearly 
beyond the applicant's control or lack of credit history.



Sec. 773.7  Loan uses.

    Loan funds may be used for any of the following purposes related to 
the production or marketing of apples:
    (a) Payment of costs associated with reorganizing a farm to improve 
its profitability;
    (b) Payment of annual farm operating expenses;
    (c) Purchase of farm equipment or fixtures;
    (d) Acquiring, enlarging, or leasing a farm;
    (e) Making capital improvements to a farm;
    (f) Refinancing indebtedness;
    (g) Purchase of cooperative stock for credit, production, processing 
or marketing purposes; or
    (h) Payment of loan closing costs.

[[Page 193]]



Sec. 773.8  Limitations.

    (a) The maximum loan amount any individual or business entity may 
receive under the Special Apple Loan Program is limited to $500,000.
    (b) The maximum loan is further limited to $300 per acre of apple 
trees in production in 1999 or 2000, whichever is greater.
    (c) Loan funds may not be used to pay expenses incurred for lobbying 
or related activities.
    (d) 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.



Sec. 773.9  Environmental compliance.

    (a) Except as otherwise specified in this section, prior to approval 
of any loan, an environmental evaluation will be completed by the Agency 
to determine if the proposed action will have any adverse impacts on the 
human environment and cultural resources. Loan applicants will provide 
all information necessary for the Agency to make its evaluation.
    (b) The following loan actions were reviewed for the purpose of 
compliance with the National Environmental Policy Act (NEPA), 40 CFR 
parts 1500 through 1508, and determined not to have a significant impact 
on the quality of the human environment, either individually or 
cumulatively. Therefore the following loan actions are categorically 
excluded from the requirements of an environmental evaluation:
    (1) Payment of legal costs associated with reorganizing a farm to 
improve its profitability as long as there will be no changes in the 
land's use or character;
    (2) Purchase of farm equipment which will not be affixed to a 
permanent mount or position;
    (3) Acquiring or leasing a farm;
    (4) Refinancing an indebtedness not greater than $30,000;
    (5) Purchase of stock in a credit association or in a cooperative 
which deals with the production, processing or marketing of apples; and
    (6) Payment of loan closing costs.
    (c) The loan actions listed in paragraph (b) of this section were 
also reviewed in accordance with section 106 of the National Historic 
Preservation Act (NHPA). It was determined that these loan actions are 
non-undertakings with no potential to affect or alter historic 
properties and therefore, will not require consultation with the State 
Historic Preservation Officer, Tribal Historic Preservation Officer, or 
other interested parties.
    (d) If adverse environmental impacts, either direct or indirect, are 
identified, the Agency will complete an environmental assessment in 
accordance with the Council on Environmental Quality's Regulations for 
Implementing the Procedural Provisions of NEPA to the extent required by 
law.
    (e) In order to minimize the financial risk associated with 
contamination of real property from hazardous waste and other 
environmental concerns, the Agency will complete an environmental risk 
evaluation of the environmental risks to the real estate collateral 
posed by the presence of hazardous substances and other environmental 
concerns.
    (1) The Agency will not accept real estate as collateral which has 
significant environmental risks.
    (2) If the real estate offered as collateral contains significant 
environmental risks, the Agency will provide the applicant with the 
option of properly correcting or removing the risk, or offering other 
non-contaminated property as collateral.



Sec. 773.10  Other Federal, State, and local requirements.

    Borrowers are required to comply with all applicable:
    (a) Federal, State, or local laws;
    (b) Regulatory commission rules; and
    (c) Regulations which are presently in existence, or which may be 
later adopted including, but not limited to, those governing the 
following:
    (1) Borrowing money, pledging security, and raising revenues for 
repayment of debt;
    (2) Accounting and financial reporting; and
    (3) Protection of the environment.



Sec. Sec. 773.11-773.17  [Reserved]



Sec. 773.18  Loan application.

    (a) A complete application will consist of the following:

[[Page 194]]

    (1) A completed Agency application form;
    (2) If the applicant is a business entity, any legal documents 
evidencing the organization and any State recognition of the entity;
    (3) Documentation of compliance with the Agency's environmental 
regulations contained in 7 CFR part 1940, subpart G;
    (4) A balance sheet on the applicant;
    (5) The farm's operating plan, including the projected cash flow 
budget reflecting production, income, expenses, and loan repayment plan;
    (6) The last 3 years of production and income and expense 
information;
    (7) Payment to the Agency for ordering a credit report; and
    (8) Any additional information required by the Agency to determine 
the eligibility of the applicant, the feasibility of the operation, or 
the adequacy and availability of security.
    (b) Except as required in Sec. 773.19(e), the Agency will waive 
requirements for a complete application, listed in paragraphs (a)(5) and 
(a)(6) of this section, for requests of $30,000 or less.



Sec. 773.19  Interest rate, terms, security requirements, and repayment.

    (a) Interest rate. The interest rate will be fixed for the term of 
the loan. The rate will be established by the Agency and available in 
each Agency Office, based upon the cost of Government borrowing for 
loans of similar maturities.
    (b) Terms. The loan term will be for up to 3 years, based upon the 
useful life of the security offered.
    (c) Security requirements. The Agency will take a lien on the 
following security, if available, as necessary to adequately secure the 
loan:
    (1) Real estate;
    (2) Chattels;
    (3) Crops;
    (4) Other assets owned by the applicant; and
    (5) Assets owned and pledged by a third party.
    (d) Documentation of security value. (1) For loans that are for 
$30,000 or less, collateral value will be based on the best available, 
verifiable information.
    (2) For loans of greater than $30,000 where the applicant's balance 
sheet shows a net worth of three times the loan amount or greater, 
collateral value will be based on tax assessment of real estate and 
depreciation schedules of chattels, as applicable, less any existing 
liens.
    (3) For loans of greater than $30,000 where the applicant's balance 
sheet shows a net worth of less than three times the loan amount, 
collateral value will be based on an appraisal. Such appraisals must be 
obtained by the applicant, at the applicant's expense and acceptable to 
the Agency. Appraisals of real estate must be completed in accordance 
with USPAP.
    (e) Repayment. (1) All loan applicants must demonstrate that the 
loan can be repaid.
    (2) For loans that are for $30,000 or less where the applicant's 
balance sheet shows a net worth of three times the loan amount or 
greater, repayment ability will be considered adequate without further 
documentation.
    (3) For loans that are for $30,000 or less where the applicant's 
balance sheet shows a net worth of less than three times the loan 
amount, repayment ability must be demonstrated using the farm's 
operating plan, including a projected cash flow budget based on 
historical performance. Such operating plan is required notwithstanding 
Sec. 773.18 of this part.
    (4) For loans that are for more than $30,000, repayment ability must 
be demonstrated using the farm's operating plan, including a projected 
cash flow budget based on historical performance.
    (f) Creditworthiness. All loan applicants must have an acceptable 
credit history demonstrated by debt repayment. A history of failure to 
repay past debts as they came due (including debts to the Internal 
Revenue Service) when the ability to repay was within their control will 
demonstrate unacceptable credit history. Unacceptable credit history 
will not include isolated instances of late payments which do not 
represent a pattern and were clearly beyond the applicant's control or 
lack of credit history.

[[Page 195]]



Sec. 773.20  Funding applications.

    Loan requests will be funded based on the date the Agency approves 
the application. Loan approval is subject to the availability of funds.



Sec. 773.21  Loan decision, closing, and fees.

    (a) Loan decision. (1) The Agency will approve a loan if it 
determines that:
    (i) The loan can be repaid;
    (ii) The proposed use of loan funds is authorized;
    (iii) The applicant has been determined eligible;
    (iv) All security requirements have been, or will be met at closing;
    (vi) All other pertinent requirements have been, or will be met at 
closing.
    (2) The Agency will place conditions upon loan approval as necessary 
to protect its interest.
    (b) Loan closing. (1) The applicant must meet all conditions 
specified by the loan approval official in the notification of loan 
approval prior to loan closing;
    (2) There must have been no significant changes in the plan of 
operation or the applicant's financial condition since the loan was 
approved; and
    (2) The applicant will execute all loan instruments and legal 
documents required by the Agency to evidence the debt, perfect the 
required security interest in property securing the loan, and protect 
the Government's interests, in accordance with applicable State and 
Federal laws. In the case of an entity applicant, all officers or 
partners and any board members also will be required to execute the 
promissory notes as individuals.
    (c) Fees. The applicant will pay all loan closing fees including 
credit report fees, fees for appraisals, fees for recording any legal 
instruments determined to be necessary, and all notary, lien search, and 
similar fees incident to loan transactions. No fees will be assessed for 
work performed by Agency employees.



Sec. 773.22  Loan servicing.

    Loans will be serviced in accordance with subpart J of part 1951, or 
its successor regulation, during the term of the loan. If the loan is 
not paid in full during this term, servicing will proceed in accordance 
with Sec. 1951.468 of that part.



Sec. 773.23  Exception.

    The Agency may grant an exception to the security requirements of 
this section, if the proposed change is in the best financial interest 
of the Government and not inconsistent with the authorizing statute or 
other applicable law.



PART 774_Emergency Loan for Seed Producers Program--Table of Contents




Sec.
774.1 Introduction.
774.2 Definitions.
774.3 Appeals.
774.4-774.5 [Reserved]
774.6 Eligibility requirements.
774.7 [Reserved]
774.8 Limitations.
774.9 Environmental requirements.
774.10 Other Federal, State, and local requirements.
774.11-774.16 [Reserved]
774.17 Loan application.
774.18 Interest rate, terms, and security requirements.
774.19 Processing applications.
774.20 Funding applications.
774.21 [Reserved]
774.22 Loan closing.
774.23 Loan servicing.
774.24 Exception.

    Authority: Pub. L. 106-224

    Source: 65 FR 76119, Dec. 6, 2000, unless otherwise noted.



Sec. 774.1  Introduction.

    The regulations of this part contain the terms and conditions under 
which loans are made under the Emergency Loan for Seed Producers 
Program. These regulations are applicable to applicants, borrowers, and 
other parties involved in making, servicing, and liquidating these 
loans. The program objective is to assist certain seed producers 
adversely affected by the bankruptcy filing of AgriBiotech.



Sec. 774.2  Definitions.

    As used in this part, the following definitions apply:
    Agency is the Farm Service Agency, its employees, and any successor 
agency.

[[Page 196]]

    Applicant is the individual or business entity applying for the 
loan.
    Business entity is a corporation, partnership, joint operation, 
trust, limited liability company, or cooperative.
    Domestically owned enterprise is an entity organized in the United 
States under the law of the state or states in which the entity operates 
and a majority of the entity is owned by members meeting the citizenship 
test.
    False information is information provided by an applicant, borrower 
or other source to the Agency that the borrower knows to be incorrect, 
and that the borrower or other source provided in order to obtain 
benefits for which the borrower would not otherwise have been eligible.
    Seed producer is a farmer that produced a 1999 crop of grass, 
forage, vegetable, or sorghum seed for sale to AgriBiotech under 
contract.



Sec. 774.3  Appeals.

    A loan applicant or borrower may request an appeal or review of an 
adverse decision made by the Agency in accordance with 7 CFR part 11.



Sec. Sec. 774.4-774.5  [Reserved]



Sec. 774.6  Eligibility requirements.

    Loan applicants must meet all of the following requirements to be 
eligible under the Emergency Loan for Seed Producers Program;
    (a) The loan applicant must be a seed producer;
    (b) The individual or entity loan applicant must have a timely filed 
proof of claim in the Chapter XI bankruptcy proceedings involving 
AgriBiotech and the claim must have arisen from acontract to grow seeds 
in the United States;
    (c) The loan applicant must be a citizen of the United States or an 
alien lawfully admitted to the United States for permanent residence 
under the Immigration and Nationalization Act. For a business entity 
applicant, the majority of the business entity must be owned by members 
meeting the citizenship test or, other entities that are domestically 
owned. Aliens must provide the appropriate Immigration and 
Naturalization Service forms to document their permanent residency;
    (d) The loan applicant and anyone who will execute the promissory 
note must possess the legal capacity to enter into contracts, including 
debt instruments;
    (e) At loan closing, the applicant and anyone who will execute the 
promissory note must not be delinquent on any Federal debt, other than a 
debt under the Internal Revenue Code of 1986;
    (f) At loan closing, the applicant and anyone who will execute the 
promissory note must not have any outstanding unpaid judgments 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;
    (g) The loan applicant, in past and current dealings with the 
Agency, must not have provided the Agency with false information.



Sec. 774.7  [Reserved]



Sec. 774.8  Limitations.

    (a) The maximum loan amount any individual or business entity may 
receive will be 65% of the value of the timely filed proof of claim 
against AgriBiotech in the bankruptcy proceeding as determined by the 
Agency.
    (b) Loan funds may not be used to pay expenses incurred for lobbying 
or related activities.
    (c) 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.



Sec. 774.9  Environmental requirements.

    The loan actions in this part were reviewed for the purpose of 
compliance with the National Environmental Policy Act (NEPA), 40 CFR 
parts 1500 through 1508, and determined not to have a significant impact 
on the quality of the human environment, either individually or 
cumulatively. These loan actions are categorically excluded from the 
requirements of an environmental evaluation due to the fact that the 
loan funds would be utilized to replace operating capital the applicant 
would have had if AgriBiotech had not filed bankruptcy.

[[Page 197]]



Sec. 774.10  Other Federal, State, and local requirements.

    Borrowers are required to comply with all applicable:
    (a) Federal, State, or local laws;
    (b) Regulatory commission rules; and
    (c) Regulations which are presently in existence, or which may be 
later adopted including, but not limited to, those governing the 
following:
    (1) Borrowing money, pledging security, and raising revenues for 
repayment of debt;
    (2) Accounting and financial reporting; and
    (3) Protection of the environment.



Sec. 774.11-774.16  [Reserved]



Sec. 774.17  Loan application.

    A complete application will consist of the following:
    (a) A completed Agency application form;
    (b) Proof of a bankruptcy claim in the AgriBiotech bankruptcy 
proceedings;
    (c) If the applicant is a business entity, any legal documents 
evidencing the organization and any State recognition of the entity;
    (d) Documentation of compliance with the Agency's environmental 
regulations contained in 7 CFR part 1940, subpart G;
    (e) A balance sheet on the applicant; and
    (f) Any other additional information the Agency needs to determine 
the eligibility of the applicant and the application of any Federal, 
State or local laws.



Sec. 774.18  Interest rate, terms and security requirements.

    (a) Interest rate. (1) The interest rate on the loan will be zero 
percent for 36 months or until the date of settlement of, completion of, 
or final distribution of assets in the bankruptcy proceeding involving 
AgriBiotech, whichever comes first.
    (2) Thereafter interest will begin to accrue at the regular rate for 
an Agency Farm operating-direct loan (available in any Agency office).
    (b) Terms. (1) Loans shall be due and payable upon the earlier of 
the settlement of the bankruptcy claim or 36 months from the date of the 
note.
    (2) However, any principal remaining thereafter will be amortized 
over a term of 7 years at the Farm operating-direct loan interest rate 
(available in any Agency office). If the loan is not paid in full during 
this term and default occurs, servicing will proceed in accordance with 
Sec. 1951.468 of this title.
    (c) Security requirements. (1) The Agency will require a first 
position pledge and assignment of the applicant's monetary claim in the 
AgriBiotech bankruptcy estate to secure the loan.
    (2) If the applicant has seed remaining in their possession that was 
produced under contract to AgriBiotech, the applicant also will provide 
the Agency with a first lien position on this seed. It is the 
responsibility of the applicant to negotiate with any existing 
lienholders to secure the Agency's first lien position.

[65 FR 76119, Dec. 6, 2000, as amended at 68 FR 7696, Feb. 18, 2003]



Sec. 774.19  Processing applications.

    Applications will be processed until such time that funds are 
exhausted, or all claims have been paid and the bankruptcy involving 
AgriBiotech has been discharged. When all loan funds have been exhausted 
or the bankruptcy is discharged, no further applications will be 
accepted and any pending applications will be considered withdrawn.



Sec. 774.20  Funding applications.

    Loan requests will be funded based on the date the Agency approves 
an application. Loan approval is subject to the availability of funds.



Sec. 774.21  [Reserved]



Sec. 774.22  Loan closing.

    (a) Conditions. The applicant must meet all conditions specified by 
the loan approval official in the notification of loan approval prior to 
closing.
    (b) Loan instruments and legal documents. The applicant will execute 
all loan instruments and legal documents required by the Agency to 
evidence the debt, perfect the required security interest in the 
bankruptcy claim, and protect the Government's interest, in

[[Page 198]]

accordance with applicable State and Federal laws. In the case of an 
entity applicant, all officers or partners and any board members also 
will be required to execute the promissory notes as individuals.
    (c) Fees. The applicant will pay all loan closing fees for recording 
any legal instruments determined to be necessary and all notary, lien 
search, and similar fees incident to loan transactions. No fees will be 
assessed for work performed by Agency employees.



Sec. 774.23  Loan servicing.

    Loans will be serviced in accordance with subpart J of part 1951 of 
this title, or its successor regulation. If the loan is not repaid as 
agreed and default occurs, servicing will proceed in accordance with 
section 1951.468 of that part.



Sec. 774.24  Exception.

    The Agency may grant an exception to any of the requirements of this 
section, if the proposed change is in the best financial interest of the 
Government and not inconsistent with the authorizing statute or other 
applicable law.



PART 780_APPEAL REGULATIONS--Table of Contents




Sec.
780.1 General.
780.2 Definitions.
780.3 Reservations of authority.
780.4 Applicability.
780.5 Decisions that are not appealable.
780.6 Appeal procedures available when a decision is appealable.
780.7 Reconsideration.
780.8 County committee appeals.
780.9 Mediation.
780.10 State committee appeals.
780.11 Appeals of NRCS determinations.
780.12 Appeals of penalties assessed under the Agricultural Foreign 
          Investment Disclosure Act of 1978.
780.13 Verbatim transcripts.
780.14 [Reserved]
780.15 Time limitations.
780.16 Implementation of final agency decisions.
780.17 Judicial review.

    Authority: 5 U.S.C. 301 and 574; 7 U.S.C. 6995; 15 U.S.C. 714b and 
714c; 16 U.S.C. 590h.

    Source: 70 FR 43266, July 27, 2005, unless otherwise noted.



Sec. 780.1  General.

    This part sets forth rules applicable to appealability reviews, 
reconsiderations, appeals and alternative dispute resolution procedures 
comprising in aggregate the informal appeals process of FSA. FSA will 
apply these rules to facilitate and expedite participants' submissions 
and FSA reviews of documentary and other evidence material to resolution 
of disputes arising under agency program regulations.



Sec. 780.2  Definitions.

    For purposes of this part:
    1994 Act means the Federal Crop Insurance Reform and Department of 
Agriculture Reorganization Act of 1994 (Pub. L. 103-354).
    Adverse decision means a program decision by an employee, officer, 
or committee of FSA that is adverse to the participant. The term 
includes any denial of program participation, benefits, written 
agreements, eligibility, etc., that results in a participant receiving 
less funds than the participant believes should have been paid or not 
receiving a program benefit to which the participant believes the 
participant was entitled.
    Agency means FSA and its county and State committees and their 
personnel, CCC, NRCS, and any other agency or office of the Department 
which the Secretary may designate, or any successor agency.
    Agency record means all documents and materials maintained by FSA 
that are related to the adverse decision under review that are compiled 
and reviewed by the decision-maker or that are compiled in the record 
provided to the next level reviewing authority.
    Appeal means a written request by a participant asking the next 
level reviewing authority within FSA to review a decision. However, 
depending on the context, the term may also refer to a request for 
review by NAD.
    Appealability review means review of a decision-maker's 
determination that a decision is not appealable under this part. That 
decision is, however, subject to review according to Sec. 780.5 or 7 
CFR part 11 to determine whether the decision involves a factual dispute 
that is appealable or is, instead, an attempt to challenge generally 
applicable program

[[Page 199]]

policies, provisions, regulations, or statutes that were not appealable.
    Appellant means any participant who appeals or requests 
reconsideration or mediation of an adverse decision in accordance with 
this part or 7 CFR part 11.
    Authorized representative means a person who has obtained a Privacy 
Act waiver and is authorized in writing by a participant to act for the 
participant in a reconsideration, mediation, or appeal.
    CCC means the Commodity Credit Corporation, a wholly owned 
Government corporation within USDA.
    Certified State means, in connection with mediation, a State with a 
mediation program, approved by the Secretary, that meets the 
requirements of 7 CFR part 785.
    Confidential mediation means a mediation process in which neither 
the mediator nor parties participating in mediation will disclose to any 
person oral or written communications provided to the mediator in 
confidence, except as allowed by 5 U.S.C. 574 or 7 CFR part 785.
    County committee means an FSA county or area committee established 
in accordance with section 8(b) of the Soil Conservation and Domestic 
Allotment Act (16 U.S.C. 590h(b)).
    Determination of NRCS means a decision by NRCS made pursuant to 
Title XII of the Food Security Act of 1985 (16 U.S.C. 3801 et seq.), as 
amended.
    FSA means the Farm Service Agency, an agency within USDA.
    Final decision means a program decision rendered by an employee or 
officer of FSA pursuant to delegated authority, or by the county or 
State committee upon written request of a participant. A decision that 
is otherwise final shall remain final unless the decision is timely 
appealed to the State committee or NAD. A decision of FSA made by 
personnel subordinate to the county committee is considered ``final'' 
for the purpose of appeal to NAD only after that decision has been 
appealed to the county committee under the provisions of this part.
    Hearing means an informal proceeding on an appeal to afford a 
participant opportunity to present testimony, documentary evidence, or 
both to show why an adverse decision is in error and why the adverse 
decision should be reversed or modified.
    Implement means the taking of action by FSA, NRCS, or CCC that is 
necessary to effectuate fully and promptly a final decision.
    Mediation means a technique for resolution of disputes in which a 
mediator assists disputing parties in voluntarily reaching mutually 
agreeable settlement of issues within the laws, regulations, and the 
agency's generally applicable program policies and procedures, but in 
which the mediator has no authoritative decision making power.
    Mediator means a neutral individual who functions specifically to 
aid the parties in a dispute during a mediation process.
    NAD means the USDA National Appeals Division established pursuant to 
the 1994 Act.
    NAD rules means the NAD rules of procedure published at 7 CFR part 
11, implementing title II, subtitle H of the 1994 Act.
    Non-certified State means a State that is not approved to 
participate in the certified mediation program under 7 CFR part 785, or 
any successor regulation.
    NRCS means the Natural Resources Conservation Service of USDA.
    Participant means any individual or entity who has applied for, or 
whose right to participate in or receive, a payment, loan, loan 
guarantee, or other benefit in accordance with any program of FSA to 
which the regulations in this part apply is affected by a decision of 
FSA. The term includes anyone meeting this definition regardless of 
whether, in the particular proceeding, the participant is an appellant 
or a third party respondent. The term does not include individuals or 
entities whose claim(s) arise under the programs excluded in the 
definition of ``participant'' published at 7 CFR 11.1.
    Qualified mediator means a mediator who meets the training 
requirements established by State law in the State in which mediation 
services will be provided or, where a State has no law prescribing 
mediator qualifications, an individual who has attended a minimum of 40 
hours of core mediator knowledge and skills training and, to

[[Page 200]]

remain in a qualified mediator status, completes a minimum of 20 hours 
of additional training or education during each 2-year period. Such 
training or education must be approved by USDA, by an accredited college 
or university, or by one of the following organizations: State Bar of a 
qualifying State, a State mediation association, a State approved 
mediation program, or a society of dispute resolution professionals.
    Reconsideration means a subsequent consideration of a program 
decision by the same level of decision-maker or reviewing authority.
    Reviewing authority means a person or committee assigned the 
responsibility of making a decision on reconsideration or an appeal 
filed by a participant in accordance with this part.
    State committee means an FSA State committee established in 
accordance with Section 8(b) of the Soil Conservation and Domestic 
Allotment Act (16 U.S.C. 590h(b)) including, where appropriate, the 
Director of the Caribbean Area FSA office for Puerto Rico and the Virgin 
Islands.
    State Conservationist means the NRCS official in charge of NRCS 
operations within a State, as set forth in part 600 of this title.
    State Executive Director means the executive director of an FSA 
State office with administrative responsibility for a FSA State office 
as established under the Reorganization Act.
    USDA means the U.S. Department of Agriculture.
    Verbatim transcript means an official, written record of proceedings 
in an appeal hearing or reconsideration of an adverse decision 
appealable under this part.



Sec. 780.3  Reservations of authority.

    (a) Representatives of FSA and CCC may correct all errors in data 
entered on program contracts, loan agreements, and other program 
documents and the results of the computations or calculations made 
pursuant to the contract or agreement. FSA and CCC will furnish 
appropriate notice of such corrections when corrections are deemed 
necessary.
    (b) Nothing contained in this part shall preclude the Secretary, or 
the Administrator of FSA, Executive Vice President of CCC, the Chief of 
NRCS, if applicable, or a designee, from determining at any time any 
question arising under the programs within their respective authority or 
from reversing or modifying any decision made by a subordinate employee 
of FSA or its county and State committees, or CCC.



Sec. 780.4  Applicability.

    (a)(1) Except as provided in other regulations, this part applies to 
decisions made under programs and by agencies, as set forth herein:
    (i) Decisions in programs administered by FSA to make, guarantee or 
service farm loans set forth in chapters VII and XVIII of this title 
relating to farm loan programs;
    (ii) Decisions in those domestic programs administered by FSA on 
behalf of CCC through State and county committees, or itself, which are 
generally set forth in chapters VII and XIV of this title, or in part 
VII relating to conservation or commodities;
    (iii) Appeals from adverse decisions, including technical 
determinations, made by NRCS under title XII of the Food Security Act of 
1985, as amended;
    (iv) Penalties assessed by FSA under the Agricultural Foreign 
Investment Disclosure Act of 1978, 5 U.S.C. 501 et seq.;
    (v) Decisions on equitable relief made by a State Executive Director 
or State Conservationist pursuant to section 1613 of the Farm Security 
and Rural Investment Act of 2002, Pub. L. 107-171; and
    (vi) Other programs to which this part is made applicable by 
specific program regulations or notices in the Federal Register.
    (2) The procedures contained in this part may not be used to seek 
review of statutes or regulations issued under Federal law or review of 
FSA's generally applicable interpretations of such laws and regulations.
    (3) For covered programs, this part is applicable to any decision 
made by an employee of FSA or of its State and county committees, CCC, 
the personnel of FSA, or CCC, and by the officials of NRCS to the extent 
otherwise provided in this part, and as otherwise may be provided in 
individual program requirements or by the Secretary.

[[Page 201]]

    (b) With respect to matters identified in paragraph (a) of this 
section, participants may request appealability review, reconsideration, 
mediation, or appeal under the provisions of this part, of decisions 
made with respect to:
    (1) Denial of participation in a program;
    (2) Compliance with program requirements;
    (3) Issuance of payments or other program benefits to a participant 
in a program; and
    (4) Determinations under Title XII of the Food Security Act of 1985, 
as amended, made by NRCS.
    (c) Only a participant directly affected by a decision may seek 
administrative review under Sec. 780.5(c).



Sec. 780.5  Decisions that are not appealable.

    (a) Decisions that are not appealable under this part shall include 
the following:
    (1) Any general program provision or program policy or any statutory 
or regulatory requirement that is applicable to similarly situated 
participants;
    (2) Mathematical formulas established under a statute or program 
regulation and decisions based solely on the application of those 
formulas;
    (3) Decisions made pursuant to statutory provisions that expressly 
make agency decisions final or their implementing regulations;
    (4) Decisions on equitable relief made by a State Executive Director 
or State Conservationist pursuant to Section 1613 of the Farm Security 
and Rural Investment Act of 2002, Pub. L. 107-171;
    (5) Decisions of other Federal or State agencies;
    (6) Requirements and conditions designated by law to be developed by 
agencies other than FSA.
    (7) Disapprovals or denials because of a lack of funding.
    (8) Decisions made by the Administrator or a Deputy Administrator.
    (b) A participant directly affected by an adverse decision that is 
determined not to be subject to appeal under this part may request an 
appealability review of the determination by the State Executive 
Director of the State from which the underlying decision arose in 
accordance with Sec. 780.15.
    (c) Decisions that FSA renders under this part may be reviewed by 
NAD under part 11 of this title to the extent otherwise allowed by NAD 
under its rules and procedures. An appealability determination of the 
State Executive Director in an administrative review is considered by 
FSA to be a new decision.



Sec. 780.6  Appeal procedures available when a decision is appealable.

    (a) For covered programs administered by FSA for CCC, the following 
procedures are available:
    (1) Appeal to the county committee of decisions of county committee 
subordinates;
    (2) Reconsideration by the county committee;
    (3) Appeal to the State committee;
    (4) Reconsideration by the State committee;
    (5) Appeal to NAD;
    (6) Mediation under guidelines specified in Sec. 780.9.
    (b) For decisions in agricultural credit programs administered by 
FSA, the following procedures are available:
    (1) Reconsideration under Sec. 780.7;
    (2) Mediation under Sec. 780.9;
    (3) Appeal to NAD.
    (c) For programs and regulatory requirements under Title XII of the 
Food Security Act of 1985, as amended, to the extent not covered by 
paragraph (a) of this section, the following procedures are available:
    (1) Appeal to the county committee;
    (2) Appeal to the State committee;
    (3) Mediation under Sec. 780.9;
    (4) Appeal to NAD.



Sec. 780.7  Reconsideration.

    (a) A request for reconsideration under this part must be submitted 
in writing by a participant or by a participant's authorized 
representative and addressed to the FSA decision maker as may be 
instructed in the adverse decision notification.
    (b) A participant's right to request reconsideration is waived if, 
before requesting reconsideration, a participant:
    (1) Has requested and begun mediation of the adverse decision;

[[Page 202]]

    (2) Has appealed the adverse decision to a higher reviewing 
authority in FSA; or
    (3) Has appealed to NAD.
    (c) Provided a participant has not waived the right to request 
reconsideration, FSA will consider a request for reconsideration of an 
adverse decision under these rules except when a request concerns a 
determination of NRCS appealable under the procedures in Sec. 780.11, 
the decision has been mediated, the decision has previously been 
reconsidered, or the decision-maker is the Administrator, Deputy 
Administrator, or other FSA official outside FSA's informal appeals 
process.
    (d) A request for reconsideration will be deemed withdrawn if a 
participant requests mediation or appeals to a higher reviewing 
authority within FSA or requests an appeal by NAD before a request for 
reconsideration has been acted upon.
    (e) The Federal Rules of Evidence do not apply to reconsiderations. 
Proceedings may be confined to presentations of evidence to material 
facts, and evidence or questions that are irrelevant, unduly 
repetitious, or otherwise inappropriate may be excluded.
    (f) The official decision on reconsideration will be the decision 
letter that is issued following disposition of the reconsideration 
request.
    (g) A decision on reconsideration is a new decision that restarts 
applicable time limitations periods under Sec. 780.15 and part 11 of 
this title.



Sec. 780.8  County committee appeals.

    (a) A request for appeal to a county committee concerning a decision 
of a subordinate of the county committee must be submitted by a 
participant or by a participant's authorized representative in writing 
and must be addressed to the office in which the subordinate is 
employed.
    (b) The Federal Rules of Evidence do not apply to appeals to a 
county committee. However, a county committee may confine presentations 
of evidence to material facts and may exclude evidence or questions that 
are irrelevant, unduly repetitious, or otherwise inappropriate.
    (c) The official county committee decision on an appeal will be the 
decision letter that is issued following disposition of the appeal.
    (d) Deliberations shall be in confidence except to the extent that a 
county committee may request the assistance of county committee or FSA 
employees during deliberations.



Sec. 780.9  Mediation.

    (a) Any request for mediation must be submitted after issuance of an 
adverse decision but before any hearing in an appeal of the adverse 
decision to NAD.
    (b) An adverse decision and any particular issues of fact material 
to an adverse decision may be mediated only once:
    (1) If resolution of an adverse decision is not achieved in 
mediation, a participant may exercise any remaining appeal rights under 
this part or appeal to NAD in accordance with part 11 of this title and 
NAD procedures.
    (2) If an adverse decision is modified as a result of mediation, a 
participant may exercise any remaining appeal rights as to the modified 
decision under this part or appeal to NAD, unless such appeal rights 
have been waived pursuant to agreement in the mediation.
    (c) Any agreement reached during, or as a result of, the mediation 
process shall conform to the statutory and regulatory provisions 
governing the program and FSA's generally applicable interpretation of 
those statutes and regulatory provisions.
    (d) FSA will participate in mediation in good faith and to do so 
will take steps that include the following:
    (1) Designating a representative in the mediation;
    (2) Instructing the representative that any agreement reached 
during, or as a result of, the mediation process must conform to the 
statutes, regulations, and FSA's generally applicable interpretations of 
statutes and regulations governing the program;
    (3) Assisting as necessary in making pertinent records available for 
review and discussion during the mediation; and
    (4) Directing the representative to forward any written agreement 
proposed in mediation to the appropriate FSA official for approval.

[[Page 203]]

    (e) Mediations will be treated in a confidential manner consistent 
with the purposes of the mediation.
    (f) For requests for mediation in a Certified State, if the factual 
issues implicated in an adverse decision have not previously been 
mediated, notice to a participant of an adverse decision will include 
notice of the opportunity for mediation, including a mailing address and 
facsimile number, if available, that the participant may use to submit a 
written request for mediation.
    (1) If the participant desires mediation, the participant must 
request mediation in writing by contacting the certified mediation 
program or such other contact as may be designated by FSA in an adverse 
decision letter. The request for mediation must include a copy of the 
adverse decision to be mediated.
    (2) Participants in mediation may be required to pay fees 
established by the mediation program.
    (3) A listing of certified State mediation programs and means for 
contact may be found on the FSA Web site at http://www.udsa.gov/fsa/
dispute-mediation.htm.
    (g) For requests for mediation in a Non-certified State, if the 
factual issues implicated in an adverse decision have not previously 
been mediated, notice to a participant of an adverse decision will, as 
appropriate, include notice of the opportunity for mediation, including 
the mailing address of the State Executive Director and a facsimile 
number, if available, that the participant may use to submit a written 
request for mediation.
    (1) It is the duty of the participant to contact the State Executive 
Director in writing to request mediation. The request for mediation must 
include a copy of the adverse decision to be mediated.
    (2) If resources are available for mediation, the State Executive 
Director will select a qualified mediator and provide written notice to 
the participant that mediation is available and the fees that the 
participant will incur for mediation.
    (3) If the participant accepts such mediation, FSA may give notice 
of the mediation to interested parties and third parties whose interests 
are known to FSA.
    (h) Mediation will be considered to be at an end on that date set 
out in writing by the mediator or mediation program, as applicable, or 
when the participant receives written notice from the State Executive 
Director that the State Executive Director believes the mediation is at 
an impasse, whichever is earlier.
    (i) To provide for mediator impartiality:
    (1) No person shall be designated as mediator in an adverse program 
dispute who has previously served as an advocate or representative for 
any party in the mediation.
    (2) As a condition of retention to mediate in an adverse program 
dispute under this part, the mediator shall agree not to serve 
thereafter as an advocate or representative for a participant or party 
in any other proceeding arising from or related to the mediated dispute, 
including, without limitation, representation of a mediation participant 
before an administrative appeals entity of USDA, or any other Federal 
Government department.



Sec. 780.10  State committee appeals.

    (a) A request for appeal to the State committee from a decision of a 
county committee must be submitted by a participant or by a 
participant's authorized representative in writing and addressed to the 
State Executive Director.
    (b) A participant's right to appeal a decision to a State committee 
is waived if a participant has appealed the adverse decision to NAD 
before requesting an appeal to the State Committee.
    (c) If a participant requests mediation or requests an appeal to NAD 
before a request for an appeal to the State Committee has been acted 
upon, the appeal to the State Committee will be deemed withdrawn.
    (d) The Federal Rules of Evidence do not apply in appeals to a State 
committee. Notwithstanding, a State committee may confine presentations 
of evidence to material facts and exclude evidence or questions as 
irrelevant, unduly repetitious, or otherwise inappropriate.

[[Page 204]]

    (e) The official record of a State committee decision on an appeal 
will be the decision letter that is issued following disposition of the 
appeal.
    (f) Deliberations shall be in confidence except to the extent that a 
State committee may request the assistance of FSA employees during 
deliberations.



Sec. 780.11  Appeals of NRCS determinations.

    (a) Notwithstanding any other provision of this part, a 
determination of NRCS issued to a participant pursuant to Title XII of 
the Food Security Act of 1985, as amended, including a wetland 
determination, may be appealed to the county committee in accordance 
with the procedures in this part.
    (b) If the county committee hears the appeal and believes that the 
challenge to the NRCS determination is not frivolous, the county 
committee shall refer the case with its findings on other issues to the 
NRCS State Conservationist to review the determination, or may make such 
a referral in advance of resolving other issues.
    (c) A decision of the county committee not to refer the case with 
its findings to the NRCS State Conservationist may be appealed to the 
State Committee.
    (d) The county or State committee decision must incorporate, and be 
based upon, the results of the NRCS State Conservationist's review and 
subsequent determination.



Sec. 780.12  Appeals of penalties assessed under the Agricultural Foreign 
Investment Disclosure Act of 1978.

    (a) Requests for appeals of penalties assessed under the 
Agricultural Foreign Investment Disclosure Act of 1978 must be addressed 
to: Administrator, Farm Service Agency, Stop 0572, 1400 Independence 
Avenue, SW., Washington, DC 20250-0572.
    (b) Decisions in appeals under this section are not subject to 
reconsideration and are administratively final.



Sec. 780.13  Verbatim transcripts.

    (a) Appellants and their representatives are precluded from making 
any electronic recording of any portion of a hearing or other proceeding 
conducted in accordance with this part. Appellants interested in 
obtaining an official recording of a hearing or other proceeding may 
request a verbatim transcript in accordance with paragraph (b) of this 
section.
    (b) Any party to an appeal or request for reconsideration under this 
part may request that a verbatim transcript be made of the hearing 
proceedings and that such transcript be made the official record of the 
hearing. The party requesting a verbatim transcript shall pay for the 
transcription service, provide a copy of the transcript to FSA free of 
charge, and allow any other party in the proceeding desiring to purchase 
a copy of the transcript to order it from the transcription service.



Sec. 780.14  [Reserved]



Sec. 780.15  Time limitations.

    (a) To the extent practicable, no later than 10 business days after 
an agency decision maker renders an adverse decision that affects a 
participant, FSA will provide the participant written notice of the 
adverse decision and available appeal rights.
    (b) A participant requesting an appealability review by the State 
Executive Director of an agency decision made at the county, area, 
district or State level that is otherwise determined by FSA not to be 
appealable must submit a written request for an appealability review to 
the State Executive Director that is received no later than 30 calendar 
days from the date a participant receives written notice of the 
decision.
    (c) A participant requesting reconsideration, mediation or appeal 
must submit a written request as instructed in the notice of decision 
that is received no later than 30 calendar days from the date a 
participant receives written notice of the decision.
    (d) Notwithstanding the time limits in paragraphs (b) and (c) of 
this section, a request for an appealability review, reconsideration, or 
appeal may be accepted if, in the judgment of the reviewing authority 
with whom such request is filed, exceptional circumstances warrant such 
action. A participant does not have the right to see an exception under 
this paragraph.

[[Page 205]]

FSA's refusal to accept an untimely request is not appealable.
    (e) Decisions appealable under this part are final unless review 
options available under this part or part 11 are timely exercised.
    (1) Whenever the final date for any requirement of this part falls 
on a Saturday, Sunday, Federal holiday, or other day on which the 
pertinent FSA office is not open for the transaction of business during 
normal working hours, the time for submission of a request will be 
extended to the close of business on the next working day.
    (2) The date when an adverse decision or other notice pursuant to 
these rules is deemed received is the earlier of physical delivery by 
hand, by facsimile with electronic confirmation of receipt, actual 
stamped record of receipt on a transmitted document, or 7 calendar days 
following deposit for delivery by regular mail.



Sec. 780.16  Implementation of final agency decisions.

    To the extent practicable, no later than 30 calendar days after an 
agency decision becomes a final administrative decision of USDA, FSA 
will implement the decision.



Sec. 780.17  Judicial review.

    (a) Decisions of the Administrator in appeals under this part from 
Agriculture Foreign Investment Disclosure Act penalties are 
administratively final decisions of USDA.
    (b) The decision of a State Executive Director or State 
Conservationist on equitable relief made under Sec. 718.307 of this 
title is administratively final and also not subject to judicial review.



PART 781_DISCLOSURE OF FOREIGN INVESTMENT IN AGRICULTURAL LAND--Table 
of Contents




Sec.
781.1 General.
781.2 Definitions.
781.3 Reporting requirements.
781.4 Assessment of penalties.
781.5 Penalty review procedure.
781.6 Paperwork Reduction Act assigned number.

    Authority: Sec. 1-10, 92 Stat. 1266 (7 U.S.C. 3501 et seq.).

    Source: 49 FR 35074, Sept. 6, 1984, unless otherwise noted.



Sec. 781.1  General.

    The purpose of these regulations is to set forth the requirements 
designed to implement the Agricultural Foreign Investment Disclosure Act 
of 1978. The regulations require that a foreign person who acquires, 
disposes of, or holds an interest in United States agricultural land 
shall disclose such transactions and holdings to the Secretary of 
Agriculture. In particular, the regulations establish a system for the 
collection of information by the Agricultural Stablization and 
Conservation Service (FSA) pertaining to foreign investment in United 
States agricultural land. The information collected will be utilized in 
the preparation of periodic reports to Congress and the President by the 
Economic Research Service (ERS) concerning the effect of such holdings 
upon family farms and rural communities.



Sec. 781.2  Definitions.

    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, and words used in the present tense include the 
future as well as the present. The following terms shall have the 
following meanings:
    (a) AFIDA. AFIDA means the Agricultural Foreign Investment 
Disclosure Act of 1978.
    (b) Agricultural land. Agricultural land means land in the United 
States used for forestry production and land in the United States 
currently used for, or, if currently idle, land last used within the 
past five years, for farming, ranching, or timber production, except 
land not exceeding ten acres in the aggregate, if the annual gross 
receipts from the sale of the farm, ranch, or timber products produced 
thereon do not exceed $1,000. Farming, ranching, or timber production 
includes, but is not limited to, activities set forth in the Standard 
Industrial Classification Manual (1987), Division A, exclusive of 
industry numbers 0711-0783, 0851, and 0912-0919 which cover animal 
trapping,

[[Page 206]]

game management, hunting carried on as a business enterprise, trapping 
carried on as a business enterprise, and wildlife management. Land used 
for forestry production means, land exceeding 10 acres in which 10 
percent is stocked by trees of any size, including land that formerly 
had such tree cover and that will be naturally or artificially 
regenerated.
    (c) Any interest. Any interest means all interest acquired, 
transferred or held in agricultural lands by a foreign person, except:
    (1) Security interests;
    (2) Leaseholds of less than 10 years;
    (3) Contingent future interests;
    (4) Noncontingent future interests which do not become possessory 
upon the termination of the present possessory estate;
    (5) Surface or subsurface easements and rights of way used for a 
purpose unrelated to agricultural production; and
    (6) An interest solely in mineral rights.
    (d) County. County means a political subdivision of a State 
identified as a County or parish. In Alaska, the term means an area so 
designated by the State Agricultural Stabilization and Conservation 
committee.
    (e) Foreign government. Foreign government means any government 
other than the United States government, the government of a State, or a 
political subdivision of a State.
    (f) Foreign individual. Foreign individual means foreign person as 
defined in paragraph (g)(1) of this section.
    (g) Foreign person. Foreign person means:
    (1) Any individual:
    (i) Who is not a citizen or national of the United States; or
    (ii) Who is not a citizen of the Northern Mariana Islands or the 
Trust Territory of the Pacific Islands; or
    (iii) Who is not lawfully admitted to the United States for 
permanent residence or paroled into the United States under the 
Immigration and Nationality Act;
    (2) Any person, other than an individual or a government, which is 
created or organized under the laws of a foreign government or which has 
its principal place of business located outside of all the States;
    (3) Any foreign government;
    (4) Any person, other than an individual or a government:
    (i) Which is created or organized under the laws of any State; and
    (ii) In which a significant interest or substantial control is 
directly or indirectly held:
    (A) By any individual referred to in paragraph (g)(1) of this 
section; or
    (B) By any person referred to in paragraph (g)(2) of this section; 
or
    (C) By any foreign government referred to in paragraph (g)(3) of 
this section; or
    (D) By any numerical combination of such individuals, persons, or 
governments, which combination need not have a common objective.
    (h) Person. Person means any individual, corporation, company, 
association, partnership, society, joint stock company, trust, estate, 
or any other legal entity.
    (i) Secretary. Secretary means the Secretary of Agriculture.
    (j) Security interest. Security interest means a mortgage or other 
debt securing instrument.
    (k) Significant interest of substantial control. Significant 
interest or substantial control means:
    (1) An interest of 10 percent or more held by a person referred to 
in paragraph (g)(4) of this section, by a single individual referred to 
in paragraph (g)(1) of this section, by a single person referred to in 
paragraph (g)(2) of this section, by a single government referred to in 
paragraph (g)(3) of this section; or
    (2) An interest of 10 percent or more held by persons referred to in 
paragraph (g)(4) of this section, by individuals referred to in 
paragraph (g)(1) of this section, by persons referred to in paragraph 
(g)(2) of this section, or by governments referred to in paragraph 
(g)(3) of this section, whenever such persons, individuals, or 
governments are acting in concert with respect to such interest even 
though no single individual, person, or government holds an interest of 
10 percent or more; or

[[Page 207]]

    (3) An interest of 50 percent or more, in the aggregate, held by 
persons referred to in paragraph (g)(4) of this section, by individuals 
referred to in paragraph (g)(1) of this section, by persons referred to 
in paragraph (g)(2) of this section, or by governments referred to in 
paragraph (g)(3) of this section, even though such individuals, persons, 
or governments may not be acting in concert.
    (l) State. State means any of the several States, the District of 
Columbia, the Commonwealth of Puerto Rico, the Northern Mariana Islands, 
Guam, the Virgin Islands, American Samoa, the Trust Territory of the 
Pacific Islands or any other territory or possession of the United 
States.

[49 FR 35074, Sept. 6, 1984, as amended at 58 FR 48274, Sept. 15, 1993]



Sec. 781.3  Reporting requirements.

    (a) All reports required to be filed pursuant to this part shall be 
filed with the FSA County office in the county where the land with 
respect to which such report must be filed is located or where the FSA 
County office administering programs carried out on such land is 
located; Provided, that the FSA office in Washington, DC, may grant 
permission to foreign persons to file reports directly with its 
Washington office when complex filings are involved, such as where the 
land being reported is located in more than one county.
    (b) Any foreign person who held, holds, acquires, or transfers any 
interest in United States agricultural land is subject to the 
requirement of filing a report on form FSA-153 by the following dates:
    (1) August 1, 1979, if the interest in the agricultural land was 
held on the day before February 2, 1979, or
    (2) Ninety days after the date of acquisition or transfer of the 
interest in the agricultural land, if the interest was acquired or 
transferred on or after February 2, 1979.
    (c) Any person who holds or acquires any interest in United States 
agricultural land at a time when such person is not a foreign person and 
who subsequently becomes a foreign person must submit, not later than 90 
days after the date on which such person becomes a foreign person, a 
report containing the information required to be submitted under 
paragraph (e) of this section.
    (d) Any foreign person who holds or acquires any interest in United 
States land at a time when such land is not agricultural land and such 
land subsequently becomes agricultural land must submit, not later than 
90 days after the date on which such land becomes agricultural, a report 
containing the information required to be submitted under paragraph (e) 
of this section.
    (e) Any foreign person required to submit a report under this 
regulation, except under paragraph (g) of this section, shall file an 
FSA-153 report containing the following information:
    (1) The legal name and the address of such foreign person;
    (2) In any case in which such foreign person is an individual, the 
citizenship of such foreign person;
    (3) In any case in which such foreign person is not an individual or 
a government, the nature and name of the person holding the interest, 
the country in which such foreign person is created or organized, and 
the principal place of business of such foreign person;
    (4) The type of interest held by a foreign person who acquired or 
transferred an interest in agricultural land;
    (5) The legal description and acreage of such agricultural land;
    (6) The purchase price paid for, or any other consideration given 
for, such interest; the amount of the purchase price or the value of the 
consideration yet to be given; the current estimated value of the land 
reported;
    (7) In any case in which such foreign person transfers such 
interest, the legal name and the address of the person to whom such 
interest is transferred; and
    (i) In any case in which such transferee is an individual, the 
citizenship of such transferee; and
    (ii) In any case in which such transferee is not an individual, or a 
government, the nature of the person holding the interest, the country 
in which such transferee is created or organized, and the principal 
place of business;
    (8) The agricultural purposes for which such foreign person intends, 
on the date on which such report is submitted, to use such agricultural 
land;

[[Page 208]]

    (9) When applicable, the name, address and relationship of the 
representative of the foreign person who is completing the FSA-153 form 
for the foreign person;
    (10) How the tract of land was acquired or transferred, the 
relationship of the foreign person to the previous owner, producer, 
manager, tenant or sharecropper, and the rental agreement; and
    (11) The date the interest in the land was acquired or transferred.
    (f)(1) Any foreign person, other than an individual or government, 
required to submit a report under paragraphs (b), (c), and (d) of this 
section, must submit, in addition to the report required under paragraph 
(e) of this section, a report containing the following information:
    (i) The legal name and the address of each foreign individual or 
government holding significant interest or substantial control in such 
foreign person;
    (ii) In any case in which the holder of such interest is an 
individual, the citizenship of such holder; and
    (iii) In any case in which the holder of significant interest or 
substantial control in such foreign person is not an individual or a 
government, the nature and name of the foreign person holding such 
interest, the country in which such holder is created or organized, and 
the principal place of business of such holder.
    (2) In addition, any such foreign person required to submit a report 
under paragraph (f)(1) of this section may also be required, upon 
request, to submit a report containing:
    (i) The legal name and the address of each individual or government 
whose legal name and address did not appear on the report required to be 
submitted under paragraph (f)(1) of this section, if such individual or 
government holds any interest in such foreign person:
    (ii) In any case in which the holder of such interest is an 
individual, the citizenship of such holder; and
    (iii) In any case in which the holder of such interest is not an 
individual or a government, the nature and name of the person holding 
the interest, the country in which such holder is created or organized, 
and the principal place of business of such holder.
    (g) Any foreign person, other than an individual or a government, 
whose legal name is contained on any report submitted in satisfaction of 
paragraph (f) of this section may also be required, upon request, to:
    (1) Submit a report containing:
    (i) The legal name and the address of each foreign individual or 
government holding significant interest or substantial control in such 
foreign person;
    (ii) In any case in which the holder of such interest is an 
individual, the citizenship of such holder; and
    (iii) In any case in which the holder of such interest in such 
foreign person is not an individual or a government, the nature and name 
of the foreign person holding such interest, the country in which each 
holder is created or organized, and the principal place of business of 
such holder.
    (2) Submit a report containing:
    (i) The legal name and address of each individual or government 
whose legal name and address did not appear on the report required to be 
submitted under paragraph (g)(1) of this section if such individual or 
government holds any interest in such foreign person and, except in the 
case of a request which involves a foreign person, a report was required 
to be submitted pursuant to paragraph (f)(2) of this section, disclosing 
information relating to nonforeign interest holders;
    (ii) In any case in which the holder of such interest is an 
individual, the citizenship of such holder; and
    (iii) In any case in which the holder of such interest is not an 
individual or government and, except in a situation where the 
information is requested from a foreign person, a report was required to 
be submitted pursuant to paragraph (f)(2) of this section disclosing 
information relating to nonforeign interest holders, the nature and name 
of the person holding the interest, the country in which such holder is 
created or organized, and the principal place of business of such 
holder.
    (h)(1) Any person which has issued fewer than 100,000 shares of 
common and preferred stock and instruments convertible into equivalents 
thereof shall be considered to have satisfactorily determined that it 
has no obligation to file a report pursuant to Sec. 781.3

[[Page 209]]

if, in addition to information within its knowledge, a quarterly 
examination of its business records fails to reveal that persons with 
foreign mailing addresses hold significant interest or substantial 
control in such person.
    (2) Any person which has issued 100,000 or more shares of common and 
preferred stock and instruments convertible into equivalents thereof 
shall be considerd to have satisfactorily determined that it has no 
obligation to file a report pursuant to Sec. 781.3 if, in addition to 
information within its knowledge, a quarterly examination of its 
business records fails to reveal that the percentage of shares held in 
such person both by persons with foreign mailing addresses and 
investment institutions which manage shares does not equal or exceed 
significant interest or substantial control in such person.
    (3) If the person in paragraph (h)(2) of this section determines 
that the percentage of shares, which is held in it both by persons with 
foreign mailing addresses and investment institutions which manage 
shares, equals or exceeds significant interest or substantial control in 
such persons, then such person shall be considered to have 
satisfactorily attempted to determine whether it has an obligation to 
file a report pursuant to Sec. 781.3 if it sends questionnaires to each 
such investment institution holding an interest in it inquiring as to 
whether the persons for which they are investing are foreign persons and 
the percentage of shares reflected by the affirmative responses from 
each such investment institution plus the percentage of shares held by 
persons listed on the business records with foreign mailing addresses 
does not reveal that foreign persons hold significant interest or 
substantial control in such person.
    (i) Any foreign person, who submitted a report under paragraph (b), 
(c), or (d) of this section at a time when such land was agricultural, 
and such agricultural land later ceases to be agricultural, must submit, 
not later than 90 days after the date on which such land ceases being 
agricultural, a revised report from FSA-153 or a written notification of 
the change of status of the land to the FSA office where the report form 
was originally filed. The report form and notification must contain the 
following information:
    (1) The legal name and the address of such foreign person;
    (2) The legal description, which includes the State and county where 
the land is located, and the acreage of such land;
    (3) The date the land ceases to be agricultural;
    (4) The use of the land while agricultural.
    (j) If any foreign person who submitted a report under paragraph 
(b), (c), or (d) of this section ceases to be a foreign person, such 
person must submit, not later than 90 days after the date such person 
ceases being a foreign person, a written notification of the change of 
status of the person to the FSA office where the report form FSA-153 was 
originally filed. The notification must contain the following 
information:
    (1) The legal name of such person;
    (2) The legal description and acreage of such land;
    (3) The date such person ceases to be foreign.
    (k) Any foreign person who submitted a report under paragraph (b), 
(c), or (d) of this section must submit, not later than 90 days after 
the change of information contained on the report, a written 
notification of the change to the FSA office where the report form FSA-
153 was originally filed. The following information must be kept current 
on the report:
    (1) The legal address of such foreign person;
    (2) The legal name and the address required to be submitted under 
(f)(1) of this section;
    (3) The legal name and the address required to be submitted under 
(g)(1) of this section.

[49 FR 35074, Sept. 6, 1984, as amended at 51 FR 25993, July 18, 1986]



Sec. 781.4  Assessment of penalties.

    (a) Violation of the reporting obligations will consist of:
    (1) Failure to submit any report in accordance with Sec. 781.3;
    (2) Failure to maintain any submitted report with accurate 
information; or

[[Page 210]]

    (3) Submission of a report which the foreign person knows:
    (i) Does not contain, initially or within thirty days from the date 
of a letter returning for completion such incomplete report, all the 
information required to be in such report; or
    (ii) Contains misleading or false information.
    (b) Any foreign person who violates the reporting obligation as 
described in paragraph (a) of this section shall be subject to the 
following penalties:
    (1) Late-filed reports: One-tenth of one percent of the fair market 
value, as determined by the Farm Service Agency, of the foreign person's 
interest in the agricultural land, with respect to which such violation 
occurred, for each week or portion thereof that such violation 
continues, but the total penalty imposed shall not exceed 25 percent of 
the fair market value of the foreign person's interest in such land.
    (2) Submission of an incomplete report or a report containing 
misleading or false information, failure to submit a report or failure 
to maintain a submitted report with accurate information: 25 percent of 
the fair market value, as determined by the Farm Service Agency, of the 
foreign person's interest in the agricultural land with respect to which 
such violation occurred.
    (3) Penalties prescribed above are subject to downward adjustments 
based on factors including:
    (i) Total time the violation existed.
    (ii) Method of discovery of the violation.
    (iii) Extenuating circumstances concerning the violation.
    (iv) Nature of the information misstated or not reported.
    (c) The fair market value for the land, with respect to which such 
violation occurred, shall be such value on the date the penalty is 
assessed, or if the land is no longer agricultural, on the date it was 
last used as agricultural land. The price or current estimated value 
reported by the foreign person, as verified and/or adjusted by the 
County Agricultural Stabilization and Conservation Committee for the 
County where the land is located, will be considered to be the fair 
market value.



Sec. 781.5  Penalty review procedure.

    (a) Whenever it appears that a foreign person has violated the 
reporting obligation as described in paragraph (a) of Sec. 781.4, a 
written notice of apparent liability will be sent to the foreign 
person's last known address by the Farm Service Agency. This notice will 
set forth the facts which indicate apparent liability, identify the type 
of violation listed in paragraph (a) of Sec. 781.4 which is involved, 
state the amount of the penalty to be imposed, include a statement of 
fair market value of the foreign person's interest in the subject land, 
and summarize the courses of action available to the foreign person.
    (b) The foreign person involved shall respond to a notice of 
apparent liability within 60 days after the notice is mailed. If a 
foreign person fails to respond to the notice of apparent liability, the 
proposed penalty shall become final. Any of the following actions by the 
foreign person shall constitute a response meeting the requirements of 
this paragraph.
    (1) Payment of the proposed penalty in the amount specified in the 
notice of apparent liability and filing of a report, if required, in 
compliance with Sec. 781.3. The amount shall be paid by check or money 
order drawn to the Treasurer of the United States and shall be mailed to 
the U.S. Department of Agriculture, P.O. Box 2415, Washington, DC 20013. 
The Department is not responsible for the loss of currency sent through 
the mails.
    (2) Submission of a written statement denying liability for the 
penalty in whole or in part. Allegations made in any such statement must 
be supported by detailed factual data. The statement should be mailed to 
the Administrator, Farm Service Agency, U.S. Department of Agriculture, 
P.O. Box 2415, Washington, DC 20013.
    (3) A request for a hearing on the proposed penalty may be filed in 
accordance with part 780 of this title.
    (c) After a final decision is issued pursuant to an appeal under 
part 780 of this title, the Administrator or Administrator's designee 
shall mail the foreign person a notice of the determination on appeal, 
stating whether a report must be filed or amended in compliance with 
Sec. 781.3, the amount of the

[[Page 211]]

penalty (if any), and the date by which it must be paid. The foreign 
person shall file or amend the report as required by the Administrator. 
The penalty in the amount stated shall be paid by check or money order 
drawn to the Treasurer of the United States and shall be mailed to the 
United States Department of Agriculture, P.O. Box 2415, Washington, DC 
20013. The Department is not responsible for the loss of currency sent 
through the mails.
    (d) If the foreign person contests the notice of apparent liability 
by submitting a written statement or a request for a hearing thereon, 
the foreign person may elect either to pay the penalty or decline to pay 
the penalty pending resolution of the matter by the Administrator. If 
the Administrator determines that the foreign person is not liable for 
the penalty or is liable for less than the amount paid, the payment will 
be wholly or proportionally refunded. If the Administrator ultimately 
determines that the foreign person is liable, the penalty finally 
imposed shall not exceed the amount imposed in the notice of apparent 
liability.
    (e) If a foreign person fails to respond to the notice of apparent 
liability as required by paragraph (b) of this section, or fails to pay 
the penalty imposed by the Administrator under paragraph (d) of this 
section, the case will, without further notice, be referred by the 
Department to the Department of Justice for prosecution in the 
appropriate District Court to recover the amount of the penalty.
    (f) Any amounts approved by the U.S. Department of Agriculture for 
disbursement to a foreign person under the programs administered by the 
Department may be setoff against penalties assessed hereunder against 
such person, in accordance with the provisions of 7 CFR part 13.

[49 FR 35074, Sept. 6, 1984, as amended at 60 FR 67318, Dec. 29, 1995]



Sec. 781.6  Paperwork Reduction Act assigned number.

    The information collection requirements contained in these 
regulations (7 CFR part 781) 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 0560-0097.



PART 782_END-USE CERTIFICATE PROGRAM--Table of Contents




                            Subpart A_General

Sec.
782.1 Basis and purpose.
782.2 Definitions.
782.3 Administration.
782.4 OMB control numbers assigned pursuant to the Paperwork Reduction 
          Act.

       Subpart B_Implementation of the End-Use Certificate Program

782.10 Identification of commodities subject to end-use certificate 
          regulations.
782.11 Extent to which commodities are subject to end-use certificate 
          regulations.
782.12 Filing FSA-750, End-Use Certificate for Wheat.
782.13 Importer responsibilities.
782.14 Identity preservation.
782.15 Filing FSA-751, Wheat Consumption and Resale Report.
782.16 Designating end use on form FSA-751.
782.17 Wheat purchased for resale.
782.18 Wheat purchased for export.
782.19 Penalty for noncompliance.

                      Subpart C_Records and Reports

782.20 Importer records and reports.
782.21 End-user and exporter records and reports.
782.22 Subsequent buyer records and reports.
782.23 Failure to file end-use certificates or consumption and resale 
          reports.
782.24 Recordkeeping and examination of records.
782.25 Length of time records are to be kept.

    Authority: 19 U.S.C. 3391(f).

    Source: 60 FR 5089, Jan. 26, 1995, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 782 appear at 61 FR 
32643, June 25, 1996.



                            Subpart A_General



Sec. 782.1  Basis and purpose.

    The regulations contained in this part are issued pursuant to and in 
accordance with Section 321(f) of the North American Free Trade 
Agreement Implementation Act. These regulations govern the establishment 
of the end-use certificate program, the completion of end-use 
certificates, the identification of commodities requiring end-

[[Page 212]]

use certificates, the submission of reports, and the keeping of records 
and making of reports incident thereto.



Sec. 782.2  Definitions.

    As used in this part and in all instructions, forms, and documents 
in connection therewith, the words and phrases defined in this section 
shall have the meanings herein assigned to them unless the context or 
subject matter requires otherwise. References contained herein to other 
parts of this chapter or title shall be construed as references to such 
parts and amendments now in effect or later issued.
    Date of entry means the effective time of entry of the merchandise, 
as defined in 19 CFR part 101.
    End Use means the actual manner in which Canadian-produced wheat was 
used, including, among other uses, milling, brewing, malting, 
distilling, manufacturing, or export.
    End user means the entity that uses Canadian-produced wheat for, 
among other uses, milling, brewing, malting, distilling, manufacturing, 
or other use, except resale.
    Entity means a legal entity including, but not limited to, an 
individual, joint stock company, corporation, association, partnership, 
cooperative, trust, and estate.
    Entry means that documentation required by 19 CFR part 142 to be 
filed with the appropriate U.S. Customs officer to secure the release of 
imported merchandise from U.S. Customs custody, or the act of filing 
that documentation.
    Grain handler means an entity other than the importer, exporter, 
subsequent buyer, or end user that handles wheat on behalf of an 
importer, exporter, subsequent buyer, or end user.
    Importer means a party qualifying as an Importer of Record pursuant 
to 19 U.S.C. 1484(a).
    Metric ton means a unit of measure that equals 2,204.6 pounds.
    Subsequent buyer means an entity other than the end user or importer 
which owns wheat originating in Canada.
    Workdays means days that the Federal government normally conducts 
business, which excludes Saturdays, Sundays, and Federal holidays.

[60 FR 5089, Jan. 26, 1995, as amended at 61 FR 32643, June 25, 1996; 64 
FR 12885, Mar. 16, 1999]



Sec. 782.3  Administration.

    The end-use certificate program will be administered under the 
general supervision and direction of the Administrator, Farm Service 
Agency (FSA), U.S. Department of Agriculture (USDA), through the Office 
of the Deputy Administrator for Commodity Operations (DACO), FSA, 
Washington, D.C., and the Kansas City Commodity Office (KCCO), FSA, 
Kansas City, MO, in coordination with the Commissioner of Customs 
pursuant to a Memorandum of Understanding.



Sec. 782.4  OMB control numbers assigned pursuant to the Paperwork 
Reduction Act.

    The information collection requirements in this part have been 
approved by the Office of Management and Budget and assigned OMB control 
number 0560-0151.

[61 FR 32643, June 25, 1996]



       Subpart B_Implementation of the End-Use Certificate Program



Sec. 782.10  Identification of commodities subject to end-use certificate 
regulations.

    (a) The regulations in this part are applicable to wheat and barley, 
respectively, imported into the U.S. from any foreign country, as 
defined in 19 CFR 134.1, or instrumentality of such foreign country 
that, as of April 8, 1994, required end-use certificates for imports of 
U.S.-produced wheat or barley.
    (b) Because Canada is the only country with such requirements on 
wheat, and no country has an end-use certificate requirement for barley, 
only wheat originating in Canada is affected by the regulations in this 
part.



Sec. 782.11  Extent to which commodities are subject to end-use 
certificate regulations.

    (a) In the event that Canada eliminates the requirement for end-use 
certificates on imports from the U.S., the

[[Page 213]]

provisions of the regulations in this part shall be suspended 30 
calendar days following the date Canada eliminates its end-use 
certificate requirement, as determined by the Secretary.
    (b) The provisions of the regulations in this part may be suspended 
if the Secretary, after consulting with domestic producers, determines 
that the program has directly resulted in the:
    (1) Reduction of income to U.S. producers of agricultural 
commodities, or
    (2) Reduction of the competitiveness of U.S. agricultural 
commodities in world export markets.



Sec. 782.12  Filing FSA-750, End-Use Certificate for Wheat.

    (a) Each entity that imports wheat originating in Canada shall, for 
each entry into the U.S., obtain form FSA-750, End-Use Certificate for 
Wheat, from Kansas City Commodity Office, Warehouse Contract Division, 
P.O. Box 419205, Kansas City, MO 64141-6205, and submit the completed 
original form FSA-750 to KCCO within 10 workdays following the date of 
entry or release. Each form FSA-750 shall set forth, among other things, 
the:
    (1) Name, address, and telephone number of the importer,
    (2) Customs entry number,
    (3) Date of entry,
    (4) Importer number,
    (5) Class of wheat being imported,
    (6) Grade, protein content, moisture content, and dockage level of 
wheat being imported,
    (7) If imported as a result of a contract for sale, the date of such 
contract.
    (8) Quantity imported, in net metric tons, rounded to the nearest 
hundredth of a metric ton, per conveyance,
    (9) Storage location of the wheat,
    (10) Mode of transportation and the name of the transportation 
company used to import the wheat, and
    (11) A certification that the identity of the Canadian-produced 
wheat will be preserved until such time as the wheat is either delivered 
to a subsequent buyer or end-user, or loaded onto a conveyance for 
direct delivery to an end user.
    (b) Importers may provide computer generated form FSA-750, provided 
such computer generated forms:
    (1) Are approved in advance by KCCO,
    (2) Contain a KCCO-assigned serial number, and
    (3) Contain all of the information required in paragraphs (a)(1) 
through (a)(9).
    (c) KCCO will accept form FSA-750 submitted through the following 
methods:
    (1) Mail service, including express mail,
    (2) Facsimile machine, and
    (3) Other electronic transmissions, provided such transmissions are 
approved in advance by KCCO. The importer remains responsible for 
ensuring that electronically transmitted forms are received in 
accordance with paragraph (a).
    (d) The original form FSA-750 and one copy of form FSA-750 shall be 
signed and dated by the importer.
    (e) Distribution of form FSA-750 will be as follows:
    (1) If form FSA-750 is submitted to KCCO in accordance with 
paragraph (c)(1);
    (i) The original shall be forwarded to Kansas City Commodity Office, 
Warehouse License and Contract Division, P.O. Box 419205, Kansas City, 
MO 64141-6205, by the importer,
    (ii) One copy shall be retained by the importer.
    (2) If form FSA-750 is submitted to KCCO in accordance with 
paragraphs (c)(2) or (c)(3), the original form FSA-750 that is signed 
and dated by the importer in accordance with paragraph (d) shall be 
maintained by the importer,
    (3) The importer shall provide a photocopy to the end user or, if 
the wheat is purchased for purposes of resale, the subsequent buyer(s).
    (f) The completion and filing of an end-use certificate does not 
relieve the importer of other legal requirements, such as those imposed 
by other U.S. agencies, pertaining to the importation.

[60 FR 5089, Jan. 26, 1995, as amended at 61 FR 32643, June 25, 1996; 64 
FR 12885, Mar. 16, 1999]



Sec. 782.13  Importer responsibilities.

    The importer shall:
    (a) File form FSA-750 in accordance with Sec. 782.12.

[[Page 214]]

    (b) Immediately notify each subsequent buyer, grain handler, or end 
user that the wheat being purchased or handled originated in Canada and 
may only be commingled with U.S.-produced wheat by the end user or when 
loaded onto a conveyance for direct delivery to the end user or a 
foreign country.
    (c) Provide each subsequent buyer or end user with a copy of form 
FSA-750 that was filed when the Canadian wheat entered the U.S.
    (d) Submit to KCCO, within 15 workdays following the date of sale, 
form FSA-751, Wheat Consumption and Resale Report, in accordance with 
Sec. 782.15.

[60 FR 5089, Jan. 26, 1995, as amended at 61 FR 32643, June 25, 1996]



Sec. 782.14  Identity preservation.

    (a) The importer and all subsequent buyers of the imported wheat 
shall preserve the identity of the Canadian-produced wheat.
    (b) Canadian-produced wheat may only be commingled with U.S.-
produced wheat by the end user, or when loaded onto a conveyance for 
direct delivery to the end user or foreign country.
    (c) Failure to meet the requirements in paragraphs (a) and (b) of 
this section shall constitute noncompliance by the importer or 
subsequent buyer for the purposes of this part.



Sec. 782.15  Filing FSA-751, Wheat Consumption and Resale Report.

    (a) For purposes of providing information relating to the 
consumption and resale of Canadian-produced wheat, form FSA-751, Wheat 
Consumption and Resale Report, shall be filed with KCCO by each:
    (1) Importer and subsequent buyer, for each sale to a subsequent 
buyer or end user, within 15 workdays following the date of sale.
    (2) End user and exporter, for full and partial consumption or 
export, within 15 workdays following:
    (i) March 31,
    (ii) June 30,
    (iii) September 30, and
    (iv) December 31.
    (b) Each form FSA-751 shall set forth, among other things, the:
    (1) Name, address, and telephone number of the filer,
    (2) Storage location of the wheat,
    (3) Name and address of the importer,
    (4) Form FSA-750, End-Use Certificate for Wheat, serial number,
    (5) Class of wheat,
    (6) Date the wheat was received at the filer's facility,
    (7) Quantity of wheat received, in net metric tons, rounded to the 
nearest hundredth of a metric ton,
    (8) Certification to be completed by end users and exporters that 
requires the end user or exporter to provide, among other things:
    (i) A certification of compliance with these regulations,
    (ii) The quantity consumed or exported,
    (iii) The quantity remaining,
    (iv) The manner in which the commodity was used.
    (v) The signature of an authorized representative of the end user or 
exporter.
    (9) Certification to be completed by subsequent buyers and importers 
that requires the subsequent buyer or importer to provide, among other 
things:
    (i) A certification of compliance with the regulations in this part,
    (ii) The quantity resold,
    (iii) The name, address, and telephone number of the buyer, and
    (iv) The signature of an authorized representative of the subsequent 
buyer or importer.
    (c) End user and exporter shall submit form FSA-751 to KCCO 
quarterly until the wheat has been fully utilized or exported in 
accordance with the regulations in this part.
    (d) Importers and subsequent buyers shall, for each individual sale, 
submit form FSA-751 to KCCO until the imported wheat has been fully 
resold.
    (e) Filers may provide computer generated form FSA-751, provided 
such computer generated forms:
    (1) Are approved in advance by KCCO, and
    (2) Contain the information required in paragraphs (b)(1) through 
(b)(9) of this section.
    (f) KCCO will accept form FSA-751 submitted through the following 
methods:

[[Page 215]]

    (1) Mail service, including express mail,
    (2) Facsimile machine, and
    (3) Other electronic transmissions, provided such transmissions are 
approved in advance by KCCO. The importer, end user, exporter, or 
subsequent buyer remains responsible for ensuring that electronically 
transmitted forms are received in accordance with this section.
    (g) Distribution of form FSA-751 will be as follows:
    (1) If form FSA-751 is submitted to KCCO in accordance with 
paragraph (f)(1) of this section:
    (i) The original shall be forwarded to Kansas City Commodity Office, 
Warehouse License and Contract Division, P.O. Box 419205, Kansas City, 
MO 64141-6205, by the importer, end user, exporter, or subsequent buyer.
    (ii) One copy shall be retained by the importer, end user, exporter, 
or subsequent buyer.
    (2) If form FSA-751 is submitted to KCCO in accordance with 
paragraphs (f)(2) or (f)(3) of this section, the original form FSA-751 
shall be maintained by the importer, end user, exporter, or subsequent 
buyer.

[60 FR 5089, Jan. 26, 1995, as amended at 61 FR 32643, June 25, 1996]



Sec. 782.16  Designating end use on form FSA-751.

    (a) If the end use specified on the applicable form FSA-751, Wheat 
Consumption and Resale Report, is ``export,'' the exporter must specify 
the final destination, by country, on form FSA-751.
    (b) If the end user utilizes the wheat for purposes other than 
milling, brewing, malting, distilling, export, or manufacturing, such 
use must be specifically designated on form FSA-751.



Sec. 782.17  Wheat purchased for resale.

    (a) This section applies to an importer or subsequent buyer who 
imports or purchases Canadian-produced wheat for the purpose of 
reselling the wheat.
    (b) The importer or subsequent buyer shall immediately notify each 
subsequent buyer, grain handler, exporter, or end user that the wheat 
being purchased or handled originated in Canada and may only be 
commingled with U.S.-produced wheat by the end user or when loaded onto 
a conveyance for direct delivery to the end user or a foreign country.
    (c) The importer or subsequent buyer shall provide all purchasers of 
Canadian-produced wheat with a photocopy of the form FSA-750 submitted 
to KCCO by the importer in accordance with Sec. 782.12(a).

[60 FR 5089, Jan. 26, 1995, as amended at 61 FR 32643, June 25, 1996]



Sec. 782.18  Wheat purchased for export.

    (a) This section applies to an importer or subsequent buyer who 
imports or purchases Canadian-produced wheat for the purpose of export 
to a foreign country or instrumentality.
    (b) Wheat that is purchased for the purpose of export must be stored 
identity preserved while the importer or subsequent buyer maintains 
control of the wheat, except that such wheat may be commingled when 
loaded onto a conveyance for delivery to the foreign country or 
instrumentality.
    (c) Importers or subsequent buyers that purchase wheat for export to 
a foreign country or instrumentality must complete form FSA-751 
quarterly, in accordance with Sec. 782.15.



Sec. 782.19  Penalty for noncompliance.

    It shall be a violation of 18 U.S.C. 1001 for any entity to engage 
in fraud with respect to, or to knowingly violate, the provisions set 
forth in this part.



                      Subpart C_Records and Reports



Sec. 782.20  Importer records and reports.

    (a) The importer shall retain a copy of each form:
    (1) FSA-750, End-Use Certificate for Wheat, that is submitted to 
KCCO in accordance with Sec. 782.12(a); and
    (2) FSA-751, Wheat Consumption and Resale Report, that is submitted 
to KCCO in accordance with Sec. 782.15(a)(1).
    (b) The importer shall maintain records to verify that the wheat was 
identity preserved until such time as the wheat was:
    (1) Loaded onto the conveyance for direct delivery to an end user, 
or

[[Page 216]]

    (2) Delivered to an end user, or
    (3) Delivered to a subsequent buyer.
    (c) Copies of the documents, information, and records required in 
paragraphs (a) and (b) of this section shall be kept on file at the 
importer's headquarters office or other location designated by the 
importer for the period specified in Sec. 782.25.



Sec. 782.21  End-user and exporter records and reports.

    (a) The end user or exporter shall retain a copy of each form FSA-
751, Wheat Consumption and Resale Report, that is filed with KCCO in 
accordance with Sec. 782.15(a)(2).
    (b) The end user or exporter shall retain a copy of each form FSA-
750, End-Use Certificate for Wheat, provided to the end-user or exporter 
in accordance with Sec. 782.17(b).
    (c) The exporter shall maintain records to verify that wheat 
purchased for the purpose of export was stored identity preserved until 
such time as the wheat was loaded onto a conveyance for delivery to the 
foreign country or instrumentality.
    (d) Copies of the documents required in paragraphs (a), (b), and (c) 
of this section shall be kept on file at the end-user's or exporter's 
headquarters office or other location designated by the end user or 
exporter for the period specified in Sec. 782.25.



Sec. 782.22  Subsequent buyer records and reports.

    (a) The subsequent buyer shall retain a copy of each form FSA-751, 
Wheat Consumption and Resale Report, that is filed with KCCO in 
accordance with Sec. 782.15(a)(1).
    (b) The subsequent buyer shall retain a copy of each form FSA-750, 
End-Use Certificate for Wheat, provided to the subsequent buyer in 
accordance with Sec. 782.17(b).
    (c) The subsequent buyer shall maintain records to verify that the 
wheat specified on the end-use certificate was identity preserved during 
the time that the subsequent buyer maintained control of the wheat, or 
until the wheat was loaded onto a conveyance for direct delivery to an 
end user.
    (d) Copies of the documents and records required in paragraphs (a) 
through (c) of this section shall be kept on file at the subsequent 
buyer's headquarters office or other location designated by the 
subsequent buyer for the period specified in Sec. 782.25.



Sec. 782.23  Failure to file end-use certificates or consumption and 
resale reports.

    Failure by importers, end users, exporters, and subsequent buyers to 
file form FSA-750, End-Use Certificate for Wheat, and form FSA-751, 
Wheat Consumption and Resale Report, as applicable, and retain or 
maintain related copies and records shall constitute noncompliance for 
the purposes of Sec. 782.19.



Sec. 782.24  Recordkeeping and examination of records.

    (a) Examination. For the purpose of verifying compliance with the 
requirements of this part, each importer, end-user, exporter, and 
subsequent buyer shall make available at one place at all reasonable 
times for examination by representatives of USDA, all books, papers, 
records, contracts, scale tickets, settlement sheets, invoices, written 
price quotations, or other documents related to the importation of the 
Canadian-produced wheat that is within the control of such entity.
    (b) Orderly retention of records. To facilitate examination and 
verification of the records and reports required by this part, copies of 
form FSA-750, End-Use Certificate for Wheat, and form FSA-751, Wheat 
Consumption and Resale Report, shall be filed in an orderly manner, and 
must be made available for inspection by representatives of USDA.



Sec. 782.25  Length of time records are to be kept.

    The records required to be kept under this part shall be retained 
for 3 years following the filing date of the applicable record. Records 
shall be kept for such longer period of time as may be requested in 
writing by USDA representatives.

[[Page 217]]



PART 783_TREE ASSISTANCE PROGRAM--Table of Contents




Sec.
783.1 Applicability.
783.2 Administration.
783.3 Definitions.
783.4 Eligibility.
783.5 Application.
783.6 Benefits.
783.7 Obligations of a participant.
783.8 Multiple benefits.
783.9 Miscellaneous.

    Authority: 7 U.S.C. 8201 et seq.

    Source: 69 FR 9745, Mar. 2, 2004, unless otherwise noted.



Sec. 783.1  Applicability.

    This part governs and provides the requirements and authorities for 
administration of the Tree Assistance Program (TAP) of the Farm Service 
Agency. This program shall operate only to the extent funds are 
appropriated for this program. Payments will be limited to lost eligible 
trees, bushes or vines, and all claims are subject to the availability 
of funds.



Sec. 783.2  Administration.

    (a) The program will be administered under the general supervision 
and direction of the Administrator, Farm Service Agency (FSA), and the 
Deputy Administrator for Farm Programs, FSA. In the field, the 
regulations in this part will be administered by the FSA State and 
county committees.
    (b) State and county committees, and representatives and their 
employees, do not have authority to modify or waive any of the 
provisions of the regulations of this part.
    (c) The State committee shall take any action required by the 
regulations of this part that the county committee has not taken. The 
State committee shall also:
    (1) Correct, or require a county committee to correct any action 
taken by such county committee that is not in accordance with the 
regulations of this part; or
    (2) Require a county committee to withhold taking any action that is 
not in accordance with this part.
    (d) No provision or delegation to a State or county committee shall 
preclude the Deputy 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, except statutory deadlines, and 
other non-statutory requirements in cases where lateness or failure to 
meet such other requirements does not adversely affect operation of the 
program.
    (f) Data furnished by the applicants will be used to determine 
eligibility for program benefits. Although participation in TAP is 
voluntary, program benefits will not be provided unless the participant 
furnishes all requested data.



Sec. 783.3  Definitions.

    (a) The definitions in part 718 of this chapter apply to TAP except 
when they conflict with paragraph (b) of this section.
    (b) The following definitions apply to TAP:
    Cutting means a vine, which was planted in the ground for commercial 
production of grapes, kiwi fruit, or passion fruit or similar fruit as 
approved by the Deputy Administrator.
    County office means the FSA or USDA Service Center that is 
responsible for servicing the farm on which the trees, bushes or vines 
are located.
    Deputy Administrator means the Deputy Administrator for Farm 
Programs, FSA, or a designee.
    Eligible bush means, a low, branching, woody plant from which an 
annual fruit or vegetable crop is produced for commercial purposes, such 
as a blueberry bush.
    Eligible orchardist means an individual, or legal entity, including 
an Indian tribe as defined under the Indian Self-Determination and 
Education Assistance Act; an Indian organization or entity chartered 
under the Indian Reorganization Act; a tribal organization as defined 
under the Indian Self-Determination Education and Assistance Act; or, an 
economic enterprise as defined under the Indian Financing Act of 1974, 
which owns a tree, bush or vine as defined in this part.

[[Page 218]]

    Eligible tree means, a tall, woody plant having comparatively great 
height, as determined by the Deputy Administrator, and a single trunk 
from which an annual crop is produced for commercial purposes, such as 
maple tree for syrup, papaya tree, or orchard tree. Plantain and banana 
plants are also included. Trees used for pulp or timber are not 
considered eligible trees under this part.
    Eligible vine means a plant with a flexible stem supported by 
climbing, twining, or creeping along a surface and from which an annual 
fruit or vegetable crop is produced for commercial purposes, such as 
grape, kiwi fruit, or passion fruit.
    Individual stand means an area of trees, bushes or vines that are 
tended by an owner as a single operation, whether or not such trees, 
bushes or vines are planted in the same field or similar location. 
Trees, bushes or vines in the same field or similar area may be 
considered separate individual stands if the county committee determines 
that the trees, bushes or vines are susceptible to losses at 
significantly differing levels.
    Lost means with respect to the extent of damage to a tree or other 
plant that the damage is such that it would, as determined by FSA, be 
more economically beneficial to replace the plant rather than to leave 
it in its deteriorated, low producing state.
    Natural disaster means plant disease, insect infestation, drought, 
fire, freeze, flood, earthquake, lightning, or other natural occurrence 
of such magnitude or severity so as to be considered disastrous, as 
determined by FSA.
    Normal mortality means the percentage, as established by the State 
Committee, of lost trees, bushes or vines in the individual stand that 
normally occurs in a 12-month period.
    Program year means a calendar year for which funding is available.
    Seedling means a tree, bush or vine which was planted in the ground 
for commercial purposes.



Sec. 783.4  Eligibility.

    (a) To be considered an eligible loss:
    (1) Eligible trees, bushes or vines must have been located and lost 
as a result of natural disasters determined and announced by FSA as set 
forth in the TAP application.
    (2) The individual stand must have sustained a loss in excess of 15 
percent after adjustment for normal mortality;
    (3) The loss could not have been prevented through reasonable and 
available measures; and
    (4) The tree, bush or vine, in the absence of a qualifying disaster, 
would not normally have been rehabilitated or replanted within the 12-
month period following the loss.
    (b)(1) The damage must be visible and obvious to the county 
committee except that if the damage is no longer visible, the county 
committee may accept other evidence of the loss as it determines is 
reasonable.
    (2) The county committee may require information from an expert in 
the case of plant disease or insect infestation.
    (c)(1) To be eligible for TAP benefits the eligible orchardist must:
    (i) Own the stand on which the claim for benefits is based;
    (ii) Have owned the stand at the time the natural disaster occurred;
    (iii) Have continuously owned the stand until the TAP application is 
submitted; and
    (iv) Not exceed or be in violation of any other limitations on 
payments.
    (2) Federal, State, and local governments and agencies and political 
subdivisions thereof are not eligible for benefits under this part.
    (d)(1) A new owner of an orchard is allowed to receive TAP benefits 
in an amount not to exceed those approved for the predecessor owner of 
the orchard and not paid to the predecessor owner, if the predecessor 
owner of the orchard agrees to the succession in writing and if the new 
owner:
    (i) Acquires ownership of trees, bushes or vines for which benefits 
have been approved;
    (ii) Agrees to complete all approved practices which the original 
owner has not completed; and
    (iii) Otherwise meets and assumes full responsibility for all 
provisions of this part, including refund of payments made to the 
previous owner, if applicable.

[[Page 219]]

    (2) In the case of death, incompetence or disappearance of an 
eligible orchardist, successors may be eligible to receive TAP payments 
as specified in part 707 of this chapter.



Sec. 783.5  Application.

    (a) A complete application for TAP benefits and related supporting 
documentation must be submitted to the county office prior to the 
deadline FSA announces.
    (b) A complete application includes all of the following:
    (1) A form provided by FSA;
    (2) A written estimate of the number of trees, bushes or vines lost 
or damaged which is prepared by the owner or someone who is a qualified 
expert, as determined by the county committee;
    (3) The number of acres on which the loss was suffered; and
    (4) Sufficient evidence of the loss to allow the county committee to 
calculate whether an eligible loss occurred.
    (c) Before requests will be approved, the county committee:
    (1) Must make recommendations and an eligibility determination based 
on a complete application on those requests that it wants to refer to a 
higher approval official.
    (2) Must verify actual qualifying losses and the number of acres 
involved by on-site visual inspection of the land and trees, bushes or 
vines.
    (3) May request additional information and may consider all relevant 
information in making its determination, including its members own 
knowledge about the applicant's normal operations.



Sec. 783.6  Benefits.

    (a) Subject to the availability of TAP funds, an approved eligible 
orchardist shall be reimbursed in an amount not to exceed 75 percent of 
the eligible costs for the qualifying loss (that loss over and above the 
calculated 15% mortality). The payment shall be the lesser of the 75% of 
actual costs for the replanting or the amount calculated using rates 
established by the State committee (not to exceed the maximum amount the 
Deputy Administrator establishes). The costs permitted shall only be 
approved for:
    (1) Seedlings or cuttings, for tree, bush or vine replanting;
    (2) Site preparation and debris handling within normal cultural 
practices for the type of individual stand being re-established and 
necessary to ensure successful plant survival;
    (3) Chemicals and nutrients necessary for successful establishment;
    (4) Labor to plant seedlings or cuttings as determined reasonable by 
the county committee; and
    (5) Labor used to transplant existing seedlings established through 
natural regeneration into a productive tree stand.
    (b) Costs for fencing, irrigation, irrigation equipment, protection 
of seedlings from wildlife, general improvements, re-establishing 
structures, windscreens and other costs as determined by the Deputy 
Administrator are not eligible for reimbursement benefits.
    (c) When lost stands are replanted, the types planted may be 
different than those originally planted if the new types have the same 
general end use, as the county committee determines and approves. 
Payments will be based on the lesser of rates established to plant the 
types actually lost or the cost to establish the alternative used. If 
the species of plantings, seedlings or cuttings differs significantly 
from the species lost then, except as the county committee determines, 
the costs may not be reimbursed.
    (d) Eligible orchardists may elect not to replant the entire 
eligible stand. If so, the county committee shall calculate payment 
based on the number of qualifying trees, bushes or vines actually 
replanted.
    (e) The cumulative total quantity of acres planted to trees, bushes 
or vines for which a person may receive assistance at any time under 
this part shall not exceed 500 acres.
    (f) The cumulative amount of TAP benefits which any person, as 
defined in accordance with part 1400 of this title, may receive under 
this part shall not exceed $75,000.
    (g) In the event the total amount of claims submitted under this 
part during a sign-up period exceeds the applicable funds available for 
such period, such payments shall be reduced by a

[[Page 220]]

uniform national percentage or by such other method deemed appropriate 
by the Deputy Administrator. Such payment reductions shall be applied 
after the imposition of applicable payment limitation provisions.



Sec. 783.7  Obligations of a participant.

    (a) Eligible orchardists must execute all required documents and 
complete the TAP funded practice within 12 months of application 
approval.
    (b) If a person was erroneously determined to be eligible or becomes 
ineligible for all or part of a TAP benefit, the person and successor 
shall refund any payment paid under this part together with interest 
from the date of disbursement at a rate in accordance with part 1403 of 
this title.
    (c) Participants must allow representatives of FSA to visit the site 
for the purposes of certifying compliance with TAP requirements.



Sec. 783.8  Multiple benefits.

    Persons may not receive or retain payments for production losses 
from trees, vines and bushes under this part if they have been 
compensated under another program for the same loss. However, this 
restriction does not apply to emergency Federal loans or payments 
resulting from purchase of the additional coverage insurance, as defined 
in 7 CFR 400.651. However, in no case shall the total amount received 
from all sources exceed the amount of the owner's actual loss, unless 
the Deputy Administrator shall approve an exemption in writing.



Sec. 783.9  Miscellaneous.

    (a) Any payment or portion thereof due any person under this part 
shall be allowed without regard to questions of title under State law, 
and without regard to any claim or lien in favor of any person except 
agencies of the U.S. Government.
    (b) Persons shall be ineligible to receive or retain assistance 
under this program if they have:
    (1) Adopted any scheme or device intended to defeat the purpose of 
this program;
    (2) Made any fraudulent representation; or
    (3) Misrepresented any fact affecting a program determination.
    (c) TAP benefits paid to a person as a result of misrepresentation 
shall be refunded to FSA with interest and costs of collection. The 
party engaged in acts prohibited by this part and the party receiving 
payment and their successors shall be jointly and severally liable for 
any amount due. The remedies provided to FSA in this part shall be in 
addition to other civil, criminal, or administrative remedies which may 
apply.
    (d) Program documents executed by persons legally authorized to 
represent estates or trusts will be accepted only if such person 
furnishes evidence of the authority to execute such documents.
    (e) A minor who is an owner that has met all other eligibility 
criteria shall be eligible for TAP assistance if:
    (1) The minor establishes that the right of majority has been 
conferred on the minor by court proceedings or by statute; or
    (2) A guardian has been appointed to manage the minor's property and 
the applicable program documents are executed 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 the minor been an 
adult.
    (f) The regulations regarding reconsideration's and appeals at part 
11 of this title and part 780 of this chapter apply to this part.



PART 784_2004 EWE LAMB REPLACEMENT AND RETENTION PAYMENT PROGRAM--Table 
of Contents




Sec.
784.1 Applicability.
784.2 Administration.
784.3 Definitions.
784.4 Time and method of application.
784.5 Payment eligibility.
784.6 Rate of payment and limitations on funding.
784.7 Availability of funds.
784.8 Appeals.
784.9 Misrepresentation and scheme or device.
784.10 Estates, trusts, and minors.
784.11 Death, incompetence, or disappearance.
784.12 Maintaining records.
784.13 Refunds; joint and several liability.
784.14 Offsets and withholdings.

[[Page 221]]

784.15 Assignments.
784.16 Termination of program.

    Authority: Clause (3) of section 32 of the Act of August 24, 1935, 
as amended; 7 U.S.C. 612c.

    Source: 69 FR 76837, Dec. 23, 2004, unless otherwise noted.



Sec. 784.1  Applicability.

    (a) Subject to the availability of funds, this part establishes 
terms and conditions under which the 2004 Ewe Lamb Replacement and 
Retention Payment Program will be administered.
    (b) Unless otherwise determined by the Farm Service Agency (FSA) in 
accordance with the provisions of this part, the amount that may be 
expended under this part for program payments shall not exceed $18 
million. Claims that exceed that amount will be prorated in accordance 
with Sec. 784.7.
    (c) To be eligible for payments, producers must comply with all 
provisions of this part and with any other conditions imposed by FSA.



Sec. 784.2  Administration.

    (a) This part shall be administered by FSA under the general 
direction and supervision of the Deputy Administrator for Farm Programs, 
FSA. The program shall be carried out in the field by FSA State and 
county committees (State and county committees) in accordance with their 
assigned duties and the regulations of this part.
    (b) The Deputy Administrator for Farm Programs, FSA, or a designee, 
may reverse or modify a determination made by a State or county 
committee.
    (c) The Deputy Administrator for Farm Programs, FSA, may waive or 
modify deadlines and other program requirements in cases where 
timeliness or failure to meet such other requirements does not adversely 
affect the operation of the program.
    (d) The program described under this part is a one-time program to 
be administered with respect to eligibility and qualifying factors 
occurring during or related to the base period of August 1, 2003 through 
July 31, 2004, as specified in this part.



Sec. 784.3  Definitions.

    The definitions in this section shall apply to the 2004 Ewe Lamb 
Replacement and Retention Payment Program and this part.
    Agricultural Marketing Service or AMS means the Agricultural 
Marketing Service of the Department.
    Application means the Ewe Lamb Replacement and Retention Payment 
Program Application.
    Application period means the date established by the Deputy 
Administrator for producers to apply for program benefits. Unless 
otherwise announced, that period will end January 13, 2005.
    Base period means the period from August 1, 2003, through July 31, 
2004, during and after which ewe lambs must meet all qualifying 
eligibility criteria.
    Ewe lamb means a female lamb no more than 18 months of age that has 
not produced an offspring.
    Farm Service Agency or FSA means the Farm Service Agency of the 
Department.
    Foot rot means an infectious, contagious disease of sheep that 
causes severe lameness and economic loss from decreased flock 
production.
    Lambing cycle means the period of time from birth to weaning.
    Parrot mouth means a genetic defect resulting in the failure of the 
incisor teeth to meet the dental pad correctly.
    Person means any individual, group of individuals, partnership, 
corporation, estate, trust, association, cooperative, or other business 
enterprise or other legal entity who is, or whose members are, a citizen 
or citizens of, or legal resident alien or aliens in the United States.
    Sheep and lamb operation means any self-contained, separate 
enterprise operated as an independent unit exclusively within the United 
States in which a person or group of persons raise sheep and/or lambs.
    United States means the 50 States of the United States of America, 
the District of Columbia, and the Commonwealth of Puerto Rico.



Sec. 784.4  Time and method of application.

    (a) A request for benefits under this part must be submitted on the 
Ewe Lamb Replacement and Retention Program Application. The application 
form may be obtained in person, by mail, by telephone, or by facsimile

[[Page 222]]

from any county FSA office. In addition, applicants may download a copy 
of the form at http://www.usda.gov/dafp/psd/.
    (b) The form may be obtained from and must be submitted to the FSA 
county office serving the county where the sheep and lamb operation is 
located. The completed form must be received by the FSA county office by 
the date established by FSA. Applications not received by that date will 
be disapproved and returned as not having been timely filed and the 
sheep and lamb operation filing the application will not be eligible for 
benefits under this program.
    (c) The sheep and lamb operation requesting benefits under this part 
must certify to the accuracy of the information provided in their 
application for benefits. All information provided is subject to 
verification and spot checks by FSA. Refusal to allow FSA or any other 
agency of the Department of Agriculture to verify any information 
provided will result in a determination of ineligibility. Data furnished 
by the applicant will be used to determine eligibility for program 
benefits. Providing a false certification will lead to ineligibility for 
payments and may be subject to additional civil and criminal sanctions.
    (d) The sheep and lamb operation requesting benefits under this part 
must maintain accurate records that document that they meet all 
eligibility requirements specified herein, as may be requested by FSA. 
Acceptable forms of supporting documentation include, but are not 
limited to: Sales receipts, farm management records, veterinarian 
certifications, scrapie program forms and identification numbers, as 
well as, other types of documents that prove the eligibility of the 
qualifying ewe lambs and the sheep and lamb operation. The supporting 
documentation provided must, at a minimum, include: date of lamb 
purchase or date of birth, date of lamb death (if applicable), lamb 
identification and control information, number of ewe lambs purchased or 
retained, and scrapie program identification numbers.



Sec. 784.5  Payment eligibility.

    (a) Payments can be made, as agreed to by FSA and subject to the 
availability of funds, for eligible ewe lambs considered by FSA, as 
determined by FSA only, to have been acquired or held during the base 
period by eligible sheep and lamb operations for breeding purposes. 
Payments may be made for eligible ewe lambs held continuously by the 
operation, through the end of the compliance period, from the time of 
the first possession of the ewe lamb in the base period. The payment 
rate cannot exceed the rate provided for in Sec. 784.6 and may be 
prorated pursuant to Sec. 784.7. For purposes of this section, the 
``base period'' is the period from August 1, 2003, through July 31, 
2004. A purchase in the base period without possession in the base 
period will not be considered an acquisition in the base period for 
purposes of this section unless otherwise allowed by FSA.
    (b) For the ewe lamb to be eligible, a sheep and lamb operation must 
certify that the ewe lamb:
    (1) During at least part of the base period was a ewe lamb which was 
both, at the same time, not older than 18 months of age and had not 
produced an offspring; and
    (2) At the time of certification, does not possess any of the 
following characteristics:
    (i) Parrot mouth; or
    (ii) Foot rot.
    (c) The sheep and lamb operation must certify and agree to:
    (1) Maintain the qualifying ewe lambs in the herd for at least one 
complete, normal offspring lambing cycle, the end of which shall 
constitute the end of the compliance period for the purposes of 
paragraph (a) of this section, and actually maintain the lambs for that 
period in accord with that certification. The ``offspring'' lambing 
cycle refers to the time in which the qualifying ewe lamb's own 
offspring would be weaned, in a normal course, from that qualifying ewe 
if the ewe were to have offspring, irrespective of whether the ewe 
actually produces offspring.
    (2) Upon request by an AMS agent or FSA representative, allow the 
AMS agent or FSA Representative to verify that the ewe lambs meet 
qualifying

[[Page 223]]

characteristics. Spot checks will be conducted by FSA within 30 days of 
the end of the sign-up period. Any animal showing evidence of parrot 
mouth, foot rot, or scrapie in such spot checks will be considered to 
have had those conditions at the time of certification. Other spot 
checks may be conducted as needed.
    (3) Maintain documentation of any death loss of qualifying ewe 
lambs.
    (4) Agree to refund any payments made with respect to any ewe lamb 
or offspring that has died before completing the full program 
requirements where said deaths for the operation exceed 10 percent.
    (5) Be in compliance with all requirements relating to scrapie, as 
described in 9 CFR parts 54 and 79.
    (d) To be eligible for any payments addressed under this section, a 
sheep and lamb operation must be engaged in the business of producing 
and marketing agricultural products at the time of filing the 
application.
    (e) In addition, to be eligible for payment, a sheep and lamb 
operation must submit a timely application during the application period 
for benefits and comply with all other terms and conditions of this part 
or that are contained in the application for such benefits, and such 
other conditions as may be imposed by FSA.
    (f) Proof that each lamb was held during and through the end of the 
base period as required by paragraph (a) of this section, as must be 
determined individually for each lamb, shall be provided in such manner, 
and with such access to the operation and the documents and information 
related to the operation, as FSA may request.



Sec. 784.6  Rate of payment and limitations on funding.

    (a) Subject to the availability of funds and to the proration 
provisions of Sec. 784.7, payments for qualifying operations shall be 
$18 for each qualifying ewe lamb retained or purchased for breeding 
purposes.



Sec. 784.7  Availability of funds.

    Total payments under this part, unless otherwise determined by the 
FSA, cannot exceed $18 million. In the event that approval of all 
eligible applications would result in expenditures in excess of the 
amount available, FSA shall prorate the available funds by a national 
factor to reduce the expected payments to be made to the amount 
available. The payment shall be made based on the national factored rate 
as determined by FSA. FSA shall prorate the payments in such manner as 
it, in its sole discretion, finds appropriate and reasonable.



Sec. 784.8  Appeals.

    The appeal regulations set forth at parts 11 and 780 of this title 
apply to determinations made pursuant to this part.



Sec. 784.9  Misrepresentation and scheme or device.

    (a) A sheep and lamb operation shall be ineligible to receive 
assistance under this program if it is determined by the State committee 
or the county committee to have:
    (1) Adopted any scheme or device that tends to defeat the purpose of 
this program;
    (2) Made any fraudulent representation; or
    (3) Misrepresented any fact affecting a program determination.
    (b) Any funds disbursed pursuant to this part to any person or 
operation engaged in a misrepresentation, scheme, or device, shall be 
refunded with interest together with such other sums as may become due. 
Any sheep and lamb operation or person engaged in acts prohibited by 
this section and any sheep and lamb operation or person receiving 
payment under this part shall be jointly and severally liable with other 
persons or operations involved in such claim for benefits for any refund 
due under this section and for related charges. The remedies provided in 
this part shall be in addition to other civil, criminal, or 
administrative remedies that may apply.



Sec. 784.10  Estates, trusts, and minors.

    (a) Program documents executed by persons legally authorized to 
represent estates or trusts will be accepted only if such person 
furnishes evidence of the authority to execute such documents.

[[Page 224]]

    (b) A minor who is otherwise eligible for assistance under this part 
must, also:
    (1) Establish that the right of majority has been conferred on the 
minor by court proceedings or by statute;
    (2) Show a guardian has been appointed to manage the minor's 
property and the applicable program documents are executed by the 
guardian; or
    (3) Furnish a bond under which the surety guarantees any loss 
incurred for which the minor would be liable had the minor been an 
adult.



Sec. 784.11  Death, incompetence, or disappearance.

    In the case of death, incompetence, disappearance or dissolution of 
a person that is eligible to receive benefits in accordance with this 
part, such person or persons specified in 7 CFR part 707 may receive 
such benefits, as determined appropriate by FSA.



Sec. 784.12  Maintaining records.

    Persons making application for benefits under this program must 
maintain accurate records and accounts that will document that they meet 
all eligibility requirements specified herein. Such records and accounts 
must be retained for 3 years after the date of payment to the sheep and 
lamb operations under this program. Destruction of the records after 
such date shall be at the risk of the party undertaking the destruction.



Sec. 784.13  Refunds; joint and several liability.

    (a) In the event there is an inaccurate certification or a failure 
to comply with any term, requirement, or condition for payment arising 
under the application, or this part, and if any refund of a payment to 
FSA shall otherwise become due in connection with the application, or 
this part, all related payments made under this part to any sheep and 
lamb operation shall be refunded to FSA together with interest as 
determined in accordance with paragraph (c) of this section and late 
payment charges as provided in part 1403 of this title.
    (b) All persons signing a sheep and lamb operation's application for 
payment as having an interest in the operation shall be jointly and 
severally liable for any refund, including related charges, that is 
determined to be due for any reason under the terms and conditions of 
the application or this part with respect to such operation.
    (c) Interest shall be charged on refunds required of any person 
under this part if FSA determines that payments or other assistance was 
provided to a person who was not eligible for such assistance. Such 
interest shall be charged at the rate of interest that the United States 
Treasury charges the Commodity Credit Corporation for funds, from the 
date FSA made such benefits available to the date of repayment or the 
date interest increases as determined in accordance with applicable 
regulations. FSA may waive the accrual of interest if FSA determines 
that the cause of the erroneous determination was not due to any action 
of the person.
    (d) Interest determined in accordance with paragraph (c) of this 
section may be waived at the discretion of FSA alone for refunds 
resulting from those violations determined by FSA to have been beyond 
the control of the person committing the violation.
    (e) Late payment interest shall be assessed on all refunds in 
accordance with the provisions of, and subject to the rates prescribed 
in 7 CFR part 792.
    (f) Any excess payments made by FSA with respect to any application 
under this part must be refunded.
    (g) In the event that a benefit under this subpart was provided as 
the result of erroneous information provided by any person, the benefit 
must be repaid with any applicable interest.



Sec. 784.14  Offsets and withholdings.

    FSA may offset or withhold any amounts due FSA under this subpart in 
accordance with the provisions of 7 CFR part 792, or successor 
regulations, as designated by the Department.



Sec. 784.15  Assignments.

    Any person who may be entitled to a payment may assign his rights to 
such payment in accordance with 7 CFR part 1404, or successor 
regulations, as designated by the Department.

[[Page 225]]



Sec. 784.16  Termination of program.

    This program will be terminated after payment has been made to those 
applications certified as eligible pursuant to the application period 
established in Sec. 784.4.



PART 785_CERTIFIED STATE MEDIATION PROGRAM--Table of Contents




Sec.
785.1 General.
785.2 Definitions.
785.3 Annual certification of State mediation programs.
785.4 Grants to certified State mediation programs.
785.5 Fees for mediation services.
785.6 Deadlines and address.
785.7 Distribution of Federal grant funds.
785.8 Reports by qualifying States receiving mediation grant funds.
785.9 Access to program records.
785.10 Penalties for non-compliance.
785.11 Reconsideration by the Administrator.
785.12 Nondiscrimination.
785.13 OMB control number.

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; and 7 U.S.C. 5101-5104.

    Source: 67 FR 57315, Sept. 10, 2002, unless otherwise noted.



Sec. 785.1  General.

    (a) States meeting conditions specified in this part may have their 
mediation programs certified by the Farm Service Agency (FSA) and 
receive Federal grant funds for the operation and administration of 
agricultural mediation programs.
    (b) USDA agencies participate in mediations pursuant to agency rules 
governing their informal appeals processes. Where mediation of an agency 
decision by a certified State mediation program is available to 
participants in an agency program as part of the agency's informal 
appeal process, the agency will offer a participant receiving notice of 
an agency decision the opportunity to mediate the decision under the 
State's certified mediation program, in accordance with the agency's 
informal appeals regulations.
    (c) USDA agencies making mediation available as part of the agency 
informal appeals process may execute memoranda of understanding with a 
certified mediation program concerning procedures and policies for 
mediations during agency informal appeals that are not inconsistent with 
this part or other applicable regulations. Each such memorandum of 
understanding will be deemed part of the grant agreement governing the 
operation and administration of a State certified mediation program 
receiving Federal grant funds under this part.
    (d) A mediator in a program certified under this part has no 
authority to make decisions that are binding on parties to a dispute.
    (e) No person may be compelled to participate in mediation provided 
through a mediation program certified under this part. This provision 
shall not affect a State law requiring mediation before foreclosure on 
agricultural land or property.



Sec. 785.2  Definitions.

    Administrator means the Administrator, FSA, or authorized designee.
    Certified State mediation program means a program providing 
mediation services that has been certified in accordance with section 
785.3.
    Confidential mediation means a mediation process in which the 
mediator will not disclose to any person oral or written communications 
provided to the mediator in confidence, except as allowed by 5 U.S.C. 
574 or section 785.9.
    Covered persons means producers, their creditors (as applicable), 
and other persons directly affected by actions of the USDA involving one 
or more of the following issues:
    (1) Wetlands determinations;
    (2) Compliance with farm programs, including conservation programs;
    (3) Agricultural loans (regardless of whether the loans are made or 
guaranteed by the USDA or are made by a third party);
    (4) Rural water loan programs;
    (5) Grazing on National Forest System lands;
    (6) Pesticides; or
    (7) Such other issues as the Secretary may consider appropriate.
    Fiscal year means the period of time beginning October 1 of one year 
and ending September 30 of the next year and designated by the year in 
which it ends.

[[Page 226]]

    FSA means the Farm Service Agency of the U.S. Department of 
Agriculture, or a successor agency.
    Mediation services means all activities relating to the intake and 
scheduling of mediations; the provision of background and selected 
information regarding the mediation process; financial advisory and 
counseling services (as reasonable and necessary to prepare parties for 
mediation) performed by a person other than a State mediation program 
mediator; and mediation sessions in which a mediator assists disputing 
parties in voluntarily reaching mutually agreeable settlement of issues 
within the laws, regulations, and the agency's generally applicable 
program policies and procedures, but has no authoritative decision 
making power.
    Mediator means a neutral individual who functions specifically to 
aid the parties in a dispute during a mediation process.
    Qualified mediator means a mediator who meets the training 
requirements established by State law in the State in which mediation 
services will be provided or, where a State has no law prescribing 
mediator qualifications, an individual who has attended a minimum of 40 
hours of core mediator knowledge and skills training and, to remain in a 
qualified mediator status, completes a minimum of 20 hours of additional 
training or education during each 2-year period. Such training or 
education must be approved by the USDA, by an accredited college or 
university, or by one of the following organizations: State Bar of a 
qualifying State, a State mediation association, a State approved 
mediation program, or a society of professionals in dispute resolution.
    Qualifying State means a State with a State mediation program 
currently certified by FSA.



Sec. 785.3  Annual certification of State mediation programs.

    To obtain FSA certification of the State's mediation program, the 
State must meet the requirements of this section.
    (a) New request for certification. A new request for certification 
of a State mediation program must include descriptive and supporting 
information regarding the mediation program and a certification that the 
mediation program meets certain requirements as prescribed in this 
subsection. If a State is also qualifying its mediation program to 
request a grant of Federal funds under the certified State mediation 
program, the State must submit with its request for certification 
additional information in accordance with Sec. 785.4.
    (1) Description of mediation program. The State must submit a 
narrative describing the following with supporting documentation:
    (i) A summary of the program;
    (ii) An identification of issues available for mediation under the 
program;
    (iii) Management of the program;
    (iv) Mediation services offered by the program;
    (v) Program staffing and staffing levels;
    (vi) Uses of contract mediation services in the program describing 
both services provided by contractors and costs of such services;
    (vii) State statutes and regulations in effect that are applicable 
to the State's mediation program; and
    (viii) A description of the State program's education and training 
requirements for mediators including:
    (A) Training in mediation skills and in USDA programs;
    (B) Identification and compliance with any State law requirements; 
and
    (C) Other steps by the State's program to recruit and deploy 
qualified mediators.
    (ix) Any other information requested by FSA;
    (2) Certification. The Governor, or head of a State agency 
designated by the Governor, must certify in writing to the Administrator 
that the State's mediation program meets the following program 
requirements:
    (i) That the State's mediation program provides mediation services 
to covered persons with the aim of reaching mutually agreeable decisions 
between the parties under the program;
    (ii) That the State's mediation program is authorized or 
administered by an agency of the State government or by the Governor of 
the State;

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    (iii) That the State's mediation program provides for training of 
mediators in mediation skills and in all issues covered by the State's 
mediation program;
    (iv) That the State's mediation program shall provide confidential 
mediation as defined in Sec. 785.2;
    (v) That the State's mediation program ensures, in the case of 
agricultural loans, that all lenders and borrowers of agricultural loans 
receive adequate notification of the mediation program;
    (vi) That the State's mediation program ensures, in the case of 
other issues covered by the mediation program, that persons directly 
affected by actions of the USDA receive adequate notification of the 
mediation program; and
    (vii) That the State's mediation program prohibits discrimination in 
its programs on the basis of race, color, national origin, sex, 
religion, age, disability, political beliefs, and marital or familial 
status.
    (b) Request for re-certification by qualifying State. If a State is 
a qualifying State at the time its request is made, the written request 
need only describe the changes made in the program since the previous 
year's request, together with such documents and information as are 
necessary concerning such changes, and a written certification that the 
remaining elements of the program will continue as described in the 
previous request.



Sec. 785.4  Grants to certified State mediation programs.

    (a) Eligibility. To be eligible to receive a grant, a State 
mediation program must:
    (1) Be certified as described in Sec. 785.3; and
    (2) Submit an application for a grant with its certification or re-
certification request as set forth in this section.
    (b) Application for grant. A State requesting a grant will submit 
the following to the Administrator:
    (1) Application for Federal Assistance, Standard Form 424 (available 
in any FSA office and on the Internet, http://www.whitehouse.gov/omb/
grants/);
    (2) A budget with supporting details providing estimates of the cost 
of operation and administration of the program. Proposed direct 
expenditures will be grouped in the categories of allowable direct costs 
under the program as set forth in paragraph (c)(1) of this section;
    (3) Other information pertinent to the funding criteria specified in 
Sec. 785.7(b); and
    (4) Any additional supporting information requested by FSA in 
connection with its review of the grant request.
    (c) Grant purposes. Grants made under this part will be used only to 
pay the allowable costs of operation and administration of the 
components of a qualifying State's mediation program that have been 
certified as set forth in Sec. 785.3(b)(2). Costs of services other 
than mediation services to covered persons within the State are not 
considered part of the cost of operation and administration of the 
mediation program for the purpose of determining the amount of a grant 
award.
    (1) Allowable costs. Subject to applicable cost principles as set 
forth or referenced in Sec. 3016.22 of this title, allowable costs for 
operations and administration are limited to those that are reasonable 
and necessary to carry out the State's certified mediation program in 
providing mediation services for covered persons within the State. 
Specific categories of costs allowable under the certified State 
mediation program include, and are limited to:
    (i) Staff salaries and fringe benefits;
    (ii) Reasonable fees and costs of mediators;
    (iii) Office rent and expenses, such as utilities and equipment 
rental;
    (iv) Office supplies;
    (v) Administrative costs, such as workers' compensation, liability 
insurance, employer's share of Social Security, and travel that is 
necessary to provide mediation services;
    (vi) Education and training of participants and mediators involved 
in mediation;
    (vii) Security systems necessary to assure confidentiality of 
mediation sessions and records of mediation sessions;

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    (viii) Costs associated with publicity and promotion of the program; 
and
    (ix) Financial advisory and counseling services for parties 
requesting mediation (as reasonable and necessary to prepare parties for 
mediation) that are performed by a person other than a state mediation 
program mediator and as approved under guidelines established by the 
state mediation program and reported to FSA.
    (2) Prohibited expenditures. Expenditures of grant funds are not 
allowed for:
    (i) Purchase of capital assets, real estate, or vehicles and repair, 
or maintenance of privately-owned property;
    (ii) Political activities;
    (iii) Routine administrative activities not allowable under OMB Cost 
Principles found in part 3015, subpart T, of this title and OMB Circular 
No. A-87; and
    (iv) Services provided by a State mediation program that are not 
consistent with the features of the mediation program certified by the 
State, including advocacy services on behalf of a mediation participant, 
such as representation of a mediation client before an administrative 
appeals entity of the USDA or other Federal Government department or 
Federal or State Court proceeding.



Sec. 785.5  Fees for mediation services.

    A requirement that non-USDA parties who elect to participate in 
mediation pay a fee for mediation services will not preclude 
certification of a certified State mediation program or its eligibility 
for a grant; however, if participation in mediation is mandatory for a 
USDA agency, a certified State mediation program may not require the 
USDA agency to pay a fee to participate in a mediation.



Sec. 785.6  Deadlines and address.

    (a) Deadlines. (1) To be a qualifying State as of the beginning of a 
fiscal year and to be eligible for grant funding as of the beginning of 
the fiscal year, the Governor of a State or head of a State agency 
designated by the Governor of a State must submit a request for 
certification and application for grant on or before August 1 of the 
calendar year in which the fiscal year begins.
    (2) Requests received after August 1. FSA will accept requests for 
re-certifications and for new certifications of State mediation programs 
after August 1 in each calendar year; however, such requests will not be 
considered for grant funding under Sec. 785.7(c) until after March 1.
    (3) Requests for additional grant funds during a fiscal year. Any 
request by a State mediation program that is eligible for grant funding 
as of the beginning of the fiscal year for additional grant funds during 
that fiscal year for additional, unbudgeted demands for mediation 
services must be submitted on or before March 1 of the fiscal year.
    (b) Address. The request for certification or re-certification and 
any grant request must be mailed or delivered to: Administrator, Farm 
Service Agency, U.S. Department of Agriculture, Stop 0501, 1400 
Independence Avenue, SW., Washington, DC 20250-0501.



Sec. 785.7  Distribution of Federal grant funds.

    (a) Maximum grant award. A grant award shall not exceed 70 percent 
of the budgeted allowable costs of operation and administration of the 
certified State mediation program. In no case will the sum granted to a 
State exceed $500,000 per fiscal year.
    (b) Funding criteria. FSA will consider the following in determining 
the grant award to a qualifying State:
    (1) Demand for and use of mediation services (historical and 
projected);
    (2) Scope of mediation services;
    (3) Service record of the State program, as evidenced by:
    (i) Number of inquiries;
    (ii) Number of requests for and use of mediation services, 
historical and projected, as applicable;
    (iii) Number of mediations resulting in signed mediation agreements;
    (iv) Timeliness of mediation services; and
    (v) Activities promoting awareness and use of mediation;
    (4) Historic use of program funds (budgeted versus actual); and
    (5) Material changes in the State program.

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    (c) Disbursements of grant funds. (1) Grant funds will be paid in 
advance, in installments throughout the Federal fiscal year as requested 
by a certified State mediation program and approved by FSA. The initial 
payment to a program in a qualifying State eligible for grant funding as 
of the beginning of a fiscal year shall represent at least one-fourth of 
the State's annual grant award. The initial payment will be made as soon 
as practicable after certification, or re-certification, after grant 
funds are appropriated and available.
    (2) Payment of grant funds will be by electronic funds transfer to 
the designated account of each certified State mediation program, as 
approved by FSA.
    (d) Administrative reserve fund. After funds are appropriated, FSA 
will set aside 5 percent of the annual appropriation for use as an 
administrative reserve.
    (1) Subject to paragraph (a) of this section and the availability of 
funds, the Administrator will allocate and disburse sums from the 
administrative reserve in the following priority order:
    (i) Disbursements to cover additional, unbudgeted demands for 
mediation services in qualifying States eligible for grant funding as of 
the beginning of the fiscal year;
    (ii) Grants to qualifying States whose requests for new 
certification or re-certification were received between August 2 and 
March 1. A previously qualifying State that submits a request for re-
certification received after August 1 may receive a grant award 
effective as of the beginning of the fiscal year. A newly qualifying 
State that submits a request for certification received after August 1 
may receive a grant award effective March 31 of the fiscal year.
    (iii) Any balance remaining in the administrative reserve will be 
allocated pro rata to certified State mediation programs based on their 
initial fiscal year grant awards.
    (2) All funds from the administrative reserve will be made available 
on or before March 31 of the fiscal year.
    (e) Period of availability of funds. (1) Certified State mediation 
programs receiving grant funds are encouraged to obligate award funds 
within the Federal fiscal year of the award. A State may, however, carry 
forward any funds disbursed to its certified State mediation program 
that remain unobligated at the end of the fiscal year of award for use 
in the next fiscal year for costs resulting from obligations in the 
subsequent funding period. Any carryover balances plus any additional 
obligated fiscal year grant will not exceed the lesser of 70 percent of 
the State's budgeted allowable costs of operation and administration of 
the certified State mediation program for the subsequent fiscal year, or 
$500,000.
    (2) Grant funds not spent in accordance with this part will be 
subject to de-obligation and must be returned to the USDA.



Sec. 785.8  Reports by qualifying States receiving mediation grant funds.

    (a) Annual report by certified State mediation program. No later 
than 30 days following the end of a fiscal year during which a 
qualifying State received a grant award under this part, the State must 
submit to the Administrator an annual report on its certified State 
mediation program. The annual report must include the following:
    (1) A review of mediation services provided by the certified State 
mediation program during the preceding Federal fiscal year providing 
information concerning the following matters:
    (i) A narrative review of the goals and accomplishments of the 
certified State mediation program in providing intake and scheduling of 
cases; the provision of background and selected information regarding 
the mediation process; financial advisory and counseling services, 
training, notification, public education, increasing resolution rates, 
and obtaining program funding from sources other than the grant under 
this part.
    (ii) A quantitative summary for the preceding fiscal year, and for 
prior fiscal years, as appropriate, for comparisons of program 
activities and outcomes of the cases opened and closed during the 
reporting period; mediation services provided to clients grouped by 
program and subdivided by issue, USDA agency, types of covered persons

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and other participants; and the resolution rate for each category of 
issue reported for cases closed during the year;
    (2) An assessment of the performance and effectiveness of the 
State's certified mediation program considering:
    (i) Estimated average costs of mediation services per client with 
estimates furnished in terms of the allowable costs set forth in Sec. 
785.4(b)(1).
    (ii) Estimated savings to the State as a result of having the State 
mediation program certified including:
    (A) Projected costs of avoided USDA administrative appeals based on 
projections of the average costs of such appeals furnished to the State 
by FSA, with the assistance of the USDA National Appeals Division and 
other agencies as appropriate;
    (B) In agricultural credit mediations that do not result from a USDA 
adverse program decision, projected cost savings to the various parties 
as a result of resolution of their dispute in mediation. Projected cost 
savings will be based on such reliable statistical data as may be 
obtained from State statistical sources including the certified State's 
bar association, State Department of Agriculture, State court system or 
Better Business Bureau, or other reliable State or Federal sources;
    (iii) Recommendations for improving the delivery of mediation 
services to covered persons, including:
    (A) Increasing responsiveness to needs for mediation services.
    (B) Promoting increases in dispute resolution rates.
    (C) Improving assessments of training needs.
    (D) Improving delivery of training.
    (E) Reducing costs per mediation.
    (3) Such other matters relating to the program as the State may 
elect to include, or as the Administrator may require.
    (b) Audit report. In addition to the auditing requirements of part 
3015, subpart I and Sec. 3016.26 of this title, any qualifying State 
receiving a grant under this part must submit an audit report to the 
Administrator in compliance with OMB Circular A-133.



Sec. 785.9  Access to program records.

    Notwithstanding Sec. 3015.24 of this title, the State must maintain 
and provide the Government access to pertinent records regarding 
services delivered by the certified State mediation program for purposes 
of evaluation, audit and monitoring of the certified State mediation 
program as follows:
    (a) For purposes of this section, pertinent records consist of: the 
names and addresses of applicants for mediation services; dates 
mediations opened and closed; issues mediated; dates of sessions with 
mediators; names of mediators; mediation services furnished to 
participants by the program; the sums charged to parties for each 
mediation service; records of delivery of services to prepare parties 
for mediation (including financial advisory and counseling services); 
and the outcome of the mediation services including formal settlement 
results and supporting documentation.
    (b) State mediators will notify all participants in writing at the 
beginning of the mediation session that the USDA, including the USDA 
Inspector General, the Comptroller General of the United States, the 
Administrator, and any of their representatives will have access to 
pertinent records as necessary to monitor and to conduct audits, 
investigations, or evaluations of mediation services funded in whole or 
in part by the USDA.
    (c) All participants in a mediation must sign and date an 
acknowledgment of receipt of such notice from the mediator. The 
certified State mediation program shall maintain originals of such 
acknowledgments in its mediation files for at least 5 years.



Sec. 785.10  Penalty for non-compliance.

    (a) The Administrator is authorized to withdraw certification of a 
State mediation program, terminate or suspend the grant to such program, 
require a return of unspent grant funds, a reimbursement of grant funds 
on account of expenditures that are not allowed, and may impose any 
other penalties or sanctions authorized by law if the Administrator 
determines that:
    (1) The State's mediation program, at any time, does not meet the 
requirements for certification;
    (2) The mediation program is not being operated in a manner 
consistent

[[Page 231]]

with the features of the program certified by the State, with applicable 
regulations, or the grant agreement;
    (3) Costs that are not allowed under Sec. 785.4(b) are being paid 
out of grant funds;
    (4) The mediation program fails to grant access to mediation records 
for purposes specified in Sec. 785.8; or
    (5) Reports submitted by the State pursuant to Sec. 785.7 are 
false, contain misrepresentations or material omissions, or are 
otherwise misleading.
    (b) In the event that FSA gives notice to the State of its intent to 
enforce any withdrawal of certification or other penalty for non-
compliance, USDA agencies will cease to participate in any mediation 
conducted by the State's mediation program immediately upon delivery of 
such notice to the State.



Sec. 785.11  Reconsideration by the Administrator.

    (a) A State mediation program may request that the Administrator 
reconsider any determination that a State is not a qualifying State 
under Sec. 785.3 and any penalty decision made under Sec. 785.10. The 
decision of the Administrator upon reconsideration shall be the final 
administrative decision of FSA.
    (b) Nothing in this part shall preclude action to suspend or debar a 
State mediation program or administering entity under part 3017 of this 
title following a withdrawal of certification of the State mediation 
program.



Sec. 785.12  Nondiscrimination.

    The provisions of parts 15, 15b and 1901, subpart E, of this title 
and part 90 of title 45 apply to activities financed by grants made 
under this part.



Sec. 785.13  OMB Control Number.

    The information collection requirements in this regulation have been 
approved by the Office of Management and Budget and assigned OMB control 
number 0560-0165.

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         SUBCHAPTER E_PROVISIONS COMMON TO MORE THAN ONE PROGRAM





PART 792_DEBT SETTLEMENT POLICIES AND PROCEDURES--Table of Contents




Sec.
792.1 Applicability.
792.2 Administration.
792.3 Definitions.
792.4 Demand for payment of debts.
792.5 Collection by payment in full.
792.6 Collection by installment payments.
792.7 Collection by administrative offset.
792.8 Priorities of offsets versus assignments.
792.9 Withholding.
792.10 Late payment interest, penalty and administrative charges.
792.11 Waiver of late payment interest, penalty charge and 
          administrative charges.
792.12 Administrative appeal.
792.13 Additional administrative collection action.
792.14 Contact with debtor's employing agency.
792.15 Prior provision of rights with respect to debt.
792.16 Discharge of debts.
792.17 Referral of delinquent debts to credit reporting agencies.
792.18 Referral of debts to Department of Justice.
792.19 Referral of delinquent debts to IRS for tax refund offset.
792.20 Reporting discharged debts to IRS.
792.21 Referral of debts to private collection agencies.
792.22 Collection and compromise.

    Authority: 31 U.S.C. 3701, 3711, 3716-3719, 3728; 4 CFR parts 101-
105; 7 CFR 3.21(b).

    Source: 59 FR 15829, Apr. 5, 1994, unless otherwise noted.



Sec. 792.1  Applicability.

    Except as may otherwise be provided by statute, this part sets forth 
the manner in which the Farm Service Agency (FSA) will settle and 
collect debts by FSA. The provisions of part 1403 of this title are 
applicable to actions of FSA regarding the settlement and collection of 
debts on the behalf of the Commodity Credit Corporation (CCC).



Sec. 792.2  Administration.

    The regulations in this part will be administered under the general 
supervision and direction of the Administrator, FSA.



Sec. 792.3  Definitions.

    The following definitions shall be applicable to this part:
    Administrative charges means the additional costs of processing 
delinquent debts against the debtor, to the extent such costs are 
attributable to the delinquency. Such costs include, but are not limited 
to, costs incurred in obtaining a credit report, costs of employing 
commercial firms to locate debtor, costs of employing contractors for 
collection services, costs of selling collateral or property to satisfy 
the debt.
    Administrative offset means deducting money payable or held by the 
United States Government, or any agency thereof, to satisfy in whole or 
in part a debt owed the Government, or any agency thereof.
    FSA means the Farm Service Agency of the United States Department of 
Agriculture (USDA).
    CCC means the Commodity Credit Corporation.
    Certified financial statement means an account of the assets, 
liabilities, income and expenses of a debtor, executed in accordance 
with generally accepted accounting principles and attested to as 
accurate by the debtor and preparer, under penalty of perjury.
    Claim means an amount of money or property which has been determined 
by FSA, after a notice of delinquency and a demand for the payment of 
the debt has been made by FSA, to be owed to FSA by any person other 
than a Federal agency.
    Credit reporting agency means: (1) A reporting agency as defined at 
4 CFR 102.5(a), or
    (2) Any entity which has entered into an agreement with USDA 
concerning the referral of credit information.
    Debt means any amount owed to FSA which has not been satisfied 
through payment or otherwise.
    Debt record refers to the account, register, balance sheet, file, 
ledger, data

[[Page 233]]

file, or similar record of debts owed to FSA, CCC, or any other 
Government Agency with respect to which collection action is being 
pursued, and which is maintained in an FSA office.
    Delinquent debt means: (1) Any debt owed to FSA that has not been 
paid by the date specified in the applicable statute, regulation, 
contract, or agreement; or
    (2) Any debt that has not been paid by the date of an initial 
notification of indebtedness mailed or hand-delivered pursuant to Sec. 
792.4.
    Discharged debt means any debt, or part thereof, which FSA has 
determined is uncollectible and has closed out, and if the amount in 
controversy exceeds $100,000.00, excluding interest and administrative 
charges, or such higher amount as may be prescribed, in which the 
Department of Justice has concurred in such determination.
    IRS means the Internal Revenue Service.
    Late payment interest rate means the amount of interest charged on 
delinquent debts and claims. The late payment interest rate shall be 
determined as of the date a debt becomes delinquent and shall be equal 
to the higher of the Prompt Payment Act interest rate or the standard 
late payment rate prescribed by 31 U.S.C. 3717, which is based on the 
Treasury Department's current value of funds rate.
    Person means an individual, partnership, association, corporation, 
estate or trust, or other business enterprise or other legal entity and, 
whenever applicable, the Federal Government or a State government, or 
any agency thereof.
    Salary offset means the deduction of money from the current pay 
account of a present or former Government employee payable by the United 
States Government to, or held by the Government for, such person to 
satisfy a debt that person owes the Government.
    Settlement means any final disposition of a debt or claim.
    System of records means a group of any records under the control of 
FSA or CCC from which information is retrieved by the name of the 
individual, organization or other entity or by some identifying number, 
symbol, or other identification assigned to the individual, organization 
or other entity.
    Withholding means the taking of action to temporarily prevent the 
payment of some or all amounts to a debtor under one or more contracts 
or programs.



Sec. 792.4  Demand for payment of debts.

    (a) When a debt is due FSA, an initial written demand for payment of 
such amount shall be mailed or hand-delivered to the debtor. If the debt 
is not paid in full by the date specified in the initial demand letter, 
or if a repayment schedule acceptable to FSA has not been arranged with 
the debtor, the initial demand may be followed by two subsequent written 
demands at approximately 30-day intervals, unless it is determined by 
FSA that further demands would be futile and the debtor's response does 
not require rebuttal. The initial or subsequent demand letters shall 
specify the following:
    (1) The basis for and the amount of the debt determined to be due 
FSA, including the principal, applicable interest, costs, and other 
charges;
    (2) FSA' intent to establish an account on a debt record 30 days 
after the date of the letter, or other applicable period of time, if the 
debt is not paid within that time;
    (3) The applicable late payment interest rate.
    (i) If a late payment interest rate is specified in the contract, 
agreement or program regulation, the debtor shall be informed of that 
rate and the date from which the late payment interest has been 
accruing;
    (ii) If a late payment interest rate is not specified in the 
contract, agreement or program regulation, the debtor shall be informed 
of the applicable late payment interest rate set out in Sec. 792.10.
    (4) FSA' intent, if applicable, to collect the debt 30 days from the 
date of the initial demand letter, or other applicable period of time, 
by administrative offset from any CCC or FSA payments due or to become 
due to the debtor, and that the claim may be reported to other agencies 
of the Federal government for offset from any amounts due or to become 
due to the debtor;

[[Page 234]]

    (5) FSA' intent, if applicable, under Sec. 792.17, to report any 
delinquent debt to a credit reporting agency no sooner than 60 days from 
the date of the letter;
    (6) FSA' intent, if applicable, under Sec. 792.19, to refer any 
delinquent debt to the IRS, no sooner than 60 days from the date of the 
letter, to be considered for offset against any tax refund due or to 
become due the debtor.
    (7) If not previously provided, the debtor's right to request 
administrative review by an authorized FSA official, and the proper 
procedure for making such request. If the request relates to the:
    (i) Existence or amount of the debt, it must be made within 15 days 
from the date of the letter, unless a different time period is specified 
in the contract, agreement or program regulation;
    (ii) Appropriateness of reporting to a credit reporting agency, it 
must be made within 30 days from the date of the letter; or
    (iii) Appropriateness of referral to IRS for tax refund offset, it 
must be made within 60 days from the date of the letter, if applicable.
    (8) The debtor's right to a full explanation of the debt and to 
dispute any information in the records of FSA concerning the debt;
    (9) The opportunity afforded the debtor to enter into a written 
agreement which is acceptable to FSA for the repayment of the debt;
    (10) That FSA maintains the right to initiate legal action to 
collect the amount of the debt;
    (11) That if any portion of the debt remains unpaid or if a 
repayment schedule satisfactory to FSA has not been arranged 90 days 
after the due date, a penalty charge shall be assessed on the unpaid 
balance of the debt as prescribed in Sec. 792.10(e);
    (b) When FSA deems it necessary to protect the Government's 
interest, written demand may be preceded by other appropriate actions.



Sec. 792.5  Collection by payment in full.

    Except as FSA may provide, FSA shall collect debts owed to the 
Government, including applicable interest, penalties, and administrative 
costs, in full, whenever feasible whether the debt is being collected by 
administrative offset or by another method, including voluntary payment. 
If a debt is paid in one lump sum after the due date, FSA will impose 
late payment interest, as provided in Sec. 792.10, unless such interest 
is waived as provided in Sec. 792.11.



Sec. 792.6  Collection by installment payments.

    (a) Payments in installments may be arranged, at FSA' discretion, if 
a debtor furnishes satisfactory evidence of inability to pay a claim in 
full by the specified date. The size and frequency of installment 
payments shall:
    (1) Bear a reasonable relation to the size of the debt and the 
debtor's ability to pay; and
    (2) Normally be of sufficient size and frequency to liquidate the 
debt in not more than three years.
    (b) Except as otherwise determined by FSA, no installment 
arrangement will be considered unless the debtor submits a certified 
financial statement which reflects the debtor's assets, liabilities, 
income, and expenses. The financial statement shall not be required to 
be submitted sooner than 15 workdays following its request by FSA.
    (c) All installment payment agreements shall be in writing and 
require the payment of interest at the late payment interest rate in 
effect on the date such agreement is executed, unless such interest is 
waived or reduced by FSA. The installment agreement shall specify all 
the terms of the arrangement and include provision for accelerating the 
debt in the event the debtor defaults.
    (d) FSA may deem a repayment plan to be abrogated if the debtor 
fails to comply with its terms.
    (e) If the debtor's financial statement or other information 
discloses the ownership of assets which are not encumbered, the debtor 
may be required to secure the payment of an installment note by 
executing a security agreement and financing agreement which provides 
FSA a security interest in the assets until the debt is paid in full.
    (f) If the debtor owes more than one debt to FSA, FSA may allow the 
debtor to designate the manner in which a voluntary installment payment 
is to be

[[Page 235]]

applied. If the debtor does not designate the application of a voluntary 
installment or partial payment, the payment will be applied to such 
debts as determined by FSA.



Sec. 792.7  Collection by administrative offset.

    (a) The provisions of this section shall apply to all debts due FSA 
except as otherwise provided in this part and part 1404 of this title. 
This section is not applicable to:
    (1) FSA requests for administrative offset against money payable to 
a debtor from the Civil Service Retirement and Disability Fund and FSA 
requests for salary offset against a present, former or retired employee 
of the Federal Government which shall be made in accordance with 
regulations at part 3 of this title;
    (2) FSA requests for administrative offset against a Federal income 
tax refund payable to a debtor which shall be made in accordance with 
Sec. 792.19;
    (3) Cases in which FSA must adjust, by increasing or decreasing, a 
payment which is to be paid under a contract in order to properly make 
other payments due by FSA; and
    (4) Any case in which a statute explicitly provides for or prohibits 
using administrative offset to collect the debt for the type of debt 
involved.
    (b) Debts due FSA or CCC may be collected by administrative offset 
from amounts payable by FSA when:
    (1) The debtor has been provided written notification of the basis 
and amount of the debt and has been given an opportunity to make 
payment. Such written notification and opportunity includes notice of 
the right to pursue an administrative appeal in accordance with part 780 
of this chapter or any other applicable appeal procedures, if not 
previously provided;
    (2) The debtor has been provided an opportunity to request to 
inspect and copy the records of FSA related to the debt;
    (3) The debtor has been given the opportunity to enter into a 
written agreement which is acceptable to FSA for repayment of the debt;
    (4) The debtor has been notified in writing that the debt will be 
collected by administrative offset if not paid; and
    (5) The debt has not been delinquent for more than ten years or 
legal action to enforce the debt has not been barred by an applicable 
period of limitation, whichever is later.
    (c) Administrative offset shall also be effected against amounts 
payable by FSA:
    (1) When requested or approved by the Department of Justice; or
    (2) When a person is indebted under a judgment in favor of FSA or 
the United States.
    (d) A payment due any person may be offset when there is a breach of 
a contract or a violation of FSA program requirements, and offset is 
considered necessary by FSA to protect the financial interests of the 
Government.
    (e) FSA may effect administrative offset against a payment to be 
made to a debtor prior to completion of the procedures required by 
paragraphs (b)(1) through (b)(4) of this section if:
    (1) Failure to take the offset would substantially prejudice FSA' 
ability to collect the debt; and
    (2) The time before the payment is to be made does not reasonably 
permit the completion of those procedures.
    (f)(1) Judgments in favor of the United States may be offset against 
any amounts payable by FSA based on information provided by or obtained 
from the Department of Justice. Debts due any agency other than FSA 
which have not been reduced to judgment shall be offset against amounts 
payable by FSA to a debtor when an agency of the U.S. Government has 
submitted a written request for offset which is mailed or hand-delivered 
to the appropriate FSA State office, Kansas City Financial Management 
Office, Kansas City Management Office, or Kansas City Commodity Office. 
Such written request must:
    (i) Bear the signature of an authorized representative of the 
requesting agency;
    (ii) Include a certification that all requirements of the law and 
the regulations for collection of the debt and for requesting offset 
have been complied with;

[[Page 236]]

    (iii) State the name, address (including county), and, where legally 
available, the Social Security number or employer ID number of the 
debtor, and a brief description of the basis of the debt, including 
identification of the judgment, if any;
    (iv) State the amount of the debt separately as to principal, 
interest, penalties, and administrative costs. Interest, if any, shall 
be computed on a daily basis to a date shown in the request. The amount 
to be offset shall not exceed the principal sum owed by the debtor, plus 
interest computed in accordance with the request, and any late payment 
interest, penalties and administrative costs that have been assessed;
    (v) Certify that the debtor has not filed for bankruptcy. If the 
debtor has filed for bankruptcy, a copy of the order of the bankruptcy 
court relieving the agency from the automatic stay must be included; and
    (vi) State the name, address, and telephone number of a contact 
person within the agency and the address to which payment should be 
sent.
    (2) Unless prohibited by law, the head of an agency, or a designee, 
may defer or subordinate in whole or in part the right of the agency to 
recover through offset all or part of any indebtedness to such agency, 
or may withdraw a request for offset. Notice of such action must be sent 
to the appropriate FSA office.
    (g)(1) After FSA has complied with the provisions of this part, FSA 
may request other agencies of the Government to offset amounts payable 
by them to persons indebted to FSA.
    (2) In the case of a request to IRS for a tax refund offset, the 
provisions at Sec. 792.19 shall apply.
    (h)(1) Debts shall be collected by offset in the following order of 
priority without regard to the date of the request for such collection:
    (i) Debts to FSA.
    (ii) Debts to other agencies of USDA as determined by FSA.
    (iii) Debts to other government agencies as determined by FSA.
    (2) In the case of multiple debts involving the same debtor, FSA 
may, at its discretion, deviate from the usual order of priority in 
applying recovered amounts to debts owed other agencies when considered 
to be in the Government's best interest. Such decision shall be made by 
FSA based on the facts and circumstances of the particular case.
    (i) Amounts recovered by offset for FSA and CCC debts but later 
found not to be owed to the Government shall be promptly refunded.
    (j) The debtor shall be notified whenever any offset action has been 
taken.
    (k) Offsets made pursuant to this section shall not deprive a debtor 
of any right he or she might otherwise have to contest the debt involved 
in the offset action either by administrative appeal or by legal action.
    (l) Any action authorized by the provisions of this section may be 
taken:
    (1) Against a debtor's pro rata share of payments due any entity 
which the debtor participates in, either directly or indirectly, as 
determined by FSA.
    (2) When FSA determines that the debtor has established an entity, 
or reorganized, transferred ownership of, or changed in some other 
manner, their operation, for the purpose of avoiding the payment of the 
claim or debt.
    (m) The amount to be offset shall not exceed the actual or estimated 
amount of the debt, including interest, administrative charges, and 
penalties, unless the Department of Justice requests that a larger 
specified amount be offset.
    (n) Offset action will not be taken against payments when:
    (1) A debt has been discharged as provided in Sec. 792.16.
    (2) FSA determines such action will unduly interfere with the 
administration of an FSA or CCC program.
    (3) The debt has been delinquent for more than ten years or legal 
action to enforce the debt due FSA is barred by an applicable period of 
limitation, whichever is later.

[59 FR 15829, Apr. 5, 1994, as amended at 60 FR 43706, Aug. 23, 1995]



Sec. 792.8  Priorities of offsets versus assignments.

    (a) No amounts payable to a debtor by FSA shall be paid to an 
assignee until there have been collected any amounts owed by the debtor 
except as provided in this section.

[[Page 237]]

    (b) A payment which is assigned in accordance with part 1404 of this 
title by execution of Form CCC-36 shall be subject to offset for any 
debt owed to FSA or CCC or any judgment in favor of the United States 
without regard to the date notice of assignment was accepted by FSA or 
CCC.
    (c) A payment which is assigned in accordance with part 1404 of this 
title by execution of Form CCC-252 shall be offset:
    (1) Against any debt of the assignor entered on the debt record of 
the applicable FSA office prior to the filing of such form with FSA or 
CCC, or
    (2) At anytime, regardless of the date of filing of such form with 
FSA or CCC, if the debt which is the basis for the offset arises from a 
judgment in favor of the United States, or under the same contract under 
which the payment is earned by the assignor.
    (d) With respect to all other Federal agencies, offset shall be made 
of any amounts due any other Federal agency which have not been reduced 
to judgment, and which are entered on the debt record of the appropriate 
FSA office prior to the date the notice of assignment was accepted by 
FSA or CCC.
    (e) Any amount due and payable to the assignor which remains after 
deduction of amounts paid to the assignee shall be available for offset.



Sec. 792.9  Withholding.

    (a) Withholding of a payment prior to the completion of an 
applicable offset procedure may be made from amounts payable to a debtor 
by FSA to ensure that the interests of FSA and the United States will be 
protected as provided in this section.
    (b) A payment may be withheld to protect the interests of FSA or the 
United States only if FSA determines that:
    (1) There has been a serious breach of contract or violation of 
program requirements and the withholding action is considered necessary 
to protect the financial interests of FSA;
    (2) There is substantial evidence of violations of criminal or civil 
frauds statutes and criminal prosecution or civil frauds action is of 
primary importance to program operations of FSA;
    (3) Prior experience with the debtor indicates that collection will 
be difficult if amounts payable to the debtor are not withheld;
    (4) There is doubt that the debtor will be financially able to pay a 
judgment on the claim of FSA;
    (5) The facts available to FSA are insufficient to determine the 
amount to be offset or the proper payee;
    (6) A judgment on a claim of FSA has been obtained; or
    (7) Such action has been requested by the Department of Justice.
    (c) Except for debts due FSA or CCC, withholding action by FSA on 
amounts payable to debtors of other Government agencies may not be made 
unless requested by the Department of Justice.



Sec. 792.10  Late payment interest, penalty and administrative charges.

    (a) Late payment interest provisions of this section shall not 
apply:
    (1) To debts owed by Federal agencies and State and local 
governments. Interest on debts owed by such entities shall be charged to 
the extent authorized under the common law or applicable statutory 
authority.
    (2) If an applicable statute, regulation, agreement, or contract 
either prohibits the charging of such interest or specifies the interest 
or charges applicable to the debt involved;
    (3) If the late payment interest is waived by FSA in accordance with 
Sec. 792.11.
    (4) To administrative charges as set forth in paragraph (f) of this 
section.
    (b) FSA will assess late payment interest on the full amount of 
delinquent debts. For purposes of this section, the term ``full amount 
of the delinquent debt'' means the sum of the principal, accrued program 
interest, and any other charges which are otherwise due and owing to FSA 
on the delinquent debt at the time the late payment interest is 
assessed, except as provided in paragraphs (a)(2) and (d)(3) of this 
section.
    (c) The late payment interest shall be expressed as an annual rate 
of interest which FSA charges on delinquent debts. The late payment 
interest rate shall be equal to the higher of the Treasury Department's 
current value

[[Page 238]]

of funds rate or the rate of interest assessed under the Prompt Payment 
Act, determined as of the date specified in paragraphs (d)(1) and (d)(2) 
of this section. The rate of interest assessed under the Prompt Payment 
Act was chosen as an alternative rate to ensure that the Government 
would recoup interest at a rate which was at least as high as that which 
it pays for late payments.
    (d)(1) When a debt results from a statute, regulation, contract, or 
other agreement with specific provisions for late payment interest and 
payment due date, late payment interest shall accrue on the amount of 
the debt from the first day the debt became delinquent, unless otherwise 
provided by statute.
    (2) With respect to debts not resulting from a statute, regulation, 
contract, or agreement containing specific provisions for late payment 
interest and payment due date, late payment interest shall begin to 
accrue from the date on which notice of the debt, including notice of 
late payment interest, is first mailed or hand-delivered to the debtor.
    (3) The rate of late payment interest initially assessed will be 
fixed for the duration of the indebtedness, except when a debtor has 
defaulted on a repayment agreement and seeks to enter into a new 
agreement. FSA may then set a new rate of interest which reflects the 
late payment interest rate in effect at the time the new agreement is 
executed. All charges which accrued, but which were not collected under 
the defaulted agreement, shall be added to the principal to be paid 
under a new repayment agreement.
    (4) The late payment interest on delinquent debts will accrue on a 
daily basis.
    (e) Except as specified in paragraph (a)(2) of this section, a 
penalty charge of three (3) percent per annum will be assessed on any 
portion of a debt which remains unpaid ninety (90) days after the date 
described in paragraph (d)(1) or (d)(2) of this section, if no repayment 
schedule satisfactory to FSA has been agreed upon. Such penalty charge 
will be assessed retroactively from the date late payment interest began 
to accrue and applied on a daily basis. Such rate shall continue to 
accrue until the delinquent debt has been paid.
    (f) FSA shall assess as administrative charges the additional costs 
of processing delinquent debts against the debtor, to the extent such 
costs are attributable to the delinquency. Such costs include, but are 
not limited to, costs incurred in obtaining a credit report, costs of 
employing commercial firms to locate debtor, costs of employing 
contractors for collection services, costs of selling collateral or 
property to satisfy the debt.
    (g) When a debt is paid in partial or installment payments, payments 
will be applied first to administrative charges, second to the penalty 
charge assessed in accordance with paragraph (e) of this section and 
late payment interest, and third to outstanding principal.



Sec. 792.11  Waiver of late payment interest, penalty charge and 
administrative charges.

    (a) FSA shall waive the collection of late payment interest and 
administrative charges on a debt or any portion of a debt which is paid 
within 30 days after the date on which late payment interest began to 
accrue.
    (b) FSA may waive the assessment and collection of all or a portion 
of the penalty charge on debts which are appealed in accordance with 7 
CFR part 780 or other applicable appeal procedures from either the date 
of the appeal or the date such interest began to accrue, whichever is 
later, until the date a final administrative determination is issued. 
Such waiver shall not apply for any delay due to:
    (1) The appellant's request for a postponement of the scheduled 
hearing;
    (2) The appellant's request for an additional time following the 
hearing to present additional information or a written closing 
statement; or
    (3) The appellant's failure to timely present information to the 
reviewing authority.
    (c) Assessment and collection of late payment interest, the penalty 
charge and administrative charges under this part may be waived by FSA 
in full, or in part, if it is determined by the Controller, FSA, or his 
or her designee,

[[Page 239]]

that such action is in the best interest of FSA.



Sec. 792.12  Administrative appeal.

    If the opportunity to appeal the determination has not previously 
been provided under part 24 of this title or part 780 of this chapter or 
any other appeal procedure, a debtor may obtain an administrative review 
under part 780 of this chapter, or other applicable appeal procedures, 
of FSA' determination concerning the existence or amount of a debt, if a 
request is filed with the authority who made the determination within 15 
days of the date of FSA' initial demand letter, unless a longer period 
is specified in the initial demand letter.



Sec. 792.13  Additional administrative collection action.

    Nothing contained in this part shall preclude the use of any other 
administrative or contractual remedy which may be available to FSA to 
collect debts owed to the Government.



Sec. 792.14  Contact with debtor's employing agency.

    When a debtor is employed by the Federal Government or is a member 
of the military establishment or the Coast Guard, and collection by 
offset cannot be accomplished in accordance with 5 U.S.C. 5514, FSA may 
contact the employing agency to arrange for payment of the debt by 
allotment or otherwise, in accordance with section 206 of Executive 
Order No. 11222, May 8, 1965, 30 FR 6469, 3 CFR, 1964-1965 Comp., p 306.



Sec. 792.15  Prior provision of rights with respect to debt.

    FSA will not provide an administrative appeal with respect to issues 
which were raised or should have been raised at any administrative 
review requested by the debtor as provided under another statute or 
regulation before:
    (a) Effecting administrative offset;
    (b) Referring the debt to private collection or credit reporting 
agencies;
    (c) Referring the debt for salary offset against the current pay of 
a present or former Government employee; or
    (d) Referring the debt to IRS for tax refund offset.



Sec. 792.16  Discharge of debts.

    (a) Except as required by other applicable regulation or statute, a 
debt or part thereof owed FSA shall be discharged with the concurrence 
of the Department of Justice, if applicable, and the records and 
accounts on that debt closed in the following situations:
    (1) When an obligation or part thereof is discharged in bankruptcy;
    (2) When an obligation or part thereof is the subject of a final 
judgment entered by a court of competent jurisdiction which is adverse 
to FSA and no appeal will be taken by FSA;
    (3) When a debt or part thereof is compromised and paid, the amount 
of such compromise;
    (4) When collection of a debt by administrative offset is barred in 
accordance with Sec. 792.7(b)(5).
    (b) Debts discharged in accordance with this section may be reported 
to the Internal Revenue Service pursuant to Sec. 792.20.



Sec. 792.17  Referral of delinquent debts to credit reporting agencies.

    (a) This section specifies the procedures that will be followed by 
FSA and the rights that will be afforded to debtors when FSA reports 
delinquent debts to credit reporting agencies.
    (b) Before disclosing information to a credit reporting agency in 
accordance with this part, FSA shall review the claim and determine that 
it is valid and delinquent.
    (c) Before a debt may be referred to a credit reporting agency, the 
debtor must be notified, pursuant to Sec. 792.4, of FSA' intent to make 
such a report. Such notification shall include:
    (1) FSA' intent to disclose to a credit reporting agency that the 
debtor is responsible for the debt, and that such disclosure will be 
made not less than 60 days after notification to such debtor.
    (2) The information intended to be disclosed to the credit reporting 
agency under paragraph (g)(1) of this section.
    (3) The debtor's right to enter a repayment agreement on the debt, 
including, at the discretion of FSA, installment payments, and that if 
such

[[Page 240]]

an agreement is reached, the debt will not be referred to a credit 
reporting agency.
    (4) The debtor's right to review of this action in accordance with 
paragraph (i) of this section.
    (d) The debtor shall be notified, in writing at the debtor's last 
known address, when FSA has reported any delinquent debt to a credit 
reporting agency.
    (e)(1) FSA shall notify each credit reporting agency to which an 
original disclosure of delinquent debt information was made of any 
substantial change in the condition or amount of the claim.
    (2) FSA shall promptly verify or correct, as appropriate, 
information about the debt on request of a credit reporting agency. The 
records of the debtor shall reflect any correction resulting from such 
request.
    (f) Information reported to a credit reporting agency on delinquent 
debts shall be derived from the system of records maintained by FSA.
    (g) FSA shall limit delinquent debt information disclosed to credit 
reporting agencies to:
    (1) The name, address, taxpayer identification number, and other 
information necessary to establish the identity of the debtor;
    (2) The amount, status, and history of the claim; and
    (3) The program under which the claim arose.
    (h) Reasonable action shall be taken to locate a debtor for whom FSA 
does not have a current address before reporting delinquent debt 
information to a credit reporting agency.
    (i)(1) Before disclosing delinquent debt information to a credit 
reporting agency, FSA shall, upon request of the debtor, provide for a 
review of the debt in accordance with Sec. 792.12. This review shall 
only consider defenses or arguments which were not available or could 
not have been available at any previous appeal proceeding permitted 
under Sec. 792.12.
    (2) Upon receipt of a request for review within 30 days from the 
date of notice to the debtor of intent to refer delinquent debt 
information to a credit reporting agency, FSA shall suspend its schedule 
for disclosure to a credit reporting agency until a final decision 
regarding the appropriateness of disclosure to a credit reporting agency 
is made.
    (3) Upon completion of the review, the reviewing official shall 
transmit to the debtor a written notification of the decision. If 
appropriate, the debtor shall be notified of the scheduled date on or 
after which the debt will be referred to the credit reporting agency. 
The debtor will also be notified of any changes from the initial 
notification in the information to be disclosed.
    (j)(1) In accordance with guidelines established by the 
Administrator, FSA, the responsible claims official shall report to 
credit reporting agencies delinquent debt information specified in 
paragraph (g) of this section.
    (2) The agreements entered into by USDA and credit reporting 
agencies shall provide the necessary assurances to FSA that the credit 
reporting agencies to which information will be provided are in 
compliance with the provisions of all the laws and regulations of the 
United States relating to providing credit information.
    (3) FSA shall not report delinquent debt information to credit 
reporting agencies when: (i) The debtor has entered a repayment 
agreement covering the debt with FSA, and such agreement is still valid; 
or
    (ii) FSA has suspended its schedule for disclosure of delinquent 
debt information pursuant to paragraph (i)(2) of this section.
    (k) Disclosures made under this section shall be in accordance with 
the requirements of the Privacy Act, as amended (5 U.S.C. 552a).
    (l) The provisions of paragraphs (a) through (k) of this section 
apply to commercial debts owed by farm producers and all personal debts. 
All commercial debts owed by debtors other than farm producers may be 
reported to credit reporting agencies without following the provisions 
of paragraphs (a) through (k) of this section.



Sec. 792.18  Referral of debts to Department of Justice.

    (a) Debts that exceed $100,000.00 exclusive of interest, penalties, 
and administrative charges, or such higher amount as may be prescribed, 
shall be

[[Page 241]]

referred to the Department of Justice before they can be discharged.
    (b) Debts which cannot be compromised or on which collection action 
cannot be suspended or terminated, may be referred to the Department of 
Justice for collection action. Claims of less than $600.00 exclusive of 
interest, penalties, and administrative costs will not be referred to 
the Department of Justice unless:
    (1) Referral is important to a significant enforcement policy, or
    (2) The debtor not only has the clear ability to pay the claim, but 
the Government can effectively enforce payment, having due regard for 
the exemptions available to the debtor under State and Federal law and 
the judicial remedies available to the Government.



Sec. 792.19  Referral of delinquent debts to IRS for tax refund offset.

    FSA may refer legally enforceable delinquent debts to IRS to be 
offset against tax refunds due to debtors under 26 U.S.C. 6402, in 
accordance with the provisions of 31 U.S.C. 3720A and Treasury 
Department regulations.



Sec. 792.20  Reporting discharged debts to IRS.

    (a) In accordance with IRS regulations, FSA may report to IRS as 
discharged debts on IRS Form 1099-G the amounts specified in paragraph 
(b) of this section.
    (b) The following discharged debts may be reported to IRS: (1) The 
amount of a debt discharged under a compromise agreement between FSA and 
the debtor, except for compromises made due to doubt about the 
Government's ability to prove its case in court for the full amount of 
the debt.
    (2) The amount of a debt discharged by the running of the statutory 
period of limitation for collecting the debt by administrative offset 
specified in 31 U.S.C. 3716.



Sec. 792.21  Referral of debts to private collection agencies.

    If FSA' collection efforts have been unsuccessful after 90 days from 
the date of delinquency, the head of the agency or his designee may 
enter into a contract with any person or organization, under such terms 
and conditions as the head of the agency or his designee considers 
appropriate for collection services to recover debts owed to FSA.



Sec. 792.22  Collection and compromise.

    The Administrator, FSA, or his designee may compromise any claim of 
the Government of not more than $100,000.00 exclusive of interest, 
penalties, and administrative charges, or such higher amount as may be 
prescribed, that has not been referred to another executive or 
legislative agency for further collection action.



PART 795_PAYMENT LIMITATION--Table of Contents




                                 General

Sec.
795.1 [Reserved]
795.2 Applicability.
795.3 Definitions.
795.4 Family members.
795.5 Timing for determining status of persons.
795.6 Multiple individuals or other entities.
795.7 Entities or joint operations not considered as a person.
795.8 Corporations and stockholders.
795.9 Estate or trust.
795.10 Club, society, fraternal or religious organization.
795.11 Husband and wife.
795.12 Minor children.
795.13 Other cases.
795.14 Changes in farming operations.
795.15 Determination whether agreement is a share lease or a cash lease.
795.16 Custom farming.
795.17 Scheme or device.
795.20 Joint and several liability.
795.21 Appeals.
795.22 Interpretations.
795.23 Paperwork Reduction Act assigned number.
795.24 Relief.

    Authority: Sec. 1001 of the Food Security Act of 1985, as amended, 
99 Stat, 1444, as amended, 7 U.S.C 1308; Pub. L. 99-500 and Pub. L. 99-
591.

    Source: 43 FR 9784, Mar. 10, 1978, unless otherwise noted.

                                 General



Sec. 795.1  [Reserved]



Sec. 795.2  Applicability.

    (a) The provisions of this part are applicable to payments when so 
provided by the individual program regulations

[[Page 242]]

under which the payments are made. The amount of the limitation shall be 
as specified in the individual program regulations.
    (b) The limitation shall be applied to the payments for a commodity 
for a crop year.
    (c) The limitation shall not be applicable to payments made to 
States, political subdivisions, or agencies thereof for participation in 
the programs on lands owned by such States, political subdivisions, or 
agencies thereof so long as such lands are farmed primarily in the 
direct furtherance of a public function. However, the limitation is 
applicable to persons who rent or lease land owned by States, political 
subdivisions, or agencies thereof.
    (d) The limitation shall not be applicable to payments made to 
Indian tribal ventures participating in the programs where a responsible 
official of the Bureau of Indian Affairs or the Indian Tribal Council 
certifies that no more than the program payment limitation shall accrue 
directly or indirectly to any individual Indian and the State committee 
reviews and approves the exemption.
    (e) Except as provided in part 1497 of this title, this part shall 
not be applicabie to contracts entered into on or after August 1, 1988 
in accordance with part 704 of this chapter.

[49 FR 14719, Apr. 13, 1984, as amended at 51 FR 8453, Mar. 11, 1986; 51 
FR 36905, Oct. 16, 1986; 53 FR 29570, Aug. 5, 1988]



Sec. 795.3  Definitions.

    (a) The terms defined in part 719 of this chapter, governing 
reconstitutions of farms, shall be applicable to this part and all 
documents issued in accordance with this part, except as otherwise 
provided in this section.
    (b)(1) Subject to the provisions of this part, the term ``person'' 
shall mean an individual, joint stock company, corporation, association, 
trust, estate, or other legal entity. In order to be considered to be a 
separate person for the purposes of this part with respect to any crop, 
in addition to any other provision of this part, an individual or other 
legal; entity must:
    (i) Have a separate and distinct interest in the crop or the land on 
which the crop is produced;
    (ii) Exercise separate responsibility for such interest; and
    (iii) Be responsible for payment of the cost of farming related to 
such interest from a fund or account separate from that of any other 
individual or entity.
    (2) The term ``person'' shall not include any cooperative 
association of producers that markets commodities for producers with 
respect to the commodities so marketed for producers.
    (c) The term ``family member'' shall mean the individual, the great-
grandparent, grand-parent, child, grandchild, and great-grandchild of 
such individual and the spouses of all such individuals.
    (d) The term ``separate unit'' shall mean an individual who, prior 
to December 31, 1985: (1) Had been engaged in a separate farming 
operation and (2) in accordance with the provisions of this part, had 
been determined to be a separate person or could have so determined 
under the circumstances existing at such time.

[52 FR 26295, July 14, 1987]



Sec. 795.4  Family members.

    Effective for the 1987 through 1990 crops, an individual shall not 
be denied a determination that such individual was a ``person'' solely 
on the basis that:
    (a) A family member cosigns for, or makes a loan to, such individual 
and leases, loans or gives equipment, land or labor to such an 
individual; and
    (b) Such family members were organized as separate units prior to 
December 31, 1985.

[52 FR 26295, July 14, 1987]



Sec. 795.5  Timing for determining status of persons.

    Except as otherwise set forth in this part, the status of 
individuals or entities as of March 1, or such other date as may be 
determined and announced by the Administrator shall be the basis on 
which determinations are made in accordance with this part for the year 
for which the determination is made.

[51 FR 21836, June 16, 1986; 51 FR 36905, Oct. 16, 1986]

[[Page 243]]



Sec. 795.6  Multiple individuals or other entities.

    The rules in Sec. Sec. 795.5 through 795.16 shall be used to 
determine whether certain multiple individuals or legal entities are to 
be treated as one person or as separate persons for the purpose of 
applying the limitation. In cases in which more than one rule would 
appear to be applicable, the rule which is most restrictive on the 
number of persons shall apply.



Sec. 795.7  Entities or joint operations not considered as a person.

    A partnership, joint venture, tenants-in-common, or joint tenants 
shall not be considered as a person but, notwithstanding the provisions 
of Sec. 795.3, each individual or other legal entity who shares in the 
proceeds derived from farming by such joint operations shall be 
considered a separate person, except as otherwise provided in this part, 
and shall be listed as a producer for payment purposes on program 
documents. The payment shares listed on the program documents for each 
individual or other legal entity shall be the same as each individual or 
other legal entity shares in the proceeds derived from farming by such 
joint operation. Notwithstanding the foregoing, each individual or other 
legal entity who shares in the proceeds derived from farming by such 
joint operation shall not be considered as a separate person unless the 
individual or other legal entity is actively engaged in the farming 
operations of the partnership or other joint operation. An individual or 
other legal entity shall be considered as actively engaged in the 
farming operation only if its contribution to the joint operation is 
commensurate with its share in the proceeds derived from farming by such 
joint operation. Members of the partnership or joint venture must 
furnish satisfactory evidence that their contributions of land, labor, 
management, equipment, or capital to the joint operation are 
commensurate with their claimed shares of the proceeds. A capital 
contribution may be a direct out-of-pocket input of a specified sum or 
an amount borrowed by the individual. If the contribution consists 
substantially of capital, such capital must have been contributed 
directly to the joint operation by the individual or other legal entity 
and not acquired as a result of (a) a loan made to the joint operation, 
(b) a loan which was made to such individual or other legal entity by 
the joint operation or any of its members or related entities, or (c) a 
loan made to such individual or other legal entity which was guaranteed 
by the joint operation or any of its members or related entities.



Sec. 795.8  Corporations and stockholders.

    (a) A corporation (including a limited partnership) shall be 
considered as one person, and an individual stockholder of the 
corporation may be considered as a separate person to the extent that 
such stockholder is engaged in the production of the crop as a separate 
producer and otherwise meets the requirements of Sec. 795.3, except 
that a corporation in which more than 50 percent of the stock is owned 
by an individual (including the stock owned by the individual's spouse, 
minor children, and trusts for the benefit of such minor children), or 
by a legal entity, shall not be considered as a separate person from 
such individual or legal entity.
    (b) Where the same two or more individuals or other legal entities 
own more than 50 percent of the stock in each of two or more 
corporations, all such corporations shall be considered as one person.
    (c) The percentage share of the value of the stock owned by an 
individual or other legal entity shall be determined as of March 1 of 
the crop year, except that where a stockholder voluntarily acquires 
stock after March 1 and before the harvest of the crop, the amount of 
any stock so acquired shall be included in determining the percentage 
share of the value of the stock owned by the stockholder. Where there is 
only one class of stock, a stockholder's percentage share of the value 
of the outstanding stock shall be equal to the percentage of the 
outstanding stock owned by the stockholder. If the corporation has more 
than one class of stock the percentage share of the value of the stock 
owned by a stockholder shall be determined by the Deputy Administrator 
on the basis of market quotations, and if market quotations

[[Page 244]]

are lacking or too scarce to be recognized the percentage share of the 
value of the stock shall be determined by the Deputy Administrator on 
the basis of all relevant factors affecting the fair market value, 
including the rights and privileges of the various stock issues.

(Title I, Agricultural Act of 1970, as amended by the Agriculture and 
Consumer Protection Act of 1973, Pub. L. 93-86, 87 Stat. 221 (7 U.S.C. 
1307) and under Title I, Rice Production Act of 1975, Pub. L. 94-214, 90 
Stat. 181 (7 U.S.C. 428c note), and Pub. L. 95-156, 91 Stat. 1264 (7 
U.S.C. 1307 note, 7 U.S.C. 1307, 7 U.S.C. 1441))

[43 FR 9784, Mar. 10, 1978, as amended at 45 FR 10311, Feb. 15, 1980; 45 
FR 11795, Feb. 22, 1980]



Sec. 795.9  Estate or trust.

    (a) An estate or irrevocable trust shall be considered as one person 
except that, where two or more estates or irrevocable trusts have common 
beneficiaries or heirs (including spouses and minor children) with more 
than a 50-percent interest, all such estates or irrevocable trusts shall 
be considered as one person.
    (b) An individual heir of an estate or beneficiary of a trust may be 
considered as a separate person to the extent that such heir or 
beneficiary is engaged in the production of crops as a separate producer 
and otherwise meets the requirements of Sec. 795.3, except that an 
estate or irrevocable trust which has a sole heir or beneficiary shall 
not be considered as a separate person from such heir or beneficiary.
    (c) Where an irrevocable trust or an estate is a producer on a farm 
and one or more of the beneficiaries or heirs of such trust or estate 
are minor children, the minor children's pro rata share of the program 
payments to the trust or estate shall be attributed to the parent of the 
minor children except as otherwise provided in Sec. 795.12.
    (d) A revocable trust shall not be considered as a separate person 
from the grantor.



Sec. 795.10  Club, society, fraternal or religious organization.

    Each individual club, society, fraternal or religious organization 
may be considered as a separate person to the extent that each such 
club, society, fraternal or religious organization is engaged in the 
production of crops as a separate producer and otherwise meets the 
requirements of Sec. 795.3.



Sec. 795.11  Husband and wife.

    With respect to the 1988 crop year, a husband and wife shall be 
considered to be one person except that such individuals who, prior to 
their marriage, were separately engaged in unrelated farming operations 
will be determined to be separate persons with respect to such farming 
operations so long as the operations remain separate and distinct from 
any farming operation conducted by the other spouse if such individuals 
have executed a Contract to Participate in the 1988 Price Support and 
Production Adjustment Programs by April 15, 1988. Such individuals must 
file a form FSA-561 with the county committee for each such farming 
operation by July 8, 1988, if they desire to be considered as separate 
persons under this section.

[53 FR 21410, June 8, 1988]



Sec. 795.12  Minor children.

    (a) A minor child and his parents or guardian (or other person 
responsible for him) shall be considered as one person, except that the 
minor child may be considered as a separate person if such minor child 
is a producer on a farm in which the parents or guardian or other person 
responsible for him (including any entity in which the parents or 
guardian or other person responsible for him has a substantial interest, 
i.e., more than a 20-percent interest) takes no part in the operation of 
the farm (including any activities as a custom farmer) and owns no 
interest in the farm or allotment or in any portion of the production on 
the farm, and if such minor child:
    (1) Is represented by a court-appointed guardian who is required by 
law to make a separate accounting for the minor and ownership of the 
farm is vested in the minor, or
    (2) Has established and maintains a different household from his 
parents or guardian and personally carries out the actual farming 
operations on the farm for which there is a separate accounting, or

[[Page 245]]

    (3) Has a farming operation resulting from his being the beneficiary 
of an irrevocable trust and ownership of the property is vested in the 
trust or the minor.
    (b) A person shall be considered a minor until he reaches 18 years 
of age. Court proceedings conferring majority on a person under 18 years 
of age will not change such person's status as a minor for purposes of 
applying the regulations.



Sec. 795.13  Other cases.

    Where the county committee is unable to determine whether certain 
individuals or legal entities involved in the production of a commodity 
are to be treated as one person or separate persons, all the facts 
regarding the arrangement under which the commodity is produced shall be 
submitted to the State committee for decision. Where the State committee 
is unable to determine whether such individuals or legal entities are to 
be treated as one person or separate persons, all the facts regarding 
the arrangement under which the farming operation is conducted shall be 
submitted to the Deputy Administrator for decision.



Sec. 795.14  Changes in farming operations.

    (a) Subject to the provisions of this part, a person may exercise 
his or her right heretofore existing under law, to divide, sell, 
transfer, rent, or lease his or her property if such division, sale, 
transfer, rental arrangement, or lease is legally binding as between the 
parties thereto. However, any document representing a division, sale, 
transfer, rental arrangement, or lease which is fictitious or not 
legally binding as between the parties thereto shall be considered to be 
for the purpose of evading the payment limitation and shall be 
disregarded for the purpose of applying the payment limitation. Any 
change in farming operations that would otherwise serve to increase the 
number of persons for application of the payment limitation must be bona 
fide and substantive.
    (b) A substantive change includes, for example, a substantial 
increase or decrease in the size of the farm by purchase, sale, or 
lease; a substantial increase or decrease in the size of allotment by 
purchase, sale, or lease; a change from a cash lease to a share lease or 
vice versa; and dissolution of an entity such as a corporation or 
partnership.
    (c) Examples of the types of changes that would not be considered as 
substantive are the following:
    Example 1. A corporation is owned equally by four shareholders. The 
corporation owns land, buildings, and equipment and in the prior year 
carried out substantial farming operations. Three of the shareholders 
propose forming a partnership which they would own equally. The 
partnership would cash lease land and equipment from the corporation 
with the objective of having the three partners considered as separate 
persons for purposes of applying the payment limitation under the 
provisions of Sec. 795.7 of the regulations.
    The formation of such a partnership and the leasing of land from a 
corporation in which they hold a major interest would not constitute a 
substantive and bona fide change in operations. Therefore, the 
corporation and the partners would be limited to a single payment 
limitation.
    Example 2. Three individuals each have individual farming operations 
which, if continued unchanged, would permit them to have a total of 
three payment limitations.
    The three individuals propose forming a corporation which they would 
own equally. The corporation would then cash lease a portion of the 
farmland owned and previously operated by the individuals with the 
objective of having the corporation considered as a separate person for 
purposes of applying the payment limitation under the provisions of 
Sec. 795.8 of the regulations. The formation of such a corporation and 
the leasing of land from the stockholders would not constitute a 
substantive and bona fide change in operations. Therefore, the 
corporation and the three individuals would be limited to three payment 
limitations.



Sec. 795.15  Determining whether agreement is a share lease or a cash 
lease.

    (a) Cash lease. If a rental agreement contains provisions for a 
guaranteed minimum rental with respect to the amount of rent to be paid 
to the landlord by a tenant, such agreement shall be considered to be a 
cash rental agreement. In addition, the rental agreement must be 
customary and reasonable for the area.
    (b) Share lease. If a rental agreement contains provisions that 
require the payment of rent on the basis of the

[[Page 246]]

amount of the crop produced or the proceeds derived from the crop, such 
agreement shall be considered to be a share rental agreement. In 
addition, the rental agreement must be customary and reasonable for the 
area.

[51 FR 8454, Mar. 11, 1986 and 51 FR 36905, Oct. 16, 1986]



Sec. 795.16  Custom farming.

    (a) Custom farming is the performance of services on a farm such as 
land preparation, seeding, cultivating, applying pesticides, and 
harvesting for hire with remuneration on a unit of work basis, except 
that, for the purpose of applying the provisions of this section, the 
harvesting of crops and the application of agricultural chemicals by 
firms regularly engaged in such businesses shall not be regarded as 
custom farming. A person performing custom farming shall be considered 
as being separate from the person for whom the custom farming is 
performed only if:
    (1) The compensation for the custom farming is paid at a unit of 
work rate customary in the area and is in no way dependent upon the 
amount of the crop produced, and (2) the person performing the custom 
farming (and any other entity in which such person has more than a 20-
percent interest) has no interest, directly or indirectly, (i) in the 
crop on the farm by taking any risk in the production of the crop, 
sharing in the proceeds of the crop, granting or guaranteeing the 
financing of the crop, (ii) in the allotment on the farm, or (iii) in 
the farm as landowner, landlord, mortgage holder, trustee, lienholder, 
guarantor, agent, manager, tenant, sharecropper, or any other similar 
capacity.
    (b) A person having more than a 20-percent interest in any legal 
entity performing custom farming shall be considered as being separate 
from the person for whom the custom farming is performed only if:
    (1) The compensation for the custom farming service is paid at a 
unit of work rate customary in the area and is in no way dependent upon 
the amount of the crop produced, and (2) the person having such interest 
in the legal entity performing the custom farming has no interest, 
directly or indirectly, (i) in the crop on the farm by taking any risk 
in the production of the crop, sharing in the proceeds of the corp, 
granting or guaranteeing the financing of the crop, (ii) in the 
allotment on the farm, or (iii) in the farm as landowner, landlord, 
mortgage holder, trustee, lienholder, guarantor, agent, manager, tenant, 
sharecropper, or in any other similar capacity.



Sec. 795.17  Scheme or device.

    All or any part of the payments otherwise due a person under the 
upland cotton, wheat, feed grain and rice programs on all farms in which 
the person has an interest may be withheld or required to be refunded if 
the person adopts or participates in adopting any scheme or device 
designed to evade or which has the effect of evading the rules of this 
part. Such acts shall include, but are not limited to, concealing from 
the county committee any information having a bearing on the application 
of the rules of this part or submitting false information to the county 
committee (for example, a set-aside agreement which is entered into that 
differs from information furnished to the county committee concerning 
the manner in which program payments are actually shared, concerning the 
actual facts of a sale, or concerning the transfer of property) or 
creating fictitious entities for the purpose of concealing the interest 
of a person in a farming operation.



Sec. 795.20  Joint and several liability.

    Where two or more individuals or legal entities, who are treated as 
one person hereunder, receive payments which in the aggregate exceed the 
limitation, such individuals or legal entities shall be liable, jointly 
and severally, for any liability arising therefrom. The provisions of 
this part requiring the refund of payments shall be applicable in 
addition to any liability under criminal and civil fraud statutes.



Sec. 795.21  Appeals.

    Any person may obtain reconsideration and review of determinations 
made under this part in accordance with the appeal regulations, part 780 
of this chapter, as amended.

[[Page 247]]



Sec. 795.22  Interpretations.

    In interpretations previously issued pursuant to the payment 
limitation regulations and published at 36 FR 16569, 37 FR 3049, 39 FR 
15021 and 41 FR 17527 shall be applicable in construing the provisions 
of this part.



Sec. 795.23  Paperwork Reduction Act assigned number.

    The information collection requirements contained in these 
regulations (7 CFR part 795) have been approved by the Office of 
Management and Budget under the provisions of 44 U.S.C. Chapter 35 and 
have been assigned OMB control number 0560-0096.

[49 FR 14719, Apr. 13, 1984]



Sec. 795.24  Relief.

    If a producer relied on a county committee and/or State committee 
``person'' determination for a crop year and higher reviewing authority 
makes a more restrictive determination, the Deputy Administrator may 
grant relief only for such crop year if the producer was not afforded an 
opportunity to exercise other alternatives with respect to the 
producer's farming operation and the program provisions and the county 
committee has determined that the producers acted in good faith based 
upon the original ``person'' determination.

[51 FR 8454, Mar. 11, 1986; 51 FR 36905, Oct. 16, 1986]

[[Page 248]]



                       SUBCHAPTER F_PUBLIC RECORDS





PART 798_AVAILABILITY OF INFORMATION TO THE PUBLIC--Table of Contents




Sec.
798.1 General statement.
798.2 Public inspection and copying.
798.3 Index.
798.4 Requests for records.
798.5 Appeals.
798.6 Fees.

    Authority: 5 U.S.C. 301, 552; 7 CFR 1.1 through 1.16.

    Source: 44 FR 10353, Feb. 20, 1979, unless otherwise noted.



Sec. 798.1  General statement.

    This part is issued in accordance with the regulations of the 
Secretary of Agriculture at 7 CFR 1.1 through 1.16, and appendix A, 
implementing the Freedom of Information Act (5 U.S.C. 552). The 
Secretary's regulations as implemented by the regulations in this part, 
govern the availability of records of the FSA and Commodity Credit 
Corporation (CCC) to the public.



Sec. 798.2  Public inspection and copying.

    5 U.S.C. 552(a)(2) requires that certain materials be made available 
for public inspection and copying. Members of the public may request 
access to such materials maintained by FSA and/or CCC at the Office of 
the Director, Information Division, Farm Service Agency, Room 3608 South 
Building, P.O. Box 2415, Washington, D.C. 20013, between the hours of 
8:15 and 4:45 p.m., Monday through Friday.

[50 FR 53259, Dec. 31, 1985]



Sec. 798.3  Index.

    5 U.S.C. 552(a)(2) requires that each agency publish or otherwise 
make available a current index of all materials required to be made 
available for public inspection and copying. FSA maintains an index of 
FSA National Handbooks, CCC Board Dockets, decisions of the Board of 
Contract Appeals of the Department of Agriculture affecting FSA or CCC, 
and Marketing Quota Review Committee determinations. In view of the 
small number of public requests for such index, publication of the index 
is unnecessary and impractical. The index is maintained and available to 
the public at the office shown in Sec. 798.2 and copies of the index 
are available upon request in person or by mail to that office.



Sec. 798.4  Request for records.

    Request for records under 5 U.S.C. 552(a)(3) shall be made in 
accordance with 7 CFR 1.3. Reasonable requests for material not in 
existence may also be honored where their compilation will not unduly 
interfere with FSA operations and programs. Each FSA office in the field 
and each FSA office and division in Washington (see statement of 
Organization and Functions of FSA, 40 FR 18815, and of CCC, 35 FR 14951, 
and any amendments thereto) is designated as an ``information center'' 
and shall make space available to inspect and copy records in their 
custody not exempted from disclosure. Copies of records shall also be 
made available upon request. The head of each office or division is 
authorized to receive requests for records and to make determinations 
regarding requests for records in the office's custody in accordance 
with 7 CFR 1.4(c). Requests to Washington divisions and offices shall be 
addressed to USDA, FSA, P.O. Box 2415, Washington, D.C. 20013. The heads 
of FSA field offices shall be addressed as listed in the local telephone 
directory under ``U.S. Government, Department of Agriculture, FSA''. 
Names and addresses of heads of field offices may also be obtained from 
the office indicated in Sec. 798.2.



Sec. 798.5  Appeals.

    Any person whose request under Sec. 798.4 of this part is denied 
shall have the right to appeal such denial. This appeal shall be 
submitted in accordance with 7 CFR 1.3(e) and addressed to the 
Administrator, FSA (Executive Vice-President, CCC), USDA, FSA, P.O. Box 
2415, Washington, D.C. 20013.



Sec. 798.6  Fees.

    This schedule supplements the fee schedule in 7 CFR, part 1, subpart 
A,

[[Page 249]]

appendix A and sets forth the fees to be charged by FSA for providing 
copies of records, materials, and services not covered in appendix A:
    (a) Records, materials and services furnished without cost.
    (1) One copy each of related directives, or blank forms required by 
FSA for program participation, if requester is a program participant.
    (2) List of names and addresses of county and/or community committee 
members, and names of county employees in the county.
    (3) One copy of an investigation report furnished to an appellant 
for a program appeal.
    (b) Records, materials and services for which fees are charged.
    (1) National handbooks. Three dollars for the first copy. One dollar 
for each additional copy. (The term ``copy'' includes all national 
amendments to date. They will be furnished separately for the requester 
to assemble).
    (2) Field supplementation to national handbooks. Five cents per 
page, not to exceed $3, for each supplement.
    (3) Computerized records. The requester shall furnish the necessary 
reels when computerized records are furnished on magnetic tape.

[[Page 250]]



                  SUBCHAPTER G_ENVIRONMENTAL PROTECTION





PART 799_ENVIRONMENTAL QUALITY AND RELATED ENVIRONMENTAL 
CONCERNS_COMPLIANCE WITH THE NATIONAL ENVIRONMENTAL POLICY ACT
--Table of Contents




Sec.
799.1 Background.
799.2 Purpose.
799.3 Applicability.
799.4 Definitions.
799.5 FSA officials and offices responsible for carrying out NEPA.
799.6 Adoption of regulations issued by others in implementing the 
          procedural provisions of NEPA.
799.7 Early involvement in private and state and local activities 
          requiring Federal approval.
799.8 Making supplements to EISs part of the final administrative 
          record.
799.9 Ensuring that environmental factors are considered in agency 
          decisionmaking.
799.10 Criteria and identification of FSA actions as to degree of 
          involvement under the NEPA process.
799.11 Expedited procedures.
799.12 Program termination.
799.13 Environmental information.

Appendix 1 to Part 799--Organization Chart--FSA-USDA
Appendix 2 to Part 799--Form FSA-929

    Authority: Pub. L. 91-190, 83 Stat. 852, as amended (42 U.S.C. 
4321); E.O. 11514; E.O. 11991; 40 CFR 1507.3, 7 CFR 3100.

    Source: 45 FR 32313, May 16, 1980, unless otherwise noted.



Sec. 799.1  Background.

    The National Environmental Policy Act (NEPA) of 1969 (42 U.S.C. 4321 
et seq.) establishes national policies and goals for the protection of 
the environment. Section 102(2) of NEPA contains certain procedural 
requirements directed toward the attainment of such goals. Section 
(102)(2) also requires all Federal agencies to give appropriate 
consideration to the environmental effects of their proposed actions in 
their decisionmaking and to prepare detailed environmental statements on 
recommendations or reports on proposals for legislation and other major 
Federal actions significantly affecting the quality of the human 
environment. Executive Order 11991 of May 24, 1977 (42 FR 26967), 
directed the Council on Environmental Quality (CEQ) to issue regulations 
to implement the procedural provisions of NEPA. Accordingly, CEQ issued 
final NEPA regulations (40 CFR parts 1500 through 1508) on November 29, 
1978, which are binding on all Federal agencies as of July 30, 1979. 
These regulations provide that each Federal agency shall as necessary 
adopt implementing procedures to supplement the regulations. The U.S. 
Department of Agriculture adopted such procedures in a final rule (7 CFR 
part 3100) published on July 30, 1979. The CEQ regulations at 40 CFR 
1507.3 (b) identify those items which must be addressed in agency 
procedures.



Sec. 799.2  Purpose.

    The purpose of this part is to establish agency procedures which 
supplement NEPA regulations issued by CEQ and USDA. This regulation, 
together with such NEPA regulations issued by CEQ and USDA, will 
supersede regulations issued by the Farm Service Agency (FSA) on 
December 20, 1974 (39 FR 43996).



Sec. 799.3  Applicability.

    This part, together with NEPA regulations issued by CEQ and USDA, 
applies to all programs administered by FSA which might have significant 
impacts on the environment.



Sec. 799.4  Definitions.

    (a) The term environmental evaluation means agency appraisal of the 
potential or likely environmental impacts of proposed legislation, a new 
program, a major change in a program, an action related to a program or 
an action related to part of a program which will be used by the 
responsible agency official to determine whether or not an environmental 
assessment and/or an environmental impact statement is needed. Such 
appraisal shall relate to the same environmental concerns as an 
environmental impact statement. The environmental evaluation shall 
particularly

[[Page 251]]

focus on the adverse affects of FSA actions on the environmental factors 
listed on Form FSA-929 (see Appendix 2) and on the significance of the 
action as discussed in the CEQ regulations concerning NEPA at 40 CFR 
1508.27. As required, the environmental evaluation shall be made by an 
interdisciplinary team.
    (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 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.



Sec. 799.5  FSA officials and offices responsible for carrying out NEPA.

    (a) Responsible officials. The Administrator of FSA, or his or her 
designee, is the responsible Federal official for carrying out the 
purpose of NEPA for all FSA programs. County committees, State 
committees, and Directors of Washington Divisions, within their 
respective areas of responsibility with the assistance of the FSA 
representative on the USDA Environmental Quality Committee, shall assist 
the Administrator in complying with the policies and purposes of NEPA 
generally, and, in particular, in determining whether the quality of the 
human environment will be significantly affected in implementing agency 
programs and preparing the necessary environmental documents.
    (b) Offices responsible for carrying out NEPA--(1) Washington 
divisions. Washington divisions are responsible for carrying out NEPA 
with regard to legislative proposals and multi-State and national 
programs or major revisions of national programs.
    (2) State committees. State committees are responsible for carrying 
out NEPA with regard to major actions in a State or area within a State.
    (3) County committees. County committees are responsible for 
carrying out NEPA with regard to major actions within a county.
    (c) All environmental assessments, environmental impact statements 
(EISs) and similar documents will be forwarded through the appropriate 
agency channels to the FSA representative on the USDA Environmental 
Quality Committee for review and submission to the Administrator.



Sec. 799.6  Adoption of regulations issued by others in implementing 
the procedural provisions of NEPA.

    In addition to provisions provided for in this part 799, FSA adopts 
the NEPA regulations issued by CEQ (40 CFR parts 1500 through 1508) and 
NEPA regulations issued by USDA (7 CFR part 3100).



Sec. 799.7  Early involvement in private and state and local activities 
requiring Federal approval.

    (a) The NEPA regulations at 40 CFR 1501.2(d) require agencies to 
provide for early involvement in actions which, while planned by private 
applicants or other non-Federal entities, require some form of Federal 
involvement.
    (b) To implement the requirements of 40 CFR 1501.2(d) with respect 
to these actions FSA shall:
    (1) Prepare, where practicable, generic guidelines describing the 
scope and level of environmental information required from applicants 
seeking assistance from FSA as a basis for evaluating their proposed 
actions, and make these guidelines available upon request.
    (2) Provide such guidance on a project-by-project basis to 
applicants seeking assistance from FSA.
    (3) Upon receipt of an application for agency approval, or 
notification that an application will be filed, consult as required with 
other appropriate parties to initiate and coordinate the necessary 
environmental analyses.
    (c) The responsibilities under this section shall be coordinated by 
the Conservation and Environmental Protection Division of the Farm 
Service Agency, Washington, D.C.
    (d) To facilitate compliance with paragraph (a) of this section, 
private applicants seeking assistance from FSA and other non-Federal 
entities are expected to:
    (1) Contact FSA as early as possible in the planning process for 
guidance on the scope and level of environmental

[[Page 252]]

information required to be submitted in support of their application;
    (2) Conduct any studies which are deemed necessary and appropriate 
by FSA to determine the impact of the proposed action on the human 
environment;
    (3) Consult with appropriate Federal, regional, State and local 
agencies and other potentially interested parties during preliminary 
planning stages to ensure that all environmental factors are identified;
    (4) Submit applications for all Federal, regional, State and local 
approvals as early as possible in the planning process;
    (5) Notify FSA as early as possible of all other Federal, regional, 
State, local and Indian tribe actions required for project completion so 
that FSA may coordinate all Federal environmental reviews; and
    (6) Notify FSA of all known parties potentially affected by or 
interested in the proposed action.



Sec. 799.8  Making supplements to EISs part of the final administrative 
record.

    Where FSA evaluates a proposal on the basis of a formal 
administrative record and an EIS on the proposal has been prepared, any 
supplement to the EIS shall be made a part of the formal record before a 
final decision on the proposal is made.



Sec. 799.9  Ensuring that environmental factors are considered in agency 
decisionmaking.

    (a) The NEPA regulations at 40 CFR 1501.1 contain requirements to 
ensure adequate consideration of environmental factors in 
decisionmaking. To fulfill these requirements, FSA officials shall:
    (1) Consider all relevant environmental factors in evaluating 
proposals for agency action;
    (2) Make all relevant environmental documents, comments and 
responses part of the record in formal rulemaking or adjudicatory 
proceedings.
    (3) Ensure that all relevant environmental documents, comments and 
responses accompany the proposal through existing review processes;
    (4) Consider only those alternatives encompassed by the range of 
alternatives discussed in the relevant environmental documents when 
evaluating proposals for agency action.
    (5) Where an EIS has been prepared, consider the specific 
alternatives analyzed in the EIS when evaluating the proposal which is 
the subject of the EIS.
    (b) The four categories of FSA activities that have or are likely to 
have significant environment impacts on the human environment are:
    (1) Legislative proposals.
    (2) Initial program implementation.
    (3) Major changes in ongoing programs.
    (4) Major environmental concerns with ongoing programs.
    (c) Initial NEPA involvement in program categories in paragraph (b) 
of this section shall begin at the time FSA begins developing proposed 
legislation, begins the planning stage for implementing a new or changed 
program or receives notice that an ongoing program may have a 
significant adverse impact on the quality of the human environment. 
Where a legislative EIS or environmental assessment is part of the 
formal transmittal of a legislative program proposal to Congress, such 
legislative EIS or assessment may negate the need for the subsequent 
preparation of a program impact statement when FSA implements the 
resulting program. The decision whether such additional statement is 
needed will be made by an interdisciplinary team. The NEPA process on 
legislative proposals and FSA programs is carried out at the national 
level.
    (d) Individual farm participation in FSA programs will normally not 
require any major involvement with the NEPA process. The practices 
carried out under FSA programs that might have impacts on the quality of 
the human environment will normally have been discussed in environmental 
assessments or impact statements on the applicable programs. However, 
for those practices that might significantly affect the quality of the 
human environment, the county committee

[[Page 253]]

shall make an environmental evaluation before approval. If the 
environmental evaluation shows that the implementation of a proposed FSA 
practice on an individual farm will have significant adverse affects on 
the quality of the human environment, the county committee will not 
approve the practice implementation until after the completion of the 
NEPA-EIS process in accordance with this part. For those actions for 
which technical assistance is provided by an agency other than FSA, and 
such technical agency is required by its regulations to implement NEPA 
requirements when providing such assistance, the county committee shall 
use the environmental determination and considerations of such agency 
instead of duplicating the NEPA-EIS process. Individual farm 
participation in acreage set-aside, acreage allotments, price support 
and loans and other similar or related programs will not significantly 
affect the quality of the human environment.
    (e) Pooling agreements and special projects carried out under 
several FSA programs involving two or more farmers in a local geographic 
area will not normally require any major involvement with the NEPA 
process. However, the county committee shall, with the assistance of a 
local interdisciplinary team, as necessary, make an environmental 
evaluation of proposed pooling agreements or special projects that have 
a potential for significantly affecting the quality of the human 
environment. The NEPA process shall begin with the initial involvement 
of FSA personnel in the planning or development of pooling agreements or 
special projects. If it is determined from an environmental evaluation 
that the implementation of a proposed pooling agreement or a proposed 
special project will have a significant adverse impact on the quality of 
the human environment, the completion of the NEPA-EIS process in 
accordance with these regulations will be necessary before approval. For 
those actions for which technical assistance is provided by an agency 
other than FSA and such technical agency is required by its regulations 
to implement NEPA when providing such assistance the county committee 
shall use the environmental determinations and considerations of such 
agency instead of duplicating the NEPA-EIS process.



Sec. 799.10  Criteria and identification of FSA actions as to degree of 
involvement under the NEPA process.

    (a) FSA will for each of its legislative proposals, initial program 
implementations, program changes or any actions under its ongoing 
programs make a determination by the use of an environmental evaluation 
as to whether or not an environmental assessment or EIS is required.
    (b) The NEPA regulations issued by CEQ at 40 CFR 1507.3(b)(2) in 
conjunction with the regulations at 40 CFR 1508.4 require agencies to 
determine those typical classes of actions for treatment under NEPA. The 
typical classes of FSA actions for treatment under NEPA are set forth as 
follows:
    (1) Actions normally requiring an EIS are:
    (i) Production adjustment programs to balance supply and demand of 
specified commodities, through cropland set-aside or other acreage 
diversion.
    (ii) Agricultural Conservation Program.
    (iii) Rural Clean Water Program.
    (iv) Other major actions that are determined after an environmental 
evaluation and/or an environmental assessment to significantly affect 
the quality of the human environment.
    (2) Actions normally not requiring an assessment or an EIS are:
    (i) Individual farm participation in FSA programs.
    (ii) Pooling agreements and special projects under FSA programs.
    (iii) Production adjustment programs for tobacco, peanuts and extra 
long staple cotton.
    (iv) Emergency Conservation Program.
    (v) Water Bank Program.
    (vi) Forestry Incentives Program.
    (vii) Sugar Program.
    (viii) Wool and Mohair Incentives Program.
    (ix) Bee and Dairy Indemnity Programs.
    (x) Commodity Income and Support and Disaster Protection Programs.
    (xi) Facility Loan Program.
    (xii) Grain Reserve Program.
    (xiii) Livestock Feed Program.

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    (xiv) Naval Stores Program.
    (xv) Indian Acute Distress Donation Program.
    (xvi) Other major actions that are determined after an environmental 
evaluation not to significantly affect the quality of the human 
environment.
    (c) FSA will independently determine by an environmental evaluation 
whether an environmental assessment or an EIS is required on actions 
included in paragraph (b) of this section where the presence of 
extraordinary circumstances or other unforseeable factors indicate that 
some other level of environmental review may be appropriate.
    (d) If an environmental evaluation indicates that an action will 
significantly affect the quality of the human environment, the 
preparation of an environmental assessment and/or an EIS will be 
necessary before the action is carried out.



Sec. 799.11  Expedited procedures.

    Where emergency circumstances make it necessary to take action with 
significant environmental impact without following the provisions of the 
NEPA regulations issued by CEQ, USDA, and FSA, FSA will, by working 
through the USDA Office of Environmental Quality, consult with CEQ and/
or EPA about alternative arrangements (7 CFR 3100.35).



Sec. 799.12  Program termination.

    An environmental assessment or an EIS will not be needed when a 
program or part of a program is discontinued because of a mandatory 
legislative requirement where the enabling legislation for such program 
does not provide authority to ameliorate or mitigate any resulting 
environmental effects on the quality of the human environment.



Sec. 799.13  Environmental information.

    Interested persons may contact the Conservation and Environmental 
Protection Division, FSA, for information regarding FSA compliance with 
NEPA.

[[Page 255]]

           Appendix 1 to Part 799--Organization Chart FSA-USDA
[GRAPHIC] [TIFF OMITTED] TC19SE91.000


[[Page 256]]



                  Appendix 2 to Part 799--Form FSA-929
[GRAPHIC] [TIFF OMITTED] TC19SE91.001


[[Page 257]]



  CHAPTER VIII--GRAIN INSPECTION, PACKERS AND STOCKYARD ADMINISTRATION 
      (FEDERAL GRAIN INSPECTION SERVICE), DEPARTMENT OF AGRICULTURE




  --------------------------------------------------------------------
Part                                                                Page
800             General regulations.........................         259
801             Official performance requirements for grain 
                    inspection equipment....................         337
802             Official performance and procedural 
                    requirements for grain weighing 
                    equipment and related grain handling 
                    systems.................................         342
810             Official United States standards for grain..         343
868             General regulations and standards for 
                    certain agricultural commodities........         369

[[Page 259]]



PART 800_GENERAL REGULATIONS--Table of Contents




                               Definitions

Sec.
800.0 Meaning of terms.

                             Administration

800.1 Mission.
800.2 Administrator.
800.3 Nondiscrimination--policy and provisions.
800.4 Procedures for establishing regulations, official standards, and 
          official criteria.
800.5 Complaints and reports of alleged violations.
800.6 Provisions for hearings.
800.7 Information about the Service, Act, and regulations.
800.8 Public information.

    Official Inspection and Class X or Class Y Weighing Requirements

800.15 Services.
800.16 Certification requirements for export grain.
800.17 Special inspection and weighing requirements for sacked export 
          grain.
800.18 Waivers of the official inspection and Class X weighing 
          requirements.

                 Recordkeeping and Access to Facilities

800.25 Required elevator and merchandising records.
800.26 Access to records and facilities.

                              Registration

800.30 Foreign commerce grain business.
800.31 Who must register.
800.32 When to register.
800.33 How to register.
800.34 Registration fee.
800.35 Review of applications.
800.36 Certificates of registration.
800.37 Notice of change in information.
800.38 Termination and renewal of registration.
800.39 Suspension or revocation of registration for cause.

        Conditions for Obtaining or Withholding Official Services

800.45 Availability of official services.
800.46 Requirements for obtaining official services.
800.47 Withdrawal of request for official services.
800.48 Dismissal of request for official services.
800.49 Conditional withholding of official services.
800.50 Refusal of official services and civil penalties.
800.51 Expenses of agency, field office, or Board of Appeals and Review.
800.52 Official services not to be denied.

                              Descriptions

800.55 Descriptions by grade.
800.56 Requirements on descriptions.

                        Grain Handling Practices

800.60 Deceptive actions and practices.
800.61 Prohibited grain handling practices.

                                  Fees

800.70 Fees for official services performed by agencies.
800.71 Fees assessed by the Service.
800.72 Explanation of additional service fees for services performed in 
          the United States only.
800.73 Computation and payment of service fees; general fee information.

                       Kinds of Official Services

800.75 Kinds of official inspection and weighing services.
800.76 Prohibited services; restricted services.

                    Inspection Methods and Procedures

800.80 Methods and order of performing official inspection services.
800.81 Sample requirements; general.
800.82 Sampling provisions by level of service.
800.83 Sampling provisions by kind of movement.
800.84 Inspection of grain in land carriers, containers, and barges in 
          single lots.
800.85 Inspection of grain in combined lots.
800.86 Inspection of shiplot, unit train, and lash barge grain in single 
          lots.
800.87 New inspections.
800.88 Loss of identity.

                   Weighing Provisions and Procedures

800.95 Methods and order of performing weighing services.
800.96 Weighing procedures.
800.97 Weighing grain in containers, land carriers, barges, and 
          shiplots.
800.98 Weighing grain in combined lots.
800.99 Checkweighing sacked grain.

                            Original Services

800.115 Who may request original services.
800.116 How to request original services.
800.117 Who shall perform original services.
800.118 Certification.

     Official Reinspection Services and Review of Weighing Services

800.125 Who may request reinspection services or review of weighing 
          services.
800.126 How to request reinspection or review of weighing services.
800.127 Who shall perform reinspection or review of weighing services.

[[Page 260]]

800.128 Conflicts of interest.
800.129 Certificating reinspection and review of weighing results.

                       Appeal Inspection Services

800.135 Who may request appeal inspection services.
800.136 How to request appeal inspection services.
800.137 Who shall perform appeal inspection services.
800.138 Conflict of interest.
800.139 Certificating appeal inspections.

                  Official Records and Forms (General)

800.145 Maintenance and retention of records--general requirements.
800.146 Maintenance and retention of records issued by the Service under 
          the Act.
800.147 Maintenance and retention of records on delegations, 
          designations, contracts, and approval of scale testing 
          organizations.
800.148 Maintenance and retention of records on organization, staffing, 
          and budget.
800.149 Maintenance and retention of records on licenses and approvals.
800.150 Maintenance and retention of records on fee schedules.
800.151 Maintenance and retention of records on space and equipment.
800.152 Maintenance and retention of file samples.
800.153 Maintenance and retention of records on official inspection, 
          Class X or Class Y weighing, and equipment testing service.
800.154 Availability of official records.
800.155 Detailed work records--general requirements.
800.156 Official inspection records.
800.157 Official weighing records.
800.158 Equipment testing work records.
800.159 Related official records.

                          Official Certificates

800.160 Official certificates; issuance and distribution.
800.161 Official certificate requirements.
800.162 Certification of grade; special requirements.
800.163 Divided-lot certificates.
800.164 Duplicate certificates.
800.165 Corrected certificates.
800.166 Reproducing certificates.

           Licenses and Authorizations (For Individuals Only)

800.170 When a license or authorization or approval is required.
800.171 Who may be licensed or authorized.
800.172 Applications for licenses.
800.173 Examinations and reexaminations.
800.174 Issuance and possession of licenses and authorizations.
800.175 Termination of licenses.
800.176 Voluntary cancellation or suspension of licenses.
800.177 Automatic suspension of license by change in employment.
800.178 Summary revocation of licenses.
800.179 Refusal of renewal, suspension, or revocation of licenses for 
          cause.
800.180 Summary cancellation of licenses.

         Duties and Conduct of Licensed and Authorized Personnel

800.185 Duties of official personnel and warehouse samplers.
800.186 Standards of conduct.
800.187 Conflicts of interest.
800.188 Crop year, variety, and origin statements.
800.189 Corrective actions for violations.

   Delegations, Designations, Approvals, Contracts, and Conflicts of 
                                Interest

800.195 Delegations.
800.196 Designations.
800.197 Approval as a scale testing and certification organization.
800.198 Contracts.
800.199 Conflict-of-interest provisions.

             Supervision, Monitoring, and Equipment Testing

800.215 Activities that shall be supervised.
800.216 Activities that shall be monitored.
800.217 Equipment that shall be tested.
800.218 Review of rejection or disapproval of equipment.
800.219 Conditional approval on use of equipment.

    Authority: Pub. L. 94-582, 90 Stat. 2867, as amended, (7 U.S.C. 71 
et seq.).

    Source: 45 FR 15810, Mar. 11, 1980, unless otherwise noted.

                               Definitions



Sec. 800.0  Meaning of terms.

    (a) Construction. Words used in the singular form shall be 
considered to imply the plural and vice versa, as appropriate. When a 
section; e.g., Sec. 800.2, is cited, it refers to the indicated section 
in these regulations.
    (b) Definitions. For the purpose of these regulations, unless the 
context requires otherwise, the following terms shall have the meanings 
given for them below. The terms defined in the Act have been 
incorporated herein for easy reference.

[[Page 261]]

    (1) Act. The United States Grain Standards Act, as amended (39 Stat. 
482-485, as amended 7 U.S.C. 71 et seq.).
    (2) Additives. Materials approved by the Food and Drug 
Administration or the Environmental Protection Agency and added to grain 
for purposes of insect and fungi control, dust suppression, or 
identification.
    (3) Administrator. The Administrator of the Grain Inspection, 
Packers and Stockyards Administration or any person to whom authority 
has been delegated.
    (4) Agency. A delegated State or an official agency designated by 
the Administrator, as appropriate.
    (5) Appeal inspection service. An official review by a field office 
of the results of an original inspection service or a reinspection 
service.
    (6) Applicant. An interested person who requests an official 
inspection or a Class X or Class Y weighing service.
    (7) Approved scale testing organization. A State or local 
governmental agency, or person, approved by the Service to perform 
official equipment testing services with respect to weighing equipment.
    (8) Approved weigher. A person employed by or at an approved 
weighing facility and approved by the Service to physically perform 
Class X or Class Y weighing services, and certify the results of Class Y 
weighing.
    (9) Approved weighing equipment. Any weighing device or related 
equipment approved by the Service for the performance of Class X or 
Class Y weighing services.
    (10) Approved weighing facility. An elevator that is approved by the 
Service to receive Class X or Class Y weighing services.
    (11) Assigned area of responsibility. A geographical area assigned 
to an agency or to a field office for the performance of official 
inspection or Class X or Class Y weighing services.
    (12) Board appeal inspection service. An official review by the 
Board of Appeals and Review of the results on an appeal inspection 
service.
    (13) Board of Appeals and Review. The Board of Appeals and Review of 
the Service.
    (14) Business day. The established field office working hours, any 
Monday through Friday that is not a holiday, or the working hours and 
days established by an agency.
    (15) Cargo shipment. Bulk or sacked grain that is loaded directly 
aboard waterborne carrier for shipment. Grain loaded aboard a land 
carrier for shipment aboard a waterborne carrier shall not be considered 
to be a cargo shipment.
    (16) Carrier. A truck, trailer, truck/trailer(s) combination, 
railroad car, barge, ship, or other container used to transport bulk or 
sacked grain.
    (17) Chapter. Chapter VIII of the Code of Federal Regulations (7 CFR 
chapter VIII).
    (18) Circuit. A geographical area assigned to a field office.
    (19) Class X or Class Y weighing equipment testing. Any operation or 
procedure performed by official personnel to determine the accuracy of 
the equipment used, or to be used, in the performance of Class X or 
Class Y weighing services.
    (20) Combined lot. Grain loaded aboard, or being loaded aboard, or 
discharged from two or more carriers as one lot.
    (21) Compliance. Conformance with all requirements and procedures 
established by statute, regulation, instruction, or directive so that 
managerial, administrative, and technical functions are accomplished 
effectively. Compliance functions include: evaluating alleged 
violations, initiating preliminary investigations; initiating 
implementation of all necessary corrective actions; conducting 
management and technical reviews; administering the designation of 
agencies and the delegation of State agencies to perform official 
functions; identifying and, where appropriate, waiving and monitoring 
conflicts of interest; licensing agency personnel; responding to audits 
of FGIS programs; and reviewing and, when appropriate, approving agency 
fee schedules.
    (22) Container. A carrier, or a bin, other storage space, bag, box, 
or other receptacle for grain.
    (23) Contract grade. The official grade, official factors, or 
official criteria specified in a contract for sale or confirmation of 
sale; or in the absence of a contract the official grade, official 
factors,

[[Page 262]]

or official criteria specified by the applicant for official service.
    (24) Contract service. An inspection or weighing service performed 
under a contract between an applicant and the Service.
    (25) Contractor. A person who enters into a contract with the 
Service for the performance of specified official inspection or official 
monitoring services.
    (26) Date of official inspection service or Class X or Class Y 
weighing services. The day on which an official inspection, or a Class X 
or Class Y weighing service is completed. For certification purposes, a 
day shall be considered to end at midnight, local time.
    (27) Deceptive loading, handling, weighing, or sampling. Any manner 
of loading, handling, weighing, or sampling that knowingly deceives or 
attempts to deceive official personnel.
    (28) Delegated State. A State agency delegated authority under the 
Act to provide official inspection service, or Class X or Class Y 
weighing services, or both, at one or more export port locations in the 
State.
    (29) Department of Agriculture and Department. The United States 
Department of Agriculture (USDA).
    (30) Designated agency. A State or local governmental agency, or 
person, designated under the Act to provide either official inspection 
service, or Class X or Class Y weighing services, or both, at locations 
other than export port locations.
    (31) Door-probe sample. A sample taken with a probe from a lot of 
bulk grain that is loaded so close to the top of the carrier that it is 
possible to insert the probe in the grain only in the vicinity of the 
tailgate of the truck or trailer, the door of the railroad boxcar, or in 
a similarly restricted opening or area in the carrier in which the grain 
is located or is loaded in hopper cars or barges in such a manner that a 
representative sample cannot be obtained.
    (32) Elevator. Any warehouse, storage, or handling facility used 
primarily for receiving, storing, or shipping grain. In a facility that 
is used primarily for receiving, storing, and shipping grain, all parts 
of the main facility, as well as annexes, shall be considered to be part 
of the elevator. A warehouse, storage, and handling facility that is 
located adjacent to and is operated primarily as an adjunct of a grain 
processing facility shall not be considered to be an elevator.
    (33) Elevator areas and facilities. All operational areas, including 
the automated data processing facilities that are an integral part of 
the inspection or weighing operations of an elevator; the loading and 
unloading docks; the headhouse and control rooms; all storage areas, 
including the bins, the interstices, the bin floor, and the basement; 
and all handling facilities, including the belts, other conveyors, 
distributor scales, spouting, mechanical samplers, and electronic 
controls.
    (34) Employed. An individual is employed if the individual is 
actually employed or the employment is being withheld pending issuance 
of a license under the Act.
    (35) Exporter. Any person who ships or causes to be shipped any bulk 
or sacked grain in a final carrier or container in which the grain is 
transported from the United States to any place outside the United 
States.
    (36) Export elevator. Any grain elevator, warehouse, or other 
storage or handling facility in the United States (i) from which bulk or 
sacked export grain is loaded (A) aboard a carrier in which the grain is 
shipped from the United States to any place outside thereof, or (B) into 
a container for shipment to an export port location where the grain and 
the container will be loaded aboard a carrier in which it will be 
shipped from the United States to any place outside thereof; and (ii) 
which has been approved by the Service as a facility where Class X or 
Class Y weighing of grain may be obtained.
    (37) Export grain. Grain for shipment from the United States to any 
place outside thereof.
    (38) Export port location. A commonly recognized port of export in 
the United States or Canada, as determined by the Administrator, from 
which grain produced in the United States is shipped to any place 
outside the United States. Such locations include any coastal or border 
location or site in the United States which contains one or more export 
elevators, and is identified by the Service as an export port location.

[[Page 263]]

    (39) False, incorrect, and misleading. Respectively false, 
incorrect, and misleading in any particular. \2\
---------------------------------------------------------------------------

    \1\ [Reserved]
    \2\ A definition taken from the U.S. Grain Standards Act, as 
amended, with certain modifications which do not change the meanings.
---------------------------------------------------------------------------

    (40) Federal Register. An official U.S. Government publication 
issued under the Federal Register Act of July 26, 1935, as amended (44 
U.S.C. 301 et seq.).
    (41) Field Office. An office of the Service designated to perform or 
supervise official inspection services and Class X and Class Y weighing 
services.
    (42) Grain. Corn, wheat, rye, oats, barley, flaxseed, sorghum, 
soybeans, triticale, mixed grain, sunflower seed, canola, and any other 
food grains, feed grains, and oilseeds for which standards are 
established under section 4 of the Act.
    (43) Handling. Loading, unloading, elevating, storing, binning, 
mixing, blending, drying, aerating, screening, cleaning, washing, 
treating, or fumigating grain.
    (44) High Quality Specialty Grain. Grain sold under contract terms 
that specify quality better than the grade limits for U.S. No. 1 grain, 
or specify ``organic'' as defined by 7 CFR Part 205. This definition 
expires July 31, 2010.
    (45) Holiday. The legal public holidays specified in paragraph (a)of 
section 6103, Title 5, of the United States Code (5 U.S.C. 6103(a))and 
any other day declared to be a holiday by Federal statute orExecutive 
Order. Under section 610 and Executive Order No. 10357, asamended, if 
the specified legal public holiday falls on a Saturday, thepreceding 
Friday shall be considered to be the holiday, or if thespecified legal 
public holiday falls on a Sunday, the following Mondayshall be 
considered to be the holiday.
    (46) ``IN'' movement. A movement of grain into an elevator, or into 
or through a city, town, port, or other location without a loss of 
identity.
    (47) Instructions. The Notices, Instructions, Handbooks, and other 
directives issued by the Service.
    (48) Interested person. Any person having a contract or other 
financial interest in grain as the owner, seller, purchaser, 
warehouseman, or carrier, or otherwise.
    (49) Interstate or foreign commerce. Commerce from any State to or 
through any other State, or to or through any foreign country.
    (50) Licensee. Any person licensed by the Service.
    (51) Loading. Placing grain in or aboard any carrier or container.
    (52) ``LOCAL'' movement. A bin run or other inhouse movement, or 
grain in bins, tanks, or similar containers which are not in transit or 
designed to transport grain
    (53) [Reserved]
    (54) Lot. A specific quantity of grain identified as such.
    (55) Material error. An error in the results of an official 
inspection service that exceeds the official tolerance, or any error in 
the results of a Class X or Class Y weighing service
    (56) Material portion. A subsample, component, or sublot which is 
determined to be inferior to the contract or declared grade. A subsample 
is a material portion when it has sour, musty, or commercially 
objectionable foreign odors, when it is heating; or when it is of 
distinctly low quality. A component is a material portion when it is 
infested or when it is determined to be inferior in quality by more than 
one numerical grade to the contract or declared grade. A sublot is a 
material portion when a factor result causes a breakpoint to be exceeded 
or when a factor result exceeds specific sublot contract requirements. A 
sublot designated a material portion shall include only one sublot.
    (57) Merchandiser. Any person, other than a producer, who buys and 
sells grain and takes title to the grain. A person who operates as a 
broker or commission agent and does not take title to the grain shall 
not be considered to be a merchandiser.
    (58) Monitoring. Observing or reviewing activities performed under 
or subject to the Act for adherence to the Act, the regulations, 
standards, and instructions and preparing reports thereon.
    (59) Nonregular workday. Any Sunday or holiday.

[[Page 264]]

    (60) Official agency. Any State or local government agency, or any 
person, designated by the Administrator pursuant to subsection (f) of 
section 7 of the Act for the conduct of official inspection (other than 
appeal inspection), or subsection (c) of section 7A of the Act for the 
conduct of Class X or Class Y weighing (other than review of weighing).
    (61) Official certificate. Those certificates which show the results 
of official services performed under the Act as provided in the 
instructions, and any other official certificates which may be approved 
by the Service in accordance with the instructions.
    (62) Official criteria. A quantified physical or chemical property 
of grain that is approved by the Service to determine the quality or 
condition of grain or other facts relating to grain.
    (63) Official factor. A quantified physical or chemical property of 
grain as identified in the Official U.S. Standards for Grain.
    (64) Official forms. License, authorizations, and approvals; 
official certificates; official pan tickets; official inspection or 
weighing logs; weight sheets; shipping bin weight loading logs; official 
equipment testing reports; official certificates of registration; and 
any other forms which may be issued or approved by the Service that show 
the name of the Service or an agency and a form number.
    (65) Official grade designation. A numerical or sample grade 
designation, specified in the standards relating to kind, class, 
quality, and condition of grain provided for in the Act.
    (66) Official inspection. The determination (by original inspection, 
and when requested, reinspection and appeal inspection) and the 
certification, by official personnel, of the kind, class, quality, or 
condition of grain, under standards provided for in the Act; or the 
condition of vessels and other carriers or receptacles for the 
transportation of grain insofar as it may affect the quality of such 
grain; or other facts relating to grain under other criteria approved by 
the Administrator (the term ``officially inspected'' shall be construed 
accordingly).
    (67) Official inspection equipment testing. Any operation or 
procedure by official personnel to determine the accuracy of equipment 
used, or to be used, in the performance of official inspection services.
    (68) Official inspection technician. Any official personnel who 
perform or supervise the performance of specified official inspection 
services and certify the results thereof, other than certifying the 
grade of the grain.
    (69) Official inspector. Any official personnel who perform or 
supervise the performance of official inspection services and certify 
the results thereof including the grade of the grain.
    (70) Official marks. The symbols or terms ``official certificate,'' 
``official grade,'' ``officially sampled,'' ``officially inspected,'' 
``official inspection,'' ``U.S. inspected,'' ``loaded under continuous 
official inspection,'' ``official weighing,'' ``officially weighed,'' 
``official weight,'' ``official supervision of weighing,'' ``supervision 
of weighing,'' ``officially supervised weight,'' ``loaded under 
continiuous official weighing,'' ``loaded under continuous official 
inspection and weighing,'' ``officially tested,'' ``Class X weight,'' 
``official Class X weighing,'' ``Class X weighing,'' ``official Class Y 
weighing,'' ``Class Y weighing,'' and ``Class Y weight.''
    (71) Official personnel. Persons licensed or otherwise authorized by 
the Administrator pursuant to Section 8 of the Act to perform all or 
specified functions involved in official inspection, Class X or Class Y 
weighing, or in the supervision of official inspection, or Class X or 
Class Y weighing.
    (72) Official sample. A sample obtained from a lot of grain by, and 
submitted for official inspection by, official personnel (the term 
``official sampling'' shall be construed accordingly).
    (73) Official sampler. Any official personnel who perform or 
supervise the performance of official sampling services and certify the 
results thereof.
    (74) Official stowage examination. Any examining operation or 
procedure performed by official personnel to determine the suitability 
of a carrier or container to receive or store grain.
    (75) Official tolerance. A statistical allowance prescribed by the 
Service, on the basis of expected variation, for use

[[Page 265]]

in performing or supervising the performance of official inspection 
services, official equipment testing services, and, when determined 
under an established loading plan, reinspection services and appeal 
inspection services.
    (76) Official U.S. Standards for Grain. The Official U.S. Standards 
for Grain established under the Act describe the physical and biological 
condition of grain at the time of inspection.
    (77) Official weigher. Any official personnel who perform or 
supervise the performance of Class X or Class Y weighing services and 
certify the results thereof, including the weight of the grain.
    (78) Official weighing. (Referred to as Class X weighing.) The 
determination and certification by official personnel of the quantity of 
a lot of grain under standards provided for in the Act, based on the 
actual performance of weighing or the physical supervision thereof, 
including the physical inspection and testing for accuracy of the 
weights and scales and the physical inspection of the premises at which 
weighing is performed and the monitoring of the discharge of grain into 
the elevator or conveyance. (The terms ``officially weigh'' and 
``officially weighed'' shall be construed accordingly.)
    (79) Official weighing technician. Any personnel who perform or 
supervise specified weighing services and certify the results thereof 
other than certifying the weight of grain.
    (80) Official weight sample. Sacks of grain obtained at random by, 
or under the complete supervision of, official personnel from a lot of 
sacked grain for the purpose of computing the weight of the grain in the 
lot.
    (81) Original inspection. An initial official inspection of grain.
    (82) ``Out'' movement. A movement of grain out of an elevator or out 
of a city, town, port, or other location.
    (83) Person. Any individual, partnership, corporation, association, 
or other business entity.
    (84) Quantity. Pounds or kilograms, tons or metric tons, or bushels.
    (85) Reasonably continuous operation. A loading or unloading 
operation in one specific location which does not include inactive 
intervals in excess of 88 consecutive hours.
    (86) Regular workday. Any Monday, Tuesday, Wednesday, Thursday, 
Friday, or Saturday that is not a holiday.
    (87) Regulations. The regulations in parts 800, 801, and 802 of this 
chapter.
    (88) Reinspection service. An official review of the results of an 
original inspection service by the agency or field office that performed 
the original inspection service.
    (89) Respondent. The party proceeded against.
    (90) Review of weighing service. An official review of the results 
of a Class X or Class Y weighing service.
    (91) Secretary. The Secretary of Agriculture of the United States or 
any person to whom authority has been delegated.
    (92) Service. The Federal Grain Inspection Service of the Grain 
Inspection, Packers and Stockyards Administration of the United States 
Department of Agriculture.
    (93) Service representative. An authorized salaried employee of the 
Service; or a person licensed by the Administrator under a contract with 
the Service.
    (94) Shallow-probe sample. A sample taken with a probe from a lot of 
bulk grain that is loaded so close to the top of the carrier that it is 
possible to insert the probe in the grain at the prescribed locations, 
but only at an angle greater or more obtuse from the vertical than the 
angle prescribed in the instructions.
    (95) Ship. The verb ``ship'' with respect to grain means transfer 
physical possession of the grain to another person for the purpose of 
transportation by any means of conveyance, or transport one's own grain 
by any means of conveyance.
    (96) Shiplot grain. Grain loaded aboard, or being loaded aboard, or 
discharged from an ocean-going vessel including a barge, lake vessel, or 
other vessel of similar capacity.
    (97) Shipper's Export Declaration. The Shipper's Export Declaration 
certificate filed with the U.S. Department of Commerce, Bureau of 
Census.
    (98) Specified service point. A city, town, or other location 
specified by an agency for the performance of official

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inspection or Class X or Class Y weighing services and within which the 
agency or one or more of its inspectors or weighers is located.
    (99) Standardization. The act, process, or result of standardizing 
methodology and measurement of quality and quantity. Standardization 
functions include: compiling and evaluating data to develop and to 
update grading and weighing standards, developing or evaluating new 
methodology for determining grain quality and quantity, providing 
reference standards for official grading methods, and reviewing official 
results through the use of a quality control and weight monitoring 
program.
    (100) State. Any one of the States (including Puerto Rico) or 
territories or possessions of the United States (including the District 
of Columbia).
    (101) Submitted sample. A sample submitted by or for an interested 
person for official inspection, other than an official sample.
    (102) Supervision. The effective guidance of agencies, official 
personnel and others who perform activities under the Act, so as to 
reasonably assure the integrity and accuracy of the program activities. 
Supervision includes overseeing, directing, and coordinating the 
performance of activities under the Act, reviewing the performance of 
these activities; and effecting appropriate action. FGIS supervisory 
personnel supervise agencies, official personnel and others who perform 
activities under the Act. Agency supervisors are responsible for the 
direct supervision of their own official personnel and employees. FGIS 
provides oversight, gui