[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2008 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

          7


          Parts 700 to 899

                         Revised as of January 1, 2008


          Agriculture
          



________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2008
          With Ancillaries
                    Published by:
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

[[Page ii]]

          U.S. GOVERNMENT OFFICIAL EDITION NOTICE

          Legal Status and Use of Seals and Logos
          
          
          The seal of the National Archives and Records Administration 
              (NARA) authenticates the Code of Federal Regulations (CFR) as 
              the official codification of Federal regulations established 
              under the Federal Register Act. Under the provisions of 44 
              U.S.C. 1507, the contents of the CFR, a special edition of the 
              Federal Register, shall be judicially noticed. The CFR is 
              prima facie evidence of the original documents published in 
              the Federal Register (44 U.S.C. 1510).

          It is prohibited to use NARA's official seal and the stylized Code 
              of Federal Regulations logo on any republication of this 
              material without the express, written permission of the 
              Archivist of the United States or the Archivist's designee. 
              Any person using NARA's official seals and logos in a manner 
              inconsistent with the provisions of 36 CFR part 1200 is 
              subject to the penalties specified in 18 U.S.C. 506, 701, and 
              1017.

          Use of ISBN Prefix

          This is the Official U.S. Government edition of this publication 
              and is herein identified to certify its authenticity. Use of 
              the 0-16 ISBN prefix is for U.S. Government Printing Office 
              Official Editions only. The Superintendent of Documents of the 
              U.S. Government Printing Office requests that any reprinted 
              edition clearly be labeled as a copy of the authentic work 
              with a new ISBN.

              
              
          U . S . G O V E R N M E N T P R I N T I N G O F F I C E

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

          U.S. Superintendent of Documents  Washington, DC 
              20402-0001

          http://bookstore.gpo.gov

          Phone: toll-free (866) 512-1800; DC area (202) 512-1800

[[Page iii]]




                            Table of Contents



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

  Title 7:
    Subtitle B--Regulations of the Department of Agriculture 
      (Continued)
          Chapter VII--Farm Service Agency, Department of 
          Agriculture                                                5
          Chapter VIII--Grain Inspection, Packers and 
          Stockyard Administration (Federal Grain Inspection 
          Service), Department of Agriculture                      333
  Finding Aids:
      Material Approved for Incorporation by Reference........     495
      Table of CFR Titles and Chapters........................     497
      Alphabetical List of Agencies Appearing in the CFR......     515
      List of CFR Sections Affected...........................     525

[[Page iv]]





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

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 7 CFR 701.1 refers 
                       to title 7, part 701, 
                       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 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, January 1, 2008), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

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 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

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 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 1986, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, or 1973-1985, published in seven separate volumes. For 
the period beginning January 1, 1986, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume.

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 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
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 
the material is not available, please notify the Director of the Federal 
Register, National Archives and Records Administration, Washington DC 
20408, or call 202-741-6010.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Statutory 
Authorities and Agency Rules (Table I). A list of CFR titles, chapters, 
and parts and an alphabetical list of agencies publishing in the CFR are 
also included in this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
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

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-741-6000 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, Washington, DC 20408 or e-mail 
fedreg.info@nara.gov.

SALES

    The Government Printing Office (GPO) processes all sales and 
distribution of the CFR. For payment by credit card, call toll-free, 
866-512-1800, or DC area, 202-512-1800, M-F 8 a.m. to 4 p.m. e.s.t. or 
fax your order to 202-512-2250, 24 hours a day. For payment by check, 
write to: US Government Printing Office - New Orders, P.O. Box 979050, 
St. Louis, MO 63197-9000. For GPO Customer Service call 202-512-1803.

ELECTRONIC SERVICES

    The full text of the Code of Federal Regulations, the LSA (List of 
CFR Sections Affected), The United States Government Manual, the Federal 
Register, Public Laws, Public Papers, Weekly Compilation of Presidential 
Documents and the Privacy Act Compilation are available in electronic 
format at www.gpoaccess.gov/nara (``GPO Access''). For more information, 
contact Electronic Information Dissemination Services, U.S. Government 
Printing Office. Phone 202-512-1530, or 888-293-6498 (toll-free). E-
mail, gpoaccess@gpo.gov.
    The Office of the Federal Register also offers a free service on the 
National Archives and Records Administration's (NARA) World Wide Web 
site for public law numbers, Federal Register finding aids, and related 
information. Connect to NARA's web site at www.archives.gov/federal-
register. The NARA site also contains links to GPO Access.

    Raymond A. Mosley,
    Director,
    Office of the Federal Register.
    January 1, 2008.







[[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, 2008.

    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 
Michael L. White, assisted by Ann Worley.

[[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
701             Emergency Conservation Program and certain 
                    related programs previously administered 
                    under this part.........................           7
707             Payments due persons who have died, 
                    disappeared, or have been declared 
                    incompetent.............................          17
708             Record retention requirements--all programs.          19
SUBCHAPTER B--FARM MARKETING QUOTAS, ACREAGE ALLOTMENTS, AND PRODUCTION 
                               ADJUSTMENT
714             Refunds of penalties erroneously, illegally, 
                    or wrongfully collected.................          20
718             Provisions applicable to multiple programs..          22
                SUBCHAPTER C--REGULATIONS FOR WAREHOUSES
735             Regulations for the United States Warehouse 
                    Act.....................................          45
743

[Reserved]

                     SUBCHAPTER D--SPECIAL PROGRAMS
750             Soil Bank [Note]............................          59
760             Indemnity payment programs..................          59
761             General program administration..............         108
762             Guaranteed farm loans.......................         129
763

[Reserved]

764             Direct loan making..........................         165
765             Direct loan servicing--regular..............         185
766             Direct loan servicing--special..............         198
767             Inventory property management...............         249
768--769

[Reserved]

770             Indian tribal land aquisition loans.........         255
771             Boll Weevil Era Dication Loan Program.......         259
772             Servicing minor program loans...............         262

[[Page 6]]

773             Special Apple Loan Program..................         267
774             Emergency Loan for Seed Producers Program...         271
780             Appeal regulations..........................         274
781             Disclosure of foreign investment in 
                    agricultural land.......................         281
782             End-Use Certificate Program.................         288
783             Tree Assistance Program.....................         293
784             2004 ewe lamb replacement and retention 
                    payment program.........................         297
785             Certified state mediation program...........         301
        SUBCHAPTER E--PROVISIONS COMMON TO MORE THAN ONE PROGRAM
792             Debt settlement policies and procedures.....         308
795             Payment limitation..........................         317
                      SUBCHAPTER F--PUBLIC RECORDS
798             Availability of information to the public...         324
                 SUBCHAPTER G--ENVIRONMENTAL PROTECTION
799             Environmental quality and related 
                    environmental concerns--compliance with 
                    the National Environmental Policy Act...         326

[[Page 7]]



             SUBCHAPTER A_AGRICULTURAL CONSERVATION PROGRAM





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]
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 Average adjusted gross income limitation.
701.18-701.20 [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.
701.50 2005 hurricanes.
701.51 Definitions.
701.52 Availability of funding.
701.53 Debris removal and water for livestock.
701.54 Oysters.
701.55 Nursery.
701.56 Poultry.
701.57 Private non-industrial forest land.

    Authority: Pub. L. 95-334, 92 Stat. 420, 16 U.S.C. 2201-2205; Pub. 
L. 109-148, Division B, sec. 101; and Pub. L. 110-28, secs. 9003-9004.

    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.

[[Page 8]]

    (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 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.

[[Page 9]]

    (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 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

[[Page 10]]

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 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, for the same or similar expenses.
    (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.

[69 FR 10302, Mar. 4, 2004, as amended at 71 FR 30265, May 26, 2006]



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

[[Page 11]]

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.
    (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.  701.17  Average adjusted gross income limitation.

    To be eligible for payments issued from the $16 million provided 
under the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and 
Iraq Accountability Appropriations Act, 2007 (Pub. L. 110-28, section 
9003), each applicant must meet the provisions of the Adjusted Gross 
Income Limitations at 7 CFR part 1400 subpart G.

[72 FR 45880, Aug. 16, 2007]



Sec. Sec.  701.18-701-20  [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.

[[Page 12]]

    (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 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.

[[Page 13]]



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 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

[[Page 14]]

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 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.

[[Page 15]]



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.



Sec.  701.50  2005 hurricanes.

    In addition benefits elsewhere allowed by this part, claims related 
to calendar year 2005 hurricane losses may be allowed to the extent 
provided for in Sec. Sec.  701.50 through 701.57. Such claims under 
those sections will be limited to losses in counties that were declared 
disaster counties by the President or the Secretary because of 2005 
hurricanes and to losses to oyster reefs. Claims under Sec. Sec.  701.51 
through 701.57 shall be subject to all normal ECP limitations and 
provisions except as explicitly provided in those sections.

[71 FR 30265, May 26, 2006]



Sec.  701.51  Definitions.

    The following definitions apply to Sec. Sec.  701.52 through 701.57:
    Above-ground irrigation facilities means irrigation pipes, 
sprinklers, pumps, emitters, and any other integral part of the above 
ground irrigation system.
    Barn means a structure used for the housing of animals or farm 
equipment.
    Commercial forest land means forest land with trees intended to be 
harvested for commercial purposes that has a productivity potential 
greater than or equal to 20 cubic feet per year of merchantable timber.
    Date of loss means the date the hurricane damage occurred in 
calendar year 2005.
    Eligible county means any county that was declared a disaster county 
by the President or the Secretary because of a calendar year 2005 
hurricane, that otherwise meets the eligibility requirements of this 
part.
    Forest management plan means a plan of action and direction on 
forest lands to achieve a set of results usually specified as goals or 
objectives consistent with program policies prepared or approved by a 
natural resource professional, such as a State forestry agency 
representative.
    Poultry house means a building used to house live poultry for the 
purpose of commercial food production.
    Private non-industrial forest land means rural commercial forest 
lands with existing tree cover, or which are suitable for growing trees, 
that are owned by a private non-industrial forest landowner as defined 
in this section.
    Private non-industrial forest landowner means, for purposes of the 
ECP for forestry, an individual, group, association, corporation, Indian 
tribe, or other legal private entity owning non-industrial private 
forest land or who receives concurrence from the landowner for making 
the claim in lieu of the owner, and for practice implementation and who 
holds a lease on the land for a minimum of 10 years. Owners or lessees 
principally engaged in the primary processing of raw wood products are 
excluded from this definition. Owners of land leased to lessees who 
would be excluded under the previous sentence are also excluded.
    Shade house means a metal or wood structure covered by a material 
used for shade purposes.

[71 FR 30265, May 26, 2006]



Sec.  701.52  Availability of funding.

    Payments under Sec. Sec.  701.53 through 701.57 are subject to the 
availability of funds under Public Law 109-149.

[71 FR 30265, May 26, 2006]



Sec.  701.53  Debris removal and water for livestock.

    Subject to the other eligibility provisions of this part, an ECP 
participant addressing damage in an eligible county from hurricanes 
during calendar year 2005 may be allowed up to 90 percent of the 
participant's actual cost or of the total allowable cost for cleaning up 
structures such as barns, shade

[[Page 16]]

houses and above-ground irrigation facilities, for removing poultry 
house debris, including carcasses, and for providing water for 
livestock.

[71 FR 30265, May 26, 2006]



Sec.  701.54  Oysters.

    (a) Notwithstanding Sec.  701.5(b), but otherwise subject to the 
other eligibility provisions of this part except as provided explicitly 
in this section, assistance may be made available under this section for 
the eligible cost of refurbishing public or private oyster reefs damaged 
in calendar year 2005 by a 2005 hurricane. Oyster bed refurbishing 
consists of removing mud from public and private oyster beds, staking 
out the leased areas, reestablishing the oyster beds using crushed 
limestone, recycled oyster shells, or other available and suitable 
approved cultch materials, reseeding the oyster beds, and related 
actions approved by FSA.
    (b) Notwithstanding Sec.  701.26, an ECP participant shall not 
receive more than 90 percent of the participant's actual cost or of the 
total allowable cost described in paragraph (a) of this section.
    (c) The provisions of Sec.  701.26(c) limiting ECP payments to 50 
percent of the agricultural value of the land do not apply to oyster bed 
rehabilitation and refurbishing.

[71 FR 30265, May 26, 2006]



Sec.  701.55  Nursery.

    (a) Subject to the other eligibility provisions of this part except 
as provided explicitly in this section, assistance may be made available 
in an eligible county under this section for the cost of removing 
nursery debris such as nursery structures, shade houses, and above 
ground irrigation facilities, where such debris was created in calendar 
year 2005 by a 2005 hurricane.
    (b) Notwithstanding Sec.  701.26, an otherwise eligible ECP 
participant may be allowed up to 90 percent of the participant's actual 
cost or of the total allowable cost for losses described in paragraph 
(a) of this section.

[71 FR 30265, May 26, 2006]



Sec.  701.56  Poultry.

    (a) Subject to the other eligibility provisions of this part except 
as provided explicitly in this section, assistance may be allowed under 
this section for uninsured losses in calendar year 2005 to a poultry 
house in an eligible county due to a 2005 hurricane.
    (b) Claimants under this section may be allowed an amount up to the 
lesser of:
    (1) The lesser of 50 percent of the participant's actual or the 
total allowable cost of the reconstruction or repair of a poultry house, 
or
    (2) $50,000 per poultry house.
    (c) The total amount of assistance provided under this section and 
any indemnities for losses to a poultry house paid to a poultry grower, 
may not exceed 90 percent of the total costs associated with the 
reconstruction or repair of a poultry house.
    (d) Poultry growers must provide information on insurance payments 
on their poultry houses. Copies of contracts between growers and poultry 
integrators may be required.
    (e) Assistance under this section is limited to amounts necessary 
for reconstruction and/or repair of a poultry house to the same size as 
before the hurricane.
    (f) Assistance is limited to poultry houses used to house poultry 
for commercial enterprises. A commercial poultry enterprise is one with 
a dedicated structure for poultry and a number of poultry that exceeds 
actual non-commercial uses of poultry and their products at all times, 
and from which poultry or related products are actually, and routinely, 
sold in commercial quantities for food, fiber, or eggs. Unless otherwise 
approved by FSA, a commercial quantity is a quantity per week that would 
normally exceed $100 in sales.
    (g) Poultry houses with respect to which claims are made under this 
section must be reconstructed or repaired to meet current building 
standards.

[71 FR 30265, May 26, 2006]



Sec.  701.57  Private non-industrial forest land.

    (a) Subject to the other eligibility provisions of this part except 
as provided explicitly in this section, assistance made available under 
this section with respect to private, non-industrial forest land in an 
eligible county for

[[Page 17]]

costs related to reforestations, rehabilitation, and related measures 
undertaken because of losses in calendar year 2005 caused by a 2005 
hurricane. To be eligible, a non-industrial private forest landowner 
must have suffered a loss of, or damage to, at least 35 percent of 
forest acres on commercial forest land of the forest landowner in a 
designated disaster county due to a 2005 hurricane or related condition. 
The 35 percent loss shall be determined based on the value of the land 
before and after the hurricane event.
    (b) During the 5-year period beginning on the date of the loss, the 
eligible private non-industrial forest landowner must:
    (1) Reforest the eligible damaged forest acres in accordance with a 
forest management plan approved by FSA that is appropriate for the 
forest type where the forest management plan is developed by a person 
with appropriate forestry credentials, as determined by the Deputy 
Administrator;
    (2) Use the best management practices included in the forest 
management plan; and
    (3) Exercise good stewardship on the forest land of the landowner 
while maintaining the land in a forested state.
    (c) Notwithstanding Sec.  701.26, an ECP participant shall not 
receive under this section more than 75 percent of the participant's 
actual cost or of the total allowable cost of reforestation, 
rehabilitation, and related measures.
    (d) Payments under this section shall not exceed a maximum of $150 
per acre for any acre.
    (e) Requests will be prioritized based upon planting tree species 
best suited to the site as stated in the forest management plan.

[71 FR 30265, May 26, 2006]



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




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

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

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



Sec.  707.1  Applicability.

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



Sec.  707.2  Definitions.

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

[[Page 18]]



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 precedence is a minor, payment of his share shall be made to his 
legal guardian, but if no legal guardian has been appointed payment 
shall be made to his natural guardian or custodian for his benefit, 
unless the minor's share of the payment exceeds $1,000, in which event 
payment shall be made only to his legal guardian.
    (c) Any payment which the deceased person could have received may be 
made jointly to the persons found to be entitled to such payment or 
shares thereof under this section or, pursuant to instructions issued by 
the Farm Service Agency, a separate payment may be issued to each person 
entitled to share in such payment.



Sec.  707.4  Disappearance.

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

[[Page 19]]

expected to have heard from him. Evidence of such disappearance must be 
presented to the county committee in the form of a statement executed by 
the person making the application for payment, setting forth the above 
facts, and must be substantiated by a statement from a disinterested 
person who was well acquainted with the person who has disappeared.



Sec.  707.5  Incompetency.

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



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

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



Sec.  707.7  Form of application.

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



PART 708_RECORD RETENTION REQUIREMENTS_ALL PROGRAMS--Table of Contents




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



Sec.  708.1  Record retention period.

    For the purposes of the programs in this chapter, no receipt, 
invoice, or other record required to be retained by any agricultural 
producer as evidence 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 20]]



 SUBCHAPTER B_FARM MARKETING QUOTAS, ACREAGE ALLOTMENTS, AND PRODUCTION 
                               ADJUSTMENT





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.



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

[[Page 21]]

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 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

[[Page 22]]

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 
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 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 Prevented planted and failed acreage.
718.104 Late-filed and revised acreage 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.

[[Page 23]]


    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:
    (1) Is applicable to all programs set forth in chapters VII and XIV 
of this title which are administered by the Farm Service Agency (FSA), 
except that only Sec. Sec.  718.6 and 718.11 are applicable to parts 761 
through 774 of this chapter;
    (2) Governs how FSA monitors marketing quotas, allotments, base 
acres and acreage reports. The regulations affected are those that 
establish procedures for measuring allotments and program eligible 
acreage, and determining program compliance.
    (b) For all programs, except for those administered under parts 761 
through 774 of this chapter:
    (1) The provisions of this part will be administered under the 
general supervision of the Administrator, FSA, and carried out in the 
field by State and county FSA committees (State and county committees);
    (2) State and county committees, and representatives and employees 
thereof, do not have authority to modify or waive any regulations in 
this part;
    (3) No provisions or delegation herein to a State or county 
committee will 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;
    (4) The Deputy Administrator, FSA, 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.
    (c) The programs under parts 761 through 774 will be administered 
according to the part, or parts, applicable to the specific program.

[72 FR 63284, Nov. 8, 2007]



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

[[Page 24]]

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, 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.

[[Page 25]]

    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
    (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

[[Page 26]]

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.
    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

[[Page 27]]

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.
    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

[[Page 28]]

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;
    (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

[[Page 29]]

 
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:
    (1) Planting, cultivating, growing, producing, harvesting, or 
storing a controlled substance in any crop year is ineligible during the 
crop year of conviction and the four succeeding crop years, for any of 
the following USDA benefits:
    (i) Any payments or benefits under the Direct and Counter Cyclical 
Program (DCP) in accordance with part 1412 of this title;
    (ii) Any payments or benefits for losses to trees, crops, or 
livestock covered under disaster programs administered by FSA;
    (iii) Any price support loan available in accordance with part 1421 
of this title;
    (iv) Any price support or payment made under the Commodity Credit 
Corporation Charter Act;
    (v) A farm storage facility loan made under section 4(h) of the 
Commodity Credit Corporation Charter Act or any other Act;
    (vi) Crop Insurance under the Federal Crop Insurance Act;
    (vii) A loan made or guaranteed under the Consolidated Farm and 
Rural Development Act or any other law administered by FSA's Farm Loan 
Programs.
    (2) Possession or trafficking of a controlled substance, is 
ineligible for any or all USDA benefits:
    (i) At the discretion of the court,
    (ii) To the extent and for a period of time the court determines.
    (c) 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 will be reduced, for the 
appropriate period, by a percentage equal to the total interest of the 
shareholder, beneficiary, or member.

[72 FR 63284, Nov. 8, 2007]



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.

[[Page 30]]



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:
    (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 violation.

    (a) Section 515(h) of the Federal Crop Insurance Act (FCIA) provides 
that a person who willfully and intentionally provides 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) The FCIA.

[[Page 31]]

    (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.).
    (7) The Consolidated Farm and Rural Development Act (7 U.S.C. 1921 
et seq.).
    (8) 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 
will be 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.

[72 FR 63284, Nov. 8, 2007]



            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

[[Page 32]]

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;
    (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.
    (7) All producers requesting to report acreage as prevented planted 
or failed must provide documentation to FSA where the farm is 
administered that meets the provisions of Sec.  718.103.
    (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.

[68 FR 16176, Apr. 3, 2003, as amended at 71 FR 13741, Mar. 17, 2006]



Sec.  718.103  Prevented planted and failed acreage.

    (a) Prevented planting is the inability to plant an eligible crop 
with proper equipment during the planting period as a result of an 
eligible cause of loss, as determined by CCC. The eligible cause of loss 
that prevented the planting must have:
    (1) Occurred after a previous planting period for the crop;
    (2) Occurred before the final planting date for the crop in the 
applicable crop year or, in the case of multiple plantings, the harvest 
date of the first planting in the applicable planting period, and
    (3) Similarly affected other producers in the area, as determined by 
CCC.
    (b) To be approved by FSA as prevented planted acreage:
    (1) The acreage must have been reported within 15 calendar days 
after the latter of
    (i) The occurrence of prevented planting, or
    (ii) The end of the planting period;
    (2) The acreage must have been prevented from being planted as the 
result of a natural disaster and not a management decision; and
    (3) The prevented planted acreage report must be acted on by the 
COC. The COC will deny the acreage report if it is not satisfied with 
the documentation provided.
    (c) To receive prevented planted credit for acreage:
    (1) The producer must show there was the intent to plant the acreage 
by providing documentation of field preparation, seed purchase and any 
other information that shows the acreage could have been planted and 
harvested under normal weather conditions, and
    (2) The producer must show that the amount of the prevented planted 
acreage credit is consistent with prior years' planting history for the 
farm.
    (d) Eligible prevented planting acreage will be determined on the 
basis of the producer's intent to plant the crop acreage and possession 
of, or access to, resources to plant, grow, and harvest the crop, as 
applicable.
    (e) Prevented planting acreage credit is not provided on acreage 
that had either a previous or subsequent crop planted on the acreage, 
unless the COC determines that all of the following conditions are met:
    (1) There is an established practice of planting two or more crops 
for harvest on the same acreage in the same crop year;
    (2) Both crops could have reached maturity if each planting was 
harvested or would have been harvested;

[[Page 33]]

    (3) Both the initial and subsequent planted crops were planted or 
prevented-planted within the normal planting period for that crop; and
    (4) Both the initial and subsequent planted crops meet all other 
eligibility provisions of this part including good farming practices.
    (f) Prevented planted acreage credit will not be given to crops 
where the prevented-planted acreage was affected by drought, unless:
    (1) On the final planting date for non-irrigated acreage, the area 
that is prevented from being planted has insufficient soil moisture for 
germination of seed and progress toward crop maturity because of a 
prolonged period of dry weather, as determined by CCC; and
    (2) Prolonged precipitation deficiencies exceeded the D2 level as 
determined using the U.S. Drought Monitor; and
    (3) Verifiable information is collected from sources whose business 
or purpose it is to record weather conditions, as determined by CCC, and 
including but not limited to the local weather reporting stations of the 
U.S. National Weather Service.
    (g) Prevented planted acreage credit under this part shall apply to 
irrigated crops where the acreage was prevented from being planted due 
to a lack of water resulting from drought conditions or contamination by 
saltwater intrusion of an irrigation supply resulting from drought 
conditions if there was not a reasonable probability of having adequate 
water to carry out an irrigation practice.
    (h) Acreage ineligible for prevented planting coverage includes, but 
is not limited to acreage:
    (1) Which planting history or conservation plans indicate would 
remain fallow for crop rotation purposes;
    (2) Used for conservation purposes or intended to be or considered 
to have been left unplanted under any program administered by USDA, 
including the Conservation Reserve and Wetland Reserve Programs; and
    (3) Not planted because of a management decision.
    (i) Failed acreage is acreage that was planted with the proper 
equipment during the planting period but failed as a result of an 
eligible cause of loss, as determined by CCC.
    (j) To be approved by CCC as failed acreage the acreage must have 
been reported as failed acreage before disposition of the crop, and the 
acreage must have been planted under normal conditions but failed as the 
result of a natural disaster and not a management decision. Producers 
who file a failed acreage report must have the request acted on by the 
COC. The COC will deny the acreage report if it is not satisfied with 
the documentation provided.
    (k) To receive failed acreage credit the producer must show all of 
the following:
    (1) That the acreage was planted under normal conditions using the 
proper equipment with the intent to harvest the acreage.
    (2) Provide documentation that the crop was planted using farming 
practices consistent for the crop and area, but could not be brought to 
harvest because of disaster-related conditions.
    (l) The eligible cause for failed acreage must have:
    (1) Occurred after the crop was planted, and
    (2) Before the normal harvest date for the crop in the applicable 
crop year or in the case of multiple plantings, the harvest date of the 
first planting in the applicable planting period, and
    (3) Other producers in the area were similarly affected as 
determined by CCC.
    (m) Eligible failed acreage will be determined on the basis of the 
producer planting the crop under normal conditions with the expectation 
to take the crop to harvest.
    (n) Acreage ineligible for failed acreage credit includes, but is 
not limited to acreage:
    (1) Which was planted using methods that could not be considered 
normal for the area and without the expectation of harvest;
    (2) Used for conservation purposes or intended to be or considered 
to have been un-harvested under any program administered by USDA, 
including the Conservation Reserve and Wetland Reserve Programs; and

[[Page 34]]

    (3) That failed because of a management decision.

[71 FR 13741, Mar. 17, 2006]



Sec.  718.104  Late-filed and revised acreage reports.

    (a) Late-filed acreage reports may be accepted after the final 
reporting date, and be considered timely filed, if both of the following 
apply:
    (1) The crop or identifiable crop residue is in the field, and
    (2) The acreage has not already been determined by FSA.
    (b) The farm operator filing a report late shall pay the cost of a 
farm inspection unless FSA determines that failure to report in a timely 
manner was beyond the producer's control.
    (c) Revised acreage reports may be filed with respect to 2005 and 
subsequent years to change the acreage reported if:
    (1) The acreage has not already been determined by FSA; and
    (2) Actual crop or residue is present in the field.
    (d) 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 the existence and use made of the 
crop, the lack of the crop, or a disaster condition affecting the crop; 
and
    (2) If the producer was in compliance with all other program 
requirements at the reporting date.

[71 FR 13742, Mar. 17, 2006]



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
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

[[Page 35]]

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 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

[[Page 36]]

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 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.

[[Page 37]]



    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 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;

[[Page 38]]

    (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 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

[[Page 39]]

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, 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

[[Page 40]]

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 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

[[Page 41]]

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 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.

[[Page 42]]



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, 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

[[Page 43]]

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 
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

[[Page 44]]

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.

[[Page 45]]



                 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 46]]

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 47]]

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 48]]

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 49]]

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 50]]

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 51]]

    (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 52]]

    (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 53]]

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 54]]

    (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 55]]

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 56]]



                     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 57]]

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 58]]



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 59]]



                      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 760_INDEMNITY PAYMENT PROGRAMS--Table of Contents




                Subpart A_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.

Subpart B_General Provisions for the 2005 Section 32 Hurricane Disaster 
                                Programs

760.101 Eligible counties, hurricanes and disaster periods.
760.102 Applicability.
760.103 Administration of HIP, FIP, LIP, and TIP.
760.104 Definitions.
760.105 Application for payment.
760.106 Limitations on payments and other benefits.
760.107 Appeals.
760.108 Offsets, assignments, and debt settlement.
760.109 Records and inspections thereof.
760.110 Refunds; joint and several liability.
760.111 Paperwork Reduction Act assigned number.

                  Subpart C_Hurricane Indemnity Program

760.201 Applicability.
760.202 Producer eligibility.
760.203 Payment calculation.

                    Subpart D_Feed Indemnity Program

760.301 Applicability.
760.302 Definitions.
760.303 Eligible livestock and producers.
760.304 Application process.
760.305 Payment calculation.

                  Subpart E_Livestock Indemnity Program

760.401 Applicability.
760.402 Definitions.
760.403 Eligible owners, contract growers and livestock.
760.404 Application process.
760.405 Payment calculation.

                    Subpart F_Tree Indemnity Program

760.501 Applicability.
760.502 Eligible producers and stands.
760.503 Application process.
760.504 Payment calculation.

                      Subpart G_Aquaculture program

760.601 Funds availability.

            Subpart H_2006 Livestock Assistance Grant Program

760.701 Funds availability.

[[Page 60]]

                Subpart I_2005	2007 Crop Disaster Program

760.800 Applicability.
760.801 Administration.
760.802 Definitions.
760.803 Eligibility.
760.804 Time and method of application.
760.805 Limitations on payments and other benefits.
760.806 Crop eligibility requirements.
760.807 Miscellaneous provisions.
760.808 General provisions.
760.809 Eligible damaging conditions.
760.810 Qualifying 2005, 2006, or 2007 quantity crop losses.
760.811 Rates and yields; calculating payments.
760.812 Production losses; participant responsibility.
760.813 Determination of production.
760.814 Calculation of acreage for crop losses other than prevented 
          planted.
760.815 Calculation of prevented planted acreage.
760.816 Value loss crops.
760.817 Quality losses for 2005, 2006, and 2007 crops.
760.818 Marketing contracts.
760.819 Misrepresentation, scheme, or device.
760.820 Offsets, assignments, and debt settlement.
760.821 Compliance with highly erodible land and wetland conservation.

             Subpart J_2005	2007 Livestock Indemnity Program

760.900 Administration.
760.901 Applicability.
760.902 Eligible counties and disaster periods.
760.903 Definitions.
760.904 Limitations on payments and other benefits.
760.905 Eligible owners and contract growers.
760.906 Eligible livestock.
760.907 Application process.
760.908 Deceased individuals or dissolved entities.
760.909 Payment calculation.
760.910 Appeals.
760.911 Offsets, assignments, and debt settlement.
760.912 Records and inspections.
760.913 Refunds; joint and several liability.

 Subpart K_General Provisions for 2005	2007 Livestock Compensation and 
                         Catfish Grant Programs

760.1000 Applicability.
760.1001 Eligible counties, disaster events, and disaster periods.
760.1002 Definitions.
760.1003 Limitations on payments and other benefits.

           Subpart L_2005	2007 Livestock Compensation Program

760.1100 Applicability.
760.1101 Administration.
760.1102 Definitions.
760.1103 Eligible livestock and producers.
760.1104 Application for payment.
760.1105 Application process.
760.1106 Payment calculation.
760.1107 Appeals.
760.1108 Offsets, assignments, and debt settlement.
760.1109 Recordkeeping and inspections.
760.1110 Refunds; joint and several liability.

                Subpart M_2005	2007 Catfish Grant Program

760.1200 Administration.
760.1201 Application for payment.
760.1202 Eligible producers.
760.1203 Payment calculation.

    Authority: 7 U.S.C. 612c; Pub. L. 106-387, 114 Stat. 1549; Pub. L. 
107-76, 115 Stat. 704; Title III, Pub. L. 109-234, 120 Stat. 474; 16 
U.S.C. 3801, note; and Title IX, Pub.L. 110-28.



                Subpart A_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.

[[Page 61]]

    (b) FSA means the Farm Service Agency, U.S. Department of 
Agriculture.
    (c) Deputy Administrator means the Deputy Administrator for Farm 
Programs, FSA.
    (d) State committee means the FSA State committee.
    (e) County committee means the FSA 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 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

[[Page 62]]

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; 71 FR 27190, May 10, 
2006]

                   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 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.

[[Page 63]]



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.
    (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:

[[Page 64]]

    (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 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

[[Page 65]]

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 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.

[[Page 66]]

    (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 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

[[Page 67]]

inspect, examine, and make copies of such books, records, 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 B_General Provisions for the 2005 Section 32 Hurricane Disaster 
                                Programs

    Source: 72 FR 878, Jan. 9, 2007, unless otherwise noted.



Sec.  760.101  Eligible counties, hurricanes and disaster periods.

    Producers who have suffered certain losses due to 2005 Hurricanes 
Dennis, Katrina, Ophelia, Rita, and Wilma (2005 hurricanes) in the 
following counties (eligible counties) are eligible to enroll in the 
programs made available under subparts B through F of this part. The 
`Disaster Period' is the time period in which losses occurred that would 
be considered eligible for the programs under subparts B through F of 
this part. Funds for the programs in subparts B through G are made 
available under Section 32 of the Act of August 24, 1935, as amended 
(Section 32).

[[Page 68]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Disaster period
                State                          County         ------------------------------------------------------------------------------------------
                                                                    DENNIS            KATRINA           OPHELIA            RITA              WILMA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama.............................  Autauga................    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Baldwin................    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Bibb...................  ................  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Butler.................    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Chambers...............    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Choctaw................    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Clarke.................    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Clay...................    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Cleburne...............    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Coffee.................    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Colbert................  ................  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Conecuh................    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Covington..............    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Crenshaw...............    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Cullman................  ................  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Dallas.................    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Escambia...............    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Geneva.................    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Greene.................    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Hale...................    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Henry..................    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Houston................    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Jefferson..............  ................  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Lamar..................  ................  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Lauderdale.............  ................  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Lowndes................    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Macon..................    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Marengo................    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Marion.................  ................  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Mobile.................    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Monroe.................    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Perry..................    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Pickens................  ................  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Pike...................    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Randolph...............    7/10/05-9/8/05  ................  ................  ................  .................
Alabama.............................  Sumter.................    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Tuscaloosa.............    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Washington.............    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Wilcox.................    7/10/05-9/8/05  8/29/05-10/28/05  ................  ................  .................
Alabama.............................  Winston................  ................  8/29/05-10/28/05  ................  ................  .................
Florida.............................  Bay....................    7/10/05-9/8/05  8/24/05-10/23/05  ................  ................  .................
Florida.............................  Brevard................  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  Broward................  ................  8/24/05-10/23/05  ................  ................  10/23/05-12/22/05
Florida.............................  Calhoun................    7/10/05-9/8/05  ................  ................  ................  .................
Florida.............................  Charlotte..............  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  Collier................  ................  8/24/05-10/23/05  ................  ................  10/23/05-12/22/05

[[Page 69]]

 
Florida.............................  Dixie..................    7/10/05-9/8/05  ................  ................  ................  .................
Florida.............................  Escambia...............    7/10/05-9/8/05  8/24/05-10/23/05  ................  ................  .................
Florida.............................  Franklin...............    7/10/05-9/8/05  8/24/05-10/23/05  ................  ................  .................
Florida.............................  Gadsden................    7/10/05-9/8/05  ................  ................  ................  .................
Florida.............................  Glades.................  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  Gulf...................    7/10/05-9/8/05  8/24/05-10/23/05  ................  ................  .................
Florida.............................  Hardee.................  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  Hendry.................  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  Highlands..............  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  Holmes.................    7/10/05-9/8/05  ................  ................  ................  .................
Florida.............................  Indian River...........  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  Jackson................    7/10/05-9/8/05  ................  ................  ................  .................
Florida.............................  Jefferson..............    7/10/05-9/8/05  ................  ................  ................  .................
Florida.............................  Lee....................  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  Leon...................    7/10/05-9/8/05  ................  ................  ................  .................
Florida.............................  Levy...................    7/10/05-9/8/05  ................  ................  ................  .................
Florida.............................  Liberty................    7/10/05-9/8/05  ................  ................  ................  .................
Florida.............................  Martin.................  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  Miami-Dade.............  ................  8/24/05-10/23/05  ................  ................  10/23/05-12/22/05
Florida.............................  Monroe.................    7/10/05-9/8/05  8/24/05-10/23/05  ................  ................  10/23/05-12/22/05
Florida.............................  Okaloosa...............    7/10/05-9/8/05  8/24/05-10/23/05  ................  ................  .................
Florida.............................  Okeechobee.............  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  Palm Beach.............  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  St. Lucie..............  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  Santa Rosa.............    7/10/05-9/8/05  8/24/05-10/23/05  ................  ................  .................
Florida.............................  Sarasota...............  ................  ................  ................  ................  10/23/05-12/22/05
Florida.............................  Taylor.................    7/10/05-9/8/05  ................  ................  ................  .................
Florida.............................  Wakulla................    7/10/05-9/8/05  ................  ................  ................  .................
Florida.............................  Walton.................    7/10/05-9/8/05  8/24/05-10/23/05  ................  ................  .................
Florida.............................  Washington.............    7/10/05-9/8/05  ................  ................  ................  .................
Louisiana...........................  Acadia.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Allen..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Ascension..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Assumption.............  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  Avoyelles..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Beauregard.............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Bienville..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Bossier................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Caddo..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Calcasieu..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Caldwell...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Cameron................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Catahoula..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Claiborne..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Concordia..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  De Soto................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  East Baton Rouge.......  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  East Carroll...........  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  East Feliciana.........  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  Evangeline.............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................

[[Page 70]]

 
Louisiana...........................  Franklin...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Grant..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Iberia.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Iberville..............  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  Jackson................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Jefferson..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Jefferson Davis........  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Lafayette..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Lafourche..............  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  La Salle...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Lincoln................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Livingston.............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Madison................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Morehouse..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Natchitoches...........  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Orleans................  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  Ouachita...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Plaquemines............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Pointe Coupee..........  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  Rapides................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Red River..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Richland...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Sabine.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  St. Bernard............  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  St. Charles............  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  St. Helena.............  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  St. James..............  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  St. John the Baptist...  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  St. Landry.............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  St. Martin.............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  St. Mary...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  St. Tammany............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Tangipahoa.............  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  Tensas.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Terrebonne.............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Union..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Vermilion..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Vernon.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  Washington.............  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  Webster................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  West Baton Rouge.......  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  West Carroll...........  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Louisiana...........................  West Feliciana.........  ................  8/29/05-10/28/05  ................  ................  .................
Louisiana...........................  Winn...................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Adams..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Alcorn.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................

[[Page 71]]

 
Mississippi.........................  Amite..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Attala.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Benton.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Bolivar................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Calhoun................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Carroll................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Chickasaw..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Choctaw................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Claiborne..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Clarke.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Clay...................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Coahoma................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Copiah.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Covington..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  De Soto................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Forrest................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Franklin...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  George.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Greene.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Grenada................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Hancock................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Harrison...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Hinds..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Holmes.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Humphreys..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Issaquena..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Itawamba...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Jackson................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Jasper.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Jefferson..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Jefferson Davis........  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Jones..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Kemper.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Lafayette..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Lamar..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Lauderdale.............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Lawrence...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Leake..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Lee....................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Leflore................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Lincoln................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Lowndes................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Madison................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Marion.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Marshall...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Monroe.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Montgomery.............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Neshoba................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Newton.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Noxubee................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................

[[Page 72]]

 
Mississippi.........................  Oktibbeha..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Panola.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Pearl River............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Perry..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Pike...................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Pontotoc...............  ................  8/29/05-10/28/05  ................  ................  .................
Mississippi.........................  Prentiss...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Quitman................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Rankin.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Scott..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Sharkey................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Simpson................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Smith..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Stone..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Sunflower..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Tallahatchie...........  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Tate...................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Tippah.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Tishomingo.............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Tunica.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Union..................  ................  8/29/05-10/28/05  ................  ................  .................
Mississippi.........................  Walthall...............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Warren.................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Washington.............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Wayne..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Webster................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Wilkinson..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Winston................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Yalobusha..............  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
Mississippi.........................  Yazoo..................  ................  8/29/05-10/28/05  ................  9/23/05-11/22/05  .................
North Carolina......................  Brunswick..............  ................  ................  9/11/05-11/10/05  ................  .................
North Carolina......................  Carteret...............  ................  ................  9/11/05-11/10/05  ................  .................
North Carolina......................  Craven.................  ................  ................  9/11/05-11/10/05  ................  .................
North Carolina......................  Dare...................  ................  ................  9/11/05-11/10/05  ................  .................
North Carolina......................  Hyde...................  ................  ................  9/11/05-11/10/05  ................  .................
North Carolina......................  Jones..................  ................  ................  9/11/05-11/10/05  ................  .................
North Carolina......................  New Hanover............  ................  ................  9/11/05-11/10/05  ................  .................
North Carolina......................  Onslow.................  ................  ................  9/11/05-11/10/05  ................  .................
North Carolina......................  Pamlico................  ................  ................  9/11/05-11/10/05  ................  .................
North Carolina......................  Pender.................  ................  ................  9/11/05-11/10/05  ................  .................
Texas...............................  Angelina...............  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Brazoria...............  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Chambers...............  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Cherokee...............  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Fort Bend..............  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Galveston..............  ................  ................  ................  9/23/05-11/22/05  .................

[[Page 73]]

 
Texas...............................  Gregg..................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Hardin.................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Harris.................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Harrison...............  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Houston................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Jasper.................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Jefferson..............  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Liberty................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Marion.................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Montgomery.............  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Nacogdoches............  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Newton.................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Orange.................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Panola.................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Polk...................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Rusk...................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Sabine.................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  San Augustine..........  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  San Jacinto............  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Shelby.................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Trinity................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Tyler..................  ................  ................  ................  9/23/05-11/22/05  .................
Texas...............................  Walker.................  ................  ................  ................  9/23/05-11/22/05  .................
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 74]]



Sec.  760.102  Applicability.

    (a) This part establishes the terms and conditions under which the 
following programs will be administered with respect to producers 
affected by 2005 hurricanes in eligible counties:
    (1) Hurricane Indemnity Program (HIP);
    (2) Feed Indemnity Program (FIP);
    (3) Livestock Indemnity Program (LIP);
    (4) Tree Indemnity Program (TIP); and
    (5) Aquaculture grants to States.
    (b) The amount that may be expended for payments under subparts B 
through G of this part shall not exceed the amount of Section 32 funds 
made available by the Secretary for the administration of these 
programs.
    (c) To be eligible for payments under these programs, producers must 
comply with all applicable provisions under subparts B through G of this 
part and, in the case of State grants, by the State.



Sec.  760.103  Administration of HIP, FIP, LIP, and TIP.

    (a) These programs are administered under the general supervision of 
the Administrator, FSA.
    (b) FSA representatives do not have authority to modify or waive any 
of the provisions of the regulations of subparts B through F of this 
part.
    (c) The State FSA committee shall take any action required by the 
regulations of subparts B through F of this part that the county FSA 
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 subparts B through F of this part; or
    (2) Require a county committee to withhold taking any action that is 
not in accordance with subparts B through F of this part.
    (d) No provision or delegation to a State or county FSA committee 
shall preclude the Administrator, FSA, Deputy Administrator for Farm 
Programs, FSA or a designee or other such person, from determining any 
question arising under the program or from reversing or modifying any 
determination made by a State or county FSA committee.



Sec.  760.104  Definitions.

    The following definitions in this section apply to the programs in 
subparts B through G of this part. The terms defined in part 718 of this 
chapter and parts 1400 and 1437 of this title shall also be applicable, 
except where they conflict with the definitions set forth in this 
section.
    Application means the `2005 Hurricane Disaster Programs Application' 
form issued by FSA.
    Application period means the date established by the Deputy 
Administrator for producers to apply for program benefits.
    Bush means a thick densely branched woody shrub grown for the 
production of an annual crop for commercial market for human 
consumption.
    Commercial use means used in the operation of a business activity 
engaged in as a means of livelihood for profit by the eligible producer.
    Crop insurance means an insurance policy reinsured by the Federal 
Crop Insurance Corporation under the provisions of the Federal Crop 
Insurance Act, as amended.
    Farming operation means a business enterprise engaged in the 
production of agricultural products.
    Fruit tree means a woody perennial plant having a single main trunk, 
commonly exceeding 10 feet in height and usually devoid of branches 
below, but bearing a head of branches and foliage or crown of leaves at 
the summit that is grown for the production of an annual crop, including 
nuts, for commercial market for human consumption.
    Owner means one who had legal ownership of the trees, bushes, vines, 
or livestock for which benefits are being requested under subparts B 
through F, on the day such plant or livestock perished or suffered 
losses due to an eligible hurricane as set forth Sec.  760.101.
    Stand means a contiguous acreage of the same crop of trees, bushes, 
or vines, and excludes container-grown crops.

[[Page 75]]

    Tier means the geographic bands of damage generally correlating to 
the severity of damage caused by the maximum sustained winds of the 
applicable hurricanes.
    Vine means a plant from which an annual fruit crop is produced for 
commercial market for human consumption, such as grape, kiwi, or passion 
fruit, that has a flexible stem supported by climbing, twining, or 
creeping along a surface.



Sec.  760.105  Application for payment.

    (a) A producer who applies for any program under subparts B through 
F shall file an application and any required supporting documentation in 
the county FSA office serving the county where the eligible loss 
occurred; or in the case of FIP, where the eligible livestock were 
physically located on the applicable date.
    (b) The application must be filed during the application period 
announced by FSA.
    (c) Payments may be made for eligible losses suffered by an eligible 
producer who is now deceased or is a dissolved entity if a 
representative who currently has authority to enter into a contract for 
the producer signs the application for payment. Proof of authority to 
sign for the deceased producer or dissolved entity must be provided. If 
a producer is now a dissolved general partnership or joint venture, all 
members of the general partnership or joint venture at the time of 
dissolution or their duly authorized representatives must sign the 
application for payment.
    (d) Data furnished by the applicant will be used to determine 
eligibility for program benefits. Furnishing the data is voluntary; 
however, without all required data program benefits will not be approved 
or provided.
    (e) A minor child shall be eligible to apply for program benefits so 
long as all eligibility requirements are met and one of the following 
conditions exist:
    (1) The right of majority has been conferred upon the minor by court 
proceedings or statute;
    (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 a surety guarantees any loss 
incurred for which the minor would be liable had the minor been an 
adult.



Sec.  760.106  Limitations on payments and other benefits.

    (a) Separate payment limitations apply to HIP, FIP, LIP, and TIP. No 
`person' as determined under part 1400 of this title shall receive more 
than $80,000 under each of these programs.
    (b) An individual or entity whose adjusted gross income is in excess 
of $2.5 million, as determined under part 1400 of this title, shall not 
be eligible to receive benefits under this part for HIP, FIP, LIP, and 
TIP; except that the individual or entity may be considered to meet the 
adjusted gross income requirement if not less than 75 percent of the 
individual's or entity's average adjusted gross income for the three tax 
years immediately preceding the applicable crop year is derived from 
farming or ranching operations.
    (c) As a condition to receive benefits under subparts B through F, a 
producer must have been in compliance with the provisions of parts 12 
and 718 of this title for the 2005 crop year and must not otherwise be 
barred from receiving benefits under any law.
    (d) An individual or entity determined to be a foreign person under 
part 1400 of this title shall not be eligible to receive benefits under 
subparts B through F of this part.



Sec.  760.107  Appeals.

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



Sec.  760.108  Offsets, assignments, and debt settlement.

    (a) Except as provided in paragraph (b) of this section, any payment 
or portion thereof to any producer shall be made without regard to 
questions of title under State law and without regard to any claim or 
lien against the commodity, or proceeds thereof, in favor of the owner 
or any other creditor except agencies of the U.S. Government. The 
regulations governing offsets and withholdings found at part 792 of this 
chapter apply to payments

[[Page 76]]

made under subparts B through F of this part.
    (b) Any producer entitled to any payment may assign any payments in 
accordance with regulations governing the assignment of payments found 
at part 1404 of this title.



Sec.  760.109  Records and inspection thereof.

    Producers receiving payments under the programs in subparts B 
through F or any other person who furnishes information for the purposes 
of enabling such producer to receive a payment under subparts B through 
F of this part 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. Producers 
receiving payments or any other person who furnishes such information to 
FSA shall permit authorized representatives of USDA and the General 
Accounting Office during regular business hours to inspect, examine, and 
to allow such persons to make copies of such books, records, and to 
enter upon, inspect and verify all applicable livestock and acreage in 
which the applicant has an interest for the purpose of confirming the 
accuracy of the information provided by the applicant.



Sec.  760.110  Refunds; joint and several liability.

    In the event there is a failure to comply with any term, 
requirement, or condition for payment or assistance arising under 
subparts B through F of this part, and if any refund of a payment to FSA 
shall otherwise become due in connection with this part, all payments 
made in regard to such matter shall be refunded to FSA together with 
interest and late-payment charges as provided for in part 792 of this 
chapter.



Sec.  760.111  Paperwork Reduction Act assigned number.

    The information collection required to support the regulations of 
subparts B through F of this part has been approved by OMB and assigned 
OMB control number 0560-0257.



                  Subpart C_Hurricane Indemnity Program

    Source: 72 FR 878, Jan. 9, 2007, unless otherwise noted.



Sec.  760.201  Applicability.

    This subpart sets forth the terms and conditions applicable to the 
Hurricane Indemnity Program (HIP). Benefits will be provided under this 
subpart to producers who have received a crop insurance indemnity from 
the Risk Management Agency (RMA) based on the associated loss criteria 
set forth in Sec.  760.202(a)(1) as provided to FSA by RMA; and to 
producers who have received Noninsured Crop Disaster Assistance Program 
(NAP) payments under part 1437 of this title based on the provisions of 
Sec.  760.202(a)(1). HIP benefits will be provided under this subpart to 
eligible producers who suffered losses due to 2005 hurricanes as set 
forth in Sec.  760.101.



Sec.  760.202  Producer eligibility.

    A producer who applies for benefits under this subpart will be 
eligible to receive a payment if both of the following apply:
    (a) The producer received a crop insurance indemnity from RMA or a 
NAP payment under part 1437 of this title for crop losses:
    (1) In an eligible county;
    (2) Recorded by RMA or FSA as being due to a 2005 hurricane and the 
loss occurred during a disaster period as set forth in Sec.  760.101; 
and
    (3) Were due to any of the following causes of loss:
    (i) Excessive moisture, precipitation, and/or rain;
    (ii) Flood;
    (iii) Excessive wind;
    (iv) Cyclone;
    (v) Tornado;
    (vi) Tropical depression;
    (vii) Storm surge; or
    (viii) Salinity due to salt water intrusion; and
    (b) An application is filed in accordance with Sec.  760.105.



Sec.  760.203  Payment calculation.

    The disaster benefits under this subpart will be equal to the 
smaller of:

[[Page 77]]

    (a) 30 percent of the RMA crop insurance indemnity or 30 percent of 
the NAP payment for eligible crop losses as provided in Sec.  
760.202(a)(1), and adding the crop insurance premium for the indemnity 
as provided in Sec.  760.202(a)(1); or
    (b) 95 percent of the expected value of the crop in the absence of a 
disaster, as determined by RMA for insured crops, using information from 
the crop policy; and by FSA for NAP crops, using the producer's price 
and yield, minus the following:
    (1) The value of the production as counted by RMA for insured crops 
to establish the indemnity and by FSA for NAP crops to establish the NAP 
payment;
    (2) The crop's eligible indemnity or NAP payment for eligible crop 
losses determined in accordance with Sec.  760.202(a)(1); and
    (3) Adding the crop insurance premium for the indemnity as provided 
in Sec.  760.202(a)(1).



                    Subpart D_Feed Indemnity Program

    Source: 72 FR 878, Jan. 9, 2007, unless otherwise noted.



Sec.  760.301  Applicability.

    This subpart sets forth the terms and conditions applicable to the 
Feed Indemnity Program (FIP). FIP benefits will be provided under this 
subpart to eligible owners and cash lessees, but not both, for the same 
livestock, for feed losses or increased feed costs that occurred in 
eligible counties during the disaster period as set forth in Sec.  
760.101.



Sec.  760.302  Definitions.

    The following definitions are applicable for all purposes of 
administering FIP.
    Adult beef bulls means male bovine animals that were at least 2 
years old and used for breeding purposes on the beginning date of the 
applicable disaster period as set forth in Sec.  760.101.
    Adult beef cows means female bovine animals that had delivered one 
or more offspring before the beginning date of the applicable disaster 
period as set forth in Sec.  760.101. A first-time bred beef heifer 
shall also be considered an adult beef cow if it was pregnant on the 
beginning date of the applicable disaster period as set forth in Sec.  
760.101.
    Adult buffalo and beefalo bulls means male animals of those breeds 
that were at least 2 years old and used for breeding purposes on the 
beginning date of the applicable disaster period as set forth in Sec.  
760.101.
    Adult buffalo and beefalo cows means female animals of those breeds 
that had delivered one or more offspring before the beginning date of 
the applicable disaster period as set forth in Sec.  760.101. A first-
time bred buffalo or beefalo heifer shall also be considered to be an 
adult buffalo or beefalo cow if it was pregnant on the beginning date of 
the applicable disaster period as set forth in Sec.  760.101.
    Adult dairy bulls means male bovine animals of a breed used for 
producing milk for human consumption that were at least 2 years old and 
used for breeding dairy cows on the beginning date of the applicable 
disaster period as set forth in Sec.  760.101.
    Adult dairy cows means female bovine animals used for the purpose of 
providing milk for human consumption, that had delivered one or more 
offspring before the beginning date of the applicable disaster period as 
set forth in Sec.  760.101. A first-time bred dairy heifer shall also be 
considered an adult dairy cow if it was pregnant on the beginning date 
of the applicable disaster period as set forth in Sec.  760.101.
    Goats means domesticated, ruminant mammals of the genus Capra, 
including Angora goats.
    Horses means domesticated horses, and does not include donkeys, 
mules or other large solid-hoofed herbivorous mammals.
    Non-adult beef cattle means male, female or neutered male bovine 
animals that weighed 500 pounds or more on the beginning date of the 
applicable disaster period as set forth in Sec.  760.101, but do not 
meet the definition of adult beef cows or bulls.
    Non-adult buffalo/beefalo means male, female or neutered male 
animals of those breeds that weighed 500 pounds or more on the beginning 
date of the applicable disaster period as set forth in Sec.  760.101, 
but do not meet the definition of an adult buffalo or beefalo cow or 
bull.

[[Page 78]]

    Non-adult dairy cattle means male, female or neutered male bovine 
livestock, of a breed used for the purpose of providing milk for human 
consumption, that weighed 500 pounds or more on the beginning date of 
the applicable disaster period as set forth in Sec.  760.101, but do not 
meet the definition adult dairy cows or bulls.
    Sheep means domesticated, ruminant mammals of the genus Ovis.



Sec.  760.303  Eligible livestock and producers.

    (a) To be considered eligible, livestock must meet all the following 
conditions:
    (1) Be adult or non-adult dairy cattle, beef cattle, buffalo, 
beefalo, horses, sheep, goats or deer as defined in Sec.  760.302;
    (2) Been physically located in an eligible county on the beginning 
date of the applicable disaster period as set forth in Sec.  760.101;
    (3) Been maintained for commercial use as part of a farming 
operation on the beginning date of the applicable disaster period as set 
forth in Sec.  760.101;
    (4) Not have been produced and maintained for reasons other than 
commercial use as part of a farming operation. Such excluded uses 
include, but are not limited to wild free roaming animals or animals 
used for recreational purposes, such as pleasure, hunting, pets, or for 
show.
    (b) To be considered an eligible livestock producer, a producer must 
have:
    (1) Owned or cash-leased, but not both for the same livestock, 
eligible livestock on the beginning date of the applicable disaster 
period as provided in Sec.  760.101; and
    (2) Suffered a feed loss or an increased feed cost during the 
applicable disaster period as set forth in Sec.  760.101 with respect to 
feed used for the eligible livestock.



Sec.  760.304  Application process.

    (a) Applicants must submit to FSA a completed application in 
accordance with Sec.  760.105, and any other supporting documentation as 
determined by FSA to be necessary to make a determination of the 
eligibility of the applicant. Supporting documents include but are not 
limited to: Purchase records; veterinarian records; bank or other loan 
papers; rendering truck receipts; Federal Emergency Management Agency 
and National Guard records; written contracts; production records; 
Internal Revenue Service (IRS) records; property tax records; private 
insurance documents; and other similar documents.



Sec.  760.305  Payment calculation.

    (a) FIP payments are calculated by multiplying the national payment 
rate for each of the following livestock categories by the number of 
eligible livestock in each category. The payment rate represents the 
cost of the amount of corn needed to maintain 1 animal unit for a 
specified period of time.
    (b) The eligible livestock categories are:
    (1) Adult beef cows or bulls;
    (2) Non-adult beef cattle;
    (3) Adult buffalo or beefalo cows or bulls;
    (4) Non-adult buffalo or beefalo;
    (5) Adult dairy cows or bulls;
    (6) Non-adult dairy cattle;
    (7) Goats;
    (8) Sheep;
    (9) Horses; and
    (10) Deer.



                  Subpart E_Livestock Indemnity Program

    Source: 72 FR 878, Jan. 9, 2007, unless otherwise noted.



Sec.  760.401  Applicability.

    (a) This subpart sets forth the terms and conditions applicable to 
the Livestock Indemnity Program (LIP). Benefits will be provided under 
this subpart to eligible livestock owners and contract growers, but not 
both for the same livestock loss, for certain livestock deaths that 
occurred in eligible counties during the disaster period as set forth in 
Sec.  760.101.
    (b) Eligible livestock owners and contract growers will be 
compensated in accordance with Sec.  760.405 for eligible livestock 
deaths that occurred in eligible counties during the disaster period as 
set forth in Sec.  760.101.

[[Page 79]]



Sec.  760.402  Definitions.

    The following definitions are applicable for all purposes of 
administering LIP.
    Adult beef bull means a male bovine animal that was at least 2 years 
old and used for breeding purposes before it died.
    Adult beef cow means a female bovine animal that had delivered one 
or more offspring before dying. A first-time bred beef heifer shall also 
be considered an adult beef cow if it was pregnant at the time it died.
    Adult buffalo and beefalo bull means a male animal of those breeds 
that was at least 2 years old and used for breeding purposes before it 
died.
    Adult buffalo and beefalo cow means a female animal of those breeds 
that had delivered one or more offspring before dying. A first-time bred 
buffalo or beefalo heifer shall also be considered an adult buffalo or 
beefalo cow if it was pregnant at the time it died.
    Adult dairy bull means a male bovine animal of a breed used for 
producing milk for human consumption that was at least 2 years old and 
used for breeding dairy cows before it died.
    Adult dairy cow means a female bovine animal used for the purpose of 
providing milk for human consumption that had delivered one or more 
offspring before dying. A first-time bred dairy heifer shall also be 
considered an adult dairy cow if it was pregnant at the time it died.
    Buck means a male goat.
    Contract means, with respect to contracts for the handling of 
livestock, a written agreement between a livestock owner and another 
individual or entity setting the specific terms, conditions and 
obligations of the parties involved regarding the production of 
livestock or livestock products.
    Doe means a female goat.
    Equine animal means a domesticated horse, mule or donkey.
    Ewe means a female sheep.
    Goat means a domesticated, ruminant mammal of the genus Capra, 
including Angora goats. Goats will be further delineated by sex (bucks 
and does) and age (kids).
    Kid means a goat less than 1 year old.
    Lamb means a sheep less than 1 year old.
    Non-adult beef cattle means male, female or neutered male bovines 
that do not meet the definition of adult beef cows or bulls. Non-adult 
beef cattle is further delineated by weight categories of less than 400 
pounds, and 400 pounds or more at the time they died.
    Non-adult buffalo or beefalo means a male, female or neutered male 
animal of those breeds that do not meet the definition of adult buffalo/
beefalo cow or bull. Non-adult buffalo or beefalo is further delineated 
by weight categories of less than 400 pounds, and 400 pounds or more at 
the time of death.
    Non-adult dairy cattle means male, female or neutered male bovine 
livestock, of a breed used for the purpose of providing milk for human 
consumption, that do not meet the definition of adult dairy cows or 
bulls. Non-adult dairy cattle is further delineated by weight categories 
of less than 400 pounds, and 400 pounds or more at the time they died.
    Poultry means domesticated chickens, turkeys, ducks and geese. 
Poultry will be further delineated by sex, age and purpose of 
production, as determined by FSA.
    Ram means a male sheep.
    Sheep means domesticated, ruminant mammals of the genus Ovis. Sheep 
will be further delineated by sex (rams and ewes) and age (lambs).
    Swine means domesticated omnivorous pigs, hogs, and boars. Swine 
will be further delineated by sex and weight as determined by FSA.



Sec.  760.403  Eligible owners, contract growers and livestock.

    (a) To be considered eligible, a livestock owner must have had legal 
ownership of the eligible livestock on the day the livestock died.
    (b) To be considered eligible, a contract grower on the day the 
livestock died must have had:
    (1) A written agreement with the owner of eligible livestock setting 
the specific terms, conditions and obligations of the parties involved 
regarding the production of livestock; and
    (2) Control of the livestock that died.
    (c) To be considered eligible, livestock must meet all the 
following:

[[Page 80]]

    (1) Be adult or non-adult dairy cattle, beef cattle, buffalo, 
beefalo, equine, sheep, goats, swine, poultry or deer.
    (2) Died as a direct result of an applicable disaster, in an 
eligible county and during the applicable disaster period as set forth 
in Sec.  760.101;
    (3) Been maintained for commercial use as part of a farming 
operation on the day they died; and before dying;
    (4) Not have been produced or maintained for reasons other than 
commercial use as part of a farming operation, including but not limited 
to wild free roaming animals or animals used for recreational purposes, 
such as pleasure, hunting, pets, or for show.



Sec.  760.404  Application process.

    (a) Applicants must submit to FSA a completed application in 
accordance with Sec.  760.105 and other supporting documents as 
determined by FSA to be necessary for making determinations of the 
eligibility of the applicant. Supporting documents must show: evidence 
of loss; current physical location of livestock in inventory; and 
physical location of claimed livestock at the time of death.
    (b) Applicants must provide adequate proof that the death of the 
eligible livestock occurred during the applicable disaster period, and 
the death was a direct result of the occurrence of a 2005 hurricane as 
provided in Sec.  760.101. The quantity and kind of livestock that died 
as a direct result of the applicable disaster may be documented by: 
Purchase records; veterinarian records; bank or other loan papers; 
rendering truck receipts; Federal Emergency Management Agency and 
National Guard records; written contracts; production records; IRS 
records; property tax records; private insurance documents; and any 
other similar documents.
    (c) Certifications of livestock deaths by third parties may be 
accepted only if both the following conditions are met:
    (1) The livestock owner or livestock contract grower, as applicable, 
certifies in writing:
    (i) That there is no other documentation of death available;
    (ii) The number of livestock, by category as determined by the 
Deputy Administrator, in inventory at the time the applicable disaster 
occurred;
    (iii) Other details necessary for FSA to determine the certification 
acceptable; and
    (2) The third party has provided to FSA their telephone number and 
address, and a statement containing:
    (i) Specific details about their knowledge of the livestock deaths;
    (ii) Their affiliation to the livestock owner or contract grower; 
and
    (iii) The accuracy of the deaths claimed by the livestock owner or 
contract grower; and
    (iv) Other details necessary for FSA to determine the certification 
acceptable.



Sec.  760.405  Payment calculation.

    (a) Under LIP, separate payment rates are established for eligible 
livestock owners and eligible contract growers in accordance with 
paragraphs (b) and (c) of this section. LIP payments are calculated by 
multiplying the national payment rate, as determined in paragraphs (b) 
and (c) of this section, by the number of eligible livestock in each 
category, as provided in paragraph (d) of this section. The payment 
calculated for an eligible contract grower for an eligible livestock 
category shall be reduced by the amount of any compensation received 
from the contractor for the loss of income from the dead livestock.
    (b) The LIP payment rate for eligible livestock owners is based on 
75 percent of the average fair market value of the livestock.
    (c) The LIP payment rates for eligible contract growers is based on 
75 percent of the average income loss sustained by the contract grower 
with respect to the dead livestock.
    (d) The categories of eligible livestock are as follows:
    (1) Adult beef cows;
    (2) Adult beef bulls;
    (3) Non-adult beef cattle;
    (4) Adult buffalo or beefalo cows;
    (5) Adult buffalo or beefalo bulls;
    (6) Non-adult buffalo/beefalo;
    (7) Adult dairy cows;
    (8) Adult dairy bulls;
    (9) Non-adult dairy cattle;
    (10) Swine, sows, boars, barrows, gilts over 150 pounds;

[[Page 81]]

    (11) Swine, sows, boars, barrows, gilts 50 to 150 pounds;
    (12) Swine, feeder pigs under 50 pounds;
    (13) Goats, bucks;
    (14) Goats, does;
    (15) Goats, kids;
    (16) Sheep, rams;
    (17) Sheep, ewes;
    (18) Sheep, lambs;
    (19) Deer;
    (20) Chickens, layers, roasters;
    (21) Chickens, broilers, pullets;
    (22) Chickens, chicks;
    (23) Turkeys, toms, fryers, roasters;
    (24) Turkeys, poults;
    (25) Ducks;
    (26) Ducks, ducklings;
    (27) Geese, goose;
    (28) Geese, gosling; and
    (29) Equine.



                    Subpart F_Tree Indemnity Program

    Source: 72 FR 878, Jan. 9, 2007, unless otherwise noted.



Sec.  760.501  Applicability.

    (a) This subpart sets forth the terms and conditions applicable to 
the Tree Indemnity Program (TIP). Benefits will be provided under this 
subpart for eligible fruit trees, bushes, and vines that were lost or 
damaged during the disaster period as set forth in Sec.  760.101.
    (b) Compensation will be based on expenses incurred for replanting, 
rehabilitation, cleanup, and debris removal.
    (c) No benefits shall be provided when the loss:
    (1) Occurred in any county other than an eligible county, or
    (2) Was not the result of an eligible disaster as set forth in Sec.  
760.101.



Sec.  760.502  Eligible producers and stands.

    (a) An eligible fruit tree, bush, and/or vine producer is one who 
bears financial responsibility and who has incurred costs of at least 
$90 per acre for replanting, rehabilitation, cleanup, or debris removal, 
excluding crop production.
    (b) An eligible stand must:
    (1) Be physically located in an eligible county;
    (2) Have been impacted during a 2005 hurricane as set forth in Sec.  
760.101; and
    (3) Be grown for commercial use.



Sec.  760.503  Application process.

    (a) Applicants must submit a completed application and report of 
acreage identifying the geographic location and number of acres in the 
disaster-affected stand of claimed fruit trees, bushes, and vines in 
accordance with part 718 of this chapter, and any other supporting 
documentation for FSA to determine the eligibility of the applicant.
    (b) Applicants must certify and provide adequate proof that the 
expenses incurred to eligible fruit trees, bushes, or vines occurred 
during the applicable disaster period and that the loss or damage was a 
direct result of a 2005 hurricane, as set forth in Sec.  760.101.
    (c) The quantity and kind of fruit trees, bushes, or vines that died 
or were damaged as a result of the applicable disaster may be documented 
by; purchase records; bank or other loan documents; Federal Emergency 
Management Agency and National Guard records; IRS records; property tax 
records; private insurance documents; and similar documents.



Sec.  760.504  Payment calculation.

    (a) TIP payments shall be calculated by multiplying the following 
national payment rate for the applicable tier by the number of eligible 
acres, excluding but not limited to such things as drainage ditches and 
canals, in a stand of fruit trees, bushes, or vines by the producer's 
share in such crop:
    (1) Tier I--$750;
    (2) Tier II--$300;
    (3) Tier III--$200; and
    (4) Tier IV--$90.
    (b) If the actual expenses incurred for damage are greater than the 
value associated with the tier based on the location of the stand, the 
applicant may submit documentation to FSA to request the stand be placed 
in the next lower-numbered tier which represents a greater level of loss 
and a higher payment rate. Regardless of the expenses incurred the stand 
can only be placed in the next lower-numbered tier.

[[Page 82]]



                      Subpart G_Aquaculture Program



Sec.  760.601  Funds availability.

    FSA will provide block grants to the states of Alabama, Florida, 
Louisiana, Mississippi, North Carolina and Texas where aquaculture was 
adversely affected by 2005 hurricanes as set forth in Sec.  760.101. 
Producers in eligible counties in those states who raise aquaculture 
species in a controlled environment as part of a farming operation and 
who have not received assistance under other disaster programs for the 
same aquaculture losses are eligible to receive these funds. Funds 
provided by a State to a farming operation under such a grant shall not 
exceed $80,000.

[72 FR 878, Jan. 9, 2007]



            Subpart H_2006 Livestock Assistance Grant Program



Sec.  760.701  Funds availability.

    FSA will administer a limited program to provide assistance to 
livestock producers where forage was adversely affected by drought in 
counties reaching D3 or D4 Drought on the U.S. Drought Monitor, during 
March 7 to August 31, 2006, in the States of: Alabama, Arizona, 
Arkansas, Colorado, Florida, Georgia, Kansas, Louisiana, Minnesota, 
Mississippi, Missouri, Montana, Nebraska, New Mexico, North Dakota, 
Oklahoma, South Dakota, Texas, Wisconsin and Wyoming. Under the 
Livestock Assistance Grant Program, FSA will provide grants to the State 
governments of these States to assist livestock producers who suffered 
forage losses as part of a farming operation in eligible counties. The 
amount of each grant will be based on the number of adult beef cattle 
and sheep from each eligible county uniformly prorated to insure that 
available funding is not exceeded. Producers in eligible counties in 
those States who suffered forage losses as part of a farming operation 
are eligible for assistance under these grants. Among other conditions 
of these grants, assistance provided by a State under such a grant to an 
applicant shall not exceed $10,000, except for general partnerships and 
joint ventures in which case assistance shall not exceed $10,000 times 
the number of members that constitute the general partnership or joint 
venture.

[72 FR 878, Jan. 9, 2007]



                Subpart I_2005	2007 Crop Disaster Program

    Source: 72 FR 72867, Dec. 21, 2007, unless otherwise noted.



Sec.  760.800  Applicability.

    This part sets forth the terms and conditions for the 2005-2007 Crop 
Disaster Program (2005-2007 CDP). CDP makes emergency financial 
assistance available to producers who have incurred crop losses in 
quantity or quality for eligible 2005, 2006, or 2007 crop years due to 
disasters as determined by the Secretary under provisions of Title IX of 
the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq 
Accountability Appropriations Act, 2007 (Pub. L. 110-28). However, to be 
eligible for assistance, the crop subject to the loss must have been 
planted or existed before February 28, 2007, or, in the case of 
prevented planting, would have been planted before February 28, 2007.



Sec.  760.801  Administration.

    (a) The program will be administered under the general supervision 
of the Deputy Administrator for Farm Programs and will be carried out in 
the field by FSA State and county committees.
    (b) State and county committees and representatives do not have the 
authority to modify or waive any of the provisions of this part.
    (c) The State committee will take any action required by this part 
that has not been taken by a county committee. The State committee will 
also:
    (1) Correct, or require a county committee to correct, any action 
taken by that FSA county committee that is not in accordance with this 
part; and
    (2) Require a county committee to withhold taking or reverse any 
action that is not in accordance with this part.
    (d) No provision or delegation to a State or county committee will 
prevent the Deputy Administrator for Farm Programs from determining any

[[Page 83]]

question arising under the program or from reversing or modifying any 
determination made by a State or county committee.
    (e) The Deputy Administrator for Farm Programs may authorize State 
and county committees to waive or modify non-statutory deadlines or 
other program requirements in cases where lateness or failure to meet 
such does not adversely affect the operation of the program.



Sec.  760.802  Definitions.

    The following definitions apply to this part. The definitions in 
parts 718 and 1400 of this title also apply, except where they conflict 
with the definitions in this section.
    Actual production means the total quantity of the crop appraised, 
harvested, or assigned, as determined by the FSA State or county 
committee in accordance with instructions issued by the Deputy 
Administrator for Farm Programs.
    Administrative fee means an amount the producer must pay for 
Noninsured Crop Disaster Assistance Program (NAP) enrollment for non-
insurable crops.
    Affected production means, with respect to quality losses, the 
harvested production of an eligible crop that has a documented quality 
reduction of 25 percent or more on the verifiable production record.
    Appraised production means production determined by FSA, or a 
company reinsured by the Federal Crop Insurance Corporation (FCIC), that 
was unharvested but was determined to reflect the crop's yield potential 
at the time of appraisal.
    Approved yield means the amount of production per acre, computed in 
accordance with FCIC's Actual Production History (APH) Program at part 
400, subpart G of this title or, for crops not included under part 400, 
subpart G of this title, the yield used to determine the guarantee. For 
crops covered under NAP, the approved yield is established according to 
part 1437 of this title. Only the approved yields based on production 
evidence submitted to FSA prior to May 25, 2007 will be used for 
purposes of the 2005-2007 CDP.
    Aquaculture means a value loss crop for the reproduction and rearing 
of aquatic species in controlled or selected environments including, but 
not limited to, ocean ranching, except private ocean ranching of Pacific 
salmon for profit in those States where such ranching is prohibited by 
law.
    Aquaculture facility means any land or structure including, but not 
limited to, a laboratory, concrete pond, hatchery, rearing pond, 
raceway, pen, incubator, or other equipment used in aquaculture.
    Aquaculture species means any aquaculture species as defined in part 
1437 of this title.
    Average market price means the price or dollar equivalent on an 
appropriate basis for an eligible crop established by FSA, or CCC, or 
RMA, as applicable, for determining payment amounts. Such price will be 
based on historical data of the harvest basis excluding transportation, 
storage, processing, packing, marketing, or other post-harvesting 
expenses. Average market prices are generally applicable to all 
similarly situated participants and are not established in response to 
individual participants. Accordingly, the established average market 
prices are not appealable under parts 11 or 780 of this title.
    Catastrophic risk protection means the minimum level of coverage 
offered by FCIC.
    CCC means the Commodity Credit Corporation.
    Controlled environment means, with respect to those crops for which 
a controlled environment is expected to be provided, including but not 
limited to ornamental nursery, aquaculture (including ornamental fish), 
and floriculture, an environment in which everything that can 
practicably be controlled with structures, facilities, growing media 
(including, but not limited to, water, soil, or nutrients) by the 
producer, is in fact controlled by the producer.
    Crop insurance means an insurance policy reinsured by FCIC under the 
provisions of the Federal Crop Insurance Act, as amended.
    Crop year means:

[[Page 84]]

    (1) For insured crops, the crop year as defined according to the 
applicable crop insurance policy;
    (2) For NAP covered crops, as provided in part 1437 of this title.
    Damaging weather means drought, excessive moisture, hail, freeze, 
tornado, hurricane, typhoon, excessive wind, excessive heat, weather-
related saltwater intrusion, weather-related irrigation water rationing, 
and earthquake and volcanic eruptions, or any combination. It also 
includes a related condition that occurs as a result of the damaging 
weather and exacerbates the condition of the crop, such as crop disease, 
and insect infestation.
    Deputy Administrator means the Deputy Administrator for Farm 
Programs, Farm Service Agency, U.S. Department of Agriculture or 
designee.
    Eligible crop means a crop insured by FCIC as defined in part 400 of 
this title, or included under NAP as defined under part 1437 of this 
title for which insurance or NAP coverage was obtained timely for the 
year which CDP benefits are sought.
    End use means the purpose for which the harvested crop is used, such 
as grain, hay, or seed.
    Expected production means, for an agricultural unit, the historic 
yield multiplied by the number of planted or prevented acres of the crop 
for the unit.
    FCIC means the Federal Crop Insurance Corporation, a wholly owned 
Government Corporation within USDA.
    Final planting date means the latest date, established by the Risk 
Management Agency (RMA) for insured crops, by which the crop must 
initially be planted in order to be insured for the full production 
guarantee or amount of insurance per acre. For NAP covered crops, the 
final planting date is as provided in part 1437 of this title.
    Flood prevention means:
    (1) For aquaculture species, placing the aquaculture facility in an 
area not prone to flood;
    (2) In the case of raceways, devices or structures designed for the 
control of water level; and
    (3) With respect to nursery crops, placing containerized stock in a 
raised area above expected flood level and providing draining 
facilities, such as drainage ditches or tile, gravel, cinder, or sand 
base.
    Good nursery growing practices means utilizing flood prevention, 
growing media, fertilization to obtain expected production results, 
irrigation, insect and disease control, weed, rodent and wildlife 
control, and over winterization storage facilities.
    Ground water means aqueous supply existing in an aquifer subsurface 
that is brought to the surface and made available for irrigation by 
mechanical means such as by pumps and irrigation wells.
    Growing media means:
    (1) For aquaculture species, media that provides nutrients necessary 
for the production of the aquaculture species and protects the 
aquaculture species from harmful species or chemicals or
    (2) For nursery crops, a well-drained media with a minimum 20 
percent air pore space and pH adjustment for the type of plant produced 
designed to prevent ``root rot.''
    Harvested means:
    (1) For insured crops, harvested as defined according to the 
applicable crop insurance policy;
    (2) For NAP covered single harvest crops, that a crop has been 
removed from the field, either by hand or mechanically, or by grazing of 
livestock;
    (3) For NAP covered crops with potential multiple harvests in 1 year 
or harvested over multiple years, that the producer has, by hand or 
mechanically, removed at least one mature crop from the field during the 
crop year;
    (4) For mechanically-harvested NAP covered crops, that the crop has 
been removed from the field and placed in a truck or other conveyance, 
except hay is considered harvested when in the bale, whether removed 
from the field or not. Grazed land will not be considered harvested for 
the purpose of determining an unharvested or prevented planting payment 
factor. A crop that is intended for mechanical harvest, but subsequently 
grazed and not mechanically harvested, will have an unharvested factor 
applied.
    Historic yield means, for a unit, the higher of the county average 
yield or the participant's approved yield.

[[Page 85]]

    (1) An insured participant's yield will be the higher of the county 
average yield listed or the approved federal crop insurance APH, for the 
disaster year.
    (2) NAP participant's yield will be the higher of the county average 
or approved NAP APH for the disaster year.
    Insurable crop means an agricultural crop (excluding livestock) for 
which the producer on a farm is eligible to obtain a policy or plan of 
insurance under the Federal Crop Insurance Act (7 U.S.C. 1501-1524).
    Marketing contract means a legally binding written contract between 
a purchaser and grower for the purpose of marketing a crop.
    Market value means:
    (1) The price(s) designated in the marketing contract; or
    (2) If not designated in a marketing contract, the rate established 
for quantity payments under Sec.  760.811.
    Maximum average loss level means the maximum average level of crop 
loss to be attributed to a participant without acceptable production 
records (verifiable or reliable). Loss levels are expressed in either a 
percent of loss or yield per acre, and are intended to reflect the 
amount of production that a participant would have been expected to make 
if not for the eligible disaster conditions in the area or county, as 
determined by the county committee in accordance with instructions 
issued by the Deputy Administrator.
    Multi-use crop means a crop intended for more than one end use 
during the calendar year such as grass harvested for seed, hay, and 
grazing.
    Multiple cropping means the planting of two or more different crops 
on the same acreage for harvest within the same crop year.
    Multiple planting means the planting for harvest of the same crop in 
more than one planting period in a crop year on different acreage.
    NASS means the National Agricultural Statistics Service.
    Net crop insurance indemnity means the indemnity minus the producer 
paid premium.
    NAP covered means a crop for which the participants obtained 
assistance under section 196 of the Federal Agriculture Improvement and 
Reform Act of 1996 (7 U.S.C. 7333).
    Normal mortality means the percentage of dead aquaculture species 
that would normally occur during the crop year.
    Person means person as defined in part 1400 of this title, and all 
rules with respect to the determination of a person found in that part 
are applicable to this part. However, the determinations made in this 
part in accordance with part 1400, subpart B, Person Determinations, of 
this title will also take into account any affiliation with any entity 
in which an individual or entity has an interest, regardless of whether 
or not such entities are considered to be actively engaged in farming.
    Planted acreage means land in which seed, plants, or trees have been 
placed, appropriate for the crop and planting method, at a correct 
depth, into a seedbed that has been properly prepared for the planting 
method and production practice normal to the USDA plant hardiness zone 
as determined by the county committee.
    Prevented planting means the inability to plant an eligible crop 
with proper equipment during the planting period as a result of an 
eligible cause of loss, as determined by FSA.
    Production means quantity of the crop or commodity produced 
expressed in a specific unit of measure including, but not limited to, 
bushels or pounds.
    Rate means price per unit of the crop or commodity.
    Recording county means, for a producer with farming interests in 
only one county, the FSA county office in which the producer's farm is 
administratively located or, for a producer with farming interests that 
are administratively located in more than one county, the FSA county 
office designated by FSA to control the payments received by the 
producer.
    Related condition means, with respect to a disaster, a condition 
that causes deterioration of a crop, such as insect infestation, plant 
disease, or aflatoxin, that is accelerated or exacerbated as a result of 
damaging weather, as determined in accordance with instructions issued 
by the Deputy Administrator.
    Reliable production records means evidence provided by the 
participant that

[[Page 86]]

is used to substantiate the amount of production reported when 
verifiable records are not available, including copies of receipts, 
ledgers of income, income statements of deposit slips, register tapes, 
invoices for custom harvesting, and records to verify production costs, 
contemporaneous measurements, truck scale tickets, and contemporaneous 
diaries that are determined acceptable by the county committee.
    Repeat crop means, with respect to production, a commodity that is 
planted or prevented from being planted in more than one planting period 
on the same acreage in the same crop year.
    RMA means the Risk Management Agency.
    Salvage value means the dollar amount or equivalent for the quantity 
of the commodity that cannot be marketed or sold in any recognized 
market for the crop.
    Secondary use means the harvesting of a crop for a use other than 
the intended use.
    Secondary use value means the value determined by multiplying the 
quantity of secondary use times the FSA or CCC-established price for 
that use.
    State committee means the FSA State committee.
    Surface irrigation water means aqueous supply anticipated for 
irrigation of agricultural crops absent an eligible disaster condition 
impacting either the aquifer or watershed. Surface irrigation water may 
result from feral sources or from irrigation districts.
    Tropical crops has the meaning assigned in part 1437 of this title.
    Tropical region has the meaning assigned in part 1437 of this title.
    Unharvested factor means a percentage established for a crop and 
applied in a payment formula to reduce the payment for reduced expenses 
incurred because commercial harvest was not performed. Unharvested 
factors are generally applicable to all similarly situated participants 
and are not established in response to individual participants. 
Accordingly established unharvested factors are not appealable under 
parts 11 and 780 of this title.
    Unit means, unless otherwise determined by the Deputy Administrator, 
basic unit as defined in part 457 of this title that, for ornamental 
nursery production, includes all eligible plant species and sizes.
    Unit of measure means:
    (1) For all insured crops, the FCIC-established unit of measure;
    (2) For all NAP covered crops, the established unit of measure, if 
available, used for the 2005, 2006, or 2007 NAP price and yield;
    (3) For aquaculture species, a standard unit of measure such as 
gallons, pounds, inches, or pieces, established by the State committee 
for all aquaculture species or varieties;
    (4) For turfgrass sod, a square yard;
    (5) For maple sap, a gallon;
    (6) For honey, pounds; and
    (7) For all other crops, the smallest unit of measure that lends 
itself to the greatest level of accuracy with minimal use of fractions, 
as determined by the State committee.
    United States means all 50 States of the United States, the 
Commonwealth of Puerto Rico, the Virgin Islands of the United States, 
and to the extent the Deputy Administrator determines it to be feasible 
and appropriate, Guam, American Samoa, the Commonwealth of the Northern 
Mariana Islands, and the former Trust Territory of the Pacific Islands, 
which include Palau, Federated States of Micronesia, and the Marshall 
Islands.
    USDA means the United States Department of Agriculture.
    USDA Plant Hardiness Zone means 11 regions or planting zones as 
defined by a 10 degree Fahrenheit difference in the average annual 
minimum temperature.
    Value loss crop has the meaning assigned in part 1437 of this title.
    Verifiable production record means:
    (1) For quantity losses, evidence that is used to substantiate the 
amount of production reported and that can be verified by FSA through an 
independent source; or
    (2) For quality losses, evidence that is used to substantiate the 
amount of production reported and that can be verified by FSA through an 
independent source including determined quality factors and the specific 
quantity covered by those factors.
    Yield means unit of production, measured in bushels, pounds, or 
other unit

[[Page 87]]

of measure, per area of consideration, usually measured in acres.



Sec.  760.803  Eligibility.

    (a) Participants will be eligible to receive disaster benefits under 
this part only if they incurred qualifying quantity or quality losses 
for the 2005, 2006, or 2007 crops, as further specified in this part, as 
a result of damaging weather or any related condition. Participants may 
not receive benefits with respect to volunteer stands of crops.
    (b) Payments may be made for losses suffered by an eligible 
participant who, at the time of application, is a deceased individual or 
is a dissolved entity if a representative, who currently has authority 
to enter into a contract for the participant, signs the 2005, 2006, or 
2007 Crop Disaster Program application. Participants must provide proof 
of the authority to sign legal documents for the deceased individual or 
dissolved entity. If a participant is now a dissolved general 
partnership or joint venture, all members of the general partnership or 
joint venture at the time of dissolution or their duly authorized 
representatives must sign the application for payment.
    (c) As a condition to receive benefits under this part, the 
Participant must have been in compliance with the Highly Erodible Land 
Conservation and Wetland Conservation provisions of part 12 of this 
title for the 2005, 2006, or 2007 crop year, as applicable, and must not 
otherwise be precluded from receiving benefits under parts 12 or 1400 of 
this title or any law.



Sec.  760.804  Time and method of application.

    (a) The 2005, 2006, 2007 Crop Disaster Program application must be 
submitted on a completed FSA-840, or such other form designated for such 
application purpose by FSA, in the FSA county office in the 
participant's control county office before the close of business on a 
date that will be announced by the Deputy Administrator.
    (b) Once signed by a participant, the application for benefits is 
considered to contain information and certifications of and pertaining 
to the participant regardless of who entered the information on the 
application.
    (c) The participant requesting benefits under this program certifies 
the accuracy and truthfulness of the information provided in the 
application as well as any documentation filed with or in support of the 
application. All information is subject to verification by FSA. For 
example, as specified in Sec.  760.818(f), the participant may be 
required to provide documentation to substantiate and validate quality 
standards and marketing contract prices. Refusal to allow FSA or any 
agency of the Department of Agriculture to verify any information 
provided will result in the participant's forfeiting eligibility under 
this program. Furnishing required information is voluntary; however 
without it, FSA is under no obligation to act on the application or 
approve benefits. Providing a false certification to the government is 
punishable by imprisonment, fines, and other penalties.
    (d) FSA may require the participant to submit any additional 
information it deems necessary to implement or determine any eligibility 
provision of this part. For example, as specified in Sec.  760.818(f), 
the participant may be required to provide documentation to substantiate 
and validate quality standards and marketing contract prices.
    (e) The application submitted in accordance with paragraph (a) of 
this section is not considered valid and complete for issuance of 
payment under this part unless FSA determines all the applicable 
eligibility provisions have been satisfied and the participant has 
submitted all of following completed forms:
    (1) If Item 16 on FSA-840 is answered ``YES,'' FSA-840M, Crop 
Disaster Program for Multiple Crop--Same Acreage Certification;
    (2) CCC-502, Farm Operating Plan for Payment Eligibility;
    (3) CCC-526, Payment Eligibility Average Adjusted Gross Income 
Certification;
    (4) AD-1026, Highly Erodible Land Conservation (HELC) and Wetland 
Conservation Certification; and
    (5) FSA-578, Report of Acreage.
    (f) Application approval and payment by FSA does not relieve a 
participant

[[Page 88]]

from having to submit any form required, but not filed, according to 
paragraph (e) of this section.



Sec.  760.805  Limitations on payments and other benefits.

    (a) A participant may receive benefits for crop losses for only one 
of the 2005, 2006, or 2007 crop years as specified under this part.
    (b) Payments will not be made under this part for grazing losses.
    (c) Payments determined to be issued are considered due and payable 
not later than 60 days after a participant's application is completed 
with all information necessary for FSA to determine producer eligibility 
for benefits.
    (d) FSA may divide and classify crops based on loss susceptibility, 
yield, and other factors.
    (e) No person, as defined by part 1400 subpart B of this title, may 
receive more than a total of $80,000 in disaster benefits under this 
part. In applying the $80,000 per person payment limitation, regardless 
of whether 2005, 2006, or 2007 crop year benefits are at issue or 
sought, the most restrictive ``person'' determination for the 
participant in the years 2005, 2006, and 2007, will be used to limit 
benefits.
    (f) No participant may receive disaster benefits under this part in 
an amount that exceeds 95 percent of the value of the expected 
production for the relevant period as determined by FSA. Accordingly, 
the sum of the value of the crop not lost, if any; the disaster payment 
received under this part; and any crop insurance payment or payments 
received under the NAP for losses to the same crop, cannot exceed 95 
percent of what the crop's value would have been if there had been no 
loss.
    (g) An individual or entity whose adjusted gross income is in excess 
of $2.5 million, as defined by and determined under part 1400 subpart G 
of this title, is not eligible to receive disaster benefits under this 
part.
    (h) Any participant in a county eligible for either of the following 
programs must complete a duplicate benefits certification. If the 
participant received a payment authorized by either of the following, 
the amount of that payment will be reduced from the calculated 2005-2007 
CDP payment:
    (1) The Hurricane Indemnity Program (subpart B of this part);
    (2) The Hurricane Disaster Programs (subparts D, E, F, and G of part 
1416 of this title);
    (3) The 2005 Louisiana Sugarcane Hurricane Disaster Assistance 
Program; or
    (4) The 2005 Crop Florida Sugarcane Disaster Program.



Sec.  760.806  Crop eligibility requirements.

    (a) A participant on a farm is eligible for assistance under this 
section with respect to losses to an insurable commodity or NAP if the 
participant:
    (1) In the case of an insurable commodity, obtained a policy or plan 
of insurance under the Federal Crop Insurance Act for the crop incurring 
the losses; or
    (2) In the case of a NAP covered crop, filed the required paperwork 
and paid the administrative fee by the applicable filing deadline, for 
the noninsurable commodity under section 196 of the Federal Agriculture 
Improvement and Reform Act of 1996 for the crop incurring the losses.
    (b) The reasons a participant either elected not to have coverage or 
did not have coverage mentioned in paragraphs (a)(1) or (2) of this 
section are not relevant to the determination of the participant's 
ineligibility under this section. In addition, such reasons for not 
having crop insurance coverage have no bearing for consideration under 
part 718, subpart D of this chapter.



Sec.  760.807  Miscellaneous provisions.

    (a) A person is not eligible to receive disaster assistance under 
this part if it is determined by FSA that the person has:
    (1) Adopted any scheme or other device that tends to defeat the 
purpose of this part;
    (2) Made any fraudulent representation;
    (3) Misrepresented any fact affecting a program determination;
    (4) Is ineligible under Sec.  1400.5 of this title; or
    (5) Does not have entitlement to an ownership share of the crop.

[[Page 89]]

    (i) Growers growing eligible crops under contract for crop owners 
are not eligible unless the grower can be determined to have a share of 
the crop.
    (ii) Any verbal or written contract that precludes the grower from 
having an ownership share renders the grower ineligible for benefits 
under this part.
    (b) A person ineligible under Sec.  1437.15(c) of this title for any 
year is likewise ineligible for benefits under this part for that year 
or years.
    (c) A person ineligible under Sec.  400.458 of this title for any 
year is likewise ineligible for benefits under this part for that year 
or years.
    (d) All persons with a financial interest in the operation receiving 
benefits under this part are jointly and severally liable for any 
refund, including related charges, which is determined to be due FSA for 
any reason.
    (e) In the event that any request for assistance or payment under 
this part resulted from erroneous information or a miscalculation, the 
assistance or payment will be recalculated and any excess refunded to 
FSA with interest to be calculated from the date of the disbursement to 
the producer.
    (f) The liability of anyone for any penalty or sanction under or in 
connection with this part, or for any refund to FSA or related charge is 
in addition to any other liability of such person under any civil or 
criminal fraud statute or any other provision of law including, but not 
limited to: 18 U.S.C. 286, 287, 371, 641, 651, 1001, and 1014; 15 U.S.C. 
714; and 31 U.S.C. 3729.
    (g) The regulations in parts 11 and 780 of this title apply to 
determinations under this part.
    (h) Any payment to any person will be made without regard to 
questions of title under State law and without regard to any claim or 
lien against the crop, or its proceeds.
    (i) For the purposes of the effect of lien on eligibility for 
Federal programs (28 U.S.C. 3201(e)), FSA waives the restriction on 
receipt of funds or benefits under this program but only as to 
beneficiaries who, as a condition of such waiver, agree to apply the 
benefits received under this part to reduce the amount of the judgment 
lien.
    (j) Under this program, participants are either eligible or 
ineligible. Participants in general, do not render performance or need 
to comply. They either suffered eligible losses or they did not. 
Accordingly, the provisions of Sec.  718.304 of this chapter do not 
apply to this part.



Sec.  760.808  General provisions.

    (a) For calculations of loss, the participant's existing unit 
structure will be used as the basis for the calculation established in 
accordance with:
    (1) For insured crops, part 457 of this title; or
    (2) For NAP covered crops, part 1437 of this title.
    (b) County average yield for loss calculations will be the average 
of the 2001 through 2005 official county yields established by FSA, 
excluding the years with the highest and lowest yields, respectively.
    (c) County committees will assign production or reduce the historic 
yield when the county committee determines:
    (1) An acceptable appraisal or record of harvested production does 
not exist;
    (2) The loss is due to an ineligible cause of loss or practices, 
soil type, climate, or other environmental factors that cause lower 
yields than those upon which the historic yield is based;
    (3) The participant has a contract providing a guaranteed payment 
for all or a portion of the crop; or
    (4) The crop was planted beyond the normal planting period for the 
crop.
    (d) The county committee will establish a maximum average loss level 
that reflects the amount of production producers would have produced if 
not for the eligible damaging weather or related conditions in the area 
or county for the same crop. The maximum average loss level for the 
county will be expressed as either a percent of loss or yield per acre. 
The maximum average loss level will apply when:
    (1) Unharvested acreage has not been appraised by FSA, or a company 
reinsured by FCIC; or
    (2) Acceptable production records for harvested acres are not 
available from any source.
    (e) Assignment of production or reduction in yield will apply for 
practices that result in lower yields than those for which the historic 
yield is based.

[[Page 90]]



Sec.  760.809  Eligible damaging conditions.

    (a) Except as provided in paragraphs (b) and (c) of this section, to 
be eligible for benefits under this part the loss of the crop, or 
reduction in quality, or prevented planting must be due to damaging 
weather or related conditions as defined in Sec.  760.802.
    (b) Benefits are not available under this part for any losses in 
quantity or quality, or prevented planting due to:
    (1) Poor farming practices;
    (2) Poor management decisions; or
    (3) Drifting herbicides.
    (c) With the exception of paragraph (d) of this section, in all 
cases, the eligible damaging condition must have directly impacted the 
specific crop or crop acreage during its planting or growing period.
    (d) If FSA has determined that there has been an eligible loss of 
surface irrigation water due to drought and such loss of surface 
irrigation water impacts eligible crop acreage, FSA may approve 
assistance to the extent permitted by section 760.814.



Sec.  760.810  Qualifying 2005, 2006, or 2007 quantity crop losses.

    (a) To receive benefits under this part, the county committee must 
determine that because of eligible damaging weather or related condition 
specifically impacting the crop or crop acreage, the participant with 
respect to the 2005, 2006, or 2007 crop:
    (1) Was prevented from planting a crop;
    (2) Sustained a loss in excess of 35 percent of the expected 
production of a crop; or
    (3) Sustained a loss in excess of 35 percent of the value for value 
loss crops.
    (b) Qualifying losses under this part do not include losses:
    (1) For the 2007 crop, those acres planted, or in the case of 
prevented planting, would have been planted, on or after February 28, 
2007;
    (2) That are determined by FSA to be the result of poor management 
decisions, poor farming practices, or drifting herbicides;
    (3) That are the result of the failure of the participant to re-seed 
or replant the same crop in the county where it is customary to re-seed 
or replant after a loss;
    (4) That are not as a result of a damaging weather or a weather 
related condition specifically impacting the crop or crop acreage;
    (5) To crops not intended for harvest in crop year 2005, 2006, or 
2007;
    (6) Of by-products resulting from processing or harvesting a crop, 
such as cottonseed, peanut shells, wheat, or oat straw;
    (7) To home gardens;
    (8) That are a result of water contained or released by any 
governmental, public, or private dam or reservoir project if an easement 
exists on the acreage affected for the containment or release of the 
water; or
    (9) If losses could be attributed to conditions occurring outside of 
the applicable crop year growing season.
    (c) Qualifying losses under this part for nursery stock will not 
include losses:
    (1) For the 2007 crop, that nursery inventory acquired on or after 
February 28, 2007;
    (2) Caused by a failure of power supply or brownouts;
    (3) Caused by the inability to market nursery stock as a result of 
lack of compliance with State and local commercial ordinances and laws, 
quarantine, boycott, or refusal of a buyer to accept production;
    (4) Caused by fire unless directly related to an eligible natural 
disaster;
    (5) Affecting crops where weeds and other forms of undergrowth in 
the vicinity of the nursery stock have not been controlled; or
    (6) Caused by the collapse or failure of buildings or structures.
    (d) Qualifying losses under this part for honey, where the honey 
production by colonies or bees was diminished, will not include losses:
    (1) For the 2007 crop, for production from those bees acquired on or 
after February 28, 2007;
    (2) Where the inability to extract was due to the unavailability of 
equipment, the collapse or failure of equipment, or apparatus used in 
the honey operation;
    (3) Resulting from storage of honey after harvest;
    (4) To honey production because of bee feeding;

[[Page 91]]

    (5) Caused by the application of chemicals;
    (6) Caused by theft, fire, or vandalism;
    (7) Caused by the movement of bees by the producer or any other 
person; or
    (8) Due to disease or pest infestation of the colonies.
    (e) Qualifying losses for other value loss crops, except nursery, 
will not include losses for the 2007 crop that were acquired on or after 
February 28, 2007.
    (f) Loss calculations will take into account other conditions and 
adjustments provided for in this part.



Sec.  760.811  Rates and yields; calculating payments.

    (a)(1) Payments made under this part to a participant for a loss of 
quantity on a unit with respect to yield-based crops are determined by 
multiplying the average market price times 42 percent, times the loss of 
production which exceeds 35 percent of the expected production, as 
determined by FSA, of the unit.
    (2) Payments made under this part to a participant for a quantity 
loss on a unit with respect to value-based crops are determined by 
multiplying the payment rate established for the crop by FSA times the 
loss of value that exceeds 35 percent of the expected production value, 
as determined by FSA, of the unit.
    (3) As determined by FSA, additional quality loss payments may be 
made using a 25 percent quality loss threshold. The quality loss 
threshold is determined according to Sec.  760.817.
    (b) Payment rates for the 2005, 2006, or 2007 year crop losses will 
be 42 percent of the average market price.
    (c) Separate payment rates and yields for the same crop may be 
established by the State committee as authorized by the Deputy 
Administrator, when there is supporting data from NASS or other sources 
approved by FSA that show there is a significant difference in yield or 
value based on a distinct and separate end use of the crop. Despite 
potential differences in yield or values, separate rates or yields will 
not be established for crops with different cultural practices, such as 
those grown organically or hydroponically.
    (d) Production from all end uses of a multi-use crop or all 
secondary uses for multiple market crops will be calculated separately 
and summarized together.
    (e) Each eligible participant's share of a disaster payment will be 
based on the participant's ownership entitlement share of the crop or 
crop proceeds, or, if no crop was produced, the share of the crop the 
participant would have received if the crop had been produced. If the 
participant has no ownership share of the crop, the participant is 
ineligible for assistance under this part.
    (f) When calculating a payment for a unit loss:
    (1) An unharvested payment factor will be applied to crop acreage 
planted but not harvested;
    (2) A prevented planting factor will be applied to any prevented 
planted acreage eligible for payment; and
    (3) Unharvested payment factors may be adjusted if costs normally 
associated with growing the crop are not incurred.



Sec.  760.812  Production losses; participant responsibility.

    (a) Where available and determined accurate by FSA, RMA loss records 
will be used for insured crops.
    (b) If RMA loss records are not available, or if the FSA county 
committee determines the RMA loss records are inaccurate or incomplete, 
or if the FSA county committee makes inquiry, participants are 
responsible for:
    (1) Retaining or providing, when required, the best verifiable or 
reliable production records available for the crop;
    (2) Summarizing all the production evidence;
    (3) Accounting for the total amount of unit production for the crop, 
whether or not records reflect this production;
    (4) Providing the information in a manner that can be easily 
understood by the county committee; and
    (5) Providing supporting documentation if the county committee has 
reason to question the damaging weather event or question whether all 
production has been accounted for.

[[Page 92]]

    (c) In determining production under this section, the participant 
must supply verifiable or reliable production records to substantiate 
production to the county committee. If the eligible crop was sold or 
otherwise disposed of through commercial channels, production records 
include: commercial receipts; settlement sheets; warehouse ledger 
sheets; load summaries; or appraisal information from a loss adjuster 
acceptable to FSA. If the eligible crop was farm-stored, sold, fed to 
livestock, or disposed of in means other than commercial channels, 
production records for these purposes include: truck scale tickets; 
appraisal information from a loss adjuster acceptable to FSA; 
contemporaneous diaries; or other documentary evidence, such as 
contemporaneous measurements.
    (d) Participants must provide all records for any production of a 
crop that is grown with an arrangement, agreement, or contract for 
guaranteed payment.



Sec.  760.813  Determination of production.

    (a) Production under this part includes all harvested production, 
unharvested appraised production, and assigned production for the total 
planted acreage of the crop on the unit.
    (b) The harvested production of eligible crop acreage harvested more 
than once in a crop year includes the total harvested production from 
all these harvests.
    (c) If a crop is appraised and subsequently harvested as the 
intended use, the actual harvested production must be taken into account 
to determine benefits. FSA will analyze and determine whether a 
participant's evidence of actual production represents all that could or 
would have been harvested.
    (d) For all crops eligible for loan deficiency payments or marketing 
assistance loans with an intended use of grain but harvested as silage, 
ensilage, cobbage, hay, cracked, rolled, or crimped, production will be 
adjusted based on a whole grain equivalent as established by FSA.
    (e) For crops with an established yield and market price for 
multiple intended uses, a value will be calculated by FSA with respect 
to the intended use or uses for disaster purposes based on historical 
production and acreage evidence provided by the participant and FSA will 
determine the eligible acres for each use.
    (f) For crops sold in a market that is not a recognized market for 
the crop with no established county average yield and average market 
price, 42 percent of the salvage value received will be deducted from 
the disaster payment.
    (g) If a participant does not receive compensation based upon the 
quantity of the commodity delivered to a purchaser, but has an agreement 
or contract for guaranteed payment for production, the determination of 
the production will be the greater of the actual production or the 
guaranteed payment converted to production as determined by FSA.
    (h) Production that is commingled between units before it was a 
matter of record or combination of record and cannot be separated by 
using records or other means acceptable to FSA will be prorated to each 
respective unit by FSA. Commingled production may be attributed to the 
applicable unit, if the participant made the unit production of a 
commodity a matter of record before commingling and does any of the 
following, as applicable:
    (1) Provides copies of verifiable documents showing that production 
of the commodity was purchased, acquired, or otherwise obtained from 
beyond the unit;
    (2) Had the production measured in a manner acceptable to the county 
committee; or
    (3) Had the current year's production appraised in a manner 
acceptable to the county committee.
    (i) The county committee will assign production for the unit when 
the county committee determines that:
    (1) The participant has failed to provide adequate and acceptable 
production records;
    (2) The loss to the crop is because of a disaster condition not 
covered by this part, or circumstances other than natural disaster, and 
there has not otherwise been an accounting of this ineligible cause of 
loss;
    (3) The participant carries out a practice, such as multiple 
cropping, that generally results in lower yields than the established 
historic yields;

[[Page 93]]

    (4) The participant has a contract to receive a guaranteed payment 
for all or a portion of the crop;
    (5) A crop was late-planted;
    (6) Unharvested acreage was not timely appraised; or
    (7) Other appropriate causes exist for such assignment as determined 
by the Deputy Administrator.
    (j) For peanuts, the actual production is all peanuts harvested for 
nuts, regardless of their disposition or use, as adjusted for low 
quality.
    (k) For tobacco, the actual production is the sum of the tobacco: 
marketed or available to be marketed; destroyed after harvest; and 
produced but unharvested, as determined by an appraisal.



Sec.  760.814  Calculation of acreage for crop losses other than prevented planted.

    (a) Payment acreage of a crop is limited to the lesser of insured 
acreage or NAP covered acreage of the crop, as applicable, or actual 
acreage of the crop planted for harvest.
    (b) In cases where there is a repeat crop or a multiple planted crop 
in more than one planting period, or if there is multiple cropped 
acreage meeting criteria established in paragraph (c) or (d) of this 
section, each of these crops may be considered separate crops if the 
county committee determines that all of the following conditions are 
met:
    (1) Were planted with the intent to harvest;
    (2) Were planted within the normal planting period for that crop;
    (3) Meet all other eligibility provisions of this part including 
good farming practices; and
    (4) Could reach maturity if each planting was harvested or would 
have been harvested.
    (c) In cases where there is multiple-cropped acreage, each crop may 
be eligible for disaster assistance separately if both of the following 
conditions are met:
    (1) The specific crops are approved by the State committee as 
eligible multiple-cropping practices in accordance with procedures 
approved by the Deputy Administrator and separately meet all 
requirements, including insurance or NAP requirements ; and
    (2) The farm containing the multiple-cropped acreage has a history 
of successful multiple cropping more than one crop on the same acreage 
in the same crop year, in the year previous to the disaster, or at least 
2 of the 4 crop years immediately preceding the disaster crop year based 
on timely filed crop acreage reports.
    (d) A participant with multiple-cropped acreage not meeting the 
criteria in paragraph (c) of this section may be eligible for disaster 
assistance on more than one crop if the participant has verifiable 
records establishing a history of carrying out a successful multiple-
cropping practice on the specific crops for which assistance is 
requested. All required records acceptable to FSA as determined by the 
Deputy Administrator must be provided before payments are issued.
    (e) A participant with multiple-cropped acreage not meeting the 
criteria in paragraphs (c) or (d) of this section must select the crop 
for which assistance will be requested. If more than one participant has 
an interest in the multiple cropped acreage, all participants must agree 
to the crop designated for payment by the end of the application period 
or no payment will be approved for any crop on the multiple-cropped 
acreage.
    (f) Benefits under this part apply to irrigated crops where, in 
cases determined by the Deputy Administrator, acreage was affected by a 
lack of surface irrigation water due to drought or contamination of 
ground water or surface irrigation water due to saltwater intrusion. In 
no case is a loss of ground water, for any reason, an eligible cause of 
loss.



Sec.  760.815  Calculation of prevented planted acreage.

    (a) When determining losses under this part, prevented planted 
acreage will be considered separately from planted acreage of the same 
crop.
    (b) For insured crops, or NAP covered crops, as applicable, disaster 
payments under this part for prevented planted acreage will not be made 
unless RMA or FSA, as applicable, documentation indicates that the 
eligible participant received a prevented planting payment

[[Page 94]]

under either NAP or the RMA-administered program.
    (c) The participant must prove, to the satisfaction of the county 
committee, an intent to plant the crop and that such crop could not be 
planted because of an eligible disaster. The county committee must be 
able to determine the participant was prevented from planting the crop 
by an eligible disaster that:
    (1) Prevented other producers from planting on acreage with similar 
characteristics in the surrounding area;
    (2) Occurred after the previous planting period for the crop; and
    (3) Unless otherwise approved by the Deputy Administrator, began no 
earlier than the planting season for that crop.
    (d) Prevented planted disaster benefits under this part do not apply 
to:
    (1) Acreage not insured or NAP covered;
    (2) Any acreage on which a crop other than a cover crop was 
harvested, hayed, or grazed during the crop year;
    (3) Any acreage for which a cash lease payment is received for the 
use of the acreage the same crop year, unless the county committee 
determines the lease was for haying and grazing rights only and was not 
a lease for use of the land;
    (4) Acreage for which the participant or any other person received a 
prevented planted payment for any crop for the same acreage, excluding 
share arrangements;
    (5) Acreage for which the participant cannot provide verifiable 
proof to the county committee that inputs such as seed, chemicals, and 
fertilizer were available to plant and produce a crop with the 
expectation of producing at least a normal yield; and
    (6) Any other acreage for which, for whatever reason, there is cause 
to question whether the crop could have been planted for a successful 
and timely harvest, or for which prevented planting credit is not 
allowed under the provisions of this part.
    (e) Prevented planting payments are not provided on acreage that had 
either a previous or subsequent crop planted in the same crop year on 
the acreage, unless the county committee determines that all of the 
following conditions are met:
    (1) There is an established practice of planting two or more crops 
for harvest on the same acreage in the same crop year;
    (2) Both crops could have reached maturity if each planting was 
harvested or would have been harvested;
    (3) Both the initial and subsequent planted crops were planted or 
prevented planting within the normal planting period for that crop;
    (4) Both the initial and subsequent planted crops meet all other 
eligibility provisions of this part including good farming practices; 
and
    (5) The specific crops meet the eligibility criteria for a separate 
crop designation as a repeat or approved multiple cropping practice set 
out in Sec.  760.814.
    (f)(1) Disaster benefits under this part do not apply to crops where 
the prevented planted acreage was affected by a disaster that was caused 
by drought unless on the final planting date or the late planting period 
for non-irrigated acreage, the area that was prevented from being 
planted had insufficient soil moisture for germination of seed and 
progress toward crop maturity because of a prolonged period of dry 
weather;
    (2) Verifiable information collected by sources whose business or 
purpose is to record weather conditions, including, but not limited to, 
local weather reporting stations of the U.S. National Weather Service.
    (g) Prevented planting benefits under this part apply to irrigated 
crops where adequate irrigation facilities were in place before the 
eligible disaster and the acreage was prevented from being planted due 
to a lack of water resulting from drought conditions or contamination by 
saltwater intrusion of an irrigation supply resulting from drought 
conditions.
    (h) For NAP covered crops, prevented planting provisions apply 
according to part 718 of this chapter.
    (i) Late-filed crop acreage reports for prevented planted acreage in 
previous years are not acceptable for CDP purposes.

[[Page 95]]



Sec.  760.816  Value loss crops.

    (a) Notwithstanding any other provisions of this part, this section 
applies to value loss crops and tropical crops. Unless otherwise 
specified, all the eligibility provisions of part 1437 of this title 
apply to value loss crops and tropical crops under this part.
    (b) For value loss crops, benefits under this part are calculated 
based on the loss of value at the time of the damaging weather or 
related condition, as determined by FSA.
    (c) For tropical crops:
    (1) CDP benefits for 2005 are calculated according to general 
provisions of part 1437, but not subpart F, of this title.
    (2) CDP benefits for 2006 and 2007 are calculated according to part 
1437, subpart F of this title.



Sec.  760.817  Quality losses for 2005, 2006, and 2007 crops.

    (a) Subject to other provisions of this part, assistance will be 
made available to participants determined eligible under this section 
for crop quality losses of 25 percent or greater of the value that all 
affected production of the crop would have had if the crop had not 
suffered a quality loss.
    (b) The amount of payment for a quality loss will be equal to 65 
percent of the quantity of the crop affected by the quality loss, not to 
exceed expected production based on harvested acres, multiplied by 42 
percent of the per unit average market value based on percentage of 
quality loss for the crop as determined by the Deputy Administrator.
    (c) This section applies to all crops eligible for 2005, 2006, and 
2007 crop disaster assistance under this part, with the exceptions of 
value loss crops, honey, and maple sap, and applies to crop production 
that has a reduced economic value due to the reduction in quality.
    (d) Participants may not be compensated under this section to the 
extent that such participants have received assistance under other 
provisions of this part, attributable in whole or in part to diminished 
quality.



Sec.  760.818  Marketing contracts.

    (a) A marketing contract must meet all of the conditions outlined in 
paragraphs (b), (c), and (d) of this section.
    (b) A marketing contract, at a minimum, must meet all of the 
following conditions:
    (1) Be a legal contract in the State where executed;
    (2) Specify the commodity under contract;
    (3) Specify crop year;
    (4) Be signed by both the participant, or legal representative, and 
the purchaser of the specified commodity;
    (5) Include a commitment to deliver the contracted quantity;
    (6) Include a commitment to purchase the contracted quantity that 
meets specified minimum quality standards and other criteria as 
specified;
    (7) Define a determinable quantity by containing either a:
    (i) Specified production quantity or
    (ii) A specified acreage for which production quantity can be 
calculated;
    (8) Define a determinable price by containing either a:
    (i) Specified price or
    (ii) Method to determine such a price;
    (9) Contain a relationship between the price and the quality using 
either:
    (i) Specified quality standards or
    (ii) A method to determine such quality standards from published 
third party data; and
    (10) Have been executed within 10 days after:
    (i) End of insurance period for insured crops or
    (ii) Normal harvest date for NAP covered crops as determined by FSA.
    (c) The purchaser of the commodity specified in the marketing 
contract must meet at least one of the following:
    (1) Be a licensed commodity warehouseman;
    (2) Be a business enterprise regularly engaged in the processing of 
a commodity, that possesses all licenses and permits for marketing the 
commodity required by the State in which it operates, and that possesses 
or has contracted for facilities with enough equipment to accept and 
process the

[[Page 96]]

commodity within a reasonable amount of time after harvest; or
    (3) Is able to physically receive the harvested production.
    (d) In order for the commodity specified in the marketing contract 
to be considered sold pursuant to the marketing contract, the commodity 
must have been produced by the participant in the crop year specified in 
the contract, and at least one of the following conditions must be met:
    (1) Commodity was sold under the terms of the contract or
    (2) Participant attempted to deliver the commodity to the purchaser, 
but the commodity was rejected due to quality factors as specified in 
the contract.
    (e) The amount of payment for affected production, as determined in 
Sec.  760.817(b), sold pursuant to one or more marketing contracts will 
take into consideration the marketing contract price as determined by 
FSA.
    (f) County committees have the authority to require a participant to 
provide necessary documentation, which may include, but is not limited 
to, previous marketing contracts fulfilled, to substantiate and validate 
quality standards in paragraph (b)(9) of this section and marketing 
contract price received for the commodity for which crop quality loss 
assistance is requested. In cases where the county committee has reason 
to believe the participant lacks the capacity or history to fulfill the 
quality provisions of the marketing contract the county committee will 
require such documentation.



Sec.  760.819  Misrepresentation, scheme, or device.

    (a) A person is ineligible to receive assistance under this part if 
it is determined that such person has:
    (1) Adopted any scheme or device that tends to defeat the purpose of 
this program;
    (2) Made any fraudulent representation under this program;
    (3) Misrepresented any fact affecting a program or person 
determination; or
    (4) Has violated or been determined ineligible under Sec.  1400.5 of 
this title.



Sec.  760.820  Offsets, assignments, and debt settlement.

    (a) Except as provided in paragraph (b) of this section, any payment 
to any person will be made without regard to questions of title under 
State law and without regard to any claim or lien against the crop, or 
proceeds, in favor of the owner or any other creditor except agencies of 
the U.S. Government. The regulations governing offsets and withholdings 
found at part 1403 of this title apply to any payments made under this 
part.
    (b) Any participant entitled to any payment may assign any payments 
in accordance with regulations governing the assignment of payments 
found at part 1404 of this title.
    (c) A debt or claim may be settled according to part 792 of this 
chapter.



Sec.  760.821  Compliance with highly erodible land and wetland conservation.

    (a) The highly erodible land and wetland conservation provisions of 
part 12 of this title apply to the receipt of disaster assistance for 
2005, 2006, and 2007 crop losses made available under this authority.
    (b) Eligible participants must be in compliance with the highly 
erodible land and wetland conservation compliance provisions for the 
year for which financial assistance is requested.



             Subpart J_2005	2007 Livestock Indemnity Program

    Source: 72 FR 72867, Dec. 21, 2007, unless otherwise noted.



Sec.  760.900  Administration.

    (a) The regulations in this subpart specify the terms and conditions 
applicable to the 2005-2007 Livestock Indemnity Program (2005-2007 LIP), 
which will be administered under the general supervision and direction 
of the Administrator, FSA.
    (b) FSA representatives do not have authority to modify or waive any 
of the provisions of the regulations of this subpart.
    (c) The State FSA committee will take any action required by the 
regulations of this subpart that the county

[[Page 97]]

FSA committee has not taken. The State FSA committee will 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 subpart; or
    (2) Require a county committee to withhold taking any action that is 
not in accordance with this subpart.
    (d) No delegation to a State or county FSA committee will preclude 
the Deputy Administrator for Farm Programs from determining any question 
arising under the program or from reversing or modifying any 
determination made by a State or county FSA committee.



Sec.  760.901  Applicability.

    (a) This subpart establishes the terms and conditions under which 
the 2005-2007 LIP will be administered under Title IX of the U.S. Troop 
Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability 
Appropriations Act, 2007 (Pub. L. 110-28) for eligible counties as 
specified in Sec.  760.902(a).
    (b) Eligible livestock owners and contract growers will be 
compensated in accordance with Sec.  760.909 for eligible livestock 
deaths that occurred in eligible counties as a direct result of an 
eligible disaster event. Drought is not an eligible disaster event 
except when anthrax, as a related condition that occurs as a result of 
drought, results in the death of eligible livestock.



Sec.  760.902  Eligible counties and disaster periods.

    Counties are eligible for agricultural assistance under the 2005-
2007 LIP if they received a timely Presidential designation, a timely 
Secretarial declaration, or a qualifying Administrator's Physical Loss 
Notice (APLN) determination in a county otherwise the subject of a 
timely Presidential declaration, or are counties contiguous to such 
counties. Presidential designations and Secretarial declarations will be 
considered timely only if made after January 1, 2005, and before 
February 28, 2007. Eligible counties, disaster events, and disaster 
periods are listed at http://disaster.fsa.usda.gov.



Sec.  760.903  Definitions.

    The following definitions apply to this subpart. The definitions in 
parts 718 and 1400 of this title also apply, except where they conflict 
with the definitions in this section.
    Adult beef bull means a male beef bovine animal that was at least 2 
years old and used for breeding purposes before it died.
    Adult beef cow means a female beef bovine animal that had delivered 
one or more offspring before dying. A first-time bred beef heifer is 
also considered an adult beef cow if it was pregnant at the time it 
died.
    Adult buffalo and beefalo bull means a male animal of those breeds 
that was at least 2 years old and used for breeding purposes before it 
died.
    Adult buffalo and beefalo cow means a female animal of those breeds 
that had delivered one or more offspring before dying. A first-time bred 
buffalo or beefalo heifer is also considered an adult buffalo or beefalo 
cow if it was pregnant at the time it died.
    Adult dairy bull means a male dairy breed bovine animal at least 2 
years old used primarily for breeding dairy cows before it died.
    Adult dairy cow means a female bovine animal used for the purpose of 
providing milk for human consumption that had delivered one or more 
offspring before dying. A first-time bred dairy heifer is also 
considered an adult dairy cow if it was pregnant at the time it died.
    Agricultural operation means a farming operation.
    Application means the ``2005-2007 Livestock Indemnity Program'' 
form.
    Application period means the date established by the Deputy 
Administrator for Farm Programs for participants to apply for program 
benefits.
    Buck means a male goat.
    Catfish means catfish grown as food for human consumption by a 
commercial operator on private property in water in a controlled 
environment.
    Commercial use means used in the operation of a business activity 
engaged in as a means of livelihood for profit by the eligible producer 
to apply for program benefits.
    Contract means, with respect to contracts for the handling of 
livestock, a

[[Page 98]]

written agreement between a livestock owner and another individual or 
entity setting the specific terms, conditions, and obligations of the 
parties involved regarding the production of livestock or livestock 
products.
    Controlled environment means an environment in which everything that 
can practicably be controlled by the participant with structures, 
facilities, and growing media (including, but not limited to, water and 
nutrients) and was in fact controlled by the participant at the time of 
the disaster.
    Crawfish means crawfish grown as food for human consumption by a 
commercial operator on private property in water in a controlled 
environment.
    Deputy Administrator means the Deputy Administrator for Farm 
Programs, Farm Service Agency, U.S. Department of Agriculture or the 
designee.
    Doe means a female goat.
    Equine animal means a domesticated horse, mule, or donkey.
    Ewe means a female sheep.
    Farming operation means a business enterprise engaged in producing 
agricultural products.
    Goat means a domesticated, ruminant mammal of the genus Capra, 
including Angora goats. Goats are further defined by sex (bucks and 
does) and age (kids).
    Kid means a goat less than 1 year old.
    Lamb means a sheep less than 1 year old.
    Livestock owner means one having legal ownership of the livestock 
for which benefits are being requested on the day such livestock died 
due to an eligible disaster.
    Non-adult beef cattle means a bovine that does not meet the 
definition of adult beef cow or bull. Non-adult beef cattle are further 
delineated by weight categories of less than 400 pounds, and 400 pounds 
or more at the time they died.
    Non-adult buffalo or beefalo means an animal of those breeds that 
does not meet the definition of adult buffalo/beefalo cow or bull. Non-
adult buffalo or beefalo are further delineated by weight categories of 
less than 400 pounds, and 400 pounds or more at the time of death.
    Non-adult dairy cattle means a bovine livestock, of a breed used for 
the purpose of providing milk for human consumption, that do not meet 
the definition of adult dairy cow or bull. Non-adult dairy cattle are 
further delineated by weight categories of less than 400 pounds, and 400 
pounds or more at the time they died.
    Poultry means domesticated chickens, turkeys, ducks, and geese. 
Poultry are further delineated by sex, age, and purpose of production as 
determined by FSA.
    Ram means a male sheep.
    Sheep means a domesticated, ruminant mammal of the genus Ovis. Sheep 
are further defined by sex (rams and ewes) and age (lambs).
    Swine means a domesticated omnivorous pig, hog, and boar. Swine are 
further delineated by sex and weight as determined by FSA.



Sec.  760.904  Limitations on payments and other benefits.

    (a) A participant may receive benefits for livestock losses for only 
one of the 2005, 2006, or 2007 calendar years as specified under this 
part.
    (b) A ``person'' as determined under part 1400 of this title may 
receive no more than $80,000 under this subpart. In applying the $80,000 
per person payment limitation, regardless of whether 2005, 2006, or 2007 
calendar year benefits are at issue or sought, the most restrictive 
``person'' determination for the participant in the years 2005, 2006, 
and 2007, will be used to limit benefits.
    (c) The provisions of part 1400, subpart G, of this title relating 
to limits to payments for individuals or entities with certain levels of 
adjusted gross income apply to this program.
    (d) As a condition to receive benefits under this subpart, a 
participant must have been in compliance with the provisions of parts 12 
and 718 of this title and must not otherwise be precluded from receiving 
benefits under any law.
    (e) An individual or entity determined to be a foreign person under 
part 1400 of this title is not eligible to receive benefits under this 
subpart.

[[Page 99]]



Sec.  760.905  Eligible owners and contract growers.

    (a) To be considered eligible, a livestock owner must have had legal 
ownership of the eligible livestock, as provided in Sec.  760.906(a), on 
the day the livestock died.
    (b) To be considered eligible, a contract grower on the day the 
livestock died must have had:
    (1) A written agreement with the owner of eligible livestock setting 
the specific terms, conditions, and obligations of the parties involved 
regarding the production of livestock; and
    (2) Control of the eligible livestock, as provided in Sec.  
760.906(b), on the day the livestock died.



Sec.  760.906  Eligible livestock.

    (a) To be considered eligible livestock for livestock owners, 
livestock must be adult or non-adult dairy cattle, beef cattle, buffalo, 
beefalo, catfish, crawfish, equine, sheep, goats, swine, poultry, deer, 
or reindeer and meet all the conditions in paragraph (c) of this 
section.
    (b) To be considered eligible livestock for contract growers, 
livestock must be poultry or swine as defined in Sec.  760.903 and meet 
all the conditions in paragraph (c) of this section.
    (c) To be considered eligible, livestock must meet all of the 
following conditions:
    (1) Died in an eligible county as a direct result of an eligible 
disaster event;
    (i) After January 1, 2005, but before February 28, 2007;
    (ii) No later than 60 calendar days from the ending date of the 
applicable disaster period, but before February 28, 2007; and
    (iii) In the calendar year for which benefits are being requested.
    (2) The disaster event that caused the loss must be the same event 
for which a natural disaster was declared or designated.
    (3) Been maintained for commercial use as part of a farming 
operation on the day they died; and
    (4) Before dying, not have been produced or maintained for reasons 
other than commercial use as part of a farming operation, including, but 
not limited to, wild free roaming animals or animals used for 
recreational purposes, such as pleasure, hunting, roping, pets, or for 
show.
    (d) In those counties in Sec.  760.902, the following types of 
animals owned by a livestock owner are eligible livestock:
    (1) Adult beef bulls;
    (2) Adult beef cows;
    (3) Adult buffalo or beefalo bulls;
    (4) Adult buffalo or beefalo cows;
    (5) Adult dairy bulls;
    (6) Adult dairy cows;
    (7) Catfish;
    (8) Chickens, broilers, pullets;
    (9) Chickens, chicks;
    (10) Chickens, layers, roasters;
    (11) Crawfish;
    (12) Deer;
    (13) Ducks;
    (14) Ducks, ducklings;
    (15) Equine;
    (16) Geese, goose;
    (17) Geese, gosling;
    (18) Goats, bucks;
    (19) Goats, does;
    (20) Goats, kids;
    (21) Non-adult beef cattle;
    (22) Non-adult buffalo/beefalo;
    (23) Non-adult dairy cattle;
    (24) Reindeer
    (25) Sheep, ewes;
    (26) Sheep, lambs;
    (27) Sheep, rams;
    (28) Swine, feeder pigs under 50 pounds;
    (29) Swine, sows, boars, barrows, gilts 50 to 150 pounds;
    (30) Swine, sows, boars, barrows, gilts over 150 pounds;
    (31) Turkeys, poults; and
    (32) Turkeys, toms, fryers, and roasters.
    (e) In those counties in Sec.  760.902, the following types of 
animals are eligible livestock for contract growers:
    (1) Chickens, broilers, pullets;
    (2) Chickens, layers, roasters;
    (3) Geese, goose;
    (4) Swine, boars, sows;
    (5) Swine, feeder pigs;
    (6) Swine, lightweight barrows, gilts;
    (7) Swine, sows, boars, barrows, gilts; and
    (8) Turkeys, toms, fryers, and roasters.

[[Page 100]]



Sec.  760.907  Application process.

    (a) To apply for 2005-2007 LIP, submit a completed application to 
the administrative county FSA office that maintains the farm records for 
your agricultural operation, a copy of your grower contract, if you are 
a contract grower, and other supporting documents required for 
determining your eligibility as an applicant. Supporting documents must 
show:
    (1) Evidence of loss,
    (2) Current physical location of livestock in inventory, and
    (3) Physical location of claimed livestock at the time of death.
    (b) The application must be filed during the application period 
announced by the Deputy Administrator.
    (c) A minor child is eligible to apply for program benefits if all 
eligibility requirements are met and one of the following conditions 
exists:
    (1) The right of majority has been conferred upon the minor by court 
proceedings or statute;
    (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 a surety guarantees any loss 
incurred for which the minor would be liable had the minor been an 
adult.
    (d) The participant must provide adequate proof that the death of 
the eligible livestock occurred in an eligible county as a direct result 
of an eligible disaster event during the applicable disaster period. The 
quantity and kind of livestock that died as a direct result of the 
eligible disaster event may be documented by: purchase records; 
veterinarian records; bank or other loan papers; rendering truck 
receipts; Federal Emergency Management Agency records; National Guard 
records; written contracts; production records; Internal Revenue Service 
records; property tax records; private insurance documents; and other 
similar verifiable documents as determined by FSA.
    (e) Certification of livestock deaths by third parties may be 
accepted only if both the following conditions are met:
    (1) The livestock owner or livestock contract grower, as applicable, 
certifies in writing:
    (i) That there is no other documentation of death available;
    (ii) The number of livestock, by category determined by FSA, were in 
inventory at the time the applicable disaster event occurred; and
    (iii) Other details required for FSA to determine the certification 
acceptable; and
    (2) The third party provides their telephone number, address, and a 
written statement containing:
    (i) Specific details about their knowledge of the livestock deaths;
    (ii) Their affiliation with the livestock owner;
    (iii) The accuracy of the deaths claimed by the livestock owner; and
    (iv) Other details required by FSA to determine the certification 
acceptable.
    (f) Data furnished by the participant will be used to determine 
eligibility for program benefits. Furnishing the data is voluntary; 
however, without all required data program benefits will not be approved 
or provided.



Sec.  760.908  Deceased individuals or dissolved entities.

    (a) Payments may be made for eligible losses suffered by an eligible 
participant who is now a deceased individual or is a dissolved entity if 
a representative, who currently has authority to enter into a contract, 
on behalf of the participant, signs the application for payment.
    (b) Legal documents showing proof of authority to sign for the 
deceased individual or dissolved entity must be provided.
    (c) If a participant is now a dissolved general partnership or joint 
venture, all members of the general partnership or joint venture at the 
time of dissolution or their duly authorized representatives must sign 
the application for payment.



Sec.  760.909  Payment calculation.

    (a) Under this subpart separate payment rates are established for 
eligible livestock owners and eligible livestock contract growers in 
accordance with paragraphs (b) and (c) of this section. Payments for the 
2005-2007 LIP are calculated by multiplying the national payment rate 
for each livestock category, as determined in paragraphs (b)

[[Page 101]]

and (c) of this section, by the number of eligible livestock in each 
category, as provided in Sec.  760.906. Adjustments will be applied in 
accordance with paragraphs (d) and (e) of this section.
    (b) The 2005-2007 LIP national payment rate for eligible livestock 
owners is based on 26 percent of the average fair market value of the 
livestock.
    (c) The 2005-2007 LIP national payment rate for eligible livestock 
contract growers is based on 26 percent of the average income loss 
sustained by the contract grower with respect to the dead livestock.
    (d) The 2005 payment calculated under 2005-2007 LIP for eligible 
livestock owners will be reduced by the amount the participant received 
under:
    (1) The Livestock Indemnity Program (subpart E of this part);
    (2) The Aquaculture Grant Program (subpart G of this part); and
    (3) The Livestock Indemnity Program II (part 1416, subpart C of this 
title).
    (e) The 2005 payment calculated under 2005-2007 LIP for eligible 
livestock contract growers will be reduced by the amount the participant 
received:
    (1) Under the Livestock Indemnity Program (subpart E of this part);
    (2) For the loss of income from the dead livestock from the party 
who contracted with the producer to grow the livestock; and
    (3) Under the Livestock Indemnity Program II (part 1416, subpart C 
of this title).



Sec.  760.910  Appeals.

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



Sec.  760.911  Offsets, assignments, and debt settlement.

    (a) Any payment to any participant will be made without regard to 
questions of title under State law and without regard to any claim or 
lien against the commodity, or proceeds, in favor of the owner or any 
other creditor except agencies of the U.S. Government. The regulations 
governing offsets and withholdings found at part 792 of this chapter 
apply to payments made under this subpart.
    (b) Any participant entitled to any payment may assign any payment 
in accordance with regulations governing the assignment of payments 
found at part 1404 of this title.



Sec.  760.912  Records and inspections.

    Participants receiving payments under this subpart or any other 
person who furnishes information for the purposes of enabling such 
participant to receive a payment under this subpart must 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. Participants receiving payments or any other person 
who furnishes such information to FSA must allow authorized 
representatives of USDA and the General Accountability Office, during 
regular business hours, to inspect, examine, and make copies of such 
books or records, and to enter upon, inspect and verify all applicable 
livestock and acreage in which the participant has an interest for the 
purpose of confirming the accuracy of information provided by or for the 
participant.



Sec.  760.913  Refunds; joint and several liability.

    In the event there is a failure to comply with any term, 
requirement, or condition for payment or assistance arising under this 
subpart, and if any refund of a payment to FSA will otherwise become due 
in connection with this subpart, all payments made in regard to such 
matter must be refunded to FSA together with interest and late-payment 
charges as provided for in part 792 of this chapter.



 Subpart K_General Provisions for 2005	2007 Livestock Compensation and 
                         Catfish Grant Programs

    Source: 72 FR 72881, Dec. 21, 2007, unless otherwise noted.



Sec.  760.1000  Applicability.

    (a) This subpart establishes the terms and conditions under which 
the

[[Page 102]]

following programs will be administered under Title IX of the U.S. Troop 
Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability 
Appropriations Act, 2007 for participants affected by eligible disaster 
events and located in counties that are eligible as specified in Sec.  
760.1001:
    (1) The 2005-2007 Livestock Compensation Program (2005-2007 LCP); 
and
    (2) The 2005-2007 Catfish Grant Program (2005-2007 CGP).
    (b) Farm Service Agency (FSA) funds as are necessary for the 
programs in subparts L and M of this part are available under Title IX 
of the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq 
Accountability Appropriations Act, 2007.



Sec.  760.1001  Eligible counties, disaster events, and disaster periods.

    (a) Except as provided in this subpart, FSA will provide assistance 
under the programs listed in Sec.  760.1000 to eligible participants who 
have suffered certain losses due to eligible disaster events in eligible 
disaster counties provided in paragraph (c) of this section.
    (b) The ``Disaster Period'' is the time period in which losses 
occurred for the particular disaster that may be considered eligible for 
the programs under subparts L and M of this part. The start and end 
dates for each eligible disaster period are specified at http://
disaster.fsa.usda.gov.
    (c) Eligible counties are those primary counties declared by the 
Secretary or designated for the applicable loss by the President, 
including counties contiguous to those counties, between January 1, 
2005, and February 28, 2007 (that is after January 1, 2005 and before 
February 28, 2007). The listing is provided at http://
disaster.fsa.usda.gov. For counties where there was an otherwise timely 
Presidential declaration, but the declarations do not cover agricultural 
physical loss, the subject counties may still be eligible if the 
counties were the subject of an approved Administrator's Physical Loss 
Notice (APLN) when the APLN applies to a natural disaster timely 
designated by the President.



Sec.  760.1002  Definitions.

    The following definitions apply to the programs in subpart L and M 
of this part. The definitions in parts 718 and 1400 of this title also 
apply, except where they conflict with the definitions in this section.
    Commercial use means a use performed as part of the operation of a 
business activity engaged in as a means of livelihood for profit by the 
eligible producer.
    Farming operation means a business enterprise engaged in producing 
agricultural products.



Sec.  760.1003  Limitations on payments and other benefits.

    (a) A participant may receive benefits for eligible livestock feed 
losses, including additional feed costs, for only one of the 2005, 2006, 
or 2007 calendar years under 2005-2007 LCP, subpart L of this part, or 
under the CGP of subpart M of this part.
    (b) As specified in Sec.  760.1106(c), the payment under the 2005-
2007 LCP may not exceed the smaller of the calculated payment in Sec.  
760.1106(a) or the value of the producer's eligible feed loss, increased 
feed costs, or forage or grazing loss.
    (c) A person may receive no more than $80,000 under 2005-2007 LCP, 
subpart L of this part. In applying the $80,000 per person payment 
limitation, regardless of whether the 2005, 2006, or 2007 calendar year 
benefits are at issue or sought, the most restrictive ``person'' 
determination for the participant in the years 2005, 2006, and 2007, 
will be used to limit benefits. The rules and definitions of part 1400 
of this title apply in construing who is a qualified separate ``person'' 
for purposes of this limit. All payment eligibility requirements of part 
1400 as they apply to any other payments, also apply to payments under 
subpart L of this part.
    (d) For payments under 2005-2007 CGP, a farming operation may 
receive no more than $80,000, except for general partnerships and joint 
ventures, in which case assistance will not exceed $80,000 times the 
number of eligible members of the general partnership or joint venture. 
This limit must be enforced by the state government administering the 
grant program.

[[Page 103]]

    (e) The provisions of part 1400, subpart G, of this title apply to 
these programs. That is the rules that limit the eligibility for 
benefits of those individuals or entities with an adjusted gross income 
greater than a certain limit will be applied in the same manner to 
payments under subparts L and M of this part.
    (f) As a condition to receive benefits under subparts L and M of 
this part, a participant must have been in compliance with the 
provisions of parts 12 and 718 of this title for the calendar year for 
which benefits are being requested and must not otherwise be precluded 
from receiving benefits under any law.
    (g) An individual or entity determined to be a foreign person under 
part 1400 of this title is not eligible to receive benefits under 
subparts L and M of this part.
    (h) In addition to limitations provided in subparts L and M of this 
part, participants cannot receive duplicate benefits under subparts L 
and M of this part for the same loss or any similar loss under:
    (1) An agricultural disaster assistance provision contained in the 
announcement of the Secretary on January 26, 2006, or August 29, 2006;
    (2) The Emergency Supplemental Appropriations Act for Defense, the 
Global War on Terror, and Hurricane Recovery, 2006 (Pub. L. 109-234; 120 
Stat. 418); or
    (3) Any other disaster assistance program.



           Subpart L	2005	2007 Livestock Compensation Program

    Source: 72 FR 72881, Dec. 21, 2007, unless otherwise noted.



Sec.  760.1100  Applicability.

    This subpart sets forth the terms and conditions applicable to the 
2005-2007 Livestock Compensation Program (LCP).



Sec.  760.1101  Administration.

    (a) This program is administered under the general supervision of 
the Administrator, Farm Service Agency (FSA).
    (b) FSA representatives do not have authority to modify or waive any 
of the provisions of the regulations of this subpart.
    (c) The State FSA committee must take any action required by the 
regulations of this subpart that the county FSA committee has not taken. 
The State committee must 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 subpart; or
    (2) Require a county committee to withhold taking any action that is 
not in accordance with this subpart.
    (d) No provision or delegation to a State or county FSA committee 
will preclude the FSA Deputy Administrator for Farm Programs (Deputy 
Administrator), or a designee of such, from determining any question 
arising under the program or from reversing or modifying any 
determination made by a State or county FSA committee.
    (e) The Deputy Administrator for Farm Programs may authorize state 
and county committees to waive or modify nonstatutory deadlines or other 
program requirements in cases where lateness or failure to meet such 
does not adversely affect the operation of the program.



Sec.  760.1102  Definitions.

    The following definitions apply to this subpart.
    Adult beef bull means a male beef bovine animal that was at least 2 
years old and used for breeding purposes on the beginning date of the 
disaster period.
    Adult beef cow means a female beef bovine animal that had delivered 
one or more offspring before the disaster period. A first-time bred beef 
heifer is also considered an adult beef cow if it was pregnant on the 
beginning date of the disaster period.
    Adult buffalo and beefalo bull means a male animal of those breeds 
that was at least 2 years old and used for breeding purposes on the 
beginning date of the disaster period.
    Adult buffalo and beefalo cow means a female animal of those breeds 
that had delivered one or more offspring before the beginning date of 
the applicable disaster period. A first-time bred buffalo or beefalo 
heifer is also considered

[[Page 104]]

to be an adult buffalo or beefalo cow if it was pregnant on the 
beginning date of the disaster period.
    Adult dairy bull means a male dairy bovine breed animal at least 2 
years old used primarily for breeding dairy cows on the beginning date 
of the disaster period.
    Adult dairy cow means a female bovine animal used for the purpose of 
providing milk for human consumption that had delivered one or more 
offspring before the beginning date of the applicable disaster period. A 
first-time bred dairy heifer is also considered an adult dairy cow if it 
was pregnant on the beginning date of the disaster period.
    Agricultural operation means a farming operation.
    Application means the ``2005/2006/2007 Livestock Compensation 
Program'' form.
    Application period means the date established by the Deputy 
Administrator for Farm Programs for participants to apply for program 
benefits.
    Disaster period means the applicable disaster period specified in 
Sec.  760.1001.
    Equine animal means a domesticated horse, mule, or donkey.
    Goat means a domesticated, ruminant mammal of the genus Capra, 
including Angora goats.
    Non-adult beef cattle means a bovine animal that weighed 500 pounds 
or more on the beginning date of the disaster period, but does not meet 
the definition of an adult beef cow or bull.
    Non-adult buffalo/beefalo means an animal of those breeds that 
weighed 500 pounds or more on the beginning date of the disaster period, 
but does not meet the definition of an adult buffalo or beefalo cow or 
bull.
    Non-adult dairy cattle means a bovine livestock, of a breed used for 
the purpose of providing milk for human consumption, that weighed 500 
pounds or more on the beginning date of the disaster period, but does 
not meet the definition of an adult dairy cow or bull.
    Owner means one who had legal ownership of the livestock for which 
benefits are being requested under this subpart on the beginning date of 
the applicable disaster period as set forth in Sec.  760.1001.
    Poultry means a domesticated chicken, turkey, duck, or goose. 
Poultry are further delineated by sex, age and purpose of production, as 
determined by FSA.
    Sheep means a domesticated, ruminant mammal of the genus Ovis.
    Swine means a domesticated omnivorous pig, hog, and boar. Swine are 
further delineated by sex and weight as determined by FSA.



Sec.  760.1103  Eligible livestock and producers.

    (a) To be considered eligible livestock to generate benefits under 
this subpart, livestock must meet all the following conditions:
    (1) Be adult or non-adult dairy cattle, beef cattle, buffalo, 
beefalo, equine, poultry, elk, reindeer, sheep, goats, swine, or deer;
    (2) Been physically located in the eligible disaster county on the 
beginning date of the disaster period;
    (3) Been maintained for commercial use as part of the producer's 
farming operation on the beginning date of the disaster period; and
    (4) Not have been produced and maintained for reasons other than 
commercial use as part of a farming operation. Such excluded uses 
include, but are not limited to, wild free roaming animals or animals 
used for recreational purposes, such as pleasure, roping, hunting, pets, 
or for show.
    (b) To be considered an eligible livestock producer, the 
participant's eligible livestock must have been located in the eligible 
disaster county on the beginning date of the disaster period. To be 
eligible, also, the livestock producer must have:
    (1) Owned or cash-leased eligible livestock on the beginning date of 
the disaster period (provided that if there is a cash lease, only the 
cash lessee and not the owner will be eligible); and
    (2) Suffered any of the following:
    (i) A grazing loss on eligible grazing lands physically located in 
the eligible disaster county, where the forage was damaged or destroyed 
by an eligible disaster event, and intended for use as feed for the 
participant's eligible livestock;

[[Page 105]]

    (ii) A loss of feed from forage or feedstuffs physically located in 
the eligible disaster county, that was mechanically harvested and 
intended for use as feed for the participant's eligible livestock, that 
was damaged or destroyed after harvest as the result of an eligible 
disaster event;
    (iii) A loss of feed from purchased forage or feedstuffs physically 
located in the eligible disaster county, intended for use as feed for 
the participant's eligible livestock, that was damaged or destroyed by 
an eligible disaster event; or
    (iv) Increased feed costs incurred in the eligible disaster county, 
due to an eligible disaster event, to feed the participant's eligible 
livestock.
    (c) The eligible livestock categories are:
    (1) Adult beef cows or bulls;
    (2) Non-adult beef cattle;
    (3) Adult buffalo or beefalo cows or bulls;
    (4) Non-adult buffalo or beefalo;
    (5) Adult dairy cows or bulls;
    (6) Non-adult dairy cattle;
    (7) Goats;
    (8) Sheep;
    (9) Equine;
    (10) Reindeer;
    (11) Elk;
    (12) Poultry; and
    (13) Deer.
    (d) Ineligible livestock include, but are not limited to, livestock:
    (1) Livestock that were or would have been in a feedlot regardless 
of whether there was a disaster or where such livestock were in a 
feedlot as part of a participant's normal business operation, as 
determined by FSA;
    (2) Emus;
    (3) Yaks;
    (4) Ostriches;
    (5) Llamas;
    (6) All beef and dairy cattle, and buffalo and beefalo that weighed 
less than 500 pounds on the beginning date of the disaster period;
    (7) Any wild free roaming livestock, including horses and deer;
    (8) Livestock produced or maintained for reasons other than 
commercial use as part of a farming operation, including, but not 
limited to, livestock produced or maintained for recreational purposes, 
such as:
    (i) Roping,
    (ii) Hunting,
    (iii) Show,
    (iv) Pleasure,
    (v) Use as pets, or
    (vi) Consumption by owner.



Sec.  760.1104  Application for payment.

    (a) To apply for 2005-2007 LCP, an application and required 
supporting documentation must be submitted to the administrative county 
FSA office.
    (b) The application must be filed during the application period 
announced by the Deputy Administrator for Farm Programs.
    (c) Payments may be made for eligible losses suffered by an eligible 
livestock producer who is now a deceased individual or is a dissolved 
entity if a representative who currently has authority to enter into a 
contract, on behalf of the livestock producer, signs the application for 
payment. Legal documents showing proof of authority to sign for the 
deceased individual or dissolved entity must be provided. If a 
participant is now a dissolved general partnership or joint venture, all 
members of the general partnership or joint venture at the time of 
dissolution or their duly authorized representatives must sign the 
application for payment.
    (d) Data furnished by the participant will be used to determine 
eligibility for program benefits. Furnishing the data is voluntary; 
however, without all required data program benefits will not be approved 
or provided.
    (e) A minor child is eligible to apply for program benefits if all 
eligibility requirements are met and one of the following conditions 
exists:
    (1) The right of majority has been conferred upon the minor by court 
proceedings or statute;
    (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 a surety guarantees any loss 
incurred for which the minor would be liable had the minor been an 
adult.



Sec.  760.1105  Application process.

    (a) Participants must submit to FSA:
    (1) A completed application in accordance with Sec.  760.1104;

[[Page 106]]

    (2) Adequate proof, as determined by FSA, that the feed lost:
    (i) Was for the claimed eligible livestock;
    (ii) Was lost as a direct result of an eligible disaster event 
during an eligible disaster period specified in Sec.  760.1001;
    (iii) Was lost after January 1, 2005, but before February 28, 2007; 
and
    (iv) Occurred in the calendar year for which benefits are being 
requested; and
    (3) Any other supporting documentation as determined by FSA to be 
necessary to make a determination of eligibility of the participant. 
Supporting documents include, but are not limited to: verifiable 
purchase records; veterinarian records; bank or other loan papers; 
rendering truck receipts; Federal Emergency Management Agency records; 
National Guard records; written contracts; production records; Internal 
Revenue Service records; property tax records; private insurance 
documents; sales records, and similar documents determined acceptable by 
FSA.
    (b) [Reserved]



Sec.  760.1106  Payment calculation.

    (a) Preliminary, unadjusted LCP payments are calculated for a 
producer by multiplying the national payment rate for each livestock 
category, as provided in paragraph (c) of this section, by the number of 
eligible livestock for the producer in each category. The national 
payment rate represents the cost of the amount of corn needed to 
maintain the specific livestock for 30 days, as determined by FSA. As 
provided in subpart K of this part, a producer may receive benefits for 
only one of the three program years, 2005, 2006, or 2007. The producer 
must indicate which year has been chosen. Payments are available only 
with respect to disaster-related fees losses in the period from January 
2, 2005 through February 27, 2007, in eligible counties for losses 
during the times specified for the disaster periods as specified in 
Sec.  760.1001(b).
    (b) The preliminary LCP payment calculated in accordance with 
paragraph (a) of this section:
    (1) For 2005 LCP provided for under this subpart will be reduced by 
the amount the participant received for the specific livestock under the 
Feed Indemnity Program in accordance with subpart D of this part and LCP 
for the 2005 hurricanes under subpart B of part 1416 of this title; and
    (2) For 2006 LCP under this subpart will be reduced by the amount 
the participant received for the same or similar loss under the 
Livestock Assistance Grant Program in accordance with subpart H of this 
part.
    (c) Subject to such other limitations as may apply, including those 
in paragraph (b) of this section, the payment under the 2005-2007 LCP 
may not exceed for the relevant year chosen by the producer the smaller 
of either the:
    (1) Payment calculated in paragraph (a) of this section for that 
year; or
    (2) Value of the producer's eligible feed loss, increased feed 
costs, or forage or grazing loss as determined by FSA for that year.
    (d) The actual payment to the producer will be the amount provided 
for in paragraph (c) of this section subject to the adjustments and 
limits provided for in this section or in this part.



Sec.  760.1107  Appeals.

    The appeal regulations in parts 11 and 780 of this title apply to 
determinations made under this subpart.



Sec.  760.1108  Offsets, assignments, and debt settlement.

    (a) Any payment to any participant will be made without regard to 
any claim or lien against the commodity, or proceeds, in favor of the 
owner or any other creditor except agencies of the U.S. Government. The 
regulations governing offsets and withholdings in parts 792 and 1403 of 
this title apply to payments made under this subpart.
    (b) Any participant entitled to any payment may assign any payments 
in accordance with regulations governing the assignment of payments in 
part 1404 of this chapter.



Sec.  760.1109  Recordkeeping and inspections.

    Participants receiving payments under this subpart or any other 
person who furnishes information for the purposes of enabling the 
participant to receive a payment under this subpart must maintain any 
books, records, and

[[Page 107]]

accounts supporting that information for a minimum of 3 years following 
the end of the year during which the application for payment was filed. 
Participants receiving payments or any other person who furnishes the 
information to FSA must allow authorized representatives of USDA and the 
General Accounting Office, during regular business hours, and to enter 
upon, inspect, examine, and make copies of the books or records, and to 
inspect and verify all applicable livestock and acreage in which the 
participant has an interest for the purpose of confirming the accuracy 
of the information provided by or for the participant.



Sec.  760.1110  Refunds; joint and several liability.

    In the event there is a failure to comply with any term, 
requirement, or condition for payment or assistance arising under this 
subpart, and if any refund of a payment to FSA will otherwise become due 
in connection with this subpart, all payments made in regard to such 
matter must be refunded to FSA together with interest and late-payment 
charges as provided for in part 792 of this title, provided that 
interest will run from the date of the disbursement of the refund to the 
producer.



                Subpart M_2005	2007 Catfish Grant Program

    Source: 72 FR 72881, Dec. 21, 2007, unless otherwise noted.



Sec.  760.1200  Administration.

    FSA will administer a limited 2005-2007 CGP to provide assistance to 
catfish producers in eligible counties that suffered catfish feed and 
related losses between January 1, 2005, and February 28, 2007, that is 
after January 1, 2005, and before February 28, 2007. Under the 2005-2007 
CGP, FSA will provide grants to State governments in those States that 
have catfish producers that are located in eligible counties and that 
have agreed to participate in the 2005-2007 CGP. The amount of each 
grant will be based on the total value of catfish feed and related 
losses suffered in eligible counties in the subject state. Each State 
must submit a work plan providing a summary of how the State will 
implement the 2005-2007 CGP.



Sec.  760.1201  Application for payment.

    Application procedures for 2005-2007 CGP will be as determined by 
the State governments.



Sec.  760.1202  Eligible producers.

    (a) To be considered an eligible catfish producer, an participant 
must:
    (1) Raise catfish in a controlled environment and be physically 
located in an eligible county on the beginning date of the disaster 
period;
    (2) Maintain the catfish for commercial use as part of a farming 
operation;
    (3) Have a risk in production of such catfish; and
    (4) Have suffered one of the following types of losses relating to 
catfish feed as a direct result of the county's disaster event that 
occurred in that year:
    (i) Physical loss of feed that was damaged or destroyed,
    (ii) Cost to the extent allowed by FSA, associated with lost feeding 
days, or
    (iii) Cost associated with increased feed prices.
    (b) [Reserved]



Sec.  760.1203  Payment calculation.

    (a) Producers must be paid for feed losses of higher costs only for 
one of the three years, 2005, 2006, or 2007, and the loss must be for 
eligible catfish feed losses in an eligible county, as determined 
pursuant to subpart K of this part. Further, the feed loss or higher 
costs must be caused by the disaster that caused the county to qualify 
as an eligible county. The loss, moreover, to qualify for payment, must 
have occurred during the allowable time period provided in this part, 
namely the period beginning on January 2, 2005 and ending February 27, 
2007. The producer must pick the year of the benefits sought.
    (b) Subject to all adjustments and limits provided for in this part 
the amount of assistance provided to each participant from the State 
will be equal to the smaller of:
    (1) Depending on the year chosen by the producer, the value of the 
participant's 2005, 2006, or 2007 catfish feed and related losses as a 
direct result of an

[[Page 108]]

eligible disaster event, as determined by the State or
    (2) Result of multiplying:
    (i) Total tons of catfish feed purchased by the participant in 
depending on the year chosen by the producer 2005 (entire year), 2006 
(entire year), or 2007 (through February 27, 2007, only), times,
    (ii) Catfish feed payment rate for 2005, 2006, or 2007, as 
applicable, as set by FSA.
    (c) The catfish feed rate represents 61 percent of the normal cost 
of a ton of feed for a year divided by six to reflect the normal feeding 
price for catfish.



PART 761_GENERAL PROGRAM ADMINISTRATION--Table of Contents




                      Subpart A_General Provisions

Sec.
761.1 Introduction.
761.2 Abbreviations and definitions.
761.3 Civil rights.
761.4 Conflict of interest.
761.5 Restrictions on lobbying.
761.6 Appeals.
761.7 Appraisals.
761.8 Loan limitations.
761.9 Interest rates for direct loans.
761.10 Planning and performing construction and other development.
761.11-761.50 [Reserved]

                   Subpart B_Supervised Bank Accounts

761.51 Establishing a supervised bank account.
761.52 Deposits into a supervised bank account.
761.53 Interest bearing accounts.
761.54 Withdrawals from a supervised bank account.
761.55 Closing a supervised bank account.
761.56-761.100 [Reserved]

                       Subpart C_Supervised Credit

761.101 Applicability.
761.102 Borrower recordkeeping, reporting, and supervision.
761.103 Farm assessment.
761.104 Developing the farm operating plan.
761.105 Year-end analysis.
761.106-761.200 [Reserved]

    Subpart D_Allocation of Farm Loan Programs Funds to State Offices

761.201 Purpose.
761.202 Timing of allocations.
761.203 National reserves for Farm Ownership and Operating loans.
761.204 Methods of allocating funds to State Offices.
761.205 Computing the formula allocation.
761.206 Pooling of unobligated funds allocated to State Offices.
761.207 Distribution of loan funds by State Offices.
761.208 Target participation rates for socially disadvantaged groups.
761.209 Loan funds for beginning farmers.
761.210 Transfer of funds.

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

    Source: 72 FR 63285, Nov. 8, 2007, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  761.1  Introduction.

    (a) The Administrator delegates the responsibility to administer 
Farm Loan Programs of the Consolidated Farm and Rural Development Act (7 
U.S.C. 1921 et seq.) to the Deputy Administrator for Farm Loan Programs 
subject to any limitations established in 7 CFR 2.16(a)(2) and 7 CFR 
2.42.
    (b) The Deputy Administrator may:
    (1) Redelegate authorities received under subparagraph (a); and
    (2) Establish procedures for further redelegation of authority.
    (c) Parts 761 through 767 describe the Agency's policies for its 
Farm Loan Programs. The objective of these programs is to provide 
supervised credit and management assistance to eligible farmers to 
become owners or operators, or both, of family farms, to continue such 
operations when credit is not available elsewhere, or to return to 
normal farming operations after sustaining substantial losses as a 
result of a designated or declared disaster. These regulations apply to 
loan applicants, borrowers, lenders, holders, Agency personnel, and 
other parties involved in making, guaranteeing, holding, servicing, or 
liquidating such loans.
    (d) This part describes the Agency's general and administrative 
policies for its guaranteed and direct Farm Loan Programs. In general, 
this part addresses issues that affect both guaranteed and direct loan 
programs.



Sec.  761.2  Abbreviations and definitions.

    The following abbreviations and definitions are applicable to the 
Farm

[[Page 109]]

Loan Programs addressed in parts 761 through 767 unless otherwise noted.
    (a) Abbreviations.
    CLP Certified Lender Program.
    DSA Disaster Set-Aside.
    EE Economic Emergency loan.
    EM Emergency loan.
    FLP Farm Loan Programs.
    FO Farm Ownership loan.
    FSA Farm Service Agency, an Agency of the USDA, including its 
personnel and any successor Agency.
    Lo-Doc Low-Documentation Operating loan.
    OGC Office of the General Counsel of the USDA.
    OL Operating loan.
    PLP Preferred Lender Program.
    RHF Rural Housing loan for farm service buildings.
    RL Recreation loan.
    SAA Shared Appreciation Agreement.
    SA Shared Appreciation loan.
    SEL Standard Eligible Lender.
    ST Softwood Timber loan.
    SW Soil and Water loan.
    USDA United States Department of Agriculture.
    USPAP Uniform Standards of Professional Appraisal Practice.
    (b) Definitions.
    Abandoned security property is security property that a borrower is 
not occupying, is not in possession of, or has relinquished control of 
and has not made arrangements for its care or sale.
    Accrued deferred interest is unpaid interest from past due 
installments posted to a borrower's loan account.
    Act is the Consolidated Farm and Rural Development Act (7 U.S.C. 
1921 et seq.).
    Additional security is property which provides security in excess of 
the amount of security value equal to the loan amount.
    Adequate security is property which is required to provide security 
value at least equal to the direct loan amount.
    Adjustment is a form of settlement that reduces the financial 
obligation to the Agency, conditioned upon the completion of payment of 
a specified amount at a future time. An adjustment is not a final 
settlement until all payments have been made under the agreement.
    Administrative appraisal review is 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 is the FSA.
    Agreement for the use of proceeds is an agreement between the 
borrower and the Agency that reflects how, when, and to whom the 
borrower will sell, exchange, or consume chattel security and the 
planned use of any proceeds during a specific production cycle.
    Agricultural commodity is livestock, livestock products, grains, 
cotton, oilseeds, dry beans, tobacco, peanuts, sugar beets, sugar cane, 
fruit, vegetable, forage, tree farming, nursery crops, nuts, aquaculture 
species, and other plant and animal production, as determined by the 
Agency.
    Allonge is an attachment or an addendum to a promissory note.
    Allowable costs are those costs for replacement or repair that are 
supported by acceptable documentation, including, but not limited to, 
written estimates, invoices, and bills.
    Applicant is the individual or entity applying for a loan or loan 
servicing under either the direct or guaranteed loan program.
    Aquaculture is the husbandry of any aquatic organisms (including 
fish, mollusks, crustaceans or other invertebrates, amphibians, 
reptiles, or aquatic plants) raised in a controlled or selected 
environment of which the applicant has exclusive rights to use.
    Assignment of guaranteed portion is a process by which the lender 
transfers the right to receive payments or income on a 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.
    Assignment of indemnity is the transfer of rights to compensation 
under an insurance contract.

[[Page 110]]

    Assistance is financial assistance in the form of a direct or 
guaranteed loan or interest subsidy or servicing action.
    Assumption is the act of agreeing to be legally responsible for 
another party's indebtedness.
    Assumption agreement is a written agreement on the appropriate 
Agency form to pay the FLP debt incurred by another.
    Average agricultural loan customer is a conventional farm borrower 
who is required to pledge crops, livestock, other chattel and/or real 
estate security for the loan. This term does not include a high-risk 
farmer with limited security and management ability who is generally 
charged a higher interest rate by conventional agricultural lenders. 
Also, this term does not include a low-risk farm customer who obtains 
financing on a secured or unsecured basis, who is able to pledge as 
collateral for a loan items such as savings accounts, time deposits, 
certificates of deposit, stocks and bonds, and life insurance.
    Basic part of an applicant's total farming operation is 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.
    Basic security is all farm machinery, equipment, vehicles, 
foundation and breeding livestock herds and flocks, including 
replacements, and real estate that serves as security for a loan made or 
guaranteed by the Agency.
    Beginning farmer is an individual or entity who:
    (1) Meets the loan eligibility requirements for a direct or 
guaranteed OL or FO loan, as applicable;
    (2) Has not operated a farm for 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:
    (i) In the case of a loan made to an individual, individually or 
with the family members, material and substantial participation requires 
that the individual provide substantial day-to-day labor and management 
of the farm, 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. 
Material and substantial participation requires that the member 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 would be seriously impaired;
    (4) Agrees to participate in any loan assessment and borrower 
training required by Agency regulations;
    (5) Except for an OL applicant, does not own real farm property or 
who, directly or through interests in family farm entities owns real 
farm property, the aggregate acreage of which does not exceed 30 percent 
of the median farm acreage of the farms in the county where the property 
is located. If the farm is located in more than one county, the median 
farm acreage of the county where the 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 applicant is an entity, the median farm 
acreage of the county where the major portion of the farm is located 
will be used. The median county farm acreage will be determined from the 
most recent Census of Agriculture;
    (6) Demonstrates that the available resources of the applicant and 
spouse (if any) are not sufficient to enable the applicant to enter or 
continue farming on a viable scale; and
    (7) In the case of an entity:
    (i) All the members are related by blood or marriage; and
    (ii) All the members are beginning farmers.
    Beginning Farmer Downpayment Loan is a type of FO loan made to 
eligible applicants to finance a portion of a real estate purchase under 
part 764, subpart E of this chapter.
    Borrower (or debtor) is an individual or entity that has an 
outstanding obligation to the Agency or to a lender under any direct or 
guaranteed FLP loan, without regard to whether the loan has been 
accelerated. The term ``borrower'' includes all parties liable

[[Page 111]]

for such obligation, 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 or guaranteed lender.
    Cancellation is the final discharge of, and release of liability 
for, a financial obligation to the Agency on which no settlement amount 
has been paid.
    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 during the period of the 
budget. Advances and principal repayments of lines of credit may be 
excluded from a cash flow budget. Cash flow budgets for guaranteed loans 
under $125,000 do not require income and expenses itemized by 
categories. 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. It may also be prepared with a breakdown of cash inflows 
and outflows for each month of the review period and include the 
expected outstanding operating credit balance for the end of each month. 
The latter type is referred to as a ``monthly cash flow budget.''
    Chattel or real estate essential to the operation is chattel or real 
estate that would be necessary for the applicant to continue operating 
the farm 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.
    Chattel security is property that may consist of, but is not limited 
to: Crops; livestock; aquaculture species; farm equipment; inventory; 
accounts; contract rights; general intangibles; and supplies that are 
covered by financing statements and security agreements, chattel 
mortgages, and other security instruments.
    Civil action is a court proceeding to protect the Agency's financial 
interests. A civil action does not include bankruptcy and similar 
proceedings to impound and distribute the bankrupt's assets to 
creditors, or probate or similar proceedings to settle and distribute 
estates of incompetents or decedents, and pay claims of creditors.
    Closing agent is the attorney or title insurance company selected by 
the applicant and approved by the Agency to provide closing services for 
the proposed loan or servicing action. Unless a title insurance company 
provides loan closing services, the term ``title company'' does not 
include ``title insurance company.''
    Coastal barrier is an area of land identified as part of the 
national Coastal Barrier Resources System under the Coastal Barrier 
Resources Act of 1980.
    Compromise is the settlement of an FLP debt or claim by a lump-sum 
payment of less than the total amount owed in satisfaction of the debt 
or claim.
    Conditional commitment is the Agency's commitment to a lender that 
the material the lender has submitted is approved subject to the 
completion of all listed conditions and requirements.
    Conservation Contract is a contract under which a borrower agrees to 
set aside land for conservation, recreation or wildlife purposes in 
exchange for reduction of a portion of an outstanding FLP debt.
    Conservation Contract review team is comprised by the appropriate 
offices of FSA, the Natural Resources Conservation Service, U.S. Fish 
and Wildlife Service, State Fish and Wildlife Agencies, Conservation 
Districts, National Park Service, Forest Service, State Historic 
Preservation Officer, State Conservation Agencies, State Environmental 
Protection Agency, State Natural Resource Agencies, adjacent public 
landowner, and any other entity that may have an interest and qualifies 
to be a management authority for a proposed conservation contract.
    Consolidation is the process of combining the outstanding principal 
and interest balance of two or more loans of the same type made for 
operating purposes.
    Construction is work such as erecting, repairing, remodeling, 
relocating, adding to, or salvaging any building or structure, and the 
installing, repairing, or adding to heating and electrical systems, 
water systems, sewage disposal systems, walks, steps, and driveways.

[[Page 112]]

    Controlled is when a director or an employee has more than a 50 
percent ownership in an entity or, the director or employee, together 
with relatives of the director or employee, have more than a 50 percent 
ownership.
    Controlled substance is the term as defined in 21 U.S.C. 812.
    Cooperative is an entity that has farming as its purpose, whose 
members have agreed to share the profits of the farming enterprise, and 
is recognized as a farm cooperative by the laws of the state in which 
the entity will operate a farm.
    Corporation is a private domestic corporation created and organized 
under the laws of the state in which it will operate a farm.
    Cosigner is a party, other than the applicant, who joins in the 
execution of a promissory note to assure its repayment. The cosigner 
becomes jointly and severally liable to comply with the repayment terms 
of the note, but is not authorized to severally receive loan servicing 
available under 7 CFR parts 765 and 766. In the case of an entity 
applicant, the cosigner cannot be a member of the entity.
    County is a local administrative subdivision of a State or similar 
political subdivision of the United States.
    County average yield is the historical average yield for an 
agricultural commodity in a particular political subdivision, as 
determined or published by a government entity or other recognized 
source.
    Criminal action is the prosecution by the United States to exact 
punishment in the form of fines or imprisonment for alleged violation of 
criminal statutes.
    Crop allotment or quota is a farm's share of an approved national 
tobacco or peanut allotment or quota.
    Current market value buyout is the termination of a borrower's loan 
obligations to the Agency in exchange for payment of the current 
appraised value of the borrower's security property and non-essential 
assets, less any prior liens.
    Debt forgiveness is a reduction or termination of a debt under the 
Act in a manner that results in a loss to the Agency, 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 FLP loan guaranteed 
by the Agency.
    Debt forgiveness does not include:
    (1) Debt reduction through a conservation contract;
    (2) Any writedown provided as part of the resolution of a 
discrimination complaint against the Agency;
    (3) Prior debt forgiveness that has been repaid in its entirety; and
    (4) Consolidation, rescheduling, reamortization, or deferral of a 
loan.
    Debt settlement is a compromise, adjustment, or cancellation of an 
FLP debt.
    Debt service margin is the difference between all of the borrower's 
expected expenditures in a planning period (including farm operating 
expenses, capital expenses, essential family living expenses, and debt 
payments) and the borrower's projected funds available to pay all 
expenses and payments.
    Debt writedown is the reduction of the borrower's debt to that 
amount the Agency determines to be collectible based on an analysis of 
the security value and the borrower's ability to pay.
    Default is the failure of a borrower to observe any agreement with 
the Agency, or the lender in the case of a guaranteed loan, as contained 
in promissory notes, security instruments, and similar or related 
instruments.
    Deferral is a postponement of the payment of interest or principal, 
or both.
    Delinquent borrower, for loan servicing purposes, is a borrower who 
has failed to make all scheduled payments by the due date.
    Direct loan is a loan funded and serviced by the Agency as the 
lender.
    Disaster is an event of unusual and adverse weather conditions or 
other natural phenomena, or quarantine, that has substantially affected 
the production 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

[[Page 113]]

subdivision in the disaster area as designated by the Agency.
    Disaster area is the county or counties declared or designated as a 
disaster area for EM loan assistance as a result of disaster related 
losses. This area includes counties contiguous to those counties 
declared or designated as disaster areas.
    Disaster set-aside is the deferral of payment of an annual loan 
installment to the Agency to the end of the loan term in accordance with 
part 766, subpart B of this chapter.
    Disaster yield is the per-acre yield of an agricultural commodity 
for the operation during the production cycle when the disaster 
occurred.
    Economic Emergency loan is a loan that was made or guaranteed to an 
eligible applicant to allow for continuation of the operation during an 
economic emergency which was caused by a lack of agricultural credit or 
an unfavorable relationship between production costs and prices received 
for agricultural commodities. EE loans are not currently funded; 
however, such outstanding loans are serviced by the Agency or the lender 
in the case of a guaranteed EE loan.
    Emergency loan is a loan made to eligible applicants who have 
incurred substantial financial losses from a disaster.
    Entity is a corporation, partnership, joint operation, cooperative, 
limited liability company or trust.
    Essential family living and farm operating expenses:
    (1) Are those that are basic, crucial or indispensable.
    (2) Are determined by the Agency based on the following 
considerations:
    (i) The specific borrower's operation;
    (ii) What is typical for that type of operation in the area; and
    (iii) What is an efficient method of production considering the 
borrower's resources.
    (3) Include, but are not limited to, essential: Household operating 
expenses; food, including lunches; clothing and personal care; health 
and medical expenses, including medical insurance; house repair and 
sanitation; school and religious expenses; transportation; hired labor; 
machinery repair; farm building and fence repair; interest on loans and 
credit or purchase agreement; rent on equipment, land, and buildings; 
feed for animals; seed, fertilizer, pesticides, herbicides, spray 
materials and other necessary farm supplies; livestock expenses, 
including medical supplies, artificial insemination, and veterinarian 
bills; machinery hire; fuel and oil; taxes; water charges; personal, 
property and crop insurance; auto and truck expenses; and utility 
payments.
    Established farmer is a farmer who operates the farm (in the case of 
an entity, its members 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 operation's projected cash flow for the 
next crop year or the next 12-month period, as mutually determined; and
    (5) Is not:
    (i) An entity whose members are themselves entities;
    (ii) 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 farming operation is not managed by an 
outside full-time manager or management service and Agency loans shall 
be based on the applicant's share of the agricultural production as set 
forth in the contract; or
    (iii) An operation which employs a full time farm manager.
    False information is information provided by an applicant, borrower 
or

[[Page 114]]

other source to the Agency that the applicant or borrower knows to be 
incorrect.
    Family farm is a farm that:
    (1) Produces agricultural commodities for sale in sufficient 
quantities so that it is recognized as a farm rather than a rural 
residence;
    (2) Has both physical labor and management provided as follows:
    (i) The majority of day-to-day, operational decisions, and all 
strategic management decisions are made by:
    (A) The borrower and persons who are either related to the borrower 
by blood or marriage, or are a relative, for an individual borrower; or
    (B) The members responsible for operating the farm, in the case of 
an entity.
    (ii) A substantial amount of labor to operate the farm is provided 
by:
    (A) The borrower and persons who are either related to the borrower 
by blood or marriage, or are a relative, for an individual borrower; or
    (B) The members responsible for operating the farm, in the case of 
an entity.
    (3) May use full-time hired labor in amounts only to supplement 
family labor.
    (4) May use reasonable amounts of temporary labor for seasonal peak 
workload periods or intermittently for labor intensive activities.
    Family living expenses are the costs of providing for the needs of 
family members and those for whom the borrower has a financial 
obligation, such as alimony, child support, and care expenses of an 
elderly parent.
    Family members are the immediate members of the family residing in 
the same household with the borrower.
    Farm is a tract or tracts of land, improvements, and other 
appurtenances that 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 the term ``ranch.'' It may also include 
land and improvements and facilities used in a non-eligible enterprise 
or the residence which, although physically separate from the farm 
acreage, is ordinarily treated as part of the farm in the local 
community.
    Farmer is an individual, corporation, partnership, joint operation, 
cooperative, trust, or limited liability company that is the operator of 
a farm.
    Farm income is the proceeds from the sale of agricultural 
commodities that are normally sold annually during the regular course of 
business, such as crops, feeder livestock, and other farm products.
    Farm Loan Programs are Agency programs to make, guarantee, and 
service loans to family farmers authorized under the Act or Agency 
regulations.
    Farm Ownership loan is a loan made to eligible applicants to 
purchase, enlarge, or make capital improvements to family farms, or to 
promote soil and water conservation and protection. It also includes the 
Beginning Farmer Downpayment loan.
    Farm Program payments are benefits received from FSA for any 
commodity, disaster, or cost share program.
    Feasible plan is when an applicant or borrower's cash flow budget or 
farm operating plan indicates that there is sufficient cash inflow to 
pay all cash outflow. If a loan approval or servicing action exceeds one 
production cycle and the planned cash flow budget or farm operating plan 
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 or farm operating plan must be prepared that 
reflects a typical cycle. If the request is for only one cycle, a 
feasible plan for only one production cycle is required for approval.
    Financially distressed borrower is a borrower unable to develop a 
feasible plan for the current or next production cycle.
    Financially viable operation, for the purposes of considering a 
waiver of OL term limits under Sec.  764.252 of this chapter, is a 
farming operation that, with Agency assistance, is projected to improve 
its financial condition over a period of time to the point that the 
operator can obtain commercial credit without further Agency assistance. 
Such an operation must generate sufficient income to:

[[Page 115]]

    (1) Meet annual operating expenses and debt payments as they become 
due;
    (2) Meet essential family living expenses to the extent they are not 
met by dependable non-farm income;
    (3) Provide for replacement of capital items; and
    (4) Provide for long-term financial growth.
    Fixture is 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 damaging the item itself.
    Floodplains are lowland and relatively flat areas adjoining inland 
and coastal waters, including flood-prone areas of offshore islands, 
including at a minimum, that area subject to a one percent or greater 
chance of flooding in any given year. The base floodplain is used to 
designate the 100-year floodplain (one percent chance floodplain). The 
critical floodplain is defined as the 500-year floodplain (0.2 percent 
chance floodplain).
    Foreclosed is the completed act of selling security either under the 
power of sale in the security instrument or through judicial 
proceedings.
    Foreclosure sale is the act of selling security either under the 
power of sale in the security instrument or through judicial 
proceedings.
    Good faith is when an applicant or borrower provides current, 
complete, and truthful information when applying for assistance and in 
all past dealings with the Agency, and adheres to all written agreements 
with the Agency including, but not limited to, loan agreement, security 
instruments, farm operating plans, and agreements for use of proceeds. 
The Agency considers a borrower to act in good faith, however, if the 
borrower's inability to adhere to all agreements is due to circumstances 
beyond the borrower's control. In addition, the Agency will consider 
fraud, waste, or conversion actions, when substantiated by a legal 
opinion from OGC, when determining if an applicant or borrower has acted 
in good faith.
    Graduation is the payment in full of all direct FLP loans made for 
operating, real estate, or both purposes by refinancing with other 
credit sources either with or without an Agency guarantee.
    Guaranteed loan is a loan made and serviced by a lender for which 
the Agency has entered into a Lender's Agreement and for which the 
Agency has issued a Loan Guarantee. This term also includes guaranteed 
lines of credit except where otherwise indicated.
    Guarantor is a party not included in the farming operation who 
assumes responsibility for repayment in the event of default.
    Hazard insurance is insurance covering 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 Agency security or that is required by law.
    Highly erodible land is land as determined by Natural Resources 
Conservation Service to meet the requirements provided in section 1201 
of the Food Security Act of 1985.
    Holder is a person or organization other than the lender that holds 
all or a part of the guaranteed portion of an Agency guaranteed loan but 
has no servicing responsibilities. When the lender assigns a part of the 
guaranteed loan by executing an Agency assignment form, the assignee 
becomes a holder.
    Homestead protection is the previous owner's right to lease with an 
option to purchase the principal residence and up to 10 acres of 
adjoining land which secured an FLP direct loan.
    Homestead protection property is the principal residence that 
secured an FLP direct loan and is subject to homestead protection.
    Household contents are essential household items necessary to 
maintain viable living quarters. Household contents exclude all luxury 
items such as jewelry, furs, antiques, paintings, etc.
    Inaccurate information is incorrect information provided by an 
applicant, borrower, lender, or other source without the intent of 
fraudulently obtaining benefits.
    Indian reservation is all land located within the limits of any 
Indian reservation under the jurisdiction of the

[[Page 116]]

United States, notwithstanding the issuance of any patent, and including 
rights-of-way running through the reservation; trust or restricted land 
located within the boundaries of a former reservation of a Federally 
recognized Indian Tribe in the State of Oklahoma; or all Indian 
allotments the Indian titles to which have not been extinguished if such 
allotments are subject to the jurisdiction of a Federally recognized 
Indian Tribe.
    In-house expenses are 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 is the appropriate Agency form 
executed by the Agency and the lender containing the terms and 
conditions under which the Agency will make interest assistance payments 
to the lender on behalf of the guaranteed loan borrower.
    Inventory property is real estate or chattel property and related 
rights that formerly secured an FLP loan and to which the Federal 
Government has acquired title.
    Joint financing arrangement is an arrangement in which two or more 
lenders make separate loans simultaneously to supply the funds required 
by one applicant.
    Joint operation is an operation run by individuals who have agreed 
to operate a farm or farms together as an entity, sharing equally or 
unequally land, labor, equipment, expenses, or income, or some 
combination of these items. The real and personal property is owned 
separately or jointly by the individuals.
    Leasehold is a right to use farm property for a specific period of 
time under conditions provided for in a lease agreement.
    Lender is the organization making and servicing a loan, or advancing 
and servicing a line of credit that is guaranteed by the Agency. The 
lender is also the party requesting a guarantee.
    Lender's Agreement is the appropriate Agency form executed by the 
Agency and the lender setting forth their loan responsibilities when the 
Loan Guarantee is issued.
    Lien is a legally enforceable claim against real or chattel property 
of another obtained as security for the repayment of indebtedness or an 
encumbrance on property to enforce payment of an obligation.
    Limited resource interest rate is an interest rate normally below 
the Agency's regular interest rate, which is available to applicants 
unable to develop a feasible plan at regular rates and are requesting:
    (1) FO or OL loan assistance under part 764 of this title; or
    (2) Primary loan servicing on an FO, OL, or SW loan under part 766 
of this title.
    Line of Credit Agreement is a contract between the borrower and the 
lender that contains certain lender and borrower conditions, 
limitations, and responsibilities for credit extension and acceptance 
where loan principal balance may fluctuate throughout the term of the 
contract.
    Liquidation is the act of selling security for recovery of amounts 
owed to the Agency or lender.
    Liquidation expenses are the costs of an appraisal, due diligence 
evaluation, environmental assessment, outside attorney fees, and other 
costs incurred as a direct result of liquidating the security for a 
direct or guaranteed loan. Liquidation expenses do not include internal 
Agency expenses for a direct loan or in-house expenses for a guaranteed 
loan.
    Livestock is a member of the animal kingdom, or product thereof, as 
determined by the Agency.
    Loan Agreement is a contract between the borrower and the lender 
that contains certain lender and borrower agreements, conditions, 
limitations, and responsibilities for credit extension and acceptance.
    Loan servicing programs include any primary loan servicing program, 
conservation contract, current market value buyout, and homestead 
protection.
    Loan transaction is any loan approval or servicing action.
    Loss claim is 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.

[[Page 117]]

    Loss rate is the net amount of loan loss claims paid on FSA 
guaranteed loans made in the previous 7 years divided by the total loan 
amount of all such loans guaranteed during the same period.
    Low-Documentation Operating loan is an OL loan made to eligible 
applicants based on reduced documentation.
    Major deficiency is a deficiency that directly affects the soundness 
of the loan.
    Majority interest is more than a 50 percent interest in an entity 
held by an individual or group of individuals.
    Market value is the amount that an informed and willing buyer would 
pay an informed and willing, but not forced, seller in a completely 
voluntary sale.
    Mineral right is an ownership interest in minerals in land, with or 
without ownership of the surface of the land.
    Minor deficiency is a deficiency that violates Agency regulations, 
but does not affect the soundness of the loan.
    Mortgage is a legal instrument giving the lender a security interest 
or lien on real or personal property of any kind. The term ``mortgage'' 
also includes the terms ``deed of trust'' and ``security agreement.''
    Natural disaster is unusual and adverse weather conditions or 
natural phenomena that have substantially affected farmers by causing 
severe physical or production, or both, losses.
    Negligent servicing is servicing that fails to include those actions 
that are considered normal industry standards of loan management or 
comply with the lender's agreement or the guarantee. Negligent servicing 
includes failure to act or failure to act in a timely manner consistent 
with actions of a reasonable lender in loan making, servicing, and 
collection.
    Negotiated sale is a sale in which there is a bargaining of price or 
terms, or both.
    Net recovery value of security is the market value of the security 
property, assuming that the lender in the case of a guaranteed loan, or 
the Agency in the case of a direct loan, will acquire the property and 
sell it for its highest and best use, less the lender's or the Agency's 
costs of property acquisition, retention, maintenance, and liquidation.
    Net recovery value of non-essential assets is the appraised market 
value of the non-essential assets less any prior liens and any selling 
costs that may include such items as taxes due, commissions, and 
advertising costs. However, no deduction is made for maintenance of the 
property while in inventory.
    Non-capitalized interest is accrued interest on a loan that was not 
reclassified as principal at the time of restructuring. Between October 
10, 1988, and November 27, 1990, the Agency did not capitalize interest 
that was less than 90 days past due when restructuring a direct loan.
    Non-eligible enterprise is a business that meets the criteria in any 
one of the following categories:
    (1) Produces exotic animals, birds, or aquatic organisms or their 
products which may be agricultural in nature, but are not normally 
associated with agricultural production, e.g., there is no established 
or stable market for them or production is speculative in nature.
    (2) Produces non-farm animals, birds, or aquatic organisms 
ordinarily used for pets, companionship, or pleasure and not typically 
associated with human consumption, fiber, or draft use.
    (3) Markets non-farm goods or provides services which might be 
agriculturally related, but are not produced by the farming operation.
    (4) Processes or markets farm products when the majority of the 
commodities processed or marketed are not produced by the farming 
operation.
    Non-essential assets are assets in which the borrower has an 
ownership interest, that:
    (1) Do not contribute to:
    (i) Income to pay essential family living expenses, or
    (ii) The farming operation; and
    (2) Are not exempt from judgment creditors or in a bankruptcy 
action.
    Non-program loan is a loan on terms more stringent than terms for a 
program loan that is an extension of credit for the convenience of the 
Agency, because the applicant does not qualify for program assistance or 
the property to be financed is not suited for program

[[Page 118]]

purposes. Such loans are made or continued only when it is in the best 
interest of the Agency.
    Normal income security is all security not considered basic 
security, including crops, livestock, poultry products, other property 
covered by Agency liens that is sold in conjunction with the operation 
of a farm or other business, and FSA Farm Program payments.
    Normal production yield as used in 7 CFR part 764 for EM loans, is:
    (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 Noninsured Crop Disaster Assistance Program for the 
production year during which the disaster occurred;
    (2) The applicant's own production records, or the records of 
production on which FSA Farm Program payments are made contained in the 
applicant's Farm Program file, if available, for the previous 3 years, 
when the actual production history in paragraph (1) of this definition 
is not available;
    (3) The county average production yield, when the production records 
outlined in paragraphs (1) and (2) of this definition are not available.
    Operating loan is a loan made to an eligible applicant to assist 
with the financial costs of operating a farm. The term also includes a 
Youth loan.
    Operator is the individual or entity that provides the labor, 
management, and capital to operate the farm. The operator can be either 
an owner-operator or tenant-operator. Under applicable State law, an 
entity may have to receive authorization from the State in which the 
farm is located to be the owner and/or operator of the farm.
    Participated in the business operations of a farm requires that an 
applicant has:
    (1) Been the owner, manager or operator of a farming operation for 
the year's complete production cycle as evidenced by tax returns, FSA 
farm records or similar documentation;
    (2) Been employed as a farm manager or farm management consultant 
for the year's complete production cycle; or
    (3) Participated in the operation of a farm by virtue of being 
raised on a farm or having worked on a farm with significant 
responsibility for the day-to-day decisions for the year's complete 
production cycle, which may include selection of seed varieties, weed 
control programs, input suppliers, or livestock feeding programs or 
decisions to replace or repair equipment.
    Partnership is 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 
partnership will operate a farm. It also must be authorized to own both 
real and personal property and to incur debt in its own name.
    Past due is when a payment is not made by the due date.
    Physical loss is verifiable damage or destruction with respect to 
real estate or chattel, excluding annual growing crops.
    Potential liquidation value is the amount of a lender's protective 
bid at a foreclosure sale. Potential liquidation value is determined by 
an independent appraiser using comparables from other forced liquidation 
sales.
    Present value is the present worth of a future stream of payments 
discounted to the current date.
    Presidentially-designated emergency is 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 loan servicing programs include:
    (1) Loan consolidation and rescheduling, or reamortization;
    (2) Interest rate reduction, including use of the limited resource 
rate program;
    (3) Deferral;
    (4) Write-down of the principal or accumulated interest; or
    (5) Any combination of paragraphs (1) through (4) of this 
definition.
    Production cycle is the time it takes to produce an agricultural 
commodity from the beginning of the production process until it is 
normally disposed of or sold.
    Production loss is verifiable damage or destruction with respect to 
annual growing crops.

[[Page 119]]

    Program loans include FO, OL, and EM. In addition, for loan 
servicing purposes the term includes existing loans for the following 
programs no longer funded: SW, RL, EE, ST, and RHF.
    Promissory note is a written agreement to pay a specified sum on 
demand or at a specified time to the party designated. The terms 
``promissory note'' and ``note'' are interchangeable.
    Prospectus consists of a transmittal letter, a current balance sheet 
and projected year's budget which is sent to commercial lenders to 
determine their interest in financing or refinancing specific Agency 
direct loan applicants and borrowers.
    Protective advance is an advance made by the Agency or a lender to 
protect or preserve the collateral from loss or deterioration.
    Quarantine is 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).
    Reamortization is the rewriting of rates or terms, or both, of a 
loan made for real estate purposes.
    Reasonable rates and terms are those commercial rates and terms that 
other farmers are expected to meet when borrowing from a commercial 
lender or private source for a similar purpose and similar period of 
time. The ``similar period of time'' of available commercial loans will 
be measured against, but need not be the same as, the remaining or 
original term of the loan.
    Recoverable cost is a loan cost expense chargeable to either a 
borrower or property account.
    Recreation loan is a loan that was made to eligible applicants to 
assist in the conversion of all or a portion of the farm they owned or 
operated to outdoor income producing recreation enterprises to 
supplement or supplant farm income. RL's are no longer funded, however, 
such outstanding loans are serviced by the Agency.
    Redemption right is a Federal or state right to reclaim property for 
a period of time established by law, by paying the amount paid at the 
involuntary sale plus accrued interest and costs.
    Related by blood or marriage is being connected to one another as 
husband, wife, parent, child, brother, sister, uncle, aunt, or 
grandparent.
    Relative is the spouse and anyone having one of the following 
relationships to an applicant or borrower: parent, son, daughter, 
sibling, stepparent, stepson, stepdaughter, stepbrother, stepsister, 
half brother, half sister, uncle, aunt, nephew, niece, cousin, 
grandparent, grandson, granddaughter, or the spouses of the foregoing.
    Repossessed property is security property in the Agency's custody.
    Rescheduling is the rewriting of the rates or terms, or both, of a 
loan made for operating purposes.
    Restructuring is changing the terms of a debt through rescheduling, 
reamortization, deferral, writedown, or a combination thereof.
    Rural youth is a person who has reached the age of 10 but has not 
reached the age of 21 and resides in a rural area or any city or town 
with a population of 50,000 or fewer people.
    Security is property or right of any kind that is subject to a real 
or personal property lien. Any reference to ``collateral'' or ``security 
property'' will be considered a reference to the term ``security.''
    Security instrument includes any document giving the Agency a 
security interest on real or personal property.
    Security value is the market value of real estate or chattel 
property (less the value of any prior liens) used as security for an 
Agency loan.
    Shared Appreciation Agreement is an agreement between the Agency, or 
a lender in the case of a guaranteed loan, and a borrower on the 
appropriate Agency form that requires the borrower who has received a 
writedown on a direct or guaranteed loan to repay the Agency or the 
lender some or all of the writedown received, based on a percentage of 
any increase in the value of the real estate securing an SAA at a future 
date.
    Socially disadvantaged applicant is an applicant who is a member of 
a socially disadvantaged group. For entity applicants, the majority 
interest must be held by socially disadvantaged individuals. For married 
couples, the socially disadvantaged individual must have at least 50 
percent ownership in the farm

[[Page 120]]

business and make most of the management decisions, contribute a 
significant amount of labor, and generally be recognized as the operator 
of the farm.
    Socially disadvantaged group is a group whose members have been 
subject to racial, ethnic, or gender prejudice because of their identity 
as members of a group without regard to their individual qualities. 
These groups consist of: American Indians or Alaskan Natives, Asians, 
Blacks or African Americans, Native Hawaiians or other Pacific 
Islanders, Hispanics, and women.
    Softwood Timber Program loan was available to eligible financially 
distressed borrowers who would take marginal land, including highly 
erodible land, out of production of agricultural commodities other than 
the production of softwood timber. ST loans are no longer available, 
however, such outstanding loans are serviced by the Agency.
    Soil and Water loan is a loan that was made to an eligible applicant 
to encourage and facilitate the improvement, protection, and proper use 
of farmland by providing financing for soil conservation, water 
development, conservation, and use; forestation; drainage of farmland; 
the establishment and improvement of permanent pasture; pollution 
abatement and control; and other related measures consistent with all 
Federal, State and local environmental standards. SW loans are no longer 
funded, however, such outstanding loans are serviced by the Agency.
    Subordination is a creditor's temporary relinquishment of all or a 
portion of its lien priority in favor of another creditor, providing the 
other creditor with a priority right to collect a debt of a specific 
dollar amount from the sale of the same collateral.
    Subsequent loan is any FLP loan processed by the Agency after an 
initial loan of the same type has been made to the same borrower.
    Supervised bank account is an account with a financial institution 
established through a deposit agreement entered into between the 
borrower, the Agency, and the financial institution.
    Technical appraisal review is a review of an appraisal to determine 
if such appraisal meets the requirements of USPAP pursuant to standard 3 
of USPAP.
    Transfer and assumption is the conveyance by a debtor to an assuming 
party of the assets, collateral, and liabilities of a loan in return for 
the assuming party's binding promise to pay the debt outstanding or the 
market value of the collateral.
    Trust is an entity that under applicable state law meets the 
criteria of being a trust of any kind but does not meet the criteria of 
being a farm cooperative, private domestic corporation, partnership, or 
joint operation.
    Unaccounted for security is security for a direct or guaranteed loan 
that was misplaced, stolen, sold, or otherwise missing, where 
replacement security was not obtained or the proceeds from its sale have 
not been applied to the loan.
    Unauthorized assistance is any loan, loan servicing action, lower 
interest rate, loan guarantee, or subsidy received by a borrower, or 
lender, for which the borrower or lender was not eligible, which was not 
made in accordance with all Agency procedures and requirements, or which 
the Agency obligated from the wrong appropriation or fund. Unauthorized 
assistance may result from borrower, lender, or Agency error.
    Uniform Standards of Professional Appraisal Practice are 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.
    United States is any of the 50 States, the Commonwealth of Puerto 
Rico, the Virgin Islands of the United States, Guam, American Samoa, the 
Commonwealth of the Northern Mariana Islands, Republic of Palau, 
Federated States of Micronesia, and the Republic of the Marshall 
Islands.
    U. S. Attorney is an attorney for the United States Department of 
Justice.
    Veteran is 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.
    Wetlands are those lands or areas of land as determined by the 
Natural Resources Conservation Service to meet

[[Page 121]]

the requirements provided in section 1201 of the Food Security Act of 
1985.
    Working capital is cash available to conduct normal daily operations 
including, but not limited to, paying for feed, seed, fertilizer, 
pesticides, farm supplies, cooperative stock, and cash rent.
    Youth loan is an operating type loan made to an eligible rural youth 
applicant to finance a modest income-producing agricultural project.

[72 FR 63285, Nov. 8, 2007; 72 FR 74153, Dec. 31, 2007]



Sec.  761.3  Civil rights.

    Part 15d of this title contains applicable regulations pertaining to 
civil rights and filing of discrimination complaints by program 
participants.



Sec.  761.4  Conflict of interest.

    The Agency enforces conflict of interest policies to maintain high 
standards of honesty, integrity, and impartiality in the making and 
servicing of direct and guaranteed loans. These requirements are 
established in 5 CFR parts 2635 and 8301.



Sec.  761.5  Restrictions on lobbying.

    A person who applies for or receives a loan made or guaranteed by 
the Agency must comply with the restrictions on lobbying in 7 CFR part 
3018.



Sec.  761.6  Appeals.

    Except as provided in 7 CFR part 762, appeal of an adverse decision 
made by the Agency will be handled in accordance with 7 CFR parts 11 and 
780.



Sec.  761.7  Appraisals.

    (a) General. This section describes Agency requirements for:
    (1) Real estate and chattel appraisals made in connection with the 
making and servicing of direct FLP and Non-program loans; and
    (2) Appraisal reviews conducted on appraisals made in connection 
with the making and servicing of direct and guaranteed FLP and Non-
program loans.
    (b) Appraisal standards. (1) Real estate appraisals, technical 
appraisal reviews and their respective forms must comply with the 
standards contained in USPAP, as well as applicable Agency regulations 
and procedures for the specific FLP activity involved. A current copy of 
USPAP along with other applicable procedures and regulations are 
available for review in each Agency State Office.
    (2) When a chattel appraisal is required, it must be completed on an 
applicable Agency form (available in each Agency State Office) or other 
format containing the same information.
    (c) Use of an existing real estate appraisal. Except where specified 
elsewhere, when a real estate appraisal is required, the Agency will use 
the existing real estate appraisal to reach loan making or servicing 
decisions 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) 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 the original appraisal were completed 
in accordance with USPAP.
    (d) Appraisal reviews. (1) With respect to a real estate appraisal, 
the Agency may conduct a technical appraisal review or an administrative 
appraisal review, or both.
    (2) With respect to a chattel appraisal, the Agency may conduct an 
administrative appraisal review.



Sec.  761.8  Loan Limitations.

    (a) Dollar limits. The outstanding principal balances for an 
applicant or anyone who will sign the promissory note cannot exceed any 
of the following at the time of loan closing or assumption of 
indebtedness. If the outstanding principal balance exceeds any of the 
limits at the time of approval, the farm operating plan must reflect 
that funds will be available to reduce the indebtedness prior to loan 
closing or assumption of indebtedness.

[[Page 122]]

    (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) Guaranteed loan limit. 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.



Sec.  761.9  Interest rates for direct loans.

    Interest rates for all direct loans are set in accordance with the 
Act. A copy of the current interest rates may be obtained in any Agency 
office.



Sec.  761.10  Planning and performing construction and other development.

    (a) Purpose. This section describes Agency policies regarding the 
planning and performing of construction and other development work 
performed with:
    (1) Direct FLP loan funds; or
    (2) Insurance or other proceeds resulting from damage or loss to 
direct loan security.
    (b) Funds for development work. The applicant or borrower:
    (1) Must provide the Agency with an estimate of the total cash cost 
of all planned development prior to loan approval;
    (2) Must show proof of sufficient funds to pay for the total cash 
cost of all planned development at or before loan closing;
    (3) Must not incur any debts for materials or labor or make any 
expenditures for development purposes prior to loan closing with the 
expectation of being reimbursed from Agency loan funds.
    (c) Scheduling, planning, and completing development work. The 
applicant or borrower:
    (1) Is responsible for scheduling and planning development work in a 
manner acceptable to the Agency and must furnish the Agency information 
fully describing the planned development, the proposed schedule, and the 
manner in which it will be accomplished;
    (2) Is responsible for obtaining all necessary State and local 
construction approvals and permits prior to loan closing;

[[Page 123]]

    (3) Must ensure that all development work meets the environmental 
requirements established in subpart G of 7 CFR part 1940;
    (4) Must schedule development work to start as soon as feasible 
after the loan is closed and complete work as quickly as practicable;
    (5) Is responsible for obtaining any required technical services 
from qualified technicians, tradespeople, and contractors.
    (d) Construction and repair standards. (1) The construction of a new 
building and the alteration or repair of an existing building must 
conform with industry-acceptable construction practices and standards.
    (2) All improvements to a property must conform to applicable laws, 
ordinances, codes, and regulations.
    (3) The applicant or borrower is responsible for selecting a design 
standard that meets all applicable local and state laws, ordinances, 
codes, and regulations, including building, plumbing, mechanical, 
electrical, water, and waste management.
    (4) The Agency will require drawings, specifications, and estimates 
to fully describe the work as necessary to protect the Agency's 
financial interests. The drawings and specifications must identify any 
specific development standards being used. Such information must be 
sufficiently complete to avoid any misunderstanding as to the extent, 
kind, and quality of work to be performed.
    (5) The Agency will require technical data, tests, or engineering 
evaluations to support the design of the development as necessary to 
protect its financial interests.
    (6) The Agency will require the applicant or borrower to provide 
written certification that final drawings and specifications conform 
with the applicable development standard as necessary to protect its 
financial interests. Certification must be obtained from individuals or 
organizations trained and experienced in the compliance, interpretation, 
or enforcement of the applicable development standards, such as licensed 
architects, professional engineers, persons certified by a relevant 
national model code organization, authorized local building officials, 
or national code organizations.
    (e) Inspection. (1) The applicant or borrower is responsible for 
inspecting development work as necessary to protect their interest.
    (2) The applicant or borrower must provide the Agency written 
certification that the development conforms to the plans and good 
construction practices, and complies with applicable laws, ordinances, 
codes, and regulations.
    (3) The Agency will require the applicant or borrower to obtain 
professional inspection services during construction as necessary to 
protect its financial interests.
    (4) Agency inspections do not create or imply any duty or obligation 
of the Agency to the applicant or borrower.
    (f) Warranty and lien waivers. The applicant or borrower must obtain 
and submit all lien waivers on any construction before the Agency will 
issue final payment.
    (g) Surety. The Agency will require surety to guarantee both payment 
and performance for construction contracts as necessary to protect its 
financial interests.
    (h) Changing the planned development. An applicant or borrower must 
request, in writing, Agency approval for any change to a planned 
development. The Agency will approve a change if all of the following 
are met:
    (1) It will not reduce the value of the Agency's security;
    (2) It will not adversely affect the soundness of the farming 
operation;
    (3) It complies with all applicable laws and regulations;
    (4) It is for an authorized loan purpose;
    (5) It is within the scope of the original loan proposal;
    (6) If required, documentation that sufficient funding for the full 
amount of the planned development is approved and available;
    (7) If required, surety to cover the full revised development amount 
has been provided; and
    (8) The modification is certified in accordance with paragraph (d) 
(6) of this section.

[[Page 124]]



Sec. Sec.  761.11-761.50  [Reserved]



                   Subpart B_Supervised Bank Accounts



Sec.  761.51  Establishing a supervised bank account.

    (a) Supervised bank accounts will be used to:
    (1) Assure correct use of funds planned for capital purchases or 
debt refinancing and perfection of the Agency's security interest in the 
assets purchased or refinanced when electronic funds transfer or 
treasury check processes are not practicable;
    (2) Protect the Agency's security interest in insurance indemnities 
or other loss compensation resulting from loss or damage to loan 
security; or
    (3) Assist borrowers with limited financial skills with cash 
management, subject to the following conditions:
    (i) Use of a supervised bank for this purpose will be temporary and 
infrequent;
    (ii) The need for a supervised bank account in this situation will 
be determined on a case-by-case basis; and
    (iii) The borrower agrees to the use of a supervised bank account 
for this purpose by executing the deposit agreement.
    (b) The borrower may select the financial institution in which the 
account will be established, provided the institution is Federally 
insured. If the borrower does not select an institution, the Agency will 
choose one.
    (c) Only one supervised bank account will be established for any 
borrower.
    (d) If both spouses sign an FLP note and security agreement, the 
supervised bank account will be established as a joint tenancy account 
with right of survivorship from which either borrower can withdraw 
funds.
    (e) If the funds to be deposited into the account cause the balance 
to exceed $100,000, the financial institution must agree to pledge 
acceptable collateral with the Federal Reserve Bank for the excess over 
$100,000, before the deposit is made.
    (1) If the financial institution is not a member of the Federal 
Reserve System, the institution must pledge acceptable collateral with a 
correspondent bank that is a member of the Federal Reserve System. The 
correspondent bank must inform the Federal Reserve Bank that it is 
holding securities pledged for the supervised bank account in accordance 
with 31 CFR part 202 (Treasury Circular 176).
    (2) When the balance in the account has been reduced, the financial 
institution may request a release of part or all of the collateral, as 
applicable, from the Agency.



Sec.  761.52  Deposits into a supervised bank account.

    (a) Checks or money orders may be deposited into a supervised bank 
account provided they are not payable:
    (1) Solely to the Federal Government or any agency thereof; or
    (2) To the Treasury of the United States as a joint payee.
    (b) Loan proceeds may be deposited electronically.



Sec.  761.53  Interest bearing accounts.

    (a) A supervised bank account, if possible, will be established as 
an interest bearing deposit account provided that the funds will not be 
immediately disbursed, and the account is held jointly by the borrower 
and the Agency if this arrangement will benefit the borrower.
    (b) Interest earned on a supervised bank account will be treated as 
normal income security.



Sec.  761.54  Withdrawals from a supervised bank account.

    (a) The Agency will authorize a withdrawal from the supervised bank 
account for an approved purpose after ensuring that:
    (1) Sufficient funds in the supervised bank account are available;
    (2) No loan proceeds are disbursed prior to confirmation of proper 
lien position, except to pay for lien search if needed;
    (3) No checks are issued to ``cash;'' and
    (4) The use of funds is consistent with the current farm operating 
plan or other agreement with the Agency.
    (b) A check must be signed by the borrower with countersignature of 
the Agency, except as provided in paragraph (c) of this section. All 
checks must bear the legend ``countersigned, not as co-maker or 
endorser.''

[[Page 125]]

    (c) The Agency will withdraw funds from a supervised bank account 
without borrower counter-signature only for the following purposes:
    (1) For application on Agency indebtedness;
    (2) To refund Agency loan funds;
    (3) To protect the Agency's lien or security;
    (4) To accomplish a purpose for which such advance was made; or
    (5) In the case of a deceased borrower, to continue to pay necessary 
farm expenses to protect Agency security in conjunction with the 
borrower's estate.



Sec.  761.55  Closing a supervised bank account.

    (a) If the supervised bank account is no longer needed and the loan 
account is not paid in full, the Agency will determine the source of the 
remaining funds in the supervised bank account. If the funds are 
determined to be:
    (1) Loan funds:
    (i) From any loan type, except Youth loan, and the balance is less 
than $1,000, the Agency will provide the balance to the borrower to use 
for authorized loan purposes;
    (ii) From a Youth loan, and the balance is less than $100, the 
Agency will provide the balance to the borrower to use for authorized 
loan purposes;
    (2) Loan funds:
    (i) From any loan type, except Youth loan, and the balance is $1,000 
or greater, the Agency will apply the balance to the FLP loan;
    (ii) From a Youth loan, and the balance is $100 or greater, the 
Agency will apply the balance to the FLP loan;
    (3) Normal income funds, the Agency will apply the balance to the 
remaining current year's scheduled payments and pay any remaining 
balance to the borrower; and
    (4) Basic security funds, the Agency will apply the balance to the 
FLP loan as an extra payment or the borrower may apply the balance 
toward the purchase of basic security, provided the Agency obtains a 
lien on such security and its security position is not diminished.
    (b) If the borrower is uncooperative in closing a supervised bank 
account, the Agency will make written demand to the financial 
institution for the balance and apply it in accordance with paragraph 
(a) of this section.
    (c) In the event of a borrower's death, the Agency may:
    (1) Apply the balance to the borrower's FLP loan;
    (2) Continue with a remaining borrower, provided the supervised bank 
account was established as a joint tenancy with right of survivorship 
account;
    (3) Refund unobligated balances from other creditors in the 
supervised bank account for specific operating purposes in accordance 
with any prior written agreement between the Agency and the deceased 
borrower; or
    (4) Continue to pay expenses from the supervised bank account in 
conjunction with the borrower's estate.



Sec. Sec.  761.56-761.100  [Reserved]



                       Subpart C_Supervised Credit



Sec.  761.101  Applicability.

    This subpart applies to all direct applicants and borrowers, except 
borrowers with only Non-program loans.



Sec.  761.102  Borrower recordkeeping, reporting, and supervision.

    (a) A borrower must maintain accurate records sufficient to make 
informed management decisions and to allow the Agency to render loan 
making and servicing decisions in accordance with Agency regulations. 
These records must include the following:
    (1) Production (e.g., total and per unit for livestock and crops);
    (2) Revenues, by source;
    (3) Other sources of funds, including borrowed funds;
    (4) Operating expenses;
    (5) Interest;
    (6) Family living expenses;
    (7) Profit and loss;
    (8) Tax-related information;
    (9) Capital expenses;
    (10) Outstanding debt; and
    (11) Debt repayment.
    (b) A borrower also must agree in writing to:
    (1) Cooperate with the Agency and comply with all supervisory 
agreements, farm assessments, farm operating plans, year-end analyses, 
and all

[[Page 126]]

other loan-related requirements and documents;
    (2) Submit financial information and an updated farm operating plan 
when requested by the Agency;
    (3) Immediately notify the Agency of any proposed or actual 
significant change in the farming operation, any significant changes in 
family income, expenses, or the development of problem situations, or 
any losses or proposed significant changes in security.
    (c) If the borrower fails to comply with these requirements, unless 
due to reasons outside the borrower's control, the non-compliance may 
adversely impact future requests for assistance.



Sec.  761.103  Farm assessment.

    (a) The Agency assesses each farming operation to determine the 
applicant's financial condition, organizational structure, management 
strengths and weaknesses, appropriate levels of Agency oversight, credit 
counseling needs, and training needs. The applicant will participate in 
developing the assessment.
    (b) The initial assessment must evaluate, at a minimum, the:
    (1) Farm organization and key personnel qualifications;
    (2) Type of farming operation;
    (3) Goals for the operation;
    (4) Adequacy of real estate, including facilities, to conduct the 
farming operation;
    (5) Adequacy of chattel property used to conduct the farming 
operation;
    (6) Historical performance;
    (7) Farm operating plan;
    (8) Loan evaluation;
    (9) Supervisory plan; and
    (10) Training plan.
    (c) An assessment update must be prepared for each subsequent loan. 
The update must include a farm operating plan, a loan evaluation, and 
any other items discussed in paragraph (b) of this section that have 
significantly changed since the initial assessment.
    (d) The Agency reviews the assessment to determine a borrower's 
progress at least annually. The review will be in the form of an office 
visit, field visit, letter, phone conversation, or year-end analysis, as 
determined by the Agency.



Sec.  761.104  Developing the farm operating plan.

    (a) An applicant or borrower must submit a farm operating plan to 
the Agency, upon request, for loan making or servicing purposes.
    (b) An applicant or borrower may request Agency assistance in 
developing the farm operating plan.
    (c) The farm operating plan will be based on accurate and verifiable 
information.
    (1) Historical information will be used as a guide.
    (2) Positive and negative trends, mutually agreed upon changes and 
improvements, and current input prices will be taken into consideration 
when arriving at reasonable projections.
    (3) Projected yields will be calculated according to the following 
priorities:
    (i) The applicant or borrower's own production records for the 
previous 3 years;
    (ii) The per-acre actual production history of the crops produced by 
the farming operation used to determine Federal crop insurance payments, 
if available;
    (iii) FSA Farm Program actual yield records;
    (iv) County averages;
    (v) State averages.
    (4) If the applicant or borrower's production history has been 
substantially affected by a disaster declared by the President or 
designated by the Secretary of Agriculture, or the applicant or borrower 
has had a qualifying loss from such disaster but the farming operation 
was not located in a declared or designated disaster area, the applicant 
or borrower may:
    (i) Use county average yields, or state average yields if county 
average yields are not available, in place of the disaster year yields; 
or
    (ii) Exclude the production year with the lowest actual or county 
average yield if their yields were affected by disasters during at least 
2 of the 3 years.
    (d) Unit prices for agricultural commodities established by the 
Agency will generally be used. Applicants and borrowers that provide 
evidence that they will receive a premium price for a commodity may use 
a price above the price established by the Agency.

[[Page 127]]

    (e) Except as provided in paragraph (f) of this section, the 
applicant or borrower must sign the final farm operating plan prior to 
approval of any loan or servicing action.
    (f) If the Agency believes the applicant or borrower's farm 
operating plan is inaccurate, or the information upon which it is based 
cannot be verified, the Agency will discuss and try to resolve the 
concerns with the applicant or borrower. If an agreement cannot be 
reached, the Agency will make loan approval and servicing determinations 
based on the Agency's revised farm operating plan.



Sec.  761.105  Year-end analysis.

    (a) The Agency conducts a year-end analysis at its discretion or if 
the borrower:
    (1) Has received any direct loan, chattel subordination, or primary 
loan servicing action within the last year;
    (2) Is financially distressed or delinquent;
    (3) Has a loan deferred, excluding deferral of an installment under 
subpart B of part 766; or
    (4) Is receiving a limited resource interest rate on any loan.
    (b) To the extent practicable, the year-end analysis will be 
completed within 60 days after the end of the business year or farm 
budget planning period and must include:
    (1) An analysis comparing actual income, expenses, and production to 
projected income, expenses, and production for the preceding production 
cycle; and
    (2) An updated farm operating plan.



Sec. Sec.  761.106-761.200  [Reserved]



    Subpart D_Allocation of Farm Loan Programs Funds to State Offices



Sec.  761.201  Purpose.

    (a) This subpart addresses:
    (1) The allocation of funds for direct and guaranteed FO and OL 
loans;
    (2) The establishment of socially disadvantaged target participation 
rates; and
    (3) The reservation of loan funds for beginning farmers.
    (b) The Agency does not allocate EM loan funds to State Offices but 
makes funds available following a designated or declared disaster. EM 
loan funds are available on a first-come first-served basis.
    (c) State funding information is available for review in any State 
Office.



Sec.  761.202  Timing of allocations.

    The Agency's National Office allocates funds for FO and OL loans to 
the State Offices on a fiscal year basis, as made available by the 
Office of Management and Budget. However, the National Office will 
retain control over the funds when funding or administrative constraints 
make allocation to State Offices impractical.



Sec.  761.203  National reserves for Farm Ownership and Operating loans.

    (a) Reservation of funds. At the start of each fiscal year, the 
National Office reserves a portion of the funds available for each 
direct and guaranteed loan program. These reserves enable the Agency to 
meet unexpected or justifiable program needs during the fiscal year.
    (b) Allocation of reserved funds. The National Office distributes 
funds from the reserve to one or more State Offices to meet a program 
need or Agency objective.



Sec.  761.204  Methods of allocating funds to State Offices.

    FO and OL loan funds are allocated to State Offices using one or 
more of the following allocation methods:
    (a) Formula allocation, if data, as specified in Sec.  761.205, is 
available to use the formula for the State.
    (b) Administrative allocation, if the Agency cannot adequately meet 
program objectives with a formula allocation. The National Office 
determines the amount of an administrative allocation on a case-by-case 
basis.
    (c) Base allocation, to ensure funding for at least one loan in each 
State, District, or County Office. In making a base allocation, the 
National Office may use criteria other than those used in the formula 
allocation, such as historical Agency funding information.

[[Page 128]]



Sec.  761.205  Computing the formula allocation.

    (a) The formula allocation for FO or OL loan funds is equal to:
    (1) The amount available for allocation by the Agency minus the 
amounts held in the National Office reserve and distributed by base and 
administrative allocation, multiplied by
    (2) The State Factor, which represents the percentage of the total 
amount of the funds for a loan program that the National Office 
allocates to a State Office.

formula allocation = (amount available for allocation-national reserve-
          base allocation-administrative allocation) x State Factor

    (b) To calculate the State Factor, the Agency:
    (1) Uses the following criteria, data sources, and weights:

----------------------------------------------------------------------------------------------------------------
                                                                                         Weight for   Weight for
              Criteria                 Loan type criterion is        Data source          FO loans     OL loans
                                              used for                                   (percent)    (percent)
----------------------------------------------------------------------------------------------------------------
Farm operators with sales of $2,500-  FO and OL loans........  U.S. Census of                    15           15
 $39,999 and less than 200 days work                            Agriculture.
 off the farm.
Farm operators with sales of $40,000  FO and OL loans........  U.S. Census of                    35           35
 or more and less than 200 days work                            Agriculture.
 off farm.
Tenant farm operators...............  FO and OL loans........  U.S. Census of                    25           20
                                                                Agriculture.
3-year average net farm income......  FO and OL loans........  USDA Economic Research            15           15
                                                                Service.
Value of farm real estate assets....  FO loans...............  USDA Economic Research            10          N/A
                                                                Service.
Value of farm non-real estate assets  OL loans...............  USDA Economic Research           N/A           15
                                                                Service.
----------------------------------------------------------------------------------------------------------------

    (2) Determines each State's percentage of the national total for 
each criterion;
    (3) Multiplies the percentage for each State determined in paragraph 
(b)(2) of this section by the applicable weight for that criterion;
    (4) Sums the weighted criteria for each State to obtain the State 
factor.



Sec.  761.206  Pooling of unobligated funds allocated to State Offices.

    The Agency periodically pools unobligated FO and OL loan funds that 
have been allocated to State Offices. When pooling these funds, the 
Agency places all unobligated funds in the appropriate National Office 
reserve. The pooled funds may be retained in the national reserve or 
reallocated to the States.



Sec.  761.207  Distribution of loan funds by State Offices.

    A State Office may distribute its allocation of loan funds to 
District or County level using the same allocation methods that are 
available to the National Office. State Offices may reserve a portion of 
the funds to meet unexpected or justifiable program needs during the 
fiscal year.



Sec.  761.208  Target participation rates for socially disadvantaged groups.

    (a) General. (1) The Agency establishes target participation rates 
for providing FO and OL loans to members of socially disadvantaged 
groups.
    (2) The Agency sets the target participation rates for State and 
County levels annually.
    (3) When distributing loan funds in counties within Indian 
reservations, the Agency will allocate the funds on a reservation-wide 
basis.
    (4) The Agency reserves and allocates sufficient loan funds to 
achieve these target participation rates. The Agency may also use funds 
that are not reserved and allocated for socially disadvantaged groups to 
make or guarantee loans to members of socially disadvantaged groups.
    (b) FO loans based on ethnicity or race. The FO loan target 
participation rate based on ethnicity or race in each:
    (1) State is equal to the percent of the total rural population in 
the State who are members of such socially disadvantaged groups.
    (2) County is equal to the percent of rural population in the county 
who are members of such socially disadvantaged groups.

[[Page 129]]

    (c) OL loans based on ethnicity or race. The OL loan target 
participation rate based on ethnicity or race in each:
    (1) State is equal to the percent of the total number of farmers in 
the State who are members of such socially disadvantaged groups.
    (2) County is equal to the percent of the total number of farmers in 
the county who are members of socially disadvantaged ethnic groups.
    (d) Women farmers. (1) The target participation rate for women 
farmers in each:
    (i) State is equal to the percent of farmers in the State who are 
women.
    (ii) County is equal to the percent of farmers in the county who are 
women.
    (2) In developing target participation rates for women, the Agency 
will consider the number of women who are current farmers and potential 
farmers.



Sec.  761.209  Loan funds for beginning farmers.

    Each fiscal year, the Agency reserves a portion of direct and 
guaranteed FO and OL loan funds for beginning farmers in accordance with 
section 346(b)(2) of the Act.



Sec.  761.210  Transfer of funds.

    If sufficient unsubsidized guaranteed OL funds are available, then 
beginning on:
    (a) August 1 of each fiscal year, the Agency will use available 
unsubsidized guaranteed OL loan funds to make approved direct FO loans 
to beginning farmers under the Beginning Farmer Downpayment loan 
program; and
    (b) September 1 of each fiscal year the Agency will use available 
unsubsidized guaranteed OL loan funds to make approved direct FO loans 
to beginning farmers.



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 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.

    Source: 64 FR 7378, Feb. 12, 1999, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 762 appear at 72 FR 
63297, Nov. 8, 2007.



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) Lender list. 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.
    (c) Lender classification. Lenders who participate in the Agency 
guaranteed loan program will be classified into one of the following 
categories:

[[Page 130]]

    (1) Standard Eligible Lender under Sec.  762.105;
    (2) Certified Lender, or
    (3) Preferred Lender under Sec.  762.106.
    (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.

[64 FR 7378, Feb. 12, 1999, as amended at 72 FR 63297, Nov. 8, 2007]



Sec.  762.102  Abbreviations and definitions.

    Abbreviations and definitions for terms used in this part are 
provided in Sec.  761.2 of this chapter.

[72 FR 63297, Nov. 8, 2007]



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) 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.
    (b) The lender or Agency may request updated information from the 
borrower to implement an appeal decision.
    (c) Appeals will be handled in accordance with parts 11 and 780 of 
this title.

[64 FR 7378, Feb. 12, 1999, as amended at 72 FR 63297, Nov. 8, 2007]



Sec.  762.105  Eligibility and substitution of lenders.

    (a) General. To participate in FSA guaranteed farm loan programs, a 
lender must meet the eligibility criteria in this part. The standard 
eligible lender must demonstrate eligibility and provide such evidence 
as the Agency may request.
    (b) Standard eligible lender eligibility criteria. (1) A lender must 
have experience in making and servicing agricultural loans and have the 
capability to make and service the loan for which a guarantee is 
requested;
    (2) The lenders must not have losses or deficiencies in processing 
and servicing guaranteed loans above a level which would indicate an 
inability to properly process and service a guaranteed agricultural 
loan.

[[Page 131]]

    (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 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:
    (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:

[[Page 132]]

    (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 for 
the Agency.
    (d) CLP and PLP approval. (1) If a lender applying for CLP or PLP 
status is or has recently been involved in a merger or acquisition, all 
loans and losses attributed to both lenders will be considered in the 
eligibility calculations.
    (2) The Agency will determine which branches of the lender have the 
necessary experience and ability to participate in the CLP or PLP 
program based on the information submitted in the lender application and 
on Agency experience.
    (3) Lenders who meet the criteria will be granted CLP or PLP status 
for a period not to exceed 5 years.
    (4) PLP status will be conditioned on the lender carrying out its 
credit management system as proposed in its request for PLP status and 
any additional loan making or servicing requirements agreed to and 
documented the PLP lender's agreement. If the PLP lender's agreement 
does not specify any agreed upon process for a particular action, the 
PLP lender will act according to regulations governing CLP lenders.

[[Page 133]]

    (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. The Agency 
may allow a PLP lender with a loss rate which exceeds the maximum PLP 
loss rate, to retain its PLP status for a two-year period, if:
    (A) The lender documents in writing why the excessive loss rate is 
beyond their control;
    (B) The lender provides a written plan that will reduce the loss 
rate to the PLP maximum rate within two years from the date of the plan, 
and
    (C) The Agency determines that exceeding the maximum PLP loss rate 
standard was beyond the control of the lender. Examples include, but are 
not limited to, a freeze with only local impact, economic downturn in a 
local area, drop in local land values, industries moving into or out of 
an area, loss of access to a market, and biological or chemical damage.
    (D) The Agency will revoke PLP status if the maximum PLP loss rate 
is not met at the end of the two-year period, unless a second two year 
extension is granted under this subsection.
    (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; 71 FR 43957, Aug. 3, 2006]



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

[[Page 134]]

non-guaranteed loans of a similar type and amount.
    (3) The $125,000 threshold includes any single loan, or package of 
loans submitted for consideration at any one time. A lender must not 
split a loan into two or more parts to meet the threshold thereby 
avoiding additional documentation.
    (4) The Agency may require lenders with a lender loss rate in excess 
of the rate for CLP lenders to assemble additional documentation from 
paragraph (b) of this section.
    (b) Loans over $125,000. A complete application for loans over 
$50,000 will consist of the items required in paragraph (a) of this 
section plus the following:
    (1) Verification of income;
    (2) Verification of debts over $1,000;
    (3) Three years financial history;
    (4) Three years of production history (for standard eligible lenders 
only);
    (5) Proposed loan agreements; and,
    (6) If construction or development is planned, a copy of the plans, 
specifications, and development schedule.
    (c) Applications from PLP lenders. Notwithstanding paragraphs (a) 
and (b) of this section, a complete application for PLP lenders will 
consist of at least:
    (1) An application form;
    (2) A loan narrative; and
    (3) Any other items agreed to during the approval of the PLP 
lender's status and contained in the PLP lender agreement.
    (d) Submitting applications. (1) All lenders must compile and 
maintain in their files a complete application for each guaranteed loan. 
See paragraphs (a), (b), and (c) of this section.
    (2) The Agency will notify CLP lenders which items to submit to the 
Agency.
    (3) PLP lenders will submit applications in accordance with their 
agreement with the Agency for PLP status.
    (4) CLP and PLP lenders must certify that the required items, not 
submitted, are in their files.
    (5) The Agency may request additional information from any lender or 
review the lender's loan file as needed to make eligibility and approval 
decisions.
    (e) Incomplete applications. If the lender does not provide the 
information needed to complete its application by the deadline 
established in an Agency request for the information, the application 
will be considered withdrawn by the lender.
    (f) Conflict of interest. (1) When a lender submits the application 
for a guaranteed loan, the lender will inform the Agency in writing of 
any relationship which may cause an actual or potential conflict of 
interest.
    (2) Relationships include:
    (i) The lender or its officers, directors, principal stockholders 
(except stockholders in a Farm Credit System institution that have stock 
requirements to obtain a loan), or other principal owners having a 
financial interest (other than lending relationships in the normal 
course of business) in the applicant or borrower.
    (ii) The applicant or borrower, a relative of the applicant or 
borrower, anyone residing in the household of the applicant or borrower, 
any officer, director, stockholder or other owner of the applicant or 
borrower holds any stock or other evidence of ownership in the lender.
    (iii) The applicant or borrower, a relative of the applicant or 
borrower, or anyone residing in the household of the 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 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.
    (g) Market placement program. When the Agency determines that a 
direct applicant or borrower may qualify for guaranteed credit, the 
Agency may

[[Page 135]]

submit the applicant or borrower's financial information to one or more 
guaranteed lenders. If a lender indicates interest in providing 
financing to the applicant or borrower through the guaranteed loan 
program, the Agency will assist in completing the application for a 
guarantee.

[64 FR 7378, Feb. 12, 1999, as amended at 68 FR 7695, Feb. 18, 2003; 72 
FR 63297, Nov. 8, 2007]



Sec. Sec.  762.111-762.119  [Reserved]



Sec.  762.120  Applicant eligibility.

    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 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 Act by debt write-down or write-off; compromise, adjustment, 
reduction, or charge-off under the provisions of section 331 of the Act; 
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 Act;
    (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 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 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 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 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 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

[[Page 136]]

and were clearly beyond their control; or,
    (ii) Lack of credit history.
    (h) Test for credit. (1) The 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 applicant, and any entity members as individuals 
will be considered when evaluating the availability of other credit to 
the applicant.
    (i) For OLs:
    (1) The individual or entity 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 applicants. Entity 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 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) Controlled substances. The applicant, and anyone who will sign 
the promissory note, must not be ineligible as a result of a conviction 
for controlled substances according to 7 CFR part 718 of this chapter. 
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; 72 FR 63297, Nov. 8, 2007]



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 to improve 
its profitability;
    (ii) Purchase of livestock, including poultry, and farm equipment or 
fixtures, quotas and bases, and cooperative stock for credit, 
production, processing or marketing purposes;
    (iii) Payment of annual farm operating expenses, examples of which 
include feed, seed, fertilizer, pesticides, farm 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

[[Page 137]]

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 applicant can demonstrate the need to 
refinance;
    (viii) Payment of loan closing costs;
    (ix) Payment of costs associated with complying with Federal or 
State-approved standards under the Occupational Safety and Health Act of 
1970 (29 U.S.C. 655, 667). This purpose is limited to applicants who 
demonstrate that compliance with the standards will cause them 
substantial economic injury; and
    (x) Payment of training costs required or recommended by the Agency.
    (2) Loan funds under a line of credit may be advanced only for the 
following purposes:
    (i) Payment of annual operating expenses, family subsistence, and 
purchase of feeder animals;
    (ii) Payment of current annual operating debts advanced for the 
current operating cycle; (Under no circumstances can carry-over 
operating debts from a previous operating cycle be refinanced);
    (iii) Purchase of routine capital assets, such as replacement of 
livestock, that will be repaid within the operating cycle;
    (iv) Payment of scheduled, non-delinquent, term debt payments 
provided the debt is for authorized FO or OL purposes.
    (v) Purchase of cooperative stock for credit, production, processing 
or marketing purposes; and
    (vi) Payment of loan closing costs.
    (b) Farm ownership loan purposes. Guaranteed FO are authorized only 
to:
    (1) Acquire or enlarge a farm; examples include, but are not limited 
to, providing down payments, purchasing easements for the applicant's 
portion of land being subdivided, and participating in the beginning 
farmer downpayment FO program under part 764 of this chapter;
    (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 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.

[64 FR 7378, Feb. 12, 1999, as amended at 72 FR 63297, Nov. 8, 2007]



Sec.  762.122  Loan limitations.

    (a) Dollar limits. The Agency will not guarantee any loan that would 
result in the applicant's total indebtedness exceeding the limits 
established in Sec.  761.8 of this chapter.
    (b) OL term limitations. (1) No guaranteed OL shall be made to any 
applicant after the 15th year that a 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

[[Page 138]]

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.
    (c) Leased land. When FO funds are used for improvements to leased 
land the terms of the lease must provide reasonable assurance that the 
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.
    (d) 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.
    (e) 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; 72 FR 63297, Nov. 8, 2007]



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, 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 764 of 
this chapter 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) 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; 
72 FR 63297, Nov. 8, 2007]



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 agricultural loan customer, but the 
frequency of change must be specified in the loan or line of credit 
instrument.
    (3) Neither the interest rate on the guaranteed portion nor the 
unguaranteed portion may exceed the rate the lender charges its average 
agricultural loan customer. At the request of the Agency, the lender 
must provide evidence of the rate charged the average agricultural loan 
customer. This evidence may consist of

[[Page 139]]

average yield data, or documented administrative differential rate 
schedule formulas used by the lender.
    (4) Interest must be charged only on the actual amount of funds 
advanced and for the actual time the funds are outstanding. Interest on 
protective advances made by the lender to protect the security will be 
charged at the note rate but limited to paragraph (a)(3) of this 
section.
    (5) The lender and borrower may collectively obtain a temporary 
reduction in the interest rate through the interest assistance program 
in accordance with Sec.  762.150.
    (b) OL terms. (1) Loan funds or advances on a line of credit used to 
pay annual operating expenses will be repaid when the income from the 
year's operation is received, except when the borrower is establishing a 
new enterprise, developing a farm, purchasing feed while feed crops are 
being established, or recovering from disaster or economic reverses.
    (2) The final maturity date for each loan cannot exceed 7 years from 
the date of the promissory note or line of credit agreement. Advances 
for purposes other than for annual operating expenses will be scheduled 
for repayment over the minimum period necessary considering the 
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 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 764 of this chapter.

[64 FR 7378, Feb. 12, 1999, as amended at 72 FR 17358, Apr. 9, 2007; 72 
FR 63297, Nov. 8, 2007]



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 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 applicant's proven record of production and financial 
management.

[[Page 140]]

    (4) For CLP lenders, the projected income and expenses of the 
borrower and the operation must be based on the 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 applicant, and the Agency will be used.
    (6) The cash flow budget analyzed to determine a feasible plan must 
represent the predicted cash flow of the operating cycle.
    (7) Lenders must use price forecasts that are reasonable and 
defensible. Sources must be documented by the lender and acceptable to 
the Agency.
    (8) When a feasible plan depends on income from other sources in 
addition to income from owned land, the income must be dependable and 
likely to continue.
    (9) The lender will analyze business ventures other than the farm 
operation to determine their soundness and contribution to the 
operation. Guaranteed loan funds will not be used to finance a nonfarm 
enterprise. Nonfarm enterprises include, but are not limited to: raising 
earthworms, exotic birds, tropical fish, dogs, or horses for nonfarm 
purposes; welding shops; boarding horses; and riding stables.
    (10) When the 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 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 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 
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 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 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

[[Page 141]]

certificates of deposit as otherwise used in the ordinary course of 
business are allowed for both the guaranteed and unguaranteed portions.
    (c) Identifiable security. The guaranteed loan must be secured by 
identifiable collateral. To be identifiable, the lender must be able to 
distinguish the collateral item and adequately describe it in the 
security instrument.
    (d) Type of security. (1) Guaranteed loans may be secured by any 
property if the term of the loan and expected life of the property will 
not cause the loan to be undersecured.
    (2) For loans with terms greater than 7 years, a lien must be taken 
on real estate.
    (3) Loans can be secured by a mortgage on leasehold properties if 
the lease has a negotiable value and is subject to being mortgaged.
    (4) The lender or Agency may require additional personal and 
corporate guarantees to adequately secure the loan. These guarantees are 
separate from, and in addition to, the personal obligations arising from 
members of an entity signing the note as individuals.
    (e) Lien position. All guaranteed loans will be secured by the best 
lien obtainable. Provided that:
    (1) 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 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,

[[Page 142]]

property in the market area. In the absence of such public sales, 
reputable publications reflecting market values may be used. Appraisal 
reports may be on the Agency's appraisal of chattel property form or on 
any other appraisal form containing at least the same information. 
Chattel appraisals will be performed by appraisers who possess 
sufficient experience or training to establish market (not retail) 
values as determined by the Agency.
    (d) Real estate appraisals. A current real estate appraisal is 
required when real estate will be primary security. Agency officials may 
accept an appraisal that is not current if there have been no 
significant changes in the market or on the subject real estate and the 
appraisal was either completed within the past 12 months or updated by a 
qualified appraisal if not completed within the past 12 months.
    (1) Appraiser qualifications. On loan transactions of $250,000 or 
less, the lender must demonstrate to the Agency's satisfaction that the 
appraiser possesses sufficient experience or training to estimate the 
market value of agricultural property. On loan transactions greater than 
$250,000, which includes principal plus accrued interest through the 
closing date, the appraisal must be completed by a State certified 
general appraiser.
    (2) Appraisals. Real estate appraisals must be completed in 
accordance with the Uniform Standards of Professional Appraisal 
Practice. Appraisals may be either a complete or limited appraisal 
provided in a self-contained or summary format. Restricted reports, as 
defined in the Uniform Standards of Professional Appraisal Practice, are 
not acceptable.

[64 FR 7378, Feb. 12, 1999, as amended at 64 FR 62568, Nov. 17, 1999; 65 
FR 14433, Mar. 17, 2000]



Sec.  762.128  Environmental and special laws.

    (a) Environmental requirements. The requirements found in part 1940, 
subpart G, of this title must be met for guaranteed OL and FO. CLP and 
PLP lenders may certify that they have documentation in their file to 
demonstrate compliance with paragraph (c) of this section. Standard 
eligible lenders must submit evidence supporting compliance with this 
section.
    (b) Determination. The Agency determination of whether an 
environmental problem exists will be based on:
    (1) The information supplied with the application;
    (2) The Agency Official's personal knowledge of the operation;
    (3) Environmental resources available to the Agency including, but 
not limited to, documents, third parties, and governmental agencies;
    (4) A visit to the farm operation when the available information is 
insufficient to make a determination;
    (5) Other information supplied by the lender or 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 
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.
    (4) The applicant must certify they will not violate the provisions 
of Sec.  363 of the Act, the Food Security Act of 1985, and Executive 
Order 11990 relating to Highly Erodible Land and Wetlands.

[[Page 143]]

    (5) All lenders are required to ensure that due diligence is 
performed in conjunction with a request for guarantee of a loan 
involving real estate. Due diligence is the process of evaluating real 
estate in the context of a real estate transaction to determine the 
presence of contamination from release of hazardous substances, 
petroleum products, or other environmental hazards and determining what 
effect, if any, the contamination has on the security value of the 
property. The Agency will accept as evidence of due diligence the most 
current version of the American Society of Testing Materials (ASTM) 
transaction screen questionnaire available from 100 Barr Harbor Drive, 
West Conshohocken, Pennsylvania 19428-2959, or similar documentation, 
approved for use by the Agency, supplemented as necessary by the ASTM 
phase I environmental site assessments form.
    (d) Equal opportunity and nondiscrimination. (1) With respect to any 
aspect of a credit transaction, the lender will not discriminate against 
any applicant on the basis of race, color, religion, national origin, 
sex, marital status, or age, provided the applicant can execute a legal 
contract. Nor will the lender discriminate on the basis of whether all 
or a part of the applicant's income derives from any public assistance 
program, or whether the applicant in good faith, exercises any rights 
under the Consumer Protection Act.
    (2) Where the guaranteed loan involves construction, the contractor 
or subcontractor must file all compliance reports, equal opportunity and 
nondiscrimination forms, and otherwise comply with all regulations 
prescribed by the Secretary of Labor pursuant to Executive Orders 11246 
and 11375.
    (e) Other Federal, State and local requirements. Lenders are 
required to coordinate with all appropriate Federal, State, and local 
agencies and comply with special laws and regulations applicable to the 
loan proposal.

[64 FR 7378, Feb. 12, 1999, as amended at 72 FR 63297, Nov. 8, 2007]



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 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 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 whose farm 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; 72 
FR 63297, Nov. 8, 2007]

[[Page 144]]



Sec.  762.130  Loan approval and issuing the guarantee.

    (a) Processing timeframes. (1) Standard Eligible Lenders. Complete 
applications from Standard Eligible Lenders will be approved or 
rejected, and the lender notified in writing, no later than 30 calendar 
days after receipt.
    (2) CLP and PLP lenders.
    (i) Complete applications from CLP or PLP lenders will be approved 
or rejected not later than 14 calendar days after receipt.
    (ii) For PLP lenders, if this time frame is not met, the proposed 
guaranteed loan will automatically be approved, subject to funding, and 
receive an 80 or 95 percent guarantee, as appropriate.
    (3) Complete applications. For purposes of determining the 
application processing timeframes, an application will be not be 
considered complete until all information required to make an approval 
decision, including the information for an environmental review, is 
received by the Agency.
    (4) The Agency will confirm the date an application is received with 
a written notification to the lender.
    (b) Funding preference. Loans are approved subject to the 
availability of funding. When it appears that there are not adequate 
funds to meet the needs of all approved 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 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 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;

[[Page 145]]

    (x) There has been no material adverse change in the borrower's 
condition, financial or otherwise, since submission of the application; 
and
    (xi) All other requirements specified in the conditional commitment 
have been met.
    (2) Inspections. The lender must notify the Agency of any scheduled 
inspections during construction and after the guarantee has been issued. 
The Agency may attend these field inspections. Any inspections or review 
performed by the Agency, including those with the lender, are solely for 
the benefit of the Agency. Agency inspections do not relieve any other 
parties of their inspection responsibilities, nor can these parties rely 
on Agency inspections for any purpose.
    (3) Execution of lender's agreement. The lender must execute the 
Agency's lender's agreement and deliver it to the Agency.
    (4) Closing report and guarantee fees.
    (i) The lender must complete an Agency closing report form and 
return it to the Agency along with any guarantee fees.
    (ii) Guarantee fees are 1 percent and are calculated as follows: 
Fee=Loan Amountx% Guaranteedx.01. The nonrefundable fee is paid to the 
Agency by the lender. The fee may be passed on to the borrower and 
included in loan funds.
    (iii) The following guaranteed loan transactions are not charged a 
fee:
    (A) Loans involving interest assistance;
    (B) Loans where a majority of the funds are used to refinance an 
Agency direct loan; and
    (C) Loans to beginning farmers 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), 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.

[64 FR 7378, Feb. 12, 1999, as amended at 72 FR 63297, Nov. 8, 2007]



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

[[Page 146]]

part. Any violations which indicate non-compliance on the part of the 
borrower must be reported, in writing, to both the Agency and the 
borrower.
    (3) Ensuring the borrower is in compliance with all laws and 
regulations applicable to the loan, the collateral, and the operations 
of the farm.
    (4) Receiving all payments of principal and interest on the loan as 
they fall due and promptly disbursing to any holder its pro-rata share 
according to the amount of interest the holder has in the loan, less 
only the lender's servicing fee.
    (5) Performing an annual analysis of the borrower's financial 
condition to determine the borrower's progress. The annual analysis will 
include:
    (i) For loans secured by real estate only, the analysis for standard 
eligible lenders must include an analysis of the borrower's balance 
sheet. CLP lenders will determine the need for the annual analysis based 
on the financial strength of the borrower and document the file 
accordingly. PLP lenders will perform an annual analysis in accordance 
with the requirements established in the lender's agreement.
    (ii) For loans secured by chattels, all lenders will review the 
borrower's progress regarding business goals, trends and changes in 
financial performance, and compare actual to planned income and expenses 
for the past year.
    (iii) An account of the whereabouts or disposition of all 
collateral.
    (iv) A discussion of any observations about the farm business with 
the borrower.
    (c) Monitoring of development. The lender's responsibilities 
regarding the construction, repairs, or other development include, but 
are not limited to:
    (1) Determining that all construction is completed as proposed in 
the loan application;
    (2) Making periodic inspections during construction to ensure that 
any development is properly completed within a reasonable period of 
time; and
    (3) Verification that the security is free of any mechanic's, 
materialmen's, or other liens which would affect the lender's lien or 
result in a different lien priority from that proposed in the request 
for guarantee.
    (d) 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:

[[Page 147]]

    (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.
    (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.

[[Page 148]]

    (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:
    (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 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.

[[Page 149]]

    (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 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 official. If requested, the Agency official 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.

[64 FR 7378, Feb. 12, 1999, as amended at 72 FR 63297, Nov. 8, 2007]



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.

[[Page 150]]

    (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 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.

[[Page 151]]

    (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 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 as 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

[[Page 152]]

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. 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 to any changes in the original loan terms. 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

[[Page 153]]

note, whichever is less. Advances cannot be made against a line of 
credit loan that has had any portion of the loan rescheduled.
    (2) The interest rate for a rescheduled loan is the negotiated rate 
agreed upon by the lender and the borrower at the time of the action, 
subject to the loan limitations for each type of loan.
    (3) A new note is not necessary when rescheduling occurs. However, 
if a new note is not taken, the existing note or line of credit 
agreement must be modified by attaching an allonge or other legally 
effective amendment, evidencing the revised repayment schedule and any 
interest rate change. If a new note is taken, the new note must 
reference the old note and state that the indebtedness evidenced by the 
old note or line of credit agreement is not satisfied. The original note 
or line of credit agreement must be retained.
    (d) Deferrals. The following conditions apply to deferrals:
    (1) Payments may be deferred up to 5 years, but the loan may not be 
extended beyond the final due date of the note.
    (2) The principal portion of the payment may be deferred either in 
whole or in part.
    (3) Interest may be deferred only in part. Payment of a reasonable 
portion of accruing interest as indicated by the borrower's cash flow 
projections is required for multi-year deferrals.
    (4) There must be a reasonable prospect that the borrower will be 
able to resume full payments at the end of the deferral period.
    (e) Debt writedown. The following conditions apply to debt 
writedown:
    (1) A lender may only write down a delinquent guaranteed loan or 
line of credit in an amount sufficient to permit the borrower to develop 
a feasible plan as defined in Sec.  762.102(b).
    (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:

[[Page 154]]

    (A) Calculate the present value.
    (B) Determine the net recovery value.
    (C) If the net recovery value exceeds the present value, writedown 
is unavailable; liquidation becomes the next servicing consideration. If 
the present value equals or exceeds the net recovery value, the debt may 
be written down to the present value.
    (iv) The lender will make any adjustment in the calculations as 
requested by the Agency.

[64 FR 7378, Feb. 12, 1999; 64 FR 38298, July 16, 1999, as amended at 66 
FR 7567, Jan. 24, 2001; 69 FR 44579, July 27, 2004; 70 FR 56107, Sept. 
26, 2005; 72 FR 17358, Apr. 9, 2007]



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

[[Page 155]]

    (vii) Cash consideration or other collateral in exchange for the 
release of liability.
    (3) The lender will use its own release of liability documents.
    (d) Interest rate changes. (1) The lender may change the interest 
rate on a performing (nondelinquent) loan only with the borrower's 
consent.
    (2) If the loan has been sold on the secondary market, the lender 
must repurchase the loan or obtain the holder's written consent.
    (3) To change a fixed rate of interest to a variable rate of 
interest or vice versa, the lender and the borrower must execute a 
legally effective allonge or amendment to the existing note.
    (4) If a new note is taken, it will be attached to and refer to the 
original note.
    (5) The lender will inform the Agency of the rate change.
    (e) Consolidation. Two or more Agency guaranteed loans may be 
consolidated, subject to the following conditions:
    (1) The borrower must project a feasible plan after the 
consolidation. See Sec.  762.102(b) for definition of feasible plan.
    (2) Only OL may be consolidated.
    (3) Existing lines of credit may only be consolidated with a new 
line of credit if the final maturity date and conditions for advances of 
the new line of credit are made the same as the existing line of credit.
    (4) Guaranteed OL may not be consolidated with a line of credit, 
even if the line of credit has been rescheduled.
    (5) Guaranteed loans made prior to October 1, 1991, cannot be 
consolidated with those loans made on or after October 1, 1991.
    (6) OL secured by real estate or with an outstanding interest 
assistance agreement or shared appreciation agreement cannot be 
consolidated.
    (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.

[[Page 156]]

    (2) Calculating recapture.
    (i) The amount of recapture will be based on the difference between 
the value of the security at the time recapture is triggered and the 
value of the security at the time of writedown, as shown on the shared 
appreciation agreement.
    (ii) Security values will be determined through appraisals obtained 
by the lender and meeting the requirements of Sec.  762.127.
    (iii) All appraisal fees will be paid by the lender.
    (iv) The amount of recapture will not exceed the amount of writedown 
shown on the shared appreciation agreement.
    (v) If recapture is triggered within 4 years of the date of the 
shared appreciation agreement, the lender shall recapture 75 percent of 
any positive appreciation in the market value of the property securing 
the loan or line of credit agreement.
    (vi) If recapture is triggered after 4 years from the date of the 
shared appreciation agreement, the lender shall recapture 50 percent of 
any positive appreciation in the market value of the property securing 
the loan or line of credit agreement.
    (3) Servicing recapture debt.
    (i) If recapture is triggered under the shared appreciation 
agreement and the borrower is unable to pay the recapture in a lump sum, 
the lender may:
    (A) Reschedule the recapture debt with the consent of the Agency, 
provided the lender can document the borrower's ability to make 
amortized payments on the recapture debt, plus pay all other 
obligations. In such case, the recapture debt will not be covered by the 
guarantee;
    (B) Pay the Agency its pro rata share of the recapture due. In such 
case, the recapture debt of the borrower will be covered by the 
guarantee; or
    (C) Service the account in accordance with Sec.  762.149.
    (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.

[[Page 157]]

    (ii) Lender's in-house expenses, which are those expenses which 
would normally be incurred for administration of the loan, including in-
house lawyers, are not covered by the guarantee.
    (2) Liquidation expenses in bankruptcy.
    (i) Reasonable and customary liquidation expenses may be deducted 
from the proceeds of the collateral in liquidation bankruptcy cases.
    (ii) In-house expenses are not considered customary liquidation 
expenses, may not be deducted from collateral proceeds, and are not 
covered by the guarantee.
    (c) Estimated loss claims in reorganization--(1) At confirmation. 
The lender may submit an estimated loss claim upon confirmation of the 
reorganization plan in accordance with the following:
    (i) The estimated loss payment will cover the guaranteed percentage 
of the principal and accrued interest written off, plus any allowable 
costs incurred as of the effective date of the plan.
    (ii) The lender will submit supporting documentation for the loss 
claim, and any additional information requested by the Agency, including 
justification for the legal fees included on the claim.
    (iii) The estimated loss payment may be revised as consistent with a 
court-approved reorganization plan.
    (iv) Protective advances made and approved in accordance with Sec.  
762.149 may be included in an estimated loss claim associated with a 
reorganization, if:
    (A) They were incurred in connection with the initiation of 
liquidation action prior to bankruptcy filing; or
    (B) The advance is required to provide repairs, insurance, etc. to 
protect the collateral as a result of delays in the case, or failure of 
the borrower to maintain the security.
    (2) Interest only losses. The lender may submit an estimated loss 
claim for interest only after confirmation of the 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. For 
purposes of calculating the time frames required under Sec.  762.149 of 
this part, for a borrower who is or will be liquidated, the date the 
borrower files for bankruptcy protection under Chapter 7 shall be the 
date of the decision to liquidate.
    (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

[[Page 158]]

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).

[64 FR 7378, Feb. 12, 1999, as amended at 71 FR 43957, Aug. 3, 2006]



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;
    (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

[[Page 159]]

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 outstanding debt, less the net recovery value of the remaining 
security, less any unaccounted for security; and
    (2) The lender generally will discontinue interest accrual on the 
defaulted loan at the time the estimated loss claim is paid by the 
Agency. The following exceptions apply:
    (i) 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,
    (ii) In the case of a Chapter 7 bankruptcy, in cases where the 
lender filed an estimated loss claim, the Agency will pay the lender 
interest which accrues during and up to 45 days after the date of 
discharge on the portion of the chattel only secured debt that was 
estimated to be secured but upon final liquidation was found to be 
unsecured, and up to 90 days after the date of discharge on the portion 
of real estate secured debt that was estimated to be secured but was 
found to be unsecured upon final disposition,
    (iii) The Agency will pay the lender interest which accrues during 
and up to 90 days after the time period the lender is unable to dispose 
of acquired property due to state imposed redemption rights on any 
unsecured portion of the loan during the redemption period, if an 
estimated loss claim was paid by the Agency during the liquidation 
action.
    (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.

[[Page 160]]

    (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 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.

[[Page 161]]

    (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; 71 FR 43957, Aug. 3, 2006]



Sec.  762.150  Interest assistance program.

    (a) Requests for interest assistance. In addition to the loan 
application items required by Sec.  762.110, to apply for interest 
assistance the lender's cash flow budget for the guaranteed applicant 
must reflect the need for interest assistance and the ability to cash 
flow with the subsidy. Interest assistance is available only on new 
guaranteed Operating Loans (OL).
    (b) Eligibility requirements. The lender must document that the 
following conditions have been met for the applicant to be eligible for 
interest assistance:
    (1) A feasible plan cannot be achieved without interest assistance, 
but can be achieved with interest assistance.
    (2) 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.
    (3) The typical cash flow budget must demonstrate that the borrower 
will have a feasible plan throughout the term of the loan.
    (4) The borrower, including members of an entity borrower, does not 
own any significant assets that do not contribute directly to essential 
family living or farm operations. The lender must determine the market 
value of any such non-essential assets and prepare a cash flow budget 
and interest assistance calculations based on the assumption that these 
assets will be sold and the market value proceeds used for debt 
reduction. If a feasible plan can then be achieved, the borrower is not 
eligible for interest assistance.
    (5) A borrower may only receive interest assistance if their total 
debts (including personal debts) prior to the new loan exceed 50 percent 
of their total assets (including personal assets). An entity's debt to 
asset ratio will be based upon a financial statement that consolidates 
business and personal debts and assets of the entity and its members. 
Beginning farmers and ranchers, as defined in Sec.  762.102, are 
excluded from this requirement.
    (c) Maximum assistance. The maximum total guaranteed OL debt on 
which a borrower can receive interest assistance is $400,000, regardless 
of the number of guaranteed loans outstanding. This is a lifetime limit.
    (d) Maximum time for which interest assistance is available. (1) A 
borrower may only receive interest assistance for one 5-year period. The 
term of the interest assistance agreement executed under this section 
shall not exceed 5 consecutive years from the date of the initial 
agreement signed by the applicant, including any entity members, or the 
outstanding term of the loan, whichever is less. This is a lifetime 
limit.
    (2) Beginning farmers and ranchers, as defined in Sec.  762.102, 
however, may be considered for two 5-year periods. The applicant must 
meet the definition of a beginning farmer and meet the other eligibility 
requirements outlined in paragraph (b) of this section at the onset of 
each 5-year period. A needs test will be completed in the fifth year

[[Page 162]]

of IA eligibility for beginning farmers, to determine continued 
eligibility for a second 5-year period.
    (3) Notwithstanding the limitation of paragraph (d)(1) of this 
section, a new interest assistance agreement may be approved for 
eligible borrowers to provide interest assistance through June 8, 2009, 
provided the total period does not exceed 10 years from the effective 
date of the original interest assistance agreement.
    (e) Multiple loans. In the case of a borrower with multiple 
guaranteed loans with one lender, interest assistance can be applied to 
each loan, only to one loan or any distribution the lender selects, as 
necessary to achieve a feasible plan, subject to paragraph (c) of this 
section.
    (f) Terms. The typical term of scheduled loan repayment will not be 
reduced solely for the purpose of maximizing eligibility for interest 
assistance. A loan must be scheduled over the maximum term typically 
used by lenders for similar type loans within the limits in Sec.  
762.124. An OL for the purpose of providing annual operating and family 
living expenses will be scheduled for repayment when the income is 
scheduled to be received from the sale of the crops, livestock, and/or 
livestock products which will serve as security for the loan. An OL for 
purposes other than annual operating and family living expenses (i.e. 
purchase of equipment or livestock, or refinancing existing debt) will 
be scheduled over 7 years from the effective date of the proposed 
interest assistance agreement, or the life of the security, whichever is 
less.
    (g) Rate of interest. The lender may charge a fixed or variable 
interest rate, but not in excess of what the lender charges its average 
agricultural loan customer.
    (h) Agreement. The lender and borrower must execute an interest 
assistance agreement as prescribed by the Agency.
    (i) Interest assistance claims and payments. To receive an interest 
assistance payment, the lender must prepare and submit a claim on the 
appropriate Agency form. The following conditions apply:
    (1) Interest assistance payments will be four (4) percent of the 
average daily principal loan balance prorated over the number of days 
the loan has been outstanding during the payment period. For loans with 
a note rate less than four (4) percent, interest assistance payments 
will be the weighted average interest rate multiplied by the average 
daily principal balance.
    (2) The lender may select at the time of loan closing the date that 
they wish to receive an interest assistance payment. That date will be 
included in the interest assistance agreement.
    (i) The initial and final claims submitted under an agreement may be 
for a period less than 12 months. All other claims will be submitted for 
a 12-month period, unless there is a lender substitution during the 12-
month period in accordance with this section.
    (ii) In the event of liquidation, the final interest assistance 
claim will be submitted with the estimated loss claim or the final loss 
claim if an estimated loss claim was not submitted. Interest will not be 
paid beyond the interest accrual cutoff dates established in the loss 
claims according to Sec.  762.149(d)(2).
    (3) A claim should be filed within 60 days of its due date. Claims 
not filed within 1 year from the due date will not be paid, and the 
amount due the lender will be permanently forfeited.
    (4) All claims will be supported by detailed calculations of average 
daily principal balance during the claim period.
    (5) Requests for continuation of interest assistance for agreements 
dated prior to June 8, 2007 will be supported by the lender's analysis 
of the applicant's farming operation and need for continued interest 
assistance as set out in their Interest Assistance Agreements. 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.
    (ii) A narrative description of the causes of any major differences 
between the previous year's projections and actual performance, 
including a detailed income and expense statement.

[[Page 163]]

    (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.
    (6) Interest Assistance Agreements dated June 8, 2007 or later do 
not require a request for continuation of interest assistance. The 
lender will only be required to submit an Agency IA payment form and the 
average daily principal balance for the claim period, with supporting 
documentation.
    (7) Lenders may not charge or cause a borrower with an interest 
assistance agreement to be charged a fee for preparation and submission 
of the items required for an annual interest assistance claim.
    (j) Transfer, consolidation, and writedown. Loans covered by 
interest assistance agreements cannot be consolidated. Such loans can be 
transferred only when the transferee was liable for the debt on the 
effective date of the interest assistance agreement. Loans covered by 
interest assistance can be transferred to an entity if the entity is 
eligible in accordance with Sec.  762.120 and Sec.  762.150(b) and at 
least one entity member was liable for the debt on the effective date of 
the interest assistance agreement. Interest assistance will be 
discontinued as of the date of any writedown on a loan covered by an 
interest assistance agreement.
    (k) Rescheduling and deferral. When a borrower defaults on a loan 
with interest assistance or the loan otherwise requires rescheduling or 
deferral, the interest assistance agreement will remain in effect for 
that loan at its existing terms. The lender may reschedule the loan in 
accordance with Sec.  762.145. For Interest Assistance Agreements dated 
June 8, 2007 or later increases in the restructured loan amount above 
the amount originally obligated do not require additional funding; 
however, interest assistance is not available on that portion of the 
loan as interest assistance is limited to the original loan amount.
    (l) Bankruptcy. 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 will 
be terminated effective on the date of the court order. Guaranteed loans 
which have had their interest reduced by bankruptcy court order are not 
eligible for interest assistance.
    (m) Termination of interest assistance payments. 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 under the terms of the interest assistance 
agreement. In addition, for loan guarantees sold into the secondary 
market, Agency purchase of the guaranteed portion of a loan will 
terminate the interest assistance.
    (n) 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.
    (o) Condition for cancellation. The Interest Assistance Agreement is 
incontestable except for fraud or misrepresentation, of which the lender 
or borrower have actual knowledge at the time the interest assistance 
agreement is executed, or which the lender or borrower participates in 
or condones.
    (p) Substitution. If there is a substitution of lender, the original 
lender will prepare and submit to the Agency a claim for its final 
interest assistance payment calculated through the effective date of the 
substitution. This final claim will be submitted for processing at the 
time of the substitution.
    (1) Interest assistance will continue automatically with the new 
lender.
    (2) The new lender must follow paragraph (i) of this section to 
receive their initial and subsequent interest assistance payments.

[[Page 164]]

    (q) Exception Authority. 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 and is not inconsistent with other applicable law.

[72 FR 17358, Apr. 9, 2007]



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]



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 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 763 [Reserved]

[[Page 165]]



PART 764_DIRECT LOAN MAKING--Table of Contents




                           Subpart A_Overview

Sec.
764.1 Introduction.
764.2 Abbreviations and definitions.
764.3-764.50 [Reserved]

                   Subpart B_Loan Application Process

764.51 Loan application.
764.52 Processing an incomplete application.
764.53 Processing the complete application.
764.54 Preferences when there is limited funding.
764.55-764.100 [Reserved]

           Subpart C_Requirements for All Direct Program Loans

764.101 General eligibility requirements.
764.102 General limitations.
764.103 General security requirements.
764.104 General real estate security requirements.
764.105 General chattel security requirements.
764.106 Exceptions to security requirements.
764.107 General appraisal requirements.
764.108 General insurance requirements.
764.109-764.150 [Reserved]

                  Subpart D_Farm Ownership Loan Program

764.151 Farm Ownership loan uses.
764.152 Eligibility requirements.
764.153 Limitations.
764.154 Rates and terms.
764.155 Security requirements.
764.156-764.200 [Reserved]

           Subpart E_Beginning Farmer Downpayment Loan Program

764.201 Beginning Farmer Downpayment loan uses.
764.202 Eligibility requirements.
764.203 Limitations.
764.204 Rates and terms.
764.205 Security requirements.
764.206-764.250 [Reserved]

                    Subpart F_Operating Loan Program

764.251 Operating loan uses.
764.252 Eligibility requirements.
764.253 Limitations.
764.254 Rates and terms.
764.255 Security requirements.
764.256-764.300 [Reserved]

                      Subpart G_Youth Loan Program

764.301 Youth loan uses.
764.302 Eligibility requirements.
764.303 Limitations.
764.304 Rates and terms.
764.305 Security requirements.
764.306-764.350 [Reserved]

                    Subpart H_Emergency Loan Program

764.351 Emergency loan uses.
764.352 Eligibility requirements.
764.353 Limitations.
764.354 Rates and terms.
764.355 Security requirements.
764.356 Appraisal and valuation requirements.
764.357-764.400 [Reserved]

                   Subpart I_Loan Decision and Closing

764.401 Loan decision.
764.402 Loan closing.
764.403-764.450 [Reserved]

      Subpart J_Borrower Training and Training Vendor Requirements

764.451 Purpose.
764.452 Borrower training requirements.
764.453 Agency waiver of training requirements.
764.454 Actions that an applicant must take when training is required.
764.455 Potential training vendors.
764.456 Applying to be a vendor.
764.457 Vendor requirements.
764.458 Vendor approval.
764.459 Evaluation of borrower progress.

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

    Source: 72 FR 63298, Nov. 8, 2007, unless otherwise noted.



                           Subpart A_Overview



Sec.  764.1  Introduction.

    (a) Purpose. This part describes the Agency's policies for making 
direct FLP loans.
    (b) Types of loans. The Agency makes the following types of loans:
    (1) FO, including Beginning Farmer Downpayment loans;
    (2) OL, including Youth loans; and
    (3) EM.



Sec.  764.2  Abbreviations and definitions.

    Abbreviations and definitions for terms used in this part are 
provided in Sec.  761.2 of this chapter.

[[Page 166]]



Sec. Sec.  764.3-764.50  [Reserved]



                   Subpart B_Loan Application Process



Sec.  764.51  Loan application.

    (a) A loan application must be submitted in the name of the actual 
operator of the farm. Two or more applicants applying jointly will be 
considered an entity applicant. The Agency will consider tax filing 
status and other business dealings as indicators of the operator of the 
farm.
    (b) A complete loan application, except as provided in paragraphs 
(c) through (e) of this section, will include:
    (1) The completed Agency application form;
    (2) If the applicant is an entity:
    (i) A complete list of entity members showing the address, 
citizenship, principal occupation, and the number of shares and 
percentage of ownership or stock held in the entity by each member, or 
the percentage of interest in the entity held by each member;
    (ii) A current personal financial statement from each member of the 
entity;
    (iii) A current financial statement from the entity itself;
    (iv) A copy of the entity's charter or any entity agreement, any 
articles of incorporation and bylaws, any certificate or evidence of 
current registration (good standing), and a resolution adopted by the 
Board of Directors or entity members authorizing specified officers of 
the entity to apply for and obtain the desired loan and execute required 
debt, security and other loan instruments and agreements;
    (v) In the form of married couples applying as a joint operation, 
items (i) and (iv) will not be required. The Agency may request copies 
of the marriage license, prenuptial agreement or similar documents as 
needed to verify loan eligibility and security. Items (ii) and (iii) are 
only required to the extent needed to show the individual and joint 
finances of the husband and wife without duplication.
    (3) A written description of the applicant's farm training and 
experience, including each entity member who will be involved in 
managing or operating the farm;
    (4) The last 3 years of farm financial records, including tax 
returns, unless the applicant has been farming less than three years;
    (5) The last 3 years of farm production records, unless the 
applicant has been farming less than 3 years;
    (6) Documentation that the applicant and each member of an entity 
applicant cannot obtain sufficient credit elsewhere on reasonable rates 
and terms, including a loan guaranteed by the Agency;
    (7) Documentation of compliance with the Agency's environmental 
regulations contained in subpart G of 7 CFR part 1940;
    (8) Verification of all non-farm income;
    (9) A current financial statement and the operation's farm operating 
plan, including the projected cash flow budget reflecting production, 
income, expenses, and loan repayment plan;
    (10) A legal description of the farm property owned or to be 
acquired and, if applicable, any leases, contracts, options, and other 
agreements with regard to the property;
    (11) Payment to the Agency for ordering a credit report on the 
applicant;
    (12) Verification of all debts;
    (13) Any additional information deemed necessary by the Agency to 
effectively evaluate the applicant's eligibility and farm operating 
plan; and
    (14) For EM loans, a statement of loss or damage on the appropriate 
Agency form.
    (c) For a Lo-Doc OL request, the applicant must:
    (1) Be current on all payments to all creditors including the Agency 
(if an Agency borrower);
    (2) Have not received primary loan servicing on any FLP debt within 
the past 5 years; and
    (3) Meet one of the following sets of criteria:
    (i) The loan requested is $50,000 or less and the total outstanding 
Agency OL loan debt at the time of loan closing will be less than 
$100,000; or
    (ii) The loan requested is to pay annual operating expenses and the 
applicant is an existing Agency borrower who has received and timely 
repaid at least two previous annual OL loans from the Agency.

[[Page 167]]

    (4) Submit items (1), (2), (7), (9), and (11) of paragraph (b) of 
this section. The Agency may require a Lo-Doc applicant to submit any 
other information listed in paragraph (b) of this section as needed to 
make a determination on the loan application.
    (d) For a youth loan request:
    (1) The applicant must submit items (1), (7), and (9) of paragraph 
(b) of this section.
    (2) Applicants 18 years or older, must also provide items (11) and 
(12) of paragraph (b) of this section.
    (3) The Agency may require a youth loan applicant to submit any 
other information listed in paragraph (b) of this section as needed to 
make a determination on the loan application.
    (e) The applicant need not submit any information under this section 
that already exists in the applicant's Agency file and is still current.



Sec.  764.52  Processing an incomplete application.

    (a) Within 10 days of receipt of an incomplete application, the 
Agency will provide the applicant written notice of any additional 
information which must be provided. The applicant must provide the 
additional information within 20 calendar days of the date of this 
notice.
    (b) If the additional information is not received, the Agency will 
provide written notice that the application will be withdrawn if the 
information is not received within 10 calendar days of the date of this 
second notice.



Sec.  764.53  Processing the complete application.

    Upon receiving a complete loan application, the Agency will:
    (a) Consider the loan application in the order received, based on 
the date the application was determined to be complete.
    (b) Provide written notice to the applicant that the application is 
complete.
    (c) Within 60 calendar days after receiving a complete loan 
application, the Agency will complete the processing of the loan request 
and notify the applicant of the decision reached, and the reason for any 
disapproval.
    (d) If, based on the Agency's review of the application, it appears 
the applicant's credit needs could be met through the guaranteed loan 
program, the Agency will assist the applicant in securing guaranteed 
loan assistance under the market placement program in accordance with 
Sec.  762.110(g) of this chapter.
    (e) In the absence of funds for a direct loan, the Agency will keep 
an approved loan application on file until funding is available. At 
least annually, the Agency will contact the applicant to determine if 
the Agency should retain the application or if the applicant wants the 
application withdrawn.
    (f) If funding becomes available, the Agency will resume processing 
of approved loans in accordance with this part.



Sec.  764.54  Preferences when there is limited funding.

    (a) First priority. When there is a shortage of loan funds, approved 
applications will be funded in the order of the date the application was 
received, whether or not complete.
    (b) Secondary priorities. If two or more applications were received 
on the same date, the Agency will give preference to:
    (1) First, an applicant who is a veteran of any war;
    (2) Second, an applicant who is not a veteran, but:
    (i) Has a dependent family;
    (ii) Is able to make a downpayment; or
    (iii) Owns livestock and farm implements necessary to farm 
successfully.
    (3) Third, to other eligible applicants.



Sec. Sec.  764.55-764.100  [Reserved]



           Subpart C_Requirements for All Direct Program Loans



Sec.  764.101  General eligibility requirements.

    The following requirements must be met unless otherwise provided in 
the eligibility requirements for the particular type of loan.
    (a) Controlled substances. The applicant, and anyone who will sign 
the promissory note, must not be ineligible for loans as a result of a 
conviction for

[[Page 168]]

controlled substances according to 7 CFR part 718 of this chapter.
    (b) Legal capacity. The applicant, and anyone who will sign the 
promissory note, must possess the legal capacity to incur the obligation 
of the loan. A Youth loan applicant will incur full personal liability 
upon execution of the promissory note without regard to the applicant's 
minority status.
    (c) Citizenship. The applicant, and anyone who will sign the 
promissory note, must be a citizen of the United States, United States 
non-citizen national, or a qualified alien under applicable Federal 
immigration laws.
    (d) Credit history. The applicant must have acceptable credit 
history demonstrated by debt repayment.
    (1) As part of the credit history, the Agency will determine whether 
the applicant will carry out the terms and conditions of the loan and 
deal with the Agency in good faith. In making this determination, the 
Agency may examine whether the applicant has properly fulfilled its 
obligations to other parties, including other agencies of the Federal 
Government.
    (2) When the applicant caused the Agency a loss by receiving debt 
forgiveness, the applicant may be ineligible for assistance in 
accordance with eligibility requirements for the specific loan type. If 
the debt forgiveness is cured by repayment of the Agency's loss, the 
Agency may still consider the debt forgiveness in determining the 
applicant's credit worthiness.
    (3) A history of failures to repay past debts as they came due when 
the ability to repay was within the applicant's control will demonstrate 
unacceptable credit history. The following circumstances, for example, 
do not automatically indicate an unacceptable credit history:
    (i) Foreclosures, judgments, delinquent payments of the applicant 
which occurred more than 36 months before the application, if no recent 
similar situations have occurred, or Agency delinquencies that have been 
resolved through loan servicing programs available under 7 CFR part 766.
    (ii) Isolated incidents of delinquent payments which do not 
represent a general pattern of unsatisfactory or slow payment.
    (iii) ``No history'' of credit transactions by the applicant.
    (iv) Recent foreclosure, judgment, bankruptcy, or delinquent payment 
when the applicant can satisfactorily demonstrate that the adverse 
action or delinquency was caused by circumstances that were of a 
temporary nature and beyond the applicant's control; or the result of a 
refusal to make full payment because of defective goods or services or 
other justifiable dispute relating to the purchase or contract for goods 
or services.
    (e) Availability of credit elsewhere. The applicant, and all entity 
members in the case of an entity, must be unable to obtain sufficient 
credit elsewhere to finance actual needs at reasonable rates and terms. 
The Agency will evaluate the ability to obtain credit based on factors 
including, but not limited to:
    (1) Loan amounts, rates, and terms available in the marketplace; and
    (2) Property interests, income, and significant non-essential 
assets.
    (f) Not in delinquent status on Federal debt. As provided in 31 CFR 
part 285, except for EM loan applicants, the applicant, and anyone who 
will sign the promissory note, must not be in delinquent status on any 
Federal debt, other than a debt under the Internal Revenue Code of 1986 
at the time of loan closing. All delinquent debts, however, will be 
considered in determining credit history and ability to repay under this 
part.
    (g) Outstanding judgments. The applicant, and anyone who will sign 
the promissory note, must have no 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.
    (h) Federal crop insurance violation. The applicant, and all entity 
members in the case of an entity, must not be ineligible due to 
disqualification resulting from Federal crop insurance violation 
according to 7 CFR part 718.
    (i) 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:

[[Page 169]]

    (1) Education. For example, the applicant obtained a 4-year college 
degree in agricultural business, horticulture, animal science, agronomy, 
or other agricultural-related field.
    (2) On-the-job training. For example, the applicant is currently 
working on a farm as part of an apprenticeship program.
    (3) Farming experience. For example, the applicant has been an 
owner, manager, or operator of a farm business for at least one entire 
production cycle. The farming experience must have been obtained within 
the last 5 years.
    (j) Borrower training. The applicant must agree to meet the training 
requirements in subpart J of this part.
    (k) Operator of a family farm. (1) The applicant must be the 
operator of a family farm after the loan is closed.
    (2) For an entity applicant, if the entity members holding a 
majority interest are:
    (i) Related by blood or marriage, at least one member must be the 
operator of a family farm;
    (ii) Not related by blood or marriage, the entity members holding a 
majority interest must be operators of a family farm.
    (3) Except for EM loans, the collective interests of the members may 
be larger than a family farm only if:
    (i) Each member's ownership interest is not larger than a family 
farm;
    (ii) All of the members of the entity are related by blood or 
marriage; and
    (iii) All of the members are or will become operators of the family 
farm; and
    (4) If the entity applicant has an operator and ownership interest 
for farm ownership loans and emergency loans for farm ownership loan 
purposes, in any other farming operation, that farming operation must 
not exceed the requirements of a family farm.
    (l) Entity composition. If the applicant is an entity, the entity 
members are not themselves entities.



Sec.  764.102  General limitations.

    (a) Limitations specific to each loan program are contained in 
subparts D through H of this part.
    (b) The total principal balance owed to the Agency at any one time 
by the applicant, or any one who will sign the promissory note, cannot 
exceed the limits established in Sec.  761.8 of this chapter.
    (c) The funds from the FLP loan must be used for farming operations 
located in the United States.
    (d) The Agency will not make a loan if the proceeds will be used:
    (1) For any purpose that contributes to excessive erosion of highly 
erodible land, or to the conversion of wetlands;
    (2) To drain, dredge, fill, level, or otherwise manipulate a 
wetland; or
    (3) To engage in any activity that results in impairing or reducing 
the flow, circulation, or reach of water, except in the case of activity 
related to the maintenance of previously converted wetlands as defined 
in the Food Security Act of 1985.
    (e) Any construction financed by the Agency must comply with the 
standards established in Sec.  761.10 of this chapter.
    (f) Loan funds will not be used to establish or support a non-
eligible enterprise, even if the non-eligible enterprise contributes to 
the farm.



Sec.  764.103  General security requirements.

    (a) Security requirements specific to each loan program are outlined 
in subparts D through H of this part.
    (b) All loans must be secured by assets having a security value of 
at least 100 percent of the loan amount, except for EM loans as provided 
in subpart H of this part. If the applicant's assets do not provide 
adequate security, the Agency may accept:
    (1) A pledge of security from a third party; or
    (2) Interests in property not owned by the applicant (such as leases 
that provide a mortgageable value, water rights, easements, mineral 
rights, and royalties).
    (c) An additional amount of security up to 150 percent of the loan 
amount will be taken when available, except for beginning farmer 
downpayment loans and youth loans.
    (d) The Agency will choose the best security available when there 
are several alternatives that meet the Agency's security requirements.
    (e) The Agency will take a lien on all assets that are not essential 
to the

[[Page 170]]

farming operation and are not being converted to cash to reduce the loan 
amount when each such asset, or aggregate value of like assets (such as 
stocks), has a value in excess of $5,000. The value of this security is 
not included in the Agency's additional security requirement stated in 
paragraph (c) of this section. This requirement does not apply to 
beginning farmer downpayment loans and youth loans.



Sec.  764.104  General real estate security requirements.

    (a) Agency lien position requirements. If real estate is pledged as 
security for a loan, the Agency must obtain a first lien, if available. 
When a first lien is not available, the Agency may take a junior lien 
under the following conditions:
    (1) The prior lien does not contain any provisions that may 
jeopardize the Agency's interest or the applicant's ability to repay the 
FLP loan;
    (2) Prior lienholders agree to notify the Agency prior to 
foreclosure;
    (3) The applicant must agree not to increase an existing prior lien 
without the written consent of the Agency; and
    (4) Equity in the collateral exists.
    (b) Real estate held under a purchase contract. If the real estate 
offered as security is held under a recorded purchase contract:
    (1) The applicant must provide a security interest in the real 
estate;
    (2) The applicant and the purchase contract holder must agree in 
writing that any insurance proceeds received for real estate losses will 
be used only for one or more of the following purposes:
    (i) To replace or repair the damaged real estate improvements which 
are essential to the farming operation;
    (ii) To make other essential real estate improvements; or
    (iii) To pay any prior real estate lien, including the purchase 
contract.
    (3) The purchase contract must provide the applicant with 
possession, control and beneficial use of the property, and entitle the 
applicant to marketable title upon fulfillment of the contract terms.
    (4) The purchase contract must not:
    (i) Be subject to summary cancellation upon default;
    (ii) Contain provisions which jeopardize the Agency's security 
position or the applicant's ability to repay the loan.
    (5) The purchase contract holder must agree in writing to:
    (i) Not sell or voluntarily transfer their interest without prior 
written consent of the Agency;
    (ii) Not encumber or cause any liens to be levied against the 
property;
    (iii) Not take any action to accelerate, forfeit, or foreclose the 
applicant's interest in the security property until a specified period 
of time after notifying the Agency of the intent to do so;
    (iv) Consent to the Agency making the loan and taking a security 
interest in the applicant's interest under the purchase contract as 
security for the FLP loan;
    (v) Not take any action to foreclose or forfeit the interest of the 
applicant under the purchase contract because the Agency has acquired 
the applicant's interest by foreclosure or voluntary conveyance, or 
because the Agency has subsequently sold or assigned the applicant's 
interest to a third party who will assume the applicant's obligations 
under the purchase contract;
    (vi) Notify the Agency in writing of any breach by the applicant; 
and
    (vii) 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.
    (6) If the Agency acquires the applicant's interest under the 
purchase contract by foreclosure or voluntary conveyance, the Agency 
will not be deemed to have assumed any of the applicant's obligations 
under the contract, provided that if the Agency fails to perform the 
applicant's obligations while it holds the applicant's interest is 
grounds for terminating the purchase contract.
    (c) Tribal lands held in trust or restricted. The Agency may take a 
lien on Indian Trust lands as security provided the applicant requests 
the Bureau of Indian Affairs to furnish Title Status Reports to the 
agency and the Bureau of Indian Affairs provides the reports and 
approves the lien.

[[Page 171]]

    (d) Security for more than one loan. The same real estate may be 
pledged as security for more than one direct or guaranteed loan.
    (e) Loans secured by leaseholds. A loan may be secured by a mortgage 
on a leasehold, if the leasehold has negotiable value and can be 
mortgaged.



Sec.  764.105  General chattel security requirements.

    The same chattel may be pledged as security for more than one direct 
or guaranteed loan.



Sec.  764.106  Exceptions to security requirements.

    Notwithstanding any other provision of this part, the Agency will 
not take a security interest:
    (a) When adequate security is otherwise available and the lien will 
prevent the applicant from obtaining credit from other sources;
    (b) When the property could have significant environmental problems 
or costs as described in subpart G of 7 CFR part 1940;
    (c) When the Agency cannot obtain a valid lien;
    (d) When the property is the applicant's personal residence and 
appurtenances and:
    (1) They are located on a separate parcel; and
    (2) The real estate that serves as security for the FLP loan plus 
crops and chattels are greater than or equal to 150 percent of the 
unpaid balance due on the loan;
    (e) When the property is subsistence livestock, cash, working 
capital accounts the applicant uses for the farming operation, 
retirement accounts, personal vehicles necessary for family living, 
household contents, or small equipment such as hand tools and lawn 
mowers; or
    (f) On marginal land and timber that secures an outstanding ST loan.



Sec.  764.107  General appraisal requirements.

    (a) Establishing value for real estate. The value of real estate 
will be established by an appraisal completed in accordance with Sec.  
761.7 of this chapter.
    (b) Establishing value for chattels. The value of chattels will be 
established as follows:
    (1) Annual production. The security value of annual livestock and 
crop production is presumed to be 100 percent of the amount loaned for 
annual operating and family living expenses, as outlined in the approved 
farm operating plan.
    (2) Livestock and equipment. The value of livestock and equipment 
will be established by an appraisal completed in accordance with Sec.  
761.7 of this chapter.



Sec.  764.108  General insurance requirements.

    The applicant must obtain and maintain insurance, equal to the 
lesser of the value of the security at the time of loan closing or the 
principal of all FLP and non-FLP loans secured by the property, subject 
to the following:
    (a) All security, except growing crops, must be covered by hazard 
insurance if it is readily available (sold by insurance agents in the 
applicant's normal trade area) and insurance premiums do not exceed the 
benefit. The Agency must be listed as loss payee for the insurance 
indemnity payment or as a beneficiary in the mortgagee loss payable 
clause.
    (b) Real estate security located in flood or mudslide prone areas 
must be covered by flood or mudslide insurance. The Agency must be 
listed as a beneficiary in the mortgagee loss payable clause.
    (c) Growing crops used to provide adequate security must be covered 
by crop insurance if such insurance is available. The Agency must be 
listed as loss payee for the insurance indemnity payment.
    (d) Prior to closing the loan, the applicant must have obtained at 
least the catastrophic risk protection level of crop insurance coverage 
for each crop which is a basic part of the applicant's total operation, 
if such insurance is available, unless the applicant executes a written 
waiver of any emergency crop loss assistance with respect to such crop. 
The applicant must execute an assignment of indemnity in favor of the 
Agency for this coverage.

[[Page 172]]



Sec. Sec.  764.109-764.150  [Reserved]



                  Subpart D_Farm Ownership Loan Program



Sec.  764.151  Farm Ownership loan uses.

    FO loan funds may only be used to:
    (a) Acquire or enlarge a farm or make a down payment on a farm;
    (b) Make capital improvements to a farm owned by the applicant, for 
construction, purchase or improvement of farm dwellings, service 
buildings or other facilities and improvements essential to the farming 
operation. In the case of leased property, the applicant must have a 
lease to ensure use of the improvement over its useful life or to ensure 
that the applicant receives compensation for any remaining economic life 
upon termination of the lease;
    (c) Promote soil and water conservation and protection;
    (d) Pay loan closing costs;
    (e) Refinance a bridge loan if the following conditions are met:
    (1) The applicant obtained the loan to be refinanced to purchase a 
farm after a direct FO was approved;
    (2) Direct FO funds were not available to fund the loan at the time 
of approval;
    (3) The loan to be refinanced is temporary financing; and
    (4) The loan was made by a commercial or cooperative lender.



Sec.  764.152  Eligibility requirements.

    The applicant:
    (a) Must comply with the general eligibility requirements 
established at Sec.  764.101;
    (b) And anyone who will sign the promissory note, must not have 
received debt forgiveness from the Agency on any direct or guaranteed 
loan;
    (c) Must be the owner-operator of the farm financed with Agency 
funds after the loan is closed. In the case of an entity:
    (1) The entity is controlled by farmers engaged primarily and 
directly in farming in the United States, after the loan is made;
    (2) The entity must be authorized to own and operate the farm in the 
State in which the farm is located;
    (3) If the entity members holding a majority interest are:
    (i) Related by blood or marriage, at least one member of the entity 
must operate the farm;
    (ii) Not related by blood or marriage, the entity members holding a 
majority interest must own and operate the farm.
    (d) And in the case of an entity, one or more members constituting a 
majority interest, must have participated in the business operations of 
a farm for at least 3 years out of the 10 years prior to the date the 
application is submitted.
    (e) And anyone who will sign the promissory note, must satisfy at 
least one of the following conditions:
    (1) Meet the definition of a beginning farmer;
    (2) Have not had a direct FO loan outstanding for more than a total 
of 10 years prior to the date the new FO loan is closed;
    (3) Have never received a direct FO loan.



Sec.  764.153  Limitations.

    The applicant must:
    (a) Comply with the general limitations established at Sec.  
764.102;
    (b) Have dwellings and other buildings necessary for the planned 
operation of the farm available for use after the loan is made.



Sec.  764.154  Rates and terms.

    (a) Rates. (1) The interest rate is the Agency's Direct Farm 
Ownership rate, available in each Agency office.
    (2) The limited resource Farm Ownership interest rate is available 
to applicants who are unable to develop a feasible plan at regular 
interest rates.
    (3) If the FO loan is part of a joint financing arrangement and the 
amount of the Agency's loan does not exceed 50 percent of the total 
amount financed, the Agency will use the Farm Ownership participation 
rate, available in each Agency office.
    (4) The interest rate charged will be the lower of the rate in 
effect at the time of loan approval or loan closing.
    (b) Terms. The Agency schedules repayment of an FO loan based on the 
applicant's ability to repay and the useful life of the security. In no 
event will the term be more than 40 years from the date of the note.

[[Page 173]]



Sec.  764.155  Security requirements.

    An FO loan must be secured:
    (a) In accordance with Sec. Sec.  764.103 through 764.106;
    (b) At a minimum, by the real estate being purchased or improved.



Sec. Sec.  764.156-764.200  [Reserved]



           Subpart E_Beginning Farmer Downpayment Loan Program



Sec.  764.201  Beginning Farmer Downpayment loan uses.

    Beginning Farmer Downpayment loan funds may be used to partially 
finance the purchase of a family farm by an eligible beginning farmer.



Sec.  764.202  Eligibility requirements.

    The applicant must:
    (a) Comply with the general eligibility requirements established at 
Sec.  764.101 and the FO eligibility requirements of Sec.  764.152; and
    (b) Be a beginning farmer.



Sec.  764.203  Limitations.

    (a) The applicant must:
    (1) Comply with the general limitations established at Sec.  
764.102; and
    (2) Provide a minimum downpayment of 10 percent of the purchase 
price of the farm.
    (b) The purchase price or appraised value of the farm, whichever is 
lower, must not exceed $250,000.
    (c) Beginning Farmer Downpayment loans will not exceed 40 percent of 
the lesser of the purchase price or appraised value of the farm to be 
acquired.
    (d) Financing provided by the Agency and all other creditors must 
not exceed 90 percent of the lesser of the purchase price or appraised 
value of the farm and may be guaranteed by the Agency under part 762 of 
this chapter.



Sec.  764.204  Rates and terms.

    (a) Rates. The interest rate for Beginning Farmer Downpayment loans 
shall be 4 percent.
    (b) Terms. (1) The Agency schedules repayment of Beginning Farmer 
Downpayment loans in equal, annual installments over a term not to 
exceed 15 years.
    (2) The non-Agency financing must have an amortization period of at 
least 30 years and cannot have a balloon payment due within the first 15 
years of the loan.



Sec.  764.205  Security requirements.

    A Beginning Farmer Downpayment loan must:
    (a) Be secured in accordance with Sec. Sec.  764.103 through 
764.106;
    (b) Be secured by a lien on the property being acquired with the 
loan funds and junior only to the party financing the balance of the 
purchase price.



Sec. Sec.  764.206-764.250  [Reserved]



                    Subpart F_Operating Loan Program



Sec.  764.251  Operating loan uses.

    (a) Except as provided in paragraph (b), OL loan funds may only be 
used for:
    (1) Costs associated with reorganizing a farm to improve its 
profitability;
    (2) Purchase of livestock, including poultry, farm equipment, quotas 
and bases, and cooperative stock for credit, production, processing or 
marketing purposes;
    (3) Farm operating expenses, including, but not limited to, feed, 
seed, fertilizer, pesticides, farm supplies, repairs and improvements 
which are to be expensed, cash rent and family living expenses;
    (4) Scheduled principal and interest payments on term debt provided 
the debt is for authorized FO or OL purposes;
    (5) Other farm needs;
    (6) Costs associated with land and water development, use, or 
conservation;
    (7) Loan closing costs;
    (8) 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;
    (9) Borrower training costs required or recommended by the Agency;
    (10) Refinancing farm-related debts other than real estate to 
improve the

[[Page 174]]

farm's profitability provided the applicant has refinanced direct or 
guaranteed OL loans four times or fewer and one of the following 
conditions is met:
    (i) A designated or declared disaster caused the need for 
refinancing; or
    (ii) The debts to be refinanced are owed to a creditor other than 
the USDA;
    (11) Costs for minor real estate repairs or improvements, provided 
the loan can be repaid within 7 years.
    (b) Lo-Doc funds approved under:
    (1) Section 764.51(c)(3)(i) may be used for any OL purpose except 
for refinancing debt under paragraph (a)(10);
    (2) Section 764.51(c)(3)(ii) may only be used for expenses under 
paragraph (a)(3).



Sec.  764.252  Eligibility requirements.

    The applicant:
    (a) Must comply with the general eligibility requirements 
established at Sec.  764.101.
    (b) And anyone who will sign the promissory note, except as provided 
in paragraph (c) of this section, must not have received debt 
forgiveness from the Agency on any direct or guaranteed loan.
    (c) And anyone who will sign the promissory note, may receive direct 
OL loans to pay annual farm operating and family living expenses, 
provided that the applicant meets all other applicable requirements 
under this part, if the applicant:
    (1) Received a write-down under section 353 of the Act;
    (2) Is current on payments under a confirmed reorganization plan 
under Chapter 11, 12, or 13 of Title 11 of the United States Code; or
    (3) Received debt forgiveness on not more than one occasion after 
April 4, 1996, resulting directly and primarily from a Presidentially-
designated emergency for the county or contiguous county in which the 
applicant operates. Only applicants who were current on all existing 
direct and guaranteed FLP loans prior to the beginning date of the 
incidence period of a Presidentially-designated emergency and received 
debt forgiveness on that debt within 3 years after the designation of 
such emergency meet this exception.
    (d) And in the case of an entity, the entity must be:
    (1) Controlled by farmers engaged primarily and directly in farming 
in the United States; and
    (2) Authorized to operate the farm in the State in which the farm is 
located.
    (e) And anyone who will sign the promissory note, may close an OL 
loan in no more than 7 calendar years, either as an individual or as a 
member of an entity, except as provided in paragraphs (e)(1) through (4) 
of this section. The years may be consecutive or nonconsecutive, and 
there is no limit on the number of loans closed in a year. Youth loans 
are not counted toward this limitation. The following exceptions are 
applicable.
    (1) This limitation does not apply if the applicant and anyone who 
will sign the promissory note is a beginning farmer.
    (2) This limitation does not apply if the applicant's land is 
subject to the jurisdiction of an Indian tribe, the loan is secured by 
one or more security instruments subject to the jurisdiction of an 
Indian tribe, and commercial credit is generally not available to such 
farm operations.
    (3) If the applicant, and anyone who will sign the promissory note, 
has closed direct OL loans in four or more previous calendar years as of 
April 4, 1996, the applicant is eligible to close OL loans in any three 
additional years after that date.
    (4) On a case-by-case basis, may be granted a one-time waiver of OL 
term limits for a period of 2 years, not subject to administrative 
appeal, if the applicant:
    (i) Has a financially viable operation;
    (ii) And in the case of an entity, the members holding the majority 
interest, applied for commercial credit from at least two lenders and 
were unable to obtain a commercial loan, including an Agency-guaranteed 
loan; and
    (iii) Has successfully completed, or will complete within one year, 
borrower training. Previous waivers to the borrower training 
requirements are not applicable under this paragraph.

[[Page 175]]



Sec.  764.253  Limitations.

    The applicant must comply with the general limitations established 
at Sec.  764.102.



Sec.  764.254  Rates and terms.

    (a) Rates. (1) The interest rate is the Agency's Direct Operating 
Loan rate, available in each Agency office.
    (2) The limited resource Operating Loan interest rate is available 
to applicants who are unable to develop a feasible plan at regular 
interest rates.
    (3) The interest rate charged will be the lower rate in effect at 
the time of loan approval or loan closing.
    (b) Terms. (1) The Agency schedules repayment of annual OL loans 
made for family living and farm operating expenses when planned income 
is projected to be available.
    (i) The term of the loan may not exceed 18 months from the date of 
the note.
    (ii) The term of the loan may exceed 18 months in unusual situations 
such as establishing a new enterprise, developing a farm, purchasing 
feed while crops are being established, marketing plans, or recovery 
from a disaster or economic reverse. In no event will the term of the 
loan exceed 7 years from the date of the note. Crops and livestock 
produced for sale will not be considered adequate security for such 
loans.
    (2) The Agency schedules the repayment of all other OL loans based 
on the applicant's ability to repay and the useful life of the security. 
In no event will the term of the loan exceed 7 years from the date of 
the note. Repayment schedules may include equal, unequal, or balloon 
installments if needed to establish a new enterprise, develop a farm, or 
recover from a disaster or economic reversal. Loans with balloon 
installments:
    (i) Must have adequate security at the time the balloon installment 
comes due. Crops, livestock other than breeding stock, or livestock 
products produced are not adequate collateral for such loans;
    (ii) Are only authorized when the applicant can project the ability 
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;
    (iii) Are not authorized when loan funds are used for real estate 
repairs or improvements.



Sec.  764.255  Security requirements.

    An OL loan must be secured:
    (a) In accordance with Sec. Sec.  764.103 through 764.106.
    (b) By a:
    (1) First lien on all property or products acquired or produced with 
loan funds;
    (2) Lien of equal or higher position of that held by the creditor 
being refinanced with loan funds.



Sec. Sec.  764.256-764.300  [Reserved]



                      Subpart G_Youth Loan Program



Sec.  764.301  Youth loan uses.

    Youth loan funds may only be used to finance a modest, income-
producing, agriculture-related, educational project while participating 
in 4-H, FFA, or a similar organization.



Sec.  764.302  Eligibility requirements.

    The applicant:
    (a) Must comply with the general eligibility requirements 
established at Sec.  764.101(a) through (g);
    (b) And anyone who will sign the promissory note, must not have 
received debt forgiveness from the Agency on any direct or guaranteed 
loan;
    (c) Must be at least 10 but not yet 21 years of age at the time the 
loan is closed;
    (d) Must reside in a rural area, city or town with a population of 
50,000 or fewer people;
    (e) Must be recommended and continuously supervised by a project 
advisor, such as a 4-H Club advisor, a vocational teacher, a county 
extension agent, or other agriculture-related organizational sponsor; 
and
    (f) Must obtain a written recommendation and consent from a parent 
or guardian if the applicant has not reached the age of majority under 
state law.

[[Page 176]]



Sec.  764.303  Limitations.

    (a) The applicant must comply with the general limitations 
established at Sec.  764.102.
    (b) The total principal balance owed by the applicant to the Agency 
on all Youth loans at any one time cannot exceed $5,000.



Sec.  764.304  Rates and terms.

    (a) Rates. (1) The interest rate is the Agency's Direct Operating 
Loan rate, available in each Agency office.
    (2) The limited resource Operating Loan interest rate is not 
available for Youth loans.
    (3) The interest rate charged will be the lower rate in effect at 
the time of loan approval or loan closing.
    (b) Terms. Youth loan terms are the same as for an OL established at 
Sec.  764.254(b).



Sec.  764.305  Security requirements.

    A first lien will be obtained on property or products acquired or 
produced with loan funds.



Sec. Sec.  764.306-764.350  [Reserved]



                    Subpart H_Emergency Loan Program



Sec.  764.351  Emergency loan uses.

    (a) Physical losses--(1) Real estate losses. EM loan funds for real 
estate physical losses may only be used to repair or replace essential 
property damaged or destroyed as a result of a disaster as follows:
    (i) For any FO purpose, as specified in Sec.  764.151, except 
subparagraph (e) of that section;
    (ii) To establish a new site for farm dwelling and service buildings 
outside of a flood or mudslide area; and
    (iii) To replace land from the farm that was sold or conveyed, if 
such land is necessary for the farming operation to be effective.
    (2) Chattel losses. EM loan funds for chattel physical losses may 
only be used to repair or replace essential property damaged or 
destroyed as a result of a disaster as follows:
    (i) Purchase livestock, farm equipment, quotas and bases, and 
cooperative stock for credit, production, processing, or marketing 
purposes;
    (ii) Pay customary costs associated with obtaining 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, or preparation of Agency forms);
    (iii) Repair or replace household contents damaged in the disaster;
    (iv) Pay the costs to restore perennials, which produce an 
agricultural commodity, to the stage of development the damaged 
perennials had obtained prior to the disaster;
    (v) Pay essential family living and farm operating expenses, in the 
case of an operation that has suffered livestock losses not from 
breeding stock, or losses to stored crops held for sale; and
    (vi) Refinance farm-related debts other than real estate to improve 
farm profitability, if the applicant has refinanced direct or guaranteed 
loans four times or fewer and one of the following conditions is met:
    (A) A designated or declared disaster caused the need for 
refinancing; or
    (B) The debts to be refinanced are owed to a creditor other than the 
USDA.
    (b) Production losses. EM loan funds for production losses to 
agricultural commodities (except the losses associated with the loss of 
livestock) may be used to:
    (1) Pay costs associated with reorganizing the farm to improve its 
profitability except that such costs must not include the payment of 
bankruptcy expenses;
    (2) Pay annual operating expenses, which include, but are not 
limited to, feed, seed, fertilizer, pesticides, farm supplies, 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;
    (4) Pay borrower training costs required or recommended by the 
Agency;
    (5) Pay essential family living expenses;

[[Page 177]]

    (6) Refinance farm-related debts other than real estate to improve 
farm profitability, if the applicant has refinanced direct or guaranteed 
loans four times or fewer and one of the following conditions is met:
    (i) A designated or declared disaster caused the need for 
refinancing; or
    (ii) The debts to be refinanced are owed to a creditor other than 
the USDA; and
    (7) Replace lost working capital.



Sec.  764.352  Eligibility requirements.

    The applicant:
    (a) Must comply with the general eligibility requirements 
established at Sec.  764.101;
    (b) Must be an established farmer;
    (c) Must be the owner-operator or tenant-operator as follows:
    (1) For a loan made under Sec.  764.351(a)(1), must have been:
    (i) The owner-operator of the farm at the time of the disaster; or
    (ii) The tenant-operator of the farm at the time of the disaster 
whose lease on the affected real estate exceeds the term of the loan. 
The operator will provide prior notification to the Agency if the lease 
is proposed to terminate during the term of the loan. The lessor will 
provide the Agency a mortgage on the real estate as security for the 
loan;
    (2) For a loan made under Sec.  764.351(a) (2) or (b), must have 
been the operator of the farm at the time of the disaster; and
    (3) In the case of an entity, the entity must be:
    (i) Engaged primarily and directly in farming in the United States;
    (ii) Authorized to operate and own the farm, if the funds are used 
for farm ownership loan purposes, in the State in which the farm is 
located;
    (d) Must demonstrate the intent to continue the farming operation 
after the designated or declared disaster;
    (e) And all entity members must be unable to obtain sufficient 
credit elsewhere at reasonable rates and terms. To establish this, the 
applicant must obtain written declinations of credit, specifying the 
reasons for declination, from legally organized commercial lending 
institutions within reasonable proximity of the applicant as follows:
    (1) In the case of a loan in excess of $300,000, two written 
declinations of credit are required;
    (2) In the case of a loan of $300,000 or less, one written 
declination of credit is required; and
    (3) 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;
    (4) 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;
    (f) And all entity members in the case of an entity, 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.
    (g) Must submit an application to be received by the Agency no later 
than 8 months after the date the disaster is declared or designated in 
the county of the applicant's operation.
    (h) For production loss loans, must have a disaster yield that is at 
least 30 percent below the normal production yield of the crop, as 
determined by the Agency, which comprises a basic part of an applicant's 
total farming operation.
    (i) For physical loss loans, must have suffered disaster-related 
damage to chattel or real estate essential to the farming operation, or 
to household contents that must be repaired or replaced, to harvested or 
stored crops, or to perennial crops.
    (j) Must meet all of the following requirements if the ownership 
structure of the family farm changes between the time of a qualifying 
loss and the time an EM loan is closed:
    (1) The applicant, including all owners must meet all of the 
eligibility requirements;

[[Page 178]]

    (2) The individual applicant, or all owners of a entity applicant, 
must have had an ownership interest in the farming operation at the time 
of the disaster; and
    (3) The amount of the loan will be based on the percentage of the 
former farming operation transferred to the applicant and in no event 
will the individual portions aggregated equal more than would have been 
authorized for the former farming operation.
    (k) Must agree to repay any duplicative Federal assistance to the 
agency providing such assistance. An applicant 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 applicant for the same purpose from another source.



Sec.  764.353  Limitations.

    (a) EM loans must comply with the general limitations established at 
Sec.  764.102.
    (b) EM loans may not exceed the lesser of:
    (1) The amount of credit necessary to restore the 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 as calculated in 
paragraph (c) of this section.
    (c) For production loss loans, the applicant's actual crop 
production loss will be calculated as follows:
    (1) Subtract the disaster yield from the normal yield to determine 
the per acre production loss;
    (2) Multiply the 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 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.
    (d) For a physical loss loan, the applicant's total eligible 
physical losses will be calculated as follows:
    (1) 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);
    (2) Add the allowable costs associated with repairing or replacing 
real estate, covered by hazard insurance;
    (3) Add the value of replacement livestock and livestock products 
for which the applicant provided:
    (i) Written documentation of inventory on hand immediately preceding 
the loss;
    (ii) Records of livestock product sales sufficient to allow the 
Agency to establish a value;
    (4) Add the allowable costs to restore perennials to the stage of 
development the damaged perennials had obtained prior to the disaster;
    (5) Add, in the case of an individual applicant, the allowable costs 
associated with repairing or replacing household contents, not to exceed 
$20,000; and
    (6) 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.
    (e) EM loan funds may not be used for physical loss purposes unless:
    (1) The physical property 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 
benefit of the coverage was greater than the cost of the insurance; or
    (2) The loan is to a poultry farmer to cover the loss of a chicken 
house for which the applicant did not have hazard insurance at the time 
of the loss and the applicant:
    (i) Applied for, but was unable to obtain hazard insurance for the 
chicken house;

[[Page 179]]

    (ii) Uses the loan to rebuild the chicken house in accordance with 
industry standards in effect on the date the applicant submits an 
application for the loan;
    (iii) Obtains, for the term of the loan, hazard insurance for the 
full market value of the chicken house; and
    (iv) Meets all other requirements for the loan.
    (f) EM 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.



Sec.  764.354  Rates and terms.

    (a) Rates. (1) The interest rate is the Agency's Emergency Loan 
Actual Loss rate, available in each Agency office.
    (2) The interest rate charged will be the lower rate in effect at 
the time of loan approval or loan closing.
    (b) Terms. (1) The Agency schedules repayment of EM loans based on 
the useful life of the security, the applicant's repayment ability, and 
the type of loss.
    (2) The repayment schedule must include at least one payment every 
year.
    (3) EM loans for annual operating expenses, except expenses 
associated with establishing a perennial crop that are subject to 
paragraph (b)(4), must be repaid within 12 months. The Agency may extend 
this term to not more than 18 months to accommodate the production cycle 
of the agricultural commodities.
    (4) EM loans for production losses or physical losses to chattel 
(including, but not limited to, assets with an expected life between one 
and 7 years) may not exceed 7 years. The Agency may extend this term up 
to a total length not to exceed 20 years, if necessary to improve the 
applicant's repayment ability and real estate security is available.
    (5) The repayment schedule for EM loans for physical losses to real 
estate is based on the applicant's repayment ability and the useful life 
of the security, but in no case will the term exceed 40 years.



Sec.  764.355  Security requirements.

    (a) EM loans made under Sec.  764.351(a)(1) must comply with the 
general security requirements established at Sec. Sec.  764.103, 764.104 
and 764.155(b).
    (b) EM loans made under Sec.  764.351(a)(2) and (b) must comply with 
the general security requirements established at Sec. Sec.  764.103, 
764.104 and 764.255(b).
    (c) Notwithstanding the requirements of paragraphs (a) and (b) of 
this section, when adequate security is not available because of the 
disaster, the loan may be approved if the Agency determines, based on an 
otherwise feasible plan, there is a reasonable assurance that the 
applicant has the ability to repay the loan provided:
    (1) The applicant has pledged as security for the loan all available 
personal and business security, except as provided in Sec.  764.106;
    (2) The farm operating plan, approved by the Agency, indicates the 
loan will be repaid based upon the applicant's production and income 
history; addresses applicable pricing risks through the use of marketing 
contracts, hedging, options, or other revenue protection mechanisms, and 
includes a marketing plan or similar risk management practice;
    (3) The applicant has had positive net cash farm income in at least 
3 of the past 5 years; and
    (4) The applicant has provided the Agency an assignment on any USDA 
program payments to be received.
    (d) For loans over $25,000, title clearance is required when real 
estate is taken as security.
    (e) 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, names the record owner of the real estate in 
question and lists the balances due on all known debts against the real 
estate. Whenever the Agency is uncertain of the record owner or debts 
against the real estate security, a title search is required.



Sec.  764.356  Appraisal and valuation requirements.

    (a) In the case of physical losses associated with livestock, the 
applicant must have written documentation of the inventory of livestock 
and records

[[Page 180]]

of livestock product sales sufficient to allow the Agency to value such 
livestock or livestock products just prior to the loss.
    (b) 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.



Sec. Sec.  764.357-764.400  [Reserved]



                   Subpart I_Loan Decision and Closing



Sec.  764.401  Loan decision.

    (a) Loan approval. (1) The Agency will approve a loan only if it 
determines that:
    (i) The applicant's farm operating plan reflects a feasible plan, 
which includes repayment of the proposed loan and demonstrates that all 
other credit needs can be met;
    (ii) The proposed use of loan funds is authorized for the type of 
loan requested;
    (iii) The applicant has been determined eligible for the type of 
loan requested;
    (iv) All security requirements for the type of loan requested have 
been, or will be met before the loan is closed;
    (v) The applicant's total indebtedness to the Agency, including the 
proposed loan, will not exceed the maximum limits established in Sec.  
761.8 of this chapter;
    (vi) There have been no significant changes in the farm operating 
plan or the applicant's financial condition since the time the Agency 
received a complete application; and
    (vii) All other pertinent requirements have been, or will be met 
before the loan is closed.
    (2) The Agency will place conditions upon loan approval it 
determines necessary to protect its interest and maximize the 
applicant's potential for success.
    (b) Loan denial. The Agency will not approve a loan if it determines 
that:
    (1) The applicant's farm operating plan does not reflect a feasible 
plan;
    (2) The proposed use of loan funds is not authorized for the type of 
loan requested;
    (3) The applicant does not meet the eligibility requirements for the 
type of loan requested;
    (4) There is inadequate security for the type of loan requested;
    (5) Approval of the loan would cause the applicant's total 
indebtedness to the Agency to exceed the maximum limits established in 
Sec.  761.8 of this chapter;
    (6) The applicant's circumstances may not permit continuous 
operation and management of the farm; or
    (7) The applicant, the farming operation, or other circumstances 
surrounding the loan are inconsistent with the authorizing statutes, 
other Federal laws, or Federal credit policies.
    (c) Overturn of an Agency decision by appeal. If an FLP loan denial 
is overturned on administrative appeal, the Agency will not 
automatically approve the loan. Unless prohibited by the final appeal 
determination or otherwise advised by the Office of General Counsel, the 
Agency will:
    (1) Request current financial information from the applicant as 
necessary to determine whether any changes in the applicant's financial 
condition or agricultural conditions which occurred after the Agency's 
adverse decision was made will adversely affect the applicant's farming 
operation;
    (2) Approve a loan for crop production:
    (i) Only if the Agency can determine that the applicant will be able 
to produce a crop in the production cycle for which the loan is 
requested; or
    (ii) For the next production cycle, upon review of current financial 
data and a farm operating plan for the next production cycle, if the 
Agency determines the loan can be repaid. The new farm operating plan 
must reflect any financial issues resolved in the appeal.
    (3) Determine whether the applicant's farm operating plan, as 
modified based on the appeal decision, reflects a feasible plan, which 
includes repayment of the proposed loan and demonstrates that all other 
credit needs can be met.

[[Page 181]]



Sec.  764.402  Loan closing.

    (a) Signature requirements. Signatures on loan documents are 
required as follows:
    (1) For individual applicants, only the applicant is required to 
sign the promissory note.
    (2) For entity applicants, the promissory note will be executed to 
evidence the liability of the entity and the individual liability of all 
members of the entity.
    (3) Despite minority status, a youth executing a promissory note for 
a Youth loan will incur full personal liability for the debt.
    (4) A cosigner will be required to sign the promissory note if they 
assist the applicant in meeting the repayment requirements for the loan 
requested.
    (5) All signatures needed for the Agency to acquire the required 
security interests will be obtained according to State law.
    (b) Payment of fees. The applicant, or in the case of a real estate 
purchase, the applicant and seller, must pay all filing, recording, 
notary, lien search, and any other fees necessary to process and close a 
loan.
    (c) Chattel-secured loans. The following requirements apply to loans 
secured by chattel:
    (1) The Agency will close a chattel loan only when it determines the 
Agency requirements for the loan have been satisfied;
    (2) A financing statement is required for every loan except when a 
filed financing statement covering the applicant's property is still 
effective, covers all types of chattel property that will serve as 
security for the loan, describes the land on which crops and fixtures 
are or will be located, and complies with the law of the jurisdiction 
where filed;
    (3) A new security agreement is required for new loans, as necessary 
to secure the loan under State law, prior to the disbursement of loan 
funds.
    (d) Real estate-secured loans. (1) The Agency will close a real 
estate loan only when it determines that the Agency requirements for the 
loan have been satisfied and the closing agent can issue a policy of 
title insurance or final title opinion as of the date of closing. The 
title insurance or final title opinion requirement may be waived:
    (i) For loans of $10,000 or less;
    (ii) As provided in Sec.  764.355 for EM loans;
    (iii) When the real estate is considered additional security by the 
Agency; or
    (iv) When the real estate is a non-essential asset.
    (2) The title insurance or final title opinion must show title 
vested as required by the Agency, the lien of the Agency's security 
instrument in the priority required by the Agency, and title to the 
security property, subject only to those exceptions approved in writing 
by the Agency.
    (3) The Agency must approve agents who will close FLP loans. Closing 
agents must meet all of the following requirements to the Agency's 
satisfaction:
    (i) Be licensed in the state where the loan will be closed;
    (ii) Not be debarred or suspended from participating in any Federal 
programs;
    (iii) Maintain liability insurance;
    (iv) Have a fidelity bond that covers all employees with access to 
loan funds;
    (v) Have current knowledge of the requirements of State law in 
connection with the loan closing and title clearance;
    (vi) Not represent both the buyer and seller in the transaction;
    (vii) Not be related as a family member or business associate with 
the applicant; and
    (viii) Act promptly to provide required services.
    (e) Disbursement of funds. (1) Loan funds will be made available to 
the applicant within 15 days of loan approval, subject to the 
availability of funding.
    (2) If the loan is not closed within 90 days of loan approval or if 
the applicant's financial condition changes significantly, the Agency 
must reconfirm the requirements for loan approval prior to loan closing. 
The applicant may be required to provide updated information for the 
Agency to reconfirm approval and proceed with loan closing.
    (3) The Agency or closing agent will be responsible for disbursing 
loan funds. The electronic funds transfer

[[Page 182]]

process, followed by Treasury checks, are the Agency's preferred methods 
of loan funds disbursement. The Agency will use these processes on 
behalf of borrowers to disburse loan proceeds directly to creditors 
being refinanced with loan funds or to sellers of chattel property that 
is being acquired with loan funds. A supervised bank account will be 
used according to subpart B of part 761 of this chapter when these 
processes are not practicable.



Sec. Sec.  764.403-764.450  [Reserved]



      Subpart J_Borrower Training and Training Vendor Requirements



Sec.  764.451  Purpose.

    The purpose of production and financial management training is to 
help an applicant develop and improve skills necessary to:
    (a) Successfully operate a farm;
    (b) Build equity in the operation; and
    (c) Become financially successful and prepared to graduate from 
Agency financing to commercial sources of credit.



Sec.  764.452  Borrower training requirements.

    (a) The applicant must agree to complete production and financial 
management training, unless the Agency provides a waiver in accordance 
with Sec.  764.453, or the applicant has previously satisfied the 
training requirements. In the case of an entity:
    (1) Any individual member holding a majority interest in the entity 
or who is operating the farm must complete training on behalf of the 
entity, except as provided in paragraph (a)(2) of this section;
    (2) If one entity member is solely responsible for production or 
financial management, then only that member will be required to complete 
training.
    (b) When the Agency determines that production training is required, 
the applicant must agree to complete course work covering production 
management in each crop or livestock enterprise the Agency determines 
necessary.
    (c) When the Agency determines that financial management training is 
required, the applicant must agree to complete course work covering all 
aspects of farm accounting and integrating accounting elements into a 
financial management system.
    (d) An applicant who applies for a loan to finance a new enterprise, 
such as a new crop or a new type of livestock, must agree to complete 
production training with regard to that enterprise, even if production 
training requirements were waived or satisfied under a previous loan 
request, unless the Agency provides a waiver in accordance with Sec.  
764.453.
    (e) Even if a waiver is granted, the borrower must complete borrower 
training as a condition for future loans if and when Agency supervision 
provided in 7 CFR part 761 subpart C reflects that such training is 
needed.
    (f) The Agency cannot reject a request for a direct loan based 
solely on an applicant's need for training.
    (g) The Agency will provide written notification of required 
training or waiver of training.



Sec.  764.453  Agency waiver of training requirements.

    (a) The applicant must request the waiver in writing.
    (b) The Agency will grant a waiver for training in production, 
financial management, or both, under the following conditions:
    (1) The applicant submits evidence of successful completion of a 
course similar to a course approved under section Sec.  764.457 and the 
Agency determines that additional training is not needed; or
    (2) The applicant submits evidence which demonstrates to the 
Agency's satisfaction the applicant's experience and training necessary 
for a successful and efficient operation.
    (c) If the production and financial functions of the operation are 
shared among individual entity members, the Agency will consider the 
collective knowledge and skills of those individuals when determining 
whether to waive training requirements.



Sec.  764.454  Actions that an applicant must take when training is required.

    (a) Deadline for completion of training. (1) If the Agency requires 
an applicant to complete training, at loan closing

[[Page 183]]

the applicant must agree in writing to complete all required training 
within 2 years.
    (2) The Agency will grant a one-year extension to complete training 
if the applicant is unable to complete training within the 2-year period 
due to circumstances beyond the applicant's control.
    (3) The Agency will grant an extension longer than one year for 
extraordinary circumstances as determined by the Agency.
    (4) An applicant who does not complete the required training within 
the specified time-period will be ineligible for additional direct FLP 
loans until the training is completed.
    (b) Arranging training with a vendor. The applicant must select and 
contact an Agency approved vendor and make all arrangements to begin 
training.
    (c) Payment of training fees. (1) The applicant is responsible for 
the cost of training and must include training fees in the farm 
operating plan as a farm operating expense.
    (2) The payment of training fees is an authorized use of OL funds.
    (3) The Agency is not a party to fee or other agreements between the 
applicant and the vendor.
    (d) Evaluation of a vendor. Upon completion of the required 
training, the applicant will complete an evaluation of the course and 
submit it to the vendor. The vendor will forward the completed 
evaluation forms to the Agency.



Sec.  764.455  Potential training vendors.

    The Agency will contract for training services with State or private 
providers of production and financial management training services.



Sec.  764.456  Applying to be a vendor.

    (a) A vendor for borrower training services must apply to the Agency 
for approval.
    (b) The vendor application must include:
    (1) A sample of the course materials and a description of the 
vendor's training methods;
    (2) Specific training objectives for each section of the course;
    (3) A detailed course agenda specifying the topics to be covered, 
the time devoted to each topic, and the number of sessions to be 
attended;
    (4) A list of instructors and their qualifications;
    (5) The criteria by which additional instructors will be selected;
    (6) The proposed locations where training will take place;
    (7) The cost per participant, including cost for additional members 
of a farming operation;
    (8) The minimum and maximum class size;
    (9) The vendor's experience in developing and administering training 
to farmers;
    (10) The monitoring and quality control methods the vendor will use;
    (11) The policy on allowing Agency employees to attend the course 
for monitoring purposes;
    (12) A plan of how the needs of applicants with physical, mental, or 
learning disabilities will be met; and
    (13) A plan of how the needs of applicants who do not speak English 
as their primary language will be met.



Sec.  764.457  Vendor requirements.

    (a) Minimum experience. The vendor must demonstrate a minimum of 3 
years of experience in conducting training courses or teaching the 
subject matter.
    (b) Training objectives. The courses provided by a vendor must 
enable the applicant to accomplish one or more of the following 
objectives:
    (1) Describe the specific goals of the farming operation, any 
changes required to attain the goals, and outline how these changes will 
occur using present and projected cash flow budgets;
    (2) Maintain and use a financial management information system to 
make financial decisions;
    (3) Understand and use an income statement;
    (4) Understand and use a balance sheet;
    (5) Understand and use a cash flow budget; and
    (6) Use production records and other production information to 
identify problems, evaluate alternatives, and correct current production 
practices to improve efficiency and profitability.

[[Page 184]]

    (c) Curriculum. At least one of the following subjects must be 
covered:
    (1) Business planning courses, covering general goal setting, risk 
management, and planning.
    (2) Financial management courses, covering all aspects of farm 
accounting and focusing on integrating accounting elements into a 
financial management system.
    (3) Crop and livestock production courses focusing on improving the 
profitability of the farm.
    (d) Instructor qualifications. All instructors must have:
    (1) Sufficient knowledge of the material and experience in adult 
education;
    (2) A bachelor's degree or comparable experience in the subject area 
to be taught; and
    (3) A minimum of 3 years experience in conducting training courses 
or teaching.



Sec.  764.458  Vendor approval.

    (a) Agreement to conduct training. (1) Upon approval, the vendor 
must sign an agreement to conduct training for the Agency's borrowers.
    (2) The agreement to conduct training is valid for 3 years.
    (3) Any changes in curriculum, instructor, or cost require prior 
approval by the Agency.
    (4) The vendor may revoke the agreement by giving the Agency a 
written 30-day notice.
    (5) The Agency may revoke the agreement if the vendor does not 
comply with the responsibilities listed in the agreement by giving the 
vendor a written 30-day notice.
    (b) Renewal of agreement to conduct training. (1) To renew the 
agreement to conduct training, the vendor must submit in writing to the 
Agency:
    (i) A request to renew the agreement;
    (ii) Any changes in curricula, instructor, or cost; and
    (iii) Documentation that the vendor is providing effective training.
    (2) The Agency will review renewal requests in accordance with Sec.  
764.457.



Sec.  764.459  Evaluation of borrower progress.

    (a) The vendor must provide the Agency with a periodic progress 
report for each borrower enrolled in training in accordance with the 
agreement to complete training. The reports will indicate whether the 
borrower is attending sessions, completing the training program, and 
demonstrating an understanding of the course material.
    (b) Upon borrower completion of the training, the vendor must 
provide the Agency with an evaluation of the borrower's knowledge of the 
course material and assign a score. The following table lists the 
possible scores, the criteria used to assign each score, and Agency 
consideration of each score:

------------------------------------------------------------------------
                         Criteria used to
       Score             determine score          Agency consideration
------------------------------------------------------------------------
1.................  If the borrower:
                             Training requirement
                       Attended sessions as     associated with course
                       agreed,.                 is complete.
                    
                     Satisfactorily completed
                     all assignments, and.
                    
                     Demonstrated an
                     understanding of the
                     course material..
2.................  If the borrower:
                             Training requirement
                       Attended sessions as     associated with couse is
                       agreed, and.             complete. Additional
                              Agency supervision may
                     Attempted to complete      be necessary.
                     all assignments, but.
                     Does
                     not demonstrate an
                     understanding of the
                     course material..
3.................  If the borrower did not:
                             Training requirement
                       Attend sessions as       associated with course
                       agreed, or.              is not complete. The
                              borrower is ineligible
                     Attempt to complete        for future direct loans
                     assignments, or.           until the training is
                              completed.
                     Otherwise make a good
                     faith effort to complete
                     the training..
------------------------------------------------------------------------


[[Page 185]]



PART 765_DIRECT LOAN SERVICING_REGULAR--Table of Contents




Sec.

                           Subpart A_Overview

765.1 Introduction.
765.2 Abbreviations and definitions.
765.3-765.50 [Reserved]

      Subpart B_Borrowers with Limited Resource Interest Rate Loans

765.51 Annual review.
765.52-765.100 [Reserved]

                      Subpart C_Borrower Graduation

765.101 Borrower graduation requirements.
765.102 Borrower noncompliance with graduation requirements.
765.103 Transfer and assignment of Agency liens.
765.104--765.150 [Reserved]

                       Subpart D_Borrower Payments

765.151 Handling payments.
765.152 Types of payments.
765.153 Application of payments.
765.154 Distribution of payments.
765.155 Final loan payments.
765.156-765.200 [Reserved]

           Subpart E_Protecting the Agency's Security Interest

765.201 General policy.
765.202 Borrower responsibilities.
765.203 Protective advances.
765.204 Notifying potential purchasers.
765.205 Subordination of liens.
765.206 Junior liens.
765.207 Conditions for severance agreements.
765.208-765.250 [Reserved]

         Subpart F_Required Use and Operation of Agency Security

765.251 General.
765.252 Lease of security.
765.253 Ceasing to operate security.
765.254-765.300 [Reserved]

                 Subpart G_Disposal of Chattel Security

765.301 General.
765.302 Use and maintenance of the agreement for the use of proceeds.
765.303 Use of proceeds from chattel security.
765.304 Unapproved disposition.
765.305 Release of security interest.
765.306-765.350 [Reserved]

            Subpart H_Partial Release of Real Estate Security

765.351 Requirements to obtain Agency consent.
765.352 Use of proceeds.
765.353 Determining market value.
765.354-765.400 [Reserved]

          Subpart I_Transfer of Security and Assumption of Debt

765.401 Conditions for transfer of real estate and chattel security.
765.402 Transfer of security and loan assumption on same rates and 
          terms.
765.403 Transfer of security to and assumption of debt by eligible 
          applicants.
765.404 Transfer of security to and assumption of debt by ineligible 
          applicants.
765.405 Payment of costs associated with transfers.
765.406 Release of transferor from liability.
765.407-765.450 [Reserved]

                      Subpart J_Deceased Borrowers

765.451 Continuation of FLP debt and transfer of security.
765.452 Borrowers with Non-program loans.
765.453-765.500 [Reserved]

                      Subpart K_Exception Authority

765.501 Agency exception authority.

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

    Source: 72 FR 63309, Nov. 8, 2007, unless otherwise noted.



                           Subpart A_Overview



Sec.  765.1  Introduction.

    (a) Purpose. This part describes the policies for servicing direct 
FLP loans, except for borrowers who are delinquent, financially 
distressed, or otherwise in default on their loan.
    (b) Servicing actions. Servicing actions described in this part 
include:
    (1) Limited resource reviews;
    (2) Graduation to commercial credit;
    (3) Application of payments;
    (4) Maintaining and disposing of security;
    (5) Transfer of security and assumption of debt; and
    (6) Servicing accounts of deceased borrowers.
    (c) Loans covered. The Agency services direct FLP loans under the 
policies contained in this part. This part is not applicable to Non-
program loans, except where noted.

[[Page 186]]



Sec.  765.2  Abbreviations and definitions.

    Abbreviations and definitions for terms used in this part are 
provided in Sec.  761.2 of this chapter.



Sec. Sec.  765.3-765.50  [Reserved]



      Subpart B_Borrowers With Limited Resource Interest Rate Loans



Sec.  765.51  Annual review.

    (a) A borrower with limited resource interest rate loans is required 
to provide the Agency annually the operation's financial information to 
determine if the borrower can afford to pay a higher interest rate on 
the loan. The Agency will review the information provided in accordance 
with Sec.  761.105 of this chapter.
    (b) If the borrower's farm operating plan shows that the debt 
service margin exceeds 110 percent, the Agency will increase the 
interest rate on the loans with a limited resource interest rate until:
    (1) A further increase in the interest rate results in a debt 
service margin of less than 110 percent; or
    (2) The interest rate is equal to the interest rate currently in 
effect for the type of loan.
    (c) Except as provided in paragraph (d) of this section, the Agency 
will increase the limited resource interest rate to the current interest 
rate for the type of loan, if the borrower:
    (1) Purchases items not planned during the term of the loan;
    (2) Refuses to submit information the Agency requests for use in 
reviewing the borrower's financial condition;
    (3) Ceases farming, as described in Sec.  765.253; or
    (4) Is ineligible due to disqualification resulting from Federal 
crop insurance violation according to 7 CFR part 718.
    (d) If the borrower has limited resource interest rate loans that 
are deferred, the Agency will not change the interest rate during the 
deferral period.



Sec.  765.52-765.100  [Reserved]



                      Subpart C_Borrower Graduation



Sec.  765.101  Borrower graduation requirements.

    (a) In accordance with the promissory note and security instruments, 
the borrower must graduate to another source of credit if the Agency 
determines that:
    (1) The borrower has the ability to obtain credit from other 
sources; and
    (2) Adequate credit is available from other sources at reasonable 
rates and terms.
    (b) The Agency may require partial or full graduation.
    (1) In a partial graduation, all FLP loans of one type (i.e. all 
chattel loans or all real estate loans) must be paid in full by 
refinancing with other credit with or without an Agency guarantee.
    (2) In a full graduation, all FLP loans are paid in full by 
refinancing with other credit with or without an Agency guarantee.
    (3) A loan made for chattel and real estate purposes will be 
categorized according to how the majority of the loan's funds are 
expended.
    (c) The borrower must submit all information that the Agency 
requests in conjunction with the review of the borrower's financial 
condition.
    (d) The Agency may provide a borrower's prospectus to lenders in an 
attempt to identify sources of non-Agency credit and assess the lenders' 
interest in refinancing the borrower's loan. The Agency will notify the 
borrower when the borrower's prospectus is provided to one or more 
lenders.
    (e) If a lender expresses an interest in refinancing the borrower's 
FLP loan, the borrower must:
    (1) Apply for a loan from the interested lender within 30 days of 
notice; or
    (2) Seek guaranteed loan assistance under the market placement 
program in accordance with Sec.  762.110(g) of this chapter.
    (f) The borrower will be responsible for any application fees or 
purchase of stock in conjunction with graduation.

[[Page 187]]



Sec.  765.102  Borrower noncompliance with graduation requirements.

    Borrower failure to fulfill all graduation requirements within the 
time-period specified by the Agency constitutes default on the loan. The 
Agency will accelerate the borrower's loan without offering servicing 
options provided in 7 CFR part 766.



Sec.  765.103  Transfer and assignment of Agency liens.

    The Agency may assign its lien to the new lender when the borrower 
is graduating and all FLP debt will be paid in full.



Sec. Sec.  765.104-765.150  [Reserved]



                       Subpart D_Borrower Payments



Sec.  765.151  Handling payments.

    (a) Borrower payments. Borrowers must submit their loan payments in 
a form acceptable to the Agency, such as checks, cash, and money orders. 
Forms of payment not acceptable to the Agency include, but are not 
limited to, foreign currency, foreign checks, and sight drafts.
    (b) Crediting account. The Agency credits the borrower's account as 
of the date the Agency receives payment.



Sec.  765.152  Types of payments.

    (a) Regular payments. Regular payments are derived from, but are not 
limited to:
    (1) The sale of normal income security;
    (2) The sale of farm products;
    (3) Lease income, including mineral lease signing bonus;
    (4) Program or disaster-related disbursements from USDA or crop 
insuranceentities; and
    (5) Non-farm income.
    (b) Extra payments. Extra payments are derived from any ofthe 
following:
    (1) Sale of chattel security other than normal income security;
    (2) Sale of real estate security;
    (3) Refinancing of FLP debt;
    (4) Cash proceeds of insurance claims received on Agency security, 
if not being used to repair or replace the security;
    (5) Any transaction that results in a loss in the value of any 
Agency basic security;
    (6) Refunds of duplicate disaster program benefits to be applied on 
an EM loan; or
    (7) Refunds of unused loan funds.
    (c) Payments from sale of real estate. Notwithstanding any other 
provision of this section, payments derived from the sale of real estate 
security will be treated as regular payments at the Agency's discretion, 
if the FLP loans will be adequately secured after the transaction.



Sec.  765.153  Application of payments.

    (a) Regular payments. A regular payment is credited to a scheduled 
installment on program and non-program loans. Regular payments are 
applied to loans in the following order:
    (1) Annual operating loan;
    (2) Delinquent FLP installments, paying least secured loans first;
    (3) Non-delinquent FLP installments due in the current production 
cycle in order of security priority, paying least secured loans first;
    (4) Any future installments due.
    (b) Extra payments. An extra payment is not credited to a scheduled 
installment and does not relieve the borrower's responsibility to make 
scheduled loan installments, but will reduce the borrower's FLP 
indebtedness. Extra payments are applied to FLP loans in order of lien 
priority except for refunds of unused loan funds, which shall be applied 
to the loan for which the funds were advanced.



Sec.  765.154  Distribution of payments.

    The Agency applies both regular and extra payments to each loan in 
the following order, as applicable:
    (a) Recoverable costs and protective advances plus interest;
    (b) Deferred non-capitalized interest;
    (c) Accrued deferred interest;
    (d) Interest accrued to date of payment; and
    (e) Loan principal.



Sec.  765.155  Final loan payments.

    (a) General. (1) Unless the Agency has reservations regarding the 
validity of the payment, the Agency may release the borrower's security 
instruments at

[[Page 188]]

the time payment is made, if the borrower makes a final payment by one 
of the following methods:
    (i) Cash;
    (ii) U.S. Treasury check;
    (iii) Cashier's check; or
    (iv) Certified check.
    (2) Security instruments will only be released when all loans 
secured by the instruments have been paid in full or otherwise 
satisfied.
    (3) The Agency will return the paid note and satisfied security 
instruments to the borrower after the Agency processes the final payment 
and determines that the total indebtedness is paid in full.
    (b) Borrower refunds. If the borrower refunds the entire loan after 
the loan is closed, the borrower must pay interest from the date of the 
note to the date the Agency received the funds.
    (c) Overpayments. If an Agency miscalculation of a final payment 
results in an overpayment by the borrower of less than $10, the borrower 
must request a refund from the Agency in writing. Overpayments of $10 or 
more automatically will be refunded by the Agency.
    (d) Underpayments. If an Agency miscalculation of a final payment 
amount results in an underpayment, the Agency may collect all account 
balances resulting from its error. If the Agency cannot collect an 
underpayment from the borrower, the Agency will attempt to settle the 
debt in accordance with subpart B of 7 CFR part 1956.



Sec. Sec.  765.156-765.200  [Reserved]



           Subpart E_Protecting the Agency's Security Interest



Sec.  765.201  General policy.

    All Agency servicing actions regarding preservation and protection 
of Agency security will be consistent with the covenants and agreements 
contained in all loan agreements and security instruments.



Sec.  765.202  Borrower responsibilities.

    The borrower must:
    (a) Comply with all provisions of the loan agreements;
    (1) Non-compliance with the provisions of loan agreements and 
documents, other than failure to meet scheduled loan repayment 
installments contained in the promissory note, constitutes non-monetary 
default on FLP loans by the borrower;
    (2) Borrower non-compliance will be considered by the Agency when 
making eligibility determinations for future requests for assistance and 
may adversely impact such requests;
    (b) Maintain, protect, and account for all security;
    (c) Pay the following, unless State law requires the Agency to pay:
    (1) Fees for executing, filing or recording financing statements, 
continuation statements or other security instruments; and
    (2) The cost of lien search reports;
    (d) Pay taxes on property securing FLP loans when they become due;
    (e) Maintain insurance coverage in an amount specified by the 
Agency;
    (f) Protect the interests of the Agency when a third party brings 
suit or takes other action that could affect Agency security.



Sec.  765.203  Protective advances.

    When necessary to protect the Agency's security interest, costs 
incurred for the following actions will be charged to the borrower's 
account:
    (a) Maintain abandoned security property;
    (b) Preserve inadequately maintained security;
    (c) Pay real estate taxes and assessments;
    (d) Pay property, hazard, or flood insurance;
    (e) Pay harvesting costs;
    (f) Maintain Agency security instruments;
    (g) Pay ground rents;
    (h) Pay expenses for emergency measures to protect the Agency's 
collateral; and
    (i) Protect the Agency from actions by third parties.



Sec.  765.204  Notifying potential purchasers.

    (a) States with Central Filing System (CFS). The Agency participates 
and complies with central filing systems in States where CFS has been 
organized. In a State with a CFS, the Agency is

[[Page 189]]

not required to additionally notify potential purchasers that the Agency 
has a lien on a borrower's chattel security, unless specifically 
required by State law.
    (b) States without CFS. In a State without CFS, the Agency follows 
the filing requirements specified for perfecting a lien on a borrower's 
chattel security under State law. The Agency will distribute the list of 
chattel and crop borrowers to sale barns, warehouses, and other 
businesses that buy or sell chattels or crops. In addition, the Agency 
may provide the list of borrowers to potential purchasers upon request.



Sec.  765.205  Subordination of liens.

    (a) Borrower application requirements. The borrower must submit the 
following, unless it already exists in the Agency's file and is still 
current as determined by the Agency:
    (1) Completed Agency application for subordination form;
    (2) A current financial statement, including, in the case of an 
entity, financial statements from all entity members;
    (3) Documentation of compliance with the Agency's environmental 
regulations contained in subpart G of 7 CFR part 1940;
    (4) Verification of all non-farm income;
    (5) The farm's operating plan, including a projected cash flow 
budget reflecting production, income, expenses, and debt repayment plan; 
and
    (6) Verification of all debts.
    (b) Real estate security. For loans secured by real estate, the 
Agency will approve a request for subordination if all of the following 
conditions are met:
    (1) The borrower is not in default or will not be in default on FLP 
loans by the time the subordination closing is complete;
    (2) The loan will be used for an authorized loan purpose or is made 
in conjunction with a guaranteed loan;
    (3) The credit is essential to the farming operation, and the 
borrower cannot obtain the credit without a subordination;
    (4) The borrower can demonstrate, through a current farm operating 
plan, the ability to repay all debt payments scheduled, and to be 
scheduled, during the production cycle;
    (5) The FLP loan is still adequately secured after the 
subordination, or the value of the loan security will be increased by an 
amount at least equal to the advance to be made under the subordination;
    (6) The borrower is not able to graduate;
    (7) If the borrower is an entity and the Agency has taken real 
estate as additional security on property owned by a member, a 
subordination for any authorized loan purpose may be approved when it is 
needed for the entity member to finance a separate farming operation, 
provided the subordination does not cause the unpaid principal and 
interest on the FLP loans to exceed the value of loan security or 
otherwise adversely affect the security;
    (8) The borrower must not be ineligible as a result of a conviction 
for controlled substances according to 7 CFR part 718 of this chapter;
    (9) The borrower must not be ineligible due to disqualification 
resulting from Federal crop insurance violation according to 7 CFR part 
718 of this chapter;
    (10) The borrower will not use loan funds in a way that will 
contribute to erosion of highly erodible land or conversion of wetlands 
as described in subpart G of 7 CFR part 1940;
    (11) There is no other subordination outstanding with another lender 
in connection with the same security;
    (12) The subordination is limited to a specific amount; the loan 
made in conjunction with the subordination will be closed within a 
reasonable time and has a definite maturity date;
    (13) In the case of real property purchase or exchange, the Agency 
will obtain a valid mortgage and the required lien position on the real 
property. The Agency will require title clearance and loan closing for 
the property in accordance with Sec.  764.402 of this chapter;
    (14) Any planned development of real estate security will be 
performed as directed by the creditor, approved by the Agency, and will 
comply with the terms and conditions of Sec.  761.10 of this chapter;
    (15) Subordinations of SAA mortgages may only be approved when there

[[Page 190]]

is no increase in the debt which is prior to the SAA debt; and
    (16) If a borrower has only a Non-program loan, the Agency does not 
permit subordination. The Agency may subordinate Non-program security 
when it is also security for a program loan with the same borrower in 
accordance with this section.
    (c) Chattel security. (1) For loans secured by chattel, the 
subordination must meet the conditions contained in paragraphs (b)(1) 
through (12) of this section.
    (2) The Agency will approve a request for a second subordination to 
enable a borrower to obtain crop insurance, if the following conditions 
are met:
    (i) The creditor to whom the first subordination was given did not 
provide for payment of the current year's crop insurance premium, and 
consents in writing to the provisions of the second subordination to pay 
insurance premiums from the crop or insurance proceeds;
    (ii) The borrower assigns the insurance proceeds to the Agency or 
names the Agency in the loss payable clause of the policy; and
    (iii) The subordination meets the conditions under paragraphs (b)(1) 
through (12) of this section.
    (d) Appraisals. An appraisal of the property that secures the FLP 
loan will be required when the Agency determines it necessary to protect 
its interest. Appraisals will be obtained in accordance with Sec.  761.7 
of this chapter.



Sec.  765.206  Junior liens.

    (a) General policy. The borrower will not give a lien on Agency 
security without the consent of the Agency. Failure to obtain Agency 
consent will be considered by the Agency when making eligibility 
determinations for future requests for assistance and may adversely 
impact such requests.
    (b) Conditions for consent. The Agency will consent to the terms of 
a junior lien if all of the following conditions are met:
    (1) The borrower's ability to make scheduled loan payments is not 
jeopardized;
    (2) The borrower provides the Agency a copy of the farm operating 
plan submitted to the junior lienholder, and the plan is consistent with 
the Agency operating plan;
    (3) The total debt against the security does not exceed the 
security's market value;
    (4) The junior lienholder agrees in writing not to foreclose the 
security instrument unless written notice is provided to the Agency;
    (5) The borrower is unable to graduate; and
    (6) The junior lien will not otherwise adversely impact the Agency's 
financial interests.



Sec.  765.207  Conditions for severance agreements.

    For loans secured by real estate, a borrower may request Agency 
consent to a severance agreement or similar instrument so that future 
chattel acquired by the borrower will not become part of the real estate 
securing the FLP debt. The Agency will consent to severance agreements 
if all of the following conditions are met:
    (a) The financing arrangements are in the financial interest of the 
Agency and the borrower;
    (b) The transaction will not adversely affect the Agency's security 
position;
    (c) The borrower is unable to graduate;
    (d) The transaction will not jeopardize the borrower's ability to 
pay all outstanding debts to the Agency and other creditors; and
    (e) The property acquired is consistent with authorized loan 
purposes.



Sec. Sec.  765.208-765.250  [Reserved]



         Subpart F_Required Use and Operation of Agency Security



Sec.  765.251  General.

    (a) A borrower is required to be the operator of Agency security in 
accordance with loan purposes, loan agreements, and security 
instruments.
    (b) A borrower who fails to operate the security without Agency 
consent is in violation of loan agreements and security instruments.
    (c) The Agency will consider a borrower's request to lease or cease 
to operate the security as provided in Sec. Sec.  765.252 and 765.253.

[[Page 191]]



Sec.  765.252  Lease of security.

    (a) Real estate leases. The borrower may lease real estate security 
provided the following conditions are met:
    (1) The Agency approves the borrower's request;
    (2) The term of consecutive leases does not exceed 3 years, or 5 
years if the borrower and the lessee are related by blood or marriage;
    (3) The lease does not contain an option to purchase; and
    (4) The requirements of Sec.  765.253 have been met.
    (b) Mineral leases. The borrower must request Agency consent to 
lease any mineral rights used as security for FLP loans.
    (1) For loans secured by real estate before December 23, 1985, the 
Agency has a security interest in any mineral rights the borrower has on 
the real estate pledged as collateral.
    (2) For loans secured by real estate on or after December 23, 1985, 
the Agency has a security interest in any mineral rights if the mineral 
rights were included in an appraisal.
    (3) The Agency may consent to a mineral lease if the proposed use of 
the leased rights will not adversely affect either:
    (i) The Agency's security interest; or
    (ii) Compliance with any applicable environmental requirements of 
subpart G of 7 CFR part 1940.
    (c) Lease of chattel security. Lease of chattel security is not 
authorized.
    (d) Lease proceeds. Lease proceeds are considered normal income 
security and may be used in accordance with Sec.  765.303.
    (e) Lease of allotments. (1) The Agency will not approve any crop 
allotment lease that will adversely affect its security interest in the 
allotment.
    (2) The borrower must assign all rental proceeds from an allotment 
lease to the Agency.



Sec.  765.253  Ceasing to operate security.

    If the borrower requests Agency consent to cease operating the 
security or if the Agency discovers that the borrower is failing to 
operate the security, the Agency will give consent if:
    (a) Such action is in the Agency's best interests;
    (b) The borrower is unable to graduate;
    (c) The borrower is not ineligible as a result of disqualification 
for Federal crop insurance violation according to 7 CFR part 718;
    (d) The borrower has leased the security according to Sec.  
765.252(a)(2); and
    (e) Any one of the following conditions is met:
    (1) The borrower is involved in the day-to-day operational 
activities, management decisions, costs and returns of the farming 
operation, and will continue to reside in the immediate farming 
community for reasonable management and operation involvement;
    (2) The borrower's failure to operate the security is due to age or 
poor health, and the borrower continues to reside in the immediate 
farming community for reasonable management and operation involvement; 
or
    (3) The borrower's failure to operate the security is beyond the 
borrower's control, and the borrower will resume the farming operation 
within 3 years.



Sec. Sec.  765.254-765.300  [Reserved]



                 Subpart G_Disposal of Chattel Security



Sec.  765.301  General.

    (a) The borrower must account for all security.
    (b) The borrower may not dispose of chattel security for an amount 
less than its market value. All proceeds, including any amount in excess 
of the market value, must be distributed to lienholders for application 
to the borrower's account in the order of lien priority.
    (1) The Agency considers the market value of normal income security 
to be the prevailing market price of the commodity in the area in which 
the farm is located.
    (2) The market value for basic security is determined by an 
appraisal obtained in accordance with Sec.  761.7 of this chapter.
    (c) When the borrower sells chattel security, the property and 
proceeds remain subject to the Agency lien until the lien is released by 
the Agency.

[[Page 192]]

    (d) The Agency and all other lienholders must provide written 
consent before a borrower may use proceeds for a purpose other than 
payment of lienholders in the order of lien priority.
    (e) The transaction must not interfere with the borrower's farming 
operation or jeopardize the borrower's ability to repay the FLP loan.
    (f) The disposition must enhance the program objectives of the FLP 
loan.
    (g) When the borrower exchanges security property for other property 
or purchases new property with sale proceeds, the acquisition must be 
essential to the farming operation as well as meet the program 
objectives, purposes, and limitations for the type of loan.
    (h) All checks, drafts, or money orders which the borrower receives 
from the sale of Agency security must be payable to the borrower and the 
Agency. If all FLP loan installments and any past due installments, for 
the period of the agreement for the use of proceeds have been paid, 
however, these payments from the sale of normal income security may be 
payable solely to the borrower.



Sec.  765.302  Use and maintenance of the agreement for the use of proceeds.

    (a) The borrower and the Agency will execute an agreement for the 
use of proceeds for each production cycle, including proceeds from the 
sale of milk, crops on hand or in storage, planned proceeds from 
Government payments, crop insurance and insurance proceeds derived from 
the loss of security.
    (b) The agreement for the use of proceeds will remain in effect 
until the proper disposition of all listed chattel security has been 
accomplished, or the remaining chattel security has been transferred to 
a new agreement for the use of proceeds.
    (c) The borrower must report any disposition of basic or normal 
income security immediately to the Agency.
    (d) If a borrower wants to dispose of chattel security not listed or 
in a way different than provided on the agreement for the use of 
proceeds, the borrower must obtain the Agency's consent before the 
disposition.
    (e) If the borrower sells security to a purchaser not listed in the 
agreement for the use of proceeds, the borrower must immediately notify 
the Agency of what property has been sold and of the name and business 
address of the purchaser.
    (f) The borrower must provide the Agency with the necessary 
information to update the farm operating plan and the agreement for the 
use of proceeds in accordance with Sec.  761.102 of this chapter.
    (g) Changes to the agreement on the use of proceeds will be 
recorded, dated and initialed by the borrower and the Agency.
    (h) The borrower must maintain records of dispositions of chattel 
security and the actual use of proceeds. The borrower must make these 
records available to the Agency at the end of the period covered by the 
agreement for the use of proceeds.



Sec.  765.303  Use of proceeds from chattel security.

    (a) General. (1) Proceeds from the sale of basic security and normal 
income security must be remitted to lienholders in order of lien 
priority.
    (2) Proceeds remitted to the Agency may be used as follows:
    (i) Applied to the FLP loan;
    (ii) Pay customary costs appropriate to the transaction.
    (3) With the concurrence of all lienholders, proceeds may be used to 
preserve the security because of a natural disaster or other severe 
catastrophe, when funds cannot be obtained by other means in time to 
prevent the borrower and the Agency from suffering a substantial loss.
    (4) Security may be consumed as follows:
    (i) Livestock may be used by the borrower's family for subsistence;
    (ii) If crops serve as security and usually would be marketed, the 
Agency may allow such crops to be fed to the borrower's livestock, if 
this is preferable to marketing, provided the Agency obtains a lien or 
assignment on the livestock, and livestock products, at least equal to 
the lien on the crops.
    (b) Proceeds from the sale of normal income security. In addition to 
the uses specified in paragraph (a) of this section, the agreement for 
the use of proceeds will allow for release of proceeds

[[Page 193]]

from the sale of normal income security to be used to pay essential 
family living and farm operating expenses. Such releases will be 
terminated when an account is accelerated.
    (c) Proceeds from the sale of basic security. In addition to the 
uses specified in paragraph (a) of this section:
    (1) Proceeds from the sale of basic security may not be used for any 
family living and farm operating expenses.
    (2) Security may be exchanged for chattel property better suited to 
the borrower's needs if the Agency will acquire a lien on the new 
property at least equal in value to the lien held on the property 
exchanged.
    (3) Proceeds may be used to purchase chattel property better suited 
to the borrower's needs if the Agency will acquire a lien on the 
purchased property. The value of the purchased property, together with 
any proceeds applied to the FLP loan, must at least equal the value of 
the Agency lien on the old security.



Sec.  765.304  Unapproved disposition.

    (a) If a borrower disposes of chattel security without Agency 
approval, or misuses proceeds, the borrower must:
    (1) Make restitution to the Agency within 30 days of Agency 
notification; or
    (2) Provide disposition or use information to enable the Agency to 
consider post-approval within 30 days of Agency notification.
    (b) Failure to cure the first unauthorized disposition in accordance 
with paragraph (a) of this section, or a second unauthorized 
disposition, whether or not cured, constitutes a non-monetary default, 
will be considered by the Agency when making eligibility determinations 
for future requests for assistance, may adversely impact such requests, 
and may result in civil or criminal action.



Sec.  765.305  Release of security interest.

    (a) When Agency security is sold, exchanged, or consumed in 
accordance with the agreement for the use of proceeds, the Agency will 
release its security interest to the extent of the value of the security 
disposed.
    (b) Security interests on wool and mohair may be released when the 
security is marketed by consignment, provided all of the following 
conditions are met:
    (1) The borrower assigns to the Agency the proceeds of any advances 
made, or to be made, on the wool or mohair by the broker, less shipping, 
handling, processing, and marketing costs;
    (2) The borrower assigns to the Agency the proceeds of the sale of 
the wool or mohair, less any remaining costs in shipping, handling, 
processing, and marketing, and less the amount of any advance (including 
any interest which may have accrued on the advance) made by the broker 
against the wool or mohair; and
    (3) The borrower and broker agree that the net proceeds of any 
advances on, or sale of, the wool or mohair will be paid by checks made 
payable jointly to the borrower and the Agency.



Sec. Sec.  765.306-765.350  [Reserved]



            Subpart H_Partial Release of Real Estate Security



Sec.  765.351  Requirements to obtain Agency consent.

    The borrower must obtain prior consent from the Agency for any 
transactions affecting the real estate security, including, but not 
limited to, sale or exchange of security, a right-of-way across 
security, and a partial release. The Agency may consent to such 
transactions provided the conditions in this section are met.
    (a) General. The following conditions apply to all transactions 
affecting real estate:
    (1) The transaction will enhance the objectives for which the FLP 
loan or loans were made;
    (2) The transaction will not jeopardize the borrower's ability to 
repay the FLP loan, or is necessary to place the borrower's farming 
operation on a sound basis;
    (3) The amount received for the security being disposed of or the 
rights being granted is not less than the market value;
    (4) Any proceeds in excess of the market value are remitted to 
lienholders in the order of lien priority;

[[Page 194]]

    (5) The transaction must not interfere with the borrower's farming 
operation;
    (6) The market value of the remaining security is adequate to secure 
the FLP loans, or if the market value of the security before the 
transaction was inadequate to fully secure the FLP loans, the Agency's 
equity in the security is not diminished;
    (7) The environmental requirements of subpart G of 7 CFR part 1940 
must be met;
    (8) The borrower cannot graduate to other credit;
    (9) The borrower must not be ineligible due to disqualification 
resulting from Federal crop insurance violation according to 7 CFR part 
718; and
    (10) The disposition of real estate security for an outstanding ST 
loan will only be authorized if the transaction will result in full 
repayment of the loan.
    (b) Sale of timber, gravel, oil, gas, coal, or other minerals. (1) 
Agency security instruments require that the borrower request and 
receive written consent from the Agency prior to certain transactions, 
including, but not limited to, cutting, removal, or lease of timber, 
gravel, oil, gas, coal, or other minerals, except small amounts used by 
the borrower for ordinary household purposes.
    (i) The sale of timber from real estate that secures an FLP loan 
will be considered a disposition of a portion of the security.
    (ii) For loans secured by real estate before December 23, 1985, the 
Agency has a security interest in mineral products, gravel, oil, gas, 
coal, or other resources and the sale by unit or lump sum payment will 
be considered a disposition of security.
    (iii) For loans secured by real estate on or after December 23, 
1985, the Agency has a security interest in mineral products, gravel, 
oil, gas, coal, or other resources if the value of such products was 
included in an appraisal. When the Agency has a security interest, the 
sale of such products will be considered a disposition of a portion of 
the security.
    (2) Any compensation the borrower may receive for damages to the 
surface of the real estate security resulting from exploration for, or 
recovery of, minerals must be assigned to the Agency. Such proceeds will 
be used to repair the damage, and any remaining funds must be remitted 
to lienholders in the order of lien priority or, with all lienholders' 
consent, used for an authorized loan purpose.
    (c) Exchange of security property. (1) When an exchange of security 
results in a balance owing to the borrower, the proceeds must be used in 
accordance with Sec.  765.352.
    (2) Property acquired by the borrower must meet program objectives, 
purposes and limitations relating to the type of loan involved as well 
as applicable requirements for appraisal, title clearance and security.
    (d) Sale under contract for deed. A borrower may sell a portion of 
the security for not less than its market value under a contract for 
deed subject to the following:
    (1) Not less than 10 percent of the purchase price will be paid as a 
down payment and remitted to lienholders in the order of lien priority;
    (2) Payments will not exceed 10 annual installments of principal 
plus interest or the remaining term of the FLP loan, whichever is less. 
The interest rate will be the current rate being charged on a regular FO 
loan plus 1 percent or the rate on the borrower's notes, whichever is 
greater. Payments may be in equal or unequal installments with a balloon 
final installment;
    (3) The Agency's security rights, including the right to foreclose 
on either the portion being sold or retained, will not be impaired;
    (4) Any subsequent payments must be assigned to the lienholders and 
remitted in order of lien priority, or with lienholder's approval, used 
in accordance with Sec.  765.352;
    (5) The mortgage on the property sold will not be released prior to 
either full payment of the borrower's account or receipt of the full 
amount of sale proceeds;
    (6) The sale proceeds applied to the borrower's loan accounts will 
not relieve the borrower from obligations under the terms of the note or 
other agreements approved by the Agency;
    (7) All other requirements of this section are met.

[[Page 195]]

    (e) Transfer of allotments. (1) The Agency will not approve any crop 
allotment lease that will adversely affect its security interest.
    (2) The sale of an allotment must comply with all conditions of this 
subpart.
    (3) The borrower may transfer crop allotments to another farm owned 
or controlled by the borrower. Such transfer will be treated as a lease 
under Sec.  765.252.



Sec.  765.352  Use of proceeds.

    (a) Proceeds from transactions affecting the real estate security 
may only be used as follows:
    (1) Applied on liens in order of priority;
    (2) To pay customary costs appropriate to the transaction, which 
meet the following conditions:
    (i) Are reasonable in amount;
    (ii) Cannot be paid by the borrower;
    (iii) Will not be paid by the purchaser;
    (iv) Must be paid to consummate the transaction; and
    (v) May include postage and insurance when it is necessary for the 
Agency to present the promissory note to the recorder to obtain a 
release of a portion of the real estate from the mortgage.
    (3) For development or enlargement of real estate owned by the 
borrower as follows:
    (i) Development or enlargement must be necessary to improve the 
borrower's debt repayment ability, place the borrower's farming 
operation on a sound basis, or otherwise enhance the objectives of the 
loan;
    (ii) Such use will not conflict with the loan purposes, restrictions 
or requirements of the type of loan involved;
    (iii) Funds will be deposited in a supervised bank account in 
accordance with subpart B of part 761 of this chapter;
    (iv) The Agency has, or will obtain, a lien on the real estate 
developed or enlarged;
    (v) Construction and development will be completed in accordance 
with Sec.  761.10 of this chapter.
    (b) After acceleration, the Agency may approve transactions only 
when all the proceeds will be applied to the liens against the security 
in the order of their priority, after deducting customary costs 
appropriate to the transaction. Such approval will not cancel or delay 
liquidation, unless all loan defaults are otherwise cured.



Sec.  765.353  Determining market value.

    (a) Security proposed for disposition. (1) The Agency will obtain an 
appraisal of the security proposed for disposition.
    (2) The Agency may waive the appraisal requirement when the 
estimated value is less than $25,000.
    (b) Security remaining after disposition. The Agency will obtain an 
appraisal of the remaining security if it determines that the 
transaction will reduce the value of the remaining security.
    (c) Appraisal requirements. Appraisals, when required, will be 
conducted in accordance with Sec.  761.7 of this chapter.



Sec. Sec.  765.354-765.400  [Reserved]



          Subpart I_Transfer of Security and Assumption of Debt



Sec.  765.401  Conditions for transfer of real estate and chattel security.

    (a) General conditions. (1) Approval of a security transfer and 
corresponding loan assumption obligates a new borrower to repay an 
existing FLP debt.
    (2) All transferees will become personally liable for the debt and 
assume the full responsibilities and obligations of the debt transferred 
when the transfer and assumption is complete. If the transferee is an 
entity, the entity and each member must assume personal liability for 
the loan.
    (3) A transfer and assumption will only be approved if the Agency 
determines it is in the Agency's financial interest.
    (b) Agency consent. A borrower must request and obtain written 
Agency consent prior to selling or transferring security to another 
party.



Sec.  765.402  Transfer of security and loan assumption on same rates and terms.

    An eligible applicant may assume an FLP loan on the same rates and 
terms as the original note if:

[[Page 196]]

    (a) The original borrower has died and the spouse, other relative, 
or joint tenant who is not obligated on the note inherits the security 
property;
    (b) A family member of the borrower or an entity comprised solely of 
family members of the borrower assumes the debt along with the original 
borrower;
    (c) An individual with an ownership interest in the borrower entity 
buys the entire ownership interest of the other members and continues to 
operate the farm in accordance with loan requirements. The new owner 
must assume personal liability for the loan;
    (d) A new entity buys the borrower entity and continues to operate 
the farm in accordance with loan requirements; or
    (e) The original loan is an EM loan for physical or production 
losses and persons who were directly involved in the farm's operation at 
the time of the loss will assume the loan. If the original loan was made 
to:
    (1) An individual borrower, the transferee must be a family member 
of the original borrower or an entity that is comprised solely of family 
members of the original borrower.
    (2) A trust, partnership or joint operation, the transferee must 
have been a member, partner or joint operator when the Agency made the 
original loan or remain an entity comprised solely of people who were 
original members, partners or joint operators when the entity received 
the original loan.
    (3) A corporation, including limited liability company, or 
cooperative, the transferee must:
    (i) Have been a corporate stockholder or a cooperative member when 
the Agency made the original loan or will be an entity comprised solely 
of people who were corporate stockholders or cooperative members when 
the entity received the loan; and
    (ii) Assume only the portion of the physical or production loss loan 
equal to the transferee's percentage of ownership. In the case of entity 
transferees, the transferee must assume that portion of the loan equal 
to the combined percentages of ownership of the individual stockholders 
or members in the transferee.



Sec.  765.403  Transfer of security to and assumption of debt by eligible applicants.

    (a) Transfer of real estate and chattel security. The Agency may 
approve transfers of security with assumption of FLP debt, other than EM 
loans for physical or production losses, by transferees eligible for the 
type of loan being assumed if:
    (1) The transferee meets all loan and security requirements in part 
764 of this chapter for the type of loan being assumed; and
    (2) The outstanding loan balance (principal and interest) does not 
exceed the maximum loan limit for the type of loan as contained in Sec.  
761.8 of this chapter.
    (b) Assumption of Non-program loans. Applicants eligible for FO 
loans under part 764 of this chapter may assume Non-program loans made 
for real estate purposes if the Agency determines the property meets 
program requirements. In such case, the Agency will reclassify the Non-
program loan as an FO loan.
    (c) Loan types that the Agency no longer makes. Real estate loan 
types the Agency no longer makes (i.e. EE, RL, RHF) may be assumed and 
reclassified as FO loans if the transferee is eligible for an FO loan 
under part 764 of this chapter and the property proposed for transfer 
meets program requirements.
    (d) Amount of assumption. The transferee must assume the lesser of:
    (1) The outstanding balance of the transferor's loan; or
    (2) The market value of the security, less prior liens and 
authorized costs, if the outstanding loan balance exceeds the market 
value of the property.
    (e) Rates and terms. The interest rate and loan term will be 
determined according to rates and terms established in part 764 of this 
chapter for the type of loan being assumed.



Sec.  765.404  Transfer of security to and assumption of debt by ineligible applicants.

    (a) General. (1) The Agency will allow the transfer of real estate 
and chattel security property to applicants who are ineligible for the 
type of loan being assumed only on Non-program loan rates and terms.

[[Page 197]]

    (2) The Agency will reclassify the assumed loan as a Non-program 
loan.
    (b) Eligibility. Transferees must:
    (1) Provide written documentation verifying their credit worthiness 
and debt repayment ability;
    (2) Not have received debt forgiveness from the Agency;
    (3) Not be ineligible for loans as a result of a conviction for 
controlled substances according to 7 CFR part 718; and
    (4) Not be ineligible due to disqualification resulting from Federal 
crop insurance violation according to 7 CFR part 718.
    (c) Assumption amount. The transferee must assume the total 
outstanding FLP debt or if the value of the property is less than the 
entire amount of debt, an amount equal to the market value of the 
security less any prior liens. The total outstanding FLP debt will 
include any unpaid deferred interest that accrued on the loan to the 
extent that the debt does not exceed the security's market value.
    (d) Downpayment. Non-program transferees must make a downpayment to 
the Agency of not less than 10 percent of the lesser of the market value 
or unpaid debt.
    (e) Interest rate. The interest rate will be the Non-program 
interest rate in effect at the time of loan approval.
    (f) Loan terms. (1) For a Non-program loan secured by real estate, 
the Agency schedules repayment in 25 years or less, based on the 
applicant's repayment ability.
    (2) For a Non-program loan secured by chattel property only, the 
Agency schedules repayment in 5 years or less, based on the applicant's 
repayment ability.



Sec.  765.405  Payment of costs associated with transfers.

    The transferor and transferee are responsible for paying transfer 
costs such as real estate taxes, title examination, attorney's fees, 
surveys, and title insurance. When the transferor is unable to pay its 
portion of the transfer costs, the transferee, with Agency approval, may 
pay these costs provided:
    (a) Any cash equity due the transferor is applied first to payment 
of costs and the transferor does not receive any cash payment above 
these costs;
    (b) The transferee's payoff of any junior liens does not exceed 
$5,000;
    (c) Fees are customary and reasonable;
    (d) The transferee can verify that personal funds are available to 
pay transferor and transferee fees; and
    (e) Any equity due the transferor is held in escrow by an Agency 
designated closing agent and is disbursed at closing.



Sec.  765.406  Release of transferor from liability.

    (a) General. Agency approval of an assumption does not automatically 
release the transferor from liability.
    (b) Requirements for release. (1) The Agency may release the 
transferor from liability when all of the security is transferred and 
the total outstanding debt is assumed.
    (2) If an outstanding debt balance will remain and only part of the 
transferor's Agency security is transferred, the written request for 
release of liability will not be approved, unless the deficiency is 
otherwise resolved to the Agency's satisfaction.
    (3) If an outstanding balance will remain and all of the 
transferor's security has been transferred, the transferor may pay the 
remaining balance or request debt settlement in accordance with subpart 
B of 7 CFR part 1956.
    (4) Except for loans in default being serviced under 7 CFR part 766, 
if an individual who is jointly liable for repayment of an FLP loan 
withdraws from the farming operation and conveys all of their interest 
in the security to the remaining borrower, the withdrawing party may be 
released from liability under the following conditions:
    (i) A divorce decree or property settlement states that the 
withdrawing party is no longer responsible for repaying the loan;
    (ii) All of the withdrawing party's interests in the security are 
conveyed to the persons with whom the loan will be continued; and
    (iii) The persons with whom the loan will be continued can 
demonstrate the ability to repay all of the existing and proposed debt 
obligations.

[[Page 198]]



Sec. Sec.  765.407-765.450  [Reserved]



                      Subpart J_Deceased Borrowers



Sec.  765.451  Continuation of FLP debt and transfer of security.

    (a) Individuals who are liable. Following the death of a borrower, 
the Agency will continue the loan with any individual who is liable for 
the indebtedness provided that the individual complies with the 
obligations of the loan and security instruments.
    (b) Individuals who are not liable. The Agency will continue the 
loan with a person who is not liable for the indebtedness in accordance 
with subpart I of this part.



Sec.  765.452  Borrowers with Non-program loans.

    (a) Loan continuation. (1) The Agency will continue the loan with a 
jointly liable borrower if the remaining borrower continues to pay the 
deceased borrower's loan in accordance with the loan and security 
instruments.
    (2) The Agency may continue the loan with an individual who inherits 
title to the property and is not liable for the indebtedness provided 
the individual makes payments as scheduled and fulfills all other 
responsibilities of the borrower according to the loan and security 
instruments.
    (b) Loan assumption. A deceased borrower's loan may be assumed by an 
individual not liable for the indebtedness in accordance with subpart I 
of this part.
    (c) Loan discontinuation. (1) The Agency will not continue a loan 
for any subsequent transfer of title by the heirs, or sale of interests 
between heirs to consolidate title; and
    (2) The Agency treats any subsequent transfer of title as a sale 
subject to requirements listed in subpart I of this part.



Sec. Sec.  765.453-765.500  [Reserved]



                      Subpart K_Exception Authority



Sec.  765.501  Agency exception authority.

    On an individual case basis, the Agency may consider granting an 
exception to any regulatory requirement or policy of this part if:
    (a) The exception is not inconsistent with the authorizing statute 
or other applicable law; and
    (b) The Agency's financial interest would be adversely affected by 
acting in accordance with published regulations or policies and granting 
the exception would resolve or eliminate the adverse effect upon the 
Agency's financial interest.



PART 766_DIRECT LOAN SERVICING_SPECIAL--Table of Contents




                           Subpart A_Overview

Sec.
766.1 Introduction.
766.2 Abbreviations and definitions.
766.3-766.50 [Reserved]

                      Subpart B_Disaster Set-Aside

766.51 General.
766.52 Eligibility.
766.53 Disaster Set-Aside amount limitations.
766.54 Borrower application requirements.
766.55 Eligibility determination.
766.56 Security requirements.
766.57 Borrower acceptance of Disaster Set-Aside.
766.58 Installment to be set aside.
766.59 Payments toward set-aside installments.
766.60 Canceling a Disaster Set-Aside.
766.61 Reversal of a Disaster Set-Aside.
766.62-766.100 [Reserved]

                    Subpart C_Loan Servicing Programs

766.101 Initial Agency notification to borrower of loan servicing 
          programs.
766.102 Borrower application requirements.
766.103 Borrower does not respond or does not submit a complete 
          application.
766.104 Borrower eligibility requirements.
766.105 Agency consideration of servicing requests.
766.106 Agency notification of decision regarding a complete 
          application.
766.107 Consolidation and rescheduling.
766.108 Reamortization.
766.109 Deferral.
766.110 Conservation Contract.
766.111 Writedown.
766.112 Additional security for restructured loans.
766.113 Buyout of loan at current market value.
766.114 State-certified mediation and voluntary meeting of creditors.
766.115 Challenging the Agency appraisal.
766.116-766.150 [Reserved]

Appendix A to Subpart C of Part 766

[[Page 199]]

Appendix B to Subpart C of Part 766--FSA-2512, Notice of Availability of 
          Loan Servicing to Borrowers Who Are Current, Financially 
          Distressed, or Less Than 90 Days Past Due
Appendix C to Subpart C of Part 766--FSA-2514, Notice of Availability of 
          Loan Servicing to Borrowers in Non-Monetary Default

                 Subpart D_Homestead Protection Program

766.151 Applying for Homestead Protection.
766.152 Eligibility.
766.153 Homestead Protection transferability.
766.154 Homestead Protection leases.
766.155 Conflict with State law.
766.156-766.200 [Reserved]

  Subpart E_Servicing Shared Appreciation Agreements and Net Recovery 
                            Buyout Agreements

766.201 Shared Appreciation Agreement.
766.202 Determining the shared appreciation due.
766.203 Payment of recapture.
766.204 Amortization of recapture.
766.205 Shared Appreciation Payment Agreement rates and terms.
766.206 Net Recovery Buyout Recapture Agreement.
766.207-766.250 [Reserved]

                    Subpart F_Unauthorized Assistance

766.251 Repayment of unauthorized assistance.
766.252 Unauthorized assistance resulting from submission of false 
          information.
766.253 Unauthorized assistance resulting from submission of inaccurate 
          information by borrower or Agency error.
766.254-766.300 [Reserved]

          Subpart G_Loan Servicing For Borrowers in Bankruptcy

766.301 Notifying borrower in bankruptcy of loan servicing.
766.302 Loan servicing application requirements for borrowers in 
          bankruptcy.
766.303 Processing loan servicing requests from borrowers in bankruptcy.
766.304-766.350 [Reserved]

                       Subpart H_Loan Liquidation

766.351 Liquidation.
766.352 Voluntary sale of real property and chattel.
766.353 Voluntary conveyance of real property.
766.354 Voluntary conveyance of chattel.
766.355 Acceleration of loans.
766.336 Acceleration of loans to American Indian borrowers.
766.357 Involuntary liquidation of real property and chattel.
766.358-766.400 [Reserved]

                      Subpart I_Exception Authority

766.401 Agency exception authority.

    Authority: 5 U.S.C. 301 and 7 U.S.C. 1981d and 1989.

    Source: 72 FR 63316, Nov. 8, 2007, unless otherwise noted.



                           Subpart A_Overview



Sec.  766.1  Introduction.

    (a) This part describes the Agency's servicing policies for direct 
loan borrowers who:
    (1) Are financially distressed;
    (2) Are delinquent in paying direct loans or otherwise in default;
    (3) Have received unauthorized assistance;
    (4) Have filed bankruptcy or are involved in other civil or criminal 
cases affecting the Agency; or
    (5) Have loan security being liquidated voluntarily or 
involuntarily.
    (b) The Agency services direct FLP loans under the policies 
contained in this part.
    (1) Youth loans:
    (i) May not receive Disaster Set-Aside under subpart B of this part;
    (ii) Will only be considered for rescheduling according to Sec.  
766.107 and deferral according to Sec.  766.109.
    (2) The Agency does not service Non-program loans under this part 
except where noted.
    (c) The Agency requires the borrower to make every reasonable 
attempt to make payments and comply with loan agreements before the 
Agency considers special servicing.



Sec.  766.2  Abbreviations and definitions.

    Abbreviations and definitions for terms used in this part are 
provided in Sec.  761.2 of this chapter.



Sec. Sec.  766.3-766.50  [Reserved]



                      Subpart B_Disaster Set-Aside



Sec.  766.51  General.

    (a) DSA is available to borrowers with program loans who suffered 
losses as a result of a natural disaster.

[[Page 200]]

    (b) DSA is not intended to circumvent other servicing available 
under this part.
    (c) Non-program loans may be serviced under this subpart for 
borrowers who also have program loans.



Sec.  766.52  Eligibility.

    (a) Borrower eligibility. The borrower must meet all of the 
following requirements to be eligible for a DSA:
    (1) The borrower must have operated the farm in a county designated 
or declared a disaster area or a contiguous county at the time of the 
disaster. Farmers who have rented out their land base for cash are not 
operating the farm.
    (2) The borrower must have acted in good faith, and the borrower's 
inability to make the upcoming scheduled loan payments must be for 
reasons not within the borrower's control.
    (3) The borrower cannot have more than one installment set aside on 
each loan.
    (4) As a direct result of the natural disaster, the borrower does 
not have sufficient income available to pay all family living and farm 
operating expenses, other creditors, and debts to the Agency. This 
determination will be based on:
    (i) The borrower's actual production, income and expense records for 
the year the natural disaster occurred;
    (ii) Any other records required by the Agency;
    (iii) Compensation received for losses; and
    (iv) Increased expenses incurred because of the natural disaster.
    (5) For the next production cycle, the borrower must develop a 
feasible plan showing that the borrower will at least be able to pay all 
operating expenses and taxes due during the year, essential family 
living expenses, and meet scheduled payments on all debts, including FLP 
debts. The borrower must provide any documentation required to support 
the farm operating plan.
    (6) The borrower must not be in non-monetary default.
    (7) The borrower must not be ineligible due to disqualification 
resulting from Federal crop insurance violation according to 7 CFR part 
718.
    (8) The borrower must not become 165 days past due before the 
appropriate Agency DSA documents are executed.
    (b) Loan eligibility. (1) Any FLP loan to be considered for DSA must 
have been outstanding at the time the natural disaster occurred.
    (2) All of the borrower's program and non-program loans must be 
current after the Agency completes a DSA of the scheduled installment.
    (3) All FLP loans must be current or less than 90 days past due at 
the time the application for DSA is complete.
    (4) The Agency has not accelerated or applied any special servicing 
action under this part to the loan since the natural disaster occurred.
    (5) For any loan that will receive a DSA, the remaining term of the 
loan must equal or exceed 2 years from the due date of the installment 
set-aside.
    (6) The loan must not have a DSA in place.



Sec.  766.53  Disaster Set-Aside amount limitations.

    (a) The DSA amount is limited to the lesser of:
    (1) The first or second scheduled annual installment on the FLP 
loans due after the disaster occurred; or
    (2) The amount the borrower is unable to pay the Agency due to the 
disaster. Borrowers are required to pay any portion of an installment 
they are able to pay.
    (b) The amount set aside will be the unpaid balance remaining on the 
installment at the time the DSA is complete. This amount will include 
the unpaid interest and any principal that would be credited to the 
account as if the installment were paid on the due date, taking into 
consideration any payments applied to principal and interest since the 
due date.
    (c) Recoverable cost items may not be set aside.



Sec.  766.54  Borrower application requirements.

    (a) Requests for DSA. (1) A borrower must submit a request for DSA 
in writing within eight months from the date the natural disaster was 
designated.
    (2) All borrowers must sign the DSA request.

[[Page 201]]

    (b) Required financial information. (1) The borrower must submit 
actual production, income, and expense records for the production cycle 
in which the disaster occurred unless the Agency already has this 
information.
    (2) The Agency may request other information needed to make an 
eligibility determination.



Sec.  766.55  Eligibility determination.

    Within 30 days of a complete DSA application, the Agency will 
determine if the borrower meets the eligibility requirements for DSA.



Sec.  766.56  Security requirements.

    If, prior to executing the appropriate DSA Agency documents, the 
borrower is not current on all FLP loans, the borrower must execute and 
provide to the Agency a best lien obtainable on all of their assets 
except those listed under Sec.  766.112(b).



Sec.  766.57  Borrower acceptance of Disaster Set-Aside.

    The borrower must execute the appropriate Agency documents within 45 
days after the borrower receives notification of Agency approval of DSA.



Sec.  766.58  Installment to be set aside.

    (a) The Agency will set-aside the first installment due immediately 
after the disaster occurred.
    (b) If the borrower has already paid the installment due immediately 
after the disaster occurred, the Agency will set-aside the next annual 
installment.



Sec.  766.59  Payments toward set-aside installments.

    (a) Interest accrual. (1) Interest will accrue on any principal 
portion of the set-aside installment at the same rate charged on the 
balance of the loan.
    (2) If the borrower's set-aside installment is for a loan with a 
limited resource rate and the Agency modifies that limited resource 
rate, the interest rate on the set-aside portion will be modified 
concurrently.
    (b) Due date. The amount set-aside, including interest accrued on 
the principal portion of the set-aside, is due on or before the final 
due date of the loan.
    (c) Applying payments. The Agency will apply borrower payments 
toward set-aside installments first to interest and then to principal.



Sec.  766.60  Canceling a Disaster Set-Aside.

    The Agency will cancel a DSA if:
    (a) The Agency takes any primary loan servicing action on the loan;
    (b) The borrower pays the current market value buyout in accordance 
with Sec.  766.113; or
    (c) The borrower pays the set-aside installment.



Sec.  766.61  Reversal of a Disaster Set-Aside.

    If the Agency determines that the borrower received an unauthorized 
DSA, the Agency will reverse the DSA after all appeals are concluded.



Sec. Sec.  766.62-766.100  [Reserved]



                    Subpart C_Loan Servicing Programs



Sec.  766.101  Initial Agency notification to borrower of loan servicing programs.

    (a) Borrowers notified. The Agency will provide servicing 
information under this section to borrowers who:
    (1) Have a current farm operating plan that demonstrates the 
borrower is financially distressed;
    (2) Are 90 days or more past due on loan payments, even if the 
borrower has submitted an application for loan servicing as a 
financially distressed borrower;
    (3) Are in non-monetary default on any loan agreements;
    (4) Have filed bankruptcy;
    (5) Request this information;
    (6) Request voluntary conveyance of security;
    (7) Have only delinquent SA; or
    (8) Are subject to any other collection action, except when such 
action is a result of failure to graduate. Borrowers who fail to 
graduate when required and are able to do so, will be accelerated 
without providing notification of loan servicing options.
    (b) Form of notification. The Agency will notify borrowers of the 
availability of primary loan servicing programs, conservation contract, 
current market value buyout, debt settlement

[[Page 202]]

programs, and homestead protection as follows:
    (1) A borrower who is financially distressed, or current and 
requesting servicing will be provided FSA-2512 (Appendix A to this 
subpart);
    (2) A borrower who is 90 days past due will be sent FSA-2510 
(Appendix B to this subpart);
    (3) A borrower who is in non-monetary or both monetary and non-
monetary default will receive FSA-2514 (Appendix C to this subpart);
    (4) A borrower who has only delinquent SA will be notified of 
available loan servicing;
    (5) Notification to a borrower who files bankruptcy will be provided 
in accordance with subpart G of this part.
    (c) Mailing. Notices to delinquent borrowers or borrowers in non-
monetary default will be sent by certified mail to the last known 
address of the borrower. If the certified mail is not accepted, the 
notice will be sent immediately by first class mail to the last known 
address. The appropriate response time will begin three days following 
the date of the first class mailing. For all other borrowers requesting 
the notices, the notices will be sent by regular mail or hand-delivered.
    (d) Borrower response timeframes. To be considered for loan 
servicing, a borrower who is:
    (1) Current or financially distressed may submit a complete 
application any time prior to becoming 90 days past due;
    (2) Ninety (90) days past due must submit a complete application 
within 60 days from receipt of FSA-2510;
    (3) In non-monetary default with or without monetary default must 
submit a complete application within 60 days from receipt of FSA-2514.



Sec.  766.102  Borrower application requirements.

    (a) Except as provided in paragraph (e) of this section, an 
application for primary loan servicing, conservation contract, current 
market value buyout, homestead protection, or some combination of these 
options, must include the following to be considered complete:
    (1) Completed acknowledgment form provided with the Agency 
notification and signed by all borrowers;
    (2) Completed Agency application form;
    (3) Financial records for the 3 most recent years, including income 
tax returns;
    (4) The farming operation's production records for the 3 most recent 
years or the years the borrower has been farming, whichever is less;
    (5) Documentation of compliance with the Agency's environmental 
regulations contained in subpart G of 7 CFR part 1940;
    (6) Verification of all non-farm income;
    (7) A current financial statement and the operation's farm operating 
plan, including the projected cash flow budget reflecting production, 
income, expenses, and debt repayment plan. In the case of an entity, the 
entity and all entity members must provide current financial statements; 
and
    (8) Verification of all debts and collateral.
    (b) In addition to the requirements contained in paragraph (a) of 
this section, the borrower must submit an aerial photo delineating any 
land to be considered for a conservation contract.
    (c) To be considered for debt settlement, the borrower must provide 
the appropriate Agency form, and any additional information required 
under subpart B of 7 CFR part 1956.
    (d) If a borrower who submitted a complete application while current 
or financially distressed is renotified as a result of becoming 90 days 
past due, the borrower must only submit a request for servicing in 
accordance with paragraph (a)(1) of this section, provided all other 
information is less than 90 days old and is based on the current 
production cycle. Any information 90 or more days old or not based on 
the current production cycle must be updated.
    (e) The borrower need not submit any information under this section 
that already exists in the Agency's file and is still current as 
determined by the Agency.
    (f) When jointly liable borrowers have been divorced and one has 
withdrawn from the farming operation, the

[[Page 203]]

Agency may release the withdrawing individual from liability, provided:
    (1) The remaining individual submits a complete application in 
accordance with this section;
    (2) Both parties have agreed in a divorce decree or property 
settlement that only the remaining individual will be responsible for 
all FLP loan payments;
    (3) The withdrawing individual has conveyed all ownership interest 
in the security to the remaining individual; and
    (4) The withdrawing individual does not have repayment ability and 
does not own any non-essential assets.



Sec.  766.103  Borrower does not respond or does not submit a complete application.

    (a) If a borrower, who is financially distressed or current, 
requested loan servicing and received FSA-2512, but fails to respond 
timely and subsequently becomes 90 days past due, the Agency will notify 
the borrower in accordance with Sec.  766.101(a)(2).
    (b) If a borrower who is 90 days past due and received FSA-2510, or 
is in non-monetary, or both monetary and non-monetary default and 
received FSA-2514, and fails to timely respond or does not submit a 
complete application within the 60-day timeframe, the Agency will notify 
the borrower by certified mail of the following:
    (1) The Agency's intent to accelerate the loan; and
    (2) The borrower's right to request reconsideration, mediation and 
appeal in accordance with 7 CFR parts 11 and 780.



Sec.  766.104  Borrower eligibility requirements.

    (a) A borrower must meet the following eligibility requirements to 
be considered for primary loan servicing:
    (1) The delinquency or financial distress is the result of reduced 
repayment ability due to one of the following circumstances beyond the 
borrower's control:
    (i) Illness, injury, or death of a borrower or other individual who 
operates the farm;
    (ii) Natural disaster, adverse weather, disease, or insect damage 
which caused severe loss of agricultural production;
    (iii) Widespread economic conditions such as low commodity prices;
    (iv) Damage or destruction of property essential to the farming 
operation; or
    (v) Loss of, or reduction in, the borrower or spouse's essential 
non-farm income.
    (2) The borrower does not have non-essential assets for which the 
net recovery value is sufficient to resolve the financial distress or 
pay the delinquent portion of the loan.
    (3) If the borrower is in non-monetary default, the borrower will 
resolve the non-monetary default prior to closing the servicing action.
    (4) The borrower has acted in good faith.
    (5) Financially distressed or current borrowers requesting servicing 
must pay a portion of the interest due on the loans.
    (6) The borrower must not be ineligible due to disqualification 
resulting from Federal crop insurance violation according to 7 CFR part 
718.
    (b) Debtors with SA only must:
    (1) Be delinquent due to circumstances beyond their control;
    (2) Have acted in good faith.



Sec.  766.105  Agency consideration of servicing requests.

    (a) Order in which Agency considers servicing options. The Agency 
will consider loan servicing options and combinations of options to 
maximize loan repayment and minimize losses to the Agency. The Agency 
will consider loan servicing options in the following order for each 
eligible borrower who requests servicing:
    (1) Conservation Contract, if requested;
    (2) Consolidation and rescheduling or reamortization;
    (3) Deferral;
    (4) Writedown; and
    (5) Current market value buyout.
    (b) Debt service margin. (1) The Agency will attempt to achieve a 
110 percent debt service margin for the servicing options listed in 
paragraphs (a)(2) through (4) of this section.
    (2) If the borrower cannot develop a feasible plan with the 110 
percent debt

[[Page 204]]

service margin, the Agency will reduce the debt service margin by one 
percent and reconsider all available servicing authorities. This process 
will be repeated until a feasible plan has been developed or it has been 
determined that a feasible plan is not possible with a 100 percent 
margin.
    (3) The borrower must be able to develop a feasible plan with at 
least a 100 percent debt service margin to be considered for the 
servicing options listed in paragraphs (a)(1) through (4) of this 
section.
    (c) Appraisal of borrower's assets. The Agency will obtain an 
appraisal on:
    (1) All Agency security, non-essential assets, and real property 
unencumbered by the Agency that does not meet the criteria established 
in Sec.  766.112(b), when:
    (i) A writedown is required to develop a feasible plan;
    (ii) The borrower will be offered current market value buyout.
    (2) The borrower's non-essential assets when their net recovery 
value may be adequate to bring the delinquent loans current.



Sec.  766.106  Agency notification of decision regarding a complete application.

    The Agency will send the borrower notification of the Agency's 
decision within 60 calendar days after receiving a complete application 
for loan servicing.
    (a) Notification to financially distressed or current borrowers. (1) 
If the borrower can develop a feasible plan and is eligible for primary 
loan servicing, the Agency will offer to service the account.
    (i) The borrower will have 45 days to accept the offer of servicing. 
After accepting the Agency's offer, the borrower must execute loan 
agreements and security instruments, as appropriate.
    (ii) If the borrower does not accept the offer, the Agency will send 
the borrower another notification of the availability of loan servicing 
if the borrower becomes 90 days past due in accordance with Sec.  
766.101(a)(2).
    (2) If the borrower cannot develop a feasible plan, or is not 
eligible for loan servicing, the Agency will send the borrower the 
calculations used and the reasons for the adverse decision.
    (i) The borrower may request reconsideration, mediation and appeal 
in accordance with 7 CFR parts 11 and 780 of this title.
    (ii) The Agency will send the borrower another notification of the 
availability of loan servicing if the borrower becomes 90 days past due 
in accordance with Sec.  766.101(a)(2).
    (b) Notification to borrowers 90 days past due or in non-monetary 
default. (1) If the borrower can develop a feasible plan and is eligible 
for primary loan servicing, the Agency will offer to service the 
account.
    (i) The borrower will have 45 days to accept the offer of servicing. 
After accepting the Agency's offer, the borrower must execute loan 
agreements and security instruments, as appropriate.
    (ii) If the borrower does not timely accept the offer, or fails to 
respond, the Agency will notify the borrower of its intent to accelerate 
the account.
    (2) If the borrower cannot develop a feasible plan, or is not 
eligible for loan servicing, the Agency will send the borrower 
notification within 15 days, including the calculations used and reasons 
for the adverse decision, of its intent to accelerate the account in 
accordance with subpart H of this part, unless the account is resolved 
through any of the following options:
    (i) The borrower may request reconsideration, mediation or voluntary 
meeting of creditors, or appeal in accordance with 7 CFR parts 11 and 
780.
    (ii) The borrower may request negotiation of appraisal within 30 
days in accordance with Sec.  766.115.
    (iii) If the net recovery value of non-essential assets is 
sufficient to pay the account current, the borrower has 90 days to pay 
the account current.
    (iv) The borrower, if eligible in accordance with Sec.  766.113, may 
buy out the loans at the current market value within 90 days.
    (v) The borrower may request homestead protection if the borrower's 
primary residence was pledged as security by providing the information 
required under Sec.  766.151.

[[Page 205]]



Sec.  766.107  Consolidation and rescheduling.

    (a) Loans eligible for consolidation. The Agency may consolidate OL 
loans if:
    (1) The borrower meets the loan servicing eligibility requirements 
in Sec.  766.104;
    (2) The Agency determines that consolidation will assist the 
borrower to repay the loans;
    (3) Consolidating the loans will bring the borrower's account 
current or prevent the borrower from becoming delinquent;
    (4) The Agency has not referred the borrower's account to OGC or the 
U.S. Attorney, and the Agency does not plan to refer the account to 
either of these two offices in the near future;
    (5) The borrower is in compliance with the Highly Erodible Land and 
Wetland Conservation requirements of 7 CFR part 12, if applicable;
    (6) The loans are not secured by real estate;
    (7) The Agency holds the same lien position on each loan;
    (8) The Agency has not serviced the loans for unauthorized 
assistance under subpart F of this part; and
    (9) The loan is not currently deferred, as described in Sec.  
766.109, or set-aside, as described in subpart B of this part. The 
Agency may consolidate loans upon cancellation of the deferral or DSA.
    (b) Loans eligible for rescheduling. The Agency may reschedule loans 
made for chattel purposes, including OL, SW, RL, EE, or EM if:
    (1) The borrower meets the loan servicing eligibility requirements 
in Sec.  766.104;
    (2) Rescheduling the loans will bring the borrower's account current 
or prevent the borrower from becoming delinquent;
    (3) The Agency determines that rescheduling will assist the borrower 
to repay the loans;
    (4) The Agency has not referred the borrower's account to OGC or the 
U.S. Attorney, and the Agency does not plan to refer the account to 
either of these two offices in the near future;
    (5) The borrower is in compliance with the Highly Erodible Land and 
Wetland Conservation requirements of 7 CFR part 12, if applicable; and
    (6) The loan is not currently deferred, as described in Sec.  
766.109, or set-aside, as described in subpart B of this part. The 
Agency may reschedule loans upon cancellation of the deferral or DSA.
    (c) Consolidated and rescheduled loan terms. (1) The Agency 
determines the repayment schedule for consolidated and rescheduled loans 
according to the borrower's repayment ability.
    (2) The repayment period cannot exceed 15 years from the date of the 
consolidation and rescheduling, except that the repayment schedule for 
RL loans may not exceed 7 years from the date of rescheduling.
    (d) Consolidated and rescheduled loan interest rate. The interest 
rate of consolidated and rescheduled loans will be as follows:
    (1) The interest rate for loans made at the regular interest rate 
will be the lesser of:
    (i) The interest rate for that type of loan on the date a complete 
servicing application was received;
    (ii) The interest rate for that type of loan on the date of 
restructure; or
    (iii) The lowest original loan note rate on any of the original 
notes being consolidated and rescheduled.
    (2) The interest rate for loans made at the limited resource 
interest rate will be the lesser of:
    (i) The limited resource interest rate for that type of loan on the 
date a complete servicing application was received;
    (ii) The limited resource interest rate for that type of loan on the 
date of restructure; or
    (iii) The lowest original loan note rate on any of the original 
notes being consolidated and rescheduled.
    (3) At the time of consolidation and rescheduling, the Agency may 
reduce the interest rate to a limited resource rate, if available, if:
    (i) The borrower meets the requirements for the limited resource 
interest rate; and
    (ii) A feasible plan cannot be developed at the regular interest 
rate and maximum terms permitted in this section.
    (4) Loans consolidated and rescheduled at the limited resource 
interest rate will be subject to annual limited

[[Page 206]]

resource review in accordance with Sec.  765.51 of this chapter.
    (e) Capitalizing accrued interest and adding protective advances to 
the loan principal. (1) The Agency capitalizes the amount of outstanding 
accrued interest on the loan at the time of consolidation and 
rescheduling.
    (2) The Agency adds protective advances for the payment of real 
estate taxes to the principal balance at the time of consolidation and 
rescheduling.
    (3) The borrower must resolve all other protective advances not 
capitalized prior to closing the servicing actions.
    (f) Installments. If there are no deferred installments, the first 
installment payment under the consolidation and rescheduling will be at 
least equal to the interest amount which will accrue on the new 
principal between the date the promissory note is executed and the next 
installment due date.



Sec.  766.108  Reamortization.

    (a) Loans eligible for reamortization. The Agency may reamortize 
loans made for real estate purposes, including FO, SW, RL, SA, EE, RHF, 
and EM if:
    (1) The borrower meets the loan servicing eligibility requirements 
in Sec.  766.104;
    (2) Reamortization will bring the borrower's account current or 
prevent the borrower from becoming delinquent;
    (3) The Agency determines that reamortization will assist the 
borrower to repay the loan;
    (4) The Agency has not referred the borrower's account to OGC or the 
U.S. Attorney, and the Agency does not plan to refer the account to 
either of these two offices in the near future;
    (5) The borrower is in compliance with the Highly Erodible Land and 
Wetland Conservation requirements of 7 CFR part 12, if applicable; and
    (6) The loan is not currently deferred, as described in Sec.  
766.109, or set-aside, as described in subpart B of this part. The 
Agency may reamortize loans upon cancellation of the deferral or DSA.
    (b) Reamortized loan terms. (1) Except as provided in paragraph 
(b)(2), the Agency will reamortize loans within the remaining term of 
the original loan or assumption agreement unless a feasible plan cannot 
be developed or debt forgiveness will be required to develop a feasible 
plan.
    (2) If the Agency extends the loan term, the repayment period from 
the original loan date may not exceed the maximum number of years for 
the type of loan being reamortized in paragraphs (2)(i) through (iv), or 
the useful life of the security, whichever is less.
    (i) FO, SW, RL, EE real estate-type, and EM loans made for real 
estate purposes may not exceed 40 years from the date of the original 
note or assumption agreement.
    (ii) EE real estate-type loans secured by chattels only may not 
exceed 20 years from the date of the original note or assumption 
agreement.
    (iii) RHF loans may not exceed 33 years from the date of the 
original note or assumption agreement.
    (iv) SA loans may not exceed 25 years from the date of the original 
Shared Appreciation note.
    (c) Reamortized loan interest rate. The interest rate will be as 
follows:
    (1) The interest rate for loans made at the regular interest rate 
will be the lesser of:
    (i) The interest rate for that type of loan on the date a complete 
servicing application was received;
    (ii) The interest rate for that type of loan on the date of 
restructure; or
    (iii) The original loan note rate of the note being reamortized.
    (2) The interest rate for loans made at the limited resource 
interest rate will be the lesser of:
    (i) The limited resource interest rate for that type of loan on the 
date a complete servicing application was received;
    (ii) The limited resource interest rate for that type of loan on the 
date of restructure; or
    (iii) The original loan note rate of the note being reamortized.
    (3) At the time of reamortization, the Agency may reduce the 
interest rate to a limited resource rate, if available, if:
    (i) The borrower meets the requirements for the limited resource 
interest rate; and
    (ii) A feasible plan cannot be developed at the regular interest 
rate and maximum terms permitted in this section.

[[Page 207]]

    (4) Loans reamortized at the limited resource interest rate will be 
subject to annual limited resource review in accordance with Sec.  
765.51 of this chapter.
    (5) SA payment agreements will be reamortized at the current SA 
amortization rate in effect on the date of approval or the rate on the 
original payment agreement, whichever is less.
    (d) Capitalizing accrued interest and adding protective advances to 
the loan principal. (1) The Agency capitalizes the amount of outstanding 
accrued interest on the loan at the time of reamortization.
    (2) The Agency adds protective advances for the payment of real 
estate taxes to the principal balance at the time of reamortization.
    (3) The borrower must resolve all other protective advances not 
capitalized prior to closing the reamortization.
    (e) Installments. If there are no deferred installments, the first 
installment payment under the reamortization will be at least equal to 
the interest amount which will accrue on the new principal between the 
date the promissory note is executed and the next installment due date.



Sec.  766.109  Deferral.

    (a) Conditions for approving deferrals. The Agency will only 
consider deferral of loan payments if:
    (1) The borrower meets the loan servicing eligibility requirements 
in Sec.  766.104;
    (2) Rescheduling, consolidation, and reamortization of all the 
borrower's loans, will not result in a feasible plan with 110 percent 
debt service margin;
    (3) The need for deferral is temporary; and
    (4) The borrower develops feasible first-year deferral and post-
deferral farm operating plans subject to the following:
    (i) The deferral will not create excessive net cash reserves beyond 
that necessary to develop a feasible plan.
    (ii) The Agency will consider a partial deferral if deferral of the 
total Agency payment would result in the borrower developing more cash 
availability than necessary to meet debt repayment obligations.
    (b) Deferral period. (1) The deferral term will not exceed 5 years 
and will be determined based on the post-deferral plan that results in 
the:
    (i) Greatest improvement over the first year cash available to 
service FLP debt;
    (ii) The shortest possible deferral period.
    (2) The Agency will distribute interest accrued on the deferred 
principal portion of the loan equally to payments over the remaining 
loan term after the deferral period ends.
    (c) Agency actions when borrower's repayment ability improves. (1) 
If during the deferral period the borrower's repayment ability has 
increased to allow the borrower to make payments on the deferred loans, 
the borrower must make supplemental payments, as determined by the 
Agency. If the borrower agrees to make supplemental payments, but does 
not do so, the borrower will be considered to be in non-monetary 
default.
    (2) If the Agency determines that the borrower's improved repayment 
ability will allow graduation, the Agency will require the borrower to 
graduate in accordance with part 765, subpart C of this chapter.
    (d) Associated loan servicing. (1) The Agency must cancel an 
existing deferral if the Agency approves any new primary loan servicing 
action.
    (2) Loans deferred will also be serviced in accordance with 
Sec. Sec.  766.107, 766.108 and 766.111, as appropriate.



Sec.  766.110  Conservation Contract.

    (a) General. (1) A debtor with only SA or Non-program loans is not 
eligible for a Conservation Contract. However, an SA or Non-program loan 
may be considered for a Conservation Contract if the borrower also has 
program loans.
    (2) A current or financially distressed borrower may request a 
Conservation Contract at any time prior to becoming 90 days past due.
    (3) A delinquent borrower may request a Conservation Contract during 
the same 60-day time period in which the borrower may apply for primary 
loan servicing. The borrower eligibility requirements in Sec.  766.104 
will apply.

[[Page 208]]

    (4) A Conservation Contract may be established for conservation, 
recreation, and wildlife purposes.
    (5) The land under a Conservation Contract cannot be used for the 
production of agricultural commodities during the term of the contract.
    (6) Only loans secured by the real estate that will be subject to 
the easement, may be considered for a Conservation Contract.
    (b) Eligible lands. The following types of lands are eligible to be 
considered for a Conservation Contract by the Conservation Contract 
review team:
    (1) Wetlands or highly erodible lands; and
    (2) Uplands that meet any one of the following criteria:
    (i) Land containing aquatic life, endangered species, or wildlife 
habitat of local, State, tribal, or national importance;
    (ii) Land in 100-year floodplains;
    (iii) Areas of high water quality or scenic value;
    (iv) Historic or cultural properties listed in or eligible for the 
National Register of Historic Places;
    (v) Aquifer recharge areas of local, regional, State, or tribal 
importance;
    (vi) Buffer areas necessary for the adequate protection of proposed 
Conservation Contract areas;
    (vii) Areas that contain soils generally not suited for cultivation; 
or
    (viii) Areas within or adjacent to Federal, State, tribal, or 
locally administered conservation areas.
    (c) Unsuitable acreage. Acreage is unsuitable for Conservation 
Contract if:
    (1) It is not suited or eligible for the program due to legal 
restrictions;
    (2) It has on-site or off-site conditions that prohibit the use of 
the land for conservation, wildlife, or recreational purposes; or
    (3) The Conservation Contract review team determines that the land 
is not suitable for conservation, wildlife, or recreational purposes.
    (d) Conservation Contract terms. The borrower selects the term of 
the contract, which may be 10, 30, or 50 years.
    (e) Conservation management plan. The Agency, through the 
recommendations of the Conservation Contract review team, is responsible 
for approving the conservation management plan.
    (f) Management authority. The Agency has enforcement authority over 
the Conservation Contract. The Agency, however, may delegate contract 
management to another entity if doing so is in the Agency's interest.
    (g) Limitations. The Conservation Contract must meet the following 
conditions:
    (1) Result in a feasible plan for current borrowers; or
    (2) Result in a feasible plan with or without primary loan servicing 
for financially distressed or delinquent borrowers; and
    (3) Improve the borrower's ability to repay the remaining balance of 
the loan.
    (h) Maximum debt reduction for a financially distressed or current 
borrower. The amount of debt reduction by a Conservation Contract is 
calculated as follows:
    (1) Divide the contract acres by the total acres that secure the 
borrower's FLP loans to determine the contract acres percentage.
[GRAPHIC] [TIFF OMITTED] TR08NO07.000

    (2) Multiply the borrower's total unpaid FLP loan balance 
(principal, interest, and recoverable costs already paid by the Agency) 
by the percentage calculated under paragraph (h)(1) of this section to 
determine the amount of FLP debt that is secured by the contract 
acreage.

[[Page 209]]

[GRAPHIC] [TIFF OMITTED] TR08NO07.001

    (3) Multiply the borrower's total unpaid FLP loan balance 
(principal, interest, and recoverable costs already paid by the Agency) 
by 33 percent.
[GRAPHIC] [TIFF OMITTED] TR08NO07.002

    (4) The lesser of the amounts calculated in paragraphs (h)(2) and 
(h)(3) of this section is the maximum amount of debt reduction for a 50-
year contract.
    (5) The borrower will receive 60 percent of the amount calculated in 
paragraph (h)(4) of this section for a 30-year contract.
[GRAPHIC] [TIFF OMITTED] TR08NO07.003

    (6) The borrower will receive 20 percent of the amount calculated in 
paragraph (h)(4) of this section for a 10-year contract.
[GRAPHIC] [TIFF OMITTED] TR08NO07.004

    (i) Maximum debt reduction for a delinquent borrower. The amount of 
debt reduction by a Conservation Contract is calculated as follows:
    (1) Divide the contract acres by the total acres that secure the 
borrower's FLP loans to determine the contract acres percentage.
[GRAPHIC] [TIFF OMITTED] TR08NO07.005

    (2) Multiply the borrower's total unpaid FLP loan balance 
(principal, interest, and recoverable costs already paid by the Agency) 
by the percentage calculated in paragraph (i)(1) of this section to 
determine the amount of FLP debt that is secured by the contract 
acreage.

[[Page 210]]

[GRAPHIC] [TIFF OMITTED] TR08NO07.006

    (3) Multiply the market value of the total acres, less contributory 
value of any structural improvements, that secure the borrower's FLP 
loans by the percent calculated in paragraph (i)(1) of this section to 
determine the current value of the acres in the contract.
[GRAPHIC] [TIFF OMITTED] TR08NO07.007

    (4) Subtract the market value of the contract acres calculated in 
paragraph (i)(3) of this section from the FLP debt secured by the 
contract acres as calculated in paragraph (i)(2) of this section.
[GRAPHIC] [TIFF OMITTED] TR08NO07.008

    (5) Select the greater of the amounts calculated in either 
paragraphs (i)(3) and (i)(4) of this section.
    (6) The lesser of the amounts calculated in paragraphs (i)(2) and 
(i)(5) of this section will be the maximum amount of debt reduction for 
a 50-year contract term.
    (7) The borrower will receive 60 percent of the amount calculated in 
paragraph (i)(6) of this section for a 30-year contract term.
[GRAPHIC] [TIFF OMITTED] TR08NO07.009

    (8) The borrower will receive 20 percent of the amount calculated in 
paragraph (i)(6) of this section for a 10-year contract term.
[GRAPHIC] [TIFF OMITTED] TR08NO07.010

    (j) Conservation Contract Agreement. The borrower must sign the 
Conservation Contract Agreement establishing the contract's terms and 
conditions.
    (k) Transferring title to land under Conservation Contract. If the 
borrower or any subsequent landowner transfers title to the property, 
the Conservation Contract will remain in effect for the duration of the 
contract term.
    (l) Borrower appeals of technical decisions. Borrower appeals of the 
Natural

[[Page 211]]

Resources Conservation Service's (NRCS) technical decisions made in 
connection with a Conservation Contract, will be handled in accordance 
with applicable NRCS regulations. Other aspects of the denial of a 
conservation contract may be appealed in accordance with 7 CFR parts 11 
and 780.



Sec.  766.111  Writedown.

    (a) Eligibility. The Agency will only consider a writedown if the 
borrower:
    (1) Meets the eligibility criteria in Sec.  766.104;
    (2) Is delinquent;
    (3) Has not previously received debt forgiveness on any FLP direct 
loan; and
    (4) Complies with the Highly Erodible Land and Wetland Conservation 
requirements of 7 CFR part 12.
    (b) Conditions. (1) Rescheduling, consolidation, reamortization, 
deferral or some combination of these options on all of the borrower's 
loans would not result in a feasible plan with a 110 percent debt 
service margin. If a feasible plan, including writedown is achieved with 
a debt service margin of 101 percent or more, the Agency will determine 
if a feasible plan can be achieved without a writedown. If a feasible 
plan is achieved with and without a writedown and the borrower meets all 
the eligibility requirements, both options will be offered and the 
borrower may choose one option.
    (2) The present value of the restructured loan must be greater than 
or equal to the net recovery value of Agency security and any non-
essential assets.
    (3) The writedown amount, excluding debt reduction received through 
Conservation Contract, does not exceed $300,000.
    (4) A borrower who owns real estate must execute an SAA in 
accordance with Sec.  766.201.
    (c) Associated loan servicing. Loans written down will also be 
serviced in accordance with Sec. Sec.  766.107 and 766.108, as 
appropriate.



Sec.  766.112  Additional security for restructured loans.

    (a) If the borrower is delinquent prior to restructuring, the 
borrower, and all entity members in the case of an entity, must execute 
and provide to the Agency a lien on all of their assets, except as 
provided in paragraph (b) of this section, when the Agency is servicing 
a loan.
    (b) The Agency will take the best lien obtainable on all assets the 
borrower owns, except:
    (1) When taking a lien on such property will prevent the borrower 
from obtaining credit from other sources;
    (2) When the property could have significant environmental problems 
or costs as described in subpart G of 7 CFR part 1940;
    (3) When the Agency cannot obtain a valid lien;
    (4) When the property is subsistence livestock, cash, special 
collateral accounts the borrower uses for the farming operation, 
retirement accounts, personal vehicles necessary for family living, 
household contents, or small equipment such as hand tools and lawn 
mowers; or
    (5) When a contractor holds title to a livestock or crop enterprise, 
or the borrower manages the enterprise under a share lease or share 
agreement.



Sec.  766.113  Buyout of loan at current market value.

    (a) Borrower eligibility. A delinquent borrower may buy out the 
borrower's FLP loans at the current market value of the loan security, 
including security not in the borrower's possession, and all non-
essential assets if:
    (1) The borrower has not previously received debt forgiveness on any 
other FLP direct loan;
    (2) The borrower has acted in good faith;
    (3) The borrower does not have non-essential assets for which the 
net recovery value is sufficient to pay the account current;
    (4) The borrower is unable to develop a feasible plan through 
primary loan servicing programs or a Conservation Contract, if 
requested;
    (5) The present value of the restructured loans is less than the net 
recovery value of Agency security;
    (6) The borrower pays the amount required in a lump sum without 
guaranteed or direct credit from the Agency; and

[[Page 212]]

    (7) The amount of debt forgiveness does not exceed $300,000.
    (b) Buyout time frame. After the Agency offers current market value 
buyout of the loan, the borrower has 90 days from the date of Agency 
notification to pay that amount.



Sec.  766.114  State-certified mediation or voluntary meeting of creditors.

    (a) A borrower who is unable to develop a feasible plan but is 
otherwise eligible for primary loan servicing may request:
    (1) State-certified mediation; or
    (2) Voluntary meeting of creditors when a State does not have a 
certified mediation program.
    (b) Any negotiation of the Agency's appraisal must be completed 
before State-certified mediation or voluntary meeting of creditors.



Sec.  766.115  Challenging the Agency appraisal.

    (a) A borrower considered for primary loan servicing who does not 
agree with the Agency's appraisal of the borrower's assets may:
    (1) Obtain a technical appraisal review of the Agency's appraisal 
and provide it at the reconsideration or appeal hearing;
    (2) Obtain an independent appraisal completed in accordance with 
Sec.  761.7 as part of the appeals process. The borrower must:
    (i) Pay for this appraisal;
    (ii) Choose which appraisal will be used in Agency calculations, if 
the difference between the two appraisals is five percent or less.
    (3) Negotiate the Agency's appraisal by obtaining a second 
appraisal.
    (i) If the difference between the two appraisals is five percent or 
less, the borrower will choose the appraisal to be used in Agency 
calculations.
    (ii) If the difference between the two appraisals is greater than 
five percent, the borrower may request a third appraisal. The Agency and 
the borrower will share the cost of the third appraisal equally. The 
average of the two appraisals closest in value will serve as the final 
value.
    (iii) A borrower may request a negotiated appraisal only once in 
connection with an application for primary loan servicing.
    (iv) The borrower may not appeal a negotiated appraisal.
    (b) If the appraised value of the borrower's assets changes as a 
result of the appealed appraisal or the negotiated appraisal, the Agency 
will reconsider its previous loan servicing decision using the new 
appraisal value.
    (c) If the appeal process results in a determination that the 
borrower is eligible for primary loan servicing, the Agency will use the 
information utilized to make the appeal decision, unless stated 
otherwise in the appeal decision letter.



Sec. Sec.  766.116-766.150  [Reserved]



                Sec. Appendix A to Subpart C of Part 766

[[Page 213]]

[GRAPHIC] [TIFF OMITTED] TR31DE07.000


[[Page 214]]


[GRAPHIC] [TIFF OMITTED] TR31DE07.001


[[Page 215]]


[GRAPHIC] [TIFF OMITTED] TR31DE07.002


[[Page 216]]


[GRAPHIC] [TIFF OMITTED] TR31DE07.003


[[Page 217]]


[GRAPHIC] [TIFF OMITTED] TR31DE07.004


[[Page 218]]


[GRAPHIC] [TIFF OMITTED] TR31DE07.005


[[Page 219]]


[GRAPHIC] [TIFF OMITTED] TR31DE07.006


[[Page 220]]


[GRAPHIC] [TIFF OMITTED] TR31DE07.007


[[Page 221]]


[GRAPHIC] [TIFF OMITTED] TR31DE07.008


[72 FR 74153, Dec. 31, 2007]



Sec. Appendix B to Subpart C of Part 766--Notice of Availability of Loan 

Servicing to Borrowers Who Are Current, Financially Distressed, or Less 
                          Than 90 Days Past Due

[[Page 222]]

[GRAPHIC] [TIFF OMITTED] TR08NO07.011


[[Page 223]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.012


[[Page 224]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.013


[[Page 225]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.014


[[Page 226]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.015


[[Page 227]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.016


[[Page 228]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.017


[[Page 229]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.018


[[Page 230]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.019


[72 FR 63316, Nov. 8, 2007; 72 FR 74153, Dec. 31, 2007]



Sec. Appendix C to Subpart C of Part 766--Notice of Availability of Loan 
         Servicing to Borrowers Who Are in Non-Monetary Default

[[Page 231]]

[GRAPHIC] [TIFF OMITTED] TR08NO07.029


[[Page 232]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.030


[[Page 233]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.031


[[Page 234]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.032


[[Page 235]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.033


[[Page 236]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.034


[[Page 237]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.035


[[Page 238]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.036


[[Page 239]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.037


[[Page 240]]


[GRAPHIC] [TIFF OMITTED] TR08NO07.038



                 Subpart D_Homestead Protection Program



Sec.  766.151  Applying for Homestead Protection.

    (a) Pre-acquisition--(1) Notification. If the borrower requested 
primary loan servicing but cannot develop a feasible plan, the Agency 
will notify the borrower of any additional information needed to process 
the homestead protection request. The borrower must provide this 
information within 30 days of Agency notification.
    (2) Borrower does not respond. If the borrower does not timely 
provide the information requested, the Agency will deny the homestead 
protection request and provide appeal rights.
    (3) Application requirements. A complete application for homestead 
protection will include:
    (i) Updates to items required under Sec.  766.102;
    (ii) Information required under Sec.  766.353; and
    (iii) Identification of land and buildings to be considered.
    (b) Post-acquisition--(1) Notification. After the Agency acquires 
title to the real estate property, the Agency will notify the borrower 
of the availability of homestead protection. The borrower must submit a 
complete application within 30 days of Agency notification.
    (2) Borrower does not respond. If the borrower does not respond to 
the Agency notice, the Agency will dispose of the property in accordance 
with 7 CFR part 767.
    (3) Application requirements. A complete application for homestead 
protection will include:
    (i) Updates to items required under Sec.  766.102; and
    (ii) Identification of land and buildings to be considered.



Sec.  766.152  Eligibility.

    (a) Property. (1) The principal residence and the adjoining land of 
up to 10 acres, must have served as real estate security for the FLP 
loan and may include existing farm service buildings. Homestead 
protection does not apply if the FLP loans were secured only by 
chattels.
    (2) The applicant may propose a homestead protection site. Any 
proposed site is subject to Agency approval.
    (3) The proposed homestead protection site must meet all State and 
local requirements for division into a separate legal lot.
    (4) Where voluntary conveyance of the property to the Agency is 
required to process the homestead protection request, the Agency will 
process any request for voluntary conveyance according to Sec.  766.353.
    (b) Applicant. To be eligible for homestead protection, the 
applicant:
    (1) Must be the owner, or former owner from whom the Agency acquired 
title of the property pledged as security for an FLP loan. For homestead 
protection purposes, an owner or former owner includes:
    (i) A member of an entity who is or was personally liable for the 
FLP loan secured by the homestead protection

[[Page 241]]

property when the applicant or entity held fee title to the property; or
    (ii) A member of an entity who is or was personally liable for the 
FLP loan that possessed and occupied a separate dwelling on the security 
property;
    (2) Must have earned gross farm income commensurate with:
    (i) The size and location of the farm; and
    (ii) The local agricultural conditions in at least 2 calendar years 
during the 6-year period immediately preceding the calendar year in 
which the applicant applied for homestead protection;
    (3) Must have received 60 percent of gross income from farming in at 
least two of the 6 years immediately preceding the year in which the 
applicant applied for homestead protection;
    (4) Must have lived in the home during the 6-year period immediately 
preceding the year in which the applicant applied for homestead 
protection. The applicant may have left the home for not more than 12 
months if it was due to circumstances beyond their control;
    (5) Must demonstrate sufficient income to make rental payments on 
the homestead property for the term of the lease, and maintain the 
property in good condition. The lessee will be responsible for any 
normal maintenance; and
    (6) Must not be ineligible due to disqualification resulting from 
Federal crop insurance violation according to 7 CFR part 718.



Sec.  766.153  Homestead Protection transferability.

    Homestead protection rights are not transferable or assignable, 
unless the eligible party dies or becomes legally incompetent, in which 
case the homestead protection rights may be transferred to the spouse 
only, upon the spouse's agreement to comply with the terms and 
conditions of the lease.



Sec.  766.154  Homestead Protection leases.

    (a) General. (1) The Agency may approve a lease-purchase agreement 
on the appropriate Agency form subject to obtaining title to the 
property.
    (2) If a third party obtains title to the property:
    (i) The applicant and the property are no longer eligible for 
homestead protection;
    (ii) The Agency will not implement any outstanding lease-purchase 
agreement.
    (3) The borrower may request homestead protection for property 
subject to third party redemption rights. In such case, homestead 
protection will not begin until the Agency obtains title to the 
property.
    (b) Lease terms and conditions. (1) The amount of rent will be based 
on equivalent rents charged for similar residential properties in the 
area in which the dwelling is located.
    (2) All leases will include an option to purchase the homestead 
protection property as described in paragraph (c) of this section.
    (3) The lease term will not be less than 3 years and will not exceed 
5 years.
    (4) The lessee must agree to make lease payments on time and 
maintain the property.
    (5) The lessee must cooperate with Agency efforts to sell the 
remaining portion of the farm.
    (c) Lease-purchase options. (1) The lessee may exercise in writing 
the purchase option and complete the homestead protection purchase at 
any time prior to the expiration of the lease provided all lease 
payments are current.
    (2) The purchase price is the market value of the property when the 
option is exercised as determined by a current appraisal obtained by the 
Agency.
    (3) The lessee may purchase homestead protection property with cash 
or other credit source.
    (4) The lessee may receive Agency Non-program financing provided:
    (i) The lessee has not received previous debt forgiveness;
    (ii) The Agency has funds available to finance the purchase of 
homestead protection property; and
    (iii) The lessee demonstrates an ability to repay such an FLP loan.
    (d) Lease terminations. The Agency may terminate the lease if the 
lessee does not cure any lease defaults within 30 days of Agency 
notification.
    (e) Appraisal of homestead protection property. The Agency will use 
an appraisal obtained within six months

[[Page 242]]

from the date of the application for considering homestead protection. 
If a current appraisal does not exist, the applicant will select an 
independent real estate appraiser from a list of appraisers approved by 
the Agency.



Sec.  766.155  Conflict with State law.

    If there is a conflict between a borrower's homestead protection 
rights and any provisions of State law relating to redemption rights, 
the State law prevails.



Sec. Sec.  766.156-766.200  [Reserved]



  Subpart E_Servicing Shared Appreciation Agreements and Net Recovery 
                            Buyout Agreements



Sec.  766.201  Shared Appreciation Agreement.

    (a) When a SAA is required. The Agency requires a borrower to enter 
into a SAA with the Agency covering all real estate security when the 
borrower:
    (1) Owns any real estate that serves or will serve as loan security; 
and
    (2) Accepts a writedown in accordance with Sec.  766.111.
    (b) When SAA is due. The borrower must repay the calculated amount 
of shared appreciation after a term of 5 years from the date of the 
writedown, or earlier if:
    (1) The borrower sells or conveys all or a portion of the Agency's 
real estate security, unless real estate is conveyed upon the death of a 
borrower to a spouse who will continue farming;
    (2) The borrower repays or satisfies all FLP loans;
    (3) The borrower ceases farming; or
    (4) The Agency accelerates the borrower's loans.



Sec.  766.202  Determining the shared appreciation due.

    (a) The value of the real estate security at the time of maturity of 
the SAA (market value) will be the appraised value of the security at 
the highest and best use, less the increase in the value of the security 
resulting from capital improvements added during the term of the SAA 
(contributory value). The market value of the real estate security 
property will be determined based on a current appraisal completed 
within the previous 12 months in accordance with Sec.  761.7 of this 
chapter, and subject to the following:
    (1) Prior to completion of the appraisal, the borrower will identify 
any capital improvements that have been added to the real estate 
security since the execution of the SAA.
    (2) The appraisal must specifically identify the contributory value 
of capital improvements made to the real estate security during the term 
of the SAA to make deductions for that value.
    (3) For calculation of shared appreciation recapture, the 
contributory value of capital improvements added during the term of the 
SAA will be deducted from the market value of the property. Such capital 
improvements must also meet at least one of the following criteria:
    (i) It is the borrower's primary residence. If the new residence is 
affixed to the real estate security as a replacement for a residence 
which existed on the security property when the SAA was originally 
executed, or, the living area square footage of the original residence 
was expanded, only the value added to the real property by the new or 
expanded portion of the original residence (if it added value) will be 
deducted from the market value.
    (ii) It is an improvement to the real estate with a useful life of 
over one year and is affixed to the property, the following conditions 
must be met:
    (A) The item must have been capitalized and not taken as an annual 
operating expense on the borrower's Federal income tax returns. The 
borrower must provide copies of appropriate tax returns to verify that 
capital improvements claimed for shared appreciation recapture reduction 
are capitalized.
    (B) If the new item is affixed to the real estate as a replacement 
for an item that existed on the real estate at the time the SAA was 
originally executed, only the value added by the new item will be 
deducted from the market value.
    (b) In the event of a partial sale, an appraisal of the property 
being sold may be required to determine the market value at the time the 
SAA was

[[Page 243]]

signed if such value cannot be obtained through another method.



Sec.  766.203  Payment of recapture.

    (a) The borrower must pay on the due date or 30 days from Agency 
notification, whichever is later:
    (1) Seventy-five percent of the appreciation in the real estate 
security if the agreement is triggered within 4 years or less from the 
date of the writedown; or
    (2) Fifty percent of such appreciation if the agreement is triggered 
more than 4 years from the date of the writedown or when the agreement 
matures.
    (b) If the borrower sells a portion of the security, the borrower 
must pay shared appreciation only on the portion sold. Shared 
appreciation on the remaining portion will be due in accordance with 
paragraph (a) of this section.
    (c) The amount of recapture cannot exceed the amount of the debt 
written off through debt writedown.



Sec.  766.204  Amortization of recapture.

    (a) The Agency will amortize the recapture into a Shared 
Appreciation Payment Agreement provided the borrower:
    (1) Has not ceased farming and the borrower's account has not been 
accelerated;
    (2) Provides a complete application in accordance with Sec.  
764.51(b), by the recapture due date or within 60 days of Agency 
notification of the amount of recapture due, whichever is later;
    (3) Is unable to pay the recapture and cannot obtain funds from any 
other source;
    (4) Develops a feasible plan that includes repayment of the shared 
appreciation amount;
    (5) Provides a lien on all assets, except those listed in Sec.  
766.112(b); and
    (6) Signs loan agreements and security instruments as required.
    (b) If the borrower later becomes delinquent or financially 
distressed, reamortization of the Shared Appreciation Payment Agreement 
can be considered under subpart C of this part.



Sec.  766.205  Shared Appreciation Payment Agreement rates and terms.

    (a) The interest rate for Shared Appreciation Payment Agreements is 
the Agency's SA amortization rate.
    (b) The term of the Shared Appreciation Payment Agreement is based 
on the borrower's repayment ability and the useful life of the security. 
The term will not exceed 25 years.



Sec.  766.206  Net Recovery Buyout Recapture Agreement.

    (a) Servicing existing Net Recovery Buyout Recapture Agreements. 
Prior to July 3, 1996, the Agency was authorized to offer borrowers buy 
out their loans at the net recovery value. A Net Recovery Buyout 
Agreement was required for borrowers who bought out their loans at the 
net recovery value. The Agency services existing Net Recovery Buyout 
Recapture Agreements as described in this section.
    (b) Requirements and terms. (1) The term of a Net Recovery Buyout 
Recapture Agreement is 10 years. Net Recovery Buyout Recapture 
Agreements are secured by a lien on the former borrower's real estate.
    (2) If the former borrower sells or conveys real estate within the 
10-year term, the former borrower must repay the Agency the lesser of:
    (i) The market value of the real estate parcel at the time of sale 
or conveyance, as determined by an Agency appraisal, minus the portion 
of the recovery value of the real estate paid to the Agency in the 
buyout;
    (ii) The market value of the real estate parcel at the time of the 
sale or conveyance, as determined by an Agency appraisal, minus:
    (A) The unpaid balance of prior liens at the time of the sale or 
conveyance; and
    (B) The net recovery value of the real estate the borrower paid to 
the Agency in the buyout if this amount has not been accounted for as a 
prior lien;
    (iii) The total amount of the FLP debt the Agency wrote off for 
loans secured by real estate.
    (3) If the former borrower does not pay the amount due, the Agency 
will liquidate the Net Recovery Buyout account in accordance with 
subpart H of this part.

[[Page 244]]

    (4) If the former borrower does not sell or convey the real estate 
within the 10-year term, no recapture is due.



Sec. Sec.  766.207-766.250  [Reserved]



                    Subpart F_Unauthorized Assistance



Sec.  766.251  Repayment of unauthorized assistance.

    (a) Except where otherwise specified, the borrower is responsible 
for repaying any unauthorized assistance in full within 90 days of 
Agency notice. The Agency may reverse any unauthorized loan servicing 
actions, when possible.
    (b) The borrower has the opportunity to meet with the Agency to 
discuss or refute the Agency's findings.



Sec.  766.252  Unauthorized assistance resulting from submission of false information.

    A borrower is ineligible for continued Agency assistance if the 
borrower, or a third party on the borrower's behalf, submits information 
to the Agency that the borrower knows to be false.



Sec.  766.253  Unauthorized assistance resulting from submission of inaccurate information by borrower or Agency error.

    (a) Borrower options. (1) The borrower may repay the amount of the 
unauthorized assistance in a lump sum within 90 days of Agency notice.
    (2) If the borrower is unable to repay the entire amount in a lump 
sum, the Agency will accept partial repayment of the unauthorized 
assistance within 90 days of Agency notice to the extent of the 
borrower's ability to repay.
    (3) If the borrower is unable to repay all or part of the 
unauthorized amount, the loan will be converted to a Non-program loan 
under the following conditions:
    (i) The borrower did not provide false information;
    (ii) It is in the interest of the Agency;
    (iii) The debt will be subject to the interest rate for Non-program 
loans;
    (iv) The debt will be serviced as a Non-program loan;
    (v) The term of the Non-program loan will be as short as feasible, 
but in no case will exceed:
    (A) The remaining term of the FLP loan;
    (B) Twenty-five (25) years for real estate loans; or
    (C) The life of the security for chattel loans.
    (b) Borrower refusal to pay. If the borrower is able to pay the 
unauthorized assistance amount but refuses to do so, the Agency will 
notify the borrower of the availability of loan servicing in accordance 
with subpart C of this part.



Sec. Sec.  766.254-766.300  [Reserved]



          Subpart G_Loan Servicing For Borrowers in Bankruptcy



Sec.  766.301  Notifying borrower in bankruptcy of loan servicing.

    If a borrower files for bankruptcy, the Agency will provide written 
notification to the borrower's attorney with a copy to the borrower as 
follows:
    (a) Borrower not previously notified. The Agency will provide notice 
of all loan servicing options available under subpart C of this part, if 
the borrower has not been previously notified of these options.
    (b) Borrower with prior notification. If the borrower received 
notice of all loan servicing options available under subpart C of this 
part prior to the time of bankruptcy filing but all loan servicing was 
not completed, the Agency will provide notice of any remaining loan 
servicing options available.



Sec.  766.302  Loan servicing application requirements for borrowers in bankruptcy.

    (a) Borrower not previously notified. To be considered for loan 
servicing, the borrower or borrower's attorney must sign and return the 
appropriate response form and any forms or information requested by the 
Agency within 60 days of the date of receipt of Agency notice on loan 
servicing options.
    (b) Borrower previously notified. To be considered for continued 
loan servicing, the borrower or borrower's attorney must sign and return 
the appropriate response form and any forms or information requested by 
the Agency within the greater of:

[[Page 245]]

    (1) Sixty days after the borrower's attorney received the 
notification of any remaining loan servicing options; or
    (2) The remaining time from the Agency's previous notification of 
all servicing options that the Agency suspended when the borrower filed 
bankruptcy.
    (c) Court approval. The borrower is responsible for obtaining court 
approval prior to exercising any available servicing rights.



Sec.  766.303  Processing loan servicing requests from borrowers in bankruptcy.

    (a) Considering borrower requests for servicing. Any request for 
servicing is the borrower's acknowledgment that the Agency will not 
interfere with any rights or protections under the Bankruptcy Code and 
its automatic stay provisions.
    (b) Borrowers with confirmed bankruptcy plans. If a plan is 
confirmed before servicing and any appeal is completed under 7 CFR part 
11, the Agency will complete the servicing or appeals process and may 
consent to a post-confirmation modification of the plan if it is 
consistent with the Bankruptcy Code and subpart C of this part, as 
appropriate.
    (c) Chapter 7 borrowers. A borrower filing for bankruptcy under 
chapter 7 of the Bankruptcy Code may not receive primary loan servicing 
unless the borrower reaffirms the entire FLP debt. A borrower who filed 
chapter 7 does not have to reaffirm the debt in order to be considered 
for homestead protection.



Sec. Sec.  766.304-766.350  [Reserved]



                       Subpart H_Loan Liquidation



Sec.  766.351  Liquidation.

    (a) General. (1) When a borrower cannot or will not meet a loan 
obligation, the Agency will consider liquidating the borrower's account 
in accordance with this subpart.
    (2) The Agency will charge protective advances against the 
borrower's account as necessary to protect the Agency's interests during 
liquidation in accordance with Sec.  765.203 of this chapter.
    (3) When no surviving family member or third party assumes or repays 
a deceased borrower's loan in accordance with part 765, subpart J, of 
this chapter, or when the estate does not otherwise fully repay or sell 
loan security to repay a deceased borrower's FLP loans, the Agency will 
liquidate the security as quickly as possible in accordance with State 
and local requirements.
    (b) Liquidation for Program borrowers. (1) If the borrower does not 
apply, does not accept, or is not eligible for primary loan servicing, 
conservation contract, market value buyout or homestead protection, and 
all administrative appeals are concluded, the Agency will accelerate the 
borrower's account in accordance with Sec. Sec.  766.355 and 766.356, as 
appropriate.
    (2) Borrowers may voluntarily liquidate their security in accordance 
with Sec. Sec.  766.352, 766.353 and 766.354. In such case, the Agency 
will:
    (i) Not delay involuntary liquidation action.
    (ii) Notify the borrower in accordance with subpart C of this part, 
prior to acting on the request for voluntary liquidation, if the 
conditions of paragraph (b)(1) of this section have not been met.
    (c) Liquidation for non-program borrowers. If a borrower has both 
program and Non-program loans, the borrower's account will be handled in 
accordance with paragraph (b) of this section. If a borrower with only 
Non-program loans is in default, the borrower may liquidate voluntarily, 
subject to the following:
    (1) The Agency may delay involuntary liquidation actions when in the 
Agency's financial interest for a period not to exceed 60 days.
    (2) The borrower must obtain the Agency's consent prior to the sale 
of the property.
    (3) If the borrower will not pay the Agency in full, the minimum 
sales price must be the market value of the property as determined by 
the Agency.
    (4) The Agency will accept a conveyance offer only when it is in the 
Agency's financial interest.
    (5) If a Non-program borrower does not cure the default, or cannot 
or will not voluntarily liquidate, the Agency will accelerate the loan.

[[Page 246]]



Sec.  766.352  Voluntary sale of real property and chattel.

    (a) General. A borrower may voluntarily sell real property or 
chattel security to repay FLP debt in lieu of involuntary liquidation if 
all applicable requirements of this section are met. Partial 
dispositions are handled in accordance with part 765, subparts G and H, 
of this chapter.
    (1) The borrower must sell all real property and chattel that secure 
FLP debt until the debt is paid in full or until all security has been 
liquidated.
    (2) The Agency must approve the sale and approve the use of 
proceeds.
    (3) The sale proceeds are applied in order of lien priority, except 
that proceeds may be used to pay customary costs appropriate to the 
transaction provided:
    (i) The costs are reasonable in amount;
    (ii) The borrower is unable to pay the costs from personal funds or 
have the purchaser pay;
    (iii) The costs must be paid to complete the sale;
    (iv) Costs are not for postage and insurance of the note while in 
transit when required for the Agency to present the promissory note to 
the recorder to obtain a release of a portion of the real property from 
the mortgage.
    (4) The Agency will approve the sale of property when the proceeds 
do not cover the borrower's full debt only if:
    (i) The sales price must be equal to or greater than the market 
value of the property; and
    (ii) The sale is in the Agency's financial interest.
    (5) If an unpaid loan balance remains after the sale, the Agency 
will continue to service the loan in accordance with subpart B of 7 CFR 
part 1956.
    (b) Voluntary sale of chattel. If the borrower complies with 
paragraph (a) of this section, the borrower may sell chattel security 
by:
    (1) Public sale if the borrower obtains the agreement of lienholders 
as necessary to complete the public sale; or
    (2) Private sale if the borrower:
    (i) Sells all of the security for not less than the market value;
    (ii) Obtains the agreement of lienholders as necessary to complete 
the sale;
    (iii) Has a buyer who is ready and able to purchase the property; 
and
    (iv) Obtains the Agency's agreement for the sale.



Sec.  766.353  Voluntary conveyance of real property.

    (a) Requirements for conveying real property. The borrower must 
supply the Agency with the following:
    (1) An Agency application form;
    (2) A current financial statement. If the borrower is an entity, all 
entity members must provide current financial statements;
    (3) Information on present and future income and potential earning 
ability;
    (4) A warranty deed or other deed acceptable to the Agency;
    (5) A resolution approved by the governing body that authorizes the 
conveyance in the case of an entity;
    (6) Assignment of all leases to the Agency. The borrower must put 
all oral leases in writing;
    (7) Title insurance or title record for the security, if available;
    (8) Complete debt settlement application in accordance with subpart 
B of 7 CFR part 1956 before or in conjunction with the voluntary 
conveyance offer if the value of the property to be conveyed is less 
than the FLP debt; and
    (9) Any other documentation required by the Agency to evaluate the 
request.
    (b) Conditions for conveying real property. The Agency will accept 
voluntary conveyance of real property by a borrower if:
    (1) Conveyance is in the Agency's financial interest;
    (2) The borrower conveys all real property securing the FLP loan; 
and
    (3) The borrower has received prior notification of the availability 
of loan servicing in accordance with subpart C of this part.
    (c) Prior and junior liens. (1) The Agency will pay prior liens to 
the extent consistent with the Agency's financial interest.
    (2) Before conveyance, the borrower must pay or obtain releases of 
all junior liens, real estate taxes, judgments, and other assessments. 
If the borrower is unable to pay or obtain a release of the liens, the 
Agency may attempt to negotiate a settlement with the

[[Page 247]]

lienholder if it is in the Agency's financial interest.
    (d) Charging and crediting the borrower's account. (1) The Agency 
will charge the borrower's account for all recoverable costs incurred in 
connection with a conveyance.
    (2) The Agency will credit the borrower's account for the amount of 
the market value of the property less any prior liens, or the debt, 
whichever is less. In the case of an American Indian borrower whose 
loans are secured by real estate located within the boundaries of a 
Federally recognized Indian reservation, however, the Agency will credit 
the borrower's account with the greater of the market value of the 
security or the borrower's FLP debt.
    (e) Right of possession. After voluntary conveyance, the borrower or 
former owner retains no statutory, implied, or inherent right of 
possession to the property beyond those rights under an approved lease-
purchase agreement executed according to Sec.  766.154 or required by 
State law.



Sec.  766.354  Voluntary conveyance of chattel.

    (a) Requirements for conveying chattel. The borrower must supply the 
Agency with the following:
    (1) An Agency application form;
    (2) A current financial statement. If the borrower is an entity, all 
entity members must provide current financial statements;
    (3) Information on present and future income and potential earning 
ability;
    (4) A bill of sale including each item and titles to all vehicles 
and equipment, as applicable;
    (5) A resolution approved by the governing body that authorizes the 
conveyance in the case of an entity borrower;
    (6) Complete debt settlement application in accordance with subpart 
B of 7 CFR part 1956 before or in conjunction with the voluntary 
conveyance offer if the value of the property to be conveyed is less 
than the debt.
    (b) Conditions for conveying chattel. The Agency will accept 
conveyance of chattel only if:
    (1) The borrower has made every possible effort to sell the property 
voluntarily;
    (2) The borrower can convey the chattel free of other liens;
    (3) The conveyance is in the Agency's financial interest;
    (4) The borrower conveys all chattel securing the FLP loan; and
    (5) The borrower has received prior notification of the availability 
of loan servicing in accordance with subpart C of this part.
    (c) Charging and crediting the borrower's account. (1) The Agency 
will charge the borrower's account for all recoverable costs incurred in 
connection with the conveyance.
    (2) The Agency will credit the borrower's account in the amount of 
the market value of the chattel.



Sec.  766.355  Acceleration of loans.

    (a) General. (1) The Agency accelerates loans in accordance with 
this section, unless:
    (i) State law imposes separate restrictions on accelerations;
    (ii) The borrower is American Indian, whose real estate is located 
on an Indian reservation.
    (2) The Agency accelerates all of the borrower's loans at the same 
time, regardless of whether each individual loan is delinquent or not.
    (3) All borrowers must receive prior notification in accordance with 
subpart C of this part, except for borrowers who fail to graduate in 
accordance with Sec.  766.101(a)(8).
    (b) Time limitations. The borrower has 30 days from the date of the 
Agency acceleration notice to pay the Agency in full.
    (c) Borrower options. The borrower may:
    (1) Pay cash;
    (2) Transfer the security to a third party in accordance with part 
765, subpart I of this chapter;
    (3) Sell the security property in accordance with Sec.  766.352; or
    (4) Voluntarily convey the security to the Agency in accordance with 
Sec. Sec.  766.353 and 766.354, as appropriate.
    (d) Partial payments. The Agency may accept a payment that does not 
cover the unpaid balance of the accelerated loan if the borrower is in 
the process of selling security, unless acceptance of the payment would 
reverse the acceleration.

[[Page 248]]

    (e) Failure to satisfy the debt. The Agency will liquidate the 
borrower's account in accordance with Sec.  766.357 if the borrower does 
not pay the account in full within the time period specified in the 
acceleration notice.



Sec.  766.356  Acceleration of loans to American Indian borrowers.

    (a) General. (1) The Agency accelerates loans to American Indian 
borrowers whose real estate is located on an Indian reservation in 
accordance with this section, unless State law imposes separate 
restrictions on accelerations.
    (2) The Agency accelerates all of the borrower's loans at the same 
time, regardless of whether each individual loan is delinquent or not.
    (3) All borrowers must receive prior notification in accordance with 
subpart C of this part, except for borrowers who fail to graduate in 
accordance with Sec.  766.101(a)(8).
    (4) At the time of acceleration, the Agency will notify the borrower 
and the Tribe that has jurisdiction over the Indian reservation of:
    (i) The possible outcomes of a foreclosure sale and the potential 
impacts of those outcomes on rights established under paragraphs 
(a)(4)(ii) and (iii) of this section;
    (ii) The priority for purchase of the property acquired by the 
Agency through voluntary conveyance or foreclosure;
    (iii) Transfer of acquired property to the Secretary of the Interior 
if the priority of purchase of the property established under paragraph 
(a)(4)(ii) of this section is not exercised.
    (b) Borrower options. The Agency will notify an American Indian 
borrower of the right to:
    (1) Request the Tribe, having jurisdiction over the Indian 
reservation in which the real property is located, be assigned the loan;
    (i) The Tribe will have 30 calendar days after the Agency 
notification of such request to accept the assignment of the loan.
    (ii) The Tribe must pay the Agency the lesser of the outstanding 
Agency indebtedness secured by the real estate or the market value of 
the property.
    (iii) The Tribe may pay the amount in a lump sum or according to the 
rates, terms and requirements established in part 770 of this chapter, 
subject to the following:
    (A) The Tribe must execute the promissory note and loan documents 
within 90 calendar days of receipt from the Agency;
    (B) Such loan may not be considered for debt writedown under 7 CFR 
part 770.
    (iv) The Tribe's failure to respond to the request for assignment of 
the loan or to finalize the assignment transaction within the time 
provided, shall be treated as the Tribe's denial of the request.
    (2) Request the loan be assigned to the Secretary of the Interior. 
The Secretary of the Interior's failure to respond to the request for 
assignment of the loan or to finalize the assignment transaction, shall 
be treated as denial of the request;
    (3) Voluntarily convey the real estate property to the Agency;
    (i) The Agency will conduct a environmental review before 
acceptingvoluntary conveyance.
    (ii) The Agency will credit the account with the greater of the 
market value of the real estate or the amount of the debt.
    (4) Sell the real estate;
    (i) The buyer must have the financial ability to buy the property.
    (ii) The sale of the property must be completed within 90 calendar 
days of the Agency's notification.
    (iii) The loan can be transferred and assumed by an eligible buyer.
    (5) Pay the FLP debt in full.
    (6) Consult with the Tribe that has jurisdiction over the Indian 
reservation to determine if State or Tribal law provides rights and 
protections that are more beneficial than those provided under this 
section.
    (c) Tribe notification. At the time of acceleration, the Agency will 
notify the Tribe that has jurisdiction over the Indian reservation in 
which the property is located, of the:
    (1) Sale of the American Indian borrower's property;
    (2) Market value of the property;

[[Page 249]]

    (3) Amount the Tribe would be required to pay the Agency for 
assignment of the loan.
    (d) Partial payments. The Agency may accept a payment that does not 
cover the unpaid balance of the accelerated loan if the borrower is in 
the process of selling security, unless acceptance of the payment would 
reverse the acceleration.
    (e) Failure to satisfy the debt. The Agency will liquidate the 
borrower's account in accordance with Sec.  766.357 if:
    (1) The borrower does not pay the account in full within the time 
period specified in the acceleration notice;
    (2) The borrower does not voluntarily convey the property to the 
Agency;
    (3) Neither the Tribe nor the Secretary of the Interior accepts 
assignment of the borrower's loan.



Sec.  766.357  Involuntary liquidation of real property and chattel.

    (a) General. The Agency will liquidate the borrower's security if:
    (1) The borrower does not satisfy the account in accordance with 
Sec. Sec.  766.355 and 766.356, as appropriate;
    (2) The involuntary liquidation is in the Agency's financial 
interest.
    (b) Foreclosure on loans secured by real property. (1) The Agency 
will charge the borrower's account for all recoverable costs incurred in 
connection with the foreclosure and sale of the property.
    (2) If the Agency acquires the foreclosed property, the Agency will 
credit the borrower's account in the amount of the Agency's bid except 
when incremental bidding was used, in which case the amount of credit 
will be the maximum bid that was authorized. If the Agency does not 
acquire the foreclosed property, the Agency will credit the borrower's 
account in accordance with State law and guidance from the Regional OGC.
    (3) Notwithstanding paragraph (b)(2), for an American Indian 
borrower whose real property secures an FLP loan and is located within 
the confines of a Federally-recognized Indian reservation, the Agency 
will credit the borrower's account in the amount that is the greater of:
    (i) The market value of the security; or
    (ii) The amount of the FLP debt against the property.
    (4) After the date of foreclosure, the borrower or former owner 
retains no statutory, implied, or inherent right of possession to the 
property beyond those rights granted by State law.
    (5) If an unpaid balance on the FLP loan remains after the 
foreclosure sale of the property, the Agency may debt settle the account 
in accordance with subpart B of 7 CFR part 1956.
    (c) Foreclosure of loans secured by chattel. (1) The Agency will 
charge the borrower's account for all recoverable costs incurred by the 
Agency as a result of the repossession and sale of the property.
    (2) The Agency will apply the proceeds from the repossession sale to 
the borrower's account less prior liens and all authorized liquidation 
costs.
    (3) If an unpaid balance on the FLP loan remains after the sale of 
the repossessed property, the Agency may debt settle the account in 
accordance with subpart B of 7 CFR part 1956.



Sec. Sec.  766.358--766.400  [Reserved]



                      Subpart I_Exception Authority



Sec.  766.401  Agency exception authority.

    On an individual case basis, the Agency may consider granting an 
exception to any regulatory requirement or policy of this part if:
    (a) The exception is not inconsistent with the authorizing statute 
or other applicable law; and
    (b) The Agency's financial interest would be adversely affected by 
acting in accordance with published regulations or policies and granting 
the exception would resolve or eliminate the adverse effect upon its 
financial interest.



PART 767_INVENTORY PROPERTY MANAGEMENT--Table of Contents




                           Subpart A_Overview

Sec.
767.1 Introduction.
767.2 Abbreviations and definitions.
767.3-767.50 [Reserved]

[[Page 250]]

      Subpart B_Property Abandonment and Personal Property Removal

767.51 Property abandonment.
767.52 Disposition of personal property from real estate inventory 
          property.
767.53-767.100 [Reserved]

            Subpart C_Lease of Real Estate Inventory Property

767.101 Leasing real estate inventory property.
767.102 Leasing non-real estate inventory property.
767.103 Managing leased real estate inventory property.
767.104-767.150 [Reserved]

                Subpart D_Disposal of Inventory Property

767.151 General requirements.
767.152 Exceptions.
767.153 Sale of real estate inventory property.
767.154 Conveying easements, rights-of-way, and other interests in 
          inventory property.
767.155 Selling chattel property.
767.156-767.200 [Reserved]

 Subpart E_Real Estate Property with Important Resources or Located in 
                          Special Hazard Areas

767.201 Real estate inventory property with important resources.
767.202 Real estate inventory property located in special hazard areas.
767.203-767.250 [Reserved]

                      Subpart F_Exception Authority

767.251 Agency exception authority.

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

    Source: 72 FR 63358, Nov. 8, 2007, unless otherwise noted.



                           Subpart A_Overview



Sec.  767.1  Introduction.

    (a) Purpose. This part describes the Agency's policies for:
    (1) Managing inventory property;
    (2) Selling inventory property;
    (3) Leasing inventory property;
    (4) Managing real and chattel property the Agency takes into custody 
after abandonment by the borrower;
    (5) Selling or leasing inventory property with important resources, 
or located in special hazard areas; and
    (6) Conveying interest in real property for conservation purposes.
    (b) Basic policy. The Agency maintains, manages and sells inventory 
property as necessary to protect the Agency's financial interest.



Sec.  767.2  Abbreviations and definitions.

    Abbreviations and definitions for terms used in this part are 
provided in Sec.  761.2 of this chapter.



Sec. Sec.  767.3-767.50  [Reserved]



      Subpart B_Property Abandonment and Personal Property Removal



Sec.  767.51  Property abandonment.

    The Agency will take actions necessary to secure, maintain, 
preserve, manage, and operate the abandoned security property, including 
marketing perishable security property on behalf of the borrower when 
such action is in the Agency's financial interest. If the security is in 
jeopardy, the Agency will take the above actions prior to completing 
servicing actions contained in 7 CFR part 766.



Sec.  767.52  Disposition of personal property from real estate inventory property.

    (a) Preparing to dispose of personal property. If, at the time of 
acquisition, personal property has been left on the real estate 
inventory property, the Agency will notify the former real estate owner 
and any known lienholders that the Agency will dispose of the personal 
property. Property of value may be sold at a public sale.
    (b) Reclaiming personal property. The owner or lienholder may 
reclaim personal property at any time prior to the property's sale or 
disposal by paying all expenses incurred by the Agency in connection 
with the personal property.
    (c) Use of proceeds from sale of personal property. Proceeds from 
the public sale of personal property will be distributed as follows:
    (1) To lienholders in order of lien priority less a pro rata share 
of the sale expenses;
    (2) To the inventory account up to the amount of expenses incurred 
by the Agency in connection with the sale of personal property;

[[Page 251]]

    (3) To the outstanding balance on the FLP loan; and
    (4) To the borrower, if the borrower's whereabouts are known.



Sec. Sec.  767.53-767.100  [Reserved]



            Subpart C_Lease of Real Estate Inventory Property



Sec.  767.101  Leasing real estate inventory property.

    (a) The Agency may lease real estate inventory property:
    (1) To the former owner under the Homestead Protection Program;
    (2) To a beginning farmer selected to purchase the property but who 
was unable to purchase it because of a lack of Agency direct or 
guaranteed loan funds;
    (3) When the Agency is unable to sell the property because of 
lengthy litigation or appeal processes.
    (b) The Agency will lease real estate inventory property in an ``as 
is'' condition.
    (c) The Agency will lease property for:
    (1) Homestead protection in accordance with part 766, subpart D, of 
this chapter.
    (2) A maximum of 18 months to a beginning farmer the Agency selected 
as purchaser when no Agency loan funds are available; or
    (3) The shortest possible duration for all other cases subject to 
the following:
    (i) The maximum lease term for such a lease is 12 months.
    (ii) The lease is not subject to renewal or extension.
    (d) The lessee may pay:
    (1) A lump sum;
    (2) On an annual installment basis; or
    (3) On a crop-share basis, if the lessee is a beginning farmer under 
paragraph (a) of this section.
    (e) The Agency leases real estate inventory property for a market 
rent amount charged for similar properties in the area.
    (f) The Agency may require the lessee to provide a security deposit.
    (g) Only leases to a beginning farmer or Homestead Protection 
Program participant will contain an option to purchase the property.



Sec.  767.102  Leasing non-real estate inventory property.

    The Agency does not lease non-real estate property unless it is 
attached as a fixture to real estate inventory property that is being 
leased and it is essential to the farming operation.



Sec.  767.103  Managing leased real estate inventory property.

    (a) The Agency will pay for repairs to leased real estate inventory 
property only when necessary to protect the Agency's interest.
    (b) If the lessee purchases the real estate inventory property, the 
Agency will not credit lease payments to the purchase price of the 
property.



Sec. Sec.  767.104-767.150  [Reserved]



                Subpart D_Disposal of Inventory Property



Sec.  767.151  General requirements.

    Subject to Sec.  767.152, the Agency will attempt to sell its 
inventory property as follows:
    (a) The Agency will combine or divide inventory property, as 
appropriate, to maximize the opportunity for beginning farmers to 
purchase real property.
    (b) The Agency will advertise all real estate inventory property 
that can be used for any authorized FO loan purpose for sale to 
beginning farmers no later than 15 days after the Agency obtains title 
to the property.
    (c) If more than one eligible beginning farmer applies, the Agency 
will select a purchaser by a random selection process open to the 
public.
    (1) All applicants will be advised of the time and place of the 
selection.
    (2) All drawn offers will be numbered.
    (3) Offers drawn after the first will be held in suspense pending 
sale to the successful applicant.
    (4) Random selection is final and not subject to administrative 
appeal.
    (d) If there are no offers from beginning farmers, the Agency will 
sell inventory property by auction or sealed bid to the general public 
no later than 165 days after the Agency obtains title to the property. 
All bidders will be required to submit a 10 percent deposit with their 
bid.

[[Page 252]]

    (e) If the Agency receives no acceptable bid through an auction or 
sealed bid, the Agency will attempt to sell the property through a 
negotiated sale at the best obtainable price.
    (f) If the Agency is not able to sell the property through 
negotiated sale, the Agency may list the property with a real estate 
broker. The broker must be properly licensed in the State in which the 
property is located.



Sec.  767.152  Exceptions.

    The Agency's disposition procedure under Sec.  767.151 is subject to 
the following:
    (a) If the Agency leases real estate inventory property to a 
beginning farmer in accordance with Sec.  767.101(a)(2), and the lease 
expires, the Agency will not advertise the property if the Agency has 
direct or guaranteed loan funds available to finance the transaction.
    (b) The Agency will not advertise a property for sale until the 
homestead protection rights have terminated in accordance with part 766, 
subpart D of this chapter.
    (c) The Agency may allow an additional 60 days if needed for 
conservation easements or environmental reviews.
    (d) If the property was owned by an American Indian borrower and is 
located on an Indian reservation, the Agency will:
    (1) No later than 90 days after acquiring the property, offer the 
opportunity to purchase or lease the property in accordance with:
    (i) The priorities established by the Indian Tribe having 
jurisdiction over the Indian reservation;
    (ii) In cases where priorities have not been established, the 
following order:
    (A) A member of the Indian Tribe that has jurisdiction over the 
Indian reservation;
    (B) An Indian entity;
    (C) The Indian Tribe.
    (2) Transfer the property to the Secretary of the Interior if the 
property is not purchased or leased under paragraph (1) of this section.
    (e) If Agency analysis of farm real estate market conditions 
indicates the sale of the Agency's inventory property will have a 
negative effect on the value of farms in the area, the Agency may 
withhold inventory farm properties in the affected area from the market 
until further analysis indicates otherwise.



Sec.  767.153  Sale of real estate inventory property.

    (a) Pricing. (1) The Agency will advertise property for sale at its 
market value, as established by an appraisal obtained in accordance with 
Sec.  761.7.
    (2) Property sold by auction or sealed bid will be sold for the best 
obtainable price. The Agency reserves the right to reject any and all 
bids.
    (b) Agency-financed sales. The Agency may finance sales to 
purchasers if:
    (1) The Agency has direct or guaranteed FO loan funds available;
    (2) All applicable loan making requirements are met; and
    (3) All non-beginning farmer purchasers make a 10 percent down 
payment.
    (c) Taxes and assessments. (1) Property taxes and assessments will 
be prorated between the Agency and the purchaser based on the date the 
Agency conveys title to the purchaser.
    (2) The purchaser is responsible for paying all taxes and 
assessments after the Agency conveys title to the purchaser.
    (d) Loss or damage to property. If, through no fault of either 
party, the property is lost or damaged as a result of fire, vandalism, 
or act of God before the Agency conveys the property, the Agency may 
reappraise the property and set the sale price accordingly.
    (e) Termination of contract. Either party may terminate the sales 
contract. If the contract is terminated by the Agency, the Agency 
returns any deposit to the bidder. If the contract is terminated by the 
purchaser, any deposit will be retained by the Agency as full liquidated 
damages, except where failure to close is due to Agency non-approval of 
credit.
    (f) Warranty on title. The Agency will not provide any warranty on 
the title or on the condition of the property.

[[Page 253]]



Sec.  767.154  Conveying easements, rights-of-way, and other interests in inventory property.

    (a) Appraisal of real property and real property interests. The 
Agency will determine the value of real property and real property 
interests being transferred in accordance with Sec.  761.7 of this 
chapter.
    (b) Easements and rights-of-way on inventory property. (1) The 
Agency may grant or sell an easement or right-of-way for roads, 
utilities, and other appurtenances if the conveyance is in the public 
interest and does not adversely affect the value of the real property.
    (2) The Agency may sell an easement or right-of-way by negotiation 
for market value to any purchaser for cash without giving public notice 
if:
    (i) The sale would not prevent the Agency from selling the property; 
and
    (ii) The sale would not decrease the value of the property by an 
amount greater than the price received.
    (3) In the case of condemnation proceedings by a State or political 
subdivision, the transfer of title will not be completed until adequate 
compensation and damages have been determined and paid.
    (c) Disposal of other interests in inventory property. (1) If 
applicable, the Agency will sell mineral and water rights, mineral lease 
interests, mineral royalty interests, air rights, and agricultural and 
other lease interests with the surface land except as provided in 
paragraph (b) of this section.
    (2) If the Agency sells the land in separate parcels, any rights or 
interests that apply to each parcel are included with the sale.
    (3) The Agency will assign lease or royalty interests not passing by 
deed to the purchaser at the time of sale.
    (4) Appraisals of property will reflect the value of such rights, 
interests, or leases.



Sec.  767.155  Selling chattel property.

    (a) Method of sale. (1) The Agency will use sealed bid or 
established public auctions for selling chattel. The Agency does not 
require public notice of sale in addition to the notice commonly used by 
the auction facility.
    (2) The Agency may sell chattel inventory property, including 
fixtures, concurrently with real estate inventory property if, by doing 
so, the Agency can obtain a higher aggregate price. The Agency may 
accept an offer for chattel based upon the combined final sales price of 
both the chattel and real estate.
    (b) Agency-financed sales. The Agency may finance the purchase of 
chattel inventory property if the Agency has direct or guaranteed OL 
loan funds available and all applicable loan making requirements are 
met.



Sec. Sec.  767.156-767.200  [Reserved]



 Subpart E_Real Estate Property With Important Resources or Located in 
                          Special Hazard Areas



Sec.  767.201  Real estate inventory property with important resources.

    In addition to the requirements established in subpart G of 7 CFR 
part 1940, the following apply to inventory property with important 
resources:
    (a) Wetland conservation easements. The Agency will establish 
permanent wetland conservation easements to protect and restore certain 
wetlands that exist on inventory property prior to the sale of such 
property, regardless of whether the sale is cash or credit.
    (1) The Agency establishes conservation easements on all wetlands or 
converted wetlands located on real estate inventory property that:
    (i) Were not considered cropland on the date the property was 
acquired by the Agency; and
    (ii) Were not used for farming at any time during the 5 years prior 
to the date of acquisition by the Agency.
    (A) The Agency will consider property to have been used for farming 
if it was used for agricultural purposes including, but not limited to, 
cropland, pastures, hayland, orchards, vineyards, and tree farming.
    (B) In the case of cropland, hayland, orchards, vineyards, or tree 
farms, the Agency must be able to demonstrate that the property was 
harvested for crops.
    (C) In the case of pastures, the Agency must be able to demonstrate 
that the property was actively managed for grazing by documenting 
practices such

[[Page 254]]

as fencing, fertilization, and weed control.
    (2) The wetland conservation easement will provide for access to 
other portions of the property as necessary for farming or other uses.
    (b) Mandatory conservation easements. The Agency will establish 
conservation easements to protect 100-year floodplains and other 
Federally-designated important resources. Federally-designated important 
resources include, but are not limited to:
    (1) Listed or proposed endangered or threatened species;
    (2) Listed or proposed critical habitats for endangered or 
threatened species;
    (3) Designated or proposed wilderness areas;
    (4) Designated or proposed wild or scenic rivers;
    (5) Historic or archeological sites listed or eligible for listing 
on the National Register of Historic Places;
    (6) Coastal barriers included in Coastal Barrier Resource Systems;
    (7) Natural landmarks listed on National Registry of Natural 
Landmarks; and
    (8) Sole source aquifer recharge areas as designated by EPA.
    (c) Discretionary easements. The Agency may grant or sell an 
easement, restriction, development right, or similar legal right to real 
property for conservation purposes to a State government, a political 
subdivision of a State government, or a private non-profit organization.
    (1) The Agency may grant or sell discretionary easements separate 
from the underlying fee or property rights.
    (2) The Agency may convey property interests under this paragraph by 
negotiation to any eligible recipient without giving public notice if 
the conveyance does not change the intended use of the property.
    (d) Conservation transfers. The Agency may transfer real estate 
inventory property to a Federal or State agency provided the following 
conditions are met:
    (1) The transfer of title must serve a conservation purpose;
    (2) A predominance of the property must:
    (i) Have marginal value for agricultural production;
    (ii) Be environmentally sensitive; or
    (iii) Have special management importance;
    (3) The homestead protection rights of the previous owner have been 
exhausted;
    (4) The Agency will notify the public of the proposed transfer; and
    (5) The transfer is in the Agency's financial interest.
    (e) Use restrictions on real estate inventory property with 
important resources. (1) Lessees and purchasers receiving Agency credit 
must follow a conservation plan developed with assistance from NRCS.
    (2) Lessees and purchasers of property with important resources or 
real property interests must allow the Agency or its representative to 
periodically inspect the property to determine if it is being used for 
conservation purposes.



Sec.  767.202  Real estate inventory property located in special hazard areas.

    (a) The Agency considers the following to be special hazard areas:
    (1) Mudslide hazard areas;
    (2) Special flood areas; and
    (3) Earthquake areas.
    (b) The Agency will use deed restrictions to prohibit residential 
use of properties determined to be unsafe in special hazard areas.
    (c) The Agency will incorporate use restrictions in its leases of 
property in special hazard areas.



Sec. Sec.  767.203-767.250  [Reserved]



                      Subpart F_Exception Authority



Sec.  767.251  Agency exception authority.

    On an individual case basis, the Agency may consider granting an 
exception to any regulatory requirement or policy of this part if:
    (a) The exception is not inconsistent with the authorizing statute 
or other applicable law; and
    (b) The Agency's financial interest would be adversely affected by 
acting in accordance with published regulations or policies and granting 
the exception would reduce or eliminate the

[[Page 255]]

adverse effect upon the its financial interest.

                        PARTS 768_769 [Reserved]



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. 488.

    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 for the purpose of rental value write-downs, equals the 
average actual rental proceeds received from the lease of land acquired 
under ITLAP. If there are no rental proceeds, then rental value will be 
based on market data according to Sec.  770.10(e)(4).
    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; 72 
FR 51990, Sept. 12, 2007]



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

[[Page 256]]

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:
    (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.

[[Page 257]]

    (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 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

[[Page 258]]

unless the Agency determines any remaining land or other loan security 
is adequate security for the loan.
    (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 record of any actual rents received 
for the land for the preceding 5 years, which will be used to calculate 
the average rental value. This record must be certified by the 
Department of the Interior. For land that has not been leased or has not 
received any rental income, the borrower must provide a market value 
rent study report for the preceding 5 years, which identifies the 
average annual rental value based on the market data. The market value 
rent study 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;

[[Page 259]]

    (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; 72 FR 51990, Sept. 12, 2007]



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.
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

[[Page 260]]

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.
    (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);

[[Page 261]]

    (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;
    (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

[[Page 262]]

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 766 are not 
applicable to loans made under this section. However, FSA may 
restructure loan debts; provided:
    (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.

[67 FR 59771, Sept. 24, 2002, as amended at 72 FR 64121, Nov. 15, 2007]



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.

[[Page 263]]



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, 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.

[[Page 264]]

    (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 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

[[Page 265]]

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 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 part 761, 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; 72 
FR 64121, Nov. 15, 2007]



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

[[Page 266]]

    (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.
    (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 765. Any remaining transferor liability will be serviced 
in accordance with Sec.  772.9(c) of this subpart.

[68 FR 69949, Dec. 16, 2003, as amended at 72 FR 64121, Nov. 15, 2007]



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'' 
by the agency must 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.

[68 FR 69949, Dec. 16, 2003, as amended at 72 FR 64121, Nov. 15, 2007]



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 3, part 766, and part 1951, subpart C, concerning internal 
agency offset and referral to the Department of the Treasury Offset 
Program and

[[Page 267]]

Treasury Cross-Servicing (or successor regulations).

[68 FR 69949, Dec. 16, 2003, as amended at 72 FR 64121, Nov. 15, 2007]



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, 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 
766. 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.

[68 FR 69949, Dec. 16, 2003, as amended at 72 FR 64121, Nov. 15, 2007]



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 and the 
Department's civil rights policy in 7 CFR part 15d.

[72 FR 64121, Nov. 15, 2007]



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

[[Page 268]]

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 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

[[Page 269]]

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.



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.

[[Page 270]]

    (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:
    (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

[[Page 271]]

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.



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 as a Non-program loan in accordance with 7 
CFR part 766 during the term of the loan. If the loan is not paid in 
full during this term, servicing will proceed in accordance with 7 CFR 
part 766, subpart H.

[72 FR 64121, Nov. 15, 2007]



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.

[[Page 272]]

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.
    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

[[Page 273]]

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.



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 time and default occurs, servicing will proceed in accordance with 
7 CFR part 766, subpart H.
    (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; 72 
FR 64121, Nov. 15, 2007]

[[Page 274]]



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 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 as a Non-program loan in accordance with 7 
CFR part 766. If the loan is not repaid as agreed and default occurs, 
servicing will proceed in accordance with 7 CFR part 766, subpart H.

[72 FR 64121, Nov. 15, 2007]



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

[[Page 275]]

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 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.

[[Page 276]]

    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 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;

[[Page 277]]

    (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.
    (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;

[[Page 278]]

    (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 must be submitted in writing by a 
participant or by a participant's authorized representative and 
addressed to the FSA decision maker as will 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;
    (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.

[70 FR 43266, July 27, 2005, as amended at 71 FR 30573, May 30, 2006]



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.

[[Page 279]]

    (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.
    (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.usda.gov/fsa/
disputemediation.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

[[Page 280]]

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.

[70 FR 43266, July 27, 2005, as amended at 71 FR 30573, May 30, 2006]



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. The 
deemed withdrawal of a participant's appeal to the State Committee will 
not preclude a subsequent request for a State Committee hearing on 
appealable matters not resolved in mediation.
    (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.
    (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.

[70 FR 43266, July 27, 2005, as amended at 71 FR 30573, May 30, 2006]



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

[[Page 281]]

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. A participant that 
receives a determination made under part 1400 of this title will be 
deemed to have consented to an extension of the time limitation for a 
final determination as provided in part 1400 of this title if the 
participant requests mediation.
    (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 seek an exception under 
this paragraph. 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.

[70 FR 43266, July 27, 2005, as amended at 71 FR 30574, May 30, 2006]



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.).

[[Page 282]]


    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, 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

[[Page 283]]

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
    (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.

[[Page 284]]

    (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;
    (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

[[Page 285]]

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 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:

[[Page 286]]

    (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
    (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.

[[Page 287]]



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 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.

[[Page 288]]

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