[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2012 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

          Title 7

Agriculture


________________________

Parts 700 to 899

                         Revised as of January 1, 2012

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2012
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

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                            Table of Contents



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

  Title 7:
    SUBTITLE B--Regulations of the Department of Agriculture 
      (Continued)
          Chapter VII--Farm Service Agency, Department of 
          Agriculture                                                5
          Chapter VIII--Grain Inspection, Packers and 
          Stockyard Administration (Federal Grain Inspection 
          Service), Department of Agriculture                      405
  Finding Aids:
      Table of CFR Titles and Chapters........................     559
      Alphabetical List of Agencies Appearing in the CFR......     579
      List of CFR Sections Affected...........................     589

[[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

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    To determine whether a Code volume has been amended since its 
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OMB CONTROL NUMBERS

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

[[Page vi]]

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

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INCORPORATION BY REFERENCE

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This material, like any other properly issued regulation, has the force 
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    What is a proper incorporation by reference? The Director of the 
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    (a) The incorporation will substantially reduce the volume of 
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    (b) The matter incorporated is in fact available to the extent 
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that volume.

[[Page vii]]

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    Raymond A. Mosley,
    Director,
    Office of the Federal Register.
    January 1, 2012.







[[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, 1600-1759, 1760-1939, 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, 2012.

    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, III 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.         701

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

[[Page 3]]

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

[[Page 5]]



       CHAPTER VII--FARM SERVICE AGENCY, DEPARTMENT OF AGRICULTURE




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


  Editorial Note: 1. Nomenclature changes to chapter VII appear at 59 FR 
60299, Nov. 23, 1994, as corrected at 59 FR 66438, Dec. 27, 1994, and at 
60 FR 64297, Dec. 15, 1995.

             SUBCHAPTER A--AGRICULTURAL CONSERVATION PROGRAM
Part                                                                Page
700

[Reserved]

701             Emergency Conservation Program, Emergency 
                    Forest Restoration Program, and certain 
                    related programs previously administered 
                    under this part.........................           7
707             Payments due persons who have died, 
                    disappeared, or have been declared 
                    incompetent.............................          19
708             Record retention requirements--all programs.          22
SUBCHAPTER B--FARM MARKETING QUOTAS, ACREAGE ALLOTMENTS, AND PRODUCTION 
                               ADJUSTMENT
714             Refunds of penalties erroneously, illegally, 
                    or wrongfully collected.................          24
718             Provisions applicable to multiple programs..          26
                SUBCHAPTER C--REGULATIONS FOR WAREHOUSES
735             Regulations for the United States Warehouse 
                    Act.....................................          49
743

[Reserved]

                     SUBCHAPTER D--SPECIAL PROGRAMS
750             Soil Bank...................................          63
755             Reimbursement Transportation Cost Payment 
                    Program for Geographically Disadvantaged 
                    Farmers and Ranchers....................          63
760             Indemnity payment programs..................          68
761             Farm loan programs; general program 
                    administration..........................         159
762             Guaranteed farm loans.......................         182
763             Land contract guarantee program (Eff. 1-3-
                    12).....................................         219
764             Direct loan making..........................         227
765             Direct loan servicing--regular..............         250

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766             Direct loan servicing--special..............         263
767             Inventory property management...............         316
768-769

[Reserved]

770             Indian tribal land aquisition loans.........         322
771             Boll Weevil Eradication Loan Program........         326
772             Servicing minor program loans...............         329
773             Special Apple Loan Program..................         334
774             Emergency Loan for Seed Producers Program...         339
780             Appeal regulations..........................         341
781             Disclosure of foreign investment in 
                    agricultural land.......................         349
782             End-Use Certificate Program.................         355
784             2004 Ewe Lamb Replacement and Retention 
                    Payment Program.........................         360
785             Certified State Mediation Program...........         364
786             Dairy Disaster Assistance Payment Program 
                    (DDAP-III)..............................         371
        SUBCHAPTER E--PROVISIONS COMMON TO MORE THAN ONE PROGRAM
792             Debt settlement policies and procedures.....         380
795             Payment limitation..........................         389
                      SUBCHAPTER F--PUBLIC RECORDS
798             Availability of information to the public...         396
                 SUBCHAPTER G--ENVIRONMENTAL PROTECTION
799             Environmental quality and related 
                    environmental concerns--compliance with 
                    the National Environmental Policy Act...         398

[[Page 7]]



             SUBCHAPTER A_AGRICULTURAL CONSERVATION PROGRAM



                           PART 700 [RESERVED]



PART 701_EMERGENCY CONSERVATION PROGRAM, EMERGENCY FOREST RESTORATION 
PROGRAM, AND CERTAIN RELATED PROGRAMS PREVIOUSLY ADMINISTERED UNDER 

THIS PART--Table of Contents



Sec.
701.1 Administration.
701.2 Definitions.
701.3-701.12 [Reserved]
701.13 Submitting requests.
701.14 Onsite inspections.
701.15 Starting practices before cost-share request is submitted; non-
          entitlement to payment; payment subject to the availability of 
          funds.
701.16 Practice approval.
701.17-701.20 [Reserved]
701.21 Filing payment application.
701.22 Eligibility to file for cost-share assistance.
701.23 Eligible costs.
701.24 Dividing cost-share among more than one participant.
701.25 Practices carried out with aid from ineligible persons or 
          ineligible legal entities.
701.26-701.30 [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.

                Subpart B_Emergency Conservation Program

701.100-701.102 [Reserved]
701.103 Scope.
701.104 Producer eligibility.
701.105 Land eligibility.
701.106-701.109 [Reserved]
701.110 Qualifying minimum cost of restoration.
701.111 Prohibition on duplicate payments.
701.112 Eligible ECP practices.
701.113-701.116 [Reserved]
701.117 Average adjusted gross income limitation.
701.118-701.125 [Reserved]
701.126 Maximum cost-share percentage.
701.127 Maximum ECP payments per person or legal entity.
701.128-701.149 [Reserved]
701.150 2005 hurricanes.
701.151 Definitions.
701.152 Availability of funding.
701.153 Debris removal and water for livestock.
701.154 [Reserved]
701.155 Nursery.
701.156 Poultry.
701.157 Private non-industrial forest land.

             Subpart C_Emergency Forest Restoration Program

701.200-701.202 [Reserved]
701.203 Scope.
701.204 Participant eligibility.
701.205 Land eligibility.
701.206-701.209 [Reserved]
701.210 Qualifying minimum cost of restoration.
701.211 Prohibition on duplicate payments.
701.212 Eligible EFRP practices.
701.213-701.225 [Reserved]
701.226 Maximum financial assistance.

    Authority: 16 U.S.C. 2201-2206; Sec. 101, Pub. L. 109-148, 119 Stat. 
2747; and Pub. L. 111-212, 124 Stat. 2302

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



                            Subpart A_General



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) and the Emergency Forest Restoration Program (EFRP) administered 
by the Farm Service Agency (FSA). Neither program is an entitlement 
program and payments will only be made

[[Page 8]]

to the extent that the Deputy Administrator announces the eligibility of 
benefits for certain natural disasters, the areas in which such benefits 
will be available, the time period in which the disaster and the 
rehabilitation must occur, and only so long as all the conditions for 
eligibility specified in this part and elsewhere in law are met. 
However, the Deputy Administrator will not apply any non-statutory 
limitation on payments provided for in this part in such a way that it 
would necessarily result in the non-expenditure of program funds 
required to otherwise be made by law.
    (b) ECP and EFRP are 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 or legal entity shall, under any circumstances, be 
considered to be entitled to an exercise of such power in their favor.
    (c) State and county committees, and representatives and employees, 
do not have authority to modify or waive any regulations in this part.
    (d) The State committee may take any action authorized or required 
of the county committee by this part, but which the county committee has 
not taken, such as:
    (1) Correct or require a county committee to correct any action 
taken by such county committee that is not in accordance with this part; 
or
    (2) Require a county committee to withhold taking any action that is 
not in accordance with this part.
    (e) No provision or delegation herein to a State or county committee 
shall preclude the Administrator, FSA, or a designee, from determining 
any question arising under the program or from reversing or modifying 
any determination made by a State or county committee.
    (f) The Deputy Administrator may authorize State and county 
committees to waive or modify deadlines and other requirements in cases 
where lateness or failure to meet such other requirements does not 
adversely affect the operation of the program.
    (g) The Deputy Administrator may limit the authority of state and 
county committees to approve cost share in excess of specified amounts.
    (h) Data furnished by the applicants will be used to determine 
eligibility for program benefits. Furnishing the data is voluntary; 
however, the failure to provide data could result in program benefits 
being withheld or denied.
    (i) FSA may consult with any other Federal agency, State agency, or 
other provider of technical assistance for such assistance as is 
determined by FSA to be necessary to implement ECP or EFRP. FSA is 
responsible for the technical aspects of ECP and EFRP but may enter into 
a Memorandum of Agreement with another party to provide technical 
assistance. If the requirement for technical assistance results in undue 
delay or significant hardship to producers in a county, the State 
committee may request in writing that FSA waive this requirement for 
that county. However, nothing in this paragraph or in this part creates 
a right of appeal or action for an applicant with respect to provisions 
relating to internal procedures of FSA.
    (j) The provisions in this part shall not create an entitlement in 
any person or legal entity to any ECP or EFRP 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 or EFRP.

[69 FR 10302, Mar. 4, 2004, as amended at 75 FR 70087, Nov. 17, 2010]



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:

[[Page 9]]

    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 or legal entity who has submitted to FSA a 
request to participate in the ECP or EFRP.
    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.
    Natural disaster means wildfires, hurricanes or excessive winds, 
drought, ice storms or blizzards, floods, or other naturally-occurring 
resource impacting events as determined by FSA. For EFRP, a natural 
disaster also includes insect or disease infestations as determined by 
FSA in consultation with other Federal and State agencies as 
appropriate.

[69 FR 10302, Mar. 4, 2004, as amended at 75 FR 70087, Nov. 17, 2010]



Sec. Sec. 701.3-701.12  [Reserved]



Sec. 701.13  Submitting requests.

    (a) Subject to the availability of funds, the Deputy Administrator 
shall provide for an enrollment period for submitting ECP or EFRP 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.

[69 FR 10302, Mar. 4, 2004, as amended at 75 FR 70088, Nov. 17, 2010]



Sec. 701.14  Onsite inspections.

    (a) An onsite inspection must be made before approval of any request 
for ECP or EFRP assistance.
    (b) Notwithstanding paragraph (a) of this section, onsite 
inspections may be waived by FSA, in its discretion only, where damage 
is so severe that an onsite inspection is unnecessary, as determined by 
FSA.

[69 FR 10302, Mar. 4, 2004, as amended at 75 FR 70088, Nov. 17, 2010]



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 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 or 
EFRP designation was approved for the applicable county office.

[[Page 10]]

    (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.

[69 FR 10302, Mar. 4, 2004, as amended at 75 FR 70088, Nov. 17, 2010]



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) In the case of ECP, 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.

[69 FR 10302, Mar. 4, 2004, and amended at 75 FR 70088, Nov. 17, 2010]



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



Sec. 701.21  Filing payment application.

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



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

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



Sec. 701.23  Eligible costs.

    (a) Cost-share assistance may be authorized for all reasonable costs 
incurred in the completion of the practice, up to the maximums provided 
in Sec. Sec. 701.126, 701.127, and 701.226.
    (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 eligible land.
    (2) Costs for personal labor shall be limited to personal labor not 
normally required in the operation of the eligible land.
    (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. 
701.112(d) or Sec. 701.212(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.

[69 FR 10302, Mar. 4, 2004, and amended at 75 FR 70088, Nov. 17, 2010]

[[Page 11]]



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 or
ineligible legal entities.

    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 or EFRP 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.

[69 FR 10302, Mar. 4, 2004, as amended at 75 FR 70088, Nov. 17, 2010]



Sec. Sec. 701.26-701.30  [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 parts 614 and 780 of this chapter apply to 
determinations made under this part.

[69 FR 10302, Mar. 4, 2004, as amended at 75 FR 70088, Nov. 17, 2010]



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 or EFRP 
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 or EFRP cost shares made,

[[Page 12]]

where the purpose of the project cannot be accomplished because of the 
applicants' lack of clearances or other problems.

[69 FR 10302, Mar. 4, 2004, as amended at 75 FR 70088, Nov. 17, 2010]



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 or legal entity for that particular disaster. These 
actions include, but are not limited to, failure to properly maintain or 
deliberately destroying a practice and providing false or misleading 
information related to practices, costs, or arrangements between 
entities or individuals that would have an effect on any eligibility 
determination, including, but not limited to, a payment limit 
eligibility.
    (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 
program 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 or legal entity 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 or EFRP 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.

[69 FR 10302, Mar. 4, 2004, and amended at 75 FR 70088, Nov. 17, 2010]



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 or EFRP cost-share recipient during the practice life-span, 
if the person or legal entity acquiring control elects not to become a 
successor to the ECP or EFRP 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 or 
EFRP 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.

[69 FR 10302, Mar. 4, 2004, as amended at 75 FR 70088, Nov. 17, 2010]



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.

[[Page 13]]



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.

[69 FR 10302, Mar. 4, 2004, as amended at 75 FR 70088, Nov. 17, 2010]



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.

[69 FR 10302, Mar. 4, 2004, as amended at 75 FR 70088, Nov. 17, 2010]



                Subpart B_Emergency Conservation Program



Sec. Sec. 701.100-701.102  [Reserved]



Sec. 701.103  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, subject to the availability of funds and only for areas, 
natural disasters, and time periods approved by the Deputy 
Administrator.
    (b) The objective of the ECP is to make cost-share assistance 
available to eligible participants on eligible land for certain 
practices, to rehabilitate farmland damaged by floods, hurricanes, wind 
erosion, or other natural disasters, and for the installation of water 
conservation measures during periods of severe drought.
    (c) Payments may also be made under this subpart 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.

[69 FR 10302, Mar. 4, 2004. Redesignated and amended at 75 FR 70088, 
Nov. 17, 2010]



Sec. 701.104  Producer eligibility.

    (a) To be eligible to participate in the ECP the Deputy 
Administrator must determine that a person or legal entity is an 
agricultural producer with an interest in the land affected by the 
natural disaster, and that person or legal entity 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.

[[Page 14]]

    (c) All producer eligibility is subject to the availability of funds 
and an application may be denied for any reason.

[69 FR 10302, Mar. 4, 2004. Redesignated and amended at 75 FR 70088, 
Nov. 17, 2010]



Sec. 701.105  Land eligibility.

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

[[Page 15]]

example, flood susceptibility for the land, soil surveys, aerial 
photographs, or flood plain data or other relevant information.

[69 FR 10302, Mar. 4, 2004. Redesignated at 75 FR 70088, Nov. 17, 2010]



Sec. Sec. 701.106-701.109  [Reserved]



Sec. 701.110  Qualifying minimum cost of restoration.

    (a) To qualify for assistance under Sec. 701.103(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. Redesignated and 
amended at 75 FR 70088, Nov. 17, 2010]



Sec. 701.111  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. 
Redesignated at 75 FR 70088, Nov. 17, 2010]



Sec. 701.112  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 subpart shall be allowed to address conservation 
problems existing before the disaster.
    (b) The practice or practices made available when the ECP is 
implemented shall be only those practices authorized by FSA for which 
cost-share assistance is essential to permit accomplishment of the 
program goals.
    (c) Cost-share assistance may be provided for permanent vegetative 
cover, including establishment of the cover where needed, only in 
conjunction with eligible structures or installations where cover is 
needed to prevent erosion and/or siltation or to accomplish some other 
ECP purpose.
    (d) Practice specifications shall represent the minimum levels of 
performance needed to address the ECP need.

[69 FR 10302, Mar. 4, 2004. Redesignated and amended at 75 FR 70088, 
Nov. 17, 2010]



Sec. Sec. 701.113-701.116  [Reserved]



Sec. 701.117  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. Redesignated at 75 FR 70088, Nov. 17, 2010]



Sec. Sec. 701.118-701.125  [Reserved]



Sec. 701.126  Maximum cost-share percentage.

    (a) In addition to other restrictions that may be applied by FSA, an 
ECP participant shall not receive more than

[[Page 16]]

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.

[69 FR 10302, Mar. 4, 2004. Redesignated and amended at 75 FR 70088, 
Nov. 17, 2010]



Sec. 701.127  Maximum ECP payments per person or legal entity.

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

[75 FR 7088, Nov. 17, 2010]



Sec. Sec. 701.128-701.149  [Reserved]



Sec. 701.150  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. 701.150 through 701.157. 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. 
701.151 through 701.157 shall be subject to all normal ECP limitations 
and provisions except as explicitly provided in those sections.

[71 FR 30265, May 26, 2006. Redesignated and amended at 75 FR 70088, 
70089, Nov. 17, 2010]



Sec. 701.151  Definitions.

    The following definitions apply to Sec. Sec. 701.152 through 
701.157:
    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. Redesignated and amended at 75 FR 70088, 
70089, Nov. 17, 2010]

[[Page 17]]



Sec. 701.152  Availability of funding.

    Payments under Sec. Sec. 1701.53 through 701.157 are subject to the 
availability of funds under Public Law 109-148.

[71 FR 30265, May 26, 2006. Redesignated and amended at 75 FR 70088, 
Nov. 17, 2010]



Sec. 701.153  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 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. Redesignated and amended at 75 FR 70088, 
70089, Nov. 17, 2010]



Sec. Sec. 701.154  [Reserved]



Sec. 701.155  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. 701.126, 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. Redesignated and amended at 75 FR 70088, 
70089, Nov. 17, 2010]



Sec. 701.156  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. Redesignated at 75 FR 70088, Nov. 17, 2010]



Sec. 701.157  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 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

[[Page 18]]

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 or 
legal entity 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. 701.126, 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. Redesignated and amended at 75 FR 70088, 
70089, Nov. 17, 2010]



             Subpart C_Emergency Forest Restoration Program

    Source: 75 FR 70889, Nov. 17, 2010, unless otherwise noted.



Sec. Sec. 701.200--701.202  [Reserved]



Sec. 701.203  Scope.

    (a) Subject to the availability of funds and only for areas, natural 
disasters, and time periods for the natural disaster and rehabilitation 
approved by the Deputy Administrator, FSA will provide financial 
assistance to owners of nonindustrial private forest land who carry out 
emergency measures to restore land damaged by a natural disaster on or 
after January 1, 2010, as determined by FSA.
    (b) The objective of EFRP is to make financial assistance available 
to eligible participants on eligible land for certain practices to 
restore nonindustrial private forest land that has been damaged by a 
natural disaster.



Sec. 701.204  Participant eligibility.

    (a) To be eligible to participate in EFRP, a person or legal entity 
must be an owner of nonindustrial private forest land affected by a 
natural disaster, and must be liable for or have the expense that is the 
subject of the financial assistance. The owner must be a person or legal 
entity (including an Indian tribe) with full decision-making authority 
over the land, as determined by FSA, or with such waivers as may be 
needed from lenders or others as may be required, to undertake program 
commitments.
    (b) Federal agencies and States, including all agencies and 
political subdivisions of a State, are ineligible for EFRP.
    (c) An application may be denied for any reason.



Sec. 701.205  Land eligibility.

    (a) For land to be eligible, it must be nonindustrial private forest 
land and must, as determined by FSA:
    (1) Have existing tree cover or have had tree cover immediately 
before the natural disaster and be suitable for growing trees;
    (2) Have damage to natural resources caused by a natural disaster, 
which occurred on or after January 1, 2010, that, if not treated, would 
impair or endanger the natural resources on the land and would 
materially affect future use of the land; and
    (3) Be physically located in a county in which EFRP has been 
implemented.
    (b) Land is ineligible for EFRP if FSA determines that the land is 
any of the following:
    (1) Owned or controlled by the United States; or
    (2) Owned or controlled by States, including State agencies or 
political subdivisions of a State.

[[Page 19]]



Sec. Sec. 701.206--701.209  [Reserved]



Sec. 701.210  Qualifying minimum cost of restoration.

    (a) FSA will establish the minimum qualifying cost of restoration, 
which may vary by State or region.
    (b) An applicant may request a waiver of the qualifying minimum cost 
of restoration. The waiver request must document how failure to grant 
the waiver will result in environmental damage or hardship to the person 
or legal entity, and how the waiver will accomplish the goals of the 
program.



Sec. 701.211  Prohibition on duplicate payments.

    (a) Participants are not eligible to receive funding under EFRP for 
land on which FSA determines that the participant has or will receive 
funding for the same or similar expenses under:
    (1) The Emergency Conservation Program provided for in subpart B of 
this part;
    (2) The Wetland Reserve Program (WRP) provided for in part 1467 of 
this title;
    (3) The Emergency Wetland Reserve Program (EWRP) provided for in 
part 623 of this chapter;
    (4) The Emergency Watershed Protection Program (EWP), provided for 
in part 624 of this chapter; or
    (5) Any other program that covers the same or similar expenses so as 
to create duplicate payments, or, have the effect of creating in total, 
otherwise, a higher rate of financial assistance than is allowed on its 
own under this part.
    (b) Participants who receive any duplicate funds, payments, or 
benefits must refund any EFRP payments received, except the Deputy 
Administrator may reduce the refund amount to the amount determined 
appropriate by the Deputy Administrator to ensure that the total amount 
of assistance received by the owner of the land under all programs does 
not exceed an amount otherwise allowed in this part.



Sec. 701.212  Eligible EFRP practices.

    (a) Financial assistance may be offered to eligible persons or legal 
entities for EFRP practices to restore forest health and forest-related 
resources on eligible land.
    (b) Practice specifications must represent the minimum level of 
performance needed to restore the land to the applicable FSA, NRCS, 
Forest Service, or State forestry standard.



Sec. Sec. 701.213--701.225  [Reserved]



Sec. 701.226  Maximum financial assistance.

    (a) In addition to other restrictions that may be applied by FSA, an 
EFRP participant will 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 subpart, to perform the practice.
    (b) A person, as defined in part 1400 of this title, is limited to a 
maximum cost-share of $500,000 per person or legal entity, per disaster.
    (c) The Deputy Administrator may waive the provisions of this 
section on a case by case basis to address unusually large losses. Such 
relief is solely at the discretion of the Deputy Administrator, and the 
failure to provide such relief is not subject to administrative review 
or appeal under parts 11 or 780 of this title.



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 Release application.

    Authority: 7 U.S.C. 1385 and 8786.

    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

[[Page 20]]

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.



Sec. 707.3  Death.

    (a) Where any person who would otherwise be eligible to receive a 
payment dies before the payment is received, payment may be released in 
accordance with this section so long as, and only if, a timely program 
application has been filed by the deceased before the death or filed in 
a timely way before or after the death by a person legally authorized to 
act for the deceased. Timeliness will be determined under the relevant 
program regulations. All program conditions for payment under the 
relevant program regulations must have been met for the deceased to be 
considered otherwise eligible for the payment. However, the payment will 
not be made under this section unless, in addition, a separate release 
application is filed in accordance with Sec. 707.7. If these conditions 
are met, payment may be released without regard to the 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.

[[Page 21]]

    (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.

[30 FR 6246, May 5, 1965, as amended at 75 FR 81835, Dec. 29, 2010]



Sec. 707.4  Disappearance.

    (a) Where any person who would otherwise be eligible to receive a 
payment disappears before the payment is received, payment may be 
released in accordance with this section so long as, and only if, a 
timely program application has been filed by that person before the 
disappearance or filed timely before or after the disappearance by 
someone legally authorized to act for the person involved. Timeliness 
will be determined under the relevant program regulations. All program 
conditions for payment under the relevant program regulations must have 
been met for the person involved to be considered otherwise eligible for 
the payment. However, the payment will not be made unless, in addition, 
a separate release application is filed in accordance with Sec. 707.7. 
If these conditions are met, payment may be released without regard to 
the claims of creditors other than the United States, in accordance with 
the following order of precedence:
    (1) The conservator or liquidator of his estate, if one be duly 
appointed.
    (2) The spouse.
    (3) An adult son or daughter or grandchild for the benefit of his 
estate.
    (4) The mother or father for the benefit of his estate.
    (5) An adult brother or sister for the benefit of his estate.
    (6) Such person as may be authorized under State law to receive 
payment for the benefit of his estate.
    (b) A person shall be deemed to have disappeared if (1) he has been 
missing for a period of more than 3 months, (2) a diligent search has 
failed to reveal his whereabouts, and (3) such person has not 
communicated during such period with other persons who would be expected 
to have heard from him. Evidence of such disappearance must be presented 
to the county committee in the form of a statement executed by the 
person making the application for payment, setting forth the above 
facts, and must be substantiated by a statement from a disinterested 
person who was well acquainted with the person who has disappeared.

[30 FR 6246, May 5, 1965, as amended at 75 FR 81835, Dec. 29, 2010]



Sec. 707.5  Incompetency.

    (a) Where any person who would otherwise be eligible to receive a 
payment is adjudged incompetent by a court of competent jurisdiction 
before the payment is received, payment may be released in accordance 
with this section so long as, and only if, a timely and binding program 
application has been filed by the person involved while capable or by 
someone legally authorized to file an application for the person 
involved. Timeliness is determined under the relevant program 
regulations. In all cases, the payment application must have been timely 
under the relevant program regulations and all program conditions for 
payment must have been met by or on behalf of the person involved. 
However, the payment will not be made unless, in addition, a separate 
release application is filed in accordance with Sec. 707.7. If these 
conditions are met, payment may be released without regard to the claims 
of creditors other than the United States, to the guardian or committee 
legally appointed for the person involved. In case no guardian or 
committee had been appointed, payment, if for not more than $1,000, may 
be released without regard to claims of creditors other than the United 
States, to one of the following in the following order for the benefit 
of the person who was the subject of the adjudication:

[[Page 22]]

    (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 the person (see standard procedure prescribed for the 
respective region).
    (b) In case payment is more than $1,000, payment may be released 
only to such person as may be authorized under State law to receive 
payment for the incompetent, so long as all conditions for other 
payments specified in paragraph (a) of this section and elsewhere in the 
applicable regulations have been met. Those requirements include the 
filing of a proper and timely and legally authorized program application 
by or for the person adjudged incompetent. The release of funds under 
this paragraph will be made without regard to claims of creditors other 
than the United States unless the agency determines otherwise.

[75 FR 81836, Dec. 30, 2010]



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 release of 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.

[30 FR 6246, May 5, 1965, as amended at 75 FR 81836, Dec. 29, 2010]



Sec. 707.7  Release application.

    No payment may be made under this part unless a proper program 
application was filed in accordance with the rules for the program that 
generated the payment. That application must have been timely and filed 
by someone legally authorized to act for the deceased, disappeared, or 
declared-incompetent person. The filer can be the party that earned the 
payment themselves--such as the case of a person who filed a program 
application before they died--or someone legally authorized to act for 
the party that earned the payment. All program conditions for payment 
must have been met before the death, disappearance, or incompetency 
except for the timely filing of the application for payment by the 
person legally authorized to act for the party earning the payment. But, 
further, for the payment to be released under the rules of this part, a 
second application must be filed. That second application is a release 
application filed under this section. In particular, as to the latter, 
where all other conditions have been met, persons desiring to claim 
payment for themselves or an estate in accordance with this part 707 
must do so by filing a release application 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.

[30 FR 6246, May 5, 1965, as amended at 75 FR 81836, Dec. 29, 2010]



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.

[[Page 23]]



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 24]]



 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 25]]

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 26]]

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 27]]


    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 28]]

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 29]]

    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 30]]

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 31]]

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 32]]

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 33]]

 
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 34]]



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 35]]

    (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 36]]

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 37]]

    (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 38]]

    (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 39]]

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 40]]

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 41]]



    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 42]]

    (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 43]]

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 44]]

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 45]]

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 46]]



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 47]]

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 48]]

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 49]]



                 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 50]]

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 51]]

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 52]]

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 the amount specified in Sec. 3.91(b)(10)(i) of 
this title 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.

[67 FR 50763, Aug. 5, 2002, as amended at 75 FR 17560, Apr. 7. 2010]



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

[[Page 53]]

Independence Avenue, SW., Washington, DC 20250-0550.
    (b) Any person who believes that they have been adversely affected 
by a 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.

[[Page 54]]

    (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 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

[[Page 55]]

    (ii) Operating agreement or similar agreement.
    (b) The warehouse facilities of an operator licensed under the Act 
must, as determined by DACO, be:
    (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.

[[Page 56]]



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;
    (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

[[Page 57]]

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 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.

[[Page 58]]



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;
    (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

[[Page 59]]

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 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

[[Page 60]]

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.



                     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.

[[Page 61]]

    (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 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

[[Page 62]]

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.



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 63]]



                      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 755_REIMBURSEMENT TRANSPORTATION COST PAYMENT PROGRAM FOR 
GEOGRAPHICALLY DISADVANTAGED FARMERS AND RANCHERS--Table of Contents



Sec.
755.1 Administration.
755.2 Definitions.
755.3 Time and method of application.
755.4 Eligibility.
755.5 Proof of eligible reimbursement costs incurred.
755.6 Availability of funds.
755.7 Transportation rates.
755.8 Calculation of individual payments.
755.9 Misrepresentation and scheme or device.
755.10 Death, incompetence, or disappearance.
755.11 Maintaining records.
755.12 Refunds; joint and several liability.
755.13 Miscellaneous provisions and appeals.

    Authority: 7 U.S.C. 8792.

    Source: 75 FR 34340, June 17, 2010, unless otherwise noted.



Sec. 755.1  Administration.

    (a) This part establishes the terms and conditions under which the 
Reimbursement Transportation Cost Payment (RTCP) Program for 
geographically disadvantaged farmers and ranchers will be administered.
    (b) The RTCP Program will be administered under the general 
supervision of the FSA Administrator, or a designee, and will be carried 
out in the field by FSA State and county committees and FSA employees.
    (c) FSA State and county committees, and representatives and 
employees thereof, do not have the authority to modify or waive any of 
the provisions of the regulations of this part, except as provided in 
paragraph (e) of this section.
    (d) The FSA State committee will take any action required by the 
provisions of this part that has not been taken by the FSA county 
committee. The FSA State committee will also:
    (1) Correct or require an FSA county committee to correct any action 
taken by the county committee that is not in compliance with the 
provisions of this part.
    (2) Require an FSA county committee to not take an action or 
implement a decision that is not in compliance with the provisions of 
this part.
    (e) No provision or delegation of this part to an FSA State 
committee or a county committee will preclude the FSA Administrator, or 
a designee, from determining any question arising under the program or 
from reversing or modifying any determination made by a State committee 
or a county committee.
    (f) The Deputy Administrator for Farm Programs, FSA, may waive or 
modify program requirements of this part in cases where failure to meet 
requirements does not adversely affect the operation of the program and 
where the requirement is not statutorily mandated.



Sec. 755.2  Definitions.

    The following definitions apply to this part. The definitions in 
parts 718 and 1400 of this title also apply, except where they may 
conflict with the definitions in this section.
    Actual transportation rate means the transportation rate that 
reflects the actual transportation costs incurred and can be determined 
by supporting documentation.
    Agricultural commodity means any agricultural commodity (including 
horticulture, aquaculture, and floriculture), food, feed, fiber, 
livestock (including elk, reindeer, bison, horses, or deer), or insects, 
and any product thereof.

[[Page 64]]

    Agricultural operation means a parcel or parcels of land; or body of 
water applicable to aquaculture, whether contiguous or noncontiguous, 
constituting a cohesive management unit for agricultural purposes. An 
agricultural operation will be regarded as located in the county in 
which the principal dwelling is situated, or if there is no dwelling 
thereon, it will be regarded to be in the county in which the major 
portion of the land or applicable body of water is located.
    Application period means the period established by the Deputy 
Administrator for geographically disadvantaged farmers and ranchers to 
apply for program benefits.
    County office or FSA county office means the FSA offices responsible 
for administering FSA programs in a specific area, sometimes 
encompassing more than one county, in a State.
    Department or USDA means the U.S. Department of Agriculture.
    Eligible reimbursement amount means the reported costs incurred to 
transport an agricultural commodity or input used to produce an 
agricultural commodity in an insular area, Alaska, or Hawaii, over a 
distance of more than 30 miles. The amount is calculated by multiplying 
the number of units of the reported transportation amount times the 
applicable transportation fixed, set, or actual rate times the 
applicable FY allowance (COLA).
    Farm Service Agency or FSA means the Farm Service Agency of the 
USDA.
    Fiscal year or FY means the year beginning October 1 and ending the 
following September 30. The fiscal year will be designated for this part 
by year reference to the calendar year in which it ends. For example, FY 
2010 is from October 1, 2009, through September 30, 2010 (inclusive).
    Fixed transportation rate means the per unit transportation rate 
determined by FSA to reflect the transportation cost applicable to an 
agricultural commodity or input used to produce an agricultural 
commodity in a particular region.
    FY allowance (COLA) means the nonforeign area cost of living 
allowance or post differential, as applicable, for that FY set by Office 
of Personnel Management for Federal employees stationed in Alaska, 
Hawaii, and other insular areas, as authorized by 5 U.S.C. 5941 and E.O. 
10000 and specified in 5 CFR part 591, subpart B, appendices A and B.
    Geographically disadvantaged farmer or rancher means a farmer or 
rancher in an insular area, Alaska, or Hawaii.
    Input transportation costs means those transportation costs of 
inputs used to produce an agricultural commodity including, but not 
limited to, air freight, ocean freight, and land freight of chemicals, 
feed, fertilizer, fuel, seeds, plants, supplies, equipment parts, and 
other inputs as determined by FSA.
    Insular area means the Commonwealth of Puerto Rico; Guam; American 
Samoa; the Commonwealth of the Northern Mariana Islands; the Federated 
States of Micronesia; the Republic of the Marshall Islands; the Republic 
of Palau; and the Virgin Islands of the United States.
    Payment amount means the amount due a producer that is the sum of 
all eligible reimbursement amounts, as calculated by FSA subject to the 
availability of funds, and subject to an $8,000 cap per producer per FY.
    Producer means any geographically disadvantaged farmer or rancher 
who is an individual, group of individuals, partnership, corporation, 
estate, trust, association, cooperative, or other business enterprise or 
other legal entity, as defined in Sec. 1400.3 of this title, who is, or 
whose members are, a citizen of or legal resident alien in the United 
States, and who, as determined by the Secretary, shares in the risk of 
producing an agricultural commodity in substantial commercial 
quantities, and who is entitled to a share of the agricultural commodity 
from the agricultural operation.
    Reported transportation amount means the reported number of units 
(such as pounds, bushels, pieces, or parts) applicable to an 
agricultural commodity or input used to produce an agricultural 
commodity, which is used in calculating the eligible reimbursement 
amount.
    Set transportation rate means the transportation rate established by 
FSA for a commodity or input for which there is not a fixed 
transportation rate

[[Page 65]]

or supporting documentation of the actual transportation rate.
    United States means the 50 States of the United States of America, 
the District of Columbia, the Commonwealths of Puerto Rico and the 
Northern Mariana Islands, and any other territory or possession of the 
United States.
    Verifiable records means evidence that is used to substantiate the 
amount of eligible reimbursements by geographically disadvantaged 
farmers and ranchers in an agricultural operation that can be verified 
by FSA through an independent source.



Sec. 755.3  Time and method of application.

    (a) To be eligible for payment, producers must obtain and submit a 
completed application for payment and meet other eligibility 
requirements specified in this part. Producers may obtain an application 
in person, by mail, or by facsimile from any county FSA office. In 
addition, producers may download a copy of the application at http://
www.sc.egov.usda.gov.
    (b) An application for payment must be submitted on a completed 
application form. Applications and any other supporting documentation 
must be submitted to the FSA county office serving the county where the 
agricultural operation is located, but, in any case, must be received by 
the FSA county office by the close of business on the last day of the 
application period established by the Deputy Administrator.
    (c) All producers who incurred transportation costs for eligible 
reimbursements and who share in the risk of an agricultural operation 
must certify to the information on the application before the 
application will be considered complete. FSA may require the producer to 
provide documentation to support all verifiable records.
    (d) Each producer requesting payment under this part must certify to 
the accuracy and truthfulness of the information provided in their 
application and any supporting documentation. All information provided 
is subject to verification by FSA. Refusal to allow FSA or any other 
agency of the Department of Agriculture to verify any information 
provided will result in a denial of eligibility. Furnishing the 
information is voluntary; however, without it program benefits will not 
be approved. Providing a false certification to the Federal Government 
may be punishable by imprisonment, fines and other penalties or 
sanctions.
    (e) To ensure all producers are provided an opportunity to submit 
actual costs for reimbursement at the actual cost rate, applicants will 
have 30 days after the end of the FY to provide supporting documentation 
of actual transportation costs to the FSA County Office. The actual 
costs documented in supporting documentation will override previously 
reported costs of eligible reimbursable costs at the fixed or set rate 
made during the application period.
    (f) If verifiable records are not provided to FSA, the producer will 
be ineligible for payment.
    (g) If supporting documentation is provided within 30 days after the 
end of the FY, but an application was not submitted to the applicable 
FSA County Office before the end of the application period, the producer 
is not eligible for payment.
    (h) Producers who submit applications after the application period 
are not entitled to any payment consideration or determination of 
eligibility. Regardless of the reason why an application is not 
submitted to or received by FSA, any application received after the 
close of business on such date will not be eligible for benefits under 
this program.



Sec. 755.4  Eligibility.

    (a) To be eligible to receive payments under this part, a 
geographically disadvantaged farmer or rancher must:
    (1) Be a producer of an eligible agricultural commodity in 
substantial commercial quantities;
    (2) Incur transportation costs for the transportation of the 
agricultural commodity or input used to produce the agricultural 
commodity;
    (3) Submit an accurate and complete application for payment as 
specified in Sec. 755.3; and
    (4) Be in compliance with the wetland and highly erodible 
conservation requirements in part 12 of this title and meet the adjusted 
gross income and

[[Page 66]]

pay limit eligibility requirements in part 1400 of this title, as 
applicable, except that the $8,000 cap provided for in this rule is a 
per producer cap, not a per person cap. For example, a partnership of 
four individuals would be considered one producer, not four persons, for 
the purposes of this cap and thus the partnership could only generate a 
single $8,000 payment under this program if the cap holds because of 
full subscription of the program.
    (b) Individual producers in an agricultural operation that is an 
entity are only eligible for a payment based on their share of the 
operation. A producer is not eligible for payment based on the share of 
production of any other producer.
    (c) Multiple producers, such as the buyer and seller of a commodity 
(for example, a producer of hay and a livestock operation that buys the 
hay), are not eligible for payments for the same eligible transportation 
cost. Unless the multiple producers agree otherwise, only the last buyer 
will be eligible for the payment.
    (d) A person or entity determined to be a ``foreign person'' under 
part 1400 of this title is not eligible to receive benefits under this 
part, unless that person provides land, capital, and a substantial 
amount of active personal labor in the production of crops on such farm.
    (e) State and local governments and their political subdivisions and 
related agencies are not eligible for RTCP payments.



Sec. 755.5  Proof of eligible reimbursement costs incurred.

    (a) To be eligible for reimbursement based on FSA fixed or set rates 
as specified in Sec. 755.7, the requirements specified in paragraphs 
(b) and (c) of this section must be met at the time of the application. 
To be eligible for reimbursement of actual costs, the requirements of 
paragraph (d) must also be met, within 30 days after the end of the 
applicable fiscal year.
    (b) Eligible verifiable records to support eligible reimbursement 
costs include, but are not limited to:
    (1) Invoices;
    (2) Account statements;
    (3) Contractual Agreements; or
    (4) Bill of Lading.
    (c) Verifiable records must show:
    (1) Name of producer(s);
    (2) Commodity and unit of measure;
    (3) Type of input(s) associated with transportation costs;
    (4) Date(s) of service;
    (5) Name of person or entity providing the service, as applicable, 
and;
    (6) Retail sales receipts with verifiable records handwritten as 
applicable.
    (d) To be eligible for reimbursement based on actual costs, the 
producer must provide supporting documentation that documents the 
specific costs incurred for transportation of each commodity or input. 
Such documentation must:
    (1) Show transportation costs for each specific commodity or input, 
and
    (2) Show the units of measure for each commodity or input, such that 
FSA can determine the transportation cost per unit.



Sec. 755.6  Availability of funds.

    (a) Payments under this part are subject to the availability of 
funds.
    (b) A reserve will be created to handle appeals and errors.



Sec. 755.7  Transportation rates.

    (a) Payments may be based on fixed, set, or actual transportation 
rates. Fixed and set transportation rates will be established by FSA, 
based on available data for transportation costs for that commodity or 
input in the applicable State or insular region.
    (b) Fixed transportation rates will establish per unit 
transportation costs for each eligible commodity or input used to 
produce the eligible commodity.
    (c) Set transportation rates will be established for those 
transportation costs that are not on the FSA list of fixed rates and for 
which an actual rate cannot be documented. The set transportation rate 
will be set by FSA, based on available data of transportation costs for 
similar commodities and inputs.
    (d) Actual transportation rates will be determined based on 
supporting documentation.

[[Page 67]]



Sec. 755.8  Calculation of individual payments.

    (a) Transportation cost for each commodity or input will be 
calculated by multiplying the number of reported eligible units (the 
reported transportation amount) times the fixed, set, or actual 
transportation rate, as applicable.
    (b) Eligible reimbursement amounts will be calculated by multiplying 
the result of paragraph (a) of this section times the appropriate FY 
COLA percentage, as provided in this part.
    (c) If transported inputs are used for both eligible and ineligible 
commodities, the eligible reimbursable costs will be determined on a 
revenue share of eligible commodities times input cost, as determined by 
FSA, and transportation may be allowed only for those commodities which 
were produced for the commercial market.
    (d) The total payment amount for a producer is the sum of all 
eligible reimbursable amounts determined in paragraph (b) of this 
section for all commodities and inputs used to produce the eligible 
commodities listed on the application.
    (e) Payment amounts are subject to $8,000 cap per FY per producer as 
defined in this part, not per ``person'' or ``legal entity'' as those 
terms might be defined in part 1400 of this title.
    (f) In the event that approval of all calculated payment amounts 
would result in expenditures in excess of the amount available, FSA will 
recalculate the payment amounts in a manner that FSA determines to be 
fair and reasonable.



Sec. 755.9  Misrepresentation and scheme or device.

    (a) In addition to other penalties, sanctions or remedies as may 
apply, a producer will be ineligible to receive payments under this part 
if the producer is determined by FSA to have:
    (1) Adopted any scheme or device that tends to defeat the purpose of 
this part;
    (2) Made any fraudulent representation; or
    (3) Misrepresented any fact affecting a program determination.
    (b) Any payment to any producer engaged in a misrepresentation, 
scheme, or device, must be refunded with interest together with such 
other sums as may become due. Any producer engaged in acts prohibited by 
this section and receiving payment under this part will be jointly and 
severally liable with other producers involved in such claim for 
benefits for any refund due under this section and for related charges. 
The remedies provided in this part will be in addition to other civil, 
criminal, or administrative remedies that may apply.



Sec. 755.10  Death, incompetence, or disappearance.

    (a) In the case of the death, incompetency, or disappearance of a 
person or the dissolution of an entity that is eligible to receive a 
payment in accordance with this part, such alternate person or persons 
specified in part 707 of this chapter may receive such payment, as 
determined appropriate by FSA.
    (b) Payments may be made to an otherwise eligible producer who is 
now deceased or to a dissolved entity if a representative who currently 
has authority to enter into an application for the producer or the 
producer's estate signs the application for payment. Proof of authority 
over the deceased producer's estate or a dissolved entity must be 
provided.
    (c) 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 be 
identified in the application for payment.



Sec. 755.11  Maintaining records.

    Persons applying for payment under this part must maintain records 
and accounts to document all eligibility requirements specified in this 
part. Such records and accounts must be retained for 3 years after the 
date of payment to the producer under this part.



Sec. 755.12  Refunds; joint and several liability.

    (a) Any producer that receives excess payment, payment as the result 
of erroneous information provided by any person, or payment resulting 
from a

[[Page 68]]

failure to comply with any requirement or condition for payment under 
this part, must refund the amount of that payment to FSA.
    (b) Any refund required will be due from the date of the 
disbursement by the agency with interest determined in accordance with 
paragraph (d) of this section and late payment charges as provided in 
part 1403 of this title.
    (c) Each producer that has an interest in the agricultural operation 
will be jointly and severally liable for any refund and related charges 
found to be due to FSA.
    (d) Interest will be applicable to any refunds to FSA required in 
accordance with parts 792 and 1403 of this title except as otherwise 
specified in this part. Such interest will be charged at the rate that 
the U.S. Department of the Treasury charges FSA for funds, and will 
accrue from the date FSA made the payment to the date the refund is 
repaid.
    (e) FSA may waive the accrual of interest if it determines that the 
cause of the erroneous payment was not due to any action of the person 
or entity, or was beyond the control of the person or entity committing 
the violation. Any waiver is at the discretion of FSA alone.



Sec. 755.13  Miscellaneous provisions and appeals.

    (a) Offset. FSA may offset or withhold any amount due to FSA from 
any benefit provided under this part in accordance with the provisions 
of part 1403 of this title.
    (b) Claims. Claims or debts will be settled in accordance with the 
provisions of part 1403 of this title.
    (c) Other interests. Payments or any portion thereof due under this 
part will be made without regard to questions of title under State law 
and without regard to any claim or lien against the eligible 
reimbursable costs thereof, in favor of the owner or any other creditor 
except agencies and instrumentalities of the U.S. Government.
    (d) Assignments. Any producer entitled to any payment under this 
part may assign any payments in accordance with the provisions of part 
1404 of this title.
    (e) Violations regarding controlled substances. The provisions of 
Sec. 718.6 of this chapter, which generally limit program payment 
eligibility for persons who have engaged in certain offenses with 
respect to controlled substances, will apply to this part.
    (f) Appeals. The appeal regulations specified in parts 11 and 780 of 
this chapter apply to determinations made under this part.



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.

  Subpart B_General Provisions for Supplemental Agricultural Disaster 
                           Assistance Programs

760.101 Applicability.

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760.102 Administration of ELAP, LFP, LIP, SURE, and TAP.
760.103 Eligible producer.
760.104 Risk management purchase requirements.
760.105 Waiver for certain crop years; buy-in.
760.106 Equitable relief.
760.107 Socially disadvantaged, limited resource, or beginning farmer or 
          rancher.
760.108 Payment limitation.
760.109 Misrepresentation and scheme or device.
760.110 Appeals.
760.111 Offsets, assignments, and debt settlement.
760.112 Records and inspections.
760.113 Refunds; joint and several liability.
760.114 Minors.
760.115 Deceased individuals or dissolved entities.
760.116 Miscellaneous.

Subpart C_Emergency Assistance for Livestock, Honeybees, and Farm-Raised 
                              Fish Program

760.201 Applicability.
760.202 Definitions.
760.203 Eligible losses, adverse weather, and other loss conditions.
760.204 Eligible livestock, honeybees, and farm-raised fish.
760.205 Eligible producers, owners, and contract growers.
760.206 Notice of loss and application process.
760.207 Notice of loss and application period.
760.208 Availability of funds.
760.209 Livestock payment calculations.
760.210 Honeybee payment calculations.
760.211 Farm-raised fish payment calculations.

               Subpart D_Livestock Forage Disaster Program

760.301 Applicability.
760.302 Definitions.
760.303 Eligible livestock producer.
760.304 Covered livestock.
760.305 Eligible grazing losses.
760.306 Application for payment.
760.307 Payment calculation.

                  Subpart E_Livestock Indemnity Program

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

                    Subpart F_Tree Assistance Program

760.500 Applicability.
760.501 Administration.
760.502 Definitions.
760.503 Eligible losses.
760.504 Eligible orchardists and nursery tree growers.
760.505 Application.
760.506 Payment calculation.
760.507 Obligations of a participant.

       Subpart G_Supplemental Revenue Assistance Payments Program

760.601 Applicability.
760.602 Definitions.
760.610 Participant eligibility.
760.611 Qualifying losses, eligible causes and types of loss.
760.613 De minimis exception.
760.614 Lack of access.
760.620 Time and method of application and certification of interests.
760.621 Requirement to report acreage and production.
760.622 Incorrect or false producer production evidence.
760.631 SURE guarantee calculation.
760.632 Payment acres.
760.633 2008 SURE guarantee calculation.
760.634 SURE guarantee for value loss crops.
760.635 Total farm revenue.
760.636 Expected revenue.
760.637 Determination of production.
760.638 Determination of SURE yield.
760.640 National average market price.
760.641 Adjustments made to NAMP to reflect loss of quality.
760.650 Calculating SURE.

                    Subpart H_Crop Assistance Program

760.701 Applicability.
760.702 Definitions.
760.703 Producer eligibility requirements.
760.704 Time and method of application.
760.705 Payment rates and calculation of payments.
760.706 Availability of funds.
760.707 Proof of loss.
760.708 Miscellaneous provisions and limitations.

                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.

[[Page 70]]

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.

        Subpart N_Dairy Economic Loss Assistance Payment Program

760.1301 Administration.
760.1302 Definitions and acronyms.
760.1303 Requesting benefits.
760.1304 Eligibility.
760.1305 Proof of production.
760.1306 Availability of funds.
760.1307 Dairy operation payment quantity.
760.1308 Payment rate.
760.1309 Appeals.
760.1310 Misrepresentation and scheme or device.
760.1311 Death, incompetence, or disappearance.
760.1312 Maintaining records.
760.1313 Refunds; joint and several liability.
760.1314 Miscellaneous provisions.

    Authority: 7 U.S.C. 4501, 7 U.S.C. 1531, 16 U.S.C. 3801, note, and 
19 U.S.C. 2497; Title III, Pub. L. 109-234, 120 Stat. 474; Title IX, 
Pub. L. 110-28, 121 Stat. 211; and Sec. 748, Pub. L. 111-80, 123 Stat. 
2131.



                Subpart A_Dairy Indemnity Payment Program

    Authority: 7 U.S.C. 450j-l.

    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

[[Page 71]]

delegated, or to whom he may hereafter delegate, authority to act in his 
stead.
    (b) FSA means the Farm Service Agency, U.S. Department of 
Agriculture.
    (c) Deputy Administrator means the Deputy Administrator 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.

[[Page 72]]

    (u) Base period means the calendar month or 4-week period 
immediately preceding removal of milk from the market.

[43 FR 10535, Mar. 14, 1978, as amended by Amdt. 1, 44 FR 36360, July 
22, 1979; 52 FR 17935, May 13, 1987; 53 FR 44001, Nov. 1, 1988; 56 FR 
1358, Jan. 14, 1991; 61 FR 18485, Apr. 26, 1996; 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 73]]



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 74]]

    (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 75]]

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 76]]

    (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.



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 77]]

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.

    (a) Payment of indemnity claims will be contingent upon the 
availability of FSA funds to pay such claims. Claims will be, to the 
extent practicable within funding limits, paid from available funds, on 
a first-come, first-paid basis, based on the date FSA approves the 
application, until funds available in that fiscal year have been 
expended.
    (b) DIPP claims received in a fiscal year after all available funds 
have been expended will not receive payment for such claims.

[75 FR 41367, July 16, 2010]



  Subpart B_General Provisions for Supplemental Agricultural Disaster 
                           Assistance Programs

    Source: 74 FR 31571, July 2, 2009, unless otherwise noted.



Sec. 760.101  Applicability.

    (a) This subpart establishes general conditions for this subpart and 
subparts C through H of this part and applies only to those subparts. 
Subparts C through H cover the following programs provided for in the 
``2008 Farm Bill'' (Pub. L. 110-246):
    (1) Emergency Assistance for Livestock, Honey Bees, and Farm-Raised 
Fish Program (ELAP);
    (2) Livestock Forage Disaster Program (LFP);
    (3) Livestock Indemnity Payments Program (LIP);
    (4) Supplemental Revenue Assistance Payments Program (SURE); and
    (5) Tree Assistance Program (TAP).
    (b) To be eligible for payments under these programs, participants 
must comply with all provisions under this subpart and the relevant 
particular subpart for that program. All other provisions of law also 
apply.



Sec. 760.102  Administration of ELAP, LFP, LIP, SURE, and TAP.

    (a) The programs in subparts C through H of this part will be 
administered under the general supervision and direction of the 
Administrator, Farm Service Agency (FSA), and the Deputy Administrator 
for Farm Programs, FSA (who is referred to as the ``Deputy 
Administrator'' in this part).
    (b) FSA representatives do not have authority to modify or waive any 
of the provisions of the regulations of this part as amended or 
supplemented, except as specified in paragraph (e) of this section.
    (c) The State FSA committee will take any action required by the 
regulations of this part that the county FSA committee has not taken. 
The State FSA committee will also:

[[Page 78]]

    (1) Correct, or require a county FSA committee to correct, any 
action taken by such county FSA committee that is not in accordance with 
the regulations of this part or
    (2) Require a county FSA committee to withhold taking any action 
that is not in accordance with this part.
    (d) No provision or delegation to a State or county FSA committee 
will preclude the Administrator, the Deputy Administrator for Farm 
Programs, or a designee or other such person, from determining any 
question arising under the programs of this part, 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 FSA committees to waive or modify non-statutory deadlines, or 
other program requirements of this part in cases where lateness or 
failure to meet such requirements does not adversely affect operation of 
the programs in this part. Participants have no right to seek an 
exception under this provision. The Deputy Administrator's refusal to 
consider cases or circumstances or decision not to exercise this 
discretionary authority under this provision will not be considered an 
adverse decision and is not appealable.



Sec. 760.103  Eligible producer.

    (a) In general, the term ``eligible producer'' means, in addition to 
other requirements as may apply, an individual or entity described in 
paragraph (b) of this section that, as determined by the Secretary, 
assumes the production and market risks associated with the agricultural 
production of crops or livestock on a farm either as the owner of the 
farm, when there is no contract grower, or a contract grower of the 
livestock when there is a contract grower.
    (b) To be eligible for benefits, an individual or entity must be a:
    (1) Citizen of the United States;
    (2) Resident alien; for purposes of this part, resident alien means 
``lawful alien'' as defined in 7 CFR part 1400;
    (3) Partnership of citizens of the United States; or
    (4) Corporation, limited liability corporation, or other farm 
organizational structure organized under State law.



Sec. 760.104  Risk management purchase requirements.

    (a) To be eligible for program payments under:
    (1) ELAP, SURE, and TAP, eligible producers for any commodity at any 
location for which the producer seeks benefits must have for every 
commodity on every farm in which the producer has an interest for the 
relevant program year:
    (i) In the case of an ``insurable commodity,'' (which for this part 
means a commodity for which the Deputy Administrator determines 
catastrophic coverage is available from the USDA Risk Management Agency 
(RMA)) obtained catastrophic coverage or better under a policy or plan 
of insurance administered by RMA under the Federal Crop Insurance Act 
(FCIA) (7 U.S.C. 1501-1524), except that this obligation will not 
include crop insurance pilot programs so designated by RMA or to forage 
crops intended for grazing, and
    (ii) In the case of a ``noninsurable commodity,'' (which is any 
commodity for which, as to the particular production in question, is not 
an ``insurable commodity,'' but for which coverage is available under 
the Noninsured Crop Disaster Assistance Program (NAP) operated under 7 
CFR part 1437), have obtained NAP coverage by filing the proper 
paperwork and fee within the relevant deadlines, except that this 
requirement will not include forage on grazing land.
    (2) LFP, with respect to those grazing lands incurring losses for 
which assistance is being requested, eligible livestock producers must 
have:
    (i) Obtained a policy or plan of insurance for the forage crop under 
FCIA, or
    (ii) Filed the required paperwork and paid the administrative fee by 
the applicable State filing deadline for NAP coverage for that grazing 
land.
    (b) Producers who did not purchase a policy or plan of insurance 
administered by RMA in accordance with FCIA (7 U.S.C. 1501-1524), or NAP 
coverage for their applicable crops, will not be eligible for assistance 
under ELAP, LFP, SURE, and TAP, as provided in

[[Page 79]]

paragraph (a) of this section unless the producer is one of the classes 
of farmers for which an exemption under Sec. 760.107 apply, is exempt 
under the ``buy-in'' provisions of this subpart, or is granted relief 
from that requirement by the Deputy Administrator under some other 
provision of this part.
    (c) Producers who have obtained insurance by a written agreement as 
specified in Sec. 400.652(d) of this title even though that production 
would not normally be considered an ``insurable commodity'' under the 
rules of this subpart, will be considered to have met the risk 
management purchase requirement of this subpart with respect to such 
production. The commodity to which the agreement applies will be 
considered for purposes of this subpart to be an ``insurable 
commodity.''
    (d) Producers by an administrative process who were granted NAP 
coverage for the relevant period as a form of relief in an 
administrative proceeding, or who were awarded NAP coverage for the 
relevant period through an appeal through the National Appeals Division 
(NAD), will be considered as having met the NAP eligibility criteria of 
this section for that crop as long as the applicable NAP service fee has 
been paid.
    (e) The risk management purchase requirement for programs specified 
under this part will be determined based on the initial intended use of 
a crop at the time a policy or plan of insurance or NAP coverage was 
purchased and as reported on the acreage report.

[74 FR 31571, July 2, 2009, as amended at 74 FR 46673, Sept. 11, 2009]



Sec. 760.105  Waiver for certain crop years; buy-in.

    (a) For the 2008 crop year, the insurance or NAP purchase 
requirements of Sec. 760.104 (this is referred to as the ``purchase'' 
requirement) will be waived for eligible producers for losses during the 
2008 crop year if the eligible producer paid a fee (buy-in fee) equal to 
the applicable NAP service fee or catastrophic risk protection plan fee 
to the Secretary by September 16, 2008. Payment of a buy-in fee under 
this section is for the sole purpose of becoming eligible for 
participation in ELAP, LFP, SURE, and TAP. Payment of a buy-in fee does 
not provide any actual insurance or NAP coverage or assistance.
    (b) For the 2009 crop year, the purchase requirement will be waived 
for purchases where the closing date for coverage occurred prior to 
August 14, 2008, so long as the buy-in fee set by the Secretary of 
Agriculture was paid by January 12, 2009.
    (c) Any producer of 2008 commodities who is otherwise ineligible 
because of the purchase requirement and who did not meet the conditions 
of paragraph (a) of this section may still be covered for ELAP, SURE, or 
TAP assistance if the producer paid the applicable fee described in 
paragraph (d) of this section no later than May 18, 2009, provided that 
in the case of each:
    (1) Insurable commodity, excluding grazing land, the eligible 
producers on the farm agree to obtain a policy or plan of insurance 
under FCIA (7 U.S.C. 1501-1524), excluding a crop insurance pilot 
program under that subtitle, for the next insurance year for which crop 
insurance is available to the eligible producers on the farm at a level 
of coverage equal to 70 percent or more of the recorded or appraised 
average yield indemnified at 100 percent of the expected market price, 
or an equivalent coverage, and
    (2) Noninsurable commodity, the eligible producers on the farm must 
agree to file the required paperwork, and pay the administrative fee by 
the applicable State filing deadline, for NAP for the next year for 
which a policy is available.
    (d) For producers seeking eligibility under paragraph (c) of this 
section, the applicable buy-in fee for the 2008 crop year was the 
catastrophic risk protection plan fee or the applicable NAP service fee 
in effect prior to NAP service fee adjustments specified in the 2008 
Farm Bill.



Sec. 760.106  Equitable relief.

    (a) The Secretary may provide equitable relief on a case-by-case 
basis for the purchase requirement to eligible participants that:
    (1) Are otherwise ineligible or provide evidence, satisfactory to 
FSA,

[[Page 80]]

that the failure to meet the requirements of Sec. 760.104 for one or 
more eligible crops on the farm was unintentional and not because of any 
fault of the participant, as determined by the Secretary, or
    (2) Failed to meet the requirements of Sec. 760.104 due to the 
enactment of the 2008 Farm Bill after the:
    (i) Applicable sales closing date for a policy or plan of insurance 
in accordance with the FCIA (7 U.S.C. 1501-1524) or
    (ii) Application closing date for NAP.
    (b) Equitable relief will not be granted to participants in 
instances of:
    (1) A scheme or device that had the effect or intent of defeating 
the purposes of a program of insurance, NAP, or any other program 
administered under this part or elsewhere in this title,
    (2) An intentional decision to not meet the purchase or buy-in 
requirements,
    (3) Producers against whom sanctions have been imposed by RMA or FSA 
prohibiting the purchase of coverage or prohibiting the receipt of 
payments otherwise payable under this part,
    (4) Violations of highly erodible land and wetland conservation 
provisions of 7 CFR part 12,
    (5) Producers who are ineligible under any provisions of law, 
including regulations, relating to controlled substances (see for 
example 7 CFR 718.6), or
    (6) A producer's debarment by a federal agency from receiving any 
federal government payment if such debarment included payments of the 
type involved in this matter.
    (c) In general, no relief that is discretionary will be allowed 
except upon a finding by the Deputy Administrator or the Deputy 
Administrator's designee that the person seeking the relief acted in 
good faith as determined in accordance with such rules and procedures as 
may be set by the Deputy Administrator.

[74 FR 31571, July 2, 2009, as amended at 76 FR 54075, Aug. 31, 2011]



Sec. 760.107  Socially disadvantaged, limited resource, or beginning 
farmer or rancher.

    (a) Risk management purchase requirements, as provided in Sec. 
760.104, will be waived for a participant who, as specified in 
paragraphs (b)(1) through (3) of this section, is eligible to be 
considered a ``socially disadvantaged farmer or rancher,'' a ``limited 
resource farmer or rancher,'' or a ``beginning farmer or rancher.''
    (b) To qualify for this section as a ``socially disadvantaged farmer 
or rancher,'' ``limited resource farmer or rancher,'' or ``beginning 
farmer or rancher,'' participants must meet eligibility criteria as 
follows:
    (1) A ``socially disadvantaged farmer or rancher'' is, for this 
section, a farmer or rancher who is a member of a socially disadvantaged 
group whose members have been subjected to racial or ethnic prejudice 
because of their identity as members of a group without regard to their 
individual qualities. Gender is not included as a covered group. 
Socially disadvantaged groups include the following and no others unless 
approved in writing by the Deputy Administrator:
    (i) American Indians or Alaskan Natives,
    (ii) Asians or Asian-Americans,
    (iii) Blacks or African Americans,
    (iv) Native Hawaiians or other Pacific Islanders, and
    (v) Hispanics.
    (2) A ``limited resource farmer or rancher'' means for this section 
a producer who is both:
    (i) A producer whose direct or indirect gross farm sales do not 
exceed $100,000 in both of the two calendar years that precede the 
calendar year that corresponds to the relevant program year, adjusted 
upwards for any general inflation since fiscal year 2004, inflation as 
measured using the Prices Paid by Farmer Index compiled by the National 
Agricultural Statistics Service (NASS), and
    (ii) A producer whose total household income is at or below the 
national poverty level for a family of four, or less than 50 percent of 
the county median household income for the same two calendar years 
referenced in paragraph (b)(2)(i) of this section, as determined

[[Page 81]]

annually using Commerce Department data. (Limited resource farmer or 
rancher status can be determined using a Web site available through the 
Limited Resource Farmer and Rancher Online Self Determination Tool 
through the National Resource and Conservation Service at http://
www.lrftool.sc.egov.usda.gov/tool.asp.)
    (3) A ``beginning farmer or rancher'' means for this section a 
person or legal entity who for a program year both:
    (i) Has never previously operated a farm or ranch, or who has not 
operated a farm or ranch in the previous 10 years, applicable to all 
members (shareholders, partners, beneficiaries, etc., as fits the 
circumstances) of an entity, and
    (ii) Will have or has had for the relevant period materially and 
substantially participated in the operation of a farm or ranch.
    (c) If a legal entity requests to be considered a ``socially 
disadvantaged,'' ``limited resource,'' or ``beginning'' farmer or 
rancher, at least 50 percent of the persons in the entity must in their 
individual capacities meet the definition as provided in paragraphs 
(b)(1) through (3) of this section and it must be clearly demonstrated 
that the entity was not formed for the purposes of avoiding the purchase 
requirements or formed after the deadline for the purchase requirement.

[74 FR 31571, July 2, 2009, as amended at 76 FR 54075, Aug. 31, 2011]



Sec. 760.108  Payment limitation.

    (a) For 2008, no person, as defined and determined under the 
provisions in part 1400 of this title in effect for 2008 may receive 
more than:
    (1) $100,000 total for the 2008 program year under ELAP, LFP, LIP, 
and SURE combined or
    (2) $100,000 for the 2008 program year under TAP.
    (b) For 2009 and subsequent program years, no person or legal 
entity, excluding a joint venture or general partnership, as determined 
by the rules in part 1400 of this title may receive, directly or 
indirectly, more than:
    (1) $100,000 per program year total under ELAP, LFP, LIP, and SURE 
combined; or
    (2) $100,000 per program year under TAP.
    (c) The Deputy Administrator may take such actions as needed, 
whether or not specifically provided for, to avoid a duplication of 
benefits under the multiple programs provided for in this part, or 
duplication of benefits received in other programs, and may impose such 
cross-program payment limitations as may be consistent with the intent 
of this part.
    (1) FSA will review ELAP payments after the funding factor as 
specified in Sec. 760.208 is determined to be 100 percent. FSA will 
ensure that total ELAP payments provided to a participant in a year, 
together with any amount provided to the same participant for the same 
loss as a result of any Federal crop insurance program, the Noninsured 
Crop Disaster Assistance Program, or any other Federal disaster program, 
plus the value of the commodity that was not lost, is not more than 95 
percent of the value of the commodity in the absence of the loss, as 
estimated by FSA.
    (2) [Reserved]
    (d) In applying the limitation on average adjusted gross income 
(AGI) for 2008, an individual or entity is ineligible for payment under 
ELAP, LFP, LIP, SURE, and TAP if the individual's or entity's average 
adjusted gross income (AGI) exceeds $2.5 million for 2007, 2006, and 
2005 under the provisions in part 1400 of this title in effect for 2008.
    (e) For 2009 through 2011, the average AGI limitation provisions in 
part 1400 of this title relating to limits on payments for persons or 
legal entities, excluding joint ventures and general partnerships, with 
certain levels of average adjusted gross income (AGI) will apply under 
this subpart and will apply to each applicant for ELAP, LFP, LIP, SURE, 
and TAP. Specifically, for 2009 through 2011, a person or legal entity 
with an average adjusted gross nonfarm income, as defined in Sec. 
1404.3 of this title, that exceeds $500,000 will not be eligible to 
receive benefits under this part.
    (f) The direct attribution provisions in part 1400 of this title 
apply to ELAP, LFP, LIP, SURE, and TAP for 2009 and subsequent years. 
Under those rules,

[[Page 82]]

any payment to any legal entity will also be considered for payment 
limitation purposes to be a payment to persons or legal entities with an 
interest in the legal entity or in a sub-entity. If any such interested 
person or legal entity is over the payment limitation because of direct 
payment or their indirect interests or a combination thereof, then the 
payment to the actual payee will be reduced commensurate with the amount 
of the interest of the interested person in the payee. Likewise, by the 
same method, if anyone with a direct or indirect interest in a legal 
entity or sub-entity of a payee entity exceeds the AGI levels that would 
allow a participant to directly receive a payment under this part, then 
the payment to the actual payee will be reduced commensurately with that 
interest. For all purposes under this section, unless otherwise 
specified in part 1400 of this title, the AGI figure that will be 
relevant for a person or legal entity will be an average AGI for the 
three taxable years that precede the most immediately preceding complete 
taxable year, as determined by CCC.

[74 FR 31571, July 2, 2009, as amended at 74 FR 46673, Sept. 11, 2009]



Sec. 760.109  Misrepresentation and scheme or device.

    (a) A participant who is determined to have deliberately 
misrepresented any fact affecting a program determination made in 
accordance with this part, or otherwise used a scheme or device with the 
intent to receive benefits for which the participant would not otherwise 
be entitled, will not be entitled to program payments and must refund 
all such payments received, plus interest as determined in accordance 
with part 792 of this chapter. The participant will also be denied 
program benefits for the immediately subsequent period of at least 2 
crop years, and up to 5 crop years. Interest will run from the date of 
the original disbursement by FSA.
    (b) A participant will refund to FSA all program payments, plus 
interest, as determined in accordance with part 792 of this chapter, 
provided however, that in any case it will run from the date of the 
original disbursement, received by such participant with respect to all 
contracts or applications, as may be applicable, if the participant is 
determined to have knowingly done any of the following:
    (1) Adopted any scheme or device that tends to defeat the purpose of 
the program,
    (2) Made any fraudulent representation, or
    (3) Misrepresented any fact affecting a program determination.



Sec. 760.110  Appeals.

    (a) Appeals. Appeal regulations set forth at parts 11 and 780 of 
this title apply to this part.
    (b) Determinations not eligible for administrative review or appeal. 
FSA determinations that are not in response to a specific individual 
participant's application are not to be construed to be individual 
program eligibility determinations or adverse decisions and are, 
therefore, not subject to administrative review or appeal under parts 11 
or 780 of this title. Such determinations include, but are not limited 
to, application periods, deadlines, coverage periods, crop years, fees, 
prices, general statutory or regulatory provisions that apply to 
similarly situated participants, national average payment prices, 
regions, crop definition, average yields, and payment factors 
established by FSA for any of the programs for which this subpart 
applies or similar matters requiring FSA determinations.



Sec. 760.111  Offsets, assignments, and debt settlement.

    (a) Any payment to any participant under this part 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 in part 792 of this title 
apply to payments made under this part.
    (b) Any participant entitled to any payment may assign any 
payment(s) in accordance with regulations governing the assignment of 
payments in part 1404 of this title.

[[Page 83]]



Sec. 760.112  Records and inspections.

    (a) Any participant receiving payments under any program in ELAP, 
LFP, LIP, SURE, or TAP, or any other legal entity or person who provides 
information for the purposes of enabling a participant to receive a 
payment under ELAP, LFP, LIP, SURE, or TAP, must:
    (1) Maintain any books, records, and accounts supporting the 
information for 3 years following the end of the year during which the 
request for payment was submitted, and
    (2) Allow authorized representatives of USDA and the Government 
Accountability Office, during regular business hours, to inspect, 
examine, and make copies of such books or records, and to enter the farm 
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 information provided by or for the participant.
    (b) [Reserved]



Sec. 760.113  Refunds; joint and several liability.

    (a) In the event that the participant fails to comply with any term, 
requirement, or condition for payment or assistance arising under ELAP, 
LFP, LIP, SURE, or TAP and if any refund of a payment to FSA will 
otherwise become due in connection with this part, the participant must 
refund to FSA all payments made in regard to such matter, together with 
interest and late-payment charges as provided for in part 792 of this 
chapter provided that interest will in all cases run from the date of 
the original disbursement.
    (b) All persons with a financial interest in an operation or in an 
application for payment will be jointly and severally liable for any 
refund, including related charges, that is determined to be due FSA for 
any reason under this part.



Sec. 760.114  Minors.

    A minor child is eligible to apply for program benefits under ELAP, 
LFP, LIP, SURE, or TAP if all the eligibility requirements are met and 
the provision for minor children in part 1400 of this title are met.



Sec. 760.115  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. 760.116  Miscellaneous.

    (a) As a condition to receive benefits under ELAP, LFP, LIP, SURE, 
or TAP, 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 those provisions or under any law.
    (b) Rules of the Commodity Credit Corporation that are cited in this 
part will be applied to this subpart in the same manner as if the 
programs covered in this subpart were programs funded by the Commodity 
Credit Corporation.



Subpart C_Emergency Assistance for Livestock, Honeybees, and Farm-Raised 
                              Fish Program

    Source: 74 FR 46673, Sept. 11, 2009, unless otherwise noted.



Sec. 760.201  Applicability.

    (a) This subpart establishes the terms and conditions under which 
the Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish 
Program (ELAP) will be administered.
    (b) Eligible producers of livestock, honeybees, and farm-raised fish 
will be compensated to reduce eligible losses that occurred in the 
calendar year for which the producer requests benefits.

[[Page 84]]

The eligible loss must have been a direct result of eligible adverse 
weather or eligible loss conditions as determined by the Deputy 
Administrator, including, but not limited to, blizzards, wildfires, 
disease, and insect infestation. ELAP does not cover losses that are 
covered under LFP, LIP, or SURE.



Sec. 760.202  Definitions.

    The following definitions apply to this subpart and to the 
administration of ELAP. 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 breed bovine animal that was used 
for breeding purposes that was at least 2 years old before the beginning 
date of the eligible adverse weather or eligible loss condition.
    Adult beef cow means a female beef breed bovine animal that had 
delivered one or more offspring before the beginning date of the 
eligible adverse weather or eligible loss condition. A first-time bred 
beef heifer is also considered an adult beef cow if it was pregnant on 
or by the beginning date of the eligible adverse weather or eligible 
loss condition.
    Adult buffalo and beefalo bull means a male animal of those breeds 
that was used for breeding purposes and was at least 2 years old before 
the beginning date of the eligible adverse weather or eligible loss 
condition.
    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 eligible adverse weather or eligible loss condition. A first-time 
bred buffalo or beefalo heifer is also considered an adult buffalo or 
beefalo cow if it was pregnant by the beginning date of the eligible 
adverse weather or eligible loss condition.
    Adult dairy bull means a male dairy breed bovine animal that was 
used primarily for breeding dairy cows and was at least 2 years old by 
the beginning date of the eligible adverse weather or eligible loss 
condition.
    Adult dairy cow means a female bovine dairy breed animal used for 
the purpose of providing milk for human consumption that had delivered 
one or more offspring by the beginning date of the eligible adverse 
weather or eligible loss condition. A first-time bred dairy heifer is 
also considered an adult dairy cow if it was pregnant by the beginning 
date of the eligible adverse weather or eligible loss condition.
    Agricultural operation means a farming operation.
    Application means FSA form used to apply for either the emergency 
loss assistance for livestock or emergency loss assistance for farm-
raised fish or honeybees.
    Aquatic species means any species of aquatic organism grown as food 
for human consumption, fish raised as feed for fish that are consumed by 
humans, or ornamental fish propagated and reared in an aquatic medium by 
a commercial operator on private property in water in a controlled 
environment. Catfish and crawfish are both defined as aquatic species 
for ELAP. However, aquatic species do not include reptiles or 
amphibians.
    Bait fish means small fish caught for use as bait to attract large 
predatory fish. For ELAP, it also must meet the definition of aquatic 
species and not be raised as food for fish; provided, however, that only 
bait fish produced in a controlled environment can generate claims under 
ELAP.
    Buck means a male goat.
    Commercial use means used in the operation of a business activity 
engaged in as a means of livelihood for profit by the eligible producer.
    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.
    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) was in fact controlled by the participant at the time of the 
eligible adverse weather or eligible loss condition.
    County committee or county office means the respective FSA committee 
or office.

[[Page 85]]

    Deputy Administrator or DAFP means the Deputy Administrator for Farm 
Programs, Farm Service Agency, U.S. Department of Agriculture or the 
designee.
    Eligible adverse weather or eligible loss condition means any 
disease, adverse weather, or other loss condition as determined by the 
Deputy Administrator. The eligible adverse weather or eligible loss 
condition would have resulted in agricultural losses not covered by 
other programs in this part for which the Deputy Administrator 
determines financial assistance needs to be provided to producers. The 
disease, adverse weather, or other conditions may include, but are not 
limited to, blizzards, wildfires, water shortages, and other factors. 
Specific eligible adverse weather and eligible loss conditions may vary 
based on the type of loss. Identification of eligible adverse weather 
and eligible loss conditions will include locations (National, State, or 
county-level) and start and end dates.
    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.
    Farm-raised fish means any aquatic species that is propagated and 
reared in a controlled environment.
    FSA means the Farm Service Agency.
    Game or sport fish means fish pursued for sport by recreational 
anglers; provided, however, that only game or sport fish produced in a 
controlled environment can generate claims under ELAP.
    Goat means a domesticated, ruminant mammal of the genus Capra, 
including Angora goats. Goats are further delineated into categories by 
sex (bucks and nannies) and age (kids).
    Kid means a goat less than 1 year old.
    Lamb means a sheep less than 1 year old.
    Livestock owner, for death loss purposes, means one having legal 
ownership of the livestock for which benefits are being requested on the 
day such livestock died due to an eligible adverse weather or eligible 
loss condition. For all other purposes of loss under ELAP, ``livestock 
owner'' means one having legal ownership of the livestock for which 
benefits are being requested during the 60 days prior to the beginning 
date of the eligible adverse weather or eligible loss condition.
    Nanny means a female goat.
    Non-adult beef cattle means a beef breed bovine animal that does not 
meet the definition of adult beef cow or bull. Non-adult beef cattle are 
further delineated by weight categories of either less than 400 pounds 
or 400 pounds or more at the time they died. For a loss other than 
death, means a bovine animal less than 2 years old that that weighed 500 
pounds or more on or before the beginning date of the eligible adverse 
weather or eligible loss condition.
    Non-adult buffalo or beefalo means an animal of those breeds that 
does not meet the definition of adult buffalo or beefalo cow or bull. 
Non-adult buffalo or beefalo are further delineated by weight categories 
of either less than 400 pounds or 400 pounds or more at the time of 
death. For a loss other than death, means an animal of those breeds that 
is less than 2 years old that weighed 500 pounds or more on or before 
the beginning date of the eligible adverse weather or eligible loss 
condition.
    Non-adult dairy cattle means a bovine dairy breed animal used for 
the purpose of providing milk for human consumption that does not meet 
the definition of adult dairy cow or bull. Non-adult dairy cattle are 
further delineated by weight categories of either less than 400 pounds 
or 400 pounds or more at the time they died. For a loss other than 
death, means a bovine dairy breed animal used for the purpose of 
providing milk for human consumption that is less than 2 years old that 
weighed 500 pounds or more on or before the beginning date of the 
eligible adverse weather or eligible loss condition.
    Normal grazing period, with respect to a county, means the normal 
grazing period during the calendar year with respect to each specific 
type of grazing land or pastureland in the county.
    Normal mortality means the numerical amount, computed by a 
percentage, as established for the area by the FSA State Committee, of 
expected livestock deaths, by category, that normally

[[Page 86]]

occur during a calendar year for a producer.
    Poultry means domesticated chickens, turkeys, ducks, and geese. 
Poultry are further delineated into categories by sex, age, and purpose 
of production as determined by FSA.
    Ram means a male sheep.
    Secretary means the Secretary of Agriculture or a designee of the 
Secretary.
    Sheep means a domesticated, ruminant mammal of the genus Ovis. Sheep 
are further defined by sex (rams and ewes) and age (lambs) for purposes 
of dividing into categories for loss calculations.
    State committee, State office, county committee, or county office 
means the respective FSA committee or office.
    Swine means a domesticated omnivorous pig, hog, or boar. Swine for 
purposes of dividing into categories for loss calculations are further 
delineated into categories by sex and weight as determined by FSA.
    United States means all 50 States of the United States, the 
Commonwealth of Puerto Rico, the Virgin Islands of the United States, 
Guam, and the District of Columbia.



Sec. 760.203  Eligible losses, adverse weather, and other loss conditions.

    (a) An eligible loss covered under this subpart is a loss that an 
eligible producer or contract grower of livestock, honeybees, or farm-
raised fish incurs due to an eligible adverse weather or eligible loss 
condition, as determined by the Deputy Administrator, (including, but 
not limited to, blizzards and wildfires).
    (b) A loss covered under LFP, LIP, or SURE is not eligible for ELAP.
    (c) To be eligible, the loss must have occurred:
    (1) During the calendar year for which payment is being requested 
and
    (2) Due to an eligible adverse weather event or loss condition that 
occurred on or after January 1, 2008, and before October 1, 2011.
    (d) For a livestock feed loss to be considered an eligible loss, the 
livestock feed loss must be one of the following:
    (1) Loss of purchased forage or feedstuffs that was intended for use 
as feed for the participant's eligible livestock that was physically 
located in the county where the eligible adverse weather or eligible 
loss condition occurred on the beginning date of the eligible adverse 
weather or eligible loss condition. The loss must be due to an eligible 
adverse weather or eligible loss condition, as determined by the Deputy 
Administrator, including, but not limited to, blizzard, flood, 
hurricane, tidal surge, tornado, volcanic eruption, wildfire on non-
Federal land, or lightning;
    (2) Loss of mechanically harvested forage or feedstuffs intended for 
use as feed for the participant's eligible livestock that was physically 
located in the county where the eligible adverse weather or eligible 
loss condition occurred on the beginning date of the eligible adverse 
weather or eligible loss condition. The loss must have occurred after 
harvest due to an eligible adverse weather or eligible loss condition, 
as determined by the Deputy Administrator, including, but not limited 
to, blizzard, flood, hurricane, tidal surge, tornado, volcanic eruption, 
wildfire on non-Federal land, or lightning;
    (3) A loss resulting from the additional cost incurred for providing 
or transporting livestock feed to eligible livestock due to an eligible 
adverse weather or eligible loss condition as determined by the Deputy 
Administrator, including, but not limited to, costs associated with 
equipment rental fees for hay lifts and snow removal. The additional 
costs incurred must have been incurred for losses suffered in the county 
where the eligible adverse weather or eligible loss condition occurred;
    (4) A loss resulting from the additional cost of purchasing 
additional livestock feed, above normal quantities, required to maintain 
the eligible livestock during an eligible adverse weather or eligible 
loss condition, until additional livestock feed becomes available, as 
determined by the Deputy Administrator. To be eligible, the additional 
feed purchased above normal quantities must be feed that is fed to 
maintain livestock in the county where the eligible adverse weather or 
eligible loss condition occurred.
    (e) For a grazing loss to be considered eligible, the grazing loss 
must have

[[Page 87]]

been incurred on eligible grazing lands physically located in the county 
where the eligible adverse weather or eligible loss condition occurred. 
The grazing loss must be due to an eligible adverse weather or eligible 
loss condition, as determined by the Deputy Administrator, including, 
but not limited to, flood, freeze, hurricane, hail, tidal surge, 
volcanic eruption, and wildfire on non-Federal land. The grazing loss 
will not be eligible if it is due to an adverse weather condition 
covered by LFP as specified in subpart D, such as drought or wildfire on 
federally managed land where the producer is prohibited by the Federal 
agency from grazing the normally permitted livestock on the managed 
rangeland due to a fire.
    (f) For a loss due to livestock death to be considered eligible, the 
livestock death must have occurred in the county where the eligible loss 
condition occurred. The livestock death must be due to an eligible loss 
condition determined as eligible by the Deputy Administrator and not 
related to an eligible adverse weather event as specified in Subpart E 
for LIP.
    (g) For honeybee or farm-raised fish feed losses to be considered 
eligible, the honeybee or farm-raised fish feed producer must have 
incurred the loss in the county where the eligible adverse weather or 
eligible loss condition occurred. The honeybee or farm-raised fish feed 
losses must be for feed that was intended as feed for the honeybees or 
farm-raised fish that was damaged or destroyed due to an eligible 
adverse weather or eligible loss condition, as determined by the Deputy 
Administrator, including, but not limited to, earthquake, excessive 
wind, flood, hurricane, tidal surge, tornado, volcanic eruption, and 
wildfire.
    (h) For honeybee colony or honeybee hive losses to be considered 
eligible, the honeybee colony or honeybee hive producer must have 
incurred the loss in the county where the eligible adverse weather or 
eligible loss condition occurred. The honeybee colony or honeybee hive 
losses must be due to an eligible adverse weather or eligible loss 
condition, as determined by the Deputy Administrator, including, but not 
limited to, earthquake, excessive wind, flood, hurricane, tornado, 
volcanic eruption, and wildfire. To be eligible for a loss of honeybees 
due to colony collapse disorder, the eligible honeybee producer must 
provide acceptable documentation to support that the loss was due to 
colony collapse disorder. Except for 2008 and 2009 honeybee losses, 
acceptable documentation must include an acceptable colony collapse 
disorder certification by an independent third party as determined by 
the Deputy Administrator, plus any other documentation requested by FSA. 
For 2008 and 2009 honeybee losses such an independent certification is 
not required in all cases, but rather a self-certification by the 
honeybee producer as determined acceptable by the Deputy Administrator 
may be allowed in addition to whatever other documentation might be 
requested.
    (i) For a death loss for bait fish or game fish to be considered 
eligible, the producer must have incurred the loss in the county where 
the eligible adverse weather or eligible loss condition occurred. The 
bait fish or game fish death must be due to an eligible adverse weather 
or eligible loss condition as determined by the Deputy Administrator 
including, but not limited to, an earthquake, flood, hurricane, tidal 
surge, tornado, and volcanic eruption.

[74 FR 46673, Sept. 11, 2009, as amended at 75 FR 19188, Apr. 14, 2010; 
76 FR 54075, Aug. 31, 2010]



Sec. 760.204  Eligible livestock, honeybees, and farm-raised fish.

    (a) To be considered eligible livestock for livestock feed losses 
and grazing losses, livestock must meet all the following conditions:
    (1) Be alpacas, adult or non-adult dairy cattle, adult or non-adult 
beef cattle, adult or non-adult buffalo, adult or non-adult beefalo, 
deer, elk, emus, equine, goats, llamas, poultry, reindeer, sheep, or 
swine;
    (2) Be livestock that would normally have been grazing the eligible 
grazing land or pastureland during the normal grazing period for the 
specific type of grazing land or pastureland for the county;
    (3) Be livestock that is owned, cash-leased, purchased, under 
contract for purchase, or been raised by a contract

[[Page 88]]

grower or an eligible livestock producer, during the 60 days prior to 
the beginning date of the eligible adverse weather or eligible loss 
condition;
    (4) Be livestock that has been maintained for commercial use as part 
of the producer's farming operation on the beginning date of the 
eligible adverse weather or eligible loss condition;
    (5) Be livestock that has not been produced and maintained for 
reasons other than commercial use as part of a farming operation; and
    (6) Be livestock that was not in a feedlot, on the beginning date of 
the eligible adverse weather or eligible loss condition, as a part of 
the normal business operation of the producer, as determined by the 
Deputy Administrator.
    (b) The eligible livestock types for feed losses and grazing losses 
are:
    (1) Adult beef cows or bulls,
    (2) Adult buffalo or beefalo cows or bulls,
    (3) Adult dairy cows or bulls,
    (4) Alpacas,
    (5) Deer,
    (6) Elk,
    (7) Emus,
    (8) Equine,
    (9) Goats,
    (10) Llamas,
    (11) Non-adult beef cattle,
    (12) Non-adult buffalo or beefalo,
    (13) Non-adult dairy cattle,
    (14) Poultry,
    (15) Reindeer,
    (16) Sheep, and
    (17) Swine;
    (c) Ineligible livestock for feed losses and grazing losses include, 
but are not limited to:
    (1) Livestock that were or would have been in a feedlot, on the 
beginning date of the eligible adverse weather or eligible loss 
condition, as a part of the normal business operation of the producer, 
as determined by FSA;
    (2) Yaks;
    (3) Ostriches;
    (4) All beef and dairy cattle, and buffalo and beefalo that weighed 
less than 500 pounds on the beginning date of the eligible adverse 
weather or eligible loss condition;
    (5) Any wild free roaming livestock, including horses and deer;
    (6) 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 exclusively for 
recreational purposes, such as:
    (i) Roping,
    (ii) Hunting,
    (iii) Show,
    (iv) Pleasure,
    (v) Use as pets, or
    (vi) Consumption by owner.
    (d) For death losses for livestock owners to be eligible, the 
livestock must meet all of the following conditions:
    (1) Be alpacas, adult or non-adult dairy cattle, beef cattle, 
beefalo, buffalo, deer, elk, emus, equine, goats, llamas, poultry, 
reindeer, sheep, or swine, and meet all the conditions in paragraph (f) 
of this section.
    (2) Be one of the following categories of animals for which 
calculations of eligibility for payments will be calculated separately 
for each producer with respect to each category:
    (i) Adult beef bulls;
    (ii) Adult beef cows;
    (iii) Adult buffalo or beefalo bulls;
    (iv) Adult buffalo or beefalo cows;
    (v) Adult dairy bulls;
    (vi) Adult dairy cows;
    (vii) Alpacas;
    (viii) Chickens, broilers, pullets;
    (ix) Chickens, chicks;
    (x) Chickens, layers, roasters;
    (xi) Deer;
    (xii) Ducks;
    (xiii) Ducks, ducklings;
    (xiv) Elk;
    (xv) Emus;
    (xvi) Equine;
    (xvii) Geese, goose;
    (xviii) Geese, gosling;
    (xix) Goats, bucks;
    (xx) Goats, nannies;
    (xxi) Goats, kids;
    (xxii) Llamas;
    (xxiii) Non-adult beef cattle;
    (xxiv) Non-adult buffalo or beefalo;
    (xxv) Non-adult dairy cattle;
    (xxvi) Reindeer;
    (xxvii) Sheep, ewes;
    (xxviii) Sheep, lambs;
    (xxix) Sheep, rams;
    (xxx) Swine, feeder pigs under 50 pounds;
    (xxxi) Swine, sows, boars, barrows, gilts 50 to 150 pounds;

[[Page 89]]

    (xxxii) Swine, sows, boars, barrows, gilts over 150 pounds;
    (xxxiii) Turkeys, poults; and
    (xxxiv) Turkeys, toms, fryers, and roasters.
    (e) Under ELAP, ``contract growers'' will only be deemed to include 
producers of livestock, other than feedlots, whose income is dependent 
on the actual weight gain and survival of the livestock. For death 
losses for contract growers to be eligible, the livestock must meet all 
of the following conditions:
    (1) Be poultry or swine, as defined in Sec. 760.202, and meet all 
the conditions in paragraph (f) of this section.
    (2) Be one of the following categories of animals for which 
calculations of eligibility for payments will be calculated separately 
for each contract grower with respect to each category:
    (i) Chickens, broilers, pullets;
    (ii) Chickens, layers, roasters;
    (iii) Geese, goose;
    (iv) Swine, boars, sows;
    (v) Swine, feeder pigs;
    (vi) Swine, lightweight barrows, gilts;
    (vii) Swine, sows, boars, barrows, gilts; and
    (viii) Turkeys, toms, fryers, and roasters.
    (f) For livestock death losses to be considered eligible livestock 
for the purpose of generating payments under this subpart, livestock 
must meet all of the following conditions:
    (1) They must have died:
    (i) On or after the beginning date of the eligible loss condition; 
and
    (ii) On or after January 1, 2008, and no later than 60 calendar days 
from the ending date of the eligible loss condition, but before November 
30, 2011; and
    (iii) As a direct result of an eligible loss condition that occurs 
on or after January 1, 2008, and before October 1, 2011; and
    (iv) In the calendar year for which payment is being requested; and
    (2) Been maintained for commercial use as part of a farming 
operation on the day the livestock died; and
    (3) Before dying, not have been produced or maintained for reasons 
other than commercial use as part of a farming operation, such non-
eligible uses being understood to include, but not be limited to, any 
uses of wild free roaming animals or use of the animals for recreational 
purposes, such as pleasure, hunting, roping, pets, or for show.
    (g) For honeybee losses to be eligible, the honeybee colony must 
meet the following conditions:
    (1) Been maintained for the purpose of producing honey or 
pollination for commercial use in a farming operation on the beginning 
date of the eligible adverse weather or eligible loss condition;
    (2) Been physically located in the county where the eligible adverse 
weather or eligible loss condition occurred on the beginning date of the 
eligible adverse weather or eligible loss condition;
    (3) Been a honeybee colony in which the participant has a risk in 
the honey production or pollination farming operation on the beginning 
date of the eligible adverse weather or eligible loss condition;
    (4) Been a honeybee colony for which the producer had an eligible 
loss of a honeybee colony, honeybee hive, or honeybee feed; the feed 
must have been intended as feed for honeybees.
    (h) For fish to be eligible to generate payments under ELAP, the 
fish must be produced in a controlled environment so to be considered 
``farm raised fish'' as defined in this subpart, and the farm-raised 
fish must:
    (1) For feed losses:
    (i) Be an aquatic species that is propagated and reared in a 
controlled environment;
    (ii) Be maintained and harvested for commercial use as part of a 
farming operation; and
    (iii) Be physically located in the county where the eligible adverse 
weather or eligible loss condition occurred on the beginning date of the 
eligible adverse weather or eligible loss condition.
    (2) For death losses:
    (i) Be bait fish or game fish that are propagated and reared in a 
controlled environment;
    (ii) Been maintained for commercial use as part of a farming 
operation; and
    (iii) Been physically located in the county where the eligible loss 
adverse

[[Page 90]]

weather or eligible loss condition occurred on the beginning date of the 
eligible adverse weather or eligible loss condition.

[74 FR 46673, Sept. 11, 2009, as amended at 76 FR 54075, Aug. 31, 2011]



Sec. 760.205  Eligible producers, owners, and contract growers.

    (a) To be considered an eligible livestock producer for livestock 
feed losses and to receive payments, the participant must have owned, 
cash-leased, purchased, entered into a contract to purchase, or been a 
contract grower of eligible livestock during the 60 days prior to the 
beginning date of the eligible adverse weather or eligible loss 
condition and must have had a loss that is determined to be eligible as 
specified in Sec. 760.203(d), and the producer's eligible livestock 
must have been livestock that would normally have been grazing the 
eligible grazing land or pastureland during the normal grazing period 
for the specific type of grazing land or pastureland for the county as 
specified in paragraph (b)(1)(i) or (ii) of this section.
    (b) To be considered an eligible livestock producer for grazing 
losses and to receive payments, the participant must have:
    (1) Owned, cash-leased, purchased, entered into a contract to 
purchase, or been a contract grower of eligible livestock during the 60 
days prior to the beginning date of the eligible adverse weather or 
eligible loss condition, must have had a loss that is determined to be 
eligible as specified in Sec. 760.203(e), and the loss must have 
occurred on land that is:
    (i) Native or improved pastureland with permanent vegetative cover 
or
    (ii) Planted to a crop planted specifically for the purpose of 
providing grazing for covered livestock;
    (2) Have had eligible livestock that would normally have been 
grazing the eligible grazing land or pastureland during the normal 
grazing period for the specific type of grazing land or pastureland for 
the county as specified in paragraph (b)(1)(i) or (ii) of this section;
    (3) Provided for the eligible livestock pastureland or grazing land, 
including cash leased pastureland or grazing land for covered livestock 
that is physically located in the county where the eligible adverse 
weather or loss condition occurred during the normal grazing period for 
the county.
    (c) For livestock death losses to be eligible the producer must have 
had a loss that is determined to be eligible as specified in Sec. 
760.203(f) and in addition to other eligibility rules that may apply to 
be eligible as a:
    (1) Livestock owner for the payment with respect to the death of an 
animal under this subpart, the applicant must have had legal ownership 
of the livestock on the day the livestock died and under conditions in 
which no contract grower could have been eligible for ELAP payment with 
respect to the animal. Eligible types of animal categories for which 
losses can be calculated for an owner are specified in Sec. 760.204(d).
    (2) Contract grower for ELAP payment with respect to the death of an 
animal, the animal must be in one of the categories specified in Sec. 
760.204(e), and the contract grower must have had:
    (i) 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;
    (ii) Control of the eligible livestock on the day the livestock 
died; and
    (iii) A risk of loss in the animal.
    (d) To be considered an eligible honeybee producer, a participant 
must have an interest and risk in an eligible honeybee colony, as 
specified in Sec. 760.204(g), for the purpose of producing honey or 
pollination for commercial use as part of a farming operation and must 
have had a loss that is determined to be eligible as specified in Sec. 
760.203(g) or (h).
    (e) To be considered an eligible farm-raised fish producer for feed 
loss purposes, the participant must have produced eligible farm-raised 
fish, as specified in Sec. 760.204(h)(1), with the intent to harvest 
for commercial use as part of a farming operation and must have had a 
loss that is determined to be eligible as specified in Sec. 760.203(g);
    (f) A producer seeking payments must not be ineligible under the 
restrictions applicable to foreign persons

[[Page 91]]

contained in Sec. 760.103(b) and must meet all other requirements of 
subpart B and other applicable USDA regulations.



Sec. 760.206  Notice of loss and application process.

    (a) To apply for ELAP, the participant that suffered eligible 
livestock, honeybee, or farm-raised fish losses must submit, to the FSA 
administrative county office that maintains the participant's farm 
records for the agricultural operation, the following:
    (1) A notice of loss to FSA as specified in Sec. 760.207(a),
    (2) A completed application as specified in Sec. 760.207(b) for one 
or both of the following:
    (i) For livestock feed, grazing and death losses, the participant 
must submit a completed Emergency Loss Assistance for Livestock 
Application;
    (ii) For honeybee feed, honeybee colony, honeybee hive, or farm-
raised fish feed or death losses, the participant must submit a 
completed Emergency Loss Assistance for Farm-Raised Fish or Honeybees 
Application;
    (3) A report of acreage;
    (4) A copy of the participant's grower contract, if the participant 
is a contract grower; and
    (5) Other supporting documents required for FSA to determine 
eligibility of the participant, livestock, and loss.
    (b) For livestock, honeybee, or farm-raised fish feed losses, 
participant must provide verifiable documentation of:
    (1) Purchased feed intended as feed for livestock, honeybees, or 
farm-raised fish that was lost, or additional feed purchased above 
normal quantities to sustain livestock, honeybees, and farm-raised fish 
for a short period of time until additional feed becomes available, due 
to an eligible adverse weather or eligible loss condition. To be 
considered acceptable documentation, the participant must provide 
original feed receipts and each feed receipt must include the date of 
feed purchase, name, address, and telephone number of feed vendor, type 
and quantity of feed purchased, cost of feed purchased, and signature of 
feed vendor if the vendor does not have a license to conduct this type 
of transaction.
    (2) Harvested feed intended as feed for livestock, honeybees, or 
farm-raised fish that was lost due to an eligible adverse weather or 
eligible loss condition. Documentation may include, but is not limited 
to, weight tickets, truck scale tickets, contemporaneous diaries used to 
verify that the crop was stored with the intent to feed the crop to 
livestock, honeybees, or farm-raised fish, and custom harvest documents 
that clearly identify the amount of feed produced from the applicable 
acreage. Documentation must clearly identify the acreage from which the 
feed was produced.
    (c) For eligible honeybee colony and honeybee hive losses and 
eligible farm-raised fish losses, the participant must also provide 
documentation of inventory on the beginning date of the eligible adverse 
weather or loss condition and the ending inventory. Documentation may 
include, but is not limited to, any combination of the following:
    (1) A report of acreage,
    (2) Loan records,
    (3) Private insurance documents,
    (4) Property tax records,
    (5) Sales and purchase receipts,
    (6) State colony registration documentation, and
    (7) Chattel inspections.
    (d) For the loss of honeybee colonies due to colony collapse 
disorder, the participant must also provide acceptable documentation or 
certification that the loss of the honeybee colony was due to colony 
collapse disorder. Except for 2008 and 2009 honeybee colony losses, 
acceptable documentation must include an independent third party 
certification determined acceptable by the Deputy Administrator, plus 
such additional information and documentation as may be requested. For 
2008 and 2009 honeybee colony losses a self-certification may be 
accepted by FSA together with any additional information demanded by FSA 
as determined appropriate by the Deputy Administrator.
    (e) For livestock death losses, the participant must provide 
evidence of loss, current physical location of livestock in inventory, 
and physical location of claimed livestock at the time of death. The 
participant must provide:
    (1) Documentation listing the quantity and kind of livestock that 
died as

[[Page 92]]

a direct result of the eligible loss condition during the calendar year 
for which payment is being requested, which must include: 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, or 
other similar verifiable documents as determined by FSA.
    (2) Adequate proof that the death of the eligible livestock occurred 
as a direct result of an eligible loss condition in the calendar year 
for which payment is requested.
    (3) If adequate verifiable proof of death documentation is not 
available, the participant must provide reliable records, in conjunction 
with verifiable beginning and ending inventory records, as proof of 
death. Reliable records may include: Contemporaneous producer records, 
dairy herd improvement records, brand inspection records, vaccination 
records, pictures, and other similar reliable documents, as determined 
by FSA.
    (4) Certification of livestock deaths by third parties will be 
acceptable for eligibility determination only if verifiable proof of 
death records or reliable proof of death records in conjunction with 
verifiable beginning and ending inventory records are not available and 
both of the following conditions are met:
    (i) The livestock owner or livestock contract grower, as applicable, 
certifies in writing:
    (A) That there is no other verifiable or reliable documentation of 
death available;
    (B) The number of livestock, by category as determined by FSA, was 
in inventory at the time the applicable loss condition occurred;
    (C) The physical location of the livestock, by category, in 
inventory when the deaths occurred; and
    (D) Any other details required for FSA to determine the 
certification acceptable; and
    (ii) The third party is an independent source who is not affiliated 
with the farming operation such as a hired hand and is not a ``family 
member,'' defined as a person to whom a member in the farming operation 
or their spouse is related as a lineal ancestor, lineal descendant, 
sibling, spouse, or otherwise by marriage, and provides their telephone 
number, address, and a written statement containing specific details 
about:
    (A) Their knowledge of the livestock deaths;
    (B) Their affiliation with the livestock owner;
    (C) The accuracy of the deaths claimed by the livestock owner or 
contract grower including, but not limited to, the number and kind or 
type of the participant's livestock that died because of the eligible 
loss condition; and
    (D) Any other information required for FSA to determine the 
certification acceptable.
    (f) FSA will use the data furnished by the participant and the third 
party to determine eligibility for program payment. Furnishing the data 
is voluntary; however, without all required data program, payment will 
not be approved or provided.

[74 FR 46673, Sept. 11, 2009, as amended at 75 FR 19188, Apr. 14, 2010]



Sec. 760.207  Notice of loss and application period.

    (a) In addition to submitting an application for payment at the 
appropriate time, the participant that suffered eligible livestock, 
honeybee, or farm-raised fish losses that create or could create a claim 
for benefits must:
    (1) For losses during calendar year 2008 and in calendar year 2009 
prior to September 11, 2009, provide a notice of loss to FSA no later 
than December 10, 2009;
    (2) For losses on or after September 11, 2009, the participant must 
provide a notice of loss to FSA within the earlier of:
    (i) 30 calendar days of when the loss is apparent to the participant 
or
    (ii) 30 calendar days after the end of the calendar year in which 
the loss occurred.
    (3) The participant must submit the notice of loss required in 
paragraphs (a)(1) and (a)(2) of this section to the administrative FSA 
county office

[[Page 93]]

    (b) In addition to the notices of loss required in paragraph (a) of 
this section, a participant must also submit a completed application for 
payment no later than:
    (1) 30 calendar days after the end of the calendar year in which the 
loss occurred or
    (2) December 10, 2009 for losses that occurred during 2008.



Sec. 760.208  Availability of funds.

    By law, ``up to'' $50 million per year for the years in question may 
be approved for use by the Secretary and accordingly, within that cap, 
the only funds that will be considered available to pay claims will be 
that amount approved by the Secretary. Nothing in these regulations will 
limit the ability of the Secretary to restrict the availability of funds 
for the program as permitted by the relevant legislation. Payments will 
not be made for claims arising out of a particular year until, for all 
claims for that year, the time for applying for a payment has passed. In 
the event that, within the limits of the funding made available by the 
Secretary within the statutory cap, approval of eligible applications 
would result in expenditures in excess of the amount available, FSA will 
prorate the available funds by a national factor to reduce the total 
expected payments to the amount made available by the Secretary. FSA 
will make payments based on the factor for the national rate determined 
by FSA. FSA will prorate the payments in such manner as it determines 
appropriate and reasonable. Claims that are unpaid or prorated for a 
calendar year for any reason will not be carried forward for payment 
under other funds for later years or otherwise, but will be considered, 
as to any unpaid amount, void and nonpayable.



Sec. 760.209  Livestock payment calculations.

    (a) Payments for an eligible livestock producer will be calculated 
based on losses for no more than 90 days during the calendar year. 
Payment calculations for feed losses will be based on 60 percent of the 
producer's actual cost for:
    (1) Livestock feed that was purchased forage or feedstuffs intended 
for use as feed for the participant's eligible livestock that was 
physically damaged or destroyed due to the direct result of an eligible 
adverse weather or eligible loss condition, as provided in Sec. 
760.203(d)(1);
    (2) Livestock feed that was mechanically harvested forage or 
feedstuffs intended for use as feed for the participant's eligible 
livestock that was physically damaged or destroyed after harvest due to 
the direct result of an eligible adverse weather or eligible loss 
condition, as provided in Sec. 760.203(d)(2);
    (3) The additional cost incurred for providing or transporting 
livestock feed to eligible livestock due to an eligible adverse weather 
or eligible loss condition, as provided in Sec. 760.203(d)(3); or
    (4) The additional cost of purchasing additional livestock feed 
above normal, to maintain the eligible livestock during an eligible 
adverse weather or eligible loss condition until additional livestock 
feed becomes available, as provided in Sec. 760.203(d)(4).
    (b) Payments for an eligible livestock producer for grazing losses, 
except for losses due to wildfires on non-Federal land, will be 
calculated based on 60 percent of the lesser of:
    (1) The total value of the feed cost for all covered livestock owned 
by the eligible livestock producer based on the number of days grazing 
was lost, not to exceed 90 days of daily feed cost for all covered 
livestock, or
    (2) The total value of grazing lost for all eligible livestock based 
on the normal carrying capacity, as determined by the Secretary, of the 
eligible grazing land of the eligible livestock producer for the number 
of grazing days lost, not to exceed 90 days of lost grazing.
    (c) The total value of feed cost to be used in the calculation for 
paragraph (b)(1) of this section is based on the number of days grazing 
was lost and equals the product obtained by multiplying:
    (1) A payment quantity equal to the feed grain equivalent, as 
determined in paragraph (d) of this section;
    (2) A payment rate equal to the corn price per pound, as determined 
in paragraph (e) of this section;

[[Page 94]]

    (3) The number of all covered livestock owned by the eligible 
producer converted to an animal unit basis;
    (4) The number of days grazing was lost, not to exceed 90 calendar 
days during the normal grazing period for the specific type of grazing 
land; and
    (5) The producer's ownership share in the livestock.
    (d) The feed grain equivalent to be used in the calculation for 
paragraph (c)(1) of this section equals, in the case of:
    (1) An adult beef cow, 15.7 pounds of corn per day or
    (2) Any other type or weight of livestock, an amount determined by 
the Secretary that represents the average number of pounds of corn per 
day necessary to feed that specific type of livestock.
    (e) The corn price per pound to be used in the calculation for 
paragraph (c)(2) of this section equals the quotient obtained by 
dividing:
    (1) The higher of:
    (i) The national average corn price per bushel of corn for the 12-
month period immediately preceding March 1 of the calendar year for 
which payments are calculated; or
    (ii) The national average corn price per bushel of corn for the 24-
month period immediately preceding March 1 of the calendar year for 
which payments are calculated; by
    (2) 56.
    (f) The total value of grazing lost to be used in the calculation 
for paragraph (b)(2) of this section equals the product obtained by 
multiplying:
    (1) A payment quantity equal to the feed grain equivalent of 15.7 
pounds of corn per day;
    (2) A payment rate equal to the corn price per pound, as determined 
in paragraph (e) of this section;
    (3) The number of animal units the eligible livestock producer's 
grazing land or pastureland can sustain during the normal grazing period 
in the county for the specific type of grazing land or pastureland, in 
the absence of an eligible adverse weather or eligible loss condition, 
determined by dividing the:
    (i) Number of eligible grazing land or pastureland acres of the 
specific type of grazing land or pastureland by
    (ii) The normal carrying capacity of the specific type of eligible 
grazing land or pastureland; and
    (4) The number of days grazing was lost, not to exceed 90 calendar 
days during the normal grazing period for the specific type of grazing 
land.
    (g) Payments for an eligible livestock producer for grazing losses 
due to a wildfire on non-Federal land will be calculated by multiplying:
    (1) The result of dividing:
    (i) The number of acres of grazing land or pastureland acres 
affected by the fire by
    (ii) The normal carrying capacity of the specific type of eligible 
grazing land or pastureland; times
    (2) The daily value of grazing as calculated by FSA under this 
section; times
    (3) The number of days grazing was lost due to fire, not to exceed 
180 calendar days; times
    (4) 50 percent.
    (h) Payments for an eligible livestock producer for eligible 
livestock death losses due to an eligible loss condition will be based 
on the following:
    (1) Payments will be calculated by multiplying:
    (i) The national payment rate for each livestock category times
    (ii) The number of eligible livestock that died in each category as 
a result of an eligible loss condition in excess of normal mortality, as 
determined in paragraph (d)(2) of this section;
    (2) Normal mortality for each livestock category as determined by 
FSA on a statewide basis using local data sources including, but not 
limited to, State livestock organizations and the Cooperative Extension 
Service for the State.
    (3) National payment rates to be used in the calculation for 
paragraph (b)(1) of this section for eligible livestock owners and 
eligible livestock contract growers are:
    (i) A national payment rate for eligible livestock owners that is 
based on 75 percent of the average fair market value of the applicable 
livestock as computed using nationwide prices for the previous calendar 
year unless some other price is approved by the Deputy Administrator.

[[Page 95]]

    (ii) A national payment rate for eligible livestock contract growers 
that is based on 75 percent of the relevant average income loss 
sustained by the contract grower, with respect to the dead livestock.
    (i) Payments calculated in this section are subject to the 
adjustments and limits provided for in this part.



Sec. 760.210  Honeybee payment calculations.

    (a) An eligible honeybee producer may receive payments for honeybee 
feed losses due to an eligible adverse weather or loss condition, as 
provided in Sec. 760.203(g), based on 60 percent of the producer's 
actual cost for honeybee feed that was:
    (1) Damaged or destroyed due to an eligible adverse weather or 
eligible loss condition and
    (2) Intended as feed for an eligible honeybee colony, as provided in 
Sec. 760.204(g);
    (b) An eligible honeybee producer may receive payments for honeybee 
colony losses due to an eligible adverse weather or eligible loss 
condition, as provided in Sec. 760.203(h), based on 60 percent of the 
average fair market value for the number of honeybee colonies that were 
damaged or destroyed due to an eligible adverse weather or eligible loss 
condition, as computed using nationwide prices unless some other price 
data is approved for use by the Deputy Administrator, for losses in 
excess of normal honeybee mortality, as determined by the Deputy 
Administrator.
    (c) An eligible honeybee producer may receive payments for honeybee 
hive losses due to an eligible adverse weather or eligible loss 
condition, as provided in Sec. 760.203(h), based on 60 percent of the 
average fair market value for the number of honeybee hives that were 
damaged or destroyed due to an eligible adverse weather or eligible loss 
condition, as computed using nationwide prices unless some other price 
data is approved for use by the Deputy Administrator.
    (d) Payments calculated in this section are subject to the 
adjustments and limits provided for in this part.

[74 FR 46673, Sept. 11, 2009, as amended at 75 FR 19188, Apr. 14, 2010]



Sec. 760.211  Farm-raised fish payment calculations.

    (a) An eligible farm-raised fish producer may receive payments for 
fish feed losses due to an eligible adverse weather or eligible loss 
condition, as provided in Sec. 760.203(g), based on 60 percent of the 
producer's actual replacement cost for the fish feed that was:
    (1) Damaged or destroyed due to an eligible adverse weather or 
eligible loss condition and
    (2) Intended as feed for the eligible farm-raised fish, as provided 
in Sec. 760.204(h)(1).
    (b) An eligible producer of farm-raised game or sport fish may 
receive payments for death losses of farm-raised fish due to an eligible 
adverse weather or eligible loss condition, as provided in Sec. 
760.203(i), based on 60 percent of the average fair market value of the 
game fish or sport fish that died as a direct result of an eligible 
adverse weather or eligible loss condition, as computed using nationwide 
prices unless some other price data is approved for use by the Deputy 
Administrator.
    (c) Payments calculated in this section or elsewhere with respect to 
ELAP are subject to the adjustments and limits provided for in this part 
and are also subject to the payment limitations and average adjusted 
gross income limitations that are contained in subpart B.

[74 FR 46673, Sept. 11, 2009, as amended at 75 FR 19189, Apr. 14, 2010]



               Subpart D_Livestock Forage Disaster Program

    Source: 74 FR 46680, Sept. 11, 2009, unless otherwise noted.



Sec. 760.301  Applicability.

    (a) This subpart establishes the terms and conditions under which 
the Livestock Forage Disaster Program (LFP) will be administered.
    (b) Eligible livestock producers will be compensated for eligible 
grazing losses for covered livestock that occur due to a qualifying 
drought or fire that occurs:
    (1) On or after January 1, 2008, and before October 1, 2011, and

[[Page 96]]

    (2) In the calendar year for which benefits are being requested.



Sec. 760.302  Definitions.

    The following definitions apply to this subpart and to the 
administration of LFP. 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 breed bovine animal that was at 
least 2 years old and used for breeding purposes on or before the 
beginning date of a qualifying drought or fire.
    Adult beef cow means a female beef breed bovine animal that had 
delivered one or more offspring. A first-time bred beef heifer is also 
considered an adult beef cow if it was pregnant on or before the 
beginning date of a qualifying drought or fire.
    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 or 
before the beginning date of a qualifying drought or fire.
    Adult buffalo and beefalo cow means a female animal of those breeds 
that had delivered one or more offspring. A first-time bred buffalo or 
beefalo heifer is also considered an adult buffalo or beefalo cow if it 
was pregnant on or before the beginning date of a qualifying drought or 
fire.
    Adult dairy bull means a male dairy breed bovine animal at least 2 
years old used primarily for breeding dairy cows on or before the 
beginning date of a qualifying drought or fire.
    Adult dairy cow means a female dairy breed bovine animal used for 
the purpose of providing milk for human consumption that had delivered 
one or more offspring. A first-time bred dairy heifer is also considered 
an adult dairy cow if it was pregnant on or before the beginning date of 
a qualifying drought or fire.
    Agricultural operation means a farming operation.
    Application means the ``Livestock Forage Disaster Program'' form.
    Commercial use means used in the operation of a business activity 
engaged in as a means of livelihood for profit by the eligible livestock 
producer.
    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.
    Covered livestock means livestock of an eligible livestock producer 
that, during the 60 days prior to the beginning date of a qualifying 
drought or fire, the eligible livestock producer owned, leased, 
purchased, entered into a contract to purchase, was a contract grower 
of, or sold or otherwise disposed of due to a qualifying drought during 
the current production year. It includes livestock that the producer 
otherwise disposed of due to drought in one or both of the two 
production years immediately preceding the current production year as 
determined by the Secretary. Notwithstanding the foregoing portions of 
this definition, covered livestock for ``contract growers'' will not 
include livestock in feedlots. ``Contract growers'' under LFP will only 
include producers of livestock not in feedlots whose income is dependent 
on the actual weight gain and survival of the livestock.
    Equine animal means a domesticated horse, mule, or donkey.
    Farming operation means a business enterprise engaged in producing 
agricultural products.
    Federal Agency means, with respect to the control of grazing land, 
an agency of the Federal government that manages rangeland on which 
livestock is generally permitted to graze. For the purposes of this 
section, it includes, but is not limited to, the U.S. Department of the 
Interior (DOI) Bureau of Indian Affairs (BIA), DOI Bureau of Land 
Management (BLM), and USDA Forest Service (FS).
    Goat means a domesticated, ruminant mammal of the genus Capra, 
including Angora goats.
    Non-adult beef cattle means a beef breed bovine animal that weighed 
500 pounds or more on or before the beginning date of a qualifying 
drought or fire but that does not meet the definition of adult beef cow 
or bull.
    Non-adult buffalo or beefalo means an animal of those breeds that 
weighed 500 pounds or more on or before the beginning date of a 
qualifying drought or

[[Page 97]]

fire, but does not meet the definition of adult buffalo or beefalo cow 
or bull.
    Non-adult dairy cattle means a bovine animal, of a breed used for 
the purpose of providing milk for human consumption, that weighed 500 
pounds or more on or before the beginning date of a qualifying drought 
or fire, but that does not meet the definition of adult dairy cow or 
bull.
    Normal carrying capacity means, with respect to each type of grazing 
land or pastureland in a county, the normal carrying capacity that would 
be expected from the grazing land or pastureland for livestock during 
the normal grazing period in the county, in the absence of a drought or 
fire that diminishes the production of the grazing land or pastureland.
    Normal grazing period means, with respect to a county, the normal 
grazing period during the calendar year with respect to each specific 
type of grazing land or pastureland in the county served by the 
applicable county committee.
    Owner means one who had legal ownership of the livestock for which 
benefits are being requested during the 60 days prior to the beginning 
of a qualifying drought or fire.
    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, or boar. Swine are 
further delineated by sex and weight, as determined by FSA.
    U.S. Drought Monitor is a system for classifying drought severity 
according to a range of abnormally dry to exceptional drought. It is a 
collaborative effort between Federal and academic partners, produced on 
a weekly basis, to synthesize multiple indices, outlooks, and drought 
impacts on a map and in narrative form. This synthesis of indices is 
reported by the National Drought Mitigation Center at http://
www.drought.unl.edu/dm/monitor.html.



Sec. 760.303  Eligible livestock producer.

    (a) To be considered an eligible livestock producer, the eligible 
producer on a farm must:
    (1) During the 60 days prior to the beginning date of a qualifying 
drought or fire, own, cash or share lease, or be a contract grower of 
covered livestock or
    (2) Provide pastureland or grazing land for covered livestock, 
including cash-leased pastureland or grazing land, that is:
    (i) Physically located in a county affected by a qualifying drought 
during the normal grazing period for the county or
    (ii) Rangeland managed by a Federal agency for which the otherwise 
eligible livestock producer is prohibited by the Federal agency from 
grazing the normal permitted livestock due to a qualifying fire.
    (b) The eligible livestock producer must have certified that the 
livestock producer has suffered a grazing loss due to a qualifying 
drought or fire to be eligible for LFP payments.
    (c) An eligible livestock producer does not include any owner, cash 
or share lessee, or contract grower of livestock that rents or leases 
pastureland or grazing land owned by another person on a rate-of-gain 
basis. (That is, where the lease or rental agreement calls for payment 
based in whole or in part on the amount of weight gained by the animals 
that use the pastureland or grazing land.)
    (d) A producer seeking payment must not be ineligible for payments 
under the restrictions applicable to foreign persons contained in Sec. 
760.103(b) and must meet all other requirements of subpart B and other 
applicable USDA regulations.
    (e) If a contract grower is an eligible livestock producer for 
covered livestock, the owner of that livestock is not eligible for 
payment.



Sec. 760.304  Covered livestock.

    (a) To be considered covered livestock for LFP payments, livestock 
must meet all the following conditions:
    (1) Be adult or non-adult beef cattle, adult or non-adult beefalo, 
adult or non-adult buffalo, adult or non-adult dairy cattle, alpacas, 
deer, elk, emus,

[[Page 98]]

equine, goats, llamas, poultry, reindeer, sheep, or swine;
    (2) Be livestock that would normally have been grazing the eligible 
grazing land or pastureland in the county:
    (i) During the normal grazing period for the specific type of 
grazing land or pastureland for the county or
    (ii) When the Federal agency prohibited the eligible livestock 
producer from using the managed rangeland for grazing due to a fire;
    (3) Be livestock that the eligible livestock producer:
    (i) During the 60 days prior to the beginning date of a qualifying 
drought or fire:
    (A) Owned,
    (B) Leased,
    (C) Purchased,
    (D) Entered into a contract to purchase, or
    (E) Was a contract grower of; or
    (ii) Sold or otherwise disposed of due to qualifying drought during:
    (A) The current production year or
    (B) 1 or both of the 2 production years immediately preceding the 
current production year;
    (4) Been maintained for commercial use as part of the producer's 
farming operation on the beginning date of the qualifying drought or 
fire;
    (5) 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, any uses of wild free roaming animals 
or use of the animals for recreational purposes, such as pleasure, 
roping, hunting, pets, or for show; and
    (6) Not have been livestock that were or would have been in a 
feedlot, on the beginning date of the qualifying drought or fire, as a 
part of the normal business operation of the eligible livestock 
producer, as determined by the Secretary.
    (b) The covered livestock categories are:
    (1) Adult beef cows or bulls,
    (2) Adult buffalo or beefalo cows or bulls,
    (3) Adult dairy cows or bulls,
    (4) Alpacas,
    (5) Deer,
    (6) Elk,
    (7) Emu,
    (8) Equine,
    (9) Goats,
    (10) Llamas,
    (11) Non-adult beef cattle,
    (12) Non-adult buffalo or beefalo,
    (13) Non-adult dairy cattle,
    (14) Poultry,
    (15) Reindeer,
    (16) Sheep, and
    (17) Swine.
    (c) Livestock that are not covered include, but are not limited to:
    (1) Livestock that were or would have been in a feedlot, on the 
beginning date of the qualifying drought or fire, as a part of the 
normal business operation of the eligible livestock producer, as 
determined by the Secretary;
    (2) Yaks;
    (3) Ostriches;
    (4) All beef and dairy cattle, and buffalo and beefalo that weighed 
less than 500 pounds on the beginning date of the qualifying drought or 
fire;
    (5) Any wild free roaming livestock, including horses and deer; and
    (6) 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.

[74 FR 46680, Sept. 11, 2009, as amended at 75 FR 19189, Apr. 14, 2010]



Sec. 760.305  Eligible grazing losses.

    (a) A grazing loss due to drought is eligible for LFP only if the 
grazing loss for the covered livestock occurs on land that:
    (1) Is native or improved pastureland with permanent vegetative 
cover or
    (2) Is planted to a crop planted specifically for the purpose of 
providing grazing for covered livestock; and
    (3) Is grazing land or pastureland that is owned or leased by the 
eligible livestock producer that is physically located in a county that 
is, during the normal grazing period for the specific type of grazing 
land or pastureland for the county, rated by the U.S. Drought Monitor as 
having a:

[[Page 99]]

    (i) D2 (severe drought) intensity in any area of the county for at 
least 8 consecutive weeks during the normal grazing period for the 
specific type of grazing land or pastureland for the county, as 
determined by the Secretary, or
    (ii) D3 (extreme drought) or D4 (exceptional drought) intensity in 
any area of the county at any time during the normal grazing period for 
the specific type of grazing land or pastureland for the county, as 
determined by the Secretary. (As specified elsewhere in this subpart, 
the amount of potential payment eligibility will be higher than under 
(a)(3)(i) of this section where the D4 trigger applies or where the D3 
condition as determined by the Secretary lasts at least 4 weeks during 
the normal grazing period for the specific type of grazing land or 
pastureland for the county.)
    (b) A grazing loss is not eligible for LFP if the grazing loss due 
to drought on land used for haying or grazing under the Conservation 
Reserve Program established under subchapter B of chapter 1 of subtitle 
D of title XII of the Food Security Act of 1985 (16 U.S.C. 3831-3835a).
    (c) A fire qualifies for LFP only if:
    (1) The grazing loss occurs on rangeland that is managed by a 
Federal agency and
    (2) The eligible livestock producer is prohibited by the Federal 
agency from grazing the normal permitted livestock on the managed 
rangeland due to a fire.
    (d) An eligible livestock producer may be eligible for LFP payments 
only on those grazing lands incurring losses for which the livestock 
producer:
    (1) Meets the risk management purchase requirements specified in 
Sec. 760.104; or
    (2) Does not meet the risk management purchase requirements 
specified in Sec. 760.104 because the risk management purchase 
requirement is waived according to Sec. Sec. 760.105, 760.106, or 
760.107.



Sec. 760.306  Application for payment.

    (a) To apply for LFP, the participant that suffered eligible grazing 
losses:
    (1) During 2008, must submit a completed application for payment and 
required supporting documentation to the administrative FSA county 
office no later than December 10, 2009 or
    (2) During 2009 and later years, must submit a completed application 
for payment and required supporting documentation to the administrative 
FSA county office no later than 30 calendar days after the end of the 
calendar year in which the grazing loss occurred.
    (b) A participant must also provide a copy of the grower contract, 
if a contract grower, and other supporting documents required for 
determining eligibility as an applicant at the time the participant 
submits the completed application for payment. Supporting documents must 
include:
    (1) Evidence of loss,
    (2) Current physical location of livestock in inventory,
    (3) Evidence of meeting risk management purchase requirements as 
specified in subpart B,
    (4) Evidence that grazing land or pastureland is owned or leased,
    (5) A report of acreage according to part 718 of this chapter for 
the grazing lands incurring losses for which assistance is being 
requested under this subpart;
    (6) Adequate proof, as determined by FSA that the grazing loss:
    (i) Was for the covered livestock;
    (ii) If the loss of grazing occurred as the result of a fire that 
the:
    (A) Loss was due to a fire and
    (B) Participant was prohibited by the Federal agency from grazing 
the normal permitted livestock on the managed rangeland due to a fire;
    (iii) Occurred on or after January 1, 2008, and before October 1, 
2011; and
    (iv) Occurred in the calendar year for which payments are being 
requested;
    (7) Adequate proof, absent an appropriate waiver (if there is a 
waiver, it itself must be documented by the producer), as determined by 
FSA, that the participant had obtained, for the grazing land incurring 
the losses for which assistance is being requested, one or both of the 
following:
    (i) A policy or plan of insurance under the Federal Crop Insurance 
Act (7 U.S.C. 1501-1524); or
    (ii) Filed the required paperwork, and paid the administrative fee 
by the applicable State filing deadline, for the

[[Page 100]]

noninsured crop disaster assistance program;
    (8) 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 and sales records; grower contracts; veterinarian records; bank 
or other loan papers; rendering truck receipts; Federal Emergency 
Management Records; National Guard records; written contracts; 
production records; private insurance documents; sales records; and 
similar documents determined acceptable to FSA.
    (c) 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. 760.307  Payment calculation.

    (a) An eligible livestock producer will be eligible to receive 
payments for grazing losses for qualifying drought as specified in Sec. 
760.305(a) equal to one, two, or three times the monthly payment rate 
specified in paragraphs (e) or (f) of this section. Total LFP payments 
to an eligible livestock producer in a calendar year for grazing losses 
due to qualifying drought will not exceed three monthly payments for the 
same livestock. Payments calculated in this section or elsewhere with 
respect to LFP are subject to the adjustments and limits provided for in 
this part and are also subject to the payment limitations and average 
adjusted gross income provisions that are contained in subpart B. 
Payment may only be made to the extent that eligibility is specifically 
provided for in this subpart. Hence, with respect to drought, payments 
will be made only as a ``one month'' payment, a ``two month'' payment, 
or a ``three month'' payment based on the provisions of paragraphs (b), 
(c), and (d) of this section.
    (b) To be eligible to receive a one month payment, that is a payment 
equal to the monthly feed cost as determined under paragraph (g) of this 
section, the eligible livestock producer must own or lease grazing land 
or pastureland that is physically located in a county that is rated by 
the U.S. Drought Monitor as having at least a D2 severe drought 
(intensity) in any area of the county for at least 8 consecutive weeks 
during the normal grazing period for the specific type of grazing land 
or pastureland in the county.
    (c) To be eligible to receive a two month payment, that is a payment 
equal to twice the monthly feed cost as determined under paragraph (g) 
of this section, the eligible livestock producer must own or lease 
grazing land or pastureland that is physically located in a county that 
is rated by the U.S. Drought Monitor as having at least a D3 (extreme 
drought) intensity in any area of the county at any time during the 
normal grazing period for the specific type of grazing land or 
pastureland for the county.
    (d) To be eligible to receive a three month payment, that is a 
payment equal to three times the monthly feed cost as determined under 
paragraph (g) of this section, the eligible livestock producer must own 
or lease grazing land or pastureland that is physically located in a 
county that is rated by the U.S. Drought Monitor as having at least a D3 
(extreme drought) intensity in any area of the county for at least 4 
weeks during the normal grazing period for the specific type of grazing 
land or pastureland for the county, or is rated as having a D4 
(exceptional drought) intensity in any area of the county at any time 
during the normal grazing period for the specific type of grazing land 
or pastureland for the county.
    (e) The monthly payment rate for LFP for grazing losses due to a 
qualifying drought, except as provided in paragraph (f) of this section, 
will be equal to 60 percent of the lesser of:
    (1) The monthly feed cost for all covered livestock owned or leased 
by the eligible livestock producer, as determined in paragraph (g) of 
this section or
    (2) The monthly feed cost calculated by using the normal carrying 
capacity of the eligible grazing land of the eligible livestock 
producer, as determined in paragraph (j) of this section.
    (f) In the case of an eligible livestock producer that sold or 
otherwise disposed of covered livestock due to a qualifying drought in 1 
or both of the 2

[[Page 101]]

production years immediately preceding the current production year, the 
payment rate is 80 percent of the monthly payment rate calculated in 
paragraph (e) of this section.
    (g) The monthly feed cost for covered livestock equals the product 
obtained by multiplying:
    (1) 30 days;
    (2) A payment quantity equal to the amount referred to in paragraph 
(h) of this section as the ``feed grain equivalent'', as determined 
under paragraph (h) of this section; and
    (3) A payment rate equal to the corn price per pound, as determined 
in paragraph (i) of this section.
    (h) The feed grain equivalent equals, in the case of:
    (1) An adult beef cow, 15.7 pounds of corn per day or
    (2) In the case of any other type or weight of covered livestock, an 
amount determined by the Secretary that represents the average number of 
pounds of corn per day necessary to feed that specific type of 
livestock.
    (i) The corn price per pound equals the quotient obtained by 
dividing:
    (1) The higher of:
    (i) The national average corn price per bushel for the 12-month 
period immediately preceding March 1 of the calendar year for which LFP 
payment is calculated or
    (ii) The national average corn price per bushel for the 24-month 
period immediately preceding March 1 of the calendar year for which LFP 
payment is calculated
    (2) By 56.
    (j) The monthly feed cost using the normal carrying capacity of the 
eligible grazing land equals the product obtained by multiplying:
    (1) 30 days;
    (2) A payment quantity equal to the feed grain equivalent of 15.7 
pounds of corn per day;
    (3) A payment rate equal to the corn price per pound, as determined 
in paragraph (i) of this section; and
    (4) The number of animal units the eligible livestock producer's 
grazing land or pastureland can sustain during the normal grazing period 
in the county for the specific type of grazing land or pastureland, in 
the absence of a drought or fire, determined by dividing the:
    (i) Number of eligible grazing land or pastureland acres of the 
specific type of grazing land or pastureland by
    (ii) The normal carrying capacity of the specific type of eligible 
grazing land or pastureland as determined under this subpart.
    (k) An eligible livestock producer will be eligible to receive 
payments for grazing losses due to a fire as specified in Sec. 
760.305(c):
    (1) For the period, subject to paragraph (l)(2) of this section:
    (i) Beginning on the date on which the Federal Agency prohibits the 
eligible livestock producer from using the managed rangeland for grazing 
and
    (ii) Ending on the earlier of the last day of the Federal lease of 
the eligible livestock producer or the day that would make the period a 
180 day period and
    (2) For grazing losses that occur on not more than 180 days per 
calendar year.
    (3) For 50 percent of the monthly feed cost, as determined under 
Sec. 760.308(g), pro-rated to a daily rate, for the total number of 
livestock covered by the Federal lease of the eligible livestock 
producer.



                  Subpart E_Livestock Indemnity Program

    Source: 74 FR 31575, July 2, 2009, unless otherwise noted.



Sec. 760.401  Applicability.

    (a) This subpart establishes the terms and conditions under which 
the Livestock Indemnity Program (LIP) will be administered under Titles 
XII and XV of the 2008 Farm Bill (Pub. L. 110-246).
    (b) Eligible livestock owners and contract growers will be 
compensated in accordance with Sec. 760.406 for eligible livestock 
deaths in excess of normal mortality that occurred in the calendar year 
for which benefits are being requested as a direct result of an eligible 
adverse weather event. An ``eligible adverse weather event'' is one, as 
determined by the Secretary, occurring in the program year that could 
and did,

[[Page 102]]

even when normal preventative or corrective measures were taken and good 
farming practices were followed, directly result in the death of 
livestock. Because feed can be purchased or otherwise obtained in the 
event of a drought, drought is not an eligible adverse weather event 
except when anthrax, resulting from drought, causes the death of 
eligible livestock.



Sec. 760.402  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 breed bovine animal that was at 
least 2 years old and used for breeding purposes before it died.
    Adult beef cow means a female beef breed 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 dairy breed 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.
    Adverse weather means damaging weather events, including, but not 
limited to, hurricanes, floods, blizzards, disease, wildfires, extreme 
heat, and extreme cold.
    Agricultural operation means a farming operation.
    Application means the ``Livestock Indemnity Program'' form.
    Buck means a male goat.
    Commercial use means used in the operation of a business activity 
engaged in as a means of livelihood for profit by the eligible producer.
    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.
    Deputy Administrator or DAFP means the Deputy Administrator for Farm 
Programs, Farm Service Agency, U.S. Department of Agriculture or the 
designee.
    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.
    FSA means the Farm Service Agency.
    Goat means a domesticated, ruminant mammal of the genus Capra, 
including Angora goats. Goats are further defined by sex (bucks and 
nannies) 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.
    Nanny means a female goat.
    Non-adult beef cattle means a beef breed bovine animal that does not 
meet the definition of adult beef cow or bull. Non-adult beef cattle are 
further delineated by weight categories of either less than 400 pounds 
or 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 or beefalo cow or bull. 
Non-adult buffalo or beefalo are further delineated by weight categories 
of either less than 400 pounds or 400 pounds or more at the time of 
death.
    Non-adult dairy cattle means a dairy breed bovine animal, of a breed 
used for the purpose of providing milk for human consumption, that does 
not meet the definition of adult dairy cow

[[Page 103]]

or bull. Non-adult dairy cattle are further delineated by weight 
categories of either less than 400 pounds or 400 pounds or more at the 
time they died.
    Normal mortality means the numerical amount, computed by a 
percentage, as established for the area by the FSA State Committee, of 
expected livestock deaths, by category, that normally occur during a 
calendar year for a producer.
    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.
    Secretary means the Secretary of Agriculture or a designee of the 
Secretary.
    Sheep means a domesticated, ruminant mammal of the genus Ovis. Sheep 
are further defined by sex (rams and ewes) and age (lambs) for purposes 
of dividing into categories for loss calculations.
    State committee, State office, county committee, or county office 
means the respective FSA committee or office.
    Swine means a domesticated omnivorous pig, hog, or boar. Swine for 
purposes of dividing into categories for loss calculations are further 
delineated by sex and weight as determined by FSA.
    United States means all fifty States of the United States, the 
Commonwealth of Puerto Rico, the Virgin Islands, Guam, and the District 
of Columbia.



Sec. 760.403  Eligible owners and contract growers.

    (a) In addition to other eligibility rules that may apply, to be 
eligible as a:
    (1) Livestock owner for benefits with respect to the death of an 
animal under this subpart, the applicant must have had legal ownership 
of the eligible livestock on the day the livestock died and under 
conditions in which no contract grower could have been eligible for 
benefits with respect to the animal. Eligible types of animal categories 
for which losses can be calculated for an owner are specified in Sec. 
760.404(a).
    (2) Contract grower for benefits with respect to the death of an 
animal, the animal must be in one of the categories specified on Sec. 
760.404(b), and the contract grower must have had
    (i) 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;
    (ii) Control of the eligible livestock on the day the livestock 
died; and
    (iii) A risk of loss in the animal.
    (b) A producer seeking payment must not be ineligible under the 
restrictions applicable to foreign persons contained in Sec. 760.103(b) 
and must meet all other requirements of subpart B and other applicable 
USDA regulations.



Sec. 760.404  Eligible livestock.

    (a) To be considered eligible livestock for livestock owners, the 
kind of livestock must be alpacas, adult or non-adult dairy cattle, beef 
cattle, buffalo, beefalo, elk, emus, equine, llamas, 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, the 
kind of livestock must be poultry or swine as defined in Sec. 760.402 
and meet all the conditions in paragraph (c) of this section.
    (c) To be considered eligible livestock for the purpose of 
generating payments under this subpart, livestock must meet all of the 
following conditions:
    (1) Died as a direct result of an eligible adverse weather event 
that occurred on or after January 1, 2008, and before October 1, 2011;
    (2) Died no later than 60 calendar days from the ending date of the 
applicable adverse weather event, but before November 30, 2011;
    (3) Died in the calendar year for which benefits are being 
requested;
    (4) Been maintained for commercial use as part of a farming 
operation on the day they died; and
    (5) Before dying, not have been produced or maintained for reasons 
other than commercial use as part of a farming operation, such non-
eligible uses being understood to include, but not be limited to, any 
uses of wild, free roaming animals or use of the animals for 
recreational purposes, such as pleasure, hunting, roping, pets, or for 
show.

[[Page 104]]

    (d) The following categories of animals owned by a livestock owner 
are eligible livestock and calculations of eligibility for payments will 
be calculated separately for each producer with respect to each 
category:
    (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) Alpacas;
    (8) Chickens, broilers, pullets;
    (9) Chickens, chicks;
    (10) Chickens, layers, roasters;
    (11) Deer;
    (12) Ducks;
    (13) Ducks, ducklings;
    (14) Elk;
    (15) Emus;
    (16) Equine;
    (17) Geese, goose;
    (18) Geese, gosling;
    (19) Goats, bucks;
    (20) Goats, nannies;
    (21) Goats, kids;
    (22) Llamas;
    (23) Non-adult beef cattle;
    (24) Non-adult buffalo or beefalo;
    (25) Non-adult dairy cattle;
    (26) Reindeer;
    (27) Sheep, ewes;
    (28) Sheep, lambs;
    (29) Sheep, rams;
    (30) Swine, feeder pigs under 50 pounds;
    (31) Swine, sows, boars, barrows, gilts 50 to 150 pounds;
    (32) Swine, sows, boars, barrows, gilts over 150 pounds;
    (33) Turkeys, poults; and
    (34) Turkeys, toms, fryers, and roasters.
    (e) The following categories of animals are eligible livestock for 
contract growers and calculations of eligibility for payments will be 
calculated separately for each producer with respect to each category:
    (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.

[74 FR 31575, July 2, 2009, as amended at 76 FR 54075, Aug. 31, 2011]



Sec. 760.405  Application process.

    (a) In addition to submitting an application for payment at the 
appropriate time, a producer or contract grower that suffered livestock 
losses that create or could create a claim for benefits must:
    (1) For losses during 2008 and losses in 2009, prior to July 13, 
2009, provide a notice of loss to FSA no later than September 13, 2009.
    (2) For losses on or after July 13, 2009, provide a notice of loss 
to FSA within the earlier of:
    (i) 30 calendar days of when the loss of livestock is apparent to 
the participant or
    (ii) 30 calendar days after the end of the calendar year in which 
the loss of livestock occurred.
    (3) The participant must submit the notice of loss required in 
paragraphs (a)(1) and (a)(2) to the FSA administrative county office 
that maintains the participant's farm records for the agricultural 
operation.
    (b) In addition to the notices of loss required in paragraph (a) of 
this section, a participant must also submit a completed application for 
payment no later than
    (1) 30 calendar days after the end of the calendar year in which the 
loss of livestock occurred or
    (2) September 13, 2009 for losses during 2008.
    (c) Applicants must submit supporting documentation with their 
application. For contract growers, the information must include a copy 
of the grower contract and other documents establishing their status. In 
addition, for all applicants, including contract growers, supporting 
documents must show:
    (1) Evidence of loss,
    (2) Current physical location of livestock in inventory,
    (3) Physical location of claimed livestock at the time of death, and
    (4) Inventory numbers and other inventory information necessary to 
establish actual mortality as required by FSA.

[[Page 105]]

    (d) The participant must provide adequate proof that the death of 
the eligible livestock occurred as a direct result of an eligible 
adverse weather event in the calendar year for which benefits are 
requested. The quantity and kind of livestock that died as a direct 
result of the eligible adverse weather event during the calendar year 
for which benefits are being requested may be documented by: purchase 
records; veterinarian records; bank or other loan papers; rendering-
plant 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) If adequate verifiable proof of death documentation is not 
available, the participant may provide reliable records, in conjunction 
with verifiable beginning and ending inventory records, as proof of 
death. Reliable records may include contemporaneous producer records, 
dairy herd improvement records, brand inspection records, vaccination 
records, pictures, and other similar reliable documents as determined by 
FSA.
    (f) Certification of livestock deaths by third parties may be 
accepted only if verifiable proof of death records or reliable proof of 
death records in conjunction with verifiable beginning and ending 
inventory records are not available and both of the following conditions 
are met:
    (1) The livestock owner or livestock contract grower, as applicable, 
certifies in writing:
    (i) That there is no other verifiable or reliable documentation of 
death available;
    (ii) The number of livestock, by category identified in this subpart 
and by FSA were in inventory at the time the applicable adverse weather 
event occurred;
    (iii) The physical location of the livestock, by category, in 
inventory when the deaths occurred; and
    (iv) Other details required for FSA to determine the certification 
acceptable; and
    (2) The third party is an independent source who is not affiliated 
with the farming operation such as a hired hand and is not a ``family 
member,'' defined as a person whom a member in the farming operation or 
their spouse is related as lineal ancestor, lineal descendant, sibling, 
spouse, and provides their telephone number, address, and a written 
statement containing specific details about:
    (i) Their knowledge of the livestock deaths;
    (ii) Their affiliation with the livestock owner;
    (iii) The accuracy of the deaths claimed by the livestock owner or 
contract grower including, but not limited to, the number and kind or 
type of the participant's livestock that died because of the eligible 
adverse weather event; and
    (iv) Other information required by FSA to determine the 
certification acceptable.
    (g) Data furnished by the participant and the third party 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. 760.406  Payment calculation.

    (a) Under this subpart, separate payment rates for eligible 
livestock owners and eligible livestock contract growers are specified 
in paragraphs (b) and (c) of this section, respectively. Payments for 
LIP are calculated by multiplying the national payment rate for each 
livestock category by the number of eligible livestock in excess of 
normal mortality in each category that died as a result of an eligible 
adverse weather event. Normal mortality for each livestock category will 
be determined by FSA on a State-by-State basis using local data sources 
including, but not limited to, State livestock organizations and the 
Cooperative Extension Service for the State. Adjustments will be applied 
as specified in paragraph (d) of this section.
    (b) The LIP national payment rate for eligible livestock owners is 
based on 75 percent of the average fair market value of the applicable 
livestock as computed using nationwide prices for

[[Page 106]]

the previous calendar year unless some other price is approved by the 
Deputy Administrator.
    (c) The LIP national payment rate for eligible livestock 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 LIP payment calculated for eligible livestock contract 
growers will be reduced by the amount the participant received from the 
party who contracted with the producer to raise the livestock for the 
loss of income from the dead livestock.



                    Subpart F_Tree Assistance Program

    Source: 75 FR 25108, May 7, 2010, unless otherwise noted.



Sec. 760.500  Applicability.

    (a) This subpart establishes the terms and conditions under which 
the Tree Assistance Program (TAP) will be administered under Titles XII 
and XV of the Food, Conservation, and Energy Act of 2008 (Pub. L. 110-
246, the 2008 Farm Bill).
    (b) Eligible orchardists and nursery tree growers will be 
compensated as specified in Sec. 760.506 for eligible tree, bush, and 
vine losses in excess of 15 percent mortality, or, where applicable, 15 
percent damage, adjusted for normal mortality and normal damage, that 
occurred in the calendar year for which benefits are being requested and 
as a direct result of a natural disaster.



Sec. 760.501  Administration.

    The program will be administered as specified in Sec. 760.102 and 
in this subpart.



Sec. 760.502  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.
    Bush means, a low, branching, woody plant, from which at maturity of 
the bush, an annual fruit or vegetable crop is produced for commercial 
purposes, such as a blueberry bush. The definition does not cover plants 
that produce a bush after the normal crop is harvested such as 
asparagus.
    Commercial use means used in the operation of a business activity 
engaged in as a means of livelihood for profit by the eligible producer.
    County committee means the respective FSA committee.
    County office means the FSA or U.S. Department of Agriculture (USDA) 
Service Center that is responsible for servicing the farm on which the 
trees, bushes, or vines are located.
    Cutting means a piece of a vine which was planted in the ground to 
propagate a new vine for the commercial production of fruit, such as 
grapes, kiwi fruit, passion fruit, or similar fruit.
    Deputy Administrator or DAFP means the Deputy Administrator for Farm 
Programs, FSA, USDA, or the designee.
    Eligible nursery tree grower means a person or legal entity that 
produces nursery, ornamental, fruit, nut, or Christmas trees for 
commercial sale.
    Eligible orchardist means a person or legal entity that produces 
annual crops from trees, bushes, or vines for commercial purposes.
    FSA means the Farm Service Agency.
    Lost means, with respect to the extent of damage to a tree or other 
plant, that the plant is destroyed or the damage is such that it would, 
as determined by FSA, be more cost effective to replace the tree or 
other plant than to leave it in its deteriorated, low-producing state.
    Natural disaster means plant disease, insect infestation, drought, 
fire, freeze, flood, earthquake, lightning, or other natural occurrence 
of such magnitude or severity so as to be considered disastrous, as 
determined by the Deputy Administrator.
    Normal damage means the percentage, as established for the area by 
the FSA State Committee, of trees, bushes, or vines in the individual 
stand that would normally be damaged during a calendar year for a 
producer.
    Normal mortality means percentage, as established for the area by 
the FSA State Committee, of expected lost trees, bushes, or vines in the 
individual stand that normally occurs during a calendar year for a 
producer. This term refers to the number of whole trees,

[[Page 107]]

bushes, or vines that are destroyed or damaged beyond rehabilitation. 
Mortality does not include partial damage such as lost tree limbs.
    Seedling means an immature tree, bush, or vine that was planted in 
the ground or other growing medium to grow a new tree, bush, or vine for 
commercial purposes.
    Stand means a contiguous acreage of the same type of trees 
(including Christmas trees, ornamental trees, nursery trees, and potted 
trees), bushes (including shrubs), or vines.
    State committee means the respective FSA committee.
    Tree means a tall, woody plant having comparatively great height, 
and a single trunk from which an annual crop is produced for commercial 
purposes, such as a maple tree for syrup, papaya tree, or orchard tree. 
Trees used for pulp or timber are not considered eligible trees under 
this subpart.
    Vine means a perennial plant grown under normal conditions from 
which an annual fruit crop is produced for commercial market for human 
consumption, such as grape, kiwi, or passion fruit, and that has a 
flexible stem supported by climbing, twining, or creeping along a 
surface. Perennials that are normally propagated as annuals such as 
tomato plants, biennials such as the plants that produce strawberries, 
and annuals such as pumpkins, squash, cucumbers, watermelon, and other 
melons, are excluded from the term vine in this subpart.



Sec. 760.503  Eligible losses.

    (a) To be considered an eligible loss under this subpart:
    (1) Eligible trees, bushes, or vines must have been lost or damaged 
as a result of natural disaster as determined by the Deputy 
Administrator;
    (2) The individual stand must have sustained a mortality loss or 
damage, as the case may be, loss in excess of 15 percent after 
adjustment for normal mortality or damage;
    (3) The loss could not have been prevented through reasonable and 
available measures; and
    (4) The trees, bushes, or vines, in the absence of a natural 
disaster, would not normally have required rehabilitation or replanting 
within the 12-month period following the loss.
    (b) The damage or loss must be visible and obvious to the county 
committee representative. If the damage is no longer visible, the county 
committee may accept other evidence of the loss as it determines is 
reasonable.
    (c) The county committee may require information from a qualified 
expert, as determined by the county committee, to determine extent of 
loss in the case of plant disease or insect infestation.
    (d) The Deputy Administrator will determine the types of trees, 
bushes, and vines that are eligible.
    (e) An individual stand that did not sustain a sufficient loss as 
specified in paragraph (a)(2) of this section is not eligible for 
payment, regardless of the amount of loss sustained.



Sec. 760.504  Eligible orchardists and nursery tree growers.

    (a) To be eligible for TAP payments, the eligible orchardist or 
nursery tree grower must:
    (1) Have planted, or be considered to have planted (by purchase 
prior to the loss of existing stock planted for commercial purposes) 
trees, bushes, or vines for commercial purposes, or have a production 
history, for commercial purposes, of planted or existing trees, bushes, 
or vines;
    (2) Have suffered eligible losses of eligible trees, bushes, or 
vines occurring between January 1, 2008, and September 30, 2011, as a 
result of a natural disaster or related condition;
    (3) Meet the risk management purchase requirement as specified in 
Sec. 760.104 or the waiver requirements in Sec. 760.105 or Sec. 
760.107; and
    (4) Have continuously owned the stand from the time of the disaster 
until the time that the TAP application is submitted.
    (b) A new owner of an orchard or nursery who does not meet the 
requirements of paragraph (a) of this section may receive TAP payments 
approved for the previous owner of the orchard or nursery and not paid 
to the previous owner, if the previous owner of the orchard or nursery 
agrees to the succession in writing and if the new owner:

[[Page 108]]

    (1) Acquires ownership of trees, bushes, or vines for which benefits 
have been approved;
    (2) Agrees to complete all approved practices that the original 
owner has not completed; and
    (3) Otherwise meets and assumes full responsibility for all 
provisions of this part, including refund of payments made to the 
previous owner, if applicable.
    (c) A producer seeking payment must not be ineligible under the 
restrictions applicable to citizenship and foreign corporations 
contained in Sec. 760.103(b) and must meet all other requirements of 
subpart B of this part.
    (d) Federal, State, and local governments and agencies and political 
subdivisions thereof are not eligible for payment under this subpart.



Sec. 760.505  Application.

    (a) To apply for TAP, a producer that suffered eligible tree, bush, 
or vine losses that occurred:
    (1) During calendar years 2008, 2009, or 2010, prior to May 7, 2010, 
must provide an application for payment and supporting documentation to 
FSA no later than July 6, 2010.
    (2) On or after May 7, 2010, must provide an application for payment 
and supporting documentation to FSA within 90 calendar days of the 
disaster event or date when the loss of trees, bushes, or vines is 
apparent to the producer.
    (b) The producer must submit the application for payment within the 
time specified in paragraph (a) of this section to the FSA 
administrative county office that maintains the producer's farm records 
for the agricultural operation.
    (c) A complete application includes all of the following:
    (1) A completed application form provided by FSA;
    (2) An acreage report for the farming operation as specified in part 
718, subpart B, of this chapter;
    (3) Subject to verification and a loss amount determined appropriate 
by the county committee, a written estimate of the number of trees, 
bushes, or vines lost or damaged that is certified by the producer or a 
qualified expert, including the number of acres on which the loss 
occurred; and
    (4) Sufficient evidence of the loss to allow the county committee to 
calculate whether an eligible loss occurred.
    (d) Before requests for payment will be approved, the county 
committee:
    (1) Must make an eligibility determination based on a complete 
application for assistance;
    (2) Must verify actual qualifying losses and the number of acres 
involved by on-site visual inspection of the land and the trees, bushes, 
or vines;
    (3) May request additional information and may consider all relevant 
information in making its determination; and
    (4) Must verify actual costs to complete the practices, as 
documented by the producer.



Sec. 760.506  Payment calculations.

    (a) Payment to an eligible orchardist or nursery tree grower for the 
cost of replanting or rehabilitating trees, bushes, or vines damaged or 
lost due to a natural disaster, in excess of 15 percent damage or 
mortality (adjusted for normal damage or mortality), will be calculated 
as follows:
    (1) For the cost of planting seedlings or cuttings, to replace lost 
trees, bushes, or vines, the lesser of:
    (i) 70 percent of the actual cost of the practice, or
    (ii) The amount calculated using rates established by the Deputy 
Administrator for the practice.
    (2) For the cost of pruning, removal, and other costs incurred for 
salvaging damaged trees, bushes, or vines, or in the case of mortality, 
to prepare the land to replant trees, bushes, or vines, the lesser of:
    (i) 50 percent of the actual cost of the practice, or
    (ii) The amount calculated using rates established by the Deputy 
Administrator for the practice.
    (b) An orchardist or nursery tree grower that did not plant the 
trees, bushes, or vines, but has a production history for commercial 
purposes on planted or existing trees and lost the trees, bushes, or 
vines as a result of a natural disaster, in excess of 15 percent

[[Page 109]]

damage or mortality (adjusted for normal damage or mortality), will be 
eligible for the salvage, pruning, and land preparation payment 
calculation as specified in paragraph (a)(2) of this section. To be 
eligible for the replanting payment calculation as specified in 
paragraph (a)(1) of this section, the orchardist or nursery grower who 
did not plant the stock must be a new owner who meets all of the 
requirements of Sec. 760.504(b) or be considered the owner of the trees 
under provisions appearing elsewhere in this subpart.
    (c) Eligible costs for payment calculation include costs for:
    (1) Seedlings or cuttings, for tree, bush, or vine replanting;
    (2) Site preparation and debris handling within normal horticultural 
practices for the type of stand being re-established, and necessary to 
ensure successful plant survival;
    (3) Pruning, removal, and other costs incurred to salvage damaged 
trees, bushes, or vines, or, in the case of tree mortality, to prepare 
the land to replant trees, bushes, or vines;
    (4) Chemicals and nutrients necessary for successful establishment;
    (5) Labor to plant seedlings or cuttings as determined reasonable by 
the county committee; and
    (6) Labor used to transplant existing seedlings established through 
natural regeneration into a productive tree stand.
    (d) The following costs are not eligible:
    (1) Costs for fencing, irrigation, irrigation equipment, protection 
of seedlings from wildlife, general improvements, re-establishing 
structures, and windscreens.
    (2) Any other costs not listed in paragraphs (c)(1) through (c)(6) 
of this section, unless specifically determined eligible by the Deputy 
Administrator.
    (e) Producers must provide the county committee documentation of 
actual costs to complete the practices, such as receipts for labor 
costs, equipment rental, and purchases of seedlings or cuttings.
    (f) When lost stands are replanted, the types planted may be 
different from those originally planted. The alternative types will be 
eligible for payment if the new types have the same general end use, as 
determined and approved by the county committee. Payments for 
alternative types will be based on the lesser of rates established to 
plant the types actually lost or the cost to establish the alternative 
used. If the type of plantings, seedlings, or cuttings differs 
significantly from the types lost, the costs may not be approved for 
payment.
    (g) When lost stands are replanted, the types planted may be planted 
on the same farm in a different location than the lost stand. To be 
eligible for payment, site preparation costs for the new location must 
not exceed the cost to re-establish the original stand in the original 
location.
    (h) Eligible orchardists or nursery tree growers may elect not to 
replant the entire eligible stand. If so, the county committee will 
calculate payment based on the number of qualifying trees, bushes, or 
vines actually replanted.
    (i) If a practice, such as site preparation, is needed to both 
replant and rehabilitate trees, bushes, or vines, the producer must 
document the expenses attributable to replanting versus rehabilitation. 
The county committee will determine whether the documentation of 
expenses detailing the amounts attributable to replanting versus 
rehabilitation is acceptable. In the event that the county committee 
determines the documentation does not include acceptable detail of cost 
allocation, the county committee will pro-rate payment based on physical 
inspection of the loss, damage, replanting, and rehabilitation.
    (j) The cumulative total quantity of acres planted to trees, bushes, 
or vines for which a producer may receive payment under this part for 
losses that occurred between January 1, 2008, and September 30, 2011, 
will not exceed 500 acres.



Sec. 760.507  Obligations of a participant.

    (a) Eligible orchardists and nursery tree growers must execute all 
required documents and complete the TAP-funded practice within 12 months 
of application approval.
    (b) Eligible orchardist or nursery tree growers must allow 
representatives of FSA to visit the site for the purposes

[[Page 110]]

of certifying compliance with TAP requirements.
    (c) Producers who do not meet all applicable requirements and 
obligations will not be eligible for payment.



       Subpart G_Supplemental Revenue Assistance Payments Program

    Source: 74 FR 68490, Dec. 28, 2009, unless otherwise noted.



Sec. 760.601  Applicability.

    (a) This subpart specifies the terms and conditions of the 
Supplemental Revenue Assistance Payments Program (SURE).
    (b) Assistance in the form of SURE payments is available for crop 
losses occurring in the crop year 2008 through September 30, 2011, 
caused by disaster as determined by the Secretary. Crop losses must have 
occurred in crop year 2008 or subsequent crop years due to an eligible 
disaster event that occurs on or before September 30, 2011.
    (c) SURE provides disaster assistance to eligible participants on 
farms in:
    (1) Disaster counties designated by the Secretary, which also 
includes counties contiguous to such declared disaster counties, if the 
participant incurred actual production losses of at least 10 percent to 
at least one crop of economic significance on the farm; and
    (2) Any county, if the participant incurred eligible total crop 
losses of greater than or equal to 50 percent of the normal production 
on the farm, as measured by revenue, including a loss of at least 10 
percent to at least one crop of economic significance on the farm.
    (d) Subject to the provisions in subpart B of this part, SURE 
payments will be issued on 60 percent of the difference between the SURE 
guarantee and total farm revenue, calculated using the National Average 
Market Price as specified in this subpart.

[74 FR 68490, Dec. 28, 2009, as amended at 76 FR 54075, Aug. 31, 2011]



Sec. 760.602  Definitions.

    (a) The following definitions apply to all determinations made under 
this subpart.
    (b) The terms defined in parts 718, 1400, and 1437 of this title and 
subpart B of this part will be applicable, except where those 
definitions conflict with the definitions set forth in this section In 
the event that a definition in any of those parts conflicts with the 
definitions set forth in this subpart, the definitions in this subpart 
apply. Any additional conflicts will be resolved by the Deputy 
Administrator.
    Actual crop acreage means all acreage for each crop planted or 
intended to be planted on the farm.
    Actual production history yield means the average of the actual 
production history yields for each insurable or noninsurable crop as 
calculated under the Federal Crop Insurance Act (FCIA) (7 U.S.C. 1501-
1524) or Noninsured Crop Disaster Assistance Program (NAP) as set forth 
in part 1437 of this title, respectively. FSA will use the actual 
production history yield data provided for crop insurance or NAP, if 
available, in the SURE payment calculation.
    Actual production on the farm means, unless the Deputy Administrator 
determines that the context requires otherwise, the sum obtained by 
adding:
    (1) For each insurable crop on the farm, excluding value loss crops, 
the product obtained by multiplying:
    (i) 100 percent of the per unit price for the crop used to calculate 
a crop insurance indemnity for the applicable crop insurance if a crop 
insurance indemnity is triggered. If a price is not available, then the 
price is 100 percent of the NAP established price for the crop, times
    (ii) The relevant per unit quantity of the crop produced on the 
farm, adjusted for quality losses, plus
    (2) For each noninsurable crop on the farm, excluding value loss 
crops, the product obtained by multiplying:
    (i) 100 percent of the per unit NAP established price for the crop, 
times
    (ii) The relevant per unit quantity of the crop produced on the 
farm, adjusted for quality losses, plus
    (3) For value loss crops, the value of inventory immediately after 
the disaster.
    Adjusted actual production history yield means a yield that will not 
be less than the participant's actual production history yield for a 
year and:

[[Page 111]]

    (1) In the case of an eligible participant on a farm that has at 
least 4 years of actual production history for an insurable crop that 
are established other than pursuant to section 508(g)(4)(B) of FCIA, the 
average of the production history for the eligible participant without 
regard to any yields established under that section;
    (2) In the case of an eligible participant on a farm that has less 
than 4 years of actual production history for an insurable crop, of 
which one or more were established pursuant to section 508(g)(4)(B) of 
FCIA, the average of the production history for the eligible participant 
as calculated without including the lowest of the yields established 
pursuant to section 508(g)(4)(B) of FCIA; or
    (3) In all other cases, the actual production history yield of the 
eligible participant on a farm.
    Adjusted NAP yield means a yield that will not be less than the 
participant's actual production history yield for NAP for a year and:
    (1) In the case of an eligible participant on a farm that has at 
least 4 years of actual production history under NAP that are not 
replacement yields, the average of the production history without regard 
to any replacement yields;
    (2) In the case of an eligible participant on a farm that has less 
than 4 years of actual production history under NAP that are not 
replacement yields, the average of the production history without 
including the lowest of replacement yields; or
    (3) In all other cases, the actual production history yield of the 
eligible participant on the farm under NAP.
    Administrative fee means a fixed fee payable by a participant for 
NAP or crop insurance coverage, including buy-in fees, based on the 
number of covered crops under NAP or insurance under FCIA.
    Appraised production means production determined by FSA, or an 
insurance provider approved by FCIC, that was unharvested, but which was 
determined to reflect the crop's yield potential at the time of 
appraisal. An appraisal may be provided in terms of a potential value of 
the crop.
    Aquaculture means the reproduction and rearing of aquatic species as 
specified in part 1437 of this title in controlled or selected 
environments.
    Brownout means a disruption of electrical or other similar power 
source for any reason. A brownout, although it may indirectly have an 
adverse effect on crops, is not a disaster for the purposes of this 
subpart and losses caused by a brownout will not be considered a 
qualifying loss.
    Catastrophic risk protection (CAT) means the minimum level of 
coverage offered by the Risk Management Agency (RMA) for crop insurance. 
CAT is further specified in parts 402 and 1437 of this title.
    Counter-cyclical program payment yield means the weighted average 
payment yield established under part 1412, subpart C of this title.
    County expected yield means an estimated yield, expressed in a 
specific unit of measure equal to the average of the most recent five 
years of official county yields established by FSA, excluding the years 
with the highest and lowest yields, respectively.
    Crop insurance indemnity means, for the purpose of this subpart, the 
net payment to a participant excluding the value of the premium for crop 
losses covered under crop insurance administered in accordance with FCIA 
by RMA.
    Crop of economic significance means any crop, as defined in this 
subpart that contributed, or, if the crop is not successfully produced, 
would have contributed or is expected to contribute, 5 percent or more 
of the total expected revenue from all of a participant's crops on a 
farm.
    Crop year means as determined by the Deputy Administrator for a 
commodity on a nationwide basis the calendar year in which the crop is 
normally harvested or, where more than one calendar year is involved, 
the calendar year in which the majority of the crop would have been 
harvested. For crops on which catastrophic risk protection, as defined 
in this section, is available, the crop year will be as defined as in 
such coverage. Crop year determinations by the Deputy Administrator will 
be final in all cases and, because these are matters of general 
applicability,

[[Page 112]]

will not considered by the Farm Service Agency to be subject to 
administrative appeal.
    Determined acreage or determined production means the amount of 
acres or production for a farm established by a representative of FSA by 
use of appropriate means such as official acreage, digitizing and 
planimetering areas on the photograph or other photographic image, or 
computations from scaled dimensions or ground measurements. In the case 
of production, any production established by a representative of FSA 
through audit, review, measurement, appraisal, or other acceptable means 
of determining production, as determined by FSA.
    Disaster means damaging weather, including drought, excessive 
moisture, hail, freeze, tornado, hurricane, typhoon, excessive wind, 
excessive heat, weather-related saltwater intrusion, weather-related 
irrigation water rationing, or any combination thereof and adverse 
natural occurrences such as earthquakes or volcanic eruptions. Disaster 
includes a related condition that occurs as a result of the damaging 
weather or adverse natural occurrence and exacerbates the condition of 
the crop, such as disease and insect infestation. It does not include 
brownouts or power failures.
    Disaster county means a county included in the geographic area 
covered by a qualifying natural disaster designation under section 
321(a) of the Consolidated Farm and Rural Development Act (7 U.S.C. 
1961(a)) and for SURE, the term ``disaster county'' also includes a 
county contiguous to a county declared a disaster by the Secretary; 
however, farms not in a disaster county may qualify under SURE where for 
the relevant period, as determined under this subpart, the actual 
production on a farm is less than 50 percent of the normal production on 
the farm.
    Double-cropping means, as determined by the Deputy Administrator on 
a regional basis, planting for harvest a crop of a different commodity 
on the same acres in cycle with another crop in a 12-month period in an 
area where such double-cropping is considered normal, or could be 
considered to be normal, for all growers and under normal growing 
conditions and normal agricultural practices for the region and being 
able to repeat the same cycle in the following 12-month period.
    Farm means, for the purposes of determining SURE eligibility, the 
entirety of all crop acreage in all counties that a producer planted or 
intended to be planted for harvest for normal commercial sale or on-farm 
livestock feeding, including native and improved grassland intended for 
haying. In the case of aquaculture, except for species for which an 
Aquaculture Grant Program payment was received, the term ``farm'' 
includes all acreage used for all aquatic species being produced in all 
counties that the producer intended to harvest for normal commercial 
sale. In the case of honey, the term ``farm'' means all bees and 
beehives in all counties that the participant intended to be harvested 
for a honey crop for normal commercial sale.
    FCIC means the Federal Crop Insurance Corporation, a wholly owned 
Government Corporation operated and managed by USDA RMA.
    FSA means the Farm Service Agency.
    Harvested means:
    (1) For insurable crops, harvested is as defined according to the 
applicable crop insurance policy administered in accordance with FCIA by 
RMA;
    (2) For NAP-covered single harvest crops, a mature crop that has 
been removed from the field, either by hand or mechanically;
    (3) For noninsurable crops with potential multiple harvests in one 
year or one crop harvested over multiple years, that the participant 
has, by hand or mechanically, removed at least one mature crop from the 
field during the crop year; or
    (4) For mechanically harvested noninsurable crops, that the mature 
crop has been removed from the field and placed in or on a truck or 
other conveyance, except hay is considered harvested when in the bale, 
whether removed from the field or not. Grazing of land will not be 
considered harvested for the purpose of determining an unharvested or 
prevented planting payment factor.

[[Page 113]]

    Initial crop means a first crop planted for which assistance is 
provided under this subpart.
    Insurable crop means an agricultural commodity (excluding livestock) 
for which the participant on a farm is eligible to obtain a policy or 
plan of crop insurance administered in accordance with FCIA by RMA. Such 
a crop for which the participant purchased insurance from RMA is 
referred to as an insured crop.
    Insurance is available means when crop information is contained in 
RMA's county actuarial documents for a particular crop and a policy or 
plan of insurance administered in accordance with FCIA by RMA. If the 
Adjusted Gross Revenue Plan of crop insurance was the only plan of 
insurance available for the crop in the county in the applicable crop 
year, insurance is considered not available for that crop. If an AGR 
plan or a pilot plan was the only plan available, producers are not 
required to purchase it to meet the risk management purchase 
requirement, but it will satisfy the risk management purchase 
requirement. In that case, the other ways to meet the requirement would 
be, if all the requirements of this subpart are met, a buy-in or NAP.
    Intended use means the original use for which a crop or a commodity 
is grown and produced.
    Marketing year means the 12 months immediately following the 
established final harvest date of the crop of a commodity, as determined 
by the Deputy Administrator, and not an individual participant's final 
harvest date. FSA will use the marketing year determined by NASS, when 
available.
    Maximum average loss level means the maximum level of crop loss that 
will be used in calculating SURE payments for a participant without 
reliable or verifiable production records as defined in this section. 
Loss levels are expressed in either a percent of loss or a yield per 
acre, and reflect the amount of production that a participant should 
have produced considering the eligible disaster conditions in the area 
or county, as determined by the FSA county committee in accordance with 
instructions issued by the Deputy Administrator.
    Multi-use crop means a crop intended for more than one use during 
the calendar year such as grass harvested for seed, hay, or grazing.
    Multiple planting means the planting for harvest of the same crop in 
more than one planting period in a crop year on the same or different 
acreage. This is also sometimes referred in this rule as multiple 
cropping.
    NAMP means the national average market price determined in 
accordance with Sec. Sec. 760.640 and 760.641.
    NASS is the USDA National Agricultural Statistics Service.
    Noninsurable crop means a commercially produced crop for which the 
eligible participants on a farm may obtain coverage under NAP.
    Noninsured Crop Disaster Assistance Program or NAP means the FSA 
program carried out under 7 U.S.C. 7333, as specified in part 1437 of 
this title.
    Normal production on the farm means, for purposes of the revenue 
calculations of this subpart, the sum of the expected revenue for all 
crops on the farm. It is stated in terms of revenue, because different 
crops may have different units of measure.
    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 seed bed that has been properly prepared for the planting 
method and production practice normal to the area, as determined by the 
FSA county committee.
    Prevented planting means the inability to plant an eligible crop 
with proper equipment during the planting period as a result of a 
disaster, as determined by FSA. All prevented planted cropland must meet 
conditions provided in Sec. 718.103 of this chapter. Additionally, all 
insured crops must satisfy the provisions of prevented planting provided 
in Sec. 457.8 of this title.
    Price election means, for an insured crop, the crop insurance price 
elected by the participant multiplied by the percentage of price elected 
by the participant.
    Production means quantity of a crop or commodity produced on the 
farm expressed in a specific unit of measure including, but not limited 
to, bushels or

[[Page 114]]

pounds and used to determine the normal production on a farm. Normal 
production for the whole farm is stated in terms of revenue, because 
different crops may have different units of measure.
    Qualifying loss means a 10 percent loss of at least one crop of 
economic significance due to disaster and on a farm that is either:
    (1) Located in a disaster county (a county for which a Secretarial 
disaster designation has been issued or in a county contiguous to a 
county that has received a Secretarial disaster designation), or
    (2) If not located in any disaster county or county contiguous to 
such a county, but has an overall loss greater than or equal to 50 
percent of normal production on the farm (expected revenue for all crops 
on the farm) due to disaster.
    Qualifying natural disaster designation means a natural disaster 
designated by the Secretary for production losses under section 321(a) 
of the Consolidated Farm and Rural Development Act (7 U.S.C. 1961(a)).
    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 by the Deputy Administrator.
    Reliable production records means evidence provided by the 
participant to the FSA county office that FSA determines is adequate to 
substantiate the amount of production reported when verifiable records 
are not available, including copies of receipts, ledgers of income, 
income statements, deposit slips, register tapes, invoices for custom 
harvesting, records to verify production costs, contemporaneous 
measurements, truck scale tickets, and contemporaneous diaries. When the 
term ``acceptable production records'' is used in this rule, it may be 
either reliable or verifiable production records, as defined in this 
section.
    Reported acreage or production means information obtained from the 
participant or the participant's agent, on a form prescribed by FSA or 
through insurance records.
    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.
    Secretary means the Secretary of Agriculture.
    State means a State; the District of Columbia, the Commonwealth of 
Puerto Rico, and any other territory or possession of the United States.
    Subsequent crop means any crop planted after an initial crop, on the 
same land, during the same crop year.
    SURE means the Supplemental Revenue Assistance Payments Program.
    Unit of measure means:
    (1) For all insurable crops, the FCIC established unit of measure;
    (2) For all noninsurable crops, if available, the established unit 
of measure used for the NAP price and yield;
    (3) For aquatic species, a standard unit of measure such as gallons, 
pounds, inches or pieces, established by the FSA State committee for all 
aquatic species or varieties;
    (4) For turfgrass sod, a square yard;
    (5) For maple sap, a gallon; and
    (6) For all other crops, the smallest unit of measure that lends 
itself to the greatest level of accuracy, as determined by the FSA State 
committee.
    USDA means United States Department of Agriculture.
    Value loss crop has the meaning specified in part 1437, subpart D of 
this title. Unless otherwise announced by FSA, value loss crops for SURE 
include aquaculture, floriculture, ornamental nursery, Christmas trees, 
mushrooms, ginseng, and turfgrass sod.
    Verifiable production records mean evidence that is used to 
substantiate the amount of production reported and that can be verified 
by FSA through an independent source.
    Volunteer stand means plants that grow from seed residue or are 
indigenous or are not planted. Volunteer plants may sprout from seeds 
left behind during a harvest of a previous crop; be unintentionally 
introduced to land by wind, birds, or fish; or be inadvertently mixed 
into a crop's growing medium.

[[Page 115]]



Sec. 760.610  Participant eligibility.

    (a) In addition to meeting the eligibility requirements of Sec. 
760.103, a participant must meet all of the following conditions:
    (1) All insurable crops on the participant's farm must be covered by 
crop insurance administered by RMA in accordance with FCIA, and all 
noninsured crops must be covered under NAP, as specified in Sec. 
760.104, unless the participant meets the requirements in either Sec. 
760.105 or Sec. 760.107. At the discretion of FSA, the equitable relief 
provisions in Sec. 760.106 may apply.
    (2) Crop losses must have occurred in crop year 2008 or subsequent 
crop years due to an eligible disaster event that occurred on or before 
September 30, 2011.
    (i) For insured crops, the coverage period, as defined in the 
insurance policy, must have begun on or before September 30, 2011;
    (ii) For NAP crops, the coverage period must have begun on or before 
September 30, 2011; and
    (iii) The final planting date for that crop according to the Federal 
crop insurance or NAP policy must have been on or before September 30, 
2011.
    (3) A qualifying loss as defined in Sec. 760.602 must have 
occurred.
    (4) The participant must have been in compliance with the Highly 
Erodible Land Conservation and Wetland Conservation provisions of part 
12 of this title, for 2008 and subsequent crop years through September 
30, 2011, as applicable, and must not otherwise be barred from receiving 
benefits or payments under part 12 of this title or any other law.
    (5) The participant must not be ineligible or otherwise barred from 
the requisite risk management insurance programs or NAP because of past 
violations where those insurance programs or NAP would otherwise be 
available absent such violations.
    (6) The participant must have an entitlement to an ownership share 
of the crop and also assume production and market risks associated with 
the production of the crop. In the event the crop was planted but not 
produced, participants must have an ownership share of the crop that 
would have been produced.
    (i) Any verbal or written contract that precludes the grower from 
having an ownership share renders the grower ineligible for payments 
under this subpart.
    (ii) Growers growing eligible crops under contract are not eligible 
participants under this subpart unless the grower has an ownership share 
of the crop.
    (b) In the event that a producer is determined not to be an eligible 
producer of a crop in accordance with this section, such crop will be 
disregarded in determining the producer's production or eligibility for 
payments under this subpart. However, any insurance, farm program, or 
NAP payments received by the producer on such crop will count as farm 
revenue if that producer is an eligible participant as a producer of 
other crops.
    (c) Participants may not receive payments with respect to volunteer 
stands of crops. Volunteer stands will not be considered in either the 
calculation of revenue or of the SURE guarantee.
    (d) A deceased applicant or an applicant that is a dissolved entity 
that suffered losses prior to the death or the dissolution that met all 
eligibility criteria prior to death or dissolution may be eligible for 
payments for such losses if an authorized representative signs the 
application for payment. Proof of authority to sign for the deceased 
participant 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. 
Eligibility of such participant will be determined, as it is for other 
participants, based upon ownership share and risk in producing the crop.
    (e) Participants receiving payments under the Emergency Assistance 
for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP) as 
specified in subpart C of this part are not eligible to receive payments 
under SURE for the same loss.
    (f) Participants with a farming interest in multiple counties who 
apply for SURE payment based on a Secretarial disaster designation must 
have a 10

[[Page 116]]

percent loss of a crop of economic significance located in at least one 
disaster county, as defined in this subpart, to be eligible for SURE.

[74 FR 68490, Dec. 28, 2009, as amended at 76 FR 54075, Aug. 31, 2011]



Sec. 760.611  Qualifying losses, eligible causes and types of loss.

    (a) Eligible causes of loss are disasters which cause types of 
losses where the crop could not be planted or where crop production was 
adversely affected in quantity, quality, or both. A qualifying loss, as 
defined in this subpart, must be the result of a disaster.
    (b) A loss will not be considered a qualifying loss if any of the 
following apply:
    (1) The cause of the loss was not the result of disaster;
    (2) The cause of loss was due to poor management decisions or poor 
farming practices, as determined by the FSA county committee on a case-
by-case basis;
    (3) The cause of loss was due to failure of the participant to re-
seed or replant to the same crop in a county where it is customary to 
re-seed or replant after a loss before the final planting date;
    (4) The cause of loss was due to water contained or released by any 
governmental, public, or private dam or reservoir project if an easement 
exists on the acreage affected by the containment or release of the 
water;
    (5) The cause of loss was due to conditions or events occurring 
outside of the applicable crop year growing season; or
    (6) The cause of loss was due to a brownout.
    (c) The following types of loss, regardless of whether they were the 
result of a disaster, are not qualifying losses:
    (1) Losses to crops not intended for harvest in the applicable crop 
year;
    (2) Losses of by-products resulting from processing or harvesting a 
crop, such as, but not limited to, cotton seed, peanut shells, wheat or 
oat straw, or corn stalks or stovers;
    (3) Losses to home gardens; or to a crop subject to a de minimis 
election according to Sec. 760.613;
    (4) Losses of crops that were grazed or, if prevented from being 
planted, had the intended use of grazing; or
    (5) Losses of first year seeding for forage production, or immature 
fruit crops.
    (d) The following losses of ornamental nursery stock are not a 
qualifying loss:
    (1) Losses caused by a failure of power supply or brownout as 
defined in Sec. 760.602;
    (2) Losses caused by the inability to market nursery stock as a 
result of quarantine, boycott, or refusal of a buyer to accept 
production;
    (3) Losses caused by fires that are not the result of disaster;
    (4) Losses affecting crops where weeds and other forms of 
undergrowth in the vicinity of nursery stock have not been controlled; 
or
    (5) Losses caused by the collapse or failure of buildings or 
structures.
    (e) The following losses for honey, where the honey production by 
colonies or bees was diminished, are not a qualifying loss:
    (1) Losses caused by the unavailability of equipment or the collapse 
or failure of equipment or apparatus used in the honey operation;
    (2) Losses caused by improper storage of honey;
    (3) Losses caused by bee feeding;
    (4) Losses caused by the application of chemicals;
    (5) Losses caused by theft or fire not caused by a natural condition 
including, but not limited to, arson or vandalism;
    (6) Losses caused by the movement of bees by the participant or any 
other legal entity or person;
    (7) Losses caused by disease or pest infestation of the colonies, 
unless approved by the Secretary;
    (8) Losses of income from pollinators; or
    (9) Losses of equipment or facilities.



Sec. 760.613  De minimis exception.

    (a) Participants seeking the de minimis exception to the risk 
management purchase requirements of this subpart, must certify:
    (1) That a specific crop on the farm is not a crop of economic 
significance on the farm; or

[[Page 117]]

    (2) That the administrative fee required for the purchase of NAP 
coverage for a crop exceeds 10 percent of the value of that coverage.
    (b) To be eligible for a de minimis exception to the risk management 
purchase requirement in Sec. 760.104, the participant must elect such 
exception at the same time the participant files the application for 
payment and the certification of interests, as specified in Sec. 
760.620, and specify the crop or crops for which the participant is 
requesting such exception.
    (c) FSA will not consider the value of any crop elected under 
paragraph (b) of this section in calculating both the SURE guarantee and 
the total farm revenue.
    (d) All provisions of this subpart apply in the event a participant 
does not obtain an exception according to this section.



Sec. 760.614  Lack of access.

    In addition to other provisions for eligibility provided for in this 
part, the Deputy Administrator may provide assistance to participants 
who suffered 2008 production losses that meet the lack of access 
provisions in 19 U.S.C. 2497(g)(7)(F), where deemed appropriate, and 
consistent with the statutory provision. Such a determination to 
exercise that authority, and the terms on which to exercise that 
authority, will be considered to be a determination of general effect, 
not a ``relief'' determination, and will not be considered by the Farm 
Service Agency to be appealable administratively either within FSA or 
before the National Appeals Division.



Sec. 760.620  Time and method of application and certification of 
interests.

    (a) Each producer interested in obtaining a SURE payment must file 
an application for payment and provide an accurate certification of 
interests. The application will be on a form prescribed by FSA and will 
require information or certifications from the producer regarding any 
other assistance, payment, or grant benefit the producer has received 
for any of the producer's crops or interests on a farm as defined in 
this subpart; regardless of whether the crop or interest is covered in 
the farm's SURE guarantee according to Sec. 760.631. The producer's 
certification of interests will help FSA establish whether the producer 
is an eligible participant.
    (b) Eligible participants with a qualifying loss as defined in this 
subpart must submit an application for payment and certification of 
interests by March 1 of the calendar year that is two years after the 
relevant corresponding calendar year for the crop year which benefits 
are sought to be eligible for payment (for example, the final date to 
submit an application for a SURE payment for the 2009 crop year will be 
March 1, 2011). Producers who do not submit the application by that date 
will not be eligible for payment.
    (c) To the extent available and practicable, FSA will assist 
participants with information regarding their interests in a farm, as of 
the date of certification, based on information already available to FSA 
from various sources. However, the participant is solely responsible for 
providing an accurate certification from which FSA can determine the 
participant's farm interests for the purposes of this program. As 
determined appropriate by FSA, failure of a participant to provide an 
accurate certification of interests as part of the application may 
render the participant ineligible for any assistance under SURE.
    (d) To elect a de minimis exception to the risk management purchase 
requirement for a crop or crops, the participant must meet the 
requirements specified in Sec. 760.613. When electing a de minimis 
exception, the participant must specify the crops for which the 
exception is requested and provide the certification and supporting 
documentation for that exception at the time the application and 
certification of interests is filed with FSA.



Sec. 760.621  Requirement to report acreage and production.

    (a) As a condition of eligibility for payment under this subpart, 
participants must submit an accurate and timely report of all cropland, 
non-cropland, prevented planting, and subsequent crop acreage and 
production for the farm in all counties.

[[Page 118]]

    (b) Acreage and production reports that have been submitted to FSA 
for NAP or to RMA for crop insurance purposes may satisfy the 
requirement of paragraph (a) of this section provided that the 
participant's certification of interests submitted as required by Sec. 
760.620 corresponds to the report requirements in paragraph (a) of this 
section, as determined by the FSA county committee.
    (c) Reports of production submitted for NAP or FCIA purposes must 
satisfy the requirements of NAP or FCIA, as applicable. In all other 
cases, in order for production reports or appraisals to be considered 
acceptable for SURE, production reports and appraisals must meet the 
requirements set forth in part 1437 of this title.
    (d) In any case where production reports or an appraisal is not 
acceptable, maximum loss provisions apply as specified in Sec. 760.637.



Sec. 760.622  Incorrect or false producer production evidence.

    (a) If production evidence, including but not limited to acreage and 
production reports, provided by a participant is false or incorrect, as 
determined by the FSA county committee at any time after an application 
for payment is made, the FSA county committee will determine whether:
    (1) The participant submitting the production evidence acted in good 
faith or took action to defeat the purposes of the program, such that 
the information provided was intentionally false or incorrect.
    (2) The same false, incorrect, or unacceptable production evidence 
was submitted for payment(s) under crop insurance or NAP, and if so, for 
NAP covered crops, make any NAP program adjustments according to Sec. 
1437.15 of this title.
    (b) If the FSA county committee determines that the production 
evidence submitted is false, incorrect, or unacceptable, and the 
participant who submitted the evidence did not act in good faith or took 
action to defeat the purposes of the program, the provisions of Sec. 
760.109, including a denial of future program benefits, will apply. The 
Deputy Administrator may take further action, including, but not limited 
to, making further payment reductions or requiring refunds or taking 
other legal action.
    (c) If the FSA county committee determines that the production 
evidence is false, incorrect, or unacceptable, but the participant who 
submitted the evidence acted in good faith, payment may be adjusted and 
a refund may be required.



Sec. 760.631  SURE guarantee calculation.

    (a) Except as otherwise provided in this part, the SURE guarantee 
for a farm is the sum obtained by adding the dollar amounts calculated 
in paragraphs (a)(1) through (a)(3) of this section.
    (1) For each insurable crop on the farm except for value loss crops, 
115 percent of the product obtained by multiplying together:
    (i) The price election. If a price election was not made or a 
participant is eligible as specified in Sec. 760.105, Sec. 760.106, or 
Sec. 760.107, then the percentage of price will be 55 percent of the 
NAP established price;
    (ii) The payment acres determined according to Sec. 760.632;
    (iii) The SURE yield as calculated according to Sec. 760.638; and
    (iv) The coverage level elected by the participant. If a coverage 
level was not elected or a participant is eligible as specified in Sec. 
760.105, Sec. 760.106, or Sec. 760.107, a coverage level of 50 percent 
will be used in the calculation.
    (2) For each noninsurable crop on a farm except for value loss 
crops, 120 percent of the product obtained by multiplying:
    (i) 100 percent of the NAP established price for the crop;
    (ii) The payment acres determined according to Sec. 760.632;
    (iii) The SURE yield calculated according to Sec. 760.638; and
    (iv) 50 percent.
    (3) The guarantee for value loss crops as calculated according to 
Sec. 760.634.
    (4) In the case of an insurable crop for which crop insurance 
provides for an adjustment in the guarantee liability, or indemnity, 
such as in the case of prevented planting, that adjustment will be used 
in determining the guarantee for the insurable crop.

[[Page 119]]

    (5) In the case of a noninsurable crop for which NAP provides for an 
adjustment in the level of assistance, such as in the case of 
unharvested crops, that adjustment will be used for determining the 
guarantee for the noninsurable crop.
    (b) Those participants who are eligible according to Sec. 760.105, 
Sec. 760.106, or Sec. 760.107 who do not have crop insurance or NAP 
coverage will have their SURE guarantee calculated based on catastrophic 
risk protection or NAP coverage available for those crops.
    (c) FSA will not include in the SURE guarantee the value of any crop 
that has a de minimis exception, according to Sec. 760.613.
    (d) For crops where coverage may exist under both crop insurance and 
NAP, such as for pasture, rangeland, and forage, adjustments to the 
guarantee will be the product obtained by multiplying the county 
expected yield for that crop times:
    (1) 115 percent;
    (2) 100 percent of the NAP established price;
    (3) The payment acres determined according to Sec. 760.632;
    (4) The SURE yield calculated according to Sec. 760.638; and
    (5) The coverage level elected by the participant.
    (e) Participants who do not have a SURE yield as specified in Sec. 
760.638 will have a yield determined for them by the Deputy 
Administrator.
    (f) The SURE guarantee may not be greater than 90 percent of the sum 
of the expected revenue for each of the crops on a farm, as determined 
by the Deputy Administrator.



Sec. 760.632  Payment acres.

    (a) Payment acres as calculated in this section are used in 
determining both total farm revenue and the SURE guarantee for a farm. 
Payment acreage will be calculated using the lesser of the reported or 
determined acres shown to have been planted or prevented from being 
planted to a crop.
    (b) Initial crop acreage will be the payment acreage for SURE, 
unless the provisions for subsequent crops in this section are met. 
Subsequently planted or prevented planted acre acreage is considered 
acreage for SURE only if the provisions of this section are met. All 
plantings of an annual or biennial crop are considered the same as a 
planting of an initial crop in tropical regions as defined in part 1437, 
subpart F, of this title.
    (c) In cases where there is double cropped acreage, each crop may be 
included in the acreage for SURE only if the specific crops are either 
insured crops eligible for double cropping according to RMA or approved 
by the FSA State committee as eligible double cropping practices in 
accordance with procedures approved by the Deputy Administrator.
    (d) Except for insured crops, participants with double cropped 
acreage not meeting the criteria in paragraph (c) of this section may 
have such acreage included in the acreage for SURE on more than one crop 
only if the participant submits verifiable records establishing a 
history of carrying out a successful double cropping practice on the 
specific crops for which payment is requested.
    (e) Participants having multiple plantings may have each planting 
included in the SURE guarantee only if the planting meets the 
requirements of part 1437 of this title and all other provisions of this 
subpart are satisfied.
    (f) Provisions of part 718 of this title specifying what is 
considered prevented planting and how it must be documented and reported 
will apply to this payment acreage for SURE.
    (g) Subject to the provisions of this subpart, the FSA county 
committee will:
    (1) Use the most accurate data available when determining planted 
and prevented planted acres; and
    (2) Disregard acreage of a crop produced on land that is not 
eligible for crop insurance or NAP.
    (h) For any crop acreage for which crop insurance or NAP coverage is 
canceled, those acres will no longer be considered the initial crop and 
will, therefore, no longer be eligible for SURE.
    (i) Notwithstanding any other provisions of these or other 
applicable regulations that relate to tolerance in part 718 of this 
title, if a farm has a crop that has both FSA and RMA acreage for 
insured crops, payment acres for the SURE guarantee calculation will

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be based on acres for which an indemnity was received if RMA acres do 
not differ from FSA acres by more than the larger of 5 percent or 10 
acres not to exceed 50 acres. If the difference between FSA and RMA 
acres is more than the larger of 5 percent or 10 acres not to exceed 50 
acres, then the payment acres for the SURE guarantee will be calculated 
using RMA acres. In that case, the participant will be notified of the 
discrepancy and that refunds of unearned payments may be required after 
FSA and RMA reconcile acreage data.



Sec. 760.633  2008 SURE guarantee calculation.

    (a) For a participant who is eligible due to the 2008 buy-in waiver 
for risk management purchase under the provisions of Sec. 760.105(c), 
the SURE guarantee for their farm for the 2008 crop will be calculated 
according to Sec. 760.631, or according to Sec. 760.634 for value loss 
crops, with the exception that the:
    (1) Price election in Sec. 760.631(a)(1)(i) is 100 percent of the 
NAP established price for the crop;
    (2) Coverage level in Sec. 760.631(a)(1)(iv) is 70 percent; and
    (3) The percent specified in Sec. 760.631(a)(2)(iv) is 70 percent 
instead of 50 percent; and
    (4) Coverage level used in Sec. 760.634(a)(1)(ii) is 70 percent; 
and
    (5) The percent specified in Sec. 760.634(a)(2)(ii) is 70 percent 
instead of 50 percent.
    (b) For those 2008 crops that meet the requirements of Sec. Sec. 
760.104, 760.105(a), 760.106, or 760.107, the SURE guarantee will be the 
higher of:
    (1) The guarantee calculated according to Sec. 760.631, or 
according to Sec. 760.634 for value loss crops, with the exception that 
the percent specified in Sec. Sec. 760.631(a)(1) and 760.634(a)(1) will 
be 120 percent instead of 115 percent;
    (2) The guarantee calculated according to Sec. 760.631, or 
according to Sec. 760.634 for value loss crops, will be used with the 
exception that the:
    (i) Price election in Sec. 760.631(a)(1)(i) is 100 percent of the 
NAP established price for the crop; and
    (ii) Coverage level in Sec. Sec. 760.631(a)(1)(iv) and 
760.634(a)(1)(ii) will be 70 percent; and
    (iii) The percent specified in Sec. Sec. 760.631(a)(2)(iv) and 
760.634(a)(2)(ii) will be 70 percent instead of 50 percent.



Sec. 760.634  SURE guarantee for value loss crops.

    (a) The SURE guarantee for value loss crops will be the sum of the 
amounts calculated in paragraphs (a)(1) and (a)(2) of this section, 
except as otherwise specified.
    (1) For each insurable crop on the farm, 115 percent of the product 
obtained by multiplying:
    (i) The value of inventory immediately prior to disaster, and
    (ii) The coverage level elected by the participant. If a coverage 
level was not elected or a participant is eligible as specified in 
Sec. Sec. 760.106 or 760.107, a coverage level of 27.5 percent will be 
used in the calculation.
    (2) For each noninsurable crop on the farm, 120 percent of the 
product obtained by multiplying:
    (i) The value of inventory immediately prior to a disaster, and
    (ii) 50 percent.
    (b) Aquaculture participants who received assistance under the 
Aquaculture Grant Program (Pub. L. 111-5) will not be eligible for SURE 
assistance on those species for which a grant benefit was received under 
the Aquaculture Grant Program for feed losses associated with that 
species.
    (c) In the case of an insurable value loss crop for which crop 
insurance provides for an adjustment in the guarantee, liability, or 
indemnity, such as in the case of inventory exceeding peak inventory 
value, the adjustment will be used in determining the SURE guarantee for 
the insurable crop.
    (d) In the case of a noninsurable value loss crop for which NAP 
provides for an adjustment in the level of assistance, such as in the 
case of unharvested field grown inventory, the adjustment will be used 
in determining the SURE guarantee for the noninsurable crop.



Sec. 760.635  Total farm revenue.

    (a) For the purpose of SURE payment calculation, total farm revenue 
will equal the sum obtained by adding the amounts calculated in 
paragraphs (a)(1) through (a)(12) of this section.

[[Page 121]]

    (1) The estimated actual value for each crop produced on a farm, 
except for value loss crops, which equals the product obtained by 
multiplying:
    (i) The actual production of the payment acres for each crop on a 
farm for purposes of determining losses under FCIA or NAP; and
    (ii) NAMP, as calculated for the marketing year as specified in 
Sec. 760.640 and as adjusted if required as specified in Sec. 760.641.
    (2) The estimated actual value for each value loss crop produced on 
a farm that equals the value of inventory immediately after disaster.
    (3) 15 percent of the amount of any direct payments made to the 
participant under part 1412 of this title.
    (4) The total amount of any counter-cyclical and average crop 
revenue election payments made to the participant under part 1412 of 
this title.
    (5) The total amount of any loan deficiency payments, marketing loan 
gains, and marketing certificate gains made to the participant under 
parts 1421 and 1434 of this title.
    (6) The amount of payments for prevented planting.
    (7) The amount of crop insurance indemnities.
    (8) The amount of NAP payments received.
    (9) The value of any guaranteed payments made to a participant in 
lieu of production pursuant to an agreement or contract, if the crop is 
included in the SURE guarantee.
    (10) Salvage value for any crops salvaged.
    (11) The value of any other disaster assistance payments provided by 
the Federal Government for the same loss for which the eligible 
participant applied for SURE.
    (12) For crops for which the eligible participant received a waiver 
under the provisions of Sec. 760.105(c) or obtained relief according to 
Sec. 760.106, the value determined by FSA based on what the participant 
would have received, irrespective of any other provision, if NAP or crop 
insurance coverage had been obtained.
    (b) Sale of plant parts or by-products, such as straw, will not be 
counted as farm revenue.
    (c) For value loss crops:
    (1) Other inventory on hand or marketed at some time other than 
immediately prior to and immediately after the disaster event are 
irrelevant for revenue purposes and will not be counted as revenue for 
SURE.
    (2) Revenue will not be adjusted for market loss.
    (3) Quality losses will not be considered in determining revenue.
    (4) In no case will market price declines in value loss crops, due 
to any cause, be considered in the calculation of payments for those 
crops.



Sec. 760.636  Expected revenue.

    The expected revenue for each crop on a farm is:
    (a) For each insurable crop, except value loss crops, the product 
obtained by multiplying:
    (1) The SURE yield as specified in Sec. 760.638;
    (2) The payment acres as specified in Sec. 760.632; and
    (3) 100 percent of the price for the crop used to calculate a crop 
insurance indemnity for an applicable policy of insurance if a crop 
insurance indemnity is triggered. If a price is not available, then the 
price is 100 percent of the NAP established price for the crop, and
    (b) For each noninsurable crop, except value loss crops, the product 
obtained by multiplying
    (1) The SURE yield as specified in Sec. 760.638;
    (2) The payment acres as specified in Sec. 760.632; and
    (3) 100 percent of the NAP price.
    (c) For each value loss crop, the value of inventory immediately 
prior to the disaster.



Sec. 760.637  Determination of production.

    (a) Except for value loss crops, production for the purposes of this 
part includes all harvested, appraised, and assigned production for the 
payment acres determined according to Sec. 760.632.
    (b) The FSA county committee will use the best available data to 
determine production, including RMA and NAP loss records and yields for 
insured and noninsured crops.
    (c) The production of any eligible crop harvested more than once in 
a

[[Page 122]]

crop year will include the total harvested production from all harvests.
    (d) Crop production losses occurring in tropical regions, as defined 
in part 1437, subpart F of this chapter, will be based on a crop year 
beginning on January 1 and ending on December 31 of the same calendar 
year. All crop harvests in tropical regions that take place between 
those dates will be considered a single crop.
    (e) Any record of an appraisal of crop production conducted by RMA 
or FSA through a certified loss adjustor will be used if available. 
Unharvested appraised production will be included in the calculation of 
revenue under SURE. If the unharvested appraised crop is subsequently 
harvested for the original intended use, the larger of the actual or 
appraised production will be used to determine payment.
    (1) If no appraisal is available, the participant is required to 
submit verifiable or reliable production evidence.
    (2) If the participant does not have verifiable or reliable 
production evidence, the FSA county committee will use the higher of the 
participant's crop certification or the maximum average loss level to 
determine the participant's crop production losses.
    (f) Production will be adjusted based on a whole grain equivalent, 
as established by FSA, for all crops with an intended use of grain, but 
harvested as silage, cobbage, or hay, cracked, rolled, or crimped.
    (g) For crops sold in a market that is not a recognized market for 
that crop and has no established county expected yield and NAMP, the 
quantity of such crops will not be considered production; rather, 100 
percent of the salvage value will be included in the revenue 
calculation.
    (h) Production from different counties that is commingled on the 
farm before it was a matter of record and cannot be separated by using 
records or other means acceptable to FSA will have the NAMP prorated to 
each respective county by FSA. Commingled production may be attributed 
to the applicable county, if the participant made the location of 
production of a crop a matter of record before commingling, if the 
participant does either of the following:
    (1) Provides copies of verifiable documents showing that production 
of the crop was purchased, acquired, or otherwise obtained from the farm 
in that county; or
    (2) Had the farm's production in that county measured in a manner 
acceptable to the FSA county committee.
    (i) The FSA county committee will assign production for the purpose 
of NAMP for the farm if the FSA county committee determines that the 
participant failed to provide verifiable or reliable production records.
    (j) If RMA loss records are not available, or if the FSA county 
committee determines that the RMA loss records as reported by the 
insured participant appear to be questionable or incomplete, or if the 
FSA county committee makes inquiry, then participants are responsible 
for:
    (1) Retaining and providing, when required, the best available 
verifiable and reliable production records available for the crops;
    (2) Summarizing all the production evidence;
    (3) Accounting for the total amount of production for the crop on a 
farm, whether or not records reflect this production;
    (4) Providing the information in a manner that can be easily 
understood by the FSA county committee; and
    (5) Providing supporting documentation if the FSA county committee 
has reason to question the disaster event or that all production has 
been taken into account.
    (k) The participant must supply verifiable or reliable production 
records to substantiate production to the FSA county committee. If the 
eligible crop was sold or otherwise disposed of through commercial 
channels, acceptable production records include: Commercial receipts; 
settlement sheets; warehouse ledger sheets or 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 by 
means other than commercial channels, acceptable production records for 
these purposes include: Truck scale tickets; appraisal information from 
a

[[Page 123]]

loss adjuster acceptable to FSA; contemporaneous reliable diaries; or 
other documentary evidence, such as contemporaneous reliable 
measurements. Determinations of reliability with respect to this 
paragraph will take into account, as appropriate, the ability of the 
agency to verify the evidence as well as the similarity of the evidence 
to reports or data received by FSA for the crop or similar crops. Other 
factors deemed relevant may also be taken into account.
    (l) If no verifiable or reliable production records are available, 
the FSA county committee will use the higher of the participant's 
certification or the maximum average loss level to determine production.
    (m) Participants must provide all records for any production of a 
crop that is grown with an arrangement, agreement, or contract for 
guaranteed payment.
    (n) FSA may verify the production evidence submitted with records on 
file at the warehouse, gin, or other entity that received or may have 
received the reported production.



Sec. 760.638  Determination of SURE yield.

    (a) Except for value loss crops as specified in Sec. 760.634, a 
SURE yield will be determined for each crop, type, and intended use on a 
farm, using the higher of the participant's weighted:
    (1) Adjusted actual production history yield as determined in 
paragraph (b) of this section; or
    (2) Counter-cyclical yield as determined in paragraph (c) of this 
section.
    (b) The adjusted actual production history yield, as defined in 
Sec. 760.602, will be weighted by the applicable crop year total 
planted and prevented planted acres, by crop, type, and intended use for 
each county. RMA data will be used for calculating the SURE yield for 
insured crops.
    (c) The counter-cyclical yield for a crop on a SURE farm will be 
weighted in such manner as FSA deems fit taking into account a desire 
for a consistent system and FSA's ability to make timely yield 
determinations.
    (d) Participants who do not purchase crop insurance or NAP coverage, 
but who are otherwise eligible for payment, will have a SURE yield 
determined by the FSA county committee as follows:
    (1) A weighted yield, based on planted and prevented planted acres, 
the location county, crop type, and intended use, will be determined at 
65 percent of the county expected yield for each crop.
    (2) The SURE yield will be the higher of the yield calculated using 
the method in paragraph (d)(1) of this section or 65 percent of the 
weighted counter-cyclical yield as determined in paragraph (c) of this 
section.
    (e) For those participants with crop insurance but without an 
adjusted actual production history yield, a SURE yield will be 
determined by the applicable FSA county committee. This paragraph will 
apply in the case where the insurance policy does not require an actual 
production history yield, or where a participant has no production 
history.

[74 FR 68490, Dec. 28, 2009, as amended at 75 FR 19189, Apr. 14, 2010]



Sec. 760.640  National average market price.

    (a) The Deputy Administrator will establish the National Average 
Market Price (NAMP) using the best sources available, as determined by 
the Deputy Administrator, which may include, but are not limited to, 
data from NASS, Cooperative Extension Service, Agricultural Marketing 
Service, crop insurance, and NAP.
    (b) NAMP may be adjusted by the FSA State committee, in accordance 
with instructions issued by the Deputy Administrator and as specified in 
Sec. 760.641, to recognize average quality loss factors that are 
reflected in the market by county or part of a county.
    (c) With respect to a crop for which an eligible participant on a 
farm receives assistance under NAP, the NAMP will not exceed the price 
of the crop established under NAP.
    (d) To the extent practicable, the NAMP will be established on a 
harvested basis without the inclusion of transportation, storage, 
processing, marketing, or other post-harvest expenses, as determined by 
FSA.
    (e) NAMP may be adjusted by the FSA State committee, as authorized 
by The Deputy Administrator, to reflect

[[Page 124]]

regional variations in price consistent with those prices established 
under the FCIA or NAP.



Sec. 760.641  Adjustments made to NAMP to reflect loss of quality.

    (a) The Deputy Administrator will authorize FSA county committees, 
with FSA State committee concurrence, to adjust NAMP for a county or 
part of a county:
    (1) To reflect the average quality discounts applied to the local or 
regional market price of a crop due to a reduction in the intrinsic 
characteristics of the production resulting from adverse weather, as 
determined annually by the State office of the FSA; or
    (2) To account for a crop for which the value is reduced due to 
excess moisture resulting from a disaster related condition.
    (3) For adjustments specified in paragraphs (a)(1) and (a)(2) of 
this section, an adjustment factor that represents the regional or local 
price received for the crop in the county will be calculated by the FSA 
State committee. The adjustment factor will be based on the average 
actual market price compared to NAMP.
    (b) For adjustments made under paragraph (a) of this section, 
participants must provide verifiable evidence of actual or appraised 
production, clearly indicating an average loss of value caused by poor 
quality or excessive moisture that meets or exceeds the quality 
adjustment for the county or part of a county established in paragraph 
(a)(3) of this section to be eligible to receive the quality-adjusted 
NAMP as part of their SURE payment calculation. In order to be 
considered at all for the purpose of quality adjustments, the verifiable 
evidence of production must itself detail the extent of the quality loss 
for a specific quantity. With regard to test evidence, in addition to 
meeting all the requirements of this section, tests must have been 
completed by January 1 of the year following harvest.



Sec. 760.650  Calculating SURE.

    (a) Subject to the provision of this subpart, SURE payments for crop 
losses in crop year 2008 and subsequent crop years will be calculated as 
the amount equal to 60 percent of the difference between:
    (1) The SURE guarantee, as specified in Sec. 760.631, Sec. 760.633 
or Sec. 760.634 of this subpart, and
    (2) The total farm revenue, as specified in Sec. 760.635.
    (b) In addition to the other provisions of this subpart and subpart 
B of this part, SURE payments may be adjusted downward as necessary to 
insure compliance with the payment limitations in subpart B and to 
insure that payments do not exceed the maximum amount specified in Sec. 
760.108(a)(1) or (b)(1) or otherwise exceed the perceived intent of 19 
U.S.C. 2497(j). Such adjustments can include, but are not limited to, 
adjustments to insure that there is no duplication of benefits as 
specified in Sec. 760.108(c).



                    Subpart H_Crop Assistance Program

    Authority: 7 U.S.C. 612c.

    Source: 75 FR 65428, Oct. 25, 2010, unless otherwise noted.



Sec. 760.701  Applicability.

    (a) This subpart specifies the eligibility requirements and payment 
calculations for the Crop Assistance Program (CAP), which will be 
administered using funds authorized by Section 32 of the Agricultural 
Adjustment Act of 1935 (7 U.S.C. 612c, as amended).
    (b) CAP, within the limits of the funds made available by the 
Secretary for this program, is intended to help reestablish purchasing 
power to producers of long grain rice, medium or short grain rice, 
upland cotton, soybeans, and sweet potatoes who suffered a five percent 
or greater loss in the 2009 crop year due to disaster.
    (c) Only producers who have a share in a farm located in a disaster 
county (a county that is the primary county that is the subject of a 
Secretarial disaster designation for 2009 crop year due to excessive 
moisture and related conditions, as determined by FSA) are eligible for 
CAP benefits.



Sec. 760.702  Definitions.

    The following definitions apply to CAP. The definitions in parts 
718, 760,

[[Page 125]]

and 1400 of this title also apply, except where they conflict with the 
definitions in this section.
    Acceptable production records means verifiable or reliable 
production records deemed acceptable by FSA.
    Application means the CAP application form.
    Application period means the 45-day period established by the Deputy 
Administrator for producers on farms in disaster counties to apply for 
CAP that ends December 9, 2010.
    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.
    Considered planted means acreage approved as prevented planted or 
failed in accordance with Sec. 718.103 of this chapter.
    Crop means the reported or determined 2009 crop year planted and 
considered planted acres of long grain rice, medium or short grain rice, 
upland cotton, soybean, or sweet potatoes as reflected on 2009 crop year 
form FSA-578, Report of Acreage, for a producer in a disaster county as 
of October 22, 2010. Subsequent crops, replacement crops, reseeded 
crops, and replanted crops are not eligible crops under this part and no 
revision of the Report of Acreage that would increase an eligibility for 
payment will be permitted to produce that effect.
    Crop year means for 2009:
    (1) For insurable crops, the crop year as defined according to the 
applicable crop insurance policy;
    (2) For NAP covered crops, the crop year as provided in part 1437 of 
this title.
    Disaster means excessive moisture or related condition, resulting 
from any of the following: flood, flash flooding, excessive rain, 
moisture, humidity, severe storms, thunderstorms, ground saturation or 
standing water, hail, winter storms, ice storms, snow, blizzard, 
hurricane, typhoons, tropical storms, and cold wet weather. A disaster 
does not include brownouts or power failures.
    Disaster county means a county included in the geographic area 
covered by a qualifying natural disaster designation under section 
321(a) of the Consolidated Farm and Rural Development Act (7 U.S.C. 
1961(a)). For CAP, the term ``disaster county'' is limited to those 
primary counties declared a disaster by the Secretary for excessive 
moisture or a related condition, which are limited to designations based 
on any of the following: flood, flash flooding, excessive rain, 
moisture, humidity, severe storms, thunderstorms, ground saturation or 
standing water, hail, winter storms, ice storms, snow, blizzard, 
hurricane, typhoons, tropical storms, and cold wet weather.
    Expected production means, for a producer on a farm who attempts to 
determine what the producer might produce for an eligible crop on a 
farm, the historic yield multiplied by the producer's share of planted 
and considered planted acres of the crop for the farm. Expected 
production may be used to assist producers in determining whether the 
producer has a crop or crops that suffered a qualifying loss of five 
percent and to determine whether that crop is eligible for CAP benefits.
    Historic yield means, for a producer on a farm, the higher of the 
county average yield or the producer's approved yields for eligible 
crops on the farm.
    (1) An insured producer's yield will be the higher of the county 
average yield listed or the approved federal crop insurance APH, for the 
disaster year.
    (2) A NAP producer's yield will be the higher of the county average 
yield or NAP approved yield for the disaster year.
    Replacement crop means the planting or approved prevented planting 
of any crop for harvest following the failed planting or prevented 
planting of a crop of long grain rice, medium or short grain rice, 
upland cotton, soybeans, or sweet potatoes not in a recognized double-
cropping sequence. Replacement crops are not eligible for CAP.
    Reseeded or replanted crop means the second planting of a crop of 
long grain

[[Page 126]]

rice, medium or short grain rice, upland cotton, soybeans, or sweet 
potatoes on the same acreage after the first planting of that same crop 
that failed.



Sec. 760.703  Producer eligibility requirements.

    (a) A producer must meet all of the requirements in this subpart to 
be eligible for a CAP payment.
    (b) To be eligible, a producer must be an individual or entity who 
is entitled to an ownership share of an eligible crop and who has the 
production and market risks associated with the agricultural production 
of the crop on a farm. An eligible producer must be a:
    (1) Citizen of the United States;
    (2) Resident alien, which for purposes of this subpart means 
``lawful alien'' as defined in 7 CFR part 1400;
    (3) Partnership of citizens of the United States; or
    (4) Corporation, limited liability corporation, or other farm 
organizational structure organized under State law.
    (c) To be eligible, a producer must have:
    (1) Produced a 2009 crop year planted or considered planted long 
grain rice, medium or short grain rice, upland cotton, soybean, or sweet 
potato crop in a 2009 eligible disaster county, and
    (2) Suffered a five percent or greater loss in an eligible disaster 
county in 2009. A list of the disaster counties for CAP is available on 
the FSA Web site and at FSA county offices.



Sec. 760.704  Time and method of application.

    (a) To request a CAP payment, the producer must submit a CAP 
application on the form designated by FSA to the FSA county office 
responsible for administration of the farm.
    (b) Producers submitting an application for a crop must certify that 
they suffered a five percent or greater loss of the crop on the farm in 
a disaster county and that they have documentation to support that 
certification as required in Sec. 760.713.
    (c) Once submitted by a producer, the application is considered to 
contain information and certifications of and pertaining to the 
producer's crop and farm regardless of who entered the information on 
the application.
    (d) Producers requesting benefits under CAP must certify the 
accuracy and truthfulness of the information provided in the application 
as well as with any documentation that may be provided with the 
application or documentation that will be provided to FSA in 
substantiation of the application. All certifications and information 
are subject to verification by FSA.
    (e) Producers applying for CAP must certify that they have an 
eligible ownership share interest in the 2009 crop acreage that 
sustained a five percent or greater loss. The determination and 
certification by a producer that a crop suffered the requisite five 
percent or greater farm crop loss is the expected quantity of production 
of the crop less the actual production of the crop.
    (f) In the event that the producer does not submit documentation in 
response to any request of FSA to support the producer's application or 
documentation furnished does not show a crop loss of at least five 
percent as claimed, the application for that crop will be disapproved in 
its entirety. For quantity losses, producers need to apply a standard 
similar to the historic yield provisions used under previous ad hoc 
disaster programs. Those provisions provided that a historic yield was 
the higher of a county average yield or a producer's approved yield. 
Thus, if an applicant is determining whether a farm has a crop that 
suffered a loss of five percent or greater on the farm's planted and 
considered planted acreage, the applicant could compare the amount 
successfully produced in 2009 from those planted and considered planted 
acres to what the participant expected to produce from that acreage 
using either the county average yield (which may be obtained from FSA by 
request) or based on analysis of approved actual production history 
yields that may exist for producers of the crop on the farm.
    (g) Unless otherwise determined necessary by FSA, producers will not 
be required to submit documentation of farm crop production or loss at 
time of application. FSA's decision not to require proof, documentation, 
or evidence in support of any application at

[[Page 127]]

time of application is not to be construed as a determination of a 
producer's eligibility.
    (h) Producers who apply are required to retain documentation in 
support of their application for three years after the date of 
application in accordance with Sec. 760.713.
    (i) The application submitted in accordance with 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 producer has submitted all the required forms. In 
addition to the completed, certified application form, if the 
information for the following forms or certifications is not on file in 
the FSA county office or is not current for 2009, the producer must also 
submit:
    (1) Farm operating plan for individual or legal entity;
    (2) Average adjusted gross income statement for 2009; and
    (3) Highly erodible land conservation (HELC) and wetland 
conservation certification.
    (j) Application approval and payment by FSA does not relieve a 
producer from having to submit any form, records, or documentation 
required, but not filed at the time of application or payment, according 
to paragraph (h) of this section.



Sec. 760.705  Payment rates and calculation of payments.

    (a) CAP payments will be calculated by multiplying the total number 
of reported or determined acres of an eligible crop by the per acre 
payment rate for that crop. Payment rates are as follows:
    (1) Long grain rice, $31.93 per acre;
    (2) Medium or short grain rice, $52.46 per acre;
    (3) Upland cotton, $17.70 per acre;
    (4) Soybeans, $15.62 per acre; and
    (5) Sweet potatoes, $155.41 per acre.
    (b) Payments will be calculated based on the 2009 crop year reported 
or determined planted or considered planted acres of an eligible crop on 
a farm in a disaster county as reflected on a form FSA-578, Report of 
Acreage, on file in FSA as of October 22, 2010.



Sec. 760.706  Availability of funds.

    (a) Payments specified in this subpart are subject to the 
availability of funds. The total available program funds are $550 
million. In order to keep payments within available funds, the Deputy 
Administrator may pro-rate payments, to the extent the Deputy 
Administrator determines that necessary.
    (b) Funds for CAP are being made available only for the 2009 crop 
year reported and determined eligible crop acreage in disaster counties 
as reflected on a form FSA-578, Report of Acreage, as of October 22, 
2010.



Sec. 760.707  Proof of loss.

    (a) All certifications, applications, and documentation are subject 
to spot check and verification by FSA. Producers must submit 
documentation to FSA if and when FSA requests documentation to 
substantiate any certified application.
    (b) Producers are responsible for retaining or providing, when 
required, verifiable or reliable production or loss records available 
for the crop. Producers are also responsible for summarizing all the 
production or loss evidence and providing the information in a manner 
that can be understood by the county committee.
    (c) Any producer receiving payment under this subpart agrees to 
maintain any books, records, and accounts supporting any information or 
certification made according to this part for 3 years after the end of 
the year following application.
    (d) Producers receiving payments or any other person who furnishes 
such information to FSA must permit FSA or 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 or other items for the purpose of confirming the accuracy 
of the information provided by the producer.



Sec. 760.708  Miscellaneous provisions and limitations.

    (a) A person ineligible under Sec. 1437.15(c) of this title 
concerning violations of the Noninsured Crop Disaster Assistance Program 
for the 2009 crop

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year is ineligible for benefits under this subpart.
    (b) A person ineligible under Sec. 400.458 of this title for the 
2009 crop year concerning violations of crop insurance regulations is 
ineligible for CAP.
    (c) In the event that any request for CAP payment resulted from 
erroneous information or a miscalculation, the payment will be 
recalculated and the producer must refund any excess to FSA with 
interest to be calculated from the date of the disbursement to the 
producer. If for whatever reason the producer signing a CAP application 
overstates the loss level of the crop when the actual loss level 
determined by FSA for the crop is less than the level claimed, or where 
the CAP payment would exceed the producer's actual loss, the application 
will be disapproved for the crop and the full CAP payment for that crop 
will be required to be refunded with interest from date of disbursement. 
The CAP payment cannot exceed the producer's actual loss.
    (d) The liability of anyone for any penalty or sanction under or in 
connection with this subpart, 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.
    (e) The regulations in parts 11 and 780 of this title apply to 
determinations under this subpart.
    (f) Any payment to any person under this subpart 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.
    (g) Any payment made under this subpart will be considered farm 
revenue for 2009 for the Supplemental Revenue Assistance Payments 
Program.
    (h) The average AGI limitation provisions in part 1400 of this title 
relating to limits on payments for persons or legal entities, excluding 
joint ventures and general partnerships, with certain levels of average 
adjusted gross income (AGI) apply to each applicant for CAP. 
Specifically, a person or legal entity with an average adjusted gross 
nonfarm income, as defined in Sec. 1404.3 of this title, that exceeds 
$500,000 is not eligible to receive CAP payments.
    (i) No person or legal entity, excluding a joint venture or general 
partnership, as determined by the rules in part 1400 of this title may 
receive, directly or indirectly, more than $100,000 in payments under 
this subpart.
    (j) The direct attribution provisions in part 1400 of this title 
apply to CAP. Under those rules, any payment to any legal entity will 
also be considered for payment limitation purposes to be a payment to 
persons or legal entities with an interest in the legal entity or in a 
sub-entity. If any such interested person or legal entity is over the 
payment limitation because of direct payment or their indirect interests 
or a combination thereof, then the payment to the actual payee will be 
reduced commensurate with the amount of the interest of the interested 
person in the payee. Likewise, by the same method, if anyone with a 
direct or indirect interest in a legal entity or sub-entity of a payee 
entity exceeds the AGI levels that would allow a producer to directly 
receive a CAP payment, then the payment to the actual payee will be 
reduced commensurately with that interest. For CAP, unless otherwise 
specified in part 1400 of this title, the AGI amount will be that 
person's or legal entity's average AGI for the three taxable years that 
precede the 2008 taxable year (that is 2005, 2006, and 2007).
    (k) 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 under CAP but only as to beneficiaries who, as a 
condition of such waiver, agree to apply the CAP payments to reduce the 
amount of the judgment lien.
    (l) For CAP, producers are either eligible or ineligible. Therefore, 
the provisions of Sec. 718.304 of this chapter, ``Failure to Fully 
Comply,'' do not apply to this subpart.
    (m) The regulations in subpart B apply to CAP. In addition to those 
regulations that specifically include subpart H or apply to this part, 
the following sections specifically apply to this subpart: Sec. Sec. 
760.113(a), 760.114, and 760.116(a).

[[Page 129]]



                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 
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

[[Page 130]]

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:
    (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

[[Page 131]]

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.
    (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.

[[Page 132]]

    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 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;

[[Page 133]]

    (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 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.

[[Page 134]]

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 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);

[[Page 135]]

    (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.
    (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.

[[Page 136]]



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.



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;

[[Page 137]]

    (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;
    (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.

[[Page 138]]

    (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.
    (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

[[Page 139]]

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;
    (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

[[Page 140]]

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 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;

[[Page 141]]

    (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.



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:

[[Page 142]]

    (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 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

[[Page 143]]

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 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.

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    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 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

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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.



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;

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    (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.



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

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    (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) 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

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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 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.

[[Page 149]]



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.
    (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.

[[Page 150]]

    (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 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

[[Page 151]]

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;
    (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.

[[Page 152]]

    (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;
    (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

[[Page 153]]

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 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

[[Page 154]]

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 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.



        Subpart N_Dairy Economic Loss Assistance Payment Program

    Source: 74 FR 67808, Dec. 21, 2009, unless otherwise noted.



Sec. 760.1301  Administration.

    (a) This subpart establishes, subject to the availability of funds, 
the terms and conditions under which the Dairy Economic Loss Assistance 
Payments (DELAP) program as authorized by section 10104 of the Farm 
Security and Rural Investment Act of 2002 (Pub. L. 107-171) will be 
administered with respect to funds appropriated under Section 748 of the 
Agriculture, Rural Development, Food and Drug Administration, and 
Related Agencies Appropriations Act, 2010 (2010 Agriculture 
Appropriations Bill, Pub. L. 111-80).
    (b) The DELAP program will be administered under the general 
supervision of the Administrator, FSA, and the Deputy Administrator for 
Farm Programs, FSA (who is referred to as the ``Deputy Administrator'' 
in this part), and will be carried out by FSA's Price Support Division 
(PSD) and Kansas City Management Office (KCMO).
    (c) FSA representatives do not have authority to modify or waive any 
of the provisions of the regulations of this subpart, except as provided 
in paragraph (d) of this section.
    (d) The State committee will take any action required by the 
provisions of this subpart that has not been taken by the county 
committee. The State committee will also:
    (1) Correct or require the county committee to correct any action 
taken by the county committee that is not in compliance with the 
provisions of this subpart.
    (2) Require a county committee to not take an action or implement a 
decision that is not in compliance with the provisions of this subpart.
    (e) No provision or delegation of this subpart to PSD, KCMO, a State 
committee, or a county committee will preclude the Administrator, FSA, 
or a

[[Page 155]]

designee, from determining any question arising under the program or 
from reversing or modifying any determination made by PSD, KCMO, a State 
committee, or a county committee.
    (f) The Deputy Administrator may waive or modify non-statutory 
deadlines and other program requirements of this part in cases where 
lateness or failure to meet other requirements does not adversely affect 
the operation of the program. Participants have no right to seek an 
exception under this provision. The Deputy Administrator's refusal to 
consider cases or circumstances or decision not to exercise the 
discretionary authority of this provision will not be considered an 
adverse decision and is not appealable.



Sec. 760.1302  Definitions and acronyms.

    The following definitions apply to this subpart. The definitions in 
parts 718 and 1400 of this title also apply, except where they may 
conflict with the definitions in this section.
    County office or FSA county office means the FSA offices responsible 
for administering FSA programs in a specific areas, sometimes 
encompassing more than one county, in a State.
    Dairy operation means any person or group of persons who, as a 
single unit, as determined by FSA, produce and market milk commercially 
produced from cows, and whose production facilities are located in the 
United States. In any case, however, dairy operation may be given by the 
agency the same meaning as the definition of dairy operation as found in 
part 1430 of this title for other dairy assistance programs.
    Department or USDA means the U. S. Department of Agriculture.
    Deputy Administrator means the Deputy Administrator for Farm 
programs (DAFP), FSA, or a designee.
    Eligible production means milk from cows that was produced during 
February through July 2009, by a dairy producer in the United States and 
marketed commercially by a producer in a participating State.
    Farm Service Agency or FSA means the Farm Service Agency of the 
USDA.
    Fiscal year or FY means the year beginning October 1 and ending the 
following September 30. The fiscal year will be designated for this 
subpart by year reference to the calendar year in which it ends. For 
example, FY 2009 is from October 1, 2008, through September 30, 2009 
(inclusive).
    Marketed commercially means sold to the market to which the dairy 
operation normally delivers whole milk and receives a monetary amount 
and in any case this term will be construed to allow the use of MILC 
records in making DELAP payments.
    Milk handler means the marketing agency to or through which the 
dairy operation commercially markets whole milk.
    Milk marketing means a marketing of milk for which there is a 
verifiable sales or delivery record of milk marketed for commercial use.
    Participating State means each of the 50 States in the United States 
of America, the District of Columbia, and the Commonwealth of Puerto 
Rico, or any other territory or possession of the United States.
    Payment quantity means the pounds of milk production for which an 
operation is eligible to be paid under this subpart.
    Producer means any individual, group of individuals, partnership, 
corporation, estate, trust association, cooperative, or other business 
enterprise or other legal entity, as defined in 7 CFR 1400.3, who is, or 
whose members are, a citizen of or legal resident alien in the United 
States, and who directly or indirectly, as determined by the Secretary, 
shares in the risk of producing milk, and who is entitled to a share of 
the commercial production available for marketing from the dairy 
operation. This term, and other terms in this subpart, will in any case 
be applied in a way that allows MILC records to be used to make DELAP 
payments.
    United States means the 50 States of the United States of America, 
the District of Columbia, the Commonwealth of Puerto Rico, and any other 
territory or possession of the United States.
    Verifiable production records means evidence that is used to 
substantiate the amount of production marketed commercially by a dairy 
operation and its producers and that can be verified by FSA through an 
independent source.

[[Page 156]]



Sec. 760.1303  Requesting benefits.

    (a) If as a dairy operation or producer, your records are currently 
available in the FSA county office from previous participation in a 
fiscal year 2009 dairy program administered by FSA, you do not need to 
request benefits under this subpart to receive payments. FSA will make 
payments as specified in this subpart to eligible dairy producers based 
on production data maintained by the FSA county office for the months of 
February through July 2009.
    (b) If records are not available in the FSA county office, dairy 
producers may request benefits. The request for benefits may be a letter 
or email; no specific form is required.
    (1) Submit your request for DELAP to: Deputy Administrator for Farm 
Programs, FSA, USDA, STOP 0512, 1400 Independence Avenue, SW., 
Washington, DC 20250-0512; Attention: DELAP Program. Or you may send 
your request for DELAP via fax to (202) 690-1536 or e-mail to 
Danielle.Cooke@wdc.usda.gov.
    (2) The complete request as described in this subpart must be 
received by FSA by the close of business on January 19, 2010.
    (3) The complete request for benefits must include all of the 
following:
    (i) The name and location of the dairy operation;
    (ii) Contact information for the dairy operation, including 
telephone number;
    (iii) Name, percentage share, and tax identification number for the 
entity or individual producer's receiving a share of the payment; and
    (iv) Proof of production (acceptable documentation as specified in 
Sec. 760.1305).
    (4) Requests for benefits and related documents not provided to FSA 
as required by this subpart, will not be approved.
    (5) If not already provided and available to FSA, the dairy producer 
or dairy operation must provide documentation to support:
    (i) The amount (quantity in pounds) of milk produced by the dairy 
operation during the months of February 2009 through July 2009;
    (ii) Percentage share of milk production during February through 
July 2009 attributed to each producer in the dairy operation; and
    (iii) Average adjusted gross income for each individual or entity 
with a share in the operation and any additional entities or individuals 
as needed to apply the adjusted gross income rules of these regulations.
    (6) Each dairy producer requesting benefits under this subpart is 
responsible for providing accurate and truthful information and any 
supporting documentation. If the dairy operation provides the required 
information, each dairy producer who shares in the risk of a dairy 
operation's total production is responsible for the accuracy and 
truthfulness of the information submitted for the request for benefits 
before the request will be considered complete. Providing a false 
statement, request, or certification to the Government may be punishable 
by imprisonment, fines, other penalties, or sanctions.
    (c) All information provided by the dairy producer or dairy 
operation is subject to verification, spot check, and audit by FSA. 
Further verification information may be obtained from the dairy 
operation's milk handler or marketing cooperative if necessary for FSA 
to verify provided information. Refusal to allow FSA or any other USDA 
agency to verify any information provided or the inability of FSA to 
verify such information will result in a determination of ineligibility 
for benefits under this subpart.
    (d) Data furnished by dairy producers and dairy operations, subject 
to verification, will be used to determine eligibility for program 
benefits. Although participation in the DELAP program is voluntary, 
program benefits will not be provided unless a producer or operation 
furnishes all requested data or such data is already recorded at the FSA 
county office.



Sec. 760.1304  Eligibility.

    (a) Payment under DELAP will only be made to producers, but the 
dairy ``operation'' must first qualify its production within limits 
provided for in this subpart in order to have the individuals or 
entities that qualify as ``producers'' receive payment subject to 
whatever additional limits (such as

[[Page 157]]

the adjusted gross income provisions of these regulations) apply. As 
needed the agency may construe the terms of this regulation in any 
manner needed to facilitate and expedite payments using existing data 
and records from other assistance programs. Further, those parties 
(State and local governments and their political subdivisions and 
related agencies) excluded from the MILC program will not be eligible 
for DELAP payments notwithstanding any other provision of these 
regulation. That said, to be eligible to receive payments under this 
subpart, a dairy producer in the United States must:
    (1) Have produced milk in the United States and commercially 
marketed the milk produced any time during February 2009 through July 
2009;
    (2) Be a producer, as defined in Sec. 760.1302;
    (3) Provide FSA with proof of milk production commercially marketed 
by all dairy producers in the dairy operation during February 2009 
through July 2009; and
    (4) Submit an accurate and complete request for benefits as 
specified in Sec. 760.1303, if production data is not available in the 
FSA county office.
    (b) To be eligible to receive a payment, each producer in an 
eligible dairy operation must meet the average adjusted gross income 
eligibility requirements of 7 CFR part 1400. No person or entity will be 
eligible to receive any payment or direct or indirect benefit under this 
subpart if their annual average adjusted nonfarm income is over $500,000 
as determined under 7 CFR part 1400. In the case of indirect benefits, 
direct benefits to other parties will be reduced accordingly. This will 
mean that all of the attribution rules of part 1400 will apply. For 
example if Individual A is over the limit and owns 100 percent of 
Corporation C which had a 20 percent interest in Corporation B which had 
a 50 percent interest in milk producer Corporation A, the AGI of 
Individual A would result in a 10 percent (100 percent times 20 percent 
times 50 percent) loss in benefits to Corporation A. For DELAP, the 
relevant period for the annual average adjusted nonfarm income is 2005 
through 2007.
    (1) Individual dairy producers in a dairy operation that is an 
entity are only eligible for a payment based on their share of the dairy 
operation.
    (2) No payment will be made to any other producer based on the share 
of any dairy producer who exceeds the income limit or who, because of 
the attribution rules, has their payment reduced.



Sec. 760.1305  Proof of production.

    (a) Dairy producers requesting benefits must, as required by this 
subpart, provide adequate proof of the dairy operation's eligible 
production during the months of February through July 2009, if those 
records are not already available at the FSA county office. The dairy 
operation must also provide proof that the eligible production was also 
commercially marketed during the same period.
    (b) To be eligible for payment, dairy producers marketing milk 
during February through July 2009 must provide any required supporting 
documents to assist FSA in verifying production. Supporting 
documentation may be provided by either the dairy producer or by the 
dairy operation for each of its producers. Examples of supporting 
documentation may include, but are not limited to: Milk marketing 
payment stubs, tank records, milk handler records, daily milk 
marketings, copies of any payments received as compensation from other 
sources, or any other documents available to confirm the production and 
production history of the dairy operation. Dairy operations and 
producers may also be required to allow FSA to examine the herd of 
cattle as production evidence. If supporting documentation requested is 
not presented to FSA, the request for benefits will be denied.



Sec. 760.1306  Availability of funds.

    (a) Payments under this subpart are subject to the availability of 
funds. The total available program funds are $290,000,000.
    (b) FSA will prorate the available funds by a national factor to 
ensure payments do not exceed $290,000,000. The payment will be made 
based on the national payment rate as determined

[[Page 158]]

by FSA. FSA will prorate the payments based on the amount of milk 
production eligible for payments in a fair and reasonable manner.
    (c) A reserve will be created to handle new applications, appeals, 
and errors.



Sec. 760.1307  Dairy operation payment quantity.

    (a) A dairy operation's payment quantity (the quantity of milk on 
which the ``operation'' can generate payments for ``producers'' involved 
in the operation) will be determined by FSA, based on the pounds of 
production of commercially marketed milk during the months of February 
2009 through July 2009, multiplied by two.
    (b) The maximum payment quantity for which a dairy operation can 
generate payments for its dairy producers under this subpart will be 
6,000,000 pounds.
    (c) The dairy operation's payment quantity will be used to determine 
the amount of DELAP payments made to dairy producers.



Sec. 760.1308  Payment rate.

    (a) A national per-hundredweight payment rate will be calculated by 
dividing the available funding, less a reserve established by FSA, by 
the total pounds of eligible production approved for payment.
    (b) Each eligible dairy producer's payment with respect to an 
operation will be calculated by multiplying the payment rate determined 
in paragraph (a) of this section by the dairy producer's share in the 
dairy operation's eligible production payment quantity as determined in 
accordance with section Sec. 760.1307.
    (c) In the event that approval of all eligible requests for benefits 
would result in expenditures in excess of the amount available, FSA will 
reduce the payment rate in a manner that FSA determines to be fair and 
reasonable.



Sec. 760.1309  Appeals.

    The appeal regulations set forth at 7 CFR parts 11 and 780 apply to 
determinations made under this subpart.



Sec. 760.1310  Misrepresentation and scheme or device.

    (a) In addition to other penalties, sanctions or remedies as may 
apply, a dairy producer or operation will be ineligible to receive 
benefits under this subpart if the producer or operation is determined 
by FSA to have:
    (1) Adopted any scheme or device that tends to defeat the purpose of 
this subpart;
    (2) Made any fraudulent representation; or
    (3) Misrepresented any fact affecting a program determination.
    (b) Any payment to any person or operation engaged in a 
misrepresentation, scheme, or device, must be refunded with interest 
together with such other sums as may become due. Any dairy operation or 
person engaged in acts prohibited by this section and receiving payment 
under this subpart will be jointly and severally liable with other 
producers or operations involved in such claim for benefits for any 
refund due under this section and for related charges. The remedies 
provided in this subpart will be in addition to other civil, criminal, 
or administrative remedies that may apply.



Sec. 760.1311  Death, incompetence, or disappearance.

    (a) In the case of the death, incompetency, or disappearance of a 
person or the dissolution of an entity that is eligible to receive 
benefits in accordance with this subpart, such alternate person or 
persons specified in 7 CFR part 707 may receive such benefits, as 
determined appropriate by FSA.
    (b) Payments may be made to an otherwise eligible dairy producer who 
is now deceased or to a dissolved entity if a representative who 
currently has authority to enter into an application for the producer or 
the producer's estate makes the request for benefits as specified in 
Sec. 760.1303. Proof of authority over the deceased producer's estate 
or a dissolved entity must be provided.
    (c) If a dairy 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 
be identified in the request for benefits.

[[Page 159]]



Sec. 760.1312  Maintaining records.

    (a) Persons requesting benefits under this subpart must maintain 
records and accounts to document all eligibility requirements specified 
in this subpart. Such records and accounts must be retained for 3 years 
after the date of payment to the dairy producer under this subpart.
    (b) Destruction of the records after 3 years from the date of 
payment will be at the decision and risk of the party undertaking the 
destruction.



Sec. 760.1313  Refunds; joint and several liability.

    (a) Any dairy producer that receives excess payment, payment as the 
result of erroneous information provided by any person, or payment 
resulting from a failure to comply with any requirement or condition for 
payment under this subpart, must refund the amount of that payment to 
FSA.
    (b) Any refund required will be due from the date of the 
disbursement by the agency with interest determined in accordance with 
paragraph (d) of this section and late payment charges as provided in 7 
CFR part 1403.
    (c) Each dairy producer that has an interest in the dairy operation 
will be jointly and severally liable for any refund and related charges 
found to be due to FSA.
    (d) Interest will be applicable to any refunds to FSA required in 
accordance with 7 CFR parts 792 and 1403. Such interest will be charged 
at the rate that the U.S. Department of the Treasury charges FSA for 
funds, and will accrue from the date FSA made the payment to the date 
the refund is repaid.
    (e) FSA may waive the accrual of interest if it determines that the 
cause of the erroneous payment was not due to any action of the person 
or entity, or was beyond the control of the person or entity committing 
the violation. Any waiver is at the discretion of FSA alone.



Sec. 760.1314  Miscellaneous provisions.

    (a) Offset. FSA may offset or withhold any amount due to FSA from 
any benefit provided under this subpart in accordance with the 
provisions of 7 CFR part 1403.
    (b) Claims. Claims or debts will be settled in accordance with the 
provisions of 7 CFR part 1403.
    (c) Other interests. Payments or any portion thereof due under this 
subpart will be made without regard to questions of title under State 
law and without regard to any claim or lien against the milk production, 
or proceeds thereof, in favor of the owner or any other creditor except 
agencies and instrumentalities of the U.S. Government.
    (d) Assignments. Any dairy producer entitled to any payment under 
this part may assign any payments in accordance with the provisions of 7 
CFR part 1404.
    (e) Violations of highly erodible land and wetland conservation 
provisions. The provisions of part 12 of this title apply to this 
subpart. That part sets out certain conservation requirements as a 
general condition for farm benefits.
    (f) Violations regarding controlled substances. The provisions of 
Sec. 718.6 of this title, which generally limit program payment 
eligibility for persons who have engaged in certain offenses with 
respect to controlled substances, will apply to this subpart.



PART 761_FARM LOAN PROGRAMS; 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]

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                       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 CL funds.
761.211 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.

    Effective Date Note: At 76 FR 75430, Dec. 2, 2011, part 761 was 
amended by revising the part heading, effective Jan. 3, 2012. For the 
convenience of the user, the revised text is set forth as follows:



PART 761_FARM LOAN PROGRAMS; GENERAL PROGRAM ADMINISTRATION



                      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. The programs are designed 
to allow those who participate to transition to private commercial 
credit or other sources of credit in the shortest period of time 
practicable through the use of supervised credit, including farm 
assessments, borrower training, market placement, and borrower 
graduation requirements. 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.

[72 FR 63285, Nov. 8, 2007, as amended at 76 FR 5057, Jan. 28, 2011]



Sec. 761.2  Abbreviations and definitions.

    The following abbreviations and definitions are applicable to the 
Farm Loan Programs addressed in parts 761 through 767 unless otherwise 
noted.
    (a) Abbreviations.
    CL Conservation Loan.
    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.
    NRCS National Resources and Conservation Service, USDA.
    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.

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    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.
    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.

[[Page 162]]

    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 CL, FO, or OL, 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.
    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 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

[[Page 163]]

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.
    Conservation loan means a loan made to eligible applicants to cover 
the costs to the applicant of carrying out a qualified conservation 
project.
    Conservation plan means an NRCS-approved written record of the land 
user's decisions and supporting information, for treatment of a land 
unit or water as a result of the planning process, that meets NRCS Field 
Office Technical Guide (FOTG) quality criteria for each natural resource 
(soil, water, air, plants, and animals) and takes into account economic 
and social considerations. The conservation plan describes the schedule 
of operations and activities needed to solve identified natural resource 
problems and takes advantage of opportunities at a conservation 
management system level. This definition only applies to the direct 
loans and guaranteed loans for the Conservation Loan Program.
    Conservation practice means a specific treatment that is planned and 
applied according to NRCS standards and specifications as a part of a 
resource management system for land, water, and related resources.
    Conservation project means conservation measures that address 
provisions of a conservation plan.
    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 164]]

    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 165]]

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.
    Downpayment loan is a type of FO loan made to beginning farmers and 
socially disadvantaged farmers to finance a portion of a real estate 
purchase under part 764, subpart E of this chapter.
    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

[[Page 166]]

    (iii) An operation which employs a full time farm manager.
    False information is information provided by an applicant, borrower 
or 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 
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.

[[Page 167]]

Such an operation must generate sufficient income to:
    (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 means the payment in full of all direct FLP loans, except 
for CLs, 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.

[[Page 168]]

    Indian reservation is all land located within the limits of any 
Indian reservation under the jurisdiction of the 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.

[[Page 169]]

    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.
    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.

[[Page 170]]

    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 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.

[[Page 171]]

    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.
    Program loans include CL, 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.

[[Page 172]]

    Socially disadvantaged applicant or farmer is an individual or 
entity who is a member of a socially disadvantaged group. For an entity, 
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 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.
    Streamlined Conservation Loan means a direct or guaranteed CL made 
to eligible applicants based on reduced documentation.
    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,

[[Page 173]]

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 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, as amended at 73 
FR 74344, Dec. 8, 2008; 75 FR 54012, Sept. 3, 2010]

    Effective Date Note: At 76 FR 75430, Dec. 2, 2011, Sec. 761.2(b) 
was amended by adding a definition, in alphabetical order, for ``Land 
Contract'', effective Jan. 3, 2012. For the convenience of the user, the 
added text is set forth as follows:



Sec. 761.2  Abbreviations and definitions.

                                * * * * *

    (b) * * *
    Land contract is an installment contract executed between a buyer 
and a seller for the sale of real property, in which complete fee title 
ownership of the property is not transferred until all payments under 
the contract have been made.

                                * * * * *



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

[[Page 174]]

    (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.
    (1) Farm Ownership, Downpayment loans, Conservation loans, and Soil 
and Water loans:
    (i) Direct--$300,000;
    (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 Farm Ownership loan, direct 
Conservation loan, direct Soil and Water loan, guaranteed Farm Ownership 
loan, guaranteed Conservation loan, and guaranteed Soil and Water 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--$300,000;
    (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 
Conservation 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 
Conservation loan, direct Soil and Water loan, direct Operating loan, 
guaranteed Farm Ownership loan, guaranteed Conservation loan, guaranteed 
Soil and Water loan, and guaranteed Operating loan-the amount in 
paragraph (a)(1)(ii) of this section plus $300,000;
    (5) Emergency loans--$500,000;
    (6) Any combination of direct Farm Ownership loan, direct 
Conservation loan, direct Soil and Water loan, direct Operating loan, 
guaranteed Farm Ownership, guaranteed Conservation loan, guaranteed Soil 
and Water loan, guaranteed Operating loan, and Emergency loan-the amount 
in paragraph (a)(1)(ii) of this section plus $800,000.
    (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.

[72 FR 63285, Nov. 8, 2007, as amended at 73 FR 74345, Dec. 8, 2008; 75 
FR 54012, Sept. 3, 2010]



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.

[[Page 175]]



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;
    (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.

[[Page 176]]

    (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.



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 the maximum amount insurable by the Federal Government, the 
financial institution must agree to pledge acceptable collateral with 
the Federal Reserve Bank for the excess over the insured amount, 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.

[72 FR 63285, Nov. 8, 2007, as amended at 76 FR 5057, Jan. 28, 2011]

[[Page 177]]



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.''
    (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;

[[Page 178]]

    (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 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, in collaboration with the applicant, will assess the 
farming operation to:
    (1) Determine the applicant's financial condition, organizational 
structure, and management strengths and weaknesses;
    (2) Identify and prioritize training and supervisory needs; and
    (3) Develop a plan of supervision to assist the borrower in 
achieving financial viability and transitioning to private commercial 
credit or other sources of credit in the shortest time practicable, 
except for CL.
    (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, except for streamlined CL;
    (7) Farm operating plan;
    (8) Loan evaluation, except for streamlined CL;
    (9) Supervisory plan, except for streamlined CL;
    (10) Training plan; and
    (11) Graduation plan, except for CL.
    (c) An assessment update must be prepared for each subsequent loan. 
The update must include a farm operating plan 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. For streamlined CLs, the borrower must provide 
a current balance sheet and income tax records. Any

[[Page 179]]

negative trends noted between the previous years' and the current years' 
information must be evaluated and addressed in the assessment of the 
streamlined CL borrower.
    (e) If a CL borrower becomes financially distressed, delinquent, or 
receives any servicing options available under part 766 of this chapter, 
all elements of the assessment in paragraph (b) of this section must be 
addressed.

[72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54012, Sept. 3, 2010; 76 
FR 5057, Jan. 28, 2011]



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.
    (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 except for streamlined CLs, 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

[[Page 180]]

    (2) An updated farm operating plan.

[72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010]



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, CL, 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.

[72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010]



Sec. 761.202  Timing of allocations.

    The Agency's National Office allocates funds for FO, CL, 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.

[72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010]



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, CL, 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.

[72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010]



Sec. 761.205  Computing the formula allocation.

    (a) The formula allocation for FO, CL, 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:

[[Page 181]]



----------------------------------------------------------------------------------------------------------------
                                                                                         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, CL, 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, CL, and OL loans...  U.S. Census of                    35           35
 or more and less than 200 days work                            Agriculture.
 off farm.
Tenant farm operators...............  FO, CL, and OL loans...  U.S. Census of                    25           20
                                                                Agriculture.
3-year average net farm income......  FO, CL, and OL loans...  USDA Economic Research            15           15
                                                                Service.
Value of farm real estate assets....  FOs and CLs............  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.

[72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010]



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

    The Agency periodically pools unobligated FO, CL, 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.

[72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010]



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, CL, 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 and CL, loans based on ethnicity or race. The FO and CL, 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.
    (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.

[[Page 182]]

    (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.

[72 FR 63285, Nov. 8, 2007, as amended at 75 FR 54013, Sept. 3, 2010]



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  CL funds.

    (a) The following applicants and conservation projects will receive 
priority for CL funding:
    (1) Beginning farmer or socially disadvantaged farmer,
    (2) An applicant who will use the loan funds to convert to a 
sustainable or organic agriculture production system as evidenced by one 
of the following:
    (i) A conservation plan that states the applicant is moving toward a 
sustainable or organic production system, or
    (ii) An organic plan, approved by a certified agent and the State 
organic certification program, or
    (iii) A grant awarded by the Sustainable Agriculture Research and 
Education (SARE) program of the National Institute of Food and 
Agriculture, USDA.
    (3) An applicant who will use the loan funds to build conservation 
structures or establish conservation practices to comply with 16 U.S.C. 
3812 (section 1212 of the Food Security Act of 1985) for highly erodible 
land.
    (b) [Reserved]

[75 FR 54013, Sept. 3, 2010]



Sec. 761.211  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 and socially disadvantaged farmers under the 
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.

[72 FR 63285, Nov. 8, 2007, as amended at 73 FR 74345, Dec. 8, 2008. 
Redesignated at 75 FR 54013, Sept. 3, 2010]



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 and 7 U.S.C. 1989.

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

[[Page 183]]


    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, Farm Ownership loans, and Conservation loans guaranteed by the 
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:
    (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; 75 
FR 54013, Sept. 3, 2010]



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.

[[Page 184]]

    (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.
    (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

[[Page 185]]

helpful to the Agency in making its determination.
    (3) The lender must send its request to the Agency State office for 
the State in which the lender's headquarters is located.
    (4) The lender must provide any additional information requested by 
the Agency to process a PLP or CLP request if the lender continues with 
the approval process.
    (b) CLP criteria. The lender must meet the following requirements to 
obtain CLP status:
    (1) Qualify as a standard eligible lender under Sec. 762.105;
    (2) Have a lender loss rate not in excess of the maximum CLP loss 
rate established by the Agency and published periodically in a Federal 
Register Notice. The Agency may waive the loss rate criteria for those 
lenders whose loss rate was substantially affected by a disaster as 
defined in part 1945, subpart A, of this title.
    (3) Have proven an ability to process and service Agency guaranteed 
loans by showing that the lender:
    (i) Submitted substantially complete and correct guaranteed loan 
applications; and
    (ii) Serviced all guaranteed loans according to Agency regulations;
    (4) Have made the minimum number of guaranteed OL, FO, CL, or 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, CL, 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.

[[Page 186]]

    (d) CLP and PLP approval. (1) If a lender applying for CLP or PLP 
status is or has recently been involved in a merger or acquisition, all 
loans and losses attributed to both lenders will be considered in the 
eligibility calculations.
    (2) The Agency will determine which branches of the lender have the 
necessary experience and ability to participate in the CLP or PLP 
program based on the information submitted in the lender application and 
on Agency experience.
    (3) Lenders who meet the criteria will be granted CLP or PLP status 
for a period not to exceed 5 years.
    (4) PLP status will be conditioned on the lender carrying out its 
credit management system as proposed in its request for PLP status and 
any additional loan making or servicing requirements agreed to and 
documented the PLP lender's agreement. If the PLP lender's agreement 
does not specify any agreed upon process for a particular action, the 
PLP lender will act according to regulations governing CLP lenders.
    (e) Monitoring CLP and PLP lenders. CLP and PLP lenders will provide 
information and access to records upon Agency request to permit the 
Agency to audit the lender for compliance with these regulations.
    (f) Renewal of CLP or PLP status. (1) PLP or CLP status will expire 
within a period not to exceed 5 years from the date the lender's 
agreement is executed, unless a new lender's Agreement is executed.
    (2) Renewal of PLP or CLP status is not automatic. A lender must 
submit a written request for renewal of a lender's agreement with PLP or 
CLP status which includes information:
    (i) Updating the material submitted in the initial application; and,
    (ii) Addressing any new criteria established by the Agency since the 
initial application.
    (3) PLP or CLP status will be renewed if the applicable eligibility 
criteria under this section are met, and no cause exists for denying 
renewal under paragraph (g) of this section.
    (g) Revocation of PLP or CLP status. (1) The Agency may revoke the 
lender's PLP or CLP status at any time during the 5 year term for cause.
    (2) Any of the following instances constitute cause for revoking or 
not renewing PLP or CLP status:
    (i) Violation of the terms of the lender's agreement;
    (ii) Failure to maintain PLP or CLP eligibility criteria. 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) and (c)(8).
    (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

[[Page 187]]

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; 75 FR 54013, Sept. 
3, 2010]



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, unless waived when conditions in paragraph 
(d) of this section are met;
    (v) Credit report;
    (vi) A plan for servicing the loan;
    (vii) For CL guarantees, a copy of the conservation plan;
    (viii) To request consideration for priority funding for CL 
guarantees, plans to transition to organic or sustainable agriculture 
when the funds requested will be used to facilitate the transition.
    (2) In addition to the minimum requirements, the lender will perform 
at least the same level of evaluation and documentation for a guaranteed 
loan that the lender typically performs for non-guaranteed loans of a 
similar type and amount.
    (3) The $125,000 threshold includes any single loan, or package of 
loans submitted for consideration at any one time. A lender must not 
split a loan into two or more parts to meet the threshold thereby 
avoiding additional documentation.
    (4) The Agency may require lenders with a lender loss rate in excess 
of the rate for CLP lenders to assemble additional documentation from 
paragraph (b) of this section.
    (b) Loans over $125,000. A complete application for loans over 
$125,000 will require items specified in paragraph (a) of this section, 
plus the following items unless waived when conditions in paragraph (d) 
of this section are met:
    (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;
    (3) For CL guarantees, a copy of the conservation plan;
    (4) To request consideration for priority funding for CL guarantees, 
plans to transition to organic or sustainable agriculture when the funds 
requested will be used to facilitate the transition.
    (5) Any other items agreed to during the approval of the PLP 
lender's status and contained in the PLP lender agreement.
    (d) Streamlined CL guarantee. For CL guarantee applicants meeting 
all the following criteria, the cash flow budget requirement in this 
section will be waived:
    (1) Be current on all payments to all creditors including the Agency 
(if currently an Agency borrower),
    (2) Debt to asset ratio is 40 percent or less,
    (3) Balance sheet indicates a net worth of 3 times the requested 
loan amount or greater, and
    (4) FICO credit score is at least 700. For entity applicants, the 
FICO credit score of the majority of the individual members of the 
entity must be at least 700.
    (e) 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.

[[Page 188]]

    (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.
    (f) 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.
    (g) 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.
    (h) Market placement program. Except for CL guarantees, when the 
Agency determines that a direct applicant or borrower may qualify for 
guaranteed credit, the Agency may 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; 75 FR 54013, Sept. 3, 2010]



Sec. Sec. 762.111-762.119  [Reserved]



Sec. 762.120  Applicant eligibility.

    Unless otherwise provided, applicants must meet all of the following 
requirements to be eligible for a guaranteed OL, FO, or CL.
    (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

[[Page 189]]

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 and were clearly beyond their control; or,
    (ii) Lack of credit history.
    (h) Test for credit. Except for CL guarantees,
    (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:

[[Page 190]]

    (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. Except for CL, 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) For CL entity applicants. Entity applicants for CL guarantees 
must meet the following eligibility criteria:
    (1) The majority interest holders of the entity must meet the 
requirements of paragraph (d), (f), and (g) of this section;
    (2) The entity must be controlled by farmers engaged primarily and 
directly in farming or ranching in the United States after the loan is 
made;
    (3) The entity members are not themselves entities; and
    (4) The entity must be authorized to operate a farm in the State or 
States in which the farm is located.
    (m) For CL individual applicants. Individual applicants for CL 
guarantees must be farmers or ranchers in the United States.
    (n) 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; 75 FR 54013, Sept. 3, 
2010]



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 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

[[Page 191]]

    (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 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) CL Purposes. Loan funds disbursed under a CL guarantee may be 
used for any conservation activities included in a conservation plan 
including, but not limited to:
    (1) The installation of conservation structures to address soil, 
water, and related resources;
    (2) The establishment of forest cover for sustained yield timber 
management, erosion control, or shelter belt purposes;
    (3) The installation of water conservation measures;
    (4) The installation of waste management systems;
    (5) The establishment or improvement of permanent pasture;
    (6) Other purposes including the adoption of any other emerging or 
existing conservation practices, techniques, or technologies; and
    (7) Refinancing indebtedness incurred for any authorized CL purpose, 
when refinancing will result in additional conservation benefits.
    (d) 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.
    (e) 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; 73 
FR 74345, Dec. 8, 2008; 75 FR 54014, Sept. 3, 2010]



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

[[Page 192]]

after the 15th year that a applicant, or any individual signing the 
promissory note, received a direct or guaranteed OL.
    (2) Notwithstanding paragraph (b)(1) of this section, if a borrower 
had any combination of direct or guaranteed OL closed in 10 or more 
prior calendar years prior to October 28, 1992, eligibility to receive 
new guaranteed OL is extended for 5 additional years from October 28, 
1992, and the years need not run consecutively. However, in the case of 
a line of credit, each year in which an advance is made after October 
28, 1992, counts toward the 5 additional years. Once determined 
eligible, a loan or line of credit may be approved for any authorized 
term.
    (c) Leased land. When FO or CL 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; 73 FR 74345, Dec. 8, 
2008; 75 FR 54014, Sept. 3, 2010]



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

[[Page 193]]

unguaranteed portion may exceed the rate the lender charges its average 
agricultural loan customer. At the request of the Agency, the lender 
must provide evidence of the rate charged the average agricultural loan 
customer. This evidence may consist of average yield data, or documented 
administrative differential rate schedule formulas used by the lender.
    (4) Interest must be charged only on the actual amount of funds 
advanced and for the actual time the funds are outstanding. Interest on 
protective advances made by the lender to protect the security will be 
charged at the note rate but limited to paragraph (a)(3) of this 
section.
    (5) The lender and borrower may collectively obtain a temporary 
reduction in the interest rate through the interest assistance program 
in accordance with Sec. 762.150.
    (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) CL terms. Each loan must be scheduled for repayment over a 
period not to exceed 20 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.
    (e) Balloon installments under loan note guarantee. Balloon payment 
terms are permitted on FO, OL, or CL 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.
    (f) 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 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; 73 FR 74345, Dec. 8, 2008; 75 FR 54014, Sept. 3, 
2010]

[[Page 194]]



Sec. 762.125  Financial feasibility.

    (a) General. Except for streamlined CL guarantees, the following 
requirements must be met and applications processed as specified in 
Sec. 762.110(d):
    (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.
    (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.
    (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. Except for CL, 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. Except for streamlined CL guarantees, the 
following requirements must be met and applications processed as 
specified in Sec. 762.110(d):
    (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; 75 
FR 54014, Sept. 3, 2010]

[[Page 195]]



Sec. 762.126  Security requirements.

    (a) General. (1) The lender is responsible for ensuring that proper 
and adequate security is obtained and maintained to fully secure the 
loan, protect the interest of the lender and the Agency, and assure 
repayment of the loan or line of credit.
    (2) The lender will obtain a lien on additional security when 
necessary to protect the Agency's interest.
    (b) Guaranteed and unguaranteed portions. (1) All security must 
secure the entire loan or line of credit. The lender may not take 
separate security to secure only that portion of the loan or line of 
credit not covered by the guarantee.
    (2) The lender may not require compensating balances or certificates 
of deposit as means of eliminating the lender's exposure on the 
unguaranteed portion of the loan or line of credit. However, 
compensating balances or certificates of deposit as otherwise used in 
the ordinary course of business are allowed for both the guaranteed and 
unguaranteed portions.
    (c) Identifiable security. The guaranteed loan must be secured by 
identifiable collateral. To be identifiable, the lender must be able to 
distinguish the collateral item and adequately describe it in the 
security instrument.
    (d) Type of security. (1) Guaranteed loans may be secured by any 
property if the term of the loan and expected life of the property will 
not cause the loan to be undersecured.
    (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

[[Page 196]]

whether it is primary or additional security. Except for authorized 
liquidation expenses, the lender is responsible for all appraisal costs, 
which may be passed on to the borrower, or a transferee in the case of a 
transfer and assumption.
    (b) Exception. Notwithstanding other provisions of this section, an 
appraisal is not required for any additional security, or for loans of 
$50,000 or less if a strong equity position exists.
    (c) Chattel appraisals. A current appraisal (not more than 12 months 
old) of primary chattel security is generally required on all loans. An 
appraisal for loans or lines of credit for annual production purposes 
that are secured by crops is only required when a guarantee is requested 
late in the current production year and actual yields can be reasonably 
estimated. The appraised value of chattel property will be based on 
public sales of the same, or similar, property in the market area. In 
the absence of such public sales, reputable publications reflecting 
market values may be used. Appraisal reports may be on the Agency's 
appraisal of chattel property form or on any other appraisal form 
containing at least the same information. Chattel appraisals will be 
performed by appraisers who possess sufficient experience or training to 
establish market (not retail) values as determined by the Agency.
    (d) Real estate appraisals. A current real estate appraisal is 
required when 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, FO, and CL. 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.

[[Page 197]]

    (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.
    (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; 75 
FR 54014, Sept. 3, 2010]



Sec. 762.129  Percent of guarantee and maximum loss.

    (a) General. Except for CLs, 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. For CLs, the percent of guarantee will be 75 
percent.
    (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. Except for CLs, all guarantees issued to 
CLP or PLP lenders will not be less than 80 percent.

[[Page 198]]

    (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; 75 FR 54014, Sept. 3, 2010]



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 the 14 day time frame is not met, the 
proposed guaranteed loan will automatically be approved, subject to 
funding, and receive an 80 or 95 percent guarantee for FO or OL loans, 
and 75 percent guarantee for CL, 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;

[[Page 199]]

    (vi) The borrower has marketable title to the collateral owned by 
the borrower, subject to the instrument securing the loan or line of 
credit to be guaranteed and subject to any other exceptions approved in 
writing by the Agency. When required, an assignment on all USDA crop and 
livestock program payments has been obtained;
    (vii) When required, personal, joint operation, partnership, or 
corporate guarantees have been obtained;
    (viii) Liens have been perfected and priorities are consistent with 
requirements of the conditional commitment;
    (ix) Loan proceeds have been, or will be disbursed for purposes and 
in amounts consistent with the conditional commitment and as specified 
on the loan application. In line of credit cases, if any advances have 
occurred, advances have been disbursed for purposes and in amounts 
consistent with the conditional commitment and line of credit 
agreements;
    (x) There has been no material adverse change in the borrower's 
condition, financial or otherwise, since submission of the application; 
and
    (xi) All other requirements specified in the conditional commitment 
have been met.
    (2) Inspections. The lender must notify the Agency of any scheduled 
inspections during construction and after the guarantee has been issued. 
The Agency may attend these field inspections. Any inspections or review 
performed by the Agency, including those 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) The guarantee fee is established by the Agency at the time the 
guarantee is obligated. The current fee schedule is available at http://
www.fsa.usda.gov and any FSA office. Guaranteed fees may be adjusted 
annually based on factors that affect program costs. 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. The guarantee fee for the loan type 
will be calculated as follows:
    (A) FO guarantee fee = Loan Amount x % guaranteed x (FO percentage 
established by FSA).
    (B) OL guarantee fee = Loan Amount x % guaranteed x (OL percentage 
established by FSA).
    (C) CL guarantee fee = Loan Amount x % guaranteed x (CL percentage 
established by FSA).
    (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 or socially disadvantaged farmers involved in 
the direct Downpayment Loan Program or beginning farmers participating 
in a qualified State Beginning Farmer 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

[[Page 200]]

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; 73 
FR 74345, Dec. 8, 2008; 75 FR 54014, Sept. 3, 2010; 76 FR 58094, Sept. 
20, 2011]



Sec. Sec. 762.131-762.139  [Reserved]



Sec. 762.140  General servicing responsibilities.

    (a) General. (1) Lenders are responsible for servicing the entire 
loan in a reasonable and prudent manner, protecting and accounting for 
the collateral, and remaining the mortgagee or secured party of record.
    (2) The lender cannot enforce the guarantee to the extent that a 
loss results from a violation of usury laws or negligent servicing.
    (b) Borrower supervision. The lender's responsibilities regarding 
borrower supervision include, but are not limited to the following:
    (1) Ensuring loan funds are not used for unauthorized purposes.
    (2) Ensuring borrower compliance with the covenants and provisions 
contained in the promissory note, loan agreement, mortgage, security 
instruments, any other agreements, and this part. Any violations which 
indicate non-compliance on the part of the borrower must be reported, in 
writing, to both the Agency and the borrower.
    (3) Ensuring the borrower is in compliance with all laws and 
regulations applicable to the loan, the collateral, and the operations 
of the farm.
    (4) Receiving all payments of principal and interest on the loan as 
they fall due and promptly disbursing to any holder its pro-rata share 
according to the amount of interest the holder has in the loan, less 
only the lender's servicing fee.
    (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]

[[Page 201]]



Sec. 762.141  Reporting requirements.

    Lenders are responsible for providing the local Agency credit 
officer with all of the following information on the loan and the 
borrower:
    (a) When the guaranteed loan becomes 30 days past due, and following 
the lender's meeting or attempts to meet with the borrower, all lenders 
will submit the appropriate Agency form showing guaranteed loan borrower 
default status. The form will be resubmitted every 60 days until the 
default is cured either through restructuring or liquidation.
    (b) All lenders will submit the appropriate guaranteed loan status 
reports as of March 31 and September 30 of each year;
    (c) CLP lenders also must provide the following:
    (1) A written summary of the lender's annual analysis of the 
borrower's operation. This summary should describe the borrower's 
progress and prospects for the upcoming operating cycle. This annual 
analysis may be waived or postponed if the borrower is financially 
strong. The summary will include a description of the reasons an 
analysis was not necessary.
    (2) For lines of credit, an annual certification stating that a cash 
flow projecting at least a feasible plan has been developed, that the 
borrower is in compliance with the provisions of the line of credit 
agreement, and that the previous year income and loan funds and security 
proceeds have been accounted for.
    (d) In addition to the requirements of paragraphs (a), (b), and (c) 
of this section, the standard eligible lender also will provide:
    (1) Borrower's balance sheet, and income and expense statement for 
the previous year.
    (2) For lines of credit, the cash flow for the borrower's operation 
that projects a feasible plan or better for the upcoming operating 
cycle. The standard eligible lender must receive approval from the 
Agency before advancing future years' funds.
    (3) An annual farm visit report or collateral inspection.
    (e) PLP lenders will submit additional reports as required in their 
lender's agreement.
    (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

[[Page 202]]

funds for a like item that will be taken as security.
    (iii) The security item has no present or prospective value.
    (2) A partial release of security may be approved in writing by the 
Agency upon the lender's request when:
    (i) Proceeds will be used to make improvements to real estate that 
increase the value of the security by an amount equal to or greater than 
the value of the security being released.
    (ii) Security will be released outright with no consideration, but 
the total unpaid balance of the guaranteed loan is less than or equal to 
75 percent of the value of the security for the loan after the release, 
excluding the value of growing crops or planned production, based on a 
current appraisal of the security.
    (iii) Significant income generating property will not be released 
unless it is being replaced and business assets will not be released for 
use as a gift or any similar purpose.
    (iv) Agency concurrence is provided in writing to the lender's 
written request. Standard eligible lenders and CLP lenders will submit 
the following to the Agency:
    (A) A current balance sheet on the borrower; and
    (B) A current appraisal of the security. Based on the level of risk 
and estimated equity involved, the Agency will determine what security 
needs to be appraised. Any required security appraisals must meet the 
requirements of Sec. 762.127; and
    (C) A description of the purpose of the release; and
    (D) Any other information requested by the Agency to evaluate the 
proposed servicing action.
    (3) The lender will provide the Agency copies of any agreements 
executed to carry out the servicing action.
    (4) PLP lenders will request servicing approval in accordance with 
their agreement with the Agency at the time of PLP status certification.
    (c) Subordinations. (1) The Agency may subordinate its security 
interest on a direct loan when a guaranteed loan is being made if the 
requirements of the regulations governing Agency direct loan 
subordinations are met and only in the following circumstances:
    (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.

[[Page 203]]

    (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.
    (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.

[[Page 204]]

    (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.
    (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

[[Page 205]]

of the request to the lender and for any reason not attributable to the 
holder and the lender, the Agency cannot make payment within 30 days of 
the holder's demand to the Agency, the holder will be entitled to 
interest to the date of payment.
    (4) At the time of purchase by the Agency, the original assignment 
of guarantee will be assigned by the holder to the Agency without 
recourse, including all rights, title, and interest in the loan.
    (5) Purchase by the Agency does not change, alter, or modify any of 
the lender's obligations to the Agency specified in the lender's 
agreement or guarantee; nor does the purchase waive any of the Agency's 
rights against the lender.
    (6) The Agency succeeds to all rights of the holder under the 
Guarantee including the right of set-off against the lender.
    (7) Within 180 days of the Agency's purchase, the lender will 
reimburse the Agency the amount of repurchase, with accrued interest, 
through one of the following ways:
    (i) By liquidating the loan security and paying the Agency its pro-
rata share of liquidation proceeds; or
    (ii) Paying the Agency the full amount the Agency paid to the holder 
plus any accrued interest.
    (8) The lender will be liable for the purchase amount and any 
expenses incurred by the Agency to maintain the loan in its portfolio or 
liquidate the security. While the Agency holds the guaranteed portion of 
the loan, the lender will transmit to the Agency any payment received 
from the borrower, including the pro-rata share of liquidation or other 
proceeds.
    (9) If the borrower files for reorganization under the provisions of 
the bankruptcy code or pays the account current while the purchase by 
the Government is being processed, the Agency may hold the loan as long 
it determines this action to be in the Agency's interest. If the lender 
is not proceeding expeditiously to collect the loan or reimbursement is 
not waived under this paragraph, the Agency will demand payment by the 
lender and collect the purchase amount through administrative offset of 
any claims due the lender.
    (10) The Agency may sell a purchased guaranteed loan on a non-
recourse 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

[[Page 206]]

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.
    (ii) Current financial statements from all liable parties.
    (iii) Verification of nonfarm income.
    (iv) Verification of all debts of $1,000 or more.
    (v) Applicable credit reports.
    (vi) Financial history (and production history for standard eligible 
lenders) for the past 3 years to support the cash flow projections.
    (3) A final loss claim may be reduced, adjusted, or rejected as a 
result of negligent servicing after the concurrence with a restructuring 
action under this section.
    (4) Loans secured by real estate and/or equipment can be 
restructured using a balloon payment, equal installments, or unequal 
installments. Under no circumstances may livestock or crops alone be 
used as security for a loan to be rescheduled using a balloon payment. 
If a balloon payment is used, the projected value of the real estate 
and/or equipment security must indicate that the loan will be fully 
secured when the balloon payment becomes due. The projected value will 
be derived from a current appraisal adjusted for depreciation of 
depreciable property, such as buildings and other improvements, that 
occurs until the balloon payment is due. For equipment security, a 
current appraisal is required. 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.

[[Page 207]]

    (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.
    (10) For CL, the lender must certify that the borrower remains in 
compliance with the approved conservation plan.
    (c) Rescheduling. The following conditions apply when a guaranteed 
loan is rescheduled or reamortized:
    (1) Payments will be rescheduled within the following terms:
    (i) FO and existing SW may be amortized over the remaining term of 
the note or rescheduled with an uneven payment schedule. The maturity 
date cannot exceed 40 years from the date of the original note.
    (ii) OL notes must be rescheduled over a period not to exceed 15 
years from the date of the rescheduling. An OL line of credit may be 
rescheduled over a period not to exceed 7 years from the date of the 
rescheduling or 10 years from the date of the original note, whichever 
is less. Advances cannot be made against a line of credit loan that has 
had any portion of the loan rescheduled.
    (iii) CL will be amortized over the remaining term or rescheduled 
with an uneven payment schedule. The maturity date cannot exceed 20 
years from the date of the original note.
    (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

[[Page 208]]

term note; and no shorter than 20 years for FO and CL, unless required 
to be shorter by paragraphs (c)(1)(i) through (iii) of this section.
    (6) No further advances may be made on a line of credit that is 
written down.
    (7) Loans may not be written down with interest assistance. If a 
borrower's loan presently on interest assistance requires a writedown, 
the writedown will be considered without interest assistance.
    (8) The writedown is based on writing down the shorter-term loans 
first.
    (9) When a lender requests approval of a writedown for a borrower 
with multiple loans, the security for all of the loans will be cross-
collateralized and continue to serve as security for the loan that is 
written down. If a borrower has multiple loans and one loan is written 
off entirely through debt writedown, the security for that loan will not 
be released and will remain as security for the other written down debt. 
Additional security instruments will be taken if required to cross-
collateralize security and maintain lien priority.
    (10) The writedown will be evidenced by an allonge or amendment to 
the existing note or line of credit reflecting the writedown.
    (11) The borrower executes an Agency shared appreciation agreement 
for loans which are written down and secured by real estate.
    (i) The lender will attach the original agreement to the 
restructured loan document.
    (ii) The lender will provide the Agency a copy of the executed 
agreement, and
    (iii) Security instruments must ensure future collection of any 
appreciation under the agreement.
    (12) The lender will prepare and submit the following to the Agency:
    (i) A current appraisal of all security in accordance with Sec. 
762.127.
    (ii) A completed report of loss on the appropriate Agency form for 
the proposed writedown loss claim.
    (iii) Detailed writedown calculations as follows:
    (A) Calculate the present value.
    (B) Determine the net recovery value.
    (C) If the net recovery value exceeds the present value, writedown 
is unavailable; liquidation becomes the next servicing consideration. If 
the present value equals or exceeds the net recovery value, the debt may 
be written down to the present value.
    (iv) The lender will make any adjustment in the calculations as 
requested by the Agency.

[64 FR 7378, Feb. 12, 1999; 64 FR 38298, July 16, 1999, as amended at 66 
FR 7567, Jan. 24, 2001; 69 FR 44579, July 27, 2004; 70 FR 56107, Sept. 
26, 2005; 72 FR 17358, Apr. 9, 2007; 75 FR 54014, Sept. 1, 2010]



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:

[[Page 209]]

    (1) The individual to be released has withdrawn from the farming or 
ranching operation;
    (2) A divorce decree or final property settlement does not hold the 
withdrawing party responsible for the loan payments;
    (3) The withdrawing party's interest in the security is conveyed to 
the individual or entity with whom the loan will be continued;
    (4) The ratio of the amount of debt to the value of the remaining 
security is less than or equal to .75, or the withdrawing party has no 
income or assets from which collection can be made; and
    (5) Withdrawal of the individual does not result in legal 
dissolution of the entity to which the loans are made. Individually 
liable members of a general or limited partnership may not be released 
from liability.
    (6) The remaining liable party projects a feasible plan (see Sec. 
762.102(b)).
    (c) Release of liability after liquidation. After a final loss claim 
has been paid on the borrower's account, the lender may release the 
borrower or guarantor from liability if;
    (1) The Agency agrees to the release in writing;
    (2) The lender documents its consideration of the following factors 
concerning the borrower or guarantors:
    (i) The likelihood that the borrower or guarantor will have a 
sufficient level of income in the reasonably near future to contribute 
to a meaningful reduction of the debt;
    (ii) The prospect that the borrower or guarantor will inherit assets 
in the near term that may be attached by the Agency for payment of a 
significant portion of the debt;
    (iii) Whether collateral has been properly accounted for, and 
whether liability should be retained in order to take action against the 
borrower or a third party for conversion of security;
    (iv) The availability of other income or assets which are not 
security;
    (v) The possibility that assets have been concealed or improperly 
transferred;
    (vi) The effect of other guarantors on the loan; and
    (vii) Cash consideration or other collateral in exchange for the 
release of liability.
    (3) The lender will use its own release of liability documents.
    (d) Interest rate changes. (1) The lender may change the interest 
rate on a performing (nondelinquent) loan only with the borrower's 
consent.
    (2) If the loan has been sold on the secondary market, the lender 
must repurchase the loan or obtain the holder's written consent.
    (3) To change a fixed rate of interest to a variable rate of 
interest or vice versa, the lender and the borrower must execute a 
legally effective allonge or amendment to the existing note.
    (4) If a new note is taken, it will be attached to and refer to the 
original note.
    (5) The lender will inform the Agency of the rate change.
    (e) Consolidation. Two or more Agency guaranteed loans may be 
consolidated, subject to the following conditions:
    (1) The borrower must project a feasible plan after the 
consolidation. See Sec. 762.102(b) for definition of feasible plan.
    (2) Only OL may be consolidated.
    (3) Existing lines of credit may only be consolidated with a new 
line of credit if the final maturity date and conditions for advances of 
the new line of credit are made the same as the existing line of credit.
    (4) Guaranteed OL may not be consolidated with a line of credit, 
even if the line of credit has been rescheduled.
    (5) Guaranteed loans made prior to October 1, 1991, cannot be 
consolidated with those loans made on or after October 1, 1991.
    (6) OL secured by real estate or with an outstanding interest 
assistance agreement or shared appreciation agreement cannot be 
consolidated.
    (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

[[Page 210]]

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

[[Page 211]]

will be shared on a pro-rata basis between the lender and the Agency.

[64 FR 7378, Feb. 12, 1999, as amended at 75 FR 54014, Sept. 3, 2010]



Sec. 762.148  Bankruptcy.

    (a) Lender responsibilities. The lender must protect the guaranteed 
loan debt and all collateral securing the loan in bankruptcy 
proceedings. The lender's responsibilities include, but are not limited 
to:
    (1) Filing a proof of claim where required and all the necessary 
papers and pleadings;
    (2) Attending, and where necessary, participating in meetings of the 
creditors and court proceedings;
    (3) Protecting the collateral securing the guaranteed loan and 
resisting any adverse changes that may be made to the collateral;
    (4) Seeking a dismissal of the bankruptcy proceeding when the 
operation as proposed by the borrower to the bankruptcy court is not 
feasible;
    (5) When permitted by the bankruptcy code, requesting a modification 
of any plan of reorganization if it appears additional recoveries are 
likely.
    (6) Monitor confirmed plans under chapters 11, 12 and 13 of the 
bankruptcy code to determine borrower compliance. If the borrower fails 
to comply, the lender will seek a dismissal of the reorganization plan; 
and
    (7) Keeping the Agency regularly informed in writing on all aspects 
of the proceedings.
    (i) The lender will submit a default status report when the borrower 
defaults and every 60 days until the default is resolved or a final loss 
claim is paid.
    (ii) The default status report will be used to inform the Agency of 
the bankruptcy filing, the reorganization plan confirmation date and 
effective date, when the reorganization plan is complete, and when the 
borrower is not in compliance with the reorganization plan.
    (b) Bankruptcy expenses. (1) Reorganization.
    (i) Expenses, such as legal fees and the cost of appraisals incurred 
by the lender as a direct result of the borrower's chapter 11, 12, or 13 
reorganization, are covered under the guarantee, provided they are 
reasonable, customary, and provide a demonstrated economic benefit to 
the lender and the Agency.
    (ii) Lender's in-house expenses, which are those expenses which 
would normally be incurred for administration of the loan, including in-
house lawyers, are not covered by the guarantee.
    (2) Liquidation expenses in bankruptcy.
    (i) Reasonable and customary liquidation expenses may be deducted 
from the proceeds of the collateral in liquidation bankruptcy cases.
    (ii) In-house expenses are not considered customary liquidation 
expenses, may not be deducted from collateral proceeds, and are not 
covered by the guarantee.
    (c) Estimated loss claims in reorganization--(1) At confirmation. 
The lender may submit an estimated loss claim upon confirmation of the 
reorganization plan in accordance with the following:
    (i) The estimated loss payment will cover the guaranteed percentage 
of the principal and accrued interest written off, plus any allowable 
costs incurred as of the effective date of the plan.
    (ii) The lender will submit supporting documentation for the loss 
claim, and any additional information requested by the Agency, including 
justification for the legal fees included on the claim.
    (iii) The estimated loss payment may be revised as consistent with a 
court-approved reorganization plan.
    (iv) Protective advances made and approved in accordance with Sec. 
762.149 may be included in an estimated loss claim associated with a 
reorganization, if:
    (A) They were incurred in connection with the initiation of 
liquidation action prior to bankruptcy filing; or
    (B) The advance is required to provide repairs, insurance, etc. to 
protect the collateral as a result of delays in the case, or failure of 
the borrower to maintain the security.
    (2) Interest only losses. The lender may submit an estimated loss 
claim for interest only after confirmation of the reorganization plan in 
accordance with the following:
    (i) The loss claims may cover interest losses sustained as a result 
of a court-

[[Page 212]]

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

[64 FR 7378, Feb. 12, 1999, as amended at 71 FR 43957, Aug. 3, 2006; 73 
FR 32637, June 10, 2008; 75 FR 54014, Sept. 3, 2010]



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 150 days after the payment due date, all lenders will 
prepare a liquidation plan. 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

[[Page 213]]

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 must be filed no later than 150 days 
past the payment due date unless the account has been completely 
liquidated and then a final loss claim must be filed.
    (vi) An estimate of reasonable liquidation expenses; and
    (vii) An estimate of any protective advances.
    (2) PLP lenders will submit a liquidation plan as required by their 
lender's agreement.
    (c) Agency approval of the liquidation plan. (1) CLP lender's or 
standard eligible lender's liquidation plan, and any revisions of the 
plan, must be approved by the Agency.
    (2) If, within 20 calendar days of the Agency's receipt of the 
liquidation plan, the Agency fails to approve it or fails to request 
that the lender make revisions, the lender may assume the plan is 
approved. The lender may then proceed to begin liquidation actions at 
its discretion as long as it has been at least 60 days since the 
borrower's eligibility for interest assistance was considered.
    (3) At its option, the Agency may liquidate the guaranteed loan as 
follows:
    (i) Upon Agency request, the lender will transfer to the Agency all 
rights and interests necessary to allow the Agency to liquidate the 
loan. The Agency will not pay the lender for any loss until after the 
collateral is liquidated and the final loss is determined; and
    (ii) If the Agency conducts the liquidation, interest accrual will 
cease on the date the Agency notifies the lender in writing that it 
assumes responsibility for the liquidation.
    (d) Estimated loss claims. An estimated loss claim must be submitted 
by all lenders no later than 150 days after the payment due date unless 
the account has been completely liquidated and then a final loss claim 
must be filed. 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 will discontinue interest accrual on the defaulted 
loan at the time the estimated loss claim is paid by the Agency. The 
Agency will not pay interest beyond 210 days from the payment due date. 
If the lender estimates that there will be no loss after considering the 
costs of liquidation, an estimated loss of zero will be submitted and 
interest accrual will cease upon the approval of the estimated loss and 
never later than 210 days from the payment due date. The following 
exceptions apply:
    (i) 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 
that accrues during and up to 45 days after the 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.
    (ii) The Agency will pay the lender interest that 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

[[Page 214]]

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.
    (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 must submit a final loss claim 
when the security has been liquidated and all proceeds have been 
received and applied to the account. All proceeds must be applied to 
principal first and then toward accrued interest if the interest is 
still accruing. The application of the loss claim payment to the account 
does not automatically release the borrower of liability for any portion 
of the borrower's debt to the lender. The lender will continue to be 
responsible for collecting the full amount of the debt and sharing these 
future recoveries with the Agency in accordance with paragraph (j) of 
this section.
    (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

[[Page 215]]

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

[64 FR 7378, Feb. 12, 1999, as amended at 67 FR 44016, July 1, 2002; 69 
FR 44580, July 27, 2004; 71 FR 43957, Aug. 3, 2006; 73 FR 32637, June 
10, 2008]

[[Page 216]]



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 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

[[Page 217]]

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.
    (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

[[Page 218]]

entity is eligible in accordance with Sec. Sec. 762.120 and 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.
    (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.

[[Page 219]]

    (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_LAND CONTRACT GUARANTEE PROGRAM (Eff. 1	3	
12)--Table of Contents



Sec.
763.1 Introduction.
763.2 Abbreviations and definitions.
763.3 Full faith and credit.
763.4 Authorized land contract purpose.
763.5 Eligibility.
763.6 Limitations.
763.7 Application requirements.
763.8 Incomplete applications.
763.9 Processing complete applications.
763.10 Feasibility.
763.11 Maximum loss amount, guarantee period, and conditions.
763.12 Down payment, rates, terms, and installments.
763.13 Fees.
763.14 Appraisals.
763.15 Taxes and insurance.
763.16 Environmental regulation compliance.
763.17 Approving application and executing guarantee.
763.18 General servicing responsibilities.
763.19 Contract modification.
763.20 Delinquent servicing and collecting on guarantee.
763.21 Establishment of Federal debt and Agency recovery of loss claim 
          payments.
763.22 Negligence and negligent servicing.
763.23 Terminating the guarantee.

    Authority: 5 U.S.C. 501 and 7 U.S.C. 1989.

    Source: 76 FR 75430, Dec. 2, 2011, unless otherwise noted.

    Effective Date Note: At 76 FR 75430, Dec. 2, 2011, part 763 was 
added, effective Jan. 3, 2012.

[[Page 220]]



Sec. 763.1  Introduction.

    (a) Purpose. The Land Contract Guaranteed Program provides certain 
financial guarantees to the seller of a farm through a land contract 
sale to a beginning farmer or a socially disadvantaged farmer.
    (b) Types of guarantee. The seller may request either of the 
following:
    (1) The prompt payment guarantee plan. The Agency will guarantee an 
amount not to exceed three amortized annual installments plus an amount 
equal to the total cost of any related real estate taxes and insurance 
incurred during the period covered by the annual installment; or
    (2) The standard guarantee plan. The Agency will guarantee an amount 
equal to 90 percent of the outstanding principal under the land 
contract.
    (c) Guarantee period. The guarantee period is 10 years for either 
plan regardless of the term of the land contract.



Sec. 763.2  Abbreviations and definitions.

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



Sec. 763.3  Full faith and credit.

    (a) The land contract 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 the 
seller, in which:
    (1) The seller had actual knowledge of the fraud or 
misrepresentation at the time it because the seller, or
    (2) The seller participated in or condoned the fraud or 
misrepresentation.
    (b) Loss claims also may be reduced or denied to the extent that any 
negligence contributed to the loss under Sec. 763.22.



Sec. 763.4  Authorized land contract purpose.

    The Agency will only guarantee the Contract installments, real 
estate taxes and insurance; or outstanding principal balance for an 
eligible seller of a family farm, through a land contract sale to an 
eligible beginning or socially disadvantaged farmer.



Sec. 763.5  Eligibility.

    (a) Seller eligibility requirements. The private seller, and each 
entity member in the case of an entity seller, must:
    (1) Possess the legal capacity to enter into a legally binding 
agreement;
    (2) Not have provided false or misleading documents or statements 
during past or present dealings with the Agency;
    (3) Not be ineligible due to disqualification resulting from Federal 
Crop Insurance violation, according to 7 CFR part 718; and
    (4) Not be suspended or debarred under 2 CFR parts 180 and 417.
    (b) Buyer eligibility requirements. The buyer must meet the 
following requirements to be eligible for the Land Contract Guarantee 
Program:
    (1) Is a beginning farmer or socially disadvantaged farmer engaged 
primarily in farming in the United States after the guarantee is issued.
    (2) Is the owner and operator of a family farm after the Contract is 
completed. In the case of an entity buyer:
    (i) Each entity member's ownership interest may not exceed the 
amount specified in the family farm definition in Sec. 761.2 of this 
chapter.
    (ii) The entity members cannot themselves be entities.
    (iii) The entity must be authorized to own and operate a farm in the 
State in which the farm is located.
    (iv) If the entity members holding a majority interest are related 
by blood or marriage, at least one member of the entity must:
    (A) Operate the farm and
    (B) Own the farm after the contract is completed;
    (v) If the entity members holding a majority interest are not 
related by blood or marriage, the entity members holding a majority 
interest must:
    (A) Operate the farm; and
    (B) Own the farm, or the entity itself must own the farm after the 
contract is completed;
    (3) Must have participated in the business operations of a farm or 
ranch for at least 3 years out of the last 10 years prior to the date 
the application is submitted.
    (4) The buyer, and all entity members in the case of an entity, must 
not have caused the Agency a loss by receiving

[[Page 221]]

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 more than three occasions on or prior to April 
4, 1996 or any occasion after April 4, 1996. If the debt forgiveness is 
resolved by repayment of the Agency's loss, the Agency may still 
consider the debt forgiveness in determining the applicant's 
creditworthiness.
    (5) The buyer, and all entity members in the case of an entity, must 
not be delinquent on any Federal debt, other than a debt under the 
Internal Revenue Code of 1986, when the guarantee is issued.
    (6) The buyer, and all entity members in the case of an entity, may 
have no outstanding unpaid judgment awarded to the United States in any 
court. Such judgments do not include those filed as a result of action 
in the United States Tax Courts.
    (7) The buyer, and all entity members in the case of an entity, must 
be a citizen of the United States, United States non-citizen national, 
or a qualified alien under applicable Federal immigration laws. 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.
    (8) The buyer, and all entity members in the case of an entity, must 
possess the legal capacity to enter into a legally binding agreement.
    (9) The buyer, and all entity members in the case of an entity, must 
not have provided false or misleading documents or statements during 
past or present dealings with the Agency.
    (10) The buyer, and all entity members in the case of an entity, 
must not be ineligible as a result of a conviction for controlled 
substances according to 7 CFR part 718.
    (11) The buyer, and all entity members in the case of an entity, 
must have an acceptable credit history demonstrated by satisfactory debt 
repayment.
    (i) 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.
    (ii) Unacceptable credit history will not include:
    (A) Isolated instances of late payments which do not represent a 
pattern and were clearly beyond their control; or
    (B) Lack of credit history.
    (12) The buyer is unable to enter into a contract unless the seller 
obtains an Agency guarantee to finance the purchase of the farm at 
reasonable rates and terms.
    (13) The buyer, 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.
    (14) The buyer, and all entity members in the case of an entity, 
must not be suspended or debarred under 2 CFR parts 180 and 417.



Sec. 763.6  Limitations.

    (a) To qualify for a guarantee, the purchase price of the farm to be 
acquired through the land contract sale cannot exceed the lesser of:
    (1) $500,000 or
    (2) The current market value of the property.
    (b) A guarantee will not be issued if the appraised value of the 
farm is greater than $500,000.
    (c) Existing land contracts are not eligible for the Land Contract 
Guarantee Program.
    (d) Guarantees may not be used to establish or support a non-
eligible enterprise.



Sec. 763.7  Application requirements.

    (a) Seller application requirements. A seller who contacts the 
Agency with interest in a guarantee under the Land Contract Guarantee 
Program will be sent the land contract letter of interest outlining 
specific program details. To formally request a guarantee on the 
proposed land contract, the seller, and each entity member in the case 
of an entity, must:

[[Page 222]]

    (1) Complete, sign, date, and return the land contract letter of 
interest to the Agency, and
    (2) Provide the name, address, and telephone number of the chosen 
servicing or escrow agent.
    (b) Buyer application requirements. A complete application from the 
buyer will include:
    (1) The completed Agency application form;
    (2) A current financial statement (not older than 90 days);
    (3) If the buyer 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 for each member of the 
entity;
    (iii) A current financial statement for 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 (in 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 land contract guarantee and 
execute required debt, security, and other instruments and agreements; 
and
    (v) In the form of a married couple applying as a joint operation, 
items in paragraphs (b)(3)(i) and (b)(3)(iv) of this section 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. The information specified in paragraphs 
(b)(3)(ii) and (iii) of this section are only required to the extent 
needed to show the individual and joint finances of the husband and wife 
without duplication;
    (4) A brief written description of the buyer's proposed operation;
    (5) A farm operating plan;
    (6) A brief written description of the buyer's farm training and 
experience;
    (7) Three years of income tax and other financial records acceptable 
to the Agency, unless the buyer has been farming less than 3 years;
    (8) Three years of farm production records, unless the buyer has 
been farming less than 3 years;
    (9) Verification of income and off-farm employment if relied upon 
for debt repayment;
    (10) Verification of all debts;
    (11) Payment of the credit report fee;
    (12) Documentation of compliance with the environmental regulations 
in part 1940, subpart G, of this title;
    (13) A copy of the proposed land contract; and
    (14) Any additional information deemed necessary by the Agency to 
effectively evaluate the applicant's eligibility and farm operating 
plan.



Sec. 763.8  Incomplete applications.

    (a) Within 10 days of receipt of an incomplete application, the 
Agency will provide the seller and buyer written notice of any 
additional information that must be provided. The seller or buyer, as 
applicable, must provide the additional information within 20 calendar 
days of the date of the 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 the 
second notice.



Sec. 763.9  Processing complete applications.

    Applications will be approved or rejected and all parties notified 
in writing no later than 30 calendar days after application is 
considered complete.



Sec. 763.10  Feasibility.

    (a) The buyer's proposed operation as described in a form acceptable 
to the Agency must represent the operating cycle for the farm operation 
and must project a feasible plan as defined in Sec. 761.2(b) of this 
chapter.
    (b) The projected income, expenses, and production estimates:
    (1) Must be based on the buyer's last 3 years actual records of 
production and financial management unless the buyer has been farming 
less than 3 years;
    (2) For those farming less than 3 years, a combination of any actual 
history and other reliable sources of information may be used. Sources 
must be

[[Page 223]]

documented and acceptable to the Agency; and
    (3) May deviate from historical performance if deviations are the 
direct result of specific changes in the operation, reasonable, 
justified, documented, and acceptable to the Agency.
    (c) Price forecasts used in the plan must be reasonable, documented, 
and acceptable to the Agency.
    (d) The Agency will analyze the buyer's business ventures other than 
the farm operation to determine their soundness and contribution to the 
operation.
    (e) When a feasible plan depends on income from sources other than 
from owned land, the income must be dependable and likely to continue.
    (f) When the buyer's farm operating plan is developed in conjunction 
with a proposed or existing Agency direct loan, the two farm operating 
plans must be consistent.



Sec. 763.11  Maximum loss amount, guarantee period, and conditions.

    (a) Maximum loss amount. The maximum loss amount due to nonpayment 
by the buyer covered by the guarantee is based on the type of guarantee 
initially selected by the seller as follows:
    (1) The prompt payment guarantee will cover:
    (i) Three amortized annual installments; or
    (ii) An amount equal to three annual installments (including an 
amount equal to the total cost of any tax and insurance incurred during 
the period covered by the annual installments).
    (2) The standard guarantee will cover an amount equal to 90 percent 
of the outstanding principal balance.
    (b) Guarantee period. The period of the guarantee will be 10 years 
from the effective date of the guarantee unless terminated earlier under 
Sec. 763.23.
    (c) Conditions. The seller will select an escrow agent to service a 
Land Contract Agreement if selecting the prompt payment guarantee plan, 
and a servicing agent to service a Land Contract Agreement if selecting 
the standard guarantee plan.
    (1) An escrow agent must provide the Agency evidence of being a 
bonded title insurance company, attorney, financial institution or 
fiscally responsible institution.
    (2) A servicing agent must provide the Agency evidence of being a 
bonded commercial lending institution or similar entity, registered and 
authorized to provide escrow and collection services in the State in 
which the real estate is located.



Sec. 763.12  Down payment, rates, terms, and installments.

    (a) Down payment. The buyer must provide a minimum down payment of 
five percent of the purchase price of the farm.
    (b) Interest rate. The interest rate charged by the seller must be 
fixed at a rate not to exceed the Agency's direct FO loan interest rate 
in effect at the time the guarantee is issued, plus three percentage 
points. The seller and buyer may renegotiate the interest rate for the 
remaining term of the contract following expiration of the guarantee.
    (c) Land contract terms. The contract payments must be amortized for 
a minimum of 20 years and payments on the contract must be of equal 
amounts during the term of the guarantee.
    (d) Balloon installments. Balloon payments are prohibited during the 
10-year term of the guarantee.



Sec. 763.13  Fees.

    (a) Payment of fees. The seller and buyer will be responsible for 
payment of any expenses or fees necessary to process the Land Contract 
Agreement required by the State or County to ensure that proper title is 
vested in the seller including, but not limited to, attorney fees, 
recording costs, and notary fees.
    (b) [Reserved]



Sec. 763.14  Appraisals.

    (a) Standard guarantee plan. For the standard guarantee plan, the 
value of real estate to be purchased will be established by an appraisal 
obtained at Agency expense and completed as specified in Sec. 761.7 of 
this chapter. An appraisal is required prior to, or as a condition of, 
approval of the guarantee.
    (b) Prompt payment guarantee plan. The Agency may, at its option and 
expense, obtain an appraisal to determine

[[Page 224]]

value of real estate to be purchased under the Prompt Payment Guarantee 
plan.



Sec. 763.15  Taxes and insurance.

    (a) The seller will ensure that taxes and insurance on the real 
estate are paid timely and will provide the evidence of payment to the 
escrow or servicing agent.
    (b) The seller will maintain flood insurance, if available, if 
buildings are located in a special 100-year floodplain as defined by 
FEMA flood hazard area maps.
    (c) The seller will report any insurance claim and use of proceeds 
to the escrow or servicing agent.



Sec. 763.16  Environmental regulation compliance.

    (a) Environmental compliance requirements. The environmental 
requirements contained in part 799 and part 1940, subpart G, of this 
title must be met prior to approval of guarantee request.
    (b) Determination. The Agency determination of whether an 
environmental problem exists will be based on:
    (1) The information supplied with the application;
    (2) Environmental resources available to the Agency including, but 
not limited to, documents, third parties, and government agencies;
    (3) Other information supplied by the buyer or seller upon Agency 
request; and
    (4) A visit to the farm.



Sec. 763.17  Approving application and executing guarantee.

    (a) Approval is subject to the availability of funds, meeting the 
requirements in this part, and the participation of an approved escrow 
or servicing agent, as applicable.
    (b) Upon approval of the guarantee, all parties (buyer, seller, 
escrow or servicing agent, and Agency official) will execute the 
Agency's guarantee agreement.
    (c) The ``Land Contract Agreement for Prompt Payment Guarantee'' or 
the ``Land Contract Agreement for Standard Guarantee'' will describe the 
conditions of the guarantee, outline the covenants and any agreements of 
the buyer, seller, escrow or servicing agent, and the Agency, and 
outline the process for payment of loss claims.



Sec. 763.18  General servicing responsibilities.

    (a) For the prompt payment guarantee plan, the seller must use a 
third party escrow agent approved by the Agency. The escrow agent will:
    (1) Provide the Agency a copy of the recorded Land Contract;
    (2) Handle transactions relating to the Land Contract between the 
buyer and seller;
    (3) Receive Land Contract installment payments from the buyer and 
send them to the seller;
    (4) Provide evidence to the Agency that property taxes are paid and 
insurance is kept current on the security property;
    (5) Send a notice of payment due to the buyer at least 30 days prior 
to the installment due date;
    (6) Notify the Agency and the seller if the buyer defaults;
    (7) Service delinquent accounts as specified in Sec. 763.20(a);
    (8) Make demand on the Agency to pay missed payments;
    (9) Send the seller any missed payment amount paid by the Agency 
under the guarantee;
    (10) Notify the Agency on March 31 and September 30 of each year of 
the outstanding balance on the Land Contract and the status of payment; 
and
    (11) Perform other duties as required by State law and as agreed to 
by the buyer and the seller;
    (b) For the standard guarantee plan, the seller must use a third 
party servicing agent approved by the Agency. The servicing agent will:
    (1) Provide the Agency a copy of the recorded Land Contract;
    (2) Handle transactions relating to the Land Contract between the 
buyer and seller;
    (3) Receive Land Contract installment payments from the buyer and 
send them to the seller;
    (4) Provide evidence to the Agency that property taxes are paid and 
insurance is kept current on the security property;
    (5) Perform a physical inspection of the farm each year during the 
term of

[[Page 225]]

the guarantee, and provide an annual inspection report to the Agency;
    (6) Obtain from the buyer a current balance sheet, income statement, 
cash flow budget, and any additional information needed, perform, and 
provide the Agency an analysis of the buyer's financial condition on an 
annual basis;
    (7) Notify the Agency on March 31 and September 30 of each year of 
the outstanding balance on the Land Contract and the status of payment;
    (8) Send a notice of payment due to the buyer at least 30 days prior 
to the installment due date;
    (9) Notify the Agency and the seller if the buyer defaults;
    (10) Service delinquent accounts as specified in Sec. 763.20(b); 
and
    (11) Perform other duties as required by State law and as agreed to 
by the buyer and the seller.



Sec. 763.19  Contract modification.

    (a) The seller and buyer may modify the land contract to lower the 
interest rate and corresponding amortized payment amount without Agency 
approval.
    (b) With prior written approval from the Agency, the seller and 
buyer may modify the land contract provided that, in addition to a 
feasible plan for the upcoming operating cycle, a feasible plan can be 
reasonably projected throughout the remaining term of the guarantee. 
Such modifications may include but are not limited to:
    (1) Deferral of installments,
    (2) Leasing or subleasing, and
    (3) Partial releases. All proceeds from a partial release or 
royalties from mineral extraction must be applied to a prior lien, if 
one exists, and in addition, the same amount must be credited to the 
principal balance of the land contract.
    (4) Transfer and assumption. If the guarantee is to remain in 
effect, any transfer of the property and assumption of the guaranteed 
debt must be made to an eligible buyer for the Land Contract Guarantee 
Program as specified in Sec. 763.5(b), and must be approved by the 
Agency in writing. If an eligible buyer for transfer and assumption 
cannot be found, the Deputy Administrator for Farm Loan Programs may 
make an exception to this requirement when in the Government's best 
financial interests.
    (5) Assignment. The seller may not assign the contract to another 
party without written consent of the Agency.
    (c) Any contract modifications other than those listed above must be 
approved by the Deputy Administrator for Farm Loan Programs, and will 
only be approved if such action is determined permissible by law and in 
the Government's best financial interests.



Sec. 763.20  Delinquent servicing and collecting on guarantee.

    (a) Prompt payment guarantee plan. If the buyer fails to pay an 
annual amortized installment or a portion of an installment on the 
contract or taxes or insurance when due, the escrow agent:
    (1) Must make a written demand on the buyer for payment of the 
defaulted amount within 30 days of the missed payment, taxes, or 
insurance and send a copy of the demand letter to the Agency and to the 
seller; and
    (2) Must make demand on the Agency within 90 days from the original 
payment, taxes, or insurance due date, for the missed payment in the 
event the buyer has not made the payment.
    (b) Standard guarantee plan. If the buyer fails to pay an annual 
amortized installment or a portion of an installment on the contract, 
then the seller has the option of either liquidating the real estate, or 
having the amount of the loss established by the Agency by an appraisal 
of the real estate. For either option, the servicing agent:
    (1) Must make a written demand on the buyer for payment of the 
defaulted amount within 30 days of the missed payment, and send a copy 
of the demand letter to the Agency and to the seller; and
    (2) Must immediately inform the Agency which option the seller has 
chosen for establishing the amount of the loss, in the event the buyer 
does not make the payment within 60 days of the demand letter.
    (i) Liquidation method. If the seller chooses the liquidation 
method, the servicing agent will:
    (A) Submit a liquidation plan to the Agency within 120 days from the 
missed payment for approval prior to any liquidation action. The Agency

[[Page 226]]

may require and pay for an appraisal prior to approval of the 
liquidation plan.
    (B) Complete liquidation within 12 months of the missed installment 
unless prevented by bankruptcy, redemption rights, or other legal 
action.
    (C) Credit an amount equal to the sale price received in a 
liquidation of the security property, with no deduction for expenses, to 
the principal balance of the land contract.
    (D) File a loss claim immediately after liquidation, which must 
include a complete loan ledger.
    (E) Base the loss claim amount on the appraisal method if the 
property is reacquired by the seller, through liquidation.
    (ii) Appraisal method. If the seller chooses to have the loss amount 
established by appraisal rather than liquidation, the Agency will 
complete an appraisal on the real estate, and the loss claim amount will 
be based on the difference between the appraised value at the time the 
loss is calculated and the unpaid principal balance of the land contract 
at that time.
    (A) The only administrative appeal allowed under Sec. 761.6 of this 
chapter related to the resulting appraisal amount will be a 
determination of whether the appraisal is Uniform Standards of 
Professional Appraisal Practice (USPAP) compliant.
    (B) The seller will give the Agency a lien on the security property 
in the amount of the loss claim payment. If the property sells within 5 
years from the date of the loss payment for an amount greater than the 
appraised value used to establish the loss claim amount, the seller must 
repay the difference, up to the amount of the loss claim. For purposes 
of determining the amount to be repaid (recapture), the market value of 
the property may be reduced by the value of certain capital 
improvements, as specified in Sec. 766.202(a)(1)--(3) of this chapter, 
made by the seller to the property in the time period from the loss 
claim to final disposition. If the property is not sold within 5 years 
from the date of the loss payment, the Agency will release the lien and 
the seller will have no further obligation to the Agency.



Sec. 763.21  Establishment of Federal debt and Agency recovery of loss
claim payments.

    (a) Any amount paid by FSA as a result of an approved loss claim is 
immediately due and payable by the buyer after FSA notifies the buyer 
that a loss claim has been paid to the seller. If the debt is not 
restructured into a repayment plan or the obligation otherwise cured, 
FSA may use all remedies available, including offset as authorized by 
the Debt Collection Improvement Act of 1996, to collect the debt.
    (1) Interest on the debt will be at the FLP non-program real 
property loan rate in effect at the time of the first Agency payment of 
a loss claim.
    (2) The debt may be scheduled for repayment consistent with the 
buyer's repayment ability, not to exceed 7 years. Before any payment 
plan can be approved, the buyer must provide the Agency with the best 
lien obtainable on all of the buyer's assets. This includes the buyer's 
ownership interest in the real estate under contract for guarantees 
using the prompt payment guarantee plan. When the buyer is an entity, 
the best lien obtainable will be taken on all of the entity's assets, 
and all assets owned by individual members of the entity, including 
their ownership interest in the real estate under contract.
    (b) Annually, buyers with an Agency approved repayment plan under 
this section will supply the Agency a current balance sheet, income 
statement, cash flow budget, complete copy of Federal income tax 
returns, and any additional information needed to analyze the buyer's 
financial condition.
    (c) If a buyer fails to make required payments to the Agency as 
specified in the approved repayment plan, the debt will be treated as a 
non-program loan debt, and servicing will proceed as specified in Sec. 
766.351(c) of this chapter.



Sec. 763.22  Negligence and negligent servicing.

    (a) The Agency may deny a loss claim in whole or in part due to 
negligence that contributed to the loss claim. This could include, but 
is not limited to:

[[Page 227]]

    (1) The escrow and servicing agent failing to seek payment of a 
missed installment from the buyer within the prescribed timeframe or 
otherwise does not enforce the terms of the land contract;
    (2) Losing the collateral to a third party, such as a taxing 
authority, prior lien holder, etc;
    (3) Not performing the duties and responsibilities required of the 
escrow or servicing agent;
    (4) The seller's failure to disclose environmental issues; or
    (5) Any other action in violation of the land contract or guarantee 
agreement that does not terminate the guarantee.
    (b) [Reserved]



Sec. 763.23  Terminating the guarantee.

    (a) The guarantee and the Agency's obligations will terminate at the 
earliest of the following circumstances:
    (1) Full payment of the land contract;
    (2) Agency payment to the seller of 3 annual installments plus 
property taxes and insurance, if applicable, under the prompt payment 
guarantee plan, if not repaid in full by the buyer. An Agency approved 
repayment plan will not constitute payment in full until such time as 
the entire amount due for the Agency approved repayment plan is paid in 
full;
    (3) Payment of a loss claim through the standard guarantee plan;
    (4) Sale of real estate without guarantee being properly assigned;
    (5) The seller terminates the land contract for reasons other than 
monetary default; or
    (6) If for any reason the land contract becomes null and void.
    (b) If none of the events in paragraph (a) of this section occur, 
the guarantee will automatically expire, without notice, 10 years from 
the effective date of the guarantee.



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_Downpayment Loan Program

764.201 Downpayment loan uses.
764.202 Eligibility requirements.
764.203 Limitations.
764.204 Rates and terms.
764.205 Security requirements.
764.206-764.230 [Reserved]

                   Subpart F_Conservation Loan Program

764.231 Conservation loan uses.
764.232 Eligibility requirements.
764.233 Limitations.
764.234 Rates and terms.
764.235 Security requirements.
764.236-764.250 [Reserved]

                    Subpart G_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 H_Youth Loan Program

764.301 Youth loan uses.
764.302 Eligibility requirements.
764.303 Limitations.
764.304 Rates and terms.
764.305 Security requirements.

[[Page 228]]

764.306-764.350 [Reserved]

                    Subpart I_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 J_Loan Decision and Closing

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

      Subpart K_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 Downpayment loans;
    (2) OL, including Youth loans;
    (3) EM; and
    (4) CL.

[72 FR 63298, Nov. 8, 2007, as amended at 75 FR 54015, Sept. 3, 2010]



Sec. 764.2  Abbreviations and definitions.

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



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 (f) 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;

[[Page 229]]

    (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) Except for CL, 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;
    (14) For EM loans, a statement of loss or damage on the appropriate 
Agency form;
    (15) For CL only, a conservation plan as defined in Sec. 761.2 of 
this chapter; and
    (16) For CL only, and if the applicant wishes to request 
consideration for priority funding, plans to transition to organic or 
sustainable agriculture when the funds requested will be used to 
facilitate the transition.
    (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.
    (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 CL Program streamlined application, the applicant must 
meet all of the following:
    (1) Be current on all payments to all creditors including the Agency 
(if currently an Agency borrower).
    (2) Have not received primary loan servicing on any FLP debt within 
the past 5 years.
    (3) Have a debt to asset ratio that is 40 percent or less.
    (4) Have a balance sheet that indicates a net worth of 3 times the 
requested loan amount or greater.
    (5) Have a FICO credit score from the Agency obtained credit report 
of at least 700. For entity applicants, the FICO credit score of the 
majority of the individual members of the entity must be at least 700.
    (6) Submit the following items:
    (i) Items specified in paragraphs (b)(1), (b)(2), (b)(3), (b)(7), 
(b)(11), (b)(15), and (b)(16) of this section,
    (ii) A current financial statement less than 90 days old, and
    (iii) Upon Agency request, other information specified in paragraph 
(b) of this section necessary to make a determination on the loan 
application.
    (e) 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.

[[Page 230]]

    (f) The applicant need not submit any information under this section 
that already exists in the applicant's Agency file and is still current.

[72 FR 63298, Nov. 8, 2007, as amended at 75 FR 54015, Sept. 3, 2010]

    Effective Date Note: At 76 FR 75434, Dec. 2, 2011, Sec. 764.51 was 
amended by revising paragraph (b)(3), effective Jan. 3, 2012. For the 
convenience of the user, the revised text is set forth as follows:



Sec. 764.51  Loan application.

                                * * * * *

    (b) * * *
    (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. Farm experience of the applicant, 
without regard to any lapse of time between the farm experience and the 
new application, may be included in the applicant's written description. 
If farm experience occurred more than 5 years prior to the date of the 
new application, the applicant must demonstrate sufficient on-the-job 
training or education within the last 5 years to demonstrate managerial 
ability;

                                * * * * *



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) Except for CL requests, 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 as specified in Sec. 762.110(h) 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.

[72 FR 63298, Nov. 8, 2007, as amended at 75 FR 54015, Sept. 3, 2010]



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.

[[Page 231]]



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 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. Except for CL, 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

[[Page 232]]

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:
    (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 K of this part.
    (k) Operator of a family farm. Except for CL:
    (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.

[72 FR 63298, Nov. 8, 2007, as amended at 75 FR 54015, Sept. 3, 2010]

    Effective Date Note: At 76 FR 75434, Dec. 2, 2011, Sec. 764.101 was 
amended by revising paragraph (i)(3), effective Jan. 3, 2012. For the 
convenience of the user, the revised text is set forth as follows:



Sec. 764.101  General eligibility requirements.

                                * * * * *

    (i) * * *
    (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. Farm experience of the applicant, without regard to 
any lapse of time between the farm experience and the new application, 
will be taken into consideration in determining loan eligibility. If 
farm experience occurred more than 5 years prior to the date of the new 
application, the applicant must demonstrate sufficient on-the-job 
training or education within the last 5 years to demonstrate managerial 
ability.

                                * * * * *



Sec. 764.102  General limitations.

    (a) Limitations specific to each loan program are contained in 
subparts D through I 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,

[[Page 233]]

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.

[72 FR 63298, Nov. 8, 2007, as amended at 75 FR 54015, Sept. 3, 2010]

    Effective Date Note: At 76 FR 75434, Dec. 2, 2011, Sec. 764.102 was 
amended by revising paragraph (f), effective Jan. 3, 2012. For the 
convenience of the user, the revised text is set forth as follows:



Sec. 764.102  General limitations.

                                * * * * *

    (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. Notwithstanding this limitation, an EM loan may cover 
qualified equine losses as specified in subpart I of this part.



Sec. 764.103  General security requirements.

    (a) Security requirements specific to each loan program are outlined 
in subparts D through I 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 I 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 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 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 downpayment loans, conservation loans, or youth loans.

[72 FR 63298, Nov. 8, 2007, as amended at 73 FR 74345, Dec. 8, 2008; 75 
FR 54015, Sept. 3, 2010]



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,

[[Page 234]]

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.
    (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.

[[Page 235]]



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.



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;

[[Page 236]]

    (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.



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_Downpayment Loan Program



Sec. 764.201  Downpayment loan uses.

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

[72 FR 63298, Nov. 8, 2007, as amended at 73 FR 74345, Dec. 8, 2008]



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 or socially disadvantaged farmer.

[72 FR 63298, Nov. 8, 2007, as amended at 73 FR 74345, Dec. 8, 2008]



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 5 percent of the purchase price 
of the farm.
    (b) Downpayment loans will not exceed 45 percent of the lesser of:
    (1) The purchase price,
    (2) The appraised value of the farm to be acquired, or
    (3) $500,000.
    (c) Financing provided by the Agency and all other creditors must 
not exceed 95 percent of the purchase price. Financing provided by 
eligible lenders may be guaranteed by the Agency under part 762 of this 
chapter.

[72 FR 63298, Nov. 8, 2007, as amended at 73 FR 74345, Dec. 8, 2008]

[[Page 237]]



Sec. 764.204  Rates and terms.

    (a) Rates. The interest rate for Downpayment loans will be the 
regular direct FO rate minus 4 percent, but in no case less than 1.5 
percent.
    (b) Terms. (1) The Agency schedules repayment of Downpayment loans 
in equal, annual installments over a term not to exceed 20 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 20 
years of the loan.

[72 FR 63298, Nov. 8, 2007, as amended at 73 FR 74345, Dec. 8, 2008]



Sec. 764.205  Security requirements.

    A 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.

[72 FR 63298, Nov. 8, 2007, as amended at 73 FR 74345, Dec. 8, 2008]



Sec. Sec. 764.206-764.230  [Reserved]



                   Subpart F_Conservation Loan Program

    Source 75 FR 54015, Sept. 3, 2010, unless otherwise noted.



Sec. 764.231  Conservation loan uses.

    (a) CL funds may be used for any conservation activities included in 
a conservation plan including, but not limited to:
    (1) The installation of conservation structures to address soil, 
water, and related resources;
    (2) The establishment of forest cover for sustained yield timber 
management, erosion control, or shelter belt purposes;
    (3) The installation of water conservation measures;
    (4) The installation of waste management systems;
    (5) The establishment or improvement of permanent pasture; and
    (6) Other purposes including the adoption of any other emerging or 
existing conservation practices, techniques, or technologies.
    (b) [Reserved]



Sec. 764.232  Eligibility requirements.

    (a) The applicant:
    (1) Must comply with general eligibility requirements specified in 
Sec. 764.101 except paragraphs (e) and (k) of that section;
    (2) And anyone who will sign the promissory note, must not have 
received debt forgiveness from the Agency on any direct or guaranteed 
loan; and
    (3) Must be the owner-operator or tenant-operator of a farm and be 
engaged in agricultural production after the time of loan is closed. In 
the case of an entity:
    (i) The entity is controlled by farmers engaged primarily and 
directly in farming in the United States;
    (ii) The entity must be authorized to operate a farm in the State in 
which the farm is located.
    (b) [Reserved]



Sec. 764.233  Limitations.

    (a) The applicant must comply with the general limitations specified 
in Sec. 764.102 except Sec. 764.102(f), which does not apply to 
applicants for the CL Program.
    (b) The applicant must agree to repay any duplicative financial 
benefits or assistance to CL.



Sec. 764.234  Rates and terms.

    (a) Rates. The interest rate:
    (1) Will be the Agency's Direct Farm Ownership rate, available in 
each Agency office.
    (2) Charged will be the lower rate in effect either at the time of 
loan approval or loan closing.
    (b) Terms. The following terms apply to CLs:
    (1) The Agency schedules repayment of a CL based on the useful life 
of the security.
    (2) The maximum term for loans secured by chattels only will not 
exceed 7 years from the date of the note.
    (3) In no event will the term of the loan exceed 20 years from the 
date of the note.



Sec. 764.235  Security requirements.

    (a) The loan must be secured:

[[Page 238]]

    (1) In accordance with requirements established in Sec. Sec. 
764.103 through 764.106; and
    (2) In the order of priority as follows:
    (i) By real estate, if available, and then
    (ii) By chattels, if determined acceptable by the Agency.
    (b) [Reserved]



Sec. Sec. 764.236-764.250  [Reserved]



                    Subpart G_Operating Loan Program

    Source: 72 FR 63298, Nov. 8, 2007, unless otherwise noted. 
Redesignated at 75 FR 54015, Sept. 3, 2010.



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 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:

[[Page 239]]

    (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.



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;

[[Page 240]]

    (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 H_Youth Loan Program

    Source: 72 FR 63298, Nov. 8, 2007, unless otherwise noted. 
Redesignated at 75 FR 54015, Sept. 3, 2010.



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.



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 I_Emergency Loan Program

    Source: 72 FR 63298, Nov. 8, 2007, unless otherwise noted. 
Redesignated at 75 FR 54015, Sept. 3, 2010.



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

[[Page 241]]

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;
    (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

[[Page 242]]

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;
    (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.

    Effective Date Note: At 76 FR 75434, Dec. 2, 2011, Sec. 764.352 was 
amended by adding paragraph (l), effective Jan. 3, 2012. For the 
convenience of the user, the added text is set forth as follows:



Sec. 764.352  Eligibility requirements.

                                * * * * *

    (l) Whose primary enterprise is to breed, raise, and sell horses may 
be eligible under this part.



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:

[[Page 243]]

    (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;
    (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.

    Effective Date Note: At 76 FR 75434, Dec. 2, 2011, Sec. 764.353 was 
amended by adding paragraph (g), effective Jan. 3, 2012. For the 
convenience of the user, the added text is set forth as follows:



Sec. 764.353  Limitations.

                                * * * * *

    (g) Losses associated with horses used for racing, showing, 
recreation, or pleasure or loss of income derived from racing, showing, 
recreation, boarding, or pleasure are not considered qualified losses 
under this section.



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.

[[Page 244]]

    (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.

    Effective Date Note: At 76 FR 75434, Dec. 2, 2011, Sec. 764.355 was 
amended by revising paragraph (b), effective Jan. 3, 2012. For the 
convenience of the user, the revised text is set forth as follows:



Sec. 764.355  Security requirements.

                                * * * * *

    (b) EM loans made as specified in Sec. 764.351(a)(2) and (b) must 
generally comply with the general security requirements established in 
Sec. Sec. 764.103, 764.104, and 764.255(b). These general security 
requirements, however, do not apply to equine loss loans to the extent 
that a lien is not obtainable or obtaining a lien may prevent the 
applicant from carrying on the normal course of business. Other security 
may be considered for an equine loss loan in the order of priority as 
follows:
    (1) Real estate,
    (2) Chattels and crops, other than horses,
    (3) Other assets owned by the applicant,
    (4) Third party pledges of property not owned by the applicant,
    (5) Repayment ability under paragraph (c) of this section.

                                * * * * *



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 of livestock product sales sufficient to

[[Page 245]]

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.

    Effective Date Note: At 76 FR 75435, Dec. 2, 2011, Sec. 764.356 was 
amended by adding paragraph (c), effective Jan. 3, 2012. For the 
convenience of the user, the added text is set forth as follows:



Sec. 764.356  Appraisal and valuation requirements.

                                * * * * *

    (c) In the case of an equine loss loan:
    (1) The applicant's Federal income tax and business records will be 
the primary source of financial information. Sales receipts, invoices, 
or other official sales records will document the sales price of 
individual animals.
    (2) If the applicant does not have 3 complete years of business 
records, the Agency will obtain the most reliable and reasonable 
information available from sources such as the Cooperative Extension 
Service, universities, and breed associations to document production for 
those years for which the applicant does not have a complete year of 
business records.



Sec. Sec. 764.357-764.400  [Reserved]



                   Subpart J_Loan Decision and Closing

    Source: 72 FR 63298, Nov. 8, 2007, unless otherwise noted. 
Redesignated at 75 FR 54015, Sept. 3, 2010.



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

[[Page 246]]

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.



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;

[[Page 247]]

    (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 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 K_Borrower Training and Training Vendor Requirements

    Source: 72 FR 63298, Nov. 8, 2007, unless otherwise noted. 
Redesignated at 75 FR 54015, Sept. 3, 2010.



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.

[[Page 248]]

    (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 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.

[[Page 249]]



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.
    (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..

[[Page 250]]

 
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..
------------------------------------------------------------------------



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.

[[Page 251]]



                           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.



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.

[[Page 252]]

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.
    (g) CLs are not subject to graduation requirements under this part.

[72 FR 63309, Nov. 8, 2007, as amended at 75 FR 54016, Sept. 3, 2010]



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 
insurance entities; and
    (5) Non-farm income.
    (b) Extra payments. Extra payments are derived from any of the 
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 program benefits or assistance to be 
applied on CL or EM loans; 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.

[72 FR 63309, Nov. 8, 2007, as amended at 75 FR 54016, Sept. 3, 2010]



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

[[Page 253]]

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 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;

[[Page 254]]

    (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 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 on any program except for 
CL;
    (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;

[[Page 255]]

    (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 
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.

[72 FR 63309, Nov. 8, 2007, as amended at 75 FR 54016, Sept. 3, 2010]



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 on any program except for CL; 
and
    (6) The junior lien will not otherwise adversely impact the Agency's 
financial interests.

[72 FR 63309, Nov. 8, 2007, as amended at 75 FR 54016, Sept. 3, 2010]



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;

[[Page 256]]

    (b) The transaction will not adversely affect the Agency's security 
position;
    (c) The borrower is unable to graduate on any program except for CL;
    (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.

[72 FR 63309, Nov. 8, 2007, as amended at 75 FR 54016, Sept. 3, 2010]



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.



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 on any program except for CL;
    (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

[[Page 257]]

control, and the borrower will resume the farming operation within 3 
years.

[72 FR 63309, Nov. 8, 2007, as amended at 75 FR 54016, Sept. 3, 2010]



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.
    (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.

[[Page 258]]



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 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.

[[Page 259]]



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;
    (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 on any program 
except for CL;
    (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

[[Page 260]]

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.
    (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.

[72 FR 63309, Nov. 8, 2007, as amended at 75 FR 54016, Sept. 3, 2010]



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.

[[Page 261]]



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:
    (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

[[Page 262]]

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.
    (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 a