FAD-144

Subject: Request dated April 8, 2011, requesting a Final Agency Determination for the 2009 crop year regarding the interpretation of 7 U.S.C. 1502(b)(9) of the Federal Crop Insurance Act (Act). This request is pursuant to 7 C.F.R. part 400, subpart X.

Background:

Section 502(b) of the Federal Crop Insurance Act (7 U.S.C. 1502(b)) states, as here pertinent:

SEC. 502. [7 U.S.C. 1502] PURPOSE AND DEFINITIONS.

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(b) Definitions. - As used in this subtitle:

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(9) TRANSITIONAL YIELD. - The term “transitional yield” means the maximum average production per acre or equivalent measure that is assigned to acreage for a crop year by the Corporation in accordance with the regulations of the Corporation whenever the producer fails-
(A) to certify that acceptable documentation of production and acreage for the crop year is in the possession of the producer; or
(B) to present acceptable documentation on the demand of the Corporation or an insurance company reinsured by the Corporation.

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Interpretation Submitted

The requestor interprets section 502(b)(9) of the Act as provisions that serve only to define the term “Transitional Yield” and to set forth the instances in which a Transitional Yield (T-Yield) may or must be used within the Federal crop insurance program. The requestor interprets this code section to not provide the policyholder with a mechanism by which to change the basis upon which his/her insurance guarantee is established. For example, the requestor believes this code section does not authorize a policyholder to use any type of “potential yield” or any other form of estimated yield in replacement of the approved yield established by the Act, Federal Crop Insurance Corporation (FCIC)/Risk Management Agency (RMA) policy and procedures and 7 C.F.R. part 400, subpart G.

Final Agency Determination

FCIC agrees with the requestor’s interpretation. Section 502(b)(9) of the Act must be read within the context of section 508(g) of the Act, which clarifies how and when transitional yields are used. Section 502(b)(9) of the Act also specifies that the transitional yield is an amount of production assigned to the acreage by FCIC. FCIC describes the manner in which such yields are assigned at 7 C.F.R. part 400, subpart G. These provisions, read together, provides the manner in which guarantees are established and there is no mechanism for producers to change this process or the outcome.

In accordance with 7 C.F.R. 400.765 (c), this Final Agency Determination is binding on all participants in the Federal crop insurance program for the 2009 crop year. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Issue: June 21, 2011