[Federal Register Volume 65, Number 235 (Wednesday, December 6, 2000)]
[Rules and Regulations]
[Pages 76115-76121]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30977]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 65, No. 235 / Wednesday, December 6, 2000 /
Rules and Regulations
[[Page 76115]]
DEPARTMENT OF AGRICULTURE
Farm Service Agency
7 CFR Parts 773 and 774
RIN 0560-AG23
Implementation of the Special Apple Loan Program and Emergency
Loan for Seed Producers Program
AGENCY: Farm Service Agency, USDA.
ACTION: Final rule.
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SUMMARY: This action is being taken to implement provisions of the
Agricultural Risk Protection Act of 2000 (Act). The intended effect is
to assist producers of apples suffering economic loss as a result of
low prices and by making low cost loans available to seed producers
adversely affected by the bankruptcy filing of AgriBiotech.
DATES: Effective December 6, 2000.
FOR FURTHER INFORMATION CONTACT: Pat Elzinga, Senior Loan Officer,
USDA/FSA/DAFLP/STOP 0522, 1400 Independence Avenue, SW., Washington, DC
20250-0522; telephone (202) 720-3889; facsimile (202) 690-1117;
electronic mail: pelzinga@wdc.usda.gov; and Orlando C. Kilcrease,
Senior Loan Officer, USDA/FSA/DAFLP/STOP 0522, Independence Avenue,
SW., Washington, DC 20250-0522; telephone (202) 720-1472; facsimile:
202-720-6797; electronic mail: Orlando Kilcrease@wdc.usda.gov.
SUPPLEMENTARY INFORMATION:
Notice and Comment
Section 263 of the Agricultural Risk Protection Act requires that
these regulations be promulgated without regard to the notice and
comment provisions of 5 U.S.C. 553 or the Statement of Policy of the
Secretary of Agriculture effective July 24, 1971 (36 FR 13804) related
to notices of proposed rulemaking and public participation in the
rulemaking process. This rule is thus issued as final and is effective
immediately.
Executive Order 12866
This rule has been determined to be significant for purposes of
Executive Order 12866 and, therefore, has been reviewed by the Office
of Management and Budget.
Regulatory Flexibility Act
The Farm Service Agency (Agency) certifies that this rule will not
have a significant economic effect on a substantial number of small
entities and, therefore, is not required to perform a Regulatory
Flexibility Analysis as required by the Regulatory Flexibility Act, as
amended (5 U.S.C. 601). This rule does not impact the small entities to
a greater extent than the large entities.
Environmental Evaluation
National Environmental Policy Act
The Agency has determined that this action does not constitute a
major Federal action significantly affecting the quality of the human
environment, and in accordance with the National Environmental Policy
Act of 1969, (42 U.S.C. 4321 et seq.) neither an Environmental Impact
Statement nor an environmental assessment is required.
Environmental Justice, Executive Order 12898
This rule is subject to the requirements of Executive Order 12898,
Federal Actions to Address Environmental Justice in Minority
Populations and Low-Income Populations. Implementation of these
requirements will occur at the time of actions performed hereunder.
Executive Order 12988
The rule has been reviewed in accordance with E.O. 12988, Civil
Justice Reform. The provisions of this rule are not retroactive and
preempt State laws to the extent such laws are inconsistent with the
provisions of this rule. In accordance with section 212(e) of the
Department of Agriculture Reorganization Act of 1994, before any
judicial action may be brought concerning the provisions of this rule,
administrative review under 7 CFR part 11 must be exhausted.
Executive Order 12372
This program is not subject to the provisions of Executive Order
12372, which require intergovernmental consultation with State and
local officials. See the notice related to 7 CFR part 3015, subpart V,
published at 48 FR 29115 (June 24, 1983).
Unfunded Mandates
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA),
establishes requirements for Federal agencies to assess the effects of
their regulatory actions on State, local, and tribal governments and
the private sector. Under section 202 of the UMRA, the Agency generally
must prepare a written statement, including a cost-benefit assessment,
for proposed and final rules with ``Federal mandates'' that may result
in expenditures to State, local, or tribal governments, in the
aggregate, or the private sector, of $100 million or more in any 1
year. When such a statement is needed for a rule, section 205 of the
UMRA generally requires the Agency to identify and consider a
reasonable number of regulatory alternatives and adopt the least
costly, more cost-effective or least burdensome alternative that
achieves the objectives of the rule.
This rule contains no Federal mandates, under the regulatory
provisions of title II of the UMRA, for State, local, and tribal
governments or the private sector. Therefore, this rule is not subject
to the requirements of sections 202 and 205 of the UMRA.
Paperwork Reduction Act
Section 263 of the Act provides that this rule will be promulgated
without regard to the Paperwork Reduction Act contained in chapter 35
of title 44, United States Code. This means that the information to be
collected from the public to implement these programs and the burden,
in time and money, the collection of the information would have on the
public does not have to be approved by the Office of Management and
Budget or be subject to the normal requirement for a 60-day public
comment period.
Background
This rule will implement sections Sec. 203(f) and 253 of the Act
(Pub. L. 106-224) enacted June 20, 2000, related to the Special Apple
Loan Program and
[[Page 76116]]
Emergency Loan for Seed Producers Program, respectively.
1. 7 CFR Part 773--Special Apple Loan Program
Apple prices in the 1998-1999 growing season fell to their lowest
levels in nearly 10 years. The average U.S. 1998-1999 farm price for
fresh market apples was estimated to be down more than 20 percent from
the previous growing season, resulting in a 16 percent drop in total
farm revenue. Even with a possible improvement in the coming growing
seasons, the serious economic impact of the earlier economic losses
will result in ongoing financial difficulties for apple producers.
Section 203(f) of the Act directed the Secretary to make loans to
producers of apples that are suffering economic loss as a result of low
prices for apples. To ensure that the borrowers under this program are
those that most likely are suffering economic loss, the Agency
restricted applicants to those that produced apples, on not less than
10 acres, for sale in 1999 or 2000. This restriction excludes hobby
apple producers. Funds allocated will most effectively assist those
most directly affected by the economic crisis in the apple industry
since those eligible will have been dependent on apple production for a
primary source of income. In addition, this program is intended to
assist producers recover from economic losses and enable them to
continue their farming operations. Therefore, loan funds must be used
for specified purposes related to the production and marketing of
apples. Distribution of funds has been determined to be on a per acre
basis to provide the most equitable access to assistance for all
affected producers, and to best meet the intent of the authorizing
statute.
Congress allocated a limited amount of funds for this program so
certain limits are necessary to help ensure that loan funds are
distributed equitably to all interested producers. In addition, this
program is intended to assist producers through a period of low apple
prices, not replace the producers' established sources of credit. For
these reasons, the regulation limits loan size to a maximum of $300.00
per acre of apples in production and a maximum indebtedness of $500,000
per producer. To expedite funding of eligible requests, the Agency will
waive the application requirements of historical production and
financial information, and cash flow projections, for applicants
requesting $30,000 or less. The Agency, however, will require these
applicants to provide cash flow projections later to show repayment if
their balance sheet shows a net worth of less than three times the loan
amount. This additional documentation is needed to minimize the credit
risk to the Government. For loans for more than $30,000, repayment will
always be based on the applicant's projected cash flow budget.
To minimize the credit risk to the Government, the Agency requires
that the applicants have an acceptable credit history and demonstrate
an ability to repay the proposed loan. The Agency cannot make a loan to
an applicant who is delinquent on a non-tax Federal debt (31 U.S.C.
3720B), or has an outstanding non-tax Federal judgment (28 U.S.C.
3201(e)). The restrictions will not apply if the Federal delinquency
and judgment are cured on or before the loan closing date. Applicants
who have provided the Agency false or misleading information are also
not eligible for this program.
The Agency has established rates, terms, and collateral
requirements for Special Apple Loans to allow for maximum flexibility.
The Act allows the Agency to require collateral in an amount adequate
to protect the Government's interest and to minimize potential loss.
The Agency therefore, will take a lien on available assets as necessary
to adequately secure the loan. The level of documentation of collateral
value will depend on the risk of loss, as determined by a review of the
applicant's financial condition, and the size of the loan. For loans
over $30,000, applicants with net worth of at least three times the
loan amount have demonstrated an ability to successfully manage the
finances of their operation and have accumulated assets to protect
against adverse conditions. Applicants with those characteristics
generally represent significantly less potential loss, so Agency will
place less emphasis on collateral when evaluating the soundness of the
loan request. Therefore, these applicants will be allowed to provide
documentation of collateral value in the form of assessments or
depreciation schedules. For loans over $30,000, applicants with net
worth of less than three times the loan amount will be required to
provide current appraisals, at the applicant's expense, to document
collateral values. All appraisals must be completed by a knowledgeable
appraiser, acceptable to the Agency. Real estate appraisals must be
prepared by a state certified general appraiser in compliance with the
Uniform Standards of Professional Appraisal Practices (USPAP). For
loans of $30,000 or less, collateral value will be based on the best
available, verifiable information. In addition, debtors will be subject
to the collection authorities of 31 U.S.C. chapter 37.
All persons approved for such loan assistance must execute loan
instruments and legal documents to secure the loan and reduce the risk
to the Government. For entity applicants, the loan instruments and
legal documents must be executed in the name of the entity and by each
individual member. This requirement is necessary to minimize the credit
risk.
The Agency will service Special Apple Loans like nonprogram loans
under 7 CFR part 1951, subpart J. These borrowers have not been
required at loan origination to meet the more stringent eligibility
requirements of Agency loans under the Consolidated Farm and Rural
Development Act (CONACT), and the Act does not provide CONACT servicing
benefits to Special Apple Loan program borrowers.
2. 7 CFR Part 774--Emergency Loans for Seed Producers Program
Seed producers have suffered economic hardships as a result of the
bankruptcy filing of AgriBiotech. AgriBiotech, one of the largest
single turf, forage, and alfalfa seed companies in the country, filed
for protection under chapter 11 of the bankruptcy code affecting over
1,200 farmer growers in 39 States. The growers are the largest segment
of creditors in the bankruptcy proceedings. AgriBiotech cannot pay
these growers for their 1999 produced crop as a result of the
bankruptcy filing. The courts have estimated the total value of seed
growers' claims to be approximately $50 million.
Section 253 of the Act directed the Secretary to make no-interest
loans to producers of the 1999 crop of grass, forage, vegetable, or
sorghum seed that have not received payments for the seed as a result
of bankruptcy proceedings involving AgriBiotech. The funds allocated
for the program are believed to be adequate for all eligible producers.
If demand does exceed the allocation, funds will be paid in order of
application approval. For the producer to be eligible, the seed
producer must have a valid claim in the bankruptcy proceeding arising
from a contract to grow seeds in the United States.
The Agency has established terms and collateral requirements for
Emergency Loans for Seed Producers to allow for maximum flexibility.
The Agency will take as security an assignment on the bankruptcy claim,
and any seed still held in the applicant's possession, as provided by
the Act to secure loans made to producers under this program. The
Agency will obtain a balance sheet
[[Page 76117]]
and any other financial information needed to determine if there are
liens impacting the collateral. In addition, debtors will be subject to
the debt collection authorities of 31 U.S.C. chapter 37. For example,
in cases of default, the Agency may seek to attach additional assets by
filing judgments or refer the debt to the Department of Treasury for
offset and cross-servicing. In light of the Government's limited
exposure on these small loans and desire for simple administration, the
Agency believes that no further security requirements are needed.
The Agency cannot make a loan to an applicant who is delinquent on
a non-tax Federal debt (31 U.S.C. 3720B) or has an outstanding non-tax
Federal judgment (28 U.S.C. 3201(e)). These restrictions will not apply
if the Federal delinquency and judgment are cured on or before the loan
closing date. Applicants who have provided false or misleading
information also are not eligible for this program. The above
restrictions are needed to minimize credit risk and comply with
statutory requirements.
All persons approved for such loan assistance must execute the
Agency's loan instruments and legal documents. For entity applicants,
the loan instruments and legal documents must be executed in the name
of the entity and by each individual member. This requirement is
necessary to minimize risk and protect the Government's interest should
default occur.
In accordance with Sec. 253 of the Act, the loan interest rate for
Emergency Loans for Seed Producers will be zero initially. Upon
completion and disbursal of the estate in bankruptcy or 18 months after
the date of the note, whichever comes first, the note will convert any
outstanding balance to the then current Farm Operating loan-direct
interest rate over an additional 7 years. Interest rates are specified
in exhibit B of Agency Instruction 440.1 (available in any Agency
office) by loan type. If the loan is not paid in full during this term
and default occurs, servicing will proceed in accordance with existing
Agency regulations (7 CFR part 1951, subpart J, Management and
Collection of Nonprogram Loans, specifically Sec. 1951.468). The loan
will be serviced as a nonprogram loan because the program is not
authorized by the CONACT and, therefore, does not receive the benefits
of CONACT program loans. The borrowers also have not been required to
meet the more stringent CONACT requirements.
Section 263 of the Act directed the Secretary to implement this
program as soon as practicable and without regard to the notice and
comment provisions of section 553 of title 5, United States Code and
the Statement of Policy of the Secretary of Agriculture effective July
24, 1971, relating to notices of proposed rulemaking and public
participation in rulemaking. Publication of this rule for immediate
effect without prior notice and comment as a final rule, therefore, is
warranted.
List of Subjects
7 CFR Part 773
Fruits, Loan programs-agriculture.
7 CFR Part 774
Seeds, Loan programs-agriculture.
For reasons set out in the preamble, 7 CFR chapter VII is amended
as set forth below.
1. Part 773 is added to read as follows:
PART 773--SPECIAL APPLE LOAN PROGRAM
Sec.
773.1 Introduction.
773.2 Definitions.
773.3 Appeals.
773.4-773.5 [Reserved]
773.6 Eligibility requirements.
773.7 Loan uses.
773.8 Limitations.
773.9 Environmental compliance.
773.10 Other Federal, State, and local requirements.
773.11-773.17 [Reserved]
773.18 Loan application.
773.19 Interest rate, terms, security requirements, and repayment.
773.20 Funding applications.
773.21 Loan decision, closing and fees.
773.22 Loan servicing.
773.23 Exception.
Authority: Pub. L. 106-224.
Sec. 773.1 Introduction.
This part contains the terms and conditions for loans made under
the Special Apple Loan Program. These regulations are applicable to
applicants, borrowers, and other parties involved in making, servicing,
and liquidating these loans. The program objective is to assist
producers of apples suffering from economic loss as a result of low
apple prices.
Sec. 773.2 Definitions.
As used in this part, the following definitions apply:
Agency is the Farm Service Agency, its employees, and any successor
agency.
Apple producer is a farmer in the United States or its territories
that produced apples, on not less than 10 acres, for sale in 1999 or
2000.
Applicant is the individual or business entity applying for the
loan.
Business entity is a corporation, partnership, joint operation,
trust, limited liability company, or cooperative.
Cash flow budget is a projection listing all anticipated cash
inflows (including all farm income, nonfarm income and all loan
advances) and all cash outflows (including all farm and nonfarm debt
service and other expenses) to be incurred by the borrower during the
period of the budget. A cash flow budget may be completed either for a
12 month period, a typical production cycle or the life of the loan, as
appropriate.
Domestically owned enterprise is an entity organized in the United
States under the law of the state or states in which the entity
operates and a majority of the entity is owned by members meeting the
citizenship test.
False information is information provided by an applicant,
borrower, or other source to the Agency which information is known by
the provider to be incorrect, and was given to the Agency in order to
obtain benefits for which the applicant or borrower would not otherwise
have been eligible.
Feasible plan is a plan that demonstrates that the loan will be
repaid as agreed, as determined by the Agency.
Security is real or personal property pledged as collateral to
assure repayment of a loan in the event there is a default on the loan.
USPAP is Uniform Standards of Professional Appraisal Practice.
Sec. 773.3 Appeals.
A loan applicant or borrower may request an appeal or review of an
adverse decision made by the Agency in accordance with 7 CFR part 11.
Secs. 773.4-773.5 [Reserved]
Sec. 773.6 Eligibility requirements.
Loan applicants must meet all of the following requirements to be
eligible for a Special Apple Program Loan:
(a) The loan applicant must be an apple producer;
(b) The loan applicant must be a citizen of the United States or an
alien lawfully admitted to the United States for permanent residence
under the Immigration and Nationalization Act. For a business entity
applicant, the majority of the business entity must be owned by members
meeting the citizenship test or, other entities that are domestically
owned. Aliens must provide the appropriate Immigration and
Naturalization Service forms to document their permanent residency;
(c) The loan applicant and anyone who will execute the promissory
note
[[Page 76118]]
must possess the legal capacity to enter into contracts, including debt
instruments;
(d) At loan closing the loan applicant and anyone who will execute
the promissory note must not be delinquent on any Federal debt, other
than a debt under the Internal Revenue Code of 1986;
(e) At loan closing the loan applicant and anyone who will execute
the promissory note must not have any outstanding unpaid judgments
obtained by the United States in any court. Such judgments do not
include those filed as a result of action in the United States Tax
Courts;
(f) The loan applicant, in past or present dealings with the
Agency, must not have provided the Agency with false information; and
(g) The individual or business entity loan applicant and all entity
members must have acceptable credit history demonstrated by debt
repayment. A history of failure to repay past debts as they came due
(including debts to the Internal Revenue Service) when the ability to
repay was within their control will demonstrate unacceptable credit
history. Unacceptable credit history will not include isolated
instances of late payments which do not represent a pattern and were
clearly beyond the applicant's control or lack of credit history.
Sec. 773.7 Loan uses.
Loan funds may be used for any of the following purposes related to
the production or marketing of apples:
(a) Payment of costs associated with reorganizing a farm to improve
its profitability;
(b) Payment of annual farm operating expenses;
(c) Purchase of farm equipment or fixtures;
(d) Acquiring, enlarging, or leasing a farm;
(e) Making capital improvements to a farm;
(f) Refinancing indebtedness;
(g) Purchase of cooperative stock for credit, production,
processing or marketing purposes; or
(h) Payment of loan closing costs.
Sec. 773.8 Limitations.
(a) The maximum loan amount any individual or business entity may
receive under the Special Apple Loan Program is limited to $500,000.
(b) The maximum loan is further limited to $300 per acre of apple
trees in production in 1999 or 2000, whichever is greater.
(c) Loan funds may not be used to pay expenses incurred for
lobbying or related activities.
(d) Loans may not be made for any purpose which contributes to
excessive erosion of highly erodible land or to the conversion of
wetlands to produce an agricultural commodity.
Sec. 773.9 Environmental compliance.
(a) Except as otherwise specified in this section, prior to
approval of any loan, an environmental evaluation will be completed by
the Agency to determine if the proposed action will have any adverse
impacts on the human environment and cultural resources. Loan
applicants will provide all information necessary for the Agency to
make its evaluation.
(b) The following loan actions were reviewed for the purpose of
compliance with the National Environmental Policy Act (NEPA), 40 CFR
parts 1500 through 1508, and determined not to have a significant
impact on the quality of the human environment, either individually or
cumulatively. Therefore the following loan actions are categorically
excluded from the requirements of an environmental evaluation:
(1) Payment of legal costs associated with reorganizing a farm to
improve its profitability as long as there will be no changes in the
land's use or character;
(2) Purchase of farm equipment which will not be affixed to a
permanent mount or position;
(3) Acquiring or leasing a farm;
(4) Refinancing an indebtedness not greater than $30,000;
(5) Purchase of stock in a credit association or in a cooperative
which deals with the production, processing or marketing of apples; and
(6) Payment of loan closing costs.
(c) The loan actions listed in paragraph (b) of this section were
also reviewed in accordance with section 106 of the National Historic
Preservation Act (NHPA). It was determined that these loan actions are
non-undertakings with no potential to affect or alter historic
properties and therefore, will not require consultation with the State
Historic Preservation Officer, Tribal Historic Preservation Officer, or
other interested parties.
(d) If adverse environmental impacts, either direct or indirect,
are identified, the Agency will complete an environmental assessment in
accordance with the Council on Environmental Quality's Regulations for
Implementing the Procedural Provisions of NEPA to the extent required
by law.
(e) In order to minimize the financial risk associated with
contamination of real property from hazardous waste and other
environmental concerns, the Agency will complete an environmental risk
evaluation of the environmental risks to the real estate collateral
posed by the presence of hazardous substances and other environmental
concerns.
(1) The Agency will not accept real estate as collateral which has
significant environmental risks.
(2) If the real estate offered as collateral contains significant
environmental risks, the Agency will provide the applicant with the
option of properly correcting or removing the risk, or offering other
non-contaminated property as collateral.
Sec. 773.10 Other Federal, State, and local requirements.
Borrowers are required to comply with all applicable:
(a) Federal, State, or local laws;
(b) Regulatory commission rules; and
(c) Regulations which are presently in existence, or which may be
later adopted including, but not limited to, those governing the
following:
(1) Borrowing money, pledging security, and raising revenues for
repayment of debt;
(2) Accounting and financial reporting; and
(3) Protection of the environment.
Secs. 773.11-773.17 [Reserved]
Sec. 773.18 Loan application.
(a) A complete application will consist of the following:
(1) A completed Agency application form;
(2) If the applicant is a business entity, any legal documents
evidencing the organization and any State recognition of the entity;
(3) Documentation of compliance with the Agency's environmental
regulations contained in 7 CFR part 1940, subpart G;
(4) A balance sheet on the applicant;
(5) The farm's operating plan, including the projected cash flow
budget reflecting production, income, expenses, and loan repayment
plan;
(6) The last 3 years of production and income and expense
information;
(7) Payment to the Agency for ordering a credit report; and
(8) Any additional information required by the Agency to determine
the eligibility of the applicant, the feasibility of the operation, or
the adequacy and availability of security.
(b) Except as required in Sec. 773.19(e), the Agency will waive
requirements for a complete application, listed in paragraphs (a)(5)
and (a)(6) of this section, for requests of $30,000 or less.
Sec. 773.19 Interest rate, terms, security requirements, and
repayment.
(a) Interest rate. The interest rate will be fixed for the term of
the loan. The
[[Page 76119]]
rate will be established by the Agency and available in each Agency
Office, based upon the cost of Government borrowing for loans of
similar maturities.
(b) Terms. The loan term will be for up to 3 years, based upon the
useful life of the security offered.
(c) Security requirements. The Agency will take a lien on the
following security, if available, as necessary to adequately secure the
loan:
(1) Real estate;
(2) Chattels;
(3) Crops;
(4) Other assets owned by the applicant; and
(5) Assets owned and pledged by a third party.
(d) Documentation of security value.
(1) For loans that are for $30,000 or less, collateral value will
be based on the best available, verifiable information.
(2) For loans of greater than $30,000 where the applicant's balance
sheet shows a net worth of three times the loan amount or greater,
collateral value will be based on tax assessment of real estate and
depreciation schedules of chattels, as applicable, less any existing
liens.
(3) For loans of greater than $30,000 where the applicant's balance
sheet shows a net worth of less than three times the loan amount,
collateral value will be based on an appraisal. Such appraisals must be
obtained by the applicant, at the applicant's expense and acceptable to
the Agency. Appraisals of real estate must be completed in accordance
with USPAP.
(e) Repayment. (1) All loan applicants must demonstrate that the
loan can be repaid.
(2) For loans that are for $30,000 or less where the applicant's
balance sheet shows a net worth of three times the loan amount or
greater, repayment ability will be considered adequate without further
documentation.
(3) For loans that are for $30,000 or less where the applicant's
balance sheet shows a net worth of less than three times the loan
amount, repayment ability must be demonstrated using the farm's
operating plan, including a projected cash flow budget based on
historical performance. Such operating plan is required notwithstanding
Sec. 773.18 of this part.
(4) For loans that are for more than $30,000, repayment ability
must be demonstrated using the farm's operating plan, including a
projected cash flow budget based on historical performance.
(f) Creditworthiness. All loan applicants must have an acceptable
credit history demonstrated by debt repayment. A history of failure to
repay past debts as they came due (including debts to the Internal
Revenue Service) when the ability to repay was within their control
will demonstrate unacceptable credit history. Unacceptable credit
history will not include isolated instances of late payments which do
not represent a pattern and were clearly beyond the applicant's control
or lack of credit history.
Sec. 773.20 Funding applications.
Loan requests will be funded based on the date the Agency approves
the application. Loan approval is subject to the availability of funds.
Sec. 773.21 Loan decision, closing, and fees.
(a) Loan decision. (1) The Agency will approve a loan if it
determines that:
(i) The loan can be repaid;
(ii) The proposed use of loan funds is authorized;
(iii) The applicant has been determined eligible;
(iv) All security requirements have been, or will be met at
closing;
(vi) All other pertinent requirements have been, or will be met at
closing.
(2) The Agency will place conditions upon loan approval as
necessary to protect its interest.
(b) Loan closing. (1) The applicant must meet all conditions
specified by the loan approval official in the notification of loan
approval prior to loan closing;
(2) There must have been no significant changes in the plan of
operation or the applicant's financial condition since the loan was
approved; and
(2) The applicant will execute all loan instruments and legal
documents required by the Agency to evidence the debt, perfect the
required security interest in property securing the loan, and protect
the Government's interests, in accordance with applicable State and
Federal laws. In the case of an entity applicant, all officers or
partners and any board members also will be required to execute the
promissory notes as individuals.
(c) Fees. The applicant will pay all loan closing fees including
credit report fees, fees for appraisals, fees for recording any legal
instruments determined to be necessary, and all notary, lien search,
and similar fees incident to loan transactions. No fees will be
assessed for work performed by Agency employees.
Sec. 773.22 Loan servicing.
Loans will be serviced in accordance with subpart J of part 1951,
or its successor regulation, during the term of the loan. If the loan
is not paid in full during this term, servicing will proceed in
accordance with Sec. 1951.468 of that part.
Sec. 773.23 Exception.
The Agency may grant an exception to the security requirements of
this section, if the proposed change is in the best financial interest
of the Government and not inconsistent with the authorizing statute or
other applicable law.
2. Part 774 is added to read as follows:
PART 774--Emergency Loan for Seed Producers Program
Sec.
774.1 Introduction.
774.2 Definitions.
774.3 Appeals.
774.4-774.5 [Reserved]
774.6 Eligibility requirements.
774.7 [Reserved]
774.8 Limitations.
774.9 Environmental requirements.
774.10 Other Federal, State, and local requirements.
774.11-774.16 [Reserved]
774.17 Loan application.
774.18 Interest rate, terms, and security requirements.
774.19 Processing applications.
774.20 Funding applications.
774.21 [Reserved]
774.22 Loan closing.
774.23 Loan servicing.
774.24 Exception.
Authority: Pub. L. 106-224
Sec. 774.1 Introduction.
The regulations of this part contain the terms and conditions under
which loans are made under the Emergency Loan for Seed Producers
Program. These regulations are applicable to applicants, borrowers, and
other parties involved in making, servicing, and liquidating these
loans. The program objective is to assist certain seed producers
adversely affected by the bankruptcy filing of AgriBiotech.
Sec. 774.2 Definitions.
As used in this part, the following definitions apply:
Agency is the Farm Service Agency, its employees, and any successor
agency.
Applicant is the individual or business entity applying for the
loan.
Business entity is a corporation, partnership, joint operation,
trust, limited liability company, or cooperative.
Domestically owned enterprise is an entity organized in the United
States under the law of the state or states in which the entity
operates and a majority
[[Page 76120]]
of the entity is owned by members meeting the citizenship test.
False information is information provided by an applicant, borrower
or other source to the Agency that the borrower knows to be incorrect,
and that the borrower or other source provided in order to obtain
benefits for which the borrower would not otherwise have been eligible.
Seed producer is a farmer that produced a 1999 crop of grass,
forage, vegetable, or sorghum seed for sale to AgriBiotech under
contract.
Sec. 774.3 Appeals.
A loan applicant or borrower may request an appeal or review of an
adverse decision made by the Agency in accordance with 7 CFR part 11.
Secs. 774.4-774.5 [Reserved]
Sec. 774.6 Eligibility requirements.
Loan applicants must meet all of the following requirements to be
eligible under the Emergency Loan for Seed Producers Program;
(a) The loan applicant must be a seed producer;
(b) The individual or entity loan applicant must have a timely
filed proof of claim in the Chapter XI bankruptcy proceedings involving
AgriBiotech and the claim must have arisen from acontract to grow seeds
in the United States;
(c) The loan applicant must be a citizen of the United States or an
alien lawfully admitted to the United States for permanent residence
under the Immigration and Nationalization Act. For a business entity
applicant, the majority of the business entity must be owned by members
meeting the citizenship test or, other entities that are domestically
owned. Aliens must provide the appropriate Immigration and
Naturalization Service forms to document their permanent residency;
(d) The loan applicant and anyone who will execute the promissory
note must possess the legal capacity to enter into contracts, including
debt instruments;
(e) At loan closing, the applicant and anyone who will execute the
promissory note must not be delinquent on any Federal debt, other than
a debt under the Internal Revenue Code of 1986;
(f) At loan closing, the applicant and anyone who will execute the
promissory note must not have any outstanding unpaid judgments obtained
by the United States in any court. Such judgments do not include those
filed as a result of action in the United States Tax Courts;
(g) The loan applicant, in past and current dealings with the
Agency, must not have provided the Agency with false information.
Sec. 774.7 [Reserved]
Sec. 774.8 Limitations.
(a) The maximum loan amount any individual or business entity may
receive will be 65% of the value of the timely filed proof of claim
against AgriBiotech in the bankruptcy proceeding as determined by the
Agency.
(b) Loan funds may not be used to pay expenses incurred for
lobbying or related activities.
(c) Loans may not be made for any purpose which contributes to
excessive erosion of highly erodible land or to the conversion of
wetlands to produce an agricultural commodity.
Sec. 774.9 Environmental requirements.
The loan actions in this part were reviewed for the purpose of
compliance with the National Environmental Policy Act (NEPA), 40 CFR
parts 1500 through 1508, and determined not to have a significant
impact on the quality of the human environment, either individually or
cumulatively. These loan actions are categorically excluded from the
requirements of an environmental evaluation due to the fact that the
loan funds would be utilized to replace operating capital the applicant
would have had if AgriBiotech had not filed bankruptcy.
Sec. 774.10 Other Federal, State, and local requirements.
Borrowers are required to comply with all applicable:
(a) Federal, State, or local laws;
(b) Regulatory commission rules; and
(c) Regulations which are presently in existence, or which may be
later adopted including, but not limited to, those governing the
following:
(1) Borrowing money, pledging security, and raising revenues for
repayment of debt;
(2) Accounting and financial reporting; and
(3) Protection of the environment.
Sec. 774.11-774.16 [Reserved]
Sec. 774.17 Loan application.
A complete application will consist of the following:
(a) A completed Agency application form;
(b) Proof of a bankruptcy claim in the AgriBiotech bankruptcy
proceedings;
(c) If the applicant is a business entity, any legal documents
evidencing the organization and any State recognition of the entity;
(d) Documentation of compliance with the Agency's environmental
regulations contained in 7 CFR part 1940, subpart G;
(e) A balance sheet on the applicant; and
(f) Any other additional information the Agency needs to determine
the eligibility of the applicant and the application of any Federal,
State or local laws.
Sec. 774.18 Interest rate, terms and security requirements.
(a) Interest rate. (1) The interest rate on the loan will be zero
percent for 18 months or until the date of settlement of, completion
of, or final distribution of assets in the bankruptcy proceeding
involving AgriBiotech, whichever comes first.
(2) Thereafter interest will begin to accrue at the regular rate
for an Agency Farm operating-direct loan (available in any Agency
office).
(b) Terms. (1) Loans shall be due and payable upon the earlier of
the settlement of the bankruptcy claim or 18 months from the date of
the note.
(2) However, any principal remaining thereafter will be amortized
over a term of 7 years at the Farm operating-direct loan interest rate
(available in any Agency office). If the loan is not paid in full
during this term and default occurs, servicing will proceed in
accordance with Sec. 1951.468 of this title.
(c) Security Requirements. (1) The Agency will require a first
position pledge and assignment of the applicant's monetary claim in the
AgriBiotech bankruptcy estate to secure the loan.
(2) If the applicant has seed remaining in their possession that
was produced under contract to AgriBiotech, the applicant also will
provide the Agency with a first lien position on this seed. It is the
responsibility of the applicant to negotiate with any existing
lienholders to secure the Agency's first lien position.
Sec. 774.19 Processing applications.
Applications will be processed until such time that funds are
exhausted, or all claims have been paid and the bankruptcy involving
AgriBiotech has been discharged. When all loan funds have been
exhausted or the bankruptcy is discharged, no further applications will
be accepted and any pending applications will be considered withdrawn.
Sec. 774.20 Funding applications.
Loan requests will be funded based on the date the Agency approves
an application. Loan approval is subject to the availability of funds.
[[Page 76121]]
Sec. 774.21 [Reserved]
Sec. 774.22 Loan closing.
(a) Conditions. The applicant must meet all conditions specified by
the loan approval official in the notification of loan approval prior
to closing.
(b) Loan instruments and legal documents. The applicant will
execute all loan instruments and legal documents required by the Agency
to evidence the debt, perfect the required security interest in the
bankruptcy claim, and protect the Government's interest, in accordance
with applicable State and Federal laws. In the case of an entity
applicant, all officers or partners and any board members also will be
required to execute the promissory notes as individuals.
(c) Fees. The applicant will pay all loan closing fees for
recording any legal instruments determined to be necessary and all
notary, lien search, and similar fees incident to loan transactions. No
fees will be assessed for work performed by Agency employees.
Sec. 774.23 Loan servicing.
Loans will be serviced in accordance with subpart J of part 1951 of
this title, or its successor regulation. If the loan is not repaid as
agreed and default occurs, servicing will proceed in accordance with
section 1951.468 of that part.
Sec. 774.24 Exception.
The Agency may grant an exception to any of the requirements of
this section, if the proposed change is in the best financial interest
of the Government and not inconsistent with the authorizing statute or
other applicable law.
Signed at Washington, D.C., on November 29, 2000.
August Schumacher, Jr.,
Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 00-30977 Filed 12-5-00; 8:45 am]
BILLING CODE 3410-05-P