Final Agency Determination: FAD-010

FAD-010

Subject: Meaning of the term "marketable" as used in section 11(c)(2) of the Apple Crop Provisions (7 C.F.R. 457.158).

On September 20, 2001, the Risk Management Agency was asked for a final agency determination, applicable for the 2000 and following crop years, regarding the meaning of the term "marketable" as used in section 11(c)(2) of the Apple Crop Provisions (7 C.F.R. 457.158) which pertains to production to count. In this section, production to count includes "All marketable harvested production from the insurable acreage." "Marketable" is defined in section 1 of the same Provisions to mean "Apple production that grades U.S. No. 1, 2, or Cider in accordance with the United States Standards for Grades of Apples."

The requestor interprets the term "marketable" as used in section 11(c)(2)'s definition of production to count as:

To encompass and include any apple marketed (sold) by an apple producer as U.S. No. 1, No. 2, Cider, or better regardless of the grade those apples received in the bin, particularly if less than 100 percent of the apples in the bin graded as below Cider grade.

The requestor provides the following example:

A bin is graded and found to have up 80 percent internal breakdown, well above the two percent tolerance permitted for a grade of Cider or better. The policyholder hand sorts, packages, and markets the good apples as U.S. Fancy, which is a better grade than the three specified in the definition. Based on the above-stated interpretation of the term "marketable," the insurance provider would treat the apples sold as U.S. Fancy as production to count regardless of any overall grade that might have been assigned to the bin.

The Federal Crop Insurance Corporation (FCIC) agrees in principle with the requestor's interpretation, but supplies the following interpretation of the term "marketable."

As used in section 11(c)(2), the term "marketable" applies to each individual apple. Therefore, even though bins of apples may grade below U.S. No. 1, No. 2, or Cider, individual apples in the bin may be of a higher grade and sorted out. These apples that are sold as a grade of at least U.S. No. 1, 2, or Cider, or higher, are then presumed to have received the grade at which they are sold.

Clearly the intent of the Apple Crop Provisions as well as all other crop insurance policies is to count all production of value when adjusting claims. Any apples that are actually sold as U.S. No. 1, No. 2, Cider, or better must be considered to have been graded at the grade for which they were sold.

Finally, it is noted that the U.S. Fancy grade is higher than the U.S. No. 1 grade. That is, U.S. Fancy apples meet and surpass the requirements for U.S. No. 1 apples. Therefore, U.S. Fancy apples can and should be considered to be a class of U.S. No.1 apples for the purpose of section 11(c)(2).

In accordance with 7 C.F.R. 400.765(c), this constitutes the final agency determination and is binding on all participants in the Federal crop insurance program for the 2000 and succeeding crop years.

Date of Issue: November 8, 2001