Final Agency Determination: FAD-185

Joint request dated February 11, 2013 and February 13, 2013, requesting a Final Agency Determination for the 2012 and succeeding crop years regarding the interpretation of section 6(k) of the Nursery Crop Insurance Provisions, published at 7 C.F.R. 457.162. This request is pursuant to 7 C.F.R. part 400, subpart X.

Section 6(k) of the Nursery Crop Insurance Provisions states, as here pertinent:

6. PIVR

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(k) At a minimum, your wholesale catalog or price list must:

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(4) Be provided to customers and used in the sale of your plants; and

(5) List each plant’s name (scientific or common), plant or container size, and wholesale price.

The first requestor interprets section 6(k)(4) to mean that over 50 percent of actual plant sales must match the wholesale prices shown on the wholesale catalog or price list.

The second requestor interprets section 6(k)(4) to mean that if an insured submits a wholesale catalog or price list that contains plant prices consistently and significantly lower than the Eligible Plant List and Plant Price Schedule (EPLPPS) published by the Federal Crop Insurance Corporation (FCIC); regularly distributes its wholesale catalog or price list to customers; regularly hands out flyers containing the prices at trade shows; regularly attempts to sell trees at the prices listed, and sometimes does; but is often forced, by market conditions and its own financial situation, to accept prices at well below their asking price – especially when dealing with more experienced and high-volume buyers. The requestor believes that such an insured has “used” the wholesale catalog or price list “in the sale of plants,” as these terms are used in section 6(k)(4). The requestor does not believe there are any regulations or policy provisions requiring an insured to always sell at prices that match the wholesale catalog or price list. An insured who (1) has prices lower than the EPLPPS price; (2) has distributed the wholesale catalog or price list to customers at trade shows and elsewhere; and (3) tries to – and sometimes does – sell at the list price has “used” the wholesale catalog or price list in connection with its “sale of plants.”

The FCIC agrees, in part, with the interpretations submitted.

The wholesale catalog or price list is used to determine the value of the inventory and that value is the lesser of the price contained in the wholesale catalog or price list and the EPLPPS. There is no quantity requirement provided in section 6(k)(4). If the wholesale catalog or price list is to be used in establishing the insurable value of the plants, the expectation is that the price charged is available to all customers. Further, section 6(k)(4) requires that the wholesale catalog or price list be used in the sale of the plants. Therefore, at a minimum, the wholesale catalog or price list must be provided to all customers and used in the sale of the plants. If it is not provided to all customers and used, then it does not qualify as a wholesale catalog or price list.

FCIC agrees, in part, with the second requestor that there may be times that customers are not buying at the listed wholesale catalog or price list prices. However, FCIC disagrees with the second requestor that the provisions in section 6(k)(4) provides the latitude that the wholesale price listed on the wholesale catalog or price list is a starting point for negotiation. The 2012 Nursery Underwriting Guide clarifies that any price discounts available must be shown on the nursery catalog, price list, or a printed discount schedule. The wholesale price contained in the wholesale catalog or price list, or on the accompanied printed discount schedule must be a reasonable representation of the realized price for plants. The 2012 Nursery Underwriting Guide also clarifies that if there is an incremental volume discount offered in pricing nursery plants, the lowest price offered will be used to establish the insurable value of the plants.

The wholesale catalog or price list is supposed to reflect the price received for the plants. If prices are decreased, those decreases must be reflected in the wholesale catalogs or price lists for the subsequent crop year. Failure to do so may be considered misrepresentation and those insureds responsible are subject to the penalties contained in section 27 of the Common Crop Insurance Policy Basic Provisions.

In accordance with the 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 2012 crop year.