Final Agency Determination: FAD-215

Subject: Request dated February 26, 2014, to the Risk Management Agency (RMA) requesting a Final Agency Determination for the 2014 crop year regarding the interpretation of Subpart U – Criteria for Ineligibility, part (f) published at 7 C.F.R. §400.679. This request is pursuant to 7 C.F.R., part 400, subpart X.

Background:

C.F.R., part 400, subpart U – Ineligibility for Programs under the Federal Crop Insurance, Criteria for Ineligibility (7 C.F.R. §400.679), published in the Federal Register on January 13, 2014, states, in relevant part:

Except as otherwise provided, a person is ineligible to participate in any program administered under the authority of the Act if the person meets one or more of the following criteria:

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(f) … has been debarred for knowingly doing business with a person debarred or suspended under 2 C.F.R, part 180 or 2 C.F.R, part 417 or 7 U.S.C. 2209(j).

Part 400, Subpart U

Definitions.

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Ineligible person – means a person who is denied participation in any program administered under the authority of the Act.

Person – means an individual, partnership, association, corporation, estates, trust, or other legal entity, and wherever applicable, a State or a political subdivision or agency of a State. “Person” does not include the United States Government or any agency thereof.

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The requestor interprets § 400.679(f) that a person may be debarred from obtaining federal crop insurance under the Federal Crop Insurance Act (Act) for knowingly doing business with a person who has already been debarred under the provision § 400.679(f). In addition, the requestor interprets the phrase “knowingly doing business” as referring to transactions that directly involve the grant or receipt of federal benefits under the Act, such as federal crop insurance; but the phrase “knowingly doing business” does not refer to the other business transactions that do not involve the grant or receipt of federal benefits under the Act.

The Federal Crop Insurance Corporation (FCIC) disagrees with the requestor’s interpretation of § 400.679(f). Section 400.679(f) identifies persons who are ineligible because they have been debarred for knowingly doing business with a debarred person. The debarment regulations published at 2 C.F.R. part 180 and 2 C.F.R. part 417 are very clear that if any person knowingly does business involving a covered transaction with a debarred person, they are subject to debarment. Covered transactions include (1) Grants; (2) Cooperative agreements; (3) Scholarships; (4) Fellowships; (5) Contracts of assistance; (6) Loans; (7) Loan guarantees; (8) Subsidies; (9) Insurances; (10) Payments for specified uses; and (11) Donation agreements. There does not have to be a transfer of Federal funds. It does not matter whether the person was debarred due to crop insurance fraud or any other cause for debarment from any other government program.

With respect to crop insurance, this prohibition means that if a person knowingly does any business with a debarred person for which crop insurance may be involved, they can be subject to debarment. For example, simply leasing property from a debarred person may not subject a person to debarment but if any of the proceeds of the crop or crop insurance go to the debarred lessor in the form of rent or any other transaction, the lessee could be subject to debarment for knowingly doing business with the debarred person. A person could not hire a debarred person to work on their farm for a share of the crop without potentially being subject to debarment for knowingly doing business with a debarred person. An approved insurance provider could not hire a debarred person because the approved insurance provider is receiving Federal benefits. If there is any way that Federal funds could be transferred or paid to a debarred person directly or indirectly, the transaction could subject the person to debarment.

The request for a Final Agency Determination was made for crop year 2014. However, 7 C.F.R. §400.679(f) applies for the 2015 and succeeding crop years. Accordingly, this determination is for the 2015 and subsequent crop years. 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 crop years the regulatory provisions are in effect. Any appeal of this decision must be in accordance with 7 C.F.R. §400.768(g).

Date of Issue: May 13, 2014