PART 1430--DAIRY PRODUCTS

    9. The authority citation is revised to read as follows:

    Authority: 7 U.S.C. 7981 and 7982; 15 U.S.C. 714b and 714c.


    10. Amend Subpart A by revising it to read as follows:
Subpart A--Price Support Program for Milk
Sec.
1430.1 Definitions.
1430.2 Price support levels and purchase conditions.


Sec.  1430.1  Definitions.

    For purposes of this subpart, unless the context indicates
otherwise, the following definitions shall apply:
    AMS means the Agricultural Marketing Service, USDA.
    CCC means the Commodity Credit Corporation, USDA.
    FSA means the Farm Service Agency, USDA.
    USDA means the United States Department of Agriculture.


Sec.  1430.2  Price support levels and purchase conditions.

    (a)(1) The level of price support provided to farmers marketing
milk containing 3.67 percent milkfat from dairy cows is $9.90 per
hundredweight for calendar year 2002 through 2007.
    (2) Subject to paragraph (b) of this section, price support for
milk will be made available through CCC purchases of butter, nonfat dry
milk, and Cheddar cheese, offered subject to the terms and conditions
of FSA's purchase announcements.
    (3) CCC purchase prices for dairy products will be announced by a
USDA news release.
    (4) CCC may, by special announcement, offer to purchase other dairy
products to support the price of milk.
    (5) Purchase announcements setting forth terms and conditions of
purchase may be obtained upon request from CCC.
    (b)(1) The block cheese purchased shall be U.S. Grade A or higher,
except that the moisture content shall not exceed 38.5 percent; the
barrel cheese shall be U.S. Extra Grade, except that the moisture
content shall not exceed 36.5 percent.
    (2) The nonfat dry milk purchased shall be U.S. Extra Grade, except
that the moisture content shall not exceed 3.5 percent.
    (3) The butter purchased shall be U.S. Grade A or higher.
    (c) The products purchased shall be manufactured in the United
States from milk produced in the United States and shall not have been
previously owned by CCC.
    (d) Purchases will be made in carlot weights specified in the
announcements. Grade and weights shall be evidenced by USDA-issued
inspection certificates.
    11. Amend Subpart B by revising it to read as follows:
Subpart B--Milk Income Loss Contract Program
Sec.
1430.200 Applicability.
1430.201 Administration.
1430.202 Definitions.
1430.203 Eligibility.
1430.204 Requesting benefits.
1430.205 Selection of starting month.
1430.206 Transition payments.
1430.207 Dairy operation payment quantity.
1430.208 Payment rate and dairy operation payment.
1430.209 Proof of marketings.
1430.210 MILC agents.
1430.211 Duration of contracts.
1430.212 Contract modifications.
1430.213 Reconstitutions.
1430.214 Violations.
1430.215 [Reserved].
1430.216 Contracts not in conformity with regulations.
1430.217 Offsets and withholdings.
1430.218 Assignments.
1430.219 Appeals.
1430.220 Misrepresentation and scheme or device.
1430.221 Estates, trusts, and minors.
1430.222 Death, incompetency, or disappearance.
1430.223 Maintenance and inspection of records.
1430.224 Refunds; joint and several liability.
1430.225 Violations of highly erodible land and wetland conservation
provisions.

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1430.226 Violations regarding controlled substances.


Sec.  1430.200  Applicability.

    (a) This subpart governs the Milk Income Loss Contract Program.
This program provides financial assistance to dairy operations in
connection with milk production that is sold in the commercial market.


Sec.  1430.201  Administration.

    (a) This program is administered under the general supervision of
the Executive Vice President, CCC, or a designee, and shall be carried
out by Farm Service Agency (FSA) State and county committees and
employees.
    (b) State and county committees, and their employees may not waive
or modify any requirement of this subpart, except as provided in
paragraph (e) of this section.
    (c) The State committee shall take any action required when not
taken by the county committee, require correction of actions not in
compliance, or require the withholding of any action that is not in
compliance with this subpart.
    (d) The Executive Vice President, CCC, or a designee, may determine
any question arising under the program or reverse or modify any
decision of the State or county committee.
    (e) The Deputy Administrator, Farm Programs, FSA, may waive or
modify program requirements where failure to meet such requirements
does not adversely affect the operation of the Milk Income Loss
Contract Program.
    (f) A representative of CCC may execute Milk Income Loss Contracts
and related documents under the terms and conditions determined and
announced by CCC. Any document not under such terms and conditions,
including any purported execution before the date authorized by CCC,
shall be null and void.


Sec.  1430.202  Definitions.

    The definitions in this section shall be applicable for all
purposes of administering the Milk Income Loss Contract (MILC) program
established by this subpart.
    CCC means the Commodity Credit Corporation of the Department.
    Class I Milk means milk, including milk components, classified as
Class I milk under a Federal milk marketing order.
    Contract application means a Milk Income Loss Contract as executed
on a form prescribed by CCC.
    Contract application period means the date established by the
Deputy Administrator for producers to apply for program benefits.
    County committee means the FSA county committee.
    County office means the FSA office responsible for administering
FSA programs to farms located in a specific area in a state.
    Dairy operation means any person or group of persons who as a
single unit as determined by CCC, produce and market milk commercially
produced from cows and whose production facilities are located in the
United States.
    Department or USDA means the United States Department of
Agriculture.
    Deputy Administrator means the Deputy Administrator for Farm
Programs (DAFP), FSA or a designee.
    Eligible production means milk that was produced by cows in the
United States and marketed commercially anytime during the period of
December 1, 2001, through September 30, 2005, up to a maximum of 2.4
million pounds per dairy operation per fiscal year.
    Farm Service Agency or FSA means the Farm Service Agency of the
Department.
    Federal Milk Marketing Order means an order issued under section 8c
of the Agricultural Adjustment Act (7 U.S.C. 608c), reenacted with
amendments by the Agricultural Marketing Agreement Act of 1937.
    Fiscal Year means the year beginning October 1 (except December 1
for fiscal year 2002) and ending the following September 30 and such
that, for example, fiscal year 2003 will run from October 1, 2002
through September 30, 2003.
    Hundredweight or cwt. means 100 pounds.
    Marketed commercially means sold to the market to which the dairy
operation normally delivers whole milk and receives a monetary amount.
    MILC means the Milk Income Loss Contract program or the form upon
which CCC and the producer agree to the terms of the payment to be made
under the MILC program.
    Milk handler means the marketing agency to or through which the
producer commercially markets whole milk.
    Milk marketing means a marketing of milk for which there is a
verifiable sales or delivery record of milk marketed for commercial
use.
    Participating State means each of the 50 States in the United
States of America, including the District of Columbia, and the
Commonwealth of Puerto Rico, or any other State, territory, or
possession of the United States.
    Payment pounds means the pounds of milk production for which an
operation is eligible to be paid under this subpart.
    Producer means any individual, group of individuals, partnership,
corporation, estate, trust association, cooperative, or other business
enterprise or other legal entity who is, or whose members are, a
citizen of, or legal resident alien in the United States, and who
directly or indirectly, as determined by the Secretary, shares in the
risk of producing milk, and makes contributions (including land, labor,
management, equipment, or capital) to the dairy farming operation of
the individual or entity that are at least commensurate with the share
of the individual or entity of the proceeds of this operation.
    Transition period means the period from December 1, 2001, until the
time the dairy operation enters into MILC contract with CCC, provided
that CCC may set such a deadline for the signing of the transition
contract as it deems appropriate in order to accomplish the purposes of
the contract.
    United States means the 50 States of the United States of America,
the District of Columbia, and the Commonwealth of Puerto Rico, or any
other State, territory, or possession of the United States.
    Verifiable production records means evidence that is used to
substantiate the amount of production marketed and that can be verified
by CCC through an independent source.


Sec.  1430.203  Eligibility.

    To be eligible to receive payments under this subpart, a dairy
operation must:
    (a) Have produced milk in the United States and commercially
marketed the milk produced anytime during the period of December 1,
2001, through September 30, 2005;
    (b) Enter into a MILC during the contract application period;
    (c) Agree to all terms and conditions in the MILC and those that
are otherwise contained in this subpart and comply with instructions
issued by CCC;
    (d) Provide proof of monthly milk production commercially marketed
by all persons in the dairy operation during the contract period, to
determine the total pounds of milk that will be converted to
hundredweight (cwt.) used for payment;
    (e) Submit timely production evidence according to Sec.  1430.209;
    (f) Be actively engaged in the business of producing and marketing
agricultural products at the time of signing the Milk Income Loss
Contract.

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    (g) In administering this program, the eligibility determination of
``dairy operation'' shall be made in the same manner as Dairy Market
Loss Assistance (DMLA) contracts in that State. New MILC operations
must be unaffiliated with prior DMLA operations.


Sec.  1430.204  Requesting benefits.

    (a) A request for benefits or contract application, under this
subpart must be submitted on a form as prescribed by the Agency.
Contract applications shall be submitted to the FSA office serving the
county where the dairy operation is located. Contract applications must
be received by FSA by the close of business on the date established by
the Deputy Administrator. Contract applications received after such
date shall be disapproved.
    (b) The dairy operation requesting MILC benefits must certify the
accuracy and truthfulness of the information in their contract
application. All information provided is subject to verification by
CCC. Refusal to allow CCC or any other agency of the Department to
verify any information provided will result in disapproval.
    (c) Contract applications will be approved by execution by FSA and
producer of a MILC. All persons who share in the risk of a dairy
operation's total production must sign and certify the contract
application.


Sec.  1430.205  Selection of starting month.

    (a) Except as provided in Sec.  1430.206 and beginning with the
2003 Fiscal Year, a dairy operation that enters into a MILC, and does
not want its payments to begin with the first month of the fiscal year,
must designate the starting month that it desires CCC to begin making
payments to them. The starting month must be selected on or before the
15th of the month before the month for which payment is sought. A dairy
operation cannot select a month for payment which:
    (1) Has already begun;
    (2) Has already passed; or
    (3) During which no milk was produced by the dairy operation.
    (b) Dairy operations may change the starting month on or before the
first day of 15th of the month before the month previously selected.
Otherwise, the starting month cannot be changed until the next Fiscal
Year. If the selected starting month is never modified, it will remain
the same throughout the duration of the contract.
    (c) MILC payments will be made consecutively to the dairy operation
on a monthly basis after the starting month has been designated until
the earlier of the following:
    (1) The maximum payment quantity is reached as determined in
accordance with Sec.  1430.207; or
    (2) The end of the applicable Fiscal Year.
    (d)(1) Dairy operations that do not designate the month to begin
receiving payments from CCC will be issued consecutive payments on a
monthly basis, on marketed milk production beginning in the first month
of the fiscal year, unless FSA is otherwise notified that selection
will be made at a later date.
    (2) Dairy operations that desire payments to begin with the first
month of the fiscal year will receive payments made by CCC
consecutively on a monthly basis until the earlier of the following:
    (i) The maximum payment quantity is reached as determined in
accordance with Sec.  1430.207; or
    (ii) The end of the applicable fiscal year.
    (e) All producers involved in the dairy operation must agree to the
month designated. The dairy operation assumes the risk of not reaching
the maximum payment quantity based on the month selected by the dairy
operation. Payments will not be issued for past months for the sole
purpose of reaching the maximum payment quantity.


Sec.  1430.206  Transition payments.

    (a) MILC program participants shall receive a payment calculated
under Sec.  1430.208 on the quantity of eligible production marketed by
the dairy operation during the period beginning December 1, 2001, and
ending on the last day of the month preceding the month the operation's
MILC is executed.
    (b) Transition payments are subject to the following:
    (1) The maximum payment quantity on eligible production, as
described in Sec.  1430.207;
    (2) Consecutive monthly payments beginning on December 1, 2001, and
if applicable the beginning of the fiscal year thereafter, until the
earlier of the following is reached for a particular fiscal year:
    (i) The maximum applicable payment quantity is reached as
determined in accordance with Sec.  1430.207; or
    (ii) The end of the applicable fiscal year.
    (c) With respect to the 2002 Fiscal Year, the dairy operation may
elect to forgo their transition payment and choose to begin receiving
payments in September, 2002 in accordance with Sec.  1430.205.
    (d) Notwithstanding any other provisions in this subpart, dairy
operations that go out of business after December 1, 2001, may enter
into a MILC with CCC for a transition payment on the quantity of
eligible production marketed by the dairy operation during the
transition period while the dairy operation was in business.


Sec.  1430.207  Dairy operation payment quantity.

    (a) The applicant's payment quantity of milk will be determined by
CCC, based on the quantity of milk that was produced and commercially
marketed by each dairy operation per fiscal year.
    (b) The maximum quantity of eligible production for which dairy
operations are eligible for payment per any fiscal year, including any
in the transition year, under this subpart shall be 2.4 million pounds
(24,000 cwt.) per separate and distinct operation. In accordance with
these regulations, the Deputy Administrator shall determine what is a
separate and distinct operation and that decision shall be final.


Sec.  1430.208  Payment rate and dairy operation payment.

    (a) Payments under this subpart may be made to dairy operations
when the Boston Class I milk price under the applicable Federal milk
marketing order is below $16.94 per cwt. No payments will be made to
dairy operations for marketings during the months that the Boston Class
I milk price under the applicable milk marketing order exceeds $16.94.
    (b) A per-hundredweight payment rate will be determined for the
applicable month by:
    (1) Subtracting from $16.94 the Class I milk price per cwt in
Boston; and
    (2) Multiplying the difference, if positive, by 45 percent.
    (c) Each eligible dairy operation payment will be calculated, as
determined by the Secretary, by:
    (1) Converting whole pounds of milk to hundredweight; and
    (2) Multiplying the payment rate determined in paragraph (b) of
this section by the quantity of eligible production marketed by the
operation during the applicable month as determined according to Sec. 
1430.205 and other provisions of these regulations.
    (d) Payments under this subpart may be made to a dairy operation
only up to the first 2.4 million pounds of eligible milk production per
applicable fiscal year, including any year in the transition period.
    (e) Dairy operations receiving benefits under this subpart, will
receive payments on a monthly basis according to the MILC, to the
extent practicable, not later than 60 days after the

[[Page 64479]]

production evidence and all supporting documents for the applicable
month are received by CCC. Payments issued by CCC later than 60 days
after all production evidence and supporting documentation are received
by CCC will be subject to prompt payment interest as allowed by law.


Sec.  1430.209  Proof of marketings.

    (a) A dairy operation entering into an MILC must, based on
instructions issued by the Deputy Administrator, provide adequate proof
of the dairy operation's eligible production during the months of each
fiscal year designated in the MILC. The dairy operation must also
provide proof that the eligible production was commercially marketed
during the months beginning December 1, 2001, and ending September 30,
2005. Evidence of milk production claimed for payment shall be provided
to CCC with supporting documentation under paragraph (b) of this
section. All information provided is subject to verification, spot
check, and audit by FSA. Further verification information may be
obtained from the dairy operation's milk handler or marketing
cooperative if deemed necessary by CCC to verify provided information.
Refusal to allow FSA or any other agency of the Department of
Agriculture to verify any information provided will result in a
determination of ineligibility for benefits under this subpart.
    (b) Eligible dairy operations marketing milk during the period
specified in the MILC shall provide any available supporting documents
from all producers in the dairy operation to assist CCC in verifying
that the dairy operation produced and marketed milk commercially from
the designated starting month and thereafter. Examples of supporting
documentation include, but are not limited to: milk marketing payment
stubs, tank records, milk handler records, daily milk marketings,
copies of any payments received as compensation from other sources, or
any other documents available to confirm the production and production
history of the dairy operation. Producers may also be required to allow
CCC to examine the herd of cattle as production evidence. If supporting
documentation requested is not presented to CCC or FSA, the request for
MILC benefits will be disapproved.


Sec.  1430.210  MILC agents.

    (a) MILC benefits may be disbursed by a dairy marketing cooperative
that serves special groups or communities, such as an Amish or
Mennonite community. Producers in such groups in a dairy operation may
authorize an agent of a dairy cooperative or milk handler affiliated
with such cooperative to obtain and disburse MILC benefits to the dairy
operation.
    (b) The authorized MILC agent must on behalf of the dairy operation
do the following:
    (1) Obtain an acceptable power of attorney or acceptable equivalent
for the producers of the dairy operation that authorizes the agent to
enter into an MILC contract;
    (2) Enter into a written agreement with CCC for approval to act as
a MILC agent on a form prescribed by CCC;
    (3) Provide the dairy operation's monthly production evidence to
the appropriate FSA office;
    (4) Disburse payment to the dairy operation in the producer's
monthly milk check or in an otherwise approved manner.


Sec.  1430.211  Duration of contracts.

    (a) Except as provided in Sec. Sec.  1430.205 and 1430.206, or
elsewhere in this subpart, contracts under this subpart entered into by
producers in a dairy operation shall cover eligible production marketed
by the producers in the dairy operation during the period beginning
with the first day of the month the producers in the dairy operation
enter into contract and ending on September 30, 2005.
    (b) If a dairy goes out of business during the contract period, the
MILC will be terminated immediately, except as applicable to earned
payments.


Sec.  1430.212  Contract modifications.

    (a) Producers in a dairy operation must notify FSA immediately of
any changes that may affect their MILC. Changes include, but are not
limited to changes to the starting month to receive payment for the
next fiscal year, death of producer on the contract, new member joining
the operation, member exiting the operation, transfer of shares by sale
or other transfer action, or farm reconstitutions undertaken in
accordance with Sec.  1430.213.
    (b) CCC may modify an MILC if such modifications are desirable to
carry out purposes of the program or to facilitate the program's
administration.


Sec.  1430.213  Reconstitutions.

    (a) A dairy operation receiving MILC benefits may reorganize or
restructure such that the constitution or makeup of their operation is
reconstituted in another organizational framework. However, any
operation that changes after December 1, 2001, is subject to a review
by FSA to determine if the operation was reorganized for the sole
purpose of receiving multiple payments.
    (b) A dairy operation that FSA determines has reorganized solely to
receive additional MILC payments will be in violation of its contract
and dealt in accordance with Sec.  1430.214.
    (c) If during the contract period a change in the dairy operation
occurs, the modification to the MILC will not take effect until the
first day of the fiscal year following the month FSA received
notification of the changes. Changes include but are not limited to any
producer affiliated with a dairy operation that has an approved MILC
with CCC forming a new dairy operation that is not formed solely to
receive additional MILC payments.
    (d) Changes resulting in the following will take effect immediately
upon notification to CCC, in accordance with Sec.  1430.212:
    (1) Increases or reductions of shareholders or producers and their
corresponding share amounts in the dairy operation; or
    (2) Purchases of a new dairy operation by a producer or producers
not affiliated with an existing dairy operation that has an approved
MILC with CCC.


Sec.  1430.214  Violations.

    (a) If producers in a dairy operation violates the MILC or the
requirements of this subpart, CCC may:
    (1) Terminate the MILC for the remainder of the fiscal year in
which the violation occurs, and allow the producer to retain any
payments received under the contract; or
    (2) Allow the MILC to remain in effect and require the producer to
repay a portion of the payments received commensurate with the
violation's severity, as CCC determines.
    (3) If the MILC is terminated under this section, the participant
shall forfeit all rights to further MILC benefits and shall refund all
or part of the payments received as CCC determines appropriate.
    (4) A producer or operation with a violation, as determined by CCC,
shall refund all MILC funds disbursed under of this part. The remedies
provided in this subpart shall be in addition to other civil, criminal,
or administrative remedies which may apply.
    (b) A MILC is violated by the following actions:
    (1) Failure to comply with the terms and conditions of the MILC and
addendum;
    (2) Reconstitutions of the dairy operation for the sole purpose of
receiving multiple program benefits;
    (3) Failure to comply with highly erodible land conservation and
wetland provisions of this 7 CFR part 12 or their successor
regulations;
    (4) Failure to meet the definition of a dairy operation according
to Sec.  1430.202;

[[Page 64480]]

    (5) Any action that tends to defeat the purpose of the program, as
CCC determines.
    (c) The Deputy Administrator for Farm Programs (DAFP) of the Farm
Service Agency may terminate any MILC by mutual agreement upon request
of the participant if DAFP determines that termination is in the best
interest of the public.
    (d) The DAFP may determine that failure of the dairy operation to
perform the MILC does not warrant termination and may require the
participant to refund part of the payments received or accept
adjustments in the payment as the DAFP determines to be appropriate.


Sec.  1430.215  [Reserved].


Sec.  1430.216  Contracts not in conformity with regulations.

    If it is discovered that an MILC contract does not comply with this
subpart as the result of a misunderstanding by someone who has signed
the contract, the contract may be modified by mutual agreement. If the
parties to the MILC cannot reach agreement for such modification, it
shall be terminated and all payments paid or payable under the contract
shall be forfeited or refunded to CCC, except as may otherwise be
allowed under Sec.  1430.214.


Sec.  1430.217  Offsets and withholdings.

    CCC may offset or withhold any amount due CCC under this subpart
under the provisions of part 1403 of this chapter or any successor
regulations.


Sec.  1430.218  Assignments.

    Any producer may assign a payment to be made under this part in
accordance with part 1404 of this chapter or successor regulations as
designated by the Department.


Sec.  1430.219  Appeals.

    Any producer who is dissatisfied with a determination made pursuant
to this subpart may request reconsideration or appeal of such
determination under part 11 or 780 of this title.


Sec.  1430.220  Misrepresentation and scheme or device.

    (a) A dairy operation shall be ineligible for the MILC program if
FSA determines that it knowingly:
    (1) Adopted a scheme or device that tends to defeat the purpose of
this program;
    (2) Made any fraudulent representation; or
    (3) Misrepresented any fact affecting a determination under this
program. CCC will take steps deemed necessary to protect the interests
of the government.
    (b) Any funds disbursed to a producer or operation engaged in a
misrepresentation, scheme, or device, shall be refunded to CCC. The
remedies provided in this subpart shall be in addition to other civil,
criminal, or administrative remedies which may apply.


Sec.  1430.221  Estates, trusts, and minors.

    (a) Program documents executed by producers legally authorized to
represent estates or trusts will be accepted only if such producers
furnish evidence of the authority to execute such documents.
    (b) A minor who is otherwise eligible for assistance under this
part must also:
    (1) Establish that the right of majority has been conferred on the
minor by court proceedings or by statute;
    (2) Show that a guardian has been appointed to manage the minor's
property and the applicable program documents are executed by the
guardian; or
    (3) Furnish a bond under which the surety guarantees any loss
incurred for which the minor would be liable had the minor been an
adult.


Sec.  1430.222  Death, incompetency, or disappearance.

    In the case of death, incompetency, disappearance or dissolution of
a producer that is eligible to receive benefits under this part, such
persons as are specified in part 707 of this title may receive such
benefits, as determined appropriate by FSA.


Sec.  1430.223  Maintenance and inspection of records.

    (a) Producers approved for benefits under this program must
maintain accurate records and accounts that will document that they
meet all eligibility requirements specified herein, as may be requested
by CCC or FSA. Such records and accounts must be retained for 3 years
after the date of payment to the dairy operation under this program.
Destruction of the records 3 years after the date of payment shall be
the risk of the party undertaking the destruction.
    (b) At all times during regular business hours, authorized
representatives of CCC, the Department, or the Comptroller General of
the United States shall have access to the premises of the dairy
operation in order to inspect the herd of cattle, examine, and make
copies of the books, records, and accounts, and other written data as
specified in paragraph (a) of this section.
    (c) Any funds disbursed pursuant to this part to any producers or
operation who does not comply with the provisions of paragraphs (a) or
(b) of this section, or who otherwise receives a payment for which they
are not eligible, shall be refunded with interest.


Sec.  1430.224  Refunds; joint and several liability.

    (a) In the event of an error on a MILC application, a failure to
comply with any term, requirement, or condition for payment arising
under the MILC application, or this subpart, all improper payments
shall be refunded to CCC together with interest from the date payment
was received through the date the refund is received by CCC.
    (b) All producers signing a dairy operation's application for
payment as having an interest in the operation shall be jointly and
severally liable for any refund, including related charges, that is
determined to be due for any reason under the terms and conditions of
the contract application and addendum or this part for such operation.


Sec.  1430.225  Violations of highly erodible land and wetland
conservation provisions.

    The provisions of part 12 of this title apply to this part.


Sec.  1430.226  Violations regarding controlled substances.

    The provisions of Sec.  718.11 of this title apply to this part.