Part 1. TEXAS DEPARTMENT OF AGRICULTURE

Chapter 20. COTTON PEST CONTROL

The Texas Department of Agriculture (the department) adopts amendments to §20.1 and §20.3, new §§20.10 - 20.17, and the repeal of §20.2 and §§20.10 - 20.14, all concerning quarantine requirements for cotton pest control. New §20.16 is adopted with changes to the proposed text as published in the May 4, 2001, issue of the Texas Register (26 TexReg 3313). Amended §20.1 and §20.3, new §§20.10 - 20.15 and §20.17 and the repeal of §20.2 and §§20.10 - 20.14 are adopted without changes and will not be republished.

New §20.16 has been changed, based on a comment received from an individual cotton grower, to clarify that a USDA certificate of inspection is acceptable to meet the requirements of the exceptions to restricted movement listed at §20.16(c). The department believes that a USDA certificate of inspection would be acceptable because it is predicated upon the cleaning or fumigation of equipment. The amendments and new sections are adopted to prevent the artificial re-infestation of boll weevil into an area that is suppressed, functionally eradicated, or eradicated. The sections are further adopted to protect the Southern Rolling Plains Zone, and other zones reaching the eradication stage in the future, from boll weevil re-infestation through the establishment of quarantine restrictions on the movement of regulated articles from a quarantined area into a restricted area. These amendments and new sections were developed using input obtained from a Boll Weevil Quarantine Task Force composed of representatives from cotton producer associations including the Texas Cotton Ginners Association, the Texas Agricultural Extension Service, the Boll Weevil Technical Advisory Committee of the Texas Boll Weevil Eradication Foundation and the Foundation.

The repeal of §20.2 is adopted because the department adopted a new Subchapter B of Chapter 20, which does not require the payment of an inspection fee. The department also adopts the repeal of the current Subchapter B. Quarantine Requirements §§20.10 - 20.14. The repeal of these sections is adopted because new sections have been added to replace §§20.10-20.14 and current sections have been updated. New Subchapter B. Quarantine Requirements §§20.10-20.17 will replace those now in effect.

Section 20.1 defines terms used in Chapter 20 and is amended to include new definitions of the terms "compliance agreement, functionally eradicated area, hostable cotton, protection plan, restricted area, and trap " and amended definitions of "certificate, cotton, cotton products, destroyed, or destruction, eradicated area, seed cotton, suppressed area, and treatment." Definitions of "quarantined area" and "quarantined articles" are deleted since they are defined within new §20.11 and new §20.15, respectively. The definition of "inspector" is deleted because that term is not used in the new sections. The amendments to §20.3 clarify the section and make it consistent with the adopted new §§20.10-20.17.

New §20.10 and §20.11 defines the pest and the quarantined areas. New §§20.12 - 20.14 establishes three categories of boll weevil eradication (suppressed, functionally eradicated, and eradicated areas) and identifies counties within the functionally eradicated area. The Texas Boll Weevil Eradication Foundation recommended to the department that the Southern Rolling Plains Boll Weevil Eradication Zone be declared functionally eradicated and provided scientific documentation acceptable to the department indicating that movement of regulated articles into this zone presented a threat to the success of boll weevil eradication. The data indicated that boll weevil numbers were well below the requirement of an average of 0.001 per trap. Consequently, the commissioner declared the Southern Rolling Plains Zone to be functionally eradicated on September 20, 2000. Regulated articles are listed in new §20.15. The articles include equipment involved in harvesting and transportation of cotton as well as cotton products. New §20.16 describes restrictions for movement of cotton products and equipment as well as methods by which movement is allowed. Equipment listed as a regulated article must be cleaned or treated prior to moving into a restricted area. Other regulated articles may be moved into a restricted area provided that the producer, transporter, ginner, or other responsible party has implemented a protection plan approved by the department and operates under the conditions of a compliance agreement established with the department. New §20.17 provides for inspections and certificates to be issued by an authorized representative of the department to certify that regulated articles have been treated and do not represent a pest risk.

Comments generally in favor of the proposal were received from the Plains Cotton Growers, Rolling Plains Cotton Growers, Inc., and South Texas Cotton and Grain Association. Public hearings were held at Weslaco, Corpus Christi, Victoria, San Angelo, Abilene, and Lubbock to hear public comments. Ten oral comments in favor of the proposal were received from cotton producers and industry representatives from across the state. The comments generally stated that the rule provided support to cotton producers for the investment they incurred toward boll weevil eradication. Three comments were received against the proposal. One industry representative requested permission to allow Malathion as a fumigation tool. Since Malathion is not considered a fumigant by the Environmental Protection Agency (EPA), it does not qualify as a product for this use.

Other oral comments expressed concern that boll weevils may be introduced into an area by transporting green bolls or seed cotton containing boll weevils within a module or transporting cotton burs for livestock feed. The quarantine specifies that persons involved in the transport of regulated articles will operate under the guidelines of a "protection plan" that specifies methods to safeguard against the incidental re-infestation of boll weevils by any method. Another oral comment was received to establish another restricted category that allows for regulations below the suppressed level. The criteria for suppression provides for flexibility but still reflect a significant reduction in weevil numbers. Developing an additional category below the suppressed level is not feasible because the level of weevils for this category would not significantly differentiate the risk of weevil infestation. The department does not feel that additional restricted categories are warranted at this time.

Subchapter A. GENERAL PROVISIONS

4 TAC §20.1, §20.3

The amendments to §20.1 and §20.3 are adopted in accordance with the Texas Agriculture Code (the Code), §74.006, which provides the department with the authority to adopt rules as necessary for the effective enforcement and administration of Chapter 74, Subchapter A; §74.004 which provides the department with the authority to establish regulated areas, dates and appropriate methods of destruction of stalks, other cotton parts and products of host plants for cotton pests; and §74.122, which provides the department with the authority to adopt rules relating to quarantining areas of Texas that are infested with the boll weevil, including rules addressing the storage and movement of regulated articles into and out of a quarantined area; and §74.123, which authorizes the department to issue or authorize the issuance of certificates or permits relating to movement of a regulated article.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 19, 2001.

TRD-200103463

Dolores Alvarado Hibbs

Deputy General Counsel

Texas Department of Agriculture

Effective date: July 9, 2001

Proposal publication date: May 4, 2001

For further information, please call: (512) 463-4075

4 TAC §20.2

The repeal of §20.2 is adopted in accordance with the Texas Agriculture Code (the Code), §12.016, which provides the department with the authority to adopt rules as necessary for administration of the Code; and §74.006, which provides the department with the authority to adopt rules as necessary for the enforcement of boll weevil eradication.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 19, 2001.

TRD-200103464

Dolores Alvarado Hibbs

Deputy General Counsel

Texas Department of Agriculture

Effective date: July 9, 2001

Proposal publication date: May 4, 2001

For further information, please call: (512) 463-4075

4 TAC §§20.10, 20.13, 20.14

The repeal of §§20.10, 20.13 and 20.14 is adopted in accordance with the Texas Agriculture Code (the Code), §12.016, which provides the department with the authority to adopt rules as necessary for administration of the Code; and §74.006, which provides the department with statutory authority to adopt rules as necessary for the enforcement of boll weevil eradication.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 19, 2001.

TRD-200103465

Dolores Alvarado Hibbs

Deputy General Counsel

Texas Department of Agriculture

Effective date: July 9, 2001

Proposal publication date: May 4, 2001

For further information, please call: (512) 463-4075

4 TAC §§20.10 - 20.17

New §§20.10-20.17, are adopted under the Texas Agriculture Code (the Code), §71.003, which provides the department with the authority to declare quarantines around pest-free areas to protect such areas from a pest; §71.005, which provides the department with the authority to prevent the movement of any plant or pest which poses a risk to a pest-free area; §74.122, which provides the department with the authority to adopt rules relating to quarantining areas of Texas that are infested with the boll weevil, including rules addressing the storage and movement of regulated articles into and out of a quarantined area; and §74.123, which authorizes the department to issue or authorize the issuance of certificates or permits relating to movement of a regulated article.

§20.16.Restrictions.

(a)

General. Movement of regulated articles is prohibited in the following cases:

(1)

from or through a quarantined area to an eradicated area, a functionally eradicated area, or a suppressed area;

(2)

from or through a suppressed area to an eradicated area or a functionally eradicated area;

(3)

from or through a functionally eradicated area to an eradicated area; or

(4)

when the department determines that the movement may cause an increase in infestation of boll weevil.

(b)

Exemptions. The following are exempt from the requirements of this subchapter:

(1)

cotton seed and vehicles transporting the seed;

(2)

baled cotton, baled gin motes and linters and vehicles transporting baled cotton and baled gin motes and linters; and

(3)

manufactured cotton products.

(c)

Exceptions. The following are exceptions to the restrictions in subsection (a) of this section:

(1)

Cotton harvesting equipment and other equipment associated with the production and transport of cotton as well as used gin equipment, otherwise prohibited from movement by these rules, may be moved to or through a restricted area provided the equipment is free of cotton products and boll weevils in any stage of development or treated in one of the following manners:

(A)

physical removal of hostable material including, but not limited to, the following methods:

(i)

removal by hand.

(ii)

high-pressure air cleaning; or

(iii)

high pressure washing; or

(B)

fumigation of regulated articles as prescribed by the department.

(2)

Cotton products and other regulated articles, otherwise prohibited from movement by these rules, may be transported to or through a restricted area provided that the producer, transporter, ginner, or other responsible party has implemented a protection plan approved by the department and operates under the conditions of a compliance agreement established with the department.

(3)

A USDA certificate of inspection (PPQ Form 540- used to certify equipment free of pink bollworm) showing that cotton harvesting equipment or other equipment associated with the production and transport of cotton, as well as used gin equipment, has been cleaned or fumigated is acceptable to the department as an exception to the restrictions set forth in subsection (a) of this section.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 19, 2001.

TRD-200103466

Dolores Alvarado Hibbs

Deputy General Counsel

Texas Department of Agriculture

Effective date: July 9, 2001

Proposal publication date: May 4, 2001

For further information, please call: (512) 463-4075

4 TAC §§27.1 - 27.8

The Board of Directors of the Texas Agricultural Finance Authority (TAFA) of the Texas Department of Agriculture (the department) adopts new §§27.1 - 27.8, concerning procedures for participation in the TAFA Preferred Lender Program, with changes to the proposal published in the April 6, 2001 issue of the Texas Register (26 TexReg 2586). New §§27.3, 27.5 and 27.7 are adopted with changes based on comment received. New §§27.1, 27.2, 27.4, 27.6 and 27.8 are adopted without changes and will not be republished.

The new sections are adopted in order to provide lenders of Texas an opportunity to participate in a preferred lender program for the Young Farmer Loan Guarantee Program and the Farm and Ranch Finance Program and to establish standards and procedures for the new program. The preferred lender program will provide approved lenders the ability to receive application approval for eligible applicants within a two-week time period and will allow approved lenders to receive preapproval for all documentation required for closing an approved commitment.

New §27.3 is adopted with changes based on a comment received from Farm Credit Bank (FCB). In regards to the requirement in paragraph (3) that an applicant provide a certificate of good standing by its regulatory agency, FCB commented that this would not be possible for an FCB association because its regulator, the Farm Credit Administration, does not issue certificates of good standing. Section 27.3(3) is changed to allow the applicant to provide a letter from the association president or other appropriate individual indicating that the lender is in good standing with the appropriate regulatory agency. In regards to the documentation required by §27.3(5), FCB suggested that the terms used to describe certain documentaion be defined to ensure the requirements are clear to applicants. The section was changed to clarify the required application information for the applicant. New §27.5 has been changed, also based on a comments received from FCB requesting clarification of paragraphs (7) and (8). Paragraph (7) has been changed to clarify the period which should be covered by an applicant's cash flow budget and paragraph (8) has been changed to clarily that the credit report required is the applicant's credit bureau report. New §27.7 (a) has also been changed based on a comment received from FCB. FCB commented that the 30 payment past due notification requirement in the proposal, in practice, would require notification before the lender would normally receive reporting of the payment being past due. The notification requirement has been changed to provide that the notice must be provided within 15 days after a payment is 30 days past due. In regards to §27.8(g), FCB suggested that if inspections are to be conducted on all loans, that the time be extended from 30 to 90 days to have flexibility in scheduling. The 30 days has been changed to 90 days to allow for flexibility in scheduling.

In addition to the comments previously addressed FCB also provided the following comments and questions which have not been incorporated into the adopted rules. In regards to new §27.2 and the definition of "Applicant", FCB questioned whether under the definition a farm credit district could apply for preferred lender status as an affiliate. An association or district may be approved as a preferred lender with the applications being considered as coming from the individual association or district, rather than a Production Credit Association or Federal Land Bank Association.

In regards to the requirement that an applicant submit at least four loan requests each fiscal year to maintain its status as a preferred lender, FCB asked if an association is divided into two divisions, will loans made by each division count towards the required four requests, or will both divisions have to make four loans each? In a situation such as this, the determination as to what would count towards the request requirement would be fact specific, and would depend on the status of the approved applicant. In regards to §27.6(b), and the review by assistant commissioner, FCB asked the purpose in review by the assistant commissioner. This subsection provides for review of the loan application by the deputy commissioner and/or the assistant commissioner. The "assistant commissioner" referenced is the assistant commissioner for finance and agribusiness development, who administers the TAFA programs, and the deputy assistant commissioner is the deputy assistant commissioner for finance and agribusiness development. This review is an internal procedure to further assure all program requirements are met. In regards to §27.8(g), and the inspection of the project and collateral pledged to the project to be constructed by department staff, FCB strongly encouraged the department to conduct inspections prior to closing the commitment rather than 30 business days after closing. The conducting of an inspection prior to closing is not possible because of the short time frame between the time of notification of approval from the commissioner to the lender and the time of closing.

New §27.1 states the purpose of the program. New §27.2 provides definitions to be used in the chapter. New §§27.3- 27.5 establish qualifications and application procedures for a preferred lender and required information for applications submitted for the consideration to the respective programs. New §27.6 establishes the commitment approval process, notification procedures for an approved or denied application. New §27.7 establishes procedures for the default of an approved commitment. New §27.8 establishes procedures for an annual review and notification process by TAFA for approved participating preferred lenders.

The new sections are adopted under the Texas Agriculture Code, §58.022 and §59.022, which provide the TAFA board with the authority to adopt rules and procedures for administration of the programs of TAFA.

§27.3.Qualifications for the Preferred Lender Program (PLP).

The applicant must submit an application for PLP status to the Authority to include:

(1)

a statement requesting PLP status for either, or both, the Young Farmer Loan Guarantee Program and the Farm and Ranch Finance Program.

(2)

a summary of the applicant's capability to adequately approve, including the approval process, and service the requested commitment(s);

(3)

evidence of credit examination and supervision of applicable state and/or federal regulatory agencies to include a certificate of good standing from these agencies, or if the regulatory agency does not issue certificates of good standing, a letter from the applicant's president or other appropriate individual that the lender is in good standing with the appropriate regulatory agency;

(4)

a statement of ability to properly service and discharge its loan making and servicing responsibilities;

(5)

a sample of the applicant's credit management system, which contains policies and underwriting standards; loan and security documentation; credit file management documentation; collateral management system documentation; and portfolio management system;

(6)

a compilation of the historical loan loss ratio for loans comparable to the two programs under these rules over the last five years, or a copy of the call report completed by the applicant and filed with their regulatory authority for a comparable period;

(7)

a copy or sample of an approved loan request including application and underwriting information. Should this be a copy of an approved application, please delete names, addresses, and other confidential information;

(8)

a copy of all loan documents, which are normally used by the Preferred Lender in closing an approved loan request;

(9)

evidence of other Preferred Lender Program status designations, if any;

(10)

a statement of any potential conflict of interest of the borrower with any employee of the Texas Department of Agriculture or the board of the Texas Agricultural Finance Authority; and

(11)

an agreement that to maintain its PLP status, the applicant must submit at least four (4) loan requests each fiscal year, which can be a combination of the two programs.

§27.5.Required Information for a Commitment Request to the Program(s).

(a)

The preferred lender will submit, at a minimum, the following, with each loan request submitted for participation in the program(s):

(1)

the eligibility checklist for the respective program;

(2)

the signed notification for the Texas Public Information Act;

(3)

a copy of the lender's loan application;

(4)

a copy of the lender's loan narrative;

(5)

historical financial statements and/or tax returns for the last three years of the proposed borrower, if available;

(6)

the borrower's balance sheet, which could be the year end statement and an interim statement, less than 90 days old;

(7)

the borrower's cash flow budget for the period of the projected financing, as approved by the lender;

(8)

a copy of the borrower's credit bureau report;

(9)

a plan for servicing the loan;

(10)

a statement of any potential conflict of interest of the borrower with any employee of the Texas Department of Agriculture or the board of the Texas Agricultural Finance Authority; and

(11)

any other information that could be applicable to approving or denying the loan request under the program.

(b)

In addition to the minimum requirements, the preferred lender will perform at least the same level of evaluation and documentation for the commitment that the preferred lender would perform for loans not in the program.

§27.7.Commitments in Default.

(a)

The preferred lender will notify staff in writing of any condition of default, excluding payment default, that may occur by the borrower within 10 business days of the determination of default. In the case of a payment default preferred lender with notify staff of any payment default when such account is 30 days past due. Such notice must be received no later than 15 days after the date the account becomes 30 days past due.

(b)

The preferred lender will notify staff in writing of any collection efforts to be taken by the preferred lender against the borrower.

(c)

The preferred lender will notify staff of a request of any deferrals or restructures of the original commitment prior to any deferral or restructure, and receipt of written notification of approval from staff prior to any deferral or restructure.

(d)

Any payment by the Authority will be pursuant to the appropriate agreement negotiated between the Authority and the preferred lender for the respective program.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on June 18, 2001.

TRD-200103460

Dolores Alvarado Hibbs

Deputy General Counsel

Texas Department of Agriculture

Effective date: July 8, 2001

Proposal publication date: April 6, 2001

For further information, please call: (512) 463-4075