Federal Register, Volume 59 Issue 198 (Friday, October 14, 1994)

[Federal Register Volume 59, Number 198 (Friday, October 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25371]

Federal Register / Vol. 59, No. 198 / Friday, October 14, 1994 /

[[Page Unknown]]

[Federal Register: October 14, 1994]

VOL. 59, NO. 198

Friday, October 14, 1994

DEPARTMENT OF AGRICULTURE

Federal Grain Inspection Service

7 CFR Part 800

RIN 0580-AA25

Prohibition on Adding Water to Grain

AGENCY: Federal Grain Inspection Service, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Grain Inspection Service (FGIS) is revising the
regulations under the United States Grain Standards Act (USGSA) to
prohibit the application of water to grain, except for milling,
malting, or similar processing operations. This prohibition is
applicable to all persons handling grain, not just those receiving
official inspection and weighing services under the USGSA. FGIS has
determined that water, which is sometimes applied as a dust
suppressant, can be too easily misused to increase the weight of grain.
Additionally, externally-applied water has a significant potential for
degrading the quality of grain. FGIS believes that this action will
foster the marketing of grain of high quality to both domestic and
foreign buyers and promote fair and honest weighing practices.

EFFECTIVE DATE: February 11, 1995.

FOR FURTHER INFORMATION CONTACT: George Wollam, FGIS, USDA, Room 0623
South Building, PO Box 96454, Washington, DC 20090-6454; (202) 720-
0292.

SUPPLEMENTARY INFORMATION:

Executive Order 12866 and the Regulatory Flexibility Act

This final rule has been determined to be significant for purposes
of Executive Order 12866 and has been reviewed by the Office of
Management and Budget. The practice of adding water to grain has
undermined the reputation of U.S. grain and jeopardized the U.S. grain
industry's commitment to quality. Prohibiting this practice will foster
the marketing of high quality grain and promote fair and honest
weighing practices.
Applying water to grain may, under certain circumstances, reduce
fugitive dust emissions--an important safety, health, and environmental
objective. But, prohibiting its use will not prevent an elevator
operator from maintaining a safe and healthy work environment, or
complying with applicable air quality standards. There are many other
equally or more effective and efficient dust control strategies
available. Most U.S. grain elevators, including those that currently
use water, already have pneumatic dust collection systems and/or oil-
based dust suppression systems installed.
Presently, FGIS knows of only a few grain elevators spraying water
on grain for dust control purposes. This is neither a common nor
generally-accepted practice. Adding even a small amount of water can be
detrimental to grain quality. Consequently, of the 63 active export
grain elevators operating in the U.S., all have pneumatic dust
collection capabilities and most do not have water dust suppressant
systems. Only three (or five percent) of these 63 export elevators (all
three operated by one company) apply water directly to grain as a dust
control method. While no precise statistics exist on how many of the
approximately 10,000 domestic grain elevators use water as a dust
suppressant, it is estimated to be no greater than the level found in
the export market.
In the short run, grain elevators that use water could experience a
minor adverse economic impact if their facilities require retrofitting
of dust control equipment. But, since most--if not all--of those
elevators are already using other dust control methods/systems in
addition to water, the cost of converting to a water-free system should
be virtually nil. Of those few facilities that use water and rely on
the added weight gain and subsequent added value to enhance their
profit margins, then this rule could have a greater impact. This action
would stop such gains derived through adulteration.
If the practice of adding water to grain were allowed to continue,
there is a significant risk that market pressures would cause today's
isolated cases of water use to become widespread. Using water as a dust
suppressant increases the weight of grain. This invites tampering and
misuse of water systems to increase profit. Adding as little as 0.3
percent water, by weight, can significantly enhance the small margin
that the grain industry operates under. For example: by applying water
at a 0.3 percent rate to a 50,000 metric ton (mt) shiplot of wheat, an
exporter could (excluding subsequent evaporation) add 150 mt of water
to the shipment. If the wheat was sold for $128 per mt (5.8 cents per
pound), the water could generate over $19,000 in additional profit for
the shipper.
The following chart compares the financial impact that adding soy
and mineral oil (common dust suppressants) and water has upon the value
of various soybean shipments.

Financial Impact of Water and Oil Dust Suppressants on Soybeans
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Additive cost Equivalent
Pounds (60 Value $6/bu Application Weight ------------------------ Total soybean Net effect
Carrier Bushels lbs./bu) ($.10/lb.) Additive rate (% by gain additive value gain (+ or -)
weight (lbs.) Per gal. Per lb. cost
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Railcar........................... 3,000 180,000 $18,000 Water............................ 0.3 540 $0.003 $0.00036 $0.19 $54 +$53.81
Soy oil.......................... 0.02 36 1.80 .2337 8.41 3 -4.81
Mineral oil...................... 0.02 36 2.70 .3506 12.62 3 -9.02
Barge............................. 60,000 3,600,000 360,000 Water............................ 0.3 10,800 0.003 .00036 3.80 1,800 +1,076.20
Soy oil.......................... 0.02 720 1.80 .2337 168.20 72 -96.20
Mineral oil...................... 0.02 720 2.70 .3506 252.40 72 -180.40
Ship.............................. 1,200,000 72,000,000 7,200,000 Water............................ 0.3 216,000 0.003 .00036 76.00 21,600 +21,524.00
Soy oil.......................... 0.02 14,400 1.80 .2337 3,364.00 1,440 -1,924.00
Mineral oil...................... 0.02 14,400 2.70 .3506 5,048.00 1,440 -3,608.00
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Furthermore, FGIS estimates that the cost of regulating the
practice of adding water to grain could quickly escalate as more and
more elevators respond to the profitable practice of applying water to
grain for dust suppression. There are approximately 10,000 grain
handling facilities in the U.S. Monitoring the use of water would
require a significant staff commitment and FGIS has no method of
assuring that additional water would not be added when an inspector was
not present.
The effectiveness of any regulatory system is compromised because
regulators cannot rely on after-the-fact product testing to verify the
proper application of water. It is technologically impossible to test
grain and distinguish naturally occurring moisture from applied or
added moisture. Consequently, a regulated system must rely on an
elaborate set of specifications involving water sources, application
rates, metering devices, and inventory controls. And, while regulators
could evaluate a new system and approve its installation, opportunities
to override computer monitoring would exist with increased incentives
to exploit any loopholes. Followup-audits of systems would be time-
consuming, expensive, and minimally effective.
Allowing the continued addition of water to grain could also have a
negative impact on U.S. grain exports. One of the major advantages that
U.S. grain enjoys compared to competing exporting countries, is the
relative low moisture content of many U.S. grains, such as wheat.
Adding water to these grains erodes this advantage. Additionally, many
foreign buyers have already expressed deep concern about potential
quality degradation caused by water and ``paying grain prices for
water.''
While prohibiting the addition of water to grain could, in the
short term, decrease the profit margin of a few grain elevators that
are using water to suppress dust, FGIS has determined that this action
will not have a significant economic impact on the overall U.S. grain
industry or on a substantial number of small entities. On the contrary,
the U.S. grain industry is expected to benefit from this action by
promoting the marketing of high quality grain and the fair and honest
weighing of grain.
David R. Shipman, Acting Administrator, FGIS, has determined that
this final rule will not have a significant economic impact on a
substantial number of small entities.

Executive Order 12778

This final rule has been reviewed under Executive Order 12778,
Civil Justice Reform. This action is not intended to have a retroactive
effect. The United States Grain Standards Act provides in section 87g
that no State or subdivision may require or impose any requirements or
restrictions concerning the inspection, weighing, or description of
grain under the Act. Otherwise, this final rule will not preempt any
State or local laws, regulations, or policies, unless they present an
irreconcilable conflict with this rule. There are no administrative
procedures which must be exhausted prior to any judicial challenge to
the provisions of this rule.

Information Collection Requirements

In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.
Chapter 35), the information collection requirements contained in this
rule have been previously approved by OMB under control number 0580-
0013.

Effective Date

It is desirable that these revisions to the regulations become
effective 120 days after promulgation. This period is deemed necessary
for all interested parties to prepare for implementation of the revised
regulations and would provide adequate time for the industry to make
necessary equipment modifications.

Background

In the March 4, 1987, Federal Register (52 FR 6493), FGIS amended
the regulations under the United States Grain Standards Act (USGSA) to
establish provisions for officially inspecting and weighing additive-
treated grain. These provisions were established to offer the grain
industry the opportunity to utilize available dust suppression
technology, apply insect and fungi controls, and mark grain for
identification purposes with Food and Drug Administration (FDA)
approved additives. The final rule specified that if additives are
applied during loading to outbound grain after sampling or weighing, or
during unloading to inbound grain before sampling or weighing for the
purpose of insect or fungi control, dust suppression, or
identification, the inspection and/or weight certificate must show a
statement that describes the type and purpose of the additive
application. A statement was not required to be shown when additives
were applied prior to sampling and weighing outbound grain or after
sampling and weighing inbound grain. However, all incidents or
suspected incidents of unapproved additive usage or improper additive
application were required to be reported to the appropriate Federal,
State, or local authorities for action.
In 1992, several foreign and domestic grain merchants expressed
concern about the application of water to grain for dust suppression
purposes. They contended that the primary purpose of applying water is
to increase the weight of the grain, and, thereby, gain a market
advantage. Furthermore, U.S. suppliers expressed deep concern about
possible negative market reaction by both domestic and foreign buyers;
i.e., buyer confidence in U.S. grain will decline if concerns develop
over potential quality degradation caused by water and ``paying grain
prices for water.'' As a result of these concerns, in the January 8,
1993, Federal Register (58 FR 3211), FGIS amended Secs. 800.88 and
800.96 of the regulations under the USGSA to require a statement on
official export inspection and weight certificates whenever water is
applied to export grain at export port locations. The purpose of this
action was to ensure that foreign buyers of U.S. grain are informed
when additives have been applied to grain exported from export port
locations. This action did not address non-export grain.
During and since revising the regulations requiring a statement on
export grain certificates, numerous grain industry groups, including
exporters, importers, millers, processors, and producers, have voiced
their growing concern about the effect that the application of water
has upon all U.S. grain, whether or not such grain is exported from the
U.S. or even offered for official inspection and weighing services.
They have stated--and available information appears to confirm--that
applying water to grain poses a risk to grain quality and can provide a
strong incentive to improperly increase weight. Furthermore, this
practice not only adds weight but creates favorable conditions for
microbial-contamination of grain. Section 13(e)(1) of the USGSA (7
U.S.C. 87b) authorizes the FGIS Administrator to prohibit the
contamination of sound and pure grain as a result of the introduction
of nongrain substances. Even though kernels of grain contain moisture,
externally-applied water is a ``nongrain substance.'' Therefore, in the
August 4, 1993, Federal Register (58 FR 1439), FGIS proposed to
prohibit the application of water to grain.
During the 120-day comment period ending December 2, 1993, FGIS
received 341 comments from the various segments of the grain industry,
including producers, end-users, grain handlers, foreign buyers,
promotional associations, and researchers. Of the total comments
received, 215 supported or generally supported the proposal and 126
opposed it. Of those that opposed the proposal, 77 recommended
regulating the use of water, 11 suggested that grain be marketed on a
dry matter or fixed moisture basis, and 38 offered no other
alternatives. On the basis of these comments and other available
information, FGIS has decided to revise the regulations to prohibit the
addition of water to grain. The following paragraphs address key issues
and pertinent comments that were considered in making this decision.

Elevator Safety

Over 100 commentors indicated that they opposed a complete
prohibition on the use of water, in whole or in part, because of safety
concerns. Mr. Wayne R. Bellinger, Director of Safety and Sanitation,
ConAgra Grain Processing Companies, commented that: ``I have seen with
my own eyes the dramatic difference in dust levels both within
operating equipment and in the workplace atmospheres in elevators where
dust suppression fluids are used.''
Grain dust is created by the impact or abrasion of grain and
includes bran flakes, fine broken brush hairs, particles of endosperm,
weed seeds, pieces of chaff and straw, and soil. This dust is so fine
that it easily becomes suspended in air and, as a result, can become
fuel for potentially disastrous grain elevator explosions. Such
explosions can shatter concrete bin walls and even lift bins of grain
weighing hundreds of tons off of the ground. Fortunately, since the
late 1970's, the number and magnitude of dust explosions has
significantly declined.
According to many commentors, the key reasons for this significant
turnaround are better engineering and greater awareness, not the use of
water. Today, grain companies educate their managers and employees
about the risk of dust explosions. Practices that were commonplace 15
years ago, such as smoking in elevators, are now prohibited by company
policy and the Occupational Safety and Health Administration (OSHA).
Elevators also have a wider variety of fire and explosion prevention
``tools'' at their disposal. These include better smoke and heat
detectors, improved bearings and buckets, blow-out panels and vents,
fire/explosion suppression systems, improved cleaning techniques, and
better dust control methods. Consequently, the vast majority of grain
elevators in the U.S. have not found it necessary to use water to
control dust. This is underscored by a joint comment submitted by
Archer Daniels Midland, Bunge Corporation, Cargill Incorporated,
Continental Grain Company, and Louis Dreyfus Corporation: ``While a
spray of water may be an effective grain dust suppressant, it is not
the only means available to control dust. There are other--better--
management practices for minimizing the risks of potential grain dust
explosions, and they have become the standard throughout the U.S. grain
handling system. Systems that add water are the exception.''
FGIS, whose employees work in and around grain elevators, is very
concerned about grain dust and has worked closely with the industry to
foster improvements in elevator safety. Based on currently available
information, FGIS does not believe that adding water to grain is a
necessary or irreplaceable dust control strategy. Most U.S. elevators,
including those that currently add water, rely on pneumatic dust
control systems, thorough housekeeping, and preventive maintenance to
control dust. Such measures are cost effective, efficient, and widely
available. Consequently, FGIS finds that there is no indication that
banning the use of water will prevent an elevator operator from taking
the necessary actions to reduce the possibility of property loss or
personal injury due to fugitive grain dust.

Grain Quality and Fair Weights

Moisture is the major factor in grain storability, chiefly because
of its influence on the growth of storage fungi. The number of days
that grain can be safely stored decreases as the moisture level of the
grain increases. Many commentors indicated that adding water to grain
creates favorable conditions for microbial-contamination. Mr. H.N.
Eicher, Vice President, Ralston Purina International, stated in his
comments: ``During the past few years the detection of various
mycotoxins have significantly increased on grain and grain by-products
originating in the USA. For this reason, we have paid premiums to our
suppliers for reduced moisture content and the addition of mold
inhibitors at loading. Temperature and humidity are our enemies, we
must be sensitive to our customers' environment. * * * The USA will not
be a quality supplier if moisture is added to grain. This is absolutely
negative and we must reduce moisture to assure that mycotoxin growth is
controlled.''
It is difficult to accurately predict the level at which the
addition of water will cause quality degradation. Many variables
influence the impact that added water has on grain quality; including,
the condition of the grain, the method of storage, and the storage
temperature. Adding 0.3 percent of water, by weight, to grain may not
significantly affect high quality/low moisture wheat when the ambient
temperature and humidity are low. If, however, the grain is of poorer
quality, or it has a higher internal moisture, or the temperature and
humidity are high, then even a very small increase in moisture may
cause the grain to spoil. Furthermore, when water is added to grain, it
is generally not distributed equally throughout the entire grain mass.
Some kernels are soaked, while some are left dry, resulting in
nonuniform quality and ``hot spots'' throughout the mass.
The practice of adding water to grain appears to be especially
troublesome to overseas buyers. In 1992, FGIS received a number of
complaints from overseas buyers expressing concern over quality
degradation due to water application. These buyers emphasized that
alternative dust control techniques are available that are practical
and effective. For example, in a 1992 letter, Dr. C.J.M. Meerhoek,
Executive Director of the European Community Seed Crushers and Oil
Processors Federation (FEDIOL), stated that: ``Spraying water for dust
suppression is considered to be an undesired practice * * * for quality
reasons (and) for `fair trade' reasons.'' In a 1992 letter from Mr.
Mitsuo Kurashige, Director of the Japan Oilseed Processors Association
(JOPA), he stated that adding water to grain ``does influence the
accuracy of foreign material analysis and accordingly affects the
differences of foreign material content between loading and unloading
analysis.'' And, in a 1992 letter from the Mielieraad Maize Board
(South African corn importer), it notified FGIS that, because of
possible water-related quality problems, it will no longer purchase
corn from U.S. export ports where water is added.
Adding water to grain also increases the weight of grain without
adding to its value. This invites tampering and misuse of water systems
to increase profit. Adding as little as 0.3 percent water, by weight,
can significantly enhance the small margins the grain industry operates
under. For example, by applying water at a 0.3 percent rate to a 50,000
metric ton (mt) shiplot of wheat, an exporter could (excluding
subsequent evaporation) add 150 mt of water to the shipment. If the
wheat was sold for $128 per mt, the water could generate over $19,000
in additional profit for the shipper.
According to a comment filed in response to the proposed rule, Mr.
Charles R. Gillum, Acting Inspector General for the U.S. Department of
Agriculture (USDA) stated that: ``As a result of our investigation of
the grain handling practices issue, we have found that the majority of
elevators applying water to grain have been doing so more to increase
grain weight than for legitimate dust suppression.''
The practice of adding water to grain is also viewed by many
commentors as ``giving our good grain a bad name'' and being
detrimental to future exports. Mr. James F. Frahm, Vice President, U.S.
Wheat Associates, stated in his comments that: ``One of the major
advantages that U.S. wheat enjoys compared to competing exporting
countries, particularly Canada and France, is the relatively low
moisture content of U.S. wheat. For the flour miller this translates
into more flour produced (and more money earned) per ton of wheat
purchased. Adding water to wheat to increase its weight erodes this
advantage.'' Most commentors, including those opposed to the proposed
rule, considered adding water for the purpose of increasing grain
weight to be an unethical, if not illegal practice. But, many
commentors expressed concern that competitive pressures may force more
elevators to begin applying water to grain because of narrow profit
margins. That is, firms adding water have such a significant economic
advantage that competing firms will be forced to follow suit unless the
practice is prohibited. Mr. Granville M. Tilghman, President of General
Grain Company, commented that: ``Sanctioning the use of water would
send a message to all farmers that it is all right to add water to
grain under one guise while the real reason would be for the purpose of
weight gain.''

Current Restrictions

Several commentors, who support the use of water, suggested that
misuse can be effectively controlled by enforcing current Food and Drug
Administration (FDA) and FGIS rules and restrictions. Dr. Ronald T.
Noyes, Professor, Extension Agricultural Engineer, Oklahoma State
University, commented that: ``FDA has a ruling in force that makes it
illegal for grain producers or commercial grain handlers to add water
to grain for the purpose of increasing market weight. It appears that
FGIS is proposing to duplicate the FDA ban of water added to grain for
purposes of weight increase, and further restrict other useful and
economical benefits of water as a safety product on grain. If the FDA
regulation is not enforced now, why do FGIS administrators think that
another more restrictive regulation will be observed.''
Unfortunately, recent experience has shown that the current rules
regarding this practice are very difficult to enforce or are not
applicable to all situations. Mr. Dane S. Hanekamp, Commodities
Manager, American Maize-Products Company, a major corn processor,
commented that: ``Under present (FDA) guidelines, re-watering grain to
dishonestly increase the weight of grain shipments is common practice,
to which several large grain companies openly admit. Though purchase
contracts explicitly guarantee that water has not been reintroduced to
the grain shipped to our processing plants at any time, for any reason,
but verification is all but impossible.''
The FDA, the agency primarily responsible for preventing
adulteration, continues to adhere to a policy articulated by former
Associate Commissioner for Regulatory Affairs Joseph P. Hile, in August
1980: ``* * * the intentional addition of water to grain would appear
to violate the Federal Food, Drug, and Cosmetic Act, which prohibits
the unnecessary addition of water to food. Under section 402(b)(4) of
the Act, a food is deemed to be adulterated `if any substance has been
added thereto or mixed or packed therewith so as to increase its bulk
or weight, or reduce its quality or strength or make it appear better
or of greater value'. * * * If we encounter (grain) adulterated with
water, we will consider appropriate regulatory action. We recognize
that it may be necessary for an elevator to add small amounts of
moisture to grain for safety reasons. * * * The addition of moisture to
grain for safety reasons is quite a different matter. * * *''
According to the comments filed by USDA's Office of the Inspector
General (OIG), efforts to apply FDA's policy have been largely
unsuccessful because of the difficulty in proving intent, defining
``small amounts'' of water, and distinguishing the process of applying
water for safety purposes from adulteration. The comment also states
that recent investigations by OIG have disclosed that elevators with
water dust suppression systems often fail to use the water systems as
designed and that often water was added to grain at points in the grain
stream within the elevator that were inappropriate if the objective of
the addition of water was for dust suppression.

Water-Use Permit System

Seventy-seven commentors recommended that FGIS develop a program
for regulating--rather than prohibiting--the addition of water to grain
for dust control purposes. A comment filed by Mr. Jon A. Jacobson, Vice
President of Marketing, Peavey Company, recommended the
``implementation of a strict user fee funded permit system, in tandem
with the use of tamper-proof computerized controls on water-based
techniques, to assure proper and controlled use.'' According to a
comment filed by Mr. James F. Frahm, Vice President, U.S. Wheat
Associates: ``Cost of issuing permits and monitoring water usage could
be covered through fees. Abuses could be controlled by using meters to
record the amount of water used and comparing that with the volume of
grain handled. Elevators are currently audited * * * and water usage
could become a part of the audit process.''
Many other commentors have concluded that a permit system would not
effectively prevent misuse, but would create an economic incentive for
all grain handlers to apply water whether or not it is needed for dust
suppression. A comment filed by Mr. David James Krejci, Executive Vice
President, Grain Elevator and Processing Society (GEAPS), an
international professional society, stated that: ``With respect to the
issues of operational economic impact, GEAPS suggests that sanctioning
the application of water through regulatory control would create the
greater problem. If water application is allowed through regulation,
all grain handling operations from farm to export will likely be forced
to adopt the practice to remain economically competitive. We cannot
envision an efficient, practical, and effective regulatory compliance
monitoring and enforcement plan. We believe that the scope and
complexity of such a compliance program would require substantial human
and financial resources.'' Archer Daniels Midland, Bunge Corporation,
Cargill Incorporated, Continental Grain Company, and Louis Dreyfus
Corporation, in a joint comment, stated: ``It is neither physically
possible nor economically sensible for the FGIS to attempt to regulate
this practice at roughly 10,000 U.S. grain handling facilities. This is
even more true for on-farm use of water based systems.''
Of additional concern to many commentors is that the effectiveness
of a permit system is compromised because regulators cannot rely on
after-the-fact product testing to verify proper application. It is
technologically impossible to test grain and distinguish naturally
occurring moisture from applied or added moisture. Consequently, a
permit system must rely on an elaborate set of specifications involving
water sources, application rates, metering devices, inventories, and
the like. While FGIS could evaluate a water system and approve its
initial installation, opportunities to override computer monitoring
would exist with increased incentives to exploit any loopholes. Follow-
up audits of systems would be time consuming, expensive, and minimally
effective. According to the comment filed by Mr. Charles R. Gillum,
Acting Inspector General, USDA/OIG: ``Our investigations have disclosed
that normal and routine monitoring of water-based systems, as would be
done by FGIS, ASCS, and others, is not sufficient to protect the
Government or grain purchasers from those elevators determined to use
water to artificially increase moisture and grain weight. * * * As for
the sophisticated, computer-controlled water systems, they are also
vulnerable to deliberate misuse. Indeed, the intentional misuse of
water by way of the computer controlled system is even more difficult
to deter. * * * As a result of our investigation of the grain handling
practices issue, we have found that the majority of elevators applying
water to grain have been doing so more to increase grain weight than
for legitimate dust suppression.''
According to a comment filed by Mr. Keith R. Mestrich, Director of
Special Services Food & Allied Service Trades Department, AFL-CIO, a
group representing sixteen national and international unions: ``Once a
company is given the go-ahead to use water, FGIS would be hard pressed
to prove water use intent after-the-fact. Monitoring use any more
closely would require extensive manpower and money. * * * We believe
that a permit system would make water use prevalent throughout the
grain transfer system. * * * The adulteration of grain would increase
in frequency. * * *'' Concerns about a permit program causing more
water abuses were also shared by many other commentors, including Mr.
Dave Lyons, Vice President for Government Relations, Louis Dreyfus
Corporation, who stated: ``Any attempt to regulate this practice * * *
will likely result in the proliferation of the practice throughout the
total U.S. grain marketing system. Competitive pressures will force
many grain handling firms to add water at various steps in the U.S.
grain marketing system. Potentially, water might be added a half dozen
times or more from the farm to final end user. Is this the type of
grain marketing system the U.S. wants to have?''
Many commentors also voiced concerns about the potential cost of a
permit system. FGIS has estimated that its cost to develop and maintain
such a system could quickly exceed $1.5 million annually, as more and
more elevators are economically forced to apply water under the pretext
of dust suppression. Mr. David Harlow, Chairman, Washington Wheat
Commission, stated in his comment that: ``* * * we've come to recognize
that the expense in implementing such a system, and especially to
maintain it, would be astronomical. Fees would have to be set so high
no one could afford to pay them. The U.S. government is constantly
cutting cost and FGIS has suffered significantly more losses than most
agencies, therefore it is highly unlikely that enough funds could be
secured to cover the expenses that would be incurred.''

Dry Matter Marketing

The concept of revising or reforming marketing practices to
eliminate the economic incentives for adding water to grain was also
put forth by many commentors. Several discussed the benefits of
marketing grain on a ``dry matter'' or ``standardized bushel'' basis
(also known as a ``fixed moisture'' or ``equivalent bushel'' basis).
According to a comment filed by Dr. Lowell D. Hill, L.J. Norton
Professor for Agricultural Marketing, University of Illinois, a leading
proponent for pricing wet and dry grain on the basis of its dry matter
content: ``Buying grain on the basis of a standardized bushel has
several advantages. Perhaps the foremost is that it removes the
economic incentives for adding water to grain. The Food and Drug
Administration would no longer need to concern itself with enforcement
of the unenforceable regulation relating to the addition of water to
increase value. Most of the impetus for State regulations relating to
moisture content of grain would also be eliminated. Price premiums
would not be needed for overdry grain since moisture content would be
used to determine quantity, not price. The elevator would no longer
have to monitor grain deliveries to identify grain with water added.
Charges and discounts would be explicit, rather than incorporated into
a combined weight-price adjust factor.''
FGIS supports the elimination of economic incentives for adding
water to grain and believes that a practical, market-oriented solution,
such as dry matter marketing, could alleviate many industry concerns
about using water to control dust. However, whether or not grain should
be marketed on its dry matter content is a marketing issue, which FGIS
does not have authority to mandate. In any event, FGIS believes that it
is outside the scope of this rulemaking to impose any requirements
designed to promote dry matter marketing.

Environmental Concerns

Air pollution from dust associated with the loading and unloading
of grain is a concern to many communities. Not surprisingly, several
commentors indicated that they are facing increasingly stringent
regulatory requirements pertaining to the control of fugitive dust
emissions in and around their facilities. Mr. Jon A. Jacobson, Vice
President of Marketing, Peavey Company, commented that: ``The Clean Air
Act Amendments of 1990 will commence initial phase-in soon. The impact
of this federal legislation will serve to tighten restrictions on
elevator dust emissions in all states. As a result, elevators will be
required to either increase internal containment or to increase
suppression techniques. Further containment is both cost and
maintenance intensive and not without potential safety hazards.
Increased suppression will be the only viable choice.''
While there is much concern within the grain industry about
pollution control regulations, the majority of the grain handlers
believe that dust controls (other than water) adequately control dust
emissions. Mr. David C. Lyons, Vice President for Government Relations,
Louis Dreyfus Corporation, commented that: ``* * * control of dust
emissions to the outside air is the responsibility of all of us in the
grain handling industry. It is our duty to preserve and protect the
environment for all citizens of the localities where grain handling and
processing facilities are located. * * * Each LDC facility has a dust
control strategy using various technologies. Filtering systems,
enclosed drag conveyors, pit aspiration and food grade mineral oil
applications are just a few of the systems we use either singly or in
combination, based on the layout and usage of each facility. At no LDC
facility is the usage of water used as a method of dust control. The
experience and safety record of Louis Dreyfus and the rest of the
industry shows that the addition of water is not necessary for dust
controls. * * * Elevator employees will not have to work in an unclean
work environment nor will the environment have to suffer if water
addition is prohibited.''

Misting

Several commentors indicated that water can be an effective and
virtually risk-free dust suppressant when applied as a mist or fog.
According to a comment filed by Dr. Ronald T. Noyes, Professor,
Extension Agricultural Engineer, Oklahoma State University: ``Spraying
200-1,000 ppm of potable tap water from city, rural or deep ground well
drinking water systems for dust control is the application of a food
grade quality material. Adding 200 ppm (the maximum allowable limit for
food grade oil), or 200 lbs. of potable water added to 1,000,000 pounds
of grain is equal to one gallon of water sprayed on 693.3 bushels of 60
lbs. Test Wt. wheat. That's one gallon of water added to 41,600 lbs. of
grain, or 1 lb. of water added to 5,000 lbs. of grain--a 0.02% wt.
change. That level of moisture is not detectable by standard FGIS
moisture testers. An application of 500 ppm of potable water, a
justifiable level for dust control, is 1 lb. of water (approximately
[one] pint of water) per 2,000 lbs. of grain. If it all were absorbed,
it would add 0.05% to the weight of the grain. However, a significant
part of the moisture will evaporate during the spraying operation or
from the grain dust after grain movement stops.''
Dr. Marvin R. Paulsen, Professor of Agricultural Engineering,
University of Illinois at Urbana-Champaign, commented that: ``My
exception to an outright ban on using water is that there is a
researchable issue involving new technology with very high pressure and
very fine spray particles. * * * Thus, the air at grain transfer points
could be humidified to drop the minimum explosive concentration. The
humidification could also reduce static electricity. Some of the fine
spray particles would adhere to passing grain but the level of actual
water addition would be far below 0.5% by weight and probably closer to
0.05%. The difference between this method and others that have been
proposed is that the nozzles create such small particle sizes using
such high pressures that it would be impossible to apply higher levels
of water with that particular system.''
FGIS shares Dr. Paulsen's view that research involving new
technologies such as spray ``misting'' should continue. However,
research to date has been limited. Consequently, there is insufficient
data for FGIS to: (1) Determine whether misting can, in fact, control
dust without harming grain; (2) define misting and establish workable
equipment/system specifications; and (3) develop appropriate controls.
FGIS will continue to work with the USDA Agricultural Research
Service and the U.S. grain industry to foster the development of
potentially viable methods of controlling grain dust, such as misting.

Oil Additives Used To Control Grain Dust

In recent years, many grain handlers have begun to use oil
additives, such as food grade soybean oil and U.S.P. white mineral oil,
to control grain dust. Unfortunately, for some end-uses, wheat and
barley treated with oil may be less functional and acceptable.
According to a comment filed by Mr. James F. Frahm, Vice President,
U.S. Wheat Associates: ``Oil has adverse effects on flour yield and
color, both important factors in determining the profitability of the
milling operation. Oil can also cause bacteria and other undesirable
materials to adhere to the wheat kernel, particularly in the crease of
the kernel, and therefore reportedly can raise bacteria counts in
flour. Because some of the oil is detectable in the resulting flour, it
may have adverse effects on the quality of the end product. * * * As a
result, some of the largest U.S. baking companies refuse flour from
wheat treated with oil * * * elimination of water as an option for dust
suppression will result in more wide-spread use of oil.''
Many commentors also believe that if the use of water is banned,
oil usage will become more widespread. Mr. James A. Bair, Director of
Government Relations, Millers' National Federation (MNF), commented
that: ``At its recent meeting, the MNF Executive Committee voted
overwhelmingly to support the proposed prohibition. Additionally, the
MNF encourages FGIS to enact the ban on all other dust control
additives as well including mineral oil and vegetable oil. * * * To
understand [the negative impact of additives on end-use quality] it is
important to note the mechanism by which water and oil control dust--by
making the dust stick to the kernel. It is in this dust where
unsanitary filth resides. This filth is normally removed in cleaning
prior to milling, however water and oil make removing this material,
especially from the crease of the kernel, a virtually impossible task.
* * *''
FGIS understands the concerns expressed by the wheat and barley
industry, flour millers, and maltsters. However, FGIS has no
information that would indicate that prohibiting the use of water would
cause any increase in the usage of soybean and mineral oil. To the
contrary, FGIS believes that the relative high cost of these oils and
the concerns expressed by certain parts of the market will continue to
severely limit the opportunities for using food grade oils for dust
suppressant purposes.

Insecticides and Grain Protectants

Two commentors requested that the proposed rule be modified to
accommodate the continued use of water-based material for insecticides,
grain protectants, and related purposes. Mr. Craig P. Jacob,
Insecticide Product Manager, Gustafson, commented that Gustafson is
strongly against revising Sec. 800.88 of the regulations under the
USGSA to require a statement to be shown on inspection certificates
whenever water-based insecticides are applied to export grain. Mr. Bob
Reeves, Technical Services Manager, Loveland Industries, commented
that: ``The basis of our opposition is that prohibition of the addition
of water in any amount to grain would eliminate the opportunity to
utilize water as a carrier for other materials (mold inhibitors).''
This final rule does not prohibit or limit the application of water-
based insecticides or protectants.

Washing Smut From Wheat

Several commentors recommended that FGIS allow water to be used to
wash smut from wheat. Mr. Mark Palmquist, Senior Vice President,
Harvest States, commented that: ``Language should be added that would
state that washing wheat (to remove smut) is a processing operation or
washing of wheat is an approved process.'' Smut or bunt (e.g., Tilletia
caries and Tilletia controversa Kuhn) is a field born disease that
occurs in certain wheat growing areas. Generally, smutty wheat is not
acceptable to millers and exporters. Although smut ``balls'' may
sometimes be removed by screening or aspiration, smut adhering to the
surface of kernels can only be removed by physically washing the wheat.
FGIS believes that washing smut from wheat is an essential and
necessary ``processing operation.'' This final rule does not prohibit
adding water to grain for purposes of milling, malting, or similar
processing operations. Therefore, using water to wash smut from wheat
would not be prohibited under this rule.

Final Action

On the basis of the comments received and other available
information, FGIS has determined that applying water to grain must be
prohibited. While water may--under certain circumstances--suppress
dust, it can also adulterate grain by artificially increasing its
weight. Additionally, adding water to grain increases the opportunity
for mold growth and mycotoxin contamination. If allowed to continue,
the practice of adding water to grain could do irreparable harm to the
reputation of U.S. grain in the domestic and world market.
Accordingly, FGIS is revising:
1. Section 800.61(b) to prohibit the addition of water to grain,
except for milling, malting, or similar processing operations.
2. Section 800.61(d)(4) to exclude water as a dust suppressant.
3. Section 800.88(d) to eliminate the provision for adding water to
export grain.
4. Section 800.96(c)(2) to eliminate the provision for adding water
to export grain.

List of Subjects in 7 CFR Part 800

Administrative practice and procedure, Grain, Export.
For reasons set out in the preamble, 7 CFR part 800 is amended as
follows:

PART 800--GENERAL REGULATIONS

1. The authority citation for part 800 continues to read as
follows:

Authority: Pub. L. 94-582, 90 Stat. 2867, as amended, (7 U.S.C.
71 et seq.)

2. Section 800.61 is revised to include a new paragraph (b)(3) as
follows:

Sec. 800.61 Prohibited grain handling practices.

* * * * *
(b) * * *
(3) Add water to grain for purposes other than milling, malting, or
similar processing operations.
* * * * *
3. Section 800.61(d)(4) is revised to read as follows:

Sec. 800.61 Prohibited grain handling practices.

* * * * *
(d) * * *
(4) Dust suppressants. Grain may be treated with an additive, other
than water, to suppress dust during handling. Elevators, other grain
handlers, and their agents are responsible for the proper use and
application of dust suppressants. Sections 800.88 and 800.96 include
additional requirements for grain that is officially inspected and
weighed.
* * * * *

Sec. 800.88 [Amended]

4. Section 800.88(d) is amended by removing paragraph (d)(ii) and
by redesignating paragraph (d)(i) General, as paragraph (d) Additives.

Sec. 800.96 [Amended]

5. Section 800.96(c) is amended by removing paragraph (c)(2)(ii)
and by redesignating paragraph (c)(2)(i) General, as paragraph (c)(2)
Additives.

Dated: October 6, 1994.
Patricia A. Jensen,
Acting Assistant Secretary, Marketing and Inspection Services.
[FR Doc. 94-25371 Filed 10-13-94; 8:45 am]
BILLING CODE 3410-EN-P