[Federal Register Volume 60, Number 135 (Friday, July 14, 1995)]
[Rules and Regulations]
[Pages 36205-36208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17383]



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DEPARTMENT OF AGRICULTURE
7 CFR Part 998

[Docket No. FV95-998-2IFR]


Amendment of Requirements Established Under Marketing Agreement 
No. 146 Regulating the Quality of Domestically Produced Peanuts for 
1995 and Subsequent Crop Years

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule amends for the 1995 peanut crop and subsequent crop 
years several provisions of the incoming, outgoing, and indemnification 
regulations established under Marketing Agreement No. 146. The changes 
are intended to recognize industry operating practices and reduce the 
burden on handlers without compromising the agreement's objective. The 
objective of the agreement is to ensure that only wholesome peanuts 
enter edible market channels. This rule was unanimously recommended by 
the Peanut Administrative Committee (Committee), the administrative 
agency for this wholesomeness assurance program.

DATES: Effective July 14, 1995. Comments received by August 14, 1995 
will be considered prior to issuance of any final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this interim final rule. Comments must be sent in triplicate 
to the Docket Clerk, Marketing Order Administrative Branch, F&V, AMS, 
USDA, room 2523-S, P.O. Box 96456, Washington, D.C. 20090-6456; FAX: 
(202) 720-5698. Comments should reference the docket number, the date, 
and page number of this issue of the Federal Register. Comments 
received will be made available for public inspection in the Office of 
the Docket Clerk during regular business hours.

FOR FURTHER INFORMATION CONTACT: William G. Pimental, Marketing 
Specialist, Southeast Marketing Field Office, Fruit and Vegetable 
Division, AMS, USDA, P.O. Box 2276, Winter Haven, Florida 33883-2276; 
telephone: (941) 299-4770, or FAX: (941) 299-5169; or Jim Wendland, 
Marketing Specialist, Marketing Order Administration Branch, Fruit and 
Vegetable Division, AMS, USDA, P.O. Box 96456, room 2523-S, Washington, 
D.C. 20090-6456; telephone: (202) 720-2170, or FAX: (202) 720-5698.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement No. 146 (7 CFR part 998) regulating the quality of 
domestically produced peanuts, hereinafter referred to as the 
agreement. This agreement is effective under the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter 
referred to as the ``Act.''
    The Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12778, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This 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.
    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), the Administrator of the Agricultural Marketing 
Service (AMS) has considered the economic impact of this action on 
small entities.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened.
    There are about 75 handlers of peanuts subject to regulation under 
the agreement, and about 47,000 peanut producers in the 16 States 
covered under the program. Small agricultural service firms are defined 
by the Small Business Administration (13 CFR 121.601) as those having 
annual receipts of less than $5,000,000, and small agricultural 
producers have been defined as those having annual receipts of less 
than $500,000. Some of the handlers signatory to the agreement are 
small entities, and a majority of the producers may be classified as 
small entities.
    In 1994, the reported U.S. production, mostly covered under the 
agreement, was approximately 4.25 billion pounds of peanuts, a 25 
percent increase from the short 1993 crop. The preliminary 1994 peanut 
crop value is $1.23 billion, up 19 percent from the 1993 crop value.
    The objective of the agreement, in place since 1965, is to ensure 
that only wholesome peanuts enter edible market 

[[Page 36206]]
channels. About 70 percent of U.S. shellers (handlers), handling 
approximately 95 percent of the crop, have voluntarily signed the 
agreement. Under the agreement, farmers' stock peanuts with visible 
Aspergillus flavus mold (the principal source of aflatoxin) are 
required to be diverted to non-edible uses. Each lot of milled peanuts 
must be sampled and the samples chemically analyzed for aflatoxin 
contamination. Signatory handlers who comply with these requirements 
may be eligible for indemnification of losses for individual lots of 
their peanuts which test positive to aflatoxin. Indemnification and 
administrative costs are paid by assessments levied on handlers 
signatory to the agreement.
    The Committee, which is composed of producers and handlers of 
peanuts, meets to review the rules and regulations effective on a 
continuous basis for peanuts regulated under the agreement. Committee 
meetings are open to the public, and interested persons may express 
their views at these meetings. The Department reviews Committee 
recommendations and information, as well as information from other 
sources, and determines whether modification, suspension, or 
termination of the rules and regulations would tend to effectuate the 
declared policy of the Act.
    The Committee met on March 22 and 23, 1995, and unanimously 
recommended several changes to incoming, outgoing, and indemnification 
regulations for 1995 and subsequent crop peanuts.
    The Committee recommended amending Sec. 998.100 Incoming quality 
regulation by revising paragraph (c) to provide that commercially 
acquired lots be designated as Segregation 2 peanuts (rather than 
Segregation 1) by the Federal or Federal-State Inspection Service 
(Inspection Service) when exceeding .50 percent freeze damage and/or 
14.49 percent loose shelled kernels (LSK's) when the Inspection Service 
is notified that a contract between the producer and the handler 
specifies these more restrictive tolerances.
    Currently, Sec. 998.100 (b) defines Segregation 1 peanuts as 
farmers' stock peanuts with not more than 2 percent damaged kernels nor 
more than 1.00 percent concealed damage caused by rancidity, mold, or 
decay and which are free from visible Aspergillus flavus. Section 
998.100 (c) defines Segregation 2 peanuts as farmers' stock peanuts 
with more than 2 percent damaged kernels or more than 1.00 percent 
concealed damage caused by rancidity, mold, or decay and which are free 
from visible Aspergillus flavus.
    The recommendation is not being adopted by the Department. The 
current standards are rules of general applicability which apply to all 
peanuts without regard to any contractual agreements between 
individuals. Buyers and sellers are free to agree to a variety of 
contractual terms. However, such agreements should not have the effect 
of determining whether peanuts are Segregation 1 or 2 as those terms 
are defined in the regulations.
    Currently, Sec. 998.100 (i) Shelled peanuts reads ``Handlers may 
acquire from other handlers, for remilling and subsequent disposition 
to human consumption outlets, shelled peanuts (which originated from 
``Segregation 1 peanuts'') that fail to meet the requirements specified 
for human consumption in paragraph (a) of the Outgoing Quality 
Regulation (Sec. 998.200). Any lot of such peanuts must be accompanied 
by a valid inspection certificate for the grade factors and must be 
positive lot identified . . . Peanuts acquired pursuant to this 
paragraph shall be held and milled separate and apart from other 
receipts or acquisitions of the receiving handler, and further 
disposition shall be regulated by paragraph (h)(1) of the Outgoing 
Quality Regulation (Sec. 998.200)''.
    This rule revises paragraph (i) of Sec. 998.100 to allow movement 
of shelled peanuts, which originated from Segregation 1 peanuts, 
without inspection and positive lot identification (PLI), from one 
handler to another and does not require the receiving handler to hold 
and mill such peanuts separate from other receipts and acquisitions. 
The high degree of control currently in place for such transactions is 
no longer needed because the peanut industry has changed from small 
locally owned plants to large corporations. The Committee believes that 
relaxing the requirements will enable handlers to reduce processing and 
storage costs and increase movement of peanuts without jeopardizing the 
objective of the agreement.
    Section 998.200 Outgoing quality regulation is being amended by 
revising paragraphs (f) and (h)(1) to allow handlers to transfer 
peanuts to any handler or to domestic commercial storage without PLI 
and certification of meeting quality requirements when it leaves the 
first facility. Currently, Sec. 998.200 (f) Inter-plant transfer reads 
``Any handler may transfer peanuts from one plant owned by him to 
another of his plants or to commercial storage, without having such 
peanuts positive lot identified and certified as meeting quality 
requirements, but such transfer shall be only to points within the same 
production area and ownership shall have been retained by the handler. 
Upon any transferred peanuts being disposed of for human consumption, 
they shall meet all the requirements applicable to such peanuts''. 
Currently, Sec. 998.200 (h) Peanuts failing quality requirements reads 
``(1) Handlers may sell to or contract with other handlers, for further 
handling, shelled peanuts (which originated from Segregation 1 peanuts) 
that fail to meet the requirements for disposition to human consumption 
outlets heretofore specified in paragraph (a) of this section. Lots of 
peanuts disposed of in this manner must be accompanied by a valid grade 
inspection certificate, and must be positive lot identified. 
Transactions made in this manner shall be reported to the Committee by 
both the seller and the buyer on a form provided by the Committee. Any 
such peanuts acquired by handlers pursuant to paragraph (i) of the 
Incoming Quality Regulation (Sec. 998.100) shall be held and milled 
separate and apart from other receipts or acquisitions of the receiving 
handler and further disposition shall be regulated by the requirements 
specified heretofore or pursuant to paragraph (h)(3) hereinafter''.
    This high degree of control is no longer needed. As stated earlier, 
the peanut industry has changed dramatically from many small locally 
owned and operated plants to large or multinational corporations with 
operations located throughout the different production areas in the 
United States. Relaxing the regulation will allow freer movement of 
peanuts, more efficient use of facilities, and reduced numbers of 
inspections, resulting in lower costs and a more competitive industry, 
without compromising the program's objective.
    Under paragraph (h) of Sec. 998.200, peanuts failing quality 
requirements for disposition to human consumption outlets can be sent 
to blanchers for reconditioning, to domestic crushers, or exported 
(when peanuts meet fragmented requirements). In Sec. 998.200 paragraph 
(h)(2) reads ``Handlers may blanch or cause to have blanched positive 
lot identified shelled peanuts (which originated from Segregation 1 
peanuts) that fail to meet the requirements of paragraph (a) of this 
section because of excessive damage, minor defects, moisture, or 
foreign material or are positive as to aflatoxin: Provided, That such 
lots of peanuts contain not in excess of 8 percent damage and minor 
defects combined or 

[[Page 36207]]
2 percent foreign material. Prior to movement of such peanuts to a 
blancher, handlers shall report to the Committee, on a form furnished 
by the Committee, and receive authorization from the Committee for 
movement and blanching of each such lot. Lots of peanuts which are 
moved under these provisions must be accompanied by a valid grade 
inspection certificate and the title shall be retained by the handler 
until the peanuts are blanched and certified by an inspector of the 
Federal or Federal-State Inspection Service as meeting the requirements 
for disposal into human consumption outlets. To be eligible for 
disposal into human consumption outlets, such peanuts after blanching, 
must meet specifications for unshelled peanuts, damaged kernels, minor 
defects, moisture, and foreign material as listed in paragraph (a) of 
this section and be accompanied by an aflatoxin certificate determined 
to be negative by the Committee * * *''
    Paragraph (h)(4) of Sec. 998.200 reads ``Handlers may contract with 
Committee approved remillers for remilling shelled peanuts (which 
originated from Segregation 1 peanuts) that fail to meet the 
requirements for disposition to human consumption outlets heretofore 
specified in paragraph (a) of the Outgoing Quality Regulation: 
Provided, That such lot of peanuts contain not in excess of 8 percent 
damage and minor defects combined or 10 percent fall through or 2 
percent foreign material. Prior to movement of such peanuts under these 
provisions to a Committee approved remiller, handlers shall report to 
the Committee, on a form furnished by the Committee, and receive 
authorization from the Committee for movement and remilling of each 
such lot. Lots of peanuts moved under these provisions must be 
accompanied by a valid grade inspection certificate and must be 
positive lot identified and the title of such peanuts shall be retained 
by the handler until the peanuts have been remilled and certified by 
the Federal or Federal-State Inspection Service as meeting the 
requirements for disposition to human consumption outlets specified in 
paragraph (a), and be accompanied by an aflatoxin certificate 
determined to be negative by the Committee. Remilling under these 
provisions may include composite remilling of more than one such lot of 
peanuts owned by the same handler. However, such peanuts owned by one 
handler shall be held and remilled separate and apart from all other 
peanuts* * *''
    Paragraph (h)(2) of Sec. 998.200 is being relaxed to allow 
individual handlers to move failing peanuts containing not in excess of 
10 percent total unshelled peanuts and damaged kernels or 10 percent 
foreign material to Committee approved blanchers, rather than reworking 
(blanching) at their own facilities. Also, paragraph (h)(4) of 
Sec. 998.200 is being similarly relaxed to allow individual handlers to 
move failing peanuts to Committee approved remillers for remilling 
shelled peanuts containing not in excess of 10 percent total unshelled 
peanuts and damaged kernels or 10 percent fall through or 10 percent 
foreign material.
    However, before such peanuts go to human consumption outlets, the 
peanuts have to be certified as meeting human consumption outlet 
requirements (must meet minimum requirements specified in ``OTHER 
EDIBLE QUALITY'' (NON-INDEMNIFIABLE) GRADES--WHOLE KERNELS AND SPLITS 
table of Sec. 998.200 (a) and must also be certified ``negative'' (not 
more than 15 parts per billion) as to aflatoxin).
    The rule recognizes the current generally more efficient, higher 
technology processing capabilities of blanchers' and remillers' 
facilities and practices compared with the typical handler's facility 
and is intended to provide handlers more reconditioning flexibility. 
This rule will tend to reduce limitations on handlers by allowing them 
to use blanchers' and remillers' generally more efficient grading and 
milling facilities to rework such peanuts, improve handlers' 
competitive position, especially with regards to imported peanuts, by 
better utilizing peanut supplies and existing facilities and increase 
peanut movement to higher value markets.
    This action also revises paragraph (j) of Sec. 998.200 to exempt 
certain peanuts, including those of a lower quality than Segregation 1 
for domestic crushing, from being assessed to lower the handlers' costs 
for these lower value peanuts, as authorized by Secs. 998.48 
Assessments and 998.31 Incoming regulation of the agreement.
    The Committee also recommended that this exemption apply to 
Segregation 1 peanuts for crushing. However, the recommendation was not 
adopted by the Department because the agreement provides no authority 
for such an exemption and it would require an amendment to the 
agreement through formal rulemaking procedures to add such authority. 
Segregation 1 peanuts are sometimes commingled with Segregation 2 or 3 
peanuts. In such cases, the Segregation 1 peanuts take on the identity 
of the lower quality Segregation 2 or 3 peanuts, because it dilutes the 
quality of higher quality Segregation 1 peanuts. In those cases, the 
quantity of former Segregation 1 peanuts which were commingled will be 
exempt from program assessments.
    Further, this action amends Sec. 998.300 Terms and conditions of 
indemnification by establishing reduced indemnification values 
specified in paragraphs (h), (i), and (x); and revising paragraph (z) 
by specifying a reduced ceiling and/or number of claims to ``trigger'' 
payments. The indemnification value of rejects and entire lots is 
reduced to 35 cents per pound from the current 45 cents. This action 
will reduce the problem encountered by the Committee and the Department 
on 1993 crop indemnification claims when the indemnification payment 
ceiling and number of claims was significantly exceeded and the 
Department was asked for and approved the authority for the Committee 
to spend up to $500,000 from the indemnification reserve fund to pay 
the excess claims. This action is expected to reduce by $2 million the 
cost to the Committee for indemnification payments, and reduce the 
possibility of handlers making indemnification, rather than the edible 
market, the primary market for peanuts when regular market prices are 
low. When the market is weak some handlers may send their peanuts 
directly to indemnification rather than incur the cost of reworking the 
peanuts to improve the quality of the lots enough to sell them in the 
edible market.
    The unchanged portions of the incoming, outgoing, and 
indemnification regulations currently in effect for 1994 crop peanuts 
are left in effect, as is, for 1995 and subsequent crop years.
    In accordance with the Paperwork Reduction Act of 1988 (44 U.S.C. 
Chapter 35), information collection requirements that are contained in 
this rule have been previously approved by the Office of Management and 
Budget (OMB) and have been assigned OMB No. 0581-0067.
    Based on the above, the Administrator of the AMS has determined 
that this interim final rule will not have a significant economic 
impact on a substantial number of small entities.
    Written comments, timely received, in response to this action, will 
be considered before finalization of this rule.
    After consideration of all relevant matter presented, the 
information and recommendations submitted by the Committee, and other 
information, it is found that the changes set forth below will tend to 
effectuate the declared policy of the Act. 

[[Page 36208]]

    Pursuant to 5 U.S.C. 553, it is also found and determined, upon 
good cause, that it is impracticable, unnecessary and contrary to the 
public interest to give preliminary notice prior to putting this rule 
into effect, and that good cause exists for not postponing the 
effective date of this action until 30 days after publication in the 
Federal Register because: (1) This action relaxes requirements 
currently in effect for peanut handlers, who voluntarily signed the 
agreement; (2) this action should be in effect as soon as possible, 
because the 1995 crop year begins July 1, 1995, and handlers need to 
know the regulations applicable to the handling of the 1995 crop; and 
(3) this action provides a 30-day comment period, and any comments 
received will be considered prior to finalization of this rule.

List of Subjects in 7 CFR Part 998

    Marketing agreements, Peanuts, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR part 998 is 
amended as follows:

PART 998--MARKETING AGREEMENT REGULATING THE QUALITY OF 
DOMESTICALLY PRODUCED PEANUTS

    1. The authority citation for 7 CFR part 998 continues to read as 
follows:

    Authority: 7 U.S.C. 601-674.

    2. Section 998.100 is amended by revising the section heading and 
paragraph (i) to read as follows:


Sec. 998.100  Incoming quality regulation for 1995 and subsequent crop 
peanuts.

* * * * *
    (i) Shelled peanuts. Handlers may acquire from other handlers, for 
remilling and subsequent disposition to human consumption outlets, 
shelled peanuts which originated from ``Segregation 1 peanuts.'' 
Transactions made in this manner shall be reported to the Committee by 
both the buyer and the seller on a form provided by the Committee. 
Further disposition of any such peanuts acquired pursuant to this 
paragraph shall be regulated by paragraph (h)(1) of Sec. 998.200 
Outgoing quality regulation.
* * * * *
    3. Section 998.200 is amended by revising paragraphs (f), (h)(1), 
the first sentence in paragraph (h)(2), the first sentence in paragraph 
(h)(4), and adding a new paragraph (j)(3) to read as follows:


Sec. 998.200  Outgoing quality regulation for 1995 and subsequent crop 
peanuts.

* * * * *
    (f) Transfer between plants.
    Except as otherwise provided in Sec. 998.32 of the agreement, 
handlers may transfer peanuts to any handler or to domestic commercial 
storage without having such peanuts positive lot identified and 
certified as meeting quality requirements. Upon any transferred peanuts 
being disposed of for human consumption, they shall meet all the 
requirements applicable to such peanuts.
* * * * *
    (h) Peanuts failing quality requirements. (1) Handlers may sell to 
or contract with other handlers, for further handling, shelled peanuts 
(which originated from Segregation 1 peanuts) that fail to meet the 
requirements for disposition to human consumption outlets heretofore 
specified in paragraph (a) of this section. Transactions made in this 
manner shall be reported to the Committee by both buyer and seller on a 
form provided by the Committee. Further disposition of any such peanuts 
acquired by handlers pursuant to paragraph (i) of Sec. 998.100. 
Incoming quality regulation shall be regulated by the requirements 
specified heretofore or pursuant to paragraph (h)(3) hereinafter.
    (2) Handlers may blanch or cause to have blanched shelled peanuts 
(which originated from Segregation 1 peanuts) that fail to meet the 
requirements of paragraph (a) of this section because of excessive 
damage, minor defects, moisture, or foreign material or are positive as 
to aflatoxin: Provided, That such lots of peanuts contain not in excess 
of 10 percent total unshelled peanuts and damaged kernels or 10 percent 
foreign material. * * *
* * * * *
    (4) Handlers may contract with Committee approved remillers for 
remilling shelled peanuts (which originated from Segregation 1 peanuts) 
that fail to meet the requirements for disposition to human consumption 
outlets heretofore specified in paragraph (a) of Sec. 998.200 Outgoing 
quality regulation: Provided, That such lots of peanuts contain not in 
excess of 10 percent total unshelled peanuts and damaged kernels or 10 
percent fall through or 10 percent foreign
material. * * *
* * * * *
    (j) Segregation 2 and 3 farmers' stock disposition.
* * * * *
    (3) Peanuts handled pursuant to the provisions of paragraphs (j) 
(1) and (2) of this section are exempt from Sec. 998.48 Assessments.
* * * * *
    4. Section 998.300, is amended by revising the per pound 
indemnification value ``45 cents'' to read ``35 cents'' everywhere it 
appears in paragraphs (h), (j), and (x); and the number ``$9,000,000'' 
to read ``$7,000,000'', ``800'' to read ``461'', ``1300'' to read 
``616'', ``2500'' to read ``853'', and ``6,000'' to read ``3,412'' 
everywhere they appear in paragraph (z) and adding a new paragraph 
(z)(6) to read as follows:


Sec. 998.300  Terms and conditions of indemnification for 1995 and 
subsequent crop peanuts.

* * * * *
    (z) * * *
    (6) Notwithstanding the limits on numbers of claims filed with the 
Committee by December 31 of the current crop year as specified in 
paragraphs (z) (2), (3), and (4) of this section; at the time of the 
Annual Program Meeting of the Committee and at any subsequent Committee 
meeting or meetings, the Committee shall evaluate claims and 
projections of claims' expenses occurring during the current crop year. 
If such projections indicate that the prescribed limit ($7,000,000 on 
1995 crop) will not be exceeded, the Committee shall authorize 
immediate payment of claims as prescribed in paragraph (z) (2) or (3) 
of this paragraph.

    Dated: July 11, 1995.
Sharon Bomer Lauritsen,
Deputy Director, Fruit and Vegetable Division.
[FR Doc. 95-17383 Filed 7-13-95; 8:45 am]
BILLING CODE 3410-02-P