[Federal Register Volume 60, Number 174 (Friday, September 8, 1995)]
[Rules and Regulations]
[Pages 46750-46753]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22283]



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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 998

[Docket No. FV95-998-2FIR]


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: Final rule.

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SUMMARY: The Department of Agriculture (Department) is adopting as a 
final rule, with one minor correction, the provisions of an interim 
final rule that 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 
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 final rule was unanimously recommended by the 
Peanut Administrative Committee (Committee), the administrative agency 
for this wholesomeness assurance program.

EFFECTIVE DATE: September 8, 1995.

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 final 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 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 

[[Page 46751]]
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 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 was not 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.
    Previously, Sec. 998.100(i) Shelled peanuts read ``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 continues in effect the revision made in 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 that had been in 
place for such transactions is no longer needed because the peanut 
industry has changed from small locally owned plants to large 
corporations with strict quality control procedures. The Committee 
believes that relaxing the requirements will enable handlers to reduce 
processing and storage costs and increase movement of peanuts without 
jeopardizing the agreement's quality control and lot identification 
objectives.
    Section 998.200 Outgoing quality regulation was 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. 
Previously, Sec. 998.200(f) Inter-plant transfer read ``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''.
    Prior to the issuance of the interim final rule, Sec. 998.200(h) 
Peanuts failing quality requirements read ``(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 
strict quality control procedures located throughout the different 
production areas in the United States. Relaxing the regulation allows 
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 quality 
control objective.
    Under paragraph (h) of Sec. 998.200, peanuts failing quality 
requirements for 

[[Page 46752]]
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) previously 
read ``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 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 previously read ``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 was relaxed by the interim final 
rule 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 was 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 at least 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).
    These changes recognize the current generally more efficient, 
higher technology processing capabilities of blanchers' and remillers' 
facilities and practices compared with the typical handler's facility 
and are intended to provide handlers more reconditioning flexibility. 
These changes 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 continues in effect the revisions made to 
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 are 
exempt from program assessments.
    Further, this action amends Sec. 998.300 Terms and conditions of 
indemnification by establishing reduced indemnification values 
specified in paragraphs (e), (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 previous 45 cents. The 
interim final rule failed to mention that the reduction in 
indemnification value also required changes to paragraph (e) of 
Sec. 998.300. This inadvertent omission is corrected in this document.
    These changes are intended to 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. These changes 
are 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 

[[Page 46753]]
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 final rule will not have a significant economic impact on a 
substantial number of small entities.
    After consideration of all relevant matter presented, the 
information and recommendations submitted by the Committee, and other 
information, it is found that finalizing the interim final rule which 
was published in the July 14, 1995, issue of the Federal Register (60 
FR 36205), with one correction adding paragraph (e) to amended 
Sec. 998.300, will tend to effectuate the declared policy of the Act. 
That rule provided that interested persons could file comments through 
August 14, 1995. No comments were received.
    It is further found that good cause exists for not postponing the 
effective date of this action until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because: (1) This action continues in 
effect relaxed requirements for peanut handlers, who voluntarily signed 
the agreement; and (2) the interim final rule provided that interested 
persons could file comments through August 14, 1995. No comments were 
received and the Department is adopting as a final rule the provisions 
of the interim final rule, with one correction.

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. Accordingly, the interim final rule amending 7 CFR part 998 
which was published at 60 FR 36205 on July 14, 1995, is adopted as a 
final rule and corrected as follows:
    In amendatory item 4, on page 36208, in the third column, the 4th 
line, a reference to ``(e)'', is added between the word ``paragraphs'' 
and the letter ``(h)''.

    Dated: September 1, 1995.
Ronald Cioffi,
Acting Deputy Director, Fruit and Vegetable Division.
[FR Doc. 95-22283 Filed 9-7-95; 8:45 am]
BILLING CODE 3410-02-P