[Federal Register Volume 61, Number 2 (Wednesday, January 3, 1996)]
[Rules and Regulations]
[Pages 102-104]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-24]



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DEPARTMENT OF AGRICULTURE
7 CFR Part 997

[Docket No. FV95-997-2FIR]


Amendment of Provisions Regulating Domestically Produced Peanuts 
Handled by Persons Not Subject to the Peanut Marketing Agreement

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (Department) is adopting as a 
final rule, without modification, the provisions of an interim rule 
that amended, for 1995 and subsequent crop years, several certification 
and identification requirements established for peanuts handled by 
persons not signatory to Peanut Marketing Agreement No. 146 
(Agreement). The interim final rule provided for a chemical analysis 
exemption for superior grade shelled peanuts and added addresses and 
updated contact numbers of chemical analysis laboratories. The changes 
are consistent with industry operating practices and bring the non-
signatory handling requirements into conformity with requirements 
specified under the Agreement. Continuation of this rule should reduce 
the regulatory burden and handling costs on non-signatory peanut 
handlers.

EFFECTIVE DATE: February 2, 1996.

FOR FURTHER INFORMATION CONTACT: Richard Lower, Marketing Order 
Administration Branch, Fruit and Vegetable Division, AMS, USDA, P.O. 
Box 96456, room 2523-S, Washington, D.C. 20090-6456, telephone (202) 
720-2020, facsimile (202) 720-5698.

SUPPLEMENTARY INFORMATION: This final rule is issued pursuant to 
requirements of 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 action will not preempt any State or local laws, 
regulations, or policies, unless they present an irreconcilable 
conflict with this rule. This action is not intended to have 
retroactive effect. There are no administrative procedures which must 
be exhausted prior to any judicial challenge to the provisions of this 
rule.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Administrator of the Agricultural Marketing Service 
(AMS) has considered the economic impact of this rule 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 approximately 45 handlers of peanuts who have not signed 
the 

[[Page 103]]
Agreement and, thus, are subject to the regulations contained herein. 
Small agricultural service firms are defined by the Small Business 
Administration (13 CFR 121.601) as those whose annual receipts are less 
than $5,000,000. It is estimated that most of the non-signatory 
handlers are small entities. Most of the 47,000 peanut producers who 
might potentially do business with these handlers are also small 
entities. Small agricultural producers have been defined as those 
having annual receipts of less than $500,000.
    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.
    After aflatoxin was found in peanuts in the mid-1960's, the 
domestic peanut industry has sought to minimize aflatoxin contamination 
in peanuts and peanut products. Under authority of the Act, Peanut 
Marketing Agreement No. 146 and the Peanut Administrative Committee 
(Committee) were established by the Secretary in 1965 (7 CFR part 998). 
The Agreement was signed by a majority of domestic peanut handlers 
(signatory handlers).
    Public Law 101-220, enacted December 12, 1989, amended section 608b 
of the Act to require that all handlers who have not signed the 
Agreement (non-signatory handlers) be subject to quality, handling, and 
inspection requirements to the same extent and manner as are required 
under the Agreement. Regulations to implement Pub. L. 101-220 were 
issued and made effective on December 4, 1990 (55 FR 49983). It is 
estimated that 5 percent of the domestic peanut crop is marketed by 
non-signatory handlers and the remainder of the crop is handled by 
signatory handlers.
    The objective of the Agreement (7 CFR part 998) and the non-
signatory handling regulations (7 CFR part 997) is to ensure that only 
wholesome peanuts enter edible market channels. Under both regulations, 
farmers stock peanuts with visible Aspergillus flavus mold (the 
principal source of aflatoxin) are required to be diverted to non-
edible uses. Both regulations also provide that shelled peanuts meeting 
minimum outgoing quality requirements must be chemically analyzed for 
aflatoxin contamination.
    Under the non-signatory provisions, no peanuts may be sold or 
otherwise disposed of for human consumption if the peanuts fail to meet 
the quality requirements of the Agreement. The non-signatory handler 
regulations have been amended several times thereafter and are 
published in 7 CFR part 997. All amendments have been made to ensure 
that the non-signatory handling requirements are the same as 
modifications made to the signatory handling requirements under the 
Agreement. Violation of non-signatory regulations may result in a 
penalty in the form of an assessment by the Secretary equal to 140 
percent of the support price for quota peanuts. The support price for 
quota peanuts is determined under section 108B of the Agricultural Act 
of 1949 (7 U.S.C. 1445c-3) for the crop year during which the violation 
occurs.
    Because aflatoxin appears most frequently in damaged, stressed, 
under-developed, and malformed peanut kernels, peanut lots with fewer 
poor quality kernels are less likely to be contaminated. Under section 
998.200(a) of the Agreement, minimum quality requirements for shelled 
peanuts are found in the ``Other Edible Quality'' table of the 
Agreement. All shelled peanuts destined for edible consumption must 
meet these minimum requirements. Peanuts meeting this minimum grade 
must also be chemically tested for contamination.
    The Agreement also has a higher level of quality requirements 
titled ``Indemnifiable Grades.'' Peanuts meeting the indemnifiable 
grades do not have to be chemically analyzed for aflatoxin.
    The minimum quality requirements specified in the ``Other Edible 
Quality'' table of the Agreement are also specified in the non-
signatory handler regulations in the table titled ``Minimum Grade 
Requirements--Peanuts for Human Consumption'' (hereinafter referred to 
as Table 1) in section 997.30(a).
    To be consistent with the Agreement, the Department established in 
the interim final rule, a second table titled ``Superior Quality 
Exemption--Peanuts for Human Consumption'' (hereinafter referred to as 
Table 2) in the outgoing quality requirements in section 997.30(a). The 
quality requirements in Table 2 are the same as those established in 
the Indemnifiable Grades table of the Agreement. Non-signatory handler 
peanuts meeting the Superior Quality Exemption grades are not required 
to be chemically tested for aflatoxin. However, buyers often require 
chemical analysis as an assurance of minimum aflatoxin contamination.
    The Superior Quality Exemption tolerances in these regulations are 
(in percentage of kernels): Unshelled and damaged kernels (1.25); 
combined unshelled, damaged kernels and kernels with minor defects 
(2.00); sound split and broken kernels (3.00 for most varieties); sound 
whole kernels that pass specified screens (3.00 for most varieties); 
combined sound split and broken kernels (4.00 for all varieties); 
foreign material (.10 for some varieties and .20 for other varieties), 
and moisture (9.00).

Amendments to Handling Requirements

    The Committee meets in February or March each year and recommends 
to the Secretary such rules and regulations as may be necessary to keep 
the Agreement consistent with current industry practice. The Committee 
met on March 22 and 23, 1995, and unanimously recommended four 
relaxations in the Agreement handling requirements which the Department 
accepted. The changes were published in the July 14, 1995, issue of the 
Federal Register as an interim final rule (60 FR 36205). The interim 
final rule established the same relaxations, as appropriate, for the 
non-signatory handling regulations.
    The first amendment relaxed Positive Lot Identification (PLI) and 
quality certification requirements specified in paragraph (g) of 
section 997.20 Shelled peanuts by allowing movement of failing quality 
shelled peanuts, which originated from Segregation 1 peanuts, from one 
handler to another handler without requiring re-inspection and PLI 
certification by the receiving handler. Previously, paragraph (g) 
provided that handlers could acquire from other handlers for remilling, 
Segregation 1 shelled peanuts that failed to meet the requirements for 
human consumption. The peanuts had to be accompanied by a valid 
inspection certificate and be positive lot identified. Further, the 
peanuts had to be held and milled separate and apart from other 
receipts or acquisitions of the receiving handler and the transaction 
had to be reported to the Division by both handlers.
    Under the relaxed handling procedure, receiving handlers are not 
required to hold and remill such peanuts separate from other receipts 
and acquisitions of the handlers and the received peanuts do not have 
to be reinspected. Any peanuts so transferred and handled must still 
meet all the applicable edible quality requirements before being 
disposed of for human consumption.
    Therefore, paragraph (g) of section 997.20 was revised, in the 
interim final rule, by removing the second sentence requiring 
inspection certification and positive lot identification and changing 
the last sentence to remove reference to received peanuts being held 
and milled separate and apart from other peanuts.

[[Page 104]]

    The second amendment relaxed ownership requirements of paragraph 
(f) of section 997.30 Outgoing regulations by allowing handlers to 
transfer peanuts to another handler or to domestic commercial storage 
facilities. Originally, paragraph (f) applied to the transfer of 
peanuts from one plant to another of a handler's plants or to 
commercial storage without having the peanuts PLI and certified as 
meeting quality requirements--provided that ownership was retained by 
the handler and that the transfer was only to points within the same 
production area.
    The amendment extended the provisions of paragraph (f) to allow the 
transfer of peanuts from one handler's facility to another handler's 
facility for further handling. The relaxation allows handlers to make 
the most efficient use of other handling facilities without having to 
pay additional costs entailed in obtaining PLI and quality 
certification of the peanuts. Any peanuts so transferred are still 
subject to all applicable edible quality requirements before being 
disposed of for human consumption. Thus, the revisions to paragraph (f) 
of section 997.30 to include the transfer of peanuts between facilities 
of different handlers without quality certification and PLI at the time 
of transfer is continued in effect.
    Similarly, the third amendment revised some PLI and certification 
requirements of paragraphs (a)(1), (a)(2) and (a)(3) of section 997.40 
Reconditioning and disposition of peanuts failing quality requirements. 
Paragraph (a)(1) previously provided that a handler of failing quality, 
Segregation 1 shelled peanuts may have remilled, moved under PLI to a 
custom remiller, sold to another handler, or blanched such peanuts. 
Paragraph (a)(2) provided that such peanuts moved to blanching, or sold 
to another handler for blanching, had to be moved under PLI. Paragraph 
(a)(3) required peanut lots in such transactions to be accompanied by a 
valid grade certificate and moved under PLI. Peanuts so handled had to 
be kept separate and apart from other peanuts at the remilling, 
blanching or receiving handler facility.
    Under the relaxed handling procedure, the peanuts do not have to be 
moved under PLI to the remiller, blancher, or receiving handler. 
Further, to be consistent with the changes in the Agreement 
regulations, peanuts so moved no longer have to be kept separate and 
apart from other peanuts at the remilling, blanching or receiving 
handler facility. Thus, the revisions to paragraphs (a)(1), (a)(2), and 
(a)(3) of section 997.40 by removing references to PLI and movement 
accompanied by valid certification are continued in effect. 
Additionally, the provisions added in the appropriate provisions to 
provide that the transferred peanuts do not have to be kept separate 
and apart at the receiving remilling, blanching, or handling facility 
remain in effect.
    The Committee members, in proposing the changes in the Agreement 
provisions, believed that the more restrictive level of regulatory 
control for each peanut lot is no longer needed. The changes in this 
rule are based on the fact that current shelling, processing, remilling 
and blanching technologies are generally more efficient than in the 
past. The rule makes it more economical for handlers to use blanchers' 
and remillers' facilities which are generally operated more 
efficiently. These facilities are now located throughout the different 
production areas which also encourages their use.
    The rule provides handlers more reconditioning flexibility by 
eliminating some certification requirements and PLI of peanuts and by 
reducing costs incurred during movement to different locations and 
facilities. The rule should improve handlers' competitive positions. 
Relaxing the regulations has allowed freer movement of peanuts and more 
efficient use of facilities. The relaxation of PLI and certification 
requirements has reduced the number of inspections and should result in 
lower costs to the entire industry. Fewer inspections are not expected 
to compromise the industry's quality control and lot identification 
objectives.
    The interim final rule also added and updated addresses and 
telephone and facsimile numbers, where applicable, of approved 
aflatoxin testing laboratories and identified the contact point of the 
USDA Science Division headquarter's office. The laboratories perform 
chemical analyses required by the non-signatory handling regulations. 
This information is provided in paragraphs (c)(5)(i) and (ii) of 
section 997.30 Outgoing regulation. Nine of the laboratories are 
approved by the USDA/AMS Science Division and eight are approved by the 
Committee. Non-signatory handlers may send peanut samples to any 
laboratory on the list, per instructions specified in paragraph (c) of 
the outgoing regulation.
    The interim final rule on these issues was published in the Federal 
Register on September 28, 1995 (60 FR 50083). That rule invited 
interested persons to submit written comments through October 30, 1995. 
No Comments were received and the Department is adopting as a final 
rule, without change, the provisions of the interim final rule.
    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. 0581-0163.
    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 available information, it is found that 
this rule, as hereinafter set forth, will tend to effectuate the 
declared policy of the Act.

List of Subjects in 7 CFR Part 997

    Food grades and standards, Peanuts, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR part 997 is 
amended as follows:

PART 997--PROVISIONS REGULATING THE QUALITY OF DOMESTICALLY 
PRODUCED PEANUTS HANDLED BY PERSONS NOT SUBJECT TO THE PEANUT 
MARKETING AGREEMENT

    Accordingly, the interim final rule amending 7 CFR Part 997 which 
was published at 60 FR 50083 on September 28, 1995, is adopted as a 
final rule without change.

    Dated: December 26, 1995.
Sharon Bomer Lauritsen,
Deputy Director, Fruit and Vegetable Division.
[FR Doc. 96-24 Filed 1-2-96; 8:45am]
BILLING CODE 3410-02-P