[Federal Register Volume 62, Number 90 (Friday, May 9, 1997)]
[Rules and Regulations]
[Pages 25433-25439]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11788]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Parts 718 and 729

RIN 0560-AE82


Amendments to the Peanut Poundage Quota Regulations

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: This final rule adopts, with certain modifications, the 
interim rule published in the Federal Register on July 16, 1996 (61 FR 
36997), which set forth regulations for Federal farm peanut poundage 
quotas. These regulations implement the provisions of the Agricultural 
Market Transition Act of 1996 (1996 Act) for the 1996 through 2002 
crops of peanuts. The amendments adopted in this final rule principally 
involve the following issues: eliminating the national poundage quota 
floor; eliminating the undermarketing carryover provisions; 
establishing temporary seed quota allocations; establishing the 
ineligibility of certain farms for quota allocation; authorizing the 
intercounty transfer of farm poundage quotas in all States, subject to 
certain limitations in some States; eliminating the special allocations 
of increased quotas for certain Texas counties; establishing new 
provisions for ``considered produced'' credit with respect to a farm 
whose quota has been transferred; and other minor clarifying and 
technical changes.
    These regulations are required by the Agricultural Adjustment Act 
of 1938, as amended (1938 Act). The modifications made in this final 
rule to 7 CFR part 729 have been made after consideration of public 
comments.
    In addition, this rule makes a technical change concerning the 
application of special sanctions in connection with certain drug-
related offenses.

EFFECTIVE DATE: This final rule is effective May 9, 1997.

FOR FURTHER INFORMATION CONTACT: David Kincannon, Farm Service Agency, 
United States Department of Agriculture, STOP 0514, 1400 Independence 
Avenue, SW, Washington, D.C. 20250-2415 or call (202) 720-7914.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule has been determined to be Economically Significant 
and was reviewed by the Office of Management and Budget (OMB) under 
Executive Order 12866.
    The 1996 Act makes at least six important changes to the peanut 
program. These changes include the following: (1) elimination of the 
minimum quota floor, (2) elimination of undermarketings, (3) provisions 
for unlimited and limited transfer of peanut quota by sale or lease 
within State in all States, (4) forfeiture of quota for certain 
nonproducers, (5) no-net-cost to treasury provisions, and (6) lowering 
the quota price support level.
    The final rule contains no changes from the interim rule published 
in the Federal Register on July 16, 1996 that have any discernible 
budget or economic impact. Differences in this cost benefit assessment 
and the one prepared for the interim rule reflect new data and 
projections.
    The economic impacts of the peanut program provisions of the 1996 
Act include expected reductions in producers' revenue by $1.25 billion 
from 1996 to 2002, while taxpayers are expected to benefit by avoiding 
costs of $0.5 billion compared with the FY 1997 baseline. First buyers 
benefit from lower prices, part of which will be passed on to 
consumers.
    Quota lease and capitalized values of quotas are expected to 
decline. Quota holders could absorb a loss of about $40 million 
annually because of reduced leasing rates due to the lower peanut price 
support. Capitalized value of quotas could decline $200 to $300 
million, thus reducing land values and the tax base of rural 
communities. With increased transferability of quotas under the 1996 
Act, the sale and rental market for quotas becomes a State rather than 
a county market. Values are reduced in more efficient production areas 
and increased in less efficient areas.

[[Page 25434]]

    Under no peanut program, producer prices would decline resulting in 
gains to first buyers of peanuts of $150 to $160 million annually, 
compared with 1996 provisions. Over the 7-year life of the program, the 
capitalized gain to first buyers would total about $800 million, 
assuming a 10 percent capitalization rate. For additional information 
or to request a copy of the cost benefit assessment, contact: Verner N. 
Grise at (202) 720-5291.

Executive Order 12988

    This final rule has been reviewed in accordance with Executive 
Order 12988, Civil Justice Reform. The provisions of this final rule 
would not preempt any State or local laws, regulations, or policies, 
unless they present an irreconcilable conflict with this rule. Before 
any legal action is brought regarding determinations made under the 
provisions of 7 CFR part 729, the administrative appeal provisions set 
forth at 7 CFR parts 11 and 780 must be exhausted.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this final rule because the Farm Service Agency (FSA) is 
not required by 5 U.S.C. 553 or any other provision of law to publish a 
notice of proposed rulemaking with respect to the subject matter of 
this rule.

Paperwork Reduction Act

    The regulations set forth in this final rule require a new 
information collection instrument, form FSA-377, Register of Tentative 
Out of County Peanut Poundage Quota Transfers. The new form necessary 
to conduct the peanut poundage quota program has been developed, and a 
notice and request for comments for revising a currently approved 
information collection was issued in the Federal Register on December 
24, 1996 (61 FR 67767), and provided for a 60-day comment period. 
Because the information collection is needed before the regular 
submission for approval of the information can be submitted to OMB, FSA 
has submitted to OMB an addendum to the information collection 
requirements, as set forth in 5 CFR 1320.18 for OMB Control Number 
0560-0006, and has requested that OMB authorize emergency processing of 
the information collection submission.

Environmental Evaluation

    It has been determined by an environmental evaluation that this 
action will have no significant impact on the quality of the human 
environment. Therefore, neither an Environmental Assessment nor an 
Environmental Impact Statement is needed.

Unfunded Federal Mandates

    This rule contains no Federal mandates under the regulatory 
provisions of Title II of the Unfunded Mandate Reform Act of 1995 
(UMRA) for State, local, and tribal governments or the private sector. 
Thus, this rule is not subject to the requirements of sections 202 and 
205 of the UMRA.

Small Business Regulatory Enforcement Fairness Act of 1996

    To the extent that this rule can be or is considered to be major 
under the Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA), it has been determined that, pursuant to section 808 of 
SBREFA, that it is impracticable, unnecessary, and contrary to the 
public interest to delay the effective date of this rule. That finding 
has been made on the basis that such a delay would make it impossible 
to make the changes in this rule effective in time for producers with a 
substantial interest in production to plant peanuts in a timely fashion 
with a proper understanding of the rules for quota distribution and for 
forfeitures. Those matters could have a substantial impact on 
individual decisions. Different provisions, if needed, can be 
implemented for subsequent crop years. Accordingly, this rule is 
effective upon publication in the Federal Register.

Federal Assistance Program

    The title and number of the Federal Assistance Program, as found in 
the Catalog of Federal Domestic Assistance, to which this final rule 
applies are: Commodity Loans and Purchases--10.051.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with State and 
local officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115 (June 24, 1983).

National Appeals Division Rules of Procedure

    The procedures set out in 7 CFR parts 11 and 780 apply to appeals 
of adverse decisions made under the regulations adopted in this notice.

Background

    Title I of the 1996 Act amended the 1938 Act and the Agricultural 
Act of 1949, as amended, to provide, for the 1996 through 2002 crops, 
for a revised peanut poundage quota and peanut price support program.
    The statutory provisions for the peanut poundage quota program 
contained in the 1996 Act were described in the supplementary 
information section of the interim rule.

Summary of Comments

    A total of 42 comments was received in response to the interim rule 
published in the Federal Register on July 16, 1996. The comment period 
expired on August 15, 1996. The following is a summary, by section, of 
the comments received:

Section 729.103--Definition of Preliminary Quota

    The interim rule defined ``preliminary quota'' to be that farm's 
quota for the previous year unless the quota is subject to a reduction. 
There are several statutory provisions calling for reductions for 
individual farm quota, one being a provision relating to residency and 
the location of the quota, which is addressed elsewhere in the rule. 
One comment objected to the references to reductions but since that 
reference relates to statutory provisions, it has been determined that 
no modification should be made.

Section 729.204--Temporary Seed Quota Allocation

    The 1996 Act allowed for providing a quota in an amount equal to 
the seed which producers would plant to grow the peanuts and the 
interim rule provided for a national per acre seeding allowance with 
small variations made to account for peanut type. A total of six 
comments addressed this issue. One respondent requested that a 
temporary seed quota allocation be allowed for peanut acreage of 
``volunteer'' peanuts--that is, peanuts which grow wild and are outside 
the area of the farm's planned cultivation of the crop. The statute and 
interim rule are clear that the temporary seed quota allocation is to 
account for seed peanuts actually planted on the farm. Therefore, no 
modification of the interim rule was made to accommodate this 
suggestion.
    There were five comments about the use of a national seeding rate 
and the method of determining the amount of seed allocation. Most 
respondents supported the use of a national seeding rate for 
determining the amount of seed allocation because it would be less 
burdensome than other options. One respondent suggested that temporary 
seed allocations be verified by receipts for seed purchased or records 
of quota peanuts retained on the farm. No

[[Page 25435]]

modification in the regulation is needed to accommodate this suggestion 
at this time. FSA will monitor seed quota allocations through spot 
checks to determine whether further action is warranted.
    One respondent from Texas suggested that the seeding rate for 
Virginia-type peanuts in that area should be 115 pounds per acre rather 
than 110 pounds per acre as provided for in the interim rule, and one 
respondent from the southeast marketing area suggested the seeding rate 
for Runner-type peanuts should be 100 pounds per acre rather than 90 
pounds per acre as provided for in the interim rule. The seeding rates 
were based on statistical surveys and the best data available at this 
time. For that reason, no adjustment has been made in the seed 
allocation formula provided for in the interim rule. However, FSA will 
continue to monitor seeding rates and review any studies or data which 
might indicate a need for seeding rate adjustments.

Section 729.205--Farms Ineligible for Farm Poundage Quota

    Provisions of the 1996 Act disallowed quotas for farms that were, 
as of the end of the 1996 marketing year (August 1, 1997) or 
thereafter, owned or controlled by: (1) A municipality, airport 
authority, school, college, refuge or other public entity (other than a 
university used for research purposes); or (2) a person who is not a 
producer and resides in another State. To implement the nonresidency 
provision, the interim rule provided that in the case of corporations 
and partnerships the forfeiture would not apply if a person (or 
persons) with a 20-percent interest in the entity had their primary 
residence in the State where the quota was allocated.
    Also, a 3-year grace period was allowed in the interim rule for 
involuntary acquisitions by foreclosure or otherwise. Further, for 
situations where the ineligible party held the farm prior to August 1, 
1997, the rule provided that the quota would be forfeited as of that 
date unless there was a sale or transfer of the quota by that date and 
to that end the interim rule allowed for the parties to complete the 
paperwork by October 1, 1997. The rule effectively allowed the sale of 
the future right to the quota to be effective for this purpose rather 
than simply limit the sale exemption to sales or transfers of existing, 
operational quotas. For farm acquisitions after August 1, 1997, the 
rule provided, in accord with the statute, that if an ineligible party 
bought the farm, the quota would not be forfeited but no quota would be 
established for the farm involved until the ineligibility was corrected 
or the quota was sold.
    There were 17 comments opposed to the ineligibility of nonresident, 
nonproducers and of certain public entities for quota allocation. The 
respondents, representing nonresident, nonproducer quota holders and 
several resident quota holders opposed this provision on the grounds it 
unfairly discriminated based on State of residency. Several suggested 
that the provision is unconstitutional. Aside from losing quota, 
several expressed concern that the provision adversely impacted the 
value of their farm as an inheritance because their heirs were 
residents of another State. Most respondents stated that not living in 
the State in which the quota was allocated was due to conditions beyond 
their control, such as family situations, health or other reasons and 
that the State in which a quota holder resided should have no bearing 
on a national quota program. One respondent stated that the quota held 
by public entities provided a source of peanut quotas for younger 
farmers who were just starting to farm.
    The ineligibility provisions are statutory and must be enforced. 
However, the rules have been amended to provide for corporations and 
other specially chartered entities such as estates and limited 
partnerships to be considered residents of the place where they are 
incorporated or created as well as residents of any State where 
individuals with at least a cumulative 20-percent interest in the 
entity reside. The incorporation and creation rule replaces the 
``primary place of business'' test that was included in the interim 
rule and which could have allowed for the maintenance of quotas by 
entities with no real tie to the State except for the quota itself. 
Also, with respect to defining who is a ``producer'' of peanuts for 
purposes of these rules, the final rule provides, as a good faith test, 
that the would-be producer must have at least a 15-percent interest in 
the quota peanut crop. A lower amount would suggest that the ``risk'' 
was incidental to other arrangements. Also, after further review of the 
statute, the final rule eliminates provisions which would allow for 
avoidance of the forfeiture by the sale, by October 1, 1997, of the 
future right to the quota. It has been determined (and the rule has 
been amended accordingly) that August 1, 1997, should be read as an 
absolute deadline in that it appears correct to presume that Congress 
did not contemplate sales of a quota to differ from the historical 
method of allowing sales only to be made of an existing, established 
quota--not future rights to a quota. Presumably, if Congress has 
intended or expected otherwise, there would have been some indication 
of that intent. On further review, none appears. In special cases of 
reliance on the previous rule, the Deputy Administrator may consider 
the granting of relief but it is not expected that there will be cases 
in which such relief is justified. Otherwise, to avoid forfeiture of 
the quota, the owner of an ineligible farm with a 1997 peanut quota 
allocation must: (1) Sell the quota prior to August 1, 1997; (2) 
beginning with the 1997 crop, produce or share in the production of the 
quota peanuts on the farm; or (3) consistent with this rule and prior 
to August 1, 1997, establish residency in the State in which the quota 
is allocated.
    The interim rule provided that schools, colleges and other public 
entities were ineligible for quota allocation beginning with the 1998 
crop. Upon further review of the 1996 Act, the agency has determined 
that the intent of Congress was to allow public universities to hold 
the historic research quotas, provided such quotas would continue to be 
used for experimental and research purposes. Accordingly, 
Sec. 729.205(a)(1) has been amended.

Section 729.214--Transfer of Quota by Sale, Lease, Owner, or Operator

    Until the 1996 Act, quotas could not be transferred across county 
lines except in States with a small total quota. However, the 1996 Act 
allows such transfers in all States up to certain percentages of each 
county's quota and all counties with quotas under a certain amount can 
have unlimited transfers. Because the demand for transfers could exceed 
the limits in some counties, the interim rule allowed for lotteries 
(the need for which could decrease as the allowable percentage 
increases). The interim rule also noted that the 1996 Act appeared to 
grant considered produced credit for any out-of-county transfers, if 
the quota was produced or considered produced on the receiving farm. 
This, the rule noted, appeared to be different from the rule which the 
statute seemed to establish for within-county transfers which appeared 
to be to allow considered produced credit only once every three years. 
The importance of considered produced credit is that it can help the 
transferring farm avoid a loss of quotas under the provisions of the 
1938 Act which provide for reducing quotas for nonproduction.
    A total of 25 respondents commented on several provisions of the 
interim rule applicable to quota transfers. There were 19 respondents 
who requested that within-county transfers be treated the same as out-
of-county transfers with

[[Page 25436]]

respect to protecting the quota on the transferring farm if the quota 
is produced or considered produced on the receiving farm. One 
respondent, a regional peanut growers' association, supported the 
interim regulation's treatment of out-of-county transfers.
    On further review of this issue, it has been determined that the 
interim rule should be amended. The provisions of the 1938 Act which 
provide for leasing are those in section 358-1. Section 358-1(a)(1)(D) 
provides that for leases under section 358-1 the transferring farm will 
receive credit so long as the quota is produced or considered produced 
on the receiving farm. It was noted, however, with the interim rule, 
that the provisions of section 358-1(b)(4) continue to provide that 
where a farm poundage quota was leased to another owner or operator of 
a farm within the same county, the transferring farm can receive 
considered produced credit for one year in any 3-year base period. On 
further review, this appears to be an additional allowance, not a 
limitation, since the 358-1(b)(4) credit is not tied to actual 
production or planting on the receiving farm and since there is no 
actual exclusion of within-county transfers provided for with respect 
to the allowance in 358b. Nor is there an inherent conflict given the 
special conditions of 358b. Further, the provisions in section 358-
1(b)(3) for removing quotas that are not produced provide that such 
reductions shall be made on such fair and equitable basis as the 
Secretary determines to be appropriate. It does not appear equitable or 
logical to apply a more difficult standard to within-county transfers 
in light of the 1996 amendments, nor does there appear to be reason to 
believe at this time that such was Congress' intention.
    Accordingly, the regulations have been revised as to within-country 
transfers. They will receive the same considered produced credit that 
is available for out-of-county transfers and, in addition, if they have 
not otherwise received considered produced credit on a spring lease in 
a 3-year base period, they can receive credit for a transfer for one 
year of the 3-year base period for a transfer even if the quota was not 
produced or considered produced on the receiving farm.
    There were seven comments which addressed the method of 
administering the provisions of the 1996 Act with respect to out-of-
county sale and lease limitation. One respondent opposed the lottery in 
favor of prorating the amount eligible for out-of-county transfer among 
all applicants requesting such transfers. Another respondent favored a 
first-come, first-granted method for approving such transfers. Five 
respondents were concerned that, in certain counties, the register of 
producers requesting to transfer quotas out of county was being filled 
with producers who had no intention of effecting such transfers, 
thereby decreasing the likelihood that bona fide requests for out-of-
county transfers would be selected in a lottery. Also, in some cases, 
producers selected by the lottery were unable to secure an agreement 
for an out-of-county transfer, thereby leaving the maximum transfer 
percentage unrealized. Suggestions for decreasing the potential for 
such a possibility included the following: (1) Permitting only those 
having a valid agreement for sale or lease to be registered for the 
lottery, (2) allowing alternate selections to transfer if the original 
lottery picks chose not to transfer out of county, (3) counting only 
the sales or leases actually transferred out of county toward 
fulfilling the transfer percentages, and (4) otherwise limiting the 
lottery to persons who will actually transfer out of county.
    In addition, three respondents stated the view that the intent of 
the law to transfer quotas to those actually producing the quota was 
being circumvented with the lottery system by the selection of those 
who made temporary, out-of-county transfers, thereby displacing those 
who wished to effect permanent transfers. Each of these respondents 
suggested giving permanent out-of-county transfers priority over 
temporary transfers.
    To allow more flexibility for handling changing circumstances, the 
rule would allow a method other than a lottery to be used. However, for 
the immediate crop year, it is expected and planned that a lottery will 
be used. Some of the distribution problems should be solved by the 
increasing transfer percentage allowed for in the statute. With respect 
to permanent transfers, the regulations currently permit priority for 
transfer by sale and it is anticipated that, beginning with the 1997 
crop of peanuts, such priority will be applied.
    The agency does not plan to use a pro rata distribution method as 
that would unnecessarily divide up the marketable quota and would 
complicate the making of a pre-lottery lease agreement. First-come, 
first-served would in this instance induce a new element of uncertainty 
and stress with little or no real gain over the current lottery system 
and would place some farms at a disadvantage to other farms on grounds 
wholly unrelated to the transfer of the quota. As to failed transfers, 
the agency plans, effective with the immediate crop year, to provide a 
method whereby a transferor who fails to complete the transfer is 
replaced in a timely manner by a substitute transferor.
    Three respondents supported the interim rule with respect to 
prohibiting the transfer to and from the same farm during the same 
transfer period. One respondent suggested allowing a permanent transfer 
to the farm and a temporary transfer from the farm for the same period. 
Another suggested ``easing'' the regulation that prohibits a quota that 
is permanently transferred to the farm from being permanently 
transferred from the farm for three years.
    It appears on further review of the regulations that the rules do 
not, as such, forbid a farmer who has recently been the recipient of a 
permanent quota transfer from then making, in the same year, a 
temporary transfer, by spring lease, to another farm. Rather, such 
farms can make those transfers under the same conditions as would apply 
if the farm which is the transferring farm in the temporary transfer 
had held the quota for a long period of time prior to that transfer. 
However, the regulations have been modified to further clarify that a 
farm cannot, as far as ``spring leases'' are concerned, receive a quota 
by a temporary transfer and then transfer that quota to another farm by 
a temporary transfer in the same lease period. That is, the interim 
rule is amended to make clear that such ``subleasing'' of quotas is not 
permitted.
    The provisions of the regulations restricting permanent transfer to 
and from a farm are not changed by this rule. However, the rule is 
amended to clarify the limitations on permanent transfers to and from 
the same farm during the same year. Further, upon review of the 
regulations applicable to disposal of a tenant's share of any increased 
quota, it was determined that applying permanent transfer limitations 
to such tenant's shares would adversely impact the tenant's ability to 
sell the quota allocation. Accordingly, the rule is amended to permit 
the sale of a tenant's share of increased quota without subjecting 
either the transferring farm or the receiving farm to any of the 
transfer limitations in part 729.

Section 729.216--National Poundage Quota

    One respondent also complained that the Department of Agriculture 
(USDA) had not allowed for sufficient comment on the particular quota 
set for 1996 following the enactment of the 1996 Act. The rule does not 
restrict the time for comment and it is USDA's intent to allow for such 
comment as is practicable within the time constraints

[[Page 25437]]

set by Congress for announcing the quota.

Other Changes and Corrections

1. Definitions

    The definition of ``farmers stock peanuts'' is revised to specify 
that dug peanuts which are not marketed but which are disposed of under 
supervision of a representative of FSA will not be considered as 
farmers stock peanuts. This modification is intended to arrive at a 
more equitable determination of what constitutes actual production for 
purposes of determinations to be made under the program regulations.
    Also, the definition of ``peanuts'' has been revised to track more 
closely with the peanut regulations in 7 CFR part 1446. This should 
avoid any possible confusion in the application of terms and rules.

2. Administration

    To assist producers who inadvertently fail to meet the final 
deadline for transferring quotas, this final rule amends the 
regulations to allow the Deputy Administrator to delegate authority to 
set guidelines for waivers by the State FSA committees. This action 
will expedite producer requests for late-filed transfers and help 
assure that available peanuts may be marketed as quota peanuts.

3. Temporary Seed Quota (TSQ)

    Upon review of the interim rule with respect to TSQ allocation and 
experience gained from the 1996 crop, FSA has determined that a 
sanction is needed in instances where the TSQ allocation was based on 
an erroneous acreage certification. Accordingly, when the certified 
acreage on which the TSQ allocation is made is greater than the acreage 
determined by FSA to have been planted to peanuts by more than the 
smaller of 2 percent of the certified acreage or 5 acres, a penalty 
will be calculated on this difference. When this tolerance is exceeded, 
the penalty will be determined by multiplying the difference between 
the certified and determined peanut acreage times the applicable per 
acre seeding rate used in the calculation of the TSQ times 140 percent 
of the applicable per pound quota support rate for the crop year 
involved. The authority for this penalty is found in section 358e of 
the 1938 Act which allows for penalties for over marketings of quota 
peanuts. Since such penalties flow from normal regulations applicable 
to the poundage quota system for peanuts, there does not appear to be a 
need for new rulemaking on this issue. In addition, in the event of an 
erroneous certification within the tolerance allowed by the rule, the 
agency may make corrections in the quota for the farm for the following 
year and may still assess a penalty in any instances in which such 
overreporting is chronic or otherwise found to have been a scheme or 
device to defeat the purposes of the program.
    The requirement in Sec. 729.214(f)(2)(iii)(A) that 90 percent of 
the transferring farm's quota must be planted in order for a fall 
transfer to be approved is amended by this rule to clarify that the TSQ 
allocation is not included as part of the farm's effective quota with 
respect to the 90-percent calculation.

4. Technical Corrections

    Section 729.214 contains a reference in paragraph (b)(5)(ii) that 
was not changed in the interim rule to reflect that the referenced 
paragraph was redesignated from ``(e)'' to ``(f).'' Also, in paragraph 
(l) the phrase ``all out-of-county transfers'' was inadvertently 
included with owner-to-owner and operator-to-operator transfers. The 
adjustment to production history in this paragraph is applicable only 
to owner-to-owner and operator-to-operator transfers and, although 
there were other changes in the interim rule to bring owner and 
operator transfers under the provisions of the new out-of-county 
transfer provisions, there was never an intention to adjust the 
produced credit for out-of-county transfers not involving owner-to-
owner and operator-to-operator transfers.
    Accordingly, this final rule amends Sec. 729.214(b)(5)(ii) to 
reflect the correct reference and Sec. 729.214(l) to remove the 
reference to ``all out-of-county transfers.''

Modification of Part 718

    This rule also makes a correction to provisions of 7 CFR 718.11 as 
promulgated in a rule published in the Federal Register on July 18, 
1996 (61 FR 37544). That section provides for certain sanctions to 
apply in the event that a person is involved in certain drug-related 
offenses and is based on a statutory provision which, by its terms, 
specifies that the sanctions shall apply to benefits related to 
commodity production. Section 718.11(b), as promulgated, only applied 
that limitation literally to (b)(1) of that section whereas the 
limitation, to matters of commodity production, was intended to apply 
to (b)(1) through (b)(3). This rule makes that correction and revises 
the provisions of that section to comport more closely with the 
language of the statutory provision.

List of Subjects

7 CFR Part 718

    Acreage allotments, Authority delegations, Crop insurance 
requirement, Drug traffic control, Price support programs.

7 CFR Part 729

    Peanuts, Penalties, Poundage quotas, Reporting and recordkeeping 
requirements.

    For the reasons set out in the preamble, 7 CFR part 718 is amended 
and the interim rule for 7 CFR part 729, published in the Federal 
Register on July 16, 1996 (61 FR 36997), is adopted as final with 
changes as set forth below.

PART 718--PROVISIONS APPLICABLE TO MULTIPLE PROGRAMS

    1. The authority citation for 7 CFR part 718 is amended to read as 
follows:

    Authority: 7 U.S.C. 1373, 1374, 7201 et seq.; 15 U.S.C. 714b and 
714c; and 21 U.S.C. 889.

    2. Section 718.11 is amended by revising paragraph (b) to read as 
follows:


Sec. 718.11  Denial of Benefits.

* * * * *
    (b) Any person convicted under Federal or State law of planting, 
cultivating, growing, producing, harvesting, or storing a controlled 
substance, as defined in 21 CFR part 1308, shall be ineligible for, 
with respect to any commodity produced during the same year and the 
next succeeding four years:
    (1) Any price support loan available in accordance with parts 1446 
and 1464 of this title;
    (2) Any price support or payment made under the Commodity Credit 
Corporation Charter Act;
    (3) A farm storage facility loan made under section 4(h) of the 
Commodity Credit Corporation Charter Act;
    (4) Crop Insurance under the Federal Crop Insurance Act;
    (5) A loan made, insured or guaranteed under the Consolidated farm 
and Rural Development Act or any other provision of law formerly 
administered by the Farmers Home Administration; or
    (6) Any payment made under any Act.
* * * * *

PART 729--PEANUTS

    3. The authority citation for 7 CFR part 729 continues to read as 
follows:

    Authority: 7 U.S.C. 1301, 1357 et seq., 1372, 1373, 1375, and 
7271.


[[Page 25438]]


    4. In Sec. 729.103(b), the definition of ``considered produced 
credit'' is amended by redesignating paragraphs (ii) through (v) as 
paragraphs (iii) through (vi) respectively, and adding a new paragraph 
(b)(ii), and the definitions of ``farmers stock peanuts'' and 
``peanuts'' are revised to read as follows:


Sec. 729.103  Definitions.

* * * * *
    (b) Terms.
* * * * *
    Considered produced credit.* * *
    (ii) A peanut poundage quota that was leased and transferred by a 
transfer agreement that was filed before August 1 of the current year 
to the extent the quota was produced or considered produced on the 
receiving farm; provided further, that to the extent that for any base 
period a farm receives credit under this paragraph, such farm may not 
receive credit under paragraph (iii) of this definition.
* * * * *
    Farmers stock peanuts. Picked or threshed peanuts produced in the 
United States which have not been changed (except for removal of 
foreign material, loose shelled kernels, and excess moisture) from the 
condition in which picked or threshed peanuts are customarily marketed 
by producers, plus any loose shelled kernels that are removed from 
farmers stock peanuts before such farmers stock peanuts are marketed.
* * * * *
    Peanuts. All peanuts produced, excluding:
    (i) Any peanuts which were not dug;
    (ii) Any dug peanuts not picked or threshed which are disposed of 
under the direction and supervision of FSA personnel; and
    (iii) Green peanuts.
* * * * *
    5. Section 729.104 is amended in paragraph (d)(3) by adding a 
sentence at the end of the paragraph to read as follows:


Sec. 729.104  Administration.

* * * * *
    (d) * * *
    (3) * * * Such authority shall include, but not be limited to, the 
delegation of the authority to the State FSA committee to, acting in 
accordance with such instructions as the Deputy Administrator may 
issue, modify deadlines for the filing of transfer of peanut quotas.
    6. Section 729.204 is amended by adding a new paragraph (e) at the 
end of the section to read as follows:


Sec. 729.204  Temporary seed quota allocation.

* * * * *
    (e) Penalty for erroneous certification. If the certified acreage 
on which the temporary seed quota allocation is made is greater than 
the acreage determined by FSA to be planted to peanuts by more than the 
smaller of 2 percent of the certified acreage or 5 acres, the producer 
shall be assessed a penalty based on this difference. The penalty 
amount shall be calculated by multiplying the difference between the 
certified and determined peanut acreage by the applicable per acre 
seeding rate used in the calculation of the temporary seed quota by 140 
percent of the applicable per pound quota support rate for the crop 
year involved. In addition, a commensurate penalty at the same rate may 
be assessed in cases within the tolerance allowed by the previous 
sentence in any instance in which the variance is determined to be due 
to a scheme or device to defeat the purposes of the program, or is 
repeated. Further, all errors may in all cases result in a commensurate 
diminution of the quota allowed the farm for the following year.
    7. Section 729.205 is amended:
    a. In paragraph (a)(1) after the word ``entities'' by adding, the 
parenthetical phrase ``(other than a university used for research 
purposes)'',
    b. By revising paragraph (a)(2)(ii), and
    c. Redesignating paragraph (c) as paragraph (e), revising paragraph 
(b), revising the new redesignated paragraph (e), and adding paragraphs 
(c) and (d) to read as follows:


Sec. 729.205  Farms ineligible for farm poundage quota.

    (a) Ineligible farms. * * *
    (2) * * *
    (ii) Whose primary domicile, as determined by FSA, in the case of 
any individual is in a State outside the State in which the quota is 
allocated or, in the case of an entity, does not qualify under this 
section to be considered to be a resident of the State in which the 
quota is allocated.
    (b) Determination of residency and related rules. (1) For purposes 
of administering paragraph (a) of this section, an entity may be 
considered a resident of the State in which the quota is located if:
    (i) It is determined that a person or persons with at least a 
cumulative 20-percent interest in any such entity are individuals whose 
primary residence is in the State in which the quota is allocated; or
    (ii) As determined appropriate by the Deputy Administrator, the 
corporation or other entity, but not a general partnership or an entity 
not recognized as a separate and distinct legal entity from its 
members, has been created under the laws of the State in which the 
quota is allocated.
    (2) For purposes of the provisions of (a)(2)(i) of this section, a 
person shall not be considered to be a producer of a crop of peanuts 
unless such person is at risk for at least 15 percent of the proceeds 
from the marketing of the production of the quota at issue.
    (c) Exemption for involuntary acquisition. Paragraph (a)(2) of this 
section shall not apply to any involuntary acquisition of a farm by 
foreclosure, or otherwise, resulting directly from the conduct of a 
public business in the State in which the quota is allocated, or an 
acquisition resulting directly by reason of a death. The exemption for 
involuntary farm acquisitions allowed under the preceding sentence 
shall only apply to the establishment of quota in the three crop years 
immediately following the date of the involuntary acquisition of the 
quota farm.
    (d) Applicable crop year. For purposes of applying the rules in 
paragraph (a) of this section as they regard production, the 
determination of whether paragraph (a)(2) of this section applies shall 
be made based on the crop last planted before the date on which the 
determination is to be made.
    (e) Allocating forfeited quota and sales of quotas subject to 
paragraph (a). Except for the exemption for involuntary acquisition in 
Sec. 729.205(c), beginning in 1997 any farm poundage quota held on or 
after August 1 of 1997 by an ineligible person as determined under 
paragraph (a) of this section shall be allocated from the quota farm to 
other farms in the same State in accordance with Sec. 729.206 of this 
part; provided, however, that if the ineligibility arises solely 
because of a purchase of a farm after August 1, 1997, or involves a 
quota which is acquired because of the expiration of a CRP contract 
after August 1, 1997, the quota shall not be forfeited but may not be 
used to market peanuts until the ineligibility is determined by the 
county committee to have been removed or the quota is sold to an 
eligible farm. Such reallocations shall be made to the extent 
practicable but shall take into account those instances in which the 
regulations call for an ineligibility for quota allocation rather than 
forfeiture of the quota.
    8. Section 729.214 is amended:
    a. In paragraph (b)(5)(ii) by removing the words ``paragraph (e)'' 
and adding in its place the words ``paragraph (f)'';

[[Page 25439]]

    b. In paragraph (d)(2)(iv) by adding the words ``or other method'' 
to follow the word ``lot'';
    c. In paragraph (e)(1) by removing the words ``result in a 
transfer'' and adding the words ``result in a temporary transfer'' in 
its place;
    d. In paragraph (f)(1)(iii)(A) by adding to the end of the sentence 
the words ``prior to adjustment for temporary seed quota allocated to 
the farm'';
    e. In paragraph (l) by removing the words ``and all out-of-county 
transfers''; and
    f. By revising paragraphs (f)(3) (i) and (m) to read as follows:


Sec. 729.214  Transfer of quota by sale, lease, owner, or operator.

* * * * *
    (f) Other transfer provisions--* * *
    (3) Permanent transfer of quota from a farm. * * *
    (i) Permanent transfer of quota to the farm. For the amount of 
quota purchased or otherwise permanently transferred to the farm in the 
current year and during the base period, as adjusted for any increase 
or decrease in such quota due to adjustment in the national quota 
during the base period, except that a transfer of a tenant's share of 
any peanut quota increase shall not be considered for purposes of 
determinations made under the provisions of this paragraph.
* * * * *
    (m) Considered produced credit. Quota that is leased and 
transferred from a farm shall be considered produced on such farm to 
the extent of considered produced credit set forth in the definition of 
``Considered produced credit'' in Sec. 729.103 of this part.

    Signed at Washington, D.C., on April 30, 1997.
Bruce R. Weber,
Acting, Administrator Farm Service Agency.
[FR Doc. 97-11788 Filed 5-8-97; 8:45 am]
BILLING CODE 3410-05-P