[Federal Register Volume 63, Number 11 (Friday, January 16, 1998)]
[Rules and Regulations]
[Pages 2846-2852]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1052]



[[Page 2845]]

_______________________________________________________________________

Part IV





Department of Agriculture





_______________________________________________________________________



Agricultural Marketing Service



_______________________________________________________________________



7 CFR Parts 997 and 998



Peanuts Marketed in the United States; Relaxation of Handling 
Regulations; Final Rule

  Federal Register / Vol. 63, No. 11 / Friday, January 16, 1998 / Rules 
and Regulations  

[[Page 2846]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 997 and 998

[Docket Nos. FV97-997-1 IFR and FV97-998-1 IFR]


Peanuts Marketed in the United States; Relaxation of Handling 
Regulations

AGENCY: Agricultural Marketing Service (AMS), USDA.

ACTION: Interim final rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: This rule relaxes, for 1997 and subsequent crop peanuts, 
several provisions regulating the handling of domestically produced 
peanuts marketed in the United States. The relaxation includes: 
Eliminating need for approval of certain facilities; allowing minimum 
grade requirements for lots of splits to correspond with grade 
standards; allowing certain lots to be custom blanched; providing that 
under the Agreement, all lots of edible quality peanuts be eligible for 
indemnification benefits; providing that peanuts which have been 
certified as meeting the minimum grade requirements, but fail on 
aflatoxin, may be roasted prior to being certified as meeting the 
latter; and allowing rejected peanuts to be placed in ``suitable 
containers'', not just ``bagged''. This rule will improve efficiency 
and reduce program costs resulting in a similar reduction in assessment 
rates charged Agreement signer and non-signer handlers.

DATES: Effective January 20, 1998; comments received by March 17, 1998 
will be considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent in triplicate to the Docket 
Clerk, Fruit and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 
96456, Washington, DC 20090-6456; Fax: (202) 205-6632. All comments 
should reference the docket numbers, the date and page number of this 
issue of the Federal Register and will be made available for public 
inspection in the Office of the Docket Clerk during regular business 
hours.

FOR FURTHER INFORMATION CONTACT: George J. Kelhart or Jim Wendland, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, P.O. Box 96456, room 2525-S, Washington, DC 20090-6456; 
telephone: (202) 720-2491, Fax: (202) 205-6632. Small businesses may 
request information on compliance with this regulation by contacting: 
Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable 
Programs, AMS, USDA, P.O. Box 96456, room 2525-S, Washington, D.C., 
20090-6456; telephone: (202) 720-2491, Fax: (202) 205-6632.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement No. 146 (7 CFR Part 998) and the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter 
referred to as the ``Act.'' The marketing agreement and the regulations 
issued thereunder (7 CFR Part 998) and the non-signatory peanut handler 
regulations (7 CFR Part 997) regulate the quality of domestically 
produced peanuts.
    The Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, 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.
    Following explanation of each change to the Agreement's regulation, 
the corresponding change to the non-signatory regulation is discussed.

Incoming Regulations

    Farmers Stock Storage and Handling Facilities: The Committee 
recommended amending Sec. 998.100 Incoming quality regulation for 1995 
and subsequent crop peanuts by removing paragraph (g) Farmers Stock 
Storage and Handling Facilities which currently regulates the condition 
of such facilities and authorizes Committee inspection. The Committee 
recommended the change to save approximately $450,000, by eliminating 
the positions of the seven fieldmen whose specified duties through last 
crop year included spending an estimated 60-65 percent of their time 
inspecting and approving such facilities. The vote was 17 ``For'' and 1 
``Against'', with the dissenting voter contending that the fieldmen 
were providing valuable services and their positions should not be 
eliminated and that inspection and approval of such facilities by the 
Committee staff was important. Handlers contend they are already paying 
their own employees to do facilities inspections and the cost of such 
duplication of effort needs to be eliminated. Also, this cost-cutting 
will not adversely affect quality since peanuts must still meet the 
Outgoing Quality Regulation.
    Elimination of the regulatory provision will allow the Committee to 
reduce its non-headquarters staff from seven to one compliance officer 
in each of the three production areas and reduce the current 
``fieldmen'' staffing costs to zero. The compliance officers will 
conduct compliance audits of Agreement signers similar to AMS approved 
non-signer program compliance plan procedures where AMS Compliance 
Staff auditors check non-signers' records. A revised 1997-98 compliance 
plan from the Committee includes this new procedure. AMS believes this 
will continue to assure compliance under the Agreement.
    The non-signer regulation contains no similar requirements for 
inspection and approval of such facilities, so no change is needed.

Outgoing Regulations

    The Committee unanimously recommended that Sec. 998.200(a) be 
amended to provide that minimum grade requirements for lots of 
``splits'' (the separated halves of peanut kernels) be modified to 
correspond with ``United States Standards For Grades Of: (1) Cleaned 
Virginia Type Peanuts In The Shell; or (2) Shelled Runner Type Peanuts; 
or (3) Shelled Spanish Type Peanuts; or (4) Shelled Virginia Type 
Peanuts'' (7 CFR Part 51: Sections 51.1235-1242; 51.2710-2721; 51.2730-
2741; and 51.2750-2763, respectively. This increase to 2.00 percent 
from the current 1.50 percent for unshelled peanuts and damaged kernels 
is needed to provide consistency with the grade standards. Under the 
current regulation, a handler could have a lot of peanuts which met 
U.S. Grade Standards for U.S. Splits, but failed to meet Agreement 
requirements for edible quality. It was expected that this change might 
reduce the number of lots which will need to be remilled to meet 
outgoing quality requirements. Although this reduction was roughly 
estimated at something less than 10 percent in an average year, this 
year's crop has been stressed by drought conditions and virtually all 
peanut producing States have expressed having problems with quality. 
Thus, this change could still result in significant reductions in costs 
for handlers.
    Another modification to Sec. 998.200(a) will remove Table 2.--
INDEMNIFIABLE GRADES. The Committee had originally established this 
table in its regulations to qualify higher grade peanut lots for its 
indemnification program covered in Sec. 998.300. However, coverage 
under this provision has been greatly reduced by

[[Page 2847]]

recent Committee action, to the point that the table is no longer 
deemed necessary. The Department agrees that Table 2 is not needed and 
its removal will simplify the Agreement regulations and therefore it is 
hereby removed.
    Similar changes are made to the corresponding Sec. 997.30(a) of the 
non-signer regulation.
    The Committee unanimously recommended that Sec. 998.200(h)(1) be 
amended to allow lots of peanuts which fail edible quality 
requirements, due to excessive fall through, to be custom blanched. 
However, such lots will have to be certified as meeting minimum ``fall 
through'' requirements after blanching. The change eliminates the 
current requirement that prior to movement of such peanuts, handlers 
have to submit a form to the Committee and receive authorization for 
movement and blanching of each such lot.
    Section 997.40(d) of the non-signer regulation currently does not 
require such handlers to submit a request to the Department and receive 
authorization for movement and blanching of each such lot. Therefore, 
no similar change to that provision is needed. However, it is being 
amended to add ``fall through'' to the category of items allowed in the 
first and third sentences.
    The Committee also unanimously recommended a further change to 
paragraph (h), specifically that subparagraphs (h)(1) and (h)(2) be 
further amended to provide that reject peanuts may be placed in 
suitable containers acceptable to the Committee. The current 
requirement specifies ``bagged,'' which refers to the older standard-
sized burlap bags. It does not include the many newer and more 
efficient containers which are easier to handle such as tote bags, 
corrugated containers (including those with capacities of over a ton), 
Super Sacks, and other various company containers used by individual 
peanut product manufacturers. The change will allow handlers to use 
more efficient containers or those desired by their customers. For 
purposes of this provision, most any container that handlers use other 
than bulk loads--i.e., those in which peanuts are not in any type of 
receptacle other than the vehicle transporting them--will be considered 
suitable.
    Section 997.40(c) of the non-signer regulation currently provides 
for ``in bulk or bags or other suitable containers.'' To make it 
consistent with the Agreement's amended regulation, the words ``in bulk 
or'' are being removed. Paragraphs (d) and (e) are also being amended 
by removing the word ``bagged'' and replacing it with the words 
``placed in suitable containers.''
    The Committee also unanimously recommended that Sec. 998.200 
Outgoing quality regulation and Sec. 998.300 Terms and conditions of 
indemnification . . . be amended to make all lots of edible quality 
peanuts indemnifiable, for freight reimbursement, when rejected on 
appeal after being certified ``negative'' as to aflatoxin. Under 
provisions specified in Sec. 998.300, product claim lots of edible 
quality peanuts will now also be indemnifiable. This involves lots 
where a handler sustained a loss as a result of a buyer withholding 
from human consumption any or all of the product made from a lot of 
peanuts which had been determined to be unwholesome due to aflatoxin 
after such lot had originally been certified ``negative'' as to 
aflatoxin. This change will provide consistency by treating all edible 
quality peanuts equally, whether appeal claims or product claims. 
Although these changes should further reduce costs and will promote 
uniformity in the handling of indemnification of all edible quality 
peanuts, there is no way to accurately quantify how much these 
reductions would be, because the savings would be different for each 
handler. However, the total savings would be significantly less than 
the projected approximately $200,000 total 1996 crop indemnification 
costs.
    The non-signer enabling legislation does not provide authority for 
indemnification. Therefore, no similar change is being made in the non-
signer regulation.
    The Committee further unanimously recommended that 
Sec. 998.200(h)(3) be amended to provide that peanuts which have been 
certified as meeting minimum grade requirements specified in 
Sec. 998.200(a)(1), but fail to meet requirements for aflatoxin, may be 
roasted while being blanched prior to being certified as meeting the 
aflatoxin requirements. After roasting, such peanuts must be sampled 
and assayed for aflatoxin content but do not have to be re-sampled and 
analyzed for grade again. This simplified process is recommended by the 
Committee because blanched peanuts, after certification, often are 
placed back into blancher for additional heating. Removing the blanched 
peanuts short of the complete roasting process for sampling and 
aflatoxin analysis, and then reinserting them back into the blancher 
adds costs to the roasting process and usually causes additional, 
unintentional damage due to the extra handling of the kernels. Also, 
the roasting will enhance the blanching efforts to eliminate aflatoxin, 
thus improving the wholesomeness, quality and value of such shelled 
peanuts. The savings involved in blanching and roasting in one step 
should far outweigh the approximately $40 per hour costs of having an 
inspector present during this process to maintain needed positive lot 
identification. Any residual peanuts, excluding skins and hearts, 
resulting from this roasting process, must be red tagged and disposed 
of to non-edible peanut outlets. A similar change is being made to 
Sec. 997.40(d) of the non-signer regulation.
    The unchanged portions of the incoming and outgoing regulations 
currently in effect for 1996 and subsequent crop peanuts will remain in 
effect for 1997 and subsequent crop peanuts.
    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has 
considered the economic impact of this action on small entities. 
Accordingly, AMS has prepared this initial regulatory flexibility 
analysis.
    There are approximately 27 signatory and 30 non-signatory peanut 
handlers who are currently subject to regulations under the Agreement 
and non-signer program respectively and approximately 25,000 commercial 
peanut producers in the 16-State production area. Small agricultural 
service firms, which include handlers, have been 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 are 
defined as those having annual receipts of less than $500,000. 
Approximately 25 percent of the signatory handlers, virtually all of 
the non-signers, and most of the producers may be classified as small 
entities. This action will be favorable to the industry by tending to 
improve efficiency, reducing costs and increasing returns.
    The relaxations to handling regulations specified in this rule will 
simplify requirements and enable handlers, both large and small, to cut 
costs and more efficiently handle their peanut supplies, without 
jeopardizing safeguard requirements in the current regulations.
    The relaxations include: 1. The elimination of the requirement for 
inspection and approval of farmers stock storage and handling 
facilities will save approximately $450,000 by eliminating the 
positions of the seven fieldmen, who had performed this activity 
through last crop year. Handlers contend they already paid their own 
employees to do this and the duplicate cost should be eliminated;

[[Page 2848]]

    2. Relaxing the minimum grade requirements for ``splits'' to 
correspond with U.S. grade standards might reduce the number of lots 
which need to be remilled this year by 10 percent due to stressed 
growing conditions in virtually all areas. This should result in 
significant reductions in costs for handlers;
    3. Another relaxation is to provide that all lots of edible quality 
peanuts, whether appeal claims or product claims, will be eligible for 
handler indemnification benefits. Thus, handlers with product claim 
lots will now also be eligible for reimbursement of most transportation 
expenses on such lots. Such additional reimbursement was not publicly 
quantified by the Committee, but would be less than the projected 
approximately $200,000 total 1996 crop indemnification costs;
    4. The revised provision to allow lots which fail edible quality 
requirements, due to excessive fall through, to be custom blanched 
eliminates the current requirement that handlers have to submit a form 
to the Committee and receive authorization for movement and blanching 
of each such lot. This relaxation will eliminate unnecessary paperwork 
and save time for all affected handlers;
    5. Relaxing the requirement that peanuts be ``bagged'' (i.e., 
placed only in older standard-size burlap bags) by allowing the use of 
suitable containers, will permit use of the many newer and more 
efficient containers or those desired by handlers' customers; and
    6. Another relaxation will allow peanuts which have been certified 
as meeting the minimum grade requirements, but fail to meet 
requirements for aflatoxin, to be roasted while being blanched prior to 
being certified as meeting the latter requirements. This simplified 
process eliminates reinserting such peanuts back into the blancher, 
which doubles the processing costs and tends to lower the peanuts' 
quality and value by causing additional damage to them. Such savings 
should far outweigh the approximately $40 per hour expense of having an 
inspector present to maintain needed positive lot identification.
    The relaxed requirements will significantly improve efficiency and 
have enabled the Committee to cut in half for the 1997-98 and 
subsequent crops years its administrative costs and assessment rate 
charged Agreement signer and non-signer handlers to finance their 
respective programs. Further, the rate of assessment last season was 
$0.70 per net ton of assessable peanuts. The rate for the 1997-98 crop 
year has been reduced to $0.35 per net ton by another rulemaking 
action, as published in the September 17, 1997, issue of the Federal 
Register (62 FR 48749). This will save regulated domestic handlers 
approximately $500,000 in administrative assessment costs which should, 
to a great extent, also correspond to the savings from this relaxation 
action.
    The specifics of each change and why they will tend to increase 
returns to handlers were covered in detail near the beginning of this 
rule under the discussion starting with ``Incoming regulations.''. 
These changes will relax requirements on regulated domestic peanut 
handlers, improve their efficiency and cut costs, to benefit the peanut 
industry, manufacturers, and consumers, while still assuring quality of 
all peanuts in domestic human consumption markets.
    As with all Federal marketing agreement and order programs, reports 
and forms are periodically reviewed to reduce information requirements 
and duplication by industry and public sectors. Consistent with the 
Paperwork Reduction Act (44 U.S.C. Chapter 35), the Committee 
unanimously recommended greatly reducing reporting and recordkeeping 
requirements on both large and small domestic peanut handlers regulated 
under these two programs. It will eliminate 20 of the 21 Committee 
forms currently approved by OMB that might accompany peanut shipments, 
to only require use of the Form PAC-1. The PAC-1 is mailed to handlers 
on a monthly basis and is used to report receipts and acquisitions of 
farmers stock peanuts and to remit assessments. It is estimated this 
will eliminate 95 percent (or about 2,291 hours and assuming $10 per 
hour, would save respondents nearly $23,000 in costs) of the current 
estimated 2,417 hours of total reporting burden on Agreement signers, 
including small businesses, and a proportional, smaller reduction in 
non-signer reporting burden. A notice of the proposed revision was 
published in the July 31, 1997, issue of the Federal Register (62 FR 
41021). Sixty days were allowed for comments. One comment was received, 
from the American Peanut Shellers Association, supporting the reduced 
burdens. This information collection package has been submitted to the 
Office of Management and Budget (OMB) for approval.
    In addition, the Department has not identified any Federal rules 
that duplicate, overlap or conflict with this rule.
    Further, the Committee's meeting was widely publicized throughout 
the peanut industry and all interested persons were invited to attend 
the meeting and participate in the Committee's deliberations. Like all 
Committee meetings, the April 29-30, 1997, meeting was a public meeting 
and all entities, both large and small, were able to express their 
views on the issues. The 18-member Committee is composed of an equal 
number of peanut handlers and producers, the majority of whom are small 
entities.
    Also, the Committee has a number of appointed subcommittees to 
review certain issues and make recommendations to the Committee. The 
Committee's Regulations, Indemnification and Quality Subcommittee and 
``New Concept'' Subcommittee met on January 28, 1997, and discussed 
these issues in detail. On March 25, 1997, the Committee held an 
informational meeting to hear a presentation by the National Peanut 
Council's Peanut Industry Revitalization Project Steering Committee and 
discuss those issues there and back with their industry peers before 
voting on those issues at the April Committee meeting. The Committee's 
Administrative Budget Subcommittee also meet March 25, 1997, to discuss 
budget recommendations. These meetings were also public meetings and 
both large and small entities were able to participate and express 
their views. Finally, interested persons are invited to submit 
information on the regulatory and informational impacts of this action 
on small businesses.
    An objective of the two domestic programs is to ensure that only 
high quality and wholesome peanuts enter human consumption markets in 
the United States. About 70 percent of domestic handlers, handling 
approximately 95 percent of the crop volume, have signed the Agreement. 
The remaining 30 percent are non-signatory handlers handling the 
remaining 5 percent of domestic production.
    Under these regulations, farmers stock peanuts with visible 
Aspergillus flavus mold (the principal source of aflatoxin) are 
required to be diverted to inedible uses. Each lot of milled peanuts 
must be sampled and the samples chemically analyzed for aflatoxin 
content. Costs to administer the Agreement and to reimburse the 
Department for oversight of the non-signatory program are paid by an 
assessment levied on handlers in the respective programs.
    The 18-member Committee, which is composed of an equal number of 
peanut producers and handlers, meets at least annually to review the 
Agreement's rules and regulations, which are effective on a continuous 
basis from one

[[Page 2849]]

year to the next. Committee meetings are open to the public, and 
interested persons may express their views at these meetings. The 
Department assesses Committee recommendations, as well as information 
from other sources, prior to making any recommended changes to the 
regulations under the Agreement.
    Section 608b of the Act was amended in 1989 to require that all 
peanuts handled by persons who have not entered into the Agreement 
(non-signers) be subject to the same quality and inspection 
requirements to the same extent and manner as are required under the 
Agreement. Section 608b was further amended in 1993 to impose similar 
requirements regarding administrative assessments. The non-signatory 
handler regulations have been amended several times thereafter and are 
published in 7 CFR part 997.
    Thus, the Committee's recommended changes to the Agreement 
regulation, as established in this rule, also are established for the 
Agreement non-signers. This interim final rule identifies the 
corresponding change to the non-signer regulation for each change to 
the Agreement regulation.
    According to the Committee, the domestic peanut industry is 
undergoing a period of great change. The Committee bases its view, in 
part, on findings in a recent study entitled ``United States Peanut 
Industry Revitalization Project'' developed by the National Peanut 
Council and the Department's Agricultural Research Service (May 1996).
    According to the study, the U.S. peanut industry has been in a 
period of dramatic economic decline since 1991 because: (1) Per capita 
peanut consumption has steadily declined a total of 11 percent; (2) 
harvested acreage has declined 25 percent; (3) production has declined 
30 percent and farm value dropped 29 percent; and (4) imports of 
peanuts and peanut products have increased from insignificant 
quantities to 48,736 raw farmer stock tons in 1995 and 55,536 in 1996.
    The study points to recent increases in the duty-free import quota 
for raw peanuts due to the North American Free Trade Agreement (NAFTA) 
and the Uruguay Round Agreements under the General Agreement on Tariffs 
and Trade (GATT). Under Section 22 import quota provisions, the volume 
of U.S. peanut imports had been limited to about 2.3 million pounds, 
in-shell basis, annually. Thus, imports have historically represented 
about one-tenth of 1 percent of U.S. food use of peanuts. Under NAFTA, 
Mexico has been granted a minimum access level for duty-free entry of 
peanuts of about 10 million pounds, in-shell basis. This level will 
increase about 3 percent annually through 2008, when quantitative 
limits will cease. Mexico's 1998 duty-free quota will total 8.4 million 
pounds. Under GATT, the 1995 quota was 74.5 million pounds. This year 
it is 86.8 million pounds, will increase to 96.7 million pounds 
(Argentina 81.2 and all other 15.5) in 1998, and can grow to about 155 
million pounds (about 4 percent of U.S. disappearance) in 2000.
    The study also projects that farm production costs and revenue will 
be equal by the year 2000, as will handler costs and revenue, leaving 
no profit.
    In addition, the modification of the Federal farm peanut poundage 
quota regulations implemented under the Agricultural Market Transition 
Act of 1996 (1996 Act) has resulted in the domestic industry undergoing 
significant changes scheduled to continue through the year 2002. The 
peanut support price has been reduced from $670 per ton in 1995 to $610 
per ton through 2002. The USDA's Farm Service Agency final rule 
implementing the Act was published May 9, 1997 (62 FR 25433). That rule 
indicates that economic impacts of the 1996 Act include expected 
reductions in domestic peanut producers' revenue of $1.25 billion from 
1996 through 2002. Quota lease holders could absorb a loss of about $40 
million annually because of reduced leasing rates due to the lower 
peanut price support. Also, capitalized value of quotas could decline 
$200 to $300 million, thus reducing land values and the tax base of 
rural communities.
    The Committee agrees that all of these factors combined show that 
the domestic peanut industry had been in decline and that the outlook 
was not expected to change without some positive intervention by the 
industry.
    World supply and demand are less important for peanuts than most 
U.S. farm commodities. Much of world peanut production is for non-food 
uses, although production for food use might increase a little if there 
were no U.S. import restrictions. Also, import quotas, though increased 
recently, still are set at relatively low levels.
    Domestic peanut production in 1996 was approximately 3.66 billion 
pounds, with a farm value of slightly under $1 billion. The 
Department's November 1 forecast pegs the 1997 peanut crop production 
at 3.5 billion pounds, down approximately 4 percent from last year. 
Harvested acreage for 1997 is forecast to be 1.384 million acres, up 
4,500 acres from a year ago. The U.S. average yield per acre for the 
1997 crop is forecast at 2,528 pounds, down 11 pounds per acre from the 
1996 crop.
    Production is expected to gradually increase from 1996 to 2002 
because domestic food use is projected to rise about 1.5 percent 
annually. Imports are expected to remain at a relatively small 
percentage of total U.S. peanut use.
    Estimated exports of 750 million pounds in Marketing Year (MY) 1997 
are below the average for the prior 3 years, but are 11 percent more 
than a year earlier. Peanut oil prices are expected to average about 38 
cents a pound of oil in MY 1997, 6 percent lower than MY 1996 as 
vegetable oil supplies return to more normal levels. Peanut meal prices 
for MY 1997 are expected to decline to $175 a ton, down 25 percent from 
MY 1996 because of larger soybean meal supplies.
    The season average price of farmer stock peanuts for MY 1997 may 
remain unchanged from the 28.5 cents per pound average for 1996. This 
was the lowest price of the last two years and reflects the adjustment 
to the reduced quota support level and an unexpected change in the 
proportions of quota and additionals in 1997 production. Average prices 
to growers are expected to increase, but will remain below 1995 prices 
because of the lower quota price support level. The value of farm 
production is expected to gradually rise and surpass that of 1995 by 
2000/01.
    The Committee recommended the changes in this rulemaking to the 
Agreement's Incoming and Outgoing regulations for 1997 and subsequent 
crop peanuts at its April 30, 1997, public meeting.

Alternative Actions Considered

    Although the Committee could have recommended no changes or less 
changes to the current regulations, it unanimously concluded that those 
were not satisfactory solutions. It believes that all possible 
simplification and cost-cutting should be done and that these 
regulations should focus more on outgoing quality and less on the 
shelling and milling processes necessary to meet the outgoing, human 
consumption requirements. Newer, high technology milling and blanching 
equipment enable handlers to recondition failing peanut lots that could 
not have been economically reconditioned when the regulations were 
first promulgated. Therefore, it is no longer necessary to impose 
restrictions that hinder the efficiency of handling operations and 
result in the loss of potentially good quality peanuts. Thus, the 
Committee believes these changes will tend to improve the returns to 
growers and handlers, while still maintaining consumer safeguard 
provisions in the current domestic regulations, because

[[Page 2850]]

all peanuts intended for human consumption must still be inspected and 
certified acceptable for such use.
    After review of the recommendations, the Department concurs that 
the recommended changes will tend to improve returns to the industry 
and be in the public interest. Expected benefits of the changes were 
included in the previous discussion of each individual change.
    In accordance with the Paperwork Reduction Act of 1995 (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 Nos. 0581-0067 (for Agreement 
signers) and 0581-0163 (for non-signers).
    After consideration of all relevant material presented, including 
the Committee's recommendations, and other information, it is found 
that this interim final rule, as hereinafter set forth, will tend to 
effectuate the declared policy of the Act.
    This rule invites comments on changes to the quality regulations 
currently prescribed under the Agreement and the non-signers program. 
All written comments timely received will be considered prior to 
finalization of this rule.
    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 rule until 30 days after publication in the Federal Register 
because: (1) This rule relaxes requirements currently in effect; (2) 
the 1997 peanut crop year began July 1, 1997, and the changes should be 
effective as soon as possible to allow the industry to receive the 
benefits for as much of the remainder of the crop year as possible; (3) 
the Committee unanimously recommended these changes at a public meeting 
and all entities, both large and small, were able to express views on 
these issues; (4) this rule provides a 60-day opportunity for comment, 
and all written comments timely received will be considered prior to 
finalization of the rule.

List of Subjects

7 CFR Part 997

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

7 CFR Part 998

    Marketing agreements, Peanuts, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR parts 997 and 998 
are amended as follows:

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

    1. The authority citation for 7 CFR part 997 continues to read as 
follows:

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

    2. Section 997.30 is amended by revising paragraph (a), to read as 
follows:

Quality Regulations


Sec. 997.30  Outgoing Regulation.

    (a) Shelled peanuts. (1) No handler shall dispose of shelled 
peanuts for human consumption unless such peanuts are positive lot 
identified, certified ``negative'' as to aflatoxin and certified as 
meeting the following requirements:

                                                                   Maximum Limitations                                                                  
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Unshelled                          Fall through                                                     
                                    Unshelled       peanuts,    ---------------------------------------------------------                               
                                   peanuts and       damaged                                                                  Foreign        Moisture   
    Type and grade category          damaged       kernels and    Sound split and      Sound whole                           material        (percent)  
                                     kernels      minor defects    broken kernels        kernels             Total           (percent)                  
                                    (percent)       (percent)                                                                                           
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Excluding lots of ``splits''                                                                                                                          
                                                                                                                                                        
Runner.........................            1.50            2.50  3.00%; \17/64\     3.00%; \16/64\ x   4.00%; both                   .20            9.00
                                                                  inch round         \3/4\ inch slot    screens.                                        
                                                                  screen.            screen.                                                            
Virginia (except No. 2)........            1.50            2.50  3.00%; \17/64\     3.00%; \15/64\ x   4.00%; both                   .20            9.00
                                                                  inch round         1 inch slot        screens.                                        
                                                                  screen.            screen.                                                            
Spanish and Valencia...........            1.50            2.50  3.00%; \16/64\     3.00%; \15/64\ x   4.00%; both                   .20            9.00
                                                                  inch round         \3/4\ inch slot    screens.                                        
                                                                  screen.            screen.                                                            
No. 2 Virginia.................            1.50            3.00  6.00%; \17/64\     6.00%; \15/64\ x   6.00%; both                   .20            9.00
                                                                  inch round         1 inch slot        screens.                                        
                                                                  screen.            screen.                                                            
                                                                                                                                                        
       Lots of ``splits''                                                                                                                               
                                                                                                                                                        
Runner (not more than 4% sound             2.00            2.50  3.00%; \17/64\     3.00%; \14/64\ x   4.00%; both                   .20            9.00
 whole kernels).                                                  inch round         \3/4\ inch slot    screens.                                        
                                                                  screen.            screen.                                                            
Virginia (not less than 90%                2.00            2.50  3.00%; \17/64\     3.00%; \14/64\ x   4.00%; both                   .20            9.00
 splits).                                                         inch round         1 inch slot        screens.                                        
                                                                  screen.            screen.                                                            
Spanish and Valencia (not more             2.00            2.50  3.00%; \16/64\     3.00%; \13/64\ x   4.00% both                    .20            9.00
 than 4% sound whole kernels).                                    inch round         \3/4\ inch slot    screens.                                        
                                                                  screen.            screen.                                                            
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 2851]]

    (2) The term fall through, as used in this paragraph, shall mean 
sound split and broken kernels and whole kernels which pass through 
specified screens. Prior to shipment, appropriate samples for 
pretesting shall be drawn in accordance with paragraph (c) of this 
section from each lot of peanuts. For the current crop year, 
``negative'' aflatoxin content means 15 parts per billion (ppb) or less 
for peanuts which have been certified as meeting edible quality grade 
requirements.
* * * * *
    3. In Sec. 997.40, paragraph (c) introductory text is amended by 
removing the words ``bulk or'', paragraph (e) is amended by removing 
the word ``bagged'' and adding in its place the words ``placed in 
suitable containers acceptable to AMS'', paragraph (d) is amended by 
removing the word ``bagged'' and adding in its place the words ``placed 
in suitable containers acceptable to AMS'', and adding after the last 
sentence, 5 additional sentences, to read as follows:


Sec. 997.40  Reconditioning and disposition of peanuts failing quality 
requirements.

* * * * *
    (d) * * * Handlers may contract with Committee approved blanchers 
for roasting positive lot identified shelled peanuts, which originated 
from Segregation 1 peanuts, that meet the grade requirements of 
paragraph (a) of this section but are positive as to aflatoxin. Lots of 
peanuts moved under these provisions must be accompanied by a valid 
grade inspection certificate and a valid aflatoxin certificate. To be 
eligible for disposal into human consumption outlets, such peanuts 
after roasting, shall have had the positive lot identity maintained and 
be accompanied by a negative aflatoxin certificate. The residual 
peanuts, excluding skins and hearts, resulting from roasting under 
these provisions, shall be placed in suitable containers acceptable to 
AMS and red tagged and disposition shall be that such peanuts are 
returned to the handler for further disposition; or that in the 
alternative, such residuals shall be positive lot identified by a 
Federal or Federal-State Inspection Service, and shall be disposed of, 
by the blancher, to handlers who are crushers, or to crushers who are 
not handlers under the Agreement only on the condition that they agree 
to comply with the terms of paragraph (c) of this section and all other 
applicable requirements of this regulation. Roasting under the 
provisions of this paragraph shall be performed only by blanchers who 
are approved by the Committee.
* * * * *

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.

Sec. 998.100  [Amended]

    2. Section 998.100 is amended by removing paragraph (g), 
redesignating paragraphs (h) and (i) as paragraphs (g) and (h), and 
removing the number ``1996'' in the section heading and adding in its 
place the number ``1997''.
    3. In Sec. 998.200, the section heading and paragraphs (a), (h)(1) 
and (h)(2) are revised and a new paragraph (h)(3) is added to read as 
follows:


Sec. 998.200  Outgoing quality regulation for 1997 and subsequent crop 
peanuts.

* * * * *
    (a) Shelled peanuts. (1) No handler shall dispose of shelled 
peanuts for human consumption unless such peanuts are positive lot 
identified, certified ``negative'' as to aflatoxin, and certified as 
meeting the following requirements:

                                                                   Maximum Limitations                                                                  
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Unshelled                          Fall through                                                     
                                    Unshelled       peanuts,    ---------------------------------------------------------                               
                                   peanuts and       damaged                                                                  Foreign        Moisture   
    Type and grade category          damaged       kernels and    Sound split and      Sound whole                           materials       (percent)  
                                     kernels      minor defects    broker kernels        kernels             Total           (percent)                  
                                    (percent)       (percent)                                                                                           
--------------------------------------------------------------------------------------------------------------------------------------------------------
  Excluding lots of ``splits''                                                                                                                          
                                                                                                                                                        
Runner.........................            1.50            2.50  3.00%; \17/64\     3.00% \16/64\  x   4.00%; both                   .20            9.00
                                                                  inch round         \3/4\ inch slot    screens.                                        
                                                                  screen.            screen.                                                            
Virginia (except No. 2.........            1.50            2.50  3.00%; \17/64\     3.00%; \15/64\  x  4.00%; both                   .20            9.00
                                                                  inch round          1 inch slot       screens.                                        
                                                                  screen.            screen.                                                            
Spanish and Valencia...........            1.50            2.50  3.00%; \16/64\     3.00%; \15/64\  x  4.00% both                    .20            9.00
                                                                  inch round          \3/4\ inch slot   screens.                                        
                                                                  screen.            screen.                                                            
No. 2 Virginia                             1.50            3.00  6.00%; \17/64\     6.00%; \15/64\  x  6.00%; both                   .20            9.00
                                                                  inch round          1 inch slot       screens.                                        
                                                                  screen.            screen.                                                            
                                                                                                                                                        
       Lots of ``splits''                                                                                                                               
                                                                                                                                                        
Runner (not more than 4% sound             2.00            2.50  3.00%; \17/64\     3.00%; \14/64\  x  4.00%; both                   .20            9.00
 whole kernels.                                                   inch round          \3/4\ inch slot   screens.                                        
                                                                  screen.            screen.                                                            
Virginia (not less than 90%                2.00            2.50  3.00%; \17/64\     3.00%; \14/64\  x  4.00%; both                   .20            9.00
 splits.                                                          inch round          1 inch slot       screens.                                        
                                                                  screen.            screen.                                                            
Spanish and Valencia (not more             2.00            2.50  3.00%; \16/64\     3.00%; \13/64\  x  4.00%; both                   .20            9.00
 than 4% sound whole kernels).                                    inch round          \3/4\ inch slot   screens.                                        
                                                                  screen.            screen.                                                            
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 2852]]

    (2) The term fall through, as used in this paragraph, shall mean 
sound split and broken kernels and whole kernels which pass through 
specified screens.
* * * * *
    (h) * * * (1) 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. 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 as 
listed in paragraph (a) of this section and be accompanied by an 
aflatoxin certificate determined to be negative by the Committee. Lots 
of peanuts which have been certified as meeting fall through 
requirements as specified in paragraph (a) of this section, prior to 
blanching, shall be exempt from fall through requirements after 
blanching. The residual peanuts, excluding skins and hearts, resulting 
from blanching under these provisions, shall be placed in suitable 
containers acceptable to the Committee and red tagged and disposition 
shall be that such peanuts are returned to the handler for further 
disposition; or, in the alternative, such residuals shall be positive 
lot identified by the Federal or Federal-State Inspection Service, and 
shall be disposed of, by the blancher, to handlers who are crushers, or 
to crushers who are not handlers under the Agreement only on the 
condition that they agree to comply with the terms of paragraph (g) of 
this section and all other applicable requirements of the Agreement. 
Blanching under the provisions of this paragraph shall be performed 
only by those firms who agree to procedures acceptable to the Committee 
and who are approved by the Committee to do such blanching.
    (2) 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 this section: 
Provided, That such lots of peanuts contain not in excess of 10 percent 
fall through. 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) of this section, 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. The residual peanuts resulting from remilling under 
these provisions, shall be placed in suitable containers acceptable to 
the Committee and red tagged and disposition shall be that such peanuts 
are returned to the handler for further disposition; or, in the 
alternative, such residuals shall be positive lot identified by the 
Federal or Federal-State Inspection Service, and shall be disposed of, 
by the remiller, to handlers who are crushers, or to crushers who are 
not handlers under the Agreement only on the condition that they agree 
to comply with the terms of paragraph (g) of this section and all other 
applicable requirements of the Agreement. Remilling under the 
provisions of this paragraph shall be performed only by those firms who 
agree to procedures acceptable to the Committee and who are approved by 
the Committee to do such remilling.
    (3) Handlers may contract with Committee approved blanchers for 
roasting positive lot identified shelled peanuts, which originated from 
Segregation 1 peanuts, that meet the grade requirements of paragraph 
(a) of this section but are positive as to aflatoxin. Lots of peanuts 
moved under these provisions must be accompanied by a valid grade 
inspection certificate and a valid aflatoxin certificate. To be 
eligible for disposal into human consumption outlets, such peanuts 
after roasting, shall have had the positive lot identity maintained and 
be accompanied by an aflatoxin certificate determined to be negative by 
the Committee. The residual peanuts, excluding skins and hearts, 
resulting from roasting under these provisions, shall be placed in 
suitable containers acceptable to the Committee and red tagged and 
disposition shall be that such peanuts are returned to the handler for 
further disposition; or in the alternative, such residuals shall be 
positive lot identified by a Federal or Federal-State Inspection 
Service, and shall be disposed of, by the blancher, to handlers who are 
crushers, or to crushers who are not handlers under the Agreement only 
on the condition that they agree to comply with the terms of paragraph 
(g) of this section and all other applicable requirements of the 
Agreement. Roasting under the provisions of this paragraph shall be 
performed only by blanchers who are approved by the Committee.
* * * * *

    Dated: January 9, 1998.
Sharon Bomer Lauritsen,
Acting Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-1052 Filed 1-15-98; 8:45 am]
BILLING CODE 3410-02-P