[Federal Register Volume 66, Number 7 (Wednesday, January 10, 2001)]
[Rules and Regulations]
[Pages 1807-1810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-651]



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  Federal Register / Vol. 66, No. 7 / Wednesday, January 10, 2001 / 
Rules and Regulations  

[[Page 1807]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1446

RIN 0560-AF56


Cleaning and Reinspection of Farmers Stock Peanuts

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Commodity Credit Corporation is adopting, as a final rule, 
with certain changes, the provisions of an August 5, 1998, interim rule 
that eased conditions for marketing Segregation 3 peanuts. The interim 
rule allowed peanut producers to recondition and regrade peanuts in 
certain limited instances. Peanuts are graded as ``Segregation 3'' 
peanuts when they are found by visual inspection to have Aspergillus 
flavus (A. flavus) mold. This rule changes the provisions of the 
interim rule to allow peanuts found to have the mold to be cleaned at a 
different buying point if the buying point to which a producer 
delivered the peanuts does not have cleaning facilities. In addition, 
this rule formally extends the time for having the peanuts visually 
reinspected to 72 hours and, under certain conditions, allows 
reinspection at an alternate site. This rule continues to limit 
reinspection to only once for any given lot. Comments solicited in the 
interim rule with respect to chemical inspection of farmers stock 
peanuts are discussed in this rule. However, no change has been made at 
this time with respect to that issue.
    In addition, this rule makes certain other technical/administrative 
changes to the program regulations. One of those is a provision 
allowing for waivers of non statutory program requirements in cases 
where such waivers serve the purposes of the program. Secondly, the 
rule drops a provision which refers to a defunct crop insurance 
procedure.

DATES: Effective January 10, 2001.

FOR FURTHER INFORMATION CONTACT: David Kincannon, (202) 720-7914.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    For purposes of Executive Order 12866, this rule has been 
determined to be not significant and has not been reviewed by the 
Office of Management and Budget (OMB).

Regulatory Flexibility Act

    The Regulatory Flexibility Act is not applicable to this interim 
rule because the Commodity Credit Corporation 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.

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.

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).

Executive Order 12988

    This final rule has been reviewed in accordance with Executive 
Order 12988. The provisions of this rule do not preempt State laws to 
the extent that such laws are consistent with the provisions of this 
rule. Before any legal action is brought regarding determinations made 
under provisions of 7 CFR part 1446, the administrative appeal 
provisions set forth at 7 CFR parts 11 and 780 must be exhausted.

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.

Paperwork Reduction Act

    The information reporting requirements contained in this rule have 
been approved by OMB and assigned OMB control number 0560-0014. The 
provisions of this rule do not impose new reporting requirements or 
changes in existing information collection requirements.

Background

    In the August 5, 1998, Federal Register, CCC issued changes in the 
peanut poundage quota regulations at 7 CFR Part 1446 with respect to 
determining Segregation 3 peanuts. The rule modified the definition of 
Segregation 3 peanuts found in Sec. 1446.103 by providing that peanuts 
found to have visible A. flavus mold upon a visual inspection at a 
buying point may be reconditioned and regraded in certain limited 
instances. For many years peanuts found to have visible A. flavus mold 
were required to be marketed as additional loan peanuts or as quota 
peanuts returned to the farm for seed. Although no cleaning was 
allowed, the impact of the inspection on farmers was mitigated by the 
availability of ``disaster transfers'' which allowed a transfer of 
additional loan peanuts to a quota loan pool. Those transfers did not 
change the ultimate use of the peanuts but did allow the farmer to 
receive a return close to that for quota peanuts if the farmer 
otherwise had unused quota.
    The Federal Agriculture Improvement and Reform act of 1996 (1996 
Act) substantially limited the quantity and price on such transfers but 
did not mandate the particular procedures by which peanuts would be 
classified as Segregation 3 peanuts. To mitigate possible harm to 
individual farmers with Segregation 3 peanuts, farmers

[[Page 1808]]

whose peanuts are found to contain visible A. flavus mold were allowed 
by the interim rule to have the peanuts reconditioned by removing 
foreign material and loose shelled kernels (LSK's) in accordance with 
directions to be issued by the Director of the Tobacco and Peanuts 
Division of the Farm Service Agency. Comments were requested on the 
interim rule. Also, the preamble to that rule requested comments on 
whether there should be chemical testing undertaken with respect to the 
delivery of all farmers stock peanuts. It was noted, however, that 
chemical testing for wholesomeness was already being undertaken, under 
other authorities, at a later marketing stage. Specifically, comments 
were requested with respect to the efficiency of such testing, 
standards for such testing and the assignment of costs for such 
testing.
    A total of 25 comments was received during the comment period, 
representing three area peanut grower associations, seven State peanut 
grower organizations, a State peanut organization, a State farmer 
organization, a national peanut sheller organization, six members of 
Congress, three Senators, an individual sheller/handler, a national 
peanut manufacturer organization, and a law firm representing certain 
peanut producers.
    One area peanut grower association, one State peanut grower 
organization, the national peanut manufacturer organization, and the 
national peanut shellers association opposed the change to allow 
regrading. The remaining 21 respondents generally supported the change 
to allow cleaning and reinspection. The respondents raised three 
primary issues: (1) Since not all buying points have cleaning 
facilities, there is a need for removing peanuts from the buying point 
to a location having such facilities, (2) tracking loads of peanuts 
cleaned and presented for reinspection may present problems, and (3) 
producers may need more than 24 hours to have peanuts cleaned and 
reinspected.
    First of all, with respect to the general issues raised (whether to 
allow recleaning at all) it remains the view of the agency that the 
rule should allow for regrading and recleaning. That allowance can help 
avoid hardship to farmers. So far, the allowance of recleaning has not 
appeared to present a problem as far as the administration of the price 
support system. The only material potential problem would be the 
potential diversion to quota loan pools of peanuts that have been 
recleaned but which might not be purchased out of the inventory at full 
price because a buyer knows that the peanuts have been recleaned. So 
far, there does not appear to be any loan problems of that kind. 
However, because pool losses can spread to all farmers under the 
statutory system that is now in place, the agency will continue to 
monitor this situation to insure fairness to all.
    We now address the other issues raised and the two additional rule 
changes undertaken in this notice:

1. Removing Peanuts From the Buying Point To Facilitate Reconditioning 
of Segregation 3 Peanuts

    Twelve respondents, both those in support of the rule and those 
opposed, expressed concern about tracking those loads of peanuts 
removed from the buying point for cleaning to assure the same peanuts 
were returned for regrading. One area peanut grower association in 
support of the interim rule stated that buying points without cleaning 
facilities should be allowed off-site cleaning in order to implement 
the interim rule on a fair and equitable basis for all buying points. 
One State grower association and one area peanut grower association 
opposed the interim rule based, in part, on the premise it would be 
necessary for peanuts to be removed for cleaning if the buying point 
did not have cleaning facilities. Also, in support of the rule, a State 
grower association and a State peanut commission commented that they 
believed loads of peanuts removed from the buying point could be 
tracked and monitored. An area peanut grower association and three 
State peanut grower associations supported the interim rule as issued 
and emphasized that peanuts should not leave the buying point.
    In some cases it may well be that the buying point to which the 
farmer takes the farm's peanuts may not be a location where recleaning 
is possible. Accordingly, not allowing the peanuts to be recleaned 
elsewhere could have a serious effect on the marketing decisions made 
by producers and could interfere with normal operations of private 
buying points and producers. On the other hand, control of the peanuts 
is important because of the possible effect on the loan program if 
buyers refuse to buy peanuts that have been moved for fear that the 
presence of the mold has been obscured by re mixing of the peanuts. 
Such fears, should they occur, could affect the marketability of the 
peanuts. In turn, the lack of marketability could produce price support 
loan losses. Hence, this raises the same general concern as the 
question of whether to allow recleaning at all and we reach the same 
result as with the general question as there does not appear to be 
strong evidence to indicate that there will be serious interference 
with the price support program if this allowance is made. In the 
absence of such evidence, the agency is reluctant to interfere with 
established marketing relationships. Accordingly, the final rule does 
not require that recleaning take place at the same location where the 
peanuts are first presented for marketing if that buying point does not 
have its own cleaning facilities.

2. 24-Hour Period for Cleaning and Reinspection

    In the interim rule, the agency generally allowed 24 hours for the 
recleaning to take place but did provide explicitly for authority to 
extend that period if the Director of the Tobacco and Peanuts Division 
(TPD) of the Farm Service Agency (FSA) saw fit to do so. A number of 
comments addressed this issue. One area peanut grower association and 
three State peanut grower associations supported the interim rule as 
written with a 24-hour reinspection turnaround. One area peanut grower 
association, three State peanut grower associations, one State peanut 
organization, six members of Congress, and three Senators supported the 
interim rule but also suggested either a 24-hour turnaround was not 
enough time or requested allowing 72 hours for peanuts to be cleaned 
and reinspected. One area peanut grower association and one State 
peanut grower association opposed the interim rule based, in part, on 
the assertion that 24 hours was not enough time to have the peanuts 
cleaned and regraded.
    Following issuance of the interim rule, FSA issued procedures 
implementing the changes to allow reconditioning and reinspection of 
farmers stock peanuts. As the marketing of 1998 crop peanuts began, 
certain buying points that did not have cleaning facilities but had 
peanut producers who wanted their peanuts cleaned and regraded 
requested that TPD grant relief to allow the peanuts to be cleaned at a 
different buying point. In order to provide equity to all producers, 
under the provisions of the interim rule, the Director of TPD, FSA, 
issued instructions to allow 72 hours for cleaning and regrading and 
buying points without cleaning facilities to move the peanuts to an 
alternate buying point for cleaning and reinspection.
    We have estimated that fewer than 350 loads of peanuts were cleaned 
and reinspected during the 1999 crop with most occurring in the 
Southeast marketing area. This represents a 30 percent decrease from 
year-earlier

[[Page 1809]]

amounts of peanuts cleaned and reinspected under this provision. We 
estimate that about 65 percent of the reinspected peanuts were able to 
qualify as Segregation 1 peanuts.
    Here also, the same concerns are at play. Those concerns were 
identified in the comments of several respondents who expressed the 
concern that reinspected peanuts would be viewed as ``hot'' with 
respect to undetected A. flavus mold and thereby cause pool losses. 
However, the relative small amount of peanuts cleaned and reinspected 
did not have a significant impact on the peanut price support loan 
program. Having decided that off-premises recleaning should be allowed, 
it follows that the recleaning period should not be limited to 24 hours 
as it may not be possible for the recleaning to be done in that period 
of time. However, this concern is not limited only to those situations, 
as 24 hours may also be too short in some instances at buying points 
with cleaning facilities at times when many peanuts are being delivered 
at once or whether there is an equipment failure or, for that matter, a 
holiday. Accordingly, subject to continued oversight, the rule allows 
for a 72 hour period for the process of recleaning and regrading to be 
completed.

3. Chemical Testing of Farmers Stock Peanuts for Aflatoxin

    With respect to chemical testing, the issue has been whether or not 
there would be a requirement of some kind of chemical testing before 
farmers stock peanuts can be marketed--currently, there is a visual 
inspection of the peanuts though, as indicated, such inspections are 
designed for the administration of the price support program and 
assigning a value to the peanuts. Wholesomeness concerns with respect 
to the human consumption of peanuts takes place as needed further along 
in the marketing process and is not under the jurisdiction of CCC. Nor 
is CCC, as such, a regulator of the marketing of peanuts except as 
needed to operate the price support program itself and to administer 
the production restriction provisions which are tied into the price 
support system. However, because of concerns that undetected problems 
could produce losses to buyers later on, there has been a debate within 
the industry about whether there should be chemical testing of all 
farmer stock peanut deliveries. In light of that debate and its 
connection with the recleaning issue, the interim rule asked for 
comment on whether chemical testing should be required for all 
marketings, as opposed to being left to individual determinations by 
individual buyers. A number of comments were received.
    One area peanut grower association and four State peanut grower 
organizations opposed the use of chemical testing of farmers stock 
peanuts. Concerns about adverse impacts on peanut producers, increased 
expense, delays in peanut delivery and environmental impacts of 
chemicals used for testing were issues raised by the respondents.
    A national peanut sheller organization and a national peanut 
product manufacturer organization, two State peanut grower 
organizations and a State peanut commission supported the use of 
chemical testing as a more accurate and consistent test for reflecting 
the aflatoxin content in farmers stock peanuts. These respondents 
pointed to studies that show occurrences of excess aflatoxin in peanuts 
graded as Segregation 1 and relatively low levels of aflatoxin in 
peanuts grading Segregation 3. The respondents emphasized that the 
studies show that the current visual inspection method of grading 
farmers stock peanuts for A. flavus mold is not a definitive indicator 
of aflatoxin content of the inspected peanuts.
    A sheller/handler acknowledged the need to enhance the peanut 
grading system and, without addressing chemical testing directly, 
stressed the need to remove subjectivity from the testing process. 
Several respondents urged using available technology in the grading 
process while protecting the integrity of the peanut price support 
program and its function for peanut producers.
    Discussion by respondents included incorporation of marketing and 
grading procedures based on the field application of beneficial mold 
that studies suggest decreases the likelihood of the occurrence of 
aflatoxin in peanuts produced on such fields. In addition, several 
respondents suggested that incoming grade requirements with respect to 
visual inspection for A. flavus mold or aflatoxin content be eliminated 
for commercial peanut sales. Since handlers are subject to outgoing 
quality standards based on chemical testing for aflatoxin, the 
respondents reasoned that there is no real justification for testing 
farmers stock peanuts.
    Discussions on the issue of chemical testing of farmer stock 
peanuts continue in the industry and, so far, no consensus has been 
reached. Thus for example, no provisions have been added to the Peanut 
Marketing Agreement, an agreement which for the most part is the 
product of recommendations of a joint group of producers and buyers. 
Issues which come into play in the question concern the type of testing 
that would be required, whether it would be required in all cases, and 
who would pay for the testing. Given that lack of unanimity on this 
issue and the lack of unanimity of treatment in the marketplace, there 
does not appear to be an established market practice which the price 
support system needs to insure that peanuts are properly valued for 
price support purposes to avoid pool losses. For that reason and given 
the limited purposes of the price support program, there does not 
appear to be reason at this time for a change in the program 
regulations regarding this issue. However, private concerns remain free 
to engage in whatever additional testing they feel is needed to protect 
their interests in the marketplace.

4. Modification of Sec. 1446.307

    In Sec. 1446.307 of the regulations, specifically in paragraph (g) 
of that section, it is provided that disaster transfers cannot be made 
from an additional peanut loan pool to a quota loan pool if the 
producer has executed a waiver of the right in connection with the 
acquisition of crop insurance benefits from the Federal Crop Insurance 
Corporation (FCIC), or other federal agency. Apparently, FCIC has, in 
the past, been the only federal agency to require such a waiver. 
Because, however, it is understood that such waivers are no longer 
required by FCIC, this provision is removed in this rule.

5. Modification of Sec. 1446.102

    In Sec. 1446.102, provisions are set out which govern the general 
administration of the price support program. In that connection, in 
order to assure maximum flexibility for the agency in dealing with new 
problems as they may arise, a new provision is being added to the 
regulations which allows the Director of TPD, FSA, to approve variances 
from the regulations where the variance does not involve a statutory 
requirement and where such a variance would serve the purposes of the 
overall administration of the program. This authority would, however, 
only be used sparingly to deal with new and developing issues or to 
resolve disputes and supplements whatever flexibility is already 
granted by other terms of the regulations, or granted elsewhere.

List of Subjects in 7 CFR Part 1446

    Loan programs--agriculture, reporting and recordkeeping 
requirements.

    For the reasons set out in the preamble, the amendments to 7 CFR 
part 1446 contained in the interim rule

[[Page 1810]]

issued August 5, 1998, are adopted as a final rule with the following 
change:

PART 1446--PEANUTS

    1. The authority citation for part 7 CFR part 1446 continues to 
read as follows:

    Authority: 7 U.S.C. 7271; 15 U.S.C. 714b and 714c.


    2. Paragraph (c) of Sec. 1446.102 is amended by adding a new 
sentence to the end of the paragraph to read as follows:


Sec. 1446.102  Administration.

* * * * *
    (c) Supervisory authority. * * * Further, the Director of TPD, FSA, 
may authorize the wavier or modification of deadlines and other 
requirements, except statutory deadlines or requirements, in cases 
where lateness or the failure to meet such other requirements does not 
adversely affect operation of the program.
    3. Paragraph (3) of the definition of ``Segregations'' in 
Sec. 1446.103 is revised to read as follows:


Sec. 1446.103  Definitions.

* * * * *
    (3) Segregation 3. Segregation 3 peanuts are farmers stock peanuts 
which, upon visible inspection, are found to contain Aspergillus flavus 
mold: Provided further, however, That, in accordance with such written 
instructions as the Director may issue, the Director shall permit 
producers at approved buying points as specified by the Director to 
have the Segregation 3 lot reconditioned, one time only, and then 
reinspected visually. If the buying point where the peanuts were 
initially delivered does not have adequate cleaning facilities, CCC may 
approve an alternative buying point for cleaning and reinspection. The 
visual reinspection may not occur more than 72 hours from the initial 
inspection except as permitted by the Director and the second grade 
shall be considered the final grade for the farmers stock peanuts.


Sec. 1444.307  [Amended]

    4. Section 1444.307 is amended by removing paragraph (g) from that 
section.

    Signed at Washington, D.C., on January 3, 2001.
Keith Kelly,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 01-651 Filed 1-9-01; 8:45 am]
BILLING CODE 3410-05-P