[Federal Register Volume 70, Number 118 (Tuesday, June 21, 2005)]
[Proposed Rules]
[Pages 35562-35565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-12156]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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 

  Federal Register / Vol. 70, No. 118 / Tuesday, June 21, 2005 / 
Proposed Rules  

[[Page 35562]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 996

[Docket No. FV05-996-2PR]


Change in Minimum Quality and Handling Standards For Domestic and 
Imported Peanuts Marketed in the United States

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule would change the peanut quality and handling 
standards (Standards) to require that domestic and imported peanuts be 
dried to 18 percent moisture or less prior to inspection and to 10.49 
percent or less prior to storing or milling. Virginia-type peanuts used 
for seed must be dried to 18 percent or less prior to inspection and to 
11.49 percent or less prior to storing or milling. The Standards and 
the Peanut Standards Board (Board) were established by the Department 
of Agriculture (USDA), pursuant to section 1308 of the Farm Security 
and Rural Investment Act of 2002. The Board suggested changing the 
peanut quality and handling standards to allow handlers and importers 
to receive or acquire high moisture peanuts to promote the development 
of new drying technologies, increase efficiencies and reduce costs to 
the industry.

DATES: Comments must be received by July 6, 2005.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent to the Docket Clerk, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC 
20250-0237; Fax: (202) 720-8938, or E-mail: [email protected] 
or www.regulations.gov. Comments should reference the docket number and 
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, or can be viewed at: http://www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Dawana J. Clark or Kenneth G. Johnson, 
DC Marketing Field Office, Marketing Order Administration Branch, Fruit 
and Vegetable Programs, AMS, USDA, 4700 River Road, Unit 155, 
Riverdale, Maryland 20737; telephone (301) 734-5243, Fax: (301) 734-
5275 or George J. Kelhart, Technical Advisor, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 
Independence Avenue, SW., Stop 0237, Washington, DC 20250-0237; 
telephone (202) 720-2491, Fax: (202) 720-8938; or E-mail: 
[email protected], [email protected] or 
[email protected].
    Small businesses may request information on complying with this 
rule by contacting Jay Guerber, Marketing Order Administration Branch, 
Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW., 
STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-2491, Fax: 
(202) 720-8938, or e-mail: [email protected].

SUPPLEMENTARY INFORMATION: This proposed rule is issued under section 
1308 of the Farm Security and Rural Investment Act of 2002 (Public Law 
107-171), 7 U.S.C. 7958, hereinafter referred to as the ``Farm Bill.''
    This rule has been determined to be not significant for purposes of 
Executive Order 12866 and has not been reviewed by the Office of 
Management and Budget.
    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.

Background

    Section 1308 of the Farm Bill requires that USDA take several 
actions with regard to peanuts marketed in the United States: Ensure 
mandatory inspection on all peanuts marketed in the United States; 
establish the Board comprised of producers and industry representatives 
to advise USDA; develop peanut quality and handling standards; and 
modify those quality and handling standards when needed. An interim 
final rule was published in the Federal Register (67 FR 57129) on 
September 9, 2002, terminating the previous peanut programs and 
establishing standards in Part 996 to insure the continued inspection 
of 2002 crop year peanuts and subsequent crop year peanuts, 2001 crop 
year peanuts not yet inspected, and 2001 crop year failing peanuts that 
had not yet met disposition standards. The initial Board was selected 
and announced on December 5, 2002. A final rule finalizing the interim 
final rule was published in the Federal Register (68 FR 1145) on 
January 9, 2003, to continue requiring all domestic and imported 
peanuts marketed in the United States to be handled consistent with the 
handling standards and officially inspected against the quality 
standards of the new program. The peanut quality and handling standards 
were later revised in rules published in the Federal Register (68 FR 
46919, August 7, 2003, and 68 FR 53490, September 11, 2003). The 
provisions of this program continue in force and effect until modified, 
suspended, or terminated.
    Pursuant to the Farm Bill, USDA has consulted with Board members in 
its review of the handling and quality standards for the 2005 and 
subsequent crop years. The quality and handling standards are intended 
to assure that satisfactory quality and wholesome peanuts are used in 
domestic and import peanut markets. All peanuts intended for human 
consumption must be officially inspected and graded by the Federal or 
Federal-State Inspection Service and, if necessary, undergo chemical 
testing by a USDA laboratory or a private laboratory approved by USDA.
    Under the Standards, Sec.  996.30(b) Moisture specifies ``No 
handler or importer shall receive or acquire farmers stock peanuts for 
subsequent disposition to human consumption outlets containing more 
than 10.49 percent moisture: Provided, That peanuts of a higher 
moisture may be received and dried to not more than 10.49 percent 
moisture prior to storing or milling: And Provided further, That

[[Page 35563]]

Virginia-type peanuts used for seed may be received or acquired 
containing up to 11.49 percent moisture.''
    High Moisture peanuts are farmers stock peanuts that have a 
moisture content, when harvested, in excess of 10.49 percent moisture. 
In order to ensure that high moisture peanuts are dried to or below 
10.49 percent moisture, growers must dry the peanuts on individual 
wagons/trailers. Often farmers stock peanuts are dried, taken to a 
sheller or handler, inspected and found to still be too high in 
moisture content, and must then be returned for additional drying at 
the grower's farm, at a handler/buying point facility, or at another 
location. Not all buying points, especially those in very rural 
locations, have drying facilities. This results in inefficiencies and 
added costs.
    Handlers may receive high moisture peanuts, but cannot acquire 
them. Peanuts that are received cannot be mixed, commingled or 
otherwise lose their identity. Accordingly, any high moisture 
deliveries from a producer cannot be mixed with other high moisture 
deliveries. However, the inability to commingle high moisture peanut 
deliveries for drying slows producer deliveries and raises drying 
costs. It also raises inspection costs because the peanuts need to be 
inspected a second time to verify moisture levels prior to handler 
acquisition.
    In response to requests from industry representatives and the 
Board, USDA allowed a trial relaxation in incoming peanut requirements 
for the 2004 crop year only. The Standards continued to require that 
farmers stock peanuts be dried to 10.49 percent moisture or less before 
storing or milling. However, wagonloads or lots of farmers stock 
peanuts grading between 10.50 and 18.00 percent moisture could be 
commingled at the handler/buying point facilities and bulk dried by 
handlers, in agreement with each producer of the wagonloads or lots 
being commingled. An 18 percent moisture limit recognizes the 
difficulties in the Inspection Service's use of its shelling equipment 
for peanuts with more than 18 percent moisture. After drying, a second 
inspection for moisture only was performed by Federal-State inspectors 
and documented accordingly. When the commingled lot was presented for 
the second ``moisture only'' inspection, the buying point was required 
to provide documentation identifying the specific lots or wagonloads 
which constituted the commingled lot. In the event that a commingled 
lot, after bulk drying, still did not meet the 10.49 percent moisture 
requirement, the lot could be further dried and re-inspected until the 
lot contained no more than 10.49 percent moisture.
    This temporary relaxation was the culmination of several meetings 
and requests from the Board and the peanut industry to bring the high 
moisture issue to conclusion. The Board made several recommendations 
regarding high moisture peanuts in 2003 and 2004. However, prior to the 
Board's discussion of any changes for 2005 crop peanuts, the 
Department's Farm Service Agency (FSA) identified an FSA program issue 
requiring resolution before implementation of any relaxation to the 
standard. Under FSA's loan program (7 CFR part 1421), high moisture 
peanuts must be segregated by each producer and dried to a moisture 
content not exceeding 10.49 percent. If high moisture peanuts from more 
than one producer are commingled and batch dried, the quality, 
quantity, and identity of each participating producer's peanuts would 
be lost. As such, those high moisture peanuts would not be eligible for 
FSA marketing assistance loans (MAL) or loan deficiency payments (LDP).
    These concerns have been resolved through a formulation of a 
revised FSA Form 1007 (a combined inspection certificate and 
calculation worksheet) that identifies and tracks high moisture peanut 
shipments. Inspection procedures and reporting requirements would 
remain unchanged. The original peanut inspection notesheet/certificate 
would accompany the FSA Form 1007 with the converted high moisture 
factors from the high moisture conversion charts provided by the 
National Peanut Research Laboratory (NPRL). The NPRL conversion charts 
provide a guide for varying levels of high moisture peanuts received 
and the converted grade factor equivalents when dried down to an 
acceptable level without having to conduct another inspection on the 
dried down peanuts.
    The Board met on March 16, 2005, and unanimously recommended that 
Sec.  996.30(b) be modified so that handlers and importers may receive 
or acquire farmers stock peanuts for subsequent disposition to human 
consumption outlets containing more than 18 percent moisture: Provided, 
That farmers stock peanuts be dried to not more than 18 percent 
moisture prior to inspection and grading. If the sound mature kernel 
and sound splits grade is 60 or below on a lot of peanuts that contains 
moisture between 10.49 and 18 percent, the lot of peanuts shall be 
dried to a moisture level of 10.49 or below prior to inspection and 
grading. Valencia peanuts may only be inspected at moisture levels 
10.49 and below. All farmers stock peanuts must be dried to not more 
than 10.49 percent moisture prior to storing or milling: Provided, That 
Virginia-type peanuts used for seed must be dried to 18 percent or less 
prior to inspection and to 11.49 percent or less prior to storing or 
milling.
    On March 23, 2005, the Board's implementation sub-committee 
recommended the removal from the Board's recommendation of the moisture 
requirement on peanuts with a sound mature kernel plus sound splits 
grade of 60 or below.
    According to a number of Board members, allowing handlers and 
importers to receive high moisture peanuts could make a significant 
difference in the efficient acquisition and warehousing of farmers' 
stock peanuts each fall. Allowing the acquisition of high moisture 
peanuts would allow handlers to accumulate a number of loads and batch 
dry them at the same time. These Board members indicated that this 
could speed up drying, grading, and movement of peanuts at harvest, 
which would be especially important when adverse weather conditions 
during harvest could cause peanut quality to deteriorate. According to 
some Board members, it would also reduce drying and inspection costs.
    Therefore under this proposal, domestic and imported peanuts must 
be dried to 18 percent or less prior to inspection and 10.49 percent or 
less prior to storing or milling. Virginia-type peanuts used for seed 
must be dried to 18 percent or less prior to inspection and to 11.49 
percent or less prior to storing or milling.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Analysis Act (RFA) the Agricultural Marketing Service (AMS) has 
considered the economic impact of this action on small entities. 
Accordingly, AMS had prepared this initial regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. There are approximately 
55 peanut shelling entities, operating approximately 70 shelling 
plants, and 25 importers subject to regulation under the peanut 
program. An estimated two-thirds of the handlers and nearly all of the 
importers may be classified as small entities, based on documents and 
reports received by USDA. Small agricultural service firms, which 
include handlers and importers,

[[Page 35564]]

are defined by the Small Business Administration (13 CFR 121.201), as 
those having annual receipts of less than $6,000,000.
    An approximation of the number of peanut farms that could be 
considered small agricultural businesses under the SBA definition (less 
than $750,000 in annual receipts) can be obtained from the 2002 
Agricultural Census, which is the most recent information on the number 
of farms categorized by size. There were 7,551 peanut farms with annual 
agricultural sales valued at less than $500,000 in 2002, representing 
87 percent of the total number of peanut farms in the U.S. (8,640). 
Since the Agricultural Census does not use $750,000 in sales as a 
category, $500,000 in sales is the closest approximation. Assuming that 
most of the sales from those farms are attributable to peanuts, the 
percentage of small peanut farms in 2002 (less than $750,000 in sales) 
was likely a few percentage points higher than 87 percent, and may have 
shifted by a small amount since 2002. Thus, the proportion of small 
peanut farms is likely to be close to 90 percent.
    According to the National Agricultural Statistics Service (NASS), 
the two-year average peanut production for the 2003 and 2004 crop years 
was 4.203 billion pounds, harvested from average acreage of 1.353 
million, yielding an average of 3,106 pounds per acre. The average 
value of production for the two-year period was $816.904 million. The 
average grower price over the two-year period was $0.194 per pound, and 
the average value per harvested acre was $604. Dividing the two year 
average value of production ($816.904 million) by the estimated 8,640 
peanut farms (2002 Agricultural Census) yields an estimated average 
peanut sales revenue per farm of approximately $94,440. Average peanut 
acreage per farm is 156.
    The Agricultural Census provides data on the value of annual sales 
of all agricultural products from peanut farms in terms of ranges. The 
value of annual agricultural product sales of the median peanut farm in 
2002 was between $50,000 and $99,999. The median is the midpoint 
ranging from the largest to the smallest.
    Several producers may own a single farm jointly, or, conversely, a 
producer may own several farms. In the peanut industry, there is, on 
average, more than one producer per farm. Dividing the two year average 
value of production of $816.904 million by 14,186 peanut producers 
(Farm Service Agency 2004 estimate) results in an estimate of average 
revenue per producer of approximately $57,585.
    The current 14 custom blanchers, 8 custom remillers, 4 oil mill 
operators, 4 USDA and 15 USDA-approved private chemical (aflatoxin) 
laboratories are subject to this rule to the extent that they must 
comply with reconditioning provisions under Sec.  996.50 and reporting 
and recordkeeping requirements under Sec.  996.71.
    These requirements are applied uniformly to these entities, whether 
large or small. In addition, there are currently 10 State inspection 
programs (Inspection Service) that will perform inspections under this 
peanut program.
    Importers of peanuts cover a broad range of business entities, 
including fresh and processed food handlers and commodity brokers who 
buy agricultural products on behalf of others. Some large, corporate 
handlers are also importers of peanuts. AMS is not aware of any peanut 
producers who imported peanuts during any of the recent quota years.
    The majority of peanut importers have annual receipts under 
$6,000,000. Some importers use customs brokers' import services. These 
brokers are usually held accountable by the importer to see that entry 
requirements under Sec.  996.60 and reporting and recordkeeping 
requirements under Sec.  996.71 are met. These reporting requirements 
are not applied disproportionately to small customs brokers.
    In view of the foregoing, it can be concluded that the majority of 
peanut producers, handlers, importers, and above-mentioned entities may 
be classified as small businesses.
    This proposal would change the minimum peanut quality and handling 
standards so that handlers may receive or acquire peanuts with a 
moisture content of up to 18 percent. The Board suggested changing the 
minimum peanut quality and handling standards to allow handlers to 
receive or acquire high moisture peanuts to promote the development of 
new drying technologies, increase efficiencies and reduce costs to the 
industry.
    USDA has considered alternatives to the suggested change to the 
quality and handling standards. The Farm Bill requires USDA to consult 
with the Board on these standards. An alternative would be to continue 
the current standards for the 2005 crop year. The current Board's 
recommended change to the handling and quality standards issue was 
raised during last year's USDA/Board standards review but was tabled 
until an inter-agency collaboration (AMS and FSA) could coordinate 
their respective peanut handling and loan regulations. However, because 
of the anticipated benefits of the recommended change, USDA believes 
the implementation of the Board's suggested change would be preferable 
to continuing without change. The Board's meeting was open to a wide 
audience and all interested persons were invited to attend the meeting 
and provide input.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this rule. A small business guide on 
complying with AMS fresh fruit, vegetable, and specialty crop programs 
similar to this peanut program may be viewed at the following Web site: 
http://www.ams.usda.gov/fv/moab.html. Any questions about the 
compliance guide or compliance with this program should be sent to Jay 
Guerber at the previously mentioned address in the FOR FURTHER 
INFORMATION CONTACT section.
    This rule invites comments on the Board's recommendation to change 
the quality and handling standards. Interested persons also are invited 
to submit information on the regulatory and economic impact of this 
action on small businesses. A 15-day comment period is provided to 
allow interested persons to respond to this proposal. Fifteen days is 
deemed appropriate because this rule, if adopted, should be in place as 
soon as possible for the 2005 crop year. Any comments timely received 
will be considered before a final determination is made in this matter.

Information Collection

    The Farm Bill specifies in section 1601(c)(2)(A) that the standards 
established pursuant to it, may be implemented without regard to the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). Furthermore, 
this rule does not change the existing information collection burden.
    Section 1601 of the Farm Bill also provides that promulgation of or 
amendments to the standards may be implemented without extending 
interested parties an opportunity to comment. However, due to the 
nature of the proposed changes, interested parties are provided 15 days 
to file comments.

List of Subjects 7 CFR Part 996

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

    For the reasons set forth in the preamble, 7 CFR Part 996 is 
proposed to be amended as follows:

[[Page 35565]]

PART 996--MINIMUM QUALITY AND HANDLING STANDARDS FOR DOMESTIC AND 
IMPORTED PEANUTS MARKETED IN THE UNITED STATES

    1. The authority citation for 7 CFR Part 996 continues to read as 
follows:


    Authority: 7 U.S.C. 7958.
    2. Paragraph (b) of Sec.  996.30 is revised to read as follows:


Sec.  996.30  Incoming quality standards.

* * * * *
    (b) Moisture. Domestic and imported peanuts shall be dried to 18 
percent or less prior to inspection and to 10.49 percent or less prior 
to storing or milling: Provided, That Virginia-type peanuts used for 
seed shall be dried to 18 percent or less prior to inspection and to 
11.49 percent or less prior to storing or milling.
* * * * *

    Dated: June 13, 2005.
Barry L. Carpenter,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 05-12156 Filed 6-20-05; 8:45 am]
BILLING CODE 3410-02-P