[Federal Register Volume 70, Number 146 (Monday, August 1, 2005)]
[Rules and Regulations]
[Pages 44043-44046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-15167]



 ========================================================================
 Rules and Regulations
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
 
 The Code of Federal Regulations is sold by the Superintendent of Documents. 
 Prices of new books are listed in the first FEDERAL REGISTER issue of each 
 week.
 
 ========================================================================
 

  Federal Register / Vol. 70, No. 146 / Monday, August 1, 2005 / Rules 
and Regulations  

[[Page 44043]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 996

[Docket No. FV05-996-2 FR]


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

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule changes 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: Effective August 2, 2005.

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; 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 final rule is issued under section 1308 
of the Farm Security and Rural Investment Act of 2002 (Pub. L. 107-
171), 7 U.S.C. 7958, hereinafter referred to as the ``Farm Bill.''
    This final 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 final 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. These 
include ensuring mandatory inspection on all peanuts marketed in the 
United States; establishing the Board comprised of producers and 
industry representatives to advise USDA; developing and implementing 
peanut quality and handling standards; and modifying 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 
the 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 
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

[[Page 44044]]

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 USDA's 
Farm Service Agency (FSA) identified an FSA program issue requiring 
resolution before implementation of any relaxation to the moisture 
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 will remain 
unchanged. The original peanut inspection notesheet/certificate will 
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 because this requirement was not needed.
    According to a number of Board members, allowing handlers and 
importers to receive high moisture peanuts will make a significant 
difference in the efficient acquisition and warehousing of farmers' 
stock peanuts each fall. Allowing the acquisition of high moisture 
peanuts will allow handlers to accumulate a number of loads and batch 
dry them at the same time. These Board members indicated that this will 
speed up drying, grading, and movement of peanuts at harvest, which 
will be especially important when adverse weather conditions during 
harvest could cause peanut quality to deteriorate. According to some 
Board members, it will also reduce drying and inspection costs.
    Therefore under this final rule, 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.

Final 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 final 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, 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

[[Page 44045]]

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 final rule changes the minimum peanut quality and handling 
standards so that handlers may receive 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 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 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 is 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.

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 were provided 15 
days to file comments. The proposed rule concerning these changes was 
published in the Federal Register (70 FR 35562) on June 21, 2005. The 
rule was posted on the AMS Web site specified above and was available 
through the internet by the Office of the Federal Register. The 
proposed rule provided that comments received by July 6, 2005, would be 
considered in finalizing the rulemaking action.
    A total of four comments were received from a peanut shellers 
association, a peanut product manufacturers association, a peanut 
growers association, and the Georgia Peanut Commission. Three comments 
were in support of the proposed rule. The comment from the peanut 
commission stated that it wanted to be certain that grower interests 
were protected and that any proposed changes would not be detrimental 
to growers. This rule would allow handlers and importers to receive or 
acquire high moisture peanuts thereby promoting the development of new 
drying technologies, increasing efficiencies and reducing costs to the 
overall industry. This comment also mentioned an additional concern 
pertaining to comparable loan calculations on peanuts that have been 
dried to a suitable loan level. As stated previously in this action, 
FSA has revised its Form 1007 to identify and track high moisture 
peanut shipments, including green peanuts. Accordingly, no changes are 
made in the provisions as proposed.
    It also is found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because producers and handlers are 
preparing for the 2005 crop year, which

[[Page 44046]]

starts September 1. Further, handlers are aware of this rule, which was 
recommended at a public meeting. Also, a 15-day comment period was 
provided for in the proposed rule and four comments were received as 
discussed herein.

List of Subjects 7 CFR Part 996

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


0
For the reasons set forth in the preamble, 7 CFR part 996 is amended as 
follows:

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

0
1. The authority citation for 7 CFR part 996 continues to read as 
follows:

    Authority: 7 U.S.C. 7958.


0
2. Paragraph (b) of Sec.  996.30 is revised to read as follows:


Sec.  996.30  Incoming quality standards.

    (a) * * *
    (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: July 27, 2005.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 05-15167 Filed 7-27-05; 4:10 pm]
BILLING CODE 3410-02-P