[Federal Register Volume 82, Number 100 (Thursday, May 25, 2017)]
[Proposed Rules]
[Pages 24082-24085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-10680]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 996

[Doc. No. AMS-SC-16-0102; SC16-996-3 PR]


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

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement a recommendation from the 
Peanut Standards Board (Board) to revise the minimum quality and 
handling standards for domestic and imported peanuts marketed in the 
United States (Standards). The Board advises the Secretary of 
Agriculture regarding potential changes to the Standards and is 
comprised of producers and industry representatives. This action would 
relax the allowance for damaged kernels in farmers stock peanuts when 
determining segregation. This change would increase the allowance for 
damaged kernels under Segregation 1 from not more than 2.49 percent to 
not more than 3.49 percent. The requirements for Segregation 2 would 
also be adjusted to reflect this change. The Board recommended this 
change to align the incoming standards with recent changes to the 
outgoing quality standards and to help increase returns to producers.

DATES: Comments must be received by June 26, 2017.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposal. Comments must be sent to the Docket Clerk, 
Marketing Order and Agreement Division, Specialty Crops Program, AMS, 
USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC 20250-
0237; Fax: (202) 720-8938; or Internet: http://www.regulations.gov. All 
comments should reference the document 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.regulations.gov. All 
comments submitted in response to this proposal will be included in the 
record and will be made available to the public. Please be advised that 
the identity of the individuals or entities submitting the

[[Page 24083]]

comments will be made public on the internet at the address provided 
above.

FOR FURTHER INFORMATION CONTACT: Steven W. Kauffman, Marketing 
Specialist, or Christian D. Nissen, Regional Director, Southeast 
Marketing Field Office, Marketing Order and Agreement Division, 
Specialty Crops Program, AMS, USDA; Telephone: (863) 324-3775, Fax: 
(863) 291-8614, or Email: [email protected] or 
[email protected].
    Small businesses may request information on complying with this 
regulation by contacting Richard Lower, Marketing Order and Agreement 
Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue 
SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-2491, 
Fax: (202) 720-8938, or Email: [email protected].

SUPPLEMENTARY INFORMATION: This proposed rule is issued pursuant to 
Public Law 107-171, the Farm Security and Rural Investment Act of 2002 
(Act). The Standards regulate the quality and handling of domestic and 
imported peanuts marketed in the United States.

Executive Orders 12866, 13563 and 13771

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
This action has been designated as a ``non-significant regulatory 
action'' under section 3(f) of Executive Order 12866. Accordingly, this 
rule is not subject to review by the Office of Management and Budget 
(OMB). Additionally, because this rule does not meet the definition of 
a significant regulatory action it does not trigger the requirements 
contained in Executive Order 13771. See OMB's Memorandum titled 
``Interim Guidance Implementing Section 2 of the Executive Order of 
January 30, 2017 titled `Reducing Regulation and Controlling Regulatory 
Costs' '' (February 2, 2017).

Executive Order 13175

    This action has been reviewed in accordance with the requirements 
of Executive Order 13175, Consultation and Coordination with Indian 
Tribal Governments. The review reveals that this regulation would not 
have substantial and direct effects on Tribal governments and would not 
have significant Tribal implications.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. It is not intended to have retroactive effect and 
shall not abrogate nor nullify any other statute, whether State or 
Federal, dealing with the same subjects as this Act; but is intended 
that all such statutes shall remain in full force and effect except in 
so far as they are inconsistent herewith or repugnant hereto (7 U.S.C. 
587).
    There are no administrative procedures which must be exhausted 
prior to any judicial challenge to the provisions of this rule.
    The Act 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; developing and 
implementing peanut quality and handling requirements; establishing the 
Board comprised of producers and industry representatives to advise 
USDA regarding the quality and handling requirements under the 
Standards; and modifying those quality and handling requirements when 
needed. USDA is required by the Act to consult with the Board prior to 
making any changes to the Standards.
    Pursuant to the Act, USDA has consulted with Board members in its 
review of the changes to the Standards included in this proposed rule. 
This proposed rule invites comments on a revision to relax the 
allowance for damaged kernels in farmers stock peanuts when determining 
segregation. The Board recommended changing the allowance for damaged 
kernels under Segregation 1 from not more than 2.49 percent to not more 
than 3.49 percent. The requirements for Segregation 2 would also be 
adjusted to reflect this change. The Board believes these changes would 
align the incoming standards with recent revisions to the outgoing 
quality standards and increase returns to producers. These changes were 
recommended by the Board at its meeting on September 1, 2016.
    The Standards establish minimum incoming and outgoing quality 
requirements for domestic and imported peanuts marketed in the United 
States. Section 996.8 defines incoming inspection as the sampling, 
inspection, and certification of farmers stock peanuts to determine 
segregation and grade quality. Section 996.13 of the Standards defines 
three levels of segregation for incoming farmers stock peanuts. 
Segregation 1 is currently defined as farmers stock peanuts with not 
more than 2.49 percent damaged kernels nor more than l.00 percent 
concealed damage caused by rancidity, mold, or decay and which are free 
from visible Aspergillus flavus. Segregation 2 is currently defined as 
farmers stock peanuts with more than 2.49 percent damaged kernels or 
more than l.00 percent concealed damage caused by rancidity, mold, or 
decay and which are free from visible Aspergillus flavus, and 
Segregation 3 is defined as farmers stock peanuts with visible 
Aspergillus flavus. Section 996.30 outlines the incoming quality 
standards, which specify that all farmers stock peanuts received by 
handlers shall be inspected and certified as to segregation and 
moisture content.
    Segregation 1 encompasses the majority of incoming farmers stock 
peanuts. Segregation 2 peanuts have historically constituted roughly 
one percent of the domestic crop. However, there has been a slight 
increase for the previous two years to 2.5 percent in 2014 and 3 
percent for 2015. The fluctuation in the percentage of Segregation 2 
peanuts is likely the result of weather conditions around harvest time.
    A group of several entities representing peanut producers wrote a 
letter to the Board requesting that the Board review the allowance for 
damaged kernels for farmers stock peanuts. In their letter, the 
producer groups stated they believe the loan value for Segregation 2 
peanuts under the Farm Service Agency's marketing assistance loans 
program remains low. Even though changes in regulations and technology 
allow Segregation 2 peanuts to now be cleaned and resold at a higher 
market rate, there has been little change in the loan value for these 
peanuts. The letter further stated that should a farmer have their 
entire crop graded Segregation 2, it could be economically devastating. 
Therefore, the letter requested an increase in the allowance for 
damaged kernels for Segregation 1 from 2.49 to 3.49 percent, shifting 
more peanuts into the category of Segregation 1.
    The Board discussed this request at its September 1, 2016, meeting. 
In its discussion, the Board recognized the large difference between 
the loan rate for Segregation 1 and for Segregation 2 peanuts. The 
Board agreed that many Segregation 2 peanut lots can be cleaned-up to 
meet the outgoing quality standards with minimal cost involved. This 
allows a significant portion of the Segregation 2 peanuts purchased to 
be

[[Page 24084]]

utilized at a higher value after processing.
    There has been significant industry advancement in technology since 
the 2002 Farm Bill established the Standards. Before 2002, Segregation 
2 peanuts had to be sent to a crusher and could not be reworked to meet 
the outgoing quality standards. In recent years, the improvements in 
technology have allowed the industry to utilize Segregation 2 peanuts 
and still meet outgoing quality standards. Further, recent changes to 
the outgoing quality standards relaxed the allowance for damaged 
kernels from 2.5 to 3.5 percent for kernels and for cleaned-inshell 
peanuts (81 FR 50283, published August 31, 2016). This relaxation made 
additional peanuts available for sale for human consumption. This 
proposed change would make a corresponding adjustment to the damage 
requirements for incoming peanuts. The change would relax the allowance 
for damaged kernels under the definition for Segregation 1 peanuts from 
2.49 to 3.49 percent, which would shift a small portion of peanuts from 
Segregation 2 into the Segregation 1 category.
    The effect of this change on the overall quality of peanuts in the 
industry would be minimal. In considering this issue, the Board 
reviewed data from the National Center for Peanut Competitiveness. The 
data indicated that roughly one third of Segregation 2 farmers stock 
peanuts would be shifted into the Segregation 1 category under the 
proposed change. Since Segregation 2 historically composes 
approximately one percent of total farmers stock peanuts, this 
adjustment would represent a very small shift in overall volume. 
Therefore, the proposed change would have an insignificant impact on 
the composition of Segregation 1 peanuts.
    As the producer value of farmers stock peanuts is determined in 
part by the category of segregation, the segregation level determined 
during the incoming inspection impacts producer returns. If a producer 
experiences a shift in damage that moves their peanuts from a 
Segregation 1 to a Segregation 2, it can have a significant financial 
impact, especially for small producers. This change would benefit the 
industry by moving more peanuts into the Segregation 1 category. This 
should increase returns and help lower financial risk to producers by 
shifting more peanuts into the higher value Segregation 1 category.
    This change would also require increasing the Segregation 2 
criteria from more than 2.49 percent to more than 3.49 percent damaged 
kernels. The Board recommended these changes, in part, to align the 
incoming standards with the recent changes that were made to the 
outgoing quality standards earlier this year. Further, the Board 
believes the 3.49 percent allowance for damaged kernels would represent 
an acceptable level of damage while maintaining quality peanuts.
    Consequently, the Board recommended increasing the percent damaged 
kernel allowance under Segregation 1 from not more than 2.49 percent to 
not more than 3.49 percent. The Board voted 13-2 in support of the 
proposed changes. One of the two Board members voting against the 
changes was concerned that the decision was being made without enough 
data and was concerned about maintaining the quality of peanuts. 
Several Board members responded that this change was not a new issue 
for the industry. Further, this change has been well supported by 
producer groups prompting this action. These changes are consistent 
with the Standards and the Act.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), 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.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened.
    Small agricultural producers are defined by the Small Business 
Administration (SBA) as those having annual receipts of less than 
$750,000 and small agricultural service firms, including handlers and 
importers, are defined as those having annual receipts of less than 
$7,500,000 (13 CFR 121.201).
    There are approximately 7,500 peanut producers, 60 peanut handlers, 
operating approximately 70 shelling plants, and 25 importers subject to 
regulation under the peanut program.
    An approximation of the number of peanut farms that could be 
considered small agricultural businesses under the SBA definition can 
be obtained from the 2012 Agricultural Census, which is the most recent 
information on the number of farms categorized by size. There were 
3,066 peanut farms with annual agricultural sales valued at less than 
$500,000 in 2012, representing 47 percent of the total number of peanut 
farms in the U.S. (6,561). According to the National Agricultural 
Statistics Service (NASS), peanut production for the 2014 and 2015 crop 
years averaged 5.7 billion pounds. The average value of production for 
the two-year period was $1.173 billion. The average producer price over 
the two-year period was $0.21 per pound. Dividing the two-year average 
production value of $1.173 billion by the approximate number of peanut 
producers of 7,500 results in an average revenue per producer of 
approximately $156,000, well below the SBA threshold for small 
producers.
    Dividing the two-year average production value of $1.173 billion by 
the approximate number of peanut handlers of 60 results in an average 
revenue per handler of approximately $19,550,000. Using a normal 
distribution, the majority of handlers may be considered large 
entities. Further, according to the Foreign Agricultural Service's 
Global Agricultural Trade System, the average annual value of peanuts 
imported into the United States for the 2014 and 2015 seasons was 
approximately $67 million. By dividing the annual average value of 
imported peanuts by the number of importers, the majority of importers 
would meet the SBA definition for small agricultural service firms. 
Consequently, the majority of producers and importers may be classified 
as small entities, but the majority of handlers may be considered large 
entities when using a normal distribution.
    This proposed rule would relax the allowance for damaged kernels in 
farmers stock peanuts when determining segregation. This action would 
change the allowance for damaged kernels under Segregation 1 from not 
more than 2.49 percent to not more than 3.49 percent. The Board 
believes this proposed rule would align incoming farmers stock peanuts 
segregation with the outgoing quality standards and increase returns to 
producers.
    It is not anticipated that this action would impose additional 
costs on handlers, producers, or importers, regardless of size. Rather, 
these changes should help improve returns to peanut producers and help 
lower financial risk.
    This proposed rule is expected to benefit the industry. The effects 
of this rule are not expected to be disproportionately greater or less 
for small handlers, producers or importers than for larger entities.
    The USDA has considered alternatives to these changes. The Act 
requires USDA to consult with the Board on changes to the Standards. An 
alternative discussed was to increase the damaged kernel percentage up 
to 4.49 percent for Segregation 1. However, the

[[Page 24085]]

Board believes this alternative would relax the kernel damage too far. 
Therefore, this alternative was rejected.
    USDA has met with the Board, which is representative of the 
industry, and has included its recommendations in this rule.
    The Act specifies in Sec.  1604(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). However, USDA 
has considered the reporting and recordkeeping burden on handlers and 
importers under this program. This proposed rule would relax the 
allowance for damaged kernels in farmers stock peanuts when determining 
segregation under the Standards. Recordkeeping requirements would 
remain the same. Accordingly, this rule would not impose any additional 
reporting or recordkeeping requirements on either small or large 
handlers or importers.
    Section 1601 of the Act also provides that 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 with a 30-day comment period.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap or conflict with this rule.
    The Board's meeting was widely publicized throughout the peanut 
industry and all interested persons were invited to attend and 
participate in Board deliberations on all issues. Like all Board 
meetings, the September 1, 2016, meeting was a public meeting and all 
entities, both large and small, were able to express views on these 
issues. Finally, interested persons are invited to submit comments on 
this proposed rule, including the regulatory and informational impacts 
of this action on small businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions 
about the compliance guide should be sent to Richard Lower at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. Thirty days is deemed appropriate because 
farmers stock peanuts are already being delivered from the 2016-17 
crop. Further, the industry is aware of this proposed action 
recommended by the Board. All written comments timely received will be 
considered before a final determination is made on this matter.

List of Subjects in 7 CFR Part 996

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

    For the reasons set forth in the preamble, 7 CFR part 996 is 
proposed to be 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. Section 996.13 is amended by revising paragraphs (b) and (c) to read 
as follows:


Sec.  996.13   Peanuts.

* * * * *
    (b) Segregation 1. ``Segregation 1 peanuts'' means farmers stock 
peanuts with not more than 3.49 percent damaged kernels nor more than 
1.00 percent concealed damage caused by rancidity, mold, or decay and 
which are free from visible Aspergillus flavus.
    (c) Segregation 2. ``Segregation 2 peanuts'' means farmers stock 
peanuts with more than 3.49 percent damaged kernels or more than l.00 
percent concealed damage caused by rancidity, mold, or decay and which 
are free from visible Aspergillus flavus.
* * * * *

    Dated: May 19, 2017.
Bruce Summers,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2017-10680 Filed 5-24-17; 8:45 am]
 BILLING CODE 3410-02-P