[Federal Register Volume 82, Number 202 (Friday, October 20, 2017)]
[Rules and Regulations]
[Pages 48755-48758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22712]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
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  Federal Register / Vol. 82, No. 202 / Friday, October 20, 2017 / 
Rules and Regulations  

[[Page 48755]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 996

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


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: Final rule.

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

SUMMARY: This rule implements 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 relaxes the 
allowance for damaged kernels in farmers stock peanuts when determining 
segregation. This change increases 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 are also 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: Effective February 1, 2018.

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].

ADDRESSES: 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 final rule is issued pursuant to Public 
Law 107-171, the Farm Security and Rural Investment Act of 2002 (Act). 
The minimum quality and handling standards for domestic and imported 
peanuts marketed in the United States (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 will not 
have substantial and direct effects on Tribal governments and would not 
have significant Tribal implications.

Executive Order 12988

    This final 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 the Department of Agriculture (USDA) take 
several actions with regard to peanuts marketed in the United States. 
These include ensuring mandatory inspection of all peanuts marketed in 
the United States; developing and implementing peanut quality and 
handling requirements; establishing the Peanut Standards Board (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 their 
review of the changes to the Standards included in this action. This 
final rule relaxes 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 are also adjusted to reflect this change. The Board 
believes these changes will 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. USDA proposed and requested public comment on the 
Board's recommendation in the Federal Register on May 25, 2017 (82 FR 
24082).
    The Standards establish minimum incoming and outgoing quality

[[Page 48756]]

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 1.00 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 1.00 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 in 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 his 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 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 final 
rule makes a corresponding adjustment to the damage requirements for 
incoming peanuts. This action relaxes the allowance for damaged kernels 
under the definition for Segregation 1 peanuts from 2.49 to 3.49 
percent, which will 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 should 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 
change. Since Segregation 2 historically composes approximately one 
percent of total farmers stock peanuts, this adjustment represents a 
very small shift in overall volume. Therefore, the change will 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 Segregation 
1 to Segregation 2, it can have a significant financial impact, 
especially for small producers. This change benefits 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 also requires 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 represents 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 
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.

Final 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 final 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

[[Page 48757]]

$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 
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 final rule relaxes the allowance for damaged kernels in 
farmers stock peanuts when determining segregation. This change 
increases 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 rule will align incoming farmers stock peanuts 
segregation with the outgoing quality standards and increase returns to 
producers.
    It is not anticipated that this action will 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 final 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 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 section 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 final rule relaxes the allowance for damaged kernels in 
farmers stock peanuts when determining segregation under the Standards. 
Recordkeeping requirements will remain the same. Accordingly, this 
action will not impose any additional reporting or recordkeeping 
requirements on either small or large handlers or importers.
    As noted in the initial regulatory flexibility analysis, USDA has 
not identified any relevant Federal rules that duplicate, overlap or 
conflict with this rule. Further, the public comments received 
concerning the proposal did not address the initial regulatory 
flexibility analysis.
    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.
    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.
    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 were provided with a 30-day comment period.
    A proposed rule concerning this action was published in the Federal 
Register on May 25, 2017 (82 FR 24082). Copies of the rule were mailed 
or sent via facsimile to all Board members. Finally, the rule was made 
available through the internet by USDA and the Office of the Federal 
Register. A 30-day comment period ending June 26, 2017, was provided to 
allow interested persons to respond to the proposal.
    Ten comments were received during the comment period in response to 
the proposal. The commenters included producers, a sheller, a producer 
association, a sheller association, two State farm bureaus, a State 
peanut board, a State commodity commission, and one anonymous 
individual. Nine of the comments received were in support of the 
proposed rule, and one comment was in opposition.
    All nine positive comments expressed support for finalizing the 
proposed rule as issued. Seven of these comments recognized the 
industry's advancements in technology that allows for better sorting 
and cleaning of incoming farmers stock peanuts. Seven commenters stated 
this change would align farmers stock segregation damage under incoming 
standards with the 2016 changes to the outgoing peanut quality 
standards. Six commenters suggested the one percent relaxation should 
allow farmers to improve returns and lower financial risk by shifting 
more peanuts into Segregation 1. One comment added that modern 
harvesting practices can cause slightly more damage to peanut kernels, 
but noted that this type of damage is cosmetic and has nothing to do 
with food safety or quality. Two of the comments asked for the changes 
to be implemented for the 2017 crop.
    Given industry and USDA adjustments that will need to occur to 
accommodate these changes, USDA believes that the changes should be 
effective well in advance of a given crop year. The 2017 crop is well 
underway. As such, USDA is setting February 2018 as the most 
appropriate effective date to ensure an orderly transition to the 
revised standards for the next season.
    The one negative comment, received from an anonymous individual, 
questioned why the standards are being lowered to match our 
competitors. The commenter also noted this is likely an effort to 
receive more product from overseas.
    Few, if any, peanuts are imported as farmers stock. Consequently, 
this action would have no impact on imported peanuts. However, imported 
peanuts are subject to the same outgoing quality requirements as 
domestic peanuts under the Standards. This action makes no changes to 
the outgoing standards. While this change would not impact imported 
peanuts, it could result in additional domestic peanuts being available 
for human consumption.
    Accordingly, no changes will be made to the rule as proposed, based 
on the comments received.

[[Page 48758]]

    After consideration of all relevant matter presented, including the 
information and recommendation submitted by the Board and other 
available information, it is hereby found that this rule, as 
hereinafter set forth, will tend to effectuate the declared policy of 
the Act.

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 
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 1.00 
percent concealed damage caused by rancidity, mold, or decay and which 
are free from visible Aspergillus flavus.
* * * * *

    Dated: October 16, 2017.
Bruce Summers,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 2017-22712 Filed 10-19-17; 8:45 am]
BILLING CODE 3410-02-P