Prohibition on Adding Water to Grain

SUMMARY: The Federal Grain Inspection Service (FGIS) is revising the

regulations under the United States Grain Standards Act (USGSA) to

prohibit the application of water to grain, except for milling,

malting, or similar processing operations. This prohibition is

applicable to all persons handling grain, not just those receiving

official inspection and weighing services under the USGSA. FGIS has

determined that water, which is sometimes applied as a dust

suppressant, can be too easily misused to increase the weight of grain.

Additionally, externally-applied water has a significant potential for

degrading the quality of grain. FGIS believes that this action will

foster the marketing of grain of high quality to both domestic and

foreign buyers and promote fair and honest weighing practices.

EFFECTIVE DATE: February 11, 1995.

FOR FURTHER INFORMATION CONTACT: George Wollam, FGIS, USDA, Room 0623

South Building, PO Box 96454, Washington, DC 20090-6454; (202) 720-

0292.

SUPPLEMENTARY INFORMATION:

Executive Order 12866 and the Regulatory Flexibility Act

This final rule has been determined to be significant for purposes

of Executive Order 12866 and has been reviewed by the Office of

Management and Budget. The practice of adding water to grain has

undermined the reputation of U.S. grain and jeopardized the U.S. grain

industry's commitment to quality. Prohibiting this practice will foster

the marketing of high quality grain and promote fair and honest

weighing practices.

Applying water to grain may, under certain circumstances, reduce

fugitive dust emissions--an important safety, health, and environmental

objective. But, prohibiting its use will not prevent an elevator

operator from maintaining a safe and healthy work environment, or

complying with applicable air quality standards. There are many other

equally or more effective and efficient dust control strategies

available. Most U.S. grain elevators, including those that currently

use water, already have pneumatic dust collection systems and/or oil-

based dust suppression systems installed.

Presently, FGIS knows of only a few grain elevators spraying water

on grain for dust control purposes. This is neither a common nor

generally-accepted practice. Adding even a small amount of water can be

detrimental to grain quality. Consequently, of the 63 active export

grain elevators operating in the U.S., all have pneumatic dust

collection capabilities and most do not have water dust suppressant

systems. Only three (or five percent) of these 63 export elevators (all

three operated by one company) apply water directly to grain as a dust

control method. While no precise statistics exist on how many of the

approximately 10,000 domestic grain elevators use water as a dust

suppressant, it is estimated to be no greater than the level found in

the export market.

In the short run, grain elevators that use water could experience a

minor adverse economic impact if their facilities require retrofitting

of dust control equipment. But, since most--if not all--of those

elevators are already using other dust control methods/systems in

addition to water, the cost of converting to a water-free system should

be virtually nil. Of those few facilities that use water and rely on

the added weight gain and subsequent added value to enhance their

profit margins, then this rule could have a greater impact. This action

would stop such gains derived through adulteration.

If the practice of adding water to grain were allowed to continue,

there is a significant risk that market pressures would cause today's

isolated cases of water use to become widespread. Using water as a dust

suppressant increases the weight of grain. This invites tampering and

misuse of water systems to increase profit. Adding as little as 0.3

percent water, by weight, can significantly enhance the small margin

that the grain industry operates under. For example: by applying water

at a 0.3 percent rate to a 50,000 metric ton (mt) shiplot of wheat, an

exporter could (excluding subsequent evaporation) add 150 mt of water

to the shipment. If the wheat was sold for $128 per mt (5.8 cents per

pound), the water could generate over $19,000 in additional profit for

the shipper.

The following chart compares the financial impact that adding soy

and mineral oil (common dust suppressants) and water has upon the value

of various soybean shipments.

Financial Impact of Water and Oil Dust Suppressants on Soybeans

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Additive cost Equivalent

Pounds (60 Value $6/bu Application Weight ------------------------ Total soybean Net effect

Carrier Bushels lbs./bu) ($.10/lb.) Additive rate (% by gain additive value gain (+ or -)

weight (lbs.) Per gal. Per lb. cost

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

Railcar........................... 3,000 180,000 $18,000 Water............................ 0.3 540 $0.003 $0.00036 $0.19 $54 +$53.81

Soy oil.......................... 0.02 36 1.80 .2337 8.41 3 -4.81

Mineral oil...................... 0.02 36 2.70 .3506 12.62 3 -9.02

Barge............................. 60,000 3,600,000 360,000 Water............................ 0.3 10,800 0.003 .00036 3.80 1,800 +1,076.20

Soy oil.......................... 0.02 720 1.80 .2337 168.20 72 -96.20

Mineral oil...................... 0.02 720 2.70 .3506 252.40 72 -180.40

Ship.............................. 1,200,000 72,000,000 7,200,000 Water............................ 0.3 216,000 0.003 .00036 76.00 21,600 +21,524.00

Soy oil.......................... 0.02 14,400 1.80 .2337 3,364.00 1,440 -1,924.00

Mineral oil...................... 0.02 14,400 2.70 .3506 5,048.00 1,440 -3,608.00

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Furthermore, FGIS estimates that the cost of regulating the

practice of adding water to grain could quickly escalate as more and

more elevators respond to the profitable practice of applying water to

grain for dust suppression. There are approximately 10,000 grain

handling facilities in the U.S. Monitoring the use of water would

require a significant staff commitment and FGIS has no method of

assuring that additional water would not be added when an inspector was

not present.

The effectiveness of any regulatory system is compromised because

regulators cannot rely on after-the-fact product testing to verify the

proper application of water. It is technologically impossible to test

grain and distinguish naturally occurring moisture from applied or

added moisture. Consequently, a regulated system must rely on an

elaborate set of specifications involving water sources, application

rates, metering devices, and inventory controls. And, while regulators

could evaluate a new system and approve its installation, opportunities

to override computer monitoring would exist with increased incentives

to exploit any loopholes. Followup-audits of systems would be time-

consuming, expensive, and minimally effective.

Allowing the continued addition of water to grain could also have a

negative impact on U.S. grain exports. One of the major advantages that

U.S. grain enjoys compared to competing exporting countries, is the

relative low moisture content of many U.S. grains, such as wheat.

Adding water to these grains erodes this advantage. Additionally, many

foreign buyers have already expressed deep concern about potential

quality degradation caused by water and ``paying grain prices for

water.''

While prohibiting the addition of water to grain could, in the

short term, decrease the profit margin of a few grain elevators that

are using water to suppress dust, FGIS has determined that this action

will not have a significant economic impact on the overall U.S. grain

industry or on a substantial number of small entities. On the contrary,

the U.S. grain industry is expected to benefit from this action by

promoting the marketing of high quality grain and the fair and honest

weighing of grain.

David R. Shipman, Acting Administrator, FGIS, has determined that

this final rule will not have a significant economic impact on a

substantial number of small entities.

Executive Order 12778

This final rule has been reviewed under Executive Order 12778,

Civil Justice Reform. This action is not intended to have a retroactive

effect. The United States Grain Standards Act provides in section 87g

that no State or subdivision may require or impose any requirements or

restrictions concerning the inspection, weighing, or description of

grain under the Act. Otherwise, this final 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.

Information Collection Requirements

In accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.

Chapter 35), the information collection requirements contained in this

rule have been previously approved by OMB under control number 0580-

0013.

Effective Date

It is desirable that these revisions to the regulations become

effective 120 days after promulgation. This period is deemed necessary

for all interested parties to prepare for implementation of the revised

regulations and would provide adequate time for the industry to make

necessary equipment modifications.

Background

In the March 4, 1987, Federal Register (52 FR 6493), FGIS amended

the regulations under the United States Grain Standards Act (USGSA) to

establish provisions for officially inspecting and weighing additive-

treated grain. These provisions were established to offer the grain

industry the opportunity to utilize available dust suppression

technology, apply insect and fungi controls, and mark grain for

identification purposes with Food and Drug Administration (FDA)

approved additives. The final rule specified that if additives are

applied during loading to outbound grain after sampling or weighing, or

during unloading to inbound grain before sampling or weighing for the

purpose of insect or fungi control, dust suppression, or

identification, the inspection and/or weight certificate must show a

statement that describes the type and purpose of the additive

application. A statement was not required to be shown when additives

were applied prior to sampling and weighing outbound grain or after

sampling and weighing inbound grain. However, all incidents or

suspected incidents of unapproved additive usage or improper additive

application were required to be reported to the appropriate Federal,

State, or local authorities for action.

In 1992, several foreign and domestic grain merchants expressed

concern about the application of water to grain for dust suppression

purposes. They contended that the primary purpose of applying water is

to increase the weight of the grain, and, thereby, gain a market

advantage. Furthermore, U.S. suppliers expressed deep concern about

possible negative market reaction by both domestic and foreign buyers;

i.e., buyer confidence in U.S. grain will decline if concerns develop

over potential quality degradation caused by water and ``paying grain

prices for water.'' As a result of these concerns, in the January 8,

1993, Federal Register (58 FR 3211), FGIS amended Secs. 800.88 and

800.96 of the regulations under the USGSA to require a statement on

official export inspection and weight certificates whenever water is

applied to export grain at export port locations. The purpose of this

action was to ensure that foreign buyers of U.S. grain are informed

when additives have been applied to grain exported from export port

locations. This action did not address non-export grain.

During and since revising the regulations requiring a statement on

export grain certificates, numerous grain industry groups, including

exporters, importers, millers, processors, and producers, have voiced

their growing concern about the effect that the application of water

has upon all U.S. grain, whether or not such grain is exported from the

U.S. or even offered for official inspection and weighing services.

They have stated--and available information appears to confirm--that

applying water to grain poses a risk to grain quality and can provide a

strong incentive to improperly increase weight. Furthermore, this

practice not only adds weight but creates favorable conditions for

microbial-contamination of grain. Section 13(e)(1) of the USGSA (7

U.S.C. 87b) authorizes the FGIS Administrator to prohibit the

contamination of sound and pure grain as a result of the introduction

of nongrain substances. Even though kernels of grain contain moisture,

externally-applied water is a ``nongrain substance.'' Therefore, in the

August 4, 1993, Federal Register (58 FR 1439), FGIS proposed to

prohibit the application of water to grain.

During the 120-day comment period ending December 2, 1993, FGIS

received 341 comments from the various segments of the grain industry,

including producers, end-users, grain handlers, foreign buyers,

promotional associations, and researchers. Of the total comments

received, 215 supported or generally supported the proposal and 126

opposed it. Of those that opposed the proposal, 77 recommended

regulating the use of water, 11 suggested that grain be marketed on a

dry matter or fixed moisture basis, and 38 offered no other

alternatives. On the basis of these comments and other available

information, FGIS has decided to revise the regulations to prohibit the

addition of water to grain. The following paragraphs address key issues

and pertinent comments that were considered in making this decision.

Elevator Safety

Over 100 commentors indicated that they opposed a complete

prohibition on the use of water, in whole or in part, because of safety

concerns. Mr. Wayne R. Bellinger, Director of Safety and Sanitation,

ConAgra Grain Processing Companies, commented that: ``I have seen with

my own eyes the dramatic difference in dust levels both within

operating equipment and in the workplace atmospheres in elevators where

dust suppression fluids are used.''

Grain dust is created by the impact or abrasion of grain and

includes bran flakes, fine broken brush hairs, particles of endosperm,

weed seeds, pieces of chaff and straw, and soil. This dust is so fine

that it easily becomes suspended in air and, as a result, can become

fuel for potentially disastrous grain elevator explosions. Such

explosions can shatter concrete bin walls and even lift bins of grain

weighing hundreds of tons off of the ground. Fortunately, since the

late 1970's, the number and magnitude of dust explosions has

significantly declined.

According to many commentors, the key reasons for this significant

turnaround are better engineering and greater awareness, not the use of

water. Today, grain companies educate their managers and employees

about the risk of dust explosions. Practices that were commonplace 15

years ago, such as smoking in elevators, are now prohibited by company

policy and the Occupational Safety and Health Administration (OSHA).

Elevators also have a wider variety of fire and explosion prevention

``tools'' at their disposal. These include better smoke and heat

detectors, improved bearings and buckets, blow-out panels and vents,

fire/explosion suppression systems, improved cleaning techniques, and

better dust control methods. Consequently, the vast majority of grain

elevators in the U.S. have not found it necessary to use water to

control dust. This is underscored by a joint comment submitted by

Archer Daniels Midland, Bunge Corporation, Cargill Incorporated,

Continental Grain Company, and Louis Dreyfus Corporation: ``While a

spray of water may be an effective grain dust suppressant, it is not

the only means available to control dust. There are other--better--

management practices for minimizing the risks of potential grain dust

explosions, and they have become the standard throughout the U.S. grain

handling system. Systems that add water are the exception.''

FGIS, whose employees work in and around grain elevators, is very

concerned about grain dust and has worked closely with the industry to

foster improvements in elevator safety. Based on currently available

information, FGIS does not believe that adding water to grain is a

necessary or irreplaceable dust control strategy. Most U.S. elevators,

including those that currently add water, rely on pneumatic dust

control systems, thorough housekeeping, and preventive maintenance to

control dust. Such measures are cost effective, efficient, and widely

available. Consequently, FGIS finds that there is no indication that

banning the use of water will prevent an elevator operator from taking

the necessary actions to reduce the possibility of property loss or

personal injury due to fugitive grain dust.

Grain Quality and Fair Weights

Moisture is the major factor in grain storability, chiefly because

of its influence on the growth of storage fungi. The number of days

that grain can be safely stored decreases as the moisture level of the

grain increases. Many commentors indicated that adding water to grain

creates favorable conditions for microbial-contamination. Mr. H.N.

Eicher, Vice President, Ralston Purina International, stated in his

comments: ``During the past few years the detection of various

mycotoxins have significantly increased on grain and grain by-products

originating in the USA. For this reason, we have paid premiums to our

suppliers for reduced moisture content and the addition of mold

inhibitors at loading. Temperature and humidity are our enemies, we

must be sensitive to our customers' environment. * * * The USA will not

be a quality supplier if moisture is added to grain. This is absolutely

negative and we must reduce moisture to assure that mycotoxin growth is

controlled.''

It is difficult to accurately predict the level at which the

addition of water will cause quality degradation. Many variables

influence the impact that added water has on grain quality; including,

the condition of the grain, the method of storage, and the storage

temperature. Adding 0.3 percent of water, by weight, to grain may not

significantly affect high quality/low moisture wheat when the ambient

temperature and humidity are low. If, however, the grain is of poorer

quality, or it has a higher internal moisture, or the temperature and

humidity are high, then even a very small increase in moisture may

cause the grain to spoil. Furthermore, when water is added to grain, it

is generally not distributed equally throughout the entire grain mass.

Some kernels are soaked, while some are left dry, resulting in

nonuniform quality and ``hot spots'' throughout the mass.

The practice of adding water to grain appears to be especially

troublesome to overseas buyers. In 1992, FGIS received a number of

complaints from overseas buyers expressing concern over quality

degradation due to water application. These buyers emphasized that

alternative dust control techniques are available that are practical

and effective. For example, in a 1992 letter, Dr. C.J.M. Meerhoek,

Executive Director of the European Community Seed Crushers and Oil

Processors Federation (FEDIOL), stated that: ``Spraying water for dust

suppression is considered to be an undesired practice * * * for quality

reasons (and) for `fair trade' reasons.'' In a 1992 letter from Mr.

Mitsuo Kurashige, Director of the Japan Oilseed Processors Association

(JOPA), he stated that adding water to grain ``does influence the

accuracy of foreign material analysis and accordingly affects the

differences of foreign material content between loading and unloading

analysis.'' And, in a 1992 letter from the Mielieraad Maize Board

(South African corn importer), it notified FGIS that, because of

possible water-related quality problems, it will no longer purchase

corn from U.S. export ports where water is added.

Adding water to grain also increases the weight of grain without

adding to its value. This invites tampering and misuse of water systems

to increase profit. Adding as little as 0.3 percent water, by weight,

can significantly enhance the small margins the grain industry operates

under. For example, by applying water at a 0.3 percent rate to a 50,000

metric ton (mt) shiplot of wheat, an exporter could (excluding

subsequent evaporation) add 150 mt of water to the shipment. If the

wheat was sold for $128 per mt, the water could generate over $19,000

in additional profit for the shipper.

According to a comment filed in response to the proposed rule, Mr.

Charles R. Gillum, Acting Inspector General for the U.S. Department of

Agriculture (USDA) stated that: ``As a result of our investigation of

the grain handling practices issue, we have found that the majority of

elevators applying water to grain have been doing so more to increase

grain weight than for legitimate dust suppression.''

The practice of adding water to grain is also viewed by many

commentors as ``giving our good grain a bad name'' and being

detrimental to future exports. Mr. James F. Frahm, Vice President, U.S.

Wheat Associates, stated in his comments that: ``One of the major

advantages that U.S. wheat enjoys compared to competing exporting

countries, particularly Canada and France, is the relatively low

moisture content of U.S. wheat. For the flour miller this translates

into more flour produced (and more money earned) per ton of wheat

purchased. Adding water to wheat to increase its weight erodes this

advantage.'' Most commentors, including those opposed to the proposed

rule, considered adding water for the purpose of increasing grain

weight to be an unethical, if not illegal practice. But, many

commentors expressed concern that competitive pressures may force more

elevators to begin applying water to grain because of narrow profit

margins. That is, firms adding water have such a significant economic

advantage that competing firms will be forced to follow suit unless the

practice is prohibited. Mr. Granville M. Tilghman, President of General

Grain Company, commented that: ``Sanctioning the use of water would

send a message to all farmers that it is all right to add water to

grain under one guise while the real reason would be for the purpose of

weight gain.''

Current Restrictions

Several commentors, who support the use of water, suggested that

misuse can be effectively controlled by enforcing current Food and Drug

Administration (FDA) and FGIS rules and restrictions. Dr. Ronald T.

Noyes, Professor, Extension Agricultural Engineer, Oklahoma State

University, commented that: ``FDA has a ruling in force that makes it

illegal for grain producers or commercial grain handlers to add water

to grain for the purpose of increasing market weight. It appears that

FGIS is proposing to duplicate the FDA ban of water added to grain for

purposes of weight increase, and further restrict other useful and

economical benefits of water as a safety product on grain. If the FDA

regulation is not enforced now, why do FGIS administrators think that

another more restrictive regulation will be observed.''

Unfortunately, recent experience has shown that the current rules

regarding this practice are very difficult to enforce or are not

applicable to all situations. Mr. Dane S. Hanekamp, Commodities

Manager, American Maize-Products Company, a major corn processor,

commented that: ``Under present (FDA) guidelines, re-watering grain to

dishonestly increase the weight of grain shipments is common practice,

to which several large grain companies openly admit. Though purchase

contracts explicitly guarantee that water has not been reintroduced to

the grain shipped to our processing plants at any time, for any reason,

but verification is all but impossible.''

The FDA, the agency primarily responsible for preventing

adulteration, continues to adhere to a policy articulated by former

Associate Commissioner for Regulatory Affairs Joseph P. Hile, in August

1980: ``* * * the intentional addition of water to grain would appear

to violate the Federal Food, Drug, and Cosmetic Act, which prohibits

the unnecessary addition of water to food. Under section 402(b)(4) of

the Act, a food is deemed to be adulterated `if any substance has been

added thereto or mixed or packed therewith so as to increase its bulk

or weight, or reduce its quality or strength or make it appear better

or of greater value'. * * * If we encounter (grain) adulterated with

water, we will consider appropriate regulatory action. We recognize

that it may be necessary for an elevator to add small amounts of

moisture to grain for safety reasons. * * * The addition of moisture to

grain for safety reasons is quite a different matter. * * *''

According to the comments filed by USDA's Office of the Inspector

General (OIG), efforts to apply FDA's policy have been largely

unsuccessful because of the difficulty in proving intent, defining

``small amounts'' of water, and distinguishing the process of applying

water for safety purposes from adulteration. The comment also states

that recent investigations by OIG have disclosed that elevators with

water dust suppression systems often fail to use the water systems as

designed and that often water was added to grain at points in the grain

stream within the elevator that were inappropriate if the objective of

the addition of water was for dust suppression.

Water-Use Permit System

Seventy-seven commentors recommended that FGIS develop a program

for regulating--rather than prohibiting--the addition of water to grain

for dust control purposes. A comment filed by Mr. Jon A. Jacobson, Vice

President of Marketing, Peavey Company, recommended the

``implementation of a strict user fee funded permit system, in tandem

with the use of tamper-proof computerized controls on water-based

techniques, to assure proper and controlled use.'' According to a

comment filed by Mr. James F. Frahm, Vice President, U.S. Wheat

Associates: ``Cost of issuing permits and monitoring water usage could

be covered through fees. Abuses could be controlled by using meters to

record the amount of water used and comparing that with the volume of

grain handled. Elevators are currently audited * * * and water usage

could become a part of the audit process.''

Many other commentors have concluded that a permit system would not

effectively prevent misuse, but would create an economic incentive for

all grain handlers to apply water whether or not it is needed for dust

suppression. A comment filed by Mr. David James Krejci, Executive Vice

President, Grain Elevator and Processing Society (GEAPS), an

international professional society, stated that: ``With respect to the

issues of operational economic impact, GEAPS suggests that sanctioning

the application of water through regulatory control would create the

greater problem. If water application is allowed through regulation,

all grain handling operations from farm to export will likely be forced

to adopt the practice to remain economically competitive. We cannot

envision an efficient, practical, and effective regulatory compliance

monitoring and enforcement plan. We believe that the scope and

complexity of such a compliance program would require substantial human

and financial resources.'' Archer Daniels Midland, Bunge Corporation,

Cargill Incorporated, Continental Grain Company, and Louis Dreyfus

Corporation, in a joint comment, stated: ``It is neither physically

possible nor economically sensible for the FGIS to attempt to regulate

this practice at roughly 10,000 U.S. grain handling facilities. This is

even more true for on-farm use of water based systems.''

Of additional concern to many commentors is that the effectiveness

of a permit system is compromised because regulators cannot rely on

after-the-fact product testing to verify proper application. It is

technologically impossible to test grain and distinguish naturally

occurring moisture from applied or added moisture. Consequently, a

permit system must rely on an elaborate set of specifications involving

water sources, application rates, metering devices, inventories, and

the like. While FGIS could evaluate a water system and approve its

initial installation, opportunities to override computer monitoring

would exist with increased incentives to exploit any loopholes. Follow-

up audits of systems would be time consuming, expensive, and minimally

effective. According to the comment filed by Mr. Charles R. Gillum,

Acting Inspector General, USDA/OIG: ``Our investigations have disclosed

that normal and routine monitoring of water-based systems, as would be

done by FGIS, ASCS, and others, is not sufficient to protect the

Government or grain purchasers from those elevators determined to use

water to artificially increase moisture and grain weight. * * * As for

the sophisticated, computer-controlled water systems, they are also

vulnerable to deliberate misuse. Indeed, the intentional misuse of

water by way of the computer controlled system is even more difficult

to deter. * * * As a result of our investigation of the grain handling

practices issue, we have found that the majority of elevators applying

water to grain have been doing so more to increase grain weight than

for legitimate dust suppression.''

According to a comment filed by Mr. Keith R. Mestrich, Director of

Special Services Food & Allied Service Trades Department, AFL-CIO, a

group representing sixteen national and international unions: ``Once a

company is given the go-ahead to use water, FGIS would be hard pressed

to prove water use intent after-the-fact. Monitoring use any more

closely would require extensive manpower and money. * * * We believe

that a permit system would make water use prevalent throughout the

grain transfer system. * * * The adulteration of grain would increase

in frequency. * * *'' Concerns about a permit program causing more

water abuses were also shared by many other commentors, including Mr.

Dave Lyons, Vice President for Government Relations, Louis Dreyfus

Corporation, who stated: ``Any attempt to regulate this practice * * *

will likely result in the proliferation of the practice throughout the

total U.S. grain marketing system. Competitive pressures will force

many grain handling firms to add water at various steps in the U.S.

grain marketing system. Potentially, water might be added a half dozen

times or more from the farm to final end user. Is this the type of

grain marketing system the U.S. wants to have?''

Many commentors also voiced concerns about the potential cost of a

permit system. FGIS has estimated that its cost to develop and maintain

such a system could quickly exceed $1.5 million annually, as more and

more elevators are economically forced to apply water under the pretext

of dust suppression. Mr. David Harlow, Chairman, Washington Wheat

Commission, stated in his comment that: ``* * * we've come to recognize

that the expense in implementing such a system, and especially to

maintain it, would be astronomical. Fees would have to be set so high

no one could afford to pay them. The U.S. government is constantly

cutting cost and FGIS has suffered significantly more losses than most

agencies, therefore it is highly unlikely that enough funds could be

secured to cover the expenses that would be incurred.''

Dry Matter Marketing

The concept of revising or reforming marketing practices to

eliminate the economic incentives for adding water to grain was also

put forth by many commentors. Several discussed the benefits of

marketing grain on a ``dry matter'' or ``standardized bushel'' basis

(also known as a ``fixed moisture'' or ``equivalent bushel'' basis).

According to a comment filed by Dr. Lowell D. Hill, L.J. Norton

Professor for Agricultural Marketing, University of Illinois, a leading

proponent for pricing wet and dry grain on the basis of its dry matter

content: ``Buying grain on the basis of a standardized bushel has

several advantages. Perhaps the foremost is that it removes the

economic incentives for adding water to grain. The Food and Drug

Administration would no longer need to concern itself with enforcement

of the unenforceable regulation relating to the addition of water to

increase value. Most of the impetus for State regulations relating to

moisture content of grain would also be eliminated. Price premiums

would not be needed for overdry grain since moisture content would be

used to determine quantity, not price. The elevator would no longer

have to monitor grain deliveries to identify grain with water added.

Charges and discounts would be explicit, rather than incorporated into

a combined weight-price adjust factor.''

FGIS supports the elimination of economic incentives for adding

water to grain and believes that a practical, market-oriented solution,

such as dry matter marketing, could alleviate many industry concerns

about using water to control dust. However, whether or not grain should

be marketed on its dry matter content is a marketing issue, which FGIS

does not have authority to mandate. In any event, FGIS believes that it

is outside the scope of this rulemaking to impose any requirements

designed to promote dry matter marketing.

Environmental Concerns

Air pollution from dust associated with the loading and unloading

of grain is a concern to many communities. Not surprisingly, several

commentors indicated that they are facing increasingly stringent

regulatory requirements pertaining to the control of fugitive dust

emissions in and around their facilities. Mr. Jon A. Jacobson, Vice

President of Marketing, Peavey Company, commented that: ``The Clean Air

Act Amendments of 1990 will commence initial phase-in soon. The impact

of this federal legislation will serve to tighten restrictions on

elevator dust emissions in all states. As a result, elevators will be

required to either increase internal containment or to increase

suppression techniques. Further containment is both cost and

maintenance intensive and not without potential safety hazards.

Increased suppression will be the only viable choice.''

While there is much concern within the grain industry about

pollution control regulations, the majority of the grain handlers

believe that dust controls (other than water) adequately control dust

emissions. Mr. David C. Lyons, Vice President for Government Relations,

Louis Dreyfus Corporation, commented that: ``* * * control of dust

emissions to the outside air is the responsibility of all of us in the

grain handling industry. It is our duty to preserve and protect the

environment for all citizens of the localities where grain handling and

processing facilities are located. * * * Each LDC facility has a dust

control strategy using various technologies. Filtering systems,

enclosed drag conveyors, pit aspiration and food grade mineral oil

applications are just a few of the systems we use either singly or in

combination, based on the layout and usage of each facility. At no LDC

facility is the usage of water used as a method of dust control. The

experience and safety record of Louis Dreyfus and the rest of the

industry shows that the addition of water is not necessary for dust

controls. * * * Elevator employees will not have to work in an unclean

work environment nor will the environment have to suffer if water

addition is prohibited.''

Misting

Several commentors indicated that water can be an effective and

virtually risk-free dust suppressant when applied as a mist or fog.

According to a comment filed by Dr. Ronald T. Noyes, Professor,

Extension Agricultural Engineer, Oklahoma State University: ``Spraying

200-1,000 ppm of potable tap water from city, rural or deep ground well

drinking water systems for dust control is the application of a food

grade quality material. Adding 200 ppm (the maximum allowable limit for

food grade oil), or 200 lbs. of potable water added to 1,000,000 pounds

of grain is equal to one gallon of water sprayed on 693.3 bushels of 60

lbs. Test Wt. wheat. That's one gallon of water added to 41,600 lbs. of

grain, or 1 lb. of water added to 5,000 lbs. of grain--a 0.02% wt.

change. That level of moisture is not detectable by standard FGIS

moisture testers. An application of 500 ppm of potable water, a

justifiable level for dust control, is 1 lb. of water (approximately

[one] pint of water) per 2,000 lbs. of grain. If it all were absorbed,

it would add 0.05% to the weight of the grain. However, a significant

part of the moisture will evaporate during the spraying operation or

from the grain dust after grain movement stops.''

Dr. Marvin R. Paulsen, Professor of Agricultural Engineering,

University of Illinois at Urbana-Champaign, commented that: ``My

exception to an outright ban on using water is that there is a

researchable issue involving new technology with very high pressure and

very fine spray particles. * * * Thus, the air at grain transfer points

could be humidified to drop the minimum explosive concentration. The

humidification could also reduce static electricity. Some of the fine

spray particles would adhere to passing grain but the level of actual

water addition would be far below 0.5% by weight and probably closer to

0.05%. The difference between this method and others that have been

proposed is that the nozzles create such small particle sizes using

such high pressures that it would be impossible to apply higher levels

of water with that particular system.''

FGIS shares Dr. Paulsen's view that research involving new

technologies such as spray ``misting'' should continue. However,

research to date has been limited. Consequently, there is insufficient

data for FGIS to: (1) Determine whether misting can, in fact, control

dust without harming grain; (2) define misting and establish workable

equipment/system specifications; and (3) develop appropriate controls.

FGIS will continue to work with the USDA Agricultural Research

Service and the U.S. grain industry to foster the development of

potentially viable methods of controlling grain dust, such as misting.

Oil Additives Used To Control Grain Dust

In recent years, many grain handlers have begun to use oil

additives, such as food grade soybean oil and U.S.P. white mineral oil,

to control grain dust. Unfortunately, for some end-uses, wheat and

barley treated with oil may be less functional and acceptable.

According to a comment filed by Mr. James F. Frahm, Vice President,

U.S. Wheat Associates: ``Oil has adverse effects on flour yield and

color, both important factors in determining the profitability of the

milling operation. Oil can also cause bacteria and other undesirable

materials to adhere to the wheat kernel, particularly in the crease of

the kernel, and therefore reportedly can raise bacteria counts in

flour. Because some of the oil is detectable in the resulting flour, it

may have adverse effects on the quality of the end product. * * * As a

result, some of the largest U.S. baking companies refuse flour from

wheat treated with oil * * * elimination of water as an option for dust

suppression will result in more wide-spread use of oil.''

Many commentors also believe that if the use of water is banned,

oil usage will become more widespread. Mr. James A. Bair, Director of

Government Relations, Millers' National Federation (MNF), commented

that: ``At its recent meeting, the MNF Executive Committee voted

overwhelmingly to support the proposed prohibition. Additionally, the

MNF encourages FGIS to enact the ban on all other dust control

additives as well including mineral oil and vegetable oil. * * * To

understand [the negative impact of additives on end-use quality] it is

important to note the mechanism by which water and oil control dust--by

making the dust stick to the kernel. It is in this dust where

unsanitary filth resides. This filth is normally removed in cleaning

prior to milling, however water and oil make removing this material,

especially from the crease of the kernel, a virtually impossible task.

* * *''

FGIS understands the concerns expressed by the wheat and barley

industry, flour millers, and maltsters. However, FGIS has no

information that would indicate that prohibiting the use of water would

cause any increase in the usage of soybean and mineral oil. To the

contrary, FGIS believes that the relative high cost of these oils and

the concerns expressed by certain parts of the market will continue to

severely limit the opportunities for using food grade oils for dust

suppressant purposes.

Insecticides and Grain Protectants

Two commentors requested that the proposed rule be modified to

accommodate the continued use of water-based material for insecticides,

grain protectants, and related purposes. Mr. Craig P. Jacob,

Insecticide Product Manager, Gustafson, commented that Gustafson is

strongly against revising Sec. 800.88 of the regulations under the

USGSA to require a statement to be shown on inspection certificates

whenever water-based insecticides are applied to export grain. Mr. Bob

Reeves, Technical Services Manager, Loveland Industries, commented

that: ``The basis of our opposition is that prohibition of the addition

of water in any amount to grain would eliminate the opportunity to

utilize water as a carrier for other materials (mold inhibitors).''

This final rule does not prohibit or limit the application of water-

based insecticides or protectants.

Washing Smut From Wheat

Several commentors recommended that FGIS allow water to be used to

wash smut from wheat. Mr. Mark Palmquist, Senior Vice President,

Harvest States, commented that: ``Language should be added that would

state that washing wheat (to remove smut) is a processing operation or

washing of wheat is an approved process.'' Smut or bunt (e.g., Tilletia

caries and Tilletia controversa Kuhn) is a field born disease that

occurs in certain wheat growing areas. Generally, smutty wheat is not

acceptable to millers and exporters. Although smut ``balls'' may

sometimes be removed by screening or aspiration, smut adhering to the

surface of kernels can only be removed by physically washing the wheat.

FGIS believes that washing smut from wheat is an essential and

necessary ``processing operation.'' This final rule does not prohibit

adding water to grain for purposes of milling, malting, or similar

processing operations. Therefore, using water to wash smut from wheat

would not be prohibited under this rule.

Final Action

On the basis of the comments received and other available

information, FGIS has determined that applying water to grain must be

prohibited. While water may--under certain circumstances--suppress

dust, it can also adulterate grain by artificially increasing its

weight. Additionally, adding water to grain increases the opportunity

for mold growth and mycotoxin contamination. If allowed to continue,

the practice of adding water to grain could do irreparable harm to the

reputation of U.S. grain in the domestic and world market.

Accordingly, FGIS is revising:

1. Section 800.61(b) to prohibit the addition of water to grain,

except for milling, malting, or similar processing operations.

2. Section 800.61(d)(4) to exclude water as a dust suppressant.

3. Section 800.88(d) to eliminate the provision for adding water to

export grain.

4. Section 800.96(c)(2) to eliminate the provision for adding water

to export grain.

List of Subjects in 7 CFR Part 800

Administrative practice and procedure, Grain, Export.

For reasons set out in the preamble, 7 CFR part 800 is amended as

follows:

PART 800--GENERAL REGULATIONS

1. The authority citation for part 800 continues to read as

follows:

Authority: Pub. L. 94-582, 90 Stat. 2867, as amended, (7 U.S.C.

71 et seq.)

2. Section 800.61 is revised to include a new paragraph (b)(3) as

follows:

Sec. 800.61 Prohibited grain handling practices.

* * * * *

(b) * * *

(3) Add water to grain for purposes other than milling, malting, or

similar processing operations.

* * * * *

3. Section 800.61(d)(4) is revised to read as follows:

Sec. 800.61 Prohibited grain handling practices.

* * * * *

(d) * * *

(4) Dust suppressants. Grain may be treated with an additive, other

than water, to suppress dust during handling. Elevators, other grain

handlers, and their agents are responsible for the proper use and

application of dust suppressants. Sections 800.88 and 800.96 include

additional requirements for grain that is officially inspected and

weighed.

* * * * *

Sec. 800.88 [Amended]

4. Section 800.88(d) is amended by removing paragraph (d)(ii) and

by redesignating paragraph (d)(i) General, as paragraph (d) Additives.

Sec. 800.96 [Amended]

5. Section 800.96(c) is amended by removing paragraph (c)(2)(ii)

and by redesignating paragraph (c)(2)(i) General, as paragraph (c)(2)

Additives.

Dated: October 6, 1994.

Patricia A. Jensen,

Acting Assistant Secretary, Marketing and Inspection Services.

[FR Doc. 94-25371 Filed 10-13-94; 8:45 am]

BILLING CODE 3410-EN-P