Amendments to the Peanut Poundage Quota Regulations

DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Parts 718 and 729

RIN 0560-AE82

Amendments to the Peanut Poundage Quota Regulations

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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

SUMMARY: This final rule adopts, with certain modifications, the

interim rule published in the Federal Register on July 16, 1996 (61 FR

36997), which set forth regulations for Federal farm peanut poundage

quotas. These regulations implement the provisions of the Agricultural

Market Transition Act of 1996 (1996 Act) for the 1996 through 2002

crops of peanuts. The amendments adopted in this final rule principally

involve the following issues: eliminating the national poundage quota

floor; eliminating the undermarketing carryover provisions;

establishing temporary seed quota allocations; establishing the

ineligibility of certain farms for quota allocation; authorizing the

intercounty transfer of farm poundage quotas in all States, subject to

certain limitations in some States; eliminating the special allocations

of increased quotas for certain Texas counties; establishing new

provisions for ``considered produced'' credit with respect to a farm

whose quota has been transferred; and other minor clarifying and

technical changes.

These regulations are required by the Agricultural Adjustment Act

of 1938, as amended (1938 Act). The modifications made in this final

rule to 7 CFR part 729 have been made after consideration of public

comments.

In addition, this rule makes a technical change concerning the

application of special sanctions in connection with certain drug-

related offenses.

EFFECTIVE DATE: This final rule is effective May 9, 1997.

FOR FURTHER INFORMATION CONTACT: David Kincannon, Farm Service Agency,

United States Department of Agriculture, STOP 0514, 1400 Independence

Avenue, SW, Washington, D.C. 20250-2415 or call (202) 720-7914.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to be Economically Significant

and was reviewed by the Office of Management and Budget (OMB) under

Executive Order 12866.

The 1996 Act makes at least six important changes to the peanut

program. These changes include the following: (1) elimination of the

minimum quota floor, (2) elimination of undermarketings, (3) provisions

for unlimited and limited transfer of peanut quota by sale or lease

within State in all States, (4) forfeiture of quota for certain

nonproducers, (5) no-net-cost to treasury provisions, and (6) lowering

the quota price support level.

The final rule contains no changes from the interim rule published

in the Federal Register on July 16, 1996 that have any discernible

budget or economic impact. Differences in this cost benefit assessment

and the one prepared for the interim rule reflect new data and

projections.

The economic impacts of the peanut program provisions of the 1996

Act include expected reductions in producers' revenue by $1.25 billion

from 1996 to 2002, while taxpayers are expected to benefit by avoiding

costs of $0.5 billion compared with the FY 1997 baseline. First buyers

benefit from lower prices, part of which will be passed on to

consumers.

Quota lease and capitalized values of quotas are expected to

decline. Quota holders could absorb a loss of about $40 million

annually because of reduced leasing rates due to the lower peanut price

support. Capitalized value of quotas could decline $200 to $300

million, thus reducing land values and the tax base of rural

communities. With increased transferability of quotas under the 1996

Act, the sale and rental market for quotas becomes a State rather than

a county market. Values are reduced in more efficient production areas

and increased in less efficient areas.

[[Page 25434]]

Under no peanut program, producer prices would decline resulting in

gains to first buyers of peanuts of $150 to $160 million annually,

compared with 1996 provisions. Over the 7-year life of the program, the

capitalized gain to first buyers would total about $800 million,

assuming a 10 percent capitalization rate. For additional information

or to request a copy of the cost benefit assessment, contact: Verner N.

Grise at (202) 720-5291.

Executive Order 12988

This final rule has been reviewed in accordance with Executive

Order 12988, Civil Justice Reform. The provisions of this final rule

would not preempt any State or local laws, regulations, or policies,

unless they present an irreconcilable conflict with this rule. Before

any legal action is brought regarding determinations made under the

provisions of 7 CFR part 729, the administrative appeal provisions set

forth at 7 CFR parts 11 and 780 must be exhausted.

Regulatory Flexibility Act

It has been determined that the Regulatory Flexibility Act is not

applicable to this final rule because the Farm Service Agency (FSA) is

not required by 5 U.S.C. 553 or any other provision of law to publish a

notice of proposed rulemaking with respect to the subject matter of

this rule.

Paperwork Reduction Act

The regulations set forth in this final rule require a new

information collection instrument, form FSA-377, Register of Tentative

Out of County Peanut Poundage Quota Transfers. The new form necessary

to conduct the peanut poundage quota program has been developed, and a

notice and request for comments for revising a currently approved

information collection was issued in the Federal Register on December

24, 1996 (61 FR 67767), and provided for a 60-day comment period.

Because the information collection is needed before the regular

submission for approval of the information can be submitted to OMB, FSA

has submitted to OMB an addendum to the information collection

requirements, as set forth in 5 CFR 1320.18 for OMB Control Number

0560-0006, and has requested that OMB authorize emergency processing of

the information collection submission.

Environmental Evaluation

It has been determined by an environmental evaluation that this

action will have no significant impact on the quality of the human

environment. Therefore, neither an Environmental Assessment nor an

Environmental Impact Statement is needed.

Unfunded Federal Mandates

This rule contains no Federal mandates under the regulatory

provisions of Title II of the Unfunded Mandate Reform Act of 1995

(UMRA) for State, local, and tribal governments or the private sector.

Thus, this rule is not subject to the requirements of sections 202 and

205 of the UMRA.

Small Business Regulatory Enforcement Fairness Act of 1996

To the extent that this rule can be or is considered to be major

under the Small Business Regulatory Enforcement Fairness Act of 1996

(SBREFA), it has been determined that, pursuant to section 808 of

SBREFA, that it is impracticable, unnecessary, and contrary to the

public interest to delay the effective date of this rule. That finding

has been made on the basis that such a delay would make it impossible

to make the changes in this rule effective in time for producers with a

substantial interest in production to plant peanuts in a timely fashion

with a proper understanding of the rules for quota distribution and for

forfeitures. Those matters could have a substantial impact on

individual decisions. Different provisions, if needed, can be

implemented for subsequent crop years. Accordingly, this rule is

effective upon publication in the Federal Register.

Federal Assistance Program

The title and number of the Federal Assistance Program, as found in

the Catalog of Federal Domestic Assistance, to which this final rule

applies are: Commodity Loans and Purchases--10.051.

Executive Order 12372

This program is not subject to the provisions of Executive Order

12372, which requires intergovernmental consultation with State and

local officials. See the Notice related to 7 CFR part 3015, subpart V,

published at 48 FR 29115 (June 24, 1983).

National Appeals Division Rules of Procedure

The procedures set out in 7 CFR parts 11 and 780 apply to appeals

of adverse decisions made under the regulations adopted in this notice.

Background

Title I of the 1996 Act amended the 1938 Act and the Agricultural

Act of 1949, as amended, to provide, for the 1996 through 2002 crops,

for a revised peanut poundage quota and peanut price support program.

The statutory provisions for the peanut poundage quota program

contained in the 1996 Act were described in the supplementary

information section of the interim rule.

Summary of Comments

A total of 42 comments was received in response to the interim rule

published in the Federal Register on July 16, 1996. The comment period

expired on August 15, 1996. The following is a summary, by section, of

the comments received:

Section 729.103--Definition of Preliminary Quota

The interim rule defined ``preliminary quota'' to be that farm's

quota for the previous year unless the quota is subject to a reduction.

There are several statutory provisions calling for reductions for

individual farm quota, one being a provision relating to residency and

the location of the quota, which is addressed elsewhere in the rule.

One comment objected to the references to reductions but since that

reference relates to statutory provisions, it has been determined that

no modification should be made.

Section 729.204--Temporary Seed Quota Allocation

The 1996 Act allowed for providing a quota in an amount equal to

the seed which producers would plant to grow the peanuts and the

interim rule provided for a national per acre seeding allowance with

small variations made to account for peanut type. A total of six

comments addressed this issue. One respondent requested that a

temporary seed quota allocation be allowed for peanut acreage of

``volunteer'' peanuts--that is, peanuts which grow wild and are outside

the area of the farm's planned cultivation of the crop. The statute and

interim rule are clear that the temporary seed quota allocation is to

account for seed peanuts actually planted on the farm. Therefore, no

modification of the interim rule was made to accommodate this

suggestion.

There were five comments about the use of a national seeding rate

and the method of determining the amount of seed allocation. Most

respondents supported the use of a national seeding rate for

determining the amount of seed allocation because it would be less

burdensome than other options. One respondent suggested that temporary

seed allocations be verified by receipts for seed purchased or records

of quota peanuts retained on the farm. No

[[Page 25435]]

modification in the regulation is needed to accommodate this suggestion

at this time. FSA will monitor seed quota allocations through spot

checks to determine whether further action is warranted.

One respondent from Texas suggested that the seeding rate for

Virginia-type peanuts in that area should be 115 pounds per acre rather

than 110 pounds per acre as provided for in the interim rule, and one

respondent from the southeast marketing area suggested the seeding rate

for Runner-type peanuts should be 100 pounds per acre rather than 90

pounds per acre as provided for in the interim rule. The seeding rates

were based on statistical surveys and the best data available at this

time. For that reason, no adjustment has been made in the seed

allocation formula provided for in the interim rule. However, FSA will

continue to monitor seeding rates and review any studies or data which

might indicate a need for seeding rate adjustments.

Section 729.205--Farms Ineligible for Farm Poundage Quota

Provisions of the 1996 Act disallowed quotas for farms that were,

as of the end of the 1996 marketing year (August 1, 1997) or

thereafter, owned or controlled by: (1) A municipality, airport

authority, school, college, refuge or other public entity (other than a

university used for research purposes); or (2) a person who is not a

producer and resides in another State. To implement the nonresidency

provision, the interim rule provided that in the case of corporations

and partnerships the forfeiture would not apply if a person (or

persons) with a 20-percent interest in the entity had their primary

residence in the State where the quota was allocated.

Also, a 3-year grace period was allowed in the interim rule for

involuntary acquisitions by foreclosure or otherwise. Further, for

situations where the ineligible party held the farm prior to August 1,

1997, the rule provided that the quota would be forfeited as of that

date unless there was a sale or transfer of the quota by that date and

to that end the interim rule allowed for the parties to complete the

paperwork by October 1, 1997. The rule effectively allowed the sale of

the future right to the quota to be effective for this purpose rather

than simply limit the sale exemption to sales or transfers of existing,

operational quotas. For farm acquisitions after August 1, 1997, the

rule provided, in accord with the statute, that if an ineligible party

bought the farm, the quota would not be forfeited but no quota would be

established for the farm involved until the ineligibility was corrected

or the quota was sold.

There were 17 comments opposed to the ineligibility of nonresident,

nonproducers and of certain public entities for quota allocation. The

respondents, representing nonresident, nonproducer quota holders and

several resident quota holders opposed this provision on the grounds it

unfairly discriminated based on State of residency. Several suggested

that the provision is unconstitutional. Aside from losing quota,

several expressed concern that the provision adversely impacted the

value of their farm as an inheritance because their heirs were

residents of another State. Most respondents stated that not living in

the State in which the quota was allocated was due to conditions beyond

their control, such as family situations, health or other reasons and

that the State in which a quota holder resided should have no bearing

on a national quota program. One respondent stated that the quota held

by public entities provided a source of peanut quotas for younger

farmers who were just starting to farm.

The ineligibility provisions are statutory and must be enforced.

However, the rules have been amended to provide for corporations and

other specially chartered entities such as estates and limited

partnerships to be considered residents of the place where they are

incorporated or created as well as residents of any State where

individuals with at least a cumulative 20-percent interest in the

entity reside. The incorporation and creation rule replaces the

``primary place of business'' test that was included in the interim

rule and which could have allowed for the maintenance of quotas by

entities with no real tie to the State except for the quota itself.

Also, with respect to defining who is a ``producer'' of peanuts for

purposes of these rules, the final rule provides, as a good faith test,

that the would-be producer must have at least a 15-percent interest in

the quota peanut crop. A lower amount would suggest that the ``risk''

was incidental to other arrangements. Also, after further review of the

statute, the final rule eliminates provisions which would allow for

avoidance of the forfeiture by the sale, by October 1, 1997, of the

future right to the quota. It has been determined (and the rule has

been amended accordingly) that August 1, 1997, should be read as an

absolute deadline in that it appears correct to presume that Congress

did not contemplate sales of a quota to differ from the historical

method of allowing sales only to be made of an existing, established

quota--not future rights to a quota. Presumably, if Congress has

intended or expected otherwise, there would have been some indication

of that intent. On further review, none appears. In special cases of

reliance on the previous rule, the Deputy Administrator may consider

the granting of relief but it is not expected that there will be cases

in which such relief is justified. Otherwise, to avoid forfeiture of

the quota, the owner of an ineligible farm with a 1997 peanut quota

allocation must: (1) Sell the quota prior to August 1, 1997; (2)

beginning with the 1997 crop, produce or share in the production of the

quota peanuts on the farm; or (3) consistent with this rule and prior

to August 1, 1997, establish residency in the State in which the quota

is allocated.

The interim rule provided that schools, colleges and other public

entities were ineligible for quota allocation beginning with the 1998

crop. Upon further review of the 1996 Act, the agency has determined

that the intent of Congress was to allow public universities to hold

the historic research quotas, provided such quotas would continue to be

used for experimental and research purposes. Accordingly,

Sec. 729.205(a)(1) has been amended.

Section 729.214--Transfer of Quota by Sale, Lease, Owner, or Operator

Until the 1996 Act, quotas could not be transferred across county

lines except in States with a small total quota. However, the 1996 Act

allows such transfers in all States up to certain percentages of each

county's quota and all counties with quotas under a certain amount can

have unlimited transfers. Because the demand for transfers could exceed

the limits in some counties, the interim rule allowed for lotteries

(the need for which could decrease as the allowable percentage

increases). The interim rule also noted that the 1996 Act appeared to

grant considered produced credit for any out-of-county transfers, if

the quota was produced or considered produced on the receiving farm.

This, the rule noted, appeared to be different from the rule which the

statute seemed to establish for within-county transfers which appeared

to be to allow considered produced credit only once every three years.

The importance of considered produced credit is that it can help the

transferring farm avoid a loss of quotas under the provisions of the

1938 Act which provide for reducing quotas for nonproduction.

A total of 25 respondents commented on several provisions of the

interim rule applicable to quota transfers. There were 19 respondents

who requested that within-county transfers be treated the same as out-

of-county transfers with

[[Page 25436]]

respect to protecting the quota on the transferring farm if the quota

is produced or considered produced on the receiving farm. One

respondent, a regional peanut growers' association, supported the

interim regulation's treatment of out-of-county transfers.

On further review of this issue, it has been determined that the

interim rule should be amended. The provisions of the 1938 Act which

provide for leasing are those in section 358-1. Section 358-1(a)(1)(D)

provides that for leases under section 358-1 the transferring farm will

receive credit so long as the quota is produced or considered produced

on the receiving farm. It was noted, however, with the interim rule,

that the provisions of section 358-1(b)(4) continue to provide that

where a farm poundage quota was leased to another owner or operator of

a farm within the same county, the transferring farm can receive

considered produced credit for one year in any 3-year base period. On

further review, this appears to be an additional allowance, not a

limitation, since the 358-1(b)(4) credit is not tied to actual

production or planting on the receiving farm and since there is no

actual exclusion of within-county transfers provided for with respect

to the allowance in 358b. Nor is there an inherent conflict given the

special conditions of 358b. Further, the provisions in section 358-

1(b)(3) for removing quotas that are not produced provide that such

reductions shall be made on such fair and equitable basis as the

Secretary determines to be appropriate. It does not appear equitable or

logical to apply a more difficult standard to within-county transfers

in light of the 1996 amendments, nor does there appear to be reason to

believe at this time that such was Congress' intention.

Accordingly, the regulations have been revised as to within-country

transfers. They will receive the same considered produced credit that

is available for out-of-county transfers and, in addition, if they have

not otherwise received considered produced credit on a spring lease in

a 3-year base period, they can receive credit for a transfer for one

year of the 3-year base period for a transfer even if the quota was not

produced or considered produced on the receiving farm.

There were seven comments which addressed the method of

administering the provisions of the 1996 Act with respect to out-of-

county sale and lease limitation. One respondent opposed the lottery in

favor of prorating the amount eligible for out-of-county transfer among

all applicants requesting such transfers. Another respondent favored a

first-come, first-granted method for approving such transfers. Five

respondents were concerned that, in certain counties, the register of

producers requesting to transfer quotas out of county was being filled

with producers who had no intention of effecting such transfers,

thereby decreasing the likelihood that bona fide requests for out-of-

county transfers would be selected in a lottery. Also, in some cases,

producers selected by the lottery were unable to secure an agreement

for an out-of-county transfer, thereby leaving the maximum transfer

percentage unrealized. Suggestions for decreasing the potential for

such a possibility included the following: (1) Permitting only those

having a valid agreement for sale or lease to be registered for the

lottery, (2) allowing alternate selections to transfer if the original

lottery picks chose not to transfer out of county, (3) counting only

the sales or leases actually transferred out of county toward

fulfilling the transfer percentages, and (4) otherwise limiting the

lottery to persons who will actually transfer out of county.

In addition, three respondents stated the view that the intent of

the law to transfer quotas to those actually producing the quota was

being circumvented with the lottery system by the selection of those

who made temporary, out-of-county transfers, thereby displacing those

who wished to effect permanent transfers. Each of these respondents

suggested giving permanent out-of-county transfers priority over

temporary transfers.

To allow more flexibility for handling changing circumstances, the

rule would allow a method other than a lottery to be used. However, for

the immediate crop year, it is expected and planned that a lottery will

be used. Some of the distribution problems should be solved by the

increasing transfer percentage allowed for in the statute. With respect

to permanent transfers, the regulations currently permit priority for

transfer by sale and it is anticipated that, beginning with the 1997

crop of peanuts, such priority will be applied.

The agency does not plan to use a pro rata distribution method as

that would unnecessarily divide up the marketable quota and would

complicate the making of a pre-lottery lease agreement. First-come,

first-served would in this instance induce a new element of uncertainty

and stress with little or no real gain over the current lottery system

and would place some farms at a disadvantage to other farms on grounds

wholly unrelated to the transfer of the quota. As to failed transfers,

the agency plans, effective with the immediate crop year, to provide a

method whereby a transferor who fails to complete the transfer is

replaced in a timely manner by a substitute transferor.

Three respondents supported the interim rule with respect to

prohibiting the transfer to and from the same farm during the same

transfer period. One respondent suggested allowing a permanent transfer

to the farm and a temporary transfer from the farm for the same period.

Another suggested ``easing'' the regulation that prohibits a quota that

is permanently transferred to the farm from being permanently

transferred from the farm for three years.

It appears on further review of the regulations that the rules do

not, as such, forbid a farmer who has recently been the recipient of a

permanent quota transfer from then making, in the same year, a

temporary transfer, by spring lease, to another farm. Rather, such

farms can make those transfers under the same conditions as would apply

if the farm which is the transferring farm in the temporary transfer

had held the quota for a long period of time prior to that transfer.

However, the regulations have been modified to further clarify that a

farm cannot, as far as ``spring leases'' are concerned, receive a quota

by a temporary transfer and then transfer that quota to another farm by

a temporary transfer in the same lease period. That is, the interim

rule is amended to make clear that such ``subleasing'' of quotas is not

permitted.

The provisions of the regulations restricting permanent transfer to

and from a farm are not changed by this rule. However, the rule is

amended to clarify the limitations on permanent transfers to and from

the same farm during the same year. Further, upon review of the

regulations applicable to disposal of a tenant's share of any increased

quota, it was determined that applying permanent transfer limitations

to such tenant's shares would adversely impact the tenant's ability to

sell the quota allocation. Accordingly, the rule is amended to permit

the sale of a tenant's share of increased quota without subjecting

either the transferring farm or the receiving farm to any of the

transfer limitations in part 729.

Section 729.216--National Poundage Quota

One respondent also complained that the Department of Agriculture

(USDA) had not allowed for sufficient comment on the particular quota

set for 1996 following the enactment of the 1996 Act. The rule does not

restrict the time for comment and it is USDA's intent to allow for such

comment as is practicable within the time constraints

[[Page 25437]]

set by Congress for announcing the quota.

Other Changes and Corrections

1. Definitions

The definition of ``farmers stock peanuts'' is revised to specify

that dug peanuts which are not marketed but which are disposed of under

supervision of a representative of FSA will not be considered as

farmers stock peanuts. This modification is intended to arrive at a

more equitable determination of what constitutes actual production for

purposes of determinations to be made under the program regulations.

Also, the definition of ``peanuts'' has been revised to track more

closely with the peanut regulations in 7 CFR part 1446. This should

avoid any possible confusion in the application of terms and rules.

2. Administration

To assist producers who inadvertently fail to meet the final

deadline for transferring quotas, this final rule amends the

regulations to allow the Deputy Administrator to delegate authority to

set guidelines for waivers by the State FSA committees. This action

will expedite producer requests for late-filed transfers and help

assure that available peanuts may be marketed as quota peanuts.

3. Temporary Seed Quota (TSQ)

Upon review of the interim rule with respect to TSQ allocation and

experience gained from the 1996 crop, FSA has determined that a

sanction is needed in instances where the TSQ allocation was based on

an erroneous acreage certification. Accordingly, when the certified

acreage on which the TSQ allocation is made is greater than the acreage

determined by FSA to have been planted to peanuts by more than the

smaller of 2 percent of the certified acreage or 5 acres, a penalty

will be calculated on this difference. When this tolerance is exceeded,

the penalty will be determined by multiplying the difference between

the certified and determined peanut acreage times the applicable per

acre seeding rate used in the calculation of the TSQ times 140 percent

of the applicable per pound quota support rate for the crop year

involved. The authority for this penalty is found in section 358e of

the 1938 Act which allows for penalties for over marketings of quota

peanuts. Since such penalties flow from normal regulations applicable

to the poundage quota system for peanuts, there does not appear to be a

need for new rulemaking on this issue. In addition, in the event of an

erroneous certification within the tolerance allowed by the rule, the

agency may make corrections in the quota for the farm for the following

year and may still assess a penalty in any instances in which such

overreporting is chronic or otherwise found to have been a scheme or

device to defeat the purposes of the program.

The requirement in Sec. 729.214(f)(2)(iii)(A) that 90 percent of

the transferring farm's quota must be planted in order for a fall

transfer to be approved is amended by this rule to clarify that the TSQ

allocation is not included as part of the farm's effective quota with

respect to the 90-percent calculation.

4. Technical Corrections

Section 729.214 contains a reference in paragraph (b)(5)(ii) that

was not changed in the interim rule to reflect that the referenced

paragraph was redesignated from ``(e)'' to ``(f).'' Also, in paragraph

(l) the phrase ``all out-of-county transfers'' was inadvertently

included with owner-to-owner and operator-to-operator transfers. The

adjustment to production history in this paragraph is applicable only

to owner-to-owner and operator-to-operator transfers and, although

there were other changes in the interim rule to bring owner and

operator transfers under the provisions of the new out-of-county

transfer provisions, there was never an intention to adjust the

produced credit for out-of-county transfers not involving owner-to-

owner and operator-to-operator transfers.

Accordingly, this final rule amends Sec. 729.214(b)(5)(ii) to

reflect the correct reference and Sec. 729.214(l) to remove the

reference to ``all out-of-county transfers.''

Modification of Part 718

This rule also makes a correction to provisions of 7 CFR 718.11 as

promulgated in a rule published in the Federal Register on July 18,

1996 (61 FR 37544). That section provides for certain sanctions to

apply in the event that a person is involved in certain drug-related

offenses and is based on a statutory provision which, by its terms,

specifies that the sanctions shall apply to benefits related to

commodity production. Section 718.11(b), as promulgated, only applied

that limitation literally to (b)(1) of that section whereas the

limitation, to matters of commodity production, was intended to apply

to (b)(1) through (b)(3). This rule makes that correction and revises

the provisions of that section to comport more closely with the

language of the statutory provision.

List of Subjects

7 CFR Part 718

Acreage allotments, Authority delegations, Crop insurance

requirement, Drug traffic control, Price support programs.

7 CFR Part 729

Peanuts, Penalties, Poundage quotas, Reporting and recordkeeping

requirements.

For the reasons set out in the preamble, 7 CFR part 718 is amended

and the interim rule for 7 CFR part 729, published in the Federal

Register on July 16, 1996 (61 FR 36997), is adopted as final with

changes as set forth below.

PART 718--PROVISIONS APPLICABLE TO MULTIPLE PROGRAMS

1. The authority citation for 7 CFR part 718 is amended to read as

follows:

Authority: 7 U.S.C. 1373, 1374, 7201 et seq.; 15 U.S.C. 714b and

714c; and 21 U.S.C. 889.

2. Section 718.11 is amended by revising paragraph (b) to read as

follows:

Sec. 718.11 Denial of Benefits.

* * * * *

(b) Any person convicted under Federal or State law of planting,

cultivating, growing, producing, harvesting, or storing a controlled

substance, as defined in 21 CFR part 1308, shall be ineligible for,

with respect to any commodity produced during the same year and the

next succeeding four years:

(1) Any price support loan available in accordance with parts 1446

and 1464 of this title;

(2) Any price support or payment made under the Commodity Credit

Corporation Charter Act;

(3) A farm storage facility loan made under section 4(h) of the

Commodity Credit Corporation Charter Act;

(4) Crop Insurance under the Federal Crop Insurance Act;

(5) A loan made, insured or guaranteed under the Consolidated farm

and Rural Development Act or any other provision of law formerly

administered by the Farmers Home Administration; or

(6) Any payment made under any Act.

* * * * *

PART 729--PEANUTS

3. The authority citation for 7 CFR part 729 continues to read as

follows:

Authority: 7 U.S.C. 1301, 1357 et seq., 1372, 1373, 1375, and

7271.

[[Page 25438]]

4. In Sec. 729.103(b), the definition of ``considered produced

credit'' is amended by redesignating paragraphs (ii) through (v) as

paragraphs (iii) through (vi) respectively, and adding a new paragraph

(b)(ii), and the definitions of ``farmers stock peanuts'' and

``peanuts'' are revised to read as follows:

Sec. 729.103 Definitions.

* * * * *

(b) Terms.

* * * * *

Considered produced credit.* * *

(ii) A peanut poundage quota that was leased and transferred by a

transfer agreement that was filed before August 1 of the current year

to the extent the quota was produced or considered produced on the

receiving farm; provided further, that to the extent that for any base

period a farm receives credit under this paragraph, such farm may not

receive credit under paragraph (iii) of this definition.

* * * * *

Farmers stock peanuts. Picked or threshed peanuts produced in the

United States which have not been changed (except for removal of

foreign material, loose shelled kernels, and excess moisture) from the

condition in which picked or threshed peanuts are customarily marketed

by producers, plus any loose shelled kernels that are removed from

farmers stock peanuts before such farmers stock peanuts are marketed.

* * * * *

Peanuts. All peanuts produced, excluding:

(i) Any peanuts which were not dug;

(ii) Any dug peanuts not picked or threshed which are disposed of

under the direction and supervision of FSA personnel; and

(iii) Green peanuts.

* * * * *

5. Section 729.104 is amended in paragraph (d)(3) by adding a

sentence at the end of the paragraph to read as follows:

Sec. 729.104 Administration.

* * * * *

(d) * * *

(3) * * * Such authority shall include, but not be limited to, the

delegation of the authority to the State FSA committee to, acting in

accordance with such instructions as the Deputy Administrator may

issue, modify deadlines for the filing of transfer of peanut quotas.

6. Section 729.204 is amended by adding a new paragraph (e) at the

end of the section to read as follows:

Sec. 729.204 Temporary seed quota allocation.

* * * * *

(e) Penalty for erroneous certification. If the certified acreage

on which the temporary seed quota allocation is made is greater than

the acreage determined by FSA to be planted to peanuts by more than the

smaller of 2 percent of the certified acreage or 5 acres, the producer

shall be assessed a penalty based on this difference. The penalty

amount shall be calculated by multiplying the difference between the

certified and determined peanut acreage by the applicable per acre

seeding rate used in the calculation of the temporary seed quota by 140

percent of the applicable per pound quota support rate for the crop

year involved. In addition, a commensurate penalty at the same rate may

be assessed in cases within the tolerance allowed by the previous

sentence in any instance in which the variance is determined to be due

to a scheme or device to defeat the purposes of the program, or is

repeated. Further, all errors may in all cases result in a commensurate

diminution of the quota allowed the farm for the following year.

7. Section 729.205 is amended:

a. In paragraph (a)(1) after the word ``entities'' by adding, the

parenthetical phrase ``(other than a university used for research

purposes)'',

b. By revising paragraph (a)(2)(ii), and

c. Redesignating paragraph (c) as paragraph (e), revising paragraph

(b), revising the new redesignated paragraph (e), and adding paragraphs

(c) and (d) to read as follows:

Sec. 729.205 Farms ineligible for farm poundage quota.

(a) Ineligible farms. * * *

(2) * * *

(ii) Whose primary domicile, as determined by FSA, in the case of

any individual is in a State outside the State in which the quota is

allocated or, in the case of an entity, does not qualify under this

section to be considered to be a resident of the State in which the

quota is allocated.

(b) Determination of residency and related rules. (1) For purposes

of administering paragraph (a) of this section, an entity may be

considered a resident of the State in which the quota is located if:

(i) It is determined that a person or persons with at least a

cumulative 20-percent interest in any such entity are individuals whose

primary residence is in the State in which the quota is allocated; or

(ii) As determined appropriate by the Deputy Administrator, the

corporation or other entity, but not a general partnership or an entity

not recognized as a separate and distinct legal entity from its

members, has been created under the laws of the State in which the

quota is allocated.

(2) For purposes of the provisions of (a)(2)(i) of this section, a

person shall not be considered to be a producer of a crop of peanuts

unless such person is at risk for at least 15 percent of the proceeds

from the marketing of the production of the quota at issue.

(c) Exemption for involuntary acquisition. Paragraph (a)(2) of this

section shall not apply to any involuntary acquisition of a farm by

foreclosure, or otherwise, resulting directly from the conduct of a

public business in the State in which the quota is allocated, or an

acquisition resulting directly by reason of a death. The exemption for

involuntary farm acquisitions allowed under the preceding sentence

shall only apply to the establishment of quota in the three crop years

immediately following the date of the involuntary acquisition of the

quota farm.

(d) Applicable crop year. For purposes of applying the rules in

paragraph (a) of this section as they regard production, the

determination of whether paragraph (a)(2) of this section applies shall

be made based on the crop last planted before the date on which the

determination is to be made.

(e) Allocating forfeited quota and sales of quotas subject to

paragraph (a). Except for the exemption for involuntary acquisition in

Sec. 729.205(c), beginning in 1997 any farm poundage quota held on or

after August 1 of 1997 by an ineligible person as determined under

paragraph (a) of this section shall be allocated from the quota farm to

other farms in the same State in accordance with Sec. 729.206 of this

part; provided, however, that if the ineligibility arises solely

because of a purchase of a farm after August 1, 1997, or involves a

quota which is acquired because of the expiration of a CRP contract

after August 1, 1997, the quota shall not be forfeited but may not be

used to market peanuts until the ineligibility is determined by the

county committee to have been removed or the quota is sold to an

eligible farm. Such reallocations shall be made to the extent

practicable but shall take into account those instances in which the

regulations call for an ineligibility for quota allocation rather than

forfeiture of the quota.

8. Section 729.214 is amended:

a. In paragraph (b)(5)(ii) by removing the words ``paragraph (e)''

and adding in its place the words ``paragraph (f)'';

[[Page 25439]]

b. In paragraph (d)(2)(iv) by adding the words ``or other method''

to follow the word ``lot'';

c. In paragraph (e)(1) by removing the words ``result in a

transfer'' and adding the words ``result in a temporary transfer'' in

its place;

d. In paragraph (f)(1)(iii)(A) by adding to the end of the sentence

the words ``prior to adjustment for temporary seed quota allocated to

the farm'';

e. In paragraph (l) by removing the words ``and all out-of-county

transfers''; and

f. By revising paragraphs (f)(3) (i) and (m) to read as follows:

Sec. 729.214 Transfer of quota by sale, lease, owner, or operator.

* * * * *

(f) Other transfer provisions--* * *

(3) Permanent transfer of quota from a farm. * * *

(i) Permanent transfer of quota to the farm. For the amount of

quota purchased or otherwise permanently transferred to the farm in the

current year and during the base period, as adjusted for any increase

or decrease in such quota due to adjustment in the national quota

during the base period, except that a transfer of a tenant's share of

any peanut quota increase shall not be considered for purposes of

determinations made under the provisions of this paragraph.

* * * * *

(m) Considered produced credit. Quota that is leased and

transferred from a farm shall be considered produced on such farm to

the extent of considered produced credit set forth in the definition of

``Considered produced credit'' in Sec. 729.103 of this part.

Signed at Washington, D.C., on April 30, 1997.

Bruce R. Weber,

Acting, Administrator Farm Service Agency.

[FR Doc. 97-11788 Filed 5-8-97; 8:45 am]

BILLING CODE 3410-05-P