Peanuts Marketed in the United States; Changes in Handling and Disposition Requirements

DEPARTMENT OF AGRICULTURE

7 CFR Parts 997, 998, and 999

[Docket Nos. FV96-997-1 FR; FV96-998-4 FR and FV96-999-3 FR]

Peanuts Marketed in the United States; Changes in Handling and

Disposition Requirements

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule relaxes, for 1996 and subsequent crop peanuts,

several provisions regulating the handling and disposition of

domestically and foreign-produced peanuts marketed in the United

States. The rule eliminates several requirements covering the

disposition of inedible peanuts. At the same time, it provides

safeguard measures including amendments to the aflatoxin provisions to

prevent inedible peanuts from entering human consumption outlets. The

rule increases opportunities for reconditioning failing peanut lots and

reduces inspection and handling costs to handlers and importers. The

changes were recommended by the Peanut Administrative Committee

(Committee), the administrative agency which oversees the quality

assurance program under Peanut Marketing Agreement No. 146 (7 CFR Part

998, Agreement). By law, the same or similar regulations issued under

the Agreement also must be issued under Part 997 regulating non-

signatory peanut handlers, and Part 999.600 regulating peanut

importers. This rule includes changes recommended by the Department to

help ensure effective safeguard measures. The changes should enable the

industry to be more competitive in the changing international peanut

market.

EFFECTIVE DATES: 1. Sections 997.20, 997.30, 997.40, 997.50, 997.51,

997.52, 997.53, 997.54, 998.100, and 998.200 are effective January 13,

1997. Section 999.600 is effective January 14, 1997.

FOR FURTHER INFORMATION CONTACT: Jim Wendland, Marketing Specialist,

Marketing Order Administration Branch, Fruit and Vegetable Division,

AMS, USDA, P.O. Box 96456, room 2525-S, Washington, D.C. 20090-6456;

telephone: (202) 720-2170, or fax: (202) 720-5698. Small businesses may

request information on compliance with this regulation by contacting:

Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable

Division, AMS, USDA, P.O. Box 96456, room 2525-S, Washington, D.C.,

20090-6456; telephone: (202) 720-2491, fax: (202) 720-5698.

SUPPLEMENTARY INFORMATION: This final rule is issued under Peanut

Marketing Agreement No. 146 (7 CFR Part 998); the non-signatory handler

peanut regulation (7 CFR Part 997); and the peanut import regulation

published in the June 19, 1996, issue of the Federal Register (61 FR

31306, 7 CFR Part 999.600). These programs regulate the quality of

domestically produced peanuts handled by Agreement signers and non-

signers as well as imported peanuts. The first two Parts are effective

under the Agricultural Marketing Agreement Act of 1937, as amended (7

U.S.C. 601-674), hereinafter referred to as the ``Act.'' Part 999 is

effective under section 108B(f)(2) of the Agricultural Act of 1949, as

amended (7 U.S.C. 1445c-3).

The Department of Agriculture (Department) is issuing this rule in

conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12988,

Civil Justice Reform. This rule is not intended to have retroactive

effect. 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.

Domestic peanut production in 1995 was 1.76 million tons, with a

farm value of slightly over $1 billion.

The objective of the two domestic programs and the import

regulation is to ensure that only high quality and wholesome peanuts

enter human consumption markets in the United States. About 70 percent

of domestic handlers, handling approximately 95 percent of the crop,

have signed the Agreement. The remaining 30 percent are non-signatory

handlers handling the remaining 5 percent of domestic production. The

1995 duty-free import quota was equal to approximately 2 percent of

1995 domestic production.

Under the three regulations, farmers stock peanuts with visible

Aspergillus flavus mold (the principal source of aflatoxin) are

required to be diverted to inedible uses. Each lot of milled peanuts

must be sampled and the samples chemically analyzed for aflatoxin

content. Costs to administer the Agreement and to reimburse the

Department for oversight of the non-signatory program are paid by an

assessment levied on handlers in the respective programs.

The Committee, which is composed of producers and handlers of

peanuts, meets at least annually to review the Agreement's rules and

regulations, which are effective on a continuous basis from one year to

the next. Committee meetings are open to the public, and interested

persons may express their views at these meetings. The Department

assesses Committee recommendations, as well as information from other

sources, prior to making any recommended changes to the regulations

under the Agreement.

Public Law 101-220 amended section 608b of the Act in 1989 to

require that all peanuts handled by persons who have not entered into

the Agreement (non-signers) be subject to the same quality and

inspection requirements to the same extent and manner as are required

under the Agreement. The non-signatory handler regulations have been

amended several times thereafter and are published in 7 CFR part 997.

Similarly, recent amendments to the Agricultural Act of 1949

require that all foreign produced peanuts in the domestic market fully

comply with all quality standards under the Agreement. Section

999.600--Specialty Crops; Import Regulations was added to 7 CFR part

999 on June 19, 1996 (61 FR 31306), to establish minimum quality,

identification, certification and safeguard requirements for foreign-

produced farmers stock, shelled and cleaned-inshell peanuts presented

for importation into the United States.

Thus, the changes to the Agreement's regulations, as established in

this final rule, also are established for the peanut non-signer and

import regulations.

According to the Committee, the domestic peanut industry is

undergoing a period of great change. The Committee bases its view, in

part, on findings in a

[[Page 1250]]

May, 1996 study entitled ``United States Peanut Industry Revitalization

Project'' developed by the National Peanut Council and the Department's

Agricultural Research Service. According to the study, the U.S. peanut

industry has been in a period of dramatic economic decline since 1991

because of: (1) Decreasing consumption of peanuts and peanut products;

(2) accompanying decreases in U.S. peanut production and increases in

production costs; and (3) increasing imports of peanuts and peanut

products.

The study shows that peanut consumption has declined. Between 1991

and 1994, per capita peanut consumption steadily declined a total of 11

percent. Peanuts used in primary products declined 12 percent, and

peanuts used in peanut butter (the largest product usage) declined 20

percent.

Among other things, the study shows that harvested acreage of

peanuts in the U.S. declined 25 percent between 1991 and 1995.

Production has fluctuated downward, with 1995 production 30 percent

below that of 1991. Farm value of peanut production has dropped 29

percent (from $1.4 billion to slightly over $1 billion) in the same

period.

The study points to recent increases in the duty-free import quota

for raw peanuts. The volume of imported peanuts has, indeed, increased

due to recent relaxations of the duty-free quota enacted through the

legislation to implement the North American Free Trade Agreement

(NAFTA) and the Uruguay Round Agreements under the General Agreement on

Tariffs and Trade (GATT). Prior to 1994, the volume of imported peanuts

was limited, in most cases, to 1.71 million pounds annually. However,

the Schedule of the United States annexed to NAFTA, implemented on

January 1, 1994, provided duty-free entry for up to approximately 7.43

million pounds of qualifying peanuts from Mexico. The duty-free access

for Mexican peanuts increased to approximately 7.88 million pounds in

1996 and is scheduled to be approximately 8.1 million pounds in 1997.

In calendar year 2008, access for Mexican peanuts will be unlimited. In

addition, the United States Schedule to the Uruguay Round Agreements

under GATT increased the peanut import quota to 76.8 million pounds in

1996 from all countries except Mexico, with additional annual increases

of approximately 10 million pounds to reach a ceiling of 125 million

pounds by the year 2000 for all imported peanuts.

The study shows that imports of peanut butter from 1991 to 1996

increased 116 percent. More significantly, the study reports that

imported peanut butter's share of U.S. peanut butter consumption

increased 12 fold between 1988 and 1993.

The study also makes projections for the near future. Farmer

production costs and revenue are projected to be equal by the year

2000, as are handler costs and revenue. Total imports of shelled

peanuts and paste are expected to increase 50 percent by the year 2000

and the U.S. position in the world market is expected to drop 7 percent

between 1995 and 1996.

In addition, the modifications in the Federal government's peanut

quota and price support program under the Federal Agriculture

Improvement and Reform Act of 1996 will result in the domestic industry

undergoing changes over the next few years. The study shows that the

quota poundage was reduced over 20 percent between 1991 and 1995, and

the support price dropped from $670 per ton in 1995 to $610 in 1996.

The Committee contended that all of these factors combined show

that the domestic peanut industry is in decline and that the outlook is

not expected to change without some positive intervention by the

industry.

In mid-1994, the Committee appointed a subcommittee to evaluate the

present program and to recommend changes. The Agreement's handling

regulations were evaluated with the intent of streamlining procedures

and making them consistent with current industry economies and

technological developments.

Different recommendations were developed for streamlining both

incoming and outgoing handling procedures. The recommendations focused

on handlers' freedom to prepare and dispose of peanut lots according to

economic incentives of the marketplace. For instance, restrictions that

prevent certain lots failing quality requirements from being blanched

or remilled would be removed so that more peanuts could be

reconditioned to meet human consumption requirements. Also, provisions

throughout the Agreement regulations require that certain lots be kept

separate and apart from other, similar peanut lots. For the most part,

these provisions tend to limit handlers' flexibility to move and

recondition peanuts. The subcommittee contended that such provisions

may work against optimum utilization of equipment and facilities and

prevent handlers from making the most economic use of their peanut

inventories. Further, peanut processing machinery has been improved

through technological advances to the point that virtually any lot of

peanuts, regardless of original (incoming) quality, can now be shelled,

remilled and/or blanched (processed) to meet outgoing quality

requirements of the Agreement and the non-signer program. It was the

opinion of the subcommittee that handlers should have the option of

deciding whether it is more economically advantageous to recondition a

lot or send it to an inedible peanut outlet.

Subcommittee members also recommended that many of the requirements

controlling disposition of inedible peanuts be removed because those

requirements should be placed on buyers rather than handlers. The

subcommittee contended that peanuts either pass or fail quality and

aflatoxin requirements, and the requirements limiting disposition based

on aflatoxin content (restricted and unrestricted dispositions) should

be removed.

The subcommittee contended further that these changes, primarily

relaxations, could be made without limiting the effectiveness of the

Agreement's quality assurance program. As long as all peanut lots

intended for human consumption continue to be sampled and tested

against current outgoing requirements, the industry's high quality

standards would be maintained.

These recommendations represented a fundamental change in the

Agreement's handling regulations. The full Committee met three times

from March to May 1996, to review all of the recommendations. At a May

23, 1996, meeting the Committee recommended the changes to the

Agreement's incoming and outgoing regulations for 1996 and subsequent

crop peanuts. After review and modifications to some of the

recommendations, the Department added an additional safeguard procedure

for imported peanuts and published the recommendations in the Federal

Register (61 FR 51811) on October 4, 1996. Because of extent of the

recommended changes, the three peanut regulations were published in

their entirety. A three-week comment period was provided for interested

parties to submit comments. Twelve comments were received by the end of

the comment period, October 24, 1996.

Seven comments were received from signatory handlers, two from

growers cooperatives, and one on behalf of the Committee. All of the

comments support the changes which effect the domestic signer and non-

signer programs. Two comments were received from importers opposing the

proposed additional reporting requirement on importers.

[[Page 1251]]

The Department requested comments on whether implementation of the

proposed changes after the beginning of the crop year would have an

unequal effect on one or more of the production areas or unequally

affect small or large handlers. Nine commenters responded that the

proposed changes should be implemented as soon as possible and should

be in effect for the entire 1996 crop year. No comments were received

opposing implementation of the changes for the 1996 crop year.

Further, seven commenters stated that the proposed changes would

not have an adverse affect on small peanut handlers. No comments were

received from persons claiming to be or to represent small businesses.

The comment submitted on behalf of the Committee recommended

revising the proposed regulatory text covering the requirement that all

peanuts be chemically tested for aflatoxin prior to disposition for

human consumption. The comment does not change the meaning or intention

of the proposal. This comment is addressed below.

One commenter suggested that the handling regulations be further

changed by eliminating the Segregation categories specified in the

incoming regulations. Such a relaxation could increase the volume of

cheaper peanuts available for processing for edible consumption. The

idea was considered and ultimately rejected by the Committee at

meetings prior to the May meeting because no agreement could be reached

on provisions to ensure appropriate compensation for producers. After

considering the comment and deliberations taken by the Committee at the

previous meetings, the Department has determined that the comment

should not be included in this rulemaking action.

Two commenters correctly pointed out that the support price of the

Department's Farm Service Agency (FSA) peanut quota program is not

scheduled to be reduced below the current $610 per ton, as indicated in

the proposed rule. This statement is corrected.

One comment was received from a peanut producers association which

addressed several issues relating to FSA's quota program. The comments

did not have relevance to the proposed handling changes in this

rulemaking.

Three commenters addressed the Department's proposed additional

import requirement covering foreign-produced peanuts which are admitted

into the U.S. and stored in warehouses for more than 30 days prior to

the opening of the duty-free import quota. Two importers opposed the

requirement and one commenter representing a domestic growers

cooperative agreed with the additional requirement. The requirement and

the Department's decision not to accept the opposing comments are

discussed below.

Of the nine comments received which addressed the effective date of

the regulations, all indicated that the rule should be implemented as

soon as possible. Several commenters stated that the entire industry is

expecting the changes to be made effective for the entire 1996 crop

year. However, handling actions already taken should not be subject to

such requirements. Thus, the actions taken in this final rule are not

intended to cover the entire 1996 crop year. Four commenters stated

that additional delays in implementation will adversely affect the

industry.

This final rule changes, for 1996 and subsequent crop peanuts,

several provisions regulating the handling of domestic and foreign-

produced peanuts and relaxes disposition requirements of such peanuts

to inedible peanut outlets. The rule increases the volume of peanuts

that can be handled and used for human consumption without decreasing

the quality requirements for such disposition. Restrictions are removed

on handler acquisition for human consumption use of certain farmers

stock lots failing incoming inspection because of excess loose shelled

kernels and fall-through peanuts. Positive lot identification (P.L.I.)

requirements for seed peanuts are removed. Shelled peanut lots meeting

Indemnifiable Grade or Superior Grade requirements may be sent to human

consumption outlets prior to the handler receiving aflatoxin

certification of the lot. Restrictions are removed on remilling and

blanching of peanut lots exceeding certain damage and foreign material

content levels. The maximum allowable aflatoxin content of peanut lots

disposed to inedible peanut outlets, such as animal feed or wildlife

seed, or are exported, is raised from 25 ppb to 300 ppb. Previous

provisions on ``restricted'' and ``unrestricted'' dispositions,

``fragmented'' peanuts, and peanut meal are removed. Peanut lots

testing above 300 ppb aflatoxin content, which are not reconditioned,

may only be crushed for oil. Safeguard measures are established

requiring aflatoxin certifications for inedible lots exceeding 15 ppb

aflatoxin content. Finally, the volume and storage location of foreign-

produced peanuts arriving in the U.S., which are inspected and stored

in Customs bonded warehouses for more than one month prior to filing

for consumption entry, must be filed with AMS.

Because this rulemaking involves substantial changes to the text of

the three peanut regulations, the explanation of the changes to each

program is repeated in this final rule. Comments received are included

in the discussion of each change in regulation. The Department also

makes a few changes to correct inadvertent omissions and redundancies

in the regulatory text of the three programs.

Incoming Regulations

Loose shelled kernels: The Committee recommended amending

Sec. 998.100 Incoming quality regulation by removing paragraph (d)

Loose shelled kernels which regulates the acquisition of loose shelled

kernels (LSKs) and other defective kernels. The regulations should

focus more on outgoing quality and less on the shelling and milling

processes necessary to meet the outgoing, human consumption

requirements. New, high technology milling and blanching equipment

enables handlers to recondition failing peanut lots that could not have

been reconditioned when the regulations were promulgated. It is no

longer necessary to impose restrictions that hinder efficiency of

handling operations and result in the loss of potentially good quality

peanuts. Therefore, this final rule removes paragraph (d)(1) from the

incoming regulations. In doing so, restrictions are removed on

acquiring farmers stock peanuts with more than 14.49 percent LSKs and 5

percent fall-through from specified screen sizes.

For the non-signer regulation, paragraph (d) Loose shelled kernels

in Sec. 997.20 corresponds to paragraph (d) of the Agreement's

Sec. 998.100 and is removed for the reasons cited above and to be

consistent with corresponding changes to the Agreement. For the import

regulation, paragraph (b)(1)(iv) Loose shelled kernels of Sec. 999.600

also is removed for the reasons cited above.

The Committee recommended removing paragraph (d)(2) of Sec. 998.100

which requires that handlers submit to the Committee diagrams of their

handling facilities and procedures. This provision is no longer

considered necessary for the Committee's oversight of the signatory

handlers and is removed.

The non-signer regulation and the import regulation do not have

paragraphs corresponding to paragraph (d)(2) of Sec. 998.100.

Seed peanuts: The Committee recommended removing the requirement in

old Sec. 998.100, paragraph (e) Seed peanuts that required handlers who

receive or acquire seed residuals to hold and mill such peanuts

separate and

[[Page 1252]]

apart from other edible quality peanuts. As long as the peanuts sent to

human consumption outlets must ultimately meet outgoing requirements,

including certification as negative to aflatoxin, it is not necessary

to hold those peanuts separate and apart from other lots also destined

for edible consumption. Therefore, this final rule amends paragraph (e)

of Sec. 998.100 by removing the requirement that handlers hold and mill

seed residuals separate and apart from other edible quality peanuts.

The Department makes a correction to paragraph (d)(2) as published

on page 51824 of the proposed rule. The second sentence is not

correctly worded and should refer to seed peanuts which ``have''

visible Aspergillus flavus mold. The words ``are free from'' are

removed from the second sentence as published in the proposed rule. The

sentence has been revised accordingly in this final rule.

For the non-signer regulation, paragraph (e) Seed peanuts in

Sec. 997.20 contains different wording but the same meaning and intent

as the Agreement regulation's seed provisions. The changes made to

paragraph (e) of the Agreement regulation concerning holding and

milling seed peanuts separate and apart from other peanuts also are

made to Sec. 997.20 paragraph (e) of the non-signer regulation for the

reasons cited above and to be consistent with corresponding changes to

the Agreement.

For the import regulation, paragraph (b)(2) Seed peanuts in

Sec. 999.600, also is changed accordingly. Further, old paragraph

(b)(2) provided that Segregation 2 and 3 peanuts may be shelled for

seed purposes, but must be dyed or chemically treated to indicate the

peanuts are unfit for human or animal consumption. That requirement was

provided in paragraphs (i)(1) and (2) of Sec. 998.200--which are

removed in this final rule (discussed below). Thus, this rule finalizes

changes to import regulation paragraph (b)(2) by removing the

requirement that Segregation 2 and 3 seed peanuts must be dyed or

chemically treated. Finally, the second sentence of the import

regulation paragraph (b)(2), which covered reporting disposition to the

Secretary, is removed because the information is adequately covered in

the last two sentences of the same paragraph.

Oilstock: In old paragraph (f) of Sec. 998.100, the Committee

recommended removing the prohibition on exporting inedible quality

peanuts to Canada or Mexico and removing references to ``fragmented''

peanuts. The Committee members expressed the point that other countries

ship inedible and unfragmented peanuts to Canada, Mexico, and other

international markets, so domestic handlers should not deny themselves

access to the same international markets. Further, removing the term

``fragmented'' from paragraph (f) of Sec. 998.100 allows the term

``peanuts'' to refer to peanuts in any form, including fragmented

kernels, which may be acquired by handlers for crushing or export.

Therefore, this final rule removes from old paragraph (f), the

prohibition on exporting inedible quality peanuts to Canada and Mexico,

and references to fragmented peanuts and the term ``shelled'' is also

removed, where appropriate, for the same reason. Old paragraph (f) also

is redesignated as paragraph (e).

For the non-signer regulation, the prohibition on exports to Canada

and Mexico and the requirement of fragmentation is removed to make

paragraph (f) of Sec. 997.20 consistent with the changes to the

regulations under the Agreement.

In Sec. 999.600 of the import regulation, paragraph (b)(3) Oilstock

and exportation does not restrict exports and so no corresponding

change is needed.

Finally, in Sec. 998.100, the Committee recommended removing

paragraph (j) which covers disposition of shelled peanuts for use as

animal feed. This paragraph contained restrictions which are not

necessary to safeguard the quality of peanuts for human consumption.

Appropriate safeguard measures are provided in replacement provisions

discussed below. Therefore, this final rule removes paragraph (j) from

the Agreement regulations.

In this final rule, corresponding paragraph (h) in Sec. 997.20 of

the non-signer regulation is removed for the reason cited above.

Paragraph (i) of Sec. 997.29 is retained because it applies to

producer/handlers handling peanuts of their own production. Such farm-

stored peanuts must meet the requirements of the non-signer regulation.

Paragraph (i) is redesignated as paragraph (g) in Sec. 997.20.

The import regulation does not have a paragraph corresponding

specifically to the Agreement regulation's paragraph (j) on animal

feed. The topic is addressed in paragraph (e) of the outgoing

regulations, the removal of which is discussed below.

Outgoing Regulations

Paragraph (a) of Sec. 998.200 Outgoing quality regulation provides

that peanut lots meeting the indemnifiable grade requirements in Table

2 do not have to be tested and certified as negative as to aflatoxin.

The Committee recommended modifying this requirement to provide that

all lots (including indemnifiable grade lots) intended for human

consumption be chemically tested and certified ``negative'' as to

aflatoxin content. The change makes the Agreement regulations

consistent with current industry practice. Most, if not all, buyers

require that all peanuts for human consumption be certified negative as

to aflatoxin. This change has a twofold purpose--it codifies a practice

which is common in the industry, and ensures that the regulations

effectuate the objectives of the Agreement. This final rule modifies

paragraph (a) accordingly.

Currently, peanut lots meeting the grade requirements of Table 1,

Other Edible Quality, must be certified negative to aflatoxin prior to

shipment to the buyer. This requirement is not changed. Further, under

previous industry practice, indemnifiable grade peanut lots were

chemically tested and certified while the lot was in transit to the

buyer. This practice is continued under the final rule and the actual

transfer of lot ownership should not normally occur until certification

has been received by the handler. A shorter turn-around time for

chemical analysis is now possible with current testing practices and

equipment, overnight and express mail services, and fax transmissions

of test results.

The comment filed on behalf of the Committee correctly points out

that proposed paragraph (a)(2) in Sec. 998.200, which is between the

two tables on page 51826, could be interpreted to mean that all shelled

peanut lots must meet indemnifiable grade requirements. The Department

agrees that this is not the intent of the Committee's recommendation.

The commenter suggested that paragraph (a)(2) in the proposed rule be

re-arranged to read as follows: ``Prior to disposition to human

consumption outlets, peanuts which have been certified as meeting the

requirements for indemnifiable grades must also be certified

``negative'' as to aflatoxin. Maximum limitations for indemnifiable

grades are as follows:'' This final rule makes the commenter's

recommended change to paragraph (a)(2) of Sec. 998.200 of the Agreement

regulations and also to paragraph (a)(1)(ii) of Sec. 997.30 of the non-

signer regulations. The corresponding paragraph in the import

regulation does not need to be changed.

The Department also corrects the title of Table 1 in Sec. 998.200

of the Agreement regulations. The word ``Non'' was inadvertently left

out of the title, which should read: Table 1--``Other Edible Quality''

(Non-Indemnifiable) Grades--Whole Kernels and Splits. This error

[[Page 1253]]

appears twice in the proposed rule because Table 1 begins on page 51825

and is continued on page 51826. The titles of the corresponding tables

in the non-signer or import regulation do not refer to

``indemnifiable'' peanuts and do not have to be corrected.

The Committee recommended changing the title of paragraph (c) of

Sec. 998.200 to read Sampling and testing shelled peanuts. The new

title includes the peanut sampling process which comprises a

significant part of paragraph (c). As a conforming change, the

beginning of the first sentence of revised paragraph (c) is changed to

add the words ``Prior to shipment, * * *.'' In addition, this final

rule designates the old introductory paragraph (c) as paragraph (c)(1)

because a paragraph (c)(2) is cited in the Code of Federal Regulations.

New paragraph (c)(1) is otherwise unchanged.

A conforming change is made to the title of corresponding paragraph

(c) of Sec. 997.30 of the non-signer regulation. No conforming change

is necessary in the import regulation. A conforming change also is made

to non-signer paragraph (c)(2) to specify that handlers shall cause

samples to be ground by the Federal or Federal-State Inspection Service

(inspection service) prior to shipment.

Paragraph (c)(4) of Sec. 998.200 specifies the maximum allowable

aflatoxin content for edible peanut lots as 15 parts per billion (ppb).

Such lots are certified as ``negative'' to aflatoxin. Consistent with

current industry practice, the aflatoxin certificates for such lots are

not required to specify the numerical aflatoxin count of the lot. This

requirement is not changed in this final rule.

Previous paragraph (c)(4) of Sec. 998.200 also specified a

``negative'' content for inedible peanut lots as 25 ppb or less. Under

the regulation, failing lots with aflatoxin content in excess of 15 ppb

but 25 ppb or less were considered ``unrestricted,'' which means the

peanuts could be used in certain non-human consumption peanut outlets

such as animal feed, wildlife feed, etc. ``Unrestricted'' uses could

provide more of a financial return for handlers while not posing a food

safety threat to consumers. Peanut lots with aflatoxin content of more

than 25 ppb were certified as ``restricted'' and could only be crushed

for oil or exported. Aflatoxin certificates from USDA and Committee-

approved private laboratories specified unrestricted lots as

``negative'' and usually did not include the numerical count of the

lot's aflatoxin content. Restricted lot certificates cited the

numerical aflatoxin count of the failing lot.

The Committee recommended revising paragraph (h) and removing

paragraphs (j) and (l) of Sec. 998.200 to remove, among other things,

procedures relevant to ``unrestricted'' and ``restricted'' lots of

peanuts. Under the proposal, restrictions on the disposition of failing

peanut lots would be relaxed under the proposed rule. Failing lots of

peanuts composed of LSKs, fall through and pickouts from initial

shelling operations would be limited to crushing or export unless

certified as to aflatoxin content. If so certified, the lots could be

disposed to other non-edible uses. Other failing lots and residuals

from blanching and remilling also could be sold to any buyer provided

that the lot is PLI, certified as to aflatoxin content, and in

specified containers. Therefore, under the proposal, there is no reason

to retain the phrase in paragraph (c)(4) of Sec. 998.200 that specifies

25 ppb or less as ``negative'' to aflatoxin for inedible peanuts.

Continued reference to 25 ppb relative to inedible peanuts would only

cause confusion in the revised regulations. The Department accepts

these recommendations of the Committee and revises, in this final rule,

the paragraphs as stated.

Replacement paragraphs (f), (g), and (h) of the new Sec. 998.200

(discussed below) require that failing lots disposed to inedible

outlets other than crushing or export be ``certified as to aflatoxin

content''--which means entering a numerical count rather than a general

statement covering a ppb spread from 16 to 26 ppb. Therefore, this

final rule establishes that, for peanut lots testing more than 15 ppb,

the aflatoxin certificate must show the lot's numerical aflatoxin

count.

This final rule establishes that aflatoxin laboratories specify the

numerical aflatoxin content on certificates issued on inedible peanut

lots testing more than 15 ppb. Also, aflatoxin certificates on lots

which fail grade requirements but are tested at 15 ppb or less should

be certified as ``negative to aflatoxin'' for inedible peanuts. The

certificates for such lots may specify the ppb aflatoxin content of the

lots.

This final rule makes corresponding changes to paragraph (a)(2) of

Sec. 997.30 of the non-signer regulations and paragraph (f)(3) of

Sec. 999.600 of the import regulation.

The Department believes these certification guidelines will assist

handlers in marketing inedible quality peanuts.

Paragraph (d) Identification of Sec. 998.200 is amended in this

final rule by adding a clause in the first sentence establishing the

maximum lot size as 200,000 pounds. Two hundred thousand pounds of

peanuts is the largest lot size which the inspection service has

determined can be efficiently and accurately sampled. The maximum limit

specification is removed from other paragraphs in the Agreement's

regulatory language and is added to paragraph (d) for consistency and

clarity. The 200,000 pound maximum lot size applies to all sampling

situations.

The Department makes a correction to the regulatory text of

paragraph (d) of Sec. 998.200. Text regarding P.L.I. was inadvertently

left out of the second to last sentence at the end of paragraph (d).

The corrected text does not change the meaning or regulatory nature of

the paragraph.

In the non-signer regulation, Sec. 997.50 Inspection, chemical

analysis, certification and identification applies to identification,

among other topics. While the maximum lot size of 200,000 pounds is

specified elsewhere in the regulations, the 200,000 pound maximum lot

size is added to Sec. 997.50. In the import regulation, paragraph

(d)(3)(ii) in Sec. 999.600 specifies the 200,000 pound maximum lot size

and is not changed.

Paragraph (f) Interplant transfer of Sec. 998.200 was revised last

year and provides that peanut lots may be transferred to any handler or

storage without P.L.I. and certification, and that, upon disposition

for human consumption such transferred peanuts must meet edible

requirements. This paragraph is consistent with the Committee's

intention to remove provisions which restrict movement and increase

costs of handling peanuts. As long as any lot of peanuts intended for

human consumption are required to be sampled and meet outgoing quality

requirements and are P.L.I., any additional requirements on the

transfer of peanuts between a handler's plants, that do not affect

outgoing quality, are irrelevant. Therefore, paragraph (f) is not

changed in this final rule. Handlers are required to keep records of

all such transfers.

Corresponding paragraph (f) of Sec. 997.30 of the non-signer

regulation covers the transfer of non-signer peanuts between plants.

This paragraph is removed (as discussed below). The import regulation

does not have corresponding requirements on the transfer of imported

peanuts between plants, and, therefore, no conforming change is

necessary.

[[Page 1254]]

Disposition of Failing Quality, Inedible Peanuts

The Committee recommended streamlining Sec. 998.200 Outgoing

regulation by removing 16 paragraphs covering disposition requirements

and procedures concerning inedible (failing quality) peanuts used for

research projects, wildlife feed, rodent bait, chemically treated seed,

fragmented export, meal from crushing, and animal feed. The paragraphs

removed from Sec. 998.200 are:

(1) Paragraph (g)(1) which defined LSKs, fall through, and pickouts

and inedible quality peanuts;

(2) Paragraph (g)(2) which required that inedible peanuts be kept

separate and apart from edible quality peanuts;

(3) Paragraph (g)(3) which provided for: (a) disposition of

inedible peanuts to research projects, wildlife feed, rodent bait,

chemical treatment for seed, and export to countries other than Canada

and Mexico; (b) designations of restricted and unrestricted failing

lots; and (c) limits on disposition of meal from crushing;

(4) Paragraph (g)(4) which specified further requirements on the

transfer of inedible peanuts;

(5) Paragraph (h)(1) which specified further requirements on

identifying and reporting the transfer of inedible peanuts;

(6) Paragraph (h)(3) which specified further requirements regarding

the disposition of failing quality Segregation 1 peanuts to specified

outlets;

(7) Paragraph (i)(1) which specified disposition of seed peanuts

and seed residuals;

(8) Paragraph (i)(2) which required chemical treatment of seed

peanuts;

(9) Paragraph (j)(1) which specified requirements on commingling

and disposition of Segregation 2 and 3 peanuts;

(10) Paragraph (j)(2) which specified further requirements on

commingling and disposition of Segregation 2 and 3 peanuts;

(11) Paragraph (k)(1) which regulated exportation of Segregation 1

peanuts;

(12) Paragraph (k)(2) which specified further requirements on the

disposition of Segregation 1 peanuts to inedible outlets;

(13) Paragraph (l)(1) which specified categories of unrestricted

shelled peanuts for disposition to crushing or export;

(14) Paragraph (l)(2) which specified categories of restricted

shelled peanuts for disposition to crushing or export;

(15) Paragraph (m)(1) which specified requirements for the

disposition of shelled peanuts for domestic animal feed; and

(16) Paragraph (m)(2) which specified coloring or dyeing and other

requirements for inedible peanuts disposed to domestic animal feed.

This final rule removes paragraphs (j) and (k) which specified

disposition requirements for farmers stock peanuts. The Committee

believed that these two paragraphs are no longer needed because

paragraph (f) Oilstock of Sec. 998.100 Incoming quality regulation

provides that handlers may acquire Segregation 2 and 3 peanuts for

crushing or export and that the Area Association supervise such

dispositions. Handlers may also acquire for crushing or export peanuts

originating from Segregation 1 farmers stock which are milled and fail

human consumption quality and are P.L.I.

Under the previous Agreement regulations, paragraph (j)(3) of

Sec. 998.200 provided handlers with an exemption from assessments for

acquisitions of Segregation 2 and 3 peanuts used for crushing or

export. Paragraph (j)(3) was added to the regulatory language last year

(60 FR 36208, July 14, 1995) to clarify Agreement provisions

Secs. 998.31 and .48. The Department clarifies in this final rule that

the assessment exemption applies to Segregation 2 and 3 peanuts

acquired only for crushing, whether domestic or export. The exemption

paragraph is redesignated as paragraph (i) in Sec. 998.100 of the

incoming regulation, and is revised to remove the references to the

removed paragraphs (j)(1) and (j)(2) in Sec. 998.200.

This final rule also relaxes restrictions on blanching and

remilling certain inedible lots. The Committee recommended relaxing

restrictions in paragraphs (h)(2) and (h)(4) which prohibited blanching

or remilling peanut lots exceeding defect levels of 10 percent total

unshelled peanuts and damaged kernels, 10 percent foreign material,

and, for remilling, 10 percent fall through. The restrictions on the

amount of damage and foreign material in out-of-grade lots are removed

so that handlers have more opportunity to recondition failing lots.

This change increases handler flexibility, reduces inspection and

handling costs, and enables more peanuts to be reconditioned and

shipped for human consumption. The restriction on 10 percent fall-

through for remilling peanuts remains in effect.

The corresponding paragraphs of the non-signer and import

regulations (Sec. 997.40(a) and Sec. 999.600(f) respectively) do not

contain similar limitations on blanching and remilling of defective

lots and do not need to be changed.

The Committee indicated that the regulations were too restrictive

and limited handlers' ability to recondition potentially edible

peanuts. Further, as long as peanuts are required to meet the outgoing

requirements, including negative aflatoxin certification, it should not

matter from which categories the peanuts originated. The Committee

recommended removal of many restrictions and the addition of

appropriate safeguards. The Committee believed these safeguard

requirements would help ensure that inedible peanuts do not end up in

human consumption outlets.

The provisions covering peanut disposition are replaced by two new

paragraphs and revisions are made in two existing paragraphs. New

paragraphs (f) (1), (2) and (3) of the outgoing regulation modify

Sec. 998.32 of the Agreement and specify disposition requirements for

edible and non-edible peanut lots. New paragraph (g) provides for

disposition of inedible milled peanuts (``sheller oilstock

residuals''). New paragraph (h)(1) covers the blanching of inedible

peanuts (revised from current paragraph (h)(2)). New paragraph (h)(2)

covers the remilling of inedible peanuts (revised from current

paragraph (h)(4)).

The Committee believed that safeguard measures in the regulations

should be maintained because peanut lots sent to human consumption

outlets still need to meet the quality requirements of paragraph (a)

and be certified negative to aflatoxin. Peanuts which cannot be

reconditioned (or which a handler chooses not to recondition) to meet

outgoing quality requirements would continue to be required to be

P.L.I., red tagged, and maintained in appropriate containers. If

disposed of to inedible peanut outlets other than domestic or export

crushing, failing peanuts would be required to be certified as to

aflatoxin content and that certification would accompany the lot to the

inedible peanut outlet. In addition, new paragraph (f)(2) also requires

that the shipping papers state that the inedible peanuts are not to be

used for human consumption. All inedible dispositions would continue to

be reported to the Committee.

In new paragraph (f)(3) of Sec. 998.200, failing quality peanuts

not sent to inedible outlets such as livestock feed, wild animal feed,

rodent bait, etc., must be either crushed or exported as prescribed in

new paragraph (g) or blanched or remilled pursuant to new paragraphs

(h) (1) and (2), respectively. Segregation 2 and 3 farmers stock

peanuts may be milled for seed.

[[Page 1255]]

New paragraph (g) of Sec. 998.200 provides that peanuts and

portions of peanuts which result from milling operations be identified

as ``sheller oilstock residuals.'' Such peanuts include loose shelled

kernels, fall through, and pick-outs as defined in that paragraph and

whole lots of failing peanuts that a handler may choose to crush or

export for crushing. Under new paragraph (g), sheller oilstock

residuals which are certified as to aflatoxin content may be disposed

of ``domestically,'' which means that the peanuts may be used for

livestock feed, wild animal feed, rodent bait, or other non-human

consumption uses, pursuant to paragraph (f)(2), or crushed for oil.

Such peanuts also may be exported. Seller oilstock residuals not

certified as to aflatoxin content must be crushed or exported as

specified in new paragraph (g). Further, shipping papers accompanying

such crushed or exported lots must specify that disposition limitation.

All sheller oilstock residuals moved under paragraph (g) of

Sec. 998.200 must be reported to the Committee--which is consistent

with current reporting requirements. Corresponding reporting

requirements to report disposition of inedible peanut lots to the AMS

are established for non-signatory handlers in paragraph (c) of

Sec. 997.40 and for importers in paragraph (e)(4) of Sec. 999.600.

This final rule removes nearly all restrictions on handlers selling

peanuts to inedible peanut outlets. To help ensure the peanut lots with

excessively high aflatoxin content are not used in inedible outlets

where aflatoxin contamination could be transferred to human consumption

products, the Department establishes in this final rule that no peanut

lot exceeding 300 ppb aflatoxin content may be disposed to an inedible

peanut outlet, other than crushing or export. The 300 ppb content

ceiling is the maximum aflatoxin content recommended by the Food and

Drug Administration (FDA) for peanuts used for finishing (i.e. feedlot)

beef cattle. To make this change, an additional paragraph (2)

specifying the restriction is added to paragraph (g) covering sheller

oilstock residuals. The same provision is added to the non-signer

regulation as paragraph (c)(2) of Sec. 997.40 and the import regulation

as paragraph (e)(2)(ii) of Sec. 999.600. This requirement will help

ensure peanut lots which are excessively high in aflatoxin are not

disposed to inedible outlets such as livestock feed where the aflatoxin

can be transferred in the food chain to other food products intended

for human consumption.

Thus, this final rule raises the aflatoxin content limit to 300 ppb

from the current 25 ppb for failing peanut lots which can be disposed

of to any inedible outlet.

Under this final rule, handlers are allowed to recondition failing

peanut lots, and have more incentive to do so. Handlers have the option

of crushing a lot for oil or reconditioning the lot. Lots above 300 ppb

aflatoxin content which are not economically beneficial to recondition

must be crushed or exported. Only lots testing 300 ppb or less should

be disposed of for use as animal feed. With current technologies,

reconditioning should be possible for most all failing peanut lots.

Whole and residual lots exceeding 300 ppb aflatoxin content may be

commingled until sufficient volume is accumulated for crushing

disposition.

According to the FDA, residuals from the reconditioning of lots

exceeding 300 ppb and the meal from crushed lots exceeding 300 ppb

should not be used as animal feed. The recommended maximum aflatoxin

content for domestic animal feed, provided below, is summarized from

FDA's Compliance Policy Guides (Sec. 683.100). The section is entitled

``Action Levels for Aflatoxin in Animal Feed'' and was last revised

March 28, 1994. The action levels provided below apply to peanut

products, peanuts, peanut meal, peanut hulls, peanut skins and ground

peanut hay. The FDA guide provides the following action levels for

animal feeds:

--Peanut products intended for finishing (i.e., feedlot) beef cattle:

Action level 300 ppb.

--Peanut products intended for finishing swine of 100 pounds or

greater: Action level 200 ppb.

--Peanut products intended for breeding beef cattle, breeding swine, or

mature poultry: Action level 100 ppb.

--Peanut products and feed ingredients intended for immature animals:

Action level 20 ppb.

--Peanut products and other feed ingredients intended for dairy

animals, for animal species or uses not specified above, or when the

intended use is not known: Action level 20 ppb.

In the previous Agreement regulations, inedible peanut lots

certified at 26 or more ppb could not be sent to inedible peanut

outlets where the peanuts would not be subject to heating in the

preparation for inedible use or sent to outlets which allow the

aflatoxin to be passed to another food product entering human

consumption channels. This is a food safety measure which helps prevent

aflatoxin- contaminated peanut lots from being used in certain inedible

outlets--such as dairy cattle feed where the aflatoxin could be passed

to human consumption in the milk.

This final rule continues to require that handlers dispose of

inedible peanuts based on aflatoxin content. However, the action level

restricting inedible disposition is relaxed significantly and the

restrictions limiting disposition to different inedible peanut outlets

are removed, except that lots containing aflatoxin in excess of 300 ppb

are required to be crushed for oil.

This final rule retains, as proposed, the phrase ``which originated

from Segregation 1 peanuts'' in paragraphs (h)(1) and (h)(2) of

Sec. 998.200. This phrase was not included in the text for the revised

blanching and remilling paragraphs recommended by the Committee and no

explanation was provided by the Committee as to the benefit of removing

this important safeguard provision. The phrase, at the very least,

serves as a reminder that only Segregation 1 peanuts may be shelled and

sent to edible consumption outlets. The phrase is included in

corresponding paragraphs (d) and (e) of Sec. 997.400 and the

introductory paragraph (e) of Sec. 999.600.

Also, the Committee recommended that the titles of the revised

blanching (h)(1) and remilling (h)(2) paragraphs include reference to

Committee-approved blanchers and remillers. However, the references are

not necessary for the meaning of the paragraphs and are not included in

this final rule.

In non-signer Sec. 997.30 Outgoing regulation, paragraphs (f)

Transfer between plants and (g) Residuals from seed peanuts correspond

to the same topics covered in the Agreement's outgoing regulation, and

are removed in this final rule. The subject matter in the two

paragraphs is replaced with revised Sec. 997.40 Reconditioning and

disposition of peanuts failing quality requirements. Paragraphs (a)(1)

and (2) of old Sec. 997.40, covering remilling and blanching of

inedible shelled peanuts are revised and the order is reversed to

conform with revised blanching and remilling paragraphs in

Sec. 998.200. The new non-signer blanching and remilling paragraphs are

designated as paragraphs (d) and (e), respectively. These new

paragraphs are not identical to the Agreement's blanching and remilling

paragraphs because non-signers are not required to receive approval

prior to moving a failing shelled lot to a blancher or remiller (as are

signatory

[[Page 1256]]

handlers under the Agreement regulations). Also, the non-signer

regulations do not limit remilling and blanching to Committee-approved

remillers, blanchers or exporters. Therefore, those requirements are

not included in revised non-signer paragraphs (d) blanching and (e)

remilling finalized in this rule.

The provisions of the previous non-signer paragraph (a)(3) of

Sec. 997.40 covering the ownership of peanuts moved for custom

blanching or remilling, and the certification and reporting of such

peanuts, are included in new Sec. 997.40 blanching and remilling

paragraphs (d) and (e). Likewise, previous paragraph (a)(4) provisions

on the bagging, red tagging and disposition of blanched and remilled

peanuts are included in the revised paragraphs (d) and (e) of

Sec. 997.40. These changes make the non-signer blanching and remilling

paragraphs conform with the Agreement regulation's revised blanching

and remilling paragraphs.

Four paragraphs in old Sec. 997.40(b) Disposition of shelled

peanuts failing quality requirements for human consumption cover the

various disposition procedures and outlets for failing quality,

inedible peanuts. These requirements are the same as, but are organized

and worded differently from corresponding paragraphs (g) through (m) in

Sec. 998.200 of the Agreement regulations. The provisions removed from

old paragraph (b) of Sec. 997.40 are:

(1) Paragraph (b)(1) which regulated the disposition of shelled

peanuts to unrestricted crushing, fragmenting or dyeing, export, animal

feed, wildlife feed, and rodent bait;

(2) Paragraph (b)(2) which specified further requirements for

disposition to animal feed (coloring or dyeing, P.L.I., valid aflatoxin

certification, and reporting);

(3) Paragraph (b)(3) which regulated the disposition of shelled

peanuts to restricted crushing, and export;

(4) Paragraph (b)(4) which regulated the disposition of Segregation

2 and 3 farmers stock peanuts to restricted and unrestricted meal,

crushing and export; and

(5) Paragraph (b)(5) which specified reporting requirements for

LSKs, fall through, and pickouts.

These paragraphs are removed for the same reasons cited above and

to correspond to changes to the Agreement's outgoing regulation. This

final rule removes all references to ``restricted'' and

``unrestricted'' failing imported peanuts and limitations on the

disposition of restricted and unrestricted lots.

Old paragraph (b)(6) of Sec. 997.40 is retained because it exempts

from assessments, Segregation 2 and 3 farmers stock peanuts acquired by

non-signatory handlers for crushing or export. The corresponding

paragraph in the Agreement is retained and redesignated in this final

rule. Therefore, such Segregation 2 and 3 peanuts acquired by non-

signatory handlers also continues to be exempt from assessments. Old

paragraph (b)(6) is revised and redesignated as paragraph (b) under

Sec. 997.51 Assessments and the existing text in Sec. 997.51 is

redesignated as paragraph (a).

There is no authority to assess imported peanuts.

Several changes are made to Sec. 999.600 of the import regulation

regarding disposition of inedible peanuts. Old paragraph (c)(3)

(reconditioned peanuts) is redesignated as the new introductory

paragraph of paragraph (e). Further, the provisions in old paragraphs

(e) and (f) (disposition and reconditioning of failing peanuts,

respectively) are revised and combined in new paragraph (e). Also,

paragraphs (g) and (h) (safeguard procedures and additional

requirements, respectively) are redesignated as paragraphs (f) and (g),

respectively.

The introductory paragraph of new paragraph (e) of Sec. 999.600

provides an overview for reconditioning imported peanut lots. New

paragraphs (e)(1), (e)(2), and (e)(3) of the import regulation

correspond to new paragraphs (f), (g), and (h) of the Agreement

regulations. New paragraph (e)(1) covers failing lots disposed of to

inedible uses such as animal feed, wildlife feed, seed peanuts and

meal--specified in previous paragraphs (e) and (f). Disposition to

these inedible outlets must be positive lot identified with red tags,

bagged, and the bill of lading must state that the peanuts cannot be

used for human consumption.

New paragraph (e)(2) of the import regulation covers disposition of

failing quality peanuts (``sheller oilstock residuals'') to crushing or

export. Peanuts covered under the new paragraph (e)(3) are primarily

loose shelled kernels, fall through and pickouts from milling

operations, but may also include any other failing lot that an importer

chooses to crush or export.

New paragraph (e)(4) specifies that identification, certification,

and movement of inedible peanuts covered under paragraph (e) must be

reported to AMS pursuant to safeguard procedures in paragraphs (f)(2)

and (f)(3) of Sec. 999.600. This does not represent additional

reporting or recordkeeping requirements of inedible dispositions for

importers. The requirements correspond to reporting requirements in the

revised Agreement regulations for signatory handlers who are required

to report dispositions and maintain records of all inedible peanut

transactions.

Finally, a new paragraph (i) is added at the end of Sec. 998.200 of

the Agreement regulations. The new paragraph specifies that certain

records are required to be maintained pursuant to Sec. 998.43 of the

Agreement. The records pertain to peanuts which are not certified for

human consumption. In addition to maintaining certain records, the

Agreement provides that all records are made available to Committee

staff and to representatives of the Secretary, as is necessary to

document compliance with Agreement regulations.

The additional provision does not represent an increase in the

number of forms handlers and importers complete, report, or maintain

under the three programs.

No corresponding changes in reporting and recordkeeping

requirements are necessary in the non-signer and import regulations.

However, in Sec. 997.52 Reports of acquisition and shipments and

elsewhere in the non-signer regulation, references regarding specific

Fruit and Vegetable Division form numbers are replaced with the generic

statement ``forms provided by the Division.'' This will enable the

Department to revise the forms and reduce the number of forms without

the additional rulemaking expense of changing the non-signer peanut

regulation each time a form is revised or deleted. All such changes

still must be submitted for approval by the Office of Management and

Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C.

Chapter 35).

The unchanged portions of incoming and outgoing regulations of all

three peanut programs, in effect for 1995 and subsequent crop peanuts,

remain in effect for 1996 and subsequent crop peanuts.

Additional Change to Sec. 999.600 Import Regulation

Early Entry and Bonded Storage Pending New Quota

Experience shows that some importers ship peanuts to the U.S.

several months prior to filing a consumption entry for the peanuts.

Such peanuts are sampled and inspected when off-loaded at the port and

then stored in Customs Service bonded warehouses until the opening of

the next year's duty-free quota.

[[Page 1257]]

Depending on how quickly one year's quota fills, storage could be as

long as 10 or 11 months. For instance, new crop peanuts from Argentina

may be harvested as early as May or June but arrive in the U.S. too

late to be included in the duty-free quota that opened a month or two

earlier on April 1. The peanuts are then placed in bonded storage

awaiting the next quota year the following April 1. Further, if the

quota is filled before all peanuts in storage can be entered for one

year, it is possible that some peanuts would have to be stored for

another full year, and the total storage time could approach 2 years.

Because of the possibility of deterioration while in storage, the

Department needs to know which peanut shipments are held in bonded

storage for an extended period of time, so that the wholesomeness of

such peanuts can be verified, if necessary, when the peanuts are

removed from storage and entered for consumption. The Department

proposed adding an additional safeguard measure, new paragraph (f)(6)

Early arrival and storage, to the import regulation. This provision

requires that importers report peanut shipments which are sampled,

inspected, and held in bonded storage in excess of a stated period of

time.

AMS sought comments on this new requirement, including comments as

to whether one month is an appropriate maximum storage period that does

not have to be reported. Two comments opposed the new requirement and

one comment concurred with the new requirement.

Both comments opposing the added provision stated that similar

requirements concerning reporting are not required under Agreement

regulations for domestically produced peanuts placed in storage, and

therefore should not be required of imported peanuts. Domestic peanut

handlers maintain records of all peanuts placed in storage and make

those records available to Committee employees (fieldmen) who routinely

visit handler offices to review records and inspect facilities. The

Department, not the Committee, is responsible for monitoring the

storage of imported peanuts. It is not practical for the Department to

make such routine on-site inspections of all importers' records and

facilities to monitor arrival on new shipments. Therefore, the

Department believes that such notification of shipments after arrival

and inspection is, at this time, the least burdensome and most

practical way for the Department to meet its safeguard obligation.

AMS is working with the Customs Service to obtain a weekly data

base of information on shipments of fresh agricultural commodities,

including peanuts, imported into the U.S. The data received will

include shipments of commodities submitted for warehouse entries. When

those procedures are complete, and when AMS has assurance that all

incoming shipments are included in the weekly computerized report, AMS

will remove this requirement on importers.

The rule proposed that entry data, as well as grade and aflatoxin

certificates for the stored peanut lot, be filed with AMS. One

commenter stated that this is logistically cumbersome and requires

additional paperwork for importers. After review of the information

needed, AMS agrees that the only information necessary for AMS

awareness is a copy of the Customs Service documentation identifying

the location and identification of the storage warehouse, the quantity

of peanuts entered for storage, and the date of storage entry. This

information is shown on Customs Form 7501 and is sufficient for

notification of lots placed in bonded storage. Therefore, it is not

necessary, as stated in the proposed rule, that importers file copies

of the grade and aflatoxin certificates for peanut lots admitted for

bonded warehouse storage. This final rule is changed to reflect this

change.

The wording of two comments indicated a possible misunderstanding

of the focus of this requirement. It is added to the import regulation

to apply to peanut lots that arrive in the U.S. and are placed in

storage prior to the filing of a Customs Service consumption entry when

the next quota period opens. It does not apply to peanut lots which the

Customs Service has already entered for consumption or peanut lots

which have met all import requirements and are placed in storage

pending shipment to buyers.

The Department indicated in the proposed rule, and establishes in

this final rule, that the grade and aflatoxin certificates issued on

such peanuts upon arrival continue to be valid for the following quota

year. This is consistent with Agreement regulation which does not place

any time limits on the applicability of grade and aflatoxin inspection

certificates or the storage of domestically produced peanuts.

One commenter suggested that as long as the Customs Service knows

the location of the bonded warehouses where peanuts are stored, the

importer should not have to report storage to AMS. Storage data is not

currently available from the Customs Service.

The commenter suggested also that as long as the Customs Service

knows the condition of the bonded warehouses where peanuts are stored,

the importer should not have to certify as to the storage conditions

when later filing for consumption entry. It is true that the Customs

Service inspects and certifies the structural integrity and security of

bonded warehouses. However, the Customs Service does not monitor such

things as whether cold storage equipment is available and maintained,

or whether the peanuts are protected from rodent or insect infestation

or rain damage from leaks in the roof. Therefore, for compliance

purposes, it is necessary that the importer certify to the Customs

Service that the peanuts have been stored consistent with industry

standards.

The commenter suggested that AMS should inspect the warehouses. AMS

will inspect such warehouses when necessary. However, inspection does

not guarantee that peanuts subsequently placed in the warehouses will

be maintained in conditions consistent with industry standards.

Knowledge of which warehouses contain imported peanuts will allow AMS

to spot check warehouses which are used and monitor weather conditions

in the area so that potentially adverse situations are known to AMS.

Finally, one commenter stated that the reinspection requirement

should not be included in the import regulations. However, to meet the

Department's statutory mandate that all peanuts in the domestic market

meet requirements applied to peanuts under the Agreement regulations,

it is necessary that the Secretary have the authority to reinspect

imported peanuts, particularly those that might be subject to

deteriorating conditions while in storage. As stated above, the

Secretary has the same reinspection authority over domestically

produced peanuts under Agreement and non-signer regulations. The

Department exercises this oversight only to ensure that wholesome

peanuts enter human consumption channels.

The proposed rule asked for comments on the minimum length of the

storage period which would require notification of AMS. One month was

proposed. No comments were received suggesting other lengths of time.

Therefore, this final rule establishes the minimum storage period

requiring notification of AMS as any period exceeding one month.

Peanuts produced in Mexico arriving in the U.S. and placed in storage

prior to December 1--in anticipation of withdrawal and entry for

consumption on or after the following January 1--must be reported

[[Page 1258]]

to AMS. Peanuts produced in Argentina or any other country, except

Mexico, which arrive and are placed in storage prior to March 1 of any

year--in anticipation of withdrawal and entry for consumption on or

after the following April 1--must be reported to AMS. The reports may

be sent via facsimile transmission or mailed pursuant to paragraphs (f)

(2) and (3) of Sec. 999.600 at the time of entry into a bonded

warehouse for storage. The report should be a copy of Customs Form 7501

identifying the importer and showing the volume of peanuts being stored

and the location of the storage warehouse.

As a safeguard measure, old paragraph (b)(4) of the import

regulation provided that if the Secretary has reason to believe that

imported peanuts have been damaged or deteriorated while in storage,

the Secretary may reject the then effective inspection certificate and

require reinspection of the peanuts. This paragraph is redesignated as

safeguard paragraph (f)(5) Reinspection. This reinspection authority

corresponds to paragraph (e) of Sec. 998.200 of the Agreement

regulations.

To avoid deterioration, peanuts should be stored in clean, dry,

odor free, warehouses and under sanitation and cold storage conditions

consistent with industry standards. While Agreement regulations do not

specify cold storage conditions, the following points should be used as

a cold storage guide:

--Temperatures should range from 34 to 41 degrees Fahrenheit with a

relative humidity of 55 to 70 percent.

--Daily or weekly recording charts of temperature and humidity should

be maintained.

--Interior air circulation should be adequate to maintain uniform

temperatures.

--Pans under refrigeration equipment should prevent condensation from

dripping onto the peanuts.

--Peanuts should be gradually removed from cold storage over 2 to 3

days.

This and other information on sanitation, facilities, management

practices, and dry storage is taken from Good Management Practices for

Shelled Goods Cold Storage and Shelled Goods Dry Storage distributed by

the National Peanut Council. Copies are available for a nominal price

to non-members by calling (703)-838-9500.

Imported peanut lots certified as meeting human consumption

requirements and subsequently stored under such conditions and in

appropriate warehouses, may be entered for consumption when the next

quota year begins--without further reporting to AMS.

One commenter stated that importers should not have to certify to

the Customs Service that stored peanuts have been stored consistent

with industry standards for the entire length of the storage period.

However, the Department believes that such certification is necessary

for compliance purposes.

Paragraph (b)(4) of the import regulation provides authority for

the Secretary to require a reinspection of an imported peanut lot. If

the documentation provided to AMS, or if any evidence subsequently

received by AMS, indicates that appropriate storage standards have not

been met or maintained and that the peanuts may have been damaged or

deteriorated while in storage, the Secretary will demand reinspection

of the lot prior to the importer's filing for consumption entry of the

lot.

Paragraph (b)(4) of Sec. 999.600 is moved from incoming quality

regulation to paragraph (f)(5) and entitled Reinspection. Experience

indicates that reinspections are more likely to be needed when shelled

peanuts are placed under bonded storage several months prior to the

beginning of the next quota year, as discussed above. As a safeguard

provision, the paragraph applies to farmers stock, shelled, and inshell

imported peanuts. The intent and requirements of the paragraph remain

unchanged.

The new requirements as applied to imports are effective five days

after publication of this rule in the Federal Register, should any

peanuts be imported under duty prior to the opening of the next duty-

free quota periods. The reporting requirement is not made retroactive

for shipments which have already arrived and been placed in storage.

Peanut shipments from countries other than Mexico arriving five days

after publication and before March 1, 1977, should be reported to AMS

under the new requirement. Importers may voluntarily notify AMS of

shipments which have been entered into warehouses since closure of the

1996 duty-free quotas and currently are in storage pending the 1997

quota year.

Some paragraphs of the three peanut regulations are not changed in

this final rule. However, for a better understanding of all changes,

the three regulations are published in their entirety in this final

rule, including paragraphs which are not changed.

Pursuant to the requirements set forth in the Regulatory

Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has

considered the economic impact of this action on small entities.

The purpose of the RFA is to fit regulatory actions to the scale of

business subject to such actions in order that small businesses will

not be unduly or disproportionately burdened.

About 80 signatory and non-signatory peanut handlers are subject to

regulation under the two domestic programs. There are about 47,000

peanut producers in the 16-state production area. Small agricultural

service firms, which include handlers and importers, have been defined

by the Small Business Administration (13 CFR 121.601) as those having

annual receipts of less than $5,000,000, and small agricultural

producers have been defined as those having annual receipts of less

than $500,000. Approximately 25 percent of the signatory handlers, most

all of the non-signers, and virtually all of the producers may be

classified as small entities. The import requirements have not been in

place long enough to determine the number of peanut importers or the

percentage which qualify as small businesses. However, it can be

assumed that some importers are small entities.

This final rule removes or relaxes several provisions regulating

the handling and disposition of domestic and foreign-produced peanuts.

Overall, the changes are intended to increase the amount of peanuts

that can be prepared for and meet the requirements for human

consumption. Such peanuts almost always bring the highest prices in the

marketplace. Thus, the value of farmers stock peanuts that can be

prepared for human consumption is higher than the value of those that

must be disposed of to inedible outlets. Producers receive increased

returns for farmers stock peanuts that can be prepared for human

consumption. Handlers and importers also receive increased returns from

shelled and inshell peanuts that are prepared for and meet human

consumption requirements. Peanut lots that fail human consumption

requirements, and that a handler or importer decides not to try to

recondition, must be disposed of as inedible peanuts to different

inedible peanut outlets. Such inedible disposition brings varying

prices for the handler or importer, almost always less than prices for

human consumption quality peanuts. The changes finalized in this

rulemaking should increase the value of certain failing peanut lots,

and thus, increase returns for both producers and handlers.

--Restrictions are removed on acquisitions of certain farmers stock

lots failing incoming inspection because of excess loose shelled

[[Page 1259]]

kernels and fall-through peanuts. This relaxation enables more farmers

stock peanuts to be processed into product that meets requirements for

human consumption. Producers receive higher prices for such farmers

stock peanut lots and handlers are able to shell and recondition those

lots into shelled peanuts which meet human consumption requirements.

--Restrictions on remilling and blanching for human consumption use are

removed on shelled peanut lots exceeding certain damage and foreign

material content levels. This change enables handlers to recondition

more lots of failing peanuts for disposition to human consumption

outlets.

--This rule also removes requirements that handlers and importers

maintain PLI, and report and keep disposition records on ``restricted''

and ``unrestricted'' inedible peanut lots. This should reduce some

inspection and reporting and recordkeeping costs.

--The maximum allowable aflatoxin content of domestically- produced and

imported shelled peanut lots which could be used as animal feed,

wildlife seed, and rodent bait is raised from 25 ppb to 300 ppb.

Depending on several market factors, such inedible peanut use can bring

higher prices than crushing the peanuts. This change provides more

opportunity for handlers and importers to increase the value, and thus,

the returns, of the peanuts they handle or import.

--Positive lot identification (PLI) requirements for seed peanuts are

removed. This will save handlers and importers inspection costs and

enable better use of storage space.

--Shelled peanut lots meeting Indemnifiable Grade or Superior Grade

requirements may be sent to human consumption outlets prior to the

handler or importer receiving aflatoxin certification of the lot. This

is a clarification of requirements to make the domestic requirements

consistent with current industry practice. Handler and importer

inspection costs should not be increased because of this provision.

The changes to handling requirements in this final rule will enable

more peanuts to be prepared for human consumption, save some inspection

and storage costs, enable handlers and importers to more efficiently

manage their peanut inventories, and make better use of inedible peanut

lots, thus, increasing returns to both producers, handlers and

importers. The changes are made without jeopardizing safeguard

provisions in the current domestic and import regulations because all

peanuts intended for human consumption still must be certified for such

use. Finally, these changes are intended to benefit peanut handlers,

peanut importers, and consumers by ensuring that all peanuts in

domestic U.S. human consumption markets are wholesome.

The proposed rule requested comments on the effect of the rule on

small businesses and no comments were received stating that the changes

would adversely affect small entities in the peanut industry.

This final rule does not increase the reporting and recordkeeping

burden on domestic peanut handlers and peanut importers regulated under

the three programs, and should result in an overall reduction in

reporting and recordkeeping burden. To verify the reduced burden,

another OMB reporting and recordkeeping burden analysis will be

conducted after the regulations and the sharing of computerized import

data between Customs Service and AMS have been implemented.

Therefore, the AMS determines that this final rule does not have a

significant economic impact on a substantial number of small entities.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.

Chapter 35), information collection requirements in this final rule

have been previously approved by the Office of Management and Budget

(OMB) and have been assigned OMB Nos. 0581-0067 (for signatory

handlers), 0581-0163 (for non-signatory handlers), and 0581-0176 (for

importers).

Because these changes could not be implemented before the beginning

of the 1996 domestic crop year, comments were requested on whether

final implementation of the changes after the beginning of the crop

year would have an unequal effect on one or more of the three

production areas. No commenters claimed implementation after the start

of the year would unequally affect the three production areas. Seven of

the commenters stated that the regulations should be in place as soon

as possible for the 1996-97 domestic marketing season. Several of the

comments suggested that unnecessary delays in implementation would hurt

the industry.

Pursuant to 5 U.S.C. 553, it is also found and determined, upon

good cause, that it is impracticable, unnecessary and contrary to the

public interest to postpone the effective date of this rule until 30

days after publication in the Federal Register because: (1) The changes

should be in effect as soon as possible to cover as much of the

remaining crop year as possible; (2) the rule relaxes requirements

currently in place with the exception of one requirement which codifies

current industry practice; (3) the domestic industry has been aware of

the issues and proposed changes since May when the Committee

recommended the changes; (4) all known handlers and other affected

members of the domestic industry, as well as all known importers, were

sent copies of the proposed rule and they and all other interested

persons were given a 20-day opportunity to file comments on the

recommended changes; and (5) comments addressing the effective date

were unanimous in recommending immediate implementation and several

commented that further delays in implementation would be harmful to the

industry. Thus, the Department sets the effective date of this final

rule as three days after publication in the Federal Register for

domestically produced peanuts and five days after publication in the

Federal Register for imported peanuts.

List of Subjects

7 CFR Part 997

Food grades and standards, Peanuts, Reporting and recordkeeping

requirements.

7 CFR Part 998

Marketing agreements, Peanuts, Reporting and recordkeeping

requirements.

7 CFR Part 999

Dates, Filberts, Food grades and standards, Imports, Nuts, Peanuts,

Prunes, Raisins, Reporting and recordkeeping requirements, Walnuts.

For the reasons set forth in the preamble, 7 CFR parts 997, 998 and

999 are amended as follows:

PART 997--PROVISIONS REGULATING THE QUALITY OF DOMESTICALLY

PRODUCED PEANUTS HANDLED BY PERSONS NOT SUBJECT TO THE PEANUT

MARKETING AGREEMENT

1. The authority citation for 7 CFR part 997 continues to read as

follows:

Authority: 7 U.S.C. 601-674.

2. Under the center heading ``Quality Regulations,'' Secs. 997.20,

997.30, 997.40 and 997.50 are revised to read as follows:

Quality Regulations

Sec. 997.20 Incoming regulation.

(a) No handler shall receive or acquire peanuts intended for human

[[Page 1260]]

consumption, either from a producer or other person, unless such

peanuts are inspected pursuant to Sec. 997.50 and are determined to be

Segregation 1 peanuts at time of receipt from the producer or, if

received from another person, had not been mixed with peanuts of a

lower quality than Segregation 1 and meet the following additional

requirements specified in this section: Provided, That a handler may--

(1) Acquire shelled peanuts from the Commodity Credit Corporation

(CCC) or cleaned inshell or shelled peanuts from other handlers, a

handler as defined in 7 CFR 998.8, or from buyers who have purchased

such peanuts from handlers or from the CCC, if the lot has been

certified as meeting the requirements of Sec. 997.30(a) and the

identity is maintained; and/or

(2) Perform services for an area association pursuant to a peanut

receiving and warehouse contract.

(b) Moisture and foreign material. (1) Moisture. Except as provided

under paragraph (d) of Sec. 997.20, no handler shall receive or acquire

peanuts containing more than 10.49 percent moisture: Provided, That

peanuts of a higher moisture content may be received and dried to not

more than 10.49 percent moisture prior to storing or milling. For

farmers stock peanuts, moisture determinations shall be rounded to the

nearest whole number. Moisture determinations on shelled peanuts shall

be carried to the hundredths place.

(2) Foreign material. No handler shall receive or acquire farmers

stock peanuts containing more than 10.49 percent foreign material,

except that peanuts having a higher foreign material content may be

received or acquired if they are held separately until milled, or moved

over a sand-screen before storage, or shipped directly to a plant for

prompt shelling. The term sand-screen means any type of farmers stock

cleaner which, when in use, removes sand and dirt.

(c) Damage. For the purpose of determining damage, other than

concealed damage, on farmers stock peanuts, all percentage

determinations shall be rounded to the nearest whole number.

(d) Seed peanuts. Peanuts which are not Segregation 1 peanuts and

therefore cannot be acquired for human consumption may be acquired,

shelled and delivered for seed purposes. Peanuts intended for seed use,

produced under the auspices of a State agency which regulates or

controls the production of seed peanuts, which do not meet Segregation

1 requirements shall be stored and shelled separate from peanuts

intended for human consumption. However, Segregation 2 seed peanuts,

produced under the auspices of the State agency, which contain up to

3.00 percent damaged kernels and are free from visible Aspergillus

flavus may be stored and shelled with Segregation 1 peanuts which are

also produced under the auspices of the State agency. A handler whose

operations include custom seed shelling may receive, custom shell, and

deliver for seed purposes farmers stock peanuts, and such peanuts shall

be exempt from the requirements of this section and, therefore, shall

not be required to be inspected and certified as meeting these

requirements, and the handler shall report to the Division the weight

of each lot of farmers stock peanuts received on such basis on a form

provided by the Department. However, handlers who acquire seed peanut

residuals from their custom shelling of uninspected (farmers stock)

seed peanuts or from another person may mill such residuals with other

receipts or acquisitions of the handler, and such peanuts which meet

the requirements specified in Sec. 997.30(a) may be disposed of by sale

to human consumption outlets.

(e) Oilstock. Handlers may acquire for disposition to domestic

crushing or export farmers stock peanuts of a lower quality than

Segregation 1 or grades or sizes of shelled peanuts or cleaned inshell

peanuts which fail to meet the requirements for human consumption.

Handlers may act as accumulators and acquire, for other handlers; a

handler as defined in 7 CFR 998.8 or from other persons, Segregation 2

or 3 farmers stock peanuts. Handlers may also acquire shelled peanuts

originating from Segregation 2 or 3 farmers stock or the entire mill

production of peanuts from Segregation 1 farmers stock or lots of

shelled peanuts originating from Segregation 1 peanuts and which have

been positive lot identified as specified in Sec. 997.30(d), which

failed to meet the requirements for human consumption pursuant to

Sec. 997.30(a): Provided, That all such acquisitions are held separate

from Segregation 1 peanuts acquired for milling or from edible grades

of shelled or milled peanuts. Handlers may commingle the Segregation 2

and 3 peanuts or keep them separate and apart. Handlers who acquire

farmers stock peanuts of a lower quality than Segregation 1 or cleaned

inshell peanuts which fail to meet the requirements for human

consumption shall report such acquisitions to the Division as

prescribed on a form prescribed by the Division. Handlers who acquire

grades or sizes of shelled peanuts which fail to meet the requirements

for human consumption for disposition to domestic crushing and

subsequent export to countries shall report such disposition on a form

provided by the Division.

(f) Shelled peanuts. Handlers may acquire shelled peanuts (which

originated from ``Segregation 1 peanuts'') from other handlers or a

handler as defined in 7 CFR 998.8, for remilling and subsequent

disposition to human consumption outlets. Further disposition of such

peanuts shall be regulated by Sec. 997.40.

(g) No producer may handle, process, prepare for sale, or otherwise

alter peanuts of his own production from the condition of farmers

stock, for disposition in human consumption outlets unless such peanuts

are first inspected and certified pursuant to Sec. 997.50 and meet the

applicable requirements of this section.

Sec. 997.30 Outgoing Regulation.

(a) Shelled peanuts. (1)(i) No handler shall ship or otherwise

dispose of shelled peanuts for human consumption unless such peanuts

are positive lot identified, certified ``negative'' as to aflatoxin and

certified as meeting the requirements in Table 1:

[[Page 1261]]

Table 1.--Minimum Grade Requirements--Peanuts for Human Consumption

[Whole Kernels and Splits]

Maximum limitations

Excluding lots of ``splits''

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

Unshelled Fall through

Unshelled peanuts, ------------------------------------------------------------------

peanuts and damaged Foreign

Type and grade category damaged kernels and materials Moisture

kernels minor Sound split and Sound whole kernels Total (percent) (percent)

(percent) defects broken kernels

(percent)

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

Runner............................ 1.50 2.50 3.00%; \17/64\ inch 3.00%; \16/64\ x \3/ 4.00%; both screens. .20 9.00

round screen. 4\ inch; slot

screen.

Virginia (except No. 2)........... 1.50 2.50 3.00%; \17/64\ inch; 3.00%; \15/64\ x 1 4.00%; both screens. .20 9.00

round screen. inch; slot screen.

Spanish and Valencia.............. 1.50 2.50 3.00%; \16/64\ inch; 3.00%; \15/64\ x \3/ 4.00%; both screens. .20 9.00

round screen. 4\ inch; slot

screen.

No. 2 Virginia.................... 1.50 3.00 6.00%; \17/64\ inch; 6.00%; \15/64\ x 1 6.00%; both screens. .20 9.00

round screen. inch; slot screen.

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

Lots of ``splits''

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

Runner (not more than 4% sound 1.50 2.50 3.00%; 17/64 inch; 3.00%; 14/64 x 3/4 4.00%; both screens. .20 9.00

whole kernels). round screen. inch; slot screen.

Virginia (not less than 90% 1.50 2.50 3.00%; \17/64\ inch; 3.00%; \14/64\ x 1 4.00%; both screens. .20 9.00

splits). round screen. inch; slot screen.

Spanish and Valencia (not more 1.50 2.50 3.00%; \16/64\ inch; 3.00%; \13/64\ x \3/ 4.00%; both screens. .20 9.00

than 4% sound whole kernels).. round screen. 4\ inch; slot

screen.

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

(ii) Prior to disposition to human consumption outlets, peanuts

which have been certified as meeting the requirements for Indemnifiable

Grades must also be certified ``negative'' as to aflatoxin. Maximum

limitations for Indemnifiable Grades are as follows:

TABLE 2.--Superior Quality Requirements--Peanuts for Human Consumption

[Whole Kernels and Splits]

Maximum limitations

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

Unshelled Fall through

Unshelled peanutes, ------------------------------------------------------------------

peanuts and damaged Foreign

Type and grade category damaged kernels and Sound split and materials Moisture

kernels minor broken kernels Sound whole kernels Total (percent) (percent)

(percent) defects (percent) (percent)

(percent)

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

Runner U.S. No. 1 and better...... 1.25 2.00 3.00%; \17/64\ inch, 3.00%; \16/64\ x \3/ 4.00%; both screens. .10 9.00

round screen. 4\ inch, slot

screen.

Virginia U.S. No.1 and better..... 1.25 2.00 3.00%; \17/64\ inch, 3.00%; \15/64\ x 1 4.00%; both screens. .10 9.00

round screen. inch, slot screen.

Spanish and Valencia U.S. No.1 and 1.25 2.00 3.00%; \16/64\ inch, 2.00%; \15/64\ x \3/ 4.00%; both screens. .10 9.00

better.. round screen. 4\ inch, slot

screen.

Runner U.S. Splits (not more than 1.25 2.00 2.00%; \17/64\ inch, 3.00%; \14/64\ x \3/ 4.00%; both screens. .20 9.00

4% sound, whole kernels). round screen. 4\ inch, slot

screen.

Virginia U.S. Splits (not less 1.25 2.00 3.00%; \17/64\ inch, 3.00%; \14/64\ x 1 4.00%; both screens. .20 9.00

than 90% splits and not more than round screen. inch, slot screen.

3.00% sound whole kernels and

portions passing through \20/64\

inch round screen).

[[Page 1262]]

Spanish and Valencia U.S. Splits 1.25 2.00 2.00%; \16/64\ inch, 3.00%; \13/64\ x \3/ 4.00%; both screens. .20 9.00

(not more than 4% sound, whole round screen. 4\ inch, slot

kernels). screen.

Runner with splits (not more than 1.25 2.00 3.00%; \17/64\ inch, 3.00%; \16/64\ x \3/ 4.00%; both screens. .10 9.00

15% sound splits). round screen. 4\ inch, slot

screen.

Virginia with splits (not more 1.25 2.00 3.00%; \17/64\ inch, 3.00%; \15/64\ x 1 4.00%; both screens. .10 9.00

than 15% sound splits). round screen. inch, slot screen.

Spanish and Valencia with splits 1.25 2.00 3.00%; \16/64\ inch, 2.00%; \15/64\ x \3/ 4.00%; both screens. .10 9.00

(not more than 15% sound splits). round screen. 4\ inch, slot

screen.

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

(2) The term ``fall through'', as used herein, shall mean sound

split and broken kernels and whole kernels which pass through specified

screens. Prior to shipment, appropriate samples for pretesting shall be

drawn in accordance with paragraph (c) of this section from each lot of

Superior Quality peanuts. For the current crop year, ``negative''

aflatoxin content means 15 parts per billion (ppb) or less for peanuts

which have been certified as meeting edible quality grade requirements.

(b) Cleaned inshell peanuts. No handler shall ship, sell, or

otherwise dispose of cleaned inshell peanuts for human consumption:

(1) With more than 1.00 percent kernels with mold present unless a

sample of such peanuts, drawn by an inspector of the Federal or

Federal-State Inspection Service, was analyzed chemically by a U.S.

Department of Agriculture laboratory (hereinafter referred to as ``USDA

laboratory'') or a laboratory listed in paragraph (c) of this section

and found to be wholesome relative to aflatoxin;

(2) With more than 2.00 percent peanuts with damaged kernels;

(3) With more than 10.00 percent moisture; or

(4) With more than 0.50 percent foreign material.

(c) Sampling and testing shelled peanuts. (1) Each handler shall

cause appropriate samples of each lot of edible quality shelled peanuts

to be drawn by an inspector of the Federal or Federal-State Inspection

Service. The gross amount of peanuts drawn shall be large enough to

provide for a grade analysis, for a grading check-sample, and for three

48-pound samples for aflatoxin assay. The three 48-pound samples shall

be designated by the Federal or Federal-State Inspection Service as

``Sample #1N'', ``Sample #2N'', and ``Sample #3N'' and each sample

shall be placed in a suitable container and ``positive lot identified''

by means acceptable to the Inspection Service. Sample #1N may be

prepared for immediate testing or Sample #1N, Sample #2N, and Sample

#3N may be returned to the handler for testing at a later date.

(2) The handler shall cause Sample #1 to be ground by the Federal

or Federal-State Inspection Service, a USDA laboratory or a laboratory

listed herein, in a ``subsampling mill'' approved by the Division. The

resultant ground subsample from Sample #1N shall be of a size specified

by the Division and shall be designated as ``Subsample 1--ABN'' and at

the handler's or buyer's option, a second subsample may also be

extracted from Sample #1N. It shall be designated as ``Subsample 1--

CDN''. Subsample 1--CDN may be sent as requested by the handler or

buyer, for aflatoxin assay, to a USDA laboratory or other laboratory

that can provide analyses results on such samples in 36 hours. The cost

of sampling and testing Subsample 1--CDN shall be for the account of

the requester. Subsample 1--ABN shall be analyzed only in a USDA

laboratory or a laboratory listed herein. Both Subsamples 1--ABN and

1--CDN shall be accompanied by a notice of sampling signed by the

inspector containing, at least, identifying information as to the

handler (shipper), the buyer (receiver), if known, and the positive lot

identification of the shelled peanuts. A copy of such notice covering

each lot shall be sent to the Division.

(3) The samples designated as Sample #2N and Sample #3N shall be

held as aflatoxin check-samples by the Inspection Service or the

handler and shall not be included in the shipment to the buyer until

the analyses results from Sample #1N are known.

(4) Upon call from the laboratory, handler shall cause Sample #2N

to be ground by the Inspection Service in a ``subsampling mill.'' The

resultant ground subsample from Sample #2N shall be of a size specified

by the Division and it shall be designated as ``Subsample #2--ABN.''

Upon call from the laboratory, the handler shall cause Sample #3N to be

ground by the Inspection Service in a ``subsampling mill.'' The

resultant ground subsample from Sample #3N shall be of a size specified

by the Division and shall be designated as ``Subsample #3--ABN''.

``Subsamples 2--ABN and 3--ABN'' shall be analyzed only in a USDA

laboratory or a laboratory listed herein and each shall be accompanied

by a notice of sampling. A copy of each such notice shall be sent to

the Division. The results of each assay shall be reported by the

laboratory to the handler and to the Division. All costs involved in

the sampling and testing of peanuts required by this regulation shall

be for the account of the applicant.

(5) Information on making arrangements for the required inspection

and certification can be obtained by contacting the Fresh

[[Page 1263]]

Products Branch, Fruit and Vegetable Division, Agricultural Marketing

Service, USDA, P.O. Box 96456, room 2049-S, Washington, DC, 20090-6456,

telephone (202) 690-0604 or facsimile (202)720-0393.

(i) Laboratories at the following locations are approved to perform

the chemical analyses required pursuant to this part. The sampling plan

and procedures may be obtained from the Science and Technology

Division.

Science and Technology Division, AMS, USDA, P.O. Box 279, 301 West

Pearl St., Aulander, NC 27805, Tel: (919) 345-1661 Ext. 156, Fax: (919)

345-1991

Science and Technology Division, AMS, USDA, 1211 Schley Ave., Albany,

GA 31707, Tel: (912) 430-8490/8491, Fax: (912) 430-8534

Science and Technology Division, AMS, USDA, P.O. Box 488, Ashburn, GA

31714, Tel: (912) 567-3703

Science and Technology Division, AMS, USDA, 610 North Main St.,

Blakely, GA 31723, Tel: (912) 723-4570, Fax: (912) 723-3294

Science and Technology Division, AMS, USDA, 1557 Reeves St., Dothan, AL

36303, Tel: (334) 794-5070, Fax: (334) 671-7984

Science and Technology Division, AMS, USDA, 107 South Fourth St.,

Madill, OK 73446, Tel: (405) 795-5615, Fax: (405) 795-3645

Science and Technology Division, AMS, USDA, P.O. Box 272, 715 N. Main

Street, Dawson, GA 31742, Tel: (912) 995-7257, Fax: (912) 995-3268

Science and Technology Division, AMS, USDA, P.O. Box 1130, 308 Culloden

St., Suffolk, VA 23434, Tel: (804) 925-2286, Fax: (804) 925-2285

ABC Research, 3437 SW 24th Avenue, Gainesville, FL 32607-4502, Tel:

(904) 372-0436, Fax: (904) 378-6483

J. Leek Associates, Inc., P.O. Box 50395, 1200 Wyandotte (31705),

Albany, GA 31703-0395, Tel: (912) 889-8293, Fax: (912) 888-1166

J. Leek Associates, Inc., P.O. Box 368, 675 East Pine, Colquitt, GA

31737, Tel: (912) 758-3722, Fax: (912) 758-2538

J. Leek Associates, Inc., P.O. Box 6, 502 West Navarro St., DeLeon, TX

76444, Tel: (817) 893-3653, Fax: (817) 893-3640

Pert Laboratories, P.O. Box 267, Peanut Drive, Edenton, NC 27932, Tel:

(919) 482-4456, Fax: (919) 482-5370

Pert Laboratory South, P.O. Box 149, Hwy 82 East, Seabrook Drive,

Sylvester, GA 31791, Tel: (912) 776-7676, Fax: (912) 776-1137

Professional Service Industries, Inc., 3 Burwood Lane, San Antonio, TX

78216, Tel: (210) 349-5242, Fax: (210) 342-9401

Southern Cotton Oil Company, 600 E. Nelson Street, P.O. Box 180,

Quanah, TX 79252, Tel: (817) 663-5323, Fax: (817) 663-5091

Quanta Lab, 9330 Corporate Drive, Suite 703, Selma, TX 78154-1257, Tel:

(210) 651-5799, Fax: (210) 651-9271.

(ii) Handlers should contact the nearest laboratory from the list

in paragraph (c)(5)(i) of this section to arrange to have samples

chemically analyzed for aflatoxin content, or for further information

concerning the chemical analyses required pursuant to this part

handlers may contact: The Science and Technology Division, Agricultural

Marketing Service, USDA, P.O. Box 96456, room 3507-S, Washington, D.C.,

20090-6456, telephone (202) 720-5231, facsimile (202) 720-6496.

(d) Identification. Each lot of shelled or cleaned inshell peanuts,

in lot sizes not exceeding 200,000 pounds, shall be identified by

positive lot identification procedures prior to being shipped or

otherwise disposed of. For the purpose of this regulation, ``positive

lot identification'' of a lot of shelled or inshell peanuts is a means

of relating the inspection certificate to the lot which has been

inspected so that there can be no doubt that the peanuts are the same

ones described on the inspection certificate. The crop year that is

shown on the positive lot identification tags, or other means of

positive lot identification shall accurately describe the crop year in

which the peanuts in the lot were produced. Such procedure on bagged

peanuts shall consist of attaching a lot numbered tag bearing the

official stamp of the Federal or Federal-State Inspection Service to

each filled bag in the lot. The tag shall be sewed (machine sewed if

shelled peanuts) into the closure of the bag except that in plastic

bags the tag shall be inserted prior to sealing so that the official

stamp is visible. Any peanuts moved in bulk or bulk bins shall have

their lot identity maintained by sealing the conveyance and if in other

containers by other means acceptable to the Federal or Federal-State

Inspection Service. All lots of shelled or cleaned inshell peanuts

shall be handled, stored, and shipped under positive lot identification

procedures, except those lots which have been reconstituted and/or

commingled at the request of the receiver. All such reconstituted and/

or commingled lots will no longer be considered positive lot identified

and, therefore, no longer be eligible for appeal inspection. Handler

shall keep and maintain records of the quantities involved in each

reconstituting and/or commingling procedure, whether in single or

multiple lots, and such records shall be available to the Division on

request.

(e) Reinspection. Whenever the Division has reason to believe that

peanuts may have been damaged or deteriorated while in storage, the

Division may reject the then effective inspection certificate and may

require the owner of the peanuts to have a reinspection to establish

whether or not such peanuts may be disposed of for human consumption.

Sec. 997.40 Reconditioning and disposition of peanuts failing quality

requirements.

(a) Lots of peanuts which have not been certified as meeting the

requirements for disposition to human consumption outlets, may be

disposed of for non-human consumption uses which are not regulated or

limited by the provisions specified in this section: Provided, That

each such lot is positive lot identified, using red tags, and certified

as to aflatoxin content (actual numerical count). However, on the

shipping papers covering the disposition of each such lot of inedible

quality peanuts, the handler shall cause the following statement to be

shown: ``The peanuts covered by this bill of lading (or invoice, etc.)

are not to be used for human consumption.''

(b) Except for inedible quality peanuts disposed of under the

provisions of paragraph (f)(2) of this section and peanuts derived from

the milling for seed of Segregation 2 and 3 farmers stock peanuts,

peanuts which have not been certified as meeting the standards set

forth in paragraphs (a) or (b) of Sec. 997.30 shall be disposed of as

prescribed hereinafter in this section.

(c) Sheller Oil Stock Residuals--For Crushing or Export. Peanuts,

or portions of peanuts which are separated from edible quality peanuts

by screening or sorting or other means during the milling process, may

be segregated into categories or they may be commingled as sheller oil

stock residuals. Such sheller oil stock residuals shall be identified

pursuant to paragraph (d) of this section, but using a red tag, and

such peanuts may be disposed of domestically or to the export market,

in bulk or bags or other suitable containers. The movement of such

peanuts shall be reported to the Division by the shipping handler and

the crusher, as requested by the Division.

(1) If the peanuts have not been tested and certified as to

aflatoxin content, as prescribed in paragraph (c) of this section, the

handler shall cause the

[[Page 1264]]

following statement to be shown on the shipping papers: ``The peanuts

covered by this bill of lading (or invoice, etc.) are limited to

crushing only and may contain aflatoxin.''

(2) If the peanuts are certified as 301 ppb or more aflatoxin

content, disposition shall be limited to crushing or export.

(d) Blanching peanuts failing quality requirements. Handlers may

blanch or cause to have blanched positive lot identified shelled

peanuts, which originated from Segregation 1 peanuts, that fail to meet

the requirements of paragraph (a) of this section because of excessive

damage, minor defects, moisture, or foreign material or are positive as

to aflatoxin. Lots of peanuts which are moved under these provisions

must be accompanied by a valid grade inspection certificate and the

title shall be retained by the handler until the peanuts are blanched

and certified by an inspector of the Federal or Federal-State

Inspection Service as meeting the requirements for disposal into human

consumption outlets. To be eligible for disposal into human consumption

outlets, such peanuts after blanching, must meet specifications for

unshelled peanuts, damaged kernels, minor defects, moisture, and

foreign material as listed in paragraph (a) of this section and be

accompanied by a negative aflatoxin certificate. The residual peanuts,

excluding skins and hearts, resulting from blanching under these

provisions, shall be bagged and red tagged and disposition shall be

that such peanuts are returned to the handler for further disposition;

or, in the alternative, such residuals shall be positive lot identified

by the Federal or Federal-State Inspection Service, and shall be

disposed of, by the blancher to crushers who agree to comply with the

terms of paragraph (c) of this section.

(e) Remilling peanuts failing quality requirements. Handlers may

remiller or cause to have remilled shelled peanuts, which originated

from Segregation 1 peanuts, that fail to meet the requirements for

disposition to human consumption outlets heretofore specified in

paragraph (a) of this section: Provided, That such lots of peanuts

contain not in excess of 10 percent fall through. Lots of peanuts moved

under these provisions must be accompanied by a valid grade inspection

certificate and must be positive lot identified and the title of such

peanuts shall be retained by the handler until the peanuts have been

remilled and certified by the Federal or Federal-State Inspection-

Service as meeting the requirements for disposition to human

consumption outlets specified in paragraph (a) of this section, and be

accompanied by a negative aflatoxin certificate. Remilling under these

provisions may include composite remilling of more than one such lot of

peanuts owned by the same handler. However, such peanuts owned by one

handler shall be held and remilled separate and apart from all other

peanuts. The residual peanuts resulting from remilling under these

provisions, shall be bagged and red tagged and disposition shall be

that such peanuts are returned to the handler for further disposition;

or, in the alternative, such residuals shall be positive lot identified

by the Federal or Federal-State Inspection Service, and shall be

disposed of, by the remiller, to crushers who agree to comply with the

terms of paragraph (c) of this section. Sec. 997.50 Inspection,

chemical analysis, certification and identification.

Each handler shall, at the handler's own expense, prior to or upon

receiving and before shipping or disposing of peanuts, cause an

inspection to be made of any such peanuts not covered by a valid

inspection certificate, to determine whether such peanuts meet the

applicable grade requirements effective pursuant to this part, and

shall comply with such identification requirements prescribed by this

part or which the Secretary may prescribe. Each handler shall also

cause appropriate samples to be drawn and chemically analyzed by a USDA

laboratory, or laboratory listed in Sec. 997.30, for wholesomeness as

provided in Sec. 997.30 of this part. Such handler shall obtain grade

and aflatoxin certificates stating that such peanuts meet the

aforementioned applicable requirements and all such certificates shall

be available for examination or use by the Division. Acceptable

certificates shall be those issued by Federal or Federal-State

inspectors authorized or licensed by the Secretary and USDA

laboratories or those listed in Sec. 997.30 of this part. Each handler

shall furnish, or cause the inspection service or the laboratory to

furnish, to the Division, a copy of the inspection certificate and a

copy of the results of the chemical analyses issued to the handler on

each lot of shelled peanuts or cleaned inshell peanuts.

3. Under the center heading ``Assessments,'' section 997.51 is

revised to read as follows:

Assessments

Sec. 997.51 Assessments.

(a) Each first handler shall pay to the Secretary, with respect to

Segregation 1 peanuts received or acquired by the handler, including

the handler's own production, an administrative assessment as approved

by the Secretary. The rate of assessment shall be the same as the

administrative assessment approved by the Secretary and applied to

signatory handlers under the Peanut Marketing Agreement No. 146. Such

administrative assessment shall be applied during the crop year

beginning July 1 and ending June 30 of the following year. Each

handler's pro rata share shall be the rate of assessment fixed by the

Secretary per net ton of farmers stock peanuts received or acquired,

other than those peanuts described in Sec. 997.20(a) (1) and (2).

During the crop year, the Secretary may increase the rate of assessment

if such an increase is established under the Agreement.

(b) Segregation 2 and Segregation 3 farmers stock peanuts disposed

to crushing or exported are exempt from assessments under this section.

4. Under the center heading ``Reports, Books and Records,''

Secs. 997.52, 997.53 and 997.54 are revised to read as follows:

Reports, Books and Records

Sec. 997.52 Reports of acquisitions and shipments.

Each handler shall report acquisitions of Segregation 1 farmers

stock peanuts on a form provided by the Division and file such other

reports of acquisitions and shipments of peanuts, as prescribed in this

part. Upon the request of the Division, each handler shall furnish such

other reports and information as necessary to enable the Division to

carry out the provisions of this part. All reports and records

furnished or submitted by handlers to the Division which include data

or information constituting a trade secret or disclosing the trade

position, financial condition, or business operations of the particular

handler shall not be disclosed unless such disclosure is determined

necessary by the Secretary to enforce the provisions of this part.

Sec. 997.53 Verification of reports.

For the purpose of checking and verifying reports filed by handlers

or the operation of handlers under the provisions of this part, the

Secretary, through its duly authorized agents, shall have access to any

premises where peanuts may be held by any handler and at any time

during reasonable business hours and shall be permitted to inspect any

peanuts so held by such handler and any and all records of such handler

with respect to the acquisition, movement, holding, processing or

disposition of all peanuts which may be held or which may have been

disposed

[[Page 1265]]

of by the handler. Each handler shall maintain such records of peanuts

received, held, and disposed of by the handler, that will substantiate

any required reports and will show performance under this part. Such

records shall be retained for at least two years beyond the crop year

of their applicability.

Sec. 997.54 Agents.

The Secretary may, by a designation in writing, name any person,

including any officer or employee of the United States Government, or

name any service, division or branch in the United States Department of

Agriculture, to act as his agent or representative in connection with

any of the provisions of this part.

PART 998--MARKETING AGREEMENT REGULATING THE QUALITY OF

DOMESTICALLY PRODUCED PEANUTS

1. The authority citation for 7 CFR part 998 continues to read as

follows:

Authority: 7 U.S.C. 601-674.

2. Under the center heading ``Implementing Regulations,''

Secs. 998.100 and 998.200 are revised to read as follows:

Implementing Regulations

Sec. 998.100 Incoming quality regulation for 1996 and subsequent crop

peanuts.

The following modify Sec. 998.5 of the peanut marketing agreement

and modify or are in addition to the restrictions of section 31 on

handler receipts or acquisitions of peanuts:

(a) Modification of Sec. 998.5, paragraphs (b), (c), and (d).

Paragraphs (b), (c), and (d) of Sec. 998.5 of the peanut marketing

agreement are modified for the purposes of this section as to farmers

stock peanuts to read respectively as follows:

(b) Segregation 1. Segregation 1 peanuts means farmers stock

peanuts with not more than 2 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 2 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.

(d) Segregation 3. Segregation 3 peanuts means farmers stock

peanuts with visible Aspergillus flavus.

(b) Moisture and foreign material.--

(1) Moisture. Except as provided under paragraph (d) of this

section, no handler shall receive or acquire peanuts containing more

than 10.49 percent moisture: Provided, That peanuts of a higher

moisture content may be received and dried to not more than 10.49

percent moisture prior to storing or milling. On farmers stock, such

moisture determinations shall be rounded to the nearest whole number;

on shelled peanuts, the determinations shall be carried to the

hundredths place and shall not be rounded to the nearest whole number.

(2) Foreign material. No handler shall receive or acquire farmers

stock peanuts containing more than 10.49 percent foreign material,

except that peanuts having a higher foreign material content may be

received or acquired if they are held separately until milled, or moved

over a sand-screen before storage, or shipped directly to a plant for

prompt shelling. The term ``sand-screen'' means any type of farmers

stock cleaner which, when in use, removes sand and dirt.

(c) Damage. For the purpose of determining damage, other than

concealed damage, on farmers stock peanuts, all percentage

determinations shall be rounded to the nearest whole number.

(d) Seed peanuts. A handler may acquire and deliver for seed

purposes farmers stock peanuts which meet the requirements of

Segregation 1 peanuts. If the seed peanuts are produced under the

auspices of a State agency which regulates or controls the production

of seed peanuts, they may contain up to 3 percent damaged kernels and

have visible Aspergillus flavus, and, in addition, the following

moisture content, as applicable:

(1) Seed peanuts produced in the Southeastern and Virginia-Carolina

areas, may contain up to 10.49 percent moisture except Virginia type

peanuts which are not stacked at harvest time may contain up to 11.49

percent moisture; and

(2) Seed peanuts produced in the Southwestern area may contain up

to 10.49 percent moisture.

Any seed peanuts produced under the auspices of a State agency

which contain up to 3 percent damaged kernels and are free from visible

Aspergillus flavus, may be stored and shelled with Segregation 1 seed

peanuts which are also produced under the auspices of the State agency.

Any seed peanuts with visible Aspergillus flavus shall be stored and

shelled separate from other peanuts, and any residuals not used for

seed shall not be used or disposed of for human consumption unless it

is determined to be wholesome by chemical assay for aflatoxin. A

handler whose operations include custom shelling may receive, custom

shell, and deliver for seed purposes farmers stock peanuts, and such

peanuts shall be exempt from the Incoming Quality Regulation

requirements, and, therefore, shall not be required to be inspected and

certified as meeting the Incoming Quality Regulation requirements, and

the handler shall report to the Committee, as requested, the weight of

each lot of farmers stock peanuts received on such basis on a form

furnished by the Committee. Handlers who acquire seed peanut residuals

from their custom shelling of uninspected (farmers stock) seed peanuts

or from another producer or sheller may mill such residuals with other

receipts or acquisitions of the handler, and such residuals which meet

the Outgoing Quality Regulation requirements, may be disposed of by

sale to human consumption outlets.

(e) Oilstock. Handlers may acquire for disposition to domestic

crushing or export farmers stock peanuts of a lower quality than

Segregation 1 or grades or sizes of shelled peanuts or cleaned inshell

peanuts which fail to meet the requirements for human consumption. The

provision of Sec. 998.31 of the marketing agreement restricting

acquisitions of such peanuts to handlers who are crushers is hereby

modified pursuant to Sec. 998.34, to authorize all handlers to act as

accumulators and acquire, from other handlers or non-handlers,

Segregation 2 or 3 farmers stock peanuts. Handlers may also acquire for

crushing or export from other handlers peanuts originating from

Segregation 2 or 3 farmers stock or the entire mill production of

shelled peanuts from Segregation 1 farmers stock or lots of peanuts

originating from Segregation 1 peanuts and which have been positive lot

identified as specified in paragraph (d) of Sec. 998.200, Outgoing

quality regulation, which failed to meet the requirements for human

consumption pursuant to paragraph (a) of Sec. 998.200, Outgoing quality

regulation: Provided, That all such acquisitions are held separate from

Segregation 1 peanuts acquired for milling or from edible grades of

shelled or milled peanuts. Handlers may commingle the Segregation 2 and

3 peanuts or keep them separate and apart. Handlers who acquire farmers

stock peanuts of a lower quality than Segregation 1 or grades or sizes

of shelled peanuts or cleaned inshell peanuts which fail to meet the

requirements for human consumption shall report such acquisitions as

prescribed by the Committee. To be eligible to receive or acquire

Segregation 2 or 3 farmers stock peanuts and shelled peanuts

originating therefrom, a handler shall pay to the Area Association a

fee

[[Page 1266]]

for the purpose of covering cost of supervision of the disposition of

such peanuts.

(f) Segregation 2 and 3 control. To assure the removal from edible

outlets of any lot of peanuts determined by Federal or Federal-State

Inspection Service to be Segregation 2 or Segregation 3, each handler

shall inform each employee, country buyer, commission buyer, or like

person through whom the handler receives peanuts of the need to receive

and withhold all lots of Segregation 2 and Segregation 3 peanuts from

milling for edible use. If any lot of Segregation 2 or Segregation 3

farmers stock peanuts is not withheld but returned to the producer, the

handler shall cause the Inspection Service to forward immediately a

copy of the inspection certificate on the lot to the designated office

of the handler and a copy to the Committee which shall be used only for

information purposes.

(g) Farmers stock storage and handling facilities. Handlers shall

report to the Committee, on a form furnished by the Committee, all

storage facilities or contract storage facilities which they will use

to store acquisitions of current crop Segregation 1 farmers stock

peanuts, and all such storage facilities must be reported prior to

storing of any such handler acquisitions. Handlers shall also report to

the Committee the locations at which they will receive or acquire

current crop farmers stock peanuts. All such storage facilities shall

have reasonable and safe access to allow for inspection of the facility

and its contents. All such storage facilities must be of sound

construction, in good repair, and built and equipped so as to provide

suitable storage and sufficient safeguards to prevent moisture

condensation and provide adequate protection for farmers stock peanuts.

All breaks or openings in the walls, floors, or roofs of the facilities

shall have been repaired so as to keep out moisture. Elevator pits and

wells must be kept dry and free of moisture at all times. Insect

control procedures must be carried out in such a manner as to prevent

undesirable moisture in the storage facilities. Any conditions in

warehouses, elevators, pits, transportation equipment, including trucks

and hopper cars, and other farmers stock handling equipment conducive

to the growth or spread of Aspergillus flavus mold shall be corrected

to the satisfaction of the Committee. The Committee may make periodic

inspections of farmers stock storage and handling facilities and

farmers stock peanuts stored in such facilities to determine if

handlers are adhering to these requirements.

(h) Shelled peanuts. Handlers may acquire shelled peanuts, which

originated from ``Segregation 1 peanuts,'' from other handlers, for

remilling and subsequent disposition to human consumption outlets.

(i) Segregation 2 and Segregation 3 farmers stock peanuts held

separate and apart or commingled, and disposed of to domestic or export

crushing are exempt from assessments under this section.

Sec. 998.200 Outgoing quality regulation for 1996 and subsequent crop

peanuts.

The following modify or in addition to the peanut marketing

agreement restrictions of Sec. 998.32 on handler disposition of

peanuts:

(a) Shelled peanuts. (1) No handler shall ship or otherwise dispose

of shelled peanuts for human consumption unless such peanuts are

positive lot identified, certified ``negative'' as to aflatoxin, and

certified as meeting the requirements in the following ``Other Edible

Quality * * *'' grades:

Table 1.--``Other Edible Quality'' (Non-Indemnifiable) Grades--Whole Kernels and Splits

[Excluding lots of ``splits'']

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

Unshelled Fall through

Unshelled peanuts ------------------------------------------------------------------

peanuts and damaged Foreign

Type and grade category damaged kernels and materials Moisture

kernels minor Sound split and Sound whole kernels Total (percent) (percent)

(percent) defects broken kernels

(percent)

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

Runner............................ 1.50 2.50 3.00%; \17/64\ inch 3.00%; \16/64\ x \3/ 4.00%; both screens. .20 9.00

round screen. 4\ inch; slot

screen.

Virginia (except No. 2)........... 1.50 2.50 3.00%; \17/64\ inch; 3.00%; \15/64\ x 1 4.00%; both screens. .20 9.00

round screen. inch; slot screen.

Spanish and Valencia.............. 1.50 2.50 3.00%; \16/64\ inch; 3.00%; \15/64\ x \3/ 4.00%; both screens. .20 9.00

round screen. 4\ inch; slot

screen.

No. 2 Virginia.................... 1.50 3.00 6.00%; \17/64\ inch; 6.00%; \15/64\ x 1 6.00%; both screens. .20 9.00

round screen. inch; slot screen.

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

Lots of ``splits''

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

Runner (not more than 4% sound 1.50 2.50 3.00%; \17/64\ inch; 3.00%; \14/64\ x \3/ 4.00%; both screens. .20 9.00

whole kernels). round screen. 4\ inch; slot

screen.

Virginia (not less than 90% 1.50 2.50 3.00%; \17/64\ inch; 3.00%; \14/64\ x 1 4.00%; both screens. .20 9.00

splits). round screen. inch; slot screen.

Spanish and Valencia (not more 1.50 2.50 3.00%; \16/64\ inch; 3.00%; \13/64\ x \3/ 4.00%; both screens. .20 9.00

than 4% sound whole kernels). round screen. 4\ inch; slot

screen.

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

(2) Prior to disposition to human consumption outlets, peanuts

which have been certified as meeting the requirements for Indemnifiable

Grades must also be certified ``negative'' as to aflatoxin. Maximum

limitations for Indemnifiable Grades are as follows:

[[Page 1267]]

Table 2.--Indemnifiable Grades

[Maximum limitations]

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

Unshelled Fall through

Unshelled peanuts, ------------------------------------------------------------------

peanuts and damaged Foreign

Type and grade category damaged kernels and Sound split and materials Moisture

kernels minor broken kernels Sound whole kernels Total (percent) (percent)

(percent) defects (percent) (percent)

(percent)

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

Runner U.S. No.1 and better....... 1.25 2.00 3.00%; \17/64\ inch, 3.00%; \16/64\ x \3/ 4.00%; both screens. .10 9.00

round screen. 4\ inch, slot

screen.

Virginia U.S. No.1 and better..... 1.25 2.00 3.00%; \17/64\ inch, 3.00%; \15/64\ x 1 4.00%; both screens. .10 9.00

round screen. inch, slot screen.

Spanish and Valencia U.S. No.1 and 1.25 2.00 3.00%; \16/64\ inch, 2.00%; \15/64\ x \3/ 4.00%; both screens. .10 9.00

better.. round screen. 4\ inch, slot

screen.

Runner U.S. Splits (not more than 1.25 2.00 2.00%; \17/64\ inch, 3.00%; \14/64\ x \3/ 4.00%; both screens. .20 9.00

4% sound, whole kernels). round screen. 4\ inch, slot

screen.

Virginia U.S. Splits (not less 1.25 2.00 3.00%; \17/64\ inch, 3.00%; \14/64\ x 1 4.00%; both screens. .20 9.00

than 90% splits and not more than round screen. inch, slot screen.

3.00% sound whole kernels and

portions passing through \20/64\

inch round screen).

Spanish and Valencia U.S. Splits 1.25 2.00 2.00%; \16/64\ inch, 3.00%; \13/64\ x \3/ 4.00%; both screens. .20 9.00

(not more than 4% sound, whole round screen. 4\ inch, slot

kernels). screen.

Runner with splits (not more than 1.25 2.00 3.00%; \17/64\ inch, 3.00%; \16/64\ x \3/ 4.00%; both screens. .10 9.00

15% sound splits). round screen. 4\ inch, slot

screen.

Virginia with splits (not more 1.25 2.00 3.00%; \17/64\ inch, 3.00%; \15/64\ x 1 4.00%; both screens. .10 9.00

than 15% sound splits). round screen. inch, slot screen.

Spanish and Valencia with splits 1.25 2.00 3.00%; \16/64\ inch, 2.00%; \15/64\ x \3/ 4.00%; both screens. .10 9.00

(not more than 15% sound splits). round screen. 4\ inch, slot

screen.

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

(3) The term ``fall through'', as used herein, shall mean sound

split and broken kernels and whole kernels which pass through specified

screens.

(b) Cleaned inshell peanuts. No handler shall ship or otherwise

dispose of cleaned inshell peanuts for human consumption:

(1) With more than 1.00 percent kernels with mold present unless a

sample of such peanuts, drawn by an inspector of the Federal or

Federal-State Inspection Service, was analyzed chemically by

laboratories approved by the Committee or by a U.S. Department of

Agriculture laboratory (hereinafter referred to as ``USDA laboratory'')

and found to be wholesome relative to aflatoxin;

(2) with more than 2.00 percent peanuts with damaged kernels;

(3) with more than 10.00 percent moisture; or

(4) with more than 0.50 percent foreign material. The lot size of

such peanuts in bags or bulk shall not exceed 200,000 pounds.

(c) Sampling and testing shelled peanuts. (1) Prior to shipment,

each handler shall cause appropriate samples of each lot of edible

quality shelled peanuts to be drawn by an inspector of the Federal or

Federal-State Inspection Service. The gross amount of peanuts drawn

shall be large enough to provide for a grade analysis, for a grading

check-sample, and for three 48-pound samples for aflatoxin assay. The

three 48-pound samples shall be designated by the Federal or Federal-

State Inspection Service as ``Sample #1,'' ``Sample #2,'' and ``Sample

#3'' and each sample shall be placed in a suitable container and

``positive lot identified'' by means acceptable to the Inspection

Service and the Committee. Sample #1 may be prepared for immediate

testing or Sample #1, Sample #2, and Sample #3 may be returned to the

handler for testing at a later date. However, before shipment of the

lot to the buyer (receiver), the handler shall cause Sample #1 to be

ground by the Federal or Federal-State Inspection Service or a USDA or

designated laboratory in a ``subsampling mill'' approved by the

Committee. The resultant ground subsample from Sample #1 shall be of a

size specified by the Committee and be designated as ``Subsample 1-AB''

and at the handler's or buyer's option, a second subsample may also be

extracted from Sample #1. It shall be designated as ``Subsample 1-CD.''

Subsample 1-CD may be sent as requested by the handler or buyer, for

aflatoxin assay, to a laboratory listed on the most recent Committee

list of approved laboratories that can provide analyses results on

[[Page 1268]]

such samples in 36 hours. Subsample 1-AB shall be analyzed only in USDA

or designated laboratories. Both Subsamples 1-AB and 1-CD shall be

accompanied by a notice of sampling signed by the inspector containing,

at least, identifying information as to the handler (shipper), the

buyer (receiver), if known, and the positive lot identification of the

shelled peanuts. A copy of such notice covering each lot shall be sent

to the Committee office.

(2) The samples designated as Sample #2 and Sample #3 shall be held

as aflatoxin check-samples by the Inspection Service or the handler and

shall not be included in the shipment to the buyer until the analyses

results from Sample #1 are known. Upon call from the USDA or designated

laboratory or the Committee, the handler shall cause Sample #2 to be

ground by the Inspection Service in a ``subsampling mill.'' The

resultant ground subsample from Sample #2 shall be of the size

specified by the Committee and it shall be designated as ``Subsample 2-

AB.'' Upon call from the USDA or designated laboratory or the

Committee, the handler shall cause Sample #3 to be ground by the

Inspection Service in a ``subsampling mill.'' The resultant ground

subsample from Sample #3 shall be of the size specified by the

Committee and it shall be designated as ``Subsample 3-AB.'' Subsamples

2-AB and 3-AB shall be analyzed only in USDA or designated laboratories

and each shall be accompanied by a notice of sampling. A copy of each

such notice shall be sent to the Committee office and the cost of

delivery of Subsamples 2-AB and 3-AB to the laboratory and the cost of

assay on them shall be at the Committee's expense.

(3) All costs involved in sampling and testing Subsample 1-CD shall

be for the account of the buyer of the lot and at the buyer's expense.

However, if the handler elects to pay any portion of these cost the

handler shall charge the buyer accordingly. Aflatoxin sampling and

testing cost for the AB subsamples shall be included as a separate item

in the handler's invoice to the buyer at the rate of $0.0027 per pound

or $0.27 per hundredweight of the peanuts covered by the invoice. When

any of the samples or subsamples have been lost, misplaced, or spoiled

and replacement samples are needed, the entire cost of drawing the

replacement samples shall be for the account of the handler. The

results of each assay shall be reported to the buyer listed on the

notice of sampling and, if the handler desires, to the handler. If a

buyer is not listed on the notice of sampling, the results of the assay

shall be reported to the handler, who shall promptly cause notice to be

given to the buyer of the contents thereof, and such handler shall not

be required to furnish additional samples for assay.

(4) For the current crop year, ``negative'' aflatoxin content means

15 parts per billion (ppb) or less for peanuts which have been

certified as meeting edible quality grade requirements as determined by

the Committee's sampling plan applicable to the respective grade

categories.

(d) Identification. Each lot of shelled or cleaned inshell peanuts,

in lot sizes not exceeding 200,000 pounds, shall be identified by

positive lot identification procedures prior to being shipped or

otherwise disposed of. For the purpose of this regulation, ``positive

lot identification'' of a lot of shelled or inshell peanuts is a means

of relating the inspection certificate to the lot which has been

inspected so that there can be no doubt that the peanuts are the same

ones described on the inspection certificate. The crop year that is

shown on the positive lot identification tags, or other means of

positive lot identification shall accurately describe the crop year in

which the peanuts in the lot were produced. Such procedure on bagged

peanuts shall consist of attaching a lot numbered tag bearing the

official stamp of the Federal or Federal-State Inspection Service to

each filled bag in the lot. The tag shall be sewed (machine sewed if

shelled peanuts) into the closure of the bag except that in plastic

bags the tag shall be inserted prior to sealing so that the official

stamp is visible. Any peanuts moved in bulk or bulk bins shall have

their lot identity maintained by sealing the conveyance and if in other

containers by other means acceptable to the Federal or Federal-State

Inspection Service and to the Committee. All lots of shelled or cleaned

inshell peanuts shall be handled, stored, and shipped under positive

lot identification procedures, except those lots which have been

reconstituted and/or commingled at the request of the receiver. All

such reconstituted and/or commingled lots will no longer be considered

positive lot identified and, therefore, no longer be eligible for

indemnification or for appeal inspection. Handlers shall keep and

maintain records of the quantities involved in each reconstituting and/

or commingling procedure, whether in single or multiple lots, and such

records shall be available to the Committee on request.

(e) Reinspection. Whenever the Committee has reason to believe that

peanuts may have been damaged or deteriorated while in storage, the

Committee may reject the then effective inspection certificate and may

require the owner of the peanuts to have a reinspection to establish

whether or not such peanuts may be disposed of for human consumption.

(f) Further modification of Sec. 998.32.

(1) The provisions of Sec. 998.32(a) restricting the disposition of

peanuts which fail to meet the requirements specified heretofore in

this section to the Commodity Credit Corporation or in such manner as

may be prescribed by the Committee with the approval of the Secretary,

is hereby modified to specify that only peanuts which have been

certified as meeting the requirements specified in paragraphs (a) or

(b) of this section, which have been sampled pursuant to paragraph (c)

of this section, and which have been identified pursuant to paragraph

(d) of this section are eligible for disposition to human consumption

outlets.

(2) Lots of peanuts which have not been certified as meeting the

requirements for disposition to human consumption outlets, may be

disposed for non-human consumption uses which are not regulated or

limited by the provisions specified hereinafter in this section:

Provided, That each such lot is positive lot identified, using red

tags, and certified as to aflatoxin content (actual numerical count).

However, on the shipping papers covering the disposition of each such

lot of inedible quality peanuts, the handler shall cause the following

statement to be shown: ``The peanuts covered by this bill of lading (or

invoice, etc.) are not to be used for human consumption.''

(3) Except for inedible quality peanuts disposed of under the

provisions of paragraph (f)(2) of this section and peanuts derived from

the milling for seed of Segregation 2 and 3 farmers stock peanuts,

peanuts which have not been certified as meeting the standards set

forth in paragraphs (a) or (b) of this section shall be disposed of as

prescribed hereinafter in this section.

(g) Sheller oil stock residuals--for crushing or export. Peanuts

and portions of peanuts which are separated from edible quality peanuts

by screening or sorting or other means during the milling process, may

be segregated into categories or commingled as sheller oil stock

residuals. Such sheller oil stock residuals shall be identified

pursuant to paragraph (d) of this section, but using a red tag, and

such peanuts may be disposed of domestically or to the export market in

bulk or bags or other suitable containers. Disposition to crushing may

be to handlers who are crushers or to domestic crushers who

[[Page 1269]]

are not handlers under the Agreement only on the condition that they

agree to comply with the terms of this paragraph and all other

applicable requirements of the Agreement. The movement of such peanuts

shall be reported to the Committee by the shipping handler and the

crusher, as requested by the Committee.

(1) If the peanuts have not been tested and certified as to

aflatoxin content, as prescribed in paragraph (c) of this section, the

handler shall cause the following statement to be shown on the shipping

papers: ``The peanuts covered by this bill of lading (or invoice, etc.)

are limited to crushing only and may contain aflatoxin.''

(2) If the peanuts are certified as 301 ppb or more aflatoxin

content, disposition shall be limited to crushing or export.

(h) Blanching and remilling peanuts failing quality requirements.

(1) Handlers may blanch or cause to have blanched positive lot

identified shelled peanuts, which originated from Segregation 1

peanuts, that fail to meet the requirements of paragraph (a) of this

section because of excessive damage, minor defects, moisture, or

foreign material or are positive as to aflatoxin. Prior to movement of

such peanuts to a blancher, handlers shall report to the Committee, on

a form furnished by the Committee, and receive authorization from the

Committee for movement and blanching of each such lot. Lots of peanuts

which are moved under these provisions must be accompanied by a valid

grade inspection certificate and the title shall be retained by the

handler until the peanuts are blanched and certified by an inspector of

the Federal or Federal-State Inspection Service as meeting the

requirements for disposal into human consumption outlets. To be

eligible for disposal into human consumption outlets, such peanuts

after blanching, must meet specifications for unshelled peanuts,

damaged kernels, minor defects, moisture, and foreign material as

listed in paragraph (a) of this section and be accompanied by an

aflatoxin certificate determined to be negative by the Committee. The

residual peanuts, excluding skins and hearts, resulting from blanching

under these provisions, shall be bagged and red tagged and disposition

shall be that such peanuts are returned to the handler for further

disposition; or, in the alternative, such residuals shall be positive

lot identified by the Federal or Federal-State Inspection Service, and

shall be disposed of, by the blancher, to handlers who are crushers, or

to domestic crushers who are not handlers under the Agreement only on

the condition that they agree to comply with the terms of paragraph (g)

of this section and all other applicable requirements of the Agreement.

Blanching under the provisions of this paragraph shall be performed

only by those firms who agree to procedures acceptable to the Committee

and who are approved by the Committee to do such blanching.

(2) Handlers may contract with Committee-approved remillers for

remilling shelled peanuts, which originated from Segregation 1 peanuts,

that fail to meet the requirements for disposition to human consumption

outlets heretofore specified in paragraph (a) of this section:

Provided, That such lots of peanuts contain not in excess of 10 percent

fall through. Prior to movement of such peanuts under these provisions

to a Committee-approved remiller, handlers shall report to the

Committee, on a form furnished by the Committee, and receive

authorization from the Committee for movement and remilling of each

such lot. Lots of peanuts moved under these provisions must be

accompanied by a valid grade inspection certificate and must be

positive lot identified and the title of such peanuts shall be retained

by the handler until the peanuts have been remilled and certified by

the Federal or Federal-State Inspection-Service as meeting the

requirements for disposition to human consumption outlets specified in

paragraph (a) of this section, and be accompanied by an aflatoxin

certificate determined to be negative by the Committee. Remilling under

these provisions may include composite remilling of more than one such

lot of peanuts owned by the same handler. However, such peanuts owned

by one handler shall be held and remilled separate and apart from all

other peanuts. The residual peanuts resulting from remilling under

these provisions, shall be bagged and red tagged and disposition shall

be that such peanuts are returned to the handler for further

disposition; or, in the alternative, such residuals shall be positive

lot identified by the Federal or Federal-State Inspection Service, and

shall be disposed of, by the remiller, to handlers who are crushers, or

to domestic crushers who are not handlers under the Agreement only on

the condition that they agree to comply with the terms of paragraph (g)

of this section and all other applicable requirements of the Agreement.

Remilling under the provisions of this paragraph shall be performed

only by those firms who agree to procedures acceptable to the Committee

and who are approved by the Committee to do such remilling.

(i) Documentation of compliance. Each handler shall keep and

maintain records of all receipts and acquisitions and all milling,

remilling, blanching, use and disposition of peanuts which have not

been certified as meeting the requirements for disposition to human

consumption, pursuant to paragraph (a) or (b) of this section, as will

document and substantiate compliance and performance under this

agreement.

PART 999--SPECIALTY CROPS; IMPORT REGULATIONS

1. The authority citation for 7 CFR part 999 continues to read as

follows:

Authority: 7 U.S.C. 601-674; and 7 U.S.C. 1445c-3.

2. Section 999.600 is revised to read as follows:

Sec. 999.600 Regulation governing imports of peanuts.

(a) Definitions. (1) Peanuts means the seeds of the legume Arachis

hypogaea and includes both inshell and shelled peanuts produced in

countries other than the United States, other than those marketed in

green form for consumption as boiled peanuts.

(2) Farmers stock peanuts means picked and threshed raw peanuts

which have not been shelled, crushed, cleaned or otherwise changed

(except for removal of foreign material, loose shelled kernels, and

excess moisture) from the form in which customarily marketed by

producers.

(3) Inshell peanuts means peanuts, the kernels or edible portions

of which are contained in the shell.

(4) Incoming inspection means the sampling and inspection of

farmers stock peanuts to determine Segregation quality.

(5) Segregation 1 peanuts, unless otherwise specified, means

farmers stock peanuts with not more than 2.00 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 mold.

(6) Segregation 2 peanuts, unless otherwise specified, means

farmers stock peanuts with more than 2.00 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 mold.

(7) Segregation 3 peanuts, unless otherwise specified, means

farmers stock peanuts with visible Aspergillus flavus mold.

[[Page 1270]]

(8) Shelled peanuts means the kernels of peanuts after the shells

are removed.

(9) Outgoing inspection means the sampling and inspection of

either: shelled peanuts which have been cleaned, sorted, sized and

otherwise prepared for human consumption markets; or inshell peanuts

which have been cleaned, sorted and otherwise prepared for inshell

human consumption markets.

(10) Negative aflatoxin content means 15 parts-per-billion (ppb) or

less for peanuts which have been certified as meeting edible quality

grade requirements, and 25 ppb or less for inedible quality peanuts.

(11) Person means an individual, partnership, corporation,

association, or any other business unit.

(12) Secretary means the Secretary of Agriculture of the United

States or any officer or employee of the United States Department of

Agriculture (Department or USDA) who is, or who may hereafter be,

authorized to act on behalf of the Secretary.

(13) Inspection service means the Federal or Federal-State

Inspection Service, Fruit and Vegetable Division, Agricultural

Marketing Service, USDA.

(14) USDA laboratory means laboratories of the Science and

Technology Division, Agricultural Marketing Service, USDA, that

chemically analyze peanuts for aflatoxin content.

(15) PAC approved laboratories means laboratories approved by the

Peanut Administrative Committee, pursuant to Peanut Marketing Agreement

No. 146 (7 CFR Part 998), that chemically analyze peanuts for aflatoxin

content.

(16) Conditionally released means released from Customs Service

custody for further handling (sampling, inspection, chemical analysis,

or storage) before final release.

(17) Importation means the arrival of a peanut shipment at a port-

of-entry with the intent to enter the peanuts into channels of commerce

of the United States.

(b) Incoming regulation. (1) Farmers stock peanuts presented for

consumption must undergo incoming inspection. Only Segregation 1

peanuts may be used for human consumption. All foreign produced farmers

stock peanuts for human consumption must be sampled and inspected at a

buying point or other handling facility capable of performing incoming

sampling and inspection. Sampling and inspection shall be conducted by

the inspection service. Only Segregation 1 peanuts certified as meeting

the following requirements may be used in human consumption markets:

(i) Moisture. Except as provided under paragraph (b)(2) Seed

peanuts, of this section, peanuts may not contain more than 10.49

percent moisture: Provided, That peanuts of a higher moisture content

may be received and dried to not more than 10.49 percent moisture prior

to storage or milling.

(ii) Foreign material. Peanuts may not contain more than 10.49

percent foreign material, except that peanuts having a higher foreign

material content may be held separately until milled, or moved over a

sand-screen before storage, or shipped directly to a plant for prompt

shelling. The term ``sand-screen'' means any type of farmers stock

cleaner which, when in use, removes sand and dirt.

(iii) Damage. For the purpose of determining damage, other than

concealed damage, on farmers stock peanuts, all percentage

determinations shall be rounded to the nearest whole number.

(2) Seed peanuts. Farmers stock peanuts determined to be

Segregation 1 quality, and shelled peanuts certified negative to

aflatoxin (15 ppb or less), may be imported for seed purposes.

Residuals from the shelling of Segregation 1 seed peanuts may be milled

with other imported peanuts of the importer, and such residuals meeting

quality requirements specified in paragraph (c)(1) of this section may

be disposed to human consumption channels. Any portion not meeting such

quality requirements shall be disposed to inedible peanut channels

pursuant to paragraphs (f) and (g) of this section. All disposition of

seed peanuts and residuals from seed peanuts , whether commingled or

kept separate and apart, shall be reported to the Secretary pursuant to

paragraphs (f)(2) and (f)(3) of this section. The receiving seed outlet

must retain records of the transaction, pursuant to paragraph (g)(7) of

this section.

(3) Oilstock and exportation. Farmers stock peanuts of lower

quality than Segregation 1 (Segregation 2 and 3 peanuts) shall be used

only in inedible outlets. Segregation 2 and 3 peanuts may be commingled

but shall be kept separate and apart from edible quality peanut lots.

Commingled Segregation 2 and 3 peanuts and Segregation 3 peanuts shall

be disposed only to oilstock or exported. Shelled peanuts and cleaned-

inshell peanuts which fail to meet the requirements for human

consumption in paragraphs (c)(1) or (c)(2), respectively, of

Sec. 997.600, may be crushed for oil or exported.

(c) Outgoing regulation. No person shall import peanuts for human

consumption into the United States unless such peanuts are lot

identified and certified by the inspection service as meeting one of

the following requirements:

(1) Shelled peanuts. (i) No importer shall ship or otherwise

dispose of shelled peanuts to human consumption markets unless such

peanuts are lot identified, certified as ``negative'' to aflatoxin, and

meet the requirements specified in Table 1.

Table 1.--Minimum Grade Requirements--Peanuts for Human Consumption

[Whole Kernels and Splits]

Maximum limitations

Excluding lots of ``splits''

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Unshelled Fall through

Unshelled peanuts, ------------------------------------------------------------------

peanuts and damaged Foreign

Type and grade category damaged kernels and materials Moisture

kernels minor Sound split and Sound whole kernels Total (percent) (percent)

(percent) defects broken kernels

(percent)

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

Runner............................ 1.50 2.50 3.00%; \17/64\ inch 3.00%; \16/64\ x 4.00%; both screens. .20 9.00

round screen. \3/4\ inch; slot

screen.

Virginia (except No. 2)........... 1.50 2.50 3.00%; \17/64\ inch; 3.00%; \15/64\ x 1 4.00%; both screens. .20 9.00

round screen. inch; slot screen.

Spanish and Valencia.............. 1.50 2.50 3.00%; \16/64\ inch; 3.00%; \15/64\ x 4.00%; both screens. .20 9.00

round screen. \3/4\ inch; slot

screen.

[[Page 1271]]

No. 2 Virginia.................... 1.50 3.00 6.00%; \17/64\ inch; 6.00%; \15/64\ x 1 6.00%; both screens. .20 9.00

round screen. inch; slot screen.

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

Lots of ``splits''

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Runner (not more than 4% sound 1.50 2.50 3.00%; \17/64\ inch; 3.00%; \14/64\ x 4.00%; both screens. .20 9.00

whole kernels). round screen. \3/4\ inch; slot

screen.

Virginia (not less than 90% 1.50 2.50 3.00%; \17/64\ inch; 3.00%;

This text is long and has been trimmed here. Open the source document for the complete record.