Peanuts Marketed in the United States; Relaxation of Handling Regulations

SUMMARY: This rule relaxes, for 1997 and subsequent crop peanuts,

several provisions regulating the handling of domestically produced

peanuts marketed in the United States. The relaxation includes:

Eliminating need for approval of certain facilities; allowing minimum

grade requirements for lots of splits to correspond with grade

standards; allowing certain lots to be custom blanched; providing that

under the Agreement, all lots of edible quality peanuts be eligible for

indemnification benefits; providing that peanuts which have been

certified as meeting the minimum grade requirements, but fail on

aflatoxin, may be roasted prior to being certified as meeting the

latter; and allowing rejected peanuts to be placed in ``suitable

containers'', not just ``bagged''. This rule will improve efficiency

and reduce program costs resulting in a similar reduction in assessment

rates charged Agreement signer and non-signer handlers.

DATES: Effective January 20, 1998; comments received by March 17, 1998

will be considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments

concerning this rule. Comments must be sent in triplicate to the Docket

Clerk, Fruit and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box

96456, Washington, DC 20090-6456; Fax: (202) 205-6632. All comments

should reference the docket numbers, the date and page number of this

issue of the Federal Register and will be made available for public

inspection in the Office of the Docket Clerk during regular business

hours.

FOR FURTHER INFORMATION CONTACT: George J. Kelhart or Jim Wendland,

Marketing Order Administration Branch, Fruit and Vegetable Programs,

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

telephone: (202) 720-2491, Fax: (202) 205-6632. Small businesses may

request information on compliance with this regulation by contacting:

Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable

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

20090-6456; telephone: (202) 720-2491, Fax: (202) 205-6632.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing

Agreement No. 146 (7 CFR Part 998) and the Agricultural Marketing

Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter

referred to as the ``Act.'' The marketing agreement and the regulations

issued thereunder (7 CFR Part 998) and the non-signatory peanut handler

regulations (7 CFR Part 997) regulate the quality of domestically

produced peanuts.

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

conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil

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

This 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.

Following explanation of each change to the Agreement's regulation,

the corresponding change to the non-signatory regulation is discussed.

Incoming Regulations

Farmers Stock Storage and Handling Facilities: The Committee

recommended amending Sec. 998.100 Incoming quality regulation for 1995

and subsequent crop peanuts by removing paragraph (g) Farmers Stock

Storage and Handling Facilities which currently regulates the condition

of such facilities and authorizes Committee inspection. The Committee

recommended the change to save approximately $450,000, by eliminating

the positions of the seven fieldmen whose specified duties through last

crop year included spending an estimated 60-65 percent of their time

inspecting and approving such facilities. The vote was 17 ``For'' and 1

``Against'', with the dissenting voter contending that the fieldmen

were providing valuable services and their positions should not be

eliminated and that inspection and approval of such facilities by the

Committee staff was important. Handlers contend they are already paying

their own employees to do facilities inspections and the cost of such

duplication of effort needs to be eliminated. Also, this cost-cutting

will not adversely affect quality since peanuts must still meet the

Outgoing Quality Regulation.

Elimination of the regulatory provision will allow the Committee to

reduce its non-headquarters staff from seven to one compliance officer

in each of the three production areas and reduce the current

``fieldmen'' staffing costs to zero. The compliance officers will

conduct compliance audits of Agreement signers similar to AMS approved

non-signer program compliance plan procedures where AMS Compliance

Staff auditors check non-signers' records. A revised 1997-98 compliance

plan from the Committee includes this new procedure. AMS believes this

will continue to assure compliance under the Agreement.

The non-signer regulation contains no similar requirements for

inspection and approval of such facilities, so no change is needed.

Outgoing Regulations

The Committee unanimously recommended that Sec. 998.200(a) be

amended to provide that minimum grade requirements for lots of

``splits'' (the separated halves of peanut kernels) be modified to

correspond with ``United States Standards For Grades Of: (1) Cleaned

Virginia Type Peanuts In The Shell; or (2) Shelled Runner Type Peanuts;

or (3) Shelled Spanish Type Peanuts; or (4) Shelled Virginia Type

Peanuts'' (7 CFR Part 51: Sections 51.1235-1242; 51.2710-2721; 51.2730-

2741; and 51.2750-2763, respectively. This increase to 2.00 percent

from the current 1.50 percent for unshelled peanuts and damaged kernels

is needed to provide consistency with the grade standards. Under the

current regulation, a handler could have a lot of peanuts which met

U.S. Grade Standards for U.S. Splits, but failed to meet Agreement

requirements for edible quality. It was expected that this change might

reduce the number of lots which will need to be remilled to meet

outgoing quality requirements. Although this reduction was roughly

estimated at something less than 10 percent in an average year, this

year's crop has been stressed by drought conditions and virtually all

peanut producing States have expressed having problems with quality.

Thus, this change could still result in significant reductions in costs

for handlers.

Another modification to Sec. 998.200(a) will remove Table 2.--

INDEMNIFIABLE GRADES. The Committee had originally established this

table in its regulations to qualify higher grade peanut lots for its

indemnification program covered in Sec. 998.300. However, coverage

under this provision has been greatly reduced by

[[Page 2847]]

recent Committee action, to the point that the table is no longer

deemed necessary. The Department agrees that Table 2 is not needed and

its removal will simplify the Agreement regulations and therefore it is

hereby removed.

Similar changes are made to the corresponding Sec. 997.30(a) of the

non-signer regulation.

The Committee unanimously recommended that Sec. 998.200(h)(1) be

amended to allow lots of peanuts which fail edible quality

requirements, due to excessive fall through, to be custom blanched.

However, such lots will have to be certified as meeting minimum ``fall

through'' requirements after blanching. The change eliminates the

current requirement that prior to movement of such peanuts, handlers

have to submit a form to the Committee and receive authorization for

movement and blanching of each such lot.

Section 997.40(d) of the non-signer regulation currently does not

require such handlers to submit a request to the Department and receive

authorization for movement and blanching of each such lot. Therefore,

no similar change to that provision is needed. However, it is being

amended to add ``fall through'' to the category of items allowed in the

first and third sentences.

The Committee also unanimously recommended a further change to

paragraph (h), specifically that subparagraphs (h)(1) and (h)(2) be

further amended to provide that reject peanuts may be placed in

suitable containers acceptable to the Committee. The current

requirement specifies ``bagged,'' which refers to the older standard-

sized burlap bags. It does not include the many newer and more

efficient containers which are easier to handle such as tote bags,

corrugated containers (including those with capacities of over a ton),

Super Sacks, and other various company containers used by individual

peanut product manufacturers. The change will allow handlers to use

more efficient containers or those desired by their customers. For

purposes of this provision, most any container that handlers use other

than bulk loads--i.e., those in which peanuts are not in any type of

receptacle other than the vehicle transporting them--will be considered

suitable.

Section 997.40(c) of the non-signer regulation currently provides

for ``in bulk or bags or other suitable containers.'' To make it

consistent with the Agreement's amended regulation, the words ``in bulk

or'' are being removed. Paragraphs (d) and (e) are also being amended

by removing the word ``bagged'' and replacing it with the words

``placed in suitable containers.''

The Committee also unanimously recommended that Sec. 998.200

Outgoing quality regulation and Sec. 998.300 Terms and conditions of

indemnification . . . be amended to make all lots of edible quality

peanuts indemnifiable, for freight reimbursement, when rejected on

appeal after being certified ``negative'' as to aflatoxin. Under

provisions specified in Sec. 998.300, product claim lots of edible

quality peanuts will now also be indemnifiable. This involves lots

where a handler sustained a loss as a result of a buyer withholding

from human consumption any or all of the product made from a lot of

peanuts which had been determined to be unwholesome due to aflatoxin

after such lot had originally been certified ``negative'' as to

aflatoxin. This change will provide consistency by treating all edible

quality peanuts equally, whether appeal claims or product claims.

Although these changes should further reduce costs and will promote

uniformity in the handling of indemnification of all edible quality

peanuts, there is no way to accurately quantify how much these

reductions would be, because the savings would be different for each

handler. However, the total savings would be significantly less than

the projected approximately $200,000 total 1996 crop indemnification

costs.

The non-signer enabling legislation does not provide authority for

indemnification. Therefore, no similar change is being made in the non-

signer regulation.

The Committee further unanimously recommended that

Sec. 998.200(h)(3) be amended to provide that peanuts which have been

certified as meeting minimum grade requirements specified in

Sec. 998.200(a)(1), but fail to meet requirements for aflatoxin, may be

roasted while being blanched prior to being certified as meeting the

aflatoxin requirements. After roasting, such peanuts must be sampled

and assayed for aflatoxin content but do not have to be re-sampled and

analyzed for grade again. This simplified process is recommended by the

Committee because blanched peanuts, after certification, often are

placed back into blancher for additional heating. Removing the blanched

peanuts short of the complete roasting process for sampling and

aflatoxin analysis, and then reinserting them back into the blancher

adds costs to the roasting process and usually causes additional,

unintentional damage due to the extra handling of the kernels. Also,

the roasting will enhance the blanching efforts to eliminate aflatoxin,

thus improving the wholesomeness, quality and value of such shelled

peanuts. The savings involved in blanching and roasting in one step

should far outweigh the approximately $40 per hour costs of having an

inspector present during this process to maintain needed positive lot

identification. Any residual peanuts, excluding skins and hearts,

resulting from this roasting process, must be red tagged and disposed

of to non-edible peanut outlets. A similar change is being made to

Sec. 997.40(d) of the non-signer regulation.

The unchanged portions of the incoming and outgoing regulations

currently in effect for 1996 and subsequent crop peanuts will remain in

effect for 1997 and subsequent crop peanuts.

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.

Accordingly, AMS has prepared this initial regulatory flexibility

analysis.

There are approximately 27 signatory and 30 non-signatory peanut

handlers who are currently subject to regulations under the Agreement

and non-signer program respectively and approximately 25,000 commercial

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

service firms, which include handlers, 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 are

defined as those having annual receipts of less than $500,000.

Approximately 25 percent of the signatory handlers, virtually all of

the non-signers, and most of the producers may be classified as small

entities. This action will be favorable to the industry by tending to

improve efficiency, reducing costs and increasing returns.

The relaxations to handling regulations specified in this rule will

simplify requirements and enable handlers, both large and small, to cut

costs and more efficiently handle their peanut supplies, without

jeopardizing safeguard requirements in the current regulations.

The relaxations include: 1. The elimination of the requirement for

inspection and approval of farmers stock storage and handling

facilities will save approximately $450,000 by eliminating the

positions of the seven fieldmen, who had performed this activity

through last crop year. Handlers contend they already paid their own

employees to do this and the duplicate cost should be eliminated;

[[Page 2848]]

2. Relaxing the minimum grade requirements for ``splits'' to

correspond with U.S. grade standards might reduce the number of lots

which need to be remilled this year by 10 percent due to stressed

growing conditions in virtually all areas. This should result in

significant reductions in costs for handlers;

3. Another relaxation is to provide that all lots of edible quality

peanuts, whether appeal claims or product claims, will be eligible for

handler indemnification benefits. Thus, handlers with product claim

lots will now also be eligible for reimbursement of most transportation

expenses on such lots. Such additional reimbursement was not publicly

quantified by the Committee, but would be less than the projected

approximately $200,000 total 1996 crop indemnification costs;

4. The revised provision to allow lots which fail edible quality

requirements, due to excessive fall through, to be custom blanched

eliminates the current requirement that handlers have to submit a form

to the Committee and receive authorization for movement and blanching

of each such lot. This relaxation will eliminate unnecessary paperwork

and save time for all affected handlers;

5. Relaxing the requirement that peanuts be ``bagged'' (i.e.,

placed only in older standard-size burlap bags) by allowing the use of

suitable containers, will permit use of the many newer and more

efficient containers or those desired by handlers' customers; and

6. Another relaxation will allow peanuts which have been certified

as meeting the minimum grade requirements, but fail to meet

requirements for aflatoxin, to be roasted while being blanched prior to

being certified as meeting the latter requirements. This simplified

process eliminates reinserting such peanuts back into the blancher,

which doubles the processing costs and tends to lower the peanuts'

quality and value by causing additional damage to them. Such savings

should far outweigh the approximately $40 per hour expense of having an

inspector present to maintain needed positive lot identification.

The relaxed requirements will significantly improve efficiency and

have enabled the Committee to cut in half for the 1997-98 and

subsequent crops years its administrative costs and assessment rate

charged Agreement signer and non-signer handlers to finance their

respective programs. Further, the rate of assessment last season was

$0.70 per net ton of assessable peanuts. The rate for the 1997-98 crop

year has been reduced to $0.35 per net ton by another rulemaking

action, as published in the September 17, 1997, issue of the Federal

Register (62 FR 48749). This will save regulated domestic handlers

approximately $500,000 in administrative assessment costs which should,

to a great extent, also correspond to the savings from this relaxation

action.

The specifics of each change and why they will tend to increase

returns to handlers were covered in detail near the beginning of this

rule under the discussion starting with ``Incoming regulations.''.

These changes will relax requirements on regulated domestic peanut

handlers, improve their efficiency and cut costs, to benefit the peanut

industry, manufacturers, and consumers, while still assuring quality of

all peanuts in domestic human consumption markets.

As with all Federal marketing agreement and order programs, reports

and forms are periodically reviewed to reduce information requirements

and duplication by industry and public sectors. Consistent with the

Paperwork Reduction Act (44 U.S.C. Chapter 35), the Committee

unanimously recommended greatly reducing reporting and recordkeeping

requirements on both large and small domestic peanut handlers regulated

under these two programs. It will eliminate 20 of the 21 Committee

forms currently approved by OMB that might accompany peanut shipments,

to only require use of the Form PAC-1. The PAC-1 is mailed to handlers

on a monthly basis and is used to report receipts and acquisitions of

farmers stock peanuts and to remit assessments. It is estimated this

will eliminate 95 percent (or about 2,291 hours and assuming $10 per

hour, would save respondents nearly $23,000 in costs) of the current

estimated 2,417 hours of total reporting burden on Agreement signers,

including small businesses, and a proportional, smaller reduction in

non-signer reporting burden. A notice of the proposed revision was

published in the July 31, 1997, issue of the Federal Register (62 FR

41021). Sixty days were allowed for comments. One comment was received,

from the American Peanut Shellers Association, supporting the reduced

burdens. This information collection package has been submitted to the

Office of Management and Budget (OMB) for approval.

In addition, the Department has not identified any Federal rules

that duplicate, overlap or conflict with this rule.

Further, the Committee's meeting was widely publicized throughout

the peanut industry and all interested persons were invited to attend

the meeting and participate in the Committee's deliberations. Like all

Committee meetings, the April 29-30, 1997, meeting was a public meeting

and all entities, both large and small, were able to express their

views on the issues. The 18-member Committee is composed of an equal

number of peanut handlers and producers, the majority of whom are small

entities.

Also, the Committee has a number of appointed subcommittees to

review certain issues and make recommendations to the Committee. The

Committee's Regulations, Indemnification and Quality Subcommittee and

``New Concept'' Subcommittee met on January 28, 1997, and discussed

these issues in detail. On March 25, 1997, the Committee held an

informational meeting to hear a presentation by the National Peanut

Council's Peanut Industry Revitalization Project Steering Committee and

discuss those issues there and back with their industry peers before

voting on those issues at the April Committee meeting. The Committee's

Administrative Budget Subcommittee also meet March 25, 1997, to discuss

budget recommendations. These meetings were also public meetings and

both large and small entities were able to participate and express

their views. Finally, interested persons are invited to submit

information on the regulatory and informational impacts of this action

on small businesses.

An objective of the two domestic programs 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 volume, have signed the Agreement.

The remaining 30 percent are non-signatory handlers handling the

remaining 5 percent of domestic production.

Under these 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 18-member Committee, which is composed of an equal number of

peanut producers and handlers, meets at least annually to review the

Agreement's rules and regulations, which are effective on a continuous

basis from one

[[Page 2849]]

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.

Section 608b of the Act was amended 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. Section 608b was further amended in 1993 to impose similar

requirements regarding administrative assessments. The non-signatory

handler regulations have been amended several times thereafter and are

published in 7 CFR part 997.

Thus, the Committee's recommended changes to the Agreement

regulation, as established in this rule, also are established for the

Agreement non-signers. This interim final rule identifies the

corresponding change to the non-signer regulation for each change to

the Agreement regulation.

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 recent study entitled ``United States Peanut

Industry Revitalization Project'' developed by the National Peanut

Council and the Department's Agricultural Research Service (May 1996).

According to the study, the U.S. peanut industry has been in a

period of dramatic economic decline since 1991 because: (1) Per capita

peanut consumption has steadily declined a total of 11 percent; (2)

harvested acreage has declined 25 percent; (3) production has declined

30 percent and farm value dropped 29 percent; and (4) imports of

peanuts and peanut products have increased from insignificant

quantities to 48,736 raw farmer stock tons in 1995 and 55,536 in 1996.

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

for raw peanuts due to the North American Free Trade Agreement (NAFTA)

and the Uruguay Round Agreements under the General Agreement on Tariffs

and Trade (GATT). Under Section 22 import quota provisions, the volume

of U.S. peanut imports had been limited to about 2.3 million pounds,

in-shell basis, annually. Thus, imports have historically represented

about one-tenth of 1 percent of U.S. food use of peanuts. Under NAFTA,

Mexico has been granted a minimum access level for duty-free entry of

peanuts of about 10 million pounds, in-shell basis. This level will

increase about 3 percent annually through 2008, when quantitative

limits will cease. Mexico's 1998 duty-free quota will total 8.4 million

pounds. Under GATT, the 1995 quota was 74.5 million pounds. This year

it is 86.8 million pounds, will increase to 96.7 million pounds

(Argentina 81.2 and all other 15.5) in 1998, and can grow to about 155

million pounds (about 4 percent of U.S. disappearance) in 2000.

The study also projects that farm production costs and revenue will

be equal by the year 2000, as will handler costs and revenue, leaving

no profit.

In addition, the modification of the Federal farm peanut poundage

quota regulations implemented under the Agricultural Market Transition

Act of 1996 (1996 Act) has resulted in the domestic industry undergoing

significant changes scheduled to continue through the year 2002. The

peanut support price has been reduced from $670 per ton in 1995 to $610

per ton through 2002. The USDA's Farm Service Agency final rule

implementing the Act was published May 9, 1997 (62 FR 25433). That rule

indicates that economic impacts of the 1996 Act include expected

reductions in domestic peanut producers' revenue of $1.25 billion from

1996 through 2002. Quota lease holders could absorb a loss of about $40

million annually because of reduced leasing rates due to the lower

peanut price support. Also, capitalized value of quotas could decline

$200 to $300 million, thus reducing land values and the tax base of

rural communities.

The Committee agrees that all of these factors combined show that

the domestic peanut industry had been in decline and that the outlook

was not expected to change without some positive intervention by the

industry.

World supply and demand are less important for peanuts than most

U.S. farm commodities. Much of world peanut production is for non-food

uses, although production for food use might increase a little if there

were no U.S. import restrictions. Also, import quotas, though increased

recently, still are set at relatively low levels.

Domestic peanut production in 1996 was approximately 3.66 billion

pounds, with a farm value of slightly under $1 billion. The

Department's November 1 forecast pegs the 1997 peanut crop production

at 3.5 billion pounds, down approximately 4 percent from last year.

Harvested acreage for 1997 is forecast to be 1.384 million acres, up

4,500 acres from a year ago. The U.S. average yield per acre for the

1997 crop is forecast at 2,528 pounds, down 11 pounds per acre from the

1996 crop.

Production is expected to gradually increase from 1996 to 2002

because domestic food use is projected to rise about 1.5 percent

annually. Imports are expected to remain at a relatively small

percentage of total U.S. peanut use.

Estimated exports of 750 million pounds in Marketing Year (MY) 1997

are below the average for the prior 3 years, but are 11 percent more

than a year earlier. Peanut oil prices are expected to average about 38

cents a pound of oil in MY 1997, 6 percent lower than MY 1996 as

vegetable oil supplies return to more normal levels. Peanut meal prices

for MY 1997 are expected to decline to $175 a ton, down 25 percent from

MY 1996 because of larger soybean meal supplies.

The season average price of farmer stock peanuts for MY 1997 may

remain unchanged from the 28.5 cents per pound average for 1996. This

was the lowest price of the last two years and reflects the adjustment

to the reduced quota support level and an unexpected change in the

proportions of quota and additionals in 1997 production. Average prices

to growers are expected to increase, but will remain below 1995 prices

because of the lower quota price support level. The value of farm

production is expected to gradually rise and surpass that of 1995 by

2000/01.

The Committee recommended the changes in this rulemaking to the

Agreement's Incoming and Outgoing regulations for 1997 and subsequent

crop peanuts at its April 30, 1997, public meeting.

Alternative Actions Considered

Although the Committee could have recommended no changes or less

changes to the current regulations, it unanimously concluded that those

were not satisfactory solutions. It believes that all possible

simplification and cost-cutting should be done and that these

regulations should focus more on outgoing quality and less on the

shelling and milling processes necessary to meet the outgoing, human

consumption requirements. Newer, high technology milling and blanching

equipment enable handlers to recondition failing peanut lots that could

not have been economically reconditioned when the regulations were

first promulgated. Therefore, it is no longer necessary to impose

restrictions that hinder the efficiency of handling operations and

result in the loss of potentially good quality peanuts. Thus, the

Committee believes these changes will tend to improve the returns to

growers and handlers, while still maintaining consumer safeguard

provisions in the current domestic regulations, because

[[Page 2850]]

all peanuts intended for human consumption must still be inspected and

certified acceptable for such use.

After review of the recommendations, the Department concurs that

the recommended changes will tend to improve returns to the industry

and be in the public interest. Expected benefits of the changes were

included in the previous discussion of each individual change.

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

Chapter 35) information collection requirements that are contained in

this rule have been previously approved by the Office of Management and

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

signers) and 0581-0163 (for non-signers).

After consideration of all relevant material presented, including

the Committee's recommendations, and other information, it is found

that this interim final rule, as hereinafter set forth, will tend to

effectuate the declared policy of the Act.

This rule invites comments on changes to the quality regulations

currently prescribed under the Agreement and the non-signers program.

All written comments timely received will be considered prior to

finalization of this rule.

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 give preliminary notice prior to putting this rule into

effect and that good cause exists for not postponing the effective date

of this rule until 30 days after publication in the Federal Register

because: (1) This rule relaxes requirements currently in effect; (2)

the 1997 peanut crop year began July 1, 1997, and the changes should be

effective as soon as possible to allow the industry to receive the

benefits for as much of the remainder of the crop year as possible; (3)

the Committee unanimously recommended these changes at a public meeting

and all entities, both large and small, were able to express views on

these issues; (4) this rule provides a 60-day opportunity for comment,

and all written comments timely received will be considered prior to

finalization of the rule.

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.

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

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. Section 997.30 is amended by revising paragraph (a), to read as

follows:

Quality Regulations

Sec. 997.30 Outgoing Regulation.

(a) Shelled peanuts. (1) No handler shall dispose of shelled

peanuts for human consumption unless such peanuts are positive lot

identified, certified ``negative'' as to aflatoxin and certified as

meeting the following requirements:

Maximum Limitations

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

Unshelled Fall through

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

peanuts and damaged Foreign Moisture

Type and grade category damaged kernels and Sound split and Sound whole material (percent)

kernels minor defects broken kernels kernels Total (percent)

(percent) (percent)

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

Excluding lots of ``splits''

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

inch round \3/4\ inch slot screens.

screen. screen.

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

inch round 1 inch slot screens.

screen. screen.

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

inch round \3/4\ inch slot screens.

screen. screen.

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

inch round 1 inch slot screens.

screen. screen.

Lots of ``splits''

Runner (not more than 4% sound 2.00 2.50 3.00%; \17/64\ 3.00%; \14/64\ x 4.00%; both .20 9.00

whole kernels). inch round \3/4\ inch slot screens.

screen. screen.

Virginia (not less than 90% 2.00 2.50 3.00%; \17/64\ 3.00%; \14/64\ x 4.00%; both .20 9.00

splits). inch round 1 inch slot screens.

screen. screen.

Spanish and Valencia (not more 2.00 2.50 3.00%; \16/64\ 3.00%; \13/64\ x 4.00% both .20 9.00

than 4% sound whole kernels). inch round \3/4\ inch slot screens.

screen. screen.

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

[[Page 2851]]

(2) The term fall through, as used in this paragraph, 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 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.

* * * * *

3. In Sec. 997.40, paragraph (c) introductory text is amended by

removing the words ``bulk or'', paragraph (e) is amended by removing

the word ``bagged'' and adding in its place the words ``placed in

suitable containers acceptable to AMS'', paragraph (d) is amended by

removing the word ``bagged'' and adding in its place the words ``placed

in suitable containers acceptable to AMS'', and adding after the last

sentence, 5 additional sentences, to read as follows:

Sec. 997.40 Reconditioning and disposition of peanuts failing quality

requirements.

* * * * *

(d) * * * Handlers may contract with Committee approved blanchers

for roasting positive lot identified shelled peanuts, which originated

from Segregation 1 peanuts, that meet the grade requirements of

paragraph (a) of this section but are positive as to aflatoxin. Lots of

peanuts moved under these provisions must be accompanied by a valid

grade inspection certificate and a valid aflatoxin certificate. To be

eligible for disposal into human consumption outlets, such peanuts

after roasting, shall have had the positive lot identity maintained and

be accompanied by a negative aflatoxin certificate. The residual

peanuts, excluding skins and hearts, resulting from roasting under

these provisions, shall be placed in suitable containers acceptable to

AMS and red tagged and disposition shall be that such peanuts are

returned to the handler for further disposition; or that in the

alternative, such residuals shall be positive lot identified by a

Federal or Federal-State Inspection Service, and shall be disposed of,

by the blancher, to handlers who are crushers, or to crushers who are

not handlers under the Agreement only on the condition that they agree

to comply with the terms of paragraph (c) of this section and all other

applicable requirements of this regulation. Roasting under the

provisions of this paragraph shall be performed only by blanchers who

are approved by the Committee.

* * * * *

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.

Sec. 998.100 [Amended]

2. Section 998.100 is amended by removing paragraph (g),

redesignating paragraphs (h) and (i) as paragraphs (g) and (h), and

removing the number ``1996'' in the section heading and adding in its

place the number ``1997''.

3. In Sec. 998.200, the section heading and paragraphs (a), (h)(1)

and (h)(2) are revised and a new paragraph (h)(3) is added to read as

follows:

Sec. 998.200 Outgoing quality regulation for 1997 and subsequent crop

peanuts.

* * * * *

(a) Shelled peanuts. (1) No handler shall dispose of shelled

peanuts for human consumption unless such peanuts are positive lot

identified, certified ``negative'' as to aflatoxin, and certified as

meeting the following requirements:

Maximum Limitations

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

Unshelled Fall through

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

peanuts and damaged Foreign Moisture

Type and grade category damaged kernels and Sound split and Sound whole materials (percent)

kernels minor defects broker kernels kernels Total (percent)

(percent) (percent)

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

Excluding lots of ``splits''

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

inch round \3/4\ inch slot screens.

screen. screen.

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

inch round 1 inch slot screens.

screen. screen.

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

inch round \3/4\ inch slot screens.

screen. screen.

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

inch round 1 inch slot screens.

screen. screen.

Lots of ``splits''

Runner (not more than 4% sound 2.00 2.50 3.00%; \17/64\ 3.00%; \14/64\ x 4.00%; both .20 9.00

whole kernels. inch round \3/4\ inch slot screens.

screen. screen.

Virginia (not less than 90% 2.00 2.50 3.00%; \17/64\ 3.00%; \14/64\ x 4.00%; both .20 9.00

splits. inch round 1 inch slot screens.

screen. screen.

Spanish and Valencia (not more 2.00 2.50 3.00%; \16/64\ 3.00%; \13/64\ x 4.00%; both .20 9.00

than 4% sound whole kernels). inch round \3/4\ inch slot screens.

screen. screen.

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

[[Page 2852]]

(2) The term fall through, as used in this paragraph, shall mean

sound split and broken kernels and whole kernels which pass through

specified screens.

* * * * *

(h) * * * (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. 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 as

listed in paragraph (a) of this section and be accompanied by an

aflatoxin certificate determined to be negative by the Committee. Lots

of peanuts which have been certified as meeting fall through

requirements as specified in paragraph (a) of this section, prior to

blanching, shall be exempt from fall through requirements after

blanching. The residual peanuts, excluding skins and hearts, resulting

from blanching under these provisions, shall be placed in suitable

containers acceptable to the Committee 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 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. 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 placed in suitable containers acceptable to

the Committee 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 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.

(3) Handlers may contract with Committee approved blanchers for

roasting positive lot identified shelled peanuts, which originated from

Segregation 1 peanuts, that meet the grade requirements of paragraph

(a) of this section but are positive as to aflatoxin. Lots of peanuts

moved under these provisions must be accompanied by a valid grade

inspection certificate and a valid aflatoxin certificate. To be

eligible for disposal into human consumption outlets, such peanuts

after roasting, shall have had the positive lot identity maintained and

be accompanied by an aflatoxin certificate determined to be negative by

the Committee. The residual peanuts, excluding skins and hearts,

resulting from roasting under these provisions, shall be placed in

suitable containers acceptable to the Committee 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 a Federal or Federal-State Inspection

Service, and shall be disposed of, by the blancher, to handlers who are

crushers, or to 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. Roasting under the provisions of this paragraph shall be

performed only by blanchers who are approved by the Committee.

* * * * *

Dated: January 9, 1998.

Sharon Bomer Lauritsen,

Acting Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-1052 Filed 1-15-98; 8:45 am]

BILLING CODE 3410-02-P