FR Doc 03-20158

[Federal Register: August 7, 2003 (Volume 68, Number 152)]
[Rules and Regulations]
[Page 46919-46924]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07au03-1]

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[[Page 46919]]

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 996

[Docket No. FV03-996-2 IFR]

Change in Minimum Quality and Handling Standards for Domestic and
Imported Peanuts Marketed in the United States

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule changes peanut quality and handling standards for
domestic and imported peanuts marketed in the United States. These
changes are based on comments received from the Peanut Standards Board
(Board) and other industry sources. The standards and the Board were
established by the Department of Agriculture (USDA), pursuant to
section 1308 of the Farm Security and Rural Investment Act of 2002.
This rule changes screen sizes specified in the outgoing quality
standards to allow smaller peanut kernels of all varieties to be used
in edible markets; specifies in the text of the regulations that
financially interested persons may appeal quality inspection results
and that ``holders of the title'' to any lot of peanuts may appeal
aflatoxin test results; allows peanut lots which meet minimum damage
and minor defect standards prior to blanching, but fail for some other
reason, to be exempt from damage and minor defect standards upon re-
inspection after blanching; and increases to 10 percent the quantity of
sound whole kernels that may be contained in lots of splits for
specified peanut varieties. These changes are intended to maximize
handling efficiency and to provide the producers, handlers, and
importers with flexibility to meet current and new market demands,
while maintaining peanut quality and wholesomeness for consumers.

DATES: Effective August 8, 2003; comments received by September 8, 2003
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 to the Docket Clerk,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC
20250-0237; Fax: (202) 720-8938, or E-mail: moab.docketclerk@usda.gov.
All comments should reference the docket number and 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, or can be viewed at: http://www.ams.usda.gov/fv/moab.html
.

FOR FURTHER INFORMATION CONTACT: Jim Wendland or Kenneth G. Johnson, DC
Marketing Field Office, Marketing Order Administration Branch, Fruit
and Vegetable Programs, AMS, USDA, 4700 River Road, suite 2A04, Unit
155, Riverdale, Maryland 20737; telephone (301) 734-5243, Fax: (301)
734-5275 or George J. Kelhart, Technical Advisor, Marketing Order
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400
Independence Avenue SW., Stop 0237, Washington, DC 20250-0237;
telephone (202) 720-2491, Fax: (202) 720-8938; or E-mail:
james.wendland@usda.gov, kenneth.johnson@usda.gov or

george.kelhart@usda.gov. Small businesses may request information on complying with this
rule by contacting Jay Guerber, at the same address as above, or E-
mail: jay.guerber@usda.gov.
SUPPLEMENTARY INFORMATION: This rule is issued under section 1308 of
the Farm Security and Rural Investment Act of 2002 (Public Law 107-
171), 7 U.S.C. 7958, hereinafter referred to as the ``Act.''
The Department of Agriculture (USDA) is issuing this interim final
rule in conformance with Executive Order 12866 and has determined it to
be non-significant.
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.

Background

Section 1308 of the Act requires that USDA take several actions
with regard to peanuts marketed in the United States: ensure mandatory
inspection on all peanuts marketed in the United States; establish the
Board comprised of industry representatives to advise USDA; and develop
peanut quality and handling standards; and to modify those quality and
handling standards when needed. An interim final rule was published in
the Federal Register (67 FR 57129) on September 9, 2002, terminating
the previous peanut programs and establishing standards in Part 996 to
insure the continued inspection of 2002 crop year peanuts and
subsequent crop year peanuts, 2001 crop year peanuts not yet inspected,
and 2001 crop year failing peanuts that had not yet met disposition
standards. The initial Board was selected and announced on December 5,
2002. A final rule finalizing the interim final rule was published in
the Federal Register (68 FR 1145) on January 9, 2003, to continue
requiring all domestic and imported peanuts marketed in the United
States to be handled consistent with the handling standards and
officially inspected against the quality standards of the new program.
The provisions of this new program continue in force and effect until
modified, suspended, or terminated.
Pursuant to the Act, USDA has consulted with Board members in the
review of the handling and quality standards for the 2003 and
subsequent crop years. USDA conducted a meeting with Board members on
April 30, 2003. The changes were raised and supported by Board members.
In addition to the meeting, USDA received written comments from Board
members and others on recommended changes to the peanut handling and
quality standards.
This rulemaking action: (1) Changes screen sizes specified in the
outgoing

[[Page 46920]]

quality standards to allow smaller peanut kernels of all varieties to
enter edible channels; (2) specifies in the text of the regulations
that financially interested persons may appeal quality inspection and
that ``holders of the title'' to any lot of peanuts may appeal
aflatoxin test results; (3) allows peanut lots which meet minimum
damage and minor defect standards, but fail for other reasons, prior to
blanching, to be exempt from minimum damage and minor defect standards
upon re-inspection after blanching; and (4) increases to 10 percent the
quantity of sound whole kernels that may be contained in lots of splits
for specified peanut varieties. These changes are intended to maximize
handling efficiency and to provide the producers, handlers, and
importers with flexibility to meet current and new market demands,
while maintaining peanut quality and wholesomeness for consumers.
The quality and handling standards are intended to assure that
satisfactory quality and wholesome peanuts are used in domestic
markets. All peanuts intended for human consumption must be officially
inspected and graded by the Federal or Federal-State Inspection Service
and undergo chemical testing by a USDA laboratory or a private
laboratory approved by USDA. The maximum allowable presence of
aflatoxin is 15 parts per billion (ppb), the same standard as required
under the three previous peanut programs. This tolerance has been in
effect for more than 15 years and was in effect at the time the
previous peanut programs were terminated. Once certified as meeting
outgoing quality standards, peanuts may not be commingled with any
other peanuts that have failed outgoing quality standards or any
residual peanuts from reconditioning operations.

Small Kernel Usage

Prior to establishing the quality standards that were applied
during the 2002-03 crop year, a few peanut handler members of the Board
suggested changing the shape and size of the holes in screens used to
sort out small kernels. The changes discussed would have increased the
number of smaller kernels that rode the screens and that could have
entered edible channels.
The shape of the opening, slotted vs. round, is a significant
factor in the number of smaller kernels that fall through or ride the
screens. Slotted screens resemble the shape of peanuts and allow
kernels to fall through as they bounce down the screen during the
sorting process. Kernels fall through round openings only when striking
the opening on end or ``standing up'' as they bounce down the screen.
When more kernels ride the screen, more are available for edible
channels.
Proponents of smaller kernel use claimed that end-product
manufacturers now have markets for smaller, whole kernels. They also
claimed that modern, electronic color sorting technologies can sort out
smaller kernels that are moldy or defective. Opponents, including some
handlers and grower representatives, claimed that the benefits of
increased use of small kernels were not worth the increased risk of
aflatoxin contamination. Based on studies conducted by the Agricultural
Research Service (ARS) going back to at least 1979, the industry was
aware that there is a higher incidence of aflatoxin contamination in
smaller peanut kernels.
Most Board members agreed that new research was needed on small
kernel sizes and aflatoxin contamination before any change was made.
USDA decided not to change screen sizes for the 2002-03 crop year and
asked ARS to conduct another analysis of the incidence of aflatoxin in
small peanut kernels. ARS peanut size and aflatoxin studies using 2002
crop farmers stock runner type peanuts from the Southeast (the peanuts
and region most likely to have aflatoxin contamination) measured the
contamination of kernels that fell through a \16/64\ inch slotted
screen and those that rode a \17/64\ inch round screen. The completed
results, received by Fruit and Vegetable Programs on January 21, 2003,
indicated that there was a small, but not significant, increase of
aflatoxin associated with the smaller peanut kernel size.
Past research demonstrated that three farmers stock grade
components are associated with aflatoxin. These are damage, loose-
shelled kernels, and small and other kernels. Very little aflatoxin is
associated with high quality farmers stock peanuts associated with the
farmers stock grade referred to as sound mature kernels and sound
splits. Studies conducted by sampling 120 contaminated farmers stock
lots, published in 1998, showed that these three risk components
accounted for 93.1 percent of the total aflatoxin in a farmers stock
lot, but only 18.4 percent of the lot kernel mass. Aflatoxin in sound
mature kernels and sound splits, small and other kernels, loose shelled
kernels, and damaged kernels represented 6.9, 7.9, 33.3, and 51.9
percent of the total aflatoxin. The small kernels had the lowest risk
of the components. The findings of research performed in previous years
were similar.
ARS believes that the results of the past studies are consistent
with the current study presented to the Board in April 2003. The
peanuts that rode the \17/64\ inch round screen were a mix of sizes
from small to large (not only small kernels as in the past studies).
The mix of sizes was used to better duplicate sheller milling lines and
processing practices. The aflatoxin impact was minimal because small
and other kernels have the lowest aflatoxin risk of the three risk
components and the small kernels composed a small percentage of the
different sizes riding the \17/64\ inch round screen. The higher the
percentage of small kernels riding a \17/64\ inch round screen, the
greater the aflatoxin impact that small kernels will have on the lot in
question. The percentage of small kernels that fell through the \16/64\
inch slotted screen and rode the \17/64\ inch round screen varied
greatly from lot to lot in the study presented to the Board. They
averaged about 7 and 21 percent in the current study, respectively. In
the final analysis, the aflatoxin impact of the smaller kernels was not
significant according to ARS.
The Board discussed the peanut size and aflatoxin study at its
April 30, 2003, meeting, and recommended relaxation of quality
standards to allow smaller peanut kernels to be used for human
consumption because the increase in aflatoxin in small kernels was not
determined to be significant. All Board members agreed that quality and
wholesomeness are paramount for producers, handlers, and importers, but
the industry believes that it can continue to provide buyers with high
quality and wholesome peanuts with changed screen size.
Compliance officers report that out of 77 shellers, a total of 62
have electronic sorting technology to sort out defective small kernels
and further improve peanut quality and wholesomeness. The 15 shellers
without sorting technology in their plants only shell seed peanuts,
which are not shipped to the edible market.
Several industry representatives at last year's Board meeting also
cited the pungent taste of small kernels as a quality factor that
should weigh against the use of smaller peanut kernels. No such
concerns were mentioned or discussed at this year's Board meeting, or
in the comments received subsequent to the Board meeting.
The screen size changes are shown in the table in Sec. 996.31(a)
Minimum Quality Standards: Peanuts for Human Consumption--Whole Kernels
and Splits: Maximum Limitations, under the column for Sound Whole
Kernels. Under the ``Excluding lots of splits''

[[Page 46921]]

category, this action changes the screen size for Runner peanuts from a
\16/64\ inch x \3/4\ inch slotted opening to a \17/64\ inch round
opening. These were the screen sizes and peanut variety used in the
study.
Because the Virginia, Spanish, and Valencia varieties do not
routinely experience high aflatoxin content, smaller kernels of those
varieties also are not expected to have significantly increased
aflatoxin contamination. Therefore, corresponding changes in screen
sizes for these varieties are also made in this rule. For Virginia
variety peanuts, the screen size changes from a \15/64\ inch x 1 inch
slotted opening to a \17/64\ inch round opening. For Spanish and
Valencia varieties, the change is from a \15/64\ inch x \3/4\ inch
slotted opening to a \16/64\ inch round opening.
Corresponding changes are made under the ``Lots of splits''
category for ``Sound whole kernels.'' For Runner variety split lots,
the screen opening would change from a \14/64\ inch x \3/4\ inch
slotted opening to a \17/64\ inch round opening. For Virginia variety
split lots, the \14/16\ x 1 inch slotted opening would be changed to a
\17/64\ inch round opening. For Spanish and Valencia varieties, the
\13/64\ inch x \3/4\ inch slotted opening would be changed to a \16/64\
inch round opening.
Currently, the table includes three columns for fall through. One
column includes a maximum 3 percent tolerance for ``Sound Split and
Broken Kernels''. The second column includes a 3 percent tolerance for
``Sound Whole Kernels'', and the third column includes a total
tolerance of 4 percent for these categories of peanuts. A comment
received from a handler association subsequent to the Board meeting
suggested combining the three columns into one column and establishing
a total tolerance of 6 percent for sound split, broken, and small
kernels allowed in any lot. The association recommended this tolerance
change to bring the tolerances into conformity with the U.S. Grade
Standards for the various types of shelled peanuts grown and marketed
in the United States.
Thus, this rule implements a relaxation in the utilization of small
peanut kernels only by changing the screens from slotted to round holes
for sound whole kernels and splits as noted above. This change is
expected to increase market share for U.S. peanuts by enabling handlers
to sell smaller peanuts to buyers who purchase less expensive peanuts
from other origins for manufacturing into peanut butter and paste, or
similar products.
This change will be implemented at shelling facilities with minimal
or no additional cost to the shellers--either large or small. The
screens with smaller openings for this change are currently used for
split lots and no additional investment for screens will be necessary.
Any adjustments to the packing line as far as screens are concerned
should be easily implemented.
According to Federal-State Inspection Service (Inspection Service),
all plants in Georgia are currently using \17/64\ round screens on
Runners and \16/64\ screens on Spanish peanut varieties. The Inspection
Service has a supply of screens for smaller peanut kernels to cover
five new shelling plants scheduled to begin operation during the 2003
crop year. In addition, the Inspection Service will provide screens for
peanut shellers in other States. The cost per screen is $55.00 plus
shipping.

Appeal Procedures

The Board recommended adding an additional paragraph in the
handling standards specifying that the ``holder of the title'' to any
lot of peanuts may request an appeal inspection if it is believed that
the orginal aflatoxin analysis is in error. Appeals for aflatoxin are
currently handled following procedures specified in the Inspection
Service's Instructions for Milled Peanuts. The ``holder of the title''
to any lot of peanuts may request such an appeal. The aflatoxin sample
would be drawn by Federal or Federal-State Inspection inspectors and
the appeal analysis would be performed, and the aflatoxin certificate
issued, by USDA or USDA-approved laboratories.
This action also specifies that any financially interested person
may request an appeal inspection if it is believed that the original
quality inspection was in error. These appeals would continue to be
handled following procedures specified in the Inspection Service's
Instructions for Milled Peanuts. Federal or Federal-State Inspection
Service inspectors would sample and inspect the peanuts following
procedures in the milled peanut instructions.
All costs involved in conducting appeal inspections are for the
account of the ``holder of the title'' or the financially interested
person requesting the appeal. Under the appeal process, appeals may be
requested verbally. A written request is not necessary.

Re-inspection of Blanched Lots

Peanut lots which meet quality (grade) standards, including damage
and minor defects, but which fail on aflatoxin may be blanched to
remove the contaminated kernels. Under the current standards, blanched
lots must be re-inspected for damage and minor defects. In some cases,
a blanched lot will pass aflatoxin but fail damage and minor defect
tolerances because the removal of the skins in the blanching process
may expose additional instances of damage or minor defects.
Currently, Sec. 996.50(d) provides that lots failing quality
standards specified in the table in Sec. 996.31(a), which are
blanched, do not have to meet the ``fall through'' standards upon re-
inspection. The Board recommends that the same exception be applied to
the damage and minor defects standard in the second column of the table
in Sec. 996.31(a). The primary benefit of this change would be to
reduce handler-operating costs and avoid a possible loss of peanuts.

Allow Handlers To Purchase High Moisture Peanuts

Under Sec. 996.30(b) Moisture, farmers stock peanuts with more
than 10.49 percent moisture content must be dried by the producer at
the buying point or moved to another location and facility for drying.
Virginia type peanuts for seed may contain up to 11.49 percent
moisture. The drying is accomplished on individual wagons, prior to
incoming inspection. Not all buying points, in very rural locations,
have drying facilities.
The Board requested that the 10.49 percent moisture standard be
changed to allow handlers to acquire farmers stock peanuts with a
moisture content up to 25 percent. They also recommended the addition
of a provision that the handler would have to agree to such acquisition
and also to agree to dry the peanuts to meet the 10.49 percent standard
prior to storage or milling. The moisture requirements for Virginia
type peanuts for seed were not recommended for change. According to
Board members, such a change could make a significant difference in the
efficient acquisition and warehousing of farmers stock peanuts each
fall. The Board indicated that this change could speed up the drying,
grading, and movement of peanuts at harvest.
After considering this request and input from the Inspection
Service, USDA believes that the Board's recommendation needs further
review and analysis. The Inspection Service indicated that its current
shelling equipment cannot properly shell peanuts with a moisture
content higher than 16 to 18 percent, and that it would have difficulty
grading such peanuts. Under current inspection procedures, such peanuts
would be further dried by the producer.

[[Page 46922]]

USDA believes that the current standards and procedures should
continue during the 2003-04 crop year. This will allow the peanut
industry to study this issue further.

Increase Sound Whole Kernel Tolerance

The Minimum Quality Standards table in Sec. 996.31(a) provides
standards for split kernel lots. Historically, lots of split kernels
may contain a maximum percentage of sound whole kernels in the lot. For
Virginia variety peanuts, sound whole kernel content is limited to 10
percent of the lot by weight. For Runner, Spanish, and Valencia
varieties, the sound whole kernel content is limited to 4 percent. The
Board recommended that the sound whole tolerance for Runner, Spanish,
and Valencia peanuts be relaxed to 10 percent, to bring the tolerance
into conformity with the tolerance for Virginia variety peanuts. This
rule change is expected to result in fewer split lot rejections for
Runner, Spanish, and Valencia variety peanuts, which should reduce
handler-reconditioning costs. No adverse impact is expected from making
this standard uniform for all four varieties.

Effective Time

Section 996.75, Effective time, also is revised so that these
changes apply to 2003-04 and subsequent crop year peanuts, to 2002 and
2001 crop year peanuts not yet inspected, and to failing peanuts that
have not yet met disposition standards.

Initial Regulatory Flexibility Analysis

Pursuant to requirements set forth in the Regulatory Flexibility
Analysis Act (RFA) the Agricultural Marketing Service (AMS) has
considered the economic impact of this action on small entities.
Accordingly, AMS had prepared this initial regulatory flexibility
analysis.
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.
There are currently 77 peanut handlers (shellers) and 25 importers
subject to regulation under the peanut program. An estimated two-thirds
of the handlers and nearly all of the importers may be classified as
small entities, based on the documents and reports received by USDA.
Small agricultural service firms, which include handlers and importers,
are defined by the Small Business Administration (13 CFR 121.201), as
those having annual receipts of less than $5,000,000.
An approximation of the number of peanut farms that could be
considered small agricultural businesses under the SBA definition (less
than $750,000 in annual receipts from agricultural sales) can be
obtained from the 1997 Agricultural Census, which is the most recent
information on the number of farms categorized by size. There were
10,505 peanut farms with sales valued at less than $500,000 in 1997,
representing 86 percent of the total number of peanut farms in the U.S.
(12,221). Since the Agricultural Census does not use $750,000 in sales
as a category, $500,000 in sales is the closest approximation. Assuming
that most of the sales from those farms are attributable to peanuts,
the percentage of small peanut farms in 1997 (less than $750,000 in
sales) was likely a few percentage points higher than 86 percent, and
may have shifted a few percentage points since then. Thus, the
proportion of small peanut farms is likely to be between 80 and 90
percent.
The two-year average peanut production for the 2001 and 2002 crop
years was 3.799 billion pounds, harvested from 1.354 million acres,
yielding 2,806 pounds per acre. The average value of production for the
two-year period was $797.469 million, as reported on the National
Agricultural Statistics Service (NASS) Web site as of February 2003
(http://www.nass.usda.gov:81/idepd/report.htm). The average grower
price over the two-year period was $0.21 per pound, and the average
value per harvested acre was $611. Dividing the two-year average value
of production ($797.5 million) by the estimated 12,221 farms yields an
estimated revenue per farm of approximately $65,254.
The Agricultural Census presents farm sizes in ranges of acres, and
median farm size in 1997 was between 50 and 99 acres. The median is the
midpoint ranging from the largest to the smallest. Median farm size in
terms of annual sales revenue was between $100,000 and $250,000.
Several producers may own a single farm jointly, or, conversely, a
producer may own several farms. In the peanut industry, there is, on
average, more than one producer per farm. Dividing the two-year average
value of production of $948.8 million by an estimated 23,000 commercial
producers (2002 Agricultural Statistics, USDA, Table 11-10) results in
an estimate of average revenue per producer of approximately $41,250.
The current 14 custom blanchers, 8 custom remillers, 4 oilmill
operators, 4 USDA and 15 USDA-approved private chemical (aflatoxin)
testing laboratories are subject to the peanut standards to the extent
that they must comply with reconditioning provisions under Sec. 996.50
and reporting and recordkeeping requirements under Sec. 996.71. These
requirements are applied uniformly to these entities, whether large or
small. In addition, there are currently 10 State inspection programs
(Inspection Service) that will perform inspection under this peanut
program.
Importers of peanuts cover a broad range of business entities,
including fresh and processed food handlers and commodity brokers who
buy agricultural products on behalf of others. Under the 2003 import
quotas, approximately 25 business entities have only imported
approximately 40 percent of the 126 million pounds of low duty quota
peanuts (sometimes called duty free quota peanuts) compared with 37
entities which had imported 100 percent of the quotas by April 5, 2002.
The current import quota period began January 2, 2003, for Mexico, and
April 1, 2003, for Argentina, and ``other countries.'' Some large,
corporate handlers are also importers of peanuts. AMS is not aware of
any peanut producers who imported peanuts during any of the recent
quota years. The majority of peanut importers have annual receipts
under $5,000,000. Some importers use customs brokers' import services
and brokers are regulated under this rule to the extent that they must
comply with entry requirements under Sec. 996.60 and reporting and
recordkeeping requirements under Sec. 996.71. These requirements are
not applied disproportionately to small customs brokers.
In view of the foregoing, it can be concluded that the majority of
peanut producers, handlers, importers, and above-mentioned entities may
be classified as small businesses. Also, financially interested persons
who may appeal quality inspection results, and ``holders of the title''
to any lot of peanuts who may appeal aflatoxin test results may include
small entities.
This rulemaking action: (1) Changes screen sizes specified in the
outgoing quality standards to allow smaller peanut kernels of all
varieties to be used for edible purposes; (2) specifies in the text of
the regulations that financially interested persons may appeal quality
inspection results and ``holders of the title'' may appeal aflatoxin
test results; (3) allows peanut lots which meet minimum damage and
minor defect standards, but fail for other reasons, prior to blanching,
to be exempt from the damage and minor defect standards upon re-
inspection after blanching; and

[[Page 46923]]

(4) increases to 10 percent, the quantity of sound whole kernels that
may be contained in lots of splits for specified peanut varieties.
These changes are intended to maximize handling efficiency and to
provide peanut producers, handlers, and importers with flexibility to
meet new market demands, while maintaining peanut quality and
wholesomeness for consumers.

Smaller Kernel Sizes

Changing screen sizes used in handling peanuts will allow smaller
kernels of all varieties to be used for edible purposes. Proponents of
smaller kernel use claim that manufacturers of peanut products now have
markets for smaller whole kernels, and that this rule change will
enable them to take advantage of this recent shift in the marketplace.
Market share for U.S. peanuts is expected to rise because the rule
enables handlers to sell smaller peanuts to buyers who would otherwise
purchase less expensive peanuts from other origins for manufacturing
into peanut butter and paste, and other similar products.
This rule implements a relaxation in the utilization of small
peanut kernels by changing the screens used for sorting sound whole
kernels and kernels with splits from a slotted screen to one with round
holes. The equipment for this change (smaller screen sizes) is
currently in use for split lots in most shelling facilities. This
change should therefore require little or no additional investment for
most shellers, large or small.
The Inspection Service has a supply of screens for smaller peanut
kernels to cover five new shelling plants scheduled to begin operation
for the 2003 crop year. In addition, the Inspection Service will
provide screens for peanut shellers that need them at a cost per screen
of $55.00 plus shipping.
Although the chances of aflatoxin contamination in small kernels is
not significant, proponents of the rule change claim that modern
electronic color sorting technologies can sort out the moldy or
defective kernels, thus ensuring that the new screens will not have a
negative impact on the quality and wholesomeness of peanuts entering
edible food channels.
Shellers that have already have this technology will have little or
no additional cost. Compliance officers report that out of 77 shellers
only 15 do not have electronic sorting technology in their shelling
plants. These firms only shell seed peanuts, which are not shipped to
the edible market.

Re-inspection of Blanched Lots

This rule change allows shelled lots that are being reconditioned
to be excluded from re-inspection for damage or minor defects if the
lot originally passed based on those standards. Peanut lots which meet
quality (grade) standards, including damage and minor defects, but
which fail on aflatoxin, may be blanched to remove the aflatoxin-
contaminated kernels.
Under the current standards, the lot must be re-inspected for
damage and minor defects after blanching. In some cases, the result of
the re-inspection is that the blanched lot exceeds tolerances for
damage and minor defects, even though the original lot did not fail to
meet the standard. This result can occur because the removal of the
skins in the blanching process may expose instances of damage or minor
defects not previously detected.
The primary benefit of this rule change would be to reduce handler
operating costs and avoid an additional loss of peanuts. The impact of
this change is not expected to be different between large and small
entities.

Increased Sound Whole Kernel Tolerance

The Minimum Quality Standards table in 996.31(a) provides standards
for split kernel lots by specifying the maximum percentage of sound
whole kernels permitted in a lot. For Virginia variety peanuts, sound
whole kernel content is currently limited to 10 percent of the lot by
weight. For Runner, Spanish, and Valencia varieties, the sound whole
kernel content is currently limited to 4 percent. This rule change
accepts the Board recommendation that the Sound Whole Kernel tolerance
for Runner, Spanish and Valencia be relaxed to 10 percent, the same
tolerance that applies to Virginia variety peanuts. The primary benefit
of this rule change would be to lower costs and increase sales revenue
by rejecting fewer lots of the Runner, Spanish, and Valencia varieties
for splits. No adverse financial impact is expected from making this
standard uniform for all four varieties. The impact of this change is
not expected to be different between large and small entities.

Appeal Procedures

The addition of provisions specifying that financially interested
persons may appeal quality inspection results and ``holders of the
title'' to any lot of peanuts may request appeals of aflatoxin test
results will benefit all persons involved.
USDA has considered alternatives to the suggested changes to the
quality and handling standards. The Act requires USDA to consult with
the Board on these standards. An alternative would be to continue the
2002-03 crop year standards for the 2003-04 crop year without
implementing the recommended relaxations made by the Board at its April
30, 2003, meeting. Because of the anticipated benefits of the
recommended changes, USDA believes that implementation of the Board's
suggested changes is preferable to continuing without change. The
Board's meeting was a public meeting and all interested persons were
able to attend and provide input.
USDA has not identified any relevant Federal rules that duplicate,
overlap, or conflict with this rule. A small business guide on
complying with AMS' fresh fruit, vegetable, and specialty crop programs
similar to this peanut program may be viewed at the following Web site:
http://www.ams.usda.gov/fv/moab.html. Any questions about the
compliance guide or compliance with this program should be sent to Jay
Guerber at the previously mentioned address in the FOR FURTHER
INFORMATION CONTACT section.
This rule invites comments on the Board's recommendations to change
the quality and handling standards. Any comments received will be
considered prior to finalization. Interested persons also are invited
to submit information on the regulatory and economic impact of this
action on small businesses.

Information Collection

The Act specifies in section 1601(c)(2)(A) that the standards
established pursuant to the Act, may be implemented without regard to
the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).
Furthermore, this rule does not change the existing information
collection burden.
Section 1601 also specifies that promulgation of the standards and
administration of the program shall be made without regard to the
statement of policy of the Secretary of Agriculture effective July 24,
1971 (36 FR 13804) relating to notice of proposed rulemaking and public
participation in rulemaking and the notice and comment provisions of
section 553 of title 5, United States Code.
Nonetheless, USDA may find, upon good cause, that it would be
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 quality and

[[Page 46924]]

handling standards under the program; (2) the 2003 peanut harvest is
expected to begin around August 15 and these relaxations should be in
place as soon as possible; (3) the Board supported the changes; and (4)
this rule provides a 30-day comment period and any comments will be
considered prior to finalization of this rule. A 30-day comment period
is appropriate for these reasons.

List of Subjects in 7 CFR Part 996

Food grades and standards, Imports, Peanuts, Reporting and
recordkeeping requirements.

0
For the reasons set forth in the preamble, 7 CFR Part 996 is amended as
follows:

PART 996--MINIMUM QUALITY AND HANDLING STANDARDS FOR DOMESTIC AND
IMPORTED PEANUTS MARKETED IN THE UNITED STATES

0
1. The authority citation for 7 CFR part 996 is revised to read as
follows:

Authority: 7 U.S.C. 7958.

0
2. In Sec. 996.31, the table in paragraph (a) is revised to read as
follows:

Sec. 996.31 Outgoing quality requirements.

(a) * * *

Minimum Quality Standards--Peanuts for Human Consumption
[Whole kernels and splits: Maximum limitations]
----------------------------------------------------------------------------------------------------------------
Unshelled
Unshelled peanuts and Total fall through Sound
peanuts and damaged whole kernels and/or Foreign Moisture
Type and grade category damaged kernels and sound split and broken materials (percent)
kernels defects kernels (percent)
(percent) (percent)
----------------------------------------------------------------------------------------------------------------
Excluding Lots of ``Splits''
----------------------------------------------------------------------------------------------------------------
Runner........................... 1.50 2.50 6.00%; \17/64\ inch round .20 9.00
screen.
Virginia (except No. 2).......... 1.50 2.50 6.00%; \17/64\ inch round .20 9.00
screen.
Spanish and Valencia............. 1.50 2.50 6.00%; \16/64\ inch round .20 9.00
screen.
No. 2 Virginia................... 1.50 2.50 6.00%; \17/64\ inch round .20 9.00
screen.
Runner with splits (not more than 1.50 2.50 6.00%; \17/64\ inch round .20 9.00
15% sound splits). screen.
Virginia with splits (not more 1.50 2.50 6.00%; \17/64\ inch round .20 9.00
than 15% sound splits). screen.
Spanish and Valencia with splits 1.50 2.50 6.00%; \16/64\ inch round .20 9.00
(not more than 15% sound splits). screen.
----------------------------------
Lots of ``splits''
----------------------------------------------------------------------------------------------------------------
Runner (not less than 90% splits) 2.00 2.50 6.00%; \17/64\ inch round .20 9.00
screen.
Virginia (not less than 90% 2.00 2.50 6.00%; \17/64\ inch round .20 9.00
Splits). screen.
Spanish and Valencia............. 2.00 2.50 6.00%; \16/64\ inch round .20 9.00
screen.
----------------------------------------------------------------------------------------------------------------

* * * * *

0
3. In Sec. 996.40, a new paragraph (c) is added to read as follows:

Sec. 996.40 Handling standards.

* * * * *
(c) Appeal inspections. Any ``holder of the title'' to any lot of
peanuts may request an appeal inspection if it is believed that the
original aflatoxin test results were in error. Appeal inspections would
be conducted in accordance with Federal or Federal-State inspection
procedures for milled peanuts. The aflatoxin appeal sample would be
drawn by Federal or Federal-State Inspection Service officials and the
appeal analysis would be conducted by USDA or USDA-approved
laboratories. Any financially interested person may request an appeal
inspection if it is believed that the original quality inspection is in
error. Quality appeals would be conducted by Federal or Federal-State
Inspection Service inspectors in accordance with the Federal or
Federal-State inspection procedures for milled peanuts. The person
requesting the appeal inspection would pay the cost of such appeals.
The appeal inspection results shall be issued to the person requesting
the appeal inspection and a copy shall be mailed to USDA or its agent.

0
4. In Sec. 996.50, paragraph (d) is revised to read as follows:

Sec. 996.50 Reconditioning failing quality peanuts.

* * * * *
(d) Blanching. Handlers and importers may blanch, or cause to have
blanched, shelled peanuts failing to meet the outgoing quality
standards specified in the table in Sec. 996.31(a). If after
blanching, such peanut lot meets the quality standards in Sec.
996.31(a), the lot may be moved for human consumption under positive
lot identification procedures and accompanied by applicable grade and
aflatoxin certificates. Peanut lots certified as meeting the fall
through standard or the damaged kernels and minor defects standard as
specified in Sec. 996.31(a), prior to blanching shall be exempt from
fall through, damaged kernels and minor defects standards after
blanching.
* * * * *

0
5. Section 996.75 is revised to read as follows:

Sec. 996.75 Effective time.

The provisions of this part, as well as any amendments, shall apply
to 2003-04 and subsequent crop year peanuts, to 2002-03 and 2001-02
crop year peanuts not yet inspected, or failing peanuts that have not
met disposition standards, and shall continue in force and effect until
modified, suspended, or terminated.

Dated: August 4, 2003.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 03-20158 Filed 8-4-03; 3:11 pm]

BILLING CODE 3410-02-P