[Federal Register: January 9, 2003 (Volume 68, Number 6)]
[Rules and Regulations]
[Page 1145-1158]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09ja03-2]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 996, 997, 998, and 999
[Docket No. FV02-996-1 FIR]
Establishment of Minimum Quality and Handling Standards for
Domestic and Imported Peanuts Marketed in the United States and
Termination of the Peanut Marketing Agreement and Associated Rules and
Regulations
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Department of Agriculture (USDA) is adopting, as a final
rule, with changes, an interim final rule establishing a new part 996
which requires all domestic and imported peanuts marketed in the United
States to be officially inspected. This action is mandated by the Farm
Security and Rural Investment Act of 2002, enacted May 13, 2002. This
rule continues handling standards that handlers and importers must
follow and edible quality standards that all such peanuts intended for
edible use must meet prior to entering human consumption channels.
Safeguards to protect against peanut quality concerns are also
specified. This rule also finalizes the termination of the Peanut
Marketing Agreement No. 146 (Agreement) and the rules and regulations
issued under the Agreement, and the termination of companion
regulations that applied to imported peanuts and peanuts handled by
persons not subject to the Agreement.
DATES: The changes to the interim rule of September 9, 2002 (67 FR
57129), are effective January 10, 2003.
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 2A38, Unit
155, Riverdale, Maryland 20737; telephone (301) 734-5243, Fax: (301)
734-5275 or Ronald L. Cioffi, 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 ronald.cioffi@usda.gov.
Small businesses may request information on complying with this
rule by contacting Jay Guerber, at the same DC 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 (Pub. L. 107-171), 7
U.S.C. 7958, hereinafter referred to as the ``Act.''
This final rule has been determined to be non-significant for the
purposes of Executive Order 12866 by the Office of Management and
Budget (OMB) and therefore has not been reviewed by OMB.
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.
Prior documents in this proceeding are: an interim final rule
published in the Federal Register, (67 FR 57129, September 9, 2002) and
a correction (67 FR 63503, October 11, 2002).
Termination of the Peanut Marketing Agreement and the Peanut Non-signer
and Import Regulations
This rule finalizes termination of Peanut Marketing Agreement No.
146 (7
[[Page 1146]]
CFR part 998.1-998.61) and the rules and regulations (7 CFR part
998.100-998.409) in effect under the Agreement on December 31, 2002, so
that indemnification payments can be made on 2001 crop peanuts. This
rule also finalizes termination of the companion regulations that apply
to peanuts handled by persons not subject to the Agreement (7 CFR part
997) and to imported peanuts (7 CFR part 999.600) effective January 13,
2003.
The Peanut Marketing Agreement No. 146 (7 CFR part 998) has been in
effect since 1965 under the authority of the Agricultural Marketing
Agreement Act of 1937, as amended (7 U.S.C. 601-674) (AMAA). The
Agreement was administered by the Peanut Administrative Committee
(PAC), which was comprised of peanut handlers and producers appointed
by USDA. Minimum quality regulations were applied to handlers who
signed the Agreement. The Agreement covered peanuts produced in the
three regional production areas in the United States. The Agreement
also included authority for indemnification payments to signatory
handlers on peanuts involved in product and appeals claims due to
aflatoxin content. Reporting and recordkeeping requirements also were
prescribed. Handlers paid assessments to the PAC to cover program
administrative and indemnification costs.
Consistent with the requirements of the AMAA, comparable quality
requirements had been in effect for peanuts handled by persons not
signatory to the Agreement (``non-signers''). The non-signer program (7
CFR part 997) was mandated in 1989 by Pub. L. 101-220, which amended
the AMAA. The peanut import regulation had been authorized by section
108B(f)(2) of the Agricultural Act of 1949 (7 U.S.C. 1445c3), as
amended in 1990 and 1993.
The non-signer regulations covered peanuts handled by persons not
subject to the Agreement. The inspection and quality requirements were
the same as those under the Agreement. Non-signer handlers had to pay
the same administrative assessment rate as applied to signatory
handlers under the Agreement.
The peanut import regulation required imported peanuts to meet the
same quality and handling requirements as required under the Agreement.
Imported peanuts were maintained under lot identification procedures
and kept separate and apart from domestic peanuts until certified for
human consumption use.
Under all three programs, failing peanuts could be reconditioned to
meet edible requirements or disposed of in non-edible outlets.
Safeguard provisions were included in the three programs to ensure that
the Federal or Federal-State Inspection Service (Inspection Service)
sampled, inspected, and certified the quality of all peanut lots
intended for edible consumption, and that chemical analyses were
performed by USDA laboratories or laboratories approved by USDA.
The Farm Security and Rural Investment Act of 2002 terminated the
PAC effective July 1, 2002. That action, in turn, required termination
of the Agreement and its implementing regulations. The Agreement and
its implementing regulations are terminated effective January 1, 2003,
by the interim final rule and indemnification payments for 2001 peanuts
can be made through December 31, 2002. The companion regulations
covering peanuts handled by persons not signatory to the Agreement and
imported peanuts were terminated effective September 10, 2002.
Assessments collected by the PAC under the Agreement and by USDA under
the non-signer regulations ceased with 2001 crop peanuts.
New Peanut Program Authority
Section 1308 of the Act requires that USDA take several actions
with regard to peanuts marketed in the United States, effective with
2002 crop peanuts.
Mandatory Inspection: Paragraph (a) requires that all peanuts
marketed in the United States (including imported peanuts) be
officially inspected and graded by Federal or Federal-State inspectors.
Termination of the Peanut Administrative Committee: Paragraph (b)
terminated the PAC effective July 1, 2002. As noted above, because the
PAC was charged with daily oversight of the Agreement's regulatory
program, termination of the PAC necessitated termination of the
Agreement and its implementing regulations. That termination is
effective January 1, 2003, and indemnification payments on 2001 crop
peanuts can be made through December 31, 2002. The companion non-signer
and peanut import regulations were based on regulations under the
Agreement. Those regulations were terminated effective September 10,
2002.
Establishment of a Peanut Standards Board: Paragraph (c) provides
for the establishment of a Peanut Standards Board (Board), and requires
USDA to consult with the Board prior to establishing or changing
quality and handling standards for domestically produced and imported
peanuts. The Board is not subject to the Federal Advisory Committee
Act. A transition period is designated to allow time for USDA to
implement nomination procedures and select a Board, as prescribed under
the Act.
USDA received nominations and applications from interested persons
to serve on the Board. A notice was published in the Federal Register
on August 2, 2002 (67 FR 50409), and an application form was posted on
the AMS website at: http://www.ams.usda.gov/fv/peanut-farmbill.htlm.
Written nominations were received through September 3, 2002.
The Act also provides, in paragraph (g)(1) of section 1308, that
during the transition period from the Agreement to the new program,
USDA may designate persons serving as members of the PAC to serve as
members of the Board, on an interim basis, for the purpose of carrying
out the duties of the Board. USDA established the interim Board and
consulted with it on three occasions to establish the quality and
handling standards specified in this program.
Maintaining wholesome quality peanuts: Paragraph (d) directs USDA
to make identifying and combating the presence of all quality concerns
related to peanuts a priority in the development of quality and
handling standards for peanuts and in the inspection of domestically
produced and imported peanuts. The Act directs USDA to consult with
appropriate Federal and State agencies to provide adequate safeguards
against all quality concerns related to peanuts. USDA notified State
government Inspection Service supervisors of the proposed text on the
internet and met with supervisors on July 29 and August 15, 2002. USDA
also has contacted officials in the United States Customs Service
(Customs Service) and the Food and Drug Administration (FDA) with
regard to this new program.
Imported peanuts: Paragraph (e) provides that imported peanuts
shall be subject to the same quality and handling standards as apply to
domestically produced peanuts.
Program Continuity
To maintain program continuity until the new peanut program could
take effect, USDA continued the implementing regulations of the
Agreement and the non-signer and import regulations as provided above.
Assessments are not being collected and indemnification payments are
not being made on 2002 crop peanuts.
[[Page 1147]]
The provisions of the new program apply to 2002 and subsequent crop
year peanuts, to 2001 crop year peanuts not yet inspected, and to 2001
crop year failing peanuts that have not met disposition standards. This
program continues in force and effect until modified, suspended, or
terminated.
Pursuant to the Act, USDA consulted with interim Board members in
the development of the quality and handling standards established in
this rulemaking. USDA coordinated a conference call with interim Board
members on July 2, 2002. An initial draft text with reduced USDA
oversight was prepared by USDA and distributed to the interim Board
members prior to the conference call. The draft was reviewed and
initial changes and comments were proposed. At the interim Board's
direction, four interim Board officers met with USDA on July 17, 2002.
Three of the four officers proposed several additional changes,
including a proposal to change the minimum kernel size that could be
used in human consumption outlets. A second draft text was prepared
reflecting those proposed changes. That draft was again distributed to
interim Board members and State supervisors of the Inspection Service
and was discussed at a meeting in Atlanta, Georgia, on July 30, 2002.
In addition to the 18-member interim Board, approximately 50 industry
members and Inspection Service State supervisors attended the meeting.
The revised draft text was thoroughly reviewed and several
modifications were recommended. Quality standards which would allow
purchase of Segregation 2 and 3 quality peanuts for processing for
human consumption use and the proposed change in the minimum kernel
size were discussed by the interim Board. An implementation schedule
also was discussed.
USDA revised the draft text after the Atlanta meeting and posted it
on the AMS website. Written comments were received from interim Board
members after the meeting and a few comments were received in response
to the posting of the draft standards text on the internet. Comments to
the draft were accepted through August 12, 2002.
Comments From Interim Board Members and Others to the Draft Rule
Most interim Board members indicated that they did not seek radical
or wholesale changes to the Agreement regulations. This was apparent
from comments offered during the initial conference call and at the
July 30, 2002, interim Board meeting.
Grower member representatives raised three general objections to
establishment of new standards for the 2002 peanut crop. They believed
that the new program should not have been implemented if the 2002 crop
harvest had begun. Because of geographical location, peanuts in south
Texas and north Florida, representing a small portion of the total
crop, were harvested before USDA could complete this rulemaking
process. Because the new quality standards offer potential benefits to
growers and handlers, some grower members contended that implementation
after the 2002 crop harvest had begun would be unfair to producers and
handlers in those early-harvest areas.
Some interim Board members suggested that the greatest benefit from
the program--purchase of Segregation 2 and 3 peanuts for possible
edible use--would affect only a very small percentage of the early
harvest peanuts, and that it may be possible to warehouse some of the
early season farmers stock peanuts until the new standards become
effective. Other interim Board members did not contest this assessment.
Section 1308 of the Act provides that its provisions take effect
with the 2002 peanut crop. An alternative considered was to continue
the more restrictive 2001 regulations for the entire 2002 crop and
implement the new program for the 2003 crop. However, USDA believed
that implementation of the program as soon as possible after harvest
begins was better than that alternative. The benefits of the new
program to the entire industry are compelling. Most interim Board
members believe that there should not be further delay in implementing
this action. Only a small number of early harvest producers were
affected by the implementation date of this action. Further, storage
accommodations can help alleviate any timing concerns. Finally, the Act
mandates that the new program be in effect for 2002 crop peanuts.
The same interim Board members concerned about producer fairness
also cautioned about making significant changes to incoming quality
provisions without knowledge of changes being considered to the
Marketing Assistance Program by USDA's Farm Service Agency. Pursuant to
the Act, the FSA loan program also was being restructured, and the
extent and nature of the loan provisions were not known until after the
quality and handling standards in this program became effective.
These members stated that the provision to allow purchase of
Segregation 2 and 3 quality peanuts for edible consumption could affect
the FSA loan program. They questioned details relating to the loan
payments, inspection costs and storage of farmers stock peanuts placed
under FSA's loan program.
None of the definitions and other provisions addressed in the
interim final rule are applicable to other peanut programs operated by
USDA, such as the loan and direct payment, counter-cyclical payments,
and quota buyout payment programs provided for in the 2002 Act. Thus,
for example, the definitions of ``handle'' and ``handler'' set out in
the interim final rule have no application to those other programs and
do not govern eligibility for payments, or the kinds of payments that
can be made, under those other programs. Rather, the definitions and
other provisions implemented in the interim final rule were strictly
developed for the limited purposes reflected in the rule and no other.
The policy choices and any statutory interpretations involved reflect
that limited purpose. FSA was consulted in that respect and assured
that the understanding and intent was clearly that these rules would
not in any way restrict policy determination made with respect to other
programs. Rules for other peanut programs will be issued in due course.
Further, references in this preamble to previous peanut programs is
meant to refer to those peanut operations which were under the control
of the Agricultural Marketing Service (AMS) and not those under the
control of FSA or FSA's predecessor agency.
Written comments concerning provisions of the draft rule were
received from a few independent handlers stating that not all handlers
are able to remove all defective kernels, particularly in lots with
concealed freeze damage or kernels with yellow pitting. Also, some
alleged that not all peanut shelling operations have the latest
technologies or their own dedicated blanching facilities to remove all
kernels which contain aflatoxin.
Handlers must make decisions regarding the reconditioning of each
failing lot. Those decisions are made on a lot-by-lot basis, based upon
the grade factors identified in the lot's latest grade inspection or
aflatoxin certificate. Handlers with the latest milling technologies or
their own blanching operations may be better able to recondition
failing lots than handlers without such equipment. Handlers are not
prevented from remilling lots more than one time to remove defective or
contaminated kernels. Custom blanching operations with current
[[Page 1148]]
technologies are available to all handlers. If reconditioning
operations are not successful, other handlers with such equipment could
acquire the failing lots or recondition them on a contract basis.
Because handlers are not prevented from reconditioning other handlers'
failing lots, high quality standards can be established and maintained.
In the 1980's, Agreement regulations prohibited small kernels from
use in edible consumption lots because research showed a higher
incidence of aflatoxin in small peanuts. Research conducted at that
time indicated that aflatoxin occurs more frequently in peanuts which
are under stress during the growing season and that many peanut kernels
are small because the plants were under such stress.
Some large handlers contended in the interim Board meeting that
modern sorting technologies are able to remove the smaller,
contaminated kernels and that end-product manufacturers now have
markets for smaller whole kernels in snack foods and other edible
products. The handlers recommended that the change would allow more
domestically produced peanuts to be used in human consumption outlets
and, thus, result in a more efficient use of total domestic peanut
production. They also claimed that foreign manufacturers of peanut
products, such as peanut paste and peanut butter, are not under such
minimum size restrictions for the manufactured product they export to
the United States. The handlers contended that relaxation in the size
and shape of the holes in the screens used to sort out small kernels
would allow domestic handlers and manufacturers to better compete with
foreign product.
However, interim Board members representing regional grower
associations opposed smaller kernel sizes for food quality and
wholesomeness reasons. They contended that the risk of increased
aflatoxin contamination in the smaller kernels outweighs the benefit of
any incremental increase in the use of small peanut kernels, or cost
savings accrued. Those opposed to the use of small kernels contended
that, in addition to having a higher incidence of aflatoxin, smaller
kernels also have a bitter taste.
At the interim Board meeting, a representative from a peanut
manufacturers' association said that manufacturers oppose use of
smaller size kernels.
The draft text which USDA posted on the internet included a table
displaying amended screen sizes that would allow smaller kernels in
edible lots. Written comments were received, most from interim Board
members, opposing the use of round hole screens and the smaller kernel
size. Those comments cited concerns for wholesomeness and a loss of
quality if smaller kernels were allowed in edible lots. Some suggested
that the screen sizes should not be changed without further research on
the increased risk of aflatoxin in small peanut kernels.
After review of the positions presented at the interim Board
meeting and the written comments received, USDA determined that the
kernel sizes specified under the previous peanut programs should be
established in the interim final rule and continue in effect for the
2002 crop year. Therefore, the recommendation to change the minimum
size standard was not accepted for 2002 crop peanuts.
An oilmill operator (crusher) commenting on the draft text stated
that the mission of the new standards should be to ensure food safety
and not to establish restrictions that increase costs and hinder trade
between willing sellers and buyers. Therefore, it was the commenter's
view that peanuts to be used for non-edible purposes such as crushing
should not be subject to the same incoming identification and
inspection requirements as edible peanuts. USDA discussed and explained
in the Interim Final Rule why incoming inspection is necessary.
Several additional minor changes were made to the draft text,
reviewed by the interim Board, and posted on the internet. Those
changes were based on further USDA review of the draft text and
discussions with Inspection Service supervisors. The changes included
re-instituting Agreement requirements in the new program that help USDA
monitor the disposition of sheller oilstock residuals, the movement of
failing lots through the reconditioning processes, adjustments to
positive lot identification procedures, and compliance oversight. A
more thorough recordkeeping paragraph also was added to reflect current
industry practice and the requirements of this program.
USDA published the interim final rule (67 FR 57129) establishing
the new peanut minimum quality and handling standards on September 9,
2002. The rule became effective September 10, 2002. Comments were
accepted through October 9, 2002. Twenty five comments were received
and are addressed below.
Comments Concerning the Interim Final Rule
The major issue discussed in the comments was the large handlers'
recommendation to change screen sizes to reduce the minimum kernel size
for peanuts intended for human consumption. Twenty one comments were
received on that topic. Five handlers, 10 growers, and 2 other persons
supported the recommendation to change the minimum kernel size. Their
position was not changed from that outlined in the interim final rule
discussion: (1) Domestic and international markets exist for small
peanut kernels; (2) allowing the use of smaller kernels in edible lots
will enable domestic handlers to compete with foreign peanut butter
produced without regard to kernel size; and (3) wholesomeness is
ensured because the outgoing standards are not changed in the new
Peanut Standards rule.
Two growers and two handlers commented that the screens should not
be changed. They claimed that an Agricultural Research Service (ARS)
study conducted in the late 1980s shows a higher incidence of aflatoxin
contamination in small peanut kernels. They commented that allowing the
use of smaller kernels is not worth the increased risk of aflatoxin
contamination in those small kernels. They also cited the pungent taste
of small kernels as a quality factor which should weigh against use of
smaller peanut kernels.
Proponents of smaller kernel use also contend that wholesomeness is
not a concern because the electronic sorting equipment identifies and
removes all damaged and contaminated kernels, even small, contaminated
kernels. Based upon compliance staff information, approximately 31 of
71 handlers have electronic equipment capable of efficiently sorting
out contaminated small kernels. One commenter pointed out that a
reduction in kernel size for domestic peanuts would be applied to
imported peanuts, but that it is not known how many foreign peanut
shelling operations utilize electronic equipment.
Manufacturer associations opposed changing screen sizes when the
interim final rule was being prepared. A handler commented that brand-
name manufacturers are the ones best prepared, but least likely (due to
quality concerns) to use the small kernels, while smaller, low-end
buyers are most likely to buy the low-priced small kernels but are
least likely to have the equipment or expend extra funds for testing to
assure the small kernels are free of aflatoxin contamination.
After consideration of comments received on minimum kernel size,
USDA has determined the regulations should continue, for the 2002
peanut
[[Page 1149]]
crop, the same screen sizes established in the interim rule and used
since the late 1980s. This decision is based on USDA's determination
that further research on aflatoxin contamination in small kernels
should be conducted. Such research has been started by ARS with the
cooperation of the Federal-State Inspection Service and Agricultural
Marketing Service aflatoxin laboratories in Georgia. Furthermore, this
year's marketing season, using the present screen sizes, is well under
way and any change in screen sizes at this stage would not cover the
majority of the 2002 crop. If, based on USDA's research and studies, it
is determined that a change in screen size is warranted, such change
will be considered and discussed with the Board.
Four other issues were covered in comments on the interim final
rule. A few handlers requested that a sampling and inspection fee of
$.0027 per pound, formerly charged to buyers under the Peanut Marketing
Agreement, be retained in the new peanut standard program. The interim
final rule terminated the Agreement. As discussed in the interim final
rule, USDA did not include the fee in that rule because the fee is
considered a contractual matter between sellers and buyers. This rule
does not reinstate such fee.
Several handlers pointed out that a separate moisture content
requirement for Virginia-type seed peanuts was omitted in the interim
final rule. This was corrected by memorandum from USDA to the
Inspection Service dated October 4, 2002. The separate moisture
requirement for Virginia-type seed peanuts is added to the final rule
as a proviso to the incoming quality standards in paragraph (b) of
Sec. 996.30.
Three commenters in Oklahoma requested an increase in the incoming
grade tolerance for foreign material content because their buying point
does not have facilities to clean freshly pulled farmers stock peanuts
to meet the required foreign material content tolerance. However, the
tolerance is the same as required under USDA's previous peanut programs
for many years. Moreover, alternative courses of action provided under
the previous programs are continued in this program to help growers and
buying point operators to meet the foreign material content tolerance.
Paragraph (c) of Sec. 996.30 provides that farmers stock peanuts with
a foreign material content exceeding 10.49 percent may held separately
until milled, moved over a sand-screen before storage, or shipped
directly to a handler for prompt shelling.
Finally, one interim Board grower member opposed the relaxation to
allow purchase of Segregation 3 peanuts for processing into edible
peanuts. The commenter stated that this would increase the chances of
kernels with aflatoxin ending up in edible peanut lots. The majority of
other commenters supported the relaxation in comments to the draft
provisions and interim final rule on the premise that contaminated
kernels would be sorted out in the handling process. USDA will continue
to allow the purchase of Segregation 3 peanuts for processing for human
consumption use because this will enable a more efficient use of peanut
production.
Clarification of Interim Final Rule
Clarification to certain provisions of the interim rule were
suggested by the Inspection and the Customs Service. These are as
follows:
The Inspection Service suggested that paragraph (b)(4) of Sec.
996.40, regarding the sampling and testing of peanuts for outgoing
requirements, should read that number 3 check samples may be ground by
the Inspection Service or a USDA or USDA-approved laboratory. The
interim final rule provided only that the Inspection Service would
grind number 3 samples. The phrase ``USDA or USDA-approved laboratory''
is added to Sec. 996.40(b)(4) to allow those entities to grind number
3 check samples if it is more convenient to the efficient testing of
the number 3 samples.
Paragraph (g) of Sec. 996.50 provides for the positive lot
identification (PLI) of residual peanuts by red tags or other PLI means
acceptable to the Inspection Service. The Inspection Service also
suggested that it is not the responsibility of Inspection Service
personnel to determine the appropriate use of other PLI methods in
addition to the use of red tags. However, Inspection Service personnel
are able to utilize lot identification methods, other than red tags, if
other methods are determined suitable and appropriate to a particular
situation or lot of peanuts and are documented on the inspection
certificate. The paragraph will continue to read as provided in the
interim final rule.
Paragraph (c) of Sec. 996.60, regarding the early arrival and
storage of foreign peanuts in the U.S. prior to the opening of an
import quota, incorrectly specifies that the Inspection Service may
require re-inspection. However, the Inspection Service does not have
authority to demand re-inspection. USDA may require such re-inspection.
Paragraph (c) of Sec. 996.60 is revised accordingly.
The Customs Service clarified titles and citations of Customs
Service regulations specified in the preamble on page 57135 of the
interim final rule. The correct citations are specified in the preamble
discussion under Import Entry Procedures.
Customs also suggested changes in the preamble discussion and text
definition of ``conditionally released'' to clarify that merchandise is
not conditionally released for storage or warehousing. Under Customs
Service procedures, warehoused merchandise is not conditionally
released. Appropriate changes in the preamble discussion under the
stamp-and-fax procedure and in the definition of ``conditionally
released'' under Sec. 996.2 have been made in this final rule.
The Customs Service requested that the preamble discussion
regarding limiting lot size to 200,000 pounds clarify that Customs has
no requirement on the amount of merchandise that can be covered under a
single entry. The 200,000 pound limit is required by USDA and the
inspection service to assure an accurate sampling protocol. The
preamble language has been clarified accordingly.
Customs also suggested clarifications in the use of some terms in
the preamble to be consistent with Customs Service terminologies. The
preamble has been edited to use ``Customs broker'' rather than ``import
broker,'' ``port of arrival'' rather than ``port of entry,'' and
``warehousing'' rather than ``storage.'' In the discussion, the process
involved in the conditional release of peanuts also has been clarified
to conform with Customs Service procedures. The suggested
clarifications are made in the preamble discussion in this final rule.
Finally, Customs Service suggested that the definition of importer
under Sec. 966.7 should include importers who enter peanuts intended
for non-edible use. Importation of non-edible peanuts may not be
economically feasible at this time, given the low value of oilstock and
feed-quality peanuts. Further, it is not USDA's intention to restrict
importation for such purposes. However, importers of all peanuts,
regardless of intended use, must comply with the inspection and
disposition requirements of this program. The definition of Importer
under Sec. 966.7 has been clarified accordingly.
After review of all comments received to the interim final rule,
USDA finalizes, and continues in effect with changes, the interim final
rule in 7 CFR part 996 as follows.
[[Page 1150]]
Peanut Quality and Handling Standards
This rulemaking action finalizes the interim final rule and
continues in effect, with changes, part 996, peanut quality and
handling standards. These standards are similar to the quality and
handling requirements that were in effect under USDA's three previous
peanut programs. The changes, described in the following discussion,
are based on interim Board recommendations in developing the draft rule
and on industry comments to the interim final rule.
No restrictions on use of farmers stock peanuts: Prior to issuance
of the interim final rule, only farmers stock peanuts determined to be
Segregation 1 quality peanuts could be acquired by handlers for
preparation and disposition to human consumption outlets. Segregation 2
and 3 farmers stock peanuts were restricted to non-human consumption
use such as seed, oilstock, animal feed, and birdseed.
This peanut standards program differs from the previous peanut
programs in that handlers may purchase any segregation quality peanuts
for shelling and eventual disposition to human consumption outlets,
provided that such peanuts, after handling, meet the outgoing standards
of this program. This change was recommended by several of the large
peanut handling operations.
Some handlers on the interim Board stated that the prohibition on
Segregation 2 and 3 peanuts for edible use is more than 35 years old
and that modern technologies enable handlers to shell and mill failing
quality peanuts of any segregation category. They stated that this will
increase use of domestic peanut production for edible consumption
without a loss in edible peanut quality. They also stated that raw,
farmers stock peanuts produced in other countries are not subject to
incoming quality requirements or restricted as to segregation levels in
those countries. Thus, they believe, this change in the peanut program
would place domestic handlers on an even playing field with shellers in
other countries who might export to the United States peanuts shelled
and handled from any quality raw peanuts.
At the interim Board meeting, at least one grower spoke in favor of
removal of the restriction on the use of Segregation 2 and 3 farmers
stock only in non-edible outlets. Many growers have long contended that
a single moldy peanut in a wagonload of farmers stock greatly reduces
the value of the entire wagon and, thus, significantly reduces the
grower's income. These growers see this as unfair and believe that they
should be able to market their peanuts without a restriction on
segregation use.
Under this program, Segregation 3 peanuts with visible aflatoxin
mold may be purchased by handlers and imported by importers. Safeguard
procedures remain in place to assure peanut quality and wholesomeness.
The requirement that any farmers stock peanuts shelled and milled for
human consumption use must be inspected and certified as meeting
outgoing quality standards for grade and aflatoxin content prior to
disposition for human consumption use is continued in this final rule.
Storage of Segregation 2 and 3 farmers stock peanuts purchased by
the handler is at the handler's discretion. Separate storage and
shelling of Segregation 2 and 3 peanuts under the handler's ownership
are no longer necessary because any peanuts intended for human
consumption use must meet outgoing quality requirements before such
use. Shelling of a handler's farmers stock peanuts and use of the
handler's shelled peanuts also are at the handler's discretion,
provided that any shelled peanuts which the handler disposes of for
human consumption use are inspected and certified for outgoing grade
quality, as indicated in the table in Sec. 996.31(a), and certified
negative as to aflatoxin pursuant to a chemical analysis carried out by
a USDA or USDA-approved laboratory. Positive lot identification (PLI)
practices covered under Sec. 996.40(a) must also be followed. A
handler may dispose of the handler's non-edible quality peanuts
(sheller oilstock residuals) to such non-edible peanut uses as crushing
into oil, or animal feed, or seed, pursuant to Sec. 996.50.
Disposition is at the handler's discretion, provided that non-edible
peanuts are moved under positive lot identification procedures and
records documenting all such dispositions are maintained by the handler
pursuant to Sec. 996.71(b).
To the extent that farmers stock peanuts are imported, the importer
has the same discretionary control over the storage, handling, and
disposition of such peanuts.
Any storage or subsequent inspection that a handler may carry out
for farmers stock peanuts held under USDA's Farm Service Agency's (FSA)
loan program are subject to the provisions of the loan program.
Likewise, a handler may receive or acquire farmers stock peanuts or
shelled peanuts from another handler and proceed to mill and prepare
those peanuts for edible or non-edible use. Any contractual
arrangements covering storage, shelling, milling, or disposition of
such peanut lots are up to the two handlers. However, any peanuts
intended for human consumption must be certified for such use pursuant
to Sec. 996.31(a).
This final rule continues the same outgoing quality standards for
damage, defects, foreign material and moisture, and maximum allowable
aflatoxin content as required under the previous peanut programs. The
15 parts-per-billion (ppb) maximum aflatoxin content is specified in
the definition of the term ``negative aflatoxin content'' in Sec.
996.11.
Direct blanching without prior inspection: Under the previous
programs, all peanuts were required to be sampled and inspected for
grade quality and aflatoxin content as the peanuts completed the
shelling operation. The peanuts also were positive lot identified at
that time and kept separate and apart from other milled lots. After the
peanuts were moved to a blanching operation and blanched, a second
sampling and grade inspection was conducted.
Under this program, handlers intending to blanch peanuts pursuant
to a buyer's demand, may move peanuts from the handler's shelling
facility to the handler's dedicated blanching facility without
obtaining outgoing inspection and PLI prior to movement. Under this
provision, the handler's blanching operation may not blanch peanuts
belonging to other handlers. Movement of such peanuts under these
conditions may be without grade inspection and PLI.
This change from the previous peanut programs was recommended by
interim Board handler members, who have their own blanching facilities,
as a method of reducing handling and inspection costs and improving the
efficiency of handling operations for peanuts that the handler intends
to blanch. This provision does not apply to peanuts sent to a custom
blancher for blanching because those peanuts may be commingled with
peanuts from another handler. To help safeguard against inadvertent
commingling with another handler's peanuts, peanut lots sent to a
custom blancher must be maintained under positive lot identity and be
accompanied by a valid grade inspection certificate.
Because the peanuts are sampled and inspected for grade and
aflatoxin content after completion of the blanching operation, and PLI
is applied at that time, the outgoing quality and identity of the
peanuts is not jeopardized.
Reporting farmers stock acquisitions: Because handlers and
importers may
[[Page 1151]]
shell and mill Segregation 2 and 3 peanuts into edible quality peanuts,
it is necessary that USDA account for all farmers stock peanuts
acquired by handlers and importers. This final rule continues to
require that all farmers stock acquisitions, regardless of segregation
category, must be reported by the handler and importer to USDA. Form
FV-305, Handlers/Importers Monthly Report is similar to the form
previously used under the non-signer peanut program and to the PAC-1
filed by signatory handlers under the Agreement.
Reporting failing lots: Under the previous programs, non-signer
handlers and importers were required to file with USDA copies of the
outgoing grade and aflatoxin certificates on every peanut lot failing
quality or aflatoxin standards. USDA used these certificates to monitor
reconditioning and proper disposition of the failing lots. Under the
Agreement, the Inspection Service and the aflatoxin laboratories filed
with PAC, all grade and aflatoxin certificates on behalf of the
signatory handlers.
Reporting procedures similar to those used under the Agreement are
used for all handlers and importers in this program. Thus, handlers and
importers are not required to file failing grade quality and aflatoxin
certificates with USDA. These certificates are filed by the Inspection
Service and USDA and USDA-approved aflatoxin laboratories.
The incoming quality, outgoing quality, and handling standards
established under the interim final rule and finalized in this rule are
the same as, or similar to, the requirements under the previous peanut
programs and are intended to maintain the peanut industry's high
standards for peanut quality and wholesomeness.
Quality Standards
The following categories of peanuts are subject to inspection
requirements and quality and handling standards established under part
996.
Incoming quality--farmers stock peanuts: Under this program, all
farmers stock peanuts received by handlers or importers must be sampled
and inspected by the Federal or Federal-State Inspection Service
(Inspection Service) inspectors to determine the moisture content of
the peanuts, the amount of foreign material in the peanuts, and the
amount of damage and concealed damage in the peanuts. Moisture and
foreign material content not exceeding 10.49 percent meet incoming
quality standards--the same as under the previous peanut programs. The
peanuts also are inspected for visible Aspergillis flavus mold. Seed
peanuts produced in the Virginia-Carolina area may be received or
acquired containing up to 11.49 percent moisture.
Domestically produced farmers stock peanuts are required to undergo
incoming inspection at a buying point prior to shelling or storage.
Incoming quality standards are found in paragraph (a) of Sec. 966.30.
Incoming inspection is conducted by the Inspection Service to determine
the general grade level of raw, farmers stock peanuts presented by the
producer at buying points in the various domestic production areas.
Peanuts are graded for foreign material, loose-shelled kernels, and
moisture content. Segregation 1 farmers stock peanuts may contain 2
percent or less damaged kernels and 1 percent or less concealed damage
caused by rancidity, mold, or decay. Segregation 2 peanuts are lesser
quality peanuts containing more than 2 percent damaged kernels, or more
than 1 percent concealed damage. Segregation 3 peanuts are those which
contain visible Aspergillus flavus. Segregation 2 and 3 peanuts may be
shelled and entered into human consumption outlets provided the peanuts
meet outgoing quality and wholesomeness requirements. Imported farmers
stock peanuts must be transported directly to a buying point and
subjected to incoming inspection to determine Segregation quality.
It is the handler's option to keep farmers stock peanuts segregated
by category or to commingle Segregation 1, 2, and 3 peanuts in the
handler's warehouse. Domestically produced and imported farmers stock
peanuts, however, must be kept separate and apart because imported
peanuts are subject to Customs Service redelivery demands until the
imported peanuts are certified as meeting outgoing quality requirements
specified in Sec. 996.31.
Incoming inspection determines the quality of the farmers stock
peanuts based on moisture content, foreign material, damage, loose-
shelled kernels, and visible Aspergillus flavus mold. Handlers and
importers must report to USDA acquisitions of all Segregation 1, 2, and
3 farmers stock peanuts. The Inspection Service issues USDA form FV-95,
``Federal-State Inspection Service Notesheet'' designating the lot as
either Segregation 1, 2, or 3 quality. Reporting requirements are
discussed in more detail below.
Because USDA cannot determine whether peanuts produced and milled
in a foreign country originated from Segregation 1 quality peanuts,
importers do not have to provide evidence of Segregation 1 quality for
foreign peanuts imported in shelled or cleaned-inshell condition.
Outgoing quality--shelled peanuts: Both domestic and imported
shelled peanuts must be sampled, inspected, and certified as meeting
the outgoing grade standards specified in the table in Sec. 996.31(a)
entitled ``Minimum Quality Standards--Peanuts for Human Consumption.''
The table lists, for different peanut varieties, maximum percentage
tolerances for damaged kernels; unshelled kernels and kernels with
minor defects; split and broken kernels and sound whole kernels (size
factors); foreign material, and moisture content. All categories and
tolerances in the table are the same as those in effect under the
Agreement at the time the PAC was terminated.
Each shelled peanut lot also must undergo chemical testing by a
USDA laboratory or a private laboratory approved by USDA. AMS' Science
and Technology Programs assures that all of the laboratories conducting
chemical analyses follow the same testing procedures. 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 PAC was terminated.
Once certified as meeting outgoing quality standards under Sec.
996.31(a) for shelled peanuts, a lot may not be commingled with any lot
that has failed outgoing quality standards or any residual peanuts from
reconditioning operations.
Outgoing quality--Cleaned-inshell peanuts: Based on the changes in
the edible use of Segregation 2 and 3 peanuts, cleaned-inshell peanuts
are no longer restricted to Segregation 1 peanuts. Cleaned-inshell
peanuts are farmers stock peanuts that are cleaned, sorted, and
prepared for human consumption markets in the U.S. and must be
inspected against minimum quality standards not exceeding 2 percent
damage, 10 percent moisture, and 0.5 percent foreign material. Cleaned-
inshell peanuts also may not exceed more than 1 percent mold unless the
lot is also chemically tested and found ``negative'' as to aflatoxin.
These standards are found in paragraph (b) of Sec. 996.31.
Handling Standards
Positive lot identification procedures are continued in effect
under Sec. 966.40. These procedures are necessary to maintain
identification of peanut lots and ensure that lots certified for edible
consumption are not commingled with
[[Page 1152]]
peanuts of lower quality. This section also establishes consistent
procedures for collecting samples from peanut lots that are being
inspected. Lot identification and sampling procedures must be applied
consistently on all peanut lots undergoing inspection to ensure that
all peanut lots are handled uniformly and lots once certified as
meeting outgoing standards are maintained and shipped without loss of
quality. PLI standards under this final rule are the same as the
positive lot identification requirements previously used by the
Inspection Service under the Agreement, non-signer, and import peanut
programs.
The Inspection Service works with domestic peanut handlers,
importers, and storage warehouses to determine the most appropriate PLI
or lot identity method to be used on individual peanut lots. Several
factors dictate which PLI method should be used: (1) Size of the lot;
(2) storage space on the dock or in the warehouse; (3) whether any
further movement of the lot is required prior to certification; and (4)
other needs of the handler, importer, dock or warehouse operators, or
the Customs Service.
For domestic lots and repackaged import lots, PLI includes PLI
stickers, tags or seals applied to each individual package or container
in such a manner that is acceptable to the Inspection Service and
maintains the identity of the lot. For imported lots, PLI tape may be
used to wrap bags or boxes on pallets, PLI stickers may be used to
cover the shrink-wrap overlap, doors may be sealed to isolate the lot,
bags or boxes may be stenciled with a lot number, or any other means
that is acceptable to the Inspection Service. The crop year or quota
year shown on the positive lot identification tags shall be the year in
which the peanuts in the lot were produced domestically or imported
into the United States, as appropriate.
PLI practices for both domestic and imported peanuts also include
affixing a PLI seal to the door of a shipping container so that it
cannot be opened without breaking the seal, and affixing a red tag on
sewn bags of failing quality peanuts. Other methods acceptable to the
Inspection Service that clearly identify the lot and prevent peanuts
from being removed or added to the lot may be used. 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 Inspection Service. All lots of shelled or cleaned-
inshell peanuts shall be handled, stored, and shipped under positive
lot identification procedures.
The standard peanut lot size is 40,000 pounds, but may vary at the
handler or buyer's preference. Lot size is limited to 200,000 pounds,
which is the largest amount of peanuts that can be adequately sampled
by the Inspection Service. The limitation was used under the agreement,
non-signer, and import peanut programs.
Sampling procedures: This rule continues in effect uniform sampling
procedures and sample sizes that the Inspection Service follows when
conducting grade inspections, and in collecting peanuts for chemical
analysis. The portion of the peanuts collected for chemical analysis
are sent to a USDA or USDA-approved laboratory. A portion of the
peanuts sampled are held by the Inspection Service as check samples if
the lot is determined to fail either grade or aflatoxin analysis. These
procedures and sample sizes are the same as those previously used under
the Agreement, non-signer, and import peanut programs.
All required sampling and positive lot identification procedures
are performed by inspectors of the Federal or Federal-State Inspection
Service. Imported peanuts are subject to Customs Service redelivery
demands if determined in violation of these quality or handling
standards or Customs Service entry requirements referenced below.
Handlers and importers must reimburse the Inspection Service and
chemical laboratories for sampling and grade inspection and chemical
analyses for aflatoxin. Incoming inspections range from $4.00 to $6.25
per ton of farmers stock peanuts. Sampling and outgoing grade
inspections vary with each Federal-State Inspection Service and range
from $1.50 to $3.00 a ton. Chemical analysis for aflatoxin averages
$40.00 per analysis. The fee schedule for USDA laboratories appears at
7 CFR part 91.37.
Import Entry Procedures
The import entry and safeguard procedures established under the
interim final rule and finalized in this rule are similar to the
procedures applied under the previous peanut import program (7 CFR part
999.600).
U.S. Customs Service requirements: Importers of foreign produced
peanuts must follow established Customs Service entry procedures and
AMS stamp-and-fax notification and inspection procedures specified
below. Customs Service importation procedures and requirements are set
out in title 19 of the Code of Federal Regulations. The Customs Service
regulations applicable to peanut handling and processing include, but
are not be limited to: Bond requirements (19 CFR part 113); transfer of
merchandise from port of arrival to another Customs Service office
location (19 CFR parts 18 and 112); entry of merchandise for
consumption (19 CFR parts 141 and 142; warehouse entry and withdrawal
from warehouse for consumption (19 CFR part 144); establishment of
bonded warehouses (19 CFR part 19); and within these parts,
manipulation in bonded warehouses (19 CFR part 19.11); substitution of
actual owner as importer of record (19 CFR part 141.20); failure to
recondition merchandise (19 CFR part 113.62(e); and redelivery of
merchandise to Customs custody (19 CFR part 113.62(d)) and 19 CFR
141.113). For Customs Service purposes, the term ``consumption'' means
``use in the United States.'' Customs Service entry procedures are not
superseded by the import procedures in this program.
It is the importer's responsibility to file import entry
documentation and notify the Inspection Service with documentation
sufficient to insure inspection of all imported peanut lots. It also is
the importer's responsibility to account for disposition of all failing
quality peanut lots imported by the importer. A bond secured by surety
or U.S. Treasury obligations must be posted by the importer with the
Customs Service to guarantee the importer's performance. For more
information on these procedures, importers should contact their customs
broker, the Customs Service office at the port where peanuts are
expected to be entered, or www.ustreas.gov/education/duties/bureaus/uscustoms.html
.
Safeguard procedures: The safeguard procedures in this part are
similar to safeguard procedures already in place for peanuts and other
imported fresh agricultural commodities and are consistent with the
inspection, identification, and certification requirements applied to
domestically produced peanuts.
To obtain information on importing peanuts or making arrangements
for necessary inspection and certification, importers may contact the
Fresh Products Branch headquarters office in Washington, DC, which will
direct them to the closest regional inspection office. The telephone
number of headquarters office is (202) 720-5870, and the fax number is
(202) 720-0393.
Stamp-and-fax procedure: Under USDA safeguard procedures
established in this program, the importer must provide advance notice
of inspection needs to the Inspection Service office that will collect
samples of the peanuts for inspection. The importer must file
[[Page 1153]]
completed entry documentation (usually Customs Service forms CS 3461
and CF 7501, or other equivalent forms) with the Inspection Service
office by mail or facsimile transmission. To expedite entry procedures,
the filing should occur prior to, or upon arrival of the shipment at
the port of entry. The Inspection Service office stamps, signs, and
dates the entry document and returns it to the importer or Customs
broker by fax or mail. The importer/broker then submits the stamped
copy to the Customs Service. This ``stamp-and-fax'' procedure is
unchanged from the procedure used under the previous peanut import
program and is similar to procedures in place for other imported
agricultural commodities under USDA jurisdiction. Failure to file the
entry documentation stamped by the Inspection Service may result in a
delay in entry of the product.
The importer must file a copy of each stamp-and-fax entry document
with USDA and forward a copy, with any lot that is transported in-bond
to an inland destination for inspection or warehousing. The importer
must provide sufficient information to identify the peanut lot being
entered and to ensure that arrangements are made for sampling and
inspection. This information must include the Customs Service entry
number, container identification, weight of the peanut lot, the city,
street address, and building number (if known) receiving the peanut
lot, the requested date and time of inspection, and a contact name and
telephone number at the destination. If the destination is changed from
that listed on the stamp-and-fax document, the importer must
immediately advise Inspection Service offices at both the original
destination and the new destination of such change. Shipments that are
not made available pursuant to entry documentation, or are not properly
displayed for sampling purposes, will be reported to the Customs
Service as failing to follow required entry procedures.
Boatload shipments exceeding 200,000 pounds must be entered as two
or more items on Customs Service entry documents. This limit on lot
size is required by USDA and the Inspection Service for sampling
purposes and is the same as the limit on lot sizes of domestically
produced peanuts. Lot size and identification arrangements must be made
cooperatively between the importer and the Inspection Service. This
facilitates subsequent lot identification, inspection, and reporting of
large imported shipments.
Release for importation: Depending on condition (shelled or
inshell) and containerization, foreign-produced peanuts may be either:
(1) Held at the port-of-entry until certified by the Inspection Service
as meeting the edible quality requirements of this rule; or, (2)
conditionally released under Customs Service entry procedures and
transported inland for inspection and certification.
Under option (1), foreign-produced shelled or cleaned-inshell
peanuts which are held at the port-of-arrival must be presented in
containers or bags that allow appropriate sampling of the lot pursuant
to Inspection Service requirements. After sampling, such lots are held
at the port-of-arrival under Customs Service custody, under positive
lot identification requirements of the Inspection Service, pending
results of the inspection and chemical analysis. If determined to meet
the applicable edible quality requirements of this part, the shelled or
cleaned-inshell peanuts may be entered for consumption without further
inspection. Reports of such entries do not have to be filed with USDA.
If a lot is held at the port-of-arrival under Customs Service
custody and subsequently determined to fail edible quality standards,
the lot, at the importer's discretion, may be: Exported; moved inland
under bond for reconditioning and, if satisfactorily remilled or
blanched, used for edible consumption; or entered for non-edible
consumption. Such failing peanuts that remain under Customs Service
custody until exported do not have to be reported to USDA because the
peanuts were not officially entered into the U.S. Failing lots that are
moved in-bond for reconditioning at a remilling or blanching facility
inland must be reported to USDA, pursuant to option 2, below. The
importer is responsible for ensuring that such lots remain under PLI
until reconditioned and determined to meet edible quality requirements.
Records of disposition of residual peanuts to non-edible outlets also
must be maintained. Such records must be maintained for the time frames
discussed under Reporting and Recordkeeping Requirements, below.
Under option (2), foreign produced peanuts moved inland from the
port-of-arrival for sampling, inspection, and certification. All
imported farmers stock peanuts must be shipped inland for sampling and
inspection because specialized sampling facilities at buying points are
not available at ports of entry. All in-bond entries must be maintained
under PLI. Shelled and cleaned-inshell lots which are subsequently
sampled and determined to meet both grade and aflatoxin quality
standards may be entered directly into human consumption channels of
commerce and not reported to USDA. For monitoring and compliance-
assurance purposes, in-bond entries which fail to meet outgoing quality
standards are reported to USDA by the Inspection Service and/or the
aflatoxin laboratory.
Peanuts transported from the port-of-arrival to another location
must be transported by a carrier designated by the Customs Service
under 19 U.S.C. 1551. Peanuts entered for warehousing must be stored in
a Customs Service bonded warehouse. Such peanuts must remain in Customs
Service custody until they are determined to meet the quality and
handling standards of this program, at which point they may be
withdrawn from warehouse and entered for consumption.
Imported shipments of farmers stock peanuts must be transported
inland to a buying point where sampling equipment is available to
conduct the incoming sampling operation. Importers are required to
maintain all records showing compliance with these standards and all
Customs Service requirements.
Importers must not release failing lots for edible consumption
until reconditioned and certified as meeting the standards of this
program.
Reporting and Recordkeeping
This rule finalizes reporting and recordkeeping standards under
Sec. 996.71 that are necessary for USDA to monitor compliance with
program quality and handling standards.
Farmers stock acquisitions: Handlers and importers are required to
report to USDA the volume of Segregation 1, 2, and 3 farmers stock
peanuts acquired from growers or others, or imported. Under previous
peanut programs, the information was used, in part, to determine the
assessment owed by signatory handlers to the PAC and non-signatory
handlers to USDA.
Because all farmers stock peanuts can now be shelled for human
consumption use, all three categories of farmers stock must be
reported. This information is used for compliance purposes and in the
compilation of reports by USDA. The monthly report must include the
volume, by variety, of Segregation 1, 2, and 3 farmers stock peanuts
acquired in the preceding month. Form FV-305, Handlers/Importers
Monthly Report is used by handlers and importers to report their
monthly farmers stock acquisitions.
To collect farmers stock information, the interim Board recommended
that USDA use the assessment form used under the national Peanut
Promotion,
[[Page 1154]]
Research, and Information Order (7 CFR part 1216). However, that form
has been discontinued and the new ``First Handler's Report'' form used
under that research and promotion program does not require disclosure
of volume handled, peanut variety, or Segregation of the peanuts
acquired. Thus, the form cannot be used for the purposes needed under
this program.
The new form, Handlers/Importers Monthly Report, must be sent to
USDA. Facsimile or express mail deliveries may be used to ensure timely
receipt of certificates and other required documentation. Mail
deliveries must be addressed to the DC Marketing Field Office, MOAB,
FVP, AMS, USDA, 4700 River Road, Unit 155, Riverdale, MD 20737, Attn:
Report of Peanuts. The Fax number is (301) 734-5275.
Falsification of any report submitted to USDA is a violation of
Federal law and is punishable by fine or imprisonment, or both.
Documentation of edible and non-edible peanuts: This program
continues the procedures previously used under the Agreement to monitor
disposition of edible and failing quality peanuts. The Inspection
Service sends copies of all grade inspections and the chemical
laboratories send copies of all aflatoxin assays to USDA. USDA uses
this information to monitor proper disposition of all lots failing
either grade or aflatoxin certification.
This represents a relaxation of reporting requirements for
importers. Under the previous peanut import program, non-signatory
handlers and importers were required to file copies of all failing
grade and aflatoxin certificates with AMS. Importers are no longer
required to do so, unless specifically requested by USDA or unless the
Customs Service demands such documentation of importers. These
certificates will be provided by the Inspection Service, USDA
laboratories, or USDA-approved laboratories, as the case may be.
Recordkeeping: Handlers and importers are required to maintain all
relevant documentation on the disposition of inedible peanuts. If a lot
is remilled, blanched, or roasted, the handler or importer must
maintain grade certificate(s) and/or aflatoxin certificate(s) showing
that the lot has been reconditioned and subsequently meets outgoing,
edible quality standards. Grade and aflatoxin inspections conducted on
reconditioned lots reference the applicable lot number and previous
grade and aflatoxin certificate numbers so that a record of the lot's
reconditioning is maintained. Documents showing the disposition of non-
edible residuals (pick-outs, etc.) must be maintained by each handler
and importer. For example, if the lot is crushed for oil, the oil
mill's report of crushing must be maintained. That crushing report must
tie the crushed residual peanuts to their original failing lots. If the
failing lot is sold for seed or for animal feed, the sales receipt of
the transaction must tie the purchased lot to the failing lot through
the inspection certificate number. If the failing lot is exported, an
export certificate must be filed showing the inspection certificate
number of the failing peanut lot. Failing peanut lots sent to a
landfill or buried also must be reported with proof of such disposition
through the inspection certificate number.
In total, the documentation maintained and distributed to USDA must
be sufficient to document and substantiate the proper disposition of
all peanut lots failing grade or aflatoxin quality standards, as well
as the residuals resulting from those failing lots.
Documentation on lot dispositions must be maintained for at least
two years after the crop year of applicability.
Confidentiality
This rule includes a confidentiality provision in Sec. 996.72 to
protect handler and importer reports and records required to be
submitted to USDA under this program. Confidential information includes
data or information constituting a trade secret or disclosing a trade
position, financial condition, or business operations of handlers or
their customers. Confidentiality provisions do not extend to disclosure
of peanut lots determined to be within the provisions in Sec.
996.74(b).
Verification of Reports
Provisions are included in Sec. 996.73 of this part that allows
USDA access to any premises where peanuts may be held or processed, and
access to any business files containing information regarding the
handling, importing, and disposition of peanuts. USDA, at any time
during regular business hours, is permitted to inspect any peanuts held
and any and all records with respect to the acquisition, holding, or
disposition of any peanuts which may be held or which may have been
disposed of by that handler or importer.
Compliance Oversight
USDA will take action against any handler or importer in violation
of the Act or this part. Such action includes instances when a handler
or importer: (1) Acquires farmers stock peanuts without official
incoming inspection; (2) fails to obtain outgoing inspection on shelled
or cleaned-inshell peanuts and ships such peanuts for human consumption
use; (3) ships failing quality peanuts for human consumption use; (4)
commingles failing quality peanuts with certified edible quality
peanuts and ships the commingled lot for human consumption use; (5)
fails to maintain PLI on peanut lots certified for human consumption
use; (6) fails to maintain and provide access to records on the
reconditioning or disposition of failing quality peanuts; or (7)
otherwise violates any provisions of the Act or this program.
USDA will use injunctions to restrain violations and withdraw
inspection services from alleged violators.
AMS will notify the FDA of the names of any handlers or importers
known to have shipped un-inspected or failing peanuts into human
consumption channels and the lot numbers of such peanuts. AMS also will
publish on the AMS Web site the names of any handler and importer and
the failing lots not reported as reconditioned or disposed to non-
edible outlets.
Final Regulatory Flexibility Analysis
Pursuant to 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 had
prepared this final 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 were approximately 45 peanut handlers and 38 importers that
were subject to regulation under the Agreement and non-signer program,
and the peanut import regulation. 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 (SBA) (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,
[[Page 1155]]
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.
Two-year average peanut production for the 2000 and 2001 crop years
was 3.711 billion pounds, harvested from 1.363 million acres, yielding
2,723 pounds per acre. The average value of production for the two-year
period was $948.777 million, as reported on the National Agricultural
Statistics Service (NASS) Web site as of August 2002 (http://www.nass.usda.gov:81/idepd/report.htm
). The average grower price over
the two-year period was $0.26 per pound, and the average value per
harvested acre was $707. Dividing the two-year average value of
production ($948.177 million) by the estimated 12,221 farms yields an
estimated revenue per farm of approximately $77,600.
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 $948.777 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
$41,251.
Oilmill operators, blanchers, and private chemical laboratories are
subject to this rule to the extent that they must comply with
reconditioning provisions under Sec. 996.50 and reporting and
recordkeeping requirements under Sec. 996.71. There are several such
entities in the peanut industry and these requirements are applied
uniformly to these entities, whether large or small. In addition, there
are currently 10 State inspection programs (FSIS) that will perform
inspection under this new 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 2001 import
quota, approximately 38 business entities imported approximately 126
million pounds of low duty peanuts (sometimes called ``duty free''
quota peanuts). That import quota period ended December 31, 2001, for
Mexico, and March 31, 2002, for Argentina, Israel, 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. Customs brokers may provide import services
to importers who are regulated under, and accountable, to this rule.
They must assure that entry requirements under Sec. 996.60 and
reporting and recordkeeping requirements under Sec. 996.71 are met.
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, and importers may be classified as small
entities. In addition, it may be assumed that many oilmill operators
and blanchers also are small entities.
The quality and handling requirements of the prior peanut quality
programs have been in effect for more than 36 years and for imported
peanuts for more than six years. Handlers and importers have been the
segment of the industry directly regulated under the three peanut
programs, and they are in general agreement that the industry has
changed greatly since the establishment of the Agreement in 1965.
With only a few exceptions, the quality and handling standards in
this peanut program are the same as, or similar to, the requirements
previously in effect for domestically produced and imported peanuts.
The few exceptions are relaxations in requirements that will benefit
handlers and importers. These requirements were subject to regulatory
flexibility analysis and were found to not disproportionately affect
small entities.
The Act requires that all peanuts marketed in the United States be
officially inspected and graded by Federal or Federal-State inspectors.
The Act further requires that USDA make identifying and combating the
presence of all quality concerns a priority in the development of
quality and handling standards and in the inspection of all peanuts in
the domestic market. Finally, USDA is to ``* * * provide adequate
safeguards against all quality concerns related to peanuts.'' The new
peanut program is to be established in consultation with the Board.
This program establishes under part 996 the minimum quality and
handling standards that were in effect on May 13, 2002, the date the
Act became effective, with relaxations recommended by interim Board
members and peanut growers and handlers. Peanuts may not be entered
into human consumption channels unless the peanuts are inspected and
meet minimum quality standards for size, damage, defects, foreign
material and moisture, and not exceed maximum aflatoxin content
specified in this rule. Handling standards include the same positive
lot identification, sampling and inspection procedures, and
prohibitions on commingling certified and non-edible peanuts as were in
effect under the three previous programs. Peanuts failing to meet the
quality standards of this part, or which are not handled consistent
with the handling standards of this part, may not be used for human
consumption in the United States.
All USDA required sampling, quality certification, and lot
identification is conducted by the Inspection Service. Chemical
analysis is conducted by USDA or USDA-approved laboratories. Private
laboratories must, among other things, agree to send copies of all
aflatoxin analyses conducted by the laboratory to USDA. Foreign
produced peanuts stored in bonded warehouses are subject to Customs
Service audits. Handlers and importers must reimburse the Inspection
Service and USDA laboratories and approved private laboratories, for
services provided and costs incurred in the sampling, grade inspection
and chemical analysis of peanuts. Incoming inspections range from $4.00
to $6.25 per ton of farmers stock peanuts. Sampling and outgoing grade
inspections vary with the Federal and each Federal-State Inspection
Service and range from $1.50 to $3.00 a ton. Chemical analysis for
aflatoxin averages $40.00 per analysis. These costs to handlers and
importers also were incurred under the previous three programs. Thus,
there is no net increase in financial burden attributable to these
aspects of the new program.
This action imposes on handlers and importers a minor reporting
requirement in addition to that imposed under the previous peanut
programs (reporting acquisitions of Segregation 2 and 3 farmers stock
peanuts). However, importers and non-signatory handlers under the
previous programs have a
[[Page 1156]]
minor decrease in reporting requirements, because they are no longer
required to submit evidence of proper disposition of failing lots. That
task is completed by the USDA. Recordkeeping requirements remain the
same as required under the three previous peanut programs. The
information collection burden under the previous programs totaled 411
reporting hours and 269 recordkeeping hours. These were approved under
OMB Nos. 0581-0067 (Agreement), 0581-0163 (non-signers), and 0581-0176
(imports).
Changes affecting regulated entities: Under this program, handlers
are no longer subject to any payment of assessments on farmers stock
peanuts acquired. Under the Agreement and non-signer program, handlers
were assessed $.33 per net farmers stock ton of peanuts acquired. This
totaled over $515,000 for the 2000 crop. Assessments collected from
signatory handlers provided for the administration of the PAC.
Assessments collected from non-signatory handlers helped reimburse USDA
for administration of the non-signer program. There are no such
assessments under this peanut program.
The previous peanut programs prohibited the use of Segregation 2
and 3 farmers stock peanuts in human consumption channels. This program
removes that prohibition and allows such peanuts to be handled and
marketed in higher return outlets. Handlers sought this change. As
noted above, handlers believe that modern milling technologies enable
handlers to remove poor quality and contaminated peanut kernels in the
shelling and milling operation. This change from the previous programs'
requirements enables more peanuts to be marketed at higher market
values for human consumption. Segregation 2 and 3 peanuts, in a normal
crop year, average around 1 percent of total production. Thus, for the
2000 and 2001 crop years, an estimated 37 million pounds of additional
farmers stock peanuts would have been available for human consumption
channels.
Handlers stated that peanuts used in the manufacturing of imported
peanut butter and peanut paste are not restricted to Segregation 1
quality peanuts produced in those exporting countries. They contended
that use of Segregation 2 and 3 quality peanuts for human consumption,
after careful and efficient sorting and milling processes, would level
the playing field for the U.S. peanut industry. Outgoing inspection
will ensure that poor quality peanuts do not enter domestic edible
consumption market channels.
Grower and handler revenues are likely to increase slightly due to
the ability to sell Segregation 2 and 3 quality peanuts for human
consumption use. This change is not expected to affect small and large
entities differently.
If Segregation 2 and 3 peanuts are handled for human consumption,
it is reasonable to assume that fewer poor quality peanuts will be
available for crushing into oil and other non-edible use such as animal
feed. Thus, if normal supply and demand factors take affect, the price
of oilstock quality peanuts could rise. A higher percentage of sheller
oilstock residuals are likely to be sorted out of Segregation 2 and 3
peanuts during the initial shelling process. Therefore, not all of the
peanuts in Segregation 2 and 3 lots will be edible, and the supply of
oilstock peanuts will not be cut off completely. The market value of
peanuts used for crushing into oil and added to animal feed could
increase.
Further, blanching operations could realize an increase in business
because blanching, as a last resort in reconditioning a failing lot,
will likely be used in the final preparation of shelled peanuts
originating from Segregation 2 and 3 peanuts for human consumption.
Finally, handlers with blanching facilities dedicated exclusively
to the handler's own peanuts may move a lot of shelled peanuts directly
from the shelling operation to their dedicated blanching operations
without first obtaining grade inspection and PLI on the lot. Handlers
recommended removing the required inspection and PLI prior to blanching
at their own, dedicated facilities because the nature of the peanuts
change in the blanching process and the peanuts must be inspected
immediately after blanching, rendering the first inspection redundant.
This would apply only to lots blanched in the handler's own blanching
facility that does not blanch peanuts belonging to others, thus
eliminating the need to establish PLI prior to blanching. This
streamlined handling process will increase efficiency of the handling
of peanuts that the handler intends to blanch. Handler costs for such
lots are reduced by inspecting the lot once, rather than twice. While
this change may tend to be most beneficial to those handlers who are
mostly larger operations with their own, dedicated, blanching
facilities, it should not have an adverse impact on small handlers.
Reporting and recordkeeping requirements under this peanut program
are not expected to adversely impact small businesses, and there is no
indication that large and small businesses would be impacted
differently. Under this program, handlers and importers must report
monthly acquisitions of Segregation 2 and 3 peanuts--a minor increase
from the previous programs when only Segregation 1 peanuts were
reported. However, the benefits of being able to handle those peanuts
for possible edible consumption outweigh the increased reporting
requirement. Further, this minor increase in reporting is offset by a
decrease in reporting disposition of failing peanut lots for non-
signatory handlers and importers. In the case of imports, few, if any,
peanuts are imported in farmers stock form because of the extra weight
and bulk of the peanut shell.
The other provisions in this peanut program are the same as, or
similar to, the requirements in effect for domestically produced and
imported peanuts for the last several years. Those requirements were
subject to prior regulatory flexibility analysis.
USDA has considered alternatives to this program. The Act provides
that a new program be established for the 2002 peanut crop. An
alternative would have been to continue the 2001 regulations for the
entire 2002 crop. However, based on industry comment, implementation of
a new program as soon as possible after harvest began was preferable to
continuing the previous programs. USDA has met with the interim Board
which is representative of the industry and has included nearly all of
its recommendations in this rule. The initial draft prepared by USDA
proposed a streamlined program with less USDA oversight of handling
standards. However, the interim Board suggested that oversight
provisions in the previous programs be included in this program to
assure the continued high quality and wholesomeness of peanuts entered
into human consumption channels in the U.S. Draft provisions were
posted on the USDA website and comments were received. Most comments
confirmed the Board's consensus that significant changes in the
previous programs were not necessary. One proposal included changing
screen sizes to allow smaller kernels to be included in lots intended
for human consumption use. Comments advised against such a relaxation
in the interim final rule. The majority of comments to the interim
final rule on this topic favored the relaxation. However, USDA has
decided to review this proposal further and not to make such a change
at this time. Thus, this program is substantially the same as
[[Page 1157]]
USDA's three previous peanut programs.
Except as previously discussed, 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.
Information Collection
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
chapter 35), the information collection requirements under the
Agreement, non-signers and import programs were approved by the Office
of Management and Budget (OMB) and assigned OMB Nos. 0581-0067, 0581-
0163 and 0581-0176, respectively. However, with the termination of
those peanut programs, reporting and recordkeeping burdens on peanut
handlers and importers have been terminated. OMB burden hours under the
previous programs were 540 hours. The burden under the new program is
estimated to be 463 hours. An estimated 367 hours (nearly 80 percent)
of the new program burden is for recordkeeping, which handlers and
importers would normally do under good business practices.
The Act specifies in Sec. 1604(c)(2)(A) that any new quality and
handling standards, established pursuant to the Act, may be implemented
without regard to the Paperwork Reduction Act. Nonetheless, USDA has
considered the reporting and recordkeeping burden on handlers and
importers under the new program.
Handlers and importers are required to complete and submit only one
report to USDA--a monthly acquisition of farmers stock peanuts.
Acquisitions of Segregation 2 and 3 peanuts must now be reported
because those peanuts can be prepared for edible markets. Because
Segregation 2 and 3 peanuts normally account for around 1 percent of
each peanut crop, this change is expected to represent only a minor
increase in the reporting burden under the new program. Non-signatory
handlers and importers are no longer required to submit evidence of
disposition of failing lots, which reduces their reporting burden.
Recordkeeping requirements remain the same as required under the three
previous peanut programs.
USDA held several meetings with the interim Board, Inspection
Service supervisors, posted a draft rule on the internet for comments,
and considered all comments, prior to publishing the interim final
rule. Twenty-five comments were received to the interim final rule and
all were carefully considered in developing this finalization action.
As earlier discussed, changes have been made to the interim final rule.
Any additional changes will be considered in consultation with the
Peanut Standards Board, as provided for in the Act. USDA also has
reviewed this rule with FSA and incorporated the suggested
clarifications suggested by the Customs Service. The program
established in the interim final rule and finalized in this rulemaking
action is substantially the same as the three previous peanut programs.
The 2002 crop harvest is now complete.
Section 1601 of the Act also specifies that promulgation of the
standards and administration of the new peanut quality program shall be
made without regard to: (A) The Paperwork Reduction Act; (B) the
Statement of Policy of the Secretary of Agriculture effective July 24,
1971 (36 FR 13804), relating to notices of proposed rulemaking and
public participation in rulemaking; and (C) the notice and comment
provisions of section 553 of title 5, United States Code.
Section 553 of title 5 provides that, upon good cause, the rule may
be made effective less than 30 days after publication in the Federal
Register. The Farm Bill required that the rule be effective for the
2002 crop year and the interim final rule became effective at the
beginning of the 2002 harvest season. A 30 day comment period was
provided in the interim final rule and all comments received were
considered. This rule finalizes the interim final rule and implements
five minor revisions which improve the overall effectiveness of the
interim final rule. Based on the above, USDA finds that good cause
exists for making this rule effective one day after publication in the
Federal Register.
List of Subjects in 7 CFR Part 996
Food grades and standards, Imports, Peanuts, Reporting and
recordkeeping requirements.
For the reasons set forth in the preamble, and under authority of 7
U.S.C. 601-674 and Public Law 107-171, 7 CFR chapter IX is amended as
set forth below.
Accordingly, the interim final rule amending 7 CFR part 996 which
was published at 67 FR 57129 on September 9, 2002, is adopted as a
final rule with the following changes:
PART 996--MINIMUM QUALITY AND HANDLING STANDARDS FOR DOMESTIC AND
IMPORTED PEANUTS MARKETED IN THE UNITED STATES
Authority: Secs. 1308, Pub. L. 107-171, 116 Stat. 178 (U.S.C.
7958).
Definitions
1. Section 996.2 is revised to read as follows:
Sec. 996.2 Conditional release.
Conditional release means release from U.S. Customs Service custody
to the importer for purposes of handling and USDA required sampling,
inspection and chemical analysis.
2. Section 996.7 is revised to read as follows:
Sec. 996.7 Importer.
Importer means a person who engages in the importation of foreign
produced peanuts into the United States.
3. Section 996.30 is amended by revising paragraph (b) to read as
follows:
Sec. 996.30 Incoming quality standards.
* * * * *
(b) Moisture. No handler or importer shall receive or acquire
farmers stock peanuts for subsequent disposition to human consumption
outlets 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; and
Provided further, That Virginia-type peanuts used for seed may be
received or acquired containing up to 11.49 percent moisture.
* * * * *
4. Section 996.40 is amended by revising paragraph (b)(4) to read
as follows:
Sec. 996.40 Handling standards.
* * * * *
(b) * * *
(4) Upon call from the laboratory, the handler or importer shall
cause Sample 2 to be ground by the Inspection Service, USDA or USDA-
approved laboratory in a ``subsampling mill.'' The resultant ground
subsample from Sample 2 shall be of a size specified by the Inspection
Service and it shall be designated as ``Subsample 2-AB.'' Upon call
from the laboratory, the handler shall cause Sample 3 to be ground by
the Inspection Service, USDA or USDA-approved laboratory in a
``subsampling mill.'' The resultant ground subsample from Sample 3
shall be of a size
[[Page 1158]]
specified by Inspection Service and shall be designated as ``Subsample
3-AB.'' ``Subsamples 2-AB and 3-AB'' shall be analyzed only in a USDA
laboratory or a USDA-approved laboratory and each shall be accompanied
by a notice of sampling. The results of each assay shall be reported by
the laboratory to the handler and to USDA.
* * * * *
5. Section 996.60 is amended by revising paragraph (c) to read as
follows:
Sec. 996.60 Safeguard procedures for imported peanuts.
* * * * *
(c) Early arrival and storage. Peanut lots sampled and inspected
upon arrival in the United States, but placed in storage for more than
one month prior to beginning of the quota year for which the peanuts
will be entered, must be reported to USDA at the time of inspection.
The importer shall file copies of the Customs Service documentation
showing the volume of peanuts placed in storage and location, including
any identifying number of the storage warehouse. Such peanuts should be
stored in clean, dry warehouses and under cold storage conditions
consistent with industry standards. USDA may require re-inspection of
the lot at the time the lot is declared for entry with the Customs
Service.
* * * * *
Dated: January 3, 2003.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 03-367 Filed 1-8-03; 8:45 am]
BILLING CODE 3410-02-P