[Federal Register: June 7, 2004 (Volume 69, Number 109)]
[Rules and Regulations]
[Page 31725-31731]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07jn04-4]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 996
[Docket No. FV03-996-2 FIR]
Minimum Quality and Handling Standards for Domestic and Imported
Peanuts Marketed in the United States
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Department of Agriculture (USDA) is adopting as a final
rule, without change, an interim final rule that changed peanut quality
and handling standards for domestic and imported peanuts marketed in
the United States. These provisions are intended to maximize handling
efficiency and to provide peanut producers, handlers, and importers
with flexibility in meeting current and new market demands, while
maintaining peanut quality and wholesomeness for consumers.
EFFECTIVE DATE: June 8, 2004.
FOR FURTHER INFORMATION CONTACT: Dawana Clark or Kenneth G. Johnson, DC
Marketing Field Office, Marketing Order Administration Branch, Fruit
and Vegetable Programs, AMS, USDA, 4700 River Road, Room 2A04, Unit
155, Riverdale, Maryland 20737; telephone (301) 734-5243, Fax: (301)
734-5275 or George J. Kelhart, Technical Advisor, Marketing Order
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400
Independence Avenue SW., Stop 0237, Washington, DC 20250-0237;
telephone (202) 720-2491, Fax: (202) 720-8938; or E-mail:
dawana.clark@usda.gov, kenneth.johnson@usda.gov or george.kelhart@usda.gov.
Small businesses may request information on complying with this
rule by contacting Jay Guerber, at the same 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 rule has been determined to be not significant for purposes of
Executive Order 12866 and has not been reviewed by the Office of
Management and Budget.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is not intended to have retroactive effect.
This rule will not preempt any State or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
rule.
There are no administrative procedures, which must be exhausted
prior to any judicial challenge to the provisions of this rule.
Background
This rule is based on recommendations of the Peanut Standards Board
(Board) and comments received from its members and other industry
sources. The standards and the Board were established by the Department
of Agriculture (USDA), pursuant to section 1308 of the Farm Security
and Rural Investment Act of 2002. This rule continues the following:
Screen sizes specified in the outgoing quality standards to allow
smaller peanut kernels of all varieties to be used in edible markets;
provisions in the text of the standards specifying that financially
interested persons may appeal quality inspection results and that
``holders of the title'' to any lot of peanuts may appeal aflatoxin
test results; provisions allowing peanut lots which meet fall through,
minimum damage and minor defects standards prior to blanching, but fail
for some other reason, to be exempt from fall through, minimum damage
and minor defects standards upon re-inspection after blanching; and the
increase to 10 percent in the quantity of sound whole kernels that may
be contained in a lot of splits for specified peanut varieties.
Section 1308 of the Act requires that USDA take several actions
with regard to peanuts marketed in the United States: Ensure mandatory
inspection on all peanuts marketed in the United States; establish the
Board comprised of industry representatives to advise USDA; and develop
peanut quality and handling standards; and to modify those quality and
handling standards when needed. An interim final rule was published in
the Federal Register (67 FR 57129) on September 9, 2002, terminating
the previous peanut programs and establishing standards in Part 996 to
ensure the continued inspection of 2002 crop year peanuts and
subsequent crop year peanuts, 2001 crop year peanuts not yet inspected,
and 2001 crop year failing peanuts that had not yet met disposition
standards. The initial Board was selected and announced on December 5,
2002. A final rule finalizing the interim final rule was published in
the Federal Register (68 FR 1145) on January 9, 2003, to continue
requiring all domestic and imported peanuts marketed in the United
States to be handled consistent with the handling standards and
[[Page 31726]]
officially inspected against the quality standards of the new program.
The provisions of this new program continue in force and effect until
modified, suspended, or terminated.
Pursuant to the Act, USDA consulted Board members in the review of
the handling and quality standards for the 2003 and subsequent crop
years. USDA conducted a meeting with Board members on April 30, 2003.
The changes were raised and supported by Board members. In addition to
the meeting, USDA received written comments from Board members and
others on recommended changes to the peanut handling and quality
standards.
This rulemaking action continues unchanged: (1) Screen sizes
specified in the outgoing quality standards to allow smaller peanut
kernels of all varieties to enter edible channels; (2) provisions in
the text of the standards specifying that financially interested
persons may appeal quality inspection results and that ``holders of the
title'' to any lot of peanuts may appeal aflatoxin test results; (3)
provisions allowing peanut lots which meet fall through, minimum damage
and minor defects standards, but fail for other reasons, prior to
blanching, to be exempt from fall through, minimum damage and minor
defects standards upon re-inspection after blanching; and (4) the
increase to 10 percent of sound whole kernels that may be contained in
lots of splits for specified peanut varieties. These provisions are
intended to maximize handling efficiency and to provide producers,
handlers, and importers with flexibility to meet current and new market
demands, while maintaining peanut quality and wholesomeness for
consumers.
The quality and handling standards are intended to assure that
satisfactory quality and wholesome peanuts are used in domestic
markets. All peanuts intended for human consumption must be officially
inspected and graded by the Federal or Federal-State Inspection Service
and undergo chemical testing by a USDA laboratory or a private
laboratory approved by USDA. The maximum allowable presence of
aflatoxin is 15 parts per billion (ppb), the same standard as required
under the three previous peanut programs. This tolerance has been in
effect for more than 15 years and was in effect at the time the
previous peanut programs were terminated. Once certified as meeting
outgoing quality standards, peanuts may not be commingled with any
other peanuts that have failed outgoing quality standards or any
residual peanuts from reconditioning operations.
The interim final rule implementing these changes was effective
August 8, 2003 (68 FR 46919; August 7, 2003). A correction to a table
specifying minimum quality standards in that rule was published
September 11, 2003 (68 FR 53490).
Small Kernel Usage
Prior to establishing the quality standards that were applied
during the 2002-03 crop year, a few peanut handler members of the Board
suggested changing the shape and size of the holes in screens used to
sort out small kernels. The changes discussed would have increased the
number of smaller kernels that rode the screens and that could have
entered edible channels.
The shape of the opening, slotted vs. round, is a significant
factor in the number of smaller kernels that fall through or ride the
screens. Slotted screens resemble the shape of peanuts and allow
kernels to fall through as they move down the screen during the sorting
process. Kernels fall through round openings only when striking the
opening on end or ``standing up'' as they move down the screen. When
more kernels ride the screen, more are available for edible channels.
Proponents of smaller kernel use claimed that end product
manufacturers now have markets for smaller, whole kernels. They also
claimed that modern, electronic color sorting technologies can sort out
smaller kernels that are moldy or defective. Opponents, including some
handlers and grower representatives, claimed that the benefits of
increased use of small kernels were not worth the increased risk of
aflatoxin contamination. Based on studies conducted by the Agricultural
Research Service (ARS) going back to at least 1979, the industry was
aware that there is a higher incidence of aflatoxin contamination in
smaller peanut kernels.
Most Board members agreed that new research was needed on small
kernel sizes and aflatoxin contamination before any change was made.
USDA decided not to change screen sizes for the 2002-03 crop year and
asked ARS to conduct another analysis of the incidence of aflatoxin in
small peanut kernels. ARS peanut size and aflatoxin studies using 2002
crop Segregation 3 farmers' stock runner type peanuts from the
Southeast (the peanuts and region most likely to have aflatoxin
contamination) measured the contamination of kernels that rode a 16/64
inch slotted screen and those that rode a 17/64 inch round screen. The
completed results, received by Fruit and Vegetable Programs on January
21, 2003, indicated that there was a small, but not significant,
increase of aflatoxin associated with the smaller peanut kernel size.
Past research has demonstrated that three farmers stock grade
components are associated with aflatoxin. These are damage, loose-
shelled kernels, and small or other kernels, and are often called the
aflatoxin risk components in farmers' stock peanuts. Very little
aflatoxin is associated with high quality farmers stock peanuts
associated with the farmers stock grade referred to as sound mature
kernels and sound splits. Studies conducted by sampling 120
contaminated farmers stock lots, published in 1998, showed that these
three risk components accounted for 93.1 percent of the total aflatoxin
in a farmers stock lot, but only 18.4 percent of the lot kernel mass.
Aflatoxin in sound mature kernels and sound splits, small and other
kernels, loose shelled kernels, and damaged kernels represented 6.9,
7.9, 33.3, and 51.9 percent, respectively, of the total aflatoxin. The
small and other kernels had the lowest risk of the three risk
components. The findings of research performed in previous years were
similar.
ARS believes that the results of the past studies are consistent
with the current studies presented to the Board in April 2003. The
peanuts that rode the 17/64 inch round screen were a mix of sizes from
small to large (not only small kernels as in the past studies). The mix
of sizes was used to better duplicate sheller milling lines and
processing practices. The aflatoxin impact was minimal because small
and other kernels have the lowest aflatoxin risk of the three risk
components and the small kernels composed a small percentage of the
different sizes riding the 17/64 inch round screen. The higher the
percentage of small kernels riding a 17/64 inch round screen, the
greater the aflatoxin impact that small kernels will have on the lot in
question. The percentage of small kernels that fell through the 16/64
inch slotted screen and rode the 17/64 inch round screen varied greatly
from lot to lot in the studies presented to the Board. They averaged
about 7 and 21 percent in the current study, respectively. In the final
analysis, the aflatoxin impact of the smaller kernels was not
significant according to ARS.
The Board discussed the peanut size and aflatoxin study at its
April 30, 2003, meeting, and recommended relaxation of quality
standards to allow smaller peanut kernels to be used for human
consumption because the increase in aflatoxin in small kernels was not
determined to be significant. All Board members agreed that quality and
[[Page 31727]]
wholesomeness are paramount for producers, handlers, and importers, but
the industry believes it can continue to provide buyers with high
quality and wholesome peanuts with changed screen sizes.
Compliance officers report that out of approximately 70 shelling
plants, a total of 60 have electronic sorting technology to sort out
defective small kernels and further improve peanut quality and
wholesomeness. The 10 plants without electronic sorting technology only
shell seed peanuts, which are used for planting and not for shipment to
the edible market. Based on more recent information, these numbers have
been updated from those in the interim final rule.
As shown in the table in Sec. 996.31(a) Minimum Quality Standards:
Peanuts for Human Consumption--Whole Kernels and Splits: Maximum
Limitations, this action continues in effect the change the screen size
for Runner peanuts from a \16/64\ inch by \3/4\ inch slotted to a \17/
64\ inch round opening. These were the sizes and peanut variety used in
the study presented to the Board.
Because Virginia, Spanish, and Valencia varieties do not routinely
experience high aflatoxin content, smaller kernels of those varieties
also are not expected to have significantly increased aflatoxin
contamination. Therefore, for Virginia variety peanuts, the screen size
continues to be a \17/64\ inch round opening (previously the opening
was \15/64\ inch by 1 inch slotted). For the Spanish and Valencia
varieties of peanuts, the change from a \15/64\ inch by \3/4\ inch
slotted opening to a \16/64\ inch round opening also is continued.
Corresponding changes are continued under the ``Lots of splits''
category for ``Sound whole kernels''. For Runner variety split lots,
the screen opening was changed from a \15/64\ inch by 1 inch slotted
opening to a \17/64\ inch round opening. For Virginia variety split
lots, the \14/64\ inch by 1 inch slotted opening was changed to a \17/
64\ inch round opening. For the Spanish and Valencia varieties, the
screen opening was changed from a \13/64\ inch by \3/4\ inch slotted
opening to a \16/64\ inch round opening.
Previously, the table included three columns for fall through. The
first two columns included a maximum 3 percent tolerance for ``Sound
Split and Broken Kernels'' and ``Sound Whole Kernels'', and the third
column included a total tolerance of 4 percent for these categories of
peanuts, except all three columns allowed 6 percent for ``No. 2
Virginia''. A comment received from a handler association subsequent to
the Board meeting suggested combining the three columns into one column
and establishing a total tolerance of 6 percent for sound split,
broken, and small kernels allowed in any lot to bring the tolerances
into conformity with the U.S. Grade Standards for the various types of
peanuts grown and marketed in the United States. These recommendations
were adopted by USDA and implemented in the interim final rule.
This final rule continues the relaxation in the utilization of
small peanut kernels for edible consumption by changing the screens
from slotted to round holes for sound whole kernels and splits as
noted. This relaxation is expected to increase market share for U.S.
peanuts by enabling handlers to sell smaller peanuts to buyers who
purchase less expensive peanuts from other origins for manufacturing
into peanut butter and paste, or similar products.
The screen changes are being implemented at shelling facilities
with minimal or no additional cost to the shellers--either large or
small. The screens with smaller openings were already being used for
split lots and no additional investment for screens should be
necessary. Any adjustments to the packing line as far as screens are
concerned should be easily implemented.
According to Federal-State Inspection Service, all plants in
Georgia shelling Runners and Spanish and Valencia varieties were
already using 17/64 round screens on the Runners and 16/64 screens on
the Spanish and Valencia varieties. The Inspection Service has a supply
of screens for smaller peanut kernels to cover the five new shelling
plants which were expected to begin operations by January 2004. In
addition, the Inspection Service will provide screens for peanut
shellers that need them at a cost per screen of $55.00, plus shipping.
Appeal Procedures
This action also continues in effect in Sec. 996.40(c) provisions
specifying that the ``holder of the title'' to any lot of peanuts may
request an appeal inspection if it is believed that the original
aflatoxin analysis is in error. Appeals for aflatoxin are handled
following procedures specified in the Inspection Service's Instructions
for Milled Peanuts. The aflatoxin sample would be drawn by Federal or
Federal-State Inspection Service inspectors and the appeal analysis
would be performed, and the aflatoxin certificate issued, by USDA or
USDA-approved laboratories.
This action also continues to specify in this section that any
financially interested person may request an appeal inspection if it is
believed that the original quality inspection was in error. These
appeals also would continue to be handled following procedures
specified in the Inspection Service's Instructions for Milled Peanuts.
Federal or Federal-State Inspection Service inspectors would sample and
inspect the peanuts following procedures in the milled peanut
instructions.
All costs involved in conducting appeal inspections are for the
account of the ``holder of the title'' or the financially interested
person requesting the appeal. Under the appeal process, appeals may be
requested verbally. A written request is not necessary.
Re-Inspection of Blanched Lots
Peanut lots which meet quality (grade) standards, including fall
through, damage and minor defects, but which fail on aflatoxin may be
blanched to remove the contaminated kernels. Under the previous
standards, blanched lots had to be re-inspected for damage and minor
defects. In some cases, a peanut lot will pass aflatoxin requirements
but fail damage and minor defect tolerances because the removal of the
skins in the blanching process may expose additional instances of
damage or minor defects that were hidden prior to blanching.
Previously, Sec. 996.50(d) provided that peanut lots certified as
meeting the ``fall through'' standards prior to blanching do not have
to meet ``fall through'' standards when re-inspected after blanching.
The Board recommended that a similar exception be applied for damage
and minor defects to reduce handler-operating costs and to avoid a
possible loss of peanuts. This action finalizes that rulemaking action.
Allow Handlers To Purchase Higher Moisture Peanuts
Section 996.30(b) Moisture specifies that ``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 may be
received and dried to not more 10.49 percent moisture prior to storing
or milling: Provided further, That Virginia-type peanuts used for seed
may be received or acquired containing up to 11.49 percent moisture.''
Handlers may receive high moisture peanuts, but cannot acquire
them. Because of this, any high moisture deliveries from a producer
cannot be mixed with other high moisture
[[Page 31728]]
deliveries. The inability to commingle high moisture peanut deliveries
for drying slows producer deliveries and raises drying costs. It also
raises inspection fees because the peanuts need to be inspected a
second time to verify their moisture levels prior to acquisition.
The Board requested that the 10.49 percent moisture standard be
changed to allow handlers to acquire farmers stock peanuts with a
moisture content up to 25 percent. The Board also recommended the
addition of a provision requiring the producer and handler both to
agree to the sale and acquisition of the high moisture peanuts. The
moisture requirements for Virginia type peanuts for seed were not
recommended for change.
According to some Board members, such a change could make a
significant difference in the efficient acquisition and warehousing of
farmers' stock peanuts each fall. Allowing the acquisition of high
moisture peanuts would allow the handlers to accumulate a number of
loads and batch dry them at the same time. These Board members indicted
that this could speed up the drying, grading, and movement of peanuts
at harvest, which would be especially important when adverse weather
conditions during harvest could cause peanut quality to deteriorate. It
would also reduce drying and inspection costs.
After considering this request and input from the Inspection
Service, USDA continues to believe that the Board's recommendation
needs further review and analysis. The Inspection Service has indicated
that its current shelling equipment cannot properly shell peanuts with
a moisture content higher than 16 to 18 percent, and that it would have
difficulty grading such peanuts. Under currentinspection procedures,
such peanuts are further dried by the producer before incoming
inspection is completed.
Accordingly, USDA believes that the current standards and
procedures should continue to allow the USDA, Board, and peanut
industry time to study this issue further.
The Board met again on this issue in February 2004 and submitted
another recommendation for 2004 and subsequent crop year peanuts. USDA
is now reviewing that recommendation.
Increase Sound Whole Kernel Tolerance
This final rule continues to provide in Sec. 996.31(a) that the
sound whole tolerance for Runner, Spanish, and Valencia peanuts be not
less than 10 percent splits, to bring all the tolerances for sound
whole kernels in lots of splits into conformity with the tolerance for
Virginia variety peanuts. These tolerances are in the Minimum Quality
Standards table for split kernel lots in that paragraph. Previously,
the sound whole kernel content for Runner, Spanish, and Valencia
variety peanuts in lots of splits was four percent. Continuation of
this change is expected to result in fewer split lot rejections for
Runner, Spanish, and Valencia variety peanuts, and reduce handlers'
reconditioning costs.
Effective Time
Section 996.75, Effective time, is finalized to apply to 2003 and
subsequent crop year peanuts, to 2002 and 2001 crop year peanuts not
yet inspected, and to failing peanuts that have not yet met disposition
standards.
Final Regulatory Flexibility Analysis
Pursuant to requirements set forth in the RegulatoryFlexibility
Analysis Act (RFA) the Agricultural Marketing Service (AMS) has
considered the economic impact of this action on small entities.
Accordingly, AMS has 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. The following discussion
addresses RFA concerns and some of the numbers used in the interim
final rule have been changed to reflect the availability of more recent
data.
There are approximately 55 peanut shelling entities, operating
approximately 70 shelling plants, and 25 importers subject to
regulation under the peanut program. An estimated two-thirds of the
handlers and nearly all of the importers may be classified as small
entities, based on the documents and reports received by USDA. Small
agricultural service firms, which include handlers and importers, are
defined by the Small Business Administration (13 CFR 121.201), as those
having annual receipts of less than $5,000,000.
An approximation of the number of peanut farms that could be
considered small agricultural businesses under the SBA definition (less
than $750,000 in annual receipts from agricultural sales) can be
obtained from the 1997 Agricultural Census, which is the most recent
information on the number of farms categorized by size. There were
10,505 peanut farms with sales valued at less than $500,000 in 1997,
representing 86 percent of the total number of peanut farms in the U.S.
(12,221). Since theAgricultural 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 bebetween 80 and 90
percent.
The two-year average peanut production for the 2001 and 2002 crop
years was 3.799 billion pounds, harvested from 1.354 million acres,
yielding 2,806 pounds per acre. The average value of production for the
two-year period was $797.469 million, as reported on the National
Agricultural Statistics Service (NASS) Web site (http://www.nass.usda.gov:81/idepd/report.htm
) in December 2003. The average
grower price over the two-year period was $0.21 per pound, and the
average value per harvested acre was $588. Dividing the two year
average value of production ($797.469 million) by the estimated 12,221
farms (1997 Agricultural Census) yields an estimated revenue per farm
of approximately $65,254.
The Agricultural Census presents farm sizes in ranges of acres, and
median farm size in 1997 was between 50 and 99 acres. The median is the
midpoint ranging from the largest to the smallest. Median farm size in
terms of annual sales revenue was between $100,000 and $250,000.
Several producers may own a single farm jointly, or, conversely, a
producer may own several farms. In the peanut industry, there is, on
average, more than one producer per farm. Dividing the two year average
value of production of $797.469 million by an estimated 25,000
commercial producers (2003 Agricultural Statistics, USDA, Table 11-10)
results in an estimate of average revenue per producer of approximately
$31,899. The figures in this paragraph were adjusted from those in the
interim final rule to reflect more recent information.
The current 14 custom blanchers, 8 custom remillers, 4 oilmill
operators, 4 USDA and 15 USDA-approved private chemical (aflatoxin)
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. These requirements
are applied uniformly to these entities, whether large or small. In
addition, there are currently 10 State inspection
[[Page 31729]]
programs (Inspection Service) that will perform inspection under this
peanut program.
Importers of peanuts cover a broad range of business entities,
including fresh and processed food handlers and commodity brokers who
buy agricultural products on behalf of others. Under the 2003 import
quotas, approximately 25 business entities have only imported
approximately 44 percent of the 126.6 million pounds of low duty quota
peanuts (sometimes called duty free quota peanuts) compared with 37
entities which had imported 100 percent of the quotas by April 5, 2002.
The current import quota period began January 2, 2003, for Mexico,
April 1, 2003, for Argentina and ``Other countries'', and September 23,
2003, for Israel. Some large, corporate handlers are also importers of
peanuts. AMS is not aware of any peanut producers who imported peanuts
during any of the recent quota years. The majority of peanut importers
have annual receipts under $5,000,000. Some importers use customs
brokers' import services. These brokers are usually held accountable by
the importer to see 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, importers, and above mentioned entities may
be classified as small businesses. Also, financially interested persons
who may appeal quality inspection results, and ``holders of the title''
to any lot of peanuts who may appeal aflatoxin test results may include
small entities.
Smaller Kernel Sizes
Changing screen sizes used in handling peanuts will allow smaller
kernels of all varieties to be used for edible purposes. Proponents of
smaller kernel use claim that manufacturers of peanut products now have
markets for smaller whole kernels, and that this rule change will
enable them to take advantage of this recent shift in the marketplace.
Market share for U.S. peanuts is expected to rise because the rule
enables handlers to sell smaller peanuts to buyers who would otherwise
purchase less expensive peanuts from other origins for manufacturing
into peanut butter and paste, and other similar products. This rule
continues to implement a relaxation in the utilization of small peanut
kernels by changing the screens used for sorting sound whole kernels
and kernels with splits from a slotted screen to one with round holes.
The equipment for this change is currently in use for split lots in
most shelling facilities. This change should therefore require little
or no additional investment for most shellers, large or small.
The Inspection Service has a supply of screens for smaller peanut
kernels to cover the five new shelling plants which were expected to
begin operations by January 2004. In addition, the Inspection Service
will provide screens for peanut shellers who need them, at a cost per
screen of $55.00, plus shipping.
Although the chances of aflatoxin contamination in small kernels is
not significant, proponents of the rule change claim that modern
electronic color sorting technologies can sort out the moldy or
defective kernels, thus ensuring that the new screens will not have a
negative impact on the quality and wholesomeness of peanuts entering
edible food channels. Shellers that already have this technology will
have little or no additional cost.
Compliance officers report that out of approximately 70 shelling
plants only 10 do not have electronic sorting technology. These latter
plants only shell seed peanuts, which are used for planting and are not
for shipment to the edible market.
Re-Inspection of Blanched Lots
This rule continues to allow shelled lots that are being
reconditioned to be excluded from re-inspection for fall through,
damaged kernels, and minor defects standards if the lot originally met
these quality standards, but failed for aflatoxin. Such lots may be
blanched to remove the aflatoxin contaminated kernels and do not have
to be graded for fall through, damaged kernels, and minor defects upon
reinspection. The primary benefit of this final rule is to reduce
handler operating costs and avoid an additional loss of peanuts.
Allow Handlers To Acquire High Moisture Peanuts
This rule also maintains the longstanding maximum moisture
tolerance for farmers stock peanuts received or acquired by handlers at
10.49 percent: Provided, That peanuts of a higher moisture content may
be received and dried to not more than 10.49 percent 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. As mentioned earlier, the Board met again to review this
matter in February 2004 and made another recommendation to allow high
moisture peanuts to be acquired. This recommendation is being reviewed
by USDA.
Increased Sound Whole Kernel Tolerance
The Minimum Quality Standards table in Sec. 996.31(a) provides
standards for split kernel lots by specifying the maximum percentage of
sound whole kernels permitted in a lot. For Virginia variety peanuts,
sound whole kernel content has been limited to 10 percent of the lot by
weight. For Runner, Spanish, and Valencia varieties, the sound whole
kernel content had been limited to four percent prior to the issuance
of the interim final rule.
The interim final rule relaxed the Sound Whole Kernel tolerance for
Runner, Spanish, and Valencia variety peanuts to 10 percent, the same
tolerance that has applied to Virginia variety peanuts. The primary
benefit of this rule change would be to lower costs and increase sales
revenue by rejecting fewer lots of the Runner, Spanish, and Valencia
varieties for splits. No adverse financial impact is expected from
making this standard uniform for all four varieties.
The impact of this change is not expected to be different between
large and small entities.
Appeal Procedures
Continuing the addition of procedures allowing handlers, shellers,
buyers or manufacturers to appeal aflatoxin test results and any
financially interested person to appeal quality inspection results will
be useful to those requesting appeals and to the inspectors drawing the
samples and performing the inspections and tests. With specified appeal
procedures, all parties involved should benefit.
USDA has considered alternatives to the suggested changes to the
quality and handling standards. The Act requires USDA to consult with
the Board on these standards. An alternative would have been to
continue the 2002-03 crop year standards for the 2003-04 crop year
without finalizing any of the recommended changes suggested by the
Board at its April 30, 2003, meeting. The Board's meeting was widely
publicized throughout the peanut industry and as a public meeting both
large and small entities were allowed to attend and express their
views.
Because of the anticipated benefits of some of the Board's
recommended changes, USDA believes that finalizing those changes is
preferable to continuing without any changes.
USDA has not identified any relevant Federal rules that duplicate,
overlap, or conflict with this final rule. A small
[[Page 31730]]
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//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.
The interim final rule concerning these changes was published in
the Federal Register (68 FR 46919) on August 7, 2003. A document
correcting the table specifying minimum quality standards was published
in the September 11, 2003, issue of the Federal Register (68 FR 53490).
Copies of the rule were provided to all Board members and peanut
handlers. In addition, the rule was posted on the AMS web site
specified above and was available through the Internet by the Office of
the Federal Register. The interim final rule provided that comments
received by September 8, 2003, would be considered in finalizing the
rulemaking action.
Four comments were received from a peanut shellers' association, a
peanut sheller, a growers' cooperative marketing association, and a
manufacturer of peanut products.
The representative of the peanut shellers' association stated that
while the association supported the Board's recommendation allowing
handlers to acquire farmers stock peanuts with a moisture content up to
25 percent, provided they were dried to not more than 10.49 percent
moisture prior to storing or milling, they understood USDA's concern
about problems of grading efficiency from too high a level of moisture.
The commenter urged the Secretary to allow up to 16 percent moisture.
USDA continues to believe that further industry dialogue is needed on
this matter. The Board met in February 2004 to further discuss this
matter and made another recommendation. USDA is reviewing that
recommendation.
The peanut product manufacturer believes that the proposal to allow
smaller peanut kernels of all varieties to enter the edible channels is
a move in the wrong direction. The commenter is concerned that an added
quantity of small kernels in each lot will increase the aflatoxin ``hot
spots'' and add to manufacturer risk and processing costs. Secondly,
this commenter expressed concern that a greater incidence of off
flavors in peanut products is likely to result from increased
quantities of small kernels and that this will give product
manufacturers reasons to reformulate their products using fewer
peanuts. The representative of the peanut growers cooperative marketing
association also mentioned the flavor characteristics of small kernels
as a potential industry marketing problem.
The ARS study cited previously in this rule addressed the potential
for increased aflatoxin arising from allowing more small kernels to be
marketed for edible products. That study found that the aflatoxin
impact of the smaller kernels was not significant enough to warrant
concern.
With regard to the off flavor of small kernels, several industry
representatives at last year's Board meeting also cited the flavor of
small kernels as a quality factor that should weigh against the use of
smaller peanut kernels. Such concerns were not mentioned or addressed
at this year's Board meeting. However, as experience with the use of
small kernels develops, further review of the matter may be
appropriate.
The growers' association representative also reiterated concerns
raised in writing to AMS in June 2003. The commenter contended that the
farmers would not benefit from allowing smaller kernels because the
rule change only applied to outgoing quality standards and not to
incoming farmers stock.
This commenter believes that the screen sizes for incoming farmers
stock peanuts should be changed to benefit producers. Currently,
farmers stock peanuts are sampled and graded, resulting in a percentage
of sound mature kernels and a percentage of other kernels. Under the
outgoing screen size changes, some of the ``other kernels'' are allowed
to be used by the sheller for edible higher valued purposes. The
commenter stated that if the same screen sizes were applied to the
farmers stock grade, then some of the ``other kernels'' which had been
classified as such would become ``sound mature kernels'', and what were
once 7 cents per pound peanuts would become 23-25 cents per pound
peanuts as ``sound mature kernels''. That would substantially benefit
the producer. The implementation of screen size changes for incoming
farmers stock peanuts is outside the scope of this rulemaking action.
Further, USDA believes that the Board should further review this issue.
An additional concern expressed by this commenter was that the
benefit of additional small kernels purchased by handlers could be
somewhat offset by subsequent reduced purchases of farmers stock
peanuts, leading to forfeitures of peanuts under loan and increased
government expenditures. The commenter estimated such a loss at over
$18 million. However, USDA views this scenario as unlikely. The
additional quantities of smaller kernels acquired by shellers are
expected to be fully used by manufacturers to meet additional market
needs, without offsetting other peanut sales. Accordingly, USDA
continues to believe that the rule change will return a net benefit to
the industry
This commenter also reiterated earlier concerns raised in writing
to AMS in June 2003 concerning the reinspection of blanched peanuts and
the potential for allowing poor quality peanuts to enter edible
consumption channels. The commenter contended that these changes would
allow pickouts with any amount of damage or undersize kernels to meet
requirements for human consumption. There are appropriate safeguards in
the program procedures to prevent such occurrences. There is a paper
trail that ties the pickouts resulting after blanching back to the
original lot. This would help prevent a new lot of pickouts with any
content of excess damage, undersized kernels, or other defects to be
used for human consumption.
This commenter also questioned the fact that the changes
implemented by the interim final rule applied to 2002 and 2001 crop
year peanuts not yet inspected and to failing peanuts that had not yet
met disposition standards. This commenter believes that the standards
should be applied on a crop year basis, rather than on a continuing
basis.
With application on a crop year basis, the commenter believes that
handlers with old crop inventories would not benefit from the changes
for the new crop, and those who have disposed of their inventories
would not be unfairly treated. Under the prior peanut marketing
agreement program, regulations were effective on a crop year basis.
However, in implementing section 1308 of the 2002 Farm Bill, USDA
concluded that a continuing regulation rather than one effective on a
crop year basis would better serve the peanut industry. Not only would
this allow industry members to better plan their business activities
but also changes could be made if deemed appropriate at any given time.
Accordingly, no change is made based upon this comment.
Finally, the commenter expressed concern that comments from all
persons received by AMS must be considered. USDA considers all
available information from any interested person and source in our
deliberations concerning this program. Such information was taken into
consideration in this action.
[[Page 31731]]
The sheller comment correctly pointed out several mistakes in the
Minimum Quality Standards table following paragraph (a) in Sec.
996.31. These errors were corrected in a document published in the
Federal Register on September 11, 2003 (68 FR 53490).
Information Collection
The Act specifies in section 1604(c)(2)(A) that the standards
established pursuant to the Act, may be implemented without regard to
the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).
Furthermore, this rule does not change the existing information
collection burden.
After consideration of all relevant material presented, including
the Board's recommendations, comments received, and other information,
the interim final rule as published in the Federal Register on August
7, 2003 (68 FR 46919), together with the corrections published on
September 11, 2003 (68 FR 53490) is finalized without change.
List of Subjects in 7 CFR Part 996
Food grades and standards, Imports, Peanuts, Reporting and
recordkeeping requirements.
PART 996--MINIMUM QUALITY AND HANDLING STANDARDS FOR DOMESTIC AND
IMPORTED PEANUTS MARKETED IN THE UNITED STATES
0
Accordingly, the interim final rule amending 7 CFR Part 996 which was
published at 68 FR 46919 on August 7, 2003, and corrected at 68 FR
53490 on September 11, 2003, is adopted as a final rule without change.
Dated: June 2, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-12787 Filed 6-4-04; 8:45 am]
BILLING CODE 3410-02-P