[Federal Register Volume 62, Number 6 (Thursday, January 9, 1997)]
[Rules and Regulations]
[Pages 1249-1275]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-283]


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DEPARTMENT OF AGRICULTURE
7 CFR Parts 997, 998, and 999

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


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

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule relaxes, for 1996 and subsequent crop peanuts, 
several provisions regulating the handling and disposition of 
domestically and foreign-produced peanuts marketed in the United 
States. The rule eliminates several requirements covering the 
disposition of inedible peanuts. At the same time, it provides 
safeguard measures including amendments to the aflatoxin provisions to 
prevent inedible peanuts from entering human consumption outlets. The 
rule increases opportunities for reconditioning failing peanut lots and 
reduces inspection and handling costs to handlers and importers. The 
changes were recommended by the Peanut Administrative Committee 
(Committee), the administrative agency which oversees the quality 
assurance program under Peanut Marketing Agreement No. 146 (7 CFR Part 
998, Agreement). By law, the same or similar regulations issued under 
the Agreement also must be issued under Part 997 regulating non-
signatory peanut handlers, and Part 999.600 regulating peanut 
importers. This rule includes changes recommended by the Department to 
help ensure effective safeguard measures. The changes should enable the 
industry to be more competitive in the changing international peanut 
market.

EFFECTIVE DATES: 1. Sections 997.20, 997.30, 997.40, 997.50, 997.51, 
997.52, 997.53, 997.54, 998.100, and 998.200 are effective January 13, 
1997. Section 999.600 is effective January 14, 1997.

FOR FURTHER INFORMATION CONTACT: Jim Wendland, Marketing Specialist, 
Marketing Order Administration Branch, Fruit and Vegetable Division, 
AMS, USDA, P.O. Box 96456, room 2525-S, Washington, D.C. 20090-6456; 
telephone: (202) 720-2170, or fax: (202) 720-5698. Small businesses may 
request information on compliance with this regulation by contacting: 
Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable 
Division, AMS, USDA, P.O. Box 96456, room 2525-S, Washington, D.C., 
20090-6456; telephone: (202) 720-2491, fax: (202) 720-5698.

SUPPLEMENTARY INFORMATION: This final rule is issued under Peanut 
Marketing Agreement No. 146 (7 CFR Part 998); the non-signatory handler 
peanut regulation (7 CFR Part 997); and the peanut import regulation 
published in the June 19, 1996, issue of the Federal Register (61 FR 
31306, 7 CFR Part 999.600). These programs regulate the quality of 
domestically produced peanuts handled by Agreement signers and non-
signers as well as imported peanuts. The first two Parts are effective 
under the Agricultural Marketing Agreement Act of 1937, as amended (7 
U.S.C. 601-674), hereinafter referred to as the ``Act.'' Part 999 is 
effective under section 108B(f)(2) of the Agricultural Act of 1949, as 
amended (7 U.S.C. 1445c-3).
    The Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is not intended to have retroactive 
effect. This final rule will not preempt any State or local laws, 
regulations, or policies, unless they present an irreconcilable 
conflict with this rule. There are no administrative procedures which 
must be exhausted prior to any judicial challenge to the provisions of 
this rule.
    Domestic peanut production in 1995 was 1.76 million tons, with a 
farm value of slightly over $1 billion.
    The objective of the two domestic programs and the import 
regulation is to ensure that only high quality and wholesome peanuts 
enter human consumption markets in the United States. About 70 percent 
of domestic handlers, handling approximately 95 percent of the crop, 
have signed the Agreement. The remaining 30 percent are non-signatory 
handlers handling the remaining 5 percent of domestic production. The 
1995 duty-free import quota was equal to approximately 2 percent of 
1995 domestic production.
    Under the three regulations, farmers stock peanuts with visible 
Aspergillus flavus mold (the principal source of aflatoxin) are 
required to be diverted to inedible uses. Each lot of milled peanuts 
must be sampled and the samples chemically analyzed for aflatoxin 
content. Costs to administer the Agreement and to reimburse the 
Department for oversight of the non-signatory program are paid by an 
assessment levied on handlers in the respective programs.
    The Committee, which is composed of producers and handlers of 
peanuts, meets at least annually to review the Agreement's rules and 
regulations, which are effective on a continuous basis from one year to 
the next. Committee meetings are open to the public, and interested 
persons may express their views at these meetings. The Department 
assesses Committee recommendations, as well as information from other 
sources, prior to making any recommended changes to the regulations 
under the Agreement.
    Public Law 101-220 amended section 608b of the Act in 1989 to 
require that all peanuts handled by persons who have not entered into 
the Agreement (non-signers) be subject to the same quality and 
inspection requirements to the same extent and manner as are required 
under the Agreement. The non-signatory handler regulations have been 
amended several times thereafter and are published in 7 CFR part 997.
    Similarly, recent amendments to the Agricultural Act of 1949 
require that all foreign produced peanuts in the domestic market fully 
comply with all quality standards under the Agreement. Section 
999.600--Specialty Crops; Import Regulations was added to 7 CFR part 
999 on June 19, 1996 (61 FR 31306), to establish minimum quality, 
identification, certification and safeguard requirements for foreign-
produced farmers stock, shelled and cleaned-inshell peanuts presented 
for importation into the United States.
    Thus, the changes to the Agreement's regulations, as established in 
this final rule, also are established for the peanut non-signer and 
import regulations.
    According to the Committee, the domestic peanut industry is 
undergoing a period of great change. The Committee bases its view, in 
part, on findings in a

[[Page 1250]]

May, 1996 study entitled ``United States Peanut Industry Revitalization 
Project'' developed by the National Peanut Council and the Department's 
Agricultural Research Service. According to the study, the U.S. peanut 
industry has been in a period of dramatic economic decline since 1991 
because of: (1) Decreasing consumption of peanuts and peanut products; 
(2) accompanying decreases in U.S. peanut production and increases in 
production costs; and (3) increasing imports of peanuts and peanut 
products.
    The study shows that peanut consumption has declined. Between 1991 
and 1994, per capita peanut consumption steadily declined a total of 11 
percent. Peanuts used in primary products declined 12 percent, and 
peanuts used in peanut butter (the largest product usage) declined 20 
percent.
    Among other things, the study shows that harvested acreage of 
peanuts in the U.S. declined 25 percent between 1991 and 1995. 
Production has fluctuated downward, with 1995 production 30 percent 
below that of 1991. Farm value of peanut production has dropped 29 
percent (from $1.4 billion to slightly over $1 billion) in the same 
period.
    The study points to recent increases in the duty-free import quota 
for raw peanuts. The volume of imported peanuts has, indeed, increased 
due to recent relaxations of the duty-free quota enacted through the 
legislation to implement the North American Free Trade Agreement 
(NAFTA) and the Uruguay Round Agreements under the General Agreement on 
Tariffs and Trade (GATT). Prior to 1994, the volume of imported peanuts 
was limited, in most cases, to 1.71 million pounds annually. However, 
the Schedule of the United States annexed to NAFTA, implemented on 
January 1, 1994, provided duty-free entry for up to approximately 7.43 
million pounds of qualifying peanuts from Mexico. The duty-free access 
for Mexican peanuts increased to approximately 7.88 million pounds in 
1996 and is scheduled to be approximately 8.1 million pounds in 1997. 
In calendar year 2008, access for Mexican peanuts will be unlimited. In 
addition, the United States Schedule to the Uruguay Round Agreements 
under GATT increased the peanut import quota to 76.8 million pounds in 
1996 from all countries except Mexico, with additional annual increases 
of approximately 10 million pounds to reach a ceiling of 125 million 
pounds by the year 2000 for all imported peanuts.
    The study shows that imports of peanut butter from 1991 to 1996 
increased 116 percent. More significantly, the study reports that 
imported peanut butter's share of U.S. peanut butter consumption 
increased 12 fold between 1988 and 1993.
    The study also makes projections for the near future. Farmer 
production costs and revenue are projected to be equal by the year 
2000, as are handler costs and revenue. Total imports of shelled 
peanuts and paste are expected to increase 50 percent by the year 2000 
and the U.S. position in the world market is expected to drop 7 percent 
between 1995 and 1996.
    In addition, the modifications in the Federal government's peanut 
quota and price support program under the Federal Agriculture 
Improvement and Reform Act of 1996 will result in the domestic industry 
undergoing changes over the next few years. The study shows that the 
quota poundage was reduced over 20 percent between 1991 and 1995, and 
the support price dropped from $670 per ton in 1995 to $610 in 1996.
    The Committee contended that all of these factors combined show 
that the domestic peanut industry is in decline and that the outlook is 
not expected to change without some positive intervention by the 
industry.
    In mid-1994, the Committee appointed a subcommittee to evaluate the 
present program and to recommend changes. The Agreement's handling 
regulations were evaluated with the intent of streamlining procedures 
and making them consistent with current industry economies and 
technological developments.
    Different recommendations were developed for streamlining both 
incoming and outgoing handling procedures. The recommendations focused 
on handlers' freedom to prepare and dispose of peanut lots according to 
economic incentives of the marketplace. For instance, restrictions that 
prevent certain lots failing quality requirements from being blanched 
or remilled would be removed so that more peanuts could be 
reconditioned to meet human consumption requirements. Also, provisions 
throughout the Agreement regulations require that certain lots be kept 
separate and apart from other, similar peanut lots. For the most part, 
these provisions tend to limit handlers' flexibility to move and 
recondition peanuts. The subcommittee contended that such provisions 
may work against optimum utilization of equipment and facilities and 
prevent handlers from making the most economic use of their peanut 
inventories. Further, peanut processing machinery has been improved 
through technological advances to the point that virtually any lot of 
peanuts, regardless of original (incoming) quality, can now be shelled, 
remilled and/or blanched (processed) to meet outgoing quality 
requirements of the Agreement and the non-signer program. It was the 
opinion of the subcommittee that handlers should have the option of 
deciding whether it is more economically advantageous to recondition a 
lot or send it to an inedible peanut outlet.
    Subcommittee members also recommended that many of the requirements 
controlling disposition of inedible peanuts be removed because those 
requirements should be placed on buyers rather than handlers. The 
subcommittee contended that peanuts either pass or fail quality and 
aflatoxin requirements, and the requirements limiting disposition based 
on aflatoxin content (restricted and unrestricted dispositions) should 
be removed.
    The subcommittee contended further that these changes, primarily 
relaxations, could be made without limiting the effectiveness of the 
Agreement's quality assurance program. As long as all peanut lots 
intended for human consumption continue to be sampled and tested 
against current outgoing requirements, the industry's high quality 
standards would be maintained.
    These recommendations represented a fundamental change in the 
Agreement's handling regulations. The full Committee met three times 
from March to May 1996, to review all of the recommendations. At a May 
23, 1996, meeting the Committee recommended the changes to the 
Agreement's incoming and outgoing regulations for 1996 and subsequent 
crop peanuts. After review and modifications to some of the 
recommendations, the Department added an additional safeguard procedure 
for imported peanuts and published the recommendations in the Federal 
Register (61 FR 51811) on October 4, 1996. Because of extent of the 
recommended changes, the three peanut regulations were published in 
their entirety. A three-week comment period was provided for interested 
parties to submit comments. Twelve comments were received by the end of 
the comment period, October 24, 1996.
    Seven comments were received from signatory handlers, two from 
growers cooperatives, and one on behalf of the Committee. All of the 
comments support the changes which effect the domestic signer and non-
signer programs. Two comments were received from importers opposing the 
proposed additional reporting requirement on importers.

[[Page 1251]]

    The Department requested comments on whether implementation of the 
proposed changes after the beginning of the crop year would have an 
unequal effect on one or more of the production areas or unequally 
affect small or large handlers. Nine commenters responded that the 
proposed changes should be implemented as soon as possible and should 
be in effect for the entire 1996 crop year. No comments were received 
opposing implementation of the changes for the 1996 crop year.
    Further, seven commenters stated that the proposed changes would 
not have an adverse affect on small peanut handlers. No comments were 
received from persons claiming to be or to represent small businesses.
    The comment submitted on behalf of the Committee recommended 
revising the proposed regulatory text covering the requirement that all 
peanuts be chemically tested for aflatoxin prior to disposition for 
human consumption. The comment does not change the meaning or intention 
of the proposal. This comment is addressed below.
    One commenter suggested that the handling regulations be further 
changed by eliminating the Segregation categories specified in the 
incoming regulations. Such a relaxation could increase the volume of 
cheaper peanuts available for processing for edible consumption. The 
idea was considered and ultimately rejected by the Committee at 
meetings prior to the May meeting because no agreement could be reached 
on provisions to ensure appropriate compensation for producers. After 
considering the comment and deliberations taken by the Committee at the 
previous meetings, the Department has determined that the comment 
should not be included in this rulemaking action.
    Two commenters correctly pointed out that the support price of the 
Department's Farm Service Agency (FSA) peanut quota program is not 
scheduled to be reduced below the current $610 per ton, as indicated in 
the proposed rule. This statement is corrected.
    One comment was received from a peanut producers association which 
addressed several issues relating to FSA's quota program. The comments 
did not have relevance to the proposed handling changes in this 
rulemaking.
    Three commenters addressed the Department's proposed additional 
import requirement covering foreign-produced peanuts which are admitted 
into the U.S. and stored in warehouses for more than 30 days prior to 
the opening of the duty-free import quota. Two importers opposed the 
requirement and one commenter representing a domestic growers 
cooperative agreed with the additional requirement. The requirement and 
the Department's decision not to accept the opposing comments are 
discussed below.
    Of the nine comments received which addressed the effective date of 
the regulations, all indicated that the rule should be implemented as 
soon as possible. Several commenters stated that the entire industry is 
expecting the changes to be made effective for the entire 1996 crop 
year. However, handling actions already taken should not be subject to 
such requirements. Thus, the actions taken in this final rule are not 
intended to cover the entire 1996 crop year. Four commenters stated 
that additional delays in implementation will adversely affect the 
industry.
    This final rule changes, for 1996 and subsequent crop peanuts, 
several provisions regulating the handling of domestic and foreign-
produced peanuts and relaxes disposition requirements of such peanuts 
to inedible peanut outlets. The rule increases the volume of peanuts 
that can be handled and used for human consumption without decreasing 
the quality requirements for such disposition. Restrictions are removed 
on handler acquisition for human consumption use of certain farmers 
stock lots failing incoming inspection because of excess loose shelled 
kernels and fall-through peanuts. Positive lot identification (P.L.I.) 
requirements for seed peanuts are removed. Shelled peanut lots meeting 
Indemnifiable Grade or Superior Grade requirements may be sent to human 
consumption outlets prior to the handler receiving aflatoxin 
certification of the lot. Restrictions are removed on remilling and 
blanching of peanut lots exceeding certain damage and foreign material 
content levels. The maximum allowable aflatoxin content of peanut lots 
disposed to inedible peanut outlets, such as animal feed or wildlife 
seed, or are exported, is raised from 25 ppb to 300 ppb. Previous 
provisions on ``restricted'' and ``unrestricted'' dispositions, 
``fragmented'' peanuts, and peanut meal are removed. Peanut lots 
testing above 300 ppb aflatoxin content, which are not reconditioned, 
may only be crushed for oil. Safeguard measures are established 
requiring aflatoxin certifications for inedible lots exceeding 15 ppb 
aflatoxin content. Finally, the volume and storage location of foreign-
produced peanuts arriving in the U.S., which are inspected and stored 
in Customs bonded warehouses for more than one month prior to filing 
for consumption entry, must be filed with AMS.
    Because this rulemaking involves substantial changes to the text of 
the three peanut regulations, the explanation of the changes to each 
program is repeated in this final rule. Comments received are included 
in the discussion of each change in regulation. The Department also 
makes a few changes to correct inadvertent omissions and redundancies 
in the regulatory text of the three programs.

Incoming Regulations

    Loose shelled kernels: The Committee recommended amending 
Sec. 998.100 Incoming quality regulation by removing paragraph (d) 
Loose shelled kernels which regulates the acquisition of loose shelled 
kernels (LSKs) and other defective kernels. The regulations should 
focus more on outgoing quality and less on the shelling and milling 
processes necessary to meet the outgoing, human consumption 
requirements. New, high technology milling and blanching equipment 
enables handlers to recondition failing peanut lots that could not have 
been reconditioned when the regulations were promulgated. It is no 
longer necessary to impose restrictions that hinder efficiency of 
handling operations and result in the loss of potentially good quality 
peanuts. Therefore, this final rule removes paragraph (d)(1) from the 
incoming regulations. In doing so, restrictions are removed on 
acquiring farmers stock peanuts with more than 14.49 percent LSKs and 5 
percent fall-through from specified screen sizes.
    For the non-signer regulation, paragraph (d) Loose shelled kernels 
in Sec. 997.20 corresponds to paragraph (d) of the Agreement's 
Sec. 998.100 and is removed for the reasons cited above and to be 
consistent with corresponding changes to the Agreement. For the import 
regulation, paragraph (b)(1)(iv) Loose shelled kernels of Sec. 999.600 
also is removed for the reasons cited above.
    The Committee recommended removing paragraph (d)(2) of Sec. 998.100 
which requires that handlers submit to the Committee diagrams of their 
handling facilities and procedures. This provision is no longer 
considered necessary for the Committee's oversight of the signatory 
handlers and is removed.
    The non-signer regulation and the import regulation do not have 
paragraphs corresponding to paragraph (d)(2) of Sec. 998.100.
    Seed peanuts: The Committee recommended removing the requirement in 
old Sec. 998.100, paragraph (e) Seed peanuts that required handlers who 
receive or acquire seed residuals to hold and mill such peanuts 
separate and

[[Page 1252]]

apart from other edible quality peanuts. As long as the peanuts sent to 
human consumption outlets must ultimately meet outgoing requirements, 
including certification as negative to aflatoxin, it is not necessary 
to hold those peanuts separate and apart from other lots also destined 
for edible consumption. Therefore, this final rule amends paragraph (e) 
of Sec. 998.100 by removing the requirement that handlers hold and mill 
seed residuals separate and apart from other edible quality peanuts.
    The Department makes a correction to paragraph (d)(2) as published 
on page 51824 of the proposed rule. The second sentence is not 
correctly worded and should refer to seed peanuts which ``have'' 
visible Aspergillus flavus mold. The words ``are free from'' are 
removed from the second sentence as published in the proposed rule. The 
sentence has been revised accordingly in this final rule.
    For the non-signer regulation, paragraph (e) Seed peanuts in 
Sec. 997.20 contains different wording but the same meaning and intent 
as the Agreement regulation's seed provisions. The changes made to 
paragraph (e) of the Agreement regulation concerning holding and 
milling seed peanuts separate and apart from other peanuts also are 
made to Sec. 997.20 paragraph (e) of the non-signer regulation for the 
reasons cited above and to be consistent with corresponding changes to 
the Agreement.
    For the import regulation, paragraph (b)(2) Seed peanuts in 
Sec. 999.600, also is changed accordingly. Further, old paragraph 
(b)(2) provided that Segregation 2 and 3 peanuts may be shelled for 
seed purposes, but must be dyed or chemically treated to indicate the 
peanuts are unfit for human or animal consumption. That requirement was 
provided in paragraphs (i)(1) and (2) of Sec. 998.200--which are 
removed in this final rule (discussed below). Thus, this rule finalizes 
changes to import regulation paragraph (b)(2) by removing the 
requirement that Segregation 2 and 3 seed peanuts must be dyed or 
chemically treated. Finally, the second sentence of the import 
regulation paragraph (b)(2), which covered reporting disposition to the 
Secretary, is removed because the information is adequately covered in 
the last two sentences of the same paragraph.
    Oilstock: In old paragraph (f) of Sec. 998.100, the Committee 
recommended removing the prohibition on exporting inedible quality 
peanuts to Canada or Mexico and removing references to ``fragmented'' 
peanuts. The Committee members expressed the point that other countries 
ship inedible and unfragmented peanuts to Canada, Mexico, and other 
international markets, so domestic handlers should not deny themselves 
access to the same international markets. Further, removing the term 
``fragmented'' from paragraph (f) of Sec. 998.100 allows the term 
``peanuts'' to refer to peanuts in any form, including fragmented 
kernels, which may be acquired by handlers for crushing or export. 
Therefore, this final rule removes from old paragraph (f), the 
prohibition on exporting inedible quality peanuts to Canada and Mexico, 
and references to fragmented peanuts and the term ``shelled'' is also 
removed, where appropriate, for the same reason. Old paragraph (f) also 
is redesignated as paragraph (e).
    For the non-signer regulation, the prohibition on exports to Canada 
and Mexico and the requirement of fragmentation is removed to make 
paragraph (f) of Sec. 997.20 consistent with the changes to the 
regulations under the Agreement.
    In Sec. 999.600 of the import regulation, paragraph (b)(3) Oilstock 
and exportation does not restrict exports and so no corresponding 
change is needed.
    Finally, in Sec. 998.100, the Committee recommended removing 
paragraph (j) which covers disposition of shelled peanuts for use as 
animal feed. This paragraph contained restrictions which are not 
necessary to safeguard the quality of peanuts for human consumption. 
Appropriate safeguard measures are provided in replacement provisions 
discussed below. Therefore, this final rule removes paragraph (j) from 
the Agreement regulations.
    In this final rule, corresponding paragraph (h) in Sec. 997.20 of 
the non-signer regulation is removed for the reason cited above. 
Paragraph (i) of Sec. 997.29 is retained because it applies to 
producer/handlers handling peanuts of their own production. Such farm-
stored peanuts must meet the requirements of the non-signer regulation. 
Paragraph (i) is redesignated as paragraph (g) in Sec. 997.20.
    The import regulation does not have a paragraph corresponding 
specifically to the Agreement regulation's paragraph (j) on animal 
feed. The topic is addressed in paragraph (e) of the outgoing 
regulations, the removal of which is discussed below.

Outgoing Regulations

    Paragraph (a) of Sec. 998.200 Outgoing quality regulation provides 
that peanut lots meeting the indemnifiable grade requirements in Table 
2 do not have to be tested and certified as negative as to aflatoxin. 
The Committee recommended modifying this requirement to provide that 
all lots (including indemnifiable grade lots) intended for human 
consumption be chemically tested and certified ``negative'' as to 
aflatoxin content. The change makes the Agreement regulations 
consistent with current industry practice. Most, if not all, buyers 
require that all peanuts for human consumption be certified negative as 
to aflatoxin. This change has a twofold purpose--it codifies a practice 
which is common in the industry, and ensures that the regulations 
effectuate the objectives of the Agreement. This final rule modifies 
paragraph (a) accordingly.
    Currently, peanut lots meeting the grade requirements of Table 1, 
Other Edible Quality, must be certified negative to aflatoxin prior to 
shipment to the buyer. This requirement is not changed. Further, under 
previous industry practice, indemnifiable grade peanut lots were 
chemically tested and certified while the lot was in transit to the 
buyer. This practice is continued under the final rule and the actual 
transfer of lot ownership should not normally occur until certification 
has been received by the handler. A shorter turn-around time for 
chemical analysis is now possible with current testing practices and 
equipment, overnight and express mail services, and fax transmissions 
of test results.
    The comment filed on behalf of the Committee correctly points out 
that proposed paragraph (a)(2) in Sec. 998.200, which is between the 
two tables on page 51826, could be interpreted to mean that all shelled 
peanut lots must meet indemnifiable grade requirements. The Department 
agrees that this is not the intent of the Committee's recommendation. 
The commenter suggested that paragraph (a)(2) in the proposed rule be 
re-arranged to read as follows: ``Prior to disposition to human 
consumption outlets, peanuts which have been certified as meeting the 
requirements for indemnifiable grades must also be certified 
``negative'' as to aflatoxin. Maximum limitations for indemnifiable 
grades are as follows:'' This final rule makes the commenter's 
recommended change to paragraph (a)(2) of Sec. 998.200 of the Agreement 
regulations and also to paragraph (a)(1)(ii) of Sec. 997.30 of the non-
signer regulations. The corresponding paragraph in the import 
regulation does not need to be changed.
    The Department also corrects the title of Table 1 in Sec. 998.200 
of the Agreement regulations. The word ``Non'' was inadvertently left 
out of the title, which should read: Table 1--``Other Edible Quality'' 
(Non-Indemnifiable) Grades--Whole Kernels and Splits. This error

[[Page 1253]]

appears twice in the proposed rule because Table 1 begins on page 51825 
and is continued on page 51826. The titles of the corresponding tables 
in the non-signer or import regulation do not refer to 
``indemnifiable'' peanuts and do not have to be corrected.
    The Committee recommended changing the title of paragraph (c) of 
Sec. 998.200 to read Sampling and testing shelled peanuts. The new 
title includes the peanut sampling process which comprises a 
significant part of paragraph (c). As a conforming change, the 
beginning of the first sentence of revised paragraph (c) is changed to 
add the words ``Prior to shipment, * * *.'' In addition, this final 
rule designates the old introductory paragraph (c) as paragraph (c)(1) 
because a paragraph (c)(2) is cited in the Code of Federal Regulations. 
New paragraph (c)(1) is otherwise unchanged.
    A conforming change is made to the title of corresponding paragraph 
(c) of Sec. 997.30 of the non-signer regulation. No conforming change 
is necessary in the import regulation. A conforming change also is made 
to non-signer paragraph (c)(2) to specify that handlers shall cause 
samples to be ground by the Federal or Federal-State Inspection Service 
(inspection service) prior to shipment.
    Paragraph (c)(4) of Sec. 998.200 specifies the maximum allowable 
aflatoxin content for edible peanut lots as 15 parts per billion (ppb). 
Such lots are certified as ``negative'' to aflatoxin. Consistent with 
current industry practice, the aflatoxin certificates for such lots are 
not required to specify the numerical aflatoxin count of the lot. This 
requirement is not changed in this final rule.
    Previous paragraph (c)(4) of Sec. 998.200 also specified a 
``negative'' content for inedible peanut lots as 25 ppb or less. Under 
the regulation, failing lots with aflatoxin content in excess of 15 ppb 
but 25 ppb or less were considered ``unrestricted,'' which means the 
peanuts could be used in certain non-human consumption peanut outlets 
such as animal feed, wildlife feed, etc. ``Unrestricted'' uses could 
provide more of a financial return for handlers while not posing a food 
safety threat to consumers. Peanut lots with aflatoxin content of more 
than 25 ppb were certified as ``restricted'' and could only be crushed 
for oil or exported. Aflatoxin certificates from USDA and Committee-
approved private laboratories specified unrestricted lots as 
``negative'' and usually did not include the numerical count of the 
lot's aflatoxin content. Restricted lot certificates cited the 
numerical aflatoxin count of the failing lot.
    The Committee recommended revising paragraph (h) and removing 
paragraphs (j) and (l) of Sec. 998.200 to remove, among other things, 
procedures relevant to ``unrestricted'' and ``restricted'' lots of 
peanuts. Under the proposal, restrictions on the disposition of failing 
peanut lots would be relaxed under the proposed rule. Failing lots of 
peanuts composed of LSKs, fall through and pickouts from initial 
shelling operations would be limited to crushing or export unless 
certified as to aflatoxin content. If so certified, the lots could be 
disposed to other non-edible uses. Other failing lots and residuals 
from blanching and remilling also could be sold to any buyer provided 
that the lot is PLI, certified as to aflatoxin content, and in 
specified containers. Therefore, under the proposal, there is no reason 
to retain the phrase in paragraph (c)(4) of Sec. 998.200 that specifies 
25 ppb or less as ``negative'' to aflatoxin for inedible peanuts. 
Continued reference to 25 ppb relative to inedible peanuts would only 
cause confusion in the revised regulations. The Department accepts 
these recommendations of the Committee and revises, in this final rule, 
the paragraphs as stated.
    Replacement paragraphs (f), (g), and (h) of the new Sec. 998.200 
(discussed below) require that failing lots disposed to inedible 
outlets other than crushing or export be ``certified as to aflatoxin 
content''--which means entering a numerical count rather than a general 
statement covering a ppb spread from 16 to 26 ppb. Therefore, this 
final rule establishes that, for peanut lots testing more than 15 ppb, 
the aflatoxin certificate must show the lot's numerical aflatoxin 
count.
    This final rule establishes that aflatoxin laboratories specify the 
numerical aflatoxin content on certificates issued on inedible peanut 
lots testing more than 15 ppb. Also, aflatoxin certificates on lots 
which fail grade requirements but are tested at 15 ppb or less should 
be certified as ``negative to aflatoxin'' for inedible peanuts. The 
certificates for such lots may specify the ppb aflatoxin content of the 
lots.
    This final rule makes corresponding changes to paragraph (a)(2) of 
Sec. 997.30 of the non-signer regulations and paragraph (f)(3) of 
Sec. 999.600 of the import regulation.
    The Department believes these certification guidelines will assist 
handlers in marketing inedible quality peanuts.
    Paragraph (d) Identification of Sec. 998.200 is amended in this 
final rule by adding a clause in the first sentence establishing the 
maximum lot size as 200,000 pounds. Two hundred thousand pounds of 
peanuts is the largest lot size which the inspection service has 
determined can be efficiently and accurately sampled. The maximum limit 
specification is removed from other paragraphs in the Agreement's 
regulatory language and is added to paragraph (d) for consistency and 
clarity. The 200,000 pound maximum lot size applies to all sampling 
situations.
    The Department makes a correction to the regulatory text of 
paragraph (d) of Sec. 998.200. Text regarding P.L.I. was inadvertently 
left out of the second to last sentence at the end of paragraph (d). 
The corrected text does not change the meaning or regulatory nature of 
the paragraph.
    In the non-signer regulation, Sec. 997.50 Inspection, chemical 
analysis, certification and identification applies to identification, 
among other topics. While the maximum lot size of 200,000 pounds is 
specified elsewhere in the regulations, the 200,000 pound maximum lot 
size is added to Sec. 997.50. In the import regulation, paragraph 
(d)(3)(ii) in Sec. 999.600 specifies the 200,000 pound maximum lot size 
and is not changed.
    Paragraph (f) Interplant transfer of Sec. 998.200 was revised last 
year and provides that peanut lots may be transferred to any handler or 
storage without P.L.I. and certification, and that, upon disposition 
for human consumption such transferred peanuts must meet edible 
requirements. This paragraph is consistent with the Committee's 
intention to remove provisions which restrict movement and increase 
costs of handling peanuts. As long as any lot of peanuts intended for 
human consumption are required to be sampled and meet outgoing quality 
requirements and are P.L.I., any additional requirements on the 
transfer of peanuts between a handler's plants, that do not affect 
outgoing quality, are irrelevant. Therefore, paragraph (f) is not 
changed in this final rule. Handlers are required to keep records of 
all such transfers.
    Corresponding paragraph (f) of Sec. 997.30 of the non-signer 
regulation covers the transfer of non-signer peanuts between plants. 
This paragraph is removed (as discussed below). The import regulation 
does not have corresponding requirements on the transfer of imported 
peanuts between plants, and, therefore, no conforming change is 
necessary.

[[Page 1254]]

Disposition of Failing Quality, Inedible Peanuts

    The Committee recommended streamlining Sec. 998.200 Outgoing 
regulation by removing 16 paragraphs covering disposition requirements 
and procedures concerning inedible (failing quality) peanuts used for 
research projects, wildlife feed, rodent bait, chemically treated seed, 
fragmented export, meal from crushing, and animal feed. The paragraphs 
removed from Sec. 998.200 are:
    (1) Paragraph (g)(1) which defined LSKs, fall through, and pickouts 
and inedible quality peanuts;
    (2) Paragraph (g)(2) which required that inedible peanuts be kept 
separate and apart from edible quality peanuts;
    (3) Paragraph (g)(3) which provided for: (a) disposition of 
inedible peanuts to research projects, wildlife feed, rodent bait, 
chemical treatment for seed, and export to countries other than Canada 
and Mexico; (b) designations of restricted and unrestricted failing 
lots; and (c) limits on disposition of meal from crushing;
    (4) Paragraph (g)(4) which specified further requirements on the 
transfer of inedible peanuts;
    (5) Paragraph (h)(1) which specified further requirements on 
identifying and reporting the transfer of inedible peanuts;
    (6) Paragraph (h)(3) which specified further requirements regarding 
the disposition of failing quality Segregation 1 peanuts to specified 
outlets;
    (7) Paragraph (i)(1) which specified disposition of seed peanuts 
and seed residuals;
    (8) Paragraph (i)(2) which required chemical treatment of seed 
peanuts;
    (9) Paragraph (j)(1) which specified requirements on commingling 
and disposition of Segregation 2 and 3 peanuts;
    (10) Paragraph (j)(2) which specified further requirements on 
commingling and disposition of Segregation 2 and 3 peanuts;
    (11) Paragraph (k)(1) which regulated exportation of Segregation 1 
peanuts;
    (12) Paragraph (k)(2) which specified further requirements on the 
disposition of Segregation 1 peanuts to inedible outlets;
    (13) Paragraph (l)(1) which specified categories of unrestricted 
shelled peanuts for disposition to crushing or export;
    (14) Paragraph (l)(2) which specified categories of restricted 
shelled peanuts for disposition to crushing or export;
    (15) Paragraph (m)(1) which specified requirements for the 
disposition of shelled peanuts for domestic animal feed; and
    (16) Paragraph (m)(2) which specified coloring or dyeing and other 
requirements for inedible peanuts disposed to domestic animal feed.
    This final rule removes paragraphs (j) and (k) which specified 
disposition requirements for farmers stock peanuts. The Committee 
believed that these two paragraphs are no longer needed because 
paragraph (f) Oilstock of Sec. 998.100 Incoming quality regulation 
provides that handlers may acquire Segregation 2 and 3 peanuts for 
crushing or export and that the Area Association supervise such 
dispositions. Handlers may also acquire for crushing or export peanuts 
originating from Segregation 1 farmers stock which are milled and fail 
human consumption quality and are P.L.I.
    Under the previous Agreement regulations, paragraph (j)(3) of 
Sec. 998.200 provided handlers with an exemption from assessments for 
acquisitions of Segregation 2 and 3 peanuts used for crushing or 
export. Paragraph (j)(3) was added to the regulatory language last year 
(60 FR 36208, July 14, 1995) to clarify Agreement provisions 
Secs. 998.31 and .48. The Department clarifies in this final rule that 
the assessment exemption applies to Segregation 2 and 3 peanuts 
acquired only for crushing, whether domestic or export. The exemption 
paragraph is redesignated as paragraph (i) in Sec. 998.100 of the 
incoming regulation, and is revised to remove the references to the 
removed paragraphs (j)(1) and (j)(2) in Sec. 998.200.
    This final rule also relaxes restrictions on blanching and 
remilling certain inedible lots. The Committee recommended relaxing 
restrictions in paragraphs (h)(2) and (h)(4) which prohibited blanching 
or remilling peanut lots exceeding defect levels of 10 percent total 
unshelled peanuts and damaged kernels, 10 percent foreign material, 
and, for remilling, 10 percent fall through. The restrictions on the 
amount of damage and foreign material in out-of-grade lots are removed 
so that handlers have more opportunity to recondition failing lots. 
This change increases handler flexibility, reduces inspection and 
handling costs, and enables more peanuts to be reconditioned and 
shipped for human consumption. The restriction on 10 percent fall-
through for remilling peanuts remains in effect.
    The corresponding paragraphs of the non-signer and import 
regulations (Sec. 997.40(a) and Sec. 999.600(f) respectively) do not 
contain similar limitations on blanching and remilling of defective 
lots and do not need to be changed.
    The Committee indicated that the regulations were too restrictive 
and limited handlers' ability to recondition potentially edible 
peanuts. Further, as long as peanuts are required to meet the outgoing 
requirements, including negative aflatoxin certification, it should not 
matter from which categories the peanuts originated. The Committee 
recommended removal of many restrictions and the addition of 
appropriate safeguards. The Committee believed these safeguard 
requirements would help ensure that inedible peanuts do not end up in 
human consumption outlets.
    The provisions covering peanut disposition are replaced by two new 
paragraphs and revisions are made in two existing paragraphs. New 
paragraphs (f) (1), (2) and (3) of the outgoing regulation modify 
Sec. 998.32 of the Agreement and specify disposition requirements for 
edible and non-edible peanut lots. New paragraph (g) provides for 
disposition of inedible milled peanuts (``sheller oilstock 
residuals''). New paragraph (h)(1) covers the blanching of inedible 
peanuts (revised from current paragraph (h)(2)). New paragraph (h)(2) 
covers the remilling of inedible peanuts (revised from current 
paragraph (h)(4)).
    The Committee believed that safeguard measures in the regulations 
should be maintained because peanut lots sent to human consumption 
outlets still need to meet the quality requirements of paragraph (a) 
and be certified negative to aflatoxin. Peanuts which cannot be 
reconditioned (or which a handler chooses not to recondition) to meet 
outgoing quality requirements would continue to be required to be 
P.L.I., red tagged, and maintained in appropriate containers. If 
disposed of to inedible peanut outlets other than domestic or export 
crushing, failing peanuts would be required to be certified as to 
aflatoxin content and that certification would accompany the lot to the 
inedible peanut outlet. In addition, new paragraph (f)(2) also requires 
that the shipping papers state that the inedible peanuts are not to be 
used for human consumption. All inedible dispositions would continue to 
be reported to the Committee.
    In new paragraph (f)(3) of Sec. 998.200, failing quality peanuts 
not sent to inedible outlets such as livestock feed, wild animal feed, 
rodent bait, etc., must be either crushed or exported as prescribed in 
new paragraph (g) or blanched or remilled pursuant to new paragraphs 
(h) (1) and (2), respectively. Segregation 2 and 3 farmers stock 
peanuts may be milled for seed.

[[Page 1255]]

    New paragraph (g) of Sec. 998.200 provides that peanuts and 
portions of peanuts which result from milling operations be identified 
as ``sheller oilstock residuals.'' Such peanuts include loose shelled 
kernels, fall through, and pick-outs as defined in that paragraph and 
whole lots of failing peanuts that a handler may choose to crush or 
export for crushing. Under new paragraph (g), sheller oilstock 
residuals which are certified as to aflatoxin content may be disposed 
of ``domestically,'' which means that the peanuts may be used for 
livestock feed, wild animal feed, rodent bait, or other non-human 
consumption uses, pursuant to paragraph (f)(2), or crushed for oil. 
Such peanuts also may be exported. Seller oilstock residuals not 
certified as to aflatoxin content must be crushed or exported as 
specified in new paragraph (g). Further, shipping papers accompanying 
such crushed or exported lots must specify that disposition limitation. 
All sheller oilstock residuals moved under paragraph (g) of 
Sec. 998.200 must be reported to the Committee--which is consistent 
with current reporting requirements. Corresponding reporting 
requirements to report disposition of inedible peanut lots to the AMS 
are established for non-signatory handlers in paragraph (c) of 
Sec. 997.40 and for importers in paragraph (e)(4) of Sec. 999.600.
    This final rule removes nearly all restrictions on handlers selling 
peanuts to inedible peanut outlets. To help ensure the peanut lots with 
excessively high aflatoxin content are not used in inedible outlets 
where aflatoxin contamination could be transferred to human consumption 
products, the Department establishes in this final rule that no peanut 
lot exceeding 300 ppb aflatoxin content may be disposed to an inedible 
peanut outlet, other than crushing or export. The 300 ppb content 
ceiling is the maximum aflatoxin content recommended by the Food and 
Drug Administration (FDA) for peanuts used for finishing (i.e. feedlot) 
beef cattle. To make this change, an additional paragraph (2) 
specifying the restriction is added to paragraph (g) covering sheller 
oilstock residuals. The same provision is added to the non-signer 
regulation as paragraph (c)(2) of Sec. 997.40 and the import regulation 
as paragraph (e)(2)(ii) of Sec. 999.600. This requirement will help 
ensure peanut lots which are excessively high in aflatoxin are not 
disposed to inedible outlets such as livestock feed where the aflatoxin 
can be transferred in the food chain to other food products intended 
for human consumption.
    Thus, this final rule raises the aflatoxin content limit to 300 ppb 
from the current 25 ppb for failing peanut lots which can be disposed 
of to any inedible outlet.
    Under this final rule, handlers are allowed to recondition failing 
peanut lots, and have more incentive to do so. Handlers have the option 
of crushing a lot for oil or reconditioning the lot. Lots above 300 ppb 
aflatoxin content which are not economically beneficial to recondition 
must be crushed or exported. Only lots testing 300 ppb or less should 
be disposed of for use as animal feed. With current technologies, 
reconditioning should be possible for most all failing peanut lots. 
Whole and residual lots exceeding 300 ppb aflatoxin content may be 
commingled until sufficient volume is accumulated for crushing 
disposition.
    According to the FDA, residuals from the reconditioning of lots 
exceeding 300 ppb and the meal from crushed lots exceeding 300 ppb 
should not be used as animal feed. The recommended maximum aflatoxin 
content for domestic animal feed, provided below, is summarized from 
FDA's Compliance Policy Guides (Sec. 683.100). The section is entitled 
``Action Levels for Aflatoxin in Animal Feed'' and was last revised 
March 28, 1994. The action levels provided below apply to peanut 
products, peanuts, peanut meal, peanut hulls, peanut skins and ground 
peanut hay. The FDA guide provides the following action levels for 
animal feeds:

--Peanut products intended for finishing (i.e., feedlot) beef cattle: 
Action level 300 ppb.
--Peanut products intended for finishing swine of 100 pounds or 
greater: Action level 200 ppb.
--Peanut products intended for breeding beef cattle, breeding swine, or 
mature poultry: Action level 100 ppb.
--Peanut products and feed ingredients intended for immature animals: 
Action level 20 ppb.
--Peanut products and other feed ingredients intended for dairy 
animals, for animal species or uses not specified above, or when the 
intended use is not known: Action level 20 ppb.

    In the previous Agreement regulations, inedible peanut lots 
certified at 26 or more ppb could not be sent to inedible peanut 
outlets where the peanuts would not be subject to heating in the 
preparation for inedible use or sent to outlets which allow the 
aflatoxin to be passed to another food product entering human 
consumption channels. This is a food safety measure which helps prevent 
aflatoxin- contaminated peanut lots from being used in certain inedible 
outlets--such as dairy cattle feed where the aflatoxin could be passed 
to human consumption in the milk.
    This final rule continues to require that handlers dispose of 
inedible peanuts based on aflatoxin content. However, the action level 
restricting inedible disposition is relaxed significantly and the 
restrictions limiting disposition to different inedible peanut outlets 
are removed, except that lots containing aflatoxin in excess of 300 ppb 
are required to be crushed for oil.
    This final rule retains, as proposed, the phrase ``which originated 
from Segregation 1 peanuts'' in paragraphs (h)(1) and (h)(2) of 
Sec. 998.200. This phrase was not included in the text for the revised 
blanching and remilling paragraphs recommended by the Committee and no 
explanation was provided by the Committee as to the benefit of removing 
this important safeguard provision. The phrase, at the very least, 
serves as a reminder that only Segregation 1 peanuts may be shelled and 
sent to edible consumption outlets. The phrase is included in 
corresponding paragraphs (d) and (e) of Sec. 997.400 and the 
introductory paragraph (e) of Sec. 999.600.
    Also, the Committee recommended that the titles of the revised 
blanching (h)(1) and remilling (h)(2) paragraphs include reference to 
Committee-approved blanchers and remillers. However, the references are 
not necessary for the meaning of the paragraphs and are not included in 
this final rule.
    In non-signer Sec. 997.30 Outgoing regulation, paragraphs (f) 
Transfer between plants and (g) Residuals from seed peanuts correspond 
to the same topics covered in the Agreement's outgoing regulation, and 
are removed in this final rule. The subject matter in the two 
paragraphs is replaced with revised Sec. 997.40 Reconditioning and 
disposition of peanuts failing quality requirements. Paragraphs (a)(1) 
and (2) of old Sec. 997.40, covering remilling and blanching of 
inedible shelled peanuts are revised and the order is reversed to 
conform with revised blanching and remilling paragraphs in 
Sec. 998.200. The new non-signer blanching and remilling paragraphs are 
designated as paragraphs (d) and (e), respectively. These new 
paragraphs are not identical to the Agreement's blanching and remilling 
paragraphs because non-signers are not required to receive approval 
prior to moving a failing shelled lot to a blancher or remiller (as are 
signatory

[[Page 1256]]

handlers under the Agreement regulations). Also, the non-signer 
regulations do not limit remilling and blanching to Committee-approved 
remillers, blanchers or exporters. Therefore, those requirements are 
not included in revised non-signer paragraphs (d) blanching and (e) 
remilling finalized in this rule.
    The provisions of the previous non-signer paragraph (a)(3) of 
Sec. 997.40 covering the ownership of peanuts moved for custom 
blanching or remilling, and the certification and reporting of such 
peanuts, are included in new Sec. 997.40 blanching and remilling 
paragraphs (d) and (e). Likewise, previous paragraph (a)(4) provisions 
on the bagging, red tagging and disposition of blanched and remilled 
peanuts are included in the revised paragraphs (d) and (e) of 
Sec. 997.40. These changes make the non-signer blanching and remilling 
paragraphs conform with the Agreement regulation's revised blanching 
and remilling paragraphs.
    Four paragraphs in old Sec. 997.40(b) Disposition of shelled 
peanuts failing quality requirements for human consumption cover the 
various disposition procedures and outlets for failing quality, 
inedible peanuts. These requirements are the same as, but are organized 
and worded differently from corresponding paragraphs (g) through (m) in 
Sec. 998.200 of the Agreement regulations. The provisions removed from 
old paragraph (b) of Sec. 997.40 are:
    (1) Paragraph (b)(1) which regulated the disposition of shelled 
peanuts to unrestricted crushing, fragmenting or dyeing, export, animal 
feed, wildlife feed, and rodent bait;
    (2) Paragraph (b)(2) which specified further requirements for 
disposition to animal feed (coloring or dyeing, P.L.I., valid aflatoxin 
certification, and reporting);
    (3) Paragraph (b)(3) which regulated the disposition of shelled 
peanuts to restricted crushing, and export;
    (4) Paragraph (b)(4) which regulated the disposition of Segregation 
2 and 3 farmers stock peanuts to restricted and unrestricted meal, 
crushing and export; and
    (5) Paragraph (b)(5) which specified reporting requirements for 
LSKs, fall through, and pickouts.
    These paragraphs are removed for the same reasons cited above and 
to correspond to changes to the Agreement's outgoing regulation. This 
final rule removes all references to ``restricted'' and 
``unrestricted'' failing imported peanuts and limitations on the 
disposition of restricted and unrestricted lots.
    Old paragraph (b)(6) of Sec. 997.40 is retained because it exempts 
from assessments, Segregation 2 and 3 farmers stock peanuts acquired by 
non-signatory handlers for crushing or export. The corresponding 
paragraph in the Agreement is retained and redesignated in this final 
rule. Therefore, such Segregation 2 and 3 peanuts acquired by non-
signatory handlers also continues to be exempt from assessments. Old 
paragraph (b)(6) is revised and redesignated as paragraph (b) under 
Sec. 997.51 Assessments and the existing text in Sec. 997.51 is 
redesignated as paragraph (a).
    There is no authority to assess imported peanuts.
    Several changes are made to Sec. 999.600 of the import regulation 
regarding disposition of inedible peanuts. Old paragraph (c)(3) 
(reconditioned peanuts) is redesignated as the new introductory 
paragraph of paragraph (e). Further, the provisions in old paragraphs 
(e) and (f) (disposition and reconditioning of failing peanuts, 
respectively) are revised and combined in new paragraph (e). Also, 
paragraphs (g) and (h) (safeguard procedures and additional 
requirements, respectively) are redesignated as paragraphs (f) and (g), 
respectively.
    The introductory paragraph of new paragraph (e) of Sec. 999.600 
provides an overview for reconditioning imported peanut lots. New 
paragraphs (e)(1), (e)(2), and (e)(3) of the import regulation 
correspond to new paragraphs (f), (g), and (h) of the Agreement 
regulations. New paragraph (e)(1) covers failing lots disposed of to 
inedible uses such as animal feed, wildlife feed, seed peanuts and 
meal--specified in previous paragraphs (e) and (f). Disposition to 
these inedible outlets must be positive lot identified with red tags, 
bagged, and the bill of lading must state that the peanuts cannot be 
used for human consumption.
    New paragraph (e)(2) of the import regulation covers disposition of 
failing quality peanuts (``sheller oilstock residuals'') to crushing or 
export. Peanuts covered under the new paragraph (e)(3) are primarily 
loose shelled kernels, fall through and pickouts from milling 
operations, but may also include any other failing lot that an importer 
chooses to crush or export.
    New paragraph (e)(4) specifies that identification, certification, 
and movement of inedible peanuts covered under paragraph (e) must be 
reported to AMS pursuant to safeguard procedures in paragraphs (f)(2) 
and (f)(3) of Sec. 999.600. This does not represent additional 
reporting or recordkeeping requirements of inedible dispositions for 
importers. The requirements correspond to reporting requirements in the 
revised Agreement regulations for signatory handlers who are required 
to report dispositions and maintain records of all inedible peanut 
transactions.
    Finally, a new paragraph (i) is added at the end of Sec. 998.200 of 
the Agreement regulations. The new paragraph specifies that certain 
records are required to be maintained pursuant to Sec. 998.43 of the 
Agreement. The records pertain to peanuts which are not certified for 
human consumption. In addition to maintaining certain records, the 
Agreement provides that all records are made available to Committee 
staff and to representatives of the Secretary, as is necessary to 
document compliance with Agreement regulations.
    The additional provision does not represent an increase in the 
number of forms handlers and importers complete, report, or maintain 
under the three programs.
    No corresponding changes in reporting and recordkeeping 
requirements are necessary in the non-signer and import regulations. 
However, in Sec. 997.52 Reports of acquisition and shipments and 
elsewhere in the non-signer regulation, references regarding specific 
Fruit and Vegetable Division form numbers are replaced with the generic 
statement ``forms provided by the Division.'' This will enable the 
Department to revise the forms and reduce the number of forms without 
the additional rulemaking expense of changing the non-signer peanut 
regulation each time a form is revised or deleted. All such changes 
still must be submitted for approval by the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35).
    The unchanged portions of incoming and outgoing regulations of all 
three peanut programs, in effect for 1995 and subsequent crop peanuts, 
remain in effect for 1996 and subsequent crop peanuts.

Additional Change to Sec. 999.600 Import Regulation

Early Entry and Bonded Storage Pending New Quota

    Experience shows that some importers ship peanuts to the U.S. 
several months prior to filing a consumption entry for the peanuts. 
Such peanuts are sampled and inspected when off-loaded at the port and 
then stored in Customs Service bonded warehouses until the opening of 
the next year's duty-free quota.

[[Page 1257]]

Depending on how quickly one year's quota fills, storage could be as 
long as 10 or 11 months. For instance, new crop peanuts from Argentina 
may be harvested as early as May or June but arrive in the U.S. too 
late to be included in the duty-free quota that opened a month or two 
earlier on April 1. The peanuts are then placed in bonded storage 
awaiting the next quota year the following April 1. Further, if the 
quota is filled before all peanuts in storage can be entered for one 
year, it is possible that some peanuts would have to be stored for 
another full year, and the total storage time could approach 2 years.
    Because of the possibility of deterioration while in storage, the 
Department needs to know which peanut shipments are held in bonded 
storage for an extended period of time, so that the wholesomeness of 
such peanuts can be verified, if necessary, when the peanuts are 
removed from storage and entered for consumption. The Department 
proposed adding an additional safeguard measure, new paragraph (f)(6) 
Early arrival and storage, to the import regulation. This provision 
requires that importers report peanut shipments which are sampled, 
inspected, and held in bonded storage in excess of a stated period of 
time.
    AMS sought comments on this new requirement, including comments as 
to whether one month is an appropriate maximum storage period that does 
not have to be reported. Two comments opposed the new requirement and 
one comment concurred with the new requirement.
    Both comments opposing the added provision stated that similar 
requirements concerning reporting are not required under Agreement 
regulations for domestically produced peanuts placed in storage, and 
therefore should not be required of imported peanuts. Domestic peanut 
handlers maintain records of all peanuts placed in storage and make 
those records available to Committee employees (fieldmen) who routinely 
visit handler offices to review records and inspect facilities. The 
Department, not the Committee, is responsible for monitoring the 
storage of imported peanuts. It is not practical for the Department to 
make such routine on-site inspections of all importers' records and 
facilities to monitor arrival on new shipments. Therefore, the 
Department believes that such notification of shipments after arrival 
and inspection is, at this time, the least burdensome and most 
practical way for the Department to meet its safeguard obligation.
    AMS is working with the Customs Service to obtain a weekly data 
base of information on shipments of fresh agricultural commodities, 
including peanuts, imported into the U.S. The data received will 
include shipments of commodities submitted for warehouse entries. When 
those procedures are complete, and when AMS has assurance that all 
incoming shipments are included in the weekly computerized report, AMS 
will remove this requirement on importers.
    The rule proposed that entry data, as well as grade and aflatoxin 
certificates for the stored peanut lot, be filed with AMS. One 
commenter stated that this is logistically cumbersome and requires 
additional paperwork for importers. After review of the information 
needed, AMS agrees that the only information necessary for AMS 
awareness is a copy of the Customs Service documentation identifying 
the location and identification of the storage warehouse, the quantity 
of peanuts entered for storage, and the date of storage entry. This 
information is shown on Customs Form 7501 and is sufficient for 
notification of lots placed in bonded storage. Therefore, it is not 
necessary, as stated in the proposed rule, that importers file copies 
of the grade and aflatoxin certificates for peanut lots admitted for 
bonded warehouse storage. This final rule is changed to reflect this 
change.
    The wording of two comments indicated a possible misunderstanding 
of the focus of this requirement. It is added to the import regulation 
to apply to peanut lots that arrive in the U.S. and are placed in 
storage prior to the filing of a Customs Service consumption entry when 
the next quota period opens. It does not apply to peanut lots which the 
Customs Service has already entered for consumption or peanut lots 
which have met all import requirements and are placed in storage 
pending shipment to buyers.
    The Department indicated in the proposed rule, and establishes in 
this final rule, that the grade and aflatoxin certificates issued on 
such peanuts upon arrival continue to be valid for the following quota 
year. This is consistent with Agreement regulation which does not place 
any time limits on the applicability of grade and aflatoxin inspection 
certificates or the storage of domestically produced peanuts.
    One commenter suggested that as long as the Customs Service knows 
the location of the bonded warehouses where peanuts are stored, the 
importer should not have to report storage to AMS. Storage data is not 
currently available from the Customs Service.
    The commenter suggested also that as long as the Customs Service 
knows the condition of the bonded warehouses where peanuts are stored, 
the importer should not have to certify as to the storage conditions 
when later filing for consumption entry. It is true that the Customs 
Service inspects and certifies the structural integrity and security of 
bonded warehouses. However, the Customs Service does not monitor such 
things as whether cold storage equipment is available and maintained, 
or whether the peanuts are protected from rodent or insect infestation 
or rain damage from leaks in the roof. Therefore, for compliance 
purposes, it is necessary that the importer certify to the Customs 
Service that the peanuts have been stored consistent with industry 
standards.
    The commenter suggested that AMS should inspect the warehouses. AMS 
will inspect such warehouses when necessary. However, inspection does 
not guarantee that peanuts subsequently placed in the warehouses will 
be maintained in conditions consistent with industry standards. 
Knowledge of which warehouses contain imported peanuts will allow AMS 
to spot check warehouses which are used and monitor weather conditions 
in the area so that potentially adverse situations are known to AMS.
    Finally, one commenter stated that the reinspection requirement 
should not be included in the import regulations. However, to meet the 
Department's statutory mandate that all peanuts in the domestic market 
meet requirements applied to peanuts under the Agreement regulations, 
it is necessary that the Secretary have the authority to reinspect 
imported peanuts, particularly those that might be subject to 
deteriorating conditions while in storage. As stated above, the 
Secretary has the same reinspection authority over domestically 
produced peanuts under Agreement and non-signer regulations. The 
Department exercises this oversight only to ensure that wholesome 
peanuts enter human consumption channels.
    The proposed rule asked for comments on the minimum length of the 
storage period which would require notification of AMS. One month was 
proposed. No comments were received suggesting other lengths of time. 
Therefore, this final rule establishes the minimum storage period 
requiring notification of AMS as any period exceeding one month. 
Peanuts produced in Mexico arriving in the U.S. and placed in storage 
prior to December 1--in anticipation of withdrawal and entry for 
consumption on or after the following January 1--must be reported

[[Page 1258]]

to AMS. Peanuts produced in Argentina or any other country, except 
Mexico, which arrive and are placed in storage prior to March 1 of any 
year--in anticipation of withdrawal and entry for consumption on or 
after the following April 1--must be reported to AMS. The reports may 
be sent via facsimile transmission or mailed pursuant to paragraphs (f) 
(2) and (3) of Sec. 999.600 at the time of entry into a bonded 
warehouse for storage. The report should be a copy of Customs Form 7501 
identifying the importer and showing the volume of peanuts being stored 
and the location of the storage warehouse.
    As a safeguard measure, old paragraph (b)(4) of the import 
regulation provided that if the Secretary has reason to believe that 
imported peanuts have been damaged or deteriorated while in storage, 
the Secretary may reject the then effective inspection certificate and 
require reinspection of the peanuts. This paragraph is redesignated as 
safeguard paragraph (f)(5) Reinspection. This reinspection authority 
corresponds to paragraph (e) of Sec. 998.200 of the Agreement 
regulations.
    To avoid deterioration, peanuts should be stored in clean, dry, 
odor free, warehouses and under sanitation and cold storage conditions 
consistent with industry standards. While Agreement regulations do not 
specify cold storage conditions, the following points should be used as 
a cold storage guide:

--Temperatures should range from 34 to 41 degrees Fahrenheit with a 
relative humidity of 55 to 70 percent.
--Daily or weekly recording charts of temperature and humidity should 
be maintained.
--Interior air circulation should be adequate to maintain uniform 
temperatures.
--Pans under refrigeration equipment should prevent condensation from 
dripping onto the peanuts.
--Peanuts should be gradually removed from cold storage over 2 to 3 
days.

    This and other information on sanitation, facilities, management 
practices, and dry storage is taken from Good Management Practices for 
Shelled Goods Cold Storage and Shelled Goods Dry Storage distributed by 
the National Peanut Council. Copies are available for a nominal price 
to non-members by calling (703)-838-9500.
    Imported peanut lots certified as meeting human consumption 
requirements and subsequently stored under such conditions and in 
appropriate warehouses, may be entered for consumption when the next 
quota year begins--without further reporting to AMS.
    One commenter stated that importers should not have to certify to 
the Customs Service that stored peanuts have been stored consistent 
with industry standards for the entire length of the storage period. 
However, the Department believes that such certification is necessary 
for compliance purposes.
    Paragraph (b)(4) of the import regulation provides authority for 
the Secretary to require a reinspection of an imported peanut lot. If 
the documentation provided to AMS, or if any evidence subsequently 
received by AMS, indicates that appropriate storage standards have not 
been met or maintained and that the peanuts may have been damaged or 
deteriorated while in storage, the Secretary will demand reinspection 
of the lot prior to the importer's filing for consumption entry of the 
lot.
    Paragraph (b)(4) of Sec. 999.600 is moved from incoming quality 
regulation to paragraph (f)(5) and entitled Reinspection. Experience 
indicates that reinspections are more likely to be needed when shelled 
peanuts are placed under bonded storage several months prior to the 
beginning of the next quota year, as discussed above. As a safeguard 
provision, the paragraph applies to farmers stock, shelled, and inshell 
imported peanuts. The intent and requirements of the paragraph remain 
unchanged.
    The new requirements as applied to imports are effective five days 
after publication of this rule in the Federal Register, should any 
peanuts be imported under duty prior to the opening of the next duty-
free quota periods. The reporting requirement is not made retroactive 
for shipments which have already arrived and been placed in storage. 
Peanut shipments from countries other than Mexico arriving five days 
after publication and before March 1, 1977, should be reported to AMS 
under the new requirement. Importers may voluntarily notify AMS of 
shipments which have been entered into warehouses since closure of the 
1996 duty-free quotas and currently are in storage pending the 1997 
quota year.
    Some paragraphs of the three peanut regulations are not changed in 
this final rule. However, for a better understanding of all changes, 
the three regulations are published in their entirety in this final 
rule, including paragraphs which are not changed.
    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has 
considered the economic impact of this action on small entities.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened.
    About 80 signatory and non-signatory peanut handlers are subject to 
regulation under the two domestic programs. There are about 47,000 
peanut producers in the 16-state production area. Small agricultural 
service firms, which include handlers and importers, have been defined 
by the Small Business Administration (13 CFR 121.601) as those having 
annual receipts of less than $5,000,000, and small agricultural 
producers have been defined as those having annual receipts of less 
than $500,000. Approximately 25 percent of the signatory handlers, most 
all of the non-signers, and virtually all of the producers may be 
classified as small entities. The import requirements have not been in 
place long enough to determine the number of peanut importers or the 
percentage which qualify as small businesses. However, it can be 
assumed that some importers are small entities.
    This final rule removes or relaxes several provisions regulating 
the handling and disposition of domestic and foreign-produced peanuts. 
Overall, the changes are intended to increase the amount of peanuts 
that can be prepared for and meet the requirements for human 
consumption. Such peanuts almost always bring the highest prices in the 
marketplace. Thus, the value of farmers stock peanuts that can be 
prepared for human consumption is higher than the value of those that 
must be disposed of to inedible outlets. Producers receive increased 
returns for farmers stock peanuts that can be prepared for human 
consumption. Handlers and importers also receive increased returns from 
shelled and inshell peanuts that are prepared for and meet human 
consumption requirements. Peanut lots that fail human consumption 
requirements, and that a handler or importer decides not to try to 
recondition, must be disposed of as inedible peanuts to different 
inedible peanut outlets. Such inedible disposition brings varying 
prices for the handler or importer, almost always less than prices for 
human consumption quality peanuts. The changes finalized in this 
rulemaking should increase the value of certain failing peanut lots, 
and thus, increase returns for both producers and handlers.

--Restrictions are removed on acquisitions of certain farmers stock 
lots failing incoming inspection because of excess loose shelled

[[Page 1259]]

kernels and fall-through peanuts. This relaxation enables more farmers 
stock peanuts to be processed into product that meets requirements for 
human consumption. Producers receive higher prices for such farmers 
stock peanut lots and handlers are able to shell and recondition those 
lots into shelled peanuts which meet human consumption requirements.
--Restrictions on remilling and blanching for human consumption use are 
removed on shelled peanut lots exceeding certain damage and foreign 
material content levels. This change enables handlers to recondition 
more lots of failing peanuts for disposition to human consumption 
outlets.
--This rule also removes requirements that handlers and importers 
maintain PLI, and report and keep disposition records on ``restricted'' 
and ``unrestricted'' inedible peanut lots. This should reduce some 
inspection and reporting and recordkeeping costs.
--The maximum allowable aflatoxin content of domestically- produced and 
imported shelled peanut lots which could be used as animal feed, 
wildlife seed, and rodent bait is raised from 25 ppb to 300 ppb. 
Depending on several market factors, such inedible peanut use can bring 
higher prices than crushing the peanuts. This change provides more 
opportunity for handlers and importers to increase the value, and thus, 
the returns, of the peanuts they handle or import.
--Positive lot identification (PLI) requirements for seed peanuts are 
removed. This will save handlers and importers inspection costs and 
enable better use of storage space.
--Shelled peanut lots meeting Indemnifiable Grade or Superior Grade 
requirements may be sent to human consumption outlets prior to the 
handler or importer receiving aflatoxin certification of the lot. This 
is a clarification of requirements to make the domestic requirements 
consistent with current industry practice. Handler and importer 
inspection costs should not be increased because of this provision.

    The changes to handling requirements in this final rule will enable 
more peanuts to be prepared for human consumption, save some inspection 
and storage costs, enable handlers and importers to more efficiently 
manage their peanut inventories, and make better use of inedible peanut 
lots, thus, increasing returns to both producers, handlers and 
importers. The changes are made without jeopardizing safeguard 
provisions in the current domestic and import regulations because all 
peanuts intended for human consumption still must be certified for such 
use. Finally, these changes are intended to benefit peanut handlers, 
peanut importers, and consumers by ensuring that all peanuts in 
domestic U.S. human consumption markets are wholesome.
    The proposed rule requested comments on the effect of the rule on 
small businesses and no comments were received stating that the changes 
would adversely affect small entities in the peanut industry.
    This final rule does not increase the reporting and recordkeeping 
burden on domestic peanut handlers and peanut importers regulated under 
the three programs, and should result in an overall reduction in 
reporting and recordkeeping burden. To verify the reduced burden, 
another OMB reporting and recordkeeping burden analysis will be 
conducted after the regulations and the sharing of computerized import 
data between Customs Service and AMS have been implemented.
    Therefore, the AMS determines that this final rule does not have a 
significant economic impact on a substantial number of small entities.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), information collection requirements in this final rule 
have been previously approved by the Office of Management and Budget 
(OMB) and have been assigned OMB Nos. 0581-0067 (for signatory 
handlers), 0581-0163 (for non-signatory handlers), and 0581-0176 (for 
importers).
    Because these changes could not be implemented before the beginning 
of the 1996 domestic crop year, comments were requested on whether 
final implementation of the changes after the beginning of the crop 
year would have an unequal effect on one or more of the three 
production areas. No commenters claimed implementation after the start 
of the year would unequally affect the three production areas. Seven of 
the commenters stated that the regulations should be in place as soon 
as possible for the 1996-97 domestic marketing season. Several of the 
comments suggested that unnecessary delays in implementation would hurt 
the industry.
    Pursuant to 5 U.S.C. 553, it is also found and determined, upon 
good cause, that it is impracticable, unnecessary and contrary to the 
public interest to postpone the effective date of this rule until 30 
days after publication in the Federal Register because: (1) The changes 
should be in effect as soon as possible to cover as much of the 
remaining crop year as possible; (2) the rule relaxes requirements 
currently in place with the exception of one requirement which codifies 
current industry practice; (3) the domestic industry has been aware of 
the issues and proposed changes since May when the Committee 
recommended the changes; (4) all known handlers and other affected 
members of the domestic industry, as well as all known importers, were 
sent copies of the proposed rule and they and all other interested 
persons were given a 20-day opportunity to file comments on the 
recommended changes; and (5) comments addressing the effective date 
were unanimous in recommending immediate implementation and several 
commented that further delays in implementation would be harmful to the 
industry. Thus, the Department sets the effective date of this final 
rule as three days after publication in the Federal Register for 
domestically produced peanuts and five days after publication in the 
Federal Register for imported peanuts.

List of Subjects

7 CFR Part 997

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

7 CFR Part 998

    Marketing agreements, Peanuts, Reporting and recordkeeping 
requirements.

7 CFR Part 999

    Dates, Filberts, Food grades and standards, Imports, Nuts, Peanuts, 
Prunes, Raisins, Reporting and recordkeeping requirements, Walnuts.

    For the reasons set forth in the preamble, 7 CFR parts 997, 998 and 
999 are amended as follows:

PART 997--PROVISIONS REGULATING THE QUALITY OF DOMESTICALLY 
PRODUCED PEANUTS HANDLED BY PERSONS NOT SUBJECT TO THE PEANUT 
MARKETING AGREEMENT

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

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

    2. Under the center heading ``Quality Regulations,'' Secs. 997.20, 
997.30, 997.40 and 997.50 are revised to read as follows:

Quality Regulations


Sec. 997.20  Incoming regulation.

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

[[Page 1260]]

consumption, either from a producer or other person, unless such 
peanuts are inspected pursuant to Sec. 997.50 and are determined to be 
Segregation 1 peanuts at time of receipt from the producer or, if 
received from another person, had not been mixed with peanuts of a 
lower quality than Segregation 1 and meet the following additional 
requirements specified in this section: Provided, That a handler may--
    (1) Acquire shelled peanuts from the Commodity Credit Corporation 
(CCC) or cleaned inshell or shelled peanuts from other handlers, a 
handler as defined in 7 CFR 998.8, or from buyers who have purchased 
such peanuts from handlers or from the CCC, if the lot has been 
certified as meeting the requirements of Sec. 997.30(a) and the 
identity is maintained; and/or
    (2) Perform services for an area association pursuant to a peanut 
receiving and warehouse contract.
    (b) Moisture and foreign material. (1) Moisture. Except as provided 
under paragraph (d) of Sec. 997.20, no handler shall receive or acquire 
peanuts containing more than 10.49 percent moisture: Provided, That 
peanuts of a higher moisture content may be received and dried to not 
more than 10.49 percent moisture prior to storing or milling. For 
farmers stock peanuts, moisture determinations shall be rounded to the 
nearest whole number. Moisture determinations on shelled peanuts shall 
be carried to the hundredths place.
    (2) Foreign material. No handler shall receive or acquire farmers 
stock peanuts containing more than 10.49 percent foreign material, 
except that peanuts having a higher foreign material content may be 
received or acquired if they are held separately until milled, or moved 
over a sand-screen before storage, or shipped directly to a plant for 
prompt shelling. The term sand-screen means any type of farmers stock 
cleaner which, when in use, removes sand and dirt.
    (c) Damage. For the purpose of determining damage, other than 
concealed damage, on farmers stock peanuts, all percentage 
determinations shall be rounded to the nearest whole number.
    (d) Seed peanuts. Peanuts which are not Segregation 1 peanuts and 
therefore cannot be acquired for human consumption may be acquired, 
shelled and delivered for seed purposes. Peanuts intended for seed use, 
produced under the auspices of a State agency which regulates or 
controls the production of seed peanuts, which do not meet Segregation 
1 requirements shall be stored and shelled separate from peanuts 
intended for human consumption. However, Segregation 2 seed peanuts, 
produced under the auspices of the State agency, which contain up to 
3.00 percent damaged kernels and are free from visible Aspergillus 
flavus may be stored and shelled with Segregation 1 peanuts which are 
also produced under the auspices of the State agency. A handler whose 
operations include custom seed shelling may receive, custom shell, and 
deliver for seed purposes farmers stock peanuts, and such peanuts shall 
be exempt from the requirements of this section and, therefore, shall 
not be required to be inspected and certified as meeting these 
requirements, and the handler shall report to the Division the weight 
of each lot of farmers stock peanuts received on such basis on a form 
provided by the Department. However, handlers who acquire seed peanut 
residuals from their custom shelling of uninspected (farmers stock) 
seed peanuts or from another person may mill such residuals with other 
receipts or acquisitions of the handler, and such peanuts which meet 
the requirements specified in Sec. 997.30(a) may be disposed of by sale 
to human consumption outlets.
    (e) Oilstock. Handlers may acquire for disposition to domestic 
crushing or export farmers stock peanuts of a lower quality than 
Segregation 1 or grades or sizes of shelled peanuts or cleaned inshell 
peanuts which fail to meet the requirements for human consumption. 
Handlers may act as accumulators and acquire, for other handlers; a 
handler as defined in 7 CFR 998.8 or from other persons, Segregation 2 
or 3 farmers stock peanuts. Handlers may also acquire shelled peanuts 
originating from Segregation 2 or 3 farmers stock or the entire mill 
production of peanuts from Segregation 1 farmers stock or lots of 
shelled peanuts originating from Segregation 1 peanuts and which have 
been positive lot identified as specified in Sec. 997.30(d), which 
failed to meet the requirements for human consumption pursuant to 
Sec. 997.30(a): Provided, That all such acquisitions are held separate 
from Segregation 1 peanuts acquired for milling or from edible grades 
of shelled or milled peanuts. Handlers may commingle the Segregation 2 
and 3 peanuts or keep them separate and apart. Handlers who acquire 
farmers stock peanuts of a lower quality than Segregation 1 or cleaned 
inshell peanuts which fail to meet the requirements for human 
consumption shall report such acquisitions to the Division as 
prescribed on a form prescribed by the Division. Handlers who acquire 
grades or sizes of shelled peanuts which fail to meet the requirements 
for human consumption for disposition to domestic crushing and 
subsequent export to countries shall report such disposition on a form 
provided by the Division.
    (f) Shelled peanuts. Handlers may acquire shelled peanuts (which 
originated from ``Segregation 1 peanuts'') from other handlers or a 
handler as defined in 7 CFR 998.8, for remilling and subsequent 
disposition to human consumption outlets. Further disposition of such 
peanuts shall be regulated by Sec. 997.40.
    (g) No producer may handle, process, prepare for sale, or otherwise 
alter peanuts of his own production from the condition of farmers 
stock, for disposition in human consumption outlets unless such peanuts 
are first inspected and certified pursuant to Sec. 997.50 and meet the 
applicable requirements of this section.


Sec. 997.30  Outgoing Regulation.

    (a) Shelled peanuts. (1)(i) No handler shall ship or otherwise 
dispose of shelled peanuts for human consumption unless such peanuts 
are positive lot identified, certified ``negative'' as to aflatoxin and 
certified as meeting the requirements in Table 1:

[[Page 1261]]



                                           Table 1.--Minimum Grade Requirements--Peanuts for Human Consumption                                          
                                                               [Whole Kernels and Splits]                                                               
                                                                   Maximum limitations                                                                  
                                                              Excluding lots of ``splits''                                                              
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Unshelled                             Fall through                                                    
                                     Unshelled     peanuts,  ------------------------------------------------------------------                         
                                    peanuts and    damaged                                                                        Foreign               
      Type and grade category         damaged    kernels and                                                                     materials     Moisture 
                                      kernels       minor        Sound split and    Sound whole  kernels          Total          (percent)    (percent) 
                                     (percent)     defects       broken kernels                                                                         
                                                  (percent)                                                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner............................         1.50         2.50  3.00%; \17/64\ inch   3.00%; \16/64\ x \3/  4.00%; both screens.          .20         9.00
                                                               round screen.         4\ inch; slot                                                      
                                                                                     screen.                                                            
Virginia (except No. 2)...........         1.50         2.50  3.00%; \17/64\ inch;  3.00%; \15/64\ x 1    4.00%; both screens.          .20         9.00
                                                               round screen.         inch; slot screen.                                                 
Spanish and Valencia..............         1.50         2.50  3.00%; \16/64\ inch;  3.00%; \15/64\ x \3/  4.00%; both screens.          .20         9.00
                                                               round screen.         4\ inch; slot                                                      
                                                                                     screen.                                                            
No. 2 Virginia....................         1.50         3.00  6.00%; \17/64\ inch;  6.00%; \15/64\ x 1    6.00%; both screens.          .20         9.00
                                                               round screen.         inch; slot screen.                                                 
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Lots of ``splits''                                                                   
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner (not more than 4% sound             1.50         2.50  3.00%; 17/64 inch;    3.00%; 14/64 x 3/4    4.00%; both screens.          .20         9.00
 whole kernels).                                               round screen.         inch; slot screen.                                                 
Virginia (not less than 90%                1.50         2.50  3.00%; \17/64\ inch;  3.00%; \14/64\ x 1    4.00%; both screens.          .20         9.00
 splits).                                                      round screen.         inch; slot screen.                                                 
Spanish and Valencia (not more             1.50         2.50  3.00%; \16/64\ inch;  3.00%; \13/64\ x \3/  4.00%; both screens.          .20         9.00
 than 4% sound whole kernels)..                                round screen.         4\ inch; slot                                                      
                                                                                     screen.                                                            
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (ii) Prior to disposition to human consumption outlets, peanuts 
which have been certified as meeting the requirements for Indemnifiable 
Grades must also be certified ``negative'' as to aflatoxin. Maximum 
limitations for Indemnifiable Grades are as follows:

                                         TABLE 2.--Superior Quality Requirements--Peanuts for Human Consumption                                         
                                                               [Whole Kernels and Splits]                                                               
                                                                   Maximum limitations                                                                  
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Unshelled                             Fall through                                                    
                                     Unshelled    peanutes,  ------------------------------------------------------------------                         
                                    peanuts and    damaged                                                                        Foreign               
      Type and grade category         damaged    kernels and     Sound split and                                                 materials     Moisture 
                                      kernels       minor        broken kernels      Sound whole kernels          Total          (percent)    (percent) 
                                     (percent)     defects          (percent)             (percent)                                                     
                                                  (percent)                                                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner U.S. No. 1 and better......         1.25         2.00  3.00%; \17/64\ inch,  3.00%; \16/64\ x \3/  4.00%; both screens.          .10         9.00
                                                               round screen.         4\ inch, slot                                                      
                                                                                     screen.                                                            
Virginia U.S. No.1 and better.....         1.25         2.00  3.00%; \17/64\ inch,  3.00%; \15/64\ x 1    4.00%; both screens.          .10         9.00
                                                               round screen.         inch, slot screen.                                                 
Spanish and Valencia U.S. No.1 and         1.25         2.00  3.00%; \16/64\ inch,  2.00%; \15/64\ x \3/  4.00%; both screens.          .10         9.00
 better..                                                      round screen.         4\ inch, slot                                                      
                                                                                     screen.                                                            
Runner U.S. Splits (not more than          1.25         2.00  2.00%; \17/64\ inch,  3.00%; \14/64\ x \3/  4.00%; both screens.          .20         9.00
 4% sound, whole kernels).                                     round screen.         4\ inch, slot                                                      
                                                                                     screen.                                                            
Virginia U.S. Splits (not less             1.25         2.00  3.00%; \17/64\ inch,  3.00%; \14/64\ x 1    4.00%; both screens.          .20         9.00
 than 90% splits and not more than                             round screen.         inch, slot screen.                                                 
 3.00% sound whole kernels and                                                                                                                          
 portions passing through \20/64\                                                                                                                       
 inch round screen).                                                                                                                                    

[[Page 1262]]

                                                                                                                                                        
Spanish and Valencia U.S. Splits           1.25         2.00  2.00%; \16/64\ inch,  3.00%; \13/64\ x \3/  4.00%; both screens.          .20         9.00
 (not more than 4% sound, whole                                round screen.         4\ inch, slot                                                      
 kernels).                                                                           screen.                                                            
Runner with splits (not more than          1.25         2.00  3.00%; \17/64\ inch,  3.00%; \16/64\ x \3/  4.00%; both screens.          .10         9.00
 15% sound splits).                                            round screen.         4\ inch, slot                                                      
                                                                                     screen.                                                            
Virginia with splits (not more             1.25         2.00  3.00%; \17/64\ inch,  3.00%; \15/64\ x 1    4.00%; both screens.          .10         9.00
 than 15% sound splits).                                       round screen.         inch, slot screen.                                                 
Spanish and Valencia with splits           1.25         2.00  3.00%; \16/64\ inch,  2.00%; \15/64\ x \3/  4.00%; both screens.          .10         9.00
 (not more than 15% sound splits).                             round screen.         4\ inch, slot                                                      
                                                                                     screen.                                                            
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (2) The term ``fall through'', as used herein, shall mean sound 
split and broken kernels and whole kernels which pass through specified 
screens. Prior to shipment, appropriate samples for pretesting shall be 
drawn in accordance with paragraph (c) of this section from each lot of 
Superior Quality peanuts. For the current crop year, ``negative'' 
aflatoxin content means 15 parts per billion (ppb) or less for peanuts 
which have been certified as meeting edible quality grade requirements.
    (b) Cleaned inshell peanuts. No handler shall ship, sell, or 
otherwise dispose of cleaned inshell peanuts for human consumption:
    (1) With more than 1.00 percent kernels with mold present unless a 
sample of such peanuts, drawn by an inspector of the Federal or 
Federal-State Inspection Service, was analyzed chemically by a U.S. 
Department of Agriculture laboratory (hereinafter referred to as ``USDA 
laboratory'') or a laboratory listed in paragraph (c) of this section 
and found to be wholesome relative to aflatoxin;
    (2) With more than 2.00 percent peanuts with damaged kernels;
    (3) With more than 10.00 percent moisture; or
    (4) With more than 0.50 percent foreign material.
    (c) Sampling and testing shelled peanuts. (1) Each handler shall 
cause appropriate samples of each lot of edible quality shelled peanuts 
to be drawn by an inspector of the Federal or Federal-State Inspection 
Service. The gross amount of peanuts drawn shall be large enough to 
provide for a grade analysis, for a grading check-sample, and for three 
48-pound samples for aflatoxin assay. The three 48-pound samples shall 
be designated by the Federal or Federal-State Inspection Service as 
``Sample #1N'', ``Sample #2N'', and ``Sample #3N'' and each sample 
shall be placed in a suitable container and ``positive lot identified'' 
by means acceptable to the Inspection Service. Sample #1N may be 
prepared for immediate testing or Sample #1N, Sample #2N, and Sample 
#3N may be returned to the handler for testing at a later date.
    (2) The handler shall cause Sample #1 to be ground by the Federal 
or Federal-State Inspection Service, a USDA laboratory or a laboratory 
listed herein, in a ``subsampling mill'' approved by the Division. The 
resultant ground subsample from Sample #1N shall be of a size specified 
by the Division and shall be designated as ``Subsample 1--ABN'' and at 
the handler's or buyer's option, a second subsample may also be 
extracted from Sample #1N. It shall be designated as ``Subsample 1--
CDN''. Subsample 1--CDN may be sent as requested by the handler or 
buyer, for aflatoxin assay, to a USDA laboratory or other laboratory 
that can provide analyses results on such samples in 36 hours. The cost 
of sampling and testing Subsample 1--CDN shall be for the account of 
the requester. Subsample 1--ABN shall be analyzed only in a USDA 
laboratory or a laboratory listed herein. Both Subsamples 1--ABN and 
1--CDN shall be accompanied by a notice of sampling signed by the 
inspector containing, at least, identifying information as to the 
handler (shipper), the buyer (receiver), if known, and the positive lot 
identification of the shelled peanuts. A copy of such notice covering 
each lot shall be sent to the Division.
    (3) The samples designated as Sample #2N and Sample #3N shall be 
held as aflatoxin check-samples by the Inspection Service or the 
handler and shall not be included in the shipment to the buyer until 
the analyses results from Sample #1N are known.
    (4) Upon call from the laboratory, handler shall cause Sample #2N 
to be ground by the Inspection Service in a ``subsampling mill.'' The 
resultant ground subsample from Sample #2N shall be of a size specified 
by the Division and it shall be designated as ``Subsample #2--ABN.'' 
Upon call from the laboratory, the handler shall cause Sample #3N to be 
ground by the Inspection Service in a ``subsampling mill.'' The 
resultant ground subsample from Sample #3N shall be of a size specified 
by the Division and shall be designated as ``Subsample #3--ABN''. 
``Subsamples 2--ABN and 3--ABN'' shall be analyzed only in a USDA 
laboratory or a laboratory listed herein and each shall be accompanied 
by a notice of sampling. A copy of each such notice shall be sent to 
the Division. The results of each assay shall be reported by the 
laboratory to the handler and to the Division. All costs involved in 
the sampling and testing of peanuts required by this regulation shall 
be for the account of the applicant.
    (5) Information on making arrangements for the required inspection 
and certification can be obtained by contacting the Fresh

[[Page 1263]]

Products Branch, Fruit and Vegetable Division, Agricultural Marketing 
Service, USDA, P.O. Box 96456, room 2049-S, Washington, DC, 20090-6456, 
telephone (202) 690-0604 or facsimile (202)720-0393.
    (i) Laboratories at the following locations are approved to perform 
the chemical analyses required pursuant to this part. The sampling plan 
and procedures may be obtained from the Science and Technology 
Division.

Science and Technology Division, AMS, USDA, P.O. Box 279, 301 West 
Pearl St., Aulander, NC 27805, Tel: (919) 345-1661 Ext. 156, Fax: (919) 
345-1991
Science and Technology Division, AMS, USDA, 1211 Schley Ave., Albany, 
GA 31707, Tel: (912) 430-8490/8491, Fax: (912) 430-8534
Science and Technology Division, AMS, USDA, P.O. Box 488, Ashburn, GA 
31714, Tel: (912) 567-3703
Science and Technology Division, AMS, USDA, 610 North Main St., 
Blakely, GA 31723, Tel: (912) 723-4570, Fax: (912) 723-3294
Science and Technology Division, AMS, USDA, 1557 Reeves St., Dothan, AL 
36303, Tel: (334) 794-5070, Fax: (334) 671-7984
Science and Technology Division, AMS, USDA, 107 South Fourth St., 
Madill, OK 73446, Tel: (405) 795-5615, Fax: (405) 795-3645
Science and Technology Division, AMS, USDA, P.O. Box 272, 715 N. Main 
Street, Dawson, GA 31742, Tel: (912) 995-7257, Fax: (912) 995-3268
Science and Technology Division, AMS, USDA, P.O. Box 1130, 308 Culloden 
St., Suffolk, VA 23434, Tel: (804) 925-2286, Fax: (804) 925-2285
ABC Research, 3437 SW 24th Avenue, Gainesville, FL 32607-4502, Tel: 
(904) 372-0436, Fax: (904) 378-6483
J. Leek Associates, Inc., P.O. Box 50395, 1200 Wyandotte (31705), 
Albany, GA 31703-0395, Tel: (912) 889-8293, Fax: (912) 888-1166
J. Leek Associates, Inc., P.O. Box 368, 675 East Pine, Colquitt, GA 
31737, Tel: (912) 758-3722, Fax: (912) 758-2538
J. Leek Associates, Inc., P.O. Box 6, 502 West Navarro St., DeLeon, TX 
76444, Tel: (817) 893-3653, Fax: (817) 893-3640
Pert Laboratories, P.O. Box 267, Peanut Drive, Edenton, NC 27932, Tel: 
(919) 482-4456, Fax: (919) 482-5370
Pert Laboratory South, P.O. Box 149, Hwy 82 East, Seabrook Drive, 
Sylvester, GA 31791, Tel: (912) 776-7676, Fax: (912) 776-1137
Professional Service Industries, Inc., 3 Burwood Lane, San Antonio, TX 
78216, Tel: (210) 349-5242, Fax: (210) 342-9401
Southern Cotton Oil Company, 600 E. Nelson Street, P.O. Box 180, 
Quanah, TX 79252, Tel: (817) 663-5323, Fax: (817) 663-5091
Quanta Lab, 9330 Corporate Drive, Suite 703, Selma, TX 78154-1257, Tel: 
(210) 651-5799, Fax: (210) 651-9271.

    (ii) Handlers should contact the nearest laboratory from the list 
in paragraph (c)(5)(i) of this section to arrange to have samples 
chemically analyzed for aflatoxin content, or for further information 
concerning the chemical analyses required pursuant to this part 
handlers may contact: The Science and Technology Division, Agricultural 
Marketing Service, USDA, P.O. Box 96456, room 3507-S, Washington, D.C., 
20090-6456, telephone (202) 720-5231, facsimile (202) 720-6496.
    (d) Identification. Each lot of shelled or cleaned inshell peanuts, 
in lot sizes not exceeding 200,000 pounds, shall be identified by 
positive lot identification procedures prior to being shipped or 
otherwise disposed of. For the purpose of this regulation, ``positive 
lot identification'' of a lot of shelled or inshell peanuts is a means 
of relating the inspection certificate to the lot which has been 
inspected so that there can be no doubt that the peanuts are the same 
ones described on the inspection certificate. The crop year that is 
shown on the positive lot identification tags, or other means of 
positive lot identification shall accurately describe the crop year in 
which the peanuts in the lot were produced. Such procedure on bagged 
peanuts shall consist of attaching a lot numbered tag bearing the 
official stamp of the Federal or Federal-State Inspection Service to 
each filled bag in the lot. The tag shall be sewed (machine sewed if 
shelled peanuts) into the closure of the bag except that in plastic 
bags the tag shall be inserted prior to sealing so that the official 
stamp is visible. Any peanuts moved in bulk or bulk bins shall have 
their lot identity maintained by sealing the conveyance and if in other 
containers by other means acceptable to the Federal or Federal-State 
Inspection Service. All lots of shelled or cleaned inshell peanuts 
shall be handled, stored, and shipped under positive lot identification 
procedures, except those lots which have been reconstituted and/or 
commingled at the request of the receiver. All such reconstituted and/
or commingled lots will no longer be considered positive lot identified 
and, therefore, no longer be eligible for appeal inspection. Handler 
shall keep and maintain records of the quantities involved in each 
reconstituting and/or commingling procedure, whether in single or 
multiple lots, and such records shall be available to the Division on 
request.
    (e) Reinspection. Whenever the Division has reason to believe that 
peanuts may have been damaged or deteriorated while in storage, the 
Division may reject the then effective inspection certificate and may 
require the owner of the peanuts to have a reinspection to establish 
whether or not such peanuts may be disposed of for human consumption.


Sec. 997.40  Reconditioning and disposition of peanuts failing quality 
requirements.

    (a) Lots of peanuts which have not been certified as meeting the 
requirements for disposition to human consumption outlets, may be 
disposed of for non-human consumption uses which are not regulated or 
limited by the provisions specified in this section: Provided, That 
each such lot is positive lot identified, using red tags, and certified 
as to aflatoxin content (actual numerical count). However, on the 
shipping papers covering the disposition of each such lot of inedible 
quality peanuts, the handler shall cause the following statement to be 
shown: ``The peanuts covered by this bill of lading (or invoice, etc.) 
are not to be used for human consumption.''
    (b) Except for inedible quality peanuts disposed of under the 
provisions of paragraph (f)(2) of this section and peanuts derived from 
the milling for seed of Segregation 2 and 3 farmers stock peanuts, 
peanuts which have not been certified as meeting the standards set 
forth in paragraphs (a) or (b) of Sec. 997.30 shall be disposed of as 
prescribed hereinafter in this section.
    (c) Sheller Oil Stock Residuals--For Crushing or Export. Peanuts, 
or portions of peanuts which are separated from edible quality peanuts 
by screening or sorting or other means during the milling process, may 
be segregated into categories or they may be commingled as sheller oil 
stock residuals. Such sheller oil stock residuals shall be identified 
pursuant to paragraph (d) of this section, but using a red tag, and 
such peanuts may be disposed of domestically or to the export market, 
in bulk or bags or other suitable containers. The movement of such 
peanuts shall be reported to the Division by the shipping handler and 
the crusher, as requested by the Division.
    (1) If the peanuts have not been tested and certified as to 
aflatoxin content, as prescribed in paragraph (c) of this section, the 
handler shall cause the

[[Page 1264]]

following statement to be shown on the shipping papers: ``The peanuts 
covered by this bill of lading (or invoice, etc.) are limited to 
crushing only and may contain aflatoxin.''
    (2) If the peanuts are certified as 301 ppb or more aflatoxin 
content, disposition shall be limited to crushing or export.
    (d) Blanching peanuts failing quality requirements. Handlers may 
blanch or cause to have blanched positive lot identified shelled 
peanuts, which originated from Segregation 1 peanuts, that fail to meet 
the requirements of paragraph (a) of this section because of excessive 
damage, minor defects, moisture, or foreign material or are positive as 
to aflatoxin. Lots of peanuts which are moved under these provisions 
must be accompanied by a valid grade inspection certificate and the 
title shall be retained by the handler until the peanuts are blanched 
and certified by an inspector of the Federal or Federal-State 
Inspection Service as meeting the requirements for disposal into human 
consumption outlets. To be eligible for disposal into human consumption 
outlets, such peanuts after blanching, must meet specifications for 
unshelled peanuts, damaged kernels, minor defects, moisture, and 
foreign material as listed in paragraph (a) of this section and be 
accompanied by a negative aflatoxin certificate. The residual peanuts, 
excluding skins and hearts, resulting from blanching under these 
provisions, shall be bagged and red tagged and disposition shall be 
that such peanuts are returned to the handler for further disposition; 
or, in the alternative, such residuals shall be positive lot identified 
by the Federal or Federal-State Inspection Service, and shall be 
disposed of, by the blancher to crushers who agree to comply with the 
terms of paragraph (c) of this section.
    (e) Remilling peanuts failing quality requirements. Handlers may 
remiller or cause to have remilled shelled peanuts, which originated 
from Segregation 1 peanuts, that fail to meet the requirements for 
disposition to human consumption outlets heretofore specified in 
paragraph (a) of this section: Provided, That such lots of peanuts 
contain not in excess of 10 percent fall through. Lots of peanuts moved 
under these provisions must be accompanied by a valid grade inspection 
certificate and must be positive lot identified and the title of such 
peanuts shall be retained by the handler until the peanuts have been 
remilled and certified by the Federal or Federal-State Inspection-
Service as meeting the requirements for disposition to human 
consumption outlets specified in paragraph (a) of this section, and be 
accompanied by a negative aflatoxin certificate. Remilling under these 
provisions may include composite remilling of more than one such lot of 
peanuts owned by the same handler. However, such peanuts owned by one 
handler shall be held and remilled separate and apart from all other 
peanuts. The residual peanuts resulting from remilling under these 
provisions, shall be bagged and red tagged and disposition shall be 
that such peanuts are returned to the handler for further disposition; 
or, in the alternative, such residuals shall be positive lot identified 
by the Federal or Federal-State Inspection Service, and shall be 
disposed of, by the remiller, to crushers who agree to comply with the 
terms of paragraph (c) of this section. Sec. 997.50 Inspection, 
chemical analysis, certification and identification.
    Each handler shall, at the handler's own expense, prior to or upon 
receiving and before shipping or disposing of peanuts, cause an 
inspection to be made of any such peanuts not covered by a valid 
inspection certificate, to determine whether such peanuts meet the 
applicable grade requirements effective pursuant to this part, and 
shall comply with such identification requirements prescribed by this 
part or which the Secretary may prescribe. Each handler shall also 
cause appropriate samples to be drawn and chemically analyzed by a USDA 
laboratory, or laboratory listed in Sec. 997.30, for wholesomeness as 
provided in Sec. 997.30 of this part. Such handler shall obtain grade 
and aflatoxin certificates stating that such peanuts meet the 
aforementioned applicable requirements and all such certificates shall 
be available for examination or use by the Division. Acceptable 
certificates shall be those issued by Federal or Federal-State 
inspectors authorized or licensed by the Secretary and USDA 
laboratories or those listed in Sec. 997.30 of this part. Each handler 
shall furnish, or cause the inspection service or the laboratory to 
furnish, to the Division, a copy of the inspection certificate and a 
copy of the results of the chemical analyses issued to the handler on 
each lot of shelled peanuts or cleaned inshell peanuts.
    3. Under the center heading ``Assessments,'' section 997.51 is 
revised to read as follows:

Assessments


Sec. 997.51  Assessments.

    (a) Each first handler shall pay to the Secretary, with respect to 
Segregation 1 peanuts received or acquired by the handler, including 
the handler's own production, an administrative assessment as approved 
by the Secretary. The rate of assessment shall be the same as the 
administrative assessment approved by the Secretary and applied to 
signatory handlers under the Peanut Marketing Agreement No. 146. Such 
administrative assessment shall be applied during the crop year 
beginning July 1 and ending June 30 of the following year. Each 
handler's pro rata share shall be the rate of assessment fixed by the 
Secretary per net ton of farmers stock peanuts received or acquired, 
other than those peanuts described in Sec. 997.20(a) (1) and (2). 
During the crop year, the Secretary may increase the rate of assessment 
if such an increase is established under the Agreement.
    (b) Segregation 2 and Segregation 3 farmers stock peanuts disposed 
to crushing or exported are exempt from assessments under this section.
    4. Under the center heading ``Reports, Books and Records,'' 
Secs. 997.52, 997.53 and 997.54 are revised to read as follows:

Reports, Books and Records


Sec. 997.52  Reports of acquisitions and shipments.

    Each handler shall report acquisitions of Segregation 1 farmers 
stock peanuts on a form provided by the Division and file such other 
reports of acquisitions and shipments of peanuts, as prescribed in this 
part. Upon the request of the Division, each handler shall furnish such 
other reports and information as necessary to enable the Division to 
carry out the provisions of this part. All reports and records 
furnished or submitted by handlers to the Division which include data 
or information constituting a trade secret or disclosing the trade 
position, financial condition, or business operations of the particular 
handler shall not be disclosed unless such disclosure is determined 
necessary by the Secretary to enforce the provisions of this part.


Sec. 997.53  Verification of reports.

    For the purpose of checking and verifying reports filed by handlers 
or the operation of handlers under the provisions of this part, the 
Secretary, through its duly authorized agents, shall have access to any 
premises where peanuts may be held by any handler and at any time 
during reasonable business hours and shall be permitted to inspect any 
peanuts so held by such handler and any and all records of such handler 
with respect to the acquisition, movement, holding, processing or 
disposition of all peanuts which may be held or which may have been 
disposed

[[Page 1265]]

of by the handler. Each handler shall maintain such records of peanuts 
received, held, and disposed of by the handler, that will substantiate 
any required reports and will show performance under this part. Such 
records shall be retained for at least two years beyond the crop year 
of their applicability.


Sec. 997.54  Agents.

    The Secretary may, by a designation in writing, name any person, 
including any officer or employee of the United States Government, or 
name any service, division or branch in the United States Department of 
Agriculture, to act as his agent or representative in connection with 
any of the provisions of this part.

PART 998--MARKETING AGREEMENT REGULATING THE QUALITY OF 
DOMESTICALLY PRODUCED PEANUTS

    1. The authority citation for 7 CFR part 998 continues to read as 
follows:

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

    2. Under the center heading ``Implementing Regulations,'' 
Secs. 998.100 and 998.200 are revised to read as follows:

Implementing Regulations


Sec. 998.100  Incoming quality regulation for 1996 and subsequent crop 
peanuts.

    The following modify Sec. 998.5 of the peanut marketing agreement 
and modify or are in addition to the restrictions of section 31 on 
handler receipts or acquisitions of peanuts:
    (a) Modification of Sec. 998.5, paragraphs (b), (c), and (d). 
Paragraphs (b), (c), and (d) of Sec. 998.5 of the peanut marketing 
agreement are modified for the purposes of this section as to farmers 
stock peanuts to read respectively as follows:

    (b) Segregation 1. Segregation 1 peanuts means farmers stock 
peanuts with not more than 2 percent damaged kernels nor more than 
1.00 percent concealed damage caused by rancidity, mold, or decay 
and which are free from visible Aspergillus flavus.
    (c) Segregation 2. Segregation 2 peanuts means farmers stock 
peanuts with more than 2 percent damaged kernels or more than 1.00 
percent concealed damage caused by rancidity, mold, or decay and 
which are free from visible Aspergillus flavus.
    (d) Segregation 3. Segregation 3 peanuts means farmers stock 
peanuts with visible Aspergillus flavus.

    (b) Moisture and foreign material.--
    (1) Moisture. Except as provided under paragraph (d) of this 
section, no handler shall receive or acquire peanuts containing more 
than 10.49 percent moisture: Provided, That peanuts of a higher 
moisture content may be received and dried to not more than 10.49 
percent moisture prior to storing or milling. On farmers stock, such 
moisture determinations shall be rounded to the nearest whole number; 
on shelled peanuts, the determinations shall be carried to the 
hundredths place and shall not be rounded to the nearest whole number.
    (2) Foreign material. No handler shall receive or acquire farmers 
stock peanuts containing more than 10.49 percent foreign material, 
except that peanuts having a higher foreign material content may be 
received or acquired if they are held separately until milled, or moved 
over a sand-screen before storage, or shipped directly to a plant for 
prompt shelling. The term ``sand-screen'' means any type of farmers 
stock cleaner which, when in use, removes sand and dirt.
    (c) Damage. For the purpose of determining damage, other than 
concealed damage, on farmers stock peanuts, all percentage 
determinations shall be rounded to the nearest whole number.
    (d) Seed peanuts. A handler may acquire and deliver for seed 
purposes farmers stock peanuts which meet the requirements of 
Segregation 1 peanuts. If the seed peanuts are produced under the 
auspices of a State agency which regulates or controls the production 
of seed peanuts, they may contain up to 3 percent damaged kernels and 
have visible Aspergillus flavus, and, in addition, the following 
moisture content, as applicable:
    (1) Seed peanuts produced in the Southeastern and Virginia-Carolina 
areas, may contain up to 10.49 percent moisture except Virginia type 
peanuts which are not stacked at harvest time may contain up to 11.49 
percent moisture; and
    (2) Seed peanuts produced in the Southwestern area may contain up 
to 10.49 percent moisture.
    Any seed peanuts produced under the auspices of a State agency 
which contain up to 3 percent damaged kernels and are free from visible 
Aspergillus flavus, may be stored and shelled with Segregation 1 seed 
peanuts which are also produced under the auspices of the State agency. 
Any seed peanuts with visible Aspergillus flavus shall be stored and 
shelled separate from other peanuts, and any residuals not used for 
seed shall not be used or disposed of for human consumption unless it 
is determined to be wholesome by chemical assay for aflatoxin. A 
handler whose operations include custom shelling may receive, custom 
shell, and deliver for seed purposes farmers stock peanuts, and such 
peanuts shall be exempt from the Incoming Quality Regulation 
requirements, and, therefore, shall not be required to be inspected and 
certified as meeting the Incoming Quality Regulation requirements, and 
the handler shall report to the Committee, as requested, the weight of 
each lot of farmers stock peanuts received on such basis on a form 
furnished by the Committee. Handlers who acquire seed peanut residuals 
from their custom shelling of uninspected (farmers stock) seed peanuts 
or from another producer or sheller may mill such residuals with other 
receipts or acquisitions of the handler, and such residuals which meet 
the Outgoing Quality Regulation requirements, may be disposed of by 
sale to human consumption outlets.
    (e) Oilstock. Handlers may acquire for disposition to domestic 
crushing or export farmers stock peanuts of a lower quality than 
Segregation 1 or grades or sizes of shelled peanuts or cleaned inshell 
peanuts which fail to meet the requirements for human consumption. The 
provision of Sec. 998.31 of the marketing agreement restricting 
acquisitions of such peanuts to handlers who are crushers is hereby 
modified pursuant to Sec. 998.34, to authorize all handlers to act as 
accumulators and acquire, from other handlers or non-handlers, 
Segregation 2 or 3 farmers stock peanuts. Handlers may also acquire for 
crushing or export from other handlers peanuts originating from 
Segregation 2 or 3 farmers stock or the entire mill production of 
shelled peanuts from Segregation 1 farmers stock or lots of peanuts 
originating from Segregation 1 peanuts and which have been positive lot 
identified as specified in paragraph (d) of Sec. 998.200, Outgoing 
quality regulation, which failed to meet the requirements for human 
consumption pursuant to paragraph (a) of Sec. 998.200, Outgoing quality 
regulation: Provided, That all such acquisitions are held separate from 
Segregation 1 peanuts acquired for milling or from edible grades of 
shelled or milled peanuts. Handlers may commingle the Segregation 2 and 
3 peanuts or keep them separate and apart. Handlers who acquire farmers 
stock peanuts of a lower quality than Segregation 1 or grades or sizes 
of shelled peanuts or cleaned inshell peanuts which fail to meet the 
requirements for human consumption shall report such acquisitions as 
prescribed by the Committee. To be eligible to receive or acquire 
Segregation 2 or 3 farmers stock peanuts and shelled peanuts 
originating therefrom, a handler shall pay to the Area Association a 
fee

[[Page 1266]]

for the purpose of covering cost of supervision of the disposition of 
such peanuts.
    (f) Segregation 2 and 3 control. To assure the removal from edible 
outlets of any lot of peanuts determined by Federal or Federal-State 
Inspection Service to be Segregation 2 or Segregation 3, each handler 
shall inform each employee, country buyer, commission buyer, or like 
person through whom the handler receives peanuts of the need to receive 
and withhold all lots of Segregation 2 and Segregation 3 peanuts from 
milling for edible use. If any lot of Segregation 2 or Segregation 3 
farmers stock peanuts is not withheld but returned to the producer, the 
handler shall cause the Inspection Service to forward immediately a 
copy of the inspection certificate on the lot to the designated office 
of the handler and a copy to the Committee which shall be used only for 
information purposes.
    (g) Farmers stock storage and handling facilities. Handlers shall 
report to the Committee, on a form furnished by the Committee, all 
storage facilities or contract storage facilities which they will use 
to store acquisitions of current crop Segregation 1 farmers stock 
peanuts, and all such storage facilities must be reported prior to 
storing of any such handler acquisitions. Handlers shall also report to 
the Committee the locations at which they will receive or acquire 
current crop farmers stock peanuts. All such storage facilities shall 
have reasonable and safe access to allow for inspection of the facility 
and its contents. All such storage facilities must be of sound 
construction, in good repair, and built and equipped so as to provide 
suitable storage and sufficient safeguards to prevent moisture 
condensation and provide adequate protection for farmers stock peanuts. 
All breaks or openings in the walls, floors, or roofs of the facilities 
shall have been repaired so as to keep out moisture. Elevator pits and 
wells must be kept dry and free of moisture at all times. Insect 
control procedures must be carried out in such a manner as to prevent 
undesirable moisture in the storage facilities. Any conditions in 
warehouses, elevators, pits, transportation equipment, including trucks 
and hopper cars, and other farmers stock handling equipment conducive 
to the growth or spread of Aspergillus flavus mold shall be corrected 
to the satisfaction of the Committee. The Committee may make periodic 
inspections of farmers stock storage and handling facilities and 
farmers stock peanuts stored in such facilities to determine if 
handlers are adhering to these requirements.
    (h) Shelled peanuts. Handlers may acquire shelled peanuts, which 
originated from ``Segregation 1 peanuts,'' from other handlers, for 
remilling and subsequent disposition to human consumption outlets.
    (i) Segregation 2 and Segregation 3 farmers stock peanuts held 
separate and apart or commingled, and disposed of to domestic or export 
crushing are exempt from assessments under this section.


Sec. 998.200  Outgoing quality regulation for 1996 and subsequent crop 
peanuts.

    The following modify or in addition to the peanut marketing 
agreement restrictions of Sec. 998.32 on handler disposition of 
peanuts:
    (a) Shelled peanuts. (1) No handler shall ship or otherwise dispose 
of shelled peanuts for human consumption unless such peanuts are 
positive lot identified, certified ``negative'' as to aflatoxin, and 
certified as meeting the requirements in the following ``Other Edible 
Quality * * *'' grades:

                                 Table 1.--``Other Edible Quality'' (Non-Indemnifiable) Grades--Whole Kernels and Splits                                
                                                             [Excluding lots of ``splits'']                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Unshelled                             Fall through                                                    
                                     Unshelled     peanuts   ------------------------------------------------------------------                         
                                    peanuts and    damaged                                                                        Foreign               
      Type and grade category         damaged    kernels and                                                                     materials     Moisture 
                                      kernels       minor        Sound split and     Sound whole kernels          Total          (percent)    (percent) 
                                     (percent)     defects       broken kernels                                                                         
                                                  (percent)                                                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner............................         1.50         2.50  3.00%; \17/64\ inch   3.00%; \16/64\ x \3/  4.00%; both screens.          .20         9.00
                                                               round screen.         4\ inch; slot                                                      
                                                                                     screen.                                                            
Virginia (except No. 2)...........         1.50         2.50  3.00%; \17/64\ inch;  3.00%; \15/64\ x 1    4.00%; both screens.          .20         9.00
                                                               round screen.         inch; slot screen.                                                 
Spanish and Valencia..............         1.50         2.50  3.00%; \16/64\ inch;  3.00%; \15/64\ x \3/  4.00%; both screens.          .20         9.00
                                                               round screen.         4\ inch; slot                                                      
                                                                                     screen.                                                            
No. 2 Virginia....................         1.50         3.00  6.00%; \17/64\ inch;  6.00%; \15/64\ x 1    6.00%; both screens.          .20         9.00
                                                               round screen.         inch; slot screen.                                                 
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Lots of ``splits''                                                                   
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner (not more than 4% sound             1.50         2.50  3.00%; \17/64\ inch;  3.00%; \14/64\ x \3/  4.00%; both screens.          .20         9.00
 whole kernels).                                               round screen.         4\ inch; slot                                                      
                                                                                     screen.                                                            
Virginia (not less than 90%                1.50         2.50  3.00%; \17/64\ inch;  3.00%; \14/64\ x 1    4.00%; both screens.          .20         9.00
 splits).                                                      round screen.         inch; slot screen.                                                 
Spanish and Valencia (not more             1.50         2.50  3.00%; \16/64\ inch;  3.00%; \13/64\ x \3/  4.00%; both screens.          .20         9.00
 than 4% sound whole kernels).                                 round screen.         4\ inch; slot                                                      
                                                                                     screen.                                                            
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (2) Prior to disposition to human consumption outlets, peanuts 
which have been certified as meeting the requirements for Indemnifiable 
Grades must also be certified ``negative'' as to aflatoxin. Maximum 
limitations for Indemnifiable Grades are as follows:

[[Page 1267]]



                                                             Table 2.--Indemnifiable Grades                                                             
                                                                  [Maximum limitations]                                                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Unshelled                             Fall through                                                    
                                     Unshelled     peanuts,  ------------------------------------------------------------------                         
                                    peanuts and    damaged                                                                        Foreign               
      Type and grade category         damaged    kernels and     Sound split and                                                 materials     Moisture 
                                      kernels       minor        broken kernels      Sound whole kernels          Total          (percent)    (percent) 
                                     (percent)     defects          (percent)             (percent)                                                     
                                                  (percent)                                                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner U.S. No.1 and better.......         1.25         2.00  3.00%; \17/64\ inch,  3.00%; \16/64\ x \3/  4.00%; both screens.          .10         9.00
                                                               round screen.         4\ inch, slot                                                      
                                                                                     screen.                                                            
Virginia U.S. No.1 and better.....         1.25         2.00  3.00%; \17/64\ inch,  3.00%; \15/64\ x 1    4.00%; both screens.          .10         9.00
                                                               round screen.         inch, slot screen.                                                 
Spanish and Valencia U.S. No.1 and         1.25         2.00  3.00%; \16/64\ inch,  2.00%; \15/64\ x \3/  4.00%; both screens.          .10         9.00
 better..                                                      round screen.         4\ inch, slot                                                      
                                                                                     screen.                                                            
Runner U.S. Splits (not more than          1.25         2.00  2.00%; \17/64\ inch,  3.00%; \14/64\ x \3/  4.00%; both screens.          .20         9.00
 4% sound, whole kernels).                                     round screen.         4\ inch, slot                                                      
                                                                                     screen.                                                            
Virginia U.S. Splits (not less             1.25         2.00  3.00%; \17/64\ inch,  3.00%; \14/64\ x 1    4.00%; both screens.          .20         9.00
 than 90% splits and not more than                             round screen.         inch, slot screen.                                                 
 3.00% sound whole kernels and                                                                                                                          
 portions passing through \20/64\                                                                                                                       
 inch round screen).                                                                                                                                    
Spanish and Valencia U.S. Splits           1.25         2.00  2.00%; \16/64\ inch,  3.00%; \13/64\ x \3/  4.00%; both screens.          .20         9.00
 (not more than 4% sound, whole                                round screen.         4\ inch, slot                                                      
 kernels).                                                                           screen.                                                            
Runner with splits (not more than          1.25         2.00  3.00%; \17/64\ inch,  3.00%; \16/64\ x \3/  4.00%; both screens.          .10         9.00
 15% sound splits).                                            round screen.         4\ inch, slot                                                      
                                                                                     screen.                                                            
Virginia with splits (not more             1.25         2.00  3.00%; \17/64\ inch,  3.00%; \15/64\ x 1    4.00%; both screens.          .10         9.00
 than 15% sound splits).                                       round screen.         inch, slot screen.                                                 
Spanish and Valencia with splits           1.25         2.00  3.00%; \16/64\ inch,  2.00%; \15/64\ x \3/  4.00%; both screens.          .10         9.00
 (not more than 15% sound splits).                             round screen.         4\ inch, slot                                                      
                                                                                     screen.                                                            
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (3) The term ``fall through'', as used herein, shall mean sound 
split and broken kernels and whole kernels which pass through specified 
screens.
    (b) Cleaned inshell peanuts. No handler shall ship or otherwise 
dispose of cleaned inshell peanuts for human consumption:
    (1) With more than 1.00 percent kernels with mold present unless a 
sample of such peanuts, drawn by an inspector of the Federal or 
Federal-State Inspection Service, was analyzed chemically by 
laboratories approved by the Committee or by a U.S. Department of 
Agriculture laboratory (hereinafter referred to as ``USDA laboratory'') 
and found to be wholesome relative to aflatoxin;
    (2) with more than 2.00 percent peanuts with damaged kernels;
    (3) with more than 10.00 percent moisture; or
    (4) with more than 0.50 percent foreign material. The lot size of 
such peanuts in bags or bulk shall not exceed 200,000 pounds.
    (c) Sampling and testing shelled peanuts. (1) Prior to shipment, 
each handler shall cause appropriate samples of each lot of edible 
quality shelled peanuts to be drawn by an inspector of the Federal or 
Federal-State Inspection Service. The gross amount of peanuts drawn 
shall be large enough to provide for a grade analysis, for a grading 
check-sample, and for three 48-pound samples for aflatoxin assay. The 
three 48-pound samples shall be designated by the Federal or Federal-
State Inspection Service as ``Sample #1,'' ``Sample #2,'' and ``Sample 
#3'' and each sample shall be placed in a suitable container and 
``positive lot identified'' by means acceptable to the Inspection 
Service and the Committee. Sample #1 may be prepared for immediate 
testing or Sample #1, Sample #2, and Sample #3 may be returned to the 
handler for testing at a later date. However, before shipment of the 
lot to the buyer (receiver), the handler shall cause Sample #1 to be 
ground by the Federal or Federal-State Inspection Service or a USDA or 
designated laboratory in a ``subsampling mill'' approved by the 
Committee. The resultant ground subsample from Sample #1 shall be of a 
size specified by the Committee and be designated as ``Subsample 1-AB'' 
and at the handler's or buyer's option, a second subsample may also be 
extracted from Sample #1. It shall be designated as ``Subsample 1-CD.'' 
Subsample 1-CD may be sent as requested by the handler or buyer, for 
aflatoxin assay, to a laboratory listed on the most recent Committee 
list of approved laboratories that can provide analyses results on

[[Page 1268]]

such samples in 36 hours. Subsample 1-AB shall be analyzed only in USDA 
or designated laboratories. Both Subsamples 1-AB and 1-CD shall be 
accompanied by a notice of sampling signed by the inspector containing, 
at least, identifying information as to the handler (shipper), the 
buyer (receiver), if known, and the positive lot identification of the 
shelled peanuts. A copy of such notice covering each lot shall be sent 
to the Committee office.
    (2) The samples designated as Sample #2 and Sample #3 shall be held 
as aflatoxin check-samples by the Inspection Service or the handler and 
shall not be included in the shipment to the buyer until the analyses 
results from Sample #1 are known. Upon call from the USDA or designated 
laboratory or the Committee, the handler shall cause Sample #2 to be 
ground by the Inspection Service in a ``subsampling mill.'' The 
resultant ground subsample from Sample #2 shall be of the size 
specified by the Committee and it shall be designated as ``Subsample 2-
AB.'' Upon call from the USDA or designated laboratory or the 
Committee, the handler shall cause Sample #3 to be ground by the 
Inspection Service in a ``subsampling mill.'' The resultant ground 
subsample from Sample #3 shall be of the size specified by the 
Committee and it shall be designated as ``Subsample 3-AB.'' Subsamples 
2-AB and 3-AB shall be analyzed only in USDA or designated laboratories 
and each shall be accompanied by a notice of sampling. A copy of each 
such notice shall be sent to the Committee office and the cost of 
delivery of Subsamples 2-AB and 3-AB to the laboratory and the cost of 
assay on them shall be at the Committee's expense.
    (3) All costs involved in sampling and testing Subsample 1-CD shall 
be for the account of the buyer of the lot and at the buyer's expense. 
However, if the handler elects to pay any portion of these cost the 
handler shall charge the buyer accordingly. Aflatoxin sampling and 
testing cost for the AB subsamples shall be included as a separate item 
in the handler's invoice to the buyer at the rate of $0.0027 per pound 
or $0.27 per hundredweight of the peanuts covered by the invoice. When 
any of the samples or subsamples have been lost, misplaced, or spoiled 
and replacement samples are needed, the entire cost of drawing the 
replacement samples shall be for the account of the handler. The 
results of each assay shall be reported to the buyer listed on the 
notice of sampling and, if the handler desires, to the handler. If a 
buyer is not listed on the notice of sampling, the results of the assay 
shall be reported to the handler, who shall promptly cause notice to be 
given to the buyer of the contents thereof, and such handler shall not 
be required to furnish additional samples for assay.
    (4) For the current crop year, ``negative'' aflatoxin content means 
15 parts per billion (ppb) or less for peanuts which have been 
certified as meeting edible quality grade requirements as determined by 
the Committee's sampling plan applicable to the respective grade 
categories.
    (d) Identification. Each lot of shelled or cleaned inshell peanuts, 
in lot sizes not exceeding 200,000 pounds, shall be identified by 
positive lot identification procedures prior to being shipped or 
otherwise disposed of. For the purpose of this regulation, ``positive 
lot identification'' of a lot of shelled or inshell peanuts is a means 
of relating the inspection certificate to the lot which has been 
inspected so that there can be no doubt that the peanuts are the same 
ones described on the inspection certificate. The crop year that is 
shown on the positive lot identification tags, or other means of 
positive lot identification shall accurately describe the crop year in 
which the peanuts in the lot were produced. Such procedure on bagged 
peanuts shall consist of attaching a lot numbered tag bearing the 
official stamp of the Federal or Federal-State Inspection Service to 
each filled bag in the lot. The tag shall be sewed (machine sewed if 
shelled peanuts) into the closure of the bag except that in plastic 
bags the tag shall be inserted prior to sealing so that the official 
stamp is visible. Any peanuts moved in bulk or bulk bins shall have 
their lot identity maintained by sealing the conveyance and if in other 
containers by other means acceptable to the Federal or Federal-State 
Inspection Service and to the Committee. All lots of shelled or cleaned 
inshell peanuts shall be handled, stored, and shipped under positive 
lot identification procedures, except those lots which have been 
reconstituted and/or commingled at the request of the receiver. All 
such reconstituted and/or commingled lots will no longer be considered 
positive lot identified and, therefore, no longer be eligible for 
indemnification or for appeal inspection. Handlers shall keep and 
maintain records of the quantities involved in each reconstituting and/
or commingling procedure, whether in single or multiple lots, and such 
records shall be available to the Committee on request.
    (e) Reinspection. Whenever the Committee has reason to believe that 
peanuts may have been damaged or deteriorated while in storage, the 
Committee may reject the then effective inspection certificate and may 
require the owner of the peanuts to have a reinspection to establish 
whether or not such peanuts may be disposed of for human consumption.
    (f) Further modification of Sec. 998.32.
    (1) The provisions of Sec. 998.32(a) restricting the disposition of 
peanuts which fail to meet the requirements specified heretofore in 
this section to the Commodity Credit Corporation or in such manner as 
may be prescribed by the Committee with the approval of the Secretary, 
is hereby modified to specify that only peanuts which have been 
certified as meeting the requirements specified in paragraphs (a) or 
(b) of this section, which have been sampled pursuant to paragraph (c) 
of this section, and which have been identified pursuant to paragraph 
(d) of this section are eligible for disposition to human consumption 
outlets.
    (2) Lots of peanuts which have not been certified as meeting the 
requirements for disposition to human consumption outlets, may be 
disposed for non-human consumption uses which are not regulated or 
limited by the provisions specified hereinafter in this section: 
Provided, That each such lot is positive lot identified, using red 
tags, and certified as to aflatoxin content (actual numerical count). 
However, on the shipping papers covering the disposition of each such 
lot of inedible quality peanuts, the handler shall cause the following 
statement to be shown: ``The peanuts covered by this bill of lading (or 
invoice, etc.) are not to be used for human consumption.''
    (3) Except for inedible quality peanuts disposed of under the 
provisions of paragraph (f)(2) of this section and peanuts derived from 
the milling for seed of Segregation 2 and 3 farmers stock peanuts, 
peanuts which have not been certified as meeting the standards set 
forth in paragraphs (a) or (b) of this section shall be disposed of as 
prescribed hereinafter in this section.
    (g) Sheller oil stock residuals--for crushing or export. Peanuts 
and portions of peanuts which are separated from edible quality peanuts 
by screening or sorting or other means during the milling process, may 
be segregated into categories or commingled as sheller oil stock 
residuals. Such sheller oil stock residuals shall be identified 
pursuant to paragraph (d) of this section, but using a red tag, and 
such peanuts may be disposed of domestically or to the export market in 
bulk or bags or other suitable containers. Disposition to crushing may 
be to handlers who are crushers or to domestic crushers who

[[Page 1269]]

are not handlers under the Agreement only on the condition that they 
agree to comply with the terms of this paragraph and all other 
applicable requirements of the Agreement. The movement of such peanuts 
shall be reported to the Committee by the shipping handler and the 
crusher, as requested by the Committee.
    (1) If the peanuts have not been tested and certified as to 
aflatoxin content, as prescribed in paragraph (c) of this section, the 
handler shall cause the following statement to be shown on the shipping 
papers: ``The peanuts covered by this bill of lading (or invoice, etc.) 
are limited to crushing only and may contain aflatoxin.''
    (2) If the peanuts are certified as 301 ppb or more aflatoxin 
content, disposition shall be limited to crushing or export.
    (h) Blanching and remilling peanuts failing quality requirements. 
(1) Handlers may blanch or cause to have blanched positive lot 
identified shelled peanuts, which originated from Segregation 1 
peanuts, that fail to meet the requirements of paragraph (a) of this 
section because of excessive damage, minor defects, moisture, or 
foreign material or are positive as to aflatoxin. Prior to movement of 
such peanuts to a blancher, handlers shall report to the Committee, on 
a form furnished by the Committee, and receive authorization from the 
Committee for movement and blanching of each such lot. Lots of peanuts 
which are moved under these provisions must be accompanied by a valid 
grade inspection certificate and the title shall be retained by the 
handler until the peanuts are blanched and certified by an inspector of 
the Federal or Federal-State Inspection Service as meeting the 
requirements for disposal into human consumption outlets. To be 
eligible for disposal into human consumption outlets, such peanuts 
after blanching, must meet specifications for unshelled peanuts, 
damaged kernels, minor defects, moisture, and foreign material as 
listed in paragraph (a) of this section and be accompanied by an 
aflatoxin certificate determined to be negative by the Committee. The 
residual peanuts, excluding skins and hearts, resulting from blanching 
under these provisions, shall be bagged and red tagged and disposition 
shall be that such peanuts are returned to the handler for further 
disposition; or, in the alternative, such residuals shall be positive 
lot identified by the Federal or Federal-State Inspection Service, and 
shall be disposed of, by the blancher, to handlers who are crushers, or 
to domestic crushers who are not handlers under the Agreement only on 
the condition that they agree to comply with the terms of paragraph (g) 
of this section and all other applicable requirements of the Agreement. 
Blanching under the provisions of this paragraph shall be performed 
only by those firms who agree to procedures acceptable to the Committee 
and who are approved by the Committee to do such blanching.
    (2) Handlers may contract with Committee-approved remillers for 
remilling shelled peanuts, which originated from Segregation 1 peanuts, 
that fail to meet the requirements for disposition to human consumption 
outlets heretofore specified in paragraph (a) of this section: 
Provided, That such lots of peanuts contain not in excess of 10 percent 
fall through. Prior to movement of such peanuts under these provisions 
to a Committee-approved remiller, handlers shall report to the 
Committee, on a form furnished by the Committee, and receive 
authorization from the Committee for movement and remilling of each 
such lot. Lots of peanuts moved under these provisions must be 
accompanied by a valid grade inspection certificate and must be 
positive lot identified and the title of such peanuts shall be retained 
by the handler until the peanuts have been remilled and certified by 
the Federal or Federal-State Inspection-Service as meeting the 
requirements for disposition to human consumption outlets specified in 
paragraph (a) of this section, and be accompanied by an aflatoxin 
certificate determined to be negative by the Committee. Remilling under 
these provisions may include composite remilling of more than one such 
lot of peanuts owned by the same handler. However, such peanuts owned 
by one handler shall be held and remilled separate and apart from all 
other peanuts. The residual peanuts resulting from remilling under 
these provisions, shall be bagged and red tagged and disposition shall 
be that such peanuts are returned to the handler for further 
disposition; or, in the alternative, such residuals shall be positive 
lot identified by the Federal or Federal-State Inspection Service, and 
shall be disposed of, by the remiller, to handlers who are crushers, or 
to domestic crushers who are not handlers under the Agreement only on 
the condition that they agree to comply with the terms of paragraph (g) 
of this section and all other applicable requirements of the Agreement. 
Remilling under the provisions of this paragraph shall be performed 
only by those firms who agree to procedures acceptable to the Committee 
and who are approved by the Committee to do such remilling.
    (i) Documentation of compliance. Each handler shall keep and 
maintain records of all receipts and acquisitions and all milling, 
remilling, blanching, use and disposition of peanuts which have not 
been certified as meeting the requirements for disposition to human 
consumption, pursuant to paragraph (a) or (b) of this section, as will 
document and substantiate compliance and performance under this 
agreement.

PART 999--SPECIALTY CROPS; IMPORT REGULATIONS

    1. The authority citation for 7 CFR part 999 continues to read as 
follows:

    Authority: 7 U.S.C. 601-674; and 7 U.S.C. 1445c-3.

    2. Section 999.600 is revised to read as follows:


Sec. 999.600  Regulation governing imports of peanuts.

    (a) Definitions. (1) Peanuts means the seeds of the legume Arachis 
hypogaea and includes both inshell and shelled peanuts produced in 
countries other than the United States, other than those marketed in 
green form for consumption as boiled peanuts.
    (2) Farmers stock peanuts means picked and threshed raw peanuts 
which have not been shelled, crushed, cleaned or otherwise changed 
(except for removal of foreign material, loose shelled kernels, and 
excess moisture) from the form in which customarily marketed by 
producers.
    (3) Inshell peanuts means peanuts, the kernels or edible portions 
of which are contained in the shell.
    (4) Incoming inspection means the sampling and inspection of 
farmers stock peanuts to determine Segregation quality.
    (5) Segregation 1 peanuts, unless otherwise specified, means 
farmers stock peanuts with not more than 2.00 percent damaged kernels 
nor more than 1.00 percent concealed damage caused by rancidity, mold, 
or decay and which are free from visible Aspergillus flavus mold.
    (6) Segregation 2 peanuts, unless otherwise specified, means 
farmers stock peanuts with more than 2.00 percent damaged kernels or 
more than 1.00 percent concealed damage caused by rancidity, mold, or 
decay and which are free from visible Aspergillus flavus mold.
    (7) Segregation 3 peanuts, unless otherwise specified, means 
farmers stock peanuts with visible Aspergillus flavus mold.

[[Page 1270]]

    (8) Shelled peanuts means the kernels of peanuts after the shells 
are removed.
    (9) Outgoing inspection means the sampling and inspection of 
either: shelled peanuts which have been cleaned, sorted, sized and 
otherwise prepared for human consumption markets; or inshell peanuts 
which have been cleaned, sorted and otherwise prepared for inshell 
human consumption markets.
    (10) Negative aflatoxin content means 15 parts-per-billion (ppb) or 
less for peanuts which have been certified as meeting edible quality 
grade requirements, and 25 ppb or less for inedible quality peanuts.
    (11) Person means an individual, partnership, corporation, 
association, or any other business unit.
    (12) Secretary means the Secretary of Agriculture of the United 
States or any officer or employee of the United States Department of 
Agriculture (Department or USDA) who is, or who may hereafter be, 
authorized to act on behalf of the Secretary.
    (13) Inspection service means the Federal or Federal-State 
Inspection Service, Fruit and Vegetable Division, Agricultural 
Marketing Service, USDA.
    (14) USDA laboratory means laboratories of the Science and 
Technology Division, Agricultural Marketing Service, USDA, that 
chemically analyze peanuts for aflatoxin content.
    (15) PAC approved laboratories means laboratories approved by the 
Peanut Administrative Committee, pursuant to Peanut Marketing Agreement 
No. 146 (7 CFR Part 998), that chemically analyze peanuts for aflatoxin 
content.
    (16) Conditionally released means released from Customs Service 
custody for further handling (sampling, inspection, chemical analysis, 
or storage) before final release.
    (17) Importation means the arrival of a peanut shipment at a port-
of-entry with the intent to enter the peanuts into channels of commerce 
of the United States.
    (b) Incoming regulation. (1) Farmers stock peanuts presented for 
consumption must undergo incoming inspection. Only Segregation 1 
peanuts may be used for human consumption. All foreign produced farmers 
stock peanuts for human consumption must be sampled and inspected at a 
buying point or other handling facility capable of performing incoming 
sampling and inspection. Sampling and inspection shall be conducted by 
the inspection service. Only Segregation 1 peanuts certified as meeting 
the following requirements may be used in human consumption markets:
    (i) Moisture. Except as provided under paragraph (b)(2) Seed 
peanuts, of this section, peanuts may not contain more than 10.49 
percent moisture: Provided, That peanuts of a higher moisture content 
may be received and dried to not more than 10.49 percent moisture prior 
to storage or milling.
    (ii) Foreign material. Peanuts may not contain more than 10.49 
percent foreign material, except that peanuts having a higher foreign 
material content may be held separately until milled, or moved over a 
sand-screen before storage, or shipped directly to a plant for prompt 
shelling. The term ``sand-screen'' means any type of farmers stock 
cleaner which, when in use, removes sand and dirt.
    (iii) Damage. For the purpose of determining damage, other than 
concealed damage, on farmers stock peanuts, all percentage 
determinations shall be rounded to the nearest whole number.
    (2) Seed peanuts. Farmers stock peanuts determined to be 
Segregation 1 quality, and shelled peanuts certified negative to 
aflatoxin (15 ppb or less), may be imported for seed purposes. 
Residuals from the shelling of Segregation 1 seed peanuts may be milled 
with other imported peanuts of the importer, and such residuals meeting 
quality requirements specified in paragraph (c)(1) of this section may 
be disposed to human consumption channels. Any portion not meeting such 
quality requirements shall be disposed to inedible peanut channels 
pursuant to paragraphs (f) and (g) of this section. All disposition of 
seed peanuts and residuals from seed peanuts , whether commingled or 
kept separate and apart, shall be reported to the Secretary pursuant to 
paragraphs (f)(2) and (f)(3) of this section. The receiving seed outlet 
must retain records of the transaction, pursuant to paragraph (g)(7) of 
this section.
    (3) Oilstock and exportation. Farmers stock peanuts of lower 
quality than Segregation 1 (Segregation 2 and 3 peanuts) shall be used 
only in inedible outlets. Segregation 2 and 3 peanuts may be commingled 
but shall be kept separate and apart from edible quality peanut lots. 
Commingled Segregation 2 and 3 peanuts and Segregation 3 peanuts shall 
be disposed only to oilstock or exported. Shelled peanuts and cleaned-
inshell peanuts which fail to meet the requirements for human 
consumption in paragraphs (c)(1) or (c)(2), respectively, of 
Sec. 997.600, may be crushed for oil or exported.
    (c) Outgoing regulation. No person shall import peanuts for human 
consumption into the United States unless such peanuts are lot 
identified and certified by the inspection service as meeting one of 
the following requirements:
    (1) Shelled peanuts. (i) No importer shall ship or otherwise 
dispose of shelled peanuts to human consumption markets unless such 
peanuts are lot identified, certified as ``negative'' to aflatoxin, and 
meet the requirements specified in Table 1.

                                           Table 1.--Minimum Grade Requirements--Peanuts for Human Consumption                                          
                                                               [Whole Kernels and Splits]                                                               
                                                                   Maximum limitations                                                                  
                                                              Excluding lots of ``splits''                                                              
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Unshelled                             Fall through                                                    
                                     Unshelled     peanuts,  ------------------------------------------------------------------                         
                                    peanuts and    damaged                                                                        Foreign               
      Type and grade category         damaged    kernels and                                                                     materials     Moisture 
                                      kernels       minor        Sound split and     Sound whole kernels          Total          (percent)    (percent) 
                                     (percent)     defects       broken kernels                                                                         
                                                  (percent)                                                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner............................         1.50         2.50  3.00%; \17/64\ inch   3.00%; \16/64\  x     4.00%; both screens.          .20         9.00
                                                               round screen.         \3/4\ inch; slot                                                   
                                                                                     screen.                                                            
Virginia (except No. 2)...........         1.50         2.50  3.00%; \17/64\ inch;  3.00%; \15/64\  x  1  4.00%; both screens.          .20         9.00
                                                               round screen.         inch; slot screen.                                                 
Spanish and Valencia..............         1.50         2.50  3.00%; \16/64\ inch;  3.00%; \15/64\  x     4.00%; both screens.          .20         9.00
                                                               round screen.         \3/4\ inch; slot                                                   
                                                                                     screen.                                                            

[[Page 1271]]

                                                                                                                                                        
No. 2 Virginia....................         1.50         3.00  6.00%; \17/64\ inch;  6.00%; \15/64\  x  1  6.00%; both screens.          .20         9.00
                                                               round screen.         inch; slot screen.                                                 
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Lots of ``splits''                                                                   
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner (not more than 4% sound             1.50         2.50  3.00%; \17/64\ inch;  3.00%; \14/64\  x     4.00%; both screens.          .20         9.00
 whole kernels).                                               round screen.         \3/4\ inch; slot                                                   
                                                                                     screen.                                                            
Virginia (not less than 90%                1.50         2.50  3.00%; \17/64\ inch;  3.00%; \14/64\  x  1  4.00%; both screens.          .20         9.00
 splits).                                                      round screen.         inch; slot screen.                                                 
Spanish and Valencia (not more             1.50         2.50  3.00%; \16/64\ inch;  3.00%; \13/64\  x     4.00%; both screens.          .20         9.00
 than 4% sound whole kernels).                                 round screen.         \3/4\ inch; slot                                                   
                                                                                     screen.                                                            
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (ii) Shelled peanuts which are lot identified, certified as 
``negative'' to aflatoxin pursuant to paragraph (d)(4)(v) of this 
section, and meet requirements specified in the Table 2, may be shipped 
to human consumption markets prior to the importer receiving such 
aflatoxin certification.

                                         TABLE 2.--Superior Quality Requirements--Peanuts for Human Consumption                                         
                                                               [Whole Kernels and Splits]                                                               
                                                                   Maximum limitations                                                                  
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Unshelled                             Fall through                                                    
                                     Unshelled     peanuts,  ------------------------------------------------------------------                         
                                    peanuts and    damaged                                                                        Foreign               
      Type and grade category         damaged    kernels and     Sound split and                                                 materials     Moisture 
                                      kernels       minor        broken kernels      Sound whole kernels          Total          (percent)    (percent) 
                                     (percent)     defects          (percent)             (percent)                                                     
                                                  (percent)                                                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner U.S. No.1 and better.......         1.25         2.00  3.00%; \17/64\ inch,  3.00%; \16/64\  x     4.00%; both screens.          .10         9.00
                                                               round screen.         \3/4\ inch, slot                                                   
                                                                                     screen.                                                            
Virginia U.S. No.1 and better.....         1.25         2.00  3.00%; \17/64\ inch,  3.00%; \15/64\  x  1  4.00%; both screens.          .10         9.00
                                                               round screen.         inch, slot screen.                                                 
Spanish and Valencia U.S. No.1 and         1.25         2.00  3.00%; \16/64\ inch,  2.00%; \15/64\  x     4.00%; both screens.          .10         9.00
 better.                                                       round screen.         \3/4\ inch, slot                                                   
                                                                                     screen.                                                            
Runner U.S. Splits (not more than          1.25         2.00  2.00%; \17/64\ inch,  3.00%; \14/64\  x     4.00%; both screens.          .20         9.00
 4% sound, whole kernels)..                                    round screen.         \3/4\ inch, slot                                                   
                                                                                     screen.                                                            
Virginia U.S. Splits (not less             1.25         2.00  3.00%; \17/64\ inch,  3.00%; \14/64\  x  1  4.00%; both screens.          .20         9.00
 than 90% splits and not more than                             round screen.         inch, slot screen.                                                 
 3.00% sound whole kernels and                                                                                                                          
 portions passing through \20/64\                                                                                                                       
 inch round screen)..                                                                                                                                   
Spanish and Valencia U.S. Splits           1.25         2.00  2.00%; \16/64\ inch,  3.00%; \13/64\  x     4.00%; both screens.          .20         9.00
 (not more than 4% sound, whole                                round screen.         \3/4\ inch, slot                                                   
 kernels)..                                                                          screen.                                                            
Runner with splits (not more than          1.25         2.00  3.00%; \17/64\ inch,  3.00%; \16/64\  x     4.00%; both screens.          .10         9.00
 15% sound splits)..                                           round screen.         \3/4\ inch, slot                                                   
                                                                                     screen.                                                            

[[Page 1272]]

                                                                                                                                                        
Virginia with splits (not more             1.25         2.00  3.00%; \17/64\ inch,  3.00%; \15/64\  x  1  4.00%; both screens.          .10         9.00
 than 15% sound splits)..                                      round screen.         inch, slot screen.                                                 
Spanish and Valencia with splits           1.25         2.00  3.00%; \16/64\ inch,  2.00%; \15/64\  x     4.00%; both screens.          .10         9.00
 (not more than 15% sound splits)..                            found screen.         \3/4\ inch, slot                                                   
                                                                                     screen.                                                            
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (iii) The term ``fall through'', as used herein, shall mean sound 
split and broken kernels and whole kernels which pass through specified 
screens. Prior to shipment, appropriate samples for pretesting shall be 
drawn in accordance with paragraph (d) of this section from each lot of 
Superior Quality peanuts.
    (2) Cleaned-inshell peanuts. Peanuts declared as cleaned-inshell 
peanuts may be presented for sampling and outgoing inspection in bags 
at the port-of-entry. Alternatively, peanuts may be conditionally 
released as cleaned-inshell peanuts but shall not subsequently undergo 
any cleaning, sorting, sizing or drying process prior to presentation 
for outgoing inspection as cleaned-inshell peanuts. Cleaned-inshell 
peanuts which fail outgoing inspection may be reconditioned or 
redelivered to the port-of-entry, at the option of the importer. 
Cleaned-inshell peanuts determined to be unprepared farmers stock 
peanuts must be inspected against incoming quality requirements and 
determined to be Segregation 1 peanuts prior to outgoing inspection for 
cleaned-inshell peanuts. Cleaned-inshell peanuts intended for human 
consumption may not contain more than:
    (i) 1.00 percent kernels with mold present, unless a sample of such 
peanuts is drawn by the inspection service and analyzed chemically by a 
USDA or PAC approved laboratory and certified ``negative'' as to 
aflatoxin.
    (ii) 2.00 percent peanuts with damaged kernels;
    (iii) 10.00 percent moisture (carried to the hundredths place); and
    (iv) 0.50 percent foreign material.
    (d) Sampling and inspection. (1) All sampling and inspection, 
quality certification, chemical analysis, and lot identification, 
required under this section, shall be done by the inspection service, a 
USDA laboratory, or a PAC-approved laboratory, as applicable, in 
accordance with the procedures specified herein. The importer shall 
make arrangements with the inspection service for sampling, inspection, 
lot identification and certification of all peanuts accumulated by the 
importer. The importer also shall make arrangements for the appropriate 
disposition of peanuts failing edible quality requirements of this 
section. All costs of sampling, inspection, certification, 
identification, and disposition incurred in meeting the requirements of 
this section shall be paid by the importer. Whenever peanuts are 
offered for inspection, the importer shall furnish any labor and pay 
any costs incurred in moving and opening containers as may be necessary 
for proper sampling and inspection.
    (2) For farmers stock inspection, the importer shall cause the 
inspection service to perform an incoming inspection and to issue an 
CFSA-1007, ``Inspection Certificate and Sales Memorandum'' form 
designating the lot as Segregation 1, 2, or 3 quality peanuts. For 
shelled and cleaned-inshell peanuts, the importer shall cause the 
inspection service to perform an outgoing inspection and issue an FV-
184-9A, ``Milled Peanut Inspection Certificate'' reporting quality and 
size of the shelled or cleaned-inshell peanuts, whether the lot meets 
or fails to meet quality requirements for human consumption of this 
section, and that the lot originated in a country other than the United 
States. The importer shall provide to the Secretary copies of all CFSA 
1007 and FV-184-9A applicable to each peanut lot conditionally released 
to the importer. Such reports shall be submitted as provided in 
paragraphs (f)(2) and (f)(3) of this section.
    (3) Procedures for sampling and testing peanuts. Sampling and 
testing of peanuts for incoming and outgoing inspections of peanuts 
presented for consumption into the United States will be conducted as 
follows:
    (i) Application for sampling. The importer shall request inspection 
and certification services from one of the following inspection service 
offices convenient to the location where the peanuts are presented for 
incoming and/or outgoing inspection. To avoid possible delays, the 
importer should make arrangements with the inspection service in 
advance of the inspection date. A copy of the Customs Service entry 
document specific to the peanuts to be inspected shall be presented to 
the inspection official prior to sampling of the lot.
    (A) The following offices provide incoming farmers stock 
inspection:

Dothan, AL, tel: (334) 792-5185,
Graceville, FL, tel: (904) 263-3204,
Winter Haven, FL, tel: (941) 291-5820, ext 260,
Albany, GA, tel: (912) 432-7505,
Williamston, NC, tel: (919) 792-1672,
Columbia, SC, tel: (803) 253-4597,
Suffolk, VA, tel: (804) 925-2286,
Portales, NM, tel: (505) 356-8393,
Oklahoma City, OK, tel: (405) 521-3864,
Gorman, TX, tel: (817) 734-3006,
Yuma, AZ, tel: (602) 344-3869.

    (B) The following offices, in addition to the offices listed in 
paragraph (A), provide outgoing sampling and/or inspection services, 
and certify shelled and cleaned-inshell peanuts as meeting or failing 
the quality requirements of this section:

Eastern U.S.

Mobile, AL, tel: (205) 690-6154,

[[Page 1273]]

Jacksonville, FL, tel: (904) 359-6430,
Miami, FL, tel: (305) 592-1375,
Tampa, FL, tel: (813) 272-2470,
Presque Isle, ME, tel: (207) 764-2100,
Baltimore/Washington, tel: (301) 344-1860,
Boston, MA, tel: (617) 389-2480,
Newark, NJ, tel: (201) 645-2670,
New York, NY, tel: (212) 718-7665,
Buffalo, NY, tel: (716) 824-1585,
Philadelphia, PA, tel: (215) 336-0845,
Norfolk, VA, tel: (804) 441-6218,

Central U.S.

New Orleans, LA, tel: (504) 589-6741,
Detroit, MI, tel: (313) 226-6059,
St. Paul, MN, tel: (612) 296-8557,
Las Cruces, NM, tel: (505) 646-4929,
Alamo, TX, tel: (210) 787-4091,
El Paso, TX, tel: (915) 540-7723,
Houston, TX, tel: (713) 923-2557,

Western U.S.

Nogales, AZ, tel: (602) 281-0783,
Los Angeles, CA, tel: (213) 894-2489,
San Francisco, CA, tel: (415) 876-9313,
Honolulu, HI, tel: (808) 973-9566,
Salem, OR, tel: (503) 986-4620,
Seattle, WA, tel: (206) 859-9801.

    (C) Questions regarding inspection services or requests for further 
assistance may be obtained from: Fresh Products Branch, P.O. Box 96456, 
room 2049-S, Fruit and Vegetable Division, AMS, USDA, Washington, D.C. 
20090-6456, telephone (202) 690-0604, fax (202) 720-0393.
    (ii) Sampling. Sampling of bulk farmers stock lots shall be 
performed at a facility that utilizes a pneumatic sampler or approved 
automatic sampling device. The size of farmers stock lots, shelled 
lots, and cleaned-inshell lots, in bulk or bags, shall not exceed 
200,000 pounds. For farmers stock, shelled and cleaned-inshell lots not 
completely accessible for sampling, the applicant shall be required to 
have lots made accessible for sampling pursuant to inspection service 
requirements. The importer shall cause appropriate samples of each lot 
of edible quality shelled peanuts to be drawn by the inspection 
service. The amount of such peanuts drawn shall be large enough to 
provide for a grade and size analysis, for a grading check-sample, and 
for three 48-pound samples for aflatoxin assay. Because there is no 
acceptable method of drawing official samples from bulk conveyances of 
shelled peanuts, the importer shall arrange to have bulk conveyances of 
shelled peanuts sampled during the unloading process. A bulk lot 
sampled in this manner must be positive lot identified by the 
inspection service and held in a sealed bin until the associated 
inspection and aflatoxin test results have been reported.
    (4) Aflatoxin assay. (i) The importer shall cause appropriate 
samples of each lot of shelled peanuts intended for edible consumption 
to be drawn by the inspection service. The three 48-pound samples shall 
be designated by the inspection service as ``Sample 1IMP,'' ``Sample 
2IMP,'' and ``Sample 3IMP'' and each sample shall be placed in a 
suitable container and lot identified by the inspection service. Sample 
1IMP may be prepared for immediate testing or Samples 1IMP, 2IMP and 
3IMP may be returned to the importer for testing at a later date, under 
lot identification procedures.
    (ii) The importer shall cause Sample 1IMP to be ground by the 
inspection service or a USDA or PAC-approved laboratory in a 
subsampling mill. The resultant ground subsample shall be of a size 
specified by the inspection service and shall be designated as 
``Subsample 1-ABIMP.'' At the importer's option, a second subsample may 
also be extracted from Sample 1IMP and designated ``Subsample 1-CDIMP'' 
which may be sent for aflatoxin assay to a USDA or PAC-approved 
laboratory. Both subsamples shall be accompanied by a notice of 
sampling signed by the inspector containing identifying information as 
to the importer, the lot identification of the shelled peanut lot, and 
other information deemed necessary by the inspection service. 
Subsamples 1-ABIMP and 1-CDIMP shall be analyzed only in a USDA or PAC-
approved laboratory. The methods prescribed by the Instruction Manual 
for Aflatoxin Testing, SD Instruction-1, August 1994, shall be used to 
assay the aflatoxin level. The cost of testing and notification of 
Subsamples 1-ABIMP and 1-CDIMP shall be borne by the importer.
    (iii) The samples designated as Sample 2IMP and Sample 3IMP shall 
be held as aflatoxin check-samples by the inspection service or the 
importer until the analyses results from Sample 1IMP are known. Upon 
call from the USDA or PAC-approved laboratory, the importer shall cause 
Sample 2IMP to be ground by the inspection service in a subsampling 
mill. The resultant ground subsample from Sample 2IMP shall be 
designated as ``Subsample 2-ABIMP.'' Upon further call from the 
laboratory, the importer shall cause Sample 3IMP to be ground by the 
inspection service in a subsampling mill. The resultant ground 
subsample shall be designated as ``Subsample 3-ABIMP.'' The importer 
shall cause Subsamples 2-ABIMP and 3-ABIMP to be sent to and analyzed 
only in a USDA or PAC-approved laboratory. Each subsample shall be 
accompanied by a notice of sampling. The results of each assay shall be 
reported by the laboratory to the importer. All costs involved in the 
sampling, shipment and assay analysis of subsamples required by this 
section shall be borne by the importer.
    (iv)(A) Importers should contact one of the following USDA or PAC-
approved laboratories to arrange for chemical analysis.

Science and Technology Division, AMS, USDA, P.O. Box 279, 301 West 
Pearl St., Aulander, NC 27805, Tel: (919) 345-1661 Ext. 156, Fax: (919) 
345-1991
Science and Technology Division, AMS, USDA, 1211 Schley Ave., Albany, 
GA 31707, Tel: (912) 430-8490 / 8491, Fax: (912) 430-8534
Science and Technology Division, AMS, USDA, P.O. Box 488, Ashburn, GA 
31714, Tel: (912) 567-3703
Science and Technology Division, AMS, USDA, 610 North Main St., 
Blakely, GA 31723, Tel: (912) 723-4570, Fax: (912) 723-3294
Science and Technology Division, AMS, USDA, 1557 Reeves St., Dothan, AL 
36303, Tel: (334) 794-5070, Fax: (334) 671-7984
Science and Technology Division, AMS, USDA, 107 South Fourth St., 
Madill, OK 73446, Tel: (405) 795-5615, Fax: (405) 795-3645
Science and Technology Division, AMS, USDA, P.O. Box 272, 715 N. Main 
Street, Dawson, GA 31742, Tel: (912) 995-7257, Fax: (912) 995-3268
Science and Technology Division, AMS, USDA, P.O. Box 1130, 308 Culloden 
St., Suffolk, VA 23434, Tel: (804) 925-2286, Fax: (804) 925-2285
ABC Research, 3437 SW 24th Avenue, Gainesville, FL 32607-4502, Tel: 
(904) 372-0436, Fax: (904) 378-6483
J. Leek Associates, Inc., P.O. Box 50395, 1200 Wyandotte (31705), 
Albany, GA 31703-0395, Tel: (912) 889-8293, Fax: (912) 888-1166
J. Leek Associates, Inc., P.O. Box 368, 675 East Pine, Colquitt, GA 
31737, Tel: (912) 758-3722, Fax: (912) 758-2538
J. Leek Associates, Inc., P.O. Box 6, 502 West Navarro St., DeLeon, TX 
76444, Tel: (817) 893-3653, Fax: (817) 893-3640
Pert Laboratories, P.O. Box 267, Peanut Drive, Edenton, NC 27932, Tel: 
(919) 482-4456, Fax: (919) 482-5370
Pert Laboratory South, P.O. Box 149, Hwy 82 East, Seabrook Drive, 
Sylvester, GA 31791, Tel: (912) 776-7676, Fax: (912) 776-1137
Professional Service Industries, Inc., 3 Burwood Lane, San Antonio, TX 
78216, Tel: (210) 349-5242, Fax: (210) 342-9401

[[Page 1274]]

Southern Cotton Oil Company, 600 E. Nelson Street, P.O. Box 180, 
Quanah, TX 79252, Tel: (817) 663-5323, Fax: (817) 663-5091
Quanta Lab, 9330 Corporate Drive, Suite 703, Selma, TX 78154-1257, Tel: 
(210) 651-5799, Fax: (210) 651-9271.

    (B) Further information concerning the chemical analyses required 
pursuant to this section may be obtained from: Science and Technology 
Division, AMS, USDA, P.O. Box 96456, room 3507-S, Washington, DC 20090-
6456, telephone (202) 720-5231, or facsimile (202) 720-6496.
    (v) Reporting aflatoxin assays. A separate aflatoxin assay 
certificate, Form CSSD-3 ``Certificate of Analysis for Official 
Samples'' or equivalent PAC approved laboratory form, shall be issued 
by the laboratory performing the analysis for each lot. The assay 
certificate shall identify the importer, the volume of the peanut lot 
assayed, date of the assay, and numerical test result of the assay. The 
results of the assay shall be reported as follows.
    (A) For the current peanut quota year, ``negative'' aflatoxin 
content means 15 parts per billion (ppb) or less aflatoxin content for 
peanuts which have been certified as meeting edible quality grade 
requirements. Such lots shall be certified as ``Meets U.S. import 
requirements for edible peanuts under Sec. 999.600 with regard to 
aflatoxin.''
    (B) Lots containing more than 15 ppb aflatoxin content shall be 
certified as ``Fails to meet U.S. import requirements for edible 
peanuts under Sec. 999.600 with regard to aflatoxin.'' The certificate 
of any inedible peanut lot also shall specify the aflatoxin count in 
ppb. The importer shall file USDA Form CSSD-3, or equivalent form, with 
the Secretary, regardless of the test result.
    (5) Appeal inspection. In the event an importer questions the 
results of a quality and size inspection, an appeal inspection may be 
requested by the importer and performed by the inspection service. A 
second sample will be drawn from each container and shall be double the 
size of the original sample. The results of the appeal sample shall be 
final and the fee for sampling, grading and aflatoxin analysis shall be 
charged to the importer.
    (e) Disposition of peanuts failing edible quality requirements. 
Peanuts shelled, sized and sorted in another country prior to arrival 
in the U.S. and shelled peanuts which originated from imported 
Segregation 1 peanuts that fail quality requirements of Table 1 
(excessive damage, minor defects, moisture, or foreign material) or are 
positive to aflatoxin may be reconditioned by remilling and/or 
blanching. After such reconditioning, peanuts meeting the quality 
requirements of Table 1 and which are negative to aflatoxin (15 ppb or 
less) may be disposed for edible peanut use. Residual peanut lots 
resulting from milling or reconditioning of such lots shall be disposed 
of as prescribed below:
    (1) Failing peanut lots may be disposed for non-human consumption 
uses (such as livestock feed, wild animal feed, rodent bait, seed, 
etc.) which are not otherwise regulated by this section; Provided, that 
each such lot is lot identified and certified as to aflatoxin content 
(actual numerical count). On the shipping papers covering the 
disposition of each such lot, the importer shall cause the following 
statement to be shown: ``The peanuts covered by this bill of lading (or 
invoice) are not to be used for human consumption.''
    (2) Peanuts, and portions of peanuts which are separated from 
edible quality peanuts by screening or sorting or other means during 
the milling process (``sheller oilstock residuals''), may be sent to 
inedible peanut markets pursuant to paragraph (e)(1) of this section, 
crushed or exported. Such peanut may be commingled with other milled 
residuals. Such peanuts shall be positive lot identified, red tagged in 
bulk or bags or other suitable containers.
    (i) If such peanuts have not been certified as to aflatoxin 
content, as prescribed in paragraph (d) of this section, disposition is 
limited to crushing and the importer shall cause the following 
statement to be shown on the shipping papers: ``The peanuts covered by 
this bill of lading (or invoice, etc.) are limited to crushing only and 
may contain aflatoxin.''
    (ii) If the peanuts are certified as 301 ppb or more aflatoxin 
content, disposition shall be limited to crushing or export.
    (3) Shelled peanuts which originated from Segregation 1 peanuts 
that fail quality requirements of Table 1, peanuts derived from the 
milling for seed of Segregation 2 and 3 farmers stock peanuts, and 
peanuts which are positive to aflatoxin may be remilled or blanched. 
Residuals of remilled and/or blanched peanuts which continue to fail 
quality requirements of Table 1 shall be disposed of pursuant to 
paragraphs (e) (1) or (2) of this section.
    (4) All certifications, lot identifications, and movement to 
inedible dispositions, sufficient to account for all peanuts in each 
consumption entry, shall be reported to the Secretary by the importer 
pursuant to paragraphs (f)(2) and (f)(3) of this section.
    (f) Safeguard procedures. (1) Prior to arrival of a foreign 
produced peanut lot at a port-of-entry, the importer, or customs broker 
acting on behalf of the importer, shall mail or send by facsimile 
transmission (fax) a copy of the Customs Service entry documentation 
for the peanut lot or lots to the inspection service office that will 
perform sampling of the peanut shipment. More than one lot may be 
entered on one entry document. The documentation shall include 
identifying lot(s) or container number(s) and volume of the peanuts in 
each lot being entered, and the location (including city and street 
address), date and time for inspection sampling. The inspection office 
shall sign, stamp, and return the entry document to the importer. The 
importer shall present the stamped document to the Customs Service at 
the port-of-entry and send a copy of the document to the Secretary. The 
importer also shall cause a copy of the entry document to accompany the 
peanut lot and be presented to the inspection service at the inland 
destination of the lot.
    (2) The importer shall file with the Secretary copies of the entry 
document and grade, aflatoxin, and lot identification certifications 
sufficient to account for all peanuts in each lot listed on the entry 
document filed by the importer. Positive lot identification of residual 
lots, transfer certificates, and other documentation showing inedible 
disposition or export, such as bills of lading and sales receipts, 
export declarations, or certificates of burying, which report the 
weight of peanuts being disposed and the name, address and telephone 
number of the inedible peanut receiver, must be sent to the Marketing 
Order Administration Branch, Attn: Report of Imported Peanuts. 
Facsimile transmissions and overnight mail may be used to ensure timely 
receipt of inspection certificates and other documentation. Fax reports 
should be sent to (202) 720-5698. Overnight and express mail deliveries 
should be addressed to USDA, AMS, FV, Marketing Order Administration 
Branch, 14th and Independence Avenue, SW, Room: 2525-S, Washington, 
D.C., 20250, Attn: Report of Imported Peanuts. Regular mail should be 
sent to FV, AMS, USDA, P.O. Box 96456, Room 2525-S, Washington, DC 
20090-6456, Attn: Report of Imported Peanuts. Telephone inquiries 
should be made to (202) 720-6862.
    (3) Certificates and other documentation for each peanut lot must 
be filed within 23 days of the date of filing for consumption entry, 
or, if a

[[Page 1275]]

redelivery notice is issued on the peanut lot, subsequently filed prior 
to conclusion of the redelivery period which will be 60 days, unless 
otherwise specified by the Customs Service.
    (4) The Secretary shall ask the Customs Service to issue a 
redelivery demand for foreign produced peanut lots failing to meet 
requirements of this section. Extensions in a redelivery period granted 
by the Customs Service will be correspondingly extended by the 
Secretary, upon request of the importer. Importers unable to account 
for the disposition of all peanuts covered in a redelivery order, or 
redeliver such peanuts, shall be liable for liquidated damages. Failure 
to fully comply with quality and handling requirements or failure to 
notify the Secretary of disposition of all foreign produced peanuts, as 
required under this section, may result in a compliance investigation 
by the Secretary. Falsification of reports submitted to the Secretary 
is a violation of Federal law punishable by fine or imprisonment, or 
both.
    (5) Reinspection. Whenever the Secretary has reason to believe that 
peanuts may have been damaged or deteriorated while in storage, the 
Secretary may reject the then effective inspection certificate and may 
require the importer to have the peanuts reinspected to establish 
whether or not such peanuts may be disposed of for human consumption.
    (6) 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 AMS 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. Pursuant to paragraph (f)(5) of 
this section, the Secretary may require reinspection of the lot at the 
time the lot is declared for entry with the Customs Service.
    (g) Additional requirements. (1) Nothing contained in this section 
shall preclude any importer from milling or reconditioning, prior to 
importation, any shipment of peanuts for the purpose of making such lot 
eligible for importation into the United States. However, all peanuts 
presented for entry for human consumption use must be certified as 
meeting the quality requirements specified in paragraph (c) of this 
section.
    (2) Conditionally released peanut lots of like quality and 
belonging to the same importer may be commingled. Defects in an 
inspected lot may not be blended out by commingling with other lots of 
higher quality. Commingling also must be consistent with applicable 
Customs Service regulations. Commingled lots must be reported and 
disposed of pursuant to paragraphs (f)(2) and (f)(3) of this section.
    (3) Inspection by the Federal or Federal-State Inspection Service 
shall be available and performed in accordance with the rules and 
regulations governing certification of fresh fruits, vegetables and 
other products (7 CFR part 51). The importer shall make each 
conditionally released lot available and accessible for inspection as 
provided herein. Because inspectors may not be stationed in the 
immediate vicinity of some ports-of-entry, importers must make 
arrangements for sampling, inspection, and certification through one of 
the offices and laboratories listed in paragraphs (d)(3) and (d)(4) of 
this section, respectively.
    (4) Imported peanut lots sampled and inspected at the port-of-
entry, or at other locations, shall meet the quality requirements of 
this section in effect on the date of inspection.
    (5) A foreign-produced peanut lot entered for consumption or for 
warehouse may be transferred or sold to another person: Provided, That 
the original importer shall be the importer of record unless the new 
owner applies for bond and files Customs Service documents pursuant to 
19 CFR Secs. 141.113 and 141.20; and Provided further, That such 
peanuts must be certified and reported to the Secretary pursuant to 
paragraphs (f)(2) and (f)(3) of this section.
    (6) The cost of transportation, sampling, inspection, 
certification, chemical analysis, and identification, as well as 
remilling and blanching, and further inspection of remilled and 
blanched lots, and disposition of failing peanuts, shall be borne by 
the importer. Whenever peanuts are presented for inspection, the 
importer shall furnish any labor and pay any costs incurred in moving, 
opening containers, and shipment of samples as may be necessary for 
proper sampling and inspection. The inspection service shall bill the 
importer for fees covering quality and size inspections; time for 
sampling; packaging and delivering aflatoxin samples to laboratories; 
certifications of lot identification and lot transfer to other 
locations, and other inspection certifications as may be necessary to 
verify edible quality or inedible disposition, as specified herein. The 
USDA and PAC-approved laboratories shall bill the importer separately 
for fees for aflatoxin assay. The importer also shall pay all required 
Customs Service costs as required by that agency.
    (7) Each person subject to this section shall maintain true and 
complete records of activities and transactions specified in these 
regulations. Such records and documentation accumulated during entry 
shall be retained for not less than two years after the calendar year 
of acquisition, except that Customs Service documents shall be retained 
as required by that agency. The Secretary, through duly authorized 
representatives, shall have access to any such person's premises during 
regular business hours and shall be permitted, at any such time, to 
inspect such records and any peanuts held by such person.
    (8) The provisions of this section do not supersede any 
restrictions or prohibitions on peanuts under the Federal Plant 
Quarantine Act of 1912, the Federal Food, Drug and Cosmetic Act, any 
other applicable laws, or regulations of other Federal agencies, 
including import regulations and procedures of the Customs Service.

    Dated: December 31, 1996.
Larry B. Lace,
Acting Director, Fruit and Vegetable Division.
[FR Doc. 97-283 Filed 1-8-97; 8:45 am]
BILLING CODE 3410-02-P