05-23911. Export Inspection and Weighing Waiver for High Quality Specialty Grains Transported in Containers

AGENCY:

Grain Inspection, Packers and Stockyards Administration, USDA.

ACTION:

Final rule.

SUMMARY:

The Grain Inspection, Packers and Stockyards Administration (GIPSA) is amending regulations under the United States Grain Standards Act (USGSA) to waive the mandatory inspection and weighing requirements of the USGSA for high quality specialty grains exported in containers. GIPSA is establishing this waiver to facilitate the marketing of high quality specialty grains exported in containers. This action is consistent with the objectives of the USGSA and will promote the continuing development of the high quality specialty export market. This waiver will be in effect for a maximum of 5 years, and if after this time period GIPSA determines that this waiver continues to advance the objectives of the USGSA, GIPSA will consider making this waiver permanent.

DATES:

Effective January 12, 2006

FOR FURTHER INFORMATION CONTACT:

John Sharpe, Director, Compliance Division, at his e-mail address: [e-mail] or telephone him at [phone].

SUPPLEMENTARY INFORMATION:

Background

The USGSA authorizes the Department to waive the mandatory inspection and weighing requirements of the USGSA in circumstances when the objectives of the USGSA would not be impaired. Current waivers from the official inspection and Class X weighing requirements for export grain appear in section 7 CFR 800.18 of the regulations. These waivers are provided for grain exported for seeding purposes, grain shipped in bond, grain exported by rail or truck to Canada or Mexico, grain not sold by grade, exporters and individual elevator operators shipping less than 15,000 metric tons during the current and preceding calendar years, and when services are not available or in emergency situations.

This final rule provides a waiver for high quality specialty grains exported in containers.

The high quality specialty grain market has evolved in recent years as specialty grain shippers have catered to the specific needs of buyers around the world. Transactions involving high quality specialty grains are typically made between dedicated buyers and sellers who have ongoing business relationships and fully understand each other's specific needs and capabilities. Prototypically, sales are for small volumes of grain meeting strict commercial contract specifications for quality, production, handling, and packaging. The contractual specifications may require a single or limited number of seed varieties and may specify certain agronomic, harvesting, conditioning, or handling practices.

The quality management processes employed by participants of the high quality specialty grain market typically exceed those practiced in the commodity grain market where commingling and blending of different quality grains is an inherent part of the marketing process. As a result, the characteristics of these high quality specialty grains are differentiated from commodity grain.

Traditionally, shippers of high quality specialty grain exported in containers handled less than 15,000 metric tons of grain annually and thereby, were exempt from mandatory inspection and weighing requirements in accordance with Section 800.18(b) of the regulations under the USGSA. However, as the high quality specialty grain market has grown, volumes have begun to exceed the 15,000 metric ton waiver threshold requiring shippers to have their high quality specialty grains inspected and weighed in accordance with the USGSA. The cost of official inspection and weighing for these specialty operations is approximately $1.80 per metric ton compared to an average $0.34 per metric ton for bulk commodity exports. Furthermore, the contract quality specifications for high quality specialty grains typically exceed the grade limits for U.S. No. 1 grain. GIPSA is therefore waiving high quality specialty grains, as defined by GIPSA, exported in containers from the mandatory export inspection and weighing requirements.

Accordingly, this action will promote the marketing of high quality specialty grains and will not impair the objectives of the USGSA. Organizations exporting high quality specialty grain will continue to be required to notify GIPSA of their actions for registration purposes in accordance with the USGSA. Moreover, nothing in this exemption will prevent buyers and sellers from requesting and receiving official inspection and weighing services should they desire such services.

On April 28, 2005, GIPSA published an interim final rule with request for comments in the Federal Register (70 FR 21921) to amend the regulations under the USGSA to waive the mandatory inspection and weighing requirements for high quality specialty grains exported in containers. GIPSA established this waiver to facilitate the marketing of high quality specialty grains exported in containers and this action is consistent with the objectives of the USGSA. GIPSA believes that this waiver will promote the continuing development of the high quality specialty export market.

In the interim final rule, GIPSA defined high quality specialty grain as grain sold under contract terms that (1) specify quality better than the grade limits for U.S. No. 1 grain, or (2) specify “organic” as defined by the regulations 7 CFR part 205 under the Organic Foods Production Act of 1990, as amended.

To ensure that exporters of high quality specialty grains comply with this waiver, GIPSA is requiring exporters to maintain records generated during their normal course of business that pertain to these shipments and make these documents available to GIPSA upon request for review or copying purposes. GIPSA is not requiring exporters of high quality specialty grains to complete or submit new Federal government record(s), form(s), or report(s). GIPSA is requiring exporters to maintain, submit upon request, and make available documentation that fully and correctly disclose transactions concerning high quality specialty grain exported in containers. These records shall be maintained for a period of 3 years. This information collection requirement is essential to ensure that exporters who ship high quality specialty grain in containers comply with the waiver provisions.

The Paperwork Reduction Act requires the Agency to measure recordkeeping burden. Under this final rule, exporters must maintain records generated during the normal course of business. Experience has shown that the U.S. grain industry maintains grain contracts which specify quality parameters agreed to by buyers and sellers of grain. GIPSA believes that grain contracts would provide sufficient information to determine if exporters of high quality specialty grain are complying with the waiver.

This waiver will be in affect for a maximum of 5 years and if after this time period GIPSA determines that this waiver continues to advance the objectives of the USGSA, GIPSA will consider making this waiver permanent. GIPSA will monitor this waiver of official inspection and weighing requirements; however, if at any time, GIPSA determines that this waiver is not consistent with the objectives of the Act, GIPSA will remove this waiver.

Comment Review

GIPSA received comments from two separate commenters in response to its interim final rule published on April 28, 2005, in the Federal Register (70 FR 21921). An individual representing a high quality specialty grain company submitted two e-mail comments, and another comment was submitted on behalf of a grain trade association. The following paragraphs address comments received regarding the interim final rule.

1. Definition of High Quality Specialty Grains

The comments received questioned the meaning of the definition of high quality specialty grain as provided in the interim final rule. The grain trade association stated that the definition of high quality specialty grain is too narrow in that it provides only for organic grains and for grains with quality specifications higher than U.S. No. 1. Specifically, the commenter suggested that the definition of high quality specialty grains be “revised to include grains with specific intrinsic characteristics that give value to customers beyond the official U.S. grain grading factors in U.S. No. 2 or 1 corn.”

GIPSA does not believe that it should expand the definition of high quality specialty grains to include specific intrinsic characteristics. GIPSA believes that the inclusion of such characteristics in the definition would allow a broader exemption from the mandatory inspection and weighing requirements than is consistent with the USGSA. Accordingly, GIPSA is not making any changes to the definition based on this comment.

The comment received from the high quality specialty grain company suggested that GIPSA clarify its definition of high quality specialty grain to define whether some factors or all factors must exceed the grade limits for U.S. No. 1 grain. The commenter also expressed concerns about the difficulty in procuring specialty soybeans with test weight that exceeds U.S. No. 1 because of environmental or varietal influences. After reviewing these issues, GIPSA believes that the definition should be clarified.

Virtually all high quality specialty grain is traded on contract specifications that require all factors exceed the grade limits for U.S. No. 1 grain with the exception of test weight. GIPSA recognizes that test weight is a factor that is used throughout the market in making stowage calculations, as a measurement of stocks (volume) and production (yield), and as a general indicator of grain quality. However, other attributes in high quality specialty grain such as oil and protein content, etc. may provide a better indicator for end-use quality. Consequently, the definition merits clarification and is amended to read as follows: “Grain sold under contract terms that specify all factors exceed the grade limits for U.S. No. 1 grain, except for the factor test weight * * *”

The commenter also asked why the example of post-harvest, pesticide-free corn would qualify for an exemption since 90 percent of corn harvested has no post-harvest chemicals applied. This comment has merit and, as a result, GIPSA will not use it in the future as an example of high quality specialty grain.

2. Phyto-Sanitary Certification

The comment from the grain trade association questioned why GIPSA's interim final rule did not address the requirement for phyto-sanitary certification for specialty grain exported in containers. The commenter recommended that GIPSA's interim final rule should permit approved private labs to perform phyto-sanitary certification to reduce cost. In brief, the USGSA does not provide GIPSA authority to regulate phyto-sanitary inspections and/or certification; consequently, GIPSA can not address this issue.

GIPSA will develop instructions to provide further guidance on requirements for high quality specialty grain exported in containers. GIPSA will also monitor exporters of high quality specialty grain in containers to ensure compliance with these waiver provisions.

GIPSA did not receive any comments regarding the information collection and recordkeeping requirements published in its interim final rule.

Executive Orders 12866 and 12988

This rule has been determined to be non-significant for the purpose of Executive Order 12866 by the Office of Management and Budget (OMB). This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This action is not intended to have a retroactive effect. The USGSA provides in Sec 87g that no subdivision may require or impose any requirements or restrictions concerning the inspection, weighing, or description of grain under the Act. Otherwise, this rule will not preempt any State or local laws, regulations, or policies unless they present irreconcilable conflict with this rule. There are no administrative procedures that must be exhausted prior to any judicial challenge to the provisions of this rule.

Paperwork Reduction Act and Government Paperwork Elimination Act

In compliance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the information collection and record keeping requirements included in this final rule has been approved by OMB under Control No. 0580-0022. GIPSA estimates that the time required for each exporter to maintain, submit upon request, and make available contractual information in a manner consistent with this rule is an average of 6-hours per year at $5.50 per hour for a total annual burden of $33.00 per exporter. Assuming that the estimated 80 exporters of high quality specialty grain in containers provide GIPSA this contractual information, the total annual burden is estimated to be $2,640.

GIPSA is committed to compliance with the Government Paperwork Elimination Act, which requires Government agencies, in general, to provide the public the option of submitting information or transacting business electronically to the maximum extent possible.

Regulatory Flexibility Act Certification

GIPSA has determined that this final rule does not have a significant economic impact on a substantial number of small entities, as defined in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). GIPSA has considered the economic impact of this final rule on small entities and has determined that its provisions would not have a significant economic impact on a substantial number of small entities because it eliminates burden. This final rule would effectively eliminate the cost impact on small businesses that would otherwise have to pay for onsite inspection and weighing services for specialty grain exported in containers.

The proliferation of high quality specialty grain exported in containers has caused shippers of high quality specialty grains to exceed the 15,000 metric ton waiver threshold for export inspection and weighing. GIPSA posed this situation to its Advisory Committee on November 16, 2004. GIPSA's Advisory Committee is composed of members representing producers, handlers, processors, and exporters. The Advisory Committee resolved that GIPSA should continue to enforce the mandatory export inspection and weighing requirements for commodity grains and establish a waiver for high quality specialty grains exported in containers. GIPSA believes that waiving high quality specialty grains exported in containers is consistent with the intent of the USGSA and will allow this market to continue to evolve.

Various methods were considered to address the challenges facing U.S. high quality specialty grain producers, marketers, processors, and handlers exporting via containers from global competition. GIPSA looked at requiring relaxed inspection and weighing requirements for these grains and decided that they would still place an undue burden on these types of shipments.

This final rule will allow exporters of high quality specialty grains shipped in containers to ship such grain without the burden of mandatory inspection and weighing, while allowing them to request the service when desired. Relieving this burden will allow the industry to grow and better compete in the global market.

This rule poses minimal additional cost to exporters. However, this rule eliminates the cost of the mandatory export inspection and weighing requirements for high quality specialty grain exported in containers. GIPSA estimates this cost to be at $1.80 per metric ton of grain exported and GIPSA believes that the benefits of this rule outweighs the cost.

List of Subjects in 7 CFR Part 800

• Administrative practice and procedure
• Export
• Grain

For reasons set out in the preamble, 7 CFR part 800 is amended as follows:

PART 800—GENERAL PROVISIONS

1. The authority citation for part 800 continues to read as follows:

Authority: Pub. L. 94-582, 90 Stat. 2867, as amended (7 U.S.C. 71 et seq).

2. Section 800.0 is amended as follows:

a. Paragraphs (b)(44) through (106) are redesignated as (b)(45) through (107), respectively.

b. New paragraph (b)(44) is added to read as follows:

§ 800.0

Meaning of Terms.

* * * * *

(b) * * *

(44) High Quality Specialty Grain. Grain sold under contract terms that specify all factors exceed the grade limits for U.S. No. 1 grain, except for the factor test weight, or specify “organic” as defined by 7 CFR part 205. This definition expires July 31, 2010.

* * * * *

3. Section 800.18 is amended by revising paragraph (b)(8) to read as follows:

§ 800.18

Waivers of the official inspection and Class X weighing requirements.

* * * * *

(b) * * *

(8) High Quality Specialty Grain Shipped in Containers. Official inspection and weighing requirements do not apply to high quality specialty grain exported in containers. Records generated during the normal course of business that pertain to these shipments shall be made available to the Service upon request, for review or copying. These records shall be maintained for a period of 3 years. This waiver expires July 31, 2010.

* * * * *

James E. Link,

Administrator, Grain Inspection, Packers and Stockyards Administration.