7 CFR § 51.1241 - Damage.
(a) Cracked or broken shells which have been broken to the extent that the kernel within is plainly visible without minute examination and with no application of pressure, or the appearance of the individual peanut is materially affected.
(b) Discolored shells which have dark discoloration caused by mildew, staining or other means affecting one-half or more of the shell surface. Talc powder or other similar material which may have been applied to the shells during the cleaning process shall not be removed to determine the amount of discoloration beneath, but the peanut shall be judged as it appears with the talc.
(c) Kernels which are rancid or decayed.
(d) Moldy kernels.
(e) Kernels showing sprouts extending more than one-eighth inch from the end of the kernel.
(f) Distinctly dirty kernels.
(g) Kernels which are wormy, or have worm frass adhering, or have worm cuts which are more than superficial.
(h) Kernels which have dark yellow color penetrating the flesh, or yellow pitting extending deep into the kernel.
The following state regulations pages link to this page.