The Grain Inspection, Packers and Stockyards Administration (GIPSA) of the U.S. Department of Agriculture (USDA) was directed in the Food, Conservation, and Energy Act of 2008 (the 2008 Farm Bill) to amend the Packers and Stockyards Act (PSA) of 1921.
Following a lengthy review of comments made on the proposed rule, GIPSA released the final revised rules with an implementation date set for February 7, 2012. Congress directed the Secretary of USDA to issue regulations that would establish criteria in five areas with respect to the Packers and Stockyards Act of 1921. The first area is found in section 11005 of the 2008 Farm Bill and directs establishment of “criteria that the Secretary will consider in determining whether the arbitration process provided in a contract provides a meaningful opportunity for the grower or producer to participate fully in the arbitration process.” Four additional regulations are found in the following section of the Farm Bill and direct the Secretary of USDA to issue regulations that would establish criteria with respect to the Packers and Stockyards Act of 1921:
1. whether an undue or unreasonable preference or advantage has occurred in violation ofsuch Act (this section was not included in the final rule);
2. whether a live poultry dealer provided reasonable notice to poultry growers of any suspension of the delivery of birds under a poultry growing arrangement;
3. when requirement of additional capital investment over the life of a poultry growing arrangement or swine production contract constitutes a violation of the PSA;
4. if a live poultry dealer has provided a reasonable period of time for a swine or poultry contract grower to remedy a breach of contract that could lead to termination of production contract.
The above list reflects the language used in the 2008 Farm Bill. In addition to these criteria, the 2008 Farm Bill also required livestock and poultry contracts to specifically disclose the right of the contract producer or grower to decline the requirement to use arbitration to resolve any controversy under the contract.
Many of the changes to the proposed rule reflect clarifications requested by commenter’s. The following list of terms defined in the proposed rule has been removed from the final rule:
1. Tournament systems
2. Capital investment
3. Forward contract
4. Marketing agreement
5. Production contract
6. Competitive injury
7. Likelihood of competitive injury.
Provisions not included in the final rule are:
1. Value-added production and premiums
3. Packer-to-packer sales and relationships with dealers
4. Prohibitions and requirement related to capital investment
5. Applicability of contracts
6. Unfair, unjustly discriminatory, and deceptive practices or devices
7. Undue or unreasonable preference or advantage
8. Livestock and poultry contract
9. Tournament systems.
As of this writing, Congress has blocked funding for further development of rules for the terms and provisions listed above. However, several of these provisions and terms remain under consideration by GIPSA.
Major Changes in the Wording of the Final Rule
Certain terms used in the statutory language of the PSA are defined in GIPSA’s regulations at title 9 of the Code of Federal Regulations (C.F.R.). GIPSA’s final rule indicates some modifications of these definitions at §201.2.While no changes were made to paragraph (m), “principal part of performance,” or paragraph (o), “suspension of delivery of birds,” there were some significant changes to the definition of “additional capital investment” which is paragraph (n). The threshold for additional capital investment has been lowered from a combined $25,000 to $12,500 and clarified with the addition of the phrase “per structure.” Previously, the definition for additional capital investment was vague, referencing “growing and raising facilities.” Maintenance and repair costs may not be included in calculating additional capital investments. Any recurring labor and operating costs that increase as a result of the additional capital investment may not be included as this clause was removed in the final rule. Anything related to the construction of additional structures or equipment appears to be included in the calculations to arrive at a combined value of $12,500 or more per structure.