AMI Concern over New USDA Rule

US - USDA has unveiled a proposed rule that, if adopted, would result in sweeping changes to how livestock are marketed and procured by meat packers, according to the American Meat Institute.
calendar icon 21 June 2010
clock icon 2 minute read

The proposed rule, characterised by Agriculture Secretary Tom Vilsack as “aggressive,” was mandated by the 2008 Farm Bill.

The proposed rule includes several new provisions:

  • A producer would not be required to prove a harm to competition when bringing a claim about an alleged anti-competitive practice;
  • Criteria would be established for what constitutes undue preferences or unreasonable advantages;
  • Dealers who operate as packer buyers would only be permitted to purchase livestock for the packer that identifies that dealer as its packer buyer;
  • Packers would be prohibited from purchasing, acquiring or receiving livestock from other packers;
  • Producers required to provide capital upgrades to their facilities would have to be given the opportunity to recoup 80 percent of the cost of a required capital investment;
  • A “clear and conspicuous print” requirement in contracts to ensure producers are provided the option to decline the use of arbitration to settle a dispute; and
  • Packers, swine contractors and live poultry dealers would be required to provide sample copies of contracts to the Grain Inspection, Packers and Stockyards Administration (GIPSA) within 10 business days and these contracts would be made available on GIPSA’s website for review.

The AMI said it had strong concern about the potential impact of the changes.

“USDA is attempting to turn the clock back on the livestock and meat marketing practices that have made the U.S. meat production system the envy of the world and that have delivered the most abundant and affordable meat products available to the American consumer,” said AMI Senior Vice President of Regulatory Affairs and General Counsel Mark Dopp.

“Courts have affirmed that our industry is dynamic and competitive and have rejected USDA’s arguments repeatedly. Now, in the face of repeated judicial rejection of their arguments, USDA is engaging in a regulatory end-run and attempting to change the law through administrative fiat. This is not an appropriate role for the Department to play and could potentially cause harm and enormous disruption.”

In an outline of the rule, USDA wrote that a number of US circuit courts of appeals have not given “deference” to USDA’s interpretation of various sections of the Packers & Stockyards Act. USDA asserts that the proposed regulations would constitute “a material change in circumstances that would warrant judicial reexamination of this issue.”

The outline ignores, however, the fact that USDA has presented these same arguments to several federal appellate courts and they have been repeatedly rejected, including rulings as recently as December 2009 and again in May 2010.

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