The Grain Inspection, Packers and Stockyards Administration (GIPSA) issued today four final regulations implementing portions of the 2008 Farm Bill. Although the new rules impose some limitations on how poultry dealers contract with growers, many of the more controversial aspects of the agency’s June 2010 proposed rule have not been finalized.  In brief, the GIPSA rules affect suspension of delivery of birds, criteria for additional capital investments, the period of time permitted for a grower to remedy a breach of contract, and arbitration.  They will take effect in 60 days, on February 7, 2012.

GIPSA first proposed rules on these issues in June 2010.  Although Congress directed the agency to implement parts of the 2008 Farm Bill, GIPSA went beyond its statutory mandate, proposing rules that would strictly limit producers’ use of tournament systems for growers, require justifications for differential pricing, and make it significantly easier for a grower to prove competitive injury under the Packers and Stockyards Act.  The provisions proved quite controversial, and NCC worked aggressively to oppose these provisions to make the final regulations consistent with the Farm Bill, more reasonable, and less onerous.  In November, Congress passed an appropriations bill forbidding GIPSA from pursuing the more burdensome regulations.  Although producers will have to adjust to the resulting GIPSA rules issued today, the rules mark a significant departure from the initial proposal’s more troubling regulations.

 The new rules provide criteria GIPSA may use to determine whether a producer has violated the Packers and Stockyards Act when dealing with a grower.  The regulations are intended to present criteria, not hard-and-fast rules, but they can be expected to guide GIPSA’s evaluation of a producer’s dealings with a grower.  The criteria fall into four categories:

  •  Suspension of Delivery of Birds.  The rules provide additional protections for growers before producers can suspend delivery of birds, including a requirement that a producer provide written notice at least 90 days in advance, explaining the reason for the suspension and when the grower should anticipate delivery to resume.
  • Additional Capital Investments.  The rules implement special protections concerning capital improvements made to growers’ facilities, generally requiring growers be given the opportunity to decline, free of coercion or retaliation, requests to make significant capital improvements to their facilities.
  • Breach of Contract Remedies.  When a grower breaches a growing contract, a producer must provide a grower a reasonable period of time to remedy a breach of contract before terminating the contract.
  • Arbitration.  All grower contracts requiring arbitration must include a specific disclaimer on the signature page allowing the grower to opt out of the arbitration clause.

In response to the publishing of the final rule, NCC President Mike Brown released the following statement:

“The National Chicken Council appreciates the work of Congress to limit the final regulations to the requirements of the 2008 Farm Bill, as Congress intended, and we will work with our members to facilitate compliance with the rule when it takes effect on February 7, 2012. However, we are disappointed that the final rule still includes provisions estimated to cost the chicken industry as much as $55.5 million annually. This is especially burdensome on an industry that has struggled financially in the face of this difficult economic climate and record-high costs of production.”

 

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