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December 2013 Archive for Ag in the Courtroom

RSS By: John Dillard, AgWeb.com

John Dillard grew up on a beef cattle farm and now works as an agricultural and environmental litigation attorney with OFW Law. His blog analyzes legal issues and court decisions that affect America’s farmers and ranchers.

 

 

 

10 Things to Watch in 2014

Dec 31, 2013

 With 2013 nearly in the books and the holiday season nearly behind us, its time to prepare for the challenges that face us in the coming year. While I am no expert on forecasting long-range weather patterns, commodity market fluctuations, or predicting the future of the Kardashian family, I do feel adequately qualified to indulge in a few predictions regarding what will be hot topics in the agricultural policy realm in the coming year. Accordingly, I, like most writers with access to an audience, have prepared a top 10 list of things to watch in agriculture in 2014.

1.      The 2012 2013 2014 Farm Bill

Farm Bills are getting harder and harder to come by these days. The 2012 effort to pass a Farm Bill failed. Congress punted by granting a one-year extension. The 2013 effort has been a struggle that will spill over into 2014. In particular, the fight over how far to cut SNAP benefits has put Democrats and Republicans at loggerheads. Based on the latest developments, we can expect to see one some time in January. However, the specifics of the Farm Bill remain to be seen because the legislation is being worked out behind the scenes by committee leaders and their staff.

2.      The Chesapeake Bay TMDL

The Chesapeake Bay is entering its third year under the restrictions imposed by the Chesapeake Bay TMDL. Under the TMDL plan, EPA is requiring the states in the watershed to make significant annual progress in reducing nitrogen, phosphorus and sediment pollution. Agriculture bears a significant portion of this burden. Achieving water quality goals in a watershed as large as the Chesapeake Bay through a single plan is a clunky process. It’s also questionable as to whether EPA has the authority to impose such a plan. American Farm Bureau Federation challenged EPA’s authority to mandate the TMDL as it did. Farm Bureau lost at the district court level, but it has appealed the case to the Third Circuit Court of Appeals. We will likely get a decision from the appeals court some time this year. The outcome of this litigation will determine how EPA approaches watershed restoration in not only the Chesapeake Bay, but other large watersheds.

3.      Mississippi River Basin Numeric Limitations on Nutrients

The Chesapeake Bay TMDL was supposed to be EPA’s case study in approaching large scale watershed restoration efforts. EPA’s plan was to take the lessons that it learned from the Bay TMDL and apply it to other watersheds across the country, with the Mississippi River being the ultimate goal. However, some environmental groups were impatient with EPA’s approach. They petitioned EPA to develop numeric limitations for nitrogen and phosphorus for all waters in the Mississippi River Basin. When EPA denied this petition, the environmental groups took them to court. A federal court held that EPA has to respond to the petition and determine whether numeric nutrient limitations are appropriate for the Mississippi River Basin. EPA has appealed this decision to the Fifth Circuit Court of Appeals. We can expect a decision on this case in the coming year.

4.      Mandatory Country of Origin Labeling

The new COOL "born, raised, and slaughtered" regulations became effective on November 23, 2013. The battle to overturn these regulations, which are intended to protect American swine and cattle producers from foreign competition, is waging on three fronts – Capitol Hill, the federal courts, and the WTO.

mCOOL supporters and opponents have been working the Farm Bill conferees to ensure that their interests are protected on the legislative front. We will likely know what the Farm Bill looks like in the next month.

The major livestock and meatpacking trade associations have challenged mCOOL in the federal courts. The mCOOL supporters, including USDA, R-CALF and HSUS, prevailed on the first round of litigation. mCOOL opponents have appealed this decision. The appeal will be heard in the D.C. Circuit on January 9th. We can expect a decision sometime in the next few months on this matter.

Canada and Mexico have also challenged the new mCOOL regulations at the WTO because mCOOL provides an incentive to discriminate against Mexican and Canadian livestock. The WTO has assigned their challenge to the same panel that rejected earlier mCOOL provisions that were less discriminatory against foreign livestock. The wheels turn slow at the WTO, but we can expect to hear at least an initial decision on the matter before the end of the year.

5.      Lawyers, Dust and Feathers – the Alt case

One of the major cases decided this year was Alt v. EPA. In Alt, EPA alleged that a poultry farmer needed a NPDES permit on the basis that the farm was discharging pollutants when stormwater washed dust, feathers and litter away from the barnyard area. Under this theory, nearly every CAFO would be required to obtain a NPDES permit, a costly and onerous process. A federal judge held that the farm was not required to obtain a NPDES permit because runoff from the barnyard area is an agricultural stormwater discharge that is exempt from permitting requirements under the Clean Water Act. While this decision is a major victory for animal agriculture, it’s not quite time to uncork the champagne. EPA and the environmental groups that intervened in the suit have decided to appeal this case. Arguments will take place later this year and we can expect a decision towards the end of 2014 or the beginning of 2015.

6.      FSMA Rollout

FDA is under the gun, or actually a court order, to write the rules that implement the Food Safety Modernization Act of 2011. FDA has to propose, accept public comment on, and finalize several major regulations pursuant to FSMA by June 30, 2015. This is a major strain on FDA’s resources and some of the rules that have been proposed reflect the rushed state that the Agency is operating under. While these rules will not be finalized until 2015, FDA is accepting public comments on their various proposals through the early months of 2014. We can expect that the new FSMA rules will have a substantial impact on various segments of the ag sector, especially produce farms and feed manufacturers.

7.      GMO Labeling

Whether food manufacturers should be required to label their products that include genetically engineered ingredients has been a hot button issue for the past few years. Supporters of mandatory labeling have hit several roadblocks at the federal level, so they have turned to state governments to require labeling. While high-profile ballot initiatives in California and Washington state have failed, supporters have made inroads with some measures in the northeastern states. For instance, Maine and Connecticut have labeling measures in place, but they only become effective if a critical mass of other states require GMO labeling. In order to avoid a patchwork of various state labeling laws, we may see efforts ramp up in 2014 to pass some type of law regarding GMO labeling at the federal level, which would preempt state labeling laws.

8.      The Renewable Fuels Standard

The fight over the Renewable Fuels Standard will likely come to a head this year. Much of the political support for the policy has dwindled in the face of opposition from a growing number of strange bedfellows including environmentalists, livestock producers, and the oil industry. With petroleum consumption decreasing, the RFS mandate for renewable fuel use is hitting the "blend wall" much sooner than was anticipated when the legislation was drafted in 2007. In response to the blend wall concerns, EPA has proposed lowering the targets for corn ethanol use in 2014. Opponents of the RFS believe this is a step in the right direction, but not far enough. Meanwhile, supporters believe this is a step down a slippery slope. We can expect 2014 to bring us legislative proposals to gut the corn ethanol portion of the RFS. We can also expect RFS supporters to sue EPA if it finalizes its proposal to reduce the corn ethanol mandate.

9.      Trade Agreements

The Obama Administration is currently negotiating two major trade agreements that could have a major long-term effect on agricultural trade. The Trans-Pacific Partnership could significantly improve our access to export markets in the Asia-Pacific region. However, agriculture is a major sticking point in these negotiations. Japan, in particular, wants to protect much of its agricultural industry from foreign competition. If this is allowed, then other countries to the agreement will likely seek similar protections, making the TPA a much weaker deal for US agriculture. We will likely see some progress on this matter in the coming year.

The second major trade agreement under negotiation is the Transatlantic Trade and Investment Partnership (TTIP). This is a proposed trade agreement between the US and the European Union. While this trade agreement could be the biggest trade deal in the world, agriculture could be a major sticking point in the negotiations. Conflicts over GMO acceptance in some of the EU member countries, the use of hormones for growth promotion, and animal welfare practices could be roadblocks for increasing trade with the EU. The TTIP negotiations have not progressed as far as TPA, so we can expect developments in TPA to influence the outcome in TTIP.

10.  Immigration Reform

The story for immigration reform in 2014 will likely be a disappointment. While it seemed possible that some type of bipartisan immigration reform deal could have emerged in early 2013, that window has likely closed. The mid-term elections will be looming over Congress and its unlikely that enough members will be motivated to take what could be a risky stand on immigration issues so close to election day. While the Republican Party continues to take a pounding on a national level for failure to catch up to the electorate’s view on immigration reform, many of the individual members of the House are from districts where any appearance of granting amnesty is a political non-starter. In the meantime, millions of undocumented workers must remain in the shadows and farmers and ranchers that depend on immigrants for labor will face the same uncertainty and labor shortfalls that they have experienced the last few years.

John Dillard is an attorney with Olsson Frank Weeda Terman Matz P.C. (OFW Law), a Washington, DC-based firm that serves agricultural clients and clients with issues before federal and state courts, EPA, FDA, USDA, and OSHA.  John focuses his practice on agricultural and environmental law.  He occasionally tweets at @DCAgLawyer.  This column is not a substitute for legal advice.

Missouri AG Plans to Sue California Over Egg Import Restrictions

Dec 10, 2013

 Missouri's Attorney General, Chris Koster, used the Missouri Farm Bureau's annual meeting to announce that he intends to sue the State of California to overturn a law that will limit most commercially-produced eggs from entering the state. Such a lawsuit was only a matter of time as many of the country's egg producers are forced to either adopt California's larger egg-cage standards or forego shipping eggs to a valuable market.

The underlying dispute began when the HSUS-backed California ballot proposal, Proposition 2, was enacted in 2008. Proposition 2 required California farmers and ranchers to abide by new animal housing requirements that banned certain practices, such as swine gestation crates, and provided for more space for laying hens. Egg producers are required to comply with the new housing requirements starting in 2015.

These new housing requirements created a competitive disadvantage for California's egg producers when compared with out-of-state producers. California egg facilities will be required to have more space and heating costs when compared to more efficient, out-of-state producers that are not subject to Prop. 2's requirements. To remedy this disadvantage, the California legislature passed a law prohibiting the import of shell and liquid egg imports from farms that do not meet California's strict hen housing requirements. This law will insulate California's farmers from competition with lower-cost competitors, but it may be problematic under the U.S. Constitution.

No lawsuit has been filed at this point, but I suspect that Attorney General will base the state's action on what is known as the Dormant Commerce Clause. In general, the Dormant Commerce Clause prohibits a state from enacting a law that discriminates against or unduly burdens interstate commerce. The Dormant Commerce Clause prevents states from enacting protectionist laws designed to favor in-state businesses over out-of-state competitiors.

Courts have recognized exceptions to the Dormant Commerce Clause.  One such exception is the "health and safety regulation" exception. A state may discriminate against out-of-state competitors if it can show that the discriminatory law is related to the state's power to regulate the health and safety of its citizens. The California egg import law is clearly designed to protect California's egg industry from the effects of Prop. 2. However, California may prevail in the litigation if it can convince the court that the legislature meant to protect its citizens and discrimination against out-of-state eggs was simply collateral damage.

The California egg law doesn't have many fans outside of the State of California. In addition to this threatened lawsuit, Rep. Steve King (R - IA) is pushing a Farm Bill amendment that would prohibit state governments from setting livestock standards for products produced outside of their own state. This amendment, if enacted into law, would supersede California's efforts to insulate their farmers from competitors that are subject to less stringent regulations. It is not known whether Rep. King's amendment will make it into the Farm Bill, but if it does, states might be a little more mindful of their own farmers and ranchers before they pass legislation that makes them less competitive.

John Dillard is an attorney with Olsson Frank Weeda Terman Matz P.C. (OFW Law), a Washington, DC-based firm that serves agricultural clients and clients with issues before federal and state courts, EPA, FDA, USDA, and OSHA.  John focuses his practice on agricultural and environmental law.  He occasionally tweets at @DCAgLawyer.  This column is not a substitute for legal advice.

Mandatory Country-of-Origin Labeling: A Short-Sighted, Protectionist Scheme

Dec 04, 2013

[The  following was originally published by Phil Olsson and John Dillard on OFW Law's blog - AgFDABlog.com]

November 23rd was a significant date for the livestock and meat industry. After more than a decade of lobbying, litigating, and haranguing, all fresh cuts of beef, pork, lamb and chicken sold in retail establishments must bear a label stating the country (or countries) where each animal supplying meat in the package was born, raised, and slaughtered. Known as mandatory Country-of-Origin Labeling (mCOOL), this new, onerous labeling requirement is a long-sought victory for the protectionist fringe of the U.S. beef cattle industry.

Prior to the implementation of the mCOOL legislation, beef and beef products were subject to the generic country of origin labeling requirements which apply to all processed products, both foods and non-foods, that is that the label should designate the place of most recent substantial transformation as the place of origin. For beef and pork, where the animals were born and/or fed in Canada or Mexico, but slaughtered and processed in the United States, this traditional rule has allowed the United States to be designated as the country of origin.

We are all familiar with the country of origin labeling which applies to fruits and vegetables, each of which usually bears a small, sticky label identifying the single country where it was cultivated, harvested and processed. It is not unusual to visit a supermarket’s produce department and see tomatoes from the United States, Canada, Guatemala, Mexico and the Netherlands displayed separately, side-by-side.

On its face, the mCOOL regulation appears rather innocuous. Retailers are simply required to denote the country where the derivative animal was born, raised, and slaughtered. However, the behind the scenes efforts that are necessary to allow retailers to comply with this labeling requirement are anything but simple. Prior to the implementation of mCOOL, meat processors "commingled" meat products with different country of origin designations in a single shipment to retail customers. On a given day, a large packing plant might process 2,000 carcasses of similar age and quality with anywhere from 100 to 800 of those carcasses attributable to animals born and/or fed in Canada or Mexico. Since these carcasses are not separated out on the production line, the various cuts of meat from these carcasses are commingled when they are packaged for shipment to retailers.  This has been a standard industry practice because, unlike various physical attributes such as age, leanness and fat cover, political boundaries do not have a material bearing on the quality, safety, or taste of meat products. However, despite a long history of "commingling" products with different country of origin designations, the new mCOOL rule does away with this practice.

The ban on commingling will cause dramatic reverberations for the beef and swine industry that will unnecessarily increase costs that will be passed along to consumers. Feedlots will be required to maintain additional records and segregate livestock based on country of origin. Processing plants will have to do separate production runs based on an animal’s country of origin designation. These processing plants will also have to use extra cold storage space to allow for segregation of finished product by country of origin. Retailers will want to purchase product with consistent country of origin labeling, which will mean that packing houses will need to contract for and process meat with the same geographical origin, day after day and month after month. This will be a strong incentive for retailers to demand that packers provide beef and pork from a single country of origin, which will lead to the loss of work and  jobs at packing houses near the borders with Canada and Mexico, which have traditionally shipped commingled products to their retailer customers. The alternative for the retailer would be to build extra SKUs into their inventory management systems to account for the different labels under the new mCOOL Rule, something which would likely be both cumbersome and costly.

These extra costs are not the unintended consequences that were overlooked when the commingling ban was put into place. Instead, these extra costs are the rather deliberate consequences forced on the livestock and meat industry via the seemingly innocuous mCOOL regulation. That is because the costs of compliance with mCOOL provide a clear incentive to avoid processing Mexican and Canadian livestock. Retailers do not want to provide extra shelf space for different label designations, packers do not want to have separate production runs or extra storage space, and stockyards do not want to undertake the burden of segregating livestock with various countries of origin. The new mCOOL regime picks winners and losers, and the clear winner is meat from animals that are born, raised, and slaughtered in the United States.

Many do not see a problem with this. American beef and pork producers grow a great product and take pride in their work. mCOOL helps to protect them from competition with our neighbors to the north and south. However, this is a short-sighted view which will cause harm to livestock demand that will greatly outweigh any benefits resulting from discriminating against foreign livestock. The U.S. cannot raise all of the beef and pork that its packers process domestically. Packers, especially those near our northern and southern borders, rely on Canadian and Mexican cattle and swine to even out seasonal fluctuations in supply. With a reduced market for meat not bearing a "Born, Raised, and Slaughtered in the United States" label, these packers will have to pay a premium for domestic livestock – exactly as the crafters of mCOOL intended. Large packers may follow Tyson’s lead and decide to not slaughter Canadian cattle at all. Smaller, single-plant packers will have to decide whether they can remain in business with this cost squeeze.

Supporters of mCOOL are careful not to designate these labeling requirements as a protectionist measure. Instead, they frame mCOOL as a measure that provides consumers with more detailed information regarding where their food comes from. mCOOL supporters have received a relative pass from the popular press regarding the specifics of the regulation because the supporters have couched the regulation as furthering the consumer’s "right to know." Ironically, many of the strongest advocates for mCOOL were also parties and amici in Ranchers Cattlemen Action Legal Fund United Stock Growers of America v. United States Department of Agriculture 415 F.3d 1078 (9th Cir, 2005), where the Court of Appeals struck down an injunction which these parties had obtained from the United States District Court in Billings Montana (2004 WL 1047837), to keep the Canadian border closed to imports of Canadian cattle. It seems clear that many of the producer parties and amici are protectionists at heart. Their protestations regarding the consumer’s "right to know" about where cattle and hogs are born or fed are unpersuasive, because nothing in current law has prevented voluntary labeling of U.S. product to provide such information on a voluntary basis. If consumers were really interested in knowing these things, they would have created a market for this kind of more detailed labeling.

The fundamental flaw in the mCOOL supporters’ logic is the presumption that competition in the beef industry is a contest between U.S. producers and foreign producers; the real competition in the beef industry is between beef and cheaper forms of protein. While mCOOL does shield domestic producers from foreign competition, it does not insulate beef producers from the consumers that decide whether to purchase their product or not. mCOOL will tighten beef and pork supplies. This will, in turn, increase the price of meat for consumers. Faced with higher prices, consumers often turn to lower cost forms of protein, choosing pork, chicken, or turkey over beef. The retail price of beef is already high due to elevated grain prices and short supplies recovering from the 2012 drought – the added costs of mCOOL will only serve to further nudge beef prices higher and further weaken demand. Ultimately, some of the most ardent supporters of mCOOL, disaffected beef producers, may prove to be the biggest victims of mCOOL.

Phil Olsson and John Dillard are attorneys with Olsson Frank Weeda Terman Matz P.C. (OFW Law), a Washington, DC-based firm that serves agricultural clients and clients with issues before federal and state courts, EPA, FDA, USDA, and OSHA.  John focuses his practice on agricultural and environmental law.  He occasionally tweets at @DCAgLawyer.  This column is not a substitute for legal advice.

 

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