Legal Jumble Over Beef, Soybean Checkoff Dollars?

November 3, 2016 11:30 AM

As clear as mud? Released July 15, 2016, a new Agricultural Marketing Service (AMS) rule proposal attempts to define the potential path of checkoff dollars, but it may add a layer of confusion for beef and soybean producers.

The newly proposed rule (No. AMS-LPS-13-0083: Soybean Promotion, Research, and Consumer Information; Beef Promotion and Research; Amendments to Allow Redirection of State Assessments to the National Program; Technical Amendments) is heavy on technicality and light on clarity through nine pages of text, and that could kick up dust over beef and soybean assessment dollars.

Under the banner of “redirection,” the AMS proposal allows beef and soybean producers in particular states to request assessment dollars be channeled away from state organizations and straight to national boards. Essentially, at a producer’s request, Qualified State Beef Councils (QSBCs) and Qualified State Soybean Boards (QSSBs) would be bypassed, with checkoff assessments funneling directly to the Cattlemen’s Beef Board (CBB) or United Soybean Board (USB).

The proposed AMS rule is a restoration of language originally included in the Beef Order (1985) and Soybean Order (1991), but accidently removed in 1995, according to AMS. From an AMS FAQ document: “AMS inadvertently removed parts of the Code of Federal Regulations from each Order as it related to producer credits or refunds regarding referendums.”

AMS is proposing to add redirection language, according to Angie Snyder, associate deputy administrator of AMS’ Livestock, Poultry and Seed Program: “During an initiative to pull out unnecessary or obsolete regulations in the 1990s, we removed defunct refund provisions. However, we also removed language that covered redirection, though it was phrased differently. Provisions would be added back in to both Orders allowing producers, if not prohibited by state law, to request that their assessments paid to a state council or board be redirected to the national program.”

The technical nature of the proposed rule is necessary due to the complexity of two orders, two laws, two boards and multiple state statutes, she says.

“We know it’s complicated and tried to boil down the proposed rule into simple form. Additionally, we posted FAQs on our website to address any questions producers might have," Snyder says.

Polly Ruhland, chief executive officer of the CBB, says the proposal is intended to clarify a producer’s prerogative to direct money to the organization of choice, within the confines of state and federal law.

“The language was inadvertently removed,” she says. “The rule proposal doesn’t contain the original language, but is more extensive for clarity’s sake.”

Essentially, 21 years after a technical error, redirection is being recodified. Harrison Pittman, director of the National Agricultural Law Center, believes the AMS proposal wording could place the USDA, national boards, state boards, state councils and producers in conflict.

“The confusion in the wording is undeniable and makes it virtually impossible to discern to whom, how, and when the rule, as proposed, would apply,” Pittman notes.

Pittman points toward two significant pitfalls in the proposal. One, state soybean boards and beef councils could lose significant funding. Two, there may be an issue as to whether state producer refund provisions are preempted or superseded by federal law. Pittman says: “It is commonly asserted that state refund provisions are preempted or superseded by the federal soybean and beef laws. If that’s true, then those state provisions have no legal effect. How can a current USDA policy or future rule be based in large part on the existence of state producer refund provisions if those same provisions are already preempted or superseded?”

Yet, AMS estimates 10 out of 569,998 soybean producers and 20 out of 915,000 beef producers will seek redirection. (In the AMS FAQ document, AMS states it isn’t aware of a single U.S. soybean producer who has requested redirection.) Therefore, according to AMS, the new rule proposal and its nine pages of technical text resurrect language which lay dormant for 21 years, in order to accommodate a projection that 30 total U.S. producers will seek redirection.

Oddly, in the background of AMS’ proposal hovers a lawsuit in Montana federal district court filed by R-CALF against USDA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America v. Vilsack). R-CALF’s legal action attacks the constitutionality of the Beef Program by claiming the federal assessment, half of which is staying with the Montana Beef Council, is forcing R-CALF to subsidize speech at a private council.

R-CALF’s suit essentially states no policies exist allowing R-CALF to direct the full assessment to the CBB and away from the Montana Beef Council (MBC). At the core, R-CALF alleges the transfer of money to the MBC is unconstitutionally compelled speech.

R-CALF filed the complaint on May 2, 2016. The subsequent sequence of events is striking. Six weeks later, on July 15, AMS reintroduced wording removed 21 years earlier. In less than another month, on Aug. 4, USDA filed a motion to dismiss the R-CALF complaint, saying USDA’s long-standing policy allows for redirected payments.

“From a legal standpoint, USDA seeks dismissal of the R-CALF complaint by focusing primarily on the impact of the so-called redirection rule, and not otherwise addressing free speech issues,” describes Pittman.

Bill Bullard, CEO of R-CALF, says the AMS proposal was prepared in direct response to R-CALF’s lawsuit, and the soybean provision added to provide cover: “This proposed rule was hastily prepared and put on the fast track, all due to our legal case.”

“I have been reading and commenting on proposed USDA rules for 15 years. I’ve disagreed with many proposed rules, but USDA has been a competent and formidable participant,” Bullard says. “However, this rule is the exception. It is sloppy, convoluted and terribly confusing.”

As for AMS’ projection that 20 beef producers will seek redirection? Bullard claims the statistic is “baseless.” R-CALF has 4,000 members and Bullard says approximately half will request redirection.

“The USDA is trying not to acknowledge that it’s unconstitutional for checkoff dollars to be funneled to a private entity to fund private speech,” he adds. “We want our lawsuit to show that the manner by which the government is taxing and using independent cattle producer dollars is unconstitutional.”

John Becherer, CEO of the USB, says although the AMS proposal carries minimal impact for the soybean industry, it is an attempt by the USDA to ensure the correct and intended language is put back in place.

“When they took out the language relative to refunds, they inadvertently created a situation where the requirements were more implicit," he says. "In soybeans, this is not something that has major implications.”

Pittman believes the AMS proposal could create “an untenable legal and political tension between producers, state boards and councils, the national boards, and USDA, particularly since AMS states that producers who receive a refund under state law will be in violation of the federal soybean and beef laws.” In the long run, he says both federal and state legislative changes may be needed to reach the clarity or actual outcome sought by the various interests at play.

In the beef and soybean industries, refunds and assessments are part of the lifeblood of representative organizations. By nature, all proposed rules and regulations rely on a degree of legalese, but AMS’ new offering on beef and soybean redirection appears unusually vague.

“All you have to do is try and read the text of the proposal to see the jumble,” Pittman says. “This is a tough issue, and we certainly could see more legal challenges in the future.”

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