Rule-making notices
Notice of Hearings
Agriculture, Trade and Consumer Protection
[
CR 04-030]
Agricultural Producer Security Rules.
The Wisconsin Department of Agriculture, Trade and Consumer Protection announces that it will hold public hearings on a proposed permanent rule and two emergency rules relating to the agricultural producer security program under ch.
126, Stats. These rules modify chs.
ATCP 99,
100 and
101, Wis. Adm. Code.
The department will hold two hearings at the time and places shown below. The department invites public comments on these rules. The department also seeks comments on other issues related to the producer security program, including possible overlap between the Wisconsin producer security program and the federal Perishable Agricultural Commodities Act (vegetables).
Following the public hearing, the hearing record will remain open until May 14, 2004, for additional written comments. You may obtain a free copy of these rules by contacting the Wisconsin Department of Agriculture, Trade and Consumer Protection, Bureau of Trade Practices, 2811 Agriculture Drive, P.O. Box 8911, Madison WI 53708, or by calling (608) 224-4928. Copies will also be available at the hearings.
Hearing impaired persons may request an interpreter for these hearing. Please make reservations for a hearing interpreter by April 19, 2004, by writing to Kevin LeRoy, Division of Trade and Consumer Protection, P.O. Box 8911, Madison, WI 53708-8911, telephone (608) 224-4928. Alternatively, you may contact the Department TDD at (608) 224-5058. Handicap access is available at the hearings.
Hearings are scheduled as follows:
Monday, April 26, 2004, 1:30 p.m. until 4:00 p.m.
Wisconsin Department of Agriculture, Trade and Consumer Protection
Board Room
2811 Agriculture Drive
Madison, WI 53718
Handicapped accessible
Tuesday, April 27, 2004, 10:00 a.m. until 12:30 p.m.
Marathon County Public Library
300 N. First Street
Wausau, WI 54403
Handicapped accessible
Analysis Prepared by the Department of Agriculture, Trade and Consumer Protection
Statutes Interpreted: ch.
126, Stats.
The Wisconsin department of agriculture, trade and consumer protection ("DATCP") currently administers an agricultural producer security program under ch.
126, Stats. ("producer security law"). This program is designed to protect agricultural producers from catastrophic financial defaults by grain dealers, grain warehouse keepers, milk contractors and vegetable contractors (“contractors") who procure agricultural commodities from producers. Among other things, the law requires most contractors to pay assessments to an agricultural producer security fund.
DATCP may adopt rules to implement the program (see statutory authority above).
Among other things, DATCP may revise contractor assessment rates, require contractor disclosures to producers, and interpret other requirements under the producer security law. This rule does all of the following:
•Authorizes a partial refund of certain agricultural producer security assessments required of grain dealers, grain warehouse keepers, milk contractors and vegetable contractors (collectively referred to as "contractors") under ch.
126, Stats. This rule authorizes a partial refund of an annual assessment that is drastically inflated by a temporary change in financial condition caused by a merger or acquisition. This rule defines the specific circumstances under which the refund is authorized. This rule does not authorize a refund if the change in the contractor's financial condition lasts more than one fiscal year.
•Updates the disclosures that contractors must give agricultural producers under current rules. The updates are needed to accommodate recent law changes under
2003 Wis. Act 38.
•Clarifies that grain dealers and warehouse keepers may provide grain purchase and deposit receipts (required by current law) in electronic form, provided that the recipient can retrieve, store and print the receipt for future reference.
Assessment Refunds
Background
Under the producer security law, contractors pay annual assessments to an agricultural producer security fund ("the fund"). If a contractor defaults in payments to producers, DATCP may compensate producers from the fund. A contractor's annual fund assessment is based on the contractor's size, financial condition and risk practices. DATCP may modify fund assessments by rule.
Financial condition is determined on the basis of an annual financial statement filed by the contractor. Other things being equal, contractors with weaker financial statements pay higher annual fund assessments. Fund assessments are calculated according to a formula spelled out in the producer security law. However, DATCP may modify fund assessments by rule.
Refunds Authorized
In some cases, a merger or acquisition may temporarily affect a contractor's financial statement. This temporary change may in some cases cause a disproportionate increase in annual fund assessments (based on the current statutory assessment formula). In such cases, this rule authorizes DATCP to refund part of a contractor's assessment if certain conditions apply. The refund is paid as a credit against the next year's assessment.
Under this rule, DATCP may refund part of an annual fund assessment paid by a contributing contractor if all of the following apply:
•The contractor paid the full amount of the assessment, including any late penalties that may apply.
•The contractor is the surviving entity in a merger under s.
179.77,
180.1101,
183.1201 or
185.61, Stats., or has acquired property pursuant to a sale of assets under s.
180.1202, Stats.
•The assessment was based on the contractor's financial statement for the fiscal year in which the merger or acquisition took effect.
•The contractor's financial statement, for the fiscal year in which the merger or acquisition took effect, caused the sum of the contractor's current ratio assessment rate and debt to equity assessment rate (both calculated according to current statutory formulas) to increase by at least 100% compared to the preceding license year.
•The contractor's annual financial statements, for the fiscal years immediately preceding and immediately following the fiscal year in which the merger or acquisition took effect, show positive equity, a current ratio of at least 1.25 to 1.00 and a debt to equity ratio of no more than 3.0 to 1.0.
•In the license year immediately following the license year for which the contractor paid the assessment, the sum of the contractor's current ratio assessment rate and debt to equity assessment rate (both calculated according to current statutory formulas) declines by at least 50% compared to the license year for which the contractor paid the assessment.
•The contractor requests the refund in writing, by the first day of the next license year.
Refund Amount
The amount of the refund under this rule will equal 75% of the difference between the assessment amount paid by the contractor and the assessment amount required of the contractor in the next license year.
Refund Paid as Credit Against Next Year's Assessment
Whenever DATCP pays a refund under this rule, DATCP must pay the refund as a credit against the contractor's assessment for the next license year. DATCP must apportion the credit, pro rata, against the quarterly assessment installments required of the contractor in that next license year. If the credit exceeds the total assessment required of the contractor in that next license year, DATCP must credit the balance in the same fashion against assessments required of the contractor in subsequent license years (up to 2 years).
DATCP may not pay refunds except as credits against future assessments (there is no cash refund). DATCP may not pay a refund (grant a credit) to any person other than the contractor who paid the original assessment on which the refund is given.
Disclosures to Producers
Under current rules, a contractor must provide an annual written “notice to producers." The notice must disclose whether the contractor participates in the fund, or has filed security with DATCP, to secure the contractor's payment obligations to producers. The notice may take different forms, depending on the basis on which the contractor is licensed by DATCP. Current rules spell out the type of notice that each contractor must give, and exact wording that the notice must include.
2003 Wis. Act 38 modified fund assessments and security filing requirements for some contractors. This rule modifies current disclosure requirements for some contractors, so that the disclosures accurately reflect current law.
Electronic Receipts for Grain
Chapter
126, Stats. requires grain dealers and grain warehouse keepers to provide written receipts for grain received from producers and depositors. This rule authorizes grain dealers and warehouse keepers to provide those receipts in electronic form, provided that the producer or depositor can readily retrieve, view, store and print the receipt for future reference.
Federal and Surrounding State Regulations
Wisconsin's Security Program
Wisconsin has an agricultural producer security program for grain, milk and vegetables. The Wisconsin legislature has spelled out detailed statutory requirements for grain dealers, grain warehouse keepers, milk contractors and vegetable contractors (ch.
126, Stats.). Contractors must be licensed by DATCP, and most contractors must contribute to an agricultural producer security fund administered by DATCP. A few contractors must also file security with DATCP.
DATCP cannot alter current statutory requirements, but can interpret and implement those requirements by rule. This rule makes limited changes to current rules. This rule will benefit contractors by authorizing assessment refunds and electronic grain receipts, without reducing producer security. This rule also modifies contractor disclosure requirements to implement recent statutory changes.
Federal Programs
There are no federal producer security programs related to milk. The United States department of agriculture (USDA) administers a producer security program for federally licensed grain warehouses that store grain for producers. Grain warehouses may choose whether to be licensed under state or federal law. Federally-licensed warehouses are exempt from state warehouse licensing and security requirements. State-licensed warehouses are likewise exempt from federal requirements.
The federal grain warehouse program currently provides little or no protection against financial defaults by grain dealers. Grain dealers are persons who buy and sell grain. Sometimes, grain dealers also operate grain warehouses. DATCP currently licenses grain dealers. Licensed warehouse keepers must also hold a state grain dealer license if they engage in grain dealing.
USDA proposes to regulate grain dealer activities of federally licensed warehouses, to the exclusion of state regulation. But USDA has not yet finalized its regulations. In any case, the federal regulations would not apply to state-licensed grain warehouses, or to grain dealers who do not operate a warehouse.
There is a federal security program for fresh market vegetables, but not for processing vegetables. Wisconsin's vegetable security program applies only to processing vegetables (not fresh market vegetables covered by federal regulations).
