Rule-making notices
Notice of Hearing
Agriculture, Trade and Consumer Protection
(Reprinted from Mid-July 2005 Register)
The State of Wisconsin Department of Agriculture, Trade and Consumer Protection announces that it will hold public hearings on a proposed amendment to chs.
ATCP 99,
100 and
101, Wis. Adm. Code, relating to Agricultural Producer Security. The hearings will be held at the times and places shown below. The department invites the public to attend the hearings and comment on the proposed rule. Following the public hearing, the hearing record will remain open until
August 30, 2005, for additional written comments.
Hearing Dates and Locations
Wednesday, August 10, 2005
10:30 a.m. to 12:30 p.m.
DATCP Northwest Regional Office
Conference Room
3610 Oakwood Hills Pkwy.
Eau Claire, WI 54701-7754
Handicapped accessible.
Friday, August 12, 2005
10:30 a.m. to 12:30 p.m.
DATCP Headquarters (Prairie Oak State Office Building)
Board Room (CR-106)
2811 Agriculture Drive
Madison, Wisconsin, 53718-6777
Handicapped accessible.
Tuesday, August 16, 2005
10:30 a.m. to 12:30 p.m.
DATCP Northeast Regional Office
Room 152A
200 N Jefferson Street
Green Bay, Wisconsin, 54301
Handicapped accessible.
Hearing impaired persons may request an interpreter for these hearings. Please make reservations for a hearing interpreter by August 1, 2005, 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.
Written Comments and Copies of Rule
Written comments should be sent to the Wisconsin Department of Agriculture, Trade and Consumer Protection, Division of Trade and Consumer Protection attention Kevin LeRoy, 2811 Agriculture Drive, P.O. Box 8911, Madison WI 53708. Written comments can be submitted via email to
kevin.leroy@datcp.state.wi.us.
You may obtain a free copy of this rule by contacting the Wisconsin Department of Agriculture, Trade and Consumer Protection, Division of Trade and Consumer Protection, 2811 Agriculture Drive, P.O. Box 8911, Madison, WI 53708. You can also obtain a copy by calling (608) 224-4928 or emailing
kevin.leroy@datcp.state.wi.us. Copies will also be available at the hearings. To view the proposed rule online, go to:
https://apps4.dhfs.state.wi.us/admrules/public/Home
Analysis Prepared by the Dept. of Agriculture, Trade and Consumer Protection
Statutes interpreted: Chapter
126, Stats.
The Department of Agriculture, Trade and Consumer Protection (“DATCP") administers the agricultural producer security program under ch.
126, Stats. DATCP has broad general authority, under s.
93.07 (1), Stats., to adopt rules related to programs under its jurisdiction. DATCP has specific authority under ch.
126, Stats., to adopt rules for the agricultural producer security program.
This rule modifies current rules related to the agricultural producer security program under ch.
126, Stats. The program is designed to protect agricultural producers from catastrophic financial defaults by grain dealers, grain warehouse keepers, milk contractors and vegetable contractors (collectively referred to as “contractors") who procure agricultural commodities from producers.
This rule does all of the following:
• It permits a licensed contractor
s to file voluntary security for the benefit of producers if the contractor's estimated default exposure exceeds the maximum amount payable from the Wisconsin agricultural producer security fund. A contractor who files voluntary security may pay lower fund assessments and make more favorable disclosures to producers. A voluntary security filing does not relieve a contractor of any other duty to file security or pay fund assessments.
• It changes and simplifies the disclosures that contractors must give to producers.
• It clarifies current grain warehouse keeper record keeping requirements.
Background. Under current law, contractors must be licensed by DATCP. Most contractors must contribute to an agricultural producer security fund (the “fund"). Fund assessments are based on contractor size, financial condition and risk practices. If a contributing contractor defaults, DATCP will pay producers out of the fund. The total payment may not exceed 60% of the fund balance at the time of default (the current fund balance is approximately $5.5 million).
The current fund capacity is adequate to cover most, but not all, potential defaults by contributing contractors. Some large contractors have an “estimated default exposure" that exceeds current fund capacity (in some cases, by a very large amount). Some of these contractors are currently required to file security to cover at least part of the difference, but others are not (DATCP lacks statutory authority to require security filings for some of the contractors).
Voluntary Security. Under this rule, a licensed contractor may file voluntary security with DATCP if the contractor's estimated default exposure exceeds the maximum amount payable from the fund (this rule does not change current mandatory security filing requirements). A contractor who files security with DATCP may pay lower fund assessments and make more favorable disclosures to producers.
Reduced Fund Assessment. Under current rules, certain contractors who file security with DATCP are entitled to a reduction in their annual fund assessments (current rules specify the amount of the reduction). Under this rule, certain contractors who file security with DATCP (required or voluntary) may pay reduced fund assessments if their “estimated default exposure" is equal to or less than the sum of the following:
• The maximum amount payable from the fund, if the contractor defaults.
• The total amount of security (required or voluntary) filed by the contractor.
Disclosures to Producers. Under current rules, a contractor must periodically disclose to producers the contractor's license, security and fund contribution status. The current rules specify the exact language that contractors must use. The disclosures are intended to help producers assess the degree of financial risk involved in dealing with any particular contractor. The current disclosures are rather complex, and in some cases overstate the amount of security coverage afforded to producers.
This rule changes and simplifies the current disclosure requirements. This rule, like the current rules, specifies the exact language to be used. Disclosure requirements vary slightly between grain, milk and vegetable contractors, because of differences in the security program for each industry. But for all contractors, the disclosure alternatives are basically as follows:
• If the contractor's “estimated default exposure" is equal to or less than the amount of fund coverage and security on file, the disclosure states that the security program may provide full compensation for producers if the contractor defaults (subject to statutory limits).
• If the contractor's “estimated default exposure" is greater than the amount of fund coverage and security on file, the disclosure states that the security program may provide some compensation for producers if the contractor defaults. But compensation may cover only a fraction of a producer's loss.
• If the contractor does not contribute to the fund or file any security with DATCP, the disclosure states that the security program will provide no compensation to producers if the contractor defaults.
Definition of “Affiliate". Under current rules, contractor financial statements must disclose accounts and notes payable from “affiliates." These accounts and notes are excluded from the balance sheet before financial ratios are calculated. An “affiliate" is currently defined as an owner, major stockholder, partner, officer, director, member, employee or agent (or a person owned, controlled or operated by one of those persons). This rule clarifies an “affiliate" also includes any other person who has significant control or influence over the contractor.
Grain Warehouse Records. This rule clarifies current grain warehouse record keeping requirements. Under current law, warehouse keepers must keep “daily position" records related to grain in storage. This rule clarifies that daily position records must identify all grain kept by the warehouse keeper, whether in licensed or unlicensed storage. Records must clearly distinguish between grain owned by the warehouse keeper and that held for others. Records must also show the amount of grain entering and leaving storage each day. Records must be based on individual grain transaction records required under current law.
Fiscal Impact
This rule will have no significant fiscal impact on DATCP or local government.
Business Impact
This rule will affect agricultural producers, grain dealers, grain warehouse keepers, milk contractors and vegetable contractors. Many of these businesses are small businesses.
This rule will have a minimal impact on most affected businesses, and effects will be positive in many cases (especially for agricultural producers). The Wisconsin legislature has spelled out detailed statutory requirements for grain dealers, grain warehouse keepers, milk contractors and vegetable contractors (ch.
126, Stats.). DATCP has limited authority to change these requirements by rule.
This rule will make minor changes to current rules. Among other things, this rule:
• Allows licensed contractors to file voluntary security (it does not change current mandatory security requirements).
• Allows some contractors to pay reduced fund assessments.
• Changes and simplifies current contractor disclosures to producers. In some cases, current disclosures overstate the amount of security coverage afforded to producers. Some contractors may incur one-time costs to change their disclosure forms.
