BILL ANALYSIS                                                                                                                                                                                                    



                                                                 AB 2240
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         ASSEMBLY THIRD READING
         AB 2240  (Ma)
         As Amended May 4, 2010
         Majority vote 

          AGRICULTURE         8-0         APPROPRIATIONS      12-1         
          
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         |Ayes:|Galgiani, Tom Berryhill,  |Ayes:|Fuentes, Ammiano, Coto,   |
         |     |Conway, Fuller, Hill, Ma, |     |Davis, Bonnie Lowenthal,  |
         |     |Mendoza, Yamada           |     |Hall, Nielsen, Skinner,   |
         |     |                          |     |Solorio, Torlakson, Hill  |
         |     |                          |     |                          |
         |-----+--------------------------+-----+--------------------------|
         |     |                          |Nays:|Norby                     |
         |     |                          |     |                          |
          ----------------------------------------------------------------- 
          SUMMARY  :  Makes permissive the re-evaluation of fees for the Market  
         Enforcement Branch (MEB); deletes outdated MEB fee structures and  
         required reporting language; increases the base fees for licenses and  
         complaints of purchasers of agricultural commodities for processing  
         and those as a dealer/broker; permits the Secretary (Secretary) of  
         the California Department of Food and Agriculture (CDFA) to appoint a  
         MEB advisory committee of producers and licensees to provide guidance  
         in establishing the fees; and, makes technical and conforming  
         changes.  Specifically,  this bill  :

         1)Raises the following fees for produce dealers/brokers:

            a)   Increases the fee for an aggrieved grower or licensee to file  
              a complaint from $60 to $100;

            b)   Increases the fee for each agent of a licensed principal from  
              $35 to $55; and,

            c)   Increases the license fee for buyers of annual volumes of  
              $20,000 or less from $100 to $150.

         2)Raises the following fees for processors of farm products:

            a)   Increases the fee for an aggrieved grower or licensee to file  
              a complaint from $60 to $100;

            b)   Increases the fee for each agent of a licensed principal from  








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              $35 to $55; and,

            c)   Increases the license fees for buyers of annual volumes of  
              $20,000 or less from $100 to $150.

         3)Deletes the outdated fee structure and reporting provisions.

         4)Creates a statutory advisory committee, to be appointed by the  
           Secretary of CDFA, of producers and licensee brokers and  
           processors, to provide guidance in the establishment of fees, or  
           permits the reliance of input by an existing similar advisory  
           committee.

          EXISTING LAW  requires any person engaged in the business of  
         processing or manufacturing any farm product, that solicits, buys,  
         contracts to buy, or otherwise takes title to, or possession or  
         control of, any farm product from the producer of the farm product  
         for the purpose of processing or manufacturing it and selling,  
         reselling, or redelivering it in any dried, canned, extracted,  
         fermented, distilled, frozen, eviscerated, or other preserved or  
         processed form, to be licensed (Food and Agriculture Code (FAC)  
         Section 55401, et. seq.) and establishes the following fee structure:

         Aggrieved grower or licensee complaint fee $60 (FAC Section 55722.5)

         An agent of a licensed principle$35

         License fee for annual sales volumes of:
                   $20,000 or less               $100
                   $20,000 to $50,000            $400 until 1-1-99; 
                                       $300 until 1-1-00;
                                       $200 thereafter.
                   $50,000 to $2 million    $500 until 1-1-99; 
                                       $400 until 1-1-00;
                                       $300 thereafter.
                   $2 million to and over   $600 until 1-1-99; 
                                       $500 until 1-1-00;
                                       $300 thereafter.  (FAC Section 55861)

         Requires any person engaged in the business of buying, receiving on  
         consignment, soliciting for sale on commission, or negotiating the  
         sale of farm products from a licensee or producer for resale shall be  
         licensed (FAC Section 56101 et. seq.) and establishes the following  
         fee structure:








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         Aggrieved grower or licensee complaint fee $60 (FAC Section 56382.5)

         An agent of a licensed principle$35

         License fee for annual sales volumes of:
                   $20,000 or less               $100
                   $20,000 to $50,000            $400 until 1-1-99; 
                                       $300 until 1-1-00;
                                       $200 thereafter.
                   $50,000 to $2 million    $500 until 1-1-99; 
                                       $400 until 1-1-00;
                                       $300 thereafter.
                   $2 million to and over   $600 until 1-1-99; 
                                       $500 until 1-1-00;
                                       $300 thereafter.  (FAC Section 56571)

         Provides definitions; authorizes MEB to approve, deny or discipline  
         licensees; fine for violations of this Chapter, to investigate  
         claims; provide alternative dispute resolution options; and, provides  
         due process for violators.  (FAC Chapters 6 and 7, of Division 20)

         Federal law authorizes similar definitions, claim and investigative  
         authority, and settlements under the Packers and Stockyards Act  
         (PASA) of 1921 (7 U.S.C., Sec. 181, et. seq.) and the Perishable  
         Agricultural Commodities Act (PACA) of 1930 (7 U.S.C., Sec. 499a, et.  
         seq.).

          FISCAL EFFECT  :  According to the Assembly Committee on  
         Appropriations, this bill could generate between $250,000 and  
         $300,000 in additional revenues for the declining MEB fund.

          COMMENTS  :  The statutes for MEB, many of which were established in  
         the 1920s, have had few significant changes until SB 1198 (Costa),  
         Chapter 696, Statutes of 1997, that recast provisions for license  
         denial, suspension, and revocation; expanded the prohibitions on  
         agent licenses; reduced fees and created a new complaint process,  
         including a alternative dispute resolution; and, claim limits.  Prior  
         to SB 1198, MEB was the investigator, the judge, and the enforcer -  
         taking action against a licensee, while being mandated to "effect" a  
         settlement.  Now they are the analyzers and facilitators, and while  
         maintaining its enforcement role, the claimants have the option of an  
         informal or a formal hearing, or to seek civil remedies in the  
         courts.








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         There are two federal programs, the Perishable Agricultural  
         Commodities Act (PACA) and the Packers And Stockyards Act (PASA),  
         both dealing with similar commodities as MEB.  SB 1198 conformed MEB  
         to the federal processes where possible, giving both PACA and PASA  
         first responsibility to handle claims.  Those commodities not covered  
         by either federal program, or that the federal programs denied action  
         on, become the jurisdiction of MEB.

         The operating revenues of MEB have been reduced as expenditures have  
         increased over the past several years.  Their current year proposed  
         budget estimates a year-end deficit causing their advisory board to  
         recommend a draw of roughly 26%, or $200,000, from their reserves  
         (known as the trust fund) in order to balance their budget.  Without  
         an increase in license fee revenues, this pattern will continue.  The  
         advisory board has recommended these fee increases during their  
         December 3, 2009, meeting, as recorded in their minutes.  AB 2240  
         reflects those recommendations.

         These fee increases are referenced by the affected industry parties  
         as a "delicate compromise crafted by the MEB Advisory Committee" and  
         should be viewed as an interim solution to prevent MEB from going  
         into a deficit position for the fiscal year 2011-12.  The opponents  
         state their opposition is not based upon the need for increased fees,  
         but that only one group of licensees are being increased, rather than  
         an across the board increase to all licensee groups, making this "an  
         inequitable" proposal.  
         
          
         Analysis Prepared by  :    Jim Collin / AGRI. / (916) 319-2084 


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