BILL ANALYSIS
SENATE FOOD and AGRICULTURE COMMITTEE
Senator Dean Florez, Chairman
BILL NO: AB 2240 HEARING: 6/15/10
AUTHOR: Ma FISCAL: Yes
VERSION: 5/3/10 CONSULTANT: John Chandler
Agriculture: processors of farm products: dealers: licensing:
fees.
BACKGROUND AND EXISTING LAW
The Market Enforcement Branch (MEB) functions of the California
Department of Food and Agriculture (CDFA) were established by
the legislature beginning in 1928, with the goal of stabilizing
chaotic marketing conditions for most agricultural commodities.
The branch is charged with licensing dealers and processors,
conducting audits and investigations, ensuring timely payment
for producers and dealers of farm products, and settling
transaction complaints.
Current law requires that all persons engaged in the processing
or manufacturing, or purchasing for processing or manufacturing
of any farm product be licensed by CDFA. Similarly, all persons
buying, receiving on consignment, soliciting for sale on
commission, or negotiating the sale for resale must be licensed
by CDFA. The current licensing fees are based on annual volume
of sales for each licensee: $20,000 or less, sales fees are
$100; $50,000 to $2 million, fees are $300; and over $2 million,
fee is $400. Agents of a licensed principal are required to pay
a $35 fee.
MEB may deny or discipline licensees for violations of
California marketing laws. Further, aggrieved growers with a
complaint against a processor or broker/dealer may file a
complaint with the MEB for a fee of $60 to help work toward a
settlement of the aggrieved grower's dispute.
Federal law authorizes similar marketing laws under the Packers
and Stockyards Act of 1921 (7 U.S.C., Sec. 181, et. seq.).
SB 1198 (Costa), Chapter 696, Statutes of 1997, recast
provisions in the Processors of
Farm Products and Produce Dealers Acts for denial, suspension or
revocation of licenses, while exempting livestock dealers, as
specified; reduced licensing fee and placed sunset on licensees
Food Safety Fund surcharge; expanded prohibitions for licensure
of agents; repealed current complaint process if federal
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alternatives are available and created new complaint process
including an alternative dispute resolution option; and
established claim limits and payments of trust fund.
AB 1459 (Wiggins), Chapter 143, Statutes of 1999, made
technical changes to require CDFA to include in their
evaluation report an analysis of whether the fee structure is
appropriate and to list a summary of fees paid by commodity and
dollar volume.
AB 1061 (Agriculture), Chapter 613, Statutes of 2005, the
committee omnibus bill that included creating a procedure for
complaints by growers or licensed produce dealers where the
claimed damages do not exceed $30,000.
PROPOSED LAW
AB 2240 would do the following:
Increase the fee for an aggrieved grower or licensee
filing a complaint against a processor or dealer/broker
from $60 to $100.
Increase the fee for each agent of a licensed producer
or dealer/broker from $35 to $55.
Increase the fee for processors and dealer/broker buyers
of annual volumes of $20,000 or less from $100 to $150.
Authorize CDFA to appoint an advisory committee of
producers and licensees to provide guidance in establishing
processor and dealer/broker fees or rely on input from any
similar advisory committees already assembled by CDFA.
Eliminate the outdated fee structure and reporting
provisions.
COMMENTS
1.Supporters state that the MEB is facing a proposed $600,000
shortfall of its annual $2.6 million budget in 2010-2011. The
current fee of $100 for the processors and produce dealers
with less than $20,000 purchases per year does not cover the
$136 cost to CDFA to process a single application. It is
estimated that the fee increases in AB 2240 recommended by the
Marketing Enforcement Advisory Committee, made up of
appointees by CDFA, would bring in $268,400 annually. With AB
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2240, combined with the effort by MEB to locate processors and
produce dealers currently operating without a license, CDFA
expects the revenue to increase $425,000. AB 2240 fee
increases will help prevent the MEB from running out of funds
needed to operate.
2.Opponents state that AB 2240 would increase the processor
licensing fee on the smallest buyers and producers which is
inequitable as over 3,000 processors will not face a fee
increase. The fee increase would, therefore, be borne by
processors and produce dealers that would be most impacted by
even a small increase in costs to their operations. Opponents
feel that the MEB enforcement costs are driven by more
complaints against the licensees that are not facing a fee
increase, and therefore, all processors and produce dealers
should share in the fee increases needed to keep the MEB
operating.
3.AB 2240 seeks to address the shortfall with fee increases. It
is estimated that the cost to process a single registration
application from a processor is $136, which is $36 above the
fee charged to the smallest processors. This raises questions
of whether the program was established with a insufficient fee
structure and why the costs of the program have increased
beyond the revenue. The committee may wish to consider if why
the cost to process a single application costs $136 and if
there are cost saving changes that if addressed could solve
the MEB budget shortfall without fee increases.
PRIOR ACTIONS
Assembly Floor 58-11
Assembly Appropriations12-1
Assembly Agriculture 8-0
SUPPORT
California Farm Bureau Federation
OPPOSITION
Family Winemakers of California
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