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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