BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 907
                                                                  Page  1

          Date of Hearing:   August 22, 2012

                          ASSEMBLY COMMITTEE ON AGRICULTURE
                              Cathleen Galgiani, Chair
                       AB 907 (Ma) - As Amended:  June 21, 2012
           
          SUBJECT  :  Processors of farm products.

           SUMMARY  :  Authorizes the California Department of Food and 
          Agriculture (CDFA) to impose sanctions three times the amount of 
          unpaid or underpaid license fees, and requires any bond or 
          irrevocable guarantee, placed in lieu of proof of financial 
          responsibility, to include both past and future debts owed, as a 
          requirement of obtaining a processor's license.  Specifically, 
           this bill  :  

          1)Includes all debts, past and future, to be considered in the 
            value of the surety bond or irrevocable guarantee that ensures 
            financial responsibility and ability to pay for the licensee's 
            obligations at the time the guarantee is issued, as a 
            requirement of processor license approval.

          2)Defines an "irrevocable guarantee" to include a personal or 
            corporate guarantee, a certificate of deposit, a bank letter 
            of credit, or a surety bond, as determined to be appropriate 
            by the secretary (secretary) of CDFA. 

          3)Triples the amount of fees due to the secretary of CDFA if any 
            person is found to be operating as a processor without a 
            license within the last five years that person has operated.

           EXISTING LAW  :

          1)Defines processor to mean any person that is engaged in the 
            business of processing or manufacturing any farm product, that 
            buys, or contracts to buy, any farm product for the purpose of 
            processing or manufacturing it and selling, reselling, or 
            redelivering it in any processed form.  It does not include 
            any retail merchant, as specified.

          2)Requires that all processors of farm products apply and obtain 
            processor licenses with CDFA.  

          3)Requires up to four years' financial documentation as part of 
            the license application.  If the secretary determines that an 








                                                                  AB 907
                                                                  Page  2

            applicant/licensee is unable to pay in full for future farm 
            product purchases, the applicant/licensee is denied a license, 
            with the following exception: 

             a)   A surety bond may be posted in lieu of financial 
               responsibility for a minimum of $10,000, or 20% of the 
               total annual value of the products the applicant/licensee 
               intends to purchase.

          4)Authorizes the secretary, through the Market Enforcement 
            Branch (MEB), to enforce processor marketing laws through 
            licensing, fees, bonds, liens, audits, investigations, 
            violations, and penalties.  

           FISCAL EFFECT  :  According to the Senate Committee on 
          Appropriations, this bill will cause a minor increase in revenue 
          from additional penalties deposited in the CDFA Fund for unpaid 
          licensing fees.

           COMMENTS  :  MEB was established to protect against unfair 
          business practices between growers, handlers, and processors of 
          California farm products.  MEB is responsible for the licensing 
          of dealers, buyers, and processors, and ensuring timely payment 
          for producers, as specified.  MEB is supported by license fees 
          paid by dealers, brokers, commission merchants, and processors.

          Within the last three years, the CDFA's MEB received formal 
          complaints from 214 winegrape growers against 81 wineries, 
          alleging $10.4 million in nonpayment for delivered grapes.  This 
          bill authorizes CDFA to impose sanctions three times the amount 
          of unpaid or underpaid license fees, as well as requires any 
          bond or irrevocable guarantee, placed in lieu of proof of 
          financial responsibility, to include both past and future debts 
          owed as a requirement of obtaining a processor's license.  

          According to the author, MEB lacks effective measures to ensure 
          that all wineries that should be licensed are licensed, and have 
          paid all license fees in full.  This bill addresses this problem 
          by increasing the penalties levied against licensees with any 
          unpaid fees within the last five years, as a means to deter fee 
          avoidance.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 








                                                                 AB 907
                                                                  Page  3

           
          California Association of Winegrape Growers (Sponsor)
          California Farm Bureau Federation

           Opposition 
           
          None on file

           
          Analysis Prepared by  :    Victor Francovich / AGRI. / (916) 
          319-2084