BILL ANALYSIS Ó
AB 907
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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
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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
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California Association of Winegrape Growers (Sponsor)
California Farm Bureau Federation
Opposition
None on file
Analysis Prepared by : Victor Francovich / AGRI. / (916)
319-2084