BILL ANALYSIS Ó
SENATE COMMITTEE ON AGRICULTURE
Senator Cathleen Galgiani, Chair
2015 - 2016 Regular
Bill No: AB 264 Hearing Date:
6/30/15
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|Author: |Dahle |
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|Version: |6/8/15 Amended |
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|Urgency: |No | Fiscal: |Yes |
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|Consultant:|Anne Megaro |
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Subject: Farm products: processors: produce dealers: seeds.
SUMMARY :
This bill would remove seeds from the definition of "farm
product" under market enforcement provisions regarding produce
dealers, thus removing seed dealers from these provisions;
retain one market enforcement provision in regards to the use of
product liens for seed owned and grown by a seed producer and
sold to a seed dealer under contract; and add to the California
Seed Law the authority for CDFA to establish methods and
procedures to settle disputes regarding financial terms and lack
of payment by a seed dealer to a seed grower.
BACKGROUND AND EXISTING
LAW :
The Market Enforcement Branch (MEB) of CDFA was established in
1928 to ensure confidence and stability in the agricultural
marketplace and to protect against unfair business practices
among growers, handlers, and processors of California farm
products.
MEB is responsible for the licensing of dealers, buyers, and
processors, conducting audits and investigations; ensuring
timely payment for producers and dealers of farm products;
settling transaction complaints; and enforcing disciplinary
action when appropriate.
MEB is supported by license fees paid by dealers, brokers,
commission merchants, and processors that range from $136 to
$400 annually, plus agent licensing fees ($55 per agent).
AB 264 (Dahle) Page 2 of ?
The California Seed Law (CSL) was enacted in 1967 to ensure that
agricultural and vegetable seed is properly and accurately
identified on the product label. Seed is analyzed through the
Seed Services program administered by CDFA. The CSL is locally
enforced by county agricultural commissioners, who enter into
cooperative agreements with the secretary of CDFA and agree to
maintain a statewide compliance level on all seed sold in the
county. Funding for this program is entirely supported through
industry seed assessments and registration fees and is
administered by CDFA. (Food and Agriculture Code (FAC) §52251,
et seq.).
Existing law:
1) Authorizes the secretary of CDFA, through the MEB, to
enforce produce dealer marketing laws through licensing,
fees, bonds, liens, audits, investigations, violations, and
penalties (Food and Agricultural Code § 56101 et seq.).
2) Defines "farm product" to mean every agricultural,
horticultural, viticultural, and vegetable product of the
soil, poultry and poultry products, livestock products,
bees and apiary products, hay, dried beans, honey, and cut
flowers. It excludes timber, milk, aquaculture, cattle,
and flower or agricultural or vegetable seed purchased from
someone other than a producer.
3) Defines "dealer" to mean any person who obtains, buys,
or agrees to buy any farm product from a producer at a
designated price for the purpose of resale.
4) Requires that all produce dealers apply for and obtain
licenses from CDFA. The application includes business
information, type of farm products handled, an
authorization for CDFA to access and obtain financial
information, a notice that CDFA may obtain criminal
records, and other requirements as specified.
5) Requires up to four years' financial documentation as
part of the license application. If the secretary is not
satisfied that an applicant/licensee is financially
responsible (able to pay in full for future farm product
purchases), the applicant/licensee may be required to
maintain a surety bond that is a minimum of $20,000 or 20%
of the annual dollar volume of business.
AB 264 (Dahle) Page 3 of ?
6) Authorizes CDFA to deny, condition, suspend, or revoke a
dealer's license under specified conditions.
7) Authorizes the secretary of CDFA to regulate seed sold
in California to ensure that agricultural and vegetable
seed is properly and accurately identified on the product
label (Food and Agricultural Code § 52251 et seq.).
8) Defines "labeler" to mean any person whose name and
address appears on a seed label for sale and distribution
in California and requires labelers to annually register
with CDFA, with exceptions.
9) Establishes the Seed Advisory Board to make
recommendations to the secretary of CDFA in regards to seed
law and regulations, enforcement, seed laboratory
diagnostics and annual budgets. Advisory board members are
appointed by the secretary and consist of registered seed
labelers representing seed production, conditioning,
marketing and utilization; persons who receive or possess
seed for sale in California; and two members of the public.
10) Authorizes CDFA to establish methods and procedures for
the conciliation, mediation, or arbitration of disputes
between labelers and any person concerning label
statements, advertisements, or disputes regarding seed
quality or performance.
PROPOSED
LAW :
This bill:
1) Expands CDFA regulatory authority within the CSL to
establish methods and procedures to settle disputes
regarding financial terms and lack of payment by a seed
dealer to a seed grower.
2) Authorizes CDFA, should the dispute end in favor of the
grower, to require compensation to the grower for the
estimated value of the seed production services a grower
provides to a dealer. If a dealer fails to comply, CDFA
may revoke the dealer's license and prevent the dealer from
renewing the license until the debt has been paid.
AB 264 (Dahle) Page 4 of ?
3) Excludes flower, agricultural, and vegetable seed from
the definition of "farm product" under market enforcement
provisions regarding produce dealers, but not processors.
4) Authorizes the use of product liens for seed grown by a
seed producer and sold to a dealer under contract, when
that seed was purchased or supplied by the grower and not a
separate entity. The lien includes the costs of labor,
care, and expense in growing and harvesting the seed and
shall be to the extent of the agreed price for that seed.
ARGUMENTS IN SUPPORT:
According to the author, "AB 264 will harmonize all seed
transactions and clarify [that] they are governed solely by the
Seed Labeling Act and federal law and are not subject to the
oversight and fees of the MEB. The law provides seed growers
substantially the same protections as they have under the Market
Enforcement Branch as well as additional recovery options for
transactions that [are] in dispute. Over the past five years,
there have been zero seed transactions disputed in the [M]arket
Enforcement Branch, therefore, the double regulation is
unjustified and AB 264 provides grower protections."
COMMENTS :
Seed Law vs. Market Enforcement. The California Seed Law (CSL)
was designed to ensure that agricultural and vegetable seed is
properly and accurately identified on the product label. The
CSL was not designed to handle financial disputes and does not
have historical expertise in this area. The Market Enforcement
Branch (MEB), however, is designed to handle financial disputes
for nearly every agricultural product in the state with the
exception of products that are highly regulated by other state
and federal laws, such as dairy and beef cattle.
This bill would add the use of product liens for seed sold
between growers and dealers within the MEB but remove all other
provisions, such as requirements that dealers provide financial
information, surety bonds, and other financial safeguards in
order to be licensed. These proactive measures help to ensure
that producers are conducting business with financially stable
dealers. This bill would authorize CDFA, through the CSL, to
handle disputes regarding financial terms or lack of payment;
however, the additional protections previously described within
AB 264 (Dahle) Page 5 of ?
the MEB are not carried over.
The committee may wish to consider if additional provisions of
the MEB should be retained or transferred to the CSL and if the
current CSL arbitration process is fully capable of addressing
financial disputes to the extent that is currently provided by
the MEB.
New protection for growers. This bill provides new protections
for seed growers by authorizing the use of product liens for
seed grown by a seed producer and sold to a dealer under
contract, as specified. The lien includes the costs of labor,
care, and expense in growing and harvesting the seed and shall
be to the extent of the agreed price for that seed.
Producer complaints. There have been no verified complaints
from seed producers to the Market Enforcement Branch within the
last five years (2010-2014). The author and the California Seed
Association argue that this is one reason as to why this bill is
necessary.
Suggested amendments. The committee may wish to consider the
following amendments:
1) On page 4, line 7, replace "dealer" with "dealer,
including but not limited to labor, care, and expense in
growing and harvesting that product"
2) On page 4, lines 12 and 13, replace "license" with
"registration"
Double-referral. The Senate Rules Committee has double referred
this bill to the Senate Committee on Judiciary as the second
committee of referral. Therefore, if this measure is approved
by this committee, the motion should include an action to
re-refer the bill to the Senate Committee on Judiciary.
RELATED
LEGISLATION :
SB 1399 (Galgiani), Chapter 277, Statutes of 2014. Extends to
January 1, 2020, the operation of provisions of the California
Seed Law, including a subvention program, and gives greater
discretion to CDFA to determine the formula used to reimburse
county agricultural commissioners for their work enforcing the
seed law.
AB 264 (Dahle) Page 6 of ?
AB 2240 (Ma), Chapter 382, Statutes of 2010. Increases fees and
fee structures to cover minimum administrative costs.
Authorizes CDFA to appoint an advisory committee to provide
guidance in establishing fees.
AB 1061 (Assembly Committee on Agriculture), Chapter 613,
Statutes of 2005. Creates a procedure for complaints by growers
or licensed produce dealers where the claimed damages do not
exceed $30,000.
SB 1198 (Costa), Chapter 696, Statutes of 1997. Amends the
Market Enforcement Code to conform to similar federal programs
where possible and changes fee structure, license application
process, and method of filing and processing claims with the
intent to reduce fees to businesses and streamline the program.
PRIOR
ACTIONS :
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| |80 - 0 |
|Assembly Floor: | |
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|Assembly Appropriations Committee: |17 - 0 |
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|Assembly Agriculture Committee: |10 - 0 |
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SUPPORT :
California Seed Association (Sponsor)
OPPOSITION :
None received
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