BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 264 (Dahle)
Version: June 8, 2015
Hearing Date: July 14, 2015
Fiscal: Yes
Urgency: No
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SUBJECT
Farm Products: Processors: Produce Dealers: Seeds
DESCRIPTION
This bill would expand the California Seed Law (CSL), which
authorizes the Secretary of Food and Agriculture (Secretary) to
develop methods and procedures for the conciliation, mediation,
or arbitration of disputes concerning label statements,
advertisements, or other disputes regarding the quality or
performance of seed, to also make those methods and procedures
applicable to financial disputes between seed dealers and
growers. This bill would provide, pursuant to the CSL, that
every producer of a flower, agricultural, or vegetable seed that
sells seed that is grown by him or her to any seed dealer under
contract, has a lien upon that product and upon all processed or
manufactured forms of that product for his or her labor, care,
and expense in growing and harvesting that product. This bill
would exclude flower, agricultural, or vegetable seeds from the
definition of farm products subject to regulation, licensing,
and enforcement by the Market Enforcement Branch of the
California Department of Food and Agriculture (CDFA).
BACKGROUND
The California Seed Law (CSL) was enacted in 1967 to ensure that
agricultural and vegetable seed is properly and accurately
identified when labeled and sold in the marketplace. Under the
CSL, the Secretary is empowered to make regulations concerning
seed quality, including germination standards for different
types of seeds. Seed quality is analyzed through the Seed
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Services program administered by CDFA. In general, the CSL is
locally enforced by county agricultural commissioners who enter
into cooperative agreements with the Secretary to maintain
specified statewide compliance levels on all seed sold in the
county. In return, county agricultural commissioners receive
annual subvention payments for expenses incurred in association
with approved enforcement activities. Commissioners and CDFA
are empowered to issue "stop-sale" orders to the owner or
custodian of any lot of agricultural or vegetable seed that
violates provisions of the CSL, as well as prevent the movement
or disposal of seeds subject to a "stop-sale" order, or declare
non-compliant seeds a nuisance and order them seized. (Food &
Agr. Code Sec. 52251 et seq.)
The CSL also empowers the Secretary to establish methods and
procedures for the conciliation, mediation, or arbitration of
disputes between labelers and any other person concerning
conformance with label statements, advertisements, or other
disputes regarding the quality or performance of seed. The CSL
requires such disputes to go through these methods and
procedures as a prerequisite to pursuing other dispute
resolution mechanisms, such as litigation in court. The CSL
also requires seed labels to provide the purchaser with notice
of the requirement to follow the conciliation, mediation, or
arbitration procedures, as well as of the consequences for
failing to follow those procedures.
Funding for carrying out programs under the CSL is supported
through industry seed assessments and registration fees, which
are administered by CDFA. Every labeler of agricultural or
vegetable seed offered for sale in California, or any person who
sells that seed in this state, must annually register as a seed
labeler and pay an annual fee. In addition, those who are
registered seed labelers must also pay an assessment based on
their annual dollar volume in sales.
This bill would expand the CSL's dispute resolution procedures
to include disputes concerning financial terms of seed sales or
the lack of payment by a seed dealer to a grower. This bill
would recognize that growers of seeds have a lien upon that
product and on processed or manufactured forms of that product
for the grower's labor, care, and expense in growing and
harvesting the seed. This bill would also remove flower,
agricultural, or vegetable seeds from the definition of farm
products subject to regulation, licensing, and enforcement under
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the Produce Dealers and Processors Act.
CHANGES TO EXISTING LAW
Existing federal law , the Federal Seed Act, makes it unlawful
for any person to transport or to deliver for transportation in
interstate commerce agricultural seeds with untruthful labels.
(7 U.S.C. Sec. 1551 et seq.)
Existing law , the California Seed Law, regulates the quality,
performance, and labeling of flower, agricultural, and vegetable
seeds sold or offered for sale in the state. (Food & Agr. Code
Sec. 52251 et seq.)
Existing law requires every labeler of agricultural or vegetable
seed offered for sale in this state, or any person who sells
that seed in this state, to annually register with the Secretary
to obtain authorization to sell agricultural or vegetable seed
before engaging in this activity, except as specified. (Food &
Agr. Code Sec. 52351.)
Existing law requires each container of agricultural seed that
is for sale or sold within this state for sowing purposes to
bear upon it specified information, including the commonly
accepted name of the kind, kind and variety, or kind and type of
each agricultural seed component in excess of 5 percent of the
whole, the lot number or other lot identification, the
percentage by weight of all weed seeds, and the name and
approximate number of each kind of restricted noxious weed seed
per pound. (Food & Agr. Code Sec. 52352.)
Existing law empowers the Secretary of Food and Agriculture to
establish methods and procedures for the conciliation,
mediation, or arbitration of disputes between labelers and any
persons concerning conformance with label statements,
advertisements, or other disputes regarding the quality or
performance of seed. These methods and procedures are a
mandatory prerequisite to pursuing other dispute resolution
mechanisms, including, but not limited to, litigation. (Food &
Agr. Code Sec. 52332.)
Existing law requires all seed, except as specified, to
conspicuously bear upon the label adequate notice of the
requirement to follow the conciliation, mediation, or
arbitration procedures governing disputes between labelers and
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another person, as authorized by the CSL, and the consequences
of failing to follow those procedures. (Food & Agr. Code Sec.
52456.)
Existing law , the Produce Dealers and Processors Act, separately
regulates the sale of farm products, including flower or
agricultural or vegetable seed purchased from a seed producer.
(Food & Agr. Code Sec. 56101 et seq.)
This bill would empower the Secretary, in addition to other
authorities granted in the CSL, the power to establish methods
and procedures for the conciliation, mediation, or arbitration
of disputes between labelers and other persons concerning
financial terms or the lack of payment by a dealer to a grower.
This bill would provide that if a proceeding for the
conciliation, mediation, or arbitration of a dispute between a
dealer and a grower is commenced for conformance with the
financial terms by a dealer to a grower, and the decision in the
proceeding is in favor of the grower, the decision may include a
provision requiring compensation to the grower for the estimated
value of the seed production services a grower provides to a
dealer.
This bill would provide that if a dealer fails to comply with
the financial obligations of a judgment rendered in a
conciliation, mediation, or arbitration proceeding between a
dealer and a grower following the conclusion of all appeals in
the proceeding, the Secretary may revoke the dealer's license
and prevent the dealer from renewing his or her license until
the time the financial obligation is fulfilled.
This bill would provide that every producer of a flower,
agricultural, or vegetable seed that sells seed that is grown by
him or her, when the seed was purchased or supplied by the
grower and not supplied by the dealer or an independent third
party who paid for the seed, to any seed dealer under contract,
express or implied, in addition to all other rights and remedies
that are provided for by law, has a lien upon that product and
upon all processed or manufactured forms of that product for his
or her labor, care, and expense in growing and harvesting that
product, as specified.
This bill would remove flower or agricultural or vegetable seed
purchased from a producer from the scope of "farm products"
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subject to regulation under the Produce Dealers and Processors
Act.
COMMENT
1.Stated need for the bill
The author writes:
The California Seed Law was enacted in 1967 to ensure that
agricultural and vegetable seed is properly and accurately
identified on the product label and that it meets quality
standards including germination, variety and species.
[Separately,] [e]xisting law governing [the California
Department of Food and Agriculture's (CDFA)] Market
Enforcement Branch [MEB] provides . . . regulatory and fee
authority over all "farm Products" which includes a broad
definition of agricultural products [such as agricultural and
vegetable seeds].
Over the past few years there has been ever increasing
confusion over which seed transactions are subject to MEB
oversight, requiring dealers to obtain licenses and regulated
by the act and which seeds are exempt. MEB staff have been
citing seed dealers and threatening them with fines unless
they register as produce dealers under the MEB.
AB 264 will harmonize all seed transactions and clarify they
are governed solely by the [California Seed Law] and
applicable federal law and not subject to the oversight and
fees of the [MEB]. Funding for this program is entirely
supported through industry seed assessments and registration
fees and is administered by CDFA.
The California Seed Association, sponsor, states:
Transactions of seed in California are governed by the federal
seed law and the California Seed [Law]. These are highly
regulated transactions that were developed to protect farmers
and retail purchasers of seed from unscrupulous seed sellers
and to standardize seed labels. Since seeds and the genes
they carry are difficult to discern from one another, the seed
labeling law provides clear guidance on what needs to be
stated on the label and how these products should be marketed
. . .
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This legislation will harmonize all seed transactions and
clarify that they are governed by the state and federal seed
acts and their dispute resolution process. By eliminating the
confusing language in the [Produce Dealers and Processors Act]
that exempts the vast majority of seed transactions from
governance under that program, this bill will subject all seed
transactions to one dispute resolution standard, one set of
regulations and one registration program.
2.Regulation under the Produce Dealers and Processors Act
In addition to the California Seed Law (CSL), seed transactions
in California are also currently regulated under the Produce
Dealers and Processors Act (Food & Agr. Code Sec. 56101 et
seq.). That act regulates "farm products," which includes
"every agricultural, horticultural, viticultural, and vegetable
product of the soil, poultry and poultry products, livestock
products and livestock not for immediate slaughter, bees and
apiary products, hay, dried beans, honey, and cut flowers."
(Food & Agr. Code Sec. 56109.) Like the CSL, the Produce
Dealers and Processors Act requires "any person engaged in the
business of buying, receiving on consignment, soliciting for
sale on commission, or negotiating the sale of farm products
from a licensee or producer for resale to be licensed." (Food &
Agr. Code Sec. 56181.) Unlike the CSL, the licensure provisions
of this act authorize CDFA, through its Market Enforcement
Branch (MEB), to investigate a person's criminal and financial
records prior to issuing a license, or to require a licensee to
post a surety bond or other "irrevocable guarantee of the
obligations of the licensee" under specified circumstances that
raise doubts about the financial solvency of a licensee, or for
those licensees who repeatedly violate the act's provisions.
(Food & Agr. Code Secs. 56133.5, 56183.5, 56252.2) The act also
contains dispute resolution procedures administered by CDFA that
parallel those contained in the CSL, and allows CDFA to take
disciplinary action against licensees who violate the act's
provisions. (Food & Agr. Code Secs. 56185, 56382.5.) Together,
these provisions help ensure that farm product merchants are
both financially solvent and reputable, and that marketplace
participants are able to seek redress when transaction
agreements are not honored.
This bill would remove seed merchants from the scope of the
Produce Dealers and Processors Act, and would instead regulate
these merchants solely under the CSL. While the CSL has
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historically focused on product standards and labeling, not
financial disputes and merchant fitness, this bill would expand
the CSL to address these new topics. This bill would empower
the Secretary, under the CSL, to create dispute resolution
processes for disputes concerning financial terms or the lack of
payment by a dealer to a grower, would authorize the Secretary
to require a seed dealer to compensate a grower for the value of
the seed production services a grower provides to a dealer in
certain situations, and would empower the Secretary to revoke a
dealer's license and prevent the dealer from renewing the
license so long as certain financial obligations of the dealer
remain unfulfilled. According to the author, these changes
"will help streamline seed transactions, while still protecting
buyers, sellers, and the public," noting that "the seed industry
is a highly regulated industry with both state and federal laws,
and that only a small number of transactions in California fall
under MEB rules" under current practice.
While this bill would not incorporate all of the Produce Dealers
and Processors Act's protections into the CSL, such as the
ability to investigate criminal histories and financial solvency
during the licensure process, or the ability to require dealers
to post surety bonds as a condition of licensure, this bill
would offer a new protection for growers in the form of a
"producer's lien." This bill would provide that every seed
producer that sells seed grown by him or her, except that grown
from seed provided by a dealer or third party, has a lien upon
that product and upon all processed or manufactured forms of
that product for his or her labor, care, and expense in growing
and harvesting that product. This new lien authority would
complement an existing lien authority producers of farm products
(including seeds) have against processors under Section 55631 of
the Food and Agricultural Code. Coupled with the ability for a
grower to recover compensation for the estimated value of the
seed production services a grower provides to a dealer under the
Secretary's dispute resolution procedures, including the value
of labor, care, and expense that went into growing and
harvesting a product regardless of the source of its seed, these
changes to the CSL help ensure that the interests of seed
growers are protected in the marketplace.
3.Amendments Taken in the Senate Agriculture Committee
The author accepted the following amendments when this bill was
heard in the Senate Agriculture Committee on June 30, 2015, with
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the understanding that they would be taken in this Committee.
These amendments make technical corrections to the bill and
enlarge the scope of relief available to growers under the
Secretary's dispute resolution procedures.
Author's Amendments :
On page 4, line 7, replace "dealer" with "dealer, including
but not limited to labor, care, and expense in growing and
harvesting that product"
On page 4, lines 12 and 13, replace "license" with
"registration"
Support : None Known
Opposition : None Known
HISTORY
Source : California Seed Association
Related Pending Legislation : None Known
Prior Legislation :
SB 1399 (Galgiani, Ch. 277, Stats. 2014) extended the operation
and repeal dates for provisions of the California Seed Law,
including an annual county subvention for enforcement activities
necessary to carry out these provisions, until July 1, 2019, and
January 1, 2020, respectively. This bill eliminated certain
provisions establishing a method of calculating apportionments
based on units of activity, and instead requires the amount of
the subvention designated to each participating county to be
established in a memorandum of understanding between the county
agricultural commissioner and the Secretary of the Department of
Food and Agriculture, in consultation with the Seed Advisory
Board.
AB 2240 (Ma, Ch. 382, Stats. 2010), among other things, raised
certain fees and deleted an outdated fee structure and reporting
provisions of the Department of Food and Agriculture's Market
Enforcement Branch. Specifically, this bill increased from $60
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to $100, the filing fee paid by a grower or licensee, with a
complaint not subject to certain federal laws, seeking
resolution of the complaint, increased from $35 to $55, the
license fee paid by agents of produce dealers and food
processors, and increased from $100 to $136, the fee paid by
produce dealers and food processors.
AB 3024 (Assembly Committee on Agriculture, Ch. 459, Stats.
2004) granted the Secretary of the Department of Food and
Agriculture the discretion to determine what enforcement
activities are to be conducted by county agricultural
commissioners and the California Department of Food and
Agriculture, regarding enforcement of the California Seed Law.
Prior Vote :
Senate Agriculture Committee (Ayes 3, Noes 0)
Assembly Floor (Ayes 80, Noes 0)
Assembly Appropriations Committee (Ayes 17, Noes 0)
Assembly Agriculture Committee (Ayes 10, Noes 0)
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