Source: MEATINGPLACE, 11/7/11

The U.S. Department of Agriculture is moving ahead with a stripped-down version of the controversial “GIPSA Rule,” leaving out major provisions strongly opposed by meatpackers but retaining new rules on poultry production and marketing. USDA sent the modified rule from the Grain Inspection, Packers & Stockyards Administration (GIPSA) late last week to the White House Office of Management and Budget (OMB) for review.

While details of the rule were not made public, the outline of the compromise was reportedly laid out in a letter to industry representatives from Lilia McFarland, a special assistant in the USDA Office of Congressional Relations. The rule moving forward contains provisions related to poultry production and a section on sample contracts for poultry and swine, the letter said. The rule apparently omits for now restrictions on “undue or unreasonable preference or advantage” in sales of livestock.

According to a bare-bones posting on the OMB’s website for regulatory affairs on Friday, USDA submitted a final rule on “swine and poultry sample contracts, suspension of delivery of birds, additional capital investment criteria, breach of contract, and arbitration.” Regulations on all these matters were in the proposed rule published in June 2010, and it could not be determined what changes were made in the final rule.

USDA also submitted what was described as an “interim final rule” on “tournament systems and compensation,” which was apparently pulled out of the proposed rule. “Tournament” refers to the system of compensation used by many integrated poultry companies in which producers are paid according to their ranking by certain criteria. As an “interim” rule, it will be open to further public comment.

Parts have been omitted
According to McFarland’s letter and OMB’s posting, several restrictions on livestock marketing included in the proposed rule were omitted from the final version. Apparently gone is the ban on packer-to-packer sale of livestock, restrictions on price premiums based on standards for product quality, and limits on contract terms based on the number of animals sold.

The biggest turnabout for the agency, however, may be the fact that it is apparently giving up its attempt to define “competitive injury,” an important legal concept, as “conduct (that) distorts competition in the market channel or marketplace.” This definition was included in the section that is apparently omitted from the final rule.

The meatpacking and poultry processing industries were united in condemning the USDA’s attempt to define “competitive injury” much more broadly than most courts of law have done, according to comments that industry members and associations filed with the government in response to the proposed rule.
Meat processors argued that the restrictions in the draft rule would destroy the system of marketing agreements and alliances that has developed in recent years to encourage cattle owners to raise animals that meet certain requirements for the quality of meat produced. McFarland said provisions omitted from the final rule remain under consideration, however.

Critics speak out
Advocates for the tight restrictions on packers in the proposed rule were quick to condemn the Obama Administration’s apparent backtracking in the final rule.

“It is clear that the administration has caved to meat industry pressure to abandon independent hog and cattle producers to unfair treatment at the hands of the large meatpackers,” said a statement by Wenonah Hauter, executive director of Food & Water Watch.

“The portions of the original rule that have been included in the final rule will provide poultry and pork producers with a degree of protection from abuse by integrators and processors,” said Roger Johnson, president of the National Farmers Union. “USDA did not yet forward to OMB the most critical parts of the rule, which include a clearer definition of USDA’s interpretation of competitive injury. The competitive injury definitions address the fundamental problems that have plagued the livestock and poultry industries. It is time for USDA to act in implementing the GIPSA rule.”

The OMB listing showed that neither of USDA’s revised proposals is considered “economically significant,” which would be a rule with a continuing impact of $100 million per year. That threshold triggers a more detailed level of analysis by the government, and holding the rule under the threshold makes it easier to finalize. Both the American Meat Institute (AMI) and the National Chicken Council (NCC) submitted studies pegging the cost of the proposed rule at more than $100 million per year.

For more stories, go to www.meatingplace.com.