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Tuesday, April 2, 2013

USDA’s “GIPSA Rule” on Livestock and Poultry Marketing Practices

Joel L. Greene
Analyst in Agricultural Policy

The 2008 farm bill (P.L. 110-246) included new provisions that amended the P&S Act to give poultry and swine growers the right to cancel contracts, to require that poultry processors clearly disclose to growers additional required capital investments, to set the choice of law and venue in contract disputes, and to give poultry and swine growers the right to decline an arbitration clause that requires arbitration to resolve contract disputes. The farm bill required USDA to propose rules to implement these provisions.

On June 22, 2010, the U.S. Department of Agriculture’s (USDA’s) Grain Inspection, Packers and Stockyards Administration (GIPSA) published a proposed rule to implement regulations on livestock and poultry marketing practices as mandated by the 2008 farm bill. The proposed rule, commonly referred to as the “GIPSA rule,” added new regulations to clarify conduct that violates the Packers and Stockyards Act of 1921 (P&S Act). The P&S Act regulations are used by USDA to ensure fair competition in livestock and poultry markets.

In what some saw as a major change from current practice, GIPSA proposed that a violation of the P&S Act does not require a finding of “harm or likely harm to competition.” The proposed rule set criteria for “unfair, discriminatory, and deceptive practices” and “undue or unreasonable preference or advantages” that violate the P&S Act. The proposed rule also included arbitration provisions to ensure that contract growers have a meaningful opportunity to participate in arbitration and the right to decline arbitration.

According to proponents of the proposed rule implementing the farm bill provisions, the rule brought fairness to contracts and reshaped interactions between producers and large meat packers and poultry processors. Opponents argued that the proposed rule went far beyond the intent of Congress in the 2008 farm bill, and that the rule altered business practices to the detriment of producers, consumers, and the industries.

USDA issued a final rule on December 9, 2011, which went into effect on February 7, 2012. The final rule, a significant modification of the proposed rule, included four provisions that address, respectively, suspension of the delivery of birds, additional capital investments, remedy of breach of contract, and arbitration.

Before USDA finalized the GIPSA rule in December, Congress passed in November 2011 the FY2012 appropriations bill (P.L. 112-55), which included Section 721 prohibiting USDA from finalizing the most contentious parts of the rule. The language from the FY2012 appropriations bill was continued into FY2013 as part of the temporary continuing resolution (P.L. 112-175), which provided funding through March 27, 2013, and was continued for the rest of the fiscal year by the year-long continuing resolution (P.L. 113-6). In addition, three provisions finalized by USDA in December 2011 were rescinded.

Repeal of the GIPSA rule may also become part of the omnibus farm bill debate in the 113
th Congress. In the 112th Congress, the House-reported farm bill, H.R. 6083, included a provision—Section 12105—that repealed the final GIPSA rule and prohibited USDA from implementing a similar rule. .

Date of Report: March 29, 2013
Number of Pages: 40
Order Number: R41673
Price: $29.95

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