Meatingplace | GIPSA rules fester as USDA goes back to the drawing board

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By Tom Johnston on 9/28/2018

USDA intends to put on its spring 2019 regulatory agenda the unsettled matter of rules governing how meatpackers contract with farmers and ranchers, with a possible notice of proposed rulemaking coming sometime after that — and then another rulemaking process to follow that notice.

So said attorney Weili Shaw as he defended USDA’s Agricultural Marketing Service Fair Trade Practices Program, formerly known as the Grain Inspection, Packers and Stockyards Administration (GIPSA), on Wednesday in oral arguments for a lawsuit filed by the Organization for Competitive Markets (OCM) asking the 8th Circuit Court of Appeals in St. Louis to compel the agency to comply with Congress’s mandate in 2008 to enact the new rules within two years.

The new timeline Shaw outlined would likely add years to a process already a decade in the making.

“The agency has not given a public timeframe for when it expects to comply with [the Congressional mandate], but the agency has authorized me to state that it intends to place the proposed rule on its regulatory agenda for the coming spring … of 2019,” Shaw told the three-judge panel. “At that time, the agenda listing would indicate when the agency intends to take the next step in the regulatory process, which in this case would probably be a notice of proposed rulemaking.”

That’s if the appellate judges ultimately side with USDA in this case. Their decision likely will come in the next three to four months, legal experts have told Meatingplace.

OCM, on behalf of two poultry growers and a cattle rancher, filed the lawsuit late last year after USDA, under the new Trump administration, withdrew an interim final rule implemented at the end of the Obama administration in 2016. That interim final rule would have made it easier for farmers and ranchers to prevail in cases where they claim packers treat them unfairly in contracts.

What OCM alleges

OCM argues that USDA, in withdrawing the interim final rule, violated Congress’ mandate in the 2008 farm bill, which was to publish a regulation that laid out criteria around contracting practices by June 2010. Absent a reasonable explanation for doing so,  the agency’s actions are “arbitrary and capricious,” OCM contends.

Attorney Karianne Jones clarified for the appellate panel that on the first of two claims, her side is only asking for the court to compel USDA to act, not to mandate any particular action or to have the agency reinstate rules. However, on the second, arbitrary and capricious claim, they are asking the court to vacate both the recent withdrawal of the interim final rule in 2016 and a proposed final rule.

“There’s simply nothing in the public record nor before this court to suggest the agency is taking its congressional duty seriously,” Jones said. “The agency certainly has a significant amount of deference in determining how and when it can regulate, but it cannot substitute its own judgment for that of Congress.”

USDA’s view

But Shaw, speaking for USDA, argued that the agency has been trying to comply with the congressional mandate for years, noting that the agency did propose a rule in 2010 and issued an interim final rule in 2016. In between, through fiscal 2012 to 2015, the appropriations committee refused to fund the congressional mandate. Now, it’s on USDA’s spring 2019 agenda, he said.

The three-judge panel led by James B. Loken was tough in its questioning of both parties.

For the farmers and ranchers, the panel questioned whether it is appropriate for the judiciary to intervene in what appears to be a conflict between the executive and legislative branches. For USDA, they expressed skepticism over the agency’s failure to publish a rule, particularly when the agency has held the position that farmers and ranchers do not need to prove competitive injury — as a consequence, for example, of discrimination in prices — to win lawsuits against packers.

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