Cash Market Moves

GIPSA Proposes Changes to USGSA Regulations

Mary Kennedy
By  Mary Kennedy , DTN Basis Analyst
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GIPSA's Federal Grain Inspection Service (FGIS) is responsible for inspection and weighing procedures for grain in domestic and export trade. The KOM, a 465-foot bulk "saltie" (oceangoing ship), enters the Port of Duluth ship canal heading to an export elevator to load durum wheat bound for Italy. The grain will be officially inspected by FGIS before it leaves port. (Photo Courtesy of Duluth Shipping News)

USDA's Grain Inspection, Packers and Stockyards Administration (GIPSA) is proposing to revise existing regulations and add several new regulations under the United States Grain Standards Act (USGSA) in order to comply with amendments to the USGSA made by the Agriculture Reauthorizations Act of 2015. The USGSA was signed into law by President Barack Obama on Sept. 30, 2015.

Specifically, the rulemaking proposes to eliminate mandatory barge weighing, remove the discretion for emergency waivers of inspection and weighing, revise GIPSA's fee structure, revise exceptions to official agency geographic boundaries, extend the length of licenses and designations, and impose new requirements for delegated states.

To see the entire proposal, visit: https://goo.gl/…

On April 25, The National Grain and Feed Association (NGFA) and the North American Export Grain Association (NAEGA) sent joint comments to GIPSA Deputy Administrator Randall Jones stating that they generally support the proposed changes and offered several recommendations to clarify the intent of the statutory revisions.

The NGFA comprises more than 1,050 member companies that operate more than 7,000 facilities and handle more than 70% of the U.S. grain and oilseed crop. The NAEGA is a not-for-profit trade association that consists of private and publicly owned companies and farmer-owned cooperatives that are involved in and provide services to the bulk grain and oilseed exporting industry.

In their joint statement, NGFA and NAEGA said several of the amendments made to the USGSA by Congress under the Reauthorization Act are the most significant changes to the statute in nearly 20 years.

"The changes and how they are implemented can have a positive impact on the global competitiveness of U.S. grains and oilseeds whose exports are valued at more than $50 billion annually," the groups stated. "These key changes include calculation and adjustment of fees to maintain a three- to six-month operating reserve for inspection and weighing services, as well as new definitions and clarification of provisions in existing requirements, and the addition of a new section to the statue that would require delegated states to notify GIPSA of any intention to temporarily discontinue service."

The discontinuation of service amendment is being put in place in hopes of avoiding what happened in July 2014 when the Federal Grain Inspection Service (FGIS) suddenly refused to send inspectors into United Grain Corp.'s Vancouver, Washington, export facility due to "safety concerns" over crossing picket lines. A labor dispute between UGC and the Longshore and Warehouse Union had been underway for nearly 17 months and tensions were running high. Without an FGIS certificate available, UGC was pretty much stopped in their tracks as far as exporting grain, and had they been given a 72-hour notice, it may have allowed them time to make other arrangements.

The USGSA mandates that most U.S. export grain be officially inspected and weighed whenever official standards and procedures are utilized, with such activities required to be performed and supervised by FGIS. According to the NGFA, "In certain cases, FGIS can choose to delegate its inspection authority to a state agency to perform the service, or to waive the official inspection requirement in response to a contractual agreement between the buyer and seller, the act requires that FGIS personnel provide official inspection service and official weighing or supervision of weighing service at export locations."

GIPSA's proposal also "requires delegated states to notify GIPSA of any intent to temporarily discontinue official inspection or weighing services at least 72 hours in advance, except in the case of a major disaster."

The NGFA and NAEGA, along with their members, would like GIPSA to add language to provide that "export port locations are notified if official service is to be discontinued 72 hours in advance."

In their proposal, GIPSA also stated: "The Reauthorization Act amended the USGSA to require GIPSA to waive the mandatory official inspection and weighing of export grain in emergency or other circumstances that would not impair the objectives of this Act whenever the parties to a contract for such shipment mutually agree to the waiver and documentation of such agreement is provided to the Secretary prior to shipment. This would allow grain shipments to continue in the event that the official system is not able to fully perform all of its duties."

In their letter to GIPSA, the NGFA and NAEGA stated that they opposed GIPSA's proposed definition of the term "emergency" as including "a situation outside the control of the service (i.e., GIPSA) or a delegated state that prevents the prompt issuance of official certificates..." The groups recommended an "emergency" instead be defined as any situation that prevents prompt issuance of certificates, in accordance with Sec. 800.160(c)."

CHANGES IN FEES AND REACTION BY INDUSTRY

Official inspection fees can be costly for a shipper, but they are necessary for a mill or exporter to accept grain. Years back, shippers could submit grades to their State Grain Inspection Agency, but that practice has ceased partially due to grain not representing the grades at time of shipment when they arrive to be milled or exported. It's basically good protection for both the shipper and end user to have officially probed grades.

The USGSA Act requires two actions be taken by the secretary of agriculture with respect to fees for official inspection and weighing. One action is that all fees related to official inspection and weighing services must be adjusted at least annually to maintain a three- to six-month operating reserve. The other is that the export tonnage fees for official inspection and weighing must be based on the rolling five-year average of export tonnage volumes.

In its proposed rule, FGIS would implement the two fee actions on a calendar year basis beginning Jan. 1, 2017. In addition, FGIS would adjust Schedule A and Schedule B fees periodically, taking into account other Schedule A fee adjustments that may have occurred to maintain a three- to six-month reserve. Here is a link to the FGIS fee schedule: https://goo.gl/…

NGFA and NAEGA strongly recommended that the determination of whether Schedule A fees should be adjusted should be based on the midpoint of the three- to six-month range, which is 4.5 months. "Thus, the targeted reserve would be 4.5 months of average operating expense based on the previous fiscal year's operating expense. All Schedule A fees would decrease or increase 2% for each $1 million that the reserve is more or less than 4.5 months of operating expense. NGFA and NAEGA further recommend that there be no cap on the amount that Schedule A fees can change. Based on projections, NGFA and NAEGA estimate that its recommended approach would result in a fee reduction of 10% or more for new Schedule A fees implemented effective Jan. 1, 2017."

To read the NGFA and NAEGA's full letter to GIPSA with more information on the recommendations on proposals and a more in-depth look into FGIS financial information as it relates to fees, visit: https://goo.gl/…

The NGFA and NAEGA recommendations could help reduce inspection costs, which would benefit farmers and end users. Inspection fees are costly and, in the end, are passed down to the farmer in the price he receives for his grain. Any savings can help not only a farmer's bottom line, but everyone in the chain of transporting grain to its final home.

Mary Kennedy can be reached at mary.kennedy@dtn.com

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(AG/CZ)