GIPSA Rule Revived

GIPSA Rule Revived

The U.S. Department of Agriculture (USDA) has said that it would finalize a livestock and poultry marketing rule that had originally been proposed by its Grain Inspection, Packers and Stockyards Administration (GIPSA) in June 2010 and commonly referred to as the "GIPSA rule." In a speech to the National Farmers Union (NFU) on March 7, 2016, and as reported by Agri-Pulse, Secretary of Agriculture Tom Vilsack indicated that a rule would be proposed in late spring or early summer and finalized before the end of the Obama Administration. The GIPSA rule was proposed to implement provisions in the 2008 farm bill (P.L. 110-246) and was intended to ensure fair competition in livestock and poultry markets by clarifying what constituted a violation of the Packers and Stockyards Act (P&S Act; 7 U.S.C. §181 et seq.).

The rule is controversial among livestock and poultry producers, industry associations, and advocacy groups. For four years (FY2012-FY2015), policy riders in appropriations acts prohibited USDA from finalizing most of the rule's provisions. However, Congress did not include a GIPSA rider in the FY2016 appropriations act (P.L. 114-113).

On March 9, 2016, Secretary Vilsack testified to the Senate Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies that USDA was reviewing the GIPSA rule to determine which parts were still relevant. Vilsack indicated that a rule, either final or proposed, could be sent to OMB in the early spring and then be ready for public comment and review in the late summer to early fall. At an oversight hearing on March 18, 2016, the House Agriculture Committee sought clarity on USDA's intentions and timing for re-proposing the GIPSA rule. USDA Under Secretary for Marketing and Regulatory Programs Ed Avalos testified that USDA had recently begun internal discussions of the rule and was at a preliminary stage and that USDA would review the many comments received during initial rulemaking and make balanced and appropriate modifications. At the hearing, USDA could not confirm whether it would issue a new proposed rule for public comment or a final rule based on previously gathered information.

The spring 2016 edition of the Office of Information and Regulatory Affairs' Unified Agenda includes two proposed rules from USDA that were addressed in the proposed 2010 GIPSA rule. The first proposed rule is on the tournament payment system. Under the tournament system, poultry processors rank a contract poultry grower's flock quality against other growers' flocks, and, depending on performance, a discount or a premium may be applied to the base contract pay for each grower. The proposed rule on the tournament system would establish specific requirements that poultry processors would have to meet when using the tournament system. The second proposed rule addresses criteria that USDA could considere to determine a violation of undue preference and advantage—that is, whether contract growers are being treated fairly under the P&S Act. USDA has stated that it is re-proposing the rule to meet the statutory requirements in Section 11006 of the 2008 farm bill.

In addition, the regulatory agenda includes a rule on scope and unfair practices that is in the final rulemaking stage. This rule would provide USDA's interpretation of the P&S Act with respect to unfair practices that may cause harm to an individual versus likelihood of harm to competition.

In response to USDA's push to complete the GIPSA rule, Section 767 of the House-reported FY2017 agriculture appropriations bill (H.R. 5054) would restore prohibitions on USDA from finalizing parts of the GIPSA rule. During the April 19, 2016, House Appropriations Committee markup of the bill, Representative Andy Harris offered an amendment with the language from previous appropriations acts that prohibited USDA from finalizing most of the GIPSA rule. The amendment was adopted on a 26-24 roll call vote.

The Senate-reported FY2017 agriculture appropriations bill (S. 2956; reported May 19, 2016) does not contain any GIPSA-related provisions.

Any new proposed rule or final rule will likely be contentious. Since the FY2016 appropriations act did not include a GIPSA rider, poultry grower advocates, such as the Rural Advancement Foundation International (RAFI), have urged USDA to finalize the GIPSA rule. In a press release, the NFU supported USDA finalizing a GIPSA rule that would "help level the playing field" for contract growers. In addition, eight Democratic Senators and House Members from the appropriations committees sent a letter to USDA supporting its move to finalize the GIPSA rule.

Some of the largest organizations representing the livestock and poultry industries (National Cattlemen's Beef Association, National Pork Producers Council, and National Turkey Federation) strongly oppose USDA reviving GIPSA rulemaking. In testimony before the House Agriculture Committee's Subcommittee on Livestock and Foreign Trade on May 24, 2016, representatives from the cattle, pork, and turkey sectors warned that reviving the GIPSA rule would likely raise costs, decrease productivity, and threaten more lawsuits for their respective industries. Similar testimony was provided to the Senate Agriculture Committee on May 26, 2016.

The National Chicken Council (NCC), which represents the broiler industry, also opposes the GIPSA rule. In response to USDA's move, in April 2016, NCC released survey results from 20 poultry companies that emphasized the benefits of the contract growing system between poultry companies and poultry growers. According to USDA, the broiler industry is highly integrated, and almost all broiler production is done under contract. RAFI criticized the survey results as a one-sided presentation of company views that do not include the views from poultry contract growers.

Similar to the situation with the FY2017 appropriations bills, the FY2015 House-reported bill (H.R. 4800) included a GIPSA rider, but the Senate-reported bill (S. 2389) did not. However, the GIPSA rider was included in the FY2015 omnibus appropriations act (P.L. 113-235). For the pending FY2017 appropriation, the GIPSA rider could receive consideration, for or against, on the House and Senate floors or could be part of the negotiations of a final appropriations bill. If a continuing resolution is used to start FY2017, FY2016 policy that does not include a GIPSA rider would continue, and USDA may have additional time to implement a new rule.

See CRS Report R41673, USDA's "GIPSA Rule" on Livestock and Poultry Marketing Practices, for complete background and details on the rule.