Written by: Evin Bachelor, Law Fellow, and Ellen Essman, Sr. Research Associate
The end of the year is here, and there is a flurry of news coming across our desks. We wish you a prosperous 2019 and look forward to keeping you up to date on what is happening in the agricultural law world.
Here’s our latest gathering of agricultural law news that you may want to know:
GMO labeling rule released by USDA. The Agricultural Marketing Service posted the National Bioengineered Food Disclosure Standard rule on the Federal Register, located here, on Friday, December 21, 2018. According to the rule page, the rule “establishes the new national mandatory bioengineered (BE) food disclosure standard (NDFDS or Standard).” The standards require foods labeled for retail sale to disclose certain information either through a new symbol, inclusion of a QR code that provides a link to a website, including a phone number to text for more information, or including the term “bioengineered” on the label. The rule defines bioengineered food as food that contains genetic material modified through changing DNA or other modifications that could not be done through conventional breeding or otherwise found in nature. Exemptions for foods served in restaurants and very small food manufacturers with gross receipts of less than $2.5 million limit the rule’s applicability. The rule will take effect on February 19, 2019, with compliance becoming mandatory by January 1, 2022. For more information, or to see the new label, visit the USDA Agricultural Marketing Service’s BE Disclosure webpage here.
Farm Bill provides good news for dairy farmers. Under the 2018 Farm Bill Conference Report, available here, the Margin Protection Program (MPP) was renamed the Dairy Margin Coverage (DMC). The name was not the only change made to the program. Per the USDA, the program “is a voluntary risk management program… offer[ing] protection to dairy producers when the difference between the all milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer.” The Farm Bill lowers the premium rates for risk coverage. Furthermore, the bill adds coverage levels of $8.50, $9.00 and $9.50 for a dairy operation’s “first five million pounds of participating production.” If a farmer covers his first five million pounds at $8.50, $9.00, or $9.50, he then has the option to cover anything in excess of five million pounds at coverage levels of $4.00-$8.00 (in fifty cent increments). Another notable change—the Farm Bill allows farmers who maintain “their coverage decisions, including coverage level and covered production, through 2023,” to “receive a 25% discount on their premiums each year.” The DMC language can be found in section 1401 of the Farm Bill.
Missouri farmer pleads guilty to wire fraud for falsely marketing grains as organic. Federal prosecutors charged Mr. Randy Constant with wire fraud, alleging that since 2008 he and his associates improperly marketed millions of dollars worth of grain as certified organic while knowing that it was not. Mr. Constant operated certified organic farms as part of his larger operation, but “at least 90% of the grain being sold was actually either entirely non-organic or a mix,” according to the information filed by the federal prosecutors. Federal prosecutors sought full restitution of approximately $128 million for victims/purchasers, in addition to the forfeiture of 70 pieces of equipment, ranging from pickup trucks to combines and semi-trucks to GPS yield mapping systems.
On December 20, 2018, Mr. Constant entered a plea of guilty. The magistrate filed a report indicating that Mr. Constant understood what his plea meant, and that the one count of wire fraud is punishable by (1) a maximum of 20 years in prison, (2) a maximum of 3 years of supervised release following prison, and (3) a maximum fine of $250,000. Further, Mr. Constant will be barred from receiving USDA benefits, including those from USDA Farm Service Agency, Agricultural Marketing Service National Organic Program, and Federal Crop Insurance Program. Additionally, Mr. Constant could face restitution to all victims/purchasers of approximately $128 million. For more information, search for United States v. Constant, 6:18-cr-02034-CJW-MAR (N.D. Iowa 2018).
Japan set to lower tariffs on agricultural commodities from TPP members and the EU. The United States exports a significant share of the beef, pork, wheat, and other farm products imported by Japan. However, two major trade agreements set to take effect early in 2019 will result in reduced tariffs for imports into Japan from a number of other countries. The United States withdrew from the Trans-Pacific Partnership negotiations, but 11 other nations continued to pursue the agreement, which is set to begin taking effect at the start of 2019. On February 1st, the Japan-EU Economic Partnership Agreement takes effect, and will result in lowered tariffs for a number of agricultural products, especially for beef. Under the new agreements, chilled or frozen beef from EU and TPP exporters will face a 26.6% tariff, while tariffs on American beef will remain at 38.5%. Prepared pork from EU and TPP exporters will face a 13.3% tariff, while tariffs on American pork will remain at 20%. For more information on Japan’s participation in the Trans-Pacific Partnership, visit the Ministry of Foreign Affairs of Japan’s TPP webpage here. For more information on Japan’s agreement with the European Union, visit the Ministry of Foreign Affairs of Japan’s EU agreement webpage here.
Ohio Case Law Update
- Signing a mortgage is enough to bind signatory despite not being named in the mortgage if the signature demonstrates an intent to be bound by the mortgage. The Bankruptcy Appellate Panel for the United States Sixth Circuit Court of Appeals asked the Ohio Supreme Court to clarify “whether a mortgage is invalid and unenforceable against the interest of a person who has initialed, signed, and acknowledged the mortgage agreement but who is not identified by name in the body of the agreement.” In this case, Vodrick and Marcy Perry filed for bankruptcy. At issue was a piece of property subject to a promissory note and mortgage. The bank held the promissory note, which was signed and initialed by Mr. Perry only, while the mortgage was signed by both Mr. and Mrs. Perry. The Ohio Supreme Court held that “the failure to identify a signatory by name in the body of a mortgage agreement does not render the agreement unenforceable as a matter of law against that signatory.” The focus is on the signor’s intent to be bound by the mortgage, even if the mortgage itself does not mention the signor by name. The case is cited as Bank of New York Mellon v. Rhiel, Slip Opinion No. 2018-Ohio-5087, and the Ohio Supreme Court’s opinion is available here.
- Specific reference in a deed to a mineral interest preserves the interest despite Marketable Title Act when the reference includes the type of interest created and to whom the interest was granted. Generally, Ohio’s Marketable Title Act allows a landowner with an unbroken chain of title for forty years or more to take an interest in the land free and clear of other claims that arose before the “root of title.” However, there is an exception where prior interests will still apply if there is a specific identification of a recorded title transaction, rather than a general reference to an interest. In this case, Nick and Flora Kuhn conveyed a 60-acre tract of land in 1915, but retained an interest in royalties from any oil and gas extracted from the parcel, specifically naming Nick and Flora Kuhn and their heirs and assigns. Then in 1969, the Blackstone family purchased the 60-acre parcel, and received a deed that included language “[e]xcepting the one-half interest in oil and gas royalty previously excepted by Nick Kuhn, their [sic] heirs and assigns in the above described sixty acres.” The Blackstone family sought to quiet title and have the Kuhn heirs’ interest extinguished or deemed abandoned in 2012. The Ohio Supreme Court interpreted the language in the deed as sufficient to survive Ohio’s Marketable Title Act, which preserves the Kuhn heirs’ oil and gas interest that dates back to 1915. The case is cited as Blackstone v. Moore, Slip Opinion No. 2018-Ohio-4959, and the Ohio Supreme Court’s opinion is available here.
Written by Ellen Essman, Law Fellow, OSU Agricultural & Resource Law Program
Last summer, federal legislation requiring a National Bioengineered Food Disclosure Standard (“the Standard”) was signed into law by President Obama. The law requires the establishment of standard for labeling foods that contain bioengineered substances such as GMOs (genetically modified organisms). It was meant to preempt state GMO labeling laws and instead create a standard that would be applicable nationwide. This summer, the United States Department of Agriculture’s Agricultural Marketing Service (AMS) is moving a step closer toward implementing the law. To this end, AMS released a list on June 28, 2017 of thirty questions for parties interested in the Standard, such as food producers, retailers and manufacturers. The answers will be taken into consideration when USDA begins writing its agency rules to fully implement the Bioengineered Food Disclosure Standard.
Many of the questions concern how certain terms, such as “very small” and “small” packages, “very small” and “small” food manufacturers should be defined under the law. Similarly, the agency asks what terms should be considered synonymous with “bioengineering.” AMS also presents technical questions, such as what kinds of breeding techniques should be thought of as conventional, what genetic modifications should be seen as natural, and what amounts of bioengineered substance in a food should require a disclosure and a number of questions relating to how bioengineering should be disclosed on food products and their packages. Finally, AMS asks quite a few questions involving compliance with the Standard, such as what types of records should be maintained by regulated parties and how AMS will go about investigating noncompliance.
The full list of questions, including an explanation of each, is available here. Producers, retailers, manufacturers, biotechnology companies, consumers and others interested in the rule are encouraged to submit their answers and feedback to GMOlabeling@ams.usda.gov by July 17, 2017.
For more information on the National Bioengineered Food Disclosure Standard legislation, see our previous blog post from July 2016 here.
After several years of debate over voluntary versus mandatory GMO (genetically modified organism) labeling, Congress passed legislation yesterday to create a unified national standard requiring disclosure of information for bioengineered foods. Predictions are that President Obama will sign the legislation soon. Once effective, the new law will preempt state laws that require labeling of foods containing GMOs, such as the Vermont labeling law that recently became effective on July 1. The bill's passage through Congress represented a bi-partisan compromise led by senators Pat Roberts (R-KS) and Debbie Stabenow (D-MI). "This is the most important food and agriculture policy debate of the last 20 years," said Sen. Roberts.
What’s in the bill?
The legislation amends the Agricultural Marketing Act of 1946 to include the following:
Definition of “bioengineered” food, which is food intended for human consumption that contains genetic material that has been modified through in vitro recombinant DNA techniques and for which the modification could not otherwise be obtained through conventional breeding or found in nature.
- The Secretary of Agriculture shall determine the amount of bioengineered substance necessary to deem the food as bioengineered.
- A food that is derived from an animal that consumed feed containing bioengineered substances shall not be considered bioengineered. Thus, meat, poultry, dairy and eggs from animals that have consumed GMO feed will not be subject to the labeling requirements because they cannot be defined as bioengineered.
- Preemption of state food labeling standards. No state or political subdivision may establish requirements for labeling whether a food or seed is bioengineered or contains ingredients that are bioengineered. A food may bear disclosure of bioengineering only in accordance with federal regulations arising from this law.
- Creation of federal mandatory disclosure standard. Within two years of the bill’s enactment, the Secretary of Agriculture must establish a mandatory national bioengineered food disclosure standard and the procedures necessary to implement the national standard.
Choice of labeling. The federal standard must give a manufacturer the option of disclosing information with on-package text, a symbol or an electronic or digital link, such as a QR code. An electronic or digital link must contain access to an internet website or other type of electronic source.
- The USDA must conduct a study to identify potential technological challenges of disclosure through electronic or digital means, and must provide additional options if determined that the proposed technological options do not provide sufficient access to bioengineered food disclosure information.
- The USDA must also develop alternative disclosure options for foods contained in small packages.
Exclusions. The following are excluded from the national disclosure standard:
- Food served in a restaurant or similar retail food establishment.
- “Very small” food manufacturers, to be defined through rulemaking.
- As explained above, meat, poultry, dairy and eggs from animals that consume GMO feed.
- A food containing meat, poultry or eggs if the predominant ingredient would not independently be subject to the standard of if the predominant ingredient is broth, stock, water or a similar solution and the second-most predominant ingredient would not independently be subject to the national standard.
- “Small” food manufacturers. The USDA must define “small food manufacturers” and provide such manufacturers with a grace period of at least one year for implementation of the new standards and the additional option of providing only a telephone number or internet website on a food label to disclose required information.
- Food safety implications. The FDA conducts a pre-market consultation process for foods from genetically engineered plants; foods that successfully complete the process shall not be treated as more or less safe than non-genetically engineered counterparts because of bioengineering.
- Organically produced foods. A food certified as “organic” under the national organic program may be labelled as “not bioengineered,” “non-GMO” or with similar language.
- Enforcement. Failing to disclose a food as bioengineered is a prohibited act, but the rulemaking process will determine whether there will be penalties for noncompliance. The USDA Secretary will have authority to request records and conduct audits and hearings in regards to compliance but will not have recall authority for a food that does not comply with disclosure regulations.
The preemption established in the new law will be effective immediately and the State of Vermont is prohibited from enforcing its GMO labeling law. The USDA, through its Agricultural Marketing Service, will begin the rulemaking process for the national disclosure standard. A few key issues for agriculture to track though out the rulemaking stage will be the determination of "how much" bioengineered substance is sufficient to deem a food as bioengineered; defining the "very small" food manufacturers that will be exempt from the standard and the "small" manufacturers that will have a grace period and simpler disclosure requirements, whether QR codes and other technology options will remain viable due to expected objections that they discriminate against lower income consumers; and penalties for noncompliance. The two year window for rulemaking, however, leaves open the opportunity for future changes such as amending the legislation or prohibiting funding to be used for its implementation. Thus, while we have entered a new stage of the GMO labeling debate, the uncertainty of GMO labeling is not yet fully resolved.
To read the legislation, visit this page.