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.
It's Farm Science Review week! Be sure to visit us in the Firebaugh Building to get your questions answered and pick up copies of our Law Bulletins and a helping of candy corn. We'll be speaking on "Pond Liability" at the Gwynne Conservation Area on Wednesday and on "Estate Planning: Mistakes to Avoid" in the Ask the Experts session everyday.
Here's our gathering of ag law news you may want to know:
Movement on Ohio “Watersheds in Distress” rules. As we have reported on several times this summer, Governor John Kasich signed an executive order on July 11, 2018 directing ODA to “consider whether it is appropriate to seek the consent of the Ohio Soil and Water Commission (OSWC) to designate” certain watersheds “as watersheds in distress due to increased nutrient levels resulting from phosphorous attached to soil sediment.” Since that time, ODA has submitted a proposed rule dealing with Watersheds in Distress. Amendments were made to the proposed rule after evaluating the first set of public comments, and ODA is now resubmitting the rules package. ODA reopened the proposed rule for public comments, but it closed the comment period on September 7, 2018. Information about the proposed rules, as well as how and where to comment, can be found here (click on the “Stakeholder Review” tab and then the “Soil and Water Conservation – Watersheds in Distress OAC 901:13-1” drop down option). A draft of the newly amended proposed rules is available here.
WOTUS woes continue. The Obama administration’s hotly contested “Waters of the United States” Rule is back in the news, and this time, where it applies is dependent on where you live. A background on the rule can be found in our previous blog post. The rule basically expanded which bodies of water qualify as “waters of the United States,” which in turn protected more waters under the Clean Water Act. The rule became effective in 2015. Since that time, U.S. District Courts in North Dakota and Georgia have issued preliminary injunctions against Obama’s WOTUS Rule, which means it cannot be carried out in twenty-four states. Additionally, last summer, the EPA and Army Corps of Engineers, under the direction of President Trump, announced their plan to repeal Obama’s WOTUS Rule and replace it with the definition of WOTUS “that existed prior to 2015” until a new definition could be developed. Trump’s rule was published on February 6, 2018, giving the administration until 2020 to come up with a new definition. However, in a ruling on August 16, 2018, in a U.S. District Court in South Carolina, Judge David Norton determined that the Trump administration “failed to comply with” requirements of the Administrative Procedure Act when it enacted its rule. This means that the Trump rule repealing and replacing the definition of WOTUS is invalidated. As a result of Judge Norton’s decision, in the remaining twenty-six states without an injunction, the Obama administration’s version of the rule has been reinstated. Ohio is one of the twenty-six states where the Obama rule currently applies. Will the Trump administration and the EPA respond to Norton’s decision by announcing yet another new WOTUS rule? Follow the Ag Law Blog for any updates. In the meantime, the country remains nearly split in half by which version of the WOTUS rule is carried out.
Regulators, meet “meat.” Under a new Missouri law, it is a criminal offense to misrepresent a product as “meat” if there is, in fact, no meat. Missouri’s revision of its meat advertising laws took effect on August 28th, and has been dubbed by many as the first attempt by a state to regulate what qualifies as meat. Defining meat as “any edible portion of livestock, poultry, or captive cervid carcass,” the law prohibits “misrepresenting a product as meat that is not derived from harvested production livestock or poultry.” Violations are treated as a misdemeanor, with a fine up to $1,000 and possible jail time. The Missouri Department of Agriculture has said that it intends to enforce the law, but that it plans to give affected companies until the start of next year to bring their labels into compliance. Supporters of the law, like the Missouri Cattlemen’s Association, argue that it will provide consumers with accurate information about their food, and also protect meat producers from unfair labeling of plant-based or lab-grown meat alternatives. Opponents have already filed a lawsuit to prevent enforcement, arguing that the law restricts free speech and improperly discriminates against out-of-state producers of meat alternatives. The named plaintiff on the lawsuit is Turtle Island Foods, an Oregon company that does business under the names Tofurky and The Good Foods Institute. The company makes plant-based food products, and is joined in its opposition by the American Civil Liberties Union of Missouri and the Animal Legal Defense Fund. Beyond Missouri, the National Cattlemen’s Beef Association has listed the issue as a top policy priority for this year, and the U.S. Cattlemen’s Association has petitioned the USDA to adopt stricter labeling requirements. As this issue develops, the Ag Law Blog will keep you updated.
USDA taps Commodity Credit Corporation to aid farmers. Readers are no doubt aware of global trade disputes in which other countries have increased tariffs on American agricultural exports. Given the extensive news coverage, the Harvest will not attempt to cover the dispute in depth; however, one point that has been less covered is the tool that the USDA has selected to provide relief to impacted farmers: the Commodity Credit Corporation. What is it? The Commodity Credit Corporation (CCC) is a federal government entity created during the Great Depression in 1933 to “stabilize, support, and protect farm income and prices.” Since 1939, it has been under the control of the Secretary of Agriculture, although it is managed by a seven member Board of Directors. CCC is technically authorized to borrow up to $30 billion from the U.S. Treasury at any one time, but due to trade agreements, that number is, in reality, much smaller. This gives USDA access to billions of dollars in funding without having to go to Congress first. The money can be used to provide loans or payments to agricultural producers, purchase agricultural products to sell or donate, develop domestic and foreign markets, promote conservation, and more. CCC has no staff, but is instead administered through other USDA agencies, largely the Farm Service Agency and Agricultural Marketing Service. On August 27th, Secretary of Agriculture Sonny Perdue announced that USDA plans to tap the Commodity Credit Corporation for up to $12 billion worth of aid to farmers affected by recent tariffs. The Market Facilitation Program will provide direct payments to eligible corn, cotton, dairy, hog, sorghum, soybean, and wheat producers, and the Food Purchase and Distribution Program will purchase up to $1.2 billion in select commodities. For more about the Commodity Credit Corporation, check out its website.
Bayer reports increasing number of lawsuits against newly acquired Monsanto. Bayer, the German pharmaceutical and life sciences company that acquired Monsanto early this summer, has indicated that there are an increasing number of lawsuits in the United States alleging that its weed killers cause cancer. According to the Wall Street Journal, there were roughly 8,700 plaintiffs seeking monetary damages from Bayer as of late August, a sharp increase from the 5,200 plaintiffs just months earlier. Many of these lawsuits involve cancer patients who claim that Monsanto’s glyphosate-containing herbicides like Roundup caused their cancer. As we reported in a previous edition of the Harvest, one person’s successful lawsuit against Monsanto resulted in a San Francisco jury award of $289.2 million for failing to warn consumers of the risks posed by its weed killers. Monsanto is expected to file motions for a new trial and for the judge to set aside the verdict, and may ultimately appeal the decision. These cancer-related claims come at a time when another Monsanto product, Dicamba, is causing great controversy. Stay tuned to the Ag Law Blog as these lawsuits continue to develop.
Written by Ellen Essman, Law Fellow, OSU Agricultural & Resource Law Program
On June 19, 2017, the Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America (R-CALF USA) and the Cattle Producers of Washington (CPoW) sued the United States Department of Agriculture (USDA) and the Secretary of Agriculture, Sonny Perdue, over the legality of the current country of origin labeling (COOL) regulations. R-CALF USA and CPoW claim that USDA’s current COOL regulations do not require foreign beef and pork products to be labeled as such, and that in fact, the regulations allow the foreign meat to “be passed off as domestic products.” This, they argue, hurts U.S. cattle and hog producers, as well as U.S. consumers. The suit was filed in the U.S. District Court for the Eastern District of Washington, in Spokane. In short, R-CALF USA and CPoW are asking the court to rule that the current COOL regulations are at odds with two federal laws: the Meat Inspection Act and the Tariff Act.
Federal laws relating to Country of Origin Labeling
According to R-CALF USA and CPoW, two laws—the Meat Inspection Act and the Tariff Act—must be taken into account when thinking about COOL. R-CALF USA and CPoW argue that read together, these two laws require imported meat from cattle and hogs to possess country of origin labels.
The Meat Inspection Act, at 21 U.S.C. §620(a), says that imported meat must “be marked and labeled as required by such regulations for imported articles.” “[R]egulations for imported articles” are governed by the Tariff Act. The Tariff Act, in 19 U.S.C. §1304(a), states that “every article of foreign origin (or its container…) imported into the United States shall be marked in a conspicuous place…in such a manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article.”
In the lawsuit, the parties argue that historically, USDA pork and beef regulations did not follow their understanding of the Meat Inspection and Tariff Acts, discussed above. In other words, the regulations did not require COOL. The 2002 Farm Bill changed that. The parties say that the 2002 Farm bill had the “primary effect of requiring” COOL on meat products from animals imported into the U.S. and subsequently slaughtered after importation.
Following the Farm Bill’s lead, USDA changed its regulations concerning meat imported into the U.S. from other countries, including meat from hogs and cattle. The regulation, found in 7 C.F.R. § 65.300, was finalized in 2009. It stated that meat “derived from an animal that was slaughtered in another country shall retain [its] origin, as declared to the U.S. Customs and Border Protection at the time the product entered the United States, through retail sale,” or sale to the end consumer. Therefore, COOL was required on meat imported into the U.S. The regulation also allowed for the “origin declaration” on labels to “include more specific location information related to production steps.” This meant that the labels for beef and pork could include where the animals were born, raised, and slaughtered.
World Trade Organization decision and change to regulations
After the new COOL regulations went into place, they were challenged by Canada and Mexico. The World Trade Organization (WTO) ultimately sided with Canada and Mexico. WTO’s reasoning for this decision is outlined in a Congressional Research Service Report on the dispute, and was based on their finding that “COOL treats imported livestock less favorably than U.S. livestock.”
Following the WTO decision, Congress determined that beef and pork—both alive and slaughtered—no longer required COOL. Similarly, USDA removed meat from cattle and hogs from its COOL regulations. These actions, the parties argue, went too far. R-CALF USA and CPoW argue that the WTO decision only involved cattle and hogs that were imported live, as opposed to imported meat.
It is important to note that a number of other foods are still required to have COOL, including lamb, goat, chicken, farm-raised fish and shellfish, fresh and frozen fruits and vegetables, peanuts, pecans, macadamia nuts, and ginseng. More information on COOL can be found here.
R-CALF USA and CPoW’s argument
Ultimately, the parties argue that USDA went too far when they removed all meat from cattle and hogs from their COOL labeling requirements. They argue that the WTO decision focused on live hogs and cattle, as opposed to meat from those animals, and that WTO never “call[ed] into question the marks and labels required by the Tariff Act” for meat. Thus, they argue that USDA regulations should continue to follow the Meat Inspection and Tariff Acts, as they did following the 2002 Farm Bill.
R-CALF and CPoW claim that as a result of USDA’s far-reaching retraction of COOL regulations, “beef and pork from animals in other countries” is permitted to have the “same labels as domestic meat.” They claim that now, “imported beef and pork can even be labeled a ‘Product of the U.S.A.’” As a consequence of this type of labeling, the parties claim that both U.S. consumers and producers are harmed.
R-CALF and CPoW’s lawsuit heavily relies on the authority of the Tariff Act and the Meat Inspection Act. Their argument, in its most basic form, is that the two laws require COOL for beef and pork, and that the WTO decision did not ever call those two laws into question. Therefore, they feel that the change in regulations went further than was necessary to comply with the WTO decision.
The defendants named, USDA and Secretary Sonny Perdue, have not yet filed their response to the lawsuit.
R-CALF USA and CPoW’s lawsuit can be read here.