- Department of Agriculture Issues Proposed Rules on Export Sales Reporting Requirements
- March 22, 2012 | Authors: Andrew R. Anderson; Matthew R. Levy
- Law Firms: Faegre Baker Daniels - Des Moines Office ; Faegre Baker Daniels - Indianapolis Office
On March 8, 2012, the U.S. Department of Agriculture issued a proposed rule amending the Export Sales Reporting Requirements under the Agricultural Trade Act of 1972 (Act). The proposed rule would impose weekly reporting obligations on producers and exporters of pork (fresh, chilled and frozen box/primal cuts) and dried distiller's grain (DDG) with respect to their foreign export activities. Although producers and exporters of several other agricultural commodities currently must report under the Act, the proposed rule would, for the first time, impose such requirements on producers and exporters of pork and DDG.
History of the Act
The Act was born out of a rapid and unforeseen increase in domestic grain prices in 1972. In that year, the Soviet Union made huge and unanticipated purchases of U.S. wheat and corn, resulting in a run-up in U.S. food prices and a depletion of U.S. reserve stocks. Congress determined that, not only did this raise domestic food security concerns, but it also created an uneven playing field among those in the industry. It was believed that large grain companies had an unfair advantage because they had access to market-sensitive information such as commodity trends and futures prices that was unavailable to the public. In most cases, the public had to wait until the commodities were actually shipped before they had access to the relevant export information.
In response, Congress passed the Act, providing both the general public and all parties involved in the production and/or export of U.S. grain with the same and most current information. The Act requires producers and exporters of certain agricultural commodities to report their exports on a regular basis. Prior to the proposed rule, only manufacturers and exporters of wheat and wheat flower, feed grains, oil seeds, cotton and beef were obligated to report under the Act. Producers and exporters of pork and DDG were exempt from the reporting requirements.
The Act requires agricultural commodity producers and exporters to report the quantity, destination and marketing year of their exports. All reports must be made on a daily or weekly basis (depending on the type of commodity and the size of the applicable export), and reporting is administered by the Foreign Agricultural Service of the U.S. Department of Agricultural (FAS). Producers and exporters must submit their reports to FAS by email or fax, but all information transmitted is kept confidential. FAS releases all daily reports to the public on the following business day, and it publishes weekly summary reports on export activity each Thursday morning.
FAS has several measures to ensure the accuracy of the export data it receives. FAS staff members meet periodically with producers and exporters to verify that they are following sound reporting practices. In addition, producers and exporters are required to submit quarterly reports providing the details of their agricultural commodities contracts in order to confirm the accuracy of the export data reported under the Act.
Reporting is mandatory, and any person who knowingly fails to report may be fined up to $25,000 per violation or imprisoned up to one year, or both.
Purpose of the Proposed Rule
FAS has stated that the purpose of the proposed rule is to provide advance notice to the public of export sales activity for U.S. pork and DDG. The goal is to improve market transparency and allow the pork and grain commodities markets to better adjust to changing export sales. Producers and exporters of pork and DDG must report on their total sales volumes and shipments, and that information would become available to the public within two weeks of the export shipment, rather than nearly two-months after the shipment as per the current system administered by the U.S. Bureau of the Census.
All interested parties have until May 7, 2012, to submit their comments on the proposed rule to FAS. If adopted, the rule would impose weekly reporting obligations on producers and exporters of pork and DDG. Parties in those industries would also be required to develop measures for providing accurate data in their reports and to attend periodic meetings with FAS staff to discuss their reporting practices. Finally, information contained in sales contracts resulting in exports of pork or DDG to non-U.S. parties would likely need to be disclosed to FAS for verification of the information reported under the Act.
These changes would require producers and exporters of pork and DDG to implement new systems within their businesses to comply with the Act. It remains to be seen whether the proposed rule would meet its objective of providing the public and futures markets with critical export data, or whether the additional administrative burdens and compliance costs imposed on parties in the pork and DDG industries would outweigh the designed benefits.