[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
HEARING TO REVIEW REAUTHORIZATION OF
THE U.S. GRAIN STANDARDS ACT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
GENERAL FARM COMMODITIES
AND RISK MANAGEMENT
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
APRIL 22, 2015
__________
Serial No. 114-11
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Agriculture
agriculture.house.gov
___________
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COMMITTEE ON AGRICULTURE
K. MICHAEL CONAWAY, Texas, Chairman
RANDY NEUGEBAUER, Texas, COLLIN C. PETERSON, Minnesota,
Vice Chairman Ranking Minority Member
BOB GOODLATTE, Virginia DAVID SCOTT, Georgia
FRANK D. LUCAS, Oklahoma JIM COSTA, California
STEVE KING, Iowa TIMOTHY J. WALZ, Minnesota
MIKE ROGERS, Alabama MARCIA L. FUDGE, Ohio
GLENN THOMPSON, Pennsylvania JAMES P. McGOVERN, Massachusetts
BOB GIBBS, Ohio SUZAN K. DelBENE, Washington
AUSTIN SCOTT, Georgia FILEMON VELA, Texas
ERIC A. ``RICK'' CRAWFORD, Arkansas MICHELLE LUJAN GRISHAM, New Mexico
SCOTT DesJARLAIS, Tennessee ANN M. KUSTER, New Hampshire
CHRISTOPHER P. GIBSON, New York RICHARD M. NOLAN, Minnesota
VICKY HARTZLER, Missouri CHERI BUSTOS, Illinois
DAN BENISHEK, Michigan SEAN PATRICK MALONEY, New York
JEFF DENHAM, California ANN KIRKPATRICK, Arizona
DOUG LaMALFA, California PETE AGUILAR, California
RODNEY DAVIS, Illinois STACEY E. PLASKETT, Virgin Islands
TED S. YOHO, Florida ALMA S. ADAMS, North Carolina
JACKIE WALORSKI, Indiana GWEN GRAHAM, Florida
RICK W. ALLEN, Georgia BRAD ASHFORD, Nebraska
MIKE BOST, Illinois
DAVID ROUZER, North Carolina
RALPH LEE ABRAHAM, Louisiana
TOM EMMER, Minnesota
JOHN R. MOOLENAAR, Michigan
DAN NEWHOUSE, Washington
______
Scott C. Graves, Staff Director
Robert L. Larew, Minority Staff Director
______
Subcommittee on General Farm Commodities and Risk Management
ERIC A. ``RICK'' CRAWFORD, Arkansas, Chairman
FRANK D. LUCAS, Oklahoma TIMOTHY J. WALZ, Minnesota,
RANDY NEUGEBAUER, Texas Ranking Minority Member
MIKE ROGERS, Alabama CHERI BUSTOS, Illinois
BOB GIBBS, Ohio GWEN GRAHAM, Florida
AUSTIN SCOTT, Georgia BRAD ASHFORD, Nebraska
JEFF DENHAM, California DAVID SCOTT, Georgia
DOUG LaMALFA, California JIM COSTA, California
JACKIE WALORSKI, Indiana SEAN PATRICK MALONEY, New York
RICK W. ALLEN, Georgia ANN KIRKPATRICK, Arizona
MIKE BOST, Illinois
RALPH LEE ABRAHAM, Louisiana
(ii)
C O N T E N T S
----------
Page
Conaway, Hon. K. Michael, a Representative in Congress from
Texas, opening statement....................................... 51
Crawford, Hon. Eric A. ``Rick'', a Representative in Congress
from Arkansas, opening statement............................... 1
Prepared statement........................................... 2
H.R. 2088, United States Grain Standards Act Reauthorization
Act of 2015................................................ 55
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 4
Walz, Hon. Timothy J., a Representative in Congress from
Minnesota, opening statement................................... 3
Submitted letter............................................. 71
Witnesses
Winkles, Jr., David M., President, South Carolina Farm Bureau
Federation, Columbia, SC....................................... 4
Prepared statement........................................... 6
Cox, Sr., J. David, National President, American Federation of
Government Employees, American Federation of Labor and Congress
of Industrial Organizations, (AFGE, AFL-CIO), Washington, D.C.. 8
Prepared statement........................................... 9
Friant, Nick, Chairman, Grain Grades and Weights Committee,
National Grain and Feed Association; Co-Chair, Grain Grades and
Inspections Committee, North American Export Grain Association,
Wayzata, MN.................................................... 10
Prepared statement........................................... 12
Supplementary material....................................... 72
Submitted Material
Ayers, David, President, American Association of Grain Inspection
and Weighing Agencies, submitted statement..................... 73
Blankenship, Brett, President, National Association of Wheat
Growers, submitted letter...................................... 75
HEARING TO REVIEW REAUTHORIZATION OF THE U.S. GRAIN STANDARDS ACT
----------
WEDNESDAY, APRIL 22, 2015
House of Representatives,
Subcommittee on General Farm Commodities and Risk
Management,
Committee on Agriculture,
Washington, D.C.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 1300 of the Longworth House Office Building, Hon. Eric A.
``Rick'' Crawford [Chairman of the Subcommittee] presiding.
Members present: Representatives Crawford, Austin Scott of
Georgia, Allen, Conaway (ex officio), Walz, Ashford, David
Scott of Georgia, and Peterson (ex officio).
Staff present: Haley Graves, Jessica Carter, John Goldberg,
Mollie Wilken, Ted Monoson, John Konya, Anne Simmons, Liz
Friedlander, Matthew MacKenzie, and Nicole Scott.
OPENING STATEMENT OF HON. ERIC A. ``RICK'' CRAWFORD, A
REPRESENTATIVE IN CONGRESS FROM ARKANSAS
The Chairman. This hearing of the Subcommittee on General
Farm Commodities and Risk Management, to review the
reauthorization of the U.S. Grain Standards Act, will come to
order.
This hearing comes nearly a century after the Grain
Standards Act of 1916 was signed into law by then-President
Woodrow Wilson. For nearly 100 years, this law has been the
cornerstone of the vibrant grain trade, both domestically and
internationally. This law is relied upon not only by exporters
and domestic shippers, but by the whole U.S. ag sector. It
establishes official marketing standards and procedures for the
inspection and weighing of grains and oilseeds, providing a
critical service to the grain marketplace.
The witnesses who join us today represent industries that
have thrived over the last century, and transformed the grain
trade into the economic juggernaut it represents today. The GSA
has supported the evolution of this industry by providing a
backbone of stability relied upon by exporters, shippers,
farmers and even consumers. With the farm economy and so many
of our constituents relying on the ability of grain and
oilseeds to get to market, reauthorization of GSA should have
this one goal in mind: stability. And I mean this in a couple
of ways.
Many of the provisions in current law are set to expire on
September 30th of this year. A lapse in authorization would
disrupt the current grain and inspections process, therefore,
Congress should not delay in passing its reauthorization. To do
this, we need to get our work done well in advance and achieve
bipartisan consensus. That is why we are hosting this hearing
more than 5 months ahead of the deadline.
Second, the GSA needs to provide stability by ensuring we
can avoid disruptions like that which took place last year in
Washington State. Last summer, the Washington State Department
of Agriculture was providing export inspections under a
delegation of Federal authority at an export terminal at the
Port of Vancouver. The Department discontinued its export
inspection amid an ongoing labor dispute.
Since labor disputes do occur from time to time, this kind
of situation was anticipated by our predecessors, which is why
the current GSA provides a mechanism for USDA to step in and
provide inspection services in the event of a disruption.
However, the dispute devolved into a political situation in
which the Secretary of Agriculture declined to use his
discretionary authority to maintain inspections. While
inspection services were eventually restored, it is incumbent
on the Committee to take appropriate action to provide
safeguards against a repeat of that unfortunate decision.
We have reviewed proposals from grain industry
organizations and have engaged in considerable discussion with
other stakeholder organizations represented on today's panel.
Likewise, Majority and Minority offices have worked very
closely in an effort to develop bipartisan consensus in advance
of the markup in the near future.
It is my understanding that discussions regarding
legislative drafts are nearly concluded, and we expect to
circulate those drafts for public review shortly. I hope the
discussion today will confirm areas of consensus as well as
provide necessary insight regarding areas where additional work
may be necessary. With that, I thank the witnesses for being
here today to aid in this process.
[The prepared statement of Mr. Crawford follows:]
Prepared Statement of Hon. Eric A. ``Rick'' Crawford, a Representative
in Congress from Arkansas
This hearing on reauthorizing the United States Grain Standards
Act, will come to order.
This hearing comes nearly a century after the Grain Standards Act
of 1916 was signed into law by then-President Woodrow Wilson. For
nearly 100 years, this law has been the cornerstone of the vibrant
grain trade both domestically and internationally. This law is relied
upon not only by exporters and domestic shippers, but by the whole U.S.
agricultural sector. It establishes official marketing standards and
procedures for the inspection and weighing of grains and oilseeds,
providing a critical service to the grain marketplace.
The witnesses who join us today represent industries that have
thrived over the last century, and transformed the grain trade into the
economic juggernaut it represents today. The GSA has supported the
evolution of this industry by providing a backbone of stability relied
upon by exporters, shippers, farmers and even consumers. With the farm
economy and so many of our constituents relying on the ability of grain
and oilseeds to get to market, reauthorization of the GSA should have
this one goal in mind: stability. And I mean this in a couple of ways.
Many of the provisions in current law are set to expire on
September 30th of this year. A lapse in authorization would disrupt the
current grain and inspections process, therefore Congress should not
delay in passing its reauthorization. To do this, we need to get our
work done well in advance and achieve bipartisan consensus. That is why
we're hosting this hearing more than 5 months ahead of the deadline.
Second, the GSA needs to provide stability by ensuring we can avoid
disruptions like that which took place last year in Washington State.
Last summer, the Washington State Department of Agriculture was
providing export inspections under a delegation of Federal authority at
an export terminal at the Port of Vancouver. The Department
discontinued its export inspection amid an ongoing labor dispute.
Since labor disputes happen from time to time, this kind of
situation was anticipated by our predecessors, which is why the current
GSA provides a mechanism for the U.S. Department of Agriculture to step
in and provide inspection services, in the event of a disruption.
However, the dispute devolved into a political situation in which the
Secretary of Agriculture declined to use his discretionary authority to
maintain inspections. While inspection services were eventually
restored, it is incumbent on the Committee to take appropriate action
to provide safeguards against a repeat of that unfortunate decision.
We have reviewed proposals from grain industry organizations and
have engaged in considerable discussion with other stakeholder
organizations represented on today's panel. Likewise, Majority and
Minority offices have worked very closely in an effort to develop
bipartisan consensus in advance of a markup in the near future.
It is my understanding that discussions regarding legislative
drafts are nearly concluded, and we expect to circulate those drafts
for public review shortly.
I hope the discussion today will confirm areas of consensus as well
as provide necessary insight regarding areas where additional work may
be necessary.
With that, I thank the witnesses for being here today to aid us in
this process, and I yield to the Ranking Member, Mr. Walz, for his
opening comments.
The Chairman. I recognize the Ranking Member, Mr. Walz, for
his opening comments.
OPENING STATEMENT OF HON. TIMOTHY J. WALZ, A REPRESENTATIVE IN
CONGRESS FROM MINNESOTA
Mr. Walz. Well, good morning, and I want to thank the
Chairman for holding today's hearing, and I associate myself
with his comments on the need to get this done on time. That
should be the standard, and that is what should be expected to
give that certainty to our shippers, and to our global market
partners. And I certainly look forward to working with everyone
on the Subcommittee to get this done.
I want to thank our witnesses for being here. We have a
wide variety of expertise amongst us, from Farm Bureau to NGFA
to our friends in labor at AFGE, the folks who do the work out
there.
I fully expect this cross-section of views will promote a
vigorous debate, and that is what we are here to do. I think
the reason, and everyone knows, the one overriding theme that
we are here for is we must maintain the integrity of the
system. It must be the gold standard as it has always been. It
must be done that way, and we all absolutely agree upon that.
There may be some divergence of opinion on how we get there.
That is our job to get done. So I look forward to hearing those
opinions, working with Chairman Crawford, a Chairman who I know
is committed, as he always has been, to get this done on time,
to get it done in a manner that satisfies all parties involved,
and that we can move forward doing what we do best: feed the
world. And that is what you do, and that is what we want to see
happen.
And so I thank you, Chairman, for holding this hearing, and
again, I look forward to working with you to get this done on
time.
The Chairman. I thank the gentleman, and would recognize
the Chairman of the full Committee, who is not here just yet,
he will be here later on, we will recognize him when he
arrives. And I would also like to recognize the Ranking Member
of the full Committee for any opening statement he would like
to make. Mr. Peterson.
OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE
IN CONGRESS FROM MINNESOTA
Mr. Peterson. Thank you, Mr. Chairman, and Mr. Walz, for
holding today's hearing, and for working in a bipartisan way.
It looks like we are going to get this bill worked out in a way
that everybody can live with.
The inspections provided by the Federal Grain Inspection
Service define and classify grains as well as assign grades to
specify weight and quality requirements, and these inspections
provide a gold standard assurance backed by the Federal
Government to both grain buyers and sellers. American grain
farmers participate in a very competitive world, and foreign
grain buyers should be confident in the process that we have in
place to ensure our exports are adequately inspected.
So as we move ahead with reauthorization, I hope that we
can take stock in how well the current system of export
inspections by the Federal and state agencies is working, and
continue to work in a bipartisan basis and get this
reauthorization moved through the both Houses and to the
President's desk.
And I yield back.
The Chairman. I thank the gentleman.
I would like to recognize our witnesses. We have one panel
and three witnesses. Starting with Mr. David Winkles, who is
the President of South Carolina Farm Bureau Federation,
Columbia, South Carolina; Mr. J. David Cox, Sr., National
President, American Federation of Government Employees, here in
Washington, D.C.; and Mr. Nick Friant, Chairman, NGFA Grain
Grades and Weights Committee.
Thank you, gentlemen, for being here. And with that, I want
to remind you that you have 5 minutes to make your oral
testimony. Anything further will be submitted for the record in
your written testimony. I would encourage you to watch the
lights. Green means go, yellow is just like when you are
driving; hurry it up, and when you see red, that means stop.
And with that, I am pleased to recognize Mr. David Winkles
for 5 minutes.
STATEMENT OF DAVID M. WINKLES, Jr., PRESIDENT, SOUTH CAROLINA
FARM BUREAU FEDERATION, COLUMBIA, SC
Mr. Winkles. Thank you, Mr. Chairman. For the record, Mr.
Chairman, I received word from the American Soybean
Association, the National Corn Growers Association, and the
National Council of Farmer Cooperatives, informing me that they
had received my written testimony, and have asked that I inform
the Subcommittee that they support the points made in my
testimony.
As a grain farmer, I understand the role and the work of
the Federal Grain Inspection Service in the grain sector, but I
believe I can add a unique perspective this morning, since I
have had direct interactive experience with the FGIS through my
responsibilities as President of the South Carolina Farm
Bureau.
For several years, our organization operated a grain export
elevator in Charleston, South Carolina. We were also in
partnership with Carolina Soya in Hampton, South Carolina, a
grain-handling and soybean processing operation, that provided
a huge positive financial impact on the farmers in the
Southeast. In the past, the South Carolina Farm Bureau
Marketing Association operated a large number of local grain
elevators, and we still own and operate one. In each of these
facilities, FGIS was and is a major asset in our ability to
market grains domestically and internationally. The grades
established by the agency served to set the standard for every
contract, and when coupled with the official inspection
services, particularly with regards to export, FGIS provided
the necessary and credible third party verification of grain
standards that provide efficiencies in the marketing and
movement of grain. Without these standards and verification of
grades, every transaction would have been significantly more
difficult and much more expensive.
As I am sure you know, in order to encourage the marketing
of high quality grain for an agricultural sector, it is highly
dependent upon export demand. The Act requires that exported
grains and oilseeds be officially inspected if sold by grade
and weight. Export inspections are carried out either by
Federal inspectors or federally supervised state agencies
called delegated official inspection agencies. We believe that
any change in these fundamental requirements needs to be
thoroughly and carefully considered in the context of how our
international customers and their respective governments would
view such changes. This is important today when some countries
have shown very little reluctance to use some very interesting
excuses to stop or inhibit exports of U.S. agricultural
commodities and products.
We applaud your actions to move this legislation earlier
this year because, as you know and as you have said, several
provisions of the Act will expire in September, including the
authority for FGIS to collect user fees that fund their
operations, and the authority for the USDA Grain Advisory
Committee. It is critically important to the grain sector that
we maintain the ability for FGIS to continue to perform its
duties and functions and not be allowed to lapse. We urge the
Committee to reauthorize the Act in a timely manner.
Also, Farm Bureau believes that it is important to ensure
that the extremely troubling precedent set in the State of
Washington last summer, and similar situations that have
occurred at other West Coast ports, are not repeated. We
believe that the Washington State Department of Agriculture's
actions created a precedent that was amplified by the FGIS
decision to not intervene. The incident created uncertainty in
our reputation as a reliable supplier of grains and oilseeds to
foreign customers. We believe it is imperative for you to
consider adoption of a contingency plan that would ensure an
immediate and effective program to continue official services
at a port. The lack or disruption of an accepted grain
standards and accepted accredited inspection procedure will
cause chaotic marketing conditions, and will financially
negatively impact farmers, local business, and consumers.
Disruption of official grading and inspection services can
have an impact on the timing of purchases and the delivery of
sales, and jeopardize marketing agreements and arrangements
that have often taken years to put in place. We must have
contingency procedures ready so that disruptions of any kind
will not negatively impact the viability of hard-won contracts.
Again, thank you for the opportunity to testify today. Farm
Bureau supports reauthorization of the Act, in addition to the
Federal organizations I mentioned earlier, with the addition of
a contingency plan. We also support the continuation of the
Grain Inspection Advisory Committee. For all of our grain
farmers and our industry sector partners, we appreciate the
important work you do as Representatives of our country. Thank
you.
[The prepared statement of Mr. Winkles follows:]
Prepared Statement of David M. Winkles, Jr., President, South Carolina
Farm Bureau Federation, Columbia, SC
Mr. Chairman, Members of the Subcommittee, good morning and thank
you for the opportunity to be here today to discuss the reauthorization
of the United States Grain Standards Act (the Act). I am David Winkles,
President of the South Carolina Farm Bureau (SCFB) and a member of the
board of directors of the American Farm Bureau Federation. I also crop
share a 1,000 acre farm that produces corn, wheat, soybeans and timber.
As a grain farmer, I certainly understand the role and work of the
Federal Grain Inspection Service (FGIS) in the grain sector. But I
believe I can add a unique perspective this morning as I have direct
interactive experience with the FGIS through my responsibilities as
President of South Carolina Farm Bureau. For several years, our
organization operated a grain export elevator in Charleston, South
Carolina. We were also in partnership with Carolina Soya of Hampton,
South Carolina, a major grain handling and soybean processing operation
that provided a huge positive financial impact on farmers in the
Southeast. In addition, the South Carolina Farm Bureau operated a large
number of local grain elevators in the past and we still own and
operate one under the management of the South Carolina Farm Bureau
Marketing Association.
In each of these grain handling facilities, FGIS was and is a major
asset in our ability to market grain domestically and internationally.
The grain grades established by the agency serve to set the standards
for every contract. And when coupled with the official inspection
services, particularly with regard to exports, FGIS provide the
necessary and credible, third party verification of grain standards
that provide efficiencies in the marketing and movement of grain.
Stated another way, without these standards and verification of grades,
every transaction would be significantly more difficult and much more
expensive.
One in 3 U.S. farm acres is planted for export and 31 percent of
farm income comes directly from exports. Farmers and ranchers know that
exports are critical to their industry and livelihoods. This is why the
reauthorization of the Act in a timely manner is so important. We have
built these markets based on product availability and quality.
Since the passage of the Grain Standards Act in 1916, the U.S. has
been the pioneer in providing quality assurance to overseas buyers. In
fact, other countries have duplicated our services as standard
guidelines for their exports. Overseas buyers continue to seek products
from the U.S. because they know the official system, with its precise
testing procedures, equipment criteria and conduct standards, ensures
accurate, consistent results. The integrity of this system, which U.S.
sellers and overseas buyers rely on, should never be compromised.
The Federal law, enacted nearly a century ago, prohibits the export
of U.S. grains and oilseeds unless inspected and weighed by official
personnel in accordance with U.S. grain standards. The law has been
amended occasionally over the ensuing decades, but the basic tenets
still apply. Exports are required to be accompanied by official
certificates showing the grade designation and certified weight, unless
the requirement is waived by the Secretary of Agriculture and the grain
is not sold or exported by grade. Under the Act, Congress vested in
USDA the responsibility and obligation to provide official inspection
services to facilitate efficient and cost-effective marketing of U.S.
grains and oilseeds.
The Act authorizes the FGIS to establish official marketing
standards for certain grains and oilseeds. In turn, the standards
facilitate the marketing of grain by serving as contract language,
enabling buyers and sellers to more easily determine quality and
therefore value of these commodities. FGIS promotes the uniform
application of U.S. grain standards through official inspection
personnel. In order to encourage the marketing of high-quality grain
for an agricultural sector that is highly dependent upon export demand,
the Act requires that exported grains and oilseeds be officially
inspected if sold by grade, and weighed. Export inspections are carried
out by either Federal inspectors or federally supervised state
inspection agencies, called delegated official inspection agencies.
We believe that any changes to this fundamental requirement need to
be thoughtfully and carefully considered in the context of how our
international customers and their respective governments would view
such changes. This is especially important in an era in which some
countries have shown little reluctance to use some interesting excuses
to stop or inhibit imports of U.S. agricultural commodities and
products.
On the domestic front, marketed grain and oilseeds may be, but are
not required to be, officially inspected. Official inspections of
domestically traded grain are done by federally supervised state
agencies and private companies, called designated official inspection
agencies. Services under the Act are performed on a user fee basis for
both export and domestic grain shipments.
Our current grain inspection system has earned worldwide
recognition as being reliable and impartial. World markets look for, if
not require, the FGIS imprimatur on the official export certificate to
ensure buyers' confidence that they can expect to receive the quality
and quantity of grain for which they paid. The integrity of the system
is vital. As I noted earlier, maintaining the confidence of our
international buyers is important to U.S. farmers and other segments of
the grain trade.
We applaud your actions to move this legislation early this year
because, as you know, several provisions of the Act will expire in
September, including the authority for FGIS to collect user fees that
fund their operations and the authority for a USDA Grain Advisory
Committee. It is crucial to the grain sector that the ability for FGIS
to continue to perform its duties and functions is not allowed to
lapse. We urge the Committee to reauthorize the Act in a timely manner.
In addition to the basic reauthorization of the Act and other
adjustments that you may consider, Farm Bureau believes it is important
to ensure that the troubling precedent set in the State of Washington
last summer and similar situations that have occurred at other West
Coast ports are not repeated.
The Washington State Department of Agriculture (WSDA) is the state
agency designated by the Grain Inspection, Packers and Stockyards
Administration to provide export inspections at the United Grain
Corporation terminal at the Port of Vancouver, Washington. Last summer,
WSDA notified USDA that it no longer would fulfill its obligation to
provide official grain inspection and weighing services at the port.
The WSDA notice stated that it was suspending official inspection
services indefinitely because the ``continued provision of inspection
services appears to have been unhelpful in leading to any foreseeable
resolution'' of the labor dispute between United Grain and the
International Longshore and Warehouse Union. The inspection agency said
it was concerned with employee safety at the entrance of the site where
demonstrations were being held. The United Grain terminal is a major
grain export facility on the West Coast.
Farm Bureau and 21 other agricultural groups urged USDA to take
immediate action to restore the inspection services by using either
Federal inspectors or qualified inspectors from other delegated
agencies. The USDA Grain Advisory Committee also called on USDA to
restore grain inspection service.
The Act currently provides USDA discretion to grant a waiver of
inspection in an emergency and authority to determine what constitutes
an emergency. In July 2014, United Grain reportedly shipped grain in
one case by obtaining a waiver from the inspection requirement. The
company also relocated grain to other facilities for inspection, which
increased shipping costs. In early August, USDA reportedly declined
using Federal inspectors at the United Grain Corporation terminal at
the Port of Vancouver because ``the situation does not ensure that FGIS
inspectors will have safe access to the facility.'' While the grain
companies and union reached an agreement to end the dispute later in
the month and inspections resumed at the United Grain terminal, the
inability of grain shippers to obtain the necessary inspection
certificates had a significant impact on all segments of the grain
trade chain.
We believe that the WSDA actions created a troubling precedent that
was amplified by the FGIS decision to not intervene. We cannot afford
for this to be repeated as it could irreparably damage the integrity
and reliability of the nation's official grain inspection system. Just
as critical, the incident created uncertainty within the U.S. grain
export industry regarding potential future disruptions of official
services at facilities operating at other U.S. export ports and has put
at risk the United States' reputation as a reliable supplier of grains
and oilseeds to foreign customers.
Because of this incident and related export shutdown and slowdown
situations, and the potential for future such incidents, we believe it
is imperative for you to consider adoption of a contingency plan that
would ensure an immediate and effective program to continue official
services at the port when service interruptions occur.
The lack or disruption of an accepted grain standards and
accredited inspection procedure will cause chaotic marketing conditions
and the resulting inefficiencies in grain marketing will negatively
impact farmers, local business, and consumers. We need to have a
reliable third party inspection and grading program for emergency
situations to assure both seller and buyer that the terms of sales and
credibility of every contract can be relied upon to be fulfilled in a
timely manner.
Viewed from another perspective, the disruption of official grading
and inspection services can have significant impacts on the timing of
purchases and delivery of sales, and jeopardize marketing agreements
and arrangements that often take years to get in place. We must have
contingency procedures at the ready to ensure that required
certification of grades and inspection services do not negatively
impact the viability of hard-won contracts.
Again, thank you for the opportunity to testify today. Farm Bureau
supports reauthorization of the Act with the addition of a contingency
plan. We also support the continuation of the Grain Inspection Advisory
Committee. For all of our grain farmers and our industry sector
partners, we appreciate the important work you do as representatives of
our industry in Congress.
The Chairman. Mr. Winkles, that was very impressive,
particularly given the fact that our yellow light did not work,
and you wrapped it up with 2 seconds to spare. I appreciate
that. That makes it tough on the other two witnesses.
Mr. David Cox, Sr., National President, American Federation
of Government Employees, right here in Washington. Mr. Cox, you
are recognized for 5 minutes.
STATEMENT OF J. DAVID COX, Sr., NATIONAL PRESIDENT, AMERICAN
FEDERATION OF GOVERNMENT EMPLOYEES, AMERICAN FEDERATION OF
LABOR AND CONGRESS OF
INDUSTRIAL ORGANIZATIONS, (AFGE, AFL-CIO),
WASHINGTON, D.C.
Mr. Cox. Thank you, Mr. Chairman. And on behalf of AFGE, I
am proud to represent the dedicated Federal employees and the
Federal Grain Inspection Service in Louisiana, Texas,
Washington, and Oregon, as well as other locations throughout
the country. And I appreciate the sincere efforts of this
Subcommittee to take into account our views as lawmakers draft
the reauthorization measure.
FGIS, with its successful record of over 4 decades of
inspecting and weighing nearly 90 percent of the grain shipped
to customers around the world, guarantees impartial and open
trading which greatly facilitates U.S. grain exports. We
understand that a small minority of voices demand that the
reauthorization bill be used to privatize the weighing and
inspection of grain. Of course, many of these same voices
called for the privatization of grain inspection and weighing
back in 2005, the last time the law was reauthorized. That ill-
advised effort ultimately failed thanks to a broad coalition of
farmers, consumers, and workers. There is no question that this
important function must continue to be performed by reliable
and experienced FGIS employees, and I strongly urge the
Subcommittee to oppose efforts to use the reauthorization of
the U.S. Grain Standards Act, or any other measure for that
matter, to promote the privatization of this work.
Privatization of FGIS would undermine America's guarantee of
impartial and honest government-backed trading, which is relied
upon by world buyers. The substitution of rubber-stamped
inspections actually completed by industry paid inspectors
would undermine international confidence in the integrity of
U.S. agricultural exports.
We strongly urge you to ensure that the grain which America
exports continues to meet the highest of standards expected by
our trading customers, so that U.S. farmers who raise the best
products in the world receive the prices they truly deserve.
Thanks to the bipartisan Congressional effort that established
FGIS, we have come a long way since the 1970s when a wholly
privatized inspection process yielded a series of scandals that
undermined confidence in the quantity and quality of U.S. grain
exports; scandals which many believe contributed to a crash in
grain prices in the middle of the decade, farm foreclosures,
and the loss of significant numbers of family farms. AFGE and I
believe America's farmers look to this Subcommittee to continue
the record of bipartisan support for grain inspection and
weighing performed by reliable and experienced Federal
employees.
Thank you very much for your consideration of my testimony,
I look forward to taking questions, and I yield back my time,
Mr. Chairman.
[The prepared statement of Mr. Cox follows:]
Prepared Statement of J. David Cox, Sr., National President, American
Federation of Government Employees, American Federation of Labor and
Congress of Industrial Organizations, (AFGE, AFL-CIO), Washington, D.C.
Chairman Crawford, Ranking Member Walz, and Members of the
Subcommittee: I am J. David Cox, Sr., and I am the National President
of the American Federation of Government Employees (AFGE), AFL-CIO,
which represents more than 650,000 Federal and District of Columbia
workers who serve the American people across the nation and around the
world, including in the Department of Agriculture. I thank you for the
opportunity to testify this morning on the reauthorization of the U.S.
Grain Standards Act.
I do not claim to be an expert on this important law, but I am
proud to represent the dedicated Federal employees in the Federal Grain
Inspection Service (FGIS), in Louisiana, Texas, Washington, and Oregon,
as well as in other locations. And I appreciate the sincere efforts of
this Subcommittee to take into account their views as lawmakers draft
the reauthorization measure.
FGIS, with its successful record over 4 decades of inspecting and
weighing nearly 90% of the grain shipped to customers around the world,
guarantees impartial and open trading, which greatly facilitates U.S.
grain exports. Continued viability and profitability for American
agricultural producers, over the long-term, is essential to the
economic health of our nation. However, the pursuit of profits must be
carefully balanced with the protection of America's standing as an
honest and trusted trading partner.
The grain inspectors represented by AFGE are focused on their
important work, rather than the details of the U.S. legislative
process. However, it is understood that a small minority of voices
demand that the reauthorization bill be used to privatize the weighing
and inspection of grain. Of course, many of these same voices called
for the privatization of grain inspection and weighing back in 2005,
the last time the U.S. Grain Standards Act was reauthorized. That ill-
advised effort ultimately failed, thanks to a broad coalition of
farmers, consumers, and workers.
I realize that grain inspection is performed in different ways,
both in this country and abroad. In the United States, Federal
employees, state employees, and even contractor employees all play
significant roles. However, today, my remarks are focused on the
responsibilities of FGIS employees with respect to the mandatory
official weighing and inspection of exported grain. There is no
question that this important work must continue to be performed by
reliable and experienced FGIS employees, and I strongly urge the
Subcommittee to oppose efforts to use the reauthorization of the U.S.
Grain Standards Act--or any other measure, for that matter--to promote
the privatization of this work.
Privatization of FGIS would undermine America's guarantee of
impartial and honest, government-backed trading which is relied upon by
world buyers. The substitution of rubber-stamped inspections actually
completed by industry-paid inspectors would undermine international
confidence in the integrity of U.S. agricultural exports.
Whether one supported or opposed its effort to outsource many of
the functions performed by Federal employees, it must be stipulated
that no Administration in the history of the Republic was more
aggressively pro-privatization than the Bush Administration. And
consistent with its ideology, the Department of Agriculture during the
Bush Administration aggressively explored the privatization of grain
inspection through a pilot project.
However, the Department ultimately abandoned that effort,
concluding ``that the use of contractors did not provide additional
savings or efficiencies that would enhance the competitiveness of U.S.
grain exports in the global market.'' i
---------------------------------------------------------------------------
\i\ ``Evaluation of the Use of Contractors to Enhance the Delivery
of Official Inspection and Weighing Services at Export Port
Locations'', Federal Grain Inspection Service, March 2009.
---------------------------------------------------------------------------
And while there were no benefits from privatization, there were
significant risks.
Pilot project contractors failed ``to hire and maintain an
adequately-skilled workforce . . . (because) (c)ertification and
weighing of grain at export facilities require skills not normally
found in the labor force. The agency invests a minimum of 2 years of
training before employees are allowed to grade and weigh grain . . .''
ii
---------------------------------------------------------------------------
\ii\ Ibid.
---------------------------------------------------------------------------
Moreover, shifting to contractors would remove the agency's
``service provision safety net . . . (leaving) the agency challenged to
fulfill its legal mandate to provide services if a contractor could not
. . . thereby allowing for potential service disruptions.''
iii
---------------------------------------------------------------------------
\iii\ Ibid.
---------------------------------------------------------------------------
It has been reliably estimated that the cost of inspection and
weighing by Federal employees is a penny per bushel. Even putting aside
the finding by the pilot project that nothing would be saved by
privatization--indeed, that much could be lost--the cost of Federal
performance is de minimis. In fact, it would be more correct to say
that the pennies spent on Federal inspectors are an investment which
yields significant dividends for our nation's farmers because of the
confidence foreign buyers can therefore have in the integrity of
American agricultural exports.
The mandatory inspection of U.S. grain exports benefits the entire
grain marketing chain, from farm gate to export. It is imperative that
lawmakers not allow empty ideology, short-sighted financial interests,
or anti-labor animus to trump the nation's interest in ensuring
impartial and honest inspection and weighing of its grain exports.
AFGE strongly urges the Subcommittee to ensure that the grain
America exports continues to meet the highest of standards expected by
our trading customers, so that U.S. farmers, who raise the best
products in the world, receive the prices they deserve.
Thanks to the bipartisan Congressional effort that established the
Federal Grain Inspection Service, we have come a long way since the
1970s when a wholly privatized inspection process yielded a series of
scandals that undermined confidence in the quality and quantity of U.S.
grain exports--scandals which many believe contributed to a crash in
grain prices in the middle of the decade, farm foreclosures, and the
loss of significant numbers of family farms. AFGE and, I believe,
America's farmers look to this Subcommittee to continue the record of
bipartisan support for grain inspection and weighing performed by
reliable and experienced Federal employees.
Thank you for your consideration. I look forward to your questions.
The Chairman. Excellent. That is great. You guys are doing
fantastic.
Now, Mr. Friant, that doesn't mean you get to use up all of
his extra time. Mr. Nick Friant, Chairman, NGFA Grain Grades
and Weights Committee, and Co-Chair of the NAEGA Grain Grades
and Inspections Committee, you are recognized for 5 minutes.
STATEMENT OF NICK FRIANT, CHAIRMAN, GRAIN GRADES AND WEIGHTS
COMMITTEE, NATIONAL GRAIN AND FEED
ASSOCIATION; CO-CHAIR, GRAIN GRADES AND INSPECTIONS COMMITTEE,
NORTH AMERICAN EXPORT GRAIN
ASSOCIATION, WAYZATA, MN
Mr. Friant. Chairman Crawford, Ranking Member Walz, Members
of the Subcommittee, I am Nick Friant, Business Unit Food
Safety Leader for Cargill, Inc., in Wayzata, Minnesota. I
provide technical and regulatory compliance assistance on a
wide range of issues related to grain quality, handling, and
inventory for Cargill's operations and merchandising personnel
in the U.S. and abroad. I appreciate the opportunity to testify
today on behalf of the National Grain and Feed Association, and
North American Export Grain Association. I chair NGFA's Grain
Grades and Weights Committee, and co-chair NAEGA's Grain Grades
and Inspections Committees, both of which address issues
concerning the official grain inspection and weighing system
and the U.S. Grain Standards Act.
Our organizations strongly support reauthorization of the
U.S. Grain Standards Act, and offer recommendations to improve
and maintain the U.S. official grain inspection system. The
inspections and other services provided by FGIS contribute
significantly to the marketing and trading of U.S. grains and
oilseeds by establishing and maintaining U.S. grain standards,
and providing official inspection and weighing services. That
is why NGFA and NAEGA urge Congress, when developing
legislation to reauthorize the U.S. Grain Standards Act, to
address each of the following concerns.
First, in response to apparent system shortcomings,
including the disruptions in official services at the Port of
Vancouver, Washington, during 2013 and 2014, we urge that
existing language in the Act be strengthened to reinforce the
obligation of the Secretary of Agriculture to restore official
service in a prompt manner. Make no mistake, foreign buyers, in
particular, the Korea Flour Mills Industrial Association, took
note of the very visible and extreme disruptions in such
official inspections which damaged the reputation of FGIS, and
undermined confidence of international buyers in the
reliability of the U.S. official grain inspection system at
export locations. I respectfully request that the letter from
KOFMIA be made part of the hearing record. Also, a diverse
array of U.S. farm, commodity, and agribusiness organizations,
including NGFA and NAEGA, strongly encouraged action by the
Secretary to meet his legal obligations to restore official
inspection services in a pair of joint letters, but
unfortunately, to no avail. I respectfully request that these
letters also be made a part of the hearing record. Therefore,
we urge that additional language be inserted into the U.S.
Grain Standards Act to remove any uncertainty that the
Secretary of Agriculture is to immediately, with the exceptions
of disruptions caused by natural disasters, restore official
grain inspection services if there are future interruptions or
disruptions.
Second, we urge that the process used by FGIS to delegate
or designate its authority to perform official service at
export elevators be made more transparent and open to public
comment, just as the agency already does through Federal
Register notice and comment rulemaking when designating
official inspection authority to state or private entities to
serve the domestic market where the use of official inspection
services is voluntary.
Further, NGFA and NAEGA strongly believe consideration
should be given to directing FGIS to license and utilize,
subject to FGIS oversight, the use of qualified personnel
employed by independent third party entities to perform
official services at export elevators through the existing
licensing provisions embodied in the U.S. Grain Standards Act,
particularly in cases where disruptions in official service
occur. Some attempt to denigrate, undermine, or obfuscate this
concept by labeling it as privatization. That emphatically is
not what NGFA and NAEGA are proposing. In this regard, two
recent studies conducted for NAEGA are enlightening, and show
the degree to which personnel from these independent third
parties already are working at export elevators to provide
services that are above and beyond those mandated under the
U.S. Grain Standards Act. I respectfully request that both of
these studies be made part of the hearing record.
Third, NGFA and NAEGA support the U.S. Grain Standards Act
provisions pertaining to FGIS's current authority to designate
qualified accredited state or private entities to perform
official inspection services in territories within the domestic
market, and support the request to extend the duration of such
designation to 5 years from the current 3 years.
Fourth, we urge that FGIS be required to base the tonnage
portion of export inspection user fees on shifts in actual
shipment volumes that are officially inspected by basing it on
a 5 year rolling average.
Finally, we recommend that reauthorization of the U.S.
Grain Standards Act be reduced from a period of 10 years to 5
years, particularly given the dynamic, changing, and highly
competitive nature of the global grain export marketplace.
NGFA and NAEGA believe that our recommendations pursuant to
the U.S. Grain Standards Act will help strengthen the official
inspection and weighing system, enhance the competitive
position of the U.S. grains and oilseeds in the world markets,
and retain integrity of the U.S. inspection results.
Thank you for the opportunity to testify. I am pleased to
respond to any questions you may have.
[The prepared statement of Mr. Friant follows:]
Prepared Statement of Nick Friant, Chairman, Grain Grades and Weights
Committee, National Grain and Feed Association; Co-Chair, Grain Grades
and Inspections Committee, North American Export Grain Association,
Wayzata, MN
Chairman Crawford, Ranking Member Walz, and Members of the
Subcommittee, I am Nick Friant, Business Unit Food Safety Leader for
Cargill, Inc. in Wayzata, Minn. In this capacity, I provide technical
and regulatory compliance assistance on a wide range of issues related
to grain quality, handling and inventory for Cargill's operations and
merchandizing personnel in the U.S. and abroad.
I appreciate the opportunity to testify today on behalf of the
National Grain and Feed Association (NGFA) and the North American
Export Grain Association (NAEGA). I serve as Chairman of NGFA's Grain
Grades and Weights Committee and Co-Chair of NAEGA's Grades and
Inspections Committee, both of which address issues concerning the
official grain inspection and weighing system and the U.S. Grain
Standards Act that are the subject of this hearing.
NGFA, established in 1896, consists of more than 1,050 grain, feed,
processing, exporting and other grain-related companies that operate
more than 7,000 facilities and handle more than 70 percent of all U.S.
grains and oilseeds. Its membership includes grain elevators; feed and
feed ingredient manufacturers; biofuels companies; grain and oilseed
processors and millers; exporters; livestock and poultry integrators;
and associated firms that provide goods and services to the nation's
grain, feed and processing industry. NGFA also has 26 State and
Regional Affiliated Grain, Feed and Agribusiness Associations.
NAEGA, established in 1912, 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.
NAEGA-member companies ship and support the vast majority of the highly
competitive and fungible U.S. grain export supply. NAEGA is dedicated
to providing for efficient, predictable, reliable and expanded trade
via responsible commercial and official practices. Through a reliance
on member action and support, NAEGA acts to accomplish its mission from
its office in Washington, D.C., and in markets throughout the world.
NGFA and NAEGA strongly support reauthorization of the U.S. Grain
Standards Act to improve and maintain the U.S. official grain
inspection system. Both of our organizations have a long history of
supporting a Federal official grain inspection and weighing system. We
have worked continuously for nearly 40 years to encourage continued
improvements to this system, as well as the broader regulatory and
commercial environment to improve the value, safety, competitiveness
and sustainability of U.S. agriculture.
The U.S. Department of Agriculture's Federal Grain Inspection
Service (FGIS) performs the essential role of maintaining the official
U.S. grain standards, which are critical to establishing value and
price-discovery in the U.S. grain and oilseed marketplace. The
inspection and other services provided by FGIS contribute significantly
to the marketing and trading of U.S. grains and oilseeds by farmers and
other commercial parties. The U.S. grain handling and export system is
admired around the world for providing a fungible, abundant, safe and
sustainable commodity supply that is responsive to customer needs.
U.S. competitiveness in global markets, as well as stakeholders
ranging from farmers to end-users, benefit when FGIS and its delegated
state agencies provide state-of-the-art, market-responsive official
inspection and weighing of bulk grains and oilseeds at export, and do
so in a reliable, uninterrupted, consistent and cost-effective manner.
That is why NGFA and NAEGA urge that Congress, when developing
legislation to reauthorize the U.S. Grain Standards Act, address each
of the following concerns:
First, in response to apparent system shortcomings,
including the frequent, intermittent disruptions in official
inspection and weighing service at the Port of Vancouver,
Washington, during 2013-14, we urge that existing language in
the Act be strengthened further to reinforce the obligation of
the Secretary of Agriculture to restore official inspection and
weighing service in a prompt manner, except in instances where
the disruption is caused by cataclysmic natural disasters.
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. Except in certain cases in
which FGIS chooses to delegate its 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.
We believe the Secretary of Agriculture already is obligated
under the existing USGSA language to step in to provide
official inspection and weighing services immediately if FGIS
employees, or personnel of a delegated state agency or
designated domestic entity are unwilling or unable to perform
such services. Regrettably, that did not occur at the Port of
Vancouver, Washington, during sporadic interruptions in
official inspection services that spanned the fall, winter and
spring of 2013-14.
Make no mistake, U.S. foreign buyers took note of this very
visible and extreme disruption, which damaged the reputation of
FGIS and undermined confidence of international buyers in the
reliability of the U.S. official grain inspection system at
export locations. One significant buyer--the Korea Flour Mills
Industrial Association (KOFMIA), in a letter dated July 10,
2014 to the agricultural counselor at the U.S. Embassy in
Korea--expressed its concern about the impact these disruptions
were having on its ability to obtain U.S. wheat. The letter
stated, in relevant part, as follows: ``Last year, the Republic
of Korea purchased over 1.3 million metric tons of wheat from
the United States. We have long viewed U.S. wheat as a
reliable, readily available commodity . . . We fear that
actions taken by your government set a dangerous precedent
which could compromise shipments from any export terminal in
the U.S. A stoppage of this nature undermines the reputation of
U.S. wheat in the marketplace. KFMIA has long been a major
buyer of wheat from the United States. We insist that you do
everything in your power to restore inspection services at the
Port of Vancouver and ensure timely loading of grain bound for
the Republic of Korea.'' I respectfully request that this
letter be made part of the hearing record.
A diverse array of U.S. farm, commodity and agribusiness
organizations, including NGFA and NAEGA, strongly encouraged
similar action by the Secretary to meet his legal obligation to
restore official inspection services in a pair of joint letters
submitted on October 18, 2013 and July 14, 2014, but
unfortunately, to no avail. I respectfully request that these
letters also be made part of the hearing record.
As expounded upon later in this testimony, U.S. farmers, grain
handlers and exporters, as well as our foreign customers, today
already are less reliant upon the official inspection and
weighing results provided by FGIS and its delegated state
agencies. Indeed, many complementary and competitive testing
services are being provided by impartial independent third
parties at U.S. export elevators in response to value-chain
demand from foreign customers, and because of the reliability,
integrity, competence and efficiency of such services. Some of
these services actually are redundant with or used to verify
official testing results determined by FGIS and its delegated
and designated agencies under the official inspection system.
Such services also are being used increasingly by our major
grain export competitors in other countries.
NGFA and NAEGA believe accurate, timely and cost-effective
delivery of mandated, impartial and federally managed official
inspection services administered by FGIS can and should remain
the cornerstone of a viable and market-responsive U.S. grain
inspection and weighing system. Official export inspections
provide transparency and market information to the entire value
chain that contribute to an efficient marketplace, while
supporting price-discovery, food security and sustainable
supplies. But to remain respected and relevant, the U.S.
official grain inspection system needs to function in a
continuous, predictable and consistent manner to facilitate the
ability of U.S. farmers and agribusinesses to reliably serve
foreign customers and remain competitive in world markets,
which is responsible for as much as 50 percent of total
utilization of U.S. wheat and soybeans, as well as up to \1/3\
of U.S. feed grains.
For these reasons, to reinforce the existing obligation of the
Secretary of Agriculture to provide for the uninterrupted
provision of official inspection service, we urge that
additional language be inserted into Section 79(e) of the USGSA
to remove any lingering uncertainty that the Secretary of
Agriculture is to immediately, with the exception of
disruptions caused by hurricanes, floods or other cataclysmic
natural disasters, restore official grain inspection services
if there are future interruptions or disruptions in the
performance of such service, either by utilizing the
Secretary's own inspection work force or delegating such
authority to another official entity or an FGIS-licensed
inspector from an independent third-party.
Second, we urge that the process used by FGIS to delegate or
designate its authority to perform official inspection and
weighing service at export elevators at export port locations
be made more transparent and open to public comment--just as
the agency already does through Federal Register notice-and-
comment rulemaking when designating official inspection
authority to state or private entities to serve the domestic
market, where the use of official inspection services is
voluntary.
Simply put, the current process for delegating state agencies to
perform official inspection at export facilities is neither
open nor transparent. The opaqueness of the current delegation
process provides no opportunity for stakeholders to offer
public comment to the Agency on a delegated state agency's
performance. Nor does it provide any opportunity to
periodically review such delegations--they can continue in
perpetuity. Therefore, we urge that the delegation of official
inspection and weighing service to state agencies be subject to
notice-and-comment rulemaking through the Federal Register, and
that the duration of such delegation or designation be limited
to 5 years--consistent with our recommendation for designated
state and private agencies providing official inspection
service to the domestic market.
Further, NGFA and NAEGA strongly believe consideration should be
given to directing FGIS to license and utilize, subject to FGIS
oversight, the use of qualified personnel employed by
independent third-party entities to perform official inspection
and weighing services at export elevators through the existing
licensing provisions embodied in the USGSA, particularly in
cases where disruptions in official service occur. Some attempt
to denigrate, undermine or obfuscate this concept by labeling
it as ``privatization.'' That emphatically is not what NGFA and
NAEGA are proposing. Instead, what we propose is a process to
further strengthen the Federal system we seek to improve and
preserve by enabling qualified individuals working under
Federal oversight and employed by independent, private third
parties to be licensed under Section 84 of the USGSA utilizing
the same process USDA already does to license personnel from
designated official state and private entities in the domestic
market.
In this regard, two recent studies conducted for NAEGA are
enlightening. The first, entitled ``U.S. Grain and Oilseed
Inspection Services and Competitiveness Study_Export Competitor
and Importer Information,'' examines the work that independent
third parties already are performing at export elevators to
provide non-grade-determining testing services that are above-
and-beyond those mandated under the USGSA, and which are
provided in response to specific quality or customer
requirements. This study found that between 20 and 25 percent
of U.S. exports of bulk grains, oilseeds and major byproducts
currently are being re-inspected in some manner by private
entities in response to requests from foreign buyers. These
services are voluntarily engaged in by the importer or by
mutual agreement of the exporter and importer as part of the
terms of the contract to either confirm some inspection
results, measure attributes not determined under U.S. mandatory
inspection requirements or meet some other commercial
requirement of the trade transaction. This certainly is strong
affirmation of the level of acceptance that foreign customers
of U.S. grains and oilseeds already have in the integrity of
test results provided to them by private third parties for
whose services they pay. This study also notes the inspection
reforms being considered by Canada and the European Union, and
contains a country-by-country analysis of the extent to which
foreign U.S. competitor countries already are utilizing such
independent third parties to perform inspection services, with
the only government involvement being accreditation to ensure
accuracy, competence and equipment calibration. In fact, the
United States and Canada currently maintain the only major
grain and oilseed exporter national government-run inspection
agencies, and as a result have significantly higher costs per
ton for basic commodity inspections.
A second study, entitled ``U.S. Grain and Oilseed Inspection
Services Competitiveness Study_Customer Specifications and
Preferences,'' examines the motivations of foreign buyers that
request independent third-party testing services. I
respectfully request that both of these studies be made part of
the hearing record.
Clearly, these studies reinforce the acceptance that already
exists in the marketplace regarding the integrity of
inspections being performed by independent third parties. We
believe our proposal to provide a mechanism for including such
inspection assets within the licensing and oversight rubric of
FGIS would further strengthen the U.S. official system.
Third, NGFA and NAEGA support the USGSA provisions
pertaining to FGIS's current authority to designate qualified,
accredited state or private entities to perform official
inspection and weighing services in geographic territories
within the domestic market, and support the request to extend
the duration of such designation to 5 years from the current 3
years.
Fourth, we urge that FGIS be required to base the tonnage
component of export inspection user fees on a fluctuating and
more market-responsive basis that takes into account shifts in
actual shipment volumes that are officially inspected, rather
than the current static formula that is based on what were
erroneously low projections in export volumes. We estimate
FGIS' current formula will result in more than $12 million in
overcharges during fiscal years 2014 and 2015, as documented in
the chart attached to our written testimony.
Currently, FGIS sets the tonnage user fees based primarily on
export tonnage projections based over a 5 year period. But to
help retain U.S. export competitiveness, we believe the
Agency's fee structure needs to: (1) be more predictable for
system users and responsive to market conditions; (2) be more
flexible and timely in making adjustments; and (3) reduce the
impact of subjective forecasting of export volumes. Rather than
continuing to rely only upon the subjective and time- and
resource-consuming rulemaking process to modify fees, the NGFA
and NAEGA propose that the FGIS be required to establish fees
through an ongoing and market-responsive process.
Specifically, we recommend that FGIS use a rolling 5 year average
as the basis for the tonnage user fee calculation. The use of
such a methodology to establish base tonnage for determining
the fee level will lead to a greater correlation between both
high- and low-volume market fluctuations, as well as better
enable U.S. exporters to project future costs. This correlation
of fees to both a 5 year moving average and continuing pursuit
of cost-controls and revenue management should create an
environment in which official fees can be adjusted continually
and more accurately.
While, NGFA and NAEGA recognize that fee increases may be
necessary from time to time, we encourage FGIS to continue its
ongoing efforts to provide efficient service at a reasonable
price to its customers. The rolling average approach we are
proposing will assist in achieving that outcome.
Finally, we recommend that reauthorization of the USGSA be
reduced from a period of 10 years to 5 years, particularly
given the dynamic, changing and highly competitive nature of
the global grain export marketplace. Thus, we recommend that
the USGSA be reauthorized through September 30, 2020.
Conclusion
As noted previously, it is the responsibility and obligation of
FGIS and delegated state agencies to provide vibrant and reliable
official inspection and weighing services to facilitate efficient and
cost-effective marketing of U.S. grains and oilseeds to foreign
markets, upon which U.S. agriculture and the American economy depend
for economic growth and jobs.
NGFA and NAEGA believe that our recommendations pursuant to the
USGSA will help strengthen the official inspection and weighing system,
enhance the competitive position of U.S. grains and oilseeds in world
markets, and retain the integrity of U.S. inspection results. Our
industry pledges to work with Congress to craft policies that achieve
these positive outcomes.
Thank you for the opportunity to testify. I will be pleased to
respond to any questions you may have.
Attachment 1
July 10, 2014
Kevin Smith,
Minister Counsellor for Agricultural,
Embassy of the United States.
Dear Mr. Kevin Smith
Recently, the Federal Grain Inspection Service has refused to
provide grain inspection services at the United Grain Corporation
export terminal in Vancouver, Washington. As a result, grain exports
from this terminal have been effectively stopped. We are very concerned
about the impact this disruption will have on our ability to source
grain from the United States.
Last year, the Republic of Korea purchased over 1.3 million metric
tons of wheat from the United States. We have long viewed U.S. wheat as
a reliable, readily available commodity. Furthermore, UGC has been an
important supplier of ours for many years. We fear that the actions
taken by your government set a dangerous precedent which could
compromise shipments from any export terminal in the U.S. A stoppage of
this nature undermines the reputation of U.S. wheat in the marketplace.
KOFMIA has long been a major buyer of wheat from the United States.
We insist that you do everything in your power to restore inspection
services at the Port of Vancouver and ensure timely loading of grain
bound for the Republic of Korea.
Your prompt attention to this matter is appreciated.
Best Regards,
Sincerely,
Cho, Won Ryang,
Executive Senior Managing Director,
Korea Flour Mills Industrial Association (KOFMIA).
Attachment 2
July 14, 2014
Hon. Thomas J. Vilsack,
Secretary,
U.S. Department of Agriculture,
Washington, D.C.
Dear Secretary Vilsack:
Many of the undersigned organizations representing agricultural
producers, grain handlers and exporters wrote to you on October 18,
2013 (copy of letter attached) expressing, in the strongest possible
terms, our concerns over the periodic disruptions in Official grain
inspection and weighing services provided by the Federal Grain
Inspection Service's (FGIS) designated agencies in the Pacific
Northwest.
During a subsequent meeting last October with Grain Inspection,
Packers and Stockyards Administrator Larry Mitchell and his colleagues,
attended by representatives of many of our organizations, we strongly
urged that contingency plans be developed to ensure that FGIS respond
immediately and effectively if there were any future disruptions in
Official inspection service from WSDA.
Our expanded stakeholder interest group now understands that on
July 1, 2014, the designated agency--the Washington State Department of
Agriculture--provided written notification that it was withdrawing
Official grain inspection services at the Port of Vancouver, WA,
effective July 7, 2014. Based upon this unprecedented development, we
urge you to direct that FGIS take immediate action to provide such
Official inspection services utilizing either its own personnel or the
personnel of another FGIS-designated agency authorized to perform such
Official services at grain export facilities.
As noted in the previous correspondence, the U.S. Grain Standards
Act (P.L. 113-36) vests in FGIS the sole responsibility to provide
Official inspection and weighing services. Further, the Statute
prohibits the export of U.S. grains and oilseeds unless Officially
inspected and weighed by Official personnel in accordance with the
Grain Standards. In addition, such exports are required to be
accompanied by Official certificates showing the Official grade
designation and certified weight--unless such a requirement is waived
by the Secretary of Agriculture and the grain is not sold or exported
by grade. Thus, Congress has vested in FGIS the responsibility and
obligation to provide vibrant and reliable Official inspection and
weighing services to facilitate efficient and cost-effective marketing
of U.S. grains and oilseeds to foreign markets, upon which U.S.
agriculture and the American economy depend for economic growth and
jobs.
To our knowledge, this latest announcement by a designated state
agency declining to provide Official services is unprecedented. We
believe WSDA's actions create an extremely troubling precedent that
will cause irreparable damage to the integrity and reliability of the
nation's Official grain inspection system. This development already has
created uncertainty within the U.S. grain export industry regarding
potential future disruptions of Official services at facilities
operating at other U.S. export ports. The disruptions that already have
occurred have put at risk the United States' reputation as a reliable
supplier of grains and oilseeds to foreign customers. In the absence of
WSDA's reliable performance of its duties, FGIS must intervene and make
the necessary arrangements to provide the mandatory Official services.
American farmers, grain handlers and exporters, as well as our
foreign customers, depend upon accurate, timely and cost-effective
delivery of mandated impartial third-party Official inspection services
administered by FGIS and its designated and delegated agencies. The
U.S. Official grain inspection and weighing system is widely recognized
around the world for its impartial, consistent, reliable and timely
measurement and certification of quality attributes and weights. The
availability of accurate FGIS inspection results also is essential to
determining grain value and market price discovery. Further, Official
export inspections provide transparency and market information to the
entire value chain that contribute to an efficient marketplace, while
supporting food security and sustainable supplies. As much as 50
percent of total utilization of U.S. wheat and soybeans (either as raw
commodities or value-added products like meat, milk and eggs), as well
as up to \1/3\ of U.S. feed grains are directly supported by the
industry user-fee funded service USDA is mandated to maintain and
administer.
To this point, confidence that the U.S. Official grain inspection
system will function in a continuous and consistent manner--and not be
subject to unwarranted disruptions--has been instrumental in
facilitating the ability of U.S. farmers and agribusinesses to reliably
serve foreign customers and remain competitive in world markets. It has
been a model of integrity. But the recent decision by WSDA, and the
subsequent inaction to this point of FGIS to fulfill its mandate to
provide Official inspection services, risks sullying that hard-earned
reputation, to the long-lasting detriment of U.S. agriculture. It also
sends a dangerous signal to any third-party that might wish to disrupt
U.S. grain export trade.
Given the gravity of this situation, we urge USDA to immediately
take all actions necessary to fulfill FGIS's statutory obligation to
restore Official inspection and weighing services at grain export
elevator facilities in the event of a disruption in such service,
either by immediately replacing absent inspectors with FGIS Official
personnel or those from available qualified providers, including other
designated or delegated Official agencies.
We appreciate your prompt consideration of this request, and look
forward to your timely response.
Sincerely,
Agricultural Retailers Association;
American Farm Bureau Federation;
American Soybean Association;
Idaho Grain Producers;
Minnesota Grain and Feed Association;
Montana Grain Growers Association;
National Association of Wheat Growers;
National Corn Growers Association;
National Grain and Feed Association;
National Oilseed Processors Association;
North American Export Grain Association;
North Dakota Grain Dealers Association;
North Dakota Grain Growers Association;
Oregon Wheat Growers League;
South Dakota Grain and Feed Association;
South Dakota Wheat Inc.;
Transportation, Elevator and Grain Merchants Association;
Pacific Northwest Grain and Feed Association;
U.S. Grains Council;
U.S. Soybean Export Council;
U.S. Wheat Associates;
Washington Association of Wheat Growers.
CC:
Hon. Krysta Harden, Deputy Secretary of Agriculture;
Hon. Edward Avalos, Under Secretary, Marketing and Regulatory Programs;
Hon. Michael Scuse, Under Secretary, Farm and Foreign Agricultural
Services;
Hon. Phil Karsting, Administrator, Foreign Agricultural Service;
Hon. Larry Mitchell, GIPSA Administrator;
Hon. Randall D. Jones, Deputy Administrator, FGIS.
attachment
October 18, 2013
Hon. Thomas J. Vilsack,
Secretary,
U.S. Department of Agriculture,
Washington, D.C.
Dear Secretary Vilsack:
The undersigned organizations representing agricultural producers,
grain handlers and grain exporters respectfully urge the U.S.
Department of Agriculture (USDA), in the strongest terms, to take all
actions necessary to provide Official inspection and weighing services
at grain export elevator facilities.
The U.S. Grain Standards Act (P.L. 113-36) vests in USDA's Federal
Grain Inspection Service (FGIS) the sole responsibility to provide
Official inspection and weighing services. Further, the Statute
prohibits the export of U.S. grains and oilseeds unless Officially
inspected and weighed by Official personnel in accordance with the
Grain Standards. Further, such exports are required to be accompanied
by Official certificates showing the Official grade designation and
certified weight--unless such a requirement is waived by the Secretary
of Agriculture and the grain is not sold or exported by grade. Thus,
Congress has vested in FGIS the responsibility and obligation to
provide vibrant and reliable Official inspection and weighing services
to facilitate efficient and cost-effective marketing of U.S. grains and
oilseeds to foreign markets, upon which U.S. agriculture and the
American economy depend for economic growth and jobs.
We have been made aware that the Washington Department of
Agriculture (WSDA)--designated by FGIS most recently on Feb. 9, 2012 to
perform such Official services through Dec. 31, 2014--periodically has
not done so at the Port of Vancouver in the Pacific Northwest. In
addition, it is our understanding that WSDA's willingness to fulfill
its designated Official service remains highly uncertain. Moreover,
FGIS seemingly has deferred to WSDA in making determinations regarding
the circumstances under which it will or will not provide the mandatory
Official services.
To our knowledge, this interruption by a designated state agency in
uniformly and consistently providing Official services is
unprecedented. We believe WSDA's actions create an extremely troubling
precedent that could cause irreparable damage to the integrity and
reliability of the nation's Official grain inspection system. This
development already has created uncertainty within the U.S. grain
export industry regarding potential future disruptions of Official
services at facilities operating at other U.S. export ports. The
disruptions that already have occurred have put at risk the United
States' reputation as a reliable supplier of grains and oilseeds to
foreign customers. In the absence of WSDA's reliable performance of its
duties, FGIS must intervene and make the necessary arrangements to
provide the mandatory Official services.
American farmers, grain handlers and exporters, as well as our
foreign customers, depend upon accurate, timely and cost-effective
delivery of mandated impartial third-party Official inspection services
administered by FGIS and its designated and delegated agencies. The
U.S. Official grain inspection and weighing system is widely recognized
around the world for its consistent, reliable and timely measurement
and certification of quality attributes and weights. As much as 50
percent of total utilization of U.S. wheat and soybeans (either as raw
commodities or value-added products like meat, milk and eggs), as well
as up to \1/3\ of U.S. feed grains are directly supported by the user-
fee funded service USDA is charged with maintaining and administering.
Having confidence that the U.S. Official system will be continually
and consistently available--and not be subject to unwarranted
disruptions--makes these user-fee funded FGIS export services a
linchpin in the ability of U.S. farmers and agribusinesses to reliably
serve foreign customers and remain competitive in world markets. It has
been a model of integrity. The availability of accurate FGIS inspection
results also is essential to determining grain value and market price
discovery. Further, Official export inspections provide transparency
and market information to the entire value chain that contribute to an
efficient marketplace, while supporting food security and sustainable
supplies.
Given the gravity of this situation, we urge USDA to take all
actions necessary to fulfill its statutory obligation to provide
Official inspection and weighing services at grain export elevator
facilities, including prompt replacement with Official personnel from
other designated or delegated Official agencies, or with FGIS Official
personnel, if a designated or delegated Official agency does not
provide such service.
We appreciate your prompt consideration of this request.
Sincerely,
Agricultural Retailers Association;
American Farm Bureau Federation;
American Soybean Association;
National Association of Wheat Growers;
National Corn Growers Association;
National Council of Farmer Cooperatives;
National Grain and Feed Association;
National Oilseed Processors Association;
North American Export Grain Association;
Transportation, Elevator and Grain Merchants Association;
U.S. Grains Council;
U.S. Wheat Associates.
CC:
Hon. Edward Avalos, Under Secretary for Marketing and Regulatory
Programs;
Hon. Larry Mitchell, GIPSA Administrator;
Hon. Randall D. Jones, Deputy Administrator, FGIS.
Attachment 3
U.S. Grain and Oilseed Inspection Services Competitiveness Study
Export Competitor and Importer Information
January 30, 2015
W. Kirk Miller and Paul B. Green
WKMGlobal Consulting
3901 Chain Bridge Road, Fairfax, VA 22030
[email protected]
Contents
Part One
Introduction and Purpose
Background
Part Two
Findings
Competitor Bulk Commodity Export Inspection Practices
Bulk Commodity Importer Inspect ion Requirements
Approximate Cost for Export Inspection Services in Select Markets
(USD)
Part Three
Summary and Conclusion
Resources
Contacts and Resource List
Appendices
Representative Importing Country Survey Results
Regarding Inspection Requirements
Pending Reform Plans in Competitor Export Countries
Canada
European Union
U.S. Grain and Oilseed Inspection Services Competitiveness Study Report
Introduction and Purpose
U.S. bulk agricultural commodities face stiff competition from
export origins that utilize private sector pre-export inspection
programs. The private sector surveyors that provide the pre-export
services are able to offer a wide array of testing and inspection
testing services for intrinsic characteristics, sustainability schemes,
and food safety analysis not routinely performed as part of the current
official U.S. export inspection model. The purpose of this study is to
look at what export competitor governments' inspection delivery models
entail, what is driving the use of alternative factors, and at what
cost.
This project has been undertaken to further accomplish the
objectives and deploy strategies in NAEGA's Unified Export Strategy
(UES) by providing for needed analysis, organization, and reporting of
the U.S. grain and oilseed inspection services. This will be
accomplished by primarily studying export inspection delivery models
and collecting export competitor and importer information. The
objective is to advance NAEGA's UES by determining if U.S. export
market-share is being placed at a competitive disadvantage or is
threatened due to costs for mandatory official services that may be
insufficient or available on a more cost-competitive basis.
Background
In order to understand what the competition is offering, it will be
useful to first describe how the U.S. export grain inspection and
weighing system is structured and functions. The U.S. Department of
Agriculture's (USDA) Grain Inspection, Packers and Stockyards
Administration's Federal Grain Inspection Service (FGIS) establishes
quality standards for grains, oilseeds, pulses, and legumes; provides
impartial inspection and weighing services through a network of
Federal, state, and private entities; and monitors marketing practices
to enforce compliance with the U.S. Grain Standards Act, as amended,
(hereinafter, USGSA) and Agricultural Marketing Act of 1946, as amended
(hereinafter, AMA).
Under provisions of the United States Grain Standards Act, most
grain exported from U.S. export port locations must be officially
weighed. A similar requirement exists for inspection, except for grain
which is not sold or described by grade. Inter-company barge grain
received at export port locations also must be officially weighed. The
Act also requires that all corn exported from the U.S. be tested for
aflatoxin prior to shipment, unless the contract stipulates that
testing is not required.
Mandatory inspection and weighing services are provided by FGIS on
a fee basis at 45 export elevators and floating transshipment rigs.
Five delegated states provide official services at an additional 13
export elevators under FGIS oversight.
Under the AMA, FGIS administers and enforces certain inspection and
standardization activities related to rice, pulses, lentils, and
processed grain products such as flour and corn meal, as well as other
agricultural commodities. Services under the AMA are performed upon
request on a fee basis for both domestic and export shipments by either
FGIS employees or individual contractors, or through cooperative
agreements with states.
FGIS administers uniform, national grain inspection and weighing
programs established by the Act. Services under the Act are performed
on a fee basis for both export and domestic grain shipments. USGSA
requires that export grain be inspected and weighed, prohibits
deceptive practices with respect to the inspection and weighing of
grain, and provides penalties for violations.
In administering and enforcing the Act, FGIS:
Establishes and maintains official U.S. grain standards for
barley, canola, corn, flaxseed, oats, rye, sorghum, soybeans,
sunflower seed, triticale, wheat, and mixed grain;
Promotes the uniform application of official U.S. grain
standards by official inspection personnel;
Establishes methods and procedures and approves equipment
for the official inspection and weighing of grain;
Provides official inspection and weighing services at
certain U.S. export port locations, and official inspection of
U.S. grain at certain export port locations in eastern Canada
along the St. Lawrence Seaway;
Delegates qualified state agencies to inspect and weigh
grain at certain U.S. export port locations and Designates
qualified state and private agencies to inspect and weigh grain
at interior locations;
Licenses qualified state and private agency personnel to
perform inspection and weighing services;
Provides Federal oversight of the official inspection and
weighing of grain by delegated states and designated agencies;
Investigates, in cooperation with the USDA Office of
Inspector General, alleged violations of the Act and initiates
appropriate corrective action;
Monitors the quality and weight of U.S. grain as received at
destination ports, and investigates complaints or discrepancies
reported by importers; and
Helps U.S. trading partners develop and improve their grain
inspection and weighing programs.
The Administrator of GIPSA is authorized by the USGSA to charge and
collect reasonable fees for the inspection and weighing of grain and
related services performed by employees of FGIS. The FGIS fee schedule
as reflected in 7 CFR, Section 800.71-73 provides for hourly rates for
contract and non-contract inspection and weighing service. The contract
service agreement is designed to help FGIS better manage its work force
at individual service points which is expected to reduce the cost of
providing official services. These cost of service reductions are
reflected in the fee schedule as lower rates than the standard non-
contract rates ($39.40 per hour for contracts to $70.00 per hour for
non-contract rates). In addition to the hourly fees for direct
inspection and weighing costs and fees for certain specific additional
test services (for instance $2.60 per online test for oil and protein
to $20.30 per online aflatoxin test via a kit), FGIS assesses
administrative fees on a per metric ton basis for all outbound carriers
in addition to all other applicable fees. These per metric ton
administrative fees vary among the four service areas ($0.092-$0.300
per mt) and to those assessed for services in one of the delegated
states ($0.059 per mt).
During the period from 2005 to the present, FGIS has increased
weighing and inspection fees. The size and frequency of fee increases
have been a point of contention for the U.S. export industry which
feels that export originating from competitor origins receive an
advantage by not having to pay for mandatory government testing on top
of testing needed to fulfill the terms of the sales contract.
At export FGIS inspectors test for a wide range of grade
determining factors including test weight, dockage or impurities,
damage, class in the case of wheat, odor and the presence of insects or
other deleterious substances and provide weighing oversight and
certification. FGIS does not routinely test for many intrinsic quality
and food safety factors which are available from FGIS or private
surveyors upon request. This represents a fairly significant difference
between how FGIS performs inspection and weighing versus other export
origins around the world. Whereas, FGIS determines what factors are
important and inspects against those criteria, other systems allow the
buyers and sellers to determine what is important and to reflect that
in their testing requirements.
The U.S. system creates a fairly large number of circumstances
where foreign customers are required to pay for mandatory FGIS tests
and then voluntarily request inspection testing for characteristics
that are of more concern to their needs and intended end use.
Addressing this source of duplicative or additional testing may provide
opportunities for the U.S. to improve its export competitiveness and
still deliver a high quality export product at a lower cost to the end-
user customer.
Findings
Competitor Bulk Commodity Export Inspection Practices
------------------------------------------------------------------------
Country Requirement
------------------------------------------------------------------------
Argentina The Government of Argentina requires
grains and oilseeds and soymeal to be inspected
pre-export by private sector surveyors under
the auspices of the Government Agency Servicio
Nacional de Sanidad y Calidad Agroalimentaria
(SENASA).
SENASA charges a stiff fee for
overseeing the private surveyors, but assumes
no liability for quality complaints.
The Government of Argentina issues
phytosanitary certificates.
The pre-export inspection cost is $0.58
USD per mt, including $0.22 USD per mt
government service fee for corn, wheat and
soybeans and $0.16 USD for soymeal.
------------------------------------------------------------------------
Australia There is no quality inspection by the
government.
Quality is determined by private
organizations or the terminal operator which
issue certificates which they guarantee.
There is a full cost recovery for
phytosanitary inspection service administered
by the Department of Agriculture Biosecurity
using ``Authorized Officers'' who are employed
by the exporters.
All bulk and container loads are tested
on a full cost recovery basis by the National
Residue Survey (NRS) an agency of the
Department of Agriculture.
------------------------------------------------------------------------
Brazil The Brazilian Government is not
responsible for quality specifications or
testing which is done for both bulk and
containerized shipments by private sector
surveyors.
In order to perform the quality and
food safety testing the private surveying firms
must be registered with MAPA and have an ISO
17025 compliant laboratory and acknowledged as
such by the Brazilian Metrology Institute,
which has the authority to conduct random scale
checks on behalf of the Brazilian Federal
Treasury.
Any test results for weed seeds,
insects, fungus and other pests that are part
of the International Plant Protection
Organization phytosanitary requirements are
reported to the Brazilian Ministry of
Agriculture, Livestock and Feed Supply (MAPA)
for their use in issuing the phytosanitary
certificate.
The inspection costs for Brazil
reportedly range between $0.13 USD per mt to
$0.20 USD per mt.
------------------------------------------------------------------------
Canada According to the Canadian Grain Act,
all grain exports from Canada, excluding
shipments to the U.S., are mandated to be
officially inspected by the Canadian Grain
Commission.
The Canadian Grain Commission is
responsible for collecting an official sample
during loading, conducts the official
inspection on the sample and issues a Final
Certificate attesting to the quality of the
shipment.
According to the published fee
schedule, the cost for the export inspection in
2014/2015 is $1.31 USD per mt.
The Canadian Grain Commission sets
standards and specifications for grain grades
basis recommendations of the Eastern and
Western Canada Standards Committees.
The Canadian Grain Commission has
developed the Canadian Grain Grading Guide
which is a complete reference guide for grading
grains, oilseeds and pulses and is protected by
the Canadian Grain Commission's International
Standards Organization (ISO) provisions.
Private sector surveyors are permitted
to perform inbound inspections at export
locations.
------------------------------------------------------------------------
EU The European Parliament has established
official control measures to ensure the
compliance with feed and food law UN Regulation
(EC) No. 882/2004 which includes certain rules
for delegation by competent government
authorities to independent third parties.
The guarantees given by the official
control activities are the baseline on top of
which specific certification schemes may
operate on a voluntary basis.
Within the European Union, grains and
oilseeds and products are inspected under
voluntary certification schemes such as ``The
GAFTA Approved Superintendents Scheme'' or
``COCERAL GTP--Community Guide to Good Trading
Practice'' which comply with EU Member State
pre-requisites for assurances that inspected
products or their production methods conform to
the particular scheme specification.
Scheme specifications may include such
things as environmental protection, animal
welfare considerations, organoleptic qualities,
``Fair Trade'' and other socioeconomic
provisions.
Schemes may attest to compliance with
government requirements for best farming or
management practices.
Fees for inspection in major export
hubs are around $0.30 USD per mt.
The EU will be considering major
revisions to its food and feed law regulations
at a meeting in February which may eventually
introduce more consistency in European food and
feed control law. A copy of the CELCAA
(European food and agriculture traders
association to which COCERAL belongs)
supporting comments are attached in the
appendix to this report.
------------------------------------------------------------------------
Russia The Russian Grain Union which is
comprised of private and public sector grain
industry bodies in Russia is responsible for
establishing certification requirements and
accredit organizations to provide services.
According to information on their
website, the Russian Grain Union certifies
quality management system in compliance with
ISO requirements.
Export inspections are conducted by
privates surveying companies and if the sales
are made under GAFTA contracts the inspections
must conform to The GAFTA Superintendents
Scheme.
------------------------------------------------------------------------
Thailand Bulk and containerized Thai rice
exports are inspected by private surveyors per
the requirements set forth by the Ministry of
Commerce's Office of Commodity Standard.
The Office of Commodity Standard is
authorized to inspect 100% to 25% of fragrant
and white rice respectively and other grades
are inspected by private companies under the
auspices of the Office of Rice Inspection,
Board of Trade providing they meet certain
conditions.
The Government of Thailand sets a
ceiling on inspection fees of approximately
$0.50 USD per mt; laboratory fees are capped at
no more than $45 per test and the fee for
issuance of a certificate is capped at $7 USD.
The Government of Thailand assumes no
liability for quality claims.
------------------------------------------------------------------------
Ukraine Export inspections for grains and
oilseeds are provided by independent surveyors
per contract specifications laid out in GAFTA
and FOSFA contract language and operating rules
such as the GAFTA Approved Superintendents
Scheme.
Inspection fees for the Ukraine are
reportedly around $0.27 per mt.
------------------------------------------------------------------------
Vietnam Information not yet available.
------------------------------------------------------------------------
Bulk Commodity Importer Inspection Requirements
------------------------------------------------------------------------
Country Requirement
------------------------------------------------------------------------
China On March 20, 2014, the China National Health
and Family Planning Commission released the
revised National Food Safety Standard--Maximum
Residue Limits for Pesticides in Foods. (GB
2763-2014)
Exported food and feed products need to be
compliant with the following Chinese
restrictions to avoid introduction of
unapproved biotechnology events:
National Standards
GMO Product Testing--General Requirements
and Definitions (GB/T 19495.1-2004)
GMO Product Testing--Technical Requirements
on Laboratories (GB/T 19495.2-2004)
GMO Product Testing--DNA Extraction and
Purification (GB/T 19495.3-2004)
GMO Product Testing--Qualitative Nucleic
Acid Based Methods (GB/T 19495.4-2004)
GMO Product Testing--Quantitative Nucleic
Acid Based Methods (GB/T 19495.5-2004)
GMO Product Testing--Testing Method for Gene
Chips (GB/T 19495.6-2004)
GMO Product Testing--Sampling and Sample
Preparation Methods (GB/T 19495.7-2004)
GMO Product Testing--Testing Method for
Protein (GB/T 19495.8-2004)
AQSIQ Developed Standards
Testing of GMO Plant and Its Products--
General Requirements (NY/T 672-2003)
Testing of GMO Plant and Its Products--
Sampling (NY/T 673-2003)
Testing of GMO Plant and Its Products--DNA
Extraction and Purification (NY/T 674-2003)
Testing of GMO Plant and Its Products--
Qualitative PCR Method for Soybean (Testing)
(NY/T 675-2003)
MOA Standards for GMO Testing of Specific Events
MOA Public Notice No. 869 (14 standards);
MOA Public Notice No. 953 (27 standards);
MOA Public Notice No. 1193 (three
standards);
MOA Public Notice No. 1485 (19 standards);
MOA Public Notice 1782 (13 standards); and
MOA Public Notice 1861 (six standards).
MEP Developed Standards
Guideline for Eco-Environmental Biosafety
Assessment of Insect-resistant Transgenic
Plants (HJ 625-2011)
On December 22, 2014, The Chinese National
People's Congress published the Second Draft of
its Food Safety Law for public comments. The
draft can be found at: http://www.npc.gov.cn/
npc/lfzt/spaqfxd/node_25114.htm.
This new law establishes new registration
requirements and reinforces the AQSIQ authority
to inspect foodstuff imports.
------------------------------------------------------------------------
Egypt The Egyptian Government requires imported
corn, soybean, wheat, rice, soymeal and DDGs to
be pre-inspected, but special measures are in
place for wheat by the General Authority for
Supply Commodities (GASC) which requires
imports of wheat to be pre-inspected by an
Egyptian Government agency prior to export.
------------------------------------------------------------------------
EU Basically all EU food safety and
socioeconomic schemes that are in effect and
apply to exports apply to imports as well as
exports.
------------------------------------------------------------------------
Japan The Japanese Government does not require pre-
inspection of imports by a government authority
prior to export.
------------------------------------------------------------------------
Korea The Government of Korea requires imports of
basic food and feedstuffs to be pre-export
inspected by a government authority.
------------------------------------------------------------------------
Mexico Mexico does not require a government
inspection prior to import for basic
agricultural commodities.
------------------------------------------------------------------------
Philippines The Philippines Government requires pre-
export inspection by an accredited third party
inspection company. Shipments will not be
released without a pre-export inspection
certificate. Currently this does not apply to
containerized shipments, but the Government of
the Philippines is considering draft
legislation to close this window.
------------------------------------------------------------------------
Taiwan No government pre-export inspection is
required as the Taiwan Council of Agriculture's
Animal Industry Department and Taiwan Ministry
of Health and Welfare's Food and Drug
Administration conduct their own import
inspections at the port of entry. Starting
January 9, 2015, imports of grains and flour of
corn and soybeans are required to have a GMO
certificate which is issued by either the
exporting country's competent authority or
suppliers.
------------------------------------------------------------------------
Thailand The Government of Thailand requires pre-
export inspection for basic agricultural
commodities.
------------------------------------------------------------------------
Turkey Information not yet available.
------------------------------------------------------------------------
Vietnam Vietnam is implementing a new biotech
regulatory system which has made a number of
U.S. bulk commodities to be non-compliant at
least in the short term until approved by the
new regulatory system.
------------------------------------------------------------------------
Approximate Cost for Export Inspection Services in Select Markets (USD)
------------------------------------------------------------------------
Source: Govt (G) or Baseline Testing
Country Private (P) Cost/per mt
------------------------------------------------------------------------
United States USGSA (Bulk G FY07 $0.399287
Grains and Oilseeds)
(Source: Calculated from FY08 $0.442203
Information Contained in
USDA FGIS
Annual Reports) FY09 $0.436873
FY10 $0.474746
FY11 $0.463697
FY12 $0.440692
FY13 $0.516284
------------------------------------------------------------------------
United States AMA (Rice) G FY09 $1.265647
(Source: Calculated from FY10 $1.621067
Information Contained in
USDA
Annual Reports) FY11 $1.547178
FY12 $1.768691
FY13 $1.968364
------------------------------------------------------------------------
Argentina P $0.58 USD/mt
------------------------------------------------------------------------
Australia P $0.30 USD/mt
------------------------------------------------------------------------
Brazil P $0.15-$0.21 USD/mt
------------------------------------------------------------------------
Canada G $35.98/hr
(as of 1.21.15) (Excludes $1.34/mt
applicable taxes)
------------------------------------------------------------------------
European Union P $0.30 USD/mt
------------------------------------------------------------------------
Russia P $0.27 USD/mt
------------------------------------------------------------------------
Thailand G/P $0.40-$0.50 USD/mt
------------------------------------------------------------------------
Ukraine P $0.27 USD/mt
------------------------------------------------------------------------
Vietnam (rice) P $0.26 USD/mt
------------------------------------------------------------------------
Summary and Conclusion
Absolute cost comparisons, as the tables indicate, between country
inspections for cross-border commodity trade is very difficult due to
differences in fee structures (i.e., hourly vs. tonnage vs. per sample)
for specific tests. Therefore, it is difficult to measure empirically
the cost and competitiveness gains that might be obtained from new
delivery models for U.S. grain inspection.
However, it is evident that:
There is a global trend toward countries permitting private
surveying firms to perform such services for the buyer and
seller, with the only government involvement (if any) being
accreditation to assure accuracy, competence and equipment
calibration, if any. In fact, many sovereign nations find that
private standards organizations such as ISO, provide rigorous
certification of accuracy at lower cost than establishing
individual government standards would entail.
The U.S. and Canada maintain the only major grain and
oilseed exporter national government-run inspection agencies
and have significantly higher costs per ton for basic commodity
characteristics.
The U.S. exports about \1/3\ of all grains and oilseeds traded
globally and between 20% and 25% of U.S. exports of bulk grains,
oilseeds and major byproducts are currently re-inspected in some manner
by private surveyors. These services are voluntarily engaged by the
importer or by mutual agreement of the exporter and importer as part of
the terms of the contract to either confirm some inspection results,
measure attributes not measured under U.S. mandatory inspection
requirements or meet some other commercial requirement of the trade
transaction. This further reinforces the global trend cited above and
indicates a strong confidence level from foreign buyers in the test
results provided to them by private surveyors that they pay for.
The USDA FGIS grain and oilseed export inspection and weighing
system is based on labor-intensive, subjective procedures and
historical precedent based heavily on reaction to events forty years
ago and fails to take full advantage of opportunities created by
professional third-party contractors using modern objective technology
to establish marketing parameters that have the most utility in the
marketplace.
Since major U.S. competitors and customers already recognize the
efficiencies and cost savings accruing to the use of private surveyors
to perform independent third party surveying services, it may be
prudent for U.S. stakeholders in U.S. competitiveness to consider
support for a competitive model of inspection service delivery.
Based on our examination of how other competitor and customer
countries address their grain export and import inspection services,
the U.S. should consider adopting a new paradigm utilizing accredited
private surveyors to compete to perform official inspection and
weighing services under a strict process-verified system overseen by a
branch of USDA such as the Agricultural Marketing Service utilizing
standards and procedures established by the USDA FGIS. This would
restore the U.S. Government's role to that of a regulatory agency and
allow commercial trade to take better advantage of the efficiencies of
the professional independent third party surveyors who provide services
to U.S. customer governments and commercial parties already.
Contacts and Resource List for Competitiveness Study
WKMGlobal Consulting believes that all the information used in this
study was derived from sources believed to be accurate and reliable and
is not responsible for any unintentional errors or omissions therein.
USDA FAS Posts
Tokyo, Japan
Taipei, Taiwan
Bangkok, Thailand
Manila, Philippines
Hanoi, Vietnam
Cairo, Egypt
Moscow, Russia
Mexico City, Mexico
EU Brussels, Belgium
Istanbul, Turkey
Beijing, China
Grain Trade and Industry Associations
Grain Trade Australia
ANEC, Brazil
Cargill Brazil
COCERAL
GAFTA
Government Websites
USDA GAIN and FAIRS Reports
USDA FGIS Annual Reports 2007-2013
Canada Grain Commission
European Union
Appendices
Representative Importing Country Survey Results Regarding Inspection
Requirements
Korea
Japan
Egypt
Thailand
Philippines
Taiwan
Pending Reform Plans in Competitor Export Countries
Canada
European Union
Representative Importing Country Survey Results Regarding Inspection
Requirements
Korea
The Government of Korea requires imports of corn, soybeans, wheat,
rice, soybean meal, and DDGs to be pre-inspected by a government
authority prior to shipment. Private surveying companies are permitted
to perform Maximum Residue Level testing in lieu of a government
inspection. Both bulk shipments and container shipments are required to
have phytosanitary inspections per requirements of the Ministry of
Agriculture. Import inspections are performed by the government and
testing is performed for biotech presence, mycotoxins, maximum residue
levels, heavy metals, radiation and plant pests and diseases. Any
private sector firm performing inspections under the auspices of the
Korean Government must first be accredited by the government and pay a
fee for compliance to the Ministry of Food and Drug Safety. According
to USDA sources there is no way for any commodity to circumvent or
avoid the government inspection requirements.
Japan
The Government of Japan (GOJ) does not require pre-inspection for
bulk or container shipments. However, for state traded commodities
(i.e., rice and wheat) whether bulk or containerized, the Grain Trade
and Operation Division of the Crop Production Department in the
Agricultural Production Bureau of the Ministry of Agriculture, Forestry
and Fisheries (MAFF) does require some testing as part of its purchase
contract. MAFF also requires that samples be taken of wheat and barley
during the harvest season in export countries and tested for chemical
residues, heavy metals, unapproved GE events and mycotoxins. The items
for inspection vary depending on the risk of the substances/chemicals
in each exporting country. For state traded commodities, testing is
either performed in a registered laboratory in the exporting country or
shipped to Japan to be tested at a MAFF laboratory. For the harvest
season survey--in the case of the United State--MAFF coordinates with
USDA/GIPSA to have samples sent to registered laboratories in the
United States. State trade wheat is tested for GMO presence,
mycotoxins, maximum residue levels, and heavy metals. Rice is tested
for all of those attributes plus moisture, damaged kernels and
impurities. Private sector surveyors can become registered by complying
with a procedure established by the GOJ.
Egypt
The Government of Egypt requires imports of corn, soybeans, wheat,
rice, soymeal and DDGs to be pre-inspected by a government authority
prior to shipment. There is no way to bypass the government inspections
and the cost on average is $8 per mt for corn; $6 per mt for wheat; $16
per mt for soybeans; $7 per mt for rice; $20 per mt for soymeal; and
$15 per mt for DDGs in addition to the approximately $.50 per mt cost
for GIPSA inspection at origin in the U.S. The Government of Egypt
Ministry of Supply General Authority for Supply Commodities (GASC)
requires imports of wheat to be pre-export inspected by a government
authority prior to export to Egypt. For GASC purchases, Egypt requires
that a six-member inter-agency committee inspect wheat at origin. The
joint committee is composed of two members each from the Ministry of
Agriculture's Central Administration of Plant Quarantine (CAPQ), the
Ministry of Trade's General Organization for Export and Import Control
(GOEIC), and the Ministry of Health (MOH). For wheat imports by the
private sector, it is optional to send only two people from CAPQ. For
corn it is also optional to send two people from the Ministry of
Agriculture and Land Reclamation's Regional Laboratory for Food and
Feed (RLFF). Egyptian Government testing is performed by the Ministry
of Agriculture and Land Reclamation which has responsibility for the
Central Administration of Plant Quarantine and the Regional Lab for
Food and Feed. In addition, the Ministry of Health and the Ministry of
Trade and Industry are also involved in import inspections. In Egypt,
inspections are performed by government agencies listed above and there
is no accreditation of private surveyors. Egypt does not have any pre-
export or arrival testing licensing program to allow private surveyors
to perform the functions on behalf of the government. International
surveying companies that are ISO 17020 and 17025 accredited are
sometimes hired by private importers to do testing and analysis as a
back-up in case a shipment is rejected, and the importer can use
inspection results from such firms in appeals made of government
inspection results. These firms are not licensed by the Government of
Egypt.
In case of rejection of shipment, according to Article 117, Chapter
4 of Ministerial Decree No. 770/2005, the exporter or importer may
appeal the final inspection results no later than 1 week from the date
of rejection. The concerned party can file and appeal with the Appeal
Committee Secretariat which has broad authority to accept the results
of the final inspection, or to amend the results or annul them. They
can also authorize a re-inspection of the consignment or allow for
treatment with certain conditions. The committee's results are deemed
to be final.
Summary Table of Egyptian Inspection Requirements
------------------------------------------------------------------------
Factors \1\ Corn Wheat Soybeans Rice Soymeal DDGs
------------------------------------------------------------------------
Moisture Max Max 13% Max 12% Max Max 12% Max
12.5% \2\ 14% 11.9%
------------------------------------------------------------------------
Density Not Not Not Not Not Not
requir require required requi required requi
ed d red red
------------------------------------------------------------------------
Damaged Max 5% Max 5% Max 5% Max 5% Not Not
Kernels required requi
red
------------------------------------------------------------------------
Impurities Max 2% Max 2% Max 2% Max Max Ash Max
0.5% 7% Ash
7%
------------------------------------------------------------------------
Oil and 9% Minimum Oil not Based Low Protei
Protein 11.5 % less than on protein n +
Content Max 18 custo not less fat
percent mer than 45% 36%
Protein needs High Digest
not less protein ed
than 37 not less prote
percent than 46- in
48% 85.5%
------------------------------------------------------------------------
GMO Testing No No No testing No No No
testin testing testi testing testi
g ng ng
------------------------------------------------------------------------
Falling N/A Minimum N/A N/A N/A N/A
Numbers 250 per
sec for
12.5%
------------------------------------------------------------------------
Mycotoxins Total Total Total Not Total Total
Aflato Aflatox Aflatoxin requi Aflatoxi Aflat
xins ins s maximum red ns oxins
maximu maximum 20 PPB maximum maxim
m 20 2 PPB Aflatoxin 20 PPB um 20
PPB B1 Aflatoxin PPB
Aflatox Maximum 10 B1 Aflato
in B1 PPB Maximum xin
Maximum 10 PPB B1
10 PPB Maximu
m 10
PPB
------------------------------------------------------------------------
MRLs Codex, Codex, Codex, EU Codex, Codex, EU Codex,
EU and EU and and EPA EU and EPA EU
EPA EPA Standards and Standard and
Standa Standar Apply EPA s Apply EPA
rds ds Stand Stand
Apply Apply ards ards
Apply Apply
------------------------------------------------------------------------
Heavy Metals EU EU EU EU EU EU
Standa Standar Standards Stand Standard Stand
rds ds ards s ards
------------------------------------------------------------------------
Radiation EU EU EU EU EU EU
Standa Standar Standards Stand Standard Stand
rds ds ards s ards
------------------------------------------------------------------------
Thailand
The Government of Thailand requires mandatory pre-inspection by a
government or private surveyor for imports of corn, soybeans, wheat,
rice, soybean meal and DDGs prior to shipment for both bulk and
containerized cargoes. The Government Agency responsible for the import
testing for feed ingredients (soymeal and DDGs) is the Department of
Livestock Development.
Tests are conducted for moisture, oil and protein content,
mycotoxins and heavy metals. The reported cost for testing for DDGs is
$12-$24 per mt.
Philippines
The Philippines Bureau of Customs (BOC) requires pre-inspection
(via a third party or accredited private inspection company) of bulk
and break-bulk shipments from all origins. Shipments will not be
released to importers without load-port survey/inspection reports. At
the current time, there is no pre-export government inspection
requirement for containerized shipments, but the Philippine BOC is
drafting legislation that would require pre-inspection of containers.
The BOC has already advised the accredited load-port inspection
companies (for bulk and break-bulk) to prepare for the expansion of
work to cover containerized shipments. The BOC accredits SGS, Bureau
Veritas, Cotecna and Intertek to perform bulk and break-bulk load-port
inspections, which are audited by the BOC/Bureau of Internal Revenue.
The cost for testing wheat for one vendor was reportedly $0.075 USD per
metric ton. The Philippines Bureau of Plant and Industry which is part
of the Philippines Department of Agriculture is responsible for any
government testing upon arrival. Importers are not able to receive any
relief from weight discrepancies but may file insurance claims for
quality disputes. The current system is valuable for the government and
all concerned in that it addresses under declaration in weight,
misclassification, and under-evaluation. It is onerous and costly for
U.S. origin exports which are already inspected by FGIS for quality and
quantity. USDA FAS Manila reports that expansion of the mandatory pre-
shipment inspection requirement to containerized shipments will likely
become a trade irritant.
Summary of Philippine Pre-Export Inspection Requirements
----------------------------------------------------------------------------------------------------------------
Factors \1\ Corn Wheat Soybeans Rice Soymeal DDGs
----------------------------------------------------------------------------------------------------------------
Moisture X X X X
----------------------------------------------------------------------------------------------------------------
Density X X X X
----------------------------------------------------------------------------------------------------------------
Damaged Kernels
----------------------------------------------------------------------------------------------------------------
Impurities
----------------------------------------------------------------------------------------------------------------
Oil and Protein Content X X X X
----------------------------------------------------------------------------------------------------------------
GMO Testing X X X X
----------------------------------------------------------------------------------------------------------------
Falling Numbers X X X X
----------------------------------------------------------------------------------------------------------------
Mycotoxins X X X X
----------------------------------------------------------------------------------------------------------------
Quantity X X X X
----------------------------------------------------------------------------------------------------------------
Price Comparison X X X X
----------------------------------------------------------------------------------------------------------------
[Section Notes]
\1\ Please note that GOE import law presently disallows/stipulates
zero tolerance for ambrosia, so U.S. grain and soybean shipments are,
from time to time, subject to screening and associated costs at ports
of discharge.
\2\ GASC has issued exemption (for French wheat) allowing up to
13.5% until the end of February 2015.
Taiwan
The Taiwanese Government does not require pre-export Government or
private sector inspections for bulk or containerized corn, soybean,
wheat, rice, soymeal or DDGs shipments from any of its import sources.
Taiwan is reportedly adding a new requirement for pre-export inspection
for radiation for products from Japan destined for food use. Import
inspections are carried out at the Taiwanese port of entry into the
Taiwan market by the Council of Agriculture's Animal Industry
Department for feedstuffs and by the Ministry of Health and Welfare's
Food and Drug Administration for foodstuffs. Starting on January 9,
2015, shipments of corn and soybeans and processed byproducts of these
two commodities are required to have certification for GE presence
which is to be issued by either the export country's competent
authority or the supplier. Private laboratories can be accredited to
provide import compliant service on behalf of the Taiwan FDA by making
a voluntary application to TFDA. Non-accredited laboratories are also
eligible to compete for the TFDA business contracts which is supposedly
awarded based on a review of qualitative criteria. Inspection results
are audited by the government agencies responsible for feed and food.
The Government of Taiwan does not intervene in weight discrepancies or
disputes which are negotiated between the importers and exporters per
the terms of the contract. The fee for inspections is determined on an
ad valorem basis of 0.05% for corn, soybeans and wheat and 0.15% for
other products on the CIF price. Importers pay the fee on non-compliant
products and additional testing requirements can add to the inspection
cost.
Pending Reform Plans in Competitor Export Countries
Canada and the European Union are considering reforms for grain,
feed or foodstuff inspection requirements, which may or may not enhance
their grain and oilseed competitiveness versus U.S. origin exports.
Amendments to the Canada Grain Regulations (Security)--Forward
Regulatory Plan: 2014-16
------------------------------------------------------------------------
-------------------------------------------------------------------------
Key changes proposed for the Canada Grain Act
Enhance producer protection
1. Extend producer access to Canadian Grain Commission binding
determination of grade and dockage (this right is known as
``Subject to inspector's grade and dockage'') on deliveries to
licensed process elevators, grain dealers, and container loading
facilities.
Producers have the right to ask the Canadian Grain
Commission for binding determination on grade and dockage when
the producer or the person delivering the grain disagrees with
the grade or dockage assigned to a grain delivery.
The producer is paid according to the Canadian Grain
Commission's determination.
Currently, this right is limited to deliveries at
licensed primary elevators.
Extending this right would resolve inconsistencies in
producer treatment across the licensed grain handling system.
2. Allow the Canadian Grain Commission to establish and administer a
producer compensation fund to compensate producers when a licensee
fails to pay for a grain delivery.
The amendment would give the Canadian Grain Commission
additional flexibility to implement an alternative producer
payment protection model.
The fund would be funded by licensee contributions, which
would be based on their expected risk of failure and volume of
grain purchases. Payments would be distributed to eligible
producers when a licensee fails to pay.
The fund would pool the risk of payment failure. It is
anticipated that it would reduce industry costs and
administrative requirements.
Until a fund is developed, the existing security-based
program and its requirements would continue, that is, producers
would be covered by the security program, and licensees would be
required to post sufficient security.
Enhance grain quality and safety assurance
1. Create a new class of licence for container loading facilities. A
new class of licence would allow the Canadian Grain Commission to:
Effectively respond to quality complaints on the
increasing volume of grain shipped in containers.
Improve statistical reporting.
License the grain industry more consistently.
2. Permit the Canadian Grain Commission to monitor, test and enforce
grain safety issues in grain elevators in Eastern Canada as
required where provincial authorities do not exist.
The Canadian Grain Commission would have the ability to
request samples of grain from Eastern elevators.
The change would improve the Canadian Grain Commission's
capacity to identify and mitigate safety issues and help resolve
market access disputes.
It would also provide a consistent, national approach to
grain safety issues.
The change would not expand the Canadian Grain
Commission's licensing authority in Eastern Canada. Primary and
process elevators east of Thunder Bay would continue to follow
provincial regulations.
The change would not be implemented until stakeholders
and provincial governments in Eastern Canada have been consulted.
Modernize the Canada Grain Act
1. Clarify that the Canadian Grain Commission acts in the interest
of all Canadians, including the entire grain sector and grain
producers.
This clarification would address stakeholder concerns
that the current mandate, which speaks specifically of grain
producers, is not in keeping with the Canadian Grain Commission's
role as an unbiased regulator.
All aspects of producer protection would be maintained,
and the Canadian Grain Commission would continue to perform
specific functions in the interests of producers, such as binding
determination of grade and dockage (Subject to inspector's grade
and dockage) and allocating producer cars.
2. Establish a non-binding process for reviewing certain Canadian
Grain Commission decisions, such as exemptions, licence
suspensions, and refusals to grant permissions.
The review process would consist of a panel of three
members:
one chosen by the party requesting the review.
one chosen by the Canadian Grain Commission.
one chosen by both parties.
Currently, a stakeholders only recourse is to seek review
by a court.
The review process would be a less costly and more
responsive way for stakeholders to appeal decisions that affect
their businesses.
3. Provide authority for the Minister of Agriculture and Agri-Food
to appoint and reappoint members to the grain standards committees,
upon recommendation of the Commission.
The Minister would also establish the terms of office for
the non-government members and establish a maximum term of
office.
4. Permit the Canadian Grain Commission to enact regulations that
require producers and shippers to make declarations on grain
deliveries.
The Canadian grain industry implemented an industry-wide
declaration system for western Canadian wheat in 2008.
Currently, grain companies use declarations for most type
of grain deliveries.
Declarations are part of a larger quality management
system for western Canadian grain, which includes testing and
monitoring protocols for industry.
Regulations would define the declaration process.
5. Make certain offences under the Canada Grain Act subject to
administrative monetary penalties under the Agriculture and Agri-
Food Administrative Monetary Penalties Act.
The amendment would allow the Canadian Grain Commission
to respond more appropriately to common violations of the Canada
Grain Act and would improve compliance.
6. Permit licensees to refuse varieties of grain that are not
registered under the Seeds Act for sale or import into Canada.
The amendment would not exclude producers from declaring
and delivering unregistered varieties.
It would allow elevator managers some discretion
regarding the orderly delivery of grain.
Date modified: 2014-12-09
------------------------------------------------------------------------
European Union
Brussels, November 2014
CELCAA Key Messages on Official Food and Feed Controls
CELCAA is the voice of the European traders in agricultural and
food commodities to the European Institutions, media and stakeholders.
Cereals, oilseeds, animal feed, oils and fats, olive oil, agro-supply,
meat and meat products, dairy products, wine, eggs, egg products,
poultry and game, raw tobacco, essential oils and spices are covered by
our umbrella.
CELCAA supports the Commission proposal towards a European
consolidation of harmonized, fair, efficient and transparent system for
official controls on food and feed.
Official controls contribute to the high level of food and feed
safety in the EU, to consumer trust and to the good functioning of the
internal market, and shall guarantee a level playing field for all
operators across the EU. The Commission proposal aims at strengthening
these principles, and goes in the right direction in terms of
consolidating the current legislation.
CELCAA would like to draw the attention of European decision-makers
to the following points, which are crucial for the trade operators in
the food and feed chain:
Risk-based approach for import controls (Art. 8; Art. 47)
CELCAA strongly supports the Commission's principle
supporting a risk-based approach and welcomes the proposal to
strengthen it. CELCAA calls for its full implementation by
competent authorities when programming and performing official
controls.
The frequency of the physical and identity checks should take
due consideration of the risk-based principle, and hence should
depend on the past experience with the given product and
country of origin, as proposed by the Commission proposal.
Controls by independent private bodies (Art. 25) and own controls
CELCAA supports the importance of independent controls; as
the mandate for controls given to a public body can be too
restrictive in some cases, as in some Member States official
controls need to be performed by a third independent party
which can be both public and private.
CELCAA welcomes the EU Parliament vote considering operators'
private quality schemes. Trade operators have invested heavily
in quality assurance systems and regular own controls, and
competent authorities should give due consideration to these
schemes when elaborating controls programs.
Principle of equivalence of SPS requirements between the EU and
third countries
In line with the international principles of equivalence of
sanitary and phytosanitary requirements under the WTO, the
Commission proposal provides a series of requirements designed
to ensure that imported products meet standards at least
equivalent to those required for production in, and trade
between, Member States. This is welcomed by CELCAA.
It is, therefore, of utmost importance that the EU system of
official controls remains fully embedded in this principle.
Without this principle, imports of much needed agri-food
products to the EU will risk breaching the legislation and thus
security of supply for EU consumers.
Trade in bulk (Art. 75)
CELCAA supports the Commission proposal recognising the
specific nature of bulk trading.
Specific rules should apply to the collection, storage,
trading and transporting of bulk agricultural commodities.
The delegated act envisaged by the EU Commission in this
respect should be maintained in the proposal and drafted in
close collaboration with representatives of traders in bulk
commodities.
Common Health Entry Document (Art. 54)
Traders should be thoroughly consulted on the draft design of
the Common Health Entry Document, so as to avoid duplication
with other requirements.
Official certificates for exports
The use of model official certificates should be optional;
Current practices need to be taken into account in instances
where an existing certificate has already been agreed
bilaterally between a Member State and a third country or where
a specific format is required by the third country and it may
be more appropriate to use this particular certificate.
Right to second opinion (Art. 34)
The right of the operator to apply for a second expert
opinion is of utmost importance for the agricultural sector.
CELCAA requests provisions to include a set timeframe to obtain
analytical results of a second sample which is imperative to
business and to avoid trade stoppages at ports.
Transparency and Information Management System (Chapter II. Art.
10; Art. 14)
CELCAA strongly opposes the publication of individual control
results and the use of rating schemes (naming and shaming).
Information identifying individual operators should only be
published when there is an overriding public interest, i.e., a
serious risk to human health and according to criteria set at
EU level. In any case, operators should be given the
opportunity to defend themselves and their comments should be
published together with the control results.
Similarly, CELCAA does not support the provision to grant a
legal basis to allow Member States to publish ratings of
individual operators. On the contrary, CELCAA supports the
strengthening of data protection in the current compromised
text (ref. Art. 133a and Art. 133b).
Publication of multi-annual national control plans should be
drafted in consultation with traders.
CELCAA is concerned about the provision of access to
information. Access to the business operators' computerised
information management system would need to take account of the
data privacy and protection and should be done only to the
extent that a food safety risk is justified. The access by
competent authorities to operators' documents and information
management systems needs to be restricted to those ones
required to verify compliance with food and feed law
requirements.
Financing of official controls & principle of costs sharing
(Chapter VI)
Food safety is a common public good. CELCAA, therefore,
believes that official controls from public authorities should
be financed through public budget.
As part of the shared responsibility in ensuring food and
feed safety, business operators have already invested in
certified quality management systems in their daily operations.
Competent authorities, therefore, need to remain in charge of
the funding of the official control system as part of their
shared responsibility.
Food and feed business operators have primary responsibility
for food safety. Official controls are under the responsibility
of competent authorities. Therefore, where mandatory fees
apply, a cost sharing system must be put in place to ensure
there is an incentive on both sides to carry out official
controls in an efficient manner.
There is a need for further harmonisation of controls across
the EU which should be proportionate to the risk as currently
there is a huge variance between Member States.
If in the event that a charge for the funding of official
controls is implemented, it must be a fundamental principle
that it is harmonised at EU level. The harmonisation of the
costs of controls at EU level is of utmost importance to the
trade and should be calculated and allocated in a way to ensure
fairness for all operators along the supply chain and to ensure
consistent as well as effective systems. This cost-sharing
system should follow the principle below:
Where fees are collected, they must be collected from
all operators in a fair manner and should be proportionate
to the official controls performed, micro-enterprises
included.
The Competent Authority must demonstrate a risk based
approach which is transparent to the Food Business
Operators.
Fees should only be recovered and related to direct
costs linked to official controls on site (e.g., short
positive list: salaries, equipment and consumables) while
Competent Authorities should remain in charge of the
indirect costs.
Competent Authorities should provide full transparency
to operators on the methods related to the costs linked to
charging.
On the application of fees, CELCAA does not support the
provision that Competent Authorities do not release goods until
fees are paid which could amount to significant additional
costs for importers should vessels be delayed at the point of
import.
Efficient controls according to the principle of thriftiness
CELCAA strongly calls for competent authorities to carry out
performance and efficient controls; they should have
appropriate means to carry out their tasks.
The time-efficiency in performing official controls, in terms
of staffs, procedures and equipment as well as in delivering
results by control authorities is essential for traders.
Potential inefficiencies by control authorities should be
avoided as they will create additional burdens to traders in
terms of costs and delay in discharging/delivering the goods.
The principle of thriftiness should be clearly mentioned as a
principle to be duly followed by the competent authorities in
the core text of proposed legislation.
CELCAA is the EU umbrella association representing EU organisations
covering the trade in cereals, grains, oil, animal feed, agro-supply,
wine, meat and meat products, dairy and dairy products, eggs, egg
products, poultry and game, tobacco, spices and general produces.
Members include COCERAL, UECBV, EUCOLAIT, CEEV, EUWEP, GAFTA, FETRATAB,
CIBC. CELCAA's main objectives are to facilitate understanding of
European decision-makers and stakeholders on the role played by the
European traders in agri-food products; to act as a platform of
dialogue and communication with the European Institutions and to
encourage public and general interests in agri-trade issues.
Attachment 4
U.S. Grain and Oilseed Inspection Services Competitiveness Study
Customer Specifications and Preferences
March 15, 2015
W. Kirk Miller and Paul B. Green
WKMGlobal Consulting
3901 Chain Bridge Road, Fairfax, VA 22030
[email protected]
Table of Contents
Introduction
Executive Summary
Background and Purpose
Official Grain Inspection
Additional Characteristic Certification
Findings
Choices for Inspection Services
Selected Importing Country/Company Data Results
Conclusions and Recommendations
Appendices
FGIS Services
Excerpted from the National Oilseed Processors Association
``Trading Rules for the Purchase and Sale of Soybean Meal''
Adopted October 18, 1933
Customer Specifications and Preferences
Introduction
U.S. exporters are in a unique position to originate and provide a
wide array of products that conform to the requirements of foreign
customers. Better understanding foreign customer needs and capabilities
of the U.S. export sector to adapt and deliver products that meet those
needs will help the U.S. to maintain and grow its grain and oilseed
market-share globally. An effective, efficient and reliable official
export inspection and weighing system can enhance the competitiveness
of U.S. grain exports and a system that is seen as inefficient or
unreliable can damage competitiveness dramatically.
Different inspection service and superintendence models are
employed at major export locations around the world driven by
government requirements, importer needs and exporter convenience
balanced against reasonable costs for assuring the product quality and
functionality. U.S. exports of most bulk grains and oilseeds, with few
exceptions, are inspected and weighed by the USDA Federal Grain
Inspection Service (FGIS) per a load order based on contract
specifications. Load orders usually include requests for additional
superintendent services to assure or provide test results covering
intrinsic quality characteristics or socioeconomic considerations. The
additional services may be provided by FGIS, if they offer the service,
or by private superintendent companies per the contract.
Executive Summary
Foreign buyers require additional third party tests to satisfy one
or more of many possible motives, e.g.:
To comply with importing government food safety requirements
such as for mycotoxins, MRL's and heavy metals.
To satisfy customer, commercial processing information needs
for amino acid profiles, farinograph or amyleograph, falling
numbers, oil and protein content etc.
To assure delivery of premium commodities or byproducts
which reduce freight costs on an end-use value basis.
To provide testing and related services for non-standardized
grains.
To satisfy socioeconomic considerations such as
sustainability and labor standards requiring certificates of
origin or custody documentation.
To meet end-user GMO approved event compliance requirements.
To verify FGIS results.
To meet commercial documentation requirements such as
banking or customs requirements.
Interestingly, some of the additional non-grade determining tests,
which may be the most important factors in the marketplace, are not
available from FGIS. This leads to the question of why the specific
factors that are part of the official U.S. grade standards are the
exclusive purview of the official U.S. Government inspection service,
but other attribute tests that seem to matter as much or more to
importers are optional and allowed to be performed by professional
private superintendent firms.
With private independent superintendent companies providing so many
services both internationally and at U.S. export locations for foreign
customers, especially customers demanding more rigorous international
quality control regimens than those used by FGIS, it is apparent that
these independent third party firms could be contracted to perform
official services without a negative impact on market perceptions or
customer confidence in U.S. origin products. They could be utilized to
provide many of the mandatory inspection and weighing tasks that are
now performed by Federal employees leading to overall efficiency gains
and cost savings. FGIS could take advantage of the professional
expertise that is available in the private sector and prioritize its
activities toward meeting traditional governmental roles of standard
setting, training, oversight and compliance.
Background and Purpose
On behalf of the U.S. grain and oilseed export industry, the North
American Export Grain Association has contracted with WKMGlobal
Consulting to conduct a review of the global marketplace and determine
what motivates foreign customer importers to request additional
independent third party testing services above and beyond what is
mandated under the U.S. Grain Standards Act. A competitive U.S. grain
and oilseed export system will always be aware of trends that cause
importer's contractual requirements for inspection and analysis to
change and will be responsive to importer needs for additional
information about export shipments. This report is to provide insight
into those trends, identify the motivating factors behind them and
explain the implications they might have for the U.S. grain handling
system's ability to meet future needs in the most cost-effective
manner.
According to the project terms of reference, this work was to be
based to a large extent on a comprehensive customer and exporter
survey:
To elicit the rationale and business case for specifying
certain additional private sector services or the rationale for
additional non-grade determining factors for U.S. grain and
oilseed export cargoes.
To use U.S. cooperators to help distribute and collect the
survey information including the costs that are incurred for
the additional services.
Official Grain Inspection
GIPSA's Federal Grain Inspection Service provides inspection
services on grains, pulses, oilseeds, and processed and graded
commodities. These services facilitate the efficient and effective
marketing of U.S. grain and other commodities from farmers to domestic
and international end-users.
Official inspection services are divided into two basic types:
``inspection for grade'' or ``factor analysis'' without grade.
Inspection for grade involves analyzing the sample according to the
quality factors listed in the Official U.S. Standards for Grain and
certifying the applicable numeric grade designation, the quality
factors responsible for the grade assignment, and any other quality
factors the customer requests.
Under the United States Grain Standards Act, the following
activities are defined as mandatory export grain inspection and
weighing services:
Official weighing of most grain exported from the United
States and of inter-company barge grain received at export port
locations.
Official inspection of most grain exported from the United
States.
Testing of all corn exported from the United States for
aflatoxin prior to shipment, unless the contract stipulates
testing is not required.
Mandatory inspection requirements do not apply to grain that is not
sold or described by grade. Mandatory inspection and weighing
requirements are waived for grain exporters shipping less than 15,000
metric tons of grain abroad annually; for grain exported by rail or
truck to Canada or Mexico; for grain sold as ``seed''; for grain
transshipped through the United States in a bonded identity preserved
fashion; and for high-quality specialty grain shipped in containers.
Additional Characteristic Certification
Some commodities like rice and processed bulk grain byproducts like
soymeal and dried distillers grains are not listed under the USGSA and
are usually inspected by private third party inspectors under industry
standards or in the case of rice under the auspices of the Agricultural
Marketing Act by either USDA FGIS or independent third party surveyors.
For standardized grains and oilseeds, FGIS tests for grade determining
factors such as test weight, damage, foreign material, class and in
some cases moisture established by FGIS. Non-grade determining factors
or attributes may be tested by FGIS or independent third party
surveyors depending on the agreement reached between the buyer and
seller of the commodity.
Additional non-grade determining factors or attributes that can be
tested cover a wide range of analytical procedures from determination
of intrinsic quality attributes to the presence of heavy metals,
certain biotech events or pesticide residues. Sometimes independent
third party contractors are needed to provide certificates for
documentation requirements related to buyer chain of custody concerns
or for socioeconomic or labeling purposes. USDA's FGIS performs some of
these tests and services, but not all of them (Examples of tests not
provided include biotech testing and weed seed identification) and many
are conducted offsite from the export elevator location where the cargo
is being sampled prior to export loading. A list of tests and fees that
FGIS conducts is attached to this report as an addendum.
It is noteworthy that independent third party laboratories often
use International Standards Organization (ISO) or industry trade
association standards that are often more rigorous than those
established and used by FGIS. The formal ISO requirements for internal
audits and feedback dictate that the private subscribers adhere to
protocols that are of a global nature rather than standards developed
and used only in the U.S. Also, many of the independent third party
superintendent companies are the same firms that are conducting inbound
inspections and surveys on behalf of U.S. export customers. It is in
these firms own best self-interest to insure that the test analysis at
U.S. origin are in line with the results that are determined at
customer import locations.
This report attempts to identify why foreign customers request
independent third parties to perform these tests rather than simply
have USDA FGIS perform the additional tests, which would seem to be the
natural default condition since they are already on location and
involved in the mandatory official testing.
Findings
In accordance with our original study objectives, WKMGlobal
developed an extensive and detailed customer preference survey. After
further detailed discussion with representatives of U.S. Wheat
Associates, U.S. Soybean Export Council, U.S. Grains Council, USA Rice
and NAEGA, it was agreed that such an extensive, survey of importers
might be an imposition on them and might yield redundant or incomplete
data. This instead led to a multi-step alternative approach:
Pursue input from a more select and targeted group of
companies from major market countries regarding the contractual
expectations from importers for inspection, quality
characteristic measurements and documentation.
Review with U.S. exporter documentation experts their
knowledge of the drivers behind these contractual provisions
and the rigor behind the provisions.
Interview some selected knowledgeable importer
representatives to determine their perspectives on what needs
are being met in the case of individual contractual inspection
document.
The basis of this approach was to test the WKMGlobal original
hypothesis that the drivers for trends in the characteristics being
measured in international trade by the global food business could be
grouped into categories:
1. Basic visual and physical characteristics of soundness,
cleanliness and accuracy of description and purity as
proscribed in the U.S. Grade Standards for standardized
grains.
2. Health and food safety characteristics as perceived and required
by Health Ministries.
3. Characteristics related to the processing performance of products
in the supply chain as they move toward their intended
uses.
4. Consumer or activist demands for information about their food and
its production methods.
5. Compliance with regulatory requirements that production methods
or processes have been completed and approved by the
importer.
The interviews and document review undertaken in conjunction with
this project clearly confirmed that as expected the first category of
inspection requirements--the physical characteristics--was a necessary
description and measurement needed for every cargo of U.S. export grain
and oilseeds. However, it is also clear that analysis of physical
characteristics is insufficient to meet the information needs of an
increasingly sophisticated food supply chain with just mandatory USDA
FGIS inspections. There was no indication from any stakeholder that the
official FGIS certificates are no longer needed and should be
abandoned.
A second hypothesis that needed verification came from a different,
but related study regarding customer acceptance of quality inspection
from non-U.S. origins by private inspection companies. WKMGlobal
surmised that the importers would also find that the current additional
characteristic inspections that were being done by private inspection
agencies to be sufficient and cost-effective. As with the categories
assumption, the project sought to verify or reject that hypothesis.
The study approach described above allowed WKMGlobal to compare
contracts and tender language from various buyers and put
characteristics requirements into the categories above. We then were
able to take those buckets of inspection criteria as the basis for
targeted questions to expert exporter and importer representatives.
The end result was a confirmation of both hypotheses--
Buyers are satisfied with the descriptive measurement of the
U.S. grain grades which provides for a definition of the basic
physical factors of the traded commodities and indicate
knowledge of the fact that the grade certificate is issued by
the U.S. Government.
However, the demands of government regulators, food
processing customers and consumers (as indicated by the market
or activist demands) is leading to more specific, testing-
related characteristic measurement
Choices for Inspection Services
U.S. grain exporter sources confirmed to WKMGlobal that there are
three models for requests from foreign buyers for additional
characteristic inspection/documentation.
1. Requirement for documentation of additional characteristics with
no designation of which entity (private or FGIS) will
perform the sampling and testing.
2. Requirement for documentation of additional characteristics with
a selection of prospective companies to provide the
sampling and testing.
3. Requirement for documentation of additional characteristics with
a specific company to provide the sampling and testing.
In the first two scenarios, the exporter is entitled to choose the
company to provide the service. In telephone interviews, we were
informed that the price for services was relatively competitive between
private firms, so the more important factors for choice between firms
were;
a. Experience and predictability of results (most export companies
have experience with major testing companies and the
predictability of testing results from those firms based on
both experience and 'round robin' lab calibration
participation).
b. Speed of turnaround for documents (Filing of documents with
banking officials has financial impact, so time is of the
essence in obtaining the results).
c. Relationship and physical proximity (if firm is already
performing inbound testing and are located in the export
facility, they have a built-in advantage to be designated
for the export testing).
When asked by the authors whether the exporters would consider
using FGIS for the optional inspections, we were told that it would be
very rare, since FGIS is not perceived to be as competent in performing
non-grade determination additional testing services's outside of the
required grade factors. (Laboratory operator competence is often a
function of the volume of tests being done and FGIS is not being used
for nearly the number of tests that many private superintendent
companies are.)
According to the January 30, 2015 companion Export Competitor and
Import Country Information study conducted by the authors, absolute
cost comparisons between country inspections for cross-border commodity
trade is very difficult due to differences in fee structures (i.e.,
hourly vs. tonnage vs. per sample) for specific tests. However, in that
study the authors found that there is a global trend toward countries
permitting private surveying firms to perform such services for the
buyer and seller, with the only government involvement (if any) being
accreditation to assure accuracy, competence and equipment calibration.
In fact, many sovereign nations find that private standards
organizations, such as the International Standards Organization (ISO),
provide more rigorous certification of accuracy at lower cost than
establishing individual government standards would entail.
The USDA FGIS grain and oilseed export inspection and weighing
system is based to a large degree on labor-intensive, subjective
procedures and historical precedent that was a reaction to events forty
years ago and fails to take full advantage of opportunities created by
professional third party contractors using modern objective technology
to establish marketing parameters that have greater utility in the
marketplace.
Since major U.S. competitors and foreign customers already
recognize the efficiencies and cost savings accruing to the use of
private surveyors to perform independent third party surveying
services, it may be prudent for U.S. stakeholders to advocate for a
more competitive model for official inspection and weighing services
involving accredited independent third party surveyors here in the U.S.
rather than such a heavy reliance on the U.S. Government monopoly
services.
According to a study conducted by the authors earlier this year,
absolute cost comparisons between different origin country inspection
costs for cross-border commodity trade is very difficult due to
differences in fee structures (i.e., hourly vs. tonnage vs. per sample)
for specific tests. However in that study, the authors found that there
is a global trend toward countries permitting private surveying firms
to perform such services for the buyer and seller, with the government
involvement, if any, being such functions as accreditation to assure
accuracy, competence and equipment calibrations.
As part of this study, we learned that over 75% of U.S. exports are
being inspected for some type of additional factors by private
superintendent companies that are fully accepted by importers. That
clearly demonstrates a high degree of confidence in the private sector
surveyors by the parties to the export transactions. This would seem to
further indicate that there would be significant value to U.S.
competitiveness if the official inspection system would utilize private
surveyors to perform the inspections under the strict supervision and
oversight of FGIS. The conversion of FGIS to a regulator and use of
accredited private contractors would be virtually the same as the
domestic system used in the U.S. and not a ``privatization'' of the
inspection system. It is better seen as inserting competition into the
current monopoly and optimizing the government's role as the regulator
and standard setting body, rather than service provider.
Selected Importing Country/Company Data Results
Exporters, superintendent companies, and trade associations have
provided contract information that indicates some of the additional
tests that key buyers are requesting. We have tried to reach out to as
many of those buyers to determine why they use third party surveyors to
perform the tests.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Importing Country Company Additional Attributes Rationale for Request
--------------------------------------------------------------------------------------------------------------------------------------------------------
Corn
--------------------------------------------------------------------------------------------------------------------------------------------------------
China COFCO Condition, phyto and chemical residues per qualified Contract specification in recognition
independent laboratory or surveyor certificates. of Chinese CIQ and Ministry of
Health requirements.
China Mycotoxins, heavy metals, residues and GMO's.
Cuba GMO's, pesticide residues, heavy metals.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Wheat
--------------------------------------------------------------------------------------------------------------------------------------------------------
Algeria Wet gluten, dry gluten, toxins, heavy metals, pesticides,
microbiology.
China Xiamen Mingsui Grains Sound condition, phyto, chemical residue analysis, crop year Contract specification in recognition
and Oils Trading Co. certificate, and wood packing material by private surveyor. of Ministry of Agriculture and CIQ.
Egypt GASC Wet gluten, dry gluten, toxins, heavy metals, pesticides and
microbiology.
El Salvador Multi-Flour Falling number, vomitoxin, and free of odor per first class Customer contract specification.
independent laboratory.
Japan Food Agency Comprehensive testing. Japanese Food Agency requirements.
Jordan Wet gluten, dry gluten, toxins, heavy metals, and microbiology.
Malaysia FFM Berhad Mycotoxin, radioactivity, heavy metals, pesticide residues, Customer contract language.
microbiology, scab and vomitoxin and certificate of origin
from nonstipulated vendor.
Nigeria Wet gluten, dry gluten, toxins, pesticides, GMO's and flour
test.
Taiwan Taiwan Flour Mills Protein, moisture, dockage, Extraction rate, bran, shorts, Customer contract language.
Association flour ash, farinograph, absorption rate, development time, and
stability time per specific private laboratories.
Saudi Arabia Wet gluten, dry gluten, toxins, pesticides, microbiology.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Soybeans
--------------------------------------------------------------------------------------------------------------------------------------------------------
China COFCO Sound condition, oil and protein content, additional specific Customer specification in recognition
phyto requirements, chemical residues and wood packing of Chinese CIQ, Ministry of Health,
material certificates from private surveyors. Certificate of and Chamber of Commerce from load
origin. port.
China Wilmar Mycotoxins, heavy metals, residues and GMO's.
Indonesia FKS MultiAgro Color, size and fragrance by private laboratory. Customer preference.
Philippines Toxins, metals, residues, GMO's.
--------------------------------------------------------------------------------------------------------------------------------------------------------
This summary is not intended to be an exhaustive list of additional
attribute testing requirements, but rather an indication of what some
firms and origin markets are requesting. Not surprisingly since they
are considered to be foodstuffs, rather than feedstuffs, wheat and rice
have more intrinsic quality testing requirements than the other
commodity grains and oilseeds. However when it comes to grain and
oilseed byproducts, especially soymeal, they are traded on detailed
criteria spelled out, not by FGIS, but by the association representing
the manufacturers of the product and utilization of accredited
independent third party laboratories and inspection agencies to perform
most of the quality determination in commerce. (See attached excerpts
of National Oilseed Processors Association Trade Rules.)
Conclusions and Recommendations
According to information gathered from a wide array of sources
including a review of foreign customer contracts and interviews with
foreign contacts as well as U.S. experts, the U.S. grain supply chain
and export trade is well-served by the existence of the USDA FGIS
regulatory and standard setting body and official U.S. inspection
certificates, but the actual delivery of export inspection and weighing
services could be improved. It is our conclusion that foreign customers
recognize the value of the independent third party superintendent
companies and respect the testing results that they provide as part of
export trade execution. This is demonstrated by the large extent to
which they are currently utilized in export transactions, not only in
the U.S., but elsewhere around the world. The flexibility, reliability
and cost-effectiveness of the independent third party service providers
generate measurable utility and value for the U.S. grain and oilseed
export supply chain and foreign customers.
It is our conclusion that foreign customers would benefit if a
significant portion of the actual inspection and weighing work that is
performed by Federal inspectors would be contracted out to accredited
independent third party laboratories under the strict regulatory
oversight of USDA FGIS. USDA FGIS would retain the responsibility for
training and compliance and insure that service providers perform their
assigned duties or be immediately replaced by another entity that will.
This might not preclude FGIS from stepping in on a temporary basis to
ensure that interruptions in service to foreign customers never occur
at export locations.
Appendices
FGIS--Tests for Grading and Quality Factors
Tests for Grading and Quality Factors (http://www.gipsa.usda.gov/
fgis/inspectionservices_testgrading.aspx)
Inspection Services
Original Inspection (white certificate)
Submitted sample (pink certificate)
Warehouseman inspection (yellow certificate)
Re-inspections
Appeal inspections
Other Grain Tests
Aflatoxin
Vomitoxin (qualitative)
Vomitoxin (quantitative)
Waxy corn (per test)
Corn Oil, Protein and Starch
Falling Number (Wheat)
Mycotoxin Analyses (Aflatoxin)
Mycotoxin Analyses (DON)
Mycotoxin Analyses (Zearalenone)
Mycotoxin Analyses (Fumonisin)
Pesticide Residue Analysis
Soybean Protein and Oil
Sunflower Oil
Wet Gluten (http://www.gipsa.usda.gov/fgis/inspwgh/
wet_gluten.pdf)
Wheat Hardness
Wheat Protein
Cracked Corn Inspection
Other Commodity Tests
Sampling (http://www.gipsa.usda.gov/fgis/
inpectionservices_sampling.aspx)
Lots sampled online during loading
Truck/trailer/container
Railcar (per carrier)
Barge (per carrier)
Sacked grain
Weighing Services
Class X weighting
Class Y Weighing
Scale Testing services
Scale testing and certification
Evaluation of weighing and material handling systems
Mass standards calibration and re-verification
Stowage Examination Services
Stowage examination (service on request) (http://
www.gipsa.usda.gov/fgis/inspectionweighing.aspx#stow)
Ships
Subsequent ship examinations
Barge
All other carriers
Other Services
Interpretive line samples
Rapid Test Kit Development Verification Service (http://
www.gipsa.usda.gov/fgis/rapidtestkit.aspx)
NTEP prototype evaluation (other than Railroad Track Scales)
(http://www.gipsa.usda.gov/fgis/inspectionweighing.aspx#ntep)
NTEP prototype evaluation (Railroad Track Scales) (http://
www.gipsa.usda.gov/fgis/weighingservices.aspx#railroad)
Grain grading seminars
Certification of diverter-type mechanical samplers
International services
Online customized data EGIS service
Samples provided to interested parties
Extra copies of certificates
Laboratory tests
Aflatoxin test (Quantitative--HPLC)
Aflatoxin (Quantitative--Test Kit)
Aflatoxin (Qualitative--Test Kit)
Appearance and odor
Ash
Brix
Calcium
Carotenoid color
Cold test (oil)
Color test (syrups)
Cooking test (pasta)
Crude fat
Crude fiber
Falling number
Free fatty acid
Insoluble impurities (oils and shortenings)
Iron enrichment
Lovibond color
Moisture
Moisture and volatile matter
Oxidative stability index (OSI)
Peroxide value
Popping ratio
Protein
Sanitation (filth light)
Sieve test
Smoke point
Solid fat index
Visual exam
Vomitoxin (Qualitative--Test Kit)
Vomitoxin (Quantitative--Test Kit)
Laboratory Working Instructions
Cooked Bostwick Method--Corn Soy Blend (http://
www.gipsa.usda.gov/fgis/inspwgh/cooked_bostwick.pdf)
Determination of Vitamin A as Retinyl Palmitate in
Processed-Grain Commodities (http://www.gipsa.usda.gov/fgis/
inspwgh/vita3r01.pdf)
Determination of Iron in Cereal Grains and Seed Oils by
Flame AA (http://www.gipsa.usda.gov/fgis/inspwgh/
WI_Iron_Flame_AA.pdf)
Sieve Method--Corn Soy Blend (http://www.gipsa.usda.gov/
fgis/inspwgh/sieve_method_csb.pdf)
Uncooked Bostwick Method--Corn Soy Blend (http://
www.gipsa.usda.gov/fgis/inspwgh/uncooked_bostwick.pdf)
Miscellaneous Processed Commodities
Falling Number
Aflatoxin--Non Field Run
Graded Commodities (Beans, Peas, Lentils, Hops, and Pulses)
Field Run (per lot or sample)
Other Than Field Run
Factor Analysis
Last updated: 06/26/2013
Excerpted from the National Oilseed Processors Association Trading
Rules for the Purchase and Sale of Soybean Meal
Adopted October 18, 1933
RULE 2--QUALITY
Section 1. Standard Of Quality
a. The standard of quality shall be the soybean meal of fair
merchantable quality conforming to standard definitions and standard
specifications of the Association, as set forth in these Trading Rules.
b. Analysis shall be made in accordance with methods approved by
the American Oil Chemists' Society (AOCS) in effect as of the date of
the contract.
Section 2. Standard Definitions
a. Soybean Cake or Soybean Chips is the product after the
extraction of part of the oil by pressure or solvents from soybeans. A
name descriptive of the process of manufacture, such as ``expeller,''
``hydraulic,'' or ``solvent extracted'' shall be used in the brand
name. It shall be designated and sold according to its protein content.
b. Soybean Meal is ground soybean cake, ground soybean chips, or
ground soybean flakes. A name descriptive of the process of
manufacture, such as ``expeller,'' ``hydraulic,'' or ``solvent
extracted'' shall be used in the brand name. It shall be designated and
sold according to its protein content.
c. Soybean Mill Feed is the byproduct resulting from the
manufacture of soybean flour or grits and is composed of soybean hulls
and the offal from the tail of the mill. A typical analysis is 13%
crude protein and 32% crude fiber, and 13% moisture.
d. Soybean Mill Run is the product resulting from the manufacture
of dehulled soybean meal and is composed of soybean hulls and such bean
meats that adhere to the hull in normal milling operations. A typical
analysis is 11% crude protein and 35% crude fiber, and 13% moisture.
e. Soybean Hulls is the product consisting primarily of the outer
covering of the soybean. A typical analysis is 13% moisture.
f. Solvent Extracted Soybean Flakes is the product obtained after
extracting part of the oil from soybeans by the use of hexane or
homologous hydrocarbon solvents. It shall be designated and sold
according to its protein content.
Section 3. Standard Specifications
a. Soybean Flakes and 44% Protein Soybean Meal are produced by
cracking, heating, and flaking soybeans and reducing the oil content of
the conditioned product by the use of hexane or homologous hydrocarbon
solvents. The extracted flakes are cooled and marketed as such or
ground into meal. Standard specifications are as follows:
Protein......................................... Minimum 44.0%
Fat............................................. Minimum 0.5%
Fiber........................................... Maximum 7.0%
Moisture........................................ Maximum 12.0%
b. Soybean Flakes and High Protein or Solvent Extracted Soybean
Meal are produced by cracking, heating, and flaking dehulled soybeans
and reducing the oil content of the conditioned flakes by the use of
hexane or homologous hydrocarbon solvents. The extracted flakes are
cooled and marketed as such or ground into meal. Standard
specifications are as follows:
Protein............................... Minimum 47.5-49.0% *
Fat................................... Minimum 0.5%
Fiber................................. Maximum 3.3-3.5% *
Moisture.............................. Maximum 12.0%
* As determined by Buyer and Seller at time of sale.
c. Any of the above meal products (listed in Section 3 above) may
contain a non-nutritive inert, non-toxic conditioning agent to reduce
caking and improve flowability, in an amount not to exceed that
necessary to accomplish its intended effect and in no case to exceed
0.5% or 10 lbs. per ton by weight of the total meal product. The name
of the conditioning agent must be shown as an added ingredient.
* * * * *
Appendices to Trading Rules for the Purchase and Sale of Soybean
Meal
Appendix A. Official Methods of Analysis
Testing methods as adopted by the American Oil Chemists' Society
(AOCS) shall be used as the official methods of analysis, except as
otherwise specified.
The method numbers listed below indicate the latest issue at the
time of this publication. It behooves the user of these methods to make
certain that the user has available and is following the latest version
of each specific method.
Moisture--AOCS Method Ba 2a-38
Protein--AOCS Method Ba 4e-93
Crude Fiber--AOCS Method Ba 6-84
Oil--AOCS Method Ba 3-38
The analysis for moisture content shall be performed in duplicate
on the unground, as received, soybean meal sample.
A second analysis for moisture content and all other constituent
analyses shall be performed in duplicate on the sample after grinding.
The average ground moisture content shall be used to convert the
average constituent values to the average moisture content of the
unground sample as received, and to a 12% moisture basis. A signed and
numbered AOCS Certificate of Analysis shall be used to report the
average moisture and constituent values on an unground moisture basis
and on a 12% moisture basis.
* * * * *
Appendix L. Official Referee Laboratories for Soybean Meal (2014-15
AOCS/NOPA Certified Laboratories)
The Association has designated as Official Referee Laboratories for
Soybean Meal those laboratories certified to it by AOCS, as follows:
Admiral Testing Services, Inc.
12111 River Rd.
Luling, LA 70070
+1-504-734-5201
ATC Scientific
312 North Hemlock
North Little Rock, AR 72114
+1-501-771-4255
Barrow-Agee Laboratories, Inc.
1555 Three Place
Memphis, TN 38116
+1-901-332-1590
Carolina Analytical Services LLC
17570 NC Hwy 902
Bear Creek, NC 27207
+1-919-837-2021
Cumberland Valley Analytical
14515 Industry Drive
Hagerstown, MD 21742
+1-301-790-1980
Eurofins Scientific
2200 Rittenhouse St.
Suite 150
Des Moines, IA 50321
+1-515-265-1461
Hahn Laboratories, Inc.
1111 Flora St.
Columbia, SC 29201
+1-803-799-1614
Intertek Agri Services
160 East James Dr. Suite 200
St. Rose, LA 70087
+1-504-602-2100
K-Testing Laboratory, Inc.
1555 Three Place Suite A
Memphis, TN 38116
+1-901-525-0519
SGS North America
151 James Dr. W.
Saint Rose, LA 70087
+1-504-463-3320
Thionville Laboratories, Inc.
5440 Pepsi St.
Harahan, LA 70123
+1-504-733-9603
Whitbeck Laboratories, Inc.
1000 Backus Ave.
Springdale, AR 72764 USA
+1-479-756-1270
The Chairman. Thank you. Again, I thank the witnesses for
your quick and concise testimony.
We will now begin questioning. I will start with myself. I
recognize myself for 5 minutes.
As I said in my opening statement, the events that caused
disruptions last year at the Port of Vancouver were unfortunate
and, I believe, entirely avoidable. Mr. Friant, can you
describe for us some of the economic consequences that resulted
for the grain trade?
Mr. Friant. I don't know the answer to that at this time. I
was not specifically involved in those facilities, but I would
be happy to visit with my NGFA colleagues and----
The Chairman. Okay.
Mr. Friant.--follow up at a later time.
[The information referred to is located on p. 72.]
The Chairman. Okay. Mr. Winkles, when Washington State
withdrew its inspectors and USDA failed to fill in, my
understanding is that South Carolina Department of Agriculture
offered to help but they were met with some resistance. Do you
have a sense of what prevented South Carolina from stepping in
to help maintain inspections?
Mr. Winkles. Unfortunately, Mr. Chairman, I do not. I am
very well aware of the services provided by the South Carolina
Department of Agriculture because they were the designated
officials in South Carolina when we had our export facility in
Charleston. We had a very close working relationship with them,
but I am not aware of the exact circumstances of why they were
not allowed to fill in.
The Chairman. Would you support a change in the law that
would authorize state agencies, either delegated or designated
under the Act, to step in in the event USDA was unable to
fulfill their inspection obligations?
Mr. Winkles. Yes.
The Chairman. You would, all right.
Let me go back to Mr. Friant. In your testimony, you
mentioned that farm, commodity, and agribusiness organizations
urged the Secretary of Agriculture to take action on the
inspection service disruptions. We all know how the Secretary
responded, but was the issue ever addressed by the GIPSA
Advisory Committee, whose mission it is to provide advice to
the GIPSA Administrator with respect to GSA implementation?
Mr. Friant. Yes, as a matter of fact, on two accounts at
two separate GIPSA Advisory Committee meetings, there were
resolutions from the committee. If you would like, I could read
you those resolutions.
The Chairman. If you would submit them for the record, that
would be great.
Mr. Friant. Yes, we can do that.
[The information referred to is located on p. 71.]
The Chairman. Thanks. And then finally, in your testimony,
Mr. Friant, you mentioned the competitiveness of the United
States as an exporter of bulk grain and oilseed in the global
market. In general, how competitive is the bulk grain and
oilseed market?
Mr. Friant. In general, the market is a very competitive
market on a global basis.
The Chairman. And how does our current official inspection
system compare to ones that are used by foreign competitors in,
say, Europe, Asia or Latin America?
Mr. Friant. As referenced in my testimony, NAEGA
commissioned two studies to compare the U.S. systems to other
systems, which have been submitted as part of the record. In
those reports, what you will find is that the U.S. is one of
two countries that still require government-mandated
inspections by government employees. More broadly on a global
basis, third parties are utilized by the individual countries
to provide those official inspection services.
The Chairman. Thank you.
I yield the balance of my time. I now recognize the Ranking
Member, Mr. Walz, for 5 minutes.
Mr. Walz. Thank you, Mr. Chairman. And thank you all for
your testimony.
Mr. Winkles, I thank you, and you do have a unique
perspective on this of actually being in the grain business,
working the elevator. How would you describe, your opinion, the
working relationship with the grain inspectors?
Mr. Winkles. We have a very, very good relationship. As I
mentioned earlier, we work very closely with South Carolina
Department of Agriculture, the grain inspectors that were
sanctioned by FGIS. Frankly, we would not have been able to
operate the facility without that assistance provided by those
grain inspectors.
Mr. Walz. Does the system work? When it is working, does it
work?
Mr. Winkles. Absolutely. It is working fine. Granted, we
all know that technologies have changed, but the world
standards are number 2 yellow corn, number 2 soybeans. So the
system is working, and we have to have a standard.
As I have noted, my personal experience, I have been able
to participate in some foreign ag service trips to Asia. Our
Asia friends tend to have a unique negotiating perspective, and
it really is important to be able to have that standard to say
this is what you purchased, and this is what it is guaranteed
to be.
Mr. Walz. Have any of you witnessed a situation that
happened in Washington, or do you have another example of that
happening, a disruption of that magnitude? Would it be safe to
say then, at this point in time it is an isolated case?
Mr. Friant. I am not aware of any other issues, but again,
we could work with our colleagues at NAEGA to see if there are
other disruptions----
Mr. Walz. Yes.
Mr. Friant.--in service similar----
Mr. Walz. Because we looked at this one too, and if I
could, Mr. Chairman, submit to the record, the Washington State
Delegation, in a bipartisan manner, unanimously sent a letter
and said the system works, don't mess up the system, just
address it so that we have a safeguard in there in case this
situation arises. So I am interpreting that that they are
pretty happy with the way the system is functioning, when it
is, make sure we put something in place to make sure this
doesn't happen.
[The information referred to is located on p. 71.]
Mr. Walz. And so I want to come back, Mr. Friant. You are
asking for some changes on this. Could you tell me the cost of
official grain inspection here as opposed to the other
countries you talk about? It is far more expensive, about a
penny a bushel, is that correct?
Mr. Friant. I don't know exactly what that number is, but
working with NGFA and NAEGA, we could certainly follow up at a
later date with that information.
Mr. Walz. If you would, that would be great.
Mr. Cox, on this, how many inspectors are employed?
Mr. Cox. There are approximately 200 inspectors that are
employed. There are about 400 employees, some of them do
various things, but about 200 inspectors nationwide.
Mr. Walz. Would you happen to know the length of time that
they have been doing that? The average length of time.
Mr. Cox. Many of them have been doing it a lifetime because
it takes about 2 years to train a person for them to be able to
function to do the work of a good quality nature. It is not
something that someone goes to school and automatically gets a
degree and is prepared to do it.
Mr. Walz. So to train up a reserve force to step in in a
situation like Washington State, are there people out there
that can do that right now?
Mr. Cox. I do not believe there is.
Mr. Walz. Okay. This one is interesting, and, Mr. Friant,
the value-added that the inspectors add is an important topic
you brought up, and you mentioned on this the non-grade
determination testing that private third parties are doing. Has
the industry asked FGIS to do that also in addition to their
normal duties of weight?
Mr. Friant. Well, normally those are requests from the
buyer to have completed, and we work with the buyer on who they
would generally like to have perform the service. It is not
generally a request that is made directly to the Federal Grain
Inspection Service.
Mr. Walz. Okay, so it is not as if they asked and they said
no that we are not going to do this, am I right in my
interpreting this that there is a value-added that you said
these other groups can provide that FGIS is not right now?
Mr. Friant. There could be other tests that are requested
for commercial purposes, potentially around functional
properties that FGIS is not able to perform.
Mr. Walz. Not able or not willing?
Mr. Friant. My understanding is not able.
Mr. Walz. Okay. Mr. Cox, do you know, at this point, how
that would be if there were these requests from buyers to add
to what is there, can that be done?
Mr. Cox. I couldn't say for sure, sir, that I am not an
expert on the total grain inspection process, but I am told by
our membership that they are quite capable of doing the work
that is requested of them on a regular basis.
Mr. Walz. I would end with Mr. Winkles', it was in your
testimony, you served this right, it is how our customers view
this process is paramount in this, and if those are things that
can enhance what we are doing, that is an area that we should
explore, but I would also make the case that I do think we need
to learn from what happened in Washington, but I would caution
us not to upset a very good and functional system over that
incident.
I yield back.
The Chairman. I thank the gentleman.
I now recognize the gentleman from Georgia, Mr. Scott, for
5 minutes.
Mr. Austin Scott of Georgia. Thank you, Mr. Chairman.
Mr. Friant, I want to follow up a little bit on what
Congressman Walz was talking about with the testing. And can
you give us some examples of the kinds of tests that are being
performed by the independent third parties, who is requesting
these tests, and are they being done primarily at the request
of a particular end-user, or is that coming from an importer or
a broker?
Mr. Friant. When it comes to additional testing, it really
depends on what the buyer, and that could be the end-user
themselves or the importer in the country, what they are
requesting. Some tests are requested for grade determining
factors to cross-check or verify the FGIS results. And then
they also may be doing additional non-grade determining factors
such as protein and oil. They could be doing additional testing
for mycotoxins or, as I mentioned, other functional properties
of the grain or products that they are buying. And we also see
more requests or more information shared around more crop
analysis, what does the overall crop look like, because we
aren't necessarily just selling one shipment at a time. Buyers
are looking at what does the U.S. crop look like more broadly.
Mr. Austin Scott of Georgia. And what percentage of the
grain that is shipped out has some type of third party testing?
Mr. Friant. In the studies that were performed on behalf of
NAEGA, more than 75 percent of grains and oilseed exports are
inspected for some additional commercial requirements by the
buyer.
Mr. Austin Scott of Georgia. By a private inspector?
Mr. Friant. By a private inspector, yes.
Mr. Austin Scott of Georgia. Seventy-five percent of what
is exported.
Mr. Friant. Yes.
Mr. Austin Scott of Georgia. Is most of that just a double-
check of the grade and weight, or is most of that getting into
more detailed analysis of the actual individual grain shipment?
Mr. Friant. I don't know the exact breakdown of which types
of tests are being performed.
Mr. Austin Scott of Georgia. Mr. Chairman, most of the
questions that I have, or that I had, have been asked by you or
Mr. Walz.
Gentlemen, thank you for coming and testifying. And with
that, I yield back the remainder of my time.
The Chairman. I thank the gentleman. And I now recognize
the Ranking Member of the full Committee, Mr. Peterson, for 5
minutes.
Mr. Peterson. Thank you, Mr. Chairman.
Most of the questions have been answered, or asked that I
was going to ask, but, Mr. Friant, is that how you say your
name? Friant?
Mr. Friant. Friant.
Mr. Peterson. Friant, I am sorry. In your testimony, you
were talking about the delegation to state agencies, and that
it is not transparent. Do you guys have a problem with what the
states are doing out there in terms of inspection? I have not
heard that in our area, what are you getting at there?
Mr. Friant. Well, the point that we are trying to address
is that the current process for designating agencies is open to
the Federal Register rule and comment-making process, whereas
the delegation of states is not subject to that same
transparent process on how the state is being delegated. The
length of the delegation, it is not limited, it is an unlimited
delegation. And so we are simply proposing to bring some
transparency to that process.
Mr. Peterson. I mean what is the problem you are trying to
get at? What problem exists that you think we are not finding
because it is not transparent?
Mr. Friant. Really, we would like it to be harmonized with
what happens on the designation process on the domestic side,
so we are--the system is a more harmonized systems process.
Mr. Peterson. So you mean some states are doing different
things that are causing you problems, is that----
Mr. Friant. Not doing different things, but we would just
like to see the process itself between delegation and
designation be a harmonized or standardized process, whereas
today, it is two separate processes, to delegate a state versus
designate a domestic facility--a domestic inspection agency.
Mr. Peterson. I am still not totally understanding what the
problem is that you are trying to resolve here.
Mr. Friant. So maybe it would be----
Mr. Peterson. How does that impact you in the marketplace?
Mr. Friant. Yes. So maybe it would be best if NGFA and
NAEGA could follow up with you at a later date to go through
some more detail?
Mr. Peterson. The question that Mr. Walz asked about the
price, as I understand it, Mr. Cox's testimony, it is about a
penny a bushel.
Mr. Cox. Yes.
Mr. Peterson. Something like that. So you think that is too
expensive, Mr. Friant?
Mr. Friant. No, but we have opportunities around an even
more reliable cost-effective system.
Mr. Peterson. But you don't have the information in terms
of how we stack up against other countries or other----
Mr. Friant. I don't have that information in front of me at
this time, but I believe the two are----
Mr. Peterson. Do you have that information?
Mr. Friant. I think the reports from NAEGA would help
clarify that comparison.
Mr. Peterson. Well, if you could make that available to the
Committee we would appreciate that.
Thank you. I will yield back, Mr. Chairman.
The Chairman. Thank you. The gentleman yields back.
I recognize the gentleman from Georgia, Mr. Allen, for 5
minutes.
Mr. Allen. Thank you, Mr. Chairman. And we do appreciate
you coming and sharing with us today.
In your testimony, Mr. Cox, you were talking about the
privatization factor as far as inspection goes and, of course,
reading your testimony, obviously, privatization seems to be a
big issue. What is the general attitude of the farm community
out there about your service versus privatization?
Mr. Cox. We believe that the farm community wants Federal
inspectors, and has had a good relationship with Federal
inspectors. And I believe if you look back at the history of 40
years ago, things were not going very well in this country, and
that is the reason that the government created Federal
inspectors, to make sure that grain was meeting a proper
standard, and that the weights were proper, and those type
things. So I believe in general, farmers are happy with the
service that the Federal inspectors provide, and the oversight,
because some are states, some various things, but the
government does provide the oversight of the general inspection
process.
Mr. Allen. And then a decision by the Washington State
Department of Agriculture to withdraw its inspectors last year
was unfortunate. Can you identify the immediate economic
consequences that were felt by the grain trade there----
Mr. Cox. Yes----
Mr. Allen.--when this occurred?
Mr. Cox. Yes, sir, I am sure there was economic
consequences that are felt any time that there is a labor
dispute, sir, and I am very much aware of those.
Mr. Allen. Okay. How much of this goes on as far as the--
obviously, we had this situation here, where we only have so
much time--and we export a lot of this. What provisions in this
new authorization can we use to guard against that sort of
thing as far as these unfortunate circumstances?
Mr. Cox. It would appear that the Committee is certainly
trying to work through various processes, and I believe from
the knowledge that I have during the labor dispute that went on
in the State of Washington that there were other companies in
this country who were prepared to inspect grain and to move
grain out of the country as such, and maybe people did not use
them and move them around. I am not a total expert----
Mr. Allen. Yes.
Mr. Cox.--on the process of how grain is exported from this
country, but I do know that there were other companies that had
bargained contracts with their unions, and were open for
business, and were willing to take that business and to move
forward with it.
Mr. Allen. Mr. Winkles, your take on this and as I said, in
reauthorization we can deal with these unfortunate delays that,
obviously, are penalizing our farmers and those in this
industry.
Mr. Winkles. Well, thank you, Mr. Allen. One thing it does
is it creates uncertainty, and that always has a negative
impact on business----
Mr. Allen. Right.
Mr. Winkles.--the business climate. I understand, I believe
there was some grain actually had to be moved from----
Mr. Allen. Right.
Mr. Winkles.--one place to another. Transportation of grain
is very expensive, and a truck is one of the most expensive
ways to move it, and it has the greatest environmental impact,
if you would.
Mr. Allen. Yes.
Mr. Winkles. We need to be very careful so that we make
sure that we have contingencies in place so that we don't
disrupt the flow of grain.
The grain trade is very interesting, very interesting
business model. When you have grain exporters who, very often,
the destination may change once it leaves its port, headed to
its destination, the destination may very well change relative
to their overall movement. So again, that is why it is so
important that we have standards in place, and that the grain
trade has the flexibility to be able to continue to operate
that way.
Mr. Allen. Right. Thank you, Mr. Winkles.
I yield back the remainder of my time, Mr. Chairman.
The Chairman. I thank the gentleman from Georgia.
And we will recognize the gentleman from Georgia, Mr.
Scott. I will just say that Georgia is very well represented on
this Committee.
Mr. David Scott of Georgia. Absolutely. We take care of
business in Georgia.
Voice. How did I get ahead of Mr. Scott?
Mr. David Scott of Georgia. It is wonderful to be here.
Mr. David Cox, you represent the American Federation of
Government Employees as the President of that union, and you
represent the grain inspectors, so I want to direct this
question at you. The last reauthorization of the U.S. Grain
Standards Act was in 2005, and there was a study commissioned
to assess the impact of using private contractors to conduct
export grain inspections. Now, I reviewed that report in great
detail and I noticed something. I noticed that the study
concluded that, ``that the use of private contractors did not
demonstrate additional savings or efficiencies that would
enhance the competitiveness of U.S. grain exports in the global
market.'' I found the report to be pretty thorough and well put
together, but I would like to give you a moment, as the
President of the union that represents the grain inspectors, a
moment to add any additional thoughts you might have to that
conclusion in that study.
Mr. Cox. Clearly, the report speaks for itself, but also
the fact that, again, you are dealing with a job, a profession,
a trade, that is learned by doing it. You have to have an
ongoing process where you have people actually do the work,
learn how to do the work, are mentored in the process, and it
is all on-the-job learning in the process. And to have a supply
of people, yes, I believe that the government is going to have
to have an element of oversight to make sure that people are on
those jobs, trained in the jobs. And the cost-effectiveness,
the report speaks for itself, and the inspection of a 1 a
bushel, even from North Carolina, I know the size of a bushel--
--
Mr. David Scott of Georgia. Yes.
Mr. Cox.--that 1 is a very reasonable price to be paid.
And we believe----
Mr. David Scott of Georgia. Okay.
Mr. Cox.--that the grain inspectors have done a very, very
good job. Again, the comment has been made, there was one
incident from the last 80 years, and it appears that bipartisan
support, you are trying very hard to deal----
Mr. David Scott of Georgia. Okay.
Mr. Cox.--with those type of incidents.
Mr. David Scott of Georgia. And to the panel, I want to ask
this question. I am aware that the bulk of the U.S. Grain
Standards Act of 1916 is permanently authorized, but there are
a few provisions that are not: first, the authority to pay for
the FGIS's operation, and improvements to the inspection
procedures would expire; second, the collection of fees for
certain supervisory inspections and weighing namely for the
state agencies to conduct export inspections would be halted;
third, the Grain Inspection Advisory Committee, GIAC, which
serves as the stakeholder link between the FGIS and the
agriculture industry, would lose authorization; and fourth, a
30 percent cap on administrative and supervisory costs relative
to the total cost for inspection, services would be lifted.
What I wanted to get, if you all could expand on these non-
permanent provisions, and how you think the industry would be
affected if we did not have legislation reauthorized by
September 30.
Mr. Winkles. Let me start, Mr. Scott. As you know, I
addressed in my testimony the fact that we really feel it is
important to have this advisory committee reauthorized. We also
feel it is very important to have the user fees reauthorized.
Mr. David Scott of Georgia. Yes.
Mr. Winkles. We understand in this time of tight government
budgets, at the national level as well as the state level, that
the users be required to pay for these services. They are very
reasonable, as has been mentioned before, so we strongly
support that these provisions, that will expire, be
reinstated----
Mr. David Scott of Georgia. Good.
Mr. Winkles.--as soon as possible. Thank you.
Mr. David Scott of Georgia. I agree. Anyone else?
Mr. Cox. I think it is very, very important to get it done
and to get it done quickly. I am sure all the Members of
Congress, as well as myself, are always familiar what happens
when we don't get legislation authorized, and we don't have
monies appropriated, it becomes very chaotic for the entire
country.
Mr. David Scott of Georgia. Yes.
Mr. Cox.--and grain exports are very, very important to
this country, and we need to have this legislation to move.
Mr. David Scott of Georgia. All right. Thank you, Mr.
Chairman.
The Chairman. The gentleman yields back.
And I recognize the full Committee Chairman, Mr. Conaway,
for 5 minutes.
OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE
IN CONGRESS FROM TEXAS
Mr. Conaway. Well, thank you, Mr. Chairman.
I just have one line of questioning. Mr. Cox, you guys may
have already covered this, and I apologize if you did, in the
Washington State incident, there was a labor dispute between
the elevator and the longshoremen, and the inspectors finally
decided to not cross the line. Is that what happened there,
that is why we quit inspecting grain, or was there just no
grain being loaded?
Mr. Cox. I am not----
Mr. Conaway. Okay.
Mr. Cox.--familiar with all----
Mr. Conaway. Well, what----
Mr. Cox.--the actual specific things.
Mr. Conaway. The program allows for if and when the state
delegated authority pulls their inspectors, then there is a
duty for USDA to send in inspectors, and USDA failed that duty
under some argument that it was unsafe. Are there reports of
violence associated with that strike? Are there police reports
we can look at, were there people beaten up, was there
intimidation, what all went on that caused the violence that
was referred to that prevented the USDA from doing their
responsibility in inspecting grain?
Mr. Cox. I do not have knowledge of all of that, sir.
Mr. Conaway. Okay.
Mr. Cox. I was here in Washington, D.C., not Washington
State.
Mr. Conaway. Yes, I got that. Well, you are here today to
represent those folks. Is there some way----
Mr. Cox. No, I am here to represent the Federal employees,
yes.
Mr. Conaway. Right, I understand that. And is there a way
that you could get for the Committee the police reports and the
other information about the violence that occurred, because
somehow we are unable to get from USDA the study they did to
say that there was, in fact, violence out there and it was
unsafe for other inspectors to cross the picket line. Is there
a way that we can get information from your organization that
would help the Committee understand the level, the extent of
the violence that did occur, if any violence actually did
occur?
Mr. Cox. I will be more than happy to make that request
from the Secretary, but also I have the same----
Mr. Conaway. No, no, I can ask the Secretary, and I have,
but is there a way that your union can get that information
separately from going through the USDA? Can you----
Mr. Cox. I will certainly----
Mr. Conaway. Yes. You have to----
Mr. Cox. We will go to our rank and file members----
Mr. Conaway. There you go.
Mr. Cox.--and ask them, sir.
Mr. Conaway. There you go. They were there for a part of
that, so if you can get that information for the Committee it
might be very helpful, because if there was violence--
longshoremen have a rough and tumble reputation. I grew up in
west Texas with roughnecks. I understand the drill. But if
there really was no violence, then it would be very
disappointing that USDA didn't fulfill their responsibility to
send in the folks. And South Carolina volunteered to go do it.
So anyway, if you wouldn't mind running whatever traps you
have. If you can't find anything, I got it, but if you would
make a good faith effort to provide the Committee with whatever
information you have, newspaper reports, whatever it might be,
from the time of the strike of the violence, I sure would
appreciate it.
All right. With that, I yield back.
The Chairman. I thank the gentleman.
And I recognize the gentleman from Nebraska, Mr. Ashford,
for 5 minutes.
Mr. Ashford. Thank you, and most of my questions also have
been asked and answered, though I just would stress that we
export 50 percent of our wheat outside our borders. From
Nebraska, we export 50 percent of our soybeans outside the
state. It is a massively important part of our economy in our
state, and it is growing.
Mr. Winkles, I would ask you--this is a good discussion. I
am beginning to understand a little more about the need,
certainly, of course, for reauthorization, but I am also
sensing a need for some flexibility as we move forward if we
are going to reauthorize for a relatively long period of time,
which is a good thing. As we expand our trade, however,
hopefully, as we expand our trade for agricultural exports from
Nebraska and throughout the entire country, is there anything
else, Mr. Winkles, if I might ask you, and I know there have
been some discussions about other ideas, but with the system
the way it is now, with the people we use now, do you see the
advisory committee which has been mentioned, do you see
anything else that we should be looking at in the
reauthorization to ensure that, as trade does expand, which I
fully expect and hope it does do, that we can meet our
obligations and make sure that that grain is accepted in the
countries we trade with?
Mr. Winkles. Thank you, and that is an interesting
question. Today, we do things in a variety of ways, and I will
point to the container shipment. Right now, we are exporting
about 50 percent of the South Carolina soybean crop in
containers. That is a big change in the system. Frankly, I
never believed that would happen, but it has. The buyers are
much more in touch. Consumers want to be more in touch with
people who grew the grain. That is going to create challenges
for the entire system. It certainly creates challenges here at
home. But we see buyers--I have visited with feed compounders
in Europe before. Cost is on everyone's mind. So as we move
along, we will have to be cognizant of new technologies as they
develop, new methods of shipment, buyer expectations, all these
things will have to be considered, but from a specific thing or
specific items, I don't think I could add any, but it just very
interesting how the market has changed over time.
Mr. Ashford. Yes. And just one quick follow-on to that--and
there will be more changes as we expand our base of consumer-
driven exports, the demands are going to be greater, obviously,
as people become more educated on the products that they are
receiving in other countries. But generally within the system
we do have, you do believe, I assume from your testimony, that
what we have is the base operation is appropriate and should be
continued.
Mr. Winkles. Absolutely. The base operation needs to be
continued. Many of these items that I was talking about to
expand export trade are very much specialty items, and they
require special treatment, special handling, identity
preservation, if you will, but the standard is still the most
important thing. I hate to guess, but I would say that is
probably 90, 95 percent of the trade. So that is key. We can
add and increase value, but the base is still there, and we
have to maintain those standards and inspection for that huge,
major percentage.
Mr. Ashford. Thanks. I yield back. Thank you, Mr.----
The Chairman. I thank the gentleman.
And I would just ask if there are any further requests for
recognition? No. I will recognize Ranking Member Walz for any
final thoughts.
Mr. Walz. Well, again, I thank the Chairman and our
witnesses. Thank you for helping provide this. You are experts
in this field, you deal with it daily, and as we said, giving
you the certainty and protecting the integrity of the system.
And it is prudent to have a fallback, if you will, a safety
valve if a situation like Washington State arises, but making
sure we keep the integrity of a working system in place. So I
thank you for the time, and I appreciate the Chairman's
commitment, and you have the commitment of the folks up here.
Let's get this reauthorized, let's get it done on time and give
you the certainty.
I yield back.
The Chairman. And I thank the gentleman, and would echo
those sentiments.
I appreciate the panelists for being here. And certainly it
is our goal to get this reauthorized in a timely fashion, and
be prepared, as the Ranking Member alluded to, that we do have
a safety valve in position that we can utilize if the need
arises.
Under the rules of the Committee, the record of today's
hearing will remain open for 10 calendar days to receive
additional material, and supplementary written responses from
the witnesses to any questions posed by a Member.
This Subcommittee on General Farm Commodities and Risk
Management is now adjourned.
[Whereupon, at 10:53 a.m., the Subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
H.R. 2088, United States Grain Standards Act Reauthorization Act of
2015, Submitted by Hon. Eric A. ``Rick'' Crawford, a Representative in
Congress from Arkansas
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
______
Submitted Letter by Hon. Timothy J. Walz, a Representative in Congress
from Minnesota
April 14, 2015
Hon. K. Michael Conaway, Hon. Collin C. Peterson,
Chairman, Ranking Minority Member,
House Committee on Agriculture, House Committee on Agriculture,
Washington, D.C.; Washington, D.C.
Dear Chairman Conaway and Ranking Member Peterson:
As the House Committee on Agriculture considers reauthorization of
expiring provisions of the United States Grain Standards Act (GSA) in
the coming weeks, we respectfully request that any legislation
considered by the Committee maintains the Secretary of Agriculture's
ability to delegate to a State Department of Agriculture, or other
applicable state agency, the authority to conduct grain export
inspection services. Additionally, it is essential that any changes to
the export inspections regime do not upset the existing process, which
is both efficient and meets the needs of growers, producers, and
distributors, as well as customers.
Prior to 1976, there were numerous examples of misgrading grains,
bribery, short-weighting, and other instances of corruption in the
grain inspection industry that led Congress in an amendment to the GSA
to establish the Federal Grain Inspection Service (FGIS) under the
authority of the Grain Inspection, Packers and Stockyards
Administration (GIPSA). Today, FGIS inspects about \2/3\ of the
nation's grain exports and, pursuant to the 1976 GSA amendments, five
states have been delegated by the Secretary of Agriculture to carry out
official inspections for the other \1/3\. It is worth noting that since
the 1976 GSA amendments were adopted, allegations of corruption in
grain export inspection services have all but disappeared; a testament
to the quality of work and impartiality from FGIS and delegated state
authorities.
State-delegated inspection services, like those that exist in
Washington State, are important for several reasons. Like FGIS, state
inspectors operate as unbiased evaluators with established grading
standards. If a producer would like to challenge a FGIS or state-
delegated inspector's ruling, there is an established appeals process
that grants recourse to producers. Also, a FGIS/state-delegated
inspection regime offers foreign customers certainty through well-
established standards--a perception and market share that could be
jeopardized if the current system is modified.
We understand there have been concerns raised with the timely
inspection of grain by Washington State Department of Agriculture
(WSDA) inspectors during an unrelated labor dispute at the Port of
Vancouver in 2014. It is important to note that when FGIS was requested
to step in to offer inspection services in lieu of WSDA, they also
refused to do so. We do not believe that any modification to the
inspection regime would remedy the root issues highlighted by the Port
of Vancouver incident.
Again, we view the existing relationship between state-delegated
export inspection services and GIPSA as mutually-beneficial. These
inspectors provide objectivity and a means of recourse for producers,
as well as predictability for customers. We appreciate your efforts to
reauthorize these important provisions, and request that you protect
the balance that the GSA currently sustains. We look forward to working
with you to reauthorize the GSA.
Sincerely,
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Hon. Dan Newhouse, Hon. Suzan K. DelBene,
Member of Congress; Member of Congress;
Hon. Cathy McMorris Rodgers, Hon. Rick Larsen,
Member of Congress; Member of Congress;
Hon. David G. Reichert, Hon. Denny Heck,
Member of Congress; Member of Congress;
Hon. Derek Kilmer, Hon. Jim McDermott,
Member of Congress; Member of Congress;
______
Supplementary Material Submitted by Nick Friant, Chairman, Grain Grades
and Weights Committee, National Grain and Feed Association; Co-Chair,
Grain Grades and Inspections Committee, North American Export Grain
Association
Insert 1
The Chairman. Thank you. Again, I thank the witnesses for
your quick and concise testimony. . . .
As I said in my opening statement, the events that caused
disruptions last year at the Port of Vancouver were unfortunate
and, I believe, entirely avoidable. Mr. Friant, can you
describe for us some of the economic consequences that resulted
for the grain trade?
Mr. Friant. I don't know the answer to that at this time. I
was not specifically involved in those facilities, but I would
be happy to visit with my NGFA colleagues and----
The Chairman. Okay.
Mr. Friant.--follow up at a later time.
The economic impact of a disruption, like the failure of FGIS to
provide mandatory services in Vancouver, Washington, extends throughout
the grain trade and negatively impacts producers and consumers as well
as buyers and sellers. Unwarranted costs resulting from the FGIS's
failure to provide services are imposed on the export elevator, in turn
those costs reduce prices paid to farmers or increase cost of supplies
for consumers. While delays in vessel loading, or shifting of load
ports, often results in demurrage or diversion costs amounting to tens
of thousands of dollars per day, the cost of not providing the timely
availability of the specific contracted volume and quality of the grain
that is delayed or prevented from being delivered is more difficult to
quantify. We also are aware that the disruption in inspections further
exacerbated rail logistical delays in the Upper Plains states, as
railcars backed up waiting unloading. But certainly the failure to
provide for reliable contract performance is of much greater
consequence to all stakeholders in the grain trade. Most economic
damage to the value chain occurs from a resulting shift in the
perception of value that is based on the reliability, integrity,
competence and reputation of grain inspections. A failure of FGIS to
provide mandatory services, as was experienced in Vancouver,
reverberates globally. One of the more astute observers of economic
impact is Warren Buffet who has been quoted as saying: ``It takes 20
years to build a reputation and five minutes to ruin it. If you think
about that, you'll do things differently.''
Insert 2
The Chairman. You would, all right.
Let me go back to Mr. Friant. In your testimony, you
mentioned that farm, commodity, and agribusiness organizations
urged the Secretary of Agriculture to take action on the
inspection service disruptions. We all know how the Secretary
responded, but was the issue ever addressed by the GIPSA
Advisory Committee, whose mission it is to provide advice to
the GIPSA Administrator with respect to GSA implementation?
Mr. Friant. Yes, as a matter of fact, on two accounts at two
separate GIPSA Advisory Committee meetings, there were
resolutions from the committee. If you would like, I could read
you those resolutions.
The Chairman. If you would submit them for the record, that
would be great.
Mr. Friant. Yes, we can do that.
The following resolution was introduced and passed at the November
4-5, 2014 GIPSA Grain Inspection Advisory Committee Meeting (http://
www.gipsa.usda.gov/fgis/advcommittee/Nov2014/November-2014.pdf):
``Whereas the U.S. Department of Agriculture has authorized FGIS
under the U.S. Grain Standards Act, as amended, to provide official
inspection and weighing services for exports of U.S. grains and
oilseeds, and as FGIS has been authorized to delegate certain of their
responsibilities to appropriate entities including the State of
Washington, and, as the State of Washington, at least for 30 days in
2014, has failed to fulfil their responsibilities and obligations under
the agreement dated November 2013, in particular clauses IV Terms and
Conditions B 1(a), B 1(b), 2, 3, 14, and, under the authority granted
FGIS to revoke the agreement under VI, (C), the Advisory Committee
recommends that FGIS remove the Delegation/Designation of all States/
Agencies that do not fulfill their obligations for providing services
as required under the Grain Standards Act and that FGIS immediately
provide the required services.''
In addition, the following resolution was introduced and passed at
the July 15-16, 2014 GIPSA Grain Inspection Advisory Committee Meeting
(http://www.gipsa.usda.gov/fgis/advcommittee/July2014/July 2014 Minutes
and Presentions.pdf):
``Whereas the U.S. Department of Agriculture is mandated under the
U.S. Grain Standards Act to provide Official inspection and weighing
services for exports of U.S. grains and oilseeds,
Therefore be it resolved that the Advisory Committee urges in the
strongest terms that FGIS take whatever actions are necessary to
immediately restore Official grain inspection and weighing service
wherever and whenever it is disrupted, either by immediately replacing
absent inspectors with FGIS Official personnel or with inspectors from
available qualified providers, including other designated or delegated
Official Agencies.''
______
Submitted Statement by David Ayers, President, American Association of
Grain Inspection and Weighing Agencies
Issues Related to Re-Authorization of the U.S. Grain Standards Act, As
Amended
Mr. Chairman and Members of the Subcommittee:
I am David Ayers, President of the American Association of Grain
Inspection and Weighing Agencies (AAGIWA), on whose behalf I am
presenting testimony today. I am the elected leader of the Association.
I own and operate a designated official agency, the Champaign-Danville
Grain Inspection Agency, with its headquarters in Urbana, IL. I have
been in the grain inspection business for nearly 40 years.
AAGIWA is the national professional association representing the
public and private agencies that are designated and delegated by USDA's
Grain Inspection, Packers & Stockyards Administration (GIPSA) to weigh,
inspect, and grade the nation's grain. AAGIWA's member agencies are
located throughout the United States and perform well over 80 percent
of all of the inspections under the United States Grain Standards Act
(USGSA). The official agencies employ over 2,000 dedicated individuals.
AAGIWA member agencies bring a professional unbiased third party
aspect to the grading and weighing of America's grain. During the
association's 67 years of service to the grain industry, it has
assisted its members in performing these services through a national
forum that promotes and assists professionalism, integrity, technology,
and performance, while providing a constant dialog with government and
industry. AAGIWA wishes to comment on the pending reauthorization of
the USGSA provisions expiring on September 30, 2015. In doing so, the
association wishes to support the reauthorization of the expiring
provisions, and provide the following observations to the Congress:
There is an important role for a Federal regulatory and supervisory
agency in the operation of an official grain inspection system. GIPSA
serves to provide an objective, third party regulatory role, which
assures credibility and integrity for both domestic and export grain
handlers and buyers of U.S. grain. Its strict Federal standards help
maintain the accuracy and consistency that the grain industry has come
to expect from the nation's official grain inspection system.
Much has changed in America's grain marketing system since the
Federal Grain Inspection Service was formed by Congress in 1976.
Industry consolidations, transportation efficiencies, testing services,
and result accuracy have all improved beyond what anyone could have
envisioned 39 years ago to make the U.S. grain marketing system the
world leader. Shuttle trains and export containers have replaced
boxcars for moving grain. We can now test for substances in parts per
billion, and electronically provide inspection and weighing results
around the world in seconds. These advancements are a result of the
vision, hard work, and commitment of the grain industry and GIPSA.
What has not changed is the need for a third party inspection
service that is both responsive and unbiased to provide accurate and
timely results so that grain can be traded throughout the U.S. and
around the world. GIPSA certificates issued by official agencies are
regarded as the final word in quality by the industry trading rules and
serve to resolve disputes and allow for the collection of funds when
grain is traded domestically and overseas. Producers, marketers,
handlers, and grain processors in the U.S. and around the world all
benefit from knowing the true quality of the grain they are selling or
buying.
GIPSA's ability to supervise official agencies has also evolved and
improved past what was possible since 1976. Each agency now has a
quality management program with internal audits that are reviewed
annually by GIPSA auditors. Inspection results are now sent
electronically on a daily basis to GIPSA for review so that file
samples can be selected on a daily basis to monitor all aspects of
inspection accuracy. These and many other enhancements implemented by
GIPSA over the last 39 have greatly enhanced FGIS' ability to monitor
official agency performance, and initiate corrective action in real
time anytime during an agency's designation.
Official agencies have also evolved with the changing pace of the
grain industry by providing on-site inspection laboratories for shuttle
loaders and at container yards shipping grain. Certificates are issued
electronically so customers and interested parties can see inspection
results anywhere around the world in seconds. GIPSA has approved and
standardized rapid testing methodologies that allow official agencies
to quickly provide accurate and reliable mycotoxin, protein, and
moisture results at remote locations, so shippers can make real time
decisions. AAGIWA is proud of what the official agencies have
accomplished and owes much of these advancements to GIPSA's willingness
to change and provide more rapid and accurate testing capabilities.
Where agencies have struggled is in surviving the changing rural
business economy. The number of official agencies has significantly
decreased since 1976. Although still a diverse group of state and
private organizations exist, much consolidation has occurred. The need
for greater capital as official agencies have consolidated has
increased. While GIPSA has been responsive in approving fee increases
this only places a larger inspection cost burden on the grain industry.
AAGIWA is requesting that the U.S. Grain Standards Act be amended
to provide GIPSA the ability to increase the maximum designation length
for official agencies from 3 to 5 years.
Providing a 5 year designation would not compromise GIPSA's
authority to suspend or revoke a designation already in place. GIPSA
would retain the authority under the Act to suspend and revoke
designations when an agency has failed to meet one or more criteria in
the Act, the regulations, and instructions issued by GIPSA, or is
involved in any violation of Federal law involving the handling or
inspection of grain. GIPSA has used this authority in the past to
protect the integrity of the official grain inspection system and the
facilitation of grain trade in export and domestic markets and AAGIWA
supports the suspension and revocation of a designation when it is
warranted.
Increasing the maximum designation period to 5 years would not
require GIPSA to provide agencies with 5 year long designations. GIPSA
can choose to establish designation termination dates for shorter
duration, as they currently do when warranted under the present
legislation.
AAGIWA believes this change will strengthen the official inspection
system, and its direct and indirect beneficiaries. This change would
allow agencies to secure more favorable financing for the purchase of
new equipment and expansion of their operations to keep pace with the
U.S. grain industry. Allowing GIPSA to increase designation times to 5
years would bring more stability to the over 2,000 citizens employed in
mostly rural communities across the nation. These hard working citizens
would know that their employer would be in business for a longer period
of time and can feel more secure in their financial situation. A 5 year
designation provides the official agency the opportunity to control
expenses which also translates to the inspection costs incurred by the
grain industry in these rural communities. Inspection costs have been
reported to be a grain company's third largest cost. Keeping these
costs under control contributes to the local elevator's viability,
which in some cases, is the only major business in many communities.
This change would not create any additional budgetary burden on the
U.S. taxpayers and it would not decrease any tax revenue to the U.S.
Treasury. What it would do, is help ensure that the official inspection
system remains robust so that it is able to meet the needs of the grain
industry, producers, and all those supported and dependent on receiving
timely, accurate, and unbiased grain inspection and weighing results.
In conclusion, AAGIWA commends GIPSA for making changes for the
betterment of the official grain inspection system, for its integrity,
and for its beneficial partnership with 49 state and private agencies
that perform official duties at the local level. As Congress moves to
reauthorize the key provisions of the U.S. Grain Standards Act it is
important that new technologies and efficiencies continue to be brought
to the official inspection system, and that the maximum designation
period be increased to 5 years so that official agencies can have the
financial stability to implement them.
______
Submitted Letter by Brett Blankenship, President, National Association
of Wheat Growers
April 20, 2015
Hon. K. Michael Conaway, Hon. Collin C. Peterson,
Chairman, Ranking Minority Member,
House Committee on Agriculture, House Committee on Agriculture,
Washington, D.C.; Washington, D.C.
Dear Chairman Conaway and Ranking Member Peterson:
As you prepare to reauthorize the Grain Standards Act, it is
imperative that we avoid the sort of disruption to our export system
that occurred last year at a United Grain Facility in the Pacific
Northwest. Wheat farmers, in particular, are reliant upon our export
markets, as wheat exports \1/2\ of our production nationwide in a given
year. As the United States is seen as the world's reliable supplier of
grain, interruptions in the flow of trade can have adverse impacts on
commodity prices, and thus, our members' bottom lines. The suspension
of Federal Grain Inspection Service (FGIS) authorized grain inspections
that occurred last summer at the Port of Vancouver in Washington State
directly impacted our members throughout the country. Vessels were not
loaded, barges could not deliver, the rail transportation system slowed
down, and our foreign customers began to question our ability to
deliver on contracts.
While labor disputes may arise at our ports, NAWG believes that
there must be a mechanism in place to ensure that the flow of trade is
not disrupted. In states where the state has delegated authority from
the U.S. Department of Agriculture (USDA) to conduct inspection, USDA's
FGIS must step in to ensure inspections continue if the delegated
entity does not fulfill their obligation within 48 hours from the
requested time of service. We further believe that if a delegated
entity fails to perform its duties, that authority should be revoked
and FGIS must permanently retain the role of inspections. NAWG urges
you to include language in your reauthorization bill that would further
emphasize this responsibility.
Additionally, we believe this restored service must be conducted
either by FGIS or by another delegated state authority, and not by a
private entity. Our trading partners have developed a trust in the
current system of inspections, a trust which would be diminished if
inspections were no longer conducted by the Federal Government or a
delegated state agency. Moving forward, we urge Congress to reject
attempts that would undermine the current system of inspections.
Further, NAWG supports legislation requiring FGIS to take whatever
actions are necessary to immediately restore official grain inspection
and weighting service wherever and whenever it is disrupted. The
situation in Vancouver, WA, where inspections were disrupted, could
have been avoided if FGIS had exercised its authority.
The National Association of Wheat Growers (NAWG) is a federation of
22 state wheat grower associations that works to represent the needs
and interests of wheat producers before Congress and Federal agencies.
Based in Washington, D.C., NAWG is grower-governed and grower-funded,
and works in areas as diverse as Federal farm policy, trade,
environmental regulation, agricultural research and sustainability. As
your Committee works to reauthorize the Grain Standards Act, I urge you
to consider the perspective of our nation's wheat farmers and to
appreciate the importance of the current system of inspections to
facilitate the flow of trade. We also urge you to maintain a close
oversight role over FGIS to ensure that the agency is following
appropriate statutory obligations when disruptions occur at our ports.
Thank you for your consideration, and I hope that you will use NAWG
as a resource as the reauthorization process moves forward.
Sincerely,
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Brett Blankenship,
President,
National Association of Wheat Growers.
CC: Members of the House Agriculture Committee.
[all]