USDA’s GIPSA Rule Must Comply with RFA
By House Small Business Committee Chairman Sam Graves
As a sixth generation family farmer, I know firsthand how binding the strings of Washington can be on a small business. An example of this is the recent United States Department of Agriculture (USDA) proposed rule that would significantly alter livestock marketing practices and further inject the government into small businesses’ marketing and business decisions. The effects of this overreaching rule could be extremely detrimental to thousands of small farms and small businesses.
The proposed Grain Inspection, Packers and Stockyards Administration (GIPSA) rule would amend the Packers and Stockyards Act of 1921 to supposedly "clarify conditions for industry compliance with the P&S Act and provide for a fairer marketplace." However, many of the provisions within the rule will severely undermine the ability of small businesses to differentiate their products from those of their larger competitors. The proposed rule may also force changes to a company’s asset structure as well as create a broader change in industry structure that could lead to more vertical integration. This will mean less competition for livestock producers, packers and consumers— a result contradictory to the proposed rule.
Although the rule was prompted by the 2008 Farm Bill, what was proposed by USDA went far beyond the intent of Congress. If implemented, the rule would hurt thousands of small businesses in the beef, pork and poultry industries, further damage our already unstable economy and cost thousands of American jobs. In fact, independent studies have shown that if the proposed rule is adopted, it will reduce the gross domestic product by over $1.5 billion and cost the U.S. economy nearly 23,000 jobs.
“The proposed GIPSA rule will destroy our small business model, force us to lay off our employees, cripple our ability to market our cattle [the] way we want to and limit consumer choice,” said Robbie LeValley of LeValley Ranch in Hotchkiss, CO in a recent Small Business Committee hearing.
Joel Brandenberge, President of the National Turkey Federation, also testified during the hearing that the rule “likely will have a chilling effect on innovation and flexibility, leading to a race toward mediocrity. It will create legal uncertainty that will drive costs higher and cause an increase in vertical integration in the livestock and poultry sector, driving producers out of the business and possibly affecting supplies.”
The USDA’s proposal also failed to provide an adequate Initial Regulatory Flexibility Analysis (IRFA), which is extremely troubling. The IRFA is required by the Regulatory Flexibility Act (RFA), a law that charges all federal agencies with examining the impact of their proposed and final rules on small businesses. If those impacts are significant, the agency is required to consider less burdensome alternatives. The RFA is a tool designed to protect our nation’s number one job creators from unnecessary, duplicative and costly federal mandates— and should not be ignored by federal agencies.
To address these concerns, I joined with Agriculture, Energy and Trade Subcommittee Chairman Scott Tipton (R-CO) in sending a letter to USDA Secretary Tom Vilsack calling on the agency to fully comply with the Regulatory Flexibility Act (RFA) and ensure that USDA understands the private sector costs of the regulations it is imposing on all sectors within the livestock industry. We also requested that USDA publish their analysis for comment to ensure small firms can inform the agency about its effect on their businesses.
What is most baffling is that the USDA recognizes that a majority of people involved in the livestock industry are small businesses, yet they still failed to fully evaluate the proposed rules effect on small companies.
“It is very appropriate that the Small Business Committee has decided to focus this hearing on small businesses in the livestock and poultry industries,” said Edward Avalos, USDA Under Secretary of Marketing and Regulatory Programs at a recent Small Business Committee hearing. “The vast majority of farmers in general, and specifically livestock and poultry producers, are small businesses. There are currently over 70,000 hog producers, almost a million cattle farmers and ranchers, and nearly 20,000 poultry growers. The majority of these individuals are family-owned small businesses.”
Small businesses are the lifeblood of our economy and the catalyst that will lead our economy back to prosperity. Instituting rules and regulations without investigating the effects on our most robust job creators is reckless and completely misguided.
As Chairman of the House Small Business Committee, I will continue to hold the USDA accountable as the rulemaking process moves forward and help ensure that the interests of small business owners are taken into full consideration. With already so much economic uncertainty persisting, the last thing family farms need is another costly government requirement.