NGFA Newsletter

Volume 50, Number 20, October 8, 1998

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Contents

Congress, Administration Attempt to Resolve Farm Spending Dispute

Rail Arbitration/Mediation -- Important Reminder

Government Fiddles While Agriculture Burns

EPA to Propose Stringent Controls on Phosphine Fumigation

GIPSA Proposes Fee Increase

FDA Tightens `Export Exception' for Commodities with Contaminants

FDA Interprets `On-Farm Feed Manufacturing, Mixing' under BSE Rule

Ocean Shipping Reform Bill Approved

Keistler Appointed to Executive Committee

NGFA Board Approves New Membership Classification, Dues Formula

Rail Arbitration -- A Compelling Membership Marketing Tool

Tom Tunnell Wins `Membership Month' Contest

National Secretary Issues Default Judgments

On Capitol Hill by Scott R. Hedderich Director of Legilsative Affairs

Congress, Administration Attempt to Resolve Farm Spending Dispute

Republican congressional leaders today were meeting with their Democratic counterparts and administration officials in an attempt to resolve differences in a farm spending plan vetoed on Oct. 7 by President Clinton.

Senate Majority Leader Trent Lott, R-Miss., signaled that Republicans would continue to oppose any fundamental changes to the 1996 farm law, including any attempt to remove the ceiling on marketing assistance loan rates. But Lott indicated Republicans might be willing to accept some additional increases in spending through another mechanism, perhaps as additional fixed market transition payments.

Both the House (by a 333-53 vote on Oct. 2) and the Senate (by a 55-43 vote on Oct. 6) had approved the fiscal 1999 agricultural appropriations bill (H.R. 4101) that would provide $4.1 billion in additional spending for agriculture. Of that amount, the bill would provide $1.65 billion in additional market transition payments to producers, as well as:

$1.5 billion to assist producers sustaining crop losses in 1998;

an additional $675 million in assistance to producers sustaining multiple-year crop losses, especially farmers in the Upper Midwest whose crops have been infected with wheat scab or sustained multi-year flooding; and

$175 million for livestock feed assistance as a cost-share program for feeders whose feed supplies sustained weather-related losses in 1998.

The bill also contained provisions that would:

allow the president to waive for one year the U.S. economic sanctions imposed upon India and Pakistan in response to their nuclear weapons testing earlier this year.

partially fund the administration's proposal to increase food safety inspections of domestic and imported products;

prohibit the Commodity Futures Trading Commission from regulating over-the-counter derivatives trading for six months; and

require the U.S. Department of Agriculture to study the impact of labeling imported meat products and requiring packers to report prices paid for livestock.

But following both the House and Senate votes, Clinton issued statements threatening a veto and accusing Congress of "not doing enough" to help to farmers. In the statements, Clinton continued to call for passage of a $7.1 billion Democratic alternative introduced by Sens. Thomas A. Daschle, D-S.D., and Tom Harkin, D-Iowa, that would remove the cap on loan rates, at an estimated cost of $5.046 billion. The Democratic alternative also would allocate $2.092 billion in "emergency agricultural assistance" to compensate producers for weather-related losses.

Agreement to Fund IMF Near: In other action, the Republican leadership of the House and Senate at press time was negotiating with administration officials to reach agreement on providing $18 billion for the International Monetary Fund (IMF). Discussions were ongoing about reforms of the IMF's lending practices and procedures that would be included in the legislation, such as opening the IMF's lending procedures to more scrutiny, requiring that borrowing countries comply with international trade agreements and ensuring that domestic creditors not receive preferential treatment in bankruptcy proceedings.

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Rail Arbitration/Mediation -- Important Reminder

Oct. 1, 1998: Two-year agreement took effect. NGFA Active and Associate/Trading member companies signing on or before this date eligible to arbitrate rail disputes occurring on or after this date.

Nov. 1, 1998: Final deadline for existing NGFA Active and Associate/Trading member companies to sign agreement.

• For NGFA member companies signing between Oct. 1 and Nov. 1, the agreement takes effect for disputes arising on the first business day after the executed agreement is received by the NGFA.
  
• NGFA member companies that decline to sign the agreement by Nov. 1 forego the right to compel arbitration of covered rail disputes for the duration of the two-year agreement.

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Government Fiddles While Agriculture Burns

It's never pretty. But just before elections, politics undeniably is at its worst.

The last two weeks ranked among the lowest in my years in Washington. U.S. agriculture faces some significant challenges ahead. There are ways that government really could be helpful. But thus far, it has failed to act in a productive manner.

On Sept. 25, as expected, fast track trade legislation went down to defeat by a substantial margin. The Democrats blamed House Speaker Newt Gingrich, R-Ga., for making the issue partisan, saying the vote would be used to target some Democratic fast-track opponents in the Fall elections. Rep. Robert Matsui, D-Calif., who in 1997 was the strongest proponent of fast-track, voted against it this time around, probably taking several other Democratic votes with him.

Both parties want to blame the other and make political hay out of the situation. But for U.S. agriculture, the outcome is the same. The administration still has no "official" authority to negotiate international trade agreements. So at a time when national economies around the globe need infusions of economic activity that could be driven by trade, the United States is providing no world leadership. About 10 percent of the entire U.S. economy is dependent upon trade. For most other economies around the world that are not nearly so self-sufficient, the percentage is much higher. For U.S. agriculture, about 30 percent of our business is trade-dependent. Yet it is surprising how many farm-district congressmen voted against the bill.

Trade is about jobs. But more importantly, trade is about economic performance. The world economy cannot achieve its potential without a serious commitment from Congress and the administration to lead the way toward freer trade. Likewise, the U.S. agricultural economy will be slow to recover its markets unless trade becomes the highest priority.

The president's pending veto of the agricultural assistance package approved by Congress -- ostensibly because it doesn't increase farm income in the manner favored by certain Democratic leaders -- poses another economic threat to U.S. agriculture. The push to remove loan rate caps as a way to boost farm income has become a central issue, even though doing so would increase the economic incentive to focus excessive resources into crops already in surplus. No matter how you cut it, the Freedom to Farm law has helped keep supply and demand in relative balance by not providing artificial incentives to some crops. Our grain "surplus" situation would have been worse without it. A return to government production incentives will reduce the chances for a market-led price-and-demand recovery.

But there's another danger. There is almost universal agreement among commercial agricultural groups, and even politicians, that discredited land-idling programs -- eliminated by Freedom to Farm -- only helped foreign competitors increase their market share. Yet, regardless of this universally held evil reputation, acreage-idling would surely return as part of a loan rate increase in an attempt to control runaway spending. Not as a long-term answer, you see; just as a short-term measure while we got past this tough period -- the identical argument used in the 1930s.

There are better -- and wiser -- ways for the government to support farmers.

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Tech Talk by Thomas C. O'Connor Director of Technical Services

EPA to Propose Stringent Controls on Phosphine Fumigation

The NGFA has learned that the Environmental Protection Agency in November is scheduled to propose stringent new controls on the use of phosphine gas as a fumigant.

The controls are being considered as part of a reregistration of aluminum and magnesium phosphide (which produce phosphine gas) as a stored product fumigant. In an Oct. 5 meeting with the NGFA and other groups, EPA officials said that while they recognize the importance of phosphine gas as a fumigant for controlling pests in stored grains and oilseeds, the agency has "serious" concerns about the potential health effects of phosphine gas on workers and bystanders based upon toxicity studies involving animals and 12 adverse "incidents" involving phosphine gas over the last 30 years. The relevance of some of the 12 adverse incidents are suspect; one of the cases cited by EPA appeared to involve serious personal misuse of the chemical by an employee.

The controls EPA said it is considering include the following:

Reduce the exposure standard for phosphine gas to 0.03 parts per million (p.p.m.), one-tenth of the current permissible exposure limit of 0.3 p.p.m. established by the Occupational Safety and Health Administration for general industry, which includes grain, feed and processing facilities. EPA concedes that there are no known methods currently available to measure phosphine gas to this minute level; the best that can be achieved is measuring to 0.05 p.p.m.

Prohibit fumigation and aeration within 500 feet of residential areas. Employers also would be required to implement a 500-foot restricted area for all structures and areas undergoing fumigation. Placarding would be required around the restricted area and employees would be required to wear appropriate respiratory protection unless the employer measured to confirm that less than 0.03 p.p.m. of phosphine gas was present in the restricted area.

EPA did not provide any scientific justification for establishing 500 feet as the restricted area. Instead, the agency said fumigant manufacturers would be studying this issue.

Require those performing the fumigation to be certified applicators. No person would be allowed to enter a fumigated area until a certified applicator or industrial hygienist confirmed that phosphine gas levels were less than 0.03 p.p.m.

Require managers to notify local residents and adjoining commercial and industrial sites prior to fumigating. Local fire and police departments also would be required to be notified in advance.

Require stringent monitoring during unloading or otherwise moving commodities fumigated with phosphine gas. For example, the agency said it was considering requiring a certified applicator to monitor the concentration of phosphine gas in a placarded railcar, container or shiphold prior to opening. Unloading would be prohibited until the measured concentration was less than 0.03 p.p.m.

Require that the storage structure be checked for leaks prior to fumigation. The certified applicator would be required to maintain a record of leak tests. Leaks would be required to be repaired or the storage structure sealed before fumigation occurred.

Prohibit treatment of burrows for rodent control within 100 feet of any residence.

The NGFA's Safety, Health and Environmental Quality Committee will be actively involved in reviewing and commenting upon EPA's proposal once it is issued.

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GIPSA Proposes Fee Increase

The U.S. Department of Agriculture's Grain Inspection, Packers and Stockyards Administration on Oct. 2 proposed an increase in inspection and weighing fees.

The agency proposed to increase its hourly rates and certain unit inspection rates by 3.6 percent. In addition, GIPSA proposed to increase the tonnage inspection rate by 1.2 percent. The agency said the increases are necessitated by a projected 3.6 percent cost-of-living salary increase for federal employees.

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Country/Terminal Corner by Randall c. Gordon Vice President, Communications/Government Relations

FDA Tightens `Export Exception' for Commodities with Contaminants

In recent letters to state officials in Arkansas and Tennessee, the Food and Drug Administration has significantly tightened the requirements applying to exporters who seek to utilize the "export exception" under the Federal Food, Drug and Cosmetic Act to ship agricultural commodities containing contaminants.

As the basis for its letters to the two states, FDA relied on a draft guidance document of its interpretation of Sections 801 and 802 of the Federal Food, Drug and Cosmetic Act that was published in the June 12^th edition of the Federal Register. The draft guidance document is designed to interpret changes to the law made by Congress in 1996 that were intended to expand and liberalize the export exception for certain products, such as human and animal drugs, biologics and medical devices. But FDA adopted a more stringent interpretation with respect to the requirements applying to products exported under Section 801(e)(1) of the law, which is of prime importance to the grain, feed and processing industry. It is this section of the law that permits exporters, under specified conditions, to transport in interstate commerce and export commodities that may not conform with FDA's action levels or advisory levels applying to contaminants (such as aflatoxin in corn).

In its draft guidance document, FDA advises industries that the agency will enforce Section 801(e)(1) in the following manner:

To meet the law's "export exemption" requirement that the shipment be in accordance with the specifications of the foreign buyer, FDA "recommends that the firm exporting the product maintain records describing or listing the product specifications requested by the foreign purchaser. This would include details about the product…."

To meet the law's "export exemption" requirement that the shipment not conflict with the laws of the country for which the shipment is intended, FDA "recommends that the firm obtain a letter from the foreign government agency, department or other body stating that the product has marketing approval from the foreign government or does not conflict with that country's laws. Letters should not be from nongovernmental bodies or persons (such as company officials or attorneys in the foreign country). Additionally, if the letter from the foreign government is not in English, FDA recommends that the firm have an English-language translation of that document or be prepared to translate the document into English at the time of any FDA inspection…."

This policy stance represents a significant departure from FDA's previous policy, which was articulated by the agency in a July 30, 1992 FOCUS article published by the NGFA. In that 1992 article, the NGFA posed -- and FDA responded to -- the following question:

NGFA: "Under the "export exemption," is an export elevator allowed to blend corn that exceeds 20 parts per billion aflatoxin with uncontaminated corn (less than 20 p.p.b.) for the purpose of reducing the aflatoxin content of the resulting mixture if: 1) the contract with the foreign buyer does not expressly prohibit blending and the specific aflatoxin content of the resulting mixture is within contract specifications of that buyer; and 2) blending is not expressly prohibited by the laws of the importing country?"

FDA: "If the elevator can document that it meets the conditions of the contract, then such conformance will be acceptable to FDA when determining the elevator's compliance with the provisions of Section 801(e)."

To meet the law's "export exemption" requirement that the shipment be "labeled on the outside of the shipping package that it is intended for export," FDA "recommends that the firm place a statement on the shipping packages themselves. A statement such as `For export only' may be sufficient."

It has been FDA's long-standing policy that for bulk commodities, this requirement can be met by inserting such a statement on the bill of lading or other shipping documents (in lieu of placarding on the transportation conveyance).

To meet the law's "export exemption" requirement that the shipment cannot be sold or offered for sale in domestic commerce, FDA "recommends that the firm maintain records concerning the product, its labeling, and similar products sold or offered for sale in the United States. The labeling can simply state that the product is `Not for sale in the United States' or bear a similar statement."

NGFA Committees Reviewing Guidance Document: FDA is seeking comments on the draft guidance document by Nov. 24, and it is currently being reviewed by NGFA's Grain Grades and Weights Committee, International Trade/Agricultural Policy Committee, Food and Feed Safety Committee, Feed Industry Committee and Legal Council. NGFA member companies that would like to provide input are encouraged to contact Tom O'Connor or Randy Gordon at the NGFA's office at (202) 289-0873 on or before Oct. 16. You also may e-mail a message to toconnor@ngfa.org. A copy of the relevant section of the draft guidance document is available under the "Member Only" section of the NGFA's web site at http://www.ngfa.org. A copy also is available by fax by calling Jackie Congress at the NGFA at (202) 289-0873.

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FDA Interprets `On-Farm Feed Manufacturing, Mixing' under BSE Rule

The Food and Drug Administration has requested comments by Nov. 23 on a "draft guidance document" that would exclude beef, dairy and other ruminant feeders who prepare complete feed for their own animals using total mixed rations from the definition of "feed manufacturer" under the agency's final rule that prohibits the feeding of certain mammalian proteins to ruminant animals to prevent bovine spongiform encephalopathy (BSE).

Under FDA's draft guidance document, ruminant feeders who mix total mixed rations for their own animals would not be considered to be on-farm feed manufacturers. Instead, they would be considered to be an "on-farm feed mixing operation." As such, they would be subject to the final rule's requirement to keep copies of invoices and labeling for all animal protein products they receive for one year, regardless of whether the protein contains prohibited material; FDA notes this would permit inspectors to trace the protein from farms to suppliers to ensure that products not containing the cautionary statement were properly labeled.

However, this interpretation would have the effect of "exempting" these producers from the final rule's labeling and manufacturing processes and equipment clean-out requirements. FDA states in the guidance document that it still could take regulatory action to "control" contamination that could result from commingling or cross-contamination of prohibited and non-prohibited material by on-farm mixer-feeders. The agency said it would do so by declaring the resulting feed to be adulterated within the meaning of the Federal Food, Drug and Cosmetic Act.

The draft guidance document also states that ruminant producers who have on-farm feed manufacturing and mixing operations still would be considered to be "feed manufacturers" under the final rule, and would be subject to the same requirements as commercial feed mills. Indeed, the draft guidance document states that the agency's "intention when drafting the regulation was to include in the definition of `feed manufacturers' those relatively large integrated operations that have feed manufacturing equipment similar to a commercial feed manufacturer."

Feed Industry Committee Reviewing Guidance Document: The NGFA's Feed Industry Committee is reviewing the FDA draft guidance document, and will be providing a response to the agency. NGFA member companies that have feed or feeding operations and would like to provide input to the committee are encouraged to contact Randy Gordon at the NGFA's office at (202) 289-0873 on or before Nov. 2. You also may e-mail a message to rgordon@ngfa.org. A copy of the draft guidance document is available under the "Member Only" section of the NGFA's web site at http://www.ngfa.org. Click on the "Feed" icon to locate. A copy also is available by fax by calling Jackie Congress at the NGFA at (202) 289-0873.

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Rails, Rivers and Roads by David C. Barrett Jr., Counsel for Public Affairs

Ocean Shipping Reform Bill Approved

The expanding list of agricultural commodities and processed goods shipped in containers on ocean liner vessels would be subject to a new regulatory framework following the Senate's passage on Oct. 1 of a major ocean shipping reform bill (S. 414). President Clinton is expected to sign the bill, which would take effect on May 1, 1999.

The bill does not affect bulk vessel shipments.

Senate Commerce, Science and Transportation Committee Chairman John McCain, R-Ariz., said: "[u]pdating shipping laws and introducing more competition in the U.S. international ocean shipping market is essential for continued growth of our market-based economy."

Among other things, the legislation would:

allow U.S. importers and exporters to contract with one or more ocean carriers of their choice, rather than as directed by ocean shipping cartels.

allow ocean shipping contract rate and service information to remain confidential.

end the filing of tariffs with the Federal Maritime Commission by privatizing ocean transportation tariff publication (the commission is required to have new tariff rules in place by March 1, 1999).

prohibits the Federal Maritime Commission or a court from ordering any person to pay the difference between the amount billed and agreed upon with a common carrier for transportation services and the amount set forth in any tariff or service contract.

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Keistler Appointed to Executive Committee

…Appointments also Made to Arbitration Appeals Panel, New Rail Arbitration Rules Committee…

James W. Keistler, merchandising manager for the Twomey Co., Smithshire, Ill., has been appointed to fill a vacancy on the NGFA's 15-member Executive Committee.

Keistler currently also serves as chairman of the NGFA's Trade Rules Committee, and is a member of the Waterborne Commerce Committee. The Executive Committee is responsible for the NGFA's overall planning, policies and finances when the Board of Directors is not in session, except for such matters as the Bylaws reserve solely to the Board.

Appointments to Arbitration Appeals Panel: NGFA Chairman Michael F. Donnelly has announced the appointment of three new members to the Arbitration Appeals Panel, which was expanded from eight to 12 members under changes to the NGFA Bylaws that were ratified by the membership at the March convention. A fourth appointment is expected shortly.

The three new appointees are: David Bastress, vice president, marketing, Kansas City Southern Railway, Kansas City, Mo.; Dennis McLeod, president, Red River Valley & Western Railroad Co., Wahpeton, N.D.; and Edward P. Milbank, president, Milbank Mills Inc., Chillicothe, Mo.

The NGFA Bylaws vest in the Arbitration Appeals Panel the responsibility for hearing appeals of arbitration cases.

Appointments to New Rail Arbitration Rules Committee: Chairman Donnelly also announced the appointment of seven members to the new 10-member Rail Arbitration Rules Committee provided for under a change to the NGFA Bylaws approved in August by the Board of Directors. The Rail Arbitration Rules Committee will be responsible for administering and considering amendments to the Rail Arbitration Rules that emanated from the Rail Arbitration Agreement and which were approved by the Board of Directors. The committee's first task will be to develop and propose, by Jan. 15, arbitration procedures for resolving disputes involving sidetrack agreements.

Appointed to the Rail Arbitration Rules Committee were: Chairman: Stevan B. Bobb, vice president, agricultural commodities, Burlington Northern and Santa Fe Railway Co., Fort Worth, Texas; George Aspatore, general solicitor, Norfolk Southern Corp., Norfolk, Va.; Joe Guenley, vice president, Agrex Inc., Overland Park, Kan.; Ed Kammerer, vice president, bulk commodities, Illinois Central Railroad, Chicago, Ill.; Diane Knutson, vice president, agricultural products, Union Pacific Railroad Co., Omaha, Neb.; Ed Laur, vice president, Attebury Grain Inc., Amarillo, Texas; and Tom Owen, assistant vice president, agri products, CSX Transportation Co., Jacksonville, Fla.

Appointed as ex-officio (non-voting) members were: John Bratten, vice president, transportation, Central Soya Co., Fort Wayne, Ind.; chairman of the NGFA's Rail Shipper/Receiver Committee; and John L. McClenathan, Jr., vice president, grain marketing, GROWMARK, Inc., Bloomington, Ill., chairman of the NGFA's Arbitration Appeals Panel.

The Bylaws require that the new 10-member Rail Arbitration Rules Committee be comprised equally of rail carrier and rail user members. Three additional appointments representing rail user members will be made shortly.

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NGFA Board Approves New Membership Classification, Dues Formula

The NGFA Board of Directors at its meeting on Sept. 12 approved a proposal to simplify the NGFA's membership structure, clarify the dues treatment of joint ventures and adjust the dues formulas.

The changes include:

a formula for assessing dues to joint ventures owned by two or more NGFA-member parent companies.

a reallocation of the weighing factors applied to storage capacity, bushel put-through and gross sales in the NGFA's dues formula, the first restructuring since 1992. The adjustments are intended to achieve greater dues equity, not increase total dues.

an increase in minimum and maximum dues levels to make them more equitable. The current minimum dues of $450 per year will increase by $50 annually effective on Nov. 1 until reaching $600 on Nov. 1, 2000. Likewise, maximum dues will increase gradually from the current $36,000 until reaching $48,000 on Nov. 1, 2000. These adjustments are intended to balance the increased dues experienced in the last six years by companies in the mid-dues ranges (with annual investments of between $500 and $35,000). The last dues adjustment was made in 1992.

a change to reduce the number of membership categories from six to four. The four categories will be: Active, Associate, Associate/Trading and Affiliate State/Regional Association.

A full explanation of the changes will accompany the dues invoices sent to NGFA member companies in advance of their membership anniversary dates.

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Membership Matters by Todd E. Kemp, Director of Marketing

Rail Arbitration -- A Compelling Membership Marketing Tool

The historic agreements concluded by the NGFA and rail carriers in late August on arbitration and mediation of disputes stand to provide major membership benefits to NGFA-member companies. And don't forget -- the same is true of rail shippers/receivers that have not yet joined the NGFA; but they must be members to be assured of access!

The NGFA and various State and Regional Grain and Feed Associations have fielded a number of calls from prospective members who want access to this method for resolving rail disputes. This includes serious interest from companies that have been approached multiple times and have found reasons to put off joining the NGFA.

In short, NOW is the time to recruit some of the "hard cases" that you've attempted to recruit repeatedly in the past.

How can you use the rail arbitration and mediation agreements to market NGFA membership?

Call your prospect and check whether he/she is aware of the agreements.

Explain to your prospect that only NGFA members are assured of access to this important new dispute-resolution system.

Make sure they receive a copy of the text of the agreements. The NGFA staff can mail this to your prospect.

Ask the NGFA staff to forward membership information and a membership application, as well as to provide follow-up.

Right now may be our best opportunity to convince rail shippers/receivers of the value added by the NGFA! Call that prospect today!

Tom Tunnell Wins `Membership Month' Contest

Tom Tunnell, president of the Kansas Grain and Feed Association, Topeka, Kan. is the winner of the NGFA's August Membership Month contest. Shown enjoying their Chicago get-away weekend, are Tom and his wife, Michelle. In the photo at left, the Tunnells soak up the atmosphere at historic Wrigley Field watching Sammy Sosa and the Chicago Cubs. In the right photo, the Tunnels visit with Patrick Arbor (left), chairman of the Chicago Board of Trade, during a VIP tour of the world's largest exchange.

Other elements of the weekend prize were airfare to Chicago; two nights' lodging at the Regal Knickerbocker Hotel; dinner at Harry Caray's restaurant; and tickets to Cubs and White Sox games. A special thanks to NGFA members sponsoring the prize package: E.D. & F. Man, International, Chicago; Advance Trading Inc., Bloomington, Ill.; Corn Products International, Chicago; the Chicago Board of Trade; ABN AMRO Inc., Chicago; and the Illinois Central Railroad, Chicago!

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National Secretary Issues Default Judgments

The National Secretary in the past few weeks has issued 11 default judgments against defendants in various arbitration cases. The accompanying table lists the parties involved in each case, the date of the decision and the amount of the default judgment. Each of these default judgments currently is available on the NGFA's web site at http://www.ngfa.org. under the "Members Only" section. Each also will be published and distributed with the NGFA Newsletter in coming weeks on a space-available basis; three are enclosed with this edition.

Default Judgments Rendered by National Secretary

(Granted since Aug. 3, 1998)

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