With new rules from the Grain Inspection, Packers and Stockyards Administration (GIPSA) going into effect this week, Eldon McAfee, attorney for Beving, Swanson and Forrest, Des Moines, Iowa, shared a few suggestions for pork producers. The new rules go into effect for production contracts entered into, amended or altered after Feb. 7.
McAfee discussed the potential ways GIPSA may use to determine if contract violations by either party are committed. “The way the GIPSA Final Rule is written they could consider other areas to determine if there is a violation,” McAfee said. “The point is that GIPSA could use other factors not spelled out in the final rule when determining if a violation has occurred.” McAfee believes, however, GIPSA will enforce only those criteria that are spelled out in the rules, except perhaps in the case of egregious circumstances.
McAfee also points out that since June 18, 2008, all swine production contracts entered into must have the following disclosures:
- Contract grower has the right to cancel within 3 days (or longer if the contract stipulates.)
- Contract must clearly disclose the right, method and deadline for cancelling
- Additional capital investments may be required. If not required, the contract can so state.
What is an additional capital investment? The rules define “additional capital investment” as $12,500 per structure or more paid by the contract grower, which does not include maintenance or repair. If additional capital investment must be made by the contract grower, McAfee suggests that the best way to handle it may be with a contract addendum at the time of the capital investment which lays out all the information required by the rule and is signed by both parties.
The GIPSA final rule also requires a reasonable period of time to remedy a breach of contract. If a breach of contract occurs, a grower must be provided written notice of the breach upon initial discovery. “This is how the rule is written and it is a factor GIPSA may consider to determine if the contract grower is in violation.”