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Russell Nemetz LMA Discussed Need for Dealer Statutory Trust, Transportation Concerns at D.C. Fly In
by Russell Nemetz, click here for bio

Program: Land & Livestock Report
Date: April 26, 2018

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Livestock Marketing Association (LMA) members and staff traveled to Washington D.C. for the 13th annual LMA D.C. Fly In. Approximately 35 people met with leaders in D.C. on issues that matter to the livestock marketing industry. Discussion centered on the need to pass H.R. 4058, the Securing All Livestock Equitably (SALE) Act creating a Dealer Statutory Trust to protect unpaid sellers of livestock against buyer payment default. Participants also discussed the need for additional Hours of Service flexibilities for livestock haulers and the role livestock auctions play in animal identification.

During meetings with legislators and legislative staff, LMA members detailed why a Dealer Statutory Trust is necessary for livestock auction markets, livestock dealers, and livestock producers. Current law results in livestock sellers, both producers and markets, going unpaid with little recourse when there is a livestock dealer default. Payment protection options in the Packers and Stockyard Act (P&S Act) do not provide sufficient protection. According to United States Department of Agriculture (USDA) Agricultural Marketing Service (AMS) Packers and Stockyards division data, between 2009 and 2016, there was $39,110,132 in valid bond claims against forty registered dealers. Recovery from those dealers’ bonds was $279,832, or just 6.5% of the total valid claims.

To make a bad situation worse, if a defaulting dealer goes into bankruptcy there is a very real risk of a preferential transfer claim. This is where the bankruptcy trustee demands the seller remit an amount equal to all payments the seller received from the defaulting dealer during the 90 days prior to the bankruptcy filing. If a Dealer Trust were added to the P&S Act, previous payments from the now-bankrupt dealer made to sellers would be considered trust funds and not eligible to be pulled into bankruptcy proceedings through a preferential transfer claim.

While LMA was primarily advocating for legislation to amend the Packers and Stockyards Act for the establishment of a Dealer Statutory Trust, D.C. Fly In attendees also discussed other issues, including transportation regulations and traceability. LMA members addressed ongoing issues with regulations that make hauling livestock challenging from an animal welfare and economics standpoint. LMA members expressed their appreciation to many offices for their assistance with obtaining an Electronic Logging Device (ELD) delay until at least September 30, 2018, via the omnibus spending package. This delay will allow time to seek regulatory and legislative solutions to modify the hours of service (HOS) specific to livestock haulers. Current regulations limit truckers to 11 hours of drive-time daily, after 10 consecutive hours off-duty, and restrict truckers’ on-duty time to 14 consecutive hours, including non-driving time.

Further, LMA remains concerned with inconsistent enforcement of the current Animal Disease Traceability (ADT) rule. LMA opposes the possibility of USDA moving forward with Phase 2, mandatory tagging of feeder cattle, prior to addressing problems in the current program.

In addition to meetings on Capitol Hill, attendees also met with Randall Jones, USDA AMS Fair Trade Practices Program Deputy Administrator; Michael Durando, USDA AMS Fair Trade Practices Program Associate Deputy Administrator; Dr. Jack Shere, USDA Animal and Plant Health Inspection Service Veterinary Services (APHIS) Deputy Administrator and USDA Chief Veterinary Officer; and Joe DeLorenzo, Federal Motor Carrier Safety Administration (FMCSA) Director, Office of Compliance and Enforcement.

“LMA’s Fly In was a productive opportunity to continue our educational efforts and to talk with decision makers in D.C. about the need to better protect livestock sellers from defaults,” said Chelsea Good, LMA Vice President of Government and Industry Affairs. “The fundamental unfairness of livestock sellers going unpaid is well understood on Capitol Hill. We are anxious to see H.R. 4058 and other efforts to create a Dealer Statutory Trust advance.”

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