Administrative Rules of the State of Montana

BEFORE THE DEPARTMENT OF AGRICULTURE

OF THE STATE OF MONTANA

In the matter of the adoption of New Rules I and II and amendment of ARM 4.12.1018, 4.12.1020, and 4.12.1031 pertaining to Commodity Dealer Licenses

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NOTICE OF PUBLIC HEARING ON PROPOSED ADOPTION AND AMENDMENT

TO: All Concerned Persons

1. On September 4, 2019, at 10:00 a.m., the Department of Agriculture will hold a public hearing in Room 225 of the Scott Hart Building, at 302 N. Roberts, Helena, Montana, to consider the proposed adoption and amendment of the above-stated rules.

2. The Department of Agriculture will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, contact the Department of Agriculture no later than 5:00 p.m. on August 30, 2019, to advise us of the nature of the accommodation that you need. Please contact Cort Jensen, Department of Agriculture, P.O. Box 200201, Helena, Montana, 59620-0201; telephone (406) 444-3144; fax (406) 444-5409; or e-mail [email protected].

3. The rules as proposed to be adopted provides as follows:

NEW RULE I MODIFIED LICENSES FOR COMMODITY DEALERS (1) The department may issue or change a license as needed to insure the producer's safety and maintain competitive fairness. If the department deems modifications are in the best interest of producers, and the alternative is not issuing a license at all, it may make modifications to licenses. All appeals, either formal or informal, to modifications are subject to the MAPA dispute process. Common modifications are listed in (a) through (c).

(a) Conditional licenses are limited in scope and differ in the amount, type, or time requested by the licensee or initially issued by the department.

(i) Conditional licenses may prevent companies from entering into new contracts until they are fully compliant or meet financial requirements.

(ii) Conditional licenses are usually triggered by a radical change in the financial status of the commodity dealer or the legality or price of the commodity.

(b) Suspended licenses are submitted with incomplete paperwork and/or bonding or are noncompliant with the financial statements filing date pursuant to the Administrative Procedure Act as referenced in ARM 4.12.1020.

AUTH: 80-4-403, MCA

IMP: 80-4-403, MCA

REASON: The department is authorized to modify commodity dealer licenses to insure payment to producers. The proposed rule provides common modifications and their associated triggers to help industry anticipate the department's probable action when responding to a variety of situations that arise in the commodity trade. No economic impact is related to the proposed rule.

NEW RULE II PENALTY MATRIX FOR COMMODITY DEALERS AND WAREHOUSE LAWS

(1)

Violation	1st time (or accidental)	2nd (or intentional)	3rd

Required paperwork submitted one month or more late or incomplete with no risk to the farmer/customer	Warning	Warning	$100 dollars per additional month and possible suspension of license until the paperwork is submitted

Required paperwork submitted one month or more late or incomplete paperwork, with risk to the farmer/customer	Warning	$250 dollars per additional month and possible suspension of license until the paperwork is submitted	$250 dollars per additional month and possible revocation of license

Required language not included in commodity contract (i.e., deferred payment) or warehouse receipt not provided	Warning	$100 per contract or missing receipt up to a maximum fine of ($5000)	$200 per contract or missing receipt up to a maximum fine of ($10,000) and possible revocation of license

Paperwork includes false or misleading material statements about buying, financial records, bonding, warehouse receipts, or storage capacity	Up to $250 and possible suspension of license until the paperwork is corrected	The lowest corrected bonding cost amount or $10,000, possible suspension, or revocation of license	The lowest corrected bonding cost amount or $100,000, revocation of license

Failure to post required testing information or retain samples as required by law	Warning	$250	$500

Operating as a commodity dealer or warehouse without a license	The higher bonding cost amount or $500	The higher bonding cost amount or $10,000 (no more than $100,000)

AUTH: 80-4-403, 80-4-429, MCA

IMP: 80-4-421, 80-4-426, 80-4-427, 80-4-428, 80-4-429, 80-4-502, 80-4-601, MCA

REASON: The proposed penalty matrix implements House Bill 50, passed in the 2019 Regular Session of the Montana Legislature. Civil penalties are defined for entities that fail to obtain proper licenses or are in violation of other commodity dealer/warehouse laws. Fines are designed to discourage entities from not properly licensing and bonding.

Economic Impact: The number of entities in violation is unknown. The department does not expect to issue fines in the first year of implementation and recognizes that collecting fines, especially minimal amounts, may be problematic. Compliance fines in subsequent years will range between $0 and $100,000.

4. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined:

4.12.1018 TERM OF LICENSES - EXPIRATION (1) A public warehouse license period ~~shall be for the term of~~ is July 1, through June 30~~, or part thereof~~. A public warehouse license ~~shall~~ expires July 1 of each year.

(2) A commodity dealer license period ~~shall be for the term of~~ is July 1, through June 30~~, or part thereof~~. A commodity dealer license ~~shall~~ expires July 1 of each year.

AUTH: 80-4-403, MCA

IMP: 80-4-404, MCA

REASON: Proposed amendments update language to comply with Secretary of State Administrative Rules of Montana standards. No economic impact is tied to these amendments.

4.12.1020 FINANCIAL STATEMENTS FILING DATE (1) The financial statement accompanying an applicant's original application ~~shall~~ must show a statement closing date that is within six months of the date of application. Thereafter, the licensee applying for renewal ~~shall~~ must submit an annual statement not later than 90 120 days after the close of ~~his~~ their business year.

(2) If the financial statement indicates noncompliance with the financial requirement provisions of the grain act or the licensee fails to submit an acceptable financial statement within 90 120 days of the end of ~~his~~ their fiscal year end, ~~then~~ the department may immediately suspend ~~his~~ their license pursuant to the Administrative Procedure Act, issue a fine, and/or make the license conditional on the paperwork arriving at a specified time.

AUTH: 80-4-403, MCA

IMP: 80-4-421, 80-4-502, 80-4-601, MCA

REASON: Industry requested the department extend timelines for financial statement filings from 90 days to 120 days. Doing so increases the time entities have to acquire the required compliance paperwork and aligns with the current state of the industry. Additional language for late and/or noncompliant paperwork reflects changes made during the 2019 Regular Session of the Montana Legislature in House Bill 50 and Senate Bill 73.

Economic Impact: Proposed amendments grant additional time to licensees to submit their financial statements which may result in lower ancillary costs, such as accounting fees, for some. The exact amount of these reduced costs is not calculatable.

4.12.1031 OTHER COMMODITIES (1) In addition to those specified commodities in 80-4-402, MCA, the following crops are commodities for all purposes:

(a) pulse crops including but not limited to peas, dried peas, chickpeas, and lentils;

(b) beans.; and

(i) Hemp is an oil crop seed commodity covered under the provisions of 80-4-402, MCA, and ARM Title 4, chapter 19, subchapter 1.

AUTH: 80-4-402, MCA

IMP: 80-4-402, 80-4-501, 80-4-601, 80-4-704, 80-18-103, MCA

REASON: While hemp has been treated as an oil crop seed for commodity purposes, the department recognizes this may not be understood by entities seeking to comply with the law. By adding hemp-specific rules and laws, the department cross-references the commodity to make buyers aware of regulations and options.

5. Concerned persons may submit their data, views, or arguments either orally or in writing at the hearing. Written data, views, or arguments may also be submitted to: Cort Jensen, Department of Agriculture, 302 N. Roberts. P.O. Box 200201, Helena, Montana, 59620-0201; telephone (406) 444-3144; fax (406) 444-5409; or e-mail [email protected], and must be received no later than 5:00 p.m., September 9, 2019.

6. Cort Jensen, Department of Agriculture, has been designated to preside over and conduct this hearing.

7. The department maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name, e-mail, and mailing address of the person to receive notices and specifies for which program the person wishes to receive notices. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the contact person in 5 above or may be made by completing a request form at any rules hearing held by the department.

8. The bill sponsor contact requirements of 2-4-302, MCA, apply and have been fulfilled. The primary bill sponsor was contacted by email on July 29, 2019.

9. With regard to the requirements of 2-4-111, MCA, the department has determined that the adoption and amendment of the above-referenced rules will not significantly and directly impact small businesses.

/s/ Cort Jensen /s/ Ben Thomas

Cort Jensen Ben Thomas

Rule Reviewer Director

Agriculture

Certified to the Secretary of State July 30, 2019.