Warehouse Regulation
Last updated: September 20, 2011
Warehouse Regulation—States are very concerned about the final rules to the U.S. Warehouse Act of 2000 which were published in the Federal Register by USDA on August 5, 2002. These final rules were released without opportunity for comment on the language that was added in subsection(c), Part 735.1 which reads, "Compliance with state laws relating to the warehousing, grading, weighing, storing, merchandising or other similar activities is not required with respect to activities engaged in by a warehouse operator in a warehouse subject to a license issued in accordance with this part." The U.S. Warehouse Act should not preempt state authority to provide protection to producers doing business with federally licensed warehouses. The USWA should not preempt state warehouse laws governing grain merchandising and producer grain purchase obligations. NASDA believes that the USDA does not have exclusive authority to regulate merchandising related activities of grain warehouses licensed under USWA. Appropriate legislative action to amend the U.S. Warehouse Act should be pursued.
Mandatory state warehouse programs have been established in many states to both adequately serve agricultural commodities and to protect farmers from suffering financially if a warehouse experiences inventory shortages or financial insolvency. The voluntary federal warehouse program also serves agricultural commodities, but lacks many protections for farmers.
All warehouses that store agricultural commodities for the public are licensed either by the USDA via the United States Warehouse Act (USWA) or by the respective state in which the warehouse operates.
Further, 23 states also regulate the merchandising of grain through grain dealer laws. These state programs serve the agricultural community well in terms of cost efficiencies and regulatory oversight.
USDA has never regulated the merchandising of grain. The USDA has taken the position that the USWA covers the merchandising of agricultural commodities and that the industry is not required to follow state law. States are very concerned about the USDA's interpretation that the federal law supersedes state law in the area of merchandising. This interpretation could not only lead to zero protection for farmers who merchandise agricultural commodities at a warehouse licensed under the USWA, but also put in jeopardy state programs where commodity producers have chosen to pay into indemnity funds for their own protection.
NASDA believes that the USDA should cooperate with the state departments of agriculture in the regulation of agricultural commodities' warehouse activities to provide producers with the best protection possible while subjecting the industry to the minimum amount of regulatory oversight. A cooperative agreement between the state(s) and the USDA would benefit the producer, the industry, and the taxpayers.
NASDA urges the administration and the U.S. Congress to direct the USDA to collaborate with state agencies and to recognize the states authority to license and regulate grain dealer and merchandising activities of federally licensed grain warehouses and examine all agricultural warehouses within their states irrespective of their license status under the U.S. Warehouse Act.