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Montana Administrative Register Notice 4-14-225 No. 10   05/28/2015    
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BEFORE THE DEPARTMENT OF AGRICULTURE

OF THE STATE OF MONTANA

 

In the matter of the amendment of ARM 4.17.105, 4.17.106, and 4.17.107 pertaining to Organic Application Procedures and Fees, Fees For Services, and Annual Report and Assessment Fees

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NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT

 

 

TO: All Concerned Persons

 

          1. On June 22, 2015, at 2:00 p.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 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 June 15, 2015, to advise us of the nature of the accommodation that you need. Please contact Cort Jensen, Department of Agriculture, 302 N. Roberts, Helena, Montana, 59601; telephone (406) 444-3144; fax (406) 444-5409; or e-mail cojensen@mt.gov.

 

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

 

          4.17.105 APPLICATION PROCEDURES (1) through (6) remain the same.

(7) Applications for certification must may include labels for all crop, livestock and handling inputs, and processing aids and evidence that each input and processing aid contains only allowed substances. Such evidence may consist of lists of ingredients, statements from manufacturers, or verification of recognized third party review.   

(8) remains the same.

(9) Applications for initial certification of producers are due at least 120 days prior to the harvest of organic crops or the sale of organic livestock or livestock products.

(a)(9) Applications to continue producer certification are due no later than March 15 annually.

(b) Applications for initial certification of handlers can be made at any time.

(c)(10) Applications to continue handler certification are due no later than September 15 annually.

(10)(11) Certified operations that do not apply to continue certification or do not comply annually with 7 CFR 205.406 may have their certification suspended. An operation that has its certification suspended may reapply, but shall pay the fees of a new applicant. but would not qualify for the new applicant discount.

(11)(12) An application for certification may be withdrawn by the applicant at any time:

(a) and (b) remain the same.

 

AUTH: 80-11-601, MCA

IMP: 80-11-601, MCA

 

REASON:  The change of the word 'must' to 'may' within ARM 4.17.105(7) reflects the current policies of the department.

 

The addition of the expedited surcharge in ARM 4.17.106(9) makes the language in 4.17.105(9) and (9)(b) no longer applicable.

 

The change in ARM 4.17.105 clarifies that applicants that are in a re-application status would not qualify for a credit.

 

FISCAL IMPACT: No fiscal impact.

 

          4.17.106 APPLICATION FEES AND FEES FOR SERVICES (1) Application fees for producers are as follows:

          (a) the application fee is $165 for operations having less than $20,000 in gross sales annually;

          (b) the application fee is $200 for operations having $20,000 to $100,000 in gross sales annually;

          (c) the application fee is $300 for operations having more than $100,000 in gross sales annually;

          (d) an additional application fee is $150 for new applications for certification;

          (e) an additional application fee is $250 for each additional certification requested;

          (f) an additional fee for mixed operations is as follows:

          (i) $50 if gross sales are less than $20,000 annually;

          (ii) $100 if gross sales are from $20,000 to $100,000 annually; and

          (iii) $150 if gross sales are more than $100,000 annually; and

(a)  a new applicant will receive a $100 credit to be applied to the first-year fees;

(b)  the application fee for an operation with gross annual organic sales from $0 to $20,000.99 is $600;

(c)  the application fee for an operation with gross annual organic sales from $20,001 to $40,000.99 is $700;

(d)  the application fee for an operation with gross annual organic sales from $40,001 to $100,000.99 is $800;

(e)  the application fee for an operation with gross annual organic sales from $100,001 to $250,000.99 is $900;

(f)  the application fee for an operation with gross annual organic sales from $250,001 to $500,000.99 is $1,000;

(g)  the application fee for an operation with gross annual organic sales from $500,001 to $1,000,000.99 is $1,250;

(h)  the application fee for an operation with gross annual organic sales at or above $1,000,001 is $1,500; and

          (g)(i) an additional fee is $75 $100 for combined livestock and crop operations.

          (2) Application fees for handlers are as follows:

          (a) the application fee is $215 per facility for operations having less than $20,000 in gross sales annually;

          (b) the application fee is $250 per facility for operations having $20,000 to $100,000 in gross sales annually;

          (c) the application fee is $400 per facility for operations having more than $100,000 in gross sales annually;

          (d) an additional application fee is $150 for new applications for certification;

          (e) an additional application fee is $250 for each additional certification requested; and

          (a) a new applicant will receive a $100 credit to be applied to the first-year fees;

(b) the application fee for an operation with gross annual organic sales from $0 to $20,000.99 is $600;

(c) the application fee for an operation with gross annual organic sales from $20,001 to $40,000.99 is $700;

(d) the application fee for an operation with gross annual organic sales from $40,001 to $100,000.99 is $800;

(e) the application fee for an operation with gross annual organic sales from $100,001 to $250,000.99 is $900;

(f) the application fee for an operation with gross annual organic sales from $250,001 to $500,000.99 is $1,000;

(g) the application fee for an operation with gross annual organic sales from $500,001 to $1,000,000.99 is $1,250;

(h) the application fee for an operation with gross annual organic sales at or above $1,000,001 is $1,500; and

          (f)(i) if an operation is certified as a producer, or is applying for certification as a producer, the operation may subtract $115 from the base application fee for handler certification.

          (3) Each applicant for certification will be inspected initially and yearly thereafter, in compliance with 7 CFR 205.403, to assess compliance with certification standards. Fees will be charged to the applicant in amounts sufficient to cover costs of the inspection:.

          (a) for any inspections conducted by department staff, The inspection charge will be $35 to $75 per hour for time incurred in the inspection and writing the report. 

The exact hourly rate will be set each year based on actual cost to the department.

The department will also charge per diem and mileage at standard state rates, plus a 10% administrative charge; and.

          (b) for inspections conducted by contracted inspectors, the inspection charge will be equal to that specified in the contract with the inspector and paid to the inspector by the department, plus a 10% administrative charge.

          (4) The fee for a transaction documentation form is $10 per sales-specific transaction documentation form that is completed by the department, and $10 for a booklet of ten sequentially numbered transaction documentation forms with an expiration date that may be used by the certified operation.

          (4) The label and product profile review fee is $35 for each new or revised label.

          (5) and (6) remain the same.

          (7) Applications submitted after the deadline must include an additional late fee of $200. On the first of every month after the first month, an additional $100 will be added to the late fee.

          (a) Application fees and the related $200 late fee are subject to a collection fee of 18% annual percentage rate or a minimum fee of $25, whichever is greater, for any payment amount not received within 45 days of the deadline and for each monthly billing cycle thereafter.

          (8) remains the same.

          (9) A surcharge of up to $1,000 may be charged for expedited services depending on the speed, time of the year, and resources required. The department may set pricing standards within department policy.

 

AUTH: 80-11-601, MCA

IMP: 80-11-601, MCA

 

REASON: The Organic Certification program does not receive general fund money and must be self-supporting through fees that are commensurate with the cost of providing certification services. The program has not had a universal fee increase since its inception in 1999.

 

Current program fees do not cover the costs of the program. The increase in the application and inspection fees for producers and handlers will allow the department to recover a larger portion of the actual cost required to certify operations. Revenue collected will be deposited in the special revenue account established by 80-11-602, MCA.

 

It should be noted that Federal Cost Share dollars from the 2014 Farm Bill (75% of costs up to $750) are available to both producers and handlers as a reimbursement of certification costs.

 

The department proposes to modify the new applicant fee from a charge to a credit to encourage new clientele and growth of the program.

 

The department proposes to eliminate the additional certification fee referenced in (2)(e) above.  Additional certifications are no longer required since there are now USDA National Organic Program Equivalency Agreements in place with foreign countries.

 

The mixed operation fee is confusing to clientele and often requires more time and expense to administer than the revenue generated by the fee. It also discourages mixed operations from certifying. Thus, the department is proposing to eliminate the fee.  The combined livestock and crop operations fee is increasing to recover cost of the additional evaluation.

 

The department proposes to eliminate the need to go through rulemaking to adjust the hourly inspection charge rate.  Basing the rate on an annual analysis of the cost of doing business will enable the department to more accurately set the dollar-per-hour rate and to more fully recover inspection costs.

 

The department proposes to eliminate the fee for Transaction Documentation Forms (TDF) since TDFs are no longer issued.

 

The department proposes to add a fee for reviewing labels and product profiles. This fee would allow the department to recover costs associated with this labor-intensive process.

 

The department is proposing to change the structure of how the application late fee is calculated and increase the cost to delinquent applicants. Applications received after the due date shorten the time required to process applications effectively, conduct inspections efficiently, and certify operations in a timely manner.

 

Expedited services (e.g., certification in less than 90 days) are requested on a regular basis. These types of services can be provided; however, the department needs the ability to charge for services that require additional resources or rescheduling.

 

FISCAL IMPACT:  FY14 expenditures for the organic program exceeded revenue by over $11,500.  Budget projections indicate future shortfalls of as much as $60,000 annually as personnel and operation costs continue to increase.

 

Application fees for producers have been modified.

 

The proposed fees for producers in the $0 to $20,000 tier have increased by $435 per applicant. Based on FY14 projections, this increase would affect 55 producers and generate an additional $23,925 in revenue.

 

The proposed fees for producers in the $20,001 to $40,000 tier have increased by $500 per applicant. Based on FY14 projections, this increase would affect 13 people and generate an additional $6,500 in revenue.

 

The proposed fees for producers in the $40,001 to $100,000 tier have increased by $600 per applicant. Based on FY14 projections, this increase would affect 23 producers and generate an additional $13,800 in revenue.

 

The proposed fees for producers in the $100,001 to $250,000 tier have increased by $600 per applicant. Based on FY14 projections, this increase would affect 12 producers and generate an additional $7,200 in revenue.

The proposed fees for producers in the $250,001 to $500,000 tier have increased by $700 per applicant. Based on FY14 projections, this increase would affect 10 producers and generate an additional $7,000 in revenue.

 

The proposed fees for producers in the $500,001 to $1,000,000 tier have increased by $950 per applicant. Based on FY14 projections, this increase would affect four producers and generate an additional $3,800 in revenue.

 

The proposed fees for producers in the over $1,000,001 tier have increased by $1,200 per applicant. Based on FY14 projections, this increase would affect two producers and generate an additional $2,400 in revenue.

 

The new application fee will decrease by $250 and affect an estimated nine producers. This change would decrease revenue by $2,250.

 

Based on FY14 projections, removal of the various mixed operation fees would affect eight producers in the less than $20,000 category, five producers in the $20,001 to $100,000 category, and seven producers in the greater than $100,001 category. This change would decrease revenue by $1,950.

 

Based on FY14 projections, the $25 increase in the combined livestock and crop operation fee would affect 27 producers and generate an additional $675.

 

This rule specifies that the hourly rate for staff inspectors will be set annually by the department at a rate that recovers the cost to the state. It is anticipated that the hourly rate for contract and staff inspectors will be $50 per hour based on the current contractor rates and hourly staff rates including benefits. There will be an additional projected revenue amount of approximately $9,750.

 

Removal of the Transaction Document Fee (TDF) will have no significant fiscal impact. No TDFs were issued in FY2014.

 

Removal of the additional certification fee will have no significant fiscal impact.

 

Application fees for handlers have been modified.

 

The proposed fees for handlers in the $0 to $20,000 tier have increased by $385 per applicant. Based on FY14 projections, this increase would affect 14 handlers and generate an additional $5,390 in revenue.

 

The proposed fees for handlers in the $20,001 to $40,000 tier have increased by $450 per applicant. Based on FY14 projections, this increase would affect three handlers and generate an additional $1,350 in revenue.

 

The proposed fees for handlers in the $40,001 to $100,000 tier have increased by $550 per applicant. Based on FY14 projections, this increase would affect five handlers and generate an additional $2,750 in revenue.

 

The proposed fees for handlers in the $100,001 to $250,000 tier have increased by $500 per applicant. Based on FY14 projections, this increase would affect eight handlers and generate an additional $4,000 in revenue.

 

The proposed fees for handlers in the $250,001 to $500,000 tier have increased by $600 per applicant. Based on FY14 projections, this increase would affect five handlers and generate an additional $3,000 in revenue.

 

The proposed fees for handlers in the $500,001 to $1,000,000 tier have increased by $850 per applicant. Based on FY14 projections, this increase would affect five handlers and generate an additional $4,250 in revenue.

 

The proposed fees for handlers in the over $1,000,001 tier have increased by $1,100 per applicant. Based on FY14 projections, this increase would affect four handlers and generate an additional $4,400 in revenue.

 

Addition of the $35 label and product review fee will affect approximately 44 operations. The department reviewed approximately 75 new or revised labels/product profiles in FY 2014. The addition of this fee will generate approximately $2,625 in revenue.

 

The total estimated net change in revenue of the changes listed in ARM 4.17.106 would result in an increase of $98,615 of annual revenue.

 

4.17.107 ANNUAL REPORT AND ASSESSMENT FEES (1)  Producers and handlers certified by the department, and new applicants for certification, must submit an annual report of their total gross sales and handling charges for all certified organic production and handling. Certified producers and new applicants for producer certification shall pay an annual assessment fee to the department as a percentage of gross sales of organically produced products. Certified handlers and new applicants for handler certification shall pay an flat annual assessment fee based on their reported level as a percentage of gross sales and handling charges for all products and services included in their Organic Handling System Plans (OHSP):

(a) the annual report and assessment for producers and handlers of all gross sales and handling charges shall be for the previous calendar year;

          (b) the report and fees for both producers and handlers are due on March 15 annually. The report and fees for handlers are due on September 15 annually. The department may assess a 10% penalty (based on the previous annual assessment report fee amount), or a minimum fee of $25, whichever is greater, for any assessment reports received after the deadline. The department may require past-due payment of fees prior to providing certification services.

          (2) The assessment fee on gross sales and handling charges for production and handling certified by the department is as follows:

          (a) the fee for certified producers is 1.0% of gross sales of organic crops, livestock, and products;

          (b) the fee for certified handlers is:

          (i) $25 for handlers whose gross sales and handling charges are less than $5,000 per year;

          (ii) $50 for handlers with gross sales and handling charges of $5,000 to $20,000;

          (iii) $100 for handlers with gross sales and handling charges of $20,001 to $40,000;

(iv) $200 for handlers with gross sales and handling charges of $40,001 to $100,000;

(v) $500 for handlers with gross sales and handling charges of $100,001 to $250,000;

          (vi) $1,000 for handlers with gross sales and handling charges of $250,001 to $500,000;

          (vii) $2,000 for handlers with gross sales and handling charges of $500,001 to $1,000,000; and

          (viii) $4,000 for handlers with gross sales and handling charges of over $1,000,000.

(2)  The assessment fee for producers is 0.5% of sales except that the minimum producer assessment is $150 and the maximum producer assessment is $5,000.

(3)  The assessment fee for handlers is 0.5% of sales except that the minimum handler assessment is $150 and the maximum handler assessment is $5,000.

          (3)(4) All assessment fees are nonrefundable upon receipt.

          (5) Any fees paid or owed in excess of the rule caps stated in ARM 4.17.106 for the year 2015 will be refunded to the producer, or if still owing will be considered void.

 

AUTH: 80-11-601, MCA

IMP: 80-11-601, MCA

 

REASON: During the review and analysis of program fees, it became apparent that the original fee structure was set up for a beginning program and the assessment fee was not balanced between producers and handlers for the current environment. Therefore, the proposed fees contain a change in structure to provide a more equitable assessment between producers and handlers, including some decreased fees as well as increased fees. The result of all fee changes within this proposal does increase revenue to the Organic Certification program.

 

Changing the annual handler sales assessment due date to September 15 will synchronize the handler sales assessment due date with the handler application date. The previous due date of March 15 was confusing to handler applicants since it did not coincide with the renewal date.

 

The 10% penalty on the previous assessment amount was confusing and difficult to implement. Changing the 10% penalty from the previous assessment amount to the current assessment amount will make this amount easier to calculate for the department and the clientele.

 

These proposed rule changes could not become effective prior to the due date of the 2015 application season, thereby prolonging the inequity of sales assessments for another year. For that reason, the department is proposing to make the change to the producer assessment fee retroactive for the 2014 reporting year. If the rule is not made retroactive, the organic program could potentially, based on FY14 statistics, lose seven producers to lower costs certifiers and the associated fees of approximately $70,000 in annual revenue.  Additionally, the department will waive late fees of producers affected by the retroactive assessment fee.

 

FISCAL IMPACT: Changing the assessment fee structure affects each producer and handler differently, depending on their annual gross sales. The department has used averages of actual costs of all tier groups from FY14 to project the future fiscal impact. However, the examples below only list the proposed minimum and maximum tiers for producers and handlers. The total estimated net change in revenue of the changes listed in ARM 4.17.107 would result in a decrease of $53,412 of annual revenue.

 

The rule establishes a $150 minimum assessment fee for new applicants and renewing certified producers. Based on FY14 projections, this would affect approximately 59 producers with an average increase of $104 per applicant, generating an additional $6,136 in revenue.

 

The rule establishes a maximum fee of $5,000 for new applicants and renewing certified producers. Based on FY14 projections, this would affect approximately two producers with an average decrease of $11,767 per applicant, creating a reduction of revenue of $23,534.

 

The rule establishes a $150 minimum assessment fee for new applicants and renewing certified handlers. Based on FY14 projections, this would affect approximately 17 handlers with an average increase of $102 per applicant, generating an additional $1,734 in revenue.

 

The rule establishes a maximum fee of $5,000 for new applicants and renewing certified handlers. Based on FY14 projections, this would affect approximately four handlers with an average increase of $1,000 per applicant, generating an additional $4,000 in revenue.

 

There is no additional fiscal impact related to new (5) in ARM 4.17.107. The reduced revenue is already reflected in the impact description above.

 

The one-time exemption of the assessment-related late fee would affect two producers and reduce 2015 revenue by $2,560.

 

The combined estimated net change in revenue for changes in ARM 4.17.106 and 4.17.107 result in an annual increase of $45,203 of total revenue.

 

4. 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, P.O. Box 200201, Helena, Montana, 59620-0201; telephone (406) 444-3144; fax (406) 444-5409; or e-mail cojensen@mt.gov, and must be received no later than 5:00 p.m., June 29, 2015.

 

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

 

6. 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 4 above or may be made by completing a request form at any rules hearing held by the department.

 

7. An electronic copy of this proposal notice is available through the Secretary of State's web site at http://sos.mt.gov/ARM/Register.  The Secretary of State strives to make the electronic copy of the notice conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered.  In addition, although the Secretary of State works to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.

 

8. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.

 

9. With regard to the requirements of 2-4-111, MCA, the department has determined that the amendment of the above-referenced rules will significantly and directly impact small businesses

 

 

/s/ Cort Jensen                                    /s/ Ron de Yong                        

Cort Jensen                                          Ron de Yong

Rule Reviewer                                       Director

                                                             Department of Agriculture

         

Certified to the Secretary of State May 18, 2015.

 

 

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