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Negotiating State Commercial Feed Licensing Requirements

Aggressive regulatory framework manifests as commercial feed licenses, product label registration and inspection fees.

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Over the years, states have increasingly regulated the sale of commercial feeds. States now typically require producers and distributors to obtain commercial feed licenses in advance of commencing operations within a given state. In addition to these commercial feed licenses, product label registration and inspection fees can also apply — further increasing the regulatory framework applicable in this area.

The regulations governing the sale and distribution of commercial feeds naturally vary from state to state depending upon the issues faced by the state. For example, South Dakota requires a sulfur maximum on all product labels for distillers dried grains sold within the state. This varied regulatory framework, however, presents potential issues for unwary producers, guarantors, or distributors of commercial feed. Although it is impossible to address every regulatory nuance applicable in each state, this article briefly addresses some of the threshold issues involved in the regulation of commercial feed at the state level, and focuses on issues surrounding the three major categories of regulations applicable to the distribution of commercial feed: (1) facility or company registration; (2) registration of feed products; and (3) inspection fees. It should be noted that these three regulatory categories do not apply in each state, but instead, states typically use some combination of these registrations in order to regulate and monitor their commercial feed supply.

Facility or Company Registration

Many states require a company producing or distributing commercial feed within the state to first obtain a commercial feed license. Commercial feed licenses are typically valid for a one year period (although some states do provide for biannual or even permanent licenses). Once a company begins operating in multiple states, the entity should review these licensing requirements and determine the renewal date for each state license in order to remain in compliance with state law.

Licensing fees can range in cost anywhere from $10 to $3,500 depending on the state and the amount of feed sold or distributed. Initially, this requirement seems straight forward — if a company produces commercial feed, it will need to register with the state. This issue, however, gets more complicated when a company owns multiple branches; particularly when that company intends to distribute its own feed under common product label for all or a number of its manufacturing facilities in a state other than where its production facilities are located. In this scenario, some states will allow a distributor or manufacturer to register only the distributor location, while other states will require the distributor or manufacturer to also register its production facilities (despite the fact that the facilities are not themselves distributing or serving as the guarantor for any feed sold within that state). To ensure regulatory compliance, a call to the state feed control officer will provide clarification on how the state views these threshold registration requirements. The American Association of Feed Control Officials (“AAFCO”) provides an additional resource in this area, and their webpage is a valuable tool for those attempting to regulate feed products.

Product Registration

Many states also require a company to register each individual feed product being sold or distributed with the state. These fees can range from $2 per product label to $70 per product, and may also require the regulator to approve the product label for distribution within the state.

Even if the regulator does not require a company to formally register its products, many states will require the company to submit a label with its company or facility registration. Additionally even if there is no explicit requirement to submit a product label, a regulator will typically want a copy of the label for its files as well as for reference purposes. In developing a product label, a company should consult the state to determine what label requirements are imposed under state law. As discussed above, South Dakota, within the distillers dried grains context, requires a sulfur maximum guarantee in addition to the other guarantees which apply in most states. To avoid misbranding or any other product label issues within a state, a company will need to pay close attention to the labeling requirements for each product the company intends to distribute. Following up with the regulator after submitting the label may help to avoid any obvious misbranding issues.

Inspection Fees

Once an entity has registered the facilities and products as required by any applicable state regulations, the entity will typically be required to pay the state an inspection fee. This payment, typically pegged to cover the costs of the grain inspection program within the state, is based upon the quantity of feed distributed by the company. Not every state imposes an inspection fee, but in those states requiring this payment (a large majority), inspection fees can range anywhere from $ .02 to $1 a ton for commercial feed (pet food is a category apart as inspection fees on these products can be upwards of $50 a ton). Where applicable, a company will need to pay close attention to the reporting cycle for this inspection fee (i.e. when does the company need to report its sales via an affidavit of tonnage, and pay the inspection fee — on a quarterly, semi-annual, or annual basis), and take steps to ensure that it is in compliance. It should be noted that some states take express steps to assist companies in avoiding double “taxation” of the tonnage sold. For example, Indiana allows a manufacturer or distributor to apply for interstate exclusion status if they furnish substantial quantities of commercial feeds to customers in other states (which exempts those sales made across state lines from inspection fees).

Additionally, a company will be required to keep sufficient records to demonstrate or verify the amount of feed being sold or distributed, and the failure to keep these records can result in fines being levied against the company. The state will also typically have broad authority to inspect and test commercial feed during typical and normal business hours (although some states do require advance notice of the inspection).

Regulation within the commercial feed industry will likely continue to increase as consumers continue to demand additional transparency and regulation of the food supply. By paying close attention to regulatory developments, and by developing sufficient monitoring processes, a company and/or facilities can ensure that it remains compliant with any applicable state commercial feed laws.

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