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Changes in tobacco growing lead to move for rule repeal

Feb. 25, 2014 | 0 comments

MADISON

Wisconsin farmers in many areas of the state used tobacco as a "mortgage lifter" crop but as decades have passed the practice of growing tobacco has dwindled. Many farmers who remain grow their crop under contract.

The changes in the tobacco business in Wisconsin are now prompting the Department of Agriculture, Trade and Consumer Protection to seek approval for the repeal of an old regulation that covers transactions between tobacco growers and the buyers who purchase their product.

Board members at DATCP approved the first step in the process — called a scope statement — to repeal the rule at their meeting Feb. 19 in Madison.

The old regulation was enacted to prohibit tobacco buyers from engaging in certain practices that were deemed unfair to growers. That included attempting to involve other buyers in collusion to manipulate the price of the leaf tobacco and lying to growers during negotiations about who is still in the market to buy tobacco.

The old rule also prohibits tobacco buyers from offering to growers any secret bonus or payment and prohibits tobacco growers or sellers from getting any of those secret bonuses, commissions or payments under the table.

Also prohibited by the old rule is refusing to negotiate with any grower for the purchase of tobacco because it was previously graded or submitted for grade; also falsely representing during negotiations with a grower that any particular lot or crop of tobacco was purchased at less than the price actually paid, or that another buyer has quit buying tobacco.

Jeremy McPherson, with the department's Division of Trade and Consumer Protection, told the board members that the rule was originally promulgated in the 1950s when tobacco growing was a prominent business in the state and when much of the crop was sold in cash markets at the conclusion of the growing season.

At that time the rule was necessary to ensure fair transactions between growers and tobacco buyers.

Today, the leaf tobacco crop in Wisconsin is generally produced and sold under contract – as opposed to a cash market.

"The few tobacco growers that are left grow under a contract rather than selling their product on the open marketing.

"This means that the rule, as it is currently written, is not relevant to the current industry," he told the board. That's why it is proposed for elimination.

McPherson explained that the department wants to repeal ATCP 104 in its entirety, which will serve to simplify the department's administrative code. The board agreed to send the idea of the rule's repeal out for a hearing process.

If public hearings reveal that that rule does or could play an important rule in the tobacco growing industry in the state, McPherson said the department could also consider maintaining the rule in its current form or could modify it to line it up with current tobacco buying and selling practices.

There are a number of federal regulations that relate generally to the tobacco industry — the Internal Revenue Service (IRS) enforces regulations that control the manufacture and distribution of tobacco products.

The 2010 Family Smoking Prevention and Tobacco Control Act granted the Food and Drug Administration (FDA) the authority to write rules that may require tobacco growers and brokers to disclose certain information to manufacturers about the type of tobacco, levels of certain chemicals and curing methods used.

However, McPherson said that the department's search did not reveal any federal law or regulation that regulates the transaction between tobacco growers and buyers comparable to the rule he was proposing to take out of the state's administrative code.

McPherson told the board he had been with the department 10 years and had never had one complaint over this rule.

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