This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations Federal Register

79779 

Vol. 85, No. 239 

Friday, December 11, 2020 

DEPARTMENT OF AGRICULTURE 

Federal Crop Insurance Corporation 

7 CFR Parts 407 and 457 

[Docket ID FCIC–20–0008] 

RIN 0563–AC70 

Area Risk Protection Insurance 

Regulations; Common Crop Insurance 

Policy Basic Provisions; Common 

Crop Insurance Regulations, 

Sunflower Seed Crop Insurance 

Provisions; and Common Crop 

Insurance Regulations, Dry Pea Crop 

Insurance Provisions 

Correction 

In rule document 2020–26036, 

beginning on page 76420 in the issue of 

Monday, November 30, 2020, make the 

following changes: 

§ 457.108 [Corrected]

■ On page 76427, in § 457.108, in the 

third column, in the fourth and fifth

lines from the bottom,

‘‘■ 5. Cancellation and Termination

Dates.’’ should read ‘‘4. Cancellation

and Termination Dates.’’

[FR Doc. C1–2020–26036 Filed 12–10–20; 8:45 am] 

BILLING CODE 1301–00–D 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

9 CFR Part 201 

[Doc. No. AMS–FTPP–18–0101] 

RIN 0581–AD81 

Undue and Unreasonable Preferences 

and Advantages Under the Packers 

and Stockyards Act 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Final rule. 

SUMMARY: This final rule establishes a 

new regulation containing criteria the 

Secretary of Agriculture will consider 

when determining whether an undue or 

unreasonable preference or advantage 

has occurred in violation of the Packers 

and Stockyards Act, 1921 (Act). A 

provision of the Food, Conservation, 

and Energy Act of 2008 (2008 Farm Bill) 

requires the Secretary to establish the 

criteria. The Act protects fair trade, 

financial integrity, and competitive 

marketing for livestock, meat, and 

poultry. 

DATES: Effective January 11, 2021. 

FOR FURTHER INFORMATION CONTACT: S. 

Brett Offutt, Chief Legal Officer/Policy 

Advisor; Packers and Stockyards 

Division, USDA, AMS Fair Trade 

Practices Program; phone: 202–690– 

4355 or email: S.Brett.Offutt@usda.gov. 

SUPPLEMENTARY INFORMATION: The Act at 

7 U.S.C. 202(b) specifies that it is 

unlawful for any packer, swine 

contractor, or live poultry dealer to 

either make or give any undue or 

unreasonable preference or advantage to 

any particular person or locality in any 

respect. In administering this provision 

of the Act, the United States Secretary 

of Agriculture (Secretary) determines 

whether the conduct of regulated 

entities is considered a violation of the 

Act. 

In the past, each determination was 

analyzed using general principles on a 

case-by-case basis, exercising the 

regulatory flexibility Congress provided 

when it passed the Act. Section 

11006(1) of the 2008 Farm Bill (Pub. L. 

110–234) requires the Secretary to 

promulgate regulations establishing 

criteria the Secretary will consider in 

determining whether an undue or 

unreasonable preference or advantage 

has occurred in violation of the Act. At 

that time, the Secretary delegated 

responsibility for establishing the 

required criteria to the Grain Inspection, 

Packers and Stockyards Administration 

(GIPSA). In 2017, GIPSA merged with 

the Agricultural Marketing Service 

(AMS). AMS now administers the 

regulations under the Act and 

undertook this rulemaking to meet the 

statutory requirement. This rule adds a 

new § 201.211 to 9 CFR part 201— 

Regulations Under the Packers and 

Stockyards Act (P&S regulations). This 

rule retains a flexible framework for the 

Secretary’s determinations, while 

providing criteria to support 

transparency in the Secretary’s 

determinations. Accordingly, the 

regulated industry and the public now 

have a reference to the general 

framework that AMS will use to 

determine whether there is an unlawful 

preference or advantage under section 

202(b) of the Act. 

Newly added § 201.211 requires the 

Secretary to consider four specified 

criteria when determining whether any 

undue or unreasonable preference or 

advantage has been given or made to 

any particular person or locality in any 

respect in violation of the Act. The 

Secretary is not limited to considering 

only these four criteria but can also take 

other factors into consideration as 

appropriate on a case-by-case basis. We 

discuss each of the four criteria later in 

this document. 

AMS published a proposed rule 

regarding this matter in the Federal 

Register on January 13, 2020 (85 FR 

1771). The proposed rule invited public 

comments on the addition of the 

proposed criteria to the P&S regulations. 

AMS allowed a 60-day public comment 

period for interested parties to submit 

comments. The comment period ended 

March 13, 2020. AMS received 2,351 

comments on the proposed rule, of 

which 235 were unique. The remaining 

comments represented 48 groupings of 

similar comments, each group having at 

least 80 percent matching text. 

Commenters represented numerous 

segments of the livestock and poultry 

industry, from individual poultry 

growers and livestock producers to trade 

organizations representing producers, 

poultry companies, the meat packing 

industry, and state and national level 

agriculture groups. After considering the 

comments received, AMS determined to 

adopt the proposed criteria with two 

modifications. Analysis of the 

comments and AMS’s responses are 

included later in this document. 

Background 

As mentioned above, the 2008 Farm 

Bill directs the Secretary to establish 

criteria the Secretary will consider in 

determining whether an undue or 

unreasonable preference or advantage 

has occurred in violation of the Act. At 

the time the 2008 Farm Bill was 

enacted, what is now the Packers and 

Stockyards Division (PSD) of AMS’s 

Fair Trade Practices Program operated 

within GIPSA. GIPSA undertook the 

responsibility for developing criteria for 

consideration. In June 2010, GIPSA 


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1 Jackson v. Swift Eckrich, Inc., 53 F.3d 1452 (8th 

Cir. 1995), IBP v. Glickman, 187 F.3d 974 (8th Cir. 

1999), Griffin v. Smithfield Foods, 183 F. Supp. 2d 

824 (E.D.Va. 2002). 

published a proposed rule (75 FR 35338 

(June 22, 2010)) that was never 

finalized, due to Congressional 

prohibitions included in the 

Consolidated Appropriations Acts for 

fiscal years 2012 through 2015, which 

disallowed any further work on the new 

criteria rulemaking. See Sec. 721, Public 

Law 112–55, November 18, 2011; Sec. 

742, Public Law 113–6, March 26, 2013; 

Sec. 744, Public Law 113–76, January 

17, 2014; and Sec. 731, Public Law 113– 

235, December 16, 2014. GIPSA 

resumed its efforts to promulgate the 

required criteria in December 2016 with 

publication of a second proposed rule 

(81 FR 92703 (December 20, 2016)), but 

decided to take no further action on that 

proposal (82 FR 48603 (October 18, 

2017)). AMS accomplishes Congress’s 

2008 Farm Bill directive with the 

promulgation of this final rule that 

establishes the required criteria. 

The PSD oversees day-to-day 

administration of the P&S regulations 

and is called upon to investigate alleged 

violations of section 202(b). Many of the 

alleged violations related to contractual 

dealings between regulated entities and 

the livestock producers, swine 

production contract growers, and 

poultry growers with whom they do 

business. Other entities, including 

retailers and the public, can also be 

harmed by violations of section 202(b). 

Difficulty lies in determining whether 

particular instances of preferences or 

advantages made or given to one or 

more persons or localities would be 

undue or unreasonable and violations of 

the Act. 

New Provisions 

Section 202(b) of the Act prohibits 

buyers to ‘‘make or give any undue or 

unreasonable preference or advantage to 

any particular person or locality in any 

respect, or subject any particular person 

or locality to any undue or unreasonable 

prejudice or disadvantage in any 

respect.’’ It is not unusual for buyers or 

sellers of livestock or poultry to receive 

advantages. For example, between two 

competing sellers, one may receive a 

better price from a buyer. The Act only 

prohibits those preferences or 

advantages that are undue or 

unreasonable. It follows that there are 

legitimate reasons for the existence of 

preferences or advantages that are not 

undue or unreasonable. Reasonable 

differences in contract terms may result 

from negotiations over particular 

interests between the parties. Some 

courts have gone so far as to say it is not 

the purpose of the Act to interfere with 

contract negotiations or to upset the 

traditional principles of freedom of 

contract.1 The Act does not create an 

entitlement to obtain the same type of 

contract offered to other producers or 

growers. However, greater clarity on the 

terms associated with grower contracts 

may increase transparency in the 

marketplace and reduce the number of 

claims of undue or unreasonable 

preference. 

Under new § 202.211, the Secretary 

will consider four specific criteria when 

determining whether a packer, swine 

contractor, or live poultry dealer has 

made or given any undue or 

unreasonable preference or advantage to 

any particular person or locality in any 

respect. Section 201.211 lists the criteria 

for consideration and provides that the 

Secretary is not limited to those four. 

Because § 202(b) of the P&S Act 

prohibits any undue or unreasonable 

preferences or advantages, in addition to 

considering the specified criteria in 

§ 201.221, the Secretary may also 

consider other factors relevant to each 

situation on a case-by-case basis. 

Under § 201.211(a), the Secretary will 

consider whether the preference or 

advantage in question cannot be 

justified on the basis of a cost savings 

related to dealing with different 

producers, sellers, or growers. Under 

§ 201.211(b), the Secretary will consider 

whether the preference or advantage in 

question cannot be justified on the basis 

of meeting a competitor’s prices. Under 

§ 201.211(c), the Secretary will consider 

whether the preference or advantage in 

question cannot be justified on the basis 

of meeting other terms offered by a 

competitor. Under § 201.211(d), the 

Secretary will consider whether the 

preference or advantage in question 

cannot be justified as a reasonable 

business decision. 

Historically, the Secretary has 

considered criteria similar to these 

when determining whether to 

commence disciplinary or judicial 

actions under the Act. PSD made these 

decisions on a case-by-case basis, 

examining the facts of each complaint 

separately. AMS chose these new 

criteria, and retained the flexibility to 

consider other criteria, based on this 

past experience. In doing so, AMS 

strikes a balance between the interests 

of all segments of the industry while 

carrying out its enforcement 

responsibilities. On the one hand, the 

law charges AMS with protecting 

producers, growers, retailers, and the 

public from potential harm resulting 

from undue or unreasonable preferences 

or advantages. On the other hand, AMS 

recognizes that among the numerous 

complaints the Secretary has examined 

in the past, many preferences or 

advantages given to individuals or 

groups have been determined to be 

lawful, while relatively few preferences 

or advantages were found undue or 

unreasonable. 

Disparate contract terms are not 

undue or unreasonable just because the 

terms are not identical. Some disparities 

in contract terms can be attributed to 

reasonable business negotiations 

between contracting parties. For 

example, price differences offered to 

different sellers may reflect differences 

in transportation costs to a slaughter 

facility or may reflect one producer’s 

ability and willingness to supply 

livestock in the early morning hours. In 

the case of a live poultry dealer that 

pays a premium to a poultry grower 

who agrees to use experimental 

vaccines, the grower has increased risk 

of financial loss if the vaccine proves to 

be unsuccessful. Based on the criteria in 

§ 201.211, the apparent preference or 

advantage might be justified on the basis 

of the company saving the expense of 

testing the vaccines through other 

means. The premium paid to the grower 

for providing the extra service of testing 

vaccines and for accepting greater 

financial risk might not be considered 

undue or unreasonable. In another 

example, a livestock packer pays higher 

prices later in the day or week after 

competitors have raised the market 

price. Based on the criteria in § 201.211, 

the apparent preference or advantage 

might be justified as necessary to meet 

competitors’ prices, and the higher price 

might not be considered undue or 

unreasonable. Finally, where a live 

poultry dealer’s competitors have 

offered long term contracts to their 

growers, the poultry dealer finds that he 

must offer comparable terms to his 

growers in the same locality. Based on 

the criteria in § 201.211, the apparent 

preference given to growers in that 

locality might not be considered undue 

or unreasonable because the difference 

in contract terms might be justified by 

the need to meet a competitor’s other 

contract terms in that locality. 

Some preferences or advantages, 

however, might be considered undue or 

unreasonable if they are so unfair that 

they would tend to restrain trade, 

creating such excessively favorable 

conditions for one or more persons that 

the competitors would have reduced 

chances of business success. In such a 

case, a higher price, referred to as a 

premium, offered to one person or 

locality but not offered to other persons 

or localities similarly situated could 


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constitute a violation of the Act. A 

livestock packer negotiating preferential 

live basis prices with only one favored 

livestock supplier and not with 

similarly situated suppliers, may be in 

violation of the Act. After considering 

the criteria in § 201.211, the Secretary 

may conclude that the packer cannot 

justify its actions on the basis of cost 

savings, meeting a competitor’s prices, 

meeting other terms offered by a 

competitor, or making a reasonable 

business decision. 

Under § 201.211(a) through (c), the 

Secretary will consider whether 

preferences or advantages given to one 

or more persons are based on cost 

savings related to dealing with different 

producers, sellers, or growers or on the 

need to meet a competitor’s prices or 

other contract terms. For example, a live 

poultry dealer offering a higher base 

price to a favored grower, but not to 

other growers in the same complex with 

the same housing types, may be in 

violation of the Act. The Secretary will 

consider all of the specified criteria. 

Under criterion (a), there would be no 

cost savings in a higher base price. 

Under criteria (b) and (c), the Secretary 

will consider whether the higher base 

price meets a competitor’s price or other 

terms. If the reason for giving the 

favored grower the higher price cannot 

be justified by meeting a competitor’s 

price or other terms, and if 

consideration of other factors particular 

to the situation does not suggest 

otherwise, the higher base price may be 

an undue or unreasonable preference or 

advantage. 

Under § 201.211(d), the Secretary will 

consider whether the preference or 

advantage in question cannot be 

justified as a reasonable business 

decision. A packer, swine contractor, or 

live poultry dealer may have a 

reasonable business reason for treating 

some persons or groups more favorably 

than others. For example, in the cattle 

industry a packer may pay producers a 

premium for delivering cattle that meet 

an established certified beef program, 

such as ‘‘Certified Angus Beef,’’ because 

the packer can realize a greater profit 

from the sale of meat branded under 

those programs. Based on the criterion 

in § 201.211(d), it is likely that the 

apparent preference or advantage to 

sellers of cattle meeting certain 

specifications in that situation would be 

justified as a reasonable business 

decision and not considered undue or 

unreasonable. In another example, a live 

poultry dealer may pay a premium to 

growers who raise test flocks utilizing a 

new breed of chicken, as this provides 

the live poultry dealer with data from 

which it can make future business 

decisions. Based on the criterion in 

§ 201.211(d), the premium might be 

justified as a reasonable business 

decision, so the Secretary might not 

determine the preference or advantage 

to be undue or unreasonable. 

Live poultry dealers, packers, and 

swine contractors should enter into 

contracts that do not discriminate, 

unless the differences are due to cost 

savings or meeting competitors’ prices 

and terms or are legitimate business 

decisions. Preferences that are not 

grounded in ordinary business 

considerations may be based upon 

reasons of unjust advantage. 

It should be noted that an alleged 

preference or advantage being seemingly 

justified under one criterion does not 

automatically confer immunity against 

all other criteria. For example, a 

preference or advantage may still be 

deemed undue or unreasonable, even 

though it is apparently given to meet a 

competitor’s offer, if the Secretary 

determines the preference or advantage 

was unreasonable based on another 

criterion. Thus, the criteria specified in 

§ 201.211 are not safe harbors, as 

suggested by some comments on the 

proposed rule. 

The flexibility in § 201.211 to 

consider criteria other than the four 

specified in the rule allows the 

Secretary to determine whether other 

pertinent factors may have influenced 

the business decisions of contracting 

parties. For example, one comment 

submitted on the proposed rule 

recommended the Secretary consider 

whether an apparent preference or 

advantage could be ascribed to an 

emergency situation, such as a 

government requisition for food after a 

natural disaster or during a military 

crisis. While AMS did not add this 

particular criterion to the four specified 

in the rule, it is nevertheless a good 

example of the type of additional 

criteria the Secretary may consider. The 

discretion to consider other criteria, 

however, is not boundless. 

In addition to the criteria enumerated 

in § 201.211, the Secretary may consider 

the overall competitive effects of any 

particular agreement. In doing so, the 

Secretary should apply the antitrust 

‘‘rule of reason’’ analysis, as used by 

courts and antitrust agencies. Section 1 

of the Sherman Act of 1890, 15 U.S.C. 

1–38, prohibits agreements in ‘‘restraint 

of trade.’’ The Supreme Court 

interpreted this prohibition to be 

limited to unreasonable restraints. See 

Ohio v. American Express Co,, 138 S.Ct. 

2274, 2283 (2018) (citing State Oil Co. 

v. Khan, 522 U.S. 3, 10 (1997)). Certain 

types of agreements (such as price 

fixing) are so likely to harm competition 

and to have no significant 

procompetitive benefit that they are 

challenged as per se unlawful. See FTC 

v. Superior Court Trial Lawyers Ass’n, 

493 U.S. 411, 432–36 (1990). All other 

agreements are evaluated under the rule 

of reason, which involves a factual 

inquiry into an agreement’s overall 

competitive effect. As the Supreme 

Court has explained, rule of reason 

analysis entails a flexible inquiry and 

varies in focus and detail depending on 

the nature of the agreement and market 

circumstances. See California Dental 

Ass’n v. FTC, 119 S. Ct. 1604, 1617–18 

(1999); FTC v. Indiana Fed’n of Dentists, 

476 U.S. 447, 459–61 (1986); National 

Collegiate Athletic Ass’n v. Board of 

Regents of the Univ. of Okla., 468 U.S. 

85, 104–13 (1984). The Supreme Court 

first applied this framework to antitrust 

cases under the Sherman Act in United 

States v. Addyston Pipe & Steel Co., 85 

F. 271, 282–283 (CA6 1898), aff’d, 175 

U.S. 211 (1899). The rule of reason 

analysis focuses on the state of 

competition with, as compared to 

without, the relevant agreement. The 

central question is whether the relevant 

agreement likely harms competition by 

increasing the ability or incentive 

profitably to raise price above or reduce 

output, quality, service, or innovation 

below what likely would prevail in the 

absence of the relevant agreement. See 

‘‘U.S. Department of Justice & Federal 

Trade Commission, Antitrust Guidelines 

for Collaborations among Competitors 

U.S. Department of Justice & Federal 

Trade Commission, Antitrust Guidelines 

for Collaborations among Competitors 

the Licensing of Competitors the 

Licensing of Intellectual Property’’ § 1.2 

(April 2000). If the agreement raises 

competitive concerns, the analysis 

considers whether the agreement is 

necessary to achieve any procompetitive 

benefits that would offset competitive 

harm. Id. This rule provides the 

analytical framework for AMS to 

evaluate specific activity. 

While the agency expects a short-term 

increase in the cost of review for 

livestock producers, poultry growers, 

and regulated entities in existing 

contracts, in the long-term, innovative 

contracts should be less costly to 

negotiate even when those contracts 

provide for preferences and advantages. 

Because this framework of criteria can 

be understood in the context of 

legitimate business decisions, regulated 

entities may more easily review 

contracts for compliance with the Act. 

By following a framework of criteria 

that promote fair dealing based in 

rational decision-making, AMS 

promotes protection for producers and 

localities that might otherwise have 


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been unable to obtain preferential 

contract terms or price advantages. 

Therefore, this rule is expected to 

improve the negotiating position of 

growers and producers. 

AMS expects adding the criteria in 

§ 201.211 to the P&S regulations to 

provide a framework in which the 

Secretary will consider potential 

violations of the Act, help the industry 

understand what the Secretary will 

consider when evaluating violation 

claims, and fulfill the Congressional 

mandate to establish criteria for making 

determinations regarding potentially 

unacceptable conduct under the Act. 

Changes From the Proposed Rule 

As originally proposed, the regulation 

required the Secretary to consider one 

or more specific criteria listed in the 

regulation, and provided that the 

Secretary was not limited to considering 

those four criteria when determining 

whether an undue or unreasonable 

preference or advantage has been given 

in violation of the Act. One comment 

asked for clarification about whether the 

Secretary was required to consider at 

least one of the four specified criteria, 

in addition to being able to consider 

other criteria. The 2008 Farm Bill 

requires the Secretary to establish 

criteria that the Secretary will consider 

in determining whether an undue or 

unreasonable preference or advantage 

has occurred in violation of the Act. 

Therefore, based on its original 

understanding of the statute and on the 

comment, AMS revised the introductory 

paragraph of § 201.211 to make it clear 

that the Secretary must consider all four 

specified criteria, and that the Secretary 

may also consider additional criteria, in 

determining whether an undue 

preference or advantage has occurred in 

violation of the Act. 

As originally proposed, criterion (d) 

would have required the Secretary to 

consider whether the alleged preference 

or advantage cannot be justified as a 

reasonable business decision that would 

be customary in the industry. Almost 

unanimously, public comments 

submitted in response to the proposal 

objected to the clause regarding whether 

a business decision is customary in the 

industry. Comments otherwise 

supporting the proposal said what is 

‘‘customary in the industry’’ is 

ambiguous and could be open to broad 

interpretation. Comments opposed to 

the proposal generally opposed this 

clause specifically, asserting that illegal 

discrimination, retaliation, and use of 

unfair marketing practices have become 

customary in the industry and that the 

wording of the proposed provision 

would offer packers, swine contractors, 

and live poultry dealers a convenient 

justification for unacceptable actions. 

Based on the comments, AMS 

determined to remove the words ‘‘that 

would be customary in the industry’’ 

from the language of criterion (d). Thus, 

§ 201.211(d) provides that the Secretary 

will consider among other criteria 

whether the preference or advantage 

under consideration cannot be justified 

as a reasonable business decision. 

Comment Analysis 

AMS received 2,351 comments on the 

proposed rule, some with multiple 

signatories. Comments are summarized 

by topic below and include AMS’s 

responses. 

Comment Period Extension 

Comment: AMS provided 60 days for 

public comment on the proposed rule. 

Twelve comments included requests 

that AMS extend the comment period 

by at least 90 days. Requesters said that 

the proposed rule and the issues it 

addressed are complex and important 

and that commenters needed more time 

to analyze their implications across the 

industry and provide meaningful 

comments. Requesters also noted the 

comment period overlapped with some 

states’ legislative sessions and that 

commenters were dealing with ongoing 

stress created by continued low farm 

prices, both requiring commenters’ 

focus at the time. 

AMS response: AMS proposed this 

rule following litigation that concerned 

a prior proposed rule on this subject. In 

the course of that litigation, the USDA 

committed to initiate timely rulemaking 

on this subject. As part of the 

rulemaking, the agency chose a 60-day 

comment period as it believed this to be 

an adequate amount of time for 

interested persons to review the 

proposal and to provide comment that 

the agency should consider. Therefore, 

AMS decided against extending the 

comment period beyond the deadline of 

March 13, 2020. 

Criteria Generally 

AMS proposed four specific criteria 

the Secretary will consider when 

making determinations about whether 

an action could be considered a 

violation of the Act. Some comments 

addressed one or more criteria 

individually, while some addressed 

them generally. Here we address 

comments on the proposed criteria in 

general. 

Comment: Several comments 

supported the proposed criteria 

generally, saying farmers and ranchers 

have long been at a disadvantage due to 

uncertainty about what actions violate 

the Act. Comments agreed that the 

proposed criteria would provide much 

needed clarity for the industry and 

should minimize or eliminate legal 

uncertainty in the marketplace. 

On the other hand, numerous 

comments opposed the proposed 

criteria generally, saying they are 

inadequate, vague, ambiguous, and open 

to a wide variety of interpretations. 

These comments said the proposed 

criteria fail to address significant and 

harmful practices in the industry that 

are both anti-competitive and 

detrimental to farmer livelihoods. 

Comments also claimed that AMS had 

proposed specific conclusory criteria for 

determining when a violation has not 

occurred. These comments opposed the 

structure of the proposed regulation, 

saying that framing the criteria in 

negative terms (e.g., ‘‘cannot be 

justified’’) fails to articulate what would 

be considered an undue or unreasonable 

preference or advantage and a violation 

of the Act, thus failing to comply with 

Congress’s mandate. Commenters claim 

that this is the reverse of Congress’s 

directive and renders the Act’s express 

prohibitions meaningless. 

Comments also criticized the criteria 

for being too general. They argued that 

different adjudicators may come to 

different conclusions when considering 

the same facts. 

For these reasons, comments asserted 

the criteria should establish standards 

on which to base decisions about 

whether a packer has violated the Act. 

Commenters asked for standards that 

state what conduct constitutes a 

violation. Comments urged USDA to 

develop clear, specific criteria, so that 

the violations would be unequivocal. 

AMS response: AMS attempted to 

balance the interests of all segments of 

the livestock, meat, and poultry 

industries. Producers and growers must 

be protected from potential harm 

resulting from undue or unreasonable 

preferences or advantages. At the same 

time, regulated entities may give 

preferences or advantages to individuals 

or groups for lawful reasons. AMS 

believes that the proposed criteria will 

provide a framework from which both 

producers and processors can benefit, 

while not harming consumers. 

Regarding the comments that suggest 

the rule should prohibit specific 

conduct—rather than providing criteria 

that can be applied across a wide range 

of behaviors—the 2008 Farm Bill 

directed the Secretary to establish 

criteria to consider when determining 

whether conduct gives an undue or 

unreasonable preference or advantage. 

AMS has chosen general criteria in this 

rule. Further, the criteria are not 


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conclusory; just because an action may 

appear justified under one criterion 

does not mean that it cannot be 

determined to be undue or 

unreasonable. 

The criteria comply with the 

promulgation requirement, whether 

they are written in positive or negative 

terms. The Farm Bill provides: ‘‘As soon 

as practicable, but not later than 2 years 

after the date of the enactment of this 

Act, the Secretary of Agriculture shall 

promulgate regulations with respect to 

the Packers and Stockyards Act, 1921 (7 

U.S.C. 181 et seq.) to establish criteria 

that the Secretary will consider in 

determining (1) whether an undue or 

unreasonable preference or advantage 

has occurred in violation of such Act;’’ 

Criteria are standards, rules, or tests on 

which a judgment or decision can be 

based. American Heritage Dictionary of 

the English Language (5th ed. 2020). 

Criteria are typically ‘‘reference point[s] 

against which other things can be 

evaluated; a characterizing mark or 

trait.’’ Black’s Law Dictionary (11th ed. 

2019). Nothing in the 2008 Farm Bill 

suggests that the Secretary was called 

upon to describe these criteria in a 

positive or negative form. All that is 

required is that the criteria provide 

traits and standards that the Secretary 

can use as a base for judgment. AMS 

considered drafting criteria in a positive 

form and determined that the negative 

form better represented Congressional 

intent. Criteria used to evaluate whether 

preferences or advantages ‘‘cannot be 

justified . . .’’ in some manner could 

establish that an undue preference or 

advantage has occurred. Conversely, if 

written in a positive form, the criteria 

would be presented as exceptions, for 

example, a criterion could state that a 

preference or advantage is undue or 

unreasonable, unless it ‘‘can be justified 

. . .’’ in some manner. 

The Farm Bill does not require the 

Secretary to consider any specific factor 

or information in developing the 

criteria. AMS’s criteria apply across a 

wide range of behaviors in multiple 

industries. This approach, rather than 

setting forth specific examples of 

unlawful conduct, provides the 

Secretary with the flexibility Congress 

intended when passing the Act. AMS 

made no changes to the rule as proposed 

based on these comments. 

Comment: One comment asked AMS 

to clarify whether the Secretary would 

be required to consider at least one of 

the four criteria specified in the 

proposed regulation, in addition to 

considering any other criteria that may 

be relevant to the situation. 

AMS response: AMS appreciates the 

comment requesting clarification of the 

proposed language. Our intention was to 

specify four criteria the Secretary is 

required to consider, and to provide 

flexibility for the consideration of 

additional criteria as appropriate for the 

situation. Accordingly, based on the 

comment, and to ensure that the 

meaning of the regulation is clear, we 

revised the introductory paragraph of 

proposed § 201.211 to clarify that the 

Secretary will consider each of the 

criteria specified in the regulation and 

may consider additional criteria. 

Unlimited Criteria for Consideration 

The proposed rule provides that the 

Secretary will consider certain criteria 

when determining whether a violation 

of section 202(b) of the Act has 

occurred. The proposed rule specifies 

four criteria for consideration but 

provides that the Secretary is not 

limited to considering those four. 

Comment: Many comments supported 

including flexibility to consider 

additional criteria on a case-by-case 

basis, explaining that there can be many 

other relevant factors to consider in 

different situations. Other comments 

argued that the provision is too 

ambiguous, and that its application is 

unclear. Some comments recommended 

the Secretary be required to consider 

only one of the listed criteria, or that 

consideration of other criteria be limited 

to certain situations. 

Some comments insisted the criteria 

list be exhaustive and not broad, as 

proposed. According to comments, no 

segment of the supply chain would 

know which practices are prohibited or 

permissible under the proposed 

language, making compliance with the 

Act nearly impossible, and exposing the 

contacting parties to unforeseeable 

liability and associated litigation and 

the cost of protecting their respective 

marketing arrangements. 

One comment opposed to the 

provision said that AMS’s approach is 

inconsistent with Congress’s directive in 

the 2008 Farm Bill to establish criteria 

and with the agency’s stated desire to 

provide transparency to the process of 

determining whether a violation of the 

Act has occurred. The comment asserted 

that giving the Secretary flexibility to 

consider other criteria would give both 

the Secretary and other right of action 

plaintiffs who believe they have been 

wronged the opportunity to file 

complaints based on unspecified 

criteria. 

One comment supported the proposal 

not foreclosing the possibility that other 

activities could be violations of the Act. 

According to the comment, the four 

listed criteria identify the most familiar 

indications of unfair practices, but other 

non-competitive conduct might escape 

the scope of the identified criteria, or 

other criteria might be found to better 

capture predatory practices. 

Another comment suggested AMS 

clarify in the final rule that the four 

criteria specified in the proposed rule 

are broadly encompassing of all 

potential scenarios and that the 

Secretary will rarely, if ever, need to 

consider other criteria. 

AMS response: The final rule retains 

the provision allowing the Secretary to 

consider criteria other than the four set 

forth in § 201.211. The U.S. Supreme 

Court noted in 1922 in the case of 

Stafford v. Wallace, 258 U.S. 495, 521, 

that the Packers and Stockyards Act is 

‘‘remedial legislation.’’ A remedial 

measure ‘‘is to be construed liberally, 

and so as to effectuate the purpose of 

Congress and secure the relief which 

was designed’’ (U.S. v. Southern Pacific 

R. Co., 184 U.S. 49, 56 (1902); Logan v. 

Davis, 233 U.S. 613, 628 (1914)). ‘‘It 

would be an ‘unnatural construction’ of 

a remedial statute to require an 

administrative agency ‘to sit idly by and 

wink at practices’ which are subversive 

of effective regulation.’’ (quoting 

American Trucking Assns. v. U.S., 344 

U.S. 298, 311 (1953)). 

AMS does not consider the criteria 

exhaustive; rather, the criteria provide 

notice to the industry of the types of 

conduct that may be found unlawful. It 

would be impossible to develop an 

exhaustive list of specific criteria that 

would remain relevant for very long in 

an evolving market environment. The 

criteria in this rule respond to a need for 

clarity among industry participants 

regarding practices that could be 

deemed unduly preferential. Although it 

is unlikely that all future litigation will 

be avoided, AMS believes contracting 

parties may be able to avoid some 

litigation by applying the criteria and 

the principles behind them when 

drafting—and contracting for— 

marketing arrangements. 

Thus, this final rule allows the 

Secretary to consider other factors that 

may not be included among the four 

listed criteria, but are evidence of an 

undue preference or advantage, 

nonetheless. The rule gives the 

Secretary principles by which to 

analyze the conduct of regulated entities 

that may violate the Act, for the 

Secretary’s investigations and 

administrative or judicial enforcement. 

The Secretary’s analysis involves 

investigative methods currently in use, 

including examination of overall market 

conditions, competitors’ pricing and 

practices, and individual entities’ 

business records to substantiate and 

justify different pricing or other 


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differing treatment of suppliers or 

territories. 

These criteria are for the Secretary’s 

determination of whether preferences 

are undue or unreasonable; the rule 

does not apply to private plaintiffs filing 

suits for damages under section 308 of 

the Act. Accordingly, no changes were 

made to the rule as proposed based on 

these comments. 

Criterion (a)—Cost Savings 

The proposed rule requires the 

Secretary to consider certain criteria 

when determining whether a violation 

of the Act has occurred. The proposed 

rule lists four criteria for consideration 

but does not limit consideration to those 

four. The first of these, criterion (a), asks 

whether the preference or advantage 

under consideration cannot be justified 

on the basis of a cost savings related to 

dealing with different producers, sellers, 

or growers. 

Comment: One comment said this 

criterion is subjective and does not 

incorporate clear standards for its 

application in relation to dealing with 

different producers, sellers, or growers. 

Another asserted that this criterion’s 

vagueness could be interpreted to mean 

that if a packer, swine contractor, or live 

poultry dealer is using a business 

practice that saves themselves money, it 

can be justified under section 202(b) of 

the Act, no matter the impact on 

producers, sellers or growers. 

AMS response: AMS intends this 

criterion to be broad and flexible for the 

Secretary to apply it across a wide range 

of conduct in the livestock, meat, and 

poultry industries. In applying the 

criteria generally, the Secretary will 

examine the facts of each case and apply 

those facts to the criteria. Costs are 

relevant to many preferential contracts. 

If a preference does not have a costbased justification, then the absence of 

a cost-based justification could indicate 

an undue or unreasonable preference or 

advantage. Or the Secretary may find 

that cost savings justify a preference 

given to one producer over another. No 

changes were made to the rule as 

proposed based on the comments. 

Comment: Several comments said that 

justifications under criterion (a) for 

costs savings based solely on volume 

should be prohibited to avoid 

discriminating against smaller livestock 

or poultry growers. Comments 

explained that an integrator can easily 

claim cost savings based on volume by 

contracting with a large-scale livestock 

or poultry grower over a smaller-scale 

livestock or poultry grower or an 

association of smaller growers. 

According to comments, this would 

result in small-to-medium sized growers 

routinely being unduly disadvantaged 

and undue preference being given to 

larger growers strictly based on size of 

operation. One comment said small 

farms are struggling to stay viable while 

larger farms are increasing in size. The 

comment argued that justifying a 

preference or advantage as a cost 

savings based solely on volume would 

only further contribute to the decline in 

sales and ultimately the viability of 

small and mid-sized poultry and 

livestock farms. 

AMS response: The rule is not 

intended to set forth prohibitions but 

rather to establish criteria the Secretary 

will consider when determining 

whether a preference is undue or 

unreasonable. A packer’s justification of 

a preference based solely on the size of 

the grower operation as the comment 

suggests does not automatically make 

the packer’s conduct lawful. The criteria 

are broad and flexible for the Secretary 

to apply criteria across a wide range of 

conduct in the livestock, meat, and 

poultry industries. In applying these 

criteria, the Secretary will examine the 

facts of each case and apply those facts 

to each of the criteria. In the comment’s 

example, resulting cost savings would 

need to be clearly demonstrated to the 

Secretary’s satisfaction, and other 

criteria would have to be considered. 

AMS believes it is up to contracting 

parties to negotiate terms in marketing 

arrangements that make business sense 

for all. Accordingly, no changes were 

made to the rule as proposed based on 

these comments. 

Comment: One comment said that 

criterion (a) should be revised to 

provide clear examples of when cost 

savings are or are not warranted. Other 

comments gave examples of when cost 

savings could be used as a justification 

for disparate treatment: When there are 

measurable and verifiable differences in 

carcass and meat quality, if those 

standards are applied to producers of all 

sizes; when there is a specified time of 

delivery or times of urgent need for 

delivery, if those criteria are offered to 

producers of all sizes; when there are 

volume-related savings that result from 

documented efficacies in the cost of 

procuring, transporting or handling 

livestock and conducting other 

transactions that occur outside of the 

plant. 

AMS response: The purpose of the 

regulation is to provide criteria that are 

broad enough to cover a majority of the 

types of conduct that could be found in 

violation of the Act. AMS believes that 

narrow examples do not encompass all 

of the situations that might result in an 

undue or unreasonable preference or 

advantage. Therefore, it is not the 

intention of the agency to set forth a 

laundry list of examples, but rather to 

establish criteria the Secretary will 

consider when examining the facts of 

wide-ranging types of conduct within 

the livestock, meat, and poultry 

industries. The comment’s proposed 

examples present the underlying factual 

situation that the agency would 

consider. For illustrative purposes, AMS 

suggests as one example where cost 

savings used as justification for 

disparate treatment could be unlawful, 

the use of consumer coupons for meat 

products. Where a packer offers a 

coupon discount on the price of bacon 

in a specific geographic region, for 

example, and the resulting price is 

below the packer’s cost in order to 

undercut competition, the behavior 

could represent an undue preference in 

that geographic region. After 

consideration, no changes were made to 

the rule as proposed based on these 

comments. 

Comment: Comments requested that 

the regulation specifically prohibit 

justifications under criterion (a) based 

on so-called efficiencies that occur 

within a processing plant or from 

operating the plant at full capacity. 

Comments explained for example that 

hog producers who pool their hogs and 

deliver a truckload that is the size 

commonly handled by a processing 

plant should be on the same footing as 

a larger single producer who provides 

the same size truckload to the plant. 

AMS response: The rule is not 

intended to set forth prohibitions but 

rather to establish criteria the Secretary 

will consider when determining 

whether a preference is undue or 

unreasonable. One of the criteria the 

Secretary will consider is whether there 

is a cost savings in dealing with one 

producer or grower over another. Based 

on the limited facts in the example 

provided by the commenter, plant 

operating efficiencies alone would not 

necessarily justify paying a single 

supplier more for hogs than several 

suppliers who pool hogs to provide 

similar volume. The general criteria still 

apply to the comment’s example, even 

if there is no explicit ban on a particular 

preference or advantage. No changes 

were made to the rule as proposed based 

on these comments. 

Criteria (b) and (c)—Meeting 

Competitors’ Prices and Other Terms 

Comments generally addressed jointly 

criteria (b) and (c). Under proposed 

criterion (b), the Secretary would 

consider whether the preference or 

advantage in question cannot be 

justified on the basis of meeting a 

competitor’s prices. Under proposed 


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2 7 U.S.C. 192(d) & (f) (prohibiting conspiracies to 

manipulate or control prices). 3 7 U.S.C. 221; 9 CFR 201.94, 201.95. 

criterion (c), the Secretary would 

consider whether the preference or 

advantage cannot be justified on the 

basis of meeting other terms offered by 

a competitor. In general, comments said 

the two criteria are vague, favor packers 

and integrators, invite collusion, and 

conflict with confidentiality laws. 

Comment: Comments expressed 

concern that criteria (b) and (c) would 

disadvantage farmers and growers, who 

have no voice in negotiations between 

other farmers and competing packers 

and integrators. According to comments, 

packers and integrators could 

individually, or could conspire to, set 

low prices or otherwise impractical 

terms agreeable to one farmer and use 

criteria (b) and (c) to justify applying the 

same prices and terms to other farmers 

for whom those prices or terms would 

be unacceptable, unworkable, or—as the 

comment implies—fail to reflect the 

ordinary forces of supply and demand. 

AMS response: The criteria are 

neither requirements nor prohibitions. 

Nor are they justifications for unlawful 

behavior. In applying these criteria, the 

Secretary will carefully examine the 

facts of each case. In the example 

provided by commenters, low prices 

and other impractical terms given to one 

farmer for the purpose of justifying low 

prices and terms offered to other farmers 

would likely violate one or more of 

sections 202(c) through 202(g) of the 

Act. Price manipulation, for example, 

violates other sections of the Act. No 

changes were made to the rule as 

proposed based on these comments. 

Comment: Comments suggested that 

in a fully functioning competitive 

market with transparent price discovery, 

applying criterion (b) might be rational, 

but in the livestock and poultry sector, 

where commenters say price discovery 

and price transparency are broken at 

best, and in the case of poultry, 

completely nonexistent, criterion (b) is 

extremely dangerous to farmers. 

According to comments, criterion (b) 

invites competitors to collude on 

pricing because justification under this 

criterion would insulate them from 

scrutiny under section 202(b) of the Act. 

AMS response: Collusion to fix prices 

among packers, swine contractors, and 

live poultry dealers is prohibited under 

the Packers and Stockyards Act.2 When 

the Secretary considers a regulated 

entity’s justification for granting a 

preference based on meeting either the 

prices or other terms offered by a 

competitor, the Secretary may also 

consider if this behavior resulted in 

other violations of the Act. The rule 

does not justify, require, promote, or 

encourage price fixing conduct. 

Regulated entities, however, 

legitimately receive information—in the 

form of market reports, open bids, and 

contract negotiations with sellers—that 

may result in granting legitimate price 

preferences to meet a competitor’s price. 

No changes were made to the rule as 

proposed based on these comments. 

Comment: Comments cited USDA 

policy that protects the confidentiality 

of prices and terms of sale that packers 

pay for livestock under the Livestock 

Mandatory Reporting Act of 1999 (Pub. 

L. 106–78, Title IX; October 22, 1999). 

According to comments, the proposed 

rule would establish a standard 

involving prices and other terms of sale 

as defense for a packer’s alleged 

violation of the Act while the public is 

simultaneously precluded from 

knowing the prices and terms of sale 

offered by any particular packer. Thus, 

according to comments, the proposed 

rule appears to facilitate and promote 

collusion among packers to share 

confidential pricing and terms of sale 

information with each other to ensure 

that the prices and terms they offer are 

similar, if not identical, to the prices 

and terms offered by competitors. 

AMS response: This rule provides the 

Secretary with broad and flexible 

criteria to consider when determining if 

a preference is undue or unreasonable. 

The rule does not require, promote, or 

encourage regulated entities to agree to 

share prices and other contract terms 

between themselves. Nothing within 

this rule is intended to limit or conflict 

with the Livestock Mandatory Reporting 

Act of 1999 or any other Federal law. No 

changes were made to the rule as 

proposed based on these comments. 

Comment: Comments claimed criteria 

(b) and (c) encourage collusion and 

conspiracy between regulated entities 

and are in direct conflict with the 

overall intent of the statute, as well as 

the specific price manipulation and 

control prohibitions in sections 202(d) 

through 202(g) of the Act. One comment 

suggested criteria (b) and (c) seemingly 

incentivize collusion between 

competitors and could decrease 

competition in the livestock and poultry 

industries. The comment said proposed 

criterion (b) should be withdrawn, and 

criterion (c) should be modified to 

require packers, swine contractors, and 

live poultry dealers to provide verifiable 

proof that the decision to meet a 

competitor’s terms results in 

performance of efficiency gains. The 

comment said that the regulations 

should make it clear that collusive 

behavior between competing firms is 

unacceptable. 

AMS response: This rule provides the 

Secretary with broad and flexible 

criteria to consider when determining if 

a preference is undue or unreasonable. 

The rule does not require, promote, or 

encourage collusion between packers, 

swine contractors or live poultry 

dealers. Other subsections of section 

202 of the Act make clear that such 

conduct is prohibited. Subject entities 

are required by other sections of the P&S 

Act and regulations to keep adequate 

records of their business operations. 

Such records should provide adequate 

information for the Secretary to consider 

in making determinations under 

§ 201.211. Accordingly, no changes 

were made to the rule as proposed based 

on these comments. 

Comment: Comments suggested 

regulated entities should be required to 

maintain and provide when challenged 

contemporaneous and detailed records 

to prove that costs, prices, and terms 

offered to one farmer are justified on the 

basis of meeting those given to other 

similarly situated farmers. 

AMS response: Entities regulated 

under the Packers and Stockyards Act 

are required to keep adequate records of 

their business operations.3 The 

regulations do not specify which 

records entities should keep. Regulated 

entities have the flexibility to determine 

what type of records best meet the needs 

of their individual businesses. AMS 

expects that these records would 

include those necessary to justify 

preferential terms offered to a producer 

on the basis of any of the criteria within 

this rule. No changes were made to the 

rule as proposed based on these 

comments. 

Criterion (d)—Reasonable Business 

Decisions 

The fourth proposed criterion for the 

Secretary to consider is criterion (d)— 

whether the preference or advantage 

cannot be justified as a reasonable 

business decision that would be 

customary in the industry. Many 

comments addressed this particular 

proposal. 

Comment: Several comments 

supported the inclusion of criterion (d) 

with the other proposed criteria, saying 

in general that they appear allencompassing. Those comments 

recommended no changes to proposed 

criterion (d). Other comments 

recommended clarifying criterion (d) to 

indicate what would be considered a 

reasonable business decision that would 

be customary in the industry. Many 

comments asked further that AMS list 

the marketing arrangements and other 


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4STANDARD, Black’s Law Dictionary (11th ed. 

2019). 

business practices commonly expected 

to constitute legitimate business 

justifications. Some comments further 

recommended developing different lists 

for different industry sectors. Other 

comments asked that such lists not be 

considered finite, giving the industry 

room to adopt new types of acceptable 

arrangements in the future. 

One comment suggested the term 

‘‘reasonable business decision’’ could 

change over time and vary from 

individual to individual and from one 

USDA administration to the next. The 

comment explained contracting parties 

might be uncertain about how a contract 

provision that appears reasonable today 

might be viewed at some point in the 

future. Thus, the comment 

recommended USDA define what it 

considers to be ‘‘reasonable’’ in making 

business decisions or simply limit any 

interpretation of what was a ‘‘reasonable 

business decision’’ to the relative 

positions, beliefs, and understandings of 

the contracting parties at the time and 

place the contract was entered into. 

AMS response: AMS has not defined 

or standardized the meaning of 

‘‘reasonable’’ in the regulation because 

the word ‘‘reasonable’’ assumes the 

commonly understood meaning of an 

objective standard. That is, a reasonable 

decision is a decision that a reasonable 

person would make under similar 

circumstances. Further, we do not agree 

that the regulation should attempt to 

identify every possible industry 

business decision or marketing 

arrangement that might be reasonable 

now and in the future. Rather, the 

Secretary can apply the timeless 

standard of reasonableness to examine 

an alleged preference or advantage. 

Accordingly, AMS made no changes to 

the rule as proposed based on these 

comments. 

Comment: Several comments asked 

AMS to clarify that just because an 

unfair practice may have become 

common within the industry, that does 

not mean it would be justified under 

proposed criterion (d) and not a 

violation of section 202(b) of the Act. 

Others said that the proposed criteria 

protected regulated entities from legal 

challenges to practices that are 

customary in the industry when a 

practice that is ‘‘customary’’ may violate 

the Act. Many comments described 

practices they say are unfair but have 

become commonplace within the 

industry, such as retaliation, racial 

discrimination, favoritism, use of 

tournament systems in the poultry 

sector, poultry pay systems where 

buyers control most grower quality 

inputs, and giving ‘‘sweetheart deals’’ to 

certain ranchers or feeders in the cattle 

industry. Comments said that these 

practices, although they might be called 

‘‘customary,’’ should not be justified 

under proposed criterion (d). Some 

comments recommended using 

examples from this list to develop other 

criteria for determining whether a 

preference or advantage is undue or 

unreasonable. Other comments asked 

that the qualifier ‘‘that would be 

customary in the industry’’ be 

decoupled from ‘‘reasonable business 

decision,’’ leaving the latter to stand on 

its own as a criterion. One comment 

suggested AMS could develop another 

criterion to incorporate ‘‘customary in 

the industry.’’ 

AMS response: While the agency’s 

intent is to establish a criterion that 

would allow preferences supported by 

reasonable business decisions, AMS 

does not intend to legitimize unlawfully 

discriminatory practices in the industry. 

As noted, some comments raised 

concerns that some ‘‘customary 

practices in the industry’’ may also be 

unlawful preferences or advantages. 

Thus, comments have raised concerns 

which, after careful consideration, 

justify modification of the rule. 

Accordingly, based on consideration of 

comments, AMS revised proposed 

criterion (d) by deleting the phrase, 

‘‘customary in the industry,’’ and 

providing that criterion (d) read, 

‘‘whether the preference or advantage 

cannot be justified as a reasonable 

business decision.’’ 

Comment: Many comments advocated 

removing criterion (d) entirely from the 

proposed regulation, arguing that both 

‘‘reasonable’’ and ‘‘customary’’ are 

subjective. Comments claimed 

application of criterion (d) would allow 

the Secretary to permit anticompetitive 

behavior of the type the Act was 

intended to prevent. Comments said 

AMS should instead adopt stronger 

rules that would fulfill Congress’s intent 

to curb anticompetitive practices. 

AMS response: As explained above, 

AMS believes reasonableness is an 

objective measure with timeless 

application to the determination of 

whether a preference or advantage 

might be undue or unreasonable and a 

violation of the Act. Under this 

objective standard, what is reasonable 

does not rely on the intent of the 

individual. An objective legal standard 

‘‘is based on conduct and perceptions 

external to a particular person.’’ 4 Thus 

a ‘‘reasonable-person standard’’ is 

objective because it does not require a 

determination of what the regulated 

entity thinks. We removed the phrase 

‘‘customary in the industry’’ from the 

language of criterion (d), and believe 

that change is sufficient to make the 

criterion a useful tool for the Secretary’s 

determinations. Accordingly, we made 

no further changes to the rule as 

proposed based on these comments. 

Additional Criteria for Consideration 

A few comments suggested additional 

criteria the Secretary should consider 

when determining whether certain 

actions are violations of section 202(b) 

of the Act. 

Comment: One comment suggested 

the Secretary consider the relative 

bargaining power of the parties involved 

in a dispute about an alleged violation. 

The comment gave the example of a 

poultry grower with five-year-old 

chicken houses trying to negotiate a 

contract with a party who knows the 

grower has no other real options. The 

comment said this situation does not 

allow for true freedom of negotiation, 

and provisions should be developed to 

protect against the imbalance. 

AMS response: The example the 

commenter provides appears to 

illustrate a possible undue or 

unreasonable disadvantage imposed on 

the poultry grower. That is, poultry 

growers lack the economic resources to 

demand higher value for their work, and 

they are at a disadvantage. When they 

negotiate, they may receive a lower 

price under their contract. The relative 

strength of their bargaining power is a 

distinct disadvantage, leading to 

unfavorable terms to the poultry grower. 

The relative strength of bargaining 

power may be an additional factor to 

consider for a given preference or 

advantage, but, as the commenter’s 

example illustrates, preferences or 

advantages are unlikely to result from 

the bargaining disparities between 

poultry growers and live poultry 

dealers. This rule is limited in scope to 

addressing undue or unreasonable 

preferences or advantages. Accordingly, 

AMS is making no changes to the rule 

as proposed based on this comment. 

Comment: Another comment 

recommended addition of a fifth 

criterion (e) and proposed the Secretary 

consider whether an apparent 

preference or advantage ‘‘cannot be 

justified as needed to address a natural 

disaster or military necessity, such as 

but not limited to an emergency for 

which the Federal government has 

invoked its authority in relation to food 

supplies under the Stafford Act or the 

Defense Production Act.’’ The comment 

explained that packers, swine 

contractors, and live poultry dealers 

might be required to award preferential 

contracts to certain farmers or localities 


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5See, e.g., Agricultural Fair Practices Act of 1967, 

7 U.S.C. 2301–2036; Civil Rights Act of 1964, 42 

U.S.C. 2000e–2000e–17. 

6See, e.g., Packers and Stockyards Act, 9 U.S.C. 

192(a)–(g); 7 CFR 201.216–201.218; 7 CFR 203.12 

(policy statement); Agricultural Fair Practices Act of 

1967, 7 U.S.C. 2301–2036; Civil Rights Act of 1964, 

42 U.S.C. 2000e–2000e–17; Sherman Act, 15 U.S.C. 

1–7; Clayton Antitrust Act, 15 U.S.C. 12–27, 29 

U.S.C. 52–53. 

to address emergencies such as natural 

disasters or military necessities. The 

comment suggested that without the 

recommended language, entities might 

hesitate to forge such contracts, despite 

the proposed rule’s provision that other 

factors besides the four listed criteria 

could be considered. 

AMS response: The commenter’s 

suggestion of a fifth criterion (e) is 

appreciated and provides an example of 

a situation in which the Secretary’s 

consideration of criteria should not be 

limited only to the four criteria set forth 

in the rule. Natural disasters and other 

emergencies would likely create 

situations in which a packer, swine 

contractor, or live poultry dealer may 

give a lawful preference or advantage to 

one producer as compared to another. A 

preference given in response to an 

Executive Order may also apply in these 

situations. While these are instances in 

which the Secretary would carefully 

examine the facts to determine whether 

a preference is undue or unreasonable, 

it is not necessary to explicitly include 

a criterion for this conduct. 

Accordingly, AMS is making no changes 

to the rule as proposed based on the 

comment. 

Comment: Some comments 

encouraged AMS to include as criteria 

for the Secretary’s consideration 

whether the alleged preference or 

advantage given to certain farmers 

reflects retaliation or racial 

discrimination against others; reflects 

unreasonable reductions in payments 

based on tournament incentive systems 

or other payment arrangements where 

the company, rather than the farmer, 

controls inputs that factor into the 

farmer’s pay; or reflects unreasonable 

‘‘sweetheart’’ deals given by companies 

to some farmers and ranchers to the 

disadvantage of others. 

AMS response: Existing law prohibits 

retaliation and racial discrimination.5

Issues of retaliation and racial 

discrimination typically would arise in 

complaints of undue or unreasonable 

prejudices or disadvantages. This rule is 

limited in scope to addressing undue or 

unreasonable preferences or advantages. 

AMS acknowledges, however, that 

retaliation and racial discrimination can 

be factors in cases of preferential 

treatment. Such conduct would also be 

considered by the Secretary under the 

broad authority granted by the Act when 

determining whether a preference is 

undue or unreasonable but need not be 

explicitly set forth in the rule. 

Accordingly, AMS is making no changes 

to the rule as proposed based on these 

comments. 

Comment: Several comments stated 

that there are important differences 

between the marketing arrangements 

and structures of the cattle, swine, and 

poultry industries and that, where 

appropriate, separate criteria should be 

developed to account for these 

differences. 

AMS response: The prohibitions of 

section 202 of the P&S Act apply to 

packers, swine contractors and live 

poultry dealers. The law does not 

specify prohibitions that apply only to 

cattle, or swine, or poultry. AMS 

proposed broad criteria that can apply 

across all segments of the livestock and 

poultry industries. If a behavior specific 

to only one segment of the livestock or 

poultry industry is unlawful, it will 

likely fit within one of the criteria set 

forth in this final rule. Criteria 

describing specific behaviors were not 

proposed as they could be viewed as 

limiting the Secretary’s ability to 

enforce this regulation. Maintaining 

broadly written criteria also provides 

sufficient flexibility to easily adapt to 

changing technology and business 

practices used across the industry. 

Accordingly, no changes were made to 

the proposed rule based on the 

comments. 

Other Recommended Modifications to 

the Proposed Rule 

A number of comments recommended 

modifications to the proposed rule. 

Many comments referred to USDA’s 

previous rulemaking efforts to establish 

the mandated criteria for considering 

alleged violations of § 202(b) of the Act 

and recommended proposed provisions 

from earlier attempts be reintroduced. 

Several comments addressed perceived 

inadequacies in the current regulations 

and enforcement of the Act. 

Comment: Numerous comments 

called for the addition of specific 

protections for farmers, including 

ranchers and growers, and provided 

examples of the types of protection they 

sought. Comments asked for protection 

that would allow farmers to file 

complaints, identify wrongdoing, speak 

with the media and elected officials, 

and form and join farmer associations 

without the threat of retaliation. 

Comments asked for protection against 

discrimination of any kind, including 

national origin, sex, race, religion, 

disability, political beliefs, marital or 

family status, or any other protected 

category. Comments said the proposed 

rule does not provide that protection, 

despite there being several documented 

cases of discrimination in the industry. 

Several comments asked that the rule 

include detailed, specific protections for 

contract poultry and livestock producers 

that apply to all forms of poultry and 

livestock, that are suitable for the future 

of the industry, are enforceable, and 

provide for real consequences for 

violations of section 202(b) of the Act. 

AMS response: Congress directed the 

Secretary in the 2008 Farm Bill to 

establish criteria to guide the Secretary’s 

consideration of facts in determining 

whether an apparent preference or 

advantage is undue or unreasonable and 

a violation of the Act. Protection against 

some of the unfair and discriminatory 

practices described by commenters is 

afforded under existing laws and under 

other provisions of the P&S regulations.6

Farmers have the right to file complaints 

regarding wrongdoing, speak with 

media and elected officials, and form 

and join farmer associations. If 

retaliation occurs, there is likely 

discrimination, which may be unlawful 

under the P&S Act or other laws. While 

this rule cannot specify protections for 

every grievance suggested by comments, 

AMS believes the establishment of the 

criteria in this rule serves broadly as 

protection for industry members and 

others who may be subjected to undue 

or unreasonable preferences in violation 

of the Act. Accordingly, no changes 

were made to the proposed rule based 

on these comments. 

Comment: Comments asked that the 

rule require contract prices to be based 

on clear, transparent, and predictable 

standards. Comments said prices should 

not be based on inputs the packing or 

processing company provides that may 

dictate the health of animals or the 

quality of feed. Comments also called 

for enforcement of fair pricing systems 

that don’t involve price fixing or 

collusion. Other comments said that 

poultry integrators should be required to 

communicate clearly to all their 

contracted growers about actions that 

appear to be, but are not, undue 

preferences, such as the examples 

provided in the proposed rule’s 

preamble. Comments further 

recommended that this communication 

be required at the time of signing 

contracts between growers and 

integrators and in routinely updated 

communications from the integrator to 

all the growers under contract with that 

integrator. 

AMS response: Comments appear to 

suggest that live poultry dealers should 


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7 9 CFR 201.100. 

8For courts ruling that 202(b) cases require a 

showing of harm to competition for violations see 

Wheeler v. Pilgrim’s Pride Corp., 591 F.3d 355 (5th 

Cir. 2009)(sections 202(a) and (b) of the P&S Act) 

and Terry v. Tyson Farms, Inc., 604 F.3d 272 (6th 

Cir. 2010)(sections 202(a) and (b) of the P&S Act). 

9Filing of a Petition for Rulemaking: Packer 

Livestock Procurement Practices; 62 FR 1845, 

published January 14, 1997. 

be required to discuss with poultry 

growers information about the business 

of other poultry growers. This rule does 

not require that confidential business 

information of some poultry growers be 

shared with other poultry growers. P&S 

regulations currently require that live 

poultry dealers furnish growers with a 

copy of their contract and all applicable 

terms.7 Live poultry dealers must also 

provide settlement sheets and all 

information and supporting documents 

needed to compute payment. This rule 

does not change these existing 

disclosure requirements. Accordingly, 

no changes were made to the rule as 

proposed based on these comments. 

Comment: Some comments suggested 

the proposed rule could be improved by 

the addition of implementation and 

enforcement methods. One comment 

suggested that the proposed rule include 

a methodology for the determination 

process the Secretary would employ 

prior to considering whether the 

allegedly undue or unreasonable 

preference or advantage meets the 

proposed criteria. According to the 

commenter, establishing such a 

methodology would provide a more 

standardized structure and make the 

process less subjective. Other comments 

asked AMS to establish methods to 

continuously review and monitor 

industry practices to ensure new 

practices are not evolving that would 

circumvent the purposes of the Act. 

AMS response: The suggestions to 

establish implementation and 

enforcement methods have merit, but do 

not address the establishment of criteria 

for the determination of whether and are 

therefore outside the scope of this rule. 

The Act sets forth the Secretary’s 

investigative and enforcement authority 

over packers, swine contractors, and 

live poultry dealers. These powers and 

procedures establish the methodology to 

be followed in applying the criteria. 

Accordingly, no changes were made to 

the proposed rule based on these 

comments. 

Comment: One comment suggested 

the rule could be improved by codifying 

the need to show competitive harm, and 

the comment provided regulatory 

applicability language for such a 

provision. The comment’s 

recommended language would require 

the Secretary to find that the challenged 

conduct or action lacks a legitimate 

business justification and harms—or is 

likely to harm—competition to bring a 

claim under sections 202(a) and (b) of 

the Act. 

AMS response: Several, but not all, 

U.S. Circuit Courts of Appeal have 

established case precedent requiring a 

showing of harm to competition.8 For 

that reason, USDA previously withdrew 

the December 2016 interim final rule 

that would have codified that harm to 

competition is not required to prove a 

violation. Given the history and 

conflicting opinions on this topic, AMS 

does not believe that this rulemaking is 

the appropriate avenue for interpreting 

the statute’s intent. Accordingly, AMS is 

making no changes to the rule as 

proposed based on this comment. 

Comment: Another comment 

suggested the proposed rule could be 

improved by first distinguishing 

between preferences, advantages, 

prejudices, and disadvantages; and 

second by defining what would be 

considered undue or unreasonable 

versions of each. 

AMS response: The terms 

‘‘preferences’’ and ‘‘advantages’’ have 

already been defined by the Judicial 

Officer. Giving an advantage to any 

person and not to other similarly 

situated persons is making or giving a 

preference. Conferring a benefit on any 

person and not on all similarly situated 

persons is making or giving an 

advantage. (See In Re: IBP, Inc., 57 

Agric. Dec. 1353 (July 31, 1998)). Thus, 

AMS finds it unnecessary to codify 

those definitions in the rule. 

Accordingly, AMS is making no changes 

to the rule as proposed based on the 

comments. 

Comment: Several comments said that 

AMS should not finalize this rule but 

should instead adopt provisions from 

prior rules. This included two rules 

GIPSA published in December 2016 (81 

FR 92703 and 81 FR 92723, December 

20, 2016). One comment characterized 

the 2016 rules as making progress 

toward an antitrust framework that 

would protect farmers. One comment 

recommended restoring provisions from 

the June 2010 proposed rule. Comments 

preferred provisions from all those rules 

that would have formally established 

that proof of actual or likely competitive 

harm is not needed for violations of 

section 202(b); created lists of ‘‘per se’’ 

and likely violations of the Act (such as 

attempted delays of payment and ‘‘holdup’’ scenarios, respectively); established 

that any conduct which harms or likely 

harms competition is a violation of the 

Act; and provided more specific, 

grounded criteria for evaluating 

violations of section 202(b), including 

whether a grower is treated fairly as 

compared to other similarly situated 

growers who have engaged in lawful 

assertion of their rights, or is treated 

differently due to arbitrary reasons 

unrelated to the grower’s livestock or 

poultry operation. Comments claim that 

the provisions of those rules would 

better address the current competitive 

imbalance in the market. 

Comments asked that many different 

provisions of the prior rules be 

incorporated into this rule. Comments 

asked for explicit prohibition against the 

use of tournament incentive system. 

Some comments also urged a ban on 

packer ownership of livestock, which is 

currently permitted. Comments also 

said that certain cattle procurement 

agreements, when offered selectively to 

some cattle sellers and not others, 

should be identified as per se violations 

of section 202(b) of the Act. Other 

comments listed specific conduct that 

commenters believe should be 

considered per se violations of the Act 

and recommended they be added to the 

regulations. 

One comment recommended USDA 

republish for public comment a petition 

submitted to GIPSA in 1996 calling for 

rules to restrict certain procurement 

practices in the meat packing industry.9

According to the comment, the 

petition’s proposal would better define 

undue preference in live cattle markets, 

facilitate reestablishing price discovery 

for domestic and import markets, and 

lessen the pending threat of beef plant 

closures and the corresponding loss of 

good paying jobs. 

AMS response: The prior rulemakings 

referenced in these comments contained 

greater breadth of rulemaking and 

proposed a number of prohibited acts. 

This rule does not have the same 

breadth as those previous rules. Nor 

does this rule expand on earlier 

rulemaking. As explained in the 

proposed rule, this rule represents a 

fresh start at fulfilling the 2008 Farm 

Bill mandate to establish criteria to 

consider when determining whether 

conduct makes or gives an undue or 

unreasonable preference or advantage. 

The criteria established in this rule can 

be applied across a wide range of 

behaviors and meets the 2008 Farm Bill 

mandate. 

Further, some of the examples of 

prohibited behaviors comments cited 

from abandoned rulemaking would be 

examples of undue or unreasonable 

prejudices or disadvantages, rather than 

preferences or advantages, and are 

therefore outside the scope of this rule. 


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10London v. Fieldale Farms Corp., 410 F.3d 1295 

(11th Cir. 2005) (section 202(a) of the P&S Act); 

Been v. O.K. Indus., Inc., 495 F.3d 1217 (10th Cir. 

2007) (section 202(a) of the P&S Act); Wheeler v. 

Pilgrim’s Pride Corp., 591 F.3d 355 (5th Cir. 2009) 

(sections 202(a) and (b) of the P&S Act); Terry v. 

Tyson Farms, Inc., 604 F.3d 272 (6th Cir. 

2010)(sections 202(a) and (b) of the P&S Act). 

11 De Jong Packing Co. v. U.S. Dep’t of Agric., 618 

F.2d 1329 (9th Cir. 1980) (agreeing with USDA that 

conspiracy to fix ‘‘subject’’ term in bidding is 

harmful to competition); IBP, Inc. v. Glickman, 187 

F.3d 974 (8th Cir. 1999) (agreeing with USDA on 

rights of first refusal can harm to competition); 

Philson v. Goldsboro Mill Co., 164 F.3d 625, Nos. 

96–2542, 96–2631, 1998 WL 709324 (4th Cir. Oct. 

5, 1998) (finding retaliation requires a showing of 

likelihood of harm to competition); Jackson v. Swift 

Eckrich, Inc., 53 F.3d 1452 (8th Cir. 1995) (finding 

that while allegations disparate contracting requires 

a showing of harm to competition, breach of 

contract and fraud claims under the Packers and 

Stockyards Act did not require harm to 

competition). 

Accordingly, AMS is making no changes 

to the rule as proposed based on these 

comments. 

Comment: Some comments 

recommended that the examples of 

potentially undue or unreasonable 

preferences or advantages given in the 

proposed rule’s preamble be codified as 

explicit violations of section 202(b). 

Comments explained that doing so 

would help bring the proposed criteria 

into line with the purpose of the Act 

and the 2008 Farm Bill mandate from 

Congress. Comments cited examples of 

premiums offered to one person or 

locality but not offered to similarly 

situated other persons or localities, 

livestock packers negotiating 

preferential live basis prices with only 

one favored livestock supplier and not 

with similarly situated suppliers, and 

live poultry dealers offering a higher 

base price to a favored grower but not 

to other growers in the same complex 

with the same housing types. 

AMS response: As explained in an 

earlier comment response, AMS has 

chosen not to codify a list of per se 

violations because we believe that 

narrow examples cannot possibly 

encompass all of the situations that 

might result in an undue or 

unreasonable preference or advantage. 

The purpose of the regulation is to 

provide criteria that are broad enough to 

cover a majority of the types of conduct 

that could be violations of the Act. 

Further, AMS believes the criteria 

established in this rule are aligned with 

the purposes of the Act and the 2008 

Farm Bill mandate because they provide 

the framework the Secretary will use 

when examining the facts of wideranging types of conduct within the 

livestock, meat, and poultry industries. 

Accordingly, no changes were made to 

the proposed rule based on these 

comments. 

Competitive Harm 

Many comments addressed the notion 

of competitive harm and whether proof 

of such harm or likelihood of such harm 

is required to bring claims of violation 

of section 202(b) of the Act. Past 

findings in the Fifth, Sixth, Tenth, and 

Eleventh Circuits have held that under 

the Act plaintiffs must show 

competition, and not just an individual, 

is or is likely to be injured through 

preferences or advantages given to 

certain individuals or localities.10 Other 

Circuits that are often cited for the 

proposition—in the Fourth, Seventh, 

Eighth, and Ninth Circuits—did not go 

so far. For example, courts in those 

circuits have agreed with USDA that 

certain violations of the Packers and 

Stockyards Act are ‘‘unfair practices’’ 

because those practices harm 

competition, or courts have opined on 

whether a specific practice would 

require harm to competition.11 In past 

rulemaking efforts to establish the 

mandated criteria, USDA reiterated its 

position that harm to competition is not 

required in all cases under the Packers 

and Stockyards Act. AMS explained in 

the preamble of the current proposed 

rule that this rulemaking is independent 

of previous rulemaking efforts to 

establish the mandated criteria to guide 

determinations about undue and 

unreasonable preferences and 

advantages under the Act and did not 

make a policy statement about 

competitive harm. 

Comments: Comments from the meat 

production, livestock production, and 

poultry segments of the industry 

expressed concern that AMS did not 

take a position on competitive harm in 

the proposed rule. Comments 

representing the interests of some 

livestock producers and poultry growers 

advocated clarifying that plaintiffs do 

not have to prove competitive harm to 

the entire industry to bring a case 

claiming undue and unreasonable 

practices. Comments said the burden of 

proof against large companies is too 

high for most farmers and that 

companies should not be allowed to 

continue unlawful practices just 

because a farmer cannot show harm to 

the entire industry. 

One comment said it seems false to 

state in the proposed rule that AMS 

does not intend to create criteria that 

conflict with case precedent, when case 

precedent is mixed on the issue of the 

need to show competitive harm. The 

comment suggests AMS is apparently 

siding with the approach that requires 

demonstration of competitive harm to 

the entire industry. The comment 

perceived the proposed rule to be an 

unprecedented failure because it did not 

address the issue of competitive harm. 

Comments asserted USDA has the 

authority and responsibility to issue 

rules for enforcing the Act that may 

conflict with court precedent under the 

Supreme Court doctrine of Chevron 

deference. According to comments, by 

not affirming in the proposed rule its 

historic position that a violation of 

section 202(b) may occur in some 

circumstances without a showing of 

competitive injury or likelihood of 

competitive injury, USDA could set a 

precedent that undermines its own 

policymaking power and codifies what 

commenters called judicial overreach 

and novel interpretation of the Act that 

contradicts the will of Congress. Thus, 

according to comments, the proposed 

rule leaves the Act largely 

unenforceable for individual farmers 

and ranchers. 

One comment questioned AMS’s 

refusal to adhere to its historic position 

on competitive harm and cited the 

October 2017 withdrawal of the 

December 2016 interim final rule on the 

Scope of Sections 202(a) and (b) of the 

Packers and Stockyards Act, which said: 

‘‘Contrary to comments that GIPSA 

failed to show that USDA’s 

interpretation was longstanding, USDA 

has adhered to this interpretation of the 

P&S Act for decades. DOJ has filed 

amicus briefs with several federal 

appellate courts arguing against the 

need to show the likelihood of 

competitive harm for all violations of 7 

U.S.C. 192(a) and (b).’’ One comment 

said Congress has not amended section 

202(b), so there is no apparent 

justification for USDA’s refusal to assert 

its longstanding interpretation regarding 

the statute. Another said by not 

affirming its historic policy on 

competitive harm AMS is dismissing 

the possibility of industry reform and 

violating the intent of the Act. 

Comments representing packers, 

swine contractors, and live poultry 

dealers disagreed with farmer comments 

and said the proposed rule must clarify 

that plaintiffs should be required to 

prove competitive injury across the 

industry to bring a claim of undue or 

unreasonable preference or advantage 

and violation under the Act. Comments 

argued that failure to recognize case 

precedent on competitive harm, in 

conjunction with the ‘‘plus other 

criteria’’ approach in the proposed rule, 

could create uncertainty about whether 

certain preferences or advantages are 

justifiable under the law and subject the 

industry to needless, costly lawsuits. 


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Comments argued that while Congress 

intended with the Act to combat 

restraints on trade and promote healthy 

competition in the livestock industry, it 

did not intend to discourage what 

comments called regular, healthy 

business competition. Comments 

referenced findings under other 

antitrust laws to assert that under the 

Act, alleged violations of sections 202(a) 

and (b) must show antitrust injury, 

which requires proof that competition 

as a whole was harmed by the 

defendant’s conduct. Comments urged 

AMS to interpret sections 202(a) and (b) 

as requiring proof of actual or likely 

harm to competition to reinforce the 

Act’s purpose, which according to 

comments is to protect competition in 

the industry. 

One comment recommended AMS 

address both sections 202 (a) and (b) 

when discussing injury to competition 

because, according to the comment, 

both are rooted in antitrust 

jurisprudence and both require injury to 

competition as a prerequisite to 

establishing a violation. According to 

the comment, addressing injury to 

competition in the context of only 

section 202(b) risks creating 

unnecessary confusion about the 

interpretation of section 202(a). 

AMS response: Given the history and 

conflicting opinions on this topic, AMS 

does not believe this rulemaking on 

preferences and advantages is the 

appropriate avenue for interpreting the 

statute’s intent with respect to all 

portions of sections 202(a) and (b) of the 

Act. 

The 2008 Farm Bill requires the 

Secretary to establish criteria to 

consider when determining if conduct is 

an undue or unreasonable preference or 

advantage. The criteria the Secretary 

establishes through the rulemaking are 

not exclusive, and pertain only to part 

of section 202(b) of the Act, which also 

prohibits undue or unreasonable 

prejudices and disadvantages. Whether 

competitive injury is required to 

establish a violation of the Act is a 

broader question applicable to the full 

provisions of sections 202(a) and 202(b) 

and is therefore outside the narrow 

scope of this rule. Accordingly, AMS is 

making no changes to the rule as 

proposed based on these comments. 

Starting Over 

Comment: Several comments urged 

AMS to abandon the proposed rule and 

start the rulemaking process all over. 

Comments claimed the proposed rule is 

inadequate and fails to meet the 

Congressional mandate to provide clear 

criteria for determining whether certain 

conduct or actions would be violations 

of section 202(b) of the Act. Other 

comments said the proposed rule failed 

to incorporate recommendations 

submitted in a June 2019 letter to AMS 

by associations representing farmers’ 

interests and recommendations in a July 

2019 letter to USDA from 17 members 

of Congress, both of which advocated 

stronger protections for farmers. Still 

other comments said the proposed rule 

does nothing more than fulfil a 

congressional mandate, while 

maintaining the status quo. 

Some comments said AMS should 

start over because the proposed rule 

reduces and eliminates competition, 

facilitates corporate abuse of 

concentrated and predatory market 

power, invites collusion, and allows 

manipulation of live cattle prices. 

One comment said the proposed rule 

was well intentioned, but does not 

accurately reflect needed modernization 

changes and improvements within the 

packers and stockyards industry. The 

comment urged USDA to withdraw the 

proposed rule and convene a livestock 

industry stakeholder summit to outline 

a course of action. 

AMS response: The purpose of the 

rule is to provide criteria that are broad 

enough to cover a majority of the types 

of conduct that could be found in 

violation of the Act. It is not the 

intention of the agency to set forth a 

laundry list of examples, as many of the 

commenters suggest, but rather to 

establish criteria the Secretary will 

consider when examining the facts of 

wide-ranging types of conduct within 

the livestock, meat, and poultry 

industries. AMS is committed to 

finalizing the rule as required by the 

2008 Farm Bill mandate to establish 

such criteria and fulfilling USDA’s 

commitment to the Court to complete 

the rulemaking expeditiously. 

Therefore, AMS is neither withdrawing 

nor making changes to the rule as 

proposed based on these comments. 

Additional Concerns Raised by 

Comments 

Comment: Numerous comments 

expressed doubt that the proposed rule 

would remedy what they identified as 

serious problems in the livestock and 

poultry industry. Comments said 

farmers have little market power in 

dealings with large meat packing and 

poultry processing companies. 

Comments described what they called 

systematic discrimination and 

unchecked abusive treatment of farmers. 

Comments provided data demonstrating 

declines in farm prices that are not 

reflected in consumer prices, and they 

warned that the demise of small and 

family farms threatens U.S. food 

security, the economic health of rural 

communities, and the environment. 

Comments claimed finally that USDA 

does not act in the interest of small 

farmers. 

AMS response: AMS appreciates the 

comments that expressed these 

concerns. Moreover, AMS understands 

the struggles farmers face across the U.S. 

Some of the concerns raised could be 

the result of preferences or advantages 

given by packers, swine contractors or 

live poultry dealers. Whether those 

preferences or advantages are undue or 

unreasonable is for the Secretary to 

determine utilizing the criteria set forth 

in this rule. The criteria are written 

broadly to cover wide ranging behaviors 

in the industry, including some of those 

identified by commenters, rather than 

narrowly addressing specific conduct. 

Some other concerns raised by the 

commenters are outside the scope of the 

Packers and Stockyards Act. AMS 

encourages commenters to continue the 

dialogue with USDA on these important 

issues so that together we can make 

improvements. 

Regulatory and Economic Impact 

Analysis 

Comment: Several comments 

addressed the regulatory impact 

analysis included (RIA) in the proposed 

rule. Most of those comments concerned 

statements in the analysis that some 

found contradictory. Comments asserted 

the RIA’s cost-benefit analysis shows 

that the rule will have no meaningful 

impact on the anti-competitive and 

improper practices that are already in 

place. According to comments, the 

statement that AMS does not expect the 

proposed rule to result in a decrease in 

the use of alternative marketing 

agreements (AMAs), poultry tournament 

systems, or other incentive payment 

systems; or decreased economic 

efficiencies in the cattle, hog, and 

poultry industries shows that the 

proposed rule is essentially toothless. 

Comments argued that the Act was not 

intended to maximize economic 

efficiencies, but to provide for a fair, 

competitive marketplace by preventing 

abuses by large, supposedly ‘‘efficient’’ 

entities. One comment asserted that if 

AMS does not expect the proposed rule 

to change anything about the current 

state of the market nor give farmers any 

more protection than they currently 

have, the total cost to industry of this 

rule is effectively zero and the costbenefit analysis in the final rule should 

reflect this. 

AMS response: AMS believes the rule 

will have a meaningful impact on anticompetitive practices that may exist in 

the industry. Although the cost benefit 


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analysis in the proposed rule did not 

quantify projected benefits, it provided 

qualitative descriptions of the types of 

benefits expected from establishment of 

the proposed rule, such as improved 

parity of negotiating power between 

contracting parties with a clearer 

understand of what constitutes an 

undue or unreasonable preference or 

advantage under the Act. 

The rule is not intended to dictate to 

industry the types of marketing 

arrangements employed. Understanding 

how the Secretary will evaluate 

allegations of violations of section 

202(b) of the Act should induce packers, 

live poultry dealers, and swine 

contractors to reevaluate—and adjust if 

necessary—marketing agreements to 

make sure they comply with the law. 

Even though the number and type of 

marketing agreements may not change 

because of the rule, this rule, like most 

rules, is expected to generate some 

costs. As explained in the RIA, most of 

the estimated costs for the final rule are 

associated with reviewing and, if 

necessary, adjusting contracts to make 

certain they comply with the rule. 

Finally, AMS would like to 

distinguish operational efficiency of a 

firm from market efficiency. The 

operational efficiency of a firm 

improves when it can produce a good or 

service at a lower cost. A characteristic 

of market efficiency, on the other hand, 

is that the prices of goods or services 

represent unbiased indicators of their 

value to consumers and society, and 

contribute to the public benefit. The 

most efficient firm operations do not 

always lead to the most efficient 

markets. For example, industries in 

which unit costs continually decline 

with increased scale, such as water and 

electric utilities are considered natural 

monopolies. The firm that emerges as 

the monopolist in those industries will 

be the most operationally efficient, but 

if left unregulated, would be able to 

exploit its market power, for example by 

restricting output and charging a higher 

price. AMS believes this rule does not 

impede operational efficiency of the 

regulated firms, but does inhibit 

practices that could reduce market 

efficiency. Market efficiency, therefore, 

should be considered when evaluating 

the costs and benefits of this regulation. 

AMS is making no changes to the rule 

or the RIA as proposed based on these 

comments. 

Comment: One comment expressed 

concern with two statements in the 

regulatory impact analysis. The first 

projects that the proposed rule may lead 

to increased litigation costs to test case 

precedents regarding violations of the 

Act. The second states that AMS does 

not intend to create criteria that conflict 

with case precedent. The comment 

asked why, if the latter is true, did AMS 

not reduce confusion and the need for 

further litigation and affirmatively state 

the need to prove competitive harm in 

the regulation. Comments suggested that 

reinforcing the need to demonstrate 

injury or likely injury to competition 

would eliminate much of the precedentconfirming litigation that AMS 

anticipates flowing from the final rule, 

which in turn would significantly 

reduce the anticipated costs of the rule. 

AMS response: This rule is intended 

to establish criteria the Secretary will 

consider when determining whether 

conduct is an undue or unreasonable 

preference or advantage. Whether 

competitive injury is required for a 

violation of sections 202(a) or 202(b) of 

the Act is beyond the narrow scope of 

this rule. Additionally, as explained 

earlier, the criteria in this rule pertain 

to the Secretary’s evaluations of alleged 

misconduct and not to those of the 

courts. Even if AMS were to state a 

position on the need to show 

competitive harm, it would do little to 

limit litigation, as those opposing that 

position would likely challenge it in the 

courts. Thus, it is anticipated that 

litigation costs will increase initially as 

market participants—who choose to do 

so—test the provisions of the new 

regulation in court. Accordingly, AMS 

is making no changes to the rule as 

proposed based on the comment. 

Comment: One comment questioned 

the claim in the RIA that the proposed 

rule would ‘‘increase the amount of 

relevant information available to market 

participants and offset any potential 

abuse of buyer-side market power by 

clearly stating to all contracting parties’’ 

the criteria for violations. The comment 

says it is not clear what basis AMS has 

to make this claim if all potential 

violations can be justified by cost 

savings, and no current customary 

practices across the industry will be 

considered a violation. 

AMS response: AMS believes that 

establishment of the criteria in this rule 

will provide clearer information to 

market participants about how the 

Secretary will evaluate allegations of 

misconduct under section 202(b) of the 

Act. AMS anticipates that as producers 

and growers become aware of this 

information, they will be better able to 

negotiate fair contract terms with 

packers, contractors, and integrators 

considered to wield greater market 

power. AMS disagrees with the 

comment’s conclusion that all potential 

violations can be justified by cost 

savings and that no currently customary 

practices will be considered violations. 

In fact, this rule gives the Secretary 

flexibility to consider multiple factors 

other than cost savings to determine 

whether a preference or advantage is 

undue or unreasonable. Removal of the 

‘‘customary in the industry’’ clause from 

proposed criterion (d) also clarifies that 

the Secretary can make determinations 

about industry decisions and practices 

based on their reasonableness and not 

on whether they are widely adopted. 

AMS is making no changes to the rule 

as proposed based on this comment. 

Miscellaneous Comments 

Comment: One comment argued that 

the Secretary of Agriculture and those 

appointed by the Secretary should not 

act as judges in matters of law and that 

allegations of violations of the Act 

should only be tried in courts of law. 

AMS response: The Act clearly 

establishes that the Secretary has 

authority to enforce administratively 

violations of section 202(b) against 

packers and swine contractors. Congress 

granted the Secretary authority to 

investigate persons subject to the Act 

and provided for administrative 

enforcement of violations. Changing 

these authorities is beyond the scope of 

this rule. Accordingly, AMS is making 

no changes to the rule as proposed 

based on the comment. 

Comment: Once comment interpreted 

the RIA’s statement that it is not the 

purpose of the Act to interfere with 

contract negotiations or to upset the 

traditional principles of freedom of 

contract to mean that the proposed rule 

is not expected to decrease the use of 

differing contracting structures, such as 

the incentive-based contracting 

arrangements often used in the poultry 

industry. The comment said it is crucial 

that the proposed rule not disrupt the 

existing contracting structures 

commonly used by the industry, and 

that any preferences or advantages 

arising from the use of these types of 

arrangements be evaluated first on 

whether they cause injury or likely 

injury to competition, and second based 

on the four criteria in the proposed rule. 

AMS response: As explained in earlier 

comment responses, AMS does not 

intend the rule to promote or prohibit 

any particular types of contracting 

arrangements. This rule is intended only 

to establish criteria the Secretary will 

consider when determining if a 

preference or advantage is undue or 

unreasonable. Whether competitive 

injury is required to prove a violation is 

a concept broader than the narrow focus 

of this rule. Accordingly, AMS is 

making no changes to the rule as 

proposed based on the comment. 


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79792 Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Rules and Regulations 

12On November 14, 2017, Secretary of 

Agriculture, Sonny Perdue, issued a memorandum 

eliminating GIPSA as a standalone agency and 

transferred the regulatory authority for the Act to 

AMS. PSD has day-to-day oversight of the Packers 

and Stockyards activities in AMS. 

13Federal Register, Volume 81, No. 244, pages 

92703–92723. 

14Federal Register, Volume 82, No. 200, pages 

48603–48604. 

Required Impact Analyses 

Executive Orders 12866, 13563, and 

13771 and the Regulatory Impact 

Analysis 

AMS is issuing this rule in 

conformance with Executive Orders 

12866 and 13563, which direct agencies 

to assess all costs and benefits of 

available regulatory alternatives and, if 

regulation is necessary, to select 

regulatory approaches that maximize 

net benefits, including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity. Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, 

reducing costs, harmonizing rules, and 

promoting flexibility. 

In the development of this rule, AMS 

determined to take a different approach 

to developing the necessary criteria than 

had been taken in previous rulemaking 

efforts. AMS determined that including 

the criteria as part of the framework for 

consideration of preferences and 

advantages in buyer-seller contracts 

would best serve the needs of the 

industry and fulfill the 2008 Farm Bill 

mandate. AMS expects the new 

regulation to bring transparency to 

considerations of potential violations of 

sections 202(b) of the Act and certainty 

to industry members forging contracts 

related to the buying and selling of 

poultry and livestock. The rule is not 

expected to provide any environmental, 

public health, or safety benefits. 

This rule has been determined to be 

significant for the purposes of Executive 

Order 12866 and therefore has been 

reviewed by OMB. This rule has also 

been determined to be an Executive 

Order 13771 regulatory action. Details 

on the estimated costs of this final rule 

can be found in the rule’s economic 

analysis. 

AMS is adding a new § 201.211, 

which provides four criteria in response 

to requirements of the 2008 Farm Bill 

for the Secretary of Agriculture to 

consider in determining whether a 

packer, swine contractor, or live poultry 

dealer has engaged in conduct resulting 

in an undue preference or advantage to 

any particular person or locality in any 

respect in violation of section 202(b) of 

the Act. Based on its familiarity with the 

industry, PSD prepared an economic 

analysis of new § 201.211 as part of the 

regulatory process. The economic 

analysis presents the cost-benefit 

analysis of implementing § 201.211. 

PSD then discusses the impact on small 

businesses. 

This rule is independent of previous 

rulemaking. PSD reviewed certain cost 

projections developed in conjunction 

with previous rulemaking in analyzing 

the regulatory impact of this final rule. 

All costs and benefits described in this 

economic analysis pertain to the 

language in this final rule. 

Regulatory Impact Analysis 

The 2008 Farm Bill requires the 

Secretary of Agriculture to promulgate a 

regulation establishing criteria that the 

Secretary will consider in determining 

whether an undue or unreasonable 

preference or advantage has occurred in 

violation of section 202(b) of the Act. 

This rulemaking fulfills that 

requirement. 

Responsibility for establishing the 

required criteria was originally 

delegated to the Grain Inspection, 

Packers and Stockyards Administration 

(GIPSA), which subsequently merged 

with AMS. AMS now administers the 

regulations under the Act and has 

undertaken this rulemaking. 

For this economic analysis, PSD 

considered the impact of three 

alternatives for this rule. PSD 

considered the impact of maintaining 

the status quo, the impact of adopting 

regulatory language that had been 

proposed in 2016, and the impact of 

adopting the language in this final rule. 

PSD considered the impact of taking 

no further action on a previous version 

of § 201.211 GIPSA 12 had proposed on 

December 20, 2016.13 GIPSA 

subsequently provided notice in the 

Federal Register on October 18, 2017,14

that it would take no further action on 

the 2016 proposed rule. Taking no 

further action would result in no 

additional out-of-pocket costs to 

businesses in the livestock and poultry 

industries but that action would not 

fulfill the requirements of the 2008 

Farm Bill. 

AMS could have proposed the same 

regulatory language as in the 2016 

proposed rule. The 2016 proposed rule 

contained six criteria the Secretary 

would consider in determining whether 

conduct or action constitutes an undue 

or unreasonable preference or advantage 

and a violation of section 202(b) of the 

Act. To determine the impact of 

adopting the 2016 proposed rule, PSD 

looked to the estimated costs of the 2016 

rule as described in that rule’s economic 

analysis, which was provided in the 

2016 notice of proposed rulemaking. 

The total first year costs of the 2016 

proposed rule were projected to be 

$15.37 million. 

This current rulemaking represents a 

different approach than used in 

previous rulemakings and establishes an 

analytical framework for considering 

whether a violation of section 202(b) of 

the Act has occurred. The final rule 

includes new criteria to bring 

transparency to the determination 

process for the industry. PSD estimates 

that the total first year costs of this rule 

are $9.67 million. 

Introduction 

As required by the 2008 Farm Bill, 

§ 201.211 specifies criteria the Secretary 

will consider when determining 

whether an undue or unreasonable 

preference or advantage has occurred in 

violation of section 202(b) of the Act. 

The criteria provide a framework to 

analyze whether a particular person or 

locality receives an undue or 

unreasonable preference or advantage as 

compared to other similarly situated 

persons or localities. AMS expects the 

four criteria to clarify the legal standard 

for the public, promote honest 

competition and fair dealing, and 

improve the negotiating position of 

growers and producers. 

Cost-Benefit Analysis 

PSD estimated the costs and benefits 

of the final rule assuming its publication 

and effectuation in May 2020. The costs 

and benefits of the final rule are 

discussed in order below. 

A. Cost Estimation 

PSD believes that the costs of 

§ 201.211 would mostly consist of the 

direct costs of reviewing and, if 

necessary, re-writing marketing and 

production contracts to ensure that 

packers, swine contractors, and live 

poultry dealers are not providing an 

undue or unreasonable preference or 

advantage to any livestock producer, 

swine production contract grower, or 

poultry grower compared to other 

similarly situated person or localities. 

PSD believes some in the industry may 

initiate litigation to test the new 

regulations, resulting in additional 

costs. 

Section 201.211 does not impose any 

new requirements on regulated entities, 

but it serves as guidance for their 

compliance with section 202(b) of the 

Act. Since the rule clarifies the 

Secretary’s consideration of unlawful 

undue or unreasonable preferences or 

advantages, regulated entities should 

face less risk of violating the Act. The 

rule does not prohibit the use of 


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Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Rules and Regulations 79793 

15AMAs are marketing contracts, where 

producers market their livestock to a packer under 

a verbal or written agreement. Pricing mechanisms 

vary across AMAs. Some rely on a spot market for 

at least one aspect of their prices, while others 

involve complicated pricing formulas with 

premiums and discounts based on carcass merits. 

The livestock seller and packer agree on a pricing 

mechanism under AMAs, but usually not on a 

specific price. 

16There are no additional mandatory record 

keeping requirements in the final rule. PSD expects 

that regulated entities may opt to keep additional 

records to justify advantages or preferences to 

demonstrate compliance with the final rule in case 

of a PSD investigation or private litigation action. 

17https://www.whitehouse.gov/sites/ 

whitehouse.gov/files/omb/memoranda/2017/M-17- 

21-OMB.pdf 

18Again, there are no additional mandatory 

record keeping requirements in the final rule. 

19https://www.nass.usda.gov/Publications/ 

AgCensus/2017/Full_Report/Volume_1,_Chapter_1_

US/usv1.pdf. 

20 Ibid. 

21All salary costs are based on mean annual 

salaries for May 2018, adjusted for benefit costs, set 

to an hourly basis, and converted in to constant 

2016 dollars. http://www.bls.gov/oes/. Accessed on 

April 9, 2019. 

alternative marketing agreements 15

(AMAs), poultry tournament systems, or 

other incentive payment systems, and is 

not expected to decrease economic 

efficiencies in the cattle, hog, and 

poultry industries. Additionally, PSD 

does not expect this rule to inhibit the 

ability of regulated entities and 

producers and growers to develop and 

enter into mutually advantageous 

contracts. 

To estimate costs, PSD divided costs 

into two major categories, direct and 

indirect costs. In addition, PSD expects 

there are two direct costs: 

administrative costs and litigation costs. 

With respect to direct costs, 

administrative costs for regulated 

entities would include items such as 

review of marketing and production 

contracts, additional record keeping,16

and all other associated administrative 

office work to demonstrate that they do 

not provide an undue or unreasonable 

preference or advantage to any livestock 

producer, swine production contract 

grower, or poultry grower compared to 

other similarly situated person or 

localities. 

Litigation costs for the livestock and 

poultry industries will initially increase 

until there is a body of case law 

interpreting the regulations. Once the 

courts establish precedent, PSD expects 

additional litigation to decline. 

With respect to indirect costs, those 

costs include costs caused by changes in 

supply and/or demand and any 

resulting efficiency losses in the 

national markets for beef, pork, and 

chicken and the related input markets 

for cattle, hogs, and poultry resulting 

from the direct costs of the rule. 

1. Direct Costs—Administrative Costs 

To estimate administrative costs of 

the rule, PSD relied on its experience 

reviewing contracts and other business 

records commonly maintained in the 

livestock and poultry industries for 

compliance with the Act and 

regulations. PSD has data on the number 

of production contracts between swine 

production contract growers and swine 

contractors and poultry growers and live 

poultry dealers. PSD estimated the 

number of cattle marketing contracts 

between producers and packers based 

on the number of feedlots and the 

percentage of livestock procured under 

AMAs. PSD then multiplied hourly 

estimates of the administrative 

functions of reviewing and revising 

contracts by average hourly labor costs 

for administrative, management, and 

legal personnel to arrive at the total 

estimated administrative costs. PSD 

measured all costs in constant 2016 

dollars in accordance with guidance on 

complying with E.O. 13771.17

Since packers, swine contractors, and 

live poultry dealers will likely choose to 

review their contracts as a precautionary 

measure to ensure that they are not 

engaging in conduct or action that in 

any way gives an undue or unreasonable 

preference or advantage to any livestock 

producer, swine production contract 

grower, or poultry grower, PSD 

estimates that the regulated entities will 

review each contract or each contract 

type once and will renegotiate any 

contracts that contain language that 

could be considered a violation of 

section 202(b) of the Act. 

One may view this estimate as an 

upper bound to the direct cost of the 

rule, as not every packer, swine 

contractor, or live poultry dealer will 

choose to conduct such a review. Some 

may choose to ‘‘wait and see’’ what 

effect, if any, the rule has on the 

industry, and whether courts rule on it 

in any way that would warrant such a 

review of their contracts. 

Based on PSD’s experience, it 

developed estimates for regulated 

entities of the number of hours for 

attorneys and company managers to 

review and revise marketing and 

production contracts and for 

administrative staff to make changes, 

copy, and obtain signed copies of the 

contracts. For poultry contracts, PSD 

estimates that each unique contract type 

would require one hour of attorney time 

to review and rewrite a contract, two 

hours of company management time, 

and for each individual contract, one 

hour of administrative time, and one 

hour of additional record keeping 

time.18 PSD estimates that each of the 93 

live poultry dealers who report to PSD 

rely on 10 unique contract types on 

average. PSD data indicates that there 

are 24,101 individual poultry growing 

contracts. PSD estimates that each of the 

237 hog packers has 10 marketing 

agreements. The 2017 Census of 

Agriculture (Ag. Census) 19 indicates 

that the universe of swine production 

contracts in the U.S. is 8,557. For hog 

production and marketing contracts, 

PSD estimates that each production 

contract and marketing agreement 

would require one-half hour of attorney 

time to review and rewrite a contract, 

one hour of company management time, 

one hour of administrative time, and 

one hour of additional record keeping 

time. For cattle processors, PSD 

estimates that each of the estimated 

1,099 marketing agreements would 

require one hour of attorney time to 

review and rewrite a contract, two hours 

of company management time, one hour 

of administrative time, and one hour of 

additional record keeping time.20

PSD multiplied estimated hours to 

conduct these administrative tasks by 

the average hourly wages for managers 

at $62/hour, attorneys at $84/hour, and 

administrative assistants at $36/hour as 

reported by the U.S. Bureau of Labor 

Statistics in its Occupational 

Employment Statistics to arrive at its 

estimate of contract review costs for 

regulated entities.21

PSD recognizes that contract review 

costs will also be borne by livestock 

producers, swine production contract 

growers, and poultry growers. PSD 

estimates that each livestock producer, 

swine production contract grower, and 

poultry grower will, in its due course of 

business, spend one hour of time 

reviewing a contract or marketing 

agreement and will spend one-half hour 

of its attorney’s time to review the 

contract. As with the regulated entities, 

one may view this estimate as an upper 

bound to the direct cost of the rule, as 

not every producer or grower will 

choose to conduct such a review. Some 

may choose to ‘‘wait and see’’ what 

effect, if any, the rule has on the 

industry, and whether courts rule on it 

in any way that would warrant such a 

review of their contracts. 


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79794 Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Rules and Regulations 

22The four proposed rules were published on 

December 20, 2016, in Volume 81, No. 244 of the 

Federal Register. 23http://nationalaglawcenter.org/aglaw-reporter/ 

case-law-index/packers-and-stockyards. 24The USDA withdrew Section 201.3(a) on 

October 18, 2017, in Volume 82, No. 200 of the 

Federal Register. 

25Federal Register, Volume 81, No. 244, page 

92580. 

PSD multiplied one hour of livestock 

producer, swine production contract 

grower, and poultry grower management 

time and one-half hour of attorney time 

to conduct the marketing and 

production contract review by the 

average hourly wages for attorneys at 

$84/hour and managers at $62/hour as 

reported by the U.S. Bureau of Labor 

Statistics in its Occupational 

Employment Statistics to arrive at its 

estimate of contract review costs for 

livestock producers, swine contract 

growers, and poultry growers. PSD then 

applied this cost to the estimated 1,099 

cattle marketing contracts, 2,370 hog 

marketing contracts, 8,557 hog 

production contracts, and 24,101 

poultry growing contracts that have 

been reported to PSD. 

After determining the administrative 

costs to both the regulated entities and 

those they contract with, PSD added the 

administrative costs of the regulated 

entities and the livestock producers, 

swine production contract growers, and 

poultry growers together to arrive at the 

first-year total estimated administrative 

costs attributable to the regulation. A 

summary of the first-year total estimated 

administrative costs for § 201.211 

appear in the following table: 

TABLE 1—FIRST-YEAR ADMINISTRATIVE COSTS

Regulation Cattle 

($ millions) 

Hogs 

($ millions) 

Poultry 

($ millions) 

Total 

($ millions) 

201.211 ............................................................................................................ $0.42 $3.05 $4.42 $7.89 

The first-year total administrative 

costs are $7.89 million for § 201.211, 

and include costs for cattle, hogs, and 

poultry because packers, swine 

contractors, live poultry dealers, 

livestock producers, swine production 

contract growers, and poultry growers 

would conduct administrative functions 

of contract review and record keeping in 

response to the regulation. The 

administrative costs are the highest for 

poultry, followed by hogs and cattle. 

This is due to the greater prevalence of 

contract growing arrangements in the 

poultry industry. 

Based on comments received to the 

proposed rule, AMS abbreviated 

criterion (d) in the final rule by 

removing the ‘‘customary in the 

industry’’ clause from proposed 

criterion. Since all contracts will likely 

be reviewed in their entirety for 

potential violations of the Packers and 

Stockyards Act, AMS does not expect 

the removal of this clause to appreciably 

reduce the amount of time for the 

administrative functions of contract 

review and additional record keeping. 

Thus, AMS expects the costs in the final 

rule to be unchanged from the proposed 

rule. 

2. Direct Costs—Litigation Costs 

In considering the costs of the rules it 

proposed in 2016, GIPSA performed an 

in-depth analysis of litigation costs 

expected as a result of the package of 

four proposed new regulations.22 GIPSA 

estimated the total costs of litigating a 

case alleging violations of the Act. The 

main costs are attorney fees to litigate a 

case in a court of law. The cost of 

litigating a case includes the costs to all 

parties including the respondent and 

the USDA in a case brought by the 

USDA and the costs of the plaintiff and 

the defendant in the case of private 

litigation. 

To estimate litigation costs for the 

2016 proposed rules, GIPSA examined 

the actual cases decided under the Act 

from 1926 to 2014 as reported by the 

National Agricultural Law Center at the 

University of Arkansas.23 The litigation 

costs estimated in the 2016 proposed 

rules are measured in constant 2016 

dollars and are for regulated entities, 

producers, and growers. The 2016 

analysis of litigation costs estimated that 

the interim final rule at § 201.3(a) was 

the primary source of litigation costs 

and that the litigation costs for all four 

proposed rules were counted under 

§ 201.3(a).24 The 2016 analysis split out 

the estimated litigation costs between 

sections 202(a) and 202(b). 

The National Agricultural Law Center 

at the University of Arkansas has not 

reported any additional cases decided 

under the P&S Act since 2015. Since 

new § 201.211 establishes criteria for 

violations of section 202(b) and there 

has not been any recent litigation 

reported by the National Agricultural 

Law Center at the University of 

Arkansas, PSD used the estimated 

litigation costs associated with section 

202(b) from the 2016 proposed rules as 

the starting point for this analysis. 

The section 202(b) estimated litigation 

costs serve as an upper boundary of 

estimated costs since the estimates 

assumed that § 201.3(a) and § 201.211 

would both be promulgated. PSD 

estimates that there would be additional 

litigation when § 201.211 becomes 

effective, even in the absence of 

§ 201.3(a). Therefore, PSD uses the 

following section 202(b) litigation costs 

estimates in Table 14 from the 2016 

proposed rule as the estimated first-year 

litigation costs assuming the rule 

becomes effective in May 2020.25


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Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Rules and Regulations 79795 

26The detail in this table and other tables in this 

analysis may not add to the totals due to rounding. 

27The framework is explained in detail in Tomek, 

W.G. and K.L. Robinson ‘‘Agricultural Product 

Prices,’’ third edition, 1990, Cornell University 

Press. 

28A dead weight loss is the cost to society of an 

inefficient allocation of resources in a market. 

Causes of deadweight losses can include market 

failures, such as market power or externalities, or 

an intervention by a non-market force, such as 

government regulation or taxation. 

TABLE 2—PROJECTED FIRST-YEAR LITIGATION COSTS

Section 202(b) of the act Cattle 

($ millions) 

Hog 

($ millions) 

Poultry 

($ millions) 

Total 

($ millions) 

Total ................................................................................................................. $0.24 $0.04 $1.49 $1.77 

PSD expects § 201.211 will result in 

an additional $1.77 million in litigation 

costs in the first full year after the rule 

becomes effective. Using the number of 

complaints PSD has received from 

industry participants as an indicator, 

PSD estimates that the majority of the 

litigation will be in the poultry industry. 

Most of the complaints concerning 

undue or unreasonable preferences that 

PSD has received since 2009 have come 

from the poultry industry. 

3. Total Direct Costs 

The total first-year direct costs of 

§ 201.211 are the sum of administrative 

and litigation costs from above and are 

summarized in the following table. 

TABLE 3—FIRST YEAR DIRECT COSTS 26

Cost type Cattle 

($ millions) 

Hogs 

($ millions) 

Poultry 

($ millions) 

Total 

($ millions) 

Admin Costs .................................................................................................... $0.42 $3.05 $4.42 $7.89 

Litigation Costs ................................................................................................ 0.24 0.04 1.49 1.77 

Total Direct Costs ..................................................................................... 0.66 3.09 5.91 9.67 

PSD estimates the total direct costs of 

§ 201.211 to be $9.67 million. As the 

above table shows, the costs are highest 

for the poultry industry, followed by the 

hog and cattle industries. The primary 

reason is the high utilization of growing 

contracts and the corresponding higher 

estimated administrative costs in the 

poultry industry. To put this direct cost 

in perspective, the actual impact on 

retail prices from these direct costs 

would be less than one one-hundredth 

of a cent. 

4. Indirect Costs 

PSD estimates that the indirect costs 

of § 201.211 on the cattle, hog, and 

poultry industries are near zero. For the 

purposes of this analysis, indirect costs 

are social welfare losses due to any 

potential price and output changes from 

the direct costs of the rule and are in 

addition to the direct costs 

(administrative and litigation costs) on 

regulated entities, producers, and 

growers who are directly impacted by 

the rule. The economy will experience 

indirect costs, for example, if the rule 

causes packers and live poultry dealers 

to reduce production, increasing the 

price of meat products and reducing the 

amount of meat consumed by 

consumers. 

As previously discussed, the 

regulation clarifies the Secretary’s 

consideration of whether a conduct or 

action constitutes an undue or 

unreasonable preference or advantage. 

PSD does not expect, therefore, that 

§ 201.211 will result in a decreased use 

of AMAs, use of poultry grower ranking 

systems or other incentive pay, reduced 

capital formation, inhibit development 

of new contracts, or decreased economic 

efficiencies in the livestock, meat, and 

poultry industries. Accordingly, PSD 

does not project indirect costs resulting 

from decreased use of AMAs, reduced 

capital, efficiency losses, or lost 

consumer and producer surplus. 

Indirect costs that could theoretically be 

anticipated are due to shifts in industry 

demand and supply curves resulting 

from the increases in industry direct 

costs attributable to the final rule. These 

shifts may result in quantity and price 

changes in the retail markets for beef, 

pork, and poultry, and the related input 

markets for cattle, hogs, and poultry. 

However, litigation costs are unrelated 

to the quantity of production—in other 

words, they are not marginal costs—so 

it is not appropriate to include them in 

the amount of a supply curve shift. 

Contract reviews and revisions are 

somewhat related to production 

quantity, but even they are less than 

fully compelling as a component of 

marginal cost. Litigation and 

administrative costs, however, are part 

of fixed costs of regulated entities. If the 

increase in fixed costs is significant 

enough, it could lead some firms to exit 

the industry in the long run. These 

nuances are not reflected in the 

assessment that follows, and thus it 

should be interpreted as a bounding 

exercise. 

To calculate an upper bound on this 

type of indirect costs based on supply 

curves shifting, PSD modeled the 

impact of the increase in direct costs of 

implementing § 201.211 in a Marketing 

Margins Model (MMM) framework.27

The MMM allows for the estimation of 

changes in consumer and producer 

prices and quantities produced caused 

by changes in supply and demand in the 

retail markets for beef, pork, and poultry 

and the input markets for cattle, hogs, 

and poultry. 

PSD modeled—again, as a bounding 

exercise—the indirect costs as an 

inward (or upward) shift in the supply 

curves for beef, pork, and poultry. This 

has the effect of increasing the 

equilibrium prices and reducing the 

equilibrium quantity produced. This 

also has the effect of reducing the 

derived demand for cattle, hogs, and 

poultry, which causes a reduction in the 

equilibrium prices and quantity 

produced. Economic theory suggests 

that these shifts in the supply curves 

and derived demand curves will result 

in price and quantity impacts and 

potential dead weight losses to 

society.28

To estimate the output and input 

supply and demand curves for the 

MMM, PSD constructed linear supply 

and demand curves around equilibrium 

price and quantity points using price 

elasticities of supply and demand from 

the GIPSA Livestock Meat and 

Marketing Study and from USDA’s 


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79796 Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Rules and Regulations 

29RTI International ‘‘GIPSA Livestock Meat and 

Marketing Study’’ prepared for Grain Inspection, 

Packers and Stockyards Administration, 2007. ERS 

Price Elasticities: http://www.ers.usda.gov/dataproducts/commodity-and-food-elasticities/demandelasticities-from-literature.aspx. 

30The $9.67 million increase in total industry 

costs from § 201.211 is only 0.0043 percent of direct 

industry costs of approximately $223 billion for the 

beef, pork, and poultry industries. 

31As discussed above, PSD expects total 

administrative and litigation costs to return to 

where they would have been absent the rule and the 

additional costs associated with the rule will 

remain at $0 after ten years. 

Economic Research Service.29 With the 

supply curves established from this 

data, PSD then shifted the supply curves 

for beef, pork, and chicken up by the 

amount of the increase in direct costs 

for each industry. PSD calculated the 

new equilibrium prices and quantities 

in the input markets resulting from the 

decreases in derived demand that result 

from higher direct costs. This allows for 

the calculation of the indirect cost from 

the lower relative quantity produced at 

the relatively higher price when the 

industry’s direct costs increase. 

The calculation of an upper bound on 

the price impacts from the increases in 

direct costs from § 201.211 resulted in 

price increases of less than one onehundredth of a cent per pound in retail 

prices for beef, pork, and poultry. This 

is because the increase in direct costs is 

very small in relation to total industry 

costs.30 The result is that the price and 

quantity effects from the increases in 

direct costs are indistinguishable from 

zero and, therefore, PSD concludes that 

the indirect costs of § 201.211 for each 

industry are also zero. 

5. Total Costs 

PSD added all direct costs to the 

indirect costs (near zero), to arrive at the 

estimated total first-year costs of 

§ 201.211. The total first-year costs are 

summarized in Table 4. 

TABLE 4—TOTAL FIRST YEAR COSTS

Cost type Cattle 

($ millions) 

Hogs 

($ millions) 

Poultry 

($ millions) 

Total 

($ millions) 

Admin Costs .................................................................................................... $0.42 $3.05 $4.42 $7.89 

Litigation Costs ................................................................................................ 0.24 0.04 1.49 1.77 

Total Direct Costs ............................................................................................ 0.66 3.09 5.91 9.67 

Total Indirect Costs .......................................................................................... 0.00 0.00 0.00 0.00 

Total Costs ............................................................................................... 0.66 3.09 5.91 9.67 

PSD estimates that the total costs will 

be $9.67 million in the first year of 

implementation. 

6. Ten-Year Total Costs 

To arrive at the estimated ten-year 

administrative costs of § 201.211, PSD 

estimates that in each of the first five 

years, 20 percent of all contracts will 

either expire and need to be renewed 

each year or new marketing and 

production contracts will be put in 

place each year. While PSD expects the 

costs of reviewing and revising, if 

necessary, each contract will remain 

constant in the first five years, it expects 

the administrative costs will be lower 

after the first year because the direct 

administrative costs of reviewing and 

revising contracts would only apply to 

the 20 percent of expiring contracts or 

new contracts. PSD estimates that in the 

second five years, the direct 

administrative costs of reviewing and 

revising contracts will decrease by 50 

percent per year as the contracts would 

already reflect language modifications, 

if any, necessitated by implementation 

of the regulation. PSD estimates that 

after ten years, the direct administrative 

costs will return to where they would 

have been absent the rule, and the 

additional administrative costs 

associated with the rule will remain at 

$0 after ten years. 

In estimating the estimated ten-year 

litigation costs of § 201.211, PSD 

expects the litigation costs to be 

constant for the first five years while 

courts are setting precedents for the 

interpretation of § 201.211. PSD expects 

that case law with respect to the 

regulation would be settled after five 

years and by then, industry participants 

will know how PSD would enforce the 

regulation and how courts would 

interpret the regulation. The effect of 

courts establishing precedents is that 

litigation costs would decline after five 

years as the livestock and poultry 

industries understand how the courts 

interpret the regulation. 

To arrive at the estimated ten-year 

litigation costs of § 201.211, PSD 

estimates that litigation costs for the 

first five years will occur at the same 

rate and at the same cost as in the first 

full year of the rule ending in May 2021. 

In the sixth through tenth years, PSD 

estimates that additional litigation costs 

will decrease each year and return to 

where they would have been absent the 

rule in the tenth year after the rule is 

effective and remain at $0 after 10 years. 

PSD estimates this decrease in litigation 

costs to be linear, with the same 

decrease in costs each year. 

The ten-year total costs of § 201.211 

appear in the table below.31

TABLE 5—TEN-YEAR TOTAL COSTS—YEARS ENDED MAY 32

Year Administrative 

($ millions) 

Litigation 

($ millions) 

Total direct 

($ millions) 

2021 ............................................................................................................................................. $7.89 $1.77 $9.67 

2022 ............................................................................................................................................. 1.58 1.77 3.35 

2023 ............................................................................................................................................. 1.58 1.77 3.35 

2024 ............................................................................................................................................. 1.58 1.77 3.35 

2025 ............................................................................................................................................. 1.58 1.77 3.35 

2026 ............................................................................................................................................. 0.79 1.48 2.27 

2027 ............................................................................................................................................. 0.39 1.18 1.58 

2028 ............................................................................................................................................. 0.20 0.89 1.08 

2029 ............................................................................................................................................. 0.10 0.59 0.69 


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32PSD uses May 2021 as the end of the first year 

after the rule is in effect for analytical purposes 

only. The date the rule becomes final was not 

known at the time of the analysis. 

33https://www.whitehouse.gov/sites/default/files/ 

omb/assets/regulatory_matters_pdf/a-4.pdf. 

34 Ibid. 

35https://www.whitehouse.gov/sites/ 

whitehouse.gov/files/omb/memoranda/2017/M-17- 

21-OMB.pdf. 

TABLE 5—TEN-YEAR TOTAL COSTS—YEARS ENDED MAY 32—Continued 

Year Administrative 

($ millions) 

Litigation 

($ millions) 

Total direct 

($ millions) 

2030 ............................................................................................................................................. 0.05 0.30 0.35 

Totals .................................................................................................................................... 15.74 13.31 29.05 

Based on the analysis, PSD expects 

the ten-year total costs will be $29.05 

million. 

7. Present Value of Ten-Year Total Costs 

The total costs of § 201.211 in the 

table above show that the costs are 

highest in the first year, decline to a 

constant and significantly lower level 

over the next four years, and then 

gradually decrease again over the 

subsequent five years. Costs to be 

incurred in the future are less expensive 

than the same costs to be incurred 

today. This is because the money that 

would be used to pay the costs in the 

future could be invested today and earn 

interest until the time period in which 

the costs are incurred. 

To account for the time value of 

money, the costs of the regulation to be 

incurred in the future are discounted 

back to today’s dollars using a discount 

rate. The sum of all costs discounted 

back to the present is called the present 

value (PV) of total costs. PSD relied on 

both a 3 percent and 7 percent discount 

rate as discussed in Circular A–4.33 PSD 

measured all costs using constant 2016 

dollars. 

PSD calculated the PV of the ten-year 

total costs of the regulation using both 

a 3 percent and 7 percent discount rate 

and the PVs appear in the following 

table. 

TABLE 6—PV OF TEN-YEAR TOTAL

COSTS

Discount 

rate 

(percent) 

($ millions) 

3 ............................................ $26.31 

7 ............................................ 23.33 

PSD expects the PV of the ten-year 

total costs would be $26.31 million at a 

3 percent discount rate and $23.33 

million at a 7 percent discount rate. 

8. Annualized Costs 

PSD annualized the PV of the ten-year 

total costs (referred to as annualized 

costs) of § 201.211 using both a 3 

percent and 7 percent discount rate as 

required by Circular A–4 and the results 

appear in the following table.34

TABLE 7—TEN-YEAR ANNUALIZED

COSTS

Discount 

rate 

(percent) 

($ millions) 

3 ............................................ $3.08 

7 ............................................ 3.32 

PSD expects the annualized costs of 

§ 201.211 would be $3.08 million at a 3 

percent discount rate and $3.32 million 

at a 7 percent discount rate. 

PSD also annualized the PV of the 

ten-year total costs into perpetuity of 

§ 201.211 using both a 3 percent and 7 

percent discount rate following the 

guidance on complying with E.O. 

13771. The results appear in the 

following table.35

TABLE 8—ANNUALIZED COSTS INTO

PERPETUITY

Discount 

rate 

(percent) 

($ millions) 

3 ............................................ $0.69 

7 ............................................ 1.21 

PSD expects the costs of § 201.211 

annualized into perpetuity would be 

$0.69 million at a 3 percent discount 

rate and $1.21 million at a 7 percent 

discount rate. Based on the costs in 

Table 8, and in accordance with 

guidance on complying with E.O. 

13771, the single primary estimate of 

the costs of this final rule is $1.21 

million, the total costs annualized in 

perpetuity using a 7 percent discount 

rate. 

B. Benefits 

PSD was unable to quantify the 

benefits of § 201.211. However, the rule 

contains several provisions that PSD 

expects to improve economic 

efficiencies in the regulated markets for 

cattle, hogs, and poultry and reduce 

market failures. Regulations that 

increase the amount of relevant 

information available to market 

participants, protect private property 

rights, and foster competition can 

improve economic efficiencies and 

generate benefits for consumers and 

producers. 

Section 201.211 will increase the 

amount of relevant information 

available to market participants and 

offset any potential abuse of buyer-side 

market power by clearly stating to all 

contracting parties the criteria that the 

Secretary will consider in determining 

whether conduct or action constitutes 

an undue or unreasonable preference or 

advantage in violation of section 202(b) 

of the Act. 

The regulation will also reduce the 

risk of violating section 202(b) because 

it clarifies the criteria the Secretary will 

consider in determining whether the 

conduct or action in the livestock and 

poultry industries constitutes an undue 

or unreasonable preference or advantage 

and a violation of section 202(b) of the 

Act. Other benefits of clarifying the 

criteria may include reducing litigation 

risk; decreasing contracting costs; 

promoting competitiveness and fairness 

in contracting; and providing 

protections for livestock producers, 

swine production contract growers, and 

poultry growers. 

Benefits to the livestock and poultry 

industries and the cattle, hog, and 

poultry markets also arise from 

improving parity of negotiating power 

between packers, swine contractors, and 

live poultry dealers and livestock 

producers, swine production contract 

growers, and poultry growers. The 

improvement in parity comes when 

contracting parties negotiate new 

contracts and when they review and 

renegotiate any existing contract terms 

that contain language that could be 

considered a violation of section 202(b) 

of the Act. 

Since the regulation increases the 

amount of relevant information by 

clarifying what might be considered an 

undue or unreasonable preference, it 

increases parity in negotiating contracts, 

and thereby reduces the ability to abuse 

buyer-side market power with the 


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79798 Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Rules and Regulations 

36Nigel Key and Jim M. MacDonald discuss 

evidence for the effect of concentration on grower 

compensation in ‘‘Local Monopsony Power in the 

Market for Broilers? Evidence from a Farm Survey’’ 

selected paper American Agri. Economics Assn. 

meeting Orlando, Florida, July 27–29, 2008. 

37See additional discussion in Steven Y. Wu and 

James MacDonald (2015) ‘‘Economics of 

Agricultural Contract Grower Protection 

Legislation,’’ Choices 30(3): 1–6. 

38U.S. Small Business Administration. Table of 

Small Business Size Standards Matched to North 

American Industry Classification System Codes. 

Effective August 19, 2019. https://www.sba.gov/ 

sites/default/files/2019-08/SBA%20Table%20of%

20Size%20Standards_Effective%20Aug%2019%

2C%202019.pdf. 

39Estimated cost to live poultry dealers of 

$3,412,301 × 6.52 percent of firms that are small 

businesses = $222,687. 

40Estimated cost to beef packers of $547,643 × 

23.1 percent of firms that are small businesses = 

$126,501. 

41Estimated cost to hogs and pork of $1,959,550 

× 19.2 percent of slaughter in small businesses × 

21.7 percent of costs attributed to packers = 

$81,603. 

42Estimated cost to hogs and pork of $1,959,550 

× 2.01 percent of contracted hogs produced by 

swine contractors that are small businesses × 78.3 

percent of costs attributed to contractors = $30,863. 

resulting welfare losses.36 Establishing 

parity of negotiating power in contracts 

promotes fairness and equity and is 

consistent with PSD’s mission to protect 

fair trade practices, financial integrity, 

and competitive markets for livestock, 

meats, and poultry.37

C. Cost-Benefit Summary 

PSD expects the ten-year annualized 

costs of § 201.211 to be $3.08 million at 

a 3 percent discount rate and $3.32 

million at a 7 percent discount rate and 

the costs annualized into perpetuity to 

be $0.69 million at a 3 percent discount 

rate and $1.21 million at a 7 percent 

discount rate. PSD expects the costs will 

be highest for the poultry industry due 

to its extensive use of poultry growing 

contracts, followed by the hog industry 

and the cattle industry, respectively. 

PSD was unable to quantify the 

benefits of the new regulation, but they 

explained numerous qualitative benefits 

that would protect livestock producers, 

swine production contract growers, and 

poultry growers; promote fairness and 

equity in contracting; increase economic 

efficiencies; and reduce the negative 

effects of market failures throughout the 

entire livestock and poultry value chain. 

The primary benefit of § 201.211 is 

expected to be reduced occurrences of 

undue or unreasonable preferences or 

advantages and increased economic 

efficiencies in the marketplace. This 

benefit of additional enforcement of the 

Act accrues to all segments of the value 

chain in the production of livestock and 

poultry, and ultimately to consumers. 

Regulatory Flexibility Analysis 

The Small Business Administration 

(SBA) defines small businesses by their 

North American Industry Classification 

System Codes (NAICS).38 SBA considers 

broiler and turkey producers/growers 

and swine contractors, NAICS codes 

112320, 112330, and 112210 

respectively, to be small businesses if 

sales are less than $1,000,000 per year. 

Cattle feeders are considered small if 

they have less than $8 million in sales 

per year. Beef and pork packers, NAICS 

311611, are small businesses if they 

have fewer than 1,000 employees. 

The Packers and Stockyards Act 

regulates live poultry dealers, which is 

a group similar but not identical to the 

NAICS category for poultry processors. 

Poultry processors, NAICS 311611, are 

considered small business if they have 

fewer than 1,250 employees. PSD 

applied SBA’s definition for small 

poultry processors to live poultry 

dealers as the best standard available, 

and it considers live poultry dealers 

with fewer than 1,250 employees to be 

small businesses. 

PSD maintains data on live poultry 

dealers from the annual reports these 

firms file with PSD. Currently, 93 live 

poultry dealers would be subject to the 

new regulation. Seventy-Four of the live 

poultry dealers would be small 

businesses according to the SBA 

standard. Although there were many 

more small businesses than large, small 

businesses produced only about 6.5 

percent of the poultry in the United 

States in 2017. 

Live poultry dealers classified as large 

businesses are responsible for about 

93.5 percent of the poultry contracts. 

Assuming that small businesses would 

bear 6.5 percent of the costs, in the first 

year the regulation is effective, 

$222,687 39 would fall on live poultry 

dealers classified as small businesses. 

This amounts to average estimated costs 

for each small live poultry dealer of 

$3,009. 

As of February 2019, PSD records 

identified 381 beef and pork packers 

actively purchasing cattle or hogs for 

slaughter. Many firms slaughtered more 

than one species of livestock. Of the 381 

beef and pork packers, 172 processed 

both cattle and hogs, 144 processed 

cattle but not hogs, and 65 processed 

hogs but not cattle. 

PSD estimates that small businesses 

accounted for 23.1 percent of the cattle 

and 19.2 percent of the hogs slaughtered 

in 2017. If the costs of implementing 

§ 201.211 are proportional to the 

number of head processed, then in the 

first full year the regulation is effective, 

PSD estimates that $126,501 40 in 

additional costs would fall on beef 

packers classified as small businesses. 

This amounts to estimated costs of $407 

for each small beef packer. 

In total, $81,603 41 in additional firstyear costs would be expected to fall on 

pork packers classified as small 

businesses, and $30,863 42 would fall on 

swine contractors classified as small 

businesses. This amounts to average 

estimated costs for each small pork 

packer of $356, and average estimated 

costs for each small swine contractor of 

$286 in the first year the regulation is 

effective. To the extent that smaller beef 

and pork packers rely on AMA 

purchases less than large packers, the 

estimates might tend to overstate costs. 

PSD then annualized the present 

value of ten-year total costs of the 

proposed rule on regulated entities, 

multiplied by the percent of small 

business. Ten-year annualized costs 

discounted at a 3 percent rate would be 

$61,097 for the cattle and beef industry, 

$32,463 for the hog and pork industry, 

and $119,271 for the poultry industry. 

This amounts to annualized costs of 

$196 for each beef packer, $103 for each 

pork packer, $82 for each swine 

contractor, and $1,612 for each live 

poultry dealer that is a small business. 

The total annualized costs for regulated 

small businesses would be $212,830. 

Ten-year annualized costs at a 7 

percent discount rate would be $64,458 

for the regulated cattle and beef 

industry, $35,416 for the regulated hog 

and pork industry, and $125,696 for the 

poultry industry. This amounts to tenyear annualized costs of $207 for each 

beef packer, $112 for each pork packer, 

$90 for each swine contractor, and 

$1,699 for each live poultry dealer that 

is a small business. The total ten-year 

annualized costs at 7 percent for 

regulated small businesses would be 

$225,570. 

The table below lists the estimated 

additional costs associated with the 

regulation in the first year. It also lists 

annualized costs discounted at 3 

percent and 7 percent discount rates, 

and annualized PV of costs extended 

into perpetuity discounted at 3 and 7 

percent. 


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43https://www.nass.usda.gov/Publications/ 

AgCensus/2017/Full_Report/ 

Volume_1,_Chapter_1_US. 

44There are significant differences in average 

revenues between swine contractors and cattle, hog, 

and poultry processors, resulting from the 

difference in SBA thresholds. 

TABLE 9—ESTIMATED INDUSTRY TOTAL COSTS TO REGULATED SMALL BUSINESSES

Estimate type Beef packers 

($) 

Pork packers 

and swine 

contractors 

($) 

Poultry 

processors 

($) 

Total 

($) 

First-Year Costs ............................................................................................... $126,501 $112,466 $222,687 $461,653 

10 years Annualized at 3% ............................................................................. 61,097 32,463 119,271 212,830 

10 years Annualized at 7% ............................................................................. 64,458 35,416 125,696 225,570 

Annualized Total Cost into Perpetuity Discounted at 3% ............................... 13,720 7,290 26,784 47,794 

Annualized Total Cost into Perpetuity Discounted at 7% ............................... 23,492 12,907 45,810 82,209 

In considering the impact on small 

businesses, PSD considered the average 

costs and revenues of each regulated 

small business impacted by § 201.211. 

The number of small businesses 

impacted, by NAICS code, as well as the 

costs per entity in the first-year, ten-year 

annualized costs per entity at both the 

3 percent and 7 percent discount rates, 

and annualized PV of the total costs 

extended into perpetuity discounted at 

3 and 7 percent appear in the following 

table. 

TABLE 10—PER ENTITY COSTS TO REGULATED SMALL BUSINESSES

NAICS 

Number 

of small 

businesses 

First year 

($) 

Ten-year 

annualized 

costs-3% 

($) 

Ten-year 

annualized 

costs-7% 

($) 

Perpetuity 3% 

($) 

Perpetuity 7% 

($) 

112210—Swine Contractor ...................... 108 $286 $82 $90 $19 $33 

311615—Poultry Processor ..................... 74 3,009 1,612 1,699 362 619 

311611—Beef Packer .............................. 311 407 196 207 44 76 

311611—Pork Packer .............................. 229 356 103 112 23 41 

The following table compares the 

average per entity first-year and 

annualized costs of § 201.211 to the 

average revenue per establishment for 

all regulated small businesses in the 

same NAICS code. The annualized costs 

are slightly higher at the 7 percent rate 

than at the 3 percent rate, so only the 

7 percent rate is included in the table as 

the more conservative estimate. 

TABLE 11—COMPARISON OF PER ENTITY COST TO REVENUES FOR REGULATED SMALL BUSINESSES

NAICS 

Average 

revenue per 

establishment 

($) 

First-year 

cost as 

percentage 

of revenue 

Ten-year 

annualized 

cost as 

percentage 

of revenue 

Annualized 

cost to 

perpetuity as 

percentage 

of revenue 

112210—Swine Contractor .............................................................................. $485,860 $0.06 $0.02 $0.007 

311615—Poultry Processor ............................................................................. 13,842,548 0.02 0.01 0.004

311611—Beef Packer ...................................................................................... 6,882,205 0.01 0.00 0.001 

311611—Pork Packer ...................................................................................... 6,882,205 0.01 0.00 0.001 

The revenue figures in the above table 

come from U.S. Census data for live 

poultry dealers and cattle and hog 

slaughterers, NAICS codes 311615 and 

311611, respectively.43 Ag. Census data 

have the number of head sold by size 

classes for farms that sold their own 

hogs and pigs in 2017 and that 

identified themselves as contractors or 

integrators, but not the value of sales 

nor the number of head sold from the 

farms of the contracted production. To 

estimate average revenue per 

establishment, PSD used the estimated 

average value per head for sales of all 

swine operations and the production 

values for firms in the Ag. Census size 

classes for swine contractors. The 

results in Table 11 demonstrate, the 

costs of § 201.211 as a percent of 

revenue are less than 1 percent.44

Although the Packers and Stockyards 

Act does not regulate livestock 

producers or poultry growers, PSD 

recognizes that they will also incur 

contract review costs. PSD estimates 

that each livestock producer and poultry 

grower will, in its due course of 

business, spend one hour of time 

reviewing a contract or marketing 

agreement and will spend one-half hour 

of its attorney’s time to review the 

contract. As with the regulated entities, 

one may view this estimate as an upper 

bound to the direct cost of the rule, as 

not every producer or grower will 

choose to conduct such a review. Some 

may choose to ‘‘wait and see’’ what 

effect, if any, the rule has on the 

industry, and whether courts rule on it 

in any way that would warrant such a 

review of their contracts. 


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PSD multiplied one hour of livestock 

producer, swine production contract 

grower, and poultry grower management 

time and one-half hour of attorney time 

to conduct the marketing and 

production contract review by the 

average hourly wages for attorneys at 

$84/hour and managers at $62/hour, as 

reported by the U.S. Bureau of Labor 

Statistics in its Occupational 

Employment Statistics, to arrive at its 

estimate of contract review costs for 

livestock producers, swine contract 

growers, and poultry growers. The result 

is that each small livestock producer 

and each small poultry that sells 

livestock or raises poultry on a contract 

is expected to bear $104 in first year 

costs, $23 in ten-year annualized costs 

discounted at 3 percent, $25 in ten-year 

annualized costs discounted at 7 

percent, and $9 discounted into 

perpetuity at 7 percent. Table 12 lists 

expected costs to livestock producers 

and poultry growers that are small 

businesses. 

TABLE 12—TOTAL COSTS TO UNREGULATED SMALL BUSINESSES

Estimate type 

Cattle 

feeders 

($) 

Hog 

producers 

($) 

Poultry 

growers 

($) 

Total 

($) 

First-Year Costs ............................................................................................... $111,866 $459,707 $2,501,106 $3,072,679 

10 years Annualized at 3% ............................................................................. 24,274 99,754 542,727 666,755 

10 years Annualized at 7% ............................................................................. 26,917 110,614 601,812 739,342 

Annualized Total Cost into Perpetuity Discounted at 3% ............................... $5,451 $22,401 $121,876 $149,728 

Annualized Total Cost into Perpetuity Discounted at 7% ............................... 9,810 40,313 219,329 269,452 

The Ag. Census indicates there were 

575 farms that sold hogs or pigs in 2017 

and identified themselves as contractors 

or integrators. About 19 percent of 

swine contractors had sales of less than 

$1,000,000 in 2017 and would have 

been classified as small businesses. 

These small businesses accounted for 

only 2 percent of the hogs produced 

under production contracts. 

Additionally, there were 8,557 swine 

producers in 2017 with swine contracts, 

and about 41 percent of these producers 

would have been classified as small 

businesses. PSD estimated an additional 

2,370 pork producers had marketing 

agreements with pork packers. If 41 

percent are small businesses, then 4,480 

hog producers could incur contract 

review costs. PSD estimated as many as 

1,099 cattle feeders had marketing 

agreements or contracts that could need 

adjustment due to the new rule. If 98 

percent are small businesses, 1,078 

could bear costs of reviewing contracts. 

Table 13 compares cost to revenues for 

producer unregulated producers that are 

small businesses. 

PSD records indicated poultry 

processors had 24,101 poultry 

production contracts in effect in 2017. 

The 24,101 poultry growers holding the 

other end of the contracts are almost all 

small businesses by SBA’s definitions. 

TABLE 13—COMPARISON OF TOTAL COST TO REVENUES FOR UNREGULATED SMALL BUSINESSES

NAICS 

Number of 

small 

businesses 

Average 

revenue 

($) 

First-year 

cost as 

percentage 

of revenue 

Ten-year 

annualized 

cost as 

percentage 

of revenue 

Annualized 

cost to 

perpetuity as 

percentage 

of revenue 

112212—Cattle Feeders ...................................................... 1,078 $305,229 0.03 0.01 0.003 

112210—Hog Producers ..................................................... 4,480 333,607 0.03 0.01 0.003 

112320—Poultry Growers .................................................... 24,101 181,545 0.06 0.01 0.005 

Ten-year annualized cost savings of 

exempting small businesses would be 

$212,830 using a 3 percent discount rate 

and $225,570 using a 7 percent discount 

rate. The cost savings annualized into 

perpetuity of exempting small 

businesses would be $47,794 using a 3 

percent discount rate and $82,209 using 

a 7 percent discount rate. However, one 

purpose of § 201.211 is to protect all 

livestock producers, swine production 

contract growers, and poultry growers 

from unfair and unreasonable 

preferences or advantages, regardless of 

whether the producer or grower and the 

packer, swine contractor, or live poultry 

dealer to which they sell or contract is 

a large or small business. PSD believes 

that the benefits of § 201.211 will be 

captured by all livestock producers, 

swine production contract growers, and 

poultry growers. For this reason, AMS 

did not consider exempting small 

business from this final rule. 

The number of regulated entities that 

could experience a cost increase is 

substantial. Most regulated packers and 

live poultry dealers are small 

businesses. However, the expected cost 

increases for each entity are not 

significant. For all four groups of 

regulated entities—beef packers, pork 

packers, live poultry dealers, and swine 

contractors—average first year costs are 

expected to amount to less than one 

tenth of one percent of annual revenue. 

Ten-year annualized costs discounted at 

7 percent are highest for swine 

contractors at two one hundredths of 

one percent of revenue. Annualized 

expected costs of $90 and $112 for 

swine contractors and pork packers, 

respectively, are near the cost of one 

hog. An annualized expected cost of 

$207 for beef packers is much less than 

the cost of one fed steer. Expected costs 

for live poultry dealers are higher, but 

as a percent of revenue, expected costs 

to live poultry dealers are very low. 

AMS expects that the additional costs to 

small packers, live poultry dealers, and 

swine contractors will not change their 

ability to continue operations or place 

any of them at a competitive 

disadvantage. 

The number of unregulated entities 

that could experience a cost increase is 

also substantial. Most affected livestock 

producers and poultry growers are small 

businesses. Again, expected costs for 

individual entities are not significant. 

The expected first year cost for each 

unregulated livestock producer or 

poultry grower is $104. Annualized 

expected 10-year costs discounted at 3 


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Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Rules and Regulations 79801 

percent are $23. Costs as a percent of 

revenue are expected to be well below 

1 percent. AMS expects that $23 per 

year will not change any producer’s or 

poultry grower’s ability to continue 

operations or place any livestock 

producer or poultry grower at a 

competitive disadvantage. 

As discussed in the Regulatory Impact 

Analysis, AMS does not expect welfare 

transfers among market segments or 

within segments. Estimated changes in 

prices and quantities are 

indistinguishable from zero. AMS does 

not expect § 201.211 to cause changes in 

production or marketing for small 

businesses, and the increase in direct 

costs is very small in relation to total 

costs. 

Comments on the Regulatory Flexibility 

Analysis 

In the proposed rule, AMS solicited 

public comment on whether § 201.211 

as proposed would have a significant 

economic impact on a substantial 

number of small business entities. None 

of the public comments specifically 

addressed the Regulatory Flexibility 

Analysis in the proposed rule. However, 

several comments were submitted by 

small farmers who said they find it 

increasingly difficult to compete in the 

consolidated livestock and poultry 

industries. Many comments expected 

the proposed rule, particularly proposed 

criterion (d), to legitimize what they 

characterized as unfair, but customary, 

business arrangements in which they 

feel powerless to affect more favorable 

contract terms for themselves. 

In response to comments, AMS 

revised the language of criterion (d) to 

provide that the Secretary can 

determine whether a preference or 

advantage is undue or unreasonable and 

a violation of the Act by considering 

whether the action is the result of a 

reasonable business decision. AMS 

removed the proposed language that 

examined whether the action was also 

customary in the industry, thus 

addressing some of the concerns 

expressed by comments. AMS does not 

expect revision of criterion (d) to impact 

the conclusions of this analysis. 

Based on the above analyses and the 

comments received, AMS does not 

expect § 201.211 to have a significant 

economic impact on a substantial 

number of small business entities as 

defined in the Regulatory Flexibility Act 

(5 U.S.C. 601 et seq.). 

Civil Rights Review 

AMS has considered the potential 

civil rights implications of this rule on 

members of protected groups to ensure 

that no person or group would be 

adversely or disproportionately at risk 

or discriminated against on the basis of 

race, color, national origin, gender, 

religion, age, disability, sexual 

orientation, marital or family status, 

political beliefs, parental status, or 

protected genetic information. This rule 

does not contain any requirements 

related to eligibility, benefits, or services 

that would have the purpose or effect of 

excluding, limiting, or otherwise 

disadvantaging any individual, group, 

or class of persons on one or more 

prohibited bases. AMS has developed 

an outreach program to ensure 

information about the regulation is 

made available to socially and 

economically disadvantaged or limited 

resource farmers, producers, growers, 

and members of racial and ethnic 

minority groups. 

In its review, AMS conducted a 

disparate impact analysis, using the 

required calculations, which resulted in 

a finding that Asian Americans, Pacific 

Islanders, and Native Hawaiians met the 

condition for adverse impacts. The 

regulation itself would provide benefits 

to all farmers and ranchers equally. 

AMS will institute enhanced efforts to 

notify the groups found to be adversely 

impacted of the regulation and its 

benefits. It is of particular importance 

that impacted individuals and groups be 

made aware of the benefits the new 

regulation may provide them. AMS will 

specifically target seven organizations 

representing the interests of these 

impacted groups for outreach. 

Paperwork Reduction Act 

This rule does not contain new or 

amended information collection 

requirements subject to the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.). It does not involve collection of 

new or additional information by the 

Federal Government. According to PSD 

records, there were approximately 312 

bonded packers; 1,326 market agencies 

selling on commission; 4,582 livestock 

dealers and commission buyers; and 95 

live poultry dealers regulated under the 

Act in 2018. The 2017 Census of 

Agriculture indicated that there were 

575 swine contractors in 2017. The 2017 

Census of Agriculture also indicated 

that there were 826,733 livestock 

producers and poultry growers. None of 

these entities are required to submit 

forms or other information to AMS or to 

keep additional records in consequence 

of this rule. 

E-Government Act 

USDA is committed to complying 

with the E-Government Act by 

promoting the use of the internet and 

other information technologies to 

provide increased opportunities for 

citizen access to Government 

information and services, and for other 

purposes. 

Executive Order 13175 

This rule has been reviewed in 

accordance with the requirements of 

Executive Order 13175—Consultation 

and Coordination with Indian Tribal 

Governments. Executive Order 13175 

requires Federal agencies to consult 

with Tribes on a government-togovernment basis on policies that have 

Tribal implications, including 

regulations, legislative comments or 

proposed legislation, and other policy 

statements or actions that have 

substantial direct effects on one or more 

Indian Tribes, on the relationship 

between the Federal Government and 

Indian Tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian Tribes. 

The USDA’s Office of Tribal Relations 

(OTR) has assessed the impact of this 

rule on Indian Tribes and determined 

that this rule may have Tribal 

implications that require continued 

outreach efforts to determine if Tribal 

consultation under Executive Order 

13175 is required, but OTR does not 

believe that consultation is required at 

this time. 

If a Tribe requests consultation, AMS 

will work with the OTR to ensure 

meaningful consultation is provided 

where changes, additions, and 

modifications identified herein are not 

expressly mandated by Congress. 

Congressional Review Act 

Pursuant to the Congressional Review 

Act (5 U.S.C. 801 et seq.), the Office of 

Information and Regulatory Affairs 

designated this rule as not a major rule 

as defined by 5 U.S.C. 804(2). 

Executive Order 12988 

This rule has been reviewed under 

Executive Order 12988—Civil Justice 

Reform. This rule is not intended to 

have retroactive effect. This rule does 

not preempt state or local laws, 

regulations, or policies, unless they 

present an irreconcilable conflict with 

this rule. There are no administrative 

procedures that must be exhausted prior 

to any judicial challenge to the 

provisions of this rule. Nothing in this 

rule is intended to interfere with a 

person’s right to enforce liability against 

any person subject to the Act under 

authority granted in section 308 of the 

Act. 

List of Subjects in 9 CFR Part 201 

Confidential business information, 

Reporting and recordkeeping 


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79802 Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Rules and Regulations 

1All references to EPCA in this document refer 

to the statute as amended through the America’s 

Water Infrastructure Act of 2018, Public Law 115– 

270 (October 23, 2018). 

2For editorial reasons, Part B was redesignated as 

Part A upon codification in the U.S. Code. 

3For editorial reasons, Part C was redesignated as 

Part A–1 upon codification in the U.S. Code. 

requirements, Stockyards, Surety bonds, 

Trade practices. 

For the reasons set forth in the 

preamble, USDA amends 9 CFR part 201 

as follows: 

PART 201—REGULATIONS UNDER 

THE PACKERS AND STOCKYARDS 

ACT 

■ 1. The authority citation for part 201 

continues to read as follows: 

Authority: 7 U.S.C. 181—229c. 

■ 2. Section 201.211 is added to read as 

follows: 

§ 201.211 Undue or unreasonable 

preferences or advantages. 

The Secretary will consider the 

following criteria, and may consider 

additional criteria, when determining 

whether a packer, swine contractor, or 

live poultry dealer has made or given 

any undue or unreasonable preference 

or advantage to any particular person or 

locality in any respect in violation of 

section 202(b) of the Act. The criteria 

include whether the preference or 

advantage under consideration: 

(a) Cannot be justified on the basis of 

a cost savings related to dealing with 

different producers, sellers, or growers; 

(b) Cannot be justified on the basis of 

meeting a competitor’s prices; 

(c) Cannot be justified on the basis of 

meeting other terms offered by a 

competitor; and 

(d) Cannot be justified as a reasonable 

business decision. 

Bruce Summers, 

Administrator, Agricultural Marketing 

Service. 

[FR Doc. 2020–27117 Filed 12–10–20; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF ENERGY 

10 CFR Parts 430 and 431 

[EERE–2019–BT–NOA–0011] 

RIN 1904–AE24 

Test Procedure Interim Waiver Process 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, U.S. Department of 

Energy. 

ACTION: Final rule. 

SUMMARY: In this final rule, the U.S. 

Department of Energy (‘‘DOE’’) has 

adopted a streamlined approach to its 

test procedure waiver decision-making 

process that requires the Department to 

notify, in writing, an applicant for an 

interim waiver of the disposition of the 

request within 45 business days of 

receipt of the application. An interim 

waiver will remain in effect until a final 

waiver decision is published in the 

Federal Register or until DOE publishes 

a new or amended test procedure that 

addresses the issues presented in the 

application, whichever is earlier. DOE’s 

regulations continue to specify that DOE 

will take either of these actions within 

1 year of issuance of an interim waiver. 

This final rule addresses delays in 

DOE’s current process for considering 

requests for interim waivers and waivers 

from the DOE test method, which in 

turn can result in significant delays for 

manufacturers in bringing new and 

innovative products to market. This 

final rule requires the Department to 

process interim waiver requests within 

the 45 business day window and 

clarifies the process by which interested 

stakeholders provide input into the 

development of an appropriate test 

procedure waiver. 

DATES: The effective date of this rule is 

January 11, 2021. 

ADDRESSES: The docket, which includes 

Federal Register notices, public meeting 

attendee lists and transcripts, 

comments, and other supporting 

documents/materials, is available for 

review at http://www.regulations.gov. 

All documents in the docket are listed 

in the http://www.regulations.gov index. 

However, some documents listed in the 

index, such as those containing 

information that is exempt from public 

disclosure, may not be publicly 

available. 

A link to the docket web page can be 

found at: http://www.regulations.gov/ 

docket?D=EERE-2019-BT-NOA-0011. 

The http://www.regulations.gov web 

page contains instructions on how to 

access all documents, including public 

comments, in the docket. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Francine Pinto, U.S. Department of 

Energy, Office of the General Counsel, 

GC–33, 1000 Independence Avenue SW, 

Washington, DC 20585–0121. 

Telephone: (202) 287–7432. Email: 

Francine.Pinto@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: 

I. Legal Authority and Background 

A. Legal Authority 

B. Background 

II. Discussion of Amendments 

III. Response to Comments Received 

IV. Procedural Requirements 

A. Review Under Executive Order 12866 

and 13563 

B. Review Under Executive Orders 13771 

and 13777 

i. National Cost Savings and Forgone 

Benefits 

C. Review Under the Regulatory Flexibility 

Act 

D. Review Under the Paperwork Reduction 

Act 

E. Review Under the National 

Environmental Policy Act 

F. Review Under Executive Order 12988 

G. Review Under Executive Order 13132 

H. Review Under Executive Order 13175 

I. Review Under the Unfunded Mandates 

Reform Act of 1995 

J. Review Under Executive Order 13211 

K. Review Under the Treasury and General 

Government Appropriations Act, 1999 

L. Review Under the Treasury and General 

Government Appropriations Act, 2001 

M. Congressional Notification 

V. Approval of the Office of the Secretary 

I. Legal Authority and Background 

A. Legal Authority 

The Energy Policy and Conservation 

Act (‘‘EPCA’’ or ‘‘the Act’’),1 Public Law 

94–163 (42 U.S.C. 6291–6317) 

authorizes the United States Department 

of Energy (DOE or, in context, the 

Department) to regulate the energy 

efficiency of a number of consumer 

products and industrial equipment 

types. Title III, Part B2 of EPCA 

established the Energy Conservation 

Program for Consumer Products Other 

Than Automobiles. Title III, Part C3 of 

EPCA established the Energy 

Conservation Program for Certain 

Industrial Equipment. Under EPCA, 

DOE’s energy conservation program 

consists essentially of four parts: (1) 

Testing, (2) labeling, (3) Federal energy 

conservation standards, and (4) 

certification and enforcement 

procedures. 

The Federal testing requirements 

consist of test procedures that 

manufacturers of covered products and 

equipment must use as the basis for: (1) 

Certifying to DOE that their products or 

equipment complies with the applicable 

energy conservation standards adopted 

pursuant to EPCA (42 U.S.C. 6295(s); 42 

U.S.C. 6316(a)), and (2) making 

representations about the efficiency of 

those products or equipment (42 U.S.C. 

6293(c); 42 U.S.C. 6314(d)). Similarly, 

DOE must use these test procedures to 

determine whether the product or 

equipment complies with relevant 

standards promulgated under EPCA. (42 

U.S.C. 6295(s); 42 U.S.C. 6316 (a)) 

Under 42 U.S.C. 6293 and 42 U.S.C. 

6314, EPCA sets forth the criteria and 

procedures DOE is required to follow 

when prescribing or amending test 

procedures for covered products and 

equipment. Specifically, test procedures 

must be reasonably designed to produce 


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