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S. HRG. 109–337

REVIEW THE REAUTHORIZATION OF THE UNITED

STATES GRAIN STANDARDS ACT

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

May 25, 2005

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry

(

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

SAXBY CHAMBLISS, Georgia, Chairman 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

JAMES M. TALENT, Missouri 

CRAIG THOMAS, Wyoming 

RICK SANTORUM, Pennsylvania 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

CHARLES E. GRASSLEY, Iowa 

TOM HARKIN, Iowa 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

MARK DAYTON, Minnesota 

KEN SALAZAR, Colorado

MARTHA SCOTT POINDEXTER, Majority Staff Director 

DAVID L. JOHNSON, Majority Chief Counsel 

STEVEN MEEKS, Majority Legislative Director 

ROBERT E. STURM, Chief Clerk 

MARK HALVERSON, Minority Staff Director 

(II) 

(III)

C O N T E N T S 

Page

HEARING(S):

Review the Reauthorization of the United States Grain Standards Act ............ 05

Wednesday May 25, 2005

STATEMENTS PRESENTED BY SENATORS 

Chambliss, Hon. Saxby, a U.S. Senator from Georgia, Chairman, Committee 

on Agriculture, Nutrition, and Forestry ............................................................. 05

WITNESSES 

Dahl, Tom, President, American Association of Grain Inspection and Weighing Agencies, Sioux City, Iowa ............................................................................ 10

Gibson, Jerry D., Regional Manager, Bunge North America, Inc., Destrehan, 

Louisiana; On Behalf of the National Grain and Feed Association and 

North American Export Grain Association ........................................................ 08

Niemeyer, Garry, Corn Board, National Corn Growers Association, Glenarm, 

Illinois ................................................................................................................... 12

Shipman, David R., Acting ADministrator, Grain Inspection, Packers and 

Stockyards Administration, U.S. Department of Agriculture, Washington, 

DC .......................................................................................................................... 06

APPENDIX 

PREPARED STATEMENTS: 

Dahl, Tom .......................................................................................................... 20

Gibson, Jerry D ................................................................................................. 22

Niemeyer, Garry ............................................................................................... 38

Shipman, David R ............................................................................................ 42

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

Harkin, Hon. Tom ............................................................................................ 50

Cochran, Hon. Thad ......................................................................................... 52

Stabenow, Hon. Debbie .................................................................................... 54

McCaw, Kathryn ............................................................................................... 56

National Grain Sorghum Producers ................................................................ 60

QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD: 

Harkin, Hon. Tom ............................................................................................ 66

Stabenow, Hon Deborah Ann .......................................................................... 71

(1)

REVIEW THE REAUTHORIZATION OF THE 

UNITED STATES GRAIN STANDARDS ACT 

WEDNESDAY, MAY 25, 2005

UNITED STATES SENATE, 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY, 

Washington, DC 

The committee met, pursuant to notice, at 10:00 a.m., in Room 

SR–328–A, Russell Senate Office Building, Hon. Saxby Chambliss 

(Chairman of the committee) presiding. 

Present or submitting a statement: Senator Chambliss. 

STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. SENATOR 

FROM GEORGIA, CHAIRMAN, COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

The CHAIRMAN. Good morning. I welcome you all this morning to 

review the U.S. Grain Standards Act. I appreciate our witnesses 

and members of the public being here as well as those who are listening through our website. I know we have some great folks from 

the Georgia, Department of Agriculture and from GIPSA’s Brunswick, Georgia office who are listening in today, and I particularly 

give a welcome to you. 

While reauthorization of the Grain Standards Act may not be the 

hottest topic of discussion in Washington, it is extremely important 

to all of agriculture that we review and reauthorize this act. As we 

will soon hear in greater detail from the Administration’s witness, 

in fiscal year 2004, GIPSA provided inspections on nearly 61 percent of America’s $50 billion total grain production and facilitated 

the marketing of $14 billion of U.S. grain exports. Authorities provided under the U.S. Grain Standards Act and those who carry out 

the law certainly contribute to the excellent reputation the U.S. 

grain inspection system holds worldwide. 

We are here this morning to hear from interested parties about 

issues the Committee should consider during the reauthorization 

process. As Chairman, I plan to introduce a reauthorization bill 

soon after the Memorial Day recess, and I plan to move the bill 

this summer. This hearing will help us gain a full understanding 

of issues to consider as we move forward in this process. 

If Senator Harkin has a statement he wants to enter in the 

record, obviously we will be happy to allow him to do so, as well 

as any other member of the Committee. 

We would now like to welcome our panel. Gentlemen, thank you 

all for being here this morning. Mr. David Shipman, acting administrator of USDA’s Grain Inspection, Packers & Stockyards AdminVerDate 0ct 09 2002 14:42 Apr 05, 2006 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\22720.TXT TOSHD PsN: LAVERN
2

istration in Washington, D.C. Thank you for being here this morning and thank you for your assistance to staff prior to this hearing. 

Mr. Jerry Gibson, regional manager for Bunge North America, in 

Destrehan, Louisiana. Mr. Gibson will testify today on behalf of the 

National Grain and Feed Association and the North American Export Grain Association. 

Mr. Tom Dahl, president of the American Association of Grain 

Inspection and Weighing Agencies from Sioux City, Iowa. 

Mr. Garry Niemeyer, a member of the National Corn Growers 

Association’s Corn Board from Glenarm, Illinois. Mr. Niemeyer is 

testifying on behalf of a number of commodity groups this morning. 

Gentleman, again, we welcome you here and we look forward to 

your testimony. Mr. Shipman, we will start with you and gentlemen, we will come right down the row with Mr. Gibson being next. 

Mr. Shipman, thanks very much. 

STATEMENT OF DAVID R. SHIPMAN, ACTING ADMINISTRATOR, 

GRAIN INSPECTION, PACKERS AND STOCKYARDS ADMINISTRATION, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, DC 

Mr. SHIPMAN. Thank you and good morning to you and the members of the Subcommittee. 

I appreciate the opportunity to be here today to discuss the reauthorization of the United States Grain Standard Act. I would like 

to make a few opening remarks this morning and respectfully request that my full statement be included in the record. 

The CHAIRMAN. Certainly, without objection. 

Mr. SHIPMAN. Nearly 29 years ago, Congress created the Federal 

Grain Inspection Service to maintain the quality of American grain 

exports and the integrity of the U.S. inspection system. In 1975, a 

Congressional report stated ‘‘it is essential that our customers have 

faith in the integrity of our inspection and weighing system and 

that they get the grade, the quality and the quantity of grain for 

which they contract and pay.’’

For the past 29 years, the employees of the Federal Grain Inspection Service, which is now the Grain Inspection, Packers & 

Stockyards Administration, have dedicated themselves to building 

a National inspection system based on quality service and integrity. During this period of time, the structure and practices of the 

grain industry have dramatically changed as exporters developed 

relationships with overseas buyers to deliver the quality and quantity of grain that best meets their needs. 

In brief, the market environment of the 1970s no longer exists 

and our trading partners have confidence in the quality and quantity of grain shipped by exporters and represented by USDA official 

inspection and weighing certificates. 

Perhaps one of the best indicators of the change that has occurred in the industry is in the number of complaints that we have 

received from foreign buyers. In 1985, we received 74 complaints 

that accounted for about 2.2 percent of the grain that was exported. 

Ten years later, in 1995, that had been reduced to 30 complaints, 

representing about 1 percent of the exports. And just last year, we 

received only four complaints, representing about 0.1 percent of the 

total volume of grain exported from the United States. 

3

As an impartial entity, GIPSA maintains over 1,400 different 

quality assessment terms and methods to test post-harvested crops 

for physical condition, impurities, contaminants and intrinsic qualities. We work closely with all segments of the grain and oilseed industry to ensure that the terms and the methods that are used to 

measure quality meet the changing needs of the marketplace. 

In addition to establishing these standards to measure quality effectively in the marketplace, we manage a network of Federal, 

State and private laboratories that provide impartial user-fee funded services to American agriculture. Last year, this network of laboratories conducted more than 2.6 million inspections. I cannot 

overemphasize the commitment and hard work of the 523 Federal 

employees and the over 2,000 individuals that work for 12 States 

and 46 private agencies authorized by GIPSA to provide inspection 

service. Collectively, they provide high quality service to American 

agriculture 24 hours a day, seven days a week, 365 days a year. 

The success of the U.S. grain inspection and weighing system did 

not just happen over the last 29 years. It required the collaborative 

effort of the Federal, State and private inspection personnel and 

the full participation and cooperation of the grain industry, an industry that has evolved from traders carying out string trades to 

agribusinesses with a greater focus on customer satisfaction. It required the introduction of new technology to sample, to weigh, and 

to measure the quality of grain. Again, this was accomplished 

through the cooperative efforts of the inspection agencies as well as 

the industry. 

It also required continuous improvements in our quality control 

and assurance systems to ensure that all measurements and inspectors were allowing to national references. And finally, it required reaching out to our many trading partners around the world 

to ensure they understood and had confidence in our system. 

If we look at just FGIS, the cost for Federal services in 1996 was 

25 cents per metric ton. In 2004, just last year, that price was 32.6 

cents a metric ton, an increase over that period of time of 7.6 cents 

or 30 percent, which equates to about a 3.5 percent annual increase. 

On September 30, 2005, authority to collect user fees, maintain 

our stakeholder advisory committee, and several other provisions 

will expire in the U.S. Grain Standards Act and require reauthorization. Without this authorization, we would be unable to collect 

the necessary fees to operate our program and therefore would 

have to shut down and disrupt the grain markets, especially at the 

export market. We believe it is in the best interest of American agriculture that Congress extend and reauthorize the provisions of 

the Act for a 10-year period from 2005 to 2015. 

With all of that said, our key customers and stakeholders support some change, not in the mission that we carry out or the role 

we play in the marketplace, but in how we deliver some of our 

services. Recognizing the changes that have occurred to both the 

inspection system and the customer relationships among industry 

participants over the last 29 years, an evaluation of how service is 

delivered is timely. State and private agencies have provided and 

continue to provide high quality inspection and weighing services 

in the domestic market. The introduction of private entities with 

4

Federal oversight into the export market is feasible, provided it is 

accomplished in a manner that does not compromise the fundamental integrity of the existing system. 

The recommendations put forth by the industry do establish a 

framework within which discussions can start on whether changes 

in the delivery of services can be done and can be done without 

compromising the integrity of the official system. 

The U.S. grain inspection system has gained worldwide recognition for its accuracy and reliability. Maintaining and strengthening 

this recognition in the future, regardless of how or by whom the 

services are delivered, is essential to the economic health of American agriculture from producers to exporters. 

I appreciate the opportunity to be here and I would be happy to 

answer any questions. 

[The prepared statement of Mr. Shipman can be found in the appendix on page 42.] 

The CHAIRMAN. Thank you, Mr. Shipman. 

Mr. GIBSON.

STATEMENT OF JERRY D. GIBSON, REGIONAL MANAGER, 

BUNGE NORTH AMERICA, INC., DESTREHAN, LOUISIANA; ON 

BEHALF OF THE NATIONAL GRAIN AND FEED ASSOCIATION 

AND NORTH AMERICAN EXPORT GRAIN ASSOCIATION 

Mr. GIBSON. Thank you, Mr. Chairman, members of the Subcommittee. Good morning. My name is Jerry Gibson. I am the regional manager for Bunge North America in Destrehan, Louisiana. 

I manage our export facility at Destrehan, which is a terminal involved in exporting grain and oil seeds around the world. 

My testimony today is presented on behalf of the National Grain 

and Feed Association and the North American Export Grain Association. NGFA and NAEGA strongly support reauthorization of the 

U.S. Grain Standards Act to preserve the official inspection system. 

The official system is a valuable enhancement to the efficient 

U.S. grain marketing system and our ability to serve global markets. USDA and GIPSA are to be commended for their efforts. We 

believe a five-year reauthorization is prudent to preserve effective 

oversight of the agency by Congress. 

As part off our support of reauthorization for the U.S. Grain 

Standards Act, the NGFA and NAEGA urge Congress to support 

two elements that we believe are essential to maintaining an effective, official export grain inspection system. 

First, we urge that Congress oppose any amendment to the U.S. 

Grain Standards Act that would authorize GIPSA to impose additional user fees to cover its grain standardization activities. 

Second, we urge Congress to amend the U.S. Grain Standards 

Act to give GIPSA the authority to delegate independent, thirdparty inspection agencies to perform the hands-on official inspection and weighing of grain and oilseeds and export facilities under 

100 percent GIPSA oversight, using GIPSA approved standards 

and procedures. 

With respect to the second point, we would make the following 

recommendations. First, GIPSA’s process for determining and approving independent third-party agencies to perform official inspections at export should be open and transparent. 

5

Second, we would recommend exporters should be free to contract with any GIPSA-approved third-party delegated agencies to 

perform official services at a port. 

The third recommendation would be for GIPSA to utilize fully 

the right to perform 100 percent on-site oversight authority at each 

export location and would collect a fee for performing this oversight 

function that is retained under the Act. 

Fourth, GIPSA would continue to issue final official inspection 

and weighing certificates. 

The fifth recommendation, GIPSA would maintain its comprehensive national quality assurance and control program, including its appeal inspection service. 

We believe now is the opportune time for change. The nature of 

the grain export industry and the global grain marketplace have 

changed dramatically in the last decade. The amendment also 

would give GIPSA the necessary flexibility to respond to competitive pressures in the global marketplace. 

Brazilian and Argentinean exporters have a decided cost advantage for quality inspections compared to the United States and exporters in both countries utilize non-government surveyors for export quality inspections. 

Confronting this global competition, U.S. exporters have responded aggressively by reducing operating costs and enhancing efficiencies whenever possible. The one operating expense that remains beyond our control and has come to represent the single 

largest uncontrollable operating expenditure we face is the cost incurred for official grain inspection and weighing services performed 

by GIPSA. The direct cost of GIPSA-provided official services have 

been rising at a rate well above the underlying rate of inflation. 

This problem is not new but the quickening pace of foreign competition and the number of other factors has provided a new sense 

of urgency to address this issue immediately. 

We believe that immediate savings from making this change 

would represent about 23 percent or $6.1 million annually. But because the future official inspection costs would be growing at a 

slower rate, the savings over time would expand compare to what 

would be expected to occur in the absence of such change, simply 

because the savings would be compounded from year to year. 

Thus, after a decade we estimate that the annual savings would 

grow to around $17.5 billion with cumulative savings of approximately $112 million over a 10-year period. 

In addition to reflecting industry change and cost competition, 

the time is right because fully 70 percent of GIPSA’s inspection 

workforce will be eligible for retirement within the next five years. 

Making a change now would minimize the impact on Federal employees. 

The NGFA and NAEGA believe that this approach holds great 

promise. The competitive position of U.S. grain and oilseeds exports 

can be maintained and enhanced. The integrity of U.S. inspection 

results will be retained. U.S. official inspection and weighing services will be more viable in the long term. 

We are not alone in this belief. Last week six major farm and 

commodity organizations joined the NGFA and NAEGA, signing a 

6

letter urging Congress to adopt this approach. I would like to submit this letter for the hearing record. 

The CHAIRMAN. Without objection. 

[The letter signed by six major farm and commodity organizations was not sent] 

Mr. GIBSON. In closing, Congress has an opportunity to give this 

important agency the authority and flexibility it needs to improve 

the affordability and long-term viability of official grain inspection 

and weighing at export facilities. The industry pledges to work 

with Congress and the Agency to achieve this important objective. 

Thank you for the opportunity to testify and I will be pleased to 

respond to any questions. 

[The prepared statement of Mr. Gibson can be found in the appendix on page 22.] 

The CHAIRMAN. Thank you, Mr. Gibson. 

Mr. Dahl, I am going to have to tell you that in preparation for 

this hearing, going over the list with my staff, I discovered something unusual. One of my very, very dearest and closest friends in 

Congress is a Congressman from Iowa named Tom Latham. I am 

pleased to serve with my colleague Tom Harkin from Iowa. Two 

weeks ago we had a hearing on the confirmation of Tom Dorr from 

Iowa. Today we have Tom Dahl from Iowa. And I am wondering 

if everybody in Iowa is named Tom? 

Mr. DAHL. Only the good people. 

The CHAIRMAN. I got you. We are pleased to have you here. 

STATEMENT OF TOM DAHL, PRESIDENT, AMERICAN ASSOCIATION OF GRAIN INSPECTION AND WEIGHING AGENCIES, 

SIOUX CITY, IOWA 

Mr. DAHL. Thank you, Chairman. And thank you for being able 

to testify today. 

The American Association of Grain Inspection and Weighing 

Agencies, AAGIWA, is the National professional association representing the public and private agencies that are designated and 

delegated by USDA’s Grain Inspection, Packers & Stockyards Administration to weigh, inspect and grade the Nation’s domestic 

grain. Its member agencies are located throughout the major grainproducing regions of the U.S. and represent the majority of all domestic inspections performed under the U.S. Grain Standards Act. 

AAGIWA member agents bring a professional and third-party aspect to the grading and weighing of America’s grain. During the 

Association’s 45-plus years of service to the industry, it has assisted its members in performing these services through a national 

forum that promotes and assists professionalism, technology and 

performance while providing a constant dialogue with Government 

and industry. AAGIWA wishes to comment on the pending reauthorization of GIPSA beyond its current September 30, 2005 statutory expiration date. In doing so, the Association wishes to support 

Congress in the reauthorization of the Agency and wishes to provide the following observations to the Congress. 

GIPSA’s role: there is an important role for a Federal regulatory 

and supervisory agency in the operation of an official grain inspection system. GIPSA serves to provide an objective third-party regulatory role which assures credibility and integrity for both domestic 

7

and foreign grain handlers and buyers of U.S. grain. Its strict Federal standards help maintain the accuracy and consistency that the 

grain industry has come to inspect from the Nation’s official grain 

inspection system. 

GIPSA’s past and present record: AAGIWA commends GIPSA for 

its current record of flexibility and availability to the suggestions 

and recommendations of its constituency. It has kept an open-mind 

to change and made changes when costs and benefits were analyzed and found productive. This association views GIPSA as an essential partner in the official inspection agency’s efforts to promote 

and facilitate the movement and trading of the Nation’s grain. The 

assurance of integrity that GIPSA lends to the official grain inspection system is vital to the systems’ continued existence. 

As a mandate for change, AAGIWA believes the GIPSA role in 

the grain industry must keep pace with the fast-changing needs of 

its customers, that it must anticipate and react quickly to new 

trends and technology, and that it must become more efficient and 

effective as the primary monitor of the U.S. Grain Standards Act. 

Toward that end, AAGIWA calls on Congress to consider the following improvements to the official grant inspection system as it 

reauthorizes GIPSA. 

Extend the designation period for official agencies. Official agencies currently must be redesignated every three years, requiring an 

extensive on-site Federal evaluation and investigative manpower 

and resources. This designation period should be extended to five 

years or more with GIPSA maintaining its traditional role of closely monitoring and evaluating official agencies’ performance. 

Support changes that would provide GIPSA the authority to delegate third-party inspection providers to perform official inspection 

and weighing services at ports under GIPSA supervision in those 

ports where GIPSA currently performs those functions. These 

third-party providers would be officially designated and would follow the same criteria as presently designated agencies. The proposed amendment should not affect those ports where inspection 

and weighing services are currently performed by delegated state 

agencies. To enhance the port inspections feasibility, official origin 

domestic interior inspections should be utilized. 

Support GIPSA in the evaluation of quality inspection tests for 

ethanol byproducts. The criteria should be established for the enduse of this product. These byproducts enter our food systems 

through feed given to livestock. Tests that monitor the level of 

microtoxins should be established. 

We oppose the Administration’s proposal to amend the U.S. 

Grain Standards Act to authorize the collection of new user fees to 

cover the costs of GIPSA standardization activities. 

In conclusion, AAGIWA commends GIPSA for making changes 

for the betterment of the official grain inspection system, for its integrity and for its beneficial partnership with 55 State and private 

agencies that perform official duties at the local level. 

As Congress moves to reauthorize this Federal agency, it is important that new technologies and efficiencies be brought to bear 

as soon as possible and that the above-stated fine-tuning be implemented in order to assure the future strength and viability of this 

valuable national industry system. 

8

I am open to question afterwards. Thank you. 

[The prepared statement of Mr. Dahl can be found in the appendix on page 20.] 

The CHAIRMAN. Thank you very much. 

Mr. NIEMEYER.

STATEMENT OF GARRY NIEMEYER, CORN BOARD, NATIONAL 

CORN GROWERS ASSOCIATION, GLENARM, ILLINOIS 

Mr. NIEMEYER. Mr. Chairman, members of the Committee on Agriculture, thank you for the opportunity to testify today on the U.S. 

Grain Standards Act of 2005. 

I am Garry Niemeyer, a corn and soybean farmer from Glenarm, 

Illinois. I currently serve on the Corn Board as the Association Relations Committee chairman for the National Corn Growers Association. 

I am pleased to submit testimony on behalf of the American 

Farm Bureau Federation, American Soybean Association, the National Association of Wheat Growers and the National Grain Sorghum Producers and the NCGA. 

Agriculture today remains the backbone of our Nation’s economy. 

American farmers and ranchers produce the most abundant, affordable and safe supply of food in the world. We produce over 1.7 trillion pounds of food and fiber. Even though the numbers of farmers 

and of total farmland are decreasing, agricultural products are increasing. Improved technology and efficiencies have allowed us to 

maximize our production per acre. 

Agriculture employs more than 24 million American workers to 

produce, process, sell and trade the Nation’s food and fiber. This 

equals 17 percent of the total U.S. workforce. While we consume 

much of what we produce, about 17 percent of all U.S. agricultural 

products are exported yearly, including 99 million tons of grain and 

feed. 

Corn exports in 2004 were over 47 million tons alone. And approximately half of the U.S. wheat crop is exported annually. The 

United States sells more food and fiber to world markets than we 

import, creating a positive agricultural trade balance. 

Agriculture is one of the few U.S. industries that enjoys a positive trade balance. When we move our commodities into more markets, both commodity prices and farm incomes tend to rise. During 

the 2002–2003 fiscal year, $56 billion worth of American agricultural products were exported around the globe. This leads directly 

into the topic of discussion for today’s hearing, the Grain Standards 

Act of 2005. 

The farm and commodity groups I represent strongly support the 

reauthorization of the U.S. Grain Standards Act. Grain inspection 

and weighing services by the Federal Grain Inspection Service are 

mandatory under the Grain Standards Act. Reauthorization of the 

Grain Standards Act is imperative to our export markets. We have 

built these markets based on product availability and quality. 

Since the passage of the Grain Standards Act in 1916, the U.S. 

has been the pioneer in providing quality assurance to overseas 

buyers. In fact, other countries have duplicated our services in 

standard guidelines for their exports. Overseas buyers continue to 

seek products from the U.S. because they know the official system, 

9

with its precise testing procedures, equipment criteria, and conduct 

standards ensure accurate and consistent results. The integrity of 

this system, which U.S. sellers and overseas buyers rely on should 

never be compromised. 

However, the cost of obtaining official services at ports where 

GIPSA provides inspection and weighing services has become a factor that is contributing to the gradual erosion of the competitive 

position of U.S. grain and oilseed exports in world markets. U.S. 

exporters report that the cost of official grain inspection is one of 

the largest expense items they face. And these costs have been increasing at a rate well above the underlying rate of inflation. 

GIPSA inspection costs in recent years have been increasing at 

more than 7 percent annually, compared to other costs in the 1 to 

3 percent range. 

Moreover, exporters have limited ability to pass on increased cost 

because of the highly competitive nature of the world’s bulk trade 

in grains and oilseeds. Dynamic and growing exporters such as 

Australia, Canada, Brazil, and Argentina are increasingly challenging the U.S. in a number of important overseas markets. While 

these countries are working hard to narrow the cost advantage the 

U.S. currently enjoys because of its transportation and handling 

systems, Brazil and Argentina already have a cost advantage over 

U.S. shippers in one key area, the cost of obtaining export inspection services. 

During an August 2004 fact-finding mission, GIPSA found that 

Brazilian and Argentinean exporters enjoyed approximately 20 to 

25 cents per ton advantage over U.S. exporters in the cost of obtaining export inspections for quality. Brazilian and Argentinean 

exporters rely on private third-party surveyors to perform official 

export inspections for quality. The U.S. must better manage the 

cost of export inspections, take advantage of modern technologies 

to enhance efficiencies and to be flexible enough to respond to a 

changing industry structure and an increasingly competitive world 

market. 

We support amending the U.S. Grain Standards Act to authorize 

GIPSA to delegate qualified third-party companies to provide official inspection and weighing services at ports where GIPSA currently provides such services. This change offers an opportunity to 

provide a degree of control over costs for inspections while retaining 100 percent GIPSA oversight of the system. 

GIPSA’s deputy administrator recently noted that technology exists to allow effective oversight of a delegated third-party inspection system that will ensure the continued integrity of the official 

inspection and weight certificate. If GIPSA is provided the option 

to use this new authority now, the changes can be implemented in 

stages with minimal impact on GIPSA employees. 

Additionally, we oppose authorizing GIPSA to collect approximately $4 million in fees that would cover the cost of the Agency 

standardization activities. User fees for standardization activities 

are an ill-conceived approach that will only serve to make effective 

cost management in the Agency more challenging than it already 

is. 

In addition, creating new fees for standardization work is inappropriate because such activities clearly benefit the entire marVerDate 0ct 09 2002 14:42 Apr 05, 2006 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 C:\DOCS\22720.TXT TOSHD PsN: LAVERN
10

keting chain. Collection of the fee would also be problematic. Fees 

charged as part of the mandatory official export would further reduce the value of the competitiveness of U.S. exports in grains and 

oilseeds and would lower producer prices. 

For these reasons, we urge Congress to fully reject any attempt 

to grant GIPSA the authority to collect user fees for standardization activities. 

Finally, we support the continuation of the Grain Inspection Advisory Committee. It is important that this committee remain representative of the industry while including farmers, exporters, 

grain elevators and seed dealers. 

Again, thank you for the opportunity to testify today. I will restate our support for the reauthorization of the Grain Standards 

Act and I am willing to answer any questions you may have. 

[The prepared statement of Mr. Niemeyer can be found in the appendix on page 38.] 

The CHAIRMAN. Thank you very much, Mr. Niemeyer. Thanks to 

all you gentlemen. 

Mr. Shipman, I need you to educate me a little bit. Those are 

pretty remarkable numbers you gave regarding the decrease in 

complaints. Give me an example of a complaint that might be filed 

and tell me the process that complaint would go through? 

Mr. SHIPMAN. Typically what the importer overseas would contact the Foreign Agriculture Service representative that is in the 

country. There is a formal process they can use to file a complaint. 

It eventually ends up with us. We have an Office of International 

Affairs that addresses that complaint. We maintain file samples. 

We maintain records as to exactly what happened during the loading. We go through a process of reviewing exactly what took place. 

We send samples off to our Board of Appeals and Review, which 

is a unit of our ‘‘chief inspectors’’ in Kansas City. They would review it for quality concerns. And a final report would be prepared 

and submitted to all of the interested parties that were involved in 

the transaction. It would go back to the importer, as well as the 

shipper and the exporter. 

The CHAIRMAN. Is a typical example a grading issue or a weight 

issue? 

Mr. SHIPMAN. Primarily it would be quality. We have had a few 

cases where there have been weight issues. To give you one example, several years ago, because there are new automated scales in 

the process, we were able to go back and basically recreate the entire loading of the vessel through an audit process. We determined 

that there was a leaky gate and there truly was a shortage in that 

shipment. And we were able to give both parties that information 

and they were able to, through the commercial markets, settle the 

differences. 

The CHAIRMAN. As I understand from the National Grain and 

Feed Association and the North American Export Grain Association, the proposal as drafted provides USDA the authority to utilize 

third-party inspectors at export port locations, all of which have 

been described here. 

If this proposal is adopted, Mr. Shipman, do you expect to exercise the authority provided in the proposal? 

11

Mr. SHIPMAN. We would certainly look at it and, as our attrition 

occurs over the next five years, we would have to look very seriously at how we would be able to implement it. If it was a requirement that we make that transition, we would be able to make that 

transition. Our plan or our strategy would be to start with a smaller port and experiment and see how well it works and phase it in 

over a period of years. 

The CHAIRMAN. Mr. Niemeyer gave a number there, 35 cents a 

ton? 

Mr. NIEMEYER. It was 20 to 25 cents a ton. 

The CHAIRMAN. That is pretty significant, I would assume. In the 

overall market, from a competition standpoint, if can achieve that 

kind of savings, that appears to have some merit. Does USDA have 

a position on that, as to whether or not that is correct or not correct, relative to what savings can be achieved? 

Mr. SHIPMAN. Let me offer a few comments on that. When we 

visited South America last year to see how their operations run, 

yes, they charge between 10 and 15 cents a metric ton for their inspection and weighing operation. Here in the States, in 2003, our 

cost was around 34 cents a metric ton. In 2004 it dropped to about 

32 cents a metric ton, about 32.5, because our volume was much 

higher. 

We do not believe that you are going to see that difference of 20 

to 25 cents immediately or you would not see it at all until possibly 

long-term. What they do in South America and the involvement of 

the private sector is not what we could endorse or what the recommendation of the industry is right now. The costs that would be 

incurred here would be higher than the 10 to 15 cents. 

We think that direct Federal oversight in the ports,including 

headquarters costs, would be around 11 cents. When we look at 

what the private sector provides today, both in the domestic markit 

where they are officially recognized, and other places in the marketplace, we think the private sector would be providing service for 

an average cost of around 19 cents per ton. 

So you are looking at probably initially a 30 per ton, if you introduced that private element into the export market. 

It remains to be seen whether, over time, you would see greater 

savings if the private sector could contain costs better than we 

have been able to in the Federal system. 

The CHAIRMAN. Staff has just handed me a sheet that shows a 

comparison of inspection fees, United States, Brazil and Argentina, 

which is based on fiscal year 2004. Total inspection fee in the 

United States: $0.348 per ton; Brazil: 10 cents to 15 cents per ton; 

Argentina: 33 cents per ton. 

So I guess we are in the ball park relative to Argentina. But that 

is a pretty significant difference with Brazil. So I hope that if it is 

the decision of the Committee to move in the direction of adapting 

the proposal and it becomes law, that you all will study this issue 

because we tell our farmers to be more efficient so we can achieve 

a more competitive atmosphere in the world market. Issues like 

this simply make us less competitive. We do not need the Federal 

government being a handicap to us. So I hope that we will monitor 

that very closely if it is the decision of the Committee to move in 

that direction. 

12

Relative to the third-party inspector proposal out there, one of 

the issues that we have heard is the fact that we must maintain 

the integrity of the system. You pointed out correctly that our reputation in the world market is pretty good from an inspection 

standpoint. It is very good, as a matter of fact. 

I hope, as we consider this issue, that we are able to ensure 100 

percent USDA oversight of third-party inspectors to make sure that 

we do maintain that integrity in the market. 

Do you have any concerns relative to that on this issue? 

Mr. SHIPMAN. As a model I look at our domestic market, where 

both State and private companies are operating today. Some of 

those private companies such as Mr. Dahls, who is here today, inspect grain that is exported to Mexico. And the integrity of those 

certificates is recognized by the buyers in that country as equivalent to the inspection certificates that are issued by the Federal 

work force. 

So in terms of being able to provide adequate oversight and ensure integrity, I think there are challenges. But I think that with 

today’s technology, it is feasible. 

The CHAIRMAN. The American Association of Grain Inspection 

and Weighing Agencies has proposed extending the length of designations of official agencies from the current three year terms to 

five year terms. Does the Department have a position or any 

thoughts on this proposal? 

Mr. SHIPMAN. The Department does not have an official position, 

but I have some thoughts. Right now the three-year designation 

works fairly well for us. The recommendation is based on driving 

costs down. I am not convinced at this time that going from a three 

to a five year designation would have a substantial decrease in cost 

because the real cost for overseeing is the continuing ongoing process, and every three years we go through a Federal Register process to solicit additional comments. The real issue is incurred in the 

auditing and ensuring oversight of the agencies operations. That is 

an ongoing process. 

The CHAIRMAN. Lastly, I understand that there is interest in revising current standards for grain sorghum. Can you explain to the 

Committee what USDA is doing in this regard? And can you also 

give us your timeframe for publishing a proposal in the Federal 

register? 

Mr. SHIPMAN. We went out with an advance notice of proposed 

rule making and received a number of comments. The comments 

were fairly disparate regarding what we should be doing. In some 

cases, comment called for changing some of the, grade linits and 

definitions for grain sorghum. Others wanted more equality between grain sorghum and corn. 

We have collected all of that information. We are in the process 

of preparing a proposal that would be published in the Federal 

Register this summer. Once the proposal is published, we will receive comments review them, and prepare a final rule. 

I do not envision that any changes to the standards would be finalized until at least a year to a year-and-a-half. 

The CHAIRMAN. Mr. Gibson, in your testimony you mentioned 

FGIS’ maturing workforce. Can you foresee a scenario in which 

FGIS inspectors retire and then are hired as third-party inspectors, 

13

enabling them to receive both their pensions and their new salaries? 

Mr. GIBSON. Yes, certainly I think that would be a resource or 

a workforce that would be readily trained and available to move 

into the private sector in some port areas. 

The CHAIRMAN. In your written testimony you discuss the use of 

third-party agencies for export grain inspection. You mentioned 

that under this proposal, the fees charged for inspection should be 

negotiated between the exporter and the third-party agency. Are 

you suggesting that fees vary for each third-party agency? 

Mr. GIBSON. No, not necessarily. I think each export facility, 

though, has different design characteristics. We all do essentially 

the same thing. But because of different design characteristics and 

different levels of automation, their manpower staffing to meet the 

FGIS oversight requirements might conceivably differ. So it would 

be up to each elevator to discuss that and negotiate that with the 

third-party, which would be an approved party or agency, approved 

by FGIS. 

The CHAIRMAN. What requirements do you envision that a thirdparty inspector will have to meet in order to receive a license to 

inspect grain for export? 

Mr. GIBSON. He would go through the similar training and evaluation of his quality of inspection, similar to every licensed grain 

inspector in the United States now. 

The CHAIRMAN. What do you expect will happen if a foreign 

buyer questions the validity of the grade or inspection certificate 

issued as a result of the work by a third-party inspector? 

Mr. GIBSON. I think that is certainly critical to the industry to 

maintain that integrity of the FGIS or the GIPSA certificate. So we 

would still see that as being a GIPSA authorized or an issued certificate, just some of the mechanical input into how that information is arrived at on that certificate could be done by third-party 

people. But it is still an FGIS or a USDA certificate. So USDA 

would still be involved in the auditing and the validation of that 

certificate, and any of the complaint reviews, similar to how they 

do it currently. 

The CHAIRMAN. Mr. Dahl, your organization has proposed extending the length of designations of official agencies from the current three year terms to five year terms. Could you explain the 

need for this extension and the process to become redesignated? 

Mr. DAHL. We feel, just on a business plan situation where we 

can, as private businesses, a five-year business plan that we can 

put together would be better than a three-year business plan. 

We do think there would be some cost savings involved in that. 

Currently, with the designation process, my agency, for instance, is 

due for designation a year from June. Our paperwork will go out 

and be due probably by October. Then there is a comment period 

of 30 days, and then another 30 days and it is reviewed. It is just 

a matter of we do the same thing every three years, the same format, all of the same questions and everything are answered. It is 

kind of redundant in its practice, and we feel that five years would 

be a better extension of that than the three. 

14

The CHAIRMAN. Do you envision some of the entities you represent being able to expand their services to export inspection 

under the NGFA and the NAEGA proposal? 

Mr. DAHL. I do not understand exactly what you are, what they 

would... 

The CHAIRMAN. If given the opportunity, do you believe your 

agencies would be interested in expanding their services to ports 

under the proposal? 

Mr. DAHL. I believe they probably would, yes. It would already 

be an officially designated agencies. I would think that they would 

already have the training and the staff in place to be able to do 

that, if given the opportunity. 

The CHAIRMAN. Mr. Niemeyer, regarding the NGFA and the 

NAEGA proposal, are you confident that USDA will issue adequate 

rules and regulations to protect the integrity of the U.S. grain inspection system? 

Mr. NIEMEYER. I feel pretty confident about that. They have done 

a great job so far and obviously integrity is the key word, as well 

as competitiveness. 

The CHAIRMAN. Gentleman, again, thank you very much for 

being here. Thank you for your input. We look forward to 

dialoguing with you as we move through the process of drafting 

this legislation and sending it to the floor of the Senate this summer. 

Thank you very much, and this hearing is concluded. 

[Whereupon, at 10:45 a.m., the committee was adjourned.] 

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A P P E N D I X

MAY 25, 2005

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DOCUMENTS SUBMITTED FOR THE RECORD

MAY 25, 2005

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QUESTIONS AND ANSWERS

MAY 25, 2005

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