TITLE 4. AGRICULTURE

PART 1. TEXAS DEPARTMENT OF AGRICULTURE

CHAPTER 23. TEXAS COMMODITY LAW

The Texas Department of Agriculture (the Department) proposes new Chapter 23, Texas Commodity Law, Subchapter A, General Provisions, Division 1, General Rules, §23.1; Division 2, Certification of Commodity Organizations, §§23.21 - 23.26; Division 3, Budget Approval and Commodity Assessments, §§23.40 - 23.44; Subchapter B, Texas Beef Promotion and Research Council, §§23.100 - 23.107; Subchapter C, Texas Grain Producer Indemnity Board, Division 1, General Provisions, §23.200 and §23.201; Division 2, Elections and Referendum, §23.220 and §23.221; Division 3, Board Members and Meetings, §§23.230 - 23.234; Division 4, Producer Assessments, §§23.240 - 23.248; Division 5, Claims, §§23.260 - 23.266; Division 6, Appeals and Remedies, §23.280 and §23.281. The proposed new Chapter 23 relocates all rules related to commodity boards, which the Department regulates pursuant to authority granted under Chapter 41 of the Agriculture Code.

At the time of this submission, Title 4, Part 1, Chapter 17, Subchapter A relating to Texas Commodity Referendum Law (Chapter 17), and Title 4, Part 6, Chapter 90, Texas Grain Producer Indemnity Fund Program (Chapter 90), are proposed for repeal and will be published in the September 8, 2017, issue of the Texas Register.

Chapter 23, Subchapter A, General Provisions, is proposed without substantive changes to the current form in Chapter 17, Subchapter A, Division 1, relating to General Rules. The new sections are proposed to reorganize existing rules and present them to the public and the regulated industry in a more easily understandable format.

Chapter 23, Subchapter B, relating to the Texas Beef Promotion Research Council (Council), is proposed with changes to §§23.105 - 23.107. The new sections are added and amended from the original form in Chapter 17 to clarify when an assessment is considered timely and prescribe penalties for the late payment of assessments to the Council. The proposed changes have been recommended by the Council. The Council is the organization certified to plan, implement, and operate research, education, promotion, and marketing programs and is authorized to administer the state beef checkoff program, under Chapter 41 of the Agriculture Code. No other substantive changes are proposed to Subchapter B.

Proposed Chapter 23, Subchapter C, Texas Grain Producer Indemnity Board (TGPIB), is made without substantive changes. Subchapter C incorporates Chapter 90, Subchapters A-E, relating to program rules governing membership and meetings of the TGPIB, as well as the operation of the Grain Producer Indemnity Fund, including producer assessments, claims and appeals. Chapter 17, Subchapter A, Division 3 is also incorporated and relates to provisions related to referenda conducted by the Board. The rules have been moved from Chapters 17 and 90 to proposed Subchapter C to present them in one location for the ease of access by the public and industry stakeholders.

Patrick Dudley, Coordinator for Agriculture Commodity Boards and Producer Relations, has determined that for the first five-year period the proposed new sections are in effect, there will be no fiscal impact for state government. There is no fiscal impact for local governments.

Mr. Dudley has also determined that for each year of the first five years the proposed new sections are in effect, there will be minimal impact on the public. The benefit to the public will be ease of locating all rules relating to Texas commodity boards. Only those beef collection points where assessments are collected from beef producers shall be affected by proposed late fees for failure to timely submit assessments monthly. There will be a cost benefit to Texas beef producers as the rules will help to ensure that collection points submit all assessments collected. By collecting assessments in full and in a timely manner, the Council will be able to promote the Texas beef industry by utilizing funds for the purpose of research, education, promotion, and marketing.

Comments on the proposal may be submitted to Patrick Dudley, Coordinator for Agriculture Commodity Boards and Producer Relations, Texas Department of Agriculture, P.O. Box 12847, Austin, Texas 78711, or by email to Patrick.Dudley@texasagriculture.gov. Comments must be received no later than 30 days from the date of publication on the proposal in the Texas Register.

SUBCHAPTER A. GENERAL PROVISIONS

DIVISION 1. GENERAL RULES

4 TAC §23.1

The proposal is made pursuant to Chapter 41 of the Agriculture Code, which provides the Department with the authority to adopt rules to administer its duties under the Code.

The code affected by the proposal is Chapter 41 of the Texas Agriculture Code.

§23.1.Definitions.

The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Chapter 41--Chapter 41 of the Texas Agriculture Code relating to Commodity Producers Boards certified by the Texas Department of Agriculture.

(2) Board--A commodity producer board certified by the Department and subject to Chapter 41, Texas Agriculture Code and this Chapter.

(3) Commissioner--The Commissioner of the Texas Department of Agriculture or designee.

(4) County agent--An agent of the Texas A&M AgriLife Extension Service.

(5) Department--The Texas Department of Agriculture.

(6) Legislation--Action with respect to Acts, bills, resolutions, or similar items by the Congress, any state legislature, any local council, or similar governing body, or by the public in a constitutional amendment or other similar procedure, including Acts providing appropriations to state or federal entities.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 31, 2017.

TRD-201703443

Jessica Escobar

Assistant General Counsel

Texas Department of Agriculture

Earliest possible date of adoption: October 15, 2017

For further information, please call: (512) 463-4075


DIVISION 2. CERTIFICATION OF COMMODITY ORGANIZATIONS

4 TAC §§23.21 - 23.26

The proposal is made pursuant to Chapter 41 of the Agriculture Code, which provides the Department with the authority to adopt rules to administer its duties under the Code.

The code affected by the proposal is Chapter 41 of the Texas Agriculture Code.

§23.21.Hearing Required for Certification.

(a) To be certified as a Board, a nonprofit organization of agriculture producers must petition the Commissioner for certification as the organization authorized to conduct an assessment referendum and an election of a commodity producers board. A hearing must be held by the Department within 30 days.

(b) Within 21 days of the hearing, the Commissioner may certify the organization by issuing an official certificate, ask for additional information, or deny certification in writing. If certification is denied, the organization must wait 120 days before petitioning the Commissioner again.

(c) Upon certification, a certified organization may conduct a referendum of the producers of an agricultural commodity on the proposition of whether or not the producers shall levy an assessment on themselves to finance programs of research, disease and insect control, predator control, education, and promotion designed to encourage the production, marketing, and use of the commodity. At the same time, the certified organization may conduct an election of members to a commodity producers board for the commodity.

§23.22.Election Plan Required.

(a) Prior to an election or referendum, an election plan must be submitted to the Department for approval. The election plan must include:

(1) the notice to be printed in newspaper and industry publications, as prescribed or approved by the Commissioner;

(2) a list of newspapers and industry publications where notices will be published, giving preference to the areas of the greatest production of the specific commodity;

(3) an election timeline, including publication of newspaper and industry notices, notices to county agents, referendum date and canvassing date;

(4) draft ballot;

(5) draft press release announcing referendum;

(6) draft board member petition; and

(7) information on whether balloting will be conducted by mail or in person.

(b) The Commissioner must be notified of biennial board elections and/or referenda to increase assessments at least 90 days prior to the election date. All election and referendum notices must be made in the same manner described in the initial referendum. In the case of a referendum adding new territory, notices will be handled in the same manner as the original referendum.

§23.23.Notice of Referendum and/or Election.

(a) The certified organization or board, once established, shall give public notice of a referendum and/or board election. Notice shall be published at least once in one or more newspapers published and distributed within the boundaries in which the board operates.

(b) All notices shall be published at least 60 days before the date of the referendum and/or election and, except as provided in subsection (c) of this section, and shall include:

(1) the date, hours, and polling places for voting, if held by physical balloting, or, if held by mail balloting, the manner in which ballots will be distributed and deadline for submission of ballots;

(2) the estimated amount and basis of the assessment proposed to be collected;

(3) whether a producer exemption is to be allowed, or will be collected on a refund-only basis; and

(4) a description of the manner in which the assessment is to be collected and the proceeds administered and used.

(c) The items listed in subsection (b)(2) - (4) of this section are not required to be included in a notice for biennial board elections.

(d) In addition to the publication requirement in this section, at least 60 days prior to the date of the election, the certified organization or board, once established, shall give written notice to each county agent in any county within the boundaries in which the election or referendum shall be held.

§23.24.Geographic Representation of Board Members.

If geographic representation for board members is desired in the original referendum, it must be stated in the original certified petition to the Department and hearing. An existing board may adopt a geographic or district representation plan which must be approved by the Commissioner at the time the election plan is submitted for approval.

§23.25.Conduct of Elections.

(a) In the case of a mail election, no ballots will be valid if postmarked after midnight on the last day of the election. In physical ballot elections, no absentee ballot will be valid if postmarked after midnight three days before the election.

(b) In physical balloting, balloting locations must be open at hours prescribed by the Commissioner and an election official must be present at all times unless otherwise prescribed by the Commissioner. Ballot boxes must be locked and unopened until the canvassing committee supervises such opening.

(c) A ballot must bear a signature and the address of the producer to be valid.

(d) Instructions for election officials and voters will be available in each election from the certified commodity organization and approved by the Commissioner.

(e) Ballots will be counted by a canvassing committee consisting of a county judge (or representative) from the area, a representative of the Texas AgriLife Extension Service, a representative of the certified commodity organization or board, and a representative of the Department.

(f) In all elections, results must be certified and submitted to the Commissioner for verification.

(g) All ballots shall be locked in a container and stored with the county clerk's office in the county designated by the certified organization. If no contests or investigations arise out of the election within 45 days after the day of such election, the clerk shall destroy by shredding or burning and notify the organization and the Commissioner by mail.

(h) Whereas the closed stored container cannot be opened during a 45 day period without a court order, any contest of the election or investigation must be filed in district court in the area of the referendum and election within 30 days after the day ballots are counted.

(i) In any case, if a recount is allowed by the district judge, the judge shall have the power to impound said locked ballot boxes and appoint a new canvassing committee consisting of four new members from the same background of the original canvassing committee and a fifth member being a representative from the Attorney General's Office of the State of Texas.

§23.26.Certification of the Board.

After the Commissioner certifies the elected board, the board shall have all board powers authorized by Chapter 41, relating to Commodity Producers Boards, and described in this Chapter.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 31, 2017.

TRD-201703444

Jessica Escobar

Assistant General Counsel

Texas Department of Agriculture

Earliest possible date of adoption: October 15, 2017

For further information, please call: (512) 463-4075


DIVISION 3. BUDGET APPROVAL AND COMMODITY ASSESSMENTS

4 TAC §§23.40 - 23.44

The proposal is made pursuant to Chapter 41 of the Agriculture Code, which provides the Department with the authority to adopt rules to administer its duties under the Code.

The code affected by the proposal is Chapter 41 of the Texas Agriculture Code.

§23.40.Budget Approval Required.

No money can be expended without prior budget approval by the Commissioner.

§23.41.Assessment of Funds.

(a) Assessments will be officially enacted the day the board notified appropriate collection points of the commodity by registered or certified mail of the date the assessment will be collected on all production of that commodity within the assessment area, and remitted as prescribed by the Board.

(b) No assessment money can be expended by the board, other than refund payments, until 60 days after the assessment has been in force.

§23.42.Restrictions on Use of Producer Assessments.

(a) General statement. Except as otherwise provided in this section, funds assessed or collected by a board organized under Chapter 41, may not be expended to directly or indirectly promote or oppose the election of any candidate for public office or to influence legislation.

(b) Actions to influence legislation. Except as otherwise provided in this section, the term "influence legislation" includes, but is not limited to:

(1) any attempt to affect the opinions of the general public or any segment thereof regarding pending or anticipated legislation;

(2) communication with any member or employee of a legislative body, or with any government official or employee who may participate in the formulation of pending or anticipated legislation;

(3) contacting or urging the public or commodity producers covered by a board to contact members of a legislative body for the purpose of proposing, supporting, or opposing legislation;

(4) actively advocating the adoption or rejection of legislation by filing formal comments in support of or in opposition to pending or anticipated legislation; or

(5) any communication with members made for the purpose of encouraging members or producers to do any of the actions identified in paragraphs (1) - (4) of this subsection.

(c) Actions not influencing legislation. The term "influence legislation" does not include the following:

(1) the development and recommendation to the legislature of amendments to Chapter 41;

(2) communication to appropriate government officials of information relating to the conduct, implementation, or results of promotion, research, consumer information, or industry information activities under Chapter 41;

(3) any action designed to market a commodity or commodity products directly to a foreign government or political subdivision thereof;

(4) making the results of nonpartisan analysis, study, or research available to the public or producers;

(5) providing technical advice or assistance (where such advice would otherwise constitute the influencing of legislation) to a governmental body or to a committee or other subdivision thereof, including appearances before any such body, committee or subdivision, in response to a request by such body, committee or subdivision, as the case may be;

(6) appearances before, or communications to, any legislative body with respect to a possible decision of such body which might affect the existence of the organization, its powers and duties or tax-exempt status;

(7) communications between the board and commodity producers represented by the board with respect to legislation or proposed legislation of direct interest to the organization and such producers, other than communications described in subsection (b) of this section;

(8) any communication with a government official or employee, other than a communication with a member or employee of a legislative body where such communication would otherwise constitute the influencing of legislation; and

(9) publication of newsletter articles regarding pending legislative issues of interest to members or producers which contain neutral, factual reports.

(d) Promoting or opposing election of candidates for public office. Activities that constitute promoting or opposing election of candidates for public office include, but are not limited to, the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate.

(e) Prohibition against indirect funding of actions to influence legislation or promoting or opposing the election of candidates for public office.

(1) Entities and individuals receiving funding from a board organized under Chapter 41 shall not use any such funds to influence legislation, as defined in this section, or for supporting or opposing election of a candidate for public office.

(2) Producer assessments may not be used to fund research which shall be utilized solely to influence legislation, as that term is defined in this section.

§23.43.Discontinuance of Assessment.

If a referendum is held for the discontinuance of an assessment and the Commissioner verifies the results in favor of discontinuance, then the assessment collection shall become void immediately. All collection points shall be notified by registered or certified mail by the board within 10 days to discontinue collection of the assessment. The board must submit to the Commissioner within 90 days a plan of disbandment. All remaining money after obligations have been paid shall be expended for projects of research, disease and insect control, predator control, education, and promotion, designated to encourage the production marketing and use of the commodity upon which the assessment was levied. Books will be audited by a state auditor and will be filed with the Commissioner.

§23.44.Penalty and Remedies.

If a person licensed by the Department commits a violation of Chapter 41, in addition to other remedies provided by law, the Department may suspend, revoke, or deny a license. Suspension or revocation of a license shall be conducted in accordance with rules prescribed by the Department and the Administrative Procedure Act, Chapter 2001, Texas Government Code.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 31, 2017.

TRD-201703445

Jessica Escobar

Assistant General Counsel

Texas Department of Agriculture

Earliest possible date of adoption: October 15, 2017

For further information, please call: (512) 463-4075


SUBCHAPTER B. TEXAS BEEF PROMOTION AND RESEARCH COUNCIL

4 TAC §§23.100 - 23.107

The proposal is made pursuant to Chapter 41 of the Agriculture Code, which provides the Department with the authority to adopt rules to administer its duties under the Code.

The code affected by the proposal is Chapter 41 of the Texas Agriculture Code.

§23.100.Scope and Conflict of Law.

Texas Agriculture Code, Chapter 41, Subchapter H and this subchapter govern the Texas Beef Promotion and Research Council and the Texas Beef Check-off referendum program. To the extent that there is a conflict with other sections of Chapter 23 of this title, this subchapter shall control. §23.101.Definitions.

The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Cattle--Live domesticated bovine animals regardless of age.

(2) Collection Point--The person or entity prescribed by the Council that is responsible for collecting and remitting an assessment pursuant to Texas Agriculture Code, Chapter 41.

(3) Council--The Beef Promotion and Research Council of Texas, as established under Texas Agriculture Code, Chapter 41, Subchapter H.

(4) Extension--Texas A&M Agrilife Extension Service.

(5) Headquarters--The principal office of the Texas Department of Agriculture located in Austin, Texas.

(6) Physical Balloting--A designated location determined by the Commissioner where an eligible producer may vote in person.

(7) Producer--Any person who owns or acquires ownership of cattle; provided, however, that a person shall not be considered a producer within the meaning of this subchapter if:

(A) the person's only share in the proceeds of a sale of cattle or beef is a sales commission, handling fee, or other service fee; or

(B) the person:

(i) acquired ownership of cattle to facilitate the transfer of ownership of such cattle from the seller to a third party;

(ii) resold such cattle no later than ten days from the date on which the person acquired ownership; and

(iii) certified, as required by procedures prescribed by the Council, that the requirements of this provision have been satisfied.

§23.102.Voter Eligibility.

A cattle producer, as defined in §23.101 of this subchapter (relating to Definitions) who has owned cattle in the last 12 months before the date of the referendum is eligible to vote in a referendum conducted under these rules.

§23.103.Conduct of Referendum.

(a) Upon request of the Council, the Commissioner shall conduct and prescribe the manner to conduct a referendum as authorized under Chapter 41 of the Texas Agriculture Code.

(b) The Commissioner shall propose in a referendum the:

(1) maximum assessment to be paid by cattle producers; and

(2) the manner in which the assessment will be collected.

(c) With the Commissioner's approval, the Council may set the assessment at a level less than the maximum assessment approved by the referendum.

(d) Notice of the referendum shall be published at least once in one or more newspapers published and distributed within the boundaries in which the Council operates. The notice shall be published at least 60 days before the date of the referendum. In addition, at least 60 days before the date of the referendum, the Department will give direct written notice to each county cooperative extension office in the state.

(e) Notice provided in accordance with subsection (d) of this section shall include:

(1) the date of the referendum;

(2) the manner in which the referendum is to be conducted and the assessment collected;

(3) the purpose of the referendum;

(4) if an assessment referendum is being conducted, the maximum assessment to be paid by cattle producers;

(5) if held by physical balloting, the date, hours, and polling places for voting in the referendum and election, and the manner in which ballots will be distributed and deadline for submission of ballots;

(6) whether a producer exemption is to be allowed, or whether the assessment shall be collected on a refund-only basis; and

(7) who to contact for more information.

(f) An eligible producer may vote only once in a referendum and each vote is of equal weight.

(g) A referendum is approved if a simple majority of votes cast are cast in favor of the referendum.

(h) All voter information, including a producer's vote in a referendum conducted under this section, is confidential and not subject to disclosure under Chapter 552, Government Code.

(i) Ballots must bear the signature and the address of the producer to be valid. A producer's signature on the ballot certifies that the voter owned cattle in the last 12 months before the date of the referendum.

(j) Ballots for the referendum will be counted in a manner determined by the Commissioner.

(k) A canvassing committee appointed by the Commissioner shall count the ballots and verify the referendum results to the Commissioner for certification. Referendum results will be certified by the Commissioner.

(l) After the ballots are counted and the results verified by the Commissioner, the ballots shall be locked in a container and stored at the Headquarters for a period of 30 days. The closed stored container containing referendum ballots cannot be opened for the 30-day period without a court order or written request for recount. If no contests or investigations arise out of the referendum within 30 days after certification of such referendum, the Commissioner shall destroy the ballots by shredding.

(m) The Department will be reimbursed by the Council for all costs associated with conducting a referendum under this subchapter.

(n) The referendum will be conducted in person and ballots will be available for eligible producers to vote at all county Extension offices. Eligible producers may vote during normal office hours of the county Extension offices during the voting period.

(1) An eligible producer who is unable to access a county Extension office to vote may request a mail ballot by contacting Headquarters. No eligible producer requesting a mail ballot shall be refused a ballot.

(2) Ballots will be mailed to Headquarters, by the county Extension offices via paid postage and by a deadline to be determined by the Department;

(3) Ballots submitted to the Department by mail shall be maintained at Headquarters.

(o) A watcher may be present at Headquarters for the purpose of observing the processing of election results and until members of the canvassing committee complete their duties. Written notice of intent to be present during processing must be submitted to the Department at least 3 days prior to the count.

(p) Request for Recount. A request for recount submitted under this division must:

(1) be in writing;

(2) state the grounds for the recount;

(3) be submitted to the Commissioner within 10 calendar days of canvass results; and

(4) be signed by the person requesting the recount or, if there is more than one person, any 1 or more of them and state each requesting person's name and residence address. If the request is made on behalf of an organization or association, the person submitting the request must state that they are authorized to request a recount on behalf of the organization or association.

(q) Conduct of Recount. A recount will be conducted by the Department, under the supervision of a representative of the Office of the Secretary of State.

§23.104.Requirements of the Council.

(a) The Council shall have an annual independent audit of the books, records of account and minutes of proceedings maintained by the Council prepared by an independent certified public accountant or firm of independent certified public accountants. The audit shall be filed with the Council, the Commissioner and shall be made available to the public by the Council or the Commissioner. The state auditor or the Department may examine any work papers from the independent audit or may audit the transactions of the Council if the state auditor or the Department's internal auditor determines that an additional audit is necessary.

(b) Not later than the 30th day after the last day of the fiscal year the Council shall submit to the Commissioner a report itemizing all income and expenditures and describing all activities of the Council during the preceding fiscal year. The annual report shall include, at a minimum:

(1) a balance sheet of assets and liabilities;

(2) an itemization of income/expenditures;

(3) a statement of Council activities carried out in the year covered by the report; and

(4) copies of any resolutions adopted by the Council regarding the program.

(c) The Department may allow for late filings of the report required by subsection (b) of this section for good cause.

(d) The Council shall provide fidelity bonds in amounts determined by the Council for employees or agents who handle funds for the Council.

(e) Prior to any expenditure of funds, the Council shall submit its annual budget to the Commissioner for approval. The Department shall act on the Council's budget submission within 45 days of the Department's receipt of the submission.

§23.105.Collection of Assessments.

(a) The assessment shall be collected at collection points determined by the Council. Except as provided by subsection (b) of this section, the collection point shall collect the assessment by deducting the appropriate amount from the purchase price of the cattle or from any funds advanced for that purpose.

(b) If the producer and collecting person are the same legal entity, or if the producer retains ownership after processing, the collecting person shall collect the assessment directly from the producer at the time of processing/sale.

(c) The secretary-treasurer of the Council, by registered or certified mail, shall notify each known collection point of the duty to collect the assessment, the manner in which the assessment is to be collected, and the date on or after which the collection point is to begin collecting the assessment.

(d) The amount of the assessment collected shall be clearly shown on the sales invoice or other document evidencing the transaction. The collecting person shall furnish a copy of the document to the producer.

(e) Unless otherwise provided by the original referendum, no later than the 15th day of each month, the collection point shall remit the amount collected during the previous month to the secretary-treasurer of the Council, along with a completed form prescribed by the board reflecting such amount.

(f) The timeliness of a payment to the Council shall be based on the applicable postmark date or the date actually received by the Council, whichever is earlier.

§23.106.Refunds.

(a) A producer who has paid an assessment in accordance with §23.105 of this title, relating to Collection of Assessments, may obtain a refund of the amount paid by filing an application for refund with the secretary-treasurer within 60 days after the date of payment. The application must be in writing, on a form prescribed by the Council for that purpose, and accompanied by proof of payment of the assessment.

(b) Providing that the assessment has been remitted to the Council by the collection point, the secretary-treasurer shall pay the refund to the producer before the 11th day of the month following the month in which the application for refund and proof of payment are received.

§23.107.Penalties for Late Payment.

(a) Any unpaid assessments due to the Council pursuant to §23.105 of this title, relating to Collection of Assessments, shall be increased 2.0 percent each month beginning with the day following the date such assessments were due. Any remaining amount due, which shall include any unpaid charges previously made pursuant to this section, shall be increased at the same rate on the corresponding day of each month thereafter until paid. For the purposes of this section, any assessment that was determined at a date later than prescribed by this subpart because of a person's failure to submit a report to the Council when due shall be considered to have been payable by the date it would have been due if the report had been filed when due.

(b) Violations of this subchapter may be referred to the Department for assessment of administrative penalties, civil or criminal penalties, or the suspension or revocation of a Department issued license in accordance with Chapter 41 of the Agriculture Code.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 31, 2017.

TRD-201703446

Jessica Escobar

Assistant General Counsel

Texas Department of Agriculture

Earliest possible date of adoption: October 15, 2017

For further information, please call: (512) 463-4075


SUBCHAPTER C. TEXAS GRAIN PRODUCER INDEMNITY BOARD

DIVISION 1. GENERAL PROVISIONS

4 TAC §23.200, §23.201

The proposal is made pursuant to Chapter 41 of the Agriculture Code, which provides the Department with the authority to adopt rules to administer its duties under the Code.

The code affected by the proposal is Chapter 41 of the Texas Agriculture Code.

§23.200.Scope and Applicability.

Chapter 41 of the Texas Agriculture Code, Subchapter I, governs the Texas Grain Producer Indemnity Board. To the extent that there is a conflict with other sections of Chapter 23 of this title, this subchapter shall control.

§23.201.Definitions.

The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Balloting--Procedure in which ballots are available to eligible producers at designated locations and then returned to the Department with the producer's indication of vote and signature indicating voter eligibility as a bona fide producer.

(2) Board--The members of the Texas Grain Producer Indemnity Board as established by Texas Agriculture Code, Chapter 41.

(3) Claimant--A grain producer who satisfies the requirements of Texas Agriculture Code, §41.208 and files an indemnification claim with the Board.

(4) Code--The Texas Agriculture Code.

(5) Customary deductions--Typical monetary deductions made by a grain buyer from the sales price of grain, due to differences in weight, grade, quality, or other factors that influence price, as supported by general industry standards.

(6) Delivery point--The location at which grain is to be delivered under the terms of a contract, or if the grain is not sold pursuant to a contract, the location at which grain is to be transferred from the grain producer to the first grain buyer.

(7) Extension--Texas A&M Agrilife Extension Service.

(8) Final sales price--The price to be paid by the grain buyer at the first point of sale to the grain producer, based on the terms of the contract between the buyer and producer, or if no contract, based on customary market standards for reaching a price.

(9) First point of sale--The initial buyer of grain from a grain producer.

(10) FOB--"Free on board," referring to that designated location, or FOB point, where title to grain passes from the grain producer to the grain buyer.

(11) Fund--The Grain Producer Indemnity Fund. The fund is a trust fund outside the state treasury held and administered by the board. The fund is made up of assessments collected at the first point of grain sale and any interest or income derived from the investment of the fund.

(12) Grain--Means corn, soybeans, wheat, and grain sorghum, and includes that grain which is grown for seed.

(13) Grain buyer--A person who buys cultivated grain or seed from a grain producer, or stores unsold grain or seed for a grain producer. The term includes a purchaser, seed dealer, warehouseman, processor, or a commercial handler.

(14) Grain producer--A person, including the owner of a farm on which grain, or grain seed, is produced, or the owner's tenant or sharecropper, engaged in the business of producing grain or causing grain to be produced for commercial purposes.

(15) Grain sorghum--Any grain harvested from Sorghum bicolor (L.) Moench or any related species of the genus Sorghum of the family Poaceae, including, but not limited to, hybrid sorghum seeds, inbred sorghum line seed, sorghum cultivar seed, and all other sorghum seed that is grown for commercial production.

(16) Headquarters--The principal office of the Texas Department of Agriculture located in Austin, Texas.

(17) Indemnification claim--A claim filed with the Board by a producer under Chapter 41, Subchapter I of the Texas Agriculture Code, seeking payment from the Board because a grain producer has suffered a loss due to a financial failure of a grain buyer.

(18) Judgment--As it pertains to "claim initiation date" and "financial failure" definitions, means a judgment entered by a court in the state of Texas having jurisdiction, with such judgment ordering the buyer to pay the claimant producer for grain that was delivered by the producer but not paid for by the buyer.

(19) Legislation--Any action with respect to Acts, bills, resolutions, or similar items by the Congress, any state legislature, any local council, or similar governing body, or by the public in a constitutional amendment or other similar procedure, including Acts providing appropriations to state or federal entities.

(20) Refund allotment--A payment issued by the Board to all grain producers who submitted an assessment in a given year, upon the Board's determination that the financial condition of the indemnity fund supports such a return of assessment dollars to participating grain producers.

(21) Reinsurance--An insurance product purchased by the Board to reduce the financial risk and capital balance associated with the function of the Board.

(22) Service charge--A charge or fee that a grain producer may pay a grain buyer for activities related to the receipt, processing, holding, and shipment of grain.

(23) Warehouseman--A person who stores grain in a house, building, or other room, and is meant to include "public warehouse operators" and "warehouse operators," as those terms are defined in the Texas Agriculture Code.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 31, 2017.

TRD-201703447

Jessica Escobar

Assistant General Counsel

Texas Department of Agriculture

Earliest possible date of adoption: October 15, 2017

For further information, please call: (512) 463-4075


DIVISION 2. ELECTIONS AND REFERENDUM

4 TAC §23.220, §23.221

The proposal is made pursuant to Chapter 41 of the Agriculture Code, which provides the Department with the authority to adopt rules to administer its duties under the Code.

The code affected by the proposal is Chapter 41 of the Texas Agriculture Code.

§23.220.Voter Eligibility.

A grain producer, as defined in §23.201 of this subchapter (relating to Definitions), who has sold grain to a grain buyer in the 36 months before the date of the referendum is eligible to vote in a referendum conducted under this subchapter.

§23.221.Conduct of Referendum.

(a) The Commissioner shall conduct a referendum as authorized under Chapter 41 of the Code.

(b) Based upon decisions of the Board, the Commissioner shall propose in a referendum:

(1) The maximum assessment to be paid by grain producers; and

(2) The manner in which the assessment will be collected.

(c) Legal notice must be published 90 days prior to the referendum in one or more statewide or regional newspapers that provide reasonable notice throughout the state. In addition, at least 90 days before the date of the referendum, the Department will give direct written notice of the referendum to each Extension office in the state.

(d) Notices required pursuant to subsection (c) of this section shall include:

(1) the date, hours and polling places for voting in the referendum;

(2) the maximum estimated amount of the assessment proposed to be collected, and the basis of collection;

(3) the manner in which the referendum is to be conducted and the proceeds administered and used; and

(4) who to contact for more information.

(e) An eligible grain producer may vote only once in a referendum and each vote is of equal weight, regardless of the grain producer's volume of production.

(f) A referendum is approved if the Commissioner finds that:

(1) two-thirds or more of those voting in the election voted in favor of the referendum proposition; or

(2) those voting in favor of the proposition produced at least 50 percent of the volume of production of the commodity during the relevant production period.

(g) All voter information, including a producer's vote in a referendum conducted under this section, is confidential and not subject to disclosure under Chapter 552, Texas Government Code.

(h) Ballots must bear the signature and the address of the producer to be valid. A producer's signature on the ballot certifies that the voter sold grain to a grain buyer in the 36 months before the date of the referendum and that the production volume provided on the ballot is accurate.

(i) Ballots for the referendum will be counted in a manner determined by the Commissioner.

(j) A canvassing committee(s) appointed by the Commissioner shall verify the referendum results to the Commissioner for certification.

(k) The Department will be reimbursed by the Board for all costs associated with conducting a referendum under this subchapter.

(l) The referendum will be conducted in-person with ballots submitted by mail to the Department by the grain producer. Ballots will be available to eligible producers at all county Extension offices. Eligible producers may pick up ballots during normal office hours of the county Extension offices during the voting period.

(1) An eligible producer who is unable to access a county Extension office to pick up a ballot may request a mail ballot by contacting Headquarters. No eligible producer requesting a mail ballot who verifies eligibility to vote shall be refused a ballot.

(2) Ballots must be returned to the Department at the address indicated on the ballot, postage prepaid. Ballots not postmarked by midnight on the final day of the voting period will not be counted.

(3) Mail ballots submitted to the Department shall be maintained at Headquarters.

(m) A watcher may be present at Headquarters for the purpose of observing the processing of election results and until members of the canvassing committee complete their duties. Written notice of intent to be present during processing must be submitted to the Department at least three days prior to the count.

(n) After the ballots are counted and the results verified by the Commissioner, the ballots shall be locked in a container and stored at the Headquarters for a period of 30 days. The closed, stored container containing referendum ballots cannot be opened for the 30-day period without a court order or written request for recount. If no contests or investigations arise out of the referendum within 30 days after certification of such referendum, the Commissioner shall destroy the ballots by shredding.

(o) Request for Recount. A request for recount submitted under this subchapter must:

(1) be in writing;

(2) state the grounds for the recount;

(3) be submitted to the Commissioner within 10 calendar days of canvass results; and

(4) be signed by the person requesting the recount or, if there is more than one person, any one or more of them and state each requesting person's name and residence address. If the request is made on behalf of an organization or association, the person submitting the request must state that they are authorized to request a recount on behalf of the organization or association.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 31, 2017.

TRD-201703452

Jessica Escobar

Assistant General Counsel

Texas Department of Agriculture

Earliest possible date of adoption: October 15, 2017

For further information, please call: (512) 463-4075


DIVISION 3. BOARD MEMBERS AND MEETINGS

4 TAC §§23.230 - 23.234

The proposal is made pursuant to Chapter 41 of the Agriculture Code, which provides the Department with the authority to adopt rules to administer its duties under the Code.

The code affected by the proposal is Chapter 41 of the Texas Agriculture Code.

§23.230.Meetings.

(a) Location, conduct and time of meetings. The Board shall meet in a location within the state of Texas, with such location of each meeting to be determined by the Chairman of the Board. The Board may also conduct meetings via teleconference or other available electronic means, if the Chairman so designates. The Board shall meet at least quarterly, on specific dates to be determined by the Board. Meetings will be conducted in accordance with Chapter 41 of the Code and the Texas Open Meetings Act.

(b) Notice of meetings. A written notice of the agenda, date, time and place of each business meeting of the Board and/or hearing conducted by the Board, shall be posted on the Secretary of State's Open Meetings website in accordance with the Open Meetings Act. In cases of emergency or urgent public necessity, notice shall be given as authorized by the Open Meetings Act.

(c) Chairman to preside. The Chairman of the Board shall preside over all meetings of the Board and shall perform all duties delegated to him or her under this subchapter. In the chairman's absence, the vice-chairman shall preside over all meetings of the Board, and shall perform all duties of the chairman.

(d) Public comment. As part of its business meetings, the Board shall include a public comment period to allow members of the public to appear and provide comment on matters within the jurisdiction of the Board. The Board, in its sole discretion, may impose a time limit on the public comment period generally or on person(s) addressing the Board. This item will be included in the agenda posted with the Secretary of State's office for the business meeting.

§23.231.Election of Officers.

Annually, the Board shall select a Chairman, Vice-Chairman, Secretary, and Treasurer among the Board members. Each officer shall be selected by a majority of Board members present at the time of the elections. Each person elected to serve as an officer shall serve in that particular office for no more than 2 years consecutively.

§23.232.Management of Budget.

(a) At each quarterly meeting, and annually, the Board shall review all of the Board's financial matters, including, but not limited to: fund income, amounts paid on claims in the preceding applicable period, and administrative costs. Based on this financial information, the Board shall prepare a budget annually.

(b) The annual budget shall set the minimum fund balance necessary to cover all anticipated administrative and operating costs, as well as a reasonable estimate for indemnity claim payments. The Board shall submit the annual budget to the Commissioner for review and approval. Upon the Commissioner's approval, the Board is authorized to make expenditures for activities authorized by Chapter 41, Subchapter I of the Code.

(c) As part of the annual financial review and budget process, the Board shall determine whether funds are available in excess of the minimum fund balance to issue refunds to producers who paid in assessments to the fund.

§23.233.Selection of Board Agents.

The Board shall have the authority to select a third party to carry out the services and administrative duties necessary to operate the indemnity fund and program, and to enter into contracts or other arrangements with such third party to operate the program described in Chapter 41, Subchapter I of the Code.

§23.234.Reporting Requirements.

(a) The Board shall have an annual independent audit of the books, records of account and minutes of proceedings maintained by the Board prepared by an independent certified public accountant or firm of independent certified public accountants. The audit shall be filed with the Board, and the Commissioner, and shall be made available to the public by the Board or the Commissioner. The state auditor or the Department may examine any work papers from the independent audit or may audit the transactions of the Board if the state auditor or the Department's internal auditor determines that an additional audit is necessary.

(b) Not later than the 30th day after the last day of the fiscal year the Board shall submit to the Commissioner a report itemizing all income and expenditures and describing all activities of the Board during the preceding fiscal year. The annual report shall include, at a minimum:

(1) a balance sheet of assets and liabilities;

(2) an itemization of income/expenditures;

(3) a statement of Board activities carried out in the year covered by the report; and

(4) copies of any resolutions adopted by the Board regarding the program.

(c) The Board shall provide fidelity bonds in amounts determined by the Board for employees or agents who handle funds for the Board.

(d) Prior to any expenditure of funds, the Board shall submit its annual budget to the Commissioner for approval. The Department shall act on the Board's budget submission within 45 days of the Department's receipt of the submission.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 31, 2017.

TRD-201703453

Jessica Escobar

Assistant General Counsel

Texas Department of Agriculture

Earliest possible date of adoption: October 15, 2017

For further information, please call: (5120 463-4075


DIVISION 4. PRODUCER ASSESSMENTS

4 TAC §§23.240 - 23.248

The proposal is made pursuant to Chapter 41 of the Agriculture Code, which provides the Department with the authority to adopt rules to administer its duties under the Code.

The code affected by the proposal is Chapter 41 of the Texas Agriculture Code.

§23.240.Maximum Assessment Rate.

(a) The maximum assessment rate shall be the rate approved by grain producers as set forth in Subchapter I, Chapter 41 of the Code. The Board may not exceed this rate without obtaining approval of the state's grain producers, with such approval being subject to the requirements of the initial referendum approval set forth in Subchapter I, Chapter 41 of the Code.

(b) The Board will determine the applicable assessment rate to be used by grain buyers each year. The current assessment rate shall at no time exceed the maximum assessment rate approved by the state's grain producers in the initial referendum or in subsequent votes. The maximum assessment rate is 0.2% of the final sales price of the grain. The Board shall provide the current assessment rate on its public website for all grain buyers to be able to access, or through other reasonable means available to the Board.

§23.241.Assessment Calculation.

The amount of the producer assessment, as set by the Board, shall be calculated using the final sales price of the grain, including all premiums and discounts for moisture, quality, variety, or any other characteristic of the grain. The producer assessment shall be calculated before the deduction of Board assessments, storage, drying, cleaning, or any other service charge.

§23.242.Notice to Grain Buyers.

The secretary of the Board shall notify each known grain buyer in the state by certified mail, and shall make reasonable efforts to notify all other grain buyers in the state by registered or certified mail, by electronic transmission of information, by publication in grain industry trade magazines or newsletters, or by publication in newspapers of general circulation, of the duty to collect the assessment. The initial notification shall be sent to the grain buyers within 30 days of the certification of the referendum results. The notice shall describe the manner in which the assessment is to be collected, and shall list the date on or after which the grain buyer is to begin collecting the assessment. Following the initial notification, the secretary of the Board shall submit annual notices to each grain buyer so long as the Board determines an assessment shall be collected.

§23.243.Grain Buyer Collection.

(a) Beginning upon receipt of the notification described in §23.242 of this subchapter (relating to Notice to Grain Buyers) and continuing until such time as the Board gives notice otherwise, each grain buyer within the state, shall collect the assessment at the first point of sale. The grain buyer shall collect the assessment by deducting the applicable percentage from the final sales price of the grain or from any funds advanced for that purpose.

(b) As set forth in this section, a grain buyer may retain a portion of the assessment collected, to cover the grain buyer's administrative costs in collecting the assessment. The allowable administrative cost shall be set by the Board annually. The secretary of the Board will notify the grain buyers in the state of the administrative cost that may be retained. Acceptable methods of notification include U.S. mail, facsimile, electronic mail, or posting to the Board's public website. The buyer shall select its preferred method for receiving notifications, and notify the Board upon remittance of its first quarterly assessment.

(c) The assessment funds submitted by the grain buyer shall be accompanied by a remittance form, prescribed by the Board. The buyer shall clearly indicate on the remittance form the total amount of grain purchased that quarter, the total price paid for grain that quarter, the total assessment collected and remitted to the Board for that quarter, and the dollar amount kept by the grain buyer to cover the grain buyer's administrative costs pursuant to subsection (b) of this section. In the event a buyer does not purchase any grain in any particular quarter, the buyer shall submit a report to the Board in accordance with §23.244 of this subchapter (relating to Remittance of Assessment), and no administrative cost compensation may be claimed or kept by the grain buyer for that quarter.

§23.244.Remittance of Assessment.

(a) No later than the 10th day of each quarter of the calendar year, each grain buyer shall remit to the treasurer of the Board the producer assessments collected during the previous quarter, along with a remittance form provided by the Board and completed by the grain buyer. In the event a grain buyer does not purchase any grain in a particular quarter and therefore, collects no assessment dollars, the buyer shall submit to the Board a quarterly remittance form indicating no grain transactions occurred during that quarter. Failure to submit such a form could lead the Board to investigate the grain buyer for failure to comply with the assessment.

(b) A grain buyer shall report to the Board any change in the information submitted on the remittance form within 30 days of the quarterly remittance.

(c) Grain buyers in compliance with collecting and remitting the assessment will receive a form of acknowledgement from the Board recognizing the grain buyer's participation in the fund.

§23.245.Grain Producer Reporting.

(a) Annually, each grain producer who has submitted grain assessments to the Board through a grain buyer shall submit a producer information report to the Board on a form prescribed by the Board. The form must include the following:

(1) Name, address, annual assessment amount(s) remitted, and tax identification for each producer; and

(2) The names of all grain buyers that the producer delivered grain to in the preceding year.

(b) Producer information reports shall be submitted to the Board by March 31 each year for all grain sales that occurred and corresponding assessments that were submitted during the Board's prior fiscal year (February 1 to January 31).

(c) Each grain producer shall also submit copies of all invoices, settlement sheets, or other industry accepted documents issued by grain buyers during the preceding year, to verify the amount of assessment collected by each grain buyer for that producer. The producer information report form will be made available to grain buyers for inclusion with producers' settlement sheets or invoices, along with instructions to producers to immediately file the form with the Board, along with proof of assessment payment documents.

(d) The Board will maintain and utilize a permanent database for verifying claims made and administering refunds for the Fund. Failure to submit a producer information report, including supporting documentation may impede a grain producer's ability to successfully file an indemnity claim or receive a future refund.

§23.246.Refunds.

(a) Board determination. Annually, the Board will review its budget for the next year and its current financial status, and based on that review, will determine whether or not to issue refund allotments. If the Board determines that the Board's financial account is not sufficient to pay refund allotments and maintain a minimum fund balance, as defined in §23.232 of this subchapter (relating to Management of Budget), the Board may not issue refund allotments. In the event the Board does not issue refund allotments for more than one crop year in a row, at the time the Board does make the determination to issue a refund allotment, the grain producers who paid in assessments in the period since the last refund allotment will be eligible for the current allotment.

(b) Payment Refunds.

(1) If the Board has determined to issue refund allotments under subsection (a) of this section, each producer who paid in assessments during the period of time covered by the refund allotment designation will be eligible for the refund on a pro rata basis. The Board will notify producers of the pending refund by notifying grain buyers, posting a notice on the fund website, and advertising of the refund allotment via public notice in a manner as determined by the Board.

(2) In a year when the Board has determined to issue refund allotments, the Board will issue refunds beginning April 1. Using the data maintained in the Board's permanent database, the Board will identify the producers that submitted assessments during the period of time covered by the refund allotment. The Board will use the information submitted by grain producers, as described in §23.245 of this subchapter (relating to Grain Producer Reporting) in calculating and issuing refund allotments and sending the allotments to grain producers.

(c) Payment suspension. Following the Board's initial determination to issue refund allotments and subsequent distribution of same, the Board may, at any time, decide to suspend any further refund allotment payments if issuing such payments would cause the Board's deposit account to fall below its minimum fund balance. All refund allotment payments shall remain suspended until such time as the Board determines that its deposit account is sufficient to pay one full year of refund allotments and maintain a minimum fund balance, and refund allotments will continue in accordance with this subsection.

§23.247.Discontinuance of Assessment.

If in such case a referendum is held for discontinuing of assessment and the Commissioner verifies the results in favor of discontinuance, then the assessment collection shall become void immediately. All grain buyers shall be notified by registered or certified mail by the Board within 10 days to discontinue assessment collection. The Board will submit to the Commissioner within 90 days a plan of disbandment. Books will be audited by a state auditor and will be filed with the Commissioner.

§23.248.Restrictions on Use of Producer Assessments.

(a) General statement. Except as otherwise provided in this section, funds assessed or collected by the Board may not be expended to directly or indirectly promote or oppose the election of any candidate for public office or to influence legislation.

(b) Actions to influence legislation. Except as otherwise provided in this section, the term "influence legislation" includes, but is not limited to:

(1) any attempt to affect the opinions of the general public or any segment thereof regarding pending or anticipated legislation;

(2) communication with any member or employee of a legislative body, or with any government official or employee who may participate in the formulation of pending or anticipated legislation;

(3) contacting or urging the public or producers of the commodity covered by the Board to contact members of a legislative body for the purpose of proposing, supporting, or opposing legislation;

(4) actively advocating the adoption or rejection of legislation by filing formal comments in support of or in opposition to pending or anticipated legislation; or

(5) any communication with members made for the purpose of encouraging members or producers to do any of the actions identified in paragraphs (1) - (4) of this subsection.

(c) Actions not influencing legislation. The term "influence legislation" does not include the following:

(1) the development and recommendation to the legislature of amendments to Chapter 41 of the Code;

(2) communication to appropriate government officials of information relating to the conduct, implementation, or results of promotion, research, consumer information, or industry information activities under Chapter 41 of the Code;

(3) any action designed to market a commodity or commodity products directly to a foreign government or political subdivision thereof;

(4) making available to the public or producers the results of nonpartisan analysis, study, or research;

(5) providing technical advice or assistance (where such advice would otherwise constitute the influencing of legislation) to a governmental body or to a committee or other subdivision thereof, including appearances before any such body, committee or subdivision, in response to a request by such body, committee or subdivision, as the case may be;

(6) appearances before, or communications to, any legislative body with respect to a possible decision of such body which might affect the existence of the organization, its powers and duties or tax-exempt status;

(7) communications between the Board and producers of the commodity represented by the Board with respect to legislation or proposed legislation of direct interest to the organization and such producers, other than communications described in subsection (b) of this section;

(8) any communication with a government official or employee, other than a communication with a member or employee of a legislative body where such communication would otherwise constitute the influencing of legislation; and

(9) publication of newsletter articles regarding pending legislative issues of interest to members or producers which contain neutral, factual reports.

(d) Promoting or opposing election of candidates for public office. Activities that constitute promoting or opposing election of candidates for public office include, but are not limited to, the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate.

(e) Prohibition against indirect funding of actions to influence legislation or promoting or opposing the election of candidates for public office.

(1) Entities and individuals receiving funding from a Board organized under Chapter 41 of the Code shall not use any such funds to influence legislation or for supporting or opposing election of a candidate for public office.

(2) Producer assessments may not be used to fund research whose results are to be utilized solely to influence legislation, as that term is defined in this section.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 31, 2017.

TRD-201703454

Jessica Escobar

Assistant General Counsel

Texas Department of Agriculture

Earliest possible date of adoption: October 15, 2017

For further information, please call: (512) 463-4075


DIVISION 5. CLAIMS

4 TAC §§23.260 - 23.266

The proposal is made pursuant to Chapter 41 of the Agriculture Code, which provides the Department with the authority to adopt rules to administer its duties under the Code.

The code affected by the proposal is Chapter 41 of the Texas Agriculture Code.

§23.260.Initiation of Claims.

(a) Eligibility and Filing Date. A grain producer who has satisfied the requirements of §41.208(a) - (b) of the Code, may file an indemnification claim with the Board. A claim must be filed with the Board within 60 days of the claim initiation date. Eligible claims are limited to those claims for losses of grain where the grain was delivered to the grain buyer not more than 1 year before the applicable claim initiation date.

(b) Claim Requirements. In order to be accepted by the Board as a complete claim ready to be reviewed, a producer must submit the following to the Board:

(1) A completed claim form. Claim forms shall be made available on the Board's website and the Board shall also provide a claim forms to any producer who requests it. The claimant must indicate the type of financial failure that has occurred to give rise to the claim. If the financial failure is due to a buyer's bankruptcy filing or other judicial procedure, the claimant must also provide the Board with the case name, number, date of filing the proceeding, and location of filing.

(2) Delivery Documentation. A claimant must provide the Board with all necessary documentation to show that grain was delivered to the buyer and no payment has been issued. This may be in the form of scale tickets, warehouse receipts, or other similar documentation that is generally used and accepted in the grain industry. The documents submitted must provide, at a minimum, the following information: date of delivery, type of grain, amount delivered, person delivering grain, and any quality, or grade, information that the producer may have.

(3) Pricing Documentation. A claimant must supply the Board with copies of any contracts or other documentation that shows the price at which the grain was sold. In the event the submitted documentation indicates pricing based on a figure or system other than market price, all documents must be signed by both the producer and the buyer in order to be considered by the Board.

(4) Court Filings. If the claim is based on a buyer's bankruptcy filing or other judicial procedure, the claimant must also provide the Board with copies of all notices and other court documents that the claimant has received in connection with the judicial proceeding. In addition, the claimant must continue to immediately provide the Board with all subsequent notices and other court documents that the claimant may receive after filing the initial claim with the Board; such documentation must be filed with the Board upon receipt by the claimant.

§23.261.Claim Review and Determination.

Upon receipt of a completed claim, the Board will review all claim materials and will conduct an investigation to determine the validity of the claim. The Board shall make a determination as to whether to approve or deny the claim within a reasonable time frame from receipt of all claim materials. Within 30 days following the Board's final determination, the Board shall issue notification to the claimant of the Board's decision. If the indemnification claim has been approved, the Board shall also remit payment to the claimant at this time, depending on availability of funds.

§23.262.Denial of Claim.

(a) The Board may deny a grain producer's claim in whole, or in part, for those reasons listed in §41.209(f) of the Code, and a denial may also be based on the following factors:

(1) The producer knowingly delivered grain to a grain buyer that has failed to comply with Chapter 41, Subchapter I of the Code.

(2) The producer failed to act in accord with standard industry practices, and as determined by the Board, such failure prevents the producer from qualifying for indemnification under Chapter 41 of the Code.

(3) The producer did not make a reasonably diligent attempt to secure payment from the grain buyer.

(b) Any producer whose claim has been denied by the Board may appeal that decision of the Board, according to the procedures outlined in division 6 of this subchapter (relating to Appeals, Remedies).

§23.263.Award.

(a) For all claims that are approved by the Board, the Board will determine the amount of the indemnification award based on the Board's current operating budget and the number of claims that are filed with the Board based on the event of financial failure. The Board may award the claimant 85% of the value of the grain, less the value of the assessment submitted by the producer for that grain, delivered to the buyer but not paid for.

(b) The value of the grain will be determined by the Board, based on the following.

(1) For all grain that was delivered to the buyer under a grain contract:

(A) for all contracts where the price was specified and the grain has been sold by the buyer but no payment has been issued to the claimant, the value of the grain shall be the contract price of the grain, less customary deductions, as established by the claimant's complete indemnification claim filed with the Board;

(B) for fixed basis contracts where the underlying futures price has not been fixed the value of the grain shall be that price on the date of the close of the futures contract denoted in the contract on the claim initiation date plus or minus the cash basis as set out in the contract, less customary deductions, as established by the claimant's complete indemnification claim filed with the Board;

(C) for futures only contracts that have been priced in the futures market but have not had the cash basis fixed, the value of the grain shall be the fixed futures price, plus or minus the cash basis at the delivery point on the claim initiation date, less customary deductions, as established by the claimant's complete indemnification claim filed with the Board;

(D) for all other types of contracts (e.g., cash basis, futures closing price, local cash price, or other pricing mechanism), the value of the grain will be established by the Board, FOB the delivery point on the claim initiation date, unless a specific date is provided in the contract.

(2) For all grain that was delivered to the buyer without a contract, and the grain has not been sold by the buyer, the value of the grain shall be the value of the grain FOB the delivery point as of the claim initiation date. The Board will establish the value, considering the following factors.

(A) All futures prices will be the futures price as of the close of business on the claim initiation date, with prices for each commodity based on the following respective exchanges, and the final price determined by taking into consideration and including all local basis adjustments applicable to each commodity:

(i) corn--Chicago Board of Trade;

(ii) wheat--Kansas City Board of Trade;

(iii) sorghum--Chicago Board of Trade, Corn Board;

(iv) soybeans--Chicago Board of Trade.

(B) For grain that is not priced, the value of the grain shall be the local producer's cash price net of all discounts, as determined by the Board, as of the claim initiation date. The amount of the producer cash price, as set by the Board, shall be calculated using the gross sales price of the grain, net of all premiums and discounts for moisture, quality, variety, or any other characteristic of the grain.

(C) Recognizing that some locations may not have sufficient volume or liquidity to determine a local cash price or basis adjustment, the Board will use its best efforts to determine a fair price for the delivery point based on available information.

§23.264.Subrogation.

(a) Grain Buyer. In accordance with §41.210 of the Code, in the event the Board approves and pays an indemnification claim, the Board is subrogated to all rights of the grain producer against the grain buyer whose financial failure gave rise to the grain producer's indemnification claim.

(b) Other organizations. In the event the Board approves and pays an indemnification claim under §41.210, the Board is subrogated to all rights of the grain producer against any other entity authorized to submit a payment to the producer for the grain buyer's financial failure causing the producer's loss, and giving rise to the indemnification claim.

(c) Limitation of Board. In any reimbursement event, the Board's subrogation rights are limited to the amount the Board paid to the grain producer in an indemnification claim award, due to the financial failure that gave rise to the grain producer's claim.

(d) Reinsurance. The Board shall have the authority to investigate the availability and, if available at a reasonable price as determined by the Board, purchase reinsurance contracts or policies to mitigate the risk that, despite the authorization for the Board to be reimbursed and subrogated, the Board will suffer severe financial losses in the event of multiple financial failure events in any given year.

(e) Funds. Any reimbursement and subrogation funds that may be recovered under §41.210 and this subchapter shall be deposited in the Board's depository bank.

§23.265.Borrowing Funds.

The Board may borrow money as needed to implement and operate the fund.

(1) The Board must receive approval of the Commissioner prior to entering into a formal commitment with the lender(s).

(2) A majority of the Board must approve the borrowing of funds.

(3) The chairman of the Board shall be the signatory for all loan documentation with the treasurer being secondary signatory, if required by lender(s).

§23.266.Use of Reinsurance.

(a) The Board may purchase re-insurance policies to mitigate the Board's financial risks. The Board will be the owner of the policies on behalf of the fund.

(b) On an annual basis, the Board will select a reinsurance provider from whom to obtain coverage. At the reinsurance provider's request, the Board will provide notice to grain buyers that the reinsurance provider has requested information from each grain buyer, including, but not limited to, certain items of financial information and performance measures. All responsive information shall be submitted directly to the reinsurance provider; the Board will not handle or maintain the information in any manner whatsoever. Submitting the requested information to the reinsurance provider shall be voluntary.

(c) In the event of a grain buyer financial failure in which the reinsurance company indemnifies the Board for a portion of the ensuing financial losses, the Board subrogates its rights as outlined in §23.264 of this subchapter (relating to Subrogation) to the insurance company. The reinsurance company's subrogation rights are limited to the amount paid by the reinsurance company to the Board in response to the grain buyer financial failure.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 31, 2017.

TRD-201703455

Jessica Escobar

Assistant General Counsel

Texas Department of Agriculture

Earliest possible date of adoption: October 15, 2017

For further information, please call: (512) 463-4075


DIVISION 6. APPEALS AND REMEDIES

4 TAC §23.280, §23.281

The proposal is made pursuant to Chapter 41 of the Agriculture Code, which provides the Department with the authority to adopt rules to administer its duties under the Code.

The code affected by the proposal is Chapter 41 of the Texas Agriculture Code.

§23.280.Administrative Review.

(a) Filing of request.

(1) Any person who believes they have been aggrieved in connection with a determination made by the Board under division 5 of this subchapter (relating to Claims) may file a request for administrative review by the Department.

(2) A request must be in writing and received by the Department within 90 days after the action of which the person is complaining occurred. Formal requests must comply with the following requirements, and shall be resolved in accordance with the procedure set forth below. Copies of the request and any supporting documentation must be mailed or delivered by the requesting party to the Department and the Board.

(b) Contents of request. A request filed under this section must be sworn and contain:

(1) a specific identification of the statutory or regulatory provision(s) that the action complained of is alleged to have violated;

(2) a specific description of each act alleged to have violated the statutory or regulatory provision(s) identified in paragraph (1) of this subsection, including an identification of the issue or issues to be resolved;

(3) a precise statement of the relevant facts;

(4) argument and authorities in support of the allegations made;

(5) any supporting documentation available; and

(6) a statement that a copy of the request has been mailed or delivered to the Board.

(c) Informal Review.

(1) Once a request is received by the Department, it shall be forwarded to the Department's Office of General Counsel for review.

(2) The General Counsel, or his or her designee, shall have the authority, prior to appeal to the Commissioner, to settle and resolve the complaint that is the subject of the request, and may solicit additional information regarding the matters alleged in the request for review from the requester, the Board or any other relevant party. Copies of any additional information received shall be provided to both the requester and the Board.

(3) If the issues raised in the request are not resolved by mutual agreement, the General Counsel will issue a written determination on the request for review as follows.

(A) If the General Counsel determines that no violation of rules or statutes has occurred, he or she shall so inform the requesting party and the Board by letter, setting forth the reasons for the determination.

(B) If the General Counsel determines that a violation of the rules or statutes has occurred, he or she shall so inform the requesting party and the Board by letter, setting forth the reasons for the determination and the appropriate remedial action.

(4) If the General Counsel's determination is not appealed, that determination shall serve as the final agency determination on the complaint.

(d) Appeal to Commissioner.

(1) The General Counsel's determination on a complaint may be appealed to the Commissioner by the requester, or his or her designee, or the Board. An appeal of the General Counsel's determination must be in writing and must be received by the Department no later than 15 days after the date of the General Counsel's determination. The appeal shall include specific reasons why the requester or the Board disagrees with the General Counsel's determination. Copies of the appeal must be mailed or delivered by the party appealing to the other party.

(2) The Commissioner, shall review the request, any supporting documentation, the General Counsel's determination, and the appeal and issue a determination on the request. The appeal shall be limited to review of the General Counsel's determination and documentation presented by parties in support of their positions.

(3) The Commissioner's determination of the appeal shall be the final administrative action of the agency and is subject to judicial review under Chapter 2001, Government Code.

(e) Appropriate remedial actions. If the Department, or the Commissioner on appeal, determines that the Board acted in a manner that warrants action by the Department, the Department may prescribe corrective action to be carried out by the Board. The Department is not authorized to award monetary damages to a person filing a request under this section.

§23.281.Penalties and Remedies.

If any grain buyer violates Chapter 41, Subchapter I of the Code by failing to promptly remit assessments, the Commissioner is authorized to suspend, revoke, or deny a Department issued license that the grain buyer may hold, and in any case in which he determines, after opportunity for a hearing, that there has been violation of or failure to comply with the Code.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on August 31, 2017.

TRD-201703457

Jessica Escobar

Assistant General Counsel

Texas Department of Agriculture

Earliest possible date of adoption: October 15, 2017

For further information, please call: (512) 463-4075