Assessments (Checkoff Programs)

 

Overview

An assessment, or checkoff program, is a program designed to collect funds from producers of certain agricultural commodities, such as cattle, turkeys, commercial eggs, peanuts, cotton, sweet potatoes, berries, and other fruits and vegetables of all kinds, for the purpose of promoting and researching those commodities.  A checkoff organization or association promotes the use and sale of the commodity itself rather than any particular producer in order to expand markets and find new uses for the commodity.  The term “checkoff program” originated from programs that were not mandatory, in which a producer had to check a box to contribute to the program.  Some checkoff programs are mandatory today, despite the name.

 

Definitions

Agricultural Commodity – Agricultural, horticultural, viticultural, and dairy products; livestock and the products of livestock; the products of poultry and bee raising; the products of forestry; other commodities raised and produced on farms, as determined appropriate by the Secretary; and products processed or manufactured from the aforementioned products, as determined appropriate by the Secretary of Agriculture.  7 USC § 7142.

First Handler – The first person who buys or takes possession of an agricultural commodity from a producer for marketing.  This can be the producer if the producer sells directly to consumers.  7 USC § 7142.

Person – Any individual, group of individuals, partnership, corporation, association, cooperative, or any other legal entity.  7 USC § 7142.

Producer – Any person who is engaged in the production and sale of an agricultural commodity in the United States and who owns, or shares the ownership and risk of loss of, the agricultural commodity.  7 USC § 7142.

 

Legal Issues

Federal Assessments

State Assessments

 

Applicable Law

Agricultural Marketing Agreement Act of 1937 (AMAA) – 7 U.S.C. § 601 et seq.

Commodity Promotion, Research, and Information Act of 1996 – 7 U.S.C. §§ 7411-7425

Promotion of Use and Sale of Agricultural Products – N.C.G.S. §§ 106-550 – 106-568

Promotion of Agricultural Research and Dissemination of Findings – N.C.G.S. §§ 106-568.1 – 106-568.12

Promotion of Sale and Use of Tobacco – N.C.G.S. §§ 106-568.18 – 106-568.37

 

FAQs

Federal Assessments

 

What crops are subject to an assessment at the federal level?  Are the assessments mandatory?

There are currently at least 18 assessment programs at the federal level for various crops and products.  They are:

  • Beef - $1 per head collected each time cattle are sold.
  • Cotton - $1 per bale of cotton.
  • Cultivated Blueberries - $12 per ton.  Producers and importers who produce or import less than 1 ton annually are exempt.
  • Dairy Products – 15 cents per hundredweight. 
  • Eggs – 10 cents per 30-dozen case of eggs sold. Producers owning 75,000 or fewer laying hens are exempt.
  • Fluid Milk – 20 cents per hundredweight.  Producers producing less than 3 million pounds of fluid milk per month, excluding those fluid milk products delivered to the residence of a consumer, are exempt.
  • Haas Avocados – 2.5 cents per pound.  Exports of domestic Hass avocados are exempt from assessments.
  • Honey – 1 cent per pound.  Producers and importers marketing less than 6,000 pounds per year can arrange an exemption.
  • Lamb – One half cent per pound of live lamb sold, plus an assessment equal to 30 cents per head of lambs purchased by the first handler for slaughter or slaughtered pursuant to a custom slaughter arrangement.
  • Mango – One half cent per pound.  First handlers or importers of less than 500,000 pounds per year are exempt.
  • Mushroom – One half cent per pound.  Producers or importers of less than 500,000 pounds per year are exempt.
  • Peanut – One percent (1%) of the price paid for all farmers stock peanuts sold. 
  • Popcorn – 6 cents per hundredweight. 
  • Pork – 40 cents per $100 of value when pigs are sold or pigs or pork products are imported into the U.S.
  • Potato – 3 cents per hundredweight on potatoes produced in or imported to the U.S.  Producers of less than 5 acres of potatoes are exempt.
  • Sorghum – 0.6 percent (%) of the net market value of grain sorghum and 0.35 percent (%) of the net market value of sorghum silage, forage, hay, haylage, and billets.
  • Soybean – One half of one percent of the market price per bushel sold each season. 
  • Watermelon – 3 cents per hundredweight for handlers and producers, 6 cents per hundredweight for importers.  Producers with fewer than 10 acres are exempt.  Importers of less than 150,000 pounds of watermelons annually may request reimbursement.

Government-sponsored federal assessment programs are mandatory.  The constitutionality of these programs was upheld in Johanns v. Livestock Marketing Association, 544 U.S. 550 (2005), on the basis that a federal assessment’s generic advertising is government speech.  Sometimes an exemption may be available for small producers.  In order to claim an exemption, you typically need to obtain an exemption certificate from the appropriate program board.

There is sometimes an exemption for certified organic producers as well.  P.L. 107-171, § 10607 (2002).  Check with the appropriate program board to find out if the program offers an exemption for producing your product organically.

How do federal assessments work?  Is there federal statutory authority or any Ag Marketing Service rules regarding how these programs/assessments are managed?

 Each federal assessment program is authorized by its own statute, called a marketing order.  See, e.g. 7 C.F.R. §§ 1205 - 1280.  As a result, each program is unique, but there are similarities between every one.  Each marketing order establishes the following: (1) a board of directors, (2) what will be assessed, (3) the assessment rate, (4) the collection procedure, and (5) how the assessment payers can hold a referendum to change or end the program.  Funds collected by the assessment will typically be managed by the board of directors, who decide where to allocate money and what business plans and programs should be approved.

The board of each federal assessment program is appointed by the Secretary of Agriculture.  Every assessment program is financed entirely by the producers, processors, importers, and first handlers of the supported product.  No taxpayer or government funds are involved.

Once an assessment program is initiated, the USDA conducts Requests for Referendum periodically (usually every 3-7 years).  7 USC § 7418.  During these periods, producers, processors, first handlers, or importers of the appropriate commodity may participate to request a referendum.  If 10% of eligible producers request a referendum, then USDA will conduct a referendum within one year of the Request for Referendum.  7 USC § 7418.  If a majority of eligible voters vote to terminate the assessment or to adjust the assessment rates then those changes will be made.  7 USC § 7418.  No later than 30 days before a referendum is conducted, the Secretary shall notify the agricultural commodity industry involved of the period in which voting will occur, registration procedures, and voting procedures.  7 USC § 7418.

How is the assessment collected for each commodity (i.e., at a buying station, by invoice at the end of a growing season, etc.)? 

Assessments are typically collected at the first point of sale (i.e., when a farmer delivers soybeans to a grain elevator or delivers a cow to a processor).  In many federal assessment programs, half of the money collected will stay in the state where it was collected to be used on relevant programs and half will go to the board collecting the assessment.

Are assessments refundable? 

Assessments are sometimes refundable, depending on the commodity.  Refunds typically operate like exemptions in that you generally need to apply to qualify.  Contact the board for your commodity’s assessment to determine whether you can obtain a refund.

How can the money be used?

Assessment programs collect money to conduct research about and promote the product for which the money was collected.  The promotion is not for any particular producer or importer; rather, it is used to promote the product generically.  Examples of generic advertising campaigns funded by national assessment programs are “Got Milk?,” “Beef: It’s What’s for Dinner,” “Pork: The Other White Meat,” and “The Incredible Edible Egg.” Funds may only be used for research and promotion, not for lobbying.  7 USC § 7411(b).

 

State Assessments

 What products are subject to an assessment at the state level?

In North Carolina, the following products are subject to state assessments:

 

Commodity

Rate ($)

Unit

Apples

0.03

100 lb.

 

0.03 or $100 min

45 lb. bushel

Blueberries

0.036

11 lb. for fresh market

 

0.018

11 lb. for second (bulk processed)

Cattle

1.00

Head

Corn

0.005

Bushel

Cotton

0.80

Bale

Eggs (shell)

0.05

Thirty dozen cases

Eggs (processed)

0.11

100 lb.

Hogs

0.04

Head (except feeder pigs)

Oats and Barley

0.005

Bushel

Peanuts

0.15

100 lb.

Irish Potatoes

0.01

100 lb. sold

Sorghum

0.005

Bushel

Soybeans

0.005

Net market price sold by producer to the first purchaser (gross $ minus quality and moisture discounts)

Sweet Potatoes

15.00

Per planted acre

Strawberries

2.00

1,000 plants

Tobacco

0.10

Per 100 lb. (flue-cured and burley)

Tomatoes

20.00

Per commercially harvested acre

 

How do state assessments work?

There are far more state assessment programs than federal assessment programs.  In North Carolina, few programs are mandatory.  The law simply permits and encourages producers of agricultural commodities to act in cooperation with growers, handlers, dealers, and processors to stimulate the growth of such agricultural commodities, particularly by means of assessment programs.  N.C.G.S. §§ 106-550, 106-553.

Generally an assessment is created through a referendum among producers and growers.  N.C.G.S. § 106-553.  The agency or group for the particular commodity creating the referendum must submit an application to the Board of Agriculture of the State of North Carolina for certification and approval for the purpose of conducting a referendum.  N.C.G.S. § 106-554.  Once certified, the agency or group may fix, determine and publicly the date, hours and polling places for voting in such referendum, the amount and basis of the assessment proposed to be collected, the means by which the assessment shall be collected if authorized by the growers, and the general purpose of the assessment.  The date of the referendum must be set at least 30 days after the date that the referendum is announced.  N.C.G.S. § 106-557.  If at least two-thirds of the producers and growers voting in the referendum vote to approve the assessment, then the assessment will be collected, and will last for three years.  N.C.G.S. § 106-561.  In the third year if the first term of the assessment, or the last year of any subsequent term, the agency or group may hold another referendum to determine whether to terminate the assessment or to extend it for another three or six years.  N.C.G.S. § 106-566.

If the referendum fails, the agency or group may call another referendum the next year.  N.C.G.S. § 106-565

Farmers dissatisfied with the assessment can demand a refund in writing from the agency or group that collects the assessment within 30 days of date on which said assessment is collected or due to be collected, whichever is earlier.  N.C.G.S. § 106-567.  It is important to note that the NC Board of Agriculture typically designates grower organizations as its agents for purposes of collecting assessments.  See N.C.G.S. § 106-564.1.

How can the money be used?

The money collected from a state or local assessment must be used for promoting and stimulating, by advertising and other methods, the increased use and sale, domestic and foreign, of the appropriate agricultural commodity.  N.C.G.S. § 106-564.  The money may also be used to conduct research on the appropriate agricultural commodity; for example, funds from the North Carolina tobacco assessment go to the N.C. Tobacco Research Commission, which has studied variety development, greenhouse seedling production, disease management, blue mold prevention, and insect management, among other topics.

 

Specific Crops

In North Carolina, some commodity assessments are collected by unique means.  Three of the most important of these are cattle, sweet potatoes, and tobacco.

Cattle

As an alternative method for the collection of assessments on cattle, the assessments in force shall be deducted by the purchaser from the purchase price of all cattle bought, acquired, or sold.  The deducted payments shall be remitted to the Commissioner of Agriculture on or before the 20th of the following month.  The Commissioner will then pay the amount of the assessments to the certified agency of the producers of such cattle.  N.C.G.S. § 106-564.3

 

Sweet Potatoes

As an alternative method for the collection of assessments on sweet potatoes, producers shall pay an assessment based on the number of acres produced, and shall report the number of acres and remit the assessment to the Commissioner of Agriculture.  This language is mandatory, and no refund of assessments can be requested for sweet potatoes.  The assessments are due on September 1 of every year.  If the assessment is not paid by September 30, there will be a penalty of 10% of the unpaid assessment, plus an extra 1% for each additional month the assessment is unpaid.  The Commissioner will then pay the assessment to the appropriate agency.  N.C.G.S. § 106-564.4.

 

Tobacco

A November 2009 referendum among North Carolina’s farmers of tobacco renewed an assessment on tobacco of 10 cents per 100 pounds of flue-cured and burley tobacco.

When the Board of Directors of Tobacco Associates, Inc. determines that it is not reasonably feasible to assess tobacco on a “per-acre” basis, the assessment may use a “tobacco poundage” basis.  The tobacco poundage assessment shall not exceed 1/5 of a cent per pound of the flue-cured tobacco marketed by each farmer.  N.C.G.S. § 106-568.34.

Farmers dissatisfied with the assessment can demand a refund in writing from Tobacco Associates, Inc. within 30 days of the last date on which the assessment is collected.  N.C.G.S. § 106-568.28.

 

 

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