Navigating The Tempest Of Government Policy

Originally printed in the February 2018 issue of Produce Business.

With political winds blowing in many directions, understanding the top legislative and regulatory issues facing the produce industry is more crucial than ever.

The U.S. and Canada both rely on bell peppers from Mexico year-round to meet demand.

Like it or not, government policy influences numerous facets of the enormous produce business, and industry members must be engaged and educated enough to weather what the future holds.

“Government regulations impact every aspect of life, from types of light bulbs on the market, to auto safety features to how fresh produce is grown and sold,” says Allison Moore, director of legislative and regulatory affairs for the Fresh Produce Association of the Americas (FPAA) in Nogales, AZ. “Understanding regulations ensures companies comply with them; being involved in the creation or revision of regulations helps ensure they are effective and address real-world needs.”

Floyd Avillo, president of FreshPro Food Distributors in West Caldwell, NJ, emphasizes anyone in the business of processing, distributing and selling fresh produce is impacted by everything from food safety to transportation rules. “Industry conversations increasingly reflect the variety of issues being dealt with, including FSMA (Food Safety Modernization Act), organic certifications, NAFTA (North American Free Trade Agreement) and electronic driver logbooks,” he says.

Although the industry has seen a lot of change, Kathy Means, vice president of demand creation and consumer affairs at Produce Marketing Association (PMA) in Newark, DE, notes such change has been challenging but also has provided opportunities.

“FSMA brings significant new regulations but also yields more consistent food safety and consumer confidence,” she says. “It’s an example of how working together makes an impact since the Food and Drug Administration (FDA) made significant changes from original proposals based on industry input. An evolution in marketing orders (both state and federal) also has helped many commodities with promotion, demand creation and research.”

John Vena, president at John Vena Inc. in Philadelphia, says it’s increasingly clear politics will play a larger role in regulations. “We must all take an interest if we wish to be in compliance,” he says. “The practices we have and will put into place in our business to comply will serve to improve our operations and procedures and will ultimately make us a better company and more competitive.”

National associations such as PMA and United Fresh Produce Association in Washington, DC, as well as regional groups including FPAA, Texas International Produce Association (TIPA) in Mission, TX, Florida Fruit and Vegetable Association (FFVA) in Maitland, FL, the Northwest Horticultural Council (NHC) in Yakima, WA, and Western Growers Association (WGA) in Irvine, CA, serve as excellent resources for the industry in this arena. “These organizations do a great job of representing the industry and making sure our input is heard,” says Mike Maxwell, president of Procacci Brothers Sales Corporation in Philadelphia. “They are experts, and we in the industry can lean on them for expertise and support what they do.”

The associations identify several key issues the industry should be tracking, from free trade to labor to a crucial transportation regulation change. “From the policy standpoint, NAFTA, the Farm Bill and immigration reform will be the major things we will focus on this year,” says Robert Guenther, senior vice president for public policy at United Fresh Produce Association. “On the regulatory side, we’ll continue to work with the implementation of the food safety regulations and other issues arising within the agencies. We have a very busy year.”

NAFTA’s Uncertain Track

The noisiest political storm currently is the renegotiation of NAFTA, which entered the sixth round of renegotiations on Jan. 21, 2018, in Montreal. “While some progress has been made on points within the negotiations, this is an important round to determine how close the three countries can get to finalizing a new agreement in the near future,” says Moore.

Guenther explains this particular round is crucial because of its timing. “The goal was to try to resolve all the uncertainty and issues before Mexico’s general elections in July,” he says. “The closer we get to Mexico’s elections, the harder it will be to focus on NAFTA, and after the elections we’ll have to deal with a whole new administration.”

NAFTA supporters view the agreement as crucial for agriculture in North America. “Grain, corn and other export crops rely on the Mexican market to move a large percentage of their goods,” says Moore. “Canada, the United States and Mexico also rely on each other for availability of fresh produce throughout the year — whether it’s U.S. apples to Mexico, Canadian cucumbers to the United States or Mexican bell peppers headed north. Many produce companies have evolved to operate with integration in all three countries to ensure consistent supply to the end consumer.”

PMA is on record supporting NAFTA and believes changes could have significant impact on trade in North America. “We want to maintain the many benefits NAFTA has provided our industry,” says Means. “The PMA Board adopted a position stating that we recognize the critical role NAFTA has played in growing consumption of fruits and vegetables in Mexico, Canada and the United States. Therefore, our highest priority in the modernization of NAFTA is the preservation of NAFTA. We support proposals that advance free and fair trade in such a way that they do no harm.”

Importers such as Vena say NAFTA opened the doors to cross-border investment and allowed the American consumer to benefit from a much larger array of fresh produce at reasonable prices. “I sincerely hope a revised NAFTA does not result in tariffs on fresh produce,” he says. “We experienced the threat of punitive tariffs on fresh produce not too many years ago in a trade war with the European Union, and it created a lot of uncertainty for produce importers — uncertainty cripples investment and will diminish what we can offer consumers.”

However, not all industry members are keen on NAFTA’s results. Lisa Lochridge, FFVA director of public affairs, reports since NAFTA’s passage in the 1990s they’ve seen a steady decline in both the acreage and production value of Florida’s iconic winter vegetable crops such as tomatoes, bell peppers, cucumbers, squash and eggplant. “The pace of that decline has increased significantly over the past five to 10 years as the Mexican government has provided subsidies for their farmers to grow produce for the U.S. marketplace,” she says. “Multigenerational family farms in Florida have been shuttered as a result. Once they’re gone, they’re gone for good.”

Lochridge emphasizes Florida fruit and vegetable producers support free trade, but only if it’s played by the rules. “They can’t compete against imported product that is ‘dumped’ in the U.S. market at less than fair value or against product unfairly subsidized,” she says. “We need an effective solution so specialty crop producers can successfully compete in our own domestic market and continue to provide American consumers with high quality, nutritious fruits and vegetables. The NAFTA talks have been bumpy, and it’s not clear whether the specialty crop industry will be successful in our efforts to find relief for growers being harmed. But the fact our proposal for a remedy is on the table is testament to the significant efforts by our industry’s leadership and lawmakers.”

Guenther highlights the need to figure out how to address the challenges among some of the U.S. southern growers and the import pressures they have from Mexico and even Canada. “It’s tough because at this point the majority of the produce industry does not support the proposal the U.S. administration has put on the table,” he says. “We are pushing the administration to work with the other negotiators to come up with a proposal more acceptable to all. In addition to playing off the various interests within the industry, we need to keep our eye on the bigger picture to ensure produce or agriculture isn’t sacrificed for concessions in another sector.”

Complicated Path Forward

The muddy waters surrounding NAFTA’s benefits and the way business has evolved in North America may make it more difficult to find a politically palatable solution for all.

FPAA members remain concerned about any proposal from the United States on a possible seasonal produce tariff. “If successful, this tactic will result in lawsuits that would raise prices for U.S. consumers, while reducing availability, selection and quality in the supermarket,” says Moore. “Pursuing such ‘trade protection through increased litigation’ also will cost U.S. exporters when similar ‘seasonal suits’ are brought by Canada and Mexico. If the rules are changed for one product or one region, it is only a matter of time before other industries seek unique rules for their products or regions.”

Mark Powers, NHC president, voices apprehension for U.S. exports if NAFTA breaks down. “If that occurs, Mexican tariff rates would increase, in the case of tree fruit up to 20 percent,” he says. “Such an increase in cost would hurt growers and consumers.”

“Growers need a way to ensure they can find reliable, skilled employees. If farmers can’t harvest their crops, they become unable to feed America.”
— Lisa Lochridge, Florida Fruit and Vegetable Association

According to United Fresh Produce Association’s Guenther, the seasonal perishable provision presents significant challenge because the produce marketplace essentially has evolved into a North American produce industry. “There has been a great deal of investment and collaboration in all three countries, taking advantage of the free-trade provisions of the past 25 years,” he says. “It’s not as simple as United States versus Mexico anymore.”

Should NAFTA break down, Dante Galeazzi, TIPA president and chief executive, warns those with cross-border operations will especially feel an impact. “Many U.S. companies have investments in Mexico and/or Canada, and likewise many Mexican and Canadian companies have invested in the United States,” he says.

Even if the negotiations leave NAFTA intact, Galeazzi notes it’s tough to say what the impact will be to produce since many agriculture clauses haven’t been discussed in negotiations. “There exist many opportunities for the industry in modernizing the agreement, for example, creating mutual recognition programs or harmonizing standards for inspections, customs processes and safety policies,” he says. “If that were to happen, produce stands to gain a world of efficiencies — time-saving processes immediately translated into financial gains.”

Guenther reports good movement on phytosanitary and sanitary issues. “The new provisions make them more transparent and more science-based, much more than we had 25 years ago,” he says.

Moore agrees increased coordination among government agencies in the NAFTA countries would be a great outcome in the negotiations. “It’s hard to predict at this point what the United States will do,” she says. “There is a possibility they will pull out of the agreement despite negotiation efforts from Canada and Mexico. That said, NAFTA must remain a win for all three countries to move forward.”

Immigration Reform

Another hot topic is immigration reform that potentially can affect the industry’s labor pool either positively or negatively. “There’s no question there’s a shortage of U.S. workers willing and able to perform farm work,” says FFVA’s Lochridge. “Growers need a way to ensure they can find reliable, skilled employees. If farmers can’t harvest their crops, they become unable to feed America. Ultimately, this is a food security issue.”

Procacci’s Maxwell agrees on the need to address this issue. “We have to do something about immigration reform so we can get pickers in the field,” he says. “It’s a shame when you can’t get your crop picked.”

So what headway is being made? The biggest issue with immigration reform, according to Galeazzi, is the lack of policy progress on the topic. “The existing H-2A program (also known as the guest worker program) is incredibly cumbersome and inefficient,” he says. “Worse, even if the program were easy to use, the number of available H-2A visas wouldn’t be enough to satisfy the demands of agriculture — let alone the other industries that apply for those visas.”

Lochridge concurs H-2A is the main tool Florida growers have to access a workforce but says it is expensive and difficult to use. “The AG Act, a bill proposed by House Judiciary Committee Chairman Bob Goodlatte (R-VA), would replace the H-2A program with a new H-2C visa program,” she says. “That bill has passed the Judiciary Committee.”

However, the wheels of government continue to turn slowly especially on a crowded political spectrum. “Immigration is one of the more enormous obstacles to be faced,” says Galeazzi. “It felt like Goodlatte’s bill was making headway in the House earlier this year. But even small requests, such as an improved day-worker program, have stalled. With the budget and tax reform taking precedent in DC, it’s tough to say if we’ll see progress any time soon.”

In the beginning of 2018, DACA (Deferred Action for Childhood Arrivals) took the spotlight in the immigration debate. “DACA itself doesn’t directly affect the workforce available for produce,” explains Guenther. “But, any agreement on DACA may be the vehicle to get reform in other areas, including guest worker programs or agriculture reforms. Eventually, the hope is that such smaller reforms will lead to creating a process to get the current undocumented workforce into a documented status — though that may not happen for years.”

Another reason to keep an eye on DACA or other similar reforms, according to Guenther, is in the event enforcement provisions grievous to the industry are attached. “Any legislation process always includes compromise,” he says. “There are different elements concerning current labor verification or enforcement that could be attached in an attempt to satisfy some in Congress and move the bill forward. It’s not an easy answer.”

NHC’s Powers notes such attachments would negatively impact the industry. “Efforts to impose mandatory E-Verify or significantly enhance interior enforcement of immigration laws without providing a workable solution for agriculture could be devastating to our growers who already face critical worker shortages,” he says. “This is also an issue for consumers who enjoy American-grown produce.”

Transportation Challenges

Recent significant changes in transportation regulations have caused further upheaval in an already challenging trucking environment. “In light of already existing shortages of truck drivers all across the United States, the implementation of an electronic logging device to monitor hours of service is causing more impacts to the available amount of driving hours,” says FPAA’s Moore.

The Electronic Logging Device (ELD) mandate, which went into effect on Dec. 18, 2017, has greatly reduced the amount of over-the-road truckers available before that date according to FreshPro’s Avillo. “The ELD now requires electronic reporting, so anyone who was not in compliance before with the Hours of Service (HOS) rules can no longer fudge it,” he says.

“Any agreement on DACA may be the vehicle to get reform in other areas, including guest worker programs or agriculture reforms.”
— Robert Guenther, United Fresh Produce Association

According to the Department of Transportation, HOS rules are designed to eliminate the type of drowsiness that can lead to crashes by regulating maximum number of hours driven, mandatory breaks and duty cycles. “However, coupled with ELDs, the new regulations not only present a regulatory burden for trucking companies, they further exasperate the challenges our industry faces with an HOS system that doesn’t take into account how transportation and produce operations interact,” says Galeazzi.

It’s not uncommon for trucks, explains Galeazzi, to wait four to six hours as product arrives from the fields, is inspected or packed, or as in the case of border regions, waits to cross international bridges and go through customs. “Multiply that wait by three or four pickups, and now the driver’s spent all of his or her day’s hours,” he says. “Most of that time has been the driver waiting or driving a few miles to the next warehouse to wait there but not a single mile toward the consignee.”

Though most in the industry were aware of the mandate and its implementation date, such a severe effect was not forecast. “This is a good example of how a seemingly innocuous regulation ends up having a significant impact on the industry,” says Procacci’s Maxwell. “We knew this was coming but didn’t expect it to impact us so much. Now it’s extremely pertinent to our business.”

The regulation stands to have an even greater impact on producers in remote regions since they’re limited in the number of available transportation options, according to Galeazzi. “The ELD regulation could also push carriers to consider less time-sensitive freight (non-perishable products). Fewer carriers hauling produce would leave members without options to get their product to market or force many to pay hundreds or thousands of dollars more per load to secure a truck for their shipments.”

Maxwell reports the cost of trucks has almost doubled since ELD’s implementation. “A lot of truckers weren’t prepared for the law and they’re sitting out until they see how this will affect them,” he says. “That results in even less available trucks and drivers in an already tight market. It is also causing delays. A lot of our three-to-four-day trucks are now five-to six-day trucks. It’s made it more difficult to get product in a timely manner.”

At this point, the United Fresh Produce Association is working to identify if the challenges getting adequate transportation are mostly due to ELD, or other factors are involved. “ELD might be the tipping point, but there may be other factors at play,” says Guenther. “Given that we have perishable commodities, the question becomes how government can work with the industry to look at potential exemptions or solutions for the challenges we’re facing.”

TIPA has sent a letter to the Department of Transportation seeking an exemption for produce carriers to help alleviate the drain on the supply pool and ensure trucking options remain viable. “In the meantime, produce operations need to confirm carrier partners are compliant with the ELD mandate,” says Galeazzi. “They should ensure warehouses load and unload trucks quickly and that local trucks understand the existing ag exemptions.”

Yet, Guenther cautions an exemption alone won’t resolve the entire issue. “The trucking industry doesn’t have many trucks hauling produce exclusively,” he says. “So if trucks are hauling or backhauling something else, they’d have to comply with ELD anyway. An exemption would be great, but we don’t want to have a false sense of security that an exemption for agriculture would solve all the problems.”

In the long term, FPAA’s Moore advocates industry and government should address trucking shortages and fully analyze how loading times impact available driving times. “It will also be interesting to see how driverless trucks, a long way down the road from being implemented, will be used to address transportation needs,” she says.

The Farm Bill Vortex

The prevailing legislative winds have set aloft renewal of the Farm Bill in 2018, with the current Farm Bill set to expire on Sept. 30, 2018. “Most people don’t realize the Farm Bill has become the single most influential funding mechanism for much in the produce industry,” says United Fresh Produce Association’s Guenther. “There is around $600 million per year going into the industry because of the Farm Bill.”

According to PMA’s Means, the bill provides funding to numerous programs supporting exports, conservation, state block grants meeting local needs and research, such as the Specialty Crop Research Initiative (SCRI). Texas relies on support from the Farm Bill to help citrus growers combat HLB or citrus greening. “We also rely on crop insurance, as extreme weather factors are a very real concern for our region,” says Galeazzi.

The Farm Bill also dictates how much the federal government spends on farm and nutrition programs. “Nutrition programs, including the SNAP program, comprise the largest portion of the bill,” says Lochridge.

Means reports the industry is working within a broad-based coalition, the Specialty Crop Farm Bill Alliance (SCFBA), to advocate for industry priorities. Formed in 2006, the Alliance now comprises more than 140 organizations representing growers of fruits, vegetables, dried fruit, tree nuts, nursery plants and other products. The Alliance already has begun outreach to Congress to communicate policy recommendations for the 2018 Farm Bill. “Our goal is to preserve the programs that have proven to be of great value to the specialty crop industry,” says Lochridge.

SCFBA priorities include maintaining or increasing funding for research programs such as the Specialty Crop Research Initiative and Specialty Crop Block Grant program, according to Powers. “Priorities also include maintaining or enhancing the U.S. Animal and Plant Health Inspection Service’s ability to protect U.S. growers from pests and diseases through programs such as the Clean Plant Network,” he says. “The NHC is also working through the Coalition to Promote U.S. Agricultural Exports to increase funding for the Market Access Program which helps growers leverage industry dollars to expand overseas markets.”

Yet, this upcoming Farm Bill faces a significant challenge in maintaining funding, according to Galeazzi. “The current administration is pushing to reduce spending, and our industry is faced with more problems now than 10 years ago,” he says. “Our industry members need to continue to tell their stories and share the importance and relevance of the Farm Bill with elected officials to minimize the impacts of such cuts.”

pb